I've had a number of calls about Bitcoin and cryptocurrencies.   Is it taxed?   Yes, under CGT.   Can a SMSF own them?   Doubtful, the Sole Purpose test may be failed.   How much should I pay?   (Insert deep and meaningful sigh).

It's not just that I'm grumpy or difficult but I'm somewhat concerned that so many well-meaning people keep telling me how wonderful cryptocurrencies are.   I read the analysis from some of the smartest people in their field, and most seem to regard cryptos as hype (nicest word I could use).

Don't misunderstand me, I have read a lot on Distributed Ledger Technology (aka the Blockchain) and I can see how revolutionary and innovative it is, and how it is likely to disrupt many industries in the future.   And, cryptocurrency is just one use of the Blockchain.

However, as a currency I have concerns.   In fact, cryptocurrencies are primarily a medium of exchange which means to me they are likely to become regulated or controlled.   Logically, why would governments want to miss out on some sort of fees or revenue?   Once that happens the price is likely to fall.   Joseph Stiglitz, who won a Nobel Prize in economics, said recently that "… you cannot have a means of payment based on secrecy when it is necessary to have a transparent banking system".

I can't see them as an investment either, the price is driven mostly by irrational speculation not any underlying value.   We're still talking about the cryptocurrencies here, not the Blockchain, where I think there are some amazing inventions close to release.   A few of the 1,400 odd cryptos may have an investible proposition, but perhaps their 'brands' are not as well known yet as Bitcoin.

Warren Buffet and his business partner Charlie Munger are not deniers but they fail to see how something like currency can be valued like a business.   There is no underlying asset, so if price falls it is due to a factor of speculation rather than some change in the quality of the business or its assets.

Again, I defer to Buffet.   His philosophy is basically that if it is too difficult to understand, then one should not invest in it.

Some months ago I read there were over 1,400 cryptocurrencies, and Bitcoin is no doubt the best known.   Hacking is a constant risk and once enough problems, concerns, or bad publicity occurs, their 'industry' is likely to face regulation.   And that may be enough to stop the market rising, or alternatively cause prices to plummet.

I recognise there are alternative views.   Some people have made good profits (the early adopters to use marketing-speak), and there are opinions by other sources (eg., Winklevoss of Facebook, Krawisz of FX Empire) that Bitcoin particularly is on its way to domination of currency.   One commentator said ordinary money will face 'hyperbitcoinization', which sounds terribly awful if you catch it   (it's not in my Oxford Dictionary either, so I don't know what it really means).

My view at the moment is that the acquisition of cryptocurrencies is basically speculation, and so no investment should be for more than you can afford to lose.   Any loss is a capital loss and would only offset against taxable capital gains, so there will not be an income tax benefit or saving.