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Speaker 2: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 3: Hello and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Jill Weisenthal and I'm Tracy Alloway.

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Speaker 3: Tracy, here's two things that I know, or I think

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Speaker 3: that I know. One is that a lot of people

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Speaker 3: in the crypto industry are excited about the new Trump

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Speaker 3: administration and perhaps regulatory changes that may come about. And

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Speaker 3: it also seems like a lot of people affiliated with

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Speaker 3: the Trump administration have an affinity for the crypto industry,

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Speaker 3: but beyond that, I don't know what any of that means.

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Speaker 3: Like it's one thing for different groups of people to

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Speaker 3: like each other have some affinity, but what it means

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Speaker 3: in terms of substantive changes in the world or at

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Speaker 3: least in regulation, I don't have a clear idea.

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Speaker 1: Yeah, there's definitely been a vibeh the vibes, yes, but

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Speaker 1: in terms of what that means concretely in the real world,

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Speaker 1: I am also unclear. I will say I'm looking at

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Speaker 1: a chart of bitcoin right now, and I mean you

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Speaker 1: can see, like beginning of November it shoots up. And

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Speaker 1: obviously there have been some things that are sort of

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Speaker 1: happening all ready. So for instance, you know Gary Gensler

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Speaker 1: is out at the SEC and he's going to be

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Speaker 1: replaced by Paul Atkins, who is a I think he's

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Speaker 1: generally considered a crypto proponent, So that's one thing. Crypto

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Speaker 1: kind of hated Genstler, So there's that expectation. But beyond that,

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Speaker 1: there's talk of like a strategic bitcoin reserve and all

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Speaker 1: these other things. And I guess I guess the difficulty

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Speaker 1: is crypto is never a unified body like everyone wants

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Speaker 1: different things, and there's all this infighting, and so I'm

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Speaker 1: just curious, like, what is it that the different factions

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Speaker 1: are basically after at the moment.

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Speaker 3: Yeah, there's a really great way to put it. And

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Speaker 3: it's clear even as you described, there's a range of

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Speaker 3: ideas that are sort of some seem more perhaps realistic,

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Speaker 3: or in the short term, some strike me as sort

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Speaker 3: of fantastical. But I would never count out anything. If

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Speaker 3: we one day have a strategic bitcoin reserve in the US,

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Speaker 3: Like I don't know, it's twenty twenty five. Anything could happen,

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Speaker 3: but there is possible. Is like a range, right, there's

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Speaker 3: a range of what's pursued. Maybe is it more regulatory

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Speaker 3: clarity on certain sort of like token projects. Is it

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Speaker 3: a way so that some sort of stable coin regulation

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Speaker 3: can be resolved in some way that expands their ability

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Speaker 3: to be a source of payments? Many big questions, many

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Speaker 3: interesting possibilities. So, as you know, with the new administration,

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Speaker 3: I think we should get a better sense of what

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Speaker 3: people in the industry are actually substantively looking for.

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Speaker 1: Absolutely, let's do it.

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Speaker 2: Well.

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Speaker 3: I'm really excited to say we have I believe the

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Speaker 3: perfect guest. Someone we've had on the podcast before, and

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Speaker 3: I said at the time we were talking about stable coins

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Speaker 3: specifically that time. But I think I said at the time,

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Speaker 3: this guest should really be the crypto industry.

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Speaker 1: It's only you said the crypto industry should shove everyone

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Speaker 1: else in a boom close.

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Speaker 3: Yeah, that's right. I just have this guest be their

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Speaker 3: spokesperson at least when talking to the mainstream media like us.

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Speaker 3: Maybe like on crypto podcasts, they could have other people,

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Speaker 3: but when they sort of address someone up for the

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Speaker 3: mainstream media and want to be presentable, I really think

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Speaker 3: this is the only guest that they should have. Very

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Speaker 3: excited we're gonna be speaking with Austin Campbell. He is

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Speaker 3: an adjunct professor at the NYU Stern School of Business,

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Speaker 3: and he is also the CEO of WSPN USA, where

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Speaker 3: he does stable coin stuff. So, Austin, thank you so

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Speaker 3: much for coming back on the show.

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Speaker 4: Yeah, well, I'm glad I'm not stuck in the broom closet.

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Speaker 3: Thank you for coming out. I think the WSPN job

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Speaker 3: is news since the last time we talked to you.

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Speaker 3: What's going on there?

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Speaker 4: Yeah, it is new. So WSPN is an up and

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Speaker 4: coming stable coin Issuer. I think one of my observations

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Speaker 4: about the industry right now, and the way I sort

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Speaker 4: of try to say it to people who are not

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Speaker 4: deep into it, is we've got a whole lot of

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Speaker 4: MySpace and very little Facebook when it comes to stable coins,

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Speaker 4: which is to say, I do have immense respect for

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Speaker 4: the work people have done so far with things like

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Speaker 4: you know, tether Circle, etc. But the reality is none

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Speaker 4: of these are, in my opinion, fully formed implementations. Yet

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Speaker 4: I think the industry still has a lot long way

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Speaker 4: to go to get genuinely professionalized. So WSPN is an

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Speaker 4: effort started out of Singapore really and expanding globally to

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Speaker 4: take a run at that problem. So Knock on Wood

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Speaker 4: hopefully will be a little bit more Facebook. But til tell.

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Speaker 1: Okay, so let's talk about what's I don't know what

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Speaker 1: crypto is excited about, because it does seem to be

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Speaker 1: very excited, and a bunch of different coins have been

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Speaker 1: rallying off the back of Trump's When what's going on

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Speaker 1: here other than the vibes?

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Speaker 4: So I think some of this is just the expectation

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Speaker 4: that people can do business potentially with some degree of clarity.

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Speaker 4: So Trump coming in and keep in mind the Trump

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Speaker 4: administration in particular is just one piece of this puzzle.

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Speaker 4: Has the industry pretty hopeful that we're going to get

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Speaker 4: a significantly greater degree of regulatory clarity around what you're

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Speaker 4: allowed to do in the United States without breaking the rules,

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Speaker 4: which is something that it transparently has not had. And

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Speaker 4: like a good example of this is the SEC. So recently, Coinbase,

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Speaker 4: in their case against the SEC, was just granted an

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Speaker 4: appeal which is going up to the Second Circuit now,

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Speaker 4: And if you read the judges ruling a lot of

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Speaker 4: the reason for that as well, you know, we have

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Speaker 4: my case, and then there's a case against crack In,

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Speaker 4: and a case against Finance, and a case against Ripple,

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Speaker 4: and helpfully, multiple federal judges are all coming to different

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Speaker 4: conclusions on what the law is and what you're allowed

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Speaker 4: to do here. So if people were saying there's regulatory clarity,

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Speaker 4: you have at least four federal judges who disagree with

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Speaker 4: you on that point right now. And it looks like, honestly,

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Speaker 4: if you understand how like circuit splits work, a fast

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Speaker 4: track to scotus to get some clarity on this, which

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Speaker 4: could be exciting, But I think the idea is that

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Speaker 4: with turnover in the leadership of the SEC, there's at

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Speaker 4: least a non zero probability that they'll like write the

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Speaker 4: rules down before going after people for not obeying them,

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Speaker 4: which would be helpful. There's probably going to be significantly

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Speaker 4: more access as in maybe any access to bankings in

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Speaker 4: the United States for crypto companies, which would be particularly helpful.

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Speaker 4: And then the other part of the puzzle is beyond

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Speaker 4: the admin. Having the Republicans take the House and the

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Speaker 4: Senate means that you have a much more friendly environment

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Speaker 4: for actually passing legislation, and I would say even more

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Speaker 4: than the Biden administration. If you want to know why

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Speaker 4: we're currently in the case we're in, it's the inability

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Speaker 4: of Congress to pass laws. Because if you're trying to

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Speaker 4: use the forty Act to regulate crypto, I will remind

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Speaker 4: people that was written closer to the Civil War than

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Speaker 4: the current day, and before the creation of the Internet.

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Speaker 3: Certainly before the creation of big clin.

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Speaker 4: Correct, So I can see why that may be a

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Speaker 4: little bit complicated.

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Speaker 3: So this really gets into a core thing, which is

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Speaker 3: that it might be nice to have some sort of

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Speaker 3: clarity on, say, what constitutes a security in the crypto age,

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Speaker 3: and because of how hard it is to pass laws

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Speaker 3: period in this country, especially on big things, let alone

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Speaker 3: sort of small or more traversial things, basically been gridlocked.

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Speaker 3: So maybe there's a chance of getting legislation if I

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Speaker 3: recall the issue at coinbase in the SEC is basically

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Speaker 3: like the SEC said, you're selling or your platform for

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Speaker 3: the dealing the trading of unregistered security.

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Speaker 1: Right.

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Speaker 3: So it's one thing, and I guess this gets to

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Speaker 3: the question about legislation. It's one thing to say, Okay,

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Speaker 3: regulatory clarity is good, but what does that regulatory clarity

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Speaker 3: look like in the good version?

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Speaker 4: So I'll say, to echo something Tracy said earlier, there

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Speaker 4: is never one opinion out of the crypto history. But

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Speaker 4: I would say if you talk to like the mainstream

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Speaker 4: exchanges and some of the more call it regulated, call

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Speaker 4: it non libertarian maximalist people in the space, here is

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Speaker 4: fundamentally what they want. They want to know what the

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Speaker 4: rubric is for understanding when a token is a security

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Speaker 4: and when it is not. Because the reality is there's

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Speaker 4: been an overwhelming focus on the use of ledger technology, which,

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Speaker 4: if you step back and leave crypto is kind of

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Speaker 4: transparently insane, right, Because if I'm at JP Morgan and

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Speaker 4: I'm trading a book and it's got securities in it,

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Speaker 4: and i just move my back end ledger from like

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Speaker 4: Microsoft Excel to Microsoft Access, that shouldn't change whether those

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Speaker 4: things are securities or not. It's an economic substance test,

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Speaker 4: and the theories promulgated around this have been overly focused

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Speaker 4: on the ledger, and you need to ask tokenized gold

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Speaker 4: is pretty obviously not a security, but tokenized applestock pretty

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Speaker 4: obviously is. And where is the dividing line between these

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Speaker 4: two sorts of things as you start mixing stuff. That

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Speaker 4: question we need answered. Then the second question you need

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Speaker 4: answered is crypto dispenses with some of the traditional functions

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Speaker 4: of a securities market, Like we don't need a clearing

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Speaker 4: agency when we have a blockchain. The blockchain does the clearing,

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Speaker 4: So how does that work? Can somebody just write it down?

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Speaker 4: Which is a problem similar to like when the abs

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Speaker 4: market came into existence. A lot of the original securities

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Speaker 4: issue where things are kind of meaningless, like who is

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Speaker 4: the senior management of an SPV? It's like a sort

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Speaker 4: of weird question, and so the sec helpfully at the time,

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Speaker 4: and they are totally capable of doing this if they want,

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Speaker 4: created a whole rubric for registering asset backed securities, and

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Speaker 4: that's gone from not existing to like a trillion dollar

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Speaker 4: market because of that. So I think what the industry

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Speaker 4: wants in a responsible way is just like, listen, any

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Speaker 4: vaguely reasonable set of rules are fine, Just what are they?

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Speaker 4: Can we write them down?

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Speaker 1: Is there any concern there that when you get regulatory clarity,

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Speaker 1: it might not be the regulatory clarity that you want,

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Speaker 1: right like, it might go the other way. And in particular,

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Speaker 1: I kind of I always think of, you know, elderly

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Speaker 1: politicians gathered in rooms trying to wrap their heads around

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Speaker 1: blockchain and all this new technology. It seems like there's

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Speaker 1: a risk there.

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Speaker 4: Well, the good news is most of this stuff is

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Speaker 4: going to be written by twenty to thirty year old

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Speaker 4: staffers instead of the elderly politicians. Right just talking about

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Speaker 4: how the sausage is really made you make a good point,

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Speaker 4: which is, you know, always be careful what you wish for.

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Speaker 4: With Washington, I would say, in the current situation where

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Speaker 4: you've had an administration trying to just wipe out the

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Speaker 4: industry and make it illegal. Almost any regulatory framework is

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Speaker 4: better on a forward basis. I think there's also at

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Speaker 4: least some degree of hope with the current crop of

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Speaker 4: Republicans that they won't make the mistake of overspecifying a

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Speaker 4: particular approach or technology, because that's the way you could

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Speaker 4: really get into trouble here. Like I was talking to

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Speaker 4: somebody who's a staffer recently, and my caution on this is,

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Speaker 4: imagine if the United States in the mid nineties canonized

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Speaker 4: AOL right as the tool for accessing the Internet and

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Speaker 4: using email right, that would have been a big mistake.

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Speaker 4: So principles based regulation focused on economic substance is probably

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Speaker 4: the best outcome. If you get something worse than that,

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Speaker 4: there will at least hopefully be enough attention on it

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Speaker 4: that you could start chipping away.

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Speaker 3: Sometimes a bit when I think about alternative histories of

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Speaker 3: the Internet, like I wonder if there could have been

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Speaker 3: a situation in which it's still largely like the darp

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Speaker 3: in it they are, and they are like furious debates

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Speaker 3: like should we allow commercial access to the Internet, you know,

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Speaker 3: in the year twenty twenty five, It's like, oh no,

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Speaker 3: It's kind of actually easy to imagine these other versions.

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Speaker 3: What's wrong with the Howie test when we're talking about

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Speaker 3: like a rubric or something to determine what is a security?

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Speaker 3: You know, it looks to me like many things that

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Speaker 3: are tokens that get traded, there's an investment contract, expectation

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Speaker 3: of profit, common enterprise, a lot of these things. I

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Speaker 3: don't know. I'm like, guess, I'm not convinced that it's

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Speaker 3: so ambiguous that these are, oh these are securities, like

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Speaker 3: they kind of look like they are in many cases.

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Speaker 4: Yeah, So I would say my personal view again, there

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Speaker 4: are some tokens that to me are pretty obviously not securities,

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Speaker 4: and some tokens that are pretty obviously.

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Speaker 3: Rather than bitcoin, what is what are some tokens that

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Speaker 3: are obviously not securities?

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Speaker 4: Well, great example like dollar backed stable coins that don't

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Speaker 4: pay interest, like, somebody help me out with that one

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Speaker 4: token gold, the things that purely do governance and have

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Speaker 4: no expectation of cash flows, because what.

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Speaker 3: About a governance token for a decentralized crypto trading platform.

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Speaker 4: So here becomes the question what are the underlying economic

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Speaker 4: characteristics that it might give you access to? And you've

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Speaker 4: gotten to the place I was going, which is the

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Speaker 4: annoying part is a lot of these tokens do exist

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Speaker 4: at the gray area of Howie in general, because like, again,

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Speaker 4: let's zoom out from crypto and create one that I

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Speaker 4: think actually sort of reveals the problem.

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Speaker 2: Is.

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Speaker 4: Let's say that I buy some sort of collectible shoes, right,

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Speaker 4: Jordan's or something like that. Okay, so if I'm purely

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Speaker 4: a buyer of the shoe, I'm probably not in a

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Speaker 4: collective enterprise with Nike. But the ecosystem theory from the

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Speaker 4: sec that they've raised as well, hold on, if there's

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Speaker 4: a whole network of brokers and promoters and Nike is

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Speaker 4: sponsoring events and all of this hype around that you

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Speaker 4: are buying with the expectation of profit, Like, where really

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Speaker 4: is the boundary between that and form owning a share

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Speaker 4: of Nike stock. If you're genuinely buying hundreds of thousands

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Speaker 4: of dollars of Jordan's a year to resell them with

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Speaker 4: an expectation of profit, are you not in a sort

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Speaker 4: of collective enterprise? And I would say you can take

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Speaker 4: that principle and pretty transparently ported onto DeFi and I

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Speaker 4: think the problem that people in crypto have had if

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Speaker 4: you talk to the really savvy lawyers in this space,

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Speaker 4: like for instance, Lewis Cohen who's in New York wrote

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Speaker 4: a paper about this called Inteloctable Modality of Securities Law.

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Speaker 4: And what you run into is there are things in

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Speaker 4: traditional markets where they haven't gone after this, but they

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Speaker 4: did go after essentially the same activity in crypto. So

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Speaker 4: now one, where is the dividing line? And then two,

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Speaker 4: even if you agree that what I just said might

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Speaker 4: be a securities arrangement, does that make the Jordans themselves

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Speaker 4: a security? Not necessarily right to go back to Howie

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Speaker 4: the oranges are not the security. So one of the

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Speaker 4: big dividing lines is take the ripple case. XRP may

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Speaker 4: have and sold as part of an investment contract, but

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Speaker 4: it does not necessarily follow from that that XRP itself

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Speaker 4: is a security.

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Speaker 1: Can I ask a provocative question? And crypto people on

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Speaker 1: Twitter slash x please don't come at me for this,

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Speaker 1: but was Genstler really that bad for crypto? Like I

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Speaker 1: know he went after Coinbase and like prosecuted a bunch

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Speaker 1: of other frauds, but he also approved the ETFs. And

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Speaker 1: it's not like the crypto industry necessarily shrunk under his

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Speaker 1: tenor Crypto seems to be doing pretty well.

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Speaker 4: So I'll answer that question in two ways. I do

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Speaker 4: think Genszler intended to be quite bad for crypto, and

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Speaker 4: the things I would point at about the SEC at

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Speaker 4: the time and the heart of my past critiques of

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Speaker 4: them are one, you somehow managed to go after preemptively

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Speaker 4: like Coinbase and crack In and meta mask and people

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Speaker 4: like that, but you missed all of FTX, Celsius, Terraform

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Speaker 4: Labs Block five, like basically, if you were a fraud,

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Speaker 4: they didn't preemptively enforce, and if you weren't they did,

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Speaker 4: and that's a pretty poor track record. And then number

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Speaker 4: two is that complete inability to just write the rules down.

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Speaker 4: I think even if Crypto didn't like the rules, if

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Speaker 4: they had just written them down and said this is

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Speaker 4: what you do, they would have been at least tolerable, because,

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Speaker 4: like I would tell you, that's where the CFTC is,

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Speaker 4: Like people in crypto don't love the CFTC, but don't

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Speaker 4: feel like they're being treated unfairly because they'll at least

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Speaker 4: just tell you what they mean to a much greater extent.

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Speaker 4: And again, when we're in a point where four federal

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Speaker 4: judges who are all individually very bright people, can't agree

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Speaker 4: with each other on the rules. That's kind of a problem.

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Speaker 4: Now to answer your question literally, actually, I think Kensler

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Speaker 4: might have been good for crypto. And the reason I

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Speaker 4: say that is it sort of by swinging the pendulum

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Speaker 4: that far, it brought a lot more public attention to

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Speaker 4: this sort of thing than you otherwise would have had

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Speaker 4: had shot the streisand principle. Yeah, like his trying so

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Speaker 4: hard to kill the industry ironically may have won Trump

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Speaker 4: the election, right if.

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Speaker 3: You look at it.

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Speaker 4: So Stand with Crypto mobilized literally over one hundred thousand

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Speaker 4: people to go vote and was pushing them to the polls,

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Speaker 4: And if you look at the margins and some of

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Speaker 4: the swing states, it's entirely possible, especially because I mean,

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Speaker 4: remember it looks like men under the age of thirty

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Speaker 4: just straight voted Republican and a shocking number of those

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Speaker 4: are registered with Stand with Crypto. So I have questions.

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Speaker 4: I kind of buy it. I kind of buy it.

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Speaker 3: Actually talk a little bit more about stable coin regulation

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Speaker 3: when we hit you on last time, and I'm like

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Speaker 3: kind of a stable coin convert at this point or

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Speaker 3: at least potentially because just the idea that this could

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Speaker 3: be like a very like powerful like to find software

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Speaker 3: rail or payment rail that could not be done under

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Speaker 3: traditional legacy rails because you couldn't coordinate the different parties.

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Speaker 3: I find that actually pretty compelling. I'm still a little

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Speaker 3: not sure. I'm not sold how big the use case

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Speaker 3: will be. But as for other people to argue about

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Speaker 3: what regulatory ambiguity today in your view, holds back stable

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Speaker 3: coin growth.

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Speaker 4: So there's kind of two parts to that. One has

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Speaker 4: been the banking regulators, primarily led by the FDIC, but

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Speaker 4: to a lesser extent, the OCC and the Federal Reserve

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Speaker 4: kind of saying you just can't do these things right.

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Speaker 4: There was a note in the Federal Register in early

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Speaker 4: twenty twenty three where they essentially said public blockchains are

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Speaker 4: not compatible with safe and sound banking practices, which is

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Speaker 4: kind of a blocker if we're being totally honest, and

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Speaker 4: I think has really inhibited the United States's ability to

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Speaker 4: approach new technology. And to be clear, this kind of

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Speaker 4: rides on the back of the technophobia of banking regulators

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Speaker 4: in general, because I don't think in their case there's

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Speaker 4: singling out, you know, cryptos so much as they're singling

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Speaker 4: out any new use of technology because they're still angry

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Speaker 4: with the traditional FinTechs as well. The other thing that's

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Speaker 4: really held it back is the complete lack of any

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Speaker 4: federal legislation. So I'm dealing with fifty states on a

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Speaker 4: state by state basis that kind of all vaguely disagree

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Speaker 4: with each other about how to do things. And one

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Speaker 4: of the things I'm most optimistic about in twenty twenty

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Speaker 4: five is federal legislation on stable coins moving, and part

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Speaker 4: of that is back to just how the sausage is made.

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Speaker 4: In Washington, we've had McHenry Waters in the House, Lumus

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Speaker 4: Gillibrand in the Senate, and Senate Banking is working on

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Speaker 4: a draft of something like there's legislation that people know

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Speaker 4: that they're reasonably comfortable with where the ven diagram overlap

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Speaker 4: is pretty significant, Like it's not perfect, there's things they're

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Speaker 4: fighting about, but it's majority agreed. That's something you could pass,

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Speaker 4: unlike say market structure, where I don't think if you

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Speaker 4: look at that bill, there's majority consensus even on how

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Speaker 4: it should work or what they should do with it.

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Speaker 1: Could you ever envision a future where the big banks

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Speaker 1: get on board with stable coins, because I think generally,

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Speaker 1: like right now, they're kind of considered competition in terms

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Speaker 1: of payments technology. But on the other hand, they could,

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Speaker 1: as you've laid out in a previous episode, allow them

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Speaker 1: to make payments more efficiently.

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Speaker 4: I do think so, and I think banks in general

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Speaker 4: need a path forward where they can do something new.

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Speaker 4: You know, we talked about last time how it's hard

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Speaker 4: to take a current bank balance sheet and create a

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Speaker 4: stable coin with it because they're not fungible between each

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Speaker 4: other in terms of assets and liabilities. But in theory,

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Speaker 4: like legally, there would be nothing stopping people with federal legislation.

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Speaker 4: You know, a JP Morgan and Wells Fargo a b

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Speaker 4: of A from starting a segregated trust company and just

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Speaker 4: using that to launch a stable coin. They can totally

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Speaker 4: do that. And you know, what the banks do have

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Speaker 4: is a ton of distribution. Chase has a lot of customers.

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Speaker 4: I don't think that's news to anybody. And so to

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Speaker 4: answer your question, could there be an effort like that, Yes,

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Speaker 4: and also it could take many forms, Joe, to your

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Speaker 4: earlier point, I think I'm very pro stable cooin technology

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Speaker 4: winning in the long run, I am not yet convinced

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Speaker 4: on the exact form that's going to take commercially, because

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Speaker 4: could it be that each bank has their own stable

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Speaker 4: coin and they're roughly fungible and they all accept them. Sure.

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Speaker 4: Could it also be the case that they do something

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Speaker 4: like DTCC, where there's a repository of all the securities

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Speaker 4: and everybody uses it. Sure could that even be bigger

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Speaker 4: than banks if you get asset managers and insurance companies

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Speaker 4: in there. Sure.

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Speaker 3: I don't know, well, you know, I think by the way,

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Speaker 3: it was just a few weeks after we recorded our

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Speaker 3: last episode, Stripe made a one point one billion dollar

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Speaker 3: acquisition of a stable coin startup called Bridge, which I

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Speaker 3: hadn't been familiar with, but I was familiar with Stripe,

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Speaker 3: and that strikes me as a pretty big endorsement. Maybe

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Speaker 3: two parts. Actually, can you just sort of give a

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Speaker 3: twenty second description of what that deal is all about

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Speaker 3: for Stripe? But also more importantly, I certainly get stable

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Speaker 3: coins for the purpose of crypto trading, Okay, I get that,

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Speaker 3: Like that's pretty obvious. And then you sort of like,

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Speaker 3: all right, there's probably some like cross border stuff where

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Speaker 3: stable coins are better, faster, cheaper than other rails, But like,

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Speaker 3: how big are we talking about? Like beyond that? I

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Speaker 3: guess this is the part I'm not totally sold on

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Speaker 3: yet in terms of like how big this market gets

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Speaker 3: out of a couple of fairly obvious niches.

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Speaker 4: All right, So I'll give you by super hot take,

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Speaker 4: which is, I think, over the next call it twenty

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Speaker 4: ish years, probably the entire euro dollar market is moving

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Speaker 4: to stable coins.

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Speaker 3: All right, that's a hot take.

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Speaker 4: Say more so the euro dollar market currently, if you're

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Speaker 4: outside the United States and you're leaving dollars in foreign

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Speaker 4: banks and institutions that are trying to get access to

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Speaker 4: dollar rails, is a little bit of a patchwork and

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Speaker 4: janky market. It's got poor standards, it could be hard

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Speaker 4: to move money around. It's highly suspect in times of stress,

436
00:22:48,520 --> 00:22:51,119
Speaker 4: see like the Federal Reserve doing the dollar swap lines

437
00:22:51,119 --> 00:22:55,159
Speaker 4: and the Great Financial Crisis to bail essentially foreign banks

438
00:22:55,200 --> 00:22:59,520
Speaker 4: holding dollars out. I think that entire market moving to

439
00:22:59,600 --> 00:23:03,159
Speaker 4: stable coins removes a lot of the correspondent banking issues.

440
00:23:03,200 --> 00:23:05,479
Speaker 4: It becomes much easier and cheaper to send money around,

441
00:23:05,920 --> 00:23:09,480
Speaker 4: and standardizes and makes safer the reserves for the entire

442
00:23:09,520 --> 00:23:13,200
Speaker 4: euro dollar market. That seems like a very large upgrade

443
00:23:13,200 --> 00:23:15,840
Speaker 4: to the entire system, and my prediction is just based

444
00:23:15,880 --> 00:23:18,879
Speaker 4: on the commercial forces over time will be overwhelming to

445
00:23:18,960 --> 00:23:22,480
Speaker 4: push you there. So if you want a use case

446
00:23:22,760 --> 00:23:25,679
Speaker 4: euro dollars, I would also say zoom out of the

447
00:23:25,680 --> 00:23:28,960
Speaker 4: money and think about standards. Brazil is maybe a great

448
00:23:29,000 --> 00:23:32,000
Speaker 4: example for this. If you think about picks, where they

449
00:23:32,080 --> 00:23:36,359
Speaker 4: created a uniform standard that everybody had to use because

450
00:23:36,400 --> 00:23:39,840
Speaker 4: the government was promoting it. Suddenly you've got all of

451
00:23:39,880 --> 00:23:42,520
Speaker 4: these new apps, new ability to move money around, and

452
00:23:42,600 --> 00:23:45,240
Speaker 4: interoperability of a system that you don't have in a

453
00:23:45,359 --> 00:23:48,920
Speaker 4: very fragmented and bespoke system. So the other important part

454
00:23:48,920 --> 00:23:51,640
Speaker 4: of the blockchain part is that open access part where

455
00:23:51,640 --> 00:23:55,000
Speaker 4: if everybody's plugging into the same ledger and can move

456
00:23:55,080 --> 00:23:58,240
Speaker 4: dollars on the same ledger, it just creates way more

457
00:23:58,240 --> 00:24:00,600
Speaker 4: ability to innovate, to build and act access.

458
00:24:00,920 --> 00:24:03,560
Speaker 1: By the way, on the topic of euro dollars, if

459
00:24:03,600 --> 00:24:06,159
Speaker 1: you haven't listened to it already, you should definitely go

460
00:24:06,280 --> 00:24:09,119
Speaker 1: back and check out our three part series on the

461
00:24:09,200 --> 00:24:12,680
Speaker 1: history of euro dollars with Lev Menon and Josh Younger.

462
00:24:12,880 --> 00:24:16,919
Speaker 1: It's really fun. Anyway, Moving on from euro dollars. The

463
00:24:17,040 --> 00:24:20,840
Speaker 1: other big thing that people seem fixated on, again some people,

464
00:24:20,920 --> 00:24:25,400
Speaker 1: because crypto is not a monolith, is the strategic Bitcoin Reserve,

465
00:24:25,920 --> 00:24:29,480
Speaker 1: which seems, you know, a little bit far fetched to me,

466
00:24:29,640 --> 00:24:34,119
Speaker 1: but as Joe suggested earlier, anything is possible. Is that

467
00:24:34,200 --> 00:24:35,640
Speaker 1: realistic in your opinion?

468
00:24:36,240 --> 00:24:39,520
Speaker 3: Well, Austin, by the way, it has done some great

469
00:24:39,520 --> 00:24:41,840
Speaker 3: threads on Twitter about how silly this idea is in

470
00:24:41,880 --> 00:24:43,040
Speaker 3: his opinion. Anyway, keep going.

471
00:24:43,359 --> 00:24:46,160
Speaker 4: Yeah, I will say I'm going to file that entire

472
00:24:46,240 --> 00:24:49,080
Speaker 4: idea for the crypto community under be careful what you

473
00:24:49,119 --> 00:24:53,560
Speaker 4: wish for. I don't think that people who are promoting

474
00:24:53,600 --> 00:24:56,520
Speaker 4: a technology where the value proposition is that there's not

475
00:24:56,640 --> 00:25:00,159
Speaker 4: government interference with the technology should be advocating strongly for

476
00:25:00,240 --> 00:25:03,960
Speaker 4: significantly more government interference in their technology. To me, the

477
00:25:04,040 --> 00:25:06,840
Speaker 4: easiest way to send bitcoin to zero in the long

478
00:25:06,920 --> 00:25:09,960
Speaker 4: run is to push for the strategic reserve. And the

479
00:25:10,040 --> 00:25:12,720
Speaker 4: reason I say that is if you understand the thinking

480
00:25:12,760 --> 00:25:17,639
Speaker 4: of nation states around financial rails. If you tell the

481
00:25:17,760 --> 00:25:23,240
Speaker 4: United States, hey, bitcoin is highly strategic, their thought is not. Well,

482
00:25:23,240 --> 00:25:26,359
Speaker 4: that means we should buy coins to go up in value.

483
00:25:26,400 --> 00:25:28,600
Speaker 4: The United States can print its own money, and there

484
00:25:28,600 --> 00:25:30,440
Speaker 4: are people at the very top who are very aware

485
00:25:30,480 --> 00:25:32,720
Speaker 4: of this, they're going to think, oh, well, we should

486
00:25:32,760 --> 00:25:34,960
Speaker 4: control that network if people are going to use it

487
00:25:35,000 --> 00:25:38,119
Speaker 4: to transfer value, which will eventually, even if not at

488
00:25:38,160 --> 00:25:43,399
Speaker 4: the start, lead to things like commandeering or nationalizing miners

489
00:25:43,480 --> 00:25:46,080
Speaker 4: and having legal authority to take control of them in

490
00:25:46,160 --> 00:25:48,240
Speaker 4: times of crisis. And by the way, like, if you

491
00:25:48,280 --> 00:25:51,159
Speaker 4: read between the lines and look at our activities in

492
00:25:51,200 --> 00:25:53,080
Speaker 4: the Middle East over the past twenty years, how do

493
00:25:53,080 --> 00:25:57,240
Speaker 4: you feel about drone strikes against foreign miners and things

494
00:25:57,280 --> 00:26:00,480
Speaker 4: of that sort. If you're telling them it's strategic, careful

495
00:26:00,520 --> 00:26:03,280
Speaker 4: because they may actually agree with you and then start

496
00:26:03,320 --> 00:26:04,200
Speaker 4: doing these.

497
00:26:04,000 --> 00:26:06,080
Speaker 3: Doing the types of things that governments do. And a

498
00:26:06,160 --> 00:26:09,560
Speaker 3: resource is strategic, correct, that's it's a it's grim, but

499
00:26:09,680 --> 00:26:12,560
Speaker 3: also seems I forget who said it on Twitter. If

500
00:26:12,600 --> 00:26:14,119
Speaker 3: the if we're going to have the government by a

501
00:26:14,160 --> 00:26:17,800
Speaker 3: bunch of bitcoin for strategic reason, then the least we

502
00:26:17,800 --> 00:26:21,240
Speaker 3: could do is apply a special excise tax on existing

503
00:26:21,280 --> 00:26:24,120
Speaker 3: bitcoin holders, because if they're so, if it's so important

504
00:26:24,119 --> 00:26:26,840
Speaker 3: for strategy, let's at least make sure it's not just

505
00:26:26,920 --> 00:26:29,239
Speaker 3: some money grab. That could be the test. Are all

506
00:26:29,280 --> 00:26:33,280
Speaker 3: bitcoiners willing to pay a tax because of this important

507
00:26:33,400 --> 00:26:35,760
Speaker 3: aspect of having a strategic holding.

508
00:26:35,880 --> 00:26:40,080
Speaker 4: I will remind all bitcoin people that the government confiscated gold.

509
00:26:40,880 --> 00:26:44,639
Speaker 3: There you go. Another thing that actually sort of dovetails

510
00:26:44,760 --> 00:26:47,719
Speaker 3: with a lot of this conversation, including the politics and

511
00:26:47,760 --> 00:26:51,560
Speaker 3: including you specifically. Sometime I think it was late last year,

512
00:26:52,440 --> 00:26:55,639
Speaker 3: Mark and Dreesen went on Joe Rogan's show, and in

513
00:26:55,680 --> 00:26:58,480
Speaker 3: the middle of a broader conversation he talked a lot

514
00:26:58,480 --> 00:27:03,600
Speaker 3: about debanking and how debanking the crypto industry, and there's

515
00:27:03,600 --> 00:27:06,600
Speaker 3: all this talk about how like maybe for political reasons,

516
00:27:06,600 --> 00:27:08,960
Speaker 3: maybe not. And I think there were some details that

517
00:27:09,000 --> 00:27:11,879
Speaker 3: some people pugged holes in, but this idea that the

518
00:27:11,920 --> 00:27:15,960
Speaker 3: government had gone after the crypto industry perhaps for political reasons.

519
00:27:16,160 --> 00:27:18,000
Speaker 3: First of all, let's just start with this sort of

520
00:27:18,160 --> 00:27:22,439
Speaker 3: neuro question of what has been the status of a

521
00:27:22,480 --> 00:27:25,320
Speaker 3: crypto company's ability to just have a bank account?

522
00:27:26,000 --> 00:27:29,520
Speaker 4: All right, So in the United States from twenty twenty

523
00:27:29,560 --> 00:27:33,719
Speaker 4: two onwards, the answer to that question is probably not,

524
00:27:34,040 --> 00:27:38,000
Speaker 4: but maybe yes. And also be careful, and what I

525
00:27:38,080 --> 00:27:41,600
Speaker 4: mean by that is starting in twenty twenty two, after FTX,

526
00:27:42,000 --> 00:27:44,879
Speaker 4: it probably originated with what I think is a legitimate

527
00:27:44,920 --> 00:27:47,760
Speaker 4: effort to look into where was FTX banking and how

528
00:27:47,760 --> 00:27:50,520
Speaker 4: the hell did this happen, which is a reasonable question

529
00:27:50,600 --> 00:27:52,880
Speaker 4: to ask in the wake of a collapse like that,

530
00:27:53,359 --> 00:27:56,159
Speaker 4: but then quickly metastasized and to actually, you know what,

531
00:27:56,320 --> 00:27:57,800
Speaker 4: just get rid of all the bank accounts of all

532
00:27:57,800 --> 00:28:01,560
Speaker 4: the crypto companies, with the FDIC doing things like telling

533
00:28:01,600 --> 00:28:03,919
Speaker 4: companies you can't have more than fifteen percent of your

534
00:28:03,960 --> 00:28:05,960
Speaker 4: deposits in crypto. But also if you want to bank

535
00:28:06,000 --> 00:28:08,960
Speaker 4: anybody in crypto, you need permission from us, and we're

536
00:28:09,000 --> 00:28:11,520
Speaker 4: just going to ask infinity questions and never actually give

537
00:28:11,560 --> 00:28:14,600
Speaker 4: you permission and make very clear we're essentially going to

538
00:28:14,600 --> 00:28:17,199
Speaker 4: torture you to death with you know, scrutiny if you

539
00:28:17,240 --> 00:28:20,719
Speaker 4: do these kinds of things. And that led to it

540
00:28:20,800 --> 00:28:25,000
Speaker 4: being nearly impossible to get accounts for handling customer money.

541
00:28:25,480 --> 00:28:28,600
Speaker 4: But it also led to, in my opinion, much more

542
00:28:28,960 --> 00:28:32,959
Speaker 4: questionable things like if you're just a regular way operating

543
00:28:33,000 --> 00:28:35,040
Speaker 4: company in crypto, not being able to get a bank

544
00:28:35,040 --> 00:28:38,160
Speaker 4: account to like, I don't know, make payroll right, or

545
00:28:38,320 --> 00:28:41,360
Speaker 4: like pay your rent, and that starts getting into the

546
00:28:41,400 --> 00:28:43,200
Speaker 4: realm of hold on what are we doing to people.

547
00:28:43,400 --> 00:28:47,240
Speaker 4: I also specifically know of individuals who had their personal

548
00:28:47,240 --> 00:28:51,000
Speaker 4: accounts and accounts of family members closed for taking jobs

549
00:28:51,000 --> 00:28:54,600
Speaker 4: in crypto and these are not like I'm coming from China,

550
00:28:54,640 --> 00:28:56,880
Speaker 4: I won't disclose the source of my money. This is

551
00:28:56,920 --> 00:28:59,160
Speaker 4: like somebody who's a lawyer admitted to the bar in

552
00:28:59,200 --> 00:29:01,240
Speaker 4: an American city in leaving a bank to go to

553
00:29:01,320 --> 00:29:05,400
Speaker 4: a crypto company and having her daughter's accounts closed. So

554
00:29:05,920 --> 00:29:10,240
Speaker 4: that seems to me excessive. Now, he raised Mark being

555
00:29:10,280 --> 00:29:13,840
Speaker 4: on Joe Rogan's podcast. Mark, when he was on there,

556
00:29:14,120 --> 00:29:17,440
Speaker 4: I think kind of revealed something the average person doesn't understand,

557
00:29:17,480 --> 00:29:20,880
Speaker 4: which is that understanding banking regulation in the United States

558
00:29:20,920 --> 00:29:23,240
Speaker 4: is really complex. Like I used to joke with people,

559
00:29:23,280 --> 00:29:25,240
Speaker 4: there was this slide at JP Morgan when I was

560
00:29:25,240 --> 00:29:28,600
Speaker 4: there on who regulates us? That looks like the Pepe

561
00:29:28,680 --> 00:29:32,920
Speaker 4: Silva conspiracy theory from It's Always Sunny And the answer

562
00:29:33,000 --> 00:29:36,160
Speaker 4: is yes, like eighty two different regulatory agencies and so

563
00:29:36,920 --> 00:29:40,560
Speaker 4: Mark on Joe Rogan tagged the CFPB. I'll just transparently

564
00:29:40,560 --> 00:29:42,880
Speaker 4: say sorry, Mark, I know we've talked about this. I

565
00:29:42,920 --> 00:29:46,000
Speaker 4: don't think that's correct. I think the drive came from

566
00:29:46,040 --> 00:29:49,440
Speaker 4: the FDIC, the OCC in the Federal Reserve, and it

567
00:29:49,520 --> 00:29:53,959
Speaker 4: was highly variable in its understanding and competence ranging all

568
00:29:54,000 --> 00:29:57,040
Speaker 4: the way from very granular I think correct and legitimate

569
00:29:57,040 --> 00:30:00,640
Speaker 4: supervisory concerns all the way down to if it says

570
00:30:00,720 --> 00:30:02,600
Speaker 4: blockchain in it, you're banned from doing it.

571
00:30:18,520 --> 00:30:22,680
Speaker 1: So I get that you find some of these crackdowns excessive,

572
00:30:22,960 --> 00:30:27,560
Speaker 1: but the FDIC ultimately ensures these deposits. And when I

573
00:30:27,600 --> 00:30:32,440
Speaker 1: hear something like fifteen percent of assets in crypto, that

574
00:30:32,480 --> 00:30:37,760
Speaker 1: doesn't seem insane to me to want to limit something. Yeah,

575
00:30:37,840 --> 00:30:41,640
Speaker 1: something that is notoriously volatile and could go down to

576
00:30:41,800 --> 00:30:45,760
Speaker 1: zero for no reason. How would you design those types

577
00:30:45,960 --> 00:30:46,800
Speaker 1: of guardrails?

578
00:30:47,120 --> 00:30:49,320
Speaker 4: Yeah, I would say. I think the problem there is

579
00:30:49,360 --> 00:30:52,479
Speaker 4: the FDIC is basically stuck in the nineteen seventies. And

580
00:30:52,520 --> 00:30:54,719
Speaker 4: what I mean by that is one, crypto assets are

581
00:30:54,720 --> 00:30:58,440
Speaker 4: not monolithic. If you're telling me I'm worried about the

582
00:30:58,480 --> 00:31:01,960
Speaker 4: hot money liquidity posits of a stable coin reserve, I'd

583
00:31:02,000 --> 00:31:04,720
Speaker 4: be like, no, yeah, that's totally legitimate. But if you're

584
00:31:04,760 --> 00:31:08,520
Speaker 4: telling me that uniewap making payroll is somehow a hot deposit,

585
00:31:08,600 --> 00:31:10,800
Speaker 4: that's very scary. That's different, and they threw them in

586
00:31:10,800 --> 00:31:11,479
Speaker 4: the same bucket.

587
00:31:11,560 --> 00:31:13,800
Speaker 1: Wait, well, what about what about if a bank has

588
00:31:14,000 --> 00:31:17,400
Speaker 1: fifteen percent of its assets in bitcoin, and another bank

589
00:31:17,440 --> 00:31:20,360
Speaker 1: has fifteen percent of its assets in doge No.

590
00:31:20,360 --> 00:31:22,680
Speaker 4: No, no. So to be very clear here, we're talking

591
00:31:22,680 --> 00:31:26,360
Speaker 4: about banks giving dollar accounts to crypto companies. This is

592
00:31:26,400 --> 00:31:29,040
Speaker 4: not banks holding crypto. Oh I see, yeah, of course,

593
00:31:29,160 --> 00:31:30,920
Speaker 4: And I want to be clear. I think that's quite

594
00:31:31,040 --> 00:31:33,520
Speaker 4: risky given the volatility in crypto, and it should have

595
00:31:33,680 --> 00:31:36,880
Speaker 4: very large risk weights. I'm talking about like uniewap having

596
00:31:36,960 --> 00:31:37,920
Speaker 4: a checking account.

597
00:31:37,960 --> 00:31:40,440
Speaker 1: Okay, this is just the payment system, yes.

598
00:31:40,960 --> 00:31:44,719
Speaker 3: I get that. Okay, Clearly a bank's assets should be

599
00:31:44,760 --> 00:31:47,360
Speaker 3: you know, mostly dollars or safe things like treasures, et cetera.

600
00:31:47,800 --> 00:31:51,680
Speaker 3: But the liability side, who is there? So the fifteen

601
00:31:51,760 --> 00:31:56,840
Speaker 3: percent is your captive fifteen percent of basically your liabilities

602
00:31:56,880 --> 00:31:59,160
Speaker 3: are crypto related companies. Oh that was the is that

603
00:31:59,240 --> 00:32:01,120
Speaker 3: statute is just regulatory like.

604
00:32:01,200 --> 00:32:04,840
Speaker 4: That was kind of regulatory fiat And so to me,

605
00:32:04,920 --> 00:32:07,400
Speaker 4: I would say two parts to it. One, this is

606
00:32:07,400 --> 00:32:09,760
Speaker 4: the classic problem of your only looking at one side

607
00:32:09,760 --> 00:32:12,320
Speaker 4: of the problem. Right. What I mean by that is,

608
00:32:12,360 --> 00:32:14,480
Speaker 4: so say I'm a bank, and I say, well, hold on,

609
00:32:15,120 --> 00:32:17,920
Speaker 4: crypto is my main business, and I primarily make money

610
00:32:17,920 --> 00:32:21,560
Speaker 4: off of facilitating payments for crypto companies, not doing large

611
00:32:21,560 --> 00:32:24,440
Speaker 4: scale commercial lending. So, hey, FDIC, if I tell you

612
00:32:24,920 --> 00:32:28,200
Speaker 4: I'm only going to hold T bills to back the

613
00:32:28,200 --> 00:32:31,920
Speaker 4: crypto deposits, would you still hold this fifteen percent threshold?

614
00:32:31,960 --> 00:32:34,960
Speaker 4: And they say yes. I have a lot of questions

615
00:32:35,000 --> 00:32:38,160
Speaker 4: because that's not an asset liability matching issue unless you

616
00:32:38,280 --> 00:32:40,120
Speaker 4: think the treasury market just to go on.

617
00:32:40,280 --> 00:32:43,840
Speaker 3: So, like, I mean, SVB got into trouble because it

618
00:32:43,920 --> 00:32:47,240
Speaker 3: had a tremendous concentration in one industry, right, correct, And

619
00:32:47,680 --> 00:32:54,280
Speaker 3: and isn't part of regulatory well supervisory preventing too much

620
00:32:54,280 --> 00:32:57,360
Speaker 3: concentration on the liability side on the depositor side.

621
00:32:57,400 --> 00:32:58,960
Speaker 4: Well no, So here's where I was going to go.

622
00:32:59,160 --> 00:33:02,360
Speaker 4: SVB got into trouble because they had a high concentration

623
00:33:02,440 --> 00:33:05,440
Speaker 4: in one industry and then yoloed into like fifteen year

624
00:33:05,800 --> 00:33:09,600
Speaker 4: duration mbs as rates went up. Had SVB been and

625
00:33:09,640 --> 00:33:12,400
Speaker 4: T bills, they would still be solvent and operating today.

626
00:33:12,800 --> 00:33:14,920
Speaker 4: So what you're really looking at this is something I

627
00:33:14,960 --> 00:33:16,840
Speaker 4: thought a lot about at JP Morgan running a bank

628
00:33:16,880 --> 00:33:21,160
Speaker 4: capital book, is it's the asset liability matching part where

629
00:33:21,160 --> 00:33:24,880
Speaker 4: people get it wrong. The more concentrated your deposit base is,

630
00:33:25,600 --> 00:33:29,120
Speaker 4: the more liquid and safe your asset base needs to

631
00:33:29,160 --> 00:33:31,680
Speaker 4: be and that needs to exist in balance with each other.

632
00:33:31,800 --> 00:33:34,520
Speaker 4: So like, you know, let's take one of the extreme

633
00:33:34,560 --> 00:33:36,960
Speaker 4: examples that the FAD hates. But like if I ran

634
00:33:37,000 --> 00:33:39,680
Speaker 4: a narrow bank, I should in theory be able to

635
00:33:39,720 --> 00:33:43,320
Speaker 4: have one hundred percent concentration. What does it matter? And

636
00:33:43,400 --> 00:33:47,560
Speaker 4: so my point about the whole issue is, if you're

637
00:33:47,600 --> 00:33:49,600
Speaker 4: only going to look at the deposit side of the

638
00:33:49,640 --> 00:33:52,600
Speaker 4: balance sheet, I'm actually terrified about your competence as a

639
00:33:52,640 --> 00:33:56,200
Speaker 4: banking regulator because you're not understanding this is a multivariate system.

640
00:33:56,280 --> 00:33:59,560
Speaker 4: You're just overfixating on one thing and two By the way,

641
00:34:00,240 --> 00:34:02,280
Speaker 4: if you're going to say individual banks are limited to

642
00:34:02,320 --> 00:34:04,800
Speaker 4: fifteen percent, but then you also go tell other banks

643
00:34:04,880 --> 00:34:08,120
Speaker 4: you can't get in, now you've created a systemic level

644
00:34:08,120 --> 00:34:09,839
Speaker 4: probable where are those deposits going?

645
00:34:10,160 --> 00:34:13,920
Speaker 1: Yeah, speaking of multivariant systems, At the very beginning of

646
00:34:13,960 --> 00:34:17,600
Speaker 1: this conversation, you said that Trump was only one piece

647
00:34:17,880 --> 00:34:19,920
Speaker 1: of the puzzle. What are the other pieces?

648
00:34:20,480 --> 00:34:22,840
Speaker 4: So I think the other big pieces here are the

649
00:34:22,920 --> 00:34:26,719
Speaker 4: judicial system as we're about to experience, because as the

650
00:34:26,760 --> 00:34:30,239
Speaker 4: SEC sort of loosed these torpedoes in the water, you

651
00:34:30,320 --> 00:34:32,759
Speaker 4: need to be very careful because those get out of

652
00:34:32,760 --> 00:34:35,880
Speaker 4: your control very quickly when they encounter the federal judiciary,

653
00:34:35,920 --> 00:34:38,879
Speaker 4: who will have their own opinions on things. And one

654
00:34:38,880 --> 00:34:41,400
Speaker 4: of the I've been saying this since the litigation started,

655
00:34:41,880 --> 00:34:44,720
Speaker 4: with the current makeup of the Supreme Court, you should

656
00:34:44,719 --> 00:34:48,520
Speaker 4: be really careful about taking securities litigation stuff all the

657
00:34:48,560 --> 00:34:51,520
Speaker 4: way there because there is a non zero chance you

658
00:34:51,560 --> 00:34:54,520
Speaker 4: are going to get very strict rulings that nobody likes.

659
00:34:54,800 --> 00:34:57,080
Speaker 4: Is it so far beyond the pale with the current

660
00:34:57,239 --> 00:34:59,920
Speaker 4: somewhat literalist Supreme Court that they look at the forty

661
00:35:00,080 --> 00:35:03,320
Speaker 4: acted say guys, we don't see anything about the Internet

662
00:35:03,360 --> 00:35:05,400
Speaker 4: in here. Why did you think any of this was okay?

663
00:35:05,480 --> 00:35:07,880
Speaker 4: Not to do with paper trading? Right? And I'm not

664
00:35:08,000 --> 00:35:10,360
Speaker 4: saying it'll go there, but I'm saying you're opening a

665
00:35:10,440 --> 00:35:15,480
Speaker 4: Pandora's box, and that's open right now. The other part

666
00:35:15,520 --> 00:35:18,320
Speaker 4: is Congress. Right as we've come back to. I really

667
00:35:18,360 --> 00:35:21,280
Speaker 4: think the biggest shift there, which people have not talked about,

668
00:35:21,360 --> 00:35:23,840
Speaker 4: is control of the Senate moving from the Democrats to

669
00:35:23,880 --> 00:35:28,400
Speaker 4: the Republicans, because the biggest crypto opponents were the Senates,

670
00:35:29,200 --> 00:35:30,560
Speaker 4: like Democratic War on the.

671
00:35:30,560 --> 00:35:33,480
Speaker 3: Bank Shrod Brown, who lost his election in Ohio. Those

672
00:35:33,520 --> 00:35:34,560
Speaker 3: two come to mind.

673
00:35:34,600 --> 00:35:37,759
Speaker 4: Correct, and so Senate Banking was serving as a bottleneck

674
00:35:37,840 --> 00:35:39,680
Speaker 4: for a lot of legislation, Like even if the House

675
00:35:39,680 --> 00:35:41,520
Speaker 4: had moved stable coins, the Senate was not going to

676
00:35:41,560 --> 00:35:44,080
Speaker 4: take it up. You saw what happened with fit right,

677
00:35:44,200 --> 00:35:47,960
Speaker 4: even SABE one repeal, which I think kind of everybody

678
00:35:47,960 --> 00:35:50,600
Speaker 4: agrees is a good idea now couldn't get a super

679
00:35:50,600 --> 00:35:53,960
Speaker 4: majority because of the Democrats and Senate Banking. With the

680
00:35:54,000 --> 00:35:56,400
Speaker 4: Republicans in control of that, I think the pathway is

681
00:35:56,440 --> 00:35:59,040
Speaker 4: open for legislation, and I think that maybe a bigger

682
00:35:59,160 --> 00:36:00,960
Speaker 4: change in the long term than Trump.

683
00:36:01,960 --> 00:36:05,520
Speaker 3: Just to be clear though, going back, Sorry I keep

684
00:36:05,560 --> 00:36:09,520
Speaker 3: hammering on this question, but having a diverse depositor mix

685
00:36:09,640 --> 00:36:11,800
Speaker 3: at your bank is a principle of banking regulation.

686
00:36:11,920 --> 00:36:12,120
Speaker 4: Right.

687
00:36:12,400 --> 00:36:17,279
Speaker 3: You don't want to have all your depositors be biotech startups, etc. Right,

688
00:36:17,320 --> 00:36:19,840
Speaker 3: because then something bad happens to the industry and everyone

689
00:36:19,920 --> 00:36:23,800
Speaker 3: pulls their money out at once. I get your point about, Okay,

690
00:36:23,840 --> 00:36:26,840
Speaker 3: you want to balance the depositor mix with the safety

691
00:36:26,880 --> 00:36:29,879
Speaker 3: and yes, SBB had only been in T bills, But

692
00:36:30,080 --> 00:36:33,520
Speaker 3: this idea that it's something novel that you want to

693
00:36:33,560 --> 00:36:36,920
Speaker 3: not be too concentrated in one area does not seem

694
00:36:36,920 --> 00:36:37,520
Speaker 3: new to crypto.

695
00:36:37,800 --> 00:36:39,560
Speaker 4: No, but that is kind of why I refer to

696
00:36:39,560 --> 00:36:42,560
Speaker 4: the FDIC being stuck in the nineteen seventies. I agree

697
00:36:42,600 --> 00:36:44,759
Speaker 4: with you, that's a principle. But the problem is when

698
00:36:44,840 --> 00:36:48,719
Speaker 4: you say, well, new technologies are scary, so don't bank them,

699
00:36:48,760 --> 00:36:50,680
Speaker 4: and we're going to apply a huge amount of scrutiny,

700
00:36:50,680 --> 00:36:52,560
Speaker 4: and you've got to be a deep specialist to bank

701
00:36:52,600 --> 00:36:54,840
Speaker 4: them at all, which means a lot of cost, a

702
00:36:54,840 --> 00:36:56,440
Speaker 4: lot of effort, a lot of build out. But then

703
00:36:56,440 --> 00:36:59,080
Speaker 4: also you can't do a material amount of these things anyways,

704
00:36:59,840 --> 00:37:03,200
Speaker 4: an industry level ban on innovation. Okay, that's what I

705
00:37:03,239 --> 00:37:06,200
Speaker 4: mean by the multivariate part. Any one of these principles

706
00:37:06,239 --> 00:37:08,520
Speaker 4: is fine on its own, but it's like if you

707
00:37:08,600 --> 00:37:12,200
Speaker 4: tell me that I can only have a car that

708
00:37:12,280 --> 00:37:15,040
Speaker 4: has space for eight car seats, but also my car

709
00:37:15,080 --> 00:37:17,160
Speaker 4: can't have more than one row of seats, Like, how

710
00:37:17,200 --> 00:37:19,520
Speaker 4: the heck do I build a car? Ita'st the interplay

711
00:37:19,560 --> 00:37:21,320
Speaker 4: of these rules together, that's a problem.

712
00:37:21,520 --> 00:37:24,640
Speaker 3: Austin Campbell perfect, Gosh, thank you so much for coming

713
00:37:24,680 --> 00:37:25,480
Speaker 3: back on online.

714
00:37:25,600 --> 00:37:27,600
Speaker 4: Yeah, thank you, really enjoyed being here.

715
00:37:39,520 --> 00:37:42,560
Speaker 3: Crazy. I still stand by my point about Austin. It's

716
00:37:42,680 --> 00:37:46,520
Speaker 3: just like the best avatar, the best spokesperson for the industry.

717
00:37:46,640 --> 00:37:48,879
Speaker 1: No, I agree. I did think I have a lot

718
00:37:48,880 --> 00:37:51,960
Speaker 1: of sympathy with the idea that if you're in crypto

719
00:37:52,360 --> 00:37:54,719
Speaker 1: and you sort of did all the right things in

720
00:37:54,840 --> 00:37:58,120
Speaker 1: terms of regulation, yeah, you were often the one that

721
00:37:58,239 --> 00:38:01,120
Speaker 1: was most likely to get cracked down on, whereas someone

722
00:38:01,120 --> 00:38:03,640
Speaker 1: who just you know, did whatever and didn't follow the

723
00:38:03,719 --> 00:38:05,319
Speaker 1: rules kind of got away with it.

724
00:38:05,360 --> 00:38:08,239
Speaker 3: That's really been a huge story, and that does not

725
00:38:08,480 --> 00:38:11,280
Speaker 3: seem good, which is that you did have these endeavors

726
00:38:11,280 --> 00:38:13,839
Speaker 3: that tried to be like the you know, Coinbase made

727
00:38:13,880 --> 00:38:15,880
Speaker 3: it right, they did, they played good, and then then

728
00:38:15,960 --> 00:38:18,359
Speaker 3: now you know, now they're a publicly listed company doing

729
00:38:18,360 --> 00:38:20,799
Speaker 3: phenomenally well. And I don't know, it seems like a

730
00:38:20,840 --> 00:38:24,320
Speaker 3: good chance perhaps that things will turn in their favor

731
00:38:24,360 --> 00:38:28,399
Speaker 3: from a regulatory perspective. On what's lingering. Here's something that

732
00:38:28,719 --> 00:38:31,840
Speaker 3: I'm still confused about. Okay, let's say they establish a

733
00:38:31,880 --> 00:38:36,880
Speaker 3: securities framework for crypto, which seems possible securities law. I

734
00:38:36,880 --> 00:38:40,200
Speaker 3: think it as all kinds of obligations about like disclosure

735
00:38:40,400 --> 00:38:42,439
Speaker 3: and all these kinds of things like what's that even

736
00:38:42,480 --> 00:38:46,960
Speaker 3: gonna mean for someone in their living rooms somewhere, maybe

737
00:38:46,960 --> 00:38:50,160
Speaker 3: in Singapore or Vietnam. Who like creates a to own

738
00:38:50,239 --> 00:38:54,600
Speaker 3: the US, who creates some token for decentralized trading network.

739
00:38:54,840 --> 00:38:58,319
Speaker 3: I get the macro premise, oh, we need rules, But

740
00:38:58,400 --> 00:39:01,239
Speaker 3: the idea of then applying these rules to the industry,

741
00:39:01,320 --> 00:39:04,200
Speaker 3: which is sort of like famous for like it's just code,

742
00:39:04,520 --> 00:39:05,759
Speaker 3: strikes me as it's going to be very.

743
00:39:05,680 --> 00:39:09,319
Speaker 1: Difficult, Yes, very difficult. The other thing I'm wondering about is,

744
00:39:09,840 --> 00:39:12,799
Speaker 1: you know, it seems like there's a desire to have

745
00:39:12,880 --> 00:39:16,080
Speaker 1: more nuance in the rules, and I wonder, at what

746
00:39:16,200 --> 00:39:20,440
Speaker 1: point do you end up with regulators having to basically

747
00:39:20,480 --> 00:39:25,759
Speaker 1: evaluate new technology. Yeah, and you know, regulators don't necessarily

748
00:39:25,880 --> 00:39:29,279
Speaker 1: seem best place to do that. That seems like a

749
00:39:29,360 --> 00:39:30,040
Speaker 1: risk as well.

750
00:39:30,480 --> 00:39:33,320
Speaker 3: In the end, I do think there are some exceptions,

751
00:39:33,360 --> 00:39:35,760
Speaker 3: like maybe stable coins, but a big part of crypto

752
00:39:36,080 --> 00:39:39,120
Speaker 3: is essentially this idea that you can have things that

753
00:39:39,200 --> 00:39:42,040
Speaker 3: have value that exist on the Internet outside of the

754
00:39:42,080 --> 00:39:46,400
Speaker 3: regulated banking system or the regulated finance system or whatever.

755
00:39:46,560 --> 00:39:49,120
Speaker 3: And the idea like it always sort of seems like

756
00:39:49,640 --> 00:39:52,000
Speaker 3: once you try to mix it with the financial system,

757
00:39:52,080 --> 00:39:53,799
Speaker 3: it's like oil and water. But I guess We're gonna

758
00:39:53,800 --> 00:39:54,880
Speaker 3: see how they can mix it.

759
00:39:55,040 --> 00:39:58,520
Speaker 1: Yeah. The one thing I'll say is bitcoin especially has

760
00:39:58,600 --> 00:40:02,440
Speaker 1: this tendency to really go with any narrative. It's that

761
00:40:02,520 --> 00:40:05,560
Speaker 1: narrative flexibility, right, And so there is an irony that

762
00:40:06,560 --> 00:40:10,600
Speaker 1: a lot of crypto proponents and bitcoin proponents now want

763
00:40:10,960 --> 00:40:15,000
Speaker 1: more legislation and they want you know, that strategic bitcoin reserve,

764
00:40:15,160 --> 00:40:18,680
Speaker 1: or at least some of them. But so far it's

765
00:40:18,760 --> 00:40:20,240
Speaker 1: resonated in the price.

766
00:40:20,400 --> 00:40:20,600
Speaker 4: Right.

767
00:40:20,640 --> 00:40:24,239
Speaker 1: It's like bitcoin has seized on that narrative and that

768
00:40:24,400 --> 00:40:26,480
Speaker 1: positive momentum, and here we are.

769
00:40:26,880 --> 00:40:29,760
Speaker 3: I loved Austin's point that if you convince the government

770
00:40:29,760 --> 00:40:33,240
Speaker 3: that bitcoin is strategic, the government might start doing things

771
00:40:33,360 --> 00:40:36,920
Speaker 3: associated with other strategic resources and it may not be

772
00:40:37,040 --> 00:40:38,080
Speaker 3: so pretty.

773
00:40:38,160 --> 00:40:42,200
Speaker 1: So also the through line from Gary Gensler cracking down

774
00:40:42,239 --> 00:40:44,759
Speaker 1: on crypto and Trump winning the election.

775
00:40:44,960 --> 00:40:47,799
Speaker 3: I think there's you know, I'm like, I think there

776
00:40:47,880 --> 00:40:50,120
Speaker 3: might be something to it. I think you would have

777
00:40:50,160 --> 00:40:51,960
Speaker 3: said that to me six months ago. It would have

778
00:40:51,960 --> 00:40:54,799
Speaker 3: been more skeptical. I think I'm less skeptical now.

779
00:40:54,960 --> 00:40:56,560
Speaker 1: Yeah, all right, shall we leave it there.

780
00:40:56,640 --> 00:40:57,319
Speaker 3: Let's leave it there.

781
00:40:57,680 --> 00:41:00,359
Speaker 1: This has been another episode of the odd Lots Pott.

782
00:41:00,520 --> 00:41:03,480
Speaker 1: I'm Tracy Alloway. You can follow me at Tracy.

783
00:41:03,080 --> 00:41:05,719
Speaker 3: Alloway and I'm Jill Wisenthal. You can follow me at

784
00:41:05,719 --> 00:41:09,280
Speaker 3: the Stalwart. Follow our guest Austin Campbell. He's at Campbell

785
00:41:09,440 --> 00:41:13,440
Speaker 3: j Austen. Follow our producers Carmen Rodriguez at Carmen armand

786
00:41:13,480 --> 00:41:17,040
Speaker 3: dash Ol Bennett at Dashbot and Kelbrooks at Calebrooks. And

787
00:41:17,120 --> 00:41:19,720
Speaker 3: for more Oddlots content, go to Bloomberg dot com slash

788
00:41:19,760 --> 00:41:22,640
Speaker 3: od Lots. We have transcripts blog in the newsletter. You

789
00:41:22,640 --> 00:41:24,719
Speaker 3: can chat about all of these topics twenty four to

790
00:41:24,760 --> 00:41:27,240
Speaker 3: seven in our discord where we have a crypto channel

791
00:41:27,560 --> 00:41:29,640
Speaker 3: Discord dot gg slash od lots.

792
00:41:29,960 --> 00:41:32,640
Speaker 1: And if you enjoy all Blots, if you like it

793
00:41:32,640 --> 00:41:35,719
Speaker 1: when we ask what crypto actually wants, then please leave

794
00:41:35,800 --> 00:41:39,920
Speaker 1: us a positive review on your favorite podcast platform. And remember,

795
00:41:40,080 --> 00:41:42,680
Speaker 1: if you are a Bloomberg subscriber, you can listen to

796
00:41:42,760 --> 00:41:45,920
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797
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798
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