It must be nice to create a false narrative on a whim. This is exactly what the Department of Treasury (IRS) has done with cryptocurrency. In all of this, one thing is clear – the IRS misunderstands cryptocurrency. It is a sad situation really – as crypto could change the underdeveloped world for the better, giving financial access and identity to the unbanked of the world. If the IRS has its way however, that poor farmer in Africa will remain just that – unbanked and foreclosed from access to financial identity, reasonable loans, and financial equality, something crypto gives the poor farmer. Instead, the IRS will continue its crusade against crypto, unchecked and without basis in fact. Piece by piece, misguided policy after another, it seeks to systematically tear it down – no matter what inconsistency or falsity it must tell.
Potential Treasury Secretary Janet Yellen remarked in January 2021 that cryptocurrency was a main culprit in illegal activities and financing terrorist activities. She said, in part, “I think many [cryptocurrencies] are used, at least in transactions sense, mainly for illicit financing and I think we really need to examine ways in which we can curtail their use and make sure that anti-money laundering doesn’t occur through those channels.” She called crypto “a particular concern” in terrorist financing.
Yet, her allegations of illicit behavior are unsupported by research. And narratives put forth by potential powerful government officials should operate in fact, not conjecture.
Recent research conducted by 33-year CIA veteran, former CIA Deputy Director Michael Morell, debunked both Yellen’s and the IRS’s claims. Yet there was far little fanfare for his research efforts. Morell’s comprehensive analysis produced results that he did not expect and the Department of Treasury, to date, apparently ignores. He found that the rate of illicit transactions in the crypto space is less than 1%, as compared to illicit activity in traditional fiat models – which ranges between 2-4% of global GDP. The differences are dramatic, like night and day. Cryptocurrency is used for illegal purposes far less than that of its brethren, fiat currency. Additionally, Morell found that the permanency of the Blockchain and its record of transactions produced a mechanism that’s highly effective for crime fighting and intelligence gathering.
Additionally, the Department of Treasury recently announced that all crypto transactions in excess of $10,000 would be reportable to the IRS, stating, “Cryptocurrency poses a significant detection problem by facilitating illegal activity broadly including tax evasion.” The illegality claim has already been debunked. And developing forensics allows crypto tracking on the Blockchain easier each year as methods continue to advance. The IRS also claims that cryptocurrency shares close parallels to cash, which similarly requires reporting of transactions in excess of $10,000. However, it is the IRS that characterizes cryptocurrency as “property” for tax purposes, not true currency – stating in its own guidance (the Internal Revenue Manual) that cryptocurrency “does not have the attributes as real currency”. They are changing their position midstream only if it benefits them. On the one hand, the IRS says crypto is “property” when it benefits tax collection, then says crypto parallels cash when it favors mandatory reporting. It is self-interest at its worst.
We fear what we do not understand. The Department of Treasury is currently working from a perspective of misunderstanding and misinformation; and then it dangerously allows that to drive public policy and a public narrative. We can only hope they too see the real utility cryptocurrency offers all of us – especially the less fortunate. We are perilously close to destroying something as revolutionary as the creation of the internet.