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Germany: Bitcoin Is "Private Money"
hypnosec writes "Germany has declared Bitcoin as a 'unit of account', which makes the virtual currency a kind of 'private money' and the process of Bitcoin mining has been deemed 'private money creation.' The recognition as 'unit of account' makes Bitcoin eligible for use in "multilateral clearing circles" and because of this citizens are liable to pay capital gains tax, if they profit from the crypto-currency by sale or purchase within a period of one year – the same as they would have to in case they profit by selling stock, bonds or other form of security. The question here is how the finance ministry would come to know of a person's Bitcoin holding as it is a decentralized currency with no governing body to keep count on the number of Bitcoins a person has. The German government expects that citizens declare their Bitcoin while filing their annual tax return."
Honor system, but if you do anything to get on their shitlist they'll eventually find it out when you try and get it converted into salable assets.
Undocumented income may be frowned upon, but UNDECLARED income is worse if you get caught.
Remember Al Capone after all :)
Way back when, I placed a pre-order on a small BitCoin miner from Butterfly Labs. Later they sent me an e-mail wanting to know if I wanted to continue with the order, or get a refund back to my PayPal account. I chose the refund. Thank God! Having to deal with all this IRS and other legal regulation shit is too much of a PITA. No doubt the NSA is tracking BitCoin transfers and users too at some level.
Life is not for the lazy.
Paper money and coins are just as anonymous, and we've been working with them fairly well for a thousand years.
If I were to start a cat breeding business and buy/sell/trade cats as currency, making money on some, losing money on others, it's a currency. If I am stupid, I'll play dumb declare nothing, and the government will come after me eventually and measure my income against my stated non-cat income, and sentence me to Al Capone Prison. Smart is declare it a business. Write off everything I can, and count every sale as a sale of a stock or pork bellies or a cat. If it's a business, I pay taxes only on profit, not income.
These are the US rules today, bitcoin changes nothing.
Learn to love Alaska
Yes, you can still turn a profit if you're using the appropriate technology and managing power cost. No, it's not a profit if the revenue is less than expenses.
However, there are other ways to make a profit that are sustainable, useful, and fulfilling. With bitcoin, you need to buy new equipment every year or so. With carpentry, for example, your equipment lasts a decade or more. With carpentry, programming or most any other business activity, you end up producing something that's actually useful and often beautiful. With bitcoin, you end up producing a number, nothing useful and certainly nothing expressive.
But how about when it has to do with money and taxes? Oh boy, so now they understand perfectly?
I actually never thought governments would move this fast to regulate BitCoins.
I suspect it helps that, while they depend on a novel mechanism for preventing duplication and double spending, BitCoins aren't really conceptually much different, once they hit the market, from the assorted oddball synthetic commodities that people (albeit generally not the general public) have been trading for years, often decades.
This means that governments are both already familiar with similar things (so they probably have applicable laws or easily adapted laws on the books) and that governments are already familiar with the tendency to concoct and sell ever more creative synthetic assets (so they are probably already used to dealing with new asset flavors popping up, and either have a system for moving quickly or sufficiently broad definitions to catch what the investment bankers have been inventing).
That's the thing: bitcoins are architecturally somewhat novel; but as a commodity that people trade with each other (especially if they trade for currency or for securities with established market values) it really doesn't bring anything fundamentally new to the table. We already have 150+ currencies in circulation, and an unknown number of stocks, bonds, futures, and more exotic derivatives. The fact that bitcoins use a different anti-counterfeiting measure doesn't really make a whole lot of difference when trying to slot them into existing regulatory structures.
"we can all see how slow they are achieveing anything at all. We can see this clearly with patents, copyrights, sexting and any other number of subjects."
Not even. Not in regard to patents and copyrights, at any rate.
The government hasn't been "moving slowly" at all. It was changes made by the government within the last 2 decades that have CAUSED the problems. Both patents and copyrights worked just fine prior to that.
(No doubt some people would argue with me about the "fine" part, but it's pretty easy to demonstrate that they worked BETTER than they do now, under the current, changed laws.)
Of course, now that the NSA and Germany's equivalent can reach deep into your private online data, perhaps they *will* know exactly how much Bitcoin you have, and exactly how much you sold.
------ The best brain training is now totally free : )
So, if one's bitcoins are considered "Private Money" and instead of a profit, I take a huge loss, but my state sanctioned currency is in abundance, then I can sum the two values and pay little to no taxes.
I'll take it!
Do we have regular bitcoin stories everytime they sneeze. I guarantee there are Bitcoin PR people planting stories here and they are goaled on how many stories they get out.
There's no need to invoke a conspiracy. The fact is that BitCoin is catnip to several common type of nerd -- the wannabe cypherpunks who like to see computers change the world, and the libertarians who want to see the centralized government control marginalized in favor of individuals. Not to mention the programmer nerds (like myself) who are simply impressed by BitCoin as a p2p software design that has managed to avoid catastrophic implosion (so far) despite the obvious monetary incentive for people to attack it.
So yes, there are a lot of BitCoin stories on Slashdots, simply because many nerds find BitCoin interesting.
I don't care if it's 90,000 hectares. That lake was not my doing.
Bitcoin would be useful if it weren't such a slimeball magnet. The basic feature of Bitcoins is irrevocable unidirectional funds transfer between anonymous remote parties. This is the scammer's dream. Scammers don't have to worry too much about the marks coming after them with cops or baseball bats. So just about every financial scheme known has been tried in the tiny Bitcoin world in the last two years.
Even the "legitimate" Bitcoin companies are flakes. Most of the "online wallet" companies turned out to be scams. Several of the "exchanges" turned out to be scams. The previous market leader, Mt. Gox, stopped paying out on US dollar withdrawals two months ago. (Whether they're broke, incompetent, or persecuted is a subject of active debate. They claim problems with their banking relationships that prevent withdrawals, but continue to accept deposits.)
Bitcoin could have been a useful petty cash system for the Internet. If you could buy song downloads or MMORPG game items with it, it would be convenient and widely used. But that's not happening. You can buy WordPress hosted blog upgrades with Bitcoins, but that's about the most mainstream thing you can do.
I suspect it helps that, while they depend on a novel mechanism for preventing duplication and double spending, BitCoins aren't really conceptually much different...
There's your difference. According to Basel III, banks may spend each coin 19 times. With traceable money, a customer could ask his bank to show which coins were his. The entire Ponzi Scheme that our currency system is today could crumble if banks could all of a sudden be monitored and held responsible.
Nae king! Nae laird! Nae yurrupiean pressedent! We willna be fooled again!
"from the assorted oddball synthetic commodities that people (albeit generally not the general public) have been trading for years"
It is true that doing fractional reserve banking with bitcoins would be more difficult (though I suspect that a bank interested in doing so could simply create a promissory note "Good for one bitcoin, but not any particular one, to be transferred to the designated wallet upon request", which could then be fractionally-reserved as far as they thought they could get away with it...); but that isn't really relevant to my point, which was just that applying rules for capital gains to bitcoins is no more difficult (and really probably a great deal easier, since bitcoins were designed by currency purists, rather than risk-crazed investment bankers) than applying them to all the various other weirdo assets that get traded.
As a currency the built-in hostility to more or less any inflationary tendency is somewhat unusual; but that isn't a significant factor when assessing capital gains or losses from trading them.
The question here is how the finance ministry would come to know of a person's Bitcoin holding as it is a decentralized currency with no governing body to keep count on the number of Bitcoins a person has.
They might not know about it but that doesn't relieve the taxpayer of their legal obligations. If you get audited and it comes to light that you aren't declaring income then you can find yourself in deeeeeep trouble. They can send you to jail for tax evasion. I'm not familiar with how it works in Germany but in the US you would at minimum declare income from bitcoin related activities on line 21 of your 1040 form under Other Income. The legality or source of this income is irrelevant to whether you are required to declare it. If you mine bitcoins then you are generating income (you have acquired an asset with a market value hence it counts as income) and you would be required to declare it as such on your tax return.
Bitcoin could have been a useful petty cash system for the Internet.
Not really. Despite the claims of proponents, bitcoin provides little tangible benefit over existing currencies in almost all circumstances. Bitcoin scratches an ideological itch for some geeks who have a poor grasp of economics and a worse grasp of risk. Bitcoin only is cheaper to use than existing currencies if you ignore the externalities, opportunity cost and financial risk. Outside of a few rare corner cases people have virtually nothing to gain by using bitcoin and stand to lose quite a lot. Bitcoin is at best an interesting (though flawed) academic exercise.