When crypto billionaire Sam Bankman-Fried, CEO of FTX, stepped onto the US Capitol’s steps on December 8 to testify in front of the House Committee on Financial Services, he knew that the cryptocurrency hearing would take time but did not expect it to last over four hours. Dressed in a navy suit and blue dress shirt with no tie, Sam was ready to present his oral testimony on the future of digital assets in front of the California Democratic Chairwoman Maxine Waters, her Republican counterpart Representative Patrick McHenry of North Carolina, and the ranking members of the House Financial Services Committee. The moments, the questions, the facts all lined up in a public congressional hearing on a clear Wednesday morning to become the first draft of history. Sam Bankman-Fried was in a good mood.
“Members of Congress were really receptive. That was super exciting,” Sam reflected fondly on a hearing from his office in the Bahamas. FTX, a global cryptocurrency exchange, has risen to prominence quickly, and is now processing about 15 billion dollars per day in trading volume. Last week, FTX.US announced their membership in the International Swaps and Derivatives Association (ISDA). “We are very excited about partnering with organizations that make up the backbone of derivatives markets and it’s wonderful,” exclaimed Sam.
FTX founder set himself in 2017 on a mission to change the world of traditional finance, underpinned by the philosophy of effective altruism, to maximize positive impact on the world. “Authenticity is important,” Sam told me recently. And he means it. The cryptocurrency ecosystem Sam Bankman-Fried sees as an opportunity “to improve a lot of people’s lives.” His net worth Forbes estimates at $22.5 billion, making him the youngest person to enter Forbes 400. The wealth he acquired, Sam is using for philanthropy to support many great organizations and meaningful causes including his personal $5 million dollar donation to Joe Biden election campaign.
The CEO of the fast-growing crypto exchange household name with naming rights for Miami Heat’s arena, endorsed by Tom Brady and Gisele Bundchen as well as the Mercedes-AMG Petronas Formula One Team, deems the first Congressional hearing on cryptocurrency in the US not only historically relevant but also a “significant moment for the crypto industry more generally.”
The extensive hearing at the Hill last Wednesday featuring a line of questioning on digital assets was in many ways a free masterclass in cryptocurrency, Web3, and decentralized finance.
“I was surprised by how well the whole event went, how balanced it was, and how interested Representatives were in figuring out what they can do to assure the best oversight and regulation that would help the industry be safe and grow,” Sam said about the Congressional cryptocurrency hearing.
A lot has happened since I’ve interviewed Sam Bankman-Fried in September in New York City. He moved FTX headquarters from Hong Kong to the Bahamas moments before China’s central bank announced all transactions of cryptocurrencies illegal, effectively banning Bitcoin.
“I am super excited to be here,” Sam told me, citing Bahamas as the perfect location to hop on and off the island without having to quarantine. “And just generally it’s been really nice,” he said, his eyes glazed over with contentment. On the regulatory side, he welcomes clarity and sees “fairly substantial benefits to moving to a regulatory framework” that can always be changed and improved over time. The CEO of FTX finds lawmakers’ and regulators’ concerns regarding the crypto industry “legitimate,” but ultimately he thinks “A lot of those are things that they’re pretty straightforward to address.”
The first congressional hearing on cryptocurrency came with a bit of a surprise for any connoisseur of political partisan habits, hard to break in Washington DC. Bipartisanship, this time, was on full display, something that can’t be seen in Washington DC as ordre de jour. Members of Congress across the political aisle genuinely seemed interested to learn more about the subject at large and this fast growing ecosystem that is attractive to a diverse range of Americans making financial decisions and using digital assets every single day.
“Yeah, I totally agree with that,” Sam shared. “I’ve been surprised by the amount of bipartisanship, by the fact that I think both sides were coming at it with an open mind. I think I was worried that there would be a lot more, sort of, partisan back-and-forth and bickering over, but, in fact, both sides approached it constructively.”
Crypto may be one of the rare places to unite the country. Democrats seem to be primarily motivated to dive into the issue through the lens of consumer protection, and Republicans are excited about an opportunity to build a decentralized internet. The two, according to Bankman-Fried, are not mutually exclusive. “I do not know exactly what will happen, but I think in the end there can be a regulatory framework that can really address both sides of it that can help build a really strong industry while also providing oversight and consumer protection.”
Since September this year, the conversation surrounding cryptocurrency has slowly entered the circles of Washington DC. “I think there’s definitely been a positive move in the last few months,” Sam shared his impression of the topic’s recently garnered attention.
During his day at the Hill, Sam had an opportunity to talk to Chairman Maxine Waters. His impression, Sam shared, is that Congresswoman Waters approached the issue of digital assets with an “open mind, which has been heartening as well,” and he finds very helpful the conversation they had and the direction where “everything is headed.”
As the hearing wrapped up, and the members of congress contemplated the course of legislative action, would immediate legislation come as a result?, I wondered. “I think that there’s going to be a lot of discussions before that exact point,” Sam said candidly.
One of the downsides of the lack of a robust cryptocurrency framework, is the flight of capital abroad, something that all major crypto players are aware and warn about.
—Do you think that the lawmakers are now more aware that basically, any single restriction here is an opportunity for some other country to offer to Americans to build businesses?, I asked.
“I certainly think that there’s more of that than there was before. I am not saying it’s infinitive or anything like that, but I definitely think that that’s something that has been growing and I think the appreciation for that from the business perspective,” he said. Sam Bankman-Fried also understands concerns which arise from questions regarding the US dollar and stabeoins perspectives. “I think that there are a lot of reasons for national security and otherwise, why it would be valuable for that to remain true,” he concluded.
FTX has all financial surveillance tools in place to tackle any potential attempt of fraud and money laundering on the trading platform. From deposits and crypto withdrawals to transaction histories, FTX was able to assist law enforcement agencies in retrieving over 10 million dollars so far. FTX 10 key points proposal for market regulation of crypto-trading platforms envisions robust cyber security and market surveillance of the platform’s trading environments “in order to curb market manipulation and promote orderly markets.”
If everything in the future comes together with US regulations and business services, I wondered would Sam consider moving the FTX headquarters to the United States? While he is “not making any promises” he would be “ potentially excited” to move it to his homeland. “I am not making any promises on that front, but it’s something we’d certainly be looking into,”he shared.
The key question worth exploring is the transformative impact cryptocurrency can have on the US economy. Apart from the transformation on the sides of payments and remittance, one of the most transformational aspects Sam sees is its “impact on social media with blockchain underlines.” At Solana Breakpoint in Portugal, Sam was talking about the potential for Solana, a company led by Anatoly Yakovenko to build blockchain social media. Clearly, the benefit of such a project may be unclear yet to a general public and those unfamiliar with the ins and outs of blockchain. What is the advantage of building social media on blockchain?
“Basically, where you have multiple social media networks that can all access the same underlying messages. And so rather than having basically every social media network completely independent and just competing with each other, to have a world where they are working with each other constructively. And of course to broadcast it on every site. I think that’s potentially super powerful,” Sam shared his thinking.
In terms of social media algorithms, Sam recently shared a brilliant analysis on a subject explaining why algorithms are not perfect and how, at the same time, they do and don’t work. “??Teaching an AI how to know what we really care about is hard,” he said. I was curious how he saw them being improved against censorship and less filtered access to content that reaches the audiences.
“Instead of just having one person, one company, saying ‘That is how blockchain, that’s how social media should work,’ and making all of the decisions around censorship and everything else,” Sam envisions a world where there are a lot of different “search systems which make their own decisions about how to moderate the platform and don’t get caught on any one of those in particular. “Anyone can sort of move from their platform to another platform, and that they can do that without having to lose their network effect and messages.”
As 2022 is about to ring in, Sam Bankman-Fried is “probably mostly going to be working” over the holidays. Next year, FTX is hosting a conference in the home of their new headquarter, the Bahamas, with SALT, a brainchild of Anthony Scaramucci, a new partnership which Sam expressed excitement about.
“We had a great time at the SALT conference in New York that we attended a while ago. We are really excited to be building a blockchain ecosystem in the Bahamas as well,” said Sam.
Can crypto unify America? Perhaps. Until then, the need for deepening an understanding of the space is evolving, as well as Sam Bankman’s role in this first draft of the history of decentralized finance.