In the US, the IRS has single-handedly killed the use case of cryptocurrency as cash.
How?
By deciding that, in their view, cryptocurrency is property and not money.
This means that every single transaction is supposed to be subject to reporting capital gains or losses, which is essentially impossible at scale.
How it works now...
Imagine you bought Bitcoin with cash consistently years ago.
Now imagine you go to buy your $3 cup of coffee.
How are you going to easily calculate your initial FIFO (first in first out) accounting method cost basis for the tiny fraction of a Bitcoin you just spent?
You don't, because its a freaking nightmare to do so.
This also applies to coin-to-coin trades which kills a lot of Dapp (decentralized application) use cases as well.
Imagine going to an exchange, buying Bitcoin, then trading Bitcoin for an altcoin that you need in order to use a Dapp. Even if you just held that Bitcoin for 20 minutes the price would have changed, requiring you to report a gain or loss when trading it for the altcoin.
This is insanity and won't last.
There is hope on the horizon!
There was a bill in 2017 that attempted to create a de minimus exemption for crypto purchases under $600, which would have meant cap gains/losses wouldn't apply if used as a form of currency for payment.
That bill died on the House floor, but a modified version is back in action.
The Virtual Currency Tax Fairness Act of 2020 is a bill being put forward for both Republicans and Democrats that would alter the IRS tax code an offer a
de minimus exemption for purchases up to $200.While I believe $200 is FAR too low and impractical, its at least a step in the right direction and would enable small purchases without the tax reporting obligation.
Coincenter, a non-profit blockchain advocacy group has been instrumental in getting this pushed forward.
If this passes and people are able to spend crypto without being taxed, get ready for a boom
In my opinion there are a LOT of people in crypto that would love to spend their crypto but can't due to the reporting difficulties.
If the bill passed and people could spend their crypto up to $200 without being taxed I think it would create a boom in price and usage as a payment mechanism.
This will eventually HAVE to happen or risk the US getting left behind as the rest of the world takes the lead in competition for crypto and blockchain business.
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Is this good news or bad news. I think that if you start spending bitcoins the IRS will take notice and will ask you how much you paid for the bitcoins and you will be subject to capital gains taxes between the difference between the amount that you paid and the current amount. The opinion of the Team CryptoBrigade I really optimistic because it wants to push the use of crypto currencies. My opinion is totally different since I think that the IRS will start tracking the users of bitcoins in order to collect taxes. Do you really trust the IRS? Well, I don't