WEBVTT 1 00:00:00.040 --> 00:00:03.799 I should make clear though, that you can have a 2 00:00:03.879 --> 00:00:07.839 crypto asset that is itself a security. So I think 3 00:00:07.919 --> 00:00:12.000 that someday we could see a world in which traditional 4 00:00:12.039 --> 00:00:16.920 stocks are tokenized. Well, if you tokenize a traditional stock, 5 00:00:17.000 --> 00:00:20.800 it is definitely still a security. You could tokenize a 6 00:00:20.839 --> 00:00:26.079 bond similarly, and so people do need to pay attention 7 00:00:26.199 --> 00:00:32.399 when they're creating crypto assets. 8 00:00:33.799 --> 00:00:36.039 This content is brought to you by Uphold, which is 9 00:00:36.079 --> 00:00:38.799 one of the top crypto platforms in the industry. I've 10 00:00:38.840 --> 00:00:41.039 been a user of this platform for many years, so 11 00:00:41.079 --> 00:00:43.200 I can vouch for them. 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Commissioner 33 00:01:55.239 --> 00:01:56.280 Purse is great to see. 34 00:01:56.120 --> 00:01:59.920 You, hey, Tony, it's good to be back. Of course, 35 00:02:00.079 --> 00:02:01.959 as you know, have to give my disclaimer, which is 36 00:02:01.959 --> 00:02:04.079 that my views are my own views as a commissioner, 37 00:02:04.519 --> 00:02:07.879 not necessarily those the SEC or my fellow commissioners. 38 00:02:08.360 --> 00:02:12.520 Yeah, Commissioner, first great hearing this week. We were talking 39 00:02:12.520 --> 00:02:15.120 a bit about it before the recording very long, but 40 00:02:15.439 --> 00:02:18.000 you and the other four commissioners appeared before the House 41 00:02:18.039 --> 00:02:22.240 Financial Services Committee. That was really refreshing to get everyone 42 00:02:22.280 --> 00:02:25.199 from the agency as far as commissioners to give their 43 00:02:25.280 --> 00:02:29.360 different point of views. How do you feel that hearing 44 00:02:29.439 --> 00:02:31.319 went and what were some takeaways for you? 45 00:02:33.000 --> 00:02:36.199 Well, I think you're right, it was about showing different 46 00:02:36.240 --> 00:02:39.840 approaches to the job. And I think that's the beauty 47 00:02:39.879 --> 00:02:42.080 of a commission. There are five of us, we all 48 00:02:42.479 --> 00:02:45.520 have different backgrounds and we bring something different to the job. 49 00:02:45.520 --> 00:02:48.879 And I think you saw that earlier this week at 50 00:02:48.919 --> 00:02:52.560 the hearing. You know, I think the big takeaways from 51 00:02:52.599 --> 00:02:57.479 the perspective of you know from my perspective, or that 52 00:02:58.360 --> 00:03:01.639 there's a lot of interest in issues that those issues 53 00:03:01.639 --> 00:03:05.960 did come up a lot. And then I think it's 54 00:03:06.120 --> 00:03:10.719 just really healthy to have a dialogue among people who 55 00:03:10.840 --> 00:03:15.319 all care about the capital markets, but who approached them differently. 56 00:03:15.840 --> 00:03:19.000 I think another theme that ran through the hearing was 57 00:03:19.319 --> 00:03:23.240 a real interest in capital formation, which is one part 58 00:03:23.240 --> 00:03:26.680 of our mission as an agency. It's a part that 59 00:03:26.759 --> 00:03:30.919 hasn't gotten a lot of attention during this past several years, 60 00:03:31.000 --> 00:03:35.280 and so I think there was understandably interest from Congress 61 00:03:35.400 --> 00:03:38.680 in what we're planning to do in that space. 62 00:03:40.199 --> 00:03:42.360 And now there was a second hearing no as schedule 63 00:03:42.439 --> 00:03:45.840 for Wednesday with the Senate folks, but that got rescheduled. 64 00:03:45.840 --> 00:03:49.439 If I'm not mistaken, are you anticipating a similar type 65 00:03:49.439 --> 00:03:51.639 of hearing with the Senate side? 66 00:03:53.319 --> 00:03:56.919 That hearing, as far as I know, was just with Chagensler, 67 00:03:57.680 --> 00:04:01.120 and I don't know why it was rescheduled or when 68 00:04:01.159 --> 00:04:04.680 it will be had, when it will be held, So 69 00:04:04.759 --> 00:04:06.319 I don't know anything about that one. 70 00:04:06.680 --> 00:04:09.800 Oh okay, so I had my ad the mistaken the 71 00:04:09.879 --> 00:04:13.439 information there. I thought all five of the commissioners we're 72 00:04:13.439 --> 00:04:14.240 going to appear again. 73 00:04:14.280 --> 00:04:20.959 But it's say, you know more than I do, Commissioner person. 74 00:04:21.600 --> 00:04:23.959 I would love to get your take on what we're 75 00:04:24.000 --> 00:04:26.920 seeing kind of a along the lines of what you 76 00:04:26.959 --> 00:04:29.399 were mentioning this shift, and I like to call it 77 00:04:29.439 --> 00:04:33.600 the Overton Windows shifting for crypto politically, where we're seeing 78 00:04:33.639 --> 00:04:37.000 democrats or working with their colleagues on the Republican side 79 00:04:37.360 --> 00:04:40.399 to help get crypto legislation through, and you have these 80 00:04:40.439 --> 00:04:44.240 hearings where it's now both Democrat and Republican voices. Do 81 00:04:44.279 --> 00:04:48.519 you feel we were hitting the tipping point of mass awareness, 82 00:04:48.600 --> 00:04:51.040 so to speak, mass adoption and everyone needs to pay 83 00:04:51.079 --> 00:04:52.439 attention now to this industry. 84 00:04:54.079 --> 00:04:56.160 I mean, I've been thinking about these issues for a 85 00:04:56.199 --> 00:04:59.360 long time, and it definitely seems that they're much more 86 00:05:00.519 --> 00:05:04.439 top of mind for more people now, and so I 87 00:05:04.480 --> 00:05:07.000 think that's positive. Although I think one of the reasons 88 00:05:07.000 --> 00:05:09.040 at their top of mind for so many people is 89 00:05:09.079 --> 00:05:14.120 that this really is an example of how a regulator 90 00:05:14.199 --> 00:05:18.439 has mishandled the situation, and so I think that is 91 00:05:19.160 --> 00:05:21.399 what has has pushed this to the top. And I 92 00:05:21.800 --> 00:05:24.360 should say, I mean, you know, I focus a lot 93 00:05:24.399 --> 00:05:26.680 on the SEC there are a lot of other non 94 00:05:26.839 --> 00:05:31.120 SEC crypto issues that have gotten attention as well, But 95 00:05:31.240 --> 00:05:33.240 I think if we had sort of done this in 96 00:05:33.279 --> 00:05:37.319 a more methodical way, there'd be less attention being paid 97 00:05:37.439 --> 00:05:38.480 to crypto right now. 98 00:05:39.360 --> 00:05:42.360 Oh sure, yeah, to your point, it has become sort 99 00:05:42.360 --> 00:05:45.160 of political where you have one side now is using 100 00:05:45.160 --> 00:05:51.199 it as a campaign item. Right, So it's interesting this 101 00:05:51.319 --> 00:05:53.439 election cycle. It's very interesting. If you told me a 102 00:05:53.519 --> 00:05:56.199 year ago that crypto would be one of the main themes, 103 00:05:56.240 --> 00:05:58.839 or that the crypto industry would be spending the amount 104 00:05:58.879 --> 00:06:03.680 of money it is from a campaign donations standpoint, I 105 00:06:03.680 --> 00:06:07.879 would not have believed you. It's pretty fascinating what's happening. 106 00:06:08.000 --> 00:06:11.480 The politics out of it, which is not really my expertise, 107 00:06:11.759 --> 00:06:17.279 and focusing more on just the regulatory approach. We're spending 108 00:06:17.480 --> 00:06:20.199 a lot of time at the SEC thinking about crypto, 109 00:06:20.279 --> 00:06:23.079 and a lot of our resources are going toward these 110 00:06:23.160 --> 00:06:26.959 crypto enforcement actions. And one of the themes that I 111 00:06:26.959 --> 00:06:29.120 think it's really important for us to think about is 112 00:06:29.199 --> 00:06:32.959 kind of what could an alternate reality look like if 113 00:06:32.959 --> 00:06:38.240 we were to take a more workmanlike approach to crypto 114 00:06:38.319 --> 00:06:44.120 and just say, okay, let's think about areas where we 115 00:06:44.199 --> 00:06:47.120 need to be involved, and then think about what does 116 00:06:47.639 --> 00:06:51.279 rational involvement look like, what would a rational set of 117 00:06:51.360 --> 00:06:54.600 rules look like, and then where could we concentrate our 118 00:06:54.680 --> 00:06:58.959 enforcement resources to do the most good those kinds of things. 119 00:06:59.560 --> 00:07:02.240 I think that's really what we should be thinking about. 120 00:07:02.279 --> 00:07:05.759 That's not really a political question. That's something that people 121 00:07:05.800 --> 00:07:07.639 on all sides of the aisle can get together and 122 00:07:07.680 --> 00:07:10.959 think about and think about together and try to figure 123 00:07:11.000 --> 00:07:14.160 that out. You might have differences in terms of the 124 00:07:14.279 --> 00:07:16.759 role that government should play in those things, but those 125 00:07:16.800 --> 00:07:19.079 are the kinds of discussions that you can then have. 126 00:07:20.399 --> 00:07:23.720 Yeah, agreed, So I notice what you mentioned that because 127 00:07:23.720 --> 00:07:27.279 the agency did not act sooner or in the right way, 128 00:07:27.600 --> 00:07:29.680 it has kind of forced the industry to become a 129 00:07:29.720 --> 00:07:33.199 political item where it shouldn't have been. Right. It's just 130 00:07:33.240 --> 00:07:35.240 a technology like the Internet. 131 00:07:36.279 --> 00:07:40.079 Yeah, it's a technology, and you know, I think this 132 00:07:40.240 --> 00:07:45.240 is another point that I like us to think about, 133 00:07:45.439 --> 00:07:50.160 not because you know, we should sit around and say, well, 134 00:07:50.160 --> 00:07:52.439 you know, let's imagine what it would would have been 135 00:07:52.519 --> 00:07:55.160 like for the sake of imagining what it would have 136 00:07:55.199 --> 00:07:57.480 been like, but to think about how can we handle 137 00:07:57.680 --> 00:08:00.759 other new technologies that come down the pist. We're seeing 138 00:08:01.560 --> 00:08:05.800 artificial intelligence. It's not new, but we're seeing new uses 139 00:08:05.839 --> 00:08:10.079 for it and new iterations of it. And so let's 140 00:08:10.120 --> 00:08:13.800 make sure that we don't repeat the same problems when 141 00:08:13.839 --> 00:08:18.040 we are confronted with a different technology, and let's try 142 00:08:18.519 --> 00:08:22.000 to do a reset in how we think about crypto. 143 00:08:22.279 --> 00:08:24.600 But I think one of the problems of us not 144 00:08:24.720 --> 00:08:30.120 having done this is that there's been a lot of emphasis. 145 00:08:30.480 --> 00:08:33.080 You know, there's been a lot of retail interest, and 146 00:08:33.720 --> 00:08:38.120 I think we have not helped by not having clear 147 00:08:38.200 --> 00:08:41.519 lines because it's made it harder for retail folks to 148 00:08:41.559 --> 00:08:45.399 sort of distinguish what where there might be there there 149 00:08:45.440 --> 00:08:48.600 and where there isn't where it's just a fraud. And 150 00:08:49.279 --> 00:08:52.159 so I think better rules will also just be helpful 151 00:08:52.200 --> 00:08:55.639 for retail folks, be helpful for us as we think 152 00:08:55.679 --> 00:08:59.799 about using our scarce enforcement resources. 153 00:09:00.600 --> 00:09:03.279 Yeah. Absolutely, And I can give some anecdotal evidence on 154 00:09:03.320 --> 00:09:06.480 my end as a podcaster. I obviously have a lot 155 00:09:06.519 --> 00:09:09.320 of retail folks who watch and listen and again tell 156 00:09:09.360 --> 00:09:13.519 you that amount of stories of folks getting into situations 157 00:09:13.559 --> 00:09:15.879 where I thought this was legit, but it's actually a 158 00:09:15.919 --> 00:09:19.200 scam or you know, how come the sec is not 159 00:09:19.240 --> 00:09:22.759 stopping these guys. It's clearly something fishy is happening here. 160 00:09:23.080 --> 00:09:26.399 And then on the building side, I want to launch 161 00:09:26.519 --> 00:09:29.480 a dow and have NFTs, but I'm scared, yes, you see, 162 00:09:29.600 --> 00:09:31.799 might go after me, even though I'm not trying to 163 00:09:31.840 --> 00:09:35.360 launch any type of trading, just have utility NFTs where 164 00:09:35.360 --> 00:09:39.120 people can unlock features, get special perks and benefits. But 165 00:09:39.919 --> 00:09:42.440 I don't want to be in any legal issues. I'm 166 00:09:42.480 --> 00:09:44.480 a small time business owner, right. 167 00:09:45.240 --> 00:09:48.960 So there are a lot of stories like that of 168 00:09:49.159 --> 00:09:52.159 people who have an interesting idea for how they might 169 00:09:52.799 --> 00:09:56.879 use the technology and they're just kind of holding back. 170 00:09:57.279 --> 00:10:01.799 Because there's this sphere of getting on the wrong side 171 00:10:01.840 --> 00:10:04.600 of the securities laws. And I think with respect to 172 00:10:04.799 --> 00:10:07.320 you know, it always makes me sad to hear of 173 00:10:07.399 --> 00:10:11.360 people who have been taken advantage of by someone a 174 00:10:11.360 --> 00:10:14.600 fraudster using crypto to lure people in, and there are 175 00:10:14.639 --> 00:10:16.399 a lot of people out there who are trying to 176 00:10:16.440 --> 00:10:20.600 do that, so people have to be very careful. But 177 00:10:20.679 --> 00:10:25.480 I think part of the the goal of getting a 178 00:10:25.519 --> 00:10:28.360 clearer framework is also so that you know what falls 179 00:10:28.399 --> 00:10:31.399 within the SEC's jurisdiction and what might fall within another 180 00:10:31.480 --> 00:10:35.279 regulator's jurisdiction. Sometimes, when one of these really bad things 181 00:10:35.320 --> 00:10:41.200 happens in the crypto space, unfortunately we can't we can't 182 00:10:41.200 --> 00:10:45.120 get involved because it's not within our jurisdiction. But there 183 00:10:45.120 --> 00:10:48.639 may be another federal or state regulator who can get involved, 184 00:10:49.200 --> 00:10:51.679 and if the lines are clear, we can then make 185 00:10:51.679 --> 00:10:55.759 a referral over to that other regulator. And so again 186 00:10:55.840 --> 00:10:58.799 I think the space would be I mean, there are 187 00:10:58.799 --> 00:11:00.919 always going to be people trying to take advantage of 188 00:11:00.960 --> 00:11:03.320 other people, and they're going to use whatever the latest 189 00:11:03.480 --> 00:11:06.480 thing is, but I think it would be harder for 190 00:11:06.519 --> 00:11:09.360 those people to do their bad deeds if we were 191 00:11:09.440 --> 00:11:12.240 to have these clear jurisdictional lines. 192 00:11:13.120 --> 00:11:17.120 Absolutely. What are your thoughts on along the lines what 193 00:11:17.120 --> 00:11:19.840 we were talking about before we Democrats and Republicans working together, 194 00:11:20.159 --> 00:11:22.840 thoughts on the crypto bills, the fit twenty one bill 195 00:11:22.879 --> 00:11:24.639 that made it out of the House. There's one in 196 00:11:24.679 --> 00:11:28.519 the Senate, the Lumbus Jillibrand Bill. There's talks of trying 197 00:11:28.519 --> 00:11:30.519 to get a bill pushed through the Senate by the 198 00:11:30.600 --> 00:11:32.480 end of the year, maybe in the lame duck session. 199 00:11:33.080 --> 00:11:35.960 I've seen Republicans and Democrats talk about this. Do you 200 00:11:36.000 --> 00:11:42.080 think those legislation would help in putting these lines in place? 201 00:11:42.799 --> 00:11:45.000 Well, as I said at the hearing, I always welcome 202 00:11:45.320 --> 00:11:49.200 the input of Congress, and so getting a sense from 203 00:11:49.279 --> 00:11:53.440 them where they want those jurisdictional lines to lie would 204 00:11:53.480 --> 00:11:56.120 be very helpful for us then to think about how 205 00:11:56.120 --> 00:11:59.159 to spend our resources. So I do welcome it. In 206 00:11:59.240 --> 00:12:01.600 terms of the detail tells of those bills, you know, 207 00:12:01.639 --> 00:12:04.519 I leave that to people in Congress, though, I think 208 00:12:05.039 --> 00:12:08.840 that the SEC should be assisting them with We provide 209 00:12:08.840 --> 00:12:13.600 something called technical assistance to Congress when they're working on things, 210 00:12:13.639 --> 00:12:16.120 and so we should be stepping up to help them 211 00:12:16.159 --> 00:12:16.480 with that. 212 00:12:18.919 --> 00:12:22.000 I want to talk about the term crypto asset securities 213 00:12:22.039 --> 00:12:25.320 or digital asset securities. I've heard s againcer and it's 214 00:12:25.360 --> 00:12:29.320 been mentioned in different legal documents as well. Recently, there 215 00:12:29.480 --> 00:12:32.799 was some folks who are the sec who apologized about 216 00:12:32.799 --> 00:12:38.279 this in a finance legal document footnote. Yet it's being 217 00:12:38.360 --> 00:12:41.639 used in different places. Where did this term originate from? 218 00:12:41.840 --> 00:12:44.799 And it seems to be causing a lot of confusion. 219 00:12:46.039 --> 00:12:48.480 Yeah, well, I don't know where it came from. But Tony, 220 00:12:48.519 --> 00:12:50.279 you and I have talked about this topic in the 221 00:12:50.360 --> 00:12:55.200 past that there is some legal imprecision and how we've 222 00:12:55.240 --> 00:12:58.279 approached this issue. And you know, we've talked about the 223 00:12:58.320 --> 00:13:02.840 fact that the Howie test from a case about orange groves, 224 00:13:02.919 --> 00:13:05.600 and the orange growths themselves were not the securities. It 225 00:13:05.639 --> 00:13:09.120 was the orange groves when paired with this contract to 226 00:13:09.240 --> 00:13:12.639 do work related to the orange groves, that turned it 227 00:13:12.679 --> 00:13:16.440 into a securities offering. And so I think in this 228 00:13:16.559 --> 00:13:20.879 connection and you have Howie has generated this whole series 229 00:13:20.919 --> 00:13:26.720 of cases about casks of whiskey, about different kinds of 230 00:13:26.799 --> 00:13:29.960 animals that could be the subject of an investment contract, 231 00:13:29.960 --> 00:13:34.240 but it doesn't turn the chinchilla into the actual security. 232 00:13:34.720 --> 00:13:40.480 And so I think some of the linguistic problems are 233 00:13:40.519 --> 00:13:44.519 sort of stemming from this wrestling with how does this 234 00:13:44.600 --> 00:13:49.399 investment contract idea really manifest itself in the crypto space, 235 00:13:50.080 --> 00:13:53.559 And we haven't been precise about that and so I 236 00:13:53.639 --> 00:13:55.919 think this is the one symptom of that. 237 00:13:57.200 --> 00:13:59.639 I remember years ago you and I talking about that, 238 00:13:59.840 --> 00:14:02.840 and you mentioned you've been speaking to the folks here 239 00:14:02.960 --> 00:14:06.519 the agency about viewing this differently, the crypto assets that 240 00:14:06.720 --> 00:14:11.440 intrinsically they're not securities. Have you do you feel, you know, 241 00:14:11.480 --> 00:14:13.960 there's been some progress made and I know sometimes these 242 00:14:13.960 --> 00:14:18.399 things take time and idea and you know, collectively we agree, okay, 243 00:14:18.440 --> 00:14:20.679 this is how it should be viewed. Do you feel 244 00:14:20.679 --> 00:14:22.919 the agencies making some level of progress. 245 00:14:24.120 --> 00:14:26.200 Well, I do think we're having to be more precise. 246 00:14:26.279 --> 00:14:30.080 I should make clear though, that you can have a 247 00:14:30.159 --> 00:14:34.159 crypto asset that is itself a security. So I think 248 00:14:34.200 --> 00:14:38.279 that someday we could see a world in which traditional 249 00:14:38.320 --> 00:14:43.200 stocks are tokenized. Well, if you tokenize a traditional stock, 250 00:14:43.279 --> 00:14:47.080 it is definitely still a security. You could tokenize a 251 00:14:47.120 --> 00:14:52.360 bond similarly. And so people do need to pay attention 252 00:14:52.480 --> 00:14:57.159 when they're creating crypto assets to whether or not they're 253 00:14:57.200 --> 00:15:03.159 doing something. Are they fractionalizing thing, are they creating a 254 00:15:03.200 --> 00:15:08.519 token that will kick off a stream of payments to people? 255 00:15:08.600 --> 00:15:10.720 I mean they need to be thinking in those kind 256 00:15:10.759 --> 00:15:14.879 of context about whether something might be a security. So 257 00:15:14.960 --> 00:15:17.879 you can't make a blanket statement. No, crypto asset is 258 00:15:17.919 --> 00:15:22.960 a security. But I think when we're thinking about crypto 259 00:15:23.039 --> 00:15:27.279 assets as the object of an investment contract, just you know, 260 00:15:27.360 --> 00:15:30.879 because of statements made around how it was sold those 261 00:15:30.960 --> 00:15:34.000 kinds of things, then we the sec need to be 262 00:15:34.039 --> 00:15:36.559 more precise in those instances. And I think you're seeing 263 00:15:36.600 --> 00:15:38.080 that sort of developing now. 264 00:15:38.879 --> 00:15:42.679 Yeah, that's a great point to delineate between Yeah, tokenized 265 00:15:42.759 --> 00:15:46.480 assets versus the one the tokens that exist on blockchains 266 00:15:46.519 --> 00:15:50.080 which help the utility function. But I definitely agree with 267 00:15:50.080 --> 00:15:54.720 you that token ied stocks, token ice come and all need. 268 00:15:54.600 --> 00:15:57.120 To be careful. They can't. You know, blanket rules don't 269 00:15:57.120 --> 00:16:00.000 work with the securities laws. It's always facts and circumstance. 270 00:16:01.519 --> 00:16:04.039 But that's why some of these statements that have been 271 00:16:04.080 --> 00:16:08.879 made around crypto coming from the SEC. In other places, 272 00:16:08.879 --> 00:16:11.759 we need to be careful too. We can't make blanket statements. Either. 273 00:16:13.679 --> 00:16:16.879 Let's move ahead to sab one two one, or solve 274 00:16:16.919 --> 00:16:20.039 one two one as some would call it. I know 275 00:16:20.159 --> 00:16:22.399 you and I touch about this on this in the past, 276 00:16:23.000 --> 00:16:26.200 and there's been moves to have it repealed in the 277 00:16:26.200 --> 00:16:30.159 House and Senate. Ultimately, President Joe Biden vetoed it. However, 278 00:16:30.240 --> 00:16:33.159 we got news that certain banks and institutions may be 279 00:16:33.200 --> 00:16:36.639 able to bypass this, such as bny mellon what can 280 00:16:36.679 --> 00:16:38.159 you tell us there, what's happening with this? 281 00:16:39.600 --> 00:16:42.120 Well, first of all, I think it's amazing that a 282 00:16:42.159 --> 00:16:46.720 staff accounting bulletin got enough attention that it became the 283 00:16:46.759 --> 00:16:52.559 subject of so much Congressional attention, and it actually, you know, 284 00:16:52.720 --> 00:16:56.559 ended up the Congress wanted to get rid of it. 285 00:16:56.559 --> 00:17:00.519 It didn't end up making it past a veto, a 286 00:17:00.559 --> 00:17:04.519 presidential veto. But the point is that there's a lot 287 00:17:04.559 --> 00:17:07.240 of concern around the staff accounting bulletin. So why is 288 00:17:07.319 --> 00:17:11.240 that a staff accounting bulletin is, as its name suggests, 289 00:17:11.400 --> 00:17:14.920 a staff document. It comes out without the traditional, the 290 00:17:14.960 --> 00:17:19.519 typical process that would go with a rule. You don't 291 00:17:19.559 --> 00:17:22.680 have any time for people to comment on it. It 292 00:17:22.839 --> 00:17:28.079 just it's out there, and people technically don't have to 293 00:17:28.119 --> 00:17:31.880 comply with it because it's a staff document, but they 294 00:17:31.920 --> 00:17:35.759 feel that they have to comply with it because it 295 00:17:35.839 --> 00:17:38.799 reflects how the staff is thinking about things, and thus 296 00:17:38.920 --> 00:17:42.200 could if you don't comply, could result in a very 297 00:17:42.319 --> 00:17:47.599 uncomfortable situation for you. And so it came out. It 298 00:17:47.640 --> 00:17:50.200 looked to me like a rule in the way it 299 00:17:50.279 --> 00:17:55.079 was written, and then it was applied at first to 300 00:17:56.720 --> 00:18:01.960 you know, just public companies that are that are filing 301 00:18:02.000 --> 00:18:04.200 with us, right, But then it sort of it started 302 00:18:04.200 --> 00:18:06.759 being applied more broadly to broker dealer. It seemed to 303 00:18:06.799 --> 00:18:11.720 apply to everyone ultimately, and so the result of that 304 00:18:12.079 --> 00:18:15.400 was that you saw, and for people who haven't followed 305 00:18:15.440 --> 00:18:18.720 the debate as closely as you have, Tony sab one 306 00:18:19.519 --> 00:18:24.680 is basically about what does a company need to do 307 00:18:24.720 --> 00:18:30.680 from an accounting perspective when it's custodying crypto for customers. 308 00:18:31.519 --> 00:18:33.880 And so the result of it has been, because of 309 00:18:33.880 --> 00:18:40.279 its onerous effects, it has effectively led to most custodians 310 00:18:40.359 --> 00:18:43.599 not being able to play in this space. And so 311 00:18:43.720 --> 00:18:46.960 there's been just a tremendous amount of pushback from traditional 312 00:18:47.000 --> 00:18:52.000 banks but also from people within the crypto space to say, hey, 313 00:18:52.079 --> 00:18:54.240 is this really does this even make sense from an 314 00:18:54.240 --> 00:19:00.400 accounting perspective, And so it's been out there for a 315 00:19:00.400 --> 00:19:02.440 long time. People have been complaining about it for a 316 00:19:02.440 --> 00:19:07.240 long time. Then last month, I think it was the 317 00:19:07.839 --> 00:19:10.519 chief accountant at the SEC, who's on the staff at 318 00:19:10.559 --> 00:19:12.720 the SEC, put out a speech and said, hey, we're 319 00:19:13.160 --> 00:19:18.400 making some exceptions here for people from SAB one twenty one, 320 00:19:18.640 --> 00:19:21.279 and so people can go look at that speech to 321 00:19:21.319 --> 00:19:24.240 see kind of the conditions that might get you out 322 00:19:24.319 --> 00:19:28.839 of SAB one twenty one. But that also strikes a 323 00:19:28.839 --> 00:19:30.759 lot of people as a little strange. Right, you've got 324 00:19:30.759 --> 00:19:33.839 the staff bulletin and then you've got a speech interpreting 325 00:19:33.880 --> 00:19:35.839 it and it's a staff speech and you've got to go. 326 00:19:36.599 --> 00:19:39.440 That doesn't seem like a great way to do rule making. 327 00:19:39.599 --> 00:19:43.200 So why not instead just say, Okay, if we're making 328 00:19:43.279 --> 00:19:47.480 exceptions for people, let's codify that so that everyone can 329 00:19:47.559 --> 00:19:51.640 comply with that, with those conditions and get the exception. 330 00:19:52.519 --> 00:19:56.200 And so whatever we do in this space, we need 331 00:19:56.240 --> 00:19:58.599 to make sure that we have rules that people have 332 00:19:58.640 --> 00:20:00.920 been able to weigh in on that those rules then 333 00:20:01.079 --> 00:20:02.920 apply equally to everyone. 334 00:20:04.599 --> 00:20:09.400 Yeah. Absolutely, because it just seems it muddies the water. 335 00:20:09.839 --> 00:20:11.920 I don't know what's happening, and a lot of people 336 00:20:11.960 --> 00:20:15.119 are complaining about it, But it would be great to 337 00:20:15.200 --> 00:20:19.240 have these trusted custodians and banks which have been established 338 00:20:19.279 --> 00:20:21.920 have insurance, have the proper security checks to be able 339 00:20:21.960 --> 00:20:25.039 to custody some of the underlying assets for ETFs like 340 00:20:25.079 --> 00:20:27.799 the bigcoin ETF and ethere and METF and so forth. 341 00:20:27.799 --> 00:20:29.960 That would be I think very good for the market. 342 00:20:29.839 --> 00:20:32.079 When it Yeah, I mean, I think, yeah, that point 343 00:20:32.160 --> 00:20:35.559 is great. Right. We need to have competition. We don't 344 00:20:35.559 --> 00:20:37.559 want to pick winners and losers in this space. We 345 00:20:37.640 --> 00:20:40.240 want everyone to be able to compete on equal footing. 346 00:20:41.079 --> 00:20:44.799 And having a world in which you have multiple custodians 347 00:20:45.319 --> 00:20:49.960 tends to be a more uh you know, resilient world. Right, 348 00:20:50.000 --> 00:20:52.079 It's it's better to have more people playing in the 349 00:20:52.279 --> 00:20:54.880 in the space. Playing may not be the right word, 350 00:20:54.960 --> 00:20:58.880 but offering custodial services. 351 00:20:58.240 --> 00:21:02.400 Yeah, for sure. Now, on the topic of ETFs, I 352 00:21:02.440 --> 00:21:04.160 would love to get your thoughts on the success of 353 00:21:04.200 --> 00:21:08.000 the Bitcoin ETFs. I mean, black Rock has over twenty 354 00:21:08.039 --> 00:21:11.359 billion in its respective ETF and then obviously the other 355 00:21:11.440 --> 00:21:14.160 issues are doing well. This seems to be a hit 356 00:21:14.319 --> 00:21:17.400 with the market, the fastest growing ETFs and the history 357 00:21:17.440 --> 00:21:20.160 of ETFs, But it had to go over the legal 358 00:21:20.240 --> 00:21:24.839 hurdle and for the SEC to lose an appeal. In hindsight, 359 00:21:25.119 --> 00:21:27.920 I know you voted to have this approved, but in 360 00:21:28.000 --> 00:21:30.880 hindsight does the agency how are they looking at the 361 00:21:30.920 --> 00:21:32.400 success of the ETFs. 362 00:21:33.920 --> 00:21:35.920 Well, we're not a merit regulator at the end of 363 00:21:35.960 --> 00:21:38.519 the day, so it's not really our goal to say, well, 364 00:21:38.640 --> 00:21:41.359 you know, this product is successful or not. But certainly 365 00:21:41.400 --> 00:21:46.200 the inflows into those products have been, as you said, notable, 366 00:21:46.880 --> 00:21:52.920 and I you know, this feeds into my point all 367 00:21:53.000 --> 00:21:56.839 along on these which is, let's just let the market 368 00:21:57.039 --> 00:22:00.920 make their decision. We might not want these products. You know, 369 00:22:01.079 --> 00:22:04.839 if someone at a regulatory agency doesn't want to have 370 00:22:04.880 --> 00:22:09.920 those products, that's fine, but you have to have a 371 00:22:10.000 --> 00:22:12.279 reason for saying the market can't have it, and we 372 00:22:12.359 --> 00:22:14.640 didn't have a good reason for saying the market couldn't 373 00:22:14.680 --> 00:22:17.000 have it. And then once we did say that the 374 00:22:17.039 --> 00:22:18.799 market could have it, it turned out that a lot 375 00:22:18.799 --> 00:22:22.839 of people actually wanted it. And so it does make 376 00:22:22.960 --> 00:22:28.359 me question which I had had questions before. But you know, 377 00:22:28.839 --> 00:22:32.759 by not allowing these products out much sooner than we did, 378 00:22:33.880 --> 00:22:37.240 what other products were people getting into and were those 379 00:22:37.279 --> 00:22:42.839 products inferior to the products that they ended up choosing. 380 00:22:43.200 --> 00:22:46.519 I mean, again, we're not a merit regulator, so I'm 381 00:22:46.519 --> 00:22:49.839 not making any comment on whether people should or shouldn't 382 00:22:49.880 --> 00:22:54.160 have this product in their portfolio. But the market tells 383 00:22:54.240 --> 00:22:57.119 us that there were certainly people who were interested in 384 00:22:57.200 --> 00:22:57.680 having it. 385 00:22:59.200 --> 00:23:03.599 No, there's a big question. Well I shouldn't say question. 386 00:23:03.680 --> 00:23:06.799 Let me frame this. Obviously, the etherem media's got approved 387 00:23:06.799 --> 00:23:09.319 as well. But there's people in the market saying, okay, 388 00:23:09.319 --> 00:23:13.920 Etherreum is an all coin, second largest behind bitcoin. Bitcoin 389 00:23:14.039 --> 00:23:17.000 was established as a commodity for a very long time, 390 00:23:17.200 --> 00:23:21.279 going back years since Jay Clayton was chair and so forth. 391 00:23:22.599 --> 00:23:26.400 So folks are wondering, well, if Etheroreum as a smart 392 00:23:26.440 --> 00:23:32.000 contract proof of steak network got an ETF, what about Slona, 393 00:23:32.000 --> 00:23:36.279 what about Cardono and so forth? Is the agency talking 394 00:23:36.319 --> 00:23:38.440 about these things? And I know there's lawsuits going on 395 00:23:38.559 --> 00:23:42.519 with some of these other tokens mentioned, but I guess 396 00:23:42.759 --> 00:23:46.440 what's the methodology here that have Etheroreum got the approval? 397 00:23:46.440 --> 00:23:48.279 But what about the other proof of steak networks? 398 00:23:48.960 --> 00:23:52.039 Well, first of all, people need to come in and ask, right, 399 00:23:52.119 --> 00:23:57.839 So that's the first thing. And there was at least 400 00:23:57.880 --> 00:24:03.480 one applicant for a Salona product that I think got withdrawn, 401 00:24:05.160 --> 00:24:07.519