Even with the advancement of Strike and the clever tool it has built, the “what about cap gains?” replies still come fast and furious on Twitter anytime the topic of circular economy is discussed.
The persistent capital gains tax problem and the IRS’s treatment of bitcoin as property instead of currency is a major hurdle between us and the Bitcoin standard.
The more I thought about the capital gains tax’s chilling factor on the circular economy, it made me start to see an overlap between what I had been doing with bitcoin payments consulting and my new role talking about Choice App.
Starting to see the overlap, I started to reinterview the Bitcoiners I knew who had been stacking bitcoin in their Roth IRAs and asking them more about it.
Certain self-directed IRAs come with what is called “checkbook control.” This means that you have a bank account and you have a checkbook and that outside of two to three prohibited transactions, you can literally invest the money in whatever you want and hold that investment and trade in and out of that investment, tax free.
Take this idea and now apply it to an IRA in which you set up an LLC or trust and then with that LLC or trust you purchase bitcoin and hold your own keys and have control over bitcoin in your own wallet. You now have bitcoin wallet control and, outside of those same two to three prohibited transactions, you’re now tax-shielded to use that bitcoin as money to make investments.
This is how the worlds collide. This is how you can begin to use bitcoin as your base currency now, in the present. and continue shifting yourself toward a personal Bitcoin standard.
Why Mining Bitcoin In An IRA Is Doubly Interesting
Among many, one of the things that’s most interesting to me about Bitcoin mining is that the revenue is denominated in sats. There are not many ways to get paid in sats available yet, but mining is one of them, and we know that getting paid in a currency is the number one way to start thinking in that currency.
When all of the mining infrastructure and hosting is wrapped in a tax-advantaged account, you can use bitcoin as the base currency on the income side as well as the expenses side with no penalties. The simple mindset shift on this will be enough to make this a good move for a lot of people. Seeing this type of budgeting in action will make your brain progress toward a personal Bitcoin standard.
Roth IRAs As Your Third Bitcoin Stack
Having bitcoin in a Roth IRA creates a guarantee that those sats can circulate as unencumbered currency in our lifetime. We have no idea what the future holds, but the landscape of Bitcoin apps and services is getting better every single day.
Imagine where BTCPay Server will be when a lot of us turn 59-and-a-half years old. Imagine, no matter what the political landscape throws at us, having a third stack to be able to use in the circular economy. (I have bitcoin from regular exchanges like Coinbase and Cash App as the way I started stacking bitcoin; and then I also stack bitcoin by earning it, mining it at home and from Bisq and ATMs; my Roth IRA stack is my third.)
My Roth IRA stack doesn’t replace anything that I’ve been doing, but it perfectly compliments it and it perfectly compliments the other ways that the Bitcoin standard is being pushed forward by showing that Bitcoin is taking ground in retirement accounts while also achieving circular economy goals.
There is a long, winding road filled with what I would consider “semi-advanced Bitcoin game theory” to get there, but I can honestly say I’ve never been more excited for the state of the Bitcoin circular economy. I can see clearly different stacks of bitcoin for different things and I can feel my budget and my family’s budget beginning to get denominated in sats.
This is a guest post by Brian Harrington. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
