New documents show that one of former President Donald Trump’s most trusted and senior advisors was secretly pushing 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 multiyear bear market, Jared Kushner — Trump’s son-in-law and a senior adviser — was quietly advocating for a U.S. digital dollar, in which the Fed would launch its own central bank currency.
The information was gleaned from a 250-page dump of Treasury Secretary Steven Mnuchin’s crypto-related e-mail correspondence from his four years in the job, which was was obtained by CoinDesk through a Freedom of Information Act request.
Other insights include details surrounding the fight between the crypto lobby and Mnuchin over the Treasury Department’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.”
In the post, Altman riffed 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 central bank digital currency, or 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.
There was no reply from Mnuchin among the documents, so it is unclear whether the Treasury secretary took any action.
Kushner’s view 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 of the world, 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 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 circulated among regulators and lawmakers, though with few tangible steps toward implementation.
During a two-day congressional hearing in July, Federal Reserve Chairman Jerome Powell said the main incentive for the U.S. to launch its own CBDC would be to eliminate the 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.”
America’s most likely path on CBDC would be to create a digital twin of the dollar, observers say. It would be 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, the full commitment of the Fed remains in doubt. Powell previously told lawmakers on Capitol Hill that he was not convinced that the benefits outweigh the costs.
Before Giancarlo began spearheading the so-called Digital Dollar Project, the former CFTC chairman was among those addressing Mnuchin on the crypto topic.
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 request, but added that 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 had informed 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, according to the new documents.
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, sent off a Bloomberg News headline via email 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 counterparty 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 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, saying 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,” according to the documents.
The Blockchain Association wasn’t alone in urging Mnuchin to re-think the new crypto rule. Correspondence shows that others suggested he lose the counterparty disclosure requirement. Ultimately, nothing came of the proposal.