The Wolf Of All Streets - Bitcoin Vs. US Debt Ceiling | Live Panel With S&P Global DeFi Team

Episode Date: May 18, 2023

Charles Jansen, Head of DeFi Transformation at S&P Global, and Charles Mounts, Chief DeFi Officer at S&P Global, discuss the US debt crisis. ►►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.

In the short term, the world seems to be focused on the debt ceiling talks in the United States, whether it will be raised or not, and what that could mean for multiple asset classes. Of course, here, we want to talk about what that could mean for Bitcoin. But with the three guests that we have today, I have Charles and Chuck from S&P and James Sicklin from Elwood. We have three absolute beasts in the world of institutional adoption in crypto. So inevitably inevitably that's where the conversation is going to head because these guys are on the front lines of institutional adoption every single day you guys don't want to miss this conversation and i'm going to go ahead and just

bring the guests on right now i've got charles janice and charles now your third time here i think and chuck your second the the three of us actually met at Mainnet in New York City, right? And we would be bringing on James, but he's having a spinning pinwheel camera situation. So we're just going to go ahead and assume that he's going to make his way into here. I think both of you are likely at the Bitcoin conference in Miami, right? And that's really starting today. So have you had a chance, either of you, to head over there for any of the pre-events or seen what's going on? Not yet. As soon as we're done here, we're heading over there to spend the rest of the day and have

a full day and evening of activities lined up. I'm sure. And so what is your focus being there? You guys obviously work at S&P Global. What are you looking to accomplish when you actually go to a conference like this? Because I met you guys at one, obviously. So, you know, there's a few kind of levels of that. So at the one level, it's really about just being in the ecosystem and making connections and learning. And the first day we found last year, the first day of the conference was particularly helpful because there's a lot of other institutional players in the arena. And so that's always super useful for us. And it's really about connecting with the, particularly around the institutional players and understanding what some of our traditional clients are doing in the space and what they're looking at around Bitcoin. And then seeing what new capabilities are evolving in the ecosystem and making sure we get connected at the right level with the different protocols and different market participants we

see at the conference. Charles, is there anything you want to add to that? No, it's really this. It's the networking. Everybody is there. You've got sometimes, I think, probably some regulator. We've got senators. You've got the Congress. So it's super relevant to be there. Yeah. And when we met in October, Charles, we've spoken since,

but we had been in the bits of a crypto winter with quite a bit of contagion and problems, but we had not gotten FTXed yet. So now, having this conversation roughly six months later, how much of your outlook has changed? Has it shaken your confidence in any way, shape or form? Are you seeing less institutions interested in the space? Are they holding off and seeing what happens next? What's the general vibe with the institutions you've been speaking to? I can take a first look on that. So there have been a lot of questioning around, you know, FTX

and what it meant and what happened, etc. Overall, I think everybody understood it was just fraud and it doesn't really have anything to do with Bitcoin or DeFi. And we spoke with many other institutions. They kind of have the same answer, like, well, a lot of sessions to explain what happened, what it is, because the big difference with Terra Luna, for instance, and FTX is that FTX really made the news. So everybody heard of FTX.

And so you had to really explain what happened. But overall, I think for us and also several institutions we spoke with, the sponsorship is still there, maybe even stronger than before. And everybody sees that, well, this is happening, tokenization of everything, et cetera. And there's a lot of push overall to just be part of that

and participate. Chuck? Yeah, so I would say that following the FTX kind of failure, we did have to shift gears for a period of time to kind of do internal explaining or explanations of what it means. And, you know, for us as a rating agency, like, look, we are well-versed in the history of kind of financial failures. And this one was straight out of the books. It was a combination of fraud, poor risk management, mismatch asset liabilities.

This is an old-fashioned failure and really had nothing to do with the developments in decentralized finance or Bitcoin or digital assets, other than the fact that FTX was involved in those marketplaces. But the failures of the company are old-fashioned, kind of happened a million times. And so we just had to spend some time explaining that internally, but it was well understood and kind of resonated with the internal audience. And certainly from our engagement with stakeholders and the traditional stakeholders in the ecosystem, what we found is those that were already advanced in their journey and kind of building capabilities and understanding, they were unfazed, but kind of facing the same challenges we're facing of like some internal explanations, but not changing their course or not kind of, it wasn't causing like a major hiccup. For institutions, though, that were just getting started in their journey, it was a little bit more of a headwind, I think, and maybe has delayed things a bit more because they hadn't done the initial legwork to really understand the ecosystem or the capability sets. And so they had, I think, I think it had more impact for institutional players that were just entering the space.

Yeah, I mean, that's specific to FTX and obviously explaining internally, as you said, but the bigger issue perhaps is the way that regulators have now approached the space as a result of FTX. So are there huge question marks now for institutions as to whether what they're doing is even legal compliance, whether, you know, there's going to be new laws passed that might impact their businesses. I would imagine that would keep a lot more people on the sidelines, even than the false sort of equivalency with FTX and what they did. Yeah. We think that policy formation is one of the most important developments and one of the

biggest barriers to institutional adoption that's in the marketplace. So you've got a lot of traditional players who have been investing significant financial and human capital to build capabilities. But until you get more clarity around the regulatory landscape or the policy formation around that, it's difficult to kind of get the mass adoption that we believe is going to ultimately come, but you're going to have to have some policy frameworks in place first. So I think that the failures or the challenges that we've seen in this last year are going to help catalyze those policy responses. Some jurisdictions are already quite far ahead, whether you look at the EU with MECA, or you look in certain

jurisdictions, whether it's Switzerland or Singapore or Luxembourg or France, that there are advancements on the policy formation side. I think the US is a bit behind in the policy formation angle. And that in part reflects our regulatory structure. Like we don't have one central regulator. We have a multitude of regulators, of financial sector regulators. And I think that compounds and makes our regulatory framework and policy formation framework more complex and more difficult. I mean, Charles, do you have anything to add there? I think it's very clearly more difficult here, but I think there's another side, which is that there's just sort of egg on the face of a lot of legislators and regulators as a result of FTX, and they just don't want to talk about it,

right? It's important to us, and they kind of want to just kick the can down the road and have that conversation further into the future. I mean, very, very highly unlikely, in my opinion, that Congress gets together and comes up with any sort of crypto-based legislation anytime soon, in my mind. Yeah. So one of the things we were hoping maybe last time we spoke, or that there would be some type of stablecoin legislation by Partizan that would be done by the end of last year or this year. But like, you know, going back to the title of this, of this podcast now

with the U S debt ceiling inside, it's, it's less likely we'll, we'll get there. Uh, I think there is more chance that other jurisdictions, so MICA was passed in Europe. So this is, this is done. Uh, the, the FCA is working hard to, to get something set up also. So it's, it's probably gonna take more time in the U.S. and come as a reaction to what will have been done in other countries, which are really leading right now.

And as Chuck was mentioning, the U.S. is slightly behind. You know, I did see that there's a new draft of stablecoin legislation put out in the House in the last couple of days. And I was just trying to start to read that this morning. But I do think that Congressman McHenry is very focused on this aspect. been some slowdown in the progress towards a kind of bipartisan approach to stable coin legislation, we still think that's likely going to be the first piece of major legislation. And even if it's slowed down, it still seems to be moving forward. So I'm hopeful that Congress can get it done this year. But for the reasons you just said, I think it's less likely now, we think, than what we thought even just a couple of months ago. Yeah, I mean, that's the low-hanging fruit. There's no question.

I think that stablecoins are in a position where almost everybody could come together and just come up with some very, very basic and sensible rules. We also have been told that Lummis-Gillibrand bill will be reintroduced in the coming month or two. Again, just because it's reintroduced, it's been almost a year. We've seen no movement on it. So I don't think that means anything will actually happen. But it is encouraging, I guess, that there are at least some Congress people and senators that still have this high on their docket, major priority and are pushing for it, just getting the other ones on board, I think that is the major challenge. Can we talk a bit about Mika? Has that in any way affected your business?

Are you working with institutions in Europe who now see that as a green light and a way to operate moving forward? Yeah, I'm happy to touch on that. So, well, it's a good development for the field in general, just because many players cannot play if you don't have rules of the game. And then you might like the rule or dislike the rules. But once the rules are set up, then they can just participate and they know the framework to do it, et cetera. Well, and more or less in the same time is an institution like Societe Generale, SGForge, launching their own stablecoin. So, well, the framework really helped when you know exactly what are the

role you can have systemic banks launching stablecoin, which was, I think, a very big development. And in Europe, we had some other banks launching stablecoin before. You had banks in Australia doing it, but not to the scale of a bank like Solgen. Overall, I think it's going to help Europe to take the lead in the field. So Dubai is really very advanced, Singapore also, but that's something that I think will also help the UK to probably get inspired by what has been done and just confirm their lead. But overall, it's welcoming as an institution.

Like everybody wants to have clear roles of the game to be able to participate. I had no idea that this stable coin existed. Oh, so it's called... No, and then I looked. Coin Vertible was launched on April 20th, 2023. I would like to say I Googled things, but now I've barred them while you guys are talking. I asked the AI and it gave me a great answer.

That was... I think I'm pretty on top of the news and I completely missed that a month ago. Yeah, so that that a month ago. Yeah. So that was a huge development. So it's made public, they had a PR, et cetera. And again, like it's Euro back stable coin done by a systemic bank. It's a very, very big development.

So I didn't follow the news in detail. I knew about that. I saw the PR, et cetera. I don't know if it was taken in the Cointelegraph and CoinDesk. They probably have. But I think, yes, there should have been way more noise on Twitter and around it.

But because it's well institution-focused, it's not a stable coin like you would say USDC, right? It's not something anybody can access to. All the stable coin issued by bank will have kyc and aml etc so they're permissioned but was it what is interesting with all of those is how they are permissioned on top of public chain and as far as i know what came come to mind right now all the other banks i did that it is the same way so it's always on top of a cerium sometime with another ledger on the side and you do the KYC ML then you will basically be well client you just interact with them and well you can use the

stablecoin there who's I'm just speaking out loud. They could be just used in exchanges or in different places where the exchange is actually the one doing the KYC, et cetera, with them. We'll see what they do. But that comes with a different set of risks compared to something like USDT where it's a full black box and now you've got an alternative, or several alternatives done by different banks. So we'll see how it takes off, but that's a huge thing. Yeah, this is really interesting. I have the article here.

I pulled it up from a month ago just so that people can see it. Obviously, full KYC AML, as you said, it's effectively a private stablecoin for institutional investors. You said that you can't use it as an individual. Is this what we're going to see in the future is sort of these sandboxed stable coins that are used for a specific person, but aren't available to everyone? Because this is really interesting. It is a huge bank, obviously launching their own stable coin. While in the United States, we talk about Circle or companies like that trying to become banks so that they can be compliant. It's almost an approach from two opposite directions.

Yeah, so I mean, I think that you kind of have to look at it. It's not, when I look at the space of cash-like applications on crypto rails, you so there's there's a number of products so at one extreme you have a cbdc then you have stable coins then you can have private company stable coins or bank issue stable coins and then you have tokenized deposits so they all kind of fit together in a spectrum and i think it's unclear like it's it's such early days it's hard to imagine or hard to know how those different component parts are going to play out kind of relative to each other. And part of that will be shaped by the regulatory and policy formation that is in the process of evolving right now. But certainly,

I think there is going to be a place for bank issued stablecoins to facilitate transactions and financing credit intermediation kind of within their network or in the future state, you know, in a public blockchain and in an interoperable way across the landscape. And one of the interesting comments we heard from one of the banks that we've spoken to was the reason that they are looking at launching their own stable coin is when they engage with their kind of client side, it became clear to them, or they had the thought that if they run the risk of becoming irrelevant, if they don't kind of build a stable coin and build up this piece of their business. And that was a really interesting comment coming from a traditional bank player. It's something you don't hear all that often in the TradFi circles. But I think the direction of travel is very clear here. And we've got a handful of bank

issued stable coins now, and I think we can expect to see many more. Go ahead, Charles. Sorry. Just on your initial question on permission thing on top of public chain, that's really developing now, not just for the stablecoin, but even for the DeFi pool. There's a lot of very interesting DeFi pool that are being created where you'll have KYC and AML. Well, everything Centrifuge is doing, I always had KYC, AML. I think Maple got different things like that also. But that's really what is being developed right now had KYCML, I think Maple got different things like that also, Clearpool, but that's really what is being developed right now. KYCML pool of money that

allows to invest in real world asset. That's actually one of the part of the market where we're the most interested in, the financing and the tokenization of real world asset. But it's probably going to be a hybrid for a while. I don't think, I don't know if it will remain like that, but right now with a lack of regulation, transparency, and international regulation, et cetera, it's a good way to get stuff started in a way that could take off. And what is really interesting is instead of doing it the 2016 way, which would have been similar, but everything on private chain, you set up everything on public chain preparing for the interoperability that everybody knows is needed. And when you look at what

Project Guardian is doing, like Project Guardian in Singapore with JP Morgan, Temasek, et cetera, the requirement to have interoperability and hence be on a public chain came from the regulator, from the Monetary Authority of Singapore. So you got different calls a bit everywhere on we need the interoperability, we need to avoid fractioning the liquidity of the market,

so let's just be on public chain and for now let's just permission it. Right. I saw that that's built on, on Ethereum, which I think is not, not, not entirely unexpected at this point, right? It seems like they capture most of the market share for things like this. So can you guys give me sort of an update as to specifically since now it, uh, James wasn't able to fix his tech, we can just talk about S&P. What at this point is your, the two of you, your team, what is your mandate? What

are you building there? I know a lot of it had to do with indexing and sort of mimicking the products and services that we have in other financial markets that just are completely lacking. Is that still the direction? Have you sort of changed course? What else are you guys working on? Yeah. So I wouldn't say we've changed course. The mission still remains the same, which is to help the organization develop and execute a strategy. And that allows us to evolve our existing products and services and create a new generation of products and services that are fit for purpose in decentralized markets and crypto finance so what has changed since we spoke to you is uh we've added to our team now uh so we've just undertaken several new hires uh to help build out um kind of the those that capability set within the organization.

And we're in the process of putting together kind of a proposal of a strategic build and evaluating what would a bigger strategic build at the organization. I think we lost a chap for us there. I can take over. So yeah, we're looking at this strategic build to look at what could be a bigger kind of evolve.

So we've got a few things kind of moving. I'm not sure. Am I still on? We had a gap there and you're frozen. I think it said Miami Hotel Internet. I've struggled with this many times. But okay, Chuck, I think you're back.

So we lost about the last 30 seconds of what we said. I lost a few on the strategic part. Yeah. So we're just kind of building kind of a strategic use case, building a strategic plan that involves use cases, looking at different divisions, whether it's indices or ratings or commodities business or data and analytics and our mobility business and seeing how that may be, how we may be able to apply that kind of in the organization more broadly. In the ratings business, as Charles has said, we're really focused on the idea of the tokenization of everything and bringing real world assets on chain and the new credit intermediation system that is going, that is being set up on decentralized rails.

So that's really exciting to us. And that could be anything from tokenized bond issuance to tokenization of equities or private credit, private lending, real estate, just any kind of asset you can think of, both tangible and intangible. And thinking about what kind of role we can play as a benchmark provider, data, a data and analytic company to facilitate that migration

to the future state of credit intermediation markets. And there's one more thing. I don't know if you saw that news, Scott. We did an investment. I'm not sure if you saw it in Credora. So it's the first investment we did from rating on something that touched really DeFi a lot. We had another investment in Luca that came from the index side,

but here it's Credora. So Credora is kind of like a credit risk rating agency of DeFi, but it's really interesting the way they work real-time and they maintain privacy in the way they look at the data. So basically, you can connect to Credora. They have something like zero knowledge to just look at your portfolio. They do not see it, but they can see the agglomeration, like how much you have in short, how much you have in long. And then they do different credit score around that.

So that was a pretty big thing of the last few months for us. That's extremely cool. I had Sid Powell on from Maple Finance last week. I'm sure, Charles, you're aware of them, and they're doing quite a bit. You're both nodding your head, which is cool and encouraging because they've taken a really novel approach to sort of this tokenization at least creating credit markets i guess out of these without actually tokenizing the asset i think is the way that they're doing it but uh a lot of novel approaches to that i mean do you think that we get to a point where effectively you can tokenize or at least collateralize almost anything with blockchain

technology yeah i think that's uh right to me the the tokenization part seems to be like the easier part are a kind of it's interesting and it's super important but what's even more interesting to me is the creation of the entire systemic ecosystem and set of rails beyond that tokenization will help power. And so it's that end-to-end market functioning capability that tokenization is a foundational layer of, but it doesn't stop at tokenization, right? It kind of goes, it will permeate across the entire kind of creation of new capital pools and the utilization of those capital pools from a broader and democratized audience. So to me, that's what's so exciting and like having tokenized real world assets and bringing that real world asset to create real world income

on chain is going to be kind of the shape of the future. Do you want to touch on the BCG report, Chuck? Yeah, so you may have seen this or your audience may have seen this as well. So Boston Consulting Group, which is one of the major consulting agencies, came out with an estimate, I guess about a couple of months ago, saying that their view that the tokenized, the size of the tokenized, the illiquid asset market will grow to a minimum of $16 trillion by 2030 and up to $68 trillion by 2030 so you know that's we're talking like you know six and a half years or so um and talking about a market sizing that goes up to almost 70 trillion dollars um i mean i've been we've been up in the markets a long time uh you don't see that kind of growth in a market structure, but maybe once in a lifetime.

So that's super exciting. And one of the really interesting aspects of that report was their estimates of the size of the tokenized illiquid asset market was based on their analysis of the client demand. It's not talking about the total addressable market, which of course can be hundreds of trillions of dollars. This is what they're estimating and what they're capturing is what they estimate the client demand for those assets will be. So that's also super interesting to see that their expectation of this mass adoption from clients in this segment of the market. Really interesting. I think that this is one of the narratives that's just sort of been lost in the crypto

winter, right? Everyone was really excited about the idea of tokenizing assets, and then price went down and people started panicking about price. Right. And now people, I mean, we have to talk about it. People are panicking about the debt ceiling now. I know that that has nothing to do necessarily with smp but do you guys have a feeling on what the likelihood that that uh gets resolved is because we talk about other topics here you know

um and what that would mean for for bitcoin in either in either way i think they'll resolve it by the way and we're watching a big dog and pony show and we've done it 78 times and they'll resolve it, by the way, and we're watching a big dog and pony show, and we've done it 78 times, and they'll do it a 79th time in that political theater. But, hey, there you go. Well, I don't think that – I'm not going to comment on the likelihood of it getting resolved, but your point is well taken that this isn't the first time kind of we've been in this cycle. And so, you know, although you always say in finance, you know, history is no judge of what the future is going to be, but it is what it is. As far as the kind of the focus on what it means for crypto and Bitcoin, I think it is actually very interesting to see. In the last year, you've had a couple of developments. One is

the emergence of a systemic banking crisis that would include Signature Bank, Silicon Valley Bank, and then the pressures with First Republic. This is the first time you're seeing the emergence of a systemic banking crisis in the age of Bitcoin and in the age of cryptocurrency. And so thinking about the ramifications of what that means for the market is still, this is going to be kind of a body of thought and analysis that's ongoing and is just emerging. It's the same thing around the debt ceiling, in my opinion. This is the first time we're really seeing this kind of pressure point around a debt, you know, cataclysm or catastrophe, if it were to kind of go down that path in the age of crypto. And what does that mean? This is going to be an example where people now have an option to really look at Bitcoin as an alternative and think, well, I think it's going to kind of shine Bitcoin in a positive light against this kind of centralized financial system kind of a new development. And I think the pathways that are being established and Bitcoin as an example of an ulterior pathway are just going to get more and more cemented in kind of the mass economy and the real economy as this story unfolds. Charles, what do you think? I agree.

You might remember when we spoke last time at Mainnet, I mentioned the fact that, you know, in Argentina, people are not really looking at Bitcoin. Bitcoin is still an investment, right? You buy Bitcoin because you hope it's going up. You don't really buy Bitcoin because you just hope the value will remain the same in, you know, the amount of banana you can buy or something like that. So right now, again, for the debt ceiling, of course,

there was a huge mistake being done there. It's hard to realize the size of it. But if we touch more on the big rhetoric there is right now on dominance of the U.S. dollar, the U. the US dollar as a reserve currency. I don't see, and I'm not really an expert in that, but like from my seat, I don't really see an alternative to the US dollar yet. You know, when we speak of the RAN or when we speak of BRICS setting up something kind of like,

get if you wanted to do with with gold and extra i i lived in in different country uh that have pretty bad economy the risk of you know having a token base on something that is holding like they say gold and it's you'll have uh you know country like brazil etc holding it for you the the real risk is the collateral disappear. Let's say if Venezuela was doing it, who really trusts that the goal is still there, right? So there's a lot of trust in something like what they want to create and I would not buy it. Now, yes, there is Bitcoin as an alternative investment. I personally think that there've been a lot of changes in the crypto world since we spoke, and one of them is just the fact that now you have Ethereum, which

is deflationary, has a use case. I mean, you can hate Ethereum, but if the- You're going to trigger the trigger the mapsies here. Now- I'm happy to have- It's a sound money if you really want to get them. Yeah. Over some money. Follow me on Twitter so you can attack me really hard on what I just said. But the point is this, I'm not against Bitcoin. I'm not for any Solana or anything like that. I'm just thinking, you know, the 21 million is great. It's much better than, you know, printing and printing and printing.

Now, if it was decaying for 21 million, well, it's actually slightly better. Now, if you really don't like Bitcoin, but somehow you would be used to buy it or have somebody buy it for you to actually do something, well, that's what's happening with Ethereum. Why we mentioned convertible, we mentioned a lot of stuff being built on top of Ethereum. Well, for transaction to be done there, there is a fee in gas and that's what push both the utility and the burn.

So I'm actually wondering if most of, I'm interested to have your opinion on that too, because of your relationship with the Bitcoin Maxi, etc. But most or many of the use cases of the big defense of Bitcoin are actually better placed for Ethereum right now, just because of the utility, the lack of cap. Before we started with 60 million ETH, we went to 120 million ETH. It was a printing nightmare, but now everything changed. I think they'll tell you that it's more about the consensus mechanism

and proof of work versus proof of stake and security and that it's a copy of Bitcoin. I don't ascribe necessarily to any of it. I don't really care. I think Bitcoin is a unique asset. But I think what's more interesting if we're talking about the ETH versus Bitcoin debate is that now Bitcoiners are effectively trying to build everything on top of Bitcoin, right? Whether it's through Lightning, Stacks, or all the ERC-20 and Ordinals, I mean, directly

on it. It's not going that great for the Bitcoin blockchain if you want to actually use it in a cheap or quick manner, but it almost seems like they're viewing and not, I can't even say they, because there's obviously division within the Bitcoin community as to whether they should be doing any of this, but effectively it makes Ethereum look like a test net

for ideas that they want to build on Bitcoin, which I just find the irony of it really, really interesting. I just think you guys are actually there. I didn't go to Miami this year as the first one that I've missed, but I think you're going to have a much better answer to that question in three days from now than I do, because I think that's going to be the core conversation in the back halls and even on stage as to sort of the approach of Ethereum versus Bitcoin and all the things that are being built. So I'd actually be interested to ask you after this week, I mean, what do you think of all

of this BRC20, Ordinals things? Do you think that it's necessary to build these things on Bitcoin if they already exist on Ethereum? So just opinion on my own. I prefer Bitcoin as what it was. Like if on the Bitcoin side, I would be more on the maxi angle on, you know, let's have one utility and we really continue to be the best. Yes.

Censorship resistance. Bitcoin is king. With proof of work, there's all the issue with electricity, but aside from that security, Bitcoin is king. With proof of work, there's all the issues with electricity, but aside from that security, Bitcoin is king. Now, trying to bring... It's also the way it's done, right? Right now, you're just filling a lot of data in the blockchain. I had some conversations that were interesting with some bank people that just bought the conversation. And they were saying, no, but look with you know all you know on bitcoin nights were better because you have the actual nft the actual picture can be

on the blockchain i don't think it really matters i think you know like let's say your house the deed of your house is in the ledger the house is not inside it and it works where you just have human agreeing that this book where there is the deeds of the house represent not inside it and it works where you just have human agreeing that this book where there is the detail of the house represent ownership uh it could be the same for you know participation in a club or just a picture it doesn't really matter where it's stored so i think it's kind of dangerous for bitcoin just the amount of data we're putting in it was not really made for that and uh well if it just destroys the main use case and it become worse and worse to transact on Bitcoin, it could really work against it.

We'll see how, you know, Lightning scale do this and how it works. But yeah, I'm not amazed by that. Chuck, do you have a feeling on it? So I would actually have probably the opposite view as Charles. Nice. Now, fine. And become toxic maxis. So, you know, so I guess we probably reflect your broader audience to the diversion of views.

And Charles, you know, in our team, I'm the chat by guy. Charles, a crypto native. So, you know, we often come at the exact same thing from a completely different perspective so from my point of view i i get the security issue and the to the extent that any kind of build out or kind of expansion of use cases undermines or kind of puts at risk or changes the security dynamic that's a real issue and and would be a concern and a real detriment. But as far as building use cases and innovation around the network and capabilities, why wouldn't you want that?

I think that coming from a Trantify background, the whole space is marked by innovation. So it seems kind of an anomaly to me that the first, the leading digital asset, cryptocurrency, wouldn't be also leading the way or innovating kind of along the way as well. So that would be kind of my initial take on that. I think maybe the market will decide, right?

So I don't think there's an issue with attempting it if it's actually adopted. And I just think a lot of people are having a problem, obviously, with the speed and fees at this point. I can even see people talking about it in the comments, but that should just push adoption or development of layer twos, right? I mean, if ever there was a time for lightning to shine and to actually start gaining usage and to start getting market share, this would be it. But interestingly, I mean, speaking of Bitcoin and narrative, since we're somewhat on the topic, we did see this huge Bitcoin move up as banks started to fail. So, I mean, we could debate whether that was crypto natives moving into Bitcoin or whether there was actually any outside,

but you're probably hearing about that narrative. I would imagine where you are. Is that a conversation that you're having with institutions, people? Are there those that are actually saying, hey, maybe I need to buy this if banks are potentially failing. I need somewhere to put my money. Or is that just yet another echo chamber narrative that we love to talk about here? Yeah, we don't really discuss price or anything like that with our customers. It's all about use cases, what could be disrupted in our business, in their business. What could we disrupt? So it's more on this angle than personal conversation.

Sure, there might be. In my opinion, there's a risk. Just the macro is really, really bad in general. You've got a war in Ukraine. You've got a lot of tension with China and Taiwan. You've got banks that are falling, et cetera. You've got the commercial real estate that seems to have a lot of issues. It really feels like we're not out of the issue at all,

and it might increase, and it might be a snowball. And historically, what we've seen is that when people are selling risky assets, they just sell everything. So it's possible if we had another big crash, COVID-like, but probably a bit longer, that big institution, that whole lot of things would just sell all their risky assets together. I kind of have this feeling, more looking at the curve of maybe Alcoins and Ethereum, et cetera, that it looks a lot like 2019.

And it's just what is a real breakthrough that can push everything up, right? So the LVing is next year. The L2s, they're there, but they're kind of missing some power. The ZK polygon could be really interesting, but it's not really there yet. GameFi is interesting. It's not really there yet. SoFi is interesting. It's not really there yet.

So we don't really have this huge, well, regulation could be coming and be a catalyst, but it's not fully there yet. So yeah, I'm kind of more thinking sell in May and walk away. I sold in April and skipped May. I think it would have been the move. If we could have gotten out of April and, and, uh, skip may, I think would have been the move if, if we could have gotten out of the,

you know, the 31,000, it does feel like we're going to have another one of those just absolutely boring summers that we tend to see in this market. And then we're just waiting a year from the having for anything major to happen. But you did touch on a few of these use cases. And I think that those things game fight, all of those will be built during this time

i think they all we get past the having we're going to see this absolute explosion of things people weren't paying attention to that were built over the last two years yeah scott can i also kind of kind of follow him up to your question so in our conversations uh we don't really i wouldn't say there's a clear movement from institutional players say, oh, I've got to get kind of exposure to this because to Bitcoin or digital assets because of the strains in the traditional financial system. That the ability for TradFi players to come in and move markets at that scale, I don't think has materialized yet.

It is going, in my opinion, it is going to materialize, but that hasn't happened yet. So that's still on the come. But what is interesting to me is looking at the Silicon Valley Bank and the speed at which that deposit flight out of that organization happened. And my understanding is it's the first time ever that a bank was kind of intervened by regulators during the workday and the reason for that was because of the speed at which deposits were fleeing and so I think that sets a kind of an important context that you know you've got kind of businesses and people kind of in real time seeing weakness in an organization and electronically acting immediately. And as they pull money out of banks that are either failing, in the process of failing, or they're concerned are going to fail, and looking for immediate alternatives, that's going to be a boost of supply and demand for Bitcoin in that audience

set. So to me, that's kind of a macro big picture catalyst underneath the scene that kind of have supported the Bitcoin story in particular in the last few months. But the main story, the onboarding of mass onboarding of institutional players and the implications for market dynamics, that hasn't really started in earnest yet. And I think once we get some policy clarity and regulatory formation, I think you're going to see that starting to shift the dynamics and the pricing mechanisms for digital assets, including Bitcoin.

I think MicroStrategy will probably have a role also, assuming they go well. And if there is a rising price, there's probably a lot of CEOs that will rethink their treasury after seeing how high it can go for MicroStrategy. That time we lost you, Charles, but I know you guys are in the same hotel, so not to put... You're back. You're back. I'm back.

Okay. I could see you. Sorry about that. So, yeah, now we're saying, I think MicroStrategy could have an impact as an example when you'll have Bitcoin potentially going back up on the next cycle, whenever it is, I think a lot of CEOs will just probably look at their treasury and thinking if it makes sense to kind of diversify and slightly, depending on the time,

and call it a light asset. I think MicroStrategy will be an interesting use case to many people and probably have a business case at some point. That makes perfect sense. So, I mean, before I let you guys go, are there any final thoughts, anything we didn't touch on that you want to let us know that's happening? I would say honestly, with all of this, all of the problems that we've seen in this market, probably a good time to be at a large institution and talking about crypto, because I think there's just a general push away from of the S&Ps and the JP Morgans and the Fidelities,

certainly, and the Charles Schwab's starting to really make a lot more noise in the space. Yeah. So I think, you know, you've captured, I think what you just said is exactly right. And there's going to be a combination of idiosyncratic and macro drivers that kind of push the kind of build out capabilities and ultimate adoption from traditional players. So on the idiosyncratic side, it's really around looking at the technology capabilities and the development of new use cases, whether, and you see the development of new use cases everywhere in kind of all aspects of the market from Bitcoin specifically to Ethereum or other protocols and the kind

of build out of credit intermediation capabilities. So that's happening at the tangible level. And on the macro level, you've got pretty significant dislocations happening in macro markets. So the drive, the rise in interest rates, the pressures that that's going to expose in credit markets, and Charles mentioned one, commercial real estate. So there's kind of an emergence of macro-driven catalysts that will, I think, in combination with the idiosyncratic, help drive and accelerate the adoption in

traditional players into this ecosystem. And the timing is really right because of the combination of those idiosyncratic and macro drivers that are at play right now. I think one last word will be around risk. So when we spoke last year, there was some interest in risk. It really kickstarted also after Terra Luna, but overall it was not the full main

focus of DeFi and crypto in general. It was more around, well, give me that yield. I don't really care where it's coming from. Now there's more and more relevance in looking at risk and getting it evaluated by a third party. Even with what happened with SVB, right, when we suddenly had a debagging of USDC, which was not something that people were expecting.

It just brings the need to have more and more evaluation. So we'll continue to push on that side. And, well, we can also really see the interest that went up compared to a year ago. Well, have a great time at the conference. I'm a little jealous. I chose not to go because I had some family things, but I'm a little jealous. I'm not going to lie. And, yeah, so I said we got to have a conversation afterwards.

You can tell me all that you guys learned, whether publicly or privately. And I'm glad that we were able to get through the hotel Wi-Fi, which is my biggest challenge every time I'm traveling. Yesterday, my Wi-Fi went out in my whole neighborhood for 10 hours, the last minute of the stream. And apparently my desk just chatted without me like six or seven minutes before my producer turned the stream off. So if he hadn't have done that, I would have literally been live streaming for eight or nine straight hours yesterday, unable to turn it off.

So we're pretty used to technical difficulties here. Not a surprise. But I'm looking forward to seeing continually what comes out of SMP. You guys are great guests. I love that you're participating so deeply in this space and hope that we can kind of realize this vision together. For everybody else,

I will be back tomorrow doing the news. Last week, I ranted like a crazy person. I'm going to probably do that again about all the news. We'll see what happens. And then next week, we're going to be flipping up the schedule majorly, starting to do daily Twitter spaces.

So I would love to have both of you there as well. I'm going to be doing that with Mario Knopfel and Rand Neuter. So we're going to do that probably at 10.30am right after the streams almost every day. So my brain is going to be scrambled eggs like that commercial from the 80s, but hey, we'll

see what happens. Chuck, Charles, Charles, Charles, Chuck, Chuck. Thank you guys so much for joining i'll see everybody else tomorrow thank you thanks for having us