On The Brink with Castle Island - Weekly Roundup 08/21/26 (SALT Wyoming, SEC's Reg Crypto, Tether's big 4 audit, Crypto Privateers) (EP.735)

Episode Date: August 21, 2026

Matt and Nic return for another week of news and deals. In this episode:  The boys review SALT Wyoming in Jackson Hole Why did Stripe buy Openrouter? Stripe says we have entered the Singularity People are upset about data centers The SEC proposes Reg Crypto governing token issuance The CFTC convenes a crypto roundtable in Washington FASB proposes treating stablecoins as cash equivalent under GAAP World Liberty gets an OCC charter Trump should divest his WLF tokens to push Clarity through Saylor wriggles out of another jam Tether passes a big 4 audit The White House issues a "crypto privateer" memo

Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guests and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only is an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees will be liquidated.

The federal government loans American International Group, AI, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. And 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. Welcome to On the Brinkup, Matt Walsh. And I'm Nick Carter. And I thought we'd be doing this one live in Jackson Hole, but we're not. We're not together anymore, but we're together all week for the Sault Conference. Pretty good conference. It's one of the best, in my opinion. It's one, you've been to three times.

I think that makes you the record attender of this conference. Me twice. But it's a very good formula. It is. Yeah, it's a good group of people. It's not one of these conferences that has like 2,000 people and 100 Accenture consultants. There's the builders in the industry are there. So what was your takeaway on the vibes?

I'd say the first day was a little bit low, and then the second day, the price of crypto just went up like 15%. So vibes are quite a bit better, I'd say. Yeah, it was a little subdued. And, you know, some of the politicians were maybe a little chastened by what had happened with clarity. But people were in good spirits. And, you know, I mean, it's hard to be depressed when you're in Jackson Hall, Wyoming. And it's just a beautiful sunny day out. and this is the Grand Teton in the background.

You know, so people are in pretty good spirits, I'd say. Especially with the enormous Bitcoin rally yesterday. I know. That was something. And we had a pretty good hike one of the days. That was good. Some great workouts. Rendezu Mountain.

I think that's 4,000 feet. I had to turn back and run down the mountain. We set out at about 6.30 to try and climb it. I realized that I had my panel at 9.30. Yeah, and you had to sprint back. Yeah, I ran down. down about half of the mountain to make my panel. Injuring yourself, no less.

Yeah, but, you know, that's just what it takes to get on a panel and to talk about quantum. Well, it's definitely a busy week. Let's start it out with the deals of the week and then we'll talk about what the SEC did. There was a meeting at the White House. There's a lot going on this week. But first one up, OpenRouter, which is the AI model routing marketplace. This was founded by the co-founder of OpenC. They're required this week by Stripe for reported $7.5 billion.

Now, why are we talking about this? I think we've been saying for a while here, and maybe not as much on the podcast, but definitely internally, that this routing is going to use stablecoins at some point, inference routing, you know, especially as these open source models start to proliferate at the enterprise level. And Stripe in the announcement actually called this out. So they said stable coins are gaining a rapid adjustment. option and will likely be further boosted as they become the native currency of the AI economy. Would you make it this acquisition?

I don't know. I mean, I think it's a good company, especially if you think that open source models are going to continue to be important and it's not going to be just a world of one or two models. So incredibly impressive to build open sea and open router back to back. Do I understand Stripe's strategic rationale? Not necessarily. I don't think they've explained in detail the role that stable coins will play with the AI model routing. I don't think you have to squint too hard, though.

I don't think you have to squint too hard to see that this is potentially going to be the first use case for agentic payments. So, you know, enterprise or eventually an individual wants to just get the most efficient fulfillment of their prompts. And I think you're going to see a lot of these enterprises reduce their dependency on Claude. open AI and start to route towards probably the Neo clouds that are running some of these open source models. And if you want to make these payments and you want to install kind of contract logic to them in terms of, okay, this department does not have access to the frontier, this department you can throttle back and the SLA should be three hours on a prompt of a certain type. You want things to run overnight and on the weekends. I think you could have stable coins

becoming just the instant settlement rail to do that. And you could probably imagine a world where bridge is helping bring, you know, fiat currencies into the ecosystem. You could imagine a world where privy is the wallet at the enterprise level. So I don't know. I'm very, very intrigued by this. And that same letter, Stripe also somewhat quixotically said, the singularity has begun. I saw that. So that was quite something.

So we are post-singularity, by the way. Has anyone informed Ray Kurzweil? Yeah. I mean, I read Ray Kurzweil's book when that came out years ago, but what exactly are they talking about here? They said the singularity happened on January 1st. Does that just mean that open AI and Anthropic got a lot better around December? I thought the singularity was when AI became recursively self-improving and human became kind of obsolete and superintelligence was here and we entered a world of post-scarcity and we merged with the machine. Isn't that the singularity?

I get. Yeah, that's what I thought it was. And do you think the Colson's know something we don't? I mean, that's very, that's likely, I would say. Well, they have access to better information than us. So whatever the singularity is, it's begun, according to the payments company, Stripe. I think maybe they are hinting that recursive self-improvement is here. Well, they're big behind a model company that is focused on biotech, aren't they?

and this week, speaking of biotech, not to take us on too much of a tangent. Did you see Moderna a couple days ago? Do you think that they used AI to find that to derive that new drug, or is that just the old fashion way? I think it's the old fashion way, because I think it's already through, is it through phase three trials? And that takes a long time to get there. And I think these frontier models have only been excellent since November, December.

So I bet it's the old fashion way. So I think it was a vaccine of sorts for melanoma. Right. I don't think it had 100% efficacy, but we do live in an age of wonders. And I think the people complaining, not that they used AI for this one necessarily, but I think the people complaining about data centers, they're going to have their comeuppance because we're going to get insane biotech advances thanks to AI.

Yes. I'm certain of it. And they're going to look very regressive trying to stop this technology from proliferating. Do you think there'll be a similar point? pushback, assuming quantum happens, which I think we both think it's going to happen, as we start to just build lots of quantum computers, do you think we'll have a similar backlash to the data centers? I don't think so. I think, you know, I always want to see the best in people. The data center activism, the most charitable way to interpret it is people have anxiety about losing their

job to AI. And, you know, what Dario and Sam are saying isn't helping about AI being very dangerous. So you can examine their claims on the object level and conclude that they are false, which they are. You know, data centers are not poisoning the groundwater or anything like that. But I think maybe if you want to be a little charitable, they're worried about job loss and economic concentration of power and so on. So I think that's probably what's motivating most of the anti-data center activism and I don't think

that would be the case around quantum I think quantum would be more niche I think quantum has the potential to just accelerate drug discovery

here at a massive level so maybe that just becomes a very popular thing it's kind of hard to see where the job loss is there

right creates jobs probably for cryptographers and security researchers and so on oh definitely

not to mention delivery people everyone's going to have to get a new laptop, new ubiquity, new car keys, and it's going to be crazy. Anyways, that was the open router one. Next one up is Twine, which is a defy lending protocol. They raised $2.5 million from cyber fund and ethereal. And lastly, short deal week, we have NeoSoul, that is a decentralized AI platform.

There raised 11 million from MH Ventures, Amber Group and others. So do you want to talk about this SEC action, reg crypto this week? Yeah, it was a big regulatory week. The biggest news is we had reg crypto assets. That's right. So that came out on the 18th. This is a notice of proposed rulemaking. So I think it mainly concerns token-based fundraising. So exempting certain fundraisers from securities registration requirements, which has been a major fight really between the SEC and the industry for the better part of a decade now. The SEC previously felt that most token offerings were under-registered securities. This was relaxed somewhat.

And then now most recently there is a rule under which startups could raise up to $5 million and be exempted from the obligations associated with being a security. certain projects could raise up to 75 million with various waivers and certain safe harbors as well, whereby the SEC would no longer treat tokens of security. So as far as I can tell, this is a pretty significant change and would allow a lot of flexibility for new token-based issuances domestically in the U.S. Yeah, I think that's right. I mean, under the Gensler administration, his MO was just come in and register, and then, of course, he wouldn't meet with you or give you any path to register

because there was no way to do it. So this is, as you said, the notice of proposed rulemaking. So they're going to put out a rule here. They have to get some comments first. It's using the exemptive authority of the 33 Act and also under the Jobs Act. So I think it's, this has a potential if it's actually a, you know, well-thought-out rule in its final state. I think to bring some of this back to the United States as opposed to having these token projects raise offshore in these foundation models, these kind of janky structures.

So, you know, the startup exemption, you'll have a $5 million ability to raise there. As you point out, the fundraising exemption is pretty similar to Reg A. So there's two tiers. Projects can raise up to $20 million or up to $75 million. And that's per year. So that's good. So that's actually quite a bit higher than I would have thought. Retail investors are capped at 10% of their income or net worth on participation.

And the second tier would require the project to produce audited financials. And then you, of course, get the safe harbor, which says once your work is done, the SEC will treat the investment contract is over and presumably the token would be a commodity. So, you know, if you're building in the token space, I think this is a hugely bullish thing. Now, of course, you have to have a token that actually makes sense, and most of them don't. So I think the ability to push cash flows back to a token, there's a lot that needs to be considered here, just on the merits of an investment. But this gives a good framework, I think, for launching tokens in the U.S. There was also a big meeting in Washington this week.

A lot of the folks here at Salt had to jet out of here early to make it. So Trump got together with Atkins and Michael Selig of the CFTC and a bunch of crypto executives. And I don't know if there were any clear deliverables or announcements from that meeting, but there was a meeting. Yeah, I watched a bit of this tape. It was kind of a victory lap for all the things the administration's done so far. There's been a lot of positive things. So well-deserved victory lap. I think it was the idea to have it on Wednesday was probably because the CFT,

had that Innovation Advisory Committee meeting on Thursday. And so everyone was in town for that. They did talk about clarity. I think Trump is optimistic it sounded like on clarity, but as we know, it's just going to come down to the ethics language. He did say something about hyperliquid coming to the U.S. Did you catch that? I mean, just the very fact that Trump uttered the word hyperliquid was notable.

But yeah, the CFTC Chair Mike Selig has said they're working to bring hyperliquid into the us in a fully compliant and legal fashion. What that would look like, I couldn't tell you how what form that might take, how you layer compliance into the protocol. But yeah, I mean, a lot of excitement around that. Yeah, hype was up 26%. And I guess this is where we should talk about a lot of crypto assets were up this week. And when I first saw them start to surge, I was wondering if it was because of this SEC notice of proposed rulemaking. But of course, it wasn't. The Treasury has intervened in the bond market and injected some liquidity there by repurchasing treasuries on the far end of the curve. So the market love that. Yeah, I mean,

what do you make of that? I mean, is that kind of an admission of our worsening fiscal position, or is it just a general notice to markets that risk on is safe? I mean, I think the 10-year was pushing up against what three five point three or something like that five point three percent and i think the bond market's just signaling this is not good and so the treasury is uh is intervening it's kind of the yellin and powell playbook to some degree isn't it so i know it's not technically money printing but it it kind of is right yeah a lot of people were short crypto bitcoin had spent a long time in that lower 60s range there was of course the white house meeting treasuries intervening in the bond market, probably dollar weakness, debasement trade.

So I think it's a lot of people are trying to sign one factor to explain. I think it's all of those together, which created a five sigma move. So it was a pretty remarkable day. In other news this week, the Financial Accounting Standards Board, FASB, has proposed treating certain stable coins as cash equivalents under U.S. gap, which basically, I think this will matter to a lot of companies that hold stable coins, obviously. So fully reserved, fully redeemable stable coins that have annually disclosed reserves, get these same accounting treatment as treasuries, commercial papers, and money market funds.

That seems obvious that they should, but they didn't prior. So I think this is a good proposal. Yeah, it's just one of those things that goes onto the radar that further legitimates stable coins and further persuades regulated institutions to use them. I mean, these are, you know, these are things that are not visible, really, but make a big difference. It's moving a stable coin from the kind of commodity line item to cash. Treasury also has solicited comments on its implementation of genius. So genius is law, but it has not been fully implemented yet.

and Treasury has asked for comments, specifically around how foreign-issued dollar stable coins, so basically Euro-dollar stable coins, would be treated. So that process continues. Yeah, that's quite interesting. And of course, we saw Jonathan Gould this week out in Wyoming. And he said, I believe that the OCC will have their rulemaking done by November,

if I'm not mistaken. Yeah, he was in fine. form here, and it was great to spend some time with him. The OCC this week granted preliminary conditional approval to World Liberty Trust Company, so that's the World Liberty Affiliated Trust Bank created to issue their USD-1 Stablecoin under federal supervision. I mean, that's not going to help these arguments here on the Trump ethics language. Cynthia Loemis was on stage, Senator Lomis was on stage with Senator Scott, and they were talking through some of this ethics language. I guess the proposal that they thought was a done deal was that Trump would, relative to his

crypto holdings, have the ability to either put them in a blind trust or sell them. And it sounds like that's not good enough for the Democrats, but I don't know what their counterproposal is. So what we're hearing is that Tillis and Gallego are teaming up on this now, but I don't Would they just want them to sell everything? What exactly do they want, do you think? I don't know. And normally I am very sympathetic to Senator Loemus' views.

However, on this one, I think, I don't think it's that much of an ask for Trump to, you know, divest his world liberty exposure. You know, I mean, it's not like this has been an, you know, important company to him for the last 20 years. It's something that's only existed since late 2024. So if it's that as a concession to get clarity signed into law, I think he should do it. Yeah, I mean, selfishly, it's what I'd like to see happen. Look, if there's a deal there, if you sell out of your world liberty and Trump coin and that's that and that gets the bill done, obviously I'd love to see that. You could argue whether that's fair or not, but, I mean, it seems like that is the position. I just want to know who's going to actually go have that conversation with Trump

because it sounds like it's Tillis and Gallego. Gallego's a brand new Democrat senator, and Tillis is on his way out and publicly has a rift with Trump. So that's not going to be a great conversation. Someone's going to have to get involved there. No, it'll be a tricky conversation. Yeah. So in AI news, Payword, which is the parent company of Cracken,

they joined Anthropics Project Glasswing. I know we'd been wondering why there were no crypto companies involved in that. So they got access to Claude's Mythos 5. I guess that's still a secret model. Is that right? People don't have access to it. So they're a restricted frontier model. Yeah.

They can find software vulnerabilities. They'll run it across its systems and find bugs and look at third-party open source code. So they're one of the first crypto firms admitted to that program. I mean, if I was one of their competitors, I would be trying to get in this desperately. from a retail confidence perspective, knowing that the custodian of your assets actually has access through Project Glasswing, that totally matters, I think. Yeah, one wonders, you know, what, if anything, could have been done about the cold card bug, had it been a white hat that discovered it, you know, and it was responsibly disclosed?

The thing is, it's not like cold card could flick a switch and up, everybody's private keys for them, right? I know. So, unfortunately, even if it had been a white hat that had found that bug, because that was baked into the entropy at the hardware level, well, I guess the software level, but in hardware that was widely distributed, there would have been no way, I think, to get the message out without tipping their hand to black hats that the entropy was compromised, don't you think? I think that's right.

And, you know, first of all, you can't reach out to them. because apparently Cold Card had deleted all of their marketing emails for privacy purposes. So there's no way to get in touch with people anyway. But as soon as you go out, as you point out, the black ass will be all over it. So I think realistically, the only way for Cold Card Whitehack to have done this would have been to actually hack the funds and just try to return them. Yeah. Yeah, which is incredibly questionable.

And, you know, probably not everyone's going to find, figure out how to get them back. So that's, that's a, that would have been a mess too. I mean, that's just kind of the worst case scenario for an exploit. Horrible situation. So strategy, our favorite topic on this show, they sold another 330 million of MSTR. They bought back another 132 million of STRC and their cash reserve is now 4.8 billion. The Bitcoin rally this week also helps them a lot. So Sailor has yet again wriggled out of this jam.

He's bobbing and we've in. He's not quite there yet on buying, having enough cash to buy out the converts and they're still underwater. But now he's got the price of Bitcoin going up 15% in a week. He's adding to his cash position. He must feel great about where he is right now. I think so. In personnel news, this is a good one, friend of the pod,

Fireblocks, digital asset custody, tokenized infrastructure company, they have named former acting SEC chairman, Alad Royceman, as their chief regulatory and policy officer and general counsel. This is a big time hire. A lot is obviously very deep in the space coming from a big law firm here after his stint at the SEC. So that's an impressive hire. Congrats to both fireblocks and Alad. A couple more headlines here.

Rain said this week that the stable coin funded payments they facilitate reach 100,000 merchants, often without merchants knowing stable coins are evolved. So these are happening on visa rails. So stablecoins are just quietly commingling with the financial system. And that continues to march along. City has confirmed that they'll launch institutional Bitcoin custody this year on their new Custody Plus platform alongside securities custody. A little late to the game. I got to say, a little late to the game, but better late than never. Yeah, city is a little bit late to the game, but you know, State Street and Bank of America are very, very late to the game.

So at least city is like middle of the pack right here. And I think kind of what we're seeing here is a bunch of firms catching up to where Boney probably was five, six years ago in terms of just offering basic cryptocurrency custody. I think you're also seeing this in just the broader tech space around stable coins where we're hearing a lot of chatter and out in Wyoming there's quite a bit of chatter around big marquee you know fang companies that are implementing stable coins behind the hood and I think that shows you the impact of genius and it just takes a while so once there's a law once there's regulatory clarity it does take a while to actually push some of these into production so I think it'll be a busy end of the

year in terms of announcements around payments integrations and stable coins for international money movement, things like that. And speaking of announcements, we forgot to include this last week. This is last week's news, but Tether has received their big four audit. So after many years of the critics demanding an audit and Tether, demurring on that, they have indeed gotten audit done by KPMG, US, full independent audit of their financial statements for the first time. The audit itself was not made public, but they did get one.

So, well done, Tether. Yeah. The Tether Truthers from 2018 are officially wrong. Whatever. Yeah, those guys are not as active on Twitter anymore. I mean, the new line that they'll say, those types of people, is that there was a hole and that, you know, it was sort of like wrongly backfilled and that they kind of bailed themselves out. I mean, you know, that's one.

interpretation of what happened between Tether and Bipfinex all those years ago. But we've largely been defenders of Tether on this podcast, and I think that's been pretty vindicated. Yeah. I mean, I get there. There was the crypto capital thing, and Bifenex had a couple hacks. So, I mean, the other thing, they're getting bash for not having these audits, but the audit firms were just unable to do it because they were getting so much political pressure

from Elizabeth Warren and others. So now that you can actually. actually do this as KPMG, it's quite a bit easier. Yeah, I mean, people just don't see what happens behind the scenes, which was there was a audit choke point that went in parallel to the banking choke point. And it was effectuated exactly the same way and no one covered it. I mean, I talked about it at the time, but Warren directly pressured the PCAOB and the AI CPA. Those are the two audit regulators to tell the big four and really all audit firms not to deal. with crypto companies at all. And a lot of crypto firms were de-audited in addition to being debanked.

This is a matter of public records. It's, you know, we know it's true. Cracken talked about it recently in a lawsuit, won a lawsuit, actually. We saw that the audit firms dropped all their crypto clients at the time. So, yeah, Tether's difficulties in obtaining a big four audit is really just a matter of, you know, major political figures in this country discouraging audit firms from dealing with crypto. So, you know, I don't, it's not some, you know, it's a much more nuanced story, I think, than the critics represent. It's going to be the largest initial audit in the history of financial services,

don't you think? I mean, usually when companies start to get audited, they have three or four people and they're at the inception stage. This is one of the biggest companies in the world going through an audit for the first time. Yeah, on that same topic there was here in Wyoming, got to spend some time with Caitlin Long, which is always great.

She told us that Custodia has now escalated their master account lawsuit to the Supreme Court. So we'll see if the Supreme Court takes that case. Of course, Custodia was denied master account access. That has a lot of implications for, you know, where the power really rests in this dual banking arrangement we have. Custodia's Wyoming Chartered Bank, special purpose depository an institution. There are many others. We actually met a few of them here.

So this case continues. I know, you know, a lot of people are going the OCC route, but a valid question remains, can the Fed deny master account access to state chartered banks? Yeah, very interesting. And obviously it would be great to see some justice served there. It sounds like there's just some shady things that happen at the administration level as they were getting denied. Yeah. And you know, we've heard some more rumors this week, too, that the 2022-23 chokepoint debanking story is not over. There are investigations ongoing potentially at some of the agencies in question.

so I remain hopeful that we will actually get a full accounting of what happened during that time in which every crypto firm lost their bank account. Yeah. So I think even though it's years later, we're potentially due to get some answers. In other news, Cantrum Fitzgerald is now, there's a report out this week that they're acting as an introducing broker for institutional clients that are doing block trades on event contracts using Kalshi and Sasquahana on the back end of that. Very interesting development.

Also, somewhat related Talos, which is a Portco of ours institutional digital asset trading platform, they crossed a trillion dollars in cumulative volume. They've also released prediction market integration. So I do think you're seeing more and more institutional appetite to use these prediction markets, although it continues to be just mostly sports on the platforms. there was also a pretty interesting news item did you see it the privateer uh white house memo oh yeah we have to talk about this i was actually talking to um to chris perkins about this uh this week uh i'm very excited about this yeah so congrats to chris i guess uh in christian color as well both chris's um they pitched to trump

i didn't know that this was going on and a crypto privateer proposal basically laid in the good guys hack back at the bad guys. So a letter of Mark for the digital age, which the U.S. historically did employ letters of Mark. That's right. Am I correct in saying that? Yeah. So we actually have a proud tradition of doing this. So, you know, the problem is pretty obvious. Bad guys are always stealing a crypto. Good guys can't go and steal back the crypto from the bad guys because it's illegal under our laws to do that. The White House released a memo this week titled Expanding Capabilities to Combat Transnational Cyber Enabled Crime and they basically said, go ahead and do it. Yeah. As far as I can tell. I think there's some maybe minor sticking

points. I don't think Trump can change the law with a memo and the law still says that hacking is illegal, but it was a very interesting, pretty unique proposal. Yeah, I mean, so you can go out and you can hack them as long as they're not a government affiliated entity. So you couldn't go out and actually hack North Korea the government, but you could hack Lazarus. And then I think you would put North Korea in a spot. You know, they'd be upset about Lazarus losing all their money. But then you could say, oh, I thought Lazarus was not you, you know, it puts them in an

interesting spot. I do have a I mean, this is where having a lawyer talk about this on the podcast might be a good idea, but let's say that North Korea uses like AWS. You can't really like hack a WS.

That's not legal, right? Well, that's what I'm wondering. So yeah, like can you hack Cloudflare and, you know, some domain registrar and Microsoft and AWS and Google Cloud. Like, is that allowed? So, I mean, so we're, have to work through these details.

Yeah. But maybe it's just Trump is saying, well, we'll look the other way. The ends justify the means. If you're getting the funds back from the bad guys, you know, you got to break some eggs to make an omelet kind of thing. Yeah. Well, congrats to Chris and Chris for pushing this from an idea to something that's actually implemented. That was very quick. One other thing, I think that might be it for news, but we did meet a lot of listeners of the podcast this week in Jackson Hole. A heartfelt thank you.

It's always nice to know who's listening. We never know. We don't have names attached to the anonymous download numbers. So thank you. It was great. It was great to meet so many fans of the pod. And we'll have to talk about this next week, but we've had some people try to solve our bad boy O-TB theme music problem.

So we can maybe debut some listener-submitted content over the coming weeks here. but really appreciate everyone who came up and introduced themselves. Yeah, well, we only need the theme music if new bad boys emerge. I don't know if there are any right now. I mean, we got Justin Son running around. There's bad boys. Kyle Davies is still on the loose. That's true.

We haven't heard from him in a while. All right, everyone, that is it for the week. Everybody have a safe and healthy weekend. We will see on Monday.