Taxation and Regulation of Bitcoin Are Normal

The future of cryptocurrencies is not tied to anonymity; as adoption grows they will be regulated and taxed, says prominent macro-investor Raoul Pal. His tweet sparked a wave of criticism from the community.

If you think that secrecy from governments and no KYC is bitcoins future then you don’t understand what adoption looks like. They will regulate it. You will declare it. You will have to do KYC and that is fine. It doesn’t take away its store of value but just integrates it.

— Raoul Pal (@RaoulGMI) November 26, 2020

“If you think that secrecy from governments and the absence of KYC is Bitcoin’s future, you don’t understand what adoption looks like. They [the authorities] will regulate this,” Pal said.

In his view, this approach does not deprive cryptocurrency of value. Holders of digital assets will undergo KYC, “and that’s fine,” the macro-investor noted.

Many Twitter users did not share this view. One said that people want to be left alone.

It enables the government to take from you and tax you. There’s an aspect of that in this revolution. People want to be left alone

— AJ La₿ella.eth (@AJ_LaBella) November 26, 2020

In response, Pal reminded that roads require taxes. He regards a scenario in which Bitcoin remains outside the regulatory framework as unrealistic.

Tough. ain’t gonna happen. If you want roads, then you have to pay taxes…

— Raoul Pal (@RaoulGMI) November 26, 2020

The host of a popular Bitcoin podcast, Stephan Livera, believes the future remains shrouded in ambiguity. In his view, two versions of Bitcoin could coexist: one tightly regulated by authorities, another open, more private and freer.

I think that future isn’t written yet, it could still end up being ‘two worlds’ co-existing:
1. Walled garden regulated compliant bitcoin.
2. Open, more private bitcoin. Bit more messy, but more free.

— Stephan Livera (@stephanlivera) November 26, 2020

Alena Vranova, founder of SatoshiLabs and co-author of The Little Bitcoin Book, sees KYC as a threat to Bitcoin holders.

KYC may be a great danger to bitcoin buyers. Anyone who hacks an exchange has your name, address, and probably how much BTC you own. Not a place to be.
It’s a very different type of situation than banking yet we’d apply rules designed for opaque banking systems.

— Satoshka and 21 million #NoBrrrrrBitcoin (@AlenaSatoshi) November 26, 2020

“Anyone who hacks an exchange will have your name, address and, possibly, information about how many bitcoins you own. There should be no regulation here. It’s a very different type of situation from banking yet we’d apply rules designed for opaque banking systems,” wrote Vranova.

Alex Gladstein, chief strategy officer of the Human Rights Foundation, urged Pal not to take the “wrong side.” In his view, Bitcoin is about privacy and freedom, not institutional adoption.

Ok, so what about encrypted communications? People said this in the early 90s. There must be back doors! Guess what? The Cypherpunks won. Now we can all use Signal. Please don’t be on the wrong side of this fight. Bitcoin is about privacy and freedom not institutional adoption.

— Alex Gladstein (@gladstein) November 26, 2020

Earlier the macro-investor had already made headlines. In June 2020 Pal, in a series of tweets, said that Ethereum could well overtake Bitcoin in growth. He declined to name exact timings.

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