The Breakdown - Libra's shaky membership FUD / Crypto In A Congressional Race / Why BTC volume is growing in Hong Kong

Episode Date: October 2, 2019

Libra is back in the spotlight after the WSJ published reports that Visa, Mastercard and others are getting cold feet after the chilly reception from regulators around the world. David Marcus took to Twitter to defend the project, while simultaneously creating a narrative line to pickup should those companies abandon the Libra Association. A challenger to Nancy Pelosi is discussing how cryptos can be used to break the power monopolies of big tech, while a new advocacy organization is taking on what they call the CA bitlicense. Finally, volume on LocalBitcoins in Hong Kong is up more than any time since the 2017 boom amidst heightened protests. The question is: who's buying?  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another Crypto Daily 3 at 3. All right, what's going on, guys? It is Wednesday, October 2nd. And we have kind of a political kind of themed three at three today. So first we're going to talk about Libra and some new information and or FUD, depending on your perspective, about its membership base of the Libra Association. Second, we're going to talk about new advocates for cryptocurrency on both the national and state level. And then third, we're going to talk about Bitcoin and Hong Kong

amid ongoing protests. So let's start with Libra. Continues to be the story defining the time in a lot of ways. So yesterday, there was another report from the Wall Street Journal with more detail about something that we've been hearing for a while, which is that key members of the Libra Association are either, A, not as committed as they perhaps seemed when, Facebook. Facebook presented them and announced the whole thing, or B, that they're reconsidering their commitment now in the light of pressure from governments around the world. So not a ton of details given in the Wall Street Journal piece, but basically you can see here Visa, MasterCard, and other financial partners that signed on to build and maintain the Libra Payments

Network are reconsidering their involvement following a backlash from U.S. and European government officials. major defections could imperil Libra. Facebook's attempt to persuade consumers to swap their national currencies for a digital coin that could be used to pay for goods and services on the internet. By the way, that's an interesting phrasing. I don't think, I think that Facebook would bristle at that as they're trying to be very clear that it's not swapping Libra for other currencies.

At least that's what they're trying to say. So on and so forth, right? So basically the key thing here is that the Libra Association is a centerpiece of its argument for why, Facebook's argument for why it should be allowed to do this. One, from the standpoint of the quality, caliber, and global pedigree of the companies involved, two, from the idea that it is truly decentralized and outside of Facebook's control. And so when there's indications that their coalition is less strong, it becomes less politically risky, costly, whatever, to oppose Lieber.

So David Marcus, the head of Calibra at Facebook, basically took to Twitter to address this. He says, felt like addressing this. One, official first wave of Libra Association members will be formalized in the weeks to come. Two, change of this magnitude is hard and requires courage, and it will be a long journey. for Libra to succeed, it needs committed members. And while I have no knowledge of specific organizations' plans to not step up, commitment to the mission is more important than anything else. Three, the part of this article suggesting we weren't on top of or didn't share detailed

information about how to secure Libra and protect the network against the legal activity is categorically untrue and worth calling BS. Four, the tone of this reporting suggests angst, etc. I can tell you that we're very calmly and confidently working through the legitimate concerns that Libra has raised by bringing conversations about the value of to the forefront. So a couple of things that are interesting about this. One is this reads to me like a pre-preparation for, in fact, some of the members that we thought were going to be part of the association, not ultimately actually deciding to join. That's kind of my read on the first two,

which is fine. And he's saying that it's about the mission and you have to be committed to the mission, which is both true but also PR spin. So that is what it is. On this latter point, though, that Facebook is freaking out about that. I don't buy that for a second. I think that there is smart enough group to have to have anticipated the type of blowback that they're getting and the type of frustration. And, you know, even in a, in the leaked transcript of Zuckerberg's conversation that's been blowing up the news as well, I think it was from a, a verge published this transcript from an internal Facebook meeting. he talked about Libra and he doesn't give a lot of that concern, right? It doesn't seem distressing. And so,

you know, he says here, part of what we're trying to do overall in this big projects now that touch very socially important aspects of society is have a more consultative approach. Clearly, I mean, we've talked about it here on the three at three before, right? Facebook is, they know that the stakes are so high with this that they have to be engaged with, with, with, you know, everyone, all the stakeholders involved from the get-go. This can't be the sort of move-fast and break-things model that just worked for them in the past. Now, it may even be ultimately that we see that to some extent this is a sacrificial lamb and gives something for regulators to say no to that Facebook can stomach versus more overarching

regulation, dismantling, et cetera, all the Elizabeth Warren plan. But, you know, who knows? So I guess the interesting thing is, one, just the specifics of Libra. obviously the actual substance of this, you know, this project itself is fascinating and has huge implications for the world to the larger context of just the continued conversation about stable coins and central bank digital currencies and who are the right people to actually make this new type of digital money, right? So the IMF published a blog post last week about central bank digital currencies, just showing kind of that the highest order eyes from the traditional

financial world, they're looking at it. And then there was a really interesting, a really interesting op-ed from Tyler Cowen today, Marginal Revolution on Bloomberg opinion, that basically gave a reason that's very different than what some of us who are concerned with central bank digital currencies are thinking about. So I think a lot of people in the crypto community look at CBDCs and are stressed out on the basis of the idea of the surveillance that they offer, right? You know, the ability for governments to monitor the financial activity of citizens. Tyler Cowan is arguing basically for a different reason, which is that it disrupts the delicate balance between state power and private power, right? So he says, he basically uses China as the example. So he says, consider China, which is perhaps

the furthest along of any government in this field with its plan for a digital UN. The Chinese banking and payment system is already so state-run and state-controlled, so this will prove one of the easier transitions, that China is in the lead here should give you pause. Most banking and financial systems are an uneasy blend of centralized and decentralized elements, with the balance changing as technologies evolve. If countries institute central bank digital currencies, it will in effect be an end run around the private sector. Too much commercial activity will be subject to centralized regulatory control. So the fascinating tension here, and I'll leave on this, is that on the one hand, you have folks like Tyler Cowen who are arguing that if central banks create the digital currencies

of the future, it will be an end run around the private sector, that it will be too much power shifted over into the hands of the state. Whereas, you know, on the other hand, there's these private actors like Facebook and Libra that would really shift the balance of power over to the private sector in a kind of undeniable way. And that's at the center of the tension of what should and shouldn't be allowed, which again is just one of the reasons that Bitcoin is so fascinating sitting in the middle where it's not private power. per se. It's not government power per se. It's this new network actor that's everything and no one and everywhere and nowhere all at once. So really fascinating stuff. Again, to me, just continues to be

the story of the year, you know, and potentially bigger. But with that, let's move on to number two. So new crypto advocates. A couple of interesting stories keeping on this theme of the relationship of crypto to politics. First is a new crypto-friendly congressional candidate. This one in the 12th District of California, which is the Nancy Pelosi's district, so it includes San Francisco. So Agatha Bassilar is a 27-year-old Brazilian American immigrant who is running on a left liberal platform and is interested in cryptocurrencies as a mechanism to redistribute power to people and away from traditional tech actors. So in a lot of ways, the statements that she's had kind of read a little bit like, you know, the tech crypto argument that folks like the Andriesen Horowitz people, Chris Dixon, have put forth in terms of disrupting the power of tech incumbents.

But it's interesting, right? She is trying to represent a voice that actually understands tech. So when we're legislating it, it's not just kind of these big broad brushstrokes, you know, dismantle them, break them up or not. But it's actually sophisticated. So she says, she basically, so this is a coin desk article, Bacilar claims the quote, once bright future for crypto in America has been dimming and has suffered as federal intervention pushed innovators out of our district and the country. She's in a position to see this because San Francisco and Silicon Valley more broadly

have, I think, seen for the first time probably ever with a new technology movement some amount of an exodus of entrepreneurs freeing for either regulatory clarity or just regulatory favorability. She says that cryptocurrency is, quote, about building alternatives that do not exploit users and creating an ecosystem of innovation that better serves the American people. She's also raising money via cryptocurrency through Coinbase. She's raised 5,000 in Bitcoin, Bitcoin Cash, Ethereum, like coin, and USD coin. So, you know, I think a couple of things. One, this is obviously a long-shot campaign. You have a 27-year-old challenger going up against Nancy Pelosi, who's arguably the most powerful.

Democrat in the country in some ways right now, the U.S. House of Representatives Speaker, Speaker of the House. So I think that you've got to think that on the one hand, Agatha's campaign is at least in part to get issues on Pelosi's agenda that might not have been there. But at the same time, I think that it is encouraging to see the voices of younger people getting into politics, A, in general, on all sides of the aisle. I think the more new blood that actually under understands the nature of the world that we live in that we're moving into, regardless of what your particular perspective is from a political standpoint, is really, really important. Two, I think it's good to see that this actual kind of, you know, showing some meaningful understanding of what's

going on in the cryptocurrency space is really positive. So again, a long shot, but certainly one worth rooting for. So check out Agatha for Congress, I think, is her URL. Second, there is a new advocacy group in crypto that just launched, I think, on Monday. They're called the Aquarian Advocacy Group. They're headed up by Margo Avizadan, who has been around the crypto space since 2012. She was at Transform PR for a while. She worked with Elixir, David Choms Company. She's done kind of a variety of things. And so their whole raise on debt, I guess, is to stop what they call the California Bit License Bill. So this is a bill. Basically, it's called the California A.B.E. B 1489, the CA Act, which is modeled on the Uniform Law Commission's Uniform Regulation for Virtual

Currency Businesses, aka the Model Act, which basically is a regulatory framework for cryptos. And it has to do with money transmitter licenses, right? So this is not new stuff. The Uniform Law Commission, the Model Act, is basically dates back to 2017. And so people like CoinCenter were actually involved in the writing of that. And so what's going on? Why is a new advocacy group coming up when CoinCenter was involved with the writing of this legislation?

Well, basically, you know, the best that I can tell is that CoinCenter effectively is what their interest is trying to, they believe that the regulation of cryptocurrencies, particularly around things like money transmitter licenses, is an inevitability. And what their goal is is to make sure that the right. folks are regulated in that context, right? And that there's not too broad and sweeping generalizations made, right? So they want to make sure that only things like custodial exchanges are caught up in that versus a huge number of other types of actors that might be. So that's kind of, the best, as best as I can tell, that's their disposition, right? It's that, again, there's,

clarity around who is actually a money transmitter and it's not these these kind of actors that shouldn't be. Aquarian for whatever reasons or set of reasons disagrees. They think that this bill would be too onerous and they are they are fighting against it. And so what do I think? What's my take? A couple things. One is I frankly, I don't know enough about this legislation to really understand what the full implications are. I share on the one hand coin center sense that regulation is inevitable and the more that we can properly define who should be kind of caught up in that and create safe space for everyone else the better at the same time I also don't mind people fighting for the widest possible kind of you know

interpretation of freedom and liberties and carving out more space so you know for me I think generally speaking it's just good to have more voices in this space more advocacy groups it's kind of like the the free market for advocacy. Now, of course, the flip side is, if you look at the DC model, advocacy can quickly become one of the most abused areas from a kind of a political, just, you know, grabbing the political bucket and grabbing all the money that's available to it. So I don't think we're there yet, though. And for now, you know, the groups that are involved in this advocacy, I think genuinely have a pretty strong, pretty strong best interest of, of, of

everyone involved even when they disagree. So, you know, congrats to Aquarian for launching and exciting to see what happens next. And finally, number three, let's move on to Hong Kong. So I saw this tweet this morning from Rhythm Trader. Bitcoin volume in Hong Kong tripled this week to new all-time highs as protesters, or as protest experience one of its most violent days. Last month, protesters called for a run on Chinese banks, and it seems they're taking it one step further by opting out of the entire system. So what's going on in Hong Kong? Hong Kong has continued. The protests have continued. The law that was originally that provoked these protests that would have sent as an extradition

treaty basically that would have sent people back to China for punishment. That was put on pause. However, by then the protesters had a multi-point plan that they wanted the leadership in Hong Kong to agree to, so they've been out. They've continued to protest. These most recent protests had to do, They coincide with a national day of celebrations in Beijing to commemorate 70 years of communist rule. And at the latest one, there was a video that was released of a policeman firing his revolver at a protester. And, of course, extremely heightened, you know, takes on both sides from the protester being shot. You know, the police claim self-defense. Protesters obviously don't have guns.

So it's kind of a whole big mess. And obviously there's a world of implications here that are bigger than just Bitcoin. However, you know, it is interesting to see this basically, it's local Bitcoin numbers that show the volume is the highest since kind of the 2017 boom, right? And it's like the third highest week in history of local Bitcoin's volume in Hong Kong. So for me, there's no doubt that it's interesting to take note of this. that it coincides with, you know, heightened protest and heightened, you know, the heightened challenge of the protest, right? They're kind of reaching a new level of intensity with shots fired, literally. The question for me is, is who, right? Who is this set of buyers? Is it just people who are

generally feeling the turmoil? Is it money trying to flee amidst the turmoil? I'm just really fascinated. I would love to know more about basically, you know, let's put it this way. We're trying to understand to what extent there's a correlation between larger political and economic actions and Bitcoin and Bitcoin's price and its demand. And we have all these things that are interesting from a correlation standpoint, right? There seems to be a correlation between the protesters in Hong Kong and the severity of the protests in Hong Kong and the local buying volume. We can extrapolate a lot, but ultimately it is just that. It's extrapolation and it's guesswork. And I think that the more that we can understand actually what the through line is, you know,

what are the groups who are watching these protests or participating these protests and then buying Bitcoin? Because it seems substantively different to me if it is big financial interests who are just trying to get their money out of there versus, you know, the same people who are protesting who are opting out of a financial system. Those are really, really different things. Now, this is not casting kind of value judgment, so I need your one or the other. And part of the beauty of a permissionless currency like Bitcoin is that it can be both of those things to different people and different things to different people. However, I would like to know.

So if you're watching the situation, if you have stronger thoughts, if you have stronger ideas, let me know. Hit me in the comments. Hit me on Twitter. Who do you think it is that's buying Bitcoin in Hong Kong and why? All right, guys, that's my three at three for the day. Thank you for listening. Thank you for watching.

and I will catch you tomorrow. Peace.