It seems as though everyone is talking about bitcoin these days. Its recent wild price run, with intraday price swings of $1,000, has made for lively discussions by investors and financial pundits.
One place that has been strangely silent on the topic is Washington. Although there have been White House statements about “monitoring the situation,” we still await any clear direction (or at least a tweet) on the subject from the President.
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Gary Cohn, President Trump’s chief economic advisor, recently shrugged off a question from Jim Kramer on the subject saying that he was not the “expert” and avoided further discussion of the topic. In a White House where the buck, and opinions, stop at the President’s desk (or twitter account), this is not surprising. It’s also not surprising given that Cohn comes from an extensive career with Goldman Sachs, which is clearly interested in ensuring the survival of the status quo for current financial systems and concerned about the disruptive potential of bitcoin.
While on the campaign trail, candidate Trump spent a substantial amount of time bashing Wall Street. Viewing Bitcoin through the lens of its ability to disrupt the powers on Wall Street through its potential as a currency or store of value, and the parabolic growth of initial coin offerings (ICOs), which could upend the current capital market funding process, would imply Trump would relish the impact that bitcoin can have. However, the President has brought in many Goldman Sachs bankers and touts the gains on Wall Street as evidence of his success. Disrupting the financial system seems like the last thing he or his followers want to do at this point.
Ambiguity on bitcoin also rides high on the left side of the aisle. Democratizing financial transactions, lowering the cost for cross border transactions, and providing a solution for the unbanked worldwide seems to fit squarely in the Democratic wheelhouse. However, the world of bitcoin thrives on a decentralized platform that has little interest in government regulation or control from any central authority. The Democrat’s desire for financial regulation to protect the small investor may be admirable for party loyalists, but the implementation of these regulations runs counter to the aims and rewards of bitcoin. Recent calls for regulation around ICOs intended to protect investors has had the result of allowing only accredited investors and foreign investors to partake in a democratic process that was rewarding small investors earlier in the year.
Given this undulating political and regulatory landscape, the most immediate place for policy around bitcoin will probably be focused in two areas: as an investment and as a currency.
The IRS has taken a position on bitcoin as an investment by stating that gains must be treated as property, similar to stock gains. This isn’t surprising as bitcoin owners have seen a $15,000 gain per bitcoin since the beginning of 2017.
There also has been movement on recognizing the use of bitcoin as a currency. A bipartisan bill (the Cryptocurrency Tax Fairness Act) has been introduced to allow for small purchases of $600 or less in bitcoin to be exempt from capital gains with the intent to create more opportunities for bitcoin to play a role in retail transactions and gain wider acceptance as a currency.
What’s needed now is direction, or at least an opinion, from the President regarding bitcoin so that policies can be formulated to address what will be the best investment of 2017. Given the many things that POTUS has an opinion on, it’s striking that he’s yet to address this topic.
Article By Jack Tatar – Co-author, “Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond”
Jack Tatar, co-author of CRYPTOASSETS, is an angel investor and advisor to startups in the cryptoasset community, and speaks and writes frequently on the topic. With over two decades of experience in financial services, he was one of the first financial professionals to receive certification from the Digital Currency Council. He is also the coauthor of one of the earliest books on Bitcoin, What’s the Deal with Bitcoins?