Game of Thrones: How Bitcoin Institutionalization Reshapes its Future

Author: Will Jager, Bitcoin Magazine; Compilation: Baishui, Golden Finance

During this election cycle, cryptocurrency companies have seen a sharp increase in political spending, and the industry is expected to impact U.S. politics. At present, several states have begun to explore the establishment of strategic Bitcoin reserves. As Bitcoin becomes more institutionalized, the state Treasury adoption of Bitcoin is seen as a victory for the cryptocurrency industry.

However, this trend has raised concerns about future rights of Bitcoin holders, as more government oversight and institutional participation may transform Bitcoin from a decentralized, peer-to-peer currency in the crypto- punk dream to another Financial assets.

During the 2024 election cycle, cryptocurrency companies have spent more than $119 million to influence the federal election, with nearly half of corporate political donations this year coming from the cryptocurrency industry. The funds mainly flow to Fairshake, the nonpartisan super political action committee, which supports candidates for cryptocurrency and opposes cryptocurrency skeptics. Cryptocurrency companies are now the largest corporate political spenders, even surpassing Koch Industries, which has made a huge contribution but are still far behind by comparison. Since the 2010 Citizens Federation ruling, cryptocurrency companies have spent $129 million, becoming the second largest corporate election spender after fossil fuel companies. This unprecedented level of spending reflects the industry’s efforts to promote regulations that benefit itself.

With the election over, states are expected to adopt more crypto-friendly policies, including allowing public pension funds and treasury investment in Bitcoin. Pension funds in some states, including Wisconsin and Michigan, have added Bitcoin ETFs to their portfolios. In November, Rep. Mike Cabell introduced the Pennsylvania Bitcoin Strategic Reserves Act, proposing that the state Treasury Secretary allocate 10% of Pennsylvania’s general funds, emergency funds and state investment funds to Bitcoin. In December, Texas Rep. Giovanni Capriglione introduced a bill that would store Bitcoin strategic reserves in cold wallets for at least five years; Ohio Rep. Derek Merrin introduced a bill that would require it to be in the state Treasury Department Establish a Bitcoin fund and grant the state finance minister discretion to purchase Bitcoin.

Meanwhile, some U.S. states are leading the way in cryptocurrency and blockchain regulation. Arizona has considered legislation to define Bitcoin as fiat currency and allows state government agencies to accept cryptocurrency payments. Oklahoma has enacted laws that confirm self-custody rights and digital asset mining rights in cryptocurrencies. The Pennsylvania House passed a bill that ensures self-custody of digital assets and the right to conduct cryptocurrency transactions, and Louisiana has now enacted regulations on node operations and household digital asset mining. Recently, 18 U.S. states also filed lawsuits against the U.S. Securities and Exchange Commission (SEC) seeking to cease their enforcement actions on cryptocurrency regulation. States believe that the SEC 's attempt to regulate digital assets without explicit approval from Congress is an act beyond its authority. They believe that this regulation should belong to the states. It is not clear whether the court will support this legal argument.

Meanwhile, at the federal level, regulation remains severely lacking in transparency, and Bitcoin is classified as a commodity rather than a fiat currency, further adding to the complexity of the regulatory framework. This year, the CFTC and SEC have strengthened enforcement actions against cryptocurrency companies that continue to adopt aggressive regulatory approaches. Recent legal lawsuits against Tornado Cash and Samourai Wallet show federal concerns about digital assets such as peer-to-peer transactions and “non-custodial” wallets that bypass traditional financial regulation, which gives AML/CFT (anti-money laundering/fighting terrorist financing) enforcement This presents challenges, especially when combined with anonymous enhancement tools such as coin mixers. While some states are supportive of Bitcoin, most states do not have policies that simply apply existing remittance laws to virtual currencies, requiring businesses that process cryptocurrencies to obtain remittance licenses. Without clear federal regulations, Bitcoin and cryptocurrency companies that want to serve the U.S. market must comply with different laws in all 50 states, and all but the most well-funded businesses will be turned away.

State-level investment marks a significant shift in Bitcoin from its original appearance as a substitute for the traditional financial system. Governments and regulators have expressed concerns about money laundering, tax evasion and the use of crime. Bitcoin holders cheer for the rise of national and corporate strategic Bitcoin reserves, but the adoption of the treasury does not necessarily lead to greater rights for Bitcoin holders. Just because the government holds Bitcoin, it doesn't mean they will suddenly agree to other people holding Bitcoin or decide to give up the power of fiat currency printers. If political priorities follow funding, the main goal of the cryptocurrency industry this year appears to be affecting national pension funds and building strategic bitcoin reserves, rather than writing self- custody or greater privacy into the law.

The push of strategic reserves marked the obvious transformation of Bitcoin from anti-establishment (a peer-to-peer currency without intermediaries) to a pure fiscal asset. The currency does not require a third party, you can directly exchange the goods and services you want with the currency. On the other hand, assets usually require third parties. In order to obtain goods or services, you must sell assets in exchange for currency, borrow them on the assets as collateral, or lend them out to earn profits. Tax professionals are required to report gains and losses, accountants track assets and their derivatives, lawyers draft contracts, police and regulators execute contracts, banks issue, hold and control currency, and as always politicians make laws that determine winners and losers and Regulations.

As a fiscal asset, Bitcoin does not pose a threat to the establishment. It will only strengthen the existing system and reward Bitcoin holders with price increases. As a treasury asset, Bitcoin is no different from gold, pork belly or mortgage-backed securities; it is just another commodity that is endlessly packaged, derived and traded. On the other hand, Bitcoin, as a free currency that can be held privately and traded without permission, challenges the status quo and can become a powerful tool for achieving financial equality. It empowers individuals to override individuals, level the playing field for those who are excluded from the current financial system, protects people from inflation, and actually allows market forces to determine winners and losers . Store digital gold in a financially regulated secure vault will address federal government concerns about Bitcoin, which will both legalize Bitcoin and encourage institutions to adopt it, but if Bitcoin continues to go this path, it keeps rising. Prices may leave people unable to see what they will lose in the process…