The Breakdown - Democrats Slam SEC Over Crypto Bill Chaos

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 Wednesday, June 4th, and today we are talking about the Democrats being furious about the SEC briefing on the market structure bill. 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. bit.ly slash breakdown pod. All right, friends, one of the continually evolving stories right now with potentially big impacts on the industry is the tension between, on the one hand, the Trump Empire's deepening

Starting point is 00:00:51 engagement with crypto and, on the other hand, congressional Democrats. Now, from a policy standpoint, right now the market structure bill is starting to get off the ground. House Financial Services Committee Chair French Hill introduced a new version of the bill late last week, known as the Clarity Act. We'll walk through the key changes in greater detail later this week as opinions in the crypto-legal community are still forming. However, the controversy from Tuesday revolves around a botched SEC technical briefing presented to Democrat staffers last week. Technical briefings are routinely conducted by government agencies to walk congressional staffers

Starting point is 00:01:24 through new bills and answer questions about implementation. Given permission to speak freely at a press conference on Tuesday, Democrat staffers said that this was, quote, the worst technical assistance briefing they'd ever witnessed. These briefings are usually conducted by subject matter experts from the agency to ensure they can provide in-depth answers. The staffers said that a member of the Crypto Task Force, Legislative Affairs staff, and someone from the Office of General Counsel were on the call. One aide said that this was a, quote, stark departure from how the agency has ever worked with respect to written technical assistance. This is supposed to be completely apolitical. When a reporter asked whether the SEC was deliberately obstructing knowledgeable staffers were merely

Starting point is 00:02:02 incompetent, one Democrat aide said it was hard to know. They added, some of it did feel like they just didn't understand some of the basic questions. The aide said that the SEC had shared supposedly privileged information on a call with Republicans, commenting, that made it feel like they were trying to hide the ball. Now, this could all be another part of anti-Crypto-Democrats' plans to delay the bill and run out the clock on this session of Congress. We already saw Maxine Waters disrupt and scuttle the first hearing on the market structure bill last month. While that hearing did take place as an informal roundtable, it seemed that very little progress was made with witnesses and lawmakers seeming to only have very surface-level knowledge of the bill. Another hearing is taking place

Starting point is 00:02:40 today, which will hopefully give an opportunity for more informed discussion, but given the tight time frame since the bill was reintroduced and these complaints from Democrat staffers, it's questionable whether lawmakers will be fully up to speed. As another wrinkle, Maxine Waters has written to the SEC to demand a comprehensive technical and impact analysis of the bill. She listed 16 different categories each consisting of multiple questions. Waters wrote that, given the significant implications this bill would have on the regulatory landscape for digital assets, a current and thorough analysis from the commission is needed for informed policymaking. Asking for a detailed report on the bill one day out from the hearing is a pretty brazen delay tactic, but it's also difficult to fault

Starting point is 00:03:19 Waters on this one. Most people of all political affiliations would agree that lawmakers should theoretically, be briefed on the legislation that they're considering. It was already a reasonable assumption that Waters wouldn't engage in good faith on the bill, but the commotion around the SEC's lack of technical assistance could torpedo support across the board. One Democrat staffer commented that even the pro-Crypto-Democrats are struggling to form a view on the bill, adding, it's impossible for them to understand what this bill does, the loopholes that it has, where it needs to be fixed and how it needs to be made stronger, without this feedback from agencies. And we are being denied that feedback. And while the House is in Republican control,

Starting point is 00:03:54 meaning they can pass the bill on strictly party lines, the Senate is a different question, with around seven Democrat votes needed to clear the filibuster. Senator Cynthia Lummis is expected to introduce the Senate version of the bill shortly, stating, it's going to look very much like the House bill. Speaking with Politico, Lummis added, We want to be bipartisan and bicameral. We'll probably tweak it a smidge and run it by Senator Gillibrand

Starting point is 00:04:15 and see if we can introduce it on a bipartisan basis over here. Now, to some, this might seem like an odd comment considering how these bills have developed. In previous years, Lumbus and Jillabrand seem to be working together across party lines on their Senate crypto bills. Now, just reading the text of that quote, it sort of feels like Lumbus is implying that consultation with Senate Democrats is just starting and is overall a bit of an afterthought. But again, there could be more to the story that isn't coming through in the brief quotes.

Starting point is 00:04:40 And maybe this is just how Washington operates. Whatever the case, it definitely doesn't fill one with confidence that the crypto agenda will be wrapped up by August as the administration planned. And all of this consternation is starting to make the crypto folk a little nervous. The crypto lobby's ambition for this year was to get legislation passed on a bipartisan basis to ensure a lasting and stable regulatory environment. However, crypto has at this point become, once again, such a toxic political subject that many are wondering about the stability even if legislation does pass. Runner-XBT tweeted,

Starting point is 00:05:09 What did Democrats do to crypto once they win the next election? Since now, the guy they hate the most use crypto as a means to enrich himself with a meme coin and other pump and dump schemes for his family and close group of friends. Lord Astrate commented, man, Democrats are going to nail crypto to the wall in the U.S. when they next get power. Whatever you think of it, it is certainly the case that the Trump family just can't stop launching new crypto projects. Trump Media Group has filed to list the truth social Bitcoin ETF. This appears to be the first product under an agreement signed with Crypto.com in April to launch a string of made-in-America ETFs. The Forrest Dax Trust Company, who works with Crypto.com

Starting point is 00:05:43 for custody, is listed as the custodian for this ETF. The other ETFs use mostly Coinbase as their custodian, so this appears like a way for crypto.com to get their foot in the door and tap into the fees generated through operating an ETF. The crypto exchange also discussed plans to list the made-in-America ETFs on their own platform, another angle for revenue generation from the product. Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products, ranging from single asset to diversify to to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the

Starting point is 00:06:28 intersection of tradfai and crypto, and one of the benefits for a lot of us is that Grayscale products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visitgrayscale.com. Go to grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. To sum, what's interesting here is the disparity between the supposed priority of getting crypto bills through Congress and headline grabbing launches from the Trump organization. Now, this one as opposed to some does sort of minimize the name.

Starting point is 00:07:06 Scanning through the filing, Bloomberg's Eric Balcunas commented, notable that the Trump name is not on the ETF or anywhere in the docs, really, although everyone knows who owns Truth Social. On Twitter, some see a crypto empire coming together. A Bitcoiner called Car Rangler wrote, pay attention to everything that's coming together in the Trump ecosystem. There's a lot going on and there's a lot connected. They even have Bitcoin mining covered. Still, I think the more common opinion was expressed by Dr. Van Nostran, who wondered about the value of launching the 12th Bitcoin ETF to compete with the big players, tweeting, what is the point of this? Another big Trump announcement from earlier this week was a crypto

Starting point is 00:07:40 wallet and trading platform. although that one is creating a rift in the president's crypto empire. Yesterday, Magic Eden announced that they were launching the quote, official Trump wallet, the first and only crypto wallet for true Trump fans. Don Jr. quickly chimed in to comment that there was nothing official about it, tweeting, the Trump organization has zero involvement with this wallet product. Eric Trump and I know nothing about it. Stay tuned. World Liberty Financial, who we have been working tirelessly on,

Starting point is 00:08:06 will be launching our official wallet soon. Eric Trump added, I run the Trump organization and I know nothing about the project. It appears that Magic Eden had partnered with the team behind the Trump meme coin rather than the Trump organization itself. Across the meme coin, the NFTs, and World Liberty Financial, there are different operational teams running the various projects. Trump family members are listed as advisors and have different levels of involvement, but apparently the meme coin operators have gone rogue and are signing partnerships on their own accord. The result is that there appear to be three separate official Trump wallets all trying to get to market.

Starting point is 00:08:38 There's this meme coin-related wallet, as well as the World Liberty Financial wallet that's currently in the works, and the Trump Media Group has also filed a trademark application for a wallet bearing the TruthFi branding, although we don't know much about that one. So rather than a unified push to build a crypto empire across multiple verticals, it instead feels like various teams are racing to push as many Trump crypto products out as possible. That race is very predictably starting to look pretty messy. By the end of the day, Eric Trump was just straight up threatening Magic Eden on social media. He tweeted,

Starting point is 00:09:07 The project is not authorized by the Trump organization. Magic Eden, I would be extremely careful using our name in a project that has not been approved and is unknown to anyone in our organization. As of last night, the Magic Eden account was tweeting, yes, it's real. All the while, the official Trump wallet account was banned from Twitter.

Starting point is 00:09:24 Cryptoskeptic Molly White, who scooped the story ahead of the first announcement, described the rollout accurately as absolute chaos. Earlier in the day, Don Jr. had made an appearance on CNBC's Squawk box to discuss the controversy around the family's crypto projects. He stuck pretty close to the talking points on Bitcoin and Defy while disavowing the seedier projects, commenting, I wasn't involved in the meme coin, I'm more focused on the stable coin and Bitcoin mining.

Starting point is 00:09:46 Don Jr. dealt with a wide range of criticism across all aspects of the family's crypto activities from the hosts. He largely stuck to previous defenses, describing the family's debanking and his belief that crypto is the future of finance. The most interesting critique came from Joe Kernan, who has been doing an excellent job of representing the Bitcoiner perspective on mainstream financial TV for years. He voiced a growing concern that many Bitcoiners have been feeling for some time, but fewer discussing, commenting, it's no longer libertarian, it's no longer decentralized, it's no longer cool. Suddenly, it's almost got the rubber stamp of the administration. Kernan was referring to the front page of the Wall Street Journal, which declared,

Starting point is 00:10:21 Bitcoin goes all in on MAGA, shedding its anti-government slant. In covering last week's Bitcoin conference, the WSJ uncovered numerous attendees concerned about the politicization of Bitcoin. Richard Scottford, a Bitcoiner who lives in Costa Rica, said, The Bitcoin conference right now is basically a right-wing rally. He commented that being enamored with powerful people is, quote, against the ethos of Bitcoin. Patrick Merck, who in a much earlier time was the co-founder of the Bitcoin Foundation, said, it's supposed to be an apolitical value-neutral network. If people believe that the U.S. government has a very large stake in its success,

Starting point is 00:10:51 I don't know how people will feel about that in other parts of the world. Dan Moore had the CEO of Pantera Capital was a little bit more clear-eyed about the real politic of the moment, commenting, as much as the early adherence to Bitcoin were libertarians that imagined it could exist in its own world, we do live in the real world. And the real world has regulators and the government will be involved. Speaking of the real world being involved, the final pillar of the administration's crypto agenda is the Bitcoin Strategic Reserve, and there seems to be some new support from an unexpected section of the government. Speaking with Bloomberg on Tuesday, Senator Cynthia Lummis said that certain divisions of the U.S. military are backing the

Starting point is 00:11:24 idea of a National Bitcoin Reserve. She said, there are generals, especially in Southeast Asia, who believe it's important to have a strategic Bitcoin stockpile because we're doing an economic war with China, and we have to prepare for a guns and bullets war. But we need both. All we need to do is look to the leadership of the current U.S. military to find support for a strategic Bitcoin reserve. The comment was referencing remarks from J.P. Morgan's CEO Jamie Diamond at the Reagan National Economic Forum on Friday. Speaking about the trade war and escalating tensions with China, Diamond noted that cornering global industries like electric cars and solar panels is, quote, the stuff of war if you read all of history. While Diamond acknowledged,

Starting point is 00:12:00 the U.S. is already in the midst of an economic war, he was focused on preparing for kinetic warfare. Diamond said, we know what constitutes national security. We shouldn't be stockpiling Bitcoin, we should be stockpiling bullets. Both Lummiss and Diamond were representing the opinions of military brass, implying there might be a diversity of opinion in the ranks. But Lummus is now putting military support for the policy front and center rather than leading with an economic argument. This has been a core part of Luke Gromond's thesis for years, that the military recognizes the need to sacrifice the dollar's reserve status in order to weaken the currency and rebuild the domestic manufacturing base. Way back in 2022, Groman tweeted,

Starting point is 00:12:35 I'm not calling for the demise of the U.S. But the contrary, the U.S. must change the structure of the post-71 reserve status to something with a neutral reserve asset like gold or Bitcoin to prevent the demise of the U.S. Many in the U.S. Department of Defense understand this, but few on Wall Street do. Lummis commented, this is about national security in a digital age. So continues to be interesting times out of Washington. 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.

Starting point is 00:13:05 Peace.

The Breakdown - Democrats Slam SEC Over Crypto Bill Chaos

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