At Bitcoin Policy Vermont, we are committed to ensuring that Vermont takes a proactive and informed approach to Bitcoin. As Bitcoin becomes increasingly integrated into global economies, it is essential that Vermont positions itself at the forefront of this economic revolution. We believe that through thoughtful education and transparent policies, Vermont can harness the transformative potential of Bitcoin to stimulate economic growth, promote financial inclusion, and empower individuals with greater control over their wealth. By adopting clear, forward-thinking regulations that encourage Bitcoin adoption while protecting consumer rights and fostering innovation, Vermont can create a robust ecosystem that benefits businesses, residents, and the broader economy. Our mission is to help the state embrace Bitcoin’s potential in a way that aligns with Vermont’s values of sustainability, independence, and economic opportunity for all.
Enshrining the right to self-custody and run Bitcoin software ensures that individuals retain full control over their financial assets, preserving privacy and independence. This protects against future regulations that might infringe on personal sovereignty or limit access to decentralized networks.
When individuals have the right to hold their own Bitcoin without relying on third-party custodians, they maintain complete control over their assets, reducing the risk of financial intermediaries or regulatory bodies seizing or restricting access to their funds. This right ensures that citizens are not forced into centralized systems that could expose them to undue surveillance, censorship, or confiscation.
In addition, running Bitcoin software, such as full nodes, allows individuals to verify transactions and participate directly in the decentralized Bitcoin network, reinforcing its security and transparency. By protecting these rights at the state level, Vermont can safeguard its residents from potential future regulations that might attempt to limit access to decentralized financial technologies. This proactive stance ensures that Vermonters can benefit from the full power of Bitcoin, maintaining their privacy, independence, and freedom from excessive governmental or institutional control. It sends a clear message that financial innovation must remain in the hands of individuals, not just large corporations or governments.
Allowing the state treasury to invest a small percentage of its reserves in Bitcoin or Bitcoin-related funds would diversify the state's assets and act as a hedge against inflation and financial instability.
The Vermont Pension Investment Commission manages a portfolio of $6,402,259,851 (as of June 30, 2024), which has struggled over the past decade to produce real, inflation-adjusted returns. With an aging population, many Vermonters rely on fixed income sources like Social Security and Vermont State Pensions to secure their retirements. Negative real returns, or even flat returns, in the face of increasing retirees pose a significant threat to the viability of these retirement funds. To protect Vermont seniors, allocating a small hedge to an asymmetric asset like Bitcoin could provide much-needed security and flexibility in the long term.
We propose that Vermont establish a Bitcoin Strategic Reserve, allocating roughly 5% of Vermont State Pension assets. Beyond the economic necessity of an allocation to sound money, holding an asset locally without relying on third-party custodians would enhance Vermont’s sovereignty, allowing the state to govern itself more independently of the incentives set by the federal government.
We propose that Vermont classify Bitcoin as a foreign currency for tax purposes. Under this framework, Bitcoin transactions would be exempt from capital gains taxes, similar to how the state treats gains from the exchange of foreign currencies used in day-to-day transactions.
This policy would reduce the tax burden on individuals and businesses using Bitcoin, encouraging its use as a medium of exchange rather than solely as a speculative investment. By eliminating the need to track capital gains for small everyday transactions, Vermont can foster a more Bitcoin-friendly economic environment, encouraging innovation and adoption of digital currencies within the state.
Additionally, treating Bitcoin like foreign currency would streamline tax reporting, providing clarity for both taxpayers and regulators, while keeping Vermont competitive in the growing field of digital assets. This approach balances the need for oversight with the flexibility required to position Vermont as a leader in financial technology.
To further enhance Vermont's financial independence and protect citizens' access to Bitcoin, we propose creating legal provisions for Bitcoin-friendly banking. This would ensure that financial institutions in the state cannot deny services to individuals or businesses simply because they interact with Bitcoin. Such policies would encourage the development of a healthy financial ecosystem where Bitcoin is treated as a legitimate asset, promoting innovation and entrepreneurship.
Currently, most local banks are currently unable to hold Bitcoin on behalf of their clients. While self-custody is ideal and something we should all strive for, the reality is that banking can provide a valuable service for those who cannot, or choose not to, store and secure their own money. By creating regulations that offer a clear framework for local banks to establish custodial Bitcoin services for Vermonters, we can open up Bitcoin to a segment of the population that has been left behind by the technical complexity of Bitcoin.
In addition, running Bitcoin software, such as full nodes, allows individuals to verify transactions and participate directly in the decentralized Bitcoin network, reinforcing its security and transparency. By protecting these rights at the state level, Vermont can safeguard its residents from potential future regulations that might attempt to limit access to decentralized financial technologies. This proactive stance ensures that Vermonters can benefit from the full power of Bitcoin, maintaining their privacy, independence, and freedom from excessive governmental or institutional control. It sends a clear message that financial innovation must remain in the hands of individuals, not just large corporations or governments.
As Bitcoin adoption grows, it is critical that Vermonters are educated about both the benefits and the practical aspects of this emerging financial system. Bitcoin, like any technology, can seem daunting or inaccessible to those unfamiliar with its fundamentals. A lack of understanding has been a significant barrier to wider adoption, particularly in rural areas and among older populations. Establishing state-sponsored educational programs can help Vermonters understand how Bitcoin works, its potential to preserve wealth, and its role in fostering financial independence. These programs could cover everything from basic Bitcoin literacy such as how to securely store and send Bitcoin, to more advanced topics like running a Bitcoin node or understanding Bitcoin's role in broader economic systems.
Additionally, financial literacy courses in schools should be updated to include Bitcoin, alongside traditional economic principles. Future generations will need to navigate a world where Bitcoin plays an increasingly important role, and giving students the tools to understand decentralized digital money will equip them for the changing economic landscape. By incorporating Bitcoin into broader financial education initiatives, Vermont can position itself as a leader in financial innovation and inclusion, ensuring that all residents can participate in the economic opportunities of tomorrow.