Bitcoin as a National Defense Strategy?
Plus, thanks to blockchain, diamonds really are forever
Ric Edelman: It's Thursday, December 14th. We've been talking about crypto taxation for the past couple of days. I've showed you how you can avoid paying taxes on your crypto profits and the tax trap. If you buy NFTs, or non-fungible tokens inside your IRA. If you missed either of those two shows, the links to them are in today's show notes. But these two episodes generated some questions from listeners. Actually, just one question. But it was asked by a lot of people, why am I bothering to talk about crypto taxes when people don't own crypto in the first place? I mean, why bother owning crypto? Isn't it just used by criminals or for speculation? As one person put it to me, there's no real legitimate use for crypto, so why buy it?
I'm happy to answer the question. One of the biggest misconceptions about crypto is indeed that there's no real purpose, no business benefit, nothing that helps consumers. That's a huge misconception. In fact, crypto has transformational uses in business and commerce. In fact, it even has national defense implications. Jason Lowery is deputy director of technology and innovation for the US Space Force. He's a Major there. He's also a US National Defense fellow and a PhD candidate in engineering management at the Air Force Institute of Technology, and he's a fellow at MIT. He just wrote an open letter to the Defense Innovation Board at the Department of Defense, urging the DoD to consider Bitcoin as a strategic asset for national security and defense.
You can find his paper on LinkedIn. In his paper, Jason Lowery says Bitcoin is, “The most significant innovation in the history of money and accounting” and that it has, “profound implications for the future of warfare”.
Now, according to Major Lowery, bitcoin offers lots of benefits to the US military: Reducing the reliance on traditional financial systems that are vulnerable to cyber-attack, corruption or manipulation, enhancing the operational security of troops and their agility by enabling fast and secure payments across borders, improving the accountability and the audit ability of the defense budget by creating a public ledger of all transactions, fostering innovation and collaboration among allies by creating a common platform for interoperability and disrupting adversaries by undermining their ability to finance their operations, launder money or evade sanctions.
Major Lowery also warned that ignoring bitcoin could have serious consequences for US national security. He cited China, Russia, Iran and North Korea. China's dominance in bitcoin mining is giving it control over a large portion of the Bitcoin network. Russia is using bitcoin to fund cyber-attacks like it did in 2016 election. Iran is using bitcoin to get around US economic sanctions and to pay for its missile programs. And North Korea is stealing billions of dollars’ worth of bitcoin to finance its weapons of mass destruction.
The best way to combat these threats, Major Lowry said, is for the Department of Defense to create a “bitcoin innovation center” to develop bitcoin-related applications, to create a bitcoin reserve fund, where the Defense Department will actually buy and hold Bitcoin as a hedge against geopolitical instability, to create a bitcoin education program within the Defense Department to train military personnel about bitcoin and to create, finally, a bitcoin alliance with other US allies.
And you still think there's nothing useful about crypto? All right. Let me give you another example. It's a bit more pedestrian than protecting the US from nuclear attack. Ethical diamonds. We all know that a lot of the diamonds that get pulled out of the ground are sourced by companies that are engaged in horrible activities. “Blood diamonds”, we call them. And you want to know that the diamond you buy is not one of those Russia mines. Lots of diamonds. It's illegal to buy a Russian stone because of the economic sanctions that we've imposed on Russia due to its invasion of Ukraine.
Now you can know exactly where your diamond was mined thanks to blockchain technology. Botswanamark is a company that certifies diamonds that are mined responsibly in Botswana. International Diamond Center has 12 jewelry stores in Florida and they are starting to sell Botswanamark-branded diamonds. Each one has a code linked to an NFT. So you know the diamonds complete history and the supply chain so you know when you buy it where your stone came from, you can follow its history from the mine, through the stages of cutting the diamond and setting it into jewelry.
You know, buying a diamond used to be about the four C's: Cut, color, clarity, and carats. Now there's a fifth C: Conflict. You want to know your diamond is conflict-free. That's just one recent example of companies using crypto to protect and improve their business.
And let's remember, crypto is a global thing. In Austria, Raiffeisen Bank is going to start letting its retail customers trade crypto starting next month. This bank was founded in 1926. It has $200 billion in assets. No small thing. And I've told you in the past about the Norwegian Seafood Association, Parmigiano Reggiano, Breitling, Starbucks, Nike, so many more companies engaging with this technology.
Now, maybe you see why there's so much excitement about the new Bitcoin ETFs that everybody is widely expecting to come onto the market by early next month. Bitcoin's price is up over 150% in just the past few months.
In anticipation of this, and the next bitcoin halving is in less than six months. Plus, we're expecting new laws from Congress next year, giving everybody much needed clarity. And well, this is why there's so many people predicting that bitcoin's price will reach $150,000. Some are predicting $300,000, $500,000 within the next few years. You need to stop ignoring bitcoin and start learning about it. I can't recommend strongly enough that you go through our course and become Certified in Blockchain and Digital Assets.
This is an online self-study, self-paced course that gives you up to 18 credits. We have five different tracks, one for financial advisors and another one just for investors. You can choose the basic course or the advanced course. In either way, we have separate tracks for back office personnel, for crypto professionals, even for those living and working outside the United States, in nine different languages. This is the oldest and largest crypto education program of its kind, and the CBDA designation is listed in Finra's database of professional designations. Check out the CBDA. Get the knowledge you need so you're not missing out on the opportunity that this new technological innovation represents. We all miss the internet back in the 90s. Let's not miss internet 3.0. Learn more about it at DACFP.com.
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