Because today’s cryptocurrencies don’t need an entity such as a bank to oversee them, they can exist outside legal jurisdictions.
Whether that means you could avoid paying capital gains tax or you could finance criminal activities, this could be seen as an advantage by those wanting to stay off the radar, but the ethical challenges of tax avoidance and funding terrorism outweigh such personal interest.
Also, the days of using crypto to dodge the Australian Tax Office (ATO) are well and truly gone now, folks. They’ve got a data matching program that’ll get you eventually if you try.
Being outside legal oversight means there’s little disincentive against market manipulation. Where insider trading on the stock market risks massive fines and jail time, there’s no such penalty for the crypto trader.
This means any Average Joe is at risk of being done over when (not if) a big player does something dodgy.
Then there’s electricity.
Creating new blocks requires enormous amounts of energy to power the computers needed to do it.
Crypto is not exactly a green option, with Bitcoin alone consuming more electricity than entire countries such as Argentina.
(If you’re wondering where all the energy comes from without the bank to pay for it: crypto ‘miners’ receive cryptocurrency whenever they mine - i.e. generate - a new block in the chain, so the miners have an incentive to own the hardware and supply the energy.)
Finally, it’s intended as a replacement for fiat currencies, but not popular in the day-to-day sense yet. Most of us already balk at a merchant passing on a 1% credit card fee.
In one example, a Sydney bar passes on its $10 equivalent BTC transaction fee for each purchase. On a $10 beer, that’s a 100% fee. Not attractive.
#Then there’s the ultimate question which seems to have the finance world divided...
Is crypto an asset? 🤔
Comments