On The Brink with Castle Island - Weekly News Roundup 09/18/20 (Why Wyoming's SPDI is so exciting, a shift in tone from the SEC, Microstrategy keeps stacking) (EP.127)

Episode Date: September 18, 2020

Matt and Nic return to cover news of the week. In this episode:  Our review of NFL week 1 Whether or not securities law topics come up at parties Why we're so excited about Kraken getting the Wyoming SPDI Why the SPDI being full reserve is so important – and why it eliminates certain regulators from the picture How Kraken's bank charter is reminiscent of a classic scene in There Will Be Blood Why Wyoming's SPDI is a long-awaited rebuke to Operation Choke Point Michael Saylor stacks MORE sats How Matt was able to initially break the Microstrategy news Why financial services firms looking at crypto need buy-in from the top Michael Saylor's revealing quote about Bitcoin's hard forks Why shrugging off hard forks defeats a key critique of Bitcoin What the SEC settlement with Unikorn inc means for other tokens The SEC sanctions rapper TI Matt's embarrassing TI story Our current view on handshakes Why the settlement quality of stablecoins is context-specific

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 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 into Britain's ailing economy with a new round of Concentive Easing. You print a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something called the Bitcoin. Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. Another week in the books. Well, not really because we taped these on Thursdays. But we're taping this before the football game, so it's better than last week. That's the new thing.

We got to get it done before Thursday night football. We used to do these on Friday mornings. Yeah, but then we never ended up getting around to posting them on Friday. I know. Then we ended up posting them on like Friday afternoons or something. Saturdays. So I think this is working out, though. We got to get it done in time for the world's worst Thursday night football game, the Browns Bengals. Yeah, there's not a lot of people that are psyched about that one.

You know, I will note that the Patriots began their 16 and a stretch run this past week, 1 and 0. Yeah, with Cam, but Brady lost with the Buccaneers. Yeah, it's interesting because up here, you know, the, the Bucks and the Patriots are both on TV so many weeks for the first, I don't know, two months. It's pretty great. Are you carrying over your fanhood to the Bucks now that Brady's there? Yeah, I'm rooting for the Bucks. I'd like to see the Bucks make the Super Bowl and against the Patriots and lose to the Patriots. Yeah. Okay. Okay. So there's still residual love there for TV12. I mean, I may or may not have gone down a YouTube rabbit hole last night and just watched like 25

minutes worth of Brady highlights last night. It happens from time to time. It's hard to to, it's hard to like get rid of that, you know, he's brought so much joy to my life over the years. I will brag a little and say that my nameless Washington football team won against the Eagles, which was pretty unexpected. They got like eight sacks in the game, which was pretty amazing. So maybe the Washington football team is actually forced to be reckoned with this year. Who knows? Hey, it's a blank slate. It's a good start. We are the football team. No other team is named after the sport.

So we've just gone for the European tradition, like, you know, how soccer teams are just called, whatever, football club, Barcelona, etc. We're importing that tradition to America. It kind of works. I kind of like it, actually. Yeah, I ordered gear. So I'm going to have a bunch of generic Washington football gear now, which is just going to be probably like the equivalent of Cassaceous coins, you know, in 10 years. When we get some new name and some new logo and stuff, it'll be a throwback to the. that era where we were nameless for a season. I think it would be kind of cool.

So speaking of gear, you have your coin metrics gear on. I need some of that ASAP. Yeah, that's the measure of a good startup. I will say full credit to the coin metrics team, the t-shirts are very soft. I think they use the same vendor as the compound people. Those are some extremely soft t-shirts. Oh, interesting. Yeah. They gave me a really nice t-shirt. So we had a pretty eventful podcast week. More legal stuff. Two lawyers on the podcast this week.

Actually, three, because David Kinnitsky is a reformed lawyer. Yeah, people don't know that, but Kinnitsky is the lawyer. That's absolutely correct. We only talk to lawyers on this podcast now. Our crypto law episodes always do great. So people want to hear lawyers explain like law concepts to people like me that don't understand it. There's a market there. There's a market there for sure.

So you had Gabriel Shapiro on on Monday, and then we had David Kinnitsky and Marco Centauri of Cracken on Wednesday. Yeah, what I liked about the Shapiro episode is that we went way beyond Howie in terms of the relevant securities laws precedents. There's all kinds of crazy stuff out there. There's timeshare cases. There's apartments that were being tokenized effectively, and they called them stock, but they actually weren't securities in the end.

That was the crazy one. That was wild. There's all these cases floating around. They're totally relevant for tokens, but people only know Howie, which is, you know, you've got to broaden your horizons a little bit, guys. So we're giving you the tools to sound smart at parties where there's a discussion of securities law as it pertains to tokens. So pay attention, people. Yeah, when parties come back and cocktail hours are a thing again, just listen to some of these episodes. You're going to sound really smart.

I mean, does Howie, you know, normally come up at your time? your parties? I mean, I've definitely talked about Howie at parties before, 100%. Howie test, talk about double spins, talk about chain tips, all sorts of stuff. Yeah, so we're trying to equip our readers to, or listeners to sound smart. And then we had the Cracken episode, which was really awesome. And just like an amazing piece of news all around. I was so pumped about that. Set it up. Set it up for the listeners.

All right. Well, I mean, if you're listening, you probably already know, but we've been tracking this speedy since before it was an actual law. We've been tracking those efforts in Wyoming for literally years now. I think the whole thing started two, three years ago. Caitlin and a bunch of other advocates have been, you know, they kind of found Wyoming to be a fertile ground for some of these new legal concepts as it pertains to digital assets. Then the Wyoming legislature passed a bunch of laws, basically giving digital assets a clear legal status and also pertaining to custodians. And they invented this special purpose depository institution charter, which was an alternative way to get a bank instead of going through the federal regulators. So you get a bank under Wyoming,

but still get access to the Fed. But your main regulator would actually be that state entity. and the first institution to acquire that charter is a subsidiary of Cracken, Cracken Financial, run by our former colleague David Kinnitsky. So the whole thing is super validating, I think, for the architects behind that law, in particular, Kenyon and really cool to see Cracken, which is definitely among the kind of more Bitcoin-focused exchanges out there. And I would say very aligned with the core values of the industry. Really cool to see Crack and get the first one.

So I couldn't be more jazzed about this. Yeah, it's a good step forward for the industry. And it's great that Marco is involved too. I remember a few years ago when Marco was working at Pillsbury and pushing a lot of these similar type of initiatives in the state of Delaware, you know, probably not to as much success, frankly. I think Wyoming has really opened their arms to, this industry. So, you know, from this point forward, it becomes really interesting from a couple

different perspectives. I think there's a bunch of open questions around how this plays out from a regulatory perspective, but maybe first, just on the product side, why this matters and why it's important. So this should set them up to offer a range of services in my eyes. So they're going to have digital asset custody. It sounds like demand deposit accounts, wire transfers, funding services, trust administration. They talked about, talked about crypto debit cards, talked about doing proof of reserves, which is, I know you were a big fan of that. Proof reserves is literally in the Wyoming law. It's pretty text. They talk about Merkel proofs. They talk about this, this requirement of maintaining full reserve. That's what people don't understand. This is a similar to a narrow bank.

It's not a bank which will engage in lending and have maturity transformation against, you know, a smaller base of reserves like most normal banks. This is a full reserve institution. So the critiques, Bitcoiners have banks. For the most part, don't apply here. We're talking about a full reserve bank. And so what they're trying to do here is get direct access to the Fed window, which, you know, it hasn't happened yet. So they need to go to the St. Louis Fed, I think, is the next step here to apply for

membership. Kansas City Fed. Kansas City, that's right. So the Kansas City Fed to get membership, obviously if they were able to pull that off, then, you know, they've really just cut out the need for them to operate through a bank. So if you just think about Cracken's kind of core services, you know, the first thing this is is just a utility for that company. And we've seen how much of a nightmare just getting banking access has been for all of the startups in this ecosystem since day one. And this would really be sort of just a, you know, a huge step, frankly, just to be able to offer those type of services and eventually offer them to other startups, I'd imagine.

I've got a bunch of questions and kind of I'm curious to see how certain things play out. One is how does New York react? So what everyone's kind of hoping for here is that New York will honor reciprocity and open up, you know, New York residents to Cracken services. Cracken does not operate in New York now. So I really wonder how the New York Department of Financial Services will look on this speedy charter, you know, this new thing and whether or not they will actually allow it. I wouldn't be surprised if we end up seeing a court fight here. Yeah, I think most of us are expecting that. You know what this reminds me of, actually?

This reminds me of a plot element from the greatest movie ever made about Bitcoin that doesn't have the word Bitcoin in it. What's that? There will be blood, right? Oh, yeah. You know, it's about oil barons and middle war rights and so on. But this, so what Cracken did was, you know, they had to rely on other banks so that their clients could, you know, send in wire transfers and make deposits so on.

Now they've cut out those other banks, in theory, and, you know, clients will be able to use Cracken Financial for the Fiat side of their business with Cracken. So they've cut out that whole dependency. This reminds me of the plot point in There Will Be Blood, where Daniel Plainview has this pool of oil and he has to figure out how to get the oil to the coast so he can get on tankers. And standard oil says, hey, just work with us. Like, we will take your oil. We'll take care of it.

You know, we'll take it from here. And Daniel Plainview really doesn't like that and basically threatens to kill the representative of standard oils. And then he, out of spite more than anything, builds this really long pipeline to get his oil to the coast, right? So this is the same thing in a metaphorical sense. Cracken has built that financial plumbing to get to the holy grail of the fiat world, which is, you know, the Fed and access to that broader banking network.

And they have totally or potentially will have the ability to cut out those dependency on the other banks, which as you say, has historically been an enormous challenge in the crypto industry. So this is the part of the podcast where I unfortunately have to admit I did not see that movie. And so this is like a movie review gone bad like when I was telling you about Armageddon and mining for gold on asteroids. Yeah, the difference is those that this is one of the greatest movies of all time. And it really is, you know, it's reminiscent of, you know, the wildcatting days and the early days of oil.

That's basically the early desert mining Bitcoin and stuff, totally the same thing. So you got to watch it. That's your homework for next week. All right. I'm going to watch it. I guess my last thought on this is that Wyoming is really kind of onto something here. And if you think about what South Dakota did with the credit card industry in terms of making that a very hospitable place to run one of those types of businesses and obviously what Delaware has done in terms of their system is a very attractive place to incorporate companies. I think Wyoming's play here is to just make this very friendly to the fintech sector.

And the governor's already talking about this on Twitter, in fact. So this is part of a bigger move here. Oh, yeah. I couldn't be more excited. I mean, because we've seen bank charters have been near. impossible to come by in this country over the last couple decades, right? So the bank sector, as a consequence, it becomes semi-nationalized if all of these banks are consolidating, the number of banks in the U.S. is declining. That basically means the competitiveness of banking

and the quality of that product offering is naturally declining, almost definitionally. Now, what Wyoming is doing is saying, hey, like, we're going to open up the floodgates again and make it possible to create a bank, once again, you don't have to go through the federal regulators. You can go through us. And by the way, if you're a full reserve bank, you're not beholden to the FDIC. You don't need deposit insurance because you're full reserve.

And now, like, this is amazing. It comes full circle. Caitlin talked about this on the podcast with us. Part of the inspiration and the reason some of those Wyoming, you know, the banking board wanted to do this was because they were afflicted by, Operation Choke Point, some of their businesses were hit by Operation Choke Point, which was that move, that collusive move by the DOJ and the FDIC, to disempower businesses that the then Obama administration

didn't like, not because they'd done anything illegal, but because they just didn't like the businesses, firearms, payday lending, businesses like that. And there were lots of Wyoming businesses that were affected by Operation Choke Point. So this is the long retort. to choke point now. Get your bank charter through Wyoming and reduce that dependency on the FDIC. We should go to Wyoming and do a live podcast episode when this is when this COVID thing's over. Yeah, we got to make the pilgrimage out there. It's, it's the new one of the new nexus of the crypto industry. So speaking of super bullish things for the industry, Michael Saylor, he's at it again. He bought more Bitcoin. I think he's addicted to the social media impressions, which is why

did it. At this point, he needs to chase that dragon and get more RTs and favs on Twitter. So he just keeps buying Bitcoin. I mean, so for those of you who are not aware of this story, Michael Saylor is the CEO and founder of a publicly traded company called Micro Strategy. He has put in the last month $425 million worth of treasury, just cash, into Bitcoin and is holding it on their balance sheet as Bitcoin. And so initially it was a smaller chunk. And then this week came out and said he bought $175 million more. He went on the pomp episode and it was a phenomenal episode. He's talking about all kind of his learning journey and what he's read, the people he's read. And this guy totally gets it. It's fantastic. Can we just call out the fact that you actually

broke the news initially that they were planning on buying Bitcoin way back in the day? Yeah. So it wasn't like I had any insight. knowledge, I just read their earnings report, you know, as one does, just for these kind of smaller, small cap stocks. I had read their earnings report and it said Bitcoin. And, you know, I have various kind of ways that I call through regulatory filings for the mention of the coin. Don't leak too much alpha, Matt. Don't leak too much alpha here. So, you know, I came across this thing and yeah, someone forwarded me this article. It was like, well, Matt Walsh, like, called it out on Twitter after the earnings report. Meanwhile, this guy's just buy, by buying Bitcoin for the past month.

When you noticed that, we didn't know the scope or the magnitude of the buy yet, though. I mean, I thought this was going to be go out and buy a million dollars worth of Bitcoin. Yeah, I thought that was it after he bought 21,000. But then he had to come back for more. He just wasn't done. No. And he's really a sharp guy. And so one of the things in Palm's podcast, which definitely deserves a listen. anyone who hasn't listened to that one yet. One of the interesting things that he said was you really just can't get anything done from an innovation perspective in this industry if you're not having top-down buy-in.

So, you know, if you're not the CEO or the CFO or the founder of the firm, you're going to have a hard time pushing one of these initiatives forward. And that really resonated with me. I mean, if you think about some of the marquee companies in this space that are not startups, you're talking about Square, you know, where Dorsey's really. pushing things. You're talking about Fidelity, where Abby and her whole senior team really bought in. You're talking about Facebook, Zuckerberg's founder there. So it's a great point, right? It's tough to do these initiatives without having that buy-in at the top. Yeah. I mean, if you're a financial

services firm, you're not going to self-disrupt unless the CEO is basically a visionary and is willing to take that risk. So I have a lot of conversations with folks that. work at asset management firms. We have a lot of friends at other non-fidelity firms. And I talk to a lot of these folks. And generally, they're trying to get things done and at various levels of frustration that they're not able to push through all of these good ideas that they have. You know, there's people out there with phenomenal ideas around different types of products that might be appealing, different ways to bring crypto assets to their customers. So I was talking to this one guy today and who's telling me about their R&D lab and their initiatives and, you know, he's kind of bummed out.

they're working on some interesting stuff. It's like privacy use cases, totally outside of crypto, but can't really get the crypto thing going. And I said, who's in charge of those efforts over there? And it was the head of risk. Was like the guy. That's the worst possible. That is not how you do it. I mean, you want that guy in the room at the very end.

But, you know, it just goes to show that some of these places, it's just a cultural challenge. and it's really bullish for, I think, startups and for places where you have senior leadership that really feels like an owner of the business versus just being kind of a not on my watch career risk person. Classic innovators dilemma situation. Yeah, it really is. I mean, you can't, the strategy of just hoping that this whole industry goes away, I think, you know, that's been out the window since 2015 or 16. You know what I liked about the Michael Siler episode with Pomp? The fact that he just rattled off, his. like 10 favorite content creators in the Bitcoin industry. And he said that he gave everyone on his

senior team homework to go read all these articles from like, you know, like Dan Held and VJ Boy Potty and Lynn Alden. I'm just, I'm laughing at the thought of, uh, of him sending, you know, his CFO like 15 medium articles about Bitcoin. But I guess that's how you do it. That's how, that's how you get orange billed. That's, I mean, you have to start somewhere. And those folks have been putting out some great content over the years. You got to read the classics. You know, got to do your homework. I mean, you talked about the Bitcoin standard. And to any, you know, would be Bitcoin content creators out there that are, their inspiration is flagging somewhat. Just take that to heart, you know, this guy read a bunch of medium articles about Bitcoin and then

bought hundreds of millions of dollars worth of it. And that was all he needed. You're making a difference. You literally making a difference. Yeah, I mean, the assembled body of literature around Bitcoin now is quite considerable. I mean, there's dozens of books about it. If there's one thing we're good at its content. The other comment he made, which I want to quote, was really, really cool. He said the hard forks, I think, are a big advantage, referring to Bitcoin Cash and BSV and other historical hard forks. The fact that Bitcoin went through it and we saw what happened, we saw that the community would defend Bitcoin. That's what gives a person like me, confidence to invest hundreds of millions of dollars into Bitcoin.

I don't want to hear that you've got a new idea and you're upset over transaction fees and you want to implement smart contracts and change everything. I do not want to hear that. I want to hear that you're going to defend the network to the death against someone that's going to break it or compromise in any way, shape, or form. I'm kind of laughing, but I just cannot believe how smart this guy has. It's so good. It's amazing.

I mean, my big takeaway from this is that the hard, forks, our dilution argument was like the thinking man's objection to Bitcoin a few years ago. And that argument has been totally defanged. Bitcoin Cash is printing all-time lows against Bitcoin. To combine Bitcoin Cash and BSV are like 3% of Bitcoin's market cap and less in terms of utilization. So these forks have been shrugged off. I mean, Bitcoin Cash is now forking into its own. It's splitting into thousands of pieces. So effectively, these forks are pretty much defunct. And the fact that Bitcoin shrugged them off and retained its unitary nature without fragmenting into tons of different pieces, that is a very powerful argument that I think

is going to start to persuade people that previously thought that forks were dilutive. Yeah, it's a really good point. Just so many things that he pointed out in that interview, so many reasons why Bitcoin has been de-risked over time. And that was a really astute observation. chain. Yeah, and we're talking about, you know, we thought Bitcoin was pretty mature in 2017, but now we have three additional years. We've been through that phase of forking. No one in their right mind would try and fork Bitcoin and co-opt it. I mean, they can try, but everyone fights the last war and the last war was lost by the would-be forkers. So I don't think anyone's going to have any enthusiasm for new forks, which just gives Bitcoin this amazing consistency, this

sort of this internal consistency, which is so important, because there's no guiding light to say, hey, this is the true Bitcoin, unlike with any other, you know, of these blockchain assets that has a foundation and a corporation. To me, that was always one of the biggest issues with Bitcoin was retaining that internal coherence over time. So hopefully more exciting things from Michael Saylor and the micro strategy guys over time, but I don't know what more they could do to just be awesome. So why don't we move on? Let's talk about some regulatory enforcement actions. It's a few

this week. All right. And kind of a shift in the tone actually, I noticed. So the main big one was Unicorn Inc and their coin was Unicoyne gold. This was an e-sports kind of startup thing.

It's still a company. Yeah, I honestly don't know what it was intended to do, but this settlement was quite interesting because they had to pay a penalty, effectively liquidate all of the company's assets, and the SEC actually required that they permanently disable the token

and get it delisted from exchanges. So effectively, this company is being wound down and the remaining funds are being paid back to investors. Now, the interesting thing is, that this specific case, there weren't really any allegations of fraud per se. It's just that Unicorn did this offering without registration and without qualifying for an exemption. So this is somewhat different from other offerings or from the bread and butter that we've seen from the SEC, whereby there were instances of fraud that they could point out. Here was really just the fact

that they sold securities without registering. Yeah, it's probably bad news for a bunch of projects, to be honest with you. The fact that they're starting to go after folks that are not overtly fraudulent, they just, hey, this is an unregistered security. Yeah, they've picked the low-hanging fruit. Now they're going from the medium-hanging fruit. So we'll see. I think there's probably more to come on that.

Hester Pierce had a dissent, though. She disagreed with it. Yeah, and this was really, really interesting. I mean, we know that Hester has been disagreeing with. the party line at the SEC for a while, but she wrote a whole blog, effectively stating that there's no real middle ground for some of these tokens that are operating in good faith and trying to issue their tokens in potentially a safe way. If you look at the legal exempt securities offerings we've seen like block stack, like INX, those involve huge amounts of legal overhead.

you know, a high single digit millions in terms of legal spend, which is out of the reach of a lot of tokens. So Hester is promoting her safe harbor as a potential compromise here. Instead of having total anarchy or the SEC crackdown on everything, she's promoting a middle ground, which we talked about on the episode with Gabriel Shapiro, actually. Yeah, I think this is a sensible middle ground. It's going to be interesting to see what would happen at the SEC if Clayton is not there next year. So I think all of this is very much in limbo at this point. Yeah. And I think it's actually unfortunate the SEC primarily went after these smaller fraudulent tokens because they effectively didn't weigh in on any of these higher profile, not fraudulent tokens, but still not registered

with the SEC, effectively unregistered potential securities issuance, they didn't really weigh in on those. And so, I mean, aside from Telegram, I think, I think there's a lot going on behind the scenes. I think that there are a lot of projects and a lot of investors in this industry that have gotten subpoenas. I think there's a lot of things that they're still working through. Yeah, there's certainly a latency, but that latency is, it causes complacency from token issuers. people interpret the SEC's lack of action or lack of overt action as assent effectively. Oh, that's for sure. But they shouldn't, but they do.

Yeah, I think if people were aware of just how much activity and how many projects have been called in, then there would be people would be going a lot slower on some of these defy tokens. So the second SEC action this week was against the rapper Ti. So he was involved in two ICOs in 2017. I've never heard of either of them, but it turns out that they were not on the up and up. And so he has been charged and he has settled. What ICOs were they?

CoinSpark and Flick. Ever heard of them? I'm shocked to hear that they weren't totally aboveboard. So I have met TI before. Well, did he make a positive impression? He actually, yeah, I kind of embarrassed myself, actually. It's kind of an embarrassing story that I'm going to tell here on this podcast. So I worked at Clear Channel.

This was back in the day, way before crypto, or early 2010s. And there was, so it's a radio station company, and you would occasionally have these opportunities to go and listen to the talent. So listen to the artist. They would play for the DJs. They would get a bunch of disc jockeys together in New York, you know, everyone from the big metropolitan stations. So it was like 8 o'clock in the morning.

T.I. came in just to talk about some new song he was coming out with. There's probably 50 people in the room. And I'm kind of standing at the back. And he gets up and he talks and thanks everyone. And then he kind of walks out of the room. And he goes in and he's walking towards me. And it's pretty clear like we're going to shake hands here. Like there's going to be some sort of engagement. There's there. There was like no other way. He saw me. There was eye contact. And so I can't listen to this. I was like, what are we doing here? And anyone that knows me knows. that I'm always like, all right, we're doing the, we bumping fists or we're shaking hands. We're going to go in for the hug. Like, how is this going to work? So I am physically cringing right now. The audience can't see it, but I'm physically cringing right now. Yeah.

So I decided to go for the handshake. So I go just hand out handshake. Simultaneously, he's going in for like the half hug and like, let's dab it out a little bit. And did you know him? Why would he hug you? Well, that's why I was like, I think we're more like a handshake relationship. But he was like, what's up, baby? And he like kind of went in for the hug.

And then I kind of like went in for the hug. And we kind of like ended with this like weird. Then he like went for the handshake. And then we kind of just like bumped into each other. And everyone in my boss was there. And he was like, that was so painful. It was, I got to say it was just, and that's the only time I ever met T. Yeah, that's honestly one of my great fears is just like meeting a rapper and having to, you know, immediately read the room and, you know, adopt the right kind of social moors and attitudes.

Yeah, and I will say this, like, COVID's been great for me on the handshake front because there's no question about it. It's like, hey, we're doing, we're either doing elbows or we're just doing the head nod. So, like, that problem has been largely disappeared from my life since March. Honestly, it's actually increased ambiguity for me because I still like to shake hands. I think they're irreplaceable, honestly. So we were, I saw you this week in person. We went out with a friend of ours in the industry, got a drink outside, and you just went in for the handshake, which is a savage move to do it.

I brazenly, brazenly shook hands with no regard for anyone's safety. It was amazing. Strongly recommended. You're over here for us. I don't know. I mean, I was just immediately into my Purell. We might get banned from Twitter for spreading COVID misinformation here. But yeah, shaking hands, totally underrated now.

All right. So that was my TI story, but it looks like he's not going to be doing any more ICOs. Yeah, but I think in the grand scheme, he kind of got off with a relatively small penalty, right? Yeah, I think he only had to pay $70,000. So I'm sure he's not worried about it. The thing I don't understand is all these celebrities affinity for terrible token offerings. Like, why did they have the need to do this? Yeah, it's really strange.

I mean, there's so many celebrities that have done this. Floyd Mayweather or Paris Hilton. I mean, the list goes on. And it's not like Floyd is short on cash. Or maybe he is now. Maybe. Maybe he is now. But he's money.

That's in his name. Yeah, it is in his name. It's true. So Arc Invest came out with another great piece with coin metrics. So this was on the heels of their awesome piece last week. Yeah, this is their second white paper on Bitcoin. It's a second in a series. So this is written by Yassine, who is great.

The first one was about kind of theoretical grounding for Bitcoin, where it kind of sits in terms of other settlement media and other kind of monetary institutions. So where to situate Bitcoin. And the second one is super numbers driven, jam-packed full of pretty great data from the coin metrics guys. And there's some really amazing stuff. I mean, they make an estimate for where they think Bitcoin's market cap is going to be in 2025.

I'm not going to spoil it. Download the report, but it's in there. They model Bitcoin's value in a bunch of different ways. and they look at the trajectory of Bitcoin's exchange volume, compare it to equity markets. They think Bitcoin's exchange volume could surpass equity markets by about 2025. I mean, some really impressive analysis in here, data-driven stuff. And Yassine is a really, really talented writer.

So I highly recommend this report. So ARC is actually in the perfect example of, what I was talking about earlier and Michael Saylor was saying that the companies that are really at the bleeding edge here have founders or CEOs or CFOs that are really bought in and you know Kathy Wood is super bought in at Arc and so they're doing great things. In 2017 I think might have been even 2016 I went to visit Art Chris Berniske invited me to the office there when I was still in school and I sat in on their Friday ideas meeting and we talked about crypto and at the time date about 200 million, I think, in assets under management. Today, they have something over

10, 15 billion now. So in terms of the most successful asset managers of the last three, four years, Ark is probably the number one most successful. Tesla has been really good for them. Yeah. I mean, not just Tesla, though. All of their theses have really borne out. And obviously, Bitcoin's been a big part of that, too. So you did some content this week. You went. on a city group webinar. Yeah, those were a couple of weeks ago, but yeah, that was with Tony McLaughlin, who's he's quite senior in their payments practice. And unsurprisingly, he doesn't love crypto, but he was kind of kind enough to suspend

his harsher critiques of crypto for the duration of that episode. And so I was doing my best to pitch stable coins to him as a genuine and a viable alternative settlement infrastructure. And he was very nice about it, but he totally doesn't buy the idea of stable coins. Well, it's not for everyone. I think the reality is that, you know, so I actually did a panel today with some institutional participants for trade group. I'm not sure if I'm supposed to talk about it. But the big question around stable coins is some people have in that crowd is just around,

Can it be used to settle institutional-grade transactions? And that's really not what the use case is at this point. I mean, we're not going to be settling repo transactions with Tether anytime soon. Like, never, actually. So I think the stable coin thing in that context, you know, we're talking more about getting to a point where there's probably either a central bank digital currency or there's some sort of an institutional consortium dollar that's maybe issued by the DTCC that allows for some of these use cases to happen.

So sometimes when you talk to folks about stable coins, they kind of go in that direction. And like stable coins aren't good for that right now. Yeah, I think the synthesis there is that you have to really understand crypto financial infrastructure as highly contextual in terms of its value proposition. So if you have access to the best financial plumbing and the best legal context there, you know, if you have good access to the U.S. banking system, then you have, you absolutely don't need stable coins pretty much for anything. However, if your local banking system is in some developing country where it takes many hops to get to the U.S. banking system and as a

consequence, you have tons of intermediation and cost, or if property rights locally are not particularly secure, then yeah, you're actually probably really going to benefit from the existence of stable coins. So I think it's always contextual. in terms of whether you find crypto infrastructure to be useful. Definitely stable coins, even the sketchier ones, are better than having no access to the dollar whatsoever or incredibly unreliable banks or weak property rights. But they're probably not better in terms of their legal and settlement quality than actual, you know, U.S. financial plumbing.

I think that's kind of my synthesis. Yeah, I think that's well said. I mean, look, they're clearly, they're solving a problem for someone out there. They're up to, what, $16 billion, just from a base of almost nothing in the past year. Yeah, the proof is in the pudding. I mean, there's clearly demand for stable coins somewhere out there. Maybe it's not U.S.-based individuals, but there's a lot of dollars out there that circulate outside the U.S. All right, so I think that's it for the week.

I'm battling a cold here. This is a tough, you know, every time you get a cold, right now, it's like, do I have COVID? And it's just going to be like that for a while. Yeah, I hate to say it, but I'm sensing some low energy levels from you over there. I mean, when I tell you, I'm battle on a cold, I'm battle on a cold right now. I'm congested. I've got a sore throat. It's bad. If I have to do this by myself next week and just monologue for 40 minutes, I'll do it. I will, I will battle through. I will, you're not going to see me quit this podcast. Well, feel better.

We'll be out with a great episode on Monday. We will. We've got Tom Lombardi coming on Monday from 3 IQ. Speaking of crypto asset management, as we were talking about earlier, startup really going after that prize when you got chief risk officers running asset management innovation functions at other places. We're going to show you the other side of the coin. All right.

So that's it. Oh, last thing. I finished the three body problem, the first book. Yeah, I finished. The first one as well, I'm halfway through the second one. Yeah, so I liked it. We'll do a full book report when we're done, but enjoyed it. Yeah, I think the, and I've heard that the third book is even better,

but the premise is very, very clever. Definitely makes me wish I spent more time understanding physics in high school. I had that same realization. I think you have to be really smart about physics to write good sci-fi as well. That was the other thing I realized. Yeah. Yeah, some people think physics is just about measuring how fast things are going and balls are dropping, but it's actually about the nature of existence.

That's very true and very deep. So on that note, have a great weekend, everyone.