Its vague language and impossible standards could kill a growing industry
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.
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, and if the industry is stifled in one country, participants will restructure or head for greener pastures abroad. The net result of that would be that innovation and growth goes elsewhere, leaving Americans poorer for it.
The sooner everybody recognises that Bitcoin isn’t going away, the sooner people can come to terms with creating a sane environment for the industry and the economy to flourish.