Speaker 1: Stable coins are the next payment system in finance. But
Speaker 1: part of that is you need adoption, and that's the
Speaker 1: important thing about why revewards exist, why exchanges are using those.
Speaker 1: You want people to adopt these payment stable coins so
Speaker 1: the innovation can grow.
Speaker 2: So what happens next summer? Is it a big dialogue continues,
Speaker 2: we have more hearings before the markup and get a
Speaker 2: new draft of the bill in place.
Speaker 1: I don't think you'll see more hearings.
Speaker 2: This episode is brought to you by Propy, which is
Speaker 2: leading to charge in putting real estate on chain. Propy
Speaker 2: is a game changer. You can buy and sell real
Speaker 2: estate with cryptocurrencies using the Property platform, which is powered
Speaker 2: by a blockchain of course, and they have a native
Speaker 2: token call pro And I've been an investor in the
Speaker 2: propy token since twenty eighteen. So Propy is a licensed
Speaker 2: Web three pioneer operating since twenty seventeen. They have facilityated
Speaker 2: over four billion dollars in transactions. They're putting titles and
Speaker 2: deeds on chain. They use coinbase for their crypto escro service.
Speaker 2: So this is a great platform and once again they
Speaker 2: are ahead of the curve when it comes to putting
Speaker 2: real estate on chain and they just launch a great
Speaker 2: campaign where you can earn some of the Propy tokens,
Speaker 2: and it's simply by doing tasks such as sharing their
Speaker 2: vision video, signing up, and inviting a friend, and much
Speaker 2: more so. If you'd like to learn more about Propy,
Speaker 2: visit the link in the description. Hey, everybody, welcome into
Speaker 2: the Thinking Crypto podcast. I'm your host Tony Edward and
Speaker 2: joining me today Summer Mersinger, who is the CEO of
Speaker 2: the Blockchain Association and also a former CFTC commissioner. Some
Speaker 2: are great to have you.
Speaker 1: Yeah, no, thanks for having me on. It's great to
Speaker 1: be here.
Speaker 2: Yeah, Summer, I thought of you after this crazy week
Speaker 2: in DC around the Crypto Market Structure Bill to get
Speaker 2: your point of view and to help break down what
Speaker 2: happened this week and what we can expect moving forward.
Speaker 2: I'd love to start with you know, what were some
Speaker 2: of the hiccups with the Crypto Market Structure Bill that
Speaker 2: kind of caused the markup delay.
Speaker 1: Yeah, there were a couple of issues outstanding that just
Speaker 1: really difficult to get consensus on and get to a compromise.
Speaker 1: Still dealing with a few issues around decentralized finance and
Speaker 1: how certain listed flinance laws apply or don't apply to code.
Speaker 1: There's still some questions around tokenized stocks and equities, and
Speaker 1: then probably the biggest one was the question around yield
Speaker 1: with stable coin yield if the third parties can offer
Speaker 1: rewards to customers. You know, there's a yield ban in
Speaker 1: Genius that does not allow issuers to offer yield, but
Speaker 1: nothing is preventing the third party exchanges from paying rewards
Speaker 1: just like you would on a credit card. So that
Speaker 1: is still an outside any issues. So I think these
Speaker 1: are just really tough issues to get consensus on. There
Speaker 1: wasn't a ton of time with the language. I think
Speaker 1: people are still working through it. And this isn't that
Speaker 1: abnormal of something that happens in legislation. There's always bumps
Speaker 1: in the road. There's always, like you said, hiccups, and
Speaker 1: it's just kind of part of legislating.
Speaker 2: That's perfect summary of what happened, and also your ending
Speaker 2: thoughts there that this is not unique to crypto. Any
Speaker 2: legislation that's going through Congress. You have parties that are
Speaker 2: going to fight each other and tit for tad and
Speaker 2: I need this and you need it right. It is
Speaker 2: the common thing. How do sausage is made? Right?
Speaker 1: Yeah? Absolutely, I think I said that a few times
Speaker 1: this week, Like and here's how legislation is made. It's
Speaker 1: some messy process and there are usually other political issues
Speaker 1: at play. It's like a giant chess board and you
Speaker 1: never know what the next move is going to be.
Speaker 1: So it's one of the it's a process and it's
Speaker 1: you know, you can try to control the process. You
Speaker 1: can try to schedule it out, but inevitably that doesn't
Speaker 1: always work out the way you plan. But I think
Speaker 1: Chairman Scott he's in a good place. The bill is
Speaker 1: continually getting getting to a better place, and I'm hopeful
Speaker 1: that we'll get something that can be passed out of
Speaker 1: the Banking Committee and sent to the floor.
Speaker 2: Now, at the crux of the issue, or who's behind
Speaker 2: some of the language that is not copasetic with what
Speaker 2: the crypto industry needs. Is it the banking lobby or
Speaker 2: is it also folks like Elizabeth Warren who you know,
Speaker 2: any any chance she gets to throw something against crypto
Speaker 2: or it's a combination of both.
Speaker 1: Yeah, this is mostly the banking lobby, just kind of
Speaker 1: entrenched traditional finance trying to uh prevent competition and making
Speaker 1: it really hard for innovation to to flourish. I mean,
Speaker 1: when you think about it, stable coins are the next
Speaker 1: payment system in finance. But part of that is you
Speaker 1: need adoption. And that's the important thing about you know,
Speaker 1: why why rewards exist, why exchanges are using those You
Speaker 1: want people to adopt these payment stable coins so that
Speaker 1: it can the innovation can grow. So banks just want
Speaker 1: to shut that down. They don't want to be they
Speaker 1: don't want to compete. They don't want consumers to have
Speaker 1: a choice between the banks and between you know, something different,
Speaker 1: and it really is it just comes down to competition.
Speaker 1: And at the end of the day, I always say
Speaker 1: we're on the side of the consumers because if you
Speaker 1: shut down these reward programs, all you're doing is taking
Speaker 1: money out of the consumer's hands.
Speaker 2: Absolutely and speaking anecdotally, like I personally put a good
Speaker 2: amount of money into stable coins on platforms like uphold
Speaker 2: and coinbase, and I'm getting a higher interest than what
Speaker 2: for example, JP Morgan, who's my bank is offering me?
Speaker 2: They give me zero point zero one or something on
Speaker 2: my savings, but I'm getting higher yield there and it's insane,
Speaker 2: Like the banks are trying to cut that off. And
Speaker 2: but at the same time summer they're also planning to
Speaker 2: launch their own stable coin, So why don't they compete
Speaker 2: and just offer the same thing or you know, on
Speaker 2: par or even more than what these exchanges are off.
Speaker 1: That's been our argument all along. You know, this is
Speaker 1: the banks want to issue stable coins, they can, they
Speaker 1: can compete if they want to give more interest on
Speaker 1: the positive accounts, there's nothing stopping them from doing that.
Speaker 1: So this is just you know, trying to stomp out
Speaker 1: any competition, and that's that at the end of the day.
Speaker 1: It is just they don't want to have to compete
Speaker 1: with the new innovative financial services technology and the way
Speaker 1: things are moving towards a new payment system. Yeah.
Speaker 2: Absolutely, So what happens next summer, is it the dialogue continues,
Speaker 2: we have more hearings before the markup and get a
Speaker 2: new draft of the bill in place.
Speaker 1: I don't think you'll see another more hearings. I think
Speaker 1: that eventually Chairman Scott will feel confident enough to schedule
Speaker 1: another markup. Markup is when they kind of all go
Speaker 1: through the bill, read it, decide what language stays in,
Speaker 1: what language goes out, and then vote out of the committee.
Speaker 1: Senate Agriculture Committee next week they're going to release text,
Speaker 1: and then the following week they're going to have a
Speaker 1: markup as well, so you've got Senate Agriculture moving forward.
Speaker 1: I think Senate Banking takes that time to work to
Speaker 1: refine some of those problems that are outstanding and try
Speaker 1: to solve some of those issues, because at the end
Speaker 1: of the day, you need both of these bills together
Speaker 1: to combine them to go to the Senate floor. So
Speaker 1: I think it's you know, it's one of those things
Speaker 1: where you know, Banking what's going to go first, and
Speaker 1: then Agriculture. It's just going to be a different order.
Speaker 1: It's not going to change the fact that they're still
Speaker 1: work being done on legislation and we expect something to
Speaker 1: get to the Senate floor this year.
Speaker 2: I don't know if you can answer this question. It
Speaker 2: might be a hard one. If you were to. Are
Speaker 2: there more folks who are pro crypto in the Senate
Speaker 2: than there are anti crypto or who are being influenced
Speaker 2: by the banking lobby, or if you want to call
Speaker 2: them detractors of the bill? What's the breakdown like between
Speaker 2: the two.
Speaker 1: I think there are quite a few pro crypto senators.
Speaker 1: I think there are a lot of senators who understand
Speaker 1: the importance of innovating our finance system and not stifling
Speaker 1: technological advances. The problem here lies in the way the
Speaker 1: banks are approaching this. This is one of their tried
Speaker 1: and true methods. Is they use this the community banks
Speaker 1: to carry the message. And a lot of senators are
Speaker 1: very They've been very close with their community banks for
Speaker 1: a very long time. These are their neighbors essentially and
Speaker 1: their home state, and so the banks are using those
Speaker 1: community banks to tell these senators, hey, we're worried about
Speaker 1: deposit flight, and it is that now they're trying to decide, Okay,
Speaker 1: who's telling me the truth? Here's what's the real situation.
Speaker 1: So I think it's more's not so much people are
Speaker 1: anti crypto. It's that they're having to choose between their
Speaker 1: small banks and crypto. And honestly, there's a way to
Speaker 1: do this without having to choose. I think if they
Speaker 1: could come to the table and do so in good
Speaker 1: faith and compromise, we could get somewhere. But so far
Speaker 1: they just haven't been willing to do that.
Speaker 2: Would a compromise potentially be that we can allow consumers
Speaker 2: to do this, but maybe we put a cap, temporary
Speaker 2: cap that only x amount of dollars can be moved
Speaker 2: from your bank account to these exchanges to do the
Speaker 2: stable coin yield. Could that be something that could work.
Speaker 1: I mean, you got to think about it in this
Speaker 1: like you got to put yourself in the consumer's shoes,
Speaker 1: right when I look at the stuff, I'm like, and
Speaker 1: you know, we are consumers ourselves, But think about it,
Speaker 1: and you know, would you want a law limiting the
Speaker 1: way you move your money and where you move it?
Speaker 1: I mean, yes, there are certainly some laws out there,
Speaker 1: you know, around de listed finance, around know your customer
Speaker 1: that you know, do put some sort of you know,
Speaker 1: kind of parameters around moving money. But you wouldn't want
Speaker 1: somebody to say, well, you can only buy so much
Speaker 1: stable coin or you can only move so much money
Speaker 1: out of your savings to buy something that you think
Speaker 1: there's a value and you see that it's going to
Speaker 1: be used for you know, payments in the future. So
Speaker 1: some of this is kind of really comes down to
Speaker 1: consumer choice and we don't want to limit that. The
Speaker 1: idea is, let's expand the options for consumers so they
Speaker 1: can have more control over their finances.
Speaker 2: Absolutely. I was just thinking like maybe it's a twelve
Speaker 2: month gap, but then it's unlimited beyond that. Right, Uh,
Speaker 2: it's a fun to get the bill through if if
Speaker 2: it's gonna this is gonna be a big sticking point
Speaker 2: for these banks, right and they're going to fight tooth
Speaker 2: and nail. But we're gonna have to wait and see
Speaker 2: what what the compromise might be. I know it's a
Speaker 2: hard question, but you know, what do you what's your
Speaker 2: best guess about the compromise.
Speaker 1: I think there's a way to do this where you're
Speaker 1: focused more on activities than you know, a lot of
Speaker 1: the the senators who have concerns are worried about paying
Speaker 1: rewards on on the payment stable coins that are just
Speaker 1: sitting there idly. In their mind, that looks a lot
Speaker 1: like a deposit. And so you know, there's probably a
Speaker 1: way to do this where you're focused more on the
Speaker 1: activity the use of the stable coin there. You know,
Speaker 1: there there's a utility to a stable coin, so maybe
Speaker 1: the rewards are associated with that. I think Crypto has
Speaker 1: put up or the stable coin stakeholders have offered a
Speaker 1: number of options. They have spent a lot of time
Speaker 1: trying to come up with options that would work based
Speaker 1: on their current business models, based on their current contracts,
Speaker 1: and it's just been rejected over and over again.
Speaker 2: So why aren't the banks concerned about staking? Because again, anecdotally,
Speaker 2: I do both. I stake on Ethereum, Solana, Cardono and
Speaker 2: so forth, so I have capitals sitting there earning, and
Speaker 2: I also I do to stable coins. Why are you
Speaker 2: not so much concerned about staking?
Speaker 1: Well, it's funny. Even when you think about stable quains
Speaker 1: and you think about Genius, this wasn't something that was
Speaker 1: part of Genius, you know, the rewards and yield issue
Speaker 1: that was all discussed in Genius. And I think they
Speaker 1: got caught flat footed in their bobbing efforts. I just
Speaker 1: don't think they were fully informed as to what they
Speaker 1: were looking at, and they weren't prepared to, you know,
Speaker 1: take on crypto at all. They didn't realize the kind
Speaker 1: of political power that crypto now has because so many
Speaker 1: Americans own and use crypto, and so they were just
Speaker 1: kind of caught flat footed in their in their negotiations.
Speaker 1: Now on staking, I mean, I think again, this is
Speaker 1: a this is something that's unique to crypto it's not
Speaker 1: something that banks do, so they probably would say, you know,
Speaker 1: maybe maybe it has to do with the fact that,
Speaker 1: you know, they don't know how to do it technologically,
Speaker 1: or they are unaware of some of the ways that
Speaker 1: it works. Sometimes it's hard to understand if you haven't
Speaker 1: been in this business and in crypto markets, it's hard
Speaker 1: to understand what staking is. So I think it's maybe
Speaker 1: a combination of not fully understanding the the what staking
Speaker 1: is and you know, this isn't the this isn't what
Speaker 1: they're fighting right now. They've got a lot of fronts
Speaker 1: that they're fighting on and I think they've got to
Speaker 1: pick and choose where they want to fight.
Speaker 2: Yeah, I think the keyword used there they got caught
Speaker 2: flat footed, right. It seems like because the Genius Act
Speaker 2: passed and then after they're not trying to re litigate, like,
Speaker 2: oh no, wait, what's just happened. So to your point,
Speaker 2: maybe you haven't gotten to the staking component. But if
Speaker 2: they were really thinking about all fronts of where capital
Speaker 2: potentially can leave the bank accounts and go into certain
Speaker 2: things that er a greater return. Staking is another big one,
Speaker 2: especially you can do it in et apps and much more.
Speaker 2: But maybe to your point, the stable coins US dollar
Speaker 2: back stable coins are easier for them to understand, and
Speaker 2: and you know that folks can move money easily too
Speaker 2: with the with the utility of the stable coins.
Speaker 1: I also think that it's part of it. You know,
Speaker 1: they have a lot to deal with right now, you know,
Speaker 1: the genius yield thing, and they got caught flood footed.
Speaker 1: They kind of were coming from behind to fight against us.
Speaker 1: And then you've seen some of the recent true socials
Speaker 1: from the President about capping credit card fees, about crapping
Speaker 1: interchange fees, and so it is. It's probably a bit
Speaker 1: of a bandwidth issue, but again the arguments are the same.
Speaker 1: Consumers should have choice. We shouldn't try to entrench traditional
Speaker 1: finance by stifling innovation.
Speaker 2: Absolutely, now, potentially some are there could be a government
Speaker 2: shutdown I think at the end of this month. Are
Speaker 2: you hearing anything about that? And could that delay uh,
Speaker 2: you know, the negotiations around the Market Structure bill and
Speaker 2: even the passing maybe if it's going to happen Q
Speaker 2: two or whatever it may be, you know, could that
Speaker 2: affect the time.
Speaker 1: The appropriations process is going much better this time around
Speaker 1: than it did before the government shutdown feels like it
Speaker 1: was just yesterday. I know it's been over for a
Speaker 1: little while, but they have passed some appropriation bills, so
Speaker 1: there are certain parts of the government that they have,
Speaker 1: you know, already decided on their their funding for the
Speaker 1: fiscal year. They are in the process of negotiating others,
Speaker 1: and I think that both sides recognize another shutdown is
Speaker 1: not helpful to anyone. So let's get this done so
Speaker 1: that we can, you know, move on to other important
Speaker 1: issues like crypto legislation.
Speaker 2: Some are best guess. I'm not going to hold this
Speaker 2: to you because we are all guessing here. Do you
Speaker 2: think this bill, maybe by the end of Q one
Speaker 2: or early Q two, is making its way to President
Speaker 2: Trump's desk.
Speaker 1: That's my hope, and I think it can be done.
Speaker 1: I never put a percentage on anything that's going through
Speaker 1: Congress because there are so many things that can disrupt
Speaker 1: the process. But I think that they are on the
Speaker 1: right track to get this done in Q one maybe
Speaker 1: Q two. It still has to go back to the House.
Speaker 1: Whatever the Senate passes, that'll take a little of the time.
Speaker 1: But the parties that need to be committed or at
Speaker 1: the table negotiating. The steps that need to happen are happening,
Speaker 1: and you've got the right players in place, people who
Speaker 1: really do want to see this framework become law. So
Speaker 1: you've got all the right pieces of the puzzle in place,
Speaker 1: and it's just a matter of putting them in the
Speaker 1: right place so we can get this bill done and
Speaker 1: get it signed by the President.
Speaker 2: Absolutely. I wanted to ask you about a new bill
Speaker 2: that was introduced by Senator Cynthia Lummus and as well
Speaker 2: as debt with Democrat Ron White in supporting it, the
Speaker 2: Blockchain Regulatory Certainty Act, which is to help protect DeFi.
Speaker 2: You know, I recall a letter from Citadel to the
Speaker 2: SEC about DeFi and it seems there's a big push
Speaker 2: against it. What are your thoughts on this bill? And
Speaker 2: you know, I'm worried we're going to lose some of
Speaker 2: the ethos of DeFi because of the big pushback we're seeing.
Speaker 1: Yeah, that's a big concern in the bill. The legislation
Speaker 1: you you talked about is part of the Senate Banking Bill,
Speaker 1: it is part of the House Clarity Bill. It's very
Speaker 1: important to defy and I think what we've been fighting
Speaker 1: back against is this kind of thought that there's a
Speaker 1: way to you know, that this isn't that people forget.
Speaker 1: This is code. This is code, open source code. This
Speaker 1: is not somebody operating and operating in exchange. And when
Speaker 1: you put certain rules on top of DeFi that don't
Speaker 1: work for DeFi, you force an intermediary and that's going
Speaker 1: backwards in kind of the innovation here. So it's important
Speaker 1: to have those protections in place. It's important for those
Speaker 1: parties involved to remember that we're talking about open source code.
Speaker 1: We're not talking about any person or any company that's
Speaker 1: controlling this code and how it operates. And at the
Speaker 1: you know, I think it's important for them to remember that.
Speaker 1: You know, you can put certain rules in place, and
Speaker 1: what's going to happen is you're going to drive all
Speaker 1: this liquidity offshore. People are going to be able to
Speaker 1: do the same thing offshore, and you'll lose this market,
Speaker 1: this innovation in the United States to someplace where there's
Speaker 1: more friendlier laws.
Speaker 2: Yeah, and you know, right across the pond, the e
Speaker 2: you they've got their legislation in place. It's not perfect,
Speaker 2: but they've got it in place. And you know, folks
Speaker 2: that are able to know what they can do, how
Speaker 2: they can invest and build, and I can't wait for
Speaker 2: that to happen here in the United States and we
Speaker 2: can unlock a lot of growth.
Speaker 1: Yeah. Absolutely, Mica. In the EU too, it's been you
Speaker 1: know that we have a lot of member companies that
Speaker 1: are global, many of them have you know, registered under MECA,
Speaker 1: and you know some of the disclosures and the way
Speaker 1: they handle new tokens is I've heard people say it's cleaner,
Speaker 1: it's easier than the way we're approaching it. So there's
Speaker 1: probably something we can learn from what they've done in
Speaker 1: Europe and in the UK and use some of those
Speaker 1: best practices to try to get to a good place
Speaker 1: in the US.
Speaker 2: Absolutely. I did want to ask you about new CFDC
Speaker 2: chairman Mike Sile getting confirmed and how you're feeling about that.
Speaker 2: And you know, I know he's got to fill in
Speaker 2: the commissioner roles and all these things, but what were
Speaker 2: your thoughts on, you know, your old agency having a
Speaker 2: new chairman.
Speaker 1: Yeah, I think it's great. He brings a fresh perspective
Speaker 1: to the CFTC. He has a great background in the
Speaker 1: crypto markets. He understands the regulatory issues that the markets
Speaker 1: are up against. From his time at the SEC and
Speaker 1: on the task Force. He's a brilliant lawyer. He knows
Speaker 1: these bills and these the legislation and the law that
Speaker 1: backs up the CFTC and the SEC. And he's going
Speaker 1: to be a great kind of new energy to the
Speaker 1: CFTC that it needs. He's coming in fresh, and I
Speaker 1: think he's going to have like a new set of
Speaker 1: new set of eyes on what the way things are
Speaker 1: being handled and how to make sure that the agency
Speaker 1: is fulfill in its mission. And part of their mission
Speaker 1: is to promote responsible innovation, and I think he's going
Speaker 1: that put that at the top of his list of
Speaker 1: important things to think about when he's when he's running
Speaker 1: the agency.
Speaker 2: Yeah. Absolutely, I see. He was also setting up the
Speaker 2: council with the CEO's innovation, I forget what it's called,
Speaker 2: but includes crypto companies and other set companies as well.
Speaker 1: So it's really great. Yeah. And the CFTC has a
Speaker 1: long history of engaging stakeholders. You know, not all agencies
Speaker 1: welcome their stakeholders in the door and ask them to,
Speaker 1: you know, help them do their job better. I would
Speaker 1: say the CFTC has done that for a long time.
Speaker 1: They have a lot of advisory committees and they really
Speaker 1: rely on the product that comes out of those advisory committees.
Speaker 1: So this this CEO Council, I think is going to
Speaker 1: be a really good thing. It's going to be really
Speaker 1: helpful to Stealing because he gets his kind of feet
Speaker 1: under him. But it's just again, it's an opportunity to
Speaker 1: hear from stakeholders to make sure that what you're doing
Speaker 1: on the regulatory front doesn't hurt what being you know,
Speaker 1: what the where the innovation is going, where the technology
Speaker 1: is going.
Speaker 2: Absolutely, final item here I wanted to ask you about
Speaker 2: was the anti CBDC bill and what's the status of that.
Speaker 2: It didn't make its way into the Defense bill that
Speaker 2: was passed, but is there optimism that that could pass
Speaker 2: this year as well?
Speaker 1: Yeah, I could see that passing It has brought support.
Speaker 1: It's just sometimes it's hard to find the right place
Speaker 1: to put legislation to get it out the floor, and
Speaker 1: sometimes you can have a bill that a lot of
Speaker 1: people support that can't quite move on its own. So
Speaker 1: they have been really trying to put this bill on
Speaker 1: you know, they tried to put it on clarity, you know,
Speaker 1: a couple different places I think they'll get there. I
Speaker 1: think it's an important message. We don't want the government
Speaker 1: creating any kind of centralized, you know, digital currency. That's
Speaker 1: for the private sector to do, not the book sector,
Speaker 1: and so it's an important message in the bill. I
Speaker 1: think there's broad support for it. It's just its time
Speaker 1: has not come yet, but I think it will.
Speaker 2: Well for sure summer. I know you had a busy week,
Speaker 2: and I'm sure you're gonna have busy weeks and months
Speaker 2: ahead as things continue with the negotiations around his bill.
Speaker 2: I'm looking forward to seeing the updates on the Blockchain Association.
Speaker 2: Thank you so much for taking the time.
Speaker 1: Yeah, absolutely, anytime. Happy to be here.