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Governments appear to be classifying bitcoin as a commodity so that they can tax and regulate it more heavily. I say this because I cannot find any definition

by nickff 11y ago

Governments appear to be classifying bitcoin as a commodity so that they can tax and regulate it more heavily. I say this because I cannot find any definition of 'money' which would not include bitcoin, and these are the effects of the classification. If I am wrong, could someone please explain how and why? P.S. I have never mined, bought, sold, or possessed bitcoin.

deleted 11y ago
[deleted]
krapht 11y ago
In your view, are gold and other precious metals commodities or money? If your answer is commodities, why not money?
- nickff 11y ago
  The most popular definition of "money" that I have seen is 'a medium of exchange'. I think that gold has been used as a money in the past, as have a number of other precious metals. The question you are asking is a good one, because it asks whether the use as a medium of exchange must be its primary use, and how popular it must be to be considered a money. It seems gold is an edge case, which could (currently) reasonably be judged to be either one.
  - danharaj 11y ago
    I disagree. You can't use gold nuggets to pay for your groceries. As a medium of exchange it is sorely lacking. Gold has been mostly a commodity for a very long time. Its main purpose with respect to money nowadays is that it is a store of value useful to backers of currency.
- IkmoIkmo 11y ago
  I'd say both and mostly used as an asset class, just like bitcoin, both money and an asset class and mostly used as the latter today. Why must they be mutually exclusive? It's no different from the dollar which is both money and traded as an asset class everyday.
tsotha 11y ago
You still have to pay taxes on currency transactions that generate a profit, so I don't understand why this would be a tax boon. If I buy a million dollars worth of yen and sell it for two million, the taxman will be around.
- josu 11y ago
  I'm guessing he is referring to sales tax or VAT, which currencies are exempt from.
- icebraining 11y ago
  According to this[1] Reddit post by a supposed tax attorney: Note: There is a code section that might provide some relief here, but only if bitcoins are categorized as a foreign currency. Under this code section, the use of bitcoin to buy goods and services would be tax free as long as the transaction was personal (i.e. not for business or investment) and did not generate more than $200 of gain. Unfortunately, the IRS ruled in Notice 2014-21 that bitcoin is not a currency for tax purposes. So, this code section is inapplicable unless the IRS changes its position sometime in the future. [1] https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_attorney_here_are_my_answers_to_the/ https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_...
icebraining 11y ago
In the same way that a language is a dialect with an army and navy, so is money any commodity that's officially recognized as currency.
protomyth 11y ago
Gold is a commodity and bitcoin fits closer to that then a currency. Bitcoin isn't issued by the US government and create by a process not by the government's will. Given how Bitcoin works, I cannot think of how it fits the definition of money as opposed to a commodity that is bartered.
- nickff 11y ago
  Why does the issuer have anything to do with the question of whether something is a money?
  - ithkuil 11y ago
    indeed the two terms are orthogonal: https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Fiat_money https://en.wikipedia.org/wiki/Fiat_money Both are moneys
    - nickff 11y ago
      Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money, as it is not supported by a government, and it is not based on a material.
      - dragonwriter 11y ago
        > Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money, Those two categories that were discussed upthreads are not exhaustive. Non-commodity, non-representative, non-government money existed long before bitcoin -- probably the best known fairly modern example is in Local Exchange Trading Systems and variations on those, which use units of accounts that (while they are often denominated in fiat currencies -- largely to simplify use and tax compliance for users) are neither the fiat currency they are denominated in (if they are denominated in one) nor backed by that currency in the sense that representational money is (in that no issuing entity promises to exchange them for the currency, even if the members of the system agree to treat them as equivalent to the fiat currency in exchange) -- and some variations intentionally divorce their units from the fiat currency entirely.
ThrustVectoring 11y ago
A bitcoin represents a portion of the blockchain, the dominant distributed-consensus protocol. Since the ability to do blockchain-stuff that takes a huge amount of processing power to revert is valuable economic activity, bitcoin is basically a cryptographic commodity.
- nickff 11y ago
  What you are saying is that bitcoin is a claim on the use of the blockchain, and that the blockchain is a resource. This is not incompatible with the bitcoin itself being money. A US Dollar can buy you a computer which has a huge amount of processing power, but the dollar is no commodity, though the processor may be.
  - mikekchar 11y ago
    Just off the top of my head, I'm not sure that the blockchain itself could be seen as a resource. However, the mining pool that makes transactions happen (and expensive to cheat) could certainly be seen as a resource. In fact, one might be able to make an argument that the overall mining hashrate sets an upper bound on the value of BTC. It would be related to the cost of the CPU resources necessary to cheat.
    - ThrustVectoring 11y ago
      Yeah, `/s/blockchain/mining pool` on my original statement. The mining hashrate also helps set the value of BTC in my model as well - it means that other valuable activities can piggyback on the hard-to-forge nature of the blockchain.
- icebraining 11y ago
  "A portion of the blockchain"? How so? The blockchain stores transactions, not Bitcoins.
  - SeeDave 11y ago
    As a bitcoin 'owner' you have the right to mark the transfer of unspent transaction outputs from one or more addresses to one or more other addresses in the blockchain.

by nickff 11y ago

deleted 11y ago

[deleted]

krapht 11y ago

In your view, are gold and other precious metals commodities or money? If your answer is commodities, why not money?

nickff 11y ago
The most popular definition of "money" that I have seen is 'a medium of exchange'. I think that gold has been used as a money in the past, as have a number of other precious metals. The question you are asking is a good one, because it asks whether the use as a medium of exchange must be its primary use, and how popular it must be to be considered a money. It seems gold is an edge case, which could (currently) reasonably be judged to be either one.
- danharaj 11y ago
  I disagree. You can't use gold nuggets to pay for your groceries. As a medium of exchange it is sorely lacking. Gold has been mostly a commodity for a very long time. Its main purpose with respect to money nowadays is that it is a store of value useful to backers of currency.
IkmoIkmo 11y ago
I'd say both and mostly used as an asset class, just like bitcoin, both money and an asset class and mostly used as the latter today. Why must they be mutually exclusive? It's no different from the dollar which is both money and traded as an asset class everyday.

tsotha 11y ago

You still have to pay taxes on currency transactions that generate a profit, so I don't understand why this would be a tax boon. If I buy a million dollars worth of yen and sell it for two million, the taxman will be around.

josu 11y ago
I'm guessing he is referring to sales tax or VAT, which currencies are exempt from.
icebraining 11y ago
According to this[1] Reddit post by a supposed tax attorney: Note: There is a code section that might provide some relief here, but only if bitcoins are categorized as a foreign currency. Under this code section, the use of bitcoin to buy goods and services would be tax free as long as the transaction was personal (i.e. not for business or investment) and did not generate more than $200 of gain. Unfortunately, the IRS ruled in Notice 2014-21 that bitcoin is not a currency for tax purposes. So, this code section is inapplicable unless the IRS changes its position sometime in the future. [1] https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_attorney_here_are_my_answers_to_the/ https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_...

icebraining 11y ago

In the same way that a language is a dialect with an army and navy, so is money any commodity that's officially recognized as currency.

protomyth 11y ago

Gold is a commodity and bitcoin fits closer to that then a currency. Bitcoin isn't issued by the US government and create by a process not by the government's will. Given how Bitcoin works, I cannot think of how it fits the definition of money as opposed to a commodity that is bartered.

nickff 11y ago
Why does the issuer have anything to do with the question of whether something is a money?
- ithkuil 11y ago
  indeed the two terms are orthogonal: https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Fiat_money https://en.wikipedia.org/wiki/Fiat_money Both are moneys
  - nickff 11y ago
    Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money, as it is not supported by a government, and it is not based on a material.
    - dragonwriter 11y ago
      > Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money, Those two categories that were discussed upthreads are not exhaustive. Non-commodity, non-representative, non-government money existed long before bitcoin -- probably the best known fairly modern example is in Local Exchange Trading Systems and variations on those, which use units of accounts that (while they are often denominated in fiat currencies -- largely to simplify use and tax compliance for users) are neither the fiat currency they are denominated in (if they are denominated in one) nor backed by that currency in the sense that representational money is (in that no issuing entity promises to exchange them for the currency, even if the members of the system agree to treat them as equivalent to the fiat currency in exchange) -- and some variations intentionally divorce their units from the fiat currency entirely.

ThrustVectoring 11y ago

A bitcoin represents a portion of the blockchain, the dominant distributed-consensus protocol. Since the ability to do blockchain-stuff that takes a huge amount of processing power to revert is valuable economic activity, bitcoin is basically a cryptographic commodity.

nickff 11y ago
What you are saying is that bitcoin is a claim on the use of the blockchain, and that the blockchain is a resource. This is not incompatible with the bitcoin itself being money. A US Dollar can buy you a computer which has a huge amount of processing power, but the dollar is no commodity, though the processor may be.
- mikekchar 11y ago
  Just off the top of my head, I'm not sure that the blockchain itself could be seen as a resource. However, the mining pool that makes transactions happen (and expensive to cheat) could certainly be seen as a resource. In fact, one might be able to make an argument that the overall mining hashrate sets an upper bound on the value of BTC. It would be related to the cost of the CPU resources necessary to cheat.
  - ThrustVectoring 11y ago
    Yeah, `/s/blockchain/mining pool` on my original statement. The mining hashrate also helps set the value of BTC in my model as well - it means that other valuable activities can piggyback on the hard-to-forge nature of the blockchain.
icebraining 11y ago
"A portion of the blockchain"? How so? The blockchain stores transactions, not Bitcoins.
- SeeDave 11y ago
  As a bitcoin 'owner' you have the right to mark the transfer of unspent transaction outputs from one or more addresses to one or more other addresses in the blockchain.