Don’t Let Bitcoin Become a Political Football

Don’t Let Bitcoin Become a Political Football

Throughout its history, bitcoin has faced endless attacks.

From the 2013 Mt. Gox hack that shut down the world’s largest bitcoin exchange… To China’s bitcoin mining ban in 2021… To the 2022 FTX scandal that saw $8 billion in crypto assets evaporate into thin air… And the “soft” attacks against bitcoin that denied everyday folks banking services if they tried to send money to a crypto exchange.

Again and again, bitcoin has found a way to not only survive — but thrive in the face of efforts to thwart its adoption.

I bring this up because there are two political battles underway that are aimed at bitcoin. One takes direct aim at weakening bitcoin’s security. The other is geared towards slowing down the pace of bitcoin adoption.

Let’s talk about bitcoin’s security first.

Securing a Monetary System Is Expensive

Bitcoin is secured by a process called “proof of work” (POW).

In a nutshell, bitcoin miners across the world compete to solve complex math problems. Winners are rewarded with newly issued bitcoin. The process of mining new bitcoins secures the network.

As you can imagine, securing a gigantic global payment network requires a gigantic amount of energy. There’s no way around this. If you want to have a truly secure global monetary network, it’s going to take lots of energy.

The same is true for countries.

Combined, the United States and European Union employ 4.75 million military service members and spend over $1.1 trillion per year to secure its global monetary network.

The U.S. military alone uses an estimated 4.6 billion gallons of fuel per year, and accounts for 93% of the government’s fuel consumption.

If the Department of Defense were a country, it would rank 34th in the world in average daily oil use, coming in just behind Iraq and just ahead of Sweden.

Now add to that the cost to run the entire global financial system… The courts needed to enforce the rules of the financial system… The agencies needed to regulate the system… And you can understand why the dollar and energy cost is so vast.

So you can see why creating and enforcing rules to issue, custody and honor money is very expensive. Bitcoin does all of this without the need of a global financial infrastructure, courts or standing military.

Attacking Bitcoin’s Energy Usage

When viewed through that lens – you can see that while bitcoin uses a huge amount of energy (currently the equivalent energy usage of Greece) – it’s far lower than the amount our present financial system uses.

And yet President Biden is threatening to upend bitcoin mining in the United States by proposing a 30% tax on all of the electricity they use.

The Biden administration is pushing to get this legislation adopted in the 2025 budget.

This is a direct assault against what makes bitcoin valuable – the unhackable nature of its proof-of-work design. The administration clearly knows this. It should also know the folly of attacking bitcoin miners.

If this tax is enacted, it will kill the U.S. bitcoin mining industry. This will force miners to relocate to friendlier jurisdictions. Leaving the country would be inconvenient for the miners… But disastrous for America.

Why would you want the most important innovation in money to make its home anywhere other than the United States?

The Chinese government tried a similar move in 2021 when it outright banned bitcoin mining. The miners just packed up their mining rigs and relocated.

If this bitcoin mining tax passes in America, they will just do the same.

A Second Line of Attack Against Crypto

In March 2022, the Securities and Exchange Commission (SEC) announced the introduction of Special Accounting Bulletin (SAB) 121.

The notice requires digital asset custodians to hold their clients’ assets on their own corporate balance sheets as a liability.

That means if a bank holds $1 billion worth of bitcoin on behalf of a customer, it would need to hold $1 billion worth of its own assets as security against that bitcoin.

This is insane because asset custody is a risk-free business.

Your one job as a custodian is to simply hold assets on behalf of your customers. There’s no counterparty risk since you hold the asset. None of your firm’s capital is at risk. No other asset except crypto is held to this absurd standard.

It has been deliberately enacted to slow the adoption of crypto assets by U.S. institutions. Fortunately, Congress is doing something about it.

On May 8, the House of Representatives voted 228-182 to repeal SAB 121. Most telling of all is the bill received bipartisan support with 21 Democrats voting for it.

The bill now moves to the Senate. However, President Biden has announced he’ll veto the bill if it makes it to his desk.

Politically speaking, this is a very dangerous move by the President. Nearly 52 million Americans own crypto assets. 

On top of that, SAB 121 takes direct aim at blocking crypto from the traditional financial system... A system that we’ve seen by the recent success of the bitcoin ETFs is hungry for the fees that can come from the custody of crypto assets.

Lining up against both Wall Street and 52 million voters is a dangerous thing to do in an election year.

Even fellow Democrats see the folly of this approach, with Democratic Representative Wiley Nickel of North Carolina saying:

Added Nickel, “Digital assets shouldn’t be a partisan issue.”

He went on to say he would “continue working on a bipartisan way” to protect American consumers and keep blockchain and crypto innovation in the U.S.

I agree with Nickel. Crypto isn’t a political issue. It’s an “everyone” issue.

And Nickel is right to be concerned because on May 10, President Trump said:

I’ve long written that it’s a policy mistake to target crypto when so many Americans across the political spectrum hold crypto assets.

So don’t be surprised if politicians try to divide us during this election season by painting being pro-bitcoin as being anti-American.

Nothing could be closer to America’s founding ideals than we the people having control over our own money.

Bitcoin is a way out of endless money printing and that is a good thing. Endless money printing creates inflation and makes life harder for everyone except the very rich.

Bitcoin belongs to everyone regardless of their political affiliation. We all have an innate right to hold our wealth in a vessel immune from government control and dilution.

There’s nothing anti-American or political about that

Unlike stocks that can get endlessly diluted by insiders issuing more shares… Or cash that gets endlessly diluted by politicians and central banks… No one can dilute bitcoin.

It’s a peerless asset in that regard. It has true scarcity that cannot be violated by anyone.

Can you name another asset with that property? I can’t.

Let The Game Come To You!™

Big T

P.S. If you believe, as I do, that every American has the inherent right to own digital assets to protect and grow their wealth, then I encourage you to share this article with your friends and families.

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