In many countries the government taxes everything, from commodity purchase to money transfers from one bank account to the next. This has prompted the emergence of the tax free market which is currently valued at $20 trillion. This market strives in handling huge financial transfers for individuals and institutions who wants to keep their hard earned resources from the jealous eyes of government taxmen.
Bitcoin and Taxation
The initial scripting of the bitcoin algorithm allows the cryptocurrency to be passed around without leaving traces that could be used to trace the name behind the bitcoin address involved in the transaction. Although this is only applicable only and only if the address has never been attached to a physical name of an owner before.
At the meantime bitcoin still bears a good level of anonymity although some experts believe that it is not as anonymous as other cryptocurrencies such as Z-Cash. This means financial transactions made in bitcoin can go totally tax free even when trajected across very many borders. However, in some countries like the united states, it’s a required of the Security and Exchange Commission (SEC) that every bitcoin exchanges collects and verifies customer biodata during the process of registration.
This does not mean it is impossible to transfer$1m from California to Beijing totally tax-free thanks to the presence of other bitcoin infrastructures apart from exchanges. Platforms like localbitcoin.com provide an escrow mechanism where bitcoin business can occur as usual only with a lower charge in terms of fees.
Imagine the $20 Trillion-dollar tax Evasion markets
The constant quest of people to have a financial freedom has led to the creation of one of the world’s most liquid markets ever. The Tax Evasion market is estimated to be worth more than $20 trillion dollars and growing. This signifies that a lot of money is moved underground beyond the reach of the governments.
With a tool that bitcoin designed and carefully coded to evade taxes in the strictest situation at the lowest possible cost of transactions, this market is slated to grow even to another level. The major question looming still remains, why then is bitcoin not being widely used? Let’s put is like this, you transfer $100 million from California to buy a city property. If the money is not cashed immediately it remain subjected to price movements which is rather undesirable for bitcoin.
Bitcoin price movements means $1 worth of bitcoin could become $1.2 in just a matter of a few hours. Consider a transaction involving $100m, in a few hours it could become $120m or worst $80m is price moves in the negative sense. This is the main reason why bitcoin is not yet the currency of choice for moving lump sum amount of money around the world easily.
What would be the Government Response?
Should bitcoin average price stabilize, price movement would be insignificant meaning large amount of funds can be transferred via bitcoin without any fears of the deposits losing its value before being cashed out by the recipient. At this point much of these $20 trillion would preferably pass via bitcoins and hopefully the cryptographic algorithm protecting bitcoin will remain untampered with.
The question remains, what actions would the authority take to tame down bitcoin abilities and bring the government back in control. Cryptocurrency exchanges would become a risky venture to operate since most government opposing bitcoin will make them illegal. This means P2P platforms will be used to handle most of the transactions.
