x

Abu Dhabi, UAESunday 24 June 2018

Agreement over Bitcoin but little rational argument

Another misconception about cryptocurrencies is that banks are not willing to adopt their use

Bitcoin and other cryptocurrencies are not immune from the IRS. Roslan Rahman / AFP
Bitcoin and other cryptocurrencies are not immune from the IRS. Roslan Rahman / AFP

Bitcoin redux

The debate around bitcoin seems to suffer from agreement on what is being discussed: the value of a bitcoin, the value of the bitcoin platform, or adoption rates. Quite often arguments are made that the platform is innovative or adoption will skyrocket and that this means the bitcoins are a good investment. That is not a rational argument.

The Pet Rock collectible sold 1.5 million units in six months when it first debuted in 1975. Definitely a high adoption rate. But the rocks, of course, did not increase in value.

On the subject of innovation and adoption, another misconception about cryptocurrencies is that banks are not willing to adopt their use. The issue though, is with the central bank. The central bank has to not only approve the use of cryptocurrencies, but also put in mechanisms for inter-bank transactions.

Scarier still is that cryptocurrencies circumvent tax authorities, eg the US’ IRS Facta programme would be gutted.

There might be ways to convince central banks to use bitcoins, but nobody wins against the IRS. Not even Al Capone.