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Is the IRS Taking Control of Bitcoin?
By Lowell Ponte
The widespread fascination with Bitcoin, the digital cryptocurrency, has been in part from its pirate-like mystique as “money,” not created nor controlled by any government, that could be used anonymously to buy and sell privately, free from tax collectors’ prying eyes and greedy grasp.
On November 28, after more than a year of a legal case by the Internal Revenue Service, U.S. District Court Magistrate Judge Jacqueline Corley ordered Coinbase, the San Francisco-based largest Bitcoin dealer in America, to turn over to the IRS the names, addresses, and taxpayer identification numbers of at least 14,355 people who were some of its customers between 2013 and 2015.
The IRS originally had sought the identity of all Coinbase clients as potential tax evaders after it found that only 802 Americans nationwide in 2015 had declared either losing or gaining any money related to Bitcoin. From 2013 to 2015, according to FortuneMagazine, “the price of Bitcoin soared from $13 to over $1,100.”
Federal Judge Corley instead also ordered Coinbase to provide the IRS the identity of anyone who through them bought or sold $20,000 worth of Bitcoin.
The price of a single bitcoin in recent days skyrocketed beyond $11,000. This ruling, therefore, could become a legal precedent requiring dealers such as Coinbase to report anyone to the government tax authorities who buys or sells two wildly-fluctuating bitcoins or less. Will bitcoin owners soon have to kiss their aspirations of financial freedom and anonymity goodbye?
Money is whatever human beings accept as money. Right now many people value bitcoins as money, and this gives the computer-generated Bitcoin its value. This is also why the financial industry and the IRS want their fat pieces of the profit. And perhaps, as its sellers and advocates claim, Bitcoin is the future of money….but it may be a darker future than people expect.
Yes, Bitcoin is a delusion, says financial editor Derek Thompson of The Atlantic magazine, but so is the fiat paper dollar no longer backed by anything. The biggest thing making our conjured-out-of-thin-air dollars “real” is that the government accepts only dollars as payment for taxes, and the Saudis, until recently, accepted only dollars as payment for their oil in exchange for the U.S. militarily defending them.
The value we put on things varies. One Christmas shoppers pay premium prices for Cabbage Patch dolls that a year later stores can scarcely give away. In the early 1600s in the Netherlands, during a famed financial frenzy people paid the price of a house for a single tulip bulb…until the hypnotic spell was suddenly broken and tulip prices collapsed to nothing overnight.
Why do so many at the moment ride the Bitcoin roller coaster as it gains or loses thousands of dollars a week? Bitcoin is far too volatile to be a reliable store of value or medium of exchange on which we can plan a future.
But in a world where many Millennials see their future being little better than a dependable welfare check, perhaps throwing the dice to strike it rich, like wagering your future on a lottery ticket, seems strangely reasonable. Look at those folks who only a few years ago made a two-bit bet on bitcoins that cost 25 cents apiece and now can sell each bitcoin for $11,000. Trouble is, bitcoins no longer cost 25 cents.
Our government has long wanted to banish cash, because it gives citizens too much freedom and anonymity. As Craig R. Smith and I document in our book Money, Morality & The Machine, this is why your bank is now required to notify the IRS of any “unusual” financial activity with your accounts.
And this is why government is delighted to see people switching to Bitcoin, so long as it has surveillance, control, and taxation of what everybody has. Bitcoin can provide more control than old-fashioned paper money, because in this version of government’s preferred “cashless” society, your savings and spending can be turned off at the flip of a computer switch. You can be made completely dependent on government if and when the government takes control of Bitcoin, as it started to do a few days ago. Was this the master plan all along?
There’s a way to escape the trap of a debased dollar and of Bitcoin. For a more detailed look at both sides of Bitcoin, get a new free White Paper, Bitcoin: The Future of Money? by calling 800-289-2646.