Molly White's Citation Needed - Issue 88 – The stockchain

Episode Date: July 11, 2025

Crypto firms hope putting a blockchain veneer on traditional equities will allow them to sidestep lessons learned in the 1929 Wall Street crash, crypto firms look to become banks, and Congress celebrates crypto surveillance while claiming to outlaw it. Originally published on July 11, 2025.

I'm Molly White, and you're listening to the audio feed for the citation-needed newsletter. You can see the text version of the newsletter online at citation-needed.news. Issue 88, the stock chain. Crypto firms hope putting a blockchain veneer on traditional equities will allow them to sidestep lessons learned in the 1929 Wall Street crash, and Congress celebrates crypto surveillance while claiming to outlaw it. This issue was originally published on July 1,000. 11, 2025.

The crypto world has two recent buzzwords, tokenization and real-world assets, or RWAs. Gone are the days when crypto evangelists dreamed of tearing down traditional financial institutions altogether. Now, crypto firms seem intent on replicating the financial system, minus regulations that might safeguard consumers or economic stability. Next, in their sites, stock exchanges. Prominent crypto firms such as Robin Hood, Republic, Coinbase, and Cracken are rapidly moving towards tokenizing traditional stocks and pressuring regulators to allow it. Instead of buying your shares of publicly traded firms via a brokerage account that places orders on the New York Stock Exchange or NASDAQ, you would use a crypto trading app to purchase a token

representing a share. Companies hoping to develop such platforms usually promote the idea by saying that a blockchain-a-fied stock market would expand trading hours and would be more accessible to international investors who didn't want to go through the somewhat onerous process of opening an American brokerage account. These companies don't usually admit that by encasing stocks in a blockchain-y wrapper, they hope to tap into lucrative equities markets while sidestepping the expensive compliance and oversight requirements of traditional American brokerages and exchanges. This fits the long history of companies trying to use blockchains as a magic get-out-of-regulation-free wand,

reminiscent of the 2017 bubble when companies used initial coin offerings or ICOs to try to sidestep IPO indeed Robin Hood has been heavily lobbying for, quote, a new regulatory approach that's needed to allow tokenization to flourish, and not, quote, stifle growth and innovation. Regular readers of this newsletter will recognize this language as the standard rhetoric of a crypto company asking for carve-outs and exemptions from regulations we collectively learned are necessary. Oh, about a century ago. When a speculative bubble emerged around stocks sold to the public based on false or incomplete information, and we wound up in the Great Depression. Some companies have gone even further, tokenizing shares in private companies. When Robin Hood announced its tokenized equities offering, only available to European investors at the

moment, they also announced that they had tokenized shares in the private companies, SpaceX, and OpenAI. This prompted concerns from European regulators and OpenAI themselves, who tweeted, quote, these, quote, open AI tokens are not Open AI equity. We did not partner with Robin Hood, were not involved in this, and do not endorse it. Any transfer of OpenAI equity required are approval. We did not approve any transfer. Please be careful. Money stuff's Matt Levine put it well in his must-read newsletter on the topic when he wrote, quote, the quote, legal friction Robin Hood mentions is that some companies are private because they do not want to comply with security's disclosure rules, and tokenization's solution is that they can sell stock to the public without complying with those

rules. Saying we should get rid of the disclosure rules sounds bad, retrograde, greedy, Saying tokenization sounds good, modern, cool. Crypto companies already barreling forward with blockchain-a-fied stocks have hit some resistance from someone they may not have expected, SEC Commissioner Hester Pierce, who has otherwise been such a staunch ally of the crypto industry that she earned and embraced the moniker Crypto Mom. On July 9, she cautioned, quote, As powerful as blockchain technology is,

it does not have magical abilities to transform the nature of the underlying asset. set. Tokenized securities are still securities. While this is temporarily reassuring, bills like the Clarity Act, currently making their way through Congress, threatened to undermine the SEC in this area. In a July 9 Senate Banking Committee hearing, former CFTC Chairman Timothy Massid agreed with ranking member Elizabeth Warren that the bill, quote, could undermine the SEC's authority substantially, effectively turning blockchings into the regulatory escape hatch the industry desires. In government, crypto was an afterthought in Congress these past couple weeks as lawmakers battled it out

over the budget reconciliation bill, but it's back with a vengeance as House Republicans have formally declared next week to be crypto week. The House is pushing for a vote on the Genius Act, Stablecoin bill, which already passed in the Senate, and they've stopped trying to advance their own Stable Act after urging from Trump. The House will also be considered the Clarity Act market structure bill and a bill called the Anti-CBDC Surveillance State Act. Clarity Act. The Clarity Act may face more resistance than genius, with Ranking Member Warren decrying it as, quote, another industry handout that gives the crypto lobby exactly its wish list.

Former CFTC Chairman Massid dubbed it, quote, 236 pages of regulatory arbitrage opportunities for creative lawyers. Law professor Richard Painter warned, The risk is that we repeat the experience of regulating the banks in the 1920s and the depression that followed, 10 years of depression. The risk is that we repeat of what happened in 2008 when campaign contributions poured into Congress from the securities by swap industry elsewhere in the financial services industry. And we had decades of deregulation. The economy collapsed. Millions of American families losing their homes, people unemployed.

We've been through this again and again. Republican senators spent considerable time during the hearing chastising witnesses and fellow legislators alike for daring to mention the crypto lobby's influence. Senator Kennedy, a Republican from Louisiana, spent about half of his allotted time, demanding that Professor Painter apologized to Senator Gillibrand, a Democrat from New York, claiming he called her a crook on Twitter back in May. Kennedy was kind enough to read the tweet aloud, serving to both clarify that Painter never described her as such and ensure that the official record now reflects Painter's perfectly accurate tweet,

which read, quote, the crypto industry's buying Congress and the White House. This won't end well. And then linked to an article titled Senator Gillibrand's role in stable coin regulation, $217,000 in crypto donations. If Kennedy thinks accepting crypto money makes one a crook, perhaps he should do something about that. Kennedy himself accepted almost $40,000 in 2024, all from Cumberland DRW's Donald Wilson. This relatively low amount compared to other crypto-backed Congresspeople is likely because Kennedy was not up for re-election in 2024. Evidently angered by painter's refusal to take the bait and his request that they actually discussed the proposed bill instead of wasting time mischaracterizing tweets,

Kennedy lashed out, quote, you're a whack job. you are a major league next-level whack job. At the end of the hearing, Chairman Tim Scott proclaimed, quote, I hope we all remember very clearly that our words are containers of power, going on not to rebuke the senator for attacking a witness as a major-league next-level whack job,

but instead those who, quote, weaponized words against Senator Gillibrand or President Trump. Notably, Painter did not bring up Gillibrand. It was Kennedy, who printed out Painter's tweet to read at the hearing. Anti-CBDC Bill. The rather alarmist-named anti-CBDC surveillance state act exemplifies the peculiar Republican stance on digital currency surveillance.

They've somehow convinced themselves that Federal Reserve Banks are poised to launch a CBDC or central bank digital currency that would enable mass surveillance, though no such plan has been seriously proposed. Somehow, preventing this imaginary threat takes priority over addressing things like the president's own stable coin, which has already given him the types of surveillance and control powers they fear in CBDCs. Indeed, those concerns have mostly come from the Democratic wing of Congress and have been brushed off by Republicans who are largely terrified to criticize anything Trump does. And while Republicans decry purely hypothetical CBDC surveillance, they celebrated crypto's

actual surveillance capabilities at the recent Senate hearing, where senators and crypto executives alike delighted in how blockchain's public ledger is eased tracing by law enforcement and, frankly, anyone else. Conveniently, recording all transactions publicly means law enforcement no longer needs to obtain a pesky subpoena to peek in on your financial activities. Here are some quotes from the hearing. This is Chairman Tim Scott, a Republican from South Carolina. Crypt companies are helping law enforcement track illicit activity with greater precision than traditional finance allows. Blockchain technology creates a permanent, traceable ledger that can help law enforcement catch those bad actors. I've said it before, so I'll say it again. It's far easier

to track something that has a digital footprint than something that does not. Here's Senator Katie Britt, a Republican from Alabama. And transactions on the blockchain offer a unique ability for tracing and tracking, including analyzing trends on the ledger. And here's Brad Garlinghouse, the CEO of Ripple. I think the good news has been in many cases, they don't often understand how traceable and trackable that actually is. And it's more trackable than obviously cash. Back in 2023, I wrote a tweet thread about how, quote, the past month or so I've suddenly started seeing a bunch of people in crypto and in the financial regulatory slash enforcement world who are unironically excited about crypto because of the financial surveillance it could empower.

and that scares the shit out of me. I mentioned listening to a panel about how algorithms could detect criminal activity on public ledgers in real time to automatically alert law enforcement, or even be programmed into the money itself to stop transactions. The dystopian future I worried about then is now being celebrated in Congress as a feature. In the White House, research by citizens for responsibility and ethics in Washington, also known as crew reveals that 19 White House officials own between $875,000 and $2.35 million in crypto assets, such as Bitcoin and Ethereum, standing to directly profit from President Trump's March executive order

directing the establishment of national crypto reserves. One of them, special assistant to the President for Communications Ian Kelly, holds all five of the assets, Trump mentioned by name and social media posts as likely candidates for the stockpile. Trump Business Interests. Remember Aqua One Foundation? The firm I mentioned last issue had bought $100 million of the Trump meme coin. A new report by Jacob Silverman in the nation questions, quote, does Trump's biggest cryptobacker really exist?

Quote, it's unclear where the real money powering this deal originated, he writes. It's possible that Aqua One Foundation is a real Emirati company, but it's just as possible that it could be a front for any number of foreign financial or political interests seeking favors from Trump. Meanwhile, shady crypto billionaire Justin Sun apparently doesn't want to be outdone by Aqua 1 and his pledge to spend another $100 million, this time also on the Trump meme coin, to secure the spot of Trump's number one benefactor bestie. Adding to his $75 million of WLFI tokens and the around $38 million he or his company

already spent on the Trump meme coin, this would put the total amount of Sun's Trump. Trump-related token purchases at roughly $213 million. Most Trump meme coin buyers are not buying directly from Trump-affiliated entities, but on the secondary market, meaning that while Trump entities may earn some profit from trading fees, they're not profiting directly from the token sale. However, the timing of Sun's announcement, a little over a week before the first tranche of meme coins held by Trump-affiliated entities are due to unlock for sale, means that it's possible that Sun plans to purchase the tokens directly from one of these entities. So far, at least

$56 million of Sun's money has gone directly to Trump himself via his trust or to Trump family members. That number could nearly triple if they are the ones selling him the tokens. As I wrote in November, shortly after Trump's World Liberty Financial opened its WLFI token sale, quote, the token has strict limitations on token resale and remuneration to token holders and availability only to accredited investors, limitations which were rather obviously crafted to try to dodge securities enforcement. If Trump succeeds with his plans to defang the SEC, I expect these limitations to swiftly change, likely significantly financially benefiting Trump and his family, who received 75% of net protocol revenues in addition to their initial allocation of

22.5 billion WLFI tokens. Well, wouldn't you know it, the team behind World Liberty has just proposed lifting the restrictions to allow WLFI to be resold. As with many other crypto businesses lately, they haven't even bothered to wait for crypto legislation to pass in Congress and are instead relying on the paralyzed SEC to not enforce existing law. Although World Liberty has yet to actually release any of the software they claim they've been developing since September, they say that allowing secondary sales of the token will, quote, bring us one step closer to building a more open, transparent, and powerful financial system. It seems to me like actually building some software might be a bigger step.

But hey, I guess cashing in on the token takes priority. This proposal, which has so far received overwhelming support, could be very lucrative for people like Sun and, of course, the Trump's. Trump Media and Technology Group, the majority Trump-owned company behind troops, Truth Social, has filed to list what it calls the Truth Social crypto Blue Chip ETF, which tracks a portfolio of Bitcoin, Ethereum, Solana, Ripples, XRP token, and Crypto.com's CRO token. The first four tokens make sense for a fund claiming to represent blue chip cryptocurrencies, as those are some of the most highly traded cryptocurrencies.

The odd one out is CRO, which is likely only included because Truth Social is partnering with Singaporean Cryptoexchange, Crypto.com, for custody services. While many applications have been filed, no ETS have yet been approved involving crypto assets besides Bitcoin or Ethereum. Truth Social also announced that it will be rolling out what it calls gems on Truth Social, which it promises will, quote, eventually be connected to a utility token. This is part of a new $9.99 a month subscription TV streaming plan. It's calling the Patriot package, which adds a

another 12, quote, premium non-woke news channels, like Newsmax and OANN, to a list of 27, like Real America's Voice and Lindell TV in the Truth Plus free plan. In regulators, crypto firms circle, ripple, and BitGo have applied for National Trust bank charters, which, if approved, would insert them directly into the heart of the traditional financial system, Quote, stoking the system with banks heavily linked to venture capital and crypto could be a terrible idea, however, wrote Bloomberg columnist Paul J. Davies in what could be the understatement of the year. At least these charters do not automatically grant banks access to master accounts, although it enables them to request access, nor do they allow them to take demand deposits

or engage in lending. These charters, granted by the Office of the Comptroller of the Currency, have historically been hard for crypto firms to obtain, so they have instead resorted to trying to worm their way into the banking world in weird ways, like by buying tiny rural banks. But shortly after these firms applied for charters, the Senate confirmed former blockchain executive Jonathan Gold as comptroller of the currency. In addition to approving banking charters, the OCC will oversee stablecoin issuers under the proposed Genius Act, likely motivating these applications by a stable coin issuers Circle and Ripple, and, quote, stablecoin as a service company BitGo, which custodies the reserves for Trump's USD1 stablecoin.

Another bank called Aribor, which, as you may guess by the Lord of the Rings name, is backed by Peter Thiel, Joe Lonsdale, and Palmer Lucky, has also applied for a bank charter. According to the Financial Times, the new bank will aim to, quote, fill the gap left by Silicon Valley Bank, the tech startup focused bank that failed in March 2023. Around 85% of Silicon Valley Bank's deposits, mostly belonging to venture capitalists and venture-backed tech companies, were uninsured. The FDIC nevertheless covered those uninsured depositors

and spent $20 billion on the whole boondoggle. As is so often the case with so-called tech visionaries, yesterday's warning lesson is tomorrow's blueprint. SEC. The whole tokenized state. stock thing is earning a mixed reception from traditional financial firms and from regulators. While SEC Commissioner Hester Purse wrote that tokenized securities are still securities, SEC Chairman Atkins said in a CNBC interview that, quote, tokenization is an innovation,

and we at the SEC should be focused on how do we advance innovation in the marketplace. The Securities Industry and Financial Markets Association, or SIFMA, a major trade group for securities firms, banks, and asset management companies, sent a letter to the SEC regarding reports that crypto firms were seeking no action letters or exemptive relief from the SEC for tokenized equities, urging them to reject the requests and instead engage in public policy discussions. These requests, if granted by the SEC, would allow companies to engage in activities that are either in an uncertain regulatory state or prohibited by securities laws. SIFMA raised concerns over, quote, fundamental.

questions as to how investors would be protected, and opined that, quote, allowing certain entities to operate platforms outside of this framework raises significant policy questions and regulatory arbitrage concerns. Some in the crypto industry bashed SIFMA for the letter. With paradigm VP of Government Affairs, Alexander Greve tweeting, quote, TLDR, they hate tokenized stocks and want to protect their market position. The old gods of finance do not share power lightly. elections and political influence. Reeling from a dramatic breakup with President Trump and furious at the budget reconciliation bill, Elon Musk declared he would start a new political party called the America Party. As Liz from Men Yell at Me writes, quote, the man who gave us the first AI chatbot to go

full Hitler and a truck so ugly your grandma has been protesting it from her nursing home has decided to invent something else, a new political party. Musk claims it will represent, quote, the 80 percent in the middle of the political spectrum, though this seems unlikely given statements suggesting that the party's platform will mirror his personal political views, which are decidedly not centrist. Asked on Twitter, quote, will America party embrace Bitcoin? Musk replied, quote, Fiat is hopeless, so yes. Whether this new pro-bitcoin party will actually emerge, or Musk will be distracted by the next shiny thing to pass within his field of vision remains to be seen. In the courts, a Nigerian scammer impersonating Steve Whitkoff and the Trump-vance inaugural committee

tricked a donor into sending him $250,000. The actual Whitkoff, a longtime Trump ally now installed as the U.S. Special Envoy to the Middle East, despite having no diplomatic experience, was at the time co-chair of the presidential inaugural committee. Whitkoff and his sons are also deeply involved in Trump's World Liberty Financial crypto business. Using the classic lowercase L's look like uppercase I's trick, a scammer obtained the email address Steve underscore Whitkoff at T47 inaugural.com with an L instead of the I in inaugural, and used it to solicit a quarter million dollars from Ivan and Moona in an email sent on December 24. As Claire Heddles at Notice observed, these just so happened to be the first names of the Moon Pay Crypto

platform's CEO and CFO, and the transfer came from a crypto wallet belonging to Moonpay. Moonpay had told Fox Business days before the transfer that they planned to contribute an undisclosed amount to the inaugural fund. In a surely coincidental development, Moonpay would be chosen only weeks later by Trump's meme coin endeavor to handle payment processing. The FBI recovered $40,353, about 16% of the stolen funds through seizure requests to tether and finance. Mark Hayes, a cryptocurrency reform advocate with Americans for financial reform and demand progress, told notice that if Moon Pay was indeed the victim in this accident, quote, that smacks of favoritism or selective enforcement. If you're friendly with Trump and you're a Trump crypto bro, you get the DOJ

proactively trying to recover your assets, even when there are not too many zeros on a rounding sheet. But if you're an average consumer and you lose your life savings because of a meme coin fronted by those same people, no one's going to help you. The city of Detroit has sued Realty, a, quote, tokenized real estate firm that purchased hundreds of rental properties across the city and sold fractionalized shares to foreign investors. They've also caused hell for renters and the city, failing to maintain the deteriorating and unsafe properties, refusing to pay bills, taxes or tickets, and trying to dodge the law using 165 corporate entities.

In bankruptcies, the FDX estate has asked to pause repayments to creditors based in 49 countries while they evaluate whether it's legal to distribute funds to them. Some of the countries on the list, such as North Korea, Iran, and Cuba, are subject to U.S. sanctions. Others have laws restricting crypto transactions. According to FTCS, residents of the potentially restricted U.S. countries hold around 5% of the value of all potentially allowed claims, with 82% of the potentially restricted claims belonging to Chinese creditors. FTX has proposed retaining attorneys to evaluate the feasibility of repaying residents of each jurisdiction. If it's not feasible,

after an objection period, FTX may forfeit payouts to residents of that jurisdiction. A lawsuit by the bankrupt Celsius platform against offshore stablecoin issuer Tether has survived a motion to dismiss. Celsius alleges that Tether sold off 39,500 Bitcoins held as collateral for a loan in a fire sale at lower than market prices to recoup the loan, violating their lending agreement. Some headlines have described this as a $4 billion lawsuit based on the idea that the amount of Bitcoin would be worth around $4 billion at Tate. today's substantially higher prices. However, even if Tether did violate the lending agreement that required them to provide Celsius with 10 hours to come up with additional collateral to avoid defaulting on the loan, it seems unlikely to me that Celsius would have been able to do so if given the opportunity. Celsius was on fire and spiraling towards bankruptcy at the time,

failing to repay other loans, and I'm not sure where they'd have found said collateral. It's an interesting lawsuit for a separate reason, though. Tether failed to convince the judge that the claims were a, quote, impermissible extraterritorial application of bankruptcy laws to a company based outside of the U.S. A lawyer speaking to DL News described the ruling as, quote, a pivotal moment that could potentially reshape the legal landscape for cross-border cryptocurrency disputes. Outside the U.S. The EU's financial oversight body is reviewing Malta's adherence to the EU's, use markets in crypto assets, or Mika regulations, after the small island country fast-tracked the authorization of a crypto firm despite, quote, material issues that remained unresolved or pending remediation at the time of the authorization.

CoinDesk has theorized that the unnamed firm might be the Seychelles-based OkX crypto exchange, which was granted pre-authorization by Malta shortly before reaching a $500 million settlement in a U.S. criminal case. Elsewhere in crypto. Sad news, folks, another planned crypto island bites the dust. This one was Satoshi Island, which I mentioned briefly all the way back in Issue 6, when I was interviewed for an ABC Australia article about it. This one had its sites set on Vanuatu, an island northeast of Australia and west of Fiji.

Naturally, Satoshi Island sold a bunch of their, quote, land-deed NFTs before actually building any of the stacks of modular homes depicted in and digital renderings, and they never seemed to tackle the problem that the land they were selling to NFT holders couldn't actually be sold. In January 2022, the Vanuatu Financial Services Commission warned the project, quote, could be a scam. Now the Satoshi Island Twitter account has announced the termination of the agreement between Vanuatu and Satoshi Island, seemingly due to Satoshi Island's failure to actually develop the project. Fear not, they're, quote, currently exploring a voluntary buyback.

Hopefully they'll work a little harder on that than they did the island residences. They're not the only crypto project to shut down recently. Three years after stopping withdrawals in the wake of the Three Arrow's capital blow up, crypto yield farming project Fin Blocks is officially pulling the plug. They'd drawn in customers with promises of, quote, up to 90% APY on your crypto, and even claimed that deposits were insured up to $45 million. It turned out that they, along with what seemed like half of the crypto industry, were issuing uncollateralized loans to the Three Arrows Capital hedge fund, which I'm sure was working out

great for them while the number was going up only. After the crisis, FinBlocks converted customer funds into a FinBlocks issued token called FBX, which is now trading at a price so close to zero that crypto trackers resort to using scientific notation. FinBlock's founders maintain that they clearly explained the FBX conversion to customers, who then opted in, but some customers say they never agreed to it. The Web 3 is going just great recap. There were five entries between July 1st and 11, averaging 0.5 entries per day. $44.45 million was added to the Grift Counter. Moon Pay apparently got scammed out of a $250,000 donation to the Trump inaugural fund. The Kinto token crashed amid community claims of a rugpole, while Kinto,

claimed they were hacked. 2.2 million dollars in user funds were stolen from texture, although the hacker returned 90%. Security researchers disclosed an exploit that put over $10 million across multiple protocols at risk, and GMX Exchange was hacked for $42 million. In the news, Dave Troy and I joined Gil Duran on his new Nerd Reich podcast to talk about the history and ideology behind cryptocurrency and various monetary policies, and how cryptocurrency Cryptobillionaires are systematically capturing politicians, regulators, and the financial system. That episode is titled Big Crypto's Assault on Democracy. I also went on the podcast Nobody Lissons to Paula Poundstone to talk about cryptocurrency,

Trump's various crypto businesses, and the future of crypto policy in the United States. That's episode 365 titled Cryptography with Molly White. Worth a read. I really enjoyed Evie's essay in her fuzzy notepad blog on what she calls quote, the whatever machine. It touches on artificial intelligence, nostalgia for when the web felt more human, and the sad trajectory of Bitcoin. That essay is titled The Rise of Whatever. Parker Malloy's article about the new Superman movie isn't so much about Superman as it is about the, quote, manufactured outrage machine that, quote, takes the most innocuous statements and transforms them

into culture war ammunition, and, quote, about how the right-wing ecosystem has become so reflexively oppositional that even basic human kindness reads as a partisan attack. It nicely tied together two other things I've read or listened to lately. Timothy Geigner's article in TechDirt about Idaho's attorney general opining that a classroom sign reading Everyone is Welcome Here, needed to be taken down as a prohibited political statement, and an episode of the Citations Needed podcast, the one about media and propaganda, not to be confused with my own S-List publication, about how primarily democratic politicians and liberal-leaning news outlets manufactured an anti-Semitism controversy over New York mayoral candidate Zohan Mdani by demanding he condemn a pro-Palestine slogan that

some interpret as anti-Semitic, which then quickly morphed into false claims that Mimdani himself uses the slogan and is an anti-Semite. Parker Molloy's article is titled, They're Literally Angry at Superman for being nice, and it's published in the present age. Also, if you're interested in my fiction reading recommendations, I published my June reading recap to TikTok and YouTube. I've been trying to do one of those every month since March. They're all on TikTok, and they're in a playlist on my YouTube channel if you've missed the previous ones. That's all for now, folks. Until next time, this has been Molly White. Thanks for listening to this issue of the citation-needed newsletter. If you would like to support my work with a free or pay what you want subscription to the citation needed newsletter,

or if you would like to receive these issues in your email, go to citation needed.news. If you enjoyed the podcast version of this episode, please consider leaving a rating or review in your podcast player of choice.