Mark Spitznagel (https://mises.org/blog/why-cryptocurrencies-will-never-be-safe-havens) has raised concerns about government regulation of cryptocurrencies.
I'm coming to the view that such regulation is not only necessary but will be extremely beneficial both for the market and for governments. [See my comments on that articl]
Some governments are already starting to regulate cryptos. Such regulations will massively increase the legitimacy of cryptos in the eyes of the sceptical masses, who will then jump on (finally) into the bandwagon, thereby massively increasing the price of these currencies.
Governments should get a share of the profits from cryptos to plough that money into infrastructure and public goods. It will only be a really stupid government that kills the chicken that lays a golden egg.
Having myself made a small paper profit (currently a notional profit of $4000 AUD on my small investment), I see no reason why government should not be able to apply the following taxes on crypto transactions:
CRYPTO-CRYPTO TRADES
The tax would need to be very small on tiny trades (such as for a cup of coffee), but it could be incrementally larger for larger trades.
A tax of up to 0.05 per cent on crypto trades will harvest significant gain for governments.
Of course, traders will then shop jurisdictions and move to exchanges in countries that do not charge such a tax. Or the exchanges will go off-line (peer-to-peer).
FIAT-CRYPTO-FIAT CONVERSIONS
Two choices:
a) at the standard GST rate (possibly at BOTH ends of the transaction).
b) as capital gains tax at the end of the transaction (this, of course, also would allow investors the option to track any capital losses).
What about the ability of crypto-owners to move their conversion to a different jurisdiction?
Yes, they can. For instance, a number of exchanges now offer USD debit cards that can be used anywhere in the world. So I can transfer funds to a US exchange, then convert to cryptocurrency, then buy a world-cruise from USA which will totally short-circuit the Australian system.
But if I wish to convert my crytpo-money into AUD (to be drawn as cash or deposited into my bank account), then generally only an Australian exchange will do so. The Australian government could require all Australian exchanges to charge a GST on such conversions. It could alternatively require me to track all my crypto investments and report on any capital gains.
Of course, there remains the option of peer-to-peer exchange in which I can find someone in Melbourne who wants bitcoin and get sell it to him in exchange for cash. This will be entirely off the record keeping system and will evade any tax.
It is not my job to think on behalf of governments about how they can tax cryptos. But this is clear: they can't avoid cryptos. These are here to stay. The only choice they have is to work out how to benefit from cryptos, which are essentially a great productivity enhancing device.
BTW, I agree with commentator Andrew Robbins here:
If a government starts to heavily regulate Cryptocurrencies they give themselves a massive disadvantage compared to other governments who don't. We're already starting to see this with ICOs preventing U.S. based IPs from participating. You do this too much, and people will eventually leave your country.
So, any government that regulates/ taxes will need to be keenly aware of competitive issues of this sort.