The Breakdown - Republican VP Nominee on Bitcoin, Crypto and Gensler

Episode Date: July 17, 2024

NLW covers the crypto opinions (and disclosed BTC holdings) of new Republican VP nominee JD Vance. Plus BlackRock's Larry Fink has become Bitcoin's most effective promoter. 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 Tuesday, July 16th. And today, we are talking about the crypto record and opinions of new vice presidential candidate J.D. Vance. 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 or go to bit.ly slash breakdown pod. Hello, friends. Quick reminder, and I will keep saying this at the beginning of any political

coverage. The breakdown will continue to cover the U.S. presidential campaign specifically in the context of the candidate's relationship with and discussions of technology and, of course, most specifically Bitcoin and Crypto. We will avoid broader political discourse wherever possible, as it is not only extremely fraught, but heavily discussed everywhere else. With that caveat aside, yesterday Donald Trump made his selection for nominee for vice president, and that is Ohio Senator J.D. Vance. There are two big things that brought Vance to prominence. The first is the release of his memoir, Hillbilly Elegy, which came out in 2016, and the second is his long duration as a tech investor. To give a quick background there, Vance graduated from Yale

Law School in 2013, and moved to San Francisco where he became a principal at Mithril Capital. Meathril is one of Peter Thiel's funds. Mithril raised two funds while Vance was there in 2013 and in 2017, but in that year 2017, Vance left Mithril and joined AOL founder Steve Case's Revolution Ventures. That move was prompted by a family consideration as his wife became a Supreme Court clerk in Washington, D.C. At Revolution, Vance focused on investing outside of the main U.S. tech hubs, which also became the theme of his own fund, which he started fundraising for in 2019, called Naria Capital.

In 2020, Nario raised $93 million out of a fund targeting $125 million, featuring limited partners including Peter Thiel, Mark Andresen, and former Google CEO Eric Schmidt. Vivek Ramoswamy, who has, of course, also been active in the Republican presidential campaign and in discussions of crypto, was also an LP. Vance stepped back from his investing role at Nario when he won his Ohio Senate seat in 2022. In his announcement post on Truth Social, former President Trump wrote, JD has had a very successful business career in technology and finance, and now during the campaign, will be strongly focused on the people he fought so brilliantly for, the American workers and farmers

in Pennsylvania, Michigan, Wisconsin, Ohio, Minnesota, and far beyond. This region, of course, includes multiple battleground states that are viewed as key to a Trump victory. Now, coming to the crypto part of this story, Vance has been explicitly pro-crypto since he took office in 2022. He sits on the Senate Banking Committee and is currently working on his own bill to regulate the industry. According to Politico sources, the draft bill is more industry-friendly than the House bill Fit 21. The biggest difference was a simpler approach to deciding which tokens are securities, with the premise being that Fit21 granted too much discretion and authority to the SEC. One lobbyist told Politico, people don't want to start over, but the Vance bill

right now is much, much better. Vance has also proposed legislation last year that would prevent banking regulators from citing reputational risk when dealing with financial institutions. This was aimed at limiting the ability to use regulatory pressure to cut off the crypto industry from banking. During the 2021 scuffle around the infrastructure bill, Vance called out the last-minute reporting requirements as an attempt to usher in, quote, mass surveillance of the crypto industry, and functioning as a backdoor Bitcoin ban. At the time, he said crypto is, quote, one of the few sectors of our economy where conservatives and free thinkers can operate without pressure from the social justice mob. If you listen to my AI show today, you also heard the way that he brings some of these

culture war-type issues, a term I used descriptively, not pejoratively in this case, to his considerations around technology. Aside from proposing legislation, Vance has been outspoken against the SEC's approach to crypto. During a conference appearance in February, Vance said, if there's a candidate for worst person on crypto policy, it's Gary Gensler. I think he wants to inject politics way too much into the actual business of securities in the U.S. But the more relevant issue is that the approach that Gary has taken to regulating blockchain and crypto seems to be almost the exact opposite of what it should be, end quote. Vance's critique was that the SEC has been laser-focused on eradicating utility from the

crypto industry, but leaving pointless tokens untouched. He emphasized that he wanted to advance use cases like verification to ensure that incumbents in finance and communications can be disrupted by crypto-based services. This is honestly a big theme when you start to listen to the collection of his comments around technology, be it crypto, AI, or anything else. He has strong concerns about big tech and big tech oligopoly. He has strong concerns about competitiveness. and the ability for the market to offer up alternatives. He explicitly said at one point that he believed

that any contender to disrupt the oligopoly of the social network giants was likely going to have to interact with blockchain in some way, and so creating safe space for that was very important to him. Vance also co-signed an open letter that chastised the SEC over their handling of the debt box case, where agency lawyers were found to have misled the court. Before these statements, Vance wasn't really on the radar as a pro-cryptop politician. In 2022, during the Canadian trucker protests, An associated bank account freezes, Vance tweeted, This is why crypto is taking off. The regime will cut off your access to banking if you have the wrong politics.

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If you want to get 10% off, use code breakdown 10. Go to the Blockworks website, blockworks.com. There will be links to register for the conference, and again, you can use code Breakdown 10 to get 10% off. Blockchain Association CEO Kristen Smith endorsed the selection of Vance in a statement. She wrote, Former President Trump has made it clear that supporting our homegrown digital asset entrepreneurs will be a priority should he win a second term. And Senator Vance, an emerging voice for fit for purpose pro-innovation crypto legislation,

is an ideal candidate to lead the Republican Party's crypto principles. We're encouraged that being pro-crypto is becoming a litmus test for political candidates. Austin Campbell of Zero Knowledge Consulting framed Vance as a crypto-moder, tweeting, I've spoken with Senate staffers who have worked with J.D. Vance's people, and I can confirm that his views appear to be reasonably pro-crypto, neither hysterically permissive nor a blocker, but rather medium-positive and fair. This is a very good outcome for the space.

Aside from his pro-innovation views, Vance is also a bitcoiner. His 22 financial disclosures showed low six-figure holdings of Bitcoin custodied with Coinbase, somewhere in the ballpark of 10 Bitcoin considering prices at the time. We don't know if he held through the bare market, but we'll find out once his 2023 financial disclosures are filed ahead of the election. To many in crypto, Vance represents a generational changing of the guard. He is only 39, so would be the third youngest vice president in history if elected. Commenters found it impossible to avoid pointing out the irony with national security expert

Matt Bebe tweeting, having the torch pass directly from boomer to millennial is probably the most Gen X thing to ever happen to Gen X. Jokes aside, this does seem to be the way power is realigning in America, with elder millennial leaders pushing forward with the backing of powerful members of Gen X. Alongside Peter Thiel, Elon Musk has already thrown in his lot with the Trump-Bans ticket, pledging to donate $45 million per month to a new superpack. If you are wondering where discourse and discussion is going to come as relates to the technology industry more broadly than just crypto and Vance's selection,

there are many stories available today discussing how influential people like Musk and Teal seem to have been in Trump's selection. There is something of a rift happening in Silicon Valley, with a growing and outspoken segment of the population breaking from the long-term perception of Silicon Valley and technology more generally as Democrat to support the Trump campaign. Broadly speaking, the two crypto takes break along the lines that everything in crypto has broken along recently. There are those who think that crypto is selling itself out and pandering to power by embracing people that they see as inherently against the freedom principles of Bitcoin in the industry more broadly. And then there are many who basically argue that crypto is still operating inside a political system

and that pro-politicians are better than con politicians. Nick Carter writes, JD is a great choice, former VC and very good on crypto. Trump 2.0 is signaling a pro-Syc, pro-Silican Valley, pro-American dynamism outlook. So that is the story with the VP candidate. I'm sure at some point his crypto views will become part of the campaign and when it does, we will come back to it. For now, though, I also wanted to discuss BlackRock CEO Larry Fink, who's out on another press tour to extol the virtues of Bitcoin. In an appearance on CNBC on Monday, Fink said, I was a skeptic, I was a proud skeptic. I studied it, learned about it, and I came away saying, okay, my opinion five years ago was wrong. Here's my opinion today. I believe Bitcoin is legitimate.

I'm not trying to say there's not misuses like everything else, but I believe it's a legitimate financial instrument that allows you to have uncorrelated returns. It's an instrument that you invest in when you're more frightened, though. It's an instrument for when you believe countries are debasing their currencies via excess deficits and some countries are. I believe we have countries where you're frightened of your everyday existence and have an opportunity to invest in something outside of your country's control. Summing up, Fink added, I'm a major believer that there's a role for Bitcoin in portfolios. I believe you're going to see it as one of the asset classes we will all look at.

I look at it as digital gold and I do believe there's a real need for everyone to look at it as one alternative if you want to hedge against hope. Now, since Fink began speaking about Bitcoin last year, we've seen a slow refinement of his communication. He started off talking mostly about servicing demand for safer and more convenient Bitcoin exposure. Fink is now leaning all the way into the digital gold narrative and framing the asset as having a legitimate place in portfolio construction. What's more, he's also talking about the geopolitical and philosophical role of Bitcoin in a way that is frankly extremely cogent and clear. All of this wasn't lost on the financial media professionals with Bloomberg's Eric Balcuna's

tweeting, hard to overstate how big a deal it is for Larry Fink to keep giving these full-throated endorsements of Bitcoin as a legitimate asset class for everyday portfolio. Buy-in from BlackRock, as well as other legacy firms like Fidelity, gives Boomer advisors comfort and cover to make the allocation. That's why betting against or minimizing the clear-to-any-one-with-ey-surly success of these ETFs has been and will be dumb, in my opinion. The other reason Larry is a powerful advocate is that he's all about stocks and bonds. He's pro-humanity.

I think when someone is 100% invested in Bitcoin, it can scare 60-40 people because it comes off as a doomsday bet against humanity. Whereas Larry's saying, hey, just use a little as a hedge against government-de-basement. this is a much more palatable message in Messenger, at least to the $30 trillion advisor in Boomer World. End quote. Indeed, it's hard to overstate how important this point is at the moment. While the Bitcoin ETFs have been trading for around five months, this quarter is when the big wirehouses and investment advisor networks come online.

Fink has gift-wrapped talking points then for every investment advisor in the country, as they start calling clients to discuss adding a small Bitcoin allocation. It's also no surprise that Fink has become fully orange-pilled this year. On Monday, BlackRock released their earnings for the second quarter. They disclosed that their assets under management had once again risen above $10 trillion. The 13% year-on-year gain was primarily about asset appreciation, but Bitcoin played a small and important role. The BlackRock Bitcoin ETF has has accumulated $18 billion in AUM since launch, with $4 billion coming in the most recent quarter. More importantly, the product is unquestionably the most successful ETF launch of all time. Just from

this interview, you can see how much of an impact Bitcoin has had on BlackRock. This was Larry Fink dropping in to talk about the earnings call for the largest asset management firm on Earth, and it sounded closer to what you might expect from a Michael Sailor appearance. Summing up, Sam Kala from Swan Bitcoin writes, Larry Fink is just another person on his Bitcoin journey. Step one, skeptic. Step two, put in the work. Step three, realized he was wrong. Step four, Bitcoin is an uncorrelated asset used to hedge currency debasement. Next step, Bitcoin is hope. All right, friends, 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. Peace.