Bank CEO: Retract your debanking piece? Me: No
kalzumeus.com
kalzumeus.com
My god, nothing left but a smoking husk after that burn.
insert reaction meme here
The drive to fight can make people say some really dumb stuff sometimes (speaking about the banking CEO)
https://www.banking.senate.gov/hearings/investigating-the-re...
So, we may not be talking Jamie Dimon, but that does not mean this request for retraction should be ignored.
[1] https://www.bitsaboutmoney.com/archive/debanking-and-debunki...
He lost me in the digressions to the facts. I agree he presented facts but he really seems like he's trying to scratch the debanking itch while just saying it hasn't happened yet and if it does happen it's because you're electing liberals (again).
I appreciate people who respond deeply to facts, but can find fault in the examples he finds to justify the paranoid he's apparently trying to quell.
While I cannot speak to anything that was written (I am far from being a crypto boi, all I see is snake oil and fraud tools), the epic disparity between the sloppy request and the meticulously eviscerating response is an absolute wonder to behold. The bank CEO brought a rubber knife to someone wielding a nuclear bazooka
> The Bank shall limit its business to the operations of a trust company and activities related or incidental thereto. The Bank shall not engage in activities that would cause it to be a “bank” as defined in section 2(c) of the Bank Holding Company Act.
Essentially Anchorage Digital is a rail for crypto to interact with the regulated financial industry, and their charter with the OCC limits them to only that form. So "bank CEO" is a misnomer; I would say "crypto CEO who managed to convince federal regulators to provide limited access to the banking system without allowing risky activities like lending or deposits".
Enforcement may vary.
EDIT: Pay attention to comment below. This comment is incomprehensive.
More than that, threads are no longer visible if you are not logged into Twitter.
I remember feeling what felt like barely constrained rage in his piece where he was proving provenance of a document or a prediction around how COVID could interact with the populations in Japan. 0, 1
The whole point of 0 ("dropping hashes") was to make sense of 1
0: https://www.kalzumeus.com/essays/dropping-hashes/
1: https://www.kalzumeus.com/2020/04/21/japan-coronavirus/
I believe i perceive a similar level of outrage and indignation over what feels like a serious mismanagement of real resources.
Like... Blowing up banks hurts real people, represents real fraud, and after dealing with the people and groups he dealt with through the vaccinateCA effort, I think he is tying together basically a comprehensive legal defense that someone else could run while charging someone like this banker/pretend banker with fraud.
even if there was jail time on the other side of it.
Maybe it's also a little bit of a show of force, explaining what it might be like for a bank to go after an independent and resourced individual.
I expect anyone else who might think of going after him, after encountering this piece, will be a bit less inclined to pursue bullying as a strategy.
[1] - https://www.bitsaboutmoney.com/archive/fiction-about-finance...
The point being that what the crypto industry really, really wants is easy access to retail customers. They need more suckers to keep the Ponzi schemes going. Plus they want protection from regulators after they steal customer funds.
For what? For stuff like this, which appeared on Reddit today. If you missed it, don't worry. There will be another one tomorrow.
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This stuff makes FBX look good. Crypto keeps developing lower and lower tiers of crappy investments.
Current losses from crypto scams add up to about $76 billion.
Don't expect much regulation in the US, with the CFTC shut down and TRUMP having his own memecoin. (It's down 80% from peak.)
I already know crypt past, crypto future and crypto now is a scam.
Except, the facts are pretty myopically one sided. It takes a lot of effort to keep seeing principled republican ideas.
Anyway, the world is often about which facts are curiously cataloged, cross references and regurgitated versus those thrown in the kitchen drawer.
Is it common to say this about your own work?
In context it strikes me less as stroking his own ego and more as contextualizing the bank CEO’s claim.
turning this into another overly verbose blog post doesn't really help my thinking on the matter (which, to be fair, is even less relevant than his musings)
One of the three witnesses the Senate Banking Committee chose to call requested, the following day, a retraction from me… for reasons.
I certainly did not see this ever happening when I started selling bingo cards on the Internet, but here we are.
For what it's worth, I think patio11's writing on software consulting is the best I've ever read. I'm sure he knows this space well, but there are...different viewpoints.
But a whole paragraph of this piece is analyzing the use of the term "retraction," so I guess we could expect him to be a bit more careful with the word "definitive".
In particular, a fight of written words when the opponent does so many written words that they purchase ink in bulk.
> If one’s bank does not employ an individual who understands the above paragraph to mean that Silvergate was solvent, Anthropic will sell you artificial cognition for $20 a month. Claude 3.5 Sonnet demonstrates sufficient reading comprehension to analyze complex technical documents to the standards of an early-career employee in financial services. We would recommend supervising Claude with management at least as competent as it.
The purpose of the article seems to be for patio11 to congratulate himself for being so clever and to mock this CEO for daring to question him. I don't feel like he actually addresses the CEO's criticism in good faith.
To look at the very first point:
>> Silvergate was trivially solvent based on their call reports. Anyone assessing their liquidity position saw this (we were doing so). Your implication that they were doomed due to BSA findings doesn’t comport with any regulatory practice—banks don’t get closed for this.
> Had we stated or implied that Silvergate was insolvent, that would have been very improper. Insolvency of a financial institution is a serious charge. We assume McCauley believes we must have made it, because no bank CEO could possibly believe that solvency is the only obligation of a financial institution. We did not make this accusation.
I'm admittedly not knowledgeable about banking regulation, but it seems like patio11 is willfully misinterpreting the CEO's criticism. The CEO's claim was that patio11's article implied that Silvergate was doomed due to BSA findings, not that patio11 accused Silvergate of being insolvent.
I don't think the CEO did a great job either, as his criticism doesn't cite specifics in patio11's article, but patio11 is just further muddying the water by dunking on the CEO rather than considering whether he misrepresented anything in his piece.
patio11 also inexplicably switches from "I" to "we" partway through the article for no apparent reason other than to sound more pretentious. There is the line "The following is in the voice of the company." but he continues to refer to himself as "I" after that announcement.
This would have been a nothing-burger if he hadn't used 'retraction'.
If the CEO doesn't think Silvergate being solvent was relevant then why did he bring it up? You could assume incompetency on behalf of the CEO to bring up a non-sequitor but why bother assuming when you can just add words to address it.
And right after the solvency discussion, patio11 goes on to list 5 banks in the last decade that were directly closed because of BSA issues.
The CEO's assertion isn't a non-sequitur. It supports the claim he makes in the next sentence, which is the actual criticism of patio11's piece.
Let's simplify the example:
>>CEO: Arnold Schwarzenegger won Mr. Universe four times in the late 60s. Your implication that Schwarzenegger was physically unfit in the 1960s doesn't comport with any reasonable definition of physical fitness.
>Critic: Had we stated or implied that Arnold Schwarzenegger did not win Mr. Universe, that would have been very improper.
Is it obvious in that case that the critic is not addressing the CEO's actual point?
You can imply that Arnold Schwarzenegger is physically unfit without specifically claiming that he never won Mr. Universe just like you can imply that Silvergate was doomed for shutdown by regulators without specifically saying that Silvergate was insolvent.
The CEO bringing up solvency before claiming that “banks don’t get closed for [BSA findings]” implied that banks not suffering from insolvency don’t get shut down, which is throughly debunked with several examples.
The core of the latter is pretty short, essentially "Silvergate was incompetent and the original article is correct as written"
The section mentions Anchorage's OCC consent order for their own BSA issues, as well as an explanation of why these issues are important and gives examples of banks that were shut down by regulators.
So is illegitimate debanking an example of a real useful purpose for cryptocurrencies? I'm also thinking of the current Musk takeover of the Treasury payments system as perhaps leading to a useful purpose for cryptocurrency. For example, the regular payment of funds from a grant could be set up as an Ethereum smart contract. Or funds allocated by the US House could be a smart contract to prevent any other level of government from tampering with them. If you can't trust the banks or government then does cryptocurrency have some benefits? This was not seen as a Western problem because we had rule of law, but now, maybe it is. Decentralization and operating outside the control of a bank or government can be very useful features if the bank or government is corrupted. Like holding gold, except much easier to use because it is digital. Much easier to hide from a corrupt government also, maybe, though the government could know you had the funds depending on how the cryptocurrency works. In the old days people used to hide grain underneath their house to keep the government or armies from taking it, so they could survive the winter. Yes, criminals can hide and use cryptocurrencies also, but they always used money/fungible assets even before cryptocurrencies, to the tune of trillions of dollars. Seems like trying to control money has not worked very well in controlling criminals and instead root causes should be addressed.
1. Define "illegitimate debanking". Debanking of whom? Crypto companies, end users, their surrogate banks and holding companies? You'll find the original article defines several forms of what crypto people mean when they say "debanking", and that the explicit goal of the term is to conflate all of them. Which is restated quite clearly in this "rambling", and as you seem to have missed the central thesis of this and the preceding article, I believe you are complicit.
2. If you believe the banking system and the government is corrupted, how does cryptocurrency solve the problem? Does it matter if the US debt is held in dollars or Dogecoin when the US defaults on the debt? Or, as I suspect, when you ask if it makes sense to use crypto in order to hide funds from the government, are you advocating that the act of government taking money through taxation (i.e. "funding the government") is the corruption you speak of?
3. Yes, criminals deal in all sorts of securities to launder money. Cryptocurrency is a wonderful way to facilitate this, as is art, cars, or anything else of value. Are you saying we should address the root cause of criminality, and ignore the tangible financial risk of supporting cryptocurrencies in the regulated financial industry?
This is begging the question.
> You have to assume there are insiders in banking and government with malicious intent. How do you protect against them?
We have a system of rules in place to disincentivize certain behaviors in government. This system is written down as the U.S. Code. If you can't trust this system, you might as well write off the concept of democracy as a whole, because a lot more than our banking system depends on a very deep-seated social contract which assumes that the people trust the government they elect.
> Could cryptocurrencies be worked into a solution?
Of course they can. The questions are: Why would we want this? What problems do cryptocurrency solve uniquely? What trade-offs would we make by implementing such a solution? And that is why statements like this belie the fallacy of crypto proponents: you are begging the question when you ask how to integrate crypto with the financial system, and do not address any of the myriad of shortcomings of doing so.
One of the points Patrick stresses repeatedly in both the original article and in his response to McCauley is that providing banking services to cryptocurrency companies is not merely being a "dumb pipe" which facilitates transactions. Giving anybody (whether an individual or a business) a checking account means opening yourself up to counterparty risk, which can blow you up if you model it incorrectly. And this is not a hypothetical: he specifically points out that this is what happened to Metropolitan when they worked with Voyager. And Patrick further elaborates that crypto companies love to push this counterparty risk under the rug by heaping it onto others, then complaining when the inevitable result is that nobody wants to do business with them.
The point of all the above is that "a zero trust approach to money movement" does not and cannot exist. You can pretend it exists, by finding some patsy to take the counterparty risk for you, but once you run out of suckers, reality will reassert itself and no amount of complaining about government interference will change the fact that you're an unacceptably risky customer and that's why nobody wants to give you an account.
In the case of debanking it seems that those who were debanked didn't consider their own counterparty risk, this is a two-way street. Businesses using multiple banks seems to be newly popular. Perhaps loans need to be considered separately from bank accounts? I'm also suggesting creating a new kind of payment system for the US federal government, so in that there is a large risk for the people that try to misuse it. Perhaps a payment system is more amenable to automation than a bank account?
Secondary risks are those enforced by regulators: KYC, AML, BSA. The government does not want your bank handling money for sanctioned individuals, countries, or terrorists. How do you encode in a smart contract that the counterparty does not represent one of these categories?
I'm 50/50 on that and the current US president makes that a hardship
Not clear to me what problem this solves- but the result would be so incredibly kafkaesque that I can actually see it happening.
I don’t think they’re very specific.
The lack of specificity was such that the government is now purporting to end “regulation by enforcement”.
Did we read the same article?