The Breakdown - Is Biden Prepping an Executive Order on Crypto?

Starting point is 00:00:00 This is sort of like saying that no one who owns stocks can be involved in figuring out how to regulate the stock market. This is the only dude in that entire building who knows anything about the space and he's not even invited to give his perspective. Sure, maybe we don't let him run the thing, but to not even let him be in the room is just the height of stupidity. 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. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Monday, October 11th, and today we have a bit of a grab bag of stories. But we're going to start with a report from

Starting point is 00:00:52 Bloomberg that the Biden administration is weighing an executive order on crypto. So this news broke over the weekend, and the source is, of course, as always, people familiar with the matter who asked not to be named. Here's the little TLDR from Bloomberg. They write, The proposed directive would charge federal agencies to study and offer recommendations on relevant areas of crypto, touching on financial regulation, economic innovation, and national security. The initiative will also aim to coordinate agencies' work on digital currencies through the executive branch. The plan would push departments that have given scant attention to crypto to focus on it.

Starting point is 00:01:33 End quote. Apparently, the White House is even considering appointing a White House crypto czar, but they still haven't decided whether they're going to actually release this executive order or not. Even if they don't, the administration says that it will still make public its overall strategy. The question, of course, to me is, is there any new insight to be gleaned from this? and it does seem that there is confirmation about all of the behind-the-scenes jockeying for position and regulatory authority that we've commented on in the past. Quote, the scrutiny has fueled behind-the-scenes jostling between agencies over who has

Starting point is 00:02:10 jurisdiction over fast-growing corners of the market, from stable coins to crypto lending products. The executive order apparently would clarify the responsibilities of different agencies. It would also create a mandate for many of them to go back to study particular issues. or areas and report their findings back to the larger group. Now, this involves potentially a ton of agencies, from treasury to commerce to the securities agencies, to the National Science Foundation, and the goal overall is to have a unified approach. As Bloomberg writes, this is particularly important in the context of all of these people jockeying for authority.

Starting point is 00:02:48 Overall, the effort is being coordinated by the National Economic Council and the National Security Council, and let's now get to the frustrating part of this. Again from Bloomberg, one challenge the White House has had in crafting its plans is that it lacks a senior staffer with deep expertise in crypto who can focus on the issue, one person familiar with the policy work said. Now, wait a second, you might be saying, isn't there someone that was appointed an advisor around technology issues that had some Bitcoin who might know about this? Well, if you remember that good on you, but there's a problem. Quote, Tim Wu, a special assistant to the president for technology and competition policy, has knowledge in the area, but is recused from working on

Starting point is 00:03:31 crypto because of his personal holdings, which included between $1 million and $5 million in Bitcoin and as much as $250,000 in Filecoin as of when he filed his financial disclosures earlier this year. Look, I understand that there are ethics issues around someone who benefits from an asset being involved in writing the policy, but this is sort of like saying that no one who owns stocks can be involved in figuring out how to regulate the stock market. This is the only dude in that entire building who knows anything about the space and he's not even invited to give his perspective. Sure, maybe we don't let him run the thing, but to not even let him be in the room is just the height of stupidity. It's also unbelievably hypocritical, given that the Federal Reserve is absolutely

Starting point is 00:04:19 embroiled in insider trading scandals right now. Two or three Fed presidents have been forced to step down because of it. Politicians are getting all worked up about it. But yeah, this guy who owns a little bit of Bitcoin definitely shouldn't be involved in helping people understand how they might want to think about regulating Bitcoin. Look, ultimately, the overlap of people who know about crypto, but who don't own any, is just people who hate crypto and make their career out of said hatred. This is not a reasonable or realistic way to create policy. Travis Kling writes, best part of the Bloomberg article on White House crypto oversight,

Starting point is 00:04:55 they recuse the Tim Wu guy, only person in the entire White House who knows anything on crypto, from helping because he owns a couple bucks of Bitcoin. Meanwhile, half the Fed and a third of Congress just hammering insider trades. Good one. Misari's Ryan Selkis made fun of this as well, saying,

Starting point is 00:05:10 Mr. President, crypto could be a boom for the U.S. dollar, help us beat China to Web 3 as we did in Web 1 and Web 2, create millions of jobs, slowly break up tech and finance monopolies, and help millions of underbanked. Do you own crypto? Yes? You need to leave the room. Overall, Ryan is still, I guess, optimistic maybe. He tweeted later, literally the only thing we need is for this administration to not ban private transactions, self-custody, and defy. If we avoid the worst, 2020 will make the dot-com boom look like a joke. Luke Youngblood, a senior staff engineer at Coinbase replied,

Starting point is 00:05:42 the bar is this low. Just don't mess up a multi-trillion dollar industry that might help prevent China from dominating the next wave of technology and finance, and yet they are still scheming to do it. Unreal. Overall, to me, this whole thing shows just how far behind the U.S. government is when it comes to its perspective on regulating crypto. I mean, the fact that they're weighing an executive order to have a bunch of departments go back and write up some research notes on something is just insane. but whatever, I guess, we have to start somewhere, right? Second, I think that this whole thing around Tim Wu having to recuse himself is an absolute clown show. Like I said, I am completely fine with people reasonably weighing the ethics issues surrounding something like this and deciding that Tim Wu maybe shouldn't be running the whole thing,

Starting point is 00:06:29 but that's different than him not having a perspective at all. It's just insane to me. In a vacuum of no expertise, the strongest opinions tend to win, and so my question is, who's actually defending this industry in the world? inside the White House, and I just don't know. This podcast is sponsored by NIDIG, the institutional-grade platform dedicated to building a more inclusive financial system through Bitcoin. To find out more about NIDIG and their mission to bring Bitcoin to all, go to nidig.com

Starting point is 00:07:03 nLW. That's N-Y-D-I-G forward-N-W. Meanwhile, to dramatize the example of what we don't want, let's turn to Colin Wu, one of the most essential journalists when it comes to crypto and China. He tweeted, Person close to the Chinese government told Kajing magazine that the Chinese judiciary is investigating how to convict and sentence cryptocurrency behavior and is expected to issue relevant judicial interpretations in the future.

Starting point is 00:07:35 The Chinese government defines all commercial activities involving cryptocurrency as illegal financial activities. However, the current law cannot be applied, so an interpretation by the judicial authority is required. Kajing magazine also pointed out that the withdrawal of all exchanges may cause the criminal activities involved to become more conceivable. So basically what's going on here is that China's legal system, its judicial system specifically, is trying to catch up to the new crypto rulings, the new mandate to actually truly ban crypto trading.

Starting point is 00:08:05 As I said, this is what we don't want here. And to be fair, what people like Gensler and Federal Reserve Chairman Powell have said is not their intention when it comes to crypto in the U.S. Related, Bitmain has said that they will no longer deliver machines to mainland China addresses. This is a company that's been more and more focused on North American mining efforts, but still, China represented about half its revenue just a few years back. It is very clear that Chinese authorities are not backing down on these crackdowns. The block wrote about some of the Chinese government's activities to try to uncover illegal mining. They wrote, for instance, China's Jiangsu provincial government recently conducted a probe into

Starting point is 00:08:41 local energy consumption and mining pool IP traffic. It detected over 4,500 IP addresses in the province that were suspected of mining activities and consume 260,000 kilowatt hours of energy. Interestingly, 21% of those mining IP addresses were found to be inside government agencies, public schools, and enterprises. Some Chinese miners have also recently shared anecdotes of them receiving calls from local energy and telecommunication bureaus

Starting point is 00:09:04 who questioned them over mining suspicion and sent staff for on-site inspections because of their abnormal energy consumption. Meanwhile, back in North American mining, Ted Cruz spoke at the Texas Blockchain Summit and Nick Carter tweeted that, his jaw dropped while listening. Indeed, Nick was so impressed that he actually transcribed part of Cruz's speech, so I'll just read a little selection from that now. There were lots of things that

Starting point is 00:09:29 went wrong during the winter storm that I think are worthy of study, but I do think that Bitcoin has the potential to address a lot of aspects of that. Number one, from the perspective of Bitcoin, Texas has abundant energy. You look at wind, we're the number one wind producer in the country by far. Number two, I think there are massive opportunities. If you look at natural gas right now in West Texas, the amount of natural gas that is being flared, 50% of the natural gas in this country that is flared in Permian right now in West Texas. I think that is an enormous opportunity for Bitcoin because that's right now energy that is just being wasted. It's being wasted because there's no transmission equipment to get that natural gas where it could be used the way natural gas would

Starting point is 00:10:03 ordinarily be employed. It's just being burned. A lot of the discussion around Bitcoin views Bitcoin as a consumer of energy. A lot of the criticism directed at it is that the consumption of energy. The perspective I'm suggesting is very much the reverse, which is as a way, to strengthen our energy infrastructure. One of the most exciting things about crypto also is the ability to unlock stranded renewables. So there are a lot of places on Earth where the sun shines a lot and the wind blows a lot, but there aren't any power lines. And so it's not economically feasible to use that energy. And the beauty of Bitcoin mining is that you can connect to the internet and you can use that energy and derive value from those renewables in a way that would be impossible otherwise.

Starting point is 00:10:38 And I think we're going to see in the next five years massive innovations in that regard as well. As I said, Nick Carter said his jaw dropped. And he said that Cruz made three. three points. Miners can mine off grid by mitigating waste natural gas, the byproduct of oil extraction. Two, miners can participate in demand response and give energy back to grid when most needed. And three, miners can take advantage of stranded renewables. These were, Carter said, the exact same points he decided to focus on when he gave his presentation. So pretty interesting stuff, and certainly a plot twist to see Ted Cruz become a policy leader when it comes to Bitcoin. Speaking of plot twists, let's bop on down to El Salvador, where President Naibu Kelle has said that the first use of their Bitcoin profits will be building a pet hospital?

Starting point is 00:11:24 Question mark, question mark. Basically, the deal here is that the trust that they hold Bitcoin in has a specific dollar-denominated mandate, and when it goes over, that's profit they can use for other things, and that's going to be used to build a pet hospital. I genuinely don't know what to think here. I guess it's cool. I'm not sure where pet hospitals rank on the needs of El Salvador's citizens, but who am I ultimately to question that decision? Meanwhile, Ethereum's Vitalik Buterin also triggered some folks when he disparaged Bitcoin Maxis for uncritical support of Naibukele. On a Reddit post titled Unpopular Opinion El Salvador President Mr. Naib Buckele should not be praised by the

Starting point is 00:12:03 crypto community. Vitalik wrote nothing unpopular about this opinion. Making it mandatory for businesses to accept a specific cryptocurrency is contrary to the ideals of of freedom that are supposed to be important to the crypto space. Additionally, this tactic of pushing Bitcoin to millions of people in El Salvador at the same time with almost no attempt at prior education is reckless and risks a large number of innocent people getting hacked or scammed. Shame on everyone. Okay, fine, I'll call it the main people responsible, shame on Bitcoin maximalists who are uncritically praising him. First, I will point out that there have been many Bitcoiners, Nick Carter among them, who I was just quoting, who have made this same critique of the Bitcoin

Starting point is 00:12:40 law, and who have this same sense that compulsion is, in fact, counter to the ideals of Bitcoin. Second, I am glad to report that there is a growing chorus of Bitcoiners who are much more cautious about their praise of Buckele, who are watching him much more closely, who see an ally around Bitcoin, but who are not willing to give the benefit of every doubt in every other area. Brady Swenson tweets, you can cheer for Bitcoin in El Salvador without cheering for Buckele. Personally, I hate any uncritical approach to really important things, so I'm glad to see this shift in tone, again, not to being against Ukele, but to holding him accountable for all the decisions he makes, not just giving him a pass because of the Bitcoin position.

Starting point is 00:13:24 Anyways, guys, clearly an interesting global intrigue, global power politics kind of way to start the week. I hope you had a great weekend, and I appreciate you listening, as always. Until tomorrow, be safe and take care of each other. Peace.

The Breakdown - Is Biden Prepping an Executive Order on Crypto?

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.