This is an opinion editorial by Holly Young, Ph.D., an active builder in the Portuguese Bitcoin community.
Disclaimer: BTC Inc. is the parent company of the Bitcoin Conference.
It was a real pleasure to watch Katie Ananina and Jessica Hodlr take the stage at the Bitcoin Amsterdam conference (not the least because minutes earlier, a journalist from the Financial Times had just sputtered out her contempt for the lack of women present at the conference). They did a great job of articulating how states ought to be seeing their citizens, especially us Bitcoiners.
Jurisdictional arbitrage is a concept which is highly relevant to Bitcoin communities. Running the risk of being called arrogant, I would like to take a moment to detail why every country should not only want us, but incentivize us to come to them.
Sure, bitcoin is f*ck you money. It raises a one finger salute to The State in its most invasive, 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. In spite of what legacy media claims about Bitcoin (and by implication, Bitcoiners) we’re not all gun-toting psychopaths, terrorists or drug barons — in fact, from what I have seen, Bitcoiners are pretty solid folk.
In general, the Bitcoiners I have met have been socially engaged, family-oriented and community-minded. They are intelligent, pushing the forefront of technical, financial and social innovation. They are wealthy, curious and idealistic in the best possible sense — ready to commit to actually building a better world. They want to invest in the future and build businesses; in general, I would go so far as to wager that a Bitcoiner contributes more to his or her 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 countries.
“What jurisdiction could fail to want to welcome a community of this kind,” you may ask? As Katie and Jessica point out, jurisdictions should be positively competing to attract new citizens of this caliber.
As we all sadly know, not all jurisdictions see it this way. The United States has fired various warning shots at its Bitcoin citizens, including threatening to levy a tax on unrecognized capital gains. There are several examples of developing countries which definitely see the potential Bitcoin offers — including the darling of the Bitcoin community, El Salvador — but none have yet emerged as a forerunner. Even El Salvador’s best efforts seem to have become, at least temporarily, slightly bogged down by problems of adoption and implementation.
Europe has been dithering over Bitcoin. Recently, we saw it threaten to ban mining. As most of us are already well aware, banning mining in any one jurisdiction does not, in fact, kill Bitcoin as the lawmakers appear to believe — instead, it sends miners (and along with them energy, wealth and a flourishing community) flocking to more welcoming jurisdictions. We saw this on a large scale for the first time in 2017, when China banned Bitcoin mining — much to the benefit of the U.S., where much of the mining power migrated to. Mining bans and tax laws seem to be coupled in an unholy allegiance when it comes to a state’s attitude to Bitcoin — and the consequences for the said state. Ban mining and tax the sale of bitcoin and watch as other jurisdictions benefit from the flood of Bitcoin migrants.
The fact is, there is a large and growing Bitcoin population in Europe and we’re looking for a home.
Several European countries have shown their colors beyond all doubt in recent years. The Netherlands, for example, once upon a time the golden land of opportunity based on trade and sound commerce, decided that Bitcoin was a net negative, implementing rigorous regulations on Bitcoin companies and a 30% capital gains tax on bitcoin assets. Predictably enough, Dutch Bitcoiners and Bitcoin companies voted with their feet, leaving the Netherlands for jurisdictions with better legislation. Perhaps the Netherlands congratulates itself on this purging of Bitcoiners — anyone with half a functioning brain, however, can see that it in fact represents a brain drain deluxe, causing young innovators and those holding the money of the future to emigrate.
It’s clear that the traditional seats of financial power in Europe are less well-placed 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 sources of funds, seems too stuck in the traces of the legacy finance system to be a real contender for the role. Brexit may have freed the U.K. from the quagmire of EU legislation, and it may have the solid name of London as a financial hub, but with the shelf life of each political leader there currently less than that of a pot of yogurt and a plummeting national currency, it would be a foolhardy company indeed which would build its foundations there now.
Portugal has by no means been known as a financial hub but a previous article of mine has detailed its merits as fertile ground for founding Bitcoin communities. The comparative ease of its visa procedures and its policy of no capital gains tax on bitcoin has seen Bitcoiners of every nationality flocking here, and those of us who hold regular meetups have seen our numbers swelling very satisfyingly.
But a fork in the road lies ahead for Portugal. It’s one of the poorest of the EU cousins and has been heavily dependent upon EU subsidies for various aspects of its capacity building in recent years. The euro has brought in even more tourism, a sector which Portugal is very heavily dependent upon to swell its coffers. If the EU were to crack down in any broad sense on Bitcoin it would be a big ask for Portugal to stand up for its Bitcoin communities.
And then there is the tantalizingly ripe fruit of capital gains tax. Last week Portugal proposed a new law to impose capital gains tax on bitcoin, though in a nuanced form: bitcoin which has been held for more than a year is still tax free.
This could be interpreted in various ways. Of course, the cynical might say that this is the thin end of the wedge — the first bite at the juicy plum of Bitcoin savings of the Bitcoiners who have been drawn here, in what may well prove to be a classic bait-and-switch maneuver. Others will argue that this regime is rewarding HODLers for their HODLing: A tax regime, to be sure, but a lenient one.
Of course, if Portugal should choose to levy a capital gains tax on bitcoin which punishes those who have emigrated here for the currently welcoming taxes offered, the effect would be very simple. The national coffers would not swell with any such tax decisions. Instead, the nascent Bitcoin communities which are flourishing and taking root here would simply vanish, melt away, as we European Bitcoiners pack our bags once again and set out in search of the next Bitcoin haven.
It does seem that there is a golden opportunity for European countries at this point, one which Portugal is uniquely poised to seize, having been for the last few years the immigration destination of choice for both European and American Bitcoiners 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 arbitrage is seen from the perspective of the wealthy and innovative community which Bitcoiners form, countries should be queuing up to advertise their merits to us.
So, what’s 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. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.