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It was a real pleasure to watch Katya Ananina And Jessica Hodlr take the stage at the Bitcoin Amsterdam conference (also because a few minutes earlier a journalist from the Financial Times had just spat her contempt for the lack of women present at the conference). They have done a great job of articulating how states should view their citizens, especially us Bitcoiners.
Jurisdictional arbitrage is a very relevant concept for Bitcoin communities. At the risk of being called arrogant, I would like to take a moment to explain in detail why every country should not only want us but also incentivize us to come to them.
Sure, bitcoin is fucking money. Wave a salute to the state in its most invasive 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 met were socially engaged, family and community oriented. They are intelligent, they push technical, financial and social innovation to the forefront. They are wealthy, curious and idealistic in the best possible sense, ready to commit themselves to actually building a better world. They want to invest in the future and build businesses; in general, I’d go so far as to wager 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 towns.
“What jurisdiction could not welcome such a community,” one might ask? As Katie and Jessica point out, jurisdictions should compete positively to attract new citizens of this caliber.
As we all sadly know, not all jurisdictions see it that way. The US has fired several warning shots at its Bitcoin citizens, including threatening to impose a tax on unrecognized capital gains. There are several examples of developing countries definitely seeing Bitcoin’s potential offerings, including the darling of the Bitcoin community, El Salvador, but none have yet emerged as a frontrunner. Even El Salvador’s best efforts appear to have been, at least temporarily, slightly bogged down by adoption and implementation issues.
Europe has hesitated on Bitcoin. Recently, we saw her threaten to ban mining. As most of us are already well aware, banning mining in any jurisdiction does not, in fact, kill Bitcoin as lawmakers seem to believe, but it does send miners (and along with them energy, wealth, and a thriving community) flocking to jurisdictions more welcoming. We first saw this 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 has migrated. Mining bans and tax laws appear to be coupled in diabolical allegiance when it comes to a state’s attitude towards Bitcoin and the consequences for said state. Ban mining and tax the sale of bitcoin and see how other jurisdictions benefit from the wave of Bitcoin migrants.
The fact is that there is a large and growing Bitcoin population in Europe and we are looking for a home.
Several European countries have shown their colors beyond doubt in recent years. The Netherlands, for example, once the golden land of opportunity based on solid commerce and commerce, decided that Bitcoin was a net negative, implementing strict regulations on Bitcoin companies and a 30% capital gains tax on assets bitcoins. Predictably, Dutch Bitcoiners and Bitcoin companies voted with their feet, leaving the Netherlands to jurisdictions with better legislation. Perhaps the Netherlands is congratulating itself on this purge of Bitcoiners: Anyone with half a working brain, however, can see that it actually represents a deluxe brain drain, emigrating young innovators and those who hold the money of the future.
It is clear that the traditional seats of financial power in Europe are less well positioned to remain on the throne when it comes to Bitcoin. Switzerland, with its long tradition of respect for finance and its discretion over identity and funding sources, seems too stuck in the tracks of the traditional financial system to be a real contender for the role. Brexit may have freed the UK from the quagmire of EU legislation and it may have London’s solid name as a financial centre, but with the shelf life of every political leader currently less than that of a pot of yoghurt and a national meltdown currency, it would indeed be a daredevil company that would build its foundation there now.
Portugal has never been known as a financial center, but a previous article of mine detailed its merits as a breeding ground for Bitcoin community founding. The relative ease of its visa procedures and its policy of not taxing capital gains on bitcoins has seen Bitcoiners of every nationality flock here, and those of us who hold regular meetings have seen our numbers grow very satisfyingly.
But for Portugal there is a crossroads. It is one of the EU’s poorer cousins and has been heavily dependent on EU subsidies for various aspects of its capacity building in recent years. The euro has brought even more tourism, a sector Portugal depends heavily on to replenish its coffers. If the EU were to crack down on Bitcoin broadly, it would be a huge call for Portugal to stand up for its Bitcoin communities.
And then there’s the enticing ripe fruit of capital gains tax. Portugal last week proposed a new law to levy capital gains tax on bitcoin, albeit in a nuanced form: Bitcoin that has been held for more than a year is still tax-free.
This could be interpreted in various ways. Of course, the cynic might say that this is the thin end of the wedge: the first bite into the juicy plum of the Bitcoin savings of the Bitcoiners who have been drawn here, in what could very well turn out to be a classic bait-and-switch maneuver. Others will argue that this scheme rewards HODLers for their HODLing – a tax regime, sure, but a lenient one.
Of course, if Portugal were to choose to impose a capital gains tax on bitcoin that punishes those who emigrated here for currently welcome taxes, the effect would be very simple. National coffers would not be swelled by such tax decisions. Instead, the fledgling Bitcoin communities that are flourishing and taking root here would simply vanish, dissolve, as we European Bitcoiners pack our bags again and set off in search of the next Bitcoin haven.
It appears that there is a golden opportunity for European countries at this point, which Portugal is uniquely poised to seize, having been the immigration destination of choice for both European and American Bitcoiners in recent years seeking to escape from more draconian (and colder) jurisdictions. If Portugal chooses to position itself as a safe haven for Bitcoiners, more and more of us will come here, enriching the economy with investment and innovation and contributing our skills and commitment to the continued growth of the country. At Bitcoin 2022, Madeira, a Portuguese island, announced its support for Bitcoin, welcoming Bitcoin communities and businesses. Will mainland Portugal follow suit?
If jurisdictional arbitration is viewed from the perspective of the affluent and innovative community of Bitcoiners, countries should queue up to advertise their merits to us.
So what is it to be, Portugal? Which way, western land?
We European Bitcoiners are waiting and watching the various political tides.
This is a guest post by Holly Young. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin magazine.