Unchained - Why Fintechs May Finally Beat Banks at Their Own Game: DEX in the City

Episode Date: May 28, 2026

Banks are about to lose two of their biggest advantages: custody and payments. A new White House EO opening Fed master accounts to fintechs could be the catalyst. Thanks to our sponsor! Coinbase One Get 20% off the first year of your Coinbase One annual plan ⁠⁠coinbase.com/unchained⁠⁠ A White House executive order is pushing the Fed to open its master account system to fintechs and crypto firms, and the implications are bigger than most people realize. Katherine Kirkpatrick Bos, Jessi Brooks, and Vy Le trace what it would mean to plug crypto directly into the core plumbing of the US dollar system, why traditional banks should be furious, and where the guardrails are missing. They also dig into the NYT’s scathing CFTC piece and whether the snark undermines the serious allegations. Plus the SEC's delayed innovation exemption, Commissioner Hester Peirce's departure, and the White House AI EO that collapsed in eighteen hours. Jessi maps the four White House factions fighting over AI governance, and argues crypto's "don't trust, verify" model is exactly the accountability layer AI needs. Hosts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Katherine Kirkpatrick Bos⁠⁠⁠⁠⁠, General Counsel at StarkWare. Previously held senior legal roles across DeFi and centralized exchanges. ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Jessi Brooks⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, General Counsel at Ribbit Capital ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TuongVy Le⁠⁠⁠⁠⁠⁠, General Counsel at Veda Learn more about your ad choices. Visit megaphone.fm/adchoices

Allowing and enabling, like, more seamless connectivity between the traditional fiat system and traditional payment systems and crypto is really the only way that crypto and defy can scales. Hi, all, and welcome to Dex in the City, where the wallets are cold and the takes are hot. Before we get going, remember, as always, we're lawyers, but we're not your lawyers. So nothing you hear on Dex in the City is legal or financial advice and it doesn't create an attorney-client relationship. For the fine print, as always, check Unchained Crypto.com. First we have Jesse, Web3 prosecutor turned Web3 Protector at Ribbett Capital, and V from the SEC to Web3. And I'm your host, Catherine KK, fluent in TradFi and Converson in Deep Tech over at Starkware.

So we are going to dive right in today with a lot of good stuff as always. We were talking that it was a relatively slow news week in crypto, but actually when we really drilled down on the topics that we wanted to talk about today, realized yes and no. I mean, even a slow news week this week, there's a lot of really substantive developments that happen that could have long-term impact. So the first one is yet another action that really has the capacity to change what it means to be a bank. So V, tell us more about this executive order that we heard. Yeah. So the White House just issued a new executive order on FinTech access to the Federal Reserve Payment Accounts.

And so first of all, for those of you guys who don't know what an executive order is, it's basically something the White House, the executive branch issues to like agencies directing them to do something. So it could be like to consider like a new regulation or to do a study on something. So in this case, they're telling the Fed to consider giving fintechs and, you know, potentially like crypto companies, to consider giving them access to a Fed master account. And a Fed master account, like the best way to think about it is it gives you access to basically the core plumbing of the U.S. dollar system. It lets qualifying institutions settle directly in central bank money, so U.S. dollars, instead of relying on intermediary banks, right? So as many of us in crypto know, if you're a crypto company or a crypto, some crypto banks or a stable coin issuer or a tokenized securities platform or a digital asset custodian, you've always had to use a separate correspondent bank for all of your fee, fiat and payment needs.

So with a Fed master account, what that could mean is, first of all, less risk of debanking, right, which is a huge issue, like, for many years. and you have a more credible and direct and efficient bridge between what you do in the on-chain world and the traditional financial world. So I've talked about this before, but allowing and enabling and enabling more seamless connectivity between the traditional fiat system and traditional payment systems and crypto is really the only way that crypto and defy can scale. So this is, I think, a really important move by the White House. And we talked about this on a previous episode in February, but the context here is really important too, right?

So if you guys recall earlier this year, Cracken got what people have described as the kind of master account light. It's a limited purpose Fed account. So it's not full access to like every Fed service, which is what the EEO is asking the Fed to consider here. But it was at the time, I think a major signal that a digital asset bank or even just a digital asset company could get direct. access to the Fed master payment system, like within defined guardrails. So this EO just pushes that even further, and I think it's really good progress. It'll be interesting to see what the Fed ends up doing. And I think it'll, I think what we can expect, of course, is for the traditional banks to push back and warn about like the various reasons why this could be dangerous, right? Like,

you're giving these companies access to the Fed system without having to comply with all of the requirements that traditional banks have to comply with under the different banking regulations. But I, you know, my take on all of this is it's really about kind of unbundling banking from the rest of the financial system, right? Like historically, if you wanted access to Fed Rails, you had to fit into the traditional bank box. But what we've seen, I think FinTech do for many years and now more so, even more so what we've seen crypto try to do is really collapse the traditional categories between banking and other kinds of financial services. So I think this is sort of going to be the trend for the next

few years is companies and platforms just trying to and wanting to be able to offer more and more financial services out of like the same platform. And I think you're sort of seeing. that across the board of crypto. That's such a good overview and really thoughtful. And in my mind, access is great and thoughtful access is great. You know, as someone who has worked also in fintech for a long time and deals a lot of fintech companies, like this has been something that they have been fighting for a while. And the skinny master account has been a potential success.

My question associated with the EO is it's all about access and opening doors, but there's pretty much nothing in there about sort of protecting once access is there and ensuring that the right sort of guardrails are in place, which there are some written in, but those are written in for banks. They don't work in the same way when it comes to fintechs or crypto entities or like state chartered entities, although some states have really, really strong oversight committees. So like as you were saying, Fed Master account is the plumbing for the whole U.S. financial system. It's like something you don't understand until you have to understand it because you work in the space. So when we give fintech or crypto firms direct access to this plumbing and this infrastructure,

we're plugging them into critical infrastructure. And so you need to be mature and responsible enough to take that on and take that responsibility on. And it's unclear from the EO about whether they've really thought through how they're going to keep it safe. There's no real mention of it. They're accelerating the front end, but it's unclear if the back. end is fully built out. You know, the framework of all that with Warsh just coming in now as well is a fascinating one because he's sort of walking into the building at the Fed, even though the Fed is technically independent, with this concept of like what might be the first thing that he jumps into

like day one. Yeah. I mean, you know, I was I was the G.C of a crypto, a federally regulated crypto bank for a while, right? And you're absolutely right. There are, real concerns that are unique to this asset class and the rails on which these kinds of assets move, right? Like you need to blockchain around AML and cyber and liquidity and operational risk, right? And I think all of that does need to be considered because it really does differ from, you know, the kinds of risks that traditional fiat rails and traditional assets pose. So I do expect that we'll get a lot of comments from both sides. both TradFi and crypto. And I do expect and hope that the Fed takes all of that really seriously.

I would be very upset as of late if I were a Trad Bank because it's really interesting. I looked at these developments and combined with Genius, with the Genius Act, banks are really set to lose two of their fundamental advantages and differentiators from non-bank competitors. and that's custody of customer funds and facilitating payments. So we're now in a situation where you have this class of FinTax that are growing rapidly, and they're really set to perform functions that are really identical from the retail customer perspective. So this is a real threat to some of the bank's bottom line.

And you have to ask, we saw a lot of movement on genius. We're all familiar with kind of a debate tied to the Clarity Act, the crypto market structure bill as to kind of the yield provisions that banks are upset about these of these stable coins. But we're getting to the point where you have to ask yourself, like, what is going to differentiate a trad bank and those functions from a non-bank permitted payment stable coin issuer? which is the term of art under the Genius Act. I would look at that and say there's a few things. I mean, one is FDIC insurance.

There's definitely going to be a sector of people that are going to continue to engage with trad banks because of that insurance, that of that peace of mind. And then also, you know, the banks still have the ability to borrow customer funds for their kind of own use. There's a lot more flexibility that they have in doing that. Whereas, you know, PPSI,

you know, the non-bank permitted payment stablecoin issuers, you know, they can really only custody stable coins. They can't borrow them. They have limitations on that yield. But that being said, this is a continued expansion of Bintech powers. And with the expansion of powers is an expansion of revenue generation that was the exclusive kind of power of banks. So I'm really interested to see how they're going to come out swinging on the policy front. Because if I were in the, the tried bank shoes, I would continue to be furious about these developments, frankly. Yeah. It's really interesting because fintech has been fighting for something like this for so long.

Like the whole point of fintech was really to disrupt banks. And they found this angle that worked really, really well for them, largely working with smaller banks, like not the big names that we know of, where they were able to stamp FDIC insured. But it was really just like banking as a service wrapped. But the problem with that was that there was no really good record. And that's what led to synapse. That's what led to a bunch of other like these fintech banking as a service collapses where we thought maybe that sector was dead, really. But perhaps this is another way in that could be more structured and regulated. Because a lot of these fintech banking as a service were regulated at the state level or not really at all because they weren't taking custody.

and they were just more like the interaction with the customer. So there's something to learn here from how fintech got customers on board. But there's also something to learn with perhaps they did so too quickly without the proper structure in place. Yeah. And look, there is a very long history of new technology, like being suffocated by legacy participants who don't want the new technology because it impedes their revenue. And sorry, I shouldn't say suffocated.

attempt to suffocate or mitigate the growth of these new technology options. I mean, we've seen it with energy. We've seen it with transportation like EV versus auto. I mean, we could go into that at length. Communications, healthcare. They're in every area. There's always the legacy participants that are like, get off my lawn. We don't want these upstarts, this kind of new emerging technology to threaten our core business. So this is going to happen inevitably we're going to see the policy fight. I firmly believe that the fintechs are ultimately going to win because a lot of what they're doing is better ultimately for the underlying customer.

I hope that fight is accompanied by exactly what Jesse, you flagged, in that there's the accompanying rails that protect those individual retail consumers that are looking for, you know, better, more efficient process of banking and yield and all of the good stuff. you know, rest in peace checkbooks, right? Like, does anyone here know how to balance a checkbook? It's not something I'm teaching my kids. Like, you know, what is that about? But it'll be really interesting to see how this administration and the next administration kind of welcomes these disruptors to the show. Like, that's one question I wanted to ask you, V, like, do you think this kind of embrace in the banking sphere, which is less of a specific crypto issue will continue with a democratic administration? Yeah, I just, I really feel like you can't put the genie back in the bottle, right? For me, this is just like, it's just another example of crypto integrating more and more into the core financial system and collapsing all of these boundaries. And I just, that's the direction of travel. And I don't think a change in administration.

They can try to roll some of that back, but ultimately they're not going to stop the overall trend. Yeah, and on that front, like, we've seen a lot of executive orders from President Trump. He's been extremely productive on EOs alone. A lot of those EOs have been challenged in court, many, many of them. Because, of course, there are limitations on presidential executive orders. They're very powerful, but they're subject to a number of really important constraints. They cannot be a mechanism of creating new law through executive order alone. like they have to be grounded in his powers. And the way that you check EO powers is through,

frankly, the litigation process is the most effective one. So there's always the chance that, say, for instance, there's a Democratic president. The first thing here she does on day one is to roll back a multitude of executive orders. But I agree with you, V, like, I don't think that there, I don't think this makes sense from a partisan perspective to say, oh, no, banks, like, you know, FinTech bad, banks, good, because that's ridiculous. Like it makes sense. Look, I think this actually is one circumstance where an EO is the right mechanism, right? I mean, normally say that.

This feels like the kind of thing that should be an EO, right? But I think this whole narrative of like Dems hate innovation and they like banks, actually Dems have historically thought against banks. That's what's so interesting about this dynamic right now. And one of the things that we've seen with fintechs is that Dems, if they're going to support any banks, like they're going to support the community banks, the smaller ones, the ones that give more access on an individual level pre-Fintech when you couldn't just do it on your phone, right? And a lot of these fintech structures have helped community banks so, so much because it's given them access to totally different kinds of consumers in different locations or with different unique attributes. And so I think thinking that this is going to be rolled back if a Dem comes along is very short-sighted and also misunderstands that this isn't a partisan issue. There are partisan aspects

of it all. But like everything has nuance. 100%. We love the word nuance. Lawyers love nuance. So really now everyone understands all everything about banks. You can sound incredibly smart at your cocktail party with all of the finance bros. But especially the ones. About banks, please. Yeah, especially the ones in work at banks. You can scare the shenanigans out of them. But moving on to a slightly spicier topic, candidly,

we haven't talked about prediction markets in a few episodes. And I honestly can't believe that we haven't talked about prediction markets in a few episodes. So I'll just give everyone a very brief update. Look, the litigation war. of litigation, it is still raging. Almost every single day, something happens where there is another lawsuit, there is another, you know, either the CFTC suing someone or a state is suing someone or an individual. It's crazy. The sheer volume, the latest updates, as of literally the last few days,

the Rhode Island AG sued Kalshian Polymarket, a new congressional probe was launched. There's an interesting New York bill that it's attempting to prohibit New Yorkers under the age of 21 from engagement with prediction markets and banning a slew of contracts. The NHL and the CFTC entered into a memorandum of understanding to, you know, kind of prevent manipulation tied to hockey, et cetera, et cetera, et cetera. I could keep going and going and going. But the one that I wanted to raise specifically is Polly Market announced last week that it's partnering with, NASDAQ private market, which means retail participants will soon basically have access to NASDAQ's private market events. So what does that mean, right? That means that if you think that this private company is going to IPO, you can bet on whether it's going to IPO and when. Or you can bet on

a private company's valuations or its funding round. Everyone and anyone who is on polymarket can now go ahead and speculate, and maybe I shouldn't be using the word bet to be clear. Okay, not bet. Not what it is. Okay. predict, predict that, you know, some sort of factor tied to the performance of these companies. So I find this very interesting and compelling in a lot of respects, because the private market has always been this massive market with significant alpha that has long been pretty much inaccessible to retail. And that's unfortunate. Like there's this whole adage, like the rich get richer because they're rich to begin with. Like it's a lot easier to become a billionaire if you have $100 million to start with. Right. So I'd like this in theory in that

it's offering access to this alpha to individual retail market participants. But then the other side of the coin, of course, is the controversy that has been raging across the prediction market spectrum that was most recently highlighted in what can only be called a completely scathing New York Times article. And I feel very mixed about the New York Times. To be fair, I have been a longtime subscriber pretty much solely for the real estate section and the wedding announcements. I was actually featured in the wedding announcements, full disclosure, a million years ago, not featured. Oh, no, I hope. Humble brag, right? Okay, not altered, but I was in it. It was pretty cool. But I have been so devastated by the Times coverage holistically vis-a-be crypto.

It has been overwhelmingly negative. It, in many times, in my opinion, has been one-sided. And my biggest problem with this article, and I, you know, I want to hear from Jesse and B because we really don't agree on prediction markets and we don't agree on this, frankly. I will say having some of the inside baseball on what happened with the CFTC, obviously I was not with the CFTC, but I know quite a number of individuals who left the commission during this time. You know, met with several of them about potential job opportunities in crypto. It was a very tough time for a number of people at the commission that were let go. This article, the TLDR, basically accuses the CFTC and ex-acting chair, Fam in particular, of what I'll call inappropriate behavior in supporting various prediction markets and pushing out members of the commission that did not adhere to kind of inappropriate specifications being. sent by individuals at the commission. These are extremely serious ethical charges, extremely serious.

That being said, I really hated the snark in this article. And what I'm talking about when I talk about snark is I really think it takes away from the credibility of the New York Times. You know, for one, it feels like they don't know crypto to begin with. They mentioned that the Biden administration, during the Biden administration, most crypto assets were regulated by the SEC, which is not entirely accurate. They specifically make a point of calling ex-acting chair fam a former intern, which is ridiculous. Like, they wouldn't call other leading individuals former interns. They make a point of calling out chair Selig's age. There's a lot of snark in there, and snark is the best possible word. I don't want that to take.

take away from the allegations in the article, but in my opinion, it does because it raises kind of credibility, motivation-oriented questions about the author of the article. So where are we? I just unloaded a whole bunch of stuff, NASAC, Times litigation war V. Jesse, give me your thoughts. I'll respond to the New York Times thing. And I think it's worth talking about your first topic as well. So I had problems with this article too. And I have many issues with the Times lately, especially with any publication that reports a story of why women are just during the workplace and publishes that. That was an actual headline.

That ended my relationship with The New York Times. However, I do know this reporter, not like super well, but he is a trustworthy reporter generally. That's true. My perspective on this article is it shouldn't be seen as a crypto article. It should be seen as a potential government corruption article. And I don't want to speak to like the specific allegations about anybody, including FAM, because there has been a lot of good that has been done at the CFTC. But there's something that really hits me hard when I read this article.

And I think it's because I'm taking it somewhat personally because we all know people at the CFTC who were treated really poorly, pushed out for asking the right ethical questions. And I have been told that there's more to come, both from the New York Times and, like, factually here. So I don't think we should be dismissing the impropriety here of what's happening. Like, careers were potentially impacted here. And so I want us all to take it seriously. And look, this is hitting me harder because as someone devoted much of my life to the DOJ, like, I'm watching the same devastating. pattern in different colors happen there right now with much of the national security section

that I worked in, like kicked out because they touched January 6 cases. So to me, like, I think it's really important to look at the underlying government corruption story or allegations and not like only see it through our crypto lens because we need to appreciate that it's darky. So probably some of it is biased, but also like look at our industry and the good and bad and look at our regulators with the good and bad. Yeah. I don't have a whole lot to add. I will say, like, just with respect to the allegations, right? So I think the things in there that were troubling is the allegation that or the suggestion that staff were fired because they, like you said, like raised concerns about the way that

investigations were being handled. I'll start up by saying, I think, think it's totally legitimate when new leadership comes into an agency and you have like a different administration, I think it's completely legitimate for a chair and a commission to decide what their policy priorities are going to be. For example, if they want to shift away from an enforcement-first approach to issuing more guidance or regulations, that is perfectly appropriate, right? And, you know, the staff are the staff and they have to get on board with it. They always have the option to leave if it's not an approach that they agree with. That said, if you are firing staff for doing their job, meaning raising concerns about investigations, or you're firing staff because you're thinking about what your next job is going to be after you leave government, obviously that raises very serious, you know, ethical concerns. And this is something, this is the reason why agencies, have an inspector general, right, is to look into allegations like this. Where is the CFTC IG? So that's my question. And, you know, I think the article raises enough concerns. I will comment

on the snark and the overall tone and all of that. I mean, I think we all, you know, working in the industry, we all have issues with a lot of the coverage in the mainstream media about crypto. But I will say that's sort of what jumped out to me is like, is there someone looking into this sort of thing because I think the allegations are serious and they deserve to be invested. And I think there's something to learn from this snark, right? We can say, oh, my God, we should trust nothing that has snark or doesn't like crypto. And maybe we should think, why does so much of the world feel this way about our industry? It's interesting. I listen to Hard Fork, which is like my only New York Times remnant every week, which is a great tech podcast.

and they used to talk really crappily about crypto. And I've like emailed them a few times, just be like, no need to respond. Here's some other thoughts about crypto. Here's an interesting article. There's like in there. Like here's that lady again. I'm like, here's a podcast. I'm like, you're the greatest podcasters.

But like if you want to listen to Dix in the City, here's one interesting one. So I think it's worth understanding why people feel this way because whether it's all accurate or not, like, if we want to continue to mature and build this industry, and maybe we don't. Maybe some people are like, I don't give enough about the people who don't like us and, like, we'll just build a better financial industry for us. But I think a lot of people building in crypto want this to be accessible for everybody because that was the goal from the start. So looking at the criticism with like a fair eye is probably a useful thing for our industry. That's a fair point. But I wish the New York Times realized,

that the snark is wholly ineffective. Like, have you ever been angry at someone or thought they're a jerk and, you know, kind of said, I'm going to go say this to them? And then realize that saying this to them was not going to be an effective way of changing their minds. Like, that's my meditation every night. Yes. Send me email.

Don't send me email. No, I agree with you. I mean, the Wall Street Journal has had problems too. Like, but why is it that these big, large news institutions have this perspective of crypto largely? Is it there aren't enough people in crypto that are turning into journalists there? Like, I'm not sure what it is, but there's some, because this is what my parents, your parents, whatever are reading.

So I think like us sitting in our bubble being like, this is snarky and unfair. Yeah, there are parts of it that are probably snarky and unfair. But like, is there anything we need to do about? Maybe not. But like us to examine it. Well, my question is, why don't they do better? They're supposed to be the best of the crem to the crem to the creme of journalism. restrain yourself, restrain the snark. If anything, your effectiveness, your coverage,

your objectivity is called into question with this unnecessary snark. So they need to do better. We need to do better, but they also need to do better. You know, I'm so glad you raised the Inspector General because I think a lot of people aren't aware of the existence of what this is. The IG, the Inspector General at the CFTC, is an independent watchdog office within the CFTC. So it's an independent organizational unit. And its whole purpose. is, you know, conducting and supervising audits and investigations of the CFTC. So, you know, doing things like recommending policies for efficiency and effectiveness and kind of making sure the CFTC is on the up and up. So the article does raise a big question. And, and, you know,

it raises appropriate questions vis-a-vis the times that if these allegations were true, where is the IG and why haven't they found these issues and addressed them? So I'm sure the IG has its own response to these allegations or has or will conduct an investigation into these allegations. The other point I want to make that I think is important is there's a lot of naming and shaming in this article and a lot of calling out the revolving door of public, private jobs, right? We have talked about this before. I also want to say there is nothing inappropriate for a government official to leave the government and go work for a market participant that was regulated by that agency. That happened.

all the time and there's nothing wrong with it. In fact, there are a number of individuals or at least one I know of that were named in that article as being fired for raising concerns that is now working for a market participant. So, you know, if the implication is that that's inappropriate, then it needs to be applied to everyone, including kind of the whistleblower victims, the alleged whistleblower victims. So I think there's just more to this story on both sides of the narrative. I certainly am not opining on the substance here because I just don't have the context. And B made a point, like, just before this conversation that if these allegations are true, then they're very important, you know, ethical issues that we should not ignore. I think that is spot on. We need to make sure

our government operates effectively and appropriately. Like, that's a major point of how America works fundamentally. But at the same time, my eyebrows were raised. And it's very easy. And it's very easy to demonize prediction markets when there's bad and good here. And some of the good is giving access to alpha to individual retailers when only rich people had access before. So this is kind of the point, you know, our friends, our best friends, the Wall Street that's like group was making that we talked about last week, right? It's like, how do we level the playing field between institutional and retail? And that is something that you hear a lot about when it comes to prediction markets. And I think that's such an interesting angle. And honestly, one of the most

compelling reasons to me for prediction markets to exist. Absolutely. And again, very important, someone alluded to this, but prediction markets are not crypto and crypto is not prediction markets. There are a slew. I mean, at this point, I was on the prediction markets panel at consensus, but there are a number of prediction markets that have nothing to do with crypto. Absolutely nothing to do with crypto. Like they don't even use blockchain rails. So they definitely get lumped into like crypto bad conversation and prediction markets are part of crypto, but they really are their own kind of unique animal. So I think it's important to extrapolate that aspect of them from kind of our broader crypto conversations. So, you know, hey, we'll take

the association when something good is happening, but it's not crypto with something bad as happening. Okay. Okay. So we are going to take a very quick break. to hear from our sponsors. And when we return, we're going to give a brief update on the innovation exemption. And then we're going to launch into our AI topic of the day. Is my crypto working as hard as I am? Honestly, that's the question that got me into staking in the first place. I work hard for my money. It should be working hard for me too. Now, you can boost your earnings this Coinbase 1 member month until May 31st, any newly staked assets will get a 40% boost for 60 days. That's extra passive income. Coinbase 1 is the ultimate membership to make the most of your money. As you know,

this is how I make the most of my money. Zero crypto trading fees, 3.5% APY on USDC, boosted staking and lending rewards, and up to 4% Bitcoin back with the Coinbase 1 card. Plus, this massive 40% staking boost. This is your last chance to take advantage of the 3% deposit boost, your share of 5 Bitcoin if you out-predict pro basketball coach lethal shooter, plus a chance at a private shooting session, a $50 Bitcoin bonus when you spend $100 on a new Coinbase 1 card in the first 30 days, and the 20% discount on the first year of annual plans all end in just a few days. Score your boost before May 31st at Coinbase.com slash unchained. Head over to Coinbase.com slash unchained.

Last chance to join at Coinbase.com slash unchained. before member month ends. No purchase necessary. See rules and other ways to enter. Terms apply to other offers. Futures swaps via Coinbase financial markets. Risk of 100% loss. Payouts event-based, not investment advice, not available in Nevada. Coinbase 1 card is offered through Coinbase Inc. and cardless ink. Cards issued by First Electronic Bank. Bitcoinback rates are based on cardholders assets on Coinbase. And we're back. So one quick thing before we move to our AI segment of the week, which I say that, but we might not always have an AI segment. It's just a lot's going on. Okay.

So last week, we teased some very big news because everybody thought the SEC was going to release this big innovation exemption. B, what happened? Where is it? What's going on? Oh, gosh. Okay. Right. So the innovation exemption has actually been teased for like, I don't know, six months or something now. So the big news is that it didn't actually, it's not going to actually come out this week. I think it's been delayed indefinitely because there was some controversy last week after, I think it was Bloomberg and Reuters reported that the exemption was going to be announced this week and that it could potentially allow, uh, tokenized versions of public equities to trade on chain, even where a broker dealer holds the underlying shares and issues wrapper tokens that trade in defy. So that immediately raised concerns among like a lot of different groups of people, like not just Tradfai, but various crypto, various parts of crypto too. We're like, are we about to let anyone create like on chain Apple or Amazon wrappers without Apple or Amazon?

involved. You know, like what in that case, what would happen to dividends and voting and proxy rights and, you know, would that create market fragmentation and like confuse investors about what kinds of assets they were actually holding? So Commissioner Peirce, God bless her, she tried to take the temperature down a little by clarifying that the exemption was always meant to be very limited and just focused on digital representations of the same underlying NMS stock that an investor can buy today, right, in the off-chain world, like not synthetic wrappers. And I think that distinction really matters.

Like, the SEC has drawn a pretty clear line between issuer-sponsored tokens and custodial tokenized securities backed by real shares that are held by regulated intermediaries. And then, on the other hand, synthetic products that just provide you with economic exposure, but not necessarily any of the rights that come with being an actual stockholder. And if you guys remember, like, I forget which company it was that started to issue some of these wrapped versions. And OpenAI came out and, like, tweeted, like, we have nothing to do with this. And basically, we are not okay with this. So this controversy has kind of been around for a long time now.

So anyway, I think the larger debate is really just about, you know, what kinds of on-chain securities market do we want? should it be issuer connected? Should it be closer to the existing securities like market structure that we have today? Or should we allow it to be something that is more open and like genuinely new and different? And honestly, I can see both sides. Like, you know, I agree that synthetic wrappers can kind of create messy or confusing investor rights and liquidity questions. But I also don't think the SEC should just try to recreate what already exists. on shame.

So a hundred percent. I think it was the right decision to delay this until a lot of these issues would be worked out. I think there's a tendency to like get this, get this guidance out, get this. But there's also at the same time a lot of discussion about the need to future proof everything and half baked, not saying it was half baked, that's a little critical, but have baked guidance is not going to be future proofable. I don't think that's a word.

But, you know, that's why we're also eager for legislation to some degree because that's quite different than the kind of guidance we're seeing real time. So I think we need to take our time and really think through these issues in a way where it's defensible and workable across participants. And I'm not sure we were there yet. Also, may I just say a moment of silence for Commissioner Perce leaving the SEC? Like she, it was announced last week that she is going to be leaving soon to become a professor at the Regent University. the School of Law, which that's a private university in Virginia Beach. And all I can say is I knew this was coming. I knew she was leaving. It is such a loss for the SEC, not just for crypto,

for the SEC, frankly, because she's always been intellectually honest enough not to make this a crypto thing. But it's such a loss for all of us to not have her as a regulator. And those students have no idea how lucky they are to learn from commissioner. Like I would actually like to register for classes so I can sit in her classroom and just soak up all the knowledge that she's going to spit on her students. And the thoughtfulness, like, moment of celebration for her, really. What was that movie that Drew Barrymore was in where she pretends to be a high schooler again? She falls in love with her teens. That would be you.

I actually loved that. Wait, what was it? Who's... It never been kissed. Never been kissed. Honestly, that movie is a classic. Okay. Wait, wait.

It again with the eye of a teacher falling in love with Judith. Okay. Not this year. It is a classic. And it is wildly inappropriate because the whole plot makes us follow a, like, 20-something-year-old teacher falling in love and ending up into, I'm, you know, not going to spoil the end, but falling in love of the high school student, which is actually... They're broad-borderly illegal.

And, yes, it's not different for it. But to be here, KK is, like, obsessed with Commissioner Perce. Yeah. I mean, aren't we all? I mean, aren't we all, yeah. Anyway, we knew this day would come, but we don't deserve her. Yes. Okay, so on that sad note, we'll move to an interesting, another topic that is executive order related.

Jesse, tell us what's going on. Yeah, I'd say it's sort of sad. It's sort of scary, but let's try and make it, like, a little bit humor. because I'm going to talk about another EO that was no more, actually. So everyone picture this. It's last week in the Oval Office. CEOs from top tech and AI companies are coming into town. Cameras are being set up.

Presidents about to sign this EO on AI that has been months in the making. And then pretty much someone comes in and says, no, this isn't happening anymore. So that just happened last week. the EO vanished from the calendar. Never to be seen again, perhaps. Who knows? Why? Because in the prior 18 hours, three phone calls happened, which I'll talk about. But we don't know exactly what was said, but we know that the executive order initially had suggested just a voluntary review of new models. So no one had to do anything, but like they could submit a new model for review. This is sort of my favorite kind of story if we want to have fun with some of the scary stuff because it's like better than Game of Thrones or like a summer house reunion because when you hear about the context, it's pretty bonkers what's been happening.

So there are literally four camps inside this White House knife fighting over AI right now. And you have to understand each of them and the different dynamics to have a sense of like what may be to come or not to come. So camp one, which is the big winner of the week, is the excellent. They want zero oversight. They want free markets. They want innovation above all. We got to beat China. Who cares about regulating it because it's more important to build. They're the Targaryans. I didn't actually watch Game of Thrones, but sure. Come on. Okay, go on. Now you've all credibility, but go on. Camp two. The operational like safety curious wing. So insiders who are looking at things like mythos and be like, what the fuck is this?

We got to do something. And that is like HACETT thinking about the FDA style review you may have heard about. It's Bessent, quietly convening Wall Street to be like, how do we deal with cyber risk? And then there's camp three, which is the national security establishment. They are a mess of their own

with their own knife fight, but essentially they're blacklisting, anthropic. But NSA is using mythos. But SISA, which is like the company's top cyber defense agency, can't get access to it. So no one really knows what's going on there. And so they don't really have much of a sway right now because all of the inner fighting,

they can't figure what they want. And then there's Camp 4, which is the gatekeeper, which is Chief of Staff, Susie Wiles, who actually has a lot more power than for how much she's discussed. And she pretty much is the gatekeeper for what ends up coming into the Oval Office. And she let in the accelerationist this time, which means that there's now really no rules for AI, not even voluntary ones. And then there's like Camp 5, which is like in a different zip code, which is all the states like really doing things.

But who knows if it's going to be preempted or really make a difference. So this is all like sort of fun and palace intrigue kind of thing. In a way that I wish wasn't real life because stuff's getting really, really scary out there. For two years, every AI CEO has been on stage somewhere saying like, this technology is coming. you all need to change, you all need to be worried. You know, we all remember a time when Altman went in front of Congress and said, regulate us or must signed a pause pledge during COVID.

I don't know if you guys remember that. I mean, maybe it was so he could build his own. But still, you know, the Pope came out yesterday, was it? Saying we all need to be a little more worried about AI and think about humans first. But they're all saying this is all really scary. but the sector is building itself on responsible alarm, but without responsible action, except maybe anthropic, right? So then this White House suggests like a mini EOS light response voluntary check, and they all freak out. So it's like a total two-step dance here. And we don't really have any

structure to oversee what could be, per their own words, the most dangerous life-changing technology. yeah. So what do we do about it, right? So essentially, I don't think it's that we're screwed because this voluntary review isn't happening because it probably wasn't even going to do that much. But just trusting CEOs without verification before government can get their shit together can also not be the answer. You know, the EU is pulling back a little bit too. So here is where I think AI can potentially learn from crypto a little bit. Don't trust the centralized entities. Don't trust the CEOs, just find a way to verify. And maybe this is where crypto's not being so thirsty. Like, AI should be thirsty for us because we need to build a receipt layer for AI. And blockchain

is one of those. I'm not saying that's the solution here, but it's something you can learn from because what is that, if not a verification layer, with some kind of receipts? Because right now, AI safety is basically like, trust us. We're trillionaires, but we're responsible. But crypto has told us, don't trust the CEOs. And I think that's a great message to have as a general matter with exceptions. Because when something goes wrong, the question's not going to be who regulates AI that comes out in the future. It's who can help us now. And why did it happen? And how can we stop it? Because with these kinds of receipts, we can say what model was used, what tests were run, who signed off, who ignored it? Because Washington is getting kneecapped by like 18 hours of a few

phone calls and we need to start building the accountability infrastructure now. And it's something that like KKK and I've talked about, you know, blockchain related, but it's not just blockchain. There's so many trust AI organizations out there, but they're just not getting the attention or funding they need. Like we probably need to be our own battlefield here. Absolutely. And I love finally something that crypto can teach AI. Like we're here. We've been. burned in the past, we can give you lessons learned. Also, by the way, if there is enough interest, if I get some tweets about this, I promise I will map these factions to actual Game of Thrones families. So just putting that out there as a resource, I will re-listen to this

podcast and map it out to the Game of Thrones family because I just love the palace entreat part of this. I do think all of this, and every time you talk about AI, on this pod, Jesse. I always think there's so much potential here. There's so many exciting aspects of all of this, but I worry that a lot of the rails are just not there. And obviously, you and I have written extensively about this most recently in our paper that we published last week. But this is all part of a broader problem. Like, what are we doing? These fits and starts are indicative of some kind of fundamental questions that haven't been answered, which scares me a little, frankly. Correct. It should scare you. But also, we can have a little fun with it in the meantime. But yeah, it's scary what happened. And I think there'll be more that comes out here. And, you know, as you think about mapping this out in your Game of Thrones or Summer House, whatever we're playing, just know the camps are going to change. Yeah. I didn't have time to watch Summerhouse. I don't think they're either. But that's the whole thing to be into. I don't understand what's going on. I feel like I need to ask Claude to summarize that because everyone's, you know,

obsessed with whatever's going on in Summerhouse. Sometimes we realize we're just like, what are the normal people obsessed with lately? Oh, Summerhouse. Speaking of normal people, this would not be an episode of decks in the city without our good news of the week. And look, we have to embrace the fact that we work in crypto, so we are nerds. And I have always, you know, owned nerd as a stamp of pride because, look, a lot of the most successful, interesting people in the world are inherently innately nerd.

whatever that means. So we all know that nerds love STEM and they love science. Okay. It's something actually really cool happen that Jesse's going to tell us about. I don't think you guys know this about me, but now they're real friends. I have a dinosaur obsession. Like if we were doing this in my bedroom, you'd see a lot more dinosaur. Maybe I'll wear one of my dinosaur shirts one day. But whenever there's a new dinosaur found, I'm really excited about it. And the one that I think we have to talk about today is it's so insane is like the biggest water creature of all time. It's called the Tylosaurus rex.

It was found partially in Texas. And essentially it's like the T-Rex of the sea. It's 43 feet, the size of like two great white sharks. And, you know, to me, like, I'm always like a little afraid of the sea. the ocean like what's happening in there but when you think about being in the water with creatures like this what was happening in the world back then everyone should read sapiens to get a real sense of like the kinds of animals that were around as well and that's obviously millions of years after the dinosaurs but like to really understand like the gravity and strength of earth

and like that a lot of this that happens that we argue about and we fight about is a big deal but like in the big scheme of time, like Tylosaurus was hundreds of millions a years ago. So what's going to matter in another 100 million years? It's crazy. And you're right. 43 feet is like the length of a school bus and it's just swimming around in the ocean. And the other thing the article mentioned is that a lot of the characteristics are around it having a bigger jaw and bite.

So it's just swimming around in the ocean going. Yeah. Okay. Everyone should watch like Apple TV. I mentioned TV so many times. I haven't even, I don't even love TV. But you love them. Do I even have any access to cable?

Dinosaur. The Apple TV has like this amazing dinosaur series that is sort of like a planet earth kind of thing, except it's all animated, obviously. And they have creatures like this. And they sort of show you that like nothing can survive in the water. Yeah, it's, that's insane. And I do love that we have spent a lot of time talking about pop culture on this episode. even though the three of us honestly works so much

that we have very little time to consume pop culture, which is kind of sad. So I'm glad we're managing to stay on the up and up about what's going on in the world outside of crypto as well. So on that note, thank you for joining us. And we will see you next week on Dex in the City.