Proof of State is the Wednesday edition of Fortune Crypto where Leo Schwartz delivers insider insights on policy and regulation.
Bitcoin Miami is a hallucinatory affair—look to your right, and you may see a sitting senator give a full-throated defense of mining, while a procession of black-suited mourners carry a coffin filled with cash to your right. That tension of absurdity has come to define the conference, which just wrapped up its last year in the Magic City before decamping to Nashville in 2024.
The fragile balance was evident in an undercurrent I heard from several attendees: sympathy for Gary Gensler and his Securities and Exchange Commission, an unthinkable blasphemy for the rest of the crypto industry.
Despite its techno-libertarian leanings, which means that some in the community are rooting for a government default, many Bitcoiners identify as “maxis”—Bitcoin is the only true crypto, and every other iteration is at best a cheap facsimile, and at worst a scam. In his crusade to tame the crypto industry, Gensler has not necessarily agreed with the sentiment. Still, he has demonstrated an alignment by arguing that nearly every cryptocurrency is a security except for Bitcoin, which has sufficiently decentralized to be categorized as a commodity and is thus outside the SEC’s purview.
“It’s been clear for quite some time what the SEC’s stance is,” said Cory Klippsten, the CEO of the wealth management service Swan Bitcoin. “It’s been consistent over and over again, the things they’re going after.”
Jack Mallers, the 29-year-old founder of the crypto-powered payments app Strike, told me of his family’s lineage in the hallowed grounds of American finance. His grandfather was the youngest chairman of the Chicago Board of Trade, helped establish the city as a global center for derivatives markets, which emerged as a tool to manage risk for commodities like corn and wheat.
“It had real purpose and a reason to exist,” Mallers said. “Think about Coinbase—what moral and ethical problems are they solving with that market so that I can log on and buy OMG coin?”
Like many Bitcoiners, Mallers argues that the prototypical crypto offers functions outside of pure speculation, from being a store of value beyond the control of central banks to increasingly serving as a cross-border payments tool. (We can debate the efficacy of the Lightning network in a future edition.) In his estimation, other supposedly decentralized blockchains, including Ethereum and Solana, are anything but, and therefore their cryptocurrencies are unregistered securities that fall under SEC jurisdiction.
“What the SEC is deeply concerned about is whether this is invalidating the legitimacy and the reputation of American financial markets,” Mallers told me. “I see Gensler as more trying to protect the integrity of America and our financial markets.”
Not everyone agrees. Christopher Calicott, the managing director of the Bitcoin-focused VC firm Trammell Venture Partners, said that he feared Bitcoiners were “weaponizing the state.”
“Rooting for a regulator to flush a competitor means you’re not as confident in your project’s success,” Calicott told me. He also pointed to recent developments with Bitcoin, where the rise of a new token-minting system on Bitcoin means that the SEC could soon come knocking.
Klippsten said Bitcoiners shouldn’t expect to be outside the law. “I would expect that to eventually have at least the prospect of enforcement by the SEC,” he told me. “It doesn’t matter what the ledger is, what matters is are you selling an investment contract.”
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
