While I work for a company (Firefish.io) that has “Never sell your bitcoins” as its major claim, I do believe that spend-and-replace should be a more common practice, especially now that there is a growing number of merchants and service providers that do accept bitcoin as payment.
Easier said than done. Spend-and-replace is still hindered by many obstacles:
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Spending in most countries is a taxable event, meaning that the usual 3-5% discount for using bitcoin is often outweighed by the income taxes liability on the purchase.
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Replacing should be done timely and effortlessly, unfortunately it isn’t. You have to maintain an account on some exchange, actively connected to your source of fiat money (bank, credit card) and then transferring the newly purchased bitcoins to your self-custodial wallet.
While this process might make sense when spending significant amount of bitcoins (equivalent to hundreds or thousands of euros), it is just prohibitive for small expenses (the daily sandwich at the nearby place, or a cool gadget from an Etsy seller).
The solution we need to make spend-and-replace the norm is not a technical one, but new favorable regulations.
In certain Countries (UK being one, if I am not mistaken), sales of shares that are compensated by purchase of the same amount within 30 days are exempt from capital gain taxation.
If such an exemption was valid for Bitcoin, spend-and-replace would become a no-brainer!
My wallet would just send a monthly alert saying:
“Time to replace your Bitcoins! In order to avoid capital gain taxation, consider buying XXX BTC within 7 days. I will remind you in 3 days.”
Ideally the same wallet, might be able to facilitate the Bitcoin purchase (e.g. Relai, Bitcoin Well wallets). I would switch immediately to any wallet offering this feature!
⇒ Fellow Italian bitcoiners, is there any such provision in the messy Italian regulation?
