Hey, it’s Gavin with your weekly recap of all things internet & money.

This week in fintech: a potential federal cyber insurance program. New political action committee (PAC) ads for crypto. CZ out at Binance. And more. 

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STORIES OF THE WEEK

1) PAC it in for Crypto 🏛️

Back in September, Axios reported on Fairshake, a new crypto-focused Super PAC backed by Coinbase CEO Brian Armstrong.

New reporting shows that Fairshake has pumped $1.2 million into television ads supporting a bipartisan group of House candidates, seeking to influence the 2024 elections. 

Fairshake isn't just throwing money around; their strategy is fairly methodical and bipartisan. They've focused on 13 lawmakers from both parties, all members of key committees like House Financial Services and Agriculture. These are committees that could drive crypto legislation, and Fairshake’s investments are a clear move to lay the groundwork for a favorable outcome. The biggest beneficiaries so far include Patrick McHenry, Dusty Johnson, and Josh Gottheimer.

• 📊 Digits: $1.2 million to support crypto-friendly lawmakers 

• 💬 Words: "Crypto jobs and innovation will be on the ballot in 2024" - Julia Krieger, Coinbase spokesperson

What it means →

It’s interesting to see the strategy that Fairshake is running with. As Politico noted, crypto isn’t exactly a mainstream, dinner table issue. But that’s why the Fairshake ads haven’t focused on crypto explicitly. Instead, they highlight ways in which the chosen candidates are focused on the economy, invested in bipartisan solutions, and fighting for “jobs of the future” (read: crypto).

In many ways, I think this is the right approach. In today’s climate, it feels like specific policy issues often become political footballs, thrown around (or fumbled) by elected officials on both sides of the aisle.

I don’t know whether crypto is fully one of those issues yet, but it certainly seems like it (with the right broadly favorable to crypto while the left is lined up against). I don’t think it always needed to be this way. I could see a world where the anti-big bank and anti-tech narrative of crypto would appeal to progressive ideals. But that doesn’t seem to be the way it has shaken out, at least for now. So by focusing on a bipartisan economic message, crypto can curry favor with DC while staying out of the limelight. 

2) Too Big to Hack 👾

The Treasury department seems to be more seriously considering a federal insurance program for catastrophic cybersecurity events. Treasury’s Federal Insurance Office is already deep into exploring the nuances of policies in response to major cyber events.

The idea is to create a framework that can handle extreme "tail events," ensuring a balance where the government doesn’t absorb excessive risk and private firms remain vigilant against foreseeable cyber threats.

• 📊 Digits: 16 significant cyber incidents just in September 2023, according to CSIS

• 💬 Words: “A well-designed federal insurance response could address the risks of tail events while incentivizing healthy private sector practices” - Graham Steele, Treasury Official

What it means → 

There have been increasing calls for a federal cyber-insurance backstop in light of the rising and evolving nature of cyberattacks. Most cyber insurance policies are full of all types of exclusions and carve-outs, which creates a layer of uncertainty about coverage during large-scale cyber events.

Perhaps anecdotal, but it feels like cybersecurity breaches are becoming less about individual lapses and more about systemic risk. Of course, that’s not to say that companies aren’t at fault when there are breaches.

But it does seem that a sufficiently motivated actor with enough effort and time can breach all but the most secure systems.

The question then is: should the government step in to provide support? In that scenario, a federal backstop would “transfer remote but potentially catastrophic risks from qualifying insurers (or their policyholders) to the federal government.” Of course, the devil would be in the details. A poorly designed program could create moral hazard, reducing incentives for companies to maintain strong cybersecurity measures.

It’s been a few years since the Colonial pipeline breach, and in many ways data breaches and cyberattacks have become part of everyday life. The SEC recently adopted clearer rules on how companies must disclose cyber events to investors, underscoring how prevalent this issue is.

We live in an increasingly digital world, and in that world, even well-prepared companies can fall victim to cyberattacks. So what role should the government—and all of us taxpayers—play in backstopping companies (and insurers) when a catastrophic breach occurs?

Byte of Bliss

🥖 From Syncus DAO, an all-time great Twitter announcement:

— Gavin