This is an opinion editorial by Holly Young, Ph.D., a builder active in the Portuguese Bitcoin community.
Disclaimer: BTC Inc. is the parent company of Bitcoin Conference.
It was a real pleasure to watch Katie Ananina and Jessica Hodlr go on stage at Bitcoin Amsterdam conference (particularly because a few minutes earlier, a journalist from the Financial Times had just spat out her contempt for the lack of women present at the conference). They did a great job of explaining how states should view their citizens, especially us Bitcoiners.
Jurisdictional arbitration is a very relevant concept for Bitcoin communities. At the risk of being called arrogant, I would like to take a moment to detail why every country should not only want us, but entice us to come to them.
Of course, bitcoin is money. He raises a finger to salute the state in its most intrusive and inappropriate form – the meddling state, the nanny state, the state that wants to take your freedom and dictate the rules by which you and your family live. But there is a central contradiction here. Despite what the mainstream media claims about Bitcoin (and by implication, Bitcoiners), we’re not all gun-toting psychopaths, terrorists, or drug barons — in fact, from what I’ve seen , Bitcoiners are pretty solid people.
In general, the Bitcoiners I’ve met are socially engaged, family-oriented, and community-minded. They are intelligent, at the forefront of technical, financial and social innovation. They are wealthy, curious, and idealistic in the best possible sense – ready to commit to actually building a better world. They want to invest in the future and build businesses; in general, I would go so far as to bet that a Bitcoiner contributes more to their community than your average member of the public, whether through investment, innovation, or general social engagement. This is, of course, cumulative – communities build neighborhoods, neighborhoods build counties, and counties build countries.
“What jurisdiction could not want to welcome a community of this kind”, you will ask me? Like Katie and Jessica reportjurisdictions should be in positive competition to attract new citizens of this caliber.
As we all unfortunately know, not all jurisdictions see it that way. The United States has fired various warning shots at its Bitcoin citizens, including threatening to levy a tax on unrecognized capital gains. There are several examples of developing countries definitely seeing the potential in bitcoin offerings – including bitcoin community darling, El Salvador – but none have yet emerged as precursors. Even El Salvador’s best efforts seem to have been bogged down, at least temporarily, by problems adoption and implementation.
Europe hesitated on Bitcoin. Recently we have seen threaten to ban mining. As most of us are already well aware, banning mining in one jurisdiction does not, in fact, kill Bitcoin as lawmakers seem to believe – instead, it sends miners (and with them energy, wealth and a thriving community) flock to more welcoming jurisdictions. We first saw it on a large scale in 2017, when China banned Bitcoin mining – much to the benefit of the United States, where much of the mining power migrated. Mining bans and tax laws seem to be joined in an unholy allegiance when it comes to a state’s attitude towards Bitcoin – and the consequences for said state. Ban mining and tax the sale of bitcoins and watch other jurisdictions benefit from the flood of bitcoin migrants.
The thing is, there is a large and growing bitcoin population in Europe and we are looking for a home.
Several European countries have undoubtedly displayed their colors in recent years. The Netherlands, for example, once upon a time the golden land of trade-based opportunities and sound trading, decided Bitcoin was a net negative, implementing tough regulations on Bitcoin companies and a tax on 30% capital gains on bitcoin assets. Predictably, Dutch Bitcoiners and Bitcoin companies voted with their feet, leaving the Netherlands to jurisdictions with better legislation. Perhaps the Netherlands is welcoming this purge of Bitcoiners – however, anyone with a working half-brain can see that this is actually a luxury brain drain, pushing young innovators and those who hold the money of the future to emigrate.
It is clear that the traditional seats of financial power in Europe are less well placed to stay on the throne when it comes to Bitcoin. Switzerland, with its long tradition of respect for finance and its discretion over the identity and sources of funding, seems too stuck in the footsteps of the inherited financial system to be a real contender for this role. Brexit may have freed the UK from the quagmire of EU law, and it may have the solid name of London as a financial centre, but with the lifespan of each political leader currently less than that of a yoghurt pot and a plummeting national currency, it would indeed be a reckless endeavor to build its foundation there now.
Portugal has by no means been known as a financial center, but a previous post of mine detailed its merits as fertile ground for founding Bitcoin communities. The relative ease of its visa procedures and policy of no capital gains tax on bitcoin has seen Bitcoiners of all nationalities flock here, and those of us who run regular meetups have seen our numbers increase very satisfactorily.
But a bifurcation is announced for Portugal. It is one of poorer cousins of the EU and has been heavily dependent on EU grants for various aspects of its capacity building in recent years. The euro has brought even more tourism, a sector on which Portugal depends very heavily to inflate its coffers. If the EU were to clamp down on bitcoin at large, it would be a big ask for Portugal to defend its bitcoin communities.
And then there is the ripe and tempting fruit of the capital gains tax. Last week, Portugal proposed a new law to tax capital gains on bitcoin, but in a nuanced form: bitcoin held for more than a year is still tax-exempt.
This could be interpreted in various ways. Of course, cynics might say this is the thin end of the wedge – the first bite of the juicy plum of Bitcoin savings from Bitcoiners who have been lured here, in what may well turn out to be a classic bait-and-pull maneuver. Others will say that this regime rewards HODLers for their HODLing: A tax regime, yes, but lenient.
Of course, if Portugal were to choose to levy a capital gains tax on bitcoin that punishes those who emigrated here for the currently welcoming taxes offered, the effect would be very simple. National coffers would not swell with such tax rulings. Instead, the fledgling Bitcoin communities thriving and taking root here would simply fade away, melt away, as we European Bitcoiners pack up our suitcases and set off in search of the next Bitcoin haven.
It looks like there is a golden opportunity for European countries at this point, an opportunity that Portugal is poised to seize, having in recent years been the immigration destination of choice for European and American Bitcoiners seeking to escape more draconian (and colder) policies. If Portugal chooses to position itself as a haven for Bitcoiners, more and more of us will come here, enriching the economy with investments and innovations and contributing our skills and commitment to the continued growth of the country. To Bitcoin 2022, Madeira, a Portuguese island, has announced its support for bitcoin, welcoming bitcoin communities and businesses. Will mainland Portugal follow suit?
If jurisdictional arbitration is seen from the perspective of the rich and innovative community that Bitcoiners form, countries should line up to tell us their merits.
So what will it be, Portugal? By where, western land?
We European Bitcoiners wait and watch the different political tides.
This is a guest post by Holly Young. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.