Tax Attacks Won’t Kill Bitcoin: Regulators Must Learn To Accept New Technology

This is an opinion editorial by Conor Chepenik, an organizer for the MassAdoption Bitcoin meetup.

Congressman Brad Sherman's recent tweet attacking Bitcoiners as "tax evaders" is a prime example of how Bitcoin has become a mainstream phenomenon. It's ironic that politicians like Sherman, who have sworn an oath to uphold the Constitution and the presumption of innocence, are so quick to label Bitcoin supporters as criminals without any evidence. Such remarks undermine the fundamental principles of justice and fairness that underpin our legal system.

The fact that politicians like Sherman are attacking Bitcoin serves as a signal to those on the fence that there may be something to this "freedom money" that is constantly under attack by those who are corrupt and compromised by legacy systems. In a way, even those who attack Bitcoin may be unwittingly working for its success and adoption.

And clearly, politicians are expecting Bitcoiners to shoulder some kind of tax burden that they do not impose on anyone else.

Imagine if a politician tried to tax people for using computational power to do math or use English to express their views. They would be ridiculed and mocked because, on top of that being an insane policy, both of these subjects are essential to a functional society.

Instead of imposing arbitrary taxes, the government should focus on creating a regulatory environment that supports innovation and economic growth. Unfortunately, in opposition to that seemingly-obvious edict, the Biden administration has proposed a 30% tax on Bitcoin mining, which is not only unfair, but also hypocritical to the values that make the United States great.

If a market participant has paid for their energy, they should be free to use it as they wish. So, why is Bitcoin mining being targeted when other industries, such as pornography, video games or gambling, also use energy to allow people to indulge in their vices online? I’m not vying for a tax on other industries. I firmly believe that if a market participant has paid for their energy they can do whatever they want with it. My intent is to point out that this proposal seems to be a clear example of government overreach and intervention in the private sector.

And it's not just Bitcoin mining that is being targeted. It is the entire Bitcoin network. When new and innovative ideas challenge the status quo, both humans and technology can exhibit resistance or embrace the change. Technology mimics many things about human biology, including the way we respond to change. Established industries or entities may resist new technologies to protect their own interests, just like how our immune system responds to foreign pathogens to protect our body. However, just as humans can adapt to changing environments, technology can also evolve and adapt to better serve our needs. People can either fight against Bitcoin or embrace it, but either way, this technology is changing the world rapidly.

It's important to remember that new technology, including Bitcoin, is not inherently bad, but rather a tool that can be used for both good and bad purposes. Instead of fighting against progress, we should embrace the opportunities that new technology provides and work together to shape a better future. Sherman's tweet may not win him any votes, but it shows his lack of understanding and respect for the rights of his constituents.

The comparison between a technology network and human biology may seem unconventional, but it provides valuable insights into the evolution and growth of new technologies like Bitcoin. Kevin Kelly’s book “What Technology Wants” highlights the importance of this. There are three quotes that really stood out to me:

“Technologies do not exist in isolation, but rather in networks that amplify their power and reach.” 

“Innovation is a team sport, and the best innovations are produced by networks of people working together.”

“The more interconnected our technologies become, the more emergent properties they exhibit, and the harder they are to predict or control.”

Technology is always evolving based on human needs. It starts with a small idea and then grows into something larger than anyone could have imagined. This evolution is not always linear, as new technologies often emerge from existing technologies. These networks grow exponentially faster as new technologies enable stuff we never thought possible. FaceTime would seem magical to someone 100 years ago in the same way that a medical device that can regenerate limbs for people would seem magical in the modern day. I assume that type of technology will come someday and with it many more innovations that I could never have hoped to imagine until I saw them.

But, just like humans, technology has its own set of rules and laws. We have to follow these rules to make the most out of technology’s potential. Imagine if someone called a conference about TCP/IP a “conference for gang members.” It would seem ridiculous. Especially from a politician who should be encouraging innovation in their district.

Attacking people because they enjoy using a protocol is insane. However, if your job was dedicated to maintaining legacy technology and adopting new technology could make you irrelevant, I suppose you wouldn't react favorably toward the new technology either.

In the end, we are all part of the network of technology, whether we like it or not. We must embrace the evolution of technology, and understand its potential to shape the world for the better. We are at the beginning of all the things that will be built on these new protocols, so it is up to us to harness their power and make the most out of their potential.

I can’t say I know for a fact that bitcoin is going well above $1 million, but I think it’s pretty damn possible and that, as more network effects get added, both in meatspace and cyberspace, the more likely it becomes.

“When zero reached Europe roughly 300 years later in the High Middle Ages, it was met with strong ideological resistance. Facing opposition from users of the well-established Roman numeral system, zero struggled to gain ground in Europe.” 

–Robert Breedlove, “The Number Zero And Bitcoin”

Now, the idea of not using zero in math is a non-starter. It seems highly likely Bitcoin will have a similar fate as zero and the idea of not using Bitcoin and all the things built on top of it will be preposterous. Just look at Nostr, for an example. There is no way the protocol would have thrived had it not been for both Bitcoin and Bitcoiners bringing so much value onto the network.

I believe a similar effect will take place for more innovations around the world, whether regulators understand Bitcoin or not.

This is a guest post by Conor Chepenik. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.