The Breakdown - Florida to Accept Bitcoin for Taxes?

Starting point is 00:00:04 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexus.io, Arculus, and FTX, and produced and distributed by CoinDesk. What's going on, guys? It is Wednesday, March 23rd, and today we are doing a little global crypto roundup. We're talking El Salvador's bond delay in what that means. India's new crypto. tax policy coming online and much, much more. Before that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to get deeper into the conversation. Come join us on the breakers discord. You can find a link in the show notes or go

Starting point is 00:00:50 to bit.ly, that's LY slash breakdown pod. Also, a disclosure as always, in addition to them being a sponsor of the show, I also work with FTX. And finally, one more quick note before the show starts. If you haven't bought your tickets yet, I highly suggest you check out CoinDesk's Consensus 2022, which this year is happening in Austin, Texas from June 9th through June 12th. This is one of the crypto industry's biggest events and has topics and voices representing a huge cross-section of the industry. There are the CZs and SBFs, but also Punk 6-529, Kathy Wood, and so many more. It should be a really good time. If you're interested, you can use code breakdown for 15% off, and you can learn more at coindesk.com slash consensus 2022.

Starting point is 00:01:42 But with that, let's get to the show and let's do a global crypto roundup. Obviously, there has been so much U.S.-based regulation stuff to cover over the last couple months, and one bit of feedback I've heard from numerous people is that you'd like to have more global perspective as well. So that is what we're doing today. And we're going to start in El Salvador first. Last we checked in, there were some indications of a potential delay. Originally, the finance minister in El Salvador thought that the bond might be available

Starting point is 00:02:11 the week of March 15th to March 20th. However, the war in Ukraine and the resulting economic volatility was last we heard giving the government of El Salvador some pause. That was despite Financial Times reports of there being $1.5 billion of interest in the $1 billion bond. I also discussed the added intrigue of the bond being issued. technically by LaGio, a small state-owned energy company instead of the state itself. Well, today the delay was confirmed by El Salvador's finance minister Alejandro Zelaya.

Starting point is 00:02:45 He said basically that El Salvador was waiting for more favorable conditions in the financial market. Ideally, they would be looking at May or June, but the bond could potentially be delayed up until September. He said, in May or June, the market variants are a little different, at the latest in September. After September, if you go out of January, if you go out to the international market, it is difficult to raise capital. Now, this all generated some pretty severe skepticism in the Twitter sphere. Adam Cochran said, El Salvador postponing their Bitcoin bond due to, quote, unfavorable market conditions is hilarious. If you actually believe in an asset and can drum up demand for your bond, a down market is ideal to sell it. Pretty clear no one wanted this

Starting point is 00:03:25 instrument. Zahir at Split Capital, who works at Deribit Insight said, unfortunate headline, I think it's a bit confusing with the earlier headline from Financial Times saying their bond purchase was oversubscribed. Two scenarios. Number one, no one wants it. Doubtful. Number two, genuinely hard to raise now. Me? Josh Cincinnati kind of skewered the whole offering, saying, I have postponed my personal bond offering where you pay me $100 for acquiring $50 of Bitcoin and a tenuous promise that I'll pay you back. Unfortunately, the market just isn't ready. CMS holdings also made light of the discordance between the comments that they were oversubscribed alongside the delays.

Starting point is 00:04:05 He tweeted, we're oversubscribed, but in a much more real sense, we find ourselves lacking subscribers. Now, some are suggesting that this switch to LaGio as the issuer has the market spooked. Certainly, there isn't an explanation that has been given that has people convinced. And that creates the opening for people to speculate about what the motives are. Is it lack of accountability for the El Salvador government? it a separation from sovereign debt? And if it is a separation from sovereign debt because El Salvador isn't sure they want to continue paying their sovereign debt, is that something that these investors really want? And of course, as you heard from some of the tweets I mentioned above,

Starting point is 00:04:41 this report that there was $1.5 billion in demand is getting pretty aggressively scrutinized. I think it's worth keeping an open mind and seeing what happens next. I will note, however, that the biggest supporters of this bond are so far pretty quiet. Whatever's really going on behind the scenes right now, I think from a narrative perspective, there are already tons of people who are waiting for this El Salvador experiment to fail, and it will be a fairly huge knock if this bond doesn't happen, even though it wasn't really part of the legal tender bill to begin with. However, El Salvador is not the only place around the world where crypto discussions are heating up. Let's head slightly north to Florida, where Governor Ron DeSantis has just signed a financial

Starting point is 00:05:21 literacy curriculum bill that would require financial literacy classes to graduate from high school. As part of that ceremony, he made comments about the state and crypto saying, we are working, and I've told state agencies, figure out ways where if a business wants to pay tax in cryptocurrency to Florida, we should be willing to accept that. We will accept Bitcoin. We're working on doing that for payments in the state of Florida. DeSantis also pointed to a recent budget bill that failed in the legislature that would have allocated funds to experiment with blockchain to optimize state functions. Finally, he went to pains to differentiate his support for cryptocurrencies from his significant skepticism around central bank digital currencies. Quote, I worry about the amount of power

Starting point is 00:06:02 that would give someone in a central authority to basically be able to shut off access to purchase certain goods. We'd be in uncharted territory. Indeed, he said he was concerned about the CBDC focus as part of Biden's recent crypto executive order. Now, while these comments are from one source, the governor, and they don't represent new laws yet, the market is still pretty enthusiastic about this. Dan Tapiero from what is just becoming an absolute financial juggernaut in 10T holding said, not sure what could be more of a green light for institutions, a U.S. state considering receiving taxes owed in Bitcoin. Remarkable to think that anyone still owns the $200 trillion in cash and bonds with negative real yields.

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Starting point is 00:08:05 There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. One of the largest exchanges in the U.S. FDXUS is also the only leading exchange that supports both Ethereum and Solana NFTs. When you trade NFTs on FTCS, you pay no gas fees. Download the FTCS app today and use referral code breakdown to support the show. Let's move to the other end of the U.S. state spectrum in my fair current resident state of New York. I wonder what we've got up here. The Block's headline reads, New York's revamped crypto mining moratorium is not a ban, but it is moving forward. Sounds promising, right? In references Assembly Bill

Starting point is 00:08:44 A7389C, which, quote, establishes a moratorium on cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions. So this is being pushed forward by the State Assembly's Environmental Conservation Committee and would represent a two-year moratorium, which would limit the expansion of proof-of-work mining in the state. The push is to get the governor of New York to put the moratorium into place via executive order. It would prevent new permits from being issued in certain mining operations until the New York Department of Environmental Conservation or DEC can study their impact with a, quote, generic environmental impact statement.

Starting point is 00:09:20 There is lots of focus around this legislation on Greenridge Generation's 107 megawatt plant, which is using natural gas at a former coal plant in the Finger Lakes. The political context here is New York's Climate Leadership and Community Protection Act, which was passed in 2019. This calls for New York to reduce greenhouse gas emissions by 85% below 1990 levels by 2050, and to achieve 100% zero-emission electricity by 2040. So the question is, is the governor considering? According to his statement, the governor is, quote, taking bold, nation-leading actions to confront climate change head on,

Starting point is 00:09:54 and the state is actively renewing proposals regarding the role of cryptocurrency mining in New York's energy landscape. So what's positive about this, if anything? Well, the original version was even more aggressive. It was three years and a total moratorium, a full shutdown of proof-of-work mining versus this new one, which is two years and limits the expansion but doesn't necessarily take existing mining operations offline. I think the most frustrating thing about this is that the debate is being undertaken completely in the absence of any discussion of the value of Bitcoin, which is really the only thing that matters in these takes. If you view Bitcoin as a useless thing, then it's use of any energy and having any emissions is something that's completely irrelevant for you, and of course you're going

Starting point is 00:10:33 to fight against it. Until we have this debate in the context of what value Bitcoin provides, it's sort of a doomed political discourse. Hopping again, this time to India. Most of the discussion around India recently from an economic perspective has had nothing to do with crypto, but everything to do with the tightrope they're walking as relates to Russia, the Ukraine and its partnership with the West. India was one of a small number of countries who abstained from condemning Russia in the UN. It is apparently in talks to buy Russian oil at discount, and it's trying to maintain trade relations with Russia despite these sanctions. This is a real tightrope, and there are complicated, strategic, non-ideological reasons why. On the one hand, India sees its biggest regional threat

Starting point is 00:11:14 is China, and 60 to 85 percent of India's arsenal is Soviet and Russian made. On the flip side, and in that same Chinese context, India is a member of the Quad, an alliance with the U.S., Australia, and Japan, which is clearly a democratic alliance meant to exist as a counterweight to China, although it doesn't say it quite that boldly. There's more to this very interesting geopolitical situation, but that is definitely the subject of another show. When it comes to India crypto policy, there has been a seemingly endless back and forth. It was banned effectively by the central bank. It was undone by the Supreme Court. But then it was going to be banned again, but then it wasn't in rumor, rumor, report, report ad infinitum. Well, finally, at the beginning of

Starting point is 00:11:55 February, we got a little bit of clarity. And on the positive side, it looked as though crypto would not be banned, but on the negative side, it would be taxed in an extremely aggressive manner. India's finance bill that includes those proposed rules on taxation is scheduled to be passed tomorrow in Parliament. The taxation proposals include a 30% capital gains tax, a 1% tax deducted at source or TDS, and no offsetting of losses and taxation of gifts. Now, when this was all announced, there were two distinct reactions. On the one hand, there were many in the Indian crypto community who were very pleased that it was going to be something less than the outright ban, which seemingly was on the table before. On the flip side, of course, were those who

Starting point is 00:12:34 said that 30% capital gains for everyone was exploitative, a tax on the poor, and basically an effective ban anyway. Since the policy was announced, there had been numerous civil society efforts to reduce it, but those seem unsuccessful so far. And now the industry is apparently exploring a Supreme Court challenge. Those involved believe it would have to be a collaborative effort across exchanges and platforms to get any notice at all. Over in Thailand, And there is also some antagonism towards crypto. The Thai SEC is banning crypto as a payment option from April 1st. They cite money laundering concerns and the inability of the central bank to intercede. Now, the SEC in Thailand did stress that it is not a trading or crypto asset ban. This is

Starting point is 00:13:16 just for payments. Still, it sort of matters, then you might think, at least in the context of one global industry, with domestic property developers who had been looking to crypto as a way to revitalize interest in property in the country that was geared towards foreigners. On a more positive side, earlier this month, there was an announcement from the Thai government that crypto trades on government approved exchanges are exempt from a 7% value-added tax until 2023. So the policy here seems a little mixed, but clearly pointing in the direction of crypto as an asset, not as a currency. However, Alex Gladstein from the Human Rights Foundation had a different take saying, breaking. Another dictator does not like the idea of money he cannot control. Speaking of Alex Gladstein, he shared one more

Starting point is 00:13:56 article from CNN that will close out this global tour with. The tweet from CNBC reads, Bitcoin is a lifeline for some Ukrainian refugees, like this 20-year-old who escaped with $2,000 on a thumb drive. The article tells the story of a 20-year-old who fled the morning of Russia's invasion. He woke up and realized he needed to get out, but he couldn't access his normal money. He couldn't wait in the ATM lines, which were insane. And so instead, he made a peer-to-peer exchange with a friend, trading $600 of his Bitcoin savings for the equivalent in the Polish national currency, which he used to pay for a bus across the border and a bed in a hostel for him and his girlfriend. He also brought with him a USB stick with $2,000 worth of Bitcoin on it, which was about 40% of his life savings. Compare this with

Starting point is 00:14:40 hours-long waits at ATMs only to discover that there was a $33 limit per transaction, followed by the central bank suspending electronic cash transfers altogether, not to mention the effects on the local currency of the invasion. And meanwhile, the people who were lucky enough to get out also can't access their money either. They mostly can't access Ukrainian bank accounts from Poland and other places where they've ended up. They also just won't be welcomed into local banks to open new bank accounts with what money they were able to carry. I end with this story because it's basically the reason that I got into this space. I worked with Sudanese refugees in Cairo around the time that Darfur was in the news in 2004, years before Bitcoin was

Starting point is 00:15:17 live. They had nothing, nothing proximate to what Bitcoin would have offered them now. Having access to Bitcoin would have been transformative. When people have responded, well, yeah, but how many refugees would actually even know about this? The short answer is that even if it's a tiny percentage, that's a tiny percentage that have the tools to protect themselves and their families and communities in a completely different way. And second, as we've now painfully learned, these sort of crises are lurking a lot closer than they might have once seemed. I, for one, am pretty glad for all the folks like this young Ukrainian who are able to use Bitcoin as a lifeline in the worst moments of their lives.

Starting point is 00:15:54 I want to say thanks again to my sponsors, nexus.io, Arculus and FTX for supporting the show, and thanks to you guys for listening. Until tomorrow, be safe and take care of each other. Peace. Hey, breakdown listeners, come join CoinDesk's Consensus 2020, the festival for the decentralized world this June 9th through the 12th in Austin, Texas. This is the only festival showcasing and celebrating all sides of blockchain, crypto ecosystems, Web3, and the Metaverse, and is designed for crypto-newbies, investors,

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The Breakdown - Florida to Accept Bitcoin for Taxes?

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