Weirdly, quite a lot these days.
As you’re probably aware, President Biden is pushing for a $1 trillion infrastructure splurge.
And a bill is winding its way through Congress to get that done.
It mostly covers public transport, airports, railways, roads, bridges, sewers, and power generation.
But there’s also important news in there for crypto investors…
As a way to foot the bill, the Senate has included a provision that would tighten tax requirements on crypto.
Basically, it would compel crypto “brokers” to report customer information to the Internal Revenue Service (IRS).
And congressional bean counters say it could raise $28 billion over the next 10 years.
The problem is the Senate has phrased its provision so loosely, it could mean the new reporting requirements include crypto “miners”… even crypto software developers.
And as our tech and digital assets expert, Jeff Brown, warns, this Trojan horse could stifle the U.S. blockchain industry.
There’s a lot to unpack here. But if you own crypto, don’t worry. As I (Chris Lowe) will show you today, there’s a silver lining. And it reconfirms the bullish case for crypto.
Most U.S. senators don’t have a clue about tech.
This was on embarrassing display during the “grilling” they gave Facebook (FB) boss Mark Zuckerberg in 2018 over the company’s for-profit surveillance model.
One memorable moment was when Hawaiian Senator Brian Schatz asked the Zuck about Facebook-owned WhatsApp, “If I’m emailing within WhatsApp… does that inform your advertisers?” (You don’t email from WhatsApp. It’s a messenger app.)
Don’t get me wrong… There are a handful of senators who are clued in on crypto.
But the way the Senate phrased its crypto tax provision proves most of them don’t know much more about crypto than they know about social media.
We’ll go straight to Jeff with more on that…
The bill states that all cryptocurrency “brokers” must hand over customer information to the IRS. That sounds fine. It’s the same requirement stockbrokers must meet. It ensures we’re all paying our taxes.
The problem is the bill’s definition of a “broker.” It says it’s anyone or anything that “effectuates transfers of digital assets.” That’s extremely broad. It could include miners of digital assets, validators, smart contracts, software developers, and others.
And that’s a problem for the blockchain industry…
People and entities that mine digital assets or run nodes of a blockchain network are not brokers. They’re the infrastructure that keeps blockchain networks running.
A smart contract isn’t even a person or an entity. It’s a piece of code running on a blockchain. Software developers who design digital asset wallets are not brokers, either. They shouldn’t be responsible for collecting and reporting user information. This makes no sense.
That’s why Jeff says the bill could be devastating for the growth of the U.S. blockchain industry.
The bill now goes from the Senate to the House of Representatives. There’ll be a chance to fix these issues there.
And if that fails, Jeff says there will be time to make changes before the bill’s final implementation.
He’s worth listening to on this…
Jeff has given readers of our Near Future Report tech investing advisory the chance to make gains of 345% on bitcoin (BTC)… and 602% on ether (ETH). Ether is the crypto associated with the world’s second most valuable blockchain project, Ethereum.
And aside from heading up four tech investing advisories here at Legacy Research, Jeff is also a member of the Chamber of Digital Commerce.
It lobbies lawmakers to implement a light regulatory touch for crypto. It also pushes for clarity around crypto tax rules.
As Jeff wrote about here, he was on Capitol Hill for Congressional Blockchain Education Day in 2019.
He met with individual offices of the House and Senate to help them understand the merits of blockchain technology.
He’s also traveled to Israel on a U.S. Certified Trade Mission on blockchain and digital payments.
So he knows this industry well.
And even if the current infrastructure bill’s tax provision remains, Jeff is confident it won’t kill crypto.
There are thriving blockchain hubs outside of the U.S.
For instance, Zug, Switzerland, is known as “Crypto Valley” because of the cluster of blockchain businesses based there.
It’s attractive partly because of its crypto-friendly regulators… and partly because it charges an 11.9% corporate tax. (That jumps to 21% in the U.S.)
Malta, Gibraltar, and Singapore are other low-tax crypto hubs with friendly regulators.
If President Biden does something so stupid as signing a bill that will hurt the U.S. blockchain industry… it will go elsewhere.
Back to Jeff…
If it passes, this heavy-handed and illogical legislation will have the opposite effect of what lawmakers intended.
Investment and innovation will move offshore. Blockchain jobs will do the same. There will be even fewer blockchain and digital asset investments for U.S. investors. And related tax revenues will decline.
But it won’t kill blockchain. I’m more bullish than I’ve ever been on the blockchain industry and digital assets. We’re still early. There is so much value to create.
What some senators seem not to understand is that blockchain is the next generation of the internet and the next generation of payment systems around the world. We’ll be developing the technology and services for the next decade, and we shouldn’t be too worried about some bumps and bruises along the way.
And as I mentioned up top, there’s a silver lining in all the shenanigans around crypto going on in Washington…
I remember the early days of crypto.
In 2010, I was working for my mentor Bill Bonner in Buenos Aires, Argentina. A colleague had a crypto mining rig hooked up in the foyer.
This was just a year after the bitcoin network went live. Back then, you could mine bitcoins using old PCs because there was so little competition from other miners.
And almost nobody outside of a small circle of intrepid computer geeks, libertarians, and newsletter writers knew bitcoin existed.
Fast-forward to today. The Senate now believes crypto legislation can contribute $28 billion in revenues for critical infrastructure upgrades.
That’s the highest amount out of several revenue raisers in the bill.
The Federal Highway Administration says it will cost $25.6 billion to replace all the structurally deficient bridges in the country.
For years, the government treated crypto as a sideshow. Or worse – something useful only for criminals.
Now, the market for cryptocurrencies has soared to an estimated $1.8 trillion.
And Washington is turning to the blockchain industry to pay for a once-in-a-generation infrastructure upgrade on par with the Interstate Highway System buildout in the 1950s.
If that’s not proof crypto has gone mainstream, I don’t know what is.
And remember, as our other crypto expert at Legacy, Teeka Tiwari, hammers on all the time, it’s adoption that ultimately drives crypto prices higher.
And if you’re still a crypto virgin… as I know many of our readers are despite our best efforts… now is a good time to finally buy.
Start with bitcoin. And remember never to bet the farm.
You don’t have to buy a whole bitcoin for $46,000. Similar to how the dollar is divided into cents, bitcoins are divided into smaller units called satoshis. So you can invest any dollar amount you like.
Teeka recommends an initial stake of $200 to $400 for smaller investors and $500 to $1,000 for larger investors.
Then it’s a matter of holding for the long term… and understanding that it’s going to be a roller-coaster ride.
But if you have the guts to stick it out, Teeka says you stand to make 11x your money as bitcoin goes to $500,000… and higher.
Regards,
Chris Lowe
August 11, 2021
Dublin, Ireland