As Bitcoin becomes increasingly prominent within the global economy, there is a rising concern as to how it will be taxed. Other digital forms of currency, like credit cards and EMV card technology have made transactions more convenient, but they are still tethered to the old banking formats, which require personal information to create accounts. With Bitcoin identities are not used and that creates some concerns with the establishment’s methods of money creation and taxation.
There are two problems surrounding the taxation of Bitcoin: first, its users are unknown and therefore whom to tax is a challenge. Secondly, there has been a question as to its legitimacy as currency or even commodity. Both of these issues make taxing the Bitcoin economy a challenge.
The nature of Bitcoin is that the ledger of all transactions is open, but the identities of those who conduct the transactions is hidden. This is the opposite of normal current transaction models, where it takes personal identification to gain access to banking and thus credit and debit cards, but the transactions are encrypted. The problem with this model is that if any transaction is hacked, the personal information can be uncovered. This has been a skyrocketing problem