When most people describe Bitcoin to people who are unfamiliar with the technology, they’ll use words like blockchain, distributed ledger technology, mining and cryptocurrency. Not Larry Sharpe. He prefers to compare it to comic books and beanie babies.
According to Larry Sharpe, the Libertarian candidate for Governor of New York, trading in Bitcoin and other digital currencies should be no different than trading in comic books, or Beanie Babies. As he put it, if you were to trade your collectible Iron Man comic books for an Incredible Hulk #1 comic book, you would just make the trade. Whether that comic book is worth $1 or $50,000, there is no reason for anyone else to be involved. On the other hand, if you were to sell that comic book for a profit, then you might have to collect sales tax at that time. According to Sharpe, this is the model that should apply when you trade your Litecoin for Bitcoin. Until you cash out, there should be no reason to tax that transaction. Although it is intuitively reasonable to assume that trading different coins would qualify as a “like-kind property” exchange, which is not taxable, the rules are not yet clear. And, if regulators in New York State have their way, cryptocurrencies will continue to be regulated more, taxed more, and traded less.
New York State has led the war on cryptocurrency, by enacting BitLicense regulations in 2015. According to Sharpe, these regulations were based on fear, and resulted in numerous blockchain companies leaving the state of New York. Although states like Wyoming saw this as an opportunity to attract blockchain startups to their jurisdictions, Sharpe does not see this as the norm. According to Sharpe, history tells us that most states tend to follow New York’s lead. As he put it, “If it changes in New York, it can change everywhere else.”
Sharpe sees these regulations as a fear-based reaction to technology that most politicians know very little about. While it is assumed that such regulations are designed to protect people, the reality is that they serve as a barrier to entry for what Sharpe describes as “new money.” He believes that regulations are a monopoly on force that “old money” lobbies for, changing only when corporate lobbyists want them to change. He prefers “standards.” Unlike regulations, where a violation can land you in jail, standards are voluntary. A company may choose to follow insurance standards, industry standards, or local standards as recommended by a city or state. If you follow them, you get a stamp on your product. If you elect not to follow them, then you don’t get the stamp, but your company may still function. Rather than stifling growth through unreasonable regulations, competing standards drive innovation and change, resulting in better, safer products for consumers.
Currently, the US is behind much of the world when it comes to cryptocurrency and blockchain technology. Startups and other businesses are flocking to Singapore, Malta and other places where taxes and regulations are more friendly to this new technology. If elected Governor of New York, Larry Sharpe will eliminate BitLicense, and replace it with a set of standards. His hope is that other states would adopt the same philosophy and business would come back, not just to New York, but to the rest of the country. As governor of New York, he would opt for three basic ideas:
- If you’re a retailer and you want to transact in crypto, the greatest challenge is in collecting sales tax. Sharpe’s solution is for a merchant to add up their total crypto transactions, look up the average value on CME, and pay sales taxes to the state based on that amount.
- If you trade one crypto for another, then just like comic books, you would only pay taxes when you cash out for fiat.
- If you want to create a “crypto bank” where you offer loans and other financial services using digital currencies, then feel free to do so, as long as there is no “fractional reserve.” In this way, he believes we can show the world we can have a banking industry without having a central bank.
Larry Sharpe does not believe that his system is perfect, but he considers it a good start. Rather than scaring people away with dangerous and complicated terminology like “cryptocurrency” that conjures up imagery about terrorist financing and money laundering, based on media scare tactics, he prefers to get people to listen by first comparing Bitcoin to comic books and Beanie Babies. By eliminating unnecessary fear, he believes that people will be more open to this new model, and we can begin to do the hard work required to bring the US back to the forefront of this important industry. To find out more about his campaign, visit LarrySharpe.com.