BTC unsure after stockpile diss; Ver sure not getting pardon

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‘Bitcoin Jesus’ won’t be getting a pardon from Donald Trump for tax crimes as confusion reigns regarding how the United States intends to tax crypto-based capital gains.

• BTC still reeling from Trump’s ‘digital asset’ diss
• Will digital assets face capital gains tax?
• Coinbase, MSTR no longer want what they asked for
• Musk renounces Roger Ver’s pardon plea
• Richard Heart’s pardon fantasy
• Congress probing Choke Point 2.0
• Morgan Stanley wants to be crypto ‘transactor’
• Ethereum’s Buterin slams’ politician coins’

Late on January 26, the BTC token’s fiat price sank below $100,000 for the first time since Trump took the oath for his second stint as president. The plunge was swift and sharp, falling from over $105,000 to below $98,000 in about 12 hours. The price briefly rebounded to $102,000 before sinking back to $99,000 by midday on the 27th before picking itself up off the floor again—for how long, no one knows.

While the selloff mirrored Monday’s plunge in the broader tech sector, BTC backers have been on the back foot since last Thursday, when Trump issued an executive order that instructed his new ‘crypto council’ to “evaluate the potential creation and maintenance of a national digital asset stockpile.”

The lack of any mention of ‘bitcoin’ or ‘BTC’ appeared to lump the token with all the other speculative assets, outraging BTC maximalists and robbing BTC of what its backers presumed was a kind of ‘most favored token’ status. Not even the latest billion-dollar-BTC-buy by MicroStrategy (NASDAQ: MSTR) founder Michael Saylor proved capable of keeping BTC’s fiat price aloft for long.

Among the more ardent boosters of a BTC reserve—which would not only involve the government keeping tokens seized as the proceeds of crime but also buying up to a million more BTC on the open market—is David Bailey, who convinced Trump to speak at the BTC conference in Nashville last summer.

On January 26, Bailey tweeted that he’d just spoken to Trump, who allegedly told Bailey that “he’s with us 100%, we’re going to send [BTC] to much greater heights, and we’re going to outcompete China and other countries that want to take it from us.” However, Bailey added that, “I don’t think he’s aware of the concern [over the non-BTC stockpile language] and I didn’t raise it.” Bullish.

XRP-issuer Ripple Labs has been catching heat for its role in allegedly steering Trump from a BTC-only stockpile to a multi-token model that includes XRP. On January 27, Ripple CEO Brad Garlinghouse tweeted his call for the crypto sector to “work together instead of tearing each other down.”

Of course, this being crypto, Garlinghouse immediately pivoted to attacking BTC maxis, saying maximalism “remains the enemy of crypto progress, and I’m very glad to see fewer and fewer folks ascribe to this outdated and misinformed thinking.”

Meanwhile, observers continue to point out the hypocrisy of all these stockpile/reserve boosters cheering the government for confiscating people’s assets. They seem to be ignoring that civil asset forfeiture allows the government to take your tokens and puts the onus on you to prove that they weren’t involved in criminal activities.

“Civil asset forfeiture is the most insane Government funding technique that is out there, and you most definitely do not want this declared as a strategic means to pump the Government’s bitcoin bags.”

A taxing issue

Speaking of the government taking things to which they’re not entitled, America’s crypto bros buzzed over the weekend due to a report that claimed Trump’s son, Eric, had let it slip that “U.S.-based crypto projects” wouldn’t be subject to capital gains tax.

However, Eric has yet to repeat this assertion to anyone other than the author of that report, who, as some were quick to point out, was a crypto influencer who’d previously promoted a number of what were eventually exposed as fraudulent crypto projects.

Moreover, amending tax codes requires an act by Congress, which might balk at the loss of tax revenue at a time when paying down the national debt is an increasingly urgent matter. There’s also the question of what defines a crypto project as being “U.S.-based” and the inevitable infighting between stakeholders this will create.

A more definitive statement came from David Sacks, Trump’s new ‘AI & Crypto Czar,’ who last week told Fox Business that many tokens—like the $TRUMP memecoin issued by the president-elect three days before his inauguration—were neither securities nor commodities but “collectibles, like [non-fungible tokens] or memecoins.”

This ‘collectible’ language has been bandied about a lot, including by the Coinbase (NASDAQ: COIN) exchange in its legal fight with the Securities and Exchange Commission (SEC). Coinbase likened many of the tokens it lists to ‘digital Beanie Babies,’ having no purpose or value other than that which ‘collectors’ ascribe to them.

Trouble is, under current U.S. tax rules, any capital gains from selling a ‘collectible’ is taxed at a maximum rate of 28%. Sellers might also be hit with a 3.8% net investment income tax depending on the size of their gross income. Seems a lot of crypto ‘collectors’ should start collecting Tylenol for the tax-shaped headaches coming their way.

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We want regulatory clarity! No, not THAT clear!

Crypto tax concerns are also weighing heavily on MSTR’s Saylor, according to a Wall Street Journal (WSJ) report that said MSTR might owe billions in taxes from the ~$19 billion in unrealized capital gains on the company’s now 471,000+ BTC stash. The issue involves the corporate alternative minimum tax (CAMT) in the Inflation Reduction Act of 2022 that could compel MSTR to pay 15% on its ‘adjusted financial statement income.’

Compounding matters, in December 2023, the Financial Accounting Standards Board (FASB) changed its rules to allow companies to report changes in the ‘fair value’ of the digital assets they control. This was an accounting perk that both Coinbase and MSTR had openly lobbied hard to get.

Coinbase used the change to add $737 million to its ‘profit’ in the first quarter of 2024. MSTR, which hoped the mark-to-market value of its BTC would speed its inclusion in the S&P500, didn’t implement the change until January 1 but immediately warned investors that the future tax implications could be massive without a crypto carveout.

And now the fair-value chickens are coming home to roost. Earlier this month, MSTR and Coinbase filed a joint letter asking the Internal Revenue Service (IRS) for an adjustment of its CAMT rules. The companies claim the CAMT as written could result in “serious unintended consequences to U.S. corporations holding substantial cryptocurrency” that has appreciated in value.

Again, while both Saylor and Coinbase CEO Brian Armstrong have Trump’s ear, tax changes are an issue for Congress, who might find it awkward to vote to strip the government coffers bare just to favor some already fabulously wealthy tech bros—including one with a record of dodging his taxes.

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Have cross, will martyr

Speaking of tax evasion, on January 26, Roger Ver issued a tweet in which he pleaded for President Trump to help make his criminal tax evasion charges go away. In May 2024, Ver was arrested in Spain after the Department of Justice (DOJ) indicted him for dodging $48 million in taxes the IRS claims Ver owes Uncle Sam.

Ver said his legal woes were “not because I’ve done anything wrong, but because of my activism within cryptocurrency.” Ver claims he’s the victim of “lawfare” by “people who hate America” and likened his legal woes to those Trump endured over the past few years.

Ver infamously renounced his U.S. citizenship a decade ago following his stay in federal prison for selling illegal explosive materials. Over tinkly piano music and amidst images of the Statue of Liberty and other American icons, Ver’s video claims he gave up his citizenship because he knew he would continue to be “targeted for my political views and past activism” if he remained a U.S. citizen.

But exiting U.S. citizens are required to pay taxes on their way out the door, and Ver’s indictment said he actively evaded this obligation by lying to the accountants preparing his declarations regarding his BTC holdings. Ver also continued to run a pair of U.S.-registered companies that were required to pay taxes regardless of his citizenship status.

Last week, following Trump’s pardon of Silk Road founder Ross Ulbricht, some crypto bros urged Trump to similarly excuse Ver’s crimes. Trump’s ‘first buddy,’ Elon Musk, initially suggested he would “inquire” as to whether Trump was up for pardoning Ver. But Musk poured cold water on this idea over the weekend, tweeting that Ver “gave up his US citizenship. No pardon for Ver. Membership has its privileges.”

Undeterred, Ver tweeted a slick 20+ minute video on January 27 detailing how he’s been “terrorized by rogue U.S. government agents who hate American freedom.” Watch for the part where a parallel is drawn between Ver and America’s founding fathers, who like him renounced their (British) citizenship and, um, fled to the Caribbean to live like a king?

Oh, and remember that Ver has also been accused of refusing to pay his private debts, including a reported $47 million marker at the (now defunct) CoinFLEX exchange and a $21 million debt to the (now defunct) Genesis Global Capital. As some crypto bros have opined, Ver’s resistance to paying his bills might be because “he is unable to do so.”

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Bleeding Heart

Crypto’s ‘pardon me’ parade is growing crowded, as Richard Heart aka Richard James Scheuler, founder of the HEX protocol/Ponzi, tweeted his own pardon plea last week. Heart is currently on the run from both America’s securities regulator and Finnish authorities who’ve accused Heart of “gross tax evasion” and the physical assault of a 16-year-old, resulting in Interpol issuing a ‘red notice’ for Heart’s arrest.

Heart’s pardon plea described himself as “a hero” for promoting his scam tokens but made no mention of Interpol’s assertions that his assault on the 16-year-old involved “grabbing their hair, dragging them into the stairwell and knocking them to the ground. While the victim was lying on their back on the floor, Schueler punched them 4–5 times in the face, nose, eyes and head area. Schueler caused the victim to suffer pain, broken facial skin, bleeding and swelling in the facial area. In addition, the victim’s clothes were covered in blood.”

What other crypto bros facing legal peril might next seek Trump’s mercy? Celsius’s Alex Mashinsky? Or what about bros already paying their debts to society, like FTX’s Sam Bankman-Fried? Come back from the (possibly) dead, Gerald Cotten, all is forgiven.

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Have you now or have you ever been to dinner at Gary Gensler’s house?

Over in Congress, committees are opening probes into Operation Choke Point 2.0, aka the conspiracy theory that President Joe Biden’s administration pressured banks into ‘debanking’ individuals/entities involved in crypto.

On January 24, the Senate Banking Committee announced it will hold a hearing focused on debanking on February 5. Committee chair Tim Scott (R-SC) called debanking “un-American” and suggested that “Biden regulators … forced financial institutions to cut off services to digital asset firms, political figures, and conservative-aligned businesses and individuals.” Witnesses for the show trial, sorry, hearing, will be named later.

The same day, House Oversight Committee chair James Comer (R-KY) sent a letter to six digital asset luminaries—including Coinbase’s Armstrong, Andreessen Horowitz co-founder Marc Andreessen and Kraken CEO Dave Ripley—promising a probe into “improper debanking of individuals and entities based on political viewpoints or involvement in certain industries such as cryptocurrency and blockchain.”

The House probe will focus on whether debanking originated “from the financial institutions themselves or from either implicit or explicit pressure from government regulators.” Comer wants to know “the reasons tech founders were given as to why they were debanked, and how this overreach affected business operations.”

On a recent episode of The Unshakeables podcast, JPMorgan Chase (NASDAQ: JPM) CEO Jamie Dimon claimed he told Andreessen that “we have not debanked anyone because of political or religious relationships, period … we do bank some crypto companies and very carefully. We are responsible on the law to fight sex trafficking, money laundering, tax avoidance.” Crypto bros might not like it, but JPMorgan “have to follow” the rules stipulated in the Bank Secrecy Act.

However, Dimon qualified that statement by saying federal regulators can “put a lot of pressure on us and they tell us what is high risk, and if we don’t debank someone and something goes wrong, we can pay hundreds of millions of dollars of fines. So a lot of banks are guessing like, ‘we should get rid of these people because [if] we don’t get rid of them, we’ll be fined.’ And you’ve seen that over and over and over.”

Dimon said “there should be far cleaner lines about what we have to do and we don’t have to do … we’ve been complaining about this for years. We need to fix it. But it wasn’t for all the things that Joe Rogan and Marc Andreessen spoke about.”

To paraphrase, if crypto firms could demonstrate the same commitment to observing ‘know your customer’ (KYC) and anti-money laundering (AML) rules like traditional financial operators, crypto firms could enjoy the same banking privileges. But they don’t. And they won’t. So they can’t.

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Banks cannonballing into the crypto transaction pool

Over at Morgan Stanley, CEO Ted Pick says his company is interested in working with regulators to see how deep it can stick its fingers into the crypto pie without getting burned.

Pick told CNBC that for his bank, “the equation is really around whether we, as a highly regulated financial institution, can act as transactors” in digital assets. Morgan Stanley would work with “the Treasury department [whose new secretary Scott Bessent—a crypto fan—was confirmed by the Senate on Monday] and the other regulators to figure out how we can offer that in a safe way.”

Pick’s comments followed similar quotes from Bank of America’s (BofA) Brian Moynihan, who said last week that “If the rules come in and make [digital assets] a real thing that you can actually do business with, you’ll find that the banking system will come in hard on the transactional side of it.”

On January 21, former Commodity Futures Trading Commission (CFTC) Chair Chris Giancarlo tweeted in response to a repost of Moynihan’s digital asset payment comments, saying “Trust me … it’s going to happen.”

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Buterin slams’ politician coins’

The fine print of Trump’s memecoin specifies that the tokens—the official nomenclature is ‘Trump Memes’—do not represent “an investment opportunity, investment contract, or security of any type.” Instead, they’re flogged as “an expression of support for, and engagement with, the ideals and beliefs embodied by the symbol ‘$TRUMP’ and the associated artwork.”

It didn’t go unnoticed that $TRUMP was one of the few tokens one can purchase without any crypto knowhow whatsoever. The Trump token team partnered with an app called Moonshot, which allows users to purchase $TRUMP (and other memecoins) using their debit/credit cards or mainstream payment apps like Apple Pay (NASDAQ: AAPL), Google Pay (NASDAQ: GOOGL), and Venmo.

Moonshot’s ease of use undoubtedly made onboarding simpler for Trump’s older devotees, many of whom would have zero experience with digital assets. Following $TRUMP’s release, Google searches for ‘crypto’ hit highs not seen since 2021, the year before ‘crypto winter’ did a number on everyone’s digital wallets.

Let’s hope these crypto newbies are enjoying their ‘expression of support’ for the president because his team wasn’t lying when they said it wasn’t an investment—at least, not a good one. The token is currently struggling to stay above $28, which is more than 60% below its peak of $72. Hey, at least you won’t have to pay any capital gains taxes, amirite?

On January 23, Ethereum co-founder Vitalik Buterin slammed “politician coins” as “a perfect bribery vehicle. If a politician issues a coin, you do not even need to send *them* any coins to give them money. Instead, you just buy and hold the coin, and this increases the value of their holdings passively … this is all risky to democracy.” Buterin recommended that “politicians do not go down this path.”

Or if they do, next time please release your tokens on Ethereum, rather than Solana. Okay? Cool.

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