The US Senate has just passed President Biden's infrastructure bill, designed to get $1 trillion invested in America's crumbling physical infrastructure. News reports have focused on the bill's bipartisan support from both Republicans and Democrats, which is a welcome novelty. There's another twist to the bill - in its later stages, its passage was snarled up by something far removed from bridges, roads, and buildings: cryptocurrency.
It's not at all obvious why crypto fell into the infrastructure bill in the first place, but the reasons this caused a storm are all too obvious.
Hands off our toys
Days before the bill was due to come to a vote, crypto players mobilized supporters on social media to fight off what they saw as "unworkable" language (Jack Dorsey) and Government intervention. Supporters included Kiss bassist Gene Simmons, and Kristin Smith, of lobbying group the Blockchain Association described it as a "wakeup call," saying that "Washington is starting to see that crypto is more of a force than anybody ever anticipated.”
The details of the government bill are somewhat recondite. But, as Ezra Klein put it in the New York Times, it was not a bid to tax all crypto, or prevent billionaires and chancers from continuing to play risky games with the alleged currencies: "Congress isn’t proposing to directly regulate the crypto markets. It’s empowering the Treasury Department to do so. Tucked inside the trillion-dollar infrastructure bill is a provision reinforcing the Treasury Department’s authority to force tax compliance from the 'brokers' who are part of those transactions."
The howls of protest were based on the idea that this was some heavy-handed big Government bid to stop people "innovating" [or more honestly, from making money out of a planet-destroying energy-wasting slot machine]. But it was just a proposal to make it possible to tax profits at the normal rates, and it was added to the legislation by a Republican, Senator Rob Portman.
Those who have the most money are best placed to avoid taxes, because their sources of income are "opaque" says Klein: "And no market is more opaque right now than the crypto markets."
Those at the top also have the means to rally an army of semi-informed people to lobby on their behalf, using the social media manipulation tools at their disposal: the lobbying storm was "a bizarre overreaction to a modest provision that would be followed by a multiyear rule-making process, where the crypto industry would have plenty of say," says Klein.
Senators produced a compromise deal which was less broad in its language, but it failed for "inane" procedural reasons. One Alabama Senator could block it because he didn't get $50 billion in extra defense spending in the bill.
It all sounds like typical politicking. But let's remember the big picture.
Blockchain is a failed protocol. It is designed to work on a "trustless" basis by duplicating the blockchain everywhere. It's deliberately not scalable: it's designed to always limit the number of tokens produced, no matter how many GPUs the enthusiasts throw at it.
For all the talk about decentralized finance ("DeFi"), or cryptocurrencies which magically connect everyone to 5G networks as a side-effect of their simple existence (Andreesen-backed Helium "people's network") There simply are not any real blockchain applications that are not vapor, and which are being rolled out in the real world.
Even if a blockchain application existed which could provide free networking or cure cancer or whatever, it would be a Bad Thing, for the simple reason of the infinitely increasing resources it would require.
Switch it all off
It's a sad fact that the planet must stop increasing its use of electricity. Even with increasing amounts of renewables entering the grid, there's not enough to balance the increasing demands that will be put on the grid when we add a massive burden: virtually the entirety of our heating and transport is currently provided by fossil fuel. We have to shift that onto the electric grid, and that already requires a faster increase in our renewables energy production (and the storage systems required to manage and dispatch that energy) than we can manage.
We don't have that energy to waste.
If we take the climate emergency seriously, governments should certainly intervene in crypto. They should switch the whole damn thing off