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The points I'm making don't have anything to do with transactions in a primarily Bitcoin marketplace. The issue is that there is nothing in place to maintain price rates, even including that, as you note, its primarily digital existence and small size make it highly susceptible to fraud. This is a major issue for converting Bitcoin to other currencies. That Bitcoins are supposed to function as cash doesn't mean they are automatically stable. Consider that Bitcoins are becoming more accepted by online retailers, and lets say that, for instance, Amazon decided one day to not only accept them, but, because of the simplicity of Bitcoin transactions (e.g., you don't have to pay eBay to implement PayPal), any and all Amazon products would be 5% off using Bitcoins. Such a situation is unlikely, but if you imagine instead of Amazon, a number of small players, like how Wordpress is doing it, it's feasible. Then, suddenly, the government steps in and forces Amazon to pay sales tax, and, because Bitcoin isn't accepted by the US Government as a full currency, they decide to set some arbitrarily low Bitcoin to USD rate, and Amazon stops taking Bitcoin. Such a series of events would lead initially to a massive increase in demand for Bitcoin, then a massive decrease. Again, fiat currencies have systems built in place to protect against such an occurrence, including scale. Bitcoin does not, and so its interaction with the general market will scare people off unless there is some sort of holding policy in place (like a 24-hour transaction period) to secure the Bitcoin's value. Not a great example, but it will do. |
For instance, should you collect sales tax when selling bitcoins? If you are in a jurisdiction that collects sales tax, then I don't see why not. Also pay income tax on your mining rewards. Now, good luck making a profit! *(without adding a secondary business, unrelated to mining. hey, at least you can be paid in bitcoins!)