Bankless - ROLLUP: CZ Steps Down From Binance | SEC Attacks Kraken | Argentina's Crypto President

Starting point is 00:00:00 CZ is going to serve an 18 months jail time, allegedly, and then also Binance is only pay $4.3 billion. And then once that is over, Binance will have the green light from the United States, which is an expensive tax to pay. But that is a hugely, like, good thing for finance in the very long term. Bankless Nation, it is time for your Friday weekly roll-up. We got a lot to talk about, David. What are we starting with?

Starting point is 00:00:26 CZ stepping down from Bynance and stepping into jail. and also Binance paying $4.3 billion to the Department of Justice. Yeah, we got to find out what that means. Also, the SEC is attacking Cracken the crypto exchange for the terrible charge of what? Being a crypto exchange? But also commingling funds, question mark, what the hell is the deal with that? So we'll unpack all of those details. Coin desk, crypto's largest, earliest crypto news media company is sold out of Barry Silberts

Starting point is 00:00:59 at Digital Currency Group, to who we will discuss. Also, blast a new layer two on the scene has caused a bunch of controversy among crypto Twitter and why many people in the crypto industry are kind of just fed up with paradigm. We'll talk about that. And Argentina is getting a new president, a new president elected to Argentina, pro the dollar and pro crypto, question mark. We will unpack all of this and more. We should also say it is going to be Thanksgiving.

Starting point is 00:01:25 You know what? I think I said happy Friday morning. And this is actually coming out on Thursday morning. So happy Thanksgiving to all U.S. listeners. I hope you have a fantastic time trying to convert your family members into crypto zealots as they ask you, hey, honey, how's that crypto thing going? I hope you have a fantastic reply to them because you are listening to bank lists. So you'll know exactly what to say.

Starting point is 00:01:49 And none of it will probably make sense to your family members, as usual. Oh, honey, I heard one of your crypto friends got put in jail again this week. It's like really bad timing. And David, you're actually on the West Coast over to visit family for the holidays as well. So are they going to be asking you about crypto? Oh, well, they know I'm very deep in the crypto's here. So they already did. I was home last night.

Starting point is 00:02:13 My mom was asking me about it. Yeah, bankless, long time bankless listeners will know when this is my background, David's home for some holiday reason. This is the home, Ryan, that I started my crypto rabbit hole journey in. This is where I like was losing blood. I was cutting my fingers on the sheet metal while I was putting to mining computers for Ethereum back in 2017. Wow.

Starting point is 00:02:31 Yeah. That was how many years, six years ago. Yeah. Yeah. Crazy. Crazy. Literally started your crypto journey with blood. Yeah.

Starting point is 00:02:39 Yeah, yeah. I have scars on my hands from trying to put together mining computers. Yeah. Right, Dave. We got to get into the markets. But before we do, want to shout out our friends and sponsors over at near. They've got a new data availability layer. David, tell us about it.

Starting point is 00:02:52 The Near layer one is also now a data availability layer for Ethereum rollups or roll-ups generally. And so data on Ethereum is still pretty expensive. World War III resistant block space is expensive. So the NIR data availability is 8,000 times cheaper than currently Ethereum data availability. So if you are launching an app chain, like in the Cosmos ecosystem or a layer two on Ethereum or a roll-up just somewhere in the Cryptoverse, well, those are kind of your only two options. Use NIR for data availability. NIR's data availability layer already has some very early partners at Madeira by Starknet, Caldera, Fluent, Vistera, Movement Labs, and a few others. So the price of data, Linweb 3, like all things, is getting

Starting point is 00:03:34 cheaper thanks to NIR. There is a link in the show notes, bankless.c-slash-near to get started. All right, let's get to the markets, David. The crack in charts this week, what are they telling us about Bitcoin? Look at that line up into the right. I mean, you're zoom super far out on the one month, but that is just an upward trend line with plenty of volatility. Bitcoin started the week at $36,000, ending the week at $36,000 and a half thousand dollars up a little bit, keeping the market's alive. Moving into ETH price also just looking like a straight line up again with some volatility, starting the week at $2,000, ending the week where we are now at $2,040. The ratio between Bitcoin and Ether a little bit up, but relatively flat and of course the total

Starting point is 00:04:11 crypto market cap cap cap. $1.44 trillion. Blue chips, Bitcoin and Ether up, marginally up, some alt coins down the market cap stack down. But overall, I would, say we are floating. We are floating up, I would say. This is definitely bull market territory. And thanks to Cracken for providing those charts. Of course, no securities traded on Cracken. These are crypto tokens, aren't they, David? We'll get to that story a little bit later. But before we touch on Cracken, let's talk about CZ, CZ, the founder of Binance, is out, David. Take us through the story. So how did this happen and what happened over the last couple of days? So the Department of Justice in the United States has actually been investigating Binance for a very long time since 2018, 2019, and it has finally come to a head, finally come to a conclusion. So CZ is going to plead guilty on Friday, here in Seattle, by the way, in the court in downtown Seattle, to money laundering charges, as well as Binance is going to pay $4.3 billion. This is a settlement between Binance and the Department of Justice and all.

Starting point is 00:05:19 also the CFTC, the commodities, futures, and trading commission versus finance. The SEC is not involved here. Yeah, so that's what's interesting about all of this. He said he's going to plead guilty, right? He hasn't actually pled guilty, and he's going to be pleading guilty in front of the court in Seattle, which coincidentally, David, that's where you are right now. I don't know how that ended up happening. You always seem to end up in the funniest places when crypto stuff goes down.

Starting point is 00:05:45 People to crypto leaders going to court for some reason all the time. Yeah. Okay. So he hasn't pled. But they're putting out all of these press releases ahead of that, basically. We already know what he's going to plead. We already know what the fines are. We already know what the settlement actually is. And here's a tweet with some of those details that you just recap. So Binance has to pay $4.3 billion in fines. Binance is reaching an agreement with FinC, OFAC, the CFTC, and we'll give them $1.8 billion. That's part of the $4.3 billion. $1, Z actually made a statement better to ask for forgiveness than permission toward operating in the U.S. So he's like, oh, oopsie, that was my strategy. And, you know, this is how it's playing out. The opposite of the Brian Armstrong approach, I'd say.

Starting point is 00:06:30 Yeah, the opposite. And then CZ, he's resigning. And he can't operate Binance for three years from the start of the agreement. Interesting, though, David, he gets to keep all of his equity. So he can't operate it, but he's not forced to sell any of the. So he gets to realize all the upside. He is still a, you know, hyper billionaire. I have no idea what his net worth is, but it's multiple billions, many billions.

Starting point is 00:06:56 In fact, at one point in time, I think Forbes estimated CZ was like maybe the second most wealthy person in the entire world, like top five. And so he gets to keep all of that. There's also, though, David, talk of some jail. Like there might be an actual, you know, sentence. Can you tell us about that? So he, CZ, is going to be released on bail. $175 million bail, and the agency, the Department of Justice, is looking to seek an 18-month sentence for CZ.

Starting point is 00:07:25 Now, like, why do we know all of these details? It's because this is a settlement agreement between Binance and the Department of Justice. So rather than just carry this out even longer, perhaps like, CZ is avoiding a much longer sentence, perhaps life. This is the terms of CZ. This is the cost of finance to pay for a clean slate from the United States government. So post this, Psi is going to serve an 18-month jail time, apparently, allegedly. And then also, Binance is only pay $4.3 billion. And then once that is over, Binance will have the green light from the United States,

Starting point is 00:08:02 which is an expensive tax to pay. But that is a hugely, like, good thing for Binance in the very long term. So he's actually going to jail, though. That's crazy. I wonder if this is like house arrest, if he can negotiate. that or if it's actual jail jail. If it's like, is this kind of like, you know, the white collar cushy jail? Or is it Arthur Hayes jail or is it Dan Bankman Free jail? Like, where on this spectrum? That seems to be unclear. Can we talk really quick, David, about what finance is actually

Starting point is 00:08:31 being charged for, though? Like, what crime did they commit? And what, what is CZ actually pleading guilty to here? I'm sure they would love to go after CZ and Binance for every single thing under the sun, but the thing that has finally come to a head here is allowing, knowingly allowing money laundering and terrorist financing to occur on finance. Finance famously was pretty loose in the early days about KYC on the exchange. You could just kind of flub your KYC, your VPN, like check, I'm not a United States citizen, and then you could just like use finance. And so they, and there were reports. Remember when the signal chats that came out with C, and other executives of finance,

Starting point is 00:09:14 they knowingly allowed terrorists to operate on finance. There's pretty ironclad proof of this. There's ironclad proof of this. And so it was not only like they allowed it, but they also knew about it and they didn't do anything about it. And so this is why the SEC is notably absent from this. This is not child's play of Gary Gensler and his influencer campaigns. This is the Department of Defense having a problem with Binance,

Starting point is 00:09:42 allowing for a terrorist to funnel money through Binance. And CZ's like, we're turning a blind eye. And so it's kind of like the highest level of offenses you could make towards the United States government. Yeah, you said the Department of Defense, and they're kind of associated here. It's like the agencies of FinCEN and OFAC. And by the way, if you're not familiar with what these agencies are, we did an entire podcast on the financial surveillance apparatus that you should absolutely check out.

Starting point is 00:10:07 But notably, what CZ did not do and what Binance did not do, it was. not an FDX-style fraud. Right. Okay? So there was not a missing funds from the exchange of billions of dollars. And by the way, that was rumored earlier in here, at least on crypto Twitter. It's just, oh, my God, CZ is doing the same thing that FDX is doing. That's not what these charges are for.

Starting point is 00:10:31 And you have to assume that these investigators went through absolutely everything they could. There's no gaping hole on the balance sheet. So it's not that. And as you said, it's not an SEC snafu. It's all about financial surveillance. It's OFAC. It's, it's Finson. It's not doing the AML KYC. This is the statement from CZ. David, you want to read some of this? CZ tweets out, today I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally, but I know it's the right thing to do. I made mistakes. I must take responsibility. This is the best for our community, the best for finance, and the best for myself.

Starting point is 00:11:06 And then he announces that Richard Tang, the former head of global regional markets, is now the new CEO of Binance. And he discusses like the qualifications of Richard and who he is. And then he talks about what's next for him. And I thought this was like a pretty crazy line. I will take a break first. I have not had a single day of real phone off breaks for the last six and a half years. It's easy. It's been grinding for six and a half years.

Starting point is 00:11:34 After that, my current thinking is I will probably do some passive. investing, being a minority token shareholder in startups in areas across blockchain Web3 and Defi, AI, and biotech. I'm happy that I will have more time to spend looking at Defi. I cannot see myself being a CEO driving a startup again. I'm content being a one-shot entrepreneur. On that note, I am proud to point out that in our resolutions with the United States agencies, they do not allege that finance misappropriated any user funds and do not allege that finance engaged in any market manipulation. Funds are Safeu, which is a meme for Safe. With that, I look forward to seeing the new leadership take the reins. Please join me in

Starting point is 00:12:16 congratulating Richard on his well-deserved promotion. Onwards, CZ. So no misappropriation of user funds, no market manipulation, but clearly doing illegal activity with respect to financial surveillance laws and regulations that are in the book. We'll talk what this means, like how people are reacting to this and how CZ might be viewed through history. But all of this also came to a head in a press release that the Department of Treasury and I believe the CFTC kind of stood up at 3 p.m. on Tuesday, November 21st. And actually, when they announced all of this, some of this news came out ahead of that and some of it was tied up in this press release. And Janet Yellen actually spoke about this. And here she is addressing crypto specifically. And what I would say is a not so veiled threat.

Starting point is 00:13:01 Let's listen. And let me be clear. We're also sending a message to the virtual currency industry more broadly today and for the future. If virtual currency exchanges and financial technology firms wish to realize the tremendous benefits of being part of the U.S. financial system and serving U.S. customers, they must play by the rules. and if they do not, the U.S. government will take action. There it is, David. If you want to play in the U.S. and you are a crypto company or a crypto project, you must play by U.S. rules. Okay, but who is she referring to?

Starting point is 00:13:46 Because Binance, okay, got him, the number one exchange. Who's the number two exchange? Coinbase, extremely compliant. Who's the number three exchange in volume after those two? Cracken, extremely compliant. after that we have bybit okay x and kukoin who are Asian exchanges so maybe this message is to them but we're now talking about the long tail of volume there's no one left FDX is gone yeah no well she's just saying this in general it's David what I think this is

Starting point is 00:14:16 is this is a statement of like we're in control right like we're in the driver's seat okay like let me show you who's boss it yeah bend the knee it actually doesn't matter what rules we say. In fact, what the subtext here is, we're not even necessarily going to give you clarity on what the rules are. But when we say jump, you jump. We are the bosses here or else we will shut you out of the U.S. market. And what that means is you're disconnected from the entire Western market. It's like Europe kind of follows suit. If you shut out, that's the stick that Janet Yellen really carries here. We'll talk about this a little bit more when we get into the crack in case. But do you know what is also crypto Twitter found hilarious was the way she

Starting point is 00:14:56 pronounced binance, David. She said the entire time, she must have mentioned this, I don't know, five, six, seven times. Benance is her pronunciation of finance. So that's like high class finance. Right. Well, I remember back in 2017, back in 2018, I were the early days of finance. People called it Benance all the time. It was like, it was back in the day. People also would say Eith or Eth. People referred to Eith as F. Yeah, but if someone started saying F, eth right now. And if someone says Benance right now, it just shows that they either don't care whatever,

Starting point is 00:15:30 or they're disconnected. They don't have any crypto friends, that's for sure. Yeah, they definitely don't. So how big of a deal is this? Let's look at this from the Binance token itself, because there is a token out there that is maybe a proxy for what's going on in Binance world, the B&B token. That is down what, 12%

Starting point is 00:15:46 here on the day? Down 12%. Yeah, so at a fully diluted market cap of $35 billion, we're losing a couple billion of market cap off of the BNB token down 12%. But I will also say, like, that's not far off from like the regular old market, like right now. Like, for example, Solana is also down 12% right now. Layer 2 tokens, like optimism, down 8% on the week.

Starting point is 00:16:10 XRP down 7% on the week. So you can't even really say I would, that the market even reacted to this. It's a little bit of a reaction, but kind of a lot of stuff. Yeah, but like 12% in crypto, like whatever. Okay, that's fine. Another big question, though, David, for Binance, I should say, is where is all of this coming from? This $4.3 billion.

Starting point is 00:16:32 Do they have the funds to actually pay for it? What's this tweet? Yeah, so Connor put out a little audit of Binance's crypto holdings from Binance's proof of reserves disclosures that they publicize because they're cool and they do that. So what reserves does Binance have? $6.35 billion in total assets, $3.2 billion in stable coins, and this does not include any off-chain cash balances or held in funds that they don't disclose. So they will likely be able to pay that $4.3 billion fine without actually having to liquidate any crypto. So they're not going to

Starting point is 00:17:07 spend up on us. So Binance is basically like, oh, $4.3 billion, we'll write you a check. Here you go. You know, it's like a cost of doing business basically for a company of this size. And honestly, like, they probably saw this coming. They probably knew this was coming. You said, investigation since 2018. They've been in the thick of it for a while. So let's talk about some different takes. One angle is, what is the Elizabeth Warren anti-crypto army take? This looks like, I'm waiting on baited breath before Elizabeth Warren says about this. Do you like victory labs, David? Because I think this screams of Elizabeth Warren doing a victory lap. The CEO of the world's largest crypto exchange pleaded guilty to breaking anti-money laundering.

Starting point is 00:17:47 laws. This is part of a larger trend of criminal activity in the crypto industry. And sadly predictable, she told us all about this in advance. I urge the Justice Department to investigate Benance for lying to Congress. She goes on, law enforcement and national security officials need additional authorities and resources to pursue money laundering, sanctions, evasion, blah, blah, blah, blah, blah. I'll keep working to pass bipartisan legislation to address the serious and dangerous problem. P.S., I was right about Hamas, too. I'm not giving you guys any ground. That's not what she said, but I think she's thinking that, David. This is definitely a victory lap from the Elizabeth Warren camp.

Starting point is 00:18:23 Nice dunk. But let's carry, let's compare this to some banks. So Poppy Trullo Grimm, Twitter, crypto-twe account says, The enforcement against Zeezy is insane. For perspective, in 2010, Wachovia Bank, owned by Wells Fargo, was shown to have purposefully laundered $378 billion from the Sinola cartel. I think that's a Mexican drug cartel. Yes, it is.

Starting point is 00:18:45 Wow. in 2004 and 2007. So $378 billion. How much was Wachovia Bank fined? A hundred and sixty million dollars. Okay, Liz Warren. Okay, explain that one. Go after the banks who are subsidizing your narrative against crypto. Like, come on. Yeah. Yeah. David, you've got to take about this. So there's another question of what does this mean for crypto in general? Is this bearish? Is this bullish? You say it's bullish. This is David Hawkins. Hoffman tweeting, a Department of Justice settlement with Binance is hugely bullish. Binance takes a hit but gains U.S. approval and regulatory clarity moving forward.

Starting point is 00:19:24 The whole industry gets further legitimized. So, David, you choose to interpret this news as bullish. Why? Do you remember when the Bitcoin was seized from the Silk Road and then it was auctioned off by the government? And there was a premium on that Bitcoin because people wanted to buy Bitcoin that was like blessed by the United States government. If the United States government is selling you Bitcoin, that Bitcoin is clean.

Starting point is 00:19:53 And this was back in the days of when just like everyone was worried about like the UTX UTXO traces of their Bitcoin coming from dirty sources. So people pay like a five to 10% premium on Bitcoin that was clean. So I'm kind of making this same comparison. Binance is going through the trials of the Department of Justice. CZ is paying his debts in 1.5 years of jail time. and $50 million fine personally that he has to pay. Binance is paying $1.4.3 billion to wipe the slate clean.

Starting point is 00:20:23 This is what happens now. Moving forward, finance now has a clean slate. They now have a green light of being washed by the government, and they are now further legitimized so long as they don't do anything wrong moving forward. Yeah. And so going back to like who are the now the biggest exchanges that own over 90% of centralized crypto trading volume, Binance, which is clean now. Coinbase, which is regulatory compliant, and Cracken, which is regulatory compliant.

Starting point is 00:20:49 So, like, come on. Like, that is just massive tailwinds for crypto-sceptics to get onboarded into crypto. Yeah, I'll note that the regulators didn't shut Binance down. Okay. They let CZ keep us, you know, $4.3 billion. It sounds like a lot, but it's a slap on the wrist. So they're indicating that they want to control these exchanges, not shut crypto down. And that is some certainty that has been injected in the market.

Starting point is 00:21:14 I think there's another question, though, here is. finance CZ, good or bad. You know how we all like to put people in, you know, especially in Crickory Camps? You're either good or you're bad. It's dark or it's light. This is a Nick Carter take on finance and CZ. I think we can acknowledge that finance has been a critical linchpin of crypto adoption globally while also granting that knowingly facilitating one billion in flows to sanctioned entities is extremely bad and not a victimless crime. So this is Nick Carter saying, it's kind of mixed, right? They did some good things. They did some bad. things, not a victimless crime. This is a danger reflecting a similar sentiment. A little sad by the

Starting point is 00:21:51 Binance suit, but at the same time, it seems relatively reasonable given all the evidence. Binance was shady indeed towards governments. As far as I can tell, they did write by their users, their true crypto ethos. Maybe the skews a bit more kind of light, which is very interesting. My personal take is, say what you want about CZ. He did onboard millions of people in crypto, and he didn't steal our money. We've had a lot. We've had a lot. We've had a lot. We've had a lot worst bankers, David. We've had Alex Machinsky in this space. We've had Sam Bankman-Fried in the space. We've had the block-fi people. And the bottom line for me is, like, I still probably trust C-Z more than U.S. regulators. And I don't know what that says about U.S. regulators or what

Starting point is 00:22:32 that says about C-Z. So I'll grant that he's kind of like a neutral type of character here. My take is he was definitely a profit maxi. He definitely was sloppy with respect to AML KYC compliance. He probably caused some- No, risky, risky. Pushing the limits. Yeah, he pushed the limits, I would say. And it cost him.

Starting point is 00:22:55 He broke the limits, actually. He broke the limits. It cost him in the end. But there's also a question of like ethically, what do you actually think about AML KYC, right? I think our posture on bankless has been, if you have the ability to block the bad guys, right, then you should be regulated to block the bad guys. If you are a credibly neutral protocol, it's just, it's open for everybody. You have no ability to block anyone.

Starting point is 00:23:19 And by the way, the good of credibly neutral protocols outweigh the bad. But finance was not a credibly neutral protocol. It was more like a bank. It was an exchange. And so it should have some type of rule structure, regulation apparatus. And finance clearly dodged that. What's your take on CZ? Are you like team CZ good or team? CZ bad or do you fall somewhere in the middle? Yeah, I'm trying not to be warped by all of the bad people that have redefined what it means to be bad. Like, San Bakersh really pushed the limit on what it means to be bad.

Starting point is 00:23:52 You know, Alex Winooski, Doe Kwan, Daniel Sesta, just like, I didn't realize how bad people could get. And so, like, maybe had I come in with more, like, virgin eyes into this place, I would have been like, more innocent. A more innocent David would have been like, oh, not a lot of. He's pretty bad. Yeah, he's like allowing flight and terrorist financing on his platform.

Starting point is 00:24:12 But like, man, like, going, I'm about to go to Argentina in January. Like, they use Binance, dude. They use Binance to get banked. They use Tron on Tether. And that's, well,

Starting point is 00:24:25 that's not Binance, but it's just like they use the finance exchange and the Binance app to send money around. This is also true for Africa. And so, yeah, I mean, like the simple take is like,

Starting point is 00:24:35 we support defy protocols that terrorists can use. and also the rest of the world. And we believe that this is a net positive outcome in the grand scheme of things. CZ tried to operate under those principles, but he didn't have that same foundation. Like he could have stopped the terrorists. No. And he chose not to. He was not an internet protocol like TCPIP.

Starting point is 00:24:58 All right. He had his own Waldgarden platform. And there's some responsibility when you have something like that. David, you alluded to it earlier. But one other question here is, okay, what does this mean for Central Garden? centralized exchanges. And you said, I mean, this is very good for a coin base. This is very good for a crack in basically because Binance is pretty much stultified in Western markets. Anywhere that the kind of the U.S. touches or the U.S. influence overshadows, Binance is kind of cut out of that.

Starting point is 00:25:25 And it looks like, I think to me, that U.S. regulators are doing some kingmaking here. They're slapping around Coinbase. We'll talk about it soon. They're slapping around Cracken as well. But that will also boost up Coinbase and Cracken, I think, in these markets. And so that is a massive factor here. I saw one last take to round this out on it. I saw this one take from Emily Parker, the end of the borderless crypto company. She wrote this in a CoinDesk. Basically, it's saying Bitmex was also a borderless crypto company.

Starting point is 00:25:57 And Bitmex got axed like right before the start of this last bull market, I think, in like 2020. That was Arthur Hayes' exchange. And it just famously operated like very light KYC AML and just use crypto as payment rails. And Emily Parker's take is like, well, Binance was the last borderless crypto company, the last like pirate bay are the, you know, the one that you couldn't really stop. Just like skipping around jurisdiction, jurisdiction. Like where am I located? Our offices are virtual, that kind of thing.

Starting point is 00:26:26 Exactly. So one passage that I liked was we will probably never see another company quite like finance. Crypto itself might be borderless, but crypto company. may find it increasingly hard to operate outside of legal or geographical boundaries. In the early days of crypto, it seems possible to launch a massive exchange that slipped through the grasp of any jurisdiction. Those days are gone. And Ryan, thematically, this kind of lines up with where we see the globe heading generally. We as a globe are not globalizing. We are balkanizing. The internet

Starting point is 00:26:57 is becoming balkanized. The walls between China and the United States are going up. The walls between Russia and the EU are going up. Walls generally across all domains, digital or physical, are generally going up. And I think this fits into that story. And what else fits into that story is underlying Web3 decentralized, credibly neutral protocols that give no Fs about those walls. And so this is the increasing retreat from globalism, the increasing strength around borders, and also the increasing ripeness for protocols that slip. right around those borders. I think this is perfectly in theme with the thing that we've been seeing over the last five years or so. Yeah, you're right, David. I think crypto exchanges are going to have

Starting point is 00:27:43 to be geopolitically aligned moving forward, some axis of power. And they can't be in both camps at the same time. It's further balkanizing. We had a lot more to talk about, including another crypto exchange that's on the hot seat. The SEC is accusing Krakken of what? Being a crypto exchange. Very different charges here. And also, maybe commingling funds? Question mark? What's up with that? What if they did? Let's talk about that. Did they really, Gary?

Starting point is 00:28:09 Yeah, did they? Did they really? Come on, Gary. Also, there's a new layer two on the scene. It's called Blast. And everyone is super happy about it. Actually, not so much. There's a lot of controversy.

Starting point is 00:28:20 We'll get to those things and more. But first, we want to tell you about the sponsors that made this episode possible, including our number one. Hear this, Gary, Gens. The number one. Preferred crypto exchange. Preferred crypto exchange. Crackin.

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Starting point is 00:31:09 in trading volume to date, all settled on-chain, GMX is leading the charge in terms of opportunities for defy liquidity providers. The future is on chain with your wallets, with your trades, and with your money in your own hands. Try it out now at app.gmx.io. The SEC is attacking Crackent this week. New charges dropped from Gary Gensler's SEC. I'll read the press release title. The SEC charges Cracken for operating as an unregistered securities exchange, a broker, a dealer, and a clearing agency.

Starting point is 00:31:38 Otherwise, I think, David, known as a crypto exchange. Maybe you can't do that in America. I'm not so sure. David, tell us some of the details here. What are the claims that are being filed against Cracken by the SEC? Yeah, so the SEC alleges that Cracken provides a marketplace that brings together the orders for securities and multiple buyers and sellers and thus operates as an exchange. The only part about that is that they use the word securities. Engages in the business of affecting securities transactions for the accounts of Cracken's customers and thus operates as a broker.

Starting point is 00:32:10 Engages in the business of buying and selling securities for its own account without an applicable exception and thus operates as a dealer. Serves as an intermediary in settling transactions in crypto asset securities by Cracken's customers and acts as a securities depository and thus acts as a clearing agency. All of these. Ryan are normal crypto exchange operations. The only thing that is different here is that they are being flavored by this security word. Basically saying that, hell, all those things that you are doing, all those assets, all those tokens, all those coins are all securities and therefore everything you do makes you a securities exchange. Yeah. If I'm reading this, David, they, of course,

Starting point is 00:32:50 as usual needs, because they dropped a similar suit against Coinbase, right? So this isn't the first time. but they mention a few, you know, token, what they would call securities. We call these just, you know, crypto assets or cryptocurrencies. ADA, so that is Cardano, Algarand, Adam, file, flow, all sorts of things, as usual. But they're basically saying these are all securities. I know we've got, you know, clarity, they don't admit to that, but these are all securities and you've been running a securities exchange illegally in America, and they're taking them to court over this. And this, Ryan, in combination with just the Department of Justice going after CZ

Starting point is 00:33:29 and finance, I think is one of the reasons why the long tail of crypto assets, the market is down this week. Like Bitcoin and Ether relatively unfazed this week. Like, Ether is actually up. But like tokens are down this week. Like the Longtail, like Maddox, Solana, Filecoin, like all the ones, all these ones, like listed here are down. And that's the same thing that happened last time. The SEC did this when they actually named names. And I think just like these three-letter agencies going after crypto is kind of like rattles. the markets and it's carrying them out of like the alt-coin season. So I might take here is that, well, okay, well, we'll just kind of see a bounce back on that because that's what we've seen

Starting point is 00:34:03 before and there's nothing really new here, except there is something new. Right. In line 221 of this complaint, there's this co-mingling funds thing that the SEC has accused Cracken of co-mingling funds with its own accounts and customers. So customers' funds are being commingled with each other's and also Cracken is using customer funds to pay its bills. And so this is the one thing that's like different and new that like flagged my attention is like, yo, what do you mean co-mingling funds? What does that mean? Because that sounds very FTX-y.

Starting point is 00:34:36 And in the press release of the from the SEC, they have like all of these bullets that I read out earlier, right? You know, engages in the business affecting security transactions, provides the marketplace, blah, blah, blah. And those are the illicit allegations. but then like there's this separate paragraph that's like, oh yeah, and also by the way, they commingled funds and they used customer funds to pay bills. Because like it's like, why wouldn't you lead?

Starting point is 00:35:01 Why wouldn't you lead with that? Why wouldn't you put that in the bullets? And so like, oh, by the way, they also did this thing. And it sound, and like the verbies that they use sounds very FTX-y, right? Just like, you know, co-meet. We all have the trauma, the PTSD of like FTX using customer funds. And that's definitely what they are alluding to in this, in this press release. Okay, so what do they mean?

Starting point is 00:35:23 Like, they have the statement in line 221 and 222 of the accusation, here's what they say. Separately, Cracken treats some fiat and custodial accounts as its own and not the customers. Supposedly because Cracken's customers owe Cracken fees arising from the customers trading. This is true. For example, Cracken has at times paid operational expenses using funds held in customer custodial accounts. This is another example of improper comminglingly. of funds that increases investor risk, which registered security intermediaries are prohibited from engaging. Cracken does not disclose to his customers that Cracken commingles customer and corporate

Starting point is 00:36:01 fiat in either customer custodial accounts or Cracken's corporate operating accounts. Once again, what does this mean? Here's how this works. And this is how all crypto exchanges work, Ryan, is that when you deposit your crypto onto Cracken or Coinbase and then you make a trade, that trade incurs a fee. This is how exchanges make business, trading. fees. And so all of a sudden, the crypto that you deposit to them, some of them, some of that crypto becomes the exchanges because of the fee. But because that state is not immediately reflected on chain, well, then all of a sudden, the fee that is collected by Cracken and the customer deposits from the customer is still in the same wallet. It's still in the same address because

Starting point is 00:36:41 Cracken's internal ledger and the Ethereum blockchain or like the Polygon Layer 2 or Solana, they don't update that immediately. And so in a one moment of time, there is a co-mingling of funds because of that discrepancy. Just a temporary co-mingling is what you're saying. Yeah, this is Nick Carter who's talking about this. So something people don't understand is that there's always crossflow between customer and exchange funds as there's always some overlap due to ordinary latency in operations. Co-mingling is a big boogeyman, but all exchanges definitely have some overlap, even if short periods, even if for short periods. Is this seriously what the SEC is?

Starting point is 00:37:22 They are talking about it as it kind of an add-on in their list of allegations, which lead with securities. But they are like, it seems like intentionally making it sound as if Cracken is running an FDX-SBF-style scheme. And really, it's just a technicality in the way the business operates. An implementation detail. Are you effing serious? So you can imagine Jesse Powell, one of the co-founders of Cracken,

Starting point is 00:37:50 how frustrated he is with this. So he follows up to Nick's tweet and says, it's so ridiculous. There's no statutory requirement to segregate. Fees paid are, quote, commingled until they are moved out. Exchanges can have customer accounts for foreign exchange or whatever, like any other business customer. And four, there are reorgs, chargebacks, failed settlements, and bank errors.

Starting point is 00:38:12 These are all things that would lead to like a discrepancy in the ledger that needs to be accounted for with time. So, yes. Again, like, it's a good little, like, good little jab. Good little. They're putting it in the press release. Those allegations will not hold up in a serious court system, right? They're just adding it to, like, flavor the entire list of complaints here. Yeah.

Starting point is 00:38:35 Yeah, that's absolutely bogus. So the big question here, though, is what is Cracken going to do about this? And I'll also like remind folks that earlier this year, David, it was nine months ago. Cracken was charged again by the SEC, this time for its staking service. And at that point in time, it decided rather than go to the court system, do all these things. Basically, the mob boss is coming and kind of collecting. It decided to pay the penalty rather than fight the SEC. $30 million.

Starting point is 00:39:03 $30 million. That was nine months ago. Okay. So now the SEC is like, oh, so you're willing to pay. I guess we'll drop some more charges on you. That's what it seems like to me. So what is Cracken going to do, David? So here's David Ripley, operating CEO of Cracken, who says,

Starting point is 00:39:18 we strongly disagree with the SEC claim, stamped firm in our view that we do not list securities and plan to vigorously defend our position. Yes. As we've seen before. See you in court, Gary. The SEC argues that Cracken should come in and register with the agency when there is no clear path to registration. Words that we've heard for like three years now. Its allegations are factually incorrect.

Starting point is 00:39:40 contrary to law and the wrong way to create policy in the United States. As an industry leader, we will stand up to these allegations and defend the crypto industry's right to exist in the United States. We believe congressional action is the most appropriate path to resolving the lack of regulatory clarity in the U.S. and will continue to support these efforts to bring clarity and certainty to the chaotic environment that has been created in the U.S. saying, Congress, will you please rein in your boy, Gary Gensler? Somebody's got to. Jesse Powell put out, retweeted this, blog post from Cracken, and he says, USA's top decelerationist, and this is coming out of the backs of like, decal is now a word that we use to describe anti-innovation in Silicon Valley

Starting point is 00:40:22 and tech and crypto. Okay, so USA's top decel is back with another assault on America. He's calling the SEC and Gary Gensler a decelerationist. The masochists haven't been happy with the beatings that they've been taking in New York. I'll unpack that in a second and are shopping for a different flavor in the regular Dom in California. Regulatory dominance? Yeah. Wow. This is unhinged. I thought we settled all their concerns for $30 million in February. Now they're back for seconds. The message is clear. 30 million buys you about 10 months before the SEC comes back around to extort you again. Lawyers can do a lot

Starting point is 00:41:01 with $30 million, but the SEC knows that a real fight will likely cost $100 million and valuable a time. If you can't afford it, get your crypto company out of the United States War Zone. That's great. I just love the energy out of Jesse. Like, just calling it how it is. It's like, they're just back to seconds. Extortion. I want to unpack the, um, the masochist, haven't been happy with the beatings they've been taking in New York and are shopping for a different flavor of reg dog in California. Is he talking about the ripple case? Well, so all of the cases that the SEC has filed in New York have gotten shut down. Lost.

Starting point is 00:41:40 The New York courts have said Gary Gensler go home. And so this allegation against Cracken was filed in California, which is brand new clean slate regulatory jurisdiction that SEC is like, hey, California, all you liberals is over there. I'm a liberal. I can say that. Will you guys like please like help us take down Cracken? Like New York's not doing it.

Starting point is 00:42:04 Like, can you guys help us? Well, they're diversifying their court cases, basically. They got a new exchange, and they've got a new court system and a new state, and they're trying to, like, they keep losing. But what does it cost them? I mean, they're getting paid by tax fund or dollars. It doesn't cost them anything to keep bringing these court cases. Gary Gensler clearly doesn't care what the crypto industry thinks of him.

Starting point is 00:42:24 He clearly doesn't care about the legitimacy and credible neutrality of the SEC as a governing entity. He is here to advance the career and political aspirations of Gary Gensler. So he could drop whatever court case he wants at any point in time and he does not care if he loses. That's what's so insidious. It's such a stupid tax on American innovation and our entire industry. And ultimately, the one in five Americans that actually own crypto. I think, David, this man, Gary Gensler is under his leadership of the SEC.

Starting point is 00:42:54 He is a political liability for the Democratic Party. He's treason. It's treason. It's treason. Treason. David goes right to treason. He's treason. Oh, man. So that's what's going on there. And it's great to see Cracken pushing back on this absolute sham of a regulator. I guess one thing we have to add at this point, of course, is full disclosure. If you're not already aware, Cracken is a sponsor of bankless. And that's why we pick

Starting point is 00:43:19 them. We picked them because they protected users for over 12 years. Gary Gensler has not even given us a Bitcoin ETF in the last 12 years. Grakken has a stellar reputation. They were first to initiate proof of reserves. We believe they are right. And the SEC is wrong. Haven't lost a dime. haven't lost a dime. However, and I just want to pull this out one more time. Cracken is not doing anything wrong, according to the SEC,

Starting point is 00:43:42 other than trading securities. And the SEC is going to Cracken and being like, hey, you guys are trading securities. But then they list a bunch of securities, and they're not going out to the securities that they issue and say,

Starting point is 00:43:55 hey, you guys made securities. They're going to Cracken and say, you guys are listing securities. And like, yeah, yeah, yeah. And so they, And so they're going after the people that aren't responsible for the inception of the alleged securities in the first place.

Starting point is 00:44:09 Because they can't actually go and take Filecoin or Salana to court because they probably don't want to lose that one either. Well, they may. They may. Yeah. It's still early here, David. Well, why aren't they doing it? Well, I bet they, who knows? Who knows what this mastermind's plans are? And the whole point of that section was to tell you that that Cracken is a sponsor. And of course. Belove sponsor.

Starting point is 00:44:30 And of course, guys, if you want to be extra sure, just don't. keep your crypto on any centralized exchange ever. Go, go bankless. That's also what we encourage. All right, David, are you ready to get blasted, man? Because there's this new layer, too. It's called blasted. And it blasted on my Twitter timeline this week. And there's some controversy about it. I've been busy looking at other things. Can you tell me what this thing is? Blast notably raised $20 million from paradigm. And this is where people's attention gets funneled into blast because paradigm is like, you know, dopamine, dopamine for like the Google Twitter D-Gen.

Starting point is 00:45:03 They did FrenTech. Exactly, they did FrenTech, right? And like you're going to see, you're going to notice, they also did blur, and you're going to notice like a lot of blasts is cut from the same cloth as FrenTech and Blur. Like a lot of things. Just dialed up. Just like really dialed up.

Starting point is 00:45:15 And so introducing Blass, the only layer two with native yield for ETH and stable coins. And so, okay, what does that mean? The TLDR is that if you submit your ether or your stables into the blast deposit contract, they just convert it to Lido Staked ETH, or they deposit it into the MakerDAO T-Bill engine. And then your ETH balance on blasts just naturally increments up, like 0.02, 0.03, over time, as ETH staking does. So it just converts your ether into staked ether on your behalf,

Starting point is 00:45:46 and then just gives you more ether on a layer two. Same thing with stables. Okay. So, like, oh, kind of cool, I guess. That's kind of cool. Yeah, you're depositing everything, every asset is yielding. I mean, there's some risk associated with that. So people have to, you know, keep that money.

Starting point is 00:46:01 Is it really any different than depositing staked eth or are eth and then minting our eth on a different layer two? Actually, straight up, no, it's not. It's not. Maybe arguably better U.X. Just saves you some transactions. Maybe. Okay.

Starting point is 00:46:14 So built by Pac-Man Blur, the blur founder. And so this is when we thought, well, it's not only just cut from the same cloth, is made by the same founder. And this is where a lot of the financial engineering, financial gamification that blur, pioneered is now being like that playbook is being repeated again. And also blur, you know, investment from paradigm. Interesting set of an investors, a lot of the crypto Twitter trade influencer accounts

Starting point is 00:46:41 that also, again, that is a playbook from Frentek, where they kind of just like gave the crypto Twitter influencers early access and investment into Frent tech so that they could like promote the whole Frent tech thing. So we're starting to see like a reproduction. a lot of the same strategies. Well, yeah, and we were looking at a tab earlier, David, that actually shows it's not just the EField and the USDC yield and Maker, but there's something called like Blast Rewards. Blast Rewards.

Starting point is 00:47:08 Okay. The longer I keep my funds on Blast, the more Blast rewards. You get rewards. Yeah. Okay. On the Blast website, you go to the website, it's Blast and it's AirDrop is the first tab on blast. Unabashed about this.

Starting point is 00:47:26 Unabashedly. I remember when I opened up Friend Tech and was like, oh man, they made an Air Drop tab. That's bold. Also, gated release with invitation codes a la Friend Tech. And so, like, you know, you don't have access. You got to get an invite code. I mean, but the whole branding, they're leaning into the, this feels very Robin Hood, I would say. Right.

Starting point is 00:47:47 They're just totally leading into, leaning into the DGen of like fast money. Like, you know, if it's deposit here, you're earning, you're earning. It's just kind of leaning into that kind of culture. it seems like to me. So what's the problem with this, though, David? It keeps getting worse. It keeps getting worse. So here's how invites work.

Starting point is 00:48:07 And so this is literally from their website. I'm reading a section from their website. How invites work. You get points when your invites earn points, your invites of people you invite, when they earn points. And then when their invites also earn points, you earn points. You get 16% bonus points when your invites earn points. And 8% when their invites earn points.

Starting point is 00:48:26 if you invite a whale, you get a lot of points and you'll move up the leaderboard. So, like, shout out to the graphic designer who made this last section a square and not a pyramid. But this is a pyramid. This is a pyramid. And so if you are just getting points, if your invites come in on board. And then also, if they invite, you get their points too. It's just a, that's a pyramid. Pyramid scheme technology.

Starting point is 00:48:52 Pyramid scheme for invitation codes, right? Okay, so what is the wisdom of the elders here? We got another pyramid scheme. What do respected members of the Ethereum community say about this? Right. Okay, so remember how they called it a layer two? Well, it's not a layer two. It is a one-way deposit contract that is a three-of-five multisic.

Starting point is 00:49:13 The layer two launches in Q1, 2024. Right now, it is like a centralized side chain with a three-of-five multisig that you cannot withdraw from. it does not go backwards. It only goes one way. That doesn't sound great. Yeah. We're amping up the risk here. And there's already, at the time of this tweet, 30 million, but I think there's more. No, no, there's over 120 million dollars deposited very, very early in the early days of this

Starting point is 00:49:40 yield bearing layer two, which again, I contest the idea that is the first yield. I have my assets on optimism, and I have that in our eth. Does that make optimism a yield bearing layer two? because it's effectively the same technology. Okay, so, okay, so it's not a real layer two. Here's another take. It's not a real layer too. It's not truly yield bearing.

Starting point is 00:50:04 The duality of paradigm. They've raised the bar in terms of technology. Founder, Reth, alloy are wonderful. They've won the hearts of engineers I love. I respect Georgios and think he cares. They've made my life as a lowly application developer better. But my God, the behavior of their investments, I thought blend was awesome, but blur, blast,

Starting point is 00:50:23 should be seriously ashamed of launching an L2 in this state. There's not even anything to roll up. It's a multi-sig wrapping a proxy to an unverified contract. It's grossed and no different than people shoveling ether directly to influencer EOAs in the hopes of a shit coin allocation. Wow, some condemnation here from a crypto developer. What's your take on this? Yeah.

Starting point is 00:50:46 Oh, actually, I got to read this. But I can't throw stones, same poster here. I claimed myirdrop. I bridge too. I'll still keep drinking that garbage. I just wish it didn't have to be this way. I don't know about that lot. Like, if you wish it didn't have to be that way,

Starting point is 00:51:03 but you're still participating in the pyramid scheme. It's incentives, right? It's the gamification. It's the incentives. Like, it's not lost on me that Matt Huang from Paradigm wrote that casino on Mars blog post. And like in the middle of launching like three different casinos. So here's a take from like, and the casinos like blur, blend, friend tech.

Starting point is 00:51:25 These are all just like gambling platforms. And so like at some point in time, Paradigm was like, you know what? Like we're just going to fund casinos. We're going to fund casinos is what we're going to do. We're just going to lean into it. And that's why they've gotten all the crypto Twitter trader influencers on board. This is a Joseph DeLong who just tweets out. Did Paradigm just turn into a pump and dump sweat shop?

Starting point is 00:51:44 Like pump and dump sweat shop. It's like, I would have called it a casino sweat shop. But like, yeah, that's like what people. is critiquing is what paradigm is is really like fun like what they're investing in here's a Ethan bookman from from cosmos remember when paradigm like took crypto off of their website and then they had to read at it and they did crypto crypto crypto crypto well now it's now it's just like Ponzi Ponzi Ponzi this is not actually what their website is but this is like the edit right so like people on crypto Twitter are just saying like yo like kind of gross and ick and it's the same

Starting point is 00:52:15 like financialization Ponzi playbook being repeated over and over and over again here's Dankrad who says, this is a very bad idea, and this is referring to the native yield aspect of of it. ETH and liquid staking derivatives are different assets with different risk profiles, and users should have a choice about which ones they want to use. The same is true for different types of stable coins, saying that just like, oh, if you deposit your assets into blast, and then they swap it out for staked ETH or and Maker Dow Treasury, it's like that is a choice that they are enshrining into the quote, unquote, layer two that's removing user choice. Okay, but so let me push back on that. Is there the possibility, David, you're being a bit puritanical about this, maybe? Right. So this is Udi, of course. He's always the one to call out. Any hint of, you know, maybe Puritanism or what we might call sobriety says, actually the thing you're calling a very bad idea would actually be more accurately described as a tradeoff. Isn't this just a tradeoff? Dan Krad replies and says, I'm not against the tradeoff, but against misnaming things to confuse users. They can make their base asset form of an LST, but they should.

Starting point is 00:53:20 call it that instead of Eith. There's an element, David, of like, I mean, are they doing, like, are they doing anything? Like, if you don't like the pyramid scheme mechanics of it, just don't participate, right? Sure. I think that's a, you know, a counter to this. It's not, you know. Sure. But also, I understand the reaction.

Starting point is 00:53:38 And I think the reaction from the crypto community is just, oh, God, another pyramid scheme. Is that all we're offering to the world? Like, we're just kind of tired of this. I certainly feel that way. Like, I'm just, I'm done with the roller coaster of like the exact same mechanic only in this mechanic, it's more pyramid scheming. That's not really innovation. That's not really going to like change the world.

Starting point is 00:54:02 And I think paradigm maybe and this particular project caught crypto in a moment where it feels like it's just jumped the shark. You know, like we're just kind of done with it. Yeah. And the mood has shifted. And I think paradigm and maybe blast is taking the full brunt of that move shift, whether fair or not for this particular project? Well, the jumping the shark thing is just like, oh, well, we saw the gamification of incentives on blur.

Starting point is 00:54:27 We saw the FrenTech invite code system work. Let's like put everything that we've learned and just go full casino. Let's just turn it up to 11 on the casino side of things. And like to some degree, there are the crypto Twitter trade influencers, the one that's like listed in the announcement. And there's all of that money sloshing around playing games. independent from like the innovations in the layer two space. It's not about like any of the optimizations that Salon is making. It's not any of the optimations that the super chain is making. It's just like the casino, the casino on Mars. And so that casino on Mars just happens to be very proximate

Starting point is 00:55:03 to more like the EF members, the more the idealists out there. And that is a friction point. We have like the DGens right next to the idealists and now like we're talking about it. And so maybe maybe that's just like this paradigm is making this product. And it's not for. us, but they just happen to also be in our community. And there's just something weird about just like the duality of paradigm that one blog post where like Georgios is working super hard to fix like roll up composability, like cross-chain who can roll up composability. He built Rust Ethereum, which devs love.

Starting point is 00:55:35 And so like they, you have this just like just extremely prestigious, hardworking, like bunch of researches, actually very hard problems. And then their products are casino ponies. Yeah, no, I get it. I think my biggest issue with this is that it's a multi-sig. A one-way multi-sig. That's probably my biggest. Otherwise, I probably feel like the same way I feel about friend tech, which is like,

Starting point is 00:56:01 it's a pyramid scheme. That's what they're doing is their growth strategy. I guess I'm neutral to like not feeling great about it. But I hope to God, this is not all that crypto produces. Like we've got to show the world a little bit more than this. All right, David, we got some more stuff coming up. Coinbase just got sold. We talk about who the new buyer is and whether we should be concerned or not.

Starting point is 00:56:21 And also, is there a new crypto president of Argentina? But before we get to all that, we want to shout out our friends and sponsors over at Metamask. And if you have not opened the new Metamask portfolio app and all of the updates that are coming your way, go check it out. It's a great place to look at your portfolio. Metamask portfolio is your one-stop shop to navigate the world of Defi. And now bridging seamlessly across networks doesn't have to be so daunting anymore. With competitive rates and convenient routes,

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Starting point is 00:58:52 Whether you are a developer, an enterprise, or a user, Arbitrum orbit lets you take your project to new heights. All of these technologies leverage the security and decentralization of Ethereum. Experience Web3 development, the way it was always meant to be. Secure, fast, cheap, and friction-free. Visit arbitram.io and get your journey started in one of the largest Ethereum communities. Javier Malay is his name. David, this is a picture of Javier. He is addressed as his superhero alter ego called General Ancap.

Starting point is 00:59:21 The ANCAPI think stands for NACRO Capitalists. It's definitely on the skews libertarian, let's say. Have you been following this? A little bit, a little bit. Yeah, so I saw this video of him waving a chainsaw around outside of the roof of his car as because like what he's waving the chainsaw saying like we're going to cut out the government it reminds me of actually a little bit of our vivake interview he's like we're just going to gut half the government if you're there's no chainsaw in the vapevake the vapec interview

Starting point is 00:59:49 yeah vivac is a lot more this guy is an eccentric character yeah he's like he's kind of like a rock star like he should have a guitar and he should be on like the rolling stones like that's a little crazy he's a little bit crazy super he's a big performer very like loud and boisterous very right wing. Elected right wing libertarian is now the new president with 80%, 87% of the votes counted 56 to Malay, 44% to the opponent. So like, what's his deal? Like what does he want? Why do people even think that he's like pro-crypto? His major narrative is what is being called economic shock therapy. So he's just going to rustle things up with the Argentine economy. And by the way, Argentine economy, if anyone can solve that problem, they'll get like a Nobel

Starting point is 01:00:36 prize because they at like 100% Argentine peso inflation year over year, like the amount that people like demand for dollars in Argentina is through the roof. So he wants to shut down the central bank, wants to ditch the peso, and wants to just cut half the government, like slashing spending and then potentially very painful reforms. And so his first presidential speech, he goes, the model of decadence has come to an end. There's no going back. So this guy wants to shake up Argentina. And I think the question is, it's like the Argentine economic situation is a very large problem. And now we have this very loud and boisterous human promising to shake things up. And is the human able to be as large as the problem? Because some people in Argentina are like, it doesn't

Starting point is 01:01:21 matter who is president. The economic situation is so terrible. Like, it's that one man can't do anything about it. It's a larger problem. It's bigger than any one man. Well, Bologi's take here is that this is the second Bitcoin president. So he congratulated him. And there's one clip here where Javier is saying about Bitcoin. What Bitcoin is representing is the return of money to its original creator, the private sector. He also says, we have to understand that the central bank is a scam. So not a big central banker.

Starting point is 01:01:51 I believe, though, David, he's not doing the El Salvador play of adopting Bitcoin, but rather kind of casting aside the peso and adopting the dollar as sort of the the stable coin. So maybe it remains to be seen how crypto-friendly he is. But certainly, I would think you would be stable-coin friendly. Would he not? Yes. Stablecoins has got to be in any rational persons who's leading Argentina with the intent to dollarize. Stablecoins has got to be on their menu of like first things to consider. The reason why people are calling him pro-crypto is because he wants to get rid of one fiat for the more strong fiat and his anti-central bank. It's like crypto-vibe, like crypto-adjacent.

Starting point is 01:02:31 Like, there's no concrete plans. Like, yeah, we're going to be a crypto country. It's just like we're going to get rid of our shitty fiat in favor of the better fiat. Well, David, you are going to Argentina pretty soon, right? It's like the beginning of next year, I believe so. Three weeks and one week in Buenos Aires, two weeks in Patagonia. So I'm going to, yeah, hang out with a bunch of Argentines. I'll get their take.

Starting point is 01:02:50 Yeah, I get some person on the street takes, too. David, some other big news this week. CoinDesk was sold. And they were sold to a crypto exchange. This is one of the largest media companies in crypto, and they were bought by a company called Bullish. This is the crypto exchange. Dave, do you remember who Bullish is? And it's from my distant past, I recall this name.

Starting point is 01:03:10 And it really had to dust off the old memory addict to get downloaded on this one. So, DCG Digital Currency Group, also the conglomerate that owns Grayscale and Genesis and is in a lawsuit with Gemini. they need to raise capital to pay to fill the hole in their balance sheet to pay back Gemini and all the other creditors of Genesis who has like a billion dollar hole in it as a result of all the fallout from 2022. So in that end, they have accepted a bid to sell Coin Dusk, the 10 year old crypto news company to bullish a crypto exchange. Where did bullish come from? Bullish is a subsidiary of Block 1, which was launched a crypto exchange bullish subsidiary of Block 1. Where is Block 1? This is going to be for like the longtime crypto people.

Starting point is 01:03:56 Block 1 is the people that made the Eos blockchain. And so this is, if any Ethereum Pearson is calling like Solana the EOS of this cycle, this is like why we're getting like some people get like the PTSD of Block 1 and invoking that. Block 1 raise a $4 billion dollar, 2018 ICO to do this high throughput, free transaction fees, EOS chain. and they raised $4 billion in Bitcoin. And Ryan, they didn't sell any of that Bitcoin. So that $4 billion in Bitcoin in 2017 to 2018 when they were raising that money is worth

Starting point is 01:04:30 some crazy amount of money now. 164,000 Bitcoin. That is more Bitcoin than micro strategy. They have more Bitcoin than Michael Saylor. Why don't people talk about them? Well, because on the Bitcoin Treasury's website, it's a treasuries for public companies. And Block 1 is like this. private conglomerate that has this massive amount of Bitcoin that they got from like this

Starting point is 01:04:55 very dubious ICO to make this very high-performance blockchain. Okay. So the big question here is, is this good or bad for crypto media? And this is Jason from Blockworks who gives his takes. And I think he says it's bad. The Coinbase and bullish acquisition is bad for our industry. And then you list some thoughts. Why is Jason saying this is bad, David?

Starting point is 01:05:16 He's basically worried about the conflict of interest between coin desk, a journalist company, a journalist media organization, and being bought by a crypto exchange. And he says, this is like NASDAQ buying the Wall Street Journal or like Binance buying CoinDisc. It crushes editorial integrity of the brand. I'd assume every reporter will leave within six months. Now, Jason, founder of Blockworks is inside of the media world. And so he would, he probably would be concerned about this and also perhaps has a buy. On the flip side of things, E. Ellie Tan, who's a journalist at CoinDesk, Fun Fact, Ryan, we've had him on bankless. I interviewed him. He's one of the few in-person interviews that I did my apartment. Eli Tan retweeted this tweet from Yano and said, how many market-nooking scoops does CoinDest have to have to prove its editorial independent? Interesting. Yeah. And I remember back in the day, editorial independence was a big problem at CoinDusk. Like the bags of Barry Silbert and the

Starting point is 01:06:19 articles that went out of CoinDesk in like 2017 to 2019, we're very, very aligned. That is no longer the case. And I think now I'm willing personally to extend Coin Desk the benefit of the doubt. I think they have totally approved myself, themselves, to be editorially independent. Why the founders of Bullish are interested in buying Coin Desk is perhaps up to be scrutinized. But anyone inside of Coin Desk, I think totally gets the benefit of the doubt. Yeah, I mean, they broke the FTX story and it ended up costing their parent company everything, DCG everything. It ended up causing this selling of coin.

Starting point is 01:06:58 Yeah, they still broke it. Yeah, I guess I'll give them the benefit of doubt for a while, but you really have to wonder how CoinDesk will operate when it's under new management. So under the previous management, I think they proved that they had editorial independence, whether that continues moving forward or not. But I do think the big signal will be how many of the journalists actually stay, those with integrity. If they stay and if they feel comfortable operating under new management, that's probably a signal that they're able to maintain their editorial independence. So I guess for me, it's to be determined, David. Getting into some optimism news, there was this blog post that came out that really got me excited,

Starting point is 01:07:32 Ryan, talking about shared upgrades for OP stack chains. So this is a roadmap for some upcoming technical improvements to the OP stack. Two main components. This first component focuses on. on changes that will impact OP stack nodes and node operators, enshrining a protocol version that means that anyone using the OP stack for their chain can easily track whether their infrastructure is up to date and in sync with the official latest protocol version.

Starting point is 01:07:59 That's component number one. The second component of two just simplifies the multi-chain contract upgrades with a multi-train upgrade contract. So eliminating hard-coded configurations, super chains, all the OP stack chains that are part of the super chain, can share one set of implementation contracts and therefore perform multi-chain protocol upgrades inside of a single transaction. So one single transaction upgrades the optimism mainnet, the base chain, Zora, public goods network, anything that is an OP stack chain that wants

Starting point is 01:08:31 to be a part of the super chain can all upgrade in unison. So this is one of many mechanisms that it would take to have to recompose the Ethereum many layer twos into like this one singular system. There's no one single silver bullet, Ryan, for reintroducing composability across Ethereum Layer 2. One of my tweets this week, Ryan, was the Layer 2 fragmentation on Ethereum is just going to die A thousand cuts. And this one is a very deep cut, I would say, like single Unison protocol upgrades for all OP stack chains that wanted to be a part of the super chain. Pretty cool. So the governance process to implement this multi-chain contract upgrades will kick off in early 2024. Yeah, I think that has been a major criticism of Ethereum and

Starting point is 01:09:12 layer two strategy this year is just like fracturing of governance, fracturing of the user experience, fractioning of composability and liquidity. And so now the story is, some of that's true, actually, in exchange for scalability. But the story is how does Ethereum stitch it all back together? And I think there's some promising solutions ahead that we'll be talking about in the weeks to come. David, you ready for meme in the week, man? I am. Let's do it. All right. Happy Thanksgiving to you. And this was the meme of the week we decided. saw one of your crypto friends got in trouble this week. David, we're looking at a picture of an awkward family dinner. Get together. Sitting around the Thanksgiving table, all of your relatives looking at you and asking you about your crypto friend who got in trouble this week. And that would be CZ finance, all of our crypto friends. Right. Happy Thanksgiving. I'm actually going to be sharing the day after Thanksgiving with CZ because I'm going to go down to the courthouse and I'm going to...

Starting point is 01:10:04 Wait, wait, tell us more about that. Okay, so we talked about earlier. You were actually in Seattle. This is just... I'm in Seattle right now. I don't know how. you do this. Whenever you go to a mountain, something bad happens to Gary Gensler, you went to Montenegro and-Wan was arrested in Montague-Guan and just happened to be there. Now you just happen to be in Seattle and C-Z is there. So you're actually going to go to his, he's got a date in the Seattle courthouse at 9 a.m. Seattle time on Friday. Where he's going to plead guilty. Where he allegedly is going to plead guilty. And yeah, he's got a date with the court. And I remember. I remember. You're going to shout out?

Starting point is 01:10:42 If I can, yeah. I'm going to go watch this. Yeah. I remember going to this courthouse, like, way back when, where I had to, like, contest a parking ticket, no, a speeding ticket. Yeah. Yeah. I've been to this courthouse.

Starting point is 01:10:53 Yeah. That's hilarious. All right, guys, we got a moment of Zen for you. If you enjoy how Janet Yellen pronounces Benance, you will enjoy this, I think. Some disclosures, of course. David and I, we are investors and advisors for optimism. Big fans of that project. Also, as we mentioned, Cracken is a strategic sponsor of the show.

Starting point is 01:11:10 We are long-term investors. We're not journalists. We don't do paid content. There's always a link to our disclosures at bankless.com slash disclosures. And you've got to know, crypto is risky. You could lose what you put in, especially if you deposit in blast. But we are headed west. This is the frontier.

Starting point is 01:11:27 It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot. We are here today to announce that the Justice Department has secured felony, guilty pleas, from the world's largest cryptocurrency exchange, finance. actually it's Benance Binance Benance

Starting point is 01:11:45 Banance and let me be clear it's Benance Finance Binance Binance Binance Binance

Starting point is 01:11:56 Binance And let me be clear it's Bananance Benance Binance It's Benance. It's Benance. Let me be clear. It's Benance.

Starting point is 01:12:17 Benance. Benance. Benance. Benance. Benance.

Bankless - ROLLUP: CZ Steps Down From Binance | SEC Attacks Kraken | Argentina's Crypto President

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