The Breakdown - Why Jay-Z's Bitcoin Trust Matters

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. The breakdown is sponsored by nexo.io and produced and distributed by CoinDesk. What's going on, guys? It is Friday, February 12th, and today we're talking about why Jay-Z's new Bitcoin trust matters. Before that, however, I want to start with some follow-up stories from show. shows from the past few weeks. We turn first to Miami. I did a whole show about just Miami's tech insurgency a couple of weeks ago now, but basically the backstory is that in December, an investor at Founders Fund tweeted out something to the effect of, guys, you know we could just

Starting point is 00:00:53 decide that Silicon Valley is in Miami, right? The mayor of Miami, Francis Suarez, tweeted back and said, how can I help? That started what has now become a three-month engagement with the technology field, including crypto, and Mayor Suarez is on a mission to make Miami a hub for all things crypto, Bitcoin, and tech in general. Now, specifically on the Bitcoin front, he's said a number of times that he would have some good news to share imminently about how he was trying to make Miami friendlier for the space. Last night on Thursday, at a city commissioner's meeting, the commissioners of Miami voted to study the use of crypto for, one, paying employees in Bitcoin, two, allowing people to pay fines, fees, and taxes in Bitcoin, and three, investing city treasury in Bitcoin. They also

Starting point is 00:01:42 voted to approve a search for a vendor to help with any transactions that would come after actual contractual approval. Now, Mayor Suarez's ask was initially a bit bigger. He wanted them to vote to move forward without hesitation on all these fronts. But the five commissioners had a long discussion and ultimately decided they wanted to study it more first. Given that we're talking about politics, right? Something that is about consensus building. This seems like a completely reasonable outcome. The City of Miami is now launching education campaigns in English, Spanish, and Creole around crypto

Starting point is 00:02:14 and is also encouraging the Florida legislature to pass laws that would allow them to invest public funds in crypto. Here's how Mayor Suarez summed up the discussion. I want to thank the City of Miami Commissioners for supporting my road. resolution which directs the city manager after analysis to procure a vendor to be able to offer our employees to get a percentage of their salary in Bitcoin, allows our residents to pay for fees in Bitcoin, and also would allow the city manager to cooperate with Miami County to allow for taxes to be paid in Bitcoin. It also a request of the state legislature that the city of Miami supports efforts to make

Starting point is 00:02:54 Bitcoin an acceptable currency for us to potentially invest in in the future. It's wonderful to be a very crypto-forward city in the city of Miami, and I want to thank my commission colleagues for allowing that to happen. Part of why this conversation is so interesting is that Miami's approach to Bitcoin in the crypto industry represents the polar opposite of the game theoretical position that we discussed around India and Nigeria earlier this week. Instead of trying to ban or limit or restrict access to this new field, Miami is using it as an opportunity to compete for. for talent. They're literally trying to attract new business creators to their city with the desired outcome being, of course, that it creates new job opportunities, that it creates a new revenue base in the form of new types of taxes, that it infuses the city with dynamism and energy, right? They're trying to turn talent into a public good. That could not be more stark than these places

Starting point is 00:03:50 where they're discussing crypto bands, which would have the exact opposite effect, potentially pushing some portion of an entrepreneurial subset of society out to try to find greener pastures and a more welcoming regulatory environment. But speaking of that, I actually want to come back to Nigeria. Now, when we discussed it last, India seemed pretty dead set on pushing a ban forward through the parliament, whereas in Nigeria, it hadn't really hit the actual legislature yet. It was entirely a central bank directive. To recap, the central bank of Nigeria effectively started enforcing last week a position that they'd had since 2017 saying that banks were not allowed to interact with crypto accounts at all, either on an individual or a business level.

Starting point is 00:04:32 Yesterday, however, this came to discussion in the Senate, and the official Nigerian Senate account live tweeted some of the comments. One senator said, the last five years, we have had people changing cryptocurrencies to over $500 million. It's good to ban because of the challenges it has presented, but in reality banning it doesn't take it away. That same senator said, even our Security Exchange Commission also recognize cryptocurrency as a financial asset they need to

Starting point is 00:04:59 regulate. What we should do is to invite the major stakeholders to a public hearing. Another senator said, all over the world, these cryptocurrencies are regulated. The operators of this so-called currency are everywhere. I would indulge the Senate to allow the regulators also to be invited so that they can tell the committees their own positions concerning the operation of cryptocurrency in Nigeria. Another senator said, cryptocurrency has become a worldwide transaction of which you cannot even identify who owns what. The technology is so strong that I don't see the kind of regulation that we can do. Bitcoin has made our currency almost useless or valueless. If we have an economy that is very weak and we cannot regulate cryptocurrency in Nigeria, then I don't know

Starting point is 00:05:39 how our economy would be in the next seven years. Yet another senator said, I am strongly against the outright ban of this medium of exchange by the central bank of Nigeria. What the CBN should be telling Nigerians are the regulations put in place to regulate the the activities of the operators. Our final quoted senator said, we didn't create cryptocurrency and so we cannot kill it and cannot also refuse to ensure it works for us. These children are doing great business with it and they are getting results and Nigeria cannot immune itself from this sort of business. What we can do is ensure bad people must not use it. This motion is most important to us. The time has come for us to harmonize all the issues concerning

Starting point is 00:06:19 cryptocurrency. So what actually came out of this is that instead of just allowing the CBN to put an effective ban on cryptocurrency, they're calling the CBN and other regulators in for a hearing. They're trying to figure out how to make it work for this emerging generation of Nigerians who are actually doing meaningful, exciting things with it. We don't know how that conversation is going to go, but you have to be pretty excited about the fact that a central bank ban has prompted a Senate to actually say, hold on, we need to understand how this could be an important thing for us and for our citizens going forward before we race to eliminate the opportunity to engage with it. Looking for the best way to stay on top of your investment game, nexo.io has you covered in three

Starting point is 00:07:08 easy steps with their high-yield savings account for digital assets. Step one, create an account at nexo.i. Step two, transfer assets to your secure nexo wallet with no minimum or maximum limits on funds deposited. Step three, sit back, relax, and earn up to 12% compounding interest paid out daily on your crypto and fiat. Your passive income made simple. Get started at nexo.io. With that, let's shift over to our main topic. Late last night, Twitter founder and CEO and Square CEO Jack Dorsey tweeted Jay-Z, Sean Carter and I are giving 500 Bitcoin to a new endowment named B-Trust to fund Bitcoin development, initially focused on teams in Africa and India. It'll be set up as a blind irrevocable trust taking zero direction from us. We need three board members to start. He then linked to a very

Starting point is 00:08:06 simple application for these board members, which I'm sure has been absolutely inundated with people applying. That 500 Bitcoin is currently worth about $24 million, but what I want to talk about is why it matters. The first reason I think it matters is the way the fund is organized. Celebrity philanthropy has historically very often been a vanity exercise. Celebs use their brand to get a bunch of money, their own, and other peoples, and then they allocate it to pet projects that aren't really focused on impact or don't really have the best accounting, but are really just about amplifying the brand of the celebrity. While we don't have a lot of details right now, Jack has made it pretty explicitly clear that

Starting point is 00:08:45 they are not to control these funds. Of course, they could exert social pressure on this board of three that they chose, but still, the way that they're framing this is that it shows the intention is to do philanthropy differently. A second reason why I think this matters is the focus of the trust. I do not believe it is coincidental that the first focus of the Bitcoin Trust is Africa and India, given that India and the most populous country in Africa are currently in the news because they're in the midst of banning discussions around Bitcoin and Crypto. Should those bans actually happen, this Bitcoin trend. Trust potentially creates a lifeline for developers and community members to keep building in spite of that.

Starting point is 00:09:27 Lastly, however, though, I want to talk about the state of celebrity in Bitcoin and crypto more broadly. Let's zoom back to 2017. You'll remember quite clearly that celebrity involvement in crypto was one thing and one thing only. Them shilling stupid friggin ICOs nonstop. You had Paris Hilton talking about Lidian coin. You had Floyd Mayweather, Shilling Centra, stocks, and Hoobie, you had Jamie Fox, Ghostface Killa, DJ Callad, Steven Seagal. Over and over, all the celebrities who were here were looking for the quick buck from the shit coin waterfall, and most of them got it, but they often got a little bit more than they could chew as well. Since then, all you've heard about those coins is that the celebrities who promoted them have been settling one by one with the SEC. Stephen Seagal had to pay

Starting point is 00:10:17 $314,000 in disgorgement fees. Caled and Mayweather both paid hundreds of thousands. In fact, Mayweather's total bill came up to close to three quarters of a million dollars, and they were both banned for promoting securities for two years in DJ Khalid's case and three years in Mayweather's case. So now let's come back to today. The celebrities so far in this phase have one of exactly two interests. One of those is NFTs, non-fungible tokens, digital collectibles. There is a ton of activity right now, particularly with musicians experimenting with digital collectibles. This feels fundamentally different to me than those types of ICOs that I was just talking about for a variety of reasons.

Starting point is 00:10:59 First, there are a number of active musicians in this space. Justin Blow, who goes by Three Lau, and Andrei Anios, better known as RAC, are just some examples. These are folks who have been exploring Bitcoin and crypto for literally years and are avid experimenters with whatever they can do with it vis-a-vis their fans. In other words, these are the opposite of tourists, and to the extent that they're finding exciting new creative mediums, of course they're going to share it with their colleagues. Which brings me to the second point about why it feels different. These NFTs, regardless of what you think about their financial characteristics, are a new

Starting point is 00:11:34 form of digital art, undeniably. In that context, it simply makes sense for artists to explore what is effectively a new medium, and a new medium that might make sense in the context of increasingly virtualized worlds. which gets us to our third point. Musicians are by definition in the hunt for new business models in a post-COVID-19 world. Over the last 20 years, obviously the business model of recorded music has been destroyed by streaming and MP3s, and COVID really killed what was left, touring. Given that, of course, there's going to be experimenting with different ways to share value with fans

Starting point is 00:12:11 and hopefully be able to get some of that value in the form of capital that you can use to live your life. All of that said, I think it's super reasonable to have questions about how broadly applicable NFTs are or to worry about a potential overheating in prices. Although, again, even with that, feels to me like the whims of digital art collectors are still really different than ICO Schillers talking to Korean pensioners. But honestly, I wanted to mention the NFT thing because it's large and I see it growing, but it's still far secondary to the main place celebs are showing up so far this cycle, which is Bitcoin.

Starting point is 00:12:43 Unlike that ICO era, the people who are getting clout out here for being involved in this space are doing it by discussing their Bitcoin holdings and when they got in. Gene Simmons, the founder of Kiss, randomly tweeted this week that he had put seven figures into Bitcoin months ago. Sean Lennon gave an amazing interview with Max and Stacey Herbert a few months ago on OrangePill podcast about how this was a tool for empowerment. It's just so notably different to see how these people are engaged. with the power shift that Bitcoin represents and seemingly don't feel the need for their brand to be bigger than Bitcoin's brand.

Starting point is 00:13:20 Now, there are some caveats. The first is that it's still early, and you know that this won't necessarily stay like this. Soldier Boy keeps screaming about random tokens. Norm MacDonald is now tweeting about Chainlink. Doge is its entire own weird meme phenomenon, which needs its own show to get into that is so separate from this in some ways. But the bigger one is that it's very clear that Tron, is out here selling celebrities right now. I turn again to Andre RAC, who last night tweeted out,

Starting point is 00:13:49 here's a list of celebs that Justin's son paid to tweet about TRX. Send me more and I'll add them. He pointed to Lindsay Lohan, Neo, Kendra Lust, Concrete Boat Boy, and says, Honestly, what bothers me most isn't the fact that people are getting paid to advertise something. It's that newcomers are continuing to get this scammy view of crypto when there are plenty of legit projects out there. It holds us back as an industry. To repeat, this is from a person with a well-known brand outside of this industry calling out this behavior within this industry. To get back finally to Jay-Z though, this is literally the chillest way to show your interest in Bitcoin. Give some money, denominate it in BTC, put it in a blind trust and don't ask for a ton of credit. That is the true

Starting point is 00:14:33 power of Bitcoin and it's awesome to see. And I guess I would just say, enjoy it while it lasts, in case it's more fleeting than we'd all probably like. For now, guys, I appreciate you listening. I hope you are headed off to have a great weekend wherever you are. Until tomorrow, be safe and take care of each other. Peace.

The Breakdown - Why Jay-Z's Bitcoin Trust Matters

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