Why should the state accept Bitcoin (BTC) to pay taxes?
Would the state have an interest in accepting Bitcoin (BTC) to pay taxes? A true store of value, the mother of cryptocurrencies would attract investors in the sector, offer more transparent, inclusive and simplified taxation, and encourage the production of green energy. We take stock of all the advantages of Bitcoin for tax payments.
Bitcoin adoption accelerating
Bitcoin is breaking records. In early 2021, the price of BTC rose above $ 50,000 before undergoing a slight correction. In this context of euphoria, the oldest cryptocurrency is attracting more and more institutional investors . For example, investment giant BlackRock has officially announced its interest in cryptocurrency. Grayscale, another famous asset manager, bought 632,800 BTC , or more than 3% of all bitcoin currently in circulation.
At the same time, many companies convert part of their cash into Bitcoin . Spurred on by CEO Michael Saylor, MicroStrategy has repeatedly bought BTC . Soon after, Tesla invested $ 1.5 billion in Bitcoin , or 8% of the automotive group’s $ 19 billion in cash. Mirroring Tesla and MicroStrategy, the German company SynBiotic will transfer part of its liquidity into bitcoin .
As Bitcoin becomes mainstream, the state remains inexorably behind. Whether in France, Belgium or most of Europe, the government is lagging far behind in the adoption of cryptocurrency. For some French ministers, Bitcoin still rhymes with terrorism . However, would the state have any interest in collecting bitcoin and authorizing tax payments with cryptocurrencies? We take stock of the issue.
„Nothing fits better in a sustainable policy than paying taxes in bitcoin,“ said Nicolas Cantu, founder of Chain Accelerator, the Blockchain startup accelerator located at Station F, in an interview with Cryptoast.
A store of value, like gold
First, the opening of bitcoin payments would allow the state to quickly amass cryptocurrency. Like gold, Bitcoin is a store of value . For many investors, BTC is a safe haven to protect themselves from the vagaries of the markets and the economy.
Like gold metal, cryptocurrency is available in limited quantities. When it was created, Satoshi Nakamoto, the creator of the currency, set the maximum amount of Bitcoins that will be issued at 21 million. BTC therefore retains intrinsic value, regardless of monetary policies and possible economic crises.
This bitcoin reserve would serve to protect the state’s holdings against fiat currency inflation . In a world where both the American Federal Reserve (FED) and the European Central Bank (ECB) are printing banknotes in an attempt to stabilize the financial system, a bitcoin reserve could allow states to secure their backs.
For many observers, the policy of quantitative easing consisting in buying back public debt and financial assets to artificially stimulate the economy will inevitably lead to inflation. Axel Weber, chairman of UBS, a Swiss financial services company, estimates that inflation will exceed 3% in the United States and 2% in the euro area by May 2021.
„Investors believe that the stimulus plans, the zero rate policy of central banks and the progress of vaccination will certainly restart the economy, but also lead to overheating and a resumption of inflation,“ explains Le World in an article published on February 26, 2021.
Moreover, many countries affected by the hyperinflation of their national currency have turned massively to the mother of cryptocurrencies. In Venezuela, Sudan and Nigeria, Bitcoin has established itself as an anti-crisis asset, a lifeline capable of protecting the economies of citizens.
Attract investors in the cryptocurrency sector
As we told you above, many investors are turning to cryptocurrencies. Following the example of Tesla, Microstrategy, GrayScale and BlackRock , thousands of firms are preparing to invest in the sector, whether by converting their cash into bitcoin or by placing their assets in blockchain-related projects. By accepting the payment of taxes and duties in BTC, the state could attract their capital.
„Today, if you are a French company and want to convert part of your cash into Bitcoin, you have to go through an Asian or American bank“, regrets Nicolas Cantu.
In recent years, the confidence placed by the French in the government has shrunk to the rhythm of political scandals. Citizens‘ mistrust of those in power is reaching record levels.
According to a survey carried out by the Center d’études de la vie politique française in February 2020 , 70% of French people do not trust the government. 64% of citizens even consider that democracy does not work in France.
By betting on Bitcoin, the state could finally regain the trust of citizens. Thanks to blockchain technology, anyone would be able to monitor how the ruling power uses tax money . Indeed, the blockchain keeps a tamper-proof and unalterable history of all transactions.
Moreover, the blockchain is already used to guarantee better traceability of agricultural products and to design tamper-proof certificates of authenticity for works of art .