On The Brink with Castle Island - Weekly Roundup 08/26/22 (Emmer's OFAC letter, Stables resist TC blacklists, Gensler's OpEd) (EP.343)

Episode Date: August 26, 2022

Matt and Nic return for news and deals of the week. In this episode:  Matt's prior radio career The boys consider reinvesting in the podcast How to avoid audience capture We puzzle over metaverse advertising How do you value metaverse real estate? Rep. Tom Emmer writes a letter to OFAC questioning their sanctioning of Tornado Cash Tether and BUSD (Paxos) don't blacklist Tornado Cash addresses The FDIC reprimands crypto companies Web3 hoodies Best podcast listening speeds Are security tokens and real world assets back? No new 3ac shenanigans Tadge Dryja leaves MIT DCI for David Marcus' Lightspark New findings on OFAC censoring Bitcoin Mining pools Tether has a new auditor Can a firm with outstanding tokens be acquired or go public? Gensler's weird op-ed Sponsor notes: Subscribe to the Coin Metrics State of the Network newsletter

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 print a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something called a Bitcoin. Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. And this episode is brought to you by Coin Metrics. And here is the Metrics Minute. Today's Metrics Minute is brought to you by Coin Metrics. Looking into Theorem Options, you can see that the market is pricing in a timeline for the merge

with volatility expected to peak in September before falling off into November, underscoring the significance of that event. In stablecoin world, the H-O-B-USD, stablecoin H-USD, depegged from a dollar and regained its peg. However, their circulating supply is only 80 million. In other stablecoin news, the market gap of finances BUSD hit new all-time high, closing at 18 billion on Ethereum alone.

That is your coin metrics Metrics Metrics Minute. People, metrics Minute, very, very popular part of this show. Are you just a lot? or is that based on data? No, I'm just alleging that based on anecdotal feedback. I wish that there is a way within podcast to see where people were most engaged, like listening to the pods, where people dropped off. There's this concept in radio called time spent listening.

I would love to know the time spent listening of various portions of this show. I guess the metrics minute would be pretty high since it's at the beginning. The three arrows sections have been very popular as well. Yeah, you can't resist. You had your past career in radio. I did. Little known fact, I was in the radio industry, more from a restructuring perspective.

It was more like going to local markets and putting Ryan Seacrest on the air, unfortunately. You hate to see it. Ryan Seacrest? Ryan Seacrest, yeah. He's on in like 100 radio markets across the world, and they just pipe them in and get rid of the, morning show. He does numbers. Ryan Seacrest does crazy numbers. That guy must make,

you know, I don't know, $100 million plus a year. He does insane numbers. From radio? Wow. Yeah. He's a talent. I hope you weren't responsible for like Rush Limbaugh or Hannity. Well, Rush, I mean, they were both on the platform, right? Yeah, it worked for your channel. They were on IHeart. Yeah, it was, they both, they both did crazy numbers too. I mean, people listen to this. Radio is still like a pretty big medium. Original and best. We should take our show to radio. Why not?

Yeah, we could take callers. Come on. That would be great. People engage us on DM in the same way that disgrunt old people call sports talk radio. That's for sure. There's just a special thrill with listening to local sports radio, especially after the hometown team has lost a game. Oh, it's unbelievable.

It's so good. WeEI in Boston. It's just the fellowship of the miserable when they're losing. Well, you know, Boston teams normally win, but, you know, in D.C., all of the local teams always lose. Yeah, that's tough. And so it's just everyone's always depressed and angry on those shows. I think, yeah, you have to be, they probably do the best ratings when the teams are losing

or when they're winning. And being stuck in between is almost the worst. Well, we had a busy week. I mean, it's actually, so we're taping this on Wednesday. So without a doubt, something big is going to happen like it always does. And we're going to have to do it jump in. It'll probably be the three arrows guys would be captured, Saddam Hussein style. And we'll have to break him and do that.

In a hole. That's right. There'll be in a hole somewhere and, you know, one of the creditors will get them. Do you remember there was, was, am I remembering this correctly that? There was this whole thing in the Western press about, was it Saddam or Bin Laden's, like, elaborate cave bunker? And there are all these illustrations that were published in the Western press about, like, this incredibly elaborate and, like, really well-furnished cave network.

And it ended up just being completely fictitious, basically. Yeah, because bin Laden was discovered next to a police station in Pakistan, right? Yeah, he was chilling. He was chilling. He was chilling. Yeah. That's what we're going to come to find out about the three AC guys. They're going to be in some palace in Dubai.

An even bigger yacht. Hanging out with Joe Lowe and the ghost of Voidy Bulger. So yeah, I'm sure something's going to happen tomorrow. Stuff's been happening. Well, this is turning into a regulatory podcast because the stuff that's happening is mostly on the regulatory side. For better for worse. So you sat down with Brooke Pollock of Hutt Capital this week.

Yeah, Brooke's perspective is always great to get on this industry, really plugged into the institutional LP landscape and how companies and firms are thinking about that. So enjoyed having Brooke on the pod. And no other Castle Island content this week. I don't know what's going on. We're slacking. Well, the pods are coming back in full force. We've got a backlog now. I'm recording a couple tomorrow. So we'll have a lot of content coming at you. Everyone's coming back in September, right? The industry is up only from here. We do have some new ones. We've landed some hot new sponsorships. We're pleased to announce. Oh, yeah. Stay tuned next week. You'll be hearing those.

So look, we can invest in this podcast now. Better microphones. Maybe. We do need better microphones. My batteries go out. Yeah, we could. There's just so much scope here. We could do video.

Yeah, we're getting a podcast studio. It's under, it's under negotiation right now. So this might be a video podcast. Maybe we can hire an editor so I don't have to edit them. That would be great. We could do that. That would really save me a lot of trouble. We're doubling down on the pod.

The viewership and the listenership is going up. I guess the viewership is zero, actually. But the listenership is going up. So it's giving us more of an ability to invest in the infrastructure. It does correlate. The incentives are not good necessarily because it correlates with the amount of scandalous things we say. So, you know, it's a phenomenon known as audience capture. You say something that the audience likes and then you get captured by them. I know this

firsthand. Happen to me. And then you have to be willing to fire them. Are you willing to fire your audience, Matt? Well, what's my target audience? People that were negatively impacted by three arrows capital. That's an enormous target. That's like the whole crypto industry. That's a lot of people. Yeah, that's everyone. get rid of those people and those people are on the right side of the law so i will stand true to those people just you know don't let the algorithm take over you know it's like um you know how there's like all these species of insect where they get a fungus and then the fungus actually controls them and like directs them to do things they're not good for the beetle they're good for the fungus uh it's like

the borg in star trek i get it i never watched star trek but i mean that's a real thing in the animal So don't let the algorithm control you. You have to be sovereign. Well, the number one way to make sure we say that is that we like things other than Bitcoin. Some people just left. Some people just turned us off. It's true. Yeah.

So I fired my fans and I'm free now. It feels great. All right. Well, let's get into some deals of the week. First one up is primitive. This is a defy infrastructure company. They've raised $9 million in a round that was led by Bain Capital. Next up we have a mural, a Dow Treasury Management startup.

There is 5.6 million from DCG, Pilumni, Galaxy Ventures, and others. Next is Safe Herron. This is a digital asset custody provider. They're focused on small and medium enterprises. They've raised $7 million. It's from Youngwee Partners and Web 3 Vision. Deals are coming back this week. Next, we've got Rocketplace, a crypto-focused asset management platform.

there is $9 million from Launchpad Capital and Menlo Ventures. Distributed finance, which is a platform aimed at promoting Dow and NFT growth in the Al-Grand ecosystem, has raised $2.5 million from borderless capital. Then we've got Orange Dow, a decentralized Web3 VC fund founded by YC alumni. They raised 80 million, primarily from the Al-GRAN and Near foundations. new fund on the on the board next is ready player me i like what they did with that name it's a metaverse avatar business and they have raised 56 million from andreson horwitz and a number of others ready player me so that's that's my name of the week i like that i'm going to be honest with you

i don't get it because the book is ready player one so if you were going to do a play on that wouldn't you want it to be like, me is a weird one, a subsidy for one there. Do you think? I, yeah, I don't know. I think it's me in the sense that your personal avatar lives in the metaverse here. That's what they're going for. And Dresa's just taking big swings right now. People gave them some heat for this Adam Newman thing. I'm all in on Adam Newman. I like it. It's contrarian. Why not? You know? I could see that being a huge idea. I don't know what it's. So this, my issue with that is that it's called flow.

And then his previous startup that he raised for like a year ago is also has flow in the name. Well, I thought it was that wasn't there a token deal that was flow carbon? Flow carbon, yeah. So you'd have to imagine that there's a token to represent your ownership interest in the thing, right? But it's just like of all,

there's so many words to choose from. You really gonna just call them both flow to consecutive startups? Well, are they, I don't, I think they're the same thing. I think there's a token and there's equity. Oh, really? All right.

Well, then it is confusing. I don't know. I'm almost certain they're totally distinct things. And he just happened to name them almost the same thing. And there's the flow blockchain. So it is confusing. Got to work on the naming, Adam. Don't bet against that guy.

That guy is going to be just slinging co-working in co-living space. So this one is all about it's not that many details, right? So it's about... I think it's we live is basically... So it's like we work, but so it's very predictable experience in terms of your living situation as a young urbanite, I believe. And there's an emphasis on amenities and an emphasis on these growing geos. Regrettfully includes Miami.

I'm feeling hard done by. I actually feel personally victimized by Adam Newman because he's driving up real estate values in Miami. He is, actually, yeah. But there's some in Fort Laudette. They're sort of second tier cities is the vibe I was getting. A lot of Lauderdaleites, I think, would resent that characterization. That it's a second tier city.

It's a vibrant city in its own right. It's got the beach. I am very interested to see where that project goes. So next up we have Koi Banks. They're a Latam-focused payments infrastructure firm. There is $22 million from All Ground Foundation and others. Next is another fund deal. So Galaxy Digital's Liquid Alpha Fund has surpassed $50 million, which was their initial target,

and they're now targeting $100 million. So capital spigot is open over at Galaxy. Next up we have DWallet Labs. They're blockchain security firm. They raise $5 million from DCG, Node Capital, and others. And the last one is Luna Market. This is a Metaverse advertising business. They've raised $1.5 million from Polygon and Anamoka brands.

In Metaverse advertising, that's something that if you'd said that 10 years ago, people would have no idea what you're talking about. So they've rebranded themselves. Right, wait, hang on. Yeah, what's Metaverse advertising? Oh, and did I leave out? They have apparently rebranded themselves to Insomnia Labs because Luna is a bad word these days. It's tainted.

Metaverse advertising is a fascinating concept. The inventory is limitless. well but for metaverse real estate to have value we have to sell the fiction that it's limited because if you do yeah but it's not well how does that work because you can zoom in forever in the metaverse right i mean you could just yeah you could just be on all day i guess like there's no minimum granularity for a unit of distance and the metaverse, right? Well, I don't even know how to think about distance. I think proximity is probably what you want. We always come back to this. So proximity also doesn't matter

because you can just teleport anywhere, right? It's like there's no website that's close to another website on the internet. They're all equally close. They're all just sort of one link away, right? I guess that's right. So you, you know, Google with three O's does not actually carry any value versus just the Google website. So, like, let's say you're into Centralland and you're like neighbors with ACON. It's not like it's that much more convenient to stroll over to Acon's house

as opposed to go to, like, Shakira's house on the other side of the map because you can just literally go there. I mean, I feel like a boomer. What am I not getting here? This is probably the way people are talking about the internet in relation to newspapers in the early days. Just why do I need to even?

I get the Boston Globe delivered to my doorstep every single morning and I read whatever I want. So we're clearly missing something here in terms of the genesis of real estate valuation in the Metaverse. That's what Adam Newman should have done. It's just become a real estate magnet in the Metaverse. Maybe that's what this is.

Yeah. I mean, look, if you can explain it, please get in touch. I don't get it. I would love to do a podcast episode on the Metaverse. Like someone who does appraisals of property. You know, what's in your model? What factors? I mean, it would probably be more valid than the average 4-9A evaluation.

Just take the last round divided by three. Here's $20,000. So the not a ton of news items this week, all regulatory. A bunch of regulatory stuff. So U.S. Congressman from Minnesota, Tom Emmer, had an open letter to Janet Yellen and the Treasury Department asking for clarity on OFAC sanctions against the open source software protocol tornado cash. I thought this was exceptionally well written.

This showed a level of understanding around public blockchains that was pretty impressive, actually. Oh, yeah. I mean, honestly, I think Emmer is probably the most sophisticated as far as crypto is concerned, member of the House, maybe member of Congress. This letter is exceptional. It describes tornado cash completely accurately and asks some really tough questions of Treasury. And basically it makes the point that this is the first time OFAC has sanctioned a set of public blockchain addresses, public blockchain contracts, and

as opposed to individuals or entities. And it was indiscriminate. There's not a lot of due process. How does a contract appeal a sanction? The contract has no agency. It also points out that the contracts were not controlled by anyone. So that's true. Trinative cash contracts, the operator keys, are 0x-0-000-0.

So they were burned. So the way tornado cash works is there's a bunch of different pools that have certain denominations, 0.1e, 1e, 10eath. And if you're exiting from the pool, you can insert arbitrary amounts and then exit, you have to exit in a uniform way, right? And so there's a bunch of different pools. And all of them had, I think that's tornado cache v2. All of them had the operator address burned.

So there is no way to stop them, unless you're stopping Ethereum. There's no way to update them, upgrade. them, et cetera. So it really is autonomous in the truest sense. And that makes, that raises some really thorny questions for treasury, I think. Yeah, I think it's hard to put a web two parallel on this for regulators, I think, but it'd be the equivalent, I think, in my mind of trying to sanction HTTPS, you know, something that is a protocol. Nobody owns it. I mean, just sort of out there it exists. It's open source. This is even past that. the sense that the admin keys are actually burned, as you point out. I'd love to know what the

response is going to be here. I guess they don't owe him a public response. Be very curious what the actual analysis is from Treasury, whether or not they actually had that level of understanding in the first place. I think Emmer's level of understanding on this might actually be greater than the average crypto market participant. Oh, completely. entrepreneur side and the investor side. I think he seems to understand this better than a lot of people that are building things on top of Ethereum. But the question is, is Treasury compelled to respond?

I don't, is there a rule? If a congressman asks you a question, do you have to answer? Is it like if you ask a cop, if they're a cop, they have to tell you? Do they actually have to tell you? I was rewatching the wire and I think there's a couple times do they didn't. By the way, that's the best show of all time. Law enforcement lying? That's something they would do?

I think. I think they lie all the time. Unbelievable. I never watched The Wire. I couldn't get into it because it was two 90s for me. I couldn't get the vibe. People were using typewriters. They didn't even have laptops.

I mean, come on. Oh, come on. The Wire is just the best show of all time. I couldn't get into it. You know, the aesthetics were just so off-putting. Did you watch The Sopranos? Yeah, I didn't really get a lot out of it, to be honest with you. I didn't get it.

Wow. I didn't get it. That's crazy. What was like, what was the point of the Sopranos? What was the point? Another just amazing show. I mean, he's living, he's living two lives. Yeah, he's a husband, he's a father, is a gangster.

I wasn't compelled by it. All right. So that was talking Emmer Letter. I did see a bunch of activity, though, around tornado cash. So Uniswap blocked 253 addresses that had traces of tornado cash interaction. And then it's interesting to me that Tether and Paxos haven't, it seems like they haven't blacklisted the addresses yet. And so USDC came out and pretty publicly did.

And I think USC in Circle had come out and said, we expect others to do it. But, you know, Paxos regulated in New York. They haven't done it. And then Tether, maybe that's less surprising. They're offshore. But I would have thought we'd see more of that. Yeah. So this is interesting.

Paxos has a reputation for being the most pro-regulatory stable coin out there, actually. The New York Trust Charter, as a stable coin issuer, gives you more credibility than other regulatory models, in my opinion. I think that's actually of all the array models, I feel like we talk about this every single week. Of all the array of models, I think that's the best one. Gives you the most assurances in terms of being a fiduciary, in terms of what you can invest the reserves in, in terms of liquidation scenarios, et cetera. BUSD, the Binance stable coin, which is actually really big. Like it's like the default dollar unit on Binance is a white label of Paxos, and they have not

blacklisted the tornado cash addresses in the contract. You can look at the contract and see that they're not blacklisted. That's remarkable. It's remarkable. I guess it's, but it's not like they haven't done the analysis. My guess is that they've done the analysis and decided that they don't have to. Yeah, unclear. And then Tether, which is not U.S. domiciled. I don't think they have a U.S. presence at all, really. Kind of less surprising that they, haven't complied, but it's not like Tether doesn't talk to low at law enforcement. They certainly do freeze addresses from time to time. But they've come out and said they will not, or at least so far, have not frozen the

OFAC addresses. They said they haven't been contacted by U.S. officials or in law enforcement with a request. They say they don't have U.S. clients. They don't onboard U.S. persons. So kind of an interesting situation, you know, people think stablequins are kind of fungible. But you're actually getting subtly different things out of them. Tether is definitely more offshore, you know, more resistant to regulatory seems. So it makes the case for USDA and Tether to coexist as opposed to they're just being one.

Oh, for sure. Yeah, I think there's clear product market fit for each of them. There's definitely a question of what's the bigger market. I think USDC is playing in a much bigger market. Well, they're kind of focused on more U.S. entities, DFI. There's more U.S.D.C. and DFI. And then Tether is really the number one digital dollar asset overseas. Yeah, for sure.

And the product market fit in China seems to be pretty pronounced for Tether. Yeah, I had this theory. I think we might have said it on this. show that the decline in tether capitalization was when the CCP was insisting that elites reshore their assets. And I thought some of those outflows from tether were part of that. I wouldn't be surprised at all. I mean, there's networks of almost Craigslist-style services that exist in China where you can give them fiat currency physical form and get tether in return. So there's clearly a big market for that use case.

I'd love to see would be more direct data on actual stable coin usage on the ground, especially in emerging markets. There's just not that much data. It's really hard to see what people are doing with it. Yeah, it's hard to pinpoint it. It's hard to pinpoint it, especially if it's not going through a centralized company. The World Bank had a good paper. I really liked it.

Looking geographically, looking by asset type. Obviously, chain analysis says their adoption. reports which come out yearly. I'm waiting with bated breath. It's almost time, chain analysis. Where is it? Where is the crypto adoption 2022? Where's my report? When does it usually come out? I think it's October. So not long. I have these things written on my calendar. The Bank of Canada used to do a good report. I think they had three years running a report on crypto adoption penetration in Canada with a very strong survey methodology, which is why I liked it. And I think they just, they furloughed it one year and they, and I was just so upset because it was one of my favorite reports. I think it was after

the 10th rugpole exchange in Canada that they just said, we're going to stop down this. They're like, yeah, we don't want to encourage them. Canada has just had a lot of bad beats on the crypto exchange. They can't get it right. So, and there's this whole thing about now that there's only so much in terms of a dollar threshold you can buy. Oh, that's in Ontario. Yeah. You can only buy up to $30,000 of non-BTC or ETH or Bitcoin cash assets, which how Bitcoin cash somehow ended up in that is just incredible to me.

Yeah. Like years ago, I guess Coinbase only listed Bitcoin, Lightcoin, Bitcoin Cash and Eith. Yeah. And somehow those four assets became enshrined. even though like coin and bitcoin cash are totally relevant yeah there's been some sort of analysis that they're presumably ontario's regulators are saying that those are the non-security assets or something who knows it's great i mean you could argue that something like bitcoin sv is more centrally controlled than just about any token out there oh yeah i'm lively i guess bitcoin sv is still

chugging along uh yeah big time i mean you ever talk to someone and it's like hardcore bitcoin NSV. Yeah, they exist. They're out there. Yeah, that's a pocket of the world. It's a, it's a wild thing. We don't have much contact with them, but they exist. They're in, there's a neighborhood of those people, for sure. They're like an uncontacted tribe in the Amazon or something. Like, you know, if you're unlucky enough to encounter them, they might shoot errors at your helicopter or something. Oh, yeah, they'll come for you. They'll come for you. There's a lot of, yeah, that's all I have to say about that. in more regulatory news.

So the FDIC, a bunch of stuff happened. So they published cease and desist letters against, it looks like five companies, including one that was FTX, FTX U.S. In these companies, the common bond was that they advertised that they had FDIC insurance on accounts where they did not. Surprised to see FDX on that list. My guess is that it was some sort of a miscommunication

where FTCS itself might have had. had bank accounts or something, but the customers didn't. So basically they just need to stop that. And then U.S. Senator Patumi, who's from Pennsylvania, he requested a comment from the FDIC over these allegations, which are definitely true, by the way, that the U.S. bank regulators are trying to stymie crypto businesses from emerging, including trying to stymie the banks themselves from launching their crypto custody businesses. So that is definitely valid.

And glad that Toome is on the case there. Yeah, I love to see those champions in Washington. He's leaving. Is he really? Yeah, he's not running again. Oh, no. So he's, you know, countdown clock to him being in the industry full time, I would think. Few pro-crypto candidates won their primaries.

And so we might get a fresh new crop here. Blake Masters was on the show. You want his problem? GMI PAC has a really good record in those primary races. I can't keep up to date on all the packs. I don't know which packs to pay attention to. GMI pack. I'm involved a little bit in that one in the sense that I say nice things about them on the podcast.

I have a hoodie that says GMI, but it's from bankless. Oh, really? Yeah, it's a Web 3 hoodie. It has a chip in it. that directs you to the NFT. Oh, that's cool. Yeah, it's just next level streetware. Speaking of bankless, we may or may not have an upcoming guest on the podcast from

that ecosystem. Stay tuned. But isn't it just kind of incestuous for podcasters to interview each other? You know, that just seems very circular. Opening question, how did you get to be such a good podcaster? It's like a lot of that stuff. Well, right. I mean, it's just podcasts

interviewing podcasts. We get interviewed on other shows. It's like, you hear us weekly. Do you not hear us enough? You really need more? I listen to a ton of podcasts. So I can handle, you know, one or two a week.

I have a friend. He'll go unnamed. He listens on 3X speed, which is inconceivable to me. I can do 1.5. Oh, 1.5. I'm a 1.5 guy. Sometimes 1.25 if I'm feeling particularly slow that day.

And he'll get through 8 to that podcast a day. That's crazy. It's astonishing. I don't know how you retain that information. That's just, he's in a rush to get information in his head. He's just hoping that some of it sticks. I don't retain it like when I'm listening on 1.5. Oh, I do.

You can get used to it. You can train your brain to get used to that. And then you get to the point where you're in a 1.0 conversation in real life and you're asking people to speed up and talk faster. Well, did you see the more just really exciting news, private blockchains? They're back. Yeah, I've noticed a disturbing trend of you speaking excitedly about security tokens and real world assets. And it's giving me shades of 2015. I don't like it.

Here's my thing. So private blockchains are not a thing. They're never going to be a thing. But all of the things that people tried to build on private blockchains will exist in the form of real world securities represented on public blockchains. Well, don't you think there are actually private blockchains that, like side chains that are private, basically? Yeah, I think those exist. Yeah, those exist. But I think they'll be, so clearly they exist right now.

But I think the end state is for these to be tied in some form. to a public notary system. But so what real-world asset tokenized on a public blockchain compels you? Well, very few because we don't have clarity from the SEC on how you can actually have a security token. And so this is the bingo card of 15C3-3-3. That's the free space on our bingo. That's the middle space.

You need clarity on possession and control of a digital asset. And that's why there's been 45. broker dealers in ATS venues that have applied for clarity from the SEC and FINRA on trying to launch things. And they all have different types of assets that they're focused on. Some are private equity shares. There's a bunch of real estate ideas that I think are really compelling. But imagine a world where you're able to go to Ave compound and take out a loan against collateral. That's your ownership interest in Adam Newman's company or something. So that's probably where we're going. But for that to work, you need a way to liquid.

liquidate the collateral frictionlessly if, you know, you fall into default. Yeah. Yeah. And I think what's going to happen here is that as much as it's antithetical to some market participants, a lot of defy is going to become permissioned around pools of, you know, capital where at the on-ramps, you're authenticated in. And maybe you don't know who you're transacting against in a defy pool, but you at least know that they're not, you know, Saddam Hussein or,

Kyle Davies or one of these people that's like in jail. And, you know, I think that's just like the way this is going to unfold. We haven't done a three hours segment this week. Actually, there is some, there's some breaking something or other, but I can't make heads or tail of it. Maybe you can explain it. I don't know. There was some document that was just filed in Singapore.

It's written in legalese. So I don't think it rises to the level of a dedicated part this week. We're not playing the bit. We're not doing the intro song. Yeah, I don't think we, I don't think there's. Yeah. So there's a document. We don't understand it.

It's, I'm waiting for one of the crypto Twitter lawyers to tell me what that means. It's a Singapore document. I don't understand these Singapore restructuring documents. But something happened in Singapore. Yeah. I investigate for yourselves. There is some personnel news this week. we don't really have a section for personnel news.

What do you got? Tadj Dryja has joined Lightspark, David Marcus's LightsPark. Oh, that's a free agent pickup. That's a big, big win for Lights Bark. Tadge, of course, one of the most tenured and important Bitcoin Lightning developers, left the DCI. So congrats to both parties there. I also have an OFAC update.

We forgot to say this in the OFAC section. So we know Ether mine, the biggest Ethereum mining pool. According to Taken's theorem, pseudonymous data scientist, is censoring OFAC transactions. We have looked into it in Bitcoin to see what the mining pools are doing. What are they doing? Drum roll. They're actually not currently censoring OFAC. Why?

Or could they? Could they? Yes. Certain mining pools have this functionality ready to go. It's just not turned on. Marathon launched the pool and then they shuttered their pool that was advertised as being OFA compliant. The U.S.-based pools could do it in an instant if they want it. They are not currently.

There have been transactions belonging to addresses on the sanctioned list that have been included in Bitcoin blocks. in almost all major pools within the last year. I can confirm that. They are not filtering for OFAC currently. That could change in an instant, of course. So that's your, in case you're wondering, that's your OFAC update. That's very interesting.

We got sidetracked on the private chains. The reason that I brought that up is because the DTCC has released something in partnership with R3 gold main JPM around post-trade settlement on private chain. So if anyone's curious, there was a Wall Street Journal article about that. This has been going on since like 2015, though. This is not new news that they're working on this, I guess. This is another way to say it.

I have a very hard time getting excited about that, to be honest with you. Well, it's good to see something happening, I guess, with the big banks on some of the stuff. The last news item I have is that Tether is now working with a, quote, Big Five auditor. Is that right? Is BDO? BDO Italia. Are they fifth?

BDO in the top five? They're surging up the leaderboard. I mean, that's what I saw. That was the headline. So they must be fifth. I mean, they're definitely not first. I didn't know people talked about auditors in the context of Big Five. But BDO has a good tagline.

If you want to be in the know, you've got to go with BDO. Is that what it is? I've never heard of BDO before this. This is the first on learning of them. Yeah, I don't know if you're allowed to stretch big four to big. What's next? Top six. Yeah, you just can't.

You can't be standing like that. I should draw the line somewhere. So Tether now has a new auditor. I like, there's some really good crypto auditors out there. shout out to Arminino Arminino do a lot they did sponsor this podcast

at one point I think they With them With them With them They do a lot With our portfolio companies I just support anyone

That makes proof of reserves happen Yeah And You know Proph reserves It's still happening Speaking of a company

That should have Proof Reserves There's Celsius Has a ton of activity This week So they're running out of money at a rapid rate. I don't know what the logic is around this bankruptcy. I'm just scratching my head.

It's not like these guys are going to be able to emerge from bankruptcy. And this plan that they're going to become a Bitcoin miner seems insane to me. There's just burning cash, it seems like. But so this week they counter sued Jason Stone, who was the guy with the huge Twitter account that was running Kifi. So that's messy. And then they sued Prime Trust. and they're saying the prime trust, which is a custodian, is in possession of $17 million worth of coins that should belong to Celsius.

This thing is a mess. I can't make heads or tail of it. Yeah, there's not much to make heads or tails of. It's just a, they just need to liquidate this thing. I feel like this could be rumbling on for years and years. I mean, have you ever heard of an efficient liquidation? of a centralized institution and distress in crypto. No, and they still have this token that's outstanding,

which these brokerage and exchange tokens have got to be just the sloppiest things to clean up in a liquidation or an M&A for that matter. Yeah, I'm really wondering what happens to an exchange that has some rev share token and they're getting acquired. My view has been for a long time that they just sacrifice the token holders and they get nothing. But FTT is like a nine, what is it,

$9 billion? Let's check the market cap on that. So, you know, how does that work? I mean, you're going to be in a situation where they kind of have to go public,

I suppose. But yeah, so it's a $9.8 billion market cap for this token. I think you'd have to do a one-time equity distribution of token holders

that could qualify for it. But this thing is like, you know, it's like one-fourth of the market cap of FTCS. Or maybe you go public and you keep the token. But I feel like you would just be inviting a securities law review of the token. Yeah, I would think so, right? I mean, I just don't know. There's no precedent for any of the stuff.

No, there have been tokens that folded as you have seen situations where tokens were converted into equity through sort of a claiming process. You've seen that at smaller scale and you've also seen MNA but you haven't seen, I don't think you've seen public companies.

Well, I guess Voyager had a token, right? So yeah, I mean, did they go, they went public with the VGX token? I guess there's nothing about public markets that means that spurious tokens can't exist. You know, Coinbase bot bread. They had a token. And what happened to the token?

I think it still exists. I don't think that Coinbase maintains it, though. And I don't know that they paid for it. Just the whole new corporate M&A is going to be a lot different beast, I guess. Well, if Gary Gensler has anything to say about it, maybe it won't go anywhere. So he wrote an op-ed this week, basically slam dunking

and taking a victory lap on BlockFi for the settlement that they had, kind of acting like it was settled law that the interest account is a security. And the jit, which is totally not true by the way. They got advice to settle that and that it would make their prospects a lot easier of, you know, going on or about their business if they settled it.

But there's no case law that says that that's security. If coin base wanted to fight that, I think they could. And they chose not to, obviously. But the whole point was that crypto is nothing new and we're just going to regulate it and where the cop on the, beat if I had to paraphrase, but you just addressed this one thing of this case that they

want. It's like, dude, there's so much else going on that you guys are totally ignoring. You got the safe harbor proposal. What's a token? What's a security? What's not? You have the security token issue where it's like give clarity to the 45 broker dealers that are asking for it. You have things like FTX with FTT. There's so many issues out there that he just sort of hand waved over. Yeah, the logic in that piece was really odd. Gensler was extrapolating from one event, one company. So the whole crypto industry was bizarre. We made some tortured analogy with cars.

I saw, yeah, a few of the cryptolars were pushing back against it. The Strong suit is not op-eds. I'll tell you that. That's it. We've gotten an episode coming out on Monday. I guess we'll hop in and we'll do an emergency insert if we have to tomorrow, but we're recording this on Wednesday. Yeah, our Monday episode is on a Bitcoin theme.

For all of you that think we've deserted Bitcoin, not the case, I'm still very faithful. I love it. I love it. All right. Well, we will see you on Monday. Have a safe and healthy weekend.