The guest commentary below was written by Dennis Porter of Swan.com. This piece does not necessarily reflect the opinion of Hedgeye.
Today in the United States, we see an overwhelming number of elected officials and candidates running for office who are vying for the attention of the Bitcoin space. How did we get here when we were instead worried that politicians would try to ban Bitcoin in the US just a few short years ago?
Many elected leaders have begun to realize that Bitcoin is here to stay in the USA. (See “A Chronic Case of Bitcoin” from the September issue of Insight). Officials as high up as US Senators are starting to understand what this technology means for the future of this country, its industry, and its citizens.
This realization was achieved through industry growth, intense grassroots advocacy, and relationship-building efforts. We now see elected officials from both sides of the aisle turn a new, favorable page with their approach to Bitcoin.
There was a time when elected officials didn't understand the internet. Eventually, they came to see it as a way to bring innovation, jobs, and investment to their local jurisdictions. The same process is occurring with Bitcoin. Some elected also see the inherent benefits of money that can not be censored or controlled by a central entity.
Republicans have taken the lead on this issue for a couple of reasons. The minority party is always looking for new ways to gain an advantage over the party in power, and Bitcoin is an obvious way to rattle the status quo.
Republicans are also incentivized to push for Bitcoin as they are not currently in a position to control the unlimited-money printer or where that unlimited money is spent. This trend will not persist as Democrats face becoming the minority party less than a year from today.
One way Democrats can shore up their losses is to tap into the Bitcoin voter group.
New Voters
In the USA, all elected officials consider how they can outmaneuver their political opponents. Often they are looking for voters, groups, or sources of money that have not yet been tapped. Republicans have rightly identified that Bitcoin aligns with many conservative and Republican ideas.
Interestingly enough, Bitcoin also aligns with the ideas of those on the left and of Democrats. Bitcoin is inclusive money that everyone on the planet has equal access to. It does not discriminate by age, race, sexual orientation, or gender. It may be the only way for people at the bottom of the socio-economic ladder to save money to get ahead in life and secure their future.
Inherently, Bitcoin is a bipartisan issue. It transcends the political divide, which gives bitcoiner voters a chance to be an extremely powerful group. We, the bitcoiners, can have both parties vying for our votes and support instead of just one.
That ensures bitcoiners will have a consistent seat at the table regardless of which party is in power. This is critical because if one side opposes Bitcoin, we would be fighting to push back on bad policy approximately half of the time instead of letting both parties compete to craft the best legislation all of the time.
Republicans have been well poised to take advantage of this new political movement due to them being the minority party. But, while the party in power almost always works to maintain the status quo, and bitcoin is a massive disruption to it, Democrats are not far behind.
They sense big losses coming in November and thus have begun reaching out to this new industry and voter bloc. I sat down with a Member of Congress recently to discuss Bitcoin, and there is incredible interest to move forward on the issue and help ensure Democrats are seen as leaders on Bitcoin.
The States
Because Texas has a large surplus of unused power, it has become a base for many Bitcoin miners. This has resulted in Texas becoming one of the key players in the Bitcoin mining industry.
Texas is not just home to mining due to its excess of energy but also because its grid is the most deregulated in this nation. The deregulated grid in Texas known as ERCOT enables Bitcoin miners to reduce costs and even sell energy back to the grid. However, Texas isn't the only state making moves.
Wyoming has passed over 25 laws to encourage Bitcoin and Digital Asset focused businesses to come there. This effort was largely pushed by Caitlin Long, the founder of Custodia (formerly Avanti) Bank.
She has been at the forefront of ensuring her state is a key player in the future of Bitcoin. Other States are noticing what is happening. Game theory is playing a role. States including Michigan, New Hampshire, and even California have been fighting to ensure that they stay competitive on Bitcoin. Look for more legislation and action to take place in these states.
I am also now working hard to make sure my home state of Oregon becomes a leader in Bitcoin. We have cheap power, but our grid is over-regulated, and we need to push local lawmakers for changes. Fortunately, we have Senator Wyden, who is a part of the task force on bringing chip fabrication to the USA.
Wyden has also been a part of the Democrat effort to soften the blow of the crypto tax reporting amendment (more on this amendment below) by ensuring that miners are not viewed as “Brokers” by the IRS.
Legislative Battlefront
We have seen incredible changes in how legislators approach Bitcoin in the last six months. The biggest one occurred when the crypto tax reporting amendment appeared in the summer of 2021.
Many legislators quickly became aware of how powerful and how motivated the Bitcoin single-issue voter bloc and Bitcoin-related industry are. Many bitcoiners became highly active in the political process when they realized that the legislation snuck into the infrastructure bill would put a “gun to the head” of infrastructure in the United States.
The crypto tax reporting Amendment would re-label large swaths of the industry as brokers. This new broker definition would force all miners, node operators, software developers, and hardware developers to report KYC/AML (known your customer / anti-money laundering) information to FinCEN.
The reason why this is problematic is that the Bitcoin network doesn't require any information to use it. On networks like Visa and MasterCard, individuals have to give up their private information to use them.
Under the “third party Doctrine,” you no longer have a “reasonable expectation of privacy” once you hand over your private info to any such company. (Side Note: This is the loophole that allows the federal government to legally spy on millions of Americans every day. It removes any reasonable right to privacy.)
With Bitcoin, no third-party information is required to use the network, making it impossible for network participants to comply with this requirement. Unfortunately, just because a law is impossible to comply with in the US doesn't necessarily mean that you are off the hook.
Thus, this legislation would open up the door for the federal government to pick winners and losers in the industry, which is very dangerous to free markets. This is where crony capitalism tends to take over where whoever has the best political connections and the most money to spend on lobbying often gets the best protection from laws that cannot be followed. The small guys end up getting pushed out of the market. This ultimately leads to a stifling of innovation, which is why as Americans we should always push back against this type of dangerous legislation.
Ultimately, we fought a massive battle over the amendment, yet lost. This was not necessarily a bad outcome, though. We may have lost that battle, but we did not lose the war. It taught us a hard lesson.
It taught us that we need to be active in the political process – that we need to be building relationships with lawmakers who will go to bat with us when the going gets tough.
This event inevitably led to our mass mobilization as a voter group, combined with the backing of the industry as a whole. We proved that we are willing to go to war over legislation. It was very difficult to mobilize bitcoiners and bitcoin-related companies in the past. This was an important moment in Bitcoin’s history because it made many of us realize that we need to bolster our defenses and go on the offense.
We need to have a good defense to prevent bad policies from passing. If you plan to live in the USA and you want your country to be more pro-Bitcoin, you must push back against attacks to damage the industry, and that take away the rights of users.
On the flip side, we need an offense because we need to make sure that we are scoring points. Imagine policy-making as if we are playing a game of soccer. Imagine we all decided to guard the goal throughout the entire match so our opponents couldn't score.
They may rarely score a goal, but we will also never win a single game. The same is true with Bitcoin. We need to have a great defense but also have times where we go on the offensive to make sure that we are scoring points legislatively as well.
We can be the ones injecting legislation into must-pass bills instead of just the bankers and bureaucrats. Rather than being on the receiving end of bad policy, we can ensure that pro-Bitcoin policy is constantly advancing on the state and federal levels.
After the “Crypto Tax Reporting Amendment” event, many in the Bitcoin Industry decided to jump into the political game. Many organizations, super-PACs, advocacy groups, and individuals chose to jump into the game.
Organizations like the Bitcoin Advocacy Group started to form – an advocacy group dedicated to helping educate elected officials and to activate grassroots supporters to make sure that every piece of legislation that comes through Congress or through a state legislator has pressure against it.
The Impact Of Staying Active
The next battle occurred several months later. The “America COMPETES Act” was recently introduced.
Within it was a piece of legislation that would have extended the bank secrecy act to allow the treasury secretary to spy on and freeze accounts or block access to financial institutions for anyone using digital currencies. The power already exists today to block and restrict access to financial services.
However, the treasury secretary must report it to the public and is limited to 120 days of activity on this specific type of power. The America COMPETES Act contained language that would have allowed the treasury secretary to extend these powers to an unlimited amount of time and with no public reporting.
The Bitcoin and digital asset industry and community became engaged and enraged, over this piece of legislation. In a very short matter of time, those who wrote this amendment into The America COMPETES Act quickly backed down.
When I spoke to those in DC about why they retreated, one of the primary reasons they cited was that they did not want a repeat of what happened in the summer over the Crypto Tax Reporting Amendment.
Ultimately, all of this dangerous language in The America COMPETES Act was struck out! Every bad line was eliminated in the Manager's Amendment. This was a massive win for the industry.
It proved our activism is effective. It showed those in DC that we would not stand for these attacks on our rights. We proved that advocacy and activism in this space could have a real impact.
Going On The Offensive
We have also now seen the beginning of our offense form. We have elected officials like Senator Cynthia Lummis and Congressmen Warren Davidson who are submitting or are on the verge of submitting a pro-Bitcoin policy.
Congressman Davidson already introduced a bill to protect self-custody and peer-to-peer transactions. The bill will have a difficult time passing, but this is a critical time in our history as we have now seen that legislators are willing to get behind a policy that is pro-Bitcoin and not just opposed anti-Bitcoin legislation or give the industry lip service.
Senator Cynthia Lummis is preparing to put a bill forward to create a new regulatory body in the USA that the CFTC and the SEC would jointly govern to manage the digital asset industry. Cynthia Lummis has been a massive supporter of the Bitcoin space, and she has even gone on to say “thank God for Bitcoin” on the Senate floor.
Congressman Tom Emmer has also put forth a bill to ban CBDCs. In 2020, if you had told me that a sitting Member of Congress would attempt to ban CBDCs instead of Bitcoin, I would not have believed you, but yet here we are.
I predict that we will see more elected officials become pro-Bitcoin as time goes on. This prediction isn't solely based on the past. It is also based on conversations I am actively participating in today. I am speaking with elected officials and candidates on both sides of the aisle.
Smart politicians see what is happening and are beginning to look for ways to get close to the industry. This is a very good sign. You want politicians to care about us as a voter group. It means we are worth caring about. Always be happy when politicians approach you. It's because they think you matter (to put it bluntly).
But, to keep them interested in us as a group, we now need to start building and contributing to good projects and organizations that will hold them accountable. Those organizations need help from people like you to support their good efforts.
If you are interested in finding an organization to support, whether it is to protect bitcoin mining, Bitcoin users, or the Bitcoin industry, reach out to me. I can help direct you to the most active projects.
Those who can support good organizations should be ready to do so. In the end, the groups forming today will be key players in making sure that the United States is protected from bad policy and regulations.
What's Next?
I firmly believe that the USA can become the best place to buy, sell, trade, earn, mine, and HODL bitcoin. We have the best and the brightest people on the planet. We have an abundance of energy to mine with.
We have one of the most decentralized governance models on the planet, all of which allows us as a nation to compete on a level that no other country or region can match. If the USA gets on board with Bitcoin (instead of trying to fight it), we will have a better America with less divisive politics.
Bitcoin is one of the most bi-partisan issues in recent history, and it is my firm belief that it will force all of us back to a rational middle ground where we can begin having conversations again. I truly believe that Bitcoin will save the USA and save the world.
If you want to see Bitcoin save America, I encourage you to vote, donate, write letters, and run for office if you feel compelled to do so.
The people reading this article are poised to change this country. And if you live outside the USA, this same advice applies. If you want your home to thrive, pushing Bitcoin to the forefront is the best possible way you can achieve that vision.
Power And Leverage
Politics is about power and leverage.
By becoming extremely active and letting elected officials know that we will not stand for a bad policy, we have set a precedent that we will not let them pass any legislation without taking action. It is vital when a bad policy comes through that we remain vigilant so that we can let our elected officials know that we activate whenever necessary.
They need to know that we will vote, we will write our elected officials, we will donate, we will oppose bad legislation, we will support good legislation, and we will even run for office if necessary.
EDITOR'S NOTE
Dennis Porter is a political strategist and Bitcoin advocate. He works to protect Bitcoin users and miners through public policy at the state and federal levels.
