On The Brink with Castle Island - Weekly Roundup 04/07/23 (OCP2.0 remedies, Treasury on DeFi, FTX.com relaunch?) (EP.414)

Episode Date: April 7, 2023

Matt and Nic return for another week of news and deals. In this episode:  What are the prospects for dealing with OCP 2.0? Creditors are considering relaunching FTX int'l The boundary between being a visionary and a scammer Nic's feud against NPR What's the deal with the bug eating meme? Are lobsters bugs? What happened to the tungsten cube NFTs? Singapore banks might be warming up to crypto Hong Kong is red hot as a crypto zone A new paper alleges the Fed has overstepped its discretionary authority The Case for Banning Crypto The US treasury report on DeFi protocols Apple embeds the Bitcoin whitepaper on all laptops Nic's UFC picks and Matt's golf picks Content mentioned in the episode: Julie Hill, From Cannabis to Crypto: Federal Reserve Discretion in Payments Politico, U.S. Diplomat to Washington: You're Becoming Obsolete in One Big Area of Tech Policy US Treasury, Illicit Finance Risk Assessment of Decentralized Finance Kathleen Breitman in Fortune, Ethereum, Arbitrum, and why L2 solutions are such a mess

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 Concentuteeasy. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have some.

something called a Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. Kind of a slow week, huh? Not a lot of news this week. Yeah, it's the first kind of quiet week in a while. Nothing major broke this week. No more banks failed.

I guess that's good, right? In the grand scheme of things. Just no huge enforcement action, no huge bank failure. But that strategic petroleum reserves running pretty low. Was anyone talking about that? Really, is it? Yeah, it's very low. There's something about the Saudis.

The Saudis are now cutting production of oil. Is that a thing? They cut production of oil. I mean, actually, let's pull this up. Yeah, so the SPDR is at 371 million barrels. And a year ago, it was $560 million barrels. So it's lower. apparently there's a there's something about how we we can't actually fully exhaust it because the pressure gets low when it gets emptier

so you may not be able to take it to zero either for that matter well it's probably not a good time to fill it up not at these prices so that's talking spdr maybe we'll have more to say about that at some point in the future we had a busy podcast week uh you had david thompson on from cooper and kirk the law firm that actually went after some of the bad actors from Operation Choke Point 1.0, he's back. Yeah, this was a fun episode. It was one of our hottest recent episodes, actually. Basically, I mean, frankly, calling a Chokepoint 2.0 almost does it a disservice in terms of the severity of what's going on.

Arguably it's worse than 1.0. also he made the point that no one actually really cared about it in 1.0 because the primary target was the payday lending industry which basically absolutely no one cares about it's not like they didn't have they didn't have crypto twitter that's the difference yeah so that's actually something that david said in the episode people are more mobilized around 2.0 so 1.0 they did help bring that to an end they basically filed a lawsuit i think on behalf of this payday lender called Advanced America. That helped. They got discovery from the FDIC.

So the point of a lawsuit isn't even strictly to win. It's to surface facts, important facts, which can then be used to embarrass the regulators if they're overstepping. I mean, I think they would win if this went to the Supreme Court last time around. It didn't even go that far, really. Just the administration changed. Yeah, the administration changed and then Trump settled, right? Yeah, the Trump FDIC was pretty sympathetic.

This time, yeah, David seems really optimistic about the prospects for some legal recourse here. So there are a bunch of cases that are in flight. However, the basically crypto plaintiffs need to come forward. So people that have been in some way injured by being unbanked. these plaintiffs need to sign on to the cases. So that's where we are right now. There's a number of folks doing it. So if you are one of these entities that's been harmed,

you can actually reach out to me, DM, on Twitter, for instance, and I'll connect you to the relevant firms. So that's our ask. if you have been harmed by choke point 2.0, let me know. It's definitely a lot of folks out there. So we've already heard from a bunch. So it'll be interesting to see what these lawsuits look like. But it seems like Cooper and Kirk will be a central actor in it.

So it was a good episode. Yeah. I mean, he thinks that the industry's number one recourse is actually on due process grounds. So Fifth Amendment challenge. Because you get discovery, right? You get to see all the emails under that one. Yeah, I mean, and who knows what's in there. And also, I mean, it is, it does appear to be unconstitutional for regulators to

to basically legislate to determine what industries can and can't do business. So that hasn't changed. So, but even if, you know, even if the case like doesn't go all the way, it still potentially has a deterrent effect. And then you sat down with the figment guys. Yeah, I sat down with. Lorien and Ben over at Figment to discuss staking the Ethereum Shanghai upgrade. So Ethereum withdrawals are going to start here pretty soon.

I think that's on the, what is it, next week on Wednesday or Thursday. So it'll be interesting to see what happens to the price of ETH there. Any predictions? I don't know. What's your view? People are worried about the withdrawals, I think. Is it? I mean, I think there's good arguments on.

Yeah, I think it's probably seldom news. I don't know. It's hard to say. There's certainly going to be people that withdraw, right? People have been locked up for a while. But to really answer that question, you'd have to have a view on just human behavior and what people's cost basis is. So hard to say. If I had to predict what the price of Eith is going to be, I'd say right about the same. Okay. So, I mean, it's kind of similar to Gox opening up withdrawals, right? The idea being there have been people locked in Gox for what, almost 10 years now? and some of them will want to sell.

Someone needs to write a book about that Gox thing. I mean, a big part of that was that Coin Lab lawsuit. So Coin Lab was that company that started in the early days. It was like a light speed backed company. They, as far as I can tell, never really shipped any product, never did anything, but they just sue people. And they were suing Gox for a long time. That did, that massively slowed down the actual settlement here. Yeah, massively.

Just put years onto the timeline of that case. And someone needs to just document all this. The Gox thing has just been such a debacle. Hopefully the FTX won is a lot faster than that. You'd have to imagine that U.S. bankruptcy courts will move faster than the Japanese court, which I guess didn't have any experience with crypto at the time either. Yeah. Part of the reason it took so long.

Yeah. And there's all sorts of issues around you had to physically sign forms and things like that. So hopefully these things can go faster now. The FDX one, there's a lot of rumblings around creditors wanting to restart that exchange. Then there's still, there's like a team of engineers down there still, apparently. Yeah, it's quite interesting. So everything that the debtors, as in the people are running the business now, do, has to be filed with the court.

So you can actually see what their day to day is like. So it's kind of interesting because they're basically operating in public here. And they keep on talking about restarting FTCS because I guess that's an asset, right? The exchange is an asset trying to maximize the value of all the assets. So that's an interesting thing that appears to be there's at least conversations about it. I think that could work. Yeah. I mean, that could work under the proper.

It was quite a popular exchange. I guess you'd have to figure out, like, access from the U.S. wouldn't be a thing anymore, I guess. No, this would be, I think, about restarting international. So I don't think that would include U.S. users. But, yeah, I mean, the product was good. I thought the product was good. It just has to be run by a ethical team with certain boundaries.

Product was good on the front end. I'd say the back end wallets were not very good. That was lacking. But yeah, I mean, if they did a proof reserve, they put someone actually credible in charge of that thing. I think the problem is that the debtors are not strictly crypto-native people, and I think that's fair to say, they are liquidation people. So it might be more of a spin-out as opposed to.

them running it. I mean, John Ray has a lot of qualities, but running exchange is probably not in his skill set. Do you think you could find someone? Is there a person out there that would want to run that exchange, do you think? I mean, that would be a hell of a job. Imagine that being a job, relaunching FTX.

It would be high profile, that's for sure. Kind of an interesting challenge, though, for a seasoned exchange entrepreneur, do you think? it is I mean there's I think the brand is total muds I don't know what you'd do with that you'd have to actually abide by laws which is not something they ever did down there in the first place I don't know I that could be tough I don't think anyone would be in a rush to put their assets on the exchange I think if you were able to get a tri-party custody type of thing going then maybe that gets interesting but I don't know I think all of these other exchanges stand to probably benefit the money most from a lot of that offshore flow. But to be clear, I think it would be a successful exchange if they launched it. I mean, there's clearly a gap in the market. Yeah.

I mean, the other offshore exchanges have been challenged recently, to say the least. I would like to see some of these folks brought to justice. There was actually Jen Vietchner from NYMAG actually put out this tweet that I hadn't seen. So she put a tweet to New York Times ethicist column. and she said this is almost certainly about an FDX employee, right? And so someone wrote in to the New York Times and said, someone I know is a high-ranking employee at a company that was recently exposed as fraudulent and has since gone bankrupt.

He was almost certainly complicit in scamming people out of millions of dollars. He left the company shortly before it collapsed and managed to escape the criminal charges that others are facing, but he has now retired as multimillionaire because of a short time there. What? A lot of guesses on that one. What did the columnists say about this? What was their advice? Their advice was that you could confront the person at the dinner party

kind of privately, don't make a huge scene about it. And if they want to make a huge scene about it at a dinner party, it's on them. But you can sort of go in there and you can just say, you can say, hey, Sam Trucoco, I really don't think that it was ethical what you did when you were running Alameda. I mean, look, we don't know for sure that this was FTX. There have been other scamp. There have been other frauds.

Yeah, there's been no shortage of frauds. We live in the golden age of fraud right now. We really do. That woman who sold the company to JPMorgan, she got charged by the SEC this week. It was a student loan company, so it's outside of crypto even. So you can't make up millions and millions of accounts

and fabricate traction for your product and then sell it to JPM. That's not allowed. Not if you want to stay on the right side of the law. Don't do that. But I guess there's some fuzzy boundary between being very optimistic about your traction and literally making up millions of users in a diligence process. That's a pretty stark line, right?

You cannot be doing that. But yeah, to your point, the difference between like an Adam Newman versus, than Elizabeth Holmes versus an Elon Musk, there's a gradient there that's sometimes a little bit hard to discern. Yeah, I feel like that is often assessed in hindsight. The boundary between visionary and fraudster is a function of whether you succeed ultimately in your ambitions. So I could have actually imagined a world where Elizabeth Holmes bluffs her way into all these partnerships and then actually figures out the tech along the way. And then people are willing to forgive the earlier indiscretions because she kind of got there.

Exactly. Exactly. And there are people like that in the crypto industry, right? They don't quite have it, but they actually think that they do. And they're so confident that they exude this energy that gets people to join their company and help them build. And sometimes they end up building what they thought they could build. Right.

So you have to be kind of delusional to be one of these kind of super visionary founders. and it's hard to know a priori if you're a if you're a fraudster or just a visionary. I mean, obviously there's things that are illegal that you shouldn't do. But I also do think that we are acting a lot with benefit of hindsight when we determine whether someone was like a fraudster the whole way. And if you succeed, you can kind of get bailed out of that. But when you take money from your affiliated market-making entity and put it in the other bucket, then you're a fraudster.

Yeah, that one's clear. We're clear on that one. All right, why don't we hop into some deals? This was an incredibly busy deal week. A ton of deals got announced this week. So, yeah, so not a lot of news, but lots of deals. So first up, layer zero. This is a cross-chain interoperability protocol.

they announced their raise of $120 million at a $3 billion valuation from A16 Z, Sequoia, Samsung, Christi's and others. I'm guessing this actually got done some time ago, given the size of the raise and the valuation. I don't know. Maybe it was reason. Maybe it was reason. Who knows? Next one up is Satsuma.

This is a blockchain data indexing platform. There is $5 million from initialized archetype, open C and others. Then we have Polyhedron Network. There is zero knowledge proof platform. There is 15 million from Polychain and Hashke. Next one is Delphi Labs. This is the incubator arm of Delphi Digital. There is 13.5 million from P2P and Jump.

Big congrats to the team over at Delphi. Next up we have Ledger, of course the hardware wallet company. There's 108 million from True Global Ventures, Digital Finance Group, Vayner Group, Tenty, and Morgan Creek. That ledger, that new product looks really sleek. Have you seen it? I think it's called the Stacks. It's on, I don't even think you can get one right now.

It's on like massive back order. It is designed by the guy from Apple, not Johnny I of the other guy. Next one up is BitGet. This is a cryptocurrency exchange. They raised $10 million from Dragonfly. Then we have lie. a multi-chain liquidity and data gateway company. There is 17.5 million from coin fund, L1 digital, Theta Capital, BlockCelerate, and Abra. Next, we have DAPBAC. This is a Web3 loyalty platform.

They raise $2.5 million from Greenfield and iOSG. Then we have crossover markets, a digital asset trading technology firm. There is a seed from flow traders, Numerra, 2 Sigma, and Wintermute. Next up, we have a merger here. So it looks like the Canadian cryptocurrency market for exchanges is going to consolidate a bit. So you have Wonderfi, Coin Square, and CoinSmart, and they have agreed to merge. That's an interesting development. I mean, I think in Canada, it's just a tough time to operate a cryptocurrency exchange. You've had so many of these frauds up there, Quadriga and others.

And the rules are starting to get a little bit onerous, I would say. and the number of assets you can list. So consolidation seems like a natural thing up there. That's pretty interesting to see a three-way consolidation. You're right, though. The Canadian regulators are pretty attuned to this stuff. I would say further along than their U.S. counterparts, actually. I think Wonderfi is publicly traded,

so maybe that makes it a little bit easier. They have a public currency to go out and get this deal done. But interesting to see. We still don't know where that Quadriga guy is. I don't think he's dead. I believe he's in the ground. Do you? I don't know.

Yeah, I'm on the not conspiracy side of that one. You know I love a good conspiracy, but I believe that he's actually deceased. I think those assets are going to be moving. I think we'll find out that he is living with a different face. Maybe hanging out, maybe he's starting a cryptocurrency claims marketplace. Speaking about just terrible products,

that thing did like $1 in trading. volume. So I think that that was like marketing, though, to publicize that because first of all, it's just kind of funny. So it's sort of like an ironic thing. And then second of all, if they turn on market making on the exchange, then they can claim all of this volume growth. So that's my theory on that. Next one up is Franklin. This is a crypto payroll company that raised $2.9 million from Gumi Cryptos, CMT, ARCA, and others. Then we have Alchemy Pay, the payments provider, unsurprisingly, they raise 10 million from DWF Labs.

DWF. Who are these guys? These guys have a huge deal every single week. At least one, right? Yeah. Yeah, all over the place. Next one up is Eco Sapiens. That's a name.

A blockchain collectibles company. They raised $3.5 million from collab currency. Then we have Astria, a modular. blockchain network. There is 5.5 million from Maven 11, 1KX, Delphi Digital, Figment Capital, and BreedVC. Then we have M0. This is a decentralized finance platform. They raised 22.5 million from Pantera, Road Capital, Standard Crypto, Parify, Distributed Global, and others. Then you have Nibiru Chain, a defy platform. They raise 8.5 million from Tribe Capital, Republic, NGC and original capital.

In the last one of the week is lore. This is a Web 3 co-ownership platform. They raised $4 million from multi-coin. Okay, that was a ton of deals. That was a lot of deals. I guess that's good. Industry woke up. Yeah.

I'm happy to see that. So, our biggest news of the week, of course, Elon Musk changes the Twitter logo to the Dogecoin logo. Yeah, that was big news, huh? Logged in. People didn't like that. What the heck is this thing?

I thought that was kind of stupid. People were scandalized by this. I just don't think it's as funny as he thinks it is. I found the reactions entertaining. I think it's funny how mad people got. Yeah, people... You can do what he wants with it. Yeah, you can do whatever you want.

The product is really kind of lacking, I would say. There are several times this week when my feed just wouldn't load. So I agree. He's also... What do you see? Did he strip? the New York Times of their blue check. Yeah, they said that they were not going to pay.

And so then he took it away from them. And there's that big April Fool's thing. That's my favorite of his product decisions recently. He also, all right, this one really tickled me. He called NPR state-affiliated media. I saw that. Well, that's kind of true, right? Which is true.

I mean, you know, they do take money from the government in a variety of ways. So I have a personal feud against NPR. are now. Yeah, I saw that. I saw that. So do we even wade into these waters? They called you a cryptocurrency influencer or something. Promoter. Promoter. That makes me sound like I shill Ponzi's or something. Cryptocurrency promoter? That's the worst thing to call someone. Preposterous thing to call you. It's of all people. I have other, you know, professional appellations. Like I have a job. They could have looked at my LinkedIn. Why didn't they look at my personal website.

There's other things to call me. That is pretty scandalous. They did correct the record. Yeah, kind of. Kind of. They said in addition to being a promoter. That's almost worse. So I don't generically promote cryptocurrency.

If you pick an average of random cryptocurrency, I probably hate it, to be clear. I don't know. Back when you first joined Fidelity, I would say you were a Monero promoter. I was a fan. I was a fan of Monaro. People would come to your desk, shout out Andy Gild,

and just ask you questions about Monaro, and you would promote it. Yeah, I didn't, I mean, I think promote a promoter is a very specific. Like, that makes me think of club promoter. You know, some of the hands out flyers on the street. Yeah, that's trying to get you to go to the club. So I don't know. I was an enthusiast of Monaro.

I'll give you that. You weren't telling people to go buy it. you were just talking about the value of the technology. Yeah, no, it was good technology. I think promoter implies that you have some sort of affiliation with the entity and that you're being paid to promote them. It does. It does.

I'm against that. So that context was an article where they falsely accused me of popularizing that, I will not eat the bugs meme, which to be clear, when I tweeted about that, that was already an old meme. I'm going to put my hand up and I have no idea what you guys are talking about with this bugs thing. All right. So I can explain it. They did a whole meme history, which is like, this is what federal dollars or federal government is funding NPR journalists doing histories of the bug eating meme.

Okay. So the catchphrase is, I will not eat the bugs. I will not live in the pod. And there's a third part, which I'm forgetting. basically it's a way of objecting to the sort of like world economic forum agenda. So bug eating is meant to be better for the climate or something like that. And people don't like it, you know? I mean, I eat lobster.

I guess lobsters are kind of bug. No way. You think about it. No way. Yeah, lobsters are like an insect. Oh, really? They're related to bugs. Yeah.

What do you think they were fish? No, there is, I mean, they're not, I don't consider that. them insects. What are they? Crestations, right? They're like a bug. They're not a bug. A lobster's not a bug. A lobster's closer. I mean, I know it's not a fish, but it's closer to a fish than a bug. Are lobster's insects? It's a crustacean, that's for sure. That's what I said. It's a crustacean. That's not an insect. I'm Googling it now. Insects and crustaceans belong to the phylum arthropoda. Yeah, if you go up high enough in the kingdoms and the phylums, you get common, everyone's in the common kingdom. I mean, you can't just keep on going up the level. They're not that far apart on the tree,

I would say. They have a common linkage, only a few rungs up to ladder. I don't know. That's a stretch. I think they're talking more about like eating these grasshoppers or whatever. Well, this article I'm reading suggests that lobstos and cockroaches are actually pretty, pretty similar. quote, they're both arthropods with segmented bodies. Exoskeletons made of Kytin. I don't know how to pronounce this. Is it Chittin or Kighton? I don't know.

We have a lot of listeners in Maine, a lot of lobster fans in Maine, and they're turning their podcast players off right now. Look, I'm not actually, I'm against bug eating for the sake of the meme, but I do like lobsters. For sure. I mean, oysters,

those are practically, but what are oysters? Oysters? No, they're like, they're probably crustaceans too. Or no, they're shellfish. Shellfish belong to the phylum, Arthropata as well,

for what it's worth. Anyway, we don't have to decide right now. Point is, I helped, I suppose, in the eyes of NPR, I helped popularize this meme. And, you know, I think they wrongly gave me credit for that.

As much as I want credit for creating memes, it wasn't me. And they wrongly said that I was a promoter. They could have said anything about what my affiliation was. They could have said VESPA owner, pickleball enthusiast. They could have said venture capitalists. They chose not to. Just venture capital?

Yeah. So I'm basically against them now. I actually listened my entire childhood. I listened to NPR. And so I'm aggrieved at them because that was, I didn't consent to that. It was forced upon me. So now that's another reason I have this grievance against NPR. So when was this?

whole battle being waged. I just kind of missed it. This was like the beginning of COVID. You were just doing memes about eating bugs. I mean, I always do memes. So that like I think the job of a contemporary venture capitalist is to create memes, at least part of it. That's part of the job. That's, yeah, that seems to be true. If you're not creating memes, like memes are how you express ideas. So that's how you, that's how you obtain cultural salience. It's how you get those entrepreneurs into your Venus fly trap. I think that's one way. I think that, you know,

if you're good at memes, it's a very underrated way to get on people's radars. So, I mean, look at the tungsten. Look how many of you bought tunks and cubes because of this point comes. Oh, that reminds me, yeah. Sam Bankman-Fried had a lot of those cubes, right?

Did he have cubes? Yeah. I wonder if they factored that into the, yeah, the NFT ones. Those were worth a staggering amount of money. Yeah, they traded it a huge, premium to the underlying tungsten and now I think they're probably trading at a discount to the tungsten much like gbdc but unlike gbdc you could buy the nfti and redeem it for the tungsten there's a redemption

function and so in theory that should the value of the nfts should be linked to the commodity value of the tungsten tungsten really had a moment there yeah i have no regrets over that all right well that That was a quick detour. Why don't we bring it back to the news of the week here? Did you see micro strategy? They bought more Bitcoin. Where do they keep on getting this money for Bitcoin? They just bought 1,045 Bitcoins for $23.9 million.

So someone, a listener of the show, reached out to me and answered the question, which is that they have this perpetual offering of stock. and when it trades a certain way, they can just issue stock, and then they use the proceeds to buy Bitcoin. That makes sense. It's not a very good explanation, but yeah,

they're basically always selling their equity for cash, which is then using to buy Bitcoin. So it's not necessarily coming from the cash flows the core business. He's really, he's building quite a war chest over there, unlevered, I guess, at this point. Yeah. So Singapore banks are working with the regulators there to codify screening requirements for crypto and digital asset customers. Could this be a reaction to Hong Kong?

This is progress. I mean, this is going to be the next big geopolitical battlefield here, where you have Hong Kong, Singapore, the UK now, all trying to create these very friendly jurisdictions. to start crypto companies or to run crypto businesses. And people are moving. This is not like a theoretical, oh, I wonder if companies will move there. We're talking to startups every single week around prospective investments. And we're asking them where they're going to be domiciled. A lot of them are starting to say, well, we're looking at the UK or, you know, we have a founder that's in Singapore right now.

We'll likely start the business there. So this is a real deal thing. Yeah. I mean, the Wells Street Journal also. had an article on Hong Kong's crypto ambitions, which appeared genuine, which is remarkable to me, because Hong Kong is basically part of China now. So I don't see a political distinction between the two places anymore, not since the kind of takeover we saw. But nevertheless, Hong Kong genuinely is welcoming crypto companies into the fold. Hong Kong banks are being encouraged to bank

crypto companies diametrically opposite of what's happening in the U.S. It's really, it's incredible. So I'm going to be interested to see how that goes in June, I think, when retail is finally allowed to reenter in Hong Kong. I mean, Chinese retail was a force here in this industry for quite a while. So they've been off the map. I wonder what that'll look like when they can now reaccess these exchanges. Yeah, I wonder if this is a genuine way of embracing the cryptocurrency. space in China. I mean, I believe the ban is still in effect. So I, the ambitions of the CCP

are very unclear here. Maybe it's just a rejoinder to the U.S. Maybe it's an attempt to uncork some of the pressure and give certain trading firms access to crypto through Hong Kong. It's very hard to decode what China's ambitions are. I mean, it's really hard. I mean, Jack Ma is back, apparently. So he was in Japan, it looks like, for over a year, kind of in exile. And now he's back in China. So are they reembracing technology? Is this a kind of a bigger play to have the infrastructure to get around Swift? I don't know. It'll be interesting. So speaking of which, there's an interesting article in Politico from a U.S. diplomat, Brandon Posen. He is serving at the U.S. Embassy in Tokyo, and he basically makes the pitch to the US to compete in crypto. And a big part of the

argument is that the CCP is on top of it. So it is this competitiveness angle. I mean, I don't know if the CCP is really actually embracing crypto, to be honest with you. Some of these arguments seemed a little weak on that front, but I do generally buy the idea that the industry is highly mobile and it will look to the most favorable jurisdictions. Pretty interesting you see an active serving diplomat make this case. Yeah, I thought that was quite well done. Did you see the U.S. Treasury report that came out today on DFI protocols? So I haven't had a chance to read it, but do you have a TLDR on that?

I mean, I'd say it's a fairly comprehensive rundown of some of the tradeoffs around DFI the calls and some of the illicit activity that could be possible on some of these networks and that has been revealed on some of these networks, particularly around North Korea being active in mixers and things like that. It's hard to say whether it was a positive or a negative report. It by no means came out and said we should try to ban defy. I think there's probably an acknowledgement that that is not really possible. There was a lot of talk around Bank Secrecy Act and anti-money laundering and how to really conform some of these laws to contemplate defy. To me, the most obvious one would be the VASPs.

So the centralized exchanges that are sort of the on-ramps into these ecosystems, really making sure that they're imposing things like the travel rule, making sure that they're imposing anti-money laundering and sanction screening. So that's kind of the obvious one. but I think the bigger question that I wrestle with is just what Defi will look like. They explicitly bring up zero knowledge cryptography in this. And so to me, that's always been the most interesting thing that could happen in the context of defy is if you have these pools where you don't explicitly know the identity of the other people

in the pool, but they have attested through a zero knowledge system that they are not on a no-fact list, that they are not sanctioned, where you could have this, this method. of basically participating on these networks in a way that makes you comfortable that you're not facing off against a North Korean hacker on the other side. So I think that's probably where we go as an industry over time. Now, what that looks like, I think is hard to say in terms of what the exact law that needs to get passed to put that into place. Yeah, my general take is defy is just code that mediates financial transactions.

So if you want to encode certain constraints into who can participate, that can be done. And it can be done, you know, with a high level of confidence. So if, so Defi, I don't think expresses a view on whether, you know, counterparties should or shouldn't be known. I think you can just embed these kind of regulatory permissioning into the contract. So obviously the industry is a bit of work to do in terms of creating that infrastructure. But I don't see it as being inherently hostile to U.S. interests or antithetical to the normal regulation that a company's finance. So maybe this isn't this. I haven't read the article yet, but it might be an acknowledgement of that.

The other thing that I think will be wrestled with at some point is just how decentralized are some of these things. And there's actually a really interesting piece by Kathleen Brightman. this week. I think she wrote it in Fortune. Yeah, Fortune crypto. So the name of the article is Ethereum, Arbitrum, and YL2 solutions are such a mess. And it basically calls out that

a lot of these Ethel2s, I guess most of them really, are they have a centralized sequencer. So you have this group, this kind of coordinated group that really cannot be decentralized at this point around just who sequences the transactions

and processes them. And that makes these things look a lot more centralized than I think the industry would like to have you believe. Yeah, I thought that was an excellent article by Kathleen. And I agree. I mean, it may be the case that they could be decentralized, but they certainly are not today. So that's something that all of these L2s are going to have to grapple with. There's another article this week, which gets my vote for the worst article. the week, which is entitled to Case for Banning Crypto in Foreign Affairs. I'm not going to run

you through it. It's pretty enraging overall, I would say. The worst line, the best slash worst line in this article was, let me find it. There is a danger that members of cryptocurrency communities embittered by their losses, maybe funneled into extreme online communities, which kind of crack me up. Imagine losing money on crypto and deciding to become like a neo-Nazi or something because of that. That's preposterous. That's the logical chain that this woman is proposing. It's not a great article. Yeah, I didn't read it. I don't really, you know, if there was an article about we should ban gravity, I think that would have about as much impact on the industry.

Yeah. She also claims that there's just five people who can approve changes to Bitcoin Core, which obviously isn't really true. That's not how it works at all. I mean, it's just full of misrepresentations. It cites David Columbia. She claims it's inherently right wing. Yeah, it's not great.

Not great. Well, speaking of things that actually are great, I was really surprised to see this Apple news. So Apple has apparently been secretly including a copy of the Bitcoin white paper on every Mac OS since 2018. I don't know how people didn't realize this earlier, but if you're running a Mac, Mahave or later, you can see the PDF of this.

if you go to, it's actually pretty complicated. So I'm not going to spell it alone. Are you going to read the command? I'm not going to put the whole command. We'll put it in our newsletter. But suffice it to say, just Google around if you want to find the Bitcoin white paper if you're running a Mac. But it's on there.

It's kind of hidden on all of these operating systems. So someone at Apple really loves Bitcoin. Do you think this was a decision that they got a sign off on from leadership? Or is this a rogue engineer that loves Bitcoin that did this? I think you'd have to maybe get. a sign-off on something like this. I think if you're a rogue engineer, you get fired for something like this because you could just put something malicious on there. It's a pretty serious deal. So maybe this went up to the top. Another thing to put on your radar was an interesting article

in the Iowa Law Review. I know you're all loyal readers of that publication from Julie Hill. So it's entitled from cannabis to crypto federal reserve discretion in payments. So Julie considers the Fed's discretion over who gets access to a master account, covering custodia and then covering banks that were designed to serve as the cannabis industry. And she argues that legally speaking, the Federal Reserve does not actually have the authority to be discretionary in the banks that they approve or disapprove master accounts for. So she says that under their mandate and established statutory law, they have to grant this access, payments, access to the payment system for firms that meet the requirements.

Whereas, of course, the Fed takes a different view, and they claim that they have discretionary authority. So I thought there's a really, really interesting paper And we'll put in the show notes All right, so I think that's it for the week We got Easter weekend And we get the Masters this weekend You're going to be watching? No, however, the UFC has come to Miami

For the first time in 20 years. Really? Wow. Yeah, it's a huge deal. I will be there. Look on TV, you might see me. People are pretty excited about it. So it's a big weekend of sport So the UFC and the WWE have merged.

Quite a deal there, huh? Yeah, us UFC fans are largely not thrilled about that because I think it will push the franchise in a more theatrical direction. And it's kind of already like that. It's not really that merit-based. It's kind of going in the WWE direction. So that's not great.

Vince McMahon. I hadn't seen him in a while. He looks strange. He's got a mustache now. He dyed his hair. He's got a mustache. I don't know what's going on there. He should have probably consulted with someone before he did that. Yeah. So tune into the fight. My picks are as follows. I know you all are very interested in knowing my picks. My track record is terrible, by the way.

All right. So I'm going for the middleweight fight, I'm going at Asanya. So that's, he's lost, his last three to Perera, but we're going out of Sonia. We're going Gilbert Burns. We're going Burns. Sorry, Massadol or Miami boy. I can't do it. And then I'm going to go for Yannas over Font

and Rosas over Rodriguez. So lock it in. All right. Well, I'm going to go Keegan Bradley, local boy. Long shot. Yeah, I'm going Keegan. Love it. Bring it home.

All right, everyone. Have a safe. healthy weekend and we will see you on Monday.