Welcome to the Age of Strange Bedfellows
Let's Get Comfortable Being Uncomfortable
I liked a Ted Cruz Tweet the other day.
Gross, I know. I’ve taken a number of showers since, and I still haven’t quite scrubbed the stink off.
Does this mean I like Ted Cruz now? Of course it doesn’t. Nobody likes Ted Cruz. But oddly enough, there are these rare occasions where someone like Ted Cruz is the voice of reason in a chaotic situation, and this past weekend was one of them.
Cruz was one of the most prominent voices in the Senate to speak out against the loosely-worded cryptocurrency provision that was jammed into the $1.2T infrastructure bill at the last minute. For more on the details of this cryptocurrency provision, I recommend reading both this article and listening to this podcast. In short, the goal of the provision was to raise approximately $28B in revenue by taxing cryptocurrency. Fair enough. However, exchanges like Coinbase, Gemini, Kraken, etc. are already obliged to provide records of your financial transactions to the IRS. The crypto provision in this bill seems to require a whole new level of intermediaries - including miners, decentralized exchanges (DEXs), software developers and any other parties that might be considered “brokers” - to report your financial transactions to the IRS. I hedge with words like “seems” and “might” in the previous sentence because, again, the wording in the provision is broad and ambiguous. It can be interpreted in a number of ways. Bottom line: The provision has the capability to tie cryptocurrency technology developers up in red tape. It also has the potential to outlaw certain crypto-related jobs on U.S. soil, which could lead to these jobs leaving the U.S. (which defeats the purpose of claiming that this provision was added to help create tax revenue from the asset class). Lastly, it sets a legal example for other countries to follow, potentially doing damage to the industry worldwide. Cruz seemed to understand the damage that this provision could do, and he came out in efforts strike the entire thing from the bill.
And then, on the floor of the Senate, he further hit the nail on the head.
You could almost feel people’s skin crawling on Twitter as they retweeted Cruz’s takes on the matter (as evidenced by the prefaces to Cruz’s words in the Tweets above and below).
The one below was my favorite.
In reality, Cruz was likely just fishing for support in a sea of people who are notoriously against government overreach. Let’s not give him more credit than he deserves.
On the other hand, politicians like Ron Wyden (D-Ore.), Cynthia Lummis (R-Wyo.), and Ron Toomey (R-Pa.) do deserve some real credit for their efforts. But, before getting to what these three Senators did, let’s acknowledge how odd of a team they make. Wyden is a Democrat from a very progressive state who is currently working to close tax loopholes for pass-through businesses. Lummis is a “right-wing rancher” - a borderline libertarian - from a very conservative state who has gone on record saying that Trump had nothing to do with the Jan. 6 insurrection. And in the middle is Toomey, a conservative Senator from a swing state who opposes not only this cryptocurrency provision, but the size and scope of the infrastructure bill at large.
Wyden, Lummis, and Toomey proposed an amendment to the cryptocurrency provision in which software developers and transaction validators would not be subject to the new reporting requirements. Cryptocurrency proponents seemed content enough with the Wyden-Lummis-Toomey amendment, and when it came time to vote, the amendment was held down by an 87-year-old Senator from the 49th least literate state in the United States, Richard Selby (R-Ala.). Oh, and he’s on the verge of retiring and has received donations from big players in the world traditional finance, players who are threatened by DeFi. Thanks, Dick.
Before offering some concluding thoughts for this edition of the newsletter, let’s acknowledge just one more of the strange bonds born out of this crypto provision battle.
Sen. Lummis just wants to rock n’ roll all night, and hodl every day.
Crypto will now likely become a wedge issue in politics. A number of single issue voters were born this past week.
I can’t say that I am one of them just yet, but I will hesitate to vote for anyone whose platform does not include a clearly defined policy on digital assets. Political lines will be redrawn and new coalitions will continue to form. It’s gonna get weird - like beyond just liking Ted Cruz Tweets weird - and I’m here for it.
Best,
Frank
Twitter: @frankcorva
I liked the Tweet by Cruz too - I’ve been against almost everything Cruz has said before that - there is no need to be apologetic for liking his tweet. People who personalize politics and politicians increase their chances of becoming dogmatists and losing their integrity as a human being. Tribalism is stupid regardless of tribe. “What is done out of love is done beyond good and evil.” And to adjust another aphorism, if one decides to ‘fight monsters,’ they are a monster themselves.