Unchained - The Chopping Block: Is This the Beginning of the End for Binance? - Ep. 474

Episode Date: March 30, 2023

Welcome to “The Chopping Block” – where crypto insiders Haseeb Qureshi, Robert Leshner, Tom Schmidt, and Tarun Chitra chop it up about the latest news. In this episode, they discuss Binance's recent regulatory issues, the potential impact on the crypto markets, the CFTC's stance on tokens, and also touch on Do Kwon's arrest and Hong Kong's approach to crypto regulation. Show highlights:  whether the chief compliance officer of Binance was aware of how the exchange was evading compliance how the CFTC contradicted the SEC about some tokens being securities whether Binance was trading against its customers what the future of Binance looks like after the CFTC lawsuit how the Do Kwon arrest coincided with Vitalik running an experiment in Montenegro  how the SEC's Wells Notice against Coinbase will affect the exchange whether all the regulatory actions are coordinated  what would happen to the crypto markets if Binance goes down  how Hong Kong’s approach to crypto regulation contrasts with that of the US Hosts Haseeb Qureshi, managing partner at Dragonfly  Robert Leshner, founder of Compound  Tarun Chitra, managing partner at Robot Ventures Tom Schmidt, general partner at Dragonfly  Disclosures Links CFTC vs. Binance Unchained: CFTC Sues Binance and CZ Over US Regulatory Violations   Coinbase Wells Notice Previous coverage of Unchained: Coinbase’s Top Lawyer Calls SEC Wells Notice a ‘Massive Overreach’  Coinbase: We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead. The Crypto Securities Market is Waiting to be Unlocked. But First We Need Workable Rules. Unchained:  SEC Issues Coinbase a Wells Notice U.S. Supreme Court Hears First Crypto Case: Coinbase Arbitration Dispute Bloomberg: Coinbase (COIN) Gets SEC Wells Notice Over Crypto Offerings Do Kwon Unchained:  Do Kwon Arrested in Montenegro, Faces Criminal Charges From US Prosecutors  Do Kwon Plans to Appeal 30-Day Detention Extension After Arrest DL News: US requests extradition of Do Kwon from Montenegro Learn more about your ad choices. Visit megaphone.fm/adchoices

Not a dividend. It's a tale of two-quan. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unnamed trading firms who are very involved. D5.Eat is the ultimate pump. DFI protocols are the antidote to this problem. Hello, everybody. Welcome to the chopping block.

Every couple weeks, the four of us get together and give the industry insider's perspective on the crypto topics of the day. So quick intros. First out, we've got Tom, the DeFi Maven, and Master of Memes. Next we've got Robert, Cryptoconnoisseur, and Captain of Compound. Then we've got to ruin the gigabrein and grand poohba at Gauntlet. And finally, you've got myself, I'm a sieb, the head, hype man at dragonfly. Four of us are early stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice.

Please see Chopin Block that X, Y, Z for more disclosures. And this week, especially not legal advice. Yeah, this super, super not legal advice, although there's a lot of legal shit that's going on that we have to talk about. So I always say- providing legal advice, but you might need legal advice after listening to us. Apparently, apparently. So I always say it's been a crazy week in crypto, and it's just never not been true. I don't know what it is, but this year has just been an avalanche of crazy, crazy things going on.

And so the first thing that just dropped a couple days ago was the CFTC lawsuit against Binance. So this is the big one. This is the thing that everybody's been waiting for for a very, very long time. Binance, although they've had lots of little kind of pot shots at them by individual regulators, individual countries, nobody's ever actually tried to go after the king. And that's basically what the CFTC did in this lawsuit. They instead of saying, oh, you're operating without a license, oh, you're doing this. Oh, you're kind of like skirting some of the rules.

They're like, no, no, no, your entire business is skirting all of the rules everywhere. And it all is going straight at not only Binance, the company, not just Binance.com, but also CZ himself. So the complaint is 70 plus pages long. It's a lot. I actually read through the whole thing. And I'm going to give for the audience some of the highlights to understand what the case is that the CFTC is laying out. So the broad shape of the case is basically that, unsurprisingly, that they're offering financial derivatives and commodities products to U.S. customers without having a license. So that's the basic, obviously thing the CFTC is responsible for that they are, you know, Binance is not doing. So now here's here's some of the interesting details that we learned from this very, very extensive complaint. There's a lot of information in here that is surprising how much data they have and how many chat logs they have from inside of finance.

So the first thing is the chief compliance officer, Samuel Lim. This guy, we have so much, so many of the chat logs from this guy, he sort of painted as like this Iago like figure, this sort of gremlin who's just like, ha, ha, we're evading compliance and it's okay. So internally, they knew that they had a huge portion of their user base from the U.S., which, of course, they should not have because they're not licensed in the U.S. to offer derivatives to U.S. customers. And so when BitMex was taken down in 2019, they decided to change the way that they reported and labeled their U.S. customers as unknown on their U.S. internal analytics. So CZ and everybody internally knew that they had a huge amount of U.S. customer base,

but they instructed their user customers to use VPNs. And they had this article that they listed of, here's how to use a VPN. If websites don't allow you to log in from the U.S., you can use a VPN. Wink, wink, you know, I don't know if you might have this problem. So they started IP blocking. There was a really good tip in there

where they claim to be IP blocking and you get a pop-up you're using from the U.S. And you could just X out the pop-up and then keep using the site. So they weren't actually IP blocking. What the CFTC can play paints is that Binance was always kind of wink-wink doing compliance stuff where basically they were like, oh, you know, we're kind of blocking the U.S.

But if a U.S. client comes to us and they're like, hey, we're now getting blocked, they would basically advise them to say, hey, just, you know, use a fucking VPN. And once they use a VPN, they'd be like, okay, great, this is the same customer. Let's continue letting them use their own same account, continue with their, you know, VIP points and their reputation and their trading limits and all that stuff. So not only were they allowing lots and lots of U.S. customers to use the platform. At one point, they had something on the order of 20% of their volume was from the U.S. until they onboarded Binance U.S., in which case, once they had Binance U.S., they pushed the customers from the U.S. to Binance U.S. unless they were doing a lot of volume. If they were doing a lot of volume, then they would advise them to say, hey, you guys get to level up from Binance U.S.

Finance U.S. is kind of the kiddie pool. We're going to bring you onto Binance.com. In order to do that, you will need to have some kind of offshore account. And so they would sort of basically nudge, nudge, advise them into, hey, set up an offshore account, we won't look through to the beneficial owners or we'll do like some kind of magic or will allow you to transfer your KYC if your KYC doesn't work to basically massage this as best we can to get you onto Binance.com where the real money is made and where the most lucrative products are also going to be tradable. Now, not only were they allowing lots and

lots of U.S. customers to trade on Binance, but also they were basically, their entire KYC program was kind of a sham. So, for one, they knew that they knew that they were allowing a lot of black market activity on the platform to the point where there are references to Hamas as being a customer of finance. And so this is in direct violation of sanctions, knowing violations of sanctions. There were a lot of examples of dark net markets, you know, basically people engaged in strictly illegal activity, a bunch of Russian mobsters or something like that that were using the platform. And they're basically like, yeah, this is almost certainly illegal activity. Let's just, let's just all agree to look the other way.

And they have chat logs where they basically acknowledge that, hey, we know that this illegal activity. Let's just kind of look the other way. These chat logs are like reminiscent of, you know, the FX chat logs from the financial crisis, if you remember all of those, very funny, but like almost so comical that someone actually wrote that level of chat log. So I highly recommend if you're a listener and you haven't read some of these, you should read them not only for the legal understanding, but also for entertainment purposes, because it's definitely worth reading for that reason. Yeah, if you just scan through for like the different spacing on the chat logs, I think it's where, if you're not going to read the whole thing, just read the chat logs.

Because you'll get, you'll get a sense very quickly of how bad this is. The other element of this is that there is basically 300 accounts that were internally used by Binance and CZ to trade directly on Binance itself. So, you know, there was also indications that big prop shops were given special latency fast lanes. So there's the same thing that has happened with FTIX. is that certain people were getting faster API access than others. And the other thing was that all this activity was obviously willful. They were denying all this stuff publicly, and they were doing this over and over and over again,

and all of their public statements. And internally, everything was rolling up to CZ. CZ was basically making all these decisions directly about the compliance program, about the strategy with the U.S., about all the shell companies that they used, and everything was happening over signal with auto-deleting messages. And so it was intentionally designed so that nothing was going to leave a trace.

There were a couple of choice quotes that I thought were very interesting that I wanted to share directly. Well, so actually, one other thing I should mention before I go into the quotes, the CFTC directly in, ironically, in this complaint, they claim that ether, Bitcoin, Lycoin, USCT, and BUSC were all commodities. Sort of indirect contradiction to the SEC with what the SEC just claimed like a week ago. And the other interesting thing is that in order to establish jurisdiction, so they made a bunch of claims to establish jurisdiction. Obviously, one of them just being that there were a ton of U.S. customers on the platform, so it's not a hard place. to establish jurisdiction. But one of the added points they made was that they used U.S. services for Binance, such as AWS and Google, which basically means that the whole world is U.S. jurisdiction now, because I don't know, almost every company has something that depends on

AWS or Google. The two quotes that I thought were fantastic. The first one was talking about Lim, the CCO. They claimed Lim displayed a nuanced understanding of applicable regulatory requirements and the potential liability that may accompany a failure to comply with U.S. law. For example, He chatted to a colleague in October 2020. U.S. users equal CFTC, equal civil case, can pay a fine, go settle. No KIC equals BSA, the Bank Secrecy Act, equals criminal case, have to go to jail. Interestingly, a lot of what they've detailed here in this complaint is not just civil. It's not just CFTC stuff.

All this stuff is about sanctions violations, is about intentionally facilitating money laundering, lots of stuff that looks a lot like the latter part of this statement, which is BSA Act, criminal case, have to go to jail. And so a lot of people are now speculating that the CFTC lawsuit, this is so, usually CFTC lawsuits don't look like this. There's not this much other stuff about potential criminal behavior that's going on here. And so a lot of people are speculating that there's going to be another drop fairly soon, whether it be from the SEC, whether it be from the DOJ. We know that the SEC and the DOJ have been investigating Binance for years. And with all this data now out there from the CFTC, there's probably going to be some collaboration with some of the other U.S. agencies that,

most likely, my guess would be that something criminal is coming because this stuff very, very clearly rises to, you know, in this example alone, there's just clear sanctions violations, which are strict criminal liability. And then lastly, the last really interesting thing, the question, when you read this thing, you're like, how do they have all this? Surely Bynes did not give this to them when they ask them for documents. And the CFTC explicitly states particular things they ask for that Bynance refused to provide them. And so in one of the, one of the same is just Somewhere in there, it says, you know, CZ communicate over signal with the auto-delete functionality enabled, with numerous finance officers, employees, and agents. For example, the following signal text chains or group chats collected from CZ's telephone were among those set to auto-delete, implying that maybe the CFTC may have leaked unintentionally in this passage, that they had access to CZ's phone.

So I'm going to stop there. What are you guys' reaction to seeing the CFTC lawsuit? I mean, that was actually the first thing I want to point out is like everyone needs to come up with some conspiracy theory for why, how the CFTC obtained those. They were a little imprecise in their language in other places too. So I could totally imagine that it's actually like someone else who is a whistleblower was in the same chat and it was on auto-delete mode. And the CFTC is not exactly being quite precise about where they got it from.

Like they know that if the group chat was on auto-delete and must have been deleted on CC's phone, but like they, it was a little bit duplicitous. was back to like 2020. So whoever was recording this, right? So there's somebody in the inner circle, if it's a leak. It was somebody who was persisting these messages for years. Yeah. Who was in the inner circle. Like that seems unlikely to me. I mean, there's a lot of different plausible explanations, assuming it wasn't like a grammatical error. So one is that at some point, the investigation was friendlier. You know, he did say that they'd been talking them for two years. It's possible he turned over from like a subpoena or something like that. His phone,

at some point, either like an image of it or whatever. That's, you know, it's not likely, but it's a possibility is that he provided that information. The second was that, you know, it was accessed through unscrupulous means in one way or another. It's possible, you know, someone just imaged it, you know, walking past his computer or something like that. Who knows? But the third possibility in my mind is that, you know, it is just a grammatical error. and it's not actually from his phone,

it's implied to be from his phone. And they're just picking up other information they have and piecing it together to say, here's what we know about him. But how could they've gotten all these chat logs? Like, this is over years of chats. I just want to point out, I don't think this is a NSA chose bad parameters for Signal

and Signal used a NIST curve and somehow they backdoor it. I feel like I've read some, you know, I've read people online be like, oh, signals now broken, whatever. I just wanted to, like, the reason I was bringing up to conspiracy theories is I've seen things like that, and I would say I highly doubt that that's true. Yeah, I highly doubt to reveal that fact through this lawsuit as well that does not seem maybe like the best use.

I mean, I agree. I think maybe it's multiple collaborators over multiple periods of time or like, you know, it's more like you have a compromised, you know, client on a bad phone or bad computer versus like something wrong with the protocol. So, yeah, I don't know. I think that there's multiple angles of attack here. But I guess when I was reading this, I think like the last big, like exchange lawsuit that was not fraud or collapse was Bitmex and thinking about kind of the similarities there. But also the difference is being not so intentionally flouting, you know, BSA compliance, which it seems like finance was pretty actively doing. Yeah, I mean, Bitmex was just such a different scale, right?

Bitmex was like, oh, you had some percent of U.S. customers on there. It's like, the DOJ showed for Bitmex was that there was some. Americans, right? They didn't even say how much, if I recall. It was like a very small number. This is like a multi-year, very willful. This is not like, oh, you were negligent and you didn't implement a KYC program. It's that you basically like lied over many years about the extent to which you were doing this. And even like, you know, like a year to two years ago, they were openly flouting this stuff. And it's also like, you know, the, the, the, with the DOJ, they never had anything on, on Arthur about like terrorist financing or, you know, facilitating. Like,

Binance is operating at such a bigger scale than Bitmex ever was as well. And I think it's important for people to understand that. Like, Binance, at the height of the market, finance was probably worth like $200, $300,000, $300 billion. It was making so much money. It was so massive as a business. I'm obviously, I mean, equity prices in general were much higher at the height of the market. But they just have such a huge footprint globally that it is basically one of the,

it was basically one of the biggest companies in the world. And they were effectively open for business for almost anybody. that's what the complaint is effectively alleging. And that just means that the volume of, you know, criminal activity and black market behavior that's flowing to the platform. Now, obviously, a lot of it is too small and it's like not worth their time to bank it. But for some of this stuff, like clearly the policy, you can see it from the interaction with CZ.

CZ is like, look, as long as we don't get caught and as long as we can sort of claim publicly that we're kind of paying lip service to compliance, do whatever. That's basically what almost every chat with CZ looks like. Well, let me push back on that statement just now. So, yes, there was a lot of stuff that was too small for them to care about it because it wouldn't be profitable. But like some of the logs that were presented were transactions that were too small and they were talking about it and it was extremely bad. The best example is like talking about how they were aware that Hamas was laundering $600 a time through their platform. And they were joking like, oh, is that even enough to buy an AK-47. Like, that's the crazy thing to me is that it is such a small amount of money that there's no way it was profitable for them as a business, and they still acknowledged it and, like, moved forward with it over, like, a small dollar amount. It's not like this was, like, billions of dollars. This was $600 of, like, terrorist financing that they laughed about.

So it seems extremely illogical. The other thing, you know, we saw what happened to Arthur. And, you know, with Arthur, that was at a time when crypto was much less villainized in the U.S. than it is today. And there was a lot less, there was a lot less, there was a lot less, bloodlust in, you know, the sort of the executive branch than there is today. So I think what happens to CZ here almost certainly is going to be really ugly. You know, we already have enough in here for them to bring criminal charges as far as I can tell. And the kind of criminal charges that you would bring to CZ are not like a, hey, you know, you slap on the wrist like, oh, you sort of, you didn't put a good enough compliance program in. The stuff here seems much bigger than that. Now, that being

said, we know the DOJ has been investigating them for years, although it seems like however the CFTC got this information, whether it be from, you know, because so many of these conversations involve the CCO, my assumption is that if there's a, if there is a cooperator, it's probably the CCO because the CCO is probably, you know, the CCO is named as a defendant, though, which I thought was kind of interesting. If it was like a plea arrangement, it's usually like they do like a separate arraignment, right? If you look at FTCX ones, the Carolyn plea for instance is like a separate chart. It's like not, not, not, she's not listed. So there's, I mean, I'm not a lawyer, so don't, don't quote me on that. I do know that that was different. That was,

that was something I noticed was different. Samuel Lynn was like explicitly one of the defendants. Right. So it's hard to tell what happens from here, but this does feel very substantively different. You know, what happened with Bitmex. It does seem though, you know, I was just talking to somebody about this yesterday that like being the biggest exchange in the world is kind of like being the emperor of China in that, like, eventually you're going to, somebody's going to come after you, somebody's going to kill it. Your lifespan is going to be very limited. But there's really no way to be the king of the world without getting some blood on your hands. That seems to be, in some way the moral of the story here. Like the only way Biden is could grow this big and become this dominant

is by cutting more corners than everybody else. And you can see very clearly that's what they were doing. I don't know if it's by cutting corners. I mean, amongst all of the bad behavior in there, like the most shocking part to me as a reader and it's like an industry participant was reading that they had 300 house accounts that they were using to trade against users on their exchange, right? That's not cutting a corner, right? They could have built the hugest exchange of all time without having any accounts trading against their customers, right?

They could have built probably the hugest care of all time while being serious about like blocking terrorist financing, right? Like none of those things, I think, help them build the hugest exchange of all time. So allowing U.S. customers definitely helped them. That was. And they pointed out the business case for like knowingly allowing U.S. customers with like a massage VPN, the whole situation. I think the hammer is going to come down on them extremely hard. And as you said, there's a lot of bloodlust right now.

Combine bloodlust plus very bad behavior plus this like quasi-zinephobic. around like binance as a Chinese exchange, I think the Venn diagram of that is going to lead to, you know, the hammer of Thor coming down on them. You know, TikTok is the target of vengeance right now. I'm serious.

TikTok is the target of vengeance. And they honestly have really done very little wrong. Okay. And they're still like in the maelstrom because like there's this like pseudo xenophobia around TikTok as a Chinese company. And like the hammer of Thor is coming down on TikTok. And it's not like, actual bad behavior and like actual like terrorist financing and actually like trying to rip off

your users. So if that's what's having the TikTok, I can only imagine, you know, what they're going to try to do to finance. To be fair, I think the finance trading against their customers thing, I think I've heard that for years and I've always just assumed it was true based on every single person I've ever talked to who worked at finance. Like it was not, let's put this way. That was not a dark, deep secret. First of all, the identity of merit point, which also ironic that the name of the trading on your own platform thing has the word merit in it, like kind of like unreal. That entity has been well known for a long time. And there have been a bunch of articles that have listed it. So it's definitely not, there's been like, CZ's only an investor in this trading

firm that happens to be 20% of finance volume. That sort of bit has been some of the older articles. So I'd say that was actually one of the least surprising things. The Hamas thing was the most surprising to me for sure. I was like, whoa. Like for such a low value thing, the idea of writing what they wrote is just, I don't need to have words for it. I'd have to assume that we're getting sort of the very just like tip of the iceberg. Like there's probably a lot more black market activity that they were aware of it.

That was very profitable for them to facilitate. Because otherwise, like, why would you just let it? Obviously, nobody's going to have $600 transactions from Hamas and just be like, okay, cool, that's fine, unless they understand that there's a broader part of their business that depends on that. Yeah, for sure. I think, like, another interesting fact is if we not just look at the Binan side, but like, let's actually look at the U.S. trading firm side because that was, you know, yes, they were like,

oh, 30% of our usage was from the U.S. but it was like 10 firms. So, like, it's not like, it's like 30% is coming from like retail users punting. No, no, no. A lot of their volume was coming from the, so they talked about like the two Bitcoin withdrawal per day accounts. And a lot of their volume was coming from these sort of non-KYC to Bitcoin accounts. One of the reasons why they really did not want to turn this off until after they had Binance US up was that it was a huge portion of their retail volume was coming from these two Bitcoin accounts. But the market makers ones were like still in violation post-finance US.

That was where it was kind of interesting. The question to me is like, well, whether the CFTC is going to go after the U.S. companies, which, you know, in order, our trading from A is Radix slash Blander. Ben Blander is one of the, how would I put it, highest ego people I've ever interacted with in algorithmic trading in my time. He thinks maybe so highly of himself that he didn't say no comment to the Wall Street Journal when he should have today. Because like the article doc where he docks himself is kind of funny. So trading firm A is Radix, which is a really small trading firm. In 2018, before I started Gauntlet, I was debating Gunk staying in Algo Trading.

I interviewed a few places, and everyone told me Radix was going to die. So I was like, okay, well, not going to go talk to them. So I guess they must have survived off this finance thing. That was, like, one interesting fact I learned about this was, like, a bunch of trading firms that were almost dead in, like, normal futures and equities. They're like, path to survival was like finance market making. trading firms B and B and B were much more larger. Okay. I'd be very surprised that they go after the trading firms, right?

I mean, in general, that's like not the way that these guys like to operate is going after the traders as opposed to going after the exchange operators. So, sort of. Trading firm B was Jane Street, training firm C's Tower Research. But trading firm A was interesting because they like explicitly logged in from a U.S. account when they are registered as a Jersey entity and then like try to to be like, oh, no, sorry, sorry, sorry, that computer happens to be owned by the Jersey entity. There's a bunch of stuff like that, which is actually like you can get a lot of penalties or your license, you can get like licenses suspended so like you can't trade CME, FCM type of things. I could see some blowback for the trading firms. I'm more curious what the U.S.

penalties are from the perspective of like, I still believe that like there's a ton of volume on Bynance that's American. It's not like even with post-Kyc doing. things like, yeah, making Jersey entities. So I'm just more kind of curious if like, if any of them get prosecuted, I actually suspect that then you'll see a ton of US volume leave Binance permanently because people will be like, we can't take this risk of like our offshore entity not being good enough cover for us. Yeah, certainly possible. Now, Binance did issue a response, I think. Dog student. After. Yes. So their response, well, the first response was four, which is CZ's code word for like ignore the fud.

But then he was going to like, okay, shit. Like we're getting a bunch of withdrawals. I should probably actually say something. So he, to be clear, the withdrawals are relatively small. So I think it's like a billion out of like 60 billion plus in total deposits they have. So Binance issued a statement basically,

first rebutting a few of the claims. It was honestly not very substantive. They basically said, like one, we have a big compliance program. We have like 70 plus people who are on compliance. full-time, which is, I don't know how that, what that has to do with anything. We work really hard on compliance.

We have great KYC. We have a lot of licenses. And then they also said, look, the internal accounts are because we take our profits in crypto and we have to divest that in order to pay our people. And so, you know, I have accounts on finance as well because I get paid in crypto and I sometimes need to turn it into cash because I need to, you know, pay my rent.

So, you know, very, like, sympathetic slant to the way he's trying to portray the 300 internal accounts that they use. And then I think the chief strategy officer of Binance stated that on Twitter that the reason why they use these internal trading accounts was only to provide liquidity and to minimize slippage, not to actively hunt orders or try to adversarially attack some of the people on their exchange as FTX was once accused of. So I don't know how much their response really addressed much of note in there. So I guess the question is like, okay, what happens from here?

Okay, let's assume, I think at this point it seems pretty obvious that there's, this is not the end. It's not just going to be a CFDC complaint. There's going to be more that comes, whether it's the SEC, whether it's a DOJ. What do you think is the net result of this? Like, obviously the stuff takes time to work out in the courts. Do you think that CZ is still going to be running Binance in two years? Do you think Binance is still going to be top dog in two years, three years, five years? What would you guys predict?

Robert, you're up first. You're making a face, so you're up first. I think, I mean, as I said before, I think, I think, as I said before, I think, this fits into like the Venn diagram of like target number one. I think it's going to be bad. I think they're going to potentially bring criminal charges. You know, I think they're going to try to shut down Binance. You know, we'll talk about the Wells knows against Coinbase, you know, coming up after this. But like, I don't think Coinbase is on the like for execution, you know, this is in the public's interest strategy. Like shutting down Coinbase is not in the public's

interest. I think there's probably enough people within the administration that truly believe that shutting down Binance is in the public's best interest, period, full stop, and will make that the goal and are smart enough to know that shutting down Coinbase is a terrible idea and against the public's interest. So how long do you think it takes for Binance to get shut down? You know, I'm probably taking a much more conservative view or aggressive view. I don't know which one that is. But honestly, I think within 18 months, there's a play at like totally shutting down bynance. Total shutdown within 18 months. Okay. Turin, what do you think? I would compare my time scale to like whether the trading firms get people go after them. Because if Binance actually

starts losing its liquidity advantage and say like other exchanges like the buy bits of the world start taking all the market makers and getting really tight spreads, like I can, could see it being happening faster because like they'll both be weaker and the government's going after them versus not. But if they somehow are able to not have that happen, then it'll be very different. So I guess like because of that, I give a pretty wide confidence in a role. I'm not sure it will totally shut down. Like Bitmex didn't totally shut down, right? Like I'm more of the mindset that it'll be crimped in some ways. And it will see Z steps down, He He steps up, something like that. Yeah, it was interesting she wasn't mentioned at all in the complaint. I thought that that made me think she was the informant, but that was just maybe my conspiratorial, like, a mindset. You know they've dated. So it's like, that's actually very conspiratorial.

Yeah. I mean, the whole, the whole story of how that happened was kind of wild. But wasn't she like a news anchor in China like before? She was like a, she was like a kind of famous news anchor. I don't know. They were both at, OK. PX before. But like her absence of her name in that doc was like very apparent, perhaps so much so that maybe she is actually the informant. I just kind of think I don't know how the U.S. really goes after them. Like I'm sure, Binance U.S., if you ask me when that's dead, I could totally be like that's dead in 12 months. I mean, think about how many times a CEO of Binance U.S. has changed. First of all, the first CEO of Binance U.S. disappeared for a couple of years, although I think I saw her in Denver. So I think she's, she's back in the world. The second CEO of Binance US, who was the former OCC head, left after three months. And then, like, it's just been this, like, kind of, like,

ring around the rosy type of, like, management since then. The Binance US, I feel like you could see getting, immediately being sent to the slaughterhouse as, like, a appeasement. And also, it has the most US liability. The, you know, Biden's US was trying to acquire the assets of Voyager. It was, It was so interesting because it was just a week ago that a judge excoriated the SEC for claiming that like, oh, no, you can't let a Binance to allow it to take the stuff because we think they're in violation of a bunch of laws. And the judge was like, okay, yeah, what laws? And then he was like, well, we can't quite say. And there's like, okay, shut the fuck up, get out of my court. Like, you know, this acquisition is going through. And then the judge just stayed the order and said, never mind, Binance U.S. cannot acquire Voyager's assets. So it seems like you're absolutely right. The pressure on Biden's US, which is much easier to get to is going to get to. turned up really quickly. Zizi being a Canadian citizen also makes is different than Arthur, who is a U.S. citizen, if I'm remembering correctly. Yeah.

So like I feel like that. And yeah, Arthur, if you're listening, apologies if I get that wrong and you change your citizenship. But I'm pretty sure it's very different with CZ because like I'm not sure how you would, how you would actually find him. I mean, he's pretty well known. He's in the UAE right now. Sure.

Yeah, yeah. Well, I mean, he takes pictures there. It's not like it's just pretty well known. It's like you can just go to his Twitter and click media and get a good sign of that. But I guess the question is more like what would the U.S. actually be able to get him extradited? And if they did, it doesn't matter. I think the bigger thing is more that they just crimp them in like all these like, it's death by 1,000 cuts, like cut off the banking system stuff first.

then suddenly, like, add Binance some sanctions list or something so that, like, other countries' residents can't, you know, use them as much. So it's, I suspect it's going to be that. But then at the end, it might not be totally dead because it has a lot of brand value. I mean, the DOJ playbook is like just seize the dot com. And then once the dot com is like this big DOJ logo that's like, hey, Binance US or Binance. com is no longer, no longer operating. How does that work? Like, they can just tell ICAN, the DOJ has jurisdiction over ICAN or like...

Yeah. I thought the I and ICAN says it's like a UN thing. That's ridiculous. Oteroon. Oteroon. That's so sweet. That's why they're going to migrate to Binance. at ETH.

Limo. That's the new... They're going to go in orbit. That's what it's going to get on urban. Okay. So my prediction is I don't think it dies. I think it just has this like very slow. slow tapering demise, if that would be.

Okay, which is kind of what happened to Bitmex, right? Bemex didn't die, but sort of, you know, slowly declined to it's now like a top 20-something exchange. Yeah, I could kind of see that happening. It's kind of like the Chinese emperors who go live in exile. You know, they're not killed, but they just, you know, they're given this little corner of the world that they have to stay in. Binance, U.S., though, 100% I think will die, like in Roberts' time frame or less.

I think that that's the sacrificial lamb that will just be killed immediately. All right. Tom, what's your take? Yeah, I'm inclined to agree with Tarun here. I mean, it was actually interesting after, I think it was immediately after they put out their sort of rebuttal and CZ tweeted out. He also appeared out this article, I think, about sort of the HKMA warming up to crypto. And you said something like, oh, there's a world outside the U.S. or something to the effect of, hey, Asia is actually opening up to crypto if the U.S. is going to shut it out. out. And I think CZ has the resources to, you know, avoid jurisdictions that have extradition

with the U.S. And so, I mean, I would not be expected if there's like a rest warrant or interpol, you know, alert out for him imminently. But like physically getting him and trying to put him on trial seems very tricky. But I agree with Taron. It seems like more, hey, just making it very difficult to deal with finance and just making kind of difficult from the due business overall. Yeah, I hear you, although, you know, I don't think CZ is that interested in going to China either. Like, he was chased out of China as well for all. I mean, they had a ton of market share in China when running an exchange is even more illegal than it is in the U.S. For the sake of our industry, please do not write things like this anymore.

What was the quote that was related to like, the block wrote this article that like Binance still have this office in Shanghai? And then CZ replied with this tweet that's like became mean. forever, which is like... Recommend no more news like this. Yeah. It's like for the sake of our industry, recommend no more news like that. And your company.

There was a little subtle threat in there as well, I believe. Yeah, yeah. But it was like, I think that thing became just like this huge meme, you know, was around about this China thing. In case anyone's ever... In case you're wondering the provenance of that meme,

it has to do with the like, hey, we're kicked out of China, but we're actually not. Yeah. I don't see a way that this thing doesn't turn criminal. I mean, with everything that's in there, especially about sanctions and terrorist financing, I think.

And, you know, like Robert was, like Robert was saying, like, there's just so much appetite to go after this, like, sort of Chinese overseas, like, runs up to a thousand shell companies, takes over the world. You know, and after Sam, like, Sam just kind of, you know, he took a giant dump in the punch bowl, and now everyone is like, huh, this punch sucks. Like, who else is making punch out there?

Turns out CZ has the biggest punch bowl of anybody. I don't know. I'm not going to lie. I've never heard. I've never heard that metaphor and it's extremely disgusting to like think about it. Isn't that the metaphor? That's a metaphor, right? I'm pretty sure it is.

I think just to be accurate, I think it's who peed in the punch ball. Is it who peed in the punch ball? It's still disgusting. It's still disgusting. Yeah, yeah. But it's more disgusting. All right. Thanks, guys.

Thank you. Thank you for the fact check in real time. That's why I can always count on you guys. Anyway, all right, sorry, please unhear that. Long story short, I think I agree with you all. Let's move on because we've, okay, that's enough about Bynas. Although, speaking of extradition, we did also just get noticed a couple days ago. The Doquan was just arrested.

So it turns out Doe Juan, he was in Montenegro, of all places, with some faked past, like some forged documents. And he got caught just for having, I guess, forged documents. Also, there was an Interpol notice out for him as well. You know, I don't know. If Doe can get out, I don't know that CZ is going to do that much better. Although, you know, I don't know what Doe is doing in Europe. It's always some damn thing in the Balkans, you know? Yeah, I think the thing that's most hilarious to me about the timing was

Vitalik is running this two-month social experiment in Montenegro in the same city that Doe was caught in. That started March 25th. And Doe was caught on 23rd. No, no, no, no. I don't think it has to do with like, but it was like, There's no way that's a coincidence. Doe was flying to the Talix conference to poach a bunch of Ethereum engineers to rebuild Terra 2. Is that what you're alluding to, Turin?

You know, I know of no such conspiracy theory. This is the only part of the show that is investment advice. No, no, I just think it was like funny. It was like the same city. I can't pronounce it. Pudadrugal, something like that. Yeah, like, yeah, there's a thing called Zuzaloo. You mentioned eath.

Limos. Zuzaloo. dot eat.limo is the signed website for it. If anyone can figure out how to spell that, good luck. Which is sort of this thing that Ethereum early, Ethereum insiders, I don't know what else I'd call it, but they're having this conference that's like part crypto stuff, part like AI safety, part some other stuff.

It's like a multi-month conference. I don't know if I call it a conference. It's like a pop-up-so. Yeah, it's like effective altruism meets Eastern European vibes. Yeah, I don't know how to. I don't feel there's no polycule thrown in there for good measure. I feel like there is a mix of also a little bit of Burning Man vibes. I feel like there's kind of a little bit of everything in there.

Yeah, there's all the people I know who are really excited about going are definitely like exactly the type people who are excited about going to the Bahamas. There's a strong overlap. Like I know people who are in the Bahamas who are going to Montenegro. It's a lot more innocuous than what was happening in the Bahamas. So just to be clear, get a clear that association. No, no, not that way. I meant more about the non-crypto-related activities of, like, longevity and, like, psychedelics and whatever, right? Like, all the other stuff is like...

Like, right now that sounds so wholesome to me. I don't know, after talking about all this, like, sanctions, violations, body laundering stuff. I'm like, oh, that sounds so, that sounds so sweet. But Joe was caught at the eve of this event. That's what I'm saying. It's like, that was the funny part. Yeah, yeah. It's like, I guess he was like, look, if I just hang out here, they can't kick me.

me out of here, right? And they're like, no, no, no, you're not invited. Like, we're getting you out and then he got caught. Well, no, no, Montenegro has some type of, like, there's a reason people keep going there for crypto things, right? Like, their government wants to use crypto as a current, like, accept crypto as a national tender or something. The hackathon at the end of Zuzal is actually, like, how to build government services for Montenegro in smart contracts. So it's like, it's definitely, there's definitely something about Montenegro and, like, their legal system being very favorable to weird crypto experiments.

That's cool. So I think that's the reason that they're both there. It's just the timing was amazing. I don't think that's why Doquan is there to offer services to the Montenayor government. I know he's not. I'm just saying the timing was amazing that it happened to be. It was very coincidental, but he was flying to the UAE, right? So he was trying to get out of there.

There was too many crypto nerds. True. Also, did he have like a Costa Rican passport? Like that? Yeah. No offense. Like if this, if Do Klan came up to me and was like, yeah, I'm from Costa Rica, I would, I too would also look twice at the passport, like five times maybe.

If you're in Montenegro, maybe you just, all accents kind of sound vaguely weird to you, you know, I don't know. It clearly didn't. It was at a private airport. It wasn't even at commercial airport. We've got a lot of other content to discover. So it's been, beyond just the CFTC action and Do Kwan getting arrested, hero of the show, we also got a Wells notice

by the SEC issued against Coinbase. So for those of you don't know, a Wells notice is basically an indication of like, hey, we're going to sue you. Give us a response in case that we decide not to sue you at the last minute, but probably we're going to sue you. So, Quimates was issued a Wells notice.

Cornice did not share all the details of the Wells notice, but basically, from what they indicated, the Wells notice addresses the staking business, which we already know Cracken was sued by the SEC and they settled over Cracken's staking business, potentially being a security. and it's a saking business and also some of them,

some of the assets listed on Coinbase, also being unregistered securities. So that's the indication we've gotten from Coinbase. Now, Coinbase issued a pretty scathing response on Twitter and in a blog post, basically saying that they met with the SEC more than 30 times in the last nine months, gave them zero feedback directly on what to change or how to register. They asked Coinbase to give proposals on what registration would look like.

Coinbase wrote up, like, you know, they put a lot of time and energy into writing out proposals at the SEC's request about what a path for crypto exchange registration might look like. And the SEC basically ignore them, canceled their last meeting, and then pop them with the Wells notice without giving them any indication over all of their conversations, which, of course, Coinbase is known as being the most compliant, most kind of compliance first exchange in the U.S. besides maybe Gemini, which likes to yell that they're very compliant. But, you know, Coinbase is obviously the biggest and the brightest within the industry.

this kind of rocked a lot of people because it sort of shows that the SEC at this point is going after everyone. It doesn't matter how good or bad of an actor you are. There's basically a full core press from the administration at this point to go after crypto. So what were you guys' thoughts

seeing the Wells notice? At this point it kind of feels like, you know, this happened months ago, but this was just last week since our last show. It feels pretty momentous. Now, Coinbase has this. very belligerent attitude about it, which is great to see.

And Coinbase, as far as I can tell, they have such a good case against the SEC, given all the facts of their engagement with the SEC and all the attempts that they've made in good faith to try to get the SEC to give them some kind of positive indication of what they should be doing.

But, you know, Genzer said publicly, he thinks everything besides Bitcoin is security, in which case, you know, compliance would basically mean, you know, become a Bitcoin-only exchange, which would just be an obvious, you know. Hey, it's not just bit macs?

Old school bitnacks? Bitcoin only trade perps. Your margin was always in Bitcoin, right? Well, the derivatives would be the problem there, right? They don't know. Well, to point this out if you haven't seen, you know, I logged into my Coinbase account today and there's actually a new derivatives tab. So.

Oh. Oh, yeah. Oh, yeah. Yeah. I think Coinbase is actually like for non-US, like London or something, that like they, they, they, they're, London or Singapore is something like that. They're going to offer like three to 10x leverage. I'm not sure, but it's like capped a lot lower than everywhere else.

It's not finance tier. I see, I see. Wait, Robert, are you using your jersey account in order to get access to those products? No, it's read only for me. I just see. Oh, it's read only. I see, I see. Okay, got it, got it, got it.

But now you're, see, you made fun of the, are you doing using the jersey accounting? But I'm telling you, if any of these FCM license people lose their FCM license over this Binance thing. You will see all the liquidity providers who are vaguely American just leave crypto exchanges, right? And so, like, to me, that's the way to finance

would probably take a higher hit in some ways. I think a lot of these trading firms, like creating these offshore entities, like they are pretty clean. There's a lot of money in making sure that those things are airtight. So I would be surprised. I mean, maybe somebody's going to get hit,

but I think the people who did it right will look at those people and be like, okay, those guys are idiots. Yeah, I'm just saying that CFTC's description of the bumblings of, you know, two firms that are extremely large, too, right? And, like, extremely well capitalized still made these kind of, like, logged in from the U.S. mistakes. I think, like, there's, especially because it seems like regulators want to, like, go for the guillotine, someone is going to get made an example of.

And the question is, like, who are they going to make the example of? And I think, like, that will scare people a lot more than, even more than, like, the loss of banking. in my mind. So, I mean, okay, so we've gotten from a bunch of different angles now, right? So like SECC going after Coinbase, CFTC going after Binance. The other big news from the CFRUSRF as well this week was them going after Tron. So the SEC filed a lawsuit against Justice Sun for unregistered securities violations, market manipulation of just tons of wash trading of Tron. I think they had like a bunch of employees just repeatedly washed selling on different exchanges, as well as paying celebrities to endorse Tron and not disclosing payments, as well as

celebrities themselves. So who do we have on the list? Lindsay Lohan, Jake Paul, Soldier Boy, Neo, Acon, and of course, Lil Yadi, who we all know and love. All of them were hit by the SEC for basically endorsing. I think Tron, I think it was mostly Tron that they were endorsing or like Tron ecosystem tokens. On the whole, it looks like basically every angle now is coming down. Like this feels one very coordinated. Obviously, you also have FDIC doing the debanking. You have the SEC going after celebrities. You have CFTC and the SEC going after exchanges. You've got, you know, Doquan getting arrested in Montenegro, which, you know, maybe

coincidental, but like it, it sort of fills in the pastiche that this now feels like a full court press, particularly within the U.S., but also the moment that Doquan was arrested, by the way, there were also charges unsealed by New York prosecutors against Doquan, basically, jockeying to get him extradited to New York for trial. So at this point, it's very hard to say that this is not. coming straight from the executive of saying, hey, I want heads. Let's go after everything in crypto because everything in this industry needs to go. Yeah, it is hard not to see it being coordinated, I guess.

I think the more cynical take here is that like, you know, some of these suits are like extremely unsurprising. Like Tran, for example, but some of them, such as Coinbase, it seems like they're going to fight pretty hard and it's clear what the basis of the case would be. But, you know, Genser's out in two years anyway. And so it's like the suit is more of the point versus actually like winning the suit. And I think there's also rumors coming out that like this ripple lawsuit, they might be able to settle. And that's why you've seen XRP kind of pumping lately. And so I don't know if it's like all of these things are going to have sort of the same outcome, I guess, or it's going to be sort of this one, you know, sort of monolithic act across all these different crypto companies.

But it does somehow feel that, hey, in the past two months, we've seen more action than we've seen in the past two years effectively. It's hard not to think that like there is something going on behind the scenes. Yeah, this feels like probably one of the most important questions over the next year is what's going to happen with the U.S. regulatory action against crypto. I agree with you that actually a lot of these things. So I think if you sort of look at them separately, right, the debanking stuff, it feels like already there's been a lot of public attention on this debanking of crypto that I think they thought was going to be more quiet because they were kind of pushing through back channels. like there was no real transparency around how they were doing it. And now, you know, there's like op-eds

in the Wall Street Journal. Like this stuff is now getting very public that, hey, FDIC is kind of, you know, putting the elbow on the scales and trying to push banks to not work with crypto companies. And people are pissed off about this. I think this is perceived

as being a sort of extra legal crossing of a boundary that FDIC really should not be doing. The same thing, I think, with the SEC action against Coinbase. I think people mostly perceive this as being excessive. and at least in court of public opinion,

it looks really bad for the SEC. If in fact they do bring a lawsuit, they might not. To be clear, a well-send it doesn't mean that there's a lawsuit filed. They might decide not to file the lawsuit

just upon seeing the responsive Coinbase. Or also just seeing that like, hey, this is going to be super unpopular and we're not going to win. So let's not even bother bringing the lawsuit. But this stuff with Binance definitely is going to play.

There's just no, no way that we're not going to see this as being one of the most important stories of the year is the CFTC lawsuit against Binance and whatever else comes from it. and it does kind of feel like this is this is kind of the way that the cycle will truly come to an end right like in some ways

the 2017-2018 cycle the biggest exchange was a PIMX and the cycle in a way was not really over until like the until the full kind of denouement of Arthur finally finding himself you know under indictment not that I wanted him to but that in some way that was the resolution of the cycle

and in some way you know Biden has been the overwhelming winner of this cycle and seeing them finally fall, whether it be one from just a death by a thousand cuts of like customers having to basically abandon them because it's just too dicey to deal with finance or two just because, you know, CZ is literally forced to step down hand over the reins.

You know, they have to divest a lot of their businesses and, you know, things just become chaos over there and people just naturally be like, okay, shit, this exchange is a mess. I don't want to trade here anymore. If Binance loses the throne, it's going to be painful in the short term because so much of the market, so much of the global market for crypto is on Binance.

They're like 60% of the global market is just on that single exchange. So it is, it is the market today. If Binance goes under, it's going to be super painful. A lot of things are going to get hurt. A lot of people are going to get hurt. A lot of startups are going to get hurt. But ultimately, the industry is going to reorganize around whatever the new exchanges are. And the end of the day, the industry is really about the technology.

It's about the assets. It's about Bitcoin and Ether and all the stuff that's getting built, not about who happens to be the biggest exchange today? I agree. I think if Binance goes down, it's potentially going to reinvent everything, and we might actually see more self-custody, more defy, more things that are long-term good and healthy grow in its way. Yeah, I think another thing that's sort of curious is that, yeah, crypto exchanges don't have a very long half-life historically, or like at least their ranking, their ability to stay

at the top for a long time has not has been sort of never been high for anyone other than coinbase which has kind of been like consistent if if not anything else but i i'm kind of i'm not so i don't i don't know if the the end of binances is sort of the end of the world and in some ways um i i but like i i still think that people do want perpetual futures in general are an innovation that's not going away. People like them. And there are reasons that they're really hard to do with real commodities because your physical delivery,

you have all the settlement risk stuff. Look at the London Mercantile Exchange recently found that like 0.8% of the nickel in their warehouses was actually stone. Stuff like that completely changes your contract specs and product. And in some sense, and I hope Gensler is listening to this. Cryptos is the most pure commodity as a commodity. It has immediate delivery properties and has like all the properties that all the commodities

trading on CME, LME, whatever, your X, J.P.JX, whatever. All of those things are all like these like approximate contracts, right? It's like, oh, we're like, we're selling you hog futures and the hogs are between like 45 pounds and 65 pounds. sometimes you might have like you might not get that many of the 65 pound ones. And there's some sense in which crypto is actually the most pure commodity that you know your delivery is like exactly a particular thing and you can build these cleaner financial products like perpetual futures on them. So the real question is like will Defi ever be able to stand up alternatives that, you know,

are compelling enough to these users? and hopefully this is a good push to push us in that direction. I mean, as much as I love Defi, I think, you know, people were saying this after the collapse of FTX as well. It's like, oh, this is going to prove the need for Defi and Defi is going to step up to the mantle. And, you know, Defi had like this kind of rebound immediately after the collapse of FTX, but then things kind of went back to trendline, which is that defy is cool.

It's great. People like it. But, like, ultimately people, most people are going to be using C-Fi because they don't know how to use metamass. they don't know how to self-custody, they don't know how to do any of the stuff. And of course, a lot of what Binance does, and this is where I have to give a lot of credit to Bydance.

Binance is operating in so many countries where nobody else is operating. They're doing so much for consumers in places where almost nobody else even bothers to offer consumer services aside from just trade Bitcoin, right? Most people, most exchanges, they're not nearly as deeply entrenched

into people's lives as Binance was. And that's part of the reason why they created such incredible business and why they're so beloved it by their consumers. So it would be great to see a world where finance can survive because, like, the enterprise value of what they've built is so massive. My worry is just that so much of it has just been tainted by the way in which it was built, that we're going to have to go through the painful process of somebody else stepping up to that mantle or just going into a world that is

that is just more, quote, unquote, decentralized in that there is not going to be any single player that is 60% market share and therefore operates in every single nook and cranny of these small countries where nobody else can afford to have a ground game besides Binance. Binance is incredibly efficient company. You know, they're obviously incredibly profitable. They're very, very good at what they do. And it's a testament to what CZ is built. But unfortunately, he just was driving too fast.

And he's caught too many tickets along the way that I don't know if he's going to be able to keep driving this car into the next decade. I keep taking these metaphors and kind of pulling them along with me. Better than the punch pull at least. I guess the thing that's weird to me is like they are a little hard to kill. They're actually in some sense already a little bit decentralized. To your point, you know, like finance Latin America is like completely different from Binance Turkey, which is sort of completely different from, you know, finance US or China or whatever.

So I kind of could imagine that maybe they actually fracture into like these like splinter sell companies that serve the regions and like they just end up being like regional exchanges. I can see that. I mean, they have so many. It's like, yeah, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like franchises, right?

So it's like there's, there are totally different exchanges that basically were bought by Binance or partner with Binance. Finance operates the tech and like change the branding and helps them with marketing and go to market and whatever. But, I mean, the one thing that became. came very clear, especially from that CFTC lawsuit, is that everything was just controlled by CZ. Same way that we saw with FTCX, right? Everything was controlled by Sam. So most of these exchanges are very, very, very centralized in the leader. And, you know, of all these companies and all

these little shells and all this stuff, CZ was always at the center of it, or it continues to be at center of it. And so I do think it'll be painful if CZ is suddenly pulled out and Binance is somehow has to continue operating. But I agree with you. I think it's likely that, you know, in some of these places like Binance U.S., I think you're right, Binance U.S. is probably not viable without the Binance branding. But in most of these jurisdictions, like Binance has just built such an incredibly, like such a committed user base. And they're just so good at what they do that I agree. Granted, their user base loves Binance because of BUSD. And if BUSD suddenly is non-existent, I would be, I would say that BUSD and USDT access are extremely important. And if somehow

Binance is unable to continue that flow of exporting dollars from the U.S. to all these places, that will... I mean, they'll always be able to facilitate U.S.D. even if they're no longer... Yeah, for sure. But I do think the BUSD growth in Latin America was actually, you know, a huge part of their success in the last year. So I'm kind of a little bit... This is why I think the separate franchise thing is actually maybe the Dark Horse theory, that like the Latin American one will just be like, sorry, we didn't, we didn't know that CZ controlled everything.

Like, guess what? We're now Binance Latam. Like, we're our own entity. Because, like, it's, they all have, you're right that they all have too much enterprise value that's like tied to their local regions. Ironically, because it's crypto, you think that there shouldn't be that much.

But, but, you know, they do. Yeah. So, okay, I think most likely over this next week, if I had to guess, we're going to see more stuff drop. Because anybody who is working on anything just feels like, oh shit, we got scooped. CFTC has a lot more than we do.

We should get something out. Whatever we have that's original, we should get it out the door. And my guess is it's not just going to be the U.S. It's going to be other countries too that we're working on something. So I think that this next week is going to be chaotic. That would be my guess,

although I don't know, you know, I don't have any insight information. I don't know anything. But obviously there's a lot of rumors flying around every which way about what's coming next on this. It's an easy thing. So everyone keeps talking about this like Asia's opening up type of thing. I don't know enough to understand that. I did speak someone who was like what used to be a regulator who said something like

this too. What's the actual story? Is that like some like opium story that people have made up? Or is there like actually some like real laws in Hong Kong or whatever that are being No, it's definitely real. So there's been rumors that Hong Kong is going to allow Hong Kong residents to start buying Bitcoin and Ether. within a couple months.

So I don't know if that's been confirmed to be true, but it's very, very clear Hong Kong is now positioning themselves to open back up to digital assets. And China itself, Beijing, kind of behind closed doors, is basically silently nodding and saying, okay, great, this is going to be the sandbox through which we allow digital assets to start coming back into the region. Hong Kong is basically a way, I mean, Hong Kong is like very,

you know, it's basically rich people and then people who've been native Hong Kongers. And it's essentially a way of saying, okay, if we allow it in Hong Kong, that essentially allows high net wars to get access to it without allowing Chinese retail, the Lao Bai Xing, the sort of ordinary people in China to potentially get fleeced by, you know,

NFT scams and ICOs and all the other nonsense. So, you know, from China's perspective, it's funny because China bans crypto, basically every bull cycle, right? This is, 2021 is actually a third time that they banned crypto, which kind of tells you, like, their bands are a little bit watery if they keep having to re-ban it.

But that's kind of the way China, operates is that like it China you know they ban something and then they kind of let it come back in the corners they don't quite enforce this thing and they sort of they oh this little loophole people are using we'll kind of let them keep doing that and watch and see how it develops because I think what China dislikes about crypto is not crypto per se but what they don't like is disorder and bull markets and crypto are really fucking disorderly right they are you know crazy people scamming pyramid schemes you know NFT fraud all this like things just go totally nuts in China every time there's a crypto bull market

and that's what China tamps down on. But once things are calm, which right now they're very calm, in a way it also just feel like the thing I was saying earlier that this is kind of the natural evolution of the cycle. The same thing happened. China banned ICOs in 2017. They were like, oh, this is all crazy. You guys aren't allowed to do this.

They tamped not down on everything. And then slowly but surely started to come back and people started to do crypto startups again and exchanges started to offer stuff to Chinese people again. And R&B started to get traded for UST. again and it started to come back. And this feels like, oh, this is, we're at that point in the handing off of this cycle to the next one where the big exchange founder gets hit.

You know, the all coins pull back and like the hype cycle's gone away. China reopens again, like new licensing regulatory regimes, start figuring out how they're going to start operating the stuff. It feels like I've seen the story before that I've very strong deja vu. My dark horse candidate, and this, again, I don't know why today I'm indulging in so much extreme speculative thought. It is actually that a lot of Chinese companies are making these kind of like announcements

that like, hey, we're not flat-footed. We also will have large language models. Like, bydo, like every two days is like, oh, no, no, no, we're going to build Baidu AI and it's going to be Open AI's competitor. Like there was like some, some like, and they're US public companies. They have to report this.

So it's like you can see this stuff. There's definitely this thing of like, you know, in the self-driving car and sort of like visual, like tagging, image tagging, video tagging stuff, there was always this idea that, like, China was way ahead of the US in AI. But then the language stuff, it's, like, clear that the US has basically steamrolled everyone. And you're starting to see this kind of, like, national angst. Like Britain was like, we're going to build our own open AI and like, we're going to, like, fund it with government money, like, and call it Brit GPT.

Like literally the prime minister. Right. Yes. It was like hilarious. So there's a lot of this, like, weird, like, national pride stuff. And I actually think someone is going to be like, hey, look, we lost the race in AI. But you know where we can actually win is crypto. And like that's going to be kind of like, that's my sort of like one year dark course speculative

theory that like China might be that place. Look, I think China understands that, right? If you remember, 2019, they announced the blockchain plus initiative in this idea that like blockchain was super strategically important for China as a technology. Like that came straight from Xi Jinping. And they started, you know, doing a bunch of stuff at the government. level to integrate blockchain. And actually, that was the first time that I think in the People's Daily, which is like the big

Chinese, you know, state-owned newspaper, they wrote this piece basically saying Bitcoin and ether are fantastic innovations, they're wonderful for society, blah, blah, blah, which is like unheard of that China would say something like that. And then, of course, they backpedaled after they banned crypto. They say, oh, and actually, no, these things are bad. They're speculative. So everything, I think, in China, particularly is very, like, China. understands that crypto is really important.

They don't necessarily know what to do with it, but they know that it's really important. And they know they see the U.S. is now giving up the lead. And they see that other countries are not, right? Other countries are not doing the same thing. Japan is not doing that. Korea is not doing that. Like pretty much at this point, the U.S. is the odd man out when it comes to countries' reactions to crypto.

The U.S. is now the most punitive of almost any country besides, you know, basically like Iran or something in its attitude towards crypto. Even China is actually being friendlier to crypto than the, than the U.S. US is at this point. So. Yeah. And I think a lot of this, this, this, uh, this like national security over building new technologies thing. I think the US suddenly like turning around from like 2017 where people like, oh, yeah, AI companies in China are way ahead to the US being like the dominant place will, will kind of drive some interest into this alternative technology national interest.

But again, this is very speculative. It's just not, it's an opinion, not a, definitely. I think also where, like, US is the only G7 country that's not considering doing a CBDC, but that's like affirmatively not going to do a CBDC. So I think it's on multiple levels. But that's for a different reason, admitted. I will say the following. I won't name the person, but someone who is in the U.S. regulatory regime, you know, I was like, hey, do you think Fed now's Fed now, which is like this thing for doing bank transfers 24-7, is going to work and do all they have all this guarantees? because it seems like they're kind of rushing it in response to crypto or something

or like the banking crisis and the person replied Fed now you mean Fed later right so they don't think they don't think it's going to actually like launch correctly and do all the things it's I think it'll launch it's not

yeah they would not play that's going to launch a few months and yeah no no no that it's going to be very very restricted It's not going to be the like, hey, we actually have everything working. There's like white list only sort of test net. Yeah, yeah, yeah, exactly, exactly, exactly. It's going to be the single sequencer roll up. Okay, nice, nice, nice.

Okay, you're going to take a page from the crypto playbook. I think that that, like, I'm not surprised. But like, I think that there's kind of this interesting thing of like the U.S. has been like, oh, yeah, like we're not going to do CDC because we have Fed now. But if Fed now fails, I bet you it might change their mind. Well, also, I mean, CBDC, the point of CBDC, the point of CBD, is not just real-time settlement among commercial banks, but it's also retail access to the central bank ledger.

For sure. Anyway, I mean, there's a lot more that we can talk about there. We're already over time, so we're going to go ahead and call it. But maybe next time we can talk about some of the Fed Now, CPDC stuff, if nothing else important happens. But my guess is that other important things will happen. If you're a listener and you actually like talking about that stuff, given that I'm not sure if we're the most qualified audience,

please somehow tweet at us or if you like listening to us talk about CBDCs I think I might resent for the show no I know I'm just saying like I would love to get a poll I'd love to get a poll of whether people want okay well I might

I might have to resign and disgrace for the show if that's what we become anyway all right nothing against CBDCs are great I love CBDCs but you know I don't know I don't that's not why I don't I definitely don't but I do think it's worth talking about then fine all right well Until next time, thanks, everybody.