Former White House chief strategist Steve Bannon is working on a cryptocurrency project to reward political activism and “provide an alternative to the financial system”, according to an entrepreneur who claims to be working on the project.
“It would provide financial services, and a reward for political activity,” says blockchain investor and businessman Jeffrey Wernick. “Not necessarily for one party, but just for participating in the process: for supporting independents, not just democrats or republicans.”
Wernick, a former trader at defunct investment bank Salomon Brothers who has restyled himself as a blockchain evangelist and investor, said he would meet Bannon over the next two weeks to further define how the populist cryptocurrency will work. “[It will be a reward for activism] not necessarily [in] one particular party—but more for political activism outside of the establishment,” he says.
People familiar with Bannon's cryptocurrency ambitions confirmed that Wernick has indeed helped Bannon navigate the crypto world – in some cases introducing him to figures in the sector. Bannon did not respond to requests for comment by the time of publication; this story will be updated if he replies.
Last week, during an hour-long interview with CNBC, Bannon briefly mentioned a plan to launch his cryptocurrency tokens. “We are working on utility tokens for the populist movement,” Bannon said after professing his love for bitcoin and all things cryptocurrency. “They’re the future.”
Wernick claims he is the one who first advised Bannon to create his own political token after getting in touch through a mutual friend. On a phone call in early July, Wernick said he was in the process of “helping design a token for Bannon, [in order to] tokenize the movement” that is rapidly taking shape behind the populist impresario.
Bannon has been increasingly supportive of anti-establishment movements and personalities across Europe – from France’s National Rally (erstwhile Front National), to Italy’s League and Five Star Movement, to far-right activist Tommy Robinson in the UK. On Saturday, it emerged that Bannon intended to kick-start a Brussels-based foundation to boost populist parties throughout the continent. While the name of the foundation, The Movement, is reminiscent of the wording Bannon used when talking of his cryptocurrency project, nobody involved in the project would confirm if the foundation and token were linked.
Wernick described Bannon’s new cryptocurrency as geared towards the “deplorables” – as Hillary Clinton labelled half of Donald Trump’s supporters in an infamous 2016 video – although the ambition is for the token to have a global reach, rather than a US-only one; the token will likely be launched by the end of 2018.
While not a nationalist himself, Wernick believes cryptocurrency can help turn around the fortunes of the impoverished working class. And he hopes that Bannon could be the right catalyst to spread the gospel of cryptocurrency among the disenfranchised masses. “He has an audience of 40 million people. His ideology is not interesting to me, it's the audience that he has,” Wernick says, adding that he has tried to involve other people in the project, and made contact with some supporters of Bernie Sanders – a cohort Bannon is eager to win to the populist cause.
Unlike professional provocateur Bannon, Wernick does not crave celebrity. A self-described private person who shuns social media and values obscurity, he made his public debut on the cryptocurrency scene relatively recently. In late 2017, he joined the advisory board of Chinese blockchain venture Qtum. The press release announcing his appointment described Wernick as a bitcoin early adopter and a “veteran investor”, whose portfolio includes investments in Uber and Airbnb. Neither company would comment on Wernick’s alleged investment.
In April 2018, Wernick spoke at a press conference in New York for the launch of IOVO, a company aimed at leveraging blockchain technology to create a platform where internet users could monetise access to their personal data – an appealing idea in the wake of the scandal about Cambridge Analytica, where Bannon worked as a vice-president until mid-2016. Sitting next to Wernick at the press conference was former Cambridge Analytica director-turned-whistleblower Brittany Kaiser, now an IOVO advisor. Wernick does not have any formal role in IOVO.
During the press conference – and, later, in a joint interview with Kaiser broadcast on CNBC – Wernick attacked technology giants for recklessly exploiting personal information without providing compensation.
One month earlier, in March 2018, during an event in Zurich, Bannon had used similar words to lambaste data-hungry technology companies. “Your data, the digital meaning of yourself, is taken totally for free, and used to basically enslave you,” Bannon said. “You’re just serfs.”
The tirade against big tech came minutes after another rant in which Bannon extolled the potential of cryptocurrency to “empower the [populist] movement” and “get away from central banks.” Bannon has recently suggested that European countries could issue national cryptocurrencies to shake off the European Central Bank’s yoke.
If the rhetoric of the Zurich speech was redolent of some of Wernick’s favourite talking points, that is because, Wernick claims, he helped Bannon write it. “I have spent a lot of time with Bannon, and for the sections about data sovereignty and crypto, frequently his words are the ones I provided,” he says.
Some time after his endorsement of cryptocurrency in Zurich, Bannon opened up about his cryptocurrency ambition in a piece published by The New York Times in June, which revealed he was toying with the idea of selling a “deplorables coin” through a fundraising mechanism called initial coin offering, or ICO.
The ICO project seems to have now been ditched amid growing concerns that ICO-ed tokens, which are often flipped around and speculated upon on online exchanges, could be classified as securities and fall foul of financial regulation.
“Ninety percent of ICOs have been a disaster,” Bannon told CNBC. He is now looking at creating a “utility token” – essentially a token that can be exchanged for a service on a platform, like a digital credit on an e-commerce website – which would potentially be less legally tricky to mint.
“[A utility token’s] primary purpose is not just as a means of speculation, but it has intrinsic value on a network. Meaning it is likely not a security,” explains Jamie Burke, CEO of blockchain-focused VC firm Outlier Ventures. “It is the Holy Grail to be a utility token rather than a security token because you avoid all the security laws.”
The very concept of "utility tokens" is, nonetheless, disputed: while the category is recognised in Switzerland — alongside payment tokens and security tokens — the US Securities and Exchange Commission is more lukewarm on the idea. In December 2017, a SEC statement read that “merely calling a token a ‘utility’ token or structuring it to provide some utility does not prevent the token from being a security”.
Ironically, the person who many credit for initiating Bannon to cryptocurrency owes most of his recent fame to an ICO. Investor and entrepreneur Brock Pierce, who worked with Bannon at in-game currency merchant IGE more than a decade ago, was the driving force behind EOS – which, at $4 billion, is one of the highest-grossing ICOs of all time.
In September 2017, Pierce said he had been talking to Bannon about blockchain technology “many, many times”, although he added that the then-White House strategist was probably too busy to pay much attention to crypto just yet.
But since leaving the White House in January 2018, Bannon has been busy meeting and talking with academics, experts and entrepreneurs in the cryptocurrency sphere, some of whom have been spotted visiting his townhouse in Washington,DC.
Timothy Lewis, a blockchain developer and investor, and a partner at Pierce’s fund DNA, says he personally talked cryptocurrency with Bannon more than once. He adds he felt it was “important that educators and stewards of technology provide the understanding”.
“[Bannon] has surrounded himself with people who understand the value of [cryptocurrency], and he himself is very intelligent. He's not a developer or engineer but he understands the markets well,” Lewis says. “Bannon has a team around him who help him understand better. He recognises that this is a transformational technology.”
This article was originally published by WIRED UK
