How Crypto Could Bring Tax Evasion to the Masses
Loopholes in lending laws are allowing cryptocurrency users to escape taxes — and the government can’t keep up
Wealthy families and merchants first conjured up the idea of offshore banking in 19th century Europe, seeking a place to store funds away from tax-hungry governments in the aftermath of the Napoleonic wars. Since then, it’s been a race to the bottom. Over the course of the last two centuries, deregulation and lenient financial laws have allowed the rich to tread the fine line between legal tax avoidance and illegal tax evasion.
But blockchain, which first emerged as a concept in 2008, is now offering ordinary people the same possibilities. Using cryptocurrency, anyone with a little technical know-how can open what is effectively the equivalent of an offshore bank account — albeit offshore in cyberspace.
On the genesis block — the first block ever mined on the bitcoin blockchain — an ominous message was inscribed: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” The words foreshadowed the development of an asset that would provide an alternative to centralized banks. For a time afterwards, bitcoin became the de facto darknet currency, at least until traders realized that because every transaction on the open blockchain is tied to a public address, meaning that the cryptocurrency is actually far less suitable for illicit transactions than the briefcases full of anonymous paper currency favored by gangsters.
A cluster of competing coins that offered enhanced privacy features came to market in 2014, including Monero and Verge; Zcash launched in 2016. These blockchain-based currencies were not only decentralized, but effectively invisible, leaving no trace of transactions. To many of their supporters, these anonymous currencies were seen as an antidote to the kind of surveillance capitalism developing in China.
In this version of the future, platforms like WeChat, or eventually Facebook, might have a direct window into your financial data, tracked spending habits can be used as marketing data, and the privilege of being able to pay for things could be revoked in much the same way that social media dissidents can be deplatformed and canceled…