But instead of taking on the financial issues dominating the headlines, the House and Senate are racing to bring stablecoins — a cryptocurrency sector few Americans have even heard of — out from the shadows.

The $230 billion stablecoin industry could be the first to benefit from Donald Trump’s promise to make the U.S. the world’s “crypto capital of the planet.”

Industry advocates say the legislation will clear up uncertainty around the regulation of their cryptocurrencies, unleashing a new era of financial innovation. Critics of the bipartisan push warn that the legislation risks another financial crash while enriching Trump, whose family is launching a stablecoin of their own.

“Passing legislation gives them a first-mover advantage to profits that are to be gained. We saw that with the Trump meme coin, where a lot of people lost out but it didn’t matter because Trump’s platform was making fees,” said Mark Hays, of the group Americans for Financial Reform. “It just seems like a witches’ brew of problematic things that could lead to another crash.”

What Is a Stablecoin?

To their proponents, stablecoins offer all the benefits of crypto without the downsides.

They are pegged to real-world currencies, such as the U.S. dollar. The idea is that one dollar-denominated stablecoin can always be redeemed for one dollar. Stablecoin issuers use real-world assets, such as U.S. Treasury bonds, to back their offerings.

Stablecoins live on blockchains — cryptographically protected digital ledgers — just like more famous tokens like bitcoin or Ether. Unlike bitcoins, they are supposed to be insulated from wild price swings by their currency pegs. That hasn’t stopped some stablecoins from collapsing.

What’s the Point?

Boosters say that stablecoins can make payments faster, cheaper, and more efficient. They argue that stablecoins will make it easier to send money across international borders and create opportunities for the unbanked by cutting out traditional financial institutions.

So far, however, they’re mostly used to buy other cryptocurrencies. Crypto traders use them to cash in and cash out of more speculative tokens without paying repeated fees. Former Securities and Exchange Commission Chair Gary Gensler has likened them to “poker chips at the casino.”

Critics say that even though the biggest stablecoin was launched in 2014, the high-minded talk of improving the payment system has yet to produce results, and the only major users so far have been crypto traders, criminals seeking to evade money laundering laws, and people in the developing world whose own currencies face runaway inflation.

“They have been around for a decade. There is no doubt people have been trying to turn them into a general-purpose payment instrument,” said Arthur Wilmarth, a professor emeritus at the George Washington University law school. “And it really hasn’t worked out.”

Are They Really … Stable?

That’s what their promoters would have you believe. In reality, stablecoins have “depegged” from the dollar dozens of times.

As Sam Bankman-Fried’s fraudulent FTX exchange collapsed in late 2022, leading stablecoin issuer Tether saw its titular offering drop from the dollar by more than 2 cents. The second-biggest stablecoin, Circle’s USD Coin, dropped more than 13 cents amid revelations that many of its cash assets were jeopardized by the collapse of Silicon Valley Bank in 2023.

Then there was the notorious TerraUSD coin, an “algorithmic” stablecoin that was not backed by real-world assets. Its collapse took the token’s supposed value of $40 billion down to zero.

Despite the promise of more concrete assets backing today’s leading stablecoins, even crypto boosters have questions about Tether. The El Salvador-based stablecoin keeps only 82 percent of its reserves in cash or cash-like instruments, dividing up the rest in more volatile investments such as bitcoin. Moreover, it has never subjected its reserve to a full financial audit.

Tether is closely aligned with Commerce Secretary Howard Lutnick, whose former firm Cantor Fitzgerald holds much of the Tether’s U.S. Treasury bonds.

The very promise of stability can lead to runs on stablecoins, experts say.

“If people think that even a few pennies of their dollar are at risk, they are going to run,” Wilmarth said. “They are not thinking, ‘I’ve put this money in the S&P 500, and I’ll ride it up and down.’”

So Congress Is Doing What Exactly?

Trump has said he wants to sign a stablecoin bill by August. If it does, the legislation would be one of a handful of signature initiatives he approves this year — raising the question of why this niche topic is so important to Congress and the White House.

Even supporters of the idea of passing stablecoin legislation say the urgency seems to be motivated in large part by the industry’s torrent of campaign spending.

“That has had an effect,” said Tim Massad, the director of the Digital Assets Policy Project at the Harvard Kennedy School, who served as the chair of the Commodity Futures Trading Commission under Barack Obama. “There’s a valid substantive reason to prioritize it, in that stablecoins exist and we have been talking about it for a while, and I think there’s also some political reason why it’s being prioritized.”

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Two bills pending in Congress, the STABLE Act in the House and the GENIUS Act in the Senate, would largely accomplish the same industry-friendly goals if passed.

Both bills would carve stablecoins out from securities law and the jurisdiction of the Securities and Exchange Commission. And both would allow some stablecoin issuers to opt for state-level regulation instead of federal, potentially letting them to shop for friendlier jurisdictions.

The bills would also create reserve requirements limiting what stablecoins can use as collateral, prohibiting them from investing in riskier assets such as bitcoins.

That is also where critics start to see problems: The Senate bill would allow stablecoins to use money market funds, which had to be bailed out by the federal government in 2008 and 2020, as collateral. Meanwhile, both bills would ban regulators from imposing tighter reserve requirements designed to protect against market crashes.

Neither bill goes far enough to outlaw foreign issuers of dollar-denominated stablecoins, potentially creating an incentive for issuers to move offshore and outside of U.S. regulation, according to Massad. And neither provides the Treasury Department with broad-enough authority to crack down on illicit finance, he said.

Moreover, both bills would allow non-banks to enter the stablecoin market, Wilmarth said, opening the door for Big Tech companies such as Meta or Amazon to get in on the action.

“Not only Big Tech but Big Finance,” he said. “They would have every piece of information about you if they could run all your basic financial transactions through their systems. I think that creates enormous concerns and problems.”

If Big Tech does enter the stablecoin market, critics warn, a run on their coins could lead to a larger financial contagion.

“You’re linking the commercial sector of our economy to our financial sector,” Wilmarth said. “Mark Twain supposedly said, ‘You can put all your eggs in one basket, but you better watch that basket.’”

Now Trump Has a Stablecoin?

Last month, members of the Trump family announced that they were getting in on the stablecoin game themselves through their World Liberty Financial venture. The firm is helmed by the sons of Trump’s Middle East envoy Steve Witkoff.

Like other stablecoins, it promises to be backed by assets such as U.S. Treasury bonds, with regular audits of its reserves.

Massad said he could think of no similar move by other presidents.

“Jimmy Carter put his peanut farm in a trust, but peanut farm regulation wasn’t exactly a big issue back then,” Massad said. “I think it’s totally inappropriate for the president or members of his family to be launching a stablecoin or otherwise engaging in crypto businesses.”

Is This Thing Going to Pass?

The announcement of the Trump stablecoin didn’t just add another potential conflict of interest to the mountain of existing ones. It also alarmed crypto industry figures, who had been counting on stablecoin legislation as a surefire win this Congress after spending hundreds of millions of dollars on politicians in both major parties during last year’s election cycle.

Both bills seemed destined to attract widespread, bipartisan support until the Trumps entered the picture.

Instead, at a House Financial Services Committee meeting earlier this month, Rep. Maxine Waters, D-Calif., the ranking member of the committee, denounced the Trumps and said she could not be involved in passing a bill that would further enrich them.

The House bill still passed out of committee with support from six Democrats, giving it a bipartisan sheen. The Senate’s stablecoin bill is co-sponsored by Republican Sens. Bill Hagerty, Cynthia Lummis, and Tim Scott, along with Democratic Sens. Angela Alsobrooks and Kirsten Gillibrand.

The post Congress’s Biggest Financial Priority Is “Stablecoin.” What the Hell Is That? appeared first on The Intercept.

Two weeks after helping tank an earlier vote on the so-called stablecoin bill, a group of 16 Democrats voted with nearly every Republican to push the bill past a filibuster threat.

While supporters said the bill would give clarity to an industry that has operated in a legal gray zone, critics warned that stablecoins pose a threat to the larger financial system. They also questioned why Democrats were giving Trump a victory on a bill that could enrich the president himself.

“We need a unified Democratic opposition. We need Democrats zeroing in on the GOP plan, and not muddying the message by getting behind an unrelated, corruption-friendly crypto bill this week instead,” Ezra Levin, co-executive director of the progressive group Indivisible, said in a statement.

Crypto Flip-Flop

The Senate’s vote for cloture on the GENIUS Act represented an industry win after a setback only 11 days before.

Stablecoins are supposed to represent one of the safest sectors of the cryptocurrency industry. In theory, dollar-denominated stablecoins are backed 1:1 by sound assets such as U.S. Treasury bills. Supporters say stablecoins could be used to make sending payments easier and cheaper. Critics say that, so far, their use cases have more often lain in buying other crypto assets and evading money-laundering laws.

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The crypto industry has put its weight in Washington behind stablecoin legislation, hoping that it can serve as the first step toward passage of a larger agenda. Yet despite a record of bipartisan backing, centrist Senate Democrats pulled their support for the bill only days before it was set to receive its first vote on the Senate floor.

Those Democrats said they had lingering concerns about issues including anti-money laundering protections, illicit transactions, and the soundness of the financial system.

After that initial, failed vote, Democrats engaged in extensive closed-door talks with the legislation’s Republican boosters. Ahead of the vote Monday, senators received copies of a proposed compromise.

Democrats backing the new version of the legislation said that it would address concerns that Big Tech companies could dominate the new industry and expand surveillance on their own customers if allowed to issue stablecoins. They claimed that it also strengthened protections for stablecoin holders if their issuers go bankrupt.

One of the lawmakers who decided that the changes went far enough was Sen. Mark Warner, D-Va., who acknowledged in a statement over the weekend that Trump’s personal involvement in the industry cast a shadow over the debate.

“Many senators, myself included, have very real concerns about the Trump family’s use of crypto technologies to evade oversight, hide shady financial dealings, and personally profit at the expense of everyday Americans,” Warner said in a statement. “But we cannot allow that corruption to blind us to the broader reality: blockchain technology is here to stay.”

Democratic staffers on the Senate Banking Committee, where Sen. Elizabeth Warren, D-Mass., serves as ranking member, rejected the changes as nothing more than a “fig leaf,” however.

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Perhaps most glaring for critics is the fact that the latest text of the bill does nothing to prevent Trump and his family members from continuing to cash in on crypto. In addition to the Trump-themed meme coin he issued just before his inauguration, Trump’s sons have now issued a stablecoin that generates the family fees when it is traded.

But skeptics say the Trump family’s corrupt entrée into the crypto world isn’t the only problem with the legislation. They also say it will still be easy for private Big Tech companies to issue stablecoins, while public giants such as Meta could find workarounds on prohibitions meant to block them from entering the market. More than anything else, critics warn, putting the congressional seal of the approval on the crypto industry could set up another market crash.

Warren pointed to analysts’ predictions that enacting stablecoin legislation could help the industry grow from a market of $200 billion to as much as $2 trillion over the next three years — making it a systemic risk to the U.S. economy.

“Two weeks ago, Democrats refused to vote for the bill because it had inadequate safeguards for consumers,” Warren said on the Senate floor. “The bill failed to address Trump’s blatant crypto corruption. So, here we are again. What has changed in the bill since the last vote? The answer: Not much. Its basic flaws remain unaddressed. While a strong stablecoin bill is the best possible outcome, this weak bill is worse than no bill at all.”

Framework Frustrated?

Senate Majority Leader John Thune, R-S.D., said Monday night that the bill could still be subjected to “bipartisan” amendments, but skeptics have little expectation that it will undergo substantive changes now that it has survived the critical cloture vote.

“The Democrats had leverage, they had the chance to withhold support for the bill that the Republicans needed to get it onto the floor, in exchange for real accountability. And that didn’t happen,” said Mark Hays, associate director for cryptocurrency and financial technology at Americans for Financial Reform and Demand Progress.

Hays pointed to one reason why Democratic leaders weren’t willing to put up more of a fight: the industry’s massive campaign spending. Crypto companies and investors put nearly $200 million into campaign spending last year. Many of the Democrats lining up to support the bill Monday face potentially serious challenges in the 2026 or 2028 election cycles.

“You have to ask the question, why? And I think the answer is there’s concern about the crypto industry’s influence,” Hays said.

Still, Hays said that the unexpectedly dramatic vote on the stablecoin bill likely means choppier waters for crypto going forward. The industry still hopes to secure so-called “framework” legislation this year that would provide it with legal guidelines for other crypto ventures, many of them even more speculative than stablecoins.

The post Senate Dems Hand Trump a Win by Backing Stablecoin Bill appeared first on The Intercept.

Then Trump and his family attempted to monetize the presidency through a meme coin and a $2 billion crypto deal involving an Abu Dhabi-backed venture firm.

Democrats were, suddenly, outraged. Some centrist party members who had treated cryptocurrency with deference even began to walk away.

Nine Senate Democrats pulled their support for so-called “stablecoin” legislation over the weekend, imperiling the industry’s most likely legislative win this year. Meanwhile, Rep. Maxine Waters, D-Calif., blocked a House hearing on a broader, more ambitious crypto “framework” on Tuesday, leading several Democrats in a walkout.

“Trump may just cause enough polarization to make crypto skepticism mainstream within the Democratic Party.”

The industry is still pushing for a vote on the legislation in the Senate, where Democrats continue to work on a potential compromise. Yet for skeptics who have had their warnings about crypto’s threat to the economy ignored for years, Democrats’ sudden conversion was heartening. They just wished it hadn’t taken Trump to wake the party up.

“Crypto has been able to buy so many Democrats because there was no organized opposition and thus little downside to politicians selling their vote,” said Jeff Hauser, a longtime critic of the industry and executive director of the Revolving Door Project. “Trump may just cause enough polarization to make crypto skepticism mainstream within the Democratic Party.”

Sporadic Opposition

The industry’s bipartisan alliances were on display last May, as the House debated its favorite legislation: the Financial Innovation and Technology for the 21st Century Act.

Out of 213 Democrats, 71 joined with Republicans to give overwhelming support to FIT21, as it is known, though the bill did not proceed to a vote in a Senate. The legislation is aimed creating a framework that would largely shield the industry from oversight by the Securities and Exchange Commission, which is viewed as having the sharpest regulatory bite.

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The industry seemed even better positioned this year, thanks to Trump’s election and a record-breaking $197 million spending spree on the 2024 campaigns. All the cash helped knocked hostile Democrats out of primaries and propel industry-friendly candidates in the general election.

Analysts predicted that after the new Congress was sworn in, Democrats skeptical of the industry would hold their tongue for fear of facing well-funded primary challengers. Trump and his family’s rapid move into the industry, though, seems to have changed the calculation for some Democrats.

The White House has said that the Trump family’s crypto deals raise no ethical concerns because Trump’s business interests are held in a trust that his sons run.

Trump’s Schemes

In September, Trump’s sons helped launch a crypto marketplace called World Liberty Financial.

Hours before his inauguration, the Trump Organization launched a Trump meme coin that has now generated more than $320 million in transaction fees, according to a recent analysis.

Then, last week, World Liberty Financial announced the massive deal with the Emirati firm, which planned to use the company’s tokens to make a transaction with the crypto exchange Binance, according to a report in the New York Times.

By that point, the bipartisan mood on Capitol Hill was already beginning to sour.

Waters expressed openness to legislation dealing with stablecoin last year. In March, however, the Trumps announced that they would be issuing a stablecoin of their own. Waters on April 2 tried to amend a stablecoin bill in the House Financial Services Committee, where she serves as ranking member, to prohibit the Trump family from issuing one that benefits the president.

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Republicans rejected her bid, and the bill passed out of committee with support from several Democrats, including some who have drawn hundreds of thousands of dollars in donations from the industry.

Then, as news of World Liberty Financial’s Abu Dhabi deal circulated, Sen. Ruben Gallego, D-Ariz., led eight other Democrats in announcing Saturday that they were backing off their support for a similar stablecoin bill in their chamber, imperiling its chances of overcoming a filibuster.

Though Gallego and several of his colleagues had just voted for the bill in committee, they now said it “has numerous issues that must be addressed, including adding stronger provisions on anti-money laundering, foreign issuers, national security, preserving the safety and soundness of our financial system, and accountability for those who don’t meet the act’s requirements.”

Gallego’s statement may have had a special sting for the industry, which spent $10 million in super PAC funds helping him win his Senate race last year.

In a joint statement Monday, three leading crypto trade organizations said they still hoped the Senate would advance the legislation.

“A comprehensive regulatory framework will enable widespread and increased stablecoin adoption,” the groups said, “which is essential to cementing U.S. dollar dominance in the digital economy.”

According to Axios, Senate Majority Leader John Thune, R-S.D., is still planning to hold a vote on the stablecoin bill on Thursday, and the measure’s sponsors are hoping to strike a deal to revive the legislation.

Waters Walks Out

On Tuesday, Waters ratcheted up pressure on the industry by objecting to a joint House Financial Services and Agriculture committee meeting on the newest iteration of the FIT21 bill.

“I object to this joint hearing, because of the corruption of the president of the United States and his ownership of crypto and his oversight of all the agencies. I object,” Waters said.

Rep. French Hill, R-Ark., the chair of the Financial Services Committee, said the hearing had been negotiated with Democrats for weeks.

“Through her actions today, the ranking member has thrown partisanship into what has historically been a strong, good bipartisan relationship,” Hill said.

Republicans and some of the committees’ Democrats continued holding a more informal roundtable, as Waters marched over to a different building for a hearing of her own.

At Waters’s breakaway hearing, one witness said Congress shouldn’t just take a hard line on the Trumps, since some of World Liberty Financial’s most problematic practices are mirrored by other leading companies.

“In many ways, the Trump family is simply copying common crypto business practices.”

World Liberty Financial markets itself as the future of decentralized finance. On its website, the company says that its governance system, based on a special token that can be bought but not traded, “ensures that every $WLFI owner has an equal voice. From submitting proposals to casting votes, your participation is key to shaping our decentralized platform.”

Yet it is controlled by a small set of insiders who stand to profit at the expense of retail customers, according to Mark Hays, associate director for cryptocurrency and financial technology at Americans for Financial Reform and Demand Progress.

“While it is entirely right for members of Congress to raise concerns about how actions of the Trump presidency distort good policymaking and threaten the public interest, none of us here should lose sight of the fact that, in many ways, the Trump family is simply copying common crypto business practices,” Hays said. “In other words, many of the potential issues we see with the Trump family’s crypto practices are a feature — not a bug — of the crypto industry.”

Neither the Trump Organization nor World Liberty Financial immediately responded to a request for comment on the company’s governance structure.

Waters’s effort to disrupt the House hearing pointed to a continuing divide among Democrats. While six other Democrats joined her, several remained at the main hearing featuring industry witnesses, including Rep. Angie Craig of Minnesota, the House Agriculture Committee ranking member.

“I think that, with more publicity around the corruption, they’re going to pay more attention.”

Democrats who stayed drew supportive statements from one of the industry’s biggest players, Coinbase.

Craig and the other Democrats who stayed did, however, criticize the Trump family’s deals.

“It is corrupt, it is wrong, and it makes this process of coming together to regulate crypto more partisan than it needs to be,” Craig said.

In the Senate, Gallego and his colleagues’ statement focused on the substance of the stablecoin bill rather than on the Trumps’ attempts to enrich themselves.

In an interview with The Intercept, Waters predicted that Democrats’ focus will soon shift to Trump. “It’s coming,” she said. “I think that, yes, they had some real issues, but I think that with more publicity around the corruption, they’re going to pay more attention.”

The post Democrats Woke Up to Trump’s Crypto Grift. Will They Stop Other Scammers? appeared first on The Intercept.

All those options have something in common that may not always occur to consumers: The transfers are offered by exclusively by private companies. That means users’ accounts aren’t stuffed with physical dollars, but rather with promises made by private companies to make the recipient whole.

Unlike with cash money, the system creates a middleman for every dollar spent — and an opportunity for them to make a profit off the digital equivalent of something so simple as handing someone else a bill.

There is a future where every monetary transaction between people involves private interests.

There’s no way to send money digitally without involving a company that has an angle. With cash on the way out — the last penny was just minted, for instance — there is a possible future where every single monetary transaction between people involves private interests.

The little-noted distinction raises a question: Why can’t the actual backer of the dollar — the U.S. government — create a way to send money itself? Academics have been exploring this question for years, asking why the federal government can’t back its own digital currency to facilitate transfers between people.

A system with a central bank digital currency, as it’s known, could operate as a public good, advocates say, with potentially zero or minimal transaction fees — just by letting the government take a small step from backing physical currency to backing its digital equivalent.

In the U.S., those researchers never got past an exploratory phase, but that did not stop a central bank digital currency from becoming a boogeyman for right-wing activists.

The Republican House majority whip, Rep. Tom Emmer, warned that the Chinese Communist Party uses a digital currency to spy on its citizens. Online memes dubbed them a “mark of the beast.” Donald Trump promised to ban them last year, and followed through with an executive order in January.

Now, Republicans are trying to make sure that no matter who is president, private companies will forever hold the monopoly on Americans sending money to each other online.

They’re pushing a formal, codified ban that would squash government competition to private payments before it ever gets started. The House included a central bank digital currency ban in its version of a defense budget bill, which will be hashed out with the Senate in the coming weeks. The bill would even prevent research on government-issued digital currencies.

The debate raises major questions about privacy, public goods, the dollar’s dominant position of the global economy, and technological innovation. That debate’s resolution, one prominent researcher told The Intercept, will determine the future of money.

“Right now, the only way to digitally transact through people is through a private sector intermediary — whether that’s a bank or a fintech company or a credit card company,” said Neha Narula, the director of the digital currency initiative at the MIT Media Lab who from 2020 to 2022 worked with the Federal Reserve Bank of Boston to explore the idea. “It is not really clear that that structure continues to work without something like cash, users having the ability to exit to cash.”

Central Bank Digital Currency

To understand the potential upsides, it is possible to look to the handful of other countries where central bank digital currencies have already been adopted. In the Bahamas, citizens can use smartphone apps or plastic cards to make fee-free purchases and transfers with the digital Bahamian dollar.

The adoption of digital currency in the Bahamas has been low, in part because so many private alternatives already exist. A similar pattern has emerged in China, which launched a digital currency in 2020.

In the long term, China hopes to use digital currency to leapfrog past the U.S. dollar’s role as the preeminent mode of international exchange. American boosters of central bank digital currencies, such as former President Joe Biden, say it is important that the U.S. not get left behind. China’s preeminence in the field is a red flag for the likes of Emmer, however, the Republican in House leadership.

“The digital yuan, Major, is a financial surveillance tool,” he told CBS News’ Major Garrett in an interview earlier this year. “The Chinese Communist Party is literally building social scores on its citizens based on their purchases. This is not an American value.”

“It is hard to imagine in 50 or 100 years we are going to be using pieces of paper.”

Narula, the researcher, acknowledged that the use cases for digital dollars may be elusive for now. Still, she believes that it is important to keep studying central bank digital currencies, given the inevitable trend toward more digital transactions.

She said, “It is hard to imagine in 50 or 100 years we are going to be using pieces of paper.”

Privacy Problems

Narula is adamant that a central bank digital currency could be built with privacy protection at its core. After all, there are already cryptocurrencies such as Bitcoin that allow their users to remain mostly anonymous.

Digital currency critics, by contrast, paint them as Orwellian tools of government oversight. One skeptic argued that privacy protections would be too vulnerable to the whims of an administration.

“It is technically possible to achieve privacy, but it’s not politically possible to achieve privacy. And that’s a very important point to stress here,” said Nicholas Anthony, an analyst with the libertarian-leaning Cato Institute. “Once a crisis occurs, it would be so easy to have privacy protections ripped away.”

Anthony said those on the left should be just as concerned as those on the right about the potential for abuse.

“Our financial transactions reveal so much about us,” he said. “Anyone in power can really use it to their advantage. So it’s really unfortunate, in my eyes, that it has become a ‘Republican’ or ‘conservative’ issue.”

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Private offerings come with a host of privacy concerns as well, Anthony acknowledged. He argued that the market will incentivize privacy protections, along the lines of Apple’s marketing on the topic. Others aren’t so sure and think the issue may be operating as a smokescreen for private companies.

“You hear a lot of high-minded rhetoric about CBDCs being a threat to people or privacy, but at the end of the day, this is really about what roles the public and private sector play in finance,” said Mark Hays, an advocate with the left-leaning groups Americans for Financial Reform and Demand Progress.

By banning even government research on central bank digital currencies, MIT Media Lab’s Narula warned, the legislation also risks endangering further progress on privacy protections.

“There’s certain experience that only people in government have when it comes to administrating our monetary system,” she said. “So to cut them off from participating in this research means that we are not going to get to the best outcomes, because we don’t have the best minds working on it.”

Private Alternatives

If a ban comes to pass, the field of digital payments will be left wide open for private industry. That could present a profitable market opportunity for financial services companies and cryptocurrency startups.

The stablecoin industry already has a market capitalization of over $300 billion, and it is poised to explode in the wake of recent legislation supported by Trump, himself a stablecoin entrepreneur.

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In fact, cryptocurrency companies have been some of the most vociferous opponents of central bank digital currencies after initially exploring partnerships with the U.S. government on them. Critics point out that government-issued digital dollars could compete with stablecoins, which earn profit for their private issuers from the interest on U.S. bonds and other securities backing consumer accounts.

Hays said that he recognized the privacy concerns that come with government-issued digital currencies.

“My dollar that I lay down at the bodega, chances are that’s not going to be on any database. But with the CBDC, in a certain way of thinking about it, it now would be,” he said.

Still, he worries that private interests are moving to take control of financial infrastructure that should belong to the public. The Department of Housing and Urban Development is already exploring the use of blockchain to monitor the billions of dollars in grants it pays out every year, he noted.

“Your HUD grant would be brought to you by Circle or Tether,” said Hays, referring to two cryptocurrency companies. “How far they get is anybody’s guess, but the fact that they are floating it gives you a signal of their intentions. They would like to see a world where that fundamental architecture — which we would argue needs to be democratically controlled — is another way of putting more of that system under private control, including crypto.”

The post You Will Never Send Money Digitally Without a Private Company — If the GOP Gets Its Way appeared first on The Intercept.

“Jersey is too expensive. We’ve got to get taxes down, we’ve got to get our rents down, we’ve got to get our costs down,” said U.S. Rep. Josh Gottheimer, a centrist Democrat and middle-of-the-pack contender in Tuesday’s gubernatorial primary. “The key to that, I believe, is crypto. So please know that you’ve got a great champion in me.”

Under Donald Trump’s presidency and a Republican-dominated Congress, the crypto industry has racked up a series of political wins. It could be within days of winning full Senate support for one of its most prized pieces of legislation, a so-called “stablecoin” bill endangered mostly by the Trump family’s attempt to profit off the burgeoning asset class.

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But the industry’s power brokers know that state offices — like governor’s mansions — could play just as important a role in crypto’s future. Industry lobbyists would like to loosen state regulations and win investments from massive public pension funds, and they’ll need state lawmakers and executives to achieve that.

For three candidates who trooped onto the stage at the rally hosted by an industry-funded group last week, the event’s appeal was obvious. Gottheimer drew more than $240,000 in campaign cash from crypto super PACs during his last congressional race. Fellow Democrat Steve Fulop, the mayor of Jersey City, has wooed crypto voters by investing part of the city’s pension fund in bitcoin. They joined talk radio host Bill Spadea, a long-shot candidate in the Republican primary, for a chance to pitch undecided voters last Thursday at an event hosted by the industry group Stand With Crypto.

“There is no mayor in the state of New Jersey that has a stronger record with regards to crypto for a longer time than I do,” Fulop said, nodding to the pension fund investment. “There is no mayor in New Jersey that has been more involved personally in crypto than I have.”

Some attendees said they were excited about crypto’s growing political clout — while adding that other issues were more likely to sway their vote. Some said they wanted to network or catch the free event’s featured performers, rappers 070 Shake and Big Sean. Watching from the audience, a college student who makes daily crypto trades gave a more jaded explanation for his attendance.

“I care a lot, because it hurts my money, for real. I was never into politics until the new Trump reelection, because they cracked the system,” said Sebastian Diaz. “The news moves the markets, instead of the actual projects.”

Crypto Throws Its Weight Around

Democrats are favored to win the New Jersey governor’s race in November, so the party’s primary on Tuesday will likely decide who replaces term-limited Democratic incumbent Phil Murphy. (While frontrunner U.S. Rep. Mikie Sherrill did not attend the rally, Stand With Crypto has rated her as “strongly” supportive of the industry.)

Political observers in New Jersey have said that crypto ranks at most a minor issue in the governor’s race, albeit one that could sway the votes of a few passionate supporters. One industry critic has asserted that the candidates lining up to back crypto may be motivated by a mix of “opportunism and fear.”

From its start, Stand With Crypto has been closely affiliated with Coinbase, a crypto exchange that drew early backing from the Silicon Valley venture capital firm Andreessen Horowitz before going public in 2021.

While the nonprofit markets itself as grassroots, Stand With Crypto has money for the sorts of events that would be the envy of most advocacy organizations, including a branded purple bus tour through five battleground states last year and an evening with the rapper Nas.

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In a tax form filed last November, Stand With Crypto revealed that it had over $8 million in revenue for 2023. The group did not disclose its donors on the form and didn’t respond to a request for comment on who they are. A “leaderboard” on its website states that it has received $1.3 million from the crypto wallet provider Exodus and $1 million from another crypto company, MoonPay.

Political Airdrop

When crypto entrepreneurs want to build buzz for a new project, they will often resort to an airdrop: a free distribution of their tokens in exchange for social media posts.

The modest buffet featuring crackers, cheese, and ranch dressing, accompanied by free music, may have been the political equivalent of an airdrop. For half an hour, the New Jersey native 070 Shake sang and rapped songs to a crowd of several hundred. She asked the crowd for a cigarette and smoked it before stubbing it out on her accompanist’s guitar.

The rally appeared to draw attendees with a wide range of attitudes about the industry itself. Many said they were crypto enthusiasts excited that politicians were finally taking note. Others just liked the idea of a free party.

Jersey City resident Carla Williams said she’d come because her friend was trying to convince her of crypto’s benefits, and she wanted to learn more.

“I’m all for a good time and free stuff,” she said, waiting in a short line to get into the 800-person capacity White Eagle Hall. But she was wary of diving into the industry head first.

“If it’s not FDIC-approved, I don’t know if I want to do it. I want to make sure if somebody steals it, I get most of my money, or all of my money, back,” Williams said.

Looking Ahead

Crypto doesn’t yet have backing from the Federal Deposit Insurance Corporation — but it does have plenty of supporters in Washington.

The industry faced a massive setback after the collapse of the fraudulent FTX cryptocurrency exchange in 2022, but crypto’s political influence returned in roaring form in last year’s congressional races.

A new wave of pro-crypto lawmakers from both parties came into office in January with help of the Fairshake super PAC, another Coinbase-backed political entity. (Fairshake also backed Gottheimer’s reelection.)

Ahead of a Senate vote on so-called “stablecoin” legislation last month, Stand With Crypto flooded Senate offices with emails and warned that it would track support for the bill on a public “scorecard,” a common tactic for influence groups like the National Rifle Association.

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Senate Dems Hand Trump a Win by Backing Stablecoin Bill

When the Senate voted to begin debate on the stablecoin bill, the group celebrated on social media. A group official promised that crypto boosters would “remember the lawmakers who have our backs.”

The ultimate fate of the stablecoin bill remains in doubt, however, as senators bicker over a proposed amendment that would tackle the divisive issue of credit card swipe fees. The Trump family’s wholesale embrace of crypto could make it harder for the industry to win political support for a more far-reaching “market structure” bill for other types of crypto assets.

But building stable political power requires making inroads in government below Congress or the Oval Office. To achieve that, the crypto industry is prepared to use as many free concerts and cold appetizers as it takes.

Later this month, Stand With Crypto is hosting another rally in New York City ahead of its June 24 mayoral primary. They promise “food, drink, and surprise live performances from NYC musical guests.”

The post Crypto Wades Into New Jersey Governor Race With Big Sean and Crudités appeared first on The Intercept.

Cryptocurrency companies are pouring tens of millions of dollars into the race through a super PAC in response to Brown’s scathing criticism of the industry as Senate Banking Committee chair.

Their leading role in the race shows how much money — no matter the “coin” — talks. 

Crypto sat in the political doghouse after the collapse of Sam Bankman-Fried’s FTX fraud two years ago, but it drew broad bipartisan support for its top legislative priority this May as it showered money on congressional races.

“Really their only avenue here to continue their scams is to get enough politicians to change the law.”

If crypto can take down Brown next month, critics warn, it could lead to more success for an agenda that includes neutering the Securities and Exchange Commission and opening the door for more traditional banks to hold crypto.

“They’re losing in the courts, they’re losing in the court of public opinion, so really their only avenue here to continue their scams is to get enough politicians to change the law,” said Dennis Kelleher, the CEO of financial reform nonprofit Better Markets. “The key to that is taking out anybody who opposes them.”

Mad Money

Operating through a cluster of blandly named super PACs, the crypto industry had made nearly half of all corporate donations in this year’s elections as of August. A single pro-crypto super PAC, Fairshake, has raised more than $200 million and spent more than $132 million this cycle.

Fairshake and its affiliates have spent millions backing Democratic Senate candidates Reps. Ruben Gallego in Arizona and Elissa Slotkin in Michigan, along with House candidates on both sides of the aisle.

Nowhere has crypto’s influence been more obvious than Ohio. In the last election cycle, a super PAC bankrolled by Bankman-Fried backed now-Rep. Shontel Brown, D-Ohio, over progressive Nina Turner. 

This year, crypto is coming even harder into the state. A Fairshake affiliate, Defend American Jobs, has spent more than $38 million on ads boosting Moreno and blasting Brown, according to a recent Washington Post analysis.

A Fairshake spokesperson did not return a request for comment, but the reasons for the attack ads are clear enough. Well before Bankman-Fried’s downfall, Brown was a vocal critic of cryptocurrency.

“Stablecoins and crypto markets aren’t actually an alternative to our banking system,” he said in December 2021. “They’re a mirror of the same broken system –– with even less accountability, and no rules at all.”

The super PAC’s spending on a race that could hand control of the Senate to the GOP has made some Democratic industry leaders uncomfortable. A spokesperson for one of the PAC’s top donors, the crypto exchange Coinbase, said the PAC’s spending decisions are made independently, a claim echoed by Andreessen Horowitz, a venture capital firm that has invested billions in the crypto industry.

Coinbase CEO Brian Armstrong said in a blog post that the company was making its donations in an effort to get “regulatory clarity.”

In June, Armstrong said, “Crypto voters won’t be taken seriously until we send a clear message to political candidates that it is bad politics to be anti-crypto.”

Taming the SEC

Yet it isn’t just “clarity” that Armstrong and other industry players want. They also want specific legislation. “Getting the wrong kind of regulation is worse than none at all,” Armstrong said last month.

Top of the list is legislation called the Financial Innovation and Technology for the 21st Century Act, or FIT 21, which would reclassify many kinds of crypto as commodities rather than securities.

The obscure-sounding shift has broad implications. Observers generally consider the rules for commodities — items like corn and wheat — to be looser than those for securities such as stocks and bonds.

“The CFTC was set up to regulate corn futures.”

Just as importantly, crypto critics say, would be a corresponding shift in oversight. Under the congressional legislation, crypto would shed the SEC for the Commodity Futures Trading Commission, a body with less resources and a leaner regulatory staff.

“The CFTC was set up to regulate corn futures,” said Mark Hays, a senior policy analyst with Americans for Financial Reform and Demand Progress. “The people they’re looking at are sophisticated hedge funds or ag traders, they are not set up to protect your cousin or your grandma logging onto their phone.”

SEC Chair Gary Gensler, who has emerged as a crypto industry foil, warned of the bill’s consequences in a statement after it passed the House with bipartisan support in May. Scammers could label themselves crypto companies in order to evade government oversight, he said.

Gensler said, “The crypto industry’s record of failures, frauds, and bankruptcies is not because we don’t have rules or because the rules are unclear. It’s because many players in the crypto industry don’t play by the rules.”

Opening Up the Banks

So far, the crypto industry’s favorite piece of legislation has not advanced in the Senate, although Majority Leader Chuck Schumer, D-N.Y., recently made supportive-sounding comments.

Gensler also warned of the potential for larger contamination of the U.S. capital market. The issue arose in 2022, when SEC staffers tried to curb the danger with guidance advising financial institutions like banks to treat crypto as a liability rather than an asset on their balance sheets.

The SEC’s thinking was that crypto is too vulnerable to theft, fraud, or lost wallet keys, but the crypto industry and bankers cried foul.

Stand With Crypto, an industry advocacy group, said the guidance “disincentivizes banks from offering digital asset custody at scale and limits banks’ ability to develop safe, innovative use cases for blockchain technology.”

While the guidance was nonbinding, for banks that decided to follow through, it meant that holding crypto for customers would require them to increase other holdings.

Congress passed legislation overriding the guidance, only to be vetoed by President Joe Biden in June. For now, the guidance remains in place. Yet the crypto industry still harbors its larger ambition of making it easier for traditional financial institutions to hold crypto.

Hays, the Americans for Financial Reform policy analyst, said, “They also want some of the other non-bank actors that provide crypto custody to be in the green.”

“Stable” Coins

Sometimes lost in the fallout from the Bankman-Fried saga is the story of an earlier crash involving a so-called stablecoin, TerraUSD, which was supposed to maintain a one-to-one peg with the dollar.

In short, it didn’t. Investors who thought they were getting into crypto in the safest way possible had their savings wiped out.

“A stablecoin is really nothing more than a crypto money market fund, with all the risks and dangers of a money market fund.”

TerraUSD was an “algorithmic” stablecoin, meaning that it was not backed by actual assets. One of the industry’s best hopes in Congress is to get legislation passed authorizing stablecoins that are backed by concrete assets.

Rep. Maxine Waters, D-Calif., the ranking member of the House Financial Services Committee and a frequent crypto skeptic, floated the idea last month of reaching a “grand bargain” with Republicans during the lame-duck Congress after the election.

Although stablecoins seem to have more legislative legs than other crypto proposals, skeptics like Kelleher, of Better Markets, are wary. He likened them to money market funds, which had to be saved from collapse by the Federal Reserve in 2008 and 2020.

“A stablecoin is really nothing more than a crypto money market fund, with all the risks and dangers of a money market fund,” he said. “Except it has even more, because it’s a crypto product that is not only unregulated, but because it’s also untransparent.”

Editor’s Note: In September 2022, The Intercept received $500,000 from Sam Bankman-Fried’s foundation, Building a Stronger Future, as part of a $4 million grant to fund our pandemic prevention and biosafety coverage. That grant has been suspended. In keeping with our general practice, The Intercept disclosed the funding in subsequent reporting on Bankman-Fried’s political activities.

The post Crypto Billionaires Could Flip the Senate to the GOP. Here’s What They Want. appeared first on The Intercept.

The traditional business ventures like golf courses that go with this lifestyle, however, now make up less than half of Trump’s wealth compared to crypto, according to a new analysis from the left-leaning watchdog group Accountable.US.

“Trump pushed bills to make it easier to pad his net worth by billions through dubious crypto schemes.”

Nearly 73 percent of Trump’s wealth — $11.6 billion of an estimated $15.9 billion — comes from crypto holdings that he built at record pace by misusing his office, the group claims in an analysis made public Thursday. The group’s president slammed Trump in a prepared statement.

“Soon after signing his ‘Big Ugly’ law that rips away health care and food security from millions of American working people and seniors, President Trump pushed bills to make it easier to pad his net worth by billions through dubious crypto schemes,” Caroline Ciccone, the head of Accountable, said. “The more the President’s wealth depends on anonymous investors around the world with hidden agendas, the greater the risk to the interests of everyday Americans and our national security.”

The Accountable analysis is the latest attempt to pierce the corporate veil of the Trump family’s opaque network of companies. Well before digital tokens became moneymakers, Trump’s worth was notoriously hard to pin down, at one point spawning a failed libel lawsuit from the real estate mogul. The speculative nature of crypto has made it even harder.

Last month, Bloomberg estimated that roughly $620 million, of what an estimated total net worth of $6.4 billion, could be chalked up to crypto.

Accountable argued in its latest analysis that Bloomberg undercounted both Trump’s crypto and total wealth, thanks largely to the wildly speculative nature of crypto.

Meme coins like the $TRUMP token, and other more ostensibly stable crypto assets such as tokens tied to the Trump family’s World Liberty Financial crypto venture, can change wildly in nominal value from day to day.

Accountable’s analysis included the total $7 billion value of $TRUMP meme coins that will eventually vest but cannot be sold for hard cash just yet, along with a recent spike in the value of World Liberty Financial governance tokens to $2 billion — thanks to a decision that they will become tradeable in the coming months.

The nonprofit group was careful to note that these represented a high-end value for Trump’s crypto holdings, since the structures of the relevant crypto companies make it difficult to tell how much he personally owns.

Whatever the true number, critics such as Sen. Elizabeth Warren, D-Mass., say that Trump’s crypto industry boosterism has been deeply corrupt because it personally benefits him.

Trump has made aggressive moves to cut down on crypto regulations at agencies such as the Securities and Exchange Commission and to pass legislation such as the “stablecoin” law he recently signed. He also recently hosted a reception for holders of his meme coin that included many foreign investors.

The White House dismissed such criticisms in a statement.

“The media’s continued attempts to fabricate conflicts of interest are irresponsible and reinforce the public’s distrust in what they read,” White House press secretary Karoline Leavitt said. “Neither the President nor his family have ever engaged, or will ever engage, in conflicts of interest. Through executive actions, supporting legislation like the GENIUS Act, and other common-sense policies, the administration is fulfilling the President’s promise to make the United States the crypto capital of the world by driving innovation and economic opportunity for all Americans.”

The post Donald Trump Is Mostly a Crypto Billionaire Now, Group Says appeared first on The Intercept.

On the eve of his second inauguration, Donald Trump did something no U.S. president had ever done: He launched a meme coin. The cryptocurrency — whose value hinges more on hype than utility — surged to an all-time high of $75.35 a token. The next day, First Lady Melania Trump dropped her own meme coin, debuting at about $13 a share. 

Both coins have since tumbled, but on Wednesday Trump’s token briefly bumped up again to $15.47 before dipping. The latest surge came after the coin’s official website announced that 220 top meme coin holders will be invited to a gala dinner with the president in May — black tie optional. 

These tokens, that are not tied to any real world assets, have proven lucrative for Trump and his family. Last month, the Financial Times estimated Trump made upwards of $350 million from the project. While small traders have lost big, the Trump Organization and its affiliates — controlling 80 percent of the token supply — have made hundreds of millions in just trading fees.

From meme coins, which usually refer to a fun internet or pop culture meme, and stablecoins, whose values are pegged to a real-world asset, to a new government-backed bitcoin reserve, Trump, once a crypto skeptic, is now the industry’s most powerful advocate.

“ He went to a big bitcoin conference in Nashville last July. That’s where he declared he would make the U.S. the crypto capital of the planet,” says Intercept reporter Matt Sledge. “And the crypto industry started showering money on him. They saw somebody who would be friendly to their industry.”

This week on The Intercept Briefing, Sledge, who covers crypto’s political reach, discusses how investing in the president has paid off for the industry and for the Trump family.

“So far in Trump’s presidency, things have gone great for the crypto industry. Even as the rest of the economy is on pretty perilous footing, a bunch of crypto companies have seen the SEC and other regulatory agencies drop investigations or lawsuits. Trump has created a ‘bitcoin reserve,’ and in general, regulators and Congress are behaving much more friendly toward the industry.”

On Sunday, a filing with the Federal Election Commission revealed that Trump received a record $239 million in donations that went toward his inauguration. According to reporting from Fortune, the crypto industry gave about $18 million alone. 

The meme coins are just one aspect of the president and his family’s growing crypto empire — an empire that includes Trump’s sons, Eric and Don Jr., taking a stake in a new bitcoin mining firm called American Bitcoin. Trump Media is also partnering with Crypto.com and a newly formed investment firm to offer financial products, including crypto to retail investors. 

“Just a few weeks ago, the SEC dropped an investigation into Crypto.com,” Sledge points out. “This is something that would’ve been really astonishing under any other president, regardless of their party. You go from a company being under investigation just a few weeks ago to it having this partnership with the president’s publicly traded company.” 

For more on how Trump is reshaping the crypto landscape and what it means for the rest of us, listen to the full conversation of The Intercept Briefing on Apple Podcasts, Spotify, or wherever you listen.

The post Trump’s Very Stable Genius Coin appeared first on The Intercept.

On one level, that assertion was an attempt to explain away a pardon that many see as a naked quid pro quo with a man whose business used Trump’s crypto tokens in a transaction that benefited the president’s family firm.

On another level, observers say, that claim is simply wrong. Zhao willingly pleaded guilty under a carefully negotiated deal with former Attorney General Merrick Garland’s Justice Department, which ultimately saw his company pay $4 billion in fines and serve only four months in prison. At the time, one analyst saw the overall package as a clear “victory” for Binance and Zhao, who is also known by his nickname CZ.

There’s a sense of bitter irony for longtime critics of Biden Justice Department. They had long complained in general about Biden’s approach to corporate crime, and Binance in particular was accused of facilitating everything from terrorism to child sexual abuse images before it received a deal that allowed its founder to spend a few months in prison. He also paid a fine worth a small percentage of his wealth.

“He got to keep all his money, control of Binance, and was allowed to handpick his successor CEO,” Dennis Kelleher, CEO of the financial reform nonprofit Better Markets, said in an email. “Even a quick read of the charging documents detailing the actual facts and violations of law would reveal that Binance and CZ got a sweetheart deal from DOJ.”

Choosing Club Fed

Progressive critics have maintained a drumbeat of criticism of Biden and Barack Obama’s Justice Departments ever since the Great Recession, when top bankers avoided jail time for their role in the housing market crash.

Prosecutions of corporate criminals fell to a record low during Biden’s final year in office, according to a report released by Public Citizen earlier this year.

“Biden is certainly not anybody to hold up as an exemplar of people ‘persecuting’ people,” said Bart Naylor, a financial policy advocate with Public Citizen.

Binance was one of the thinning ranks of companies to find itself in court, but critics say it may be the exception that proves the rule. Three years ago, it was one of the leading cryptocurrency exchanges in the world, as it effectively thumbed its nose at U.S. anti-money-laundering laws designed to prevent terrorists, drug traffickers, and other criminals from making their dirty money look clean.

In statements around the time of the November 2023 plea deal, Biden Justice Department officials laced into Zhao. Still, the deal they crafted allowed Binance to remain one of the leading players in the field.

Unlike the bankers who escaped jail time, Zhao was the rare executive to see the inside of a prison’s walls, but not for long.

Prosecutors sought a three-year sentence for Zhao, but a federal judge dipped below that request to hand him the monthslong term. He served his time at a low-security prison in California. Since then, he has returned to serving as something of an oracle to crypto industry fanboys.

“If you set the bar at response to the great financial crisis, then yeah, bar cleared. It was more than was common in the past,” said Jeff Hauser, executive director of the left-leaning nonprofit Revolving Door Project. “But if you consider how seriously the establishment of both political parties takes issues like terrorism, I think a four-month prison sentence is comically inadequate.”

Even at the time of the settlement, observers believed that it might not dent Binance’s business by much.

“While the massive penalty is a blow to the company’s treasury and the humbling of Zhao undercuts Binance’s longtime edge, the early market response suggests the company will survive,” Fortune magazine intoned shortly after the deal was announced. As of this quarter, Binance is still the world’s largest cryptocurrency exchange.

Nevertheless, Trump has cast the prosecution has a grave overreach by the Biden administration that he had to correct.

“It wasn’t a crime, that he was persecuted by the Biden administration, and so, I gave him a pardon at the request of a lot of very good people,” Trump said.

“Unparalleled, Open Corruption”

During and after the Biden administration, cryptocurrency insiders painted a dark portrait of regulators’ attempts to place guardrails on the industry in the wake of FTX founder Sam Bankman-Fried’s far-reaching fraud. They complained about relentless attention from agencies ranging from the Securities and Exchange Commission to the Justice Department.

The idea that the Biden administration was single-mindedly focused on crushing crypto is absurd, Hauser said. At most, Hauser argued, the SEC under former Chair Gary Gensler was generally skeptical of the industry.

“The Garland Justice Department did not, and nor did the Yellen Treasury Department, or other aspects of the national security state, never sought to delegitimatize crypto and tie it strongly to terrorism,” Hauser said. “If they had told that story repeatedly, I think the reputation of crypto may have been very different, and that might have impacted at a minimum how Trump chose to be corrupt in this administration.”

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Since Trump’s inauguration, he has sought to rapidly reverse perceptions of the federal government’s attitude toward crypto. He has pardoned crypto executives and even a crypto company itself, in an apparent first. In addition to cheerleading crypto’s growth, moreover, he and his family have jumped headlong into crypto schemes themselves, relying on various ventures to rapidly boost Trump’s net worth.

Trump directly tied his pardon of Zhao to the Biden administration’s “war on cryptocurrency.” In doing so, he also pardoned a man whose business is linked with his.

In May, an investment fund created by Abu Dhabi’s sovereign wealth fund used the Trump family’s stablecoins to invest in Binance, effectively allowing the Trump family to reap the benefits of a large transaction relying on its token.

Frank Bowman, a University of Missouri law professor who studies pardons, said that if reporting on the financial ties between Binance and Trump’s business ventures is accurate, “the pardon is perhaps the most overtly corrupt in American history. Zhao helps the Trumps make billions and gets a pardon. With Trump, one has already almost exhausted the superlatives. But this is unparalleled, open corruption.”

Update: October 24, 2025, 9:40 p.m. ET
This article has been updated to include comment from Dennis Kelleher.

The post Trump Is Rewriting History to Justify His Sketchy Pardon of a Crypto King appeared first on The Intercept.

Cryptocurrency figures have given the majority of the donations or loans to the effort to replace Warren, an industry scourge, with Republican John Deaton, campaign finance reports filed Tuesday show.

Crypto industry big shots have given more than three times as much to Deaton’s campaign, or a super PAC supporting him, than small-dollar donors. Their combined $3.6 million effort pales in comparison to the $19 million Warren has raised, but it shows how much her criticisms have enraged the crypto world.

In their first debate Tuesday, Warren took a swipe at Deaton’s close ties to the industry.

“His crypto buddies are going to want a return on their investment. He’s going to fight for crypto.”

“I fight for everybody, fight for working people,” Warren said. “If John Deaton has a chance to go to Washington, his crypto buddies are going to want a return on their investment. He’s going to fight for crypto.”

Warren trounced her Republican opponent by a 24-point margin six years ago and is gliding toward a similar result this time, according to recent polls.

Still, cryptocurrency industry leaders have contributed heavily to the push to elect Deaton, an attorney who has sued the Securities and Exchange Commission on behalf of the industry. Crypto trade publications dubbed the contest “the first Bitcoin election.”

When it comes to Deaton’s own campaign organization, he has loaned or donated to himself more than he has raised from individual contributions.

A pro-Deaton super PAC called the Commonwealth Unity Fund, which is bankrolled by the industry, has raised and spent more money than Deaton’s campaign.

The San Francisco-based crypto company Ripple Labs gave the PAC $1 million in May. Bitcoin-boosting twins Tyler and Cameron Winklevoss chipped in $500,000 each in July. Days later, the co-founder of the Tether stablecoin, Philip Potter, contributed nearly $500,000 more. The PAC’s Tuesday filing shows that its only more recent receipt was from a crypto industry lawyer.

A different crypto super PAC, Fairshake, has raised more than $160 million while spending its money on races expected to be far closer: the Republican bid to unseat Sen. Sherrod Brown, D-Ohio. The massive spending campaign is aimed at convincing Congress to relax regulations on crypto.

During the Tuesday debate, Deaton painted the crypto industry as a way for ordinary Americans to escape bank fees — something Warren helped to do by spurring the creation of the Consumer Financial Protection Bureau.

“I can’t help it,” he said, of the industry spending on his race. “When she goes to ban an entire industry, that they are motivated against her because they see a viable candidate.”

The post Elizabeth Warren’s Crypto Haters Are Burning Cash in Her Senate Race appeared first on The Intercept.

Once again, Israeli bombs rained down on Gaza. The latest wave of strikes killed more than 100 people, mostly women and children, according to health authorities. 

The bombardment marked the deadliest day since the weeks-old U.S.-brokered ceasefire between Israel and Hamas began on October 10 — a ceasefire Israel has repeatedly broken with impunity.

“As the Trump administration likes to say, the ceasefire is still in place. And the media has parroted that as well. But an overwhelming amount of people that we spoke to on the ground are saying that there is no ceasefire with killings being at this rate. This is a continuation of the genocide,” says Intercept reporter Jonah Valdez. Palestinians “have a very crystal-clear view of Israel’s policy and their goal of wanting mass expulsion from Gaza. … Those who are surviving it and living it are seeing through the propaganda that the ceasefire is still in place.”

On The Intercept Briefing, Valdez joins host Jordan Uhl and reporter Matt Sledge to explain why President Donald Trump “has a lot to gain from continuing to tell the public that there is a ceasefire” and to discuss the news stories published on The Intercept this week.

“It’s important to mention this layer of hope that exists. No one wants to call the ceasefire dead prematurely because if it surviving allows for other Palestinians and Gaza to survive,” Valdez adds, “then, you know, of course they have vested interest in seeing the truce live on.”

And back in the United States, Trump’s pay-to-play approach to running the government continues unabated. Trump recently pardoned the billionaire crypto king, Binance founder Changpeng Zhao, whose company has done business benefiting the Trump family. 

“Binance overnight became the biggest customer of the Trump family venture, which is called World Liberty Financial,” Sledge points out. “I think a lot of skeptics out there are saying, like, ‘Boy, this sure just looks exactly like pay to play, like quid pro quo.’”

Listen to the full conversation of The Intercept Briefing on Apple Podcasts, Spotify, or wherever you listen.

Transcript

Jordan Uhl: Welcome to The Intercept Briefing, I’m Jordan Uhl. 

Once again, Israeli bombs rained down on Gaza. The latest wave of strikes killed more than 100 people, mostly women and children, according to health authorities. 

The bombardment marked the deadliest day since the weeks-old U.S.-brokered ceasefire between Israel and Hamas began on October 10 — a ceasefire Israel has repeatedly broken with impunity.

Meanwhile, back in the United States, President Donald Trump’s pay to play approach to running the government continues unabated. Trump recently pardoned the billionaire crypto king and Binance founder Changpeng Zhao, whose company has done business benefiting the Trump family. 

Today we’re going to get into the top stories Intercept journalists are reporting, with Jonah Valdez and Matt Sledge.  

Welcome back to The Intercept Briefing, Jonah and Matt.

Jonah Valdez: Thank you. Glad to be here.

Matt Sledge: Howdy, Jordan.

JU: Jonah, let’s start with you. Tell us about what is happening with the ceasefire in Gaza.

Israel said it was back in place. Is that holding true now?

JV: Question to you is, what ceasefire, right? 

JU: Sure. 

JV: Since the beginning of the ceasefire at least since when it went into effect on October 10, Israel has continued to kill Palestinians in Gaza almost at a near daily rate, of course, at a lower volume, if you will, compared to other parts of the genocide.

But as we’ve seen this past week on Tuesday with the new round of airstrikes, the death toll has reached back to that 100-a-day amount of deaths. And it could be a wake-up call to anyone who had the illusion that there was a ceasefire in place. And I think it’s becoming increasingly clear that the terms of the ceasefire from the beginning and what experts I spoke to, what Palestinians have been saying is that this gave so much leeway to the Israeli government to resume military attacks, military aggression, on Gaza whenever it sees fit — and basically having veto powers. 

This time around, they’re accusing Hamas of not delivering hostages, the remains of former Israeli hostages on time. And they accused Hamas of returning remains that belonged to a body of an Israeli that was already returned earlier in the genocide. And using that on top of accusations that Hamas fighters had killed an Israeli reservist in the south and Rafah, which Hamas flatly denies. And Hamas has been saying that they’re trying their best to find the bodies, but of course are buried deep under billions of pounds of rubble.

And yet Israel is looking for these excuses to restart the aggression, as we’ve seen on Tuesday. So that’s where things are. And I think this sort of start and stop bombings is going to become the norm unfortunately, for as long as this ceasefire holds.

JU: Now in the immediate hours and days after this agreement was initially announced, you saw celebration, understandably from people in Gaza. You published a piece this week that spoke to Gazans on the ground. How are they feeling now about this ceasefire agreement?

JV: Yeah, in, in the story I co-wrote it with a Palestinian writer in Gaza, Taqwa Al-Wawi, and she basically interviewed over 40 people, I think was the count. Of people living in Gaza, whether they actually feel, if the ceasefire exists, if it’s in place. As the Trump administration likes to say, the ceasefire is still in place. And the media has parroted that as well. But an overwhelming amount of people that we spoke to on the ground are saying that there is no ceasefire with killings being at this rate. This is a continuation of the genocide. 

And they have a very crystal-clear view of Israel’s policy and their goal of wanting mass expulsion from Gaza. I think it’s clear that the tactics have changed, but the goal remains the same. And those who are surviving it and living it are seeing through the propaganda that the ceasefire is still in place.

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We Asked People in Gaza What They Think of the Ceasefire: “Just a Declaration, Not Reality”

But I think it’s important to mention this layer of hope that exists. No one wants to call the ceasefire dead prematurely because if you know it surviving allows for other Palestinians and Gaza to survive, then you know, of course they have vested interest in seeing it — seeing the truce, the so-called truce, live on and to get to the second phase of the Trump plan.

The Trump plan lays out so much about development and rebuilding, but what Palestinians want right now is at least an end to daily slaughter. So right now, I think we should at least start with the minimum of peace.

JU: Of course. Now, Matt, I want to bring you in here. You’ve been reporting on a lot of the shady dealings of the Trump administration.

Last week, Trump pardoned a billionaire crypto king, who he said had been “persecuted” by the Biden administration because of their “war on crypto.” Could you tell us about this billionaire and the actual facts of the case?

MS: He runs a company called Binance, or he did run a company called Binance and he’s known to a lot of the crypto faithful as “CZ.” Those are his initials. 

A couple of years ago, the Biden Justice Department, after an investigation, declared that Binance was essentially this global hub for money laundering and violations of anti-money laundering rules. They said that Binance had facilitated all sorts of nasty stuff ranging from drug trafficking to the arms trade, to even child sexual abuse material.

And under this pretty carefully choreographed deal, both CZ and Binance pleaded guilty. CZ wound up spending four months in a federal low-security prison in California, and then he was out. But he still had this felony on his record. And under the terms of the plea agreement, he’s nominally not supposed to actually run the company day to day, even though he controls almost all of its shares. So this pardon, it seems, will allow him and his company to do business in the U.S. again, which is huge for them. Binance is the biggest cryptocurrency trading platform out there, but it’s excluded from the U.S. market right now. So it has a lot of room for growth here.

Related

Trump Is Rewriting History to Justify His Sketchy Pardon of a Crypto King

And what a lot of people pointed out is that Binance did a major business deal earlier this year — denominated in the Trump family’s stablecoin. And it’s complicated. But basically this deal is putting about $80 million a year directly into their bank account.

And Binance overnight became the biggest customer of the Trump family venture, which is called World Liberty Financial. I think a lot of skeptics out there are saying, like, “Boy, this sure just looks exactly like pay to play, like quid pro quo.”

JU: Is what they’re doing illegal? Have you talked to anybody who said this certainly violates a regulation or a law? Or is it another instance of them just going right up to the line without fully crossing it?

MS: Yeah, I think we’ll never know, or we will most likely never know what was actually said behind closed doors.

But it seems like from a strictly legal perspective, they may be on OK ground as long as they never said, “Do this business deal, and you’ll get a pardon.” They may have been smart enough not to say that, but to everybody with a head on their shoulders who’s not one of the MAGA faithful, this whole deal just stinks to high heaven.

Just the timeline of events is bad enough. And then the Wall Street Journal on Thursday came out with reporting that essentially said there had been this concerted effort inside Binance to cultivate the Trump family business. They were really trying to do some kind of business deal, any kind of business deal, that would benefit World Liberty Financial and the Trump family — at least according to the Wall Street Journal.

JU: Well, it seems like a common theme when these areas overlap Trump’s executive power and influence in the crypto world. Of course, Justin Sun, the founder of TRON, was under federal investigation, acquired a massive amount of Trump’s meme coin and suddenly that investigation was over. So we appreciate your reporting on that. It looks suspicious at best, so adding clarity there is of great value. 

Now, Jonah, I want to bring it back to you. Trump, of course, has a real vested interest in making sure the ceasefire continues to be thought of as successful since he was instrumental in brokering that deal. But is it still a ceasefire if innocent Palestinians are being killed and Israel can declare when it’s on and when it’s off? Doesn’t seem to work like that.

Jonah Valdez: Yeah, that’s just not how ceasefires work. It’s like if a ceasefire calls for an end to hostilities, anything hostile any military aggression is just a blatant violation of that. We’ve seen, as I said, at the top, Israel is just blatantly violating the ceasefire all throughout.

I don’t think it’s accurate to say that there is, technically, a ceasefire in place, at least as it’s spelled out in Trump’s 20-point plan, which he made in coordination with Israel and leaving out any Palestinian voices. It’s worth reminding. 

And, Trump has, as you mentioned, he has a lot to gain from continuing to tell the public that there is a ceasefire. He himself has supported Israel’s recent strikes that killed 109 people on Tuesday and Wednesday. Throughout his second term, he’s positioned himself as a so-called peacemaker in the Middle East. And so he really wants this ceasefire to hold as a sort of foreign policy win so he could, you know, check that box, but also so that he and his inner circle — including Jared Kushner or Steve Witkoff, which helped with the ceasefire negotiations — they all want the further normalization of Israel’s relationships with Arab countries through the Abraham Accords. They see that momentum from the ceasefire deal can lead to normalization with Arab countries. And of course, a lot of those policy goals are wrapped up in personal financial interests.

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Connecting it with what Matt was saying about crypto: Steve Witkoff’s family and the Kushners are very invested in, or at least are receiving billions in investments from countries like the UAE and Qatar into their crypto ventures. And this idea of maintaining peace in the Middle East is directly tied to these financial interests.

And of course going back to why the ceasefire even took place, a big part of that was Israel deciding to bomb Qatar’s capital, Doha, in an attempt to assassinate Hamas negotiators. So it was really whenever Israel’s aggression finally rubbed up against Trump’s own personal interests, is when he started to care about people in Gaza.

So it got us to this point, and he’s still being pretty obvious about where his intentions are. And I spoke with someone, a source who described it as, what matters is the appearance of a ceasefire. They’re saying that no one should be surprised that Israel’s continuing to break the ceasefire.

It’s still within the Trump administration’s bigger picture. As long as they could say the ceasefire is in effect, and as long as they aren’t returning to the volume of killings that we’ve seen at other points of the genocide, it’s palatable for the international community to still let Israel function under this sort of diplomatic cover.

[Break]

JU: Jonah, I’m curious, as we see that Gazans are slowly returning home, what are you watching as they try to begin to rebuild their lives? What are a few markers of progress that you will be looking for?

JV: Some of the people in Gaza that we talked to have been using these last two weeks within the so-called ceasefire period to return to normalcy and try to resume parts of life that they hadn’t been able to like: finish their degrees, actually be able to buy food at the store, and afford to do with increasing aid coming into the territory, have weddings, get married, fall in love, the basic things of life.

We spoke to one person who actually had to cancel their wedding because of Tuesday’s airstrikes. It hit their neighborhood and their neighborhood has now been targeted, I think, three times. And so they think it’s too dangerous for them to continue with the ceremony. So it’s tough.

This idea of rebuilding is still stunted by ongoing violence or the threat of violence from the Israelis. And I think with so much attention also on the recovery of Israeli hostage remains. There’s still, as many as some estimates put 14,500 missing Palestinians under the rubble or at least, some are under the rubble. Some are disappeared under other circumstances, or sometimes detained, or abducted by the Israeli military and are unaccounted for. So I think finding people’s missing, on top of the 66,000 that are already accounted for, I think allowing families to bury their dead properly and grieve properly is what we’re beginning to see a little bit of now.

And there’s all this talk about delay of return of the hostage remains to Israel. But Palestinians are rightfully focused on recovering their own dead. They just haven’t been able to even do basic ceremonies for their loved ones, throughout the last two years.

The idea of rebuilding is difficult. And I think it’s worth mentioning that the Israeli government still controls more than 50 percent of the territory, and within those territories have been just undergoing a pretty mass demolition campaign of any living structure that still exists within that 53 percent it still controls, whether that’s using their own military ordinance to demolish buildings.

There’s been reporting over this past week indicating that there’s Israeli contractors that are making thousands of dollars just being shipped into Gaza to lend their demolition equipment, their tractors, to take part in just making that part of the Strip completely unlivable.

When you talk about rebuilding, it’s with what and where and how, I think, is still a major question. Again, like this, Trump plan calls for reconstruction, but there is no avenues for that reconstruction right now. If anything, we’re only seeing investment in the continued destruction of any structures that still exist.

And that’s on top of the humanitarian issues of lack of aid still entering. Israel is continuing to restrict aid into the territory. 12 major international NGOs just wrote a joint letter this week accusing the Israeli government of not allowing them to deliver aid.

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And again, that’s another violation of the ceasefire. The ceasefire calls for aid to be delivered into the territory at the same rate it was at the previous ceasefire, which is 600 trucks per day. It’s my understanding that that’s not happening, and even that 600 is the bare minimum. So people are continuing to have shortage of food, have shortage of medical supplies. The hospital system is still barely functioning, with the bare minimum. This idea of rebuilding is pretty tough right now to even imagine, when the basic necessities of life are still not being provided or not being allowed in — I think we should be clear — are being deprived of at the hands of the Israeli government.

JU: It’s absolutely heartbreaking and tragic. 

Matt, I want to go back to Trump benefiting from his position, from his office and from his relationship and influence over the crypto industry. Trump and his family have raked in almost $800 million in the first half of the year just from cryptocurrency, according to Reuters. You’ve been digging into the world of crypto for many months now. Could you tell us about the Trump family relationships in that world and what you think comes next?

MS: There are just a dizzying array of ventures that the Trump family has gotten involved in the crypto world over the last year. I think it’s always really important to remember what a complete 180 this is for Trump, from saying just a few years ago that crypto is a scam to jumping headlong into it. I should note, of course, that the official White House line is that Trump is no longer directing these businesses, that they’re under the control of his sons and the Trump organization and various other entities and so on. I will leave it to the listener to decide whether that’s credible. 

But you’ve got this stablecoin, you’ve got a Bitcoin treasury company, you’ve got the Trump meme coin, you’ve just got this perfusion of various different ventures. And it’s really astounding, as you were saying, how much their money just comes from crypto now. Whereas traditionally, Trump had been a real estate guy. He was a hard asset, real estate guy to varying degrees of success. And then he was, “I will lend my name now that I’m famous from ‘The Apprentice’ to other people’s real estate projects.” And now we have taken this complete jump away from the physical, tangible to these other kinds of business where you can get money just essentially for being who you are. It’s pretty mind-boggling.

And I think one thing that’s really important to note is that, what it means is that Trump and his family’s finances are now intertwined with the world of crypto. They will rise and fall with the overall market’s fortunes. So I think everybody has to be concerned about whether Trump is putting crypto first or putting what a president is supposed to put first, first.

JU: You’ve also recently reported on a few programs hidden in plain sight that the Trump administration has been using. Could you tell us about the 1122 program?

MS: Sure. At The Intercept we’ve covered a lot this disturbing trend of police militarization, of warrior cops, and a lot of the focus there has been on this program called 1033 that allows the military to send surplus equipment to local cops. 

I reported this week on another program that essentially allows local cops to buy military style equipment at a discount. And a nonprofit group put out a report finding more than $100 million worth of purchases, and they say they’re concerned that this program is poised to grow under Trump as so many local police departments team up with ICE and DHS to aid in mass deportation, and this police militarization is put on steroids in places like Los Angeles and Chicago.

JU: And could you tell us what you found about the Quiet Skies program?

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MS: I did a little reporting this week on TSA watchlists and Sen. Rand Paul, who’s a libertarian leaning Republican, announced last month that he’s going to do an investigation of the George Washington University Program on Extremism, a program affiliated with the university that says it’s looking for domestic extremists and Islamic extremists and so on. What Rand Paul is investigating is whether George Washington was actually feeding names to TSA and DHS during the Biden administration to be put on watchlists. 

I spoke with some representatives of Muslim and Arab American advocacy groups, and they’re really concerned that Muslim and Arab Americans were wrongfully put on these lists, potentially on the nomination of this George Washington program.

JU: Thank you for your reporting and to both of you for joining me. We’re going to leave it there. Thank you, Jonah. Thank you Matt, for joining me on the Intercept Briefing.

JV: Thanks so much. 

MS: Thanks, Jordan.

JU: And that does it for this episode of The Intercept Briefing. 

We want to hear from you. 

Share your story with us at 530-POD-CAST. That’s 530-763-2278. You can also email us at podcasts at the intercept dot com. 

This episode was produced by Laura Flynn. Sumi Aggarwal is our executive producer. Ben Muessig is our editor-in-chief. Chelsey B. Coombs is our social and video producer. Fei Liu is our product and design manager. Nara Shin is our copy editor. Will Stanton mixed our show. Legal review by David Bralow. 

Slip Stream provided our theme music.

You can support our work at theintercept.com/join. Your donation, no matter the amount, makes a real difference. If you haven’t already, please subscribe to The Intercept Briefing wherever you listen to podcasts. And tell all of your friends about us, and better yet, leave us a rating or a review to help other listeners find us.

Until next time, I’m Jordan Uhl. 

Thanks for listening.

The post From Trump, With Impunity appeared first on The Intercept.

The ghost of Jeffrey Epstein. Another government shutdown. The U.S. military shooting down a boat. The Centers for Disease Control and Prevention is in turmoil just ahead of flu season. And where in the world will the National Guard go next? 

This is the world Congress returned to this week. If your head is spinning, you’re not the only one. This week on The Intercept Briefing, we break it all down with host Akela Lacy and politics reporters Jessica Washington and Matt Sledge. 

“The biggest thing hanging over everybody is this looming shutdown,” says Sledge, as Congress needs to negotiate a budget extension before a potential October 1 shutdown. And, as Sledge notes, there are a handful of expected fights this session that could hamstring Congress. “There are a million other things happening on Capitol Hill. There’s a big defense bill working its way through the House and Senate. And then there’s this whole Epstein situation,” he says, “which threatens to derail everything else.”

On Wednesday morning, Reps. Thomas Massie, R-Ky., and Ro Khanna, D-Calif., held a press conference with Epstein’s victims, where they announced a bill to force a vote to release the full Department of Justice investigation into the late Jeffrey Epstein.

“Democrats are saying, well, this is something we should do regardless, it is very clearly also a political issue in the sense that Trump has a real weakness with his base,” says Washington. “Democrats perhaps were slow to understand how much of a political liability this was for Trump. But they’re waking up, and this does very clearly seem to be an issue that is, if not partisan — obviously we’re seeing Republicans join in as well — deeply political in nature.”

Listen to the full conversation of The Intercept Briefing on Apple Podcasts, Spotify, or wherever you listen.

Transcript

Akela Lacy: Welcome to The Intercept Briefing. I am Akela Lacy. 

Many of us returned this week to reality, but the end of summer feels a little different these days. Things are eerily more unhinged. Coming off a holiday weekend of speculation that the president died, Donald Trump held a press conference where he claimed without evidence that Colorado is engaged in mass voter fraud 

Donald Trump: The problem I have with Colorado — one of the big problems — they do mail-in voting. They went to all mail-in voting, so they have automatically crooked elections and we can’t have that. 

AL: Then he announced that the U.S. shot down a boat, allegedly carrying drugs in the Caribbean, acknowledging the administration’s efforts to deploy the U.S. military in its fight against narco-traffickers.

DT: We just, over the last few minutes, literally shot out a boat — a drug-carrying boat. A lot of drugs on that boat. 

AL: And then he threatened to deploy military troops to not just Washington, D.C., but Chicago and Baltimore. 

DT: If the governor of Illinois would call up, call me up, I would love to do it. Now, we’re going to do it anyway. We have the right to do it, because I have an obligation to protect this country and that includes Baltimore.

AL: The mask is no longer slipping; it’s off. The threats aren’t threats. They’re policies. And my question is, does anyone really have the power to stop it? 

As Congress returns to session, they’re faced with avoiding fiscal free fall, preparing for fights on Trump’s nominees and a congressional stock trading ban. There’s also been talk of a looming “crime bill” with few details. Meanwhile, despite House Majority Leader Mike Johnson’s best efforts to avoid in-fighting among Republican congressional members over releasing Department of Justice sex trafficking investigation files on Jeffrey Epstein, a bipartisan effort to force a vote is gaining steam. 

Ro Khanna: Less than 1 percent of these files have been released. 

Thomas Massie: If you’ve looked at the pages they’ve released so far, they’re heavily redacted. Some pages are entirely redacted, and 97 percent of this is already in the public domain.

RK: We are demanding today on the discharge petition that all of the files be released. 

AL: So, today we’re going to break it all down with my colleagues Intercept politics reporters, Jessica Washington and Matt Sledge. Welcome back to The Intercept Briefing, Jessie and Matt.

Matt Sledge: Thanks so much for having me. 

Jessica Washington: Thank you for having us. 

AL: As always, this is a fast-moving news environment. So just a note, we’re speaking on Wednesday, September 3.

Congress is back from their August recess, and we’re coming off of a weekend of conspiracy theories that Trump died and jumping right back into the “crime emergency,” a showdown at the CDC and another looming government shutdown. On top of that, it feels like we’re hearing about a new congressional retirement every other day.

There have been more retirements announced at this point in 2025 than at the same point in any year since 2018. Matt, let’s start with you. What is the mood in D.C.? 

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MS: Well, I think you have the D.C. where ordinary people live and they’re coming off of several weeks of facing off against National Guard officers and FBI agents just on ordinary residential streets. And then you have the mood on Capitol Hill where lawmakers are coming back after this long August recess and looking at what is going to be just a frenetic period of legislative activity. 

I think the biggest thing hanging over everybody is this looming shutdown: this intra-party debate among Democrats over what to do, and this pressure from the White House that seems aimed almost at forcing a shutdown.

And then there are a million other things happening on Capitol Hill. There’s a big defense bill working its way through the House and Senate. And then there’s this whole Epstein situation happening as well, which threatens to derail everything else. 

Akela Lacy: On the Epstein files, let’s just jump into this.

This might be the number one topic the Trump administration wishes would go away, but has yet to: releasing DOJ investigation files on Jeffrey Epstein, who committed suicide in his cell in 2019 while under investigation for sex exploitation and trafficking underage girls. 

On Tuesday, the House Oversight Committee released more than 33,000 pages the Justice Department had turned over in August, but it was only a portion of the investigation file. Much of it was already public. And then on Wednesday morning, Reps. Thomas Massie and Ro Khanna held a press conference with Epstein’s victims. 

Anouska De Georgiou: If Ghislaine Maxwell were pardoned, it would undermine all the sacrifices I made to testify and make mockery of mine and all survivors suffering.

Marina Lacerda: My name is Marina Lacerda. I was “Minor-Victim 1” in federal indictment of Jeffrey Epstein in New York in 2019. I was one of dozens of girls that I personally know who were forced into Jeffrey’s mansion on 9 East 71st Street in New York City when we were just kids. 

Anouska De Georgiou: That is why the Epstein Files Transparency Act is so essential.

AL: They announced a bill to force a vote to release the full investigation. Jessica, can you bring us up to speed? What are Massie and Khanna proposing exactly and do they have the votes? 

JW: As you’ve already said, Republican Rep. Thomas Massie of Kentucky and Democratic Rep. Ro Khanna of California are teaming up to force essentially a full release of the Epstein files, which is essentially just the investigation from the DOJ into Jeffrey Epstein, who I think as most people know, is a convicted sex offender, who committed suicide in prison in 2019. So they need 218 signatures at least to force a vote. This is what’s known as a discharge petition.

So Khanna told NBC News that he was certain that the entire Democratic Caucus — which just for its math is 212 members — would vote yes. He also believes that he has six Republican votes, meaning in theory they do have the votes to force the vote, which is kind of a funny way of saying it.

The White House has been fighting this discharge petition saying that anyone who supports it — it would be considered a hostile act if anyone supports it.

So it’s a little less clear when they actually would get to a vote to pass the discharge position to the actual vote. And that would not be likely for another two weeks at least. It’s a little less clear whether or not they’d actually have the votes to release the files, but it does seem that they have the votes to at least get this discharge petition through.

AL: So if there’s only really like a certain pathway for success on the discharge petition, what is the end game here? Is it actually to get these released? Is it to make a statement to Trump? I mean, the press conferences you have Khanna praising Republicans like Marjorie Taylor Greene and Lauren Boebert, and talking about how strongly they feel that this is not a partisan issue.

I mean, in the backdrop, Democrats are internally fighting over whether or not to cooperate [with] Republicans over this government shutdown. I mean, what is the play there? 

JW: Yeah, I mean I think it’s twofold. I mean, you could argue that there the Democrats are saying, well, this is something we should do regardless.

I think it is very clearly also a political issue in the sense that Trump has a real weakness with his base, which is that a decent amount of his base is deeply committed to conspiracy theories and many of these theories center around Jeffrey Epstein and child exploitation more broadly. So that’s really at the center of a lot of his supporters’ worldview, and Democrats perhaps were slow to understand how much of a political liability this was for Trump. But they’re waking up and this does very clearly seem to be an issue that is, if not, partisan, obviously we’re seeing Republicans join in as well, is deeply political in nature. 

AL: Why do you think it’s causing a split with some Republicans? I mean, particularly with like, you know, people, these are what is considered the fringe members of the Republican Party, whereas more traditional conservative Republicans are not being visible on this issue. Is that because they’re afraid of Trump, or is it something else?

JW: Yeah, I think fear of Trump is definitely a motivator for the Republicans who are trying to avoid, I mean, obviously we saw House Speaker Mike Johnson send Congress home early just to avoid even having to take a vote on this. So we know this is a messy, messy issue for the GOP.

I think on the one hand, you definitely have Republicans who are afraid of Trump, but then you also have Republicans who are afraid of their own base, who recognize how deeply unpopular it is to try and prevent these files from being released. They’ve been selling their supporters for a very long time, you know, “We’re going to release the Epstein files.” And so they’re really at a tricky area where they can either support Trump and not vote to release the files. But then that brings them into a very messy fight with their own base. So it’s a real complicated issue for Republicans. 

AL: Matt, the most looming issue for this congressional session is negotiating a budget extension before a potential October 1 shutdown. What can you tell us about this? 

MS: Well, I think it’s really hard to game out what’s going to happen now. What is clear is that Republicans are going to need some kind of Democratic support to get a budget extension passed, and that is going to be hugely dependent on these intra-party discussions among Democrats.

As we all remember, Chuck Schumer got pilloried for providing support for the last one of these extensions. I think he’s going to be very reluctant to make a similar decision now. There are a lot of Democrats — not just progressives — who are really angry about the idea of giving Republicans support right now.

And you know, Trump has made things even harder for Democrats — I’m sure this is intentionally — by pursuing rescissions and most recently, the so-called pocket rescission where he is essentially saying, “OK, Congress, you passed this bill telling me to spend this much money. I’m just going to ignore you.” And so it means that any kind of deal that Republicans make with Democrats is that much harder because Democrats know that they have a man in the White House who doesn’t honor deals that Congress makes on Capitol Hill.

AL: Yeah, we remember Democrats were hammered after they didn’t hold the line against Trump in March. It sounds like that is changing a little bit, but what is the strategy from Sen. Chuck Schumer and House Minority Leader Hakeem Jeffries right now? 

MS: That is a great question, and I’m not sure that they have tipped their hands. Perhaps it’s strategic silence. But as far as I know, I haven’t heard them lay out their strategy going into this fight. That doesn’t mean they haven’t cooked one up behind the scenes, but I think the public at large is in the dark about what they want to pursue. I think, tonally and posture-wise, they’re both trying to telegraph that they’re going to take a tough posture against the Trump administration and Republicans. But whether they actually follow through on that is an open question. 

AL: I know there was a Dear Colleague letter where they said that they’re unified; they’re describing Republicans’ approach as a “go it alone” approach that is heading the country towards a shutdown, prioritiz[ing] chaos over governing, partisanship over partnership, and Trump over Americans.

That is definitely a different tone than what we heard in March, but there’s also talk that Democrats and strategists want them to make any sort of shutdown an issue about health care; and try to put that on Trump’s back. If health care is the number one issue that’s resonating with voters, is it too little, too late? I mean, is that the right play? 

MS: It’s hard to say. And I think this is what critics of a maximalist strategy would say is that the party that forces the shutdown usually loses in the court of public opinion. Does putting a health care spin on it help that much? I’m not sure that’s the grand winning strategy here, but it could help put the focus on all the things that the Big Beautiful Bill did in terms of cutting people’s health care. So it could echo their messaging around that bill, which is going to be a huge issue heading into the midterms next year 

[Break]

AL: The backdrop of all of this is Trump has flooded Washington, D.C., with National Guard troops and threatened to send more to cities including Chicago and Baltimore. We know at the end of the day this is between Trump and local mayors, but where are Democrats in Congress on this issue right now? And is this something Democrats are considering when they’re debating whether to cooperate with Republicans right now?

JW: It’s been relatively quiet from Democrats in Congress. I mean, you would imagine that D.C. being taken over by a Republican presidential administration would be a slightly bigger deal to them. But we haven’t really heard too much. I mean, certainly there has been some action. Congresswoman Delia Ramirez, D-IL, held a press conference on Wednesday morning, along with Congresswoman Eleanor Holmes Norton, D-D.C., Judy Chu, D-Calif., Congressman Glenn Ivey, D-Md., and Congresswoman Nydia Velázquez, D-N.Y.

So there has been some action from congressional Democrats, particularly on the more progressive end, and obviously Congresswoman Eleanor Holmes Norton represents D.C. although she doesn’t have a vote in Congress. But we’ve also seen capitulation from local Democrats as well. The D.C. mayor has very much been rhetorically capitulating to Trump, saying, oh, well, maybe this’ll help, or maybe that’ll help — kind of agreeing that some of this was necessary.

So, obviously that historically has not been a winning strategy with Donald Trump. Capitulation does not seem to appease him in any real way. But we have really seen congressional Democrats be very, very quiet on this issue when you would imagine with all of the talk of authoritarianism and fascism, that you would see a little more action when we actually have troops occupying the nation’s capital.

AL: Right. I was reading a newsletter the other day and it was like, you know, Democrats’ hands are kind of tied because crime is down since they sent the National Guard in. It’s like, yeah, if there are military people patrolling the streets people are not going to be — I just, the logic is kind of mind-numbing.

JW: No, the logic is quite mind-numbing to me. I mean, especially because we have local examples of how to actually fight crime. I mean, if you think about Baltimore, for example, they heavily invested in the sorts of things that we know actually prevents crime: afterschool activities, having people in the community actually step in and do violence intervention. And so to say OK, well, crime is down because D.C. is currently being occupied by a military force is a little silly when we have these examples.

AL: I want to also flag this crime bill. Jessie, what can you tell us about Trump’s latest proposal? 

JW: Yeah, so as of Wednesday, September 3, while we’re recording, we don’t actually know what is in this bill, only that Trump and the GOP were working on it over recess. Trump in relation to his, what I’m calling the takeover of D.C., has suggested a crime bill essentially to force a lot of these tough on crime policies into not just D.C. but other cities across the country. I think what we should expect to see is an attempt to really roll back the clock on even minor criminal justice reforms that occurred under the Biden administration, and even in some cases under the Trump administration — under the first Trump administration — to be clear.

So I think what we’re likely to see is really, when I say tough on crime, what I really mean is policies that are incredibly punitive. So I think we should expect to see really punitive policies. I think in line with what we’ve seen from Trump kind of across the board in this administration, is really any kind of success you might say of the Biden administration when it comes to issues like criminal justice issues like housing, anything like that, really a rolling back of the clock on those things. So that’s what I am expecting when this bill actually comes out. 

AL: I mean, do you have any sense of like, why now? My sense of reading at least some of the coverage of this is like: yes, obviously Trump has been threatening all sorts of things on return to “law and order”, et cetera, et cetera, but it seems like it sort of caught people by surprise. 

JW: Yeah, I think twofold. I mean, one, I think it’s very connected to the takeover we’re seeing in D.C..

This is not unusual, Republican administrations have historically used D.C. as kind of a weapon — talking about crime in D.C. in a very racialized way. And then using that as a backdrop to push really punitive criminal justice measures. So I think that’s part of, it seems to be, a distraction from the Jeffrey Epstein files. This has politically been a massive loser for Donald Trump. And I think we’re seeing him really throw different political red meat, so to speak, to his base at this moment, to distract 

AL: Trump also recently just signed an executive order to end cashless bail. What is the significance of that move and how does it fit into the scene he’s painting of America as this lawless land that needs his protection? 

JW: Yeah, so Trump signed an executive order that, I mean, to be clear, it penalizes cities and states that have limited or abolished cash bail. So he can’t unilaterally get rid of those policies, but he can punish cities and states that have enacted it.

Effectively what this means is whether or not you end up in jail or you get to go home has to do with the amount of money in your wallet. Donald Trump is very clearly painting a scary picture of this country that doesn’t actually fit into reality. I mean, what the evidence shows is that no-show rates are essentially the same in jurisdictions that require cash bail and those who don’t.

So this idea that ending cash bail is what’s led to a huge crime surge, which also isn’t happening by the way, is just completely ludicrous. And like I was saying before, Donald Trump is trying to throw this scary picture out about crime because he’s losing on this other issue, which is really related to these conspiracy theories around child exploitation.

But he still needs to use fear as a weapon and a cudgel. So we’re seeing that with what he’s doing in D.C., with the pushing of this crime bill, and also with this executive order to try and eliminate places that have limited or abolished cash bail. 

AL: So what I’m hearing is that if it wasn’t already clear to people, it’s becoming more apparent each day that Trump is deadset on militarizing law enforcement and solidifying this police state. But where does that leave us and what are the long-term effects of that project? 

MS: I think it’s still really an open question just because you look at these recent court rulings just in the last few days about the Posse Comitatus Act and about the deployment of troops to Los Angeles and there’s finally some pushback from the courts. And then with this executive order — as with all of Trump’s executive orders — it’s always, this is what Trump is purporting to do. And it’s very unclear that he has the actual power to do what he’s saying.

So I think we are at another one of these junctures where it’s hard to tell how this is all going to shake out. 

AL: There’s talk of a Republican forcing a vote on banning congressional stock trading. How far is that likely to go and could that catch Democrats on their heels? 

MS: Yeah, so I mean, there’s a member from Florida who is threatening to force a vote on this.

At the same time, she is giving House leaders a little bit of leeway to try and pursue their own stock trade ban. I don’t think Mike Johnson is very enthused about this, but this is an issue that has polled very well among ordinary people of both parties. I think everybody sees the potential for corruption here.

At the same time is an alternative bipartisan proposal for a stock trading ban from other members of Congress. I’m not sure how far either of these is going to get in the face of skepticism from Mike Johnson. He has proven himself to be pretty good at maneuvering around these discharge petitions. And I think without the fire under the feet of the base — the MAGA base on an issue such as Epstein that’s become such a rallying cry — I think it’s so much harder to get a bill over that hurdle of Mike Johnson’s opposition. This is an issue that people care about, but I don’t think it’s as quite the rallying cry that the Epstein files have become 

AL: Another area where Democrats have had a difficult time avoiding the appearance of hypocrisy in criticizing Trump is the embrace of crypto. Matt, do you see this tying their hands at all when it comes to drawing lines in the sand with the GOP? 

MS: I think for some members, you know, they have really opened themselves up to charges of hypocrisy by supporting many of the crypto industry’s priorities. The line those kind of pro-crypto Democrats are trying to draw is we [that] want good, clear regulations for everybody, but we oppose Donald Trump’s self-dealing and corruption. I think the larger critique of that, though, oftentimes from progressive Dems is this entire industry is rife with self-dealing and corruption, and you can’t really draw some distinction between bad crypto, i.e., Trump and good crypto, meaning other actors. So yeah, some people have definitely opened themselves up to charges of hypocrisy. But there’s also the caveat there — and you hear this from a lot of people who care passionately about this issue — is that it still has not broken through to the general population of voters as a major issue. And I think unfortunately, it may not break through as a major issue until we see a big financial market crash tied to cryptocurrency. 

AL: Dark. 

ML: Yeah.

AL: Jessie, progressives have been pushing a bill to block bombs to Israel. What’s the story there, and is that having any effect? 

JW: Yeah, so this has been an ongoing legislative effort led by progressive Democrats to block the sale of specific U.S. made weapons to Israel. So this wouldn’t include everything. As our colleague Jonah Valdez reported, what’s significant now is that even AIPAC-funded Democrats have started to sign onto this legislation. Israel’s actions have been really increasingly unpopular. We’re seeing movement even among Democrats who we really thought would hold the line on Israel— would continue kind of in perpetuity — to send weapons that are being used now in Gaza.

And so we are really seeing a bit of a sea change now, does that mean that we should be expecting imminent legislation to pass on this and that the U.S. will immediately stop selling arms to Israel anytime soon? I wouldn’t bet on it, especially at this point in the legislative session, but certainly we’re seeing a lot of momentum. And I think that’s what people are watching Democrats, who really seemed like they were going to hold the line on this issue forever actually taking into account not only their constituents’ concerns, but also really start to, it seems, potentially absorb some of the really horrific news out of Gaza, finally, 

AL: As the death toll climbs, I’ll also just mention, I know that shortly after, [Zohran] Mamdani’s win in the New York City mayoral primary in June, in which he outperformed several members of the New York congressional delegation in their own district, some of whom were pro-Israel and had endorsed his opponent, the Institute for Middle East Understanding Policy Project started running ads in districts of several of these members and then in other states. And I think two or three of them have since signed on to this bill after having those ads run in their districts. So I just wanted to mention that.

There’s been a lot of news about concerns over redistricting in several states. Matt, what are your thoughts on this? 

MS: Yeah, I think one of the most interesting overlooked issues here is the intraparty fights that this is going to set off. We’ve already seen this in Texas, when Greg Casar and Lloyd Doggett were maneuvering behind the scenes to claim one of these Democrat friendly districts in Texas. And then in California, if the new maps pass there through the referendum process, it’s going to shake up even some of these safe Democratic districts. They’re going to have different maps and it’s potentially going to open the door for primary challengers a little bit. So, you know, Akela, you were already talking about these retirements that we’re seeing in record numbers. There’s already been this surge in primary challengers months and months before anybody’s going to actually go into the ballot box. 

And I think in California where you have just so many blue districts that’s potentially going to make things even more interesting to see the lines reshaped there. 

AL: Now I’ll just open it up a little bit for both of you. What are you watching closely for the remainder of this session? I’ll start with you, Matt. 

MS: Sure. Yeah. We talked a little bit about crypto and the industry is really hoping to get another piece of legislation passed before the year comes to an end. [A] so-called framework legislation that would lay out the ground rules for all of cryptocurrency and — in the industry’s eyes, hopefully — put most of the regulatory powers under the CFTC, which they view as friendlier to the industry than the SEC. There are a lot of moving parts to this. You’ve got multiple committees with jurisdiction in both the House and the Senate. Big personalities, and they’re trying to do it all before the end of the year because traditionally in an election year, almost nothing happens.

So this is a huge push from the industry. They already had a big win with the so-called stablecoin bill earlier in the year. And they want to notch another one before Congress goes dormant ahead of the elections. It’s hard to say whether they will get what they want, but they’re pushing hard and I think they know that this may be their best chance for years.

AL: Jessie, what about you? What are you watching? 

JW: Yeah, so I’m definitely watching what’s going to happen with the Epstein files. I think that is interesting from a political sense in particular. This is a story that really does seem to potentially be unraveling the GOP and unraveling Trump. I think it’s worth watching. 

But for me, you know, and not just my own little special interest, but watching what’s happening with D.C. I’m really curious to see if congressional Democrats do step up and actually start to really make this an issue — make the occupation of the nation’s Capitol — a political issue on the hill. And also if we see some real pushback to the crime bill that Trump is proposing and these other actions that he’s taking to really roll back the clock on these really hard one criminal justice reforms that first of all never went far enough. 

And finally we started to see some bipartisan support for reforms, particularly when you looked into the price of incarcerating people in the United States. There was some bipartisan support for reducing sentencing. And I have deep concerns about where we’re going to be going and whether or not that happens [in] this session, I’m not sure, but it is definitely something that I’m paying close attention to.

AL: It sounds unsurprisingly, like the next few months will be wild. For all of our listeners to keep tabs on what’s next, follow our reporting at theintercept.com. And we will leave it there. Thank you both Matt and Jessie for joining me on the Intercept Briefing. 

JW: Thanks so much for having me. 

MS: Thanks for having me.

AL: That does it for this episode of The Intercept Briefing. 

We want to hear from you. 

Share your story with us at 530-POD-CAST. That’s 530-763-2278. You can also email us at podcasts at the intercept dot com. 

This episode was produced by Laura Flynn. Sumi Aggarwal is our executive producer. Ben Muessig is our editor-in-chief. Chelsey B. Coombs is our social and video producer. Fei Liu is our product and design manager. Nara Shin is our copy editor. Will Stanton mixed our show. Legal review by Shawn Musgrave. And transcript by Anya Mehta. 

Slip Stream provided our theme music.

You can support our work at theintercept.com/join. Your donation, no matter the amount, makes a real difference. If you haven’t already, please subscribe to The Intercept Briefing wherever you listen to podcasts. And tell all of your friends about us, and better yet, leave us a rating or a review to help other listeners find us.

Until next time, I’m Akela Lacy. 

Thank you for listening.

The post Unhinged: A Return to Washington appeared first on The Intercept.

Last week, the White House released a proposed framework for the regulation of cryptocurrency. The document gives the green light to regulators to continue crafting rules around the industry, and even explores the creation of a “CBDC”: a central bank digital currency. Actor, writer, and crypto skeptic Ben McKenzie joins Ryan Grim to discuss the framework and the future (or lack thereof) of the crypto industry.

[Deconstructed theme music.]

Ryan Grim: The White House this week unveiled an expansive series of reports on the crypto industry which is made up of digital assets and servers and crypto mines that seemed kind of silly about a decade ago but have since mushroomed into a full-blown thing we all apparently have to start thinking about.

The reports were asked for by an executive order back in March of this year, and hinted at some form of future regulatory structure for crypto and also inched forward toward the creation of a dollar-backed digital currency. Now for me, I’ve always placed crypto somewhere between pointless and a scam — and that’s setting aside the energy and carbon side of it. But it really doesn’t seem like it’s going away and ignoring it doesn’t seem to be the best approach.

Ben McKenzie is a writer, and actor, and a director, and has been one of the leading voices among crypto skeptics out there. This summer, for The Intercept, along with Jacob Silverman, he found a deeply disturbing dispatch on the world of crypto in El Salvador headlined “Nayib Bukele’s Broken Bitcoin Promise: El Salvador’s Embrace of Bitcoin Didn’t Bring Prosperity — It Rode in With Waves of Repression ” He’s also writing a book about crypto and fraud with Jacob called “Easy Money,” which will be published by Abrams Press in 2023.

Ben is cursed — or perhaps blessed, depending on how you see it — to be known most places he goes as Ryan from “The O.C.,” but hopefully by now he’s at least equally appreciated for his crypto work.

And Ben, thanks so much for joining me and welcome to Deconstructed.

Ben Mackenzie: Thank you, Ryan. Thank you for having me. Great intro.

RG: [Laughs.] So before we get to the White House announcement, let’s talk first about your El Salvador piece. Most of it is pretty brutal, but there’s also this one funny moment I wanted to read from you.

So you and Jacob wrote: “Attempts to contact the president via his preferred medium — Twitter — were unsuccessful, except in causing a minor Salvadoran social media flurry that an actor from the TV show “Gotham” was in town.”

[Laughs.] So did you ever hear from anybody inside the Bukele circle, whether he saw that bat signal that you tried to put out?

BM: [Laughs.] We never heard anything, and it was quite funny. A lot of different contacts were given to us in his administration, we reached out to, I want to say, at least half a dozen. Nobody took us up on the offer.

And to make matters worse, I’m here, I played a young Commissioner Gordon on a TV show called “Gotham.” And now Bukele, the president of El Salvador, fancies himself as a Batman.

RG: Mmm. He’s a vigilante?

BM: He loves the comics — he’s the vigilante. He’s the tough guy. He’s rooting out crime. And so I tweeted at him from inside his country to no avail, even though we know — or we can certainly imagine that he was probably glued to Twitter actually at that very moment, because some pretty shocking allegations have come out from El Faro, the local opposition newspaper, had released some audio recordings of members of his administration, who had basically cut a deal with the gangs in order to stave off gang violence, which is a big problem in El Salvador. They had cut a deal and said: If you don’t mess with each other, then we’ll leave you be. That gang violence had re-erupted in the spring, which had caused Bukele to administer martial law, which is where we found the country when we visited there in the spring.

But anyway, the worst of it all was that Nayib is a lover of celebrities. He had just met with Daniel Baldwin.

RG: [Laughs.]

BM: There was a whole to-do. They called a press conference for him to meet with the Baldwin brother that you’d ever knew existed

RG: I’d never heard of him until you mentioned that.

BM: Yeah. I tried not to take it personally. But you know what? He probably didn’t want to talk to me because I’d have some tough questions for him.

RG: Oh yeah. I was just gonna say, a friend of mine at a party once that had a bunch of celebrities because it was like around Obama’s inauguration was asked if he was a celebrity. And he mentioned a Baldwin, he made up a Baldwin name.

BM: [Laughs.]

RG: [Laughs.] And they all took a picture with him, because nobody’s gonna question you if you just say a name and a Baldwin.

But so for those listeners that don’t know Bukele, he calls himself the “cool dictator,” and he officially adopted crypto in El Salvador, basically on the day, correct me if I’m wrong, that it completely blew up.

BM: [Laughs.] Yeah.

RG: What did you learn about the crypto uptake and how people in El Salvador are adopting it?

BM: Right. So — they’re not, is the short answer.

RG: [Laughs.]

BM: In June of 2021, Bukele, sort of out of nowhere, announced that El Salvador — this small, mountainous country lacking in natural resources, and quite poor, the average Salvadoran makes about $300 a month — was suddenly going to adopt Bitcoin as legal tender in September, so only three months later. This was quite a surprise to the world, but also to Salvadorans themselves.

And the marketing pitch was quite — it was an interesting marketing pitch, because on the face of it, maybe this could work, right? El Salvador’s economy is heavily dependent on remittances. About a quarter of the economy — 24 percent — is the 2-3 million Salvadorans who live in the United States who send money back home. And if you could use Bitcoin, rather than traditional means — Western Union MoneyGram — then theoretically, this could boost government coffers, it could theoretically reduce transaction costs for customers, could be a win-win, could be a game-changer, right? [Laughs.] But like everything in crypto, things did not go according to plan.

And effectively, as we find ourselves here, no one is using cryptocurrency — almost no one — in El Salvador. The government’s own figures have shown that less than 2 percent of remittances are using the Chivo Wallet system that they set up.

There’s a number of reasons for that, but one of them is that the system doesn’t work very well, they built a system on top of Bitcoin. And another is that the people don’t trust the government to make things work very well. Bukele himself is popular, but people would rather go with the things that they’ve relied upon — Western Union, MoneyGram, traditional services — even paying the larger fees, so that the thing works, first of all — you’re not ripped off — and you’re not exposed to the volatility of the underlying cryptocurrencies themselves.

And I think that’s really such a shining example of rubber hitting the road here. These cryptocurrencies are not actually currencies by any reasonable economic definition. They’re a poor medium of exchange, a unit of account, and store of value. Those are the three functions of money that economists look for when they look for a reasonable currency. They’re really much more similar to unregistered, unlicensed securities; they’re investments of money in a common enterprise with the expectation of profit to be derived from the efforts of others. That’s the definition of a security under American law, under what’s called the Howey Test.

And they’re being sold in these unregulated marketplaces. So the propensity towards fraud is just sort of undeniable. And it’s really kind of a sad thing that it got adopted by a country that could ill-afford to spend the hundreds of millions of dollars that they spent to roll out this disastrous program.

RG: Securities, though, in general, represent shares in a thing, like in a thing that produces something of value; you could debate the amount of the value, but usually, it’s a company that produces something. And so this feels more like these kind of mafia companies that don’t actually make anything, but then they have a stock that a bunch of stock brokers sell, that then drives the price up, then they all dump it on the market —

BM: Yep.

RG: And move on to the next thing. What’s the difference between a classic mafia pump-and-dump scheme and this?

BM: There’s not much. There really isn’t. I mean, you hit the nail right on the head. It’s air.

RG: Right.

BM: It’s securitized air. They securitize — I mean, in an unlicensed and unregistered way — some bits of computer code that people are sending back and forth to each other on these things called blockchains. And a blockchain, for all its supposedly innovative nature is not innovative, really. It’s 30 years old. Blockchains have been around since 1991, Stuart Haber and Scott’s vernetta at Bell Labs came up with a way of storing information in blocks that can be added to and never subtracted from. The reason that blockchain has not taken off outside of crypto is that it doesn’t really work very well. And the computer scientists that Jacob and I have spoken to in the book are extremely dismissive of this.

So, you’re absolutely right: What they’re really doing is they’re telling a story. Robert Shiller, the Nobel Prize-winning economist has spoken about this, I think, quite well. He’s talked about how economic narratives form. And the narratives come from somewhere. In the case of crypto, the genesis, I would say, is the subprime crisis, which created a lot of distrust of financial intermediaries and banks and the financial system — for good reason, you might say, they utterly failed us. And so that energy was directed — you could say, on the left, it was directed towards Occupy, and on the right, it was the Tea Party. But in terms of the cypherpunks, this was directed towards creating this quote-unquote trustless currency.

Well, it didn’t work as a currency. But eventually it sort of worked as this thing that you could gamble on.

RG: Mhmm.

BM: And you could create all these other currencies — quote-unquote currencies, that again, you don’t know who owns the majority of these quote-unquote coins, you don’t know what they’re doing to inflate the value of those coins. There’s a lot of what’s called wash trading going on in crypto, where you basically trade the coins back and forth amongst accounts you control, to inflate the value to make it look like there’s a market. And then once you’ve gotten real people in — regular, real money in — you dump and you cash out into real money. That’s happening an awful lot. And that’s why you’re seeing arrests almost by the day.

RG: And so when the crypto world blew up, around the time that Bukele was adopting it, there was a thing called a stablecoin that completely collapsed, which I found kind of amusing — well, not amusing for the people who lost their shirts.

BM: [Laughs.]

RG: But what is a stablecoin? If somebody told me that they were selling me a stablecoin, that would be my first kind of indication to go away? Like why are you calling this a stablecoin? What’s so stable about it that you need to put stable right in the name? So what’s the difference?

BM: Such a good point, Ryan. I mean, one of the rules of thumb I’ve discovered in crypto is everything is the opposite of what it purports to be, right? Currencies are not currencies; stablecoins are not stable; centralized means centralized.

RG: [Laughs.]

BM: You can even combine them together, these meaningless words, to create meaningless phrases like some absurdist attempt at German. There are things called DAOs, which are supposedly decentralized, autonomous organizations. Well, they’re neither decentralized, nor autonomous, nor particularly organized.

RG: [Laughs.] Right.

BM: [Laughs.] They’re, they’re a mess. And so there’s a joke in the skeptic community that basically crypto is speed-running the last half a millennia of financial mistakes, right? It’s all the stuff that we’ve tried that just hasn’t worked. And so your question is: Why does it keep going? And the answer is that it’s not working for the vast majority of people — the vast majority have lost money — but it’s working for somebody.

And so you have to ask: Well, who is it working for, right? The people that issue the coins, the people that run the exchanges, the marketing companies that get the marketing dollars in, and the celebrities who benefit. But the poor guys holding the bag here are the retail customers who have gone into the casino thinking they’re gonna get rich, and instead they lose all their money.

Sorry, I didn’t answer the stablecoin question. I would be happy to answer that!

RG: What do they even pretend to mean by stablecoin?

BM: Sure. So a stablecoin is theoretically, a coin tied to a regular currency, an actual currency. So in the case of El Salvador, the stablecoin that’s really in question there is a company called Tether. One Tether is theoretically worth $1.

And you ask yourself: Why is that necessary in crypto? Well, once you’ve entered the casino, and you’ve bought a bunch of crypto, you probably want to stay in the casino for as long as you can, as long as you’re winning, because to come out of the casino, and to transfer back into real money, you’re going to trigger a taxable event, you’re going to have to go through a bank account, and so you want something that you can go in and out of in between your speculative plays on the price of this or that crypto going up or down. But you don’t want to be exposed to the volatility of crypto itself.

RG: Mhmm.

BM: So, Secretary Gensler of the SEC calls them the poker chips at the casino. And I think that’s right, that’s the correct metaphor. The majority of the transaction volume in crypto is actually conducted in stablecoins. It’s people kind of gambling with these chips and using them to — also, I would argue, most likely manipulate the price of the other cryptocurrencies.

RG: Mhmm.

BM: And they’re run by, in the case of Tether — who, by the way, Tether and the people that are behind Tether, have allegedly been very involved in trying to reformulate El Salvador’s security laws.

RG: And Bukele said as much, right?

BM: That’s right. And so these guys, they’re gonna be featured in the book. They’re pretty — [laughs.] They’re an amusing group. You’re talking about a company that has 12 employees, according to LinkedIn, that was once worth $80 billion on paper. I think it’s now $60-something-[billion]. So they’ve got a dozen employees, they’re worth $60 billion; they have fewer employees than my neighborhood deli, and they’re running a $60 billion company.

RG: Hmm.

BM: And it’s awfully hard not to look at them and say: Well, they got a money printer, right? They got this thing that in the casinos, the crypto casinos, is supposedly worth $1. But how much real money is actually backing them?

RG: So they make the chips.

BM: They make the chips. But your question is: A chip is just a piece of plastic, right? In this case it’s a piece of code. What’s the real asset backing it, right?

And, if you want to go into detail here, one of the big tells of Tether, in my opinion, is the way they control the redemption process. When you’re running a Ponzi scheme, one of the things that you really need to do is make sure that people are not trying to all get their money out at the same time, because it’s not there. So when you try to get your money out, the whole thing falls apart. It’s what took down Madoff was the subprime crisis; when the markets crashed and everyone tried to get their money, only to discover that it wasn’t there.

RG: That’s when hedge funds run into trouble, too.

BM: That’s right.

RG: That’s when they start to pause redemptions. Everybody’s like: Oh, wait, why are you doing that?

BM: That’s right. And they’re using leverage. And leverage is used in all sorts of mainstream financial products and things like hedge funds. But when you’re actually running a Ponzi, when there really isn’t a product there to begin with, that’s when you get into real trouble.

What Tether does is — and this is on their website, you can look this up — you are not allowed to redeem Tethers for less than $100,000. They just won’t even engage with you. So Tethers are being traded on the casino floor amongst participants — and the casinos keep a certain amount of liquidity there so they can go in and out. But the real money, the people that have bought Tethers in the billions, a lot of them have exited their positions.

So the question is: What happens if and when Tether falls apart, which admittedly, has been the Boogeyman for a long time of crypto skeptics. Tether had to settle with the New York Attorney General in early 2021 and agree not to do business in New York, the financial center of the world, which would seem to be [laughing] a bad sign if you’re running a supposedly revolutionary technology, stablecoin company. They had to settle and they had to agree to quarterly attestations. But the company itself has never been audited. And I think that’s just a big red flag. They’ve got some guys who have sketchy pasts. And you know, you could make a plausible argument that they’re running a counterfeit dollar operation.

RG: What’s their response been to skeptics, like yourself, who’ve made this criticism of them? Because, typically, in the financial world, if you issue an analysis that’s this blunt about a firm, you’re gonna hear from lawyers, you’re gonna get threatened with lawsuits, how dare you make these claims about us? Do they ever do that? And what has generally been their response to the kind of suggestion that there’s not a whole lot of difference here between a Ponzi scheme and what’s going on? Or the chips in the casino or Gensler’s points?

BM: Yeah, I have to say, it’s been quite shocking to me. I’m the son of a lawyer. I would have thought that we — Jacob and I — would have been, if not sued, I would have assumed we would have been criticized and there would have been some threats made.

We wrote this article for The Washington Post on Binance, which is the largest crypto exchange in the world, and in there were some pretty startling facts about the massive conflicts of interest in Binance and the way that Binance had just shut down at several points in 2021, as the price of crypto collapsed; all of a sudden, you couldn’t get your money out, which again, goes back to redemptions, and tells of a Ponzi.

And there was no pushback. I mean, there were no clarifications; there was nothing. In fact, they’re trying to talk to us to explain their side of the case.

I think what’s happening — I mean, if you looked at it from a legal perspective, I’m not a lawyer — but these are companies that are not domiciled in the United States. The volume of crypto runs through offshore exchanges. In the case of Binance, they famously don’t have a headquarters.

RG: Mhmm. [Laughs.]

BM: There is no finance headquarters, which is pretty remarkable, right? They are run through these shell corporations in the Caribbean. And the same with Tether. I think they banked at Deltec in the Bahamas or somewhere.

So, my guess as to why we hadn’t been sued? I can’t speculate as to whether we’re right or wrong, but [laughs] I mean, if you sue us in American court, you’re gonna have a discovery process, right?

RG: Mhmm.

BM: So, I don’t know. It’s interesting. I’m surprised there hasn’t been more pushback. But yeah, I can’t speak to their motivations.

RG: Huh.

So in the White House reports that came out this week, a lot of it seems to be pretty vague. Gesturing in a variety of different directions. But one of the few things that was a little bit less vague was a suggestion that OK, maybe the U.S. ought to create a U.S. digital currency.

And I’m curious what that means, because to me, I don’t quite understand why, like what I have in my bank account app is not a digital currency. I can move it digitally from my checking account to my savings account, or from my checking account, I can use it to pay for things digitally. Obviously, though, there’s something different because they’re talking about creating it. And they’re getting all of these different agencies and smart people together to do it.

So what would be the difference between a U.S. digital currency and the currency that we currently have that we can move around digitally?

BM: On one level, there isn’t much difference. You’re right. One of the amusing things about cryptocurrency is that you needed to create digital dollars to begin with. I mean, the vast majority of our dollars are not physical, hard currency. Obviously, they’re just numbers in bank accounts, databases in bank accounts. And so on that level, there isn’t much difference.

There are, however, some potential gains to be had, arguably, by cutting out the middleman in terms of the banking system and allowing each of us to have our own account at the Fed that, for example, imagine there’s another pandemic and the Fed needs to issue stimulus checks. Well, if everybody has their own account, they can do that immediately, right, with a click of a button. And you save all this time, this effort, and you have an immediate economic impact. And I think economists and central bank people get all excited about the potential advantages there. Because we do have a problem with banking the unbanked in this country. A lot of people who don’t have access to bank accounts are getting screwed over by payday lenders and things like that. So there’s potential savings there.

What’s fascinating about the central bank, digital currency proposals — which are still, I would argue, in their nascent stages in America, I don’t think it’s really gotten that advanced that I’m aware of — is that they’re not based on blockchain.

RG: [Laughs.]

BM: [Laughs.] They have nothing to do with blockchain because blockchain doesn’t work. Right?

So it’s very funny, when crypto was in its heyday a year ago, you would have a lot of conflation, purposeful conflation of like: Look there’s this rumor that you know, the U.S. is going to go to a digital currency that’s going to be great for crypto. Well, no, obviously not! Because if the thing that you say you’re making — this supposed digital currency, which is in fact not a currency — if it’s replaced by the Fed issuing it, then your business model is destroyed. I mean, to be blunt. There’s no reason for you to exist.

But it’s all kind of a bit of smoke and mirrors. Because what the Fed is really doing right now, as far as I can tell — I’ve marked it, I’ll just read from the statement:

RG: Sure.

BM: “To make payments more efficient, the Federal Reserve has planned the 2023 launch of FedNow—an instantaneous, 24/7 interbank clearing system that will further advance nationwide infrastructure for instant payments alongside The Clearinghouse’s Real Time Payments system.”

So they’re working on the plumbing of our banking and clearinghouse system. That’s not sexy, it’s not interesting. It doesn’t really have much to do with retail, regular folks’ everyday experience. But I think that there are advances that are on the horizon there. Other countries are trying this kind of stuff; Brazil is trying it, India.

But ironically or amusingly enough, this has nothing to do with blockchain, and none of them are using blockchain. So, unfortunately, crypto is most likely going the way of the dodo bird.

RG: Does that mean that because they’re not using blockchain, it wouldn’t be as energy intensive?

BM: Yes.

RG: What is it about crypto that makes it — it is the blockchain that makes it so bizarrely energy intensive?

BM: It’s the proof of work concept that is tied to Bitcoin itself.

So proof of work is, you’re trying to run a quote-unquote trustless system, which is a whole other topic we can talk about. Because, from economists it’s very funny, because you can’t create a trustless money. Because money is trust.

RG: Right.

BM: We made up money! There’s a great book, “Money” by Jacob Goldstein, who is one of the hosts on Planet Money. And in, in his book, Jacob writes: The thing that makes money money is trust. We made it up. So replacing it with computer code is a story. It’s an interesting story. It’s not a true story.

So, what proof of work is, in order for us to run this system where we don’t trust each other, we’re all going to validate each other. We’re all going to run these computers that are going to constantly check each other and make sure that the blockchain is accurate, and in order to incentivize people to validate those transactions, if they guess correctly, these computers run 24/7, and they guess at random numbers and letters, if they guess correctly, they get bitcoin. They mine a new Bitcoin and they get the money associated with it.

It’s not a very smart system, to be blunt. I went to the largest crypto mine in America, just outside of my hometown of Austin in March of this year. It’s called the Whinstone Facility. And it’s a former Alcoa aluminum smelting plant that is now devoted to mining Bitcoin, where they just run these warehouses of computers —

RG: Just banks of servers?

BM: Yeah, it’s crazy man. So, in 2021, Bitcoin used the energy equivalent of Argentina. And the greenhouse gas, the estimated greenhouse gas used to consume that electricity, that energy, it more than offset the electric vehicle savings that we had done that we had accumulated globally for that year.

So it’s ridiculous, you’re running this tiny little program, which actually has quite few users — crypto is actually quite small in terms of people who are actually trying to transact in it — and the cost is massive, and you’re not getting anything out of it. Bitcoin can only process only five to seven transactions a second; Visa can do 24,000. So when you talk to computer scientists, they just tear their hair out. They just scream, almost almost literally scream in agony, like: This doesn’t work! Stop trying to make this work!

You can switch from proof of work to what’s called proof of stake, which is what Ethereum is doing, this thing called the Ethereum Merge. But that then makes it awfully clear that you’re running a security, because basically a proof of stake is basically like the people that have stake in it, that own a bunch of the Ethereum, they’re controlling what to do with the network. So that sounds like a share of a stock to me and to the government, by the way. I think the SEC has already sort of hinted that that’s going to be coming. So the whole thing kind of collapses in on itself. Because again, there’s nothing new under the sun. They’re just taking money from people and speculating on it, and unfortunately, in this case, the casinos are unregulated, so most folks are gonna lose.

[Musical interlude.]

RG: And one of the things that the governments don’t like about crypto is that it has been used on the black market, and there are cases where I think that’s actually a good thing. Like, in general, I kind of think that it’d be nice if people have some way of getting around government surveillance to a point.

BM: Yeah.

RG: Is there any way that people could create some type of asset that can get around government surveillance without it becoming one of these Ponzi schemes?

BM: Yeah, I mean, that’s a great question. And we do hear about that. We hear about people using it, basically, because they’ve run out of better options, right?

RG: Right.

BM: Folks using it in Afghanistan, there’s an article about folks using in Argentina, where there’s hyperinflation — or massive levels of inflation, I don’t know if it’s technically hyperinflation yet — but places where the currency, or the banking system, in the case of Afghanistan, is just not working, right?

And the trick there is that it’s difficult to come up with an alternate payment method that can’t be used by the bad guys just as much as it can be used by the good guys. And quite frankly, the bad guys often have more money [laughing] to try to launder and move around. So it’s one of those really difficult and perplexing questions.

I would say, if you’re not trying to send it overseas, the original way of doing this is cash, right? I mean, that’s, that’s the way you do it, you know, for all the folks that are here in America and trying to give folks that work for you a little tip, or do this or that, you give them some cash. And I don’t knock that! I actually think that’s like a good — well, I shouldn’t say it’s a good workaround — but it’s a time-honored workaround.

The problem is sending it internationally. I don’t know how you do it. The worry here that I have in terms of folks being being paid in crypto is the volatility of the price, but also that when it comes to a company like Tether, at some point, that company might fail, that company might might crash because it might not have the reserves that it says it has. If that happens, all hell breaks loose, and they can’t get any of their money out. And so there’s a real counterparty risk there that I think is significant and not to be discounted.

So I think folks use it when they have to, and I don’t begrudge people that pay others in crypto, we’ve heard from a lot of different people in a lot of different circumstances — that’s really their only way of doing it. But it’ll be painful if it crashes even further and wipes people out.

RG: And I started the show by saying we can’t really ignore this any longer. But is that true? It sounds like, on some level, that maybe this might just crash and burn and work itself out?

BM: Yeah, it’s the question that I keep going back to over and over again. I was talking to an economist yesterday. And we were arguing about it. I don’t know — of course, no one knows the future. I’m skeptical. But then again, [laughing] that’s my forte, I guess.

I think that you have to separate out, as we’ve been talking about, digital currencies and their future from blockchain. So when you talk about blockchain, I think blockchain will probably not be won’t disappear, but its uses will be confined to small systems, where you would want to create an immutable ledger that could track — the economists I was talking to were talking about memorabilia. Pokemon cards, you could create a blockchain for Pokemon cards, and people can trade them back and forth. OK. Sure. I got nothing against blockchain, by the way.

RG: Right.

BM: It’s just just a ledger. What I’m mad about is the potential fraud behind the markets these days. So blockchain will probably be around in some limited way is my guess. Digital currencies probably are the future. We’re probably a little bit away from really honing those and figuring those out. There’s some experimentation going on. But my guess is that yeah, there’s potentially large savings in intermediaries — actually, in a real way, sort of addressing the initial issue of crypto, trying to cut out the middleman.

The problem is that to cut out the middleman between the thing that they hate the most, the Fed, the central authority, and the actual consumer. So that’s my guess as to where it’s going. But once the fraud washes out, and these things are classified as securities, I’d be very curious to see what’s left in terms of the current quote-unquote cryptocurrencies.

RG: What happened to NFTs? Did they go away? Are they still around? They were everywhere for like, two weeks.

BM: Yeah. Yeah. So NFTs were these fascinating things that for economists are just total head scratchers. I mean, cryptocurrencies are bad enough. But you’re buying a non-fungible token, which as far as I can tell, it’s basically a receipt for a JPEG. It’s like: Hey, I bought this thing. Let me show you. It’s on a blockchain.

And you can right-click and save a JPEG, you don’t need to buy it for millions of dollars worth of cryptocurrency. So it was hard not to see that — it is still hard for me not to see that as just pure speculation. Somebody’s gone in, and they’ve accrued a bunch of crypto, and they want to make even more crypto. And so they gamble on it. And there’s some status games going on. It’s like: I paid a bunch of money to this NFT that this celebrity was hawking. But when you get into the plumbing of them, the wash-trading in the NFT marketplace was off the charts. I read something that said 99 percent. Some study had 99 percent wash trading.

RG: That means just people moving NFTs back and forth between accounts.

BM: Yeah, sorry. Yeah. So wash trading is just: You’re just selling it back and forth to accounts that you control, making it look like there’s a real marketplace, but there isn’t one. And so my suspicion is that sort of what happened, is that it was even more filled with air. And as soon as crypto itself started crashing, and people actually needed to get back out into real money, they’re no longer speculating on NFTs. And it’s the most bubblicious of all the bubbles, it pops the first — and NFT’s are really fascinating, because in my understanding, they’re not really even the digital art itself, which I think can be interesting. Sometimes it’s gauche; sometimes it’s interesting. But you’re buying this thing, which is sort of like a link to a URL. It’s a receipt. It’s a very weird thing. And I think folks are gonna realize pretty quickly that they may have lost all their money in that regard.

RG: The other selling point of this, people talk about the security of it all, yet I keep seeing people getting ripped off and robbed and somebody stole their frogs or whatever, somebody stole their NFTs, somebody stole their Bitcoin. How do they keep getting their pockets picked if this is the most secure system that they can develop?

BM: Exactly, exactly. I mean, for a supposedly decentralized system, there’s a hell of a lot of different protocols, and you’ve got to do this, and you’ve gotta go to this person, to this intermediary. And at every juncture, because it’s unregulated, there’s not only nothing stopping people from ripping you off. There’s also almost arguably very little even disincentivizing from ripping you off. Like why not rip you off? Right?

RG: Mhmm.

BM: And I think that goes back to just faulty philosophy here, that you could create this money that’s trustless, and a system where you didn’t need to trust anybody, you just had to trust the code, so to speak. Well, code doesn’t fall from the sky.

RG: [Laughs.]

BM: [Laughs.] Code is written by people who are running companies, right, that are trying to make money. How are they making money? Well they want to sell their coin and the coin to be valued, and this, that, and the other. But to your point from a while back, like what is separating what they’re doing from Penny stock fraud from the 80s or, or microcap from the 90s. I mean, people just inflating some security, and then cashing out. They look awfully similar.

And I think in crypto, you just have to question: Are we really going to keep doing this, where people are just going to get ripped off? If you talk to folks in crypto, and I did, walking around South by Southwest and the Bitcoin Conference in Miami, which is the biggest Bitcoin conference in the world. And I would ask folks about people who lost their money due to scams.

And one of the first people I asked, he goes: Oh, well, you know, I’ve been scammed.

And I was like: What?

And he’s like: Yeah. Yeah. Yeah. I had to learn. I had to do my own research. It was a learning experience.

And then I asked the next person, he got scammed as well. And I swear to God, almost everybody I talked to in crypto has been scammed at one point. And it’s sort of a badge of honor. It’s like: Yeah, I didn’t learn this, or that, or the other. And now I know, now I’m better. But you got to do your own research, you got to learn.

It’s fascinating to study the psychology of it, because it really smacks a lot of multilevel marketing schemes, where the system can’t fail, you can only fail the system, right? It’s not that the MLM that you work for isn’t a good MLM, it’s that you didn’t sell enough of it, you didn’t do it correctly. And it’s sort of similar to that, right? But when you go down underneath it, you go: Oh, wait a minute. If you got scammed and you worked in crypto, you’re a guy who devotes your entire life to it, seemingly, then what hope do the rest of us have? And isn’t money supposed to be easy? Isn’t the whole idea of money —

RG: Right.

BM: — that it’s supposed to be convenient, accessible, and usable? So yeah, I think it really does get to the heart of the matter.

RG: We wouldn’t really tolerate that with online banking. Like I opened up a SunTrust account, and they took my money, but then I realized that I had not checked the right box. And so the next time I opened up a SunTrust account, they didn’t steal my money. I’d be like —

BM: Exactly! Exactly!

RG: — [laughing] You can’t steal my money!

BM: Why do you know, when you put your money in licensed banking, why do you know your money is good? Because of regulation! Because of the FDIC program, right? The Federal Deposit Insurance Corporation, which has been around since the ’30s, since we created securities laws in this country, which it was all, in some sense, a reaction to the lack of securities laws and the lack of a thing like the FDIC in the ’20s — and the Roaring ’20s, the crash, and the Depression, and all that stuff. The FDIC guarantees your bank account up to a certain amount. And so you know your money is good, and no one has ever lost a penny of an FDIC-insured bank account since it came into being.

So how does it work? Well, the banks, in order to get that FDIC license have to follow a whole host of regulations, right? They have to comply with a whole bunch of stuff. Now, is the system perfect? Hell no! Right, I mean, you saw in the subprime crisis, you saw the Savings and Loan Crisis, you see these banks have all sorts of problems, but at least there’s regulations. And the government is saying: in exchange for following the regulations, we’re your backstop. We will make sure that everyone knows their money’s good. That is a way of creating trust, right? Trust through proven experience. Their track record. That’s how it works, right? You don’t just create trust out of thin air by saying: Oh, it’s code! It just doesn’t work that way.

RG: The White House report kind of waves at the possibility that the CFTC, the Commodity Futures Trading Commission, might end up being the place that regulates them. I think it already regulates some elements — futures tied to crypto or something. Does that seem right to you? Or do you think it ought to be the SEC since you’re talking about these things as securities, but if they’re securities are they illegal securities, because they don’t actually produce, they don’t actually make anything?

BM: Exactly. So what government agency is in charge of regulating Ponzi schemes?

RG: [Laughs.] Is it the FTC? Or they’re illegal.

BM: No, they’re illegal. So they’re securities that have no product, right? And our Ponzi schemes. Madoff didn’t actually make the trades or didn’t make a fraction of the trades. So what do you think it is? Who’s in charge of Ponzi schemes?

RG: Uh — I don’t know!

BM: Sorry, I’ll answer for you —

RG: Is it the SEC?

BM: The SEC. The SEC is in charge of Ponzi schemes. If you go to the SEC website, there is a page — the seven tells of a Ponzi scheme, seven warning flags of Ponzi schemes. If you look at crypto, I think it checks off like five or six of the seven. [Laughs.]

RG: Right off the bat.

BM: Right off the bat. So, look, as you can probably tell, I would like the SEC to be in charge. The CFTC would really like to be in charge. There’s a whole inner turmoil there as they’re battling over jurisdiction. And Bitcoin has been classified as a commodity. And it’s a very strange case, we’ll go into it in the book, but it’s super boring. I won’t bore you with it now. But the 20,000 other cryptocurrencies that currently exist sure as hell look like securities to me. And the other thing I’ll say here is the real risk of putting the CFTC in charge is that you’re looking at potentially a lot of regulatory capture. The CFTC has the budget, I think it’s like a fifth the budget of the SEC, or sixth, or something like that. We see crypto really cozying up to the CFTC. One of the commissioners of the CFTC took a selfie with one of the big crypto players. Actually, she just did another one — maybe it’s not a selfie, but a picture, with the guys that she’s supposed to be regulating. She deleted the first one, the last one’s up.

[Laughs.] The SEC has always had trouble being taken seriously. It’s often mocked and ridiculed for being ineffective. But if you want a really ineffective regulatory body, the CFTC with a fraction of the budget might be an even better choice. So all I really care about is the average Joe not getting swindled here. The thing with the SEC, they’re not the DOJ, they’re not going to charge people with crimes they go to jail for. They can fine people, they can refer cases to the DOJ. But at some point — and the DOJ has got his hands full at the moment, of course — at some point, I’d hope for some folks to actually go to jail who committed crimes, be charged with those crimes, because that’s where I think you’ll really see the sort of house of cards collapse.

In the last bubble of crypto, during what’s called the ICO craze, the initial coin offering craze,that I think was really what helped bring down the house was the DOJ getting involved and actually saying: Alright, you guys have committed wire fraud, tax fraud, bank fraud, whatever it is, and you’re actually gonna go to jail, and that spooks everybody, and they kind of cut it out. So, hopefully, something like that is coming.

RG: Mhmm. And you said 20,000 currencies?

BM: Yeah, if you think of them as securities — here’s a fun little fact for you — that’s more than all the securities in the major U.S. stock markets. Like that’s all the securities listed on NASDAQ and New York Stock Exchange combined. Isn’t that fascinating?

RG: So they’re just popping up new securities constantly?

BM: Yeah, yeah, yeah.

Yeah. And so why do we have securities laws? We have securities laws because of disclosure, right? And primarily, when you’re giving your money, when you’re investing in something, giving your money over to someone, you need to know who the hell is taking your money? And what the hell they’re doing with it. Right? And so the SEC has all these rules, all these forms you have to fill out. Are they perfect? Hell, no. There’s so much fraud going on, it’s crazy! I’m writing a book about it, so I’m paying a lot of attention. But if you think the regulated markets are bad, I mean, imagine the unregulated ones, right? Where there’s no disclosure, where you have no idea.

You can look at some websites, and you’ll see who actually owns the majority of these coins.

RG: Mhmm.

BM: They could be like 10 wallet addresses that control 90 percent of the supply. I mean, what are we talking about? That’s such a tell. That’s obviously gonna give over to wash trading and market manipulation, things like that. And regular people are not aware. They’re hearing from social media, from their friends: Hey, I made a bunch of money in crypto and you should buy it too. And then they buy and they lose their money or they can’t get the money out. It’s a recipe for fraud.

RG: So it sounds like this is pretty straightforward. Just have the SEC regulate these crypto-securities, and then have the Fed create a digital currency for anybody who actually wants an actual digital currency, which I can see a lot of benefits to, aside from that. If you could actually kind of cut credit card processors out of it — stop making 7/11 —

BM: Yep.

RG: — pay so much money to Visa and MasterCard and just let them use the Fed. If you would let regular people just set up accounts at the Fed and the Fed would also then have a lot more control over money supply, because they could monkey around a little bit with individual rates that they either charged on credit or, or gave to savings accounts.

BM: Yeah.

RG: Instead of having to take a gigantic hammer, like they keep doing, this week with another 75 basis point interest rate hike that’s such a blunt weapon.

BM: Yeah.

RG: This would give them a lot more nuance. So it sounds like if you do those two things, crypto would have nowhere to run, really.

BM: Yeah. I mean, that sounds plausible to me. And I think not only that, but you’d actually have like, as you’re pointing out quite a lot of upside, potentially. You could fine-tune a lot of the stimulus measures. If you went back to March of 2020, and you imagine the Fed had a system like a CVC, or something with more direct access for regular people, then the Fed could get the money to the people that really need it much quicker, and could also potentially cut out a lot of fraud.

You’ve seen that actually the DOJ has set up fraud task forces, fraud task forces in exciting cities like Sacramento, to deal with the fraud that came out of the pandemic stimulus measures. Because the fraud there is potentially one of the biggest frauds other than crypto in history, because you turn on the spigot of trillions of dollars, and you only need a small percentage of that to be fraud for it to be a lot of money.

And you could potentially cut that down significantly with issuing some sort of CBDC. So yeah, I think the future is actually potentially very bright in this area. But ironically enough, not only will it not involve blockchain most likely, but it also spelled the death of crypto.

RG: And then we could go back to making aluminum outside of Austin.

BM: [Laughs.] Yes, exactly. Well, you know, at least it’s a thing that you can use.

RG: Yeah! And we need aluminum.

BM: Yeah! I know.

RG: A lot of craft beer getting bought.

BM: [Laughs.] That’s right. Well, Ben, thanks so much for joining me. This has all been really helpful.

RG: Thanks, Ryan. I really appreciate it. Quite an honor to speak to you, and I really love the podcast, and thanks very much.

BM: A reminder for people. The book is called “Easy Money” and it’ll be out next year, published by Abrams Press, written with Jacob Silverman. And also check out their great dispatch from El Salvador from July of this past year.

[Deconstructed theme music.]

Zach Young: Producer Zach here — quick note before the credits. We reached out to Tether and Binance for comment regarding this show. As a publication we hadn’t heard back from them.

RG: That was Ben McKenzie. And that’s our show.

Deconstructed is a production of First Look Media and The Intercept. Our producer is Zach Young. Laura Flynn is our supervising producer. The show was mixed by William Stanton. Our theme music was composed by Bart Warshaw. And I’m Ryan Grim, D.C. bureau chief of The Intercept.

If you’d like to support our work, go to theintercept.com/give. And if you enjoy this podcast, be sure to also check out Intercepted, as well as Murderville, which is now in its second season.

If you haven’t already, subscribe to the show so you can hear it every week. And please go leave us a rating or a review — it helps people find the show. If you want to give us additional feedback, email us at Podcasts@theintercept.com.

Thanks so much. See you soon.

The post Is Crypto a Big Scam? appeared first on The Intercept.

Months later, the picture is much different — and worse — from what Forough imagined. The school survived, becoming mostly virtual, but has transformed from a coding boot camp into a relief organization. The biggest risk for Forough’s students wasn’t lack of education, it was hunger. Forough looked for a way to provide emergency checks to the women but was stymied by banks that don’t want to risk violating severe U.S. sanctions.

JPMorgan Chase repeatedly blocked her attempts to transfer money, she said, and she grew increasingly alarmed by students who said they couldn’t access cash at local Afghan banks — many of which have closed or imposed strict withdrawal limits. In response, she turned to cryptocurrency to provide monthly emergency payments to help students afford enough food to survive.

“Since September, we’ve been sending cash assistance, about $200 per month, for each family, because the majority of our students have said their family lost their jobs. They are the sole breadwinner of the family,” explained Forough, whose family fled Afghanistan in the early 1980s, during the Soviet occupation, and now lives in New Hampshire. Code to Inspire pays its recipients in BUSD, a so-called stablecoin whose value is tied to the U.S. dollar, and then the women convert it to afghanis, the local currency, at money exchanges. “We created a safe way for our girls to cash out their crypto and pay for expenses, so they can pay for medical expenses and food and everything that’s needed.”

There are several advantages to using crypto: Afghans fleeing the Taliban can take their assets with them without risk. Humanitarian agencies seeking to bypass banks and discreetly avoid the Taliban can provide cash directly to those in need. Smugglers and intermediaries who may steal or try to resell aid packages can be circumvented if aid is given directly through a digital transaction.

“I am still in disbelief that I could receive money without any fear of [it] being confiscated in such a transparent way,” said T.N., a 21-year-old graphic design student in Herat enrolled in Code to Inspire, in a statement to The Intercept. “Creating a BUSD wallet was very easy and it was a delightful experience knowing how fast and in such a private way you can receive money even in Afghanistan.”

While Code to Inspire is in a uniquely tech-savvy position compared with most Afghan organizations, Forough isn’t alone in thinking that blockchain-based solutions may help Afghans in need in the midst of an unprecedented economic crisis.

Several other NGOs and humanitarian organizations — facing a choice between failed banks still hampered by sanctions and hawala networks of informal money traders that many fear are tied to the drug trade or controlled by the Taliban — are considering the use of cryptocurrency as an alternative.

One American attorney advising international groups in Afghanistan said that his clients are moving closer to experimenting with crypto payments, though he was not at liberty to identify the NGOs and asked for anonymity to protect their identities. Others are stepping up in a more visible way to harness the power of cryptocurrency to deliver assistance.

“You can trade back and forth, send it overseas or receive it overseas, without ever touching banks, without touching the Afghan government or Taliban.”

Sanzar Kakar, an Afghan American raised in Seattle who has worked on commercial projects in Afghanistan, including a local ride-hailing company akin to Uber, created an app. “We’re trying to solve this problem, that 22.8 million Afghans are marching toward starvation, including 1 million children this winter who might die of starvation,” said Kakar. HesabPay, launched in 2019, helps Afghans transfer money using crypto.

“We can’t get money through banks, but 88 percent of Afghan families have at least one smartphone,” said Kakar, who hopes to facilitate money transfers of afghanis, along with USDC, another stablecoin. He is in the process of setting up money-exchanging shops at which Afghans can obtain QR codes or trade crypto for hard currency.

“You can trade back and forth, send it overseas or receive it overseas, without ever touching banks, without touching the Afghan government or Taliban,” said Kakar. “It’s all on the blockchain network.”

A liquidity crisis is at the heart of the growing catastrophe in Afghanistan. Following the pullout of U.S. forces last August, the country was isolated overnight. The U.S. seized assets from the Afghan central bank and ended transfers of U.S. currency. Companies in Poland and France contracted to print the afghani ended shipments. Almost immediately, the Society for Worldwide Interbank Financial Telecommunication, known as the SWIFT system, which underpins international financial transactions, suspended services in Afghanistan. Commercial banks couldn’t lend money, and retail customers couldn’t take their own money out of banks.

The departure of the international community, fearing that any transaction within Afghanistan would violate sanctions on the Taliban, ground the economy to a halt. Nearly four-fifths of the Afghan budget was foreign-funded before the U.S. left.

The Biden administration has issued exemptions to the sanctions for humanitarian aid. These Treasury Department licenses, however, have done little to mitigate the spiraling crisis, as The Intercept has reported. Taliban leaders listed by the sanctions are in charge of senior Afghan government positions, leading many banks to continue to block routine transactions because they conclude that any tax or duty paid to the government could risk violating sanctions. Overcompliance and compliance costs associated with the sanctions have damaged the ability to conduct ordinary commerce in the country, leading to mass unemployment and skyrocketing food and fuel costs.

So though humanitarian aid is technically allowed, restrictions by banks have made it functionally impossible. Several U.S. banks contacted by The Intercept declined to comment on the record about the shut-off of transactions with Afghanistan. “We comply with all economic sanctions laws and regulations and process NGO-related payments accordingly. We have no further information to share,” said a spokesperson for Wells Fargo.

New reports continue to show ghastly consequences of the economic collapse in the country. Parents have sold children into arranged marriages in order to purchase enough food to survive. In Kandahar, a high school teacher recently died of starvation after at least four days of not eating, according to a local human rights watchdog. UNICEF estimates that 3.2 million children face malnutrition and over 1 million face the immediate risk of death by starvation. The United Nations reports that only 2 percent of Afghanistan’s population of 40 million is getting enough to eat.

The Biden administration, while choking off the Afghan economy, has approved $782 million in aid since October. The funds include shelter, emergency food and hygiene services, and 1 million Covid-19 vaccine doses.

The challenges to introducing cryptocurrency payments and transactions, however, are steep. “We explored this option, but it is not for us,” said Kevin Schumacher, deputy executive director of Women for Afghan Women. “How do you pay 1,100 staff in 16 provinces, many of whom can’t read or write, with crypto?”

“Even the smallest fluctuations in crypto rate can erase thousands of dollars off your books,” added Schumacher. He also feared that the Treasury Department and IRS would look down upon audits that included cryptocurrency payments. “Lastly, very, very, very few vendors in Afghanistan understand and use crypto.”

The fluctuations in value can be mitigated, said Kakar and Forough, by using stablecoins that are pegged to the dollar and are not subject to the wild fluctuations in valuation that occur with popular cryptocurrencies such as Ethereum or Bitcoin. Many Afghans use Binance, the international trading platform, which allows users to buy and sell stablecoins along with more speculative coins.

Kakar explained that many steps are in place on his app to ensure that users are authenticated. HesabPay, Kakar’s company, is running commercials on Afghan television and radio stations to explain the product, which uses biometric technology (such as facial recognition) to identify users.

“Even though these are decentralized technologies, you don’t want to have any involvement with the Taliban. You want to directly help the people.”

“It’s all in the blockchain, all on a permanent ledger outside of the whole banking system, but under the purview of the Treasury, so they know that money is not being used for terrorism finance,” said Kakar.

Cashless digital transactions that sidestep traditional banks still pose risks, especially for U.S. citizens or financial institutions facilitating or investing in platforms for Afghans.

Rahilla Zafar, a former U.S. aid worker in Afghanistan, now works with cryptocurrency donors to raise charitable funds for the region. “Even though these are decentralized technologies, you don’t want to have any involvement with the Taliban. You want to directly help the people,” said Zafar, who noted that U.S. donors are concerned about accidentally violating sanctions.

Zafar works with Crypto for Afghanistan, a charity that helps donors raise money for humanitarian projects. One such project is ASEEL, an app that originally served as an Etsy-style marketplace, helping Afghan artisans sell handmade goods. Now the company has transformed into a relief organization, distributing packages of food and medicine.

ASEEL accepts Bitcoin, Litecoin, Ethereum, and other major cryptocurrencies, which are used to purchase supplies. But as Nasrat Khalid, the founder of ASEEL, explained, it can’t provide direct cash payments in Afghanistan because of the sanctions.

“We’ve helped 55,000 people, a lot of traction in the last six months. But we can only do aid packages because of the OFAC status,” said Khalid, referencing the Treasury Department’s sanctions enforcement office.

Despite the steep learning curve and several barriers to entry, within Afghanistan using crypto is seen as an unqualified improvement on the status quo. Zafar recalled working in Afghanistan years ago, when militants would raid vans transporting cash around the country. Forough said that her sister’s bank account was seized by the Taliban after the U.S. withdrawal because of her work with Western groups. There are more and more new reports of banks closing.

With crypto, Forough’s tiny pocket of Afghanistan is surviving. “A group of our students just finished our academy scholarship, 77 of them,” said Forough. “Including, I believe, the very first female blockchain coders in Afghanistan. It’s very exciting even though the situation on the ground is not very pleasant.”

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