Joshua Henslee has been releasing lots of highly informative content on his YouTube channel recently. In this video, he touches on how the source of funds rules could crash the digital currency market. Henslee also points out a flaw in BTC that nobody is paying attention to right now. You don’t want to miss this one.
Why source of funds could be the pin that bursts the bubble
It’s no secret that the last couple of years in the digital currency markets has been defined by government regulation. Country after country has regulated digital currencies, exchanges, and other entities like wallet providers, and many more are in the process of doing so. Henslee points out that this desire by governments to understand and regulate digital currencies isn’t going to slow down or go away. Dr. Craig Wright has been warning us about this for years.
What does ‘source of funds’ mean, and why could it be a big problem for the digital currency bubble? Basically, it’s a set of rules that mean banks and other financial institutions need to know where and how their clients obtained funds before accepting them into their bank accounts.
Whereas normal income is derived from employment and clearly traceable investments such as stock trading, digital currencies can be a little more complicated. “If suddenly there’s a $200,000 deposit into your account… you’ll need to create some additional context as to where that money came from,” Henslee says.
Dexes, exchanges, and other unregulated entities could also create issues in this area. If this becomes a problem for a large number of people in the market, the prices of digital coins could plummet dramatically.
“It’s one thing to be a millionaire based on your ETH, SOL, and BTC holdings. It’s another thing when you sell it and want to go buy a house,” Henslee states.
How the fear of this could have ripple effects across digital currency markets
Henslee points out that you can mitigate some of the risks by keeping clear personal records. However, all it takes is one large influencer to be negatively impacted by the source of funds rules, and fear could spread like wildfire across the markets.
Henslee also points out that many people involved in digital currencies aren’t paying taxes. Coinbase (NASDAQ: COIN) and others have confirmed this. “That’s why they want decentralized exchanges, Taproot, and Lightning in the first place,” he points out. Henslee also reminds viewers that it doesn’t matter what your personal views are on taxes; the law says we all have to pay them.
Tainted coins make BTC non-fungible
However, the stampede for the exits that could be triggered by a spotlight on the source of funds rules isn’t the only problem facing BTC. Henslee points out that all of the ‘privacy-enhancing’ technology like coin mixers taint UTXOs, and this is a much bigger problem for BTC because it will lead to a situation whereby coins are non-fungible.
“When you have coins that are tainted, you now make BTC non-fungible,” Henslee says.
He points out that buyers don’t have much to worry about from a legal point of view because the law protects them as long as they can prove they bought coins legitimately. However, they may find their BTC coins are worth less than ‘clean’ coins bought on regulated exchanges.
Awareness of this could trigger a much larger stampede for the exits, Henslee reflects. He notes that there’s lots of hubris and arrogance from people who only care about fiat gains and don’t truly understand Bitcoin.
Tether and its role in the digital currency trading system
Henslee points out that you can’t deposit fiat currency into Binance in the United States. There are many other exchanges like this, and it’s by design.
Getting into and out of trades in USDT and USDC solves the source of funds problem to some degree. This way, users can show that they sold Tether for USD or another fiat currency without worrying that the BTC or other coins they sold for these stablecoins might have been tainted or difficult to trace. However, he also states that many observers see Tether itself as a massive risk to the entire system.
“That’s the way they want it,” Henslee says. “I don’t know how much longer it can go on.”
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