The Breakdown - What the Crypto Executive Order Actually Says

Episode Date: January 28, 2025

NLW breaks down the specific language of the Trump crypto executive order, including the controversial lack of "bitcoin." Should bitcoiners be worried? Sponsored by: Ledn Need liquidity without selling your Bitcoin? For 6+ years, Ledn has been the trusted choice for Bitcoin-backed lending. With transparency, security, and trust at our core, we help you access your BTC’s wealth while HODLing. Discover what your Bitcoin can do at ledn.io/borrowing. 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 Monday, January 27th, and today we are diving deep on what the crypto executive order actually said. 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 are going to bit.ly slash breakdown pod. All right, friends, well, it had to happen. After just a nonstop insano week last week, things have finally calmed down a little bit. In fact, as you'll see,

a lot of today's episode is about taking a breather to understand what actually happened. If you've been on crypto Twitter at all, you know that everyone's just playing around with this deep seek R1 model that's the number one app right now and is beating chat chbtee t and making everyone question the U.S.'s leadership in AI, which of course, if you're interested in, go check out the AI show, but for now, let's come back to crypto, where last week was one of the most positive in history for crypto policy in the United States. We had, by way of reminder, the SEC forming a crypto task force, which revoked SAB 121 as one of their first actions. We had the incoming president launch a meme coin, which, like it or hate it, signaled a big shift in what would be allowed

within the industry. And capping it all off was the White House signaling a new direction and policy with the signing of the crypto executive order. Now, on the Friday 5 with Scott Melker, we talked a lot about the EO, but we didn't get so much into the details. Instead, we mostly talked about the impact and the community's reaction to it. So today, we're going to circle back, take a closer look at those details, understanding that the order is going to shape, at least in some way, how the next year plays out, so it's worth being clear on what it actually says. As I said on Friday, the document is largely a placeholder for future action. It redefines official U.S. policy in a more positive direction, but is pretty thin on what should actually be done. That said,

the policy redirection was firm and clearly stated. The order declared that, quote, the digital asset industry plays a crucial role in innovation and economic development in the United States, as well as our nation's international leadership. It is therefore the policy of my administration to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy. Substantively, the order establishes a working group to make policy recommendations. They have a number of roles. Firstly, to identify every policy, rule, and regulation that affects the industry within the next month. Agency heads will then have 60 days to comment on

whether the regulations should be repealed, or, in the case of informal policies, if formal regulations should be adopted. The second role is to come up with a full regulatory and legislative plan within six months. That plan will cover stablecoins, market structure, oversight, consumer protection, and risk management. Finally, the Working Group is tasked with evaluating the creation of a national digital asset stockpile. One of the most notable things about the working group is a shift of policy away from banking regulators and towards commerce officials. The Department of Homeland Security is represented, as is the Treasury. but none of the banking regulators have a seat at the table. The focus is clearly on using

crypto to drive economic growth with concerns of financial stability taking a back seat. A second substantial measure is a complete ban on the development of CBDCs. All department initiatives are immediately shut down, and government officials are prohibited from even promoting the idea of CBDCs within the U.S. or overseas. This part suggests the Trump administration has decided to pursue privately issued staple coins as the foundation of infrastructure changes rather than CBDCs. More importantly, it flags that U.S. markets won't be connected to any CBDC-based system established by international bodies. Still, as we've discussed, primarily this is a vibe shift.

It represents the White House saying they want to develop the domestic crypto industry. We don't know exactly what the policies will be, but the message for startups is to bring their companies back home and build in the United States. Catherine Kirkpatrick-Boss, the General Council of Starkware, captured the mood of the industry after last week, stating, I honestly don't even know how to process this much good news for crypto at once. Now, while the EO was overwhelmingly positive for the industry, for some, it didn't quite sit right and there was a very specific reason.

Podcaster Peter McCormick commented, The executive order does not mention Bitcoin once. Within the industry, most of the discussion centered around the Bitcoin's strategic reserve or, as the EO put it, the Strategic National Digital Asset stockpile. Autism Capital posted, Part of Trump's Crypto Strategic Reserve Executive Order calls for a basket of crypto-reserve assets. This shouldn't be an opportunity to fill it with all coins that have bought goodwill.

If Trump is getting honest crypto advice, the crypto basket should be one asset. Bitcoin. Ripple and XRP, as I mentioned on Friday, have been in the sites as offender number one when it comes to this particular phrasing. Now, to me, what it feels like more than anything else is that we have to look at this again just as the placeholder language. There was a race during the transition period to get EOs for all of the important issues. This one is very clearly a flag in the sand that says we're going to do stuff here in this space. And yes, it's clear that there's been a lot of lobbying behind the scenes for other assets besides Bitcoin being included in a potential stockpile, but they haven't even decided whether they're going to make this

stockpile. This crypto working group is meant to, quote, evaluate the potential creation and maintenance of a national digital asset stockpile and proposed criteria for establishing such a stockpile, potentially derived from cryptocurrencies lawfully seized by the federal government through its law enforcement efforts. That means that the real battle when it comes to Bitcoin versus everything else is going to happen in the context of that exploration. And if you were in the White House and you had multiple constituencies and stakeholders you had to deal with, would you commit in the context of an EO to one specific asset, or would you leave the language purposefully vague and punt that particular can down the field until you had more time to deal with it? My guess is that it's

firmly about can kicking rather than as a declaration against Bitcoin. It's also worth that if the stockpile did begin with retaining seized assets, there's about 170 million worth of Ethereum, 26 million of BNB, and 150 million in assorted stable coins that are sitting there, and so probably they'd want language that's broad enough to include those things? Anyways, the good news is for those who are angry about this, that the Trump White House is probably one of the most online in history, meaning that they've probably seen the backlash, and there's got to be at least a reasonable chance they'll take that into consideration. Purchasing crypto to fill a strategic reserve will take a fair bit of political capital to achieve, and there's basically zero chance that

gets off the ground without the full support of the crypto industry. Still, it's going to be something to watch over the next few weeks and months as things really rev up, but for now, let's shift our attention to a number of other stories that I think also might be quietly significant. If you've been around Bitcoin for long enough, you've heard the term Hoddle and the name Leden. Lennon has been the go-to leader in Bitcoin lending for over six years. They help clients unlock the liquidity of their Bitcoin, allowing them to hoddle while still accessing the wealth of their BTC. They've been battle-tested with their focus on transparency, security, and trust, allowing them to build a proven track record of client's success and security. Lettin has helped tens of thousands of

clients harness the value of their digital assets, issuing more than $6.5 billion in loans over the years. But as the crypto industry says, don't trust verify. Check out Ledin's trust pilot or their reviews on social media. And to learn more about what your Bitcoin can do for you, check out leaden.io slash borrowing. That's LEDN.com.com. Please visit ledden.com slash legal for product terms and disclosures. Product availability varies by jurisdiction. One tangible sign of the crypto industry's return to the U.S. is the reshors of startups. We haven't seen any figures for how many startups are moving to the U.S., but anecdotally, the number seems significant. Returning to the U.S. isn't just about freeing developers

up to focus on their projects. It's also a big reduction to the barriers to entry and financial drag on crypto startups. Bruno Pavarillo, the founder of Magna, commented, a friendly U.S. crypto regulatory environment will destroy the cottage industry of charging 50K for a Kaman and BVI Corp and 30K per year for a director that sits on 65 other boards. More concrete is a domestic pivot from cryptoVCs. A16Z have announced they will be be shuddering their London office. Anthony Albanese, the COO of A16Z crypto, tried to soften the blow, saying, we're excited by the enthusiasm for crypto building and adoption in the UK and are encouraged by the recent positive policy announcements and actions. However, we have chosen to focus on the U.S.

given the new administration's strong policy momentum and will therefore be closing our UK office. This doesn't change our confidence in the UK's growing role in crypto and blockchain. We will continue to invest in great entrepreneurs no matter where they are in the world, including in the UK. We also remain ready to help the UK with its ongoing crypto efforts. The London office was opened in 2023 during the height of excitement about the UK becoming a crypto hub. Since then, a change of government curtailed policy advances and left the UK as mildly hostile once again. The other possible reason for the closure is the departure of General Partner Shriam Krishnan. Khran was the head of the London office, but recently left the firm to

take on an advisory role in the Trump White House. Adam Wren, a UK Bitcoiner commented, The UK could have been a world leader in crypto and associated digital asset services. I mean, the city and our fintech sector is right there. Very difficult catching the U.S. now, another opportunity squandered. Overall, Coinbase CEO Brian Armstrong believes global competition is ramping up. Reflecting on his time in Davos over the past week, he commented, President Trump is forcing everyone to up their game. Basically, every conversation I had with major market leaders was focused on what the Trump administration plans to do on crypto, e.g. on a strategic Bitcoin reserve and how they can avoid being left behind.

Armstrong added that crypto and economic freedom was the new global paradigm, moving on from discussions of technocratic control that had dominated Davos for the past few years. He added, The energy is palpable, and many are curious about how embracing crypto as a technology can increase economic freedom globally. And as the nature of U.S. regulations begin to shift, Coinbase are questioning the logic of their compliance system moving forward. Once again, CEO Brian Armstrong, this time in a tweet, said, We need to rethink our listing process at Coinbase, given there are around 1 million tokens a week being created now and growing. High-quality problem to have, but evaluating each one

by one is no longer feasible. And regulators need to understand that applying for approval for each one is totally infeasible at this point as well. They can't do a million a week. It needs to move from an allow list to a block list and utilize customer reviews or automated scans of on-chain data to help customers sift through. That, and will continue to integrating native decks support more deeply. Customers shouldn't need to know or care whether the trade is happening on a decentralized exchange or a centralized exchange. I think that the point remains even if you ignore the thousands of rugs and scams that go live each day. There are still enough popular meme coins and project tokens to swamp any manual process. Coinbase director Connor Grogan pointed out,

how much market structure has changed, tweeting, there are 36.4 million crypto tokens today. We're on pace to have 100 million tokens by the end of 2025. To put it in perspective, the 2017-2018-alt season had just under 3,000 tokens, and the 2013-2014-alt season had less than 500 tokens. It's also worth noting that Coinbase sat out the token listing game for a few years after being sued by the SEC. Meme coin listing started again in November,

most recently with the addition of the Trump and Melania coins, with the team has years' worth of tokens to sift through to get up to speed. Anselm suggested there's an easy solution, tweeting, you simply need to hire someone who is in the trenches to your listing teams. They can tell you the 10 out of million tokens that need to be listed as soon as possible. And yet, on a policy level, the solution is far from clear. Hester Pers's 2020 Safe Harbor proposal contemplated a world where token issuers would disclose their plans to the SEC in exchange for regulatory exemption.

Looking at current market structure, that plan seems completely infeasible. One solution that seems to be supported by the White House is the idea of separating out meme coins as a type of collectible and providing a broad-based exemption. This would solve the issue of limited resources at the SEC, but does nothing to address the incentive structure issue. Night Owl commented, The Catch-22 Crypto Policymakers will find themselves in is that if they require securities regulation compliance for tokens that distribute cash flows and are valuable while deeming NFTs and memecoins collectibles, and incentivizes more creation of the latter. Gibis commented on the state of the industry posting, almost every project that's hit CT breakthrough this cycle is straight-up

trash. People are still trying to tokenize reputation or creating platforms that launch tokens with no tie to real value that don't intertwine incentives. Far be it for me to tell people to not play the game at hand, but none of this stuff is even close to the mark. Pentoshi believes that market forces alone can rebalance the industry, commenting, utility used to be a meme. It was all just ideas and use cases that for the most part didn't need a token. Most of it was just like a power cord plugged into itself. So everyone sold their bag for memes. But now a lot of this infrastructure will be used by the largest institutions in the world, and it's likely underowned in some cases. A lot of it will have repricing as Tradfai not only comes but builds. Meanwhile, people will be left holding the bag. There's a place for

memes, yes, but a rebalancing may be in order. The New York Department of Financial Services recently attempted to address the issue of meme coins, putting out a, quote, notice regarding rapidly proliferating sentiment-based virtual currencies, count on the U.S. government to find the most complicated way to say something. They warn these tokens are often tightly held by insiders and highly volatile. The department declared that this entire category of coins was inconsistent with their guidance on coin listing and market manipulation. But this does nothing to stop the tokens being traded on chain and therefore has very little effect on investor protection. We are rapidly approaching the point where decentralized exchanges overtake centralized exchanges in terms of volume

and ignoring that fact is not a viable regulatory strategy. It is not at all clear to me what a reasonable regulatory regime would look like when it comes to meme coin launch pads, and it's also not viable for Coinbase and other large US exchanges to sit this one out, given that meme coins are the dominant theme of this cycle. The SEC still has a lot of low-hanging fruit to deal with, but eventually this issue is going to be placed on the agenda. It is one that I am definitely watching more closely. I think it's going to have a big impact

in shaping how this industry plays out over the next year or two. For now that, that is going to do it for today's breakdown. Appreciate you guys listening, as always. Looking forward to seeing what this week brings. Until tomorrow, be safe and take care of each other. Peace.