WEBVTT 1 00:00:00.200 --> 00:00:05.400 I think by now it's safe to say shouldn't be terribly controversial to say that 2 00:00:05.679 --> 00:00:09.720 not only what they're saying out of the sec but actually how they're conducting business 3 00:00:10.320 --> 00:00:15.880 again, is strongly consistent with a strategy of we think crypto is in the 4 00:00:16.000 --> 00:00:21.760 state we are. If the rest of the world wants to proceed with these 5 00:00:22.679 --> 00:00:30.280 disintermediated computer systems where trading and assets which you can create a thin air are 6 00:00:31.199 --> 00:00:35.679 the realm of the coin, the rest of the world can go with God, 7 00:00:35.719 --> 00:00:46.679 but cut the United States out of it. This content is brought to 8 00:00:46.759 --> 00:00:50.640 you by Bitco, which is one of the top crypto custodians in the crypto 9 00:00:50.719 --> 00:00:55.880 industry. Bitco works with many big companies and brands such as Pantera Capital, 10 00:00:55.920 --> 00:01:00.840 Bitstamp, and bitcoin Ira. Nike also selected Bitco to power its wallets for 11 00:01:02.000 --> 00:01:07.359 its NFTs and Bitco has many great services such as hot wallets, custodial wallets, 12 00:01:07.480 --> 00:01:11.959 self managed cold wallets, and NFT wallets. Many institutions trust Bitco with 13 00:01:12.040 --> 00:01:18.480 its top level security and incredible services such as being able to deploy your capital 14 00:01:18.640 --> 00:01:22.480 walle It's in custody, which includes lending, borrowing, trading, staking, 15 00:01:22.560 --> 00:01:25.719 DeFi access, and more. If you'd like to learn more about bitco, 16 00:01:26.040 --> 00:01:30.280 please visit bitgo dot com link in a description. Welcome to the Thinking Crypto 17 00:01:30.319 --> 00:01:34.560 Podcast, your home for cryptocurrency news and interviews. With me today is Bill 18 00:01:34.640 --> 00:01:38.760 Hughes, who's the senior counsel and director of Global Regulatory Matters at Consensus. 19 00:01:38.879 --> 00:01:42.719 Bill, great to have you on. It's great to be here with you. 20 00:01:42.719 --> 00:01:46.840 Thank thank you for having me. Bill. Let's start with your background. 21 00:01:47.040 --> 00:01:49.359 Where are you from and what's your professional background. I'm born and raised 22 00:01:49.400 --> 00:01:57.200 in Washington, DC, and after attending law school at the University of Virginia, 23 00:01:57.439 --> 00:02:02.159 I went into litigation up in New York, then went back into government, 24 00:02:02.879 --> 00:02:07.840 serving most recently at the Department of Justice, working with the Deputy Attorney 25 00:02:07.840 --> 00:02:15.199 General, the chief operating officer of the Department of Justice. I then had, 26 00:02:15.360 --> 00:02:21.599 by that point, become completely obsessed with the crypto ecosystem and decided to 27 00:02:21.800 --> 00:02:25.039 forego an opportunity to go back into private practice at a law firm and instead 28 00:02:25.159 --> 00:02:30.319 really want to dig into the crypto ecosystem. I found a wonderful opportunity at 29 00:02:30.360 --> 00:02:37.639 Consensus to help them navigate the regulatory landscape and really think about things such as 30 00:02:38.039 --> 00:02:42.879 regulatory risk, and I've been with the company for two and a half years, 31 00:02:44.120 --> 00:02:49.520 really taking a global perspective on the changing regulatory landscape in the context of 32 00:02:49.560 --> 00:02:59.599 the ethereum, programmable blockchain ecosystem and interoperable ecosystems. Now was your first encounter 33 00:02:59.719 --> 00:03:04.199 with the crypto acid class and technology wity theorem or bitcoin? And what was 34 00:03:04.240 --> 00:03:08.520 your AHA moment? It was bitcoin? It was twenty seventeen. Funny enough, 35 00:03:08.919 --> 00:03:14.319 I just flew down to Austin to watch this solar eclipse, the one 36 00:03:14.319 --> 00:03:17.199 that hit in North America most recently. Really, the first time I started 37 00:03:17.240 --> 00:03:22.800 thinking about bitcoin and crypto generally was at the last solar eclipse in twenty seventeen. 38 00:03:24.080 --> 00:03:30.120 It was a family member who peaud my interest into the subject. He 39 00:03:30.199 --> 00:03:37.120 was even back then. God knows. I certainly don't remember what the top 40 00:03:37.199 --> 00:03:42.759 ten coins were back in twenty seventeen in August, but he was researching them 41 00:03:43.280 --> 00:03:46.800 while we were all on vacation, and it really piqued my interest. And 42 00:03:46.960 --> 00:03:52.280 as soon as I started learning about bitcoin, I quickly couldn't think about really 43 00:03:52.319 --> 00:03:55.599 anything else. So this is like my third cycle now, so I'm getting 44 00:03:55.599 --> 00:04:00.000 a little long in the tooth, but it really was Bitcoin that got me 45 00:04:00.080 --> 00:04:06.479 interested, and it was really in that cycle where Ethereum was very new and 46 00:04:09.479 --> 00:04:15.199 sort of the concept that its proposition was really a new form of Internet was 47 00:04:15.720 --> 00:04:24.560 still not fully explored in the crypto ecosystem, let alone broader society. And 48 00:04:24.639 --> 00:04:30.160 I think the idea of a new Internet that has structured fundamentally differently, that 49 00:04:30.240 --> 00:04:35.600 gives a lot more control and agency and authority to individuals as opposed to intermediaries, 50 00:04:36.759 --> 00:04:43.800 it's exciting to see that arc slowly evolve over time in a, in 51 00:04:43.839 --> 00:04:47.759 my view of very positive direction. Yeah. Absolutely so give us a quick 52 00:04:47.759 --> 00:04:54.839 overview of consensus for those who may not know about the earth. So Consensus 53 00:04:54.879 --> 00:05:04.319 Software was created in twenty twenty the summer I joined basically six months after it 54 00:05:05.279 --> 00:05:11.199 was formed. It's a US company. It is a software company that works 55 00:05:11.240 --> 00:05:16.959 on what really is an entire blockchain stack that works with Ethereum. It was 56 00:05:17.079 --> 00:05:23.879 born out of a company which still exists, Consensus ag or now called Consensus 57 00:05:23.920 --> 00:05:28.160 Mesh, which is a Swiss company that was founded. Both have the same 58 00:05:28.240 --> 00:05:33.360 founders and CEOs, Joe Lubin from who was one of the many people on 59 00:05:33.399 --> 00:05:42.600 the project that created Ethereum, that former company still exists. It attracts a 60 00:05:42.600 --> 00:05:47.199 lot of projects, incubates them, invests in them, and tries to do 61 00:05:47.279 --> 00:05:54.720 what it's done since basically twenty sixteen created an environment where Ethereum has a two 62 00:05:54.759 --> 00:06:00.000 sided market, developers building useful apps, users coming in and using them, 63 00:06:00.040 --> 00:06:04.480 attracting more developers, and having it being a very virtuous cycle. Consensus software 64 00:06:04.519 --> 00:06:11.519 where I'm working. Some of those projects came out of the old consensus into 65 00:06:11.519 --> 00:06:15.160 the new consensus that includes meta mask, which I'm sure your listeners are familiar 66 00:06:15.240 --> 00:06:21.399 with, the infuror nodes through which most people access the Ethereum blockchain, and 67 00:06:21.439 --> 00:06:30.839 a lot of exciting new offerings such as the layer two solution Linear, which 68 00:06:30.360 --> 00:06:38.000 we launched recently and are looking forward to decentralizing, and other services like smart 69 00:06:38.000 --> 00:06:45.480 contract auditing and other things. So it's really across the board. I enjoy 70 00:06:45.639 --> 00:06:49.560 very much as a lawyer being on the cutting edge of crypto in many respects 71 00:06:49.560 --> 00:06:54.759 and having to stay very up to date on what's going on with the ecosystem, 72 00:06:55.480 --> 00:06:59.199 how those new ideas are being received around the world, not only in 73 00:06:59.240 --> 00:07:03.600 the market but by regulators. So you know, you could you could find 74 00:07:03.959 --> 00:07:09.560 more boring companies to be at that's for sure. This is this is certainly 75 00:07:09.639 --> 00:07:12.759 an exciting one in the crypto ecosystem to be a part of. Yeah. 76 00:07:12.800 --> 00:07:15.839 Absolutely, I mean, uh, Etherorem second largest by market cap, tons 77 00:07:15.839 --> 00:07:20.759 of apps and different projects being built on Etherorem. And I think you guys, 78 00:07:20.920 --> 00:07:24.560 if I'm not mistaken, and I don't know if I misread this, 79 00:07:24.639 --> 00:07:28.879 but over the years, Consensus also works on other blockchains, right, Uh, 80 00:07:29.639 --> 00:07:33.040 the names escape me, but I believe at one point Cardano, I'm 81 00:07:33.079 --> 00:07:39.639 not mistaken, and not not on Cordona. So everything that our offerings generally 82 00:07:39.759 --> 00:07:45.399 are interoperable with, obviously there's development work in order to expand, to ensure 83 00:07:45.399 --> 00:07:49.439 because we want to make sure our offerings are are are as reliable as they 84 00:07:49.439 --> 00:07:58.319 can be for users. They they're all interoperable with essentially the way Ethereum works 85 00:07:58.360 --> 00:08:05.759 the virtual machine. So a lot of interoperable chains include Avalanche, Polygon, 86 00:08:05.439 --> 00:08:13.759 Arbitrum, just to name a few, And so a lot of what encompasses 87 00:08:13.800 --> 00:08:20.120 the DeFi is in this ecosystem, and a lot of the NFT landscape is 88 00:08:20.160 --> 00:08:26.120 in this is in this ecosystem. Excitingly, just in the last year, 89 00:08:28.120 --> 00:08:31.639 a new development in meta mask has been meta Mask snaps. Basically, what 90 00:08:31.720 --> 00:08:37.399 this is is it creates an interface through which anyone can develop an interface that 91 00:08:37.519 --> 00:08:45.559 allows the meta mask wallet to work with essentially a blockchain ecosystem that it previously 92 00:08:45.600 --> 00:08:52.240 did not. A huge snap in this regard has been snaps which allow you 93 00:08:52.320 --> 00:08:56.600 to use meta mask for Solana and so a lot of people are starting to 94 00:08:56.679 --> 00:09:01.320 use their meta mask wallet for Solana, NFTs and a lot of mean coins 95 00:09:01.399 --> 00:09:05.360 and the rest. And that was basically a third party using the meta mask 96 00:09:07.679 --> 00:09:11.879 interface as a development platform to create something new, which is very exciting for 97 00:09:13.000 --> 00:09:15.840 us as a company to be part of. Yeah. Absolutely, I know 98 00:09:16.240 --> 00:09:20.559 many blockchains integrate the e v M, and which is pretty amazing when you 99 00:09:20.559 --> 00:09:26.960 think about it, the entire ecosystem using that the ev M, and so 100 00:09:28.159 --> 00:09:30.159 I don't know, I don't know if you can answer it because you're not 101 00:09:30.240 --> 00:09:33.519 on the you know, one of the developers on the technical side was that 102 00:09:33.360 --> 00:09:37.279 the goal of the EVM to get it, you know, used by different 103 00:09:37.320 --> 00:09:43.080 chains, to have more interoperability and much more. I don't know whether it's 104 00:09:43.159 --> 00:09:48.320 necessarily a goal for the EVM to sort of be the one virtual machine to 105 00:09:48.480 --> 00:09:54.039 rule them all. I think it's probably safe to say that you want the 106 00:09:54.120 --> 00:10:01.000 virtual machine to be as useful and efficient as possible. And it's just the 107 00:10:01.120 --> 00:10:07.960 nature of markets and that and network effects that as you have a big concentration 108 00:10:09.039 --> 00:10:13.960 of developers and a big concentration of apps, that users will migrate there, 109 00:10:13.320 --> 00:10:20.080 and then it happens to be a very virtuous cycle. And so meta mask 110 00:10:20.240 --> 00:10:24.960 is millions and millions of users. Lots of people build their apps to work 111 00:10:24.039 --> 00:10:28.799 with meta mask because they know the user base is there. I think the 112 00:10:28.840 --> 00:10:31.960 same thing if you're building a side chain or a layer too. The fact 113 00:10:33.039 --> 00:10:39.759 that it can be interoperable with Ethereum not only means improved security for your chain 114 00:10:39.879 --> 00:10:43.720 to the extent that you can use that base layer as and it's decentralization for 115 00:10:43.799 --> 00:10:52.399 its security features, but it also comes with a huge community that has been 116 00:10:52.519 --> 00:11:01.159 using Ethereum for years now. I think we are still in the processes of 117 00:11:01.200 --> 00:11:05.519 seeing, especially chains which aren't sort of directly interoperable, how they coexist and 118 00:11:05.559 --> 00:11:11.600 interrelate with each other. Bridges have been so far technology that's trying to meet 119 00:11:11.679 --> 00:11:16.080 that need. But you know, as they say, early days, we'll 120 00:11:16.080 --> 00:11:24.200 see how the marketplace and technology evolves to actually connect these these different ecosystems. 121 00:11:24.799 --> 00:11:30.360 Yeah. Absolutely. Now bill etherorem obviously getting a lot of adoption, second 122 00:11:30.440 --> 00:11:35.360 largest by market cap, right behind Bitcoin of course, and there's a lot 123 00:11:35.360 --> 00:11:39.399 of the Bitcoin etf issuers are looking to get an etherorem ETF spoty TF. 124 00:11:39.799 --> 00:11:45.559 However, there seems to be some challenges with the SEC and share genser and 125 00:11:45.559 --> 00:11:48.840 so forth. I would love for you to talk about the recent letter that 126 00:11:50.000 --> 00:11:52.799 was sent by you and your team to the SEC regarding the approval of the 127 00:11:52.840 --> 00:12:03.399 etherm' spoty TF. Sure, as your viewers may be aware, bitcoin was 128 00:12:03.840 --> 00:12:07.120 ETFs went forward basically at the start of this year. There had been a 129 00:12:07.120 --> 00:12:16.440 long drawn out process to discuss with the SEC and eventually litigate against them to 130 00:12:16.480 --> 00:12:24.000 get it approved. There were disagreements as to whether the bitcoin ecosystem was safe 131 00:12:24.120 --> 00:12:33.799 enough for the average person to invest in through these basically securities products. Ethereum's 132 00:12:33.840 --> 00:12:39.120 going through very much the same process now. There Early on was a lot 133 00:12:39.120 --> 00:12:52.240 of there was a lot of let's say optimism about the SEC approving the an 134 00:12:52.240 --> 00:13:03.000 Ethereum spot ETF because ethereum futures ETFs have been a proved and it looks very 135 00:13:03.080 --> 00:13:07.120 much like a Bitcoin ETF, so not the logical next step would be, 136 00:13:07.720 --> 00:13:13.759 for similar reasons, approve and the Ethereum ETF. We're getting very mixed signals 137 00:13:13.759 --> 00:13:18.879 out of the SEC, specifically in response to all of these applications put in 138 00:13:18.919 --> 00:13:24.519 by Van Eck, Arc Valkyrie, black Rock, Grayscale and the like, 139 00:13:26.480 --> 00:13:30.000 and they're asking a lot of questions about the nature of ethereum. One of 140 00:13:30.000 --> 00:13:33.879 those questions, which which because we're on the tech side of crypto, that 141 00:13:33.919 --> 00:13:39.399 peaud our interests, was basically tell us about the proof of stake consensus mechanism, 142 00:13:39.480 --> 00:13:46.679 which is different than how bitcoin works, and what if any concerns regarding 143 00:13:46.720 --> 00:13:56.960 fraud or manipulation of Etherium That consensus mechanism poses another concentration in the ethereum community, 144 00:13:56.159 --> 00:14:01.399 and these are areas that were very knowledgeble bound, and we think the 145 00:14:01.440 --> 00:14:05.399 SEC could benefit from getting our perspective, so we submitted a letter basically addressing 146 00:14:05.440 --> 00:14:13.279 that the proof of stake can census mechanism, there's no meaningful risk of fraudo 147 00:14:13.360 --> 00:14:18.320 manipulation. In fact, the way it's designed is in some ways very similar 148 00:14:18.360 --> 00:14:28.000 to the way bitcoin works. To ensure that the transactions are manipulated that people 149 00:14:28.039 --> 00:14:35.120 aren't defrauded. But in some ways it actually improves upon the security model that 150 00:14:35.159 --> 00:14:41.120 bitcoin uses. It's more expensive to attack the network, and attack is short 151 00:14:41.120 --> 00:14:48.559 lived. And there's this concept of data finality the transactions. You go back 152 00:14:48.639 --> 00:14:52.960 enough far in time, you actually can't change the transaction ledger at all. 153 00:14:52.919 --> 00:14:58.440 So for all these reasons, there really is should be no question that there 154 00:14:58.480 --> 00:15:05.039 are in terms of Froudum manipulation which should which should affect the decision to otherwise 155 00:15:05.080 --> 00:15:09.440 approve in the theorem ETF. And we were happy to share those comments with 156 00:15:09.480 --> 00:15:13.440 not only the sec but with the broader community. Now, Bill, do 157 00:15:13.720 --> 00:15:20.159 you feel that it's not maybe a specific to etherorem an etherorem issue per se, 158 00:15:20.240 --> 00:15:24.679 but rather a political one, because look, the only reason to approve 159 00:15:24.679 --> 00:15:28.200 the pitcoin spot ETF is because the courts made them do it, and you 160 00:15:28.240 --> 00:15:31.039 still had two commissioners at the SECU who did not sign off on the approval. 161 00:15:31.240 --> 00:15:37.000 Chair Againser was a third, following Mark Eueita and Hester Purse. So 162 00:15:37.240 --> 00:15:41.919 is this the larger macro theme of we want to slow crypto down or stop 163 00:15:41.960 --> 00:15:46.600 it because it's disrupting so many things. Is that the macro and then we 164 00:15:46.600 --> 00:15:52.759 can talk about the micro of etherom. I think by now it's safe to 165 00:15:52.799 --> 00:16:00.000 say shouldn't be terribly controversial to say that the not only what they are saying 166 00:16:00.399 --> 00:16:06.080 at the SEC. In terms of SEC leadership. Again, SEC leadership is 167 00:16:06.240 --> 00:16:11.919 five commissioners, but really one commissioner holds a majority of the power. That's 168 00:16:11.960 --> 00:16:18.279 the chairman, that is Gary Ginstler. Not only what they're saying out of 169 00:16:18.320 --> 00:16:23.519 the SEC, but actually how they're conducting business again is strongly consistent with a 170 00:16:23.600 --> 00:16:30.600 strategy of we think crypto is a mistake. We are if the rest of 171 00:16:30.639 --> 00:16:38.919 the world wants to proceed with these disintermediated computer systems where trading and assets which 172 00:16:38.919 --> 00:16:45.039 you can create a thin air are the realm of the coin. The rest 173 00:16:45.039 --> 00:16:48.840 of the world can go with God, but cut the United States out of 174 00:16:48.879 --> 00:16:52.840 it. What we have is a good thing. The SEC does a good 175 00:16:52.919 --> 00:16:56.879 job, Our capital markets are strong. We don't need to be changing horses 176 00:16:57.000 --> 00:17:03.039 to this new way of doing business. It's safe to say that that's kind 177 00:17:03.079 --> 00:17:10.519 of the majority opinion. Certainly the opinion as far as outward objective evidence suggests 178 00:17:10.599 --> 00:17:17.440 of SEC leadership, and so I think that's manifesting itself in the discussion about 179 00:17:17.480 --> 00:17:27.279 the ethereum ETF conversation, they got huge criticism from people who otherwise they consider 180 00:17:27.359 --> 00:17:38.759 allies. The current leadership the SEC considers allies for approving the bitcoin ETF in 181 00:17:38.880 --> 00:17:45.799 light of the DC Circuit Court opinion which for basically ninety five to ninety nine 182 00:17:45.839 --> 00:17:51.599 percent of people ended the discussion they had to do it. There are some 183 00:17:52.200 --> 00:17:56.480 people very close to the leadership in the SEC who insists that they'd made the 184 00:17:56.519 --> 00:18:02.519 wrong choice none by approving it after the or decision, they should have rejected 185 00:18:02.519 --> 00:18:07.920 it. Again, I think that's way off a ledge, but it goes 186 00:18:07.960 --> 00:18:18.160 to show you the type of organized, persistent antagonism that is I think generally 187 00:18:18.319 --> 00:18:25.960 behind this view of the market and of crypto specifically. I think you're likely 188 00:18:26.119 --> 00:18:33.440 to see litigation again about ethereu ETFs, and but that's largely driven as to 189 00:18:33.519 --> 00:18:38.559 like how the SEC actually responds when it and it needs to formally respond by 190 00:18:38.759 --> 00:18:42.039 like May twenty third, that's when we're going to start to get a view 191 00:18:42.039 --> 00:18:47.319 behind the curtain as to what the SEC actually think says to these things. 192 00:18:48.000 --> 00:18:53.119 So on that note of litigation, and correct me if I'm wrong here. 193 00:18:53.279 --> 00:18:57.680 You know, the litigation that took place between Grayscale and the SEC was just 194 00:18:57.720 --> 00:19:02.720 between those parties. There were no other issuers. Now there's a lot of 195 00:19:02.720 --> 00:19:06.319 issues she got Black Croc and Fidelity and so forth. So could the SEC 196 00:19:06.680 --> 00:19:15.039 get a lawsuit from each of these folks? Potentially? Really it It will 197 00:19:15.079 --> 00:19:19.039 depend on their reasoning with respect to the first two. I'm sure all the 198 00:19:19.079 --> 00:19:25.640 issuers are going to be discussing amongst each other, like how do they push 199 00:19:25.680 --> 00:19:29.759 forward to, you know, enjoy the rights that they would otherwise have. 200 00:19:29.839 --> 00:19:34.119 If they think the SEC is rejecting something unlawfully or their their logic doesn't hold, 201 00:19:34.160 --> 00:19:40.279 they can have that rejection reviewed. It is final agency action that can 202 00:19:40.359 --> 00:19:42.039 be reviewed by a court. If you think the agency got it wrong, 203 00:19:42.839 --> 00:19:48.680 so precisely, how to proceed, Well, we will see. I suspect 204 00:19:48.720 --> 00:19:55.480 it will not be. I suspect you probably get one, maybe two lawsuits 205 00:19:55.480 --> 00:19:59.720 that really focus on the core issues, rather than a number of redundant lawsuits. 206 00:19:59.720 --> 00:20:04.319 But the thing about litigation is it's not just about the merits of the 207 00:20:04.359 --> 00:20:08.559 case. The process through which you litigate the case, the strategy, the 208 00:20:08.559 --> 00:20:15.000 blocking and tackling of litigating can sometimes meaningfully affect the outcome. And so these 209 00:20:15.000 --> 00:20:19.599 are very sophisticated players. I think they will if they choose to proceed in 210 00:20:19.640 --> 00:20:23.640 a lawsuit, will do so as smartly as possible, and that could include 211 00:20:23.960 --> 00:20:32.480 bringing lots of lawsuits. Some question, could they come together and have a 212 00:20:32.519 --> 00:20:41.119 group lawsuit if that makes sense. There are frequent instances in which a case 213 00:20:41.319 --> 00:20:45.440 is brought by a number of plaintiffs, each asking for relief with respect to 214 00:20:45.519 --> 00:20:51.839 something a little different, but basically all their claims are very similar, and 215 00:20:51.960 --> 00:20:56.880 so it makes sense to collapse all of what they're asking a court to do 216 00:20:56.960 --> 00:21:00.640 into one package, one complaint. So they could do that. Alternatively, 217 00:21:00.960 --> 00:21:07.000 you know, you could have the best plaintiff go forward to get the best 218 00:21:07.000 --> 00:21:14.000 outcome for that plaintiff, and then with the idea being that the court's determination 219 00:21:14.160 --> 00:21:18.119 would be equally applicable across the board, and so it's just a more efficient 220 00:21:18.160 --> 00:21:23.559 outcome. Maybe some of those applicants who deal with the SEC often, maybe 221 00:21:23.599 --> 00:21:30.079 you're a bit squeamish, more squeamish than you know people in crypto maybe for 222 00:21:30.200 --> 00:21:34.440 bringing a lawsuit against the SEC. So we will, we'll see how it 223 00:21:34.519 --> 00:21:41.720 unfolds. But I think the weight of opinion is that we can expect a 224 00:21:41.839 --> 00:21:48.079 rejection of these products come may, and that for them to eventually be approved 225 00:21:48.200 --> 00:21:56.880 by this leadership in the SEC will require a fighting court. Let's say they 226 00:21:56.920 --> 00:22:00.359 rejected the case you have, black Rock and whoever else you know decides to 227 00:22:00.400 --> 00:22:06.039 file a lawsuit. Let's say the election goes, Biden doesn't get re elected, 228 00:22:06.079 --> 00:22:11.759 and that meets Genzer is out. Could the new SEC chair, whether 229 00:22:11.279 --> 00:22:17.440 I'm assuming will be a Republican Republican appointed, would come in and say, 230 00:22:17.480 --> 00:22:19.559 okay, I'm going to prove this, you know, just drop all this 231 00:22:19.599 --> 00:22:22.799 stuff. Could that happen? Can that be a scenario that plays out? 232 00:22:23.720 --> 00:22:30.440 It? Certainly? New leadership would certainly mean a different SEC on a number 233 00:22:30.440 --> 00:22:36.039 of a number of bases. As a general matter, new leadership does not 234 00:22:36.559 --> 00:22:42.640 necessarily change how the staff at the SEC, which is, you know, 235 00:22:44.480 --> 00:22:49.359 staff work from one set of leaders to another to another to another over a 236 00:22:49.359 --> 00:23:00.920 long period of time. You don't necessarily see immediate about faces among the staff 237 00:23:02.319 --> 00:23:06.359 or the agency as a whole as to a position they've taken for years. 238 00:23:07.680 --> 00:23:12.440 But priorities change, policies change. You could see if there's new leadership, 239 00:23:12.480 --> 00:23:18.279 whether that's a Republican or Democrat, frankly, just because if Gary Ginstler leaves, 240 00:23:18.519 --> 00:23:22.079 if Biden wins another term, and Chairman Gainstler leaves at the end of 241 00:23:22.119 --> 00:23:27.400 the year because he didn't get any other spot in the administration and he just 242 00:23:27.480 --> 00:23:33.400 wants to leave on his own terms. New leadership could be like, look, 243 00:23:33.440 --> 00:23:37.720 our policy on this is different. Maybe we think we haven't been true 244 00:23:37.839 --> 00:23:41.160 to our word, that we're not a merits regulator, and in fact we're 245 00:23:41.160 --> 00:23:45.480 making a decision that this is all stupid to invest in, and really that's 246 00:23:45.519 --> 00:23:51.240 not our job. They could stad They could instead take a number of different 247 00:23:51.279 --> 00:23:56.039 tacks, which would, let's say, result in the parties coming to an 248 00:23:56.079 --> 00:24:03.440 agreement that the active litigation should be paused while maybe a new process is worked 249 00:24:03.480 --> 00:24:08.200 out, maybe new applications or filed, and an actual productive back and forth 250 00:24:08.240 --> 00:24:14.440 about those applications is done, and and eventually if things work out, you 251 00:24:14.480 --> 00:24:22.759 could you could certainly move to withdraw the case to to and and a court 252 00:24:22.799 --> 00:24:26.039 can answer that. So you you certainly could see that whether it will come 253 00:24:26.079 --> 00:24:32.440 to that is hard to say for sure. All right, So let's jump 254 00:24:32.480 --> 00:24:37.920 to the micro of etherorem under the J. Clayton administration, or as the 255 00:24:37.000 --> 00:24:41.079 chair of the SEC. Him and Bill Hinman gave clarity on Etherorem that it's 256 00:24:41.119 --> 00:24:47.160 not a security. Fast forward. You know etheroremy future is and all these 257 00:24:47.160 --> 00:24:52.279 things will approved to c FDC views as a commodity. But then Gary Genser 258 00:24:52.319 --> 00:24:55.920 comes into office, he refuses to echo the statements of Bill him In and 259 00:24:56.000 --> 00:25:00.079 Ja Clayton. Recently, Rosston Benham, chair of the CFTC, testified saying 260 00:25:00.200 --> 00:25:03.119 he's not sure what the SEC is doing here, especially with the approval of 261 00:25:03.160 --> 00:25:10.480 Prometheum's license to custody Etherorem as a security. And then you have rumors, 262 00:25:10.599 --> 00:25:15.160 and this hasn't been confirmed or reports, I should say, of the Etheroum 263 00:25:15.160 --> 00:25:19.200 Foundation getting I don't know what, is it a wells notice or something like 264 00:25:19.240 --> 00:25:23.880 that. I don't know, Yeah, administrative subpoenas, that's the rumor. 265 00:25:25.279 --> 00:25:30.240 Yeah, So what the hell is going on here? Is this once again 266 00:25:30.279 --> 00:25:33.880 going back to the political thing against HER's playing games here. Maybe he's trying 267 00:25:33.880 --> 00:25:37.400 to use this as a delay tactic. I don't know's it's hard to say 268 00:25:37.960 --> 00:25:42.359 what It's impossible to say what's going on in this head necessarily because no one 269 00:25:42.480 --> 00:25:49.640 really knows, but from what is being reported from what you can sort of 270 00:25:49.640 --> 00:26:00.079 see in the public sphere, the SEC has been completely mixed messaged on a 271 00:26:00.640 --> 00:26:08.839 recently that the Chairman has been purposefully evasive in public forums about the status of 272 00:26:08.880 --> 00:26:14.599 Ethereum, and I think once that started happening, that was a big sign 273 00:26:14.799 --> 00:26:22.319 that the understanding of the market, well, it was. It was certainly 274 00:26:22.079 --> 00:26:25.920 a latent way to do it, a covert way to do it, but 275 00:26:26.200 --> 00:26:33.039 it if if ethereum was so established as a commodity across the board, then 276 00:26:33.319 --> 00:26:38.279 the SEC Commissioner should have no problem stating such. The fact that he wasn't 277 00:26:38.440 --> 00:26:44.640 was in my view, a very a subtle but important indication that something was 278 00:26:44.680 --> 00:26:53.839 afoot those messages, however, I completely get how the market has been so 279 00:26:55.000 --> 00:27:00.359 certain to this date, even looking past what Hinman sent, even looking past 280 00:27:02.039 --> 00:27:07.839 the guidance that they put out basically describing based on some sort of factors relating 281 00:27:07.880 --> 00:27:14.359 to decentralization, when something should be considered a security. I think if you 282 00:27:14.400 --> 00:27:17.720 look, if you read that twenty nineteen document and you look at ethereum, 283 00:27:17.799 --> 00:27:22.119 you think Ethereum clearly passes the test. It's no longer a security. Even 284 00:27:22.440 --> 00:27:29.960 aside all that, as recently as October twenty twenty three, we are talking 285 00:27:30.440 --> 00:27:45.200 six months ago, the SEC allowed ethereum futures trading products to be listed on 286 00:27:45.599 --> 00:28:00.880 CFTC regulated exchanges called dcms. Implicitly, that means that they don't view which 287 00:28:00.920 --> 00:28:06.640 is the spot, which is the spot asset that the future is tethered to, 288 00:28:07.240 --> 00:28:14.119 is a security. If it were a security, they couldn't just hand 289 00:28:14.519 --> 00:28:19.839 the the ethereum futures product over to the CFTC and say it doesn't impact us. 290 00:28:21.240 --> 00:28:26.759 There is a whole process of through which securities futures are supervised really by 291 00:28:26.920 --> 00:28:32.640 both of these agencies. So six months ago you have the SEC stating pretty 292 00:28:32.680 --> 00:28:40.720 definitively, although it's an implicit statement that ethereum is not a security. I 293 00:28:40.759 --> 00:28:51.559 think the reports reflect a very recent acceleration in scrutiny of ethereum. I suppose 294 00:28:52.880 --> 00:28:56.680 that you know, to the extent the SEC is interested in looking at the 295 00:28:56.720 --> 00:29:04.440 ethereum foundation for the role they play in being somewhat of a shelling point in 296 00:29:04.599 --> 00:29:15.759 ethereum development. That seems to jive with how the SEC generally sees the world. 297 00:29:15.480 --> 00:29:18.839 There's always somebody at the center of it that you can point to and 298 00:29:18.880 --> 00:29:25.039 say you're responsible, even though that's really not how Etheroreum works in practice. 299 00:29:25.200 --> 00:29:29.359 You know, they'll they'll view it with the lenses that they see that they 300 00:29:29.519 --> 00:29:36.839 view traditional finance in with. And so I think we should take these reports 301 00:29:36.880 --> 00:29:41.759 seriously that they may completely flip their position on ethereum, and I think that 302 00:29:41.759 --> 00:29:52.200 that would have really remarkable and negative impacts on the market generally and investors and 303 00:29:52.240 --> 00:29:57.160 people who just use this technology separate and apart from any sort of investment use 304 00:29:57.200 --> 00:30:04.920 case that there is, because it'll have an impact on them too. Yeah, 305 00:30:06.079 --> 00:30:07.599 So, as you're saying that, I thought of the Ripple case, 306 00:30:07.680 --> 00:30:11.519 right, and the ruling that came there, and obviously that hasn't fully wrapped 307 00:30:11.559 --> 00:30:17.519 up yet, but there was a key ruling that the asset itself intrinsically is 308 00:30:17.519 --> 00:30:21.000 not a security, but it just depends on how it's served up, and 309 00:30:21.200 --> 00:30:22.920 you know, there's a contract and whatever it is. So, for example, 310 00:30:23.000 --> 00:30:26.160 the judge said, which I'm sure you know, secondary market sales not 311 00:30:26.200 --> 00:30:30.400 securities, but the institutional sales where maybe there was a contract and Ripple actually 312 00:30:30.440 --> 00:30:33.759 spoke to people and so forth, how does that play a factor with E 313 00:30:33.839 --> 00:30:38.599 theorem? I know it's a difference set with the entirely different, but how 314 00:30:38.599 --> 00:30:45.599 does that play a factor in possibly fighting back against the SEC. So where 315 00:30:45.720 --> 00:30:51.000 Ripple and these other cases, even the coin base case, the terror Terrorform 316 00:30:51.079 --> 00:30:53.240 Labs case, and the coin based case, where they differ is that the 317 00:30:53.400 --> 00:31:03.200 court and Ripple looked at Howie and said, well, how he applies to 318 00:31:03.400 --> 00:31:11.480 individual contracts, transactions or schemes. And she said that the units which I'm 319 00:31:11.519 --> 00:31:15.759 going to be focusing on here are these specific sales, in part because that's 320 00:31:15.839 --> 00:31:21.880 the way the parties kind of presented the issue to the judge. However, 321 00:31:21.960 --> 00:31:26.920 in these other cases, the court said, well, you know, you're 322 00:31:26.920 --> 00:31:30.440 not limited to looking to specific transactions or to specific contracts. You can also 323 00:31:30.480 --> 00:31:36.200 look at schemes. And the problem with the scheme is from the perspective of 324 00:31:36.240 --> 00:31:41.240 somebody in the industry, is the SEC can define a scheme to be as 325 00:31:41.279 --> 00:31:44.839 broad as it would like, and all a court needs to do is collect 326 00:31:44.920 --> 00:31:48.279 all these odds and ends that the SEC is assembled in front of the judge 327 00:31:48.319 --> 00:31:51.960 saying this is all a scheme, Judge, everything in here is a security 328 00:31:52.000 --> 00:31:55.279 and the judge says, yes, I agree, it's an entire scheme. 329 00:31:55.359 --> 00:32:00.799 And so anything within the scope is considered a securities transaction that needs to be 330 00:32:00.880 --> 00:32:08.839 registered, and so that is the scope of Howie. Of the Howie test 331 00:32:08.920 --> 00:32:16.640 is precisely the issue which continues to be the club that the SEC wants to 332 00:32:16.680 --> 00:32:24.400 bash Crypto with and the point where Crypto is in response saying, there has 333 00:32:24.440 --> 00:32:31.000 to be some limiting principle to this test. It can't be a mechanism through 334 00:32:31.039 --> 00:32:37.359 which the SEC basically says, whatever we say is an investment contract goes, 335 00:32:38.079 --> 00:32:44.200 and obviously it's not. Whatever their particular boxes you have to check. But 336 00:32:44.279 --> 00:32:49.480 those boxes are not terribly difficult in most situations, especially in crypto, when 337 00:32:51.119 --> 00:32:54.759 the indish the facts that you won't need to pull from and to bring together 338 00:32:54.920 --> 00:33:00.559 can be you know, so broad and so diverse. So if the SEC 339 00:33:00.680 --> 00:33:07.039 is right, then really a ham they could they could they could label almost 340 00:33:07.079 --> 00:33:10.400 anything in crypto of securities transaction. And of course they have the view that 341 00:33:10.759 --> 00:33:15.680 of of their of their authority under Howie and also their discussion as an agency 342 00:33:15.799 --> 00:33:24.319 too, to label things as they see fit. Hopefully courts draw some much 343 00:33:24.359 --> 00:33:30.680 needed lines there, and the in the community say collectively with one voice, 344 00:33:30.599 --> 00:33:37.319 no, it cannot possibly be that Howie is a blank check for the sec 345 00:33:37.440 --> 00:33:39.680 to do whatever it wants in this space, and if it indeed is, 346 00:33:39.880 --> 00:33:44.799 then all the more reason for the legislature in this country to get its act 347 00:33:44.839 --> 00:33:54.000 together and put forward meaningful, meaningful new legislation which sets forth a coherent policy 348 00:33:54.599 --> 00:34:00.240 that doesn't set America at the sideline. And then in the rear view of 349 00:34:00.319 --> 00:34:07.119 this, you know, world changing technological ecosystem. Hard question for you, 350 00:34:07.199 --> 00:34:10.519 what do you think happens? First, this thing goes to the Supreme Court 351 00:34:10.599 --> 00:34:17.000 because there's this split decisions in different circuits and so forth, or Congress gets 352 00:34:17.000 --> 00:34:24.480 their act together and passes clear legislation. It's hard to say. I'd like 353 00:34:24.519 --> 00:34:30.480 to say Congress, because anything going to the Supreme Court will take years because 354 00:34:30.599 --> 00:34:39.360 what you need really unless it's really a crucial, juicy applicable in this setting 355 00:34:39.400 --> 00:34:44.400 but also more generally issue of federal law or constitutional law, it really needs 356 00:34:44.440 --> 00:34:46.559 to be something important that a lot of circuits disagree with, or at least 357 00:34:46.559 --> 00:34:52.599 two we're not even anywhere close to two circuits disagreeing on these issues yet. 358 00:34:53.599 --> 00:34:57.960 There way is for two circuits to take up the issue and decide it, 359 00:34:58.079 --> 00:35:01.960 and then you have a conflict and do that quickly, but that doesn't normally 360 00:35:02.039 --> 00:35:12.320 happen in situations like this. Congress could change laws this year, we can 361 00:35:12.360 --> 00:35:16.199 get into this, but I think it's unlikely unfortunately that they will. But 362 00:35:16.280 --> 00:35:22.760 who knows what the next Congress will bring. You know, A lot depends 363 00:35:22.760 --> 00:35:27.480 on its composition and who's in the White House. I do think, and 364 00:35:27.519 --> 00:35:31.079 I maybe i'd be so bold to share this with you. I do think 365 00:35:34.480 --> 00:35:40.360 something will happen, which will I think in spur more legislative debate on these 366 00:35:40.400 --> 00:35:45.000 issues. And it has to do with Prometheum, a special purpose broker dealer. 367 00:35:46.320 --> 00:35:52.000 Well, I've had Aaron Kaplan promete them on and yeah, there's a 368 00:35:52.000 --> 00:35:57.519 lot of things happening there, and it just I know, my gut feeling 369 00:35:57.559 --> 00:36:00.920 is something seems shady there, there's something on there. Well, well let 370 00:36:00.920 --> 00:36:07.039 me well, let me fan that fire for you. So basically when the 371 00:36:07.079 --> 00:36:10.639 special purpose broker dealers, I believe this, this type of entity came into 372 00:36:10.679 --> 00:36:20.719 existence basically in twenty twenty and Prometheum hasn't been approved by the SEC. It 373 00:36:21.400 --> 00:36:25.039 was it was allowed membership into Finra, which is a self regulatory organization that 374 00:36:25.119 --> 00:36:30.239 sort of does a lot of the day to day supervision of like what are 375 00:36:30.360 --> 00:36:37.639 SEC rules and so operating is a special purpose broker dealer. In most instances, 376 00:36:37.719 --> 00:36:40.280 you really don't have to go to the SEC and say, mother, 377 00:36:40.400 --> 00:36:45.559 may I do X, Y or Z. What you do is you basically 378 00:36:45.639 --> 00:36:49.679 say, I'm a regulated entity. I'm going to make a judgment as to 379 00:36:49.719 --> 00:36:53.760 what I'm able to do, and I don't need that before I go off 380 00:36:53.800 --> 00:36:57.880 and do it. I don't need that decision. Second guest or reviewed. 381 00:36:58.519 --> 00:37:05.480 So Prometheum on their own said Ethereum is a security. Implicit in them custodying 382 00:37:05.519 --> 00:37:10.159 it. It gets a little murky because under my understanding based on things I've 383 00:37:10.199 --> 00:37:16.800 read, is it doesn't necessarily need while while it should be a security, 384 00:37:16.960 --> 00:37:21.960 it may not necessarily need to be. To make matters even more complicated is 385 00:37:22.000 --> 00:37:31.480 that they may not need to custody only registered securities. The long story short 386 00:37:31.679 --> 00:37:38.639 is, there is a scenario it appears where by virtue of Prometheum saying on 387 00:37:38.679 --> 00:37:44.719 its own, we are going to custody ethereum, the implication that it is 388 00:37:44.719 --> 00:37:52.039 a security would open an opportunity for the SEC to revisit the issue. And 389 00:37:52.159 --> 00:37:59.119 how it would revisit the issue is essentially finally talk to the CFTC and say, 390 00:37:59.199 --> 00:38:06.840 hey, our view as the theoryum has changed. We understand that there 391 00:38:06.920 --> 00:38:14.159 are products that are traded on exchanges that only you supervise that could no longer 392 00:38:14.360 --> 00:38:20.840 happen given our change of view. Let's talk about a process through which we 393 00:38:20.920 --> 00:38:27.840 can try to keep the market as stable as possible, but transition the regulatory 394 00:38:27.920 --> 00:38:34.480 regime from being just CFTC to being combined. Because these are futures of securities 395 00:38:37.400 --> 00:38:45.000 that has been posited by mostly in question form via blog by some very smart 396 00:38:45.599 --> 00:38:53.079 regulatory lawyers, would it be consistent with these I think not too fanciful conspiracy 397 00:38:53.119 --> 00:38:59.280 theories from people in the ecosystem about how convenient it's been for this prometheum to 398 00:38:59.280 --> 00:39:02.480 come out of nowhere and be the darling of the sec and bandied about in 399 00:39:02.519 --> 00:39:08.840 front of the press and in congressional hearings and all of a sudden picking ethereum. 400 00:39:09.280 --> 00:39:14.800 It's all just a bit too coincidential. Yeah, and and this is 401 00:39:15.000 --> 00:39:19.800 this is sort of what I just described to you could potentially be the third 402 00:39:19.920 --> 00:39:28.960 act of what would be a masterful administrative strategic gambit to undo years of treating 403 00:39:29.000 --> 00:39:37.039 ethereum as a commodity. We shall see how it plays out. But the 404 00:39:37.440 --> 00:39:44.360 one thing that kept me skeptical of that being the outcome is whether special purpose 405 00:39:44.360 --> 00:39:52.480 broker dealers like Prometheum could custody unregistered securities, not just registered securities, because 406 00:39:52.480 --> 00:39:58.800 no one's registered Ethereum and no one practically can. There's maybe there's some notion 407 00:39:58.920 --> 00:40:04.760 that maybe they could, and if that's true, then the last bar for 408 00:40:04.840 --> 00:40:09.320 them to being able to custody it would be would go away. And so 409 00:40:10.039 --> 00:40:16.199 I think watching Prometheum closely and how the SEC and finn RA handle Prometheum is 410 00:40:16.239 --> 00:40:21.920 going to tell us a lot about the long term plan for Ethereum here. 411 00:40:22.840 --> 00:40:27.360 So, so Bill, let's say that this is Gary's master plan, right 412 00:40:27.440 --> 00:40:31.519 and under the current administration, Elizabeth Warren and all these people anti crypto Army 413 00:40:31.559 --> 00:40:37.079 and all that this is the plan to try to classify ether as a security. 414 00:40:37.800 --> 00:40:42.400 There's so many projects built on etherorem and so forth. What would the 415 00:40:42.440 --> 00:40:46.000 next steps be if you were at the SEC to sue the Theorem Foundation and 416 00:40:47.039 --> 00:40:52.480 what would that look like? Would Consensus enter into battle against the SEC with 417 00:40:52.719 --> 00:40:58.119 other entities in the crypto industry? What can you tell us there? So 418 00:40:58.239 --> 00:41:04.559 there was some I was watching another podcast I think it was last week, 419 00:41:04.679 --> 00:41:13.039 where it was positive that all any investigation, any smoke associated with that or 420 00:41:13.239 --> 00:41:20.280 Prometheum, was all about providing a basis to deny the ets and it wasn't 421 00:41:20.400 --> 00:41:27.480 really an enforcement action in the sense that they were actually trying to build a 422 00:41:27.519 --> 00:41:31.000 case that they could then bring to federal court. I actually don't subscribe to 423 00:41:31.039 --> 00:41:36.320 that at all. I think that they're going to do everything across the board. 424 00:41:36.480 --> 00:41:40.320 I think they're going to deny the application. They will make their they 425 00:41:42.280 --> 00:41:45.039 I wouldn't be surprised if they make it strong of a case and many using 426 00:41:45.280 --> 00:41:52.760 many different tactics that ethereum is a security, and I would and with respect 427 00:41:52.760 --> 00:41:58.760 to who a case would be brought against. Again ones just speculating they could 428 00:41:58.840 --> 00:42:05.639 do what they've always done and not bring a case against who they assert is 429 00:42:05.639 --> 00:42:15.480 the issuer. Ethereum is a security could be an allegation in a case against 430 00:42:15.719 --> 00:42:22.280 essentially anyone transacting or offering, facilitating, offering software in offering a platform where 431 00:42:22.320 --> 00:42:29.000 Ethereum is traded, much like Coinbase. In the Coinbase case, they asserted 432 00:42:29.039 --> 00:42:34.400 all the thirteen different tokens or securities without again bringing those claims against any one 433 00:42:34.440 --> 00:42:40.760 of those token foundations or development teams or founders or anything like that. So 434 00:42:40.840 --> 00:42:45.840 you could do it that way, I will, So it's it's unclear exactly 435 00:42:45.440 --> 00:42:52.039 how it would happen. I think one thing is for sure, though I've 436 00:42:52.079 --> 00:43:00.920 said this in the past, if bringing a case asserting the ethereum as a 437 00:43:00.000 --> 00:43:08.480 security would essentially put everything outside of Bitcoin and some other proof of work tokens 438 00:43:08.480 --> 00:43:19.239 that practically nobody cares about saying all of that is within the ambit of the 439 00:43:19.360 --> 00:43:22.000 SEC, and the current SEC wants to see all of this go away. 440 00:43:23.599 --> 00:43:28.119 So Ethereum would really would be the last stand. And so much like at 441 00:43:28.159 --> 00:43:35.840 the end of Avengers Endgame, where all the different Avengers appear out of the 442 00:43:35.880 --> 00:43:44.000 portals to fight the final fight against Stanos, you'd see something similar. I 443 00:43:44.039 --> 00:43:55.239 think you'd have Gary Gensler standing across from an entire crypto ecosystem loaded for bear 444 00:43:55.440 --> 00:44:00.840 to fight a fight which really dictates how the rest of crypto, at least 445 00:44:00.079 --> 00:44:05.360 in the short term goes in this country. So I think it would be 446 00:44:05.480 --> 00:44:08.559 I think it would be a very important fight and one that lots of people 447 00:44:08.599 --> 00:44:15.639 would show up for. Absolutely that would be really crazy for the market. 448 00:44:15.719 --> 00:44:21.480 And I'm hoping if it does get it at that Congress, they would be 449 00:44:21.519 --> 00:44:25.199 forced to act like immediately like you have an entire industry, because what we're 450 00:44:25.199 --> 00:44:30.360 seeing too is folks are suing the SEC counter suing, being proactive, like 451 00:44:30.440 --> 00:44:34.239 not even waiting for any type of wells notice or anything. We're going to 452 00:44:34.280 --> 00:44:37.039 sue you because we want to know what the hell is going on? What's 453 00:44:37.639 --> 00:44:42.320 security? What's not? What about secondary market sales? And I want to 454 00:44:42.320 --> 00:44:46.679 ask you this, given that both the CFTC and the SEC many times they 455 00:44:46.719 --> 00:44:52.119 have turf wars going on. And look, we know they all battle for 456 00:44:52.280 --> 00:44:59.000 more budget and who gets more share of the market and reviewing the market. 457 00:44:59.360 --> 00:45:05.000 So what the sea FDC joined a crypto industry in fighting against the SEC. 458 00:45:05.119 --> 00:45:09.199 Here is that even possible? I there are turf wars, I would be 459 00:45:10.440 --> 00:45:22.320 extraordinarily surprised whether that they would take any dispute to the judiciary branch for resolution. 460 00:45:23.119 --> 00:45:29.039 That's generally really not how things happen. When it comes down to it, 461 00:45:29.880 --> 00:45:34.000 what the CFDC thinks and says does matter. It certainly matters to the 462 00:45:34.000 --> 00:45:40.800 market. It should matter from in the interest of just sort of federal government 463 00:45:42.000 --> 00:45:45.519 speaking with one voice for the Biden administration, speaking with one voice on issues. 464 00:45:45.559 --> 00:45:55.760 It doesn't help anybody to have two different appendages of this same executive authority 465 00:45:57.039 --> 00:46:01.960 saying completely different things about the legal status of certain conduct. That said, 466 00:46:04.719 --> 00:46:10.480 the simple truth about securities is that the CFTC does not Their view that something 467 00:46:10.559 --> 00:46:21.440 is not a security is not afforded weight in cot in comparison to what the 468 00:46:21.519 --> 00:46:24.960 SEC has to say about it. If the SEC declares something of security, 469 00:46:27.000 --> 00:46:32.880 then it's a security for purposes of the executive branch's position on it. I 470 00:46:32.920 --> 00:46:39.920 think what notably you see here is the including very recently the chairman of the 471 00:46:39.920 --> 00:46:52.920 CFTC appearing to tell Congress who funds these agencies and supervises them, he has 472 00:46:52.079 --> 00:47:02.119 absolutely no understanding why the SEC has proceeded along this path appearing to be preparing 473 00:47:04.199 --> 00:47:10.840 to declare ethereum a security. If they were to do that, the SEC 474 00:47:12.079 --> 00:47:15.760 has to, for the sake of the market, work it out with the 475 00:47:15.800 --> 00:47:22.679 CFTC about what comes next. There are a couple precedents about things going from 476 00:47:22.719 --> 00:47:27.360 commodity status to security status based on how the rules work and how particular funds 477 00:47:27.360 --> 00:47:37.199 are operated, and so these there's not It's not like there is no precedent 478 00:47:37.280 --> 00:47:39.960 as to these things. But what's clear in those instance is the two agencies 479 00:47:40.039 --> 00:47:44.440 talk and come up with a plan. It appears that that has not happened 480 00:47:44.519 --> 00:47:50.000 yet, and being a wily political operative like Chairman Gensler, maybe the plan 481 00:47:50.199 --> 00:47:55.360 is to ask for forgiveness rather than permission, and just to go ahead and 482 00:47:55.480 --> 00:48:00.760 make it clear publicly that ethereum is a secure in the SEC's view, and 483 00:48:00.800 --> 00:48:06.360 then leave the SEC the CFTC no choice but to get on the same page 484 00:48:06.360 --> 00:48:10.679 with them, rather than try to come work out in some sort of compromise 485 00:48:10.760 --> 00:48:15.079 beforehand, where the SEC would, you know, conceivably with that cfty C 486 00:48:15.199 --> 00:48:21.159 would conceivably dig in its heels and be like, absolutely not, ethereum is 487 00:48:21.199 --> 00:48:24.960 a commodity, full stop. We'll we'll argue, well, we'll take you 488 00:48:24.960 --> 00:48:29.400 to the mat on this. Who knows how it plays out. It's just 489 00:48:29.440 --> 00:48:35.320 clear that the agencies aren't talking right now, and certainly everything that's CFTC has 490 00:48:35.360 --> 00:48:39.559 to say about it or has said about it historically, is going to be 491 00:48:39.599 --> 00:48:44.679 brought up in any fight about the status of ethereum going forward, and as 492 00:48:44.760 --> 00:48:51.360 rightfully it should be, and I think a federal judge would appropriately be alarmed 493 00:48:51.760 --> 00:48:57.480 with what the market's been told and what it might be and the flip flop 494 00:48:57.519 --> 00:49:02.440 which we may in fact see happen soon. Now. The House Financial Services 495 00:49:02.480 --> 00:49:07.159 Committee, Patrick McHenry and these folks have been hounding Gary Ginter on these issues. 496 00:49:08.119 --> 00:49:10.639 There's a couple of bills in the House, but it seems like stable 497 00:49:10.679 --> 00:49:15.920 coins are or stable coin regulation is going to be the bill that gets through. 498 00:49:15.480 --> 00:49:19.679 But do you think we can at least see the bills making out of 499 00:49:19.679 --> 00:49:22.840 the House, not go through the Senate or get put into law, but 500 00:49:22.159 --> 00:49:25.199 at least making out of the House this year Because Patrick McKinny and these guys 501 00:49:25.239 --> 00:49:30.280 are making a big push. Maybe, and I think stable coins is a 502 00:49:30.719 --> 00:49:37.920 maybe. I agree with you that out of all of the bills, stable 503 00:49:37.920 --> 00:49:44.800 coins probably has the best chance of proceeding all the way to a bill that 504 00:49:44.840 --> 00:49:49.599 would be sent to the White House. I will note that in terms of 505 00:49:49.639 --> 00:49:52.639 what has been really standing in the way of the stable coin bill so far 506 00:49:52.880 --> 00:49:58.599 has been the White House because the Fed and the National Economic Council do not 507 00:49:58.880 --> 00:50:06.000 like the way that the original bill was structured. Whether their concerns have been 508 00:50:06.519 --> 00:50:13.119 ameliorated hard to say. I think the next likely bill that would go forward 509 00:50:13.199 --> 00:50:17.360 has to do with anti money laundering, some sort of expansion of the Bank 510 00:50:17.480 --> 00:50:27.440 Secrecy Act authorities of Treasury or the sanctioning authorities of Treasury. This is in 511 00:50:27.480 --> 00:50:35.840 response to DPRK hacking. This is in response to Hamas using tether and finance 512 00:50:36.000 --> 00:50:42.360 and other rails to you know, transact in what on a relative basis is 513 00:50:42.360 --> 00:50:46.400 a very small amount of cryptocurrency compared to their normal fundraising efforts. Right, 514 00:50:46.719 --> 00:50:53.480 But that is Elizabeth Warren will not stop talking about it. Well, she 515 00:50:53.880 --> 00:51:02.920 has an amazingly impressively poor track record of getting bills actually through the Congress. 516 00:51:02.559 --> 00:51:10.559 She's a much better talker and backroom dealer than a legislator by any objective measure. 517 00:51:12.079 --> 00:51:15.800 But she's not gonna let a drop. She actually has a number of 518 00:51:16.239 --> 00:51:22.480 hawkish Republicans who just are very hawkish on national security things, feel very strongly 519 00:51:22.559 --> 00:51:29.639 about drug trafficking and child trafficking and the like, and so so ani money 520 00:51:29.719 --> 00:51:35.559 laundering, especially as it's applied to not just intermediaries but software developers in their 521 00:51:35.599 --> 00:51:40.760 programs, wallets, DeFi protocols. I actually think that has a larger likelihood 522 00:51:40.760 --> 00:51:46.960 of going through then market structure, which purports to divide the token ecosystem into 523 00:51:47.000 --> 00:51:55.039 commodities and securities. And so, you know, all the best of luck 524 00:51:55.119 --> 00:52:04.519 to Chairman McHenry and the other sponsors Chairman Thompson in getting this through. No 525 00:52:04.599 --> 00:52:10.960 one's really seen revised language of the bill that they've they've put forward and have 526 00:52:12.159 --> 00:52:16.639 kept very close wraps on. But we'll see what they can do. McHenry, 527 00:52:17.159 --> 00:52:24.159 this is his swan song. You know, he'll be leaving Congress before 528 00:52:24.360 --> 00:52:30.000 before the year is out, and so hopefully he is successful in getting these 529 00:52:30.000 --> 00:52:36.280 things through. But with the election, with the how evenly divided the parties 530 00:52:36.280 --> 00:52:38.719 are in terms of numbers, it's a very all task at the moment, 531 00:52:39.480 --> 00:52:43.639 for sure. Bill, I forgot to ask you about this and how it 532 00:52:43.679 --> 00:52:45.960 plays a factor as relates to what the SEC is trying to do. But 533 00:52:46.119 --> 00:52:52.239 like black Rock tokenizing on Etherorem, PayPal launched your stable coin and Etherorem, 534 00:52:52.960 --> 00:52:57.559 how does that come into play in fighting back against the SEC. I don't 535 00:52:57.559 --> 00:53:00.159 know if it does, but maybe showing the centralization and utility and things like 536 00:53:00.199 --> 00:53:05.280 that. I think it's biggest application is showing that, you know, this 537 00:53:05.360 --> 00:53:09.880 stuff has a future, like the weird crypto people have been insisting for years 538 00:53:09.920 --> 00:53:15.920 now, When Larry Fink says, yeah, they're right, it's a big 539 00:53:15.960 --> 00:53:22.360 deal. More people who tuned you out because you were nuts or you were 540 00:53:22.400 --> 00:53:27.400 different, you were a little radical, a little rough around the edges, 541 00:53:27.679 --> 00:53:30.840 well styles, start listening to you and be interested into the argument that you're 542 00:53:30.880 --> 00:53:37.199 saying. This is this is not just a way to gamble on you know, 543 00:53:37.920 --> 00:53:44.440 fundamentally worthless Internet money. It's it's a new layer on which the world's 544 00:53:44.440 --> 00:53:49.159 economy can run. Certainly it's financial markets can run, but it can also 545 00:53:49.199 --> 00:53:53.119 do lots of other stuff too. So I think it really matters from that 546 00:53:53.280 --> 00:53:59.840 perspective. And I and that really matters when it comes to how legislation and 547 00:54:00.119 --> 00:54:10.480 rules are drafted. There there's sort of a spectrum about how careful legislatures legislators 548 00:54:10.599 --> 00:54:16.280 are when they're drafting particular language on the negative impacts they're trying to address a 549 00:54:16.320 --> 00:54:21.039 problem. Normally they're trying to solve a reduce a risk, or solve some 550 00:54:21.039 --> 00:54:28.000 sort of problem that they see in the marketplace. Whether they're really also hyper 551 00:54:28.000 --> 00:54:32.199 sensitive to doing something that is unnecessary that would injure that ecosystem. There's a 552 00:54:32.239 --> 00:54:38.280 spectrum there. A lot of the folks who we view as very crypto friendly 553 00:54:38.360 --> 00:54:45.199 are very sensitive to that. They don't want to pass legislation which unduly squelches 554 00:54:45.400 --> 00:54:51.039 hitpers the industry, makes the tech fundamentally difficult to develop and use in the 555 00:54:51.119 --> 00:54:54.440 United States. There are others who just simply don't care. Elizabeth Warren is 556 00:54:54.679 --> 00:55:00.840 obviously the paradigm on that end of spectrum, whereas the purpose of the burdens 557 00:55:00.880 --> 00:55:05.440 and regulation is to kill it in the United States and hopefully around the world 558 00:55:05.440 --> 00:55:12.719 with any luck. So the the the the, So you get that sense. 559 00:55:12.760 --> 00:55:20.159 I do think things where you can see blockchain as a settlement layer for 560 00:55:20.280 --> 00:55:24.239 real world assets in a way that traditional financial entities are interested in leveraging that 561 00:55:24.599 --> 00:55:30.599 technology and maybe even get on the same page with you with sort of evangelizing 562 00:55:30.639 --> 00:55:36.599 it as the future, as Larry I think has clearly started to do. 563 00:55:37.280 --> 00:55:42.239 I just think it's positive across the board, and you know, we'll see 564 00:55:42.280 --> 00:55:45.320 what the future brings. I you know, is it going to be this 565 00:55:45.440 --> 00:55:51.679 sort of crypto DeFi you know, a non utopia that maybe some people on 566 00:55:51.800 --> 00:55:55.760 CT like strongly advocated for or probably not. But at the end of the 567 00:55:55.880 --> 00:56:01.119 day, I think the market's going to dictate how it looks and and if 568 00:56:01.159 --> 00:56:07.039 we're going to onboard the biggest financial institutions in the world, let alone governments, 569 00:56:08.320 --> 00:56:12.119 the ecosystem, which is really just white space, is going to be 570 00:56:12.159 --> 00:56:16.159 built accordingly to suit their needs and to suit their risk profile. So I 571 00:56:16.199 --> 00:56:21.760 think you're going to see a range of offerings across the board, a range 572 00:56:21.800 --> 00:56:24.880 of protocols across the board that are really tailored to what people want. And 573 00:56:24.880 --> 00:56:29.440 I think that's one of the features of crypto right. So it's exciting, 574 00:56:29.639 --> 00:56:31.760 to say the least. We've come a long way, and you know, 575 00:56:31.840 --> 00:56:35.719 still have a long way to go. Sure, Bill, I know you've 576 00:56:35.760 --> 00:56:38.079 kept you over time, So we can hit the wrap up questions here. 577 00:56:38.679 --> 00:56:42.280 First, If you could create your own metaverse, what would the theme be? 578 00:56:44.079 --> 00:56:51.000 Gosh, honestly, I couldn't say. I want it to be really 579 00:56:51.280 --> 00:56:55.079 I think it would be really neat and I and I've not necessarily a metaverse. 580 00:56:57.199 --> 00:57:02.960 Having having a way to incentivize uh, collective input on policy, I 581 00:57:02.960 --> 00:57:14.320 think would be really interesting. You know, you know, betting markets actually 582 00:57:14.320 --> 00:57:17.760 do a fairly good job at sort of like assessing otherwise uncalculable risks. And 583 00:57:19.519 --> 00:57:27.960 I think there may be something really interesting about incentivizing smart, thoughtful, crowdsourced 584 00:57:28.000 --> 00:57:35.519 input on policy and having that be a more effective fulsome way to like try 585 00:57:35.519 --> 00:57:38.280 to get to the right answers on questions which are very hard right and get 586 00:57:38.320 --> 00:57:45.280 around the you know, the secret vested, hidden interests of big players masquerading 587 00:57:45.320 --> 00:57:49.480 as the voice of the masses. Right, there's something, there's something there. 588 00:57:49.599 --> 00:57:52.920 There's something there, and you know, when if I ever have time 589 00:57:52.920 --> 00:57:57.000 to work on it, maybe I do that for sure and get some rapid 590 00:57:57.000 --> 00:58:05.760 fire questions for you. Firstus favorite food, let's say pizza because it's easy. 591 00:58:05.880 --> 00:58:10.519 Favorite fast food is Popeyes swear by Popeyes. Favorite musician or band. 592 00:58:13.360 --> 00:58:16.400 Really have liked The National for a long time. But if people have not 593 00:58:17.079 --> 00:58:23.880 checked out Gregory Allen Issakoff, they should favorite movie. An eighteen year old 594 00:58:23.960 --> 00:58:31.800 me would have said Shawshank or Braveheart. Recently, I really loved Oppenheimer, 595 00:58:31.880 --> 00:58:39.360 and I'm pretty much one of these very you know, non unique persons who 596 00:58:39.360 --> 00:58:45.119 think Interstellar is like a masterpiece. I mean, two of my top favorites 597 00:58:45.159 --> 00:58:52.599 like Interstellar and I love Oppenheimer I also love If no one has watched Margin 598 00:58:52.679 --> 00:59:00.400 Call, that's great, great, great movie about an investment bank and the 599 00:59:00.440 --> 00:59:06.159 collapse and the collapse of the financial system. It's a endlessly rewatchable. Yeah, 600 00:59:06.280 --> 00:59:09.239 I've watched in many times as well. The Dialogue and All those Things 601 00:59:09.320 --> 00:59:15.280 is a really great favorite book. Favorite book. When I was a kid, 602 00:59:15.400 --> 00:59:22.639 I loved The Killer Angels, which was a story about the Battle of 603 00:59:22.639 --> 00:59:35.000 Gettysburg. Recently I just completed again completely pedestrian take for a crypto guy. 604 00:59:35.039 --> 00:59:44.440 But I recently completed all four books related to the Three Body Problem. It's 605 00:59:44.480 --> 00:59:47.800 the hardest best sci fi I've ever written in my life, and so I 606 00:59:47.920 --> 00:59:54.199 wholeheartedly approve it or recommend it. So I would say recently, the most 607 00:59:54.239 --> 01:00:00.360 captivated I've been in a book is the Three Body Problem series. Interesting, 608 01:00:00.360 --> 01:00:02.159 I'll check that out. And when you're not working at consensus, what are 609 01:00:02.159 --> 01:00:07.280 you doing for fun? I got three kids, so I'm driving them to 610 01:00:07.360 --> 01:00:13.480 softball practice, picking them up from school. I love to cook. You 611 01:00:13.519 --> 01:00:16.679 may have seen our new puppy walking around in the background. She's a handful 612 01:00:19.800 --> 01:00:24.679 and exercising, and I'm like complete midlife guy right now, where I really 613 01:00:24.760 --> 01:00:28.639 care that there are weeds in my lawn and it needs to be just so, 614 01:00:28.920 --> 01:00:34.679 and so I get to play chemistry mad scientists by you know, trying 615 01:00:34.679 --> 01:00:37.199 to kill some of the plants in my yard and not others. So you 616 01:00:37.280 --> 01:00:45.920 know, getting old is fun and enjoying family life and you know, doing 617 01:00:45.960 --> 01:00:50.239 what dads do, and that's what I do for fun. Bill, a 618 01:00:50.400 --> 01:00:53.679 pleasure chatting with you. I got to have you on because obviously this etherorem 619 01:00:53.719 --> 01:00:59.000 situation is going to continue, so I got to have you back on sooner 620 01:00:59.039 --> 01:01:02.679 than later. But thank you so much for joining me my pleasure. It 621 01:01:02.719 --> 01:01:07.840 will be an exciting summer to say the least, So thank you for having 622 01:01:07.880 --> 01:01:07.119 me on.