The Breakdown - Crypto Ally Paul Atkins To Be Named SEC Chair

Episode Date: December 5, 2024

Gensler, out. Paul Atkins, in? Reporting suggests that Trump has made his selection for SEC Chair and it's one the crypto industry is enthusiastic about. The only hurdle is how much the candidate doesn't really want to have to clean up after Gary. 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, December 4th, and today we are talking about the potential next SEC chair. 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. Hello, friends. Well, big news, the Trump transition team appears to have selected the next SEC chair. According to a scoop from Veronica Irwin of Unchained, former SEC Commissioner Paul Atkins has been offered the job. One of her three sources, quote, specified that Trump

has reached out to Atkins but is waiting on him to accept. Interestingly, CoinDesk sources suggest Atkins is reluctant to take the role. Referencing a person familiar with Atkins thinking, they reported that Atkins feels the role as unattractive due to the amount of work required to, quote, turn around the bloated agency he believes was mismanaged by outgoing SEC Chair Gary Gensler. This reluctance to want to clean up after Gensler echoes sentiment from former CFTC chair Christian Carlo, who already performed that duty after Gensler left the CFTC. Reportedly Atkins also isn't super keen to walk away from his current business interests.

He's the CEO of Potomac Global Partners, a regulatory and risk advisory firm. Sources said he would only consider resigning once the firm is well positioned to operate without him. There are a few other candidates reportedly on the short list, but Atkins as the first pick says a lot about how the incoming Trump administration is thinking about the role. Atkins served as an SEC commissioner during the George W. Bush years, but was a break from the usual mold. George Mason University professor and former SEC advisor J.W. Verrett said, Senate Republicans really respect the tradition of commissioner Paul Atkins. He was the first time anyone had been a true libertarian and SEC commissioner, and that was a unique thing. After concluding

his term, Adkins established Potomac Global Partners in 2009. The firm has advised fintech and crypto firms on risk management and regulatory relations since the earliest days of those industries. In July 2021, the firm published a playbook for convincing skeptical Democrats to be more open to crypto regulation. It called for the industry to highlight real-world use cases, depoliticize the issue, and step up self-regulation around market manipulation. The report suggested common-sense regulation and argued that the industry should, quote, make regulation a feature, not a bug. All of which suggests that his consultancy did have influence in shaping the way the industry engages in Washington. Atkins served as the co-chair

of the Token Alliance within the Digital Chamber from 2017 and has taken on formal advisory roles with several crypto projects. One of those was the Reserve Rights Foundation. CEO Nevin Freeman gave Atkins a glowing report, tweeting, Paul has been open to working with crypto clients in his consultancy since 2017. I believe he would take a principled approach and I'd be very excited to work with him and his team on productive rulemaking via our work at the Digital Securities Initiative. For those who are wondering, Paul is not actively consulting on reserve and was only an advisor back at the beginning of the project. But in our interactions, I was impressed by his open-mindedness. The fact that he was cool with his reserve advisership being publicized shows he was very willing to

lean in on crypto. More generally, Atkins' philosophy on regulation seems colored by his libertarian philosophy. He is a big advocate for strong consumer protection where necessary, but prefers to get there through risk management and accountability at firms rather than broad prescriptive rules. In 2004, During his time at the SEC, Atkins dissented on the rule requiring hedge funds to register. He wrote, I fear that we are setting off at a frenetic pace down the road of regulatory overreaction, without pausing to consider where we want to go. Atkins argued registration would not address the fairly rare cases of fraud at hedge funds. Breaking down the individual cases, he pointed out that a registration requirement

wouldn't have changed the facts in any of them. Back then, Atkins wrote, I recommend that investors in all of these funds ask themselves what they will gain from this proposal, more protection, or ultimately just a narrower range of investment options as fewer advisors offer their services. Fraud deterrence is a laudable goal, but so is avoiding regulatory overreach. Our release makes it abundantly clear that we do not know what information we want or need. I will not ask taxpayers to foot the bill for a fishing expedition carried out to protect institutions or the very rich from investment losses. When it comes to this upcoming job, the big issue in apparent Atkins blocker is that the SEC chair is really two massive

jobs during the next administration. Whoever takes on that role will be tasked with overhauling capital markets regulation with a lighter touch yet functional framework. Crypto reform will be important, but thoughtful the regulation of traditional financial services is also necessary to free up U.S. capital markets. A successful SEC chair could make being a good actor the most profitable path, addressing the slide into casino capitalism. The second massive undertaking is a complete overhaul of SEC culture. Beyond regulations, the Genzer year saw unprecedented attrition in senior staffing, and frankly a perversion of the SEC's mission. The agency was tasked with controlling markets rather than promoting them. Current Commissioner and Lifetime staffer Mark Ueda is on record

saying he no longer recognizes the SEC's culture. He said the pride in maintaining a, quote, gold standard is gone, with SEC staff now encouraged to do the, quote, minimum required by law. Overnight, Paul Atkins was priced in at over 70% odds on Kalshi to take the role, barely nudging down on reporting he was hesitant to accept. Finance lawyer Mike Selig is optimistic, tweeting, the contrast between Gensler and Atkins couldn't be more stark. Expect to see Atkins reverse Gensler's anti-crypto policies and help the new administration make America the crypto capital of the planet. Staying on this theme for a moment, Coinbase is setting the tone for the industry by blackballing law firms that hire anti-crypto SEC staff. The revolving door began swinging

several months ago as some of Gensler's top deputies began taking on their private sector roles. The hire that spurred Coinbase to action was Milbank taking on former enforcement director Gerbier Garal as a partner in late October. Coinbase CEO Brian Armstrong made the boycott public yesterday, tweeting, we've let all the firms we work with know that if they hire anyone who committed these bad deeds in the soon-to-be prior administration, we will no longer be a client of theirs. Senior partners at these law firms seem unaware of the crypto industry's position on this. For instance, Milbank recently messed up and hired Gerbier. We don't work with them now and never will while he works there. It's an ethics violation in my book to try and unlawfully kill an industry

while refusing to publish clear rules. If you were senior there, you cannot say you were just following orders. They had the option to leave the SEC and many good people did. It was not a normal SEC tenure. They can go work in other areas. I don't believe in permanently canceling people, but we as an industry should not be putting money in their pocket after the abuse. Let your law firms know that hiring these folks means losing you as a client. The industry cheered the high-conviction leadership with crypto lawyer John Deaton stating, every CEO involved in crypto should follow Brian's lead. Crypto advisor Anna Stone wrote, The most powerful currency in crypto remains your reputation and ethics. Coinbase's chief legal officer Paul Grewell told Bloomberg that he hopes the statement, quote,

does provoke a wider conversation among industry leaders about the revolving door in Washington and the historic assumption that lawyers in government can essentially do whatever they want without any consequence. And I think that overall the important thing here is that by drawing a line in the sand publicly, Armstrong has created context for a larger conversation. There are many flavors of reporting about this, but the point is that there is reporting about this. Washington-based legal recruiter Jeffrey Lowe told Bloomberg, it might be something that a client will be telling its law firms privately, but to just put it out there really draws a line in the sand. Next up, an interesting one in 2022 follow-up, CELCIA CEO Alex Mishinsky will plead guilty

to two counts of fraud instead of going to trial in January. The decision to take a plea deal comes after Mishinsky failed to have criminal charges thrown out in November. During a case conference on Tuesday, Mishinsky agreed to plead guilty to commodities fraud, as well as a charge related to a fraudulent scheme to manipulate the price of the CEL token. He further admitted to making false statements about the platform's earn program, encouraging investors to deposit their Bitcoin. According to court reporting from inner city press, Mishinsky told the judge, I said that Celsius had approval from regulators. It was false. I falsely said I was not selling my CEL tokens. I accept full responsibility for my actions. Following up, the judge asked

Mishinsky whether he knew the conduct was wrong and illegal. Mishinsky said, I did not know which law it was violating, but I knew it was wrong and illegal. The judge made it clear that sentencing guidelines call for a 30-year prison sentence, with Mishinsky already aware. If he is sentenced at the guideline, Mishinsky will be in prison longer than SBF and won't be eligible for release until he's 84 years old. The judge also signed a forfeiture order, which could result in additional compensation for SELChi's victims. Overall, we are starting to get very close to closing the chapter on the last cycle. With Alex Mishinsky resolved, the outstanding issue is Doe Kwan, who's still fighting against extradition 18 months after his arrest in Montenegro. Crypto Hunter wrote,

Alex Machinsky finally comes and tells the judge he knew what he was doing was wrong and illegal. In every Celsius AMA, he lied through his teeth about Celsius's health. He was withdrawing while telling customers their coins were safe. Unfortunately, this won't restore all the losses creditors have endured, but it's a step forward towards justice. Lastly today, we've been paying a little bit of attention to whether or not we are heading into an alt season, which makes this last story all the more interesting. Apparently, the trenches run all the way to D.C. as a congressman has revealed his D.Gen bag. Georgia Representative Mike Collins has updated his financial disclosure with two very interesting

crypto holdings. Collins added a position in Aerodome, the major decks on base, and a base meme coin called Skimask Dog. Both holdings were registered as below $15,000 in size. A ski mask dog was launched in April, never got above $40 million in market cap, and fell below $1 million by August. He came back to life in October and is now at around a $200 million market cap, thanks in no small part to becoming the first meme coin to show up in a congressional disclosure statement.

Essentially, it seems that Collins had the true D-Gen experience of riding an obscure meme coin to zero before finding out your dust has randomly pulled a 200x. The Georgia Congressman seems extremely in on the joke. His Twitter profile reads, come for the meme, stay for the policy. When unusual whales broke the news, Collins responded with the Pepe meme of the D-Gen mascot and dark sunglasses and a leather jacket. And this was from his official congressional Twitter account rather than a personal account. Rocky Rock of Injective Labs retweeted the Pepe commenting,

this is a post by a sitting member of the U.S. Congress. 2025 is going to be lit. Investor Travis Kling had his mind blown, tweeting, so the AI agents are going to have to compete with literal congressmen. Blunt's capital commented politicians buying memes was not on my bingo card. And indeed, it's starting to feel as though an ETF based on following Nancy Pelosi's stock picks is from a simpler time. Get ready for congressman pumping meme coins just by following disclosure rules.

As Income Sharks wrote, this could be a wild four years. That is going to do it for today's. breakdown. Appreciate you listening as always. Until next time, be safe and take care of each other. Peace.