With help from Derek Robertson

As the Biden administration carries out its post-FTX crackdown on digital assets, one mainstay of the crypto lobby’s response has been to threaten to move overseas.

This week, though, raised the prospect that it could instead find safe harbor closer to home. Republican officials in Florida and Texas signaled their intent to challenge Washington’s authority over the future of monetary technology by formalizing their support for Bitcoin and opposition to a central bank-controlled digital currency.

If the initiatives gain steam, states could thwart the ambitions of some Washington policymakers to sideline crypto and roll out a digital dollar issued by the Federal Reserve.

At the federal level, the White House bashed crypto in a new report while news broke that the Securities and Exchange Commission is eyeing legal action against the country’s largest crypto exchange, Coinbase.

Meanwhile, a Texas state House member introduced a resolution affirming the rights of Bitcoin owners and Florida Gov. Ron DeSantis proposed a new law to stymie Washington’s plans for a digital dollar. While several states have created crypto-friendly laws in recent years, this week’s moves are especially notable because it shows state officials are still willing to push pro-crypto initiatives despite the risks exposed by FTX’s meltdown and the ongoing federal crackdown.

Collectively, the action this week inches the country closer to a political standoff over the future of money that looks more like the country’s pre-20th century past: when the structure of the banking system and the definition of money were subjects of hotly contested battles that often broke along regional and pro- versus anti-federalist lines.

On Monday, the White House released the annual report of its Council of Economics Advisers, which devotes an entire chapter to digital assets.

The report concludes that “some crypto assets appear to be here to stay” and that they may someday prove useful. But it describes them mostly as risky financial instruments with little purpose.

In sum: “crypto assets to date do not appear to offer investments with any fundamental value, nor do they act as an effective alternative to fiat money, improve financial inclusion, or make payments more efficient; instead, their innovation has been mostly about creating artificial scarcity in order to support crypto assets’ prices.”

Instead, the report touts central bank digital currencies and the Fed’s forthcoming FedNow payment system as more promising avenues for upgrading money and finance.

Meanwhile, Coinbase, the largest U.S. crypto exchange, revealed yesterday that the SEC has served it with a Wells notice, a prelude to likely securities law enforcement action.

The states are another matter.

On Monday, Republican Harris Anderson filed a resolution in the Texas House of Representatives that generally declares the state a friendly jurisdiction for owning, mining and developing software on Bitcoin.

The resolution also described Bitcoin-related coding as protected expression under the state’s constitution; clarifies that the state constitution’s ban on unreasonable search and seizure extends to Bitcoin; and confirms the right of Bitcoin owners to hold their keys themselves.

The resolution, which was referred to committee yesterday, would amount to a formal expression of legislators’ opinions, rather than changing state law. It appeals both to a political culture that prides itself on independence from Washington, and to a state oil and gas industry that has dipped its toes into Bitcoin mining.

Meanwhile, in Florida, DeSantis introduced a bill on Monday to amend the state’s uniform commercial code to ban the use of any U.S. or foreign central bank digital currency, while encouraging other states to follow suit.

DeSantis here is taking a stand against a hypothetical. The Biden administration and the Fed are still considering whether to create a CBDC, and any potential deployment would be years away.

But any anti-CBDC legislation is effectively pro-crypto, because CBDCs are opposed by crypto’s backers for both competitive and ideological reasons. The proposal comes less than a year after DeSantis signed a crypto-friendly law that was drafted with significant input from industry lobbyists.

A decade ago, state-level resistance to federal monetary imperatives would have been merely symbolic. In the current national political environment, it has the potential to be more potent.

During the Obama and Trump years, state-level nullification efforts became a popular form of resistance to Obamacare and federal gun laws, while many sanctuary cities ceased cooperating with federal immigration law. States have defied federal drug laws to foster the development of cannabis industries. And as the conservative super-majority on the Supreme Court goes about reshaping American jurisprudence, calls have grown for states to defy its rulings.

Public confidence in the courts, Congress, and the presidency all stand at or near 50-year lows, according to Gallup polling that stretches back to the heights of Watergate.

Meanwhile, Western states like Wyoming and Colorado have already taken moves to embrace cryptocurrencies. Last year Arizona passed a law that, while it does not defy federal tax law, treats certain forms of crypto activity more favorably for the purpose of calculating state tax liability.

DeSantis’ anti-CBDC proposal comes as presidential primary polls show him losing ground to former President Donald Trump, who continues to find new ways to escalate his rhetorical assault on federal power. On Saturday, Trump plans to hold a rally in Waco, Texas, to coincide with the 30-year anniversary of the federal siege of a compound belonging to the Branch Davidians, a religious cult. The siege, which resulted in the death of 76 group members, has become a rallying point for anti-government extremists.

As the presidential nominating process kicks into gear later this year, radical ideas about money and federal power are percolating around the country.

Another thorny problem that AI might tackle: Diplomacy.

In an op-ed for Foreign Policy, Andrew Moore, chief of staff to former Google CEO Eric Schmidt and a former diplomat himself, argues that AI is already assisting with translations, briefings, and even identifying optimal diplomatic agreements, among other things.

“Intelligent systems can also help negotiators test various positions and scenarios in a matter of minutes,” Moore writes. “During the first round of Iran nuclear negotiations, a team at the U.S. Energy Department built a replica of an Iranian nuclear site to test every permutation of Iranian nuclear enrichment and development. In the future, an AI system will be able to run similar scenarios and virtual experiments faster and at a much lower cost.”

Moore also makes a case that quantum computing and blockchain technology have a role to play in future diplomacy: The former as an obvious security risk and imperative, and the latter as a ledger by which to verify the fulfillment of diplomatic agreements and even to track war crimes. — Derek Robertson

What lessons do America’s historic tech innovators carry for our would-be current ones?

Programmer Alice Maz put into context the legacy of the historic partnership between the Advanced Research Projects Agency (ARPA) and Xerox PARC in a blog post this week — specifically, how the leadership of famed computer scientists Robert Taylor and J.C.R. Licklider helped produce the “world-changing research” that led to the birth of the internet.

Maz draws on a 2018 paper from Dominic Cummings, the former advisor to British Prime Minister Boris Johnson, who argued that the ARPA-Xerox PARC project should be a model for post-Brexit Britain. The condensed takeaway, in Maz’s idiosyncratic, capitalization-free style: “articulate a vision, or find someone else who has laid one out that you can believe in. find the best people and become close to them. challenge each other to keep up, be the best possible versions of yourselves. work hard, work fast, pour as much of yourself into the work as you are able to. disregard rules as much as you can without seriously jeopardizing your life or liberty. and don’t worry about a practical outcome. just aim to do the biggest, most important thing you can.”

Out of context, that might sound like typical tech-world cheerleading. But the entire point of Maz’s exegesis is to distinguish between projects: “I probably wouldn’t sleep on the floor at [T]witter. I’d give almost anything to sleep on the floor at [PARC].” The only modern company that garners a favorable comparison? OpenAI — which, it should be said, started as a non-profit research lab. — Derek Robertson

• Last night the world’s first 3D-printed rocket failed shortly after its launch.
• Publishing companies are gearing up for battle with the LLMs.
• GPT-4: Not yet capable of fixing hyperinflation in South America.
• Boston Dynamics is showing off its new, less-flashy commercial robots.
• What’s the deal with those deepfake images of Trump’s “arrest”?

Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Mohar Chatterjee ([email protected]); Steve Heuser ([email protected]); and Benton Ives ([email protected]). Follow us @DigitalFuture on Twitter.

Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency.

If you’ve had this newsletter forwarded to you, you can sign up and read our mission statement at the links provided.