Speaker 1: Welcome back into the podcast today. I've got Bill Barhyde
Speaker 1: coming in from Ober today and we're going to be
Speaker 1: breaking down the Clarity position and what's happening in DC,
Speaker 1: which is a lot literally as we're recording this, DC
Speaker 1: is underway for a potential markup. So Bill, welcome to
Speaker 1: the show.
Speaker 2: Great to be here, Thanks for having me.
Speaker 1: So, Bill, you have had a chance to well to
Speaker 1: give our viewers and listeners a little bit of history
Speaker 1: here around Obra. You shifted and pivoted a little bit
Speaker 1: of where you guys were in the crypto industry to
Speaker 1: where you are now. Kind of explain that first.
Speaker 2: Yeah, so, under the last two different kind of government regimes,
Speaker 2: we had a lot of differing opinions as to how
Speaker 2: to operate in the digital asset space. It's just the
Speaker 2: reality of what we had and our goal all along
Speaker 2: has been to build what amounts to effectively a crypto
Speaker 2: banking platform that basically prepares people for the current state
Speaker 2: and the future state of the digital asset world being
Speaker 2: able to buy first gen crypto assets bitcoin, ethereum, xrps,
Speaker 2: you know whatever stable coins are, yield on them, borrow
Speaker 2: against bitcoin, things like that, and you know, we have
Speaker 2: this manatra trader and borrow, right. I mean, that's what
Speaker 2: people would want to do in the digital asset realm.
Speaker 2: And we've had to modify how we bring those services
Speaker 2: to market to kind of fit the mold of what
Speaker 2: is available within the existing regulatory frameworks. And we through
Speaker 2: a lot of I wouldn't say trial and error, but
Speaker 2: a lot of like legal work and digging in, we
Speaker 2: realize that the easiest and most straightful way, not the
Speaker 2: easiest that's crazy actually, but the most realistic way of
Speaker 2: offering those services is through the model that we operate
Speaker 2: under today at AVRO.
Speaker 1: All Right, so the model that you're working on today
Speaker 1: is a bit different. You've got lending products in there.
Speaker 1: You're mostly going after high net worth individuals institutions. Do
Speaker 1: you see the pivot that is happening right now in
Speaker 1: DC to finally position the rest of the market. We've
Speaker 1: seen kind of the early adopters moving into the space.
Speaker 1: Do you think this is the trigger for traditional investors
Speaker 1: and maybe of all types starting to move into the market.
Speaker 2: Well, it's happening already. So you know, a few things
Speaker 2: have happened in the last year, and that really matter.
Speaker 2: I was actually two years that really matter, even before
Speaker 2: the Trump administration came in, but post Trump administration it's
Speaker 2: really accelerated. And you know, we've seen the black rock
Speaker 2: ETFs were a huge catalyst because it sent a message
Speaker 2: to Wall Street that if you're not focusing on you know,
Speaker 2: digital assets, you are missing the boat. And it's become
Speaker 2: their fastest growing products ever. And that's pretty much true
Speaker 2: for everyone who's released a BITCOINYTF. So that's part one.
Speaker 2: I would say Part two is we went from the
Speaker 2: last administration saying everything is a security to recent guidance
Speaker 2: of interpretation of existing law, even pre Clarity Act, which
Speaker 2: I'm sure we'll get into. That's no, not everything is
Speaker 2: a security, and here is guidance on how to think
Speaker 2: about that, and here's guidance on what to do if
Speaker 2: something is a security. And that's what we had been
Speaker 2: asking for in principle all along. Now we kind of
Speaker 2: surmise that this was where the world had to go,
Speaker 2: meaning the US Securities and Commodities rules kind of had
Speaker 2: to go in this direction if any sane you know,
Speaker 2: layer of oversight was applied, and so we were preparing
Speaker 2: for that. And so to your point about you know,
Speaker 2: pivoting how we operate, Right, we formed a wealth advisory Right,
Speaker 2: we integrated with third party custody service providers, integrate with
Speaker 2: certain you know, third party qualified custody prime brokers, and
Speaker 2: we basically built an end to end stack to facilitate
Speaker 2: services for clients. Again under that mantra of trade eer
Speaker 2: and borrow, I want to own digital assets, right, I
Speaker 2: want to earn yield on digital assets, and I want
Speaker 2: to borrow against the value of digital assets. Same concept
Speaker 2: from a client's mentality perspective. Maybe foregoing kind of small
Speaker 2: dollar deposits under this model, but you know, still getting
Speaker 2: to the promised land.
Speaker 1: Yeah. Well, and I think this is something we're seeing
Speaker 1: more active obviously in the crypto space, especially from our audits.
Speaker 1: We've seen this already right now in terms of the
Speaker 1: lend borrow tools that you guys have available. What assets
Speaker 1: kind I borrow against today?
Speaker 2: Yeah? Today it's bitcoin, Ethereum and Solana that I can
Speaker 2: borrow against, and we'll be adding more to that over time.
Speaker 2: My prediction is in two years we'll be doing more
Speaker 2: loans against token is stocks than we will against bitcoin. Yeah,
Speaker 2: and that makes a lot of sense.
Speaker 1: What did you make of anthropics moved. Did you follow
Speaker 1: this just yesterday where.
Speaker 2: They beware trying to block these secondary sales and secondary sales.
Speaker 2: This is an ongoing issue, right. It has to do
Speaker 2: with you know, aligning interests of companies that puts vesting
Speaker 2: schedules in place, and you know have basically transfer rights
Speaker 2: issues and and you know, are trying to avoid reaching
Speaker 2: a circuit. There's different rules that apply when you reach
Speaker 2: different shareholder numbers, and so all of that creates downstream
Speaker 2: issues for companies. So so I do get and open
Speaker 2: eye open AI went through the same thing. I think
Speaker 2: like maybe eighteen months ago I read where they were
Speaker 2: basically trying to block companies from creating secondary markets in
Speaker 2: their shares or tokenizing their shares, which is gives you
Speaker 2: the net effect of having a secondary market. So it's
Speaker 2: a complex issue. It can be addressed head on, and
Speaker 2: you know, but you have to basically want to deal
Speaker 2: with the issue. If you don't want to deal with
Speaker 2: the issue because you're a private company and you don't
Speaker 2: want any disclosures, you want to keep a number of
Speaker 2: shareholders under a certain threshold, then you're just going to
Speaker 2: basically say, you know what, we don't support any of this,
Speaker 2: everybody go away. And that seems to be the position
Speaker 2: that they've taken so far.
Speaker 1: You think this is going to be a company by
Speaker 1: company assessment.
Speaker 2: Right now, it is unless the standards change, right. So
Speaker 2: for for example, you know, now we have a very
Speaker 2: simple standard for doing financing that's not yet equity, right,
Speaker 2: the you know safe agreement, right, it's a simple agreement
Speaker 2: for you know, for future equity or a staff for
Speaker 2: future tokens. And we may end up with something like
Speaker 2: that for the ability to have transfer rights in private companies.
Speaker 2: But the tokenization of everything is actually going to change
Speaker 2: everything from a trading and custody perspective in the coming months.
Speaker 2: And so I think this is a short term problem,
Speaker 2: meaning that it's going to be very very difficult for
Speaker 2: companies to prevent people who have full ownership of their
Speaker 2: shares from transferring those shares unless there's some very very
Speaker 2: explicit agreement that they make early on with shareholders in
Speaker 2: a in a private company structure that private placements just
Speaker 2: aren't allowed. Uh and and for some via some legal
Speaker 2: mechanism can block them, but that doesn't happen, which I
Speaker 2: think I think is going to become the norm In
Speaker 2: other words, I think the norm is going to be
Speaker 2: we're going to have private markets, and we're going to
Speaker 2: have public markets, and everything's going to be tokenized, and
Speaker 2: everything's going to be fungible, and everything's going to be
Speaker 2: tradable twenty four to seven unless you make exceptions.
Speaker 1: M Yeah, well, and I think the advantage to that
Speaker 1: is kind of like what we're seeing in the market
Speaker 1: right now. Here's JP Morgan filing for a tokenized money
Speaker 1: market so, uh, this is a big deal. Eric was
Speaker 1: talking about this because JP Morgan is inching further into crypto.
Speaker 1: Pretty low fees in general, pretty stable knap. What do
Speaker 1: you make of this with JPM coming in, uh to
Speaker 1: the money market fund? This is an interesting play. What
Speaker 1: are your thoughts?
Speaker 2: Yeah, I mean we've we've predicted this is going to happen.
Speaker 2: We've launched the tokenized field bearing stable coin as well.
Speaker 2: It's different from from this product. This is more of
Speaker 2: a traditional money market fund, right, which tends to you know,
Speaker 2: is a bank product, whereas you know, at what we're
Speaker 2: doing is a security product, and and and so you
Speaker 2: get to you get kind of to the same place.
Speaker 2: Ours is a much higher year. But look, every bank
Speaker 2: is going to want to do this because when you
Speaker 2: tokenize a product, you do effectively two things that matter
Speaker 2: and and and The first is you're representing a work
Speaker 2: product as a fungible token. Okay, why why is that interesting? Well,
Speaker 2: that's interesting because it's tradable anywhere, all right, exactly, and
Speaker 2: and and so, but more importantly than that, you enable
Speaker 2: infinite distribution. Right, So, if you have a money market
Speaker 2: product today, as a bank, there's only one place to
Speaker 2: buy that money market that's the bank that issued it.
Speaker 2: If you tokenize it, you can issue it, you can
Speaker 2: you can release it everywhere within the guidelines or the
Speaker 2: framework of of you know what the banks and the
Speaker 2: sec allow, plus what you know would be allowed into
Speaker 2: the Clarity Act.
Speaker 1: And so.
Speaker 2: But basically, you have significantly broader distribution for your money
Speaker 2: market product than you do if you're just offering it
Speaker 2: via your small bank. Now obviously you know JP Morgan,
Speaker 2: Morgan Stanley's, you know, just launch an ETF. These are
Speaker 2: not small banks, but every bit sized bank in the
Speaker 2: country can now offer a a tokenized money market product,
Speaker 2: create some tweak differentiator that might say, my money market
Speaker 2: product is a little bit different than theirs, tokenize it,
Speaker 2: release it, and now Coinbase might have a page or
Speaker 2: Abra might have a page in our in our wealth
Speaker 2: management stack that says, here's seventy five different money market products,
Speaker 2: and our AI Portfolio Allocation tool will decide based upon
Speaker 2: certain parameters, which, uh, you know which product you should
Speaker 2: store your cash in? Do you want to use the
Speaker 2: ABRA USDAF for high yield and here are the risk
Speaker 2: disclosures for that? Or do you want a treasury money
Speaker 2: market product? And the difference might be daily liquidity for
Speaker 2: you know, fifty business points less versus monthly liquidity for
Speaker 2: fifty basis points more.
Speaker 1: Who knows when you look at the speed in which
Speaker 1: we're already see this happened. You just stated a few
Speaker 1: minutes ago that this would be just months around the
Speaker 1: corners here in terms of token is securities lining up obviously,
Speaker 1: with Clarity in tow, this could really remake how the
Speaker 1: US financial markets work. What are you thinking for twenty
Speaker 1: twenty six will be the big takeaway and let's assume
Speaker 1: that Clarity gets through. But the big takeaway for later
Speaker 1: this year, anything that you're watching specifically.
Speaker 2: Yeah, I think there's two, well actually three things that
Speaker 2: I'm thinking about. You know, this twenty six so far
Speaker 2: has been a continuation of twenty five. Twenty five was
Speaker 2: the year of the stable coin circle coming out, et cetera,
Speaker 2: et cetera. And we're seeing, you know, just a huge
Speaker 2: number of bank based stable coins being released as a
Speaker 2: result of Genius Act and inserts its purpose, and the
Speaker 2: competition is very healthy. The second thing is is now
Speaker 2: I would call it an essential tension that's evolved in
Speaker 2: the last ninety days and especially between the bank lobby
Speaker 2: and the crypto lobby, and that is, you know, some
Speaker 2: of it's centered around this idea of who can pay
Speaker 2: yield on on on deposits or cash deposite equivalents, which
Speaker 2: in this case would be stable coins. And that's that's
Speaker 2: a great fight because it clarifies a lot of things.
Speaker 2: Part of the pun, right, So that's the purpose of
Speaker 2: this act, right, is the clarified. You know, get everybody
Speaker 2: on the same bus, pointing in the same direction and say, okay,
Speaker 2: here's the rules of the road, which is what we've
Speaker 2: actually been asking for for a long time. So I
Speaker 2: have a very strong feeling about this, and it's probably
Speaker 2: a little contrarian to my peers, in the space. You know,
Speaker 2: most crypto exchanges want to act like a bank, but
Speaker 2: they don't want to be a bank, right, and they think, well,
Speaker 2: that's the advantage of tokenization is I can act like
Speaker 2: a bank, and I have. If you're holding someone else's
Speaker 2: money and you're lending against those deposits, right, you're a bank.
Speaker 2: And and so having different rules for you know, coin
Speaker 2: based act thing as a bank and a bank acting
Speaker 2: as a bank doesn't actually make sense to me. Okay, unless,
Speaker 2: of course, there's no fractional reserve lending in the system,
Speaker 2: and then maybe you can use money transmitter licenses and
Speaker 2: lending licenses and things like that. But this gets very
Speaker 2: complicated for the audience that I'm gonna make it simple. Okay,
Speaker 2: If you're Chase, the oversight that you have because your
Speaker 2: deposits are insured by the taxpayer is enormous, right. I'm
Speaker 2: you know, I've never seen the team, but I'm gonna
Speaker 2: go out a limb and say there is a team
Speaker 2: of occ fdic Finns and staff on site at Chase
Speaker 2: overseeing the bank, okay, because they don't want to be
Speaker 2: left holding the proverbial bag if they start doing you know,
Speaker 2: fraud and all these other things and you know, unrealistic
Speaker 2: lending practices, risk free lending practices, et cetera, et cetera.
Speaker 2: Point Base doesn't operate that way. Point Base operates effectively
Speaker 2: as a large money transmitter, right, which is overseen by
Speaker 2: myriad state licenses or some kind of you know, occ
Speaker 2: trust charter. Okay, but it's a very different regime than rating,
Speaker 2: you know, under a fraction of reserve banking system. And
Speaker 2: so to tell Coinbase that you know, you can't basically
Speaker 2: just offer blindly the same services as the bank, actually
Speaker 2: makes a lot of sense to be right, unless you
Speaker 2: basically say, hey, I want to be a bank, and
Speaker 2: that's fine, and now you may operate differently because your
Speaker 2: assets might be tokenized, but you're a bank. Okay. So
Speaker 2: so I feel like having this fight was actually very productive,
Speaker 2: and I've gotten a little bit of a look behind
Speaker 2: the scenes that who's doing a lot of the drafting
Speaker 2: and some staffers, and these people are super smart, like
Speaker 2: they this is not just willy nilly, like hey what
Speaker 2: do you want? What do you want? Like these people
Speaker 2: really understand the nuances involved. Because you've got bank, you've
Speaker 2: got banking regulation, you've got securities regulation, You've got commodities
Speaker 2: and derivatives regulation, and they all have to reconcile because
Speaker 2: in the US we create clear delineations between those concepts.
Speaker 2: And this also let's stop brand in a second, but
Speaker 2: this also mandates a lot of cooperation between the agencies.
Speaker 2: If you look at the different sections, you just take
Speaker 2: a look at the summary sections, and it does actually
Speaker 2: mandate cooperation. That's always been a hard thing, right between
Speaker 2: the FED and the OCC and the FDAC and the
Speaker 2: SEC and the CFTC. Who does what? Who gets to
Speaker 2: stop somebody from doing something? You know? And and so
Speaker 2: I like, in very many ways the direction this is going.
Speaker 1: Do you think that with the likelihood that maybe the banks,
Speaker 1: I guess you could consider, based on what we've seen
Speaker 1: so far, that they didn't get everything they wanted, do
Speaker 1: you think they would reposition their lobby efforts towards the
Speaker 1: OCC in terms of the policy descriptions.
Speaker 2: Yeah. I think the last ditch effort is Elizabeth Moore
Speaker 2: and herself, who who is you know, just hell bent
Speaker 2: on you know, killing any innovation in the banking space
Speaker 2: that's not self serving. And you know, look, her stated
Speaker 2: goal is to socialize the banking system. If you tokenize
Speaker 2: assets and create an infinite number of stable coins, that
Speaker 2: is the opposite of socializing the banking system. What China
Speaker 2: has done is socializing the banking system. Everybody gets a
Speaker 2: social credit credit score. You stay in line. If you don't,
Speaker 2: your social score goes down, which affects your ability to
Speaker 2: transact and a commerce at a free society. And and
Speaker 2: so that is that that's evil to me. Like, I'm
Speaker 2: not even gonna sugarcoat it's it's not a difference of opinion. Well,
Speaker 2: it is a difference of opinion, and one side is
Speaker 2: evil and one side is not. And I've never experienced
Speaker 2: that in my life because I'm a technologist at the
Speaker 2: end of the day who happens to understand money and
Speaker 2: and and so the idea that it's an existential fight
Speaker 2: of good versus evil is not something I've ever had
Speaker 2: to deal with before. And yeah, okay, she may be
Speaker 2: misguided as opposed to like, genuinely evil. I don't know
Speaker 2: her personally, but but this has to be stopped, right
Speaker 2: this march towards The best way to stop the methodical
Speaker 2: march towards a socialized banking system is a decentralized system
Speaker 2: with no off switch exactly. That's what we represent well.
Speaker 1: And I think this is the thing that really starts
Speaker 1: to boil down into what's happening right now in DC,
Speaker 1: just to get everybody on board with this. You are
Speaker 1: talking about some pretty significant changes right now. Currently, the
Speaker 1: Banking Committee members have filed over one hundred amendments yep.
Speaker 1: And this is ahead of you know, this week's market vote,
Speaker 1: which is tomorrow. Can you imagine the amount of amendments now.
Speaker 1: I've talked to many lobbyists in DC. I've talked to
Speaker 1: several of the Senators, and they all tell me one thing,
Speaker 1: and that is many of these things are ponds in
Speaker 1: a chess game that they're playing behind the scenes. Is
Speaker 1: there any area right now that you're concerned that you
Speaker 1: think is at risk, whether it's DeFi privacy protections, possibly
Speaker 1: even attack again on the yield side, Where do you
Speaker 1: see the weaknesses?
Speaker 2: So it's a good question. I think that if you're
Speaker 2: a operating as an exchange, you're probably going to want
Speaker 2: federal licensing. As a result of the Clarity Act, it
Speaker 2: probably weakens the position of states around leveraging money transmission
Speaker 2: rules and makes it more likely that companies would want
Speaker 2: to operate under federal regime. Now that having been said,
Speaker 2: there's a bunch of things in here that create safe harbors,
Speaker 2: and some of hester Pierce's Piers's ideas around that safe
Speaker 2: harbor are baked in here, which I find super interesting.
Speaker 2: And also, I think even independent of that, the SEC
Speaker 2: and CFTC were already moving in that direction, partially based
Speaker 2: upon on their ability to interpret existing law, but partially
Speaker 2: I think based upon their guess work as to where
Speaker 2: this was this was going. So so I think I
Speaker 2: can see some states being not too happy about this individually,
Speaker 2: you know, especially the ones that might be little, say,
Speaker 2: a little more heavy handed, but there's very little, in
Speaker 2: my opinion, they can do about that. I think this
Speaker 2: bill is is very good for consumers. I think it's
Speaker 2: going to encourage a lot of the offshoring of crypto
Speaker 2: back on shore. Right. So, I know you're asking about
Speaker 2: things that would be concerned about, and I'm gonna flip
Speaker 2: it a little bit and say, the biggest thing I
Speaker 2: would be concerned about is crypto continuing to move offshore
Speaker 2: as it relates to providing services to Americans. I mean,
Speaker 2: you know, if I'm in Dubai. I don't mind buying
Speaker 2: a service provider who's based in Dubai. But as an American,
Speaker 2: you know why am I using FTX based in the Bahamas.
Speaker 2: Well because they couldn't figure out how to operate on shore. Now,
Speaker 2: now you may say, okay, they were committing fra aud this,
Speaker 2: that and the other thing. But but the bottom line
Speaker 2: is is that if I think if you had this,
Speaker 2: my guess is they would have operated on shore. They
Speaker 2: wouldn't have done the stupid things they were doing, and
Speaker 2: all of that mess and bruhaha from Celsius, Block five
Speaker 2: Voyage or FTX whatever could have been avoided.
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Speaker 1: That's an interesting point is that the I guess the
Speaker 1: limitation of our own government not really opening up for
Speaker 1: one of the most innovative categories and sectors out there
Speaker 1: early enough has really kind of put us behind the
Speaker 1: eight ball in terms of innovation. But at the same
Speaker 1: time you would also argue, well, this is the biggest
Speaker 1: financial market in the world. We catch up pretty quickly.
Speaker 1: Do you think the US's position again with clarity getting through.
Speaker 1: If it does, do you think the US position can
Speaker 1: truly be a pole position in crypto or do you
Speaker 1: think we risk losing this to Asia?
Speaker 2: I actually think this strengtion, we leap frog a lot
Speaker 2: of what others have done via Genius and Clariac, and
Speaker 2: that is astounding to me. I mean it was dire
Speaker 2: four years ago. Yeah, for sure, I mean literally dire.
Speaker 2: I'm not this is not iperble. And so for us
Speaker 2: to be in a position to leap frog the the
Speaker 2: industry from a regulatory perspective is not something that I
Speaker 2: had on my bingo card four years ago. I'll tell
Speaker 2: you that. Yeah, I was just like, how is the
Speaker 2: US crypto industry going to survive? Given this mostly illegal
Speaker 2: onslaught of never ending you know, regulation by enforcement, And
Speaker 2: this genuinely undoes that and creates a viable framework. And
Speaker 2: so a couple of examples, right, what does it mean
Speaker 2: to be decentralized? It defines network tokens clearly, right, which
Speaker 2: the last you know, under the last administration, everything was
Speaker 2: as security and so having that clarity right there, you know.
Speaker 2: And again they do provide text for explicit tests for
Speaker 2: decentralization in general, and I have no problem with that.
Speaker 2: If something doesn't have an off switch in general, and
Speaker 2: I'm giving you my interpretation, it's sufficiently decentralized by definition,
Speaker 2: because you can't turn it off. So if there's no
Speaker 2: one you can sue, because it's already out there, it's
Speaker 2: already on and you can't turn that off. It should
Speaker 2: be deemed decentralized. And from what I can gather based
Speaker 2: upon again the intelligent people that I've been working on this,
Speaker 2: they're trying to build a legal framework that provides legal
Speaker 2: ease for what I just said in a non legal
Speaker 2: ese way. And that's great. That's you know again, it's
Speaker 2: I keep saying the same thing in different ways, but
Speaker 2: that's what we've been asking for all along.
Speaker 1: Senator Warren came in with forty amendments to your point,
Speaker 1: not surprising. We thought it might be more. But one
Speaker 1: is preventing the Federal Reserve from issuing master accounts to
Speaker 1: crypto companies. Do you think, because again that's you know,
Speaker 1: securing the shore of what her constituents and donors are
Speaker 1: really about, do you think that has any potential of
Speaker 1: making it through?
Speaker 2: And the I think that's absurd, and I think it's
Speaker 2: probably illegal. I mean, what is a crypto company?
Speaker 1: Right?
Speaker 2: You started the conversation by asking how we pivoted from
Speaker 2: a legal perspective in terms of how we operate. But
Speaker 2: if I go get an OCC charter explicitly to operate
Speaker 2: as a token ized bank, I'm going to have a
Speaker 2: FED master account and that's just the way the FED
Speaker 2: operates technically.
Speaker 1: JP Morgan would be a crypto company right now.
Speaker 2: Absolutely, That's my point, And so that the whole discussion
Speaker 2: becomes absurd under this model.
Speaker 1: Yeah, how does she? I guess in the position, And
Speaker 1: I understand you know where you think it's going, but
Speaker 1: we don't know that it is truly an evil mission
Speaker 1: of trying to do this to the American financial system.
Speaker 1: But why do you think we're seeing such such deviation
Speaker 1: between the really the Republicans of the Democrats right now?
Speaker 1: It appears that the Republicans seem to be very pro crypto,
Speaker 1: most of which we've got to get a handful of
Speaker 1: senators through some very key ones on the Democratic sides.
Speaker 1: Wouldn't you think that the Democrats would take this as
Speaker 1: an opportunity and use this to leverage into midterms.
Speaker 2: Yeah, there's a couple of things going on, right So
Speaker 2: the reality is there are Democrats that support this, and
Speaker 2: the biggest problem with the Democrats that support this is Trump.
Speaker 2: And so there's just this, you know, divide Now it
Speaker 2: was a similar thing like you know, if you go
Speaker 2: back fifteen years when when Obama was in office, there
Speaker 2: was in similar kind of I don't know ideological, I'm
Speaker 2: not a politician what the right word is, but that
Speaker 2: divide was basically you know, block block block and we
Speaker 2: have a similar thing going on right now, block block
Speaker 2: block And I'll say straight up, you know, as somebody
Speaker 2: who voted for this administration, you know, launching meme coins
Speaker 2: owning businesses in the space probably wasn't the best way
Speaker 2: to start, you know, within the administration. It didn't provide
Speaker 2: a good look, right, And so yes, I wish they
Speaker 2: hadn't done that. But the reality is is the good
Speaker 2: that they've done so far outweighs everything that I might
Speaker 2: say I wish they hadn't done. It's just to me,
Speaker 2: it's just it's like dwarfs everything else. And so so
Speaker 2: listening to them just say block block bloc when I
Speaker 2: know via one on one conversations from people who are
Speaker 2: in the know with certain Democrats that they fully support
Speaker 2: this because they know it's the future. They actually like
Speaker 2: the technology. Some of them are invested in the technology themselves,
Speaker 2: and so that's the power of you know, the Elizabeth
Speaker 2: Warrens of the party who are hell bent, like I said,
Speaker 2: on socializing the system during the next you know, potential crisis.
Speaker 1: One of the big topics we get into here on
Speaker 1: this show is really getting debasement, you know, getting away
Speaker 1: from dollar exposure. You look at some of the things
Speaker 1: that are happening right now. Is just looking at four
Speaker 1: X data. I'll bring that up on screen for everybody
Speaker 1: so you can kind of see what I'm referencing. But
Speaker 1: this is a good example. This is the share of
Speaker 1: global foreign currency reserves, which have fallen to its lowest
Speaker 1: level this century. So to me, when you look at
Speaker 1: the movement into cryptodigital assets token it is treasuries et cetera. Bill,
Speaker 1: how long do you think we will be before we
Speaker 1: really the dollar is no longer the global reserve. Do
Speaker 1: you think that's in our lifetime?
Speaker 2: Yeah? I mean the transition is happening now. That's why
Speaker 2: we saw the run up in gold. Right, So let
Speaker 2: me break it down from a macro perspective. Right, So,
Speaker 2: FED tried to low or interest rates I think three
Speaker 2: times in the last current cycle. Each time. Now when
Speaker 2: they do that Normally, what's supposed to happen is miny
Speaker 2: long term rates are supposed to start to trickle down. Right,
Speaker 2: That didn't happen all three times they spiked. Why why
Speaker 2: is this happening? Well, this chart is very telling, right,
Speaker 2: So our debt is simply unsustainable. When you basically create
Speaker 2: more and more and more of something, right, you reduce scarcity.
Speaker 2: And unfortunately, in this case, the scarcity of our debt
Speaker 2: is just going away. We are producing an infinite amount
Speaker 2: of it, and we've reached a point where the debt
Speaker 2: servicing is costing us a trillion dollars a year. It's
Speaker 2: more than the defense budget. Right, so maybe not before Iran,
Speaker 2: but but certainly before a round it was more than
Speaker 2: the defense budget. That is untenable if your goal is
Speaker 2: to be the global reserve currency, because no one is
Speaker 2: going to support you because eventually demand for your debt
Speaker 2: is going to not be sufficient versus the supply of
Speaker 2: debt you're creating. So the only way to deal with that, well,
Speaker 2: there's two ways to deal with that. The first is
Speaker 2: not good. That's usually war, and that's what Dalio writes
Speaker 2: about when he talks about, you know, changing world orders
Speaker 2: and rising fall of empires, says, look at bond markets,
Speaker 2: and he's right. But the second thing is interest rates
Speaker 2: have to skyrocket, right, because if the demand just isn't there,
Speaker 2: you even have to keep paying more and more and
Speaker 2: more to create the demand. And that just basically creates
Speaker 2: a vicious cycle because the interest payments have to come
Speaker 2: from somewhere, and it either comes from taxes or printing money.
Speaker 2: And if you print money, the debasement just accelerates. And
Speaker 2: I think we're in that mode now where taxes are untenable.
Speaker 1: Right.
Speaker 2: The only thing that potentially staves off a hyperinflation cycle
Speaker 2: from a late stage empire like this is massive increase
Speaker 2: in productivity. Right. If Elon is right and we have
Speaker 2: a trillion robots doing a trillion new things, yes, we
Speaker 2: could get to the point in five years where we
Speaker 2: have huge, massive gains in productivity which could increase GDP,
Speaker 2: which could negate the effect of the debatement cycle. But
Speaker 2: we're not even close to that right now. Right, And
Speaker 2: so if you're living in the here and now, we have.
Speaker 1: Probable to take a minute, guys, and just so to
Speaker 1: join this Baronation Edge private member group, you guys will
Speaker 1: do that by just clicking the reds down in our description,
Speaker 1: this is your insider's edge to the crypto money revolution,
Speaker 1: which is what we're really focused on here on.
Speaker 2: P the last two.
Speaker 1: This is additional research.
Speaker 3: That I do or along with this pill and we
Speaker 3: have on our research around only what insides our episodes,
Speaker 3: but a lot of that research gets built more content
Speaker 3: that I drop.
Speaker 2: Up here on the bar and market registration.
Speaker 1: We do more trendsit sentiment analysis, question tokens to all
Speaker 1: sorts of strategies solved the this of course, it will
Speaker 1: also guide you over to our telegram group and we
Speaker 1: give this as a leaf community access. You get bonus
Speaker 1: content over there. Do you think that this uh well
Speaker 1: has different out there that we never all the time?
Speaker 1: Not a chance. This is your opens ten year vision continues.
Speaker 1: All you have to do is hit it's going to
Speaker 1: go to jobel there and that you got pressure on
Speaker 1: China and are ututely free. Those are just your things.
Speaker 1: It opens up lanes here in the US to drive
Speaker 1: more petroleum products out of the US and become somewhat
Speaker 1: of a nets supplier to the world. Do you think
Speaker 1: this is part of the potential to try to stabilize
Speaker 1: where the dollar is heading.
Speaker 2: Yeah, I mean, look like I said, it's it's the
Speaker 2: problem is is demand, and you showed it on your chart.
Speaker 2: Demand for dollar reserves is waning. It's a function, it's
Speaker 2: it's it's all related, right.
Speaker 1: Uh.
Speaker 2: Now, the demand for treasuries was stabilizing before Iran. My
Speaker 2: guess is that it's probably decreased since then.
Speaker 1: Yep.
Speaker 2: But but you know, China is clearly a net seller.
Speaker 2: Japan was a net seller. The US convinced them to
Speaker 2: basically stabilize. And remember when the carry trade was starting
Speaker 2: to unwind last summer, the effect that that had. Europe
Speaker 2: is clearly not interested in buying oodles of American debt
Speaker 2: at this point, and so the problem is the same, right,
Speaker 2: The only real guarantee, Well, there's two guaranteed buyers of
Speaker 2: our debt right now. The first is tether, which seems
Speaker 2: to have an infinite appetite for US treasuries because of
Speaker 2: the adoption of stable coins slash tether slash circle. And
Speaker 2: the second is ourselves, which is not a good look
Speaker 2: when you start buying your own debt, because the only
Speaker 2: way to do that is to print more money, and
Speaker 2: that's what we're doing. Right, So, so you know this
Speaker 2: is just gonna be another inflation trade, and I think
Speaker 2: you're going and basically see the norm get back to
Speaker 2: four to five percent this year unless something dramatic happens
Speaker 2: in Iran and oil prices plummets, which is possible. I
Speaker 2: hope that happens, but right now, I don't have any
Speaker 2: visibility to that happening. Right, We're going to see four
Speaker 2: to five percent sustained inflation, maybe with spikes up or down.
Speaker 1: Yeah, for sure. Well, and this starts to rotate into
Speaker 1: the midterms. This is something that I thought was interesting.
Speaker 1: I want to get your opinion on this, andresen Horowitz
Speaker 1: and I'll bring this up on screen so you can
Speaker 1: see it. And reason Horowitz now plowing in a ton
Speaker 1: of money into the midterms. Another one hundred and fifteen
Speaker 1: firm now spending one hundred and fifteen million on politics
Speaker 1: in this cycle, not ever seen by a VC firm before.
Speaker 1: So this tells me something that what are they concerned
Speaker 1: about going into the midterms? Is there anything that you
Speaker 1: think is going to pivot here?
Speaker 2: What's happening they're concerned about? AI? Mostly now if if
Speaker 2: if you're in the know, and VC land. You know
Speaker 2: that the powers that be in Silicon Valley were called
Speaker 2: to the White House under Biden and and that we're,
Speaker 2: in no uncertain terms, told to pack it up as
Speaker 2: it relates to AI, right. Uh, you know, we're going
Speaker 2: to own it, We're going to regulate it. There's not
Speaker 2: going to be a free market, and and it's just
Speaker 2: not going to happen. That's what they were told, right.
Speaker 2: And that was the biggest wake up call in history
Speaker 2: for for Silicon Valley from a political perspective, right, And
Speaker 2: and it galvanized Silicon Valley into the arms of this administration.
Speaker 2: And a lot of my friends who are not even
Speaker 2: armchair politics politicians politicians are interested in politics now all
Speaker 2: of a sudden are paying big time attention or even
Speaker 2: involved in this administration. And I actually think that's a
Speaker 2: good thing because I think getting people, uh, from a
Speaker 2: citizen activism perspective involved, regardless of whether you were doing
Speaker 2: that under Obama, because I have a lot of friends
Speaker 2: who did that under the Obama administration. People who became
Speaker 2: politically involved for the first time took jobs in the
Speaker 2: State Department. It was a little bit different. It wasn't
Speaker 2: so much technology as it is now. But I pull
Speaker 2: it that right, and I don't think that I don't
Speaker 2: believe in the idea of a career politician, by the way,
Speaker 2: so as a libertarian, but that's a different issue, right.
Speaker 2: So I think that to get to your point your question,
Speaker 2: this is about AI, right, the progress that we've made
Speaker 2: and the potential to lose that progress is existential crisis
Speaker 2: for the is a potential existential crisis for the United
Speaker 2: States in this new type of Cold war that's going
Speaker 2: on between the US and China, right, And so that
Speaker 2: is you know from I haven't talked to them about this,
Speaker 2: but I can easily see, you know how them discussing
Speaker 2: this of the in the in the format of this
Speaker 2: is a fight to the death.
Speaker 1: And so.
Speaker 2: When you say they're spending one hundred million, when you
Speaker 2: look at it from that perspective and they're literally investing
Speaker 2: tens of billions of dollars, it's actly a pretty small
Speaker 2: insurance policy if you think you're gonna wine. Yeah.
Speaker 1: Well, And I think the point being is that at
Speaker 1: some at some point, don't you think that the new
Speaker 1: age of lawmakers are going to realize the two critical
Speaker 1: components of future innovation AI crypto organization and truly adopted
Speaker 1: by partisan wouldn't you assume this is going to happen?
Speaker 2: Well once it Okay, so once it happens, and it's
Speaker 2: very complete because it's you know, everybody just makes it
Speaker 2: their own idea. That's how politics works, right Like you know,
Speaker 2: I invented the internet like kind of thing with val Gore,
Speaker 2: right so so so that will happen. And by the way,
Speaker 2: I think those things all merge into part of the
Speaker 2: same thing, right AI. It's tokenization, crypto rails, smart contracts,
Speaker 2: they all become part of of a new financial order
Speaker 2: because AI agents that have already taken over part in
Speaker 2: my life are actually going to be based on crypto
Speaker 2: rails anyway. But I think, I think what's going to
Speaker 2: happen and is and politicians are exceedingly good at this
Speaker 2: is you know, making things their own idea when it's
Speaker 2: self serving. And that's even I'm referring to people i've
Speaker 2: you know, supported publicly as well. And that's fine as
Speaker 2: long as the public gets what it wants and what
Speaker 2: it should have, which is you know, air first of all,
Speaker 2: airing on the side of freedom and getting out of
Speaker 2: the way and only getting in the way when it
Speaker 2: really absolutely needs to, which is very rarely in.
Speaker 1: My opinion, Yeah, for sure, exactly try to get away
Speaker 1: from avoiding conflict I think with the American people when
Speaker 1: it comes to just innovation, building businesses. Examples that we're
Speaker 1: dealing with right now, Clarity Act passes. You have to
Speaker 1: pick three winners. Who do you think they would be?
Speaker 1: And this industry wise, or it could be Americans, it
Speaker 1: could be you know, who do you think that three
Speaker 1: would be.
Speaker 2: I think the wealth industry is going to be pushed
Speaker 2: to migrate to tokenization as a result of this, and
Speaker 2: so you're going to see a crop of AI based
Speaker 2: robo advisors that offer you know, tokenized and automated portfolio
Speaker 2: creation capabilities. That's something that you know, I think is
Speaker 2: a big part of Abra's future. You know, ultimately, you know,
Speaker 2: as a fiduciary for our clients, we're always looking for
Speaker 2: ways to help them navigate their own requirements, risk profiles,
Speaker 2: it's et cetera, et cetera. So I think that you know,
Speaker 2: it's a little self survey. I apologize, but I think
Speaker 2: we're very well positioned as as a result of what
Speaker 2: we're reading and Honestly, that was mostly a function of
Speaker 2: us surmising where we think this had to go, based
Speaker 2: upon everything that had happened and what we were hearing
Speaker 2: from the administration. And and so that's number one. I
Speaker 2: think the banks are actually winners here, and so you know,
Speaker 2: and I also think that the startup world to DeFi
Speaker 2: is actually the third big winner here. The ability for
Speaker 2: decentralized systems to you know, be created from nothing, to
Speaker 2: have their big bang moments and potentially go from raising
Speaker 2: money in what would be a security offering to becoming
Speaker 2: fully decentralized. That's the path from sidnadio to decentralization that
Speaker 2: we always said needed to be clarified. And that's you know,
Speaker 2: I'm talking myself into it, but that's probably the most
Speaker 2: important thing long term here is not even ABRA or
Speaker 2: the banks. It's the ability for decentralized systems to basically
Speaker 2: be combusted into existence and go from raising money via
Speaker 2: security sale to being sufficiently decentralized.
Speaker 1: Well, we've seen and the model has been in place
Speaker 1: for DeFi. We've seen so many different winners and a
Speaker 1: lot of the ecosystems out there, I would call Salona
Speaker 1: being one of the big ones that has really created
Speaker 1: a lot of kings, and the likelihood is we'll see
Speaker 1: MA maybe ten x fifty x one hundred of x
Speaker 1: of that in the coming years. How long do you
Speaker 1: think you know, you and I both probably were around
Speaker 1: in the era when I was a young engineer at
Speaker 1: Microsoft in nineteen ninety six through seven, just getting into Microsoft,
Speaker 1: the birth of the Internet and then the obviously the
Speaker 1: dop bomb, but the creation period after that was significant
Speaker 1: and it happened fairly quickly. What do you think that
Speaker 1: looks like in terms of the Bell curve for crypto?
Speaker 2: I was at Netscape when you were at Microsoft, and
Speaker 2: when we were mortal enemies. Yeah, exactly. I think I
Speaker 2: testified at one point and against you guys. So look, historically,
Speaker 2: when you have these kind of bubbles and crashes, yeah,
Speaker 2: those become the best times for entrepreneurs to build, even
Speaker 2: if they don't know it at the time, even if
Speaker 2: it's scary and painful, and you know, especially back then,
Speaker 2: because you know, being well educated and having a degree
Speaker 2: in compute science was like a lottery ticket like that
Speaker 2: you knew was going to win. That's not necessarily the
Speaker 2: case today, except if you're willing to basically take the
Speaker 2: proverbial risk to be an AI entrepreneur. You can kind
Speaker 2: of trip over something useful, interesting that you know people
Speaker 2: will pay for. But that's historically the best time to
Speaker 2: be to be an entrepreneur in my mind. And this
Speaker 2: is by far the best time in history that I've
Speaker 2: ever seen for a twenty something out of school to
Speaker 2: start a company. You know, the big challenge in the nineties,
Speaker 2: the dot com era, the mobile app era was always
Speaker 2: about do you know how to build a sustainable company.
Speaker 2: That's That's not a problem right now, That's not that's
Speaker 2: not the key challenge here, because you're going to see
Speaker 2: one in two person billion dollar companies come out of
Speaker 2: this AI era, and they're going to hire you know,
Speaker 2: we work with Goodwin or you know, some accounting firm here,
Speaker 2: accounting Silicon Valley that's going to basically act as your
Speaker 2: finance team, your legal team, you know, and and it's
Speaker 2: all going to be outsourced. And you're gonna have your
Speaker 2: three person startup and and AI is going to enable
Speaker 2: that I have agents for everything. And and I'm an
Speaker 2: older guy, right so, so you know, the kids aren't
Speaker 2: going to know anything different. This is an awesome time.
Speaker 1: I think it is too. That's what I tell you know.
Speaker 1: We get a chance to do these wealth seminars and
Speaker 1: this is the one thing. Most of them are business
Speaker 1: owners that are coming in and he's trying to explore,
Speaker 1: you know, how crypto and blockchain are going to be
Speaker 1: usable in their own businesses, and I'm like, I'm just
Speaker 1: so excited for them because I'm like, you're you're you
Speaker 1: own a business in a time in which innovation is exploding.
Speaker 1: So totally welcome to the fun. Hey Bill, it's been
Speaker 1: good having you on today. Thanks for the round up here.
Speaker 1: We're gonna be watching Aber very closely, so we appreciate
Speaker 1: you stuffing it.
Speaker 2: So good to see you. Thanks for having met at
Speaker 2: the Static the same thests Tott