The Breakdown - Arizona Gov Vetoes Bitcoin Bill

Starting point is 00:00:00 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 Monday, May 5th, and today we are talking about an Arizona veto of a Bitcoin bill and Dems revolting over stable coins. I mean, what is this? 2023? 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 in the show notes or go to bit.L.Y slash breakdown pod. Well, friends, kicking off, Arizona will not become the first state with a Bitcoin Reserve after the governor delivers a veto. Last week, the Arizona legislature passed the first Bitcoin Reserve bill in the nation. It allowed the state treasury and retirement system to invest up to

Starting point is 00:00:54 10% of funds into Bitcoin and other cryptocurrencies, which was, of course, an extremely tentative step into Bitcoin investment. The bill's sponsor, Jeff Weninger, emphasized that these entities only may invest in crypto. He made it clear that the bill was largely aimed at getting approval set up ahead of a future where Bitcoin could become a much more important asset. All the effort, however, was for nothing, with Arizona Governor Katie Hobbs vetoing the bill on Friday. In a letter explaining the decision, she wrote, the Arizona State Retirement System is one of the strongest in the nation because it makes sound and informed investments. Arizona's retirement funds are not the place for the state to try untested investments like

Starting point is 00:01:29 virtual currency. For those who follow Arizona politics, it comes as little surprise that the Democrat governor would overrule the Republican-controlled legislature. Julian Farrow of Apollo Stats wrote, Katie Hobbs is the most partisan governor in America, and possibly in the country's history. That's not hyperbole. In 2024, she had 185 vetoes, 20% of all bills that came to her desk. The previous record was 58. Sadly, not a surprise she killed this Bitcoin Reserve bill. Unsurprisingly, there was a ton of outrage from Bitcoin Circles. David Bailey, the CEO of Bitcoin magazine tweeted, impeach Katie Hobbs, she just screwed over Arizona. Jameson Lop, the CTO of Casa, commented, a little more calmly, this veto will age poorly.

Starting point is 00:02:10 Ironically, the Arizona Pension Fund is already exposed to Bitcoin through a sizable investment in Micro Strategy, which, by the way, guys, I know is called Strategy Now. It's just the most confusing name in the world. So, like X is still often referred to as Twitter. Unfortunately, Sailor is going to have to deal with me calling it Micro Strategy for some time, just for clarity's sake. Back to the Arizona Pension Fund, it holds around $15 million worth of the stock, having more than triple the size of their holdings in the first quarter. Notably, this was one of their best performing positions for last year. Wendy Rogers, one of the Republican state senators that supported the

Starting point is 00:02:43 bill, wrote, I understand the governor vetoed my Arizona Bitcoin Reserve bill. That's unfortunate. Politicians don't understand that Bitcoin doesn't need Arizona. Arizona needs Bitcoin. I will refile my bill next session. If she vetoes it again, I'm sure Governor Andy Biggs will be happy to take credit for signing the bill for this already proven innovation that will protect our wealth. Andy Biggs is an Arizona congressman who just announced his candidacy for next year's Arizona gubernatorial election. Matthew Siegel, the head of digital assets research at Van Eck, pointing out the timing of the veto, tweeting, in the old days, you could bury a veto like this on a Friday night and hope it died in silence. Now, thankfully, moves like this dominate the Saturday morning doom scroll

Starting point is 00:03:20 and help raise money to beat leaders who betray the will of the people. Ask around, it's happened before. Now, of course, this is not the end of the journey. We still have Bitcoin bills moving through other states, with Utah and North Dakota getting close to a final vote. But if anything, this veto underscores how strong the partisan divide on crypto remains. Speaking of, back in Washington, Politicoe reports that Senate Democrats are holding a last-minute revolt against stablecoin legislation. On Saturday, a group of 10 senators released a statement that they could not support the Senate bill in its current form. They wrote, the bill as it currently stands still has numerous issues that must be addressed, including adding stronger provisions on anti-money laundering,

Starting point is 00:03:57 foreign issuers, national security, preserving the safety and soundness of our financial system, and accountability for those who don't meet the Act's requirements. The group acknowledged that the absence of regulation, quote, leaves consumers unprotected and vulnerable to predatory practices, but said they could not vote for the bill if it came to the floor. The list of co-signers included four Democrats who approved of the bill in its initial form, Senators Gallego, Warner Kim, and Blunt Rochester. Senator Gallego posted on Sunday that, quote, This isn't some reversal out of nowhere by Dems. The fact of the matter is, Dems, including me and my team, were trying to negotiate with the Republicans for weeks. The bill that was introduced for floor

Starting point is 00:04:33 consideration backpedaled on a lot of the progress we made and did not include other improvements we sought. It seems they want us to suck it up and vote for this bill without our input. That's not what we expected during this negotiation and not how I operate. Our statement makes clear we won't let them jam us. Looking forward to continuing to get this bill to a better place. Interestingly, the group seems to be merely the public-facing side of resistance to the bill. Politico reports that Senate Minority Leader Chuck Schumer, quote, privately urged Democrats on Thursday not to commit to supporting the stable coin bill. The discussion reportedly came out of a tense closed-door caucus meeting,

Starting point is 00:05:04 with Schumer raising specific concerns around how tether would be treated under the bill. Axios reports the meeting was not intended to be about crypto, but was turned in that direction by Elizabeth Warren. Now, if you'll give me a minute while I go throw my head through a wall, I'll be right back. Okay, back again, Warren apparently raised concerns around the latest Trump crypto scandal. That World Liberty Financial had issued $2 billion in stable coins to settle the fundraising deal between Abu Dhabi Investment Fund, MGX, and finance. Pro-Crypto Democrat Kirsten Gillibrand, one of the co-sponsors of the bipartisan bill, defended her position in the meeting.

Starting point is 00:05:36 She pointed to changes negotiated so far and pledged to continue improving the bill. A spokesperson for Gillibrand said that the senator, quote, believes that the best way to address concerns about the Trump family's crypto interests are by enacting clear regulations, not leaving the status quo in place. Responding to the weekend news blast, Republican Senator Haggerty played a little hardball. He tweeted, We must advance legislation that enshrines American leadership in the digital asset space and protects the U.S. dollar for centuries to come.

Starting point is 00:06:02 That time is now. We have a choice here. Move forward and make any remaining changes needed in a bipartisan way or show that digital asset in crypto legislation remains a solely Republican issue. Now, for clarity from an American political purpose perspective, Although Republicans hold a slim majority in the Senate, any legislation they attempt to pass without bipartisan support will get tripped up by the filibuster. And so it seems Warren and the anti-crypto army are still able to throw their weight around in Washington. Thinking back to the Senate Banking Committee vote in March, regulatory analyst Jason Brett noted that Warren had been visibly displeased with Gallego's vote.

Starting point is 00:06:37 He wrote that she, quote, appeared somewhat shocked and seemed to briefly stare down the freshman senator after his vote. Finance lawyer Scott Johnson commented, The Natsack and other amendments the Dems proposed in the Markup Committee were bat-h-hap. Haven't seen anyone summarize them separately, but if that's their actual line in the sand, then this is all posturing and they don't intend to vote for this no matter what. Mike Dutus of Sixth Man Ventures was amazed that Democrats would rugpole clearly important legislation, posting, Democrats retrading on crucial U.S. Stablecoin legislation,

Starting point is 00:07:04 which many of them already voted to support in committee. This is a bipartisan bill, and stablecoins are the clearest massive-scale use of crypto that deeply benefits U.S. interests. exports the dollar, treasury-backed, desired by the entire world. NYU Stern Professor Austin Campbell wrote a long thread about why the Democrats are scuttling the youth vote by making crypto a partisan issue. The full post is worth reading, but to sum it up, quote, the absolute number one thing you can do to turn young voters away is opposed technology

Starting point is 00:07:29 and side with banks. Now, it feels to me like there is a lot of intrigue here that I frankly don't fully understand. Are Republicans throwing their weight around, feeling like they can walk back some compromises because of a more powerful political hand, with Democrats who generally support the bill and crypto, feeling forced to stand up from a process standpoint, or is this Elizabeth Warren playing spoiler? That certainly wouldn't surprise me.

Starting point is 00:07:52 In any case, what's important to note is that if stable coins can't pass, it's likely that we see the entire crypto agenda derailed. And with Congress running out of time before the midterms, that could mean years before permissive, or frankly even common sense crypto legislation is passed in the U.S. And yet, if politics continues to be politics, there are some strong indicators of the trajectory of crypto pointing positive and mainstream.

Starting point is 00:08:15 Maybe the biggest one is that Apple has announced that they'll allow crypto to be used for in-app purchases. Following a big loss in court, Apple was forced to allow developers to offer users' external payment methods without taking a 27% cut. Crypto developers can now offer direct links to crypto payments, enabling NFT marketplaces, direct crypto purchases, and a ton of defy functionality directly in iPhone apps. The rule changes are only applicable in the U.S. App Store, so could also be open up a big point of differentiation between regions. Peter Pan of 1KX Networks believes the floodgates

Starting point is 00:08:45 are now open, tweeting, mobile-first consumer crypto is now possible. Crypto lawyer Gabriel Shapiro asked, did the U.S. just become the best place to found a crypto company? Many thought that this change would have some really big downstream effects. Throughout the last cycle, the so-called Apple tax was one of the big blockers to deliver a native crypto experience on mobile. Even for the period where there wasn't an outright ban on crypto apps, most crypto firms opted for a browser-based interface to avoid dealing with Apple's fees. Web3 commentator Decipher wrote that this is, quote, probably one of the biggest wins for crypto this year. Apple can't gatekeep you anymore when it comes to NFTs, and crypto is now the official way to avoid their absurd fees. Darkstar wrote,

Starting point is 00:09:22 Crypto payments are now just payments. NFTs are now just digital purchases. And speaking of purchases, while Democrats seem to be reigniting their war against crypto, the Ivy League seems to be putting partisanship aside to diversify into Bitcoin. Brown University has disclosed a $5 million position in BlackRock's Bitcoin fund purchased in Q1. This is the third university endowment purchasing Bitcoin via the ETFs, following Emory and the University of Austin. Position is, of course, a tiny fraction of the overall fund, which is some $7.2 billion, but yet everything like this changes the Overton window in ways that are positive. Anyways, guys, I'm keeping a close eye on this stablecoin legislation, as I think it's one of the most important bellwethers to understand

Starting point is 00:10:00 where crypto policy really sits in the U.S. We will just have to wait and see how things develop, but for now, that is going to do it for today's breakdown. Appreciate you listening, as always, and until next time, be safe and take care of each other. Peace.

The Breakdown - Arizona Gov Vetoes Bitcoin Bill

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