The Breakdown - The Most Pro-Bitcoin Politicians in the US

Episode Date: August 21, 2020

Today on the Brief: Markets react to FOMC notes Taiwan blocks China streaming services Initial jobless claims back on the rise Our main discussion is a look at the politicians on both sides of the aisle who are pro-digital currencies and, especially, pro-bitcoin. Featuring: Rep. Thomas Massie Governor Jared Polis Andrew Yang Rep. Ted Budd Rep. Trey Hollingsworth Rep. Darren Soto Rep. Stacey Plaskett Rep. Tom Emmer Senate Candidate Cynthia Lummis Rep. Warren Davidson Rep. Patrick McHenry

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 crypto.com, BitStamp, and nexo.io, and produced and distributed by CoinDes. What's going on, guys? It is Thursday, August 20th, and today we are talking about the most pro-Bitcoin politicians in the U.S. It is that unfortunate season known as convention season, first up are the Democrats this week and then the Republicans next week. And if that gives you the tremors, you are not alone. But to keep the spirit of talking politics, but to maybe bypass the ridiculousness and showmanship we can expect over the next couple weeks, I thought it would be fun to go look at the statements and records of a few of the politicians across both aisles who are actively investing in a Bitcoin and crypto future. So that should be fun. First, however, let's do the brief. First up on the brief today, our reliance on the Fed. So what happened? Yesterday, the minutes of the last federal open market committee meeting were published and basically the key line was this one. Many participants

judged that yield caps and targets were not warranted in the current environment but should remain an option. What this effectively is saying is that the Fed is not looking at yield curve control. right now, and really, I thought that John Authors from Bloomberg did a great job of summarizing the market's reaction. He wrote, what reverberated with the markets was the language about yield curve control. If many participants don't think it's needed, that is a strong hint that it isn't happening. And a separate sentence told us, of those participants who discussed this option, most judged that yield caps and targets would likely provide only modest benefits of the current environment. Not only is yield curve control not warranted, many of them think, but it wouldn't help

much if it was attempted. The result was a sudden and sharp correction for 10-year real yields. The Fed might not think the yield curve control is a big deal, but the instinctive market reaction suggests that investors disagree. I may do this op-ed and a couple more as this week's long-read Sunday, because I think the whole thing is great, but more or less, the thing that I wanted to point out is just how closely the markets are following everything the Fed says, even when they said it a month ago, we were just finding out now, and how much they're expecting the full bazooka that has been promised to them to come out, no matter what the state of the market conditions is. We're clearly not just looking at a situation where the Fed is there on a rescue

mission, but as John authors put it, as a weapon for stimulating the economy. That's a pretty big difference. Next up on the brief today, China is blocked abroad again. So what happened? Taiwan is blocking streaming services from Tencent and Baidu that had been able to work around previous Taiwan bans. This is the latest ban on some China digital service and is important because it's one of the key issues in the larger conversation of China versus the world, right? You have India, which has made major moves against China in terms of apps like WhatsApp and TikTok. You have the U.S. where we've been covering the tension between U.S. and China more broadly, and more specifically the focus on WhatsApp and in particular TikTok and whether there's going to be a sale to a U.S. company

so that TikTok gets to remain in operations. And of course, when it comes to Taiwan, Taiwan is extra dicey because you don't just have this particular data question. there's also the much larger question of the relationship between China and Taiwan in general, which many argue is one of the likely or the potential flashpoints in a big and even military way between the U.S. and China. I think what's clear is that after this year, the genie is out of the bottle when it comes to China's data and internet practices, and it may very well be that the world starts to bifurcate itself into those who are willing to deal with it and those who are not.

Last up on the brief today, jobless claims. So jobless claims rose 135,000 initial claims to 1.1 million this week. That's up from last week and up from the week before. We had seen a small decline finally over the last couple weeks that had reversed a trend of increasing, but this just flips it back again and is obviously a real bummer to see. When it comes to jobless claims we're dealing with, as we're seeing, incredibly messy data. We're dealing with the new issues of parents who feel like because of school issues and school care, they can't go back to work. And we're dealing with this very strange in-between unemployment regime where some payments are ending, new payments are being proposed, and what it leads to is just a very unstable, rocky moment for a lot of people's lives. I'm sure to those people, it will be great comfort that both parties, rather than getting a deal done, will be celebrating their chosen contenders in the great boisterous battle that is the election cycle at their conventions, respectively, this week and next. But with that, let's talk politics, or at least let's talk

pro-Bitcoin, pro-crypto, pro-digital currency politicians. Unfortunately, I'm not going to be able to give you guys much at the top. We've seen Donald Trump tweet, I am no fan of Bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. We haven't heard anything from Biden on this topic, so I can't give you a presidential blow-by-blow when it comes to digital currencies or to Bitcoin specifically. But what I can do is walk you through some of the other folks in Congress, but in particular, who have been more vocal about their interest in this space. I'm going to do this sort of chronologically, going back to some of the earliest indicators or the earliest conversations about this. So hopefully

it'll be a fun combination of where different people stand, who you might want to learn more about. and when they actually got involved. So first up is Thomas Massey, a Republican out of Kentucky, and I thought this was incredibly cool. In a Bitcoin talk post from August 2, 2013, Massey was mentioned. So here's the quote. At a libertarian convention that was attended by a few friends of mine, I was told that there was a panel of libertarian congressman,

and during a Q&A, the question was asked, so if we got rid of the Fed, what will we replace it with? Congressman Massey's response was Bitcoin. Massey is quite an impressive guy. He's an MIT educated engineer and lives in a solar-powered home that he built himself. As far as I know, this may be the first public endorsement of Bitcoin from a member of the U.S. Congress. Now, importantly, he did later update his post to have a U-stream video of the event. Sadly, that has since gone away the way of the dodo on our deep internet world.

But I think that it's pretty cool to see 2013 in August, so exactly seven years ago. ago, a congressman talking about Bitcoin is a real alternative to the Fed. So pretty interesting start to our pro-Bitcoin politician story. Next up we have Jared Paulus. He is a Democrat and is currently the governor of Colorado, but previously he was a congressman. In 2014, he got notice in our community when after another senator wrote a proposal for a full-on ban of Bitcoin, Jared Paulus wrote a satirical letter suggesting we banned the U.S. dollar. Some of the choice quotes from that were, the exchange of dollar bills, including high-denomination bills, is currently unregulated and has allowed users to participate in illicit activity. The very features of dollar bills, such as

anonymous transactions, have created ubiquitous cases from drug purchases to hit men to prostitutes, as dollar bills are attractive to criminals who are able to disguise their actions from law enforcement. Now, his point was obviously to show the folly of going after the medium rather than the activity, but I thought it was pretty prescient considering we're still kind of making the same fight today six years later. Later in an interview with CoinDesk, he said that he would protect Bitcoin in the U.S. Congress. So Paulus is another OG when it comes to the intersection of Bitcoin and legislators. Speaking of early to the Bitcoin game was Andrew Yang, who has one of the longest track records on crypto. Now, this makes more sense he came out of the technology industry,

so had a little bit more visibility into it. He was tweeting about Bitcoin as early as 2012, 2013, and actually started accepting Bitcoin and other crypto in July of 2018 for his campaign. Now, right before the surprise performance that he had at the Iowa caucus this year, he had this conversation with Joe Wisenthal where he basically argued that Bitcoin couldn't be impeded

even if we tried. There's a lot of people who are like really big cryptocurrency fans, for example, who have, they love Andrew Yang. And when I talk to them, they're like, ask them about crypto. What would you do with regards to regulation of that and, say, Bitcoin exchanges, do you support the right of people to use their bank accounts, credit cards, et cetera, to move into cryptocurrencies and other forms of money that aren't as easily tracked by centralized authorities? Well, what I would say is that we need to have a uniform set of rules and regulations around cryptocurrency use nationwide,

because right now we're stuck with this hodgepodge of state-by-state treatments, and it's bad for everybody. It's bad for innovators who want to invest in this space. So that would be my priority is just clear and transparent rules so that everyone knows where they can head in the future and that we can maintain competitiveness. Because to me, the underlying technology of cryptocurrencies is very, very high potential, and we should be investing in it. But do you support sort of monetary freedom for people that want to move their money away from fiat currencies, get their money out of the banking system into cryptocurrencies? Right now, you have banks restricting payments to these platforms and so forth, and people feel like government regulations are essentially impeding in their desire to do that. Well, right now, people who are investing in these currencies are finding a way to do so and make use of their investments.

No, I don't think that you could impede it with regulation if you tried. Next up, we're back to the Republican side of the aisle with North Carolina Congressman Ted Budd. Ted Bud has been involved in lots of different things regarding these issues, but most recently, or one of the things that I wanted to focus on, at least, is that in 2019, he championed two bills, the Cryptocurrency Tax Fairness Act and the Virtual Value Tax Fix. And basically his argument was that the development of this industry, the blockchain industry, was not just a cool technology. It was an issue of national security. He believed that a threat to that national security, a threat to that industry, came in the form of what he called undue tax burden.

And this was something that could actually be eased through legislation. Now, one thing that we'll see is that this theme of national security is coming up a lot more. Part of what makes crypto and Bitcoin and digital dollars have a different place in the conversation this year in 2020 is the connection point to it with national security issues, particularly vis-vis China. What's going on, guys? I'm excited to share that one of this month's breakdown sponsors is crypto.com. Crypto.com offers one of the most cost-efficient ways to purchase crypto out there,

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NXO also lets you earn up to 10% annually on your Fiat and digital assets. What's more, interest is paid out daily, and you can add or withdraw funds at any time. Get started at nexo.io. Next up on this list, let's look at a bipartisan crew. We have Trey Hollingsworth, a Republican from Indiana, and Darren Soto, a Democrat from Florida. In May 2019, they wrote a bipartisan letter to Larry Kudlow, who is a prominent Trump advisor. You see him on TV all the time. And Hollingsworth wrote, innovation is part of this country's DNA, and our efforts to further

develop blockchain technology can help our country remain a leader in invention and modernization. I am encouraged by the administration's efforts to explore financial technology and artificial intelligence, and I look forward to working together as the technology evolves. Darren Soto added, blockchain has the profound. potential to benefit society and be a driver of economic growth. It is crucial we continue to be informed on new initiatives and educate Congress and other government agencies on the impact of these emerging technologies. I'm proud to take bipartisan action in promoting blockchain. In addition to that idea of national security, what you're seeing here is an innovation theme, particularly around

the provision of government services that would become more important just about a year later in the context of the COVID-19 crisis. As the markets were tanking and everyone in Congress and in the Senate was racing to try to figure out what the relief bill, what the stimulus bill would look like, congressional Democrats added a digital dollar provision into multiple bills that preceded what would eventually be the CARES Act. They called it Fed account and it would have been a direct account with the Federal Reserve, the reason being or the idea being that this would be the most efficient way to get money into the hands of citizens really quickly. Now, there are a huge number of problems with that sort of model. In particular, the questions that it brings up about the relationship

between the Federal Reserve and commercial banks, commercial banks and consumers, and ultimately consumers in the Fed. Right now, it is a relationship that is mediated by those commercial banks, and this would effectively cut them right out. There were also other implications in terms of the ease with which the Federal Reserve could then just go into your account and pull money out, right? It isn't just a one-way street. So this was never really likely to get through and certainly didn't, as we know, when the CARES Act was finalized. However, it was an interesting and important moment that elevated this to a national conversation. Related, when the CARES Act was passed, 11 members of Congress wrote a letter to the Treasury Secretary,

suggesting that he used blockchain on stimulus payments. The letter was spearheaded by Congressman Darren Soto, who we heard from before, and who, by the way, is all over the place as the co-chair of the Congressional Blockchain Caucus, as well as another co-chair, Tom Emmer, who will hear from in just a minute, and Congressman David Schweikert from Arizona. Additional signers include Ted Bud, Warren Davidson, Tulsi Gabbard, Anthony Gonzalez, Roe Kana, Ben McAdams, Bill Posey, and Stacey Plaskett. For those keeping score at home, that's seven Republicans and four Democrats. Let's actually talk about Stacey Plaskett for just a minute. Stacey Plaskett is a three-term Congresswoman who is on the Commodities Exchange Credit Committee and recently appeared on the Hodel Pack podcast. And I wanted to grab this quick clip where she describes why she and many like her are concerned

that we don't create too many regulations around this new technology. Many of us like myself are concerned that we do not create so much regulations that the industry cannot evolve, cannot grow to maturity. And so where I'm interested, like some of my colleagues, in creating a sandbox regulatory framework, the same that's in London, which allows those who are involved in it to have some leeway, have flexibility in being engaged in developing the area,

well, at the same time, having some regulatory oversight to ensure that bad actors or great fraud or even unsuspecting or, you know, injuries that others would not even necessarily be consciously trying to do don't take place. And so, you know, there's still a lot of debate going on as to what exactly that's going to look like. And so the discussion is going on in Congress right now. By the way, if you like that, definitely go check out hoddlepack.substack.com. They've been doing the series of interviews around crypto in Congress that are absolutely great. Now, this theme of being concerned about too many types of regulations was echoed by a group of four congressmen who just sent a letter to the IRS

focused on trying to get them to balance their policy to not disincentivize staking. And if you're feeling right now like, wait a second, staking, were that in the weeds already? Yes, we are, and it's actually really encouraging to see. So you have Bill Foster and Darren Soto, who are Democrats, and Tom Emmer and David Shwekirt, who are Republicans from Arizona. And basically, in their letter to the IRS commissioner, they all expressed concern that, quote, the taxation of staking rewards as income may overstate taxpayers' actual gains from participating in this new technology. I think it's wildly encouraging to see this level of discussion

rather than just the very broad-based, this is important for innovation and probably could be a national security thing. I mean, this is getting into the weeds of how to look at policy. So it shows you in some ways how far this has come even at the highest levels. Now let's talk about Tom Emmer for a minute, the Republican Congressman from Minnesota that we mentioned before. He is the chairman of the National Republican Congressional Committee. He has been on the Pomp podcast. And when the whole Twitter hack happened, he tweeted out, Bitcoin isn't the problem. Centralized Control is. Tom Emmer is one of the most thoughtful and informed people in Congress when it comes to this issue. And in fact, next week is leading the first quote, cryptocurrency town hall,

saying this, the United States has always been a world leader in technology and innovation. The development of cryptocurrencies and blockchain technology are the next evolution of innovation that will permeate every aspect of our society. We've worked hard to educate federal officials, elected and unelected, on the importance of creating a regulatory and legal environment that allows these new technologies to take root and thrive. This event is designed to keep cryptocurrency, blockchain technology, and all of the innovations in this space at the forefront of the discussion as we head into the election this November. That conversation will have Jeremy Aller from Circle, Brad Garlinghouse from Ripple, people from Itoro, Block BitPay, and is done in conjunction with the Chamber

of digital commerce. Now, if you're saying to yourself, okay, okay, okay, we've heard a lot about quote-unquote cryptocurrencies and digital currencies and blockchain technology, but what about Bitcoin? I want to roll out or close with a couple folks who are clearly thinking with that level of nuance and a degree of detail. First up on that list is Cynthia Loomis. Cynthia is a former U.S. Representative for Wyoming who is currently running for U.S. Senate. She has been in Bitcoin since 2013 after buying on a tip from her son-in-law when it was only $320. Since then, in a conversation with CoinDesk, she said, I've watched it mature as a store of value.

I've watched the fundamentals of Bitcoin play out as something that has scarcity built into it. And with only 21 million Bitcoin being issued, that scarcity, which under economic theory should store value, has done so. The more I watched it since originally buying, the more I've come to believe that those overarching economic principles that underlie Bitcoin are playing out the way that one would hope and expect they would. As a person who's always looking for a store of value, I'm impressed with that. I'm a budget, debt, and deficit hawk. I've watched us print money and avoid the scarcity principle by printing more and more money and watching the value of the dollar

decline as a result of that. Alternatives to fiat currency are ready for prime time. This is the 21st century. Fiat currencies may be on the decline, and I believe that cryptocurrencies may be on the uptick. Now, the good news for people who want someone who speaks like that about Bitcoin in the U.S. Cynthia has just won her primary, beating out nine other Republican candidates and is looking good for the general. Next up on our Bitcoin specific list and the penultimate person that we're going to look at today is Warren Davidson Republican Congressman from Ohio. Warren Davidson is well known for having co-introduced the Token Taxonomy Act, and he was recently on Laura Shin, and I want to quote him actually kind of extensively because I thought it was really interesting.

I took an interest in Bitcoin early on because in manufacturing, we had a lot of international payments, and it has all of the payment system problems that people recognize. So you would wire transfer money, and early on it was really clunky because you couldn't wire directly to China. So you'd go through Hong Kong. It was very inefficient, and that led to an interest in things like Digi Cash. So when Bitcoin came on the scene, you say, oh, this really is a pretty elegant solution, pretty neat idea.

What I think is so relevant about that is that it's clear that Davidson has both a longitudinal perspective over time, but also a personal business use case sense of why this is important from an actual applied global payments perspective. That said, he also has an understanding of the theory and where Bitcoin fits in the context of U.S. stimulus and U.S. money printing. In that same interview, he said, the modern monetary theory people believe that if you have a central bank, you can just keep printing money. That's not what history shows. And frankly, the logic of it is that you can dilute the value of everyone's money and there's no consequence for it, and that's completely irrational. So people in the crypto space, and obviously the Bitcoin fans, will see the

fallacious argument for what it is. But I think if you had Bitcoin as your national currency, you would see the lack of flexibility that it would provide for a central bank in a situation like this. I view Bitcoin personally, kind of like digital gold versus a true currency. I think it's a great store of value. I don't own any personally. I think, given the role in how vocal I have been as a legislator about the crypto space, that it would be inappropriate for me to do so, though not technically a violation of the rules. Still, there's no doubt that what Warren Davidson is best known for in our space is this line from the Libra hearings, where he asked Meltem de Mirrors whether she knew the difference between Bitcoin's and shi-coins.

Highlighted a lot of background information about Bitcoin and about the, you know, immutable, distributed ledger and the benefits of that, decentralization versus centralization. A lot of people in this space will use a phrase that you may be familiar with. There's Bitcoin and then there's Bitcoin. It's from those same hearings that our last featured person on the U.S. politicians who are pro-Bitcoin list comes from, and that is Patrick McHenry. McHenry is a congressman from North Carolina and is the ranking Republican on the House Financial Services Committee. He has been, of almost any politician, the most fluent and close.

clear-headed about the difference between all of these things which get lumped together as cryptocurrencies or digital currencies, saying on Laura Shin that, quote, I think Libra has opened a lot of new people's eyes about the value of cryptocurrency. Libra is not cryptocurrency, however, and we need to stop lumping it together with very real, very important projects that are out there like Bitcoin. I think when you're taking a truly decentralized long-term store of value and a belief in a system, Not a belief in a government or governmental entities. I think cryptocurrency has enormous value separate and aside from digitized fiat currencies. This clear-eyed understanding was on display in his statements at the Libra hearing,

and I want to close with this one line that he shared, which has been something of a rallying cry ever since he said it. Change is here. Digital currencies exist. Blockchain technology is real. and Facebook's entry in this new world is just confirmation, albeit at scale. The world that Satoshi Nakamoto, author of the Bitcoin white paper envisioned, and others are building, is an unstoppable force.

We should not attempt to deter this innovation, and governments cannot stop this innovation, and those that have tried have already failed. force. That is, I think, the best way to end this episode about the most pro-Bitcoin politicians in the U.S. Whether they are pro-Bitcoin now or they're going to fight it tooth and nail, I believe, like McHenry believes, that this is an unstoppable force. And I think that, as crazy as it might be along the way, we're going to see a huge number of people come to see Bitcoin specifically and the larger world of digital assets that it heralds as something not to fight,

but as something to embrace for the huge potential it brings. Anyways, guys, I appreciate you listening. I hope that you enjoyed this. I hope that you're not bashing your head against the wall, watching these conventions. But until tomorrow, be safe and take care of each other. Peace.