Can't the government force taxes to be paid in the currency of its choice, thereby making taxpayers (residents, visitors, and their counter-parties) subject to its currency?
> thereby making taxpayers (residents, visitors, and their counter-parties) subject to its currency?
It does not make them subject to inflation, no.
If you hold entirely cryptocurrency, you are not subject to the inflation of holding the currency. Instead, you can simply convert to that currency, only when you need to pay taxes.
This avoids the inflation, in the same way that hold stock in a company, and not holding any dollars, avoids you from being subject to inflation.
Suppose you had a particular debt, denominated in currency A, owed at the end of the year. Would you want to hold some amount of currency A throughout the year to ensure you could pay that debt? I suppose you could argue that you'd buy some currency swaps or somesuch, but most people would just hold that currency.
Remember the Asian Financial Crisis, when a bunch of the "tigers" had loans denominated in USD, Francs, etc., and then there was a big capital outflow, tanking their local currencies against those debts? People will want to make sure they don't float against the currency they owe.
Holding enough currency to have a small amount of hedged safety against risk of that currency changing in value is not really a good enough reason to say that a country would be able to "force" "taxpapers to be subject to its currency".
Even if we say that people would hold some of that original currency, there could still be a significant benefit to transferring most of your wealth to a deflationary currency. Therefore, people would still be able to avoid being subject to that original currency to a large degree.
> significant benefit to transferring most of your wealth to a deflationary currency
I'm not familiar with any evidence of that claim, despite my economics education. I suppose the best historical corollary would be gold? If so, I think we can agree that almost no one has adopted that practice. Do you think Bitcoin is different enough than gold such that it would motivate different behavior?
Let's consider the effects of owing tax in the national currency. Retail businesses would owe sales tax in that currency, perhaps paid quarterly. Rather than adding complexity to each sale, they'd probably price goods in the national currency, even if not a legal requirement (which it easily could be). If goods are priced in national currency, it's handy to keep your working capital in that same currency. ... The incentives start to align to keep the bulk of domestic economic activity using the domestic currency.
For comparison, we can look at behavior in countries which make significant use of some foreign currency. For example, in some central American countries, banks make it easy to keep a USD-denomimated bank account. Why do people want USD instead of gold?
> I suppose the best historical corollary would be gold?
Not really a good analogy. The difference between gold and other forms of alternative currency, is the ease at which it can be transferred.
This whole situation only works, in the case where it is simple and easy to transfer between the deflationary, and non deflationary currency.
Obviously, the ease at which it is possible to transfer currency to other people, is an important factor as to why someone would or would not use a currency.
> if goods are priced in national currency, it's handy to keep your working capital in that same currency.
Not necessarily. If there are easy ways of instantly transforming your deflationary currency, automatically, without you having to do anything, into that other currency, then there is no need to hold that other currency.
> Why do people want USD instead of gold?
Obviously it is because it is pretty difficult to spend gold at your supermarket.
This isn't a problem though, if you have a cryptocurrency credit card, for example, that immediately turns your deflationary crypto, into USD.
Imagine we had some kind of credit card that was linked to VTI (and the market didn't have these silly business hours). When you charge the card, it automatically sells shares to fund your purchase.
Would you use that card? How does it differ from the scenario you described for Bitcoin?
What it can't do, though, is force people to accept them.
If you want your money to inflate, you are free to use any infatuation currency that you want.
But other people, who prefer to not be subject to inflation, are now free to not be subject to it.