The Breakdown - What the Gensler Treasury Secretary Rumors Say About Crypto's Current Mindset

Episode Date: August 21, 2024

Recently, a very loosely sourced article claimed that VP Harris was likely to name Gary Gensler as Treasury Secretary. NLW breaks down the news and what it's spreading suggests about the current psychology of the crypto space. 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 Tuesday, August 20th, and today we are talking about the rumor that scared the crap out of the entire crypto-Twitter sphere yesterday. 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 of the show notes or go to bit.L.Y slash breakdown pod. Well, you may have noticed yesterday that there was an absolute S show all over crypto Twitter that started when the Washington Reporter published an article with the headline, Scoop, Kamala Harris likely to nominate Gary Gensler as Treasury Secretary if elected.

Senate sources. The few people who actually read the article came away with a sense that the story was misleading at best. The anonymous source was actually talking about a convoluted plan to retain a Democratic majority at the SEC in the event of a Trump election win. The theory goes that Gensler should step down ahead of the election, allowing the Biden administration to appoint a new chair. The source said, the only way I see Gensler agreeing to that is if Harris promised if

she wins, she'll give him Treasury Secretary. That was the whole source. Now, there could definitely be additional gossip going on in Washington that wasn't reported, but as far as the journalism goes, this was incredibly thin. This is particularly true when you consider the headline suggesting that Gensler as Treasury secretary is, quote unquote, likely. Leo Schwartz, one of the very capable cryptojournalists at Fortune knew exactly how this would play out, tweeting, this is going to be widely shared on crypto Twitter and should not be taken seriously. Another Fortune crypto editor, Jeff John Roberts, scolded the

denizens of crypto Twitter for being so easily misled. He wrote, lack of media literacy among otherwise smart crypto people is a problem. This quote unquote headline, for example, is bullshit. There's no link in a quick Google search shows author Matthew Foldy is a wannabe GOP politician. Crypto skepticism of Dems is understandable, but no excuse to be gullible. Crypto writer David Z. Morris dug into the standing of the newspaper tweeting, so after some looking, though, Washington reporter is not a real news organization. It's run by GOP operatives. The author of the piece is currently running for Congress. This isn't a news story, it's a political smear. Some people actually checked with their own sources

as well, with Custodia Bank CEO, Caitlin Long, tweeting, okay, multiple Dems contacted me to say the Gensler as Treasury Secretary rumor is false. One thinks the source of the rumor is Gensler himself, thinks he planted it just to mess with us, which sounds about right, to be honest. So why discuss this here? While the article should obviously be given zero credibility as an actual piece of news, it's still interesting as a meta point of discussion. There's a little doubt that Gensler is a man of immense political ambition and a fairly shrewd operator within Democrat circles.

Rumors of him having his eyes on the role of Treasury Secretary have been longstanding. Alex Thorne pointed out, many have heard that Gensler might be getting vetted for Treasury Secretary. That is a real rumor that has been going around for years. But I don't believe the report today, nor that the reporter has particularly knowledgeable or real sources. But also, it's not impossible. Then again, policy director Justin Slaughter is discounting and entirely tweeting, yet this is an example of a game of telephone going wild. Gary's odds of being Treasury Secretary are lower than mine of starting this week for the Braves on the mound. Ignore this.

VP of Government Affairs, Alexander Greaves, pointed out that there's only one way to be sure, commenting, any nominee needs 51 votes in the Senate for confirmation. But only if there's a Republican Senate majority, this can't happen. Now, I actually think the interpretation of this as crypto-Twitter just falling for any story that comes along is a little bit off the mark. I think the much more interesting analysis of this story is one, reflective of Twitter in general. Twitter is a place that rewards headlines and screenshots of headlines, which is exactly what this was, more than actually sharing or reading articles. Twitter slash X themselves acknowledge this, given that when you try to post a link to something that you haven't read, it asks if you want to actually read it first. But that's a much longer conversation about media sensationalism that I want to get into here.

I think when it comes to the Cryptosphere itself, there are a couple of other more relevant points. The question of how a potential Harris campaign would deal with crypto is very high among people's interest right now. It's of interest to the Cryptoprogressives, who are trying to find a reason that they don't have to vote for Donald Trump, it's high for those on the other side, who are convinced that the Democrats have it out for crypto, that actions mean more than words, and who recognize that this would pretty much be the most demonstrative action that a future Harris presidency could take to make it clear that there is no interest in any sort of crypto reset. I think the speed with which this flew around crypto Twitter also simply reflects the fact that

we're all jumpy and on edge right now. This has been one of the weirdest cycles we've ever experienced. We got to all-time highs before the halving on the back of the ETF, but no one for the entire cycle has believed that we're actually in anything resembling a real bull market, or at least anything resembling a bull market like we've had in the past. I'm sure many of you can feel this, but simply put, for basically the entirety of this year, people have been looking for reasons why this isn't a bull market rather than reasons why this is. You can feel it right down to the very structure and behaviors of organizations in this industry. I used to say that in the wake of FTCS, there weren't any crypto marketers who were getting fired for doing nothing. Marketing

understandably went to zero, and that's one of the things that you would expect most to come back as a bull market took hold. However, firms have been very, very hesitant to actually make any sort of moves because of this sense that even if things were positive or turning more positive, it was still on very shaky ground. The political part of this conversation is an unavoidable aspect of this, and until we have more clarity, either in the form of a Trump win, or in the form of better understanding of personnel and policies in a new Harris administration, I basically expect, as a default, there to be this sort of nervous energy. And for those of you hoping that maybe the DNC platform would answer some of these questions, unfortunately you will be disappointed.

Hello friends, before we get back to the rest of the show, I want to implore you to join me at Permissionless. Permissionless is the conference for Cryptonatives by CryptoNatives, and the reason it's so important this year is that despite regulators' best attempts to push industry founders, devs, and executives out of the U.S., the United States remains the beating heart of crypto. Today, the tide is turning. Policymakers have pivoted from fighting crypto to embracing it. Literally now we are in a major political party's platform, which will lead ultimately to the creation of new financial products, new applications, and ultimately new adoption. Permissionless is the conference for those using and building on-chain products.

It's home to the power users, the devs, and the builders. And perhaps more importantly, I will be there. The location is Salt Lake City, the dates are October 9th to the 11th, and tickets are just $499. If you want to get 10% off, use code breakdown 10. Go to the Blockworks website, blockworks.co. There will be links to register for the conference, and again, you can use code Breakdown 10 to get 10% off. As the Democratic National Convention gets underway, the party has released their official platform. Missing from the sprawling 92-page document was any sign of a crypto pivot. In fact, the platform doesn't mention crypto policy at all, either positively or negatively.

About as close as it came was a commitment to keep America on the forefront of scientific discovery and innovation. This section listed specific fields including AI, biotech, and quantum computing, but cryptocurrency was passed over. The innovation policy also seems to focus on the need for regulation and establishment of global rules. And while I'm not sure that people expected there to really be a big shift embodied in this document, the lack of any sort of mention is notable, particularly in contrast to the Republicans who have clearly put crypto on the ballot, with a pledge to end the crypto crackdown, allow self-custody, and defend the right to mine Bitcoin. Total silence and response from the Democrats feels like it says something about how the issue was prioritized. Then again, the whole

platform kind of felt stale. The document still referred to Joe Biden as the candidate and continuously frame the platform around continuity and extension of policy into the Biden second term. NBC News reported that the document was approved by the platform committee on July 16th a few days before Biden dropped out of the race. Frankly, the lack of an update makes it fairly clear that the election is just as much about personality instead of policies as it seems. It is also bizarre to me that the Democrats didn't feel it necessary to switch out the names of the candidates, but that's, once again, a little beyond the scope of this particular show. So what has this been from the pro-democrat crypto side? Investor Adam Cochran is trying to argue that no news is good news, tweeting. Not mentioning crypto is the

pivot. For years, we've had anti-crypto rhetoric. Warren shouting for an anti-crypto, and Treasury OFAC and the Fed going chokepoint claiming crypto is about money laundering. People were screaming from the rooftops about Harris's early financial picks, who they swore would be anti-crypto. What's in the DNC platform? Nothing. No crackdown. No policy to make validators register with Vincen. No policy to empower the SEC. No formal chokepoint strat. strategy? No ban on crypto due to scams. Absolutely nothing. Crypto doesn't need government handouts to succeed. It needs a non-hostile environment. Proactive and supportive policy is great, but it also takes time to develop. But make no mistake, Warren wanted anti-crypto to be the party

identity and it's not even a talking point. That is a pivot and it's a damn good one. Troy Cross, a fellow at the Bitcoin Policy Institute, disagreed. Responding, it pains me to say it, but this is pure cope. If Harris's administration were planning to ban self-custody, Bitcoin mining and continue silently debank in crypto-involved businesses and individuals, it wouldn't be in the platform. I'm not claiming that the Harris campaign is actually coming for your Bitcoin. I am claiming the absence of a plank in the party platform saying we're ending crypto in America is not evidence of anything. Their plans are entirely unknown. When it comes to the perspective of people who have been sitting on this fence,

bankless co-host Ryan Sean Adams seemed to capture the mood, writing, the 92-page Democrat platform document was released today outlining the Kamala Harris agenda. Not a single mention of crypto, not even a word, after years of hostility. No way to spin it, this feels like spit on the face. The question of course is, will it matter? Well, new polling from Coinbase took a closer look at young crypto voters across swing states. It found that crypto holders under 35 were split roughly evenly between parties, 41% identified as Democrats, while 39% identified as Republicans. The polling also found that 51% of these younger crypto voters said they were likely to support crypto-friendly candidates. Currently, this age

demographic is around 40% of all eligible voters and will become the majority by the 2028 election. Turnout for young voters has also been on the rise and was viewed as a key factor in the 2020 election. In Georgia, a key swing state during that cycle, around 51% of eligible voters under 30 cast ballots. In the previous election, youth turnout was just 37%. Supported by this polling, Coinbase argued that, quote, Young voters can tip the scales for either party, and this is all the more critical in battleground states where a handful of ballots can mean the path to victory for either party. Taking Coinbase's statistics at face value, up to 5% of voters or young people who care enough

about crypto for it to be the deciding factor in their vote. That's well within the margin of error for the seven major swing states identified as the keys to winning this election. Coinbase argued that candidates across the aisle must then pay attention to the young, diverse pro-crypto constituency that can make or break campaigns. The spin from the crypto industry is clear and summed up by Kristen Smith. The CEO of the Blockchain Association tweeted, Our industry will vote this November.

Crypto offers a new lifeline to financial independence for millions. Americans, especially younger Americans, feel left behind by the current system. They're eager to voice this frustration at the ballot box. Well, my friends, we will see, won't we? For now that, that is going to do it for today's breakdown. Appreciate you listening as always. And until next time, be safe and take care of each other. Peace.