The Breakdown - New York City Gets Itself a Bitcoin Mayor

Starting point is 00:00:00 This sort of competition for businesses, for tax bases, for the narrative is going to be an increasing feature of this landscape. And so I am feeling extremely bullish this morning, waking up to see multiple major American city mayors excited about the possibilities that Bitcoin and crypto represent and actually starting to put their money where their mouth is and get involved. 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 Wednesday, November 3rd, and today we are discussing how New York City has gotten itself a Bitcoin mayor. Yesterday was election day in the United States, and while this

Starting point is 00:00:55 wasn't a huge election day in the sense that there weren't midterms, it wasn't exactly a referendum on Congress or the Biden administration, it was something of a preview for what's to come. And frankly, for Democrats, it wasn't a great showing. States that had seen pretty significant Democratic majorities in the last election actually lost some ground here. For example, the banner headlines were a much closer than expected New Jersey governor's race and a governor's race in Virginia that actually is going to the Republicans. The first time a top-of-the-ticket-referferfer Republican has won in that state since 2009. The New York Times morning newsletter called it the Democrats' rough election night and said, good morning, Republicans had a very good election night.

Starting point is 00:01:45 Now, while these elections may not directly impact what's going on in Congress and the Senate right now, they do in an indirect way. As the New York Times writes, so what do Democrats do now? They have two basic options. The first is for congressional Democrats to try to distaste. themselves from Biden and drop his legislative agenda. The second is for the party to decide that its best chance at political recovery involves passing that agenda, which is still broadly popular polls show. It's hard to see how Democrats would benefit from the first option, but it's not clear whether they remain unified enough to pull off the second. Now, holding aside every issue except crypto issues, there is some reason for the crypto community to be excited by the

Starting point is 00:02:29 wind being taken out of the Democrat sales, at least when it comes to the infrastructure bill. If you're a regular listener, you will know the complete saga about how a pay-for provision was shoved into the infrastructure bill at the last minute, which could have serious, serious implications for how crypto is regulated in this country. Theoretically, this was designed to recapture some $29 billion in crypto taxes that the Biden administration says that U.S. crypto citizens aren't paying, but the way the provision was written would give the Treasury Department extremely wide-ranging powers, and would reclassify as brokers a number of non-custodial actors in the crypto chain. The legacy of that battle is that we saw

Starting point is 00:03:10 a bipartisan group of senators and congresspeople step up and advocate for the rights of the crypto community and for pro-innovation policies. But still, as I said then and I'll say again, I am not comfortable with the idea that in practice, the folks over at Treasury aren't going to take advantage of their extremely wide latitude to define things in a way that isn't good for this industry. There's much that feels very important about the infrastructure bill that has absolutely nothing to do with crypto, and it's a shame that the way that our process works, we have to reject things out of hand when they come after issues that are salient to our industries and to our livelihoods, but here we are. It's hard for me to not be at least a little relieved that it has now gotten

Starting point is 00:03:51 even harder for the Democrats to pass this bill as written. But that is a little more political than this show is normally focused on being, and what we're really talking about is a specific election, and that is in New York. New York has had a, shall we call it, tempestuous relationship with crypto. This really started in 2014 with the launch of the Bit License. The Bit License is required for companies to operate and offer crypto-related services in New York, and it is extremely burdensome to get. What's more, it was clear right out of the gate that this was the case. On August 9th, 2015, the Crypto Exchange Cracken wrote a blog post called Farewell, New York. It used a D&D metaphor throughout and wrote,

Starting point is 00:04:39 Today Cracken discontinues service to New York residents. Regrettably, the abominable bit license has awakened. It is a creature so foul, so cruel, that not even Cracken possesses the courage or strength to face its nasty, big, pointy teeth. It's a at least a 40 man, bro. Additional attributes to tax and debuffs include one, no guarantee of support from New York banks. Two, no guarantee of enforcement against the unlicensed competitors. Three, reduced consumer protection. Four, unjustifiable burden and restrictions on global operations. Five, unjustifiable bifurcation of the service for New York alone. Six, unjustifiable expense for the opportunity to compete for the small market. Seven, no exemption from traditional

Starting point is 00:05:20 money transmission licensing. Eight, no on-ramp for small businesses. Nine, dubious value to the consumer. While we're sure that the protection from New York law enforcement is valuable, it comes at a price that exceeds the market opportunity of servicing New York residents. Therefore, we have no option but to withdraw our service from the state. Clients in New York who wish to continue enjoying our award-winning service are encouraged to escape across the border before the consumer-protective walls are erected around the state line. If the BIT license becomes significantly nerfed at some point in the future, we may attempt to rescue. Until then, you're on your own. Good luck.

Starting point is 00:05:54 narrator, the Bit License has not been nerved. NIDIG sponsors this podcast and they are helping banks, corporate treasuries, and fintechs integrate Bitcoin into their products and balance sheets. See why Bitcoin means business at nydig.com slash NLW. That's nydig.com slash NLW. New York has also obviously been one of the more aggressive states in terms of enforcement actions. The New York Attorney General had a settlement earlier in the year with Tether and just last

Starting point is 00:06:31 month ordered Celsius and Nexo to shut down while investigating three other firms. Now, law enforcement isn't necessarily a bad thing, but frankly, all of this adds up to New York, the center of the traditional finance world, not being particularly hospitable for this new area of finance. It is understandable then that when the New York mayoral race started, many in crypto were excited about the possibilities, in particular the possibilities for an Andrew Yang victory. Andrew Yang has long been an outspoken proponent of Bitcoin, including during his presidential run. In February, he tweeted, as mayor of New York City, the world's financial capital, I would invest in making the city a hub for Bitcoin and other cryptocurrencies. Now, it pretty quickly became clear that

Starting point is 00:07:17 this race wasn't Yang's to win. He simply couldn't get support and has subsequently gone on to found a new third party called Forward. For what it's worth, crypto and crypto adoption is a major pillar and platform of the Forward Party. However, as so often happens in politics, some of the better ideas of the vanquished get adopted into the Victor's platform. And while the cynical take is that that's just to consolidate followers, the more optimistic slant is that sometimes even politicians recognize that other people have good ideas and they want to make them their own. In either case in June, then front-running candidate for the Democratic nomination and former cop Eric Adams mentioned Bitcoin as well. On the eve of the Democratic primary, he said, I'm going to promise you

Starting point is 00:08:04 in one year, you're going to see a different city. We're going to become the center of life science, the center of cybersecurity, the center of self-driving cars, drones, the center of of Bitcoins. So, what was driving that? Well, on the one hand, you have to think, of course, there was a goal to unite the party, including extending an invitation to the yangers, right? This is a classic political move. There were also a couple notable crypto donors on Adams' roster, including Brock Pierce. What's more, from a campaign perspective, Adams had been running on a promise to not only fight crime, but to promote economic prosperity. Coin desk columnist David Morris wrote about this a few weeks later. Quote, in short, Adams seems to be more focused on well-paying jobs in a

Starting point is 00:08:47 vital economy than on changes to the status quo of financial regulation. In many ways, this is hugely bullish for the sector, a sign that crypto is stealing some limelight from Silicon Valley as a synodoc for innovation and growth. And New Yorkers were eager for that message thanks to an unemployment rate of 10.9% in May, far above the national rate of 5.9%. That's probably thanks above all to the loss of tourism, which is a huge driver of the New York economy during the coronavirus pandemic. It's also a meaningful signal locally, given the 2019 progressive backlash against plans to build an Amazon headquarters in the borough of Queens, which had its justifications but was seen by some as anti-jobs. Adams is more of a centrist than those anti-Amazon activists and has aimed mostly at appealing to blue-collar New Yorkers. Much of his platform focuses on small business, but the nod to tech is part of that larger promise of more and better jobs.

Starting point is 00:09:38 Anyone who listens to this show regularly will know my thoughts on Bitcoin and economic prosperity, and so I was thrilled when on July 6th, Eric Adams was officially named the New York Mayor candidate for the Democrats, which effectively mean that he was named New York Mayor. However, that wasn't it for mayoral candidates in New York City talking about crypto. Adams' Republican opponent Curtis Sliwa, who is the founder of Guardian Angels, which is an organization that nonviolently helps prevent crime, and who also had a real focus on animals and homes. homeless issues and the mentally ill, tweeted on September 1st, quote, As New York City Mayor, I will make New York City the most cryptocurrency-friendly city in the

Starting point is 00:10:16 nation. Property taxes, fines, and fees will be payable in crypto. We will open more crypto-a-tems and incentivize business to accept crypto. We must modernize our economy and make it accessible for all. There is a lot to love here. The U.S. and the world's traditional finance capital should also be focused on the economic opportunity that this new area of finance represents. What's more to love is this bipartisan focus on crypto is based in financial accessibility and economic empowerment, not just a new tax base, not just a new playground for finance bros. If this is a model of what's to come around the country, I think we have lots and lots to be excited about. But as I said, in New York City, the Democratic nominee is pretty much the same thing

Starting point is 00:11:01 as the actual winner of the race. And last night in his election, that was enshrined, Eric Adams will be the new mayor of New York City, and so the question becomes, what can he actually do? Back to David Morris from that column in July. It's not as if Adams has much sway on the crypto issue anyway. The Bit License was imposed by state legislators in Albany, and the New York Mayor generally has a contentious, if not outright hostile relationship with the state capital. His chances to get any changes on the Bit license are close to nil. So if Adams wants to make New York City more of a center of bitcoins, his real options include the kind of programs he pursued as Brooklyn Borough President, including investment in STEM programs for local students.

Starting point is 00:11:39 It's an uphill battle to get more hometown kids in the pipeline for the local tech industry, but if any city can pull it off, it's New York, which has some of the country's most well-regarded public secondary schools and universities. It's also possible that Adam's quality of life measures could help attract new businesses or individuals to the city. Those include enhanced child care services and a firm but just approach to violent crime, which has been edging up. The timing would certainly be right, given an ongoing out-migration from the San Francisco Bay, area and a historic dip in rents in New York City. Now, this is the thing that I think gets me

Starting point is 00:12:11 most excited is this competition between cities. I can testify firsthand to the fall of San Francisco, which has been widely publicized, my wife and I are San Francisco refugees from a few years ago. What's more, I believe firmly that crypto has broken on some pretty fundamental level, the mythology that the only place the technology innovation comes from is Silicon Valley. Not only has Silicon Valley not owned crypto as much as it has a role now, it was actually kind of late to the party, especially based on what you'd expect. Right now, San Francisco isn't really even in the conversation about where America's first Bitcoin city is going to be. You see Bitcoiners taking up stock in places like Austin. Clearly, New York is contending for this

Starting point is 00:12:53 and has a great leg up just based on their existing financial base. And then, of course, there's Miami. Miami and its Mayor Francis Suarez have been making moves for a couple of years now. Around primary night in June, Eric Adams even bantered a little bit with Suarez saying, Miami, you had your run, we're bringing our businesses back. But don't count Mayor Suarez out just yet. Suarez also won his re-election campaign, as expected. And when yesterday, Pomp tweeted out, It is time. Who's going to be the first American politician to accept their salary in Bitcoin? Suarez responded, I'm going to take my next paycheck 100% in Bitcoin. Problem solved. Suarez's director of innovation and tech, by the way, responded to that, saying that he had

Starting point is 00:13:35 already sent over his strike link for Mayor Suarez to register and additionally added, quote, my experience receiving a portion of my pay last week went flawlessly, and Mayor already scaling my, quote, pilot to 100% allocation. Boss, move. This sort of competition for businesses, for tax bases, for the narrative, is going to be an. increasing feature of this landscape. And so I am feeling extremely bullish this morning, waking up to see multiple major American city mayors excited about the possibilities that Bitcoin and Crypto represent and actually starting to put their money where their mouth is and get involved. So what do you think? Can New York City become a Bitcoin city? What will it take? What has to happen next? And what's

Starting point is 00:14:19 the single biggest thing that Eric Adams can do if he's really serious about this commitment? Let me know on Twitter, and if there are any really good ideas, I'll be sure to come back to them on a show later this week. For now, guys, I appreciate you listening, and until tomorrow, be safe and take care of each other. Peace.

The Breakdown - New York City Gets Itself a Bitcoin Mayor

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