On The Brink with Castle Island - Weekly Roundup 12/15/23 (Cantor and Tether, cash vs in-kind ETFs) (EP.486)

Episode Date: December 15, 2023

Matt and Nic return for another week of news and deals. In this episode:  Coinbase's positioning ahead of the ETF Cantor CEO Howard Lutnick acknowledges their Tether role Where do we stand on cash creation versus in-kind creation for the Bitcoin ETF? Coinbase launches an RWA hub in Abu Dhabi Kucoin settles with the state of New York Do Kwon is staying in Montenegro a bit longer Coinlist settles an OFAC violation FASB adopts (again?) fair value accounting for Bitcoin SBF's lawyer said he was the "worst witness he's ever seen" The status of Warren's anti-ML crypto bill How potent will the crypto lobby be in 2024? Content mentioned in this episode: Charles Rettig, IRS Digital Assets Plan Would Be a Setback for Taxpayer Services Sponsor notes: Coin Metrics State of the Network's Q4 2023 Mining Data Special In Coin Metrics State of the Network Issue 237, we spotlight crucial developments and data across the mining ecosystem

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 Concentuteease. You've printed a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the Bitcoin. Welcome to On the Brink. I'm Matt Walsh.

And I'm Nick Carter. And some episodes brought to you by Coin Metrics, and here is the Metrics Minute. For today's Metrics Minute, we're looking at Bitcoin mining data. Bitcoin's hash rate surged from 250 XA hashes to 480 XAHashes this year. Miners benefited from improving market conditions, with quarterly mining revenue exceeding 2 billion in Q2, 3, and 4. Transaction fees also saw a revival surpassing 200 million in Q4. In the mining pool landscape, F2 Pool gained attention for excluding O-FAC transactions from its blocks. Meanwhile, you have new entrants like Ocean Pool, which have a non-custodial payout system.

Publicly traded mining stocks outperformed Bitcoin itself with a mean return of 352% among a basket of top 10 mining stocks. your metrics minute. So you're playing hurt today. This is, this is a bad flu for you. Yeah, I'm on like day five of the flu right now. I can't believe you didn't get the Tamiflu. Tamiflu gets it done right away. That's the move. Everyone got sick after Basel. It's like, it's flooding here now as well. It feels biblical. You know, there's a plague, the flood. God has determined that this city has sinned, and we're being punished. Yeah, that's tough. That's tough.

Well, you missed a big New York trip. Yeah. No, I'm out for the count. But, you know, back here on Brink Nation, no days off. You got to keep on doing podcasts. Yeah, it's not going to. We probably get some complaints about the quality of your voice,

but we'll persevere. I couldn't speak yesterday, so this is great, comparatively. Yeah, no, yesterday in that board meeting, you were just a child of trial. Ash, really. It was just terrible. Pretty much. But I'm energized.

I've been spending this entire week talking to people about J.P. Morgan and how if you're in the crypto space or if you're really passionate about this industry and you want to see good things happen and you want to just stop having things happen to you, you just cancel your J.P. Morgan account. It's the one thing you can do against Jamie Diamond. Yeah, I think you should do more rants. I mean, they can't be contrived like you do have to be passionate about them, but people love the rants. people love the rants and I think people like to feel empowered. So there's something very tactical you can do.

You can decide where you want your money to go in financial services and it can go to a company that is actually supporting the ecosystem and hiring people and not taking canned responses that Elizabeth Warren probably planted with him around how Bitcoin is bad, but my private blockchain project is good. You just got to take matters into your own hands. You take your checking account. You move it over to fidelity. you take your credit cards, you shut them down.

There's plenty of good alternatives. And then your wealth management platform, you've got to get on that. Compare Jamie Diamond to Howard Lutnik of Canter. I can't wait to talk about Howard Lutnik. Oh, my gosh. What a contrast in terms of tone. Howard Lutnik, man. This guy, we need to have him on the podcast.

I just found out about him, and I was so entertained by his interview on CNBC. It was the funniest thing I've ever heard from a serious C-level executive at a large financial institution. I think that was like a two coffees and maybe like the amount of Zins. I'm talking to six milligrams Zins at least because he was so fired up during that interview. So fired up. A lot of energy this week. We did three podcasts this week. That's right.

So you sat down with Brian Farnett. two of them pertaining to Coinbase. You sat down with Brian Foster, head of wholesale at Coinbase. That was a fun one. I've known Brian for years, so he runs the wholesale business over Coinbase. Coinbase is a fascinating outfit right now.

So I think they're the custodian on something like 11 of the 12 ETF proposals. They've built out that institutional business over the years, this base thing. So Ria sat down with Rowan Stone of Coinbase to talk about base. That's the L2 network on Ethereum. There's a lot going. on at Coinbase. I mean, they've been on quite a run lately, actually.

Let's see. They're at a yearly high. They're certainly down from where they listed, but they're at their highest point since April of 2022. And I mean, there's no firm that's better positioned with the ETF coming out. They are the prime beneficiaries. Yeah, I agree. The thing I love about Coinbase is how active.

they're getting in a smart way on the policy front. And so just mobilizing people to talk to their elected officials. It's a really good strategy that they have over there in terms of bringing attention to this ecosystem. You sat down with a tie turban of Dynamic to talk about their series A that they just raised from Founders Fund. Yeah, Dynamic, a portfolio company of ours. So we were involved at the Seed Round there.

So Dynamic is powering Web3 logins. these login experiences are awesome. So you just, you know, the days of writing down alpha numeric numbers or seed phrases and accessing these Web3 sites is gone. And so this is just a traditional Web 2 login flow. It's kind of like an OAuth for blockchain type of a model. So they announced a subsequent round of financing, a $13.5 million series A from Andreessen, founders fund, and us.

I was excited to have a tie on and talk about that. Just a super smart guy. So busy, busy week on the podcast. Yeah. Should we jump into some deals? Let's jump into some deals. As always, these are powered by Masari Enterprise, an awesome product. There's a few of these deals that I didn't come across my Twitter stream or

coin desk or any of these things. So shout out to Masari Enterprise. I don't know how they find some of these things. But first one up is Dynamic, which you just mentioned. So Web3 login, 13.5. million dollar Series A and Dresen Founders Fund and Castle Island. Congrats to the dynamic team. Then we have GFox, a UK based crypto derivatives exchange. There is 30 million from M&G investments. Next one up is Canaan. This is a publicly traded Bitcoin mining company that raised $25 million

via a preferred shares offering. Then we have Andalusia Labs, a blockchain protocol development company. there is $48 million and a billion dollar valuation from Lightspeed and Mubidala. Wow. That was one of the ones that I didn't see anywhere except for Masari Enterprise. So good catch on that deal. Then we have Nonco. This is a digital asset brokerage firm that raised 10 million from Valor Capital Group, HackVC, Morgan Creek, Theta Capital, and others.

Lastly, you've got got Gotcha Monsters, a Web3 Gaming Company. they raised 3 million from Anamoca, Infinity Ventures, and FBG. Gotcha Monsters. What was that one that we liked back in the 2016-17-time period? Chain monsters. Chain monsters. Whatever happened to Chain Monsters. I think I still have some of mine.

I think I lost my wallet on that one. Yeah. Chain monsters. I got a lot of detritus from old blockchain games in my wallets I don't know if there's ever really been a successful blockchain game. Shout out Andy Gild from Fidelity on the chain monsters front. We used to do one-on-one check-ins. He was kind of working on the crypto stuff with us at the time.

And he used to just try to talk about chain monsters the whole time. Like there's other stuff to talk about, like how the project's going. But big chain monster fan. Didn't really work. out for us in the end on those chain monsters. Look, you win some and you lose some. I mean, with blockchain games, I'd say you pretty much always lose.

But maybe there'll be a good one one day. I mean, there's so many people, there's so many people trying to build Web3 games. Something's going to work. I'm not a gamer, so I don't really know. I don't have a good nose for these games. We're like seven years in to people trying to build blockchain games and the track record's pretty bleak.

You know what game I like? Maybe wrong. Snake. Do you remember those on the Nokia phones, a little snake thing? Snake went crazy. It was a great game. Brick breaker, that was a great game on BlackBerry's. That was incredible, incredible game.

I remember when I moved from BlackBerry to iPhone, I was like, how am I going to be able to type without the keyboard? Like the Taktow keyboard. I thought I would never be able to do it. I still think BlackBerry typing was better than the iPhone. iPhone. I miss it. I miss it. I really do. Yeah, if BlackBerry could just have evolved that with the keyboard, that was a great thing. Yeah, what happened to them? Why did they have to crash and burn like that? I don't know. That Netflix show about BlackBerry is pretty interesting. Yeah, it was a film or a series.

I think it was a film. It had a whole, their whole downfall. Yeah, that was a good, good product. All right, so let's hop into some deals. I want to talk about this tether thing first. So we'll tee up some audio right now with Cantor Fitzgerald's CEO Howard Butnik in his, I guess it was a CNBC podcast that he went on this week. All right. So why don't we, why don't we cue that up and then we'll talk about it? Roll it.

Cryptos. Okay, so I am a fan of crypto. But let's be very specific. Bitcoin, just. Bitcoin, right? These other coins, they're not a thing, all right? They're just not a thing. They're like kind of make-believe these other things. Maybe Ethereum is okay, but Bitcoin. So every four years, Bitcoin doubles the price of how much work you have to do to get a coin. And if you go look at the history of Bitcoin, every time the doubling happens, it does well.

So that and combined with the concept of an ETF in America, right? Now, Bitcoin isn't really for Americans, you know that. It's just a speculative thing. It's kind of, I call it Tesla stock. It's kind of like Tesla stock, right? It's just something to trade. It's like, why is Tesla Tesla? The answer is because everybody buys it and it goes up.

I mean, it's not like the fundamentals of Tesla or the fundamental. Why do you like that? Why if it's just a speculative trade? Bitcoin or not. Because I think the halving and the way that the world works these days. There's a lot of people who are worried about the fact that we run $2 trillion deficits, right? And there's a lot of the world that really wants to buy things. So they want to buy stable coins, right? And I'm a big fan of the stable coin called Tether.

Because you do business for them. Well, I hold their treasuries, right? So I keep their treasuries and they have a lot of treasuries. They're over $90 billion now. So I'm a big fan of tethers. I think they're an excellent, interesting way that if you go to Argentina, right now, right, you have the new president of Argentina. Remember, he said he was going to use the dollar to run the country? You know, the only problem with that is you need some. You need some of your own dollars to run your country in dollars. Like for us, it's pretty easy. We print them. It's easy for us. We go to printing press. We have some dollars. They don't have them. So the idea of them doing it in dollars was a really

fun thing to say to get elected, but you can't really do it unless you have reserves. And they don't have reserves. They can't do that. It's interesting. that you're saying this. Last week, Jamie Diamond said that if he were in the government, he would ban back. Not to mention what Munger said about it overall. Well, okay, once upon a time, right? You know, Charlie Munger had a view, right? And that's a reasonable view, which says it has no purpose, okay?

It has no fundamental purpose. But things that trade up and down sometimes have a purpose, right? Just think of this. If you're a Russian oligarch, all right, and you were trying to get out of Russia, and you were scared to death of Putin and you wanted to get out. What did you do? You bought the world's biggest yacht.

Why? Because you figured if I got to get out of Russia and I don't live in a country, I'll live on a country that's a boat. Right? The boat's so big. I live on this boat. And guess what?

What did the U.S. do? We just took them. Now, what is the only asset that these people could have held where no one could take it? You know what the answer is? Bitcoin. Great.

So it's used for illicit. It's not a illicit. But expatriate your assets. To go around sanctions. Well, I think Bitcoin is that. Like, Bitcoin is on control, but there's no one you can call. See, Tether, if you have Tether, right? And Justice Department calls Tether, they freeze it.

Because there's someone to call. There's no one to call on Bitcoin. So Bitcoin is a weird thing, but it's only Bitcoin is a weird thing. You know, an Ethereum, you can call Joe Lubin. Like, you can call a guy and say, hey, Joe. All right, so Howard Lutnik comes out here. This is like one of the best appearances I've seen on a mainstream situation by a CEO of a big financial services firm. So it had been this sort of poorly kept secret that a lot of Tethers backing was in U.S. Treasuries that were held at Cantor Fitzgerald.

But this confirms it. So it's tough day for the Tether Truthers, huh? Very tough. Yeah, I mean, we kind of did know this already, but I don't think they'd ever acknowledged it. And then he just came out and set it. Like, you sounded proud of it, too. I mean, so many people were out there just saying, look, tether is unbacked. There's no treasuries there.

No one's ever met anyone that's ever worked with them. And meanwhile, like the people in the industry were like, well, you know, I've heard a Cantor Fitzgerald. And from what I understand, they hold all the treasuries. And he was unapologetic about it. That's why, like, from what I've heard about canter, when the tether truthers come at them, tell their haters. Canada like, yeah, so like what about it? Yeah, we like manage their treasury portfolio. What's the deal?

Like, what's the problem? You know? Tether is like the 16th largest holder of U.S. treasuries right now. And they're held out of all the Cainter. That's if you add up all the stable coins. All the stable coins in circulation. So I guess they're not fully all backed by treasuries. No, because Tether's, you know, 90 billion and all the stable coins are 130.

billion. So that 16th stat is all of the stable coins. Regardless, they're pretty big. And it seems like Cantra Fitzgerald is reaping the benefit of that. So it sounds like also he likes Bitcoin. It's kind of open-minded to Ethereum. All the other stuff, not so much. Yeah, he was calling Bitcoin the halving, the doubling. He was implying that the price of Bitcoin had to double during the having. To be clear, there's nothing requiring that that occurs. Okay, you can't write into the protocol rule that says the price has to double. It's a stock to flow guy. He's just, he's looking at that rainbow chart. He loves the stock to flow. The price has to go up at the having. It's, you know, science. I liked his, uh, I liked what he said about, you know, Russian oligarchs and, uh, you know,

Before they would store their wealth on a yacht because it was portable and you can live on the yacht in theory. If you have to escape brush it or something. But then we just seized all the yachts. That's right. So turns out yachts are actually not a reliable store value. In fact, they're very easy to identify unless it's Sam Chabucco's yacht, which case it's like a mystery where it is. Sam Chibuco's, yeah, yeah, whatever happened to that boat? It was re-registered.

It's still operational. Do we have any listeners that have seen Sam Tribuco on that boat? It can't be in the U.S. waters, right? Is it in non-extradition waters? Yeah, I mean, like, what? We seized every Russian oligarch's yacht, and we can't find Sam Tribuco's measly yacht. Like, come on.

I don't know. I continue to think that Sam Tribuco is probably the state witness for this upcoming trial with S. SBF and the Chinese money laundering scandal. So we might see Sam Trubuco on a witness stand in 2024. Maybe that's a good prediction. We have to do a predictions episode here in the next couple weeks. Oh, yeah.

I'll get ahead of the predictions. I'm going to stake it in the ground. Sam Trubuco testifying against SBF around SBF made me launder all that money to the Chinese. So Howard's point was that unlike a yacht, your Bitcoin can't easily be seen. Which I thought like he was he made the point pretty elegantly. I mean, it can be seized, but it's harder to seize. So he's like, he understands value proposition. He said, he said Joe Loubin could freeze Ethereum,

which I just don't think is true. Like it's not even a little bit true. No, not very fair to Joe Lubin and, the Ethereum ecosystem. Yeah, like I'm not going to go to bat to defend Ethereum or anything, but come on. Don't Lumin can freeze the theory. Not my understanding of how that protocol works. Yeah.

So I think he's still a little bit, probably a little bit of work to do in terms of blockchain 101, but he did the industry a tremendous favor just by going about for another. I mean, that is literally the number one outstanding dark cloud hanging over the industry. still to this day. It's incredible. So if you just look at this year, so much has happened this year. People have been thinking we're in a bear market. I've been saying we're not.

It's been a bull market for a while. But, you know, biggest risk going into the year after FTX blew up, okay, finance. Like, do they have the capital? Is this a Fugazi type of situation? You get the settlement. You get finance with a court-appointed overseer in there. They appear to have all the funds. Then you have this tether-fud.

okay, this is an $80 billion plus thing, and do they actually have any money there? Is this just something that's propping up the price of Bitcoin? Is it nefarious? Nope, turns out assets are with Cantor Fitzgerald. Does these markets climb a wall of worries? Well, what's the opposite of that? Because this is like a wall of optimism.

I mean, worries are being diffused now. Yeah, and then you get this ETF situation coming on. So I have a prediction on the ETF. Okay. It's kind of a mainstream view at this point. Maybe I don't know. But so there's all this back and forth in these filings with all the sponsors really about cash creation versus in kind. So will the authorized participants be able to create shares in this by just bringing Bitcoin to the table and creating shares that way?

Or will it have to be a cash transaction? So the cash creation is less efficient because there's, more financing steps, there's more legs to the transaction on the back end. None of this will be visible to retail, but it's just how does the shares of the ETF get created from Bitcoin. I predict that this will be cash create and that the SEC will not allow in-kind creations. And so you can launch your ETF. My guess is it'll still happen the week of January 5th to 10th time period, but it'll all

be cash create, which is kind of interesting from a couple angles. One is that's a less efficient way to do it. There's higher financing risks. There's potentially some capacity issues there with some of the back-end market makers on just the overnight risk of holding the BTC. And so these things will settle on a T-plus-1 basis since there's a cash leg involved. So Bitcoin's open 24-7, Fedwire's not. so the ability to actually move U.S. dollars through this system, if they're not stable coins, is challenged. So I think there will be some kind of dislocations on the price side. I don't think it's going to be as efficient of a product as people want.

I think that there'll be some kind of tracking error from the underlying. I don't know the range that could be in the double digit basis points, maybe, in terms of pricing error. But this will open up the banks to be authorized participants of this product. So I think you're going to see a bunch of U.S. banks that can't touch crypto because of sub 121 actually be able to be in the quote unquote crypto game just in a different way. So they'll be doing the cash creations for these ETFs. And I think you'll have all these banks that probably aren't really ready to go on day one necessarily, but they're going to have to come up to speed really fast on on Bitcoin.

They're going to have to really understand the spot dynamics of Bitcoin to understand if there are massive price dislocations between the price of Bitcoin and then the price of Bitcoin in these ETF wrappers. So a lot of banks will be scrambling here over the next couple of weeks, I'd imagine, to operationalize their processes, make sure they have market data feeds coming in, the whole nine yards. I think you can pound your chest a bit because you were one of the first people to talk about this distinction, and now it's all the rage.

Yeah, it's just reading all these ETF filings. You know, you can go on the Black Rock Fidelity bitwise, all these comment letters, which, by the way, Some of these comment letters are just fictitious. So we had a portfolio company that was represented as sending a comment letter to the BlackRock ETF. They never sent it. So someone just spoofed their name and tried to ride on their credibility. And the comment letter said, you shouldn't approve the ETF. And they were like, we didn't send that.

Like people can just dedos these sites. But there was a really interesting comment letter from a professor actually at Georgetown this week that went into really. It's just a super thoughtful comment letter, and I tweeted about it, and we can put it in the show notes. But it was just talking about why an in-kind product is better than a cash product. It's this guy James J. Angel from he's an associate professor of finance at Georgetown. Recommend everyone check that out, but talks about why in-kind creation eliminates trading costs and execution risks. It talks about how other commodity ETFs don't require cash create and redemption. So there's a total double standard by the SEC if they approve this just on a cash basis.

These ETF sponsors should really have the ability and the freedom to accept Bitcoin directly. And then he goes on to talk about market structure. So it's worth a read. It's a pretty long one. So in your view, it's more efficient to have in-kind, but it doesn't look likely that that will be the case at this point. In-kind is definitely better for investors because there'll be, fewer transaction costs associated with the workflow. It's less financing on the back end, less steps. And it will just allow the price of Bitcoin spot to track closer to Bitcoin in an

ETF wrapper. It's just a better product. Does this imply that a cash crate product would have a higher expense ratio than in that case? TBD on where all of these things price. But yeah, there'll be more costs associated on the back end. I guess who bears those costs is TBD. But the issue for the SEC is that they don't want these authorized participants touching the underlying in some capacity. So it's not, the SEC is taking the posture that if you're a broker dealer in the U.S., they want you to stay away from the BTC, it looks like. Well, that's your ETF chatter for the week.

We're not far away now. Three. No, it's coming up. Coming up. I'm a 99.5% handicap on this thing, getting approved as a cash create. I'll take it. Elsewhere in news,

Coinbase Asset Management is launching a real-world asset tokenization platform, license in Abu Dhabi, called Project Diamond. They're issuing short-term debt instruments on the base blockchain. Pretty fascinating, huh? Abu Dhabi trying to become a hub for crypto innovation. And I think these security tokens on base could be a really big category here. It solves a lot of issues from just an onboarding and customer experience workflow. If you're able to just have an integrated package with Coinbase, I would think, right?

You just onboard with Coinbase institutional. You get direct access to the chain that way. That could be a big business. Does the buy side even know about this? Like people that cover Coinbase stock just view it as like a Schwab comp. They're just doing so many different things. I think it's hard to track it all. You know what I was thinking to myself though is the RWA theme was one of the bigger themes

in the crypto markets for the last year and people kind of clowned on it a lot. But from where I said, it looks like it was both consensus and right. like RWA tokens, protocols did well, gain TVL, now you have Coinbase leaning into RWA.

It seems like it actually did kind of pay out, it played out the way people thought it would. Sometimes being consensus is, you know, it works. Yeah,

it's playing out, but it has a long way to run. I mean, we're still not at the point where you have tokenized, uh, reits, tokenized,

SPI, QQQQ, there's all sorts of stuff that would be very popular if there was a path to launching some of these products. And who knows, maybe Abu Dhabi emerges here is a place where you can actually trade some of these things. So Ku Koi, Kukoin. You sound like you're, you sound like this is a Jordan flu game for you right now. I mean, well, I guess the difference is that I believe that he actually played well during that game. Is that correct?

he played exceptionally well yeah yeah i'm still waiting for your maybe you're going to turn it on in the back part of this podcast here yeah um so yeah i mean this is not like that because i'm not performing so um you need a you need like an ivy right now yeah i actually unwisely went to play pedd at a event this weekend while i had the flu i had the I played terrible idea. I played Padel like an idiot. And they had the IVs there for some reason. But I didn't do it because I don't know.

I feel like I want to minimize the number of needles that go into my body. So if it's not a hundred percent necessary, I'm not going to, I don't see the appeal. People do that for hangover cures and stuff like that now. That's like a normalized thing. It's crazy to me. So Cucorin. All right. So I'll take the Cucorin one if you can't.

get through it. I was on my third attempt. It's a Seychelles-based cryptocurrency exchange. They agreed to a $22 million settlement with the state of New York over failing to register with the state, and they will cease operations in New York. I don't know a lot of people in New York they were using Ku-coin, if I'm being honest to you. Yeah, I didn't really think of Ku-coin as a stalwart New York institution. When I think Ku-coin, I don't think New York. I do think of New York as a hub of crypto innovation in the world though. I mean, I'm down in New York like twice a week, some of these weeks. There's so much going on down there. Yeah. It's kind of weird and ironic, I guess, because they're just trying to, they're so tough for the crypto industry, but it does

still seem to be where the bulk of the activity is in the U.S. talent density, man. That's wins the, wins a day. People want to live in great cities. And New York is a great city. probably has pound for pound more blockchain startups than any place on earth. So Montenegro has extended their detention of Doquan, reportedly at the request of U.S. and South Korean authorities. I thought he was meant to be exorided to the U.S. Is that still happening? This is crazy.

So every week where it's like, hey, Doquan's coming to the U.S., and it's like the next week, actually Doquan's bending the holidays in Montenegro. this guy can't catch a break I would rather I think be in prison in the U.S. probably than Montenegro Montenegro

it looks bad over there it doesn't sound good at all you know what doesn't look good either is Brooklyn MDC prison yeah I mean it's look the U.S. isn't exactly known for a carceral system I mean we're known for it being

terrible actually Yeah, I don't know, prison in general anywhere, probably not great. Yeah. But so that's that. Next one up, Coin List, which is a crypto exchange. They settled an OFAC violation with the U.S. government for $1.2 million. OFAC is, of course, the Office of Foreign Asset Control. If you are enabling a customer to send money to someone on a sanctions list, you get an OFAC violation.

You got to just use travel rule compliance software here, guys. It's not rocket science. All these crypto intermediaries that are actually not complying with the travel rule are just insane right now. There's tools out there, not a note of bane, shout out one of our portfolio companies working with a lot of these brokerages. How are you not complying with the travel rule? It's 2023. So here's a piece of news that I thought was already in the books, but apparently is news, new news. So the FASB is adopted fair value accounting rules for Bitcoin,

meaning that if you are corporate and you hold Bitcoin, you can actually price it, you know, according to its actual value, as opposed to an indefinite and tangible. I thought this is already in the, I thought this has already been enacted though, but apparently just went in. I feel like we talk about this every couple of weeks.

thought this already happened too. Yeah. So now it's really, really in. Fair value for sure. Finally. So you get to mark this asset to the actual price, which is a no-brenner. Yeah, revelatory.

I know. It's crazy that it was ever the other way. But it's progress. So I read this Bloomberg piece this week on this guy, David Mills, who I guess is a friend of Sam Bankman-Frey's father. So he was sort of the legal architect of the default. strategy and he said that SBF was quote the worst witness he's ever seen very hard to argue with david mills on that so he ran the defense strategy as a favor to joseph bankman is that right yeah he said

it was 85 i think 85% favor 15% because he was just fascinated with the legal side of it um and i guess these his friendship with david bankman or david what's joe bankman joe bankman is uh his his friendship is more or less over. Seems like he's catching a little bit of the blame. There's no one to blame here other than the parents and SBF. So take it easy on David Mills. This guy architected a legal strategy that had zero chance of winning. Yeah, I mean, it was just the case from hell.

Worst witness he's ever seen, though. I mean, I haven't seen a lot of witnesses, and obviously I didn't see the actual video, but from the text, the inner city press rundown, he was the worst witness of ever studied. I mean, what did he do, though, was so bad? Was it that you're not meant to take the stand? Like, I guess that's pretty rare in these high-profile white collar prosecutions. They don't often take the stand because it tends to hurt them.

Like, what was the problem? I think meandering, meandering answers, not being direct, just going off on tangents, trying to confuse people. didn't seem like people were buying it. Yeah. Yeah, that was a pretty much unwinnable case. Other odds and ends this week. So there's this pretty interesting op-ed by Charles Reddigg,

who's a former IRS commissioner, talking about this IRS broker rule provision. So this was part of the infrastructure bill that the IRS is going to have more oversight on crypto brokers and intermediaries. And the way it's worded right now would be really cumbersome. And so his point is that, look, this exceeds congressional mandate for what the IRS is actually able to do. And it's going to hurt other IRS operations in the sense that it's vastly

overreaching. It's going to require tremendous headcount to actually do some of these things that are above and beyond what you would do in the securities market and the commodities market. And he's saying, look, it's just going to impair the IRS's ability to function. You know, you're just going to have to have an army of people on this and it's pretty unworkable. So there's, you know, regulation that applies to some of these protocols, which there's no one actually at the protocol to produce some of this documentation. So it was pretty consistent with a lot of the comment letters that have been received in this rulemaking period. But it was just fascinating that it's a former IRS commissioner that's actually saying, like, look, this is like, you can do this

rule, but there's no way we can actually operationalize it. It's like you'd have to triple the size of the IRS to actually do this. do we know what the status of Elizabeth Warren's bill is that she's trying to garner support for Elizabeth Warren introduced a new anti-money laundering bill this week it has five or six co-signers on it it would apply reporting requirements to node operators so if you're out there running an Ethereum node you would fall under the definition of a broker and Elizabeth Warren's bill I don't think this bill has got any like not going anywhere. Doesn't appear to even have support from Sherrod Brown, the Ohio

senator who's on the Senate Banking Committee. He has not publicly signed on for this. So like most Warren bills, I think it's just a conversation starter and not going anywhere. I don't know. I saw some people acting pretty concerned about it, actually. But it would be very unfortunate if her first successful introduced bill in her long bleak career failed legislation was this specific one that would be a shame um i don't i'm not putting up the alarm bells on that bill yet so okay we'll let you know when it's time to panic we'll tell you i mean time to panic is always early so if you want to start panicking a little bit that's fine i there's i don't think that this is going anywhere particularly in a uh it has no shot of getting anywhere if Brown doesn't sign on for it. Now, Brown is something that we got to talk about

this race as we get into 24 and we'll have more politics episodes here into 24, but there are some key races coming up. So Sherry Brown's Senate race is a very important one. It's going to take a lot of capital to unseat him in Ohio and it's unclear who the Republican opponent's going to be, but it seems like a number of them are very pro-technology, pro-innovation. So it'll be interesting. And he's Senate banking chair. So that's a very, very powerful seat in the Senate. Ohio has kind of turned red since the Trump election, right?

So that was kind of a blue state for a while. It seems like it's a bit more of a red state. So we'll be tracking that election pretty closely here. All right. We'll see if we can rustle up any other candidates to come and do the show. They're welcome. Speaking of candidates, did you see that Novigrats is abandoning Biden and backing Democrat Dean Phillips? I didn't even know there was another candidate on the Democratic side.

Yeah, Dean Phillips out of California, who's a representative, is running for the presidency. He's not on the ballot in every state. It turns out it's very difficult to get on the ballot in a lot of these states, but he's on in New Hampshire, along with like 70 other people. And he's only down by 70 points to Biden in the Democrat side. But, you know, what do you figure the bump up is if he were to go on the Galaxy Brands podcast? Do you think that's worth like 40, 50 points in the polls? It could help.

Yeah, does he have a view? Does he have a crypto platform? I don't know if he has a crypto platform. That's why I need to do the show. He needs to figure out. how to come up with one. I mean, having Novagrats go over and support you, though, is I'm sure if he wasn't thinking about the crypto platform, maybe he is thinking about it now. That's a nice pickup. I'm going to be curious to see if in this cycle,

some of these candidates that are overly hostile, whether they suffer at all due to that and whether the pro-crypto candidates at all benefit. I think this is the first time when we've reached critical mass and people are actually politically minded about this stuff, they realize there are real stakes here, that we might see that effect in the elections. So I think it would be an interesting experiment

to see if the crypto lobby or the crypto single-issue voters matter at all. I don't know what the answer is. I think the answer might be we don't matter at all, but I want to know. Well, there's a lot of activity behind the scenes. There's a lot of capital being raised right now

for political action committees that are targeting some of these vulnerable districts where there's very hostile folks. And I think it will matter. And I think it'll only start to matter here once we get into Q1 and these elections start to heat up a little bit. All right. So I think that's it for the week. I'm really hopeful that you get some sort of treatment for this malaise.

It could be malaria that you're dealing with. Could be swine flu. It's tough to look at you right now. I'm glad that this we haven't figured out how to do video podcasts. Sorry for making you look at me, but, you know, we don't have to do video. Yeah, this video would have been terrible for this podcast. Terrible, terrible. All right, we'll feel better.

And we will be back on Monday. We have a busy podcast slate coming up here. A lot of podcasts already recorded. We're not taking the holidays off on the podcast. We'll be churning out content. I think we're getting towards our 500th episode. We're close. Yeah, I was actually just wondering, how are we going to celebrate our 500th?

That has to be a marquee episode. That will be, yeah, we'll have to have something special for that. That's coming up. It'll be within the next couple weeks at this pace. Yeah. All right, everyone. We'll have a safe and healthy weekend and we will see you on Monday.