Speaker 1: This is the only way that banks will survive. Now,
Speaker 1: unless you've been living under rock, you know that the
Speaker 1: banks have been under amazing stress. As a matter of fact,
Speaker 1: we have seen more banks collapsing at a higher level,
Speaker 1: at a higher dollar value than we saw in two.
Speaker 2: Thousand and eight.
Speaker 1: And while many people think it's getting over, it is not.
Speaker 2: It's only just beginning.
Speaker 1: And so I'm sitting down with a banking expert. I'm
Speaker 1: talking about Caitlin Long, someone who's been in the inner
Speaker 1: workings of the banking and financial industry and is in
Speaker 1: the process of setting up her own bank right now.
Speaker 1: We're going to talk about the problem that's been created,
Speaker 1: but from a whole different level than.
Speaker 2: You've heard before.
Speaker 1: We're talking about the way money is flowing, how the
Speaker 1: Fed is causing this, the only way the banks are
Speaker 1: going to be able to protect themselves from this damage
Speaker 1: and destruction that's coming in the way. We're going to
Speaker 1: talk about the damage that will happen in the economy
Speaker 1: from centralizing the entire banking process. We're going to talk
Speaker 1: about her revolutionary bank and why the Federal Reserve does
Speaker 1: not want to allow it to happen.
Speaker 2: We're going to talk.
Speaker 1: About the FED now system and the new CBDC that
Speaker 1: everybody's afraid of, the UCC Universal Commercial Code filings that
Speaker 1: are making it so you don't own any more money
Speaker 1: than so much more. We cover a lot of ground.
Speaker 1: It was amazing conversation with Kitlin.
Speaker 2: Long.
Speaker 1: Let's go ahead and just jump right into it. Caitlin,
Speaker 1: thanks so much for taking the time to join me today.
Speaker 1: I know you are super busy, so I appreciate it.
Speaker 2: Dealing with all kinds of banking stuff.
Speaker 1: So I want to dig into the banking stuff, past,
Speaker 1: current and potential future where this is going. And so
Speaker 1: you're certainly one of the people that are kind of
Speaker 1: on the forefront that can help with this. But I
Speaker 1: first wanted to start in talking about you know, I
Speaker 1: know you're the founder ce CEO of Custodia Bank, and
Speaker 1: so I want to get into that. But before we
Speaker 1: kind of get into that, I just want to talk
Speaker 1: about like this current banking shuffle that we're in right now,
Speaker 1: this consolidation of banking, and so we're seeing smaller banks
Speaker 1: going down consolidating to bigger banks. At this point, we
Speaker 1: have like eight banks that are probably you know, too
Speaker 1: big to fail, right and We're starting to see kind
Speaker 1: of this flow to these too big defail.
Speaker 2: And it seems like.
Speaker 1: It's almost like the only banks that can survive this
Speaker 1: type of situation the FED has put them in is
Speaker 1: these two big defail banks unless maybe one the FED
Speaker 1: decides to cut rates down below the two to three
Speaker 1: percent range where where the banks can be profitable, you know,
Speaker 1: or they greatly loosen the financial conditions.
Speaker 2: So one or the other.
Speaker 1: And if it's not that, then it seems almost like
Speaker 1: we would need a fully reserved bank.
Speaker 3: Ah wow, okay, yes, well, so I actually tweeted out today.
Speaker 3: We're recording this on the twenty third of May. I
Speaker 3: tweeted out today in response to Jamie diamond saying there's
Speaker 3: going to be more consolidation in banking, And of course
Speaker 3: I suspect he's looking as chops at JP Morgan because
Speaker 3: they are beneficiary. They're one of the eight or so
Speaker 3: banks that you describe as likely too big defail, and
Speaker 3: because they've been subject to Basil three, they've had to
Speaker 3: pay attention to their liquidity in a way that all
Speaker 3: the other banks that are not subject. The vast majority
Speaker 3: of the quantity of banks in the United States are
Speaker 3: not subject to any real liquidity requirements. They'll run some
Speaker 3: stress tests, but they'll assume, you know that thirty five
Speaker 3: percent of their deposits get withdrawn within the span of
Speaker 3: a week as a stress test. Well, we saw in
Speaker 3: Silicon Valley Bank twenty five percent be withdrawn within the
Speaker 3: span of hours. And the small banks in this country
Speaker 3: have about seven cents now of cash on their balance sheets.
Speaker 3: Only seven cents for every dollar on their balance sheet
Speaker 3: is cash. So if twenty five cents gets withdrawn in
Speaker 3: this short period of time, you start to see the problem.
Speaker 3: They need to start to liquid aid assets, and they're
Speaker 3: liquid aiding assets at a loss, which is what took
Speaker 3: Silicon Valley Bank down. Okay, so that's the background. I
Speaker 3: tweeted up today that in ninety four there was a
Speaker 3: huge consolidation wave and it was something I worked on
Speaker 3: at the early stage of my career in the bank world.
Speaker 3: There were more than ten thousand banks back then, and
Speaker 3: what caused that consolidation wave was that they were very
Speaker 3: cost and efficient in spite of the fact that green
Speaker 3: Span at the time had engineered a steep yeal curve.
Speaker 3: So I would go back to the way you asked
Speaker 3: the question. It's not so much rates coming down to
Speaker 3: two or three percent, it's the steepness of a yeld
Speaker 3: curve because those businesses, those banks, traditional banks, make money
Speaker 3: based upon borrowing short term and lending long term, and
Speaker 3: they don't really care in the grand scheme of things,
Speaker 3: with the exception of mark to markets, which will come
Speaker 3: back to in a minute, whether interest rates are you know,
Speaker 3: five percent short term and eight percent long term and
Speaker 3: they capture the three percent spread, or you know, one
Speaker 3: percent short term versus four percent long term and capture
Speaker 3: the three percent spread. It's a three percent spread either way.
Speaker 3: Now that presumes.
Speaker 1: Yeah, except go ahead, I could ask, except for the
Speaker 1: big draw away from the banks is because the FED
Speaker 1: is paying five percent so well, folks are forced to
Speaker 1: compete with that, So if the Fed were to bring
Speaker 1: it down, then it wouldn't be as competitive.
Speaker 3: Well, that's absolutely right in the So that's why you
Speaker 3: can't look at this in a vacuum. First of all,
Speaker 3: I was going to add that the banks may have
Speaker 3: marked to market losses on their balance sheet, which is
Speaker 3: what's killing the regional and community banks right now because
Speaker 3: they during all the COVID era. The way the plumbing works.
Speaker 3: Is all that money that came from all the fiscal
Speaker 3: stimulus had to go through the banking system. So the
Speaker 3: banks suddenly found themselves flush with cash and there was
Speaker 3: no loan demand. And so what did they do. They
Speaker 3: bought treasuries. But because treasuries had no capital charge, they
Speaker 3: rolled the dice and played the yield curve. And this
Speaker 3: is where the management's made the mistake. They didn't have
Speaker 3: to do what they did. They invested in long term treasuries.
Speaker 3: Now those long term treasuries have a big mark to
Speaker 3: market loss. And your point is also very well taken,
Speaker 3: which is their something different now that didn't exist back
Speaker 3: in nineteen ninety four, the last time we came off
Speaker 3: a big rate rising environment. But the FED had engineered
Speaker 3: a steep yield curve, and that is money market funds,
Speaker 3: ding ding ding ding. You can earn right now north
Speaker 3: of five percent in a US government money market fund,
Speaker 3: where you're taking US government credit risk, whereas banks are
Speaker 3: paying little to no interest and you're taking bank credit risk.
Speaker 3: A lot of money is walking with its feet. In fact,
Speaker 3: actually at one point there was an estimate that eight
Speaker 3: hundred and fifty billion of deposits had been had exited
Speaker 3: the traditional banks for the crypto industry back at the
Speaker 3: peak of the crypto craze, and now we're almost at
Speaker 3: that amount of money that's been withdrawn from the banking
Speaker 3: industry to go to the money market funds. It's really
Speaker 3: stunning how much money has moved from the banking industry,
Speaker 3: and traditional banks were just not ready for this.
Speaker 2: So that's one of the things.
Speaker 1: So obviously one the risk that you said bank risk
Speaker 1: versus government risk. So there's the risk that they're dealing with,
Speaker 1: and so that has people on edge. And then there's
Speaker 1: the carrot dangling where like, hey, I can go make
Speaker 1: five percent instead of the two percent or I'm sorry,
Speaker 1: the zero point two five.
Speaker 3: Or whatever it is.
Speaker 1: Yeah, yeah, whatever, And I've got counterparty.
Speaker 3: Credit risk, right, so if you adjust that for the
Speaker 3: counterparty credit risk, it's negative yield.
Speaker 1: Yeah, which, while I was thinking, so, if inflation stays
Speaker 1: where it's at, interest rates and banking regulations remain where
Speaker 1: they're at, it just seems like there's just no way
Speaker 1: these small, too big defail or non two big defail
Speaker 1: banks can stay in business.
Speaker 2: It just seems like they're almost guaranteed.
Speaker 1: To fail, Like I said, unless something were to happen,
Speaker 1: and that's what I was saying. If the FED were
Speaker 1: to bring the rates down, it eases the banks. Also
Speaker 1: takes away that big demand for people to move like
Speaker 1: that'd be one thing that I was thinking.
Speaker 3: But if they're going to recapitalize the banks, they need
Speaker 3: to do what green Span did in the early nineties
Speaker 3: and engineer a steep yield curve, which is what he did,
Speaker 3: and it recapitalized the banks back then. And that's the
Speaker 3: last time we really had rising rates and you had
Speaker 3: a big bank consolidation wave, big banking consolidation wave. We
Speaker 3: didn't have the giant banks back then that we do today.
Speaker 3: But right now there's a balance sheet problem in the
Speaker 3: banking industry. And so long story short, this is the
Speaker 3: type of consolidation wave where profits are going to be
Speaker 3: privatized and losses are going to be socialized, unlike the
Speaker 3: bank consolidation wave I worked on in beginning of nineteen
Speaker 3: ninety four, where it was a win win because you
Speaker 3: had a lot of banks that, in spite of the
Speaker 3: fact that they were earning high spreads, just couldn't keep
Speaker 3: up because they were cost inefficient. So it was a
Speaker 3: win win to consolidate back then. Now this consolidation wave
Speaker 3: is more about balance sheet weakness. And you have seen
Speaker 3: a couple of really strongly performing bank stocks, and as
Speaker 3: who they've been, they've been the winners of the auction processes,
Speaker 3: buying these these defunct banks out of the bank auction
Speaker 3: process and immediately booking again and their stocks go up. Okay,
Speaker 3: that's that's the privatization of profits and socialization of losses
Speaker 3: that everybody should be upset about.
Speaker 2: Yeah, certainly.
Speaker 1: Now, you know, one of the big things with consolidation
Speaker 1: of bank is through the consolidation getting getting rid of
Speaker 1: sort of this like local regional relationship of the banker
Speaker 1: and then potentially pushing more and more like credit decisions
Speaker 1: up to the larger you know, national type corporations and
Speaker 1: things like that. I know, about half of US employment
Speaker 1: is with firms that have less than five hundred employees,
Speaker 1: so about half of that business environment could potentially be affected.
Speaker 2: I mean, these some of the risks that you see
Speaker 2: with consolidation.
Speaker 3: Absolutely, but it's happening anyway. Matt Levine at Bloomberg has
Speaker 3: been correctly pointing out money market funds are basically just
Speaker 3: narrow banks. Okay, so the bank, all the almost six
Speaker 3: hundred billion of deposits that have been withdrawn from the
Speaker 3: banking system and deposited into money market funds, is maybe
Speaker 3: permanently leaving the banking industry. And so all the concern
Speaker 3: about that's implied in your question, which is that that's
Speaker 3: where credit comes from. You got to have regional banks
Speaker 3: that can provide that can make loans, because that's where
Speaker 3: credit to small and medium sized businesses comes from. It
Speaker 3: doesn't come from the large banks. They're not set up
Speaker 3: to do that. And so but yet I look at
Speaker 3: it and say, it's already happening, folks, because people are
Speaker 3: voting with their feet to go to money market funds.
Speaker 3: This is not rocket science. And unfortunately, if we had
Speaker 3: to start all over again, we wouldn't structure the banking
Speaker 3: system the way it's structured today, where you have this
Speaker 3: enormous maturity transformation maturity mismatch in banks borrowing short term,
Speaker 3: lending long term, and trying to capture a three percent spread.
Speaker 3: Why because it's fundamentally unstable. As Matt pointed out, I
Speaker 3: think it was in yesterday's column that the assumption that
Speaker 3: was made for decades is that banking deposits were sticky
Speaker 3: and they might be withdrawn from one bank to go
Speaker 3: to another, but that would that was a zero sum
Speaker 3: game because it all stayed within the banking system. Well,
Speaker 3: now they're not sticky. The banking deposits are leaving. They
Speaker 3: left to go to crypto and now they're leaving to
Speaker 3: go to the money market fund industry, and that is
Speaker 3: outside of the banking industry. And here's the irony. This
Speaker 3: is where those of us who liked to talk plumbing
Speaker 3: of the money markets. Look at what the FED did
Speaker 3: with the RRP facility, the reverse repo facility. That's exactly
Speaker 3: what's allowing the money market fund industry to invest in
Speaker 3: all of these high yielding US government instruments and they
Speaker 3: can invest in repail and pick up even extra yield.
Speaker 3: And the impact of that is if anybody could get
Speaker 3: direct balance sheet exposure to the FED, then there's an
Speaker 3: incentive to there's less credit risk than going through a bank,
Speaker 3: so you're picking up higher yields and you're getting US
Speaker 3: government slash FED counterparty credit risk. It's it's you know,
Speaker 3: this is why money is voting with its feet. And
Speaker 3: so the concern about credit availability in the small and
Speaker 3: medium sized businesses. Boy, the bank regulators should have had
Speaker 3: that concern in mind a long time ago. It's so
Speaker 3: interesting because this is bread and butter stuff for the
Speaker 3: banking industry, and yet it's amazing how many really smart
Speaker 3: people missed it.
Speaker 2: Yeah.
Speaker 1: I think banking is sticky. It's just getting less and
Speaker 1: less sticky.
Speaker 2: Right. Technology has made it easier to move.
Speaker 1: I've been with my same bank since ever I first
Speaker 1: been kind of overopened, and it's like still there because
Speaker 1: it's a pain the butt to go close bank accounts.
Speaker 1: It's really difficult, and so it is pretty sticky. But
Speaker 1: to your point, it's getting much easier and money moves
Speaker 1: a lot faster now than I ever did before. I
Speaker 1: was reading a report from Christopher Whale, and he was
Speaker 1: talking about the FDIC report saying that most of the
Speaker 1: banking system is insolvent already. Yes, they're just not realizing
Speaker 1: the losses correct, right, And so a lot of these
Speaker 1: assets that they have on their books potentially like commercial
Speaker 1: real estate and regular mortgage backed securities, et cetera, underwater,
Speaker 1: you know, mortgage loans, things like that. We can see
Speaker 1: delinquencies are going through the roof cars, credit cards, et cetera.
Speaker 2: Things like that.
Speaker 1: And so we have this, but every time it seems
Speaker 1: like they, you know, FED or the banking systems kind
Speaker 1: of like backs against the wall. It's like another three
Speaker 1: or four letter letter special.
Speaker 2: Yeah, pops up, right. So I mean, I mean, there's
Speaker 2: really nothing stopping them.
Speaker 1: I mean, the FED can just continue to take these
Speaker 1: assets off the books apar, put them off the balance
Speaker 1: sheet in some tucked away.
Speaker 2: Corner, and just kind of keep this going. Right.
Speaker 3: Well, sure, right, but here's the thing, and this is
Speaker 3: where I think those who thought that the expansion of
Speaker 3: the Fed's balance sheet is by definition inflationary, the credit
Speaker 3: creation is what's inflationary. And you know, prior to the
Speaker 3: financial crisis, the fed's balance sheet was eight hundred billion.
Speaker 3: It was you know, it was nothing compared to what
Speaker 3: it's been in the trillions today. And and nonfinancial sector
Speaker 3: debt is ninety five trillion ish last I looked. Okay,
Speaker 3: so there's been ninety five trillion ish of US dollar
Speaker 3: credit issued in the United States, of which nine trillion
Speaker 3: ish has been monetized by the FED. Those are approximate numbers.
Speaker 3: But you see the point where I'm going about ten percent.
Speaker 3: The FED has monetized about ten percent of the credit
Speaker 3: that got issued. Okay, by the time this is all
Speaker 3: said and done, a lot of it's going to end
Speaker 3: up on the fed's balance sheet through the mechanisms you
Speaker 3: just talked about. But what a lot of folks miss
Speaker 3: is that that's not the inflation. The inflation occurred when
Speaker 3: the credit got created in the first place. How did
Speaker 3: it get created. It got created in the banking system,
Speaker 3: and it got created in the shadow banking system, which
Speaker 3: is through securities markets, et cetera. But the credit creation
Speaker 3: was what was inflationary. It wasn't the expansion of the
Speaker 3: fed's balance sheet per se. That's a piece of it,
Speaker 3: but it's not the vast majority of it, even with
Speaker 3: the FED basically backstopping. So what they're doing is basically
Speaker 3: filling a hole. Right when you get into deflationary environments
Speaker 3: where debt is defaulting, the credit outstanding is shrinking, that
Speaker 3: is small d deflation. The FED has expanded its balance
Speaker 3: sheet in order to keep credit inflated. Okay, So they're
Speaker 3: not trying to issue ninety five trillion more of debt.
Speaker 3: What they're trying to do is keep that ninety five
Speaker 3: trillion on its normal trajectory. And here's the interesting thing.
Speaker 3: If you go look at the data. I haven't updated
Speaker 3: this in a little while, but if you look at
Speaker 3: the non financial sector debt in the United States, it's
Speaker 3: pretty much to straight line up and you can't tell
Speaker 3: when Republicans were in charge, which is when Democrats were
Speaker 3: in charge. Okay, so we've had two and a half
Speaker 3: to three trillion dollars of non financial sector debt growth
Speaker 3: in each of the last ten years, and it's you know,
Speaker 3: it's essentially keeping me total economy inflated. Only a small
Speaker 3: percentage of that historically has been the FED itself. The
Speaker 3: real inflation came from the credit that was created in
Speaker 3: both the traditional banking system and in the non traditional
Speaker 3: i either shadow banking system. But it all got created
Speaker 3: in the financial system and then got intermediated out into
Speaker 3: the real economy. And so you know, basically there's a
Speaker 3: big debate over the stability of the US dollar banking system.
Speaker 3: I look at it, and you know, as you said,
Speaker 3: the FDIICE is saying, hey, the banking systems in soolveent. Okay, well,
Speaker 3: it really always has been. This is not new fractional
Speaker 3: reserve banking is not new. Bank runs are not new.
Speaker 3: None of this is new. What's new is that people
Speaker 3: are much more aware of what the issue has been
Speaker 3: all along. But it was always there, bubbling under the surface,
Speaker 3: building up, and fundamentally, this is not a stable system.
Speaker 3: It seems stable because they've been able, as you point out,
Speaker 3: to pull the rabbit out of the hat with the
Speaker 3: latest alphabet soup program. But all that is doing is
Speaker 3: taking defaulted credit off the traditional banking system's balance sheet
Speaker 3: and putting it onto the Fed's balance sheet to try
Speaker 3: to keep the aggregate of total credit inflated.
Speaker 1: And while that doesn't cause the deflation, because the aggregate
Speaker 1: credit is still there, and even though it may be
Speaker 1: tucked away somewhere, it's still a drag on the overall economy,
Speaker 1: and it's still a drag on growth and production because
Speaker 1: whoever owes that debt is still being held down by that,
Speaker 1: right So even though it's kind of like tucked away, hidden,
Speaker 1: you know, out ofside, out of mind, it's still there.
Speaker 1: It's still dragging the situation down. So it never allows
Speaker 1: us to kind of heal and start growing again.
Speaker 3: Absolutely well, and we don't know what real market interest
Speaker 3: rates are We have no idea. The one thing I'm
Speaker 3: pretty confident of, although no one knows for sure, is
Speaker 3: that they would be hired than they are today right
Speaker 3: if free markets really rained. But this is why the
Speaker 3: most important price that needs to be left alone and
Speaker 3: not controlled by the government is the price of borrowing money,
Speaker 3: because it is the traffic light that allocates capital across
Speaker 3: industries and across time. And when that is controlled, which
Speaker 3: it is in every major economy in the world right now,
Speaker 3: because there's something called a central bank, and the central
Speaker 3: banks have desks that literally buy and sell government obligations
Speaker 3: to control those interest rates. And so when they're controlling
Speaker 3: those interest rates to their target levels, you know they're
Speaker 3: not free market interest rates. And so to your point,
Speaker 3: we're not allowing all of the dead weight of the
Speaker 3: economy to burn. And I like a nessin Teleb's analogy
Speaker 3: of forest fires. If you don't allow the underbelly, the
Speaker 3: undergrowth to burn every now and then when the real
Speaker 3: one comes, you get a conflagration, and it might burn
Speaker 3: hot enough that it burns all the bacteria in the soil,
Speaker 3: and nothing grows for decades until you know an elk
Speaker 3: or a moose comes along and takes you know what,
Speaker 3: and then the bacteria regenerates in the soil, but it
Speaker 3: takes decades for that to happen. I'm literally watching that happen.
Speaker 3: There were terrible forest fires not far from where I
Speaker 3: live here in Wyoming a couple of years ago, and
Speaker 3: nothing is growing back because they didn't let it burn
Speaker 3: in the more mild years, and when it finally came,
Speaker 3: everything including the bacteria in the soil, burned. It's really sad.
Speaker 2: I recently went out to Wyoming.
Speaker 1: I was out there earlier this year for the Bitcoinski
Speaker 1: Week and boy was it beautiful. Absolutely, Oh yes, sure
Speaker 1: it is. Yeah, it is wild, big country out there,
Speaker 1: for sure.
Speaker 2: Man, Wow, God blessed.
Speaker 3: Whyom I go? I keep it wild's yeah, that's for sure.
Speaker 2: It made me. It made me think, I mean, this
Speaker 2: is off track. But we went. I went.
Speaker 1: We were there in Jackson Hole, right and then we
Speaker 1: went about to forty five minutes out and did a
Speaker 1: little helly scheme. But I got to kind of drive
Speaker 1: out and see that that rugged country and just get
Speaker 1: to meet some of the people that are out there.
Speaker 1: And I left thinking these people are never going to
Speaker 1: live in fifteen minute cities in metaverse like correct, these
Speaker 1: are the cowboys out here, right, And it made me
Speaker 1: feel a little bit better.
Speaker 2: So I'm just gonna say, Hey, I lived on.
Speaker 3: The East Coast for thirty years in big cities, so
Speaker 3: I can move easily from one environment to the other.
Speaker 3: But I grew up here, and I totally get it.
Speaker 3: I'm much, you know, much more, much more comfortable here,
Speaker 3: and you know, boy, there are a lot of people
Speaker 3: who are moving here who are like that, escaping the
Speaker 3: cities and appreciating the big, wide open spaces and generally
Speaker 3: being left alone.
Speaker 1: Though. I can say I'm here in southern California and
Speaker 1: in Orange County along the beach Newport Beach, Corona del Mar,
Speaker 1: Laguna Beach, I mean some of the most expensive real
Speaker 1: estate anywhere, and I was completely shocked how expensive it
Speaker 1: was out Jacksonming.
Speaker 3: Yeah.
Speaker 1: I mean, I'm like thirty forty minutes from the airport
Speaker 1: in the in the middle of seemingly nowhere, and these
Speaker 1: homes are like fifteen million dollars on yep, what is
Speaker 1: going on us?
Speaker 3: Oh? I watched that for years, and you know, they're
Speaker 3: very land constrained around Jackson. The rest of Wyoming's not
Speaker 3: like that. When I moved from the New York City area,
Speaker 3: my cost of living went down by two thirds. It's
Speaker 3: the rest of Wyoming isn't like that. But you know
Speaker 3: what's interesting is people Jackson's like a gateway drug to Wyoming.
Speaker 3: A lot of people fall in love with Wyoming when
Speaker 3: they see that, and then they realize, wow, the once
Speaker 3: you go not far from Jackson any directions, it's equally beautiful,
Speaker 3: but the real estate prices are a lot lower, and
Speaker 3: you don't have the craziness of the resort town. And
Speaker 3: so now the joke is the billionaires are driving out
Speaker 3: the millionaires, and the millionaires in Jackson who used to
Speaker 3: be in Jackson are now really scattered all over Wyoming,
Speaker 3: and as you can imagine, it's causing a little bit
Speaker 3: of friction with the locals.
Speaker 1: Yeah yeah, yeah, So jumping back onto this, you know
Speaker 1: what we were saying about kind of setting the price
Speaker 1: of money. A lot of people don't realize that you
Speaker 1: actually buy money. You use money to buy things, but
Speaker 1: you also buy money when you borrow the money. And
Speaker 1: while most people understand the dangers of price fixing, which
Speaker 1: of course we're already starting to hear talks of price
Speaker 1: fixing because inflation is so bad yield curve control. So
Speaker 1: most people kind of understand intuitively that price fixing.
Speaker 2: Isn't a good thing. It's actually a very dangerous thing.
Speaker 1: But they don't think to the point that you made,
Speaker 1: that setting the price of money actually sets the price
Speaker 1: of everything. And also they don't realize how much information
Speaker 1: is in that price. So if I'm a business owner,
Speaker 1: if the interest rate is very low, that means there's
Speaker 1: lots of excess some money in the system, and people
Speaker 1: are healthy and wealthy, and I should probably launch a
Speaker 1: new product or business, and if the rates are high, I.
Speaker 2: Might I might know the opposite.
Speaker 1: And so when that's all distorted, all types of misallocation, unfortunately,
Speaker 1: people's lives get ruined, you know, in a small business
Speaker 1: sector specifically, going back to this, so in this you know,
Speaker 1: banking situation, as I kind of said, it almost seems
Speaker 1: like no bank's really going to survive unless either these
Speaker 1: conditions change or there was like some sort of like
Speaker 1: a full reserve bank, which of course Custodia Bank was
Speaker 1: trying to do. And I know that you and I
Speaker 1: got to talk about this a little bit in Miami,
Speaker 1: and I know you can't lay out a whole lot
Speaker 1: of details, but you had a full reserve bank idea.
Speaker 1: Seemingly they didn't want that, at least that's what it appears, like,
Speaker 1: what kind of information can you give us on that?
Speaker 3: What it's so interesting because we have full reserve banks.
Speaker 3: They're called money market funds. They're not banks in the
Speaker 3: sense that they don't take deposits, but they're really the
Speaker 3: same thing, right. They have liabilities in the form of
Speaker 3: fund shares, and they have assets in the form of
Speaker 3: t bills and repo that back one hundred percent of
Speaker 3: the obligations. That's really one hundred percent reserve bank. And again,
Speaker 3: people are voting the money market funds, taking money out
Speaker 3: of the banking system to put them into money market funds,
Speaker 3: voting with their feet because that's what they that's what
Speaker 3: they want. There's something else out there that is essentially
Speaker 3: a full reserve bank. It's called a money transmitter. The
Speaker 3: fifty states have money transmitter licensing regimes. That's how most
Speaker 3: of fintech's are licensed. They just can't take a US
Speaker 3: dollar deposit. A bank is a unique animal. It is
Speaker 3: a corporation bestowed by law with the right to accept
Speaker 3: US dollar deposits. But the FinTechs are not banks yet,
Speaker 3: they're effectively one hundred percent reserve banks. Why because they
Speaker 3: are not allowed to lend their customer funds. They have
Speaker 3: to hold one hundred percent of their customer funds in
Speaker 3: something called permissible investments, and the permissible investments are generally
Speaker 3: short term, high quality liquid asset. Okay, So if we
Speaker 3: want to step back and look at it objectively, we
Speaker 3: already have one hundred percent reserve banks. They're just not
Speaker 3: legally banks because they can't accept deposits, but they're effectively
Speaker 3: the same thing. They're called FinTechs, and they're called money
Speaker 3: market funds. And so what's funny is.
Speaker 1: How do they money market funds not collect deposits?
Speaker 3: Well, because deposits are a US dollar that is deposited
Speaker 3: into a bank. So legally, a money market fund is
Speaker 3: a security. You're buying a security. Now, you and I
Speaker 3: look at that and say, it's effectively the same thing,
Speaker 3: but the plumbing is very different and the legal structure
Speaker 3: is very different. A money market fund cannot be used
Speaker 3: to make a payment that has to be done through
Speaker 3: a bank. Now, if we segregate out what are the
Speaker 3: functions of our bank. We really use our bank for
Speaker 3: basically two things, for storing our deposits, storing our US
Speaker 3: dollars and for making payments. So the storage of the
Speaker 3: US deposits that can be handled through a money market
Speaker 3: fund with arguably higher yields and lower risk, which is
Speaker 3: why again so many people are voting with their feet.
Speaker 3: A lot of people have commented that this isn't a
Speaker 3: bank run, it's a bank walk. It's the slow bleed
Speaker 3: of deposits out of the banking system into money market
Speaker 3: funds just simply because of the economics, the risk adjusted
Speaker 3: returns okay, And that's a situation that has been created
Speaker 3: by the FED itself. But we also use the bank
Speaker 3: for payments, and the money market fund cannot offer access
Speaker 3: to fedwire and ACCH. In order to get access to
Speaker 3: fedwire and ACCH as a financial institution, you must be
Speaker 3: a bank.
Speaker 1: Where where do like Charles Schwab and those types, because
Speaker 1: they offer they have bank subsidiaries.
Speaker 3: They either have bank subsidiaries, which is what Charles Schwab
Speaker 3: and Morgan Stanley for example, have, or they use a
Speaker 3: clearing bank like a JP. Morgan what would be called
Speaker 3: a correspondent bank, and basically it's really passing through their
Speaker 3: balance sheet and that's how they get access to the FED.
Speaker 3: So this whole question of who gets access to FED
Speaker 3: accounts is a very interesting one because in other countries,
Speaker 3: non banks get access to central bank accounts. So the
Speaker 3: FinTechs like the paypals and Stripes and squares of the
Speaker 3: world in the UK, for example, would be eligible to
Speaker 3: get a clearing account at the FED. However in the
Speaker 3: US that's not the case. Well, in the UK would
Speaker 3: be the Bank of England, but in the US that's
Speaker 3: not the case. The law says you have to be
Speaker 3: a depository institution. Now, an eligible depository institution. What is
Speaker 3: that defined as? Number one, it's insured depository institutions, so
Speaker 3: FDIC insured banks or NCUA insured credit unions. That's a
Speaker 3: group number one insured depository institutions. And number two is
Speaker 3: depository institutions eligible to apply for insurance. Custodia falls into
Speaker 3: that second bucket. We are uninsured. The FDIC was refusing
Speaker 3: to ensure any companies applying for insurance that were involved
Speaker 3: in the digital asset industry. Incidentally, I agree with them.
Speaker 3: We can come back and talk about that later if
Speaker 3: you want to. But the point is that second bucket
Speaker 3: is in federal statute, and federal law says the Federal
Speaker 3: Reserve shall provide services to eligible depository institutions. If shall
Speaker 3: means shall, then that means a federal reserve should or
Speaker 3: will have to provide those services. Both the FED and
Speaker 3: the FDIC started to reinterpret the laws that apply to them,
Speaker 3: shall we say.
Speaker 1: And.
Speaker 3: Start to pick and choose who they got to serve
Speaker 3: and who they didn't want to serve. And that has
Speaker 3: resulted in the politicization of the banking system. And that
Speaker 3: is something I have spoken out about broadly. Banking should
Speaker 3: not be politicized. If there are fights over whether marijuana
Speaker 3: is legal, or whether abortion clinics should have access to
Speaker 3: the financial service to you know, to banks, or whether
Speaker 3: oil and gas companies should have access to banks, those
Speaker 3: should be fought out in the regulatory realm, not behind
Speaker 3: closed doors in a bank supervisors exam one.
Speaker 2: Yeah, that's a big deal. That's a big deal.
Speaker 1: Now what about you'd said the two functions of the bank,
Speaker 1: But there's a third function of the bank too, which
Speaker 1: is extending credit. That's to the point that you're making earlier.
Speaker 1: That's where the money is actually created issues through the bank.
Speaker 3: Correct. Not everybody borrows from a bank, right, So now
Speaker 3: we can actually do we can divide banks into lending
Speaker 3: banks and banks that are really just payment banks. Or
Speaker 3: there's a third category, which is custody banks. So custody
Speaker 3: banks like Bank of New York, Mellon, Stay Street, Northern Trust,
Speaker 3: most of their business is providing custody for securities. They
Speaker 3: do have small lending books, but that if you go
Speaker 3: if you look at the balance sheets of those banks,
Speaker 3: they are teeny tiny compared to the assets under custody.
Speaker 3: It's i don't know, like one hundred billion of on
Speaker 3: balance sheet assets and twenty trillion of off balance sheet
Speaker 3: assets under custody at those banks. Directionally, those ratios are right.
Speaker 3: They really are not in the business of making loans.
Speaker 3: They're mostly in the business of providing services. And that's
Speaker 3: that's that's a well trodden path for banks. So it's
Speaker 3: not the case that every bank makes loans.
Speaker 1: Okay, So custodia is not dead in the water. You're
Speaker 1: up and running, just not full services at this point,
Speaker 1: is that correct?
Speaker 3: We're not taking third party customer funds right now. We've
Speaker 3: actually been operating since October. We kept it quiet, but
Speaker 3: we've been operating since October, and we got our certificate
Speaker 3: of authority to operate from the Wyoming Division of Banking
Speaker 3: last October. But stay tuned. We will have announcements coming
Speaker 3: out relatively soon about a pivot.
Speaker 1: Yeah, we'll certainly be hanging on that. I'm curious then,
Speaker 1: you know, part of I think what custodia and maybe
Speaker 1: potentially you can tell me about the name, but kind
Speaker 1: of like custodian I'm guessing right.
Speaker 2: Full reserve, but also involved.
Speaker 1: Bitcoin and I think maybe other crypto assets as well,
Speaker 1: and taking custody of those. And I'm just curious, you know,
Speaker 1: like we're obviously in this transition and most of us
Speaker 1: alive today are used to banks holding our money for us. Now,
Speaker 1: of course, we have bitcoin that allows us to take
Speaker 1: custody of our own assets.
Speaker 2: You know, we have this.
Speaker 1: We're kind of stuck between generations. Some people are still
Speaker 1: going to want that custody, et cetera, and especially maybe
Speaker 1: with institutions and things like that. I'm just curious your
Speaker 1: take on that, given what's happened over the weekend with Ledger.
Speaker 3: Well, look, I mean what Ledger revealed is something that
Speaker 3: a lot of folks did not understand about the nature
Speaker 3: of the hardware provider having software control over the extraction
Speaker 3: of private keys and a hardware device. Okay, So what
Speaker 3: that's underscoring is that if you are not self custodying
Speaker 3: literally by you generating a random seed phrase and you
Speaker 3: storing it yourselves in a secure way, then you're relying
Speaker 3: on someone else and it's just a different layer of trust. So,
Speaker 3: you know, I think a lot of the engineers who
Speaker 3: said this is no big deal understood it all along.
Speaker 3: A lot of people who were really shocked just didn't
Speaker 3: understand that's what that's what the hardware devices were all along.
Speaker 3: So there was a really interesting panel that I was
Speaker 3: honored to be part of that Jamison Lop of KASA
Speaker 3: hosted with Obe of Fetiment, and it's basically three different
Speaker 3: models of custody, with KASA being self being a three
Speaker 3: of five multi sig, with custodia being a structure that
Speaker 3: is very different than traditional full service third party custody
Speaker 3: because the legal structure of the Wyoming law allows you
Speaker 3: to retain title legal title to your assets even when
Speaker 3: you turn over your private keys. And then there's the
Speaker 3: community custody model, where essentially you're segregating out parts of
Speaker 3: the keys into the your trusted community.
Speaker 1: And then of course would you put that third model
Speaker 1: sort of like with a coinbase kind of model.
Speaker 3: Well, no, it's not, because in that case you're keeping
Speaker 3: parts of your key, as I understand it, with trusted
Speaker 3: people in your community. Coinbase full service counterparty risk. What
Speaker 3: you have as an IOU, you don't have legal title
Speaker 3: to the asset, and as the SEC properly required Coinbase
Speaker 3: to disclose last spring, and this applies to all third
Speaker 3: party custody that exists in the US market right now.
Speaker 3: The way that legal structure works is when you turn
Speaker 3: over your bitcoin to a custodian, they give you an
Speaker 3: IOU back, and if they go out of business because
Speaker 3: of their legal structure, they're subject to the US Bankruptcy
Speaker 3: Code and you're stuck in a bankruptcy line getting your
Speaker 3: money back.
Speaker 1: It looks like though, with Celsius and Blockfi they're letting
Speaker 1: people who are in custody solutions get their money back,
Speaker 1: but not in their earn or yield products.
Speaker 3: Well, again, some of that is a function of just
Speaker 3: how much money the custodian has. So they were able
Speaker 3: and willing to be able to pay those out and
Speaker 3: they were deemed to be senior claims. So now we
Speaker 3: get into some very esoteric legal structures as to whether
Speaker 3: the account was an omnibus account or not. If it's
Speaker 3: an omnibus account or not, you are definitely in a
Speaker 3: debtor credit or relationship. But if you have a trust
Speaker 3: account owned, there's a better argument for segregation. What Coinbase
Speaker 3: was required by the SEC to disclose, and it was
Speaker 3: about a year ago. There was a big bruhaha over oh,
Speaker 3: it's Coinbase going bankrupt. Well, no, I didn't think they
Speaker 3: were going bankrupt. What they asked. What the SEC made
Speaker 3: them disclosed is that if they ever did that, there
Speaker 3: is a risk that that the people who are holding
Speaker 3: money in their trust company might not find that their
Speaker 3: assets are segregated right at the moment when they need
Speaker 3: the assets to be segregated. Why. Because the US Bankruptcy
Speaker 3: Code is US bankruptcy Court judges are empowered under the
Speaker 3: US Bankruptcy Code to be able to break contracts and
Speaker 3: in a trust company or a money transmitter legally in
Speaker 3: the United States, the asset segregation is by contract, Okay,
Speaker 3: big difference with a bank like Custodia or a broker dealer.
Speaker 3: Banks and broker dealers have special statutory segregation of assets
Speaker 3: and special receivership regimes. A bank judge cannot break the
Speaker 3: statutory segregation of assets. That judge must respect it. Okay.
Speaker 3: So what that means, and that is that the greater
Speaker 3: likelihood is that if anything happened to a custodian that
Speaker 3: was a bank or a broker dealer, you were more
Speaker 3: likely to get your money back. Ultimately, in the case
Speaker 3: of Lehman, pretty much everybody got their money back. It
Speaker 3: took some time, but that's because they had statutory segregation
Speaker 3: of assets and they paid out the money fairly quickly.
Speaker 3: So it does depend on how deep the loss is
Speaker 3: and whether they recover sufficient assets to start to pay
Speaker 3: out creditors fast. Bankruptcy judges want to pay out creditors fast,
Speaker 3: for sure. But the gist is this is complicated stuff.
Speaker 3: There's one other piece I'll add, which is that Wyoming
Speaker 3: offers something called bailman. Bailman is the law of valet
Speaker 3: parking for your car or a code check you are
Speaker 3: not handing legal title to your car when you perk
Speaker 3: it at the garage to the garage, the garage can
Speaker 3: do one and one only one thing only, which is
Speaker 3: park your car. They can't take it on a joy ride.
Speaker 3: They can't, you know, rent it out to an uber
Speaker 3: driver and pocket the earnings and securities custody. That's exactly
Speaker 3: how it works. You custody, You deposit your securities with
Speaker 3: a custody bank. They take your securities for a joy ride,
Speaker 3: stick you with the risk, and they pocket the losses.
Speaker 3: That's the way it works. Okay. So the Wyoming bailment
Speaker 3: law not only keeps title with statutory segregation with the
Speaker 3: customer if the customer elects the bailance. However, also it
Speaker 3: prohibits the custodian from the proverbial joy ride with your assets.
Speaker 3: The only thing that you can do as a custodian
Speaker 3: under Wyoming law is what your customer specifically directs you
Speaker 3: to do. Whereas in the securities custody world, the Bank
Speaker 3: of New York's the you know, the the Northern Trust,
Speaker 3: the State streets go read the fine for rent. They
Speaker 3: can they can lend out your assets without your express
Speaker 3: consent and it's called securities lending. These are big, big
Speaker 3: businesses for these banks. Uh, and they're pocketing profits.
Speaker 1: Uh.
Speaker 3: And you're arguably getting a lot of risk that you're.
Speaker 1: Part of the whole rehypothification and it goes down absolutely right, Yes,
Speaker 1: without getting going down that whole rabbit hole. But I'm
Speaker 1: just curious, you know, to the point of the securities.
Speaker 1: I mean, like, so I don't own the apple stock.
Speaker 1: E trade owns it and they owe it to me.
Speaker 1: But then E Trade doesn't own it either. It's owed
Speaker 1: to them, which is owed to them, And there's I
Speaker 1: don't know, five five, five six people in this process,
Speaker 1: this DTCC kind of clearing services that does all this.
Speaker 1: It seems like now we have technology that could fix
Speaker 1: that problem. So you know, whether that be on some
Speaker 1: blockchain or on top of the bitcoin blockchain, we have
Speaker 1: like you know, potentially like a taro layer that we could.
Speaker 2: Now own securities.
Speaker 3: Yeah.
Speaker 2: Yeah.
Speaker 1: And it wasn't that long ago that stocks used to
Speaker 1: be bearer instruments. It was a stock certificate. It was
Speaker 1: actually a certificate. You know, we've we've we've grown yeah,
Speaker 1: paper and we've grown up. Seen the movies. I don't
Speaker 1: know if they still do it, but they had, like
Speaker 1: you know, the criminals, like give me the bearer bonds, right,
Speaker 1: like bear bonds were like bear instruments and so like.
Speaker 1: It wasn't that long ago that these securities were bare instruments,
Speaker 1: and now we have the technology to do that again. However,
Speaker 1: there's this whole establishment that seems to rent seek in
Speaker 1: the middle.
Speaker 2: Of every opportunity to hear back.
Speaker 1: And not just rent seek taking a piece of the transaction,
Speaker 1: but actually leveraging them out, use them to your point
Speaker 1: of joy, joy writing your cart while you're gone.
Speaker 2: Do you think I mean, is that going to be
Speaker 2: a big.
Speaker 1: If not almost insurmountable obstacle in the way of letting
Speaker 1: technology fix that solution.
Speaker 3: Well, so this is interesting. This is a broader question.
Speaker 3: Do the bank regulators want technology innovation in the banking system?
Speaker 3: And here's what I think happened. I think the answer
Speaker 3: is no.
Speaker 2: I would say no.
Speaker 3: And here's why they let the back end systems of
Speaker 3: the banking industry atrophy. And now here come all these
Speaker 3: FinTechs with these ferrari front ends that have to plug
Speaker 3: into the horse and buggy back end. And then here
Speaker 3: comes crypto on top of that, which is in some
Speaker 3: ways even faster and more efficient than the FinTechs because
Speaker 3: they've got their own separate settlement systems. Wow, that's scarce.
Speaker 3: The banking regulators and here's the problem. They're in a
Speaker 3: catch twenty two. We talked at the beginning of this
Speaker 3: conversation about the catch twenty two they're in with, which is,
Speaker 3: if they keep raising interest rates and have an inverted
Speaker 3: yield curve, they cause more banks to go bust. Now
Speaker 3: they're in a catch twenty two on technology too, that
Speaker 3: very few people are talking about. People are voting with
Speaker 3: their feet to use the better technology, especially the millennials
Speaker 3: and gen zs. They've never set foot in a bank branch.
Speaker 3: Yet liquidity and capital in the banking world are calibrated
Speaker 3: to an analog world. So people are voting with their
Speaker 3: feet to go digital. They want regulated digital asset service providers.
Speaker 3: They'd rather do business within the regulated world, but the
Speaker 3: traditional regulators are trying to shove them backwards in technology.
Speaker 3: I talked to one of the gen Z folks at Miami.
Speaker 3: He's never written a check and has only set foot
Speaker 3: in a bank branch once in his life. So there
Speaker 3: you go. Now, try to make somebody like that live
Speaker 3: in an analog world. Yeah, not going backwards.
Speaker 1: Yeah, they're not going back It makes me think of
Speaker 1: a quote from Christine Legard and she said that innovation
Speaker 1: is a threat to our financial stability.
Speaker 2: Which it is.
Speaker 1: I mean, it's innovation. It disrupts the old way of
Speaker 1: doing things. That's the entire point. And it's actually a
Speaker 1: conversation I had with Robert Breedlove while we were in Miami,
Speaker 1: and I was explaining kind of how I was thinking
Speaker 1: through this, and like from many ways, we had a
Speaker 1: long rip on his podcast.
Speaker 2: We talked about it, but how like.
Speaker 1: Our current form of government was built for the industrial
Speaker 1: age and now we've moved, we've moved to the information age,
Speaker 1: and we still have an industrial age government, but we
Speaker 1: have an information age world. And one of those things
Speaker 1: I didn't talk about it necessarily with him, but one
Speaker 1: of those things that I was thinking about is that,
Speaker 1: you know, we've gone from a slow settlement to instance
Speaker 1: or not I'm sorry, slow transactions to instant transactions, and
Speaker 1: so kind of to the point earlier about moving money
Speaker 1: from bank to bank, I can literally do it with
Speaker 1: a push of a button instead of driving to the
Speaker 1: bank and filling out the forms, et cetera, and or
Speaker 1: whether I buy things, you know, I used to have
Speaker 1: to go to the store and I push a button.
Speaker 1: So now we have instant transactions, but the settlement still
Speaker 1: is in the dark ages here, right, And so that's
Speaker 1: kind of the point that you're making. The banks have
Speaker 1: this cart and buggy back end, and how we have
Speaker 1: these ferrari or even spaceship set transactions, and so there's
Speaker 1: just this big gap that's there.
Speaker 3: Well, and that's what Custodia set out to solve. We
Speaker 3: we really truly were a friendly and we're actively working
Speaker 3: with both sides to figure out how to make sure
Speaker 3: that neither side caused problems for the other. And in fact,
Speaker 3: unfortunately what happened is both sides caused problems for the other. Right,
Speaker 3: we saw the traditional banking system, you know, through the
Speaker 3: through the d banking, and just like the small number
Speaker 3: of banks that were willing to serve this industry caused
Speaker 3: a lot of problems for the digital asset industry. And
Speaker 3: by the way, the digital asset industry arguably blew up
Speaker 3: some of those banks because going back to FTX, there
Speaker 3: were eleven banks, including three gesibs that provided financial services
Speaker 3: to FTX, which which appears to have been just a
Speaker 3: giant fraud and allegedly and yet eleven banks didn't catch that,
Speaker 3: including three gesives including by the way, three us G SIPs.
Speaker 3: I think there were two non us G SIPs as well.
Speaker 3: These are supposed to be the best of the best
Speaker 3: at catching money laundering, at catching you know, know, your
Speaker 3: customer violations, and they were apparently allowing wires allegedly to
Speaker 3: be sent to FTX that ended up instead being sent
Speaker 3: to Alameda.
Speaker 2: Yeah.
Speaker 1: I saw that with silver Gate, and I was just like,
Speaker 1: I couldn't believe it. I mean, how do you not
Speaker 1: pick something like that up.
Speaker 3: Well, I got to tell you, this is one of
Speaker 3: the things that makes me sad about the attempt to
Speaker 3: just shove this entire industry offshore and out of the
Speaker 3: banking industry, is that there were some of us as
Speaker 3: I think you know, who actively knew about some of
Speaker 3: the frauds. Right, let's go back to my public statements
Speaker 3: against the lenders. It was clear to me the lenders
Speaker 3: were going to blow up. You cannot take an asset
Speaker 3: that is finite in quantity and start rehapothecating it. The
Speaker 3: moment you do that, somebody's insolvent and it's just a
Speaker 3: matter of time before they blow up. And there is
Speaker 3: no lender of last resort, unlike there is in the
Speaker 3: traditional finance industry. And then I have publicly disclosed that.
Speaker 1: You've been about that since you came into the space
Speaker 1: years now, You've been pounded the table on that, right.
Speaker 3: And so those of us who spun all that and
Speaker 3: who and who also were working with law enforcement, to
Speaker 3: the criticism of people in the in the you know,
Speaker 3: the purists, I look at that and say, even the
Speaker 3: purest libertarians should recognize that fraud is an attack on
Speaker 3: property rights, and we should want to rid this industry
Speaker 3: of fraud. And you know, behind the scenes, I've been helping.
Speaker 3: I just heard of a horrific situation yesterday where somebody
Speaker 3: was defrauded a substantial amount of money out of their IRA.
Speaker 3: And you know the sad thing is it was done
Speaker 3: through an offshore crypto exchange into a D five protocol.
Speaker 3: He thought this was a regulated entity, and had there
Speaker 3: been a regulated entity, he would have been handling his
Speaker 3: business through the regulated entity. But because of the way
Speaker 3: the US has shoved this all offshore. What have they done.
Speaker 3: They've just empowered the criminals and the illicit finance part
Speaker 3: of the industry and the crazy leverage I'm seeing now
Speaker 3: two hundred to one leverage futures come back. I mean,
Speaker 3: this is just awful.
Speaker 1: I wish we could there's certainly that, and there's a
Speaker 1: complete breakdown in our regulatory agency as well, which I
Speaker 1: always have to preface this with a disclaimer, I'm not
Speaker 1: for this. I think we should be free to do
Speaker 1: what we want with our property and we'll take the responsibility,
Speaker 1: and I think the SEC should shut down in disgrace.
Speaker 2: That being said, they're here, so I guess we got
Speaker 2: to deal with that.
Speaker 1: But you know, back to the FTX scenario, okay, I
Speaker 1: mean it was part in the US. Part was of Bahamas.
Speaker 1: It was American investors, and we consider here and argue
Speaker 1: about that. But they bought what the only US licensed
Speaker 1: crypto derivatives exchange Ledger, and that went through the CFTC.
Speaker 1: They don't even have any bank accounts. Everything was commingled
Speaker 1: like nobody even looked at that, and supposedly they kept
Speaker 1: everything on a spreadsheet.
Speaker 2: Like what kind of compliance are they doing?
Speaker 3: Yeah, I don't know about that.
Speaker 1: With led Ledterx was not part of the bankruptcy, but
Speaker 1: that because I was bought by FTX US or whatever.
Speaker 3: Yes, but it was a separate legal So here's the
Speaker 3: interesting thing this is, this is a really important point.
Speaker 3: Ledger X just got sold. It had positive equity value,
Speaker 3: it was solvent, and I don't believe ledier X was
Speaker 3: included in the bankruptcy filing and it just got sold.
Speaker 3: Of course the equity interest was owned by FTX.
Speaker 1: But business the CFTC approved the sell for.
Speaker 2: FTX to buy that.
Speaker 1: Yes, they did, right, and they didn't they didn't look
Speaker 1: into FTX.
Speaker 2: That that's my that's my point.
Speaker 3: I agree. Uh And again like I don't there were
Speaker 3: so many due diligence failures. But again I got to
Speaker 3: tell you, like you know, what was going on behind
Speaker 3: the scenes of this industry. Those of us who had
Speaker 3: been around for a while were quietly all talking to
Speaker 3: each other saying, how the hell did FTX make as
Speaker 3: much money as it did as fast as it did.
Speaker 3: We knew what the economics were in this industry, and
Speaker 3: we were we knew something was wrong there, and it
Speaker 3: wasn't until until later that evidence started piling up that
Speaker 3: something was very wrong there, and how is it that
Speaker 3: the banks didn't catch that? You know? Unfortunately, for better
Speaker 3: or for worse, the structure of the US system relies
Speaker 3: on the banks as the government's cop right. They're supposed
Speaker 3: to do the anti money laundering and know your customer
Speaker 3: and O fact checks. And based on what I saw
Speaker 3: from the FDICS Inspector General report, eleven US banks plus
Speaker 3: several other non US banks failed on that front. What happened?
Speaker 2: Yeah, yeah, so that was a little bit of a rapple.
Speaker 1: I didn't really intend to go down to but it
Speaker 1: is super interesting and it's important to understand as we
Speaker 1: go through this transition. But going back to here kind
Speaker 1: of the horse and buggy bank back end and strapping
Speaker 1: to a Ferrari front end, we now have the launch
Speaker 1: of the fed now system that's coming up in about
Speaker 1: forty days, about just a little over a month that's
Speaker 1: supposed to launch. Now I've tried to do my research.
Speaker 1: I don't see a whole lot of information on this.
Speaker 1: You know, it allows the banks to move money back
Speaker 1: and forth faster. It's a new rail, it's not a currency.
Speaker 1: So if we have like the BI we have the
Speaker 1: bitcoin network, which is the network, and then we have
Speaker 1: Bitcoin is the asset that SIT's honest, this is just
Speaker 1: the network, the rail, not the asset.
Speaker 2: But when I look at that, you.
Speaker 1: Know, one of the things that doing is they're allowing okay,
Speaker 1: you know now twenty four to seven settlement. But like,
Speaker 1: if there's no asset moving back and forth, what settlement
Speaker 1: is there? All there is is a ledger that the
Speaker 1: Fed's going, okay from bank number one to bank number two.
Speaker 1: I mean, I would imagine this can happen in a database,
Speaker 1: a blockchain, a database or whatever. Yeah, I mean yeah,
Speaker 1: it's not like you need somebody there with like a
Speaker 1: pencil like tracking it. So like he went home or
Speaker 1: took a break to go to lunch or something, and
Speaker 1: so I was like, okay, so like what are they settling?
Speaker 2: I mean yeah, I mean what you.
Speaker 3: What you're underscoring is that all money is really just
Speaker 3: a ledger. System used to be done you know, in
Speaker 3: caweri shells. Then it was done in you know, pencil
Speaker 3: and paper, and now it's done in bits in a
Speaker 3: computer database. But it's just a ledger, that's all it is.
Speaker 3: And the whole reason why there is such a thing
Speaker 3: called settlement, is that the adults screwed up with the
Speaker 3: kids understood. The kids used to trade baseball cards with
Speaker 3: both kids holding both baseball cards, and on account of
Speaker 3: three you let go of the one you're trading right now,
Speaker 3: that's simultaneous settlement.
Speaker 2: Give me the drugs, No, give me the money. No
Speaker 2: give me the drugs, give me the money.
Speaker 3: But obviously it doesn't work that way because of the
Speaker 3: layers of intermediaries and the way technology has worked and
Speaker 3: still works at most banks, by quantity is that they're
Speaker 3: batch processing their transactions, so they're not real time settling.
Speaker 3: They're delayed settling, and then trying to settle as many
Speaker 3: of them net, they'll net all the debits and credits together.
Speaker 3: It used to be when processing power is expensive and
Speaker 3: when computer storage was expensive, that it made sense to
Speaker 3: do it that way. Well, now those two things are
Speaker 3: not expensive anymore. We can move data at the speed
Speaker 3: of light. We can go back to what the kids
Speaker 3: we're so smart about, which is real time grows settlement.
Speaker 3: Both legs of the transaction happen at the same time.
Speaker 3: Nobody therefore carries an unsettled transaction, which is really a
Speaker 3: counterparty credit risk, and we can reduce the risk in
Speaker 3: the system as a whole. So FED now is designed
Speaker 3: to do that. Now here's the problem. Remember when I
Speaker 3: said that the bank's balance sheets and liquidity were calibrated
Speaker 3: for an analog world. They were calibrated for the world
Speaker 3: where you had to go line up and fill out
Speaker 3: a form to get money out of a bank. Now,
Speaker 3: with online banking, we've now learned everything moves a lot
Speaker 3: faster in terms of transaction instructions. The settlement is still
Speaker 3: happening behind the scenes on the back end in the
Speaker 3: horse and buggy. But FED now is going to replace
Speaker 3: that horse and buggy settlement system. So now we're going
Speaker 3: to twenty four to seven three sixty five. What do
Speaker 3: you think is going to happen to bank runs if
Speaker 3: we can start to settle US dollars twenty four seven
Speaker 3: three sixty five.
Speaker 2: Well, certainly speed it up, you bet.
Speaker 3: Big increase in bank runs, big increase in problems in
Speaker 3: the banks. Ergo, here's the punchline. They're gonna have to
Speaker 3: gate it. It's not really going to be a widely
Speaker 3: used real time gross settlement payment system because right now
Speaker 3: they're proposing to have a two hundred and fifty thousand
Speaker 3: dollars payment cap. Well, heck, if you've got fifteen employees
Speaker 3: in your business, your payrolls more than two hundred and
Speaker 3: fifty thousand. Okay, how useful is this? Really, it's not
Speaker 3: going to be that useful. But the alternative is to
Speaker 3: go to one hundred percent reserve banks and then have
Speaker 3: an unlimited cap on the payments because everything has to
Speaker 3: be pre funded and it's real time grows settlement. That
Speaker 3: that would be a real innovation.
Speaker 1: I read this very very interesting article from Deep Throat
Speaker 1: Deep Throat Ipo.
Speaker 2: I think it is.
Speaker 1: I sent it to a few people. I sent it
Speaker 1: Joseph Wing, you know the fed guy. I sent to
Speaker 1: a people get their opinions on it, and he basically
Speaker 1: highlights how.
Speaker 2: Well.
Speaker 1: I won't go into the whole background of the story,
Speaker 1: but basically, how you have these the four largest banks
Speaker 1: in the world being Chinese banks having having money offshore.
Speaker 1: Tong Longo says, yeah, but don't forget about the eurobanks,
Speaker 1: the Euro dollar banks as well. But let's just say in
Speaker 1: the point we have we have four for of the
Speaker 1: largest banks in the world are Chinese banks that are
Speaker 1: in the you know, Cayman Islands or whatever they're in,
Speaker 1: and they're trillions and trillions of dollars. They He has
Speaker 1: all the math. It's an amazing article, so so dense.
Speaker 1: He had to highlight just the key points. But in
Speaker 1: the US banking system, we have like eight hundred billion.
Speaker 1: So he's like, they have trillions. All they have to
Speaker 1: do is just move from bank A to bank B
Speaker 1: with a bank with a push of a button and
Speaker 1: up that bank's done up.
Speaker 2: Now transfer from this.
Speaker 1: And he's like, even JP Morgan is powerless to this,
Speaker 1: and and he goes on to say, like, the only
Speaker 1: way that the US could defend itself from this is
Speaker 1: by putting in the gates exactly what you just.
Speaker 3: Said, right, They have to get all this right. But
Speaker 3: remember also what I just said. As the banks fail,
Speaker 3: it's a swap from the bank's balance sheets when they
Speaker 3: fail to the FED through these alphabet soup.
Speaker 1: Right.
Speaker 3: So I have always expected the Fed's balance sheet to
Speaker 3: expand massively. It's not a shock to me that it
Speaker 3: went from eight hundred billion to almost ten trillion at
Speaker 3: its peak. It's going to go a lot higher over time,
Speaker 3: but that's not necessarily inflationary. This is where the Austrian
Speaker 3: school folks got it wrong, because all they're doing is
Speaker 3: filling up the whole from the defunct balance sheet whose
Speaker 3: credit creation went away when the bank failed.
Speaker 1: But that's where I have a little bit of a
Speaker 1: disagreement with the likes of the Jeff Schneiders of the
Speaker 1: world that maybe take that viewpoint, because to your point
Speaker 1: from an Austrian lens, you're not increasing the money supply,
Speaker 1: you're just moving it. But by making that, by making
Speaker 1: that policy decision, by putting that fed put into play,
Speaker 1: it puts people into this easy mindset that makes them, yes,
Speaker 1: spend more.
Speaker 3: Money, privatized profits, socialized losses. Again, this should make every
Speaker 3: fair minded human angry.
Speaker 1: Right, So, even though that's factually correct, it's not. It
Speaker 1: didn't increase the money supply, it's not inflationary. It's actually
Speaker 1: not correct because by seeing that, it makes me feel
Speaker 1: better about going to getting a loan, which then did
Speaker 1: increase the money supply.
Speaker 3: Absolutely, the money'pply already increased. That's the point. It's already there. Right.
Speaker 3: There's ninety five trillion of non financial sector debt outstanding
Speaker 3: that all got intermediated through the financial system and it's
Speaker 3: been growing two and after three trillion a year, and
Speaker 3: as long as the FED can keep it growing too
Speaker 3: and after three trillion a year, through turning the dials
Speaker 3: behind the curtain, they keep the economy inflated. The moment
Speaker 3: they can't keep that number continuing to go up to
Speaker 3: and after three trillion a year, that's when things start
Speaker 3: to become really dicey. But your point is that that
Speaker 3: caused distortions. I agree, absolutely it did. So I don't
Speaker 3: think we're disagreeing. I just think we're talking past each
Speaker 3: other a little bit on the semantics.
Speaker 1: Yeah, so back to the FED now then, very interesting.
Speaker 2: I hadn't really thought about that part specifically.
Speaker 1: So it's not really real time settlement because they have
Speaker 1: to put these gates in play. To your point, it's
Speaker 1: actually a pretty low number. So yeah, I mean, is
Speaker 1: this then just kind of like the first step that
Speaker 1: you think this kind of is this gateway drug, kind
Speaker 1: of like Jackson Jackson Hill.
Speaker 2: It's like this gateway drug where it.
Speaker 1: Kind of opens up to the FED in the banking system,
Speaker 1: to these new rails, and over time they'll probably grow
Speaker 1: it and maybe it moves towards sort of like a
Speaker 1: CBDC Or is it just like, hey, they updated their
Speaker 1: software on the back end, We don't care what software
Speaker 1: they used today.
Speaker 2: Why do I care what software they used tomorrow? Kind
Speaker 2: of thing.
Speaker 3: Well, no, we really do care what software they use.
Speaker 3: But there's not a limit on fedwire. Fed Now is
Speaker 3: supposed to replace fedwire, but until the banking system's liquidity
Speaker 3: gets massively increased, then it's not really a replacement. They're
Speaker 3: going to keep both systems going for a long time anyway,
Speaker 3: but they're never really going to be able to take
Speaker 3: the gate off fed now until you get to essentially
Speaker 3: one hundred percent reserve system. Why, because the money is
Speaker 3: going to be slashing around like that old Hoover quote.
Speaker 3: You know, it's like a cannon ball loose on a
Speaker 3: on a ship during a tempest tossed era, right, the money.
Speaker 3: Can you imagine if Silicon Valley Bank weekend, if we'd
Speaker 3: had twenty four seven three sixty five withdrawls, the amount
Speaker 3: of money slashing around the banking system from bank to
Speaker 3: bank that weekend would have been staggering. Right, But this
Speaker 3: is exactly why they have to gate it, and so
Speaker 3: it really isn't going to replace fedwire fedwire is the
Speaker 3: slow analog system that's basically digitizing analog data. It's not
Speaker 3: literally paper, so there is a digitization, but it's not
Speaker 3: natively digital data. And so but it's a slow system.
Speaker 3: You're still filling out the form in an analog way.
Speaker 3: Even if it's a form fill on your bank's online
Speaker 3: banking website, it's still analog. And as a result, you
Speaker 3: can't program it to have a wire go through at
Speaker 3: eleven fifty nine pm on a Saturday night. You can't
Speaker 3: do that. It settles only during business hours and only
Speaker 3: when the FED gets around to settling it. So you
Speaker 3: know it's that's the only scenario in which the FED
Speaker 3: is willing to have an unlimited transfer value. But not
Speaker 3: with not with FED. Now where I thought you were
Speaker 3: going as the CBDC debate, which is is this a
Speaker 3: gateway drug to CBDCs? And you know this is a
Speaker 3: this is an interesting question because the states, the Red states,
Speaker 3: it started with South Dakota and Florida got involved in
Speaker 3: now Texas and Alabama. I mean, a number of are
Speaker 3: saying they're not going to adopt the proposed UCC Article twelve,
Speaker 3: which is the update to allow electronic controllable records electronic
Speaker 3: financial instruments right, including crypto of all forms. It's an
Speaker 3: important update and it got politicized unfortunately because of the
Speaker 3: way they handled the concept of a prospective center by
Speaker 3: digital currency. And so now there is zero possibility of
Speaker 3: all fifty states having a uniform commercial code on controllable
Speaker 3: electronic records. But that said, I have said that a
Speaker 3: CBDC is a hill I'm willing to die on, because
Speaker 3: it is true that once you get to a digitized
Speaker 3: government money, you get to government control. One thing most
Speaker 3: folks don't realize now is how surveiled all financial transactions are.
Speaker 3: The government can and will get every financial transaction on
Speaker 3: you if it wants to without even without having to
Speaker 3: show probable cost. Doesn't get a warrant. There is no
Speaker 3: Fourth Amendment anymore on data that you provide to a
Speaker 3: third party. It's called the third party doctrine. It's been
Speaker 3: upheld at the Supreme Court as valid. You have no
Speaker 3: privacy interests in data that you give up to a
Speaker 3: third party. And this was a Supreme Court case, the
Speaker 3: Miller case in nineteen seventy seven that upheld the Bank
Speaker 3: Secrecy Act, and then it was started to it's been
Speaker 3: starting to chip away because cell phone location data is
Speaker 3: something anyone, not just the government, but anyone can buy
Speaker 3: so they can track you using your cell phone pings
Speaker 3: on cell phone towers, and a lot of Fourth Amendment violations,
Speaker 3: in my mind, have taken place by the government just
Speaker 3: going out and buying that data from a third party
Speaker 3: under the guise that you have no privacy interest anymore
Speaker 3: because you gave up your data to a third party. Well,
Speaker 3: luckily in the Carpenter case two years ago, three years ago,
Speaker 3: now the Supreme Court has started to walk that back
Speaker 3: and say, you can't live in the modern world without
Speaker 3: giving up your you know, some data to a third party,
Speaker 3: and you might not have even realized you did it.
Speaker 3: And so they started to carve back a third party doctrine.
Speaker 3: But what I want to the listeners to realize is
Speaker 3: there is no financial privacy. You should assume there already
Speaker 3: is none. And so the CBDC proponents look at that
Speaker 3: and say it's no different than where it is now.
Speaker 3: Most people they'll perceive that their bank is only going
Speaker 3: to give up their give up data to the government
Speaker 3: if there's a valid search warrant or a subpoena.
Speaker 1: Yeah, yeah, and to your point, I mean they already
Speaker 1: have all that data, even with the whole to your point,
Speaker 1: your cell phones tracking you and this whole uh, you know,
Speaker 1: this whole noise being made about the whole TikTok situation,
Speaker 1: and the Chinese are still in your data. It's like
Speaker 1: that they're they already sell all that data, like they're
Speaker 1: probably already buying that data.
Speaker 2: It's all out there.
Speaker 1: But in regards to this back to yes, I did
Speaker 1: want to take from the FED noalysid into this UCC filing.
Speaker 1: And part of what I was thinking I wanted to
Speaker 1: ask you about on the UCC filing is that it's
Speaker 1: about who owns the property, right, That's what the UCC
Speaker 1: filings about, right, who owns the property. And so we
Speaker 1: kind of already understand that, like okay, well, you know,
Speaker 1: most people don't put they're waking up to the fact
Speaker 1: that the money in my bank is isn't my money anymore,
Speaker 1: it's the bank's money. And I have a claim and
Speaker 1: I owe you to that. And in regards to the
Speaker 1: CBDC versus a bitcoin or another crypto asset, if I
Speaker 1: have that bitcoin or a crypto asset, then that's my property.
Speaker 1: But if I have a CBDC, I think per the
Speaker 1: UCC filing, it's not my CBDC, it's not my money.
Speaker 1: Is that part of what that UCC was about to
Speaker 1: basically say that all of the CBDC money that exists
Speaker 1: in society will actually be owned by the banks, not
Speaker 1: by us the people.
Speaker 3: Well, again, it was set up to recognize that that
Speaker 3: government issued money isnt io you. So really is it
Speaker 3: that different than the dollar bill in your wallet if
Speaker 3: you still carry one, Because if you pull out that
Speaker 3: dollar bill, it says pay to the order of that
Speaker 3: dollar bill is in iou.
Speaker 1: So it used to be an iou for gold, right,
Speaker 1: But when they severed the gold standard to iow you
Speaker 1: for it's not io you anymore.
Speaker 3: Turtles all the way down. It's an io you to
Speaker 3: an io you to an i owe you to to
Speaker 3: an io Right. What is the full faith and credit
Speaker 3: of the US government? People would say, well, it's the
Speaker 3: taxing authority, or it's the you know, warships or you
Speaker 3: know national parks. Right, there are there are some massets there,
Speaker 3: but the government itself is insolved.
Speaker 1: It's it's only as good, it's only as good as
Speaker 1: the next person will take it from me.
Speaker 3: Well, but that's the point where this gets to. Once
Speaker 3: you make that leap, you just made the most important
Speaker 3: leap to understanding why bitcoin has value. And a lot
Speaker 3: of folks who were trained in a traditional world think
Speaker 3: that money has to be backed by something. No, what
Speaker 3: you just said is brilliant. Everything is subjective everything. Okay,
Speaker 3: once you realize that that piece of paper in your
Speaker 3: wallet with a picture of a dead president in green ink,
Speaker 3: the intrinsic value of that is a fraction of a penny.
Speaker 3: It's just a piece of linen with some green ink
Speaker 3: on it. But yet, why is it that I can
Speaker 3: trade one of those pieces of paper that says a
Speaker 3: dollar one dollar on it for a can of Coca
Speaker 3: cola because it's a recognized medium of exchange. What makes
Speaker 3: it recognized even though it's intrinsic value as virtually zero,
Speaker 3: It's because somebody else accepts it as that. It's all subjective.
Speaker 3: It is always all subjective, And once you realize that
Speaker 3: it's always all subjective, that's why bitcoin has value. So
Speaker 3: many people say, so many smart people, so many well trained,
Speaker 3: including economics PhDs, we'll say bitcoin has no value because
Speaker 3: they're not backed by anything. What you've got to realize
Speaker 3: is neither is the US dollar. It's not backed by anything.
Speaker 3: The full faith and credit of the US government is
Speaker 3: as ephemeral as anything. In fact, I would much rather
Speaker 3: trust math than trust the wa of math and trust
Speaker 3: the laws of man.
Speaker 1: The backed by something is when gold was money and
Speaker 1: the paper was the iou for that.
Speaker 2: So the dollar that I.
Speaker 1: Had was backed by the gold that was in the bank,
Speaker 1: and so if I gave it to you, you can go
Speaker 1: redeem it. So it was backed by that.
Speaker 3: But what gave the gold value?
Speaker 2: Nothing? It was suggested. Yeah, no, I know.
Speaker 1: The point I was trying to make is only debt
Speaker 1: needs to be backed by something. Oil is not backed
Speaker 1: by anything. Gold's not backed by anythink Bitcoin's not backed
Speaker 1: by anything. Only debt is backed and so anyone that says,
Speaker 1: but what is it backed by? In my opinion, shows
Speaker 1: that they don't really understand how this system works. They're
Speaker 1: referring to a debt based system when dollars actually used
Speaker 1: to be backed by something they're not anymore either.
Speaker 3: So well, that's a great point because the way I
Speaker 3: like to phrase it is slightly different than but it's
Speaker 3: exactly the same point you just made, which is that
Speaker 3: you don't want money to be issued by anyone. So
Speaker 3: Toshi gifted society, gifted humanity with money that is not
Speaker 3: issued by anyone. And gold was not issued by anyone.
Speaker 3: Silver was not issued by anyone. Calalie shells, wamp them,
Speaker 3: beads were not issued by anyone. They were things that
Speaker 3: occurred in nature and Satoshi's invention their commodities exactly, and
Speaker 3: they were goods that exchange, were commonly accepted in exchange,
Speaker 3: and then evolved because they were so commonly accepted in
Speaker 3: exchange to be what we know as money. Here's the
Speaker 3: crazy thing. The vast majority of people working in the
Speaker 3: financial services industry don't understand money. It took me a
Speaker 3: long time to figure that out. Took me a long
Speaker 3: time to understand money. Most people don't realize what money is.
Speaker 3: It's the most confusing concept in society, and yet every
Speaker 3: day we all interact with it. But you know, to
Speaker 3: your point about social media and the bank runs, More
Speaker 3: and more people are waking up to realize that the
Speaker 3: money in their bank is not theirs legally, it's alone.
Speaker 3: You've lent your money to the bank and the bank
Speaker 3: goes it back to you. Even fewer people realized the
Speaker 3: same is true of securities. You've lent your securities to
Speaker 3: your broker dealer, and they owe it back to you.
Speaker 3: And what we realize is that when companies like FTX
Speaker 3: took money in exchange for bitcoin, they sold bitcoin to
Speaker 3: their customers, they didn't go out and actually buy the bitcoin.
Speaker 3: They just pocketed the money. But that bitcoin I owe
Speaker 3: you was always there. Now that ended up with a
Speaker 3: lot more people thinking they owned bitcoin than really did.
Speaker 3: And anytime an institution goes naked short, that's called naked short.
Speaker 3: They sold more bitcoin than they actually had. Anytime they
Speaker 3: do that, it's just a matter of time before that
Speaker 3: institution blows up. And this is one of the reasons
Speaker 3: why I'm a big proponent of not your keys, not
Speaker 3: your coins. You only own the assets that you directly control.
Speaker 3: And back to the UCC point, that's what's sad about
Speaker 3: the way this whole thing evolved. The Wyoming original version.
Speaker 3: Wyoming was the first state to create an appendix for
Speaker 3: digital assets, an interpretive appendix to the UCC Uniform Commercial Code.
Speaker 3: Why did Wyoming do that? Wanted to make a roadmap
Speaker 3: for judges so that judges had a means by which
Speaker 3: to adjudicate disputes and not clog up the court system.
Speaker 3: We want clear obligations, rights and obligations of parties to
Speaker 3: a transaction involving digital assets, so that the legal system
Speaker 3: couldn't be used as an attack vector on bitcoin. That
Speaker 3: was the concept. So Wyoming started this whole thing, and
Speaker 3: guess what Wyoming did. Wyoming created an appendix that defines
Speaker 3: bitcoin in the category of money, So digital assets with
Speaker 3: no issuer are in the category of money for commercial
Speaker 3: law purposes in Wyoming. And I think ultimately many of
Speaker 3: the Red States are going to end up going in
Speaker 3: that same direction. But it's sad because it kind of
Speaker 3: got co opted. This whole multi state effort for the
Speaker 3: Uniform Law Commission, of which I supported and was in
Speaker 3: to be an observer. The whole thing got co opted
Speaker 3: by this central bank digital currency issue. And it's sad
Speaker 3: because the Uniform Law Commission did a lot of good
Speaker 3: work there, but because of that one sentence in the
Speaker 3: draft Uniform Law, it got vetoed. And it's the governors
Speaker 3: who are vetoing it are not wrong in their sentiment,
Speaker 3: they were looking in the wrong place. But they were
Speaker 3: not wrong in their sentiment that they want to avoid
Speaker 3: having a central bank digital currency recognized in their states
Speaker 3: as a means by which to protect their citizens. They
Speaker 3: are absolutely right in that philosophy.
Speaker 1: Yeah, man, that's a lot. We've covered a lot, and
Speaker 1: I kind of got involved in that UCC and a
Speaker 1: couple conversations around that, and it was a little bit confusing.
Speaker 1: But to your point, that's the helial dion, so we
Speaker 1: have to stay vigilant on that. And so you know,
Speaker 1: sometimes these laws seem a little bit vague, and maybe
Speaker 1: the should clean that up and try it again. But
Speaker 1: I think we'll stop with that. We've gone super long.
Speaker 1: I really appreciate how your time. You've been more than generous.
Speaker 1: Custodiabank dot com. Follow that what's going on Caitlin long
Speaker 1: underscore on Twitter, will link to all that down below.
Speaker 1: Anything else you want to call attention to or close
Speaker 1: it out with.
Speaker 3: No, thank you, it's just fun. We missed each other
Speaker 3: in Miami and we got to actually go a little
Speaker 3: bit deeper as a result, So thanks for making the
Speaker 3: time to reschedule. Really appreciate it.
Speaker 1: Yeah, it works out all right, Caitlyn, Thank you so much.
Speaker 2: Thank you all right. That's a wrap.
Speaker 1: Hopefully you enjoy this conversation with Caitlin as much as
Speaker 1: I did. Now, I've done another conversation with Caitlin, just
Speaker 1: in the past, not too far ago. We'll link to
Speaker 1: that down below if you want to get caught up
Speaker 1: so you can stay at the same pace with us. Otherwise,
Speaker 1: let me know what you think. Leave me a comment,
Speaker 1: give me thumbs up if you like it. If you
Speaker 1: don't give me thumbs down, that's okay, but at least
Speaker 1: tell me why I hit that subscribe button so you
Speaker 1: don't when I put new videos out, and that's what I.
Speaker 2: Got to your success.
Speaker 1: I'm out.