Molly WhiteThe crypto industry clearly has a strong spokesperson and salesman in Senator Toomey.
Sen. Brown introduces the witnesses. Prof. Hilary Allen and Ben McKenzie Schenkkan (better known as Ben McKenzie) will be critical of crypto; Kevin O'Leary and Jennifer Schulp are both pro-crypto.
First up is Prof. Hilary Allen. Her statement is challenging crypto's claims they are decentralized. She has suggested that "a ban on crypto would be the most straightforward".
She says that if legislators are not willing to proceed with a ban, then they must be very careful not to enact laws that would make crypto "too big to fail".
Now Kevin O'Leary is up. He was a paid spokesman of FTX. He's listing his crypto entanglements, and talking them up 🙄
O'Leary echoes Toomey in his statements that Bitcoin "isn't a coin, it's software".
This is a recently popular argument, which seems to seek to lean on "code as speech" precedence.
O'Leary explains how HE will be the one to do the detective work on what happened at FTX.
He characterizes skeptics as "entrenched businesses" who "abhor competition".
Now Jennifer J. Schulp, who's in camp "this is an FTX problem, not a crypto problem". She's talking up defi.
She characterizes various regulatory suggestions from the crypto-critical as "taking technological choices out of people's hands."
"Risk is a natural component of markets, and failure is often necessary for development."
Now Ben McKenzie, who says the crypto industry depends on "misinformation, hype, and, yes, fraud".
McKenzie is outlining how he does not believe that cryptocurrencies are currencies, and how he believes that every cryptocurrency is a security.
"In my opinion, the cryptocurrency industry represents the largest Ponzi scheme in history." - McKenzie
Sen. Brown asks if this kind of fraud exists at other crypto firms.
Allen: Yes
O'Leary: Yes, at unregulated exchanges
Schulp: Most likely
McKenzie: It's endemic.
McKenzie outlining the cross-pollination between execs at online gambling and fraud enterprise Ultimate Bets and the crypto industry: Stuart Hoegner at Tether and Dan Friedberg at FTX
O'Leary not great at yes or no questions. He claims the comparison to gambling are outdated and like early comparisons of the stock market to gambling.
Sen. Toomey pushing back on McKenzie's claim that all cryptocurrencies—including Bitcoin—would be securities.
Not surprised there.
He's having Schulp make that argument for him.
The argument, a common one, is that Bitcoin is too decentralized to be classed as a security.
O'Leary outlines the potential for blockchains, saying that 1/3 of the MIT class wants to work in the crypto industry.
Maybe not the best argument given that SBF was an MIT grad...
O'Leary is blaming FTX's collapse on Changpeng Zhao (CZ) of Binance.
Hilary Allen explains how "proof of reserves" and other crypto industry attestations don't replace proper auditing.
Allen also says that arguments that crypto needs to be regulated completely differently from existing systems because "it's decentralized" doesn't hold water, and explains how the Bitcoin software and mining pools are highly centralized.
Sen. Menendez (D-NJ) asks O'Leary if he might not have lost money if FTX had complied with existing regulations.
He says absolutely, but FTX wasn't regulated.
Compelling.
Sen. Menendez (D-NJ) is worried about the extent to which crypto might be integrated with traditional finance, adding contagion risk.
Mendendez asks McKenzie how we could combat the advertising.
McKenzie says we should use the right terminology, classify cryptos as securities, possibly treat crypto as gambling and restrict advertising, and require disclosures.
Sen. Tester (D-MT) opens with skepticism, asks Allen how her concerns expressed in front of the Senate last year have developed.
She expresses her gratefulness that banking regulators have largely siloed crypto, and limited FTX's explosion from affecting traditional finance.
But she expresses concerns over how crypto and traditional banking are increasingly intermingling, and she says we need to "firm up" the separation between the two.
"We have to think about how much of this we're willing to tolerate in the name of innovation." - Hilary Allen
Allen explains how the subprime mortgage crisis exposure was around $1.3T, and the reduction in the crypto industry "market cap" (which she also expresses skepticism about) was on that order, so if crypto and tradfi had not been segregated, its failure could've been catastrophic.
Sen. Tester asks if, had the two been closely coupled, the government might have had to bail out crypto like it had to bail out banks in 2008. Allen says yes.
O'Leary points to LedgerX as the "only entity that didn't go to zero" in the FTX collapse as proof that proper regulation could have protected FTX investors.
He conveniently ignores the other US-based entities involved the bankruptcy.
Sen. Hagerty (R-TN) is concerned about a "similar implosion by Binance", which he says would be catastrophic for the crypto industry and for consumers. Asks how US regulators could work with global regulators to bring transparency to Binance.
Sen. Hagerty outlines ties he believes exist between Binance and the CCP, seems very concerned about that. Schulp decides to sidestep discussing those ties.
Sen. Warner (D-VA) is up. He's also concerned Binance and possible ties to the CCP.
Talks about the "clunkiness" of Bitcoin, lack of scalability, environmental cost.
Allen says we're sort of partway down the iceberg, points to the earlier Terra/Luna collapse.
McKenzie points out the existence of the "Exchange coordination" signal chat which included both CZ of Binance and SBF of FTX, describes it as an example of centralization in the industry.
McKenzie making sure to raise his concerns about the connections between Alameda and Tether.
Sen. Lummis (R-WY) is up. She's been among of the biggest crypto advocates in the Senate.
"Digital assets are not on trial. Fraud and organizations are on trial. Let's separate digital assets from corrupt organizations."
She namedrops Kraken, Coinbase, and Bitstamp as shining stars of the crypto exchange industry.
Wonder how those donations are looking.
Her first question might as well come from a talking Bitcoin.
Lummis: "Why do digital assets and DLT have the power to make our capital markets safer and more efficient?"
Shamelessly plugs her and Gillibrand's bill, "Responsible Financial Innovation Act", which she says she'll reintroduce next year.
Sen. Warren (D-MA) is up. Hold on to your butts, this is going to be a stark difference from Lummis.
Warren characterizes crypto as a tool for crime. She asks Allen about claims from the crypto industry that blockchains are uniquely transparent. "Does the fact that the blockchain is public mean it is more difficult for criminals to launder money using crypto?"
Allen explains that blockchains are "the worst of both worlds", and enable criminals to launder money while also making it difficult for average people to maintain privacy.
Allen explains that blockchains are "the worst of both worlds", and enable criminals to launder money while also making it difficult for average people to maintain privacy.
Allen explains that the claims that crypto could be more efficient, made by Schulp but also many others, rely on crypto sidestepping regulations on things like anti-money laundering. She describes crypto as "regulatory arbitrage".
Warren asks O'Leary if we should accept weaker KYC/AML in crypto because it is "so promising". He says no.
O'Leary: "I take issue, Senator, with your concept that it makes it easier to do money laundering. Currencies have been used for drug trafficking since the 60s."
wat
Argues that "USD is used for money laundering too". Warren isn't having it, saying yes—that's why the same rules should apply to crypto as to traditional finance.
"No!" - O'Leary
Sen. Van Hollen (D-MD) asks Allen what she would do if she was queen for a day.
Allen: "If I were queen for a day I would ban it. But if I was someone who was dealing with multiple constituencies..." she would strengthen banking law and prevent banks from touching crypto. Give SEC more money. Pass legislation classing all cryptos as securities.
#FTXhearing
#FTXhearing
Sen. Cortez Masto (D-NV) asks how we would regulate crypto.
O'Leary objects to Allen's suggestion that we ban banks from interacting with crypto, says it would "make US banks the most uncompetitive financial services industry in the world".
O'Leary starts to shill crypto, Cortez Masto cuts him off (thank god)
"If we allow crypto to infect our banking system, we will be back here, and not in a good way." - Ben McKenzie
Cortez Masto asks about the claims that this was an issue of centralization not crypto, asks if defi would've helped.
Allen states that defi is a marketing term, it's not very decentralized.
Allen distinguishes decentralization of networks from decentralization of power and economic decentralization.
Louder for the people in the back!
Sen. Smith (D-MN) characterizes FTX collapse as shocking but not surprising.
Says people should be allowed to invest however they like, but they should be able to trust that the market is fair and have transparency.
Smith outlines externalities of crypto mining, speaking of proof of work mining (used for Bitcoin and some others). Describes energy & pollution impact.
"The technology is bad." - Ben McKenzie
Sen. Sinema (something-AZ) is up now. She's another huge crypto promoter, and is talking up crypto's appeal to those skeptical of governments and centralized control.
Sinema refers to Prof. Allen as "him". Did she just now start listening?
Sinema is challenging Allen's and others statements to "let [crypto] burn", saying they're advocating for burning average retail investors.
🙄
Frank Millheim 
@molly0xfff just rolled out of bed, camera off, so, yes.
Elizabeth Alcinoe@molly0xfff She's horrible.
Lesley Carhart @molly0xfff just when I think she can’t get more seedy
Uncle 6 🌁@molly0xfff what are the !!!-ing odds
Rev. GothAlice@molly0xfff "Programmable money" and I thank you for your mental sacrifice to watch this so I don't have to. I had to turn it off. Oof.
Lee Fife@molly0xfff
Of course, she is ...
Of course, she is ...
Anarcho Doggo@molly0xfff lol that tracks
Bad at Names@molly0xfff Sounds about right for the morally bankrupt narcissist to take money to promote a pyramid scheme.
Doctor😷G 🇵🇹🇺🇸
Blake C. Stacey@molly0xfff My surprised face: 😐
Scotchfairy@molly0xfff not to mention the negative impact the crypto miners have had on computer & gaming console sales because they hoard GPU cards.
Come to think of it, the film industry has taken a hit from computer animation and special effects suffering the same problem.
Plus stress on already shaky power grid.
(This is all above and beyond the USUAL complaints made about crypto's negative effects)
Come to think of it, the film industry has taken a hit from computer animation and special effects suffering the same problem.
Plus stress on already shaky power grid.
(This is all above and beyond the USUAL complaints made about crypto's negative effects)
Aron Lee@molly0xfff Reminds me of the green currency calculator to explore how sustainable different currencies are. https://bit.ly/36MAAhB
@molly0xfff Makes me think of what Eugen Rochko (@Gargron) said when asked why he doesn't see crypto as part of a decentralized internet: crypto is "kind of a decentralized thing because you have all these nodes working together to maintain this blockchain, but at the same time it's just a single source of truth."
Alan Twigz
Dirk Hohndel
Aaron K.
yomikoma@molly0xfff that’s my senator! :D
Nick Messick
Quest(continued)
I usually enjoy listening to eWarren as she seems to come more prepared than most Senators. But the scare tactics of the "terrorist/drug dealer" rhetoric is just that, a scare tactic. One she bought hook, line, and sinker; perhaps from across the isle. To me, it's the equivalent of screaming 'what about the children?!?'
Luis Villa@molly0xfff literally, the 60s, money laundering was invented by Nero
kira :3@molly0xfff somehow cryptospeak doesn't have the same impact when it's said in a congressional hearing instead of a reddit post
@molly0xfff
I'll start by saying O'Leary is a tool. He can only answer yes or no when it serves his purpose, otherwise ol' windpipes comes out to bore us with the details that serve him. On the CNBC interview he couldn't answer how much of his own money he invested in FTX outside his ~$15M hype man fee, leading me to believe it is zero.
However, he has a point. Anything of value can be used to launder money. USD, crypto, property, services, anything of perceived value.
(continued)
@molly0xfff “regulatory arbitrage” is at the heart of this godforsaken valley, especially that hellmouth over in Shallow Alto
@molly0xfff Uber is not a taxi company. AirBnB is not a hotel company. Crypto is not banking. /sure_jan.gif
GayPunkRock 🏳️🌈🏳️⚧️@molly0xfff I know this is serious stuff but the name “Schulp” is *sending* me 🤣
George William Herbert
Andrew Bennett
Benjamin Brittain@molly0xfff I'm really appreciating your live-tooting of this
Dr. Octothorpe@molly0xfff Lisa Simpson: “Mr. Burns, your campaign seems to have the momentum of a runaway freight train. Why are you so popular ?”
0xC0DEC0DE07EA