Earlier this year, the US Internal Revenue Service (IRS) reminded that cryptocurrency transactions are to be taxed just like transactions of any other property. The same release, though, sets a few questions, as the tax collector explains that virtual currencies (not just Bitcoin) function in the same manner as traditional currencies while, at the same time, treating it as property for tax purposes.
St. Louis’ Federal Reserve Bank, however, seems to be a bit more definitive in its statements. In a blog post shared on the bank’s official website, it goes on to outline three distinct similarities between Bitcoin and conventional cash.
Lack of Intrinsic Value
What has no intrinsic value? Both bitcoin and the cash in your wallet. Learn other qualities they share https://t.co/uxwWMHieVS
— St. Louis Fed (@stlouisfed) April 27, 2018
Starting off, the blog post outlines that bitcoin nor cash have any intrinsic value. The bank says that there is a serious and ongoing debate about the characterization of bitcoin and that in no instance does it have any value on its own.
Digital currencies exist as data. The cash in your wallet exists as a blend of 75 percent cotton and 25 percent linen. Neither is inherently valuable.
The statement that data on its own has no essential value raises a few eyebrows, to say the least. As a matter of fact, the issue of data protection is becoming a hot topic in the last few years, especially when it comes to information shared on the Internet. Why would we urge to protect something so rigorously, if it has no inherent value?
Supply is Limited
In order for any currency to maintain its value, its supply needs to be limited in a way. That’s called scarcity. Think of it this way, if you had a dollar and there were only ten dollars in circulation, you’d be holding 10% of the world’s monetary supply. However, if there were trillions of dollars, you’d hold…, well, you get the point…