What a Kennedy in the White House Could Do for Bitcoin

Bitcoin’s been getting some heavy endorsements lately. Hot on the heels of recent spot Bitcoin ETF announcements by various issuers including Blackrock, the world’s largest asset manager, the most popular digital currency has received endorsement from none other than possible Democratic Party presidential candidate Robert F. Kennedy Jr.

RFK Jr., a member of the Kennedy political dynasty in case you didn’t know, announced two key initiatives that, if enacted, could light a flame under demand for Bitcoin: exempting capital gains tax on Bitcoin exchange into USD; and progressively backing US Treasury bills and the US dollar with Bitcoin.

“Backing dollars and US debt obligations with hard assets could help restore strength back to the dollar, rein in inflation and usher in a new era of American financial stability, peace, and prosperity,” he said on a virtual “Heal the Divide” event. “The benefits include facilitating innovation and spurring investment, ensuring citizen privacy, incentivizing ventures to grow their business and tech jobs in the United States rather than in Singapore, Switzerland, Germany, and Portugal.”

Long Way from White House

To be sure: RFK Jr. is still a long way from the White House and his embrace of COVID-19 conspiracy theories may yet hobble him in the race to be the Democratic Party candidate. And, as of 30 June, RFK Jr. held between $US100,000 and $250,000 worth of Bitcoin which may expose him to accusations of a conflict of interest (although that hasn’t prevented many other US politicians from accruing material wealth while in office and likely open to similar accusations).

Warming to the theme of weaponizing fiat currency, RFK Jr. pulled out a reference to his uncle, the greatly revered JFK.

“My uncle, President Kennedy, when he was in office, understood the importance of hard currency and the dangers of having pure fiat currency with no other option. He understood the relationship between fiat currency and war, fiat currency and … very, very destructive environmental projects, and also these giant aggregations of wealth and the unbalance, the disparities in wealth that are the ultimate yield of every fiat currency,” he said.

RFK supported the view of SEC Chair Gary Gensler that Bitcoin “is not a security and should not be regulated like one” and also expressed his determination to end the Biden administration’s campaign against financial institutions dealing in Bitcoin.

Kennedy Pledges 

It’s not the first time RFK Jr. has spoken in favour of Bitcoin. In May, at Bitcoin 2023, the world’s largest Bitcoin event, he pledged:

• “First, I will defend the right of self-custody of Bitcoin and other digital assets,
• Second, I will uphold the right to run a node at home,
• Third, I will defend use-neutral, industry-neutral regulation of energy,
• Fourth, I will make sure that the United States remains the global hub of Bitcoin and other cryptocurrencies… I will reverse the government’s growing hostility toward this industry”.

He also criticized a proposal of the Biden administration to impose a 30 per cent excise on crypto mining operations (which was subsequently dropped during the debt ceiling negotiations earlier in May), as well as opposing Central Bank Digital Currencies (CBDCs) for being "instruments of control and oppression” likely to be abused by authorities.

Capital Gains Tax Windfall

His proposal to exempt capital gains tax on Bitcoin would provide a windfall to existing Bitcoin holders while also incentivising innovation in ventures that involve the acquisition and disbursement of Bitcoin, such as Bitcoin mining.

The second proposal to back US Treasuries and the US dollar with Bitcoin is more complex in that it is both a political statement about unfunded debt being used to “fund wars” as well as the resulting inflation (from mounting debt) imposing a “hidden tax of inflation”.

From an investors’ point of view, both policies would likely drive price due to the favourable tax treatment in the first case and the reduction in supply in the second case — if the US is buying Bitcoin, then there is less for everyone else due to Bitcoin’s fixed and predictable supply schedule.

Purely for illustrative purposes, let’s consider how allocating just 1 per cent of the net value of US Treasuries issued per year might move the Bitcoin price.

1. In 2023 year-to-date, the net issuance of US Treasuries (being the net of Treasuries issued less Treasuries retired) was around $US900 billion. If this continues, the annualised net issuance would be $US1.8 trillion.
2. A 1 per cent allocation (per RFK Jr.’s comments) would be $US18 billion.
3. The Bitcoin network currently issues around 900 BTC per day.
4. If the $US18 billion was allocated over 12 months to just maintain the supply/demand equilibrium, then this is about $US50 million to buy 900 BTC every day.
5. The price per BTC would then be $US50 million/900 = $US56,000 ($A83,000), being nearly double the current price (assuming existing “hodlers” don’t sell).

Of course, these are just policy announcements from a Democratic Presential candidate who is currently lagging Joe Biden in the polls. It is by no means a certainty that RFK Jr. will win the nomination or navigate successful passage of these policies into law even if he does. Nevertheless, it is significant that a politician aiming to be the next US president has lent his support to the crypto king in such a striking fashion.

Many Bitcoin enthusiasts like to say that the Bitcoin protocol and network does not care one jot about politicians, regulators, central banks, or legislators. The network continues to function day after day producing roughly 900 BTC per day (as of writing) no matter what extraneous noise is being generated or written about. Its value derives precisely from its decentralisation and its hardness (fixed supply schedule), and as awareness continues to grow, so shall the Bitcoin price.

But this time, maybe it does. As with all nascent technologies, only time will tell, and prudent investors will manage their exposure accordingly.