Big Crypto's Assault on Democracy

The latest episode of the Nerd Reich podcast focuses on how the crypto industry is eating Washington D.C.

What seemingly started as an anti-government escape fantasy by tech “libertarians” has evolved into something even more dangerous: a coordinated assault on American democracy itself.

In this new episode, we discuss how crypto billionaires are weaponizing digital “currency” to systematically capture politicians, regulators, and the financial system.

My guests: Crypto critic Molly White of the Citations Needed newsletter and independent journalist Dave Troy of America 2.0.

Upshot: Crypto isn't about innovation. It's is about power, corruption, and the future of American democracy.

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Full transcript below:

Crypto vs Democracy: How Bitcoin Billionaires Are Buying Congress( w/ Molly White and Dave Troy)

Note: Transcripts are auto-generated and may contain errors.

Gil Duran: Most people think crypto is just a form of digital money—volatile, speculative, maybe a little sketchy, but ultimately just another investment option.

What they don't realize is that crypto represents something far more dangerous: a coordinated assault on American democracy itself.

Welcome to the Nerd Reich Podcast. I'm Gil Duran. Today we're deep diving into the political machine that crypto has built, a system that's captured regulators, bought off politicians from both parties, and is systematically working to replace our entire financial system with something designed to enrich a small group of billionaires while impoverishing everyone else.

We'll explore how this movement traces its roots back to the same anti-government extremism that fueled the Civil War, the John Birch Society, and ultimately, January 6th. And we'll talk about how crypto isn't just about making money, it's about remaking society according to the vision of people like Balaji Srinivasan and the Network State Movement, who literally want to replace nation states with corporate territories.

And we'll examine the most troubling development of all: how Democrats are being systematically captured by crypto money, with prominent Democrats supporting the Crypto Corruption Bill, legislation that would essentially hand the keys of our financial system to an industry built on speculation, opacity, and fraud.

Joining me today are two of the most insightful analysts tracking this: Molly White, creator of the essential Web3 is Going Just Great and Citations Needed newsletters — and Dave Troy, an independent journalist at America 2.0 who's traced the deep historical roots of crypto's anti-democratic ideology.

This isn't just about technology or finance. This is about the future of American democracy itself. Let's begin.

Gil Duran: Dave and Molly, welcome to the Nerd Reich podcast. Let's start with the basics because a lot of people don't really know them. Even though they hear a lot about crypto, there's often not an explanation accompanying that. And we know that actually a very small percentage of Americans use crypto or have crypto. So, what is crypto and why does it exist?

Molly White: Thanks for having us. Well, cryptocurrencies are basically a digital form of asset that has no real backing. It's just sort of issued in a digital format, but there is no good or service connected to it necessarily. They were created in 2008, 2009 with the creation of Bitcoin, which more or less followed the great financial crisis. It was right around that time. And it was created by someone who believed that there should be less government and bank intervention with the monetary system, that people should be able to transact peer to peer in a way that you can hand someone a $5 bill and there's no intermediary there.

But when you are transacting digitally, you have to go through a bank or a payment processor or a fintech company like Venmo or something like that. The belief was that you should be able to transact much like you do with cash. But it has really morphed into something quite a bit bigger than that. Most people are not using these cryptocurrencies like you would use cash for payments or things like that. They've really become mostly a vehicle for speculation where people purchase a crypto asset in hopes that the price will go up and they will turn a profit.

Dave Troy: Yeah, building on everything that Molly said, which was 100% correct, there's a certain amount of history behind where in particular Bitcoin came from. So if you follow the history of monetary policy in the 20th century, one of the big things that happened was, of course, the Great Depression and the responses to that.

So basically, when Franklin Roosevelt came into office in 1933, one of the first things that he did was he outlawed the private holding of gold, and this was seen as being very aggressive by the government. And the reason that they needed to do that was because gold had a fixed price into dollars, and they needed a lot of dollars in order to fund the New Deal. So they kind of wanted to break the relationship between gold and the US dollar.

In 1971, Richard Nixon really extended that much further by breaking that relationship at the international level, kind of rewriting the Bretton Woods agreements that were created at the end of the war. The bottom line is that there was a long running gripe over what people call fiat currency, which is the dollar as issued by the Federal Reserve Bank and other central banks and hard assets or gold.

And so what ended up happening was some cypherpunk type people in the late 90s started talking about ways to build out digital scarce currencies that would function similarly to gold and have the same kind of scarcity properties that gold has. And like Molly mentioned, have the property of being able to be transactive peer to peer without an intermediary bank, which of course, these folks don't trust, so they're trying to get them out of the mix. And so anyway, that's kind of the origin story. And that's why in the origin block of Bitcoin, there's a coded message talking about the financial crisis, because this is seen as a cure to bank bailouts and fiat currency and all of the problems that come with it. So that's sort of the 10,000-foot overview of where this stuff came from.

Gil Duran: Money and monetary policy are power. So let's talk about the politics of crypto. In The Politics of Bitcoin: Software as Right-Wing Extremism, the late David Golumbia wrote: "As they are currently configured, Bitcoin and the blockchain technology on which it rests satisfy needs that make sense only in the context of right-wing politics. Those of us who do not share those politics must therefore view Bitcoin and the blockchain with both skepticism and a clear eye for the political terms and concepts invoked."

Now, has this changed? Is crypto still fundamentally a threat to liberal democratic order or do I have that wrong?

Molly White: I think the broad ideology of many in crypto has really changed over the past handful of years as the crypto world, particularly some of the bigger industry players have really gotten in bed with the government in the US particularly. The intervention of the government is seen to be beneficial to the cryptocurrency industry, potentially even bolstering the value of cryptocurrencies like Bitcoin and various others if, for example, the government were to establish a large strategic reserve of Bitcoin.

And so a lot of the sort of ideological components of the cryptocurrency world have gone out the window, I would say. Broadly speaking, it's challenging to discuss the politics of cryptocurrency enthusiasts as a whole, because it is a large group of people and there is some diversity of politics in there. But there are a lot of people on the right within the crypto world.

The crypto industry, and by that I mean the companies, the major companies, which are largely led by very wealthy crypto entrepreneurs have increasingly aligned themselves with politicians like Donald Trump. And so, it is, I think, correct to say at this point that cryptocurrency is largely a right wing phenomenon. Although there has been this very strong push by members of the cryptocurrency industry to portray crypto as something that is good for everyone, that it's something that Democrats need to embrace in their politics and their political campaigns, that it's something that is the future and everyone just needs to get on board or get left behind.

Gil Duran: We're definitely going to get into that in this episode. Dave, you mentioned this in your answer, but you've written extensively about the politics of crypto tracing the long history of anti-government right-wing paranoia as it relates to monetary policy. For people who don't understand some of this deeper history, can you give us a kind of thumbnail sketch the simple story of why these folks are so obsessed with controlling monetary policy, distrusting the dollar and seeking to create some other value system that serves this purpose? Because "Paranoia on Parade," which you wrote, was a formative reading for me in terms of understanding a lot of this background. But can you simplify that and give people an idea?

Dave Troy: Well, I'll try. I mean, it's obviously a big, hairy, complicated topic. I would say that in general, what we're dealing with is kind of a conflict of worldviews that have persisted across a couple of centuries at minimum. You can probably trace it back much further.

Just going back to the US Civil War, for example, there was a faction of people that were super into slavery and they were super into gold. And it turns out that those people and their descendants tended towards this kind of gold bug, money hoarding kind of mindset.

And of course, you also had the introduction of various kinds of propaganda elements into the global mix. You had things like the "Protocols of the elders of Zion," which made the argument that there's some international Jewish conspiracy to control the world and start wars and all of this. And these things don't die, unfortunately. If you look now at a lot of the kind of narrative warfare that's going on around Israel and Palestine and the United States, a lot of it has to do with Jewish conspiracies to control the world and start wars. I mean, this stuff just doesn't go away.

Speaking in very broad terms, if you trace the networks of people that were connected to the Civil War, were connected to the formation of the Federal Reserve and the people that hated those people and the industrialists that were opposed to the New Deal which largely was the National Association of Manufacturers. That group, the National Association of Manufacturers, really controlled a lot of the capital in the United States in the 1930s because they owned all the big manufacturing, heavy industry companies.

They in turn ended up being formative for the creation of the John Birch Society, which was a big anti-tax, anti-communist group. That group, in turn, was very pro gold and all of that. They, in turn, had a big role in the creation of the Council for National Policy in 1981, and it was the Council for National Policy that planned and executed the January 6th insurrection. So there's a direct line between these groups and the networks that are connected to them and the worldviews that they hold.

And they're not always exactly the same because stuff morphs and changes through time. And obviously the introduction of something like crypto is a new thing. Like it would not have been possible in 1951 or whatever, but it's possible now. And a lot of those same ideas carry through. So what you're really dealing with is the kind of persistence and durability of these kinds of worldviews.

And of course, the sort of pro crypto, pro gold folks are very much informed by Austrian economics, which is sort of what the School of Thought is called. And that in turn has a lot of connections to the Chicago School of Economics and people connected to Pinochet and things like that.

So there's these kinds of teams that you can identify through history and you can see how they've been battling each other again and again and again through different episodes over the course of time. And it's not at all a stretch to say that they're carrying similarly aligned worldviews from one skirmish to the next. And we participants in the global economy and politics get the pleasure of seeing these things play out again and again and again.

Gil Duran: The core idea seems to be the idea that someone's controlling monetary policy and we should be the ones controlling it. And so we're going to create our own way of doing that. So it does seem like a long running ideological project, sort of rooted in a conspiracy theory that sort of sounds like a conspiracy itself when you talk about it, but is now very real when we see Coinbase sponsoring Trump's military parade, which we'll talk about in a minute.

In the United States, crypto has suddenly become a huge power player in American politics. And 25 years ago, this was something in science fiction, a handful of very forward thinking, sort of apocalyptic minded people were thinking about crypto. Last year, the crypto backed political action committee, Fair Shake, spent millions and millions of dollars to largely tear down Democrats and elect crypto friendly politicians, some of whom were Democrats.

And this really sticks in my craw because about 10 years ago, I was working in California politics, progressive politics, to push a slate of pro worker, pro family bills in the California state legislature. And that group was also called the Fair Shake Project. And when I saw Fair Shake poop up, I was like, how the heck would someone come up with Fair Shake? And it turns out that the main democratic political operative who had put together that Fair Shake package has now completely sold out and is working for crypto and has recycled the fair shake name. Chris Lehane is his name. There was a New Yorker story about him to now support this crypto billionaire push for power in politics. So there's a little personal aside there. I was quite aggrieved to find out it was actually the same guy doing the same name in a different format.

But back to the details here, these crypto groups spent $40 million to elect Republican Senator Bernie Moreno in Ohio, defeating incumbent Democrat Sherrod Brown, who was a crypto skeptic, and they spent $10 million to destroy Congresswoman Katie Porter, who was running for Senate in California. And now we're seeing unprecedented crypto corruption with Donald Trump and his family cashing in on meme coins and other scams. And basically this industry that creates its own so-called money is using it as a weapon to buy very real power.

Molly, what's the political goal here for crypto and what's the end game?

Molly White: Well, I think a lot of the goal has been to buy favorable regulation for the industry. I mean, the people who are funding these super PACs are crypto industry executives or tech executives who have a very strong financial interest in deregulation in the crypto sector and the proliferation of crypto among American people.

There was this broad feeling that cryptocurrency would thrive if it wasn't for the over regulation and the excessive enforcement that was happening in the United States, which is a bit amusing to those of us who watched the lack of crypto enforcement over the last decade or so. I mean, it's not that long ago that we all saw FTX collapse in quite spectacular fashion, along with the rest of the cryptocurrency world and dozens of cryptocurrency companies, some of which were based in the United States, many of which were ultimately implicated in criminal wrongdoing. And the regulators were, at that point in time, seen to be largely absent or at least very late to the game.

And so the fact that now we're hearing that crypto has been stifled by the regulators is a little bit perhaps hard to swallow, but that is the sort of belief system.

There was this strong push in the 2024 election cycle to elect any politician who was seen to be friendly to the cryptocurrency industry and willing to go along with bills that were essentially written by the crypto industry to benefit their businesses. And so that's largely why we saw this push to oust lawmakers who were seen or at least portrayed to be anti crypto in some way, as well as to install both Republicans and Democrats who were willing to go along with the crypto industry's agenda.

Gil Duran: So Dave, what's the goal of all this crypto money flowing into US politics and what's the end game?

Dave Troy: Well, so as Molly alluded to a little bit earlier, there was kind of this initial anti-government, ideological, hardcore kind of bent to the whole thing, but now it's kind of turned into a runaway Ponzi scheme. So, if you're running a really large Ponzi scheme and you're getting rich and all your friends are getting rich, your main thing you want to do is continue to get rich and to make sure that you can see this thing to whatever point of completion you think it is.

So as Molly suggested, the big goal in 2024, and this is continuing on, is really regulatory capture of the entire US regulatory apparatus, sort of on the belief that if you can capture the US apparatus, then other mechanisms around the world may soon follow, whether it's in Europe or in the UK or wherever you're thinking of. So they're basically just going full steam ahead at this point.

And of course, many of the anti-government ideological people are sort of holding their nose and watching this happen because they also know that if this goes to completion, it has a good chance of disrupting things like the Federal Reserve. So while on the one hand, they don't like the idea of kind of getting in bed with the government, they're not exactly kicking the government out of bed either yet.

The other thing that's happening is, and there was a really good paper that the European Central Bank published on this a few months ago, it's called "The Distributional Consequences of Bitcoin." And what it basically argues is as Bitcoin gets more and more valuable, the money that's invested in Bitcoin can be used as leverage to capture more and more of the regulatory sphere. Of course, as that happens, then it actually sucks money out of the regular economy and impoverishes basically everybody else at the expense of the crypto universe. And so this becomes a kind of a runaway problem.

The European Central Bank basically concluded that the end result would be regulatory capture, and there really wasn't any way to control it unless somebody took steps to intervene and try to stop this. So I think that paper needs to be more widely understood. And of course, the crypto folks downplay that, but the logic is kind of inescapable.

And the real test is going to be what happens with crypto spending in 2026 and 2028. I mean, in 2024, we saw levels, if you include Elon Musk's money in the mix, you're talking four or $500 million just in the U.S. on crypto spending. And as we've said, it's not just on Republicans. There's a bunch of Democrats who think that this can somehow serve either themselves or society for some reason. And I would say they're wrong and they're on the wrong side of this.

Molly White: I would jump in also to say that it's not only Democrats who believe that crypto is a powerful force for good, but it's also Democrats who fear the crypto lobby. There was a very active push by the crypto industry to make examples of people like Katie Porter early in the election cycle to basically send this message that if you're against us, or even if you're just not with us, we will spend $10 million to get you out of office. And they did that several times. And I think they were very successful in playing those outcomes into messages to democratic campaigns to say, you don't want to go up against us. At least stay quiet if not join up with us.

Gil Duran: Very Machiavellian strategy, right? They took a head in front of everybody and just hammered her with 10 million dollars to teach everybody a lesson. And to some degree, it seems to have worked.

And Dave, what you're talking about is basically the ability to use Bitcoin to suck up all this value and wealth from society and build a self replicating, ever more exponentially powerful political corruption machine, basically, that will buy all the politicians. And if you listen to what they're arguing for now, they want to eliminate capital gains on Bitcoin, which, why would anybody stick money into a mutual fund if they can stick money into Bitcoin and have weird upsides and no taxes? Like, it's just crazy.

Let's talk about the crypto corruption bill currently making its way through Congress. I think that's what it should be called, the crypto corruption bill. Instead, crypto has convinced everyone to call it the GENIUS Act, an acronym for Guiding and Establishing National Innovation for US Stablecoins. So they have a way, and Trump's been doing this a lot with his bills, of framing it officially in a very inherently positive way. And so if you're going to call it genius, though, I think evil genius would be more apt. One bill just passed the Senate, but there's another version of the bill in the House.

Molly, tell us what would this bill do and why is it so important?

Molly White: Yeah, so this bill and the corollary bill that's working its way through the house aims to establish a regulatory framework for stablecoins, which are a subset of crypto assets that are intended to be pegged to some other asset, often the dollar or the euro or some sort of fiat currency. And so you have these dollar stable coins that unlike something like Bitcoin, which is heavily volatile, more or less represents a dollar in the crypto world.

And these have become an enormous part of the cryptocurrency ecosystem. They're a substantial portion of the value in the crypto world because they serve more or less as the poker chips in the crypto casino, I guess you could say. If you go into a casino to gamble, you don't bring your dollars to the poker table. You buy casino chips and then use those. It's a very similar thing in the crypto world where you need to have some sort of crypto asset to represent your dollars.

And so there has been this proliferation of these stable coins, but there isn't a very strong regulatory environment for them in the United States. And there's this goal at least to create one, or at least to create some regulatory structure. I would not describe the proposed one in this bill as particularly strong.

It aims to establish some requirements around who is allowed to issue these stable coins, what kind of assets can be used for backing. And then, as with other financial regulation, there are components of what kinds of consumer protections are required, disclosures, transparency, auditing, that kind of thing. But this bill and the corollary bill in the house are pretty weak.

As with many of the bills that we're seeing right now, they are very rushed. They are more or less written by the cryptocurrency industry to benefit the cryptocurrency industry. And they have a lot of flaws that I think have been rightfully identified mostly by Democrats who have been opposing them. But as you mentioned, this has made its way through the Senate with the support of over a dozen Democrats who voted in favor of it. And so, we'll see where it goes in the House.

It sort of remains to be seen whether the House will take up the Genius Act or continue working on their own bill. Donald Trump has pushed for the House to take up the Genius Act and pass it with a quickness. And so, it remains to be seen, but there's been a very strong push, both from the Trump administration and from the crypto industry to get this bill out the door.

Gil Duran: Dave, what do you think is going to happen with the crypto corruption bill? And why is it so important?

Dave Troy: Well, I agree with everything that Molly said in terms of it being a kind of a weak framework. I don't know whether the House will put it through sort of in the same form. But I think the issue is that if they don't get it this time, they're going to get it some other time. Going into 2026, they're going to aim to look at who supported what with this and try to shape the outcomes in 2026 to ensure that this kind of framework gets put in place.

I mean, the really dangerous thing about this too, is that when you talk about stable coins, practically the way it works is, you have these companies that are taking in real US dollars from people and they're issuing them poker chips instead, or Disney dollars or Starbucks gift cards, if you want to use that analogy. And then they're going to earn interest on the real dollars that they take in. They can potentially spend and invest those in ways that are relatively opaque.

One of the issues right now in this space is that there's this big company, Tether, that has a huge amount of... I forget what the total capitalization of Tether is right now, but it's billions and billions of dollars of US dollars that they have in their holdings, and nobody's really sure exactly how many they have to back the stable coins that they claim to be backing.

So it's very much like Wildcat banking that emerged in the United States in the 1880s and stuff where you had these little temporary banks that would turn up in your town. And this is the reason why bank buildings are built to be these big Greek stone temples now is because people can't just pack up and leave. It was built to give the impression of stability as were these little Wildcat banks had their own little bank notes and so the way that that got cured was they taxed Wildcat banks out of existence by basically saying, you have these fake bills, then we're just going to tax any exchange on them to oblivion.

And we kind of need to do the same thing with this stuff, but we're not. So we're heading right into a stability trap that is likely to destabilize much of the world economy if it's allowed to go to its final conclusion.

Gil Duran: As we mentioned before, Democratic senators, I believe it was 18 Democratic senators supported this crypto corruption bill, including both of my senators in California, Alex Padilla and Adam Schiff. Padilla, like me, is a former Senator Feinstein staffer. Adam Schiff, I've long admired him, his chief of staff was my intern. And it seems shocking to me that people who largely share my politics would be supporting crypto at this period of time with everything we've seen so far about what tech wants to do to the American government.

And it almost seems as if they don't understand the political vision underlying crypto, or they don't care, or they're just scared, or maybe they just want to cash in on the crypto craze too. The Republicans have been wholly bought off, but now the crypto industry is clearly buying a stable of Democrats. And it's not just campaign contributions we're talking about. It's a systematic capture of the regulatory apparatus by an industry that thrives on opacity, speculation and the kind of financial engineering that crashes economies.

You've got Senators Ruben Gallego of Arizona, Elissa Slotkin of Michigan, who were elected with major support from crypto and I think can be best described as crypto Democrats. And in fact, earlier this year, Gallego partied in Sedona with Marc Andreessen, a man who embraces the ideas of Curtis Yarvin and Balaji Srinivasan and the Network State.

With Democrats like these, who needs Republicans?

And so I think what we're witnessing is the crypto industry's political strategy paying off, normalizing a technology through adoption in mainstream ways, capturing regulators through these revolving door relationships and buying political protection from both parties. They've learned this from other industry lobbying playbooks, but they're moving faster and with more precision right now.

Why are Democrats going along with a so-called industry that sees the United States potentially as outdated and seeks to overthrow the financial system with a risky and volatile product? And what does that tell us about the actual state of American democracy today?

Molly White: I mean, I think it really illustrates the problem we have in the American political system with the influence of money in politics. I mean, this is a group that has been able to raise around $200 million in the 2024 election cycle, and they're certainly refilling their war chests for the midterms and beyond, and then using that as a weapon to make politicians fall in line. And I think that democratic politicians have bought the threats from the crypto industry, which have been very explicit, I should say.

I've spoken to people who work, Senate staffers who have said that there are very explicit threats going around that, if you do not vote for this bill, the crypto lobby is going to come for you. We saw great reporting out of Lever News recently about Democratic strategists and donors to these groups, again, saying explicitly that if you vote against this bill, you are getting zero crypto dollars going forward. So I think that has been a very successful tool.

And I think many democratic politicians are unfortunately much too focused on their re-election prospects, their future campaigns, than they are on what's best for the American public, for the financial system, for democracy, quite frankly. And so they are, if not failing to stand up to this, some of them are explicitly going along with it.

And it's hard to say which of them are convincing themselves. They are basically buying the story that crypto is beneficial to everyday people. There's certainly a very strong push in the marketing sense of things from the crypto industry trying to portray cryptocurrency as something that would democratize finance, that would bank the unbanked. There has been sort of no end to the stories about how crypto is beneficial to people while they very much gloss over the many ways in which people are regularly harmed by the cryptocurrency world through the collapses that we've seen, through the very substantial frauds and scams that happen in the crypto world, and certainly stand to be made worse by the deregulation that the crypto industry is pushing for.

Gil Duran: It seems like Democrats should be starring in PSAs that warn people not to buy crypto since Americans are losing billions and billions of dollars to crypto, crypto scams, to rug pulls. Instead, they're all pretending as if we have to do this and we're going to go along with it. Dave, what would you say to Democrats who are lining up at the crypto trough?

Dave Troy: Well, I think the first thing is, as Molly said, they don't really understand the origins of this or what the intentions are. I think personally that these lawmakers need to be brought up to speed on articles like "Paranoia on Parade" or David Golumbia's book or a lot of Molly's writing along with the work she's done with David Gerard and others. Because once you understand kind of what this is intended to do, it's easy to see why it's toxic and needs strong regulations, honestly. So I think that's one thing.

The other problem though is, this whole democracy thing is that they've got constituents, and I'm going to generalize and say it's mostly younger men calling them up saying that they need to support crypto and crypto is great and that crypto has changed their lives and all this. And there is a cohort of younger men who have, for lack of other types of opportunities landed on crypto as a kind of a way to accelerate what they think is their rightful status in society.

And it's kind of like gambling, you can go from having a hundred bucks to a thousand bucks to $10,000 to a hundred thousand to a million if you play enough of your cards right in a row. And unfortunately, the way that the structure of this is all set up right now is it's just an open casino where people can do that kind of stuff.

And so when those people are succeeding and they have the ability to call up and tell their representatives that they need to support this stuff and or to send them contributions, those dollars and those phone calls, they talk. And I think that that's part of the issue here is that there's just enough of a constituency that they feel like they can't ignore it.

And as Molly also said, there's also the implicit threat where if you don't go along, you're going to get punished. So it's a bit of carrot, it's a bit of stick, it's a bit of grassroots or astroturf. All of the above are contributing to the success of this.

And I mean, honestly, I feel like an honest politician would study it, come out with strong statements about why it's bad, but then more importantly, articulate some kind of vision for the future that makes sense. Because right now people are like, why should we defend the Federal Reserve? People need to talk about why that kind of construct is probably the best for the economy. And if we do want to change it, because there's reasons to not like it, then let's talk about how to fix it and make it better.

This road that we're on right now is the road to perdition.

Gil Duran: Let's talk about a company for a moment, Coinbase. Last year, I wrote a story about Brian Armstrong, the CEO of Coinbase, who completely embraces the idea of the network state, the creation of these private tech cities and territories to replace existing nations. In fact, Balaji Srinivasan, who wrote the Network State book, was the chief technology officer at Coinbase. And Brian Armstrong spoke at the network state conference and said, if you're building network states, build them with Coinbase.

So kind of a weird thing for a major CEO to be involved in. And it's hard to imagine like the CEO of Coca-Cola or even Philip Morris talking about we're going to create our own countries and we're going to use our company to do that. Right. But he somehow gets away with it probably because he's got over six billion dollars and has shown a willingness to spend it ruthlessly in politics. Armstrong declared that Bitcoin could become the world's reserve currency.

Dave what would that mean for American democracy and how does crypto serve as a vehicle for these very clearly anti-democratic ideologies? And what does it mean when sitting US senators are literally partying with people who dream of a post-USA world?

Dave Troy: Yeah, I mean, there's a bunch of folks in the Senate who have been vocal cheerleaders of this stuff, particularly folks like Cynthia Lummis from Wyoming and Marsha Blackburn from Tennessee. And this idea that Bitcoin might become the reserve currency versus the dollar, I mean, first off, it's kind of impractical because it's not terribly liquid. Actually, there was just another article I think I saw today that was in like the Financial Times or something talking about the reasons why Bitcoin wasn't likely to become a reserve currency.

But just the fact that we're having this discussion speaks to a kind of sickness within the political discourse where we really ought to be sure that the dollar stays as the world's reserve currency because we obtain significant global advantages by having that status. And there's really no reason why we can't continue to do it as long as we just kind of own the position and behave responsibly. So, I mean, I think it's kind of crazy that we're even having that kind of a conversation.

And honestly, there's so many issues with Bitcoin in terms of the way transactions are done, slowness, various things like that, that it's not really a practical solution to deal with a problem of that size. So I mostly discount any suggestion that that's kind of where this is going, but the fact that we're having the conversation is what is so toxic.

Gil Duran: They seem to really go out of their way to normalize these crazy ideas and then they get people like in the mainstream press and political establishment to pretend like that's not important. That's just weird stuff. At the same time, these guys have a lot of money and increasingly a lot of power.

So a lot of my journalism has just been focused on taking them at their word and really examining what they're talking about because I think they're serious about the stuff, whether or not it works almost is beside the point because I consider the network state in particular, largely a cult, a cult of billionaires, unfortunately, who are making a big push with their crypto dreams, which are now in the US Congress with the Freedom City idea, which is very clearly an attempt to create these zones. They're trying to bring that about in the world. And so that's kind of scary.

The stuff that I wrote about last year and seemed like a conspiracy theory to some people is now in the newspapers, but the press isn't really focusing on the ideology behind it or what that would mean for the country.

Molly, Coinbase recently sponsored Donald Trump's sad military birthday parade and they recently acquired I think the same week the services of David Plouffe, a political strategist who worked for both Barack Obama and Kamala Harris. This has gotten them some criticism and you've written about this, crypto was supposed to be about decentralization and challenging the establishment but now these guys are billionaires and they're cozying up to the military industrial complex and seeking to become the establishment even hiring up the most expensive consultants who will work for any side as long as it pays enough.

You quote one crypto enthusiast who wrote, quote, "what Coinbase did by sponsoring this army parade feels like an insult to everything our industry stands for. Crypto emerged from ideals of decentralization, individual sovereignty and freedom from oppressive state control, not to funnel resources into institutions whose core purpose involves violence and ending lives."

So tell us about these tensions in the crypto community.

Molly White: Yeah, I mean, there is this really interesting dynamic within the crypto world where for a while there was this long standing sort of belief that the crypto executives who are running these businesses who are cozying up to politicians and getting involved in politics were acting in the best interests of the little guy, the everyday Bitcoin enthusiast or the person who put a couple hundred bucks into whatever cryptocurrency interested them.

And I think we're beginning to see rifts emerge in that where people are realizing that when a billionaire says, we are going to Congress to fight for you, the little guy, they often are not being fully honest about that and that perhaps their interests are more self-serving. And so now, there has been this somewhat tension within the crypto world where some people are seeing these actions for what they are. They're seeing the grift by Donald Trump and his family members as purely a means for self-enrichment, not as an embrace of cryptocurrency's values such as they are. And it's been somewhat complicated, I think, for people in the crypto world to deal with. But unfortunately, I don't think we're seeing all that much pushback with the crypto companies that are doing this because I think a lot of people are willing to sacrifice those ideals in very similar ways as these crypto executives have.

Dave Troy: Yeah, and I just wanted to jump in with regards to Coinbase. One of the things that you've covered and I've covered regarding the network state concept is this idea of a parallel establishment. This idea of parallel companies running to replace legacy things like the press and different tech firms and whatever else.

So with respect to the stock market, right now, obviously, they're focused on currencies and money. But ultimately, I think that they would like to see themselves as replacing the stock market as well.

And so the idea that Coinbase could end up as a place where companies are listing their stock as crypto entities, basically, that's kind of the end game for a lot of this. So they're not just settling on replacing aspects of the monetary system. They want to replace the entire financial system. And sure, that's ambitious. It's going to take some time. But if you look at the kind of strategy that we're employing, where they're capturing the regulatory environment, where they're really removing any barriers to what might become securities listings for companies on something like Coinbase, sky's the limit. They can go as far as they want with this unless somebody says, no, this is getting silly. So I think people need to think about this from a big picture, long term perspective about what their goals really are.

Gil Duran: So here are some questions from our listeners. LM asks, could you provide some possible warning signs of crypto related financial crises, such as bank and currency crises or real asset crashes? That's kind of an intense question. I don't know, Dave, that sounds kind of like it's in your wheelhouse, you write about this kind of stuff a lot.

Dave Troy: I mean, I think we have to just be kind of like watching this stuff from a day-to-day basis and see where instability is rising, where there's potential criminal activity taking place and just kind of see where it goes. I mean, the problem is, is nobody really knows where the demons are going to come from with this, other than that there's a lot of sort of financial mass flowing into these instruments. So, we mentioned tether earlier. If that starts to get weird and go sideways, then that could become a source of instability. Really the issue is size. Like as long as this stuff was tiny and off to the side, like it kind of didn't matter, but now it's becoming legitimized and it's getting larger and there's just more and more stuff touching it. So it becomes more and more of a systemic risk.

So that European Central Bank paper that I talked about talks about some of the ways that it can lead to political instability. I know there's others that have written about financial instability. I sent a warning to the National Security Council about this back in like 2021, suggesting that this is where it was going to lead. So, I mean, there's a lot of people that have been concerned about this. I think the real question is just, how is it going to go down when it goes down? And I think there's a decent chance that something will happen. But I'm curious what Molly has to say on the subject as well.

Molly White: Yeah, I mean, I think the story of crypto is really one of repeated boom and bust cycles. If you look at Bitcoin price charts, for example, you'll see, it sort of explodes and then it crashes and then it explodes and it crashes. And we've seen the most recent time this happened was in 2022 or so, around the time of the FTX collapse. But there was a lot of other chaos that led up to that.

And some of the things that contributed to that were the amount of leverage that was happening within the crypto sphere where companies were all lending money to each other, sometimes rehypothecating loans, creating this incredibly unstable structure such that at the first sign of crypto prices beginning to falter, everything fell apart. And so I think the enormous amount of leverage in the crypto sector is really something to keep an eye on. It's something that should be carefully regulated, I think.

Another thing is just the speed at which things can fall apart in the crypto world. Crypto operates 24-7. Things happen very quickly on a programmatic basis. You can see a cryptocurrency, crypto token collapse in the span of seconds. And those types of collapses can have cascading effects throughout the crypto world that are hard to stop once they start. We saw that very clearly in the downturn in sort of 2022, where things went from looking more or less fine for a company to suddenly withdrawals were paused and then next thing you know they're declaring bankruptcy.

And so I think those types of things are really important to keep an eye on when it comes to stability because when there's an industry where things can go really bad really quickly and that exposure is spread throughout the entire industry very very deeply. I would be asking very serious questions about is this something we want to welcome into the broader financial system where those types of collapses, which as I mentioned are regular in the crypto world, it's basically an accepted fact that crypto goes through these, they call them crypto winters where crypto prices collapse. Is that something that we want to lash the entire American financial system to that we want to have banks getting very heavily involved with?

We're now seeing talk of using crypto assets as consideration for mortgages, things like that. We're hearing about people loaning money against crypto assets. I mean, all of these things, I think, are very, very seriously concerning.

Dave Troy: Yeah, and I would also just quickly add that, we do see now big institutional firms like BlackRock, buying into the ETFs and stuff and presumably selling those assets to pension funds and large institutional investors. So it's getting into everybody, everyday people's lives, kind of whether they want that exposure or not in a lot of cases. And I think, we're setting ourselves up for a much messier future financial crisis when we have one, not if.

Gil Duran: It seems like unfortunately, a lot of this conversation is above the level that most Americans are able to pay attention to right now with all the other problems and crises they have. A lot of us learned what credit default swaps were in the worst possible circumstances and would not have thought about them prior to the disaster in 2008. And so it seems like they're really cooking up this volatile soup where a bunch of people are going to cash in and be in a great position when some kind of crash takes everyone else.

And it's amazing how much history does repeat itself. And it's really even a bigger question why people like Senator Padilla and Senator Schiff are going along with this madness. Because if they're worried about reelection, it's going to look really bad later that you went along with this kind of thing.

And another thing I would say is that it's amazing how the crypto people always try to make volatility and defeating volatility one of their strengths when they have the most volatile products imaginable compared to the dollar. And it fits this sort of idea of accusing the other side of doing what you're actually doing. Right. They're always saying, well, this will solve volatility. Well, how do you explain that when a token can evaporate in a few seconds? Right. They never explain it, though. They just buy off the politicians and move ahead.

Another question here, Gannett asks: Where is Russia in all of this? Crypto seems like it meets multiple criteria to help them destabilize the US dollar and ramp up climate change so they can unlock the formerly frozen tundra. And I would add to that that other countries too have been able to use crypto for all kinds of illicit purposes. North Korea has teams stealing crypto to support its nuclear program. You've got Iran and other people able to evade sanctions with crypto. Who wants to take that one to start?

Dave Troy: I'll do a pass at it. Yeah, basically, I agree that this crypto in general helps Russia and their desires. One of Russia's biggest gripes is just the dollar and the fact that it is the reserve currency. And so they have this feeling of kind of paranoia that the dollar is enabling the US to lord over the rest of the world.

There's a conspiracy theory that Putin likes to cite called the Golden Billion, which is basically the idea that the US combined with Europe runs the world. The dollar, I mean, it's very explicit. There's a book written by a guy named Sergey Glazyev, who was the architect of this BRICS currency idea that explicitly talks about taking down the dollar through destabilization. And some of this, they think, is paybacks for what happened to the ruble back in 1991. They felt like that they were the victims of financial warfare coming from the West. And so therefore, this is their big opportunity for payback.

Crypto, it's complicated. There's a bunch of different coins in play. There's one that's being used by the Russians right now to avoid sanctions. And they've kind of run hot and cold on things like Bitcoin mining within Russia, because I think they recognize that it has the ability to destabilize the ruble as well. But in general, all crypto that isn't dollars is something that I think that they generally are in favor of because it tends to suck wealth out of the rest of the dollar economies. In general, I think they're favorably disposed to using it as a tool to fight what they consider to be Western hegemony.

Gil Duran: Molly, any thoughts on the geopolitical treacheries of crypto?

Molly White: I more or less agree with what Dave said, but I think that it's been sort of a complex topic in various countries where in some ways they see it as very beneficial. We've seen Russia especially recently embracing crypto more openly as a way to evade US sanctions. That's been very effective for them in that sense. Countries like Russia have in the past banned crypto among Russian citizens because again, they sort of fear that it will allow them to sort of escape the Russian monetary system. It is sort of this double edged sword, I think with a lot of these countries that haven't established a firm position on it in some ways.

Dave Troy: And just a real quick thing on Russia, there was a big Ponzi scheme in Russia in the 90s called MMM that was set up by a guy named Sergei Mavrodi. And it basically was like crypto. It was like, they just called it a blatant Ponzi scheme, but it was a way for a lot of young men mostly to get rich quick. They saw how destabilizing something like that was, even as it was kind of also a social experiment to kind of see who participated in it and why and what the psychology was. So they have a lot of experience in Russia with this kind of psychology around schemes like this. And so, we're just getting the business end of that now.

[Commercial break]

Producer Voice: And now it's time for the Nerd Reich plugs where we tell you how you can support our guests. First up, Molly White. You can check out her excellent newsletters at citationneeded.news and her other newsletter at web3isgoinggreat.com. And she's molly.wiki on blue sky. Dave Troy is editor and publisher of America 2.0 at americatwo.news. On socials he's at Dave Troy on X, at davetroy.com on Bluesky.

Gil Duran: So looking ahead, if crypto succeeds in capturing both parties and regulatory agencies. What does a crypto dominated financial system actually look like for ordinary Americans? Are we talking about a full return to the kind of unregulated speculation that caused previous crashes? Or is it something even more destabilizing? And most importantly, what would it take to stop this trajectory before it's too late? Molly, let's start with you.

Molly White: I think it's a little hard to envision a crypto dominated financial system because frankly crypto is not very well suited for that kind of scale. There are a lot of technological flaws with cryptocurrencies and blockchain technology, broadly speaking, that make it very challenging to use on the scale of the United States financial system.

And so while there have been a lot of sort of lofty plans, they often stop short of the actual realities of implementation, because again, this is really just not well suited. So I don't necessarily think we are likely to be headed towards a world where crypto forms the basis of the financial system, although there certainly are people in the crypto world who believe that that would be a beneficial future.

I think more likely is a future where crypto is accepted as an asset class that is broadly normalized and is integrated with the current financial system in ways that could be very, very destabilizing. So again, I've spoken a little bit about the repeated boom and bust cycles within crypto, the enormous volatility of cryptocurrencies, the speed at which things can go very badly very quickly.

That combined with very poor regulation and frankly the introduction of new legislation that would worsen the regulatory environment around cryptocurrency, I think is really leading us towards a scary future where volatility in the crypto world is no longer limited to those who engage with crypto. So, if you look back at 2022, the most recent crypto collapse, we saw FTX explode in just a very spectacular fashion. A lot of people lost a lot of money, lives were ruined. Many people, if they did not have exposure to cryptocurrency, would not have noticed that it happened if it wasn't for New York Times headlines about Sam Bankman-Fried and his criminal enterprise, which was certainly an interesting story. But, we did not see the stock market crash. We did not see banks go under.

We were not seeing the sort of ripples throughout the traditional financial system that you might expect if a financial institution of that size that was deeply intertwined with the rest of American finance and banking went under. I worry that the way that things are going politically, the goals of the crypto industry that are being realized in Congress right now are steering us towards a future where a future collapse like that could be a very different story and that people who, even the people who decide I don't want anything to do with cryptocurrency, I don't hold any crypto assets, I don't have any exposure to crypto or even crypto companies via their publicly traded stocks could still suffer major consequences because of the contagion that is allowed to grow between this sector and traditional finance.

Dave Troy: Yeah, I would second everything that Molly said there and add a few sort of colorful dystopian notes. Imagine the world as run by Biff Tannen, like in Back to the Future 2, where everything is being run by kind of the world's worst people. That's who stands to benefit if... Well, I'm just saying, it could get a lot worse, we're in the early stages. But yeah, I imagine that taken to scale and where retirees are systematically stripped of their assets because they're NGMI or in crypto terms not going to make it. There's a reality where the people who get into this stuff earliest and double down on it hardest end up being rewarded the most by its success. And so that's a little bit disgusting when you think about it because it really does mean that the world's worst people are going to end up in control of the political system.

Ultimately. And, we are seeing aspects of that now, but it could get a lot, lot worse, believe it or not. So, think about Andrew Tate being in charge, that's sort of where this is going if it's not arrested. And in terms of ways to arrest it, I really think it's, we've got to figure out a way to get political systems to understand the reality of this and not to try to normalize it, not to try to explain it away as innovation and not to be afraid of crypto money and its consequences. Ultimately, we've got to stand up for something. That leadership has been scarce. I don't agree with Elizabeth Warren on everything, but I think Elizabeth Warren has been maybe the closest to anybody who has been speaking up about this. And there's one of her staffers who is now at Brookings who has been writing about this.

Molly White: Tonantzin Carmona, she's wonderful.

Dave Troy: Yeah. Yeah. So, and the key point that you made, Molly, is that you don't have to be a holder of crypto assets to be harmed by this change if this happens in this way, because ultimately assets are sucked out of the traditional financial system, which is going to have an impact on people's retirement accounts and other assets. So it's really crucial that we get ahead of this. And so far we don't show any signs.

Molly White: Yeah, I would just add on to that actually in terms of what people can be doing and what needs to happen is, there is a lot of money and incentive in being pro crypto. It is very lucrative to scream from the rooftops about how great crypto is. And so, that is largely what people hear about crypto, including members of Congress, their staff, their advisors. And so I think that it's very important for people to educate themselves about cryptocurrency, seeking out people who are presenting skeptical narratives and being very aware when narratives are coming from people who benefit financially. That's unfortunately a very common thing in the crypto world is that the people who are loudest about it also stand to profit the most.

And then, communicating those things to political representatives saying that, this is not something that I want. This is something that I want you to stand up against because, the people who stand to profit from crypto are very loud. They're the ones who are pushing for this. They're calling Congress people. They are holding events and rallies. A lot of people don't necessarily call their senator because they don't care about something or they don't want something. But in this case, I think just being aware of the potential downsides, the potential for corruption. We didn't even really go into the level of corruption that we're seeing with Donald Trump and members of his family around crypto, where they are personally profiting from it while writing the rules of the road, essentially.

These are the types of things that we need to be very loud about. And we need to understand that even though crypto seems like sort of a fringe thing, it's something that maybe, that guy you went to college with really cared about, but you never really were interested in it. It actually has, at this point in time, very serious ramifications for the public, in the same way that people need to be caring about their taxes and the price of housing and education and things like that. Unfortunately, crypto has become something that everyday people need to worry about because of the way that it is becoming this sort of corrupting force in American politics.

Gil Duran: When I went to college, people cared about Hootie and the Blowfish and the Dave Matthews band. Crypto was only in science fiction books. It is amazing to me though that, we had this billionaire Elon Musk, the world's richest man, supposedly, in our government tearing it apart. And he named his effort after a crypto product, DOGE, right? So you had this melding of these things and kind of, in a way, a very pure glimpse of the ideology behind crypto.

And it does seem like we're going to need to have Democrats at the very least wake up and start pushing back against this stuff. Because if they don't, then crypto winter is coming for us all. Thanks in part to Senators Alex Padilla and Adam Schiff, who I'll have more to say about in the very near future. But thank you all for joining us today. This has been great. And I hope you'll come back sometime to the Nerd Reich Podcast.

Molly White: Thanks for having me.

Dave Troy: Absolutely. Thanks for having us.

Producer: The Nerd Reich Podcast is produced and edited by R.R. Robbins. It's written and hosted by Gil Duran. Like the show, have topics we should cover? Send us a message at thenerdreich.com.

Today's final words from legendary money man, John Maynard Keynes: "The market can remain irrational longer than you can remain solvent."

See you next time.