On The Brink with Castle Island - Weekly Roundup 03/24/23 (Do Kwon apprehended, SEC v Coinbase, bank crisis retrospective) (EP.409)

Episode Date: March 24, 2023

Matt and Nic return for another week of news and deals. In this episode:  Matt's turkey trouble continues Nic's vespa problem Nic's latest Choke Point 2.0 article Did the government destroy Signature on purpose? Who is the main architect of Choke Point 2.0? Why was Signature closed when PacWest and First Republic were given time? The Catch-22 in NY banking law Who has recourse in the Signature situation? Why we won't be going offshore The SEC announces charges against Justin Sun and celebrity endorsers The SEC sends Coinbase a Wells Notice FTX creditors recoup $460m from Modulo Capital Reps Emmer and Soto introduce the Blockchain Regulatory Certainty Act The White House report is hostile to crypto Matt's Hong Kong conspiracy theory Is the EU racing ahead of the US in terms of regulation? The XRP case is nearing summary judgment Bitwise announces their futures ETF $BITC We read some of our podcast reviews Content mentioned: Nic in Pirate Wires, Did The Government Start A Global Financial Crisis In An Attempt To Destroy Crypto?

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 quantitative 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 a Bitcoin. Bitcoin.

Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. And what a busy week, huh? A lot of regulatory. For the regulatory pod, I mean, what a week. There's some pickleball talk on this podcast. I think we'll probably have some turkey updates.

I had a busy turkey week. All right. Let's start with the turkeys. That's clearly the top news item. What's going on? All right. So the turkeys have been back for a while. I have the fence, they're coming over the fence.

The problem remains the neighbor feeds the turkeys. So I'm pretty sure my neighbor does not have a garbage disposal. He just feeds turkeys the food. So you're going to have turkeys in a situation like that. So I had a consult with a professional, I guess I would call them like a pest eradicator because it has having some other issues with mice, unfortunately. I've got an unfinished basement, had a big water issue that have talked about on this podcast. So he was over.

I was explaining the turkey situation. And he got like medieval. He pulled out this cinder block thing that is a, the best I can describe it would be it's a mouse trap on steroids. This is probably the size of like three cinder blocks. And he said, why don't you just put this underneath your porch? I was like, what is that going to do? Wouldn't that like threaten a small child? or something? Well, yeah, which I have a couple, which

long story short, did not go down this path. It's like a bear trap for turkeys? There was a proposal that was made that not only would my mice issue be solved by this thing, but potentially anything that came in the domain of my yard would be dead, basically. Any creature, any creature, mice to turkey sized and possibly up. Yeah, he said, I'm not allowed to tell you that this will kill squirrels, but wink wink, nod, squirrels, chipmunks.

And I said, well, take a look at these turkeys. And he said, yeah, that's cinderblock thing. Is this legal in the state of Massachusetts? Can't be. Can't be. So I did not go down this path. So I'm still just kind of dealing with these turkeys. But then maybe like four hours later, I just looked out my window and there were just five turkeys just perched staring down at me.

At night, they sleep in the trees. And they were just looking at me as if they knew what I had been contemplating. but I spared their lives. I think they're smart creatures and they may even be listeners of the pod so they know what you're planning. And for everyone who's on Twitter telling me about pellet guns and BB guns,

I'm aware. There are limitations to what I can talk about on the podcast. We don't advocate for violence on this show, even if it's against birds that threaten us. Let's just say they're not deterred

by certain pellets or flying objects. Got to increase the caliber. Yeah, I think so. But then you have to clean them up. The problem is unresolved. Unresolved. Unresolved. Now let's get into your news.

So the VESPA is out of commission. You know what's crazy is I now get flagged down on the street on the VESPA by listeners of the show. Really? Because I have mentioned the Vespa, so now people will know to look out for me. It's not crazy. I've gotten some pictures of just yellow Vespas from people, listeners of the program. Could be me. Could be you, yeah.

So my Vespa, her name is Daisy. She is in Vespa prison right now. She has a boot on her. It's all very unjust. So I am stranded. I'm immobile. How do you get the boot off? All right, here's the crazy thing.

The analogy here is like a startup dealing with the SEC. I would like to come into compliance, but my paths to compliance have been closed off. You just don't know. what the rules are. You don't even know who your regular. The rules of the game are unclear. Chi, Daisy is in my garage. I don't have the title to my Vespa. I went to the management. I explained to them. I don't have the title yet. The title's coming in the mail.

So I did lose my mail key, so I can't get the title. It may be in the mailbox. I don't know. I can't get into it. This sounds less like a regulator problem, more like a U problem so far. partially self-inflicted partially unclear regulatory regime i explain all this very patiently to the building management they're like okay that's fine i wake up this morning go down there excited to take a little trundle on daisy and lo and behold there's a boot on her she's imprisoned i can't ride daisy they tell me i've wrongly parked her in my own parking garage in my own parking spot she's stuck I explain the situation. They tell me not until I get the title.

So they're pretty much the Gary Gensler of building management. That's terrible. I mean, it's a small little thing. Shouldn't you just be bringing this up in the elevator with you, maybe putting it in your unit? Should have done that. Yeah. That's tough to hear.

Sticky situation for me right now. Speaking of pickleball, did you catch this Brian Armstrong tweet? We'll get into the Coinbase story, but he had a pickleball tweet that went pretty viral. Yeah, I like this one. So impressive flexibility on the analogy front from Brian Armstrong. So he's explaining the Wells notice that they got from the SEC in.

He was asked to explain in NFL terms. He says, imagine you've got football and soccer refs on the field, but we're actually playing pickleball in parentheses. Fastest growing new sport in America. Absolutely correct, Brian. He says, the refs can't agree on the rules of the game. And one of them decides to change a call they made back in April 2021. It's pretty good.

Pretty good tweet. Yeah. I like that tweet. That's got over 6,000 likes. Great sport. 800 retweets. Yeah, so you have a pickleball teacher. Yeah, I had to resort to getting lessons on pickleball.

You're never going to improve if you don't actually learn from the professionals. I mean, if I was getting, you know, just shellacked by 7-year-olds in pickleball, I would probably get some lessons too. I will say I don't lose to 70-year-olds anymore. So we've made progress. Is there a ranking system in pickleball? Is there any way to actually quantify how good one is? There actually is.

Yeah, I think it's on one to five. So Shea, who runs the Bitcoin meetup down here, is one of the best pickleball players in South Florida, actually. Really? He's a truly excellent player. I think he's like a four. I believe it's out of five. So there is a ranking system.

All right. I'm probably sort of in the two range. All right. Should we talk about some crypto stuff? We had a busy podcast week. Yeah, I think we had two on one day. So both ordinals focused. I sat down to Nick Hansen of Luxor. That's our second Luxor episode. Luxor Bitcoin mining pool all in on ordinals, all in. They really, yeah. They were printing the four megars, right? They did the four megger. And there was an interesting story behind the four mega, which covered that episode.

A lot of risk associated with that because it was a non-standard transaction. So there was a non-zero risk that the transaction would be malformed and they'd mine the block, transaction data would be invalid, rejected, and they would lose all of the capital that they spent mining the block.

It was actually a very risky situation. Yeah, yeah, that was a good episode. Ria also sat down with the founders of gamma.io, Jamil and Nick and talking about the Ordinals marketplace that they just launched. So enjoyed that one as well. Big week. I also did an inscription just now on Bitcoin. What did you do?

I inscribed my latest article on Bitcoin. Your latest article is a follow-up blog to your Operation Chokepoint 2.0 blog. I recommend everyone check it out. Publish it on pirate wires. We'll put it in the show notes. Did the government attempt to start a global financial? crisis in an attempt to destroy crypto. Good question.

It is. I would say that there's a lot of shenanigans here. Yeah, I mean, are they responsible for this financial crisis? Kind of. I mean, do I think that they, some folks in the government, did they think they could surgically take down the crypto adjacent banks and things got totally out of control? I think that is part of the story. I do think that's part of the story.

So I'm investing it that in depth. Please read the whole article. I know it's very long, but it's really critical information. I mean, this is definitely a coordinated crackdown on the Fiat rails here. That's what we're seeing, no doubt. Getting a back account as a crypto startup right now

is just probably harder than it's been since 2014, I would say. It's bananas. So I identified, the individuals in the administration that are basically architecting chokepoint 2.0. Actually named them in the article. Really the key person is Barat Ramamerti, formerly of the National Economic Council, which is basically the economic decision-making entity in the White House. Used to work for Elizabeth Warren.

Fun fact. She actually is the one that placed him in the White House. so and there's a whole consolation of other people but i think we should know who's basically behind this stuff so i named all these people i mean it's really interesting obviously some of these people martin gerenberg was chairman of the fdic during choke point 1.0 in the obama administration no surprise that he's back we know that elizabeth warren and gensler are tight as thieves the adrian harris part at dFS makes sense i mean dFS effectively shut down signature. I think there's going to be shareholder lawsuits there should be. I mean,

that was basically an illegal eminent domain of a publicly traded company. I've never seen anything like that. That's basically like just taking someone's house. And really one of the key points I wanted to convey in that article was signature was not in as bad financial position as many of their peers that were given time to save themselves. In particular, First Republican Pac-West arguably had a worse financial outlook on that weekend, that fateful weekend when signature was shut down on Sunday night. They were given time to raise liquidity. Bruce Republic was able to muster for 30 billion of injections. Signature was not granted that same affordance. So it does look like a double standard to me. And DFS says that they had lost faith in management. So apparently they had lost faith

because management had a view that they should be banking this sector of the economy that is not illegal. Yeah, it's a totally catch-22 because, so I looked at the New York banking law. It's extremely broad, actually, as it turns out. You can basically shut down a bank for almost any reason you want, which doesn't really work in our favor in this case. The one of the reasons is if, A, they're not giving you information when you ask for it. That was actually one of the things they mentioned. So we'll see if that was true or not. Another reason is if you think they can't function in a safe and sound manner. That's that safety and soundness term again. And as we've seen over the last few months, all these financial regulators keep saying banking crypto startups is

incompatible with safe and sound banking operation. So because they decreed crypto is incompatible with safety and soundness, then referring to safety and soundness is just another fancy way of saying because you serve as crypto. So it's totally a catch-22 situation. I mean, this This is why you have the judicial branch of government, and I think the courts here will have a lot to say about it. Unfortunately, that doesn't do anything for the signature shareholders. And these folks are going to be zeroed out here, which is really a shame. It seems like this is a very coordinated action from on high. Yeah, on Friday closed, signature was worth $4.3 billion.

A few months before, they're worth $22 billion. So shareholders are clearly an injured party here. Also, clients of the bank are potentially an injured party. So that's going to be one of the, that will be the crux of litigation, which I do expect emerges here. Finding a client that was basically lost money because they were forced, all of the crypto clients of signature were given 24 hours last week to withdraw their funds. So basically the whole crypto business was shuttered.

They were given 24 hours to find new banks. So it's very possible that also some of the clients were injured by this liquidation. You know, it's important that to contextualize some of these people that you called out in the article have been around for other regimes, even well before choke point 1.0. So there's this great excerpt in the book Crypto by Stephen Levy, which was actually written before cryptocurrencies. It was a book about the early days of cryptography. And there's this excerpt about Zimmerman who invented PGP. I'm just going to read it here. So by early 1991, Zimmerman was making progress toward a working product.

Then something happened to change his course and to make PGP famous. The unlikely shift was that the U.S. Senator Joseph Biden, the head of the Senate Judiciary Committee and co-sponsor of pending anti-terrorist legislation, the Senate bill 266. In the draft of the bill, which was introduced in January 24th, which was in 1991, Biden inserted some language, and I quote, It is the sense of Congress that providers of electronic communication services and manufacturers of electronic communication service equipment shall ensure that communication systems permit the government to obtain the plain text contents

of the voice data and other communications when appropriately authorized by law. So that I'm going to stop quoting. That would have effectively banned cryptography in the United States in 1991. And so that was the original sort of crypto wars. And obviously now Biden is president and, you know, overseeing this bureaucracy of folks that are also going after cryptography and cryptocurrencies. But important to remember that the crypto industry won that fight. Crypto industry is going to win this fight.

I mean, that's why we have a system of government that has laws that cannot just be adjudicated by the executive branch. The executive branch is there to enforce the laws. They're not there to make the laws. they're not there to interpret the laws and to rule on them. So unfortunately, that doesn't do anything for signature, but important to contextualize this. Yeah, I mean, and this is ultimately where checks and balances come in.

A lot of people think that I'm kind of a dumer about this because I keep on diving deep into all the bad stuff that's happening. But I'm not a dumer, to be clear. People keep asking me, am I going to go offshore? We're not going offshore. We're staying here. We're staying put. We're betting on America.

Castle Island will be an American venture capital fund as long as we're allowed to be. We don't leave that. We don't give up that easy. Okay. We're named after an American island, okay, a fort. We are. Much like that fort, we are going to stay put. Keep fighting.

We are. Okay. You know, you've got voice and exit, and we are using voice. We're using voice. Balogie is encouraging people to exit, though. We are, we're not going anywhere. as much as we love Balagy, we won't exit. Okay, I went through a lot to become a U.S. citizen.

I took the test. Okay, I had to answer three questions. Actually, one of them was who was the vice president at that time. It was Joe Biden. So I legally immigrated to this country and I'm not leaving. All right, I like it. We're a very patriotic podcast, a red, white, and blue. And, you know, every four years there's an election.

So things could get better. Yeah, this isn't over. This isn't over at all. And in fact, you know, I've been really encouraged. So I talked to so many banks in the course of researching this article. Many of them had never had a crypto practice before a couple months ago. And many of them now see the opportunity to service these startups. Of course, there's costs associated with that.

A lot of bureaucracy, a lot more oversight. But it's not impossible. You just need to be a little bit courageous. And I'm really hardened by what I'm seeing. So yes, things are a little tough right now across all regulatory fronts, but, you know, we seem to be prevailing in the courts. There's certainly some favorable court decisions happening. Congress is pushing back. And the market is also clearing.

We're seeing the market responding to this in real time. I agree. All right. Good rah-rah there. I think let's hop into some deals of the week here. Good news is that companies are getting funded here in the U.S. Yeah, deals are back. So starting with Open, that's with a three instead of an E.

I mean, I guess maybe that's pronounced Ope Thrian. Probably not. Ope3an. That's, yeah, that's how I would have said it. Yep. That's a Web3 super app. They raised $28 million from Anamoka, Dragonfly, Republic Crypto and Galaxy. Next is Sanoa.

This is another Web3 super app. They raised $7 million from Quiet Capital underscore, Accrue, Human Ventures, and others. Web3 Super Apps, very, very hot this week. I couldn't tell you what that means. Can you be a super app when you're at the seed stage? Maybe. Yeah, no, it's ambitious. It's set optimistically.

Super apps are huge in China. We don't really have super apps here. Intention to become a super app. Next up we have Turnkey, a crypto custody startup. They raise a $7.5 million seed from Sequoia variant and Coinbase. Next one up is CCP games. This is a blockchain video game developer. They raised 40 million from Andreessen.

CCP games? I don't know about that name, man. Yeah, given what's happening with TikTok in Congress right now, I don't know if you would want to name your startup CCP. Why don't they run this by us? I mean, we read deals every week. I can tell you what a good name is. Turnkey, that's a great name. Then you hop right down to CCP.

I would change that. I'm sure it stands for something benign, but optics matter. Last up, we have Metrica with a K. They're a blockchain risk management platform. they raised a $4 million extension to their series A from M12 and NYCA. Well, we got some bad boys news today. Let's roll it. Why don't we roll it?

Yeah, bad boys. What you're going to do? What you're going to do when they come for you? Bad boys, bad boys. What you're going to do? What you're going to do when they come for you? All right. They caught one of the bad boys, Doquan.

They caught him trying to get into Montenegro from Serbia. apparently he's arrested. Very little is known about this at the time of this recording, but I think one of the bad boys is now in custody in Montenegro of all places. I mean, this is a great thing, not just because he appeared to have created fraud in many different ways, but also because it's catharsis. We can move on from the battle days of 2022 into a glorious new era where these people are actually brought to justice. Shinsky, Kwan, you know, like, it's all happening now. The wheels of justice are finally turning. I love it. I mean, we need to get Sam behind bars, and we also need to rectify these three arrows boys.

So another breaking story here is that a bankruptcy judge, Judge Martin Glenn, on Wednesday, ordered three arrows co-founder Kyle Davies to comply with the subpoena that was posted on Twitter in January and said that the hedge fund liquidators could seek to hold him in contempt of court if he fails to do so. So we might be heading in a world of criminal penalties here against Mr. Kyle Davies here pretty soon. Apparently, Doe Kwan was staying at this glorious estate in I think it was Serbia. Some pictures emerged. Oh, really was nice? It looked really charming.

He was at an Airbnb? Don't tell me that, really? Well, you know, it rented Castle. I don't know what platform he used to rent it. I presume they accepted Bitcoin. but it looked nice. Yeah, I'm not surprised. I wonder what he was doing going to Montenegro.

I wonder if he got tipped off that they were on to him. The thing is, is that I just can't imagine there are that many Koreans in Montenegro. He's pretty recognizable. Oh, yeah, he's one of the most wanted people in the world. See what happens there. Do they have an extradition treaty with Korea? No idea. No idea.

I think we're about to find out, though. I think the U.S. might try to get him, too. Who knows? So that's a array of positive news. Also in bad boys, well, I don't know if you describe him as a bad boy, TBD. Justin's son, the SEC announced a litany of charges against Justin's son, in particular over his BitTorrent token, the Tron Foundation, and other charges against celebrity endorsers. I have to be really honest with you. I didn't know who half of these celebrity endorsers were.

So I'm going to read them off. Some of them I know. Lindsay Lohan, know her. How do you not know? There's two people I don't know on this list. DeAndre Cortez Way is Soldier Boy. I'm familiar with Soldier Boy's War. You know Soldier Boy.

Austin Mahone, don't know who that is. No idea. Michelle Mason, don't know who that is. Miles Parks McCollum, who goes by Little Yadi, maybe I should know who that is. I don't know who that is. You don't know a little yadi? I don't know a little yadi.

Is that, I feel like I should. Maybe that's an embarrassing thing to admit. No idea who little yadi is. I actually like some of this music. Schaefer Smith, also known as Neo. I think I know who that is. You must know Neo. Is that like the Neo from like 10 years ago, Neo?

Yeah, I mean, this is all like musicians from the early to mid 2000s. And then Acon, obviously I know who Acon. We know Acon. Didn't Acon have his own coin or something? What's he doing promoting? So why is he promoting Justin Sons' coins? I believe he was trying to start a crypto enclave in Africa somewhere, if I'm not wrong.

So these people got paid like $10,000 to just send out a tweet and ended up costing them quite a bit more. You hate to see it. Get back to making music, guys. You know, it's hard to knock the SEC going after Justin's son. I'd say that is well within the scope of things that I would expect to see the SEC doing. Yeah, here's the thing. We're not a blanket against the SEC on this show. Some of what they do make sense.

Yeah. Some of it is puzzling and maybe doesn't make sense. But in this case, I think they're within their rights. Now, on to the next story here. So the Coinbase SEC thing, I think is a lot hairier. and this is setting up to be probably like a two-year fight, if I had to guess. So the SEC has served Coinbase with a Wells notice, notifying the company that they intend to pursue charges against them

related to unregistered securities and their staking program. I guess we'll be talking about this for the next two years. Yeah, so talk about Catch-22s. This seems like a bit of a Catch-22. Coinbase had a lot of contact. with the SEC. They went public. The SEC, Paul Gras, had a thread saying, the SEC gave them basically zero feedback on what to change or how to register their tokens. The SEC, apparently when asked, didn't tell them which tokens they considered to be unregistered

securities. The point of the Wells notice is to give the company the ability to defend itself in writing before the enforcement action comes. But the SEC is, been extremely vague on what they think the precise infractions are, or which tokens they believe on the platform are unregistered securities. So they're not really giving them the chance to practically defend themselves. All that said, Coinbase is one of the most well-heeled and well-organized possible opponents here. So if they do plan to contest this, you couldn't really have a better champion from the crypto industry's perspective. So the quote, unquote clarity we're all seeking, we may actually get that through this case because they're not

just going to roll over, it appears. I think that's right. I mean, ultimately, though, what we do need in terms of regulatory clarity is just an act of Congress. And so I continue to say the two things I would love to see is, number one, a stable coin bill, just codifying how stable coins can be issued in the United States. And number two, I'd like to see a market structure bill that says which regulator is in charge of the spot market and then how you bring these tokens into compliance. how you go from raising capital to having a protocol.

And I would probably put the safe harbor in a proposal like that. So that's kind of where we need to get. But I think, you know, where this might end up is that Coinbase could end up winning this in the courts after a long battle just based on missteps that the SEC has had over the years, the lack of guidance, the fact that they've reversed course on a number of issues, the fact that they have the Hinman test out there. And I think Gensler will probably be out of the SEC by the time this is all decided. This, to me, feels like this is setting up to be a multiple year battle, similar to kind of when

was it Clayton dropped the ripple thing kind of on his way out. That's all over from the Clayton era. People forget that, that that was not a Gensler special. That was the previous administration. So this could be one of these things that drags on for years. But obviously, Coinbase will fight it. it's existential to their business to win this case. Yeah, and here's the thing, you know, as we've said on this show before,

these agencies have finite resources and also finite political capital. They don't want to lose in the courts. That's embarrassing. You don't want to lose in the courts. If their resources end up tied up in these expensive costly litigations, there's certainly a question thereover whether that's the best use of taxpayer dollars, and it also just means save less resources for other stuff. So I agree. If Coinbase does fight it, I think it'll go for years. And hopefully we'll get some answers there based on the resolution of this case.

So I guess we'll talk a lot about this Coinbase case. And certainly this is going to be something that the industry will be rallying behind, I'm sure. Over to the kind of the bad boy exchange, there was some news out of FTX, the crime family, this week. So they actually settled with Medulo Capital. Medulo Capital was that trading shop that Sam gave $475 million to. It looked like sort of an Alameda 2.0 type of structure. So they settled for $460 million out of the $475, which is a really good outcome there for FTX creditors, in my opinion. There's a world where that was just vaporized, that cash. It looks like they got it back.

It looks like they're on the path to settling with SWE, too. I think we're going to probably have more news coming out about that. in the next couple days. But John Ray is out there getting settlements. Yeah, impressive result there. Certainly a good one for the creditors. No idea where Medeulo capital had the cash. I'm shocked.

They were able to recover most of that. I wonder if they just didn't put it. Maybe they're good traders. I don't know, right? Like the market has not done great over the past year and it seems like it's only a delta here of $15 million. So in legislative news, Housewip Tom Emmer and Darren Soto, who's a Democratic representative out of Florida, they introduced the Blockchain Regulatory Certainty Act, which stipulates that companies that don't

hold customer assets should not be considered money transmitters. That seems like a quick win, right? Yeah, I mean, so far, I think historically we haven't had any dedicated. legislation in Congress passed, which serves the industry to date. But there certainly are a lot of bills being introduced these days. Maybe they'll be snuck in in the omnibus. That seems to be how these things work. They end up getting shoehorned in some other piece of legislation. Yeah, that's, well, that's how we got screwed on the infrastructure bill, right? So there is also, I think, Emma introduced the anti-CBDC Act. We're seeing a lot of

happening at the state level. DeSantis. Yeah, Descentes did that. DeSantis. He tried to introduce a bill to to ban CPTCs in Florida. In Texas, the proof of reserve bill I actually hosted a panel in D.C. this past week I moderated with the author of that bill, Representative Capri Gleone in Texas.

That bill made it through committee and could be passed as early as April. So look out for that. Proof reserves in Texas law that could be coming. Wow. All right. Well, that'll be an interesting development. You know, it's good to see this be a bipartisan bill that, you know,

Emmer went out and looks like got Darren Soto on board with this. I think that's how you have to do it here. You have to find more Democrats that are kind of like-minded on these crypto issues and want to see startups be successful. I think that's the path to getting something a lot more comprehensive. Start with something like this blockchain regulatory certainty. Act. Maybe we get to the stable coin thing. Ideally, we get to this market structure bill. I mean, that's a win. If you get stable coin clarity and you get a market structure bill in the United States,

that's when this industry is 10 times larger. So did you read the White House report that is like 500 pages? And many of those pages are dedicated to harassing the crypto industry. If I was to summarize it, it is crypto is bad. It's unproven. and dollars are good and you should trust them not and you should trust the banking system not not these crypto things yeah i'll admit i haven't been through it with a fine tooth comb yet i'm trying to keep my blood pressure levels down so i haven't ready yet there's a lot of claims that are made that are easily refuted i would say in that is it even worth refuting them or should we just leave them to it I think we should just pretend that that was not published.

I don't think that a lot of people are going to be reading it. It seems like a paperweight. We already know what the White House thinks of crypto. That's already established. They don't like it. They don't like it. They don't like it. You know, it's interesting, though.

There are some people in the White House that weren't that hostile. Carol House was spearheading their strategy around the time of the executive orders. She's now left. But she didn't seem that hostile to criminal. crypto. Unfortunately, she's not in there anymore. Do you want to hear my conspiracy theory about Hong Kong? I'm ready for it. Any in all conspiracy theories, I'm into it. All right. So Hong Kong has announced that they are going to attempt to be a hub for crypto startups. So there's actually, I think it was a Bloomberg article this week that said that there was something like 80 startups that

were already on board to move to Hong Kong. And my tinfoil hat on this is that nothing happens in Hong Kong without China and the CCP being on board with it, obviously. I think that's not commercial. Right. I mean, Hong Kong is pretty much explicitly a part of China now. Yeah, but you can't do retail crypto in China. So the Chinese retail bid is non-existent, which by the way, imagine what the price of Bitcoin and Eath would be if people in China could easily buy it. It would be having a different conversation. My theory is that China is experimenting here with Hong Kong, wants to get a bunch of crypto infrastructure placed because they're worried about sanctions. And if they invade Taiwan, then they're worried that they're going to be cut off from the SWIF system, among other

kind of sanctions. And they just want to have those rails up that they can move capital around. And they want to have companies that are proximate that can facilitate some of that. That's what I think. The other explanation I've heard is that they want to create a bit of an outlet for Chinese individuals, financial firms that are frustrated by the lack of crypto. And so this is a soft way of reintroducing it. I don't know how that works, though, if you have a hard prohibition in mainland China and then kind of a regulatory sandbox in Hong Kong, I don't know how porous that barrier is. Yeah, it's not like a Macau casino where you can actually walk into a cryptocurrency exchange.

Do you imagine if they just set up like Binance terminals once you get off the boat from mainland China into Hong Kong and just sit down at a terminal. He starts slinging like long-tailed coins. We should have physical brick-and-mortar crypto exchanges. That should exist. That'd be fun. It did exist. And remember that New York City one?

There was one way back in the day. Here's an interesting thing on the seasonality of crypto prices recently. If you look at U.S. trading sessions, Bitcoin has been sold off. but if you look at the hours when U.S. markets are not open and open, that's when it's primarily rallying. So it looks like U.S. individuals are selling and the rest of the world is buying. And right now the rest of the world is basically responsible for a rally. So sentiment here is grim.

We're reading the headlines. everyone's depressed. Sentiment elsewhere is sunny. An interesting divergence that's emerging right now. Well, the UK, I have to hand it to the UK. It seems like they are on the right path here from a regulatory structure perspective. Kind of I'm bullish on the UK at the moment. Really?

Yeah. I don't think anyone said that in years. Really? No. As a UK citizen myself, I'm certainly not bullish on the UK. I don't think there's a lot of startups yet in the UK, but I think that they're trying to be a crypto hub here recently. Within the past few months,

I've had some legislation to codify what it means to operate a regulated spot venue, to codify what it means to operate derivative venue. So I could see the UK making a play here. Well, here's another narrative violation. I've heard from more than a few startups now. They actually like the micro-regulation in Europe. Yeah, people are saying that. Which is you don't normally hand it to the European.

for their regulatory work. But people like that there's clear rules of the road. People would love it. You know, if they came out, if Congress came out and passed a bill tomorrow that the SEC oversees crypto and there were clear rules on how to come into compliance, people would love that here too.

It's just ambiguity is what's difficult. Yeah. So credit to the Europeans, believe it or not, Micah somewhat favorably received. Now, I don't know. I don't know if the UK is going to be the next Silicon Valley, but yeah, it'll probably catch a bid. Actually, we have a company that's proximate to us that is evaluating moving to the UK. Really?

I don't think I've told you about this. Yeah. I didn't know that. Yeah. Well, Castle Island were stand put, as we said. We will be here. Here's something interesting. There are now rumors that the XRP case is nearing summary judgment.

Yeah, I saw that. Ripple has been flying on the news. Here's the thing. Summary judgment doesn't necessarily mean Ripple is winning the case. No. It means something is going to happen. It could be SCC wins,

Ripple wins, or the judge just sends it to trial. Those are three possible outcomes. It's not necessarily good, but XRP enthusiasts are acting like it's good. I have been an XRP antagonist for the longest time. I hold the view that that thing was pretty predatory towards retail. However, the enemy of my enemy is my friend.

That's a big, however. It's a big however. I'm magnanimous of you met. I wish them the best in their case against this tyrannical organization. I've been a critic of the ripple people, certainly. many times the XRP fans don't like me but I'm with you I actually support them in their case and good good luck godspeed you know I don't know what else to say about that one so bitwise has announced the launch of their Bitcoin strategy optimum role ETF ticker BITC similar to BITO

but more efficient and basically better at rolling the futures. So in theory, a better instrument for people that want Bitcoin exposure through the futures product as a regulated ticker. So how I would think about this, so I did a podcast with Matt Hogan yesterday. I recorded it. And they would love to do a spot product. They have applied for a spot Bitcoin ETF, as has. Fidelity and a number of other sponsors.

SEC is incorrectly, I believe, denying that still. In the meantime, you have these futures-based ETFs. And, you know, the problem with the futures contracts is that they can be quite inefficient at times, depending on the price of Bitcoin and whether the spot market is higher than their derivatives market or vice versa. You get some irregularities in terms of the cost to roll those contracts. So some of these Bitcoin futures ETFs either just buy the front month contract or they buy the near month futures contract.

What this one is trying to do is be more for savers and less for like short-term traders, I guess I would say. And I'd caveat all this with not investment advice. But they try to just get the optimum kind of lowest cost on the role of the futures. So again, it's not a perfect product because it's not a spot Bitcoin product. That would be the best product. But this one is a is an enhancement. They're really smart team over there to come up with it.

Good job bitwise. Did you see this Microsoft news? It's kind of got buried this week, but they're reportedly building out a browser that has cryptocurrency payment functionality. That would be very disruptive and very interesting, I think. That would be pretty cool. I don't know if I would, you know,

when was the last time you used a Microsoft browser, though? Yeah, I don't believe I've ever used Edge. Edge pops up sometimes by accident on my computer, and I always think I have a virus. Microsoft is just making some great strategic moves with this AI stuff. Have you tried chat GPT4 yet? I actually have not tried it yet. What do you think?

It seems very good. Our merch guy has been doing a bunch of AI stuff. We need to pay a little bit more attention to our merch empire here, which is frankly just crumbling. I feel like we have opportunities with the merch that we're not capitalizing on. There's so many ideas that are flurrying back and forth on our text messages that are not just being actioned. We really just need to start to speak these to the merch guy.

Yeah, I feel like the barriers really on our end. But we have so many catchphrases now. We do. So those ought to be merch. We do need to just merchify this whole thing. But there's a concept of having AI powered, you know, cartoons, I guess I would call them. The merch guy's onto a few things. cooking. Stay tuned. On the brink. Dot shop, is that it? On the brink dot shop, I believe that domain

still works. There may even be stuff for sale there. There is. Yeah, you got to kind of punch around. I had to actually walk someone through on DMs, how to do it. You would think that if you had a merch shop, you'd just be able to like see the store, but we didn't, I don't know what we did. We didn't do it that way. We're working on a refresh. If you'd like to support the podcast, there will be a way to do so. I guess the best way to support the podcast is to leave a five-star review, right? Do we still think that? Unsubscribe, resubscribe.

Yeah, reviews are good. I think they help. I don't know. I haven't looked at our reviews lately. Maybe we should see if there's any funny ones. Yeah. How do you find the reviews? I don't know, because I stopped using the Apple thing.

I'm using this other. All right, so reviews. Average is 4.8 with 242. ratings. Guys, we can do better. We can do better than that, guys. That's pretty good. I feel like this is a, this is a 4.9 effort every week at minimum. All right, let's see. Here's a recent comment from Nicholas Beard. The deals may be boring, but they're essential in the same way I read financials. They don't exhilarate me, but the information is relevant. Thanks, Nicholas. I agree. I agree that they're not exhilarating yet necessary. They're, they are essential.

I'm a big fan of fake deals by the intern probably the best mining crypto these days he should bring back the intern he was he really snuck in some duzies there were some there was some like multi-million dollar long-tail coin deals in there okay this one's pretty funny this reviewer immerzel says

now that it's football season every time I hear the announcer in the football game say brought down by as in football commentary. I can't help but finish in my head with bad mortgage investments. That's pretty good. We're going to have to get brought down by bad treasury investments update. I'm scrolling past some meme reviews. I don't like that one.

I'm not even going to read it. It's obscene. Don't leave obscene reviews. That's uncalled for. And this reviewer recently says, we'd love to hear your thoughts on Zcash Selanta, which I think is the Irish word for cheers.

Zcash. We love Zucco. Zcash, I think, is pretty good. I think the privacy model's good. I think they have a spam attack on the blockchain, which has been bloating the blockchain. Did you see this? No, I don't really follow it.

We don't hold any Zcash, so I don't really follow it too closely. I would say Zcash made a big, contribution by productizing zero knowledge proofs in a real world context. Maybe the first time that was done, at least in the crypto space, obviously now there's been a cambering explosion of ZK technology. So their contribution to the industry has been significant, even if it's not one of the top 10 coins anymore. I have a story. I was at the chain.com partner summit. I think it was 2014 or probably 15 down in New York this was before Zcash

Zucco did a talk on zero knowledge systems and how you could use that in the context of chain solution and I was sitting in front of Lale Brinard really yeah she was there did she seem compelled she seemed quite interested hmm so Lail Braynard formerly of the Fed now of the National Economic Council. It's a very powerful position. In the White House. I don't know if she's pro-Cryptor or not.

She was at that thing. She strikes me as having MMT sympathies, so I'm guessing she is not. Yeah. Yeah. I don't know if privacy coins would have really, there was no ZECASH at the time, but don't know how popular that would have been.

All right, well, that is it for the week. Very intense week. Bitcoin's still doing well. Stay safe out there. They couldn't stop us. Trying to keep us down. They can't. Get your bank accounts up and running.

Hug your banker. Hug your banker. Bankers are great people, except for the ones that don't bank crypto startups or blockchain. There's a few. In fact, there's quite a few that have given crypto startups

hard nose recently. I've had some aggressive conversations on behalf of some portfolio companies in the past couple weeks. The scarcest resources, courage. You know what was a really good bank is Silvergate and Silicon Valley Bank and signature. They were excellent banks.

They were. They were. They were truly very good banks, except for possibly bond portfolios. The service quality was good. Service quality was great. People were great. People are still around, thankfully. So I'm sure they'll go to other banks and start their crypto practices.

The world is worse off for them not being in business anymore. Agreed. Agreed. All right, everyone. That is our optimistic take on the week's events. We will see you on Monday. Let's safe and healthy weekend.