Joe Colangelo is the founder and CEO of Boxcar, the “Airbnb of parking.” The following article is an exclusive contribution to CoinDesk’s Crypto and Taxes 2018 series.
Bitcoin has a remarkable way of teaching people very rapidly about the law of unintended consequences. A great example is when the Chinese government began inspecting regulated exchanges in February 2017.
Believing that the exchanges might get shut down (they eventually did), buyers flocked to Localbitcoins, a peer-to-peer exchange whose volume surged 3,600% in the course of a month. By trying to keep better track of and control bitcoin users in China, the government drove them to a method that was much harder to surveil.
In the U.S., the Internal Revenue Service’s (IRS) treatment of bitcoin taxation has arguably had a similar effect. By effectively telling taxpayers they need to calculate capital gains taxes for every $25 gift card purchased with bitcoin, the IRS is giving them one more reason to treat bitcoin less like a payment protocol and more like digital gold.
But perhaps more importantly from a public-policy perspective, the agency’s guidance may encourage citizens to use unregulated foreign cryptocurrency exchanges and transact using privacy coins such as zcash and monero. It’s almost certainly a contributing factor behind the estimated 0.5% self-reporting rate among bitcoin users come tax time. Read more from coindesk.com…
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