Well, eventually people will want to either turn them back into fiat or buy assets with it - otherwise, what's the point of having it?

At that point, the anonymity starts to matter; it's just as with other kinds of money laundering - IRS doesn't really catch the source and storage of dirty cash, they get the people when they inevitably want to spend it.

Buying things directly with bitcoin.

In the US, buying anything with Bitcoin is a taxable event. You might get away with buying the odd coffee but I suspect buying large items like houses and cars will start to attract attention if you didn’t report the capital gains for it.

For now, the law is on a collision course with technology.

Taxable events need to happen in fiat, there is too much incentive to obfuscate these events on blockchains.

Transactions in cryptocurrencies will become increasingly hard to trace.

I'm not sure governments know what they're up against.

> I'm not sure governments know what they're up against.

Oh, they know. Bunch of idealists who are also pretty bad programmers with delusions of understanding finance. Plus a lot of scammers, and even more gullible people who just want to get rich quickly. Nothing governments can't handle when they eventually start caring.

Yup. Everything old is new again.

Governments aren't facing any new problems here... while crypto can be moved faster than cash, I suspect that in the end governments may end up with even tighter control of crypto than they ever had with cash.

>I suspect that in the end governments may end up with even tighter control of crypto than they ever had with cash.

I'd LOVE to see a govt try to control cryptocurrencies, the thought is laughable.

The whole point of bitcoin is that there is no mechanism by which government (or any other actor) could exert such control.

Laws can be changed.

Sure, and I'd bet that they are going to be changed in the opposite direction than what you'd (presumably) want, to ensure that it's harder to use cryptocurrencies in an anonymous or tax-avoiding manner.

For example, it seems that currently USA sellers are allowed to interpret sales in Bitcoin as "barter events" and not submit the usual cash payment form 8300 for such sales, but (as you say) laws can be changed and I expect that this won't be the case soon, and the changed laws would be likely to require any legitimate seller to report such transactions (for non-small amounts, like the form 8300 limit of $10000 USD) and refuse them at all if the buyer wishes to remain anonymous. All it takes is a tiny change in the laws, extending the sentence "Cash may also include cashier’s checks, bank drafts, traveler’s checks, and money orders" by adding a definition of cryptocurrency. It's not done yet simply because the gov't is slow to react.

Anyone considering the future of cryptocurrencies should consider not only the current laws, but how the laws are likely to be changed to extend the current regulation principles to cover cryptocurrencies - the governments around the world have a rather clear and long-term consensus about the goals and principles of that regulation, and changes in technology simply mean that the written law will lag a few years while that consensus is (re-)implemented in laws covering the New Thing.

Everytime someone trades fiat for cryptocurrency, someone else trades the same amount of cryptocurrency for fiat. Probably the first person thinks that fiat is overvalued, and maybe the second person thinks that the cryptocurrency is. The future will tell who is making the right bet.

On a side note, I've noticed that a lot of crypto people are pretty obsessed with the USD value of whichever cryptos that they may own. "Make fun all you want, my ROI in 2017 was xx%". Well, good for you, and happy that we have now established that you still use real money to measure value, and that you are in it for the short term profit, not for some abstract, idealistic purpose.

They're speculating. That's about all you can say.

Some people have goals with their speculation. I assure you many of these people are gamblers, but there are plenty of reasonable folk in the space too. It's just you don't hear them beating the drum as loudly as the naive.

I know a few people who put a huge stash into crypto because they don’t want their spouses to know about their money when they get married.

Why are they marrying someone who they don't trust? That sounds like an awful state of affairs and likely those marriages will not last. Don't most wedding vows include a line about being honest? Yikes to those marriages.

Yes and no. emotionally, its a bad idea. Rationally, it probably isnt an awful idea to hedge against a marriage not working out

> Rationally, it probably isnt an awful idea to hedge against a marriage not working out

That doesn't make sense. Rationally, hiding that money in secret is a reason that the marriage won't work out. Hide that money, tell lies, be a scheming and awful person, and there will be a self-fulfilling prophesy of that marriage not working out.

That may be true but most marriages don’t work out and they are not self-fulfilling prophecies.

While true, that's not really the point of the parent comment.

This is another attempt at security by obscurity. Like others, it doesn't work.

Open source (this time in the form of full disclosure and a prenup agreement) is the way to go.

You can get married without sharing assets. In fact in my country this is now the default option. Everything you owned before marriage will remain yours.

What country?

Yes the Netherlands. There was some grumbling about "romance" but most marriages end in tears and legal trouble anyway. And women are supposed to have their own income in modern society.

Probably the Netherlands