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August 11, 2021 - 5:27pm
Earlier this week, UnHerd contributor Greg Barker suggested that the crypto elite had ‘entered full-blown panic mode’ due to a new anti-crypto law in President Biden’s latest $1.2 trillion infrastructure bill. Among those in ‘panic mode’, he said, were Senator Ted Cruz, who warned that “crypto got screwed tonight” and J.D. Vance:
But even if only 14% of the US population currently intend to buy Bitcoin, it represents a burgeoning and highly engaged potential base of 45M users, employees, entrepreneurs and investors. This is a rapidly growing industry and it should not surprise us to see rapid growth in the coming years. Imagine if an internet-killing regulation came out in 1998 just before the massive growth that we saw following ‘98? Technology entrepreneurs, investors, and workers would rightly be protesting about it.
Barker goes on to argue that the supposedly hysterical reaction of Bitcoiners is a sign of just how fragile the crypto ecosystem is. They are “so desperate for this bill not to pass because it exposes the myth that Bitcoin is detached from the legacy world.”
But the fundamental problem with the infrastructure bill is the vague language and the unjustly high standards it places on actors within the cryptocurrency space. Without amendment, the bill would require “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person” to report to the IRS the name and address of each customer. This could unjustly capture bitcoin miners, bitcoin node runners or other participants in the crypto ecosystem.
It is not the case that “Bitcoin and crypto people are panicking because they don’t want to pay tax”. In truth, it is about not unjustly outlawing non-broker participants in the industry where they are clearly not brokers and do not have the information required to file a return on transfers occurring.
To understand why this bill is so ill-conceived, consider that Bitcoin’s blockchain is a ledger of transactions between pseudonymous entities. The participants in the network (whether they are bitcoin nodes or miners) literally do not have the information they would need to report to the government, as the data required is not conveyed as part of the protocol. Harmless behaviour such as participating in or developing software or hardware for use with or on the Bitcoin network could end up being criminalised by this bill.
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Subscribe“Without serious consultation and discussion, there is a risk of killing an industry before it has even had a chance to flourish. Bitcoin is an idea whose time has come,
I sort of think this ‘Industry’ needs killing, as the last thing it is – is an industry, but purely speculation instead, and that is exactly what this bill lays groundwork to do if they decide to. The writer misses a tax ramification in the bill. Basically it classes bitcoin as neither money or goods, and the wording implies the tax on it could be on every penny it is worth. Normally the gain of investments is taxable, sale price minus cost basis – – but with this bill the entire bit coin value could be taxable if they wished that.
So what the H*ll is Bit Coin? It has no value inherent at all. It is merely a computer set of 0 and 1’s, like the lotto numbers are. Those lotto numbers can be worth millions, but they have no intrinsic value, merely a gambling code.
Gold is real, it has actual value, it virtually NEVER is lost – that ring you wear may very well contain some ancient Egyptian gold, it is fungable (every oz is 100% like the others, so someone can electronically trade it to another across the world as it is Gold, and the same everywhere) it has value for art, jewelry, and mostly as money, as it has for over 5000 years. The Gold Standard kept money sound always – we got off it in 1971, and the dollar will die because of that. Under the gold standard you could only spend what you had – under the current Fiat $ you can print any amount, and thus debase the $, which is Biden’s goal.
12000 Digital Currencies exist, many a great deal better in every way to Bitcoin. Bitcoin mark II, Mark VII, they can just be made – it is nothing but faith, like Ponzie.
Fiat currency was backed by gold till 1971, now it is backed by Central Banks, someone will back your central bank currency – Bit coin? NO. Bit coin is bought and sold musing Tether, a crypto backed by 1 US $ per coin, it has a market cap of 68Billion – but the thing is there is no audit showing that! It is impossible tether is actually backed, it is not in a bank account, the 68 billion UDS$ – yet it is what is used to change cash into Bitcoin.
If there is a run on bit coin there is nothing behind it. This is why I fear it. Entire economic systems collapse when there is a run on something without an actual basis, like unbacked money.
So they say there can never be more than 21 million bitcoin, so it cannot inflate by excess printing – that is crazy.
“The satoshi is currently the smallest unit of the bitcoin currency recorded on the block chain. It is a one hundred millionth of a single bitcoin (0.00000001 BTC).”
So instead of pennies with bit coin you have Satoshi – 100,000,000,000th of a Bitcoin! That is virtually infinite –
I have been wrong on bit coin and failed to make a lot of money – but them I still fear it – I think one day it will sell down to zero and join its 12000 other Cryptos, there is nothing to stop it as it has NO intrinsic value, its only worth is what someone will give you for it – it makes no dividend or interest…
I worry it may destroy a great many lives, even economies…..
Have to agree with you. Cryptocurrencies are Assets which yield no income, the trading on it gives a Capital Gain (or loss) not an income. A crypto- coin has only the value someone will pay for it. Just as, at the height of the Wall Street boom shares were being traded at levels totally unrelated to any income they might yield and solely on a putative selling price. Prior to the Wall Street Crash there were many US millionaires, after it americans were begging in the streets.
There are 2 ways to create wealth, the first is to do some work, ie grow things make things, dig things up, and provide services which people want and will pay for. The second way is to take the existing stock of wealth and spin it around faster so it looks more. Unfortunately the second way is not lasting. Crypto is the second way and I am shocked traders are aloud to advertise the way they do.
Hear hear. One senses this writer would have objected in 1920 to Ponzi-scheme-killing bills, on the grounds that Ponzi schemes were the future.
I’m not quite convinced the bill is unnecessary. If, as the author suggests, crypto is rapidly becoming a viable form of currency with a “potential base of 45M users“, then crypto transactions must be adequately monitored and accounted for.
It does appear, however, that in their haste legislators have created a sloppy bill. Tidy up the language, make crypto brokers (not incidental participants) responsible for financial reporting and the bill seems appropriate to me.
Crypto is not a viable currency – its price goes wild – it is not a store of value. Bit coin is used to Transfer one currency to a another – becaused you buy your Bit coin in $, and send the code to someone else, and they cash out of it in their currency. It is not currency, but like Western Union, a means to transfer and convert moneys quickly.
Yes, it’s parasitical on something else, like so much on the web.
Bitcoin and Non-Fungible Tokens are just a new collectable of value only to those who dabble in such things because they have no intrinsic worth. The value in crypto has been in the algorithm itself which has many uses. A law dealing with the crypto currencies won’t matter to me because I’m not a speculator nor have any need to move money in less traceable ways.
“Bitcoin is an idea whose time has come” – a lot has been written concerning bitcoins but practically none of it has focussed on the mathematics so it is good to see in the comments some recognition of the abscence of intrinsic value. What a purchaser buys is a tedious to calculate number. Money is a promise to give value, generally backed by an entity with a credit rating. A bitcoin is not money – no entity with a credit rating promises to give you value. There is no fund backing it. It is a number that has no value unless someone decides to buy it from you. One day they will go out of fashion, no one will buy them and everyone who has bought one will lose their entire investment. In the meantime the price will fluctuate depending on sentiment based on fear of loss or fear of missing out.
A spin off is that the custodian of whether your particular tedious to calculate number is a valid one is the blockchain records on a community of computers. Your ownership depends on them being turned on and you keeping your record of your number to yourself, there is no ledger of owners. To stop the anonymous transfer of bitcoins regulators have to focus on the interface between “real” money and bitcoins. Done properly it can curb illegal activity. That will fight crime and reduce interest in bitcoins. Hopefully they will then disappear sooner, before too many hard earned savings are invested in them.