The Breakdown - Institutions Are Getting Ready for the Next Bull Market | Weekly Top Five

Episode Date: September 9, 2023

Covering the biggest stories of the week in discussion with Scott Melker: 1. Visa Stablecoin Settlement program expansion Solana  2. FASB accounting rule Change 3. Genesis Shuttering Trading desk / Coinbase institutional lending + Grayscale letter to SEC + Genesis suing DCG 4. ARK Van Eck Spot ETH ETF 5. CFTC + LBRY Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

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 Saturday, September 9th, and that means it's time for the weekly recap. 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, back with round two of the Dialogue News Analysis Show that I've been experimenting with with Scott Melker on Fridays. Still doesn't really have a name.

So for you guys, it is just the weekly recap. But on this show, we're digging deeper into a bunch of things that we've covered this week on the breakdown, as well as some things that we haven't. We talk about Visa Stable Coin Settlement Program, the FASB changing the accounting rule, a slew of discussions around Genesis and DCG, including Genesis suing DCG, a little bit more ETF talk because it's 2023. so what else are we going to talk about? And then the recent CFTC decisions against a set of DFI protocols. As always, this content is a little bit more opinionated and analysis versus just what happened. And I think that if I have to sum it up,

what all of these stories sort of look like to me or where their common through line is, is entering this phase of final cleanup and preparation and transition from everything that was to everything that will be. You're seeing half of the stories that come out about new tradfi integrations and institutional programs and infrastructure being built, and then half the programs that are about legal battles and clean up from what happened before. To the extent that there is a shift in feeling among those legal battles,

more and more of them are crypto taking the fight to regulators and availing themselves of the legal system to actually get better policy made. And so I think net net the trend is towards positivity and the next thing versus being dragged down by the last thing. That said, there is still a lot of. cleanup left from last year. So let's dive in and see what you guys think. So it was pretty challenging this week to get down to a top five in my very humble opinion. So much so that I kind of like listed a few honorable mentions here. I'm not even in the top

five. Apparently is a JP Morgan moves into deposit tokens for settlements. State was hacked by North Korea once again. How can we stop North Korea from hacking us? We have apparently the U.S. authorities and FBI looking into DCG and the IMF saying not to ban crypto. And those aren't even in our top five stories. Pretty crazy week, I would say. But what is is Visa Tapsalana and USTC stable coin to boost cross-border payments. Do you want to dig into this for me? It seems that they already were piloting this for quite a while. They've been doing it on Ethereum, but that they've now moved on mostly to Salana because it's faster and cheaper. Yeah, I mean, I think there's a couple things that are interesting about this.

One is, you know, I think the overarching is Visa just absolutely plowing ahead with the integration of crypto rails as part of its normal course of business. I think what's meaningful about moves like this is that you're sort of moving out of the realm of, oh, it's a cute pilot project for the sake of headlines into this is just another option to settle transactions, which is the core business that we're doing. And I think putting kind of a fine point on that is the fact that this wasn't like, I don't believe at least that Visa sat down with the Salana Foundation and cooked up something big. This is just Visa tapping into existing public infrastructure, making a decision to do it, which is exactly what you'd want to see in the normal course of sort of crypto adoption is, again, not sort of headline driven, you know, partnerships, quote unquote, but just integrations of infrastructure. And I think that's what we saw here.

Yeah, I agree. And Kai Sheffield, who's the head of the visa side of this, did a great thread on it and said exactly what you just did. He basically said, listen, this is how in this thread, you guys should dig it. He said, this is how visa works, right? When we settle a transaction, it's between the merchant and the bank. And this is just a better way to do it that we're piloting for anyone who wants to use USC. They're effectively saying what we've known all this time is that there is a better way to do this, a faster way that eliminates intermediaries. and settles even quicker. I mean, it seems like such a layup, but like you said, this didn't require them going to the Salana Foundation or calling a CEO. They just said there's an existing technology here that can make our business better and are adopting it. I think this is just absolutely huge. And yet again, one of those things that's not making noise in this bear market or this

crypto winter, whatever we call it, that will be in a year, one of those narratives that we look back on and go, holy crap, Solana is working with Visa. and this is how Visa is settling their transactions as we see Salana go up by a few hundred percent. I really think these are going to be meaningful stories in a year when the bull market picks up. I think one of the things that is going to be sort of fascinating to see is Solana has had a real trial by fire, which it was always going to, you know, anytime you have an Alt-Layer one that rises to be sort of the darling of a bull cycle, it has to then go through a bear cycle and see if, you know, was it just venture capitalist taking advantage of a new narrative to make a bunch of money

or does it have actual staying power, right? And Salana had it extra hard because of its association with Sam and FTX and Alameda. And so the fact that you still have people building on it that range from, you know, small projects all the way to sort of visa, I think is testament to the fact that it's, it's sort of gone through and is working its way through that trial by fire. Yeah, in fact, I mean, from a market perspective, you would think that because of the relationship with SBF and FTX, that it was almost beaten down more obviously than it should have been

and should be one of those that actually has further to rise, right? I mean, the reversion to the mean for Solana, when you see the things Ethereum doing in thatmatic and Polygandis partnerships should be tremendous to see. There's still a ton of building. happening on Solana. For what it's worth, that's been my assessment of a lot of, you know, we got down to, what was it, you know, 17, 18,000 in Bitcoin, you know, sort of the lows post-FTX, and we decoupled from the larger macro to the downside. And I think a lot of what we've been doing

since then is to some extent finding where the bottom was supposed to be for this cycle, you know, to the extent that there is such a thing. You know, so it's always been kind of interesting to, to see people kind of, you know, why are we at 26 or 30 or whatever? It's, you know, my feeling has been that it wasn't necessarily some sort of, you know, big move. It was just that reversion to the mean of, you know, this thing isn't totally dying. And we're back to sort of where the bottom might have been had it not been for catastrophic fraud all over the place. A hundred percent. Even if you just look at sort of the four years cycle, we had what would have been the bottom on the chart when, you know, people view that metric in different ways,

but where weekly RSI was oversold and all this bottomed around 20 and then all of a sudden we got this sort of FTX black swan, but retraced that across the entire market in just two months. So I really do think that right now, 25K is just sort of fair value, right? It's where it's where price was before and after Grayscale, before it after Black Rock, and before it after sort of FTC. So I agree with that. I think that that means this is just that part of the cycle. Yeah. There's something to be said for people like not being real stressed out about where the price is too, just as a psychological indicator of that. Like, you know, yeah, it would be nicer if it was 30. But at 30, we're getting kind of

excited. At 26, we're just sort of hands-up, shrug. I guess this is kind of where we are for a while. Absolutely. So I think the next story, and I think that this one is one of the biggest stories of the year, actually, is FASB's crypto accounting, shake up their more corporate investment. Michael Saylor and others argue for anyone who wasn't paying attention, you've probably watched the show. You've probably heard the nuance of this. But effectively, we had Michael Saylor and MicroStrategy buying Bitcoin sparking the last whole market. I think it's fair to say. It was like August 2020, and that led to the massive run-up Tesla buying, Square buying. And we saw that Michael Saylor sat down with, I believe it was 2,000 CFOs of companies.

We were all so excited that February of 2021, he was going to teach them all how to put Bitcoin on the balance sheet. Crickets, right? It absolutely didn't happen. And it turned out that was a result of the way that they had to account for their Bitcoin on their balance sheet, which was effectively to peg it to the lowest point it was during that quarter and then take the loss. and even if it was higher, you couldn't take the game. Well, those rules are now changing in 2025. So I don't think that this is a massive catalyst at the moment,

but this opens up just huge potential in the future. Yeah, I mean, it's funny. I love the quotes around this one because the people who are on the FASB were basically like, it's very rare that we get to do something that's incredibly obvious time saving and right, but this is that, you know? And that's why it had a unanimous vote. It just the way that it was a counterfeit. for it didn't make sense before.

And to your point, Scott, you know, I don't think, this is going to be a theme too. Anytime you start to kind of look at institutions getting involved in some way, there's a temptation to view every story as it should be a bigger deal than it is. But really, it's all about the slow accumulation of normalization. And this is just another part of that. You know, no one is going to make the decision to put Bitcoin or ether or anything on their balance sheet because they know how to account for it. but they might have come close and not because they didn't know how to account for it

or the way that they would have accounted for it didn't make any sense to them. So it's kind of a barrier clearing process that I think is part and parcel of where we are in the cycle as well. That's right. Now if they want to, they can. And before if they wanted to, they couldn't unless they were out of their mind and wanted to piss off their board and shareholders, right? I mean, Michael Saylor obviously here is saying fair account value accounting is coming

to Bitcoin. This upgrade to FASB accounting rules eliminates a major impediment to corporate adoption of Bitcoin as a treasury asset. Like I said, guys, this is a 20-25 thing, but this is going to give those CFOs and risk managers a long time to actually consider this. And then James Lavish, I just want to point out, he did an incredible threat on this. If you're looking to have it explain to you, I think in more layman's terms, this is the thread you want to go to. Now, listen, I think we all are clear on that one. This next story, we had to effectively like rope in five different things because this is everything gray scale at the moment and it's a monster headache in my opinion.

But the first one that I went, I think went completely unnoticed as part of the Genesis story is they're shuddering their crypto trading desk for the U.S. market. This is their OTC trading desk. I'm going to be honest with you, Nathaniel, I didn't know that they still had a trading desk. Yeah, I think that's why the story went unnoticed because people would have assumed it was just gone already. Right. But I really thought that in their bankruptcy, they had capitulated and that their business had basically wound down, but apparently they were still a major player. And this is important because this is how huge entities largely buy and sell Bitcoin, right? They're not going on Coinbase and placing a bunch of bits.

Michael Saylor might be honestly. But most of them do this through institutional OTC deaths. And this could leave a gaping hole. I mean, Max Boone, who I love said, so Genesis trading stops trading why. And no one on crypto Twitter is commenting on it. But at the same time, we see the news, Coinbase begins offering crypto loans to large, US institutional investors. That's the other side of Genesis's business, but clearly Coinbase is stepping in to try to fill this Genesis vacuum. Yeah, I mean, it is a big loss to have sort of

a prime brokerage-esque service, you know, the most notable one totally decommissioned. But at the same time, you know, you have to think that any institution worth its salt, any investor worth at Salt saw the writing on the wall, you know, basically probably as soon as withdrawals started being halted in November and started making other plans. So even if there was still business going through there, you have to think that some of that was starting to shift. It does leave a vacuum, but, you know, nature abhors a vacuum and so to crypto markets. And especially with so many institutions now lurking around the edges of the space, building infrastructure for it, you have to think that that's, that gap is going to be filled by more than just crypto-native companies like

Coinbase real, real soon. Yeah, I think we all know that it's going to be the BNY Melons and the JP Morgans. I mean, we already talked about at the very beginning that that was an honorable mention because I think we need to see more from that story. But this isn't all that's going on with Genesis at the moment, right? So Genesis global capital files for over 600 million in unpaid DCG loans, court talks.

To be clear for anyone who doesn't understand this story, Genesis is a subsidiary of DCG, much like CoinDesk is, which is being sold for pennies on the dollar, much like Grayscale is, obviously, who have the Grayscale Bitcoin trust. But this is basically DCG taking a loan from Genesis, their own company. Genesis now suing them because they didn't pay back that loan, suing themselves for a loan that they took from themselves, that they failed to pay back to themselves.

So they correct summary of this. Yeah, were you able to, one thing that I didn't notice that I had been looking for was the crypto legal court to explain to what extent this was procedural and and sort of something that was not necessarily expected, but made sense in the context of bankruptcy and might actually be sort of all part of the process versus something that really suggested a huge riff or a breakage within within these firms. It seemed more like the latter. But my first instinct with legal stuff, especially with someone as savvy at operations as Barry Silbert is that there may be, you know, some normal process around it.

But I can really figure that out. Yeah. So we dug in a bit on Twitter spaces actually sort of as this news was coming out. David Bailey obviously is an activist around GBTC. And we had a few of the lawyers who were involved. And I think it's a bit of both, to be honest. So when it says Genesis is suing DCG, knowing that Genesis is in bankruptcy, means this is the lawyers who have taken over the bankruptcy for Genesis, right?

We keep seeing the same thing. We keep seeing these stories of Alameda doing things and FTX doing things, but that's not the original, obviously, executives of the entities making those decisions. So, yes, I think a part of this is trying to claw back some money basically for Genesis creditors. But by the way, apparently getting rid of their OTC desk also makes that much more impossible, much less possible, which was in that first story. But a lot of this is definitely trying to figure out whether what DCG did and Barry Silbert, who is obviously very smart, was fraud or not. And that's why the FBI is looking into this.

That's why the Winklevye are sort of raising the red flags. I mean, you think about this. Barry Silbert and DCG, they knew Genesis was going to be bankrupt, but still took a massive loan after knowing that. Right. It was basically a piggy bank. And if you look at the terms of this loan, it's basically no very low interest. And the interest didn't need to be paid until the entire settlement of the loan at the very end of the loan. So no payments during.

So I think it's just a little bit suspect. I don't like to go tin hat. But basically it seems that there's no real wall between these companies. And it was basically the piggy bank for DCG when they saw Genesis in trouble to take some money. And I think that's probably going to emerge as the bigger story. Let me ask you a question, which takes this in a slightly different angle, but I think it's relevant. When FTX collapsed, the first few weeks, everyone was basically looking for other fallout, right? They were looking for dominoes.

And the big one was Genesis, right? That was the biggest sort of thing that seemed like a direct result. The other one that people have had, so subsequent to that, DCG and its potential failure, has been one of the two biggest going concerns, right? One of the big things that could knock the sort of industry off its rocker once again. I think that sort of towards the end of January, towards the beginning of February, especially when they announced sort of a provisional agreement, which ended up not being a provisional agreement, the DCG pressure started to come off a little bit.

The other big one is obviously finance. And, you know, on any given day, we could fill all five of these stories with the latest finance fund, right? It's just sort of the nature of the beast right now. It is. How my question, because there's a, there's a lot of speculation about this, how much actual damage to the industry do you think there would be in the context of whatever, the FBI actually going after DCG more? And by that, I mean, how much do you think the industry has sort of internalized and just sort of like, you know, almost cordoned off these things? You know, and maybe we can save the same question for finance for another week when we actually do that. But I'm interested in that debate because my suspicion is that the long period of time that the market has had to digest these possibilities makes them potentially a little bit less terrifying than they would have been if it all piled up, you know, call it December, January.

I agree 100%. I mean, we've even seen Binance market share basically go from 80% to 30% over the course of this year. The smaller they get, the less impactful their collapse will be. I think that that's fact. And I think that most serious people are not doing business with DCG based on the same sort of thinking. So to your point, I think the longer this happens for both Binance and DCG, the less impactful will be, especially if this pushes into just a natural next cycle. I found the tweet I was looking for, by the way, that just gives a pretty good quick summary of this from AP Abacus, who, you know, he gets all the insiders at the SEC and such. Update, attempting to keep it as simple as possible on DCG stuff. DCG knew 3AC was insolvent before anyone else bought their GBTC bags. If you guys remember, BlockFi and 3AC were the biggest holders of GBTC. DCG knew FTX was insolvent before anyone else.

DCG took out huge loans from themselves. Genesis is controlled by DCG. DCG knew Genesis was insolvent before anyone else. DCG knew that had forever to pay back billions and loads to a bankrupt Genesis, which they controlled. Bury DCG went all in on the GBDC and Gray Scale, again, a company they control, carry trade, and lost while also paying themselves huge fees. Incest at best, fraud at worst. So I mean, listen, I can't, you know, there's a lot of smoke.

That's how I'll say. There's a lot of smoke. I think it is also notable the degree to which the Winkle Vosses have just been, been comfortable going full scorched earth. That is a very costly strategy. It's costly to them. It's costly to the industry. which makes it more notable than just sort of, you know, a billionaire catfight.

Yeah. And so meanwhile, as we try to put a bow, which is impossible on everything DCG, the SEC should expeditiously approve GPDC conversion, says Grayscale. You have Michael Sunnenshine, the CEO of Grayscale saying that they're basically pushing for an immediate conversion to an ETF because, hey, why not we won? and then you have the actual filing here. So in the midst of all of this, another DCG subsidiary, which is Grayscale, GBTC, has won, as we know, against the SEC, and now are saying, listen, we want to get in, we want to meet with the SEC, sit down face to face, and we want this to happen right now, which I also find curious because,

frankly, the worst thing that can happen to DCG as a company is for GBTC to convert to an ETF. All of the money they're making is because GPTC is a closed-ended fund and a trust, and they're charging huge fees to do it. Those fees would go away with an ETCF conversion. Yeah, I mean, but that I think it has to reflect an assessment that the writing's on the wall and that that is going to be unwound some way or it's going to convert. And there's also a lot of psychological and market signaling that matters. You know, if Grayscale were able to get in there, get the first ETS,

that is a projection of strength when they are clearly, you know, digging under every couch cushion, trying to figure things out, and probably calling in every favor that they have, you know? So to the extent that their business looks, you know, like it's, it's rebooted in this very positive way sort of heading into a new cycle and a new era in crypto. I think that there's value there in terms of their ability to go get capital from elsewhere. So I don't know, maybe that's part of it, but who knows? I agree.

If you know that it's going to blow up one way or another and if somebody else gets the ETF that GBC effectively becomes completely useless. You need to shoot yourself in the foot and be the first one to get there and hope that the AUM that comes in because it's an ETF covers the income that you're losing from those fees. But this is a very, very dangerous game and very dangerous situation. And if you want to talk about, I've seen some, I think, bad takes, to be quite frank, a lot of people fear that if they get an ETF conversion and the fund opens, there would be massive selling pressure on the market because all of that Bitcoin unlocked in gray scale and GBTC would basically become available for selling pressure on the market,

but that does not really concern me. It's never played out like that. Every time those huge selling pressure is going to come, it never does. Bullish on locks is a phrase for a reason. It's just like this is a market that is entirely predicated on being the freest market that exists. It trades 24-7. It trades with fewer intermediaries and craziness than anywhere else.

And because of that, it's more volatile, but it's, it's open. So the fear of people being allowed to do what they're supposed to do is, is nuts. A, B, you know, the, if you talk to people who have spent this bear cycle interacting with institutional investors, I had Hannie Rochwan from 21 co, 21 shares on the, on the Bitcoin Builders show earlier this week. So he shared a stat that more than half of their funds are within five. of all-time highs in terms of the underlying coins held. So not in terms of the AUM from a U.S. dollar perspective, but in terms of how many Bitcoin are in the fund, how many ether in the

fund. And he said some of that is turnover of, you know, new people being able to smell blood and kind of take advantage of lower prices. But the majority of it is people just not being that freaked out and holding. And, you know, so the idea that somehow this one thing is going to, you know, open up a ton of Bitcoin, whatever. It's just, it never plays out like that. It seems unlikely. And even if it was, you know, whatever, you know, three days later. Yeah, exactly.

It's just there's there, there will be an entirely new category of people salivating to get Bitcoin at whatever new floor has just been created. And it'll, you know, maybe not bump right back up, but it's not going to be a long-term impairment. Yeah. Also, I have to imagine that a ton of the people who have had their. Bitcoin locked in GBT all this time are institutions and are hedged in one way or another. So they would be unwinding those hedges at the same time, which would effectively account for it. And there would be an immediate and massive arbitrage opportunity here, just like that cash and carry trade I just talked about that would probably cover this completely.

If there's a huge opportunity to buy or sell things at different prices on the same underlying asset, you can be guaranteed that the best traders in the world are going to find a way to exploit that, that that inefficiency is immediately going to be gone. So I agree with you. But you did just invoke 21 shares. If you had the conversation with them, then you're the man to lead this conversation. 21 shares in Kathy Woods, Ark file for first U.S. spot ether ETF. Man, the SEC is just under fire right now.

How many applications for how many different crypto products can they continue to reject? I think that there's a, the pressure. I mean, we talked about this last week, that there's an opportunity for the SEC to use the gray scale decision against them as a moment to sort of pivot, basically, and say, you know, we've never been against reasonably structured products, you know, here's a thing, right? I think that that's sort of part of what people are are smelling around, you know, a potential spot, E3TF as well. It's just that when you kind of take a step back and you assume that the broad take of sort of the mainstream regulator is what are reasonable protections, what are reasonable

products to be offered, things like spot Bitcoin ETFs and spot E3 ETFs look real reasonable, you know, especially as they have gone, you know, listen, we talked about this last week, too. All of the promoters of those products are taking up that narrative where they said, you know what? It wasn't the wrong call to push these things back in the past. The market has gotten a lot more sophisticated. We've got surveillance sharing agreements that, right? Like, they are making that argument even if the SEC isn't. And it's very clear that, you know, the judicial branch doesn't seem to have their back with sort of specious and novel legal arguments. And it doesn't seem likely that the way that policy gets made eventually when it gets made is going to be so strict as to deny or to have it makes sense to deny things like Bitcoin spot ETFs and ether spot ETFs.

I agree. And then of course, right when Kathy Wood, Arc 21 shares came in and filed, Vanek couldn't be left out of the party. They came in later the same day. It makes me wonder, you don't see a Bitcoin spot ETF, I mean, an Ethereum spot ETF filed for at all. Then all of a sudden you see two in one day. Is that coincidence? I literally have no idea, but it seems like it takes more than a couple hours to decide that you're going to file for something like this. How was Vannack right on their heels?

Lots of drawers with lots of applications ready to go that have been through the entire internal process. I mean, because this is such a weird, it is such a weird artifact where the broad, sense, which has been borne out, that ETFs have such a powerful first mover advantage. You know, I mean, we've seen it with gold and other ETFs where the first one to market just, you know, accrues much more than others. It feels like part of the strategy is just to have things. I mean, there's probably other crypto asset ETFs that are sitting in drawers, you know, applications that are waiting to go as well.

And it's just sort of a question of when is the right time to actually file them. Yeah. And from what I've heard speaking with James Seifert from Blue, Bloomberg, who's obviously one of their two ETF experts, the expectations seeing all of these filed is that, A, we know that they say 75% chance of a Bitcoin spot ETF approval by the end of the year. I still think that's aggressive, to be honest. But very, very likely that in October about a month from now, we will start to see Ethereum futures ETFs approved ahead of any of these other spot ones.

And that Valkyrie's Bitcoin Ethereum blended futures ETF that they applied for would likely be the first because it's the closest to the Bitcoin one. But it does seem that the SEC has almost no argument they can make against an Ethereum futures ETF because we already have the Bitcoin futures ETF. And by the way, at 2x leverage Bitcoin futures ETF. Yeah. No, I agree. I think, you know, I think at this point it's much more about politics and saving face than it is about rational decision making. I agree. And so coming into the last story, which is sort of our bucket of regulation and legal that we have happening here. CFTC goes after, I'm going to assume it's pronounced open, other defy operations in enforcement suite. Sweep, it was open, zero X and Derodex.

By the way, I was reading this article and I laughed because they said they had reached out to all of them for comment, but they couldn't find anyone at Derrdex to reach out to for comment. There was no human being that they could track down in all of their research as CoinDesk to find a single person who ran or even worked at this place. But these are small fines, 250,000, 200,000, and 100,000. But basically saying that these three offered illegal derivatives trading in the United States. So this is clearly saying, hey, you can't operate a leverage defy protocol in the United States. Obviously, we already saw sushi swap, which isn't leverage be attacked.

But this is sort of a statement, right? These are small, small settlements. but I think a huge statement on what these companies can and cannot do in the United States. Yeah, I mean, this is the playbook we've seen. Go after small actors, use it, hold it up as not only a win for sort of the politicking and the agency, but also as precedent that can be, you know, wrapped to other cases because these people aren't going to fight the case, right? So you sort of have these summary judgments that basically, you know, the SEC argues constitutes policymaking.

And this is this is the definition of regulation by enforcement when people use, that phrase is taking, you know, the agreement of parties that are admitting culpability or at least paying fines, even though they technically don't have to admit culpability and saying that that applies to everyone else as well. You know, they're, I think that the defy was always going to be a battle and there are, you know, it's going to take huge, huge discussions in Congress to figure out where those lines are. But the SEC is effectively, I think, shoring up their side of the argument with these sort of decisions as their sort of entree into that conversation. Right. Just to be clear, though, what makes this slightly different is I 100% true on the SEC.

These three are the CFTC, right? These are, they're not huge, no, but say these aren't huge multi-million settlements like the SEC goes for. But this is the CFTC getting in on the party saying that, hey, maybe, you know, doing a little bit of a regulation by enforcement works for us as Well, following me, Gary Gensler, let's attack Kim Kardashian, so no other celebrities do anything, playbook. The CFTC, you can kind of read through the comments how different folks have reacted to the events that have transpired over the last, you know, 12 months or whatever. And the CFTC clearly took umbrage with being associated with Sam as sort of FTX's preferred regulator. because there was a very distinct and, you know, serious uptick in aggression following FTCs that felt more from the comments sort of around it, you know, about sort of making a point that the CFTC wasn't some sort of pushover regulator. Now, that might have also been a political calculus because there is still jockeying for which regulator is going to actually kind of own these markets or, you know, different parts of the market.

and maybe they thought that they were impaired basically by that association as sort of the crypto industry's preferred regulator. So they had to sort of, you know, jump to. But again, there's just so, so much politicking involved versus, you know, just good faith's efforts to try to figure out the industry. Right. Maybe in this case also there's an element of the CFTC generally is viewed as the regulator for exchanges.

So it makes sense that these three would fall under the purview of the CFC. FTC, and I don't think, honestly, that anybody is going to attempt to offer leverage or derivatives trading in the United States now, even based on the three of these. So as quiet and small as they are, I think it's actually really big news. And the other thing I think that's really big news, how, speaking of the SEC, Library decides to fight. Blockchain firm files notice of appeal against SEC. Now, I think this is huge because Library lost and said, it's over, we're winding down, we're out of here, right? And literally said, we're not. going to be in business. And now, in my opinion, because they've seen Ripple win and they've

seen Grayscale win and there's now a roadmap to beating the SEC, they've decided to appeal and they can now make the case that, listen, if Ripple's a win, we should be a win. It feels like there has to, like, where is the money coming from to fight this case too? I mean, there has to be some external catalyst. I mean, look, the folks involved in that were very begrudging of it. I mean, you could see from the kind of. of ongoing social conversation that it was, I mean, it really laid bare this strategy of, of leaning on an actor that couldn't defend itself, you know, even though that they thought they had good legal things because it just would have been so expensive to fight. So, you know,

I wonder that there's sort of a, you know, a ghost of the machine who's now kind of come in as well to say, you know, here's the blank check to fight this. Yeah, I don't want to quote the numbers because they'll be wrong. But I seem to recall that libraries originally, penalty from the SEC was something like $20 million. And in a rare move, the SEC lowered it to $130,000 or something like that because Library had no money to even pay a penalty after this entire suit. So to your point, there's literally no way they could be appealing this. When the SEC has looked into their books, we all know that they have no money.

Where is that money coming from? I don't want a tinfoil had it, but somebody really wants Library to fight back against the SEC here. Listen, I'm for it. So good for them. I think we're all for it. Actually, right after this on spaces of Jeremy Kaufman from Library, who is, I don't know if you guys have ever listened to him, but he is about as big a character as you can get in crypto.

And he's going to join to talk about this. So I can't wait to hear him rail against the SEC once again. It's always good for a quality soundbite. But do you think that Library could actually win this? Do you think that there's, I mean, we're not lawyers, but do you think that the precedent now that's been set? could help them from these other cases? I think that, so one, there has to be a legal assessment that, yes, they can.

Or, you know, here's the other thing. It felt very much like they didn't even have the chance to fight it. There was no, it wasn't even a consideration at the time, even though they felt they had really strong arguments. The assessments that I've seen from other crypto legal folks were basically, it's a real bummer that this one got lost in the shuffle and that we weren't paying attention because there could have been a really good fight here. You know, it didn't seem like a slam dunk fight for the for the SEC in quite the same way that some of their others have been. So, you know, it may be that there's precedent. It may also just be that it's not so much precedent specifically in terms of what, you know, has come through rulings, but the fact that, you know, the demonstration that the courts are looking at things from first legal principles and actually,

understanding or trying to understand what's going on versus just sort of assuming that the SEC probably has it right and moving on with their day. Yeah, I think they probably got more money and better lawyers to be honest with you because they were sort of the first sacrificial lamb of the industry against the SEC, at least on a grand scale. And anyone who knew the story, Jeremy Kaufman from library literally was the first person who heard them say, come in and register, meet with us. He's told the story in my podcast. He went into the SEC, sat down with them, and basically gave them a full PowerPoint presentation on why he wanted to do what he was going to do. And then they just sued him outright for the release for the unregistered security offering.

So he literally presented it to them. I think Ripple spent $100 or $200 million defending themselves. Library spent, I don't want to quote numbers again, but something like five, right? They didn't have the money to do it. So they didn't have the war chest and they didn't have good legal representation and they made it much harder on themselves. So maybe they can come back and circle back. I see you deadly digging for something right now. So that's the other, I mean, well, the other thing that I was thinking about is that, you know, outside of just sort of a, you know, an external funder.

It also, it looks like Perkins Cooey is representing them. It could be a law firm that wants to, that thinks there's a really strong case and wants to, you know, make it. I mean, law firms do this all the time, right? If they think that there's an opportunity for a precedential case that they can, you know, sort of associate themselves with, it's very good for business. So I wouldn't be surprised if there's a piece of that going on. But again, you know, whatever combination of things it is, let's go. Yeah, people don't realize, I think, how common that is in the legal system, that a law firm will come in and do it pro bono so that they can make the case and make a name for themselves or that they effectively just take all the money from the settlement as a part of it. or that actually there's a huge business in the United States of private equity and venture capital type funds backing lawsuits.

And then the person who actually has the legal wins, quote unquote, ends up with like 5% of the money. It's actually a crazy story. Like it must have been in the 1980s. My dad invented disappearing sunblock. So like, you know, you would put it on for kids and it would be purple and then it would disappear. And now I can't remember it was Johnson and Johnson. And one of the huge companies just basically came out with it. And my dad said, I have the patent on it.

And he had this huge conglomerate that came in and backed the case. They won the case and my dad got nothing. Because it was like millions of dollars that people had to pay for the case. And he won and his patent was honored. And yay, right? So principle was a pretty, pretty crazy story. That's it. We went through all five.

We knocked it out in about 40 minutes. Pretty impressive, I would say. I mean, we had the honorable mentions. I know that you have a show coming out today on the IMF. if you have just the quick brief highlights of that, because I think that news has gone largely unmiss. People can just listen to the breakdown and hear it. Yeah, no. I mean, the TLDR is that the IMF came out and the Financial Stability Board, I think, came out with a paper that was requested by the G20, which is currently being, you know,

chaired by India as part of an upcoming meeting that's meant to be sort of a comprehensive set of recommendations around crypto asset, you know, rules of the rules of the road effectively. And so it's almost think of it like an updated summary document of positions. So this is something that the, you know, member states could view and see sort of what these institutional bodies or international bodies rather think are the ways to think about these issues, where the risks are, where the opportunities are. Things that stand out are one, very much a continued nervousness around stable coins. There are a number of parts of it that are basically argue that stable coins are going to be the fastest transmission mechanism for volatility within

the crypto space to move over to the traditional financial world. You know, I think that people who pay attention to this are probably rightly skeptical of the concern around stable coins as opposed to CBDCs, you know, from these international bodies. But that was one piece is sort of more of a, more of the same, I would say. The piece that was picked up on, and I think rightly so, was that there's an acknowledgement in the report that outright bans are very unlikely to work and that, you know, like water flowing, it's just going to move somewhere else. And so to the extent that you're, I mean, they're talking to the G20. They're talking about international cooperation and international norms. A ban of, you know, sort of outright ban of activities in one area is likely just push it to

some other area. And so there's a shift in tactics to very sort of targeted regulatory, you know, actions. So they point to, you know, Dubai rules against privacy coins. and a couple other things. So IMF is saying, despite our best wishes, it's not going to die. So, you know, probably get smarter about how you're going to try to target it. Yeah, absolutely.

To me, it just sounds like one of those, why ban it when you can try to control it type things? Yeah, but what do I do. Pretty much. All right, guys, that's all we got. Obviously, this will be available on my audio channels, and I'm assuming on yours and on your YouTube channel as well. If you guys want a better version of this,

you should probably go to his audio channels. because he'll do a much better intro. And we all know it'll be much more professional than whatever I come up with on the spot at the beginning. Thank you very much. I'm really coming to enjoy this. I see that in the comments, people are really enjoying it saying they're going to listen back twice, that they love the back and forth.

I think the format's great. And I can't wait to see how this continues to build, man. Thanks. I hope you have a wonderful rest of your Friday. Yep. Have a good weekend, everyone.