The Wolf Of All Streets - $1 Million Bitcoin, Binance, QE Infinity | James Lavish, Preston Pysh, Jon Najarian, Greg Foss, Lawrence Lepard, Paul Grewal

Episode Date: March 28, 2023

Podcast version of Twitter Spaces with James Lavish, Preston Pysh, Jon Najarian, Greg Foss, Lawrence Lepard, and Paul Grewal. ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►BITGET GET UP TO A $8,000 BONUS IN USDT AND GET MASSIVE DISCOUNTS ON TRADING FEES! 👉 https://thewolfofallstreets.info/bitget    ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

you guys may have seen that just announced of course we have uh Preston Fish, Lawrence Foss, James Lavish says you've requested. I believe I had you as a speaker. And John Najarian joining. And then later around noon, I'm going to have Paul Graywall from Coinbase joining as well to discuss everything that's been going on there. So that should be pretty incredible. He is the chief legal officer at Coinbase.

So I think we have most people up. We're going to go ahead and try to get started. So listen, there's a lot to cover today, obviously. We have the Binance action with the CFTC, Coinbase's action, which we'll leave to later. But first, because of this specific panel and who we have brought up, I want to talk about banks because it seems that, as usual with the manic news cycle in the United States and in the world, things get forgotten very quickly. And in my very humble opinion, this issue is nowhere even remotely close to being finished

with or over. And so I want to talk about the BTFP program, what that actually means, whether that is or is not QE infinity, and what we can look forward to in banks. James Lavish, so first of all, I want to start with you because you literally laid this entire thing out in your newsletter just a few days ago. What BTFP is, if you can give the very quick, I think for people, TLDR, exactly what it is and what it means, and then we can get into the debate that seems to be raging as to whether it is a form of QE, whether it is not, whether we're being hyperbolic about it and what this means for money printing and spending. And then Lawrence, I see you have your hand up. We'll go to you right after, James.

Take it away. Hey, man. All right. Awesome, Scott. You guys can hear me? Yeah, we hear you great. All right. Awesome, Scott. You guys can hear me? Yeah, we hear you great. All right. Awesome. So thank you for having me. And I appreciate you having us all up here. So what is BTFP? Well, it's the new program that the Fed and the Treasury put together in order to help kind of backstop the banks in the United States and stop the bleed, so to speak. So what it stands for is Bank Term Funding Program. And its purpose is to, it's just to allow the Fed to provide liquidity to banks who can't find it themselves. And when they, if they're underfunded due to the large and sudden customer deposit withdrawals uh against the large and sudden increases in the fed funds rate so

why does that matter i'll go through this super quickly um but basically for those who don't know what happened to SVB, Silicon Valley Bank, basically they owned bonds that had long duration, which means that they had interest rate risk. And those interest rate risks came home to roost when the Fed raised rates at a meteoric level or rate. And so when their deposit, their deposit base, which they put in their reserves, was put into treasuries, those treasuries were impaired. And so when customers wanted their deposits back, they had to sell treasuries for a tremendous loss. And that just, it became so bad that they were insolvent. So that's the basic premise of what happened. And what the BTFP does is it opens a window, right? So you normally have a discount window, and Greg and I have talked about this a bunch.

Greg can go into this in much greater detail, but basically the discount window is when you're a bank, you're a commercial bank, and you need capital, you go to that window and you need capital, you go to that bank, you go to that window and you borrow basically from the Fed. And it's got, it used to have a really, really big, bad stigma to it. It's different than the overnight window where you borrow from other banks. This is where no other bank will even lend to you. You need money. It's the lender of last resort. So, but in the BTFP, what's important about it is that when you go and you you ask for capital, you put up collateral.

But that collateral is the things that are being accepted right now are high quality mortgage backed securities and U.S. Treasuries. And so but here's the important thing. There's no haircut, meaning you can borrow up to 100% of the collateral. The collateral is valued at par, not market value, which means that you don't have to worry about the fact that it's impaired by 20, 30%. You can borrow about 100% of that, and we'll get into why that's important in a second here. The rate for borrowing is the one year overnight swap rate, which is OIS plus 10 basis points, which if you look at the if you look at the yield curve right now, that's it. It's so it's so steeply inverted that it's basically, you know, 50 basis points, half a percent cheaper than if you were to borrow at the Fed funds rate or the overnight rate. So there's no prepayment penalty. The loan term is for a year, and there's no transaction fee.

So basically what this means is if you have $100 million of U.S. treasuries and you go into that window to borrow on it, then if you were borrowing in the discount window, you would take a haircut and you would only be able to borrow against the market value, which is, let's say, $700 million. If you had a billion dollars that you were trying to borrow against, you would be able to borrow $700 million. But you take that haircut on top of that market value. So now you only have $665 million you can borrow against. But if you go and borrow in the BTFP window, you can borrow against a full billion dollars. So the difference is $335 million,

which is about 50%. So this is why when everybody's trying to debate whether this is QE or not, whether this is adding liquidity or it's not, it's going on the Fed's balance sheet. It is adding liquidity that would not otherwise be there. It's a 50% increase in available capital that would not be there for that bank to either shore up its own capital and give that give that capital out to depositors who are asking for return of their deposits or to lend against you know if you're a big bank you can go in there and borrow and uh and borrow on the market on the uh on the par value of your treasuries and uh and just you know increase your your business so um it's uh the other thing that's really important about it is that it's all confidential

for at least one year after the program ends. So you can borrow. There's no stigma. If you're JP Morgan, you can go borrow a couple hundred billion dollars. And that's why some reports from the big banks are coming out saying they think that this program is going to grow to over $2 trillion

because there's no stigma. It's kind of a sweetheart deal and uh you know as much as if something was needed that this is uh it's just insane that this is where we've gotten to so that's kind of the the overview of it that was long but hope that gives you an idea all right go ahead so you have your hand up yeah Yeah, thanks, Scott. Thanks for having me up. Yeah, James nailed it on the description. Let me kind of come at it a slightly different way. No matter what you call it, the big takeaway for me here is that, you know, people are losing confidence in the system and they should be. And let me explain what happened. I mean, when Silicon Valley Bank, you know, had the bank run and got taken over by the FDIC, it's very clear what should happen next. Dodd-Frank prevents banks from being bailed out. And Janet Yellen even came out

on the morning, on Sunday morning, at Meet the Press and said, you know, the Dodd-Frank law prevents us from bailing out the banks. And so we're not going to bail out the banks. And so what should have happened is the FDIC should have taken it over and they should have done an orderly liquidation where they tried to sell the bank. But if you looked at the balance sheet, the hole was somewhere between 10 and 30 billion dollars in terms of asset values against liabilities. And no one wanted to buy it. And so they recognized the contagion was going to take place. And there was going to be, you know, they're going to be widespread bank runs and a real problem. So they basically broke black letter law. Black letter law said on monday morning fdic should have owned the bank and should have slowly but surely liquidated all the assets and all the depositors the 170

billion dollars of depositors should have taken a haircut they should have been haircutted somewhere between you know the 10 and the 30 billion dollars of losses so you know they would have gotten 80 cents on the dollar whatever the math is and they didn't do that. And then, of course, they said it wasn't a bailout. They said it wasn't going to cost the taxpayers. And they said it wasn't QE. And those were all three, you know, lies, basically, because it clearly was a bailout. The bank would have failed if it had not done it. And FDIC would have had to take it over.

There would have been haircuts. And so, you know, I guess the point I'm trying to get at that I think is most important here is that people are losing credibility in the system and they should. I mean, we all know they should, but others are as well. And moves like this on the, you know, on the part of the people running it. I mean, they're, they're, they're, I said in another space is they're unforced errors. It's like announcing all the swap lines that they announced on Sunday night before Credit Suisse. I mean, these are the kinds of things that send shivers through all of the major institutional investors all over the world. And everybody who has capital invested in anywhere in the world starts thinking, what should I do? How should I manage this money?

Where should I go? I mean, stunning what's happening. Forty two billion dollars went out the door at Silicon Valley Bank in one day. I mean, this isn't the Bailey Savings and Loan, right? I mean, this stuff is happening really, really quickly. I mean, the movie I think is so great on this. I recommend everybody go back and watch his margin call. I mean, it's just it's incredible how quickly this stuff is unfolding. So I'll leave it there. Just to play devil's advocate, you know that I obviously agree with you. So this is unprecedented move, as you said, but if they had not backstopped or done anything for Silicon Valley Bank, seeing as in the era of social media and the fast dissemination of information, to your point, 42 billion out the door in 24 hours, basically because a few VCs got panicked.

What would have prevented massive bank runs on effectively every regional bank? Or I guess, what should they have done? I know that according to Dodd-Frank, they should have just taken the haircut. But wouldn't that have probably sent everyone running from the hills from every comparable regional bank? Very possibly. And I'm not saying I've got the right policy response. I mean, they probably had to do it. And in some ways, maybe we should all be glad they did it. But they shouldn't lie to us and tell us that it wasn't a bailout and that they should point out that they broke the law. And, you know, I mean, people ask me, what would you do if you were Jerome Powell? I mean, I'd resign. I mean, you know, the system is horribly broken and we need to you know, we need to fix it along many, many lines.

I mean, whether you know whether you're going to let something like this, you know, cause contagion. I mean, that's that's a decision that's above my pay grade. Right. But and so I completely agree with your point, Scott. But I'm saying, you know, let's not call it something it's not. Yeah, I mean, I'm making a fair point, but that would be sort of ignoring the fact that they put us in this position with fractional reserve banking in the first place and that the structure of how it's built basically means that a bank run is impossible to defend. Foss, please go ahead. Well, that's exactly right, Scott. Thanks for having me. And Lawrence, well said. Look, the problem is that banks are the transfer mechanism for the fiat Ponzi. The reality is when you're 20 to 25 times levered to your equity capital base, you are using 95 cents of every loan

dollar or every dollar you loan. 95ety five cents of it is depositors money and only five cents is your equity absorb your risk absorbing equity base. OK, that's the nature of banking. So you don't you know, you can't change that, Scott. And I would agree with you that the Fed did what they had to do to restore a degree of confidence because I think there would have been a nationwide bank run. And that's the reality, though, people. So understand that this is the system that the way it's built. And there are banks that are too big to fail. And that's what the depositors, the confidence of depositors rely on. So James gave a great description. Let's just say this, you can call it what you want, but if it walks like a duck and quacks like a duck,

chances are it's a duck. And this thing is QE infinity because it's the only solution to the fiat Ponzi. The fiat Ponzi is built on debt, and the debt burden is growing faster than the ability of tax receipts to keep up with it. Why is that? Because debt is about four times as large as the entire global economy, which means to say your interest coupon or your interest expense will always exceed the growth of the economy. That means that fis will debase with

100% certainty. It also means that banking requires the backstop of the central banks in order to maintain that confidence in the system. And I'll just say this, BTFP, it doesn't stand for whatever James said. It stands for backstop the Fiat Ponzi. OK, it's that simple. It's designed this way, guys, because that's what fractional reserve banking is. And Duration bond prices falling because of interest rate risk, not because of credit risk. And that could be the next shoe to fall is the credit risk concerns. And the banks, Scott, are wholly undercapitalized for their credit risk exposure now because they've just blown a hole in their equity base

due to duration mismatch or interest rate risk. So it's not a pretty picture. We are in the first innings. If you drew a parallel to the 2007 financial crisis, 2007 to 2009, we are still in the year 2007, in my opinion. I hope I'm wrong. I do not want this to turn into a full blown 2009 great financial crisis. But why wouldn't it if the system has never been changed from back in those days, except one thing, there's more leverage in the system now, which is to say, risk happens faster. Thanks, Scott. In the past, when we've seen QE infinity, that's seen markets raging. So is this the same sort of brand of QE that we would expect then for the bottom to be on everything and to see a massive run? Because that's obviously not what

we saw in 2007 or 2008. No, that's right. Well, look, 2007 through 2009 was QE and it turned into QE infinity, but it had to put out a whole bunch of fires first. And, you know, the system would have collapsed and the S&P bottomed at 666. I know the sign of the devil. It doesn't matter. The S&P would have bottomed at zero. Okay. Let's be clear. Just because you're doing QE doesn't remove risk from the system. Multiples and valuations contract when credit concerns increase, which means discount rates increase, which means the value of those cash flows or the multiples go down. So would the S&P have bottomed? Yeah, it probably would have bottomed right around zero. And I know John Najarian is on stage here and I'm not trying to talk about, you know,

an equity book versus a debt book. But right now we are in a credit situation. And as credit risk increases, discount rates also increase. And when discount rates increase, the valuation of cash flows goes lower. And when the valuation of cash flows goes lower, everything else being equal, stock prices go down, fire after they'd done QE infinity. So this is a real mess. And it doesn't mean that stock prices can't go down, even if they're doing QE infinity, and in particular, financial stock prices. That's the biggest mismark in the market right now, are people who own financials and have no clue as to the leverage and the risk to which they are exposed. Just my two sats from Canada. A few quick points. A, for all the speakers, feel free to jump in. You do not need to wait for me at any point if you have something to say. And

for everyone else, hit that little arrow up top and share this so we can get more people in the room. John, I believe we summoned you. I heard your name, which means you get to go next. Oh, cool. Well, thank you, Scott. And thank you for the kids. What I pay attention to right here, guys, is the credit default swaps. Because as you guys know, or if you don't, you'll learn it in 10 seconds. Insurance for credit is basically done through these credit default swaps. So what that means is that you have insurance that becomes more expensive for people because we've got issues. We've got stocks blowing up. There's a whole host of reasons. But when people are afraid, they generally go for put options.

Hey, John, we're losing you. Okay, go ahead. You're back. Go ahead. seems we uh lost john there preston you're the uh you've been the last man standing here waiting waiting patiently i'm really curious as to what you think as to whether this is a form of qe uh or whether it is not in fact that i mean i think we're all pretty much in consensus but i'm sure you have your your take on it yeah i would just uh i would go a little bit further than just saying it's qe and i would say that it's it's a form it's not exactly yield curve control but it's a form of yield curve control uh because they're they're effectively saying the yields or the prices aren't going to go any lower than this. So James gave a great roll up talking about like the rates that they're borrowing against and whatnot.

So like if I was just going to provide like a really simple example for people to understand, let's say you had a balance sheet and you had, you know, bonds sitting on your balance sheet. You bought those bonds for a hundred bucks. Now they're at $85 and you got all these people trying to withdraw withdraw funds out of your out of your bank. You have to sell that. You can't you can't do anything but sell that to come up with the cash in order to pay back the depositors. So that's where these banks are are stuck because they have to sell at eighty five dollars and they bought it for 100. And that's that's where the quandary comes from.

So by them stepping in and providing this facility, they're basically saying the price, the price isn't eighty five dollars. It's basically ninety five dollars after you account for the interest rate that they're borrowing at. So they're basically bumping up the value of everything at ninety five. And they're saying it's not going to go it it's not going to go any lower than 95. And anybody who's having issues with it being lower than, than 95 can come to us and we'll provide the liquidity that you need so that it doesn't go any lower than that. That's, that's what's happening. So whatever anybody wants to call that, feel free to call it whatever you think it is.

I know there was, you know, most debates are over the terminology difference in my head versus the other person's head. But the reality of it is, is they're backstopping the prices. They're backstopping the yields. And they're most importantly, they're manipulating markets yet again. And that's the key point. When you manipulate markets, what you do is you continue to erode the trust of the participants in that system. Whether they understand how it's happening, what's happening, the erosion of trust will continue to break down as long as they keep stepping in with a bigger and bigger tool to continue to manipulate the markets. Because when you don't have free and open markets,

you're going to destroy the trust of society and the instrument that's underlying all of it, which is the U.S. dollar and any other fiat currency. So I guess the question is then what is that timeline? Because it seems that this is a game that the government or the Fed, any agency effectively has played forever, right? And at what point do you think there's a tipping point where the mainstream actually understands this? I mean, I find it very easy, obviously, for us to discuss this in what we would all argue is a bit of an echo chamber. Bitcoiners have gotten this for a very long time, right? This is nothing new. But when does your average person really experience that crisis of confidence where they start to panic

and start wondering where they can put their money? Preston, I'll let you finish up and then Greg. Yeah, so I would tell you, I think it's actually starting to happen now. I think it's ever since COVID, it's starting to pick up where more and more people are questioning what's actually happening. And they're not necessarily understanding the why.

Like they haven't come to the point where they figured out that it's actually the money that's causing these issues or the currency that's causing these issues. But they're quickly getting there. implement bigger and bigger tools like this, this buying, you know, this BTFP facility, as the tools get larger and larger to manipulate it, what what's actually starting to happen and like, and you saw this in Congress, where the the representative was talking to Janet Yellen, he says, at what point is is the debt to GDP load too big? And what you're finding is she has to purposely lie to continue to dupe elected officials, but what she can't dupe is just the pure math. And I know Greg keeps saying it's mathematic, and James is writing about debt spirals. And the reason that they're writing about it is because when Janet Yellen's response is we have some of the lowest real rates we've ever had in history, she is purposely lying, trying to mask the reality of the mathematics. And 48 percent interest rates for a negative two percent real interest rate. Right.

But that sure as hell does not solve the problem if you're dealing with 50 percent interest rates. And so this is the narrative that she that she was saying when she was testifying. Oh, well, I don't know that the debt to GDP load is all that bad. We're having some of the lowest real interest rates we've ever dealt with. But that's but that is a rope-a-doping the public, right? You can't rope-a-dope the math. And I think that they're actually experiencing a debt spiral here. And I think that I can't tell you, oh, it's going to be six months. I'm not dumb enough to say it's going to be the next 90 days and I'll bet you a million dollars, right? Like that's a fool's errand in my opinion, because as policymakers are making decisions, you are pulling the speed of this to the left

or to the right, depending on what the policy is that they're making up in the moment. And there's 12 people in a room that are making these policies and it's constantly sliding that timeline left and right. But I will tell you this, this is going down in the coming five years. Anybody who doesn't think it's happening in the coming five years is smoking crack. So well done. Well said. And John Najarian is back on stage, so I don't want to steal his thunder, but he did before he cut out, say, credit default swaps. Now that's from an equity guy or an options guy. OK, so congratulations, John. You're talking credit default swaps, which actually run the world. OK, so how do we know what's happening, Scott? Because people are actually quoting credit

default swap spreads for the first time in my 30 year history of trading credit. They're trying to figure out what it means because it tends to be an early warning system, right? We knew CSFB or Credit Suisse, rather, was going down about three years prior to it going down. The only thing that happened is its stock price bled down to close to zero over that entire period because the cost of insuring against default, which is equivalent to the cost of them funding their business, was increasing. And a bank doesn't work when you are paying more for your funds than you're able to charge on your loans. So always look at credit default swaps. That's how I view the system as people understanding the system. Preston says, I don't know, within five years, it's going to morph into a sovereign debt problem because it always gets kicked one level higher from the financial system to the sovereign debt

system. Preston, I actually think we have longer than five years. But what is Bitcoin? Bitcoin is credit default swap insurance on a basket of fiat with no counterparty risk. It's the most beautiful instrument ever designed to protect yourself against the fiat with no counterparty risk. It's the most beautiful instrument ever designed to protect yourself against the fiat Ponzi. So if you want to value Bitcoin, follow credit default swap spreads on sovereign debt and understand that is stupid cheap compared to the insurance that people are paying in the open market trad fi world right now. So watch credit default swaps, Scott, the US dollar and I'm Canadian is the best looking horse at the glue factory. That is good news, because Canada will fail 10 years before the USA does. And Preston, Canada hasn't failed yet, although we

have an incompetent prime minister who says stuff like the budget will balance itself. Well, we need to fail in about 10 years or we need to fail 10 years before the USA does. So my best estimate is the USA still has 10 years to go. Let's hope I'm wrong. Let's buy your Bitcoin. When I say let's hope I'm wrong. I don't want Canada to fail either, guys. The solution is Bitcoin. It's that simple. Go ahead, John. heaven. But anyway, Scott, what I was quickly saying about credit default swaps, and again, for the kids did a great job with that. But you basically have banks and other than people putting money on deposit at the banks, that's not the bank's money. But what banks do frequently is, of course, they raise money the same way many businesses do. And then people buy insurance on the bonds that they've bought for Credit Suisse or CSFB back in the day.

And when they buy that insurance, they're basically protecting against, of course, default for that bond. That bond is going to pay them because they have this insurance that if the company decides, well, we can't pay, that insurance is supposed to protect them. When that insurance becomes too dear, too expensive, just as was stated here, companies start to basically fail because they can no longer issue more debt because people that buy that debt want to insure it. And if they can't insure it through a CDS, then they go over to the options world and they try to do it over there. I think the overall feeling right now is insurance for virtually all of the non too big to fail banks in the U.S. is quite high. And when you see it going up that much, it means there's a banks in the U.S. is quite high. And when you see it going up that much,

it means there's a problem in the system. And as far as where we're going with the next leg of this, we need to see time pass so that we see some risk takers step into the market. Those are the people that sell puts. Those are the people that sell credit default swaps. And you just took out two of the bigger people that used to do that. Deutsche and Credit Suisse were two of the largest players in that market, both in the terms of puts that were sold in big quantities. I'm not talking 20 lots, 50 lots. We're talking 100,000 and up lots of puts, as well as billions of dollars worth of CDS or credit default swaps. So Deutsche, Paribas, SockGen, Credit Suisse, and UBS are some of the biggest players in that market. And you just took

two of them out effectively. Deutsche, I'm sure, can't get that through their board meetings anymore, that they're willing, that they're going to take on any more risk or they will lose counterparty exposure. They won't be able to lay stuff off to other parties. And so that's one of the big risks right now, Scott, that is being mitigated by time. And if they're lucky, by deposits and people buying their bonds yet again. But these have not been great bets in the past, and they're certainly not great bets at this kind of risk versus reward that we see in the markets right here. With that said, I'll toss it back to Scott and anybody else who needs to opine. Hey, John, you know, that's a good point about they need to sell bonds. And here's one of the

crazy things that just happened, right? So Credit Suisse gets backstopped or kind of rescued with a deal with Swiss Bank. And they turn around and they don't make the equity holders whole, but they do give them some sort of payout. And I think it was three and a half billion dollars. But the problem is they wiped out that AT1 credit, which means that that's an additional tier one capital, unsecured debt, and they wiped it out. Debt is supposed to always be above equity and claims, always. And so with pure manipulation, the Swiss National Bank, the bank that took control of this situation had just wiped out the debt holders over equity. And so that just, again, manipulation totally screws up the market. So if you look at the Deutsche Bank, you know, credit default swaps, the unsecured, the subordinated debt is that those default, those credit default swaps are trading at three times what the, what the the secure debt is and so there's a reason for that it's not just because it's more likely to default it's because it's more likely not to be backstopped

and so again the these central banks are are getting in there and manipulating shit and they're and they're and they're just turning stuff around to the point where now you should be able to go get some subordinated debt easier than you can raise equity you know but you're not going to because you've got again manipulated markets or just they're distorting everything and that goes back to larry's point and presson's point. He made it, you know, they said it so well, which is we are seeing a loss of confidence of the entire system, not just from depositors and citizens who are worried about their deposits winning out their backstop. It's from investors, too. They don't know where to turn and where to put their money because they don't know what the rules are anymore. The rules are changing every single day.

And that's one of the major problems that we're having. Hey, James, you know what I found really interesting with John said? And incidentally, like I've followed John for probably two decades, at least when he was a contributor on CNBC. I haven't seen him there anymore because I don't know if I don't watch CNBC anymore, but I'm not sure if John is there. But here's what I know. He said something that's very interesting from a credit guy's perspective. When you sell puts, OK, you're basically selling insurance, aren't you? So what is an insurance provider? Well, an insurance provider can be a seller of credit default swap protection, or it can be a seller of puts on the subordinate claim, which is the common stock.

Well, don't forget that there's lots of CDS traders out there who can actually sell protection on the senior debt and turn around and hedge themselves in the common stock, the subordinate claim, using either delta hedging by shorting outright the common stock or going to a option seller and buying that put option protection at a strike price from that seller. Now, he mentioned that CS is no longer in the markets for selling protection, whether it's CDS or put options, nor is Deutsche Bank. This just means that the gaps in buying protection will be more severe because there's not a balance of sellers and buyers, is there? one thing for sure, James, you're totally right that AT1 alternative tier one or COCO bonds, contingent convertible bonds, rewrote the claims, the priority of claims for capital contributors. Guess who's the biggest issuer of AT1 bonds on the planet? Oh, it's Deutsche Bank. Oh, I have exposure to Deutsche Bank in the form of these 81 bonds. And the regulators in Switzerland just zeroed me out to the tune of 17 billion while they rescued the equity guys, not rescued them. They gave them a de minimis return of three and a half billion to pay bonuses. Essentially, this is all the risks and risks happen faster now. And especially when there's not natural

sellers of protection, things gap wider. And when things gap wider, people get crushed. And that's where we are right now. It's the beginning innings. Think back to 2007. This is when Jim Cramer got on TV and had his little hissy fit that they have no idea how bad things are. Well, don't listen to Kramer. And John, you can relay that message to him. He's an equity mope that understands zero about credit. OK, listen to credit default swap markets, not Jim Kramer talking heads when he says everything's fine at Silicon Valley Bank and everything's fine at Deutsche Bank. That is the problem. Uneducated talking heads on TV and therein is the risk to the public

in the USA and Canada. Well, doesn't this beg the question then, can you guys hear me again? I'm not showing that it's coming through. Hopefully you can. Yeah. Doesn't this beg the question then, we've seen this slight lull,

which all it takes for lizard-brained humans to think that the banking system is okay is to have one week of no failures, right? So you don't really see the conversation around Silicon Valley Bank or Credit Suisse or Deutsche Bank continuing into the news cycle. So what shoe drops next? I mean, now at this sort of infinite backstop, BTFP, do we see just sort of quiet bailouts in the background, which I would argue are probably happening with quite a few regional banks?

Or are we going to see some more major failures coming in the future? Commercial real estate's a disaster. The VC space is a disaster. I mean, there's plenty of other parts of the balance sheet that I think are going to just be gaping holes, particularly in those two areas. Yeah, commercial real estate seems to be the huge thing that nobody is talking about. Preston, I see you had your mic off. I don't know if you had a comment there.

Oh, no. Yeah, that's that's all I was saying is commercial real estate is a disaster. The VC space, Silicon Valley VC space has gaping holes, total lack of liquidity for continuing to pump that market. So I'd say those are the two big areas that are going to have lots of impairment. Yeah. We keep pointing at 2007, 2008 as the likely corollary. I've been trying to bring Mike McClone up, but I'm not sure he's available right now, but he's been pushing, and we've been discussing this every Monday, that it's more of a 1929, which obviously is a much scarier number, but that he doesn't really

see what stops that situation from happening. And Preston, you sort of threw out, you know, five, 10 years, false 1015. I think a point that James Lavis and I discussed quite often in the past is if the dollar or the United States fails, which is kind of what we're talking about there, it's the last to fail, which is a terrifying idea, right? The United States isn't going to go first. It will be the last. It is still the global reserve currency. So if we're talking about five, 10 years, even 20, what does that mean we see between now and then? Mike, I see you're up. So you're the king of the 1929 comparison. So I would love to hear your thoughts. Well, thank you. I appreciate listening because I'm learning a lot and I just

don't watch CBS and stuff. It's close to me. It's it's we're digging into the the the trees in the forest. It's the macro that's just shockingly scary. And that is, you know, we all know what the central banks are focusing on backward working inflation measures and still tightening as we have a bank run. I mean, just hawkish hawkish central banks in a bank run is an oxymoron. So to me, that's more the macro. And the bottom line is everything right now is tilted on one key thing, and that's this stock market just kind of hanging in there. And we all know it's supposed to go down.

And I think everybody's tilting on that. If it makes that next move, I should say when it makes that next move, we can go lower. And it kind of makes sense. But right now it's just hanging there. So I think trigger fingers are all waiting on how the equities do. And the bank crisis to me is just part of what we all mentioned. I mean, it's just shocking that it was all almost completely based on reserve assets that have declined in value because of too much duration. And the reason the duration is dropped so much because the Fed raised rates too high, too much, too fast.

And we're still hiking rates. So to me, that's the macro. And then everything else just trickles down from there. It's a great point because, you know, there's the lagging effects of the rising interest rates. And look at how fast they have risen. I mean, Larry and I have talked about this and, you know, made some great points. He's made some great points about this.

I mean, this is just insanity how quickly they have raised these rates. And they took everybody by surprise, just slow talking it all the way. Now, if you were if you're a credit guy, you were kind of paying attention to this and you saw it before even the Fed saw it. But this is just insanity how quickly they've raised these rates. And we haven't seen the effects yet. And that's the problem. So you ask what shoe's going to drop. And the obvious shoes are definitely commercial real estate. That's a problem. and private equity firms marking their books improperly. They're marking things at cost rather than the market value, a true market value, which if you do that right, then you have some major losses in your portfolio. But what's gonna happen in my mind is something that we don't see, something's gonna break that it's broken

because of credit risk that's that's just an off it's kind of like an offspring of this interest rate risk that some of these uh some of these institutions have and we don't know what shoe it's going to be but i think it's good something is going to break and it could be in the treasury market it could be in the repo market. We don't know yet, but there is something big that could be on the horizon here. And I'm more concerned about that than I am about just sliding quietly into a recession personally. Yeah, I think it's the treasury market. And just to put some numbers on what James was just saying, you know, so remember in 2019 when we had the pivot and, you know, the repo market went nonlinear up, that all occurred. We've raised rates twice as much in half as much time as what caused the 2019 repo blowout.

And so to think that it wouldn't blow the system up is just absurd. And I think the treasury market's where you're going to see it. I think you're going to have seriously serious problems with the treasury auctions. I mean, they're running out of suckers to buy the treasuries and, you know, rates are going to go significantly higher in my opinion, over time. And that's, you know, they're going to get to a point where they're not going to want to be even talking about raising rates.

They're going to be talking about yield curve control because they know that the debt trap at higher rates will make the entire world bankrupt. So, Larry. Yeah, go ahead. Go ahead. I was just going to say, sorry to interrupt. Look, rates can go higher for two reasons. One is inflation expectations and one is credit concerns, the credit spread.

So watch CBS on sovereign debt and understand that those spreads have to work their way into a treasury market somehow. Right. So even though inflation could be coming down, I think what you're saying is that credit spreads are widening and therefore the total level of interest rate paid on debt could actually be right as stable or rising, even though interest rates are coming down. Excuse me. Inflation expectations are coming down, excuse me, inflation expectations are coming down. I actually believe that interest, that inflation expectations will come down, and it will draw down the US Treasury funding costs, but it will be offset materially by increased credit spreads on sovereign debt, which therefore means increased credit risk.

A shout out to John Najarian, when you have increased credit spreads, you have increased volatility. It's directly related to the volatility in equities. And so you can watch spreads on all sorts of credit products, whether it's high yield spreads or CMBS spreads or investment grade spreads. And when those spreads are widening, you need to understand that vol or volatility is increasing in lockstep. And that's called a long volatility trade. You need exposure to long volatility assets.

And guess what the best long volatility asset there is in the world? It's called Bitcoin with no counterparty risk and no theta, no time expiry. It's the perfect insurance product. I got to run from Canada. I'll leave you guys 10 minutes to tell everyone what an idiot FOSS is. But remember, own long volatility assets.

And Bitcoin is the most perfect long volatility asset that's ever existed. Ninety nine percent of all other assets in the world are short vol, which means when volatility increases, they lose value. Watch and learn over the next 10 years why people will understand that Bitcoin is the perfect insurance on the Fiat Ponzi. Thanks from Canada. Scott, you're a star. Hey, Foss, man, if you're an idiot, I don't know what that makes me. But at least if you are, you're our idiot. So thanks for joining, as always. And just so everyone knows, we're not going to stop in 10 minutes. We will have a definitely Paul from Coinbase.

And the guests, you guys are welcome to stick around and stay as long as you want. I will keep this running as long as necessary. Lawrence, I see your hand up there. Please go ahead. I'm not sure if uh that's old that was that was before i i was called on i'm good yeah but i still want you to speak i got nothing more to say it's a mess yeah i mean obviously this the inevitable conversation turns to bitcoin when we discuss this and boss i think just segued nicely into that. But I want to talk about Bitcoin and the crypto industry, obviously.

We're going to eventually be getting Paul here from Coinbase as the chief legal officer to talk about their suit. But we're seeing a very clear uptick in rhetoric, enforcement, and action from the United States government and other regulators. We can talk that to death and we probably will later. Does that concern any of you for Bitcoin itself as an asset? I think I know the answer, but I would love to hear you guys describe why that is or isn't a problem for Bitcoin. Preston, this seems right in your wheelhouse, not to put you on the spot.

I think that anybody who's getting scared about any type of action that they see in the day-to-day just really doesn't understand the long game right like um for me i just think of it as uh it it's it's just sliding the the inevitable to the left or the right similar to the comment that I had earlier in reference to policymakers kind of accelerating things. So I think a lot of what we've been seeing in the past year and a half is Wall Street trying to decapitate Silicon Valley incumbents on the tech and the ownership of the exchanges in this new financial layer that's being created. I think

that Sam Bankman Freed was their perfect idiot savant to decapitate and then try to exercise the power of the government and legal to take out the incumbents. And I mean, so we can focus on the negative news, but then look at NASDAQ, like they're going to start doing custodial services and exchange services. You got Fidelity that's doing these things. So when I look around, I think what the attempt really is, is to exercise the legal arm of the government that are totally commingled with legacy, large cap, Wall Street elite. And as they as they swing that saber around and they cause damage to the incumbents, they're going to have to sell stock or do whatever to to make them fumble the ball so that they can pick it up. And I'm just trying to use analogies here for John.

The question then remains, I mean, you brought up the obvious point about Fidelity and NASDAQ, which I mean, I think we all generally agree that the more the merrier in this space and the more credibility. But there is a sort of tin hat you can put on there, which I don't like to venture too far down. But the fact that at the same time as we're seeing enforcement action against Coinbase, who I think everyone would argue if you're going to choose one exchange that's attempted to be compliant, has attempted to work with regulators, has attempted to walk in their doors and present exactly what they're doing. At the same time as we're seeing Wells notice and likely enforcement action, we're seeing the old school Wall Street players start to also ramp up their efforts in the space. Is that a coincidence or is this going to be sort of an attempted wholesale takeover of the crypto space by the incumbents? Anyone who would like to jump on that one can please go ahead.

I know a few of you had a meeting and Lawrence will need to leave. Lawrence, before you have to leave, I would love your opinion on that one, can please go ahead. I know a few of you had a meeting and Lawrence will need to leave. Lawrence, before you have to leave, I would love your opinion on that, actually. I'm sorry, I'm probably not the best guy to answer that. I mean, I look, I mean, the incumbents are going to defend their turf. We know that they're going to break all the laws to do what they always have. So, you know, it's what they're doing is is beyond, you know, wrong and evil and against the law, in my view. But it is what it is. You know, the fortunate thing is that as a weapon, Bitcoin is a really, really sharp spear and, you know, 12 words. And, you know, unless they want to, you know, torture you to get your coins, they can't steal your money. And as you know,

as Jason Lowery points out, you know, that makes you as powerful as some large armies. So my view is we're all going to fight back. And ultimately, the people who are clinging to this old system, they're going to be dead and gone. So we'll win. It's a timeline issue, right? Gary, I see you. I just joined as a speaker. You've obviously, last time we spoke, you were effectively up in New York and Washington taking meetings with these exact entities. So what's your thought here?

I think change is awesome. These guys continue to try to manipulate the game process. There's more of us than there is of them. All their tools are breaking us. They're all breaking. So I think what we need to do is just get our own house in order, clear up all the skeletons

that may be laying around in the closets, the digital closets, our immaturity, areas that maybe we go short term instead of thinking long term this is a multi multi-trillion dollar opportunity and we're allowing scumbags to come into this market and make it look like a really bad place so if we can just stop making so many mistakes the policymakers and professional politicians will make them for us.

So that's what I think is our biggest liability is us. Us being the industry and the crypto industry itself? Yeah, yeah. We're just going out of our way to make this a bad advertisement for any kind of, you know, normal human being that's not on the cutting edge of technology and wants to take risks. We're all, you know, taking risks or managing risks based on the thesis that we make about the world. We're probably more intelligent than or more actively engaged intelligence than the vast majority of the population. That puts us in, I think, in a role of being more responsible.

All these markets always grow up with this kind of carnival circus, lots of crazy stuff going on. This is our opportunity here as the old construct, the analog construct is failing. This is our opportunity. So I think the more of this type of thing that we can do to raise the altitude of the industry, that there are a lot of really smart, well-funded people in here. This is not a policy scheme. There are people in here. I'm 65. I intend to be doing this for the next 15 years of my life. I've got plenty of things I can do with the next 15 years of my life. This must be really interesting. And that's what makes us so powerful. There is so much passion here. And it's not just passion. It's passion with a balance sheet behind it. We're making bets on our vision for the future.

So I just think that we would do well with such a huge opportunity to get our shit together. Mark Moss and Jeff Frost, thank you both of you guys for joining. I'm not sure how much you've listened in, but now that we've transitioned to Bitcoin, it seems like a perfect time for me to transition to you guys. Mark, what do you make of the sort of increased rhetoric now, all of this enforcement action happening at the same time as we're starting to see, for example, NASDAQ opening their doors to the asset class? Yeah, it's certainly interesting what's going on.

I think what's evident if you study history, you'll see that anytime a nation, an empire is failing, one of the last final stages that it goes through is capital controls. And so they have to kind of control the capital. They have to keep that in the place. And so it makes sense that if there's an exit, the system just falls even faster, which is why we've seen, you know, a lot of people talking about Caitlin Long, her bank, Custodia Bank, not getting approved by the Fed, because if a bank would actually, you know, hold your money, people would actually want to use that and it might drain all liquidity out of the banking system. And so I think this is just kind of par for the course.

It goes to show where we're at, what stage we're at in the fall of the empire and the desperation that they have. I think, you know, obviously there's the choke point 2.0, which we've been talking about with all the different banks. The thing that I'm super concerned with right now is this restrict act that's going through. I mean, this is taking – this is the Patriot Act times 1,000. I mean, this is just crazy what they're trying to do with it. And so they're coming at it from every single angle,

from the banks restricting it to the point of the question that you're asking, like, why would they be restricting the banks, but then somehow using and pushing over to NASDAQ? And it seems like it's probably a way to co-opt it, you know, allow people, throw them a piece of meat, allow them to still have access to it allow look like we're still allowing it to happen but at the same time only in a co-opted fashion where potentially you can't self-custody uh you can't manage it on your own so to speak

that's that's what i'm seeing it's really scary it's happening really fast i think as scary as it is it's it's a fight, we have a lot of people in the government right now that seem to be pretty pro-Bitcoin. I mean, Patrick McHenry, who leads the financial committee, has been pro-Bitcoin for a long time. When Meta was trying to, or Facebook was trying to launch their stablecoin, I mean, he said, look, Bitcoin is different. Bitcoin can't be stopped. And so they get it. So we're definitely in for a battle, in my opinion. Yeah, but it's scary. Perfect. Listen, Paul, Paul Graywall is here from Coinbase. I'm glad we were able to get you up on stage and get you here so quickly and really, really appreciate the time. So listen, guys, I'm going to continue with Paul here, but I would love for you guys to stay on stage because he only has about 20, 30 minutes. But I think that right now, the key

topic happening, obviously, is this regulation. And of course, regulation by enforcement that seems to be part of the course. Paul, welcome. Thank you so much for joining once again. And I would love to really get deeper in the weeds here with you. Hey, thanks, Scott. I'm glad I was able to join. It's good to be on with you. Yeah, so listen, let's start from the beginning, I guess. We've obviously all seen the news about the Wells Notice that's come, which is not yet enforcement action, but usually leads to one. Why do you think that you're seeing this after the repeated and consistent efforts of Coinbase to be compliant? Well, you know, as you suggest, Scott, the Wells notice, as surprising as it was to receive, was not surprising entirely in terms of timing. And I think to understand that, it's important to understand sort of the history that predates that, at least for Coinbase.

As I've talked about now at length and in public, we've been engaging with the SEC, trying to get reasonable rules for registration for many, many months. We've had 30 separate conversations or meetings with staff, 30 other engagements more generally. So lots and lots of efforts to try to get some rules in place that would not just allow a cryptocurrency exchange like Coinbase to register, but that would provide clarity and certainty for everyone. And, you know, based on rules and standards that we may not all like, but that at least would give us a clear sense of where the line is, how we avoid crossing that line, and confidence that the

standards are going to apply to one participant in this economy are going to apply to everyone. It was disappointing that after many, many months of those discussions, the SEC ultimately decided that litigation or the threat of litigation was the way it wanted to go, rather than giving us feedback on our ideas for what a registration path could look like, or some sense of what a framework could look like, again, that would apply to everyone. That is disappointing. Maybe it's even a little bit frustrating, but it was not entirely surprising given the history of the SEC in refusing to propose rules that everyone will understand, reflect a public transparent process, and provide some certainty to this market rather than the uncertainty we're seeing today.

In any way do you view this as the SEC taking a shot at the biggest player to sort of send a message or lesson to anyone else? Or do you even view it as the opposite, which is somewhat Coinbase being thrown out, the baby being thrown out with the bathwater as a result of the actual, you know, legitimate, problematic platforms and companies that we've seen that probably have had just enforcement action against them. Well, I do think that as one of the largest businesses operating in crypto, as the first major business to go public, Coinbase does stand in a little bit of a different place, perhaps, in the list of targets that the SEC has focused on in recent months. But we also recognize that there are many others who have been fighting this fight for far longer. The federal court dockets of this country reflect all sorts of different actions taken by the SEC against everyone from Library to Ripple, and the list goes on from there, that reflect a campaign that goes back much further than

the more recent focus on Coinbase. So it's important, I think, for Coinbase and others to acknowledge that others have carried this flag for a great deal of time. I think the issues, though, when it comes to Coinbase are an important turning point for crypto and for the SEC's efforts to really push this technology and push this new way of interacting online into a corner and to cabin it off and even cut off its oxygen without any real legal authority to do so.

So I do think this is a new chapter, even if it's a chapter in a bit of a freeze on innovation and what platforms like yours can do moving forward. So how long do you anticipate this taking to play out? I think a lot of people view the case now with Coinbase, whether or not when it's filed, as sort of the guidelines for what you will or will not be allowed to do in the United States. Yeah, I mean, look, if the case does in fact precede the litigation, I think many people on the spaces will already appreciate that we could be talking about many, many months, even many, many years of process. Unfortunately, the court system and the court process in this country does not move particularly fast. Now, all that said, I do think that Americans are increasingly clear that they want to see reasonable rules for this technology, and they want to see them now. Something like 80% or more of Americans feel like the current financial system, the traditional financial system, is stacked against them and stacked in favor of incumbents. And there need to be rules in place and rules put in place now, not in a year, not in five years.

Rules that cover all of the complex questions that apply to our industry. How should issuer disclosures work? What does it mean for traditional rules that impose intermediary structures that don't make sense for crypto to apply? All of that needs to be sorted out now and not after many years of court litigation and individual cases that look at one piece of this or another. For the simple reason that the rest of the world is not waiting, Scott. Like anyone paying attention to this, looking at what's happening in the UK, looking at what's happening in Germany and Singapore, can see that the rest of the world is moving ahead. And if the United States insists upon this

sort of knee-jerk, reactive approach to setting rules, it's going to find itself far, far behind the rest of the world in short order and maybe in a place where it's going to be impossible to catch up. That begs the question then, is that at this point going to or should it come from regulators or should it come from legislation? A lot of people have pointed to the fact that we really don't have any guidance from Congress and therefore for regulators, sort of the old

adage, the only tool you have is a hammer. Everything looks like a nail. Do we need some sort of legislation or guidance from our legislators to give these regulators a path to, I guess, approach the industry more appropriately? Well, I don't think that regulators need to wait for legislation in order to do the right thing. It is very clear that under its current authority, the SEC could promulgate simple rules that define what is a security and what is not, what issuer disclosures make sense for crypto, what market structures are appropriate. All of those issues could be addressed by reasonable rules pursuant to notice and comment rulemaking that are set out in processes defined by Congress. Now, if the SEC and others simply refuse to do that, if they're going to continue to rely upon an enforcement strategy alone and regulation by enforcement alone, Congress does need to act. It's one of the reasons, Scott, why a couple weeks ago I testified in front of Congress, and in my testimony I laid out what we thought would be sensible legislative reforms that this Congress could enact now to bring some certainty to this market.

And even in a highly political environment like the one we have in Washington right now, Democrats and Republicans could and should come together on, for example, stablecoin rules. Things like what disclosures need to be made, what reserve requirements ought to apply, what audits ought to apply to those reserves. We can get those rules enacted by Congress today in a way that I think would bring meaningful change to this market and signal very clearly to regulators that they need to follow the rules. I think there are other legislative opportunities as well. For example, defining the respective jurisdictions of the regulatory agencies that have oversight over crypto. Once again this week, Scott, we've seen the CFTC and the SEC take diametrically opposed positions on a basic question like, what is a security? What is a commodity? Is ETH one or the other, neither or both? This is not the right way to regulate this. And we think that

if the regulators themselves can't get to a common understanding or some sensible standards, legislation could fill that gap. You had an incredible tweet just about that, I believe, yesterday. Security can apparently also be a commodity except when it's not, and it depends on which regulator you ask and when. If you're confused, you're not alone. Is this really the best American law has to offer? That's exactly what you said about this. And it couldn't be more appropriate. But doesn't that just leave Coinbase and the rest of the industry in the middle of a regulatory power struggle? It does. It does. And at the same time, I think it's important to understand that, you know, we in the industry and we in the crypto community are not without our own tools available to us to try to bring meaningful change. to what is clearly government overreach, what is clearly the abdication of responsibility on the part of the SEC

to promulgate reasonable rules that will give us the clarity and certainty that we need. I think there's also the power of public pressure. You know, recently Coinbase announced something called Crypto 435, which refers to the 435 congressional districts in this country. And our goal in announcing Crypto 435 was to empower regular people all over this country to voice their concerns about this overreach and demand that sensible rules be enacted. So I think there is a very important role for the wider community here, in addition to industry leaders like Coinbase doing their part. The other thing I would just highlight is that Congress does tend to pay attention to and focus on the last battles that it may have fought and lost. And in this particular case, I'm referring to the fact that,

you know, we've seen over the course of the last 12 months, one failure after another, and in some cases, outright fraud on the part of FTX. Those are important issues to address. And I'm especially pleased to see that the fraud of FTX is being addressed in the criminal court system. But we can't just focus on what has happened in the past and develop only rules to address those concerns. That's important. But it's also important to build a framework that allows us to grow this economy so that we can develop important use cases that give more people access to the financial system and develop non-financial use cases for crypto as a whole as well?

Because without that framework, Scott, without sensible rules, we're going to see this entire industry move further and further from the shores of the United States. And it would be somewhat ironic if that were the end result of Congress's response or lack of response when pushing this activity outside the United States, in many cases, is what brought all this pain to American investors in the first place. I think that's an incredible point. The United States has always prided itself, and as a United States citizen, on the fact that we've led in technology and innovation. And I think that a lot of the world has always looked to American regulators as to how they will proceed. But we really flipped that on a dime in this case. There's very reasonable regulation already enacted and even being proposed in jurisdictions all over the world, somewhat argue, including all of Europe. What does that mean for Coinbase operating outside of the United States versus the business onshore?

Well, look, the rules that we're seeing enacted in Europe and elsewhere aren't perfect. And there are certainly elements of the Mika framework in Europe, for example, and elsewhere that we would like to see adapted, better adapted to the realities of the marketplace. But the point is that they are developing rules and frameworks. They're relying upon a public process. And for Coinbase, it's impossible to ignore that. We are a proud American company. We were founded in California. We were incorporated in Delaware. We are subject to the New York Bit License.

We're not going anywhere anytime soon when it comes to the US market. And we're standing and fighting here because we believe the United States could and should continue to be a leader when it comes to crypto. But we can't ignore also that around the world, other governments are saying, we want to fill this gap that the United States seems to be willing to permit.

And we're seeing growth in our international business. We're seeing other markets extend a hand to crypto, even as they're imposing strict standards and protecting their consumers and protecting their investors. At some point, this country is going to have to wake up and see that it's not a God-given right that we lead in every industry and technology. Unless we wake up and develop reasonable rules, we're going to see other countries claim that mantle. And that's why I think it's important that anyone concerned about these issues raise their voice and share their concerns before it's too late. In quite a few of the interviews that I've done with founders and CEOs of companies,

they've actually at this point made the argument that negative clarity would be better than no clarity at all. I mean, do you agree with that assessment at this point? Well, I think to a point I agree. I certainly wouldn't want the clarity that all crypto should be banned for all purposes for all time. I suppose that's one form of clarity. But because I believe so strongly

that crypto can be an important part of the solution to so many problems we have today with our traditional financial system, I think a more nuanced approach is important. But there are some basic questions, Scott, that we still haven't answered in this country that need to be answered. The fact of the matter is that you and I and others on this space can't definitively say whether certain tokens, major tokens in the crypto economy even qualify as a security.

That's a problem. It's also a problem that we don't have basic standards yet for issuer disclosures when it comes to crypto. When it comes to stablecoins, we don't have rules that compel certain disclosures regarding reserves. We don't have standards for audits that should apply to particularly fiat-backed stablecoins. So there's just a whole host of elementary but critical topics that we haven't addressed. And even if we can't address them all at once, there's so much we could do.

And there's enough of a bipartisan consensus that this matters that the time to act, I believe, is now. we saw the lummis jilla brand bill proposed last summer and there was quite a bit of excitement over quite a few of the things that you just listed at the very basic level getting a bit of clarity or at least small transactions for people not being subject to taxes so the crypto could actually be used of course some very what many viewed as reasonable rules surrounding stablecoins. The rumor on the Hill is that that's going to be reproposed leaner and meaner within the coming month or two. Do you think that that bill could offer any of this clarity that you're talking about? Yeah, I do think there are certainly elements of the bill that could go a great distance to answering some of the questions that we've been discussing.

I think it's important to understand that, you know, legislation takes time. I don't think anybody who pays any attention to Congress would disagree with that. And so, you know, even if it may take many months for us to get to a final product that both houses of Congress could approve and the president could sign. We need to get going on that now. I should say, because it's going to take many months, we should get going on that now. And I think that most people in crypto, certainly Coinbase, would be willing to accept an imperfect solution to no solution at all on most issues. And even if there are certain topics, for example, that there is not yet a consensus on, there's no reason for us to back off of developing sensible standards where there is common ground.

And I would highlight stablecoins as one area where I think there is a strong political consensus around the main topics. And we can build some momentum, right, show some progress and signal to the market and signal the rest of the world that the United States is not just going to hand over its leadership and give it up for free. It feels like as we sit here today, that's exactly what's going on. And I think that would be just a tragic mistake. I think we all agree that it's a tragic mistake, I guess, that the question becomes whether it's intentional or just a result of incompetence or this power struggle between regulators. It almost feels like they just don't understand the industry at all.

And we could benefit from a regulatory regime that was specific to the crypto industry i'm not pretending that we're large enough that we deserve a full cftc or sec just to regulate crypto but i do think it is very clear that using rules from the 1930s also doesn't yeah i mean look uh we may not be as large as other elements of the financial system yet, but we are at roughly a trillion dollars. We are, I think, offering a set of fundamental solutions to fundamental problems that have plagued traditional finance for decades. I don't think crypto is something that this Congress can ignore entirely. And at the same time, while there may be certain actors whose intentions are less than pure, I have to say, like meeting with a number of members of Congress on these issues over the last several months,

I've been generally impressed that there are good people trying to do the right thing in the Congress. I think the challenge has been that they're all looking backwards and all reacting to what happened with FTX in particular, and scrambling to make sure that any criticisms that come their way are deflected. And I can understand that political instinct. But at the same time, I just want to encourage our lawmakers to not be so caught up in what is just a guard variety fraud and ignore that there's a lot of innovation happening right now that they need to continue to nurture and develop, even as they protect consumers and investors. Yeah, that's the baby being thrown out with the bat. Totally. That I was speaking of, obviously, which is just everything is viewed as FTX is my fear

and that everything gets punished as such. Yeah, no question. And, you know, look, I alluded earlier to the fact that this campaign goes back now, you know, now several years. It's not something entirely new, but it's one of the reasons why we have attempted to voice our concerns and speak out in those other actions where we have something unique to offer and add. So for example, in the Ripple litigation, we filed an amicus brief making very clear that certain defenses offered by the defense in that case had merit and were consistent with U.S. law going back many, many decades. We didn't have to do

that, but we thought it was important to offer our voice there you know, others have, I think, taken the lead and I want to give full credit and props to the lawyers working in that case. Stu Alderati, John Deaton has weighed in. You know, these are leaders who've been fighting these fights for years and they deserve full credit for their efforts. We've also found an amicus brief

in the Wahi case, which is an SEC action brought against one of our former employees who engaged in insider trading. We fully support the idea of prosecuting Mr. Wahi. It's one of the reasons we were so pleased to see the Department of Justice pursue this aggressively. But that's no reason for the SEC to jump in and abuse its scope of discretion simply for the fact, you know, simply to achieve, you know, the goal of exercising jurisdiction over these cases. So, you know, we're going to continue to raise concerns where we can and voice the concerns of many in crypto where others can't.

But the main thing is we all have to start to act. The time to act is now. And whether that's court litigation, whether that's public advocacy, Coinbase is going to continue to do its part. I want to talk a bit more about that. I've sort of made the argument that regardless of what you think about the individual assets, that the community has to come behind and support any platform effectively that's being unjustly targeted by the regulators, including, of course, Ripple,

which you brought up before. And so the real question then here, you've obviously talked about Coinbase 435 and the initiatives that you're taking. How can all of us on this space is beyond, how can we start to spread the word to galvanize the efforts to sort of consolidate behind Coinbase and help push this in the right direction?

Because as you said, it's not going to happen without the support of the community, without pressuring legislators. What steps can we take as individuals? Well, I want to be very clear. I appreciate the offer to consolidate behind Coinbase, but I actually think the right way to think about this is how do we all consolidate

behind crypto? Because again, even though I have a particular interest in making sure that Coinbase is kept safe, our broader interest is making sure that this entire ecosystem flourishes and develops. And I do think that Crypto 435 is a good way for people to learn more about how they can engage with their regulators or rather engage with their elected officials to voice their concerns. The main point, though, is that we have to speak up and speaking up on Twitter and in other places is important. But elected officials pay attention to who calls their office. Elect elected officials pay attention to who calls their office. Elected officials pay attention to who writes them letters. It sounds very 1980s or 90s, but that is the way that they still to this day continue to

take the temperature and pulse of the people who put them in office. And so I think that's an important way for individuals to stand up, not just for Coinbase, as I said, but for crypto as a whole. And even where we may have disagreements inside the crypto community about one issue or another, I think it's important that we find common ground where we can and speak up on common issues so that policymakers, elected officials, our representatives understand this is not something they can just choose, they can conveniently ignore or choose to sweep under the rug. We are paying attention and we will vote. You probably have a better gauge than any of us of just how big this community is in the United States and how much impact we can have. Is your feeling that there are enough of us, there are enough people that are passionate and care about this to actually move the needle? Yeah, I mean, look, Scott, it's amazing. We have now reached the point where 20% of Americans have owned crypto or otherwise interacted with the crypto economy. That's one in five Americans for a technology that is, what, 13 or 14 years old at this point at most. So there are millions and millions of us who have voted with our pocketbooks and said, we want this.

We want an alternative traditional financial system. And I think that if even a tiny fraction of those millions and billions of Americans voice their concerns, ask their regulators, why haven't you enacted sensible rules for this technology and for this industry? Ask their elected officials, why can't you at least pass legislation addressing stable coins in areas where there is already broad bipartisan consensus? a huge shift in the current attitude away from regulation by enforcement, away from debanking crypto and towards sensible standards that we can all live with. I will say that it's been encouraging to see that there has been some significant pushback from the judicial system against the regulators in some of these cases, which is unexpected. And I think it's just a very important note for people who are listening or paying attention to this, just

because a regulator says it's true, does not make it true, does not make it true and does not make it lawful. Yeah, that's exactly right. Look, regulators are charged with taking the laws that Congress passes and providing guidance and direction to the market in ways that make it reasonable and easy to follow. But when a regulator says that a particular asset, for example, is a security, that's just the regulator's allegation. A court of law is ultimately responsible for making the final decision. We're going to see that in the Ripple case. We're going to see that in any litigation that's brought against Coinbase. We're going to see that in the Ripple case. We're going to see that in any litigation that's brought against Coinbase. We're going to see that in any situation where a regulator makes a claim that has not yet been tested. And so I think it's important for all of

us to continue to have faith in our courts. Courts aren't perfect. They get things wrong too. But we have a judicial process in this country and a rule of law in this country that protects us against the policies and preferences of any individual regulator or other official and make sure that whatever position they're taking is actually consistent with the law that Congress has passed or that our Constitution protects. And that's very, very important to keep in mind. Hey, Paul, this is Ryan. Sorry, I just want to touch on a point that you mentioned earlier. You said 20% of Americans have owned crypto. And I think what we're thinking as the crypto community is we're thinking that's 20% of Americans that are passionate about crypto and really care about crypto and are willing to maybe push the crypto agenda. But there is the other side of the coin where we say, okay, 20% of people have owned crypto.

Of those 20%, maybe 50% of those people have lost money on crypto. Maybe some people had their money on FTX. Maybe some people had their money on FTX. Maybe some people had their money in Luna. So I think that that stat, whilst it's an impressive stat that at some point they've owned crypto, I wonder how many people actually believe in the crypto fight and are doing it

because of this new financial system and how many of them came here for the gains and maybe got wrecked or got wiped out in the process. Yeah, it's certainly the case that, look, we have tourists in crypto like we have in any industry or any new technology. And particularly for those who have a negative experience, it may be the case that they're not terribly excited to stay engaged and further engage with it. But the fact of the matter is that for most assets and most crypto products and services, people remain engaged and are saying they want to see crypto part of the solution. It's one of the reasons why, for when uh when when 60 or more of americans

say that they want a major upgrade to the financial system they're generally talking about crypto because crypto offers new on-ramps new access um and um a better more transparent way to interact with the with the financial system that's been that's been made available so far. So I take the point that not everyone has had a positive experience, but I would argue that not everyone has had a positive experience with the traditional financial system either. And I think bearing in mind that we are still a relatively young industry, a young technology, the level of engagement suggests that Americans want this as an option. Maybe not all of them and maybe not entirely, but they want this as an option.

And policymakers and regulators need to pay attention to that. I must say, I ran a poll on my Twitter. So I ran a poll on my Twitter and I did do it at a point where they had just done regulatory action against you guys or the Wells notes against you guys, not regulatory action. And I asked people,

would you change your current vote crypto slant from the other party? So I voted very generically and I said, would you change the party that you vote for if one party was a little bit, was seen to be a little bit more crypto friendly? Now granted that my Twitter is targeted very much at crypto people, but 90% of people I think said that they would change their vote because,

because of a party. So, I mean, it is, it is certainly a passion point. No question about it. And particularly in a political system and at a time in this country where things are so evenly divided, one of the things I think that almost every elected official appreciates is that a very passionate, even if relatively small, community can turn an election, can change the outcome of who's representing us in Congress. And so they're going to pay attention to it. But for all that to matter, we have to get involved. We have to lend our voice to the conversation. And at the end of the day, Scott and Ron, we have to vote, right? Like if we don't vote, none of this matters. So I think all of these things are things that are within reach of most of us on this spaces. It's not that hard to send a message to a congressperson. Crypto 435 lays out how you can do that in a relatively easy way. And it's also not that hard,

even though it may feel that way at times, to vote if you believe that elected officials need to reflect popular sentiment. I do believe that people in crypto are becoming one-issue voters. But Paul, to that end, I know that we've kept you a couple minutes over here and that this was a very last-minute thing. So I can't tell you how much we appreciate you joining us and how much we appreciate your efforts. And just let us all know anytime how we can help get the word out or spread the message and make sure that the messaging is appropriate. So thank you once again, everybody follow Paul for updates on what's happening there. And thank you. All right. I appreciate it, everybody. Thanks. So we're going to continue on since we have some amazing new speakers added and some thank you guys for sticking around, those of you who did.

I guess we've got quite a bit to unpack here, and I know we weren't going to speak specifically about Binance with Paul, but I think that that's the huge elephant in the room right now. Mark Yusko, thank you for joining, buddy. Just love you to unpack or share your thoughts on generally what paul had to say and what's happening oh look i appreciate the invite up and and i came in a little bit late but look at anyone who's following this saga understands the the the power game power struggle that's going on between those that are trying to obfuscate

or delay the inevitable transition from TradFi toward a more decentralized financial system. But I think what Paul is talking about, and they're trying to fight the good fight, despite where the rules are set before the game starts, not after the game starts, that you don't change the rules as the game's going along and that we don't have this regulation through enforcement. We actually have regulation by regulation. So I'm hopeful that this latest nonsense around the Wells Notice results in some true outcomes in the court system and some regulatory actions that put up guardrails and guideposts. That would be a great outcome. some regulatory actions that put up guardrails and guideposts. That would be a great outcome.

Eleanor, you were one of the, everyone welcome, Eleanor. Thank you, Mark. You were one of the first people sort of, I would say, sounding the alarm, obviously, as a journalist covering this space. I mean, you tweeted on February 9th, Scoop, Gary Gensler's embarking on a, quote, midnight massacre in an attempt to bring all of crypto under his control. In the coming weeks, the SEC, Gov, NYDFS, and the USOCC will be bringing a myriad of enforcement actions against exchanges, banks.

That was a bit prophetic. Unfortunately, you didn't even get to include the CFTC there, right? Yeah, no, exactly. At the time, it was just the SEC. But, you know, I think we're seeing now, it's not even just the CFTC there, right? Yeah, no, exactly. At the time, it was just the SEC. But, you know, I think we're seeing now, it's not even just the CFTC, right? It's the New York State regulators. It's the OCC.

It's kind of a, I wouldn't say coordinated, but it's kind of a, you know, coming from all angles, you know, blitz basically on the space. You know, that scoop I got back in February. Eleanor, go ahead and stay coordinated go yeah please it's coordinated okay well coordinated maybe um but yeah i mean that that was back in february right and that was like right after i think it was right before the sec went after paxos and then there was just a deluge of stuff after that um it's been really

crazy to see and i don't, I feel like there's more coming. Not that I know anything, but just I feel like, you know, they're just kind of warming up. That's a bit disconcerting with the amount. I mean, I sort of made a joke yesterday on Twitter, something to the effect of, are you even a crypto company if you're not being sued? Right. I mean, I guess who's who's even left. Right. I mean, if we now are seeing Binance and Coinbase, I guess I'm curious as to whether this is the sort of final boss where they have finally decided to poke the biggest bears possible or if we're going to continue to see just a massive trickle down effect of enforcement

actions. Yeah. I mean, I hope that we don't see that. I do feel like, you know, going after Binance is obviously kind of going after the biggest player in the room, right? Go big or go home. But, you know, I think what Paul said is obviously what is very, we all need is, right, obviously some laws and people, you know, talking to their lawmakers, going to their Congress members and saying, look, we want this technology to stay. We use it every day. We're building businesses around it. We're hiring people, employing people.

And I think until that happens, until kind of Congress really wakes up and says, wow, like, OK, this is really an issue. I think the SEC and the CFTC kind of have carte blanche to kind of do whatever they want until Congress says, all right, we've got to put some stuff in place here. Yeah, I'm going to go out on a limb and say that's not going to happen, unfortunately. Yeah. Go ahead, Mark. I agree with her. I'm hopeful for it, but it's just not happening. No, I think the sad part is it's he who has the gold makes the rules or he or she who has the gold makes the rules. And that gold is owned by the big five banks. And they made it very clear in the past 18 months that this is the then they fight you phase. And they are going to buy all of the regulation that they want. They're going to do it the old

fashion way, which is buy off politicians in the legal form or the illegal form through the tumblers, the Sam's mom's kind of way. And until we as a community and as a system of businesses that come together and put the lobbying, not just effort, unfortunately, but also money into the system. And that's, well, we don't want to be part of that system. We don't want to be part of that corrupt system. Okay, well, then it's going to be a long, tough fight because that system is in charge, as they just proved by taking down Silvergate and Signature and SBB. And, oh, by the way, now if you're a crypto company,

you can come to J.P. Morgan with some rules and restrictions related to how you act. So I wish Eleanor's point was right, that we could come together and move forward and what Paul was saying. But right now, money talks. Mike, I see that you joined, which means you probably have something to say. Well, I just joined because I have a newborn in the house, and so I was only able to listen earlier. But now the baby's sleeping. So,

you know, listen, I just think there's some nuance here. Like, I don't think the CFTC is wrong to go after Binance as I've read through this complaint. I mean, pretty much everything in here, in my view, is correct. But Binance has mostly been a nefarious entity that's tried to avoid regulation that has moved constantly that has no oversight, no governance, no board of directors, no stated investors, no stated corporate executives, etc., etc., etc. And they have multiple inside trading firms, very similar to FTX and Alameda. It's not clear what exactly those firms are doing because there's no disclosures about it. They don't disclose it in terms of use. They don't tell you what they're actually doing. And so usually when somebody is working that hard to hide something from you, there's something to hide. And so I

think, look, I think I hear privately from my friends at Coinbase that they appreciate what I'm saying about Binance. They're not going to say that publicly, obviously, like Paul would never say, hey, we agree with your points about Binance. But I think you need to differentiate between actors that are trying to follow regulation and actors that aren't. And so lumping them all together as bad or lumping them all together as good, I think is an extremely naive viewpoint. Coinbase has mostly tried to follow the rules. I mean, look, there's some things that are total gray areas, right, where it's hard to know whether they should register with the SEC. It's hard to know whether staking should be legal, et cetera, et cetera. But for the most part, it doesn't seem like they've gone out

of their way to hide from regulation, whereas I view Binance as essentially the polar opposite of that. So again, I think there's nuance here. I got to just take the other side. Binance is not a U.S. organization. They don't have any obligation in most cases to comply with with, quote unquote, the lack of rules. We don't really have good rules. This is extreme overreach by U.S. regulators into a global corporation that by and large does the vast majority of its business outside the jurisdiction of U.S. regulators. So I think it's theater, political theater more than anything else. But the idea that a foreign corporation should comply with U.S. regulations, that's not true for any other industry, name one. I used to, you know, it's funny, I used to find myself agreeing with Mark on almost everything. But on this one, I strongly disagree. I think

Binance has basically served U.S. customers from the very beginning. It was at one point their largest market. There's plenty of proof that they've helped U.S. customers evade U.S. regulation. They continue to market to U.S. customers via Binance U.S., an entity that actually has commingled funds with Merit Peak and some of the trading firms, as well as Binance Offshore. So I think it's well within the purview of the CFTC to crack down on that. And I would actually strongly recommend it. So again, hard disagree with Mark. Generally, I agree with Mark, but not on this. It's interesting that it seems that most of the complaints as of yesterday, the narrative was that they were going after things that had happened previous to 2009, even 2019, excuse me, or 2020.

But there was an interview, I don't have the article in front of me at this exact moment, that came out today basically saying that there was, quote unquote, and this was someone from the CFTC saying that there was ongoing fraud. So that narrative has changed massively. Because even yesterday, I was, you know, sort of thinking through this, and it seemed that perhaps Binance had done some things in the past and we're cleaning up. Obviously, CZ is out on a roadshow for regulation all over the world. So do you think that this is an ongoing concern or that we're really seeing, again, a jockeying for position between regulators here in an attempt to punish finance for past deeds?

I mean, you know where I stand, Scott. I think it's a very serious ongoing concern and it's a systemic risk to the entire crypto ecosystem because you essentially have a company that has failed to put itself in position to be held accountable in any jurisdiction, period, and consistently goes out of its way to essentially shirk all responsibility. And so you look at what happened with Three Arrows, you look at what happened with FTX and some of these other firms, it's a pretty consistent fact pattern where if somebody's moving domiciles and trying to create corporate shells, you know, FTX has more than 120 entities, Three Arrows had way too many entities for essentially two kids trading in their dorm room, borrowing money from trading firms with no collateral and

not the appropriate risk management framework. And so you basically have that at Binance. And for some reason, I guess because everybody's so conflicted, because everybody has long positions in all these tokens and everybody has private equity positions in all these companies. Nobody wants to see the truth that there's no examples in history of a good actor at this scale behaving like Binance. There's no 50 or 100 billion dollar company that literally goes out of its way to hide every single detail of the way it operates from public view. And sunlight is the best disinfectant. And so, yes, it's an ongoing problem that the answer from the, from basically the defenders of finance historically has been, yes, you're right. We fucked up. We did everything wrong. We didn't,

we didn't do regulation soon enough. We probably should have not had an under collateralized stable coin. We probably should have filed with different regulators. We probably should have disclosed, you know, who, who's on our board. We probably should have had a board. We probably should have disclosed who's on our board. We probably should have had a board. We probably should have done X, Y, and Z thing. But the reality is it's a culture of evasion. It's a culture of obfuscation. This is a company that goes out of its way consistently to do that. And if you read through this complaint in detail, it confirms a lot of things, including the fact that everything is actually controlled by CZ.

So this idea that his lieutenants or somebody else was essentially the puppet master doing all these things is wrong. It's all coming from CZ. And so as long as CZ is the CEO of Binance, it is an entity that will continue to commit crimes. It's an entity that can continue to commit fraud. And I think in a lot of ways, it needs to be removed from the US market because the US market will be completely unsafe as long as customers continue to access Binance via Binance U.S. Wow. You know, I always thought I was the king of hyperbole. I have been dethroned. I have not heard that kind of hyperbole since I listened to Kyle talk about the CCP. Yeah, I'm just kind of shocked. To compare Binance with FTX is comical.

I mean, it's literally comical. One is a thriving global organization with actually lots of infrastructure and regulatorily compliant in certain jurisdictions where they operate. lots of infrastructure and regulatorily compliant in certain jurisdictions where they operate. The other was a total fraud perpetrated by

a criminal enterprise. So I just find that just, wow. I guess I'm happy because I don't have to be known as the king hyperbole anymore. Well, Mark, I think it's important to point out that there's no, other than your characterization,

which is an opinion, there's no substantive difference in terms of the way that FTX and Binance operate. They're literally structured in almost the exact same way. Not true at all. Not true at all. Come on. Come on, Mike.

I mean, let's be realistic here. You're talking about you're comparing Sam who leveraged his own token, took consumer deposits, siphoned it to a separate entity, was less than 100% capitalized. And you're comparing that to Binance, which has up until now only proven that they're 100% capitalized. We don't know of any allegations. That's actually, Ram, that's completely untrue. They've admitted that their stable coin was not properly collateralized. They've admitted that they went out. That's the same thing Tether said.

Tether was literally not collateralized for years. And they paid a huge fine. Look, you guys can defend crime and fraud all you want. That's totally fine. It doesn't bother me. This industry lives on the fringes of reality in a lot of ways and that's fine but but you're not actually calling out anything substantive it's just your feeling it's your feeling that this is a good he's a good guy he's a nice guy and it's your feeling too because i mean you're making you're making crazy comparisons

without facts you're lumping ftx and binance into the same thing which is absolutely absolutely absurd you're not substantiating it with any facts other than little here, which are taken out of context. And I mean, look, you've been called out on Twitter multiple times for doing that. And I just want to make sure

that we keep the integrity of the spaces here by making sure that we stick to the facts here. You don't have any facts that FTX is the same. Did you actually, did you read the complaint? it sounds like you didn't read the complaint. I read 75 pages of the complaint. I did. I suggest you read it again with a fine-tooth comb and highlight and underline because I think you missed a lot of facts here. And, look, this is going to go to court.

So it doesn't really matter what you are. I think what matters is what happens when it goes into a court of law. So let's see. Speaking of integrity, though, like there are plenty of people in this space who backed companies that committed fraud, that recommended platforms that went bankrupt, right? And so don't call out integrity to me. I never recommended any of those platforms.

So I'll just leave it at that. I'm just saying you have been called out for maybe moving know maybe um uh moving information more in the direction that it suits your narrative and in this case that's not the case i want to jump because i see we've got mark cojones in the crowd and i know that he's always got some good information so mark welcome buddy thanks for having me thanks for calling me up and i wish i would have been here when the Coinbase legal guy was on. I thought that was fascinating. A couple things. My goal was to destroy and upend the SEND, Silver Gates Network, that happened,

and then Cignet, and that's happened. And I think, and I'll talk real slow, I don't think people truly understand how significant it now is. Because now people's money is sort of stuck. And the criminals in the space are not going to be able to flee. And the Cignet moved, since they were in business, a trillion dollars of money. And that's now, the government now has all the records. And the government will also have all the records of Sen. So in that complaint yesterday, it was admitted that Binance had done some work and some money laundering for such people as Hamas. And in my letter, plural, to all the powers that be,

I highlighted what Signature did, what Silvergate did, and it's very, very serious, very serious stuff. And I've been right. And I have details. And the stuff coming down is going to be heavy duty. So, you know, if you all think that this is just some cheerleading section playing around, you're sadly mistaken. And I think Coinbase is at grave, grave risk here because their desire to fight the government

the way they're doing it couldn't be more wrong. They should say, we have gaps in how we do things. We've made significant mistakes. We understand that these things may be securities and we'll do whatever we can to comply. Because fighting the government here with what they have in their possession on Signature, on Silvergate, and on Binance, it's not good.

It's not good. Can you speak? You have the complaint against Coinbase is very specific around three things. One, as far as I understand, is listing securities on the listing tokens that are potentially securities on their platform. That's number one. Number two, it is around the staking service and the fact that the staking service may be a security.

And the third one, which has come up up is something to do with their wallet now with all those in mind coinbase has specifically gone to the sec to be compliant can you please show us what we need to do to be compliant the sec said no they went back to the sec and they asked the sec look can you show us where on our platform we're not being compliant so that we can come into compliance? And the SEC said, no, we can't tell you. So I'm not sure how much more you want Coinbase to do to go. I mean, they've pretty much done exactly what you said. And so, look, we think we've done everything right. We may have made mistakes.

We think that we've done everything right. In the event that we haven't done something right, can you please show us how we should be doing it? And they got, they got met with a big fat, well, we're not helping you kind of thing. So I mean, unless you're talking, unless you're talking about something which is not out in the public yet, and you're talking about them using the banks to do money laundering or related activities, which may or may not goes that deep into the network that I guess if the, if, if they, they have done something like that, they should probably go and admit it or discuss it. But I find it very hard to believe that Coinbase knowingly,

knowing Brian Armstrong and knowing the rigid approach, which he's kept at all times to try and stay within the law, even where it's cost him market share or growth in his business, I find it very hard to believe was being discussed where there's proof that they laundered money for read the whole complaint what they said in the complaint was that what if people like hamas wanted to transfer money and then the guy responded and he said yes they would do it in small amounts because if there were big amounts it would be flagged for money laundering they did not say specifically that we are aware of a hamas transfer of money it was done it was done as a what if. And clearly the response was, yes, then they would probably do it with small sums of money and not big sums of money so it wouldn't be flagged. And I read the complaint.

That is as far as the complaint goes. It does not say at any point that there is definitive proof that money moved from one Hamas account to another Hamas account or from a non-Hamas account to a Hamas account. They used it as a figurative thing. So there's a DOJ suit against some terrorist that was filed not that long ago. And I don't have it in front of me where players were laundering money for terrorists. So here's all I'll say, right? That the government now has everything they need to bring cases, right?

They have all the records of the trillion dollars that was moved from both Sen and Signet. If any amount of money, of that money, went through Coinbase, Lord help them. Lord help them. And wait a minute. And all of these other foreign exchange or crypto players, a lot of them have been charged. And I think there will be a lot more. And if you look at the progression that the government is taking, they started with FTX. Everyone's flipped. They're now going after the just and sons of the world. They've destroyed the on and off ramps of this space. And the money

is essentially locked down. So things take time. It takes the government time to figure all this stuff out, to build a case. And all I'll simply say is I wouldn't dismiss anything that's going on. I think it's beyond serious. I think it's huge trouble for everything in the space. And there's going to one day be a 2.0 where this shit gets cleaned up. But you're in the early to mid innings because I think it's going to go FTX, Binance, then Tether. But Mark, how much of that money, that trillion dollars, went through the big five banks? Far more than went through Coinbase or Binance.

Well, all I know for sure is the government now has the proof. Now, what they do with it, that's up to them. But they seized signature they have all the records so if they want to get to the bottom of it they surely will and they're clearly right in my experience going to go after somebody and somebody's really, really hard and make an example. And the fact that Coinbase wants to take on the government like this, in my mind, is a huge mistake. Huge mistake.

But I would take the dead opposite of that. I would take the dead opposite of that. And I'm not dismissing what you're saying at all. I think that there's definitely something there. But the implication there that just because they have the records, Coinbase did something wrong is a big jump in my mind. If Coinbase hasn't done anything wrong, and there's no evidence of that. And as Rand pointed out earlier, this suit addresses, well, first of all, it's just a Wells notice so far. There actually is no action from the SEC against Coinbase, which is very important for people to realize. But it really does generally address the wallet, the staking, of course, and the way that they listed

tokens, which really is talking about securities law and what's deemed a security or not deemed a security. And I think that that is a fight that Coinbase has to take on behalf of themselves and behalf of the entire industry. And what you're saying is that they should bow right now, delist effectively everything, become a Bitcoin-only exchange if they're in fear of the SEC, because it's the CFTC that's saying Bitcoin, ETH, Litecoin, and some stablecoins, and effectively blow up their business and become non-existent and irrelevant.

They can't do that. Their only option here is to fight, and living in fear of the boogeyman of some transactions doesn't seem to make sense if they believe that they're actively compliant. I mean, I understand part of what you say, and I don't need to be shined on on T-Zero, but T-Zero is SEC FINRA compliant and has recognized everything as securities. So if I'm Coinbase and the government says these are securities, Coinbase says fine. How do we combine that?

Which part of the government? Which part of the government? Because the CFTC doesn't agree. Well, somewhere, right, giving the money they spend on lobbying and the money they spend on influence, somewhere they can say, let's everyone get together and get to the bottom of this because otherwise we're sort of done.

So how would you guys have us comply to make everybody happy? There has to be, there is an answer. And the other thing is no one knows including myself what the government has including coinbase they may have whistleblowers they may have people who know things that no one else knows see no one knows and what but coinbase does know what they've done so you're implying that Coinbase should comply with everything that the government's saying and basically fold. Here's, you and I come at the world very differently, right?

I trust very few people in the world. I sure wouldn't trust the management of any companies. And I sure wouldn't trust the government. Okay, so I don't trust either one of them. But when they said we've done everything right, that's exactly what SBF said and everyone believed them. And everyone believed them. As they say, don't piss on my back and tell me it's a shower. Everyone in this ecosystem believes everybody.

No one's done anything wrong, right? I don't disagree with that notion at all. I don't agree with that notion at all. But Sam wouldn't have probably, in this case, wouldn't have been suing the SEC. But great. All I'm saying is I think the risk is kind of red. I think it's very high. To poo-poo anything that's going on with either Binance or Coinbase or Tether or other players in the system, given the fact that the government has banking records in their property and can access them up to a trillion dollars,

I would just kind of drive slow. Right. up to a trillion dollars, I would just kind of drive slow, right? I would just be very, very, very wary because no one saw this coming in the space. And it's far worse than anyone thought. And the government is the government. And they are all powerful, whether you guys believe that or not. And companies lie and managements lie all the time. All the time.

Signature put out a press release two days before they were seized saying everything's great. Right? SBF said everything's great. We're processing refunds. Binance, the same thing. Justin Sun, he had lunch with warren buffett everyone in this space and ecosystem lies that's a given so given they lie and given you guys have your money involved i would just be very careful that's all i'm trying to say just well john john i saw you had your hand up before you're a lawyer you're actually deep

in the weeds and actual little litigation with the sec so you probably have the most relevant opinion here what do you think well listen i don't think anyone could could um take issue with mark saying that you should be cautious that's that's certainly uh but you know as far as his opinion not fighting the government well i'm the guy you can imagine what my position is i recommend it i sued coinbase i'm not coinbase the scc nine days after their overreach in the ripple case when they didn't limit the case to just ripple and claim that the token itself is a security and secondary market cells are securities. I recommend it. Back then, the extraordinary thing, people laughed at me. I said Coinbase should entertain,

file a motion to intervene before the government can get under its skis. But when Mark says don't fight the government, so what's Coinbase do? Shut down? When Mark says listen to the government, who? When the government says it's regulators regulators gary ginsler who won't be there three years from now well what about when it's jay clayton and bill hinman they say ethereum is not a security but a new chairman says it is a security or implies it you have to fight the government when the government is corrupt and they overreach coinbasebase met 30 times. Coinbase has a broker-dealer license for securities and said, which one of these tokens are security? And the government says, we don't tell you. We don't give advice. The SEC says, we're not going to tell you which ones are securities, even though we're saying you're listing securities. These are assets in the secondary market.

And you have a government regulator who is absolutely crushing this industry for purpose. If you talk about the Hamas language, you know what it reminds me of? It reminds me of the Ripple case when they talked about they use fraud-like language, even though they didn't allege fraud against the executives. It's because it inflames people's emotions. When you talk about terrorists, that terrorist, Hamas language in the complaint is absolutely not necessary or arguably relevant to the underlying swap and derivatives charges. It's there to create the narrative for Elizabeth Warren and Gary Gensler to say, look, Bitcoin included is still being used primarily for illicit purposes to fund terrorism. It is a campaign that is coordinated, intended.

And I'm telling you, what's going to happen is they're going to crush this market until the incumbents come in and get a bigger slice. Go on Crypto Law US, my site. Gary Gensler in April 2018 at MIT discusses this issue. He says the incumbent players are not going to let this happen. He goes on to say that the disruptors will have to pay up to 50% of their business. The man's on video at MIT before being chairman is saying this. So let's recognize what it is. But if you have a regulator who is out of control, like Gary Gensler, your only option is to fight. That's my take. Yeah, I mean, John, I just pinned a tweet that I sent right after FTX,

which is Wall Street is going to sweep in and buy up our entire industry for pennies on the dollar, right? That's exactly what's happening. It seems like instead they're not going to have to buy it. They're going to be handed it. Well, that's exactly what's happening. I mean, look at the meantime. We have the NASDAQ is going to custody Bitcoin. You have all these other New York Bank Mellon and others getting involved in infrastructure and things like that. It's exactly what's happening.

But it is absurd to bow down to a unelected regulator who's going to be replaced in the next election, most likely. We can't have a system in the United States where one chairman and the director of corporation finance says, let me make it clear, Ethereum is not a security. And then turn around and two years later, the new chairman says everything, including ETH, is basically a security. That's just an absurd system. Let's not forget Coinbase is a publicly listed company that was basically given approval by the SEC in order to go public. What changed from that time to now? What changed is the threat got bigger, the banking industry is falling apart,

and they're panicking, and they're going to shut down this new industry until they can incorporate it. Go ahead, Gary. Classic move by the regulators and the institutions, guys. I wanted to ask the Coinbase gentleman if he feels like there's, at this point, picking winners and losers. I mean, I've seen this play out in so many industries. And this is my point about us getting smart. I really like what John's talking about. It's like Coinbase.

We should be applauding Coinbase for using shareholder dollars to fight this case. Okay, we're not big enough to do it. I actually moved money this weekend, realizing how much lobbying they're doing. I actually moved funding into Coinbase to support them. And that's a little bit against my thesis actually, but we need mature, large players that don't allow enforcement bodies that are basically, in my opinion,

enforcers for an organized crime syndicate to come in and keep being inefficient and costing Joe Domestic so much money. That's who this is really harming is Joe Domestic. And crypto and blockchain are designed to blow out all the inefficiencies in the analog financial industry. That's what they want to stop. So that's why I talk about let's get smart. Let's get mature. Let's clean up our side of the street because they're going to shoot holes at us all day long and they can do it. Yeah, Gary, interesting point when talking about choosing winners or losers. Until a week or two ago, I think people would have assumed that choosing winners and losers would have been choosing Coinbase as the likely winner. Because they've been the most compliant, they've effectively been close to the government, they are publicly traded. And that narrative has now shifted.

That, to me, was very surprising. I'm not surprised that the United States government is finding a way to go after Binance. I was pretty surprised that Coinbase became a target. That seems like poking a very, very big bear. Well, but you saw that NASDAQ once in on the game right so and so well of course yeah yeah yeah i mean listen fidelity's here they've been here from the very beginning so i don't think that that's in any way cahoots with the government but when you see nasdaq one day announcing that they're going to be hustling the assets and the next day allowing the trading

of the assets and by the way for anyone who's been watching from the cheat sheets, the NASDAQ is going to be listing the assets that the CFTC has said are commodities and not securities necessarily. So Ethereum, for example, NASDAQ has said they're going to offer Ethereum trading, once again, sort of putting them in the middle of that regulatory debate between the CFTC and the SEC. John, I want to ask you a question. Do you think, because I've floated this idea not to go too far down the tin hat, but do you think that there's specific language in the CFTC enforcement action against Binance about sort of the vagaries of digital assets first, but then specifically listing Bitcoin, Ethereum, Litecoin,

I believe, and a couple of stable coins as commodities very clearly that this was sort of a secondary maneuver for them to gain regulatory control over a part of the industry. And now is it a foot race between the CFTC or the SEC to get something on the books in a legal enforcement action to sort of deem these assets as such?

Yeah, I think that that plays a part because you've got to look at the fact that the chairman of CFTC stated at one interview, it has got a lot of publicity. I'm going to try to find it where he said he disagreed about Ethereum with the SEC. And so here's the situation. If they believe that this asset class is going to be around in the foreseeable future, that they can't completely stomp it out. If that's the case, then yes, you have the land grab that's going on and the CFTC is striking. What's more, the real interesting question, Scott, is will the SEC now come in and take and actually take an action where they claim that Ethereum and any staking rewards from Ethereum or other assets were being utilized as securities?

And are they going to do a piggyback action? I predict it, yes, because it's an all-out assault war against the industry that they're going to come in. And so that's going to be an incredible dynamic where you have one regulator saying Ethereum, Bitcoin, Litecoin, whatever else is a commodity. And then the SEC coming in saying, well, even if there's rewards from Bitcoin, that these assets, primarily Ethereum I'm focusing on, is being utilized in this yield-producing product as an investment contract with the exchange itself. And then you, so you could see that happening. And I actually have predicted that that's what's going to happen.

And hopefully I'm wrong, but that's where I see the fight going. And then you'll have two regulators arguing the same asset, a.k.a. Ethereum, is being utilized as both a commodity and packaged as a security. So incredibly nonsensical. I mean, when you stand back and look at it from the outside, we can't even get a definition of what the asset class is, but are trying to mature in this country and lead in innovation, it's literally impossible because we don't even have agreement on the most basic definitions or level of what the asset class even is. It's absurd. Scott, people need to realize that in 2019, the FSOC signed by Clayton, the CFTC chairman, the Secretary of Treasury. In 2019, the annual report to FSOC listed XRP, Bitcoin, Ethereum, and Litecoin, and stated that this asset class was growing exponentially. If you take XRP and you go back to 2014, the Government Accountability

Office for the United States listed XRP as a virtual currency utilized in decentralized payment system called Ripple. And then in 2015, you had XRP deemed a convertible virtual currency by the FinCEN. So the point being is that the U.S. government has been made well aware of these assets and this assets class. It's been discussed. And so when we get now from 2018 to today and we see all this enforcement action, it's just out-of-control regulators taking advantage of the fact that we have an inept, incompetent Congress that they know is not going to provide any regulatory clarity on this asset class at the earliest is going to be mid to late 2025, depending on the election in 2024. And so there's no doubt that your point is this land grab that's going on with the different governmental agency is another element of what's going on in the nonsense. I think it's pretty clear that the government views staking as a service, as a security,

which is what they went after Kraken for. And I think that that argument actually holds some water because it's a centralized, obviously, entity that's managing the staking and that there's a split reward, whatever. But we haven't gotten any clarity really on staking directly into the contract or what that is. And by the way, I'm a huge fan of Kraken and I defend them to the death believing that they didn't necessarily do anything knowingly wrong because there was no clarity and no way for them to register in the first place.

So they tried. But Coinbase has argued that their staking service is different. But I mean, this starts to get really, I think, maybe even to Mark's point, you know, it's a very scary fight to take on. I mean, if staking itself is deemed a security, it doesn't seem very logical to me. I mean, we're really starting to go down a very slippery slope here. Yeah, listen, the only clarity we're going to get is from the court system. And so and if everyone looks at what's happening in the court system, it's not the same. There are victories. If you look at the grayscale spot BTF issue, you had the court basically saying that the SEC wasn't making any sense. That's in essence what those judges said.

If you look at the Ripple case, you have a federal judge saying that the SEC are hypocrites who have lacked a faithful allegiance to the law. That's from not John Deacon. That's from a federal sitting judge presiding over the case. When you look at the Voyager bankruptcy, you see what the judge said there related to the SEC's conduct. So our victories are going to come in court. And so that's why I strongly disagree with any essence of not fighting these regulators. That's the only thing we can do, because I think we will win, because the law is not on their side. The Second Circuit is more conservative and the current

Supreme Court is way more circuit and they shut down the EPA's gross overreach in the West Virginia case. And so that's where our battles are going to be won. The only thing that I would say is I think you guys are missing the point that no one really cares about the SEC and no one really cares about the sec and no one really cares about the cftc the department of justice can put people in a place called prison and if the doj finds or any of their agencies find money laundering went through any of these places i would simply say all bets are off because there is something called the Patriot Act. And in discovery and in what went through Cignet and what went through Sen, if money was laundered through

Binance, Tether, Coinbase, any of these exchanges, you know, best of luck. And all I'll say is I'm suing the FBI. I'm suing the DOJ for FOIA when they came and knocked on my door and told me to quit hassling people. So I understand the struggle and I understand where you're coming from, John, where I think everyone is missing it is there are people who are under criminal investigation here. Criminal, not civil. SEC is civil. CFTC is civil. And instead of just saying, look at the big old mean SEC, they're not working with us. You know, great.

But if the deal, but if it comes out that the DOJ is deeply involved in Binance and the DOJ is going to start looking at Coinbase for what went through there, you guys will have wished you would have taken this a little more seriously. And that's how I'm saying it. I don't think they're not taking it seriously. I just want to see the evidence that that's happening. I agree with you in theory, of course.

The DOJ doesn't share evidence with me, you, anybody. They don't even share with the people who they're investigating. They'll just do what they do. But to think that a trillion dollars went through two banks that essentially were seized by the government and there wasn't foul play and waiting to see exactly what plays out, I think would make more sense. That's all I'm trying to do. I'm trying to say there's more to it here than I think meets the eye and that what you guys are digesting. And if you think, you know, there's nothing to it, just carry on.

No worries. Listen, for the record, that's why I said no one could take an issue with Mark saying you need to be very cautious. As a former federal prosecutor, I have to agree that if there is evidence of real money laundering, including to terrorism, including to cartels or any of that, that would be the linchpin to shut down, not crush, but to shut down. And so no, no one should not be cautious at this stage. Even if there isn't evidence of that, you should be cautious just because you have these regulators who are, in my opinion, coordinated and trying to crush the industry. So you should be cautious with that.

But I can't take an issue with that caution that Mark is saying. Yeah, I don't think anybody can take issue with being cautious. I just would love to see the enforcement. I will say this, you know, obviously I'm a Voyager creditor and everybody cheered when the judge of the bankruptcy attorney

effectively dunked all over the SEC, pushed the deal through, said that the assets could be transferred. And now the DOJ is stepping in and another judge is allowing that to happen. So it is a bit suspect that we can see that in real time in the Voyager case right now. It's only a stay for the moment, of course. But the very fact that we can't even get clarity in the legal system on something like this is very concerning. I will say I am a Coinbase customer

and I'm another customer of Uphold. And I can tell you the AML KYC that they put me through, I would very much be surprised if Coinbase, that doesn't to say that there weren't slips that could have happened, but I would be very much surprised if Coinbase had a serious money laundering issue through there now the question is these fake accounts you know the problem is what mark is saying is that regardless

if coinbase has been intended to be the best corporate citizen uh possible if there is evidence even if someone beat coinbase's system and coinbase was unaware, that's the real threat. And so that's why I said I would never disagree with what he said. Correct. We agree there. I'm glad we all agree. And to that end, unfortunately, I have to end this space and move on. It's been a great two hours and 20 minutes. What an incredible platform where you can move through so many conversations and incredible guests at such amount of time.

We went from effectively talking about the bankruptcy, the banking system and credit swaps to having the head of legal at Coinbase answer questions for 30 minutes to move into this incredible conversation. So I thank all of you, all the guests. Of course, you're welcome back anytime in the future. Amazing to have you and all your perspective.

And I thank you for spending your time with us. To everyone else, we'll be doing this every single Tuesday. Please share this conversation after it's recorded with anyone else.

And of course, generally we'll be on YouTube at 9.30 a.m. on Eastern Standard Time. Thank you guys so much for joining and for listening. Until next time, talk to you guys later.m. on Eastern Standard Time. Thank you guys so much for joining and for listening. Until next time, talk to you guys later. Peace. Thank you, everyone.