The Breakdown - This Presidential Candidate Has a Crypto Plan That Includes "Code is Law"

Episode Date: November 19, 2023

ORIGINALLY PUBLISHED FRIDAY NOVEMBER 17th Vivek Ramaswamy introduced a thoughtful, comprehensive crypto plan. Will other candidates match him? 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 Friday, November 17th, and today we are talking about one presidential candidate's crypto plan. 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, happy Friday. Today we are turning to a theme which is going to be a lot more prominent in the months to come, which is the role of crypto in the elections.

I think you'll see from today's show that the level of discourse in this area is getting a lot more sophisticated, which of course can't help but be a good thing for the industry. Now specifically, Republican presidential candidate Vivek Ramoswamy unveiled his crypto policy platform on Thursday. During an appearance at the North American blockchain summit in Texas, Vivek announced that as president, he would rescind most crypto regulation and gut the enforcement division of the SEC. His reform platform is grouped under three principles. The freedom to code, the freedom of financial self-reliance, and the freedom to innovate. Regarding freedom to code, Ramaswami noted enforcement efforts against tornado cash developers as the prime example of the issue.

His platform would ensure that software in the cryptospace enjoys First Amendment protection because code is speech. He said, you've got to draw the distinction between the code itself, which is protected, versus people who misuse it to steal. That's something that isn't happening today. Now, when it comes to his platform on financial self-reliance, it's wide-ranging. He identified a range of burdensome financial surveillance rules that he would look to wind back, including AML and KYC rules and the weaponization of the Bank Secrecy Act. By the way, questions around the Bank Secrecy Act are the subject of this week's Long Read Sunday. Now, Vivek's bottom line was that the existence of self-hosted wallets shouldn't be up for debate.

He said, quote, that's part of the Jacksonian vision of financial self-reliance and independence. We can't have a regulatory apparatus that effectively attacks self-hosted wallets and prevents them from being able to exist. Now, the final pillar, and by far the most radical, is related to ensuring that freedom to innovate continues to exist in America. Vivek said, the wet blanket on American innovation isn't even Congress. It's the regulatory state that's making up its own rules regardless of the laws that actually exist in this country. This is part of Vivek's wider policy goal to downsize the federal bureaucracy by 75% during his first year. He referred to the public sector as having a, quote, proliferating cancer of federal employees. His view is that a huge portion of federal regulation is unconstitutional,

having never been specifically directed by Congress. Now, of course, this folds into broader reform discussions going on within the GOP about regulatory overreach. A 2021 Supreme Court decision raised questions about the ability for government agencies to extend their power beyond the explicit scope of legislation. This is known, of course, as the major questions doctrine and is at issue in the SEC's lawsuit against Coinbase. Ramaswami believes that he can achieve this outcome as president without, quote, asking Congress for permission or forgiveness because this relates to the executive branch of the government. Now, for the crypto industry, this would mean almost all crypto regulation would be rescind it, and much of the SEC's jurisdictional claim over the industry would be invalidated.

If he were to become president then, Ramoswamy said, what changes is that regulation by enforcement ends. The rules are delineated clearly in advance, rather than having to wait for an enforcement action from the SEC. Now, speaking to why this cleaning out of regulation would be necessary for the crypto industry specifically, Vivek said, a big part of what we're missing today is clarity from our regulators. What we're going to have is rescinding any of those regulations that are allowing the regulatory state to go after perfectly legal behavior by claiming that somehow it shouldn't exist because they don't like it. All of that can end on my watch. Now, he used a specific example of the status of Ethereum, stating that, if the head of the SEC

or the commissioners of the SEC cannot instantly answer, whether or not some widely used cryptocurrency or coin counts as a security or a commodity, that means the rules that we have right now are a failure. Vivek summarized his position on existing crypto policy by stating, since the inception of crypto, the shadow government in the administrative state in Washington, D.C., and its cronies on Wall Street, have tried to quash its rise. That ends on my watch. Now, putting a fine point on all of this, Vivek tweeted, 15 years ago, U.S. taxpayers were forced to bail out big banks, brokering an arranged marriage between big banks and big government that has poisoned the proper functioning of capitalism

ever since then. The crypto movement was born as an alternative to that ignominy. The policy I released today will guarantee a vibrant future for crypto to ensure economic freedom for Americans seeking an alternative to centralized finance. The three pillars are, one, freedom to code, developers shall enjoy the freedom to write and publish code, two, freedom to financial self-reliance. Users should enjoy the freedom to be financially self-reliant and independent. Three, freedom from regulatory overreach. Projects should enjoy freedom from regulatory overreach and uncertainty. Using this policy as our foundation will allow us to unshackle American innovators from the administrative state that persecutes in Steinme's innovation. This is the way.

Now, Vivek is still a minor candidate in the race for the Republican nomination. 538 currently has his aggregate polling number at around 5%, trailing both Ron DeSantis and Nikki Haley among the non-Trump candidates. However, one of the things that's notable about Vivek is that he's punching above his weight class by building coalition of support outside of mainstream press coverage, taking his platform directly to interested constituents. You might have seen Vivek all over CryptoMedia this week, and that's the kind of thing he's doing across basically every issue.

Now, one of the big questions, of course, is not so much, at least from where we're sitting right now, if Vivek can win, although crazier things have happened. At least when it comes to the crypto issue, can he get enough traction in general that his complete articulation of a plan puts pressure on other candidates to come up with their own plans, to articulate where they agree and where they disagree. It's also worth noting that these crypto policies are not out of sync with the larger GOP political movement at this moment. There are a lot of these questions floating around this major questions doctrine idea,

and obviously this could have big implications for the way that power in Washington is apportioned. 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. PVI. DBA.D.A. Crackin. Now, what about reactions from the crypto space? Nick Carter tweets. Vivek's crypto stump speech just delivered in Fort Worth was outstanding. Calls out chokepoint 2.0. Calls BSA unconstitutional.

Criticizes third-party doctrine. Says Constitution protects self-hosted wallets. We'll rescind most, if not all SEC crypto regs on day one. 75% reduction in number of federal bureaucrats on year one. It was also the most eloquent extemporaneous stump speech I've ever seen. Not a single filler word. Didn't stumble once. No notes. Very impressed by that. Coinbase CMO Kate Rausch wrote, major questions doctrine. Administrative law never sounded so good. Oh, and check the polling like Vivek clearly has. People will vote on crypto in 2024. Crypto trader, Sable Riley writes, a president that actually understands emerging technologies? Are we really going to flub this one, guys? I'm younger than Vivek and if,

traded crypto and actively mine it, and I don't even understand it. Now, a more substantive discussion came from Metaverse lawyer. They write, this is not an endorsement of Vivek by any means. I don't support or agree with all of his platform, and this isn't meant as a politics discussion. But on the topic of crypto asset regulation, he totally gets it and hits the nail on the head here. A couple key points I agree with, and that I and many others in the crypto sector have been speaking out on for several years now. One, regulation by enforcement action is an inefficient and unfair way to regulate digital asset innovation. Two, code is speech protected under the First Amendment and should not be curtailed, restrained, or infringed on. Regulators and law enforcement need to focus on

cracking down on illicit activity, not try to crack down on one particular technology of many that illicit actors use. Three, the right to privacy and one's financial affairs should not only be protected and defended, but we need to normalize talking about privacy rights in the same way the founding fathers did. Indeed, the U.S. was founded in part from a movement and desire to be free from government and imperial overreach and oppression, as have many nations. The right for one's personal affairs to be shielded from the prying eyes of government shouldn't even be questioned. It's a founding ideal that must remain at the core of the American spirit. They then go on to talk about the Bank Secrecy Act, as well as the freedom to innovate, and conclude. Well said, Mr. Ramoswamy,

it's refreshing to hear a candidate speak with such clarity and understanding on these issues, and would love to hear other candidates' views on these topics. However, I don't expect Vivek to win, and it doesn't appear that we are going to reverse global trends which are going in the wrong direction on these issues. It's crucial for those of us who are paying attention to these things to speak up and educate the masses and local authorities wherever we are at. This is a battle that is still only in its early stages. I get the feeling that battle lines are only going to get drawn more firmly and unfairly. Are we going to have an evolution of thought or a revolution? Only time will tell, but I know I'm on the right side of history either way. Now on the flip

side, there were some who weren't as keen on the crypto industry's connection with this particular candidate. Fortune crypto editor Jeff Roberts writes, Vivek has a crypto plan, but who Who cares? This is the guy who hinted 9-11 was an inside job. Crypto needs to stop playing foots with demagogues and crackpots. Now, I'm sure that many of you will have wildly divergent opinions on this candidate based on the full spectrum of his political positions. The thing that I think is notable is that we really are in a sea change moment, where these dark horse candidates between Vivek and RFK Jr. seem to be sensing that the crypto block is a block whose support they can win, and thus they're paying attention to these issues. Now, to round the

out this episode, let's talk about a few people who are already in positions of power in Washington, D.C., and how they are interacting with crypto. In a letter to the Treasury Department, a group of nine lawmakers have called proposed crypto tax changes a, quote, dangerous and improper overreach. Led by House Financial Services Committee Chairman Patrick McHenry and Democrat Richie Torres, the group said the new reporting requirements would be, quote-unquote, unworkable. The proposal from the Treasury and IRS would redefine thousands of crypto entities as brokers and require them to submit reports on their user's trading activities. The requirements would extend far beyond exchanges, likely capturing infrastructure firms, including validators and wallet providers.

Many of these firms are small startups which don't have the resources needed to comply. A Wednesday announcement alongside the publication of the letter said, if finalized the proposed regulations overly broad definition of a digital asset broker, insufficient definition of a digital asset, an unreasonably short comment period threatened to prevent a large swath of the digital asset ecosystem from continuing to exist in the United States. Now, this rule was proposed in August and in the short period of time managed to gather over 124,000 public comments. The IRS also held a public hearing on Monday to allow commenters to present their complaints. The upshot of the hearing was that the IRS officials considered the

proposal, quote, open for revision. The final version is likely months away, but after receiving such serious pushback, it appears that it could be subject to a major rethink. Now, in another letter, several members of Congress have sent a letter to key regulators urging them not to enforce SEC staff accounting bulletin 121, better known as SAP 121. This bulletin was issued in March of last year and required companies to account for crypto assets in custody on their own balance sheets rather than in separate accounting. The measure was widely viewed as reducing protections for custody clients by making assets subject to bankruptcy proceedings. It is also functioned as a de facto ban on regulated banks providing custody services due to onerous regulatory capital requirements

for balance sheet assets. Last month, the Government Accountability Office delivered a ruling that SAB-121 is properly considered to be a rule rather than a bulletin and therefore did not follow the rulemaking procedure required of the SEC. This week's letter urged banking regulators, including the FDIC, OCC, and Federal Reserve not to enforce SAB 121. It noted that the guidance was issued without proper consultation with these prudential regulators. Seven pro-crypto lawmakers from both parties co-signed the letter, including Patrick McHenry, Senator Cynthia Lummis, Senator Kirsten Gillibrand, and Richie Torres. The letter argued that, quote, enforcing this noncompliant rule would set a concerning precedent that would facilitate regulatory

gamesmanship to circumvent the Administrative Procedure Act, effectively allowing the SEC to have regulatory authority over institutions which Congress did not authorize. The GAO in making their ruling ordered that SAB 121 should be put forward to congressional scrutiny according to proper procedure. Several lawmakers, including Lummis, have signaled that they intend to block the rule once it is placed in front of them. Now, in our third and final letter to discuss today, a group of bipartisan lawmakers have written to the White House and the Treasury to ask them to quantify the extent that terrorist group Hamas is using crypto to fund their activities. The letter was co-signed by 59 representatives, including House Financial Services Committee Chairman Patrick McHenry, Majority Whip

Tom Emmer, Digital Assets Subcommittee Chairman French Hill, as well as Democrat representatives Richie Torres and Josh Gottheimer. It was sent hours before the House Financial Services Committee was set to hold a hearing on Wednesday to get to the bottom of the issue. Now, of course, although there have been an endless number of article on the topic, no one seems to be able to pin down an exact number on how much funding Hamas was able to raise using crypto. The notorious Wall Street Journal article, which formed the basis for a scathing letter from Elizabeth Warren, originally put the number at 41 million for Hamas and 93 million for Palestinian Islamic Jihad. In the weeks after the article was written, multiple on-chain analytics firms disavowed those numbers.

This included one of the Wall Street Journal's sources, Elliptic, who said in a clarification that the, quote, data simply does not support this. Since then, Nick Carter has spearheaded an open-source attempt to quantify the actual amount based on analysis of the on-chain data. Estimates vary, but all contributors agree that the numbers are far, far lower than those reported in the Wall Street Journal. The letter put the onus back on the administration, asking officials to put forward a number they could stand behind. Now, the Treasury has been openly calling on Congress to grant them enhanced power to fight

on-chain terrorism finance, so it stands to reason that they should ground this request with solid facts. The lawmakers wrote, Congress must understand the size, scope, and duration of Hamas's digital asset operations, as well as whether the United States has had success in seizing illicit digital assets. It is important to understand the scope of Hamas's digital asset fundraising campaign in the context of its traditional fundraising activities. Not accounting for the funds Hamas receives from Iran or through donations, it is estimated that Hamas's global investment portfolio generates hundreds of millions of dollars in revenue. This could far exceed the amount Hamas received through digital asset donations. Now look, there is clearly a political point that is trying

to be made here, but ultimately the question is, should it really be controversial to ask the administration about the scope of the problem before passing laws to grant them additional powers? I don't think so. And so, friends, that is where we will wrap for today. I hope that you are heading into a great early Thanksgiving. Might we even say early Christmas weekend? Until next time, be safe and take care of each other. Peace.