The SEC vs. The Crypto Market | Omid Malekan

[00:00:06] [SPEAKER_01]: What the heck is going on with crypto? The SEC is suing Binance suing Coinbase as

[00:00:15] [SPEAKER_01]: usual the headlines are all BS, but they do create a feeling of panic among

[00:00:21] [SPEAKER_01]: Main Street investors who don't really understand what's going on

[00:00:24] [SPEAKER_01]: So I brought on one of my favorite guests omen Malekan

[00:00:28] [SPEAKER_01]: He's come on many times before to talk about the history of money crypto

[00:00:32] [SPEAKER_01]: He was part of the whole Wall Street insane series where we talked about all our adventures on Wall Street from my hedge fund days

[00:00:40] [SPEAKER_01]: Used to help city group with all their crypto activities. He wrote a great book about crypto and Bitcoin called re-architecting trust

[00:00:47] [SPEAKER_01]: I highly recommend it for anyone who's trying to understand this whole

[00:00:52] [SPEAKER_01]: Trillion-dollar industry and he brings up some amazing points in this podcast

[00:00:57] [SPEAKER_01]: Like why crypto is here to stay and why this is potentially a great opportunity all these things that are happening right now

[00:01:04] [SPEAKER_01]: Anyway, listen to the podcast. Here's omid

[00:01:11] [SPEAKER_01]: This isn't your average business podcast and he's not your average host

[00:01:16] [SPEAKER_01]: This is the James Altucher show

[00:01:28] [SPEAKER_01]: Omid first off house life house things going

[00:01:31] [SPEAKER_00]: Life for me is good

[00:01:32] [SPEAKER_00]: Things are good in a way

[00:01:35] [SPEAKER_00]: I am relieved that the US government has decided to sue everyone in my industry into oblivion because

[00:01:44] [SPEAKER_00]: This is now the beginning of the end of how this whole thing is going to play out

[00:01:48] [SPEAKER_01]: I agree with you

[00:01:49] [SPEAKER_01]: But first off, let me tell you a small experience

[00:01:51] [SPEAKER_01]: I had a couple weeks ago

[00:01:53] [SPEAKER_01]: I was in Norway and I was talking to

[00:01:56] [SPEAKER_01]: Bankers who work for the central bank or one guy had previously run the central bank

[00:02:00] [SPEAKER_01]: So I'm into a whole bunch of central bankers in Norway

[00:02:04] [SPEAKER_01]: They're all serious about taking their national payment system to the next level looking at crypto looking at CDBC

[00:02:11] [SPEAKER_01]: It's like every country in the world. It seems

[00:02:14] [SPEAKER_01]: Except the US is taking crypto extremely seriously like nobody wants to be left behind and they realize that the old system is

[00:02:22] [SPEAKER_00]: An antique almost yeah, and I would tie those things together

[00:02:26] [SPEAKER_00]: I think one of the reasons every other country is increasingly taking crypto seriously is because of the

[00:02:35] [SPEAKER_00]: US's

[00:02:36] [SPEAKER_00]: Increasingly negative attitude towards that. It's almost like a very effective advertising campaign, which is like hey

[00:02:43] [SPEAKER_00]: America really doesn't like this thing that might be a threat to American financial hegemony

[00:02:50] [SPEAKER_00]: To which if I was any other country would be like oh really interesting

[00:02:54] [SPEAKER_00]: So it's a threat to America you say well, we know we've been looking for a way to diversify from

[00:02:59] [SPEAKER_00]: America's chokehold over the global financial system. We should look into this crypto thing

[00:03:04] [SPEAKER_01]: Well and look every country's currency is weak

[00:03:07] [SPEAKER_01]: Relative to other currencies usually the dollar and some currencies are weaker than others

[00:03:12] [SPEAKER_01]: So of course they would like to latch on to a potentially stronger currency

[00:03:17] [SPEAKER_01]: That's global where they could become a banking center ahead of the US

[00:03:22] [SPEAKER_01]: I mean, I think this is the thinking in many countries

[00:03:24] [SPEAKER_00]: That's such a great point James because there's always been this race to see who can be the next major global financial hub because we've seen what it's done for

[00:03:35] [SPEAKER_00]: London Dubai

[00:03:37] [SPEAKER_00]: Singapore I think at this point

[00:03:38] [SPEAKER_00]: It's pretty easy to see how crypto is going to be a big part of the future financial system

[00:03:44] [SPEAKER_01]: Well, is it or isn't it like I don't want I always want to make sure I'm not smoking crack

[00:03:49] [SPEAKER_01]: And I'm not being religious about crypto and those might be two separate things but in this case, I'm linking them

[00:03:56] [SPEAKER_01]: In general, I don't want to be smoking crack

[00:03:58] [SPEAKER_01]: But I also don't want to be religious about crypto like blindly religious like is it a done deal that

[00:04:05] [SPEAKER_01]: Crypto is gonna be part of I mean money evolves money always evolves

[00:04:08] [SPEAKER_01]: It went from metals to paper money back by metal to paper

[00:04:13] [SPEAKER_01]: backed by the trust in your government, you know aka fiat money and

[00:04:18] [SPEAKER_01]: It went digital with basically most money now not being cash

[00:04:22] [SPEAKER_01]: But just sort of like a line in some account on a bank or federal reserve or whatever and now we're we're saying crypto

[00:04:28] [SPEAKER_01]: Solves many of the problems left over with fiat money like you have to trust your government

[00:04:33] [SPEAKER_01]: You have to trust many banks that are in the way of every single transaction

[00:04:37] [SPEAKER_01]: You have to deal with fees upon fees upon fees, you know as you mentioned last time three trillion dollars in fees every year

[00:04:43] [SPEAKER_01]: From from financial transactions so crypto solves all these things, but

[00:04:49] [SPEAKER_01]: Is it kind of a done deal that people said okay when the infrastructure is built?

[00:04:52] [SPEAKER_01]: We're all gonna switch to some form of either

[00:04:55] [SPEAKER_01]: Bitcoin or central bank digital currencies with some sort of blockchain based currency environment

[00:05:01] [SPEAKER_00]: Let me turn the tables on this a little bit because I think it's a very good question

[00:05:05] [SPEAKER_00]: We've spent a lot of time in my previous appearances on this podcast

[00:05:09] [SPEAKER_00]: Discussing all the reasons why I think that's true

[00:05:12] [SPEAKER_00]: All the historical

[00:05:14] [SPEAKER_00]: architectural technology reason so I

[00:05:17] [SPEAKER_00]: Want to try a different argument this time okay the one thing?

[00:05:22] [SPEAKER_00]: I think everybody would agree about crypto right now is that it is getting an insane amount of negative attention

[00:05:30] [SPEAKER_00]: Particularly within

[00:05:32] [SPEAKER_00]: Corporate and political circles, you know just just the fact that like so much of the US regulatory agencies

[00:05:39] [SPEAKER_00]: Attention is now going to like suing coinbase and Binance and creating new rules

[00:05:44] [SPEAKER_01]: We summarize that for a second because for anybody listener who doesn't know

[00:05:49] [SPEAKER_01]: Something that's been happening in the crypto world in the past few days really over the past week is that?

[00:05:55] [SPEAKER_01]: The SEC which is the regulatory

[00:05:58] [SPEAKER_01]: government organization which is in charge of all stocks and and things like that are saying that some cryptos are security

[00:06:04] [SPEAKER_01]: They're being very vague about how they're defining cryptos as securities

[00:06:08] [SPEAKER_01]: But that they're not letting that vagueness stop them from suing crypto exchanges that are trading in these quote-unquote

[00:06:15] [SPEAKER_01]: Securities there's a disagreement basically so SEC says they're doing something illegal by trading securities

[00:06:20] [SPEAKER_01]: And they're saying they're not even trading securities

[00:06:22] [SPEAKER_01]: And there's sort of this gray area in between but that's gotten everybody freaked out including the exchanges and

[00:06:29] [SPEAKER_01]: It's driven the price of crypto down as people say

[00:06:32] [SPEAKER_01]: Hey, I'm gonna take a step back and wait and see how this shakes out

[00:06:35] [SPEAKER_01]: And you know of course the headlines are going crazy and saying the SEC is trying to wipe out crypto

[00:06:41] [SPEAKER_01]: forgetting the fact that cryptos got several hundred million users all over the world not just the US but

[00:06:46] [SPEAKER_00]: Anyway, go ahead Omen. That's right. And some of the allegations

[00:06:51] [SPEAKER_00]: particularly against Binance are even worse than just violation of

[00:06:56] [SPEAKER_00]: Securities laws their allegations of fraud and them like co-mingling customer funds and and wash trading and other

[00:07:03] [SPEAKER_00]: extra bad things

[00:07:05] [SPEAKER_01]: Why are they saying that because the SEC because Binance has been pretty

[00:07:10] [SPEAKER_01]: Transparent from what I know and basically says that's just ridiculous. Like where does the SEC have any evidence?

[00:07:16] [SPEAKER_00]: Yeah, I mean there one is that they're clearly

[00:07:20] [SPEAKER_00]: working with some of the former executives of Binance the US

[00:07:25] [SPEAKER_00]: Binance us was supposed to be an almost independent

[00:07:30] [SPEAKER_00]: company that all it did was

[00:07:32] [SPEAKER_00]: license

[00:07:33] [SPEAKER_00]: Binance's technology and software but otherwise like completely different

[00:07:38] [SPEAKER_00]: structure

[00:07:39] [SPEAKER_00]: independent management

[00:07:42] [SPEAKER_00]: different kinds of controls and stuff and also in the SEC suit

[00:07:47] [SPEAKER_00]: Our claims that none of that was true that it was really just a front that

[00:07:51] [SPEAKER_00]: CZ the same individual who runs Binance global was also running Binance us, but they obviously have

[00:07:59] [SPEAKER_00]: high ranking insiders

[00:08:01] [SPEAKER_00]: That are cooperating with the investigation and they have documents

[00:08:06] [SPEAKER_00]: We'll see how they got access to those documents and and we'll see though

[00:08:10] [SPEAKER_00]: I do think I want to differentiate. It's important to know that like one way to categorize the coin base

[00:08:18] [SPEAKER_00]: lawsuit is like

[00:08:20] [SPEAKER_00]: Procedural like oh coin base didn't have the right paperwork in place and they didn't register and fill out the right form

[00:08:28] [SPEAKER_00]: Etc, but there's no allegation of like you know fraud and you know full disclosure

[00:08:34] [SPEAKER_00]: I own some coin base shares

[00:08:35] [SPEAKER_00]: But I wouldn't own coin base shares if I thought they were doing anything like that the Binance

[00:08:40] [SPEAKER_00]: Accusations or allegations if true and I have no idea if they are

[00:08:45] [SPEAKER_00]: Would mean that if you are a customer of Binance you should be concerned

[00:08:50] [SPEAKER_00]: but nevertheless to your point the

[00:08:52] [SPEAKER_00]: The US government has has come down very hard

[00:08:57] [SPEAKER_00]: particularly from the Securities and Exchange Commission and that's the backdrop and

[00:09:02] [SPEAKER_00]: I would summarize everything that's happening that it's basically become impossible

[00:09:06] [SPEAKER_00]: To do crypto in the US in a compliant way

[00:09:10] [SPEAKER_00]: And that's not just my opinion if you're a centralized exchange

[00:09:14] [SPEAKER_00]: If you're an exchange

[00:09:15] [SPEAKER_00]: But even if you're a hedge fund who wants to use it an exchange to trade like it's not clear if any exchange

[00:09:21] [SPEAKER_00]: except maybe like the

[00:09:23] [SPEAKER_00]: Cash settled futures of the CME are the kind that your your

[00:09:27] [SPEAKER_00]: Compliance people would be comfortable with today after these latest lawsuits

[00:09:32] [SPEAKER_01]: Well, let me ask you about that like what it doesn't seem like these lawsuits have anything to do with the decentralized

[00:09:37] [SPEAKER_01]: Exchanges like uniswap or pancake swap

[00:09:39] [SPEAKER_01]: Well, what are you saying? Are you saying that US citizens might not be able to use those or ah well

[00:09:44] [SPEAKER_00]: There too. So one crazy thing in the lawsuit against coinbase coinbase has a bunch of different services

[00:09:52] [SPEAKER_00]: One of them is like completely centralized custodial. They control the keys you trade through them

[00:09:57] [SPEAKER_00]: But they also have things like non custodial wallets

[00:10:01] [SPEAKER_00]: That's just software that you can use to generate your own keys and do whatever you want

[00:10:05] [SPEAKER_00]: One of the allegations in the SEC lawsuit is that

[00:10:09] [SPEAKER_00]: Because some people use this non custodial wallet to do use DeFi like uniswap then coinbase who created that wallet

[00:10:19] [SPEAKER_00]: Should have had a broker dealer license. So there's all this stuff now. There's even a pending

[00:10:26] [SPEAKER_00]: Definition change the SEC has proposed that it in its own rulemaking wants to change the definition of an exchange

[00:10:34] [SPEAKER_00]: In a way that would suck up all of DeFi

[00:10:37] [SPEAKER_00]: And then would make all of the DeFi

[00:10:40] [SPEAKER_00]: not only non-compliant in the US but

[00:10:44] [SPEAKER_00]: impossible to make

[00:10:46] [SPEAKER_00]: Compliant because if a DeFi protocol is just code and then the SEC says well, we think that's an exchange and the code needs to

[00:10:53] [SPEAKER_00]: Come in and register and the code needs to have a way that if we tell them to change things the code will

[00:10:59] [SPEAKER_00]: comply within

[00:11:01] [SPEAKER_00]: No a month right which they can't do there's no there's no real authority

[00:11:06] [SPEAKER_00]: Right and it's it's uniswap is immutable code. You can't change it

[00:11:11] [SPEAKER_00]: You can issue new code, but the existing code is deployed forever on the Ethereum blockchain. So

[00:11:17] [SPEAKER_00]: Increasingly it's becoming that if you're a developer and this isn't just my opinion like earlier today

[00:11:22] [SPEAKER_00]: I had conversation with somebody that has a startup that wants to offer

[00:11:26] [SPEAKER_00]: Crypto custody key management services. They're debating their originally US company. They're debating if they should be offshore

[00:11:33] [SPEAKER_00]: Protocols are shifting people literally telling some of their people that they want them to move to Europe or Asia

[00:11:40] [SPEAKER_00]: Capital is moving you have

[00:11:44] [SPEAKER_00]: murmurs that

[00:11:46] [SPEAKER_00]: increasingly

[00:11:47] [SPEAKER_00]: VCs are not gonna want to invest in us-based crypto startups doing anything because of all this regulatory uncertainty that the

[00:11:55] [SPEAKER_00]: VCs are telling the founders, you know what move to England or Dubai to start your company

[00:12:01] [SPEAKER_00]: so I would summarize it all as being that the

[00:12:05] [SPEAKER_00]: US government has now fired its

[00:12:10] [SPEAKER_00]: Best shot at really trying to cripple the industry here

[00:12:16] [SPEAKER_00]: No, we'll see. I don't think in the long term

[00:12:18] [SPEAKER_00]: I don't think it's going to work and I think within a couple years it will be viewed as a major strategic mistake

[00:12:25] [SPEAKER_01]: So it seems to me and it doesn't really matter the reasons why the SEC is doing this

[00:12:30] [SPEAKER_01]: But it seems to me obviously

[00:12:31] [SPEAKER_01]: They're just it's a power play. It's the securities and exchange commission

[00:12:34] [SPEAKER_01]: So they get more power and money the more securities there are so it's a pretty convenient to say

[00:12:40] [SPEAKER_01]: cryptos or securities

[00:12:41] [SPEAKER_01]: but it is scary actually right now like we really don't know what's gonna happen and what they're gonna do and who

[00:12:48] [SPEAKER_01]: We're gonna sue next so it really does put a damper on

[00:12:52] [SPEAKER_01]: Temporarily or maybe for permanently like the end of the entire industry because you don't know what's what's legal and what's not even though

[00:12:58] [SPEAKER_01]: Crypto's been trading fine for over a decade

[00:13:01] [SPEAKER_00]: Right and I'll tell you like an interesting point someone I know who works for a major

[00:13:07] [SPEAKER_00]: American financial firm that's been trying to get into crypto

[00:13:10] [SPEAKER_00]: The point that he made to me was he said look we do many things

[00:13:15] [SPEAKER_00]: much of which is regulated by the SEC and

[00:13:18] [SPEAKER_00]: Our fear now is if we try to do crypto even

[00:13:22] [SPEAKER_00]: With the best of intentions of being compliant

[00:13:26] [SPEAKER_00]: That's just going to bring the hammer down on everything that we do and

[00:13:32] [SPEAKER_00]: This is the chilling effect. I think it's important to know right when regulators come down on a sector and enter an industry and activity hard

[00:13:40] [SPEAKER_00]: It's not just the people who are already doing it that are going to be affected

[00:13:45] [SPEAKER_00]: There is this very chilling effect that those who are strongly considered doing it are now going to

[00:13:51] [SPEAKER_00]: Change their mind because every institution has risk and compliance people and they're always

[00:13:57] [SPEAKER_00]: weighing the cost and benefit of doing something and

[00:14:01] [SPEAKER_00]: if

[00:14:01] [SPEAKER_00]: One of the downsides of doing anything in crypto is that Gary Gensler might come after you then I think a lot of

[00:14:09] [SPEAKER_00]: Reasonable people are gonna conclude. It's not worth it. Yeah. I yeah, that's true in America

[00:14:15] [SPEAKER_01]: In America, right? In other countries. It doesn't affect you at all

[00:14:19] [SPEAKER_00]: Other countries are moving in the exact opposite direction at this point, which is also fascinating

[00:14:24] [SPEAKER_01]: We mentioned that in the sense that they would like to be this world center of banking before the us does

[00:14:30] [SPEAKER_01]: And they're winning like I would say the uk dubai are probably front runners in this but

[00:14:37] [SPEAKER_01]: Many many countries are trying to be centers of banking for crypto right now

[00:14:40] [SPEAKER_01]: But how does this play out here? Like what's happening?

[00:14:43] [SPEAKER_01]: Is there any substance to what it almost doesn't matter of their substance to these lawsuits? But like just what's gonna happen?

[00:14:49] [SPEAKER_00]: so

[00:14:51] [SPEAKER_00]: The quickest thing that would change this will be the outcome of next year's election, I think

[00:14:56] [SPEAKER_00]: Because in the us for whatever reason its cryptos become very polarized and the republicans are extremely

[00:15:04] [SPEAKER_00]: pro i mean even

[00:15:06] [SPEAKER_00]: yesterday you had a couple of

[00:15:09] [SPEAKER_00]: Republican members of congress propose a bill to fire gary genseler

[00:15:13] [SPEAKER_00]: And like that you know the congress people in congress will disagree with regulators, but this is getting pretty toxic

[00:15:20] [SPEAKER_00]: There are candidates who are running for office

[00:15:24] [SPEAKER_00]: for president who are

[00:15:26] [SPEAKER_00]: Increasingly pro crypto interestingly enough they come from both sides of the aisle

[00:15:30] [SPEAKER_00]: Yeah, because I never really view this as a republican or democrat issue

[00:15:34] [SPEAKER_01]: No, me neither and and I mean this very much reforms the problems in the economic system it reduces fees

[00:15:40] [SPEAKER_01]: It's good for people who don't like spending so much money on financial fees. It's inclusive

[00:15:45] [SPEAKER_00]: Right, the dem the demographically young people

[00:15:49] [SPEAKER_00]: Like it it takes power and influence away from the too big to fail wall street banks that nobody really likes

[00:15:55] [SPEAKER_00]: So yeah, I I am shocked that the breakdown has falling along the lines that it has but

[00:16:01] [SPEAKER_00]: The election could change that outcome other than that all of this is going to go into the courts now and

[00:16:07] [SPEAKER_00]: The one thing that's become clear is that because the sec in particular under gansler acts in such bad faith

[00:16:14] [SPEAKER_00]: That it's not about rules. It's not about protecting customers. It's about hurting crypto

[00:16:20] [SPEAKER_00]: No one's going to try to be compliant anymore because it's pointless right in fact coinbase

[00:16:26] [SPEAKER_00]: out of every crypto company

[00:16:28] [SPEAKER_00]: In the world was probably the one that

[00:16:32] [SPEAKER_00]: Tried to play ball the most and we can question whether they went about it the right way and

[00:16:38] [SPEAKER_00]: Some of the things they sure should not have done but nevertheless like they made a strong effort

[00:16:45] [SPEAKER_00]: To

[00:16:47] [SPEAKER_00]: win over

[00:16:47] [SPEAKER_00]: US regulators for selfish reasons right like if coinbase had actually found a way to get licenses and approvals from gansler on the

[00:16:55] [SPEAKER_00]: SEC would only help its business

[00:16:56] [SPEAKER_00]: But it was all for naught. So everyone's just going to fight everything now

[00:17:01] [SPEAKER_00]: And then it moves into the court system

[00:17:04] [SPEAKER_00]: But as we know that process often takes years to play out

[00:17:09] [SPEAKER_00]: and the third thing which I think is really worth watching now is that

[00:17:14] [SPEAKER_00]: Because the rest of the world is moving in the opposite direction

[00:17:20] [SPEAKER_00]: America's

[00:17:20] [SPEAKER_00]: In transience is increasingly going to look stupid geopolitically, you know like Hong Kong and China

[00:17:28] [SPEAKER_00]: Which had all but banned crypto

[00:17:30] [SPEAKER_00]: Is suddenly coming around to being very pro-crypto and I think they're doing that specifically because they see America

[00:17:37] [SPEAKER_00]: fumbling the football here

[00:17:39] [SPEAKER_00]: And it's like there's one thing in washington everyone agrees about it's that the us should not be ceding anything to china

[00:17:47] [SPEAKER_00]: And I think within a year or two it'll become very obvious that if we don't change direction with crypto, we will

[00:17:54] [SPEAKER_01]: Yeah, I mean I mean right now. What's the status with china? Like don't they have

[00:17:58] [SPEAKER_01]: Crypto as illegal at the moment. Ah, well

[00:18:01] [SPEAKER_00]: James guess after the us which country has the second most amount of bitcoin mining in it

[00:18:09] [SPEAKER_00]: Um, I'm going to guess china. That's right. Uh, and that's after they quote unquote banned

[00:18:15] [SPEAKER_00]: Mining, uh, but over 20 percent of the global hash power best that we can tell is in china

[00:18:22] [SPEAKER_00]: and hong kong

[00:18:24] [SPEAKER_00]: has suddenly

[00:18:26] [SPEAKER_00]: approved crypto for retail trading

[00:18:28] [SPEAKER_00]: Announced that it's going to come up with a licensing regime for crypto. It's a industry friendly licensing regime

[00:18:35] [SPEAKER_00]: The government has encouraged its banks to

[00:18:38] [SPEAKER_00]: Bank the crypto companies that are that were unbanked in the us

[00:18:42] [SPEAKER_00]: deliberately and again

[00:18:46] [SPEAKER_00]: put yourself in the position of

[00:18:49] [SPEAKER_00]: The communist party of china

[00:18:51] [SPEAKER_00]: They had their reasons for wanting to restrict certain amounts of crypto for example to preserve their capital controls, right? But here you have a

[00:19:01] [SPEAKER_00]: Rapidly growing dynamic disruptive industry. It already has hundreds of millions of owners investors that here it's all over the world

[00:19:09] [SPEAKER_00]: There's a lot of capital in crypto

[00:19:12] [SPEAKER_00]: It stood the test of time despite all the volatility

[00:19:16] [SPEAKER_00]: And your biggest geopolitical rival hates it. Yeah

[00:19:21] [SPEAKER_00]: That almost in of itself to me is reason enough for the ccp to be like, well, we'll figure out how to make crypto work for us

[00:19:45] [SPEAKER_01]: So what's going to happen next with this like right now

[00:19:49] [SPEAKER_01]: The sec just in the past week has put

[00:19:52] [SPEAKER_01]: You know the whole industry into this

[00:19:55] [SPEAKER_01]: spiral of

[00:19:57] [SPEAKER_01]: What's next who's going to get sued next? What's the actual law here? We don't know

[00:20:02] [SPEAKER_01]: And on and on what's actually gonna what do you think's gonna house is going to play out?

[00:20:07] [SPEAKER_00]: Uh, we have a little bit of uh in between period now where

[00:20:12] [SPEAKER_00]: Some of the court cases have been already going on for years

[00:20:16] [SPEAKER_00]: So we await to see what the judges ruled in them

[00:20:20] [SPEAKER_00]: It is interesting that

[00:20:22] [SPEAKER_00]: independent of crypto

[00:20:25] [SPEAKER_00]: The supreme court has increasingly

[00:20:29] [SPEAKER_00]: been

[00:20:30] [SPEAKER_00]: harsh on regulatory agencies that it believes are stepping

[00:20:35] [SPEAKER_00]: over their bounds

[00:20:37] [SPEAKER_00]: the current court

[00:20:38] [SPEAKER_00]: increasingly takes the position that if

[00:20:42] [SPEAKER_00]: Just because congress didn't rule on something doesn't mean the regulators get to

[00:20:47] [SPEAKER_00]: And there's hope there's a famous case involving chevron that people think the supreme court might overturn and

[00:20:54] [SPEAKER_00]: That could have reverberations throughout all industries that are currently

[00:20:59] [SPEAKER_00]: In a state of confrontation with their regulator over an issue that was not explicitly spelled out by congress

[00:21:07] [SPEAKER_00]: So that I think is a sort of a tailwind

[00:21:13] [SPEAKER_00]: but ultimately

[00:21:14] [SPEAKER_00]: The thing everybody should remember is that

[00:21:18] [SPEAKER_00]: Crypto is going to keep crypto-ing. This is not just an american thing. It's a global thing

[00:21:24] [SPEAKER_00]: Europe

[00:21:25] [SPEAKER_00]: As we speak has a new

[00:21:28] [SPEAKER_00]: Pro adoption regulatory framework going into effect in the uk you have the current prime minister talking about how he wants to make the uk hub for digital assets

[00:21:39] [SPEAKER_00]: Yeah, dubai and abu-dabi

[00:21:42] [SPEAKER_00]: You know, they're they're

[00:21:44] [SPEAKER_00]: You could argue number one in that race to become the next major global financial hub. So they're I hear stories about it

[00:21:51] [SPEAKER_00]: Like everything they're trying to do to help

[00:21:54] [SPEAKER_00]: american crypto companies set up shop there so

[00:21:58] [SPEAKER_00]: Usage is going to continue. I think adoption is going to continue

[00:22:02] [SPEAKER_00]: And the stuff that you can't do in america people are just going to do elsewhere

[00:22:07] [SPEAKER_01]: Yeah, it's very true like uk and dubai have not slowed down

[00:22:10] [SPEAKER_01]: And also just the work hasn't slowed down like aetherium has more transactions for day than bitcoin now

[00:22:17] [SPEAKER_01]: Many of these infrastructure coins

[00:22:20] [SPEAKER_01]: Like I call them picks and shovel tokens that help you help different blockchains communicate with each other help

[00:22:25] [SPEAKER_01]: Offer more services on a blockchain like lending and staking and all this kind of stuff

[00:22:29] [SPEAKER_01]: These projects continue to grow you have you have i'll call them

[00:22:34] [SPEAKER_01]: Utility tokens or however you call them like tokens like render which allow you to do 3d rendering of videos

[00:22:41] [SPEAKER_01]: These are being used by movie studios right now to

[00:22:44] [SPEAKER_01]: To make their movies and so so cryptos in use

[00:22:48] [SPEAKER_00]: And hasn't slowed down. Oh, yeah, here's a headline. I'm going to quote it from today guy fury and sammy haygar

[00:22:56] [SPEAKER_00]: Launch web three tequila loyalty program

[00:23:00] [SPEAKER_01]: see that's actually

[00:23:02] [SPEAKER_01]: I don't even I haven't even heard that news

[00:23:05] [SPEAKER_01]: But what you just said there with loyalty program. This is going to be the multi trillion dollar use case that people

[00:23:11] [SPEAKER_01]: Don't realize is going to be the biggest use case for crypto

[00:23:15] [SPEAKER_00]: Agreed and it's awesome because that's a real world use case

[00:23:21] [SPEAKER_00]: Right, yeah, like that would you can't do in any other way?

[00:23:25] [SPEAKER_01]: I mean you can do frequent fire miles, but then you're limited to just your company

[00:23:29] [SPEAKER_01]: You're not there's not going to be like exchanges where you could trade these things for

[00:23:33] [SPEAKER_01]: There's going to be more incentive with this with a crypto based

[00:23:36] [SPEAKER_01]: loyalty program

[00:23:38] [SPEAKER_01]: Because there's so many additional features that crypto provides you because it's built into crypto

[00:23:42] [SPEAKER_00]: Yeah, I mean there was a headline not that long ago

[00:23:46] [SPEAKER_00]: I think in the last month that luftanza

[00:23:49] [SPEAKER_00]: Is exploring blockchain based rewards?

[00:23:52] [SPEAKER_00]: And like who knows the rewards gain better than an airline?

[00:23:56] [SPEAKER_00]: Yeah, and they didn't have to do this. It's also not you know in a year and a half ago

[00:24:02] [SPEAKER_00]: During the peak of the bubble where all the

[00:24:04] [SPEAKER_00]: No speculative access was going on companies would announce that

[00:24:08] [SPEAKER_00]: They're going to do something with tokens

[00:24:12] [SPEAKER_00]: NFTs, etc

[00:24:13] [SPEAKER_00]: And some the critic would say they're just you know giving into the hype they're feeling peer pressure

[00:24:18] [SPEAKER_00]: This is the sexy thing every baseball stadium is is named after

[00:24:23] [SPEAKER_00]: Or every you know sports venues named after a crypto company and

[00:24:28] [SPEAKER_00]: Tom Brady is into it and

[00:24:30] [SPEAKER_00]: Matt Damon is telling us during the Super Bowl that fortune favors the bold. That's why they were doing it, right?

[00:24:37] [SPEAKER_00]: Here we are a year and a half later. The opposite is true prices are down

[00:24:40] [SPEAKER_00]: The headlines are constantly negative

[00:24:44] [SPEAKER_00]: Uh, you know spf is on his way to jail

[00:24:48] [SPEAKER_00]: and yet

[00:24:49] [SPEAKER_00]: Every day on every other day you hear from some

[00:24:53] [SPEAKER_00]: Otherwise successful corporation brand individual that they see some value in tokens for rewards and

[00:25:00] [SPEAKER_00]: Customer engagement or payments or whatever

[00:25:03] [SPEAKER_00]: So that to me is the kind of data point that proves that there is real world utility

[00:25:09] [SPEAKER_01]: Yeah, I mean the fact that

[00:25:10] [SPEAKER_01]: crypto's up almost 100 percent

[00:25:12] [SPEAKER_01]: Since the ftx scandal

[00:25:15] [SPEAKER_01]: Is a lot like we've had you know that industry has had non-stop bad news

[00:25:20] [SPEAKER_01]: And yet the tokens are up like 100 percent or more so

[00:25:26] [SPEAKER_01]: So so again like

[00:25:28] [SPEAKER_01]: How does this play out though? Because if you're like right now if I was just getting involved in crypto

[00:25:33] [SPEAKER_01]: I wouldn't want to hold my tokens at coinbase and particularly not by nas and if I had already my tokens at by nas

[00:25:39] [SPEAKER_01]: I'd probably be pulling them out. Maybe I would be with coinbase as well

[00:25:44] [SPEAKER_01]: like

[00:25:46] [SPEAKER_01]: You know it does slow down

[00:25:48] [SPEAKER_01]: Adoption at least in the us right now the second and in fact, I was just reading

[00:25:52] [SPEAKER_01]: You know google searches related to crypto are at a two-year low at the at the moment

[00:25:57] [SPEAKER_01]: So so basically main street has

[00:26:00] [SPEAKER_01]: Is doing a wait and see approach now to crypto they've pulled out of crypto and they're waiting

[00:26:05] [SPEAKER_00]: Some some parts of main street although there was uh, I believe data from the federal reserve that came out in the last couple

[00:26:11] [SPEAKER_00]: weeks that showed in the last two three years a percentage of

[00:26:15] [SPEAKER_00]: Us individuals who own some kind of a crypto asset has gone up

[00:26:19] [SPEAKER_00]: What's the number? I'd have to look it up. So it was one of those that on a percentage basis

[00:26:25] [SPEAKER_00]: It's like the the numbers doubled but doubled by the mean gone from like six percent to 11 percent

[00:26:31] [SPEAKER_00]: Here fed survey 12 percent of us adult till crypto

[00:26:35] [SPEAKER_00]: Uh, this was in 2021 so it could be outdated data

[00:26:39] [SPEAKER_00]: But no, I think actually, you know, who knows what prices will do

[00:26:44] [SPEAKER_00]: and and certainly with

[00:26:45] [SPEAKER_00]: You know part of the challenge now as far as prices are concerned is that

[00:26:50] [SPEAKER_00]: You've had two of the

[00:26:52] [SPEAKER_00]: biggest gateways that people use to

[00:26:56] [SPEAKER_00]: acquire crypto finance and coinbase come under

[00:27:01] [SPEAKER_00]: Significant scrutiny, but then there's always this question of how much of that is priced in

[00:27:06] [SPEAKER_00]: I actually at this point think like because some people were actually surprised that

[00:27:09] [SPEAKER_00]: Bitcoin and eiths price didn't fall that much when this news hit

[00:27:13] [SPEAKER_00]: I know bitcoin partly because it's

[00:27:16] [SPEAKER_00]: It's generally the one coin that's being left alone

[00:27:19] [SPEAKER_00]: You know the sec the cftc another u.s regulatory body

[00:27:24] [SPEAKER_00]: Declared years ago that bitcoin is not a security. It's a commodity and that was under gary gensler

[00:27:29] [SPEAKER_00]: Where he ran that agency that he's not going to reverse on that

[00:27:32] [SPEAKER_00]: By the way coinbase stock hasn't even really fallen like it's up 4% today

[00:27:37] [SPEAKER_00]: It did coinbase stock. I believe fell significantly when the binance

[00:27:41] [SPEAKER_00]: So but that too like coinbase stock has gone from what 300 to 50 or something like that

[00:27:48] [SPEAKER_00]: so it's a lot of this a lot of the negativity is

[00:27:51] [SPEAKER_00]: priced in now and I would actually say

[00:27:54] [SPEAKER_00]: At this moment in time the asymmetric risk as far as regulatory headlines is to the upside

[00:28:01] [SPEAKER_00]: meaning that you know if the

[00:28:04] [SPEAKER_00]: SEC comes out tomorrow and sues Robin hood

[00:28:08] [SPEAKER_00]: And i'm using them as an example because one of the things that has happened is Robin hood and a bunch of other

[00:28:14] [SPEAKER_00]: Places where people buy and trade crypto have started delisting certain coins

[00:28:19] [SPEAKER_00]: Because in the coinbase or binance lawsuit the sec for the first time said well, that's a security. That's not compliant

[00:28:27] [SPEAKER_00]: But if the sec sues Robin hood, I don't know if you're going to move the needle that much people are like, yeah

[00:28:32] [SPEAKER_00]: Like gansler hates crypto and he's just going to sue everybody because he doesn't care about being right or destroying his agency's credibility

[00:28:40] [SPEAKER_00]: That's priced in but if in one of these ongoing lawsuits like the ripple one

[00:28:47] [SPEAKER_00]: Or

[00:28:48] [SPEAKER_00]: There's coinbase actually sued the sec not that long ago seeking regulatory clarity

[00:28:54] [SPEAKER_00]: There's the lawsuit over bitcoin ETFs and the grayscale bitcoin trust

[00:28:59] [SPEAKER_00]: Etc etc

[00:29:00] [SPEAKER_00]: I think there's more

[00:29:02] [SPEAKER_00]: Potential bullish catalysts that could come out just because we priced in the worst

[00:29:08] [SPEAKER_01]: Yeah, and the worst has already happened like you said in the very beginning of this conversation

[00:29:11] [SPEAKER_01]: It's almost good that finally the sec has sued everybody because this has been expected

[00:29:17] [SPEAKER_01]: For at least a year or two

[00:29:19] [SPEAKER_01]: But the question is like a year from now what is happening?

[00:29:22] [SPEAKER_01]: How does this play out? How do you think this plays out?

[00:29:25] [SPEAKER_01]: And by the way as this plays out

[00:29:27] [SPEAKER_01]: Every way in which this plays out is bullish. Yeah, because crypto's not they're not going to make crypto illegal

[00:29:33] [SPEAKER_01]: They're just making it difficult, but somehow it'll get resolved

[00:29:36] [SPEAKER_00]: Right. Do you this is a funny reference, but do you remember when

[00:29:41] [SPEAKER_00]: Elliott spitzer went down?

[00:29:43] [SPEAKER_00]: Yeah, of course, right like and his thing was

[00:29:47] [SPEAKER_00]: Was like what was it he was visiting a prostitute

[00:29:51] [SPEAKER_01]: And yeah, or and he well no he paid for the prostitute to come

[00:29:55] [SPEAKER_01]: To where he was I think he was traveling from new york to dc. He was governor

[00:29:58] [SPEAKER_01]: So he paid the prostitute so it was like over state lines, you know sex trafficking sort of thing

[00:30:05] [SPEAKER_00]: Whatever it was it was like my impression of because if you remember spitzer was a bulldozer

[00:30:12] [SPEAKER_01]: Yeah, he he pulled a lot of financial people in jail a lot of very rich people in jail

[00:30:17] [SPEAKER_00]: He put rich people in jail over like

[00:30:20] [SPEAKER_00]: Dubious kinds of accusations in the sense that like, you know, yes, I guess like wall street analysts were pumping token

[00:30:28] [SPEAKER_00]: stocks

[00:30:30] [SPEAKER_00]: That their bank trader was wanted the ipo for us. But it wasn't like

[00:30:34] [SPEAKER_00]: Let's just say that other people have not gone to jail for doing far more dangerous things in financial services

[00:30:42] [SPEAKER_00]: And then when he was a governor so he was attorney general when he did those things and he used that to

[00:30:49] [SPEAKER_00]: Sort of like catapult his political career then as a governor. He was a bit of a bulldozer too

[00:30:54] [SPEAKER_00]: And I am by no means a political expert

[00:30:57] [SPEAKER_00]: But I had this strong impression at the time that one of the reasons he went down was because nobody liked them

[00:31:02] [SPEAKER_01]: Right and people were celebrating in the street when he when he went down

[00:31:05] [SPEAKER_00]: Yeah, so I even with with someone like a ginsler

[00:31:09] [SPEAKER_00]: I would say

[00:31:11] [SPEAKER_00]: There's a certain level of assholeness that nobody likes you

[00:31:15] [SPEAKER_00]: Even the people who are

[00:31:17] [SPEAKER_00]: Ideologically aligned with you

[00:31:19] [SPEAKER_00]: And I think ginsler has really crossed all of those lines

[00:31:23] [SPEAKER_00]: Uh, just the amazing thing. So here's another revealing thing

[00:31:27] [SPEAKER_00]: First of all, he's the coinbase lawsuit was intentionally

[00:31:32] [SPEAKER_00]: Wait, let me step back. There was a very positive development in the us in the past week also that

[00:31:38] [SPEAKER_00]: um, the republicans in two different

[00:31:42] [SPEAKER_00]: committees in the

[00:31:44] [SPEAKER_00]: hassle representatives

[00:31:46] [SPEAKER_00]: proposed a very well thought out and comprehensive crypto regulation bill

[00:31:53] [SPEAKER_00]: And it was so

[00:31:54] [SPEAKER_00]: They clearly took the time to learn about what differentiates

[00:31:59] [SPEAKER_00]: crypto assets from traditional assets and and you know, like

[00:32:03] [SPEAKER_00]: Thoughtful ways of how something could begin as a security

[00:32:06] [SPEAKER_00]: But if it's sufficiently decentralized and they even have threshold for what that means then it becomes a commodity etc

[00:32:12] [SPEAKER_00]: So they propose a very comprehensive new law

[00:32:16] [SPEAKER_00]: No democrats supporting it yet, but a good conversation starter and ginsler's

[00:32:22] [SPEAKER_00]: sec

[00:32:24] [SPEAKER_00]: Timed the coinbase lawsuit

[00:32:27] [SPEAKER_00]: to coincide with the hearing that congress was having

[00:32:31] [SPEAKER_00]: in

[00:32:32] [SPEAKER_00]: Discussing this and this is one of many times where he clearly thinks

[00:32:36] [SPEAKER_00]: He's more important than the elected representatives. And that's not just my opinion

[00:32:42] [SPEAKER_00]: congressman richie torrez of new york who's a considered a rising star in the democratic party

[00:32:50] [SPEAKER_00]: Called ginsler as being in I think something like he acts in contempt of congress

[00:32:55] [SPEAKER_00]: Um, yeah, I saw that that he he doesn't want to let the democratic process come to a solution here

[00:33:02] [SPEAKER_00]: Then at the same time so congress is having a hearing over this new bill

[00:33:06] [SPEAKER_00]: Gensler completely steals their thunder because all the headlines that they were about the coinbase lawsuit not about

[00:33:12] [SPEAKER_00]: You know expert witnesses testifying about this bill and so on

[00:33:16] [SPEAKER_00]: And then ginsler goes on tv to talk about why he's suing and all the usual nonsense about

[00:33:24] [SPEAKER_00]: Cleaning up the industry and there's been too much fraud, but then at one point he says

[00:33:28] [SPEAKER_00]: We don't need any more digital currencies

[00:33:32] [SPEAKER_00]: You know we already the dollar is already digital

[00:33:34] [SPEAKER_00]: The euro is already digital and this is this ignorant comment that some people have been making to me for years

[00:33:40] [SPEAKER_00]: I like oh, well, you know my my bank account is accessible through the internet and the bank uses a database

[00:33:46] [SPEAKER_00]: So isn't it already a digital currency? But I thought this was ginsler

[00:33:51] [SPEAKER_00]: really

[00:33:53] [SPEAKER_00]: Revealing his hand that he's just trying to kill this thing

[00:33:57] [SPEAKER_00]: and

[00:33:58] [SPEAKER_00]: That's the kind of thing that's remarkable for a few reasons one

[00:34:01] [SPEAKER_00]: This is a guy who taught an entire class on bitcoin and blockchain

[00:34:07] [SPEAKER_00]: At mit which I watched a lot of the video for the content was pretty good

[00:34:12] [SPEAKER_00]: He was involved with the mit digital currency initiative which covers crypto not

[00:34:18] [SPEAKER_00]: you know electronic banking from the 1970s

[00:34:22] [SPEAKER_00]: And now he goes on national tv and says all of that is completely pointless

[00:34:28] [SPEAKER_00]: So this is what I mean like it takes a certain level of being a low rent low integrity individual

[00:34:35] [SPEAKER_00]: To pull a switch like this. I as someone who works in academia. I feel bad

[00:34:40] [SPEAKER_00]: For all of his former students and colleagues

[00:34:43] [SPEAKER_00]: Because how are they supposed to interpret this?

[00:34:45] [SPEAKER_00]: I'm like wait he he he was one of us and now he's telling me today that everything I do is completely

[00:34:50] [SPEAKER_00]: pointless

[00:34:52] [SPEAKER_00]: So that's revealing the other thing is he slipped up in the sense that

[00:34:59] [SPEAKER_00]: While the sec is supposed to create

[00:35:03] [SPEAKER_00]: integrity for financial markets

[00:35:06] [SPEAKER_00]: primarily by eliminating information asymmetries

[00:35:10] [SPEAKER_00]: It's supposed to be neutral on the merits of an investment

[00:35:14] [SPEAKER_00]: And even ginsler himself has said this in the past that if a company

[00:35:18] [SPEAKER_00]: Files to go public. It's not the sec's job to determine if its product is good

[00:35:25] [SPEAKER_00]: Or if it's that's a good point right or if its business model is is viable or if they should be like, you know charging more

[00:35:31] [SPEAKER_01]: What are you saying though?

[00:35:33] [SPEAKER_01]: Maybe personally he's saying, you know, the u.s doesn't need another digital currency

[00:35:38] [SPEAKER_01]: but

[00:35:39] [SPEAKER_01]: From a legal standpoint what he's saying is he's making it. He's not saying crypto's outlawed

[00:35:43] [SPEAKER_01]: He's just making it too difficult for anyone to trade it

[00:35:46] [SPEAKER_00]: But but he's saying we don't need it right which is a major major

[00:35:52] [SPEAKER_00]: revelation

[00:35:53] [SPEAKER_00]: And slip up because it shows what his real intention is

[00:35:57] [SPEAKER_00]: It's also a direct violation of the sec's mandate

[00:36:04] [SPEAKER_00]: Which is not just to regulate regulate markets, but to facilitate

[00:36:10] [SPEAKER_00]: capital formation and don't take my word for it to the listeners at home just go to the sec website

[00:36:17] [SPEAKER_00]: And look up what their mission is

[00:36:19] [SPEAKER_00]: It's explicitly to facilitate capital formation in the u.s

[00:36:26] [SPEAKER_00]: Among the federal financial regulators the sec and the cftc are generally perceived to be the

[00:36:33] [SPEAKER_00]: pro market free market regulators whereas like the bank regulators are more of the

[00:36:38] [SPEAKER_00]: Socialist ones

[00:36:40] [SPEAKER_00]: But that's because when congress created these agencies

[00:36:45] [SPEAKER_00]: It gave them these specific mandates that you're not just here to be the cop

[00:36:49] [SPEAKER_00]: You're not just here to crack down on bad people doing bad things but to enable good people doing good things

[00:36:56] [SPEAKER_00]: And when gansler said on cnbc

[00:36:59] [SPEAKER_00]: That we don't need any more digital currencies. He showed that he's acting to stop

[00:37:04] [SPEAKER_00]: capital formation

[00:37:06] [SPEAKER_00]: And I think I hope that that level of being a

[00:37:12] [SPEAKER_00]: Extremist in the position of a regulator comes back to bite him in the ass somehow

[00:37:34] [SPEAKER_01]: It looks like there's a couple ways this could play out one is congress and the courts

[00:37:40] [SPEAKER_01]: Get so disgusted that

[00:37:42] [SPEAKER_01]: They basically say look you can't do this

[00:37:45] [SPEAKER_01]: You're trying to ruin an industry that a is not going to be ruined

[00:37:48] [SPEAKER_01]: And b it's going to leave the us behind and c you just don't have the right to do this like you can't make law

[00:37:54] [SPEAKER_01]: You just have to enforce law

[00:37:56] [SPEAKER_01]: the other way to play out is

[00:37:58] [SPEAKER_01]: all these lawsuits go to trial and he just loses because

[00:38:03] [SPEAKER_01]: You can't sue coinbase over something which

[00:38:05] [SPEAKER_01]: Is not law

[00:38:06] [SPEAKER_01]: But he's basically saying they're they're trading these securities

[00:38:09] [SPEAKER_01]: But no one's ever defined what how cryptos are security

[00:38:12] [SPEAKER_00]: Even he refuses amazingly enough like another way that he's just a bad faith actor

[00:38:18] [SPEAKER_00]: He they still refuse to say whether eith is or is not a security

[00:38:23] [SPEAKER_00]: and

[00:38:24] [SPEAKER_00]: All these video clips have unearthed of gansler and his role at mit

[00:38:29] [SPEAKER_00]: Shortly before he took the gig at the sec where he's like well, you know, eith is not a security

[00:38:34] [SPEAKER_00]: Bitcoin is not a security. You like coin is not a security and then he says some other things might be

[00:38:39] [SPEAKER_00]: But he was drilled himself in front of congress like a month ago

[00:38:44] [SPEAKER_00]: about whether eith is a security and

[00:38:46] [SPEAKER_00]: He weirdly alternated between saying the sec has all the authority it needs to decide that

[00:38:53] [SPEAKER_00]: And then refusing to answer the question

[00:38:55] [SPEAKER_00]: And it got to the point where coinbase actually sued the sec and one of the things it asked for is to

[00:39:02] [SPEAKER_00]: Provide a list of what is or isn't a security, you know

[00:39:05] [SPEAKER_00]: Just like take the top 100 coins and just tell us yes or no

[00:39:09] [SPEAKER_00]: And the sec's response his court was that

[00:39:13] [SPEAKER_00]: I'll simplify here, but it was basically we will not provide a list of what is or is not a security

[00:39:18] [SPEAKER_00]: But we will keep suing companies for registered for trading illegal securities. Yeah, so how can that doesn't make sense

[00:39:25] [SPEAKER_01]: That's almost like a babel on b article

[00:39:27] [SPEAKER_01]: Or an onion article like how can he get away with doing that with a straight face?

[00:39:32] [SPEAKER_00]: I don't know the straight face part. I don't know. He's like I said he and I'm not even being like pro crypto here

[00:39:37] [SPEAKER_01]: I'm being like anti this is like a typical bureaucratic government stupidity

[00:39:42] [SPEAKER_01]: This is like the post office saying you're not allowed to use FedEx because those aren't real letters

[00:39:47] [SPEAKER_01]: And only letters all letters have to go through the post office and people say well, what do you mean? They're not letters

[00:39:53] [SPEAKER_01]: Oh, we're that's up to us. Don't worry about it

[00:39:56] [SPEAKER_00]: Yeah, I don't know I and also like

[00:39:59] [SPEAKER_00]: I'm not a mind reader

[00:40:00] [SPEAKER_00]: You know everyone has been saying

[00:40:03] [SPEAKER_00]: All of this is going to come back on the sec in a bad way either because they they lose in court or congress forces them

[00:40:10] [SPEAKER_00]: Or you know, frankly the president

[00:40:12] [SPEAKER_00]: Just appoints a new maybe the next president after the election if we have a change in

[00:40:16] [SPEAKER_00]: Leadership appoints a new sec chair with a mandate to clean all this

[00:40:21] [SPEAKER_00]: It's gonna like destroy the credibility of the agency

[00:40:25] [SPEAKER_00]: Gensler is not going to be around for any of that to happen

[00:40:28] [SPEAKER_00]: Um, it just shows you though like

[00:40:31] [SPEAKER_00]: How much of a scoundrel must you be that you have no qualms about single-handedly singing the credibility of a what?

[00:40:41] [SPEAKER_00]: 80 90 year old agency

[00:40:43] [SPEAKER_00]: Just because either you have an axe to grind or somehow he thinks that being the

[00:40:49] [SPEAKER_00]: The uh like the bad guy of crypto will serve his own personal or political ambition

[00:40:56] [SPEAKER_01]: So

[00:40:57] [SPEAKER_01]: If you were to guess what are the next things that happens and what are the next catalysts for crypto good or bad?

[00:41:04] [SPEAKER_01]: What would you say? How would you kind of take this and because I remember initially in the conversation you said

[00:41:09] [SPEAKER_00]: You were implying this is a good thing. Well, it's a good thing in that like the worst is now behind this

[00:41:14] [SPEAKER_00]: In the sense that like we knew

[00:41:16] [SPEAKER_00]: We knew the sec was going to come down hard. They have

[00:41:21] [SPEAKER_00]: There'll probably be other suits a lot of people waiting for the justice department to go after a finance

[00:41:27] [SPEAKER_00]: for criminal violations that

[00:41:30] [SPEAKER_00]: Uh, would be more severe, but

[00:41:32] [SPEAKER_00]: So what I finance has many billions of dollars and it's already hired all the world's top law firms

[00:41:38] [SPEAKER_00]: so they'll they'll fight this

[00:41:40] [SPEAKER_00]: To the ends of the earth and I don't have any personal allegiance to any of these companies. I just think that like

[00:41:46] [SPEAKER_00]: We should have

[00:41:48] [SPEAKER_00]: Ways that well intentioned crypto service providers exchange it etc become compliant register

[00:41:55] [SPEAKER_00]: But it's not what gary ganster says that literally he keeps saying like well, you know the law passed in 1930 is all we need to know how to regulate

[00:42:03] [SPEAKER_00]: Digital currencies that were invented three years ago

[00:42:06] [SPEAKER_00]: Yeah

[00:42:07] [SPEAKER_00]: So all of that will play out the the other thing is as the election approaches, you know, it's interesting that

[00:42:14] [SPEAKER_00]: ron de santis pro crypto

[00:42:17] [SPEAKER_00]: rfk jr. Who's running in the democratic primary against biden

[00:42:21] [SPEAKER_00]: pro crypto all the republicans will probably be

[00:42:24] [SPEAKER_00]: um pro crypto

[00:42:26] [SPEAKER_00]: but

[00:42:27] [SPEAKER_00]: elizabeth warren is campaigning she's up for reelection against crypto

[00:42:33] [SPEAKER_00]: She actually has like a campaign ad that she's building an anti crypto army

[00:42:38] [SPEAKER_00]: Which is just funny to me. Why does she think like people care about this issue at all?

[00:42:42] [SPEAKER_01]: Like either you're pro crypto or you don't care

[00:42:44] [SPEAKER_00]: Yeah, look, I can't like I can't imagine a single person

[00:42:48] [SPEAKER_00]: Who hates crypto enough that that becomes the reason they go vote for a candidate in election

[00:42:54] [SPEAKER_00]: There are plenty of people who don't believe in it or skeptical

[00:42:58] [SPEAKER_00]: Don't like it

[00:42:59] [SPEAKER_01]: The main argument of a politician is that a lot that they say a lot of crimes are committed using crypto

[00:43:05] [SPEAKER_01]: But you could have argued this

[00:43:08] [SPEAKER_01]: About first off you could certainly argue it about the dollar a lot of crimes are committed in with the u.s. Dollar

[00:43:13] [SPEAKER_00]: By every day cartel and through regulated banks right now as we speak

[00:43:19] [SPEAKER_00]: There's like a hundred million dollars being washed through the banking system

[00:43:24] [SPEAKER_01]: I mean jp morgan just settled. I think for two hundred ninety million dollars for victims of jeffrey eppstein

[00:43:31] [SPEAKER_01]: so

[00:43:33] [SPEAKER_01]: You know that's the u.s. Dollar and the largest bank in the world

[00:43:37] [SPEAKER_01]: And again the internet started every new technology kind of starts with nefarious use

[00:43:43] [SPEAKER_00]: Just three months ago. Wells fargo one of the biggest banks in america was ordered to pay a 3.7 billion dollar fine

[00:43:54] [SPEAKER_00]: For various violations and no one batted an eye. No one was like, oh boy, you know that wells fargo

[00:44:00] [SPEAKER_00]: It just paid a 3.7 billion dollar fine

[00:44:05] [SPEAKER_00]: Just for stuff that it's done in recent years. It's like, yeah, you know wall street commits crimes gets fine

[00:44:12] [SPEAKER_00]: All is good. But let me put this number in context, right if i'm looking at like

[00:44:17] [SPEAKER_00]: crypto market caps

[00:44:19] [SPEAKER_00]: The uniswap token uni has a market cap of 3.2 billion chain link is 2.0 billion

[00:44:26] [SPEAKER_00]: No shiba inu coin four billion

[00:44:29] [SPEAKER_00]: Wells fargo paid the

[00:44:32] [SPEAKER_00]: equivalent total value

[00:44:35] [SPEAKER_00]: Uh like the 20th biggest crypto coin one time and if you go back obviously like to 2008

[00:44:42] [SPEAKER_00]: They've probably paid well over 10 billion dollars in fine

[00:44:45] [SPEAKER_00]: And that's normal. No one has a problem with that. But then

[00:44:50] [SPEAKER_00]: Oddly you have elizabeth warn going on about how crypto is the thing that enables

[00:44:57] [SPEAKER_00]: fentanyl distribution

[00:44:59] [SPEAKER_00]: I actually have no idea what she's talking about but that's her new talking point

[00:45:03] [SPEAKER_00]: Yeah, so it's crazy. It's like insane. What's happening? Yeah, and the other thing that I think could happen is that as

[00:45:10] [SPEAKER_01]: I mean first off first off we I've even covered this on the podcast about fentanyl distribution

[00:45:16] [SPEAKER_01]: With general robert spaulding who was uh, who's uh, was the white house

[00:45:20] [SPEAKER_01]: Expert on china for many years

[00:45:22] [SPEAKER_01]: We know that china has been giving for free

[00:45:25] [SPEAKER_01]: Fetanyl to mexican cartels who have then just been showering it into the us at super cheap prices

[00:45:32] [SPEAKER_01]: Wow, I didn't know that in dollars

[00:45:35] [SPEAKER_01]: So I don't even know what elizabeth warren's talking about since there's all the evidence is that

[00:45:39] [SPEAKER_01]: I mean, there's like hardcore evidence that it's china also

[00:45:42] [SPEAKER_00]: Here's the other amazing thing

[00:45:44] [SPEAKER_00]: There used to be a time where it was republicans that if they wanted something to not happen

[00:45:49] [SPEAKER_00]: They would be like oh, but the drug dealers

[00:45:51] [SPEAKER_00]: And there was always like a hint of racism to this too

[00:45:55] [SPEAKER_00]: It's amazing to me that this is completely flipped that it is now

[00:46:01] [SPEAKER_00]: progressive democrats like elizabeth warren who

[00:46:05] [SPEAKER_00]: Fall back on these stupid tropes that well, this is going to enable drug dealing

[00:46:10] [SPEAKER_00]: And you know crypto is disproportionately black in the us

[00:46:15] [SPEAKER_00]: If you look at it globally

[00:46:18] [SPEAKER_00]: The countries that have the highest per capita adoption are countries that are poorer

[00:46:24] [SPEAKER_00]: The global south

[00:46:26] [SPEAKER_00]: Places where you have you know a lot more black and brown people than you do minorities

[00:46:32] [SPEAKER_00]: And here you have a progressive democrat

[00:46:36] [SPEAKER_00]: campaigning against it in a fashion that

[00:46:39] [SPEAKER_00]: It's like oh well, I guess elizabeth warren prefers wells far ago

[00:46:43] [SPEAKER_00]: The other thing I could think could happen is as the rubber

[00:46:47] [SPEAKER_00]: Actually meets the road and the campaign gets going people like her just realize how stupid this position is and how there's like

[00:46:53] [SPEAKER_00]: Not a single person who's going to vote for you because of it

[00:46:56] [SPEAKER_00]: But a lot of

[00:46:58] [SPEAKER_00]: The kind of people who like take my class right there are people who are

[00:47:02] [SPEAKER_00]: From latin america and they have both experienced crushing hyperinflation

[00:47:09] [SPEAKER_00]: and the fact that

[00:47:11] [SPEAKER_00]: remittances to and from

[00:47:13] [SPEAKER_00]: Their country, you know 20 fees goes to intermediaries

[00:47:18] [SPEAKER_00]: Those are the kind of people that I feel like would otherwise vote for elizabeth warren along for various issues

[00:47:24] [SPEAKER_00]: But they're very passionate about this crypto thing because they see it as a fundamental good

[00:47:29] [SPEAKER_01]: So you're basically thinking that you don't really know exactly the form in which Hathers plays out

[00:47:34] [SPEAKER_01]: but it's

[00:47:35] [SPEAKER_01]: almost certainly going to play out

[00:47:37] [SPEAKER_01]: In favor of crypto like genser is going to lose some power, you know the head of the scc is going to lose some of his power

[00:47:43] [SPEAKER_01]: and

[00:47:44] [SPEAKER_01]: Crypto will move forward

[00:47:46] [SPEAKER_01]: Would you just so we don't really know the form is going to take it?

[00:47:50] [SPEAKER_01]: Do you have a sense of how long it will take because in the meantime?

[00:47:53] [SPEAKER_01]: I would say public interest in crypto does go down when you feel like you can't trust any institution to

[00:47:58] [SPEAKER_01]: Put your money there or to trade there

[00:48:00] [SPEAKER_00]: Again in the u.s. Um, this is a global phenomenon

[00:48:04] [SPEAKER_00]: I don't timing is always the thing and and if if like

[00:48:09] [SPEAKER_01]: You know and just sorry to interrupt but just to your point

[00:48:12] [SPEAKER_01]: If it's just in the u.s. And eventually like

[00:48:15] [SPEAKER_01]: Eventually just hits bottom in the u.s. But then the rest of the world of course is moving forward

[00:48:19] [SPEAKER_01]: If prices start to go up the use is going to be pretty us is going to be pretty insistent that hey

[00:48:23] [SPEAKER_00]: We need to be a part of this. Yeah timing has always been I've been wrong about many things in my years of working in crypto

[00:48:29] [SPEAKER_00]: And timing has always been number one. I generally expect things to happen sooner than they do

[00:48:34] [SPEAKER_00]: So i'm forcing myself to be a more conservative, but I think

[00:48:38] [SPEAKER_00]: Within two in the next two years we're going to have significant resolution of almost all of these topics

[00:48:43] [SPEAKER_00]: I think the election would have happened and we would have seen that there are actually many people who

[00:48:49] [SPEAKER_00]: See the core proposition of crypto as good

[00:48:52] [SPEAKER_00]: I think the court system will have had time to weigh in on some of the sec's more ridiculous charges

[00:48:58] [SPEAKER_00]: And I think global adoption away from america will have really taken off up to and including

[00:49:04] [SPEAKER_00]: State level adoption. Right? So I think I talked about this before that

[00:49:08] [SPEAKER_00]: I think there are already governments that are secretly adopting bitcoin

[00:49:13] [SPEAKER_00]: Either by mining it or slowly buying it up

[00:49:17] [SPEAKER_00]: I mean, there are smaller governments that publicly have said they've been doing it like a salvatore even butan

[00:49:22] [SPEAKER_00]: I would not be surprised if you look at

[00:49:25] [SPEAKER_00]: The access of china satiravia the ua e

[00:49:30] [SPEAKER_00]: iran

[00:49:32] [SPEAKER_00]: russia

[00:49:33] [SPEAKER_00]: That they have many

[00:49:35] [SPEAKER_00]: incentives

[00:49:36] [SPEAKER_00]: Already to begin to slowly embrace the bitcoin

[00:49:41] [SPEAKER_00]: And that the ua s government's crackdown is actually the best advertising campaign for them to accelerate that process

[00:49:47] [SPEAKER_00]: You know if nothing else we america drove down the price of bitcoin

[00:49:51] [SPEAKER_00]: So it's cheaper to acquire

[00:49:54] [SPEAKER_01]: And what do they what don't you think these other countries see as the ultimate use case?

[00:49:58] [SPEAKER_01]: You know again, like I said, I was I talked to people at other governments

[00:50:03] [SPEAKER_01]: They are moving towards some sort of cdbc or blockchain based

[00:50:08] [SPEAKER_01]: Payment system as many governments have already discussed. But is that does that necessarily involve have to involve

[00:50:15] [SPEAKER_01]: bitcoin ethereum and and all the cryptos we know and love

[00:50:19] [SPEAKER_00]: Not on day one, but I think other governments increasingly have a dollar problem

[00:50:25] [SPEAKER_00]: I think they see that so much global commerce now happens in dollars

[00:50:29] [SPEAKER_00]: But the u.s has gone overboard in weaponizing that fact in order to try to control and influence everyone and everything

[00:50:37] [SPEAKER_00]: Even like the way

[00:50:39] [SPEAKER_00]: You know the sec acts now like if you actually listen to people like gensler talk

[00:50:44] [SPEAKER_00]: There is this this hubris and arrogance that like, you know, well, I am the america's premier capital market regulator

[00:50:51] [SPEAKER_00]: So whatever I say is truth

[00:50:53] [SPEAKER_00]: And I don't care that my counterpart in literally every other ngc even in canada disagrees

[00:50:58] [SPEAKER_00]: You know, I'm I'm gary. This is america and we tell you what to do

[00:51:03] [SPEAKER_00]: So the world has this dollar problem

[00:51:05] [SPEAKER_00]: There's no other currency that

[00:51:08] [SPEAKER_00]: Is like immediately better

[00:51:09] [SPEAKER_00]: You know, you definitely don't want like to switch to

[00:51:13] [SPEAKER_00]: The chinese yuan because of their capital controls and their political process is a lot less trustworthy than ours

[00:51:19] [SPEAKER_01]: Right and you know, this was a concern

[00:51:22] [SPEAKER_01]: About two months ago when oh my gosh

[00:51:25] [SPEAKER_01]: There was oil transactions for the first time done in the yuan instead of the dollar and then the brazilian real

[00:51:30] [SPEAKER_01]: Instead of the dollar, this is the end of the dollar and i'm telling myself

[00:51:35] [SPEAKER_01]: Do people really want

[00:51:37] [SPEAKER_01]: The brazilian real like two trillion dollars worth of the brazilian real instead of the u.s dollar right like this is ridiculous

[00:51:43] [SPEAKER_01]: It's not nothing is

[00:51:45] [SPEAKER_01]: You know, maybe the worst case is some basket of currencies going to replace the dollar

[00:51:49] [SPEAKER_01]: But even then I don't see how a basket

[00:51:51] [SPEAKER_01]: Where you're reliant on the value of lots of currencies all of a sudden is going to replace the dollar as a safe reserve currency

[00:51:59] [SPEAKER_00]: Agreed. So I should make it clear. I'm while I believe that

[00:52:02] [SPEAKER_00]: D dollarization is a thing and it's increasingly going to be a thing. I do not think that like

[00:52:09] [SPEAKER_00]: Even within the next decade, suddenly everyone's going to hit a switch and dump all their dollars and buy other currencies

[00:52:16] [SPEAKER_00]: For the reasons that you alluded to

[00:52:18] [SPEAKER_00]: However, I do think that

[00:52:20] [SPEAKER_00]: Countries are increasingly going to try to find regional solutions and bilateral solutions

[00:52:26] [SPEAKER_00]: So yeah, like the rest of the world does not want china's currency as their major reserve currency or brazils, but

[00:52:35] [SPEAKER_00]: it's not unreasonable for

[00:52:38] [SPEAKER_00]: uh, you know china buys commodities from brazil and brazil

[00:52:43] [SPEAKER_00]: Manufactured goods or electronics from china. It's not unreasonable for them to say hey

[00:52:46] [SPEAKER_00]: Let's start settling some of this in our two currencies, right?

[00:52:49] [SPEAKER_00]: Like, you know brazil's like, okay

[00:52:51] [SPEAKER_00]: I'm gonna all accept some some chinese yuan

[00:52:54] [SPEAKER_00]: For my exports because i'll turn around and just use those to buy chips that manufactured in china

[00:53:00] [SPEAKER_00]: if this kind of like

[00:53:03] [SPEAKER_00]: Regionalization starts to take hold and again like no one's dumping all their dollars

[00:53:07] [SPEAKER_00]: Or many reasons why the dollars are reserve currency having also to do with like how easy it is to borrow in dollars for example

[00:53:14] [SPEAKER_00]: The the popularity of us treasuries is collateral

[00:53:20] [SPEAKER_00]: But I do think that countries are going to be a lot more willing to do

[00:53:23] [SPEAKER_00]: Regional baskets bilateral trading and when they do that they are going to need some way of settling things occasionally

[00:53:31] [SPEAKER_00]: And I think eventually, you know, this might take my entire

[00:53:34] [SPEAKER_00]: Lifetime to play out, but I think eventually bitcoin becomes the preferred thing to do that

[00:53:41] [SPEAKER_00]: You've got to start somewhere so again like I don't think anybody's going to be like

[00:53:44] [SPEAKER_00]: Oh, we're dumping our trillion dollars in treasuries. I'm putting it all in bitcoin

[00:53:47] [SPEAKER_00]: There's literally not enough bitcoin in existence

[00:53:50] [SPEAKER_00]: But I also don't think it's unreasonable for a country to say hey our sovereign wealth fund has

[00:53:57] [SPEAKER_00]: 600 billion dollars in assets

[00:54:00] [SPEAKER_00]: Some combination of like currencies real estate

[00:54:03] [SPEAKER_00]: Equities whatever a lot of it is dollarized

[00:54:06] [SPEAKER_00]: Which we're worried about because if there's like another russian war situation type stuff

[00:54:11] [SPEAKER_00]: Who knows what america will try to sanction?

[00:54:13] [SPEAKER_00]: So we decided to put two percent of our sovereign wealth fund into bitcoin

[00:54:18] [SPEAKER_00]: That's where I think it begins

[00:54:20] [SPEAKER_01]: Right and and to be clear right now essentially zero percent

[00:54:25] [SPEAKER_01]: So the sovereign wealth fund is like the investments managed by an entire country. So like

[00:54:30] [SPEAKER_01]: You know

[00:54:31] [SPEAKER_01]: A sovereign wealth fund could be hundreds of billions of dollars potentially or or or greater and

[00:54:37] [SPEAKER_01]: Right now there's essentially zero percent invested in bitcoin and forget about the other cryptos

[00:54:42] [SPEAKER_01]: But zero percent because of the exact thing that started last week

[00:54:48] [SPEAKER_01]: Which is that every sovereign wealth fund has been waiting for the us sec

[00:54:54] [SPEAKER_01]: To do something and now

[00:54:57] [SPEAKER_01]: You're right. This is now started

[00:54:59] [SPEAKER_01]: This is the beginning of the end of this worry that's been going on for years

[00:55:03] [SPEAKER_01]: Institution fidelity they don't want to invest in crypto until it's clear what the us regulatory position is now

[00:55:10] [SPEAKER_01]: It's going to be forced

[00:55:11] [SPEAKER_01]: to figure this out

[00:55:14] [SPEAKER_01]: And when that happens, this is this is actually

[00:55:18] [SPEAKER_01]: Now that i'm thinking out loud about this is this is really the catalyst everyone's been waiting for is that

[00:55:24] [SPEAKER_01]: What does the regulatory landscape look like and now we're going to finally know

[00:55:28] [SPEAKER_00]: Right one way or another right like either america is going to come around and and create sensible regulations for crypto

[00:55:35] [SPEAKER_00]: Or america is going to effectively ban crypto from americans, which again, which is impossible because

[00:55:42] [SPEAKER_00]: It's impossible. But you know if they even try to do that

[00:55:46] [SPEAKER_00]: Ultimately like crypto is either valuable or it's not and if you think bitcoin is valuable then america

[00:55:53] [SPEAKER_00]: suppressing

[00:55:55] [SPEAKER_00]: Americans ability to buy and hold crypto just means that you get it cheaper

[00:56:00] [SPEAKER_01]: Well, this just reminds me again of I remember and I guess it was

[00:56:04] [SPEAKER_01]: 1994 1995

[00:56:07] [SPEAKER_01]: I was explaining this new phenomenon the worldwide web to executives at hbo the media company the tv company and

[00:56:17] [SPEAKER_01]: The one of the top guys who eventually became for a short time the the ceo of hbo

[00:56:23] [SPEAKER_01]: He was asking me wait. He said do you mean

[00:56:26] [SPEAKER_01]: through

[00:56:27] [SPEAKER_01]: You know

[00:56:28] [SPEAKER_01]: The phone wires and the cable

[00:56:31] [SPEAKER_01]: Lines people could send audio and video and text to other people and I said yes

[00:56:37] [SPEAKER_01]: And he said well won't the phone companies are never going to allow this

[00:56:40] [SPEAKER_01]: It's in the and they have the government in their in their back pockets like the government is just going to ban this

[00:56:45] [SPEAKER_01]: They're not going to let the phone companies go out of business

[00:56:48] [SPEAKER_01]: And of course, huh it all got figured out and resolved and

[00:56:52] [SPEAKER_01]: The phone companies now own the internet basically or the back part of it

[00:56:56] [SPEAKER_00]: And you know same thing's going to happen here. That's amazing. Yeah. Yeah, that that's an amazing anecdote

[00:57:02] [SPEAKER_00]: So so I want to I know we've been talking for a while

[00:57:04] [SPEAKER_00]: But I want to go back to a question you posed in the beginning of this conversation

[00:57:08] [SPEAKER_00]: Which was you said you don't want to take it for granted that crypto will be the future

[00:57:14] [SPEAKER_00]: And I said that you know, we we've

[00:57:17] [SPEAKER_00]: Spend enough time discussing the reasons why so I want to tackle this question in a different way

[00:57:22] [SPEAKER_00]: There are a lot of people who hate crypto

[00:57:25] [SPEAKER_00]: There are a lot of very prominent people who are anti crypto and borderline obsessed with it. Would you agree with that?

[00:57:32] [SPEAKER_01]: Yes, look at look at like the seem to live who's a very very smart guy

[00:57:36] [SPEAKER_01]: And he was pro-crypto

[00:57:38] [SPEAKER_01]: All the way through up till 2019. He was writing very pro-crypto things and problems with the dollar versus crypto and so on

[00:57:45] [SPEAKER_01]: I don't know

[00:57:46] [SPEAKER_01]: Like only this year I think or past year or so

[00:57:49] [SPEAKER_01]: He's been kind of down on crypto and he says because of the volatility

[00:57:52] [SPEAKER_01]: But actually bitcoin has been very unvolatile this past, you know, eight months six months

[00:57:58] [SPEAKER_00]: So in the seams defense and I know nissim and uh,

[00:58:02] [SPEAKER_00]: he often

[00:58:04] [SPEAKER_00]: is

[00:58:04] [SPEAKER_00]: Invited to my class to come and give the anti crypto argument because I want to give the students

[00:58:10] [SPEAKER_00]: Both sides and he makes some very interesting and often

[00:58:14] [SPEAKER_00]: If nothing else entertaining arguments

[00:58:17] [SPEAKER_00]: But yeah, I mean there are people like him what elizabeth warn is doing

[00:58:21] [SPEAKER_00]: Like you would think that the most pressing thing going on in america right now

[00:58:26] [SPEAKER_00]: Is like whether dogecoin is a security and that we didn't have an inflation crisis

[00:58:33] [SPEAKER_00]: A banking crisis

[00:58:35] [SPEAKER_00]: Chaotic political situation a war in russia, etc. All right, and then they're like

[00:58:40] [SPEAKER_00]: Reporters there are many academics actually most people I come across in academia are very anti-crypto

[00:58:47] [SPEAKER_00]: People on twitter, etc. And

[00:58:50] [SPEAKER_00]: The question I have for you

[00:58:52] [SPEAKER_00]: Is by the way, even even the white house one last data point earlier this year. They published their like 500 page

[00:59:01] [SPEAKER_00]: annual economic report about the state of the u.s economy

[00:59:04] [SPEAKER_00]: And it had a whole chapter on how crypto should not exist or has service has no value

[00:59:10] [SPEAKER_00]: Which again, right? Like we just had a banking crisis

[00:59:14] [SPEAKER_00]: Which I don't think were necessarily out of the woods with the regional banking issue inflation is that

[00:59:20] [SPEAKER_00]: Multi decade highs are many problems with the american economy china reshoring chips

[00:59:26] [SPEAKER_00]: infrastructure

[00:59:27] [SPEAKER_00]: The environment climate change and it's like the white house said no

[00:59:31] [SPEAKER_00]: We need to have a chapter for why this relatively small industry has no service no value

[00:59:38] [SPEAKER_00]: So the question I have for you is has there ever been anything

[00:59:43] [SPEAKER_00]: That got that much negative attention

[00:59:48] [SPEAKER_00]: That turned out to be just completely hype and bogus and had no impact in history

[00:59:54] [SPEAKER_01]: It's a difficult question because

[00:59:57] [SPEAKER_01]: By saying have had no impact

[00:59:59] [SPEAKER_01]: We don't really talk about it now

[01:00:01] [SPEAKER_01]: So it's unlike for instance a lot of a lot of industries had negative impact

[01:00:05] [SPEAKER_01]: Negative hype when they started but they ended up having positive impact

[01:00:09] [SPEAKER_01]: So the automotive industry huge negative discussions in the turn of the 20th century

[01:00:15] [SPEAKER_01]: You know, oh all the horse and buggy drivers are going to be out of business

[01:00:20] [SPEAKER_01]: Or you're gonna have a heart attack if you go faster than 35 miles per hour

[01:00:23] [SPEAKER_00]: Yeah, you know, there's gonna be pollution. So there was a lot of um, but but that that sort of proves my point

[01:00:29] [SPEAKER_01]: Right, like so i'm trying to think of the answer to your question

[01:00:32] [SPEAKER_01]: Like was there anything that had the negative hype that ended up ultimately having negative impact where we're basically the crowd was correct

[01:00:39] [SPEAKER_01]: And everybody was magically correct for the first time ever

[01:00:42] [SPEAKER_00]: Right and it had no impact right like that, you know automobiles ended up becoming a thing

[01:00:47] [SPEAKER_00]: I'm sure like with electricity

[01:00:49] [SPEAKER_00]: I know with like radio people thought it would fry their brains, but it doesn't even have to be

[01:00:53] [SPEAKER_00]: A technology right it could just be

[01:00:56] [SPEAKER_00]: An idea like there've been a lot of ideas that have been very controversial at some point had some very vocal critics that stake their personal careers and reputations

[01:01:07] [SPEAKER_00]: Being against it right like say climate change

[01:01:10] [SPEAKER_00]: You could say most of the social causes that we now sort of

[01:01:14] [SPEAKER_00]: Except as mainstream like you know civil rights pro-gay marriage whatever these are all things that

[01:01:20] [SPEAKER_00]: elicited a lot of passion and excitation from certain otherwise intelligent credible people

[01:01:27] [SPEAKER_00]: but in the end of the day

[01:01:29] [SPEAKER_00]: that we learned that

[01:01:33] [SPEAKER_00]: ultimately if

[01:01:34] [SPEAKER_00]: It's almost like any kind of attention proves that it's going to be a thing and an important thing positive or negative doesn't matter

[01:01:40] [SPEAKER_01]: Well, I think climate change is a great example of this because

[01:01:43] [SPEAKER_01]: Let's say belief in climate change is a spectrum where some people are you know

[01:01:48] [SPEAKER_01]: 100 convinced that

[01:01:51] [SPEAKER_01]: Every piece of man-made pollution contributes to climate change and other people aren't completely on the other side

[01:01:56] [SPEAKER_01]: which is that

[01:01:57] [SPEAKER_01]: climate's always changed because of nature and blah blah blah and there's an and when

[01:02:02] [SPEAKER_01]: There's no bad effects

[01:02:03] [SPEAKER_01]: And then there's more most people are somewhere in the middle where some things some things are man-made

[01:02:08] [SPEAKER_01]: Some things are just a natural cycle of things right there clearly is some change

[01:02:13] [SPEAKER_01]: We don't know if it's because of man-made or anyway some most people are in the middle

[01:02:17] [SPEAKER_01]: But I would say regardless of how you feel

[01:02:19] [SPEAKER_01]: The impact has been largely positive like the development of battery powered vehicles and technologies

[01:02:26] [SPEAKER_01]: solar power as

[01:02:27] [SPEAKER_01]: As an industry and as a technology has grown exponentially in the past

[01:02:31] [SPEAKER_01]: 2030 years so these things are net positive. I'm just trying to think if there's any been new

[01:02:37] [SPEAKER_01]: technology or discovery

[01:02:40] [SPEAKER_01]: Or financial innovation like even take mortgage derivatives, okay from the oos had not only had a huge negative

[01:02:47] [SPEAKER_01]: hype but created a the worst financial crisis in us history and now they are just

[01:02:53] [SPEAKER_01]: The bread and butter of every bank and hedge fund. It's it's just now normal business now mortgage derivatives and

[01:03:00] [SPEAKER_01]: I'm trying to think of what else

[01:03:03] [SPEAKER_01]: you know what

[01:03:04] [SPEAKER_01]: What had negative hype where it ultimately did not have any impact at all

[01:03:10] [SPEAKER_01]: Even if you go back all the way to the the south sea bubble that was basically the first

[01:03:16] [SPEAKER_01]: central bank was basically

[01:03:18] [SPEAKER_01]: You know the the south sea company

[01:03:21] [SPEAKER_00]: Mississippi, but yeah, um, yeah, Mississippi. Yeah, yeah, that was in france was the mississippi company

[01:03:26] [SPEAKER_00]: I actually don't know but was the

[01:03:28] [SPEAKER_00]: I know more about the mississippi bubble than the south sea bubble. So I don't they were related. They were kind of

[01:03:33] [SPEAKER_01]: Around the same time. Yeah. Yeah

[01:03:37] [SPEAKER_01]: John law who was british kind of learned from the example there and brought it over to france like exported it to france

[01:03:42] [SPEAKER_01]: I'm trying to think what else what

[01:03:44] [SPEAKER_00]: But but so so yeah, that's the and you know, we could crowd sources, right?

[01:03:49] [SPEAKER_00]: You have a wide audience like I would love to be because what i'm getting at obviously is the the fact that to me

[01:03:56] [SPEAKER_00]: The fact that crypto generates so much negative attention proves that it's

[01:04:01] [SPEAKER_00]: Going to be disruptive and impactful if it wasn't people just wouldn't care, right?

[01:04:07] [SPEAKER_00]: If it wasn't people would say

[01:04:08] [SPEAKER_00]: Oh, well, yeah, you know the bubble happened. All right. Well people lost money on a dumb idea

[01:04:14] [SPEAKER_00]: I don't care. It's got nothing to do with me or like oh ftx happen and

[01:04:18] [SPEAKER_00]: Turned out to be a total fraud be like, all right. Well, I guess

[01:04:22] [SPEAKER_00]: I guess, you know those who trusted bad technology

[01:04:26] [SPEAKER_00]: Got what they deserve and then they wouldn't talk about it, but they're literally like people

[01:04:30] [SPEAKER_00]: I mean I follow them on twitter some of them who are obsessed and it's like every day

[01:04:35] [SPEAKER_00]: They have to tweet something about like why crypto is bad and what i'm saying is that

[01:04:42] [SPEAKER_00]: That to me proves that it's going to be extremely disruptive

[01:04:48] [SPEAKER_01]: Yeah, I mean again, it reminds me of the internet but not in 1995 but in

[01:04:54] [SPEAKER_01]: 2001 where you know if you weren't like a technologist

[01:04:57] [SPEAKER_01]: Even the most diehard internet investors

[01:05:00] [SPEAKER_01]: Basically said this is a scam this whole web internet thing and they gave up they threw in the towel

[01:05:05] [SPEAKER_01]: Which is why you know the naziq fell from 5 000 to whatever below a thousand

[01:05:10] [SPEAKER_01]: But long term, you know by 2005 the internet

[01:05:14] [SPEAKER_01]: Had a billion users worldwide and the rest is history

[01:05:18] [SPEAKER_01]: So my guess is something similar is going to happen here

[01:05:21] [SPEAKER_01]: But you i'm just trying to think of if there's any answer at all to your question of something that was discussed a lot

[01:05:27] [SPEAKER_01]: And ended up having no impact

[01:05:29] [SPEAKER_00]: That's the question and and it it actually um

[01:05:33] [SPEAKER_00]: Part of this reminds me of my favorite rick rubin

[01:05:38] [SPEAKER_00]: quote or saying that

[01:05:40] [SPEAKER_00]: Great art splits the audience

[01:05:43] Um

[01:05:45] [SPEAKER_00]: And uh, and I think

[01:05:48] [SPEAKER_00]: That's crypto right you have like

[01:05:50] [SPEAKER_00]: A minority but a sizable minority of people which i'm a part of that are just deeply passionate and believe that this is going to be one of the

[01:05:59] [SPEAKER_00]: Most transformative things to hit society in our lifetimes

[01:06:02] [SPEAKER_00]: And then you have a bunch of other people who who are not just like opposed to it

[01:06:07] [SPEAKER_00]: But they're staking their careers and reputations on being opposed to it

[01:06:14] [SPEAKER_00]: And now we've split the audience

[01:06:16] [SPEAKER_01]: It's very interesting. So you know great science in some ways mirrors great art in that way

[01:06:22] [SPEAKER_01]: But i'm going to think about this there must be something but if you think about it like

[01:06:26] [SPEAKER_01]: Like everything what else had negative hype? Well, obviously the space program had negative hype

[01:06:31] [SPEAKER_01]: You know because of all the money that was being spent like what good is it to send someone to the moon?

[01:06:35] [SPEAKER_01]: Look at all this money that's being spent and yet, you know, what we've learned through this is

[01:06:39] [SPEAKER_01]: Significant and and we're now setting up satellites regularly based on the technologies developed then

[01:06:46] [SPEAKER_00]: Yeah, I mean there've been things that fizzled right like they had a mini bubble and fizzled often

[01:06:51] [SPEAKER_00]: Perhaps because they were too early like there was a 3d printing bubble in the last 10 years

[01:06:56] [SPEAKER_01]: But now 3d printing is going to change the world. Like this is another exponentially growing industry. Uh, okay railroads

[01:07:03] [SPEAKER_01]: You know, there was a bubble and then a bust like every railroad company

[01:07:07] [SPEAKER_00]: I believe that yeah, there were two but but those examples we know what what i'm looking for is like

[01:07:15] [SPEAKER_00]: What is the thing that got enough attention that the

[01:07:18] [SPEAKER_00]: Leader of the most powerful country in the world at that time took it upon themselves to like stake a claim against it

[01:07:26] [SPEAKER_00]: And then ended up having no impact

[01:07:29] [SPEAKER_00]: I can't I can't think of anything

[01:07:32] [SPEAKER_00]: I can't think of anything either and I I need to become a bit more

[01:07:35] [SPEAKER_00]: Eloquent to explaining what I mean here, but to me that's the tell

[01:07:39] [SPEAKER_00]: There's a tell that so many very fascinating that that's the tell you're right

[01:07:43] [SPEAKER_00]: I know people who like i'm at a dinner party right and the last thing I want to talk about is crypto because it's just

[01:07:50] [SPEAKER_00]: No, that's my job. It's

[01:07:52] [SPEAKER_00]: It's what I do during the day and now i'm at a dinner party. I'm trying to relax. I'd rather talk about

[01:07:57] [SPEAKER_00]: Sports or movies or what other people do girls? Yeah

[01:08:02] [SPEAKER_00]: But there's there's all if you talk about your dinner parties. Yeah, but there is always someone who like

[01:08:09] [SPEAKER_00]: Has to seek me out to tell me why they think crypto is a scam

[01:08:14] [SPEAKER_00]: And how they think it's completely

[01:08:16] [SPEAKER_00]: completely

[01:08:18] [SPEAKER_00]: bogus and this this actually happened recently we're like

[01:08:22] [SPEAKER_00]: Somebody asked me they're like, oh, what do you do? I said I teach I write oh, what do you teach?

[01:08:26] [SPEAKER_00]: Oh, you know crypto's like okay. Well if you had to summarize crypto in

[01:08:30] [SPEAKER_00]: Like one sentence what would it be and I said it's a better way to build trust in a digital setting

[01:08:34] [SPEAKER_00]: And they were like oh, okay, and then some other random person was standing in the corner

[01:08:38] [SPEAKER_00]: He's like I have a different summary of crypto and he was like it's a complete scam

[01:08:44] [SPEAKER_00]: and

[01:08:46] [SPEAKER_00]: You know, it wasn't like I disagree. It's just ones and zeros. It's nothing

[01:08:51] [SPEAKER_00]: But it wasn't it wasn't there's always that person where I go where crypto comes

[01:08:55] [SPEAKER_00]: It's not like I don't care right no one ever says like I don't care about crypto

[01:08:59] [SPEAKER_00]: The people who do are actually my favorite people but there's always like there are people who like oh, I love crypto

[01:09:04] [SPEAKER_00]: I'm a big believer. I own bitcoin. I love nfts whatever and then there's also the people who are like

[01:09:10] [SPEAKER_00]: It's a scam. It's all nonsense blah, blah

[01:09:13] [SPEAKER_00]: I mean the the guy who was like the star of the tv show

[01:09:18] [SPEAKER_00]: The oc the actor has written a book

[01:09:22] [SPEAKER_00]: How cryptos are scam and testified in fauna congress about this what yeah

[01:09:28] [SPEAKER_01]: He got involved. I don't know. I should look into this, but it's like oc

[01:09:32] [SPEAKER_01]: Yeah, I only know that one the one actress became famous. I don't know any of the other actors

[01:09:36] [SPEAKER_01]: Yeah

[01:09:37] [SPEAKER_00]: What's his name because it keeps a ben mckinsey

[01:09:42] [SPEAKER_00]: Uh, yeah, kenzie. Yeah, who's that?

[01:09:44] [SPEAKER_00]: Yeah, I don't know but it's like here's the headline ben mckinsey actor turned crypto naysayer like

[01:09:50] [SPEAKER_00]: Here's a guy who could have been a naysayer about like

[01:09:54] [SPEAKER_00]: nuclear proliferation

[01:09:56] [SPEAKER_00]: The war in ukraine growing political

[01:10:01] [SPEAKER_00]: disharmony

[01:10:02] [SPEAKER_00]: deforestation

[01:10:04] [SPEAKER_00]: drought

[01:10:05] [SPEAKER_00]: plastic in the ocean

[01:10:08] [SPEAKER_00]: You can go on and on right

[01:10:11] [SPEAKER_01]: He picked crypto

[01:10:12] [SPEAKER_01]: Yeah, he wrote and you know, it's not easy to write a book like he wrote a whole book on it

[01:10:17] [SPEAKER_00]: Yeah, now it's a scam. Yeah, and

[01:10:20] [SPEAKER_00]: That to me is the tell like these people don't realize it but

[01:10:26] [SPEAKER_00]: they're not

[01:10:27] [SPEAKER_00]: Whether it's ben or the guy who was yelling at me at the party

[01:10:32] [SPEAKER_00]: They're not anti this because they think it won't be impactful

[01:10:38] [SPEAKER_00]: They're against because somewhere deep in their consciousness

[01:10:43] [SPEAKER_00]: They think that this is going to matter and it's going to be very transformative

[01:10:49] [SPEAKER_00]: And that's the thing that's triggering them

[01:10:52] [SPEAKER_01]: You think they're afraid of that like because it's out of their control or they didn't make

[01:10:57] [SPEAKER_01]: Money on it when they felt they should have and they're afraid they're too late

[01:11:00] [SPEAKER_00]: Uh, I don't the money thing was true

[01:11:02] [SPEAKER_00]: Possibly during the bull market, but you know during the bear market anybody who bought crypto in the last couple years is down

[01:11:09] [SPEAKER_00]: So I don't think

[01:11:11] [SPEAKER_00]: It's almost I think fear of change is a big part of it. I think this really does

[01:11:18] [SPEAKER_00]: represent a way to change the social power structure

[01:11:24] [SPEAKER_00]: And it's not just about money right like it's when nfts first became a thing

[01:11:29] [SPEAKER_00]: There were a lot of artists

[01:11:31] [SPEAKER_00]: Who embraced it and then there were a lot of artists who hated it

[01:11:35] [SPEAKER_00]: And I was I was actually very surprised by like the artists that were hating it because I was like wait

[01:11:40] [SPEAKER_00]: For the first time there's a business model now where digital artists could sell their work and make money

[01:11:45] [SPEAKER_00]: It's a new source. You can like monetize existing art

[01:11:49] [SPEAKER_00]: They're fascinating new models like the fact that you could have built-in royalties that even if your nft resells in the future

[01:11:56] [SPEAKER_00]: You get a person I was like, why would artists be opposed to this and I met one artist and

[01:12:02] [SPEAKER_00]: I asked him and he said, you know

[01:12:04] [SPEAKER_00]: There's a lot of shitty artists in the world

[01:12:06] [SPEAKER_00]: That have never made any money and they're just jealous that somebody that took the time to learn

[01:12:13] [SPEAKER_00]: What an nft is and how to create digital art and sell it on open sea or wherever is now making money and they're not

[01:12:21] [SPEAKER_00]: So I think there's a version of that

[01:12:24] [SPEAKER_00]: That's true for a lot of things right like decentralization

[01:12:28] [SPEAKER_00]: Threatens anyone and everything that has something to do with the centralized power

[01:12:32] [SPEAKER_00]: Structure. I have no idea why

[01:12:35] [SPEAKER_00]: That would trigger a former actor, but you know, maybe he had ambitions of being like a bank CEO

[01:12:42] [SPEAKER_00]: Or or you know like working at the new york stock exchange or something

[01:12:46] [SPEAKER_00]: so I think there's something there about

[01:12:50] [SPEAKER_00]: It's the fact that crypto could be so disruptive. That's making these people so reactive not the opposite

[01:12:58] [SPEAKER_01]: Yeah, so interesting. Well, look there's a

[01:13:03] [SPEAKER_01]: You bring up so many interesting points as always omid and

[01:13:06] [SPEAKER_01]: Uh, this really kind of answers a lot of my questions about what's been going

[01:13:10] [SPEAKER_01]: On because it's been it's been really like a crazy few weeks with all this stuff and it's been hard to kind of

[01:13:16] [SPEAKER_01]: Keep up to pace with it enough to explain to people what's going on

[01:13:20] [SPEAKER_01]: but

[01:13:21] [SPEAKER_01]: I think I think

[01:13:23] [SPEAKER_01]: I think you're right actually the most interesting thing is that the fact that there is so much discussion about it

[01:13:28] [SPEAKER_01]: Is almost the bullish thing about it right now

[01:13:32] [SPEAKER_01]: So i'm gonna have to think more about that, but

[01:13:35] [SPEAKER_01]: I do agree that this is going to play out and this is

[01:13:39] [SPEAKER_01]: This is the beginning of the end in the sense that

[01:13:42] [SPEAKER_01]: The beginning of the end of

[01:13:43] [SPEAKER_01]: A certain stage of crypto where everybody wondered well, what's going to be the regulatory framework?

[01:13:47] [SPEAKER_01]: Now we're going to find out and this is the main thing that's been holding it back

[01:13:51] [SPEAKER_01]: Every institutional investor including all these sovereign wealth funds. So

[01:13:56] [SPEAKER_01]: At the end of the day, this is

[01:13:57] [SPEAKER_01]: Either crypto is going to end which I don't think it's going to will or this is enormously bullish

[01:14:03] [SPEAKER_01]: For crypto and I hate to sound like almost religious about it because i'm not like i'm

[01:14:08] [SPEAKER_01]: I'm waiting for for crypto to be easier to use. I'm waiting for it to be

[01:14:12] [SPEAKER_01]: You know, there's some there's currently problems

[01:14:14] [SPEAKER_01]: But this regulatory issue has been an overhang on crypto for a long time and now it's going to get figured out

[01:14:21] [SPEAKER_00]: Yeah from uh from your mouth to satoshi's ears james

[01:14:25] [SPEAKER_00]: What was that there was that winston churchell another winston churchell court that was like

[01:14:29] [SPEAKER_00]: It's not the end and it's not the beginning of the end, but maybe it's the end of the beginning something like that

[01:14:37] [SPEAKER_00]: But uh, it was a great conversation and as always thank you for having me on

[01:14:43] [SPEAKER_01]: Thanks. Once again, when are you when's your are you teaching this summer? Are you teaching in the fall semester or what's the story?

[01:14:49] [SPEAKER_00]: I'm teaching in the fall

[01:14:50] [SPEAKER_00]: Just doing a lot more blogging and writing and learning actually

[01:14:54] [SPEAKER_00]: I'm using a lighter schedule this summer to go back to learning because aside from all this regulatory stuff

[01:14:59] [SPEAKER_00]: There's some super interesting developments with like layer twos

[01:15:03] [SPEAKER_00]: New protocols uniswap just announces v4 today. So lots of cool stuff for me to dig into

[01:15:09] [SPEAKER_01]: All right. Well, as always come back on the podcast and I will talk to you soon great

[01:15:16] [SPEAKER_01]: Bye. Bye