Report from the “Capital of Capital” Bitcoin 2021
Written by GDF, Head of Americas Regulatory Affairs, Carl Schonander
No question about it, the June 4–5, 2021 Miami Bitcoin Conference was in some ways an over-the-top affair. It was raucous at times. How could it not be with the bar opening at 9:00 AM!? But there were some serious underlying themes and discussions as well. They include, but are not limited to, Miami’s bid to become the “Capital of Capital;” the constant references to inflation as a reason to hold Bitcoin; doubling down on the decentralization aspect of Bitcoin and the relationship with DeFi; the importance of the energy discussion surrounding Bitcoin; and, especially inside conversations, the importance of getting the securities vs. commodities issue right as well as the importance of international regulatory cooperation, two issues GDF will continue to contribute to addressing.
Move over LA (and maybe NYC and London too) for Miami
The Bitcoin conference was supposed to be held in Los Angeles. This year though it was held in Miami because of Florida’s more permissive Covid-19 restrictions. Miami government leaders took full advantage. Miami Mayor Francis X. Suarez kicked things off on the first day, underlining that for Miami to be the “Capital of Capital” meant to be the “Capital of Bitcoin.” He talked about Miami accepting tax and fee payments in crypto, allowing employees to collect salaries in crypto and the city perhaps holding some cryptocurrency (these are proposals at this time). Miami Dade Commissioner Danielle Cohen Higgins (District 8) opened things up on the second day. She noted that the cryptocurrency exchange FTX has purchased the naming rights to the Miami Heat’s arena, further cementing Miami’s welcome to crypto. Who knows what will happen? But many Californians are already moving to Texas and Florida. New Yorkers could also be tempted by lower taxes and better weather.
The Spectre of Inflation
Probably half of the speakers mentioned looming U.S. inflation as a reason to hold Bitcoin. One does not have to necessarily buy into the more heated rhetoric about dollar “debasement,” the “theft” and “corruption” of the conventional financial system, or the allegedly nefarious machinations of central banks to recognize that there is a serious debate even within the Democratic Party about what monetary and fiscal expansion, coupled with unspent savings and supply chain problems might mean for inflation. Treasury Secretary Janet Yellen estimates 2021 U.S. inflation to hover around 3%. Given that institutional investment companies are increasingly finding ways to invest in crypto for their clients, sometimes as an inflation hedge, at least in part, it was understandable that the inflation narrative was such a recurring theme for speakers.
Doubling Down on Decentralization
One of the most highly anticipated sessions was Alex Gladstein’s interview with Jack Dorsey. Dorsey focused a lot on the open source and decentralized elements of Bitcoin. He emphasized the human rights dimension to more inclusive finance and said banks are not needed anymore. Dorsey went further and said that Square was focused on making “Bitcoin the native currency for Internet.” Later in the conference, there was a session called “Bitcoin is DeFi. The speakers disagreed somewhat on just how decentralized Bitcoin is right now given that many holders work with intermediaries to access it. However, they all agreed that going forward, decentralized Bitcoin has to be the order of the day. Panelists were in strong agreement that DeFi companies must learn from Bitcoin and really preserve the decentralized aspects of their companies in order to prevent governments from stifling the main players in the industry.
Everybody Recognizes Energy is Important — But there is a But
One of the most interesting panels was called “Mining as a Public Company.” Frank Holmes set up the discussion by noting that large institutional investors could be looking to invest over a trillion dollars in crypto in the coming years. However, their ESG committees need to be assured regarding Bitcoin mining energy sustainability. What about creating “sustainable” Bitcoin assets, somehow separated from previously mined Bitcoin? Before the panelists had much time to respond, the crowd erupted in opposition. Obviously the audience felt strongly about preserving Bitcoin as one asset class. But Holmes made it clear that this is an issue that has to be solved if really large institutional investor Bitcoin positions are going to materialize.
Side Conversations Reveal that Regulation Matters to the Industry
Casual observers could be forgiven for thinking that regulation does not matter to Bitcoiners and the digital assets industry in general. Yes, the 12,000 participants got to hear from local political crypto boosters, as well as already established congressional supporters. But no senior Biden Administration official or serving regulator spoke at the gathering. Nonetheless, it was clear from side conversations that many of the matters GDF works on such as the securities vs. commodities issue and international regulatory cooperation are of great interest to the community. Getting international regulation right is particularly important to companies engaged in cross-border Fintech services. What this suggests is that the GDF supported proposed “Eliminate Barriers to Digital Innovation Act” is important because it could spur more clarity and
certainty with respect to the securities vs. commodities question. And that bringing international regulators together, a regular GDF activity, will continue to be important.
