The Breakdown - Biden Joins the Pro-Crypto Pivot

Episode Date: May 30, 2024

President Biden's team has reportedly started making overtures towards the crypto crowd. NLW explores whether the industry is buying it or remains skeptical. 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 Thursday, May 30th, and today we are talking about President Biden joining the crypto pivot. 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.ly slash breakdown pod. All right, friends, welcome back to another breakdown. As you guys know, I am recording down from Austin this week as I am attending consensus.

And so this episode will be once again a little bit shorter, but there is a big piece of news that we have to focus on. And that is, of course, that the political reengagement with crypto is expanding. According to sources speaking with the block, the Biden campaign is starting to engage with the crypto industry. Over the past month, there's been a notable shift from Democrats on crypto policy. We went from Biden threatening to veto legislation to repeal SAB-121 to a large number of congressional Democrats voting in favor of crypto bills. This was all capped off by the SEC capitulating to approve

eth-tifs. Many within the industry were quick to declare this a complete reversal from Democrats, while others remained more skeptical. It was entirely unclear whether this pivot was just a minority of Democrat lawmakers expressing frustration with the administration's crypto policy, or represented a deeper shift that went all the way to the top of party leadership. What we're now hearing from sources familiar with the Biden campaign is that the change of approach began two weeks ago, shortly after the veto threat. The campaign has reportedly begun reaching out to industry figures for guidance on quote, crypto community and crypto policy moving forward. The sources claim this was a huge shift in tone, with the campaign having previously rejected offers of

assistance on crypto issues. Sources say this change reflects that the Biden campaign is increasingly recognizing that crypto issues will have a major impact on the election. It seems like very early days for the Biden campaign on crypto with outreach just beginning. But reports like this suggests the shift is being taken seriously and goes beyond simply giving the bare minimum of lip service to the crypto industry. Of course, that will be proven out or not by what actually happens. It's impossible to view this shift as anything but a reaction to the Trump camp aggressively positioning themselves as pro-crypto. A crypto industry source with ties to Trump's inner circle commented, they have very smart and capable people advising on that front, and you've

seen some of the results of that and we'll see more in the coming months. If you have a pulse in the crypto industry, we've seen more powerful figures within crypto speaking to engagement from the Trump campaign. Masari's CEO, Ryan Selkis, for example, has made no secret of his involvement. Bitcoin magazine CEO David Bailey also claims to be working with the Trump team. Earlier this month, he spoke about a day one executive order being prepared in convening a Bitcoin mining roundtable to educate the Trump campaign. As for the Biden team's outreach, sources say it had generally been well received from industry figures. However, one source mentioned that a lot of skepticism remained, describing the pivot

as too little too late. Uniswap founder Hayden Adams is adamant that this is the start of a genuine policy shift, tweeting, The too little too late, this is pandering crowd is missing the point. Dem establishment finally realized being anti-crypto by letting Warren run financial policy will lose elections. This is a big deal. Nothing politicians care about more than winning elections. It's a new era.

Finance lawyer Scott Johnson took the other side of the argument, claiming that much more is needed to turn the crypto voter. He wrote, there's a dozen things they can do tomorrow if they really want to demonstrate a course change. Talk is cheap. There's still three and a half years of cumulative damage that should be unwound. Indeed, the commentary on X-slash Twitter focused on one major olive branch that would make Biden's shift more credible, the firing of Gary Gensler. DC investor tweeted,

If Joe Biden and the Democrats are serious about winning crypto voters, the best thing they could do is fire Gary Gensler immediately and name Hester Purse as his replacement. This would be a good start to win back a lot of liberal crypto voters, in my opinion. Now, those familiar with agency structure have pointed out that the president is very limited in his ability to remove the head of the SEC. Gensler still has more than two years remaining in his term and can only be removed for cause. In practice, this almost never happens, and the entire structure of agency leadership is designed to resist the politicization of regulators. What the president could do is nominate a different chair from among the current commissioners. The decision on who chairs the committee is at the sole discretion of the president and could send a powerful message to the crypto industry without violating tenure rules.

Ryan Selkis had a different wish list if the Biden team wants to really get credible. He said there is no amount of industry outreach that will save you from the onslaught that is coming from the crypto army. One, free Ross, two, speed up Marty Grumberg's resignation, three, demand Gensler's resignation, four, signed SAB 121 repeal, five, executive order explicitly ending choke point, or war. Trader Forlux writes only wins that matter are A at the ballot box or B, unconditional surrender, i.e. forcing Gensler-Groonberg at all out of government. This isn't even a start more like a little blood in the water. 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

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the breakdown. So what do I think of all of this? A couple things. Even if you are in, it's too little too late camp. The notable shift has to be seen as well-notable. That particular part of the Democratic Party had doubled and tripled down constantly on its anti-cryptoposition. And the fact that that levy is finally broke is not an insignificant thing, even if crypto voters and crypto advocates are unwilling to give them the benefit of the doubt any further. Second, I think realistically, from a politics perspective, kind of only makes sense for the crypto industry to continue to treat it like it's too little too late and to keep up the pressure. From a complete efficacy standpoint, as so many have pointed out, there are still great potential for harms to be

caused and more issues that need to be addressed and some very specific policies that can change those things in the short term, things that are within the power of this administration to do. It is only rational to keep up the pressure to try to get more of those things, one, especially before electoral pressure is off, one way or another. Third, I do think it's important to not overstate how significant this pivot is. We have seen a thawing in the relationship, not outright overtures, at least that have been public. I think for a lot of people, even if they are not in the it's too little too late camp, they're going to need to see something more than what we've gotten so far. Whiffs and hints that they might not hate us isn't really a super compelling political

position. However, to the extent that we do see a continued softening and thawing in that relationship, I do think that there are plenty of folks who are left in progressive inclined in general, who just need to see that the Democrats aren't going to make their role in life illegal in order to stay on Team D, which frankly is exactly why I think it makes sense to keep up the political pressure for as long as possible to try to win more concessions before that group naturally retreats to where it wants to be. Let's not overstate this. So far we are seeing the first whispers of a pivot. Ultimately, we can only be so thankful for so long that they're not trying to criminalize us anymore

and are going to need to see a lot more. Are we getting any of that? Well, from the stage at consensus, Treasury official Brian Nelson did claim the agency isn't trying to ban crypto mixers. As the head of the Treasury's terrorism and finance intelligence unit, Nelson has led the crackdown on mixing services. Over recent years, of course, we've seen government attempt to shut down tornado cash, samurai, Sinbad, and countless others.

ZK. Snacks, the developers of the Wasabi Wallet recently announced that the company will discontinue operations, citing a lack of regulatory certainty. Nelson was specifically speaking to a FinCEN proposal last year, which would classify mixers as a, quote, primary money laundering concern. This classification would increase compliance issues with accepting crypto funds that have touched mixers. And while not technically a ban, the policy would make it practically impossible to deposit mixed funds into a centralized exchange. Nelson said at the end of the day, this proposal is not a ban on mixer. This is a proposed rule designed to drive transparency. He added that he is sympathetic to the desire for

financial privacy within the crypto ecosystem and encourage the industry to work with Treasury on ways to ensure privacy without enabling terrorism financing. He said from our perspective, we believe there is a difference between obfuscation and anonymity enhancing services that support privacy. We of course totally recognize that in the context of public blockchains that there would be a desire to have a certain degree of privacy. In that spirit, we want to work closely with industry to identify and collaborate on tools that can enhance privacy. Currently, Nelson claimed that the majority of mixers he is seeing are not actually designed to enhance privacy. Instead, he sees services designed to get around AML and KYC reporting requirements. What you make of this is probably going to be

a Rorschach test. For those who are looking for signals of the Biden administration's shift, This is somewhat positive engagement from a Treasury official at a crypto event. Others, though, are going to be stuck on their fundamental disagreement about how he characterizes mixers. So, who really knows? Another mixed bag was the Treasury's new risk assessment on NFTs with the focus on their use in illicit finance. The 29-page report found that bad actors can use NFTs to launder funds, but that these

methods are seldom used for terrorist financing. They said in a statement that, quote, The assessment finds that NFTs are highly susceptible to use in fraud and scams and are subject to theft. The report determines that illicit actors can use NFTs to launder proceeds. from predicate crimes, often in combination with other methods to obfuscate the illicit source of proceeds of crime. It also found little evidence of the misuse of NFTs by terrorists or proliferators, in contrast to fraudsters to date. Once again, Rorschach test. Do you see this as

the Treasury saying, hey, we think there are problems but not the big terrorist problems? Or do you see it as them hating on NFTs? The fact is, something is shifted. And if you need any more evidence of that, Arkinvest CEO, Kathy Wood used her consensus appearance to speak to the shock approval of the Ethereum ETFs. She said, the read was that it was not going to be approved. It was absolutely not going to be approved. If it were to have been approved of the regular way, we would have been getting questions from the SEC. No one was getting questions from the SEC beforehand. She said that the swirling activity on Capitol Hill that week made it clear that crypto had been identified as an election issue, which likely pushed the SEC to alter their decision.

So, friends, here we are. We are still at the very beginning of this pivot, but it does appear that the pivot is on. The next set of questions is going to be how deep and how fast it goes. we will just have to wait and see. For now, that is going to do it for today's breakdown. One more big thank you to my sponsor for today's show. Check at the Ledger Bitcoin Orange Nano. 5% will go to support Bitcoin development. Until next time, be safe and take care of each other. Peace.