Dina DeMalkota on Bitcoin Regulation
Have a good week Rabbi,
Regarding taxes and regulation on Bitcoin, do you think it is permissible for a state to impose draconian taxes or strong restrictions on a virtual currency? And is there an obligation to obey such draconian restrictions? After all, Bitcoin is a currency that threatens the state’s control over inflation, and therefore the state has an interest in restricting its use. The question is whether there is a halakhic obligation to deviate from these restrictions, or should we say that in such a situation it is tantamount to a dina dazzelnuta?
The Tax Authority recently announced that Bitcoin trading is subject to capital gains tax and VAT, while taxation on any other currency such as the dollar or euro is zero. In order for a virtual currency to start operating as a regular currency, it must be allowed to be regulated as a regular currency, and as long as this does not happen, the state is effectively delaying and restricting its use.
It is important to note that because Bitcoin ownership is anonymous, the state has almost no tools to enforce taxation on Bitcoin.
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Do ordinary property laws even apply to abstract assets like Bitcoin? Or perhaps it should be treated like ownership of a poem or a book. That is, copyright property that belongs more in the realm of plagiarism laws.
Why would it be a problem to impose income tax on foreign exchange trading? Or why would it be a problem to impose income tax on trading in a certain currency? Same thing with income tax on Bitcoin (except that Bitcoin is really not a currency and does not resemble a currency in any way – I am clear that it is considered fiat and has owners [although owners cannot physically have it]).
Regarding its abstraction, why would it be different from the abstraction of the ‘money’ that I have in the bank, or all kinds of other ‘papers’ values. Those who make a living off their employees really believe that they do not have money in their bank account but that the bank is their debtor. To me, this seems completely absurd. And it seems that it will not be long before there will be (or almost no) physical money in the form of coins and banknotes, which also have no ‘real’ value And it's not clear to me why they should be viewed differently from money in the bank.
Plagiarism, in my opinion, is theft of everything, since ownership of information or an abstract thing is ownership of everything.
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