Leo Fernevak on Nostr: If I understand you correctly, you are saying that exchanges and potentially ETF ...
If I understand you correctly, you are saying that exchanges and potentially ETF providers can increase the supply of paper bitcoin and sell such printed tokens to customers.
I see a couple of problems with this. First, this would become apparent when the company is audited. If they don't own as much bitcoin in reserve as they claim then they would be engaging in fraud. For this to go unnoticed we would need governments collaborating deeply with exchanges.
Secondly, fake paper bitcoin would only be a problem for those that use government-aligned custodians. It seems like it would be self-defeating for governments to undermine the government-aligned custodians where they can easily tax the paper bitcoin.
Since sovereign owners can verify their bitcoin they are not impacted by frauds. You could argue that the exchange rate could be impacted temporarily. This is possible, yet would allow bitcoiners to stack more bitcoin at a cheaper price for a longer period.
2. Yes, bitcoin on exchanges will be impacted by all kinds of taxes. Yet, if governments overplay the taxes then nobody will want to use government custodians, so there's that consideration as well.
Bitcoin in self custody is hard to tax, in spite of KYC regulations. Bitcoin is global and not jurisdictional. If a government seek to tax your bitcoin in a manner you disagree with, you can cross the border and spend your capital (bitcoin) in a better jurisdiction.
This is how game theory plays out: jurisdictions have to compete for capital and skill by offering good conditions of living, low taxes, et cetera.
I wrote a longer piece on game theory and why tainted coins will not work over time:
I see a couple of problems with this. First, this would become apparent when the company is audited. If they don't own as much bitcoin in reserve as they claim then they would be engaging in fraud. For this to go unnoticed we would need governments collaborating deeply with exchanges.
Secondly, fake paper bitcoin would only be a problem for those that use government-aligned custodians. It seems like it would be self-defeating for governments to undermine the government-aligned custodians where they can easily tax the paper bitcoin.
Since sovereign owners can verify their bitcoin they are not impacted by frauds. You could argue that the exchange rate could be impacted temporarily. This is possible, yet would allow bitcoiners to stack more bitcoin at a cheaper price for a longer period.
2. Yes, bitcoin on exchanges will be impacted by all kinds of taxes. Yet, if governments overplay the taxes then nobody will want to use government custodians, so there's that consideration as well.
Bitcoin in self custody is hard to tax, in spite of KYC regulations. Bitcoin is global and not jurisdictional. If a government seek to tax your bitcoin in a manner you disagree with, you can cross the border and spend your capital (bitcoin) in a better jurisdiction.
This is how game theory plays out: jurisdictions have to compete for capital and skill by offering good conditions of living, low taxes, et cetera.
I wrote a longer piece on game theory and why tainted coins will not work over time:
quoting nevent1q…xsdyA few thoughts on the game theory of tainted bitcoin.
TLDR; taint cannot work over time.
Let's visualize a possible scenario where a jurisdiction, for example the EU, decides to classify certain bitcoin addresses as tainted.
A few expected outcomes:
1. Many entrepreneurs would likely leave the EU in reaction, either because they own bitcoin or because they consider the regulatory move to be a red flag indicating more coming authoritarian measures. If A happens, then a logical B can be expected to follow.
These entrepreneurs won't take their bitcoin *with them* because all bitcoin exists globally without borders and their bitcoin are already waiting for them in the new jurisdiction. Their bitcoin does not move when they move, but their spending is now relocated outside of the backwards jurisdiction.
2. Let's then assume that some entrepreneurs have had their bitcoins classified as tainted by the EU. As they settle in a new jurisduction - which doesn't care about the EU:s taint decisions - these "EU-tainted" coins are soon entering the economy and switching hands. Nobody in a free economy has any reason to care about the dictatorial phantasmas of the EU.
3. After these coins/sats spread in the free market economy, they will eventually end up in contact with the EU again. At that point, the coins are now integrated in the economy and the "EU-taint" will be considered obsolete.
If the EU decides to keep rejecting the "EU-tainted" coins/sats, the EU will lose out on more and more commerce due to self-quarantine. The number of tainted coins will grow over time and the EU will have to eliminate themselves from an in increasing amount of valuable trade.
Over time the taint policy will become so ridiculous and economically harmful for the EU that there won't be any public support to keep the taint regulations.
Besides, as the coins/sats have moved through the free, prosperous and just jurisdictions of the world where property rights are respected, the laggard economies that issued the taint will have little incentive to remain laggards. Or Lagarde's, as they may end up being called.
Don't be a Laggarde!
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