The Breakdown - A Presidential Campaign Crypto Milestone

Episode Date: May 23, 2024

Former President Trump becomes the first major party candidate to accept crypto, the latest on the ETH ETF, and the gear up for the FIT21 vote. Today's Show Brought To You By Ledger - 5% to Bitcoin Developers When You Buy https://shop.ledger.com/pages/bitcoin-hardware-wallet Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Wednesday, May 22nd, and today we are continuing our big, crazy crypto-political week. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link of the show notes or go to bit.ly slash breakdown pod. All right, friends, today we are continuing our beat-by-beat moment-by-moment coverage of all of the quick-changing realities in Washington, D.C. when it comes to crypto. And to be honest, even though

you'll hear a bunch of interesting things, today is kind of the quiet day, because later today we have the vote on the Fit 21 Act, which will shape a lot of what comes next. But we kick off today with an announcement from the Trump campaign, which has followed through on their pledge and are now accepting campaign donations in crypto. The first time a major party candidate has done so. Donors can now pay using Bitcoin, Ethereum, Salonar, Ripple, and USDC, as well as Dogecoin and Shib. The Trump campaign said in a statement, this addition to President Trump's already groundbreaking digital fundraising operation marks the first time a major party presidential nominee has embraced cryptocurrency for donations. Biden's surrogate Elizabeth Warren said in an attack on cryptocurrency

that she was building an anti-crypto army to restrict Americans' rights to make their own financial choices. MAGA supporters now with a new cryptocurrency option will build a Crypto Army moving the campaign to victory. Which, if you take nothing else away from that, the anti-crypto army meme has now been explicitly weaponized by the other side, with the army and war analogy coming to its natural head. This crypto donation option was promised to NFT holders during the now notorious event earlier this month, where Trump said he's good with crypto in any of its forms. The fundraising platform is being powered by Coinbase Commerce. Although Trump's crypto position has become a major story in our corner of the internet, the topic has yet to make

it onto a list of issues on the campaign's website. Certainly, the Biden campaign is beginning to pay attention to the size of crypto fundraising. In a message sent to political donors the same day, the president's campaign said, folks, this couldn't be any more serious. Cryptocurrency executives and oil barons are coming out of the woodwork for Trump. They're rushing $800,000 checks at glitzy events. Now Trump is outraising us. He raked in 76 million total in April, over 50 million of it coming from a single gala in Palm Beach. The campaign repeated their message of Trump's billionaires, and frankly, this is what I've seen happening for the last couple years. The centerpiece of Elizabeth Warren's antagonism towards crypto has been that she just saw it as another money thing and so as something to be roundly condemned. Honestly, if you go back

to hearings a couple years ago even before all the anti-crypto army stuff, it's very clear that she didn't buy or even want to consider any of the grounds up, decentralized aspects of this. If it had to do with money, it must be the same corrupt system that she was fighting before, and so screw it all. As much as it seems like the Democrats may be revisiting some of their crypto-propos, policies, they're still using this language, cryptocurrency executives and oil barons. The connection couldn't be clearer. To the extent that you're trying to find bigger signal in all of this, I'm not sure how much we should take from a single fundraising email. I'm much more interested in more substantive communications from the White House and from leading Democrats when it comes to

whether it actually appears that they are shifting their position on any of these questions. Now, speaking of shifting their position on these questions, after Monday's shock revelation that the SEC will likely approve Ethereum ETFs, many assume the pivot was politically motivated. A source familiar with the situation seems to agree telling the block, it is a completely unprecedented situation, which means it's entirely political. The unprecedented situation is that exchanges have been told to revise their 19B4 filings on short notice in preparation for the approval deadline on Thursday. Meanwhile, S1 filings that describe the ETF products are yet to receive comments from SEC staff. In the lead-up to the Bitcoin ETF launch, S-1 revisions took several weeks. Staff at the asset managers and

SEC reportedly worked through Christmas to get them done. We haven't seen anything close to this kind of activity so far on the Ethereum products. S-1s and 19B4s are handled by two separate divisions of the SEC. It's technically possible but extremely unusual for the approval process to be split into two stages. The block source said, they're doing the equivalent of writing the term paper the night before. They're not even internally coordinated yet, which is why this is most likely a political decision. The issue is that the Democrats desperately need young people to go out and vote for them. And the main positioning, if you look at what Biden is doing from a campaign perspective, is to position himself as a forward-looking octogenarian.

Coinbase president and COO. Emily Choi went on the record to discuss the rapid turnaround at the SEC. She said, The sense is that the tone at the SEC has just changed literally overnight based on some feedback, it must have gotten from seeing the SAB-121, and probably the administration sensing some panic. Galaxy Digital CEO Mike Novogratz is the only one saying the quiet part out loud, stating, feels like someone at the Biden White House made a call and said, guys, we can't be the party against crypto anymore. Elsewhere in the interview, Novogratz commented on how insane the partisan divide on crypto policy had become,

adding, it almost became a purity test, Republican good for crypto, Democrat bad for crypto, and the Democratic regime woke up and said, this is crazy. He suggested that surrounding the vote to repeal SAB-121, Democrat Senate leader Chuck Schumer likely told Elizabeth Warren, enough, this is becoming dumb. Nate Garassi, the president of the ETF store, though, is more skeptical that politics had anything to do with it. He said, once the SEC approved Ether futures ETFs that likely sealed the fate of an approval outcome for spot ether ETFs. I strongly suspect the SEC learned an important lesson from the circus atmosphere surrounding the spot Bitcoin ETF approval process and decided to approach spot Ether ETFs much more quietly. He added that the Bitcoin ETFs had already ironed out most of the sticking points for these

products, adding that made it much easier for the SEC to wait until the last minute to engage with exchanges and issuers. Hello Breakers. Today's episode is sponsored by Ledger. As another cycle ramps up, It's another chance to think about your Bitcoin custody best practices, and of course, to help all the new folks do the same. Ledger is the global platform for securing Bitcoin and other crypto. Ledger combines both hardware wallets and the Ledger Live app to offer the best way to buy, sell, swap, and stake without sacrificing on security or self-custody. Ledger features cutting-edge technology in the form of a certified secure chip and a proprietary operating system, but also brings ease of use. This makes Ledger a safe and secure way to manage your digital assets without all the stress. Check out the link to the Bitcoin Ledger Nano in the show notes.

5% of all sales of the Bitcoin Ledger Nano go to support Bitcoin development. Thanks once again to Ledger for supporting the breakdown. You guys have probably heard Nate's name a lot on this show because his commentary is so often spot on. But on this one, I am going to have to hard disagree. I think he's right in that the approval of Ether's futures ETFs did mean that there would be eventually a spot ether ETH, but I think that the idea that they could wait until the last minute to not get a carnival atmosphere just probably doesn't bear out. Bloomberg's Eric Balcunas also disagrees saying that from what he's hearing, this all happened on Monday and was a surprise to all,

even SEC staff. Aside from the politics, it seems like it's all hands on deck for asset managers rushing to tidy up their ETF filings. Filings for listing on the CBOE were updated on Tuesday morning with NASDAQ and NYSC filings, no doubt following close behind. One source said that the SEC had requested the same updates universally across all products. Another commented that the request for changes were relatively light. The biggest modification is that staking has been removed from the products. When staking was added to some of the ETFs, it was generally considered a speculative move unlikely to meet SEC approval. Galaxy Digital head of firm-wide research, Alex Thorne, claimed that a lack of staking could be a big deal for some customers. He tweeted,

lack of staking in ETHETPs would be material for returns. If you bought 10,000 of ETH on Merge Day in September 2022, and held it until today without staking, you underperformed by 8% over that period against someone who bought in state. Still, the reply section pointed out that complaining about an 8% underperformance for an asset that doubled in price is probably not a huge problem. Still, for crypto-native firms with the sophistication required to stake their eth, it would make the ETFs a vastly inferior product. As for the timeline when these products would begin trading, analysts are at a bit of a loss. This split approval process would be highly unusual, as is doing everything at the last minute. Speaking to the S-1 approval, Bloomberg's Eric Balcunis

again said, we don't know exactly when that will be, but all of this is now logistics. To get over the mountain of possible approval is the big thing. Now it just comes down to logistics and legal documents and stuff like that, which, as far as I heard, everyone was caught flat-footed yesterday. And so I don't know how fast the fast track is, but it's probably going to be a mad scramble for the next couple of days, maybe even weeks. He added that it was a benefit that everyone involved has already been through the revision process for the Bitcoin ETFs. So, quote, there's going to be a lot of cut in pace. James Safart, the other Bloomberg ETF analyst honed in on the main point tweeting, it's happening, still potentially a long way from launch, but these

filings prove that all of the rumor and speculation and chatter have been accurate. Need to actually see SEC approval orders on all the 19B4s, and then we need to see S1 approvals. Could be weeks or more before ETF's launch. One interesting point is that the products are still listing under the commodity-based trust shares rule. Jake Trevinsky, the chief legal officer of Variant Fund, tweeted, this means if the SEC approves the Spot ETH ETF, it will have to admit that unstaked Eath is not a security. That would be a major policy move from a commission that has consistently refused to acknowledge any asset other than Bitcoin as a non-security commodity. Have we earned it? Finally today, by the time you're listening, the House vote on the Fit 21 bill has likely

already taken place, but the political jockeying from Tuesday is still informative. Throughout the week, it's been very unclear how hard Democrat leader Maxine Waters has been pushing her colleagues to vote no. She has said she has strongly opposed personally, along with House Ag ranking member David Scott. Much more clear is a group of eight Democrats asking for support to pass the bill. An internal memo was sent by representatives including Wiley Nichol, Josh Gottheimer, and Jim Himes. It said, as Democrats, we feel this is a crucial opportunity to regulate the digital asset market. This should not be a partisan issue. Nickell used his time on the floor on Tuesday to make the case for the bill. Among many other points, he reminded colleagues that, quote, this common sense legislation is

designed to stop another FTX from happening by giving regulators increased power over bad actors. The biggest news regarding Democrat support was reporting from the prospect that Nancy Pelosi is considering voting for the bill. Although Pelosi is no longer a part of Democrat leadership, the two-time House Speaker remains a major power broker within the party. Pelosi is still one of the most effective Democrat fundraisers, and her opinion holds a huge amount of sway with House Democrats. Her support of the bill could give many lower-ranking Democrats tacit approval to defy waters. Early in the morning, we got a full screed from SEC Chair Gary Gensler. He leaned into the idea that giving crypto tokens their own clear definition outside of securities law would somehow wreak havoc

on existing capital markets. He claimed that the bill would, quote, create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors in capital markets at a measurable risk. CFTC chair, Rosten Benham, presented to House Democrats in favor of the bill on Tuesday. Once the bill passes the House, and it seems almost certain that it will, it will need to move through the Senate. At this stage, it seems that relatively little work has been done to get the bill ready for a Senate vote. House committee staff reportedly said they've been having increasing discussions with their Senate counterparts, and added that they're open to attaching the bill to must pass legislation towards the end of the year.

Roshan Colbert, head of policy at DYDX and a former staffer to Democrat Senator Cory Booker said, for the Senate to take this up with the committee process to go through, that would be needed to really consider this bill in full. So unfortunately, I think there's not a great chance of Senate consideration this Congress. House Financial Services Chairman Patrick McHenry said, What we want is to have a substantial vote total this week in the House that will show momentum. He mentioned that this bill would have gone to a vote a long time ago if House business had not been derailed by the replacement of the Speaker during the end of last year. Still, the delay may have benefited the bill's chances, with McHenry noting that his fellow lawmakers now have an

awareness of the existence of crypto voters. Reflecting on his retirement at the end of the year, McHenry said that his younger colleagues would take up the mantle of crypto policy. However, he added, we're going to drive like hell to get whatever we can out of this Congress. Whatever policy, good policy, we can get done. We're going to try to get done. There is bipartisan support for that drive. So that's where we will leave things today. Tomorrow should be a big one. I'll try to record as early as possible and get it out to you. For now, though, I just want to say one more big thank you to the sponsor for today's show. Check out the ledger Bitcoin Orange Nano. 5% of sales will go to support Bitcoin development. Until next time, be safe and take care of each other. Peace.