Gamestop and Decentralization, Bitcoin.gov, and Sen. Lummis' New Bitcoin Caucus
HODLpac Newsletter - February 2021, Part 1
It’s been a crazy 3 months since our last newsletter. Oh, right, it’s only been two weeks. We have a new president, the 117th Congress is off and running, and crypto is still in the national spotlight.
Let’s jump in to what you need to know about crypto-related politics and policy.
You may have noticed that you’re receiving this email on a Tuesday instead of a Monday. We’re switching our publication schedule to the first and third Tuesday of every month for the following simple reason: we noticed that so much great content is published by others on Mondays and we need time to sort through it and include it here.
Also, if you don’t already, please follow us on Twitter: https://twitter.com/HODLpac
And join our Discord: https://discord.com/invite/fDxHZxJ
Now, here is what you need to know…
Decentralization’s Moment Continues
The main idea of our last newsletter was that the deplatforming hoopla that was (and still is) dominating the national conversation was a great opportunity to share the benefits of decentralization with both the general public and policymakers. The case for uncensorable, open internet systems (social networks, payment systems, etc.) was being made on the national stage right before our eyes.
Again, could we ask for a better headline?
Well, the dominant story of the past week is another such opportunity. Decentralization’s moment to shine continues.
The only thing anybody was talking about last week was Gamestop, r/WallStreetBets, and Robinhood.
It wasn’t long before the story made its way to Capitol Hill where it seemingly united disparate factions across the two parties. Here’s a handful of stories outlining how different policymakers reacted to the story:
“Something AOC, Trump Jr. and Ted Cruz can all agree on: GameStop,” Kellie Mejdrich, Politico
“When Ted Cruz and A.O.C. Agree: Yes, the Politics of GameStop Are Confusing,” Lisa Lerer and Astead W. Herndon, New York Times
Hearings are scheduled in both the House and the Senate:
Why does this matter for crypto?
First, as Jerry Brito and Peter Van Valkenburgh of Coin Center put it on the most recent episode of their Tangents podcast (which also has a great discussion on regulating DeFi), the arbitrariness of centralized power was put on full display (again). For example:
Robinhood prevented users from buying Gamestop, AMC, and other “meme stonks,” while still allowing them to sell. Putting aside conspiracy theories about why Robinhood did what it did (more on this below), it goes without saying that decentralized exchange (not a noun) can’t be shut down by any centralized party.
The second reason this story matters for crypto is a technical one: blockchain technology could help prevent similar situations from happening in the future.
To understand why, one must understand what actually happened “under the hood.” Here is Robinhood’s official explainer blog and a great, in-depth tweet thread:
In summary: securities trading is settled by firms called clearing houses, which have deposit requirements that brokers (like Robinhood) must meet. When a wave of retail investors came online all wanting to buy the same few securities, brokers’ deposit requirements skyrocketed and they were forced to close trading on those securities to limit the damage.
So, at the core of this system is a ledger of who owns what and how many securities.
Of course, blockchains offer a solution for things that involve ledgers. In particular, they offer instant settlement, transparency, and auditability, among other things.
Here’s some good resources from the Blockchain Association on the potential of digital securities.
“How Blockchains Will Catalyze Next Generation Securities Markets,” Blockchain Association
“How Regulators Can Help Pave the Way for the Adoption of Digital Securities,” Blockchain Association
Many in the crypto industry were quick to point out this out:
Senator Cynthia Lummis, who is quickly becoming one of our premier champions in DC (more on that below), also chimed in to point out that blockchain-based securities would prevent the overlending of shares to short-sellers.
As the ripple effects of the Wall Street Bets saga make their way through Washington, the crypto community should make sure our voices (and solutions) are heard.
However, we also have to engage with the powers that be to create new systems around the technology we promote. As Jill Carlson rightly points out in her recent CoinDesk article, technology alone is not the solution.
But the issues lie not with the technology. They lie with the way the protocols, processes, rules and laws around the market were designed. And these kinds of issues do not go away no matter how decentralized your trading venue is or how many blockchains you are using.
Indeed, it takes buy-in from all corners of society — governments, corporations, the public, and so on — to make big changes like the ones the crypto community wants to see made to some our most important systems.
Our work is cut out for us but, if you’re reading this, you are well-equipped to contribute to getting it done! Contacting your representative, voting with your dollars to support decentralized alternatives, and donating to HODLpac or Coin Center are all ways you can make a difference.
Last week, Representatives Tom Emmer (R-MN-6 ) and Patrick McHenry (R-NC-10) — the most recent chair of the NRCC and the ranking member on the House Financial Services Committee, respectively — showed why they should be considered among crypto’s strongest allies in Congress by publishing the Bitcoin white paper on their official government websites.
Check it out:
Patrick McHenry @PatrickMcHenry✅ https://t.co/JM7iqzWqiC Policymakers should be on the side of innovation and ingenuity, which are vital to American competitiveness. I hope others in US govt join me. #Bitcoin
Let’s try to get more members of Congress to join them…
Tom Emmer @RepTomEmmer✅ https://t.co/y7usH4gJBV #Bitcoin https://t.co/CNdrDiukCp
If you respond to the above tweet thread and tag your representative we’ll send you 15 HODLvotes to use to decide who gets donations during our next Community Ballot.
Senator Lummis’ Bitcoin Caucus
One of the pieces of content released yesterday that we changed the publication date of this newsletter to include was newly-elected Wyoming Senator Cynthia Lummis’ appearance on the Pomp Podcast.
During the podcast, Senator Lummis announced she will be pioneering a new Financial Innovation Caucus to educate other senators on cryptocurrency and digital assets.
Presumably, this new caucus will overlap with the existing Blockchain Caucus in the House of Representatives.
We’ll be updating the HODLscore section of our website to reflect these developments.
“The False Narrative Of Bitcoin’s Role In Illicit Activity,” Hailey Lennon, Forbes
“‘Crypto Mom’ Hester Peirce calls for more regulatory coordination,” Forkast Podcast
“SEC and others may be looking at regulating DeFi. But how?,” Lachlan Keller, Forkast News
“They Found a Way to Limit Big Tech’s Power: Using the Design of Bitcoin,” Nathaniel Popper, New York Times
“Geopolitics at Stake in US Response to China’s Digital Yuan: Report,” Benjamin Powers, CoinDesk
“The Store of Value Generation is Kicking Your Ass and You Don’t Even Know it,” Mark Cuban, Blog Maverick
“Cryptocurrency Exchange Coinbase Picks Direct Listing Over IPO,” Crystal Tse
and Katie Roof, Bloomberg
“Ripple files court response to the SEC's XRP lawsuit,” Michael McSweeney, The Block
Did we miss anything?