The Breakdown - The Growing Political Force of Crypto

Episode Date: May 26, 2024

A reading and discussion based on: https://blockworks.co/news/single-issue-crypto-voter and https://blockworks.co/news/crypto-matters-foundations-free-prosperous-society Today's Show Brought To You By Ledger - 5% to Bitcoin Developers When You Buy https://shop.ledger.com/pages/bitcoin-hardware-wallet 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 Sunday, May 26th, and that means it's time for Long Read Sunday. 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 at the show notes or go to bit.ly. slash breakdown pod. Hello friends, well, it only makes sense that on the most consequential week in crypto political history, we read a couple of essays that are related to crypto politics.

The first is by Austin Campbell, who's frequently quoted on this show, and is along the lines of a conversation that we've had over the past few weeks about crypto single issue voters. Let's turn it over to NLW AI version, created by 11 Labs, to get a sense of what Austin says. Why I'm a single issue crypto voter? Given the events of the past two years, everyone one in the United States and both parties should be single-issue voters in favor of crypto having a level playing field. In particular, we should support all politicians who oppose the Biden administration's extreme efforts to kill the industry in the United States, regardless of party, Republican or Democrat. This stance is not about being pro-crypto, it is about being pro-fairness. Today, the actions of the

executive branch target the crypto industry, but who will be the next target under future administrations? fossil fuel producers, abortion providers, public sector unions, gun manufacturers, green energy companies, the press. As a people, we cannot allow government misbehavior of this sort, and it must be our primary source of concern. If we cannot secure fair treatment under the law for all, every other right we enjoy as Americans is threatened. Why do I believe this? In the beginning of U.S. regulatory engagement, we had a few strict crypto regulators like the New York Department of Financial Services with its bit-licensed regime. Even so, those regulators intended for crypto did exist, just within the rules. In 2022, however, we began to see regulators take it upon themselves to judge

that an industry should not exist and begin to take any and all actions to destroy it. As a result, we have seen a staggering variety of inappropriate and in some cases illegal actions from federal agencies against crypto. The SEC has been sanctioned by a federal judge in Utah for lying in court bankrupting a business and destroying lives to get a TRO in the debt box case. The SEC treated the BTC-ETF application process so inappropriately that it was ultimately overruled by a different federal judge who called its behavior arbitrary and capricious. The SEC promulgated a rule on crypto custody called SAB-121 without consulting the industry or other regulators, which is so mechanically broken, it has essentially banned regulated financial entities from offering crypto custody

and caused both houses of Congress to vote in bipartisan fashion to overrule it. Additionally, the SEC somehow managed to sue Ripple, Coinbase, Crackin, and Uniswop Labs, while failing completely to sue either FTX, Terraform Labs, Celsius, 3AC, or BlockFi before their various collapses harmed countless investors and consumers. Banking regulators have engaged in similarly inappropriate behavior, from issuing a joint letter in February 2023 that unilaterally called tokens on public blockchains, highly likely to be inconsistent with safe and sound banking practices, to pressuring banks to de-platform their crypto customers without evidence of legal wrongdoing or undue risk through Operation Choke Point 2.0. They have also overrease.

The Federal Reserve continues to deny custodia, a regulated bank in Wyoming, an account. Across the board, our federal government's approach to crypto reeks of bias and misconduct. If we cannot trust the federal government to play fair, then all other political positions fade in importance until the checks and balances of the system are restored. In this case, it is important to remember that the ultimate check on both the executive and the legislative branches is the people. My belief is that crypto deserves fair treatment. While Republicans have been the recent champions of the industry, thanks to their pro-business views,

forward-thinking Democrat Richie Torres wrote an op-ed in 2022 titled The Liberal Case for Cryptocurrency. Long after Trump has gone from crypto, Torres, and other Democrats will remain. More than 30 Democrats between the House and Senate broke ranks with the administration to vote down SAB-121. Fair treatment under the law is a stance all Americans of all parties can rally behind. As a longtime Democrat myself, I believe this stance will stand the test of time for both parties. Even politicians who do not care about or even dislike crypto should be able to support the basic point that obeying the law and having fair rules is essential. If they can't, we should vote them out. I believe we should vote for any politician, Democrat, or Republican, who rejects things

like the SEC's illegal antics in the debt box case or the gross misconduct of the head of the FDIC. We must secure the basic fairness of our system and hold accountable those who flagrantly violate it. That is why I am a single-issue voter on this topic. It is not that I am pro-crypto, it is that I am pro-fairness. Hello, breakers. Today's episode is sponsored by Ledger. As another cycle ramps up, it's another chance to think about your Bitcoin custody best practices, and of course, to help all the new folks do the same. Ledger is the global platform for securing Bitcoin and other crypto.

Ledger combines both hardware wallets and the Ledger Live app to offer the best way to buy, sell, swap, and stake without sacrificing on security or self-custody. Ledger features cutting-edge technology in the form of a certified secure chip and a proprietary operating system, but also brings ease of use. This makes Ledger a safe and secure way to manage your digital assets without all the stress. Check out the link to the Bitcoin Ledger Nano in the show notes. 5% of all sales of the Bitcoin Ledger Nano go to support Bitcoin development. Thanks once again to Ledger for supporting the breakdown. Next up, we're going to read an op-ed by Charles Hoskinson, who's best known, of course,

is the founder of Cardano. The piece is called Why Crypto Matters, and I think I'm going to let it do most of it speaking for itself, once again through an AI version of myself. Why Crypto Matters, foundations of a free and prosperous society. Since our industry was founded in 2009 and the few decades of intellectual cypherpunk discourse that preceded it, there are more than 420 million cryptocurrency users worldwide, of which 93 million are from the United States, with a collective value in the trillions of dollars. Including the Internet, no technology has seen such remarkable sustained growth from a single

protocol and user to these staggering numbers in a completely uncoordinated and decentralized manner in just 15 years. Our collective success stems from a lack of trust in institutions, their leaders, and globalization's inequity. Simply put, the social contracts we inherited aren't being honored. Since 1971, our money has been debased through decades of unending inflation, that has hollowed out the middle class. The American dream of owning a home, starting a family, and saving for retirement seems unattainable for so many millions now. Ninety-three million Americans have chosen to explore the cryptocurrency industry because they have become accustomed to systems and products that evolve rapidly with technology and are designed to improve in quality

over time instead of governance structures that continue to fail us through stagnation. It's not good enough to demand elections to hire different politicians who renew and modernize our social contract. We must develop capabilities to ensure, sure our social contract cannot be violated. We need high-integrity institutions with blockchain systems embedded within them. Any politician who supports our industry should be rewarded with election or re-election. Those who oppose it should be fired. The rest of their policy doesn't matter because the U.S. can no longer govern. Every problem of the modern age is bipartisan. Since Lincoln's election, 100% of all U.S. presidents have been Republicans or Democrats. The same is true for the

legislative branch in the courts. Electing more Republicans and Democrats won't, some how magically end the chaos they have caused. Over 63% of Americans want a viable third-party option in elections. Yet the majority are unwilling to vote for a third-party due to the lesser evil concern. There is a bipartisan agreement, the Monoparty concept, that ballot access and design can never change to permit viable third-party options. Once in power, the Monoparty gives more money and control to a gargantuan federal bureaucracy. The point of cryptocurrencies is to opt out of this system by rebuilding our social contracts using protocols. Eventually, the majority of Americans will be within the new system, which will simply make the old one obsolete. This belief brings me to the reason for

writing this editorial. While both parties are generally incompetent and corrupt in their management of our affairs, there is a policy difference between Biden and others. The Biden administration has engaged in an all-out war on the cryptocurrency industry for the past few years, from Operation Chokepoint 2.0, which systematically unbanked cryptocurrency companies, to the SEC committing itself to unprecedented regulatory capture and regulation through enforcement that has drawn the criticism of its own leadership, the current climate is of fear, persistent obfuscation, and a guilty-until-in till-in innocent attitude.

The administration has also prevented meaningful legislative actions from moving forward. For example, the recent veto threat of legislation repealing SAB 121 demonstrates that any sensible action to provide clarity or rulemaking should be removed. Another example is the White House's opposition to H.R. 4,763, which would dramatically enhance clarity in our industry and create hundreds of thousands of American jobs. Furthermore, there is a systematic war on liquidity, defy, and self-custody, where legitimate exchanges, wallet providers, and DAPs operating without compliance issues, have received Wells notices from the SEC. Coinbase received a Wells notice related to its proposed LEND program, which the SEC viewed as

involving unregistered securities. Uniswap received a well's notice concerning potential securities law violations. Coinbase faced another Wells notice for operating as an unregistered securities exchange broker and clearing agency. Binance received a Wells notice concerning its operations as an unregistered exchange. Bitrex received a Wells notice for unregistered securities trading. Beeksy the exchange received a Wells notice, contributing to its eventual shutdown. Cracken issued a well's notice for issues related to unregistered securities. Robin Hood received a Wells notice for operating an unregistered securities exchange. Consensies received a well's notice from the SEC for its Metamask product. It's worthwhile to focus on Coinbase. The SEC allowed the company

to conduct a public offering and expose retail investors to the risk of its business model. It then declared that Coinbase was operating an illegal business nearly two years afterward, with the exact same facts and circumstances listed in the S-1. The consensus case seems to stem from Ethereum being considered a security after previously being considered not a security. It also implies that non-custodial wallets are now under U.S. regulatory capture. Then there are the words of the administration's advisors. In the March 2023 issue of the economic report of the president, the authors issued a scathing rebuke of our industry. It has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion, and creating mechanisms for the

distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and recipient. Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits. They predictably referenced Terra, BitConnect, and FTX as shining examples of the successes of the cryptocurrency industry. Moving along, we have the administration's roadmap to mitigate cryptocurrency's risks, which claims our industry is funding North Korea, needs more enforcement actions, facilitates money laundering, and isn't FDIC insured? So I guess those full reserve banks in Wyoming are an inherent risk to the banking system because they have 108% of customer deposits on hand. It's a repeated pattern of claiming

the industry is doing something wrong and needs to follow relevant regulations, come in and register, providing no meaningful path or clarity to do so, and then punishing the people who try to comply, like Coinbase. This behavior isn't the well-intended ignorance of an out-of-touch regime. It's a systematic effort to end the American cryptocurrency industry. While I'm cynical that changing leadership in Washington will result in meaningful improvements in the state of America, it is clear that if we create a political cost to being anti-crypto, politicians will back off from over-regulating our industry. We don't need saviors or some grand plan. We want the power to decide how our money, identity, and property should work through voluntary math-based protocols. In other words, we need time for

the industry to grow unopposed. The majority of cryptocurrency users are under the age of 40, and the majority of the young are politically liberal in the United States. If this voting block throws out a president they would usually vote for, then no Democrat in 2028 will be anti-crypto. This translates to the time we need to finish the job and integrate the fruits of our labor into a new American government once the generations cycle out. Endless propaganda will attempt to convince Americans that 2024 is existential, and anyone but Biden will mean the death of America. Somehow, our institutions will collapse due to a single imperial presidency. An orange-colored tyrant will declare himself king and end the Constitution.

The reality is that we'll witness the same politics we have endured since the beginning of the 21st century. Gridlock, bickering, grandstanding, and publicity stunts. Our institutions aren't designed to assign power to a king. They are built to assign power and money to corporate masters who fund the revolving door of the bureaucratic branch of the U.S. government. Our votes and voices only matter if we use them with focus and intent. If we vote for pro-crypto candidates in 2024, America will eventually heal itself. If we vote against them, then we won't. Don't. Make your voice count. Vote crypto. As I mentioned on Friday show, there are many questions that remain after such an incredibly consequential week. How deep the Democrats pivot really is,

who will emerge as leaders, what Trump's long-term intentions with crypto will end up being. But right now, this industry has never had more political momentum. That's something worth celebrating, and it's something worth leaning into. So keep up the fight, have a great Memorial Day weekend, and until next time, be safe and take care of each other. Peace.