The Breakdown - SEC Chair Gensler's Feeble Anti-BTC Arguments Smacked Down on National TV

Episode Date: February 16, 2024

We're officially living in the post-ETF world, and people are sick and tired of the supposedly "merit neutral" SEC spreading lies and FUD about Bitcoin. SEC Chair Gary Gensler went on Squawk Box, trotting out his greatest hits, only to be brutally rebuffed by host Joe Kernan. 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 Thursday, February 15th, and today we are talking about SEC Chair Gary Gensler getting the Smackdown on TV. 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.L.Y slash breakdown pod. All right, friends, well, as I alluded to, SEC chair Gary Gensler sat down for an interview

with CNBC's squawk box yesterday morning to talk crypto regulation, Bitcoin, and the ETFs. Gensler refused to engage in speculation about the Ethereum ETF, simply repeating that the SEC's decision to approve Bitcoin products was cabined. He's still using that damn word to a single crypto asset. The interview really heated up, however, when the discussion veered towards the use of Bitcoin in illicit transactions and its merit as a decentralized money. Co-host Joe Kernan took the opportunity to challenge the supposedly merit-neutral regulator about his opinions on Bitcoin. Here is a clip of that exchange. Now, there are obviously frauds and things that happen, but maybe not like this. Like the dollar is like a hundred times more. Well, I know that's your perspective,

but I'm just curious how you think about that. That's true, though. This is how much has been money laundered with Bitcoin. This is how much, this is Bitcoin, this is dollar. Yes, Joe, look, here's the Jamie Diamond quote. The only true use case for it is for criminals, drug traffickers, money laundering, and tax avoidance. I know, but we have a guess. We have a guess, Joe.

What is your opinion? And what is your opinion that we have something trading on the exchange for the public that has this type of use case, at least as described by the president of one of the largest financial issues in the company. It's the leading market share in ransomware, and that's publicly known. Right. You know, it's the token of choice for ransomware. Joe, if I can say the U.S. dollar, the euro, the yen, you have the whole society using it

as a medium of exchange. We buy our cups of coffee, as I see here. We get paid in dollars or yen or euro. And you have a whole central bank and support for one currency generally per economic region. That we don't have here. So there is a very real economic difference. Which is part of the attraction since it's decentralized and you can't have a profligate central bank. It's not that decentralized, Joe.

I know you're saying because of the ETS. But really it is for D5. centralize because look how finance tends towards centralization since antiquity. So what do we have? We have a handful of three to six core so-called crypto exchanges. I understand that the asset itself, the way that, you know, the, that's how the accounting ledger. Right. That's how the ledger and. Now, how many times do you have people on this show that say, I want to invest in something because how the books and records are kept? I mean, Joe, really? You, it's just an accounting ledger, a clever.

That everyone has, that everyone has and can't be double-counted. It's almost immutable. That's why people think it has in here and values. So you trust it more than an Oracle database, or you trusted more than a lot of the Bitcoin Bulls say they trusted a lot more than the central bank that enables the fiscal authorities to spend money to the tune of $33 trillion. That's everybody's investment choice. And then I think about how much.

many things can be used in a deleterious way, of course, but that doesn't, that has nothing to do with the underlying thing that you're using itself. Now, these comments obviously lit a fire across Bitcoin Twitter. There were tons of themes in the commentary, one of them being how much Gensler has changed since he praised Satoshi's innovation at MIT in 2018. During the interview, in fact, Joe directly called out Gensler's MIT course as evidence that he clearly understands Bitcoin. Tray Sellers, the VP of Enterprise Sales at Unchain Capital, said,

I watched Gensler's full MIT course on Bitcoin, and this is not the same man. So strange. Coin Bureau said, seems like the presenters on CNBC were paying attention in Gary Gensler's MIT lectures, and he wasn't. Another theme was Gensler's brushing off of the Bitcoin ledger as a solution to the double spend problem, basically saying that there was no investment case behind that. Darren Feinstein, the founder of Core Scientific, said, Gensler downplaying people who make investments based on, quote, how the books and records are kept

is mind-blowing. The Bitcoin Network is the most important accounting ledger technology and history and the first innovation in the last 700 years. This interview makes no sense. Now, many simply thanked Joe Kernan for not allowing Gensler's talking points to pass without criticism and representing the Bitcoin review point on mainstream financial television. Joe has been a quiet advocate, at least relatively quiet, for Bitcoin for a few years, but as Bitcoin enters a bull market, we're watching him become louder and louder. Anthony Scaramucci of Skybridge Capital said Joe gets it and isn't afraid to explain despite some elitist scorn. I admire that.

Ryan Shot Adams from Bankless said, credit where it's due. Joe did a great job pushing Gensler in this interview. I watched the entire thing. Don't often see this in traditional media, but Joe is doing a great job. Lyle Pratt got at what many bitcoins think is the real thing going on here when he wrote. The sad thing about this is Gensler knows he's wrong and is just spouting the script he thinks will secure his spot as Treasury Secretary after Yellen. Today's episode is brought to you by Cracken. For far too long, the whole financial system has been standing still, too slow, only on for

certain hours, overly designed for some types of people, but not for others. Crypto, at its best, represents progress. It asks the question, what if? It invites people in instead of leaving them out. It's on 24-7-365 and moves at the speed of real life. Not everyone believes it. We've got our fair share of detractors, but that's the way it always is when you're building something new. Cracken is a crypto company that has been through the highs and lows of the industry, facing forwards towards progress throughout. And now they're inviting us to see what crypto can be. Learn more at crackin.com slash the breakdown.

Disclaimer, not investment advice. Crypto trading involves risk of loss. Cryptocurrency services are provided to U.S. and U.S. territory customers by Payward Ventures Inc., PVI, DBA, DBA, Cracken. Now, taking a step back, Gensler on this interview trotted out the same set of talking points he has had for months. However, this was the first interview where he got serious pushback. Joe Kernan did everything short of laugh in his face. The credibility of Gensler's stance on Bitcoin has absolutely collapsed, to the point where he can't even get through a CNBC interview without looking foolish. It's not even so much that he has a difference of opinion. At this point, what he's saying just doesn't mesh with reality anymore. Fudd on illicit transactions,

the value of central bank issued fiat money, Bitcoin is just a speculative asset. It's now clear that he's lying about all of it, and Kernan was the first one to really clearly call him out on national TV. Indeed, Hunter Horsley from Bitwise gets the point, tweeting, the tone is shifting. Now, another shift in tone is the narrative around Bitcoin's use in illicit finance breaking down. During yesterday's House Financial Services hearing, we expected to hear senior treasury officials ask for enhanced tools to combat terrorism financing in crypto. Brian Nelson, the Undersecretary for Terrorism and Financial Intelligence, did ask for more power, but the response he received from House Republicans was much more than he bargained for.

Representative Tom Emmer raised the notorious Wall Street Journal article, which claimed that Hamas and other Palestinian terrorist groups had used crypto to raise $120 million in funding. He put it to Nelson that leading blockchain analytics firms had debunked this number as wildly inflated. Nelson was forced to admit that, quote, that assessment largely tracks with our own. We don't expect the number is very high. Nelson added, we also assessed that terrorists still prefer to use traditional products and services. Nelson's view was that the Treasury had done a very thorough job of tracking Hamas-affiliated crypto services, so he had a high degree of certainty about his answer.

Still, Emmer wanted to make the record crystal clear, obtaining Nelson's confirmation that, quote, Hamas is using crypto in relatively small amounts compared to what's been widely reported. Digital assets were not even a popular tool for Hamas. Given these facts, Emmer was frustrated that Treasury had not corrected the record until now. noting that, we have senators who are legislating on these false figures and major CEOs using these figures to inform their perspectives on digital assets. We can go to chain analysis and use their third-party reporting, but Treasury already has the data. He pointed out that this legislation could, quote, literally destroy innovation in this country.

Emmer closed his time by asserting that, quote, the Treasury must do a better job with all the data it has to paint an accurate narrative of digital assets and not perpetuate a false one. Basically, if the Treasury had any legitimate data, which showed that crypto was a large and rising terrorist financing threat, this was their opportunity to present it. Instead, we got confirmation that the opposite is true. The best that Nelson could manage is to suggest that the illicit use of crypto has the potential to grow and that the Treasury is keeping a close eye on that growth. That, of course, falls far short of justifying the massive expansion of power that the Treasury has

been asking for. Nick Carter from Castle Island Ventures tweeted, hey, we were right. Turns out making a huge gigantic stink about this and not letting it go for a month can work. Also, shame on UWSJU nasty regime shills. Going absolutely ballistic was the right thing to do. Journalists on notice. Cody Carbone, the chief policy officer at the Chamber of Digital Commerce, tweeted, the anti-crypto army exploited a tragedy and lied to so many to continue pushing a narrative. Besides the gaslighting to ban U.S. innovation and demonize an industry, these tactics have distracted from combating real problems, like state-sponsored hacking and ransom. somewhere. Orlando BTC tweets,

If senior treasury officials are downplaying Hamas' use of crypto, then you absolutely know it's not a helpful tool for illicit finance. This makes sense. I'd think if I were committing crimes, the last thing I'd want is an open immutable ledger. I don't know, could just be me though. Lastly, Austin Campbell tweeted, I agree this was a valuable line of questioning by Tom Emmer, but we should also congratulate under Secretary Nelson. Clear answers, direct, informed with the balanced assessment of risk, noting where the actual problems were. done. Now, this is kind of an important detail. Undersecretary Nelson didn't mince words. He didn't try to wriggle out of the line of questioning. He played it straight and confirmed that the Wall

Street Journal figures were wildly inflated. Many other Treasury and other officials have waved their hands at a vague terrorist threat while asking for stronger tools. Nelson chose instead not to mislead Congress in this manner. Had the Treasury taken this sort of tone right from the beginning, in other words, collaborative open and realistic about the actual risks of crypto terrorist financing, not just some trumped-up idea of it, the industry probably could have been a really good ally. Now, on the other hand, the whole thing got the community fired up once again about the stupidity in general of the illicit finance conversation. Bullie Esquire tweets, saying the government should ban crypto because a very small fraction of dumb bad people use it

for illicit purposes is such an insanely idiotic position. Some people use the internet for illicit purposes. Lots and lots of people use banks for illicit purposes. People use hammers and rope for illicit purposes. and nobody is talking about banning those, because that would be effing stupid. Just be honest and say you want to ban it because you can't control it, and it threatens your existing power structure. Now, one more report to wrap up this slightly shorter DC-focused issue. According to Politico reporting, Fed Chair Jerome Powell held a closed-door meeting with House Financial Services Committee Democrats on Wednesday.

Regarding stablecoin legislation, Powell reportedly said, quote, We need a framework for stablecoins and that he is very supportive and am glad that we are close. Now, quotes have been trickling in over the past month, implying that House Democrats are close to an agreement on stable coin legislation. The major sticking point has been whether the Fed should be given sole oversight authority or whether the task can be handed to state regulators. Democrats had been adamant that the Fed needs to be in charge, but that kind of language was notably absent from Powell. The question of CBDCs was also raised with Powell taking the position that, quote, We aren't advocates, but we haven't made a decision to recommend a CBDC to Congress.

He reiterated that the Fed cannot launch a CBDC without authorization from Congress. Aside from crypto topics, Democrat lawmakers pressed Powell on why voters were not more enthusiastic about the strong economy. Powell responded by explaining that wage growth had been beating inflation for low-income workers, which is also, quote, now increasingly true for most income earners. In his typically roundabout way, it seems that Powell was trying to explain to Democrats that inflation has been painful for the middle class, whose wages are not keeping up with the cost of living. The fact this is confusing tells you just about all you need to know

about the state of the political discourse in Washington, D.C. right now. However, that is going to do it for today's breakdown. One more big thank you to my sponsor for today's show Cracken. Go to crackin.com and see what crypto can be. Until next time, be safe and take care of each other. Peace.