The math behind crypto doesn’t magically make you immune to government oversight. All they have to do is ask, and you better not lie.
That doesn't make them incompatible, but it does perhaps provide some lessons for everyone on why financial systems are the way they are as it is, and how you can't just jump on a technology and escape.
At the very least it has all been an interesting thing to learn from.
27kWh of energy burned per transaction, with a maximum scaling limit on the order of 5 or 6 transactions per second. If everybody in the world used Bitcoin, then you'd be entitled to your one transaction every few decades.
A costly lesson, interesting, but costly.
That seems like a pretty big hassle.
That technolibertarianism is rampant throughout the tech industry and not just in the crypto space. Ignoring laws is viewed as being perfectly fine as long as you label it "disruption". I don't see much difference in peole running unlicensed hotels out of their condo with the help of Airbnb compared with a crypto trader dodging taxes.
If you pay someone for cryptocurrency in cash and they send to a wallet you have set up by yourself there is not really any way to prove that it's yours.
because asking everyone how much they have in offshore tax havens is working so well.
heck, not even when the information is given to the IRS anything happens: https://en.wikipedia.org/wiki/Panama_Papers#United_States
US based coin exchanges like Coinbase do
If anything is actually protecting clients against crypto theft, it's the exchange's privately-purchased insurance rather than the government. Although I wouldn't rely on that for much either as insurers are rarely eager to pay out.
But you better hope it is truly untraceable, and that no one else involved in that transaction makes it traceable, otherwise the IRS will come for you.
Same with crypto, except it is a lot easier for someone else to make you traceable since all the transactions can be traced to their origin on the blockchain. If someone you transacted with files US taxes, it's not that hard for the IRS to trace that back and ask who the BTC came from. It would only take one person turning on you for you to get caught.
It's really not worth it.
I can't tell if you're acknowledging this, or if I am mistaken about this but I don't think you can legally avoid income taxes by being paid in kind. My understanding is if you're a US citizen you have to pay Uncle Sam on everything you earn not just every dollar. Otherwise we'd all just take our paychecks in krugerands.
You don't typically pay taxes on stocks you currently own. You pay taxes on capital gains from the sales.
Not legally, but the math always gives you a stronger presumption of innocence than you'd otherwise have.
The economics are the same as gold mining, where what gives gold value is the fact that the expected returns from mining it are always negative. With gold, the concept is basically just that different types of sand have different weights, so due to a quirk in physics if you shake up sand the the heavier types of grains go to the bottom of your bucket. The fact that you can't ever reverse entropy like this (predictably) profitably is what secures its value. Similarly, with crypto what secures its value is that electricity cost of mining always outweighs the expected value of the crypto mined.
Anyway because the expected returns are always negative, it's much harder than it would otherwise be to identify people who have actually beat the odds to make money. Maybe not with Bitcoin due to the design of the ledger, but certainly with other cryptocurrencies.
If you Google for people who have made the money money mining gold, there are literally zero results. Why? Because the expected negative value makes it exceedingly difficult for the IRS to convict folks who are cheating on their taxes.
The typical MO for tax evasion is to just not report your side gig (crypto or otherwise), hope you don't get caught and play dumb and pay up if you do get caught. This doesn't change whether it's crypto or doing under the table work which is the point I'm trying to make here. You either pay up front the right way or have a chance of not paying at all (tax evasion) but if you get caught doing that you pay slightly more for not paying up front. Anyone who is being charged with tax evasion is doing something very stupid.
It should be obvious but the people who've revived these letter should play dumb (if applicable) and pay up at this point since clearly the IRS knows that they owe more than they've paid.
The nice thing about the IRS is that intent is pretty irrelevant. You make money, you don't pay taxes, your wages get garnished and your bank accounts seized for taxes, fees, penalties and interest. There's no messing around with the IRS, intent not required. If they can show intent you go to prison.
[edit] The difference with under the table work is that you get cash, then you spend the cash and not a record was made, then you've got the IRS forensic accountants on your ass if you do it too much. With crypto if you want to get your purchasing power back you pretty much have to go through a fiat gateway, every transaction there is logged, and likely reported.
The first time I had to deal with them, I was surprised that the IRS is very professional, patient and courteous to me! I believe if they assume you're not trying to cheat taxes, they will help you to solve your case.
I can't stress how common this is with cash only side gigs. People hope they don't get caught and if they get caught they play dumb and agree to pay X per month to settle the bill.
They need to show intent or get you to lie to them if they want to put you in prison (which they don't because they want your money instead).