Don't invest in cryptoassets unless you're prepared to lose all the money you invest. Cryptoassets are high-risk investments, and you are unlikely to be protected if something goes wrong.Take 2 mins to learn more

Thanks to our supporters

brand imagebrand image

Heads I win, tails I win

When America sneezes the whole world catches a cold. Even, it seems, Bitcoin. Many people believe that President Biden’s capital gains tax proposal caused Bitcoin’s fall in value below $50,000 for the first time in a few weeks. But travellers on Bitcoin’s road to hegemony…


Share to Facebook
Share to Twitter
Share to Linkedin

When America sneezes the whole world catches a cold. Even, it seems, Bitcoin.

Many people believe that President Biden’s capital gains tax proposal caused Bitcoin’s fall in value below $50,000 for the first time in a few weeks. But travellers on Bitcoin’s road to hegemony should remember the words emblazoned on the Hitchhiker’s Guide to the Galaxy: Don’t Panic. Wherever the Biden administration decides to set taxes, Bitcoin will emerge stronger than before – although the same cannot be said for the US economy or its taxpayers.

It’s true that the Biden administrations’ plans to double the US long-term capital gains tax rate to almost 40% might look like a direct attack on Bitcoin, especially when so many institutions and individuals are using Bitcoin to protect their wealth from dollar depreciation. But the panic is unfounded for several reasons.

First, these are just proposals: the bill has to pass through Congress, and almost every president sees their legislative wings clipped through the rounds of bipartisan horse trading – even when they hold a majority in both houses. Secondly, of the two main ways this could play out, both are good for Bitcoin. Here’s how.

The likeliest (and most liberal) scenario is that Biden’s tax proposal will be whittled down to a less draconian figure that doesn’t penalise savers, institutions or corporations that have made substantial profits from their Bitcoin or other investments. Let’s remember that over half of US citizens hold shares, along with an unknown (and rapidly rising) number of crypto holders, so
there is only so much stomach for a precipitous tax hike. So it seems probable that capital gains will stay at a reasonably modest level, and that would have huge implications for Bitcoin.

How come? By taxing holdings at a sustainable rate, the US government would be tacitly admitting to at least one of Bitcoin’s societal benefits: the ability to generate tax income for the government of, by and for the people. Sure, it wouldn’t be an explicit endorsement – not that Bitcoin needs one – but it makes it that much harder to move against Bitcoin in the future. As they say in the States, “No taxation without representation”. Well, when it’s (sensibly) taxed, Bitcoin will have such a strong toehold in the US financial and political system, it will be incredibly hard to dislodge.

But let’s say the bill goes through largely unchanged, and US investors face a swingeing spike in capital gains tax. Under this scenario Bitcoin still prospers, albeit in a more circuitous way. Following the logic of the Laffer Curve, too much tax will simply cause capital flight as investors move their wealth to other jurisdictions with less punitive policies. And not just the institutions and high-net-worthers, but all the others who are inevitably caught up when a dragnet is cast too wide and too indiscriminately.

And wherever these investors fly, it’ll be to territories that are tolerant of Bitcoin, accelerating the shift in gravity away from the US and towards other nations – including, as I’ve argued before, the global South.

As I say, the second scenario is less likely, though it’s perfectly plausible. But how much better would it be for the US economy, its institutions, corporates and individual mom-and-pop investors if the Biden administration seized the opportunity to enable the public to profit from people’s private Bitcoin holdings in a sustainable way?

For Bitcoin, it’s a case of “heads I win, tails I win”. But there’s only one winning choice for US taxpayers. Setting capital gains at a sensible rate will enable the government to raise revenue and, to some extent, resist the urge to print more dollars. Bitcoin will triumph either way, but let’s cross our fingers and hope the US chooses the path that makes everyone a winner.

Obi Nwosu
Obi Nwosu
Obi Nwosu is one of Britain’s longest-standing Bitcoin experts. As CEO and co-founder of, the UK's oldest Bitcoin exchange, he has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people.

You may also like


Cybersecurity in crypto: Attack on DeFi Exchanges

What exactly happened in the biggest hack in DeFi? Can it happen again? As the ecosystem grows, its market has also experienced a huge pump with a current market capitalization of over $121 billion. However, this growth has also shined a light on cybersecurity issues….

Read more

Decentralisation – coming to a screen near you

You should never laugh at people from the past, unless you’re comfortable with future generations mocking you. But it’s still funny to think that in the early days of radio, families used to gather in front of their giant, sideboard-sized sets and stare at them…

Read more

Crypto-backed property purchases are on the rise among first-time buyers

Traditional businesses are partnering with blockchain intelligence firms to facilitate house purchases for a new generation of young crypto entrepreneurs. In December 2017 two properties were purchased in the UK with Bitcoin.  The purchases sparked excitement that Bitcoin-backed property transactions would become commonplace, reflecting the…

Read more

Onchain Reaction with Tom Salter – Who Has Been Driving Bitcoin’s August Price Rally?

Tom joins to review Bitcoin’s price rally, along with the aftermath of Chinas’s crackdown in July and the explaination behind the market’s current bullish picture.

Read more


Subscribe to us

Understanding your dog for dummies cheatsheet

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.