The Potential Fall Brought by the Rise of Cryptocurrencies
Here’s some food for thought, what would happen if our nation’s principle source of tax revenue was drastically cut? On top of that, what if it happened when we were 20+ trillion dollars in debt?
Ever since Satoshi Nakamoto created Bitcoin in 2007 and successfully implemented the first blockchain database, cryptocurrencies have steadily been on the rise. The promise of a decentralized economy, fast and cheap transnational transactions and the scarcity of online currency make it a valuable asset in the modern world economy. Its reputation is shifting from shady, digital coins used to power illegal enterprises like the Silk Road, to a legit currency accepted by companies like Amazon.
I have invested in four currencies myself and am always trying to learn about the technology of the crypto-market. In my research, I came across A Sovereign Individual, written in 1997 by James Dale Davidson and Lord William Rees-Mogg. It outlines the imminent shift to the information age in the 21st century, the potential rise of “online money” and its impact on the world economy. According to Davidson and Rees-Mogg, if adopted in mass scale, this form of currency could undercut the taxing power of nation states by 50–70%.
Currently, the IRS classifies cryptocurrencies as “intangible property” and goes under capital gains or losses taxes. However, taxing could become increasingly difficult as the more people and institutions join the decentralized economy and the technology of untraceable money continues to evolve.
Will Davidson and Rees-Mogg be proven right? Will the rise of cryptocurrencies spell doom for the modern nation state? How will countries like the US evolve in their tax systems to adjust to such rapid innovation?
As a designer, one of the most vital things to me is finding the most valuable problem to solve. I don’t claim to have solutions, but clearly there is an emerging problem on the horizon that needs to be addressed. I am curious how the tax system, or even government can be redesigned to address this issue.
I am still a relative novice when it comes to cryptocurrencies and am always looking to learn more. If you want to discuss this issue, any issue, or even just say hi, feel free to reach out to me at email@example.com.