The Breakdown - Trump's Crypto Engagement is Making it Hard for Pro-Crypto Republicans

Starting point is 00:00:00 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 Tuesday, April 1st. And today we are talking about the trouble with Trump's Pro Crypto stance. 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 going to bit.ly slash breakdown pod. Well, here's an interesting little bit of scuttlebut. House Financial Services Committee Chairman French Hill believes that the president's pro-crypto stance is actually getting in the way of passing crypto legislation, specifically the

Starting point is 00:00:51 wide range of crypto projects that Trump has gotten involved in. During a press call on Monday, Hill said that Trump's engagement, quote, in the meme coin arena and in considering the formation of a stable coin have made our work more complicated. Certainly we've seen this in recent congressional hearings, with anti-cryptodemocrats using criticism of the Trump meme coin as reason to generally resist legislation moving forward. The recent announcement of a stable coin to be launched by World Liberty Financial simply adds to the impression that crypto regulation is a way to advance the Trump family's interests. Republican lawmakers haven't been quick to criticize the president, so these comments suggest that there are Trump-related roadblocks to forming a consensus in Washington. Speaking with Politico about the World Liberty Stablecoin, Connecticut Democrat Jim Himes said, I can't think of anything quite so damaging to bipartisanship than that happening.

Starting point is 00:01:37 Heimps is far from an anti-crypto Democrat, having backed sensible crypto policy in the past. He said that he hopes to support stablecoin legislation during the House markup later this week, but the growing Trump Association makes that more difficult. He added, Chairman Hill is making a real, genuine effort to make this bipartisan. Having Chapter 29 of the Trump family grift emerged the week before the markup is about his catastrophically dumb move is sharing war plans on signal. Even Cynthia Lummis is a little concerned. She said, it shouldn't make life harder, but it might. Senator Kirsten Gillibrand, another pro-Crypto-democrat

Starting point is 00:02:09 added, you need the regulation regardless, but it's certainly not helpful. It makes something that's a very serious financial payment system into something that seems non-serious. During his press call, French Hill also discussed how negotiations are going around stablecoin legislation. There are currently a pair of bills introduced in the House and Senate, respectively, which have slight but important differences. The House bill is more accepting of state regulation and provides a two-year grace period for foreign issuers like Tether to come up to code. For anything to pass, a consensus will need to be reached between the two chambers. As a leader in the House, Hill is obviously pushing for that version of the bill. He said, if you're going to have a stable coin for use and activity in

Starting point is 00:02:46 the U.S. and it's held out as a dollar-backed stablecoin, it ought to comply with the U.S. stable coin regime. However, he added that the two-year transition period is, quote, more than adequate. Now, aside from the Trump of it all, another big area of conflict is rising around interest-bearing stable coins. Senator Gillibrand raised this issue at an event last week. Her basic premise was that interest-bearing stable coins threatened to undermine bank's ability to access cheap funding in the form of customer deposits. She said this could limit the ability to write mortgages and threaten the viability of the traditional banking industry. Now, we had discussed last week how it sounded like banking lobby narrative, and the information reports that this is indeed coming from the banking lobby.

Starting point is 00:03:23 Their other asks include banning commercial firms from issuing stablecoins and preventing non-bank stablecoin issuers from accessing Fed infrastructure. Coinbase CEO Brian Armstrong put out a blog post in defensive on-chain yield. He wrote, The government shouldn't put its thumb on the scale to benefit one industry over another. Banks and crypto companies alike should both be allowed to and incentivize to share interest with consumers. This is consistent with the free market approach. We have a huge opportunity in front of us right now with the pro-crypto administration and Congress actively working on new stablecoin legislation. We can choose to level the playing field and ensure these laws

Starting point is 00:03:57 pave a way for all regulated stable coins to deliver interest directly to consumers the same way as savings or checking account can. Or we can protect an outdated system that pays the average person 0.01% and keeps the lion's share of the interest with the middlemen. Nick Carter made the point that on-chain interest is happening regardless of U.S. regulation and that lawmakers really only get to choose whether they have a hand in regulating it. He wrote, lots of belly aching in Washington around interest-bearing stables. The same thing happened with money market funds and nothing bad happened. Bank lobby is just making life worse for everyone. Despite the pro-cryptop posture of the new admin, the rulemaking around stables is creating a split system. More better products outside

Starting point is 00:04:33 of onshore regulatory ambit, worse, less competitive and fewer products onshore. We'll continue to watch to see if this is really a stumbling block or if it's just last-minute jitters before things get done. Now, building out some of these stories a little bit, Reuters reports that the Trump family has substantially taken over control of World Liberty Financial. The project was always Trump-branded, but it was previously unclear how much ownership the family actually had. Trump family members were often referred to as ambassadors or advocates for the project. Reuters found that in January, as fundraising ramped up, co-founder Zach Folkman and Chase Harrow were replaced as controlling parties. They were replaced by an entity in which the Trump family holds a 60% stake.

Starting point is 00:05:11 writes Reuters, overall, the Trump family now has a claim on 75% of net revenues from token sales and 60% from World Liberty operations once the core business gets going. The arrangement means the Trump family is currently entitled to about 400 million in fees. After World Liberty's co-founders take their cut, the crypto venture will be left with 5% of the 550 million raised to date to build the platform. The key criticism of the protocol was always that it was functionally a way to pass money to the Trump family without falling a foul of political donation laws. Justin's son through Trondow invested 75 million in the company through buying the token. It seemed at first that the quid pro quo was World Liberty reciprocally buying 10 million in Tron tokens, but this new reporting suggests a much

Starting point is 00:05:50 more direct contribution to the Trump family fortune. Financial academics suggest that tokenomics of the platform make little sense for investors. David Krause of Marquette University said the structure of the project, quote, pretty much excludes public investors or token holders from any meaningful financial participation. Now, of course, we know here in this industry that tokens can pump regardless of value accrual, but a lack of an obvious investment case makes the project even more likely to gather criticism. Trump has arranged for his personal assets to be held in trust and managed by his children for the duration of his presidency. He has committed to playing no role in managing day-to-day operations. But of course, the myriad of Trump family-owned crypto projects make it

Starting point is 00:06:27 much easier to claim that there are conflict of interests inherent in passing crypto legislation. Today's episode is brought to you by a crypto tax calculator. If you're looking for accurate crypto taxes with no guesswork? Check out crypto tax calculator. Get accurate CPA endorsed tax reports with full support for IRS rules. For those who have fallen down the on-chain rabbit hole, CTC has you covered with more than 3,000 integrations. They have full support for defy staking and NFTs. Import directly to TurboTax or H&R block or share securely with your accountant. Create an account, import your sources, and review. It's that easy. Hello, friends. I am thrilled to share that Ledger is once again partnering and sponsoring with the break

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Starting point is 00:08:19 We were all wrong about Trump being good for crypto. This guy and his insiders extracted billions and obliterated the market. This was always going to be the double-edged sword here. It's very likely that the crypto community wouldn't care about the Trump family launching a series of crypto projects if the overall market were doing better. There was always a Faustian bargain involved in supporting Trump, with side projects and value extraction on the one hand, and tolerable as long as the pro-crypto policies were put in place. The risk was always exactly what's happening now, where crypto being too closely associated with Trump would cause issues in the extremely partisan Washington,

Starting point is 00:08:52 D.C. environment. Hottel Magoo wrote, Republicans are probably going to get wiped in the midterm, so any Bitcoin bill needs to happen ASAP or it won't happen at all in the Trump administration. Pleditor added, The moment for crypto legislation died when Trump went blitzkrieg on crypto-grifting. He's positioned to benefit from it personally way too much for Congress to pass it in good faith. So far, it seems like the bipartisanship is holding, but the specifics certainly aren't making it easy. Outside of the administration, there's other forces from within the industry

Starting point is 00:09:20 urging a rethink on legislative strategy. Unchain reports that lobbyists for Coinbase are pushing Congress to pass stablecoin and market structure bills in the same package, citing six sources in D.C. It's generally thought that stable coin legislation is pretty close, but market structure could take a lot more drafting and negotiation. Unchained notes that market structure would be extremely beneficial for Coinbase, which they note sells more than 200 digital assets and offers a wide variety of additional services like staking in custody. But then again, market structure would be extremely beneficial for any company trying to deal with crypto in America. Carrick Halvert, the VP of U.S. policy at Coinbase denied the reporting, but did add, crypto is a comprehensive market that needs a comprehensive solution. We think that when legislation passes into law,

Starting point is 00:09:59 it's really important that we address all of those different buckets. At the end of the day, we do think it's important to have all of this legislation pass into law at the same time, or roughly the same time, because we don't want to create gaps or holes in the market. A lobbyist critical of Coinbase's strategy said, most think it's a bad idea. We should have a low-hanging fruit win on stable coins before doing harder stuff like passing a market structure bill. The reporting put many in the industry on edge. Alex Thorne of Galaxy Digital wrote, forcing stablecoin and market structure bills into one package is risky.

Starting point is 00:10:28 Stablecoin bills already have consensus. We think the Genius Act can pass Senate with 65 to 70 votes. A combined package? Who knows? A deal in hand is worth two in the bush. Always take the deal when you have it. Christopher Perkins of Coin Fund reiterated this even more simply, tweeting, prioritized stable coins now. Staying on our Washington theme, Miller White House Levine, the former CEO of the Defy Education Fund, is launching a new nonprofit aimed at educating Washington about Solana. The Solana Policy Institute will work with the SEC, the CFTC and lawmakers to help them think, quote, beyond Bitcoin. White House Levine said, we've got a lot of work to do on that front to educate people in Washington and policymaking

Starting point is 00:11:06 circles about crypto because right now people hear crypto and by and large think of Bitcoin and that's it. But of course, the ecosystem has exploded well beyond Bitcoin and there's applications for all sorts of things being built on these decentralized networks. Now, Defi Education Fund did a lot of important work over the past few years. For example, they delivered numerous independent briefs in lawsuits to explain how DeFi operated to judges. Their brief, for example, was specifically credited with explaining the issues around staking during the early stages of the Coinbase lawsuit, helping the firm secure a partial dismissal. However, the organization was funded by a grant from the Uniswap Foundation and viewed as an

Starting point is 00:11:39 Ethereum-aligned organization. Whitehouse Levine commented now, however, I'm excited about Solana because I've spent the last eight years of my career fighting for developer rights and people's ability to use these decentralized network applications. Now, certainly everything that's not Bitcoin needs a narrative boost right now. Both on Wall Street and indeed, it really is just a Bitcoin world at this point. Frankly, with what we've seen over the last year, that's not necessarily an unreasonable position to take. But I think having people like Miller involved in telling the story of the best parts of the opportunities of these other networks is a hugely positive thing compared to just pump and dump in Griff stories that people

Starting point is 00:12:15 otherwise might hear. Lastly today, to the surprise of absolutely no one but the most diehard meme coiners, Elon Musk has clarified that the government has no plans to adopt Dogecoin. Speaking at a town hall, Musk said, There are no plans for the government to use Dogecoin for anything as far as I know. The question, of course, came in the context of Musk's government efficiency agency. The billionaire commented that he originally wanted to call the organization the government efficiency commission. However, the internet insisted on calling it Doge, and who is Elon to fight the Twitter hive mind?

Starting point is 00:12:45 Since the department was stood up, Musk has floated the idea of using blockchains to track all government spending. But apparently that won't be done using Dogecoin. Alas, for the token itself, it has retraced almost its entire move since the agency was first announced, and fell a further 3.2% when must confirm the meme coin won't be used by the government. The White House declined to comment on Dogecoin adoption when contacted by Fortune, which might be the most ridiculous press query ever fielded. For now, though, that is going to do it for today's breakdown. Appreciate you listening, as always. And until next time, be safe and

Starting point is 00:13:15 take care of each other. Peace.

The Breakdown - Trump's Crypto Engagement is Making it Hard for Pro-Crypto Republicans

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