Topic: What happens in the government if Bitcoin takes over? (Read 1942 times)

I have had some in depth discussions about this and am not convinced that a government could successfully do this.

It would certainly be interesting to see one or several try it and see what happened.

You know what? There have already been coins being set up to make it so that the developers can take a percentage of transactions and block mining and use it for their own purposes, it would actually be incredibly easy and even eliminate the need for tax collectors etc. for governments to make their own coin and take a percentage of all the currency to fund anything they want. While yes, currencies like Bitcoin will remain tax free, it could actually be incredibly easy to set up a government backed cryptocurrency. They'd just have to make it appealing, hell because of the way the blockchain works, they wouldn't even need a tax revenue department anymore because it would all be done automatically.

We have a classic case of this not happening with Scotland where even though you've got the SNP ranting on about Scottish independence they still want to keep the pound! >_< I don't think many small countries have the balls to become fully independent from empires.

LABOUR leader Johann Lamont has said that the “only logical place to go” for a currency option in an independent Scotland would be to have a separate Scottish currency. in a speech to the Scottish Trades Union Congress (STUC).

bitcoin could hamper that effort by making it difficult to create a deflationary environment that makes it cheaper to repay such debt.

Generally very small countries wish to replace their currency with a currency they do not control.

The deficit is not created printing more cash, but by borrowing from banks and selling treasury bonds.   I don't see why bitcoin would prevent that.  Even if bitcoin replaces the dollar, there will be banks that lend bitcoins, even 10 times more bitcoins than they do actually own.  People would still have to pay lots of taxes so that the government can pay the interest on those borrowed coins.

The deficit is not created printing more cash, but by borrowing from banks and selling treasury bonds.   I don't see why bitcoin would prevent that.  Even if bitcoin replaces the dollar, there will be banks that lend bitcoins, even 10 times more bitcoins than they do actually own.  People would still have to pay lots of taxes so that the government can pay the interest on those borrowed coins.

The biggest problem for the government if BTC were to replace "official" currency would be how to run the huge budget deficit which has become the norm in most "developed" countries. If there wasn't any deficit, with a crystal-clear and balanced budget, there should be no difference for the governement between using fiat or BTC.

So what makes you think the U.S. controls its borders?

Currently it seems that, for many bitcoiners, just owning coins is all they want from life. But, in that distant future we are considering, that will be sort of passé:  people will presumably want to spend their bitcoins too. 

Suppose you buy a fancy car with the bitcoins from those "side jobs".  The tax detectives will know about the payment, and will link it to you, from the dealer and other sources.  They check their databases and discover that the payment did not come from any of the addresses that you declared in your tax forms.  What then?

Mixing won't help, quite the opposite. The tax office does not need to find out where your extra coins came from; it is you who will have to explain -- and prove -- to them that you paid the tax on that extra income.

Ditto for coins from "dirty" jobs -- if the tax guys suspect that your extra coins may be related to illegal activity, they will warn the police.  Then it will be you, not the police, who will have to explain -- and prove -- that those coins came from legal activities.

Note that the government does not have to catch every single tax evader.  They only need to catch and sternly punish enough of them to scare most of the other citizens into voluntary compliance. 

Dealing strictly in bitcoin would make it very difficult to sufficiently track a person's income. This is especially true for people who do a lot of "side" work as they could simply provide a different address to send payment to for each payment. A person could easily tumble their coins to hide the fact where they originally came from (a particular employer who could then trace them to the employee).

The don't need any new ways.  Not paying taxes is already a crime, whether you transact in dollars, in euros, or in something else.  If you earn bitcoin and do not pay taxes on that, they can take your car and house and/or send you to jail.

Or do you think that they cannot find out about your bitcoin income?

At this point the U.S. Federal Reserve is well aware of Bitcoin, including all of its advantages and disadvantages. The Federal Advisory Council, which regularly consults with the Board of Governors of the Federal Reserve, held a meeting on May 9 where the banking industry representatives discussed whether Bitcoin poses a threat to the traditional financial system and regular consumers.
The verdict: Bitcoin is potentially risky only for people who buy it, but as these risks are addressed over time, the digital currency could drastically change the world’s finances for the better.
First of all, the FAC’s report notes that “Bitcoin’s nascency makes it more curiosity than threat” and it only accounts for a “fraction of today’s global fund flows.” In other words, Bitcoin is still in its adolescent stages with plenty of room to grow. In fact, the FAC sees the possibility of Bitcoin having a great impact in the long term as “the network self-refines and adoption increases, requiring traditional payment processors to adapt and respond.”
Greater Financial Inclusion

The FAC’s meeting report lists several of Bitcoin’s most popular advantages, including lower transaction fees for merchants than credit cards. In addition, the report notes that digital currency “enables cheap international remittance to the developing world and the developed world’s ‘unbanked,’ expanding financial inclusion.” Essentially the FAC is acknowledging that the vast majority of people on Earth don’t have access to a bank, and that Bitcoin could give them more power over their money.
The Federal Reserve even sees a scenario where traditional banks join the cryptocurrency fun and “participate increasingly in Bitcoin fund flows,” an idea that is supported by the fact that more people are using accounts with multiple currencies. It appears that the Fed sees nothing intrinsically wrong with financial institutions dealing in cryptocurrency.
Consumer Protection

Bitcoin’s greatest flaw, according to the FAC report, is the risk it poses to consumers who buy the digital currency. This risk is mainly that Bitcoin is highly susceptible to theft, a problem magnified by unsecured wallets and unreliable exchanges like Mt. Gox.
However, the Fed suggests a few solutions. “Supervised risk management of Bitcoin exchanges” would ensure their solvency, and further regulations could require that the exchanges invest in appropriate cybersecurity measures to prevent hacking. These efforts would theoretically prevent another Mt. Gox from occurring in the future.

What ways could they have up their sleeve? That is what I'm mostly concerned about.

Just look back at the Governments, music and film industries reactions to torrents. So just replace 'music and film industries' with 'Banks', and you pretty much have your answer.