All of a sudden, cryptocurrency has become a powerful force in Washington
The clunky and awkwardly undemocratic underbelly of US politics was on full show earlier this month as Joe Biden’s landmark bipartisan $1.2 trillion infrastructure bill clumsily made its way through congress. Aside from the plethora of obscure handouts to organizations entirely unrelated to an infrastructure bill, the highlight of this process was the 2,700-page package being spectacularly held up by a small but hugely important clause with profound implications to the US cryptoeconomy.
Specifically, the clause attempts to address how crypto would be pulled into the US tax system, how the data required to report such tax events is collected, and who’s responsibility it is to collect said data. The impact of the clause, if the industry is forced to comply, would devastate crypto markets in the US and force innovation, jobs, and investment into other jurisdictions.
There are landmark events in crypto history that will be remembered in years to come when we look back at this first decade — the first BTC transaction, pizza guy, the DOA hack, block size wars, and the Bitcoin Cash fork, Mt Gox, and the HODL meme all stand out. It is reasonable that we now add to this list the crypto industry single-handedly holding up the mighty Infrastructure Bill and catapulting crypto to the top of the political agenda in DC. As we have maintained in our reports over the years, education of Bitcoin/crypto, without a centralized body to coordinate, is a problem that comes with open-source decentralized technologies. The temporary derailing of the momentous Infrastructure Bill by an industry with its roots in humble retails traders and investors has forced the topic onto the syllabus of politicians and their advisors. Crypto has leveled up to the final boss.
Despite the bill disappointingly passing without amendment, what is clear now the dust has settled is that crypto has shown itself to be a truly established and highly organized, motivated movement. A force of positive change that has infiltrated public conversation and investment portfolios but was arrogantly underestimated and misunderstood by Washington’s political elite. Whilst the crypto industry quietly continues to build, grow, and mature, political rhetoric and mainstream media have been bogged down with Dogecoin pumps, high leverage retail gambling concerns, ESG virtue signaling, Tether conspiracies, ransomware attacks and supposed high levels of crypto-enabled money laundering. With the exception of a few politicians, Washington has largely failed to understand what crypto actually represents and why 47m Americans (17% of the population and rising) hold and are empowered by “magic internet money.” They have misunderstood the importance crypto holds for millions and the enormous opportunity the US has to be at the center of this next evolutionary stage of the internet and money markets whilst driving the formation of a global regulatory framework.
So, what happened?
A last-minute shock inclusion into the bill of a clause that expanded the definition of a broker would result in miners and software developers being pulled into the unwieldy US tax system. For context, ‘brokers’ in the eyes of the IRS are the legal entities required by law to collect and report data on transactions and users. The bizarre idea that a team of coders would need to request users of their open-source software to provide them with KYC and AML documents is simply ridiculous. Expecting miners to request the identification of users broadcasting transactions on the Bitcoin network is laughable and shows that the clause has nothing to do with taxing crypto and everything to do with halting the industry dead in its tracks. This is unequivocally about Government control and categorically not about tax.
It is understood that the Treasury was indeed the cause of the unexpected egregious language, and exerted their influence over the fantastic work that pro-crypto NGO’s, Blockchain Association and Coin Center have spent years doing in influencing and educating DC policy makers on crypto and the need for progressive and fair tax rules for the industry.
This last-minute influence by the Yellen et al, piggybacking their wishes into a Bill that was certain to pass into law is a gross misuse of power. It is an indictment of the establishment that Yellen and her advisors can potentially derail the USA’s digital economy and disrupt countless billions of dollars of commerce because they feel threatened by open source software they don’t have total control over. The arrogance of centralized power makers to exert their individual opinions, without hearings or public stakeholder consultation, over a 2 trillion dollar industry that they publicly have little understanding off is sensational. Why is the Treasury even writing clauses in congressional bills anyway? Did they consult with anyone from the industry before wielding their oppressive power? Have they provided adequate reasoning for using crypto as their “pay for”?
When the industry realized what was happening, market participants put aside any ideological differences and urgently pulled together to fight the common enemy. CEOs and Founders of US crypto companies voiced their opinions and rallied their collective user base. On the ground, the aforementioned Blockchain Associate and Coin Centre led the charge with direct lobbying and coordination of stakeholders in D.C.
This groundswell of opposition and torrent of engagement on social media caused lawmakers to pause and focus their attention on the industry for fear of opposing thousands of constitutes that hold the keys to reelection. Until this month, it’s clear that many in DC had no idea how passionate and steadfast crypto users and hodlers are in America and are now hurrying to get up to speed with the basics of the industry and not just Elon’s Dogecoin pumps and dumps. The real education of DC is now underway, and even Ted Cruz came out fighting with a barnstormer of a Senate speech — full clip here. There is little doubt that the billions of investment dollars pouring into Texas post the Chinese mining ban has compelled Cruz to evaluate the industry more seriously than perhaps most other mandarins in D.C. Is crypto now becoming a single-issue voting matter? Ted Cruz’s surprise stance is telling.
“When it comes to particularly ugly legislation, this component, the regulation of cryptocurrency may take the price of the ugliest we have seen’’
“The right outcome…strike the whole damn thing and if we want to legislate on this then actually do our jobs…hold hearings, listening to witnesses, understand the consequences….that would be the reasonable, rational thing to do. Don’t just put out a rule of massive taxes and regulation with no understanding…’’
“Let’s recognize that if we gathered all 100 senators in this chamber and asked them to stand up and articulate two sentences defining what in the hell a cryptocurrency is, that you would not get greater than five who could answer that question’’
Sen. Ted Cruz.
Despite the Bill passing with the original text due to Senator Shelby — a soon to be retired 87 year old, who blocked a workable amendment out of spite for not getting his own military spending agenda included in the Bill — the market has shrugged off any negative ramifications (of which there could/should be plenty) and rallied to multi-month highs. This is a clear indication that consensus from market participants is that despite the Treasury’s attempts, the momentum behind US crypto is such that the current wording will ultimately be changed as it is simply unenforceable. Fundamentally, the market does not believe that the IRS will be able to police the laws which it is trying to force down the throats of the cryptoeconomy.
To some extent and from an ideological perspective, Bitcoin and decentralized technologies do not require politicians backing or laws, many protocols like Bitcoin will survive just fine albeit in the grey/black markets. However, it would be a net benefit to global adoption if the US regulators understand and embrace the industry rather than follow China down a more dictatorial path and pushing the industry underground.
Crypto has a choice now, play the DC game, level up, and act like the many other industries that have dedicated lobbyists that exert real political influence over Congressmen and women (often with a financial incentive kicker) or continue adhering to the permissionless, libertarian and free-market principles aligned with Bitcoin’s original state. Interestingly, many crypto commentators have looked to the NRA as an example of best practice on how to sustain the influence of an industry within the Capitol.
In summary, the “Infrastructure Bill moment’’ earlier this month represents a wider coordinated political movement that we have talked about before. The slow creep of regulation, the suffocating power grab by Western Governments, the implementation of “temporary’’ laws and restrictions for the benefit of society around the world is all driven by a bid for greater control by centralized bodies and governments. “Build Back Better’’ and “The Great Reset’’ is what is in play here, and crypto is just part of the autocratic jigsaw that is being assembled on the Wests table right before our eyes, if we care to look.
It is hard not to appear a bit “tin foil hat’’ about current global political and economic macro, but we need to start calling a spade a spade. The erosion of freedoms, self-sovereignty, free will, and thought is at stake, be it under the guise of a health pandemic, protection of the environment, safeguarding investors, or regulating crypto. Building back better with Central Bank Digital Currencies is at the center of all this. The Great Reset is here.
The past 100 years of economic history have shown the pattern of cyclical monetary resets that the global elite has structured and implemented, always catalyzed by global stresses such as war and/or economic depressions. The most famous of these is the 1944 Bretton Woods agreement, where the gold-pegged USD became the global reserve currency off the back of a devastated and war-weary world. Prior to Bretton Woods was the Genoa Agreement (Treaty of Rapallo) — a conclave of 34 nations, who amongst many things started the process of removing the public’s ability to claim gold vs their paper currency, leaving only nation-states the power and privilege to do so amongst themselves. The behind closed doors power grab is nothing new, and the Genoa Agreement was formalized fresh off the back of a world financially depressed by WWI and in desperate need of leadership and change. The 1971 Smithsonian Agreement is another example of state intervention into global currencies, followed by the ‘temporary’ removal of the gold standard by Tricky Dicky in 1973, resulting in the unsustainable debt-based economies of the 21st century.
The next monetary reset is now upon us, and the global power brokers in the world aren’t even hiding it. This isn’t happening behind closed doors ala Bretton Woods and Genoa, and this isn’t a conspiracy theory, this is a fact, and the unelected World Economic Forum is at the helm of this totalitarian movement which has spawned a creepy coordinated narrative amongst world leaders. The global pandemic and the economic crises that lockdowns have inflicted are the catalysts needed to push the next monetary reset narrative with control by the central powers the key to getting this done. Central Bank Digital Currencies will be the medicine that the global elite will prescribe.
“The pandemic represents a rare but narrow window of opportunity to reflect, reimagine, and reset our world”
“History shows that epidemics have been the great resetter of countries’ economy and social fabric. Why should it be different with COVID-19?”
Prof. Klaus Schwab, Executive Chairman, World Economic Forum. June 2020
Has the swan song of the fiat experiment begun in earnest? Is the next global monetary reset already underway? One thing we do know is that stakes could not be higher, and we expect crypto to play an important role as authoritarian policies continue to become the norm in developed economies. Do we want to live in a world of mass financial surveillance where the state owns and controls the majority via financial repression and ‘temporary restrictions’ on freedoms? If we do, then look no further than China’s social credit system, the rollout, and export of the digital Yuan, and the CCP’s response to the health pandemic. Or do we want to live in a world where free will is upheld and the sovereign rights of individual humans are safeguarded at all costs? These are some of the questions being asked of the world right now, meanwhile, the builders keep building.