On The Brink with Castle Island - Weekly Roundup 05/03/24 (CZ sentenced, Roger Ver arrested, Coinbase earnings) (EP.525)

Episode Date: May 3, 2024

Matt and Nic are back for more news and deals. In this episode:  Matt get's 2nd in Jeopardy at ETH Boston We reminisce over Nic's 2020 holiday quiz Ian Cain's Senate candidacy in MA CZ get 4 months in prison The significance of '4' Did CZ deserve his sentence? Roger Ver arrested for tax fraud Tough week of outflows from the ETFs The chilling effects of the DoJ Samourai case Coinbase reports earnings Content mentioned: Nic's 2020 Bitcoin Esoterica Compendium Sponsor notes: Measuring Exchange Quality & 'Fake Volume' Trusted Exchange Framework In Coin Metrics' State of the Network issue 257, we delve into our framework to assess exchange quality in digital asset markets

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 concentrated easing. You've printed a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something called the Bitcoin. 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 we're looking at the Coin Metrics Trusted Exchange Framework. It quantitatively evaluates centralized exchanges based on data quality, transparency, resilience. The top three ranked exchanges, according to this framework, are Coinbase BitStamp and Binance. They all get an A.

During market cells, like the Bitcoin spot ETF launch, Binance and Coinbase unsurprisingly showed correlated trading volumes. In contrast, Upbit showed uncorrelated volume spikes, deviating from authentic patterns. A lead lag analysis revealed pricing asymmetries with Upitz market lagging finance by 14 seconds, while Coinbase and Gemini showed no such lags. I don't exactly know what that is meant to employ. fly. Can't have a lag. What are you doing having a lag? There's a lag. As of April 26, trusted crypto trading volume derived by filtering out fake volume, stood at 40 billion daily,

about half of the $80 billion peak seen in March this year. That is your Metrics Minute. Good Metrics Minute. Bitstamp, the oldest cryptocurrency exchange out there. Funny you mentioned that, Matt. Funny you mentioned that. Before we recorded. That was on my holiday quiz from 2020. It was a very hard holiday quiz. It was a hard one. And I, yeah, it's, I got the answer. Yeah, you're actually nailing a lot of these questions.

It came up because apparently you got second place in Jeopardy at Heath, Boston. Yeah, it was a really disappointing performance. So, Heath Boston was this past weekend in Boston. That team did a great job. Jake, Jake Lynch in particular, who, kind of spearheads the effort there. And I was on jeopardy, crypto jeopardy, to end it on Saturday night. And I lost to Josh Lamb, which if you're going to lose to anyone, losing to Josh Lamb,

I can take. There's no shame in that. Yeah, he's been in the industry longer than I have. And he crushed me. And you know what the, the question I got wrong, I knew the answer to, but I just froze. And he got me faster. So it was, what was the name of the estate that Sam, Bankman Fried lived at in the Bahamas? The Albany. the Albany and I was just a little bit too late on the uptake. Easy. Should we do a holiday quiz this year? We should.

I don't know why. Why did I do one in 2020? I used to just do stuff like this. Oh, yeah. I had so much more Joie de Ville back then. What was that restaurant you used to go to in the north end up here? Jocamo. Jocamo.

Yeah, I used to come into the office of Fidelity and say, what did you do this weekend? Well, I ate at Jocamo's three times and I wrote about 47. pages about cryptocurrency. First of all, Doc Mo's was and remains great. And second of all, I did use to write so much more, but I did just write a new,

very long article. But I'm on a cadence of like one a year now. I don't know what happened. Yeah, you're like Bill Simmons. You know, you're prolific writer, and then you just stop. It's like, who's the guy that wrote Catch on the Rye?

I should know this, Salinger. J.D. Salinger? He wrote like one book and that was it. It was pretty good one. It was a good one though. That's me. I'm done. Like I'm retired.

I don't know. Like I don't have it in me anymore. Well, I don't know. We're traveling so much these days. I mean, we're both zigzagging across the world these days. Yeah. Okay. So let me ask you some questions from my 2020 holiday quiz.

See if you can nail these. Do I answer them or do we let the listeners have a beat? Well. Do do do do. Do you want to give them a pause to the? give them a pause. Yeah, and if you're listening on 2X, maybe slow it down to 1X right now. All right, this is an easy one.

Although it'll be painful to listen to us on 1X. This is an easy one. The Mount Gawkes parent company was named T. Bonn Limited. Who was T. Bonn? Do you need the options or do you know the answer? Well, it would do do do do do do do. All right, here are the options. It's Mark Garbell is his aunt, his goldfish, his cat, or a character from his favorite anime.

His cat. It was his cat. had diabetes also died recently oh really yeah rip to t-bonne too bad um actually that was one of his excuses as to why gox collapse was that he was busy tending to his diabetic cat i yeah i could see it it was either that or malleability bug or the cat who was one or the other all right um let's see here what oh yeah that was actually another question when gox was hacked carpel is blame the losses on what exploit 51% attacks node dos attacks eclipse attacks transaction malability transaction malleability yeah segue fix that it did okay here's a here's a tricky one

launch in august 2013 raising 4,700 btc what was the first ICO and here are the options counterparty tenebricks master coin mycelium or ethereum The answer would be what is MasterCoin? Correct. J.R. Willett. J.R. Willett. Everyone's friend on LinkedIn. Here's what people don't know about this.

It was the first ICO ever, and it was the most successful protocol ever for a while, because it became Omni. Omni was what Tether was issued on. Correct. So it actually was very useful, but not for what J.R. Willett originally intended. Well, the other interesting part of it. that is that Vitalik went to Jara Willett and said, I have some ideas. I think we could incorporate them into MasterCoin. And J.R. Willett said, yeah, I'm good. And then Vitalik went and built Ethereum. Okay, here's another good ancient history one. Announced in April 2011 and discussed by

Satoshi on Bitcoin talk. What was the very first altcoin forked from Bitcoin? Xcoin, name coin, doge coin or light coin? That would be what is name coin? Correct. Correct. Name coin as discussed by Satoshi as a valid use case for Bitcoin. Okay. Domain names. All right. Let's see. This one's about Luke Dash.

Luke Dash famously inserted text into Bitcoin. So he's not a fan of ordinals. He doesn't like arbitrary content insertion into Bitcoin. However, in the year of our Lord 2011, he inserted arbitrary content into Bitcoin. So anyway. Is there a question there? Yeah, yeah. I just wanted to point out that he's a hypocrite first of all.

Okay. So his pool, he used to have a mining pool, legious. He put in some text content. What was it? Was it a Roman Catholic prayer? Was it an indictment of out coins? Was it a memorial for his friend? Or was it a marriage proposal?

That's a tough one. I don't think I know, but I'll say Roman Catholic prayer. That's correct. based on your knowledge of Luke Dash. Right. It is the divine praises, which is a, yeah, I guess it's a Catholic thing.

Okay. Yeah. So you got someone correctly. I thought it was, he's the guy that killed Contra Party, right? Yeah, I think so. He also killed a coin. Okay, so here's the question.

What coin did he attack into oblivion? mining pool, Elegious. The options are Prime coin, Coiled coin, Nova coin, and Fryecoin. This is actually deep lore. Give me the options again?

Prime coin, coiled coin, Nova coin, and fry coin. I don't know the answer to this, but I'm going to go with Prime coin. It's coiled coin. Coiled coin. People don't know this, but he destroyed an early alt coin with his mining pool.

Just overwork. overwhelmed it, huh, with this one computer probably? Yeah, I don't think it took a lot of hash rate. Wow, I did not know. That's deep lore. You know, there's people that got, like, all of these questions, right? Oh, is that right? I'm not surprised.

Like, insane. Like, I probably would have only gotten 20, right, out of 44. That's, um, those are pretty good questions. I think we need to make one, uh, and just automate it this year at some point. Maybe we'll put it out to the listeners. Okay. I have one last one for you. it's about airdrops.

Which of these, people won't know this one. Which of these coins did not do an air drop to Bitcoin holders? Ripple, Stellar, Byteball, and Steam It. Ripple, Stellar, Byteball, and Steam it. And did not do one to Bitcoin holders.

I am going to say, Bightball. Bightball did do anirdrop. To Bitcoin holders. Probably the only reason anyone knows about them. Steam it did not, but Ripple and Stellar. did do air drops.

I do remember that. Yeah. Stellar was doing air drops on like Facebook stuff back then. That was a lot of time. Bitcoin, there was a thousand XRP air drop in 2013

to Bitcoin holders, which I guess was worth something later on. Of course. Yeah, that's worth a lot now. All right. So those are some of my questions from the quiz.

I'll put it in the show notes if you want to take it. It's a telegram. I think you can still take it. Is it a telegram bot? Yeah, you took it through telegram. Wow, all right. I like it.

Maybe it still works. Who knows? And yeah, maybe we'll do another one this year. But I don't think I have as many facts as I once did. There's so many things that have happened in this industry over the past few years. Yeah, we could come up with some fresh ones. Okay. OtB Christmas quiz.

Stay tuned for that. So busy week all around here. So we're recording this very late on a, I guess it's Thursday night. The days are all kind of blending together here. Yeah, that's my bad. I was traveling. I know you're up at 4 a.m. tomorrow, so you're really being a trooper for this one. Trooper, trooper for the listeners here.

You sat down with Ian Kane, U.S. Senate candidate from Massachusetts on the show this week. Very special episode for me. So I go way back with Ian. So we went to high school together, and then we went. went to business school together. And now he's running for U.S. Senator in the great state of Massachusetts against Elizabeth Warren, who, as I said on the podcast, is a current senator from Massachusetts, although she is from Oklahoma,

which not a lot of people know. Really? Really? Yeah. Didn't know that. Born and raised in Oklahoma. Works not really for the people of Massachusetts as much as she does for, like, the anti-business side of the country.

But Ian is running for senator. and Ian knows a lot about blockchains. I would say his view is that the people of Massachusetts generally don't really care about crypto, so he's not trying to make that the core issue, which I think is probably very smart, but talked about stable coins, talked about the market structure bill, talked about all the good things that he's trying to do to create jobs in the great city of Quincy, which is the sixth largest city, I guess, in Boston. So he's outside of Boston in Massachusetts, rather.

So he is the president of the city. council in Quincy so I had a good time with this episode I suggest everyone to check it out did we ever figure out of John Quincy Adams is named after Quincy or the other way around I think it's the other way around because I think it was all called Braintree back then and then they renamed it to Quincy okay yeah good well Quincy is it for you yeah Quincy's good little good little city that's where they have the Boston blockchain week yeah Boston blockchain week is not he And Ian made that happen.

It was like an invasion of Boston blockchain week. He grabbed it. He brought it out to Quincy. It's like five miles away now. So there were a lot of deals this week. I don't even know if we can read all them. There may be too many deals. Just a tremendous amount of capital formation right now.

Just a lot of new startups getting off the ground. So first one up is Movement Labs. This is a protocol development team. They raised $38 million from Polychain, HackVC, placeholder, archetype, and Maven 11. Then we have Open Delta Bitcoin-focused stablecoin. They raised $2.1 million from six-man ventures. Then we have location-based service.

This is a blockchain gaming company that raised $10 million from Spartan, OKX, 7X, and Foresight. This next deal is pretty interesting. Tether has an arm known as Tether Evo now. And they invested $200 million for majority stake in BlackRock Neurotech. no relation to the asset manager, which is a Salt Lake City brain computer interface company. Wow.

I think it's safe to say that Tether, if you just look at it from a nuts and bolts perspective, revenue profit, it is probably the best business on planet Earth right now. For sure. Here's my prediction about Tether. In 10 years, we're going to forget that there was ever a stable coin involved,

and they're just going to be a gigantic conglomerate. Probably. Probably. Picture Hathaway. You know, just take the float from, in this case, the stable coin, their case, from the insurance, and deploy it into other kinds of stuff. It's incredible, the scale of that business. And the revenue per employee is, it's definitely the best in the world. And they just are sitting, they earn billions of dollars every quarter and they don't know what to do with it.

So now they're putting it into brain computer interfaces. Wow. hey, that sounds pretty cool. If you're going to put it somewhere. I mean, it's better than putting it on like whatever Sam was doing with the money down at FTX when he didn't know what to do with it. It wasn't even his. At least it's theirs.

Next one up is backed. This is a company focused on tokenizing real world assets and they raised 9.5 million from NOSIS and blockchain founders fund. Then we have X10. They're a crypto exchange. There raised 6.5 million from Tioga, Symantic and Starkware. This is a big deal. Securitized.

The company focused on. on the tokenization of assets, there is $47 million from BlackRock, Hamilton Lane, Parify, TradeWeb, Apto, Circle, and Paxos. Really big deal there. So BlackRock led that round. Yeah, huge congrats to Carlos and the team over there. Awesome to see them thriving like that. Next up we have Baxus. They are a company building a wine and spirits marketplace using the blockchain. They raise $5 million from multi-coigne, salon of ventures, and FJ Labs. Oh, man.

I love it. So I am an angel investor in a spirits company. I believe you are as well. It's called Rosa Luna. Oh, Rosaluna. It's a Mezcal brand. I think we need get that thing on a blockchain ASAP. They need all the help they can get.

No, they don't. They're doing great. They're doing great. I hope that the founder doesn't listen to this podcast. Yeah, no, it's great. Mezcal. You can get it at the Soho House. You can.

You can get it. I was at a restaurant down here in South Shore and they had it the other day. I actually personally don't like Minnesota, but Rosaliyan is good. Just a founder bet for you? Yeah, look, strong team, founder market fit, good terms. Yeah, we like we like Rosaluna and we'll put it on this blockchain for sure. Next one up is Agora. This is an on-chain governance platform.

There is 5 million from Han Ventures, Seed Club, and Coinbase. Then we have a really chunky deal optimism. Of course, the Ethelayer 2. There is 90 million in a direct token purchase from A16 and Z crypto. Then we have Hopper. This is a decentralized privacy platform that raised 1.5 million from Nosis Dow. Then we have Milky Way. There is Celestial Liquid Staking Protocol.

There is 5 million from Polychain, Binance, and HackVC. This is a good one. Department of XYZ. This is the Crypto Venture Fund that is started by Matt Home. who's a former NYDFS regulator. Great guy over there and excited that they have launched their debut fund. So congrats to Matt. And we've already co-invested with them, in fact.

We have. We have. Yeah. Let's go. It's a great angle for a fund over there. Yeah. Love it. Mitosis,

that's the layer one blockchain. They raise $7 million from Amber Group, Forsight, and Big Brain Holdings. Then we have Resonance. This is a cybersecurity company that raised $1.5 million from ARCA, Fabric, and blockchain founders fund. Blockchain Founders Fund has been on the board today. And lastly,

Pantera have made an undisclosed investment in TAN, Telegram Open Network. Busy, busy deal week, huh? Busy on the newsfront. So people love this on Twitter, man. CZ, of course, sentenced for 40 months in prison. Definitely on the light side, not what the prosecutors wanted.

CZ loves the number four. this is of cosmic significance, I think. Like, what are the odds? Poetic, really. I mean, he, so $4 billion fine and four months. It really is, I mean, do we have to, listeners probably know the significance of four, or should we go through that again?

Well, actually, not everyone knows the provenance of four. Yeah, why don't you cue that one? I'm not sure we know it. I can't vaguely know it. Let's pull up the tweet. Let's pull up the tweet. All right, so we'll explain the, the why this is funny so cz had this tweet it was on january 3rd 2023 said we'll try to keep

2023 simple spend more time on less things dues and don'ts number one education number two compliance number three product and service number four ignore fud fake news attacks etc in the future would appreciate if you can link to this post when i tweet four there you go so four ignore the fud fake news and attacks. All right. So four is a metony, a numerical metonymy for ignoring FUD. Correct. And then he would just get in the habit of tweeting the number four as a shorthand. And then four took on a life of its own and then he was sentenced to four months in prison, which is actually not that bad. And a $4 billion fine. And yeah, it's honestly, it's not that bad. A lot of people said that he won this whole engagement.

by, you know, his reputation is still pretty intact. He's still a billionaire, presumably, I think he's like one of the only shareholders in finance. Still worth a lot, obviously. He only has to do four months in prison. I don't, like, if it were up to me, I would not be a billionaire in exchange for having no prison time. I mean, I think he's worth like $47 billion.

So would you rather be a mere hundred millionaire? but not have a criminal record. Or would you rather be a billionaire, but you have to do time? I mean, it's like a 47 billionaire or a one billionaire. I think there's a difference here. There's a chance that this guy is the richest person to ever set foot in the U.S. prison. And my follow-up question would be, what type of prison were you talking about? Because this guy might be going to like a country club in Connecticut for all we know.

Well, didn't our friend Sam Bankran-Fried said that after a certain level of wealth, the net utility of each billion declines. Is that what he said? Yeah, Sam said that, right? Was Sam ever an actual billionaire? Well, you know what he said? He said his utility function was actually linear, whereas most people's was logarithmic.

So he had this view that because he could create so much goodness in the world with his philanthropic activity or whatever, that his utility function actually was linear. would always increase with his wealth, which was, I thought, a pretty elaborate philosophical justification for saying that him having a lot of money is good. Yeah, interesting. Well, you got Sam doing a 25-year stint here.

You've got CZ as number one nemesis doing a four-month stint, and CZ walks away with all of his billions, and Sam doesn't. And, you know, you really have to just remember that CZ didn't steal anyone's money at the end of the day. So all of his charges were around, you know, they're bad charges. It's anti-money laundering. He wasn't doing sanction screening.

And, you know, he deserves punishment, obviously. But he didn't steal people's money like Sam. Yeah, I was just thinking about it. Imagine if the facts of the case were identical. And then you have this smooth-talking, Californian, Wonder Kid, American. And then you have, you know, CZ, who's Canadian, actually. but you know of Chinese descent is foreigner you would imagine Ceteris paribus the courts would treat Sam better just because the inherent bias right but the facts of the case are so disparate

I mean Sam just wantonly stole billions of dollars CZ finance operates in a mercenary fashion that's a fact like they are very cutthroat we experienced this. We're aware of this. Everybody that operates in crypto knows this. Yeah, they're cutthroat on the venture side. They're cut throat on a lot of different aspects. Yeah, I mean, they strike an extremely hard bargain

that I would say if it was happening in lit securities markets would maybe be considered illegal. Okay, some of the things that they do. But he did always try and run a solvent functional exchange. Now, one of the things that's really interesting about this is that there was a number of, there were sealed documents in this. And so there are a lot of things that did not make the light of day

that the judge considered as part of the sentencing. I believe the prosecution was asking for three years. Do you want my theory here? Sounds like there's a conspiracy coming up. Yeah, I mean, we don't know why he got the more lenient sentence. But if I had to guess, it would be that Binance has unbelievable data. on who is using that platform.

And that would extend to a number of enemies of the United States. And so my guess is that there are intelligence agencies that have been in and around Binance for quite a while and that CZ has been helping them identify the bad guys. And we're probably going after the bad guys if I had to guess. I will say that I think, I don't know if this is true. Is this the first time that someone has faced criminal sanctions for BSA violation at the corporate level?

like an individual? Well, no, because Arthur Hayes faced them, right? Yeah, that might be true. It does seem to me, though, that having a lax compliance program, if you're a banker, the executives don't go to prison for that,

right? Like HSBC, they laundered hundreds of millions for the cartels. Nobody at HSBC went to jail, you know? That's what I've been saying for a long time.

Jamie Diamond should be in jail for all those sanctions violations that J.P. Morgan said over the... I think we should get that narrative going. But the point I'm making is bankers don't go to prison for this stuff. They just don't, unless it's the Icelandic bankers and they had the financial crisis,

and that was the one time. Bankers don't go to prison. Crypto executives do for the same crime, basically. So we are held to double standard. That is true. Even if it's a light sentence, it's still actually pretty harsh. It's big fine,

and he's going to literal, actual prison. Well, I think all in all, if you had told CZ a year ago that he could have this deal, he would take it. And my guess is that he comes out and he turns into a philanthropist and he has a second chapter here. So I think he'll be all right. He says he wants to do education.

Yeah, that was number one, right, education? That's his, he's pivoting to one now. One. Four to one. Yeah. Smart. Very smart. Well, let's talk about another case here.

So Roger Verre, who is a controversial early Bitcoin evangelist, often known as Bitcoin Jesus, he was arrested in Spain this week on tax fraud. So Verre had previously given up his U.S. citizenship, and as part of giving up your U.S. citizenship, you need to pay an exit tax. And I believe you have to pay taxes for the next like seven years. And it sounds like the U.S. government does not think that they were paid what they were owed here. Yeah, I mean, he had hundreds of millions of dollars worth of Bitcoin. even back in the day

and he didn't disclose any of it, it seems? I think he disclosed some, but there's some documentation that says that he hid some and against the advice of his own counsel. So if these allegations are correct, he's definitely in trouble. I mean, it looks pretty serious. The allegation is that he evaded $48 million worth of taxes.

Kind of crazy. It's like, all right, so you hit the job. You bought Bitcoin for under a dollar. You made hundreds of millions of dollars, probably later worth billions. And you're going to now go to jail over $50 million that you refuse to pay to the government out of principle. Yeah, they're asking for $47 million here. So you wonder what happens if he has $47 million still. He probably lost a lot on Bitcoin cash.

I saw a lot of hardcore bitcorners defending him. I'm not going to say that he got his just desserts because I don't like the guy. I think he just very blatantly and clearly broke the law. So it's not like I feel any catharsis because I think he's a bad person, which I do. It's that he's just very plainly broken the law in a very egregious way. Yeah, I don't think the dancing on his grave is very appropriate here. It's not a very happy situation. And you can disagree with the fact that the U.S. has an exit tax and a seven-year roll-off, apparently,

which I didn't know. But this seems, you know, again, if this is all true, it just, it's a cut and dry case. Yeah. Now, I have a bigger question. What's that? You know who else left the country? Who's that?

Tribes. Well, I don't know about him. Oh, Mr. Davies? Our friend Kyle Davies, he is apparently given up his U.S. citizenship. Did he pay the exit tax? It's an exit tax. and then it's a seven years. So are we getting checks to the U.S. Treasury from Kyle Davies from parts unknown here?

Because the seven-year period is still going on right now. And he's made a bunch of money on this ox, whatever token. Yeah. Probably not. Who's checking that treasury account? I think it's kind of like once you start to break one rule, you just keep breaking all the rules. Yeah. There's, trust me, there's some more bad boys out there.

There's a bunch of these people that have left the country. I don't have a lot of sympathy for people that leave the United States. For all the United States issues, still the greatest country. Yeah, I mean, okay, yeah, you're going to go move to St. Kitts or whatever, Puerto Rico like to save on taxes, but you're going into exile for what, 20%? How is that worth it? That's not worth it. You have to live in exile.

Like, you can't come back to the U.S. Why would you want that deal? It's a terrible deal. It's a terrible deal. Like, especially if it's a small Caribbean island. Come on, dude. Just bouncing around. I don't know.

So anyways, that's the Roger Verre story slash Kyle Davies story. All right, let's move on here. Consensus. So we talked about the, I don't know, I actually don't know if we talked about this. It was after we went to press. Okay, so consensus is suing the SEC. So they're saying that the agency is gearing up to sue them and to assert that Ethereum is a security.

And this week, there is all sorts of follow-up. that. So pretty interesting lawsuit. They're filing it in Texas. We'll see if they can make some progress there. This week, House Financial Services Chairman Patrick McKenry accused the SEC Chairman Gary Gensler of misleading Congress in his previous testimony on this is ethos security issue. So I really like this legal strategy. I mean, none of this is going to come to a head during Gensler's remaining term here. I mean, Biden could win. Even if Biden, yeah, But even if Biden does win, I mean, this is like a four-year battle. I think Gensler will be running for office somewhere in Maryland by then wanting.

Yeah, this is going to be like Gensler inheriting Clayton's cases. These are going to go to a successor. I just don't get it. I, you know, gearing up to say ETH is a security after you just approved ETH futures. Yeah, he's just dropping bombs on the way out of the door. I don't know. Is you leaving? We'll see.

I don't know. How's that Senate race in Maryland going to kind of, kind of, When is that? Like a year from now to yours? Maybe he knows, maybe he's seen the internal polling from the Democrats and he knows, he thinks that Biden's not getting reelected. I don't know. Looks too close to call from where I said.

So on the ETF front, I don't know, maybe we shouldn't talk about ETFs anymore. It's just catastrophic news on the ETS. I mean, we just have some weak paper hands out there in this retail. We got shellacked on the ETF. So the launch and haul. Hong Kong was a dud. Yeah, Hong Kong. Don't talk to me about Hong Kong in a big market.

Hong Kong was dead. All these people that were saying the Chinese people were going to play in this Hong Kong market. No one showed. No one showed up. There's like five people. No one showed up. So that didn't work. Our onshore ETF market was a catastrophe this week.

I don't want to talk about it. Outflows, yeah. Outflows across the board here. So. Outflows from I bit. Jerome Powell just. in the driver's seat on these Bitcoin ETFs this week. Yeah, we got crushed.

Okay. But we're going to dust ourselves off and we're going to keep trucking away. Okay. I mean, inflation's a bear, but I don't know. This is not a macro podcast, but you think the Fed's going to increase rates here? Have you seen the national debt? No, it's not possible.

Speaking of BlackRock, actually, Robbie Mitch Nick, their head of digital assets, he said in an interview that they expect the next wave of adoption to come from sovereign wealth funds, pensions, and endowments. Robbie's a smart guy. Get out there. We need it. Keep it up.

Keep your foot on gas. Okay. Pensions, get in front of those endowments. This is the hardest working man in showbiz. That's what I like is when he refers to the largest pools of capital on the planet. That's what we need. Yeah, it's like I love that. I love that. All right.

So here's an interesting story. Politico had a report this week that. our friend Adrian Harris, who is the New York Department of Financial Services superintendent, has been playing a large role in getting Senate Majority Leader Chuck Schumer to throw his weight behind Stablecoin legislation. And apparently Schumer might want to put this in an FAA funding package because stable coins go well with airplanes, I guess. I don't know if I get that, but yep, just pack it in there.

And alongside a bill that would be focused on cannabis banking, legislation. And that's an interesting one because I guess Sherrod Brown, who's the senator from Ohio who leads Senate banking, who's a really terrible senator, he really wants this cannabis bill and he's been blocking stable coin legislation. So I guess let's just put these things together and you get half a cannabis, half a crypto and just move it forward. Big weed guy. Oh, didn't know that about Sherrod Brown. Yeah, I don't know. I think he's just one of these guys that has Elizabeth Warren calling him every day and telling them not to do things that would advance early stage capital formation, stuff like that. So Adrian Harris, I have a bonus pick with her,

though. She wrongly sent signature into receivership, and I'm still upset about it. So, but she likes stable coins now? Well, I guess she's been overseeing stable coins for a while, and I don't know. I think New York does an adequate job regulating stable coins right now. Yeah. So it's, you know, I don't think that this bill is going to go anywhere unless McHenry and Waters can get on the same page. But if they can, I could see it going through. I'm also hearing things about SAB-121. Are you hearing things? I'm hearing things.

I'm hearing that there's progress being made on it. I don't know if that's going to be tangible, but I'm hearing that votes are being discussed on repealing Sab 121. And I'm furthermore hearing that the bank lobby is helping us here. Every week we think we claim on this podcast that pro-cryptial legislation is coming. And every week it continues to not occur. Yeah, but if you just keep on claiming it, it will eventually happen. Yeah, that's true. Yeah, but at least the bills have been written.

They exist. And apparently now some Democrats are on board here with Schumer. Maybe that's going to be turning around. We'll see. All right, so do you want to talk about this DOJ stance on crypto wallets? Coin Center's been doing some good work on this. I'll put a piece in the newsletter about that. We had Cynthia Lummas chiming in,

really pushing back on the DOJ's classification of self-custody. Got a lot of people freaking out here. This has had an actual chilling effect on the industry already. So basically the DOJ has upended, what, 10 years of FinCEN guidance regarding non-custodial operators. And based on the Samurai case, they're claiming that you don't need control to have, I guess, obligations under the BSA. Is that fair to say?

Yes, but again, this will be litigated now? Yeah, so it should be a matter that comes in front of a court because this is massively overturning, like, a decade of precedent. it's already caused other lightning wallets and non-gustodial services to leave the U.S. to shudder their services. So actually pretty bad. Everyone's scared. Yeah, it's not great. And this is your reminder.

We don't give this enough to donate to Coin Center. So they're doing some great work on this topic and really fighting for civil liberties in this industry. So encourage everyone to check out the piece that they wrote this week. Yeah, this has a lot of people very alive. armed. I will say that. All right. So let's talk about Coinbase here first and then maybe we'll talk about blocks. So Coinbase just reported earnings here for Q1, 2024. Really good. So revenue 1.6 billion, up 72% versus Q4. Net income of 1.2 billion up 331% versus Q4. They've got $7.1 billion in cash. They 2x the amount of USDC on the platform quarter over quarter. And they have a

eight times more base developers than they did at the end of Q4. So that's a pretty healthy quarter there. Yeah, super impressive earnings. Good quarter everyone. It's sold off. Coinbase stock sold off. So the street's expectations were beat. But the crypto native sell side analysts that figured this whole thing out from on-chain data, that was actually priced in. Yeah, I think that's right. I think these so the street was way off base in Q4 and what do you think the street is doing now just like running nodes on base or something well I the Delphi guys I read their research I mean it's possible to back into the coin base numbers by looking at exchange volume base data you know looking at the blockchain I think like the estimates were actually spot on by the more crypto native cell side

analysts. So given that, it actually shows that the markets following the expectations to the more crypto-native firms. It's interesting. So another public company news. So Block, we talked about them last week because they're building a Bitcoin miner. They're also donating 10% of their Bitcoin profits every quarter, well, not donating rather. They're just buying Bitcoin with it. So they're taking 10% of anything they make on their Bitcoin line of business and buying Bitcoin with it. do we know if the is it 10% of their overall business or is it of the bitcoin business specifically i thought they said the bitcoin business oh is that profitable i don't know could be some hollywood accounting there maybe they don't have to actually buy any bitcoin

well it's like the forest gump accounting um do you know about the forest gump accounting uh where like the actors don't get paid rev share on the film or something like that? I think it was the writer. I think the writer of Forrest Gump had some deal where he got a certain percentage of the profits of the film or something. And they just didn't turn a profit.

Yeah, they didn't turn a profit, although massive revenue, they just threw a bunch of junk cost in there. Yeah, that's, I would say, common in Hollywood, actually. Dirty. Yeah. So, yeah, I'm reading it now. It's 10% of the,

their monthly Bitcoin-related gross profit is going to be used to buy additional Bitcoin. So it's gross profit. There's got to be something there. They can definitely twizzle the dials and not turn a profit if they want. I guess it's an incentive to buy Bitcoin on block, though, right? Yeah. We know the Jack Dorsey loves Bitcoin. He doesn't need to prove it to us.

All right. So we got some heat on, or I guess I got some heat on Warpcast, or maybe you did, too for our TikTok take. People said that we shouldn't be encouraging the U.S. to shut down TikTok. Let me just clarify my position here. So if the U.S. is not allowed to run its social media services in China, why are we allowing a Chinese company to run social media here? Yes, I think TikTok is kind of stupid,

but that's secondary point that reciprocity is the key issue for me. Yeah, it's just not fair. Like, why should we let China feed their problems? propaganda into the brains of our children, but we can't feed our propaganda into their children's brains. Give us a tip for tat. Let us release, you know, Facebook meta directly to the Chinese youths and filter it and put our propaganda in their heads. Yeah, maybe we'll sell some of our carbohydrate food to them while we're at it. Yeah, give them the American seed oils, you know. So that's our stance on that one.

Should we delve into another controversial topic? Oh, what is that? The encampments on American colleges? I saw some this week. Really? You saw them? Yeah, I was out in Chicago this week. I saw them on the campus now at the Northwestern.

Yeah, because I feel like UChicago is kind of too serious a place to have that. Yeah, it was, yeah, there's protests. Did you go and, you know, interview? with the protesters to, you know, understand their demands and things like that? Well, I was meeting a startup on campus and they were not protesting these people. They were like building, building their startup, actually. So there's entrepreneurs and then there's people that camp in the quad, and those are not overlapping.

So that's where you're saying. Yeah. And I was, yeah, this is a tough topic to get into because you don't want to step on a third rail. But let me just say, When I was in college, I was not, this was not what I was doing. Yeah, I mean, where I went to school, there were certain parts of the quad that were very manicured and you couldn't walk on the lawn and you get yelled at. Oh, really? So let alone camp on the lawn.

If you camped on the lawn, they would probably execute you. People in the UK are a lot more polite, I think. They are much more concerned with maintaining proper landscaping. that's for sure. Yeah, yeah. So at St. Andrews, you just can't disturb the toopuri or the nice groomed lawns. Forget about camping. I think there's a lot of misguided youth out there, to say the least.

All right, well, we have some good episodes coming out next week. Oh, do we have a busy podcast week next week? I recorded a video podcast today. Well, we do have the ability to do that now. yeah hopefully i don't have to edit it if i don't have to edit it then we'll publish it how about that yeah i like it i like it all right so we'll have a few episodes next week we're really starting to ratchet it up i think we're going to get to a thousand episodes at some point this year they're just cranking them out at this that's a terrifying prospect that's so much work yeah well we uh we got a lot to

talk about all right everyone that is it everybody have a safe and healthy weekend and we'll see you on One letter.