The Wolf Of All Streets - Bitcoin Is Winning As Treasury Takes Power From The Fed | Caitlin Long

Episode Date: September 13, 2026

Caitlin Long explains why she believes Operation Choke Point 2.0 is still alive, even as major banks embrace crypto. She shares what she saw in Fed emails obtained through her lawsuit and why she believes crypto banks are still being blocked. We also discuss what a forensic investigation could reveal about the Fed’s role in the 2023 banking crisis, how far up it could go, and whether anyone will be held accountable. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Adion, fintech built for your next move. What if the biggest transformation in banking isn't coming from banks at all, but from the technology they spent years trying to stop? Today I'm talking with my friend Caitlin Long about the explosion of tokenized deposits. The tokenized securities piece is dragging the banking industry into the tokenized dollar piece. Why she believes they could eventually overtake stable coins. Tokenized deposits access the entire liquidity of the banking system as a whole, and all the network effects for the banks being networked in the bank.

back end of their back offices already. And how traditional finance is being pulled onto crypto whales, whether they like it or not. Now you have the entire securities market going tokenized and all the derivatives and treasuries and commodities going tokenized. It's unstoppable at this point. We also get into the Genius Act, the Clarity Act, Operation Choke Point 2.0, the Fed's resistance to crypto, and why all of this could ultimately be incredibly bullish for Bitcoin. The financial system is changing fast.

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available depending on where you are. Talk to a financial advisor. So, Caitlin, it seems this This tokenized deposit stablecoin thing you've been talking about for a while might be catching on. Oh my gosh. Wow. Yeah. All the bank, you know. Yeah, I was just going to say in the last three weeks a month, in the last three weeks or month we had. So first of all, we have a consortium of tech companies that are launching OpenUSD, their own stable coin platform.

Then, you know, I don't know if the order is right. Bank chain from the community and regional banks. 39 state banking associations saying that because they're going to get squeezed by the crypto companies and the big banks, they need to launch their own stable coin network. And then, of course, we have all of the big banks coming together and saying that they're going to launch their own stable coin. So, you know, it's happening. My big thing, of course, this is not a surprise to me. And we've been playing in this. It's custodians been working on this since 2020. My big observation is the Fed should have listened to us when it had to

it's Faster Payments Initiative in 2016, where we said, don't build Fed now, build tokenized deposits. And look what's happening now. It's overtaking Fed now. Now, the Fed's making a huge push to have a settlement vehicle for these tokenized dollars be fed now because it's 24-7. But there are limits on the size of transactions that can go through on Fed now. And the problem is that the large value payment system in the banking system is fed wire, which is not programmable.

So it's not really interoperable with all these tokenized dollars. Now you have the entire securities market going tokenized and all the derivatives and treasuries and commodities going tokenized. It's unstoppable at this point, Scott, and it's incredible. Did you expect it to happen this fast? Because it seems like a hockey stick of weight. Is it fast? You know, I mean, some of us have been working on this since 2014, you know, was when I started

working on it at Morgan Stanley before I left to go to Symbia, which was one of the original tokenized securities platforms. And it was just too early. That was its biggest challenge, right? Its competitor back then was digital asset, which did survive and is now the Canton network. So, you know, sometimes with a lot of these things, if you're just too early, surviving is the most important thing. And I'm still really, really glad it. I think you and I've talked about this in years past that I switched from working on tokenized securities to tokenized dollars, because to me, until we have a tokenized dollar, you're not going to have the real benefits of tokenized assets, including securities, commodities, derivatives, loans, what have you, until you can

settle the dollar leg in a tokenized form. And so it's really, it's almost got, I think, that the tokenized securities piece is dragging the banking industry into the tokenized dollar piece. And my prediction, this will be controversial in the crypto space, is the tokenized dollars will squeeze out stable coins. And it's because there's just so much more liquidity behind tokenized dollars, right? If there's a... Find the difference because I think most people probably just went isn't a stable coin a tokenized dollar. Well, tokenized deposits will squeeze out. Did I say tokenized dollars? The dollar does immediately because I think you've been tokenized deposit.

I mean, I met tokenized deposits. So my bad, let me restate it. tokenized deposits will squeeze out stable points. They are all tokenized dollars. And why is it that tokenized deposits will squeeze out stable coins? It's because tokenized deposits access the entire liquidity of the banking system as a whole. And all the network effects for the banks being networked in the back end of their back offices, already and all the liquidity that can be accessed.

Granted, it's not 24-7, but I literally had a prep call for tokenized deposits versus stable coins panel that's coming up at the Philadelphia Fed, where I think the bank folks assumed that I was going to be raw raw stable coins. And I came out and said, I think tokenized deposits are going to elbow out stable coins in velocity and volume over time. And it shocked the bankers to hear somebody who's perceived to be a crypto person saying that. Yeah.

Yeah. It's still crypto to a degree, right? Of course. It's just a technology. It's the same technology. But we're seeing all these announcements that seem to be stable coin. So I wonder if this consortium of big banks that we're seeing, you know, that's talking about launching this stable coin, I wonder if that's the same conclusion

that they'll arrive at by the time they launched this. It sounds like they're making a stable coin. Well, again, some of these things are semantic differences and the definitions of these things are still evolving. The word stable coin is sticking for sure. But when Vantage and Custodia talked about our first ever bank issued stable coin, it really was a tokenized deposit that we did in 2025. that the terminology had not actually evolved yet because it was a bank-to-bank transaction.

So everything bank-to-bank is going to be tokenized deposits. And once you go outside of the network, then it converts to a stablecoin. That's what our token in the Hazel network does programmatically. There's no crypto exchange involved. It's literally the same token. So the engineers will look at it and say, what changed? The answer is nothing on the technology side. It's literally the same token, but the legal characterization and the obligor and the regulatory structure is very different depending upon whether the token is inside the network or outside of it.

I think what a lot of these stablecoin announcements from the big banks are is private stablecoins because a lot of the big companies are still really afraid. their Stockholm syndrome, they've been beaten down so many times by the federal bank regulators to hate crypto. And they haven't made the jump yet from public blockchain to, sorry, from private blockchain, private permission to public blockchains. We're calling at an in Hazel network, we're calling our network a permission to public blockchain because it's ERC20. So the engineers will recognize it as a public blockchain, absolutely.

But to get access to the network, you've got to go through a bank. So therefore, it's permissioned in that way. But long story short, all these terminology is still evolving. And I think some of the things that have been announced by the big banks are we're going to eventually call those tokenized deposits, not stable coins. So a lot of this, I think people would say it was made possible by the passage of the Genius Act. Yes, definitely. And we're still now waiting for the Clarity Act. And, you know, when this comes out, we'll be days away from the cloture vote in the Senate. What do you think about

the Clarity Act and odds right now? Less than 50-50. Still possible, but far less than 50-50. The Democrats just don't want this. Do we need it? Does it matter which parts of it would impact this stable coin in tokenized deposit conversation? Well, that all has to do with yield, right? But the Genius Act is what we needed for tokenized dollars. So yeah, I mean, from Cosodia's perspective, since we are a Genius Act, the Genius Act, of course, is not effective yet. So anyone who claims to be a Genius Act compliant stablecoin issuer is not being accurate, but we are intended to be a Genius Act stablecoin issuer. That's what we're structured to be. And so from our perspective, clarity is nice to have, but not a must have.

And for the crypto exchanges, it's a lot more important. And for tokenized securities and other tokenized asset classes, it's a lot more important. Tokonized securities are happening insanely fast as well. Yeah. Isn't it awesome? I love it. Yeah. DTCC talking about everything being tokenized.

When they just, they push back so hard. I mean, Scott, it's so crazy. You know, I remember the Delaware blockchain initiative in 2015 and 2015. 2016, right, more than 10 years ago now, you know, trying to do tokenized securities and all the DTCC push back against all this. And now 10 years ago, it's, you know, everyone's racing to, you know, to be among the first to get it done. It's just so awesome because it's going to drag the banking industry into the 20th century. So then that gives the inevitable sort of question of what was this all created for and was it for us to be on team big bank? Right. It's so interesting.

Somebody told me just yesterday, you are the most misunderstood banking executive. And it was actually when I was recounting the story about, you know, everyone just assumed because I was a crypto person that I'd be raw, raw stablecoin. And I was like, no, tokenized deposits are going to be, you know, crowding up stable coins. And that just shocked, you know, the banking people are all nodding their heads, right? And it just shocked everybody. But I've always believed that, you know. So if we step back, what are the first principles? To me, the most important thing about crypto is the ability to have peer-to-peer transaction.

It's not having lots of liquidity in markets so that bid offer spreads are really tight. To me, the most profound thing that anyone has said in the last several years about crypto and Bitcoin is Nick Zobbo in 2021, at Bitcoin 2021. he gave a talk where he basically said liquidity is nice to have. Sure, it's great bringing all these suits into these markets, but that is not what we're here for to answer your earlier question. The fact that it exists and that you can transact peer to peer, you don't really care whether the daily bid offer spread is tight, whether there's a lot of liquidity and trading volume on a daily basis.

What you care about is when you need to liquidate it to pay for your living expenses, is there a a way for you to do that. And yes, the answer is you can do it peer to peer. So yes, the fact that the suits are here and that we have all these institutional markets is great. Now, if you step back and look at my career and the fact that I was working on tokenized securities more than 10 years ago and started working on tokenized dollars

at Custodia in 2020, what was I really after? It was creating that bridge between traditional finance and the crypto industry, these new technologies, go back and look, it'd be fun to go back and look at the tweet that I sent at the Fed over the Faster Payments Initiative, I believe in 2016, saying y'all to look at stable coins in 2016 when vast majority of people

hadn't even heard of them. And I saw it then that, that, you know, doing a Web 2, 24-7 real-time payments system, which is what they ultimately built in Fed now, was gonna get overtaking. taken by these tokenization technologies. And that is what's happened. There's more volume and value transacting

in stable coins than in Fed Now. Because so many of the banks have not signed up. There's an interesting dynamic where because of the caps on Fed now, and because of the way the rules work, most of the banks who integrated with it are receive only. So there's not a lot of send happening in Fed now. And frankly, you know, I think tokenized deposits will ultimately crowd that out as well. We are using that at Hazel Network.

We are integrating because Vantage was one of the beta testers for FedNow. So they've been integrated with Fed now for years now. And so we're using because of the Genus Act requirement for fast redemption. We're using Fed now as one of the Fiat rails for redemption of a stable coin because it's, you know, 24-7. real time. But again, there are caps on it and the like. So long story short, it's there, but I think it's going to, most of the volume and value will be ultimately transacted on these tokenized systems. And it's happening so fast. God, it's so much fun. You have such a complicated relationship with the Fed. Yeah. Well, it's so fun. I mean, literally, one of the people on this

call, this prep call has been a nemesis, right? And, you know, it was just sort of fun to see the proverbial jaw drop because as someone said, you know, you're the most misunderstood person. My principles haven't changed. What I've been working on hasn't changed. It's just that the markets have moved this way. And I think everyone in the banking space saw a traditional person. Remember, I spent 22 years at Credit Suisse and Morgan Stanley, you know, traditional. financial finance, right? That's my background. Wanting to connect these two systems, I've spent the last 10 years working on that, 10 plus years working on that. But yet, if you step back and think about it for the purists who

think, well, why would we want to have sort of an intermediate step? Why do we even want tokenized deposits? Stop and think about the infrastructure. There's wallet infrastructure now going into the core of the banking system. People can vote with their feet. And they That matters. So you still need a way to convert your Fiat currency because, let's face it, that's what we're all paying for our utility bill and our gas bill and, you know, at restaurants with where most of us are still using traditional rails, not Bitcoin, to pay for our day-to-day expenses.

So you still need a way, you still need a bridge to convert them. Those bridges are getting built really fast. And I love that, you know, just look at the daily transaction volume on these stable coin card bridges. Look at what Visa is doing. I think it's $20 billion a day now in stable coins. That's global, but that's pretty significant. It is, and wait until tokenized deposits start coming in. Right now that doesn't really exist.

Okay. So in an updated status on Operation Joke point 2.0, now that all the banks are participating and are they still trying to kill us? Yes. Yes. Yes. Yes. Certain are. Yeah. Again, there's still this perception that crypto bad, regardless of whether you are, you have a squeaky clean, you know, compliance record, regardless of whether you're actually regulated like a bank and have to go through full scope bank exams as we are. Right. Look at the outcry. When the Fed gave Cracken its master account, it got announced in March. If you look at the database, though, they signed the documents in January. Look at what the banks did, the screaming that took place from Elizabeth Warren and that crew over that was insane. And if you go look at how that bank is regulated, they have the same charter we are, they're going through a full scope bank exam with camel scores. Bankers know what that means every year. That is a far higher bar than what a trust company or a money transmitter has to satisfy. But the wild thing is that the CEO of Cracken Bank testified publicly about a month ago

that even though they got the account in January, the Fed had not let them operationalize it yet. And if you put the puzzle pieces together, they had a 12-month trial, and it's eight months into the 12-month trial. And they hadn't let them turn it on yet. So it was never real, is what I concluded. I'm not shocked because the Fed just plays games. And if you step back and look at what's really going on, all the jobs, Genus Act rules, of course, have been proposed by Treasury by the other bank regulators like the FDIC and the OCC, but the Fed has not proposed its rules yet. They all take effect at the end

of January, 27, automatically per the Genius Act. And they haven't even proposed their rules yet. That tells you the Fed is not on board with any of this. They want to go back to, you know, just traditional systems and traditional banking. So in the case of crap, and they're kicking the can down the road basically. Yeah. I mean, and you know. Yeah. Like, you know, publicly announced that okay.

And I actually do happen to know a lot about what happened in that situation. There is a back story. It has nothing to do with Cracken. There is a backstory. It's just the DC politics. And by the way, may very well have to do with our pending lawsuit that they want to be able to say, see, we did give one crypto company a master account, but it was a three-card Monty. It was, okay, we gave it to you, but we won't let you use it.

Big difference, right? So classic Fed, right? But what's really going on, just look at the data. The Fed hasn't even announced its Genius Act rules yet. Banks read those body language things and realize the Fed is not on board with any of this. They want to be the bouncer of the crypto industry and trying to kill it still. And in spite of the fact that there are a couple of people who have made some positive statements at the Fed, look at what they've actually done. They're still dragging their feet.

There's definitely still Operation Show.2.0. By the way, I'm super psyched on that topic that Alan Lane published his first public remarks about what happened to Silvergate. He is, I'm so happy that he's able to get the story out. He obviously can't tell the full story. And he talks about why, because it's illegal for him as a banker to disclose what's called confidential supervisory information. that was set up to protect banks against bank runs. The regulators weaponized it to do all these probably illegal things behind the scenes and not let executives like Allen tell the truth about what the Fed did to it.

I happen to know from some of the service providers in the room who owed a confidentiality obligation to Silvergate, but obviously after it collapsed, you know, they didn't really have anyone that they owed a confidentiality obligation to. So one of them told me the whole story. Silver Day was assassinated. What Nick Carter wrote back in 2023 was absolutely correct. It was assassinated.

And it started that spring 2023 bank run, because if you look at the data, Silvergate's announcement that it was voluntarily liquidating, i.e. assassinated by the Fed, triggered the Silicon Valley bank run the next day. And then two days later, signature bank failed. So the Fed triggered all. The Fed triggered all that.

Failed, right. Yeah. Well, yeah, but you know, Silvergate never failed. What they did was liquidated. They didn't have to hit the deposit insurance fund to pay back depositors. Silicon Valley Bank and Signature Bank did. Both of them did actually hit the deposit insurance fund. So I think it is fair to say both of those banks failed, whereas Silvergate liquidated.

It's shareholders took it on the chin. But, you know, there is an investigation going on into this because the Fed at the time published a, a its own, you know, internal review about a month after the failure, right? In one month, what can you really accomplish is an interesting question. So vice chair Bowman, who's a Trump appointee, hired an independent forensic investigator to review all of that, all of that. And that report has been delayed.

The public testimony is that people at the Fed have not been cooperating. with the Fed's own forensic accountant investigation into what happened in the spring 2023. I am not surprised. Why am I not surprised? Because remember, I got discovery on the Fed and I saw some of the email exchanges, some of which were made public in our lawsuits.

It was pretty clear that Operation Chokepoint 2.0 was underway. What I was able to piece together from insiders who came forward was it was all coordinated and Custodia got caught up in that, but it was a bigger, broader thing that targeted Silvergate, a United Texas bank, and a number of other banks at the same time. They all got consent orders and nasty grams from the Fed, and it was two weeks after FTX failed.

And it was all coordinated. I cannot wait to see what that forensic investigation is going to show because don't be shocked if what does come out is that there was illegal behavior and don't be shocked if it goes all the way up to the top or very near the top of the Fed itself. Because I do happen to know the people who were involved in all this. And they were coordinating with Gary Gensler and with the Biden White House with people like Lail Brainerd who came from the Fed and was the head of the National Economic Council during the Biden White House when Operation Show. 0.2.0 happened. And by the way, all coordinated with Elizabeth Warren, too. And don't be surprised if nobody gets in trouble when it all comes out.

Yeah, that's going to be the sad thing is that, you know, like the cynicism of your question is, yeah, laws were broken, but does anyone care? That's the sad thing. I mean, at this point, I just saw something, 84% of American voters think the government is corrupt. And I'm surprised it's only 84% because we don't realize it. people or 16% thinking. I know, exactly. They're probably the ones working for the government who probably think that everything that gets done

is, you know, by the book, but it's absolutely not. I was talking with someone who is working on a lot of pardons. There was a famous case in Wyoming where a diesel mechanic got a Trump pardon relatively recently, and he just took the, whatever the regulator

of the engine was, the diesel engine off because it reduced the performance of the engine, but of course, it broke some, you know, regulation from the, I don't know, EPA or someone like that. And so the Biden administration went after and criminally for being the mechanic that did this. And Trump pardoned him and other diesel mechanics who were doing the same thing. And anyway, the conversation he and I had was that, you know, just how many times the government abuses its power and just breaks the law and gets away with it. And it was interesting to hear it coming from someone who works on pardons because these are people, you know, who were criminally charged in some cases in ways that

actually broke the law. And that's the kind of thing that he was, he's working on, writing the ship. But it makes you wonder how many, how many of those the government gets away with. If you make the law, you can't break the law, right? Yeah. Well, and you know, the crazy thing is just how the courts have not been reliable in and there's I'll eventually have a lot to say as being someone who's working you know obviously in the court system to try to get justice for my company it's that's that that is a broken system too unfortunately okay so I want to talk about the idea that the Fed has not written rules for genius which are supposed to come into effect

in January of 2027. What happens if they just don't? Genius Act takes effect. Genius Act takes effect. So they do need to write some rules at some point, right? Eventually, they're going to have to comment on this in some way, shape, or form. Yeah, I mean, the way the banking industry works is there are three bank regulators, the national bank regulators, the OCC.

The FDIC is a bank regulator primarily for state chartered banks. And then the Fed is the other federal regulator, again, primarily for state charter banks. So every bank that is regulated by the Fed that wants to issue stable coins is going to be jammed by the fact that the Fed hasn't issued its rules yet. Now, I saw something that they've sent their proposed rules over to the Office of Management and Budget, which is a precursor for getting them out. So eventually they're going to get published. But they were all supposed to be completed by July.

And these rulemakings are typically that you have to keep the rules open for 60 days. And then, you know, thousands of comment letters come in. And the government actually has to take the time to read them by law and incorporate the comments into the final rule. So the OCC was supposed to everything was supposed to be done by July. The OCC missed that. And Jonathan Gould, when he was out in Wyoming at Skaramucci's conference a few weeks back, said that they will have all of their rules done by November. So the OCC missed it by, what, five months or so,

but the Fed's going to come in under the wire. So unfortunately, it hurts the Fed regulated banks because they don't really know what the Fed's going to say. Now, we kind of know because we know what the Genius Act said and we know what the FDIC and OCC rules are. But the fact that the Fed didn't join in in those rulemakings with their fellow federal regulator, By the way, all three of those agencies historically have been like this.

They don't like each other. They all jockey for power. And the Fed views itself as the super regulator above the other two. And so, you know, I don't know. The Fed might go on its own way because it's the most independent. It's anti-Trump. It's very political in spite of the reputation as being a political. It's very political.

And it's very anti-Trump and very anti-Crypto as a whole. But we also have a midterm election between now and that Genius Act implementations and a very good chance that certain houses of the government may switch sides. Well, what does it mean if we get a blue wave and all of a sudden it's Trump and a Democrat Senate and a Democrat House or one or the other with when it comes to all of this rulemaking and the laws that are being implemented and whether they'll last. I mean, genius will last, obviously, it's law. Yeah, genius is law. They're not overturning that. They'd have to get Congress to overturn it at this point. But I actually think that that's part of the reason why the Fed has been foot dragging,

is they're hoping that Trump loses the midterms and the momentum for all this goes away. And so even on the Skinny Master account proposal, that's scheduled to take effect at year end. There are rumors that some of the people pushing that inside, well, a lot of the people pushing that inside the Fed are gone. They've done a lot of downsizing in their innovation group, which is quite a statement in and of itself. And I'm aware that certain people who used to talk about stable coins were told not to talk about stable coins anymore. And you'll see that that has basically said nothing about stable coins for the last, you know, five, six months.

That's not an accident. So long story short, I think that the powers that be, and Kevin Warsh has not taken control of this yet. I mean, he's got other stuff on his plate, of course, but he has not fired any of the anti-crypto people who are still there. It is. It's because it's not on his radar. Like, he's not going to fire people for being anti-crypto.

I don't know. I mean, apparently he and Trump talk a lot. It's on Trump's radar. So I don't know. It's an interesting dynamic. But they set it up so that the Fed is kicking the can post the midterms. And my read of it is that they're praying that Trump loses the midterms. and that the momentum for all this goes away.

But to your point, I mean, they can't dodge it permanently. It's just that they want to be the anti-crypto agency. They want to be the bouncer of the financial system. And the bouncer of crypto, they view themselves as the last, you know, as the only serious agency, which is obviously not true. But that's how they view themselves. And so they're trying to be a blocker here is how I read it, unfortunately. So what happens if we do get that blue wave and Elizabeth Warren is back at the head of, you know?

Of the Senate Banking Committee. That's, wow. I mean, I try to stay pretty apolitical. You do. But stop and think about that, you guys, when you're casting your votes. But I mean, what does it look like if she, you know, like this? So we had this beautiful Goldilocks moment after the election where it felt like crypto was no longer political. And maybe the anti-crypto army was dead and maybe their rhetoric was not palatable to voters. So at least even if they believed it, they would be more quiet and subversive about it. Then obviously we got like Trump meme coins and all these other things.

Oh, unfortunately. Oh, horrible. Right. That have muddied the waters. But so then that reinvigorated the- Well, and Hunter Biden did the same, right? And his meme coin crashed 99% this weekend. I thought that was glorious.

I saw a Geiger Capital say this is just perfect. I laughed. I'm like, oh, I feel sorry for the people who there's not many of them on it. I mean, I wouldn't have touched any of that. But it's become palatable to be the anti-crypto army. I mean, they're, right? So like, yeah, right? The anti-crypto army comes back into major power in the United States.

Oh, I mean, there's a real plausible argument that Elizabeth Warren is likely to become the Senate banking chair. They must be able to do if she goes all in again. Yeah, there's some debate if the Democrats take the Senate. whether Sherrod Brown, if he wins election to come back into the Senate, remember he lost last time. And he was the Senate banking chairman, but he's not much better than she is on crypto. He was very anti-crypto. So just again, just think about the dynamic. You may like your local senator, but putting Elizabeth Warren back in majority, she's going to, I mean, she clearly has.

has, again, I know a lot of stuff that's eventually going to come out. She has no compunction working with unscrupulous people to try to take down the crypto industry. She's just like a religious fanatic against everything, technology innovation. And it's ironic that she calls herself a progressive because she's anti-progress. Okay. So there's a world. I'm not trying to do the worst case scenario panic thing. But okay, she becomes head of Senate banking.

And then two years later, the Republicans lose the midterms. And she's again in a new presidency or about who should run the SEC and who should run the S-FTC because that's how we got Gensler last time. So I'm not hyperbolic, right? And she had people in the White House advising Biden that were, you know, in his ear about crypto. So that can happen again. Oh, yeah. She put her people in charge of presidential personnel. that's how she controlled all this.

So, you know, now that she's shown that template, I'm sure others will try to copy her and get their people put into positions of power. But, you know, the Biden, obviously Biden was kind of checked out, right? And so I don't know that there will be someone so malleable next time, you know, where functionally there were multiple presidents of the United States and she actually happened to be the one controlling financial services functionally because she had all our people.

You can't take our timeline for granted. No, I mean, it's very real. It's very real. It's crazy. I love that letter that Scott Besson sent her about how she just doesn't understand how a swap works. Holy cow. And she might be in charge of Senate banking, right? He just eviscerated her.

It was awesome. But what it showed is that, you know, she doesn't understand market. She doesn't understand these financial products. She's a smart woman. Keep in mind, she was a Harvard law school professor. While I was in law school there, my roommate was Warren was her favorite law school professor. She taught bankruptcy. I never took a class from her.

But, you know, she was my law school roommate's favorite law school professor. And she was well liked and well respected back then. She is not dumb, but she is just a religious fanatic on not understanding financial markets. Speaking of financial markets, just zooming out away from the specific to crypto conversation, it's been a pretty tumultuous and wild time in market. You mentioned invests before my brain naturally went to this bond intervention. Yeah. There's comments about Japan saying that he's the house.

He's the house now. Yeah, exactly. Just wild things, I think, happening on the macro front. And I would argue that that has been the catalyst for Bitcoin to kind of move off the floor. Oh, absolutely, no doubt. Doing all of that right now, just the sort of general macro picture, because it seems exceptionally complex. And now crypto and Bitcoin are a part of it. Yeah, it's definitely.

And trading with gold, too. And sort of the debasement trade is starting to work again, even though gold and Bitcoin decoupled, you know, up until that point. But yeah, yeah, there's a very clear. point where the 10-year treasury yield started rising, and it was when the Iran War started. And then the intervention, to your point, the most recent run-up from low 60s to 80,000, is definitely a debasement trade kind of thing. You know, it's the bond market vigilantes are back. That's the thing that I think about.

I started my career in 1994 when the bond market vigilantes were major. And we're really pushing Alan Greenspan into what was the first, you know, really interventionist fed, you know, post-World War II. And in that regard, because Volker had tried to break the back of inflation and, you know, raised interest rates, short-term interest rates were 21% at the peak in the early 80s, right? And then, you know, Greenspan came in. There was the committee to save the world, the Plaza Accord, all that sort of history in the 80s. That was interventionist, but it was coming more from Treasury. But Greenspan, when the 87 crash happened, that's when Fed intervention started. And then there was the bond market vigilantes in the mid-90s pushing back against everything that was being done.

And Greenspan, you know, kind of crushed them. But I remember the famous saying during the Clinton era of James Carville saying, when I die, I want to get resurrected as the bond market because they really control things. Well, back then they did. And then, you know, all the Fed interventions did tamp that down. But what it did was just build, it's to use Nassim Taleb's analogy, all it did was basically just create fodder for the next forest fire so that when it eventually comes, it turns into a conflagration because you didn't let the underbrush burn when the forest fire would have been a small

one and so when it eventually comes it's a conflagration and it seems like the bottom market vigilantes are back is the conflagration coming or is this just a skirmish and you know because Bessent and and Wors are Bracken Miller Acolytes you know they've maybe they're working together I don't know we'll have a few words for he did you did I although I look at that some of those things are PR and somewhat coordinated to try to help, you know, maybe boost credibility in a market where, let's face it, at $40 trillion of debt with most of it now short term, we're headed to the point where the refinancing schedule for U.S. government debt might be $40 trillion every three months.

That's an awfully heavy issuance calendar, right? Because we didn't term it out. The U.K. turned out a lot of their government debt. So they issued very long term. And in a steep yield curve environment, which is how the normal yield curve, would always be, you're taking higher short-term interest expense because long-term interest rates are typically higher than short-term interest rates, which makes sense. There's a time preference, right? You have to be compensated for not consuming today and saving. You want interest rates to be positive.

So this whole idea that interest rates can be negative and that yield curves are inverted is a function of the intervention and central planning that takes place at central banks in the economy that is not the natural state of things. The natural state of things is an upwardly sloping yield curve. But long story short, the UK did, you know, 10 years, 20 years ago, start issuing a lot of long-term guilt. Whereas in the Yellen and Besson era, it's been a lot more short-term because that allows them to basically do de facto QE and the Treasury becomes more important to markets than the Fed.

but that long-term relationship between Besson and Warsh could turn out to matter. There's no question Treasury is taking a lot more power from the Fed. And by the way, one of the most interesting things that happened in the last few weeks was Treasury taking the power to recognize foreign stable coins. Typically, that would be the Fed that would, because they manage the Eurodollar market through central bank swap lines and the like, right? So they basically get to say operationally, you know, who gets, gets access to the Fed's balance sheet through swap lines on these for foreign central banks.

But what Treasury did was say we get to say which foreign stable coins can come onshore into the U.S. So Treasury just dominated the Fed by saying we get to we get to tell the Fed which foreign stable coins they're going to have to accept through the central banks. What does that mean? That's just another data point that Treasury is dominating the Fed, but step back and think about it, the Fed's anti-crypto, anti-tokenization. So the Fed created that opportunity for Bessent to dominate the Fed because of its own intransigence about tokenization technologies. This all seems really good for Bitcoin. Absolutely. Yeah, I mean, that's probably the biggest takeaway of this whole conversation.

I realize you and I usually talk Bitcoin here. We're talking banking and, you know, fixed income markets and financial sector plumbing. And some folks probably are used to for that. Yeah, it is definitely mattering because we're figuring out how tokenization technologies have to plug in to these traditional Web 2 technologies that are in some cases, you know, 30, 40, even, you know, with the ACH system, 50 years old, right? And that's not easy. That is not easy. And a lot of people are working on it. And it's going to happen this time for sure.

Yeah, we talk about the bond vigilantes being back. I know we got to go in a couple minutes, but I mean, people seemed already forget that Powell tried to lower rates and interest rates went up, right? So long term interest rates, yeah, yeah. This has been happening. Oh, yeah, yeah. And it's global. But the Fed and Treasury interventions, none of them have worked now for quite a while.

Yeah, I mean, you know, the Fiat Bears would look at this and say this was entirely predictable, right? because the global Fiat system basically copied the U.S. system and it's not stable. Does that mean that it can still, you know, run another 50 years? Sure, that's one scenario. Could it end tomorrow? Sure, that's one scenario. It's very unlikely that it, you know, we have sort of the big collapse tomorrow. But I wouldn't be shocked.

Let's put it that way. All the Bitcoin people would say, see, I told you so. But a lot of folks have been saying this for 50 years. And I think the more interesting question is why it has it, why did it not collapse when the U.S. abandoned the gold standard in 1971? I spent a lot of time digging into that question. That's the more interesting question. Why hasn't it collapsed yet if it's inherently unstable?

And the answer is we had a really great balance sheet in the United States. We had a lot of asset value that was not encumbered by debt. And yeah, we keep encumbering more and more and more and more and more of it, right, by debt, not just in the government sector, but in the private sector too. but there's still more asset value in the United States. We still have positive equity. I used to track the implicit value from the Fed's Z1 financial statements. And as long as we printed $1.5.5 to $2 trillion of new money a year,

so M2 basically goes up by $1.5 to $2 trillion a year, then the dollar system was going to keep going. But what that tells you is that all of this lip service about reducing the Fed, balance sheet and it was never going to happen. Lynn Alden's right. There's nothing stopping this train. What a what a time to be alive. Thank you so much as always really a amazing conversation. I think Bitcoin's going much higher. Oh yeah absolutely I've never thought it wasn't yet it's just super cyclical and um but the more nonsense the more you want to just check out and just be done with it. Yeah. Well, and unfortunately, I know, I know we got to stop, but I have not given,

given the cold card hack and everything that happened that really, really stung a lot of the people who did, do everything right, so to speak, for self-custody, don't give up on it. There was an obvious fault there in not having sufficient entropy in the private key generation. And unfortunately, with all these AI tools, you know, it's, there's just new, It's not just a hack a day, it's multiple acts a day now. Web 2 is just not secure. So I'm even more bullish on self custody. Exactly. So just don't give up, folks. And use it as hopefully cheap tuition. All of us have been burned by self-custody and, you know,

screwing things up. And the more you practice, the more you learn, the more you understand, the more you take on your own self, the better. you are invest in yourself, invest in your own knowledge. That's the best advice to navigate through this incredible time that we are alive. And I'm incredibly optimistic. I'm worried about, you know, the stability of a lot of parts of this U.S. economy, but I'm also incredibly bullish on the world that we have in front of us. What a time to be alive, as you said. Well, thank you. What a great way to end. Thanks, Caitlin. Thank you. Take care.