The Breakdown - Finish the Job: Crypto Legislation, Token Rights, and Spicy Dividends

Episode Date: July 29, 2025

On this Long Read Sunday, NLW dives into the two major fronts of America’s evolving crypto legislation. First, he reads and reacts to a joint op-ed from Congressmen Tom Emmer and Nick Begich urging the Senate to pass the Clarity Act and Anti-CBDC Surveillance State Act following the passage of the Genius stablecoin bill. Then, in a sharp historical detour, NLW turns to Byron Gilliam's essay connecting 1600s VOC dividends in mace and nutmeg to today’s debates over crypto token rights and revenue alignment. It's a double-header episode exploring how regulation, history, and investor trust intersect to shape the future of digital assets. Sources: https://www.coindesk.com/opinion/2025/07/22/the-senate-must-finish-the-job-on-americas-pro-crypto-futureemmer-begich https://blockworks.co/news/token-holders-demanding-revenue Brought to you by: Grayscale offers more than 20 different crypto investment products. Explore the full suite at grayscale.com. Invest in your share of the future. Investing involves risk and possible loss of principal. To learn more, visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Grayscale.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ -- ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.grayscale.com//?utm_source=blockworks&utm_medium=paid-other&utm_campaign=brand&utm_id=&utm_term=&utm_content=audio-thebreakdown)⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Sunday, July 27th, and that means it's time for Longreed Sunday. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Hello, friends. Welcome back to another Long Reads episode of The Breakdown. We got two good ones for you today. Obviously, one of the big themes right now is what's going on with crypto legislation. We have passed the

stable coin bill, but next up is the market structure bill. This week, we got a version in the Senate that had a slightly different approach than the House bill to how to handle the securities designation of crypto assets. We're going to get a little bit into that today, but we're going to come out this from two different perspectives, one very big picture and one a little bit more specific. For the big picture, we turn to an op-ed from two congressmen, Tom Emmer and Nick Begich, who argue that we need to push on the momentum to finish the job on crypto regulation. Let's turn it over to the 11 Labs version of me, and then we will come back and discuss. President Trump ran and won on a bold promise to make America the global capital of cryptocurrency

and blockchain innovation. Now, with a Republican House, a Republican Senate, and a Republican president, we have both the mandate and the responsibility to deliver. Last week, we made historic progress. President Trump signed into law Senator Bill Haggerty's guiding and establishing national innovation for U.S. Stablecoins, Genius Act, a landmark bill that cements a federal framework for dollar-backed digital assets. These payment stablecoins, pegged to secure assets, now have clear rules that promote transparency, protect consumers, and boost demand for U.S. Treasuries, all while reinforcing the dollar's position as the world's most foundational transactional currency. The Genius Act is a major win for American leadership in digital finance, but on its own, it's not enough. To secure the full promise of stablecoins

and of American crypto innovation more broadly, the Senate must also pass Chairman French Hill's Digital Asset Market Structure Clarity Act, which just passed the House. These two bills are complementary. Genius establishes the rules for stable coins. Clarity delivers the broader market structure that distinguishes digital commodities from traditional securities and clearly defines the regulatory roles of the Commodity Futures Trading Commission, CFTC, and the Securities and Exchange Commission, SEC. Without the Clarity Act, the rules governing digital assets will remain fragmented, confusing, and vulnerable to politicization. Under the Biden administration, that ambiguity was weapon resulting in regulatory overreach, stifled innovation, and an exodus of talent and capital overseas.

President Trump is reversing course, embracing a vision of American-led digital innovation, through executive action, a call for Bitcoin reserves, and by working with the most pro-crypto-counterous in U.S. history. But without legislative clarity, that progress is at risk. FTX, the most spectacular crypto fraud in history, happened outside the U.S. precisely because early regulatory uncertainty pushed innovators offshore. The lesson is clear. Without clear rules of the road, the result is chaos abroad and missed opportunity at home. The Clarity Act provides the roadmap we need to keep the digital asset economy rooted in the U.S., with smart regulation that matches the technology's unique characteristics. It will not only protect consumers and investors, it will also position the U.S.

as a global leader, using financial innovation as a diplomatic asset. Central Bank's Surveillance. There's another critical frontier the Senate must address, protecting Americans from surveillance-driven central bank digital currencies, CBDCs. While other nations embrace centralized digital currencies as tools of control, none more chillingly than the Chinese Communist Party, we must draw a firm line in defense of American freedom. That's why the House passed the Anti-C-C surveillance state act, which prohibits the Federal Reserve from issuing a CBDC.

It's a necessary safeguard, and we're working to ensure its passage. We cannot unleash a new era of innovation while leaving the door open for future administrations to turn that same technology against our own citizens. The Senate must send the Anti-CBDC Surveillance State Act and the Clarity Act to President Trump's desk so that the United States doesn't just participate in the digital asset revolution, but leads it. This isn't a Republican issue or a democratic issue. It's an American issue.

Whether you're from Minnesota or Alaska, whether you're 18 or 80, when done right, This technology empowers individuals, strengthens financial sovereignty, and unlocks opportunity for all. It's the future. And now, we must finish the job. Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products, ranging from single asset to diversify to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of tradfai and crypto, and one of the benefits

for a lot of us is that grayscale products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visit grayscale.com. Go to grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. So as I said, that one was the wide-angle view. But one of the key considerations with the market structure bill is how to handle the security-like nature of crypto assets. Are they securities? Are they commodities? Do they start as securities but turn into not securities? Are they something else called ancillary assets? These are the questions that we're debating between. But ultimately,

part of what that comes down to is what rights they confer upon the people who hold them. And for that, to Byron Gilliam, who goes all the way back to the Dutch East India Company as a source of inspiration. Again, I'm going to hand it over to the 11 Labs version of myself, and then I will be back with some commentary. The world's first publicly traded company tried to rug at shareholders. When the Dutch East India Company sold shares to investors in 1602, it promised to liquidate the entire concern and return all capital to shareholders in 1612. That was standard practice at the time. shareholders invested for a set amount of time, after which they expected to have their capital returned, plus some additional yield. By 1609, however, it was clear that the company, known locally by

its Dutch initials, VOC, had no intention of returning investors' money, mostly because they didn't have it. In addition to trading in spices, the company acted as a de facto navy for the Dutch Republic, tasked with projecting power in the Far East. But building forts and projecting naval power abroad required long-term investments, so rather than return investors' money as promised, the company simply kept it. Shareholders, accustomed to financing single ships for a single voyage, were understandably unhappy. Protests against the decision to unilaterally convert temporary capital into permanent capital were led by Isaac Lemire, a former director of the VOC, who publicly campaigned against company management, and petitioned the government to force the

company's liquidation in 1612 as scheduled. It was a long shot, the government was never like to compel the company building its navy to liquidate, but the company recognized that Le Maire's campaign would impede its ability to raise capital in the future. To placate investors, it offered dividends. This was not easily done because while the VOC was doing a brisk trade in spices, its high investment needs meant that it was chronically short of cash, so it paid the dividends in spices instead. Between 1610 and 1612, the VOC awarded dividends totaling 163% of equity, according to one study, but mostly in spices like mace and nutmeg. Shareholders were skeptical.

Many refused these in-kind dividends, holding out for cash instead. Spices were hard to sell and impossible to sell at anything like what the company said they were worth. But if nothing else, it was a gesture to reassure shareholders that they had a claim on the company's earnings. It was a long while before shareholders were convinced, in 1616, some of the company's unpaid dividends were converted into interest-bearing loans. In 1620, the company was flush enough to pay a 37.5% dividend in cash. But in 1623, short of money again, the company paid a 25% dividend in cloves. Dividends continued to be paid partly in spices until at least 1643, after which they were paid in cash, and, when the company was short of cash, bonds. Shareholders continued to grumble,

but it did work out for them in the long run. One historian, estimates that the VOC's annual dividends averaged out to 18% of its paid-in capital over 200 years. 200 years. VOC's original investors did not value the shares as a function of 200-year cash flows. They thought they'd have their money back in 10 years. But the company's early dividends, paid while it was still a money-losing venture, helped convince investors that shares can have value even if the paid-in capital is never intended to be paid back.

On this point, crypto still has some convincing to do. spicy buybacks. In the debate over what percentage of revenue, if any, crypto projects should pay out to token holders, Tom Taubridge, co-founder of Fluence, takes an extreme view, 100%. Tobridge reasons that the portion of revenue used for buybacks is a measure of a team's trust and alignment with token holders, so a team that pays out 100% of revenue is perfectly aligned and presumably trustworthy. 80% of revenue is still pretty good, not a lot of misalignment, but there might be some. But when a team pays only, say, 20% of revenue to token holders, now trust and alignment is very different because management is taking 80% of revenue to do

something else with it. By that logic, there should be a lot of distrust and misalignment between the owners of Pump. Fund and the owners of its new token, P-UMP. Unlike inequities, these two groups are not the same, because pumpholders have no legal claim on Pump.com's earnings or assets. Still, investors value the token at $4 billion, presumably because PumpDot Fund's owners have promised to use 25% of the platform's revenue to buy P-UMP. It's possible, of course, that the 75% of revenue retained by Pump. Fund's owners will be invested in a manner that ultimately benefits token holders. But it might also be invested in a new business line that the owners decide is unrelated to the pump token, or in houses and yachts for the management team.

There's no telling. It's therefore probably best to value the pump as a multiple of its current cash return, much like the VOC's pioneering investors did. From the VOC in 1602 until about U.S. Steel in 1901, investors tended to value stocks only by the dividends they received, assigning no value to a company's retained earnings. Ignoring retained earnings made sense because before U.S. Steel set a new standard of disclosure by releasing full financial statements, investors had no idea what companies were doing with them. Today, token investors are not much better informed, so it similarly makes sense to value many tokens by the rate of their current buybacks and nothing else.

That's not exactly what people are doing. Based on revenue for the month of June, Pump is trading at 40 times its annualized buyback. That equates to a 2.5% yield at the current token price. Not crazy by crypto standards, but also seemingly pricing in something more than the current rate of cash return. By contrast, VOC's early shareholders effectively demanded all of the company's cash flow, because they were rightly suspicious of what management was using them for, self-dealing and empire-building, as it turned out. Even in those early money-losing years, the company paid as much as it could

possibly manage, albeit in Mace, nutmeg, and cloves, because it had to prove that VOC shares had value. It's since been established that shareholders have a claim on earnings, so valuation is easy. Every stock is worth the discounted value of its future cash flows. Until that's established in crypto as well, token holders should probably demand bigger buybacks. All right, back to Real NLW here. One of the things that I felt for some time is that one of the upsides and benefits of crypto regulation is that it could actually allow crypto token issuers and crypto token communities to really experiment with the types of different financialization opportunities that tokens enable. Basically, I think that to some extent, we need the sandbox of what's allowed in order to actually get some of the most interesting innovations.

Now, whether this round of legislation actually enables that or not remains to be seen, but it's certainly more hopeful than it's been for some time. And with that, we will wrap this edition of Longreed Sunday. Big thank you to Byron and the Congressman for their op-eds, and big thanks to you guys for listening. Until next time, be safe and take care of each other. Peace.