TFTC: A Bitcoin Podcast - #540: Exposing Operation Chokepoint 2.0 with Caitlin Long

Episode Date: September 25, 2024

Marty sits down with Caitlin Long to discuss how Elizabeth Warren and crew kicked off financial panic by targeting crypto banks. Caitlin on Twitter: https://x.com/CaitlinLong_ Custodia: https://custodiabank.com/ Paul Clement amicus brief: https://storage.courtlistener.com/recap/gov.uscourts.ca10.88322/gov.uscourts.ca10.88322.10011074966.0.pdf Custodia brief: https://storage.courtlistener.com/recap/gov.uscourts.ca10.88322/gov.uscourts.ca10.88322.148.0.pdf 0:00 - Intro 1:39 - Overview on the Silvergate situation 6:13 - First highlight from the document 10:23 - Recap on Silvergate from the beginning 15:50 - River & Unchained 17:05 - Why crypto banks are targeted 22:35 - Stories from the legal frontline 25:17 - Architects of Choke Point 2.0 and the damage they caused 39:11 - Will justice be served? 45:29 - Gradually, Then Suddenly & Zaprite 47:06 - Crypto was the target and taxpayers felt the pain 54:51 - Political possibilities 1:03:34 - Pushing back on state overreach 1:13:46 - Clearing the way for mining 1:16:49 - The banks can't handle bitcoin 1:20:25 - Get the word out Shoutout to our sponsors: River https://river.com/tftc Unchained https://unchained.com/concierge/ Zaprite https://zaprite.com/tftc Gradually, Then Suddenly https://thesaifhouse.com/gradually TFTC Merch is Available Shop Now: https://merch.tftc.io Join the TFTC Movement: Main YT Channel https://www.youtube.com/c/TFTC21/videos Clips YT Channel https://www.youtube.com/channel/UCUQcW3jxfQfEUS8kqR5pJtQ Website https://tftc.io/ Twitter https://twitter.com/tftc21 Instagram https://www.instagram.com/tftc.io/ Follow Marty Bent: Twitter https://twitter.com/martybent Nostr https://primal.net/martybent Newsletter https://tftc.io/martys-bent/ Podcast https://www.tftc.io/tag/podcasts/

This is a scandal. Elizabeth Warren and her crew touched off a financial panic because they were trying to kill off the crypto industry and they succeeded. They kicked off the biggest bank run in decades. None of that would have happened, I think, had the Fed not. And why do they get away with it? Because the banks, guess what the Fed said about us in private? Why they're targeting this industry particularly? Well, Elizabeth Warren said it herself. She wants a central bank digital currency. But then I had a conversation in recent months with someone who was at the table and told me what really happened.

It was 100%. But here's the punchline. They're doing it again. This rip of TFTC was brought to you by River. It's the best place to buy Bitcoin. Go to river.com slash TFTC and enjoy this episode. world of fiat currencies bitcoin is the victor i mean that's part of the bull case for bitcoin if you're not paying attention you probably should be

caitlin it's been uh it's been too long but we're back having you on tftc and to talk about something very important something that has been somewhat brushed under the rug since the first quarter second quarter of 2023 which is uh the the banking crisis that unfolded obviously big headlines are silicon valley bank first republic but there were a few banks or a couple banks particularly silver gate and signature bank which were heavily involved with bitcoin and crypto businesses banking them providing services to the industry that many have surmised were taken behind the shed and shot in the head uh somewhat unlawfully or they were singled out in what many are calling operation choke point 2.0 there's been development um some information brought to

light in the last week particularly uh elaine hetrick he trick from silvergate uh wrote a a brief uh as part of their bankruptcy filings at uh the process at silvergate and it's become apparent that silvergate was completely solvent at the time that they were forced on one and there was some uh how should we say um arbitrary uh rules thrust on quote-unquote crypto banks that that forced these banks to go under so you are the founder and ceo of custodia which has been on the tip of the spear uh in this fight against this current administration um and the attack on the banking industry within Bitcoin and broader crypto. And so I think you can give a better high level view of exactly what's going on and what you're seeing and the significance of this

brief that was put out last week. Yeah, well, thank you. Great intro. Before we dive in, by the way, cool to be back to you. You and I did a couple of podcasts in your early years, and then we went in slightly different directions. You've become such an expert in mining. And we'll come back and talk about mining because there was a mining conference at the University of Wyoming last week. And then I went down the banking path trying to solve the banking problem for this space and haven't quite solved it yet. We're up against some pretty crazy abuses of regulatory power. And to your point, what happened last week was Silvergate's getting ready to pay out the remaining funds. It liquidated. It didn't fail. And Elaine actually said that in her affidavit.

And so what she admitted was something that a lot of people had suspected, but no one had ever said it. When Silvergate, I'm sorry, when Signature Bank failed, Barney Frank came right out and said, something happened here. This is wrong. But when Silvergate failed, nobody said that because they were muzzled. They couldn't say anything. And now they're unmuzzled. And we see what Elaine said, and credit to Nick Carter for not only being the first to report about Operation 12.2.0, But also for during the middle of the night in Singapore, tweeting about this filing, which was so important because it confirmed that the Fed, according to Elaine's sworn affidavit in the court filing, said to them, you will either diversify away from your crypto customer base or you will throw in the towel. I'm paraphrasing, but diversify means you have to go from 100% of your customers being crypto companies to having 15% of your customers being crypto companies.

And I'm sure they gave them an impossibly short period of time to do that. And it was not possible. And Elaine talks about how they had a financial advisor who was looking at the different options and ended up concluding that the only option for them was to liquidate. And here was the irony. If that had happened in a vacuum, we wouldn't be talking. But to your point, there was a systemic run that started. And here's the aha. Silvergate announced on the afternoon of March 8th, 2023, that it was voluntarily, quote unquote, liquidating the very next day the systemic bank run started. yeah and it's uh we'll dive into the arbitrary nature of signaling out these particular banks for servicing um bitcoin and crypto companies but let's dive into the affidavit logan if you

pull up the first screenshot from nick uh as he was reporting over at token 2049 yeah but here's what elaine said uh in section 17 following the rapid contraction of silvergate banks business silvergate bank had stabilized was able to meet regulatory capital requirements and had the capability to continue to serve its customers that had kept their deposits with silvergate bank and here's the red line however the increased supervisory pressure on silvergate bank and other banks focused on servicing crypto asset businesses for silvergate bank to a point where it would have needed to remake its business model away from its focus on crypto asset businesses seek to sell itself as a going concern in the shadow of the regulatory overhang or begin

winding down its affairs with the goal of preserving as much value as possible for stakeholders. And so has there ever been a signaling out of an industry and banks essentially being forced by the regulators to switch their business model on the go like this in U.S. history? Not that I'm aware of. And somebody just asked me about this today. If the bank regulators are going to do something like put that 15% rule in place, Elaine didn't talk about it publicly. You'll note there are some footnotes that she talks about how there are certain things

she can't talk about because it's deemed confidential supervisory information. Okay, that's how the bank regulators work. Tyler Winklevoss had a very, the federal bank regulators, but Tyler Winklevoss had a very good description of it. it's when the regulators come in, they say, hey, you've got a nice bank there to the bank CEO and say to them, gee, it would be a shame if you lost your charter if you didn't do the following. Okay. So that is how this stuff works. And a lot came out in the litigation for Operation Chokepoint 1.0 where the payday lenders got together and sued the FDIC because they were

the instigator of this during the first Obama term. Now comes Operation Chokepoint 2.0. The FDIC agreed to settle that lawsuit and said they wouldn't do it again. And I do believe that the FDIC violated the terms of the settlement of that lawsuit. But this was the Fed, okay? So now we know that, I mean, we already knew the Fed was coordinating on Operation Chokepoint 2.0. But here's the thing. If the bank regulators are going to get together and arbitrarily and capriciously put a limit on a bank's ability to serve a lawful industry like they did, the law requires that to be put through a public notice and comment process in order for it to be deemed valid. Okay. So here's the problem. Bank regulators do this kind of stuff that's not legal all the time

And they hide behind confidential supervisory information. And banks have to deal with this kind of backroom pressure all the time. The FDIC in that Operation Chokepoint 1.0 lawsuit originally lied and said that they weren't pressuring the banks to debank the payday lenders. And that Operation Chokepoint 1.0 went to 30 different industries before it was shut down under Trump. And that lawsuit was settled in 2017. But here's the punchline. They're doing it again. And why do they get away with it? Because the banks don't sue them. And if they try to sue them, the federal regulators will hide behind confidential supervisory information. So what you see in that affidavit is multiple references to there's more, but we can't tell you because it's confidential supervisory information. This is essentially a gag order. Like you can't tell. Correct. You can't tell the public all this information. And that's the other thing.

So the smoking gun, and to rewind this for everybody, take a trip down memory lane, particularly with Silvergate. We'll go through Silvergate and signature Silvergate. uh got caught up in ftx and the narrative around the run on silvergate was that they had taken customer deposits they were lending them out and they didn't have enough cash on the balance sheet to pay um depositors as they were withdrawing their cash that wasn't the case if you understand silvergate's balance sheet and the way they were handling uh their their crypto backed loans like they were ensuring that they had plenty of cash to make sure that they and treasury reserves to make sure that they could handle withdrawals as they were coming they wanted to be 100 backed

even though they're not regulatory regulatorily um uh mandated to do so but they weren't they understood that they're in a risky industry and they just wanted to provide those assurances to their customers and they did as you said they didn't they weren't uh yeah elaine said that in that first sentence you just read she said that silvergate survived the bank run yes and and this is like building on your point that the the regulators are lying so whether it was a combination of the regulators and the media but the whole uh scene around the unwinding of silvergate was this was a run of the bank they were poorly run um and they just tried to basically besmirch the whole industry crypto is risky don't bank yes look what happened to silvergate and then similarly

the signature, which is even odder because if anybody who's listening doesn't remember, they essentially got taken out behind the woodshed on a Sunday night and didn't even have the opportunity to open up Monday morning to prove that their balance sheet was sufficiently robust. Well, a couple of things. Those of you who are bank experts know that the FDIC almost always closes banks on a Friday night. So Marty, it was interesting you pointed out this was a Sunday night. It was very unusual because they usually take the weekend to figure out how to get a bank sold and get the depositors assumed by another bank. But this was a Sunday night. So it was a rush job that clearly happened a couple of days after the norm.

But here's the other thing. Multiple folks have confirmed that Silvergate, or sorry, Signature had the USDC reserves coming in Monday morning. They had plenty of liquidity lined up because Silicon Valley Bank had failed and Silicon Valley Bank had to, you know, the depositors had to move their reserves and the reserves were coming over to Signature. So Signature was not only solvent, as Barney Frank said, it was liquid and the money was coming Monday morning. So yes, there were bank runs happening at both of these banks, no doubt. And they were both caught up with FTX. They both had compliance issues with that. But I asked someone today, has a bank ever been shut down because of a compliance problem? What you see with compliance problems is fines,

consent orders, people getting fired, directors getting fired. You don't see the entire bank suddenly shut down without a buildup to those things. And I don't think there's been a bank that's actually been shut down for compliance problems. Again, all those other things that build up to it, yes, no doubt there were fines coming because of the FTX issues and the like, and they did pay fines. There was a consent order, but that's not what caused them to liquidate. What caused them to liquidate was the Fed gave them this ultimatum. And it sounds like the FDIC did the same thing. And just to put a punchline on it, those were separated by four days, right?

March 8th was, I think, a Wednesday. Silicon Valley bank run started on Thursday the 9th. Silicon Valley bank failed Friday the 10th. Signature failed Sunday the 12th. So there you have it. Now, what touched all this off was the Fed giving the ultimatum to to to to Silvergate in an environment where everybody knew there was this crackdown. Because to go back a little bit in time, the the White House and Fed and FDIC and OCC made announcements in January. That's when Custodia got denied. Then the OCC charters by Paxos and Protego got withdrawn voluntarily, quote unquote, of course, being sarcastic there, in February and March, respectively.

So everybody was on edge and knew. And, you know, with fractional reserve banks, you take your money out. And I don't blame the corporate treasurers for doing this. They lose their job if they didn't take their money out right away. They ask the questions later. So that traditional bank model where the bank is holding 10 cents of cash to back demand deposits that could be withdrawn in the span of minutes, it just doesn't work anymore. And crypto is, of course, being targeted by the regulators. We know why. But this is a bigger issue. I like how Austin Campbell summarized it up, that the bank regulators are applying 1970s risk management tools to 2020s problems. This episode was presented by River. River is the best, most secure place to buy Bitcoin in the United States. Go to river.com slash TFTC, set up an account today. You'll be able to DCA into Bitcoin without paying any fees. You'll be able to give people Bitcoin via River links.

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regulators are targeting uh crypto companies and banks that that bank those companies but for anybody who's listening who may be unaware. Let's explain why they're targeting this industry particularly. Well, Elizabeth Warren said it herself. She wants a central bank digital currency. I'm dead serious. She told Chuck Todd, it's on John Deaton's, it just went around over the weekend on John Deaton's campaign Twitter account. Very short interview. Yes, she wants a central bank digital currency and everything that is bitcoin or even crypto based by is deemed by them to be a threat to that total control that they're after yeah and again onto the deception that the regulators in combination with the media are using like going back to signature bank logan

if you could throw up that third screenshot i put in our chat i think this is the smoking gun for signature particularly because again going down memory lane if you remember the narrative around signature the sunday that the federal regulators took it behind the woodshed it was about commercial real estate uh next next one logan no the one before that um there we go oh that's yeah there you go oh wait yes that was it that was it logan that was it but this is the smoking gun here which is that um the narrative around signature bank was it had problems with its commercial real estate book it wasn't well capitalized but then when it was eventually sold to flagstar bank explicitly the regulator said the sale should not include the transfer of cash depositors related

to signature banks digital asset banking business and so they tried to write it off as a commercial real estate exposure problem but it seemed like they were directly attacking the bank's digital asset banking businesses. Correct. That's exactly what they were doing, Marty. That's exactly what they were doing. This is unlawful. And I mentioned earlier that if they actually put that 15% limit out there for public notice and comment, if they were trying to do this according to the Administrative Procedure Act, it would have immediately been sued by the crypto industry. because that is arbitrary and capricious to say, oh, 15%, you can't have more than 15% of your exposure to this one particular industry. Leaving that procedural question aside,

from a substantive perspective, I agree with Austin Campbell's point that we should actually have specialist banks serving this industry. A, it is high risk from a liquidity perspective because there have been bank runs, right? No question, everything moves fast in crypto and you've got to be able to cash your demand depositors out on demand. And the only way to do that is for you to hold cash and T-bills,

maybe T-bills, but that's it. Cash and T-bills against your customers' assets. Custodia, it's public information. We've never held anything other than short-term T-bills against our customers' funds. Deposits. so that's the way you do it and then you build a compliance department that specializes in compliance for high-risk customers and we've proven you can do it and the fed knows because

the fed has across time periods reviewed every single payment originated by custodia yes if you bank with custodia the fed has been watching very very closely so but they haven't found anything. We have a clean compliance record. So they know we're clean. So they know that somebody who specializes in this can figure out how to separate the wheat from the chaff and can manage the asset liability mismatch risk. But traditional banks, what they've instead tried to do is push this out to a broader group of banks. Most banks have watched what happened here and said not worth the regulatory risk, and most of them don't want to invest in the specialized compliance people and tools that you need in order to bank high-risk customers. Now, you would probably quibble whether

these are high-risk customers, but under the Bank Secrecy Act and other anti-money laundering and OFAC laws, they are deemed high-risk customers, and that's just the way it is. But the point is, it can be done. And yet the vast majority of banks won't invest in the specialized compliance requirements to do it. Ergo, what did they achieve? What they're really trying to do is push the entire crypto industry. Well, first of all, they wanted us to completely fail. And I actually think they thought that the entire industry would fail. They did succeed in murdering Silvergate, Signature, and Protego. They're not around anymore. Paxos had an application for a bank subsidiary. Of course, it's got its non-bank subsidiaries

that are still operating. And then Custodia, we fought it. And I'm glad we did because we're still alive because we fought it. They clearly did try to kill all of us and they succeeded in killing three of the five and causing the fourth, the Paxos bank application to be quote-unquote voluntarily withdrawn. Well, you mentioned earlier that during Operation Chokepoint 1.0, it was important that people stood up and sued the government and regulators for being arbitrary and capricious. And now with Operation Chokepoint 2.0 targeting our industry, Custodia, the bank that you found and are CEO of, you guys are standing up And you alluded to it, are fighting back on behalf of the industry and common sense, I would argue.

And so what has that been like for you as a company, for you personally? As much as you can disclose, I imagine there's much that you cannot. Yeah, well, look, I have a legal background, and I've litigated before. This is actually my fifth lawsuit in my life. Two personal, two were when I was on the Morgan Stanley 401k plan as a fiduciary. I got personally named in two multi-billion dollar lawsuits there, both of which were dismissed, but it does tend to focus the mind when you're personally named in a multi-billion dollar lawsuit twice. But anyway, I did have experience with this, and I'm not as afraid of it as I think some others might have been, but I also just have a very deep sense of right and wrong. And did I expect to spend, you know, four and a half years of my life working on this and not be a lot further down the path? No, I didn't. We knew it was possible that something would go haywire.

But in the early years, Marty, and you remember this, all those Wyoming laws, Washington, D.C. was embracing them and the Fed was embracing them. The state of Wyoming had more than 100 meetings with the Fed, mostly Kansas City, but also board of governors, people from D.C. And they were meeting weekly to get the new charter up and running. And it is public information that Esther George, the then president of the Kansas City Fed, said she respected what Wyoming had done and thought they had taken a thoughtful approach to the new digital asset banking charter. So this clearly was going down a good path, a friendly path, until FTX happened and Elizabeth Warren's crew stepped in and started Operation Chokepoint 2.0. And now, fast forward 18 months plus later, here we are in litigation. We're at the 10th Circuit Court of Appeals. The case is now what lawyers would call fully briefed. and heading to oral argument and then decision next. And that's why I think it's important to get this story out there,

particularly the story of Silvergate. I think the timing couldn't be better for people making the case that this industry is being targeted than this affidavit to come out last week. And as you mentioned, there is a targeted effort by individuals within the government, and you put together somewhat of a flow chart uh separating the the actors um oh that was nick carter oh this was nick so the architects of choker 2.0 we can pull this up logan but he did that in february 2023 marty and i am amazed because in the fog of war i don't know how he got that so accurate it's incredible so let's walk

through this right now because it is a multi-faceted effort across different federal agencies um to to really target this we have the senate the federal reserve new york state so not a federal entity but i would in retrospect that's the one change i would make i would leave adrian harris off she's i don't think she was part of this no in fact actually i think she got she was the regulator of signature but i think she got i don't think she was the instigator let's put it that way um of of what happened to signature that was coming out of the fdic it was coming out of Everybody on the left-hand side and the upper right and middle column of Nick's chart there. Yeah.

And so this is an administration with some Senate members that is targeting this. So you have all the way up to the White House. Obviously, the SEC, Gary Gensler, has been getting a lot of flack over the years, particularly the last three years, for his posturing, the Treasury, the FDIC, and the Federal Reserve. And what do you think it's going to take to change policy? I'm trying to not be political leading up to the election here, but is it the doing of this current administration that really has a hard line on this? There's obviously been rumors that Elizabeth Warren has had her pick of the litter to place individuals within the Biden administration to push forward her particular agenda. Do you think she is at the core of all this? Well, so we had whistleblowers come forward. DC's a sieve, thank God. And so I knew the weekend after we were denied, which was on a Friday, January 27, incidentally during an FOMC blackout week when the Fed's not supposed to do anything but FOMC business, and they rushed to deny this applicant who's been outstanding for two years at that point, more than two years at that point. And so obviously something was coordinated. And it all, the White House announcement and the Fed announcement of an anti-crypto policy plus the custodian denial all hit at 11 a.m. Eastern on Friday, January 27th during an FOMC blackout week. Totally coordinated. But that weekend, we had the first whistleblower come forward and he gave me Bharat Ramamurthy's name. That's the guy in the upper left chart who was at the White House. And he explained all kinds of the politics of it. It kind of at this point doesn't matter. But it took me a little bit to figure out. And it was subsequent people who told me about the deal that Warren had cut with Biden that when she dropped out of the 2020 presidential race, that she would endorse him if she got control of financial services and economic policy and personnel. And she has her people all over these federal financial regulators, as well as she controls the Office of Presidential Personnel at the White House.

These are her acolytes, her her staffers or former staffers. And that was the deal. And Biden has upheld the deal. And it's a very good question. How much does Harris know about this and how much, if any, is she bound by any of this? and we don't have the answer yet. So I don't want to get political. I think Trump made it pretty clear he would clean house. But what I would say is that I'm not sure. I'm not sure yet whether Harris will or not. She hasn't said anything yet. This was a deal between Biden and Warren. And Scaramucci told me that the deal was off after the first term. It was only a first term deal anyway. So he was optimistic. And again, no one knows, but he was optimistic that even if

Biden had been reelected, that the deal would not have held. My point, though, is, and there is a list that's been put together of all the senior career staffers at these agencies. It's not enough at the political level. Definitely the political people were the Warren acolytes, and they locked arms and got this done. And in particular, it was Bharat Ramamurti, so I'm told, by that first whistleblower, Gary Gensler, Marty Grunberg, and Michael Barr. And those were the people who did this. And to be honest, here's the punchline without getting too in the weeds on the DC politics. What did they achieve? They kicked off the biggest bank run in decades. And it cost the FDIC insurance fund about $40 billion to make the depositors of Silicon Valley Bank, Signature Bank,

and First Republic Bank whole. And there's another angle to this. J.P. Morgan had wanted to buy First Republic Bank for years. First Republic, in order for J.P. Morgan to be able to buy it, had to be deemed insolvent. There are all kinds of questions whether First Republic was really insolvent or not. Same kind of thing. But in order for J.P. Morgan to be able to buy it,

because J.P. Morgan has more than 10% of the deposits in the U.S. banking system, and there is a statutory limit that no bank can have more than 10% of deposits, How did J.P. Morgan get to buy First Republic? Because it was deemed insolvent. Okay. The stock, I went back and looked just a couple days ago, J.P. Morgan stock went up by almost 15 billion in market value. That's how much the FDIC insurance fund got hit to make First Republic depositors whole. So that was, in essence, a dollar for dollar transfer from the FDIC to J.P. Morgan shareholders. None of that would have happened, I think, had the Fed not done what it did to Silvergate four or five days before. Yeah, and it's astonishing considering the panic that ensued from particularly Silicon Valley Bank. Obviously, you had most of Silicon Valley venture capital funds, startups, the startup founders, those fund managers banking with Silicon Valley Bank. And there was deep worry that the startup industry within the United States was going to be at systemic risk levels if somebody didn't step in. And to think that all this was incited by Elizabeth Warren and a gang of motivated individuals within the federal government and the regulators below them to pinpoint the Bitcoin and crypto industry is insane.

the amount of chaos that ensued is it's nothing to take like there's a I remember because it's affected I run a fund at 1031 we were at Silvergate we had to move our money to Silicon Valley Bank and all this is going on we had a we had a bank hop for for a number of months because there was a lot of uncertainty that was incited into the market yeah correct everybody did it is it is stunning, even for Custodia, just the number of people who are still struggling with banking. And I've publicly disclosed, we've been debanked multiple times, each time due to no fault of our own. We have not had challenges on the compliance front because we've invested so much money and time and effort in the processes around it. And so us getting debanked, we're in the same boat

as everybody else. So this is why if Custodia can get a Fedmaster account, then we can get a Fedmaster account for the industry. And finally, we're not reliant upon these banks who, to be honest, do want to service us. Why would a capitalist not want a customer, especially if they're a customer that they can charge high fees to. Of course they would. Why does the banking industry turn us away? It's the regulatory pressure that they're getting. And that's what custodian, man, I did not expect us to be the poster child for fighting against this, but you can see why a lot of banks don't fight it. Again, the confidential supervisory information thing causes a lot of this stuff to happen behind closed doors and in a way that can't be brought out in

litigation. Again, look at the footnotes that Elaine had in her affidavit. I wish we could frankly get the real story, but she made it clear she can't give it because of confidential supervisor information. She gave as much as she could. But I would love to know the real story because there's a lot that I know that I can't share for the same reason. And man, if you knew it all, man, you'd be like, why do we have this system? Because what happened is when the regulators got captured by political interests, they got weaponized against law-abiding citizens. And there was a great quote from the, I think it was the Center for Government Accountability that said, debanking turns law-abiding citizens into criminals and the states can set them free. Yes,

indeed. That was a great quote. And yes, the states can set them free. And Marty, here's what's fun. The states are starting to get really pissed off about all this because it's targeted way too many industries unfairly. And it's not a political party thing per se, because the guy who's the most outspoken against it in Wyoming is a Democrat. But here's the fun part. The chief financial officer of Florida, Jimmy Patronus, a few weeks ago said, it's time for Florida to set up our own bank. Because we don't want our Florida companies to be debanked for political reasons. And why are we spending all this, you know, paying out all this money to New York and San Francisco banks, we should keep that money inside Florida. And so he wants to set up his own bank. And you

know, he's going to have the same Fed master account fight that we're going to have. State of Texas has its own master account. So the Fed has historically been, you know, picking winners and losers and giving these valuable accounts to, you know, its friends. Meanwhile, blocking legally eligible applicants like Custodia that did nothing but try to comply with their laws and rules. But I digress. It's going to be interesting. And I will tell you this, there's some chatter that, look, if the Fed is going to start to weaponize access to the banking system, to the payment system so that only its friends get it and its perceived enemies, I say perceived because we're not real enemies, but they clearly perceive us as such because they're trying to kill

us. If that's what's going to happen, well, then maybe there should be a competing Federal Reserve. Maybe certain states should get together and say, we need to create a new clearinghouse. Originally, there were multiple clearinghouses that were competing with each other in the ACH system. And then they all ended up getting merged in together. But there's plenty of history, plenty of examples of clearing houses being created. And if the states are starting to get pissed off, rightfully so, about their businesses unfairly and unlawfully being debanked, don't be surprised if in the next few years you see that, if there's not serious Fed reform in the meantime i would love to see that just from the pure basis that competition's good

the fed needs competition and it's it's ironic too because you're you're attacking an industry two industries really like a banking industry and then the industry is trying to bank below it which is the the bitcoin industry and there are serious problems throughout our economy in our financial system that many Bitcoiners, yourself included, are trying to fix by creating businesses and tools that enable people to secure their financial future and adopt a better money. And it's just extremely ironic when you juxtapose what many in our industry are trying to do with what's going on at the Fed monetary policy level. I mean, they just cut rates by 50 bps, 25 bps more than was expected just two months

ago which signals that there may be something uh afoot in the back end of the financial system here particularly uh from a liquidity perspective they're proclaiming that inflation is somewhat tame but i saw you retweeted lynn alden earlier today you know the rate of inflation has been tamed to to an extent depending on what metric you look at but absolute inflation people are still feeling it like that lower rate of inflation is still building on a higher base that people are still paying more and more month in and month out than they were four years ago. Totally. My cup of coffee. I was tweeting about going to Costco for the first time in several months. The sticker shock. Oh my God, my cup of coffee. They used to put 80, they used to put 100

K cups in the box. Now they only put 80 and it's about the same price that they're charging for what they used to have a hundred K cups in the box. And that just happened, Marty. So, I mean, that's in the last i don't know six plus months that that that that happened that's the kind of sticker shock that we're all living with yeah i mean parker lewis was tweeting about it where we get our eggs and our beef uh shirttail creek farms here in austin they just raised their egg prices by nine percent which is material that's not right anywhere near the uh two and a half to three percent target whatever the target is now that the fed is proclaiming and what does justice look like for taking it back to Operation Chokepoint 2.0.

What does justice look like? I was just thinking now I'm getting somewhat worked up because you think about not only did this targeted attack on a particular industry incite this banking crisis that had the country in a state of panic for a couple of months last year. And people were forced to step in. And J.P. Morgan comes out ahead.

J.P. Morgan comes out ahead. But then not only that, like on the other side, you have really good people. I know him personally. Alan Lane is a great guy who's running a very good business. And then I don't know Barney Frank personally at all, but it's ironic that they took the guy who's one half of the Dodd-Frank Act, which was written and passed into law to make sure that consumer protections were put into place within the banking industry. And it seems like they were not insolvent, but it's almost like they were trying to humiliate somebody who created legislation to put consumer protection in place within the banking industry. It's almost like it was a humiliation ritual of what many would deem to be good people. I would love to talk to him, actually. I talked to Chris Dodd not long after Dodd-Frank occurred, but I would love to talk to Barney Frank.

the problem is right now, because of all the litigation, you know, they're all still trying to settle their compliance problems. They're all still trying to settle their shareholder lawsuits, right? There's still some, you know, they're not ready to be unleashed to talk yet. And that's why probably he hasn't talked more than he did right at that time. Thank goodness he did speak out at that time, because to your point, he's such a credible witness for what happened. And we wouldn't have known that signature had been suicided had he not talked about it that weekend. He probably afterward was told, stop talking about it. But for now, he'll be back, I assume. We'll all get to know the real story once all the litigation's over.

But is there justice? Look, custodian getting a master account would be justice. um and so we'll see if that justice comes we disclosed that us not having a master account has cost custodia eight million dollars and counting which for a small organization is crushing and that doesn't even include the legal costs so um yeah we're we ended up you know fighting this fight on behalf of the industry that we didn't we didn't pick this fight it came to us And here's a funny thing, Marty. If you look at that list of the five crypto native companies that were either already banks or were applying to become some form of bank at the Fed or the OCC, like I said, three of them are gone. Silvergate, Signature, and Protego, not operating. The Paxos bank charter subsidiary application was withdrawn. That leaves the only one still operating as custodian. That's it. so we survived it and here's the funny thing i think they so disrespected a woman from wyoming

i'm deliberately saying both of those words a woman from wyoming they thought that i was just a wilting we were wilting wallflowers that would that were hillbilly idiots and we would not stand our ground and we would turn and run when the giant bully came and disparaged us the way that it did. And we filed a complaint with the Fed Inspector General. What they publicly said about us was filled with lies and filled with inaccuracies that the Fed refused to correct. And of course, the Inspector General complaint went nowhere. The Inspector General reports to Jay Powell. So kind of a conflict there. But it is in our lawsuit filing that you should probably put that up in the show notes here. Our lawsuit filing discloses, and I'm so glad that our lawsuit filing

was able to get it out there. Guess what the Fed said about us in private? They said we had an impressive and experienced management team. Guess what they said about us in public? Deficient and limited experience. Okay, there were eight categories of 180 degree flip-flops. So we can prove that the Fed actually thought highly of custodia with their own words that came out in discovery. Here's the funny part. That was all behind, that was all sealed in the court filings at the district court, but it got unsealed in the court filings at the appellate court. So you now can go see in the filing that Custodia filed last Wednesday, you can see some of the words that the Fed itself used before Elizabeth Warren and her crew decided to crush us. They really actually

thought highly of us. And what they said publicly was 180 degrees deliberate disparagement. Gun to their back from Elizabeth Warren. You may think this way, but you can't say it. Well, again, you're asking about justice, right? I mean, this is why the courts exist. And look, the two fishermen in Loper Bright will have changed the entire administrative state in Washington, D.C., that's the case in which the Chevron deference doctrine was overturned. They were two fishermen, right? I'm sure that whatever agency, you know, boarded their boats and made them pay for the inspections thought they were hillbilly idiots, too. And so the funny thing is, like, go and look at what the Fed clearly did in this organized, coordinated attempt to kill

all the crypto banks in that January to March 2023 time period. That's when all of us either got denied or shot or quote unquote voluntarily withdrew. All five of us in that January to early March, late January to early March, six week time period, all of us. And so what do you think they were trying to do with Custodia? We weren't operating at that point. They were trying to scare the hell out of us and make us run away. And we didn't. They had no idea who they were dealing with in our board, in the state of Wyoming backing us, in our shareholders backing us. Quick break here, freaks. This rip is brought to you by Gradually Then Suddenly, a framework for understanding Bitcoin as money by Parker Lewis. I wrote the foreword to the book.

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TFTC to get $40 off their annual subscription. Zaprite.com slash TFTC, $40 off. I mean, many in the industry have surmised that the Fed is posturing this way because anybody who's listening is unaware of the way Custodia operates. You guys are a fully one-to-one reserved back bank. Correct. And so many in the industry are talking, saying, yeah, it makes sense to us that the Fed wouldn't allow this because it would set the precedent that, oh, there's an actual safe bank that has full reserves in the system. And once you create that optionality for the market, people are going to say, oh, I can bank with this extremely safe bank or go into these other risky, fracturally reserved banks. Do you think that is behind any of the intention of this sort of stall warding? Well, I thought so, but then I had a conversation in recent months with someone who was at the table and told me what really happened.

it was 100% our association with crypto, period, full stop. So there was 86 pages of vitriol and hyperbole and lies about us. But what really mattered, the one thing that drove the Fed was, I'm told by an insider, our association with crypto. And Marty, that's why the Silvergate thing was so meaningful to me when I saw it all come out last week, because I had thought, I wasn't sure what really happened in Silver Garden. I thought that they'd had a bank run. And they did. But what I didn't know is that they'd survived it. Yeah, they had the compliance problems and all that, right? But they survived it. If the Fed hadn't given them that ultimatum, they would still be here. The other bank runs probably wouldn't have happened. And the FDIC's deposit insurance fund

wouldn't have had a $40 billion hit. And it only has $110 billion or so in it right now. So that $40 billion hit is huge to the FDIC. And every other bank in the country who was innocent in all this had to increase their deposit insurance premiums, which means that every other bank in the country is now charging all the customers more fees to recover those deposit insurance. So we all paid for it. So it wouldn't have happened. That's the aha. It wouldn't have happened? Most likely. It certainly wouldn't have happened in the way that it did because the panic at Silicon Valley Bank was literally one day after the announcement of Silvergate. You cannot ignore that coincidence in the backdrop of what you were talking about back then,

of all the just jitteriness in the financial markets. And to your point, fractional reserve banks, historically people have, especially the corporate treasurers, they'll withdraw their money first and ask questions later. And if the bank survives, They'll put it back the next day. But there is so much job risk, so much career risk to a corporate treasurer. Think about all those startups that had all their money at Silicon Valley Bank. There's so much career risk to the corporate treasurer. If the bank where they have the company's funds has a bank run, everybody's going to be rushing to the exit first. So the funny thing is, I don't think that's what actually happened in terms of the Fed denial. And I'm taking it straight from the lion's mouth. It was all crypto.

They were just trying to kill crypto and they succeeded in killing three of those five crypto banks. And only one of the five of us is still operating. Yeah. And I think this is the most important thing that we can get out of this episode and hopefully get out to the broader public is the cost uh that the fdic paid which means the taxpayers paid the increase in the insurance premiums like everybody's paying that cost and that's the unfortunate one of the unfortunate things about being in this industry is that the

mainstream perception of of what we do in this industry is all these guys are crazy speculators scammers whatever there certainly is some of that in some areas of the industry but i believe that most people in this industry are trying to build good products that increase the quality of life for every individual those products touch and that is a thing that doesn't play in our favor is the the mainstream narrative that we're just some crazy crypto bros and gals that are that are highly speculative and not adding any value to the economy and there are plenty of data points against that to prove that um bitcoin is really increasing the quality of life particularly for people who use it as a savings vehicle and hold it for the long term. And I think to help turn

the tide of perception, particularly in the eyes of the public, it's important to highlight that this targeting of our industry had an adverse effect on every American in one way or another. Absolutely. And I'm hoping that the press picks this up. I am aware of some stories being written. I've gotten some phone calls today about all of this. I'm hoping that this goes nationwide. Nick, I know, is writing, he already announced he's going to be writing a follow-up story. He was at Token 2049 and, you know, tweeting in the middle of the night, fired up. Poor guy didn't get any sleep that night. Fired up, pissed off about, you know, what we all kind of knew but didn't really know until the news came out last week. But my point is, like, I think this is,

it's time for this to go national. This is a scandal. Elizabeth Warren and her crew touched off a financial panic because they were trying to kill off the crypto industry. And it probably, almost certainly, wouldn't have happened had they not done what they did to Silvergate. And then the next day, the panic ensued. Holy cow. And it also shows how fragile the system is.

It really does. Oh my gosh. If a small bank that was serving a relatively small industry could touch off a system-wide bank run? Yeah. This is, you and I have talked about this going back to like 2016, maybe when we did our first podcast together.

The traditional financial system has never been stable. This is not news to most of us that it is subject to periodic bouts of instability. And part of the thing that we like Bitcoin so much for, it's not price stable, but it's systemically stable. The dollar might be relatively price stable right now, relatively, but there's a perception that it has systemic stability. It does not. Bitcoin as a system is far more stable.

Yeah, and it's something that the banking industry should be embracing because if you're looking for a way out of these problems, let's build on a strong foundation, which Bitcoin provides. And not only that, you mentioned it earlier, but the industry that is bubbling up around Bitcoin, like those are paying customers and this industry that is growing rapidly and an asset that is at one and a half trillion dollars combined with Bitcoin and the other cryptocurrencies and adoption continues the way it has for the first 15 years. that market cap and that addressable markets only going to grow even larger orders of magnitude larger and so there's an opportunity for the united states economy to foster this innovation and make sure that it actually happens here in the united states and to think that we actively have politicians and regulators attacking what could be a golden goose in the 21st century is completely insane and not only are they suiciding these banks that they don't like but uh they may not know, but they're suiciding themselves in the long run. They are. And that's why I do so

appreciate and have tried to be so politically neutral. I appreciate the Democrats who have broken ranks with this Warren crew. There is a war going on inside the Democratic Party between the Warren crew and the more moderate wing over this financial services policy. And it's just an unknown what Harris is going to do. And I've heard rumblings that she's going to clean house. So all these people are going to be gone. I think it's more likely that Trump would clean house. We can probably all assume that that would be the case because Trump at least has come out publicly and strongly in support of crypto's right to exist. And if Trump really wanted to support us, he would take the taxes off Bitcoin and let it compete with the dollar

and may the best system win. I don't put it past Trump to do something like that. and just say to all the entrepreneurs, come back, get out of the Middle East, get out of Singapore, come back to the United States. No more taxes on Bitcoin. Heck, look what El Salvador did accomplish by doing just that one simple thing. No taxes on Bitcoin.

We recognize it as legal tender. The US doesn't even have to do that. Just say no more taxes on it and let it develop accordingly. And like I said, The powers that be want to do anti-money laundering and counter-financing of terrorism. We've proven that it can be done. It absolutely can be done.

Even in this high-risk industry, we've proven it. And they know it. That's the funny thing we said. We filed that in our lawsuit filing. The Fed has, across time periods, reviewed every single payment originated by Custodia, every single one. I can't think of another bank that's been reviewed at that level of detail. or another industry that's been so targeted like this, but stop and think about what that means

for the banks that have been willing to service it, the costs that they're incurring because of all the compliance people that they have to hire and all the risk management people that they have to hire. It's a high cost industry, but I think this industry is willing to pay it. So it doesn't, just because you take taxes off it and bring entrepreneurs back in does not mean that you're abandoning the policy objective of shutting down money laundering and terrorism financing. I think those two things can coexist. So we'll see. If the Republicans take the Senate, which I think there's a very high probability occurs, Tim Scott will be the chairman of Senate banking, and he's a Bitcoiner. He came out with Senator Lummis to the Scaramucci Salt Conference

in Jackson Hole about a month ago. And I got a chance to spend some time with him, shared everything. He knows even the things I can't share now. The things that I legally could share with him, I did. So he knows there's some bad stuff going on here. And one of the interesting questions is, who's going to be in control of the Department of Justice? Because if there are congressional subpoenas or even criminal referrals, it does matter who's in control of the Department of Justice as to whether those things, you know, have any teeth. We've seen that in this Congress, where Congress and the Department of Justice are controlled by the same party. Congressional subpoenas have teeth, and if someone ignores them, we saw that with Bannon and Navarro

in the January 6th committee, and they went to jail for ignoring them. But the most important thing is for congressional subpoenas to have that kind of teeth, it does require the Department of Justice to have the same political party because what has evolved is that if it's a different political party, and we've seen it on both sides of the aisle, and there's a congressional subpoena that comes for an investigation, if the subpoenaee decides to ignore it, then there might not be any consequence. It used to be that Congress had a jail and Congress had a, they do have a police force. They could historically arrest people for ignoring congressional subpoenas. That got changed, I don't know, 30, 40 years ago so that the Department of Justice, which was then supposedly

more independent and less political would be the one that would do the prosecuting. Well, unfortunately, the Justice Department has become very political. I was just talking to somebody about this. It goes back to the George W. Bush, you know, Patriot Act era, when the Justice Department became very political. And ever since then, regardless of which party was in charge of the Justice Department, they chose whether to prosecute the referrals that came from Congress. So if you have the same political party controlling the subpoena power and the DOJ, you're going to have some teeth if crimes are uncovered. But if it's a split in control, then all that's going to happen in Congress is just investigations and people ignoring subpoenas.

So this is going to be fascinating to watch because what we're just talking about right now applies across the entire federal government. And it's not just the banking regulators. There are things like this, analogous things that have happened that folks have been alleging are illegal. And elections matter. And we'll see if the same political party is in control of subpoena power. The Senate has more subpoena power than the House does. I actually asked the question, why with the Republicans in charge of the House, was there not an investigation into all this? And the response was two things. One, the Senate does have more subpoena power than the House. Although, of course, we do see the House subpoenaing. It's coming from certain committees.

It's not coming from financial services. And the second point is McHenry, who controls the House Financial Services Committee right now, has been trying to get legislation done. And so the last thing with Biden in control of the DOJ, the last thing he wants to do is send over, you know, criminal referrals for failure to appear. He doesn't even want to do the subpoenas. He doesn't even want to do the investigation because he's trying to get his stablecoin bill passed. So that's the incentives, the weird incentives in DC. I know I went off on a little tangent here, but the punchline of this whole discussion in the last couple of minutes is elections matter. They do matter. And again, I want to belabor the point that we have a massive opportunity

in front of us as americans and as an american citizen i want to see us take advantage of that despite all of this weaponization of the federal government and regulatory agencies the united states still has a leg up on a lot of the world in regards to innovation around bitcoin and broader crypto um and like you mentioned i know a lot of people going to dubai going to singapore going to el salvador because they simply do not want to put up with the regulators here in the united states and i think we're at a critical junction in the industry in the within the united states where it can go one way or the other we could shoot ourselves in the foot and give up the massive lead that we have i mean per capita i believe i think this is still true americans hold

the most bitcoin uh in any country in the world uh we've got the most businesses here we a lot of we have a lot of bitcoin within the borders of the united states a lot of businesses a lot of individuals who want to see a lot of miners most hash rate um not per capita but like we have the largest percentage of hash rate out of all the countries in the world post chinese mining ban like it it's all happening here despite all of the weaponization of these regulators and the federal government and i i can see it people are getting fed up and deciding to use their option to exit to other more favorable jurisdictions and so i do think this is elections are important particularly this one as it pertains to our particular industry and yeah um i would hate

to see us blow the opportunity that we have the head start that we have and i think it's imperative that we make the correct decisions over these next six months. Absolutely. And so much of it, because we've seen how much power these federal agencies have grabbed. I think the pendulum is swinging back with the Chevron deference doctrine overturned. There were three Supreme Court cases at the end of the last term that clipped the wings of federal agencies, including one of the Fed itself, that said that someone can challenge a federal rule. The statute of limitations doesn't start to toll until the party has been harmed by the rule. So the Fed had been arguing all the way up to the Supreme Court that if there's a five-year

statute of limitations, that ends five years after the rule got created. And the Supreme Court said, nope, that ends five years after the party was harmed by the rule. So you can sue over every single rule that has been implemented if you've been wrongfully harmed by it. Think about the implications of that in addition to Chevron deference being overturned, right? These federal agencies have, and the SEC has had its wings clipped multiple times. These federal agencies have had their wings clipped by the recent Supreme Court decisions. And so that pendulum is clearly swinging back. It's going to take a long time for those rules to be overturned in court

and for the court cases to work through the Supreme Court. But I will say it's public information that Custodia has three former U.S. solicitors general who either represent us or who have filed amicus briefs on our side in the case. And one of them is Paul Clement, and he's the attorney who represented the two fishermen at Loper Bright Enterprises, who literally got the administrative state challenged all the way up to the Supreme Court. And his brief, by the way, is also something you should put up in the show notes, because you probably have a lot of listeners who are Fed historians and armchair Fed historians. One of the things that folks have said for years about the Fed is that it has an unusual structure,

which it does. The federal agency is the Board of Governors in Washington, D.C., and then there are 12 private corporations, the regional reserve banks. And so it's a hybrid from that perspective, but there's no question that the agency in Washington, D.C. is a federal agency subject to the Freedom of Information Act, subject to the Administrative Procedure Act, all of those acts that apply to federal agencies. The reserve banks are private corporations, and their boards are controlled by the banking industry. And if the presidents of reserve banks are doing official U.S. government business, the question is, have they been properly appointed under the U.S. Constitution's Appointments Clause, which requires that

the president nominate and Senate confirm the principal officers of the United States and that there has to be, when administrative decisions are made, when U.S. government decisions are made, there has to be a nexus to a presidentially appointed Senate-confirmed officer. But there is not that nexus in the case of the Federal Reserve Banks, the 12 privately owned. Their boards are controlled by the banking, by the private sector. So Paul opens up that whole question. And that's Paul Clement, folks. He's pretty famous in Supreme Court circles. So I will just point you to the amicus brief and his analysis. It's beautifully written in my humble opinion. And even somebody who's not a lawyer would, I think, appreciate reading that.

I mean, this reminds me of a conversation I had the other week on this podcast, particularly about the intersection and the interaction between the populace and the federal government. And you mentioned many examples, whether it's Chevron deference, what Custodia is doing to sue the federal reserve like it feels like for many decades the populace has been a rather complacent state and i think over the last three or four years particularly people are beginning to realize like oh if i actually participate file freedom of information act request if i actually sue the government if i take the fight to them when they're overreaching their bounds like you'll be surprised at the amount of power your punch has at the end of the day. And this is another

great example, like is the federal government or particularly the Federal Reserve operating in an unconstitutional way, but not having this nexus that is written as a law that is necessary for them to actually to operate legally. Yeah. There's a book written, a couple of books written on the Fed that I recommend. There's one called The Power and Independence of the Federal Reserve. There's a whole chapter on this very issue written by Peter Conte Brown, a professor at the University of Pennsylvania Law School, and Roger Lowenstein's book. I forget the name of it, but it's a famous book on the history of the Federal Reserve. And you know what's fun, Marty, is Wyoming's first congressman, Frank Mondale. I'd never heard of the guy. He was

highlighted in the Lowenstein book, because he was there when the Fed was being debated. He was in Congress in 1911, 12, when the Fed was being debated. And he warned that the structure of the Federal Reserve was such that this was an organization that was going to centralize in its power, and that power over money and credit was going to centralize in New York and Washington, D.C. Man, was he prescient. He was right. That's exactly what happened. And part of the reason why the Fed got created with these 12 private organizations is they wanted some decentralization in the Fed. They did not want all decisions to be made out of Washington, D.C. And back then, the Federal Reserve Board of Governors didn't even exist. The Fed was just these 12

unaffiliated regional banks that banked the banks in their regions. And each one at the time had a different interest rate and monetary policy. Imagine that. So go back to what we were talking about earlier. States are starting to get pissed off and fight back. When I talked to Chuck Gray, by the way, I highlighted his speech. He's the Secretary of State of Wyoming. He's the number two elected official in Wyoming. He's one of us. He's a Bitcoiner. And he was skeptical in the beginning. He comes from a caucus in the Wyoming legislature that has been skeptical. But now that Trump has come out strongly in support, I've seen the skepticism turn. And I will congratulate Chuck because he has preceded Trump's speeches. He came out strongly for Bitcoin literally the day before

Trump's Nashville speech, which nobody knew was coming, and not to the extent that it was. And then he just gave another great speech right before, like literally two hours before Trump was paying for cheeseburgers at PubKey in New York with Bitcoin. And that speech I would highlight with Chuck is worth listening to for all Bitcoiners, because Chuck's in a position of real power. First of all, he comes out with a full throated defense of federalism, that the states are the primary unit of government in this country. And that if the states are being, if the banking system is being weaponized against the states you know he was really interested when i talked to him afterwards about jimmy patronus in florida proposing to start their own bank and

that maybe the state should be locking arms and starting their own clearing houses that's what the fed is it's a clearing house so wow if the states start start gathering power together i know it's hard because it's the states are meant to be decentralized but if they start joining forces, there's plenty of history. That's why I brought this whole thread up again. Historically, the Fed was 12 different legal entities, all owned by the private banking industry, all of them. And they still are. They're governed by the Board of Governors, which is their regulator. And that's the federal agency. But you mentioned the Freedom of Information Act earlier. The Kansas City Fed maintains that the Freedom of Information Act

doesn't apply to it. So try a FOIA request to the Kansas City Fed. It's going to get rejected and they're going to explain to you they're a private organization and they don't have to comply with it. And so you can imagine the football that happens, something in D.C. gets done. They'll ship it off to one of these reserve banks where the Freedom of Information Act doesn't apply, or at least they take the position it doesn't apply. Right. So then D.C. says, oh, Freedom of Information Act, you know, we don't have it in D.C. and try to go get it from Kansas City. And Kansas City says, well, the Freedom of Information Act doesn't apply. So you can imagine the games that get played on acts like that. And it's going to be interesting to see because, of course,

Peter Conte Brown points out that what you have with the regional Federal Reserve Banks sitting on the FOMC, the Federal Open Markets Committee that votes interest rates, you actually have economically self-interested people voting themselves interest because the Fed prints the money to pay the banks the interest, right? But remember, if they're not presidentially appointed or Senate confirmed or appropriately a derivative thereof, is that constitutional? That's the question that Paul Clement asks in his brief. Pretty powerful stuff. It's a very good question that I think more people should ask and should probably get more tick in the mainstream and i completely i've been saying it for years partly inspired by the work

um that you and many other individuals did in wyoming states are going to lead the way um yeah not only in bitcoin but i think we've seen a post-covid um really claiming their autonomy from the federal government i really like that trend hope it continues um to to increase in magnitude and in veracity and i do think the federal government is doing a very good job of increasing the momentum to how antagonistic they are being towards particular industries. Yeah, absolutely.

Yeah, keep your eye on Chuck Gray. He's definitely an up-and-coming politician nationally who has come out with one of the best Bitcoin, pro-Bitcoin speeches of the year because it was really pro-freedom. And he gets it at a visceral level that it's about financial privacy. And he called a CBDC sinister

and he defends Wyoming's industries, especially the energy industry, wants Wyoming to develop its Bitcoin mining industry. We've got some issues in Wyoming with the Public Utilities Commission because it's such a vast space, which by the way, so is Texas, but Texas deregulated and look what happened.

Wyoming, I think should be going down that same path because right now energy costs, Wyoming is one of the largest energy producing states and 90% of the energy that we produce gets exported outside of the state. And so the state doesn't benefit from it other than just the mineral royalties that get paid into the state. And by the way, that's why we have a sovereign wealth fund. The state has net assets, not net debt. It's one of two states in the country that has net assets, even taking its public sector pension obligations into account. It's Wyoming and Alaska that have net assets as states because we do get mineral royalties, but we haven't built industries and jobs around the exporting of that energy.

And if we can keep it in Wyoming, great. But part of the reason we don't is the Public Utilities Commission forces a subsidy for the transmission costs. So, you know, that problem got solved in Texas when it got deregulated and ERCOT started to develop actually market-based solutions. And you know what's going on in the Bitcoin mining space. No one articulates it better than you do, how that helps to balance the Texas grid and how it helps to keep power prices down in Texas. And I hope Wyoming does the same thing. And keep an eye on Chuck Gray. There are other, of course, politicians. I can't thank Senator Chris Rothfuss enough. He's the Democrat I mentioned earlier. And then, of course, Senator Lummis, Governor Gordon. They've all just been big supporters of what we're doing here, and they're appalled at what the federal government has done to the state, and they're fighting. states will lead the way and i know we're going over time we only booked an hour had the last question i prepped you for it earlier but looking ahead what is a bold prediction or idea you have for our industry that you think many people would disagree with would disagree with uh i i think that bitcoin i've predicted it before but i'll say it again

i think that bitcoin is going to take down a global systemically important bank we see this with all the big banks wanting to pile in to Bitcoin and they're going to fractionally reserve it. They're going to rehypothecate it. They're going to commingle it with prime brokerage collateral and let people substitute when there's a margin call. Oh, I'll substitute a T-bill or Apple stock for the margin call that I got on my Bitcoin loan. And they're going to find themselves fractional and it's going to take down a large bank. And I do believe that that's eventually going to happen because these banks don't have the risk management mindset. They've got, to Austin Campbell's point, the 1970s mindset of let's just diversify the risk as opposed to,

no, let's actually segregate it and shut the asset liability risk and margin call risk down. You can do that and have a vibrant economy. And I will say something controversial here. There are a number of Bitcoiners who are hardcore, hey, we ought to have raw, raw leverage on Bitcoin. And you've heard me say this before, a fool and his Bitcoin are soon parted. Fascinating debate in Safe's podcast with Michael Saylor that was recorded last week. The last hour of it is the two of them arguing over this very point. Michael Saylor just thinks it's the greatest thing ever that the large banks are coming

for Bitcoin and that we can all leverage our Bitcoin and save is views it the way I do, which is that's that is way too risky. And Andreas, I think, put it best. Bitcoin is a disinflationary asset. It is not an asset that inherently has yield. And if you are investing in Bitcoin yield, That yield is coming from somewhere. And you better go figure out where the yield is coming from and whether the yield is appropriately compensating you for the risk. And I think Michael puts way too much faith in the large banks for their ability to risk manage this. They've never seen anything like Bitcoin. This is the apex predator, to borrow a phrase from Trace Mayer from years ago. This is the apex predator of finance. If they get themselves leveraged at all, more than one to one, they're going to get in trouble at some point. And I guarantee you they're going to get themselves leveraged more than one to one. They don't have the risk systems to segregate Bitcoin and they don't have the philosophy to segregate Bitcoin either. Michael Saylor would, of course, love to borrow the U.S. dollar. He's basically the, what was the name of the industrialist in Weimar, Germany, who went short the mark and then bought a bunch of industrial businesses and made a fortune off

the hyperinflation. That's what Michael Saylor is. He's the equivalent of that, shorting the U.S. dollar to buy Bitcoin. He is doing that by borrowing in U.S. dollars to buy Bitcoin. It's not a strategy I would recommend. I think it's a risky strategy. It's paid off brilliantly for him, though. But he might ironically play a part because of all the banks coming for Bitcoin and some of these big banks getting over their skis. We haven't talked about this. Maybe it's a good place to end. The Fed did give supervisory non-objections, which means that it let Bank of New York Mellon get into the businesses that the

Fed officially claims are so risky that they threaten financial system stability. So watch what they do, not what they say. Yeah. The banks are used to the Fed and the Treasury coming in and printing money and issuing bills when they get into trouble. They're going to find out the hard way that you can't print more Bitcoin. Yes. The scarcest asset in the world.

Caitlin, thank you for all that you're doing. This is a very important conversation. Freaks, get the word out. Elizabeth Warren, in an attempt to kill our industry incited a banking crisis that put the US in a very precarious situation in the spring of 2023. It's a headline that needs to get out there. And as was proven by this affidavit written last week, it's actually what happened.

These banks were secure. They had enough deposits. They were able to unwind successfully, get everybody back their money. But Elizabeth Warren, for some reason or another, targeted our industry and put the American banking system at risk. I think that's a pretty serious act on behalf of the senator from Massachusetts. Hopefully soon to be former senator from Massachusetts. I haven't endorsed anyone, but the closest I've come is John Deaton. I know a lot of Bitcoiners because of his work with Ripple are hesitant to help him. man oh man has he done a lot for our industry and would he do a lot for our industry if he's able to win that election so i hope that the hardcore maxis um can look at what he did and

say you know what he actually helped helped society even though he was he was doing it on behalf of the xrp holders he represented the individual xrp holders most bitcoiners probably don't even know, he aggregated 60,000 XRP holders to agree to be sued by the SEC. It's insane what happened. And most Bitcoiners are probably not paying attention to that. And he won. That's what's interesting about it. And so, yes, the Maxis hate XRP. But what John did for 60,000 individuals there was just incredible and what he's trying to do now is knock off elizabeth warren let's put it this way if the democrats keep the senate and sherrod brown loses guess who's going to be the ranking democrat on senate banking elizabeth warren yeah

i'd rather ally with a ripple guy than see her become uh get into that position so if you're If you're listening and you're a Massachusetts freaks, get on the sidewalk, start knocking on doors. It's time. There's a question we talk about a lot here in the comments. How do the people of Massachusetts put up with this? Are they proud of her? I can't imagine that they are. Well, he accepts Bitcoin.

I think I saw a MetaLaw man, James Murphy. He's challenging a lot of us to step up and donate Bitcoin. At the moment, I run a mixed company and I don't make political endorsements, but the more I learn about what Warren did here, the more I realize she almost killed my company and she was targeting our industry and I'm coming pretty close to making that endorsement and thinking hard about making a contribution. So Bitcoiners who care about the U.S. market, go look up his, he does accept Bitcoin. So give some thought to it. I won't recommend it, but give some thought to it. Elizabeth Warren, you came at the wrong woman. We're going to win.

Caitlin, thank you for joining us. This was great. Really fun. Really great. And we'll do this again. Let's do a mining one at some point soon. got to get you to wyoming bitcoin research institute at the university of wyoming um we this state is all in so we'll get you here sometime soon well i got will cole shilling me

on wyoming literally every day so i'm going to make the pilgrimage soon so thank you keep up the fight and uh we'll do this sooner than uh two or three years between uh this episode and the last episode we recorded enjoy your night yeah you too thanks a lot peace and love freaks