With the newest Chinese legislation prohibiting the acceptance of the digital currency, Bitcoin, it seems that the currency's progress toward monetary legitimacy may have stopped. Expert tax planning attorney Joe Garza explains why this could be the end of BItcoin.
Dallas Attorney Joe Garza Explains Why Bitcoin May Have Bitten the Dust
Why Bitcoin May Have Finally
Bitten the Dust
Tax Trends Weekly
Financial news wouldn’t be the same these days without updates Bitcoin,
the digital currency that has undergone erratic spikes in value since it was
launched in 2008. But now, it looks like the end of Bitcoin’s glory days may
soon be approaching. The October Silkroad takedown may not have been
enough to hurt Bitcoin in the long-term, but recent news from China doesn’t
look good for the once regulation-free currency. The New York Times reports
that “If Bitcoin is a
bubble, as its critics
contend, it is showing
signs of deflating.”
This week, BTC China—the largest Bitcoin exchange in the
that it would no longer accept deposits
of Chinese currency.
This was revealed only
a few weeks after the
Chinese government banned large financial institutions from trading in Bitcoins. Even some European countries are starting to crackdown on Bitcoin,
although on a much smaller scale. Norway has just emulated Germany in its
decision to levy a capital gains tax on citizens’ Bitcoin assets.
Bitcoin Worth the Risk?
Though some may bemoan the end of Bitcoin’s glory days, it is clear that for
many investors, the risks of Bitcoin have far outweighed their benefits. Not
only is Bitcoin a totally uninsured asset, but it is one that has proven incredibly easy to steal. This month, approximately $100m. worth of Bitcoins was
pilfered from customers of Sheep Marketplace, an online bazaar for illegal
drugs. But people making shady purchases haven’t been the only ones to
suffer. At the end of October Chinese Bitcoin trading platform, GBL vanished
without a trace, taking over $4 million of its customers money with it.
Apparently, the thing that makes Bitcoin so great for thieves is that “ownership” of a Bitcoin is defined by nothing more than access to a “private cryptographic key to unlock a specific address,” according to an article on The
Verge. If someone else gets a hold of your key—well, they can do whatever
they want with your Bitcoins. It’s not even that difficult access keys since many
services store private keys of their users online. And even though Bitcoins can
be publicly traced online, laundering them can be easy thanks to anonymous
services known as tumblers.
So, could Bitcoins stay strong if investigators discover a way to make them
more traceable? It couldn’t hurt, but with China essentially out of the Bitcoin
game and other governments cracking down on the currency, opportunities
for Bitcoin are rapidly shrinking. Even more importantly, analysts have long
been predicting that Bitcoin is in a speculative bubble that is soon to burst.