This Week In Bitcoin July 18, 2016
Bitcoin Goes Mainstream, Money Laundering, Capital Gains and Inheritance Tax
Bitcoin is becoming more user friendly and more trusted among young people. This week my friend Phoebe asked me for bitcoin:
After Phoebe sent me a payment address, she had zero steps to receive money.
Compare the experience of my friend Kerry, to whom I sent digital dollars. Despite the fact that Kerry and I both use the same bank, Kerry needed to complete four steps before receiving dollars:
My transaction with Phoebe cost $0.10 in bitcoin. My transaction with Kerry cost $1.
Nevertheless, doubters persist. One of my readers wrote to me: “Bitcoin is completely abstract. At least USD and CAD can be touched, or stored under your mattress.”
In fact, 90 to 95% of USD and CAD (dollars) cannot be touched as they are digital bits stored on inscrutable central databases. These bits can’t even be held by you and me, because they are necessarily entrusted with banks. How these bits are created and who benefits from their creation requires expert knowledge, but even the experts can’t agree how many ‘dollars’ exist, as demonstrated by the myriad measures of money such as M1, M2++, etc. All we know for certain is that the number of ‘dollars’ increases exponentially. In fact, dollars are complex, indefinite, and intellectual: synonyms of ‘abstract.’
By contrast, the code that runs bitcoin and its real-time ledger are available for inspection by anyone. Exactly twelve and a half bitcoin are created every ten minutes. Last Saturday there were exactly 15.75 million bitcoins. Bitcoin is simple, objective, and finite: antonyms of ‘abstract.’
I’m not able to say with certainty that the Bank of Canada is a fraud or a pyramid scheme. I can say for certain the Bank of Canada is obfuscating the truth by talking about QE on their FAQ, while admitting QE is unrelated to CAD. I can also say for certain they’re withholding the truth by refusing to clearly answer simple questions such as: “Who benefits from the increasing supply of Canadian money?”
Certainly our mistrust of the traditional system should grow after this week’s congressional report revealing the US Department of Justice did not prosecute HSBC for money laundering in 2012 because the Bank of England warned it would cause a global financial disaster.
Money laundering is a topic I explored on my podcast this week with Economist Maxine Cunningham, who analyzes bitcoin as a potential investment. Cunningham and I also explore the difficulties faced by tax institutes as they attempt to determine capital gains and inheritance in bitcoin. Payment of these taxes for bitcoin is largely reliant on self-reporting.
Finally, congratulations to programmer Felix Weis, who completed a round-the-world trip spending only bitcoin. Here he is on the the Island of Yap, notable for its fascinating monetary history.
Want more? My article of the week is It’s Not About the Technology, It’s About the Money by Daniel Krawisz.
