The Breakdown - The Newly Pro-Crypto SEC Gets a Running Start

Starting point is 00:00:00 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 Thursday, January 23rd, and today we are talking about the SEC, getting a move on. 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. Well, friends, the SEC is moving rapidly on from the Gensler era, getting a quick start on pro-crypto policy changes. The agency has specifically announced a formal crypto task force

Starting point is 00:00:47 dedicated to developing a framework for digital assets. What's more, the task force will be led by Cryptomomom herself, Commissioner Hester Perce, and includes a dedicated chief of staff and chief policy advisor. Fellow Republican Commissioner Mark Yuwita has been selected as acting chair while the agency awaits the confirmation of Paul Atkins. An SEC announcement said, The task force's focus will be to help the commission draw clear regulatory lines,

Starting point is 00:01:10 providing realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously. End quote. Short-term plans include hosting roundtable discussions to gather insights from the industry. The SEC also plans to coordinate with other federal agencies, particularly the CFTC, as well as state and international regulators. The SEC framed crypto policy as an agency-wide effort.

Starting point is 00:01:32 A statement said the ultimate goal was to, quote, set the SEC on a sensible regulatory path that respects the bounds of the law. It noted that, quote, to date, the SEC has relied primarily on enforcement actions to regulate crypto retroactively and reactively, often adopting novel and untested legal interpretations along the way. Clarity regarding who must register and practical solutions for those seeking to register have been elusive. The result has been confusion about what is legal, what creates an environment hostile to innovation, and conducive to fraud. The SEC can do better. Now these sentiments are nothing new from Republican commissioners. We also knew a big shakeup was coming at the SEC based on rumors in

Starting point is 00:02:06 the press over recent weeks. However, there is a significant difference between whispers in the news and a formal statement of policy change from the agency. This news also makes it clear that crypto is the number one priority at the SEC. Investment advisor Doug Bonaparte tweeted, We went from a seemingly anti-crypto SEC to a pro-crypto one virtually overnight. Who's excited? When Zach Guzman discussed forthcoming changes at the SEC with Hester Perce back in December, she had a three-phase plan of action. First was to establish this task force on day one, mission accomplished, next was the goal of removing as many of the enforcement actions as possible. Per said the aim was to stop the SEC being a topic of conversation at crypto conferences,

Starting point is 00:02:43 adding, I want people to get to the point where they're spending their time talking about the technology and its potential. The final stage was allowing crypto-financial products to become more crypto-native and better for investors. This included allowing in-kind redemptions for the Bitcoin ETFs and staking for the Ethereum ETFs. It appears that steps to are already being taken to wind down enforcement actions. The SEC Commission had a closed-door meeting scheduled for today, with the agenda exclusively focused on the settlement and resolution of various types of enforcement actions and litigation. Without a three-person majority to pass votes, the commission is a bit limited in what it can achieve at the moment. For example, the SEC can't

Starting point is 00:03:16 settle any litigation without putting the issue to a vote. Still, it seems as though all practical steps are being taken to get the process in motion. For crypto lawyers, this is everything they've been asking for. Rebecca Reddick, the head of legal at Gito Labs wrote, the tide keeps turning. Commissioner Hester Purse has been thoughtful on crypto for years. Now she's leading the SEC's regulatory efforts on crypto through a new task force. The priorities are on point, grateful for the leadership from acting Chair Ueda on this. Reddick summarized those priorities as one, providing clarity on who must register, two, designing realistic paths to registration, three, creating disclosure frameworks for tokens, and four, halting regulation by enforcement.

Starting point is 00:03:53 She commented, this is literally the industry's wish list for thoughtful regulations. Indeed, the announcement seems to be beyond industry expectations. Eric Turner, CEO of Masari wrote, If you asked me for a best-case prediction for the SEC this time last year, I couldn't have imagined a crypto task force led by Hester Perce. We've done a complete 180. Now, one of the early decisions we can expect from the permissive SEC is a range of ETF approvals. The agency can approve ETFs at the staff level without the need for a commissioner vote, as we saw with the launch of Spot Ethereum ETFs. Asset managers have inundated the SEC with ETF applications, betting that they will be waived through under this administration.

Starting point is 00:04:29 This started early, with Bitwise, Canary, and 21 shares filing for Solana, ripple, and several other major all-coin funds in November. The list accelerated in the past week, more than doubling to over 30 applications. Bloomberg's Eric Balcunas tweeted, Kensler wasn't even out of the building for five minutes in the ETF industry unloaded a massive crypto-filing frenzy. So far, there's nothing from the major Trad-Fi players like BlackRock and Fidelity. However, BitWise is in the game with four applications on deck,

Starting point is 00:04:52 including an ETF conversion for their top-10 crypto index fund. ProShares has also filed for futures-based Solana and Ripple ETFs, which is a little odd given regulated futures markets for those two coins don't currently exist. However, yesterday the CME added a page to their website introducing Sol and XRP futures. The page said the markets would go live on February 10th pending regulatory approval. It was taken down by the evening with a CME spokesperson confirming the page was real, but saying that no decision had been made on whether or not to launch the markets. In the path, regulated futures were viewed as a pathway to listing spot ETFs, but who knows what guidelines the new SEC will set. For the rest of the pack,

Starting point is 00:05:27 one of the interesting ones is the light coin ETF. Due to the token being a Bitcoin fork, it presumably has some of the lowest barriers to being approved. Canary funds also updated their filing late last week, and remember, we saw updates to the Bitcoin ETFs in the months leading to approval. Bloomberg ETF analyst James Safart suggested this quote might be indicative of SEC engagement on the filing. On the complete opposite end of the spectrum, some ETF issuers are trying their luck with meme coin funds. Yesterday, Bitwise, registered a Dogecoin trust in preparation for an ETF filing, and it appears that coin shares also registered a Dogecoin trust in December, but that went under the radar until now. For some, this seemed inevitable. Back in November,

Starting point is 00:06:04 Eric Baucus commented, today's satire is tomorrow's ETF? You could ask yourself, is DojaBridge too far, and I would say, we'll see. I think someone's going to try it because why not? Even farther out on the spectrum is a trio of filings from Rex Osprey. They've also filed for a Doge ETF but added an for Bonk and the newly launched Trump meme coin. While Rex isn't a massive issuer, Balcunas vouched for them as a serious player, commenting, worth noting the main guy behind Rex isn't some rando come-lately issuer, but rather an early pioneer in the industry with decades of experience. He birthed VXX and a bunch of other ETFs. To be clear, most of these ETFs aren't even out of the starting blocks on the

Starting point is 00:06:39 path to being approved, so don't expect anything for the next few months at least. Only a dozen of the funds have filed accompanying 19B4 paperwork, which is required before the SEC even considers whether they should be approved. The agency can also delay their decisions well into the second half of the year, as we saw with the lengthy Bitcoin ETF process. Still, this looks like asset managers are positioning to get as many crypto ETFs launch as possible this year. Nate Garassi, the president of the ETF store commented, Gary Gensler always referred to crypto as the Wild West. Under the Trump administration, I think that's exactly what we'll get from an ETF perspective. Literally anything is possible. Make of this what you will.

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Starting point is 00:07:45 don't trust verify. Check out Ledin's trust pilot or their reviews on social media. And to learn more about what your Bitcoin can do for you, check out leaden.io slash borrowing. That's LEDN.com.com. Please visit leaden.com slash legal for product terms and disclosures. Product availability varies by jurisdiction. Over on Wall Street, meanwhile, crypto has become a major focal point. Goldman Sachs, CEO David Solomon spoke with CNBC's Squawk Box live from Davos on Wednesday with Bitcoin policy a key point of discussion. Solomon said, well, first, you know, we've had this conversation a number of times. The underlying technology is something we spend a lot of time on. It's something that we're

Starting point is 00:08:22 utilizing and testing to create less friction in the financial system. Super important. So, more of the same, the standard blockchain, not Bitcoin script. However, when discussing the Bitcoin's strategic reserve, Solomon commented, at the end of the day, I'm a big believer in the U.S. dollar. Bitcoin is a speculative asset, an interesting speculative asset. I don't think there's a lot more to ask about this, though. I do not think Bitcoin is a threat to the U.S. dollar. Others might, but I don't see Bitcoin as a threat to the U.S. dollar. Again, not wildly out of the ordinary from the Goldman Sachs executive, but still a slight shift in tone. Basically, it's clear that banking executives can no longer

Starting point is 00:08:53 dismiss Bitcoin from their macro framework. Regardless of how they think about it, Bitcoin is now an asset where bankers need to have a clear position. Meanwhile, BlackRock CEO, Larry Fink, has somehow managed to get even more bullish on Bitcoin and tokenization. In a Bloomberg interview from Davos, Fink discussed the Bitcoin adoption he's seeing, commenting, I was with the sovereign wealth fund during this week, and that was the conversation. Should we have a 2% allocation? Should we have a 5% allocation? If everyone adopted that conversation, it would be 500,000, 600,000, 700,000 per Bitcoin. Seeming to catch himself, giving a price target contrary to SEC rules, he added, I'm not promoting it, by the way. That is not my promotion. Over the past six months,

Starting point is 00:09:28 Fink and BlackRock have been filling out their narrative around Bitcoin. They began to communicate major talking points to their clients, making it clear they view Bitcoin as a store of value rather than a speculative asset. Fink pushed this narrative further, stating, If you're frightened of the debasement of your currency or you're frightened of your economic or political stability of your country, you can have an internationally based instrument called Bitcoin that will overcome those local fears. So I'm a big believer in the utilization of that as an instrument. For what it's worth, Fink also said that he doesn't believe inflation is commenting, the biggest risk we have worldwide today is the world believes we are past the high

Starting point is 00:09:57 point of inflation. I could truly see a scenario where we are going to have elevated inflation. Fink is also wildly optimistic about asset tokenization. He said, I believe we're going to be in the cutting edge of tokenizing bonds and stocks. We have the technology now. The fact we are not moving forward in tokenizing every bond in stock is crazy. He added that asset tokenization would, quote, democratize investing in ways we can't imagine. For some in the crypto universe, this was music to their ears. Robert Leshner, the CEO of Superstate tweeted, I want to live in a world where tokenization moves 100 trillion from spreadsheets into defy. Chow Wang of Alliance Dow commented, the tokenization of everything was always bound to happen, but it did require a substantial

Starting point is 00:10:32 shift in consumer psychology and behavior before it could happen. Trump coin has blown that over window wide open. Overall, crypto was a major topic across Davos this week. Bank of America, CEO Brian Moynihan confirmed that banks are ready to push forward with adoption as soon as they get the green light. He said, if the rules come in and make it a real thing, you can actually do business with, you'll find that the banking system will come on hard on the transactional side of it. If you can go down the street here and you can go and buy lunch, you can pay with Visa MasterCard, a debit card, Apple Pay, etc. This would just be another form of payment. We have hundreds of patents on blockchain already. We know how to enter the field. That's perhaps

Starting point is 00:11:05 not the revolutionary crypto banking product many anticipate, but it demonstrates that Wall Street knows they need to be ready to participate. On a separate panel, Coinbase CEO Brian Armstrong was present to discuss the need for sovereigns to adopt Bitcoin as a reserve asset. When the governor of the South African Central Bank wasn't convinced, stating, I would have a significant problem with the lobby that says government should hold this asset or that asset without understanding what the strategic intent of government is. Armstrong responded, throughout history, various items have served as money. This is still maybe a new idea, but I think it's clear at this point that Bitcoin is a better form of money than gold. It's provably scarce like gold, but it's more portable and divisible,

Starting point is 00:11:38 so has higher utility. It was the best performing asset of the last 10 years. So for store of value, I think it's going to be important for governments to hold this over time. It might start with being 1% of their reserves, but I think over time it will come to be equal to or greater than gold reserves. Now, to put these comments in greater context, the South African Central Bank clearly understands the benefit of holding gold, considering they maintain around 125 tons of the metal worth around $10 billion. And for those who have been listening for a while, you might recognize that while digital assets in general are nothing new at Davos, crypto having been a mainstay of the conference for years, it is very clear that Bitcoin

Starting point is 00:12:10 specifically is much more of a conversation point than it has been in the past. In fact, historically, Davos has been our annual chance to update the blockchain-not-bitcoin narrative, and that's just not exactly what happened this year. Pretty interesting stuff coming out of that event, but for now, that is going to do it for today's episode of The Breakdown. Appreciate you listening as always, and until next time, be safe and take care of each other. Peace.

The Breakdown - The Newly Pro-Crypto SEC Gets a Running Start

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