In May 2021, I had just had a pretty intense 12 months helping move the OC Bitcoin Network from a monthly meeting to a weekly meeting. In addition to the Meetup work, in the same 12 months I independently advised over two dozen small businesses on how to start implementing Bitcoin payments and personally advised the BTCPay server in four brick and mortar restaurants as well as in several e-commerce restaurants installed company.
The whole of 2020 felt like a real grassroots war to me. It opened my eyes to the fact that the circular economy is at hand. It made me realize that bitcoin is not a thing that will happen in the future. Bitcoin is one thing that is happening right now.
When the opportunity arose to work at Choice App, a Bitcoin-based Individual Retirement Account (IRA) service, I was obviously excited because I enjoy talking about all kinds of Bitcoin products, and my wife was excited that we too coming back to dual income stacking after being in charge for a full year. But I have to be honest, there was a little voice in my head telling me I was selling out and going corporate which made me think about a lot of things. It made me think a lot about what our way of getting Bitcoin to circulate as a currency in our lives and it made me open up the tactics that I was focused on.
Bitcoin repairs retirement accounts. This is of course positive, but at first glance it can also encounter resistance and questions such as “Why do I need an IRA when I have Bitcoin?”.
I asked myself the same question. The concepts of IRAs and retirement accounts in general feel like a holdover from the old world. In young people or old people who lived through 2008 and read the Bitcoin Genesis block, the words do not leave a good taste.
The whole concept of a retirement account doesn’t make sense if Fiat is the base. Realizing this led me to stop contributing to one a long time ago and instead start stacking Bitcoin.
And I know from conversations with many other Bitcoiners that some had gone this route too, while others had taken the time to set up self-paced IRA accounts and began to blur the two worlds. I didn’t hate this idea, but I was having a hard time researching where this type of account fits into my bitcoin stacking plan.
Bitcoin retirement accounts, capital gains taxes and the connection of both worlds
To this day, it’s still hard to talk about onboarding businesses into the BTCPay server and using Bitcoin as money. It’s work you do for the love of the game, not your paycheck. It is work that you do for your children and grandchildren who will hopefully live in a world where the bitcoin circular economy has won and has become the standard.
Despite the advancement of Strike and the clever tool it has developed, the question “What about cap profit?” Responses are still quick and angry on Twitter when the circular economy is discussed.
The ongoing capital gains tax issue and the IRS’s treatment of Bitcoin as property rather than currency is a major hurdle between us and the Bitcoin standard.
The more I thought about the capital gains tax chilling factor on the circular economy, the more I saw an overlap between what I’d done with Bitcoin payments advice and my new role, speaking on Choice App.
When I saw the overlap, I started re-interviewing the bitcoiners I knew who had bitcoin stacked in their Roth IRAs and asking them more about it.
Certain self-directed IRAs have a so-called “checkbook control”. This means that you have a bank account and checkbook and that you can literally invest the money in anything you want outside of two to three prohibited transactions and hold that investment and trade on that investment tax free.
Take that idea and apply it now to an IRA where you set up an LLC or trust and then with that LLC or trust you buy bitcoin and hold your own keys and have control of bitcoin in your own wallet . You are now in control of the Bitcoin wallet and apart from these two or three prohibited transactions, you are now tax protected to use these Bitcoins as money for investments.
So the worlds collide. That way, now, in the present, you can use Bitcoin as your base currency. and keep moving towards a personal bitcoin standard.
Why mining Bitcoin in an IRA is doubly interesting
Among many, the most interesting thing about Bitcoin mining for me is that the income is given in sats. There aren’t many ways to get paid in sats yet, but mining is one of them, and we know that paying in a currency is the first way to think in that currency.
When all of the mining infrastructure and hosting are housed in a tax-privileged account, you can use Bitcoin as your base currency on both the income side and the expense side with no penalties. Simply changing your mindset will be enough to make this a good move for many people. When you see this type of budgeting in action, your brain will make progress towards a personal bitcoin standard.
Roth IRAs as the third bitcoin stack
Having Bitcoin in a Roth IRA creates a guarantee that these sats can circulate as unencumbered currency during our lifetimes. We have no idea what the future holds, but the landscape of Bitcoin apps and services is getting better every day.
Imagine where BTCPay Server will be when many of us turn 59-and-a-half years old. Imagine no matter what the political landscape throws at you, having a third stack to use in the circular economy. (I got bitcoin from regular exchanges like Coinbase and Cash App when I started stacking bitcoin; and then I also stack bitcoin by making 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 I’ve done before, but it compliments it perfectly and perfectly complements the other ways the Bitcoin standard is being advanced by showing that Bitcoin is gaining ground in retirement accounts while being circularly economic Goals.
It’s a long, winding road filled with what I would call “semi-advanced bitcoin game theory” to get there, but I can honestly say I have never looked at the state of bitcoin like that -Circular economy pleased. I can see significantly different stacks of bitcoin for different things and I can feel my budget and my family’s budget gradually being expressed in sats.
This is a guest post by Brian Harrington. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.