A Headline at Politico Declares that the U.S. Can’t Be a Financial Leader without Crypto; The Headline Was Written by a Crypto Firm

 

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A Headline at Politico Declares that the U.S. Can’t Be a Financial Leader without Crypto; The Headline Was Written by a Crypto Firm

(Left to right): Politico Reporters, Sam Sutton and Ben Schreckinger, Interviewing
Senators Kirsten Gillibrand and Cynthia Lummis

By Pam Martens and Russ Martens: July 18, 2022 ~

Yesterday we spotted a headline at the news outlet, Politico, that read: “Meeting the Moment: Without cryptocurrency regulatory approval, the U.S. risks its status as a financial leader.” Posing as actual journalism with a byline by a person named Jennifer Gregory, the article provides a lengthy interview with Michael Sonnenshein, the CEO of Grayscale Investments, a peddler of Bitcoin. Sonnenshein uses the interview to whine about a recent Securities and Exchange Commission decision that didn’t go his way and tout how his powerful outside law firm, Davis Polk, plans to appeal the decision.

In small print, the article notes that it is actually “Sponsored by Grayscale Investments.” In other words, it’s an advertisement posing as real journalism.

Unfortunately, this co-branding between the Bitcoin company, Grayscale, and the news outlet, Politico, goes much deeper than just this one headline.

On March 24 of this year, Politico held a conference titled “Regulating the Digital Gold Rush,” a conference which was financially underwritten by Grayscale. The conflicted financial backing for the event didn’t stop Politico from placing two of its reporters, Sam Sutton and Ben Schreckinger, on the stage at the conference with their interviewees, Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY).

Both Gillibrand and Lummis have received an influx of donations to their political campaigns from crypto interests and were at the conference to promote a crypto-friendly bill they were planning to introduce in the Senate.

As the Politico reporters asked softball questions of the two Senators in front of a backdrop showing the words “Politico” and “Grayscale” side by side, the Senators gushed over their desire to help the crypto industry “innovate.” Gillibrand explained that New York “is the financial services capitol of the world” and “this is one of the greatest, growing industries that New York definitely wants to have a part of.”

In reality, 1,600 of the smartest minds in technology sent a letter to Congress on June 1 explaining why both crypto and blockchain are a sham and harmful to U.S. interests. Bill Gates, the founder of Microsoft, one of the most valuable tech companies in the U.S., stated in June that crypto is based “on the greater fool theory,” adding that “I’m used to asset classes… like a farm where they have output, or like a company where they make products.” Legendary investor, Warren Buffett, called Bitcoin “rat poison squared” in 2018, the same year that Bill Harris, the former CEO of Intuit and PayPal, wrote a detailed critique of Bitcoin for Vox, under the headline: “Bitcoin is the greatest scam in history.”

Harris explained:

“In my opinion, it’s a colossal pump-and-dump scheme, the likes of which the world has never seen. In a pump-and-dump game, promoters ‘pump’ up the price of a security creating a speculative frenzy, then ‘dump’ some of their holdings at artificially high prices. And some cryptocurrencies are pure frauds. Ernst & Young estimates that 10 percent of the money raised for initial coin offerings has been stolen.”

The Federal Trade Commission reported in June that “since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams. That’s about one out of every four dollars reportedly lost to fraud during that period.”

None of this stopped Gillibrand and Lummis from introducing their crypto-friendly legislation on June 7. On the same day it was released, two financial services watchdog groups savaged the bill.

Americans for Financial Reform released the following statement:

“A bill introduced by Sens. Kirsten Gillibrand and Cynthia Lummis to revamp regulation of cryptocurrencies is little more than a giveaway to an industry that wraps itself in the mantle of innovation but poses serious risks to investors, consumers, and possibly even financial stability…

“Notably, the bill proposes an approach to classifying digital assets as securities that are linked to underlying ancillary assets, or tokens. This approach would cede more regulatory power to the Commodity Futures Trading Commission while undermining existing securities law and oversight by the Securities and Exchange Commission. The measure could even create a loophole that traditional securities issuers could exploit to avoid more robust disclosure requirements. Additionally, the bill would exempt small transactions from being reported as taxable income and allow cryptocurrency miners to defer tax payments for some activities, perhaps indefinitely. This step would incentivize an increase in wasteful, climate-harming mining activities, but the bill itself does nothing to address those environmental impacts, save authorizing a study.”

Dennis Kelleher, the President and CEO of  Better Markets, issued the following critique of the proposed legislation:

“The bipartisan crypto bill with the Orwellian name of ‘Responsible Financial Innovation Act’ released today will likely result in crypto being largely unregulated, even though it is an extremely volatile financial product with a limited track record, which itself is mostly bad.  Worse, it appears to be designed to disarm the public by making them think crypto will be properly regulated while the industry and the insiders know that is simply not true. The tell is that the bill gives the industry what it wants most: the Commodities Futures Trading Commission (CFTC) as its primary regulator, even though it exists to police markets where physical producers and purchases of commodities like corn, wheat, oil, natural gas, hogs, and cattle hedge their price risk to facilitate the delivery of everyday goods to the American people.

“Of course, crypto is nothing like corn or hogs or oil, but the industry wants the CFTC as its regulator because it is the smallest financial regulator with the smallest budget.  The financial industry and its allies in Congress have made sure that the CFTC has been chronically underfunded for decades…

“Giving the CFTC jurisdiction over crypto is like New York City outsourcing crime fighting to a small-town police force. You might see a cop every now and then and they might even make the occasional arrest, but by and large the criminals will be running the place.

“By doing this, Congress is playing with fire, and it should know better because that’s exactly what they did in the 1990s by first repealing the Glass-Steagall Act and then prohibiting the regulation of derivatives with the 2000 Commodities Futures Modernization Act (CFMA), including credit default swaps (CDS). Those Congressional actions, which were also broadly bipartisan, resulted in gigantic banks that were too-big-to-fail and trillions in dangerous derivatives that were unregulated. In 2008, that caused the biggest taxpayer-funded bailouts in history, the worst financial crash since 1929, and the worst economy since the Great Depression, devastating tens of millions of Americans who lost jobs, homes, savings and so much more.

“Now, just 14 years after that horrific crash, Congress is again listening to the financial industry’s Siren song of innovation, which was also the tune they played for repealing Glass-Steagall, enacting the CFMA, and unleashing CDS on the global financial system.  In a world that wasn’t run by lobbyists, awash in campaign cash, greased by the revolving door, and dominated by secret, backroom deals, this bill would never be filed…”

This shilling for the crypto industry by two elected members of the U.S. Senate is only the latest of the nauseating tactics crypto peddlers have used. Crypto pushers hired themselves Trump’s outgoing SEC Chairman, Jay Clayton; celebrities like Matt Damon, LeBron James, Spike Lee, Tom Brady, Alec Baldwin, and numerous others have taken money to shill for crypto; and high-priced lobbyists have been used to sway Congress and state legislatures to back off any regulatory push. Crypto even slapped its name on sports stadiums and arenas – similar to Enron and Citigroup just before they blew up.

Like any other pump and dump scheme, crypto mania worked for a while. Insiders grabbed their windfall profits early and left the unsophisticated with the losses. Now it’s all coming unwound as crypto firms are locking out investors from making withdrawals; filing bankruptcy; and crypto founders disappearing.

What the American people are not likely to forget, however, are the names of those who shilled for this industry instead of taking a timely, principled stand.

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