Crypto’s Big Bet Is Paying Off

Summary

The Daily – Episode Summary: "Crypto’s Big Bet Is Paying Off"

Podcast Information:

• Title: The Daily
• Host/Author: The New York Times
• Description: "This is what the news should sound like. The biggest stories of our time, told by the best journalists in the world. Hosted by Michael Barbaro and Sabrina Tavernise. Twenty minutes a day, five days a week, ready by 6 a.m."

Episode Details:

• Title: Crypto’s Big Bet Is Paying Off
• Release Date: December 19, 2024
• Hosts: Sabrina Tavernise and David Yaffe-Bell

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Introduction

In the December 19, 2024 episode of The Daily, Sabrina Tavernise and David Yaffe-Bell delve into the meteoric rise of cryptocurrency, particularly Bitcoin, and explore whether the recent surge signifies a pivotal moment for the crypto industry or merely another fluctuation in its volatile history.

Bitcoin’s Surge: A New Milestone

Key Discussion:

• The episode opens with Bitcoin surpassing the $100,000 mark for the first time, marking its highest valuation ever.

Notable Quotes:

• David Yaffe-Bell [00:40]: “Bitcoin, wow. Through the roof. Another huge record tonight, a new record.”
• Sabrina Tavernise [00:49]: “Bitcoin surging past $100,000 for the first time.”
• David Yaffe-Bell [02:38]: “Bitcoin now is worth over $100,000.”

Insights:

• The comparison of the infamous 10,000 BTC pizza purchase to its current value, highlighting Bitcoin’s exponential growth over 15 years.
• Total Bitcoin valuation reaching approximately $2 trillion, eclipsing giants like MasterCard, Walmart, and JPMorgan Chase.

Regulatory Battles and Gary Gensler’s Role

Key Discussion:

• The crypto industry's significant court victory against the U.S. government, allowing broader retail investment in cryptocurrencies and integrating crypto into mainstream financial systems.

Notable Quotes:

• David Yaffe-Bell [04:54]: “Crypto industry was succeeding, at least in terms of the market, in a way that it hasn't even in the past.”

Insights:

• Gary Gensler, SEC Chair, emerged as the primary regulator aiming to impose Wall Street-like regulations on crypto to build trust and protect the broader economy from crypto's inherent volatility and past fraudulent activities.
• The regulatory crackdown intended to prevent crypto-induced economic instability, referencing incidents like the FTX collapse.

Crypto’s Political Mobilization: The Fair Shake Super PAC

Key Discussion:

• In response to regulatory pressures, the crypto industry launched a formidable political spending campaign through the creation of the Fair Shake Super PAC, investing approximately $130 million in the 2024 election cycle.

Notable Quotes:

• David Yaffe-Bell [09:29]: “They created a brand new super PAC called Fair Shake, which spent a total of about $130 million in the 2024 campaign cycle.”
• David Yaffe-Bell [12:20]: “They spent $40 million on that race.”

Insights:

• The Fair Shake Super PAC aimed to elect pro-crypto candidates, notably influencing key races such as the Ohio Senate race and the California Democratic Senate primary.
• Successful campaigns included supporting Bernie Moreno over crypto-skeptic incumbent Sherrod Brown and defeating Katie Porter, an ally of crypto critic Elizabeth Warren.

Donald Trump’s Strategic Pivot to Crypto

Key Discussion:

• Former President Donald Trump dramatically shifted his stance on cryptocurrency during the 2024 campaign, embracing it as a tool for economic dominance and launching his own crypto venture, World Liberty Financial.

Notable Quotes:

• David Yaffe-Bell [15:52]: “He made a now very famous appearance at the annual bitcoin conference in Nashville in July where he said that if the United States doesn't embrace crypto, then China will.”
• David Yaffe-Bell [16:58]: “World Liberty Financial... a new avenue for people to get close to Trump, to kind of show their loyalty to Trump.”

Insights:

• Trump's initial skepticism and aggressive stance against crypto evolved into enthusiastic support, influenced by significant political contributions and strategic lobbying by crypto executives.
• The establishment of World Liberty Financial signifies a deep intertwining of crypto interests with Trump’s political and business endeavors.

Crypto’s Influence in Washington: A New Era

Key Discussion:

• The appointment of key pro-crypto figures like Howard Lutnick and Paul Atkins to influential government positions marks a significant shift in regulatory and economic policies favoring the crypto industry.

Notable Quotes:

• David Yaffe-Bell [22:24]: “There are a couple of key people who are going to have important roles in the Trump administration who are big crypto backers.”
• David Yaffe-Bell [24:17]: “Paul Atkins... he's really respected in the legal community. But he's also a crypto backer.”

Insights:

• Howard Lutnick: Appointed as co-chair of the presidential transition team and later as Commerce Secretary, Lutnick is a prominent Bitcoin advocate, enhancing crypto's integration into global financial markets.
• Paul Atkins: New SEC head with a background supporting crypto, indicating potential regulatory relaxations and a friendlier stance towards the industry.

Policy and Regulatory Implications

Key Discussion:

• The crypto industry's ambitious policy agenda includes shifting regulatory control from the SEC to the Commodity Futures Trading Commission (CFTC) and proposing the creation of a national Bitcoin strategic reserve.

Notable Quotes:

• David Yaffe-Bell [27:07]: “One thing that the crypto world has been pushing for is a bill that would essentially shift regulatory control of the industry from the SEC... to the CFTC.”
• David Yaffe-Bell [28:34]: “It’s a stockpile of bitcoin owned by the US Government. The same way that the US Government has gold sitting in a vault, it would have its own bitcoin sitting in a digital wallet.”

Insights:

• National Bitcoin Strategic Reserve: A proposed government-held Bitcoin reserve aimed at leveraging crypto assets to potentially reduce national debt and maintain economic dominance in a post-dollar world.
• Regulatory Shift: Moving oversight to the CFTC could result in more lenient regulations, fostering innovation but raising concerns about oversight and consumer protection.

Concerns and Potential Risks

Key Discussion:

• The episode highlights the dangers of regulatory capture, where the crypto industry gains undue influence over financial policies, potentially leading to systemic risks if crypto becomes deeply entrenched in the national economy.

Notable Quotes:

• David Yaffe-Bell [32:50]: “This is a degree of regulatory capture that is really concerning to a lot of people, especially advocates for consumers.”
• David Yaffe-Bell [34:01]: “With those shackles off, crypto has an opportunity to make itself a cornerstone of American finance. And a crash in that world... could be so much more damaging to so many more people than it ever has been in the past.”

Insights:

• The consolidation of crypto influence within the government raises alarms about the lack of rigorous oversight, increasing the risk of widespread economic instability should the crypto market experience significant downturns.

Conclusion

The episode of The Daily underscores a transformative phase for the cryptocurrency industry, marked by unprecedented regulatory victories, strategic political investments, and a significant shift in governmental attitudes towards crypto. While these developments have propelled Bitcoin and the broader crypto market to new heights, they also pose substantial risks to the stability of the U.S. economy. The intertwining of crypto interests with high-level government positions suggests a future where crypto could become deeply integrated into national financial systems, necessitating careful consideration of the potential ramifications.

Final Thoughts: As the crypto industry cements its presence in Washington, the balance between fostering innovation and ensuring economic stability becomes increasingly precarious. The episode serves as a critical examination of whether the crypto surge represents sustainable progress or the precursors to a more profound financial crisis.

Transcript

[Sabrina Tavernisi]

This podcast is supported by the Capital One Quicksilver card. Earn unlimited 1.5% cash back on every purchase everywhere. Plus, there's no limit to the amount of cash back you can earn. And rewards don't expire for the life of the account. It's that simple. The Capital One Quicksilver card. What's in your wallet? Terms apply. See capitalone.com for details. From the New York Times, I'm Sabrina Tavernisi, and this is the daily. Since the election of Donald Trump, cryptocurrency has surged to its highest level ever.

[David Yaffe-Bell]

Speaking of President Trump coming back. Wow. Did he put the fire onto bitcoin? Bitcoin, wow. Through the roof. Another huge record tonight, a new record.

[Sabrina Tavernisi]

For bitcoin surging past $100,000 for the first time.

[David Yaffe-Bell]

We have 100,000 in bitcoin. We have the potential for people feeling as if, wow, we made it.

[Sabrina Tavernisi]

Today, my colleague David Yaffe bel at me on how a small, renegade industry that began as a challenge to the financial system ended up on top of it. It's Thursday, December 19th. So, David, you and I have been talking for years now about the ups and downs and ups again of this thing that never really seems quite real or solid, and that is crypto. And now crypto has exploded in value. Is this just another twist in the roller coaster, or is it something bigger? Is this a pivotal moment?

[David Yaffe-Bell]

So, obviously, it's impossible to predict the future, especially where cryptocurrency is concerned, but it's certainly the case that this new surge in the crypto world is different from ones that we've seen in the past. And let me put this into perspective for you for a second. Bitcoin was created about 15, 16 years ago, essentially out of thin air. It was worth nothing. You know, famously, there was this early experiment to kind of prove how bitcoin could be used, where a guy went onto an Internet forum and said, I'll send 10,000 Bitcoin to somebody in an exchange. Send, send me $40 worth of pizza. And that exchange happened, and somebody was paid 10,000 bitcoin for two pizzas. Fast forward to this year, and suddenly, that is the most expensive dinner in the history of the world.

[Sabrina Tavernisi]

How much is it now?

[David Yaffe-Bell]

Just one. Bitcoin now is worth over $100,000. Ooh.

[Sabrina Tavernisi]

So do the math for me, actually.

[David Yaffe-Bell]

Wait, what is it? So that's a $1 billion pizza order right there.

[Sabrina Tavernisi]

Wow.

[David Yaffe-Bell]

Yeah. And, you know, it's. This is a 15 year, you know, time horizon. I mean, you know, this isn't like centuries and centuries. If you look at all the bitcoin in circulation, the total value of those bitcoin is about $2 trillion. And that's more than the combined worth of MasterCard, Walmart and JPMorgan Chase. So that just gives you a sense of the scale of this. And you know, what it essentially shows is that bitcoin has been one of the most successful financial products of the last 20 years. And that this industry is succeeding, at least in terms of the market, in a way that it hasn't even in the past. When you've seen headlines about people getting.

[Sabrina Tavernisi]

Rich from bitcoin, okay, so feels potentially very real. Why has crypto been having this resurgence?

[David Yaffe-Bell]

So there are two main drivers behind this. And the first one will be familiar to listeners of the show who've followed our coverage over the years. And it all comes back to this obscure court case that played out about a year ago. On one side, you had the crypto industry, which wanted to offer a new investment product that would basically just make it easier for people, regular people, to invest in bitcoin. On the other side, you had the US Government, which wanted to stop that from happening. They didn't want the US Investing public to have more exposure to the crypto markets. In that court battle, the crypto industry won. And it was a huge game changer for the industry. It meant that, you know, ordinary people had a type of access to crypto investments that they'd never had before. And in some ways, it kind of brought crypto into the mainstream of the U.S. economy. You know, it allowed people to have their retirement accounts invested in crypto, and it brought a huge amount of new money into the bitcoin world, sending the price of bitcoin higher and higher.

[Sabrina Tavernisi]

Got it. So that's part of the explanation. This kind of opening up of the mainstream economy to this pretty rarefied, kind of weird, formally on the fringes financial instrument. But I also remember at that point, David, because you and I of course did an episode about this. I remember that the federal government and the regulators did not like that so much. There was kind of a frenzy of concern among the federal government.

[David Yaffe-Bell]

Absolutely. Federal regulators in Washington were concerned that people would be exposed to the volatility of the crypto world, that their savings could disappear. There were wider concerns about how crypto companies were behaving, whether they were sort of revealing the right type of information to the public about these kind of risky financial assets that they were offering. And what the feds wanted to do was kind of protect the wider economy from the craziness and volatility of this fringe boom and bust crypto world. And the person who is at the center of that effort to kind of protect the US Economy was a guy named Gary Gensler, the chair of the securities and Exchange Commission. The field is going to have a challenge building trust. Right? And it already has a challenge building trust when there's so many fraudsters, scammers, grifters in the field. And there are.

[Sabrina Tavernisi]

And just remind us, David, what was Gensler's kind of thrust here? What was he trying to do?

[David Yaffe-Bell]

Look at the leading lights in this field, in the crypto field just two years ago. A number of them are in jail right now. And I'm not just talking about sbf. I mean, a number of others. And there's been tens of billions of dollars of losses and bankruptcies and so forth. Gensler was essentially trying to kind of partition crypto away from the US economy. And the way that he was doing that was insisting that crypto should be regulated like Wall Street. It's an innovation, but innovations don't long thrive if they don't also build trust. I mean, the automobile wouldn't have survived if you didn't have traffic lights, if you didn't have stop signs and even cops on the road to make sure there weren't accidents. And so that's part of our role as being the cops on the beat and the. He said that, you know, crypto companies should have to reveal to their investors sort of basic details of how these companies operate so that people would know what they were getting into, essentially what they were putting their money into. And he did that through a campaign of enforcement. He was filing lawsuit after lawsuit after lawsuit against the biggest crypto companies. And he essentially became the sort of bait noir of the crypto industry. You know, every company was getting these notices saying, the SEC is coming after you.

[Sabrina Tavernisi]

He was basically trying to make sure that crypto, which really is this pretty risky thing, that if it were to go belly up, it would not infect the broader economy.

[David Yaffe-Bell]

Absolutely. I mean, remember, you know, last time the kind of crypto world collapsed with, you know, the FTX crypto exchange going under, that was really bad for crypto investors, but it didn't have a particularly sizable effect on the rest of the economy. People who hadn't chosen to risk their money in the kind of crypto casino were more or less spared any of the harm of that. And Gensler and other U.S. regulators wanted to ensure that that stays the case in future kind of crypto crises.

[Sabrina Tavernisi]

So, David, how did the crypto industry respond to that, to all of this that Gensler was doing?

[David Yaffe-Bell]

The crypto industry responded with just a torrent of anger. You had basically every crypto executive going on Twitter saying things like, gensler is the devil incarnate. You know, you can't really overstate the level of vitriol that was directed toward this regulator. Of course, for, you know, regular people, that was easy to ignore. It was just executives kind of sounding off on Twitter. But behind the scenes, crypto was asserting itself in a much more aggressive and important way. Industry leaders were starting to get organized, organized in a way they'd never been before. They were putting together a political spending machine, you know, raising money in advance of the 2024 election campaign, where the industry would go on to spend huge amounts to support congressional candidates across the country who support crypto, who think that it's a valuable technology that could actually boost the US Economy in the long term.

[Sabrina Tavernisi]

And this was new for the crypto industry.

[David Yaffe-Bell]

It's not completely new. You know, listeners might remember Sam Bankman Fried. He was that kind of tousled haired chief executive of the FTX crypto exchange who was a big star in business and politics for a while until it turned out that he was stealing billions of dollars from his customers and was.

[Sabrina Tavernisi]

Prosecuted and went to jail for it.

[David Yaffe-Bell]

Exactly. And is now serving a 25 year sentence. So he's not on the scene anymore. And you know, in any case, the political spending that he was doing was sort of haphazard. It wasn't kind of driven by a unified strategy. It was really organized by him rather than by a kind of coalition of companies. But what we ended up seeing in 2024 was a coalition of crypto companies working together really closely and really strategically to pour a huge, you know, honestly unprecedented amount of money into politics. They created a brand new super PAC called Fair Shake, which spent a total of about $130 million in the 2024 campaign cycle, supporting more congressional candidates around the country. And that amount of spending is one of the most audacious, aggressive spending sprees by any industry in the post Citizens United era of American politics.

[Sabrina Tavernisi]

Interesting.

[David Yaffe-Bell]

It's a huge deal, not just for crypto, but honestly, in the history of money in politics in the United States and at a high level, the objective was to create the most pro crypto Congress in US History to fill seats with people who had advanced crypto policy goals. But obviously there were particular races that were especially important. And one great example, that kind of Crystallizes the stakes of this for the crypto industry was the Ohio Senate race, which pitted Sherrod Brown against Bernie Moreno. The stakes were so high because Sherrod Brown, the incumbent Ohio senator, longtime Democrat, was chair of the Senate banking committee, which is a kind of super important committee in the legislative process for financial regulation. And Brown was also a crypto skeptic. Last year, I warned that the splashy super bowl ads left out key details. They didn't mention the fraud. They didn't mention the scams. They didn't mention the outright theft. The ads didn't point out that you can lose big in crypto's huge price swing. So you had this kind of powerful anti crypto figure in the Senate, and his opponent, Bernie Moreno, is sort of the opposite. They want to tell us what kind of car to drive. They want to tell us what kind of stoves to have. They want to tell us that we're not allowed to own bitcoin, and they don't even understand what it is. I mean, that's a fundamental assault on our rights. I mean, a bitcoin booster who'd actually founded his own crypto company and on the campaign trail, you know, talked relentlessly about how much he loved crypto. The industry spent $40 million on that race.

[Sabrina Tavernisi]

Wow.

[David Yaffe-Bell]

You know, to try to boost Bernie Moreno's candidacy. And Moreno won. Another key race was the Democratic Senate primary in California. The industry spent a huge amount of money trying to tank the candidacy of one of the Democrats running that slot, Katie Porter. The reason they went after her is because Porter is a close ally of Elizabeth Warren, the liberal Democratic senator who's also been an outspoken critic of crypto. So you can see how the industry was kind of both trying to boost people that they liked and also take down vocal critics of the crypto industry. In California, Katie Porter lost. And that sent a really strong message about the power of the crypto industry.

[Sabrina Tavernisi]

Okay, so they dump all of this money into these congressional races, which, as you and I both know, is the oldest way and the most tried and true way of, you know, shaping political outcomes in the United States is putting money into politics.

[David Yaffe-Bell]

Absolutely. It's the oldest corporate strategy in American history. But it's still a little surprising coming from the crypto industry because, remember, this industry originated as this kind of renegade libertarian force in American economics. It wanted to be something different to redefine, define how business was done in the United States. But it's evolved significantly over the last 15 years to the point that it's now Kind of another big money industry. It's playing at the big boy table with big pharma, big oil, those other kind of classic political spenders.

[Sabrina Tavernisi]

Okay, so they're at the big boys table. What else do they do in this strategy to influence politics?

[David Yaffe-Bell]

Well, in addition to spending all this money on congressional races, they're targeting the most important and influential political figures figure in the country, and that's Donald Trump.

[Sabrina Tavernisi]

And David, tell me the deal with Trump and crypto, because my sense from reading your coverage and our colleagues coverage is that he likes it. But I don't remember anything in his first term about crypto or his relationship with crypto. So tell me about Trump and crypto.

[David Yaffe-Bell]

Yeah, Trump didn't say much about crypto in his first term. And on the rare occasions that he did talk about it, he was uniformly negative. He tweeted about its volatility, about its association with criminal behavior, and he just spoke plainly about how much he didn't like it. Bitcoin just seems like a scam. In 2021, he called into Fox Business and suggested that bitcoin was a scam, that it was designed to undermine the US Dollar. I don't like it because it's another currency competing against the dollar. Essentially, it's a currency competing against the dollar. I want the dollar to be the currency of the world. That's what I've always said. He just didn't hide that skepticism. He made his preferences clear in all sorts of ways. In fact, toward the end of his first term, the SEC under Trump actually brought one of the very first major enforcement lawsuits against the crypto industry. So that was the kind of Trump first term attitude toward crypto. But then something happened this year in, you know, early to mid 2024 on the campaign trail. Hello, bitcoiners. Thank you very much. Hello. It's good to be with you. Suddenly, Trump started talking about crypto in a different way. He started saying that he loved it. And I don't think you've ever seen anything like it. And most people have no idea what.

[Sabrina Tavernisi]

The hell it is.

[David Yaffe-Bell]

You know that, right? He, he made a now very famous appearance at the annual bitcoin conference in Nashville in July where he said that if the United States doesn't embrace crypto, then China will. Because if we don't do it, China's going to be doing. Others are going to be doing it. Let's do it and do it right. And he promised to turn the US into the crypto capital of the planet. Planet. And the bitcoin Superpower of the world, and we'll get it done. And he vowed to get rid of Gary Gensler, the kind of arch villain of the crypto world. On day one, I will fire Gary Gensler and appoint a new SEC chairman. I didn't know he was that unpopular. But his pivot on crypto, and it's really a transformation on crypto crystallized this fall when Trump announced that he is starting his own crypto business, which he calls World Liberty Financial.

[Sabrina Tavernisi]

Okay, World Liberty Financial, what is that?

[David Yaffe-Bell]

It's still pretty sketchy what World Liberty Financial actually is, but what Trump has said publicly is that it's going to be a crypto platform. It's going to enable people to do things like borrowing and lending with cryptocurrencies. And there's even a new digital currency associated with it called wlfi for World Liberty Financial, and it's available for purchase. You can think of it as the kind of technology equivalent of the Trump Hotel, the Trump Hotel on the blockchain. You know, it's a new avenue for people to get close to Trump, to kind of show their loyalty to Trump. And it poses as clear a conflict of interest as any in the kind of Trump business portfolio.

[Sabrina Tavernisi]

And why did Trump change?

[David Yaffe-Bell]

So Trump himself has given a series of different explanations for it, but the one that he seems to mention most often is that his sons, including Barron, are really interested in crypto and that they're constantly in his ear about this exciting new technology and how important it is for the US to embrace it. So that's the sort of official explanation, but I think it's clear to anyone who's paying attention to the crypto industry that the sheer amount of money the industry was spending on politics got his attention and that it also gave crypto executives a level of access to him that they'd never had before and an ability to try to change his mind. You've got crypto executives donating millions of dollars to the Trump campaign, crypto companies inviting Trump to speak at their events, individual executives kind of courting people in Trump's orbit to try to get meetings with him. It becomes this sort of full court press and a kind of industry wide embrace of the Trump candidacy.

[Sabrina Tavernisi]

And of course, we know the end of this story, which is that Trump wins the election.

[David Yaffe-Bell]

Not only does Trump win, but the candidates that the crypto super PAC supported also overwhelmingly win. The vast majority of them win their races. In total, various crypto groups have proclaimed that hundreds of pro crypto candidates across the Senate and the House were elected. So this is really a kind of astonishing political victory for the crypto industry, an industry that was kind of out in the political wilderness before the election. And it's these political victories that are the other main draw driver of the surge in Bitcoin's valuation that we've seen recently. The pro crypto candidates won. They owe a debt of gratitude to the industry, and that sets the crypto industry up in an entirely new way in Washington, giving it just a whole new level of influence.

[Sabrina Tavernisi]

We'll be right back. Support for this podcast comes from Avangrid. Tom Turnwald is the President and CEO of an Ohio millwork company that was started by his father and employs his kids kids. He's also a trustee to nonprofits and board member to for profit organizations in his community.

[David Yaffe-Bell]

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[Sabrina Tavernisi]

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[David Yaffe-Bell]

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[Sabrina Tavernisi]

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[David Yaffe-Bell]

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[Sabrina Tavernisi]

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[David Yaffe-Bell]

So there are a couple of key people who are going to have important roles in the Trump administration who are big crypto backers. The first one is a guy named Howard Letnick. We are going to welcome bitcoin into the financing family of the global financial markets.

[Sabrina Tavernisi]

And Cantor Fitzgerald is going to be.

[David Yaffe-Bell]

Your sponsor, who runs an investment bank called Cantor Fitzgerald. He's run it for many years, and he's a huge bitcoin booster. And his bank for a long time has had a business relationship with a very important crypto company called Tether. We finance and arrange that vast amounts, and we are going to now build.

[Sabrina Tavernisi]

That ecosystem for bitcoin.

[David Yaffe-Bell]

And Lutnick was appointed by Trump as co chair of the presidential transition team, which is a super important role. He essentially was overseeing the selection of personnel throughout government.

[Sabrina Tavernisi]

Incredibly powerful role because in government, personnel is policy. So this is a big deal.

[David Yaffe-Bell]

Exactly. So that in and of itself was a huge boost for the crypto industry. But then Howard Lutnick, I think he's going to be a bulldog for America at the Commerce Department. What you think, sir? Lutnick himself was picked by Trump to be Commerce Secretary, a kind of important role in economic regulation in the Cabinet. So that was the first kind of big personnel win for the crypto industry. But the part of the new administration that crypto was most fixated on was the sec, the nation's main financial regulator. And it's the agency that had been going after crypto companies in this Gensler era, launching all of these lawsuits. Right. That Trump has chosen to lead the SEC is an experienced securities lawyer named Paul Atkins.

[Sabrina Tavernisi]

What do we know about Paul Atkins? My understanding is he did serve at the SEC before. He's well known in Wall Street. He's well known in Republican political circles.

[David Yaffe-Bell]

Paul Atkins gonna run the SEC's pro crypto. He is good.

[Sabrina Tavernisi]

I'm glad to hear it. Because that agency has.

[David Yaffe-Bell]

Atkins is not some, like, crazy fringe pick. He's really respected in the legal community. But. But he's also a crypto backer. He has consulted for crypto companies during his career in the private sector. And crucially, he served on the advisory board of one of the largest crypto trade groups. And so, as you can imagine, it's beginning to look a lot like a crypto Christmas. There was a huge amount of Enthusiasm in the crypto world when he was selected.

[Sabrina Tavernisi]

It's enthusiasm, and it's palpable.

[David Yaffe-Bell]

If you look, it's the most pro crypto, pro bitcoin administration in Washington history. It's safe to say not by bitcoin. And I'm freaking out about it because. So those two key personnel selections, Letnick and Atkins, added to the various Trump family members who are outspoken about crypto. I believe in cryptocurrencies. I believe that cryptocurrencies are the future. Eric Trump was just at a big bitcoin conference in Abu Dhabi talking about how much he loves bitcoin. You know, that's just generated a huge amount of optimism in the crypto world.

[Sabrina Tavernisi]

Okay, so not only can crypto count on all of these new people coming into Congress, but they actually have these two incredibly important positions in the highest level of government. What is the effect of that likely to be for the industry, David? It feels almost like kind of crypto cabinet, right?

[David Yaffe-Bell]

Absolutely. A crypto cabinet, a crypto Congress, and a crypto policy wish list that just seems to get longer and longer day by day, as the industry grows more confident about getting what it wants. I think the top of that wish list is that these lawsuits that the SEC has been filing against big crypto companies get dropped. That's something that the industry is hoping happens very early in the new administration.

[Sabrina Tavernisi]

And can Atkins just do that, like, say these cases are now canceled?

[David Yaffe-Bell]

In theory, yes. He's running the agency. The agency is bringing these suits, and he could shut them down. It's unlikely to happen immediately, but I think at the very least, we're likely to see way fewer new suits. And I think some of those big cases that Gensler filed could disappear or get settled very quickly. So that's on the kind of the SEC front. There's also legislation that the crypto industry wants, and that has the potential to really shape the industry for the long term. Because, you know, we could always have a new SEC chair in four years or eight years who adopts the Gensler approach. But legislation could really kind of cement the industry status in Washington.

[Sabrina Tavernisi]

Right.

[David Yaffe-Bell]

And one thing that the crypto world has been pushing for is a bill that would essentially shift regulatory control of the industry from the sec, which is this aggressive enforcement agency, to a separate financial regulator called the CFTC for the Commodity Futures Trading Commission, which is much smaller, much less aggressive, and generally considered by the crypto world to be a kind of better, friendlier regulator.

[Sabrina Tavernisi]

So, in other words, they want to take power away from this quite powerful agency that had been going after them and give it to a much less powerful agency and presumably less resourced.

[David Yaffe-Bell]

Yes, exactly. But the crypto wish list actually goes on even further than that, and it includes things that just a year ago would have sounded like the most ridiculous pipe dream for the industry. So one that's getting a lot of attention is that the crypto world wants the US Government to create what they call a bitcoin strategic reserve to keep 100% of all the Bitcoin the US government currently holds or acquires into the future. And this is actually something that Trump talked about on the campaign trail and said he would do. This will serve, in effect, as the core of the strategic naming national bitcoin stockpile.

[Sabrina Tavernisi]

And what is that exactly? A national bitcoin stockpile.

[David Yaffe-Bell]

So I'll start with the caveat that nobody's exactly sure what this is. Okay. But, you know, from the reporting that I've done and what people have said publicly, it sounds like what the crypto world is talking about is a stockpile of bitcoin owned by the US Government. The same way that the US Government has gold sitting in a vault, it would have its own bitcoin sitting in a digital wallet. And you can see why this is appealing for people in the crypto industry who are invested in bitcoin, because if the US Government suddenly starts buying huge amounts of bitcoin, then the price will go up and those crypto investors will get richer. And the announcement of the creation of the stockpile would send all sorts of positive signals to the market and cause the price to go up further. So there are clear advantages from a crypto perspective.

[Sabrina Tavernisi]

But what justification does the crypto industry give for this? Presumably they're not saying, hey, US Government invest in this thing so that my assets can go up. Like, why do they say it's good.

[David Yaffe-Bell]

For the U.S. so that's where the arguments get a lot harder to understand and the logic starts to become a little bit tenuous. But I'll do my best to kind of articulate what the best version of the argument is. And essentially, it's that bitcoin is a great investment. Look how much it's gone up in the last 15 years. Look how much it could go up in the next 15 years. And profits from that investment could be used by the US Government to chip away at the national debt. You know, we might not have to raise taxes if the government's just sort of coasting along on its bitcoin investment profits. So those are the sorts of arguments that the crypto industry is making. There's also a kind of geopolitical argument. You know, right now the world runs on the US Dollar. And so when the US Wants to kind of push around its geopolitical rivals, it can do that with economic sanctions. But in a hypothetical future world that isn't run on the dollar, that's run on cryptocurrencies, it might help the US to have this huge stockpile of bitcoin. How exactly would that work? I don't know. But that's the argument, right?

[Sabrina Tavernisi]

If the world is not running on the US dollar, the US Has a lot bigger problems than cryptocurrency, I suppose, but. But let's just kind of carry this pipe dream out here. What would be in it for the U.S. like, why would the U.S. ever want to do something like this?

[David Yaffe-Bell]

You know, in theory, bitcoin's at about $100,000 today. Let's say it reaches a million 10 years from now. That's a 10x return for the US government. And potentially those profits could be reinvested in some way, and then the US wouldn't have to keep borrowing huge sums to offer all the services that are expected from the government. And, you know, the US could do all that and pay down the debt without raising taxes on the rich crypto entrepreneurs who are trying to have vacations in Bermuda or whatever.

[Sabrina Tavernisi]

Okay, so in sum, it's possible that these crypto companies are actually going to get their entire wish lists for Christmas. What might that mean for the rest of the US Economy?

[David Yaffe-Bell]

Well, for a minute, I'll just try to channel what the crypto industry would say to that question, which is that for years people have complained, you know, this stuff is useless. It doesn't do any of the amazing things that we were promised. And the industry has come back and said, our hands are tied by these regulators. They're essentially trying to create a system where we can't operate legally. And so we haven't even really had an opportunity to showcase the amazing potential benefits of cryptocurrency. Well, now the shackles could come off. In theory, there's an opportunity here for the crypto industry to prove that this stuff actually is useful, that it can create economic benefits for Americans beyond just the kind of short term high of, of seeing your, your bitcoin shoot up in value.

[Sabrina Tavernisi]

But I guess, David, one man's shackles is another man's safety valve, right? I mean, fundamentally, this is a very risky asset for all of the reasons we've discussed and it does seem like watching these new government officials come in and understanding how friendly they are to the industry, for me, it feels a bit like we might, might be witnessing the architecture of the next financial crisis being built before our eyes.

[David Yaffe-Bell]

Yeah, this is a degree of regulatory capture that is really concerning to a lot of people, especially advocates for consumers, people who think that it's important for the government to have a strong hand to stop abuses in the business world. The crypto industry is now being regulated by people the crypto industry chose, and there's something fundamentally dangerous there. You know, in the past we've had this kind of rollercoaster experience with crypto. There have been high highs and low lows and big crashes, but it's all happened outside the existing financial system. The victims of previous crypto crashes have often been wealthy people who were kind of gambling on the speculative asset that went up and down and who were prepared for the potential consequences. But in this dangerous new scenario, and with those shackles off, crypto has an opportunity to make itself a cornerstone of American finance. And a crash in that world, in a post Trump crypto world could be so much more damaging to so many more people than it ever has been in the past.

[Sabrina Tavernisi]

David, thank you.

[David Yaffe-Bell]

Thanks for having me.

[Sabrina Tavernisi]

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