On The Brink with Castle Island - Weekly Roundup 02/16/24 (Treasury rebukes WSJ, BitVM, Ethereum ETF prospects) (EP.504)

Episode Date: February 16, 2024

Matt and Nic are back with news and deals of the week. In this episode:  On The Brink is now on Farcaster The pitfalls of Web3 social The boys have problem with seed phrases Optimistic rollups on Bitcoin are now possible?  ETF flow updates GBTC and Mt Gox flows  Why the halving may not be bullish SEC vs Debt Box  Why we think an Ethereum ETF is unlikely SAB121 update The Treasury rebukes the WSJ's story on Hamas' use of crypto Can John Deaton unseat Elizabeth Warren?  Sponsor notes: Navigating the Avalanche: An Introduction to the Avalanche Network In Coin Metrics State of the Network Issue 246, we navigate Avalanche's role in the digital asset ecosystem

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 to Britain's ailing economy with a new round of Conjecturee 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. And this episode is brought to you by Coin Metrics, and here is the Metrics Minute. Today's Metrics Minute, we're looking at Avalanche. Avalanche. As you may know, Avalanche's three-chain architecture comprises the exchange chain, the contract chain, and the platform chain. transaction count on the contract chain peaked at one million daily in early 22 before the downturn

it rebounded to about 500k a day in May 23 and it did reach a record of 6.3 million daily transactions in November driven by a surge in inscription transactions quite interesting there are a lot of blockchains that had massive inscription transactions when that frenzy was underway A lot of blockchains actually went down because of that. Fees on the contract chain average around 10 cents. In April 2020, daily active and new addresses surpass 500K a day fueled by interest from financial institutions

like Wisdom Tree and Wellington asset management who used Avalanche's custom subnetwork called Spruce, ostensibly for foreign exchange and interest rate swap executions. That is your metrics win it. Metrics Minute, Avalanche. We haven't had an avalanche update on the Metrics Minute's minute. That is the first one. Keeping it fresh at quite metrics.

Yep. Good job. So do you know that we had a snow day up here? I thought the Massachusetts wasn't meant to have snow days because they're well equipped to handle the snow. So I was in New York on Monday and I was supposed to come back on Tuesday, but I ended up coming back on the last flight on Monday because we were supposed to have 18 inches of snow.

Got zero snow. It just didn't snow. Okay. How are we in the year 2024 And we still have meteorologists calling for 18 inches of snow and you get none So did you have a snow day anyway? Well, all the kids were off of school and you know, I didn't go into Boston because I was expecting it to be 18 inches of snow It said it would start around 9 o'clock and just never came

That's insane It's yeah The science of meteorology is in its infancy. It really is. What a gig, though. You just go on TV, you get people all riled up and, you know, people watch. I never watch the local news unless there's a huge storm, but never came.

It's notoriously unriable here in Miami, actually. The weather forecasting doesn't work here. In the summer, it says every single day that there's a thunderstorm. And then, you know, some percentage of the time they have that. But we people don't trust. No one trusts the weather forecasts here. People complain about blockchains. Plenty of things in the real world that don't work either.

Yeah. In any event, what a busy deal week. And I should mention that this on the brink channel in Farcaster, it's getting some adoption. So there is a lively community building here on Farcaster, which is an open, decentralized social platform. And the client that I'm using is Warpcast. So our handle there is on the brink on Warpcast. So I encourage everyone to check it out. You're having some technical issues, though.

So I was one of the earliest adopters of Farcaster, and I forgot how to log on. And I don't know what your credentials are. This is like crypto 101 stuff here. Yeah, so what's the deal? If you lose your seed phrase, are you out forever? I don't like that. How did you lose your seed phrase?

I don't know. I wrote it down. I probably didn't even write it down. Oh, this is terrible. I mean, it's a social network credential. Not money. I don't know. Maybe it will be.

So I lost, I think, the seed phrase to one of the most valuable handles on Forecaster, which is just NIC. And now I can't participate in our thriving community here. So you're going to have to do it for me. Brink Nation. Germany. We got someone in Oklahoma hopping on here. We got people chirping you about Zinn. It's great. You got to find a way to get on. Yeah, let's see. Let's see what the community is saying. Kaimi says they like the intro song. It's one of the best ones out there. Sorry, Nick. I know you mentioned you want to change it.

I think I made the intro or well. I paid someone to make it, but I found. No, who found the clip? You found the clips? I found the clips and then we did it on five. It's a $5. Hang on a second. It was my idea, though. It was my idea. I think it was a joint collaboration, but.

The intro is obsolete. It refers to the financial crisis of 2008, which is so long ago now. That was a fulcrum experience. That's why Bitcoin exists today. This is because of that financial crisis. But we've had more financial crises. since then. And we will have more to come.

So shouldn't we refresh it with like Silvergate and signature related newsreels and similar such things? When does the bank term funding program add? Is that in March? It was a one year program, right? Yeah, Arthur Hayes really thought that

something would happen when it ended. Well, is it officially over? Because I feel like that's the original banks are a crisis ready to to happen at any moment really. Well, didn't the bank that acquired signature also went down? Am I just imagining that? I don't know if that was the same bank.

It could be. But yeah, there's a bank in New York that's really struggling at the moment. So that's my issue with the intro. Aside from the fact that we used very generic free to use IP unconstrained guitar music, which I don't like, that it's an obsolete intro that we should refresh because we've had another crisis.

All right. So the bank term funding program, it was announced on January 24th of 2024, the Federal Reserve announced that they will cease making new loans on March 11th, 20204. So I would say the next banking crisis will probably be March 11th, 20204.

And we have a whole new set of soundbites. But if we really knew that, then wouldn't that be reflected in the regional bank prices today? What's the meta on that? So if you're an equity participant, are you shorting those bank stocks knowing that if they just turn this thing back on, you really think they're going to let 100 community banks fail during an election year? Well, so then that suggests that we won't have a bank crisis. I don't think we will because why would the FDIC and the Fed sort of willing to do that?

the banks have had some time to shore up their balance sheets, etc. I think we get a nice little one-day crisis there, and then it's open up the bazooka, inject more liquidity, please. Well, elsewhere in on the brink, Farcaster commentary, Brand at Dead says, Great Insights, Re-supposed courtroom warmth. Thank you.

Yes, thank you. We agree. That was a great insight. That's all I'm seeing. Please keep posting, I guess. Because, again, we don't know who listens to this thing, and we don't know what they think. Yeah, hop into the channel. We'll keep it lively in the channel.

We'll figure out a way for Nick to actually get access to his account again. It's got to look, it's tough to be, you know, a co-host of a channel that you can't even get access to. Do you think Dan Romero can restore my account or is that against the rules of Farcaster? there's got to be a way to restore the account. I think you're tied into your eth address. Yeah, I mean, I'm starting to think that this whole Web 3 thing, maybe we should go back. Like Web 2 account recovery, that works. You know what's really cool is Coinbase just added pass keys.

This is a great user experience now to be able to just authenticate with your face ID onto some of these platforms. So do you not need... private keys anymore or that's in conjunction with a private key? It's just the Coinbase custodial login interface now. You don't have to go through the 2FA login flow. You just use a pass key. I'm pretty convicted in the notion that we will not scale to more than a few hundred million users unless we can deprecate the whole private key and BIP 39 thing.

I think that's probably right. It needs to go away. It's been fun. You know, it's been a good 15 years of scrolling down words on a piece of paper. But I always forget which order I wrote them in, you know, like, am I going down the list or am I doing a zigzag? Oh, yeah. You're terrible with that. Why wouldn't you just go down and then up? I can't decide, like, am I doing the snake model? Am I going down and then doing a circle, like starting from the bottom of the next column? And then also, some of the words look like other words.

They do. My handwriting is very bad. You're giving me cold sweats right now because this is a, this is a pain. We went through this recently. It's, yeah. We can't say any more about this, but we went through this exact problem recently. Yeah. Turns, turns out that it's pretty obvious that you go down and then up and then down again,

but it wasn't obvious to you. I mean, I shouldn't be trusted to write down this stuff. Handwriting's bad, unclear convention in terms of, which how to read this stuff. And if you get the words out of order, you're screwed. Totally. Like they have to be an order. They don't tell you that in blockchain.

It's cool. All right. Well, let's hop into some deals of the week. It was a busy week. This is going to end up being one of these things this year where we just have 30 deals, certain weeks, and we're going to have to make a cutoff point, I think. The market is back and all sorts of things are getting funded now. So the first one up is RW3 Venture.

This is a blockchain venture capital fund. They raised $60 million for their debut fund. We've already done a couple deals with these guys. So congrats to the RW3 Ventures team. A really good debut fundraise there. Yeah, really exciting to see new funds get raised. A really positive sign. Next up, we have Superform, Crypto Yield Marketplace.

There is 6.5 million from polychain block tower and circle. Then we have Flood. This is a protocol for order routing. They raise $5.2 million from Bain Capital Crypto, archetype and robot ventures. Then Ripple is reportedly acquiring standard custody and trust company. They are a crypto custodian base in New York. Then we have Fortify.

This is the Castle Island Company. They raised $10 million. They're an MPC custody business from Electric Capital and Pantera. Next up, we have architect a crypto trading platform. They'd raise 12 million from Block Tower, Tioga, Coinbase Ventures, Parify, and SV Angel. Then we have Altiverse. This is a Web3 gaming company that raised 4 million from IDG, Anamoka, and Morningstar Ventures. Next up, this is my deal of the week.

Watches.io, no surprise about what they do. Well, it may be a surprise, actually. They're a platform for trading and tracking watches using the blockchain. They raise $1.9 million from Lemnis Cap and Big Brain Holdings. I kind of like this idea. you kind of, you know, take something physical, you attach it to a digital record, and then you have provenance off of that. That's a really interesting concept, I think.

I don't really wear watches, though. I love it. I think I'm the last believer in the fidgital concept. I think it's really just me, but I still like it. Fidgetals are cool. Next one up is analog. This is a blockchain interoperability protocol. There is $16 million from Tribe, Wintermute, and GSM.

Then we have Blueprint Finance, their DeFi Protocol. There raised 7.5 million from Tribe, hashed, and Portal Ventures. Then it's Lava Network, a modular blockchain project. There raised 15 million from Jump Capital, Hashkey, Tribe, North Island Ventures, and others. Then we have Drosera, an incident response company. There is 1.5 mil from Antigram and Arrington Cap. Lastly is Helica, a Web3 gaming analytics platform. raised $8 million from Pantera and Spermion.

Man, I mean, if this bull market keeps rolling half of the podcast is just going to be the deal section. I don't know what we're going to do. It really is. It's heating up. This market is on fire right now. I guess it's on the back of these Bitcoin ETFs, but there's a lot of new innovation happening.

I want to talk a little bit about this Bitcoin L2 space. So it seems like to me, this BitVM invention, if you want to, I guess it is an invention. is really spurring a new wave of innovation on top of Bitcoin in terms of bringing the Ethereum virtual machine onto the Bitcoin L1, which has been really interesting to see. Yeah, I agree. And have we talked about BitVM on the podcast? I don't think so.

We should do a whole episode on it at some point, but maybe tee this up. Yeah, I was lucky enough to spend some time with Robin, the inventor of BitVM recently. And I now am convinced that there will be optimistic. real-up's, true optimistic roll-ups on Bitcoin in this year, 2024. How BivVM actually works? I couldn't actually tell you.

It's very complicated. Computer science stuff. But what it allows to take place is a federation of sequencers, let's say, can manage a roll-up that settles to Bitcoin. and the only trust assumption you need is that one of them in that set is honest and would be if you know how an optimistic roll-up works. Only one of them needs to honestly broadcast the fraud proofs to the underlying blockchain for user funds which are pegged in to the roll-up to be secure.

Caviat, slight asterisk, the miners also need to not do a 51% attack. but I and censor the fire proofs I don't really believe that the miners would do that I know people always like when we're reasoning about Bitcoin security they're like oh what if the miners do this and that it's like yeah what if the miners

set their machines on fire like and blow up their data centers why would they do that the miners depend on Bitcoin for their revenue a lot of these are public companies so why would they do something that destroys their revenue forever so that's not even in the realm

of things I contemplate Like I don't, when I'm doing my security red team analysis, I don't at all ascribe any probability to the likelihood of miners going completely berserk and doing completely logical crazy stuff. Sorry. No, you just have to follow the, follow the incentives, really. Yeah, I mean, like these are public companies. They're long Bitcoin structurally by definition. Why would they want to basically destroy Bitcoin? They wouldn't. So anyway, the security assumption seems very tolerable, which is that only one member of the validator set or whatever sequences, whatever you want to call them, has to be honest for the optimistic roll-up to work. And optimistic roll-ups are the number one roll-up type on Ethereum, arbitram and optimism,

very successful, tons of TVL, it works. So we're on the brink of being able to import this technology from Ethereum to Bitcoin, which if you remember, this is what we always said we were going to do. find the best technology from the other blockchains, be conservative about it, wait till it was optimized and implement it. And this is now possible with BitVM with no soft fork required. And I think that's immensely bullish and very, very exciting. It's going to be immensely bullish for the miners. I'll tell you that. I mean, you think about the fee revenue that this could take into the miners. That's very bullish. It's also very bullish just from the perspective of letting people,

people do things with their Bitcoin in a, you know, public chain context. So you want to participate in yield and defile. You want to actually move Bitcoin around, earn interest, that type of thing. It'll be interesting to see what people build. I mean, I think that it will actually cannibalize fee revenue on the base layer, if I had to guess. So you're kind of in the mind of similar to optimism and arbitram that it will actually grab fee revenue. Yeah. Because the business model of these altruise. is M.AV and fees on the L2, obviously there's some conveyance of those fees to the base layer, but I think you're actually alleviating a lot of the pressure on the base layer.

But even so, I think it's a good thing to happen. It opens up a new transactional space, which has been missing in Bitcoin. So I'm still very supportive of it. Well, what if you can merge mine some of these L2s? I mean, wouldn't the miners still enjoy that? Yeah, I mean, that's basically what's going to happen. it reduces the fee intensity of all the transactions that would have been on the L1 that are now on the L2.

Yeah. So this was my, I tweeted, not to turn this podcast into me reading my own tweets or anything, but I tweeted a list of the stuff I'm excited about on Bitcoin. And this was my number two thing I'm most excited about. And what's number one? Oh, just ETF flows. I mean, you can't. not that's of course the number one thing that's driving the market today everybody's already

clued on to that this i think people haven't woken up to yet i mean how many people know about this the fact that optimistic roll-ups are now possible and even the bick corners a lot of them don't know what an optimistic roll-up is because they don't pay attention to eat stuff oh yeah i think we're three narratives away from this right so you have first you have the bitcoin etf narrative that's playing out over several months here as these r a platforms, independent broker dealers, the wirehouse banks, add support. And we should talk about the banks because there's some news on that front as well. Second narrative is going to be the halving and that'll play out. And then the third narrative, you know, later in the year maybe

will be some of these Bitcoin L2s launching and people actually understanding that there's real projects that are building in the space. The halving was my least impactful narrative that I had on that list. Out of 10, it was the number. It was the bottom. I am looking forward to some of these halving parties. I just don't think the having is a good thing for two reasons. One, the security budget continues to decline. Two, it's going to plunge a bunch of miners barring a further Bitcoin rally, which is possible into bankruptcy.

Because a lot of them have to have heavy debt loads and they have to service the debt. The revenue gets cut in half basically. maybe not in half, but declines, let's say, by a third, assuming maybe there's some hash rate fall off. Those miners, when they go bankrupt, they sell all the coins that they've accumulated. So for me, the having is not only is it not necessarily a positive thing, but it could easily be a negative thing. Okay. Sell the news then, right? Well, we'll see what happens to the miners post-having. But yeah, I think there could be insolvencies.

All right. Well, let's talk about some of the flows in the Bitcoin space. So, you know, we should talk about the Bitcoin ETFs because these things are absolutely roaring right now. Bitwise crossed $1 billion. BlackRock is up over $5 billion, which is just crazy in three weeks, just most successful ETF of all time, I believe. But we still have some overhang. So Genesis Capital, which is, of course, the bankrupt crypto lending company,

subsidiary of digital currency group, they received court approval this week to sell positions in several of gray scales products that they were holding as collateral. So this involves the Bitcoin Investment Trust, GBTC, the Ethereum Investment Trust, ETHE, and the Ethereum Classic Investment Trust, ETCG. Remember Ethereum Classic? Wow. So on Wednesday, the price, if you just take all of this collateral, the price of all of this combined would have been $1.65 billion. So you could look at that, and the naive way to think about that would be all that's got to get sold. So they need to go out and they need to hire a broker. It's not a rush process.

So this will be orderly. But I think we should clarify that this does not mean that 1.65 billion of spot selling pressure is necessarily coming to this market. And so part of this bankruptcy approval is that a bunch of these assets are to be returned to their customers and their creditors in kind. And so if you put Bitcoin into Genesis, it looks like a big portion of the creditor base will be getting Bitcoin back. And so the dynamic here appears to be, you know, you have this big slug of GBT. Yes, the GBTC will get sold. And yes, you have to sell Bitcoin as a second order effect there. But there will be a rebuying of Bitcoin in order to make the actual creditor's whole.

So I actually don't think this is as big of an overhang as people think. And I guess I'm not that worried about it. The other way to think about this is that $1.65 billion is equivalent to the last three days of net ETF flows. So that's offset by the insane buying that we're seeing of these ETFs on a net basis. That's even accounting for the GBDC outflows. So we bust some fud there. And the next fud I want to talk about is this Mount Gawks thing that's been hanging over

the industry for ages. So what's the total cumulative value of the Mockox coins at this point? I don't know. And I don't appreciate you putting me on the spot like that. All right. So sorry for putting you on the spot, but I think it's around 140,000 Bitcoin, more or less. I think there's already been some distributions. It could be a little bit off in that number. So today's prices, that's like $7 billion worth of Bitcoin. Now, that's a lot. and it's obviously more than what Genesis has out there. But I think the important thing to remember here is that this bankruptcy process has been playing out over a very, very long period of time.

And so if you have had the opportunity to sell into these claims and the claims have steadily been trading up. And so, you know, if you want to take 50 cents on the dollar for your claim, you would have been able to get out of that already. So the holder base of the Mount Cox claims has shifted over time. And my understanding is that there's a large SPV. that is a sizable holder of this. And it's Bitcoin,

um, Bitcoin whales, Bitcoin OGs basically that are behind this SPV. And the idea here is that the SPV would be able to distribute in kind. And so I actually think that there's a pretty good chunk of this Mount Gawks claim that as it's sent back will just be sent back through to these people that were long Bitcoin anyway. And the reason they entered this SPV is because they really saw it as a way to accumulate Bitcoin

at like half off. And so I don't think that this sell, again, I am speculating, but I don't think that this is going to be as material as people think in terms of a net selling event. Yeah, you have to basically model the objectives of the agents that are in the trade. And if they were purely arbitrage, although this is a multi-year arbitrage, kind of hard to call it an arbitrage, then you would imagine they'd be closing the trade and blocking. in the yield. But if they were doing it in order to buy up cheap Bitcoin, and they just wanted Bitcoin exposure, you'd imagine they wouldn't sell at the end. Yeah. And you and I've met these people, right? Like the profile of the people that are coming into this trade recently, you know, past few years, have been people that realize there's only 21 million Bitcoin and they want to buy someone on a discount.

Yeah. My understanding is that the large doers of this trade were doing it. for the latter reason, which is Bitcoin exposure. So again, I don't think it's as big of a deal. So that's that. All right. Well, shall we talk about Debtbox? Kind of an interesting twist in the story here. How is Debtbox not on the Wall Street Journal front page every day?

I don't understand this. So maybe it's a refresher. So Debtbox is this company that was targeted by the SEC. The SEC, this is now factual. deliberately misrepresented evidence in order to receive a temporary restraining order against this company. This led to an asset freeze and basically the company getting shut down. Irreparable harm was done to the company. The SEC, once it was revealed that they did this, got reprimanded by the judge. They went through and said, oh, we're going, this was just some

enforcement attorneys that went rogue. We're going to do some counseling and, you know, we're going to train them to not break the law again. And then they asked quietly for the case to be dismissed against Debtbox. Now, in a very interesting twist, Debt Box, who's actually was the target now by the SEC, they are asking a federal judge to deny the motion to dismiss the charges against them because they want their day in court and to prove that the SEC was acting in, quote, gross misconduct against them. So fascinating situation. This is a huge scandal that's getting absolutely no mainstream attention. Yeah, I mean, this one is really embarrassing for the SEC, and it was pretty insulting

the way they tried to sweep it under the rug after the misconduct was revealed. I've never seen a situation here, though, where the entity being sued has asked to deny a motion to dismiss. That's an amazing twist. It's an amazing twist, but, you know, between debt box and then this Prometheum thing, which continues to hang out there where the Promethean guys are the only ones that have gotten the special purpose broker dealer and they're out there saying okay the first asset that is a security is Ethereum it just seems like there's a there's a story underneath the hood here that is probably

not a great one for the SEC okay a couple more SEC related items first one I want to touch on is the spot the Ethereum ETF so I don't know what the prediction markets are saying do you know what they're saying about the odds of the Ethereum ETF? I haven't seen it really. Well, we can look it up. Okay. So Polymarket says there's a 58% chance

an Ethereum spot ETF is approved by June 30 of this year. So I would say the general sentiment in the crypto industry is that it's going to happen. And

I couldn't disagree more. I don't think it's going to happen. Why not? I think Ethereum is so different from Bitcoin that the SEC will not be persuaded by sort of a carbon copy of the arguments that were made in support of Bitcoin. This isn't a criticism of Ethereum, by the way. This is me putting myself inside the mind of the SEC. And I think they will be able to plausibly claim that it's super. different that the Bitcoin ETF approval has no bearing really on the Ethereum

ETF approval, especially if staking is included. I don't think at all an an ETF that gets approved has staking in it and then as such that makes it, let's say we do get a spot ETF with no staking that makes it a worse instrument than just holding Ethereum, right? The four four points of opportunity cost. So I don't think it would see that many inflows either for that matter because if you wanted Ethereum exposure as an allocator, you now realize that you're investing an inferior instrument. You're getting diluted as an ETF holder and you're benefiting people that hold basically Staked Heath. And that might be sort of like a hard thing to justify to your MD or whatever. So I would be

cautious of, I have you wrong here. I'm cautious of the high prong of ETH ETF. Yeah. So my view on this is that if you just interpret the law, it should be approved. But my view is that it will not be approved until it is forced to be approved in court. And so, you know, it'll get denied. It's never been about the law. It's not about the law. It's not about the law. It's not about the law. Now, okay, so it gets denied, which is kind of my assumption. Then the question is, who sues the SEC under the Administrative Procedures Act and says, look, we have ETH futures, ETFs. It's the same type of instruments, the exact same argument as Bitcoin. So we should have an Ethereum ETF. So, you know, I think that lawsuit would easily be won. You basically just copy and paste the Bitcoin

arguments. Now, who's actually going to bring the lawsuit is my question. Because if you're gray scale, you have $8 billion in this Ethereum trust and you're charging a 2.5% management fee. So why are you, you just saw what happened to GBTC in terms of the outflows. Why are you in a rush to sue the SEC so that you can bring your asset down to 20 basis points or whatever the you know maybe they'll take it down to 150 like they did for Bitcoin but you'll just hemorrhage out basically a UM and so it might actually be in grayscale's best interest to not sue the SEC at which point you have to question who else is going to sue the SEC you know do you really see a blackrock or fidelity suing their regulator I I doubt it right so exactly yeah the SEC was compelled to

authorize the Bitcoin ETF don't forget that the big financial institutions that are the other names around the table here are not going to sue their primary regulator they're just not going to do it so i actually have a really hard time seeing how under this regime an eth etf is approved at all and i think that's very positive for bitcoin because the market the allocator market outside the crypto space will look at it and be like okay well there's something different about bitcoin it's bitcoin and then a spateau base and all the rest. It's probably not a bad prognostication.

It'll be interesting to see how it plays out. I mean, all it would take is one of these issuers to sue. And I actually do think there is a firm that will sue. So stay tuned, I suppose. It'll be an interesting year for the Ethereum, folks. The lawsuits also take forever. I mean, how long did it take from the inception of the gray scale lawsuit all the way through to resolution?

I mean, it was over a year, right? Right. So one more SEC item, Sab 121, cross it off your bingo cards. I think that there's a misconception in the crypto space that the banks are against us. And I don't think that's true. The banks would like to do crypto stuff. They're always looking to find waste or non-interest income and, you know, just grow the scope of the things they can do. several bank lobby groups have joined forces to urge the SEC to repeal Sab 121.

So this actually, I think, is very telling. It shows it's not crypto versus the banks. So the banks actually see crypto as a potential business line item for them, but they've been stonewalled by Sab 112. Yeah. So the bank policy institute, the American Bankers Association, SIFMO, which is a securities industry and financial markets association, and the financial services for, have all collaborated on this letter. And, you know, this is really just highlighting the chilling effect that staff accounting

Bolton 121 has had on the whole industry. Now, it's interesting on Thursday, which is today when we're recording this, a spokesman for the SEC came out in response to Bloomberg asking about this and said, this is non-binding staff guidance. However, that completely is not in line with what the U.S. government has already come out. So they've had an independent oversight committee come out and analyze this and say that it's actually a rule. So the SEC put out a rule. They're calling it non-binding staff guidance, but that's clearly not what it is.

So this will play out over time, but it's interesting to see the banks. Obviously, it's completely rational. If you're looking at this, you're saying we could be making money in the custody business. We have authorized participant desks that should be trading in kind. We have clients that want exposure to this, and we want to just more or less be in it. It was the government accountability office, actually, that did a study, and they concluded the SEC's guidance amounted to a rule subject to congressional review. Now, the SEC knows that, and they still came out on Thursday and said, no, it's just guidance. This is a pattern of completely lawless behavior, and they wonder while their attorneys are leaving.

Joe Kernan had a great clip on Squackbox going after Gensler on the crypto stuff earlier this week. The narrative has definitely reached the CNBC crowd. Okay, one last thing while we're complaining about Washington. Actually, they caught a dub here. Treasury Undersecretary Nelson testified in front of the House and our favorite representative, Emmer, asked him about the Wall Street Journal numbers regarding purported use of crypto by Hamas and terrorist groups,

Under Secretary Nelson said that the Wall Street Journal's numbers were inaccurate. So if you remember, this was a big story in October of last year, which we made a huge fuss about. And now we have the body with the most authority in the land regarding, you know, how much crypto was used by these terrorist groups was a meaningful part of their operations. They're saying it wasn't. So another L for the Wall Street Journal. They were wrong. I need them to admit it.

I want a full retraction. I thought Emmer did a great job in that clip. And I actually thought that Nelson handles himself quite well. It was one of the better testimonies I've ever seen. It held his ground. And there's a delicate balance there between we want to catch bad guys and we want to actually clarify that this emerging technology is not really how people are using. You know, it's not how terrorists are financing themselves. Yeah, I mean, this might be a controversial statement, but as far as I can tell of all the

bodies that oversee crypto in some way within the U.S. government, there's a lot. The Treasury seems to be the most sophisticated and not uniformly hostile to crypto. And this was key. Yeah, there's green shoots, I'd say, in every department. I mean, we actually, we have some Brink Nation participants in various agencies that Listen, they're not on Warpcast, but there's some really smart people that understand these nuances pretty intricately, I would say, across the government. We're going to be accused of being feds if we say that, but, but anyway, what I would like

for the Wall Street Journal is to retract. I'm demanding retraction, and I'm still mad. Okay, still mad. It's been four months. Yeah, I can hold a grudge for a lot longer than four months. Chips on shoulders put chips in pockets. That's what they say. Is that what they say? That's what they say. That's the first time I've heard them say that.

Now, lastly here, this is kind of interesting. I don't know what to make of this. So the Boston Globe reported yesterday, Boston Globe, by the way, I still subscribe to that paper. I definitely wouldn't recommend it. But they are reporting that John Deaton, who is a pretty prominent crypto attorney. Folks in the XRP community will definitely know him. He's been very involved in some of the ripple fights against the SEC that he is evaluating. Apparently he moved to Massachusetts and he's evaluating running against Senator Elizabeth Warren. Now, I've never met John Deaton. I don't know, I really don't know anything about John Deaton. So I'll reserve judgment. I need to study his positions. And obviously the first instinct is to say anyone running against Elizabeth Warren like you would

support. But I will say I have seen some polls on how people would fare against Elizabeth Warren. It's not as pretty as you would think. I don't know if there's anyone that can beat Elizabeth Warren in Massachusetts, if we're being honest. Yeah, I know. She is the safest seat in the country. I mean, I think there's, I think Charlie Baker, if he decided to run, would probably give Elizabeth Warren a good shot. But I mean, it's to the point where like if Tom Brady, did Iran, I am 99.9% sure he would lose. Yeah, I mean,

she has absolutely rock solid support from the good people in Massachusetts. There's many good people in Massachusetts. Their love for Elizabeth Warren is very perplexing. It knows no bounds, really. Yeah, she's beloved there, so just because she

annoys us here in the rest of the nation doesn't mean she'll get voted out. I really like John Deidon. I think he's a great Twitter follow, but unfortunately, I don't think he'll win in this case. So stay tuned on that front. All right, that's a good place to leave it. We will be back next week.

Everybody have a safe and healthy weekend. We'll see you on Monday.