The Central Bank Digital Currency Conspiracy

The problem with conspiracy theories is that they put too much faith in central planning. I’m currently slogging through Whitney Webb’s two-volume Epstein exposé, One Nation Under Blackmail, and there is not enough Adderall on the planet for me to keep the cast of characters straight in my head.

Maybe I’m slow, but what if it’s not a conspiracy? What if individuals were acting in self-interest, and sexual deviants just happen to enjoy hanging out with other sexual deviants? Look at all those photos of Epstein and friends. Do these people look like they’re under duress? Do you see Larry Summers blinking B-L-A-C-K-M-A-I-L in Morse code?

Elsewhere, here’s Whitney Webb with FTX and the Curious History of Farmington Bank. In 2022, FTX invested $11.5 million in Farmington Bank, which was owned by a Hong Kong businessman named Archie Chan, who is a business director of Glorious Sun Enterprises, which helped launder money for former Philippines president Ferdinand Marcos, whose wife collaborated with Adnan Khashoggi, who was a client of…Jeffrey Epstein. Dun DUN DUN.

Wait, there’s more! In 2020, Farmington Bank was sold to FBH Corp, which shares a chairman with Deltec Bank and Trust, which provides banking services for Tether, which was co-founded by Brock Pierce, who attended a party in the Virgin Islands hosted by…Jeffrey Epstein. Dun DUN DUN!!

That’s some shady stuff. But, maybe the Curious History can also be explained by distributed self-interest: Scammy crypto projects opened accounts with Deltec because the bank was actively trying to attract new clients with lax compliance controls. Deltec literally advertises “remote offshore private bank accounts” with a $1 million minimum deposit. Adverse selection at work.

Webb then identifies a startup called Fluent Finance1 working on a US+ stablecoin. Fluent Finance has a partnership with Farmington Bank, which has since changed its name to Moonstone. Webb surmises:

If Tether is set to unravel in the wake of FTX’s collapse, as some believe, US+ seems designed to be the “trustworthy” counterpart meant to herd the “legacy” financial system into the CBDC era.

There already exists a “trustworthy” counterpart to Tether. It’s called USDC and the CEO headlined at Davos last month. Speaking of scammy bottom-dwellers attracting the same – USDC has established a money market mutual fund with BlackRock, and is seeking access to the Fed’s overnight reverse repo facility for that fund. If granted, HODLing USDC will become the equivalent of holding funds at the Federal Reserve.

We know that globalist entities care very much about Central Bank Digital Currencies; the Atlantic Council even has a CBDC tracker on its website.
Still, it does not look like central planning so much as distributed self-interest. Circle began as a mediocre bitcoin wallet, and found that it could achieve competitive advantage by sucking up to regulators. Last August, following OFAC sanctions on Tornado Cash, Tether issued a statement explaining that the company would only freeze Tornado Cash addresses if requested to do so by law enforcement. This is in contrast to USDC, which preemptively blacklisted Tornado Cash smart contracts. Washington Post accused Tether of “defy[ing] US sanctions.”

In the current year, anything less than enthusiastic overcompliance constitutes defiance. There will always be scummy entities that obsequiously cater to the needs of regulatory bodies. Companies that try to strike a balance between regulatory compliance and censorship resistance (eg Coinbase) are NGMI. Fortunately, bitcoin also relies on distributed self-interest. Go crypto-anarchy or go home.

1. This is another case of scammers attracting scammers. Fluent Finance boasts a supposedly illustrious founding team with extensive experience in Central Bank Digital Currencies — Except that it’s all bullshit. All the articles praising their influence are press releases published by their own crappy company, and claims of having invented the Eastern Caribbean Digital Dollar are easily disproven.

Compliance Racket

See! This is how an innocent private enterprise becomes a security state tool. Notice that Coinbase didn’t actually do anything wrong – there was no evidence of money laundering or terrorist financing or actual criminal activity. Coinbase is being fined for letting customers open accounts “without sufficient background checks”.

The $100 million settlement requires that Coinbase invest $50 million in its compliance program. In other words, Coinbase needs to hire a lot of expensive former federal regulators to do compliance duty. This may look like a penalty, but it’s actually an induction. When a critical mass of ex-government employees occupies the corner office, only then can Coinbase become a respectable financial institution.

The “compliance program” is obviously bullshit. When a criminal wants to launder stolen crypto, they don’t go to the hassle of opening a new Coinbase account. They borrow a hacked account, or buy one off the dark web, and launder the proceeds through a victim. The unwitting money mule is as old as advance fee fraud.

Speaking of hacked accounts, here’s Michael Terpin suing AT&T because a 15-year-old kid stole his phone number in a SIM swap. The teen used the number to access Terpin’s email where Terpin’s private keys were saved, and swiped $24 million worth of shitcoins.

This is not uncommon; last year there were 28 lawsuits filed against mobile service providers for enabling SIM-swap attacks on crypto accounts. In most cases, hackers bribed retail employees to override security measures and hijack the SIM account.

I’m generally unsympathetic to people who secure their crypto with a cell phone, but I do wonder — How come AT&T never gets in trouble for facilitating money laundering?

They already have very good compliance, that’s why.

Why are Weedwacker engines such crap?

There is no tool I hate more than the gas-powered string trimmer. What idiot decided that it would be a good idea to cut weeds with twirling bits of string? If the grim reaper were around today, he would be depicted not with a scythe, but a Craftsman gas trimmer.

I recently destroyed my second weedwacker in as many years. These run about $150 new — enough money that I don’t really want to toss it — so I hauled it to a small engine repair shop and asked for a quote.

Mechanic: “Just throw it away and buy a new one.”

E: “What?”

“It’s not worth it. It will take at least two hours of labor, and we have to special order the parts. These aren’t designed to be serviced.”

“It’s barely a year old!”

“That’s about how long they last. If you want something that you can use longer, buy an Echo. We sell and service them.”

“Wait, why does Craftsman last only a year? Is it because they’re made in China??”

“No. It’s because emissions regulations mess them up. Just buy an Echo.”

I had a ton more questions but I felt guilty asking questions without buying anything, and there was no way I was gonna spend $$$$ on an Echo. So I thanked the mechanic for his time and left.

Seriously? Craftsman string trimmers crap out because of EPA regulations?

Small engines have two emissions metrics to meet: (HC + NOx) and CO. Hydrocarbons (HC) and Carbon Monoxide (CO) are the result of unburned fuel in the exhaust; Nitrogen oxides (NOx) form when nitrogen and oxygen combine at high combustion temperatures.

Historically, small engines were factory-tuned to run rich, meaning they would draw a mixture of more fuel and less air than could fully combust. Excess fuel lowers the operating temperature (evaporative cooling), and helps the engine generate more power under heavy load. A rich mixture dumps HC and CO; a lean mixture runs hotter and cleaner while producing NOx.

Handheld engines don’t have catalytic converters or electronic fuel injectors, nor do they have on-board computers that can be programmed to cheat on EPA tests. Two-stroke engines like the weedwacker produce little NOx to begin with, so the cheapest way for a manufacturer to reduce emissions is to tune the carburetor to run lean.

In older weedwacker models, the carburetor has an adjustable air screw. Air density varies depending on temperature, altitude, and humidity; so a consumer might want to adjust the air:fuel mixture to match local conditions.

EPA regulations require that any engine with adjustable fuel mixture meet the emission standards across all settings. Craftsman solves this problem by blocking access to the air screw: Everyone runs lean.

Running hot and lean shortens the life of the piston and rings and bearings, but that’s fine. According to Federal regulations, light-duty handheld engines should have a useful life of 50 hours. That’s how long they’re tested during certification, and there’s no incentive to exceed this.

There isn’t even any incentive to invest in cleaner technology, because by 2024 California will entirely ban small gas-powered engines.

Then there’s the increase in ethanol fuel blends. Ethanol is green because it’s made out of corn. It also has 33% less energy per volume than regular gasoline, which is effectively like running lean. Even worse, ethanol attracts water, which separates from the fuel and corrodes the engine. All engines are susceptible to moisture, but someone who shells out for an Echo probably knows to buy ethanol-free fuel by the can.

And that’s how EPA regulations turn small engines into garbage.

Fraud as a Feature, not a Flaw

The only crime more stupid than money laundering is fraud. Here we have Wells Fargo “erroneously” repossessing people’s cars and homes, making “incorrect” charges to checking and savings accounts. Wells Fargo screwed their customers for over $2 billion, but it was an accident so the shareholders pay a penalty and no one goes to jail.

The difference between an innocent mistake and criminal fraud is a matter of mindset, which is why SBF is now pretending to be an imbecile.

SBF didn’t do it on purpose! He doesn’t even know how to code!

Traditionally, fraud was a civil matter where a victim could recover damages in court, outside of federal jurisdiction. During the 19th century, the US Mail service was struggling to compete with private express companies, so Congress offered discounted rates for large-volume ads to drum up business. Direct mail marketing was a novel idea, with obvious potential for abuse, so in 1872 Congress added a provision that it would be a federal offense to mail any material in a scheme to defraud.

Money-making onion? Looks like mail fraud to me.

Fraud had to be criminalized, because Congress wanted people to feel like they could trust the junk mail circulars that were subsidizing the mail service. But prosecutors found the Mail Fraud statute useful for so much more:

When a “new” fraud develops – as constantly happens – the mail fraud statute becomes a stopgap device to deal on a temporary basis with the new phenomenon, until particularized legislation can be developed and passed to deal directly with the evil. Prior to the passage of the 1933 [Securities] Act, most criminal prosecutions for fraudulent securities transactions were brought under the Federal Mail Fraud Statute. —Chief Justice Warren Burger, 1974

There was really no need for the 1933 Securities Act, nor the creation of the Securities and Exchange Commission — the Federal Mail Fraud Statute was broad enough to prosecute securities fraud. But it was the Great Depression, and FDR promised lots of makework. Basically the function of the SEC is to go after businesses that have failed to provide ex-SEC commissioners with sinecures.

You know who didn’t get prosecuted for securities fraud? Pump-and-dumper Joseph P. Kennedy. As a major donor to Franklin D Roosevelt and the Democratic party, Kennedy was appointed chairman of the SEC.

That’s the great thing about broad, ambiguous laws. Prosecutors have full discretion to go after their political enemies while excusing their friends. Same approach with Twitter content moderation. What are Twitter’s content moderation rules? Nobody knows; that what makes them useful!

Government agencies select accounts they want to vaporize, then Twitter’s Trust and Safety team invents a violation. Show me the man and I’ll find you the crime.

The Mail Fraud statute was followed by the Wire Fraud statute and Computer Fraud Act, each more versatile than the last. Sharing a Netflix password? That’s Computer Fraud. Downloading JSTOR journal articles at MIT? Also Computer Fraud.

There’s gonna be new crypto regulation. The Digital Commodities Consumer Protection Act, or something like it. It’ll boil down to crypto-fraud, where it becomes a federal offense to use crypto in furtherance of a scheme to defraud. And it’ll be broad and ambiguous, enforced by an agency full of grifters, weaponized against dissidents. Maybe they’ll put SBF in charge.

Self-bailing Bailouts

Wait, disregard my earlier post, I wasn’t thinking straight. I saw SBF say “F— regulators” and instantly wanted to give him all my money. A day later I realized AH, that’s his schtick! Say some politically expedient words, signal that you’re in the in-group, and My god how the money rolls in!

Remember that time Bitfinex suffered a $60 million hack, issued BFX tokens as placeholders for customer deposits, and eventually paid it all back? It was hailed as a triumph of the FREE MARKETS. And remember that time Poloniex did the same thing? Even Ponzi schemes get lucky sometimes.

Bitfinex lost 120,000 BTC in the 2016 hack. That would be worth over $2 billion today.

In theory FTX could pull off the same stunt. Replace the vanished funds with tokens of a different stripe and let the trading continue. $8 billion sounds like a huge hole to fill, but FTX only misappropriated 70,000 BTC. The rest of consists of shitcoins. Do casino patrons care if their gambling chips change color?

Arguably, a one-time hack is different from profligate political spending. Speaking of which — Remember that time Citigroup, Bank of America, JP Morgan Chase, Goldman Sachs received a $700 billion bailout from the Fed, and paid it all back? Do you think they suspended political contributions during that time? Do you think they refrained from using bailout money for banker bonuses? Hahahaha.

Here’s the highly esteemed Interfluidity with my favorite description of the 2008 bailout and subsequent repayment:

Suppose my kid’s meth habit got the best of him. He needs to come up with $100K quick or his dealer’s gonna whack him. But he’s a good kid, really! Coulda happened to anyone. So I “lend” him the money, even though he has no visible means of support and the sketchiest loan sharks in town wouldn’t give him the time of day. Now I believe in bootstraps and hard work, individualism and self-reliance. So I tell my son. “Son, you are going to pay me back every penny of that loan. You are going to work it off. I have arranged with one of my golf buddies, a guy who owes me a favor or three, a job that pays $200K a year. You’d better show up every day at 9 a.m. and sit behind that desk, and get me back my money!” And he does! After a year, he’s made me whole. What a good kid.
…
After assuming the banking system’s downside risk, the US government engineered a wide variety of favorable circumstances that helped banks “earn” their way back to quasi-health.

Free markets involve a good deal of engineering. Did Bitfinex “engineer” (through wash trades and Willybots) the bull market that enabled debt repayment? Or did Bitfinex provide such a valuable service to the industry that a bull market naturally ensued. Either way, bitcoin HODLers end up being the biggest beneficiaries. It’s a tremendous act of altruism that Maximalists keep railing against the shitcoins.