Molly WhiteMcKenzie 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 He claims the comparison to gambling are outdated and like early comparisons of the stock market to gambling.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.
🙄
Sinema ostensibly asked Allen a question, but she's just grandstanding.
Sen. Toomey is back and shilling. "We haven't talked as much as we ought to about some of the, I think, really exciting and terrific applications that the crypto ecosystem makes possible".
Sen. Brown talks about "regulatory clarity", asks if crypto platforms could even
comply with regulations if that had the clarity.
Allen says no.
And with that, the hearing is over.
Elizabeth Alcinoe@molly0xfff Thank you, Molly!
spherulitic@molly0xfff thank you for covering this! Great stuff 👍🏼
Nancy White@molly0xfff Many thanks.
reversion to the deoradh™@molly0xfff many thanks
Rodney Norris@molly0xfff Thanks! This allowed me to follow along while in work meetings.
Aaron K.
mcneely@molly0xfff how on earth did O'Leary get included in this panel? What exactly are his qualifications other than "TV Money Guy"TM
Dr. Juande Santander-Vela@molly0xfff thanks for this! Loved the “soul leaving body” picture 😉
Kim Spence-Jones #FBPE@molly0xfff Thank you so much for this thread. 😍
Tess Elation@molly0xfff thank you again!
goat@molly0xfff "Imagine the grand possibility of me making loads of cash!"
Buck@molly0xfff "everyone please envision a large pyramid...."
Live, Laugh, Lovecraft
David Alpert@molly0xfff Does he say what any of those, um, are? Because I’d love to know as well!
bdha@molly0xfff As a Philadelphian, the door can’t hit Toomey on the way out soon enough.
Matt Chambers@molly0xfff Definitely shilling.
John Refior@molly0xfff Things like sanctions evasion for North Korea, or money laundering for ransomware attackers who shut down hospitals
https://apnews.com/article/cryptocurrency-technology-science-business-north-korea-d83c20b00b9abc973926dc93be0b6b35
#cryptocurrency #Toomey
https://apnews.com/article/cryptocurrency-technology-science-business-north-korea-d83c20b00b9abc973926dc93be0b6b35
#cryptocurrency #Toomey
Cryptocurrency expert gets 5 years in NKorea sanctions case
NEW YORK (AP) — A cryptocurrency expert was sentenced Tuesday to more than five years in federal prison for helping North Korea evade U.S. sanctions. Virgil Griffith, 39, pleaded guilty last year to conspiracy, admitting he presented at a cryptocurrency conference in Pyongyang in 2019 even after the U.S.
Versian SystemI need to know what the exciting and terrific applications he thinks is possible with Crypto that can't and isn't already being solved in other less complicated and world ending methods.....
Cranky David@molly0xfff
rampant fraud and extortion aren't exciting enough for him?
rampant fraud and extortion aren't exciting enough for him?
@molly0xfff what were those, reportedly? Not that I believe there are, mind you…
trash vampire@molly0xfff as one of his constituents I am shocked his bad opinions would extend to crypto.
Metacodger@molly0xfff Sen Toomey is right. How else would we enable sex trafficking, kidnapping payments, and ransomware?
Oliver@molly0xfff "whereof one cannot point to a single solitary example in all these wasted years, thereof one cannot speak" Sen. Wittgenstein (D - Phil)
Peter@molly0xfff I really just cannot understand where these people are coming from. They must be getting paid so much, or have some big payoff waiting for them. It’s unbelievable!
RealGene ☣️
Luke Seale@molly0xfff lmao I loved that his example was smart contracts. As though before crypto there was no way to get computers to automatically transfer money.
Uncle 6 🌁@molly0xfff what, no, surely not
@molly0xfff on brand for her.
Sporticus@molly0xfff play stupid games, win stupid prizes. Freedom to toss your money into a wood chipper is still freedom.
Steffan Ziegler@molly0xfff "won't someone think of my apes?"
Blake C. Stacey@molly0xfff Gallego will have to list this hearing as an in-kind campaign contribution.
Frank Millheim 
@molly0xfff just rolled out of bed, camera off, so, yes.
@molly0xfff She's horrible.
Lesley Carhart @molly0xfff just when I think she can’t get more seedy
@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 🇵🇹🇺🇸
@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."