This installment of The Matt Allen Letter is free for everyone. If you would like to read about my stock market picks, stock analysis, and much more. You can subscribe here.
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This installment of The Matt Allen Letter is free for everyone. If you would like to read about my stock market picks, stock analysis, and much more. You can subscribe here.
Dear Friends,
If you know me personally, then you know I have been a staunch supporter of cryptocurrency along with blockchain technology for close to 6 years now.
I was the guy that talked about bitcoin, and people looked at me crazy back in the day. The main two questions that I have always been asked are 1. Is it magic internet money aka a scam? 2. Won’t the USA government destroy it via regulation?
In this article, we will be talking about how the United States Senate just made one of the worst mistakes in the history of American Innovation. The crazy part is that they basically did this by mistake. Please keep in mind: I believe that the right form of regulation is great for the crypto industry.
Background:
As you might know, the $1 Trillion Dollar Infrastructure bill just passed the United States Senate. This bill allocates money to build roads, bridges, transportation systems, and support clean energy, among other developments. You might be wondering, what the hell does any of this have to do with cryptocurrency?
The bill includes a tax provision that outlines plans to raise about $28 billion for that $1 trillion package through taxes from crypto transactions. The provision imposes tax-reporting requirements for cryptocurrency brokers, the same way stockbrokers report their customers’ sales to the IRS. I think this is a great thing for the industry.
HOWEVER, The problem with this is that they completely messed up the wording of the provision. The provision defines brokers way too broadly, potentially destroying innovation by unfairly putting new tax-reporting obligations on software developers (smart contracts) and crypto miners.
In laymen (Matt Allen) terms:
Do you know, when you create an account with a Robinhood, Td Ameritrade, Coinbase ect, then you have to put all your personal information in? You have to put your legal name, home address, your social security number, and sometimes even upload your ID?
This is because the IRS/Treasury Department REQUIRES this information for tax and anti-money laundering purposes. These companies pay a tax on this as well.
Now imagine, you having to do this every time you shop at Amazon, create a netflix account, or do literally ANYTHING on the internet. The current provision in the bill mandates that all blockchain and crypto companies report this information. (crazy)
The bill forces them to be taxed as well. In laymen’s term, imagine Amazon was taxed every time you browsed around on their website. It would be insane.
This would kill future American innovation. It would be the equivalent of all internet companies leaving the United States in 1999.
Senate Response:
The Crypto industry made lobbying moves very fast. As a reporter on CNBC put it, “Washington DC was shocked at the unleashing of the millennial led lobbying downpour that happened over the weekend.”
Jack Dorsey, Elon Musk, Cathie Wood, Brian Armstrong, Mark Zuckerberg, The Winklevoss Twins along with many more A-List CEOs were either in Washington DC or working the phones.
I have a good friend, who works at a Crypto Lobbying Firm in Washington DC, and he called me asking for man power. I spent a lot of my weekend on the phone with Senate staffers trying to educate on them.
The Senate realized two things: 1. What the hell does cryptocurrency have to do with this bill? 2. They realized that the bill would kill American innovation.
Senate Democrats and Republicans both agreed that this was an insane provision, and they decided to define the word broker. Coinbase is a perfect example of what the word broker means. It’s a place that you buy and sell crypto. (How freaking hard is that?)
All we needed were all Senators to agree on this change of wording. Well guess what?
Richard Shelby, who is 87 years old and retires next year, decided to veto the provision because he wants to add $50 Billion more to military spending. He said, if he doesn’t get the $50 billion, he won’t allow the cryptocurrency one.
Can Richard Shelby even open up a PDF file? Does Richard Shelby even use a smartphone? Why does one person get to dictate the future of American Innovation?
Does Richard Shelby know that the Defense Department is building their new software on the blockchain? He literally just screwed the military as well.
This is not final until the House passes it, and the President vetoes it. We cannot let this pass the House of Representatives. I do believe that things will work out.
PS: The Senators who are the most anti-crypto are getting the most money from Wall Street. Sheesh!
Have a great rest of the week!
Follow me on twitter and instagram: @investmattallen
Matt Allen
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