Transcription
We'll have an announcement. I I wish I could say more. It's a breakthrough as far as getting everything in place, legally sound, properly safeguarding the assets.
>> How reversible are executive orders if we see regime change?
>> Very reversible. There's no more powerful institutional sponsorship than the US government saying we give this a thumbs up and we think that this should be part of the the financial architecture that we have an opportunity right now to really lead. And many people out there would say that the banks are actually probably more in need of this legislation than crypto is. This is the the new architecture of the financial system going into the future. And if we're not setting the rules, we will be following somebody else's rule book.
That's dope.
>> Let's go.
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>> So we started SPR or clarity because last week you were in Vegas actually. We could start there and you you you made all the headlines by saying that there'd be an announcement coming from the White House on a strategic Bitcoin reserve. It seems to be like the forgotten stepchild of all the you know clarity genius with rationally so
>> uh just because there's so many priorities but it was nice to I think hear
>> that there's still progress there. There's still work going on behind the scenes. Uh we never, you know, put it down. We never stopped working on it. But um it was one of those things that clarity was dominating all the headlines, sucking up all the oxygen in the room. But Harry has really led the charge on that. Harry Jung, my deputy, and done an incredible job working through just the inter agency process, the the executive order obviously ticked certain agencies to to work this out. But that's usually just a starting gun and then it's like, all right, actually do the work. Uh what legal memos need to be drafted? What authorities do we have? Do we have the appropriate authorities? Um, so working through all of that takes time and uh, Harry has done an incredible job of bird-dogging that and staying on top of it and it's really been a team effort with Steven Miller's team, DCOSP, the deputy chief of staff for policy who uh, their group is really responsible for making sure that all the executive orders that have been signed are being followed through on followed through on and uh, so uh, we'll have an announcement. And I I wish I could say more at this time, but uh I I think I we're still within the window that I gave myself.
>> Yeah, we're an announcement of an announcement phase still,
>> but uh but no, it's it's a breakthrough as far as uh getting everything in place uh legally sound uh properly safeguarding the assets. We obviously were working on the SPR ever since the executive order was signed and then the theft of of assets from the US Marshals uh for some of the tier 2 assets if you follow that story uh was really just kind of like a great proof point that uh we really need to take this seriously. These assets have to be safeguarded. They are unique. It's going to require the government to uh to to do this in a bit of a different way and obviously take it very very seriously because we have more of these assets on the balance sheet. I I don't want to take for granted that everybody understands the mechanics of getting law done.
>> Sure.
>> So, executive orders obviously come from the top. How important is it to still get legislation? Because Lumis has obviously been pushing the legislation extremely hard. How important is it that that gets done? And how reversible are executive orders if we see regime change?
>> Very reversible. As we saw from uh Trump to Biden, back to Trump, uh there were a lot of executive orders. A lot of the activity that happened on the first day uh of each of those uh different administrations was reversing a lot of the executive orders that were in place. So uh we have been very clear from the beginning this needs to be codified into law. Um, so Bitcoin Act with Senator Lumis and then Representative Beg in the House is going to be introducing ARMA, which we have worked with him on to uh to update and uh just take a lot of the stakeholder feedback and really get a product that they believe in the House that can get marked up and and would have a shot at maybe hitching a ride along an NDAA or something like a must-pass bill. Um, so we've worked closely with their team and you know like Clarity, this is the the seventh iteration, let's say, of legislation that ultimately gets you to this place. Bitcoin Act being a version one, ARMA being a version two, you you keep updating the the piece of legislation. You make it better and you're you're really finding the market clearing price for legislation. So, um we're we're very excited about uh that bill that's going to be uh rolled out here and hopefully marked up very soon and uh codifying what the president started by signing the executive order. But you've seen a lot of other countries uh follow suit and say, "Hey, we need to take this very seriously." And what are we doing to uh to position ourselves in this in this new world?
Yeah, that game theory is interesting because when you have the president's signal that Bitcoin is a worthy strategic asset, >> whether we do it or not or how we do it, you have to imagine that every central bank or every government on the planet is on notice that now maybe they need to hold some of this stuff.
>> Yeah, it it relates to so many of the things that we're doing. I just had a meeting earlier with some uh some representatives from uh from the UK and uh they were echoing what we've heard from so many different jurisdictions. They're waiting on the US to lead. All eyes are fixed on Washington uh with the Clarity Act and with the things that we're doing because they want to establish regimes that are compliant that they could potentially get reciprocity and uh so we have an opportunity right now to really lead. Um obviously we did that with Genius. That's an example of what it what good looks like when you actually legislate to uh to to allow innovators and builders uh to create something new. We've seen huge explosion uh in the stablecoin market. We think the same thing is going to happen with Clarity Act. Um, there's there's no more powerful institutional sponsorship than the US government saying we give this a thumbs up and we think that this should be part of the the financial architecture, the fabric of of the global financial uh system of the future. And so um that's why I think we just have an incredibly important moment right now. We have to seize that uh moment and not let it slip through our fingertips because the prime beneficiaries primary beneficiaries of this would be other jurisdictions if we fail to to meet the moment.
Yeah, you've made, I think, the most compelling point about clarity, even outside of all the headaches and and watching it sort of be litigated in real time, which is we need a clarity act from this government and not from whatever future iteration of this government we we have. And I I thought that was sort of the most compelling point. We've seen what the anti-crypto army can do.
>> Right.
>> Right. We had four years of, you know, contentious relationship with the government. Clarity Act looks very different if Elizabeth Warren is the head of the Senate Banking Committee >> or Sherrod Brown coming back. I mean, um, yeah, don't leave it to chance. Um, as I've said, uh, to to anyone that maybe has misgivings or is questioning, you know, why is this so important? It's like it may not seem important right now, but in a few years, you you would be very grateful. This legislation is really future-proofing the industry. Not for this administration. Obviously, this administration is as pro-crypto as you can get. Uh, across the board, we have a great team. The president has nominated and the Senate has confirmed. Incredible leaders, Chairman Atkins, Chairman Selig, Comptroller Goolsbee, Secretary Yellen, I mean just very very pro-innovation, forward-thinking uh want the US to dominate in this technology area and in so many other technology areas. But uh this legislation is really putting the the industry on a firm footing when potentially those those same people that uh aren't in charge anymore and and maybe a more critical view comes back in. So, I don't think uh the industry is out of the woods by any means, and I think that's why this legislation is so important. And we're also doing it at a time when there's not a crisis. Most pieces of financial legislation in uh America's history have been passed in response to crisis. And so, the the pendulum swings way too aggressively in the direction of overly burdensome regulation. We're doing this with clear eyes when the market the industry is doing very well and we're allow we're able to to really soberly assess uh what good looks like in terms of regulation.
>> Uh so brass tacks, I mean where where does it stand right now? Obviously we finally got seemingly an agreement on stablecoins. I laugh because the banks started bitching immediately and the crypto industry started complaining immediately which means you did something right.
>> Right. If it was eerily quiet, uh I think you know we would know that there was a problem under the surface. So we go to markup.
>> Y
>> Seems like stablecoins are kind of done, >> right? Uh but there's I'm assuming other things you're thinking about to the future that are going to need to be sorted before this thing becomes law.
>> Yeah, you got to look at two buckets of issues. One is is substance, right? The things of the bill that are really germane. And then bucket two is is the politics. And what's left in the the substance bucket is almost nothing at this point. We have done a steady march through call it a dozen or 15 issues that at one point in time felt like they were unsolvable. um going back to battles around the DeFi carve-outs um, you know, stablecoin rewards and yield, just you go down this list and we have checked off all of these and it's really a testament to uh Senate Banking Committee, Senator Lummis, um, industry coming together, putting forward creative solutions where it felt like there were red lines that people couldn't come off of. People got creative. They got uncomfortable in certain ways because they recognize that, you know, looking at the big picture, >> there are going to have to be some areas of the bill where you're going to have to give on and certain of those gives are going to matter more to certain industry participants. But I think really credit to to the crypto industry, the fact that they recognize the big picture, the value of this for what it means for for crypto for the long term. And so we've we've ticked off so many of the the substance issues that you're kind of looking at and you're like, what else is there to do? So now we're really just on to the political issues and um solving those. Uh not saying it's going to be easy, but uh I have confidence because we've been able to work through so many of the other very very challenging issues.
On the stablecoin side, you had this interesting situation where Genius passed with seeming consensus even from the banking industry at the time and it feels like they looked at it a month or two later and said, "What have we done?" Right?
>> And they kind of looked it back and they were like, "Well, we're this didn't address our problems. We rushed this through and now we need to add to it, right?" And so I see the stablecoin deal that that's being agreed here as actually way more aggressive than the Genius Act, right? Because you went from yield from issuers to yield from everyone >> being problematic. I would think the banks would be celebrating and immediately the lobby started making noise that uh they don't think it goes far enough to protect deposit flight, which obviously the White House has already pointed out with actual math, right? The data is not an issue.
>> Yes. Let's engage with the facts. Yeah. Um
>> it's it's very interesting and it's been somewhat hard to discern exactly what the motivation is uh for for the bank trades and certain individual banks. There is quite a bit of delta between the bank trades and what we hear from a lot of individual banks. There are a lot of banks out there. I just met with one this morning um that are very bullish on on this legislation and many people out there would say that the banks are actually probably more in need of this legislation than crypto is. Uh that bank permissible activities and and title four is hugely important to the banks because you know in a world in which you start to tokenize a lot of these assets if banks don't have a clear permission to engage in this they're going to be left behind. So uh competitively I think it's it's arguably as important maybe even more important that the banks get this legislation done. So the fact that there are some that are that are very outspoken over this issue of stablecoin rewards and yield um is is maybe it raises the question is do they just want to fight a bill overall and uh maybe it's not just this issue but that's the one that's been most salient that they've tried to use as a wedge issue but credit to Senator Tillis, Senator Ossoff >> response response was incredible agree to disagree
>> exactly exactly and um, you know, ultimately they're the ones that that cast the votes. They're the ones that have been entrusted by the the constituents of their state to use their informed judgment to decide what's best for for their constituents in their state and America overall. And um, you know, I I would have loved to have never uh heard the word heard the words rewards and yield in the context of clarity. I would have loved to have just let Genius be the final word on it. Um, but we saw that we just didn't have the votes to advance a bill out of the Senate Banking Committee, much less in the in the broader Senate if we didn't do something on this issue. And so we convened a number of meetings at the White House which ultimately led into forming a draft that we then then did a handoff with Senator Tillis and Senator Ossoff. They ran their own independent process, pressure tested everything that that we had done, looked at this from all angles, I mean this has really been picked over with a fine-tooth comb. And I think to your point, um, when you look at the response from from both sides, I think, you know, with these compromises, you you got it just about right when there's equal amounts of frustration or disappointment on both sides. That is the the true mark of a of a good compromise.
>> But everyone's saying, "Yes, let's move this forward, but I'm really not that happy about it." That was the only uh conclusion that gets this to markup, I would imagine. I sat down a couple months ago with Chris Giancarlo, a friend of mine from, you know, former CFTC chairman obviously, and he was the first person who said to me what you just said, which the banks need this more than the crypto industry. I'm a big fan of strong opinions, loosely held. I say a lot of things emphatically and then retract them.
>> Yeah.
>> You know, when when presented with new information, I had never thought about it that way. I was a huge proponent of the crypto industry needs this, but it really is the banks and maybe you can explain more what what that means to you, but they need to participate in this and they're actually the ones with more stringent fiduciary duties and rules that can't do anything until they have clarity.
>> Exactly. So the what I mentioned in title four, the list of permissible activities for banks um without legislation that clearly says banks can engage in this activity whether it's lending against using as collateral underwriting, you know, just kind of like the the full suite of engagement with digital assets, then banks are dependent upon OCC interpretations of what is what is permissible for them. So we've seen from administration to administration a uh reversal of of course on that obviously with the Biden administration taking a very negative view. And so if you're a large institution like that, you're not going to set up a line of business. You're not going to open a new division. You're not going to invest the money necessary in order to build this out if in a few years it could potentially get reversed and you have to shutter the whole thing again. So uh SoFi is a great example of this. They got into crypto early and then Biden administration comes in. They had to shut it all down. Now they're turning it back on. That kind of uh reversal and whipsaw is just not how institutions operate. So if we want uh you know, the the banks and all market participants to be able to engage in the space, they need that clear marker that says definitively yes, banks can engage in this activity and it's not subject to change with a new administration coming in.
>> Right. So the crypto side obviously needs it as well, right? They may need it more, but but we still need it. What do you think right now are the key facets of clarity that remain that are most important for the crypto industry? I I just think in the press we've gotten so fixated on stablecoins, >> which we've already done with Genius, that we're forgetting about all the things that are actually in this bill.
>> Sure. I know. I sometimes forget, you know, the different parts of it. There is a lot in this bill. That's what makes it so complicated. That's why it takes a long time. I uh you know whenever I post something you know demonstrative or indicating that we've made progress that we're getting closer um get pilloried by certain folks that say yeah yeah you know just tell me when it finally passes and I can just tell you that the the number of issues in this bill that are of great importance obviously giving CFTC spot authority over digital commodities, defining clearly what's a security, what's a commodity, establishing clear rules around what disclosure is required for people listing different assets, exchanges. There's software developer protections in here which are massive. Um, there's the DeFi carve-outs, what is going to be reg, you know, activity that needs to register, what is not. Um, you know, the list goes on. The bank permissible activities. I mean, there's just so much in here and it touches on so many different facets of of finance. There's capital markets, there's banking, there's payments, there's there's so much in here and that's why a lot of people are are making sure that does this work for me? Does this threaten my existing franchise, what have you. But um, you know, it it is going to be I think one of the most impactful pieces of financial legislation in American history. Um, if we can get it done and uh, you know, as of late with some of the the recent developments, I am uh trending bullish. I try and keep uh my my expectations low and and we'll exceed.
>> I've been a vocal pessimist, but I'm coming around.
>> We're getting there. We're getting there.
>> I'm coming around. I mean, yeah. What's your vision assuming this does pass for what this industry looks like, you know, a year, three, five years down the road?
>> Well, I think you you look to Genius as an illustrative example of what can happen. Genius passes. Stablecoin market has exploded. You see tremendous investment going into that. Uh new funds that just got raised. Pantera, a16z, Dragonfly, Paradigm. So many of these funds are are being raised and one of the primary theses that they're investing in is around stablecoins and new payment rails. So um that is proof point of cause and effect. We got this bill done. There's regulatory clarity. The rules are being written and now here comes all of this investment. All of this new venture money, institutions starting to, you know, say, okay, what does this mean for for my company, my business? How can I take advantage of this? How can we potentially integrate this product into our suite of products available? So I think with clarity you're going to see a similar uh response to that that government stamp of approval that these assets, this industry is here to stay. Um, and you're already seeing a number of the the banks and other existing institutions start to position themselves. But that's really just going to firm up with this legislation getting passed. Uh and I think you're going to see a lot more uh investment in the space, a lot more institutional adoption uh which inevitably makes its way into the entire financial fabric.
So we had this sort of meme, you know, no bill better than bad bill, bad bill better than no bill. The the question to me is once this is passed, inevitably there will be problems, but like you said, it's the the breath is way too wide for to be able to forecast every unforeseen issue that could come with it. How hard is it to change things once they're codified in law, to amend this bill, to go back and say, "Ah, maybe we need to clarify this single thing a bit more."
>> Yeah. So with any piece of legislation, there's there's parts of it that are hard-coded and then parts that are directing rulemakings, which is very very important in a post-Chevron world under the Loper-Bright standard that these agencies have a clear mandate from Congress to rulemaking in a certain area. So um with the parts that are hard-coded, you you really want to pay very very close attention to those because that would have to be revisited with legislation. But a lot of this is is directing rulemakings with guidelines and and principles applied to the rulemakings that the agencies will undertake. So um to to answer your question, the parts that are hard-coded, yes, we have paid very very close attention to those, making sure that we don't hard-code something in there that is uh very difficult to reverse. But on those areas where it really was kind of a, you know, unstoppable force meeting an immovable object, those are usually the ones where if not the whole thing, at least part of it gets put over to rulemaking to allow some more play in the joints. And then also obviously rulemakings can be revisited in an easier way. Uh not not simple to to reverse a rulemaking, but uh certainly leaves the door open uh in a way that doesn't necessarily have require an act of Congress.
>> I mean, it needs to be somewhat flexible. When I looked at the Tillis and Ossoff you know kind of compromise, obviously I haven't seen the the full deal, my first thought was, so what activity is defined here? If Coinbase says >> move your uh USDC from this wallet to this wallet, now you have a rewards activity. Is it behaving like a, you know, a bank deposit or is it behaving like a credit card rewards? Right? So I'm assuming there's going to be a lot of push and pull once these things are actually put into practice.
>> Yeah, exactly. And this was what we understood the banks to be saying is a a product right now that allows someone to take money out of their bank account and park it on a crypto exchange and just earn idle yield on it for doing nothing else. That feels a lot like a traditional deposit uh bearing uh or interest-bearing bank deposit. And so we said, okay, we're going to address that issue head-on. And we did with the economic or or functional equivalence. But we wanted to make very clear that you know beyond that kind of simple model there where it is, you know, okay, this feels a lot like a a bank deposit. All the rewards that that you might pay related to bonafide activity should be permissible. That feels a little bit more like credit cards. And obviously the velocity of stablecoins um is it demonstrates the fact that these are very very uh valuable and and strong product-market fit for for payments. Um, so anyone that that was fighting against and and the banks came out recently and said that it falls short of of achieving the goals. It's we we address that issue head-on and credit to crypto. The fact that they came forward that you know again, I I would love to have done nothing on stablecoin rewards and yield. Obviously, a lot of of crypto, probably all of crypto would also have loved to have just said, you know, we we fought this battle during Genius. Let's not revisit it. But crypto came a long way and made a tremendous amount of concessions. But, uh, it was pretty clear that the banks wanted to basically reopen Genius and totally ban all rewards, yield, anything on top of stablecoins. And we made clear to them, we're not disrupting Genius. We're not going to disturb that. There are rulemakings that are already going on right now. Um, so we had to uh, you know, it took a lot of, uh, legal drafting to make sure that what we were doing was narrowly tailored so that we were able to address the issue that the banks were raising and that the senators uh, wanted to see addressed, but in a way that didn't necessarily disrupt Genius.
>> So, fast forward through the summer, Clarity Act gets passed, let's assume, because I assume we're really on a July August timeline really, right before midterm season and recess.
>> What percentage of what we need done is done at that point? Are we at 90% of everything the crypto industry needs and everything else is a cherry on top? Because it's always been sort of Genius and Clarity where the glaring elephants in the room, right?
>> Yeah. As far as the the substance goes, I would say 90% is probably the the right number. There's still some cats and dogs, little things here and there that we're trying to get tied up and then there will need to be a reconciliation with the A portion which has already passed out of committee and is waiting for the banking portion to catch up. Um, so I would say substance-wise, you know, about 90% is is there, but when you get to the floor now, you need to negotiate with the the whole caucus on the other side of the aisle. There's going to be other Republicans that that might raise issues of their own. So, uh, some of these issues, um, if we've done our jobs, uh, there will not be many issues revisited, but inevitably some people will try and take another bite at the apple on some of these issues. But again, if if we've done uh the work, which I believe we have on a lot of these issues, then the compromises will hold, but it doesn't mean that people won't try and and reopen them.
>> Yeah. I guess it just is there anything left that we could possibly ask for or are we good for the next hundred years to some degree, right?
>> Yeah. I just find it funny because I don't think people think about it in the frame of Clarity Act passes and in the year 3000 they might be talking about this the same way we're still talking about the Glass-Steagall Act. Oh yeah, absolutely. Um, yeah, these are these are seminal pieces of legislation. It is difficult to get a major piece of financial legislation done um when you're not doing it in response to a financial crisis. That's why I think it's I made that point earlier. It's so important to remember that this is abnormal, but it really should be the norm. We should be legislating in in good times uh with a sober assessment of the issues and what makes sense from a good policy standpoint. What puts the United States on the best footing competitively? uh relative to the rest of the world. I mean, one of the things that that really underwrites American success and American hegemony in the world, we've got our military, obviously. We've got an incredibly uh robust and rich judicial system and and leg, you know, legal history here. People avail themselves of our laws and contracts the world over. But one of the other major ones is our role in financial markets. Our capital markets are deep. They're liquid. They're predictable. There's good consumer protections. They have really been uh stood the test of time and been a major major factor. Obviously our our uh currency as well, the dollar's status in in global foreign exchange, global trade is massively important. So this is the the new architecture of the financial system going into the future and if we're not setting the rules, we will be following somebody else's rule book.
>> Last question. I know we got to go. How many people do you have to talk to a day in conflicting conversations? And what does 5:00 p.m. look like versus 9:00 a.m. to you? You know, 9:00 a.m. this is done. And then you call somebody else at 3 and they're relitigating the same point you thought was done at 9:00 a.m. I I can't even imagine what your day looks like.
>> Yeah. I I almost have to write it down. I remember the conversations that I had because a lot of times you're relaying the same information to a whole host of different people. And so you're like, "Have I already shared this information with you?" I always find myself asking like, "Did I already tell you this or was that a different agent in your I know. I really do need to get one of those." Um, but uh, you know, the day starts early, it ends late. Uh every day is a bit unpredictable but um we we just were in touch with with all the stakeholders internally, externally on the hill throughout the administration and obviously Clarity is is dominating my time, but it's not the only thing that we're doing as we talked about with the SPR with different rulemakings that are in flight following on from Genius. Uh, there is a lot going on. This administration is working hard every day to advance uh this industry's interest. And it really comes back to President Trump is a competitive guy. Americans are competitive by nature. We want to be number one. We want to dominate. We want to be the best in the world. And uh crypto is obviously one of those technologies that the president said early on, we want to be number one. We don't want to seed any ground to anybody else. Certainly not China in this space. Same is true for AI, nuclear technology, any of the frontier technologies that um are are you know, in development or in kind of a nascent stage right now. The president uh really just sets the vision and says let's let's do everything that we can to allow America to succeed and allow the United States to thrive and to dominate.
>> Is that urge to dominate the reason that all of you are football players?
>> I I don't know.
>> You, Bo, Harry, right? All of you played football.
>> That's right. We have a strong uh strong football connection in our office. I would never make it.
>> Couldn't do it.
>> Yeah, it's it's funny. You know, Bo and I uh obviously have the history both being Yale football guys, but what was interesting is I knew of Bo and he knew of me years before we ever actually met because I had transferred into Yale uh had played football at Nebraska and then transferred in. Bo was uh I believe a freshman All-American at NC State and had transferred in. So, I remember hearing of his story and when he was making the decision to transfer to Yale, uh, he had heard of my story, but it took years later when we were both running for Congress in 2022 before someone finally put us in touch and we've been like brothers ever since. So,
>> I love Bo, man. It was, uh, I love watching his meteoric ascent.
>> Can only hope the best for all of you, man. Thank you so much. I really appreciate, no pun intended, the clarity on everything. How I find myself doing that all the time. Thank you, man.
>> Absolutely. Thank you.