If you’ve been watching a lot of TV lately, you might have seen an ad featuring Matt Damon, clad in all black, striding through a hall of CGI mountain climbers, explorers, a Wright brother, and some astronauts. He is telling you to be brave, commit, take a risk.
A risk on cryptocurrency.
The ad prompted a wave of social media mockery, but Damon is not the lone A-list celebrity hawking cryptocurrency. So have Spike Lee, Tom Brady, Alec Baldwin, and Neil Patrick Harris, among others. Why are all these famous people, who presumably don’t lend their image to just any advertisement, suddenly endorsing cryptocurrency? And why should we be concerned about the deepening connection between Hollywood and crypto?
On Friday’s episode of What Next: TBD, I spoke with Jacob Silverman, a staff writer for the New Republic, and Ben McKenzie, actor, writer, and director, who is maybe best known for playing Ryan Atwood on The OC. The pair connected over their mutual concern about crypto marketing; now, they write a column for Slate and are working on a book. Our conversation has been edited and condensed for clarity.
Lizzie O’Leary: Why are we seeing so many celebrities endorsing cryptocurrency?
Ben McKenzie: What makes it work? Money. The same thing that always makes it work: money, real money. You have PR firms who reach out to agents and reps and money gets negotiated, and we’re talking big money. I mean, a $100 million ad campaign for Crypto.com. I don’t know what Damon got paid, but it’s obviously millions of dollars.
Are you frustrated with this?
McKenzie: I’m disappointed that they’re taking money to do something like this when, if you talk to a financial expert, is this the advice they’re giving you? To shill for these companies? And is it worth it?
Why are celebrities usually so conservative about this? Well, because they have a brand to protect, they have an image to protect, right? From the celebrities’ standpoint, I just think we need to reflect upon what we’re doing. We do have some obligation, and wouldn’t you feel bad if your fans lost money because you gave them bad financial advice?
Jacob Silverman: One thing that’s worth noting, and this is something that Ben and I are discovering in our reporting, is that the celebrities may not know what they’re shilling. I think that’s probably fair to say in a lot of these cases. A lot of these deals are brokered through third parties or marketing agencies or groups with which a celebrity might not have an established business relationship. There’s a real problem with lack of due diligence and investigation of who are these people, because there’s not much incentive to. If you take the money and promote the coin and then the coin does its thing, it gets lost in all the froth of the market.
In the same vein, celebrities are also putting their names and their fame behind NFTs, non-fungible tokens. If you’re still confused about them, by the way, it can help to think of NFTs as digital collectibles. They’re stored on a blockchain, like cryptocurrencies, but the data is unique. An NFT could be art made by Paris Hilton or music by Grimes. Eminem has sold NFTs, so has Snoop, and Tony Hawk. Lots of celebrities with already made audience of fans who are willing to pay for something that makes them feel both special and closer to someone famous.
Silverman: What’s marketed sometimes to customers or users is access, or a parasocial relationship with that celebrity. NFTs always use the term community. The idea of community is being constantly pushed. So it definitely hinges on this idea that you have more access to the celebrity and you have a closer relationship because you get a limited NFT and they might post something for their members and audience in that supposed community.
You guys called this a moral disaster back in October. Jacob, tell me why?
Silverman: These folks are essentially leading their fans into the casino to gamble. People know that there are risks, but the risks are often unknown, and so are the rules by which you’re gambling. It’s often marketed to you as an investment with almost no downside and a new possibility to get rich. There’s so much salesmanship and so much money here and also so few incentives to really be honest, no matter where you are in this ecosystem, because everyone is just hoping that you’re able to cash out at the top. The price of these assets is pretty much driven by FOMO and trending topics and virality and no real economic fundamentals underneath. All of that combines with the big celebrity imprimatur to drive these very volatile prices.
McKenzie: And crypto exchanges are the equivalent of unlicensed, unregistered casinos, in my opinion, at least the overseas ones are. Most of the trading in crypto is done in overseas exchanges with very little regulation. The market is highly concentrated, highly illiquid. There are huge whales playing games with this stuff that can very easily lead to a lot of manipulation.
If people want to spend their money on something promoted by a celebrity—whether it’s Flatbelly Tea or an NFT or buying some obscure coin—shouldn’t they be allowed to make that mistake?
McKenzie: Absolutely. I mean, they should absolutely be allowed to make a mistake for something that’s clearly advertised as what it is. But I don’t see Matt Damon saying, “What are you? A wimp? You’re not going to gamble on an unlicensed, unregistered security?” I just feel like we’ve transitioned past false marketing and into something a little more pernicious.
I feel like every conversation that I have about cryptocurrency, NFTs, a lot of aspects of big tech, come back to the question of regulation. Tech moves fast and Washington moves slowly. Do you see any universe in which there is a regulatory framework that has the caveat emptor stuff labeled out there the way you guys want it to be?
Silverman: It’s hard to have faith in the U.S. government to properly and swiftly regulate industries and to prosecute bad actors. There are criminal elements in crypto, and that shouldn’t be a controversial thing to say. Tether’s being criminally investigated for bank fraud by the DOJ.
Tether’s a stablecoin, a cryptocurrency where the value is pegged to the U.S. dollar. The idea is that stablecoins are less volatile than other cryptocurrencies. On Wednesday, the Securities and Exchange Commission chairman, Gary Gensler, said he hoped to see the U.S. regulate crypto exchanges, the platforms where cryptocurrency’s traded, sometime this year.
McKenzie: The United States is late to the game here. There’s a big divide between our acceptance of “financial innovation” and what separates that from scams.
Silverman: It gets at that question of, what kind of innovation is happening here? Are we really liberating people financially and giving them new ways to spend and transmit money? Or are we doing more innovation in ransomware payments and new types of Ponzi schemes and new rug pulls? My fear is it’s more of the latter.
You’re touching on something that has made crypto attractive, that there is a lot of distrust of institutions, distrust of banks as an aftermath of the financial crisis. What do you do with the yearning to be independent that can lead some people to be really interested in cryptocurrency, to think, “You know what? I’m going to operate outside of the big guys who just want to screw over little people?”
Silverman: We are critical of some of the big companies and the bad actors, but you really do have to have a sympathy toward people who honestly or legitimately try to gamble on this stuff. You have to point to not just erosion of our institutions and our democracy, but also record income inequality, the minimum wage still being far lower than it should. What you hear a lot when we talk to people from this industry, whether it’s an average retail trader who’s just got a thousand bucks on the line or someone who’s a big-time trader moving a lot of money, is that it seems like one of the few possibilities to really make big gains these days and a way out. It’s become this aspirational thing.
You also have a desire, I think understandable, but somewhat misplaced in this case, that, “OK, we are going to overthrow the big banks,” or something like that. What we try to tell people is that crypto takes a lot of the current system of supercharged capitalism and makes it potentially even worse and just removes more guardrails and tries to replicate some existing banking and financial institutions in even more harmful ways. While it preaches some kind of revolution, we actually think it’s taking the status quo and pushing it in an even farther in the wrong direction.
Ben, if you end up reduced to “Ryan from The OC doesn’t want you to buy crypto,” are you cool with that?
McKenzie: Totally cool with that. I’m so cool with that. I just hope that people are aware of the risks. There’s a lot of red flags everywhere.