The Breakdown - Fairshake Helps Hand Anti-Crypto Army a Loss

Episode Date: June 26, 2024

NLW catches up on the latest on crypto in politics, including a report that Trump will speak at the Bitcoin Conference and a primary loss for a notable member of the anti-crypto army. 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, June 26th, and today we are continuing our coverage of Bitcoin and Crypto's infiltration of the 2024 presidential campaign season in the United States. 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 at the show notes or go to bit.L.Y slash breakdown pod. Well, friends, yes, the political news keeps coming. Former President Trump could be heading for Nashville

next month to speak at the Bitcoin conference. According to reporting from Axios, Trump is in talks to speak at Bitcoin 2024. Sources familiar with the matter said that Trump had been invited but could not confirm whether Trump had made a decision about the appearance. Brian Hughes, Trump's senior advisor, wouldn't speak to the rumors, but said, crypto innovators and others in the technology sector are under attack from Biden and Democrats. While Biden stifles innovation with more regulation and higher taxes, President Trump is ready to encourage American leadership in this and other emerging technologies. The Bitcoin Conference already has multiple political speakers on the lineup.

Independent presidential candidate Robert F. Kennedy Jr. is slated for an appearance, as well as former Republican candidate and rumored VP running mate for Trump, Vivek Ramoswamy. Republican senators Bill Hagerty and Marsha Blackburn are also speaking at the conference. For Bitcoins for Bitcoin magazine, which runs the event, did not comment on the rumors. CEO David Bailey has recently presented himself as gaining access and trust within the Trump camp, but for his part, Bailey told everyone to slow their role, making the pointed comment that the only place to get official updates is, you guessed it, via official channels. He tweets, media reporting getting way over their skis.

This was not, however, the only political Bitcoin news. Following Trump's lead, more Republicans are clamoring to attract the crypto vote. On Tuesday, Florida Republican Matt Gates introduced a bill that would allow people to pay federal income taxes in Bitcoin. Gates said in a statement, My groundbreaking legislation will modernize our tax system by allowing federal income tax to be paid with Bitcoin. By enabling taxpayers to use Bitcoin for federal tax payments, we can promote innovation, increase efficiency, and offer more flexibility to American citizens. This is a bold step towards a future where digital currencies play a vital role in our financial system,

ensuring that the U.S. remains at the forefront of technological advancement. Gates claimed the policy was inspired by a trip to El Salvador for the inauguration of President Buckele. Taking this bill on face value, it's not clear that paying taxes in Bitcoin is something that anyone actually wants to do. Colorado introduced a similar policy at the state level in September 2022. The state partnered with PayPal to provide the service, which accepts most major cryptocurrencies. It was promoted as an additional low-fee option compared to credit card payment. According to Local Magazine 528, only 11 people paid their state taxes in crypto in 2023 out of 3.1 million eligible taxpayers.

Then again, this bill isn't intended to be a serious policy that has a chance to become law. It's intended instead as a signaling device designed to generate headlines. That in itself is an interesting shift for Gates who's up for re-election this year. He's facing a last-minute primary challenge from former Navy officer Aaron Dimock. Polling for Gates seems to have stabilized but was looking disastrous earlier this year. His role in the ouster of House Speaker Kevin McCarthy had pushed his approval rating down to just 21%. Crypto writer Steve Kaczynski wrote,

the Republicans continued to double down on crypto as the U.S. election approaches. Over on the Democrat side of the House, anti-Crypto candidates continue to face major defeats. Representative Jamal Bowman was demolished in the Democratic primary for his house seat in northern New York City and the surrounding region. Bowman won the Bronx vote, but suffered a landslide defeat across Westchester to his rival, George Latimer. Latimer is a fairly centrist Democrat who has spent his career as an elected official across local and state governments in Westchester. The story of Bowman's defeat is, according to many, all about the influence of outside spending on the election outcome. This was the most expensive congressional primary in history, with $23 million spent. Bowman's campaign was outspent nine to one. The majority of the money

came from pro-Israel's super PAC the United Democracy Project, who spent $14 million on attack ads against Bowman, Bowman being one of the most outspoken advocates for a ceasefire in Gaza. Spending from Israel-aligned groups dwarfed everyone else and was the central focus of reporting. At the same time, crypto industry super PAC Fairshake spent $2.1 million on ads against Bowman as well. Important to note that the ads didn't mention crypto at all. Instead, they accused Bowman of being anti-Semitic and highlighted his support of defunding the police. Fairshake spokesman Josh Flasto said, Jamal Bowman fought against setting clear rules of the road for the crypto and blockchain industry,

and tonight he's looking for a new job. The crypto and blockchain community will continue to support candidates who believe in innovation and job creation and reach across the aisle to get things done. Bowman had voted against every crypto bill that reached the House, and his role as a key Elizabeth Warren ally painted a target on his back. Masari's CEO, Ryan Selkis tweeted a message to Warren stating, It brings me joy to destroy every colleague you care about, Katie Porter first, Bowman next, Sherrod and Tester soon.

Maybe you'll remember that the next time you're tempted to defame honest men with families and American teams. All we wanted was a fair shake. Zero Knowledge Consulting founder Austin Campbell suggested Bowman's anti-crypto stance might have been a problem for voters, commenting, It's almost as if getting on the wrong side of an issue the young voters in your own party care deeply about is a terrible idea. For context, Bowman was already lagging badly in the polls before a single dollar was spent. So it's questionable how much impact the crypto lobby had.

Still, part of the logic behind the crypto industry's massive election spend is to demonstrate political power. Much like the banking lobby, the crypto industry needs to be seen as capable of extracting a political cost against anti-crypto lawmakers. Given that we've now seen two high-profile primary elections impacted by Fairshake, it seems as though the crypto industry is making the point loud and clear. Hello, friends, before we get back to the rest of the show, I want you to join me at Permissionless. Permissionless is a conference for crypto natives by crypto natives. And the reason it's so important this year is that despite regulators' best attempts to push industry founders, devs, and executives out of the U.S., the U.S. remains the beating heart of crypto.

Today, the tide is turning. Policymakers have pivoted from fighting crypto to embracing it. which will lead to the creation of new financial products, new applications, and ultimately new adoption. Permissionless is a conference for those using and building on-chain products. It's home to the power users, the devs, and the builders. And what's more, I'm going to be there. The location is Salt Lake City. The dates are October 9th to the 11th, and right now, tickets are just $199. Towards the end of the month, they're going up to $499, and if you want 10% off, use code breakdown 10 when you check out. If you go to the Blockworks website, blockworks.com, there will

will be lots of information about how to register, and again, use code Breakdown 10 to get 10% off. Of course, all of this brings back up that question of whether there will actually be a pivot on the Democrat side of the aisle. Many in the crypto industry have been watching closely to see whether the Biden White House will position themselves as pro-crypto ahead of the election. All we've had so far is whispered rumors of a crypto pivot, but very little action. Those reading the tea leaves, however, got another serving this week with news that Carol House had rejoined the White House. House was one of the primary authors of the 2022 executive order on crypto regulation. At the time, the executive order was well-received. It put in place a number of well-thought-out recommendations,

commissioned numerous studies, and was generally believed to be a necessary step to bring the government up to speed on crypto. Things obviously turned later in the year, but for a brief moment, the EO represented hope that the Biden administration would treat crypto policy with the thought and attention it deserved. House stepped away from her role in the administration in June of 2022, a few months after the EO was signed. House is returning to the White House as the special advisor for cybersecurity and critical infrastructure policy within the National Security Council. During her time away from D.C., she served as an advisory board member focused on digital

currency for the New York Department of Financial Services. House also served on numerous advisory committees and crypto policy, most notably for the Digital Dollar Project. There's no clear sign that House returning to the administration is a sign that Biden is pivoting on crypto. But then again, staffing up with knowledgeable people ahead of the election can't be a bad thing. Some are choosing to view this as a sign that the White House is reengaging on crypto, although not necessarily taking it as a signal of a new positive outlook. On announcing her

appointment, House wrote that she is, quote, honored to have been called to return to service of absolutely critical mission sets that are necessary to shape the future of secure and trustworthy digital economies. It's also noteworthy that national security advisors are viewed as having a key role to play in crypto policy for this administration. During her time away, House made it clear that it was important to keep the crypto industry in the U.S. She said this would make it easy to bring enforcement against bad actors and ensure proper supervision. House also views the U.S. financial system as the, quote, heart of so many parts of the toolbox of U.S. national security tools and capabilities. Anything that potentially weakens the sector could be a concern.

Overall, House's stances that the U.S. crypto industry needs a clear path to registration and compliance, so that good actors can be differentiated from bad actors in the space. Finally, rounding out our political stories for the day. Try as he might, as he see Chairman Gary Gensler just can't keep the politics out of the regulatory discussion. During an appearance at a Bloomberg invest event on Tuesday, Gensler was continuously asked to speak to the political impact of his ambitious reform agenda. Host Anne-Marie Horton set the stage by pointing out that the Gensler SEC has faced a record number of court challenges against their rulemaking.

Asked if he would still give the agency an A for effort, Gensler responded, quote, We have already finalized and implemented really consequential rules. Gensler was particularly proud of shortening the settlement time for securities from two days to one, which he referred to as the agency's own having. Hortarn pointed out that a lot of the SEC's court losses have happened out of the Texas circuit and asked whether it was political. Avoiding the question, Gensler simply said, we really respect the courts and follow what they say.

Turning to crypto, Gensler was a little dismissive, suggesting that Bloomberg is only focused on crypto policy for the clicks. Horton asked how the SEC could justify going after the industry while approving crypto ETFs at the same time. Gensler said he didn't see the contradiction, responding, what the investing public now has is exchange traded products on regulated stock exchanges. Gensler contrasted the ETFs against crypto exchanges, which he referred to as noncompliant. Gensler once again alleged that many exchanges list unregistered securities and commingle functions

often trading against their customers. Getting a little more incendiary, Gensler said, this is a field where the leading lights from a couple of years ago are either in jail, about to go to jail, or awaiting extradition. Think about it. That is the field. That's the field where the public has really been hammered, and there is significant non-compliance. That statement set off a shockwave across the industry. Catherine Minerick, the newly appointed chief legal officer at Uniswap Labs, wrote, this is an irresponsible way for a regulator to characterize the leaders of an entire industry, which includes so many individuals deeply committed to making the world better for everyone,

not to mention multiple U.S. public companies. Later in the interview, Gensler repeated the claim that most of the industry leaders are heading to jail and was perturbed by laughter from the crowd. He said, I say this and you giggle, but this is a serious thing. These are a lot of folks that are not living within our securities laws, but they're also not living within our Bank Secrecy Act around anti-money laundering. It's not tickey-tacky. It's about real protections for investors and trust in our capital markets. Less controversially, Gensler was

asked to pin down the timing for the Ethereum ETFs to be fully approved. He refused to give a date, but said the process was going smoothly. Gensler emphasized that, quote, it's really all about the asset managers making full disclosure so those registration statements can go effective. The interviewer rounded out the conversation with a series of political questions, none of which Gensler was comfortable engaging with. She put to Gensler's statements from Mark Cuban that Gensler himself could quite literally cost Biden the election. The rankled Gensler, who refused to respond to the statement, added, I don't speak about elections. Finally, when asked whether he feels like he's up against the clock leading up to the election, he admitted that there are still some rules that the SEC is trying to finalize,

but didn't feel like they were running out of time. Regarding serving out his term, he said, if I'm honored to serve out my term, which is through 2026, then great. If it's earlier, that's democracy and action, and I deeply believe in it. When it was suggested that Gensler might not hang around into a Trump presidency, all he could do was grin as the crowd snickered. This is obviously starting to get very ugly for Gensler, with Bloomberg putting front and center the claim that he is about to cost his president the election. The interview wasn't hostile. It was simply a matter-of-fact reflection of how the Gensler SEC has failed to execute on its agenda. It was a good reminder that Gensler hasn't just made enemies in the crypto industry.

His reforms have also generated a record number of legal challenges across Wall Street. Anthony Scaramucci of Skybridge Capital thinks the writing is on the wall, tweeting, President Biden should ask for Gensler to step down. Of course, if that were ever to happen, you better believe we will do an emergency breakdown episode to tell you all about it. For now, though, that is going to do it for today's episode. Appreciate you listening, as always.

And until next time, be safe and take care of each other. Peace.