1 00:00:10,920 --> 00:00:15,480 Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast. 2 00:00:15,520 --> 00:00:19,800 Speaker 1: I'm Joe Wisn't Thal and I'm Tracy Halloway. So, Tracy, 3 00:00:19,840 --> 00:00:24,320 Speaker 1: you know, we recently had the collapse of the stable 4 00:00:24,400 --> 00:00:29,240 Speaker 1: coin us T and the total disaster of that didn't 5 00:00:29,280 --> 00:00:31,840 Speaker 1: turn out to be a particularly stable coin in the end. 6 00:00:32,760 --> 00:00:34,320 Speaker 1: You're not gonna say it. You're not going to say 7 00:00:34,360 --> 00:00:38,680 Speaker 1: unstable coin. You're so close, so close to to saying 8 00:00:38,680 --> 00:00:43,479 Speaker 1: the cliche. Okay, Yes, so Tara slash Luna collapsed and 9 00:00:43,560 --> 00:00:47,360 Speaker 1: that kicked off I would say soul searching. Maybe not 10 00:00:47,400 --> 00:00:52,240 Speaker 1: soul searching, I think so searching is a fine word. Well, 11 00:00:52,320 --> 00:00:55,760 Speaker 1: a vast amount of criticism of the stable coin space, 12 00:00:56,000 --> 00:00:59,680 Speaker 1: and we saw some other stable coins, notably Tether start 13 00:00:59,720 --> 00:01:02,400 Speaker 1: to cobble a bit, although it looks like it's gotten 14 00:01:02,440 --> 00:01:05,080 Speaker 1: back closer to its PEG since all of this happened, 15 00:01:05,240 --> 00:01:08,600 Speaker 1: but lots of people asking tough questions about the space. 16 00:01:08,760 --> 00:01:14,400 Speaker 1: Are stable coins sustainable? Are they inherently susceptible to some 17 00:01:14,480 --> 00:01:18,959 Speaker 1: sort of bank run like phenomenon? And then secondly, is 18 00:01:19,000 --> 00:01:22,080 Speaker 1: this whole terror Luna collapse going to expose the sector 19 00:01:22,200 --> 00:01:24,560 Speaker 1: to more regulation? Is there going to be even more 20 00:01:24,600 --> 00:01:28,520 Speaker 1: attention trained on this, yeah, right, because if there are 21 00:01:28,560 --> 00:01:31,200 Speaker 1: different models of stable coins, so this is really important. 22 00:01:31,240 --> 00:01:36,000 Speaker 1: So there are stable coins where a issuer has a 23 00:01:36,080 --> 00:01:39,280 Speaker 1: dollars equivalent of assets in a regulated bank. There are 24 00:01:39,280 --> 00:01:42,360 Speaker 1: stable coins in which the issuer has in theory a 25 00:01:42,440 --> 00:01:45,000 Speaker 1: dollar or more than a dollar's worth of crypto assets 26 00:01:45,080 --> 00:01:47,440 Speaker 1: held up in some smart contract. And then there are 27 00:01:47,440 --> 00:01:51,200 Speaker 1: these so called algorithmic stable coins in which I don't 28 00:01:51,200 --> 00:01:53,760 Speaker 1: know through magic, they they don't really seem to work, 29 00:01:53,800 --> 00:01:55,800 Speaker 1: but they keep trying. Whether it's like somehow the price 30 00:01:55,840 --> 00:01:58,320 Speaker 1: is supposed to just stay there even without the money, 31 00:01:58,760 --> 00:02:01,400 Speaker 1: but what if The point is, if you sell something 32 00:02:01,720 --> 00:02:04,840 Speaker 1: that is nominally supposed to be worth a dollar and 33 00:02:04,880 --> 00:02:07,120 Speaker 1: it doesn't stay at a dollar, then regulators are going 34 00:02:07,160 --> 00:02:09,639 Speaker 1: to get interested. And of course we saw in the 35 00:02:09,639 --> 00:02:14,960 Speaker 1: financial crisis that one of this sort of loci a 36 00:02:15,080 --> 00:02:19,799 Speaker 1: source of instability, yeah, was money market mutual funds, which 37 00:02:19,800 --> 00:02:21,720 Speaker 1: we're supposed to stay at a dollar and didn't the 38 00:02:21,760 --> 00:02:25,120 Speaker 1: reserve the reserve funds. And so any time you have 39 00:02:25,160 --> 00:02:28,160 Speaker 1: something that's supposed to hold a dollar or supposed to 40 00:02:28,160 --> 00:02:31,000 Speaker 1: be stable and is not, this is a major source 41 00:02:31,120 --> 00:02:36,280 Speaker 1: of regulatory interest, regardless of what the model is that's right, 42 00:02:36,440 --> 00:02:39,520 Speaker 1: and regulators are well aware that when you have something 43 00:02:39,600 --> 00:02:41,960 Speaker 1: that's supposed to be worth a dollar, if it dips 44 00:02:42,000 --> 00:02:44,880 Speaker 1: below a dollar, like reserve primary did back in two 45 00:02:44,880 --> 00:02:48,320 Speaker 1: thousand eight, it can actually have massive consequences for the 46 00:02:48,400 --> 00:02:51,080 Speaker 1: rest of the financial system. You get a contagion effect. 47 00:02:51,120 --> 00:02:54,040 Speaker 1: And I think this is partially why they're worried about 48 00:02:54,040 --> 00:02:56,079 Speaker 1: the space. But the other thing I would say is 49 00:02:56,440 --> 00:02:59,240 Speaker 1: this is why when people say, oh, Tera Luna, you 50 00:02:59,240 --> 00:03:01,720 Speaker 1: should have known better. This was a terrible, you know, 51 00:03:01,880 --> 00:03:06,280 Speaker 1: volatile asset, It's like, well, the marketing actually matters here. 52 00:03:06,400 --> 00:03:08,480 Speaker 1: If you say this thing is always going to be 53 00:03:08,520 --> 00:03:11,840 Speaker 1: worth a dollar. Yes, obviously people can do due diligence 54 00:03:11,919 --> 00:03:14,520 Speaker 1: and decide for themselves whether or not that's true. But 55 00:03:14,639 --> 00:03:19,160 Speaker 1: you're putting it forth as a stable, one dollar pegged asset, 56 00:03:19,400 --> 00:03:22,600 Speaker 1: and that comes with some sort of responsibility that regulators 57 00:03:22,720 --> 00:03:26,400 Speaker 1: might well want to enforce. Absolutely. Like that to me 58 00:03:26,520 --> 00:03:29,280 Speaker 1: is the key thing, Like, Okay, yes, at some level, right, 59 00:03:29,360 --> 00:03:32,760 Speaker 1: people can learn about the smart contract risk, and they 60 00:03:32,760 --> 00:03:35,800 Speaker 1: can learn about you know, what theoretically isn't isn't back 61 00:03:35,840 --> 00:03:39,720 Speaker 1: into coin, but call something a stable coinet falls that 62 00:03:39,840 --> 00:03:42,920 Speaker 1: seems like a problem, so we need to learn more 63 00:03:43,040 --> 00:03:45,040 Speaker 1: about the space. And the other question I have like 64 00:03:45,080 --> 00:03:46,880 Speaker 1: why is it growing? I thought the whole point of 65 00:03:46,920 --> 00:03:48,640 Speaker 1: crypto was to make a lot of money and have 66 00:03:48,680 --> 00:03:51,280 Speaker 1: the number go up, So why the attraction to a 67 00:03:51,320 --> 00:03:55,640 Speaker 1: coin that doesn't go up? Is another well? Also also 68 00:03:56,000 --> 00:03:59,800 Speaker 1: to get away from fiat dollars, right, and instead of 69 00:04:00,200 --> 00:04:02,280 Speaker 1: away from it, it seems like we've just created the 70 00:04:02,320 --> 00:04:05,960 Speaker 1: shadow banking system, almost like the euro dollar market, just 71 00:04:06,040 --> 00:04:09,080 Speaker 1: to create more dollars that are pegged to dollars. Anyway, 72 00:04:09,120 --> 00:04:11,360 Speaker 1: I have so many questions. Let's let's get attitude. So 73 00:04:11,360 --> 00:04:14,480 Speaker 1: I'm really excited about our guest because he has a 74 00:04:14,560 --> 00:04:18,320 Speaker 1: great position within this world to understand the sort of 75 00:04:18,680 --> 00:04:23,080 Speaker 1: intersection of crypto and traditional banking, which is kind of 76 00:04:23,120 --> 00:04:25,159 Speaker 1: what a stable coin is. It is this attempt to 77 00:04:25,200 --> 00:04:28,040 Speaker 1: sort of like bridge. Okay, you have the US dollar 78 00:04:28,760 --> 00:04:30,719 Speaker 1: and you have crypto, and you sort of make a 79 00:04:30,720 --> 00:04:33,240 Speaker 1: crypto version of the US dollar. We're gonna be talking 80 00:04:33,279 --> 00:04:35,840 Speaker 1: to someone who is a great viewpoint on that. We're 81 00:04:35,839 --> 00:04:38,880 Speaker 1: gonna be speaking with Allen Lane. He's the CEO of 82 00:04:39,240 --> 00:04:42,880 Speaker 1: silver Gate Bank, which is a bank that has kind 83 00:04:42,920 --> 00:04:46,120 Speaker 1: of become the bank that banks crypto. It's been banking 84 00:04:46,120 --> 00:04:50,760 Speaker 1: and working with crypto companies since it is active in 85 00:04:50,800 --> 00:04:53,520 Speaker 1: the sort of like plumbing the backside of the stable 86 00:04:53,560 --> 00:04:56,719 Speaker 1: coin space. So we're gonna get all into the business 87 00:04:56,760 --> 00:04:59,280 Speaker 1: of stable coins. So, Ellen, thank you so much for 88 00:04:59,360 --> 00:05:02,159 Speaker 1: joining us. Yeah, thank you for the opportunity. It's it's 89 00:05:02,240 --> 00:05:04,200 Speaker 1: great to be here with with both of you. Ellen, 90 00:05:04,360 --> 00:05:07,240 Speaker 1: why do people why are people so excited about stable coins? 91 00:05:07,279 --> 00:05:09,880 Speaker 1: I thought the whole point of cryptocurrency was like a 92 00:05:10,000 --> 00:05:12,520 Speaker 1: number shooting up to the moon. What's so exciting about 93 00:05:12,560 --> 00:05:17,960 Speaker 1: a coin that just stays flat at the U. S dollar? Yeah, yeah, 94 00:05:18,080 --> 00:05:22,200 Speaker 1: you're you're you're referencing the number go up, right, you know, 95 00:05:22,200 --> 00:05:26,480 Speaker 1: I mean point of a coin that doesn't go up. Yeah, well, um, 96 00:05:26,520 --> 00:05:31,640 Speaker 1: you know. As a regulated financial institution UM Silvergate is 97 00:05:31,960 --> 00:05:35,760 Speaker 1: a California State chartered bank. We are a member of 98 00:05:35,760 --> 00:05:38,480 Speaker 1: the Federal Reserve. Our deposits are insured by the fdi 99 00:05:38,560 --> 00:05:42,880 Speaker 1: C and so we're very interested in the stability of 100 00:05:43,120 --> 00:05:48,279 Speaker 1: the US dollar and and making sure that anytime any 101 00:05:48,279 --> 00:05:51,200 Speaker 1: of our customers show up, they you know, that they 102 00:05:51,200 --> 00:05:54,360 Speaker 1: can get their dollars back out and and so you're 103 00:05:54,400 --> 00:05:58,039 Speaker 1: absolutely right. I heard in your introductory comments that we've 104 00:05:58,040 --> 00:06:00,600 Speaker 1: been banking this ecosystem since in your ray of two 105 00:06:00,600 --> 00:06:04,440 Speaker 1: thousand fourteen, which is an important data point because back 106 00:06:04,480 --> 00:06:07,080 Speaker 1: then it was bitcoin only, and so we entered the 107 00:06:07,120 --> 00:06:13,039 Speaker 1: space really focused on this this new digital asset called bitcoin, 108 00:06:13,560 --> 00:06:16,240 Speaker 1: and some of the companies that were being formed at 109 00:06:16,240 --> 00:06:21,799 Speaker 1: the time to provide services to this budding bitcoin space, 110 00:06:22,440 --> 00:06:26,679 Speaker 1: and many of them were struggling to find and maintain 111 00:06:26,760 --> 00:06:29,880 Speaker 1: bank accounts, and so that was really where we started. 112 00:06:29,920 --> 00:06:32,800 Speaker 1: We've obviously evolved quite a bit over the last eight years, 113 00:06:33,120 --> 00:06:35,400 Speaker 1: and and happy to talk a little bit about that, 114 00:06:35,720 --> 00:06:37,840 Speaker 1: but I don't want to derail the state the stable 115 00:06:37,839 --> 00:06:41,560 Speaker 1: coin conversation. Well, I mean, I'll take you up on 116 00:06:42,120 --> 00:06:46,960 Speaker 1: both those topics. So, you know, a regulated bank interested 117 00:06:47,040 --> 00:06:49,599 Speaker 1: in the stability of the US dollar and presumably you know, 118 00:06:49,680 --> 00:06:53,640 Speaker 1: relatively interested in kind of boring investments. You got into 119 00:06:53,640 --> 00:06:58,960 Speaker 1: crypto in when stable coins didn't really exist, and you've 120 00:06:59,000 --> 00:07:03,280 Speaker 1: since evolved old from becoming just a bank for crypto 121 00:07:03,320 --> 00:07:07,200 Speaker 1: related businesses to one that is more intricately involved in 122 00:07:07,240 --> 00:07:11,960 Speaker 1: the stable coin business. Can you explain that transition to 123 00:07:12,080 --> 00:07:15,280 Speaker 1: us and what exactly is is the opportunity there for 124 00:07:15,320 --> 00:07:17,840 Speaker 1: you when it comes to stable coins. Let's go back 125 00:07:18,320 --> 00:07:22,160 Speaker 1: briefly to to our entrance into the space, and it 126 00:07:22,240 --> 00:07:29,040 Speaker 1: was really preceded by intellectual cure curiosity on my behalf. Personally, 127 00:07:29,080 --> 00:07:31,480 Speaker 1: I was looking at bitcoin in two thousand thirteen and 128 00:07:31,560 --> 00:07:34,040 Speaker 1: this meme was with bitcoin you could be your own bank, 129 00:07:34,600 --> 00:07:37,200 Speaker 1: and you know, being a career banker, I thought that 130 00:07:37,240 --> 00:07:41,200 Speaker 1: was interesting. And so as I went down the bitcoin 131 00:07:41,320 --> 00:07:43,920 Speaker 1: rabbit hole, as they as they say, back in two 132 00:07:43,960 --> 00:07:47,960 Speaker 1: thousand thirteen, I was really intrigued by this concept of 133 00:07:49,040 --> 00:07:53,400 Speaker 1: the fact that bitcoin had a fixed supply. And you know, 134 00:07:53,440 --> 00:07:55,600 Speaker 1: we're talking a little bit here about the stability of 135 00:07:55,640 --> 00:07:59,160 Speaker 1: the US dollar UM, and we know that the FEDS 136 00:07:59,240 --> 00:08:02,960 Speaker 1: mandate is to try to to try to maintain inflation 137 00:08:03,600 --> 00:08:06,680 Speaker 1: around two percent. You know, there's obviously we're quite a 138 00:08:06,680 --> 00:08:09,680 Speaker 1: bit above that right now. But even with just that mandate, 139 00:08:09,760 --> 00:08:12,440 Speaker 1: the fact that inflation at a target rate of two 140 00:08:12,440 --> 00:08:15,920 Speaker 1: percent means that by definition, even though I mentioned at 141 00:08:15,920 --> 00:08:18,200 Speaker 1: the outset that we're interested in the stability of the 142 00:08:18,280 --> 00:08:21,160 Speaker 1: US dollar, the fact is the US dollar is destined 143 00:08:21,480 --> 00:08:24,160 Speaker 1: to go down and value um if the FED hits 144 00:08:24,200 --> 00:08:27,080 Speaker 1: their target by two percent a year UM. And so 145 00:08:27,240 --> 00:08:29,920 Speaker 1: I fell down the bitcoin rabbit hole. Um, I was 146 00:08:29,960 --> 00:08:32,280 Speaker 1: intrigued by it. I didn't buy as much as I 147 00:08:32,280 --> 00:08:36,000 Speaker 1: should have. And that's probably the pointers there you go. 148 00:08:36,360 --> 00:08:39,520 Speaker 1: That's that's probably every bitcoiners, um you know thought, no 149 00:08:39,559 --> 00:08:41,800 Speaker 1: matter when you get in. But the fact of the 150 00:08:41,840 --> 00:08:44,560 Speaker 1: matter is at once we got into the ecosystem and 151 00:08:44,600 --> 00:08:47,240 Speaker 1: we were trying to help our customers. So the first 152 00:08:47,280 --> 00:08:49,480 Speaker 1: thing we did, Tracy, is is we were just a 153 00:08:49,559 --> 00:08:52,920 Speaker 1: bank willing to talk to these these new companies. And 154 00:08:52,960 --> 00:08:57,199 Speaker 1: I should mention right up front. Silver Gate is institutionally focused, 155 00:08:57,280 --> 00:09:01,079 Speaker 1: so we do not bank consumers directly. Uh So this 156 00:09:01,120 --> 00:09:04,640 Speaker 1: is an important distinction because many of our customers provide 157 00:09:04,679 --> 00:09:08,440 Speaker 1: services to consumers, but we are an institutionally focused bank. 158 00:09:08,640 --> 00:09:12,760 Speaker 1: And so we were opening bank accounts for businesses who 159 00:09:12,800 --> 00:09:15,760 Speaker 1: were providing services to the bitcoin ecosystem. And what did 160 00:09:15,800 --> 00:09:18,280 Speaker 1: that look like back in two thousand fourteen, Well, it 161 00:09:18,320 --> 00:09:21,800 Speaker 1: looked like Genesis, which at the time was still called 162 00:09:21,840 --> 00:09:25,560 Speaker 1: second Market. Um. They were enabling some of their customers 163 00:09:25,640 --> 00:09:29,160 Speaker 1: to um, you know, to buy and sell bitcoin. And 164 00:09:29,240 --> 00:09:32,640 Speaker 1: we went deep on this early so um you know, 165 00:09:32,679 --> 00:09:36,000 Speaker 1: because we needed to satisfy ourselves in our regulators that 166 00:09:36,120 --> 00:09:38,520 Speaker 1: we knew what was the use of proceeds. You know, 167 00:09:38,559 --> 00:09:42,120 Speaker 1: what was this money being used for. These businesses are 168 00:09:42,200 --> 00:09:45,720 Speaker 1: deemed to be money service businesses. And so what we 169 00:09:45,760 --> 00:09:49,520 Speaker 1: would do is when when Genesis then called Second Market, 170 00:09:49,960 --> 00:09:53,840 Speaker 1: would actually UM try to transact on behalf of a customer. 171 00:09:53,880 --> 00:09:55,560 Speaker 1: So one of their customers wanted to buy our self 172 00:09:55,600 --> 00:09:58,760 Speaker 1: bitcoin and that meant that they were sending a wire 173 00:09:58,800 --> 00:10:02,600 Speaker 1: transfer across our platform. We asked at the time, okay, 174 00:10:02,720 --> 00:10:06,360 Speaker 1: give us the bitcoin address you know for this transaction. 175 00:10:06,480 --> 00:10:09,000 Speaker 1: And what we wanted to see on the blockchain was 176 00:10:09,120 --> 00:10:11,160 Speaker 1: if someone was sent in a hundred thousand dollars to 177 00:10:11,200 --> 00:10:13,280 Speaker 1: buy ourselves bitcoin. We wanted to go out to the 178 00:10:13,280 --> 00:10:16,760 Speaker 1: blockchain and see that there was in fact a transaction 179 00:10:17,160 --> 00:10:19,640 Speaker 1: that represented a hundred thousand dollars of value. And I 180 00:10:19,679 --> 00:10:22,800 Speaker 1: think at the time Second Market was was somewhat amazed 181 00:10:22,920 --> 00:10:27,480 Speaker 1: that this this bank in southern California was actually asking, 182 00:10:28,120 --> 00:10:31,080 Speaker 1: you know, for blockchain addresses, UM and I think we 183 00:10:31,120 --> 00:10:34,960 Speaker 1: have a pretty deep understanding of of this ecosystem. To 184 00:10:35,040 --> 00:10:38,320 Speaker 1: now get to the point of the story around stable Coin, 185 00:10:38,600 --> 00:10:41,839 Speaker 1: you first have to understand what is silver Gate known 186 00:10:41,920 --> 00:10:46,160 Speaker 1: for today, and that is a platform. It's a global 187 00:10:46,760 --> 00:10:51,440 Speaker 1: payments platform that is referred to as the SIN, which 188 00:10:51,480 --> 00:10:53,680 Speaker 1: is an acronym S E N. It stands for the 189 00:10:53,720 --> 00:10:57,440 Speaker 1: silver Gate Exchange Network. And what that is is it 190 00:10:57,520 --> 00:11:02,280 Speaker 1: is a two sided network where we connect digital asset 191 00:11:02,960 --> 00:11:07,680 Speaker 1: exchange platforms such as coin base and Gemini and crack 192 00:11:07,800 --> 00:11:10,160 Speaker 1: in and f t X. And as soon as I 193 00:11:10,160 --> 00:11:13,360 Speaker 1: start naming, I'm I'm worried, I'm gonna let leave somebody out, 194 00:11:13,480 --> 00:11:16,480 Speaker 1: We've We've got all of them, all of the major ones, 195 00:11:16,600 --> 00:11:19,920 Speaker 1: anybody that is serious about regulation, and that's an important 196 00:11:19,960 --> 00:11:24,280 Speaker 1: distinction because they have to satisfy not only their own 197 00:11:24,400 --> 00:11:27,319 Speaker 1: legal and regulatory requirements, but then we have to verify 198 00:11:27,480 --> 00:11:31,440 Speaker 1: that that that their compliance programs are sound. So that's 199 00:11:31,520 --> 00:11:33,800 Speaker 1: one side of the network, um. And then on the 200 00:11:33,840 --> 00:11:38,439 Speaker 1: other side of the network is institutional investors other folks 201 00:11:38,559 --> 00:11:44,400 Speaker 1: who are providing access to to bitcoin and other digital assets, 202 00:11:44,640 --> 00:11:48,240 Speaker 1: and we connect them across our platforms so that they 203 00:11:48,280 --> 00:11:51,520 Speaker 1: can interact twenty four hours a day, seven days a week. 204 00:11:51,880 --> 00:11:54,800 Speaker 1: It is only fiat currency, though, and that's that's another 205 00:11:54,800 --> 00:11:58,280 Speaker 1: important distinction, especially as we moved to the stable coin topic, 206 00:11:58,400 --> 00:12:03,520 Speaker 1: because our customers are dealing with US dollars and and 207 00:12:03,600 --> 00:12:07,760 Speaker 1: now euros. We we launched the euro sand platform back 208 00:12:07,800 --> 00:12:10,240 Speaker 1: in February so that we can provide this service over 209 00:12:10,280 --> 00:12:14,640 Speaker 1: in Europe as well. But it is a seven A 210 00:12:14,800 --> 00:12:18,640 Speaker 1: p I enabled connection, so that our customers can move 211 00:12:18,720 --> 00:12:23,599 Speaker 1: US dollars amongst themselves around the ecosystem any time or 212 00:12:23,640 --> 00:12:25,640 Speaker 1: the day of the day or night. We launched this 213 00:12:25,679 --> 00:12:28,280 Speaker 1: back in two thousand seventeen, and it was really a 214 00:12:28,320 --> 00:12:32,360 Speaker 1: game changer for the industry and for Silvergate because we 215 00:12:32,360 --> 00:12:35,400 Speaker 1: were the first bank in the world to actually bring 216 00:12:35,559 --> 00:12:39,160 Speaker 1: this the legacy banking system that only operates forty hours 217 00:12:39,160 --> 00:12:44,240 Speaker 1: a week Monday through Friday, into the seven digital asset 218 00:12:44,320 --> 00:13:01,720 Speaker 1: market that trade around the clock around the world. So 219 00:13:01,960 --> 00:13:07,720 Speaker 1: can you describe how stable coin issuers use your services directly? 220 00:13:07,800 --> 00:13:11,800 Speaker 1: Where are you in the ecosystem because obviously, as you mentioned, 221 00:13:11,800 --> 00:13:13,320 Speaker 1: you have a lot of clients who are in the 222 00:13:13,360 --> 00:13:16,560 Speaker 1: broader crypto space f t X and all these exchanges 223 00:13:16,600 --> 00:13:20,800 Speaker 1: and so forth. How would a stable coin issuer what 224 00:13:21,040 --> 00:13:25,320 Speaker 1: value do they get from silver Gate? Yeah, so, so 225 00:13:25,440 --> 00:13:29,440 Speaker 1: they use the sen and our a p I for 226 00:13:30,200 --> 00:13:33,280 Speaker 1: the important you know that that on ramp and off ramp. 227 00:13:33,880 --> 00:13:36,920 Speaker 1: I've often tried to just describe what we do is, Hey, 228 00:13:36,960 --> 00:13:40,959 Speaker 1: we are the regulated on ramp from the US dollar 229 00:13:41,040 --> 00:13:45,360 Speaker 1: and other fiat currencies into the bitcoin and digital asset market. 230 00:13:45,920 --> 00:13:49,440 Speaker 1: And then likewise we are the off ramp from that 231 00:13:49,559 --> 00:13:53,520 Speaker 1: the digital asset market back into fiat currencies and the 232 00:13:53,600 --> 00:13:56,480 Speaker 1: way that's done. And so let's talk about the stable coins, 233 00:13:57,000 --> 00:14:00,200 Speaker 1: the stable coin issuers who use our platform. So, UM, 234 00:14:00,840 --> 00:14:06,679 Speaker 1: they are all of the regulated US dollar backed stable 235 00:14:06,720 --> 00:14:11,720 Speaker 1: coin issuers. And UM, by that distinction I heard in 236 00:14:11,760 --> 00:14:15,320 Speaker 1: your opening remarks, you were you were distinguishing between the 237 00:14:15,360 --> 00:14:18,840 Speaker 1: different types of stable coins, the dollar backed ones are 238 00:14:18,880 --> 00:14:21,120 Speaker 1: the only ones we back. UM, So we don't bank 239 00:14:21,440 --> 00:14:26,880 Speaker 1: bank the algorithmic stable coin offerings, nor do we, um, 240 00:14:26,960 --> 00:14:29,520 Speaker 1: you know these other you know stable coins that are 241 00:14:29,560 --> 00:14:33,760 Speaker 1: maybe collateralized by other digital assets. Um, those are those 242 00:14:33,800 --> 00:14:37,240 Speaker 1: all they don't need a US dollar bank because they're 243 00:14:37,240 --> 00:14:40,320 Speaker 1: not backed by U S dollars. So by definition, but importantly, 244 00:14:40,560 --> 00:14:43,600 Speaker 1: we also don't bank Tether. And believe it or not, 245 00:14:43,680 --> 00:14:47,560 Speaker 1: we had the opportunity to work with Tether very early on, 246 00:14:48,040 --> 00:14:51,920 Speaker 1: but because they weren't inside the United States, and you know, 247 00:14:51,960 --> 00:14:56,120 Speaker 1: again we're very serious about regulation and and so we 248 00:14:56,200 --> 00:14:58,200 Speaker 1: looked at it and we thought, you know, this is 249 00:14:58,200 --> 00:15:03,160 Speaker 1: an interesting idea Tether was launched before Circle um launched 250 00:15:03,160 --> 00:15:06,280 Speaker 1: the U S you know USDC, so we thought, yeah, gosh, 251 00:15:06,320 --> 00:15:10,280 Speaker 1: that's an interesting idea. But they're offshore. We can't really 252 00:15:10,320 --> 00:15:12,960 Speaker 1: get our hands around, you know, their regulatory status in 253 00:15:13,160 --> 00:15:15,680 Speaker 1: the United States and so so we were not able 254 00:15:15,720 --> 00:15:18,880 Speaker 1: to bank them back then, so back in two thousand seventeen, 255 00:15:19,120 --> 00:15:21,280 Speaker 1: nor do we bank them today. So that's what we 256 00:15:21,320 --> 00:15:24,520 Speaker 1: don't do. What we do is for U S d C, 257 00:15:25,760 --> 00:15:29,760 Speaker 1: for the packs dollar, which is issued by pass, for 258 00:15:29,840 --> 00:15:33,760 Speaker 1: the Gemini dollar issued by Gemini, and for true US 259 00:15:33,840 --> 00:15:38,520 Speaker 1: d UM they use the san and our a p 260 00:15:38,720 --> 00:15:42,440 Speaker 1: I for the minting and burning of their tokens, so 261 00:15:42,480 --> 00:15:49,400 Speaker 1: they're they're those tokens are issued when a dollar hits 262 00:15:49,480 --> 00:15:53,320 Speaker 1: their silver Gate bank account, and it's all programmatic and 263 00:15:53,400 --> 00:15:58,440 Speaker 1: so so if if somebody wants to purchase U S 264 00:15:58,520 --> 00:16:01,880 Speaker 1: d C from Circle, what they would do is they 265 00:16:01,880 --> 00:16:06,720 Speaker 1: would send dollars into circles bank account at silver Gate, 266 00:16:07,720 --> 00:16:11,920 Speaker 1: and when those dollars hit the bank account, then at 267 00:16:11,960 --> 00:16:15,280 Speaker 1: that moment, there is an a p I call from 268 00:16:15,320 --> 00:16:19,640 Speaker 1: silver Gate to Circle that says we just received X 269 00:16:19,680 --> 00:16:24,120 Speaker 1: amount of dollars from this customer, and at that point 270 00:16:24,680 --> 00:16:27,480 Speaker 1: Circle knows we have the dollars in our possession, so 271 00:16:27,600 --> 00:16:30,720 Speaker 1: they turn around and they meant the U s DC 272 00:16:30,880 --> 00:16:35,320 Speaker 1: token and send it to the wallet address of that 273 00:16:35,320 --> 00:16:38,560 Speaker 1: that institution that is looking to purchase the U s 274 00:16:38,640 --> 00:16:42,400 Speaker 1: DC And then the same thing happens in reverse. So 275 00:16:43,000 --> 00:16:45,800 Speaker 1: if someone wants to redeem their USDC and go back 276 00:16:45,840 --> 00:16:50,400 Speaker 1: to U s dollars, they send the USDC to to 277 00:16:50,560 --> 00:16:53,600 Speaker 1: the wallet at Circle Circle. At that point, once they 278 00:16:53,640 --> 00:16:55,760 Speaker 1: have possession of the U s d C, they then 279 00:16:55,800 --> 00:16:59,000 Speaker 1: send an instruction to us via a p I and 280 00:16:59,160 --> 00:17:01,960 Speaker 1: we then in turn will send the dollars back to 281 00:17:02,080 --> 00:17:08,040 Speaker 1: that prior USDC tokenhore. So, can I ask a step 282 00:17:08,040 --> 00:17:11,480 Speaker 1: back question, a broader question about the space? Is there 283 00:17:11,480 --> 00:17:14,240 Speaker 1: an irony here that you know, a lot of crypto 284 00:17:14,359 --> 00:17:18,119 Speaker 1: is sold on the basis that you can have financial 285 00:17:18,200 --> 00:17:22,040 Speaker 1: assets that sit outside of the traditional financial system. And 286 00:17:22,200 --> 00:17:24,520 Speaker 1: you mentioned one of the things that got you interested 287 00:17:24,520 --> 00:17:26,880 Speaker 1: in crypto in the first place was this idea of, 288 00:17:26,920 --> 00:17:30,639 Speaker 1: you know, be your own bank with bitcoin. But you know, 289 00:17:30,760 --> 00:17:33,119 Speaker 1: fast forward some years and you are a bank that 290 00:17:33,240 --> 00:17:37,120 Speaker 1: deals in the crypto space. Isn't there a fundamental tension 291 00:17:37,200 --> 00:17:42,440 Speaker 1: there about having a financial system outside of traditional regulation, 292 00:17:42,520 --> 00:17:49,440 Speaker 1: but still needing to be plugged into a regulated financial entity. Yeah. So, um, 293 00:17:49,840 --> 00:17:53,800 Speaker 1: so get an important distinction. What would be that these 294 00:17:54,440 --> 00:17:58,879 Speaker 1: entities that we're banking aren't operating outside of regulations. That 295 00:17:58,920 --> 00:18:01,040 Speaker 1: would be the first thing I would say. But to 296 00:18:01,119 --> 00:18:05,720 Speaker 1: the broader kind of fundamental question, I distinctly remember when 297 00:18:05,840 --> 00:18:09,200 Speaker 1: I was talking with our team internally about this back 298 00:18:09,240 --> 00:18:13,199 Speaker 1: in two thousand thirteen, and um, you know I and 299 00:18:13,320 --> 00:18:16,280 Speaker 1: this meme was be your own Bennic, and my thought 300 00:18:16,320 --> 00:18:20,760 Speaker 1: process was, well, if this takes off, you know, it's 301 00:18:20,800 --> 00:18:22,920 Speaker 1: going to take years. It's going to take decades. I've 302 00:18:22,920 --> 00:18:25,480 Speaker 1: been in banking for forty years, so I've seen all 303 00:18:25,520 --> 00:18:28,840 Speaker 1: the different things. I mean, I was there right as 304 00:18:29,000 --> 00:18:32,840 Speaker 1: reg Hugh was being repealed, which limited the amount of 305 00:18:32,840 --> 00:18:35,280 Speaker 1: interest that you could pay on deposits. I was there 306 00:18:35,280 --> 00:18:37,920 Speaker 1: when the first A t M s were being installed. 307 00:18:37,960 --> 00:18:42,360 Speaker 1: So I've seen all of this quote unquote innovation. Bitcoin 308 00:18:42,520 --> 00:18:45,760 Speaker 1: is the true innovation in my opinion, but it's not 309 00:18:45,840 --> 00:18:51,120 Speaker 1: going to displace government, sovereign government's desire to issue their 310 00:18:51,160 --> 00:18:56,280 Speaker 1: own currencies. And so I view bitcoin as you know, 311 00:18:56,720 --> 00:18:59,399 Speaker 1: you guys are very familiar with the meme. Digital gold, 312 00:18:59,600 --> 00:19:02,280 Speaker 1: you know is a way to save a portion of 313 00:19:02,440 --> 00:19:06,639 Speaker 1: your wealth. And I think that we still need to 314 00:19:06,680 --> 00:19:11,160 Speaker 1: operate in the financial world with fiat currencies, the world 315 00:19:11,160 --> 00:19:13,960 Speaker 1: that we actually live in UM and and just like 316 00:19:14,240 --> 00:19:17,480 Speaker 1: some some people might might try to, you know, try 317 00:19:17,520 --> 00:19:20,240 Speaker 1: to save some of their wealth in gold or in 318 00:19:20,320 --> 00:19:23,199 Speaker 1: some other you know, in stocks and bonds, etcetera. I 319 00:19:23,240 --> 00:19:26,240 Speaker 1: think bitcoin UM is certainly an alternative, but I don't 320 00:19:26,280 --> 00:19:29,320 Speaker 1: think it's going to replace the dollar. And so I 321 00:19:29,359 --> 00:19:33,639 Speaker 1: actually think silvergate is perfectly positioned to UM. You know, 322 00:19:33,720 --> 00:19:37,359 Speaker 1: kind of have a foot in, you know, in both ecosystems. 323 00:19:37,440 --> 00:19:42,280 Speaker 1: So you're the owner of the assets that were DM 324 00:19:42,400 --> 00:19:44,720 Speaker 1: so Facebook for a few years at least, I think 325 00:19:44,760 --> 00:19:48,720 Speaker 1: starting in twenty I think starting they tried to get 326 00:19:48,760 --> 00:19:52,520 Speaker 1: their own stable coin off the ground. It's gonna be 327 00:19:52,560 --> 00:19:54,800 Speaker 1: sort of a global thing. It just never really worked. 328 00:19:55,200 --> 00:19:57,840 Speaker 1: Why couldn't What was the problem from your view? Why 329 00:19:57,840 --> 00:20:01,120 Speaker 1: didn't that work? And one of the asset what constitutes 330 00:20:01,400 --> 00:20:03,760 Speaker 1: the assets that were left over that you've played, Why 331 00:20:03,800 --> 00:20:07,560 Speaker 1: it didn't work? You know? Unfortunately, I think it's because 332 00:20:07,560 --> 00:20:10,440 Speaker 1: it was Facebook, you know, I I will say early on, 333 00:20:10,640 --> 00:20:13,680 Speaker 1: I think you know, they not only you know, kind 334 00:20:13,720 --> 00:20:18,080 Speaker 1: of raised the ire of the US government, but of 335 00:20:18,080 --> 00:20:21,560 Speaker 1: of you know, a lot of governments when they when 336 00:20:21,560 --> 00:20:23,520 Speaker 1: they announced that they were going to issue this and 337 00:20:23,560 --> 00:20:26,480 Speaker 1: make it a you know, backed by a basket of currency. 338 00:20:26,600 --> 00:20:29,320 Speaker 1: So it's like, well, let's let's not only you know, 339 00:20:29,480 --> 00:20:32,240 Speaker 1: upset the US, you know, the US government, but let's 340 00:20:32,320 --> 00:20:35,680 Speaker 1: upset you know, all of these other sovereign nations who 341 00:20:35,720 --> 00:20:38,600 Speaker 1: are issuing their own currencies, and let's make it a basket, 342 00:20:38,640 --> 00:20:42,000 Speaker 1: you know. So so I I think they quickly realized 343 00:20:42,320 --> 00:20:47,080 Speaker 1: that that it needed to be backed by a single currency. Unfortunately, 344 00:20:47,560 --> 00:20:50,439 Speaker 1: by that time, you know, I think they were just 345 00:20:50,600 --> 00:20:53,040 Speaker 1: in the crosshairs and no matter what they did, you know, 346 00:20:53,040 --> 00:20:56,080 Speaker 1: they tried to move off shore. Um. You know, they 347 00:20:56,080 --> 00:20:58,359 Speaker 1: were a Swiss entity for a while trying to issue 348 00:20:58,400 --> 00:21:01,320 Speaker 1: a U. S Dollar back token. That you know, if 349 00:21:01,320 --> 00:21:04,240 Speaker 1: you just stop and think about what I just said, um, 350 00:21:04,280 --> 00:21:07,399 Speaker 1: you know, that's you know, that's gonna be problematic, a 351 00:21:08,280 --> 00:21:11,919 Speaker 1: Swiss entity issuing a U. S dollar back token. And 352 00:21:12,000 --> 00:21:14,359 Speaker 1: so you know, there are a lot of challenges. But 353 00:21:14,480 --> 00:21:17,280 Speaker 1: at the end of the day, what we saw as 354 00:21:17,320 --> 00:21:19,920 Speaker 1: the opportunity, and I should mention we were not involved 355 00:21:19,960 --> 00:21:23,959 Speaker 1: with Facebook um at all during any of that we 356 00:21:24,080 --> 00:21:27,680 Speaker 1: ended up coming on the scenes late, so they had 357 00:21:27,720 --> 00:21:31,359 Speaker 1: as as you'll know. Just remind you that they started 358 00:21:31,359 --> 00:21:34,240 Speaker 1: out as Libra. They then switched to ink too d M. 359 00:21:34,359 --> 00:21:36,920 Speaker 1: They then moved to UM at some point in that 360 00:21:36,960 --> 00:21:41,280 Speaker 1: they moved from the US to Switzerland. And during that 361 00:21:41,520 --> 00:21:45,679 Speaker 1: entire time, we at silver Gate we're looking at the 362 00:21:45,720 --> 00:21:49,239 Speaker 1: feasibility of issuing our own stable coin. So we were 363 00:21:49,240 --> 00:21:52,920 Speaker 1: already banking UM, USDC and some of the other early 364 00:21:53,119 --> 00:21:55,720 Speaker 1: entrants UM, and we were looking at the pros and 365 00:21:55,760 --> 00:21:57,880 Speaker 1: cons of whether or not we should issue our own 366 00:21:58,320 --> 00:22:00,760 Speaker 1: Why would we do that? Well, back at that time, 367 00:22:01,560 --> 00:22:04,359 Speaker 1: the thought process was what we've We've got this send 368 00:22:04,359 --> 00:22:06,800 Speaker 1: the silver Gate Exchange networks. So a lot of our 369 00:22:06,800 --> 00:22:11,320 Speaker 1: customers are using the send to transact dollars U seven. 370 00:22:11,400 --> 00:22:14,760 Speaker 1: But that's not on a blockchain, it doesn't candidate, it 371 00:22:14,760 --> 00:22:17,200 Speaker 1: doesn't need to be to do an an intra bank 372 00:22:17,280 --> 00:22:20,399 Speaker 1: transfer UM. But if they want to take their dollars 373 00:22:20,440 --> 00:22:23,360 Speaker 1: outside of silver Gate, well then oftentimes what they were 374 00:22:23,400 --> 00:22:25,840 Speaker 1: doing was they were starting on the send, they were 375 00:22:25,880 --> 00:22:29,679 Speaker 1: then buying a you know, USDC UM and then taking 376 00:22:29,680 --> 00:22:33,760 Speaker 1: that U S D c UM to places where where UM, 377 00:22:33,800 --> 00:22:36,840 Speaker 1: where they didn't have a silver Gate bank account, for instance, 378 00:22:37,000 --> 00:22:39,240 Speaker 1: and so we started thinking about whether or not we 379 00:22:39,240 --> 00:22:42,960 Speaker 1: should issue our own. We did the legal permissibility analysis, 380 00:22:43,520 --> 00:22:48,000 Speaker 1: UM we we believe that it's legally permissible for UM 381 00:22:48,359 --> 00:22:50,480 Speaker 1: for us to issue a stable coin. We have not 382 00:22:50,880 --> 00:22:54,520 Speaker 1: actually heard anything to the contrary and all the conversations 383 00:22:54,560 --> 00:22:57,399 Speaker 1: we've had with our regulators, so so we do believe 384 00:22:57,400 --> 00:23:00,679 Speaker 1: it is legally permissible. And we were getting ready to, 385 00:23:01,000 --> 00:23:02,879 Speaker 1: you know, kind as they say, go to Washington and 386 00:23:02,920 --> 00:23:05,760 Speaker 1: talk about this back in March of right as the 387 00:23:05,760 --> 00:23:10,600 Speaker 1: pandemic hit and so obviously everybody's priorities shifted a little bit, 388 00:23:10,760 --> 00:23:13,800 Speaker 1: and so we we cooled our heels in the first 389 00:23:13,800 --> 00:23:17,240 Speaker 1: and second quarter of but we were still working on 390 00:23:17,280 --> 00:23:23,000 Speaker 1: the idea. And it was late where we actually were 391 00:23:23,040 --> 00:23:26,919 Speaker 1: approached by the d M Association and they wanted to 392 00:23:26,920 --> 00:23:30,879 Speaker 1: talk with us because they were familiar with our ability 393 00:23:31,000 --> 00:23:34,320 Speaker 1: to mint and burn tokens. And at the time they 394 00:23:34,359 --> 00:23:36,560 Speaker 1: were working with four other banks. I don't know who 395 00:23:36,560 --> 00:23:39,359 Speaker 1: those banks were, but four other large banks, and the 396 00:23:39,400 --> 00:23:42,440 Speaker 1: concept was these four banks were going to hold the reserves, 397 00:23:42,520 --> 00:23:44,200 Speaker 1: but you know, each of them was going to hold 398 00:23:45,200 --> 00:23:47,960 Speaker 1: of the dollars back in these tokens, So you're gonna 399 00:23:47,960 --> 00:23:51,399 Speaker 1: have this this broad array of banks holding the reserves, 400 00:23:51,880 --> 00:23:54,720 Speaker 1: but none of those banks really had the capability that 401 00:23:54,800 --> 00:23:58,040 Speaker 1: Silvergate has developed to be able to interact with the 402 00:23:58,040 --> 00:24:01,760 Speaker 1: technology mint minting and burning and all of that. So what, 403 00:24:02,080 --> 00:24:04,760 Speaker 1: you know, what what we looked at at that time was, well, 404 00:24:04,960 --> 00:24:07,399 Speaker 1: this is a this is a completely separate use case 405 00:24:07,840 --> 00:24:10,399 Speaker 1: from what we had been contemplating, you know, to go back, 406 00:24:10,840 --> 00:24:12,680 Speaker 1: you know, to what I was saying a minute ago. 407 00:24:12,960 --> 00:24:16,600 Speaker 1: We were were contemplating potentially issuing a stable coin because 408 00:24:16,640 --> 00:24:19,960 Speaker 1: we saw the value in helping our customers have a 409 00:24:20,000 --> 00:24:22,960 Speaker 1: dollar token that could be used in the crypto ecosystem. 410 00:24:23,040 --> 00:24:25,800 Speaker 1: But what the d M Association was trying to do 411 00:24:25,960 --> 00:24:30,159 Speaker 1: was really take this concept of a tokenized dollar to 412 00:24:30,240 --> 00:24:33,960 Speaker 1: be able to use it for for for commerce, for payments, 413 00:24:33,960 --> 00:24:38,040 Speaker 1: for remittance, you know, not cryptocurrency trading. And that was 414 00:24:38,320 --> 00:24:42,120 Speaker 1: fascinating to us. And again right at that intersection of hey, 415 00:24:42,160 --> 00:24:45,800 Speaker 1: we're a bank and banks participated in payment systems, and 416 00:24:45,920 --> 00:24:48,359 Speaker 1: wouldn't this wouldn't this be interesting to be able to 417 00:24:48,480 --> 00:24:51,480 Speaker 1: unlock the ability for people all over the world to 418 00:24:51,560 --> 00:24:55,119 Speaker 1: have a tokenized dollar in an app on their phone 419 00:24:55,160 --> 00:24:57,159 Speaker 1: that they could use to pay for things and and 420 00:24:57,200 --> 00:25:01,880 Speaker 1: that would be interoperable. And so that is our our 421 00:25:01,960 --> 00:25:04,280 Speaker 1: thesis going in and so we said, yeah, we'd absolutely 422 00:25:04,359 --> 00:25:06,480 Speaker 1: like to be a part of this. Um As we 423 00:25:06,640 --> 00:25:11,359 Speaker 1: worked with the d M Association over the first six months, 424 00:25:11,160 --> 00:25:14,720 Speaker 1: it got to the point where they abandoned that multi 425 00:25:14,760 --> 00:25:18,480 Speaker 1: bank kind of approach, and um we agreed, and we 426 00:25:18,520 --> 00:25:22,440 Speaker 1: announced in May of last year May at silver Gate 427 00:25:22,480 --> 00:25:25,080 Speaker 1: was going to be the exclusive issuer of the d 428 00:25:25,280 --> 00:25:29,000 Speaker 1: m U S Dollar and and so um that was 429 00:25:29,480 --> 00:25:32,280 Speaker 1: you know, that was at the time a big deal 430 00:25:32,359 --> 00:25:35,080 Speaker 1: for us, and obviously we thought that we saw a 431 00:25:35,119 --> 00:25:38,760 Speaker 1: path to us participating and you know, partnering with them 432 00:25:38,800 --> 00:25:42,560 Speaker 1: to issue the d m U S D. Unfortunately, um 433 00:25:42,720 --> 00:25:47,320 Speaker 1: AS is now somewhat ancient history. There's a President's Working 434 00:25:47,320 --> 00:25:50,080 Speaker 1: Group of regulators. It's called the President's Working Group. It's 435 00:25:50,119 --> 00:25:54,760 Speaker 1: the U S. Treasury, the Federal Reserve, the SEC, and 436 00:25:54,800 --> 00:25:58,719 Speaker 1: the CFTC and um they've been looking at this question 437 00:25:58,720 --> 00:26:01,760 Speaker 1: of stable coins. They were doing some work last year, 438 00:26:02,320 --> 00:26:05,399 Speaker 1: you know, to address the potential regulation for stable coins, 439 00:26:05,400 --> 00:26:08,320 Speaker 1: and so we were strongly encouraged to wait and to 440 00:26:08,480 --> 00:26:11,760 Speaker 1: not launch last summer and to wait for that work 441 00:26:11,800 --> 00:26:14,400 Speaker 1: to be done, and that report was issued on November 442 00:26:14,440 --> 00:26:18,760 Speaker 1: one last year. What's it been like generally to work 443 00:26:18,920 --> 00:26:22,720 Speaker 1: with regulators and you know, people like the Federal Reserve 444 00:26:22,800 --> 00:26:26,400 Speaker 1: because my my general impression of it when it comes 445 00:26:26,440 --> 00:26:29,440 Speaker 1: to the crypto spaces that often it's sort of like 446 00:26:29,520 --> 00:26:33,080 Speaker 1: it's better to just do it without asking permission and 447 00:26:33,160 --> 00:26:35,720 Speaker 1: you see no. But honestly, when you apply to the 448 00:26:35,760 --> 00:26:39,760 Speaker 1: regulators officially, you tend to get rejected, whereas if you 449 00:26:39,800 --> 00:26:42,600 Speaker 1: go out and do it, I mean, I'm thinking specifically 450 00:26:42,680 --> 00:26:44,560 Speaker 1: of tether Um, if you go out and do it 451 00:26:44,600 --> 00:26:47,560 Speaker 1: like often you you just kind of get away with it. 452 00:26:47,640 --> 00:26:53,200 Speaker 1: So I'm curious what those conversations are are actually, Like, yeah, Tracy, 453 00:26:53,240 --> 00:26:57,240 Speaker 1: it's it's a it's a fair question, um. And you know, 454 00:26:57,520 --> 00:27:01,480 Speaker 1: at times some of our investors, you know, have asked 455 00:27:01,520 --> 00:27:03,520 Speaker 1: us the same question, Well, why don't you just you know, 456 00:27:03,560 --> 00:27:06,880 Speaker 1: watch something. Well, I think there's a big difference between 457 00:27:07,560 --> 00:27:11,359 Speaker 1: a a regulated bank that is already operating under the 458 00:27:11,480 --> 00:27:16,440 Speaker 1: supervision of you know, and under the authority of these regulators, um, 459 00:27:16,480 --> 00:27:20,439 Speaker 1: these different regulatory agencies, versus a tech startup that's going 460 00:27:20,480 --> 00:27:23,439 Speaker 1: to spend something up and launch it in into the Market. 461 00:27:23,680 --> 00:27:26,119 Speaker 1: But to your question of what's it been like, you know, 462 00:27:26,320 --> 00:27:30,840 Speaker 1: our our regulators have really come up the learning curve. 463 00:27:31,320 --> 00:27:33,840 Speaker 1: I mean, we've been doing this now, as I mentioned, 464 00:27:33,880 --> 00:27:36,359 Speaker 1: for for eight years. And just to go back for 465 00:27:36,480 --> 00:27:39,919 Speaker 1: just a second, in two thou fourteen, we did a 466 00:27:40,040 --> 00:27:43,760 Speaker 1: version of what you're suggesting, obviously at a very small scale, 467 00:27:43,800 --> 00:27:47,920 Speaker 1: but we started opening accounts for for these these customers 468 00:27:47,920 --> 00:27:50,120 Speaker 1: such as Second Market at the time, but we were 469 00:27:50,160 --> 00:27:55,359 Speaker 1: confident that we understood how the existing regulations applied to 470 00:27:55,440 --> 00:27:58,399 Speaker 1: that activity. So you know, there have been finns and 471 00:27:58,480 --> 00:28:00,720 Speaker 1: guidance issued in two thousand third team there there was 472 00:28:00,760 --> 00:28:03,560 Speaker 1: clear guidance for how we bank should interact with the 473 00:28:03,640 --> 00:28:06,919 Speaker 1: money service business. So but what we did was so 474 00:28:06,960 --> 00:28:10,840 Speaker 1: we applied these existing regulations to to the activity that 475 00:28:10,960 --> 00:28:15,560 Speaker 1: these um customers were engaging in. And then we invited 476 00:28:15,560 --> 00:28:17,920 Speaker 1: our regulators into our offices in the summer of two 477 00:28:17,920 --> 00:28:22,000 Speaker 1: thousand fourteen and we gave them a bitcoin tutorial. Not 478 00:28:22,119 --> 00:28:24,720 Speaker 1: to be unfair to them, but bitcoin was brand new 479 00:28:24,960 --> 00:28:27,359 Speaker 1: and in two thousand fourteen when I asked the question, 480 00:28:27,400 --> 00:28:29,800 Speaker 1: so it was the State Banking Department and the FED, 481 00:28:30,200 --> 00:28:32,200 Speaker 1: and I asked the question if they had heard of bitcoin, 482 00:28:32,760 --> 00:28:35,040 Speaker 1: and there they were thinking about it, well, is that 483 00:28:35,119 --> 00:28:38,600 Speaker 1: kind of like, um, you know, banking marijuana companies, um, 484 00:28:38,640 --> 00:28:41,000 Speaker 1: you know, and so it was kind of all, you know, 485 00:28:41,080 --> 00:28:44,600 Speaker 1: it was very unclear, but I I could show you 486 00:28:44,680 --> 00:28:47,200 Speaker 1: the presentation. It was like an eight page or fourteen 487 00:28:47,200 --> 00:28:50,560 Speaker 1: page presentation. This is what bitcoin is and these are 488 00:28:50,560 --> 00:28:52,960 Speaker 1: the types of companies that are being formed. Um, this 489 00:28:53,120 --> 00:28:55,120 Speaker 1: is the finn Send guides that came out last year. 490 00:28:55,320 --> 00:28:57,640 Speaker 1: This is how we're thinking about banking the companies. We 491 00:28:57,760 --> 00:29:01,280 Speaker 1: engaged very early with our relators and then over the 492 00:29:01,360 --> 00:29:04,440 Speaker 1: last eight years they've been in at least annually, and 493 00:29:04,760 --> 00:29:07,960 Speaker 1: most years they've come in for an interim visit to 494 00:29:08,040 --> 00:29:09,920 Speaker 1: kind of look and make sure that you know that 495 00:29:10,640 --> 00:29:13,680 Speaker 1: we're doing everything appropriately. So our regulators have had a 496 00:29:13,720 --> 00:29:17,320 Speaker 1: long time to go to school on the different things 497 00:29:17,400 --> 00:29:20,000 Speaker 1: that that we're doing. Um, I'll just mention one other 498 00:29:20,080 --> 00:29:25,680 Speaker 1: thing off topic. But we also offer loans collateralized by bitcoin, 499 00:29:25,880 --> 00:29:28,680 Speaker 1: and that was a that was another path that we 500 00:29:28,720 --> 00:29:32,200 Speaker 1: went down with our regulators starting back in two thousand 501 00:29:32,200 --> 00:29:35,440 Speaker 1: and nineteen, where we did the legal analysis. You know, 502 00:29:35,480 --> 00:29:39,560 Speaker 1: we satisfied ourselves that it was permissible to lend against 503 00:29:39,560 --> 00:29:43,200 Speaker 1: bitcoin as collateral. We then engaged with our regulators. We 504 00:29:43,240 --> 00:29:45,440 Speaker 1: told them how we were thinking about doing it, all 505 00:29:45,440 --> 00:29:48,400 Speaker 1: the risk mitigains that we had in place. We launched 506 00:29:48,400 --> 00:29:52,600 Speaker 1: a pilot in early ran that pilot for several months, UM, 507 00:29:52,680 --> 00:29:54,880 Speaker 1: and then came out of the pilot. Now back then 508 00:29:54,960 --> 00:29:58,480 Speaker 1: in in two thousand and twenty, and we sit here 509 00:29:58,480 --> 00:30:03,920 Speaker 1: today now with over a billion dollars in send leverage commitments. 510 00:30:04,360 --> 00:30:08,040 Speaker 1: We call the product send leverage. And so that's another 511 00:30:08,120 --> 00:30:12,800 Speaker 1: example of engaging with our regulators. And so Tracy, they've 512 00:30:12,960 --> 00:30:17,400 Speaker 1: they understand this this technology, they have bigger questions. So 513 00:30:17,440 --> 00:30:19,760 Speaker 1: when we get back to d M, and I want 514 00:30:19,800 --> 00:30:22,760 Speaker 1: to tie in the last part of your question, UM, 515 00:30:22,920 --> 00:30:26,640 Speaker 1: which was, Okay, we bought these assets, UM, what what 516 00:30:26,680 --> 00:30:28,520 Speaker 1: did we buy? And what do we plan to do 517 00:30:28,560 --> 00:30:32,200 Speaker 1: with it? So when the President's Working Group Report was 518 00:30:32,240 --> 00:30:36,400 Speaker 1: issued in on November one of last year, it clearly 519 00:30:37,040 --> 00:30:41,880 Speaker 1: UM stated a preference for stable coins to be inside 520 00:30:41,880 --> 00:30:45,640 Speaker 1: the banking system. So we're a bank, so we can 521 00:30:45,720 --> 00:30:50,120 Speaker 1: check that box. UM. The other thing that it clearly 522 00:30:50,160 --> 00:30:53,080 Speaker 1: said was there was a desire to see that these 523 00:30:53,160 --> 00:30:56,680 Speaker 1: payment networks were essentially not UM, you know, kind of 524 00:30:56,720 --> 00:30:59,880 Speaker 1: controlled by I forget the terminology that was used. But 525 00:31:00,040 --> 00:31:02,480 Speaker 1: I'll just say big tech okay, um, you know, we 526 00:31:02,480 --> 00:31:04,840 Speaker 1: can go back and look at the actual language, and 527 00:31:04,920 --> 00:31:07,960 Speaker 1: so look at we look at that guidance and then 528 00:31:08,040 --> 00:31:10,200 Speaker 1: you know, kind of breathed a sigh of relief that 529 00:31:10,240 --> 00:31:14,640 Speaker 1: we had not gone ahead and launched. So to your point, Tracy, 530 00:31:14,320 --> 00:31:17,959 Speaker 1: they didn't tell us no, you can't do this, you 531 00:31:17,960 --> 00:31:21,800 Speaker 1: know in the summer. What they strongly encouraged us to 532 00:31:21,960 --> 00:31:25,960 Speaker 1: wait until this guidance came out. And once the guidance 533 00:31:26,000 --> 00:31:27,880 Speaker 1: was out, it was pretty clear that nan if we 534 00:31:27,920 --> 00:31:31,200 Speaker 1: had launched with with DM, we would have then been 535 00:31:31,240 --> 00:31:35,120 Speaker 1: operating a stable coin that was in direct contravention of 536 00:31:35,280 --> 00:31:39,040 Speaker 1: what the regulatory guidance was. And so so we were 537 00:31:39,080 --> 00:31:42,239 Speaker 1: glad that we hadn't moved forward at the time. And 538 00:31:42,360 --> 00:31:45,600 Speaker 1: now to your question, so what did we buy? So 539 00:31:45,760 --> 00:31:48,280 Speaker 1: at the same time that we read the report, the 540 00:31:48,400 --> 00:31:51,280 Speaker 1: d M folks read the report, they were looking at that, 541 00:31:51,360 --> 00:31:53,320 Speaker 1: and we called them up and we said, well, what 542 00:31:53,320 --> 00:31:55,640 Speaker 1: do you guys think And they said, yeah, you know, 543 00:31:55,720 --> 00:31:58,880 Speaker 1: we think we're gonna We're gonna pause. This effort. Looks 544 00:31:58,880 --> 00:32:00,760 Speaker 1: like we're kind of dead in the water. My words, 545 00:32:00,800 --> 00:32:04,720 Speaker 1: not theirs um and so we're going to engage strategic 546 00:32:04,720 --> 00:32:06,800 Speaker 1: advisors to help us figure out what to do with, 547 00:32:07,320 --> 00:32:09,680 Speaker 1: you know, with this because the one thing I can 548 00:32:09,720 --> 00:32:12,840 Speaker 1: say with confidence is, you know, they didn't spend Facebook, 549 00:32:12,840 --> 00:32:15,160 Speaker 1: who was the initiator of this. They didn't spend two 550 00:32:15,240 --> 00:32:19,160 Speaker 1: or three years and you know, you know, millions and 551 00:32:19,240 --> 00:32:22,240 Speaker 1: millions of dollars with some of the best software engineers 552 00:32:22,240 --> 00:32:25,440 Speaker 1: in the world. They didn't build this technology to turn 553 00:32:25,480 --> 00:32:28,760 Speaker 1: around and sell it to somebody else. Um. But yet 554 00:32:28,880 --> 00:32:31,600 Speaker 1: that's where they found themselves. And so we looked at that. 555 00:32:32,160 --> 00:32:34,360 Speaker 1: We had been ready to go, um, we had done 556 00:32:34,360 --> 00:32:37,040 Speaker 1: all that work to integrate with them, and so we 557 00:32:37,120 --> 00:32:38,719 Speaker 1: looked at the tech and and we said, you know, 558 00:32:39,560 --> 00:32:43,959 Speaker 1: this is actually purpose built for payments. They had some 559 00:32:44,040 --> 00:32:47,040 Speaker 1: of the you know, best technologists in the world building it. 560 00:32:47,320 --> 00:32:50,760 Speaker 1: They had a lot of digital first retail platforms ready 561 00:32:50,800 --> 00:32:53,440 Speaker 1: to engage with it to start offering it to their 562 00:32:53,520 --> 00:32:58,200 Speaker 1: retail customers. And so let's let's see if we can 563 00:32:58,240 --> 00:33:02,000 Speaker 1: acquire this technology and and then you know, we'll just 564 00:33:02,120 --> 00:33:04,000 Speaker 1: come back to where we were a couple of years ago, 565 00:33:04,120 --> 00:33:06,760 Speaker 1: and we'll issue it ourselves. And so that's what we 566 00:33:06,840 --> 00:33:11,480 Speaker 1: bought in January. So we bought the protocol itself, which 567 00:33:11,520 --> 00:33:13,800 Speaker 1: is open source. And you know, some folks have said, well, gos, 568 00:33:13,840 --> 00:33:15,800 Speaker 1: what did you really buy because isn't this open source? 569 00:33:15,840 --> 00:33:18,480 Speaker 1: It's it's absolutely open source, and we think it needs 570 00:33:18,480 --> 00:33:20,160 Speaker 1: to be. People need to be able to look at 571 00:33:20,160 --> 00:33:23,000 Speaker 1: the blockchain, just as we looked at the blockchain back 572 00:33:23,040 --> 00:33:25,760 Speaker 1: in two thousand fourteen when we were looking at bitcoin 573 00:33:25,840 --> 00:33:29,600 Speaker 1: transactions because we wanted to verify that leg of the transaction. 574 00:33:29,680 --> 00:33:35,160 Speaker 1: So it's open source, but importantly, there are proprietary regulatory 575 00:33:35,160 --> 00:33:37,760 Speaker 1: compliance elements that have been built on top of it 576 00:33:37,800 --> 00:33:41,160 Speaker 1: to satisfy the Know your customer, the anti money laundering, 577 00:33:41,200 --> 00:33:44,080 Speaker 1: the b s A requirements, um So buying all of 578 00:33:44,120 --> 00:33:47,240 Speaker 1: that together in furtherance of then us being able to 579 00:33:47,240 --> 00:33:50,360 Speaker 1: issue our own stable coin, and again for the use 580 00:33:50,400 --> 00:33:54,040 Speaker 1: of payments and remittance and not for a cryptocurrency you 581 00:33:54,360 --> 00:34:14,240 Speaker 1: use cans. So I want to ask another regulatory question, 582 00:34:14,640 --> 00:34:18,680 Speaker 1: which is what, in your view should back stable coins? 583 00:34:18,880 --> 00:34:23,439 Speaker 1: Should they be entirely say, short term treasuries like one 584 00:34:23,480 --> 00:34:26,359 Speaker 1: to one because this is a big question. And then 585 00:34:26,520 --> 00:34:29,040 Speaker 1: also if there is going to be sort of non 586 00:34:29,440 --> 00:34:32,480 Speaker 1: perfectly liquid assets like maybe there's some commercial paper or 587 00:34:32,480 --> 00:34:35,759 Speaker 1: maybe there's some more longer dated treasuries. Is their risk 588 00:34:35,880 --> 00:34:39,480 Speaker 1: of contagion to the broader financial system if in a 589 00:34:39,560 --> 00:34:42,960 Speaker 1: crypto crash and people want to pull out, stable coin 590 00:34:43,040 --> 00:34:47,520 Speaker 1: issuers have to liquid date some of their assets rapidly. 591 00:34:47,600 --> 00:34:49,720 Speaker 1: Like I know, you're not in the business of actually 592 00:34:49,719 --> 00:34:51,840 Speaker 1: holding them, because if you talk of the assets, because 593 00:34:52,120 --> 00:34:54,960 Speaker 1: you're in the uh, the API, the minting and burning 594 00:34:54,960 --> 00:34:57,760 Speaker 1: of stable coins. Nonetheless, I want to get your take 595 00:34:57,920 --> 00:35:00,879 Speaker 1: on if I buy a stable coin, what should I 596 00:35:00,960 --> 00:35:03,920 Speaker 1: expect in terms of what's backing it? And then this 597 00:35:04,120 --> 00:35:08,760 Speaker 1: sort of like potential spillover effects of crypto volatility into 598 00:35:08,920 --> 00:35:12,560 Speaker 1: assets that don't necessarily have that you know, uh, into 599 00:35:12,640 --> 00:35:18,120 Speaker 1: the into the broader financial assets. Yep, yep, great question. Uh. 600 00:35:18,120 --> 00:35:21,600 Speaker 1: And we think a lot about this because candidly we 601 00:35:21,800 --> 00:35:25,480 Speaker 1: treat sin and all, you know, so so we have UM. 602 00:35:25,520 --> 00:35:26,960 Speaker 1: I don't think I've mentioned this yet, but we have 603 00:35:27,200 --> 00:35:31,040 Speaker 1: over fifteen hundred institutional customers at silver Gate in this 604 00:35:31,120 --> 00:35:35,839 Speaker 1: initiative who are using the sin every day and UM 605 00:35:35,880 --> 00:35:38,320 Speaker 1: as an example, in the in the first quarter of 606 00:35:38,400 --> 00:35:41,480 Speaker 1: this year we had a hundred and forty two billion dollars, 607 00:35:41,520 --> 00:35:45,040 Speaker 1: so we're about you know, fifteen sixteen billion dollar bank. 608 00:35:45,400 --> 00:35:47,480 Speaker 1: In terms of total assets, we had a hundred and 609 00:35:47,560 --> 00:35:51,120 Speaker 1: forty two billion dollars move across the sin in the 610 00:35:51,160 --> 00:35:53,680 Speaker 1: first quarter of this year alone. That was actually down 611 00:35:53,800 --> 00:35:56,160 Speaker 1: quite a bit from the fourth quarter UM and as 612 00:35:56,520 --> 00:35:59,480 Speaker 1: you know, the currency trading was down, but in the 613 00:35:59,480 --> 00:36:02,919 Speaker 1: fourth quarter we had over two and so what that 614 00:36:03,000 --> 00:36:07,360 Speaker 1: means is that we have to stay liquid. There's different 615 00:36:07,360 --> 00:36:10,480 Speaker 1: definitions of liquidity, right. The way we define it as 616 00:36:10,760 --> 00:36:15,560 Speaker 1: is that we we have a very large investment securities portfolio. 617 00:36:15,880 --> 00:36:19,160 Speaker 1: So on fifteen billion in assets, we probably have twelve 618 00:36:19,239 --> 00:36:23,520 Speaker 1: billion in investment securities. I already mentioned, you know, we 619 00:36:23,719 --> 00:36:27,759 Speaker 1: were the collateralized bitcoin lending UM. You know, we we 620 00:36:27,840 --> 00:36:31,640 Speaker 1: have about a billion dollars in commitments there. But the 621 00:36:31,760 --> 00:36:37,040 Speaker 1: overwhelming majority of our balance sheet is in investment securities. 622 00:36:37,440 --> 00:36:44,120 Speaker 1: Now they're not all treasuries, but but they importantly they 623 00:36:44,880 --> 00:36:48,239 Speaker 1: all trade actively. You know, the types of securities that 624 00:36:48,280 --> 00:36:51,520 Speaker 1: we buy as a bank, we can we can trade 625 00:36:51,600 --> 00:36:55,000 Speaker 1: out of those on any given day. Obviously, if if 626 00:36:55,040 --> 00:36:57,560 Speaker 1: they're longer in duration and interest rates have gone up, 627 00:36:57,640 --> 00:37:00,239 Speaker 1: then you know we're gonna have to take a haircut. 628 00:36:59,800 --> 00:37:02,160 Speaker 1: But we do look at at this and this is 629 00:37:02,200 --> 00:37:05,520 Speaker 1: one of the reasons we don't We don't pay interest 630 00:37:05,960 --> 00:37:09,200 Speaker 1: on our deposits. And we don't and and we actually 631 00:37:09,320 --> 00:37:13,760 Speaker 1: encourage our customers to only keep as much at silver 632 00:37:13,880 --> 00:37:18,040 Speaker 1: Gate as that they need for for their for their 633 00:37:18,040 --> 00:37:21,920 Speaker 1: trading and investing activities. We you know, you you mentioned 634 00:37:22,000 --> 00:37:23,960 Speaker 1: Joe that you know that we don't hold all the 635 00:37:24,000 --> 00:37:28,240 Speaker 1: reserves for USDC. For instance, usdcs over fifty billion dollars. 636 00:37:28,360 --> 00:37:31,600 Speaker 1: We're only a fifteen billion dollar bank, and we have customers, 637 00:37:31,600 --> 00:37:35,280 Speaker 1: so obviously we don't have the majority of those dollars. 638 00:37:35,360 --> 00:37:39,759 Speaker 1: They're spread elsewhere in the banking system. And there is 639 00:37:40,080 --> 00:37:42,800 Speaker 1: you know, um, there are other banks that have obviously 640 00:37:42,840 --> 00:37:44,759 Speaker 1: since we've got into the space, or other banks that 641 00:37:44,800 --> 00:37:49,879 Speaker 1: are banking this this crypto space. UM. And candidly, I 642 00:37:49,920 --> 00:37:52,120 Speaker 1: think what they're doing with the deposits, and this is 643 00:37:52,120 --> 00:37:55,239 Speaker 1: not criticism, this is just a factual statement. They are 644 00:37:55,719 --> 00:37:58,520 Speaker 1: doing what we did back in two thousand fourteen, which 645 00:37:58,760 --> 00:38:01,080 Speaker 1: we looked at this and we and thought, heck, this 646 00:38:01,160 --> 00:38:05,839 Speaker 1: is a potential source of deposits to fund our lending activities. Um. 647 00:38:06,000 --> 00:38:08,399 Speaker 1: And and so if if you were to look at 648 00:38:08,480 --> 00:38:10,400 Speaker 1: some of the other banks that are banking the space, 649 00:38:10,719 --> 00:38:12,799 Speaker 1: and what are they doing with the deposits. You know, 650 00:38:12,840 --> 00:38:16,279 Speaker 1: I think they're primarily using those in some of their 651 00:38:16,360 --> 00:38:21,520 Speaker 1: lending operations. Um and and again UM that their banks, 652 00:38:21,560 --> 00:38:25,760 Speaker 1: that's what they do. We have decided that the industry 653 00:38:25,840 --> 00:38:30,080 Speaker 1: is relying on us as critical infrastructure to provide liquidity. 654 00:38:30,120 --> 00:38:33,560 Speaker 1: And when you know, when Tera was melting down, obviously 655 00:38:33,600 --> 00:38:37,560 Speaker 1: we didn't have any exposure whatsoever to Tara, but that contagion, 656 00:38:37,640 --> 00:38:39,920 Speaker 1: if you will, that was spreading throughout the ecosystem and 657 00:38:40,000 --> 00:38:42,080 Speaker 1: causing people to go to cash or go to stable 658 00:38:42,120 --> 00:38:44,359 Speaker 1: coiner you know, go to a dollar back stable coin. 659 00:38:44,680 --> 00:38:47,040 Speaker 1: You know, you you can imagine that we might have 660 00:38:47,080 --> 00:38:52,160 Speaker 1: seen heightened activity across our platform um and and the 661 00:38:52,200 --> 00:38:55,799 Speaker 1: industry relies on us for that critical function. So can 662 00:38:55,840 --> 00:38:58,319 Speaker 1: you talk a little bit more about risk management and 663 00:38:58,440 --> 00:39:02,160 Speaker 1: specifically in the context of this sort of one way 664 00:39:02,480 --> 00:39:05,920 Speaker 1: risk which is basically what we saw over the past 665 00:39:05,960 --> 00:39:08,719 Speaker 1: month or so when Tera Luna collapsed, which is that 666 00:39:08,880 --> 00:39:13,320 Speaker 1: you had bonds and stocks falling, you had all sorts 667 00:39:13,320 --> 00:39:16,520 Speaker 1: of crypto and tokens falling at the same time. There 668 00:39:16,600 --> 00:39:19,880 Speaker 1: was lots of anecdotes about people potentially having to liquidate 669 00:39:19,920 --> 00:39:23,759 Speaker 1: positions in order to pay off collateral on margin that 670 00:39:23,800 --> 00:39:27,239 Speaker 1: they needed to to pay because of the volatility. How 671 00:39:27,280 --> 00:39:31,160 Speaker 1: do you actually handle that risk, because it feels like 672 00:39:31,239 --> 00:39:35,040 Speaker 1: with a lot of crypto, it's basically crypto exposure kind 673 00:39:35,120 --> 00:39:40,960 Speaker 1: of squared and also pegged too, occasionally tied into stocks 674 00:39:40,960 --> 00:39:43,440 Speaker 1: and bonds, so it's sort of it feels like it 675 00:39:43,560 --> 00:39:47,680 Speaker 1: feeds on itself at certain times. I what I can 676 00:39:47,760 --> 00:39:50,480 Speaker 1: say about the way we're set up at silver Gate 677 00:39:51,520 --> 00:39:55,600 Speaker 1: is because we are not the bank that is holding 678 00:39:56,400 --> 00:40:00,719 Speaker 1: like the reserves, we technically do, you know, don't want 679 00:40:00,760 --> 00:40:04,200 Speaker 1: to be their primary bank in the sense that you know, 680 00:40:04,480 --> 00:40:07,200 Speaker 1: where I've spent most of my career as a business banker. 681 00:40:07,680 --> 00:40:09,839 Speaker 1: You know, the idea is, well, gosp let's get them, 682 00:40:09,960 --> 00:40:13,640 Speaker 1: let's get the operating deposits, let's make them alone, you know, 683 00:40:13,719 --> 00:40:17,200 Speaker 1: let's get the full relationship. We take a very narrow 684 00:40:17,360 --> 00:40:20,440 Speaker 1: view here, which is, you know, don't keep with us 685 00:40:20,600 --> 00:40:25,120 Speaker 1: excess deposits that are needed for other things, because we 686 00:40:25,200 --> 00:40:29,360 Speaker 1: are primarily a liquidity source. And and so what that means, 687 00:40:29,400 --> 00:40:34,120 Speaker 1: Tracy is is that when when there's this type of activity, 688 00:40:34,160 --> 00:40:36,320 Speaker 1: we see a lot of money going through our bank, 689 00:40:37,000 --> 00:40:40,560 Speaker 1: but um, but we actually see our deposits. I talked 690 00:40:40,560 --> 00:40:43,440 Speaker 1: about this on an investor call last week. I I 691 00:40:43,520 --> 00:40:47,440 Speaker 1: referred folks on that call back to our earnings transcript 692 00:40:47,800 --> 00:40:50,280 Speaker 1: at the end of the first quarter. If you remember 693 00:40:50,320 --> 00:40:54,280 Speaker 1: back at that time, you know, pandemic hit markets were crazy. 694 00:40:54,320 --> 00:40:57,080 Speaker 1: You know, Bitcoin sold off, you know the crypto markets 695 00:40:57,120 --> 00:40:59,680 Speaker 1: were selling off as well. And what we saw back 696 00:40:59,719 --> 00:41:02,920 Speaker 1: at that time was a surge in our deposits. And 697 00:41:02,920 --> 00:41:05,000 Speaker 1: and we reported on that because it was quarter end. 698 00:41:05,080 --> 00:41:08,200 Speaker 1: We said, look, our deposits are elevated at quarter end. 699 00:41:08,719 --> 00:41:11,560 Speaker 1: We believe that's temporary. Um And by the time we 700 00:41:11,719 --> 00:41:14,360 Speaker 1: released our earnings the third week of April, we're already 701 00:41:14,400 --> 00:41:17,840 Speaker 1: seeing deposits kind of normalized, and we reported on that fact. 702 00:41:18,200 --> 00:41:22,120 Speaker 1: But critically, we are this critical um, you know, piece 703 00:41:22,160 --> 00:41:26,120 Speaker 1: of infrastructure where where folks as their exiting the ecosystem, 704 00:41:26,160 --> 00:41:28,879 Speaker 1: we're wanting to go to cash. Those dollars passed through 705 00:41:28,920 --> 00:41:31,400 Speaker 1: silver Gate and then end up wherever they're going to 706 00:41:31,480 --> 00:41:34,200 Speaker 1: put them. Sometimes it just ends up at USDC, in 707 00:41:34,239 --> 00:41:36,640 Speaker 1: which case those dollars aren't going to sit at silver Gate. 708 00:41:36,640 --> 00:41:38,880 Speaker 1: They're gonna sit it in Reserve, but they might pass 709 00:41:38,920 --> 00:41:41,719 Speaker 1: through us on on their way. One of the things 710 00:41:41,840 --> 00:41:44,239 Speaker 1: I mean, we've been bent managing liquidity this way since 711 00:41:44,280 --> 00:41:47,319 Speaker 1: we launched the SIN in two thousand seventeen. Back at 712 00:41:47,360 --> 00:41:49,000 Speaker 1: that time, believe it or not, we were a two 713 00:41:49,000 --> 00:41:52,960 Speaker 1: billion dollar bank and we we had a billion dollars 714 00:41:53,120 --> 00:41:56,440 Speaker 1: in crypto related deposits. We were holding almost all of 715 00:41:56,480 --> 00:41:59,080 Speaker 1: that at the time at the Federal Reserve. Because when 716 00:41:59,160 --> 00:42:02,760 Speaker 1: you're going are these times of of liquidity and stress, 717 00:42:03,239 --> 00:42:05,480 Speaker 1: you want to make sure that you're not investing those 718 00:42:05,640 --> 00:42:08,960 Speaker 1: those those funds um you know, into something that's more 719 00:42:09,040 --> 00:42:11,200 Speaker 1: long term, because you don't know how sticky it's gonna be. 720 00:42:11,719 --> 00:42:14,200 Speaker 1: I just want to go back to this point earlier. 721 00:42:14,200 --> 00:42:17,800 Speaker 1: It's like about contagion. Like we have seen Tether's total 722 00:42:17,880 --> 00:42:21,480 Speaker 1: assets shrink in this latest market volatility, so presumably it 723 00:42:21,560 --> 00:42:23,680 Speaker 1: had to sell some of its assets. I haven't looked 724 00:42:23,680 --> 00:42:25,960 Speaker 1: at what's going on with us DC. I don't know 725 00:42:26,040 --> 00:42:28,960 Speaker 1: if it's had to actually liquidate or if people are 726 00:42:29,000 --> 00:42:33,320 Speaker 1: just hanging out in USDC. But is there risk of volatility? 727 00:42:33,360 --> 00:42:36,000 Speaker 1: I mean, you expect, obviously the stable coin industry to 728 00:42:36,000 --> 00:42:37,920 Speaker 1: get much bigger, otherwise you wouldn't be in it, you 729 00:42:37,960 --> 00:42:42,480 Speaker 1: know today, One like, is there risk of crypto market volatility, 730 00:42:42,640 --> 00:42:46,720 Speaker 1: forcing liquidations and other assets and therefore spreading volatility elsewhere 731 00:42:46,719 --> 00:42:52,479 Speaker 1: into the financial system. Yeah, I certainly think that's one 732 00:42:52,520 --> 00:42:55,239 Speaker 1: of the things that the regulators are concerned about. And 733 00:42:55,280 --> 00:42:57,080 Speaker 1: that's you know, if you go back and look at 734 00:42:57,120 --> 00:43:00,000 Speaker 1: the President's Working Group report that I've referenced a couple 735 00:43:00,080 --> 00:43:05,040 Speaker 1: times already, you know, they there are concerns about contagion 736 00:43:05,200 --> 00:43:09,840 Speaker 1: and you know this points of liquidity stress, etcetera. Which 737 00:43:09,880 --> 00:43:13,640 Speaker 1: is which is candidly one of the reasons that that 738 00:43:13,719 --> 00:43:16,040 Speaker 1: that we think, you know, from our perspective, and I'm 739 00:43:16,080 --> 00:43:19,280 Speaker 1: not you know, hey, I'm a free markets guy. UM. 740 00:43:19,320 --> 00:43:24,120 Speaker 1: Clearly USDC has found you know, product market fit, right. 741 00:43:24,160 --> 00:43:26,640 Speaker 1: I mean they didn't you know, they weren't sitting in 742 00:43:26,640 --> 00:43:29,160 Speaker 1: their garage trying to come up with something they hoped 743 00:43:29,360 --> 00:43:33,440 Speaker 1: that the industry would use. They launched something, and the industry, 744 00:43:33,480 --> 00:43:36,080 Speaker 1: you know, has said yes, and and they're speaking with 745 00:43:36,120 --> 00:43:39,920 Speaker 1: their wallets, and there's over fifty billion dollars of UM 746 00:43:39,960 --> 00:43:44,400 Speaker 1: you know backing USDC right now. What What we see 747 00:43:44,760 --> 00:43:47,920 Speaker 1: is UM is that there is a there is a 748 00:43:48,080 --> 00:43:55,480 Speaker 1: need for a tokenized dollar to be used by consumers 749 00:43:55,960 --> 00:43:58,879 Speaker 1: to pay for things. UM. And you know, the way. 750 00:43:58,920 --> 00:44:01,000 Speaker 1: And I know I'm getting off your question, Joe, But 751 00:44:01,000 --> 00:44:03,080 Speaker 1: but but this is important for you know, for me 752 00:44:03,200 --> 00:44:05,560 Speaker 1: to say, because the way I think about this is 753 00:44:05,600 --> 00:44:08,879 Speaker 1: not dissimilar to the way I've described how we don't, 754 00:44:08,920 --> 00:44:11,480 Speaker 1: you know, we don't encourage our customers to keep a 755 00:44:11,480 --> 00:44:14,600 Speaker 1: lot of access deposits with us. I think about a 756 00:44:14,600 --> 00:44:19,080 Speaker 1: tokenized dollar the way I think about a physical dollar bill, 757 00:44:19,600 --> 00:44:21,640 Speaker 1: or let's let's say a twenty because you know, you 758 00:44:21,960 --> 00:44:24,080 Speaker 1: typicularly can only get twenties out of the A t M. Right, 759 00:44:24,320 --> 00:44:26,000 Speaker 1: So if I go to the A t M and 760 00:44:26,520 --> 00:44:30,040 Speaker 1: I pulled twenty dollars out, well, now that's no longer 761 00:44:30,239 --> 00:44:33,160 Speaker 1: in my bank. It's not f D. I c ensured. 762 00:44:33,560 --> 00:44:35,319 Speaker 1: I can take it anywhere and I can use it 763 00:44:35,360 --> 00:44:38,600 Speaker 1: to pay for something. But importantly, I didn't withdraw all 764 00:44:38,640 --> 00:44:40,759 Speaker 1: my money out of the bank. I only withdrew what 765 00:44:40,840 --> 00:44:44,520 Speaker 1: I needed to transact. So I think that that is 766 00:44:45,120 --> 00:44:50,440 Speaker 1: that is the place for a silver gate issued tokenized dollar. 767 00:44:50,719 --> 00:44:53,880 Speaker 1: And and we've also started talking about it internally, and 768 00:44:53,920 --> 00:44:56,279 Speaker 1: we're beginning to talk with our regulators about this as well. 769 00:44:56,760 --> 00:44:59,279 Speaker 1: We're getting we're getting away from calling or stable coin 770 00:45:00,040 --> 00:45:04,320 Speaker 1: because obviously stable coins on a really bad name because 771 00:45:05,040 --> 00:45:09,080 Speaker 1: they've proven themselves to not be stable um in many cases. Um. 772 00:45:09,120 --> 00:45:11,839 Speaker 1: But but for us we're looking at this is Hey, 773 00:45:11,880 --> 00:45:16,160 Speaker 1: this is a tokenized dollar right now on my iPhone. 774 00:45:16,960 --> 00:45:19,839 Speaker 1: I have both the dunkin Donuts app and the Starbucks app, 775 00:45:20,320 --> 00:45:22,319 Speaker 1: and I can load both of those with value. But 776 00:45:22,400 --> 00:45:26,560 Speaker 1: guess what, it's not interoperable. I can't pull it back off. Um. 777 00:45:26,800 --> 00:45:29,760 Speaker 1: And and I you know, I can't take my dunkin 778 00:45:29,840 --> 00:45:32,520 Speaker 1: Donuts app and pay for a coffee at Starbucks. And 779 00:45:32,600 --> 00:45:35,160 Speaker 1: so so what we see and this is a longer 780 00:45:35,280 --> 00:45:37,040 Speaker 1: view and it's going to take a while to get there, 781 00:45:37,480 --> 00:45:41,439 Speaker 1: but everything in the world is moving digital um. And 782 00:45:41,640 --> 00:45:44,239 Speaker 1: people say, well, money is digital too, And that's true 783 00:45:44,280 --> 00:45:46,600 Speaker 1: for all of us in the first world, but there 784 00:45:46,600 --> 00:45:49,239 Speaker 1: there are many people that don't have access. They all 785 00:45:49,280 --> 00:45:52,120 Speaker 1: have phones, um, but they don't have the ability to 786 00:45:52,120 --> 00:45:55,400 Speaker 1: pay for things. Um. And so I just view a 787 00:45:55,480 --> 00:46:00,120 Speaker 1: tokenized dollar as a way to take some portion of 788 00:46:00,440 --> 00:46:03,160 Speaker 1: your value that whether you have it sitting in a 789 00:46:03,160 --> 00:46:05,200 Speaker 1: bank account or whether you have it sitting in bitcoin, 790 00:46:05,600 --> 00:46:08,360 Speaker 1: pull that out, put it in a digital wallet on 791 00:46:08,400 --> 00:46:11,000 Speaker 1: your phone so that you can use it to pay 792 00:46:11,040 --> 00:46:14,400 Speaker 1: for things, whether that be an online merchant, whether that 793 00:46:14,520 --> 00:46:18,600 Speaker 1: be at a physical merchant, and so that's that and 794 00:46:18,600 --> 00:46:22,680 Speaker 1: and to me that shouldn't create any concern about financial 795 00:46:22,719 --> 00:46:25,520 Speaker 1: contagion and runs on the bank and all of that stuff, 796 00:46:25,520 --> 00:46:28,879 Speaker 1: because it's no, it's no different than withdrawing cash out 797 00:46:28,880 --> 00:46:33,080 Speaker 1: of an a t M. So Tether okay, clearly controversial 798 00:46:33,160 --> 00:46:36,080 Speaker 1: in many ways. There have been questions swirling around what 799 00:46:36,239 --> 00:46:40,600 Speaker 1: exactly is backing it for many many years. Now. You 800 00:46:40,680 --> 00:46:44,319 Speaker 1: have a vantage point where you see the flows and 801 00:46:44,360 --> 00:46:49,000 Speaker 1: the mechanics of what happens when stable coins are are 802 00:46:49,200 --> 00:46:52,680 Speaker 1: moving or not moving. So you described, for instance, when 803 00:46:52,719 --> 00:46:55,880 Speaker 1: we had the big run recently, there was an increase 804 00:46:55,880 --> 00:46:58,920 Speaker 1: in your deposits and lots of money flowing in. Can 805 00:46:58,960 --> 00:47:02,279 Speaker 1: you give us your take on tether and what exactly 806 00:47:02,520 --> 00:47:04,200 Speaker 1: is going on there, because I think a lot of 807 00:47:04,200 --> 00:47:08,440 Speaker 1: people are still concerned about a lack of transparency on 808 00:47:08,480 --> 00:47:10,719 Speaker 1: the backing and a lot of people have also been 809 00:47:10,760 --> 00:47:14,399 Speaker 1: looking at the deposit data for tether and I think 810 00:47:14,440 --> 00:47:17,319 Speaker 1: their bank is UM. It's in the Bahamas, right, like 811 00:47:17,600 --> 00:47:21,200 Speaker 1: Deltech or something UM And and basically saying that we 812 00:47:21,280 --> 00:47:24,879 Speaker 1: don't see deposits moving in the way that you might 813 00:47:25,000 --> 00:47:28,040 Speaker 1: expect when tether is actually moving. And again, this is 814 00:47:28,080 --> 00:47:30,600 Speaker 1: something that's supposed to have billions and billions of dollars 815 00:47:31,000 --> 00:47:33,719 Speaker 1: worth of assets backing it. So could you maybe just 816 00:47:34,360 --> 00:47:38,440 Speaker 1: give us your opinion of what is going on there. So, unfortunately, 817 00:47:38,520 --> 00:47:43,040 Speaker 1: my knowledge is is limited, UM, just as the rest 818 00:47:43,080 --> 00:47:46,200 Speaker 1: of the of the world's knowledge is limited because you know, 819 00:47:46,239 --> 00:47:49,319 Speaker 1: we don't bank them, as I mentioned, UM. But what 820 00:47:49,480 --> 00:47:54,080 Speaker 1: I can tell you is that our customers who use 821 00:47:54,200 --> 00:47:57,359 Speaker 1: tether um. You know, we have customers all over the world. 822 00:47:57,400 --> 00:48:01,719 Speaker 1: We have customers in Europe and Asia and Latin America UM, 823 00:48:02,000 --> 00:48:07,560 Speaker 1: and those customers that use tether do not have the 824 00:48:07,719 --> 00:48:12,400 Speaker 1: same concern that I hear that you just you know, 825 00:48:12,440 --> 00:48:16,320 Speaker 1: are articulated. And so there's a there's clearly a difference 826 00:48:16,560 --> 00:48:20,759 Speaker 1: in perception between those who are inside the ecosystem and 827 00:48:20,800 --> 00:48:23,799 Speaker 1: those who are outside of it. Now I don't know 828 00:48:23,880 --> 00:48:26,919 Speaker 1: why that is, Tracy I, but I do know that 829 00:48:27,000 --> 00:48:29,160 Speaker 1: when we talk to our customers, because we've asked them, 830 00:48:29,160 --> 00:48:30,640 Speaker 1: you know, what if we were to issue our own 831 00:48:30,640 --> 00:48:33,400 Speaker 1: staff This goes back obviously like two thousand and eighteen nineteen. 832 00:48:33,600 --> 00:48:35,480 Speaker 1: What if we were to issue our own you know, 833 00:48:35,640 --> 00:48:38,759 Speaker 1: how do you view tether um and they use tether 834 00:48:38,840 --> 00:48:42,880 Speaker 1: because it works, and so unless and until there is 835 00:48:42,920 --> 00:48:46,239 Speaker 1: a run um that actually causes them to burn through 836 00:48:46,239 --> 00:48:48,719 Speaker 1: all their cash and then their securities and then you know, 837 00:48:48,840 --> 00:48:52,359 Speaker 1: theoretically their commercial paper and you know, it's it's it 838 00:48:52,560 --> 00:48:55,759 Speaker 1: just works. And there are, by the way, also use 839 00:48:55,800 --> 00:48:58,680 Speaker 1: cases that I've heard of where people in other countries 840 00:48:59,080 --> 00:49:01,759 Speaker 1: who want to hold old U S dollars because they 841 00:49:01,840 --> 00:49:06,080 Speaker 1: might be in a country that that is experiencing hyperinflation. Um, 842 00:49:06,320 --> 00:49:10,080 Speaker 1: they're comfortable um. And these are like consumer folks. They 843 00:49:10,120 --> 00:49:16,080 Speaker 1: are comfortable holding holding color um as as a dollar proxy. UM. 844 00:49:16,239 --> 00:49:18,480 Speaker 1: And you know, I I don't know that how widespread 845 00:49:18,480 --> 00:49:28,000 Speaker 1: that is, but I've certainly heard that. Ellen. Thank you 846 00:49:28,080 --> 00:49:30,760 Speaker 1: so much for coming on. This is just like such 847 00:49:30,800 --> 00:49:32,920 Speaker 1: a big area and we know there's like tons of 848 00:49:32,960 --> 00:49:36,560 Speaker 1: money going into this space and it's so crucial and 849 00:49:36,680 --> 00:49:39,279 Speaker 1: so really appreciate getting your perspective. I feel like we 850 00:49:39,280 --> 00:49:42,480 Speaker 1: could probably do like three hours actually on this topic. 851 00:49:42,560 --> 00:49:44,759 Speaker 1: We'll have to have you back because I think, like 852 00:49:44,920 --> 00:49:49,080 Speaker 1: stable coin design, stable coin regulation, the business of stable 853 00:49:49,080 --> 00:49:52,560 Speaker 1: coins is not going away anytime soon. So I appreciate 854 00:49:52,560 --> 00:49:56,360 Speaker 1: you coming on. Udlines. Yeah, I really appreciate the opportunity. 855 00:49:56,400 --> 00:50:00,799 Speaker 1: It's um, I'm happy to come back anytime. Absolutely love 856 00:50:00,880 --> 00:50:03,600 Speaker 1: this space and I appreciate all the work that you 857 00:50:03,640 --> 00:50:19,040 Speaker 1: guys are doing. Absolutely, thank you girl. You know it's 858 00:50:19,120 --> 00:50:23,960 Speaker 1: interesting was that Ellen said that they might think about 859 00:50:24,080 --> 00:50:27,440 Speaker 1: rebranding stable coins, that it does seem like it's kind 860 00:50:27,440 --> 00:50:29,839 Speaker 1: of gotten tarnish because on the one hand you have 861 00:50:29,880 --> 00:50:32,759 Speaker 1: tarra usd, which is not stable, and then on the 862 00:50:32,760 --> 00:50:37,080 Speaker 1: other hand, the other stable coin is tether and people 863 00:50:37,120 --> 00:50:39,800 Speaker 1: are just sort of suspicious of it for obvious reasons. 864 00:50:40,080 --> 00:50:42,240 Speaker 1: So it's like, if you're gonna launch something, maybe that's smart, 865 00:50:42,280 --> 00:50:44,560 Speaker 1: like call it a tokenized dollar or something else, because 866 00:50:44,800 --> 00:50:46,480 Speaker 1: I do think it's sort of a dirty word at 867 00:50:46,480 --> 00:50:50,279 Speaker 1: this point. I agree, But you know what this whole 868 00:50:50,320 --> 00:50:53,000 Speaker 1: thing reminds me of, and this is a slight tangent, 869 00:50:53,160 --> 00:50:56,560 Speaker 1: but like it is actually really a parallel to what's 870 00:50:56,560 --> 00:51:01,640 Speaker 1: going on here. Do you remember pure to pure lending? Yeah? Absolutely, okay, 871 00:51:01,680 --> 00:51:05,240 Speaker 1: So peer to peer lending this whole idea that individuals 872 00:51:05,280 --> 00:51:10,000 Speaker 1: could lend to other individuals and thereby bypass the banks completely. 873 00:51:10,680 --> 00:51:14,040 Speaker 1: And the irony was always that there was actually a 874 00:51:14,080 --> 00:51:16,839 Speaker 1: bank underwriting all these loans. It was called web Bank, 875 00:51:17,080 --> 00:51:20,880 Speaker 1: So this kind of you know, reminds me. Um. So 876 00:51:20,920 --> 00:51:25,200 Speaker 1: that's point one. And then secondly, they also rebranded from 877 00:51:25,239 --> 00:51:28,520 Speaker 1: peer to peer lending to direct lending once it became 878 00:51:28,680 --> 00:51:31,880 Speaker 1: very very apparent that the lending was not in fact 879 00:51:31,920 --> 00:51:34,880 Speaker 1: peer to peer, So it kind of reminds it reminds 880 00:51:34,920 --> 00:51:37,040 Speaker 1: me a lot of that. That's a that's a really 881 00:51:37,080 --> 00:51:41,600 Speaker 1: good analogy, you know, speaking on the Tether point, and 882 00:51:41,680 --> 00:51:43,600 Speaker 1: this came up. You know, I think, like going back 883 00:51:43,600 --> 00:51:47,399 Speaker 1: to the first time we ever interviewed Sam Bankman Freed, 884 00:51:47,640 --> 00:51:51,680 Speaker 1: it really is striking the degree of confidence that people 885 00:51:51,840 --> 00:51:54,600 Speaker 1: in the industry have with tether and their comfort that 886 00:51:54,640 --> 00:51:58,120 Speaker 1: they have redeeming and minting and burning tether versus the 887 00:51:58,160 --> 00:52:01,200 Speaker 1: outside skepticism. It's like there's huge bid Esque spread, so 888 00:52:01,280 --> 00:52:04,680 Speaker 1: to speak on tether as a concept. I mean, it 889 00:52:04,719 --> 00:52:08,440 Speaker 1: would be pretty amazing if all of Tether's problems just 890 00:52:08,719 --> 00:52:12,160 Speaker 1: boiled down to like a perception gap and a bad 891 00:52:12,239 --> 00:52:15,560 Speaker 1: pr strategy between people who understand it and people who 892 00:52:15,680 --> 00:52:18,760 Speaker 1: are outside of the space, Like that would be pretty 893 00:52:18,920 --> 00:52:22,280 Speaker 1: insane and also a massive own goal for the company itself. 894 00:52:22,920 --> 00:52:26,759 Speaker 1: Um But that's kind of what we hear consistently. It's 895 00:52:26,800 --> 00:52:28,719 Speaker 1: like well, the people who deal with it have full 896 00:52:28,760 --> 00:52:31,160 Speaker 1: faith in it, and people who are not dealing in 897 00:52:31,239 --> 00:52:36,000 Speaker 1: it are extremely skeptical. Yes, But on the other hand, 898 00:52:36,040 --> 00:52:40,320 Speaker 1: note that Allen is not a Tether business partner, so 899 00:52:40,560 --> 00:52:43,640 Speaker 1: it is striking that. I mean, again the reasons for that, 900 00:52:43,680 --> 00:52:46,680 Speaker 1: they're offshore, etcetera. But here is the company that's sort 901 00:52:46,680 --> 00:52:49,920 Speaker 1: of like, is the core banking infrastructure to all of crypto, 902 00:52:50,040 --> 00:52:53,120 Speaker 1: and Tether isn't one of them. So you know there's 903 00:52:53,160 --> 00:52:55,840 Speaker 1: something going down there, and not necessarily bad per se, 904 00:52:56,520 --> 00:53:00,279 Speaker 1: but there's a reason you know, silver Gate is not 905 00:53:00,360 --> 00:53:03,720 Speaker 1: a t other business. Yeah, but I do think getting 906 00:53:03,719 --> 00:53:06,120 Speaker 1: back to that rebranding point. I mean, we started out 907 00:53:06,120 --> 00:53:09,319 Speaker 1: this conversation by saying that the marketing here matters. And 908 00:53:09,360 --> 00:53:11,719 Speaker 1: if you say you've created a stable coin and it's 909 00:53:11,719 --> 00:53:13,800 Speaker 1: one for one with a dollar and then it isn't, 910 00:53:14,320 --> 00:53:17,680 Speaker 1: then that's an issue and that's something that regulators you know, 911 00:53:17,800 --> 00:53:21,160 Speaker 1: will pursue and will be interested in. But if you 912 00:53:21,480 --> 00:53:24,279 Speaker 1: morph into something like a tokenized dollar or I don't know, 913 00:53:24,360 --> 00:53:28,400 Speaker 1: call yourself like a variable stable coin or something like that, 914 00:53:28,440 --> 00:53:31,279 Speaker 1: I don't know, then then maybe that does lessen some 915 00:53:31,400 --> 00:53:33,600 Speaker 1: of the pressure. But of course the question is whether 916 00:53:33,680 --> 00:53:37,680 Speaker 1: or not you're sort of um abdicating your original use purpose. 917 00:53:38,280 --> 00:53:41,240 Speaker 1: I also think this question of like, Okay, if something 918 00:53:41,320 --> 00:53:43,120 Speaker 1: is going to be called a stable coin or whatever 919 00:53:43,160 --> 00:53:46,800 Speaker 1: it is, well there's gonna need to be more rules. 920 00:53:46,840 --> 00:53:50,000 Speaker 1: I think about what actually backs it and how much 921 00:53:50,080 --> 00:53:53,600 Speaker 1: it has to be backed by short term treasuries or 922 00:53:53,640 --> 00:53:58,080 Speaker 1: long term treasuries or things that absolutely our dollar equivalent 923 00:53:58,600 --> 00:54:02,920 Speaker 1: versus other assets. Because as they get bigger as an industry, 924 00:54:03,239 --> 00:54:06,120 Speaker 1: these sorts of like stresses are going to emerge. And 925 00:54:06,160 --> 00:54:09,440 Speaker 1: again going back to the financial crisis, the lesson is 926 00:54:09,840 --> 00:54:13,440 Speaker 1: crises happen in essentially assets that are deemed to be stable, 927 00:54:13,480 --> 00:54:16,880 Speaker 1: like that is the source of trouble. And so how 928 00:54:17,239 --> 00:54:19,719 Speaker 1: what they what they can really hold, how liquid they 929 00:54:19,760 --> 00:54:21,760 Speaker 1: have to be, how fast they have to be able 930 00:54:21,800 --> 00:54:24,880 Speaker 1: to liquidate their assets to meet redemptions are sort of 931 00:54:24,920 --> 00:54:27,239 Speaker 1: like huge questions that I think we're gonna need to 932 00:54:27,239 --> 00:54:30,680 Speaker 1: just get like clearer answers on. Right, So I guess 933 00:54:30,719 --> 00:54:33,480 Speaker 1: there's two options here. One is you agree these are 934 00:54:33,560 --> 00:54:35,799 Speaker 1: safe assets, They're supposed to be safe and there's going 935 00:54:35,840 --> 00:54:38,359 Speaker 1: to have to be some sort of oversight on them. 936 00:54:38,480 --> 00:54:42,240 Speaker 1: Or two you say, actually, maybe they're not that safe, 937 00:54:42,280 --> 00:54:44,319 Speaker 1: and you step away from that marketing and you go 938 00:54:44,360 --> 00:54:47,640 Speaker 1: in a totally different direction. But then again the question 939 00:54:47,719 --> 00:54:50,239 Speaker 1: is what impact does that have on crypto? Yeah, now 940 00:54:50,280 --> 00:54:52,400 Speaker 1: it's a fascinating We We really could probably talk like 941 00:54:52,480 --> 00:54:55,120 Speaker 1: three hours and go down all kinds of little avenues 942 00:54:55,160 --> 00:54:57,799 Speaker 1: on this, because it really is like pretty big to 943 00:54:57,880 --> 00:55:01,680 Speaker 1: think about the future of crypto, the stable coin rabbit hole. 944 00:55:01,760 --> 00:55:04,120 Speaker 1: It's also, i mean, it's also just interesting from the 945 00:55:04,160 --> 00:55:07,080 Speaker 1: perspective of what is money and what is the financial 946 00:55:07,120 --> 00:55:11,040 Speaker 1: asset and what makes something safe and contagion effect and anyway, Yes, 947 00:55:11,080 --> 00:55:12,880 Speaker 1: you're right, Okay, we should stop. Shall we leave it there? 948 00:55:12,960 --> 00:55:15,320 Speaker 1: Let's leave it there? All right? This has been another 949 00:55:15,360 --> 00:55:18,160 Speaker 1: episode of the All Thoughts podcast. I'm Tracy Alloway. You 950 00:55:18,160 --> 00:55:20,759 Speaker 1: can follow me on Twitter at Tracy Alloway and I'm 951 00:55:20,840 --> 00:55:23,560 Speaker 1: Joe wisen't though. You can follow me on Twitter at 952 00:55:23,560 --> 00:55:28,160 Speaker 1: the Stalwart. Follow our producer Carmen Rodriguez at Carmen Armann. 953 00:55:28,239 --> 00:55:32,200 Speaker 1: Follow the Bloomberg head of podcast, Francesca Leivi at Francesca Today, 954 00:55:32,680 --> 00:55:35,480 Speaker 1: and check out all of our podcasts at Berg under 955 00:55:35,520 --> 00:56:07,600 Speaker 1: the handle at podcasts. Thanks for listening to to