The Breakdown - The Crypto Army Rallies!

Episode Date: December 21, 2023

As the anti-crypto army gets louder, the Crypto Army is rallying to the cause. Elizabeth Warren's latest tirades contain some chilling subtext.  Today's Sponsor: Kraken Kraken: See what crypto can be - https://kraken.com/TheBreakdown 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 Wednesday, December 20th, and of course, we are talking once again about Elizabeth Warren. 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 of the show notes or go to bit.ly slash breakdown pod. Well, one day, friends, one day a week will go by where we don't have to talk about Elizabeth Warren, and yet that week is not this week.

The erstwhile Massachusetts Senator has launched the latest salvo in her war against crypto, firing off a brace of letters, of course, to the Blockchain Association, Coin Center, and Coinbase. The focus of those letters was on lobbying efforts from these three organizations. She repeated a claim from Politico, accusing the groups of, quote, flexing a not-so-secret weapon, a small army of former defense, national security, and law enforcement officials to work on your behalf to undermine bipartisan efforts in Congress and the Biden administration to address the role of cryptocurrency in financing Hamas and other terrorist organizations. Warren asserted that since the October 7th attacks, quote,

new information has revealed that crypto has become an essential part for Hamas's operational activity. She was, of course, still citing the notorious Wall Street Journal article to ground this claim. That article has since been subjected to a thorough debunking, and the newspaper was forced to issue a correction. Warren also pointed to the recent finance settlement, saying that the exchange had failed to, quote, implement programs to prevent and report suspicious transactions with terrorists, ransomware attackers, money launderers, and other criminals. According to Warren, these shortcomings within a segment of the crypto industry makes engaging with experts in defense and law enforcement inappropriate for the purpose of lobbying. Now, the trigger for this latest outburst from Warren came in November, with a letter to Congress from the Blockchain Association, The lobbying group had put forward a letter signed by 40 former ex-intelligence officers,

military officials, and national security professionals. Politico had characterized the letter at the time as downplaying, quote, illicit activity in crypto relative to traditional finance and argued against policies that would drive digital asset players overseas. Blockchain Association had said that they wanted to, quote, address and clarify misperceptions about illicit finance and money laundering. Warren's letter noted that Coinbase had recently added three former members of Congress. She wrote,

This abuse of the revolving door is appalling, revealing that the crypto industry is spending millions to give itself a veneer of legitimacy while fighting tooth and nail the stonewall common sense rules designed to restrict the use of crypto for terror financing, rules that could cut into crypto company profits. Warren rallied against what she views as gaps in the nation's ethics laws, which allow former government employees to, quote, almost immediately cash in and go to work as lobbyists or advisors for private sector industries with a keen interest in federal policy. Still the most galling part of the letter was the list of questions that Warren demanded answers to. Warren asked these two lobbying groups in Coinbase to provide a list of former military

and government officials that they employ along with their compensation. In addition, she demanded a full accounting of all legislative and regulatory activities these officials have engaged with, including a list of all Biden administration officials who accepted meetings. More specifically, Warren also wanted to know whether any of the 40 national security and law enforcement experts who signed the November letter were compensated for their involvement. The very overt subtext of the letter was that experts in the field couldn't possibly disagree with Warren on the merits and must have instead been bribed by the crypto industry. Now, while it wasn't the focus of reactions to the letter, I would like to specifically call out the fact that Warren is asking

here for a list of administration officials who have held meetings with lobbyists. Now, of course, it's likely that nothing will come of that, but the idea of putting together a list of internal enemies to target is an absolutely shocking callback to some of the darkest periods of American history. Now, Coin Center executive director Jerry Brito invited people to read the letter for themselves so they could see what a, quote, bullying publicity stunt it is. His organization put out a public statement which said, engaging like-minded experts to advocate against legislative proposals that one sincerely believes are unconstitutional and detrimental to the nation's welfare does not constitute undermining bipartisan efforts in Congress. Rather, it is the exercise of the fundamental right to

freely associate and petition the government. It's everyone's right and no one should apologize for doing it, resorting to questioning motives often reflects an inability to prevail on the merits of the argument itself. Brito added in a Twitter thread, she says the public, quote, deserves transparency, but the implication of that view is that nonprofits deserve no privacy from government intrusion. Surely she would see the problem in this if a right-wing senator sent as bullying a letter demanding transparency from a progressive advocacy group. Kristen Smith, the CEO of the Blockchain Association, was also appalled by the letter,

writing in a Twitter thread, as Americans, we all share the common goal of fighting terrorism and protecting our national security. Senator Warren should focus her efforts on the perpetrators, not those working hand-in-hand with U.S. law enforcement to catch bad actors. The industry is eager to engage on policy issues. Last month, we invited Senator Warren to our annual policy summit in D.C., just one mile from her office, with a genuine invitation to speak with our industry directly. We were hopeful that she would join us, but she didn't.

Our community, those that build the technology and those that use it, is strong and passionate and includes people of diverse backgrounds and experiences. Today's letter is yet another disappointing step taken by Senator Warren to discredit our industry and the individuals who are working to build a more inclusive financial system and user-focused internet. Blockchain association and our members will continue to constructively engage in Washington, educating our policymakers and participating in the legislative process, so that the crypto community can continue to build the technology that will reform the legacy system that Senator Warren has long criticized.

Now, perhaps expectedly, the reaction from Coinbase was somewhat less heated. executives expressed disappointment rather than shock. Head of U.S. policy, Kara Calvert said, the dedicated national security and law enforcement experts who work at the exchange, quote, do not deserve to be maligned as they work to keep our nation strong and safe. Chief Policy Officer Fariair Shirzat wrote, There's an ongoing debate in D.C. about how the U.S. lost tech leadership on semiconductors and mobile phone technology.

The national security implications of both losses are profound and far-reaching and factors significantly in America's geopolitical strategy, particularly in East Asia. That is why we have seen bipartisan efforts in recent years to ensure the U.S. remains a home for emerging and foundational technologies so that we don't repeat the mistakes of the past. To drive digital asset innovators offshore, as Senator Warren seems determined to do, at the very moment that China is trying to draw the industry to Hong Kong, and the rest of the G20 are integrating the technology into their financial systems would be a catastrophe. Chief legal officer Paul Gruel was content to take a swipe at the hypocrisy, writing,

what's appalling is smearing the integrity of people who have served our country in uniform and otherwise, especially when that same door leads to your own office. Now, this theme of smearing the brave men and women of the military and national security establishment who had moved on to work earnestly in an industry that they believed in, continued in outside commentary. Michelle Corver, a former federal prosecutor who now works on regulatory policy at A16C tweeted, boy, I never thought that in speaking truth to power, I would face such disparagement for my 25 plus years of public service fighting crime, basically being called a prostitute for believing in the promise of technology and seeking to help entrepreneurs build compliant businesses after kick-starting the DOJ's very effective digital currency

crime-fighting arsenal. Auditioning. Shame on you. 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, BVI, DBA, Crakken. David Ackerman, a former FINRA arbitrator who is now head of compliance at Mobile Coin, was one of the signatories to the November letter. He wrote in a Twitter thread, I participated due to a concern over the hostile and sometimes personally directed rhetoric, regulation by enforcement, and unworkable legislation proposals by the Biden administration, Senator Warren and Chair Gensler, the result of which is driving American blockchain companies offshore.

How, some ask, does this pose a national security risk? Twofold. One, blockchain and web three technology is and will continue to develop. If done in less restrictive jurisdictions like China or parts of Africa, we lose the ability to ensure a high ethical standard to the rule of law. Two, when responding to modern cyber threats, it is critical to build nimble, agile security teams consisting of top-tier talent, since no one can ever know the next attack vector focuses on threat response, speed, and agility. That is impossible if no talent remains in the USA. The clear gaslighting tone from the Senator's letter and cherry-picked quotes from cited sources

are reminiscent of many disinformation and misinformation campaigns deployed against the United States by hostile state actors and bear similarities to analogous comments leading up to 2016. As disturbing as this behavior is coming from a sitting U.S. Senator, it is neither shocking nor uncommon in today's fractured political landscape. As much as I respect Senator Warren's dedication to investor protection, I urge her and her colleagues to remember, we are all Americans. Similarly common is the rhetoric, a person cannot be dedicated to the mission of protecting the United States if that person suddenly wears a suit instead of a uniform. Again, although distasteful, this is by no means a novel or uncommon line when it suits a political purpose. innovation and common sense regulation can coexist. We can protect Americans and build the future. First, we must choose to work together. The facts as I see them are, one, a person does not stop being

mission-driven simply because you decide to work in the private sector. Two, a person does not dedicate their life to defending this country in the Constitution of the United States and suddenly abandon their oath simply because they say something you disagree with. Three, the protection of America and Americans is difficult and reasonable minds will differ on how to achieve strategic aims. However, if we vilify one another, this only succeeds in weakening our defense and strengthening our enemies resolve. I will always choose America. Bill Hughes, a lawyer at Consensus wrote, impunging the integrity of scores of former national security, law enforcement, and regulatory agency officials, and U.S. Armed Services officers by suggesting they've sold out their country for

a lobbying payday is certainly one way to go. My unsolicited advice, which no one will take, is to stay to the high road and not accept the invitation to petty squabbling, which is precisely the trap which has been laid. Call it shameful, which it is. and move on. Her lapdogs are now saying incarcerate or execute anyone in crypto. The mask is truly off. What lies underneath is ghoulish. This is a great opportunity to let this profound strategic mistake blow up in their face. Let's not screw it up. Now, one of the things that he's referring to were basically insane comments from Matt Stoller on Twitter. And indeed, this is one of the reasons that Warren's constant attacks on crypto can potentially matter. She remains a standard bearer for progressives.

While she has become thoroughly discredited within the industry, her opinion still informed the narrative for publications like Politico. Journalist and director of research at the American Economic Liberties Project, Matt Stoller, responded to the industry outrage by tweeting, anyone involved with crypto is committing treason. For helping terrorists like Hamas, anyone in the crypto business is committing treason.

No, I'm not interested in an in-depth, good faith discussion of Bitcoin after the scams, fraud, grift, and terrorist financing facilitated by crypto of the last two years. If you're in the industry today, you're a scumbag. Now, I want to come back to Bill Hughes' point that this is an invitation to petty squabbling and a trap.

I think he's right. I think, frankly, this is Elizabeth Warren realizing that the tide has passed her by, that her best chance ever of seeing the crypto industry die has gone, that the second the SEC is basically forced to approve a Bitcoin spot ETF because of losses in the courts this year, that it will mean a truly different period. Even if institutions and normies don't flood in, you better believe the airwaves are going to be flooded with ads and a true and full normalization of Bitcoin and crypto as an asset class and just another financial instrument will take place. This is the screaming, croaking, crying, scratching, clawing attempt of a person who's lost to extract their last damage on the way out. Now, one last note on the hypocrisy of the whole thing.

We have, of course, covered Senator Warren's anti-money laundering bill at length in previous shows. By way of a quick refresh, Warren's bill would require all manner of crypto infrastructure to comply with the Bank Secrecy Act by identifying users with a KYC procedure and submitting suspicious activity reports to the government. The proposal would include everyone from the largest centralized exchange, right down to the smallest self-hosted wallet startups and at-home validators. The key criticism then has, of course, been that these smaller entities don't have access to this kind of information, nor the resources to put together large compliance teams. Most industry figures think that this bill would cripple the industry in the U.S.

Now, if you are thinking that legislation sounds like it could have been tailor-made by the banking industry to kill off crypto. Turns out you're not far off from the truth. On Tuesday afternoon, the Chamber of Digital Commerce published a snippet of public comments made by Senator Roger Marshall at an event earlier this month. Marshall was the first sponsor of Warren's bill and serves as one of the few GOP supporters who allow Warren to proclaim that it has bipartisan support. During his appearance, Marshall said, The first thing we did is we went to the American Bank Association and said, Help Us Craft this. He continued, I don't know if you saw Senator Warren's hearing with Jamie Diamond yesterday, but Mr. Diamond said basically, in his opinion, crypto is only a tool for criminals.

Making it clear how little consultation with the crypto industry happened behind this bill, Marshall closed out by saying, I think it's a light touch by the federal government as opposed to a heavy touch. And that's about all I know about crypto. Cody Carbone, the chief policy officer at the Chamber of Digital Commerce said, Roger Marshall said it loud and clear. The big banks wrote the digital asset anti-money laundering act, and that's, quote, all he knows about crypto. This is a ban on crypto and a prohibition on consumer choice, so the big banks can catch up and own the future of finance. Austin Campbell wrote, When I said earlier that Elizabeth Warren was in the pocket of the banks, this is why.

All Americans should be outraged that banks, which are the main facilitators of money laundering to terrorist groups, are using that as a fake concern to entrench their monopolies. Brian Armstrong from Coinbase wrote, Senators Warren and Marshall now lobbying for big banks, upside-down face emoji. Being anti-crypto is a really bad political strategy going into 2024. 52 million Americans have used crypto. Thirty-eight percent of young people say crypto can increase economic opportunities. Just 9% of Americans are satisfied with the current financial system. CryptoPrices up 90% year-to-date. StandwithCrypto.org is on its way to 1 million advocates or voters who want sensible crypto policies. And indeed, while attacks from the anti-crypto army are ramping

up, the crypto industry has armed itself for the battle. Crypto will clearly be on the ballot in 24, and a newly formed SuperPack will ensure that pro-crypto candidates have the support of well-funded campaigns. The Political Action Committee, called Fair Shake, has raised 78 million so far, and has its site set on a 100 million target by the next quarter. The SuperPack has the backing of 22 firms and individuals, including A16Z, Ark Invest, Coinbase, Circle, and Cracken. Now, SuperPacks are not allowed to donate to political candidates directly. Instead, the focus will likely be on producing advertising to indirectly support pro-crypto candidates, attack their rivals and generally make the political case for the crypto industry.

78 million in fundraising would make Fairshake one of the larger super PACs heading into this election. This is a similar size to the Club for Growth, which is headed up by David McIntosh and receives large donations from Coke Industries. Fairshake have committed to supporting candidates across party lines, but the only thing that mattering is a commitment to moving crypto policy forward. Fairshake said in a press release, in order for the blockchain economy to realize its full potential, clear, regulatory, and legal framework for success is needed. Brian Armstrong again wrote,

What does it mean to be pro-innovation or pro-crypto? One, help create sensible and clear rules and regulations to protect consumers and clean up bad actors so the industry doesn't move offshore. Two, recognize this technology isn't going anywhere and it has the potential to update the financial system. Three, don't be ignorant and hostile toward crypto and spread misinformation about it.

Pretty low bar, honestly. Everyone in D.C. should be able to get on board with this. Sadly, that is not the case today. Ryan Selkis from Masari summed up, What Senator Warren does is grandstand, defame, and bully people into doing her bidding within the administrative state. I realized in January that she was worth full attention, opposition, and war. That's what she declared on us. She has Harvard.

We've built the 300. Let's dance. Never a dull moment, friends. And this is the week before Christmas. Anyway, one more big thank you and shout out to my sponsor for today's episode, Cracken. Go to Cracken.com and see what crypto can be. Until next time, be safe and take care of each other. Peace.