Crypto suddenly became part of the U.S. Senate’s debate over the infrastructure bill, and the outcome in my view is the greatest regulatory certainty crypto has ever had in the U.S.
Out of seemingly nowhere, the infrastructure bill introduced an estimated $28 billion tax on the crypto industry. Many in the industry expressed outrage and concern. The crypto-related amendments that were introduced and debated in the Senate focused on a battle over how tax reporting will work and whom it should apply to.
Jeff Bandman is a former senior official at the Commodity Futures Trading Commission who led the agency’s initial virtual currency and blockchain work and was founding director of LabCFTC. He is currently principal of Bandman Advisors.
Here’s the silver lining – and for me a huge “Aha” moment. If the U.S. government thinks it is going to raise $28 billion in taxes from the crypto industry in the next 10 years, it means crypto is here to stay. It means crypto is going to be a new cornerstone of the U.S. economy.
Let me say this another way – the government is going into partnership with the crypto industry.
The government didn’t abolish tobacco – it taxes it. The government taxes alcohol. The government taxes capital gains and income, and all kinds of other things. It does not tax illegal narcotics, it does not tax prostitution (except in Nevada). And once the government gets used to receiving tax revenue, it is almost unprecedented for that to stop.
IF THE U.S. GOVERNMENT THINKS IT IS GOING TO RAISE $28 BILLION IN TAXES FROM THE CRYPTO INDUSTRY IN THE NEXT 10 YEARS – THIS MEANS CRYPTO IS HERE TO STAY.
My first “Aha! Moment” that crypto was here to stay occurred back in 2013-2014, when the government seized copious quantities of bitcoin (BTC, -1.86%) from the illegal Silk Road criminal enterprise.
And what did the government do with all those bitcoins? It auctioned them off to the American people. Wow!
When I teach my introductory courses on crypto-assets law, policy and regulation, in the very first class, I ask the students this riddle: How is bitcoin like a speedboat? (Actually I put up photos of both.)
There is no single right answer, and the responses are clever and creative. It is liquid. It is volatile. It is powerful. It moves rapidly, it moves frictionlessly. Your two happiest days are the day you buy it and the day you sell it.
The answer we arrive at is that the government auctions off seized bitcoin just like it auctions off other seized items – boats, cars, houses and furniture. The government does not auction off narcotics or AK-47s.