On The Brink with Castle Island - Weekly Roundup 12/11/20 (What's Treasury up to?, MSTR's bond offering, would the STABLE act kill Dunkin?) EP.157

Episode Date: December 11, 2020

Nic and Matt return to cover an avalanche of news and deals. In this episode:  Blockstack's transmutation Bitso raises $62m Matt breaks down the Microstrategy bond offering Mass Mutual buys $100m worth of Bitcoin through NYDIG A bipartisan group of Representatives asked Jay Clayton for clarity on broker dealer custody for cryptoassets The looming crackdown on noncustodial wallets from Treasury The effect of requiring transactional metadata for on-chain transactions More comments on the STABLE Act Matt's plan to primary Stephen Lynch via Dunkin talkin points Would the STABLE Act kill Dunkin Donuts? Why Bitcoin is pristine collateral Fidelity Digital Assets partners up with BlockFi for Bitcoin-backed loans Bitwise launches their index fund Square goes carbon neutral Standard Chartered launches a crypto trading service Singapore's DBS bank launches a crypto exchange Paxos and BitPay file for national bank charters The Financial Times changes their tune on BTC Our call for data portability legislation

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 to Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called a Bitcoin.

Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. Tons of news this week. I think this is the biggest news week of maybe the entire year, just in terms of how many companies have announced products and coming into the fray and all the government stuff. It's been a busy week. I think so too.

You know the whole gradually then suddenly thing? Parker Lewis, did he invent that? Yeah, well, that was the name of his series. series. So I think we have left gradually and now we're in suddenly. Yeah, I do think so, which I guess is a double-edged sword. You know, you got a lot of good announcements and then you have, you know, some bad ones. Treasury rumors. Yeah, remains to be seen what that actually entails. But I think anyone that expected a harmonious rise to the heavens for Bitcoin, just always going up at a 45-degree angle with no pushback. they're going to be disappointed because as Bitcoin gets bigger, the state's resistance to it is also going to increase. Yeah, I think that's exactly right. Well, we had a busy week on the podcast. You had a really interesting one with Mustafa Yeham of Bixen.

That was a really opened up the, I guess it opened up the industry. And there are some popular misconceptions that you guys talked about in terms of Bitcoin mining. Yeah, this was a barn buster of an episode. we hit so many of these critiques of Bitcoin, which have to do with mining, whether miners care about Bitcoin, spoiler alert, they do, whether they, how they view the control over protocol upgrades. Does China pose a risk to Bitcoin through mining? Mustafa was great. He was very patient with me, and he gave me great answers to all those questions, one of our most popular episodes of the year so far. Yeah, I really enjoyed that one. And then you did another one with Mani Balee of Blockstack.

And they actually had some news around they have an opinion letter from their council that says that their stack token is no longer security. So it's, I don't know what you call the, what just happened, that transmutated into a non-security, I guess you'd say. Yeah, I always think of Calvin and Hobbs when we talk about transmogrification. Yeah. I don't know if you read that comic strip, which is great. I mean, there aren't really that many precedents.

here for securities offerings, which have then transmuted into non-securities, commodities, whatever you want to call it. In fact, there's no precedent for that. You know, Ethereum was not ever, you know, explicitly. No one conceded that the Ethereum offering was most like an investment contract or, you know, probably a security. It was just sort of grandfathered in and then the CFDC said, okay, we're cool with it now. But with Blockstack, they did a reg A-plus offering under the aegis of the SEC. That was a securities offering. And now their counsel has said, we've moved on. We're not a security anymore. I've always been a big Blockstack fan, back to One Name. Do you remember One Name, the original product? Yeah, I own my name on Blockstack

1.0. I don't know what I can do with it now. Well, it sounds like this new platform that they're coming out that involves really tight integration, it sounds like, with the Bitcoin protocol. That sounds like it's pretty compelling. Yeah, that was one thing that I found very interesting and obviously liked about it. I mean, adding smart contracting to Bitcoin, you could say it's a side chain. You could say it's an alternative form of block space. It settles back to Bitcoin. Kind of reminds me of Vera Block in a way, actually, in terms of the way that it operates.

Either way, you know, we talked about this. We've been talking about this for a long time, just this whole host of other blockchains that are referencing Bitcoin and adding to the demand for block space, which would be great. It hasn't developed as fast as I would have expected, but maybe this is going to change now with block stack. Yeah, so I thought that was an interesting one.

Why don't we move on to some deals and some fundraising? All right, so this is a huge one. Bitso, which is a crypto exchange. based in Mexico, they raised a $62 million series B led by QED investors and Kasek Ventures. Some great investors there joining that round. These international exchanges continue to be a really interesting place to invest. Yeah, the Latin American market obviously absolutely primed. Bixo looks like they're going to be expanding beyond just Mexico.

Folks down there have an appetite for Bitcoin. And it's obviously an enormously popular asset now just for remittance purposes. And they are one of the prime movers in that market. So really, really fascinating one to track. The next one up is Luca. Luca is a crypto asset tax and data company. They raised $15 million in Series C financing from a group of investors that actually included State Street and S&P Global.

So congrats to the Luca team. And then we have yield in all caps. No prizes for guessing what they do. They're a defy banking platform. They raised $5 million from alphabet and digital strategies. When you have a name in all caps, is that do you have to say it like an exclamation point? You got to scream it.

It's like, yield. Yield. So there's another deal. This is a fixed income deal, which is rare for the deal section. So this is, of course, micro-stratage's bond offering. So why don't you tell us what's going on there? Because really not that many people in crypto and fixed income, I'd say. I mean, I might be on that list because some of this just doesn't really make sense to me.

But micro-strategy, which is the publicly listed company run by Michael Saylor, they actually made news. The first, I guess, deal was that they announced that an additional $50 million worth of Bitcoin had been purchased last Friday as part of their Treasury Management Program. I believe that was done at 19,427 cents per Bitcoin. So last Friday, right around market close. So that brings their total of Bitcoin on the balance sheet to about $50 million U.S. And of course, they're up big on it.

So then earlier this week, they announced a plan for a convertible note offering. So they went out and I believe the number is up to about $550 million in aggregate principal amount of convertible notes. So they've basically gone out to the market to raise debt for the company. The convertible notes pay out at 0.75% twice a year. So it's payable semi-annually. It's 0.75% per annum on the note. So it's next to nothing. And what they're going to do here is go out and just buy Bitcoin. So they've basically said to investors in this note, give us your dollars. We're going to invest in our company. And explicitly, we're going to go out and buy 550. million dollars worth of Bitcoin with it.

Now, just to maybe talk about how a convertible note works, so these are pretty common in startup equity financing, they will have a conversion price to them. So at some point, there's the ability to have these nodes convert into equity of the company, or they could just be repaid. So they could be repaid at principal plus interest, or they would convert at what looks like a price per share of $397 in 99 cents per share in much. micro strategy when this was issued was at $289 per share. So it would be a step up in valuation that they would convert into. But my guess is that what Michael Saylor is seeing here is that,

you know, he's going to use this to buy Bitcoin. Presumably the value of micro strategy would go up with the Bitcoin and you'd probably not want to convert these folks into equity in the holding company. And so it looks like you're basically, as an investor in this security, this fixed income convertible note, you're essentially just giving them dollars. They're buying Bitcoin with them and you're getting a 0.75 interest rate. So that's kind of the deal in a nutshell. Yeah. And as a callable note, the choice to convert the debt into equity is not the owners of the bonds, to be clear. That choice would be made by micro strategy itself at a time of their choosing, right? Yeah, that's exactly right. So micro strategy can can pay this off whenever they want.

And so I guess the retail version of this would be someone taking out a dollar loan on blockfi and just going and buying more Bitcoin or something, except it's at a much lower interest rate. And it's an institutional buyer. To be honest with you, I don't really get it. I don't really get why this is that attractive. I get why it's attractive for micro strategy. I'm not sure why an investor would really find this very attractive. Yeah, it is a fascinating little vignette on the state of the credit markets today, I thought, because micro strategy and fairness, they have a clean house. They don't have a lot of debt.

And so, you know, they're not laboring under some enormous debt load. So the market can clearly tolerate some debt issuance. But, I mean, think about this, the rates being offered here, very, very low interest rate, effectively negative in real terms. So it always kind of shocks me that the markets are so willing to absorb all this debt. But I guess the context really is that you have $19 trillion of negative yielding sovereign debt. And so compared to that, this maybe looks more attractive. Yeah, and I'd love to have someone who spends their days in the fixed income market explain this to me a little bit more.

But my take on this is that investors in this offering are basically just looking at this and saying, you know, look, it's not a great payout, but maybe there's this call option value here on, I get converted into equity and this thing just goes off to the races. I guess that's one way to think about it. And then I guess the other way to think about this from just a micro strategy perspective is, I think they have plenty of capacity as a business

to put more debt on the balance sheet, you know, from what I've seen, they're not very levered at all. They could probably go out and do this again. Especially because it looks like this first offering, was oversubscribed or there was clearly strong demand for it. I guess my potential answer to your question would be, look, this thing isn't going to have the exact same return profile as Bitcoin by any means, but because there's a prospect of it being converted, micro strategy equity, which itself is a bit of a derivative on Bitcoin,

as a fixed income instrument being issued through that plumbing, you know, maybe because this is the first Bitcoin-like fixed-income instrument out there, that might be why there was appetite for it. But yeah, it is a little bit mystifying. Maybe. I mean, does it hurt the narrative that this is not really a treasury asset anymore from micro-strategy? This is just explicitly one of their businesses, if not their entire business. Yeah, initially it was, you know, Michael Saylor could sort of get away with the narrative that this was merely prudent treasury management. And I think we might have slightly departed the realm of prudence now that we're talking about heaping on leverage in order to acquire more Bitcoin, which I do not recommend for individuals,

at least. Yeah, I mean, this guy is, he's a savage, this guy. Yeah, he just continues to impress. So that is the micro strategy bond offering. What do we have as far as news? Well, I think one of the things that I want to cover is one that just came out. So Mass Mutual, which is an enormous insurance company, came out and they have joined the Bitcoin Club with a $100 million Bitcoin purchase. They've apparently been making these purchases through Nidig, which is the large company out of New York, the subsidiary of Stone Ridge. They've also taken a $5 million minority equity stake in Nidig. So this is a whole new type of category of entry. here. Yeah, and three is a trend, by the way, and this is the third kind of major corporate

treasury allocation to Bitcoin. So we can officially call this a trend. This makes a ton of sense, I think, for an insurance company that's sitting on a lot of cash. Now, albeit, look, Bitcoin's a very risky asset, but you'd have to think that some pension funds, some insurance companies are spending time trying to think if this might make sense to put some balance sheet cash into this, put some of the float into Bitcoin. Yeah. And, you know, aside from just, you know, the market impact of this trade and the signal sense of the market, the thing that excites me about this is that it is a completely

different genre of allocator as a large insurance company with presumably functional governance. That's very different from a micro strategy where you effectively have one individual calling the shots. And micro strategy could afford to swing for the. fences because it's the founder CEO in charge. And with Square, you know, it's Jack Dorsey is effectively in charge over there. But those are both sort of more nimble companies. This is a large, slower moving insurance firm. To me, that's a very different signal. That's a more patient

and probably careful allocator. So I think people might be taking this one a little seriously. Yeah, I was really surprised to see this, but very pleasantly surprised. The next story up is we had a bipartisan group of nine members of the House of Representatives send a letter to Jay Clayton, the SEC chairman. And what they're asking for is clarity around how broker dealers can provide custody services for crypto assets. So tokenized securities as well as just general commodity crypto assets it looks like. And of course, as people know, FINRA and the SEC have been super, super slow to approve these BD applications, super slow to approve new ATS venues. And with these congressmen want. And I think what a lot of entrepreneurs would also love to see and a lot of

incumbents who are trying to change the classifications of their BDs is they just want to see some action here. I mean, what's up with the line? Yeah, I think some of the congressmen might be brinkers. That's what I call listeners of the show because this is something that we complain about all the time on this show. And it's kind of a niche issue and it's not something that crypto people are really that focused on as far as advocacy goes. But it really does hold back as, you know, the industry in a material way. So it's really great to see. Yeah, I mean, you have these startups that have, you know, been going after ATS venues. We're going to create these platforms that allow secondary trading. And it's not like they're hearing no. They're just hearing

nothing, which is even worse, in my opinion. So hopefully we start to see some action. So speaking of congressional letters, there was some crossover. in terms of the representatives that wrote that letter and the representatives that wrote a letter to Steve Mnuchin about the proposed rumors coming out about what the Treasury is thinking of doing with regards to Stable Act. So Warren Davidson had his name on both of those letters saying that he was very concerned about potentially interfering with the ability to transact on a non-custodial basis. So we do have a bit of a Bitcoin caucus in Congress, which has our best interest at heart. It's not the majority.

It's only about a half dozen representatives and one to two senators. But we have some representation up there. It's feeling like whatever is going to happen here out of treasury is not going to be good. And people are speculating it's around self-custody. If it's only that KYC needs to apply to outbound treasurer. transactions on a VASP level. I think that's one thing. If it's more onerous on self-custody, I think we have a whole new set of problems. And the defy sector within this industry would be tremendously negatively impacted by such a thing. And so you've seen Jeremy Aller come out with a

letter this week. But the frustration here on my side is that we don't even know what's being contemplated. I mean, there's no like proposal here. We don't even know if Minookin's talking to people. It's, you know, there's a lot of rumors here. And we've had Fred Wilson and Brian Armstrong and Ballagy all come out with their reactions. But we don't really know what's on the table. Yeah. And it's kind of terrifying because we're seeing preemptive reactions to some proposed rulemaking where we don't know what the rules are.

But everyone that's sort of roughly familiar with it seems to be pretty terrified by it. So it's like this alien menace that we don't even know how to grapple with. because we don't know what the threat is. But I think we should install the taxonomy here. You know, so you've got VASP to VASP transactions. I would imagine that those would absolutely require the exchange of information in keeping with what sort of FATIF has laid down expectation-wise. And then you've got VASP to non-custodial transactions,

which in certain jurisdictions also require exchange of information, Netherlands and Switzerland. And then you have non-custodial to non-custodial transactions or self-hosted to self-hosted transactions. If this rulemaking pertains to that category, then we have an enormous problem. I think we have an enormous problem, even if we have the requirement to certify that you own a wallet on the outbound. So if you're a coin-based customer and you're withdrawing Ethereum to a smart contract,

you don't own that wallet necessarily. That's right. So that to me is a big problem as well. That's true. Yeah, I mean, a lot of this defy activity works on a peer-to-pool basis, not peer-to-peer basis, and you're interacting with a pool of funds. So technologically, that also doesn't work.

But, you know, if the Treasury overreaches even further and says there needs to be somehow identity metadata inserted into blockchain transactions between unhosted or self-hosted wallets, that's something that is completely incompatible with the state of the technology today. I think it would really kneecap a big chunk of the market where you see entrepreneurs going after data self-sovereignty and trying to build systems on the internet that are community-owned.

And so this goes way beyond Bitcoin, but this really has the potential to kneecap an entire category of this industry in a way that would be the, equivalent, I think, of not allowing the internet to flourish in 1995 or 1996. It would be the equivalent of if the U.S. government just didn't allow the World Wide Web to exist and required you to go through portals like AT&T or MCI or whatever the big telcos were back then. Yeah. Or if, for instance, you know, to communicate with ham radio, you had to buy a specific medallion from the government in order to make a local connection on, you know, on licensed radio

spectrum, for instance. I mean, it's super, super onerous. We're talking about public payments infrastructure here where the private sector and not the government has innovated. And this kind of backlash would set America back. I mean, America is the nexus of this industry. and it would take us from one of the most progressive countries in terms of crypto regulation immediately to one of the most repressive ones on a par with Russia or any of these other countries

where crypto is outright banned. So hopefully, I mean, it's quite possible that by the time this podcast has released, some things come out here, so we'll see. Yeah, not optimistic about that. There's the other less likely to be implemented, but sort of equally worrying piece of legislation here, which is the, of course, stable act. I entitled it the dastardly stable act in our last podcast. Our thoughts on that are quite clear. Yeah, we had a lot of actually questions from our newsletter last week, people coming in and asking things. I actually spoke to

quite a few people in political circles that I'd never really met before that don't really like some of the people that are behind this bill and were telling me all sorts of reasons why they were opposed to these people, which is also interesting. But there is a few questions that I guess we could opine on. So one question that folks had are, you know, is, are there policy groups advocating for blockchain and fintech entrepreneurship and enablement that are fighting against hostile acts like these? And are there places that we recommend people check out? And the answer is yes. We have a small but vibrant policy advocacy ecosystem that is working for us and communicating

with our government representatives. The two entities that we work with the most and respect a lot are Coin Center and the Chamber of Digital Commerce. Coin Center got active on Gitcoin, which is an Ethereum-based cruise. crowdfunding service and got a ton of donations through that system, which was really cool to see. We recommend supporting them both. They really do great work. Another question that I got a couple times actually was reference to the fact that PayPal and Venmo service would effectively be illegal. It would be very difficult for them to operate stored value

systems in an open way if this bill were to somehow get passed. and a bunch of people asked me about the Starbucks app and I don't think that it would apply the Starbucks app obviously we're not legal experts but I'm pretty sure you can only use Starbucks cash within Starbucks I think it would be closer to a gift card but I don't know but I have to tell you that if this did affect Starbucks

it would obviously affect Dunkin' Donuts and if there's one way for Stephen Lynch to lose re-election it's to come at Dunkin' Donuts and salty and I'm telling you he will lose if he does something against dunks. Matt, this sounds like the beginnings of your stump speech for when you primary Stephen Lynch here. I got to tell you people in my neighborhood don't care about Stephen Lynch killing the crypto and fintech ecosystem. They do care about him killing Dunkin' Donuts.

So if the story here is Stephen Lynch hates Dunkin' Donuts, I think we're going to have a lot of allies in South Boston. I like that angle. Yeah, for gift cards or or. coffee points, I guess they're not redeemable for dollars. They're only really redeemable for coffee or, you know, horrible pastries. So I think that would be the whole in that legal theory. I hope you weren't suggesting that Dunkin' Donuts has horrible pastries. That's obviously not true. I mean, I sometimes engage in, you know, I actually get the pastries. I just don't feel good about it. So here's my grab about Dunkin' Donuts. They had a really good thing going with the chocolate

crella the chocolate stick as some people call it and then they've discontinued it which i don't understand for the life of me i mean that was their best donut was the chocolate stick i don't even know what that is but i'll take your word for it yeah not good so maybe the coffee apps are exempt but the issue remains really is that the bills authors conceded publicly on twitter after i challenged them about this that their definition of stable coins would encompass general fintech activity, any IOU-based balance that you have on a digital wallet of any sort, which is, you know, sort of redeemable for dollars. And we don't typically expect that these entities obtain bank charters to operate. Now, for PayPal and Venmo and Zell and all of those,

they can go out and get bank charters because they're really big. But that would still be super anti-innovation, and it would basically make it impossible for new startups to compete. And that's really the issue is that it would just kill the vibrancy of the fintech industry. It would make it impossible for noise startups to get involved because getting a bank charter requires a huge amount of paid in capital. It's incredibly onerous. It's highly regulated. You're effectively becoming semi-nationalized. You know, banks are not these private sector entities. They're public-private partnerships. So it kills off innovation there. And it's bad for financial inclusion. and this was the thing that rankled me the most about that bill.

Some of these fintech companies like Square, Cash App, have been incredibly good for financial inclusion. And they wouldn't exist if the buried entry was Get a Bank Charter. They just wouldn't. And if you look at where CashUp is used, it's used a lot in the American South, in places, Ark did a good piece of research on this, Ark Invest, in places where people are systematically underbanked.

And when we were trying to get those stimulus payouts earlier in the, year, one of the proposals was to use these fintechs like Square, like the cash app, because they do reach more people that are kind of frozen out of the bank system. So if you're trying to increase financial inclusion, you want as many of these fintech startups to exist as possible. You don't want to restrict the whole industry and force everyone to get this bank license, which isn't even really addressable to the kind of activity they're engaged in. Yeah, totally agree. Well, I guess the last question that we got a lot was what type of activities have Stephen Lynch and Rashida Teleb been doing have they been meeting with fintech entrepreneurs in their districts to understand

how this proposal would impact job creation and I you know the answer to that is I don't think so not to our knowledge at least so Stephen if you're a brinker if you're listening we would love to meet with you and very politely inform you of our objections to this bill As your constituents, I think you're obliged to meet with us. I don't know what the rule is exactly, but you should anyway. And if not, then we're just going to start hanging signs. Let's say Stephen Lynch hates Dunkin' Donuts. We'll do it.

We'll do it. Well, let's move on to a big product collaboration this week. So Fidelity Digital Assets in BlockFi announced that they're collaborating on a product that essentially looks like a tri-party repo. So it's going to be, as an institutional, customer, if you want to get a U.S. dollar loan against your Bitcoin collateral, you park the collateral, park the Bitcoin with Fidelity Digital assets, and you get a U.S. dollar loan from BlockFi. So that flow looks really professional. I mean, that's a, it's not exactly, but it's kind of like

a tri-party repo transaction in some sense. So that's the type of thing that, that's the type of thing that institutions want right now. They want to be able to free up U.S. dollars against Bitcoin collateral. And this is a really interesting product. I think. Yeah, and I don't know who it was that coined this term. Bitcoin is pristine collateral, but it really is. Bitcoin is the greatest collateral ever invented by human beings. Gold, obviously, being probably a slightly superior form of collateral historically.

But Bitcoin is so great because it's completely auditable, it's digitally native, very easily to transmit. I don't have to run you all through the pitch for Bitcoin. But the point is Bitcoin here is being used in the way that it's going to be used in the future, which is as this monetary base asset, as this kind of U.S. Treasury alternative. It's not really a payment system. It's not great for buying coffee. It is great for owning value and storing wealth over time and over space

and then proving to a third party you own that value. So this is using Bitcoin not necessarily, I wouldn't say, as Satoshi intended, but sort of in the most suitable way. Yeah, yeah, agreed. So I'm really excited about that one. Another one that I was really excited about is Bitwise. So Bitwise announced that shares of their Bitwise 10 crypto index have begun trading on the public markets under the symbol BITW. So this is effectively what Grayscale has done.

And this is the, I believe this is the first U.S. domiciled index fund that's available. And it's already trading at a pretty significant premium to NAV, which shows you just the demand there and the fact that people are willing to absorb. these type of premiums just to get exposure, which I think is a double-edged sword. I mean, obviously it's not ideal to have these huge nav premiums, but it shows you that we need to figure out a way to get these assets in the hand of retail users in a way that they actually want to engage with, which is on their brokerage platforms. Yeah. So huge congrats to the Bitwise team.

It's been a long journey for them three or four years now. I actually remember when they first released their announcement of their index tracking product, not a financial product, but just an index itself. And I wrote about it. It was way back in 2017. And I said, this is really cool. We need more well-constructed, thoughtful indexes. And they've come a long, long way since then.

Yeah. So congrats to the Bitwise team. Here is an interesting piece of news. There's just so much. There's so much. Square announced their intention to go carbon neutral entirely. And they've launched something called the Bitcoin Clean Energy Investment Initiative. And they're going to be investing in companies that mine Bitcoin in kind of a sustainable way,

which is just great optics and good for the narrative. And also good for Square. It's good corporate responsibility. A little bit of a narrative violation there. announced that they're going to be investing in some of these companies. I'd have to imagine it's probably going to be some of these pipe to crypto type of things, which are taking stranded natural gas and turning it into Bitcoin. So, man, Jack Dorsey is a very impressive person to be pushing this. Yeah. And on the pipe to crypto front, there's a variety of ways that

oil wells try and deal with their excess natural gas. So it depends on the jurisdiction, but it gets flared, it gets vented, it gets captured. What the Pipe to Crypto companies do, and there's a few now, there's more than one, probably closer to a half dozen now, is they just take care of all the gas, which is this waste product from mining oil. And because gas is so cheap, it's really not worth it to build pipelines and capture it. And they combust it and feed that energy into Bitcoin A6 and mine, it and if you were to merely vent the methane gas, combusting it instead actually has a net

positive environmental impact because that just decays into carbon dioxide, which is much less worse from a climate perspective than methane gas, which is a much worse greenhouse gas. So in some cases, it's actually strongly a net positive from an environmental perspective. Yeah. Yeah. So congrats to Square here. I thought that was great. Moving on here, a few institutional moves.

So London's standard chartered bank is launching a crypto asset trading service. It looks like they're collaborating with a bunch of industry participants, including Elmax, Erasex, Mataco, Silvergate, and others. And then there was also an announcement that SC Ventures, which, which is Standard Charters Ventures Unit, is partnering up with Northern Trust to launch something called Zodia Custody, which is an institutional crypto asset custody business.

So more and more traditional banks getting into the mix here. Yeah, and I'll just pile on. Singapore's DBS Bank is also launching a digital currency exchange. So, I mean, just so many of these announcements in this just in the last week. The next one is kind of in the private blockchain

area, but I do think it's a really cool concept. So JP Morgan is reportedly working with Goldman Sachs to use blockchain to facilitate intraday repo transactions. It looks like this is on the JPM coin, which is essentially just moving dollars outside of the Fedwire system, I believe, or at least net settling them. So I think that's a really cool use case. And these repo transactions, I've always thought made a compelling use for blockchain technology or some sort of a natively issued digital dollar. And on the other end, maybe a natively issued treasury or some sort of a bearer collateral.

So I think that we'll see something interesting come out of this. It looks like it's in proof of concept mode at this point. I mean, hopefully this portends something, some action by JPM to actually use public blockchains at some point. That would sort of, that would be the threshold of which I would start to think it was cool. Well, you could see the benefit of doing this on, you know, you could do this. It's essentially just a stable coin. So I think you could probably do this on a public blockchain pretty easily.

So on the crypto to bank pipeline, actually, there is some news there. So in fact, maybe they're trying to get ahead of some legislation. Paxos, which is. they do a lot. They issue stable coins, among other things. They're sort of a custodian, they're in exchange. They're filing for a national bank charter. And then BitPay, which is, of course, the crypto merchant services and payments company based in Georgia, they are filing to become a federally regulated U.S. bank. So there's a lot of lines being blurred here between the bank sector and the crypto industry.

And just for the record, we're not looking to become a bank at this point. Unless we want to issue a stable coin, at which point we will have to. Okay. So the doors open. Yeah, I think you need something like 20 million and paid up capital to do that, though, first. Okay. So we'll hold off for now. There's a couple articles and reports that I enjoyed this week. So Ryan Selkis came out early this year with the crypto theses for 2021.

A little bit controversial. He dunked on XRP in a pretty funny way. And all the XRP, the XRP army was all over it. The ripple people did not like that. Yeah, I think BitStamp actually had to issue an apology because of some of the comments that Ryan made in the report, which you published with BitStamp. But, yeah, I will concede.

I didn't read every word of it, but I did skim through it. There's some interesting stuff in there. Yeah, I liked it. Everything that Ryan writes, I tend to read. So I liked it a lot. Here's another gradually than suddenly moment right here. I mean, if you told me five years ago today that I'd be reading articles like this, I probably wouldn't have believed you, honestly.

So I'm referring to this article written in the Financial Times. Again, Financial Times, there are no friends to Bitcoin. This is the publication that employs Isabella Kaminska. You know, God bless her, but she is not a Bitcoin fan at all. In fact, she hates Bitcoin so much that they invited Craig Wright to a conference that they held to discredit Bitcoin. So, yeah, I'll go ahead and say that on the podcast. That really, really rubbed me the wrong way. Anyway, the FT had a column from Rishir Sharma, who's the,

chief global strategist at Morgan Stanley, so a person of consequence entitled, will Bitcoin and the dollar's reign and effectively positing that Bitcoin could be an alternative to the dollar as a global reserve currency, you know, and saying that it's benefiting from debasement, which is, of course, true, and that, you know, investors are, their faith is being shaken in the dollar a little bit. regardless of whether this comes to pass, the mere fact that it's being discussed as a possibility in a mainstream news organization with a headline like that is just a little bit staggering. Yeah, I was not expecting to see that. I was quite surprised because, as you point out, you don't see a lot of positivity about this industry coming out of the FT.

And I mean, compared to 2017, the focus would have been on ICOs, you know, the ICU flavor of the week and just basically dunking on Bitcoiners is just being caught up in this incredibly noxious and in salubrious space. Today, it's different. All the conversations around Bitcoin have to do with global macro. And there's really not that much mention of ICOs,

which are sort of obsolete at this point. So why don't we close it out with, I guess this is a non-crypto story, but it definitely would impact their crypto efforts. So Facebook is under a lot of pressure here from the FTC and a, a number of state attorney generals with an antitrust lawsuit that's come down quite a serious one kind of reminds me of the Microsoft one from years and years ago to break up the company

and would essentially, if successful, seek to break up WhatsApp, Instagram and Facebook, you know, break up those two acquisitions from the mothership. And I think as we mentioned last week or the week before, the integration between those platforms has started to get pretty sticky and you can now cross message. And I think the idea is that the Facebook Libra now called DM project would enable money to move pretty frictionlessly between those networks as well. So you'd have to think that if this is ultimately successful, that functionality goes away on both the messaging and the dollar movement side. I think there's a lot to talk about here, not the least of which is will this slow down any of the Libra efforts?

you'd have to imagine it would. I think one of the whole valid propositions of Libra is that it would be cross-platform is that it would grant four-ish billion people that use Facebook and all of its associated suites of products, access to the same financial network, which is obviously not how things work today. People are siloed and their little fintech apps, which are sort of locally siloed,

and then they're siloed within their banks and within their national payment system. So that was the vision of Libra. It is interesting to see these antitrust cases gaining teeth. I mean, Chamath predicted this. He said, we're going to move from the equivalent of the gilded age to a new progressive era. And there will be a populist move to bust these trusts. And I'm with him.

I think my preferred mechanism of reducing corporate power here would be through innovation and through the building of permissionless, unowned but shared infrastructure, obviously what's happening in the industry, to bust these silos, but antitrust can't hurt. I think there's a couple interesting angles here. Fred Wilson, I think, has blogged about this in the past just around.

There's an alternative way to do this potentially around making some of these data monopolies open up their API and open up their social graphs. allowing people to build on them. That's probably where we'd see an explosion of just product innovation based on some of the data that could be unlocked and allow startups to build things on top of those platforms. So that might be a preferable outcome here, but who knows?

Yeah, data portability mandate would be fascinating because right now if you try and leave Twitter, you leave Facebook or Google, there really is no ability to take any of that. data or any of those connections with you. So this would transform these companies into protocols of a sort. So that would be one really interesting way to kind of backdoor in some more fairness. I don't think there would be anything that could be better for the crypto asset industry

in terms of the tech tribe of this industry that's trying to build user-owned networks than to have some sort of a mandate that makes the data monopolies open up their social graph because the big problem is the cold start problem for all these networks. other than the fact that a lot of them don't work yet, which whatever. But the other problem is that you have to build up just the density of users. And if you could come out of the gates with that user network and the social graph already built and the product actually works, then you're off to the races. That's well said.

One thing that cracked me up about Facebook's reply to the antitrust case was where they said, hey, actually, the FTC already ratified our acquisitions of these startups. so no givebacks. And I thought that was so funny because it's like, you don't make the rules, Facebook. You can't just institute a no give back policy around these acquisitions. Well, I mean, this will be interesting. This will play out over many years, I'm sure,

but this is really where Microsoft had their eye on the monopoly lawsuit for a very long time and sort of missed the Internet in a lot of ways. And so you wonder if, you know, this would potentially make Facebook miss crypto. That's an interesting idea. Yeah, Microsoft was in the wilderness for 20 years there. But then they somehow recovered and became the biggest company in the world again. Yeah, that turnaround story. There'll be books written about that if there haven't been already.

All right. So I think that's it for the week. You know, busy week. We'll see. I'm sure there'll be more news coming out. today and tomorrow. Maybe we'll have some treasury news next week. Yeah, I'm hoping this podcast isn't dated by the time it's released in terms of some sort of punitive announcement regarding non-custodial wallet. So I guess we'll find out. All right, everyone, have a great weekend and we'll see you

next week.