New documents show that one of former President Donald Trump’s most trusted and senior advisors was secretly pushing for the White House to lean into crypto, well before skyrocketing crypto prices reignited mainstream interest in the space.
In 2019, when crypto was in the midst of a multi-year bear market, Jared Kushner — a senior adviser and Trump’s son-in-law — was quietly advocating for a U.S. digital dollar, in which the Fed would launch its own central bank digital currency. This is according to a 250-page dump of Secretary Steven Mnuchin’s crypto-related e-mail correspondence from his four years at Treasury, which was was obtained by CoinDesk through a Freedom of Information Act (FOIA) request.
Other insights include details surrounding the fight between the crypto lobby and Mnuchin over the Treasury’s last-minute attempt at rolling out new rules pertaining to user-controlled digital wallets.
Neither Mnuchin nor Kushner immediately responded to CNBC’s request for comment about their crypto-related email exchanges.
Kushner backs a digital dollar
On May 29, 2019, Kushner, who was more known for his work on the administration’s foreign policy efforts rather than fiscal matters, sent an e-mail to Mnuchin to suggest that a group be assembled to “have a brainstorm” about the topic of a U.S. digital currency.
The note included a link to a blog post by OpenAI CEO Sam Altman in which Altman argues that while the U.S. government cannot stop cryptocurrency, it can “create the winner.” From there, Altman riffs on a hypothetical “U.S. Digital Currency” or USDC, which would function as a second legal currency. He goes on to say that if the U.S. was the first superpower government to launch a CBDC, it would have an “enviable position in the future of the world” and exercise some degree of power over a worldwide currency.
“My sense is it could make sense and also be something that could ultimately change the way we pay out entitlements as well saving us a ton in waste fraud and also in transaction costs,” Kushner wrote of the proposal.
There is no reply from Mnuchin, so it is unclear whether the Treasury Secretary heeded his advice.
Kushner’s take on the CBDC phenomenon ultimately proved prescient.
Few countries were seriously dabbling in national digital currencies in mid-2019, but today, at least 87 countries representing over 90% of global GDP are exploring a CBDC, according to research from the Atlantic Council.
China is miles ahead of the rest, having spent years developing and piloting its digital yuan. Beijing is currently in the process of ramping up efforts to roll out the so-called e-CNY to the broader population, with the ultimate goal of replacing the cash and coins already in circulation. In the years since Kushner floated the idea of a digital dollar, talk of a CBDC in the U.S. has also proliferated among regulators and lawmakers, though with far fewer tangible steps toward implementation.
During a two-day congressional hearing in July, Federal Reserve chair Jerome Powell said the main incentive for the U.S. to launch its own CBDC would be to eliminate the use case for crypto coins in America.
“You wouldn’t need stablecoins; you wouldn’t need cryptocurrencies, if you had a digital U.S. currency,” Powell said. “I think that’s one of the stronger arguments in its favor.”
In practice, America’s take on a CBDC would essentially just be a digital twin of the U.S. dollar: Fully regulated, under a central authority, and with the full faith and backing of the country’s central bank.
“A dollar in CBDC form is a liability of the central bank. The Federal Reserve has to pay you back,” explained Ronit Ghose, who heads FinTech and digital assets for Citi Global Insights.
Though former Commodity Futures Trading Commission Chairman Chris Giancarlo has since taken up the cause for a digital dollar, it is still unclear whether there is sufficient backing from the likes of the Fed to scale the project. Powell previously told lawmakers on Capitol Hill said that he was undecided on whether the benefits of a digital dollar outweigh the costs.
Before Giancarlo began spearheading the Digital Dollar Project, the former CFTC Chairman was among the crypto progressive voices in the ear of Secretary Mnuchin.
An e-mail exchange from July 2018 shows that Giancarlo, via his executive assistant, was adamant about setting up time for an in-person meeting with the Treasury Secretary.
When CNBC asked about the White House meeting, Giancarlo said he could not recall that specific meeting request, but throughout 2018, he “routinely apprised Secretary Mnuchin of ongoing operation and supervision of the Bitcoin Futures market launched under CFTC oversight in December 2017.”
Giancarlo also told CNBC that it was “quite likely” that he was informing Secretary Mnuchin about his growing concerns surrounding the potential adverse impact of a “Hard Brexit” on London-based swaps clearing under the joint supervision of the CFTC and the Bank of England.
Mnuchin’s office expressed interest in some other countries’ crypto plans as well.
In Sept. 2019, Mnuchin’s team seemed particularly interested in Venezuela’s announcement that it would use cryptocurrencies as a way to facilitate free national and international payments. The move could have helped the Venezuelan government circumvent U.S. sanctions, which had largely isolated the state from the global economy.
Monica Crowley, then the Treasury’s Assistant Secretary for Public Affairs, fired off a Bloomberg News headline to Mnuchin that read, “Maduro says Venezuela to activate crypto payment method ‘soon,'” to which the Treasury chief replied, “Let’s discuss.”
Stricter crypto rules
In his final months at Treasury, Mnuchin apparently argued with the blockchain lobby over his plan to impose new rules on user-hosted cryptocurrency wallets.
Part of the problem had to do with concerns over privacy and the difficulty of fully meeting compliance requirements. The proposal would have required crypto exchanges to collect counter-party information, including names and addresses, from those looking to send or receive crypto from a self-hosted wallet.
The timing was also rushed.
The Financial Crimes Enforcement Network, or FinCEN, proposed the rule a week before Christmas 2020, after Joe Biden had been elected as the next president but before he took office. Although this deadline was extended multiple times, FinCEN initially offered only a 15-day public comment window on the proposal. Typically, comment periods run 30 to 90 days.
The Blockchain Association, which had reached out to Secretary Mnuchin a month before the proposal was formally put forth, enlisted the help of an attorney. Kirkland & Ellis lawyer Paul Clement wrote a letter to Mnuchin on the Association’s behalf noting that “the notion that stakeholders could meaningfully engage with a rule that touches on more than 24 separate subjects in such a highly truncated period would be doubtful even in the ordinary course.”
Clement warned, “Thus, what purports to be just a reporting requirement may well operate as a de facto ban.”
The Blockchain Association wasn’t alone in urging Mnuchin to re-think the new crypto rule. Correspondence shows others suggesting he lose the counter-party disclosure requirement. Ultimately, nothing came of the proposal.