Power Play: The Impact Of Bitcoin's Institutionalization On Its Future Landscape

(MENAFN- crypto Breaking)

During this election cycle, Political contributions from Cryptocurrency enterprises have surged dramatically, allowing the sector to play a significant role in U.S. politics. A number of states have started considering the establishment of strategic bitcoin reserves. As Bitcoin gains more acceptance among institutional investors, its integration into state treasury portfolios is regarded as a positive development for the cryptocurrency community.

Yet, this trend also brings to light concerns regarding the future rights of Bitcoin holders. As government regulations and institutional participation increase, there is a risk that Bitcoin could evolve from the vision of decentralized, peer-to-peer currency championed by cypherpunks into a mere financial instrument.

In the lead-up to the 2024 elections, cryptocurrency firms have invested over $119 million in federal elections, with nearly 50% of all corporate political contributions this year having originated from the crypto sector. These financial resources have predominantly been funneled into a non-partisan super PAC known as Fairshake, which advocates for pro-crypto candidates and stands against skeptics. Currently, crypto companies stand as the largest corporate political contributors, even outpacing Koch Industries, which, while significant, falls short by comparison. Since the Supreme Court's 2010 Citizens United decision, these corporations have contributed a total of $129 million, making them the second-largest corporate contributors after fossil fuel companies. This exceptional spending level underscores the industry's ambition to influence regulatory frameworks to its advantage.

With the elections behind us, there is an expected movement toward states adopting more favorable policies regarding cryptocurrency. This includes permitting public pension funds and state treasuries to hold Bitcoin . Certain state pension funds, like those in Wisconsin and Michigan, have already integrated Bitcoin ETFs into their investment strategies. In November, Representative Mike Cabell put forward Pennsylvania's Bitcoin Strategic Reserve Act , which proposes that the state treasurer invest up to 10% of Pennsylvania's General Fund, Emergency Fund, and State Investment Fund in Bitcoin . Following this initiative, Texas Representative Giovanni Capriglione introduced legislation for a strategic Bitcoin reserve to be maintained in a cold wallet for five years, while Ohio Representative Derek Merrin has proposed the creation of a Bitcoin fund within the state treasury, granting the state treasurer the authority to purchase Bitcoin at their discretion.

Additionally, several U.S. states have taken initiatives in regulating cryptocurrency and blockchain. Arizona is examining legislation to recognize Bitcoin as legal tender and enable state agencies to accept cryptocurrency payments. Oklahoma has enacted regulations affirming rights for self-custody of cryptocurrencies and digital asset mining . Pennsylvania's legislature has also approved a bill that grants rights for individuals to self-custody digital assets and makes cryptocurrency transactions more secure. Meanwhile, Louisiana has established provisions to support node operation and home digital asset mining . Recently, eighteen U.S. states have launched a lawsuit against the Securities and Exchange Commission (SEC), challenging its regulatory actions on cryptocurrencies. The states assert that the SEC is overreaching by attempting to regulate digital assets without clear approval from Congress, arguing that such regulatory jurisdiction should reside with the states. It remains uncertain how the courts will decide on this matter.

At the federal level, regulatory guidance continues to be insufficient, and Bitcoin 's classification as a commodity compounds the complexities of the regulatory landscape. This year, the CFTC and SEC have intensified their enforcement actions against cryptocurrency companies, maintaining a robust regulatory stance . Recent legal actions against Tornado Cash and Samourai Wallet highlight the federal government's concerns regarding digital assets, particularly with respect to peer-to-peer transactions and“unhosted” wallets that evade traditional financial oversight, complicating efforts related to AML/CFT (Anti-Money Laundering / Countering the Financing of Terrorism) enforcement, especially when paired with anonymity-enhancing tools such as mixers. While a handful of states have adopted a favorable stance toward Bitcoin , many others lack clear policies and simply apply pre-existing money transmission laws to virtual currencies, necessitating that businesses engaged with cryptocurrencies secure money transmitter licenses. In the absence of clear federal guidelines, Bitcoin and cryptocurrency firms aiming to enter the U.S. market must navigate a convoluted array of laws across all fifty states, often sidelining all but the most financially robust enterprises.

State-level investment signifies a pivotal transformation from Bitcoin 's origins, which began as an alternative to the conventional financial system. Governments and regulators have raised concerns about issues like money laundering, tax evasion, and illicit activities. While supporters of Bitcoin are optimistic about the rise of state and corporate strategic Bitcoin reserves, the adoption by treasuries does not automatically translate into enhanced rights for Bitcoin holders. Just because governments hold Bitcoin does not imply that they will show leniency toward individual ownership or relinquish their control over fiat currency production. If political incentives align with financial contributions, the primary objective of the cryptocurrency sector this year appears to be influencing state pension funds and promoting strategic Bitcoin reserves, rather than securing legal rights for self-custody or enhanced privacy.

The movement toward strategic reserves illustrates a definite shift away from Bitcoin 's anti-establishment roots as a peer-to-peer currency free from intermediaries, steering it toward being primarily a treasury asset. Currencies inherently do not require intermediaries, enabling direct exchanges for goods and services. In contrast, assets typically necessitate third-party involvement; to acquire goods or services, one must sell the asset for currency, secure a loan against it, or lend it out for returns. This situation calls for tax specialists to document gains and losses, accountants to manage the asset and its derivatives, attorneys to draft agreements, as well as law enforcement and regulatory agencies to ensure compliance with contracts. Politicians continuously shape the legal and regulatory frameworks that determine the beneficiaries of this system.

When viewed as a treasury asset, Bitcoin poses no threat to the established order. It merely reinforces the status quo and provides Bitcoin holders with a potential increase in the value of their assets. As a treasury asset, Bitcoin parallels commodities like gold, pork bellies, or mortgage-backed securities-simply another asset subject to relentless packaging, derivation, and trading. Conversely, Bitcoin , regarded as money that fosters freedom and can be privately held and transacted without authorization, challenges existing power structures and serves as a potent instrument for financial equity. It empowers individuals in contrast to groups, levels the playing field for those excluded from the current financial landscape, guards against inflationary theft, and indeed allows market dynamics to influence outcomes. Although securing Bitcoin in regulated vaults with financial oversight could address the federal government's apprehensions about the currency-thus legitimizing it and fostering institutional adoption-the rising value could obscure the potential losses that could accompany this trajectory if Bitcoin continues down this path...

This article is a guest contribution by Will Jager. The views expressed here are entirely his own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Crypto assets are highly volatile. Your capital is at risk.
Don't invest unless you're prepared to lose all the money you invest.
This is a high-risk investment, and you should not expect to be protected if something goes wrong.

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