If you’ve watched the news, overheard any business district lunch break conversations, or even meandered through a busy grocery store lately, then you’ve probably heard about Bitcoin the digital crypto-currency.
Bitcoin, built upon digital blockchain technology that records every transaction on a ledger, is, to many, the answer to government controlled and inflation prone fiat currencies. And it has been on an absolute tear in 2017 as it gains acceptance among established financial institutions and retail speculators that want in on the action.
It sailed passed $10,000 per coin earlier this week before correcting approximately 20 percent in short order. The headlines have added to the mania and now it seems even Grandma is trading digital currencies.
The premise behind Bitcoin – a self-contained, finite, anonymous digital currency that verifies truth in transactions via blockchain ledgers – seems to line up well with Conservative and Libertarian values that necessarily make them skeptical of central bank control of money, inflation that erodes buying power, and the government’s inclination to forcibly take cut of any and all financial transactions.
A currency with a finite limit, expanding transact-ability, and ostensibly insulated from government control does give a sense of freedom from Big Government.
However, the accelerated price appreciation over the last 12 months should give any interested buyer pause, especially when total novices feel compelled to jump on the bandwagon to make some money. Such popular sentiments among retail investors for the latest and greatest hot commodity is usually a contrary indicator that smart money insiders use to sell their positions to naive Mom-and-Pop speculators.
More importantly though, and something Conservatives know to be all too common, the more attention Bitcoin and other crypto-currencies receive from the masses and Wall Street, the more attention they will in turn receive from regulators and the guys in suits at the Internal Revenue Service.
To that point, the IRS just won a court battle to gain access to 14,000 Bitcoin accounts in order to collect unpaid taxes from Bitcoin traders that ‘failed to report transactions.’
You can always count on Uncle Sam to stick his long arm into your pocket – no matter how advanced the technology is or insulated from government regulation you may think it to be.
In a ruling on Tuesday, a federal court judge ordered San Francisco-based Coinbase to comply with a summons that requires it to identify 14,355 accounts, which have accounted for nearly 9 million Bitcoin transactions.
The order, which covers transactions between 2013 and 2015, comes after a prolonged court fight that began when the IRS demanded that Coinbase provide detailed personal information for more than a million customer accounts.
“The summons as narrowed by the Court serves the IRS’s legitimate purpose of investigating Coinbase account holders who may not have paid federal taxes on their virtual currency profits,” wrote U.S. District Judge Jacqueline Corley.
On top of the risks crazy price swings and similarities to many since popped financial bubbles in history, the original attractive attributes of these digital currencies will only erode further as governments move in to either regulate or snuff out the new Wild West of alternative currencies.
Either government will remove the threat to their monopoly on stores of value, or they will make sure to take their cut of anything they can get their grimy hands on.