BITCOIN: If You Can’t Beat ‘Em, Join ‘Em

Bitcoin: If You Can’t Beat ‘Em, Join ‘Em
 
In February of 2021, I wrote that I believed bitcoin was a short-term investment; it would not be allowed to replace the dollar, the monetary standard of the entire world. I felt that Bitcoin would not be allowed to replace that standard because it and similar types of currency are not currently regulated or insured. I was wrong. Why? The issue may be complex, but the answer is simple: Like many others, I was listening to Warren Buffett and other financial titans. Berkshire Hathaway Vice Chair Charlie Munger stated at the firm’s February 2021 annual meeting, “Bitcoin is too volatile to serve as a medium of exchange.”

Wrong! As the International Trade Administration reported in June 2021, El Salvador was to become the first country to adopt Bitcoin as legal tender—a nation whose official currency is the U.S. dollar. Indeed, Bitcoin became legal Salvadoran tender in September alongside the U.S. dollar. According to law, the country’s Central Bank and Superintendent of the Financial System must develop norms and regulations to facilitate the use of Bitcoin in the market. (See the associated story at https://www.trade.gov/market-intelligence/el-salvador-adopts-bitcoin-legal-tender).
Other countries also are developing norms and regulations to facilitate the use of Bitcoin in the market. In a December article for Investopedia, Prableen Bajpai, a trading strategy expert and founder of FinFix and Analytics Private Ltd., wrote that “Several other countries allow Bitcoin to be used in transactions and have developed forms of regulation.” She cites examples such asDenmark, France, Germany, Iceland, Japan, Mexico, and Spain. She also points out that, in 2020, the European Commission finalized a proposal for legislation to regulate crypto assets.
In the United States, the Financial Crimes Enforcement Network has been involved with cryptocurrency regulation for almost a decade, and is currently working to establish guidelines that will allow standardized tracking and reporting of cryptocurrency on a national level for a wide range of institutions. Banks and cryptocurrency exchanges will be required to report transactions and suspicious activities, indicating that the government has prioritized the role that cryptocurrency already plays. With this in mind—as well as the fact that the Internal Revenue Service has already categorized Bitcoin as property for taxation purposes—the conclusion is clear that cryptocurrency will remain an important part of the American financial scene for some time to come.


I am reminded of the fact that, although a wide range of activities are not legal, one must still pay taxes on the money generated from such activities. The Feds are following the money. In the case of crypto, they know that they can’t stop this movement. For now, all they can do is regulate (and, of course, profit).
But they will not stop there. The Federal Reserve and Wall Street will study it, dissect its effectiveness, and then use their findings to issue their own cryptocurrency in a few years. Until then, Bitcoin and other cryptocurrencies such as Ethereum, Binance Coin, and Tether, to name but a few, will continue to soar and dip in value, and fortunes will continue to be made and lost. This is the era of Robin Hood, and Captain Obvious and I now both believe that cryptocurrency is here to stay. 
For those of us who missed the Bitcoin frontier investment phase and find the current price prohibitive, other avenues to crypto wealth exist. We need to find our own share. 
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