On The Brink with Castle Island - Rep. Tom Emmer (R-MN) on Crypto's Legislative Wins (EP.529)

Episode Date: May 24, 2024

Minnesota Representative and House Whip Tom Emmer joins the show once again to talk about the policy sea change in Washington and recent legislative successes. In this episode: The House passes Emmer's anti-CBDC bill Trump's embrace of crypto and what that means Why some Democrats and the White House have changed their tone on crypto Congress votes to repeal SAB121 in defiance of Biden's veto threat Is the influence of the progressives in DC waning with regards to crypto? Will Biden follow through on his SAB121 overturn veto threat? FDIC chair Marty Gruenberg's planned resignation and what that means Whip Emmer's thoughts on stablecoin legislation The SEC's reversal on the Ethereum ETF The importance of the FIT21 act and its prospects in the Senate Whip Emmer's legislative expectations over the remainder of 2024 Whip Emmer's prior OTB episodes:  Rep. Tom Emmer (R-MN) on FTX, the SEC, and the House Crypto agenda for 2023 (EP.382) Rep. Tom Emmer (R-MN) on MMT, CBDCs, and crypto policy for 2022 (EP.276) 

Hello, welcome back to On the Brink. This is Nick Carter. Today, we're sitting down once again with Minnesota Representative and House Whip Tom Emmer. He's been on the show a couple times. Couldn't be a better time to have Representative Emmer back on the show, frankly. This has been a breathtaking couple weeks in Washington, from the passage of the Fit 21 Act to both houses of Congress voting to overturn Sab 121. to the resignation of Chair Marty Groomberg. To the recent passage of Emmer's anti-CBDC bill, it's been a breakneck pace, and it seems like things in Washington are changing for the better. We sit down with Mr. Emmer and talk about all these things, his views on the legislation, and what it means for Washington's pivot on crypto.

Let's dive right in. This is a pretty historic week, I would say, in terms of policy and legislative. developments in crypto and we're honored to have whip emmer on the show again for the third time tom welcome back to the show thank you nick it's good to be with you especially it's been a great two weeks i would argue yeah i mean i don't even know where to start so many things have happened it feels like there's a real sea change in washington as it pertains to crypto i guess we'll just start with the uh the most recent development which is the house just minutes ago past your

bill, the anti-CBDC bill. So tell me a little bit about how that went. It went well. We ended up having it be bipartisan, although we didn't get the number of Democrats we got on the market structure bill that we passed yesterday. I still take the position, Nick, that this is a nonpartisan issue. It is, and literally what you saw with the breakdown today, and this is the anti-surveillance bill, if you will. You got a whole group. of people in this country that argue, oh my goodness, we're falling behind China. China's got the digital yuan and they're doing business around the world. You know what? I don't let that take your eye off the ball. The digital yuan is being used as a government surveillance tool to collect

financial data, very personal private financial data on citizens. And in China, they're building social credit scores based on behaviors. And that's just not an American value. And people will say to me, well, that would never happen here. Well, then what happened up in Canada? When Trudeau said, extraordinary resors, I'm going to shut down all of the digital transactions and basically froze all the accounts of the truckers that were protesting against him because of the 22, I think it was 2022 vaccine mandate. So what this bill says, this bill simply says you cannot federal government create or implement a central bank digital currency unless you can emulate cash. And that means open, permissionless, and private with a capital P. And we know right now they cannot do the

private. But if they ever could, then they can propose it. The other piece of the bill, and there's more to it, but it's this simple, is if they ever do get to that point or they think they did, Nick, they have to come to Congress to get authorization before they create this government surveillance tool. Because if this is not done right, it literally is the most personal data and behaviors that our government will be able to collect. So just to dwell on this topic for a minute, I think a lot of us in the cryptos space feel passionately that CBDCs are a real threat because we don't believe that if implemented, they would retain the same properties of cash, even though it would be nice to believe that.

It doesn't seem like that's the direction the digitization of finance is going in. In terms of stable coins, one reason that we're excited about them is they do have some privacy characteristics that do emulate cash. How do you see stable coins fitting into this whole puzzle? I mean, obviously, their reference in the Fit Act, but what's your sort of current posture on stable coins? Well, you've got to be very careful with Fed-oriented bill drafting. What do I mean by that? Well, there have been proposals on the stable coin legislation that it's going to be a state-based system, which is what I believe in, right?

But each state has to get approval from the Fed. That's not a state-based system. We have to be very vigilant. We have to pay attention to what's going on because a lot of these bills get drafted by people here in Washington, D.C., who literally are former employees of the Fed or the Treasury, or they want to be employees of the Fed or the Treasury. And I go back to it, if this is not a Republican-Democrat thing, what this comes down to is central, control, top-down central control versus decentralization of not only finance, but of the population that we do not need to have concentrated information in one place if we decentralize.

And then Nick Carter and Tom Emmer can do business together, peer-to-peer business. The control freaks, and I'll put the senator from Massachusetts, who shall not be named, I'll put her as one of the leaders of that thought process. They don't want to give up control. And by the way, if they could get more control, which is what you just referred to, collecting this data, God knows what they do with it. I mean, they literally, if you think they won't weaponize this tool against their political adversaries, think again.

They will absolutely use it to choke off. I mean, look at what Marty Gruenberg and these guys have tried to do to the digital assets crypto space by literally trying to choke off your banking relationships. Yeah. I mean, this is insane. So, speaking of our dear friend in Massachusetts, I mean, it's been an incredible couple weeks here. It seems like the tone in Washington has really shifted.

I mean, the tone from the White House specifically has shifted. Of course, Trump has now embraced crypto. So what do you make of this possible realignment we're seeing certain Democrats becoming more pro-crypto to peers? Of course, your Democrats voting on the Fit Act. What is your read of why the winds have changed so dramatically in Washington recently? So Gary Gensler, the worthless head of the SEC, who has absolutely no credibility. They promulgate this Saab 121 rule that says banks, traditional banks.

banks who custody digital assets or more specifically crypto, even if they're not lending against it, this rule said they had to include this on their balance sheets for their loan to asset leverage ratio, right? Totally inappropriate. We had a CRA that might flood from Nebraska. Great crypto guy was on. It was his CRA. May 8th, if your listeners go look, May 8th, President Biden sent out a letter with a veto threat for Saab 121, the CRA. That night, May 8th, President Trump literally announced, I am the pro-crypto candidate. And from that point forward, Nick, we have seen some flashes of light that are really interesting, like Chuck Schro-Crypto candidate. Schumer of all people, leading 11 Democrats in the Senate to vote for the CRA that Joe Biden said he'd

veto. And then you saw 71 Democrats in the House yesterday joined with Republicans to vote for a digital assets market structure bill. I mean, there's definitely something going on. And I got to give, even though, again, this is central government, central control people versus a liberty-minded, self-determination people that want to make our own choices, it's not Republican Democrat. You've got to give President Trump credit because he recognizes and he has listened to those of us that have been talking about this. There's an age group. Let me put it this way. If you look at the people who are opposing this legislation in Congress, Nick, they're dinosaurs, they're old people. Young people, this is where they live.

The voting block 18 to 40, they don't want people that look like me or older telling them, you should be worried about the internet. You should, no, they want the internet to explode. They want every opportunity they can to make it better and to make the world a better place. They do not trust politicians who are telling them no. The Elizabeth Warrens, in this case, Joe Biden. And I think what has happened is once Trump made that statement, I mean, he'd been giving us indications already, right?

He said there will never be a central bank digital currency. But he literally when he came out and said, I am the pro-crypto candidate, I think that really caused the Biden folks to shudder and go, oh, my gosh, what are we going to do about this? Because we already got all these other problems with different voting bases. This one has become very active, which I've got to compliment you and everybody involved in not only raising your voices but becoming active so that you have become a political force in Washington, D.C. and it's really amazing to see. Well, you saw an expression you may not

be interested in politics, but it's interested in you. Politics is certainly interested in the crypto space, so we don't really have a choice, really, except to get involved. Well, you know what they say, Nick? They say, if you're not at the table, you're on the menu. I have been surprised, though, because it's not typical of the Democrats to follow Trump's lead on anything. And of course, he goes to this dinner at Mara Lago and he says, I support crypto, reversing himself from his prior view a few years ago. And I could have seen the Democrats just go the other way and say, well, we're, of course, diametrically opposed to Trump on this matter. Do you think that they maybe saw something in the polls saying, oh, the crypto? single issue voters, that's a bigger block than we thought it was. You know, that could swing the

election. Absolutely, I do. And it's not just it could swing the election. You start combining this with traditional Democrat voters, black, Asian, Hispanic, even liberal Jews that are now actually looking at Republican candidates. They're not going to vote for Joe Biden. And you start combining all the young people and the innovators and the entrepreneurs that are in this space. Yeah, this is, it has a cumulative effect. And look, I don't expect them to go against Trump. I expect them to recognize because what Trump's doing is he's telling people. I have evolved.

I've learned. I believe this is the future and the future is now. I will be the pro-crypto guy. If that is your issue, I'm the guy. And Biden, I think that scares the daylights out of them because it is a very potent group. And I think it is bigger. If you see just the sliver that we have when you look at polling, well, that usually is just the tip of the iceberg. There's a much bigger piece below that.

So I do think they're very concerned about it. So Saab 112 is an interesting one because that's something we've been talking about on this podcast for years. And it was a very esoteric and very niche issue, but it's very problematic because it meant that the largest financial institutions, banks couldn't really touch crypto. at all. They had to treat it like an asset on their balance sheet, even if they were custodying it for a third party. And it always surprised me that Democrats would take the other side of that, that rule made by the SEC, because in my view, this would allow the largest, most regulated financial institutions to take charge of crypto custody, which if you wanted to centralize power, for instance, that would be good. You would have at least more oversight over the crypto custody market.

So I always found it very curious that the Democrat posture on Zab 112 was being in favor of it. Well, remember, though, this is coming from two people who, you know, Elizabeth Warren and Gary Gensler, Elizabeth Warren, clearly over the last two weeks, I think we see evidence that her influences is starting to wane. And Gary Gensler, I mean, that guy's just lost all credibility in this space. He's, it's interesting when you have 21 House Democrats vote with the Republicans on the CRA to eliminate Saab 121. And you've got 11 Democrats in the Senate, led by Schumer again, voting against their own administration in an election year on an accounting issue. This is, this is pretty big.

And look, Gensler, we know, is a bad faith regulator. And I think that's become way too obvious even for Democrats. It is remarkable that this became a Senate and House priority. I mean, this is a minor accounting issue should never have escalated. We should never have seen the Biden admin feuding with his own party over issuing a veto threat. It should have been overturned straightforwardly. What do you make of the veto threat now? Do you expect Biden to follow through on that?

I think what Biden should do. If he's smart politically, he would just end the rule. He wouldn't sign the CRA. He just announced that the rule has been declared void and invalid. That way, he doesn't have to violate his veto threat and everybody gets what it is they wanted. Saab 121 is no longer on the books. But these guys just continue to surprise me by their incompetence

and their ineptness. It's like every time you tell them, this is a good idea. They're like, well, no, we have to do just the opposite, right? Not listening. Here's the problem. They're playing politics with all these issues, Nick. Again, not to be partisan on this, but they're playing politics with all these issues. And because they're doing that, they are failing to listen to the people that this is so important to that. And I think it doesn't matter whether you're a Republican, a Democrat, or other in the crypto world, if the elected officials, regardless of their party persuasion,

are not going to listen to you, you're not going to support them. So again, there are single issue voters that I know all over the place that give financially to both Democrats and Republicans who agree with them on crypto issues, right? Those people are single issue voters, and they are playing a bigger and bigger role, not just by getting involved, but financially. And I think that is not lost in the White House. So one of the developments I want to talk about, which personally was very meaningful to me was the resignation of Marty Grumberg, FDIC chair.

I've agitated against them for some time. I mean, frankly, I was scandalized by what I called choke point 2.0, which as you were refer to is the systematic debanking of crypto firms, which he executed chokepoint 1.0 under Obama, then extended it targeting crypto under Biden and went further than that. In fact, the FDIC is now systematically targeting fintechs, banking as a service embedded finance, which people actually haven't realized yet in my opinion. Then he faces a scandal over basically a bro culture at the FDIC, the culture of serial misconduct, 500 employees reported that this culture existed. Democrats initially closed ranks, or at least Elizabeth Warren supported him, and then he

resigns. What do you make of this development? Is this more validation that the Warren camp is losing some power here? I would agree with that. Maxine Waters also tried to close ranks and support him. But let's face it, Marty Brunberg is a... a lazy, destructive, and apparently a wildly toxic regulator. I wish he had resigned.

But unfortunately, Nick, what this creature of the swamp is doing is he's announced that he will resign as soon as his replacement has been identified. He's just doing what these rodents do all the time. He's trying to hold on. And by the way, this is without party persuasion. I don't care. who this guy, he's been there for a couple of decades and he's actually led the FDIC for 13 years. Like you pointed out, this 2.0, choke point 2.0 wasn't his first rodeo. I mean, these guys are corrupt.

They're dishonest. And really what he's doing here is if he were to literally resign, which he should have long ago. But if he would, then you would have a two-two tie on the voting out of the FDA. and Biden wouldn't be able to, man, more importantly, it's not Biden. Our senator from Massachusetts wouldn't be able to advance her agenda. Yeah, I know it's kind of hard to tell what's going to happen next, but I suppose Biden has to propose a successor to Gruenberg and then be confirmed by the Senate. Is that how that would work?

That's right. That's exactly right. But you don't need that. He could resign today. I guarantee you, there are other. people at the FDIC that could step in as interim leaders until you do that. This is a complete, you know, hide the ball. He's given you a shiny object. I'm going to resign, but I'm not leaving. My hope is that there is a reprieve for firms that are doing something

technologically progressive and enabling them to get banking because as far as I can tell, it's actually been getting worse, the exclusion from the banking system, not better. Yeah, but I think sub 121 is the beginning of good things to come. Right. Yeah, and it's been very interesting to see the large banks generally supporting the crypto space. People think crypto is bad for the banks. But the banks were themselves saying, we want to service crypto. We want to obtain other forms of revenue, non-interest revenue, for instance, custody and

crypto. People think it's banks versus crypto. But in this case, it's not. It's the banks saying we actually want to do business in the crypto space. we've been systematically walled out of doing that and stable coins for that matter too. Well, stable coins as we go forward are huge. If it's done right, this is the whole thing about a CBDC. I don't need the federal government creating more money and trying to use a CBDC, not just as a surveillance tool, but as a monetary policy tool. Yeah, no, don't be doing that.

The whole reason that Bitcoin was created was because of the mismanagement of our monetary system over a long period of time. People didn't trust what these guys were doing. And now they think they're going to take that inside of the system they've already built. Our private banks understand, I think, what's at stake. There's a huge marketplace out there for both traditional banking and more importantly for the digital asset banking that is going to take. place and grow in the 21st century. And I think that's why you have willing partners that want to be involved in this process. And guess what? I firmly believe that if we do this out in the private sector, it will be so much better than if the government tries to snuff out all the competition,

especially when you look at stable coins. Could you imagine, Nick, if we created a dollar-backed stable coin that can be created anywhere, not just in this country. It can be traded anywhere. You can create it somewhere else, but it has to be, if we're going to recognize it, has to be backed by U.S. dollars. Guess what? You know the cab driver down in Brazil would love to do business in dollars. Can't do that right now. But if you have a dollar back stable coin, they could. If we do this right, the benefits to this country in solidifying our reserve currency status and being able to lead in this area, I think will be insured. Yeah, I've noticed a tonal shift from folks even in the

Federal Reserve acknowledging this point that you make that stable coins extend the reach of the dollar, they extend the property rights associated with the dollar, and they're a buyer for U.S. debt, which we have other sovereigns divesting out of U.S. debt. Stable coins as of today are the 16th largest, quote, quote, sovereign buyer of the debt. They're 160 billion. And that's even before they've been regulated in this country. That's right. Unambiguously, good for dollar dominance, as far as I can tell.

Two more points to cover here, Ethereum ETF. So the SEC made a stunning about face on the Ethereum ETF. What do you make of this? I mean, is this just a nakedly political decision? Did they see the light on Ethereum? A pretty shocking development, frankly. Look, the SEC's ideological inconsistency on nearly this exact same topic has literally been litigated and the SEC lost, right? I mean, think about it.

I'd be surprised if they do not approve the ETF, but I would, the Ethereum, ETF, but I'd expect them to make it painful. Everybody out there better not assume all is peaceful in the valley. I think they've lost every step of the way. So I wouldn't be surprised if they approved it, but they're going to make it a painful process, in my opinion. I think Thursday is the deadline for the SEC's. It is the SEC deadline to approve CBO's application.

So we'll see where it goes. That's today. That is today. The FIT Act, Fit 21, that was also pretty landmark past the House of a lot of Democrats as well. This specific legislation, obviously it's really validating to see a super bipartisan piece of legislation. And a piece of legislation that carves out regulatory boundaries in terms of playing out. what's the role of the CFTC versus the SECF? That's what we've been waiting for all these years.

What do you make of this bill? I mean, what's the significance of it in your mind? Well, it's not perfect, but it is a very good start. And literally what it's doing is because people like the head of the SEC right now, because they haven't issued any rules, because they haven't issued any guidance where entrepreneurs, innovators, creators can see what the rules of the road are going to be so they can evaluate what the pros and cons of doing business here in the United States are. They've been driving this innovation away now for years.

This bill is the first step towards creating a regulatory framework that people can understand and people can rely on. If this becomes law, if it does find its way through the Senate and across the president's desk, you are going to have a situation where a centralized investment contract, right, is under the purview of the SEC.

But when that investment contract evolves or matures into a decentralized project, whatever that goal is, guess what? the SEC is no longer involved. Because there is no central control. And then it takes the commodities and put them where they rightly should be, which is within the CFTC.

So you don't have this machine gun regulator approach that they're all trying to grab a piece of this thing. And I do think it was good. And I think I've already pointed out, it's very interesting to me that all of the members who opposed it are old. They are dinosaurs. Their only understanding is two-dimensional, right? They started reading books. They like newspapers.

They probably still punch the buttons for the radio in their car, right? This is a new world that we're living in. And I think what yesterday showed us is Congress is moving in the direction of recognizing we are now in the 21st century, the technology age, full board. I mean, the end of the last century, it started, but this thing is blossoming while we talk. And I think Congress recognized that yesterday. I think there's a lot more to come. In terms of the Senate, sister bill in the Senate, it's kind of unclear, right? I think most of the work was done in the House for the Fit 21 Act. So kind of unclear what the prospects are for the Senate is out of fair characterization? I think it is right now. But remember, the Senate

is controlled by Democrats and Schumer showed us something we never expected last week on sob 121. And it just depends on where the Biden White House is in what they may or may not do. So no, I wouldn't get overly hopeful. I think there have been some issues with people that are territorial about this stuff. And I'll leave that to you and your listeners to weigh in with their representatives, whether they be senators or members of the House, and let them know. No, look, we need this. We expect this to happen. Let's get over ourselves and get it done. So pretty remarkable two weeks here, some complete victories and some partial ones. What would you say is on your wish list here legislatively on a go forward basis as it pertains to crypto?

What else would you like to see? Well, I want to see the right kind of stable coin legislation. I really do. And I don't think we're there yet. I don't know that we'll get there in the next three, four months. It's just you're into full election mode, campaign mode, which is going to become more and more evident. When we get to July, you've got the Republican convention, August, you've got the Democrats convention in Chicago. And then before you know it, boom, we're there. It's November.

So I wouldn't want people to get a false hope that this is going to have to have. within the next 60, 90, 120 days. But I can tell you, all the work that's being done right now, you could have some opportunities during the lame duck. And even if you don't, I do believe the White House is changing. I think Democrats are changing because they're starting to recognize this is a very powerful group. And by the way, the issues that you're dealing with are extremely potent for everyday Americans.

They don't want their government spot. on them. They want the freedom to self-determine, make their own choices. They want to control their own data. They don't want to be part of an algorithm that, you know, somebody either private or the government has collected all of this personal data and is directing them, influencing them on the internet. All of this is related. And I think once we get to the next Congress, a lot of the stuff that we're doing right now, if it isn't already in law, you're going to a lot more of it and it will be long. I think if it's President Trump, I'm very confident. If it's Joe Biden, if it continues to go the way it's going, I won't guarantee it, but hopefully

we're seeing the last of the senator from Massachusetts influence and of Gary Gensler period and Marty Gruenberg and all of these bums. Well, Tom, I know you're tremendously busy at the moment and as always, we appreciate you work and advocacy on these topics. I mean, especially the cross-examination you gave Chair Groomberg last year. That was awesome. So thank you for your work and congrats on the CBDC bill and can't wait to see what you do from here. Thanks a lot. I appreciate what you're doing.