Bitcoin is Property. Really? Who decides this?
What would the legal and tax implications be?
What is the reality and how does it pan out when you apply a bit of logic?
There has been much debate over the legal status of Bitcoin. Some argue that Bitcoin is property and should be subject to various taxes, while others contend that Bitcoin is a currency or commodity and should not be subjected to the same regulations and taxation.
The official stance of most governments has been ambiguous, with many countries still determining their exact position on the matter.
However, there appears to be an emerging consensus among legal experts across jurisdictions that Bitcoin is property.
I want to challenge that line of thinking.
Definition of Bitcoin
Bitcoin is a digital currency and a form of money that operates as a peer-to-peer network. It allows users to send and receive funds without using intermediaries like banks or credit card companies.
Bitcoin the currency is the token used in this system, while Bitcoin the network is made up of computers all over the world that validate transactions and secure the blockchain by solving complex mathematical equations.
Bitcoin provides an innovative way for people to store value, transact, and invest without relying on third parties.
Overview of Bitcoin’s History and Rise in Popularity
Bitcoin is a decentralized digital currency created in 2009 by an anonymous individual or group of people known as Satoshi Nakamoto.
It has since gained great popularity, with its market capitalization rising from a few hundred million dollars in 2013 to over $500 billion today.
Bitcoin has become increasingly accepted as a legitimate form of payment for goods and services and is also seen as an attractive investment asset due to its potential for significant gains.
Why I Would Argue That Bitcoin Must Not be Considered Property
The difference between possessions and knowledge is really important, you know?
You can physically own stuff, like a leather wallet that contains cash, but that doesn’t really apply to cryptocurrency.
I mean, if someone steals your wallet, it’s no longer yours, right? It becomes the thief’s. But that’s not the case with a private key.
It’s not something you have, it’s something you know. Think about all those people who are super careful about their seed words.
Can any of them seriously guarantee that nobody’s ever taken a peek at those carefully preserved pages?
Any law that treats cryptocurrency as a tangible possession instead of a type of knowledge is just plain wrong.
Blockchains are all about knowledge and verification, not physical possession. I mean, it’s an undeniable fact, right? You can prove it.
Financial Regulations
Now some would argue that my approach doesn’t hold water because we cannot physically own money that is represented digitally in our bank accounts. I disagree.
The reason this is different is because a third party assigns you legal rights to owning a bank account which is underpinned by financial regulations that are enforced by governments using violence.
Think I am wrong?
What happens when you have a lot of money in the bank and haven’t paid taxes?
When you get caught the funds you have will be confiscated and you will likely face a prison sentence that is enforced by government officials who physically exert power over you.
Lack of Tangible Attributes
When it comes to cryptocurrency and blockchain, it’s not about owning, but knowing.
The important laws are about creating and sharing knowledge, not just possession.
Imagine this: You see someone bringing your bins in from the curb, and you now feel obligated to reciprocate next time.
Does that make you a money transmitter? There was an exchange of value, right?
So, what rules should apply to witnessing and speaking the truth?
Can I be classified as a money transmitter simply because I witnessed and can testify to value being exchanged? Which by the way is exactly what a node does …
Lack of Recognition by Governments and Banks
The legal status of Bitcoin as property becomes a tricky issue due to the lack of regulation from governments and banks.
Without a clear framework or infrastructure in place, defining and protecting ownership of this digital currency is a complex task. Since the technology behind Bitcoin is decentralized, confirming ownership becomes difficult for any government or bank.
As a result, users are left without legal protection if their Bitcoin holdings are stolen or lost, as there is no official entity to recognize such claims.
Adding to the complexity, traditional concepts of property and ownership do not apply neatly to bitcoin, as it cannot be physically stored or transported like traditional money.
With its abstract nature and lack of physical form, bitcoin doesn’t fit snugly into existing regulatory frameworks designed for tangible assets.
Consequently, it remains unclear what can exactly be considered ‘property’ concerning this digital currency.
Implications for Owners if Bitcoin Is Property
Most jurisdictions are either too lazy, unwilling or simply too incompetent to deal with Bitcoin as an asset class. I agree it’s not an easy task, but the lack of willingness is not only because of the complexity but potentially also because it is a revolution against the status quo. A sort of “money rebellion”
Bitcoin is like air or sunshine. The difference is that governments cannot provide replacements for the sun or the atmosphere.
For money, they can, and have done so for centuries. Losing that power and hold over the population is not in their interest.
Taxation Considerations
When considering bitcoin as property, it is important to take note of the taxation considerations.
Taxation on Bitcoin can vary greatly depending on the jurisdiction and how it is used.
In general, capital gains taxes are applicable when an individual sells their bitcoin for a profit above what they purchased it for.
Additionally, income taxes may apply when a user receives payment or compensation in Bitcoin.
Accounting for your Bitcoin Tax Revenue is not easy. It is important to research the local regulations and ensure you understand any taxation implications that may exist before participating in any activity related to Bitcoin.
Difficulty in Enforcing Ownership Rights in Court
Enforcing ownership rights of Bitcoin using the legal system has proven to be an incredibly difficult task for both holders and governments.
This is primarily due to the decentralized nature of cryptocurrency, which makes it difficult to distinguish between legitimate and illegitimate transactions, as well as locate and identify the parties involved.
Furthermore, since cryptocurrency is not regulated by traditional banking or financial institutions, there is no central authority to enforce any laws or regulations related to ownership rights.
This lack of oversight leaves holders vulnerable to potential fraud and theft, making it difficult for governments to protect their citizens from such risks.
Also, in some countries, there are currently no laws that specifically govern the use of digital currencies like Bitcoin.
Thus, enforcing ownership rights can be a complex process often requiring specialized knowledge and expertise on the part of both holders and governments.
Conclusion
Cryptocurrency isn’t something you can hold or touch; it’s a concept based on knowledge.
Think of a crypto wallet like a keychain that securely holds cryptographic keys instead of physical money.
When you “transfer” cryptocurrency, you’re not actually moving anything physical; it’s just updating the ownership records.
Addressing misconceptions about cryptocurrency and changing long-held beliefs requires collective efforts.
Let’s all aim for a deep understanding of this fascinating realm!
What is your opinion on the matter? Leave me a comment below.
