Is crypto winning?
Is crypto winning?
A dispatch from Austin, site of the crypto State Fair
Consensus, the mother of all destination crypto conferences, just wrapped up in Austin. It was my third Consensus and first one since 2019, when it was still held in New York City. I learned many interesting things over the course of the three days and met even more interesting people. All that stuff will inevitably drive future reporting and writing in this newsletter, and I’ll have a lot more to say about all of that. For now, here’s the first dispatch, featuring an on-stage political debate that struck me as particularly illustrative of the current moment in crypto.
For years, Consensus has served as a reliable bellwether for the general mood of the crypto industry, and a telling reflection of its collective self-image. This year, as I walked through the exhibition halls and listened to the talks and panels in the massive Austin Convention Center, the mood was upbeat and optimistic. A big reason for that is that the latest crypto winter has given way to a resurgence in the markets. But there was something bigger going on. The same question kept finding its way to the forefront of my mind: Is crypto winning?
“Winning at what?” you might ask. For one thing, the industry has done well in Washington of late. Two weeks ago, Congress defied a veto threat from the Biden administration and repealed an SEC rule (well, an obscure accounting bulletin that was effectively a rule), called SAB 121 that the crypto industry hated because, it argued, the measure made it cost-prohibitive for banks to act as custodians for their clients’ crypto assets. Last week, the House passed a crypto-focused market structure bill called Financial Innovation and Technology for the 21st Century, or FIT 21. Then the SEC approved the first-ever exchange-traded funds (ETFs) that track the price of Ethereum. Given America’s prominent position in global financial markets, this sudden shift in the political winds is a big deal.
Then again, on Friday Biden followed through on the threat to veto the SAB 121 repeal. Prominent legal minds in the cryptosphere are wary of what they see as potentially fatal flaws in FIT 21, which is also still a long way from becoming law, if it ever does. Several of the most prominent brand names in the space are still locked in court battles with the Securities and Exchange Commission. Roman Storm, who helped create Ethereum-based privacy tool Tornado Cash, faces prosecution in the US on charges of money laundering and violating sanctions law. (And a court in The Netherlands just sentenced fellow Tornado Cash developer Alexey Pertsev to 64 months in prison.)
So even if in some ways these days are the best of times for crypto, in other ways they are still the worst of times. While the industry may really be breaking through, its struggle to be seen as legitimate—now more than a decade in the making—doesn’t look even close to being over.
This backdrop set the stage for one of the most well-attended events at Consensus: a debate between Messari CEO and prominent crypto Twitter influencer Ryan Selkis and Marvin Ammori, the chief legal officer at Uniswap Labs (one of those brand names digging in to fight the SEC in court), over how best to move forward as an industry in the political arena.
“Both these guys, they share the same goal,” the debate’s moderator, CoinDesk contributing editor-at-large Zack Seward, said as he introduced Selkis and Ammori. “They want to advance crypto policy in a meaningful way, such that builders aren’t vilified and such that the industry doesn’t go offshore.” Where they disagree is in the “tactical approach to getting that done,” Seward said.
Specifically, Selkis has been aggressively advocating for crypto advocates to abandon Democrats and the Biden Administration and throw their support completely behind Donald Trump and the Republican party (that’s at least partly because Trump has recently adopted pro-crypto rhetoric). Ammori’s view is that the crypto industry should focus on supporting pro-crypto candidates on both sides of the aisle, and avoid making crypto a partisan football.
“The long-term ramifications of that is we have a smaller tent, not a bigger tent. We have a politics of subtraction not addition,” Ammori said in his opening statement. “If it becomes really partisan, every four years we’ll have a massive pendulum swing one way or the other—we won’t have the certainty we want.” The real long-term opposition is not the Democrats, Ammori argued—it’s the banks, which see crypto as a threat. “We know they are lobbying against us.”
Selkis called Ammori’s argument a “whitewashing” of “the Democrats’ obstructionist mentality towards crypto for the last three and a half years.” What has moved the Democrats more recently, he said, has been “raw political power and an understanding that there are going to be severe consequences this election because of how unfair they have been … the bad faith, the out-of-control bastardization of American values and civil liberties,” Selkis said. Trump has changed the game by embracing crypto as a campaign issue, he said.
If the Democrats have truly had a change of heart on crypto, Selkis argued, they should repeal SAB 121 (this was before the administration vetoed the repeal), ask SEC chair Gary Gensler to resign, drop the charges against Roman Storm, and reverse several other policy stances Selkis and many others in the industry see as anti-crypto. Selkis, whose opening statement drew significantly more applause than Ammori’s, has spearheaded a growing pro-Trump movement in cryptoland, most prominently from his perch as a widely-followed influencer on crypto Twitter. He also recently appeared on stage with Trump at Mar-a-Lago as part of an event for people who bought Trump NFTs.
Ammori argued that while Selkis might want people to believe that Trump’s embrace of crypto has turned the tide by itself, it’s not so simple. He went through each of the 12 Democratic votes in the Senate for the SAB 121 repeal—a “seismic shock” in the way it went against the Biden administration’s wishes—arguing that in each case it was about “pure Senate politics” and had nothing to do with Trump. “They are worried about their own jobs, not about Biden-Trump.” What’s changed the game, he said, is money—specifically super PAC money.
“Why do they care so much about their own jobs? They care because we finally have a tool, one of our allies, one of our buddies.” Ammori was talking about Fairshake, a pro-crypto Super PAC that has raised more than $100 million to support pro-crypto candidates on both sides of the aisle. He noted that Fairshake contributed $10 million to help Democrat Adam Schiff defeat his anti-crypto primary opponent, Katie Porter. “People have noticed,” Ammori said. “It’s not just a vague Trump campaign promise, it is $100 million that can be spent in seven races.” He noted that last election cycle, the industry only had about $10 million to spend, and most of that came from SBF.
Fairshake raised $50 million just this past week—$25 million from VC firm Andreessen Horowitz (a16z) and $25 million from the crypto payments firm Ripple. Other big supporters include the exchanges Coinbase and Gemini and the asset management firm ARK Invest.
Selkis acknowledged the power of Fairshake’s money, but didn’t budge from his position that Trump has been the most important catalyst. “Yes, there’s multiple tools in the arsenal but the spark for this entire fire, the trigger event for this entire cascade of positive events was presidential power and presidential campaign power.”
During an on-stage interview immediately following the Ammori-Selkis debate, Chris Dixon, head of a16z Crypto, tried to lift the conversation above the partisan fray, touting a16z’s $47 million in total donations to Fairshake. But he didn’t hold back from criticizing those currently in power. “Obviously there’s been sort of a massive attack from the current administration on American entrepreneurs, which I think has been a bad policy,” Dixon said. “What it’s done is it’s deterred good entrepreneurs from working in the space and I think it has done almost nothing to discourage bad actors.”
A16z sees its policy efforts as “a very long-term effort,” said Dixon, adding that “more broadly, for me it’s not just crypto it’s what I would describe as internet freedom: open-source software, strong cryptography, and blockchains.” He argued that society is in a pivotal moment, “where these four or five companies control the internet” just as powerful AI tools like large language models are emerging. “As exciting as AI is in many ways,” he said, “it tends to be a centralizing technology that rewards companies with large pools of capital and data and I think blockchains and crypto is like really the only kind of credible counterbalance to that.”
In other words, Dixon, Selkis, and Ammori would probably all agree: Even if crypto is winning at the moment, the game is still in its early innings. —Mike Orcutt
ODDS/ENDS
Elon Musk and Donald Trump have been “discussing cryptocurrency policy,” unnamed sources tell Bloomberg. Musk responded to the report by posting on his own platform: “Pretty sure I’ve never discussed crypto with Trump, although I am generally in favor of things that shift power from the government to the people, which crypto can do.”
OpenAI says China, Russia, and others have been using its tech to run influence campaigns online. A story in the New York Times cites a report produced by the company that found a number of groups were using its AI tools to spread fake or deceptive messages about various geopolitical flashpoints (including the war in Ukraine and religious tensions in Israel). The story suggests the AI-generated content didn’t get a lot of traction on social media, but it also more or less parrots the report’s findings. The overall effect is that OpenAI gets off easy: they get to look like they’re being proactive and transparent about policing the use of their tools in the wild, without having to deal with the bigger question of whether such technology is safe to use in the first place.
The celebrities are at it again. Australian rapper Iggy Azalea has joined the ranks of public crypto influencers(?), with the release of her own memecoin, $MOTHER. She also proclaimed crypto to be “sexy” in a post on TwitterX this week. Surprise, surprise: the release has already been embroiled in scandal, with celebrity promoter Sahil Arora allegedly hoarding $380,000 in pledges for another unofficial token called $IGGY, according to a report in Decrypt. Azalea and her management have since distanced themselves from Arora, who is also in hot water for alleged shady dealings with Caitlyn Jenner’s token (sigh). This is crypto, so it keeps getting weirder: Azalea has also been accused of allowing M 0.00%↑ OTHER insiders early access to 20% of the supply—much of which those folks sold (“dumped,” in crypto parlance) on the market at the expense of retail investors. Amid all the furor it seems Azalea didn’t get the memo about how the SEC has gone after other celebrities who’ve touted crypto assets (*cough* Kim Kardashian *cough*).
Did PayPal’s crypto team out-privacy Bitcoin? That was the subject of some debate this week after the payments platform announced that users of its new stablecoin, PYUSD, launched on the Solana blockchain last week, can make “confidential transfers” on-chain. Transactions made this way hide the dollar amount publicly while recording the details for regulatory purposes. Bitcoiner Udi Wertheimer griped on Twitter that the feature sounded a lot like “confidential transactions,” a feature “Bitcoin devs have been larping about for almost a decade but never built, and you’re telling me PayPal users will have it first? LOL.”
Matter Labs, the firm behind the zero-knowledge-based Layer 2 zkSync, filed an application to trademark the term “ZK.” Perhaps needless to say, many of its industry peers are not happy about that.
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