Unchained - Why a U.S. Ban on Yield-Bearing Stablecoins Would Help 'Too Big to Fail' Banks - Ep. 840

Episode Date: May 23, 2025

Yield-bearing stablecoins have had decent growth, now topping $6 billion in supply and paying out nearly $600 million to users, according to data from Stablewatch. But just as these products go mainstream, the U.S. Senate is moving forward with a stablecoin bill that could ban them outright in America. In this episode, NYU professor and Zero Knowledge Consulting founder Austin Campbell joins Laura to break down: Why yield-bearing stablecoins are under fire in Washington Why Dems are pushing for the ban and who stands to benefit How this bill could give foreign issuers an edge over U.S. ones Whether yield-bearing stablecoins are securities under U.S. law And what the future holds for projects like Ethena, Sky, and others Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! Bitkey: Use code UNCHAINED for 20% off Focal by FalconX Austin Campbell, NYU Stern professor and founder and managing partner of Zero Knowledge Consulting Unchained:  How the Senate Stablecoin Bill Enriches Corporations at the Expense of Consumers Stablecoin Bill Passes Key Hurdle: Dems Join GOP to Deliver a Crypto Win Tether in the Clear? Yes, Under This New Republican-Led Senate Stablecoin Bill Stablecoin Bill Stalls in Senate as GOP Cries Foul Over Dem Resistance Timestamps: 0:00 Introduction 💣 1:29 Why the new stablecoin bill takes direct aim at yield-bearing stablecoins 🗳️ 3:36 How Democrats are driving the push for a ban and what their motivations might be 🏦 6:28 Why calling stablecoins “banks” leads to major policy confusion 🌍 13:49 How the bill could hand an advantage to offshore stablecoin issuers 🎒 19:31 Whether Tether is warning about risk or just protecting its own interests ⚖️ 21:09 Are yield-bearing stablecoins actually securities under U.S. law? 💰 23:40 What real benefits yield-bearing stablecoins offer to users 🚫 29:54 Why Austin opposes the proposed 10% interest cap 📚 32:04 Why Ethena would likely be regulated under market structure rules instead 📰 35:04 Weekly News Recap Learn more about your ad choices. Visit megaphone.fm/adchoices

The single biggest set of beneficiaries of interest-faring stable coins being banned are going to be the largest financial companies in America. If you think the too big to fail problem is bad now, wait until you do this. Hi, everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin. Every episode, we love to feature your comments. Today, we have responses to my recent interview with Linda Shea, developer ecosystem lead at Farcaster. Linda and I discussed micro payments for content and whether this will finally take off on Farcaster. On X, Redrum Rick said, LFG, let's see a Farcaster can make it happen.

If you want your response featured, leave it on a video on YouTube, Farcaster, or X. This is the May 23rd, 2025 episode of Unchained. BitKee is the Bitcoin Wallet from the team behind Square and Cash app. It's the first two of three multi-sick hardware wallet with recovery tools, that replace the need for a seed phrase. Get 20% off with code unchained. An AI that speaks crypto and does the work of a team of analysts. Introducing Focal by Falcon X, bringing in clarity to a world of noise.

Visit askfocal.com. Today's guest is Austin Campbell, NYU Stern Professor and founder and managing partner of Zero Knowledge Consulting. Welcome, Austin. Thank you very much. Happy to be back. The U.S. is potentially on the verge of passing a stable coin bill in the Senate. This was thought to be one of the few pieces of bipartisan legislation that Congress might take up this session, but it's proved to be a more contentious process than expected.

An initial attempt to get past a procedural step known as the cloture vote to allow for floor debate initially failed, and it finally passed on Monday of this week. You've been especially critical of one of the provisions, which would ban yield-bearing or interest-bearing stable coins. How did this ban come to be? So the origin of the ban is, if we're being honest, essentially lobbying by various banking associations to prevent stable coins from paying yield. There is, despite the facts on the ground, a belief in the banking sector in the United States that somehow the passage of stable coin legislation is going to be immediately destructive to deposits within the U.S. system. Now, as a factual matter, most of the demand for stablecoins currently comes from non-U.S. persons who are getting access to dollars. And in the U.S., it's really only people using it for crypto trading and some other niche use cases. They're not really a big component here. So one, I find this a little bit misguided. But two, I think one of the interesting things that we've had in market structure is despite the rise in interest rates in the banking sector, checking accounts and many savings accounts is anybody who has a bank account will know, still basically pay you zero. And I will remind you, this is not the way it

used to be in the 90s or 2000s. I have enough gray hair to be able to talk about these kinds of things. And what that means is that banks are having a significant expansion in the amount that they can lend for while not paying that through to depositors. That's great if you're a bank, right? Like this is a profit driver that will flow to executives, that will flow to investors. it's less clear to me that that is good for consumers or the overall market. And so the lobbying around the Genius Act to ban interest has really been a bank-specific thing on that front. And as far as I understand, I think this was something that Democrats supported. Is that correct?

Yeah. So the Republicans, I think, largely could do without this, though there is, let's be clear, not complete uniformity of views among the Republicans, like Josh Hawley, for instance, is on the record having raised this concern to name at least one Republican. But it is mostly Democrats who have been concerned about this. And I think it is mostly Democrats who, I will be gentle and say, may not be fully informed on the dynamics of market structure and the modern banking system who are for this. Because as I recall, Richie Torres at one point was on unchained and talking about this exact problem and may have referred to it as a gerontocracy. And if you look at the

vote to end debate and bring genius to the floor, I'm going to give a fascinating little statistic, which is that of the Democrats who voted yes to bring it to the floor, the average age was 56.4. And of the Democrats who voted no on bringing it to the floor, the average age was 68.5. Okay. And is the support of the ban also leaning more toward the older Democrats? Okay. Correct. And so what reasons do they give for supporting this ban? So the sort of first line reason that people give is, quote unquote, we have to protect community banks. To which I say, that's nonsense. And what I mean by that is this. There are many small community banks that are very effective, very capable, and can't. compete. And in fact, probably allowing more competition for deposits is a net positive as over again, the post like Dodd-Frank period, it's been a systemic move towards the very large banks where deposits have been going. This has not been to the benefit of smaller banks in general. But two, there are a significant subset of community banks where I'm just going to briefly describe the business model of

these banks, which is we will take deposits. We will pay the depositors zero. we will make loans largely to commercial real estate billionaires and like large businesses in our area. If it goes well, we pay ourselves giant bonuses. And if it goes poorly, we kind of shrug and say banking is risky and then stick the depositors with the losses. I would suggest this is probably not a business model that needs to exist, right? Like that is a very sort of market deforming thing.

And if the reality is, as a community bank, you have no edge in underwriting or like making better than average loans in your local community, you probably don't have a purpose to exist and don't need to. Yeah, and it's surprising because I think it is not in line with how people traditionally view the values of the Democratic Party. I do want to call out a specific way of framing that point of view that I saw you kind of tangled with on X. FinTech writer Alex Johnson tweeted,

Low-cost deposits held by community banks really do fund entrepreneurship in America, particularly entrepreneurship that happens outside of VC hubs like New York, San Francisco, and Miami. If you want to allow stablecoin issuers to compete on a perfectly level playing field with banks, including being able to offer yield on stablecoin balances, that's fine. But please also propose ideas for how stablecoin issuers can fill in the lending gaps that will be created by the resulting deposit outflow. So what's your response to that? So one, I think that's a little bit of a misunderstanding of what's going on here, which is, I just want to be very clear for people.

Stable coins are not banks as we think about them in the modern conception of finance, right? The purpose of a stable coin, and this is going to sound incredibly boring because it is incredibly boring, is to take your money, put it in a pile, and not lose it. Like, I stopped talking there. That's the end, right? That's all they really do. They take this, they buy T bills with it, and they go home. A bank takes your money, goes and underwrites borrowers who are credit risky, lends that

money at ideally significantly higher rates than the stable coin is receiving on its safe reserves, makes those loans, and then can take money that is deposited as a result of those loans and go do it again and again. And again, that is called fractional reserve banking. It's why banks are levered balance sheets. these are fundamentally two very different exercises. So one, the idea that somehow the introduction of stable coins, which serve a different set of both capital markets and consumer preferences,

will be strictly disruptive, I don't think is true. And if it was, the money market fund industry already would have destroyed, like, banking. So, and it hasn't because they do the same thing, right? Go look at Fidelity's government money market fund. It is essentially the internal money management of a stable coin. five. Two, there's nothing that says that the capital to fund the loans that community banks would be making necessarily needs to or should be also coming from the local community. And that is, I think, the core mistake that people are making with this argument, right? Because this is a statement of essentially our economic preference is European feudalism from the Middle Ages, right, which is to say, I want to localized and self-contained. economy where the money that comes in and the money that goes out stays in one place that is like essentially self-contained. Because what we've said here is my local community deposits into this

bank and this bank will then take the money and make loans only into the local community. Well, if you know anything about finance, the only free lunch is diversification. And this is an active refutation of the idea of diversification or external capital, which to me is crazy, Right? Like wouldn't you want, just hypothetically, if you're thinking about a better market structure, for underwriters to exist locally, not banks, but originators, right? Because there are plenty of alternative lenders who do the same kind of business. And they should be the ones who know a local community, know the businesses, know the people, know the market, sort of understand the taxonomy of what is there for lending. But then those people, if they could make at market or above market like loan returns, should. should be originating all of that in the capital markets, right? Because there may be a spot in Ohio that has some very good entrepreneurs, but all the money is in Florida. And right now we've said, womp, womp, too bad. And instead, what I am saying is we should take that money from Florida and led it to people in Ohio. Yeah. And I think you made this response in your tweet back to him,

which was just that in a global world, in an increasingly digital world, it sort of just feels super analog or like very much of a throwback and not like the way the future is going. So in that respect, it seems to put a damper on American competitiveness. So like it doesn't prepare the U.S. for the way the future is going. And in fact, it prevents the U.S. from moving there if we want to enshrine sort of this 1970s model of parochial banking in the United States. Right. And it is, I actually think you've hit on an important thread here and also, you know, something that explains the age divergence in the genius vote is people who have the mental model of a time before the internet as their model of banking, aka the only way I can find somebody is to be in the local community and meet them face to face. Those people are, of course, going to be very protective of community banking because without that, who's lending in our like local world. But on the other hand, so I was just having coffee with a couple of friends who actually work in the banking industry, one of whom is from Michigan.

And he was talking about the fact that one of the most popular banking apps in Michigan, in rural communities for younger people is SOFI. Right. We all have the internet now. Everybody can get online. Everybody can use a bag from anywhere. Anybody can apply for a loan from anywhere. We're no longer living in a world where if you're in Lansing, Michigan and there's not a local bank, you've got to, like, drive six hours to the big city and somehow beg them to give you a loan and they don't know you. That's not how it works. Right. And so to me, community banks right now and why I've regarded a lot of what they're doing is special pleading is trying to have their take and eat it too, which is to say, we want protection from competition for the internet for all of our deposits. Like we want these localized monopolies. But then if you look at the actual balance sheet of many times, community banks. We want to be able to go lend and do all of this exotic stuff globally.

Yeah. So in a moment, we will talk about the geopolitical implications of pushing this ban through. But first a quick word from the sponsors who make this show possible. BitKee is the only Bitcoin wallet on Time magazine's best inventions list of 2024. Built by the team behind Square and Cash app, BitKee is a 203 multi-signature wallet and the first hardware wallet with an innovative recovery suite that eliminates the need for seed phrases in self-custody. Their new inheritance feature means BitKee's not just the easiest way to self-custody or Bitcoin, it's the easiest way to ensure it ends up in the hands of loved ones when it's time for it to leave yours. Learn more at bitkey.world. B-I-T-K-E-Y-D-Wold. Use code unchained for 20% off.

Here's another listener comment responding to my interview with Farcasters Linda Shea. On YouTube, Salient 244 wrote, No way, an ex-coin-based employee working on a base promoted product founded by an ex-coinbase employee. Almost a pattern here. Maybe... Nope, never mind. Remember, if you leave us a comment on ex-Farcaster or YouTube or on Apple Podcasts, you might hear it on a future show.

Back to my conversation with Austin. Columbia Business School Professor Omid Molokon, had a tweet that began by describing the impact of this ban on yield bearing stable coins. It explains that if this goes through, there will be three buckets of stable coins. So the first is onshore regulated stable coins, which he said would pay no interest. Offshore regulated stable coins, which he said would pay interest. And then tokenized money market funds, which he said, quote, are ostensibly the same thing, but due to securities laws restricted to large institutions and millionaires and would also pay.

interest. And then he explained all three of these are backed by U.S. treasuries primarily and would earn interest from them. And then he said, however, what this means is the interest income from all three comes from the American taxpayer. Can you finish out kind of the implications of what he believes would happen in this world? Yeah. And I think there's a couple of important threads to pull on there. And I may even add some implications as well. But one of them, which is quite important, is that for non-U.S. persons, it means that the non-U.S. products are strictly more. more popular than the U.S. products. Right.

So like if I'm in, let's pick some locales, Bermuda, Spain, Nigeria, right, Singapore, and my options are a U.S. regulated dollar stable coin that will pay me nothing and a non-U.S. regulated dollar stable coin that will pay me interest. That's a very easy choice for me to make, right? Like that does not require much discussion.

And so what it's doing is explicitly favoring non-U.S. issuers over U.S. issuers. And the important thing to remember is that the choice Congress faces is not, yes, interest-bearing stable coins and no interest-bearing stable coins. It is, yes, interest-bearing stable coins, or yes, interest-bearing stable coins, but not here. Right. We're not declaring war on other countries to stop them from creating interest-bearing U.S. stable coins. It's just not a thing. You know, and it's quite ironic that you know, a Republican Senate is working on this because it seems to fly in the face of what the administration is trying to do from an economic standpoint by explicitly favoring non-Americans.

Two, it creates a divergence within the United States where those who do not have access to the best in class financial products essentially strictly get worse returns. So again, as we think about social priorities, what we've said is that stable coins that can give you adequate returns, that should only be for millionaires and billionaires. Like all the regular people in America, no, you guys can fund Jeremy Aller's bonus, right? And so, by the way, not picking on Jeremy. This is just the structure of the bill right now. But I mean, the point of that is the money doesn't go away. The stable coin is still earning the interest. And if they can't pay it to users, well, they get to keep it. Right. This is the same reason I've called out these

community banks for essentially special pleading and wanting to pay their executives big bonuses and just not pay the depositors, right? The money doesn't vanish. It just goes to the people who own the thing. And so this creates a very weird dynamic if we're trying to think about how stable coins are going to be structured because the geopolitical flows that you would want, right, which is U.S. control of things like TYC data, financial rails, the treasury flows themselves, now all get obfuscated away offshore. I would in fact take Omid's point and take it one step further and say we've already made this mistake once and it was the euro dollar market, right, where we allowed this whole market to proliferate and develop offshore. And then all of a sudden in 2008, we realize,

oh my God, this has a massive backflow effect to the United States when all of these dollar constructs have been created outside that we haven't been looking at at all. And it leaves the Fed in the position of either having to do all the dollar swap lines, right, with foreign entities in order to make sure that things work, or potentially just let it all burn down, right, which is quite outside their mandate. I would say we're kind of recreating those sins. I also think there's another important point that Omed didn't get to. The single biggest set of beneficiaries of interest-bearing stable coins being banned are going to be the largest financial companies in America. If you think the too big to fail problem is bad now, wait until you do this.

And what I mean by that is this. It would be trivial for somebody like Goldman Sachs because they have Marcus and they have a giant asset management platform. To onboard somebody as a stable coin user and say, when you leave the stable coin with us, we will instantly convert it into our money market fund. Therefore, you are earning interest. And the moment you want to, the exact moment, you want to take it and pay some of the same thing, somebody else will wrap the money market fund and the stable coin because we're using the fund as reserves and said that to somebody else. So they essentially can still create an interest bearing stable coin.

Anybody who's got the right banking or money transfer licenses and a large enough asset manager can create an interest bearing stable coin. Small entities cannot do this because they do not have diversified financial services and a unified platform. So here, and surprise, surprise that the big bags have been completely silent on this point, you're giving a huge advantage to the largest bags at asset managers. Yeah, so basically it's not only anti-consumer, but also anti-competitiveness in the U.S. Yeah, it is an antitrust problem.

And by the way, it is ironic. It is the community banks arguing for this because they're not going to win that fight with Goldman Sachs. Well, so, you know, we've been talking about all of this in terms of like the wider financial system, But Tether, which made $13 billion in profits in 2024, which is more than double the profits of Black Rock last year, made a statement to Bloomberg that yield bearing stable coins, quote, introduce risk and regulatory complexity that go against the core purposes of a stable coin. So do you agree with Tether. What do you think those risks are that they're calling out? I mean, the made risk is to Tether's profit margin, going to be honest. I get it. Here's the reality. All companies, advocate and talk their own book. It's totally fine. Like, I don't blame Palo and the crew for doing that. It's what they should be doing, to be totally honest. But it's on us not to fault for that. There's not really risks being introduced to the system to instead of paying $13 billion to the

small group of people who own tether, paying that to the average people. Like, that's just not a thing. So I would just transparently sort of paint that as I totally get why tether would not want interest-bearing stable coins because they are the single individual largest beneficiary of that restriction. And I get why they would circulate that talking point, but I'll be honest, I don't find it credible. Like the, again, I want to go back to the argument that somehow giving people a stable dollar interest-bearing instrument being destructive to the financial system is to say, hey, forget about stablecoins. We have $6 trillion of government money market funds, more than that, actually. and nobody's been at war with those. So like, what's going on here, people?

And I did want to ask, though, about the regulatory aspect because yield bearing stable coins would traditionally be considered securities under U.S. law. So have you thought about, you know, how they could be allowed? Boy, do I have thoughts on that. The answer is no, they have not. And what I mean by that is this. I think the reason that people jump to the securities framework for the thing is because the analogy that they have in their head is a money market fund. And I will remind people that, yes, asset manager issued 1940 Act government money market funds and prime funds are securities. But some interesting trivia nuggets. There are ways to issue bank issued money market funds, which are not securities. Your savings account is not a security.

And guaranteed investment contracts from insurance companies are often not considered securities. there are plenty of exceptions to things like the Howey test or the Reeves test, and the big exemptions often come from being in an even more stringent regulatory framework. So like if Chase pays you interest, that does not turn your Chase account into a security. That is still a bank deposit. And I will remind everybody in the Genius Act that all of these things are being swept into banking supervision. So I would argue these are pretty transparently not securities in the case where we're making them function essentially. like I'm going to use a word that will trigger some people, something slightly less narrow than narrow banks. Okay. And just define narrow banks?

Okay. So the narrow bank was this idea that came up post crisis where people looked at bags and said, well, hold on. The risky part of the bank, when I explained the whole banking model, is the part where I take the deposits and then lend them. So I'm not going to do that. The narrow bank was like this, only an economist could have come up with this construct where they were like, here's what we're going to. to do. We're going to take deposits and we're going to put those deposits at the Fed. That was it. That was the whole business model, which is reductive, right? Like I understand why the Federal Reserve was like, this is silly. Stop it. But on the other hand, what stable coins have done is actually what I would call the, you know, sort of honest version of that, which is to say, I'm going to take deposits. And I'm not just going to park them at the Fed. So they're literally out of the

monetary system. But what I am going to do is only make risk-free loans to the federal government, with that money, right? So again, it is basically taking a money market fund and putting it inside a payments wrapper. Right. And so, you know, that that is a different object than, say, Goldman Sachs. Okay. So let's say that the regulatory issues are squared away and for whatever reason, Congress decides that it is okay with not having this ban. Just paint a picture of, you know, how that would benefit either American consumers or the American economy or just generally the U.S. is standing in the world or, you know, whatever benefits you could think of. All right. So let's start with Americans because this is one of the misunderstood ones.

I think there are three sets of Americans who are going to benefit from this dramatically. If we can pass this bill and find a way, however it happens, to pay appropriate amounts of yield through to the consumers. Because I want to be clear, I don't think they're going to get 100% of the yield. You do have to like manage risk, run a compliance program, et cetera. There are real costs with this, but they also shouldn't get zero. Okay, fine. So group number one, who are often forgotten in these discussions, are small business owners. And the reason I say that is that small business owners kind of get worse of in the current banking system,

which is to say they don't get paid interest, but they often have to hold balances above FDIC limits in their bank accounts, especially in high turnover businesses. So like great example. in the bank failures of 23, I have a friend who ran a grocery store. And let me tell you, he often had more than $250,000 in his bank account. And the reason is because he's running a very high turnover business where people are like buying eggs and tomatoes and bacon and milk, right?

And the problem is his profit margin on that is single digit percentage points. Right. He's not making bank on that. But his turnover is dramatic. So like he could end a day with a million dollars in his bank account. but net net after he pays all his suppliers, he owns like 25 grand of that. And so him losing all of that and a bankruptcy destroys his business and bankrupts him and the community loses a grocery store.

This person being able to use stable coins instead that are purely backed by T-bills in a bankruptcy remote vehicle, massive improvement. He should use that 10 times out of 10 if you could do it in a secure way over using an uninsured bank account. Because he's essentially making a free loan to a bank, in credit risky fashion and not getting paid for it. You can think of any balance you have in your bank account above 250,000, is you selling CDS to that bank for zero. Okay.

Two, people who are traditionally underbanked. The problems they have are banks don't love dealing with them, provide them terrible customer service, typically just kick them off the platform constantly. It's really bad, like really, really bad. And so what that means is now, you know, And this is why, for instance, Richie Torres has been interested in crypto, people who previously have been forced into things like check cashing and predatory lending and pawn shops can probably get access to direct intermediaryless cash payments to each other in a much safer fashion, right? Like, this is giving them a way out of a very predatory system.

Three, I would say sort of unifying some of these things is just merchants who take money in general. card businesses are incredibly profitable in the United States. Just go look at Visa or MasterCard's results and ask yourself, where is all that money coming from? If I can take money from consumers in a more cash-like fashion and get rid of the multiple percentage point interchange fee, I'm going to be a very happy person. And by the way, they're probably going to split these benefits with consumers. They're not just going to internalize them all because this is a competitive market. So by the way, pro tip, you know, for the Trump administration, if you guys are trying to bring inflation back down,

this could knock two-ish percent off a lot of consumer goods if you just fix the payment system. So at this point, I'm thinking it's probably, you know, pretty good odds that this ban actually does become law. I think we're in this period where senators can introduce amendments, so anything could happen. So for that reason, you know, I'm not going to say definitively. But if this ban goes through, then do you, you know, what opportunity? do you see for it to get unwound, or do you think it's just going to be like that for quite a while? Or, yeah, what are the prospects? Well, as a guy who used to run a regulatory and tax arbitrage book at one of the largest banks in America,

let me tell you, people are endlessly clever. I functionally don't think there's a ban that you can create that also doesn't just destroy the business model and cause stable coins not to be issued in the United States and instead be issued elsewhere. somebody eventually will not find a way to circumvent. The problem is circumventing these things often adds layers and layers of complexity that don't need to be there and or creates a market structure that looks like a Rube Goldberg machine. So I just wrote a paper with V.

Who's a friend, Twong Vela, who's a former SEC attorney now at Anchorage, where we described the securities trading system. And to trade like a single stock on Robin Hood, you're going through like nine intermediaries. you're just going to end up with something that looks like that so that people can push the cash flows around until you find somebody who can pay people, which is super obnoxious and super annoying. And again,

I don't think it's going to work out the way the community begs want because the only way to probably like do this in an ironclad fashion that solves the concern they have is simply to ban marketing and affiliate agreements. Notice I said that without four stable coin issuers, like just ban them, which means banks can't do it. Credit card companies can't do it.

Walmart can't do it. Amazon. Because again, people will find the weak point. So you kind of just have to ban paying people for things out of your company, which seems hard. Yeah. And yeah, it's so interesting that this is happening because in the months leading up to this, there were a number of new stable coins that said that they were going to offer yield. So it looked like it was moving to this more competitive stage that,

would potentially benefit consumers. And now, yeah, the kibosh looks like it's going to be put on that. So just the last couple questions, you know, what are your odds on like what happens these next few days for the Senate vote? So there's two potential real poison pill amendments that people are trying to stick onto this thing that I think would make it hard for it to pass. If we avoid either of those, I very much like the odds. Those are the Josh Hawley introduced 10% cap on interest rates on credit cards, which I understand where he's coming from, which is to say you don't want banks taking advantage of people. But anybody who understands the financial system or has looked at credit card businesses at big banks, understand functionally what this will do. Back to our

previous discussion is to say, congratulations, to have a credit card, you already have to be rich and not beat it. Right. And you would say, okay, well, that's great. Now banks aren't taking advantage of these poor consumers, but here's the problem. What you've actually said is great, now predatory, like payroll lenders and like pawn shops are going to take advantage of them instead, because people still need money in unexpected ways. So it's probably not a very bad idea. I think enough people know that that if somehow it gets attached, it will kill the bill. The other one that's complicated is back to restructuring our payment system.

There's been a big fight on an ongoing basis between credit card issuers and retailers because retailers hate paying giant interchange fees. no senator wants to have to pick between those constituencies. Like that is a nightmare for them, right? That's like saying, listen, you have to come out right now on TV and ban either donuts or ice cream. Right. Like some group of people is going to be very angry and you're not making any friends by doing that. And so none of them want to vote on that thing.

That would be another one that if somehow it gets stuck to that would be a real poison pill. And those are like preexisting hot button issues. And in classic American politics, you know, in our current political system, because you don't have a rule that bills, when you put them out there, only need to do the thing the bill says it actually does, you can get all these random things like stuck on to bills that are a real problem. All right. Well, last question. You know, people in crypto will know that one of the most popular stable coins that grew to very large market cap very quickly is Athena, which is thought of as a synthetic dollar. do you see any future legislation that would address something like an Athena? And if so, do you think that would be in market structure?

Or is that just way off? So, I mean, as it is, genius would essentially say Athena is not a stable coin, cannot call itself a stable coin and cannot be used for payments. It doesn't say you can't do this kind of thing, but it does say there are limits on how you represent things and what you call things, right? Which, by the way, I think comports with U.S. regulation. in general. Like, I can't just set up an LLC, have three dudes in a broom closet, slap bank in

our name, and start taking deposits without, you know, going and getting a bank charter. So essentially, what they're setting up here is a process saying, if you want to promise people dollar stability and use certain words and have certain benefits, you have to comply with all of these things. So Athena could exist. It just can't call itself a stable coin. Yeah, and they already call themselves a synthetic dollar. Correct. But they're also not available in the U.S. Yes. And two, what it leads to, which is largely correct, is Athena looks like things that more exist in like fund management or securities world. Like what they're doing under the hood there is just to spot futures basis trade. Like this is something that literally like the large trading desks like city, J.P. Morgan,

Bank of America do. And it's essentially when there's a differential between either funding rates or prices in futures markets and spot markets, you just arbitrage those, right? Like, you can make money and you try to bring them back together over time. Good. That's good for market structure. And it's typically been a very profitable trade that's been hard for retail to get access to. So in a sense, like Athena really is democratizing financial access to these things if they do a good job of it. Now, how should that be regulated? Well, you're into market structure at that point, exactly as you said. That is very much a question about how you do that, very much not a question. for stable coins other than the it's not a stable coin statement.

Okay. So potentially we might see it in a market structure bill. All right, Austin, this has been so comprehensive. I really appreciate that you shared all your insights. Thank you so much for coming on Unchained. Thank you very much for having me. I really enjoyed it. Don't forget.

Next up is the weekly news recap. Today, presented by Unchained producer Pam Magimdar. Stick around for this week in crypto after this short break. Markets are ripping, but not every pump is created equal. You need to make sense of that. the action and what's coming next. But where do you start? Meet Focal by Falcon X, your AI-powered crypto analyst. It's like having a legion of experts at your fingertips, ready to break down market making events, chart protocol TVL, and track ETF flows. Get clarity in a world of noise with

focal. Learn more at askfocal.com. Welcome to this week's Crypto Roundup. In today's recap, Circle weighs a multi-billion dollar sale, Coinbase faces a DOJ probe after a major data breach, and $260 million vanishes in a sui-based exploit. Argentina shuts down its Libra investigation, Genesis sues DCG for $3.1 billion, and Solana unveils both a new phone and a protocol overhaul. Plus, Ripple's CEO gets ghosted in this week's lighter moment.

Thanks for tuning in to the weekly news recap. Let's begin. Circle weighs $5 billion sale as IPO plans remain uncertain. Stable Coin Issuer Circle is reportedly exploring a potential $5 billion sale to either Coinbase or ripple, even as it continues preparations for a public listing. According to Fortune, the discussions are informal and preliminary, with no official offers on the table. The move follows Circle's S-1 IPO filing in April, with J.P. Morgan and City valuing the company in the $5 billion range. range. While Ripple's reported bid of $4 to $5 billion was rejected last month, insiders say Coinbase remains a more likely suitor due to its close ties with Circle. The two firms

co-founded the Center Consortium and share revenue from interest on USDC reserves. CoinBases agreements also give us certain rights over Circle's assets in case of insolvency. Quote, aligning incentives is essential. Circle General Manager Emmett Hollier has said previously, highlighting the platform structure. In a statement, to the media, Circle maintained, quote, it is not for sale, affirming its commitment to the IPO. DOJ launches probe into Coinbase cyber attack. The U.S. Department of Justice has opened a criminal investigation into the recent cyber attack on Coinbase, focusing on the individuals behind the breach rather than the company itself. The probe follows a May 11 ransom demand in which an unidentified

actor claimed to have stolen sensitive customer data and internal documents, seeking $20 million in exchange for silence. Coinbase refused the demand and instead offered a $20 million reward for information leading to an arrest. On Wednesday, Coinbase disclosed new details about the incident into filing with Maine's Attorney General. The company confirmed that 69,461 customers had their personal and financial data compromised in a breach that began on December 26, 2024, and continued undetected for months.

The hacker reportedly bribed overseas customer support agents to act. Access account details including government-issued IDs, addresses, and balances. Coinbase estimates potential costs between $100 million and $400 million for remediation and reimbursements. Cetus exploit drains $260 million from SWI ecosystem. CETIS Protocol, the largest decentralized exchange and liquidity provider on the SWE blockchain, has been hit by a massive exploit resulting in the loss of approximately $260 million. According to on-chain analysts, the attacker used spoof tokens and manipulated liquidity pool price curves to withdraw real assets without proper deposits. This is the seventh largest hack in crypto history, according to rec.

Cetus confirmed the incident on X, stating that its smart contracts were paused, quote, for safety, and that an investigation is ongoing. preliminary findings indicate the attacker exploited broken reserve calculations and added near-zero liquidity to drain major pools, including those holding SWI and USDC. The breach has caused a widespread crash in SWE-based tokens. The DEX's token Cetus dropped over 40%, while Binance founder Z stated that his team has offered support to the SWE network. The wallet linked to the exploit reportedly moved significant funds across blockchains, further complicating recovery efforts. Argentina shuts down Libra Task Force. Argentine President Javier Milet has officially dissolved the special investigative unit

probing the controversial Libra meme coin scandal, just months after the token's dramatic rise and fall drew widespread scrutiny. The decision was formalized through Decree 32, 2025, signed by Millet and Justice Minister Mariano Cuneo Liberona, and published in the country's official Gazette. The unit, known as the Unidad de Tareas de Investigation, UTI, was formed to investigate Mille's ties to Libra, a Solana-based meme coin that stored to a $4.5 billion market cap following a February endorsement by the president on social media. The token lost over 97% of its value within hours, resulting in investor losses estimated at $250

million. The decree states that the unit had, quote, fulfilled its purpose by, submitting findings to the public prosecutor's office. During the investigation, the UTI collaborated with the central bank and anti-corruption office, examining alleged insider gains exceeding $100 million. Genesis Sues parent company DCG. Genesis Global has filed two major lawsuits against its parent company, Digital Currency Group, DCG, seeking over $3.1 billion in damages. The filings submitted in Delaware in New York courts, accused DCG and CEO Barry Silbert of orchestrating fraudulent asset transfers and misleading creditors in the lead-up to Genesis's bankruptcy in January 2023.

Central to the case is a $1.1 billion promissory note issued by DCG in 2022 to cover losses from the collapse of Three Arrow's Capital, which Genesis argues lacked real liquidity. Genesis claims DCG used the firm as a corporate, quote, alter ego, executing over $1.2 billion dollars in improper transfers, including large volumes of Bitcoin, Ether, and other crypto assets. Quote, Genesis was recklessly operated, exploited, and then bankrupted. One complaint alleges. Meanwhile, other legal challenges are unfolding across the industry. The SEC has charged Unicoin and its executives with a 110 million dollar fraud tied to falsely marketed token rights, and Bankor is suing Uniswap for allegedly infringing on its patented automated marketmaker

technology used in decentralized exchanges. Moreover, strategy, its executive chair, Michael Saylor, and other senior suits are being sued by investors alleging that the company misrepresented profitability and risk metrics during its Bitcoin accumulation process, citing misleading fair value accounting practices under new FASB rules. Solana Mobile launches SKR token and sets phone release date. Solana Mobile has announced to launch of SKR, a native token designed to power and incentivize its growing decentralized mobile ecosystem, alongside the release of its second crypto-focused smartphone, the Seeker, which is set to ship on August 4. The SKR token will act as the foundation of the Solana Mobile ecosystem's economic model, offering rewards and governance rights to users,

developers, and hardware partners. Quote, it transforms the traditional mobile business model by giving stakeholders actual ownership in the platform, said Emmett Hollier, general manager of Solana Mobile. L'AWLAP also introduces T-PIN, a new decentralized architecture that relies on secure hardware in modern smartphones to validate user interactions through cryptography. Quote, we're unlocking open innovation, platform ownership, and a decentralized future for mobile, said Anatoly Yakavenko, co-founder and CEO of Solana Labs. Anza unveils Alpenglo to redefine Salana's core consensus protocol. Infrastructure firm Onza, a spin-out from Salana Labs, has proposed a sweeping upgrade to

Salonis consensus mechanism with the introduction of Alpenglo, a protocol its developers call the most significant change in the network's history. Alpin glow aims to replace Salana's current systems, Tower BFT, and the proof of history model with two new components, voter and rotor. Voter manages voting and block finalization, while rotor is designed to disseminate data more efficiently, reducing network latency and improving confirmation speeds. Onza claims Alpenglow can achieve transaction finality in as little as 150 milliseconds. Quote, this overhaul will make Solana viable for entirely new categories of applications that demand real-time performance, said Bitwise analyst Danny Nelson.

According to Roger Wattenhofer, one of the researchers behind Alpenglow, their proposal could go live at the end of 2025 or early 26, but it still needs to go through a governance process. Time for FunBits! Ripple CEO Left on Red by Senator Lummus. Ripple CEO Brad Garlinghouse learned the hard way this week that even crypto moguls can get ghosted. After Senator Cynthia Lemmas canceled a planned meeting, Garlinghouse took to X with a public invite for a makeup chat,

offering to hash out crypto strategy live on an X-space or on stage at a future event. Quote, I invite you to join me, to talk about how to make the U.S. the crypto capital of the world, he posted. The senator's response? Radio silence. Crypto Twitter had thoughts. Quote, Weird tweet, said chain links.

Zach Reins. Pierre Rochard, CEO of a Bitcoin bond company, mused that Garlinghouse might have burned bridges with his past jabs at Bitcoin and support for CBDCs. For now,

the only blockchain Brad's navigating is the chain of unanswered DMs. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to unchainedcrypto. Beehive.com That is Unchangedcrypto.beehive.com and sign up for a free newsletter so that you can stay up to date with the latest in crypto.

Unchamed is produced by Laura Shin with help from Matt Pilchard, Wanneranovich, Margaret Curia, and me, Pamajumdar. The weekly recap was written by Wanneranovich and edited by Stephen Erlich. Thanks for listening.