In the future, I think it's gonna get much more difficult for banks to trace where exactly the BTC came from.
It sounds like you're thinking as a bank, well they're not in difficult position, they're not at risk.
They have a rule like if the customer failed to show the evidence, the banks will give penalty which could make the tax double or triple than the actual tax. The banks can also have an option to seized the coins, so they don't need to work harder to handle this case, the customer is.
I'm sorry if I am making a bad analogy.
But why is this any different than paying for groceries in cash, and your cash payment being refused unless you can prove that your $20 bill did not come from illegal activities? That is not sustainable for banks to keep verifying.
I am the person who first bought the bitcoin from an exchange, so I can choose to show them where I got it from.
But I can pay my jeweler in bitcoin to receive a bar of gold for example.
If the jeweler has to declare the bitcoin on his balance sheet, and banks ask him where it came from, he can show them that it came from a customer.
That customer could have done something illegal like not paying taxes, or getting it from selling drugs.
But that does not mean that the jeweler did something illegal
by receiving the bitcoin and exchanging it for his goods and services. He received bitcoin as payment and converts it to
cashcashn and he is not responsible for how the BTC was acquired before he received it.
A $20 bill in my pocket could have passed through the hands of criminals, but that does not make it any less valuable or useful.
Neither do I have to pay taxes every time I spend that $20 bill, or prove that it didn't come from criminal activities. But spend $20 worth of bitcoin and technically you do owe taxes, and a forced proof of transaction history.
Both the tax and the proof of history are unfair and completely unsustainable.
Banks and governments are treating bitcoin as if it is not money. But it is.
In my opinion it is absolutely mandatory that if we want this technology to survive, we keep it outside of the banking system by never converting to fiat currency.
My prediction is that banks will soon offer crypto currency trading on THEIR platforms, of which they have full control and they own the private keys.
We can never give up self custody, and I believe that they are coming for it.