As cryptocurrencies grow the power of governments to tax will diminish.
I think it'll be similar to music and movie piracy - they will be simply used so widely that it will be impossible to fight. Embattled governments will turn to deflation and increase the tax burden on those who continue to use state currencies, increasing even further the incentive to switch to cryptocurrencies. With only worthless fiat to pay armies and bureaucrats, governments may well collapse.
That seems pretty unlikely to me; much taxation is based around physical location and economic relationships, not control of the currency. My employer pays taxes not because the government controls the money, but because they rent an office in Copenhagen, do business there, and employ about 200 people, and it's pretty hard to hide all that. For one thing, the employees want to be counted as employed too, or else they wouldn't be eligible for pensions or various other aspects of the social system, and would complain loudly if the company failed to register its employees and pay taxes.
Also, things like car tax are successfully collected even on entirely black-market sales through this simple expedient: drive around the city scanning license plates, and check whether the car is registered. The same is done with apartments: do you own a $1m apartment in the center of Copenhagen? Your income taxes better explain where you got that much money. Paying for the apartment in Bitcoin won't help you hide the physical apartment.
I don't see cryptocurrencies as all that fundamentally different than cash (or even gold) for those kinds of purposes, which are already fairly easy to use for black-market transactions. The availability of money is not what's keeping my employer from paying me under the table; if they could get away with it, they could slip me USD or EUR bills under the table. And in a handful of small-scale occupations (e.g. hiring a house cleaner) people do so. But for most larger-scale stuff the cash itself is not the limiting factor; the limiting factor is that you do other things that get you noticed. Even that part is pretty classic: Al Capone was famously taken down on tax-evasion charges because he was clearly living a lifestyle above what he was reporting. If you buy a mansion and Lambo with your Bitcoin, you had better have your taxes in order.
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Less philosophy, more inevitability really.
As cryptocurrencies grow the power of governments to tax will diminish. I think it'll be similar to music and movie piracy - they will be simply used so widely that it will be impossible to fight. Embattled governments will turn to deflation and increase the tax burden on those who continue to use state currencies, increasing even further the incentive to switch to cryptocurrencies. With only worthless fiat to pay armies and bureaucrats, governments may well collapse.
What comes next I have no idea.
That seems pretty unlikely to me; much taxation is based around physical location and economic relationships, not control of the currency. My employer pays taxes not because the government controls the money, but because they rent an office in Copenhagen, do business there, and employ about 200 people, and it's pretty hard to hide all that. For one thing, the employees want to be counted as employed too, or else they wouldn't be eligible for pensions or various other aspects of the social system, and would complain loudly if the company failed to register its employees and pay taxes.
Also, things like car tax are successfully collected even on entirely black-market sales through this simple expedient: drive around the city scanning license plates, and check whether the car is registered. The same is done with apartments: do you own a $1m apartment in the center of Copenhagen? Your income taxes better explain where you got that much money. Paying for the apartment in Bitcoin won't help you hide the physical apartment.
I don't see cryptocurrencies as all that fundamentally different than cash (or even gold) for those kinds of purposes, which are already fairly easy to use for black-market transactions. The availability of money is not what's keeping my employer from paying me under the table; if they could get away with it, they could slip me USD or EUR bills under the table. And in a handful of small-scale occupations (e.g. hiring a house cleaner) people do so. But for most larger-scale stuff the cash itself is not the limiting factor; the limiting factor is that you do other things that get you noticed. Even that part is pretty classic: Al Capone was famously taken down on tax-evasion charges because he was clearly living a lifestyle above what he was reporting. If you buy a mansion and Lambo with your Bitcoin, you had better have your taxes in order.