DeFi and the “digital asset” felony hidden in the infrastructure bill
decential.io
decential.io
I don't see why transferring money via a cryptocurrency vs cash should be subject to different rules.
This is just the kind of thing that cryptocurrencies need to contend with if they want to be used everywhere. Either they need to comply with the existing financial regulations or become powerful enough that they can change the financial regulations.
Is it though? Putting onerous requirements on something is an excellent de-facto way to effectively outlaw something when there isn't enough political will to directly ban it.
Edit: Look no further than what Texas is trying to do with abortion access. They can't directly outlaw abortion but they can add a bunch of inane requirements that make getting one prohibitive. Alabama continually passes laws that put additional requirements on the staff of abortion clinics and most of them are not reasonable, unless the reason is to make operation increasingly difficult. https://www.prochoiceamerica.org/state-law/alabama/
This is what should happen.
Sure, all transfers are visible in the blockchain, but how do you preserve that information across tumblers and/or associate wallets to tax IDs?
Just because the nature of the software makes it impossible to comply with particular laws doesn't make it good or bad. You need to make a value judgement if the regulation itself is valuable.
Say you take your money put it in a bank account, the bank lends that money out again. Are you responsible for knowing the recipient? No. I imagine the same will be extended to putting money into a swap pool or DEX.
Now say you actually send money to someone over $10k and don't report it. This is just like a 1099.
Honestly, all the fear over what this is going to do is total FUD. It's not that difficult of a rule to deal with for law abiding citizens, and anyone who wants to continue using crypto to launder money or evade taxes will keep using mixer wallets.
My read of this law is that the bank or recipient of your money would be required to make the report (as they are the 'possessor'), which appears to already be the case (so-called KYC laws). I think you may be underestimating the amount of regulatory compliance that the government requires of many businesses.
So my take is they haven't figured out how to regulate the institutional aspect, they're simply attempting to monitor person to person transfers as a first pass. And this makes sense given the wash sales and other tricks people are trying to pull via NFTs and the like.
The bank has a corporate identity which can be held liable.
So what is a liquidity pool? Example one indicated that a person could withdraw coins using tokens he got when he deposited coins.
So pools are something you deposit coins into for LP tokens and later can surrender the tokens for coins.
In example 2, they say that coins received from a liquidity pool swap cannot be traced. Why not? When the liquidity pool received the coins could it not associate the coins with where it came from?
Even if not, then the liquidity pool itself is the source of the coins. When it gets coins, it needs to know who sent it, and when it sends coins it needs to know who it’s sending it to.
All of this is possible. Just because they currently don’t track this information doesn’t mean it’s impossible to track. It would just require adjustments to their business to make it in compliance with regulations.
Transactions on the LP are visible in the ledger, so if you want, you can construct a list of depositing and withdrawing addresses and amounts.
But cryptocurrency is fungible so it doesn't make much sense to try to match up deposit transfers with withdrawals to form some concept of "who paid whom". That would be equivalent to trying to identify who's money I got when I make a cash withdrawal at my bank's ATM.
Edit - To expand this thought: If I exercise my freedom of speech by writing a smart contract and publish the code, how can I be liable if someone else uses that code on an actual blockchain?
6050l should be repealed altogether, not extended to "digital assets". It was wrong when it was first passed and it hasn't gotten any better since.
It'll be interesting to see how this plays out.
Of course I can't speak to what was in "Satoshi"'s heart. But I am convinced that person was a member of the list, and shared the anarcho-capitalist goals/dreams that many of the members had.
More generally, other attempts at digital cash were highly discussed topics in those crowds, and the interest was primarily in the ability to transact anonymously and confidentially, because of what that would do to taxation.
If you're interested in what that crowd was thinking at the time, there's an exhaustive "FAQ" still available, written by one of the more vocal proponents of digital anarcho-capitalism:
The overwhelming culture of Bitcoin now is Number Go Up, which will be tested should US regulators fall more anti-crypto than pro-crypto.
We need the state to abolish markets, only then can we abolish the state.
Doing it the other way round will just result in all of us being slaves to Jeff Bezos.
Speaking for myself, I'm probably closest to mutualism than anything else, and I just don't see how you can have a state that strong that doesn't inevitably lead to stratification and rigid hierarchy.
Conversely, I don't see how markets are the problem. Capitalism is a problem, sure - but capitalism requires the state! To accumulate capital indefinitely, you need abstract property rights, and then you need the state to maintain the registries of who owns what, and to enforce - with violence if need be - the owner's monopoly on the property. Conversely, if the government, or the society at large, simply refuses to acknowledge such property rights, how would Jeff Bezos become himself?
(Yes, ancaps themselves think that removing the state would usher hyper-capitalism, but I don't understand why everybody is so ready to accept that claim while ridiculing most everything else they have to say.)
And maybe it wouldn't be him, but somebody who's shown more propensity for violence, say Erik Prince. If we don't use the state to rob those people of their power first, there will be nothing in their way once we abolish the state.
But the state is just an abstraction. It's the people who are in the way of Jeff Bezos doing something like that. In a centralized state, it's people who are in service of the state - which, in practice, usually means people in service of someone like Jeff Bezos, simply because sociopaths can play the power game better than anyone else. I don't see any fundamental difference between Amazon and the US Government in that regard. The latter is ostensibly democratic, but in practice, representative democracy at best just gives voters the opportunity to back one elite group against the other - so on matters where they're all in agreement (e.g. that elites should have all the effective political and economic power), it doesn't really solve anything.
In a decentralized society, it's organized community that stands in the way. You can argue that it's not strong enough to face someone like Bezos - but, again, Bezos only has the economic power that he has because our government actively protects his concentration of it. If it's not there to do so, how would he acquire the monopoly on violence in the first place? A lone guy with a gun doesn't have a monopoly on violence. A lone guy with enough capital to subsidize a private army might, but that's not possible in a society where capital can't be accumulated indefinitely.
I agree with you here.
> A lone guy with a gun doesn't have a monopoly on violence. A lone guy with enough capital to subsidize a private army might, but that's not possible in a society where capital can't be accumulated indefinitely.
This is where I disagree. He already accumulated plenty of capital and that's exactly the problem. Nothing stopping him from hiring an army with his amazon bucks.
In order to switch to this decentralized society, we need to reset hierarchies, like ones based on capital accumulation first. The only entity I see that would possibly be strong enough to do so is the state.
Now getting it to do so is the tricky part. I'm not sure anything short of a vanguard revolution would do the trick, but vanguards have the unfortunate property of trying to hold on to power after the revolution is done.
https://en.wikipedia.org/wiki/Dual_power#Strategy_and_ideolo...
(Note that crypto meshes really well with this paradigm.)
I will also add that "resetting" accumulation of capital doesn't require any physical acts of violence, either. The only reason why e.g. Bezos owns as much as he does, is because he says so, the government confirms it, and we all collectively accept it as a society. But take that last part away, and it all falls down like a house of cards. And you can't pay for an army with wealth that you don't actually control.
OTOH if you try to "reset the hierarchy" through centralization of power, it just replaces one set of elites with another. Worse yet, the new elites get more tools at their disposal to maintain their dominant position - all while talking about how they're really doing it for the sake of public good etc.
If you're interested, I suggest reading some of Tim May's writings. He was very much a very right-wing anarchist focused on destroying the state, and saw encryption, privacy tech and digital cash as mechanisms to do so. I distinctly recall reading a long essay he wrote explaining why he vehemently disagreed with Kropotkin, if you're looking for a way to distinguish this school of thought from Syndicalists.
(I do not endorse his views at all, my highly simplified view is his philosophy played out in reality ends up being indistinguishable from feudalism. I focus on him because he was a sort of spokesman for that crowd, wrote just a ton of messages and essays over a long time, so there's a huge record of his thought, and he was really smart, well educated, and capable of writing cogently.)
"It's impossible to comply with the ban on murder while we continue killing people" - Yes, that's the point. Stop doing what you're doing.
No need to equate DeFi with murder either, that's just being ridiculous.
There isn't a right to undermine the nation state and maybe, just maybe, the government is for once waking up and doing a useful thing by nipping this in the bud before it becomes dangerous?
This resolves to "there is a right to undermine anyone or anything for undermining your beliefs," because what is and isn't considered a "natural right" is entirely subjective.
If it's not codified in law, it's not a right, it's a feeling.
OPs implicit assertion that undermining nation-states is somehow bad does not have a foundation that is any more stable.
Nor is it obvious at all that there are no other forms that have yet to be tried. Or are being tried - I mean, the Zapatistas are crazy decentralized, but it's not a feudal society, either.
The logical outcome of anarcho-capitalism is feudalism, as people with more money concentrate more and more power with no state to stand in the way. Sooner or later you either do what Jeff Bezos wants or his Prime Forces will see that you are punished. Who's gonna stop them?
It is impossible to report "who" you received an asset from if you received it from a smart contract that is not under the control of any one business or individual. In the cases of most defi contracts, the assets involved are pooled from many thousands of individuals and act as a sort of autonomous market maker.
Cases where criminals obfuscate simple transfers are already prosecuted under money laundering laws, and they are very easy to prosecute because blockchains are a completely open record for anyone to data-mine.
If research into and use of financial smart contracts should be shut down immediately in the US, let them debate and make a law about that. Don't sneak it into a monster bill and pretend that it's about something entirely different.
This doesn't mean it's not under control of someone or a group of people. Claiming it's not under control just means you're hiding the true controller, which might be an embargoed entity like Iran.
If you have to submit a 1,000 long list of people each of whom has a fragment of control, so be it. Or spend a few dollars getting a Delaware corp.
You could probably suceed in arguing that mining was creating the asset.
> literally impossible to comply right?
This has sadly not always been a defense, like jailing women for miscarriage.
> but it's valueless until transacted
That's up for debate, and most people would disagree. Mining/staking revenue is taxed as income when received, not when you sell.
This strikes me like Indiana legislating the value of pi. There exists a natural world out there, beyond human influence, and certain computer programs (particularly ones on Ethereum, where they run on all computers, not one computer) effectively become part of the natural world. The law is set up on the assumption that all actions are ultimately caused by a human or organization, but this may not be a valid assumption anymore.
If I may translate this in to politician speak, you're saying that the Iranian government and other OFAC-sanctioned entities can create autonomous fiscal cyberweapons which cannot be turned off?
(Requires a bit of imagination to do this without oracles, which are obviously a weak spot, but you could imagine having an autonomous bug bounty program that can automatically validate and pay out certain kinds of exploits. Self-funding ransomware?)
If there can be autonomous organizations, there can be autonomous crimes, and that is not a stable situation.
"few dollars"? More like a couple of hundred, some of that on-going and yes, it costs money to shut it down.
And, if you live in CA, you also get to pay $500/year for the privilege of operating a "not CA" corporation in CA, not to mention some other reporting.
There are already hundreds if not thousands of these; the average person commits a felony something like once a day. Nobody seems to want to tackle over-criminalization. Many books and articles have been written on the subject, and I invite you to read them.
Am I missing something? I just can't see how a felony a day is even close to the correct order of magnitude.
Same person wrote a book with this as the description:
>Have you ever clogged a toilet in a national forest? That could get you six months in federal prison. Written a letter to a pirate? You might be looking at three years in the slammer. Leaving the country with too many nickels, drinking a beer on a bicycle in a national park, or importing a pregnant polar bear are all very real crimes, and this riotously funny, ridiculously entertaining, and fully illustrated book shows how just about anyone can become—or may already be—a federal criminal.
https://nitter.net/CrimeADay/status/1444874259357130753
The felony per day comes from two angles. One, when the magnitude of the felony is small, but still a felony nonetheless. If I find a twenty dollar bill on the sidewalk and fail to report that as income, I'm technically committing tax evasion. The government would never find out and no reasonable prosecutor would come after me, but it is a crime nonetheless.
The other angle comes from ambiguously worded laws or overly broad laws. The Computer Fraud and Abuse Act is a notorious example. Breaking a ToS can count as a violation of this law. Exceeding your access or permission level is also notoriously fraught with selective enforcement. https://en.wikipedia.org/wiki/Computer_Fraud_and_Abuse_Act
Regarding the second claim, I guess that might get us close to the same order of magnitude (assuming people are constantly violating enforceable sections of site and app ToSes).
I just got a copy of the book, will give it a read.
"The IRS plainly states that taxpayers must report “all income from any source," even income earned in another country, unless it is explicitly exempt under the U.S. Tax Code. This covers a wide range of miscellaneous income, including gambling winnings. According to the Cesarini decision, money you find isn’t explicitly exempt."
[Original comment] The Cesarini case was taxed under the 1939 tax code "Section 22(a)", which according to the ruling held that "[p]erhaps a more appropriate interpretation of Section 22(a) would be to hold that all windfalls ... are taxable income under its sweeping language. ... Insofar as the policy of Section 22(a) is to impose similar tax burdens on persons in similar circumstances, there is no basis for distinguishing value received as windfall and ... value received as salary."
Interestingly they also made the argument that it should count as a gift which the court rejected.
https://law.justia.com/cases/federal/district-courts/FSupp/2...
Afaict, that isn't true of the modern tax code (Title 26 - https://www.law.cornell.edu/uscode/text/26), which the plantiffs tried to argue (unsuccessfully) they should be taxed under: https://www.law.cornell.edu/uscode/text/26/6501
(A) General rule If the taxpayer omits from gross income an amount properly includible therein and— (i) such amount is in excess of 25 percent of the amount of gross income stated in the return, or (ii) such amount— (I) is attributable to one or more assets with respect to which information is required to be reported under section 6038D (or would be so required if such section were applied without regard to the dollar threshold specified in subsection (a) thereof and without regard to any exceptions provided pursuant to subsection (h)(1) thereof), and (II) is in excess of $5,000, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time within 6 years after the return was filed.
So assuming you don't find 5k, 25% of your gross income, or any amount of money in foreign financial assets/stocks/bonds, it shouldn't matter.
Arguably this is at odds with the broadest definition of gross income, ie "including (but not limited to)":
https://www.law.cornell.edu/uscode/text/26/61
I don't think its at all clear that you need to pay taxes on gross income from found monies under the limits above. And knowingly evading is a prerequisite to felony tax fraud; which is to say there is a mens rea component. I would still report if I found a significant amount of money just to avoid the possibility of future audits, but I don't think you can reasonably argue that people who aren't reporting a 20$ bill they found are knowingly evading taxes.
Laws like these aren’t really to protect people. It’s to protect the current financial system where elites are given special privileges and non-elites are selectively fucked over at the whim of people in power.
This is supposedly because elites are more trustworthy and responsible but that’s been shown to be a lie.
If a law is going to turn millions of people into criminals overnight - then you probably need some kind of grandfather clause, or else it's just a bad law.
If there was a standard eth log to emit then contacts could choose to emit it and then as long as one actor in the environment coalesces all of those logs and reports it then they'd all be in compliance
This way, DeFi protocols don't have to worry about anything to be compliant and if the government provides an attribute on-chain, it can be used to build democratic DAOs with "One person, One vote" instead of the plutocratic operation of today's DAOs.
Gist with details about implementation: https://gist.github.com/numtel/c2030ec401959a45825ee3efc6f3b...
I wouldn't be surprised if years down the line US govt starts requiring validators to not include certain txns like tornado cash.
Also that PII clearly shouldn't be in the public logs.
The issue would seem to be much broader than that, however. What about miner or validator rewards? Is it an implication of the bill that the receipt of digital assets as part of a miner or validator reward would also trigger a reporting requirement, if the block reward exceeds $10,000 in value?
Who would one be able to identify as the person responsible for sending the portion of the reward that is generated by cryptocurrency inflation? And what about miner fees? Would every user that pays miner fees need to be identified?
Even a simple transfer would require a sender to identify themselves both to their recipient and to the miner who mines the block. But how would the miner and the sender even have the physical ability to connect with each other to share this information, even if they wanted to?
It's one thing to make DeFi illegal, or to make participating in DeFi in a compliant manner impractical, it's an entirely different thing to make operating a miner illegal or impractical.
Somehow I doubt this would have been Congress's intent, but might it be the effect of the bill?
Rider (legislation) https://en.m.wikipedia.org/wiki/Rider_(legislation)
Interesting mathematic, economic, and computer science ideas are being explored and tested. In the future it may be possible to have a global financial system where the users are in control of their own funds. Isn't that something worth exploring?
State control of funds is the only thing that can bring us back from the brink of neofeudalism. The venom is against the people trying to accelerate our decline by taking that away.
As a counterexample, there was a lot you could accuse the USSR of, but enforcing corporate interests was not one of them.
Perhaps if the government switched over to digital signatures instead of SSNs compliance would be possible.
The requirement for secrets only shared with the government in each transaction is what breaks crypto in this instance. Perhaps someone could figure out a way to easily attach secret information that only the government could read to each transaction?
One solution would be that each transaction would have an identity broker attached to it where you would store your verified identity that would send the tax records to the IRS for you on the person the transfer was going to on their behalf, so you wouldn't have to see the SSN of everyone you did business with and likewise.
The key here is to separate custody of funds from knowledge of identity.
Edit: downvotes? Why? Can someone tell me why I'm at least wrong?
attaching an SSN to every bitcoin transaction is nonsensical, in short.
With crypto the same manual reporting would apply. If however we want to supplement crypto with new extensions to help facilitate the reporting that's certainly possible.
What is more concerning is that legislators can come up with this clearly unworkable law without doing a modicum of research.
I think they know exactly what they are doing.
Today if I have a cash transaction greater than $10k I have to report it. This bill just clarified that cash includes digital assets.
Is your issue with the existing law or you feel crypto shouldn’t be treated like cash?
Both. This law is wrong (even without the crypto / DeFi elements) and crypto shouldn't be treated like cash. It's not property, or even a legally enforceable contract like the one that governs your relationship with your bank. From any reasonable perspective it should be classified as something akin to "goodwill" and not something the law should concern itself with.
Currencies do not attract CGT on disposal. Assets (like crypto) do.
This is a big difference
I wouldn't assume this unless you are aware of specific case law that says this. If you held some assets on a blockchain and the developers decided to block your address after you made fun of them on twitter or something, it certainly seems like you'd have standing to sue.
What exactly would you sue them over? The design always depended on the voluntary consent of everyone involved. The developers never promised that the protocol would remain unchanged. This has happened before—for example, the Etherium hard-fork that reversed withdrawals from the DOA which were unexpected and unintended but authorized by the smart contract code—and no one on the losing side of that fork managed to successfully sue the developers for changing the protocol. They would have had standing if anyone did.
The developers don't even fully control it; as an open, distributed system, someone else can step in and supplant them with new client software if users (meaning mainly buyers and retailers accepting the currency) decide they prefer different rules. Whatever changes the developers might make is only an expression of their opinions about how the system should work. Other users of the network are not obligated to accept those changes if they happen to disagree.
Ignoring the changes to crypto, what makes the law wrong?
If this law is incompatible with DeFi, it is DeFi that is unworkable, not the law.
As cryptocurrency replaces government-issued money, defi replaces traditional financial institutions/services.
So, for those who believe in decentralization, the reason may not be a valid justification. Of course, at that point, one also shouldn't be surprised that pushing back against centralization is criminalized by those who benefit from it. But even so, they don't need to comply - they can accept that what they're doing is illegal, but continue doing it because it's morally right.
There are instruments on instruments cross referencing each other creating entirely new instruments.
Maybe a defi ecosystem empowered by cryptocurrency but one doesn’t necessarily equal the other. The picture is much much larger now with the meta verse angle.
Shouldn't it be reasonable for someone to think the infrastructure bill is a good idea but this part is not?
And who actually writes it? Often industry. In this case maybe law enforcement?
If your company can only release once every 2–8 years, then naturally the releases would become huge. Unfortunately, our government is so bogged down by divisiveness and the filibuster, etc, that is the state we're in. Except in cases of near outright catastrophe, the only substantive thing they can pass is the budget reconciliation bill, which only requires a majority instead of a super-majority. As a result, that bill becomes enormous, just like the software release.
As with software, the fix is likely to make it easier to pass more small bills, but the very systems that lead to the current status quo make reforming it nearly impossible.
The fact that they want to pass bills which only have a bare majority and not a super-majority is a big part of the problem. If you can't get super-majority (or more like near-unanimous) approval for your bill, odds are that it's not good law or something the government ought to be doing. But the focus is always on these huge, controversial proposals with razor-thin margins and getting them passed over the strenuous objection of approximately half of Congress and a large fraction or possibly even a majority of the population at large. In short, the system is utterly broken.
So those razor-thin margins? They're not necessarily because the bill in question is not good. Indeed, the very politicians who vote against it might concede that it's good - in private. But they have elections to win, and voters to rile up to win them.
Not to mention that Congress, by design, is not really a good representation of public opinion. In fact, Senate is skewed so badly at this point that it's possible to pass and ratify a constitutional amendment through votes of politicians representing less than 1/4 of the country's population, so long as they're concentrated in the right states.
We changed policy at my company from requiring one senior dev to approve pull requests to needing 2. Approvals went from nearly instant to taking much longer, and as a result we did start making longer PRs because of the nuisance of tracking down the second approval for very small changes. When I think about how congress needs 50+ senator approvals for any change to happen, it's no wonder to me that pork and riders became the standard.
I'd be much more entusiastic about a series of bills. Or a Congress more willing and active about legislation from the liberal-wing. At least that'd fit their marketing better.
But the right-wing is incredibly obstructionist. Without serious action the two are just stuck in a staring contest as the judicial and executive suck up all the power and responsibility they leave on the table.
Laws are software and should be written and managed like that.
So at this point, your Chesterton fence alarm should be blazing red, because it is unlikely that you, sitting in pure contemplation, can correctly decide that something so widespread and stable across centuries is "preposterously stupid".
So let's try to understand why this is necessary.
To start, we do not live in a democracy, we live in a system where large majorities are needed for something to pass. Democracy is three wolves and two sheep voting on who to have for dinner. It scares the hell out of people, and rightly so.
To defend against this, we institute a number of undemocratic consensus requirements that effectively boil down to large supermajorities being needed in order to get a law passed. This, by the way, is why people are so confused that Biden can't get his infrastructure bill passed even though he has that oh-so-sexy 2 seat margin in the house and a 50-50 senate.
Now imagine you are a team leader with 10 reports, and you are evaluating some course of action, and 6 people feel strongly that option A is the way to go, but 4 people feel strongly that A is a menace and the opposite of A is the correct approach.
Do you go ahead and do A, because 6 is a bigger number than 4? If you do, you are a fool, because you tore your team apart, four people may leave, and you are screwed. You need to govern by consensus, and that means:
1. Abandon option A and find another option, A' that a large majority (8 out of 10) can support. This, of course is the ideal solution. A majority so large that the remaining holdouts feel like assholes for pressing the issue.
2. Come up with a mix, where you do A but also B, where the group that hates A loves B, and is willing to trade doing A for getting B. And the group that love A doesn't like B so much, but is willing to accept B in order to get A. So everyone is a little happy.
#1 we can call "find the one pure course of action we all agree on" approach
#2 we can call "generate a collective basket of actions that, together, we can all agree on".
And very little introspection should tell you that option 1 is almost never available, but option 2 is virtually always available.
So one senator gets more grain subsidies, and in exchange he's willing to tolerate removal of a tax deduction and the subsidy of some solar panels, and another senator hates the solar panel subsidy, but loves getting rid of the tax deduction more, and doesn't much care about the grain subsidy, and the third senator hates getting rid of the tax deduction but loves the grain and solar subsidies more.
Thus there is a policy mix where all of them can agree, even though on each specific policy there is no consensus. This magic by which the sum of policies is able to achieve consensus while each individual policy is not really confuses people who don't understand convex preferences. They think preferences should be linear, not convex. Some even have bizarre moral beliefs about this, which is truly a WTF situation, but that's where we are, people get outraged about literally everything, including convex preferences.
You may have noticed that this basket approach is very reminiscent of the gains from trade you learned in your econ 101 class, and you'd be correct -- this consensus formation is even called "horse trading".
Thus welfare maximization via convex preferences is the process by which a super-majority agreement is reached when there is no one pure action that we all agree on, allowing government to continue while protecting us from the tyranny of majority rules.
The only thing "preposterously stupid" is the shallow dismissal of this consensus formation, seeing as how it is the bedrock that allows consensus to be reached in any group situation, from being an engineering team lead to running a local Kiwanas club to running congress.
Next time you face a divided membership in whatever team you are leading, start some creative horse trading -- there is a good chance you will be able to reach consensus.
Imo, I don't care about crypto being crypto, or about paying taxes. In fact, I prefer to pay taxes like income, and for the government to be able to track it, that way banks can more easily incorporate digital asset holdings which will increase the power of bitcoin and therefore the innovation bitcoin provides.
That being said, I suppose it means I agree that you have to go "through the state first."
Abolishing the state? I don't have that visionary capacity, however, certainly taking a step towards a utopia where there are less middle men, lowers the wealth gap therefore. Furthermore, technology is ultimately what will one day lead us to renewable energy sources, genomics which can help us understand anxiety and depression better, and oh yeah. Space travel :) So using the state to prop up bitcoin sounds like the much more efficient idea. The term "crypto" in itself is a slap in the face, therefore, imo. We want to take a step towards limiting the states power, but not so much of a step to arise heavy social movements against bitcoin via state supported propaganda.
That being said, I loved the example of saying that I am not liable for knowing who held my cash before I did when going to a bank ATM. The bank, however, is required to verify incoming funds are not tied to illegal activities. That being said, the bank only has to verify the identify of the person sending funds to them directly, not investigate where the funds came prior. They then work with the IRS, simply to report any sums coming in over a certain dollar amount, and perhaps any funds that fail some sort of security verification tied to hacking.
I read that identify verification of bitcoin users can be time consuming, so I have tried to find out which software would allow banks to easily track an identity. It could, come to pass that exchanges that do not disclose identities of funds when transferring funds, will not be able to interact with banks in the future, and/or, they will not be allowed to operate in the US at all.
I would be more than fine with that. I am all for the protection of privacy in many areas, but I still believe in paying taxes, and so I don't expect privacy on the movements of my assets when they are tied to income. Now if I send 1M to someone. To me, it becomes the liability of the person receiving that amount and/or their exchange or bank to report it, not me, as I'm not the one making income. Now if I report it as a loss to avoid taxes, then yes, I would expect less privacy in that case.
Now, when I buy from an exchange and bits come from everywhere, that makes the exchange liable not me, and yes they should have an accessible list of identities for any subpoenas looking for crime, however, without a crime, they should only have to actually report large amounts transferring from person to person, or report income made from selling an asset. That list would make it easy, if the IRS was investigating someone, to compare that number to a person's reported income. It should not be that difficult really, but trying to avoid it? That seems like a good way for exchanges to get investigated or barred from activity.
Even still, some exchanges will comply, and investors can simply shift to them, or they can go to non US exchanges, but if they ever bring that money back into the US, then it would be reported over a certain dollar amount by that receiving exchange etc.. etc...
So I don't really see a complex issue really, unless no exchange is operating in a way that would comply with normal income reporting tax code. I'd like to know which exchange is or is not.
As far as feudalism and market makers who benefit more than "the common people." Ultimately that comes down to the ability to prosper, thrive, find freedom, life liberty and the pursuit of happiness. Having more control and more money, like jeff bezos, isn't going to yield enough happiness to say that is a worthy end goal, because it still falls short on several accounts: Spiral Dynamic Theory, Maslow's Heirarchy, and perhaps Map of Consciousness theory. A person benefiting more than the social environment around them, creates alienation and creates existential angst.
Therefore, what bitcoin is to me... is the promise of expanded innovation. If the whole world can communicate better through fair global trade through blockchain, and advanced circuitry leads us one day to clean, renewable energy, the entire base line of global culture will rise, and everyone ends up benefiting equally.
Having more money than someone else, ultimately is a minimal factor in comparison to the whole ecosystem improving, and that is what I believe bitcoin is bringing.
So yeah. Crypto due to untrust of state. I get it, and I agree, but sometimes innovation is more about learning how we can all work together, and that ultimately is what decentralization is supposed to do.
We just have to pay our taxes in the mean time, bc learning to decentralize, does not mean we will have the millions of advancements needed to tie in to that decentralization to effectively roll out a new culture. It may take 100 years...
Like when we went into Iraq. Great idea to take out a dictator, but how to do reconstruction and build a new culture? Woops. NO IDEA.
An initial great idea needs a long time to develop to truly understand its applications, and it seems much more beneficial to get the state behind bitcoin than to buck the system.
But if for example I have to pay a higher short term gains rate than I do other income? Then I would not be happy.
Oh, and the market makers, the nodes, have incentive to operate, so capitalism is built into the code. Decentralization combined with capitalism, seemed to be the right call for our current state in evolution per spiral dynamic theory.