The government crackdown on crypto is about to start in the US
I predicted that this would happen. We saw crypto banned in China, in Russia, in many other countries. Now that Bitcoin is over $11,000 we are about to see crypto get banned in the United States. They will not directly ban it but will make it so much of a burden to use it (tax increases, deliberate complexity, etc) that no one will be able to do anything with crypto beyond buy and hold. The crackdown will be so harsh that I expect there will be people who will receive life sentences over not revealing their crypto holdings to the government. We may even see a special police agency created specifically to accelerate the crackdown.
In my opinion this is going to be theoretically futile. Very sophisticated users will be able to anonymously exchange value just as they have always done. Less sophisticated users will be caught up in the net and could receive extremely tough penalties.
Those with a deep understanding and awareness of cybersecurity understand that tracking value transmissions over a global network is impossible. It was impossible prior to Bitcoin and remains impossible after Bitcoin. I will not discuss the technical details for why this is theoretically the case but only express these facts so that my opinions are put into context. Hackers can break into networks undetected, and they'll be able to move millions or billions of dollars of value across networks undetected.
Gov't will use the next crash in crypto as an excuse for a crazy ass crackdown. To "protect" the consumers...of course.
Hi @dana-edwards So it begins. I agree with you that this will be futile. From the very beginning the cryptocurrency forefathers have already predicted this will happen that is why there is much emphasis on decentralization and anonymity built into most if not all cryptocurrency. Let the next phase of battle begin between those who wants to emancipate money vs those you wants to control it for themselves.
If corporate adoption continues the government will have a more and more difficult time cracking down on its use.
Let's see if and how much Monero and other privacy coins will spike when this starts rolling out in the US.
That is what I believe too. Privacy coins will be the future of cryptocurrencies. Just choose today the right one.
I have confidence that many people in the crypto world will always be one step ahead of the government. Unfortunately, the government will crackdown and make an example of one poor soul as a scare tactic to instill fear in the many so everyone else will fall in line and comply. The Founding Father's of the US must be rolling in their graves. It is a disgrace to see how far we have come from the ideologies and principles that made this one of the greatest nation's on earth's history. Big government and crony capitalism is turning this country into a disgrace. I can't remember the last time we were not at war or had elected representation that actually cared about our freedoms and liberties. Crypto was designed as our way out. Of course government was nowhere to be seen when BTC dropped from $1000 to the low $200's. Now that BTC broke that $10K mark, they are suddenly interested and want their piece of the pie...
We always knew it was going to happen
This is why I had mixed feelings when BTC passed $10K. Now it's on the radar and everyone is talking about it. People are investing and they have no idea what the Blockchain is or what the ideologies and history of BTC is. They are just FOMOing and buying for purely speculative and greedy reasons. This could lead to a bubble, crash, and then the government comes to the "rescue" with regulation and takes over BTC as we know it.
Maybe as YOU know it. But I know different things.
Simple answer...
The Government could come along and BAN THE SUN tomorrow...
So, if that happens, will YOU stop seeing the sun? If it was illegal?
Now go out and read the Code in Bitcoin and discover for yourself that it's about as easy to regulate as the Sun. So if you don't have anything constructive to share, you're spreading the FUD of ignorant speculation. I've heard predictions like yours for years. But the truth is, what you're suggesting is similar to Banning the Sun. Seriously!
Bring it! The authoritarians can only do so much... things are breaking UP and AWAY!
Bitcoin's code is a better regulatory layer than Politicos who are most certainly criminals themselves.
The FUD of Law Law land doesn't go so far anymore...
It's starting. Coinbase has to give up the info of investors who had more than $20K invested in 2013. This is their foot in the door.
On the other hand, it’s been said that regulators have been open-minded and are working to accommodate innovation in the space.
You’ve said before to pay your taxes (income and capital gain) on crypto earnings, and it’s understandable AML is a valid concern as the domain evolves...
While this post and some of the news coming out on such regulation seems a bit fear-based, do you still foresee things flowing relatively smoothly for those who choose to remain compliant, handling tax matters responsibly, etc?
It is futile. We pay taxes to avoid the consequences of not doing so. AML has a 99% failure rate in law enforcement and that is with cash and other less sophisticated methods. In the digital realm, the very foolish and the innocent could be caught up in stuff which they have nothing to do with. The sophisticated criminals, hackers, etc, will easily get away with it.
So this bill in my opinion only creates additional risks and it is unclear what can be gained from it. I mean if 99 out of 100 who attempt to hide money are successful at it then what is the point? And think about the scope? If the government demands everyone declare the cash under their mattress it would be similar to this bill. Are they going to check under every mattress?
What this bill will accomplish is to create a psychological burden on people involved with crypto. People will feel psychologically uncomfortable having to declare their crypto. This is similar to how people feel uncomfortable being strip searched to get on an airplane after 911. Due to technical and theoretical reasons, this will not stop the sophisticated criminal.
On compliance, I think if you comply you probably will be fine but the burden of compliance is just another psychological cost to prevent people from actually using crypto. If you use a crypto which is not anonymous (such as avoiding Dash, Monero, etc), then you may reduce your risk but with something like money laundering it is hard to know exactly. If someone or some bot gifts you Zcash and you accept it, now you have to figure out what to do about it. If you have to report what crypto you have, and you report you have Zcash, what are the consequences going to be for possession of a high anonymity crypto?
So you’d figure best to simply play by the book, file your taxes accurately reporting income and capital gains, declare holdings if it “required,” hiding nothing, eliminating as much risk as possible by being a straight-shooter with nothing to hide?
That’s the gyst I’ve pieced together from some of your other views on the matter, though would just like to clarify. Your wisdom in such matters is respected and appreciated.
Also curious as who the “foolish and innocent” would constitute of, and how you’d foresee that part playing out, what type of stuff they could get caught up in...
I figure it is up to each person to determine the risk vs reward for compliance. If you have a lot to lose then you probably want to comply but I'm not a lawyer. The only thing I know is that the psychological cost being raised is not good for crypto as it will make it much harder to use in a transparent manner. People will always have ways to do anonymous and or pseudo anonymous value exchange. This just makes crypto less attractive to the mainstream.
The foolish are the people who use really stupid methods to try to hide or launder money or value exchanges. Such as people who go to some website which offers to tumble your coins without using a VPN etc. That would be a foolish criminal and there are a lot of these in the crypto space.
The innocent are people who just get caught up in investigations. As far as taxes are concerned, there is not a lot of clarity on exactly how to do it. Also there is civil asset forfeiture if you were not aware, and RICO.
Great answer.
For myself, I feel doing everything legit is the way to go. Were I still younger, more rebellious and anti-government, and single, the temptation to cut corners would be greater. Having wisened up a bit as a married man, priorities have shifted. Too many legit opportunities in this space to mess around trying to save 15% or fight the system. Securing a sound future for my family and conducting business with integrity is far more important than any gains that could be had messing around...
For me, I do things which I consider smart whether I'm pro or anti. If you have a significant amount of money you earned in crypto then would you want to risk losing it all because you are pissed off at the IRS or FBI or some random agency? People who are in crypto have a legit chance to become millionaires and compliance is how individuals and companies keep their profits. Compliance isn't even enough, as there is more involved in asset protection strategies than mere legal compliance.
People who decide to be secretive will not be stopped by any laws. If people determine the rewards are very great and the risks very low then we have to assume people will be doing it no matter what the law says. A law is only as good as law enforcement is effectively enforcing it. My argument is that money laundering in the digital form is impossible to enforce and it is the same argument you could make about the great firewall being of very limited effectiveness and so on.
For the typical Chinese person it is true that this will probably keep capital from flowing out and people will probably not bother going through the effort. For sophisticated individuals or and organizations there is nothing that can be done to prevent capital from flowing out, to prevent value from moving where people want it to move.
So I will say if someone has plenty of legit opportunities to become a millionaire then why mess that up by getting involved in unnecessarily high risk opportunities? On the other hand a homeless person or young teenager is not going to care, and either of these people being locked up for money laundering in my opinion is what I mean by the innocent or the foolish.
People might disagree and think homeless people deserve to go to prison on that or that teenagers messing around with Monero deserve to get a criminal record, but I think there is a big difference between the poor and young who take risks to get ahead vs the rich and old being greedy.
It's intelligent contributions to the community like this, I appreciate dearly.
I've come across so many here embodying the "fuck the government, they don't deserve anything" attitude, that such a mature voice of reason so clearly painting such a counter-perspective is priceless. 🙏
it is not about taxes...it is about control
Control leads to taxes and more regulation. The very things BTC was designed to break free from. It was meant to give financial freedom back to the individual that would be universally accepted, without borders, and free the inflationary natures of the corrupt central bankers & big government.
I guess you are right...I see a war in the horizon...God have mercy!
I don't hate all regulation, I really don't, but the NY BitLicense is an abomination that really turned me off to anything regulators have to say about the cryptocurrency space.
Regulators aren't really being open minded in this bill anyway. The bill here is both a burden on the honest crypto users and also not likely to be effective against highly skilled hackers, terrorists, etc. Terrorists don't even use a lot of money in their operations and haven't needed crypto before because they have hawala or even bag of cash exchanges.
The threat of terrorism is also very low statistically and the success rate for tracking money is also very low. Look at the fact that the bill wants to increase the years in prison from 5 to 10 years for money laundering. Sophisticated hacker will never be caught on money laundering, so who is most likely to be arrested on something like this?
How can Uncle Sam pass up on another lucrative tax collection opportunity?
They get less tax actually. Money laundering produces tax revenue.
The bankers will NOT let go of 'their' system without a fight!
'They' will use Media campaigns (crooks / t3rror etc etc)
it will fall flat because 'crooks' use cash!
'They' will also try & use "regulation" / laws etc.
it will fall flat because horse has already bolted
Solutions:
Excellent post Dana as always. I am sure the Governments would do all possible in their strides to stop the flow and usage of bitcoins and other cryptos. But the big question is , will they succeed ? Maybe temporarily yes but we have seen what happened to the price of bitcoin after China crack down.
Regards Nainaz
#thealliance