On The Brink with Castle Island - Rodrigo Seira (Cooley) and Ron Hammond (Blockchain Association) on Digital Asset Policy in 2025 (EP.583)

Episode Date: December 16, 2024

Rodrigo Seira, Special Counsel at Cooley and Ron Hammond, Director of Government Relations at The Blockchain Association join the show. In this episode we discuss: The 2024 election and the impact of the crypto vote. Executive branch actions to keep an eye on in 2025. Potential SEC related actions that would impact the digital asset market. The future of Staff Accounting Bulletin 121. Where digital asset legislation fits into the 2025 legislative priorities. Stablecoin legislation. Market structure legislation. To learn more about Cooley visit: www.cooley.com To learn more about The Blockchain Association visit: www.theblockchainassociation.org

Today on the podcast, I sat down with Rodrigo, Sierra of Cooley, and Ron Hammond of the Blockchain Association. We talked about the impact of the recent elections and what we should expect to see in the coming months in the blockchain industry. This one was a deep dive into specific bills and potential administrative actions that could really move this industry forward. I think you'll enjoy this one. So without further ado, here's my conversation with Rodrigo and Ron. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not refer to you. like the opinions of Castle Island Ventures.

Guest and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only is an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep.

The federal government is stepping it to stabilize. is Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. You've printed a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. Rodrigo and Ron, thanks so much for joining us today on the podcast. I always love talking about crypto policy when it's going in our direction. So this should be a fun episode.

Yeah, great to be here, man. Thanks for having me. Yeah, likewise. Before we hop in, just so people know who's talking, why don't we just start with some quick introductions, maybe start with you, Rodrigo, and then you, Ron. I'm Rodrigo Seda. I'm special counsel at Cooley's new Miami office. And I'm outside counsel to crypto founders and investors, work on a lot of financing, token distributions, and just general product design work for crypto service.

And I'm Ron Hammond. I'm the director of government relations and institutional relations for the blockchain association. So it is a trade association based in D.C., about 100 companies, ranging the gambits from stable coin issuer, central like exchanges, D5, venture capital, and plenty more. So I'm the Republican lobbyist. So I do both House, Senate, and now soon to be the admin. So it's a lot to cover for one person, but it's been really exciting. And before that, I was Ripples in-house lobbyist for a year. And then before that, I was with Congressman Warren Davidson for five years. I was his crypto staffer and wrote the first bipartisan crypto market structure regulatory bill, knows a token taxonomy act, and various iterations that's now the

called Fit 21 famously. I've been here since day one in crypto policy. So I'm really excited to get into it. Well, I'm excited to get into it. My first question will be a very general one that above both of your takes on. It feels like a lot has shifted in a positive direction in a short period of time here. What's your overall take on just what happened with the election and what the impact is to the overall crypto industry? I can try to maybe take a first step with that. The truck that I've been telling is that it somewhat feels like the day after Prohibition ended, which is both a cause to celebrate, but also maybe a word of warning that we shouldn't get too drunk here. So I think I'm cautiously optimistic about the change. I think it does represent a fundamental shift in the regulatory

landscape. However, I worry about a lot of clients and investors that we're correcting a little bit here. And I think it really requires us to take a more nuanced view at what the different types of actions and the different types of actors that are in the space. It's been heavily remarked, For example, that Paul Hackens is going to be the next SEC chairperson. I think under his administration, we probably see a much more favorable SEC regime. I think probably the most likely thing to change in the short term is a sharp decrease in new lawsuits that the SEC brings alleging registration violations only. If you look at some of the statements that Commissioner Perris and Commissioner Marguereta have made, I think it's clear that both of them think that the current SEC regime is not purpose fit for crypto,

and they don't think that suing crypto projects for failing to register is a helpful approach. So I would think that under the next SEC admin, those types of lawsuits will decrease significantly. I distinguish from that any lawsuit that has allegation of fraud or some other consumer harm, which I think any SEC administration is going to be still interested in bringing and motivated to bring. And I think it also importantly leaves out potential new lawsuits from private plaintiffs, notwithstanding who's in the White House January 20th or who's at the SEC offices. The law is not going to change that day. And we have now case law, particularly in the next circuit in California, that is pretty favorable

to plaintiffs that are suing to projects, including under this new theory that token holders and thousand of general partnerships. So I would expect those lawsuits to continue. For those folks, the landscape hasn't really changed and they have had some early success. So I would see that continuing. And I think on a more general level, what we're going to see is the SEC to try to make a concerted effort to restart, or maybe this is hopeful thinking, but to restart discussions for the administration. Under, for example, the Clayton SEC admin, there was a lot of healthy scores with industry and the SEC gave some incentive relief in the way to both no action letters. All of that basically totally broke down in my view under Gensler.

And I think it's something that's not lost to folks like Commissioner Peres. So I would think that they are going to be very interested in restarting those discussions. I think we'll see folks from FIPHub like values to panic who used to be often going to crypto conferences and other industry events. take out the T. I think you'll see those folks go back into the public more and hopefully a little bit more exempted relief. Outside of that, I think we can talk a little bit more about the rules and the legislator proposals later. That's my initial title take. That's great. Ron, what's your take just overall? I'll give you more of a congressional view because it's got more of my wheelhouse.

It's not dead. The two-year turnaround from the FTX collapse to where it's going right now and just the vibes shift has been incredibly noticeable. For example, two years ago, after FTX, my Democrat colleague in particular, it was having a really hard time, even just having a dialogue with many senior Democrats and staff on committee. There was just an overall view that crypto was done. They lumped in SBF with all the industry because SBF was very much out and about and throwing wads of cash of folks and his own customers to do politicians here. And you also have to remember, too, the politicians that many of them gave their funds back or donated elsewhere, they had to raise money from other constituents, other organizations to pay back the FTX situation. And that really

left a bad taste in mouth. It's one thing to raise your own campaign. It's another thing to pay back someone for a fraud that you had no idea that was happening at the time that you took the money. So that really was a bad taste in folks mouth. It is night and day difference now. And my Democrat colleague to that point, too, just got up the phone with them. He was at event with BP Harris and a lot of the senior Democrats and very much welcoming talking about how they thought they weren't doing to go on the crypto vote. That was potentially one reason why they didn't get the White House and the results they wanted in the election. So hearing him being in the room in these conversations at this event, whereas two years ago, he would not even invite to that

has been just a night and day difference. And then on Republican side, the optimism is just pouring in here. I mean, I just got two emails already just now for stab going to work on priorities for 2025, all positive, all in different tangents here. So now it's more harnessing and moving a lot of energy and a lot of the good built up in the past year and parsing on that and to actually getting stuff done next to year, a half, two years, which can be surprising a little hard in a lot of folks think. And to Rob Rico's point, the laws don't change on January 20th. a lot of time before we start seeing some rule changes on the books. And there's a lot of things that can go wrong in Congress too. Politics always messes things up as we've seen plenty of times

before. So I'm cautiously optimistic, but we have a lot of tough battles ahead. Again, and most of that to me within the industry itself, where we're going to have to get a lot of central like exchanges and a lot of folks in D5, for example, on the same page for regulation. And that can be really difficult. So it's by no means going to be a cakewalk. It's going to be pretty difficult. Well, definitely a lot of battles ahead. And maybe just to stay on the election for the next question. The industry really did get its act together, at least a little bit from my perspective in terms of how to approach congressional elections during this cycle. So the impact of Fair Shake and some of the capital that was raised and some of the overall effort to get out

the vote in places like Ohio and Montana seemed like it was the first time that as an industry, we really came together and pushed back. Curious to your guys' view on Fair Shake and some of the other overall efforts to play a more active role in some of these races. Huge. Back in 2017, 2018, when I was working on this, more from the Capitol Hillside as a Hill staffer. Campaign donations, obviously we don't deal with that as a Hill staffer. But we would look at the FEC reports. And I would notice, even though we were one of the very few pro-C. members of Congress at the time and doing everything we could to listen to the industry and hear the concerns and work on legislation back then, the industry was saying, well, we don't play the D.C. rule games here.

We're crypto. We're different. And I think that's where the crypto maturity has really come to D.C. Is that they realized, look, the D.C. game, we're all about disrupting a lot of things. And we have on several fronts. But sometimes you've got to play the game a little bit. And I think Bear Shake is an epitome of they play the DC game, dollars do talk in DC, and the amount of candidates who were coming to the industry, they were coming to the blockchain association, they're coming to other groups, other companies, not even sometimes for a fair shake angle, but more just we know you guys are the big dogs in town. Obviously, I want to be helpful with the industry. Obviously, I want to win this election. Please tell me how I can be getting on crypto. And the

number of conversations on a candidate level I had, on the Republican side especially, was astronomical. And I think Fairshake did a really good job, at least bringing it down between Republicans and Democrats. So there was really this view of, hey, this is a momentum shift. And also it's a younger generational momentum shift. And also they did things like not really attacking incumbents mice like Sherrod Brown, who has been very much noticeably really bad on crypto. Every single time that we had a stable coin bill, for example, two years ago, right to be finished, to go across the finish line. Sherry Brown killed it. He's killed it several other times in the past. Again, these are private discussions, but we've had so much time, we've had the momentum there. And all we need is

to him to check the box. And he never did. So I think Fairshade did a good job. They took a lot of guts to go up to send a banking member in particular and share at that, but it works. And I think we have a really good playing field for next year to go forward. But crypto folks need to remember, that's just one election. There's another one in two years. And guess what? We are going to be hit up a lot. And I'm glad that fair shake folks are doubling down on their efforts for 2026. So let's hope that it continues because that's how the banks have done so well in DC. It's how other industries have done so well is that they play the DC game. And I think crypto, for the small, scrappy bunch we are. We did pretty dang well. Of course, the dollar amounts

really do help. And we were very significant in the grand scheme of things. Yeah, it's hard to see who was on the other side of that. It just continually baffles me. I'm not sure whose vote was being sought by being anti-crypto, if you're Sherry Brown. I think that's one of the key points for me is that I think this election proved that the anti-crypto army was a political loser, that you were basically incentivizing a very ardent group of crypto supporters to vote against you, and you weren't really getting much juice out of that. I think the other important point to bring out here is just to note the effort that this took to put together and the mind shift that it required from the industry. A lot of the crypto-oGs are cypropunk anarchists that would want nothing less than to have to spend the day and DEC shaking hands with folks like Braun, no offense.

But I think motivated at least in part by Gary Gessler's super aggressive enforcement campaign, a lot of the people that were very deeply invested in the industry. realized that either they were at the table or they were being served for dinner. So they made a concertive effort to put a lot of money and effort behind. And it took a real coalition building to take out anybody behind that. And yes, I think we definitely flexed their muscle politically. We proved that the anti-crypto army is not a good platform. But we need to double down and keep it going so that it's not just this cycle. Like Ron said, I think the announcement after the election that Coinbase and others in recent

also announced that they were contributing more in fair and shape, I think those are critical to make sure that this has lasting impact. I couldn't agree more. So maybe just transitioning here into what starts to happen in January. We touched on a little bit already at the SEC, but there's a lot that the SEC ought to do here. There's a lot of correcting things that have happened over the last four years, but there's also just what is the path forward for the industry and overall for financial services. And things I'm thinking about are rulemaking, no action letters. You mentioned the exemptive relief. Let's get rid of SAB-121. Let's start talking about the custody rule.

Let's start talking about some of these ATS venues for security tokens. There's a lot of stuff to do. How do you guys think about what the prioritization should be here and what we should realistically expect in your one? I think maybe even before we get to that point, I think there's still some risk and some question about whether there's any further enforcement actions that are going to be brought by this administration. Jake famously sued Ripple on his last day.

as SEC Chair, which I think was December 23rd or something like that. I hope that doesn't happen, and I think it's not going to because as opposed to, for example, a transition between Clayton and Gensler, this amid transition entails a clear shift in crypto policy that the electorate has expressed. So I think it would be somewhat foolish for the administration to bring, for example, the cases against uniswap or OpenC, but that's still out there. And I think we need to hold our breath until the changing up the guard there. forward more. The first thing that the SEC could do after reestablishing more the dialogue with the industry is get rid of some of the proposed and adopted rules that are really unpopular.

SAB 121 is hopefully on the chopping block. Something like the proposed rule for amending 3B16 under the Exchange Act, which would expand the definition of exchange to include what the SEC called communication protocols, which is basically an attempt to expand the definition. of exchange to capture AMMs and other crypto decentralized exchanges. Hopefully that gets shelved. And after that, there's a fair amount that a motivated SEC staff could do just on the basis of rulemaking and guidance. So, for example, the laws amassed around air drops, and it has led to a lot of projects

really having these distribution mechanisms that are very contorted and not the most efficient way to distribute tokens, but really just a reaction to what they see as the regulatory pressures. So I think the SEC could do a lot of good by clarifying their position on airdrops, things like that. I'll piggyback off that too and get a more focus on Congress, at least quickly in the SEC. So we've been having these conversations with the SEC staff, especially with person you ate at post-election. It seems like the potentially will tease something a little more flushed out at our summit in two weeks when they're both speaking. So I'm excited to see what they're thinking on that front. But the wheels of our already started in motion.

They already started identifying where they should essentially act here. I think actually that's going to be really important for the congressional actions afterwards. There's a lot of questions of how much can the SEC do, how much this EFTC can do on rulemaking and such, and what does Congress need to fill the gaps in for to prevent a Gensler coming back into power years down the road and really railroading this industry again. So I think a lot of actions are going to be at the SEC are going to determine what happens in Congress, which is actually perfect because Congress is going to be pretty tied up for quite some time on nominations in the Senate. Then they're going to have a big spending fight in March that it could result in the shutdown, There was a lot of drama. The house is going to be operating off a one vote margin,

which is the closest margin ever in history. And that is going to create so much drama and can really stall a lot of things here. And then last, we go to tax. Tax is going to be the next big thing after the big budget fight in March. The tax bill could go all the way to the summer. And there will be crypto provisions in there. We're already having those conversations, having for quite some time. So at least when it comes to the congressional side, it looks like tax is going to actually be more of the first stuff tackled. We could see stable coins moving as well. I'm predicting that's more fall timeframe. But it is the main. The main hurdle for that bill was the Fed, Treasury, and Brainer. And those folks are all gone. So much

easier pathway for stable coins here. And then I think for things like Fit21, for example, market structure, that's where a lot of question marks come to play of how far as the SEC and CET can go on the rulemaking sign and what does the conference need to fill those gaps in? And that can create a lot of uncertainty in terms of the future for market structure. So that's one of those bills where I think a lot of talks and developments that referenced earlier within the industry as well with policymakers are going to be occurring. But to Rob Rico's point, a lot of this stuff is going to be happening at the agency level first. We would like to see some Trump executive orders, probably around debanking and a few other

ESG stuff that could help mining. But from the most part, I think we're going to see a lot of stuff happening towards the middle part of 2025, about the later part for Congress. A lot of good stuff there from both of you. Rodrigo, just to maybe jump on what you said about enforcement actions that could happen between now and January 20th. If I recall correctly, Clayton actually, at least the rumor was, went to Gensler and said, look, I have this ripple thing.

Do you want to take it up? And he got the nod maybe from Gensler and he still pursued it. So I guess you would just hope that there's that professional courtesy during this transition, which maybe is too much to ask for. Again, I'm hopeful that it doesn't come to that. From like a Machiavellian perspective, it could be a ploy to try to enshrine your policy choices by tying the next administration's hands. A lot of people expect that the new admin will, for example, settle the ongoing cases

with all the exchanges. And I'm hopeful that they will eventually get there. but I do think people are probably underestimating the effort and how complicated that it's going to be for the agency. I don't think it's the case that the next administration could simply just settle all the cases that they disagreed with right away without creating a mess. They're going to be Justin's law idea that they said the SEC is like an oil tanker. It's not going to shift on a dime. And the folks there are going to be focused on making sure there's some semblance of continuity and making sure that the market is not totally. whipsawed by huge changes in direction here. So I do think that it could be a way to limit the

next administration and the choices that they can make and somewhat enshrine the crypto policy choices of this admin, but I hope it doesn't get to that. I think the other thing that's worth mentioning in the background of this, we've seen a lot of appeals courts, even last week with a tornado hash designation, show a willingness to curtail with the ACS administrative of overreach. So even outside of the change in administration, there's this other broader trend in the legal landscape in the U.S., which is a lot of federal agencies are getting a lot less discretion. This has obviously been impacted by the overturning of the Chevron deference in the law of right case. So I'm hoping that that also adds more pressure on the current admin to

not take any drastic actions and to reconsider any losses that might stretch the limits of their So Ron, when you think about this from a congressional side and what the industry should be pushing for, it does seem like we have this window of time here where we need to get some laws passed so that we can't have this happen again, what has happened to the industry here over the last four years. So it sounds like stablecoins first and then maybe market structure would be the next big thing. But how do you think about the timeline for that? How should the industry be working in a way that is productive to get some of these things to actually happen?

This is going to be the major next set of fights that we're going to have within the lobbying side. I'm excited to see how this fight is going to evolve because we've been playing defense for so long. And then towards the end of Gensel's tenure, we played a lot of offense that worked out well. But now it's shifting totally to be like, all right, we get constructive and we need to work together here. And this is where a lot of the new players, the Tadify folks who are coming in who are lobbying on this stuff are really going to be impactful, both for good and for bad, candidly. So I've rented this issue a lot, even when I was working on the crypto framework bill in 2017, I knew it wasn't going to pass. I knew it was just going to be a marker, but it was a mean about bipartisan marker. But even then, I was getting crapped on by a lot of folks in the industry after the

bill text came out because a lot of people said, like, you didn't take this definition or you didn't take this approach. And I was like, well, D5 likes this and the Central Exchange is like this. And I think that kind of jockeying going back and forth is really, really critical. And that's the part that has been a major issue in the crypto industry behind the scenes, is just getting folks to all agree on the baseline of what can we all agree with as an industry. Because to Rodriguez's point earlier, there is still that, I'd say like 10% now, but There is that cohort of folks who are very loud who talk about one regulation, but when the time comes for crunch time, they hate everything.

There are going to be rules coming, guys. And this is really important we have to understand that this is going to be needed to move crypto for United States to have this framework. So we need to get on board. It has to be some concessions, again, for big or small players potentially. So we'll just have to see that it goes. And at the same time, also understanding where the red lines are. There are some concessions that can be made. So it will be it.

Again, for the instance like the stablecoin bill has an algorithmic stablecoin moratorium two years. And originally they wanted to ban algorithm of stable coins. And this is all in response to Terra. We got it done very significantly to just a moratorium. We also got to a point where things like die were protected and such. There was a grandfathering clause as well. And overall, the industry, for the most part, got good with that position. Even though it's a little bit of a concession, there was an understanding it's still

a good for the industry as a whole. And I think that those are the tough conversations are going to have to keep going when it comes to market structure, when it comes to non-bank versus bank issuing stable coins and various other things down the road. So not even forgetting privacy, tornado cash, all these other issues. that are still being front and center, both in the courts and in Congress. So, again, I'm optimistic, but when I laid at that time frame in terms of Congress is being pretty busy the first six months, that please actually, can't really, about a year left. Because the last six months of Congress,

in 2026, they're going to be out campaigning. So you really have a year to move this stuff forward, and then we will likely have a Democrat Senate in 26. The map does not look good for Republicans. So that Senate Democrats can really block a lot of stuff that comes out of Congress, and then you're really solely relying on the agencies and everything they do can get reversed if there was a change in administration in 2028. So there's a lot of things we have to make sure we get stopgaps in for, play defense when appropriate, but also advance as much as we can because there is a potential understanding

that these could be the next two years, that something happens, and then we're sitting dead in the water for the next six years. And that's not happening, especially if we want to take the lead here. Maybe to highlight the point that Ron made and turned it into a call to action, I think, and I'm totally guilty of this, it's much easier to criticize than to be constructive, and the whole crypto industry has been in a position where all we've really done in the last couple of years is criticize the admin.

And now we need to shift gears significantly and re-engage and also compromise if we're going to be able to do something. And I think the compromise part is going to be really tough because people are very idealistic in this space and they come to it with like deep philosophies that don't necessarily always allow for a compromise. But at the end of the day, that is how long. Washington works. So it's going to require a lot of work from folks like Ron to consensus build around what are going to be maybe not perfect solutions for everybody, but improvements

and a framework that allows crypto to develop in the U.S. The amount of hill staffers that get pro-cryptor legislation are things are trying to help the industry, the amount of times they send me tweets from executives in the industry, either shit-talking their bill or shit-talk in their effort. I am trying to help these guys out, and I'm getting nothing but just absolute dogged on. What the hell is happening? Why can't these guys ever be excited. And so it's stuff like that. I personally experienced that in 2017. This face, everyone's on Twitter now or X or whatever. So you shout out into X, the members of Congress see it. Trump could see it. There's a lot of players that can see it. And there have

been multiple times those tweets have backfired significantly, especially when it comes to our allies on Capitol Hill or emboldening our opponents on Capitol Hill. I'm not saying anyone's going to take any advice here, but the number of times I've had my favorite stories like JD Bants, last year when I met with him, Brian Armstrong, Frederson, Lerner, who was referencing seeing CEO tweets, please tell the CEO to stop because Senator Warren is showing his tweets on the Senate floor and literally gaining co-sponsors on her bill because she's saying the entire crypto industry is this guy and this guy is misogynistic and he's saying terrible things and he doesn't even like the Republicans that are supporting him. And that dynamic really need to clamp down on.

And again, that's him from JD Vance personally, not a staff. And it's weird now he's going to be BP. So this is just the dynamic we're going to be facing. And I think everyone should be aware that Robby goes point. We have a constructive here and we have a very limited window And if we just fight within ourselves, we could squander that and we could get crushed again in four years. So, Ron, in terms of a compromise here, what a market structure bill could look like, do you imagine this would just be a centralized company focused bill? Or do you think that this would cover Defi? What are the vectors for compromise here?

So there have been a lot of, the Defi piece was a very significant hurdle. And eventually they got to saying, let's just touch Defi later on. They took the MECA approach and saying, we'll punt later on. And again, that had a lot of back push from. folks on the Republican side and mostly on the Democrat side, because the view in Congress is like, hey, we don't really pass big bills that often. So when we do, we want to make sure we stop gap any potential loopholes and stuff like that. So let's try to write the perfect bill, which is impossible because especially in this space, it evolves so quickly. So at least right

now, I'm pretty confident we'll still get D5 protections here. This is the unfortunate truth is that MECA has been a lot years ahead of the United States or the EU has with a MECA framework. And that has been setting the tone a lot for the United States of having to follow suit of what the EU has done. Now, it usually doesn't have been the case. But the United States has been unfortunately fall into that trend past 10, 20 years. So the hope is that we can maybe be a lot more proactive here or at least be a little more forward thinking.

And again, I think it doesn't include at least carving out D5. But I will lastly say the defy conversations are happening on Capitol Hill. There was the first DFI hearing in September. And there is a recognition of we need to start working on a framework. So I do think we can see a D5 framework. It'll be a separate provision. But I think we can see some efforts there in next two years. By no means do I think it's a sign in the law.

But it's a conversation that's happened on the Hill of We just can't keep hunting it down the road. We need to start having these conversation of just what does that regulatory framework look like for D5 with the understanding it's different from C5, which that took about three years to get them to recognize that, but we're making progress here. I want to switch gears a little bit and talk about the bank regulator side of this. So if we do live in a world eventually at some point in the future, a terrible world, it would be to have Elizabeth Warren as the head of Senate banking at some point in the future. And it's definitely possible. But if we do live in that world, you want to live in that world where there are

protections against some of the things that have happened over the past few years around crypto founders and their companies getting debanked and deplatformed around things like what happened to NIDIG with the FDIC coming in and just basically kneecapping their whole initiative to onboard regional banks with a Bitcoin custody product. How can we make sure that that doesn't happen again? So I worked on the choke point stuff in Congress or 1.0 and then I worked on debanking stuff more on the industry side for crypto. So I've seen this battle play on two fronts here over about 10 years now. And I really hated how we call it the chokepoint 2.0 while folks were saying that because that instantly got back to the partisan nature of what chokepoint 1.0 evolved into over time,

which was anytime there was a mass shooting or an instance with a firearm, there was a lot of reaction from Capitol Hill saying, well, we can't ban the Second Amendment, but let's try to chuck it off as much as much as much we can. And that's a lot of what eventually led to choke point 1.0 in the Obama era. And naturally Republicans were really very much defensive on the Second Amendment, and they fell into that camp. Democrats, when they learned that sex workers are gained debanked, that's where they got involved. And they said, hey, we should not be debanking anyone, the sex workers here. This is a legitimate line of industry. So fast forward a couple of years here to the crypto side of things. And the problem that we always have

was that we never got the spoken gun. We always know that the Fed was talking verbally, but they would never put anything in writing. Very strategic. And it is very much behind the scenes and very dirty. And just the amount of folks there were into banks from all sorts of businesses was pretty shocking. So there are called bills out there in Congress right now to prevent that. We could see potentially the one of the two men running for a house finance service chair one of four. he is leading one of the bills that actually prevents choke point entirely. But the one thing I think folks need to understand is that the banks like showpoint stuff. They like that discretion. And I'm very

curious to see how the banks react because that has gone mainstream in the past two weeks after the Mark Andreessen interview. I was in D.C. just last night. And still everyone's talking about it. And the question is, what's the banks line here? Because they do like that debanking ability. And they'll lobby to protect that. He'd been lobbying against that bill for years now. So we'll see how that plays out. But I think there's be a push from Congress to try to do something here. The question is just how much can the banks push back, which again, the banks, they're political and their lobbying status. They're also in influx in a lot of places, too, especially with Republicans. They've been slipping a lot in that space.

So we'll see what happens to the Republican majority, if they still hold that power. Before you hop in, Rodrigo, I'd say, Ron, to your point on the smoking gun, that is right that all of this was verbally communicated over the telephone. But I think what you probably need is someone to get subpoenaed from some of these banks that were actually getting those phone calls, and you need a framework for them to be able to actually tell the truth on what happened under these confidential supervisory discussions. We just need the truth out there. Exactly.

I was talking to House Financial Service Herbett Committee back in 2020 and March when this was happening. But even before the hearing that happened with the FDIC, OCC, and Fed in November of this year, I was out of Miami, New York, D.C. I was talking to a bunch of companies who got debanks. I was just like, hey, look, walk me through it, trying to help the committee, at least just fact find here because we don't send folks down a rabbit hole here if there's nothing at the end of it. And the fact finding took a long time to get to. And the common fact pattern, again, was always

verbal. And that was always the thing that was so shocking is how is this possible? We had a couple leads of some being regulators tell us in more of a whistleblower capacity. But then when it came time to be public or to at least be anonymous, but at least like get their story out, there was fear of retribution. And I think that's very telling to why a lot of companies went more public after the Joe Rogan interview because there was just that cultural shift that we've seen post election. Will that continue? We'll see. But again, it's an issue that both Republicans and Democrats have been vehemently against, but there have been some interests, shockingly, the banks again, who think that it's good to have that. So we'll see how that plays out in next two years,

because it as a deep state almost versus a anti-incumbency approach, that's going to go more macro here. So we'll see how that ball shakes out. What's your take, Hercigga? So I think Ron is much closer to the metal on this one than me, but my high-level take is It seems like based in no small part on work that Nick and you guys at Castle Lion had done, this issue seems to have broken through to the public discourse with the Joe Rogan interview with Hendrickson talking about it. So it feels like it's getting much more attention than it was before. And it's also now we've sought between both parties being persecuted by this tool. So my hope is that the combination of both sides feeling the burn and this topic being much more

front and center means that there'll be some real pressure on the banking regulators to reform. And maybe that is some legislation that has passed in Congress the session, or maybe that's just internally they realize that this is not something to play around with more. So that's my rosy take on the issue, but it feels like everyone acknowledges from both sides as the real problem. And it sounds like we're going to get more of the, I don't know if it's going to be a smoking gun, but more of the background info is going to start leaking out. So I think with that, there'll be more added pressure. Yeah, it would be good to just be in a position where this is just structurally not possible to implement in the future. I don't know if that's too much to ask for.

Is this where we say Bitcoin solves this or what? I don't think Bitcoin solves this. I think people need to get cash into the system to buy Bitcoin ultimately. This is pretty nefarious activity that's been going on here. There's one thing I get out to. So I stress the timeline again for Congress. We have a very limited window here. So a lot of things I'm telling folks in Congress too is, hey, look, let's do the research. Let's see the investigations. But like, understanding, let's not take up all of our crypto bandwidth on fact-finding on debanking, because a lot of stuff has been resolved, or at least folks have found other banking partnerships.

Bitcoin's your reserve, for example, which doesn't have bipartisan support yet. It's like, hey, look, we have very limited time here. Let's make sure we funnel all the members of Congress into one cohesion to get stable coins, to get D-E5 protections, to get NFT protections. And that's going to be really hard. This banking story, there's been several more probably similar types of stories on different topics that are going to derail a lot of attention for Congress. And it's kind of hurting cats with ADHD.

And the macro scale things is a lot of important things. And the market structure bill could probably solve all this or a stable coin bill could solve this problem. Let's get back to moving forward. There's me a lot of distractions, but we've got to keep everyone rowing the same boat forward. So maybe to build on that, if I just look at this from the perspective of what would open up the industry from a capital formation perspective, I think stable coin bill and a market structure bill would be the two biggest from my perspective.

Is that the right way to think about it in terms of what the priorities should be? Yes. I've been talking a lot to the Tadai folks recently, a lot recently. since the election. It's mostly the research teams reaching out, but they're having, in some cases, fully dedicated business lines built out already, ready to launch, others, they're just starting. But they keep pointing to the January 5th, 20203 Fed policy statement that says banks need to have extra risk practices when it comes to banking crypto asset companies or crypto assets generally. They keep point to that statement as the main inhibitor for them getting involved, as well as

SAP 121. Again, there's a view that Sabo 21, I'm pretty confident we'll get rolled back in the early parts of the Trump administration. But that Fed policy statement, it's a sleeper. But like, that is a really big hold up there. So try and push for that as well. And then lastly, self-custody, that's a tougher battle too. But the self-custy protections, they're never guaranteed, especially in the Republican administration. We saw that with Mnuchin trying to go after self-hosted wallets in the last moments of the Trump administration. So there's still a national security apparatus that is very anti-crypto and anti-self-custody in a Republican space. So it's making sure we can try to get good self-custy protections as much we can. And that's going to be an uphill battle. But

But we'll see you can get some there. Well, those are great callouts and definitely things that the industry needs to be aware of. What do you guys think this looks like with banks and broker dealers pushing into the industry for the first time? So if some of these rules become clear, you're going to be in a spot where the banks are all going to want to custody crypto assets. The broker dealers are going to want to connect to secondary trading for not just commodity digital assets, but for security tokens at some point in the future.

And so maybe this lobbying effort ends up looking a lot different, just the cast of characters will look a lot different. Is that a good thing? Is that a bad thing? What you would be aware of? I could just lobbyings out quickly. You got to remember when I was on the lobbying side, I first got with Ripple and then with the BA about a year later, there's like six of us. And then when I was a hill stabbers, three lobbyists, and then Digital Chamber Commerce. So it went from three people to I'd say about 75 lobbyists now in D.C., which were still about three times smaller than any of the bank lobbyists and their consultant army here. So we're always outgunned in terms of manpower. But things like Twitter actually really carry a lot of weight

People are on Twitter in D.C. way too much. That stuff does, better for worse, as I mentioned earlier, but the JD-Band story, it does carry weight there. So that's been kind of exciting to see. But at least on the lobbying side, B.N. Melon was lobbying me on Cussie issues back in 2017. Some of them have been involved in this space early on. And again, some of the companies that we all know have been here, like Fidelity, State Street, with early movers. But it's a lot more of the more traditional clients folks. I don't want to say any explicitly their names just yet, but they've hired Crypto-Pacific lobbyists. And I think we're going to see a lot more clashing of banks trying to get their priorities in and try to get regulatory capture and carve out a lot of

these folks here in the crypto space. And again, in some cases, crypto might be partnering with a lot of these companies. And so that creates a lot of conflicts here. So it's going to be really interesting to watch. You just got to be careful and see where the narrative spin, what message folks are saying. Because I think the best part about the crypto policy world is that since we're on X, we're pretty transparent about where we are for better for worse. But at least we're very transparent about where a lot of folks are at position-wise. And there's a wide array of views in the crypto industry. And that's going to be, again, we had honed that into a good message. So I'm optimistic.

From my perspective, I think it can definitely be helpful to build a really broad coalition and leverage the lobbyist armies that Tramai has. I think the word is that it's an obvious one is that that entails that we are basically going to be playing in their space, right? And I think there's a fundamental choice that we still need to make with regards to how crypto is regulated in the United States. And the why path is we update the securities laws a little bit, maybe tailor the disclosure is more, and then we treat crypto under that framework. And I think that's probably the most likely scenario if the Trappai lobbyists get their way. But I think the alternative is you recognize

there's fundamental differences between crypto and securities, and maybe you accept it or you clarify that regime doesn't apply to begin with. And maybe you treat it under like a consumer protection regime or some different regime. I think Ron smiling a little bit. I'm not sure if you bought that one, but the danger is that that choice is not discussed and and turning to willingly, but we can sleep walk into it because the traffic lobbyists are driving there and we're applauding whatever exempt of relief we get along the way. Definitely some thorny topics.

And Rodrigo, to your earlier point around some of the private cases that have been brought in this industry, what's the answer there? How does the industry push back on some of the things that have happened, maybe outside of just pure play government action? That's a tricky one. Part of the solution is developing new types of legal entities that are better suited to protect token holders and Dow's and other crypto-enabled communities. So folks like Andreessen have been doing a lot of work pushing the Wyoming Duna, which is a new type of nonprofit entity in Wyoming that is Taylor-Maylor. made for token holders and to provide Dow members with limited liability. So I think things like that are going to be needed unless we get some statutory change, which I'm not holding my breath

for. But the issue now is, I think, quite salient because you basically have a plaintiff's law firm that has developed like a playbook to sue Dow's and investors. And they brand this playbook like four or five times with increasing success in the same courts and Caltech. California, and now they basically convinced a couple of judges that DAOs are a shady tool to avoid liability, and that's the frame that's been able to imprint on this. And I think without framing, judges are understandably not willing to give any flexibility here. I think that risk is going to continue for a while. I think that DUNI is a potential solution, and I'm excited to see more those in the wild and more projects adopting them. So far, I think if there's been a market's

practice for a lot of the projects that are launching tokens that has been somewhat ossified, but hasn't really been fully tested in court. So I think part of what's going to happen in this next admin is the design space for those types of structures is opened up a little bit more. And people are going to be looking at different types of entities and looking to be more in the U.S. as opposed to just reflexively transform offshore entities. That makes all the signs. Guys, well, this has been a blast. It's very clear that we should not be just resting on our laurels. with what has happened in the election, that there's a lot of work to do. So thank you to

both of you for joining and for all you guys are doing. Maybe just in closing, where can we send people to follow your work and learn more about your organizations? I'm on Twitter at R-S-E-I-R-A-273. It's not a great handle. And you can also find me on Coolie's website. I'm on Twitter as well, Ron W. Hammond. I do threads every Monday on the Laces on Congress on Crypto, and then do memes every quarter, just because I love crypto policy memes. So why not? Love it.

All right, guys. Really appreciate you joining today. Thank you. Thanks, Matt. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website.

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