On The Brink with Castle Island - Lee Bratcher (Texas Blockchain Council) on PoR legislation in TX (EP.448)

Episode Date: September 5, 2023

We sit down with Lee Bratcher, President and Founder of the Texas Blockchain Council. Lee is one of the primary architects of Texas' Proof of Reserve bill, now in effect. In this episode:  The origin of the TBC Why Lee is moving their Summit to Ft Worth Notable legislative successes by the TBC in Texas The importance of getting the UCC to recognize digital assets The importance of Bitcoin mining The origins of HB1666 Why PoR legislation benefited from the industry spontaneously adopting the standard How the TX PoR bill emerged as a compromise How Lee expects this to become model legislation in other states Comparing PoR to established financial statement audits The importance of frequency in Proof of Reserve The lack of accounting firms that are willing to supervise PoR How would PoR dealt with issues at Gox, Quadriga, FTX, or Prime Trust? How are companies operating in Texas reacting to the bill? Future legistlative directions The role of stablecoins in upholding the role of the dollar The lost authority of the states in chartering banks Further reading on PoR:  Nic in Forbes, The crypto industry is embracing self regulation. It's time Washington gets on board Texas HB1666 TBC, Texas 'Proof of Reserves' Bill

Hello and welcome back to On the Brink. I'm Nick Carter. Today we're sitting down with Lee Bratcher, president of the Texas Blockchain Council, and the man largely responsible for the passage in Texas of HB1-66666, a bill asking custodians and exchanges operating in Texas to engage in routine proof of reserves attestations. This is pretty much the first bill of its kind. We have seen certain jurisdictions mention proof reserves in the past. Wyoming, Canada, and others. But Texas is the first state to really ask their crypto exchanges operating there to engage in the procedure. I've been talking about proof reserve for about half a decade now, and I couldn't be happier to see this bill signed into law and formalize what has

been a informal procedure undertaken by many crypto exchanges and bring it into the regulatory fold. It's been a pleasure working with Lee over these last few years, and the organization he's built at the TBC has become very effective. I think it's a model to follow for other state advocacy organizations. Without further ado, let's jump right into the episode. All right, today we have great guests. I'm very excited to be hosting Lee Bratcher, the president of the Texas Blockchain Council.

Not to butter you up, Lee or anything, but I think the TBC is maybe the most effective state. advocacy org as it pertains to crypto. Is that fair to say? Well, we have a lot of allies in other states, so I don't know if I should say the best, but certainly the largest. Well, thanks for joining us. I'm really glad you could be here with us. Yeah, thanks for having me on, Nick. So today, I think the main focus is going to be sort of a landmark piece of legislation that was passed really majorly in part due to your efforts, which is, of course, HB 1666. I don't know about the number.

Myself, I wish it was a different number, but I'll take it, which is the proof reserves bill in Texas. But before that, maybe for those who aren't as familiar with the TBC, you tell us about the origin of the council and sort of what you sought out to achieve when you started it. Sure. Yeah, we started it in late 2019. I was a political science professor at the time studying. My researcher was blockchain and property rights and studying how.

how to increase the flourishing of communities by increasing their security and property rights. And so the next frontier was digital property rights and read the Bitcoin white paper. And that was actually in 2015 when I was at the Army War College. So I studied that as an academic for a few years and then started the TBC in late 2019.

It's a trade association. So it's an entity that helps bridge the gap between industry and regulators, elected officials. We do a lot of advocacy and lobbying. We employ lobbyists and we do a lot of education. The other piece that we focus on is the business development aspect of a trade association or chamber of commerce. So we work to help our member companies with connections, business development connections, or increasing their brand, whatever assistance they need from us that we can deliver. And you also put on a great conference, I think. Have you hosted it twice or three times already? No. Yeah, the third one will be this

November and we're excited to have you back for a record third annual time. I think you'll be the only, except for Senator Cruz. You and Senator Cruz will be the only people that we've had three times in a row. Wow. That's awesome. Yeah, I know. It has a special place in my heart. I just enjoyed that conference so much both years. So I can't stop coming. I mean, obviously, I have to attend again. So it's in Fort Worth this time. I've never been to Fort Worth. It is. We're moving it to Fort Worth because, you know, they became the first city in the U.S.

to mine Bitcoin. We were working with them on that, donated the S-19 machine. And the mayor of Fort Worth took a big political risk when she did that. And it turned out really good for them. They've got about 700 million media impressions from that. Wow. And so since she took a risk on us, we're going to take a risk on them and move the conference up there. I actually had no idea that was why, but I'm always excited to explore another city.

Houston also has a fairly sizable presence in sort of the Bitcoin community. Is that fair to say, especially on the mining front? It is. It is. And we are a Bitcoin First Industry Association, but we're not Bitcoin only. So love our friends in the Maxi world. But the need for us to branch out to the broader digital asset ecosystem, was paramount.

And so we've rebranded it to the North American blockchain summit. And we're also inviting other ecosystems, builders from the Ethereum community, other smart contract and layer one ecosystems. So just anybody who's building responsibly, ethically solving business problems, of course, we're not going to have anybody,

you know, we're not going to have eith or excuse me, we're not going to have doge coin chills at the event. But, yeah, it should be a good time. So it's such, it's so interesting that your, um, your sort of academic background was in the study of property rights. I mean, I think that's one of the most, that's one of the most important lenses through which to evaluate and understand what's happening with cryptocurrency. And that discussion today is all about is how can we use the

specific assurances of public blockchains, uh, to augment, the transparency of these contractual relationships between custodians and end holders and, you know, how does that distinguish itself from sort of traditional assurance? And I think this is something that's really overlooked is that digital assets have these specific qualities, especially in these custodial settings, that exceed the qualities of these kind of traditional financial relationships. So that's our discussion topic today. Maybe just before we jump into that, what would you say are some of your other notable successes with the TBC? What are you most proud of with that organization? Yeah, thanks for the question, Nick. We in the 87th session in Texas, which was the

2021 session, passed a couple pieces of legislation that were industry first, if you will. So we, we amended the uniform commercial code in Texas to recognize definitions of virtual currency, how to perfect your security interest in virtual currency. And I'm using the term virtual currency because that's what the uniform commercial code utilizes. They've actually now transitioned to saying digital assets. But that was quite important for a lot of our member companies who are engaging in lending arrangements with collateralized, cryptocurrencies. And so you can now perfect, you know, of course, you can write it into the contract that you perfect your security interest however you want to, right? But if that is not in the contract,

you don't need to file a traditional UCC-1 or financing statement to perfect your security interest as long as you possess the cryptographic keys or if it's a multi-sig, the majority of the key. So possession of the majority of the keys equates to perfection of security interests. that's a little bit granular and nuanced, but we're really proud of that. We're also quite proud of our work in the Bitcoin mining space. We work very closely with Ercot. Around 3% of all power that's used in Ercot in Texas is Bitcoin mining. And we as well, the miners in Irkot, we view it as a capacitor, right?

It is there when you want it to be there and not when you don't. So that shaves off the peaks of the day. duck curve and pulls up the valleys of the duck curve. So it creates a very much more efficient grid. So people might freak out about 3% of all power used in Texas is used to mine Bitcoin. In reality, we need that number to be 5% because it's a demand side battery. It's contributing to the grid. So we're very proud of our work with ERCOT in that sense as well. Yeah, it's such a difficult point to appreciate. I think energy is one of those things that actually reminds me of sort of the blockchain space and that to really understand it deeply,

it requires a lot of work. And our traditional intuitions about energy just don't apply. I mean, you have to understand that it's something that decays with distance. It needs transmission. It's not a single grid. I mean, it's disparate. In particular in Texas, great case study where East and West are often priced completely differently, have different scarcity characteristics.

And it's not something that's static. I mean, the demand modulates, the supply changes. So we did do a miniseries on that, trying to explain the relationship between Bitcoin and the grid itself. I think it's still kind of an underappreciated quality of Bitcoin, the fact that it can contribute to grid flexibilization, which is so important in Texas in particular with more renewables on the grid. I actually have a paper coming out with Sean Connell about this soon. So we're hopefully going to publish that in an energy journal, and that will add more context to the debate.

That's awesome. I look forward to reading that and promoting it. In fact, your talk in the first year of the summit, you had that famous curve where you showed some of the excess capacity in generation in West Texas and how Bitcoin miners could take that capacity, utilize it for productive means and then turn off when the wind stop blowing. Yeah, I ended up seeing that slides from that talk and a few pitch decks that came back to me later for Bitcoin miners and similar businesses, which is always funny when you see your own

work coming full circle like that. So in terms of HB 1666, where were the origins of that? Where did the idea come from in the first place? Well, so we have as part of the TBC, Winstead is one of the member companies. They're a law firm, and Gavin Fury is of counsel there. He does a lot of their digital asset work and was one of the original writers of the proof of reserves paper along with Caitlin Long. And you may have actually also been on that paper from, I want to say, 2015 in the early days, 2014 to 2015.

And this paper was sent to the SEC, several other federal agencies and regulators and really never got a lot of traction. And so that paper, along with Gavin being, you know, an early member of the TBC, along with your work publishing different exchanges that have self-attested and provided information to their consumers and to the general public. Combination of all those things created a situation where we wanted to do something. And then we had a meeting with a high-level elected official intent. Texas after FTX, and this brings us to the near, you know, the near past, this would have been probably November of 2022. This high-level elected official said, hey, we can't have what just

happened with FTX. You know, Texas is taking a stand and wants to be for this industry. This is a bad look. So we're going to do something in the legislature. We'd rather you guys help, you guys help research it than have our staffers who don't know. as much about the industry do it. So we came together with their staff and amalgamated a group of industry experts, which you were one of, and really came down to the writing of policy and alongside our elected officials who are working on the bill. So one thing that I often think about is, you know, the industry, many exchanges and custodial firms in the industry chose without any demands or pressure from above to engage in proof of reserves attestations.

And in many cases, they actually had CPA firms cover those under the agreed upon procedures moniker. And this was a spontaneous kind of bottom up thing. Did that trend help in terms of like building the political support for this build? The fact that the industry was already active and kind of trying to push this procedure Ford's? Absolutely. Yeah, I think even just in my own mind, I heard most about the Cracken efforts.

And, you know, Pierre Rochard, who now is at Riot, was formerly at Cracken. They are an industry leader when it comes to proof of reserves. There was another firm, actually, that you mentioned in some of your writing that we also looked at the name is escaping me at the moment. but it was one of the very early firms to to follow that path. Might have been Bitmex? It was Bitmex. Yeah, it was Bitmex.

So the leaders like that were certainly influential in our thinking. Yeah, it's often interesting to see how self-regulatory efforts by the industry can inform subsequent actual regulation. My sort of hypothesis is that if there is self-regulation, the ultimate demand, made of the industry by the state are less onerous because they acknowledge that the industry has been proactive. And I think proof reserve is the perfect case study here. And I think, you know, if you look at the token space, maybe we eventually get some federal legislation pertaining to token disclosures, transparencies, things like that, maybe trying to harmonize it with the securities law framework, you would hope to see something similar where industry,

leaders start to make these disclosures, not because they're asked, but because it's the right thing to do. And so I would encourage people to look at the history of the proof of reserve procedure, which dates back about a decade now, the spontaneous adoption within the industry, and then its influence on the deal making at the state level. So I think that's a really useful case study. So in terms of actually drafting the bill and then winning support, that's a part of the process that was kind of opaque to me, but what did it look like in terms of gaining support in the Texas legislature for the draft bill? Yeah, you know, the Texas legislature works across the aisle quite a bit, so we had to win support from Democrats and Republicans. We had several Republicans who thought that perhaps it was

a little bit too onerous, just because we are a light touch regulatory state. several Democrats who thought it was not strict enough. And so what we came to was a compromise between several elected officials from both parties who work, you know, Texas elected officials are, their full-time jobs are not to be politicians, right? They work in finance and banking and their doctors and lawyers, et cetera. So we had several who work in the finance world who happened to, be, you know, young, innovative, forward-thinking members of the legislature. And they came together

on this bill and convinced some of their colleagues who may be a little bit more senior in years that this was the right way forward. And so it was nearly unanimous in both houses, but the House and the Senate. Right. And I think that's a landmark piece of legislature. now that it's been passed. I mean, I know that a number of, I know that Prove Reserve was mentioned in certain pieces of legislation in Wyoming. I know it's been mentioned in Bermuda, actually, and hinted at in several other regulatory regimes, including Singapore and UAE. I did a sort of a brief survey recently. But I'd say this is probably the first time a a sort of regulatory body of note has specifically asked for custodians to engage in proof

reserve attestations. And hopefully not the last as well. Do you expect this to be something that other states model their own legislation on? We do. That's the goal. We think that as exchanges, is digital asset service providers comply with this legislation, they will see lower compliance costs across the 50 states. So once you're doing it for a large market like Texas, then it makes sense to do it for a broader swath of the market. And you may not even need to see it proliferate all the state houses and state legislatures and assemblies because there is some self-regulatory work going on. But we hope that some of the large states will employ it. And it does need to be employed delicately because as you and I

have talked about in the past, it's not a, it's not a panacea. It's not going to be the silver bullet. It is a tool in the tool belt of transparency advocates and advocates for, you know, self-custody and things like that. But it is not the panacea that, you know, I think the media it might have made it out to be. Yeah, and I think it's regrettable maybe that certain exchanges that did POR in the past use the audit terminology with it because that provided an attack surface, frankly, for some folks in Washington that are critics of the crypto space to allege that we were overselling the benefits of POR. And so it's been a bit delicate to walk it back now. So I guess that's actually a really important point is how do you compare proof

reserve in terms of the assurances you get from that to establish audit types like a financial statement audit. How do you see them working together also audit or coverage and then these attestations from exchanges? Yeah, this bill in Texas is really just a first step because it is not real-time proof of reserves. It applies to money transmission license holders that have half million customers in Texas does not apply to banks or other institutions. institutions that are, you know, public or have regular financial audits. So it's a quarterly self-attestation than the annual third-party attestation, which, as many of your listeners will know, is not real-time proof of reserves. It is far from it. And so what this does gets the regulators

in the habit of understanding this as a assurance mechanism and makes them more comfortable with it. And so we can, and also increases the communication between the digital asset service providers and the regulators. So as these muscles get exercised a little bit more, we would expect these timeframes to be more compressed. And hopefully five years from now, we're talking about real time proof of reserves. Yeah, and the frequency is very important, I think, because one of the big criticisms of proof

reserve is that, well, the exchange or custodian could simply borrow the funds needed to perform the attestation, which in the audit world is called window dressing and satisfy it that way. But of course, as you move to higher frequency, that becomes less tractable as a way to fludge the numbers. So what I prefer is certain exchanges do it on a daily basis. obviously they're not getting an auditor to come in on a daily basis because that'd be prohibitively expensive, but they do the procedure daily. Monthly seems to be an emerging standard too, and I think that's also very sound. And so it's good to see that you envision it getting higher frequency in the future. Another criticism that I've heard is that Prod Reserve is proposed as a substitute

to traditional audit means, but I don't think anybody who's serious about it sees it. that way, right? Agreed. Yeah, it's certainly complimentary. Yeah, that's my view as well. One interesting sort of feature of the market here is that there's unfortunately not a lot of CPA or accounting firms that are kind of willing to supervise these. And I have kind of my own reasons that I would give to explain why they're keeping the industry at arm's length. But what would be your explanation for why the sort of the big four, for instance, are not getting as active in providing these, you know, at-us services to firms that are doing PR.

I think the risk reward is out of whack for them at their level. They have to think quite politically as well, and so they're trying to read the tea leaves and looking at risk reward. And so it's not surprising to me that they're not getting involved. I do think, though, that proof of reserves legislation can spur mid-sized firms to flip that risk reward on its head a little bit and realize there's a business opportunity here. We should be the first to really get the right expertise on our team to do this. And I know there's several firms that are thinking that way. Yeah.

And, you know, the language in the bill that asks audit firms to oversee. these yearly, that was a creature of a compromise, I think. But one of the beneficial effects, as you say, is it creates the market for CPA firms to develop this competency. And, you know, I was excited to see in the Llamis Gillibrand bill draft recently an explicit request that the PCAOB, the public company audit regulator, standardize proof reserves. So, I presume you also would say that the bill in Texas makes it more likely. Is that fair to say that ultimately one of these regulatory bodies that oversees the function of audit in this country would acknowledge the procedure and maybe move towards standardization?

We would hope that. I think standing in the way of that is a certain senator from Massachusetts, but yeah, hopefully that does come to pass. Yeah, it's been disappointing. Historically, historically we've had that beloved senator has written letters to some of the audit regulators about so-called sham audits, which is unfortunate. The PCOB itself has issued guidance cautioning firms against using POR and the SEC even recently came out with the letter basically criticizing the procedure. And I think that's why this bill at the state level is so important. I mean, it shows it's not all about federal power. The states themselves can carve out a different path for themselves, and they can catalyze more activity here, even if at the federal level,

there's inertia. Now, as for sort of what functionally proof reserve does, one criticism is that, well, it doesn't address the loss of keys. I mean, keys can still be lost. you know, those contracts with clients can still be violated. What's your answer to that? I mean, how would a proof reserve had it been present, had it been a requirement of an FTX, of a Mount Cox, a quadriga, how would it have alleviated those situations?

Yeah, I think there is a fair game, or it's fair to say that it may not have, depending on the way that the regulators interacted with, with the companies and the way the fraud was perpetrated, right? So in FTX's case, they certainly would have been under more scrutiny. And you'd like to say that the proper third party requiring this attestation would have been able to discover the fraud that was taking place. But that is why we need a combination. At this juncture, we need a combination of proof of reserves and the traditional audit and assurance practices.

So until we get to the point where proof of reserves are near real time. And so I would say that we are requiring the companies to demonstrate attest to the custodial assets that they have and the liabilities. Of course, when we say proof of reserves, we mean proof of reserves. and liabilities. And the third-party entity that's attesting to this does not bear the same level of risk as a full audit, but does bear some reputational risk. So they are going to dig and ask questions and pursue the kind of audit practices that we would want.

But again, we still need the traditional. the traditional audit assurance practices to ensure that we're covered from both ends. Yeah, I mean, it occurs to me that I'd say in the case of each of Prime Trust, Quadriga, FTX, Biffinx hack, and Mount Gox, the insolvencies, the shortfall in assets to match the customer liabilities was actually persisted for a period of months or years. I mean, in the case of Gox, it may have been insolvent for virtually its entire existence. FTX, we know that they were siphoning customer assets out of the exchange and delivering them to a related party.

In Prime Trust, we know that keys had been lost for long period of time. And even though Prime Trust is regulated as a Nevada trust company, the keys themselves were inaccessible for a long period of time. So in each of those cases, a high-frequency proof reserve would have at least revealed the loss of the keys or the shortfall in assets. So it wouldn't have, you know, it doesn't stop fraud, of course, but I think it reveals it and it reveals it faster than in the counterfactual real world, the pace at which it was revealed, which was pretty slowly, regrettably. So I think it doesn't inhibit bad things from happening, but when they do occur, you're aware of them faster. And I think it's also kind of a good housekeeping mechanism. So it forces more prudence and better behavior from these exchanges if they know they're being scrutinized. In terms of the businesses in Texas that this applies to, I know there's some exceptions for publicly traded companies, which is fair.

I mean, they're held to a much higher standard of audit and assurance. how has the reaction been? I mean, it's an additional compliance overhead, but what are you hearing from companies in Texas that now are going to have to undertake this procedure? Right, yeah, and it is, it does apply to companies that have an MTF. So most of these are national companies

that just have MTRs in the various states, and they have either customer assets in custody, of greater than 10 million or greater than 500 customers. I misspoke earlier, but it's greater than 500 customers or 10 million in assets in custody that this would then capture. The reaction has been mixed. Some have been frustrated about the additional compliance cost, and others have realized that that cost pales in comparison to the lack of public trust and the business deficit

that's caused by pervasive lack of trust from the public. So I think bringing in best practices, increasing that trust over time will generate a significant amount of business activity that will overcome or be much larger than any negligible compliance costs in the near term. And in terms of the timing here, we're actually right on the verge of this being fully applicable for these entities, right? that's correct. September 1st is when the bill itself goes into effect

and then these quarterly attestations would then be required in the months after. And on the CPA audit side, there are a few kind of boutique firms that are willing to cover these, right, even if the big four are staying away for the most part. That's correct. And thankfully on that side, we have several more months before we need to cross that bridge. There are currently a few that do,

and I would guess that between now and a year from now, there'll be several more. Does this provide assurance only to clients of these exchanges and custodians that reside in Texas, or does it kind of have a global effect, as in the exchange has to attest to all of their assets and not just the ones that pertain to Texan residents? So it's a great question.

And the answer is the full assets and liabilities of the digital asset service provider will need to be attested to. But that will not be publicly available as required by the law unless this company has a practice like a Bitmex or Cracken or others who do public disclosures on a more regular basis. So they are required to, it would be pretty prohibitive for them to just look at their Texas consumers. So if they want to do business in Texas, if they do business in Texas, they then need to perform this. That's interesting. So just because they may have a relatively small number of assets in Texas or a small number of Texas clients, it actually does provide assurances for their whole, their entire user base. That's kind of a nice, nice quality of the legislation, I would say.

Yeah, yeah, we were, and, you know, the compliance cost doesn't really change. There's not like a marginal increase in compliance cost for adding, you know, users from Oklahoma or, you know, Nevada, California, etc. right if you're going to do this you're you're the nature of the technology allows you to scale it very easily totally um in terms of um next steps here i mean do you expect this to inform possible federal legislation do are you have you heard from other states that are looking to be fast followers here what do you expect to happen well i'm not holding my breath on any federal legislation unfortunately due to the Senate banking committees signaling that they aren't interested in passing the market structure bill or the stable coin bill out of the House of financial services. But we are optimistic that other states will take it up at the state level at the money transmission licensing regime, of course, resides in all 50 states.

So hopeful that a couple of the large states take this up in the coming years. it is a heavy lift legislatively, so it wouldn't surprise me if it took a couple years for it to really permeate. Yeah, and that's one of the really nice features of the financial regulatory system in this country is the states are meaningfully empowered as their local regulators. And even if it doesn't happen at the national level, what happens at the state level really matters still. So we can get these really nice assurances just from the states themselves. as being proactive. So that's a great future. Now, in terms of taking this momentum and moving on with the TBC, anything to share about your future legislative agenda or any other?

Yeah, we had a piece of Dow legislation that would have been pretty groundbreaking that did not make it across the finish line during the last session. We worked very closely with attorneys at large, well-known crypto VC firms that really, really know this area and established a first of its kind unincorporated nonprofit association based Dow legislation, which would be slightly different, not better or worse, but slightly different than the Wyoming version of blockchain LLC Dow legislation. And so that is going to be on the on the docket for the next session for sure. That has great potential to create a entity registration framework that really fits Dow's better than than what we currently have. And we're also looking for,

I think there is a lot of room with stable coins. And to get the state regulators and the OCC and the Fed to work together on allowing banks to custody, well, first, let's allow in a custody stable coin deposits, right? And certainly under a different risk framework because capital flight is faster and, you know, you can't lend that out at the same ratio as your traditional sticky deposits. but there is a framework to be had that can be overly conservative. Let's just cross that step to allow banks to custody stable coin deposits, the USDA backing stable coins.

Because ultimately, as we get further into this, I think stable coins are a key to solving the conversation at the federal level with national security hawks who are worried about the dollar. And of course, we know that the dollar is potentially going to lose its reserve currency status, not because of anything technologically that's happening, but because of profligate spending at the federal level. But what we do see is stable coins locking up more dollars and creating more demand for dollars, and it could prolong the dollar as the world's reserve currency. So we have some thoughts around that that we are pushing with the Texas delegation to Congress.

We're thinking through it at the state level with the banking regulators. There's a lot there that I think people are just beginning to grasp because it does bridge that national security, you know, macroeconomic policy component with stable coins, which are relatively small, you know, just over $100 billion when I last checked of total aggregate market cap. That will grow in the years ahead. Yeah, that's such an interesting point that you mentioned. I mean, stable coins as a buyer for the U.S. debt at a time when foreign central banks are divesting and the general flow is divestiture, which of course makes our cost to service that debt more expensive at a time when we are running high deficits. And actually just ran the numbers today. And stable coins as a sink for as a demand source for treasuries around 120 billion, I would say. Believe it or not, that's actually

if that was a sovereign nation, that would be the 16th largest nation in terms of holding U.S. debt. Wow. So that would be ahead of Saudi Arabia, Korea, Germany, the Netherlands, Sui, Mexico. I mean, those are serious countries. So even in their early era, I mean, stable coins were in the single digit billions as recently as 2018. even in this early era, there are already a meaningful buyer for U.S. debt. And I think that's one of our strongest, just truthful narratives to bring to Washington to explain the merit of this asset class. Yeah, I wasn't aware that U.S. debt was the, I mean, I knew U.S. debt was the lion's share,

but I also come at this from the perspective of just the dollar in general creating demand. But the point that you've made is even more poignant because there are, There are scarcity of central banks and entities around the world that are interested in, you know, seeing the United States or are purchasing our debt when we are increasing the money supply at the rate that we are. Yeah. And it's so interesting that stable coins are over 90, and over 99% of all stable coins reference the dollar. So that is way out of whack from the dollar's predominance in other settings. foreign exchange reserves or, you know, trade receipts internationally. And so there's something about crypto that just leads to this massive liquidity network effect. And it ends up being dollars that denominate the vast majority of all stables. So as far as I'm concerned, stable coins are

very pro-American interest phenomenon. And because stable coins have these freeze and seize function, and the vast, vast majority deal, you know, I think it still comports with our national security interests, the ability to engage in sanctions and still have discretion over who is using them and for what. So I've always been baffled at Washington's kind of reticence over the stable coin sector. I completely agree. And I think the importance to our national security of the dollar remaining the world's reserve currency versus our ability to execute sanctions, which is already highly degraded for a myriad of reasons, the former is far more important than the latter.

So I don't know, you know, people at Treasury would probably argue that all day long. I know there may be people at OFAC and other federal entities that are very, you know, interested in sanctions, but in the academic literature, there are lots of academic, academics that make the argument that sanctions are not even effective at their goal. And so I'm not suggesting that we do away with them. I'm just suggesting that it is far less important than the dollar remaining the world's reserve currency. Completely.

And it's a blunt instrument. And with overuse, it wears ever blunter. Our allies even now look for alternatives because they fear the interventionist nature of dollar policy. And, you know, I find it so interesting that in this country we have a dual system of banking charters. And the states have historically had they've been on kind of even footing with the federal government as far as chartering banks. And you saw these special purpose banks. Wyoming proposed and they were basically denied access to the federal reserve system because of intersaintimptum of dollar settlement.

And that's been something that's caused me a great deal of dismay is seeing the states marginalized as entities that can charter these banks and can fill market needs as they merge, especially as it pertains to crypto. So I'm hoping that the states kind of, I don't know, maybe prevail legally like you have the custodia case now in the courts. but I think that's something where there's been a massive concentration of power at the federal level and a loss of power at the state level, which is out of step with how it's been historically in this country. Yeah, and I think the more that we can get that message to governors of various states,

I don't know that they realize that their authority is being taken in that. it's been a very quiet usurping of that authority. Completely. Well, Lee, this has been really fantastic, and I want to thank you for your efforts. Pushing the agenda in Texas, I think a lot of us recognize what you've done and how important it has been. And I hope that other state advocacy organizations follow your lead. If people want to get in touch with you or follow your work, where would you direct them?

Sure. I met Lee underscore Bratcher on Twitter, and we hope that the listeners would join us at the summit, November 15th through 17th, North American Blockchain Summit. I can't wait to be there, Fort Worth. I'm very excited. Thank you for the invitation. And thanks for coming back on the show.