It's not easy to impose capital gains tax on cryptocurrency. The reasons are obvious:

• Know Your Customer (KYC) regulations can only be enforced on centralized exchanges
  • Cryptocurrency constantly pushes toward decentralization.
  • Privacy coins compound the problem making money even harder to track.
• Crypto exists worldwide without borders or red-tape.
• There is no official source that determines the value of cryptocurrency.

I was thinking about that last bullet point last night and it really got to me. How am I supposed to pay taxes on gains that are subjective? The value of Bitcoin on Binance is different than the value of Bitcoin on Coinbase. Hell, the value of Bitcoin on Binance is different than the value of itself because there are so many trading pairs; each one has it's own value and liquidity. No one can tell me the value of my holdings, so how can I be expected to pay taxes on them?

What about premiums on crypto? The Kimchi Premium is the gap in cryptocurrency prices for South Korean exchanges. What happens if a premium appears in conjunction with USD? Am I then expected to pay taxes on those "gains"? What happens if the country one lives in experiences hyper inflation? Are citizens in Venezuela expected to pay a capital gains tax on assets that actually lost value simply because the native currency lost even more value? It's not hard to poke holes in the logic here.

The extreme volatility of crypto is also an issue. If I lose 99% of my investment one year but the next it goes x100 I'm expected to pay taxes on that even though I broke even. This is an issue with any asset, but the volatility of crypto compounds the problem by several factors.

If you've ever looked into what it takes to legitimately pay your taxes by the book you know it's ridiculous. You're expected to keep track of every buy and every sell. For some people this is thousands of transactions that they are expected to do the math on at the end of the year.

What about Steem? Am I supposed to keep track of the time/date/amount of every single reward I receive? The law says yes, but I'm guessing not a single person here actually does that because it's a completely unreasonable command.

Obviously, most people ignore these rules because they are so antiquated and overly complicated. Most will simply cash out to USD and pay the capital gains on that because that math is a thousand times easier and almost just as accurate.

Another question we have to ask ourselves is: Does the government even have a legitimate claim to cryptocurrency gains in the first place? Taxes used to make sense. You do business in America so you pay taxes to America. This money is used to pay for the infrastructure that we all use. However, now that we have this borderless and worldwide pseudo anonymous asset the lines are very blurred.

A physical company uses the infrastructure of the country it's located in. They drive on the roads. They sell to the people in that location. It makes sense that taxes would have to be paid. With crypto it makes no sense at all. A dev team could create a product that everyone in the world uses and none of that physical infrastructure is being utilized. Why should they then be responsible for paying for the upkeep of the country that they reside in?

What about the politics of paying taxes? Megacorps like Amazon, Apple, and Microsoft have all found loopholes to not pay their fair share, while all the little guys are still stuck with the bill.

How much of your paycheck goes to endless warfare and incompetent politicians? There are plenty of legitimate reasons as to why a person wouldn't want their money to flow in that direction.

What is the benefit of even being a citizen at this point? Seems to me that the more time goes by the more outdated and nonsensical this system will become. Citizenship has been slowly moving from a privilege to a burden over time. I won't be surprised if in 2 or 3 more crypto bubbles cycles we see people renouncing their citizenship to live in one of those crypto city-states that seem to be popping up.

The IRS is not to be trifled with

I'm not promoting tax evasion. On the contrary, a 15% capital gains tax is not worth going to jail for. However, it is very bothersome that traditional governments can't keep up with technology. There is a very good chance that these beacons of authority will use their incompetence as a weapon, especially as time progresses and more power gets ripped from their clutches. By making it near impossible to comply with their outdated laws they can literally target anyone for incarceration. Ah, who am I kidding? The Patriot Act has already smeared our constitution beyond recognition.

At least we won't have to worry about gains tax this year amirite?

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