On The Brink with Castle Island - Weekly Roundup 12/23/22 (Caroline pleads, SBF is extradited, Visa's autopayments) (EP.383)

Episode Date: December 23, 2022

Matt and Nic return for another week of news and deals. In this episode:  Are stablecoins still a priority in DC? The rise of the FUDfluencer Sam agrees to be extradited Did the SDNY wait for Sam to be extradited to release Caroline's plea deal? Alameda was siphoning FTX funds from day 1 What's the deal with Modulo Capital? Is Gerald Cotten back from the dead? Does Flashboys need a new chapter? What is going on with IEX? How did Michael Lewis not figure out something was up at FTX? Sen. Pat Toomey's stablecoin legislation Core Scientific files for bankruptcy Why the mining shakeout might lead to consolidation The Fed's stablecoin blog Visa's autopayments for non-custodial wallets Stablecoins are having a great year Where are the remaining FTX execs? Content mentioned:  Coinbase, Regulating Crypto: How we move forward as an industry from here Visa, Auto Payments for Self-Custodial Wallets Sponsor notes: Talos powers institutional access to the entire digital assets ecosystem via a single-point of entry. Connect directly to your preferred prime brokers, lenders, investors, custodians, exchanges, OTC desks and more, or meet them on Talos. Get started at Talos.com 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 Concentute Easy. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the 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. All right. Year in review, year-end metrics minute here. Let's look back in performance for selected top assets in the Coin Metrics universe,

excluding stable coins. Tron had the best 2022 returns. Tron at minus 29%. Bitcoin's minus 64% ETH at minus 68. Luna is an even minus 100. The correlation between Bitcoin and the S&P reached an all-time high this year. It's now sitting well above 0.4. Stable coin settled more than $7 trillion in 2022.

And since the merge, yearly ETH issuance has dropped close to 90%. its supply has been pretty much steady at $120.5 million since the merge. That's your Metrics Minute. Pretty good metrics minute there. Good job Metrics Minute, people. Next one up is Talos. Talos powers institutional access to digital assets, whether you're on the buy side or the sell side, whether you're in TradFi at our crypto-native firm. The Talos platform enables the entire digital asset ecosystem via a single point of entry. So they have a platform that supports price discovery to execution to settlement, you can trade through the API or the web-based GUI, and he can connect to all the liquidity in the crypto ecosystem, whether that be prime

brokers, lenders, investors, custodians, exchanges, OTC desks, meet everyone on Talos. They have the best leadership team in the biz. Head over to talos.com. That's t-a-l-os.com. This episode is brought to you by Tamaflu, unfortunately. You're looking a little worse for the wear. Running amok in my house right now. Toddlers will do that to you. That'll happen.

The pod goes on. Yeah, you're really pulling through for this one. I can't do it by myself. Jordan Flu Game. There's a lot to talk about. There's a lot of bad boys this week. Some bad girls, too. Bad girls, possibly maybe even good girls.

TBD. Maybe. Who knows? Podcast was ripping this week. Emmer came back on. Repeat guest. Stalward guest. Representative Tom Emmer from Minnesota.

Yeah. Just pretty awesome episode, I thought. Tom was fired up. Oh yeah. We did a whole transcript for that. I used AI tools for my transcript. Shout out AI. Oh, nice.

Well, he's not very, he's not happy with the SEC. He didn't pull any punches around Gensler. We made little video clips. Also, they're on the On the Brink Twitter account with the key moments. I mean, very critical of Gensler in the extreme. Covered the F-T-X-I-E-X-S-E-C meetings, of which there were many. Much more to discover there. That's a lot of unanswered questions on-E-X.

Oh, yeah. I think we're going to see if we can get answers to that next year. Subpoenas, possibly hearings, more hearings. But, yeah, I thought it was a great episode. Very glad that Tom joined us again. So apart from the SEC stuff, I thought one of the more interesting things that he said was that stable coin bill was not a slam dunk to be the first thing they worked on next year. It sounds like maybe there'd be some market structure bills around who regulates the spot market before stable coins was his perspective. Yeah.

I think that was his perspective. Yeah, that's what he said. I have relatively little visibility and how all that stuff works. But it is interesting a few months ago, everyone seemed super gung-ho about. about a stable coin bill. And that seems to fall off the radar as a priority. It might still happen. But I guess not the most urgent thing that Congress is considering now.

All right. So there's a lot to talk about this week. Why don't we hop into some deals of the week? First one up is Aztec protocol. This is a privacy preserving protocol. They raised $100 million from Andresen, Variant, Hashki, and others. So big, big fundraises this. week actually. Yeah, another big one. Amber Group, the beleaguered crypto brokerage and lending firm

has reportedly raised 300 million led by Fenbushi Capital. So word is here, this one, so there's a hole there, it sounds like maybe. And this could be a little bit of a debt to equity swap type of a round here, but good to see them pulling the round together. Next one up is foundation devices. This is a hardware wallet company. They raised $7 million from Polychain, Greenfield Capital, Third Prime, Warburg, Ceres, and others. And another big news item,

Binance U.S. has agreed to buy the assets of the bankrupt crypto lender Voyager for $1.02 billion. So I guess the way this is structured, I would love to actually see how this was structured, but from what I can tell, this is a $20 million payment

plus the assumption of $1.2 billion dollars worth of liabilities of the crypto assets to allow folks to withdraw. So I'd love to understand that a little bit more, but that's what it looks like. Binance is probably going to be a better steward of that asset than FTX, the former putative buyer. Well, I guess you can see on chain that Binance has like $50 billion worth of Bitcoin, right? I don't think FTX ever had any. there's definitely some questions there were questions raised this week around whether binances

US's wallets were commingled with binances itself there was a kind of a blockbuster I think sub stack article sub sub substack article that came out questioning that so I read that but so there's like an eight was it an eight million dollar

transfer from finance to finance US but couldn't that just be a customer there's plenty of customers that are on both that could have moved money. Yeah, I think there's definitely a risk. We see this a lot with like amateur on-chain sleuths looking at wallets. Not to say that, you know, on-chain sleuthing is bad, but you do get weird conclusions drawn when you have amateurs looking at on-chain stuff without enough context.

Like you remember the tether paper where there was that famous tether, infamous tether paper back in the day, deciding that the whole thing was, you know, bound to fail at any moment just by looking, and like caused the price of Bitcoin. And the whole thing was based on this analysis of when tetherers were moving around on chain. It's just like, don't even bother with the on chain stuff if you don't understand it. Well, there's people on Twitter that really understand it. There's many more people on Twitter that have no idea what they're talking about and that are just trying to get more followers by fudding everything they can. So it's a hard time to be on Twitter.

The new influencer strategy is just to post as many bearish conspiratorial things as possible and hope that further things collapse so that you can take the credit for things failing. If things don't fail, it's not like there's going to be any accountability for these people. They'll just move on. No. So it's like only upside, I guess, in being like a bare, bearish. influencer. I think that's right. All right. Next one up is layer two labs. This is Paul Storch's company. It's a Bitcoin development company. They raised $3 million from angel investors.

Yeah, huge congrats to Paul and the team there. That's a drive chains company. Drive chains. He's taking drive chains to Bitcoin. Cool to see that. Finally, getting built out and raising money. Next up, we have Revel. They're an NFT platform. They raise $7.8 million. from Dragonfly, USV, Sfermian, and Sixth Man Ventures. Then we have U-Torg. This is a crypto exchange. They raise $5 million from Dragonfly, TA Ventures, Hyper, and others. Next up we have Aracus, a decentralized market maker.

They raised $4 million from Uniswap, Excel, and Polygon. I'm like halfway through Dune, speaking of Aracus. I haven't finished it. I don't know what it is. I just can't get that book done. But now you get all the references to Dune in the startup world of which there are many. Yeah. Now I know what all these names are named.

Yeah. Next one up is decent. This is an NFT infrastructure protocol. They raised 3.5 million from Y Combinator. I don't know. This name is not good. It's far too generic. It's not like go decent. Yeah. Decent company. Next one we have Corweave, the former Ethereum miner now GPU rendering company.

They've raised 100 million from. Magnetor Capital to expand their cloud infrastructure. Congrats to the theme there. Congrats to the court weave team. And then the last one up, we have Spaceport. This is a Web3 Intellectual Property Protocol. They raised 3.6 from ARCA, Deccasonic, Crit Ventures, and others. So busy deal week.

Busy on the newsfront, too. Why don't we queue it or write it? Just roll it. Just get it going. All right. Let's roll it. I don't know. What you're going to do? What you're going to do when they come for you? Bad boys, bad boys. What you're going to do? What you're going to do when they come for you?

I don't know. We get a lot of people saying that, you know, they're kids like that music. There's just, if there's ever like a time when there aren't bad boys, I think people are going to be disappointed. But the good news is that they just keep on coming out of the woodwork. Yeah, sometimes I just put on the song. I think it's a good song in its own right. It's a great song. It's an absolutely great song. All right. Well, bad boy number one, SBF, just the all-time bad boy.

He has consented to extradition. Just what a wild few days. So he decided over the weekend that he wanted to get back in the United States, although he's being held in this, like, doctor's office at the Fox Hill prison. So he didn't even get a real taste of the bad, real bad side of prison. So I guess he even had a cot, which is more than you can say for a lot. Like, I'm on record. I don't think we should be punishing these people.

over and above the, you know, significant punishment of being in jail. So I agree. I agree with that. But let's just put it out there that he, uh, he actually does have a brain. And obviously you want to get to the United States. So over the weekend, he decided that he wanted to come back. They had this extradition, uh, hearing, I guess on Monday, but there's confusion with his U.S. lawyer and his Bahamian lawyer.

So then it didn't end up happening until late Wednesday night that he was, he came back to the United States. And so he is in New York right now. I don't know at the time of this recording where he's going to be housed. I saw a report that there was a facility in Brooklyn. There's another one in Manhattan that he was rumored to be going to. But he's back in the United States. And I think there's going to be potentially a bail hearing on Friday or Monday, it looks like. I guess the other big news item is Caroline Ellison and Gary Wang have resurfaced. They have pled guilty. They've struck a plea deal with prosecutors, much to dig into there.

Do you find it at all interesting, the timing of that plea relative to Sam's extradition? Yeah, I think that they wanted to wait until he was back on U.S. soil to make the announcement. So U.S. Attorney Damien Williams from Southern District of New York put out a statement, I believe it coincided on Wednesday night when Sam landed back in the United States or when he got in possession of the FBI put out a statement and a video. So you can go see this. Maybe we can link it in our newsletter. Basically came out and said that Caroline Ellison and Gary Wang are cooperating. They've pled guilty to criminal charges, which, by the way, are pretty significant in terms of the total number of years that they would have been facing here.

So in Caroline Ellison's, it was 110 years. Wang was facing upwards of 40. The plea agreements are out there. We'll also put that in our newsletter. And they're cooperating against Sam. A lot of interesting things here. So the SEC and the CFTC have also charged Ellison and Wang, SEC focusing on defrauding investors, CFTC focusing on cases of fraud. And the other just fascinating thing was Damien Williams came out in that video and said, this is not the end of it. there will be more. So there were other fraudulent actors involved here.

And if you were part of this fraud, come in and speak to us. So we will have more bad boys in the weeks to come here, it looks like. I mean, that has to be directed at Sam Trubuko. Where is he in all this? I don't know. I mean, so there's a lot of people, though, right? I mean, there's our favorite person, the head of Corp Dev, head of ventures, head of toy ventures, head of investor relations, you know, that guy.

That's one guy. That should be four guys. I think he's the name. Yeah, should be four. Probably knew a lot of things. There's the head of regulatory. I haven't heard much about that guy. There's a Shad, co-founder, haven't heard much about where he is.

But Gary Wang and Caroline Ellison are stateside talking. Yeah, I mean, it's going to be interesting if they end up having to do time. My intuition should be that they ought to. I don't see how they do fully cooperate and whatever. I don't think that should absolve you entirely. So I want to pick out a couple of interesting parts here. So from the SEC complaint, there's a little bit more clarity or basically assertion. on how the money was stolen.

And we've gotten this question from a few listeners, just if we could cover how the money was taken. So the SEC gets into that a little bit by saying it was taken explicitly in two clear ways. One is by directing FTX customers to deposit fiat currency into bank accounts controlled by Alameda. The second was by allowing Elmita to draw down in an unlimited way on lines of credit from FTCX. I would add to that that now we have in some of the CFTC filings, that there was the liquidation engine. They just could not be liquidated.

So that's another way to move customer assets to Alameda. Obviously, all these venture capital investments are ways to divert client funds. There's tons of information here about all of the loans. And it looks like actually the Gary Wang loans are asserted to have actually gone to Sam. So it looks like Gary Wang only took $200,000 of this $224.7 million loan that was labeled as going to Gary Wang. The rest actually went to Sam. So Wang is coming out and saying that he was manipulated, I guess, by SBF,

and that he actually went off and he only got 200K of those proceeds. Seems like a raw deal to me. Yeah. I mean, I guess I'm sympathetic to the line they'll surely both take that Sam was really the one directing operations both on the FTX and the Alameda side. I mean, I couldn't understand that. But also, these people did have agency, and they were aware of what they were doing. So I don't think they'll be able to fully claim that Sam, you know, sole culpability lies with Sam.

I think that's right. The other interesting tidbit, I think, that came out in that indictment was that Alameda had been the recipient of FTX client assets from inception? From the get-go. Yeah, there was, it was a, it was not one of these cases where they just became fraudulent after Q2. This outright states from Ellison and Wang asserting that it was fraudulent from the jump. So that covers a certain Mr. Tribugo's tenure at Alameda in, in case there are any questions about that part. Yeah, and in case there's any questions on this head of IR, head of product, head of Corp Dev, head of Toy Ventures guy.

Bankman Freed, with Defender's knowledge and consent, assured investors that FTX customer assets were secure and hid Alameda's close relationship to FTCX. I'm reading from the SEC complaint. Along with another FtX employee, who is that? Bankman Freed was the point person for investor relations at FtX. And if you read the SEC's filing here or charge, it's all about defrauding the venture investors. Yeah. You know, SCC doesn't really care about the customers here.

But defrauding the venture investors is what they're going to get a lot of these people on. And so it would be interesting to see who goes in and has conversations here because more is coming. It's very clear that there's going to be more charges. I'll say this about Sam. He actually looked somewhat healthier in those photos of him being extradited. He had a 5 o'clock shadow, which I think is a good look for him. he lost some weight. He was wearing a shirt, like a collared shirt.

Honestly, with a haircut, I could see him cleaning up a little bit. I mean, I bet it's a little bit less stressful now that it's all out in the open, right? Maybe he gets like an hour a day to go for a walk. Could be looking up for him. Quitting the stimulants, going on a diet, maybe not the vegan food thing anymore.

I want to see, I think he looks, physically, he looks fairly good. Oh, so there's a bright side. In other FTX related news, this Medulo capital that I've been pretty public about that, hey, this is not the Brazilian asset manager. This thing looks strange. Turns out it's strange. So it's a $400 million investment that FTX made into Madulo capital probably made it to look

like it was the reputable medulo. Turns out this is just a prop trading firm started by a bunch of his buddies down in the Bahamas that they put $400 million into. So what's left of that is coming back. But talk about just a continuous fraud. This is just breathtaking the levels of fraud here. And apparently Bikgo prevented an animated employee from liquidating $50 million worth of WBTC in the final days of FTC's life.

I'd love to know who that was. Good job, Pickgo. So one of the bad boys tried to steal $50 million as the company was going out of business, one of the people at Alameda who apparently did not have the ability or the right to interface with Bicco, and they stopped it. So they're sitting on $50 million of customer assets that will be coming back to the state. So that's good. Yeah, speaking of those transfers that occurred at the 11th hour, I continue to be interested in seeing what Mr. John Ray is able to do in terms of identifying the transfers to Bahamanian residents.

purported Bahamanian residents the roughly 150 million pulled out of FTCS in the final days I don't think Bahamanians had $150 million in FTCS in the aggregate that seems implausibly high I think some of our fellow crypto-Twitter

Confederates may find themselves among that count let's not overlook that one all of a sudden done so what you're referring to is that there was some buying of kyc going on some u.s persons that knew that you could get money off if you represented that you were a bohemian and that is how some of this happened i think that is probably accurate and the way it happened as far as i understood it was you had to transfer funds from your account on ftx remember people's accounts weren't rendered inoperable there it was like a long period of time where you could still trade on FTX even after we knew that

it was insolvent, which is insane, but that was the case. I say we when clients of FTX could trade on FTX. So people would do things like buy a specific NFT from, for a way, you know, way overpriced NFT from a Bahamanian resident who had access to the exchange, then they would cash out and then, you know, presumably transfer some of the funds to the buyer. Or by a specific very illiquid perp that they would instruct the Bahamanian KYC user of FTX to own that and then sell into the pump, basically. So there were like weird exotic mechanisms that of people, apparently we're doing, and I hope that all gets kind of unwound when all of a sudden done.

All right. So speaking about bad boys, we have our first ever new bad boy introduction of a dead member, a dead person. We have a dead person bad boy, a legally dead person. Gerald Cotton, who is, of course, the founder of the Quadriga Canadian Crypto Exchange that was one of the biggest frauds before FTX. He died a couple of years ago, three, four years ago, I think. Was it two years ago? All the time just blends at this point. But he went on vacation to India and he died.

And then it came out that the whole thing was a total fraud and that he was a con artist even before crypto, very mysterious circumstances under which he died when he was in India. And two weeks after he died, it was revealed that he was the only one that had access to the cold wallets. And so you can see on the blockchain the money there, but you can't touch it because he's the only one who apparently had the keys. and he's dead legally. And guess what? The money moved this week. Someone had to buy some Christmas presents this week.

And Gerald Cotton rose from the dead and got inducted into the bad boy club. Hang on Matt. Here's the whole in your story. Why would someone expect Christmas presents from you if they thought you were dead? Well, he's off probably living with Kyle Davies in Bali right now. He's probably got some people around him that need some Christmas presents. So I'm in the camp of I think he's actually deceased for what it's worth. Like he shuffled off the mortal coil.

Like he is no longer with us in this world. So then you're in the camp of his girlfriend had access to the keys, or his wife, I guess. He had married her by that point. So you think his wife had access to the keys then. I don't know which of his associates has done the transfer. But I actually think, yeah, you know what? I'm a whatever the opposite of a truth there is,

like an establishment narrative believer. I actually do believe that he's physically done. You think that Gerald Cotton's actually dead. This guy went to India. He did his will 12 days before he went to India. His will left everything to his wife. He got everything in order. He went to India.

I think he paid a doctor and he got a fake death certificate. I need to see a DNA sample to believe that this guy's dead. This guy is alive. and he's starting a real estate on-chain asset play with the three of those guys for all I know. I think he's dad clearly all is not right here. The funny thing is Quedriga seemed so small now by comparison. It doesn't mean it's not bad. It set the Canadian crypto industry back a lot, but it does seem very small in comparison.

I mean, it was a couple hundred million, I think, was the size of the loss. Yeah, no, this guy was not in a. effective altruist. He would have raised a lot more money if he was. Well, that is Quadriga. There was a very good documentary on it, or was it a podcast series? Quadrigua had so much intrigue around it, but, you know, all the drama, it pales in comparison with now with the FTX drama, which is just one of the biggest stories ever. There was a podcast and I think it was on Netflix. There was a documentary, and they're going to have to update that at this point. They're also going to have to update Flashboys, the book. I tweeted

about this this week, but the last chapter of Flashboys is now going to say, and then we secretly sold the business to FTX, and that ended up being a total Ponzi scheme. But before we, it was revealed, it was a Ponzi scheme, we quietly lobbied the SEC to go after Coinbase and a bunch of our competitors, sullied our names forever in the financial services industry, and then we had to give all the money back. That's the last chapter now. Yeah, it hasn't been written yet even. We don't know what the hell is going. IEX seems to think they've done nothing wrong and they're continuing their lobbying ambitions, apparently undeterred. Anyone who's doing business with IEX at this point doing it at their own risk, I think. The trilateral IEX, FTX, SEC meetings are very curious. And we

we need to know what we, I mean, if you listen to Representative Emmer's podcast last week, he talks about trying to give effectively FTCS slash IEX a monopoly on digital asset trading in the U.S. with the baptism of the SEC. That is astonishing, if true. Yeah, that would be really bad. So the other funny thing is that Michael Lewis, Michael Lewis was the stenographer for IEX, was in the midst of writing a hagiography of a certain, Sam Bankman freed. Apparently he'd been traveling with him for six months. That book's going to be awesome. What I want to see is what the first draft of that book looked like. I know. Because that will bear no resemblance to the final. I know everyone is all excited to see what Michael Lewis comes up

with now. But also, if he had access to everything for six months, how did he not figure out something was up? I don't know. I mean, it wasn't his job to run the product management organization. It's not like he was responsible for looking at the cold wallets. I'm sure in retrospect, a lot of things look fishy. Yeah. I don't know if he's that impartial, to be honest.

So there's some grayscale news this week. So they came out, there was a CEO letter. It said that they may launch a tender offer to repurchase up to 20% of outstanding shares. So they're exploring that. I don't think that would close the gap, but like, gap is wide at this point, 40 plus percent. So our favorite, unfortunately retiring,

Senator, Pennsylvania Senator Pat Toomey, did release a proposed Stablecoin bill. I actually liked what I saw here. What was in the bill? I like this a lot. So I guess this doesn't have a chance of passing because there's just no time, but somewhat of a template maybe for future legislation. So the bill would retain privacy for stable coin transactions. It would put the OCC, the office of the comptroller of the currency, is the licensor of companies that want to do payment stable coins. It would let non-bank entities issue these things and clarify that the stable coin issuers that don't offer interest, they don't have to worry about securities laws. So it looks like a common sense bill to me that unfortunately won't pass, but maybe someone picks it up and runs with it. I wonder what Toomey does next.

Yeah, it's a shame we're losing him, one of our best advocates. I really like the non-bank issuance of stable coins just for the sake of competitiveness and the privacy protections. You know, if you think about stable coins like cash, you know, when you withdraw cash from the bank, they know who you are, but then you can transact freely with people without having to disclose those cash transactions within constraints of. obviously. Stable coins are kind of the same. If you're creating or redeeming a stable coin, obviously the issuer knows who you are, but then you transact on chain. The issuer doesn't

necessarily know that much about that. So it kind of just takes the intuitions behind cash and transfers them to the digital realm, which I think is a good system overall. Yeah, I think that's good system as well. So maybe we'll see someone run with that. A couple mining related news items. So Core Scientific has filed for bankruptcy officially. Looks like there's a debt to equity proposal. The current proposal would be 97% of the Nucco would be owned by the debt holders and 3% by the equity holders. And other news, Greenwich, which is the Bitcoin miner, they've reached a debt restructuring agreement with NIDIG, but are still negotiating with other lenders. So the mining space has been just hit hard here.

GDA is doing just fine, though, it looks like. Genesis Digital Assets, which is no affiliation with DCG, but this Genesis Digital Asset group got $1.1 billion from Sam Bankman Freight. Yeah. And actually from FTCS customers. So on the mining front, a lot of folks were saying, well, we think it'll be good that the mining margins are being challenged. It's good for decentralization. I am of the opposite view.

I think that it will lead to significant consolidation. I don't think you see a wave of bankruptcies in a specific industry without consolidation occurring. And I think if you want to preview of what it's going to look like, the Greenwich deal is indicative. Their lender, NIDIG, basically assuming the machines. So NIDIG was one of the largest lenders,

and I think they will end up being one of the largest miners unless they, you know, choose to get out of that business. Because that's kind of the nature of a lot of these deals, the minor financing deals. So I actually do think it'll raise the jinnee coefficient of mining, not fatally, but kind of the wrong direction from a decentralization perspective. That's not saying any of these entities are doing the wrong thing. or they should operate differently. That's just one of the natural features of a market like this is consolidation. I wish that original 21-ink idea of having Bitcoin miners attached to like your hot water heater. I wish that actually worked.

I mean, there are lots of like wildcat mining installations with, you know, small natural gas flaring, you know, oil wells where there's a small amount of natural gas being flared. So there's definitely kind of a vibrant underbelly there. Kind of hard to quantify that part. But yeah, I think with a lot of these public miners failing and the wave of acquisitions were likely to see here, there will be a few larger miners that end up controlling more of the U.S.-based hash rate. Another piece that I read this week that I thought was good was Brian Armstrong's blog post. So he wrote a piece called Regulating Crypto,

how we move forward as an industry from here, had some concrete recommendations, calls for a reworking of the Howie test, which I think is desperately needed, calls for just clarity on who oversees the spot market, SEC versus CFTC, again, desperately needed. Calls for regulating the centralized players, but letting DFI continue to blossom

and not regulate the protocol level in DFI, which I think is very common sense. Ask for some things that I think are probably unlikely to happen, which would be for either the SEC or the CFTC, whoever gets the spot market, to come out within 90 days and say of the top 100 assets, whether or not their securities or commodities, I think that would be great. Can you imagine the bull run this industry would go on if something like that happened?

But I don't think that'll be likely. But I think it's good to see Armstrong start to get a little bit more public here, especially on the regulatory front. I think that Sam was just sucking all the oxygen out of the room on Capitol Hill. And Armstrong probably should be a little bit more vocal here, just given that Coinbase has been playing by the rules for an awful long time. Yeah, I think they can pound their chess a little bit, stock price notwithstanding, about their record of performance, security, safeguarding client assets, playing by the rules, getting audited financials. Now is the time to do it. you know, people don't really appreciate these onshore exchanges that have been playing fairly

and quietly and, you know, respecting their clients and not gambling with client assets. And Coinbase has a great track record there. One interesting post I read this week of my favorite blog of the week was actually from the Federal Reserve of all places. They published, well, a few Fed economists. published a note called the stable and stable coins. It's actually one of the better taxonomies of stable coins I've read. So credit to them for engaging with the reality of stable coins. It's not just fearmongering. They actually look into the different mechanics. You know, they distinguish between uncollateralized algorithmic and overcollateralized algorithmic, which is a mistake I've

seen from a lot of other places. So we'll link to that one in the show notes. Did you see this Visa crypto research piece, auto payments for self-custodial wallets? I thought that was a really good piece. Yeah, I really like it. Visa is clearly getting into an early lead here in terms of designing interesting products for non-custodial usage as well as just custodial transactions. They've been active in the stable coin and crypto payment space for a long time. I I mean, I think really my takeaway from the end of this year is that, you know, stable coins are still going very strong here. They contracted a certain amount, but not really that much, from sort of 180 billion

outstanding to 140. Stable coins are on track to do a record amount of transaction volume this year. And they have clear product market fit, not just for folks to hold U.S. dollars in a self-sovereign manner, but for regular, you know, B2B payment. and things like that. So the sort of crypto's first killer app is going pretty strong here. Yeah, the killer app is US dollars on blockchain rails at the moment. You know, apart from from BTC and Eith.

That's really the dominant usage of public blockchains at this point. Yeah. All right. So I think that's it. It's, um, this will not be our last episode of the year. We're working. Working through the break. Maybe we'll do, next week we'll do like a year in review of,

of how just much of a bloodbath this year was. Yeah, we'll do some predictions maybe for 2023. I've got some predictions. No pressure. More bad boys. What do you do if you're one of these FTX execs that's in on it that hadn't gone in to speak to the DOJ yet? Like, what are you doing?

What type of advice are you doing? You need to turn your boat, orient your boat towards Manhattan. I mean, unless you can get that boat to Indonesia. you got to take it up take it to the Hudson River and just go in and just say guys I'm sorry those are your choices

I will testify against Sam I don't know what Sam's gonna do there's no one above him in the food chain I don't think yeah people keep saying like Sam is gonna like spill the beans on like Biden's or Tether to save himself

and it's like what beans does he have he doesn't have beans no There's nothing he could say to save himself at this point. He might just honestly just start with I'm sorry. That might actually knock more years off than anything else that he has in mind.

Yeah, so I actually watch a certain Mr. Martin Schrelli's live stream. I know I'm not maybe not allowed to admit that but I actually thought it was very, it was very interesting. So it was all about the sentencing guidelines and so there's a points-based system where you get points for basically the severity of the crime and there's a lot of different conditions it's very comprehensive and um he was

of the opinion that sam was looking at 40 years to life based on the charges and the points and 40 to life 40 to life well i i have a hard time thinking that it would be on the low end of that if caroline ellison's looking at 110 if she didn't cooperate yeah but i i think that's like a nominally adding everything up, I think hers is likely much, much less. But Schrelli seemed to know the names, all the judges by reputation and name, I guess he has experienced with the SD&Y. He felt that certain judges do exercise discretion so you could get maybe a discount depending or a worsening, you know, but yeah, for what it's worth. He went through all the charges and said that Sam is looking at 40. Oh, I don't know. I don't think he's,

going to get it light here. There's too many, too many grieved actors here from too many different parts of the industry, politicians. There's, there's a lot of upset people here. So on that sunny note, we will see you on Monday.