Taxing All Bitcoin Buying Will Backfire for the IRS

Bitcoin has a remarkable way of teaching people very rapidly about the law of unintended consequences. A great example is when the Chinese government began inspecting regulated exchanges in February 2017.

Believing that the exchanges might get shut down (they eventually did), buyers flocked to Localbitcoins, a peer-to-peer exchange whose volume surged 3,600% in the course of a month. By trying to keep better track of and control bitcoin users in China, the government drove them to a method that was much harder to surveil. In the U.S., the Internal Revenue Service’s (IRS) treatment of bitcoin taxation has arguably had a similar effect.


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