Are Democrats Against Crypto? Rep. Ritchie Torres Answers

Are Democrats against Crypto? That’s the question we bring in today’s State of the Nation with New York Representative Ritchie Torres. It seems that crypto is becoming an increasingly divisive and polarized topic in the halls of Congress, and we are hopeful that we can find some common ground on both sides of the aisle. Crypto is good for the American people. It’s as simple as that. ------ 🚀 Airdrop Alpha is waiting for you on Bankless.com https://bankless.cc/Alpha ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://bankless.cc/kraken 🧠 AMBIRE | SMART CONTRACT WALLET https://bankless.cc/Ambire 👻 PHANTOM | FRIENDLY MULTICHAIN WALLET https://bankless.cc/phantom-waitlist 🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask ------ Topics Covered 0:00 Intro 7:00 What is MEV? 13:30 MEV is Subjective 17:15 The Oil Analogy 21:15 The Benefits of Smoothing 28:35 Builders and Proposers 38:45 Forced Centralization 44:35 Rug Pool Protection 48:30 Distribution 58:20 Pros of Burning 1:05:15 Burning on Overdrive 1:09:30 Does this Hurt Stakers? 1:13:55 Too Deflationary? 1:23:30 Monetary Premium 1:28:15 EIP-4844 1:31:00 The Engine 1:35:50 Wen? ——— Resources: Rep. Torres https://twitter.com/RitchieTorres?s=20 ---- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:04Ryan Sean Adams?

  Bankless Nation, we have a special episode for you today, a bonus episode. The question on my mind is, are Democrats for or against crypto? We have Representative Ritchie Torres, who happens to be a Democrat, helping to answer that question. I'm taking this episode solo today, but it is jam-packed. This is our first Democratic member of Congress on Bankless, so you know we had to ask him, what does he think about crypto? Is it a partisan issue? What does he think of Gary Gensler and CDBCs? Will crypto become a 2024 election campaign issue? And how about his party? How about the Democrats? How do we get more support for crypto among progressives and among Democrats? That was the question today.

• 0:47Ryan Sean Adams?

  So yes, we are having a politician on the podcast today. And I want to begin by saying this, Bankless is not a political podcast. We're not red, we're not Team Blue, we don't have a party affiliation to the US or in any country. What we do care about are values like decentralization, autonomy, and power to the people that underlie crypto technology. You've heard us talk about this before on the Bankless podcast, and to the extent these values are political, so are we. This is not a clean party lines distinction. We'll have anyone on the podcast from Team Red, Cynthia Lummis, Ted Cruz, they're all welcome here, so is AOC and Elizabeth Warren. We just want to have the conversation. For my own part, as I've said before, I see massive value for both conservatives and

• 1:30Ryan Sean Adams?

  true progressives in the crypto movement, and I think that'll come out here today. I'll be back to have this conversation with Representative Ritchie Torres, right after we hear from the fantastic sponsors who made this episode possible, including Kraken, our number one recommended crypto exchange. Go create an account.

• 1:47David Hoffman?

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• 2:32David Hoffman?

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• 3:16David Hoffman?

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• 4:01David Hoffman?

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• 4:15Ryan Sean Adams?

  Bankless Nation, I'm super excited to introduce you to Representative Ritchie Torres. He's a member of the US House of Representatives from New York's 15th Condesional District. This is basically the Bronx. Representative Torres was elected to Congress in the 2020 elections and is one of the few members of the Democrat Party who is pro crypto. And that is great to hear. Representative Torres, welcome to Bankless. How you doing today?

• 4:39Speaker 02

  It's a pleasure to be here.

• 4:41Ryan Sean Adams?

  Can you tell us firstly, we've been looking for some Democrats to come on Bankless to talk a bit more about crypto, and you are a name that has come to mind more than a few times. Tell us about your position on crypto. Why are you supportive? Why are you pro crypto?

• 4:57Speaker 02

  Sure, and I should start with a disclaimer. I've never been a user of crypto. I've never been an investor in crypto, so I have no personal skin in the game, but I do have an intellectual curiosity about the innovative possibilities of crypto and blockchain. Like, I'm drawn to the potential of blockchain to radically decentralize the internet, creating a new layer, commonly known as Web 3, or radically decentralize finance, creating a better, cheaper, and faster payment system, particularly for the lowest-income families. I'm excited about the possibility of creating a decentralized economy, progressive ownership

• 5:41Speaker 02

  society, in which workers and creators can keep a greater share of their own income, can enjoy and own the fruits of their own labor. I'll use an analogy. So I represent a neighborhood known as Arthur Avenue, which historically was actually controlled by the mafia. And if you owned a business on Arthur Avenue, you would have to pay a toll or taxes to the mafia. And there's a sense in which big tech is the mafia of Web 2. Apple has a take rate of about 30%, YouTube 50%, Facebook 100%. In fact, big tech has a much higher take rate than the mafia.

• 6:23Speaker 02

  And so what I find most appealing about crypto and blockchain is that it will enable workers and creators to liberate themselves from the excessive and often extortionary rent-seeking of the legacy financial system and the legacy internet.

• 6:38Ryan Sean Adams?

  These are many of the benefits that we see, Representative Torres, but I want to ask you the question. If you could do some political analysis, how come you think this topic of crypto is so polarizing in Capitol Hill?

• 6:54Speaker 02

  Well, I think the starting point is a lack of education. Like, everyone seems to have an opinion on crypto. Everyone has heard of crypto, but few people can define it. I mean, I would venture to guess that most members of Congress could not define crypto, blockchain, and Web 3, and yet everyone is rushing to offer an opinion on the subject. So, the, you know, I said earlier at a congressional hearing that there seems to be an anti-crypto derangement syndrome that has clouded clear and rational thinking about the subject of crypto, and much of it is rooted in ignorance. What you will find is that the pro-crypto members of Congress are much more knowledgeable about the technology than the opposition.

• 7:40Ryan Sean Adams?

  Would you think, there was a time, I would say, in the not-too-distant past, where I would have said crypto was kind of a bipartisan issue, and there was kind of some bipartisan support, but not a lot. A lot of bipartisan apathy, I would say, or neutrality, let's say. But increasingly, it's seemed to have split among party lines. And I'm wondering if you see that, and I'm wondering if you're like, what could you say on behalf of Democratic Party? Like, how would you sell members of the Democratic Party on this technology? And why do you think it has split across partisan lines?

• 8:21Speaker 02

  Well, my perception is that the divide on crypto is not so much partisan or ideological as it is generational. You will find that younger Democrats like myself and Wiley Nickel, who sits on financial services, are much more open to the innovative possibilities of crypto and blockchain. And I want to be, you know, crystal clear, whatever one's personal view of crypto is irrelevant. Like, for me, as a policymaker, my role is not to evaluate the utility of crypto and blockchain. Right, you know, the role of government is not to sabotage innovation. The role of government is to ensure that innovation is safe for consumers and investors.

• 9:06Speaker 02

  And so that's the role that I see myself as playing in the United States Congress. As you know, Congress is something of a gerontocracy. Until recently, our three leaders in the Democratic Caucus were all above the age of 80. Almost all of our committee chairs are above the age of 70. And so among the leading members of Congress, there tends to be a xenophobia about new technologies like crypto and blockchain. So I see it more as a generational divide than an ideological one.

• 9:37Ryan Sean Adams?

  More of a generational divide than an ideological one. And so you do think that there are wins for the Democratic Party and kind of the policies and the things that the Democratic Party values. There are lots of wins in crypto. So would you point to like?

• 9:52Speaker 02

  I think everyone has, like, there's a sense in which crypto is a Rorschach test.

• 9:56Ryan Sean Adams?

  Right.

• 9:57Speaker 02

  On which you can project your ideological values. You know, a libertarian sees in crypto a tool for an alternative to government control. A progressive might see in crypto an alternative to corporate control or a tool for aiding the most vulnerable in our society. And a conservative might see in crypto a tool for creating a civil society on the internet. So it's like a buffet. There's something for everyone in the world of crypto and blockchain. And I can explain briefly why it appeals to me. I represent New York 15, which is the South Bronx. It's the poorest congressional district in America.

• 10:38Speaker 02

  And so I represent families who are struggling to put food on the table and pay their bills and keep their families afloat. And these are families who have been catastrophically left behind by the traditional financial system. But I represent immigrants who pay exorbitant fees in order to transfer their own money abroad to their loved ones. You know, about a decade ago, the New York City Department of Consumer Affairs did a study and found that low-income people in places like the South Bronx. Pay $200 million a year on check cashing fees.

• 11:16Speaker 02

  People of color in places like the South Bronx. And so for me, a technology like blockchain can enable the lowest income families to transfer remittances while escaping the long delays and the high fees of the traditional financial system. And that's a game changer.

• 11:36Ryan Sean Adams?

  What would you like to see Congress or the US do to sort of support the use cases and the crypto technology that can bring the change that you just discussed? What could Congress be doing? What should it do?

• 11:54Speaker 02

  Well, Congress should create a workable but rigorous framework for regulating crypto. We should create a framework that enables the best actors to innovate while filtering out the worst actors. And what I find fascinating is the debate in Congress is not how to regulate crypto, but whether to regulate crypto. You know, there is an anti crypto faction which has taken the position that crypto should collapse under the weight of its own volatility and that to regulate crypto is to legitimize it. Whereas I feel differently. I feel like we have an obligation to create an environment in which the worst actors are held accountable, but the best actors are given the freedom to innovate,

• 12:39Speaker 02

  to build on the computing platform that is blockchain.

• 12:44Ryan Sean Adams?

  I think this sounds reasonable. I mean, one of the criticisms, though, from the crypto community to regulators and to the US government is entrepreneurs and those good actors trying to work on some of these cases that you just mentioned don't have sufficient regulatory clarity. There's a kind of an encounter in a congressional hearing a couple of weeks ago where members of Congress repeatedly asked the leading regulator of the SEC, Gary Gensler, to just tell us a simple matter, second largest market cap cryptocurrency, that is Ethereum, whether it's a security or not. And he failed to do that. He wasn't able to do that. How could we get more clarity to the industry?

• 13:27Ryan Sean Adams?

  Do you agree that the clarity that we have is not sufficient to foster this technology and to have it achieve some of these cases that you mentioned in the United States?

• 13:39Speaker 02

  There is a lack of regulatory clarity. The SEC under Gary Gensler has not issued a single rule relating to crypto. It has not issued a single piece of guidance relating to crypto. It has simply taken enforcement actions that come out of nowhere. And the crypto community feels ambushed by the SEC. It feels like the SEC is weaponizing the registration process against the crypto industry. For me, clarity is the cornerstone of compliance. The government has no right to accuse you of speeding unless it is telling you the speeding limit, unless it is clearly defining the rules of the road.

• 14:21Speaker 02

  And so there needs to be a greater regulatory clarity. And I confronted Mr. Gensler a few weeks ago, and I said to him, the lesson learned from the failure of FTX is that companies like FTX, offshore, over-leveraged, deregulated companies, bear the greatest risk of losing customer funds. So why not focus your enforcement efforts on companies that bear the same characteristics as FTX? And yet, Mr. Gensler has done otherwise. Instead of targeting Sam Bankman-Fried, he's chosen to target Kim Kardashian. Instead of targeting an offshore exchange, he's chosen to target Coinbase.

• 15:03Speaker 02

  Instead of targeting an offshore, stablecoin issuer, he's chosen to target Paxos, which is rigorously regulated by the New York State Department of Financial Services. And so when I brought up these points to Mr. Gensler, he more or less conceded the premise of my question. And in my view, his enforcement priorities are catastrophically in the wrong place.

• 15:24Ryan Sean Adams?

  Is this just a problem with one rogue regulator in the SEC? Or is it deeper than that? Some in crypto have brought forth this idea of maybe an operation checkpoint where there is an all-out assault on crypto that spans multiple regulatory branches and multiple areas of government, where it's become much more difficult even for a crypto entrepreneur or a startup to actually get a bank account. We can't even get the industry banked in a regulated way. Is this one rogue actor? Or do you feel like it's deeper than this?

• 16:01Speaker 02

  There is skepticism about crypto across the regulatory state, but Gary Gensler stands in a class of his own when it comes to weaponizing the registration process against crypto. And what I find ironic is that Mr. Gensler himself was once a supporter of crypto and blockchain. I mean, he taught a course on blockchain when he was at MIT. A few weeks ago, there was a video of Mr. Gensler shilling for a particular blockchain. So there's the old Gary Gensler, who was a crypto cheerleader. And then there's the new Gary Gensler, who's a crypto critic. And the new Gary Gensler would accuse the old Gary Gensler of selling an unregistered security. So it would be amusing were it not for the fact

• 16:45Speaker 02

  that his approach to crypto is driving the activity offshore, which will only create more companies like FTX.

• 16:53Ryan Sean Adams?

  Representative Torres, why does this happen to people when they go to DC? I mean, like, this is kind of a fundamental question I have generally. And I think a lot of members of our generation have. It just seems like there's this corrupting force where, you know, before you get to DC, you have one vision for the world and have one set of values. And then after you get to DC, all of that changes. Why is there a new Gary Gensler? Why does that have to be the case? Is there just a corrupting force? Or like, how do you explain this?

• 17:27Speaker 02

  Politics poisons everything it touches. And when regulators act like politicians, it has a distortionary effect on industries like crypto. You know, there are politicians and regulators who are intent on portraying crypto as the villain in order to portray themselves as heroes, as saviors. And so for me, it's ultimately driven not by principle, but by politics. That's how I view the behavior of these actors.

• 18:01David Hoffman?

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• 18:45David Hoffman?

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• 19:30David Hoffman?

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• 19:46Ryan Sean Adams?

  Can you tell me about your policy or stance on central bank digital currency? So, there are different things people mean when they say CDC, right? And recently, there's been more political clamor about certain...

• 20:05Ryan Sean Adams?

  Certain politicians rejecting the idea of a CBDC. You know, DeSantis in Florida has even worked on some legislation to have it banned in Florida. What's your take from your community and from kind of the value set that you just purported? What's your take on a central bank digital currency? Is that a good thing for the United States? Does it require safeguards? Are you supportive of it? Or do you not like the idea of a central bank digital currency?

• 20:34Speaker 02

  To be honest with you, I have no strong opinions about a CBDC. I would have questions. So first, I do believe that the Federal Reserve does not have the authority to create a CBDC without the express approval of Congress. I feel like that's such a consequential policy that Congress ought to weigh in on the matter. So that's why I agree with some of the criticisms. But the question I would ask is, what function would a CBDC perform that could not be performed presently by a stablecoin? If it's simply mimicking the function of a stablecoin, then I would question the necessity of it, the utility of it.

• 21:19Speaker 02

  But if there's a value add, then I would have an open mind about it. So it depends on what the arguments are made with respect to CBDC, but I certainly believe that if there were to be a CBDC, it would have to perform a function that's not presently performed by a stablecoin, and there would need to be clear congressional authorization. You know, one of the common misconceptions about crypto is that cryptocurrency would pose an existential threat to the status of the dollar as the world's reserve currency. But we've actually seen the exact opposite. You know, the fact that most stablecoin issuers have chosen to peg their dollars, peg their stablecoins to the dollar.

• 22:02Speaker 02

  reinforces rather than challenges the supremacy of the US dollar. And so crypto blockchain, stablecoins have enabled the United States to outcompete countries like China in the realm of digital currencies, even without a CBDC.

• 22:19Ryan Sean Adams?

  One thing I think the crypto community is worried about, and I would say the larger community that cares about digital privacy and civil liberties in the US is worried about a some version of a central bank digital currency that is completely surveilled, that does not take privacy into account. Lately, you know, crypto itself has come under fire and recently, I'm not sure if you've been following this, but there has been a series of smart contracts on Ethereum, tornado cash, privacy mixer, basic privacy technology on Ethereum has been OFAC sanctioned. And so the worry in the crypto community and the digital privacy community at large

• 23:04Ryan Sean Adams?

  is if there is some version of a central bank digital currency that moves forward, right? And it does make sense that it will have, it will be government surveillance attached. And American citizens will lose their right to privacy, the same right to privacy they had with physical cash. If I give you cash, a $20 bill, Representative Torres, there is no tech company, there is no agency in the US government that is tracking that transaction. We're worried we lose that with the move to digital privacy, to a central bank digital currency or some sort of government mandated CBDC. Can you weigh in on that?

• 23:49Ryan Sean Adams?

  How important is this fight for privacy in your eyes?

• 23:53Speaker 02

  It's so consequential as to be existential for our democracy. I mean, you know, a totalitarian regime like the Chinese Communist Party is intent on creating a CBDC so that it can monitor the transaction of every Chinese citizen and have the authority to unilaterally exclude disfavored citizens from the financial system. So that's the kind of authority that should never exist in the United States, that if we were to ever create a CBDC, there has to be strong safeguards for privacy and civil liberties, and those should be non-negotiables. And then even if we were to have a CBDC, the uses should be limited. You know, I could imagine one circumstance in which it could be useful.

• 24:35Speaker 02

  So if the economy were on the verge of collapsing and we were on the verge of facing a Great Depression, then certainly something like a CBDC could enable an instantaneous injection of stimulus that could lift up the economy. But again, outside that context, I feel stable coins are performing the same function and probably could perform it more joyfully.

• 24:57Ryan Sean Adams?

  Do you see the crypto becoming an increasing political issue when we get to something like the 2024 elections or maybe crypto and CDPC, these types of issues, will they rise to the level of national conversation?

• 25:13Speaker 02

  Well, there are certainly more elected officials who are villainizing the crypto industry and scapegoating crypto as if it were the root of all evil in society. You know, I said earlier that Congress has an anti-crypto derangement syndrome and it's pervading our politics. But, you know, I see a disconnect because within the crypto community, I see a groundswell of enthusiasm and engagement. But there has been a failure to translate that grassroots enthusiasm for crypto into an effective operation in Washington DC. And at some level, it's understandable. You know, people see politics as something to be avoided. You know, people are so cynical and so disillusioned that they would rather keep

• 25:57Speaker 02

  politics at arm's length, but there's no escaping the power that politics wields on your life. And if you if you disengage, you might react when it's too late. And that's why there's such antagonism toward the crypto industry, because the crypto community has not told its story in Washington DC. It's had its story told for for the community by others.

• 26:23Ryan Sean Adams?

  How would you advise us on that? How can we as the crypto community step up and do better to educate and to tell our story?

• 26:35Speaker 02

  Well, there's there among some members is a prejudice against crypto. And prejudice means judging before knowing. And so if there's no knowledge of crypto, if there's no firsthand engagement with crypto entrepreneurs, then you become a boogeyman who can be easily villainized and scapegoated. And so I would encourage crypto entrepreneurs to meet with their members of Congress and explain the transformative power of the technology in their lives, like make what is presently abstract more real to those members of Congress. There's no substitute from hearing directly from the people who vote you into office. And I know people find politics nauseating and something to be avoided at all costs. But the the future of crypto

• 27:19Speaker 02

  depends on political and civic engagement.

• 27:23Ryan Sean Adams?

  So engagement, engaging representatives, talking about the issues.

• 27:27Speaker 02

  And not simply leaving it to lobbyists, but but the entrepreneurs themselves, the innovators themselves should meet with their members of Congress and make the case for crypto. And that's more powerful than you think. For me, there's nothing more powerful than hearing directly from the people I represent in the Bronx.

• 27:45Ryan Sean Adams?

  One item that is adjacent to crypto, but somehow also affecting it are the recent bank failures. And so we've seen a few bank failures in March and one as recently as last week with First Republic Bank. What's going on here? Do you have any takes?

• 28:00Speaker 02

  It's straightforward. There's a classic series of bank runs. You know, it's largely a story of interest rate management failure. When interest rates rise, long-term assets become less valuable, but deposits become more valuable. And so if you have a stable deposit base, the gains from your deposits should offset the losses from your long-term assets. But if you have an unstable deposit base, then there's no structural offset. And that's precisely, that explains the failure of Silicon Valley Bank. 90% of the deposits

• 28:45Speaker 02

  at Silicon Valley Bank were uninsured, and the largely uninsured unstable deposit base of Silicon Valley Bank left it wide open to a bank run, particularly in the age of social media. You know, the speed of the Silicon Valley Bank failure was historically unprecedented. In 2008, Washington Mutual, which was the largest bank failure in history, saw the loss of about 16 billion in the span of 10 days. By contrast, Silicon Valley Bank saw the loss of 42 billion in the span of a few hours. So, social media has enabled financial panic to spread on a scale and at a speed that we've never seen before.

• 29:26Speaker 02

  And banking regulators have to think about the role of social media in financial panics.

• 29:32Ryan Sean Adams?

  Representative Torres, we've talked a lot about crypto. We just talked about the bank failures and some of your takes on that. We're engaging in crypto with, you're right, an audience that skews younger, certainly. And I think that's where this community kind of has arisen from. And I speak to a lot of younger people who are basically jaded by politics. There's almost this nihilism, this this lack of hope. And you know, crypto has been advertised as like, oh, it's a way to escape from the system. And my encouragement has been for young people to to engage in the political process as as you have encouraged us here today.

• 30:13Ryan Sean Adams?

  But I think in order to engage, they have to have some hope that they will be heard, that things can change. As we close out this this episode, can you provide us some hope for the future? Like, what is going well about America right now? Where can we end up at the end of this decade? Give us a reason to engage in in the political process. Give us some hope here.

• 30:39Speaker 02

  Look, we're living in a time where the individual has never had a greater impact on society, where the potential for social impact has never been greater. And we're living in a time where you're one hashtag away from sparking a social movement. You know, hashtag I can't breathe, the whole host of hashtags. And we've seen in the past few years, some of the largest demonstrations in American history, from the Women's March to the March for Our Lives, March for Climate Change, March for Criminal Justice Reform. And the common thread among all these mass mobilizations is young people, is that young people have a passion for social justice that has been a driver of social impact in

• 31:24Speaker 02

  our society. And so I feel like if there were ever a time to bet on the grassroots energy and the social impact of young people, that time is now.

• 31:35Ryan Sean Adams?

  Awesome. We'll close with that. Representative Torres, thank you so much for joining us. Thank you for your voice in DC for crypto. We appreciate all that you're doing.

• 31:44Speaker 02

  Absolutely. Thank you for having me on.

• 31:46Ryan Sean Adams?

  Bankless Nation, got to end with this. Risk and disclaimers, of course. None of this has been financial advice. It wasn't even political advice, at least I don't think so. Crypto is risky. You could definitely lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.