EU reaches agreement on ‘landmark’ crypto rules

[letitroll]

Yeah the problem for btc….which the btc etf approval hastens for an asset with no intrinsic value above and beyond its promise that it can be sold for higher in the future once the catalyst ‘roadmap’ has played out…..is when all the major tent pole promised positive catalysts are gone (and to be clear I think this is the last BIG one which the authorities know/knew) and has turned out to be disappointing based on price reaction…..

like what’s left?

The great killer of the BTC chainletter….isnt regulation per se although that is a negative contributor…it’s that the chain letters velocity (or this case cultural meme) slows down….and that the chain letter damages enough people financially that every person is one removed from someone who’s been burned financially.

Its that the chain letters future positive catalysts start to sound less compelling and logical as in the past. That BTC memes next catalyst sounds like sitcom writers who’ve “jumped the shark”…..that the story doesn’t quite sing to be people the way it did.

Sitting 45% off the 2021! ATH’s in real terms….is confirmatory for those who are skeptical of the new positive catalysts.

Very serious question @tecate whats left in the BTC catalyst roadmap outside of institutionalization which has just occurred and allocations from institutions play out rising over the next 12 months….is it simply the use case expansion into payments….which hilariously is incompatible with BTC ETF-ization….i can’t remember the last time I paid for my shopping with my vanguard exchange traded fund inside my brokerage account as the settlement mechanism.…..and imagine a situation where buying a bag of Tayto….triggered a capital gain tax event for the purchaser….see thats where we are now…..BTC is a commodity, its underlying trades on regulated exchanges…the acquisition of BTC for sure now triggers an IRS/revenue capital goods ‘cost basis’ event….the next time its sold or its ownership changes….like paying for tayto….you create a capital gain/loss event.

So if you’re gonna lean into payments as the catalyst….…please explain to me how you get around the friction created above vs. fiat currency….L2 solutions are not an explanation/solution…….L2 lightning payment solutions, secured on BTC, will simply be classed as BTC derivative products with the exact same capital gains/loss problem….underlying layer abstractions in financial markets like L2’s have been closed off by regulators (CDS’s, interest rate swaps, options etc.)

Look forward to your explanation which tackles fundamentally the above and gets around it.

 

[tecate]

@tecate More seriously, am I right that it is in effect a way round doing what is essentially a US$ contract?

I guess I didn't want to open this up into its own particular rabbit hole. It was supposed to be a recent example of ongoing small (but significant) measures that help to embed and enable bitcoin use more and more - all the while.

The Argentinian government came out a couple of weeks ago and said they're fine with contracts that are set out in Bitcoin or settled in Bitcoin. It's not a workaround for USD based contracts. Millei wants to dollarize. In the very same announcement, the government said its all good with USD based/settled contracts too.

I see that you agree that @letitroll has a point about US Gov capture of bitcoin.

Nation-state attack vectors have been a feature of discussions among bitcoiners from the outset. So what he mentioned is nothing new, as you can see from Antonopolous' discussion of that very thing, back in 2019. I've always said that ETF approval is a bittersweet thing - and adds a whole bunch of new challenges. I don't agree with the outcome that @letitroll suggests though. There's likely to be a battle re. governance - in the same way as a similar battle is unfolding relative to nation-state regulation of bitcoin.

What I do think is that the vast, vast majority of bitcoin holders don't give a fiddlers about decentralisation, lack of censorship etc. etc They are simply speculating. So what if at some future date the Feds raid the party, they will have made their fortune and got out by then.

Bitcoin doesn't choose who gets to use it. That's why Antonopolous rightly said that despite him not liking ETFs, they were going to happen anyway (because Wall Street isn't going to pass up on the opportunity). So different folks use Bitcoin. And sure, there's a good bunch of them that fully understand it - and get decentralization and there are those who don't. I would say that the vast majority of the ETF bitcoin buyers will fall into that category...of either not understanding it or not giving a toss. But then they're also a whole new market. They're mainly boomers. As we were going into the last bear market, @letitroll declared that it was over! Bitcoin couldn't possibly get any more new folks to support it. He's just discovered that he had that wrong.

 

[Duke of Marmalade]

@tecate You will be aware that I am not a great DMcW fan and nor is he a fan of me. It was good to see him have to eat humble pie. I myself have been forced onto that pastry but my day will come But I do agree with him that bitcoin is a zero sum (some say negative sum because of the cost of "mining") game and therefore has Ponzi features (let's not go down that rabbit hole). But he does come up with some awful nonsense in his latest podcast like some rigmarole that Esparanto is to English what bitcoin is to the US $ - go figure.

 

[tecate]

when all the major tent pole promised positive catalysts are gone (and to be clear I think this is the last BIG one which the authorities know/knew) and has turned out to be disappointing based on price reaction…..like what’s left?

Your nation state attack vector argument has some merit (even if the two of us still speculate on different eventual outcomes) - stick with that. The idea that bitcoin has nothing more to offer - sorry dude, you've got that wrong. And while you've identified some risk with an ETF, its a wonderful opportunity for a greater body of folks to understand it better. The vast majority of folks still don't.

Sitting 45% off the 2021! ATH’s in real terms….is confirmatory for those who are skeptical of the new positive catalysts.

This is such a nothing burger! I'm not even going to address it. There's a guy on your side of the fence (as far as this debate is concerned) in the Duke who is far better placed to counsel you on this. He screamed 'but $20k at us all for a full 18 months solid relative to the previous cycle that you weren't around for. There's a need for folks to step back and zoom out. Then look at see where things stand. It's at $42.5K! Just like the Duke before, you, you've used the ATH (how much time was spent between $50k and ATH?? A couple of weeks? Everyone recognizes that (in hindsight) as the frothy peak of that cycle.

And you can go fish with this "in real terms" stuff. The "in real terms" item that you mention is the entire shortcoming of the fiat money system. Take that up with Jerome Powell and Christine Lagarde. It was clear from the outset that its part of the reason this debate exists at all - and it will be a key element in why you'll likely lose your wager.

Very serious question @tecate whats left in the BTC catalyst roadmap outside of institutionalization which has just occurred and allocations from institutions play out rising over the next 12 months….is it simply the use case expansion into payments….which hilariously is incompatible with BTC ETF-ization

A very serious answer for you. You think that bitcoin has even scratched the surface in terms of staking a claim to the wealth that exists in the world? It's not even properly understood by the vast majority of folks. We've discussed the various directions this will go in ad-nauseum. It will simply continue on those paths. The spot ETF green light in the US will have repercussions elsewhere in the world also. It already has. The US isn't the only game in town.

So if you’re gonna lean into payments as the catalyst….…please explain to me how you get around the friction created above vs. fiat currency….L2 solutions are not an explanation/solution…….L2 lightning payment solutions, secured on BTC, will simply be classed as BTC derivative products with the exact same capital gains/loss problem….underlying layer abstractions in financial markets like L2’s have been closed off by regulators (CDS’s, interest rate swaps, options etc.)

BTC-centric L2 have been closed off by regulators? Ok? So I can't whip out my phone this very minute and send a few satoshis to anyone that cares to accept them? There are many issues to be resolved with L2 solutions - no doubt. It's been an ongoing headache - but they don't seem to be the issues that you're referring to. That said, I can still effect a BTC lightning payment right now if I wish.

 

[tecate]

@tecate You will be aware that I am not a great DMcW fan and nor is he a fan of me. It was good to see him have to eat humble pie. I myself have been forced onto that pastry but my day will come But I do agree with him that bitcoin is a zero sum (some say negative sum because of the cost of "mining") game and therefore has Ponzi features (let's not go down that rabbit hole). But he does come up with some awful nonsense in his latest podcast like some rigmarole that Esparanto is to English what bitcoin is to the US $ - go figure.

Yeah, I don't think he gets it. We've done this to death so not going to go back over it. Here's a https://x.com/SamanthaLaDuc/status/1745946901218771076?s=20 (Twitter exchange) that covers the same misunderstandings that McWilliams presented with that you may find of interest.

 

[Duke of Marmalade]

It's not even properly understood by the vast majority of folks.

Your absolutely right there and that includes the vast majority of current buyers who are hoping that they too will get an easy ride to billionaire status. The denouement will come when the satoshi drops.
Several millennials have in the past asked my views, as an elder lemon, on bitcoin (not bothering to understand it themselves). I simply referred them to that fallen hero of mine whom you introduced me to - Professor Roubini. I guess they would love to shove more humble pie down my throat.

 

[letitroll]

BTC-centric L2 have been closed off by regulators? Ok? So I can't whip out my phone this very minute and send a few satoshis to anyone that cares to accept them? There are many issues to be resolved with L2 solutions - no doubt. It's been an ongoing headache - but they don't seem to be the ones that you're referring to. That said, I can still effect a BTC lightning payment right now if I wish

Closed off by regulators….in this way….your welcome to pay for your tayto with an L2 solution if somebody will accept it….or send somebody satoshis vs revoluting euros.

But you never tackled the core problem I gave you to solve for me…..these transactions done as payments on BTC or a L2 derivative of BTC …..are now deemed by the regulators to be capital transactions….triggering a capital gain or a loss upon disposal….or a cost basis upon acquisition

If payments using BTC are the future….its not a future I relish… going to the shops and trying to figure out what your capital gains might be on buying a pint of milk.

If that’s the future then I’d go long tax accountants and go short BTC.

 

[tecate]

Your absolutely right there and that includes the vast majority of current buyers who are hoping that they too will get an easy ride to billionaire status. The denouement will come when the satoshi drops.

I know well because the mistake that has been made is that the folks you refer to are 100% of the driving force behind bitcoin, and with that, there can't possibly be anything tangible in sight. Sure there's a cohort of speculative interest, but the people you have in mind are not representative of everyone that takes an interest in it.

Closed off by regulators….in this way….your welcome to pay for your tayto with an L2 solution if somebody will accept it….or send somebody satoshis vs revoluting euros.

But you never tackled the core problem I gave you to solve for me…..these transactions done as payments on BTC or a L2 derivative of BTC …..are now deemed by the regulators to be capital transactions….triggering a capital gain or a loss upon disposal….or a cost basis upon acquisition

If payments using BTC are the future….its not a future I relish… going to the shops and trying to figure out what your capital gains might be on buying a pint of milk.

If that’s the future then I’d go long tax accountants and go short BTC.

I believe I've seen some level of discussion of this - but to refresh my memory, can you cite a link or two to where regulators have laid this down?You know how many times various government entities have swayed this way and that where BTC is concerned over recent years? We're in the middle of that regulatory battle - and it will drag up all sorts, from the good, the bad to the downright ugly. Last I checked, we don't have one world, one government. Jurisdictional arbitrage is at play.

If we're doing quid pro quo, can you explain how you're not going to lose the wager you committed to, when you believe that ETFs are going to be wildly successful in the US?

 

[time to plan]

This is how a cultist wets themselves on this "ground breaking" development:

I'll leave it to listeners to decide whether this is a US $ contract or a BTC contract.

I guess that answers the above musing.


Messie et al would just love to deal directly in US $ but that seems to be verbotten. But the new law seems to allow a way around that ban if you arrange that the actual transaction is in btc although the commercial reality is a US $ one. Well yes, let the cultists add it to their list of use cases.


Gee! Could bitcoin be the solution to our homelessness problem?


The cultists are certainly finding that difficult.

It would be great to be a fly on the wall listening to the conversations at a bitcoin cult meeting.

Is that Argentine fascist guy going full BTC?

 

[Duke of Marmalade]

Is that Argentine fascist guy going full BTC?

I don't think so but @tecate may correct me. My read is that you are not allowed to transact in any currency other than the peso. But the new law allows you to transact in assets. Well obviously bitcoin is a more convenient "asset" than Argentinian beef though that remains to be approved by the courts. I think the 100$ lease is a test case, it is hardly high finance. This ETF thing seems to endorse bitcoin as an "asset" rather than a currency. I don't think there are any ETFs purely linked to a currency (money market funds are not the same thing). It is a use case but I think @tecate agrees with me that it is not the game changer that the cultist I quoted believes.

 

[tecate]

I don't think so but @tecate may correct me.

Lots of things can be talked about but we'll have to see in reality what he's about. He's only in the job a number of weeks. He classes himself as a libertarian, he has said nice things about bitcoin but essentially, its looking like that he will generally bring a 'free markets' approach to Argentina.

My read is that you are not allowed to transact in any currency other than the peso. But the new law allows you to transact in assets. Well obviously bitcoin is a more convenient "asset" than Argentinian beef though that remains to be approved by the courts.

The peso remains legal tender in Argentina - nothing else. Both USD (which you would regard as currency Duke) and BTC were both recognized as being an appropriate form in setting out or settling a contract by the Argentinian government within the one policy change. I'm not getting hung up on what's deemed currency or asset. There's been dialogue ongoing by courts and regulators around the world on that framing - and it will continue for another few years.

And yes, Bitcoin is more convenient for the purposes of settlement than Argentinian beef, or any other commodity including gold.

I think the 100$ lease is a test case, it is hardly high finance.

All it is is the first example that follows that significant policy change by the Argentinian government.

I don't think there are any ETFs purely linked to a currency (money market funds are not the same thing). It is a use case but I think @tecate agrees with me that it is not the game changer that the cultist I quoted believes.

As I mentioned to you the other day, prior to this more recent fiat money experiment, money was backed by gold - and we did have gold ETFs hit the market in 2004. Interestingly, I noticed this old AAM post (from 2007) on the subject ->

According to the World Gold Council, gold demand rose 29% in the first half of 2005. The increase came mainly from the launch of a gold exchange-traded fund

 

[tecate]

With the ETF chatter comes a chance for people to take another look at BTC or finally come to understand it as has occurred https://x.com/JRobertsonMS/status/1746638305834266915?s=20 (in this instance). All of the ETF promoters are churning out bitcoin related marketing that will likely prompt others to take the time to understand it better.

 

[letitroll]

I believe I've seen some level of discussion of this - but to refresh my memory, can you cite a link or two to where regulators have laid this down?

@tecate

BTC has been classified as a commodity by the CFTC and now the SEC has allowed it to trade on-exchange inside an ETF which tracks the underlying spot commodity. The IRS classification and treatment follows automatically.

The EU has also deemed BTC to be a commodity and the EU's has had its own ETF for a while......Irish Revenue, HRM....are already collecting gains on sale on these transactions.

The tax status in both jurisdictions are locked and loaded.....BTC has been funneled into a regulatory & tax bucket from which it will never escape.....and the players (Coinbase, et al) allowed it to happen

BTC by nature of its inclusion as commodity and now an ETF......has been deemed to be "capital good".....it therefore creates upon acquisition a cost basis event (the price you paid) and then it also upon disposal creates a gain on sale or a loss on sale.

https://www.irs.gov/taxtopics/tc409 - pulled from IRS -

"Almost everything you own and use for personal or investment purposes is a capital asset. Examples of capital assets include a home, personal-use items like household furnishings, and stocks or bonds held as investments. When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss. Generally, an asset's basis is its cost to the owner"

This is so elementary - but I mean there it is......BTC ETF holders or direct BTC holder will pay capital gains upon disposal.

So I'll ask again now that its just abundantly clear- how could a person thinking logically envisage a world where BTC or an L2 derivative (which is an abstraction of BTC, like a futures contract) function as payments system?

Every transaction performed using this method would create an endless trail of capital gains/losses to account for?

See the government is the only one who issues currency.....currency can be held and used for transactions triggering no such gains/losses....as its not considered a capital asset ya know cause its issued by the government......everything else and BTC (incl. L2 coins which convert into and out of BTC) are effectively a capital asset.....stock, bonds, btc, futures, interest rate swaps

As I've said the government doesnt kill the BTC dream with a ban......it kills it with bureaucracy and the laws on the books.....and its just killed the currency/payments pathway dream for BTC..........unless you can explain to me how a payments system that generates untold levels of tax accounting for its users and indeed the business they interact with can work....then I consider that BTC catalyst/dream to be over and you've kind of answered my question and proved my point.......the BTC ETF USA approval was the final tent pole positive catalyst.....selling into this as a BTC holder makes sense......cause whatever the future BTC narrative dream is now.....makes no sense.....and BTC weakness & relentless selling into the ETF inflows makes a tonne of sense.

 

[tecate]

@letitroll : There's more than one way to skin a cat (as we'll get to in a second). Additionally, your view is blinkered to meet your own bias on the matter.

So you say that the gubermint has just "killed the currency/payments pathway dream of BTC," yet as has been a theme for a while now, none of this has been settled. You present an over-simplified scenario. With that, some questions in return.

- How can a lightning network transaction be audited? Don't private payment channels differ from the legacy payment rails that we're used to?

So now we've gotten into the weeds, we could really do with some clarity right? Which leads to my next question.

- What clarity has the IRS (or any other tax authority in the world for that matter) provided with regard specifically to lightning network payments? If you can provide a link to that info, that would be informative.

I suspect none exists although you may surprise me. But lets suppose for a second that the IRS ignores the auditing difficulty presented by lightning network and just says its a taxable event. If a hard line is pursued to a point where you drive such payments underground, what actual tax is a government collecting on any such transactions at that point? Haven't we seen something similar with the approach to cash in the past? To you, the consideration from the tax authority's perspective is straightforward but from mine, it's anything but.

Added to that, there isn't just one world gubermint here. The treatment will differ - and the fact that the treatment differs - has implications also for those countries that try and take a hard line. Not only is there not one world gubermint, the gubermint in the US alone could just as easily take a whole different approach to things. While Pocahontas was given the green light to run policy relative to crypto under the Biden Admin in return for dropping out of Presidential running, she won't always be pulling the strings. The Republicans take a different view entirely.

There are also technological solutions to this issue. For example, the Strike app allows you to make purchases in Bitcoin - over lightning - with Strike handling the tax accounting.


BTC isn't a one trick pony. I'd encourage you to have a https://x.com/LynAldenContact/status/1745956428752232824?s=20 (read through) the various ways in which it can be used.


On the ETF we both agree that there's a nation-state attack risk although we disagree entirely on the outcome of that ultimately. I'll come back to the same question I've asked you a couple of times now. If your thesis is that spot Bitcoin ETFs are going to be wildly popular, why didn't this factor in to the rationale you provided previously for your wager i.e. BTC will never reach ATH price ever again? You never mentioned it, I assume, because you never believed that approval would come.

You said back then - as you're saying right now - that bitcoin has no other addressable market. Aren't all these ETF people new? They certainly are to my mind. For the 'capture' of bitcoin to become a reality by way of these ETFs, they're going to have to be wildly popular. How is that going to be achieved without a huge uplift in price?

 

[Duke of Marmalade]

@letitroll Interesting point on the tax treatment. However, does this not just confirm bitcoin as a valid currency? As far as I know currencies are a taxable "asset" its just that if a currency is the numeraire, by definition it will never trigger CGT events. For example, as I understand it my holdings in sterling are taxable but of course my holdings in euro are not.
However, I do agree that this ETF thing confirms that BTC is not in the currency sphere but in the commodity sphere. That is the reality - very, very, very few are holding bitcoin for its medium of exchange utility which is really almost non existent.

 

[tecate]

I do agree that this ETF thing confirms that BTC is not in the currency sphere but in the commodity sphere

I don't think the pigeon holing is useful. Have a look at Lyn Alden's list of use cases that I linked to above. To one grouping of people, it may find use in the ETF world, to another in another part of the world, it may take on a different use case entirely. For others still, they may come to appreciate it for one use, only to later find that they may as well use it for remittance purposes, to settle a contract, to buy something online, etc.

 

[Duke of Marmalade]

I don't think the pigeon holing is useful. Have a look at Lyn Alden's list of use cases that I linked to above. To one grouping of people, it may find use in the ETF world, to another in another part of the world, it may take on a different use case entirely. For others still, they may come to appreciate it for one use, only to later find that they may as well use it for remittance purposes, to settle a contract, to buy something online, etc.

I think the list can be condensed to the two - medium of exchange or investment(speculation). She lists many features of its use as a MOE but according to the MSO 95% buy it as a speculation, 4% buy it as an "investment" and 1% buy it as a MOE and these last tend to value its secrecy rather than its other supposed advantages over fiat.

 

[tecate]

I think the list can be condensed to the two - medium of exchange or investment(speculation). She lists many features of its use as a MOE but according to the MSO 95% buy it as a speculation, 4% buy it as an "investment" and 1% buy it as a MOE and these last tend to value its secrecy rather than its other supposed advantages over fiat.

I think you're throwing out use cases without good cause. Remember that a week ago, there were no spot Bitcoin ETF products in the US. While we can look at the pros and cons of that development, it is yet again, a new development for Bitcoin - and one that unleashes it to a whole new market. The point being that this move alone demonstrates that bitcoin and its eventual uses cases and level of use - are still in development and have yet to fully reveal themselves.

 

[letitroll]

Interesting point on the tax treatment. However, does this not just confirm bitcoin as a valid currency?

No it confirms BTC as a capital good......which is game over for the payments dream...cause every microtransaction into and out of BTC attracts capital gains and losses. Your euros in fact are the government issued currency and unit of account that decides if/when a capital good has triggered a gain/loss. Government issued FIAT currency keeps score so to speak.....when capital good transaction occur without FIAT settlement...they are considered to be "in-kind" transactions.

For example if you work for a company - and that company provides you a company car.....you guessed it your in receipt of 'benefit in-kind' and get taxed as if it were fiat income.

Its an important function of a government issued currency. When capital goods change ownership...the parties settle in Euros/USD....the seller has a gain or loss on sale and buyer has a cost basis event. Capital goods, that aren't settled in fiat, say like moving BTC to an L2 and back again trigger in-kind gain/loss taxes...where the value of BTC at the of the in-kind exchange needs to be used.

However, I do agree that this ETF thing confirms that BTC is not in the currency sphere but in the commodity sphere. That is the reality - very, very, very few are holding bitcoin for its medium of exchange utility which is really almost non existent.

Yes and the BTC community in chasing this 'number go up' approach - have closed off, the admittedly naive in the first place, dream of BTC somehow expanding into a ubiquitous payments layer. That dream is just DOA.

Which is kind of my point here that the bitcoiners dont wanna hear - cause it dismantles an important piece of the narrative....and the narrative drives the price.....BTC is perpetual dream machine......but its institualization & categorization narrows the use cases & constrains the 'dream'.....selling the dream is becoming incrementally harder....as Government bureaucracy, financial services regulation & the tax system invelope BTC in its loving embrace.

As I've said - in a purely trading/price framework..thinking about this as an investor...where an asset has all its major positive catalysts in the past.....and has no intrinsic value above and beyond what the next person will pay....that's the mother of all sell signals.....BTC's best & most achievable catalysts are behind it now and that spells trouble for the price.....the velocity of the cultural meme underpinning BTC will be hurt by that....and the price 45% off ATH's in real terms is confirmatory of that idea.

 

[Duke of Marmalade]

No it confirms BTC as a capital good......which is game over for the payments dream...cause every microtransaction into and out of BTC attracts capital gains and losses.

Yes, I myself travel a bit to NI but I have agreed with Revenue that I may account for my sterling transactions by summarising them at the end of each day and using the average €/£ exchange rate for the day to determine my capital gains/losses