The infrastructure bill and spending bill are getting closer to the required votes needed to advance. However, the collective budget of $4.5 trillion has raised concerns amongst members of the Democratic party. An asset purchasing taper by the Fed may alleviate inflationary pressures, but the timeline remains uncertain. Globally, Bitcoin adoption is progressing despite technical issues with El Salvador’s Bitcoin payment systems.
Infrastructure Bill and Spending Resolution Gain Momentum
Democrats in the House aim to pass the infrastructure bill this month without any Republican votes. Doing so will require support from all but three Democrats; however, five centrists have already expressed resistance to the bill’s current language due to concerns about overspending and inflation. Similarly, Senate Democrats can pass the $3.5 trillion spending bill without Republican support if the collective party votes for it, but moderate members have expressed trepidation about the size of the bill. Joe Biden said that he was “confident that Congress will deliver to [his] desk both the bipartisan infrastructure plan and the Build Back Better Plan”, referencing the $3.5 trillion spending bill by its official name. The U.S. federal government has nearly $28.8 trillion in national debt and quickly approaches the current debt ceiling. Mitch McConnell stated that Democrats “will have to raise the debt ceiling on their own” due to his concerns about their recent “reckless tax and spending spree.” The Democrats are all but sure to increase the debt limit to avoid government shutdown and default.
Several Latin American Countries Consider Bitcoin As Legal Tender
El Salvador’s largest bank, Bancoagrícola, has started accepting Bitcoin as payment. However, El Salvadorians continue to struggle with the new Bitcoin standard in the country. Much of the issues seem tied to the speed of the transition, the instability of the technological infrastructure, and inadequate resources for citizens to begin using the currency. Despite these initial complications in El Salvador, several Latin American countries are starting to consider Bitcoin as legal tender: a recent survey on Toluna found that 48% of Brazilians would like to make Bitcoin legal currency in their country. Paraguayan Congressman Carlitos Rejala also stated that he would make “Bitcoin as official money” if he were president, a position he is considering running for in 2023. Laos has legalized Bitcoin mining and trading, authorizing six companies to engage in both activities.
U.S. Legislators Continue Refining Bitcoin’s Legal Landscape.
The SEC has yet to approve a Bitcoin ETF despite receiving applications from over 20 companies. Fidelity recently had a private meeting with the SEC in hopes of getting their ETF approved. House Democrats have introduced a bill that would subject cryptocurrencies to wash sale rules, making it more difficult for investors to avoid capital gains taxes. These same rules currently apply to equities and other securities. Bitcoin infrastructure improvements continue with the release of Bitcoin Core 22.0 last week, despite legal concerns introduced by U.S. legislators. This update introduced improvements to several components of the software’s functionality, including privacy and functionality of hardware wallets. Notably, this is the first major release to support Taproot, which will be activated in November.
The Biden administration intends to pass several spending packages before the end of the year, despite the rapid money supply increases and high levels of inflation in the past year. The Democratic majority in the House and split majority in the Senate make these spending ambitions a strong possibility. However, the measures are so extreme and unnecessary that there are concerns about the budgets within the Democratic party. The Fed intends to begin tapering its asset purchasing due to inflation metrics beyond expectations, even for COVID era monetary policy. However, the country’s unstable economic recovery continues to complicate this timeline.