Trump Appoints "PayPal Mafia" Sacks as US Government Crypto Czar - A threat to US Banks? - Stablecoins/Crypto Exchanges - Where are the Beneficial Owners? - Tether/Binance - Advice for Donald Trump
Please Note: BOOM has no personal or direct interest in US politics but holds the view that Donald Trump’s victory over Biden/Harris appears to have been a net benefit for the USA. However, that hypothesis will be put to the test during the next 4 years. The journey has not yet begun. There is great uncertainty.
Trump Appoints Crypto Czar — US Banks Should see the Threat
Fascism Revisited
Crypto is a Casino Crime Scene
The Crypto Threat to the Banks
Mysterious Ownership Structures in Crypto - Where are the Beneficial Owners?
Advice for Donald Trump
More Interest Rate Cuts — BOOM gets it Right
TRUMP APPOINTS CRYPTO CZAR – DAVID SACKS —
US BANKS SHOULD SEE THE THREAT
US President-elect Donald Trump has appointed David Sacks as his "White House AI & Crypto Czar” (whatever that means).
David Sacks was born in South Africa and is a former PayPal Chief Operating Officer. He was also the founder and CEO of Yammer which is now a part of Microsoft365. He has a Bachelor of Arts degree in economics from Stanford University in 1994 and a Law degree from the University of Chicago Law School in 1998.
Sacks is often referred to as a member of the so-called "PayPal Mafia", a group of founders and early employees of PayPal who became founders of other successful technology companies. Prominent members of the “mafia” include Elon Musk, Peter Thiel (both from South Africa/Namibia) and Reid Hoffman (a founder of LinkedIn).
Reuters reported the appointment in Trump’s words from a Truth Social post --
“He will work on a legal framework so the Crypto industry has the clarity it has been asking for and can thrive in the US".
Presumably, the PayPal Mafia wanted to ensure oversight by one of their own of any laws and regulations concerning Crypto and Artificial Intelligence. The “Czar” David Sacks will (presumably) have oversight on any proposed legislation coming from the Justice Department or the Attorney General. He will presumably consult with his Crypto allies on such matters.
It seems that the PayPal Mafia and the Crypto lobby in general have sought and achieved possible undue influence on the upcoming Trump administration.
The regulated will have infiltrated the regulators from Day One.
Trump has also appointed a Crypto advocate, Paul Atkins, to lead the SEC, the Securities and Exchange Commission. Atkins is the founder and CEO of Patomak Global Partners LLC, a consulting firm specialising in regulatory compliance and strategic advisory services for financial firms and Crypto companies. Atkins is a lawyer, assisting corporations with mergers, acquisitions, and securities offerings. Atkins has also helped with compliance and regulatory investigations. He is described as a “prominent lobbyist, business leader, and former government official with extensive experience in financial regulation”. He holds a law degree from Vanderbilt University Law School.
FASCISM REVISITED
Last week, BOOM wrote about the steady development of fascism in the United States – the merger of Corporate and State interests (as defined by Mussolini, the Fascist dictator of Italy for 26 years).
This trend is not new and has been in place for many decades involving many Presidents. It was encouraged by the Biden Presidency and it looks like Trump wants to continue along the same path but with different rhetoric. The over-representation of Corporate interests as compared to the interests of the People is the critical element of Fascism as opposed to Democracy.
Public officials are expected to act for the benefit of the People above all else.
Therefore, David Sacks and Paul Atkins, as public officials, will be expected to act for the benefit of the People of America, not for the benefit of a core group of corporations and billionaires residing in Silicon Valley, California. We shall see.
THE BITCOIN RESERVE IS A CRAZY IDEA – CRYPTO IS A CASINO CRIME SCENE
Trump has stated that he wants to make the United States the "Crypto capital of the planet" (whatever that means) and to accumulate a national stockpile of Bitcoin, a so-called “Bitcoin Reserve”.
Last week, BOOM pointed out that a Bitcoin Reserve is a crazy idea. In other words, if the US Government were to adopt a policy of investing in Bitcoin, then US citizens (and any other citizens around the globe) could decide to follow. They could take their savings out of their bank deposits to buy Bitcoins and, possibly, other Cryptos. There are currently over 2.4 Million Cryptos on issue in the Crypto Casino.
Citizens (and corporations) could also decide to borrow from their banks and buy yet more Bitcoins and Cryptos. Literally TRILLIONS of Dollars could ultimately be sucked into the Crypto Crime Casino globally if that were to happen.
The total Market Cap for all Cryptos (including Bitcoin) is already US $ 3.65 TRILLION.
THE CRYPTO THREAT TO THE BANKS – GENERATING A “RUN” ON THE BANKS
In an interview late last week in Abu Dhabi, Eric Trump commented very critically on the conventional banking system —
“Listen, right now, if you live in America and want to get a home loan, it takes you 90 days. How the hell does it take 90 days to get a home loan? By then, the house is already sold. Your dream is gone. ……. The banking system we have around the world, the modern banking system, is antiquated. It's antiquated, and it's just a matter of time before crypto not only catches up but really leaps ahead.”
The banking sector in the USA must surely see Donald Trump’s ideas on Crypto as a direct threat. Crypto is genuine competition for deposit moneys in the banks if “investment” in the Crypto Casino is directly encouraged by the US Government. If this became a speculative madness, then huge money flows could develop rapidly from bank deposits to the offshore Casino. In effect, it could generate a digital “run” on the banks.
If the banks allowed the transfers to take place, all citizens in all nations with privately owned banks could follow the same logic.
As BOOM pointed out last week, once those funds are exchanged for Cryptos at online Crypto exchanges, the sellers of Bitcoin/other Cryptos would (almost certainly) wish to retain their funds as Stablecoin “deposits”, for example in Tether. After all, why would they return to a fragile banking system? Stablecoin volumes could explode.
It is important to understand that Stablecoins are (effectively) offshore US Dollars (more commonly called Eurodollars). These dollars are largely out of any control from US regulatory authorities.
Hypothesis for the Future
It’s now time to play the game of Hypothesis for the Future ….. more commonly understood as the game of What If?
Currently, such Stablecoin “deposits” do not generate any interest return. However, if the Trump/Sacks/Atkins/PayPal mafia team were to issue US banking licenses to US based Stablecoin companies (or some other novel licence resembling a banking licence), then they could (presumably) offer interest payments on “deposits” and they could also offer interest bearing loans.
If all of that were to happen, then a Cyberspace banking “industry” could rapidly develop. And that would certainly be an existential threat to the conventional banking industry worldwide.
The implosion of the US banking system would not be of any benefit to the People of America or the People of any other nation that has a privately owned commercial/retail banking system.
A THREAT TO US DOLLAR DOMINANCE AND TAX HAVEN BANKS?
But there is more ….. much more to consider. There is another possible dynamic to this game of “What If”?
Most large Crypto exchanges are outside the US, offshore, and so are the Stablecoin companies. They are effectively in Cyberspace and their beneficial owners (if you can identify them), both individual and corporate, live in other nations.
In effect, a speculative flood of US Dollars into Bitcoin/Crypto would wind up on the largest Crypto exchanges such as Binance and in the largest Stablecoin volumes such as Tether.
In this scenario, not only could the US banks and other nations’ banks be threatened by deposit withdrawals but also the established offshore Tax Haven banks could be threatened as well. After all, they currently have a stranglehold on Eurodollar holdings (off shore US Dollars). But that is another matter for another day.
Let’s look more closely at the largest Stablecoin and the largest Crypto exchange.
STABLECOINS AND CRYPTO EXCHANGES – MYSTERIOUS OWNERSHIP STRUCTURES – WHERE IS THE BENEFICIAL OWNERSHIP?
BOOM has researched the ownership structures of both Tether and Binance. It is incredibly difficult to accurately uncover the exact history and the beneficial ownership of both. This is a deep rabbit hole with much uncertainty involved. Please bear that in mind.
TETHER
Tether is a Stablecoin – a US Dollar Proxy -- for the Casino Crime world of Crypto. It is a bridge from the Crypto world back to the real world of regulated finance. All Stablecoins provide that connection.
One of the important things to know about Tether is that its daily trading volume is more than twice the volume of Bitcoin. In the last 24 hours, during a weekend, the volume of Bitcoin traded amounted to around US$ 42 Billion. The Volume of Tether traded was US$ 106 Billion.
During the week, Bitcoin Daily volumes occur around US $ 85 Billion. Tether volumes often exceed US$ 185 Billion. (Data Source: Coinmarketcap)
Tether is also the largest Stablecoin by market cap. The market Cap is about US$ 140 Billion which is less than its daily trading volumes intra-week.
In May 2023, Tether announced its new strategy of funnelling 15% of its net profit into accumulating Bitcoin to diversify its reserves, of which the majority are in US Treasury Bills, according to the company. The fact that Tether owns a (presumably) large stock of US Treasury securities and is diversifying into holding Bitcoin is intriguing.
One source stated -- “The largest Stablecoin by Daily volume and by market capitalisation, Tether, operates in the Cayman Islands but is owned by a company, Tether Limited, that was incorporated in 2014 in Hong Kong, China.”
That sounds feasible. And it may be true. Or it may not. BOOM cannot be sure.
Another source stated the following --
From CoinmarketCap – What is Tether?
Quote:
“Tether’s company structure looks as follows:
• Tether Holdings Limited, incorporated in the British Virgin Islands in 2014, is the ultimate parent company and owns 100% of iFinex Inc. and Tether Limited Inc.
• iFinex Inc. is the parent company of Tether Limited Inc. and also owns the Bitfinex cryptocurrency exchange.
• Tether Limited Inc., incorporated in Hong Kong in 2014, is the company that launched and operates the Tether platform and issues the Tether tokens.
• Tether Operations Limited, incorporated in the British Virgin Islands in 2017, is a subsidiary of Tether Holdings Limited that provides operational support and services to Tether Limited Inc.
• Tether International Limited, incorporated in the British Virgin Islands in 2017, is another subsidiary of Tether Holdings Limited that provides marketing and business development services to Tether Limited Inc.”
Do you have a headache yet? Coinmarketcap also provided the following diagram – it looks feasible and it may, or may not, be true. BOOM cannot be sure.
BINANCE
The history of Binance is also very complex. The founder of Binance, Changpeng Zhao, was born in China in 1977 in Jiangsu Province. In 1989, his family moved to Canada. In 2005, he moved back to Shanghai, China, at the age of 28 years and established his first technology startup company called Fusion Systems, which was known for "some of the fastest automated high-frequency trading platforms and systems for stockbrokers”.
Here is what Binance says about itself (from its website) --
Changpeng Zhao, known as CZ, is a serial entrepreneur with an impressive track record of successful startups. He launched Binance in July 2017 and, within 180 days, grew Binance into the largest digital asset exchange in the world by trading volume. A pioneer within the blockchain industry, CZ has built Binance into the leading blockchain ecosystem, comprised of Binance Exchange, Labs, Launchpad, Academy, Research, Trust Wallet, Charity, NFT, and more. CZ spent his youth flipping burgers before studying at McGill University Montreal. In 2005, CZ quit his role as head of the Bloomberg Tradebook Futures Research & Development team and moved to Shanghai to start Fusion Systems. Soon thereafter, he learned about Bitcoin and joined Blockchain.com as Head of Technology.
The co-founder of Binance is listed as Yi He, a woman who was co-founder of the digital asset exchange OKCoin between 2014 and 2015.
According to the website, the average Daily Volume on Binance is US$ 65 Billion. That is not small change.
It equates to an Annual Volume of US$ 23.75 TRILLION (!)
Binance was initially based in China, then moved to Japan shortly before the Chinese government restricted cryptocurrency companies. Binance subsequently left Japan for Malta and, according to various sources, “currently has no official company headquarters”.
Binance appears to be owned by Binance Holdings Limited, a company that may be still resident in China.
The beneficial shareholders of Binance Holdings Limited are a mystery as far as BOOM can ascertain. Presumably, the founder, Changpeng Zhao, owns the majority of shares. Yi He, co-founder of Binance, is believed to hold a significant stake in the company. Several early investors, including venture capital firms and angel investors, contributed to Binance’s initial funding rounds. They may (or may not) own shares in Binance Holdings Ltd. However, if so, their ownership percentages remain undisclosed as far as BOOM can ascertain. Some Binance employees may hold stock options or other forms of equity in the company. But that also is undisclosed to BOOM’s research.
More on Binance –
(Source: Wikipedia)
In July 2020, Binance announced a "strategic partnership" with a Chinese state-owned enterprise under the State-owned Assets Supervision and Administration Commission of the State Council and that Binance had joined a group "aiming to facilitate" the Belt and Road Initiative.
On 28 October 2020, Forbes magazine staff released leaked documents showing that Binance and Changpeng Zhao created an elaborate corporate structure designed to intentionally deceive United States regulators and secretly profit from cryptocurrency investors located in the country.
In February 2022, Binance took a $200 million stake in Forbes. It's unclear if this investment was ever completed.
In 2022, Zhao invested US $ 500 million through Binance to finance the acquisition of Twitter by Elon Musk. The Zhao connection to Musk is not well known.
In November 2023, Binance was found guilty of violating US laws to prevent money laundering and US sanctions violations. The Binance exchange agreed to pay the government US $4.3 Billion in fines and fees.
The founder and CEO, Changpeng Zhao, plead guilty and that may (or may not) have led to a US Criminal Conviction. BOOM is not a lawyer and cannot be sure of that. Zhao agreed to step down from his role as head of Binance.
The Criminal Division of the US Department of Justice has a website on the matter -- United States v. Changpeng Zhao
https://www.justice.gov/criminal/case/united-states-v-changpeng-zhao
Quote:
“On November 21, 2023, Binance’s founder and Chief Executive Officer, Changpeng Zhao, pleaded guilty to violating the BSA by causing Binance to violate the BSA by causing Binance to fail to implement an effective anti-money laundering program. Simultaneously, the Department of Justice announced that Binance Holdings Limited (Binance) pleaded guilty to conspiracy to violate the Bank Secrecy Act (BSA) and to fail to register as a money transmitting business, failure to register as a money transmitting business, and violating the International Emergency Economic Powers Act (IEEPA). Binance, the largest cryptocurrency exchange in the world, prioritized growth, market share, and profits over compliance with U.S. law in a deliberate and calculated effort to profit from the U.S. market without implementing controls required by U.S. law. Binance agreed to pay $4.3 billion in penalties and will undertake compliance enhancement and remediation and retain an independent monitor. This is the Department’s largest corporate guilty plea that also involves the guilty plea of a Chief Executive Officer. This prosecution was led by the Criminal Division’s Money Laundering and Asset Recovery Section, the National Security Division and the U.S. Attorney’s Office for the Western District of Washington.” Unquote
In April 2024, Zhao was sentenced to four months in prison after pleading guilty to charges of money laundering. According to records with the United States Federal Bureau of Prisons (BOP), as of August 22, 2024, Zhao was listed as an inmate of the Residential Reentry Management (RRM) Long Beach field office, which helps place federal offenders. (Source: Wikipedia)
Zhao is a Canadian citizen and a citizen of the United Arab Emirates. As far as BOOM can tell, he mostly resides in Dubai (?). But BOOM cannot be sure of that.
US officials said in November that Binance and Zhao's "wilful violations" of its laws had threatened the US financial system and national security.
In 2022, prior to the prosecution, an article was published by Reuters titled “Binance's books are a black box, filings show, …”.
Some excerpts follow which are certainly worth reading to understand a company with an annual turnover in excess of US$ 23 Trillion --
"Binance turned a blind eye to its legal obligations in the pursuit of profit," said Treasury Secretary Janet Yellen. "Its wilful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform."
Again, from the Reuters report in 2022 -- “Binance's former chief financial officer, Wei Zhou, did not have access to the company's full accounts during his three-year tenure, according to two people who worked with him.” and “Zhao and other executives have consistently declined to publicly identify which entity controls the main exchange. But in a private court submission filed in 2020 in an arbitration case in the Cayman Islands, Chief Compliance Officer Samuel Lim said it is owned and operated by a Cayman Islands company, Binance Holdings Limited.”
That begs the question – who owns the company that is operating in the Cayman Islands? Who is the beneficial owner?
And … more from the Reuters report --
“Reuters also asked representatives of the local Binance units and affiliates about their relationship with the main Binance exchange. Only one responded, a South African firm called FiveWest. Its managing director, Pierre van Helden, said — "How Binance operates globally is unclear to us ...".
And ……
“In Italy, Binance's public corporate filings detail just the unit's capital base and its ownership by a separate Binance company in Ireland. The Italian company, Binance Italy S.R.L., has its listed address in a block of shops and apartments in the southern city of Lecce.”
And more ….
“One, a Lithuanian firm called Bifinity UAB, offers the most detailed picture. Bifinity described itself in one regulatory filing as the "official fiat-to-crypto payments provider for Binance." Fiat means dollars, euros and other traditional currencies.”
“Bifinity also disclosed that Binance and its companies are its "main strategic business partners." In a 2021 annual report, Bifinity reported 137 million euros ($145 million) in net profit and assets of 816 million euros. Bifinity said it had made payments of 421 million euros to a single related party, with some 185 million euros in "related expenses," but did not specify whether this party is Binance.”
“Bifinity, whose annual report said it has 147 employees, does not have a website or publicly provide any contact details. The company's chief executive, Saulius Galatiltis, did not respond to requests for comment. At its registered address at a business centre in Lithuania's capital Vilnius, Bifinity is not listed on the tenants' board.”
And yet more …..
“Zhao told Bloomberg in March that he will be based for the "foreseeable future" in Dubai. Filings by Binance's Dubai entities give no details of its financial activity or its ties to the main Binance platform.” ……… “Many crypto exchanges, including Binance competitors Huobi and OKX, operate from offshore locations such as the Seychelles – as did Bahamas-based FTX. Standards on corporate transparency and financial reporting are typically looser in such jurisdictions than in the United States.”
And …. “In terms of the balance sheet from Binance, there really is no colour," said Todaro, the analyst at Needham & Company.”
BOOM is not sure what is meant by the term “no colour” here but it seems to imply that there is obscurity.
References:
Reuters — “Binance's books are a black box, filings show, …”
Coinmarketcap — What is Tether?
https://coinmarketcap.com/academy/article/what-is-tether
ADVICE FOR DONALD TRUMP
BOOM would advise President-elect Trump to tread carefully here. And to put the interests of the People of America before a select group of corporations of America and corporations of China. Billionaires are not representative of the people. Beware Donald Trump.
BOOM does not think the US banking industry or the global banking system will sit by and watch Trump’s proposed Crypto developments calmly. The tax haven banks can also be expected to exert whatever influence they can have.
Foreign investors in US Treasuries, US based banks and US companies may also feel threatened. They may be disturbed to imagine that their bank accounts in the US may be less secure than previously thought.
If the plan is to boost US resident Crypto exchanges and Stablecoins, then that is almost certainly doomed to failure in BOOM’s opinion. It is BOOM’s guess that the world of conventional global finance and the largely unseen world of global criminal finance will not be inspired by such a “vision” of US dominance.
And one more suggestion for Donald. Remember, the concept of “American Exceptionalism” is largely confined within the borders of the United States. “America First” does not inspire 7.5 Billion people who do not live in the USA.
Global finance is not a game.
INTEREST RATE CUTS — BOOM GETS IT RIGHT
Five months ago, in the BOOM Editorial dated July 21st, BOOM wrote — “Interest rate cuts are expected in both the United States and in Western Europe in the coming months as CPI inflation rates continue to fall” and … “BOOM feels that these (current) interest rate levels are far too high for the economic predicament that Western Europe now finds itself in with the major threat not being inflation but falling economic growth or stagnation.”
The European Central Bank cut their key rate by 0.25 % last week and the Swiss National Bank cut theirs by a “surprise” 0.50 %. No surprise to BOOM readers.
Last Sunday, BOOM’s editorial stated “US Government expenditure has rapidly increased in 2024 compared to 2023. From published data and forecasts, it appears that US Government spending has ballooned by more than $ 3 Trillion above expectations during 2024. This is an extraordinary Fiscal event.”
The financial mainstream media headlines on Thursday read “Government Spending Shock: US Budget Deficit Soars In Worst November On Record”.
No shock to BOOM readers.
BOOM cannot understand why mainstream media finance journalists and “professional” economists are paid salaries.
“Well, God gave them wisdom that have it; and those that are fools, let them use their talents.”
—William Shakespeare, "Twelfth Night"
In economics, things work until they don’t. Until next week, make your own conclusions, do your own research. BOOM does not offer investment advice.
ALL SUBSTACK EDITORIALS ARE AVAILABLE AT BOOM SUBSTACK ARCHIVE. https://boomfinanceandeconomics.substack.com/archive
ALL PREVIOUS EDITORIALS ARE AVAILABLE AT BOOM ON WORDPRESS.
https://boomfinanceandeconomics.wordpress.com/
BOOM Finance and Economics is also available on LinkedIn
https://www.linkedin.com/in/gerry-brady-706025157/recent-activity/articles/
Sources: BOOM often uses charts from Trading Economics, Incredible Charts and Stockcharts. Investopedia is a useful source for financial definitions.
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