Vitalik versus a16z
Vitalik versus a16z
Two flavors of “pro-crypto” politics
Happy Saturday! That’s it. That’s the intro.
What are the politics of crypto? It depends on what you mean by “crypto.”
Will the real “pro-crypto” please stand up?
That is not the title of Ethereum co-creator Vitalik Buterin’s most recent blog post, but it would have worked.
In the post, which in reality is titled Against choosing your political allegiances based on who is “pro-crypto,” Buterin acknowledges genuine fears that governments could undermine the freedom to hold and trade cryptocurrencies. “In the wake of these fears, there is a growing push within the crypto space to become more politically active, and favor political parties and candidates almost entirely on whether or not they are willing to be lenient and friendly to ‘crypto’,” he writes.
That’s a flawed approach, he argues, at least according to his view of what crypto really is. “Making decisions in this way carries a high risk of going against the values that brought you into the crypto space in the first place,” he writes.
Buterin doesn’t name names. But it’s hard to overlook that he came out with this post the day after Marc Andreessen and Ben Horowitz, co-founders of the venture capital firm Andreessen-Horowitz (a16z), published a video explaining why they are supporting Donald Trump in the US presidential election.
If you’re curious, you should watch the 90-minute-long conversation, which was filmed before Joe Biden withdrew from the race. In short, the two VCs, who both say they have supported Democrats dating at least back to the Clinton administration, argue that the Biden administration’s policies, particularly those concerning crypto and artificial intelligence, have been harmful to technology startups and innovation in America. They are also not happy about tax policies Joe Biden proposed that they say could kill firms like a16z if enacted. “The future of our business, the future of new technology, and the future of America is literally at stake,” Horowitz proclaims at the beginning of the conversation.
The duo is particularly perturbed by the administration’s treatment of blockchain technology, which Horowitz calls “probably the most important—in terms of how the world works—technology that we deal with.” The worst offender in their view is Gary Gensler, the chairman of the Securities and Exchange Commission (SEC).
Horowitz argues that crypto startups need guidance from policymakers that clarifies when a crypto-token is a security, like a stock or bond, and when it’s something different, like a commodity. Indeed, a16z has supported a bill that recently passed the House, called the Financial Innovation and Technology for the 21st Century Act (FIT 21 for short), that would provide such clarification. But in the absence of new legislation, Gensler has relied on laws first enacted in the 1930s to bring lawsuits against many crypto companies for allegedly issuing unregistered securities or brokering illegal securities transactions. According to Horowitz, that includes more than 30 a16z portfolio companies.
Though the SEC has lost its fair share of those suits, its aggressive stance has discouraged startup development, Horowitz argues, because small companies don’t have the resources to defend themselves against the government. The Federal Deposit Insurance Corporation (FDIC) has discouraged banks from serving crypto businesses as well. Actions by the two agencies illustrate how the Biden administration has gone “outside the law, using the administrative state to crush an industry,” Horowitz says.
“This has been a brutal assault on a nascent industry that I’ve never experienced before,” Andreessen adds.
The duo has failed to land a meeting with Biden to plead their case. Gensler has also left them hanging. “He’s running this campaign against crypto. We’re the largest crypto investors, or largest blockchain investors, in the world,” Horowitz says. “And we’ve requested meetings with him at least a half a dozen times.”
One of Gensler’s closest allies in Congress, Senator Elizabeth Warren, also refused to meet—the only senator to do so, according to Horowitz. Warren introduced a bill last year that infuriated crypto advocates who say it would effectively ban cryptocurrency self-custody, in which an individual maintains sole control of the cryptographic keys to their digital assets. She’s also run ads declaring she was building an “anti-crypto army” in Washington.
“It’s been intensely frustrating that it’s been impossible to make progress on this with the White House,” Andreessen says. “And it’s just a totally intolerable situation.” He then notes the “stark contrast” in Trump’s approach, officially articulated in two sentences in the new Republican platform. Andreessen calls the platform “a flat-out, blanket endorsement of the entire space.”
Anti-anti-crypto
As we’ve discussed before, though, that’s not the case. While the language does include an explicit promise to protect the right to self-custody—which would be a legitimate win for the industry—it’s mostly political red meat designed to exploit the discontent that many in the industry feel toward the Biden administration. If it’s “pro-crypto,” it’s equally just anti-Gensler and Warren.
It’s likely that a Trump win would end Gensler’s term, and chances are his replacement would be much friendlier to the industry. It would also make Warren a lot less influential in Washington. That would probably be good for crypto businesses and maybe even crypto innovation—at least in the US. But the platform says hardly anything about internet freedom and privacy, which are core values of many people who would call themselves “pro-crypto.” Trump has been silent on many of the values of the cypherpunk movement, which Ethereum’s Buterin calls the “ideology that originally created crypto in the first place.”
For decades, cypherpunks have used technical tools to oppose government attempts to restrict individual freedoms. Buterin points out that in the 2000s they used torrent networks and encryption to oppose restrictive copyright legislation aimed at internet filesharing. “A lesson learned very early on (was) the importance of decentralization,” he writes; Bitcoin and other blockchains are an “extension of that spirit” into the realm of payments and money.
But there’s a lot more to “crypto” than money, Buterin argues. “Within the crypto space there is often a tendency to over-focus on the centrality of ‘money,’ and the freedom to hold and spend money.”
Buterin acknowledges that this freedom is vital. But “a near-exclusive focus on cryptocurrency and blockchains” doesn’t completely reflect crypto’s founding, cypherpunk ideology, he argues. Other freedoms he views as just as foundational are the freedom to communicate privately, the freedom to have privacy-friendly digital identities, the freedom to have private thoughts (“This one is going to become more important in the next few decades, as more and more of our activities become mediated by AI in deeper and deeper ways.”), and the freedom to have “high-quality access to information.”
Buterin goes on to point out that since blockchain networks are borderless, the crypto-sphere is “uniquely international.” Crypto fans should judge politicians by “how much they and their policies show a care for the outside world,” he writes. “I will not name specific examples, but it should be clear that many of them fail on this metric.”
Priorities, priorities
Clearly, Andreessen and Horowitz have different priorities. After talking about crypto policy, they go on to explain why they prefer Trump’s stated view on AI and technological innovation generally—vaguely tying it to national security and “American dynamism.” (Horowitz also notes that a16z is doing “a lot of work” in the defense industry.)
“The Biden White House has a very complicated model of things,” Horowitz says. He and Andreessen say the AI-focused executive order the administration published last fall is too restrictive and it stands to harm startups if enacted. They prefer Trump’s simpler approach: “What he said to us is, ‘Look, AI is very scary, but we have to win. Because if we don’t win then China wins and that’s a very bad world,’” Horowitz says.
Andreessen says Trump’s side is the only one advocating for technological innovation. The discussion echoes the “Techno-Optimist Manifesto” that he published last October. Among other things, the piece attacked the so-called Precautionary Principle, a school of thought that calls for approaching new things that could be harmful with caution, the rationale being that pursuing innovation without considering potential harms could lead to disaster. Policymakers who apply this principle may try to create rules that anticipate how a new technology, like crypto or AI, might harm people, for example. Andreessen argued that the Precautionary Principle not only “would have prevented virtually all progress since man first harnessed fire” but is also “deeply immoral.”
Buterin responded then, too. Cautious policymakers may be holding back potential technological advances, but AI is “fundamentally different from other tech, and it is worth being uniquely careful,” he wrote in a November post titled “My Techno-optimism.”
Be careful with “pro-crypto” politicians too, Buterin argues in his latest essay. He warns that voting for politicians just because they say they are “pro-crypto” will send a clear signal that, “It doesn’t matter if they also support banning encrypted messaging, if they are a power-seeking narcissist, or if they push bills that make it even harder for your Chinese or Indian friend to attend the next crypto conference—all that politicians have to do is make sure it’s easy for you to trade coins.”
Besides that, he writes: “Crypto-friendly now does not mean crypto-friendly five years from now”—especially if the politician in question is an authoritarian. “The game of politics is much more complicated than just ‘who wins the next election.’”
It’s also true that seemingly solid political ground can shift quickly. Joe Biden’s policies seem to be what ultimately drove Horowitz and Andreessen to Trump—and to record a 90-minute video describing the shift in lurid detail. But that Biden guy isn’t even in the race anymore. —Mike Orcutt
ODDS/ENDS
“If we don’t do it, China is going to pick it up and China’s going to have it—or somebody else, but most likely China. China’s very much into it. Also, it’s not going away. It’s amazing. I’ve gotten to know a lot of people—like even the meeting in San Francisco [Trump’s June 6 fundraiser]. I went to San Francisco, I met many people that—these are people that this is really becoming an industry [for].” Donald Trump, to Bloomberg, on crypto.
Influential crypto critic Molly White has launched a new website called Follow The Crypto, which tracks spending by pro-crypto political action committees in the US. Did you know that crypto-focused super PAC Fairshake has raised more than any other PAC this election cycle?
Statistician and political commentator Nate Silver has joined the crypto-based prediction market Polymarket as an advisor. The platform has been getting a lot of attention because so many people are using it to bet on the US presidential election—even though it doesn’t allow people in the US to trade.
“It should not be long” before Ethereum developer Virgil Griffith is released from prison, according to his lawyer. Griffith pleaded guilty in 2022 to a charge of violating US sanctions against North Korea. He had attended a crypto conference in Pyongyang where he allegedly shared information about how to use blockchains to evade sanctions.
Swiss privacy software maker Proton AG has launched a self-custody Bitcoin wallet. The wallet “automatically uses a different Bitcoin address from a pool of addresses generated for each user, making it more difficult to connect the transactions and improving privacy,” according to Decrypt.
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