In spite of what some may have believed until now, Bitcoin was never designed to circumvent legal financial obligations. To the contrary, it was designed to work within the system and function, in many ways, as a currency – but as a better alternative. In every society, taxes are a natural part of life, whether we like it or not. Crypto is able to work within those systems through the incorporation of a simple script and Dr. Craig Wright explains in a blog post how and why this is important.
Asserts Wright, “It is possible to integrate a value-added tax directly into Bitcoin using script. Doing so would allow an organisation to pay its VAT [value added tax] instantly on the sale of goods or services. Further, it can be integrated in such a way that even a reversal from the customer would allow instant and automated taxes to still apply without fraud.”
This means that it would be easier to apply anti-money-laundering laws, tax responsibilities and more. It would also bring all crypto entities into the realm of tax regulations, which is currently one of the biggest reasons governments have not been more willing to pursue oversight. The lack of established guidelines relating to tax implications has kept them away.
Even crypto exchanges are on the hook for taxes. Wright adds, “What people fail to see is that money-laundering protections require exchanges to capture your identity. If they are not doing so, they are a criminal organisation and will be shut down. If you’re using a criminal exchange, you can expect it to be seized and your funds to vanish. In other words, your investment will become worthless in moments. Anti-money laundering provisions apply even when we’re talking about peer-to-peer exchanges (such as the mythical unicorn, a DEX [decentralized exchange]).”
Bitcoin was created to be “an immutable evidence trail.” It was never designed to be an anonymous system – private, yes, but not anonymous. IT wasn’t meant to facilitate illicit activity or fraud, such as what was seen by e-gold and bit gold. Wright explains, “…[T]he reality is that the more we allow people to get away with scamming the system and cheating, the more we give government departments an excuse to crack down on us and invade our lives and our privacy.”
Once more individuals realize, and recognize, the true purpose of Bitcoin, it will be allowed to flourish as intended. If we work to develop an economic system that works in harmony with governments – which will always be a requirement – it will thrive. As Wright aptly states, “If we want privacy, the best way to achieve it is to work within the system to ensure that those in charge of the system do not unduly crack down and stop people from being free. It is the anarchists and those who seek fraud that bring restrictions upon the rest of us unfairly.”
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.