I’ve been following the Bitcoin world for a few years and it seems like we didn’t advance much in explaining to government workers the situation and its consequences. The question of the use cryptocurrencies for money laundering, which being asked so much by regulators and politicians, is a question that deserve a better answer than “I heard that you can buy drugs with $$ too” and such. Quite long ago I spoke with several people about a possible solution but I never saw it “leaking” to the “right ears”. So on this open letter I’m going to explain this very simple idea.
I suggest the following regulation to cryptocurrencies. A business that would like to accept them as a means of payment, will have to declare to the tax authorities a list of addresses (public keys), and they’ll be obligated to accept payments to those addresses only. In other words, all their income is visible to the tax authorities without any need to report anything.
Enforcement of this is no less good than traditional enforcement. The only way to catch a business not paying tax is to come as a customer and not get an invoice. Same here: come as a customer, and ask to deposit coins into a different address than the business previously declares. So the enforcement abilities of tax payment don’t go worse than the current situation.
This can not only replace invoicing but also replace accounting. The tax authorities can then track not only the income but also the expenses namely deals done between other businesses, and automatically calculate the net profit. Obviously this is also a much more transparent, easy, and fair way to perform legitimate businesses and prove their legitimacy, simply by doing all transactions in the addresses privately submitted to the tax authorities.