The more I consider the long-term implications of cryptocurrency and its exponential growth in circulation and consumption, the more I contemplate the effect this could have on government revenues.
It can be debated whether Bitcoin or another coin or this coin or that coin will endure, but there is no question - blockchain - and cryptocurrency - is here to stay. Yes, Bitcoin could be the "Myspace" of today's crypto world, to be later over-shadowed by a "Facebook". But the technology behind these coins and their popularity will only grow.
Which begs the question: How will governments respond to this when more and more of their piece of the action pours like water through their fingers? How will governments gather funds?
It's true, even now, that governments know all about your income long before you ever file for taxes. The process of filing taxes is, in and of itself, a massive industry, established and lobbied for by large "tax-help" companies to assist customers in sifting through a ridiculously complicated tax code. This business also stands to lose a great deal of money if cryptocurrency becomes the de facto standard for transacting wealth.
The crypto-anarchist might say, "Cryptocurrency will finally bring an end to unjust and oppressive governments taking our money and misusing it!"
I highly doubt the reality of this scenario. Governments will find ways to get revenues. How, is the question.
Perhaps more per-use fees will have to be introduced. Fees for all kinds of government services. Sales taxes, also, would have to gather a substantial amount of funds. It is conceivable that, in the future, we may have no income tax, but instead a very large 30-40% sales tax on goods and services. Significant revenues could be gathered through taxes on consumption, services, and entertainment. Utilities might also instead have much greater tax charges included in fees.
And let's face it. Roads and infrastructure are kind of nice to have and to be maintained. Schools, police, firefighters, parks, public sanitation, and legal systems are pretty nice too. This stuff costs a lot of money.
No doubt about it. The government will get their taxes! There truly is no avoiding it.
And what will happen to those big tax-help corporations that are so willing to add to the cost of processing your taxes even though most of it could be done automatically? Will they go the way of Blockbuster Video? We can only hope...