The Wolf Of All Streets - Consensys Launches Lawsuit Against SEC! What’s Next? | Crypto Town Hall

Episode Date: April 26, 2024

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We should have the other co-hosts and guests up on stage soon. Hope you guys are all having a great Friday. We wanted the title to be a lot longer today, but there's not enough room. We have Consensus Launches Lawsuit Against SEC, but that's a fraction of what's happening with the United States government just this week. Carlo, you and I obviously were talking about offline the FBI letter that we saw, which is a head scratcher. We have the SEC sending the Wells notice to consensus and consensus effectively suing at the same time. We have Samurai wallets. We have the new IRS form.

If it's got three letters and is a United States agency, it's basically attacked the crypto industry this week. We're going to dive in, I think, to all of this, but pretty astounding. I don't know if it's coordinated or just coincidental timing. Carlo, you, I think when we were talking this morning, it was the FBI letter that you had sent to me that I had seen and had been circulating, right? Literally hard to even keep track. Yeah, it is really hard to keep track. And, you know, like I like I commented in my in my tweet that I posted about it, I'm not surprised by this development. I've been saying for well over a year that the end game here is to really

turn the screws on KYC compliance. And this FBI notice, it's interesting because I'm unclear how this protects the consumer, because it doesn't seem like there's a lot of downside to the consumer in KYC compliance. Obviously, there's a lot of downside to the platforms in failing to comply. And I'm wondering if this is opening a paradigm shift now, where we're going to see more aggressive enforcement on the consumer side for failure to provide KYC information. That's always been my underlying concern about all this. Is there precedent for something like that? Obviously, you know, we've seen, for example, Binance being charged for allowing Americans to trade on the platform.

But the Americans using the VPN, to my knowledge, on any of these platforms have never themselves been accused of any wrongdoing. And lawyers, other lawyers I've spoken to, have said effectively Americans can do whatever they want. It's the onus is on the platforms or the issuers of tokens or whatever it is to KYC, AML, follow accredited investor laws or entirely block Americans. Yeah, exactly. I don't see any law on the books right now that would empower regulators to go after consumers. And it makes sense from an enforcement perspective to go after the platforms. But the chilling effect that could come if you see some form of regulatory enforcement or legislation that starts to now target the consumer side could have a tremendous chilling effect because it would make people think twice about connecting to these apps.

So yeah, right now, I'm seeing it all from the platform side. And I'm currently involved in a number of, you know, federal criminal cases involving this failure to have a money services license, this 18 USC 1960 statute that's in the pin tweet, is a very, very easy crime for prosecutors to charge because it almost has a strict liability component to it. It's very easy elements to make. And it doesn't matter whether you knew or didn't know that you were supposed to comply and get the proper licensing. So it's an easy slam dunk. It's much easier to prove than money laundering. And then in the same kind of breath, we have the IRS. We knew this was coming, right? Because it goes into effect on January 1st, 2025. But the IRS finally releasing their

forms, which show that effectively any centralized exchange, likely DeFi platform, and even wallets having to act as a broker, and they're defining broker much like it would with someone, you know, stocks, meaning that effectively every wallet would have to KYC, AML, everybody using it and send you a form showing the taxes of all of your transactions. It literally impossible, right? First of all, I mean, literally impossible to track. But it seems like when you put all these together, the samurai wallet guys, now, there's a lot of nuance in that case. I don't know if they, if there was wrongdoing there, and they seem to kind of flaunt their dislike of the United States. But I mean, this is all of these, to some degree, share one thing, which is an attack on self-custody. Yes, I testified at that hearing before Treasury and strongly advocated for them to put a pause on this and to really seriously consider the implications of requiring this level of KYC for every crypto transaction on the blockchain. This broker dealer provision is,

frankly, I think going to be incredibly difficult for them to monitor and to enforce. It's creating a ton of confusion. But now that it's become official that this is what they want to do, a lawsuit's already been dropped by i believe the blockchain association so i think this will get tied up in the courts and fought uh aggressively because it is a disaster and i don't see how uh practically speaking it can even be implemented because just like you said the amount of shit coin trading that's going on the amount of people jumping in and out of trades it would be impossible to comply with this thing and it it's just, again, it goes to a lack of understanding and a lack of really interest in how this technology works. Yeah, also worth mentioning, and then I'll go to you, Dave, also worth mentioning at the same time, which I didn't

even talk about in the intro, is that we're seeing sort of an uptick in the stablecoin regulation. We have Maxine Waters coming out and saying she thinks that they're very close to stablecoin regulation alongside actually marijuana banking laws, and that she's working with Patrick McHenry and others. That's coming out of Congress. On the flip side, we have Lummis Gillibrand's updated and less favorable for the industry bill in the Senate. And if you dig into that one, which bans algorithmic stablecoins, and the language actually implies

that you would have to have a United States banking license to issue stablecoins over 10 billion effectively in the same time that we're talking about this sort of low-key ban on self-custody, it's pushing Tether out of the United States and moving stablecoins into the banking system if passed. Now, we have one from Congress, one from Senate. They're actually quite different. But crazy everything that's happening this week. Ryan, then... Well, Dave, actually, you were first. Sorry. Then Ryan and William. Dave, go ahead.

Dave has decided to ghost us. Ryan, go ahead. Yeah, I'm speechless, right? We saw the FCC come into existence because of essentially Black Friday 1929, crash of the stock market. Investors need to be protected. Americans are too stupid to be able to invest their own money and figure out what's real. We're seeing the Wild West with crypto again. US government's going to take the same play, but they need an entirely new department to govern it because it's a completely different

type of asset that they've never seen before. I mean, honestly, with the SEC, the way they're regulating crypto right now, the forever stamp from the post office should be a security. Absolutely. Everything is a security, the way that they're talking about it. But like Carlo kind of alluded to, all the things they're proposing can't even be enforced. Right. I mean, it's impossible. to, all the things they're proposing can't even be enforced. Right? I mean, it's impossible. And it's like they have no idea. Well, it's not even logical.

It's such a gross overreach. And what's happened in this country is it used to be yes until no. And now it's no until yes. Literally, you do not have the right to do anything until the government gives it to you. And that's what they're making it very, very clear when it comes to financial services or anything regarding something that might even look valuable.

They're saying it's a no until yes. Yeah, crazy. William, what are your thoughts? Yeah, very short thought here. I'm wondering what's very peculiar to me with this current situation with consensus doing the SEC and two weeks ago with the Uniswap situation. the Congress members that have been traditionally very vocal, pro-crypto, especially Emmer and Davidson, they have been silent on this issue this week and the Uniswap issue. And I wonder why. Good question. We've had Warren Davidson on this show a number of times.

It would be great to have him back on. He's been a great friend of the show for sure. So that's a good question and not one that I had really considered. But maybe they're just busy fundraising and getting ready for the election cycle and don't have time to pick these fights because that's how things generally work in the United States. I don't know. I mean, they have been very vocal in general on Twitter specifically. I mean, that's the signal we get from them. And even in their private communications, I'm on their mailing lists. They've been almost radio silent on crypto as if they've lowered the tone a bit.

I don't know why. Interesting. Definitely something that we should probably explore further. And then, so all of this, you know, and I think we should dig into all of it, leads to the biggest story, I think you could say, which is the one in the title, Consensus Launching the Lawsuit Against the SEC. Effectively, they I don't know the exact timing, but received a Wells notice implying that the SEC was going to take action and either and proactively or either had it in waiting or suing the SEC for clarity on whether an opinion as to what it is, even though we know that Gary Gensler in speeches before he was at the SEC had said he believes Ethereum is a commodity.

And a lot of this aligning now, obviously, with the looming deadline of the Ethereum spot ETF approval, or obviously being rejected, which has become the expectation. Matt Hogan, we've talked about this quite a bit before, but I assume there's very, very little expectation at this point that we see an Ethereum spot ETF in the very near future. Yeah, I think that's fair to assume. You don't have to look too far into the tea leaves to believe that. So I think the market is going to move on past that. I also think the market may take a relatively benign view of all these lawsuits. I mean,

it's important to remember that they sound scary, but the courts have been the friends of crypto for the past few years. I'm not overly taken aback by these things. On the surface, they're making ridiculous accusations that would be terrible for the industry if they went through. But, you know, we've made progress in the courts over time. So I take a more benign view of all these developments. I agree. And we also have to remember that all of these have an exceptionally long time frame that will extend far beyond the current regime.

Even if it's the same party, you know, it's very unlikely that Gensler will be here when these actions are settled. 100%. And I would also add, you know, the stablecoin legislation is mixed, but it is notable that it's advancing, you know, probably in an election year. And I think what that tells you is that over time, you know, Wall Street's going to realize the money that's going to be made here. And these things are going to be settled by new legislation, more so than court battles that can take, you know, multiple years, maybe five to 10 years for some of these complex ones. So I think most of the lawsuits, you know, they definitely occupy the headlines. I don't think they're going to dictate the future of crypto. I think sort of what's happening with the stablecoin bill and the way forces align behind stablecoins from TradFi and DeFi, I think that's really the place to watch. Do you think that, so it's interesting that we've seen both Congress and Senate, as I said, news about those stablecoin bills after we've kind of had... Until Gillibrand came out again recently, kind of a rehash of their previous bill, it had gone silent. We just weren't hearing about crypto legislation at all kind of

to Williams points um are you surprised that we have kind of both houses talking about it again this week like you said it is an election year my assumption was they would all just pump this you know to Q1 of 25 earliest yeah it really feels like they are trying to tighten screws. They brought in Gensler to rein in on crypto, but he got a defeat in the spot ETF case. And it all feels like everything else that's happening this year feels like they're kind of, I don't want to say it is, but it feels like there was a deal where they would approve, they will go along with the ETFs, but then they after CZ, essentially anyone that's outside the system. So what it really feels to me is that they have realized that something that people want is very difficult to do anything about. It's essentially impossible. But what they can do is kind of do a roundabout way, open up a regulated avenue. If you want Bitcoin, if you want to trade, hey, we have something here for you

on the stock exchange. But then anything else is going to be taxed heavily. It's going to be criminalized, and it's outside of our system. Sorry, I'm actually curious of Matthew Siegel's view on this. I would take a different approach to that, not that you're wrong. I would say that there was no trade. They just never intended to allow the ETFs until they lost in court, right? And that kind of forced their hand. I think given Gensler's approach and what we've seen, he would have probably rather have continued to deny Bitcoin spot ETFs if he could have. I mean, Matthew, obviously, you're over at VanEck,

you speak for yourself, not for them. But do you think that we would have seen Bitcoin spot ETFs or that there was some sort of grand deal there. Hey, Scott, I got booted out of the room, so I missed. Spaces has been brutal, guys, for anyone listening. Everybody's getting kicked off, brought back up. When you get co-hosted, you get sent to listener. It's been really bad this week. But basically, he was making the point since that he thought effectively there was a trade, that the ETFs were approved, but they continue to go after everything else. Kind of like, you know, you get your spot ETF, but the rest of the industry gets crushed. I sort of made the point, I think, that Denzel actually didn't want to approve the ETFs in the first place.

And that was actually, his hand was forced by the courts. So just kind of wondering from your perspective, that was a trade off or the ETFs just made. There's no logic here. You know, it all stems from the Biden executive order, right when he took office instructing every agency to apply maximum pressure to this industry. And the Bitcoin ETF was only approved after a lawsuit where the SEC is basically a deadbeat debt. So I think the setup is the same for Ethereum. I've been telling everyone, please moon gold and Bitcoin so that Jan feels flush to sue the SEC when and if we get rejected. And I think the bigger kind of thing that I'm watching is just the market performance here as Bitcoin dominance continues to rise. BTC down 7% this month. Layer 1 is down 20. Solana down 30, lots down more than that. So the speculative avenues into BTC are open

via these ETFs, and there's going to be Hong Kong ETFs trading on Monday. But there is an attack on the utility of BTC via these enforcement actions on open source developers and the unhosted wallets. So I think we're in this air pocket. The hash price just hit another all-time low. Transaction fees for Bitcoin are back to where they were pre-halving. So the runes optimism is, you know, wave one of that is over. And frankly, we haven't been too impressed with many of the experiments on btc so far most people are building uh casino defy um for the most part and you know a little bit of rwa experimentation but it's it's very early days on that uh and uh i will say just on the stablecoin front you know i think

part of the reason why there's this momentum in DC is some of the developments of just this week. Block is now allowing Square merchants to convert a part of their daily sales to Bitcoin. And then Stripe yesterday, after abandoning crypto in 2018, has reintroduced the ability for merchants to accept crypto payments directly on chain and then automatically convert to fiat. So the largest companies experimenting on stablecoins probably helping Congress a little bit here, get momentum. My base case is still no legislation until after the presidential election. Really, we go to Ryan in a second, but very important, notable for people

who haven't seen that Stripe news that it's specific to USDC and nothing else. And the previous Stripe experiment was with Bitcoin, which they eventually gave up on sort of alluding to the high volatility of Bitcoin, obviously, and the inconsistency in transaction fees. And their founder and president effectively came out and said, listen, crypto is ready for the prime time now. It's cheap, it's fast, it's consistent. But he was talking specifically about stablecoins, right? So it's only USDC in that case.

Yeah, but it's USDC on Solana, right? And so even if you look at Strikes remittance, yeah, if you look at like Strikes remittances program, it's you can't do that in New York. There's still no New York DFS approval of any Lightning payment rails. It seems like with this Stripe announcement that Solana may be in a slightly different position. And I think that's that's bullish. Yeah, really interesting. Ryan, you had your hand up. Yeah, I'd say that it seems very well planned and orchestrated. It just seems like a gatekeeping strategy.

So rolling out an ETF, you know, assuring up large amounts of the crypto in a approved way of acquisition. You can acquire Bitcoin in small chunks through Cash App, Venmo, PayPal, Square, Stripe, but they control how you transact it and they track how you transact it. So it's a very measured, logical rollout. And I think it's just a gatekeeping strategy. And my second point is if we want legislators to back a certain stablecoin, then as a crypto community, let's only donate to politicians in that stablecoin, then as a crypto community, let's only donate to politicians in that stablecoin.

And in order for them to claim that donation, they have to accept the stablecoin. Yeah, it's pretty interesting. I see, Matthew, you're giving the thumbs up there. It does. I think it was David Bailey or someone had sent a tweet that effectively, you know, with all this self-custody attacks and these things that basically, if you want to own Bitcoin in the United States, you'll own a BlackRock Bitcoin ETF or hopefully a VanEck or Bitwise Bitcoin ETF and that'll be it. The way that this is going. I don't see how it's enforceable, but it does seem, as you said, Ryan coordinated.

This is all, I mean, we've seen it brewing, but this week has been quite wild and I'm trying to really dig into whether that's a coincidence, but I generally don't think things are right. The last piece of the puzzle is a national mining pool. When you, when you roll out a department of Energy mining pool to help with energy subsidies to balance the grid and for better national security, it will be the final piece of the puzzle. If you want to transact Bitcoin from a United States approved address to another United States approved address, it has to be processed through an appropriate tool. But I'm more of a conspiracy theorist when it comes to this stuff.

Yeah, right. But that could also be somewhat solved if there was... Not solved, but they could force a third-party platform of some sort as a pass-through from your self-custodied wallet to somewhere else so that it can be tracked by the IRS or the government as well. And that would not be that complex to require something like that, in my mind. If you're looking for a low-lift conspiracy theory, I think that they just... I don't think the issue here is the self-custody.

I think the issue here is the privacy and the taxes and the control. Right. So you can, I would venture to say they would allow you to self-custody your assets as long as they know exactly what they are and what they're used for. But, you know, it's pretty scary. I mean, hey, David Silver, you haven't been up here in a while, buddy. Part of our crack legal team. What do you make of all of this at the moment?

I think this is all marketing. This is all good PR for the community. I don't think these are winnable things, but I think it's good that they're showing a fight. But this isn't the fight they're going to win. You're saying the government won't win or consensus, for example consensus for example won't win consensus will not win this fight uh it's great pr it's great way to take the fight to them but the fight's gonna happen on the government's terms um and look i think they're doing this to it's the same teams that are representing other big players. This is an effort to split decisions and force an issue, which is great legal work. I'm not knocking the legal work.

I'm not knocking the legal what's going to ultimately happen. But this was just they got a Wells notice and this was a great PR move. Yeah. So do we think that they were just sitting and waiting for the Wells notice with this action ready? 100%. This was ready and this was just a click and file. They knew this was coming. They've clearly been in negotiations. No one's ever surprised when they get a Wells notice. That's the end of the process, not the beginning of the process for that type of notice. So this was all set to go. And this is a brilliant move from a PR standpoint, from a rally the troops standpoint. It's not a brilliant move on how to win the fight, but it's going to set them up where there was it was just great for them.

I loved everything they did. i don't love it from winning the battle here this is not a battle win this was a pr win across the board and will force the government to slightly change how they're handling things but i will tell you this yeah maybe it's our echo chamber but it feels like a hell of a lot more people are talking about consensus suing the sec than are talking about consensus suing the SEC than are talking about the SEC sending consensus to Wells Notice. So if even only that was the intention, it's been incredibly successful. 100%. And think about it, you know, if you could just sue the SEC and have these type of lawsuits going, everyone would have done this. You know,

this is not this is not something the SEC is not scared of this. The courts aren't going to embrace this. This was a fantastic PR play. Everything that the large crypto companies have done so far in their battles with the SEC have always elicited right now positive PR, and it's getting slowly but surely one member of Congress, two members of Congress, three members of Congress to come along.

And all this does is it gives them a way to lobby Congress and do things that the crypto space wants them to do. And it gives them a platform to talk about it. It's not going to change the legal strategy the sec but it is going to change the getting pressure from people coming out um by the way it got consensus's name back in the spotlight it got them to talk about their products it was a fantastic pr move i going to have to disagree and say that you are trolling. The consensus has hired the best litigators. This is not an ambulance chasing civil case.

This is in federal district court in a district that has been very receptive to arguments about SEC override. And, you know, PR is reality, right? If PR can shape the debate, can force lawmakers to change their mind and trickles up to judges. So I think it's a little too narrow to just call it a PR initiative. So David, do you believe that they... Okay, go ahead, William. I was just gonna ask if David actually thinks that's completely unwinnable and just PR if it's in the middle, but go ahead. I don't think it is. Yeah, I think the question…

Go ahead, William. Sorry. Okay, so I don't think the question is about whether it's winnable or not because this is going to be a long process. I've read it completely. And what they've done, what ConsenSys has done, they threw the kitchen sink at the SEC basically. There are a lot, there are many issues that they raised. One thing that's interesting, they did not mention, there isn't one mention of the ETF, of the Ethereum ETF.

But indirectly, it kind of puts in, it helps the ETF, especially if the SEC rejects it in a month or so, in a few weeks. In light of all of this, it will raise more questions. So I think the strategy of consensus, maybe it's a bit of PR yet, but it's also a delay tactic. It's going to prolong this and then push the SEC to be on the defensive again and again and again. And I totally agree with that. That's my point when I say it's a PR move. First of all, they have the best lawyers in the country. There is no insinuation that they are ambulance chasing lawyers like myself. My point was that they are the best legal team in the country who's already working on similar issues. This is a coordinated effort to push a narrative and force a fight at the OK Corral.

There's nothing wrong with that. It's actually a fantastic legal strategy. The point I'm making when I say it's PR more than legal, this particular fight won't be a winner for them. It will push the narrative that the crypto industry wants pushed. That's fantastic, you know, legalese as far as I'm concerned. Whether you win or not, if you push the narrative into positive terrain for what you're looking for, that's a win across the board. David, I can tell you're in your car. So the most important question is, are you chasing an ambulance right now? I am going to hear my daughter fake playing

the violin for the next 30 minutes. The pains of parenting. I think a lot of us have obviously been there. Dave Weisberger, you had had your hand up earlier and then I know you had to jump off a call. I mean, what do you make of all this at the moment? Well, I mean, you got two stories. It's a similar theme. There are people in the government who want to control everything. call? I mean, what do you make of all this at the moment? Well, I mean, you got two stories there. It's a similar theme. There are people in the government who want to control everything. There are people in the government who want to control some things. And there's a minority of people that we all support that want to allow for freedom up to certain levels. So, you know, it's like, if you think about medieval warfare, you know, the way you design a castle is, you know, you have the outer wall, the inner wall, the mountain

Bailey, you know, whatever I want, I'm a geek about this crap. So let's not go down that rabbit hole. But look, the simple reality is there's no version of this world where the government is going to allow unfettered peer-to-peer transfers of large-scale fiat-valued stuff. They're just not going to. Now, do I think they should? Yes. So this is not me defending that prospect. It's just reality. Just like you can't go buy a condo with a briefcase full of cash anymore, you're not going to be able to do things completely off the grid in terms of make car purchases, condo purchases, et cetera, et cetera. So understand that. And in the crypto world, that causes angst, but it is what it is. That doesn't stop anybody, however, from if people like Warren Davidson gets his Keep Your Coins Act or some variation thereof from being able to buy and hold Bitcoin and buy

and hold whatever or swap from one asset to another without going into fiat. Eventually, that's going to be where the rubber meets the road. And so when they do things like saying absolute idiocy that a wallet is a broker, not understanding, and I tweeted this yesterday, that literally a wallet is less of a broker than a mattress stuffed with cash because the wallet doesn't actually hold the Bitcoin. It just holds keys to the Bitcoin. It's literally like saying your safe deposit box key is a wallet. It's insane. And so, you know, eventually this will become obvious. I mean, whether it's in the court because the lawmakers are this dumb or whether cooler heads prevail, there will be a level. But if anyone expects that, that it thinks that there's no tie between the stablecoin legislation idea and this idea of

being able to control it, they're crazy because we already know they're going to control centralized exchanges. And so if you sell your whatever coin for dollars on a centralized exchange, you're getting taxed on that as a capital gain, full stop, and everything that goes along with it. But what they want to do is be able to say, if you do a transfer from whatever coin into USDC, it's the same thing. And by doing that, then they can get DeFi. Now, do they expect that DeFi code is going to do it, or are they going to want to have the ability to see it? I think the easiest way for them to do it is to work with a stablecoin provider. So expect Circle to be dragooned into the dark side. And ultimately, whether Tether

is allowed in the US is going to be dependent. Forget all the political posturing. And ultimately, whether Tether is allowed in the U.S. is going to be dependent. Forget all the political posturing. Do they, are they willing to have that reporting work? That's my conspiracy theory. But if you look at Lummis-Gillibrand, Tether would be immediately excluded for not having a banking license in the United States. I'm not saying that will pass, but yeah. No, but first of all, Cynthia Lumison, under no circumstances, is on the side of let's control everything. But she's been very clear about let's control fiat. I mean, terrorism stuff. I mean, she's said it before. So, you know, they're probably looking at it saying, well, we can't control Tether, so give up.

But remember, in a negotiation, you don't go to your best and final first time i mean sometimes you do uh but very very rare so don't expect that it is the first salvo anyway my conspiracy theory for what for what it's worth is that the end state that is wanted by the smarter people in the room and i'm not talking about i don't want to start start defaming members of congress other than el Warren, who she wants to have nothing to do with this. She what she's one of those. I want to control everything, people. But I don't think that's a majority on either party. I mean, certainly not Republicans, even in the Democrats. I don't think that's a majority. So I think that the line that they're going to go to is as soon as you exchange for fiat or fiat equivalent at that point. And I think that we could live with that as an industry one way or another. That's, I think, where it's going to go. If it goes further than

that, it's a disaster. And if it goes better than that, it's a huge win. Yeah, there's a nuance there. Like, I agree with you. And I don't find it hugely problematic if they just want you to pay the taxes that you owe based on the legal tax code. I find that highly problematic if they just want you to pay the taxes that you owe based on the legal tax code. I find that highly problematic if they're attacking privacy and your ability to self-custody. So it's kind of two things. But yeah, if they just want to see that you bought and sold a coin and made a profit, then welcome to America. But my point is that from an industry perspective, from a political perspective, the way the industry should portray it is we're not trying to avoid taxations on gains that are brought back in to our home currency. What we want is to be able to own what we own.

And there was a great, absolutely great open letter from Ryan Sean Adams, which I loved, on Twitter. I mean, it was, and Warren Davidson quote tweeted it. He basically wrote, Dear Congress, I'm a crypto user in America with non-custodial wallets. I'd like to keep my wallet private for the same reason you want to keep your bank statements or email inbox private. Unfortunately, you're not doing it. Without privacy options, our wallets are exposed to predatory corporations and foreign actors, or will harvest our data and exploit us. Anyway us anyway it's terrific and that is literally the posture that needs to happen from the crypto community that because that is literally what people in congress don't understand they have no idea what we're actually talking about they don't

understand it well yeah there you go i'm going a lot. Yeah, no, quite quickly. I mean, I'm all for privacy, but that is different than reporting. I think you can have privacy and also the obligation to report. So I don't think they are mutually exclusive. So we shouldn't overplay the privacy aspect, I think. Yeah, you still need to report your transactions for your taxes if you're not a United States citizen. And you may have a problem with taxes, but that's the law. We shouldn't get an exception rationally as the crypto industry for that. Right.

Yeah, I think that that makes a lot of sense, which actually is interesting that, you know, the wash, wash sale is still effectively allowed for crypto, and not for other industries, you know, you can basically realize a loss and immediately buy back your assets still in crypto, as far as I know, and take advantage of that sort of tax loophole, which you cannot do with an equity. I think that will change. But that is an actual advantage that people have been pointing at, the government has been pointing at, that maybe it will be a loophole that's closed for us. Let's see, Zach, another part of our crack legal squad jumping up on stage. Zach, what are your thoughts?

We're talking about the samurai situation. You can. Well, look, I think the issue, privacy is an important feature to be built into all sorts of tools. I think there is a way to distinguish between privacy in terms of what a company does with your data and and then tools that are inherently private, like coin joins. And there are instances in which the company that makes software is just not in a position to report on what happens with that software, if something is truly non custodial, if it's open source software. And, you know, I think both in the case with the coin join tool and the samurai situation, but also, you but also if you look at the legislation proposed by Elizabeth Warren to regulate everything as a money service business, this is basically an effective ban on a lot of these self-custody tools because there is literally no way, like

technically there is no way to comply with these laws because you don't know what your users are doing if you don't have access to their funds. Hey, Zach, do you think that they should have or could have just gone after the samurai devs for conspiracy to commit money laundering? I mean, they clearly did advertise these devs, the service as particularly useful to Russian oligarchs who wanted to avoid sanctions.

The DOJ could have charged them with that money laundering conspiracy without calling the Samurai Wallet a money service business, don't you think? A hundred percent. Listen, I don't necessarily have strong opinions one way or another on the money laundering charges. It looks like they said some stuff in public

that was really stupid. It also looks like they may have fallen for an undercover sting operation to the extent that they are actually guilty of intentionally conspiring to help people launder money. That is, I think, perhaps rightfully a criminal offense. But the charges involved with the actual software tool and saying that this non-custodial coin join through the Whirlpool and Ricochet implementations was a money service business that that is the real problem for the industry and that's the precedent that could be really dangerous like tornado cash go ahead Carlo yeah remember when you're dealing with money laundering that money laundering usually requires another

predicate offense like wire fraud in this case the government indicted under 18 USC 1960. Because as I had discussed at the beginning of the show, that is really an easy, easy statute, because the elements are very straightforward. You have to be in a business that involves money transmission, it can be a very informal business, it doesn't have to be formal, you are required in virtually every you're required in every state to have a license. So the failure to have the license and be in the business, and knowingly operating the business without the required license is all the government has to prove, then

what happens with the proceeds of that endeavor is where the money laundering crime kicks in. So it's almost a strict liability crime. And I'm seeing more and more of it pop up in the crypto sector when it comes to how the government is approaching prosecuting these platforms. I actually think in the money laundering charges, the predicate offense has to do with activities on the Silk Road. It seems like the undercover agent was specifically asking them to help off board Silk Road funds. Great point. I mean, again again it always has to tie to some other fraud it's it's not it's not a crime that you can bring independently you've got to you've got to

you've got to have illicit funds before you can have money laundering yeah in this case i think the money laundering evidence will be around like were they actually encouraging russian oligarchs to evade sanctions? Were they helping? I mean, they did it publicly, right? Well, they said welcome new, like, what they said was really unhelpful and stupid. They said welcome new Russian oligarch users. Does that mean they were intending to help Russian oligarchs?

No, it was probably said. One hundred percent. You nailed it, Zach. Because that just to intervene, that's exactly the point. That's why money laundering is a tougher statute to prove. You get a lot more bang for your buck as a prosecutor by going under 18 U.S.C. 1960 because the elements are much easier and less bogged down in intent and knowledge. That's exactly the reason.

I think the worst evidence for them is going to be the stuff they said to this undercover agent through Twitter DMs. Look, it looks like a lot of money also came from these, like, hacking scams, right? There's like a botnet or something where someone laundered a ton of Bitcoin through that system. So it's really going to be about what was their sort of intentional participation in that. And I actually think that's a fair thing to charge them with. If the government has the goods on that, then like that is a totally rightfully a criminal offense. But just you're operating this business without licenses, I understand how that's an easier charge to bring. And I worry that that is a tempting thing to plead to if they can trade the money laundering charges that will come with much stiffer sentences and are hard to prove. But that's why, look, I think it's really important to have good amicus briefs here.

It's really important that they have good defense lawyers that understand the technology, because there is a little bit of divergence in interest here, perhaps between the individual defendants who are looking at a shitload of time under these money laundering charges and like the cause of online privacy. Joe, I saw you giving a thumbs up to that fourth member on stage of our crack legal squad. We've got we just need John Deaton and Fred up here today. I think we can be billed into oblivion by our panel. Go ahead, Joe. No, I think there's been a great breakdown so far. I mean, to me, the last point that Zach was just making makes it very likely you don't get any case law precedent from this case. You get a plea because of the stiff charges that are being faced.

So if you can get a compromise in that and get them to plea out and reduce their sentence, I think it's probably the path of least resistance, which means you don't really get a whole lot in the way of precedent. You don't really get the amici briefs filed. You just get sort of a lying down on it because of the stiffness of the charges they face but you say no precedent you mean that it can't be used against future self-custody or wallets um in a case against them for yeah i mean if maybe things are less gratuitous there's nothing resolved other than we plead guilty to the lesser included or some you know some charge then you know, some charge,

then, you know, yeah, you're not going to get much in the way of, you know, you get much in the way of, well, this is a clear precedent for all the issues Zach says. He was just on, you know, the importance of it to the industry. I think you don't get that fight, right? To get that precedent, you need to have someone put up a fight and try to make case law on it. And to me, that seems not very likely given the facts we have so far. And in particular, I know Zach and I were talking in another space about the presence of the undercover agent.

I mean, to me, I think they got them saying very stupid things. And it's a done deal. So this ends up being more about the individuals than about the wallet itself. That would actually be probably a good win relatively for the industry. Well, I don't know if it's a scrutiny of the wallet. Yeah. I don't know if it's a win.

I don't know if it's a win because the same scenario in context. Well, yeah. Unfortunately not for them. Right. But what I will say is like, you know, the one thing you got to figure out about this, this distinction, this is where the law is going to have to eventually resolve this is like, to what degree of custody and control do you need to have to transform into a money services business? That's like the core legal issue that at some point has to be addressed. Now, here are the bad facts. Okay. And you can kind of interpret this however you want, good or bad. But the allegations in the

indictment are that they profited personally through facilitating these transactions to the tune of $3 million. So I would tell you, and again, there's no guarantees, not legal advice, but if you're trying to put together some sort of protocol that would push it towards not being a money services business, you would not want to engage in profit on the behalf for facilitating transactions. You want to be open source, you want to be able to exist without your involvement, have no real control over these things. But the greater degree of control over facilitating broadcasting, however you want to determine the transactions, then that's more likely to fall across that chasm there. But I see Carl has his hand up. Go ahead.

Yeah, Joe, you bring up a great point. And I'm actually living it right now, because I'm involved in at least two cases involving violations of that statute. And the targets in those cases who got indicted, were essentially just regular everyday average people who either got lured into it through maybe first starting as a pig butchering scam, where they've lost a bunch of money, and now they're trying to get their money back. So they start acting as money transmitters. They allow their bank accounts to be used to funnel these funds that are then sent to another bank account and turned into Bitcoin and sent overseas to these transnational criminal organizations. So you have essentially non criminals, people who don't even

understand what blockchain technology is, what Bitcoin is, who are getting drawn into this. And to sort of wrap up that point, Joe, it's a very, very low standard as to what qualifies as a money transmitter business, because you have average everyday straw bank accounts from citizens that are being prosecuted for this. So it's a dangerous trend that I'm seeing. Yeah. And then think about, sorry, sorry, real quick. Just think about the implications for something like lightning, right? Lightning is very small, right? For Bitcoin right now. But if it were to grow and become significantly bigger, and you've got people opening channels, I can tell you like that's a point of serious concern for me to what extent you're facilitating transactions. So it's a really long discussion we should probably have at some point.

Yeah, Joe, exactly what I was going to say. I recently interviewed Justin Sun. I know he's obviously controversial, but we were talking about the proliferation of USDT on Tron. I don't think a lot of people realize how popular Tron is for moving Tether, but the over 50% of the total market cap of Tether is on Tron. And we were discussing how it was going viral. And he said, listen, somebody just tells their friend in, you know, they live in Venezuela or Argentina says, I want to send you some money, download this wallet, right? They have those individuals have literally no idea they're using blockchain or Tron. They don't understand the tech of a stable coin. They

literally just want the five bucks that their friend is going to send them. And so the bulk of the people now seeing adoption through word of mouth of stable coin wallets, Tron or otherwise, are just people who think they're using a PayPal or a Venmo or just giving their friends some money, simply transacting are all those people effectively going to become victims because they're unknowingly using a wallet or technology that becomes uncompliant or illegal? Well, that's kind of Yeah, I mean, the obvious answer is, is that they could be right? Like, we don't know. We don't know how strict the enforcement is. But I can just tell you, you know, like everything else in, in crypto, the broader crypto market, you get prosecutors, they tend to go after the bigger targets. Right. But that's not to say that, you know, what you're doing isn't technically running afoul of some law, which is the which is the really scary, sad part about this, right? You've constructed a system where innocent people could theoretically get caught up in this. Will there be charges against them? I don't think so, okay? But I don't know. And I like to give certainty to people when they're advising you and they're just trying to be legally compliant. And what ends up happening is the bigger

targets, when they get sufficiently large, that's when the long arm of justice comes down on you. Joe, you really just, you weren't here at the beginning, but you bookended very well, what Carlo and I were talking about at the beginning, specifically him that while there's no precedent at the moment for the individual really to be in trouble, we kind of gave Binance as an example, right? They allowed Americans, but the Americans who used the VPN and signed up are not in trouble and legally shouldn't be at the moment. But that what you're discussing is very, very scary if they jump that creek. And I don't know that they will. I mean, we're going to obviously wrap this up relatively soon. Ryan, I just want from a mining

perspective, you kind of presented a tinfoil hat theory there that was pretty scary. But do you view self custody in general being utterly under attack here as it kind of seems like? And do you think that it will end up really in a position where the individual could see, you know, legal problems for just simply transacting? I think it just comes down to control. And anywhere the federal government does not feel like they have control to one, seize assets, two, tax assets, or three, control someone, even foreign assets. I think that's where the gun's going to get pointed. And mining is a big part of that. It's essentially anyone in the world that has electricity can generate Bitcoin at this point. And that's a scary proposition to the U.S. government that has a very, very tight global financial view. You know, from my standpoint with my project, Lumerin, this puts a huge target on us because we're in the business of seeing that hash power be freely traded, which is terrifying.

So, you know, wherever the government wants control, that's going to be where the target's at. And right now it's very much on money transmission, KYC, AML, anti-money laundering, right? So any type of coin mixer is going to be under the target. Worth asking you in the context of Lumarin then, obviously, do you see this as escalating largely outside the United States as well? Or can a platform like Lumarin just continue to exist in compliant regulatory zones and ignore the... I mean, you can't, but that's not true decentralization, obviously. But I'm just saying, is this

unique to the United States right now? Or is this something you think we can fear all over the world? I think as the world's largest countries start having very problematic economies and fiscal policies, they're all going to join together eventually to find a way to control it. So we already see in the U.S. where miners are looking in other countries to move their operations where it's more favorable government situations. We're seeing more governments taking an interest in mining where they have better energy production or government subsidized energy production where they can bring on large mining facilities. So we're going to see a disbursement of mining out of the U.S. The U.S. is then going to have to scramble for control if they want to keep a lid on the movement of global finance when it comes to Bitcoin. How that played out for my project personally, I hope my name is way far away from it by the time that happens, to be perfectly honest with you. You and me both, buddy. Send some final thoughts before we wrap. Yeah, just adding to what Ryan was saying,

it's very easy to, or I should say relatively easier to preserve democracy when things are fine. But when the governments of the world run into trouble, as we are seeing, things get tougher and tougher,

the authoritarian tendencies increase, and the fight just gets harder and harder. So this is why it's so important for us to focus on building tools that are resistance to any political party's overnight will to fix their deficit or fix their PR through attacks on crypto. The US is running into financial problems. China is deep in trouble. EU is having trouble growing.

So as these problems increase, you should expect more. I mean, the consensus on average among policymakers to move a little bit more and more towards control. And to your point, once you give up a liberty or they take it by force you rarely get it you're never getting it back the pendulum generally yes yeah yeah it's scary taking it back is called revolution unfortunately that's right that that is how it's the only way. They never give it back willingly. William, final thoughts? Yeah, just a prediction. I think by the next election, the SEC, all of this is going to be like a house of cards.

And they are going to start to unpeel all of these bad things that they've started. So that's my prediction. This is kind of as messy as it got that it's going to be. We have a few more months to hold on and then hold off, and then it's going to get better. I mean, if they really want to know what's going on, all they have to do is allow the banks to accept crypto deposits and get that reporting from there instead of making it so difficult for people that have money in their wallets to to move it

around but they are not thinking that way at this point happy to end on a note of optimism from william uh maybe you're more cautiously optimistic than i am but uh certainly certainly we'll take it guys absolutely another amazing uh day on crypto town hall We're here every single weekday, 10, 15 a.m. Eastern Standard Time. I highly, highly, highly encourage you to follow all of our speakers and that red Crypto Town Hall logo up there. But follow all these speakers. We only bring them up because we enjoy their opinions. We view them as experts and because they're eloquent speakers who endorse. So if you're following us, you should absolutely be following them. Especially our crack legal team. Otherwise guys,

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