1/ My worst fears have been realized.

Many will think that those are that Operation Chokepoint 2.0 is real. And here's the thing: I've known that for a while. What was not known to me was whether OCP 2.0 was founded on a concern about sophisticated understandings of the banking 2/ system connections to the traditional financial system (which I think are overblown, but some hold), or rather if it was based on mere technophobia and aversion to new technologies where the banking regulators were throwing the baby out with the bathwater.

0/ I have a homecoming announcement, after having a surreal and exceptional experience earlier today.

I will be teaching at @NYUStern this fall, continuing my ongoing quest to improve the education around blockchains, decentralized finance, and fintech evolution in general. 1/ In 2010, I graduated with my MBA from @NYUStern. MBAs are a weird sort of degree sometimes, halfway between practical and academic in a way that can either be awkward or incredibly powerful.

Thanks to a number of exceptional professors, including David Backus (may he rest in peace), David Yermack (shockingly early to blockchain), Richard Sylla (a true financial historian), @VasantDhar (who is almost single-handedly responsible for my original interest in trading technology, so really you can blame him for all of this), and so many more I do not have space to name here, I left Stern with a far greater depth of understanding of finance than I expected.

0/ I want to echo @ccatalini here and double down:

When in history has it been a good idea to stand in front of technological progress and shout stop?

Historically, that's been a great way to get run over by the speeding train of human ingenuity. Not pleasant!

https://twitter.com/ccatalini/status/1821924148941353180

1/ In particular, the reason this is going to look so foolish is not some of the things you will hear from the OG crypto libertarian cohort (#BTC, as much as I think it's cool and is an interesting innovation, is not on the path to become money globally, ht: @GeorgeSelgin).

0/ Today, we are forced to return to an incredibly unfortunate subject: Operation Chokepoint 2.0.

I will include the press release from the Federal reserve at the end of this thread, along with @nic__carter's original article on OCP 2.0. 1/ So let's start with a quick summary. After the carnage of 2022 in crypto markets, and the belated realization by banking regulators that crypto was a risk, they came to a couple of determinations that have proven incredibly toxic (and maybe illegal):

0/ So @GaryWinslett recently asked for a defense of crypto and why he, as a well-situated middle class American who largely thinks our system works, should believe in it or support it. I think that’s a totally legitimate question to ask, and one that cuts to the heart of why the debate has been so broken.

I think it was also asked in good faith, so I believe it deserves a real answer. One of my criticisms of the crypto space is that CT has a bad habit of just screaming at people instead of actually debating real concerns and questions, and I don't want to behave like that myself. Thus, I am going to endeavor to answer Gary in a few parts, and specifically point to some things I think align with the worldview of many antitrust folks, YIMBYs, classic liberals, and those who care about financial inclusion.

In other words, good question Gary, and I am glad you asked. 1/ One important thing to remember is that the starting point here is not neutral. The current position of the American government with regard to crypto is hysterically against. @SGJohnsson has a good thread on the receipts that I will put in the appendix of this post, so without turning this into a very long post about the wrongdoing of the Obama administration with regard to crypto, it’s important to understand that the current position of the administration is this:

If you have a token, you are a security, and there is no functional way to register or trade tokens as security, so your only recourse is to shut down. This is both unsupported by law (and if you don’t believe me, please read @NYcryptolawyer's scholarship on this issue) and a backdoor ban by the SEC without any legislative or commercial purpose behind it.

Also you’re not allowed to have a bank account. No, literally, the FDIC went around pressuring banks to close the accounts of almost all crypto companies in the wake of the 2022 events (and if you don’t believe me, read @nic__carter's piece on Operation Chokepoint 2.0, the details of which will shock you). This is the equivalent behavior to, when Bernie Madoff turned out to be a giant fraud, running around to all American banks to have them shut down the accounts of asset managers.

Additionally, Biden has been actively blocking all attempts to unwind what is, essentially, an extra-judicial blockade against the space. Biden vetoed the SAB-121 repeal, a custody rule promulgated by the SEC that bans people from doing crypto custody and, to make it even better, puts the assets of customers of crypto custodians at risk during a bankruptcy by making it entirely possible they are not bankruptcy remote. This is an anti-secure custody rule! And the Biden administration blocked the repeal, which was bipartisan!

Finally, if you look at the enforcement actions in the space, there have been a number of massive frauds: 3 Arrows Capital, Celsius, Terraform Labs, FTX, etc. How many of those were enforced against? Zero, until very far after the fact in a few lagging cases, and those mostly by the DoJ! Who did they enforce against? Coinbase, Kraken, Consensus, etc. Can anyone tell me what the logic is of an executive effort that specifically lets criminals go free until it blows up so much it hits the press, but attempts to prosecute those trying to obey the law and treat customers well? It’s hard to perceive that as legitimate.

In some cases, the administration itself is the criminal. The SEC was sanctioned for committing perjury in the Debt Box case, both forcing a whole project offshore and damaging the participants while lying to a Federal judge in such spectacular fashion that the entire Salt Lake City office of the SEC has been shut down after sanctions being levied against them. Again, none of that is hyperbole. This happened.

So my first point to people with the same question as Gary would be this: you may think your default stance is not caring, but your default stance is actually a complete disregard of constitutional rights and instead support for an extrajudicial, highly illegal, and incredibly stupid (if you don’t believe me, and you are a Democrat, imagine the Trump administration about to run this playbook against green energy, abortion providers, public sector unions, etc. and pointing at literally what Biden did as precedent) campaign against the industry.

TL;DR: we are not starting from zero. You’re actually on the side of a jihad against this technology, with the base assumption that it’s not just silly and useless, but evil on par with North Korea.

1/ A brief 🧵here as Gabe hits at the core of my concerns with the SEC approach.

The SEC is, allegedly, a regulator charged with protecting the integrity of markets. This includes protecting investors from scams, conmen, misinformation, etc. It includes policing insider trading.

https://twitter.com/lex_node/status/1668627925573447681

2/ It also includes liquidity, capital formation, and the general well-functioning of markets, either explicitly or implicitly (as blowing up market liquidity is sure not investor protective).

Given that things like IPOs and companies are long-term investments and the kinds of

1/ Some brief thoughts with a bit of a focus on crypto with regard to the action in banks today. First, the overall problem we are facing with banks is on the asset side of the balance sheet. Rising rates mean that fixed rate instruments (bonds, loans, etc.) have all declined 2/ in value. Any forced liquidations of those prior to maturity realize losses. Similarly, a lot of sectors of the lending market look shaky to varying degrees: commercial real estate, autos, etc. What this means is that there is a lot and growing worry about the quality and

1/ Today, I finished teaching the final class of the semester in my blockchain course along with my co-professor Gur Huberman at Columbia. A couple of observations on teaching in the space, and some thoughts on what it means overall: 2/ First, my students are smart, motivated, and curious. This was a late Thursday afternoon, filled with 2nd year B-school students (which for those of you who don't know, I can say having gone to b-school myself that means you are totally checked out and ready to party before

1/ I told my class yesterday that MiCA might be the most significant development in crypto for the next two years. If the details work out (always TBD as they implement), the EU has created a framework to formalize how crypto works in the largest economic block to effect such 2/ rules. In the past, when Europe has taken these steps, normally they have been surpassed as a place for innovation by the United States. However, in this case, the hysterical response towards a new technology by US regulators and some politicians means that the EU has a

1/ Strong disagree. I agree they are no great innovation (that is the blockchain), but this incessant idea that somehow there is no KYC for fiat-backed stablecoins is profoundly incorrect.

https://twitter.com/jp_koning/status/1648744304293052433

2/ First, to mint that much in stablecoins, or in fact to mint even literally $1 of stablecoins, you do have to KYC. Nobody gets to mint or burn on the regulated ones without doing this. It’s a traditional financial transaction and you obey those rules.