12/08/2021: The House Financial Services Committee

*Notice the lazer eyes, clearly he's a believer

Rarely do we find ourselves perusing the humorous and entertaining parts of the once free internet only to wind up at the CNBC's broadcast of the most informative congressional meeting about technology ever witnessed. It presented similar pageantry to a WWF match minus the sex appeal. Charismatic teams forming across enemy lines, committee members wasting their few allocated minutes to boast irrelevant military or business careers, and of course through all the trials and tribulations of the modern world, representative Al Lawson from Florida failing to turn off their microphone remotely when talking to their wife after surrendering the floor. Barrow Downs Digital booned through this 5 hour prelude to a future kangaroo court so you don't need to!

Combatants:

🎯Jeremy Allaire, Co-Founder, Chairman and CEO, Circle

🎯Samuel Bankman-Fried, Founder and CEO, FTX

✅Brian P. Brooks, CEO, Bitfury Group

✅Charles Cascarilla, CEO and co-Founder, Paxos Trust Company

🎯Denelle Dixon, CEO and Executive Director, Stellar Development Foundation

🎯Alesia Jeanne Haas, CEO, Coinbase Inc. and CFO, Coinbase Global Inc.

*If the architect of the Rayburn Building was a football guy, I would guess room 2128 to be on the far right C-Gap

Regardless of the question, train of thought, or CEO/Congressional Member speaking, the atmosphere found its way precipitating back to one person, Sam Bankman-Fried. Although frequently suggested by the other CEO's as being a PHD, it seems he holds a BA in physics from MIT. A small factoid that seems to unravel the sweater of lies that builds a bizarre cult of personality. Bankman-Fried loves utilitarianism, only sleeps 4 hours a day on bean bag chairs, and tricked the government of Japan into ignoring his business by titling it like a think tank. It has all the makings of a Theranos, WeWork, Nikola story with a B budget Netflix biopic to follow. In an objective world, he is the 29 year old CEO of FTX (the 3rd largest market-maker in crypto) and the wealthiest person in crypto with an estimated worth of $26.5 Billion or 531,532 BTC or 13.25 Trillion Banano.

So why does he carry a Hulkamania status compared to the other peons in the room? Our best guess is that Bankman-Fried is #1 on their chopping block. FTX is heavily intertwined with Tether, the largest stable coin pegged to the USD. Noticeably they were the only company to be subpoenaed that failed to show up, which several committee members reiterated. They were also none to happy that Coinbase founder Brian Armstrong "sent his second." Tether is one of two coins I mentioned that is directly attempting to act as a digital dollar. At this point in time, Alameda Research, the parent company of of FTX, both owned by Bankman-Fried, received $36.7B in Tether, mostly in the last year. Tether currently has a market cap of $80B, which averaged out among employees comes out to around $10-$20B per person.

Tether has failed since 2017 to accurately provide promised audits of what is held in their reserves. Several auditors have been fired or quit. They have been fined and banned from the state of New York. Tether primarily operates alongside an exchange they also operate called Bitfinex. Almost every member of their C-Suite is a convicted white collar criminal. In a coincidental collapse, Tether claimed earlier in the year that their reserves are backed by a majority of commercial paper mostly in Chinese real estate group Evergrande. Unbeknownst to them Evergrande was in the process of imploding themselves, when a few months ago the company failed to make interest payments. Despite this, Tether claims to have no negative impact on their reserves.

It would be ineffective to walkthrough the Tether story with The Consensus as others have already done a far better job of this:

Tethers Story - https://www.youtube.com/watch?v=-whuXHSL1Pg

Tracking flow of USDT - https://protos.com/tether-papers-crypto-stablecoin-usdt- investigation-analysis/

The over arching theory is that Tether is minting unbacked stable-coins to purchase Bitcoin to both enrich themselves as well as covering up hundreds of millions to billions in losses. While this is alarming and an obvious red flag, we will discuss in a later post, the potential fallout that may or may not come.

*CEO of Bitfury, Brian Brooks, winks and smiles at committee members after each question

All in all, the committee was on their A-Game. Most of the members understood digital wallets, crypto derivatives, KYC/AML, and the potential positive impacts cryptocurrencies hold for the U.S. economy and the average American citizen. The goal of this meeting seemed to be an attempt to pry as much information to speed-run compliance and taxes for 2022 as well as add opinions in order to put their names on the eventual central bank digital currency. The dot com bubble was only mentioned 137 times, which I took the over on. Zuckerberg was mentioned far more often. I think it will be tough for them to draw fair regulation for crypto users. They will most likely fall to one extreme or the other. It is near impossible to legislate around an understanding of the web that is linearly described as Pets.com > Facebook > Bitcoin.