BTC Sessions - Wealthsimple and Paypal Adding BTC, SEC May Target DeFi, US Army To Track Bitcoin EP079

Starting point is 00:00:13 Wasabi wallet and fairly private. What's up everyone? I'm Ben with the BTC sessions and this is your daily session. Hodel their Bitcoin. Before we dive in, I just want to give a shout out to sponsors of the show, Ledden.io. This is where you can use your Bitcoin for a variety of different services. I've been working with these guys for well over a year now. The first thing I ever used of theirs was their Bitcoin backed loans. In my case, I was in a pinch. I needed to get my hands on

Starting point is 00:00:52 but I didn't want to sell my Bitcoin for two reasons. Number one, that's a taxable event. And number two, I was worried I would have to buy back in at a higher price. So I was able to utilize their loan program. I was able to deposit Bitcoin, get dollars into my bank account within 24 hours. And when I paid back those dollars, I got back the exact same amount of Bitcoin. Now, they've also got a couple other offerings. They've got their Bitcoin and USDC savings accounts.

Starting point is 00:01:18 They just bumped up the interest rates on those up to a maximum of 8.8. And they've got their B2X offering that uses the same loan mechanism to instantly buy more Bitcoin. So that effectively doubles your Bitcoin on the spot. So if you want to check them out, there's a link in the show notes down below. And if you click that link, if you haven't checked them out yet, then take a look. But if you use that link and you opt to get a loan, they'll give you 50 bucks worth of Bitcoin for free. And if you want to help out the show in another way, and you have not yet gotten yourself a hardware, to secure your Bitcoin. Number one, please do, regardless of what kind you do, because it's very

Starting point is 00:01:57 easy to let it slide, and then all of a sudden your Bitcoin is worth more and you're worried about losing it or getting hacked. It's great to have hardware to give you that piece of mind. So one such option is the Ledger, the NanoS or the NanoX. I have both for different purposes. I also have a variety of other hardware wallets, but if you're looking to get started, this is a nice kind of user-friendly first foray into hardware wallets. So be sure to check them out. And if you use the link in the show notes down below, not only will you get more secure than you currently are, but you'll also be helping out the show as well. And with that, let's dive into the news. So we've got a couple things that came up. One we've mentioned before and this one is

Starting point is 00:02:38 relatively new, but we're seeing more and more easy on ramps for people to get exposure to Bitcoin, and I suppose other cryptocurrencies as well, but exposure to Bitcoin via more traditional investing avenues. So one such thing is wealth simple. And so this is kind of like one of those automated brokers where you can just very easily step in and invest in like general ETFs and index funds of the stock market without having to overthink it and just kind of get some general exposure to the market. They also have a trading app where you can buy individual stocks, but then they've just introduced that they're about to launch Wealth Simple crypto, which gives you access to, at the time, Bitcoin and Ethereum. I know which one I would favor,

Starting point is 00:03:32 but very interesting to see a lot of these institutions start to do this. And Cash App, more or less, was the one that really paved the way and had so much interest that I think just the game's theory of it has forced the hands of people like Wealth Simple to introduce stuff, like this because they see how much of a revenue source it is for cash app and square. So this one is not yet launched, but there's a wait list that you can sign up for. And basically, you would have the app and you'd be able to invest in Bitcoin and or Ethereum. Bitcoin. But besides the fact, you can invest in either or, and they essentially have custody of it.

Starting point is 00:04:17 Now, this for us hardened bitcoinsers is not ideal myself. I prefer to hold my own Bitcoin. There can be exceptions if perhaps the tax benefit of doing so is attractive enough. But from what I've read here, this is not the case. Furthermore, when I look into this, obviously it's custodial. They hold it. they keep their coins. It's stored with Gemini Trust, which a lot of these tend to be stored with Gemini from what I've been seeing. Now, in the FAQs, there's a couple things that I noticed. One, namely here, is that, now this is the Canadian version of it.

Starting point is 00:05:08 I imagine the US version would be similar, but one thing I noticed is cryptocurrencies purchased and held in an account with wealth simple crypto are not protected by the cipf the canadian deposit insurance corporation or any other investor protection insurance scheme so like in the u.s you have the fdic which protects your deposits up to i believe 200 000 i think that's the threshold it could have moved a little bit but besides the fact there's there's no there's no there's no guarantees with this. So, I mean, that does raise my eyebrows, that's for sure. Again, nice that Normies can get exposure to Bitcoin price fluctuations, but for myself, it's definitely not something that I would like. The only reason I would utilize something

Starting point is 00:06:09 this would be for the tax benefit, but it looks like this is not available in any sort of like a tax-free savings account vehicle. So at that point, I have to question why bother, why not just hold my own Bitcoin? So anyways, that's that. But on the next story, which we've touched on before, is PayPal has now officially confirmed the development of crypto capabilities, quote-unquote. So the payment processor is reportedly working on bringing Bitcoin buying and selling features. This from finance magnates.com. So I'll just read a little bit from the article here. PayPal, one of the major online payments giant has confirmed that it is working to bring

Starting point is 00:06:56 crypto capabilities to its platform. As reported by the block, the revelations were made in a letter to the European Commission in March responding to the body's public consultation. on its proposed framework for crypto assets. In the quote here, as an innovative fintech company, and by virtue of its mission, PayPal is monitoring the evolution of the crypto asset space.

Starting point is 00:07:20 The letter detailed that PayPal initiated its development in the crypto area since last year, when it joined the Libra Association as a member. Notably, PayPal became the first company to quit the consortium, followed by MasterCard Visa and others. And then continuing the quote, PayPal has taken unilateral,

Starting point is 00:07:37 and tangible steps to further develop its capabilities in this area, and therefore, without questioning the value of the project, took the decision not to participate in the Libra Association and continue to focus on advancing our existing mission and business priorities to democratize access to financial services. So yeah, they are further with their quote, PayPal's continuously monitoring and evaluating global developments in the crypto and blockchain distributed ledger space. would be supportive of a harmonized approach across EU markets on applicable licensing or authorization requirements. Yeah. So anyways, more or less, they are actively working on rolling this out on their platform. I would be surprised if we didn't see it by the end of the year.

Starting point is 00:08:29 You know, they see that money rolling in through cash app and they probably want a piece of that pie. and they'll get it to be sure. Same with wealth simple and other vehicles like that. Again, I think overall, nice for people to have access to something like that, but for myself and I'm sure for most of you watching, you're a little bit more inclined to remove the custodian, remove the trusted third party and just do it yourself. Buy Bitcoin, pull it off the exchange,

Starting point is 00:08:59 and hold it yourself in your own hardware, however you set that scheme up. regardless, we're kind of diving down this road of the normalization of Bitcoin in the legacy system. And so we see responses to that in various forms. So this article from Decrypt is talking about the SEC killing ICOs and how Defy or decentralized finance, a lot of the shit that's being run on Ethereum, could be next. So I'll read a little bit from DeCrypt here. the SEC and the CFTC have announced that they have issued fines to ABRA, a crypto company that let users trade tokenized versions of stocks and foreign currencies. This could mean that regulators

Starting point is 00:09:44 are about to crack down on decentralized finance or defy experts say. The CEO and founder of leading defy project, AVE, I'm not sure how to say AVE, AVE, says defy protocols must decrease regulatory risk by becoming quote unquote sufficiently decentralized. So to speak to the ABRA thing, I actually quite liked what ABRA was doing previously before they apparently got cracked down on and had to close up shop. So what they did is you could download the app, provide minimal information. You could deposit Bitcoin from anywhere in the world. And then you could trade that Bitcoin into any local currency.

Starting point is 00:10:29 so you get exposure to that stability, I suppose, or you could trade it into a variety of different U.S. stocks. So you could load Bitcoin, buy Tesla stock with it, hold and get exposure to the price fluctuations, and then cash those fluctuations that capture that loss or gain out into a local currency or out back into Bitcoin and then cash that out to your own wallet. So it was cool because it gave access people the world over that that wouldn't have had access to U.S. stocks.

Starting point is 00:11:05 They were now able to participate. Well, not anymore. That feature was killed off quite some time ago, and I was disappointed to see it go, and there was really no word as to why. Well, here's our answer. And so could this translate to defy or decentralized finance? Well, ABRA was very obviously a centralized company. and when you hear the term defy or decentralized finance you think oh well who's there to crack down on but it tends not to be the reality of the situation so we have a quote down near the bottom of the article

Starting point is 00:11:38 from nick carter so for now nick carter a partner at crypto vc fund castle island vendors is staying out of defy his quote says we don't invest in anything potentially questionable we have always been more risk averse from a regulatory perspective, he told decrypt. And we don't have exposure to DFI. Other VC funds like Framework Ventures are big investors in DFI. Framework declined to comment for this particular article. Now, Carter said that some of the easiest targets for regulators are DFI networks. His quote goes, they purport to be decentralized, but are only shallowly so, like those that involve money transmission and lending, they're fundamentally regulated activities. Declining to name names, Carter said that most of the top DeFi projects have this issue.

Starting point is 00:12:33 Generally a coordinator, administrator, or central entity that manages the system. And again, this is very much true. Most things have some sort of coordination or some sort of like central authority that we heard a quote previously when some shit went wrong with defy they pulled the big red lever to shut shit down if you have a big red lever to shut shit down it's not decentralized nobody can just pull a lever and shut down

Starting point is 00:13:05 bitcoin it's just not going to happen and so this is where I think we're going to start to see the nuanced sliding scale of decentralization start to draw lines in the sand where you know who can you crack down on If you create something that is supposedly decentralized finance, but you've somehow inserted yourself in the middle so that you can either control the system

Starting point is 00:13:33 or reap some benefit from the system and collect some sort of fee, it is not decentralized. And odds are at some point in time, some type of regulator is going to come after you. If something like this was built in a way where it was done anonymously, There's no, all of a sudden there is no coordinator. It just operates on its own. And, you know, again, nobody's there to reap fees or pull levers.

Starting point is 00:14:02 Perhaps you could get away with this, but that's not the case of a lot of this stuff. And even so, given how quickly a lot of this stuff is moving, the SEC is obviously slow to act on this stuff. A lot of the ICO judgments didn't come until like years later. You know, a year or two after the ICU boom, we started to see people get cracked down upon, have to pay back money, big fines, things like that. In other instances, slaps on the wrist. So maybe a lot of D5 people are just kind of rolling those dice and seeing where the chips land. I don't know.

Starting point is 00:14:42 Anyways, it'll be interesting to watch. I get the feeling that a lot of the things. defy crap is going to be ICOs 2.0 and it will assume that it is free from the scrutiny of regulators but again if there's anybody in the middle that is just saying the word decentralization but there is somebody to point to they will be gone after and and that's kind of the caveat with a lot of these things now in again the realm of kind of regulation and tracking the US government is getting a lot more series about tracking cryptocurrencies, Bitcoin, everything. So the Department of the Army is the latest agency to seek cryptocurrency tracing tools. This again from Decrypt. So we'll just go through

Starting point is 00:15:31 a little bit here. So the Department of the Army, the federal agency that is part of the Department of Defense and oversees the U.S. Army is on the hunt for a cloud-driven tool that can help the Army Criminal Investigation Division Command, track cryptocurrencies, and analyze transaction sources. Now, what stuck out to me here is this quote, the agency seeks potential contractors capable of providing one license for one user of a cloud web-based application capable of assisting law enforcement to identify and stop actors who are using cryptocurrencies for illicit activities such as fraud, extortion, and money laundering.

Starting point is 00:16:14 Now, obviously, as I put the most emphasis on it, the word stop. How do you stop it from happening? Yes, you can, in any jurisdiction, there will be laws. You can crack down on businesses. You can crack down on people breaking the laws of whatever jurisdiction that is, tracking them down and charging them with whatever crimes of the land that they have committed. However, stopping the transactions themselves from occurring, as we know, especially with something like Bitcoin, it's just not possible. Now, some less decentralize, again, getting back to the sliding scale of decentralization.

Starting point is 00:17:03 Some currencies, yes, you'll absolutely be able to stop them. Stable coins, we've seen funds frozen, even just recently, there was about, I think, $100,000 that got frozen of U.S.D. see and so it kind of starts to beck into the fact that not not every coin is beyond the reach of the law but when you get something that is truly decentralized where you can't freeze or reverse transactions you don't stop it you can track it you can potentially use that evidence against somebody who may have broken a law in a certain jurisdiction but you don't stop it and that's what a lot of these agencies are going to have to grapple with. Now, sometimes they will overreach.

Starting point is 00:17:50 Now, I wanted to allude to a little bit of something that happened previously. The, what is it called? The Department of the Army isn't the first entity that, as is alluded to by the title, is not the first entity to request this kind of information. So more from the article here. Earlier this month, the U.S. Internal Revenue Service or the IRS released its own request for information for tracking tools. That would help it with privacy-centric cryptocurrencies as well as lair to off-chain protocols like the Bitcoin Lightning Network. However, the particular request sought a working prototype for this tool that would be developed to its specifications.

Starting point is 00:18:32 Now also, Coinbase just recently over the past week or so has been getting a lot of U.S. contractors and that's come to light and a lot of people shitting all over them for it. Rightfully so, Coinbase has been the least, they've been the company to drop the ethos of why Bitcoin was created the most. By and large, they are the worst example of what a company in this space should be. and I do very much. I did do a video, I think last year,

Starting point is 00:19:06 when a hashtag called Delete Coinbase was trending. And I spent 30-something minutes explaining why this is such a terrible company for Bitcoin and everybody. And at this point, the list goes on. It would be an hour-long video if I tried to remake it. But anyways, you can go back and look at that. You search Delete Coinbase. It'll be one of the first ones on YouTube. Besides a fact, yeah, over the weekend it was revealed that Coinbase,

Starting point is 00:19:31 has sold access to its analytic tools to the secret service. They also are selling their analytic software to the IRS and the DEA. So yeah, pretty much just sucking up to every single U.S. agency they possibly could. Now, Brian Armstrong, the CEO, tried to justify this saying like, hey, you know, we built the software. We're just kind of recouping some of our costs by licensing it to whoever wants it. That's not what this is. at all. It's, again, it's, they built a tool for themselves and then they're just kind of bending the knee to, without provocation to every major agency. And honestly, I think that they should be, I guess they can do whatever the hell they want, but God, don't use Coinbase. Now, speaking of

Starting point is 00:20:23 Coinbase, the IRS is being sued by an ex-coinbase user over the seizure of his financial records. So a former Coinbase user who last August received the infamous IRS crypto letter is suing to block the tax agency from unlawfully seizing private financial records. So he got a soft letter from the IRS along with 10,000 other Americans. And it said that the IRS had, quote unquote, information on their cryptocurrency accounts. They wrote that they had reason to believe he had not paid taxes on his cryptocurrency. Harper claims he's paid his crypto taxes in full since 2013. Now, the IRS never said where it got its information,

Starting point is 00:21:09 but Harper believes his details may have been among the trove of 13,000 account records that the IRS agents seized from Coinbase in early 2018 following a court order and controversial legal fight. Now, it says here, if they acquired it via the Coinbase summons, and we don't know that for sure, it was a defective process that denied me the opportunity to contest the seizure of my data. I'll be seeking destruction of the records in the IRS's control.

Starting point is 00:21:40 A win would allow all recipients of the letter to seek the same. Yeah, very, very interesting. So basically, the IRS may have unlawfully obtained these records of Coinbase users. and if they did so, then it would be inadmissible in trying to obtain warrants to get these people's records and you just wouldn't be able to prosecute it. So, yeah, I'm going to wish Jim Harper the best of luck in his legal pursuits because that would be a huge win and would be a nice punch to the gut of these overreaching agencies. Now, moving on, on the flip side of the coin,

Starting point is 00:22:23 you know obviously bitcoin can be used for illicit activities i don't think anybody's any stranger to that um but again with the bad is also the good you you're always going to get both sides of this for every illicit activity of money laundering or or drug drug cartels or whatever you're also going to get the people in places like venezuel and argentina that just want to get the hell out of their local currency and not be starving in the streets and be able to preserve the fruits of their labor away from a state gone out of control. So with that said, the dark net markets are mixing Bitcoin at a blistering pace, apparently. So this article from CoinDest says, Darknet marketplaces are embracing cryptocurrency obfuscation techniques such as

Starting point is 00:23:13 Bitcoin mixers at a blistering pace according to new research by analytics firm Crystal Blockchain. Bitfury's intelligence outfit in its Darknet Activities Report released Tuesday that Darknet entities sent $67 million worth of Bitcoin transaction scrambling mixers, sorry, a worth of Bitcoin two transaction scrambling mixers in quarter one of 2020. And that's a staggering spike from the $3 million recorded in Q1, 2019. Now, to me, this doesn't come as much of a surprise because the tools have become much, much easier you have with Saobie wallet that you can get on your desktop and and it's relatively simple to break those links between you and your coins and uh you also have samurai wallet which is now mobile

Starting point is 00:24:03 and a lot of Bitcoin users they they don't utilize it on on desktops or laptops or don't even have desktops or laptops and so they're just on their phone and they're they're mixing their coins there to obtain more privacy with an easy downloadable mobile app that does it on the fly. And so it's no surprise to me that people are using these tools as they learn that Bitcoin in itself isn't private. And now the thing about this is, is that privacy gets demonized because some people who want privacy are doing immoral things. But other people who want privacy just don't want to be a target, right? They do not want outsiders peering on in on how much wealth they've accumulated.

Starting point is 00:24:57 They don't want somebody to say, hey, that guy's got a whole Bitcoin. That guy's got 10 Bitcoin or 50 Bitcoin, whatever it may be. And they don't want down the line as that value grows. They don't want somebody saying, hmm, that is now worth me looking into where, that person is trying to find them and going to their home and essentially holding them a hostage for their Bitcoin. They don't want that possibility. And so rightfully so, they try to break those links between them and their coins.

Starting point is 00:25:28 The thing about Bitcoin is, again, it is not by any means private. And so when you go to spend Bitcoin out a merchant or you make the mistake of doing something publicly and people see a transaction that you've done, they can then link that transaction back to the previous wallet and piece-taxed. and piece together a pretty good picture of what Bitcoin that you own unless you are actively coin joining. And so I think these tools are going to continue to proliferate. We just saw BTC Pay Server, continue to implement updates to the pay to endpoint, which is another obfuscation technique when paying a merchant.

Starting point is 00:26:07 The merchant contributes money and it all gets mixed together. so it's very difficult to tell who spent what and what went where. We're going to see more of these tools come out and it's very difficult to track this kind of stuff. You know, people can make mistakes, but it's getting more and more difficult. And pretty soon you taint the entire pool of Bitcoin to the point where nothing is tainted. And I hope it goes that way because I would rather have regular police work cracked on people doing illegal things as opposed to every single innocent person be grouped together with criminals and thus become targets of other criminals. Now, there are some regulations coming down in regards to encryption, as have been repeatedly in the past.

Starting point is 00:26:59 And they're trying to break encryption or force companies to insert back doors to their software to prevent encrypted. communication. So some of these bills, the Lawful Access to Encrypted Data Act, or the Eliminating Abusive and Rampant Neglect of Interactive Technologies, which is also short for Earnit Act, basically, again, as I said, inserting backdoors and preventing encryption, it also would repeal the act that makes social media platforms not liable for the content that people post. You can imagine something like Twitter, Facebook, whatever, they do what they can to try and remove illicit activity from their platforms. But it's also very important for freedom of speech that they be able to try and do those reasonably over time as opposed to just blanket banning certain things. Because at that point, free speech tends to go away.

Starting point is 00:28:02 I think it's much better that they're not liable for the content, but, you know, that, they the users kind of hold them to account as to what gets through on their platform. The issue with this repeal of holding people not holding platforms liable for what gets put through their their platforms is you get something like WhatsApp. You get something like signal or telegram or whatever, any sort of encrypted messaging platform. And so you want to have a private conversation with somebody. You just don't want that going. You're discussing. sensitive topics, you don't, for whatever reason. You don't really need a justification for wanting privacy. Well, when this gets repealed, essentially there's no way to guarantee that illicit stuff is

Starting point is 00:28:50 not being sent through their servers in something like WhatsApp, unless they break the encryption or remove end-to-end encryption entirely and check every message. And that ruins the privacy for absolutely everybody. Furthermore, if you put a backdoor in anything for the good guys, that means the bad guys can also gain access to it. It's not an exclusive door. People can gain access to these things. So if you break encryption only for the good guys, you also break it for the bad guys and they can then use those backdoors themselves. So it's a slippery slope and I err on the side of privacy for all instead of privacy for none. But besides the fact, let me know what you think about all of this, about the juxtaposition of open source, permissionless worldwide immutable cryptocurrency like Bitcoin against the backdrop of highly regulated and political legacy financial rails and communication rails.

Starting point is 00:29:59 Where do you think we end up with this? What wins out? do we get a mishmash of both where you can interact immutably on something like bitcoin but if you interact with every any particular individual there's checkpoints and things like that or do you think that in the end privacy and and the ability to freely transact with who you choose wins out curious to know your thoughts anyways guys i'm going to wrap it there thank you so much for watching and or listening. As always, if you're here on YouTube, do hit like, subscribe, and share, show this around to

Starting point is 00:30:35 everyone that you can. Always great to get more eyeballs on the show. Secondly, if you want to help out the show in another way, you can hit up the sponsors or the affiliate that I mentioned down below. That was Leiden, where you can get that 50 bucks with a Bitcoin for free, or grab yourself a hardware wallet, a ledger, and you will be helping out the show. And if you really loved what you saw, you can always shoot me a tip, a Lightning Network tip at my tippin.me page that is tippin t i p p i n dot me slash at b tc sessions and with that i'm out

Starting point is 00:31:08 have yourselves a wonderful evening a wonderful rest of your day and i'll see you next time for your daily session

BTC Sessions - Wealthsimple and Paypal Adding BTC, SEC May Target DeFi, US Army To Track Bitcoin EP079

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