When I visited Istanbul, I passed through a district with an endless number of exchange shops, and it seemed like a place where you could easily wash money without any bank account involved. I believe Turkey isn't alone in having such a culture of buying/selling US dollars by tracking the USD rate.

Do the IRS and say Turkey's tax office tracks these as well? Assuming that you don't try to deposit the exchanged for bills in a bank.

Couldn't someone offer Bitcoin exchange in existing currency shops or the same service via Bitcoin ATMs? How would the IRS and its equivalents track that without requiring identification and registration before use? I suppose a small amount would be allowed for the tourist aspect but then you could use a group of friends or employees to wash small amounts. If you require ID for that, including tourists, then you can track it.

This is not tax advice but from what I've seen in news reports, the IRS has different rules for currency. The reason bitcoin users have to report every little gain/loss is that the IRS doesn't consider it currency.

And the main reason they don't consider it currency is to impose a tax that discourages its use.

Without capital gains, if Bitcoin had ~0% inflation and the US got back up to 5%-10% inflation, then Bitcoin would become a better store of value.

However, with capital gains, the US would have to have significant inflation, around 20% or more, before Bitcoin would really be competitive. (I'm assuming there are significant transaction costs related to the low acceptance of Bitcoin)

In this manner, the US can (1) gain some additional tax revenue, and (2) prevent Bitcoin from becoming a competitor to the national currency, which every nation wants complete control over.

I've been thinking about this and wondering how they could prevent people moving to a WeChat like app and doing all financial transactions within that. If you enable anonymity in that there's no need to identify your meat life persona with your WeChat profile, how would the control be retained? Short of illegalizing mobile devices that allow installing a banned app like WeChatAnonEdition and having traffic police carry inspection devices that would allow them to detect illegally open Android devices in a driver's pocket, I don't see how it can be prevented. If you sell and buy inside WeChatAnonEdition and also get your salary inside WeChatAnonEdition, there is no monitoring and control anymore.

Just to be clear, I'm not agains taxes, because not paying taxes is like swatting an apartment, and generally taxes make sense to be paid, although most places also have several unfair tax codes, so I understand the common perception of taxes as "highway robbery".

This is fantastic, thank you!