A few weeks ago, Musk, a Bitcoin “believer,” suddenly went on record to badmouth Bitcoin, followed by a more than 40% drop in the price of Bitcoin and more than half a million people blowing their positions. What makes investors even more angry is that Musk is still hailing one and stepping on the other.
Also a digital asset, Musk is singing the praises of bitcoin while endorsing dogcoin. Many U.S. investors then feel that Musk is manipulating the market, and such behavior needs to be managed.
▲ On May 21, Musk tweeted: I have never dumped dogcoins, and I won’t in the future
The U.S. financial regulators associated with Bitcoin are broadly divided into four categories, all of which have their own sub-regulatory direction.
After this bitcoin fiasco, U.S. Treasury Secretary Yellen, Federal Reserve Chairman Powell, and SEC Chairman Geisler, among others, have not been without reaction.
When talking about digital assets, they all mention two words, warning and regulation: warning investors to recognize the risks and saying they want to strengthen the regulation of digital assets. It’s just that similar reactions have been said much more often in the past few years.
All said and done, but in terms of effectiveness, the risks are still not insignificant, and the regulation seems to be in place yet unregulated. Bitcoin, why has it become a “roller coaster” that the United States can’t handle?
Repeating the same mistake
This year, Bitcoin has seen an unprecedented amount of attention.
As recently as January 8, Bitcoin traded at a record high of $40,000, and its market value surpassed a trillion dollars for the first time. Keep in mind that in 2020, there will only be 16 countries with a global GDP of over $1 trillion.
And that’s not even the end of it. By April, the price of Bitcoin soared to a record high of $64,829.14, repeatedly breaking records.
What the rising price is pulling in is investor enthusiasm. In the first quarter alone, the largest U.S. virtual currency exchange, Bitcoin Base, added more than 13 million new users.
The number of Bitcoin Base users reached 56 million in March 2021.
The number of players has increased and the market has become bigger, so it is reasonable that the fluctuation of the bitcoin price should level off. But the opposite is true – bitcoin went from an all-time high to a near-collapse in just 40 days.
Many investors who have lost a lot of money have chosen to blame Musk for the crash, and it was his statement three months ago that pushed bitcoin to the “altar”.
In January, Musk changed his Twitter profile to “Bitcoin” and on that day, Bitcoin jumped 18%.
In February, Tesla announced that it had spent $1.5 billion on bitcoin, and within an hour of the announcement, bitcoin had risen 13%.
In March, Tesla announced that it would accept bitcoin as a payment method, and the price of bitcoin went up that day.
But no one expected the bitcoin “believer” to turn his gun and sing the praises of bitcoin just two months later.
On May 13, Musk first announced that he was suspending Tesla’s previous decision to accept bitcoin as a payment method. Three days later, Musk hinted that Tesla was selling all of its bitcoin holdings. This news, in turn, sent bitcoin plummeting 10%.
Two tweets from one man directly wiped out all of bitcoin’s gains since February of this year. Musk’s actions have put the demand for better regulation of bitcoin as soon as possible back on the table. But this is an issue that has been discussed since the advent of Bitcoin. Yet, for so many years, people seem to keep repeating the same mistakes.
Bitcoin’s history has seen four rounds of “upswings and downswings,” with the reasons for the upswings varying, but one of the key words for the downswings was regulation.
On June 1, 2011, the U.S. news site “Gork” published an in-depth report detailing how bitcoin was used to buy illegal drugs on the dark web. Within a week of the report, the price of bitcoin went from $10 to $32.
Searching for and researching bitcoin was not only for those involved in the gray economy, but it also caught the attention of U.S. regulators. Subsequently, the U.S. Treasury Department announced that it was going to regulate entities that provide money transfer or brokerage services for bitcoin.
As soon as the news came out, people started selling off the bitcoins they had. The bitcoin market was very small at the time, and such a large sell-off directly triggered an “avalanche” of bitcoin prices – from $32 to $2 in the second half of 2011.
In April 2013, December 2013, and the end of 2016, bitcoin fell by 80%, 87%, and 81% respectively.
There has been no shortage of regulatory words, but instead of being regulated and restrained, the bitcoin market has expanded even more recklessly. Yang Shuiqing of the Economic Research Office of the Institute of American Studies at the Chinese Academy of Social Sciences told Lord Tan.
This year, the bitcoin market has increased the launch of open-end fund products. The U.S. is considering adopting a bitcoin fund, and once it is issued, more ordinary people will be able to hold bitcoin.
Bitcoin is geared toward more and more investors, and regulation, by necessity, is on the horizon. But the important thing is that there has been talk of regulation, but the market volatility and chaos is still more dramatic than ever. Who is responsible for this problem?
The north and south
After this round of plunges, the United States came out to take a stand in a number of sectors.
On May 20, the day of the Bitcoin crash, Gary Janssler, chairman of the U.S. Securities and Exchange Commission, was the first to come out and take a stand to strengthen the regulation of digital asset trading platforms; then, Federal Reserve Chairman Jerome Powell slammed the risks digital assets pose to U.S. financial stability, synchronizing the pressure on virtual currencies ……
But these statements, more like verbal shouting, the only one to take actual action, is the IRS.
On the same day, the U.S. Treasury Department proposed tightening tax regulation efforts on virtual currencies, requiring transactions of $10,000 or more to be reported to the IRS.
Can taxation, solve bitcoin’s regulatory problems? Tan searched the department’s official website and found that back in 2014, when the entire virtual currency market value was only $6 billion, or one 160th of the current market value, the IRS issued a guidance document that clearly stated that bitcoin should be considered “property” and thus began the road to taxation.
However, only 802 taxpayers reported their bitcoin earnings to the IRS in 2015, which is far fewer than the actual number. The IRS decided to take enforcement action and, in addition, to make an example of them.
In 2016, the IRS issued an anonymous subpoena to Bitcoin Base, the largest virtual currency exchange in the U.S. This subpoena is a powerful weapon given to the IRS by the judiciary, through which the IRS is able to investigate information about a certain class of taxpayers without having to specify specifics.
The IRS has been sending “John Doe” anonymous subpoenas to virtual currency exchanges to find information about taxpayers’ tax obligations.
The subpoenas require Bitcoin Base to disclose to the IRS the complete transaction history of more than 1 million U.S. users of the exchange between Dec. 31, 2013 and Dec. 31, 2015. The exchange refused, citing the need to protect the privacy of its users.
After more than a year of tussling, it ended with the IRS winning the case. Only, the tug-of-war has continued, and after the IRS got hold of the user information and account transaction information of the Bitcoin base, there were still people who were not conscious enough to declare their income tax correctly, and the IRS could only write letters of warning, sending out more than 10,000 letters.
In the past two years, tax collection has become almost the most common means of regulating bitcoin in the U.S. In April and May of this year, the IRS won two more lawsuits against bitcoin taxation in Boston and San Francisco, respectively.
It’s been a busy round, collecting more and more taxes, but does that, in turn, mean tightening? On the contrary, many people see this move as a “confirmation of bitcoin’s identity”.
Roger Fuehrer, one of the early promoters of Bitcoin, said at the beginning of the tax.
If the IRS is trying to tax bitcoin, it means that they are accepting that bitcoin could be used by mainstream people and institutions.
That’s not industry boasting, the New York Times reported at the time, and made reference to this idea – that taxing could mean that virtual currencies are growing.
Ajayi Winzer, the associate dean of the Arizona State University College of Business interviewed in the article, likewise argued that a tax, puts bitcoin on track to become a true financial asset. This will move bitcoin further away from a fringe situation and into the mainstream financial system.
The data is telling, as the FBI has asked for 80 new employees and $21.6 million in expenses – cases of illegal applications of digital assets – to keep them busy.
So it seems that the IRS is focused on increasing a lump sum of tax revenue, as to how volatile the value of bitcoin is and whether it poses a financial risk, which, apparently, is not in the tax department’s consideration.
People Have Different Minds
In fact, the IRS’s parent department, the U.S. Treasury Department, has long been settled on the definition of bitcoin.
A year before the taxation began, in March 2013, the Financial Crimes Enforcement Network (FinCEN), a bureau under the U.S. Treasury Department, issued its Regulations for the Personal Management of Virtual Currency, which defined virtual currency.
It is important to understand that the Financial Crimes Enforcement Network has a unique mission. Its mission, to combat money laundering and promote national security, is to protect the financial system from illegal use by gathering financial intelligence. after the birth of bitcoin in 2009, this agency collected over 300 million pieces of intelligence to characterize bitcoin.
As a medium of exchange, Bitcoin is capable of functioning like a currency in certain environments, but does not possess all of the attributes of a currency. The report also mentions a sentence that Bitcoin can be converted into actual money under certain conditions.
This phrase is seen as a positive sign that Bitcoin is recognized as a legitimate currency.
▲ Senate Homeland Security and Governmental Affairs Committee Chairman Tom Carper Holds First Congressional Hearing on Emerging Technologies in Virtual Currencies
In the eyes of the Treasury Department, bitcoin is not an illegal currency as long as it follows the regulatory rules of traditional financial institutions.
But in the eyes of the IRS, bitcoin is not currency, it’s property. The same administrative system, with different agencies, treats the same thing with divergent views.
Amidst the hesitation, in February 2017, Bitcoin had its wildest period. The ICO (Initial Public Offering of Virtual Currency) policy at the time allowed, for the first time, virtual currency founders to sell their new products directly to the market. In the first half of the year alone, ICO funding in the U.S. totaled more than $1 billion, 10 times the amount raised in all of 2016.
The industry’s boom also drove up the price of bitcoin, which rose 160% in the first half of 2017.
The price of Bitcoin has been on a “roller coaster” from record highs to sharp declines.
In July of that year, the U.S. Securities and Exchange Commission issued regulatory guidance for ICOs. The Commission said that digital assets should be classified as securities. This meant that trading in bitcoin would have to be regulated by the SEC. But at the time, none of the major virtual currency exchanges were registered.
Soon, these exchanges let this guidance, become a scrap of paper. The story of a lawyer named Nick Morgan is telling.
He worked as a lawyer in the SEC’s enforcement division, and at the time, he was a strong supporter of classifying all digital tokens as securities – investors buy these tokens with the expectation that they will appreciate in value. Later, he went to a law firm called P&H, and at that time, his viewpoint became one of hope that the SEC would remain tolerant enough of these tokens.
The reason was simple: P&C had just taken on a job advising a virtual currency platform on equity financing.
Different companies have different views and choices about bitcoin for their own particular considerations, and so do regulators, for that matter.
At a time when the U.S. Securities and Exchange Commission is stepping up its regulation of bitcoin, even publishing a website called “HoweyCoins.com” to explain to potential investors in initial token offerings which virtual currency investment schemes are potentially fraudulent, Federal Reserve Chairman Jerome Powell spoke at a “Decoding Virtual Currencies Conference”, made it clear that
Regulating virtual currencies does not fall under the jurisdiction of the Federal Reserve’s responsibilities.
Yang Shuiqing of the Economic Research Office of the Institute of American Studies at the Chinese Academy of Social Sciences has also been following Powell’s attitude toward virtual currencies.
According to her analysis, the Federal Reserve is currently accelerating the launch of digital dollars. In the launch path, the “digital dollar project” is one of the options. The program may choose the most mature crypto-digital assets as digital dollar “tokens” to promote the promotion of digital dollar and strengthen the reserve position of the dollar.
Each institution has its own agenda. They all seem to be in charge, but leave gaps in regulation.
In May, U.S. Treasury Secretary Janet Yellen admitted in a speech at the Wall Street Journal CEO Council Summit that the U.S. does not have a framework to properly regulate virtual currencies .
There is also a history as to why it was the Treasury Secretary who made this statement.
In the wake of the 2008 financial crisis, eight federal financial regulators came together to form an interagency body, the Financial Stability Oversight Council, whose goal was to improve coordination among agencies and address the riskiness of U.S. financial problems. The Secretary of the Treasury is the chair of this agency.
In fact, since the beginning of 2018, this committee has dedicated a working group on virtual currencies, which involves, among others, none other than the Federal Reserve, the Treasury Department and the SEC. The original intent of the working group was to coordinate multi-sector action to strengthen regulation of bitcoin.
But the jurisdictional overlap and friction between these agencies has not gone away, and like mentioned above, the complexity and evolution of virtual currencies has led to different interpretations by various regulators.
The SEC views digital assets as securities, the CFTC calls bitcoin a commodity, the Treasury Department, views bitcoin from a monetary perspective, and the IRS, a division of the Treasury Department, again views it as property for tax purposes.
In the opinion of Liu Dian of the Chongyang Institute of Finance at Renmin University of China.
To this day, bitcoin still does not have a clear trading rule and a mature regulatory system, like financial derivatives or futures products.
Trying to find a consensus, but in reality, there doesn’t seem to be one either. It seems to be all about regulation, but bitcoin is, well, getting riskier.
Last week, a quote from a Wall Street Journal story on Bitcoin hit a sore spot with the virtual currency working group.
When Musk speaks, bitcoin investors have to listen sideways.
When one person’s words can easily stir up a trillion-dollar market, the regulator’s call to “reduce risk” will undoubtedly become an empty phrase, and what’s even more frightening is that no one will believe in the “crying wolf” until the day the bubble shatters, along with irreparable losses will come a crisis of confidence in the regulator.
Today, bitcoin is like a more and more “crazy” fast car, sitting at the head of the control is a capitalist like Musk, sitting on this fast train, is an ordinary people.
They are left to their own devices, not knowing whether their next destination will be a mountain or a valley, or whether they will be derailed and fall into the abyss.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/why-doesnt-anyone-care-about-musk/
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