The Future Of Money

Pertinacious Tom

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Legislators Hid a Sneaky Crypto Reporting Provision in the Infrastructure Bill

They didn't really hide it and it's the same old reporting provision brought to us by the drug war in the 80's, just applied to new tech.
 

...

Section 6050I is a "long-forgotten statute" within the tax code, says Abe Sutherland, an adjunct at the University of Virginia School of Law and a fellow at the Coin Center. It requires people who transact large amounts of cash—above $10,000—to file reports to the IRS detailing the senders' names and Social Security numbers. The new law amends the rule to make it apply to cryptocurrency transactions.

This is "way more severe" than just adding friction, he says.

"All other tax code reporting violations are misdemeanors, but violation of 6050I can be a felony (up to five years in prison)," Sutherland notes on Twitter. "The law's relative clarity and limited applicability in the case of old-fashioned cash does not translate to digital assets. Compliance can be impossible."

...

The change to Section 6050I largely flew under the radar, as much of the cryptocurrency community was distracted by another measure in the same bill. This provision redefines broker to include "any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person." As Will Wilkinson writes at Model Citizen, "This definition is so vague and broad that miners/validators, node operators, or even Axie breeders—none of whom are brokers in any recognizable sense—could conceivably fall within its scope, which would subject them to nonsensical and potentially ruinous broker tax reporting requirements."

...

Brito objects not just to the rule change but to how it was pushed through. The language was added at the last minute to a $1.2 trillion infrastructure bill without normal, separate hearings, debate, and voting. "There's a whole process through which the issues get aired and unintended consequences become understood, and then members can vote with a full knowledge of the vote," says Brito. But that didn't happen. Many lawmakers may not have even realized that the change had been included in the bill.

...

 

BeSafe

Super Anarchist
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Yea, tether and usdc make tax collection 'problematic'.  They've tried to delay dealing with the issues by some heavy duty kyc requirements but that won't work under a broad adoption scenario. 

It is a problem - the more libertarian argument is that 'money without government' is the endgame.  But governments can't exist without taxes.  So this IS an existential threat to the status quo.

If this whole thing goes financially nuclear, its going to reshape the tax landscape and taxes will have to shift from income base to asset based taxes.  You WILL be taxed on what you have, instead of what you earn.  That's the only way out of the corundum.

 

BeSafe

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I seem to recall some rather large payments last month of property taxes, based on what we have. We have sales tax too, so taxes are on what you earn, what you have, and what you spend.
Yup - and if you take away one of the pillars, the others will go up to compensate.

 

Pertinacious Tom

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China's Bitcoin Crackdown Is Good for America

The annual China crackdown is more severe than past ones and is actually driving out some miners, who seem to be heading to Khazakstan and to the USA, among other places.
 

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The bitcoin network is resilient. Almost overnight, Chinese mining operations started packing up their ASICs and looking for more hospitable climes. For bitcoin miners, time really is money. Each hour their expensive hardware remains offline means forgone bitcoins to recover capital costs and earn profits.

Bitcoin miners needed a new, non-hostile home, and they needed it quick. They found a welcoming one in the state of Texas. Not only does Texas house a bustling cryptocurrency scene in Austin, power is cheap and abundant—two things that miners love. Furthermore, the state has taken steps to pass pro-Bitcoin laws that encourage the development of the industry in the state.

Today, the United States is the world leader in bitcoin mining, hosting some 35 percent of the global hashrate. The runners up are Russia (11 percent) and China's neighbor Kazakhstan (18 percent)—the latter absorbed many of the runaway Chinese miners in the wake of the CCP ban. Kazakhstan is suffering its own civil unrest at the moment, so we may see miners move once more, perhaps to nearby Russia or even a farther destination like the United States.

This is not to say there is no mining in China. A plucky underground of illegal bitcoin miners still whir away in Sichuan, trying their best to make some money and not get caught. There are no official figures, but some estimate that these bitcoin bootleggers might constitute some dozen or so percent of the hashrate. How sustainable this covert practice is remains to be seen.

The Chinese bitcoin mining ban was great for bitcoin and the United States. The network withstood a fifty percent hashrate shock with little disruption. Mining infrastructure quickly recalibrated and relocated to other more welcoming locations. Now that a similar dynamic is occurring in Kazakhstan, seasoned bitcoin users don't need to fear that the network will be disrupted (even though weak hands may see this as a reason to sell). In terms of uptime, bitcoin keeps on delivering.

The great mining migration of 2021 is a fantastic opportunity for the United States.

A common line of attack is that bitcoin is "bad for the environment." This is the excuse China gave for banning bitcoin. Let's side aside the facts that spending energy on good things (like secure sovereign money) is … good, and that we "waste" more energy on things like Netflix alone without blinking an eye. In truth, Bitcoin encourages parsimony in energy expenditures because miners have an economic incentive to get costs down as low as possible.

Bitcoin miners might be the most energy-conscious technology ever invented. They want to make money with energy as cheaply as they can. One cool innovation: natural gas flare harvesting. The natural gas industry has to literally burn off excess gas into the air because there is nothing they can do with it when demand is too low. Bitcoin miners have started forming partnerships with natural gas companies to turn that wasted energy into mined bitcoins. It's a fantastic illustration of how bitcoin mining can encourage better energy use and environmental practices.

...
The bolded part is equally true of metals mining and really lots of businesses. Bitcoin miners use stacks of computers and gold miners use lots of heavy equipment but at the end of the day they both have capital and energy expenses and want to keep those down.

 

BeSafe

Super Anarchist
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Bitcoin mining allowed local entities in China to turn 'government supplied energy' into hard western currency - which was far more useful than actually turning the 'government supplied energy' into products to sell.  China isn't using any less power because they stopped bitcoin mining - they just shifted to something else to sell.

From the IEA:

image.png

 
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Pertinacious Tom

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Bitcoin Won’t Rescue Russian Oligarchs From Sanctions
 

Prominent Russian oligarchs have found themselves on the receiving end of significant sanctions following Russia’s invasion of Ukraine. As a result of the invasion, the Russian ruble has collapsed and Russians are rushing to banks to withdraw rubles and American dollars. Amid all of this economic turmoil there has been an uptick in cryptocurrency trades involving rubles and the Ukrainian hryvnia. As a means to preserve savings in the midst of economic turmoil, buying cryptocurrencies might sound appealing despite their well‐known volatility. However, those buying Bitcoin in an attempt to avoid sanctions will quickly learn that such an approach is unlikely to work. This is thanks to the transparent nature of Bitcoin and the regulations governing financial institutions and cryptocurrency exchanges.

...

Given the costs and risks associated with transferring and concealing massive cryptocurrency transfers it is unlikely that many oligarchs will try to evade sanctions by using cryptocurrencies. This should reassure lawmakers such as Sen. Elizabeth Warren (D‑MA), who yesterday tweeted, “Cryptocurrencies risk undermining sanctions against Russia, allowing Putin and his cronies to evade economic pain. U.S. financial regulators need to take this threat seriously and increase their scrutiny of digital assets.”

The conflict in Ukraine does not require financial regulators to increase their scrutiny of cryptocurrencies. Lawmakers should remember that for millions of law‐abiding people across the world living under authoritarian regimes, cryptocurrencies offer the opportunity to evade corrupt, unreliable, and unstable institutions. But they are of limited use to prominent international pariahs seeking to hide billions of dollars.
Wars often provide an excuse to do something you already wanted to do.

 

Pertinacious Tom

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Cryptotoken LBC is Legally a Security, Federal Judge Declares, and Requires Regulation by the SEC

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The LBC token's market value fell by nearly one-third in the past day as of posting time. Within the LBRY system, the tokens compensate miners, and, as the decision explains, "can also be spent on the LBRY Blockchain to publish content, create 'channel(s)' that associate content with a single user, tip content creators, purchase paywall content, or 'boost' channels or content in search results…Users generally must pay a fee in LBC in order to 'interact with the LBRY Network for anything beyond viewing free content.'"

LBRY Credits (LBC) are thus mostly used for the LBRY site's operation. The company runs a blockchain-based censorship-free online site for content, one that vows users will suffer no YouTube-esque takedowns. Its CEO is Jeremy Kauffman, a Libertarian Party candidate for Senate in New Hampshire. Some see hints of a political hit in the fact that this one small token-issuing company among so many has been singled out for SEC clampdown; as LBRY notes in a court filing in June 2021, the SEC has only ever brought "about 19 actions involv[ing] registration violations without fraud allegations" and that "it is a mystery why the SEC chose to pursue those matters—and why the SEC now pursues LBRY—while leaving thousands of other digital assets relatively untouched."

A rub in this decision that seems to be unnerving the crypto token community the most, a strong hint that those other digital assets might not remain "untouched" by the SEC for long, is it implies that any pre-mined token—which the issuers keep quantities of without spending money before releasing it into the marketplace at large—is thus obviously a security under SEC definition.

The relevantly unnerving part of the decision is where Judge Barbadoro writes that "a reasonable purchaser of LBC would understand that the tokens being offered represented investment opportunities—even if LBRY never said a word about it." Because "by retaining hundreds of millions of LBC for itself, LBRY also signaled that it was motivated to work tirelessly to improve the value of its blockchain for itself and any LBC purchasers. This structure, which any reasonable purchaser would understand, would lead purchasers of LBC to expect that they too would profit from their holdings of LBC as a result of LBRY's assiduous efforts."

This seems to imply that to pre-mine means to have created an unregistered security. And that means every transaction involving such tokens that were not registered with the SEC is potentially a crime. This would include the second largest market-cap virtual currency, ethereum. (SEC chief Gary Gensler already said last month before this decision that he believes ethereum is a security for different reasons.)

The SEC seeks in this case "injunctive relief, disgorgement of monies obtained through LBRY's offerings, and civil penalties."


Gee, why would anyone see hints of a political hit?
 

Pertinacious Tom

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Sam Bankman Fried and FTX: trust but verify

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Unlike blue-chip financial institutions that gain trust by being too big to fail—meaning taxpayers will provide a backstop—SBF did it in part by winning the affection of the progressive elite in a way that set him apart from the usual libertarian crypto bros.

The World Economic Forum hosted him as a speaker in Davos, Switzerland, listing FTX as a corporate partner. Journalists fawned over him, including Fortune magazine, which asked if he was "the next Warren Buffett" in a cover story that evoked another infamous profile.


Securities and Exchange Commission (SEC) Chief Gary Gensler is accused by one congressman of helping the company to create a "regulatory monopoly." As the second-largest donor to Democratic politicians in the lead-up to the 2022 midterms, SBF branded himself a new kind of capitalist, a different sort of billionaire.


SBF was an "effective altruist," or part of a movement that encourages its adherents to make as much money as they can so that they can give it all to charities that they deem maximally efficient at alleviating suffering.


"So the ethics stuff—mostly a front?" Vox reporter Kelsey Piper asked SBF via Twitter direct message after FTX filed for Chapter 11.


"Yeah," replied SBF. "it's what reputations are made of, to some extent. I feel bad for those who get fucked by it. By this dumb game we woke westerners play where we say all the right shiboleths and so everyone likes us."


Real effective altruism might be a legitimate method for deciding which charities to support with money that was earned honestly. But SBF is an alleged fraudster who represented the antithesis of Milton Friedman's claim that "the social responsibility of business is to increase its profits," which the Nobel Prize–winning economist wrote about in a 1970 New York Times essay.

...

Satoshi wanted to replace trusted third parties with verifiable math, or rules over rulers. The bitcoin network relies on open-source software, and it becomes harder for any single entity to modify as the number of its participants grows and grows.

Bitcoin also made it possible to maintain custody of your own digital money instead of trusting it to a bank or an exchange like FTX.

If anything, this saga shows that Satoshi was right: Don't just trust, verify. And when business owners seem more interested in magazine covers, running in elite circles, cozying up to regulators, and giving away their fortunes instead of making money for their investors, take your money and run the other way.

2nd largest donor to TeamD, huh?

$am'$ $peech was obtained through fraud. Living off it is ok because... ?
 

veni vidi vici

Omne quod audimus est opinio, non res. Omnia videm
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It already is electronic, I carry a wallet full of money and never use it .
Next step is a biometric identification system
The future of black market exchanges is the curious question
 

Olsonist

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Pertinacious Tom

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I'm barely conversant in Bitcoin myself but one of my filters is that anyone who takes Bitcoin even slightly seriously (hi Tom!) is a bozo.
One of my filters is to not listen to those who are barely conversant as they babble nonsense.

People wonder what purpose it serves. How about: it's an option in the search for something to trust more than US politicians' "full faith and credit" that they occasionally talk about defaulting on.

I'm barely conversant in trusting politicians but one of my filters is that anyone who does trust them (hi most everyone) is a bozo.
 

Pertinacious Tom

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BeSafe

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The future of black market exchanges is the curious question

Truth. They'll always be there - just in different forms.

TOR was created by funding from the government. The CIA runs its own TOR servers. The SEC has been working WITH various Crypto exchanges and coin developers.

The world of spycraft and diplomacy needs secrecy. Black Markets come into being to address undeserved markets - often indulging in vice. But these services continue to exist because governments take advantage of them. If a black market starts to dominate some area of society, its clear evidence that the local government is failing to provide whatever services are being filled.

Bitcoin is 100% traceable. That's one of the reasons the government LIKES it. For people with skill, it allows tracing of transactions and relationships. But for people without skill, it seems a mystical black box. Its PERFECT. Anonymizer services - however - are things the government doesn't like. That's why those projects tend to get singled out. Governments love encryption - it creates the appearance of anonymity. As long as there's a back door.
 
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BeSafe

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would we be going thru all this Bitcoin BS had Nixon kept us on the gold standard?

Probably :) The gold standard was never what backed up the dollar. That's a bit of a libertarian fairy tale and I say that as someone who is a little 'L' libertarian.

Oddly enough, what backs up the global currency is the naval power of the issuing government - its the ability to 'project force'. That's been true since the Spanish Armada, through the western Europeans, and now the American Hegemony.


Global-Reserve-currencies-political-strength-countries.jpg



This is what backs up the dollar.


Carrier.png
 

Pertinacious Tom

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Bitcoin seems trustworthy right now, but the day will come when they confiscate your guns.
When considering cryptocurrencies and the future of money, as with any other issue, it's important to note that I sometimes say bad things about TeamD gun bans and confiscation programs and someone has to bring it up most every day. Glad to see that today was your day.
 

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