Will Ohio really become the Silicon Valley of the Midwest? Or it is just throwing spaghetti at the wall with no rhyme or reason and hoping something sticks. The Ohio House just voted in favor of the “Ohio Blockchain Basics Act” (HB 116). This legislation would provide a $200 capital gains tax exemption for crypto transactions, opening up a nuanced discussion that stretches far past your typical DeFi protocol.

$200: Real Relief Or Political Theater?

Let’s face it, who in the real world even realizes a large part of their crypto profit comes from $200 or less transactions. Instead, it seems like giving someone driving a Hummer a free thimble full of gas. Oh great, it’s a start, but can we really do more than just scratch the surface? This is where the wonder gives way to a shock and fascination.

The exemption would reduce the administrative burden of taxing micro-transactions. It might even be true of using Bitcoin to purchase a cup of coffee—if people really do use Bitcoin to buy coffee! Perhaps the real underlying goal is the utility of being used for small-dollar payments. Maybe it’s a serious effort to promote everyday use of crypto, or maybe it’s just a cynical move to look crypto-friendly. It would be as smart as incentivizing electric car adoption by providing subsidies for buggy whips. It’s indeed a fascinating and interesting new dataset, but ultimately not very useful.

I suspect it will be the later. And who does this really benefit? Just picture the administrative burden to keep tabs on all those little transactions only to figure out they go under the $200 threshold. In this instance, it appears like utility is the one going up in smoke. Is the juice worth the squeeze? Fear comes in when you just imagine what this new administrative load will feel like.

Blockchain Basics Or Regulatory Confusion?

The bill casts a broad net, using the same language in a blanket fashion. It tries to solve issues ranging from digital asset mining to self-hosted wallets. Securing self-hosted wallets from unwarranted government crackdown upholds personal liberty and in doing so, it underscores the need for decentralization. Exempting miners and stakers from money transmitter laws would be controversial.

Here's where the "unexpected connection" comes in. Remember the Wild West? No regulations all around, just rampant land grabs and tech gold rushes? That’s honestly sort of how the early days of crypto were too. This bill, well-intended as it is to provide clarity, threatens to do exactly that. Anxiety and fear arise when considering the possibility of leaving regulatory gaps.

  • Pros:

    • Reduced complexity for small transactions
    • Protection for self-hosted wallets
    • Encouragement of crypto mining in designated zones

  • Cons:

    • $200 threshold may be too low to be meaningful
    • Potential loopholes for tax avoidance
    • Risk of regulatory arbitrage
    • Uncertain impact on local government revenue

And what about the local impact? Allowing residential mining “subject to local ordinances” seems good at first. Just imagine the possible community conflicts created by noise and energy use. Anger could arise from neighbors experiencing disturbances. It's a recipe for NIMBYism, crypto edition.

Ohio: Leader or Late to the Party?

Ohio should still be as much the national leader Demetriou envisioned, but is it too late, or is it just in time? States such as Kentucky have already made their mark, with laws allowing for bitcoin and Ethereum self-custody already on the books. Is Ohio just keeping up with the pack, or is it really doing something new and innovative? Surprise and curiosity soon gives way to disappointment when we compare Ohio’s response with what we see in other states.

The irony is thick here. Instead of joining in the U.S. Senate’s slow-motion deliberation on stablecoin reform, Ohio too has turned its attention to larger $200 tax exemptions. It’s the equivalent of erecting an ornate doghouse while letting the dog’s owner’s house burn down.

The Satoshi Action Fund is of course rooting for this, but let’s not kid ourselves that this isn’t still a long shot. Permitless carry has passed the Ohio House, but still must pass the Ohio Senate. Despite this achievement, anxiety is as high as ever, with the future of the bill completely up in the air. And even if it does, the proof will be in the pudding when it comes to how this is implemented.

In the end, Ohio’s crypto tax cut is a roll of the dice. It would certainly draw in innovation and investment as promised, but it would equally serve to bring about unfortunate unintended consequences and regulatory complications. This is something we should all be watching closely and be ready to pounce if we need to change direction.

The emotional pull is pretty hefty, but the relatability may only extend to the crypto diehards already licked deeply into the crypto crackpipe. What about the average Ohioan? Will this bill actually improve their lives? And that’s the question we need to start answering.