Why Bitcoin could emerge stronger from the U.S. crypto crackdown

The crackdown on crypto in the US seems to be far from over. Its latest victim is Binance, the world's largest exchange, which was sued last week by the Commodity Futures Trading Commission for allegedly evading US customer restrictions laws. While many in the industry see this as a coordinated attempt to stifle crypto innovation in the country, not everyone is so worried about it. Cory Clipsen, the CEO of Swan Bitcoin, remains confident that bitcoin will emerge stronger from the crackdown. And he even welcomed the lawsuit against Binance.

The non bitcoin shitcoin industry dramatically fucked up. And of course there was going to be backlash.

But is bitcoin really immune from the US government's pressure? And how could the demise of centralized exchanges possibly favor bitcoin adoption? I tried to find out in my conversation with Corey Cripson, the CEO of Swan Bitcoin. I'm Giovanni. On this show, we challenge the ideas that shape the world of crypto. In each episode, we assess a crypto narrative, a macroeconomic outlook or a potentially disruptive technology. Only the most solid ideas will make it to the other side. You were saying that in the moment we are now, it's one of the greatest moments in history for bitcoin. A lot of people might ask themselves, how come we are seeing so much turmoil going on in the banking system in crypto, how come this is so great time for bitcoin according to you?

Yeah, the way I'm looking at this, this moment in time here in 2023 is we have a banking crisis that just happened, at least the first stage of it, tbd, it's roiling a bit. We'll see if there are other shoes to drop. So the last time that we had a banking crisis to talk about, we've really only had one in the lifespan of bitcoin, which is only 14 years now was 2013. It was the Cyprus bail in which really only affected pretty much like rich oligarch types from the Eastern bloc basically storing money in Cyprus, kind of knew the risks there and they basically decided to soak those people and take their money essentially. And also they were probably like a tenth of a percent, the number of people who were sort of that knew something about bitcoin, that were following it, that were interested in it versus where we are today. And so with a Western world banking crisis that's much, much bigger and with a thousand times more people knowing about it and we're not already sort of in a bull market, so you know, there's four year cycles until there's not, it's a meme that's very strong. I think we have a setup for the first ever extended duration bull market. It might be choppy, it might go up, might go down, whatever. But I think instead of sort of packing our bull market into like four to six months, which is what's happened in 2013, 2017, 2021, I think we have a really good shot of this creating a circumstance where you can talk about Bitcoin and get people interested in bitcoin and get them buying bitcoin for the first time or get people buying more bitcoin over probably like a two year period, could be even three years, something like that.

You know. I would like just to touch upon what happened in the latest few days. This week big news was the lawsuit against Binance. Binance is of course one of the biggest, if not the biggest cryptocurrency exchange in the world. Basically the US regulators are accusing Binance of violating trading derivatives rules in the in the US and also encouraging customers that are in the US to bypass restrictions. You kind of welcome this thing around Binance that happened, saying that basically it's a good thing. So can you explain why you think it's a good thing?

Yeah, so I don't know about welcomed. I think I forecast, I would say that this would happen I think anytime that you know, basically the, the truth about altcoins is laid bare and that it's proven that they're, you know, basically just just lottery picks or gambling or pump and dump schemes or whatever. It is the classic like affinity marketing. I love bitcoin. Buy my shitcoin. Like cz has said his portfolio is like 99 bnb. That's what he tries to promote he bnb to go to the moon. He doesn't care about bitcoin. He doesn't promote self custody, you know, except occasionally. But for the most part, you know, he want, he wants all your money and he wants you to turn trades through these altcoins and he wants to use his market makers to paint the tape and make it pretend like these things are good and keep on taking listing fees and giant token piles from these new VC backed projects and insider schemes and just kind of keep the casino going.

The Binance cases seem to be included in a broader, broader trend. As you already mentioned in the US regulators are going down pretty hard on the crypto industry in the us especially on the connections between the crypto industry and the banking system. So a lot of people call it the operation choke point 2.0. As this sort of coordinated attack on crypto in the US do you see this coordinated attack happening? Do you agree with this view?

So it's not coordinated by some group of people like plotting some kind of, you know, effort to snuff out crypto. There's plenty of banks that want to, that want to serve normal businesses that have good operations. What I think is happening is there's a backlash that obviously would happen as all of these scams and all of this mismanagement is uncovered. So you know, basically the, the outright fraud of Celsius and Alameda ftx, the dramatically inept and incompetent risk management of Gemini, Genesis 3 hours capital was both scamming and mismanaging. Voyager and Blockfi. Dramatic mismanagement and tons of marketing misrepresentations, you know, kind of false marketing. And so you can brand it operation choke point 2.0 if you want to, but that's generally going to be kind of, you know, kind of a self serving label put on something to make it seem like there's a bad guy that's trying to do something to you when it's really just kind of a collection of actions that would naturally have occurred regardless of whether it's coordinated or not. So it's kind of crypto blockchain VCs pushing the idea of Operation Chokepoint 2.0, making it sound like that's something that's like branded and organized, but really it's just, wow, the non bitcoin shitcoin industry dramatically fucked up and blew up and lost everybody tons, billions of dollars worth of money and exposed themselves for being full of scams. And of course there was going to be backlash, right?

But I guess that the main point a lot of people in the industry are making is that yes, we had the last year a bunch of bad actors that really, really kind of compromised the reputation of the industry. That doesn't exclude there are also good actors in the industry that want to play according to the rules.

You know, there is a spectrum obviously, like I think, you know, Coinbase obviously is trying to do the profit maximization thing and I don't think they're, you know, moral, but what they're doing is not illegal yet for the most part it may be ruled illegal in the future, but you know, they're basically trying to play the, the clean casino game, you know, promote, promote the casino games, let people have fun trading, whatever it is. So yeah, I mean they're dramatically cleaner than, you know, Mashinsky and Celsius or sbf And FTX obviously as, as are, you know, Kraken and Gemini too.

Yeah. But one of the main points here is that the SEC has been going after these companies using this approach which is defined as regulation by enforcement, by which basically Gary Gensler came out saying that practically all cryptocurrencies have to be defined as securities except Bitcoin. Do you see Gensler's approach to crypto, to the crypto industry as the right one?

I don't know if it's right or not, but I mean the SEC is doing its job which is to, you know, basically protect people from Ponzi schemes and scams and unregistered securities and at least anything that is a security require it to register and play by the same rules as the rest of the tradfi industry. You know, if you are in D.C. and you've been banging on, if you've been banging the drum for a couple of decades saying like, I want to get rid of the SEC and you know, I think that, you know, Ponzi schemers should be able to send direct mail to nursing homes and try to get old people into Ponzi schemes. And like you're just totally against regulation and that's, you're just anarcho libertarian, whatever, that's totally fine. That's morally consistent. But to want to have security regulation for the, but not for me, which is what the altcoin industry wants. And they want basically all of these other schemes and scams and pump and dump things to continue to be regulated, but just not their little nook, I think is just hypocritical.

You are running a bitcoin only company, which is Swan Bitcoin, and you have been sort of. Yeah. Pointing out at all these troubles that are affecting other cryptocurrencies while a bitcoin is basically shining out of the city, out of the situation as the winner in a way. But what I wanted to ask you is that even bitcoin only companies in the US are being affected by this crackdown that we are seeing. Even you at Swan Bitcoin, you had your corporate account shut by Citibank back in October without any sort of explanation. So I was wondering, how can you see this trend as positive even for a bitcoin company?

Yeah, I mean that's obviously super annoying. It's because a lot of people don't have the same opinion or aren't educated and they just think of the crypto industry because that's how the sort of affinity marketing scheme has worked over the last six Seven years, which is like there's the crypto industry and bitcoin is part of it, whereas really there's bitcoin and then there's 22,000 altcoins, which are a totally different category. It's a different asset class. And obviously banks aren't up to speed on this necessarily, and so they just include it all in like one risk category. And so if they find out that you're doing bitcoin and they do a scan and they're uncomfortable with it for some reason, you never get to know. But the good thing is, if you have a business that is simple, like Swan, where we're, you know, basically just a brokerage with a bunch of financial services and products, it's very easy to understand, it's no problem whatsoever to go right out the door, cashier's check in hand, and just open an account with any of the 10,000 other banks. There's plenty of banks that will serve you for an operating account where you're just making payroll and paying vendors and things like that.

Okay, so just to wrap up the discussion, I wanted to touch upon something that's I read on Twitter. So you have been quite vocal about what's going on with Binance, kind of, as you said, foreseeing its demise and welcoming this situation that Binance is going through as positive for bitcoin, because you said that Binance is slowing down bitcoin. But on the other hand, a lot of people are pointing at the fact that Binance, like Coinbase, are extremely popular platforms that have been onboarding tens of thousands of people into bitcoin in the last years. And so they were extremely beneficial for bitcoin adoption.

Yeah, I mean, my take there is like, Bitcoin onboards people into bitcoin as people find out about it and then they look for a place to buy it. And there's always going to be a place to buy bitcoin. And so the activity, the primary marketing activity of Coinbase and of Binance is to market altcoins. It's, it's. I love bitcoin, Buy my shitcoin is basically the whole game. Orange washing. Right? You know, these people, they actually understand what bitcoin is and they've chosen to go the path of, you know, trying to monetize. As long as the window is open for monetizing through altcoin trading, they'll do it. Right, because the profits are just dramatically higher than just being an honest on ramp for Bitcoin or even an exchange for bitcoin. Obviously, people need to buy and need to sell. So, yeah, I mean, I think that. I think that basically altcoins in particular, since 2017, have siphoned away demand from bitcoin. And basically any action that you can take to speed up the adoption of bitcoin makes it less likely that a US Government led coordinated attack on bitcoin and bitcoiners can happen. And anything that you're doing to slow down bitcoin adoption makes it more likely that essentially the forces of tyranny coalesce in a contra bitcoin movement.

Cool. Okay, I think that we can wrap up here the discussion. Corey, it was super cool, as always, to debate with you these issues. And let's see how this Binance thing plays out.

Yeah, let's see. Well, thanks again as always for having me on, Giovanni. I always enjoy speaking with you.