We Study Billionaires - The Investor’s Podcast Network - BTC142: Bitcoin Policy Update Q3 2023 w/ Perianne Boring (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. About two or three times a year, I like to bring on a guest to talk about the current policy and political situation surrounding the Bitcoin ecosystem. Today's guest is Ms. Perry Ann Boring, who's the founder and CEO of the Chamber of Digital Commerce. She's been working on Capitol Hill with policymakers educating them on Bitcoin for nearly a decade, and no one understands the current status and positioning for policymakers better than

Starting point is 00:00:30 than Perry Ann. During our show today, we talk about the current bills, the likelihood and timing of these bills making their way into law, the appetite for a Bitcoin ETF getting approved by the SEC, numerous presidential candidates proposing Bitcoin policies, and what that might actually look like in application if they're elected. This is a really interesting conversation, and I'm telling you, Perry Ann is extremely knowledgeable on how this environment is actually shaping up. So with that, let's go ahead and jump to it. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish.

Starting point is 00:01:19 Hey, everyone, welcome to the show. I'm here with Perry Ann. Perry Ann, welcome to the Investors podcast in Bitcoin Fundamentals. Thank you for having me. It's good to be here. Hey, so you're doing all sorts of work on the Hill. We're going to cover all of this in detail. One of the things that is fresh, maybe new that's just happening right now,

Starting point is 00:01:38 now is this market structure bill. Tell people what this is. Before you even get to that, give them a little bit of background about yourself, about the chamber that you stood up, and then I guess we'll get into that after you give your intro. Yeah, no, absolutely. Well, I'm Perry and Boring. I'm the founder and CEO of the Chamber of Digital Commerce. We're a nonprofit trade association that's representing the digital asset and blockchain technology ecosystem. We're headquartered in Washington, D.C., and we're helping to lead the adoption of this technology. We've always been very convicted about Bitcoin, as well as digital assets in general, and we want to see this ecosystem be successful. One of the big challenges that we always

Starting point is 00:02:20 felt we would see for this space is public policy and regulation. And, you know, fast forward a couple years and the policy conversations are front and center for every company trying to build and innovate in this space. We were founded in 2014, so we just celebrated our nine-year anniversary last month. So we were the first trade association in the United States to represent this industry. And we've really been on the ground since early, early days promoting Bitcoin and making sure that our policymakers are well informed as they're navigating this space. We've had a very, very eventful summer. This has been one of the busiest summers ever at the Chamber of Digital Commerce and for anybody working in Bitcoin policy. So Preston, as you noted, just right before the August

Starting point is 00:03:11 recess, one of the very last task that the House Financial Services Committee and the House Agriculture Committee took on was marking up the market structure bill. The formal name of the bill is the financial innovation and technology or fit for the 21st Century Act, HR 4763. This bill, we previously were just calling it the market structure bill, but they gave it a formal name just over the past couple of weeks. This creates the comprehensive regulatory framework for digital assets at the SEC and the CFTC. So there's been a lot of legislation introduced over the past, you know, give it five years related to digital assets, cryptocurrencies, including Bitcoin.

Starting point is 00:03:58 This one's a little bit different because it's a comprehensive regulatory framework. So for the entire digital asset space, including Bitcoin. And the big hurdle was getting it through committee. So, you know, for those well-versed and legislative process, members can introduce a bill. it has to pass out of the committees of jurisdiction. This bill has two committees of jurisdiction. That's the Agriculture Committee who oversees the CFTC and the Financial Services Committee that has jurisdiction over the CFTC.

Starting point is 00:04:28 And it passed a markup out of both committees on a bipartisan basis. So now it is ready to go to the full House floor for a vote. So we have never had comprehensive legislation make it this far through the legislative process ever. So it's very encouraging and the fact that it had strong bipartisan support was also really, really important. So we've been very, very busy this summer. And this is really the culmination of many years of work from our team and many other people working in the policy domains in Washington, D.C. to get to this point. What's the main takeaways in that bill that are different or that you think are just noteworthy highlights for people to understand?

Starting point is 00:05:10 Some of the things that are really important to understand is just why is it still necessary. Today, there's a lot of confusion and there's a lack of clarity in terms of how these assets are regulated today. That is the number one challenge. That is the number one complaint that we get when we talk to any type of institutions. Bigger companies, particularly public companies, have very, very different risk profiles than startups or young technology companies. It's really important that we have a legal environment that's welcoming to larger companies because they can invest very real resources and building very real infrastructure that can help bring more people into this community, which is the goal, right?

Starting point is 00:05:49 To grow Bitcoin to get as many people buying and operating and living within the Bitcoin community. We need as many on-ramps and off-ramps as possible to get all types of people involved in the Bitcoin space. And I believe institutions will play a part of that. But they're really sitting at the sidelines right now. And if you talk to them why, it's because they feel like they're, they don't have the regulatory clarity that they need and they're right.

Starting point is 00:06:13 Today, the way that we've defined digital assets, Bitcoin, and other cryptocurrencies, is really through the speeches and statements of the people that work at these regulatory agencies. This bill really codifies that in law by creating a definition of a digital commodity. It also creates a definition of a restricted digital asset. those are the cryptocurrencies that will be regulated by the SEC. It also defines a payment stablecoin. These are cryptocurrencies that can trade on both SEC and CFTC regulated exchanges,

Starting point is 00:06:44 but the SEC and the CFTC will not have the authority to regulate the operations of stable coin operations that's defined in a separate bill. So it defines digital commodities. It defines what tokens are going to be regulated by the FCC. It carves out those stable coins and make sure that those are defined as well. But particularly, you know, one reason why I think this is good for Bitcoin in addition to creating that legal framework that's going to allow more companies to invest and build in the space. That means a more conservative risk profile is it also provides consumer protections, particularly for retail purchasers of digital assets. So the digital commodity exchanges, the exchanges that will be regulated under the CFTC for the trading of Bitcoin and other digital commodities, it will subject them to. to segregate customer funds. I think overall, that's, you know, I think something we can all attest is important given all of the catastrophes we have seen at exchanges over the past year.

Starting point is 00:07:42 And it also provides additional disclosures for retail customers. So it creates a lot more formal protections, consumer protections, particularly for retail investors. And again, I think from our perspective, we want to grow the Bitcoin community as fast as possible. And a lot of that is just maturing the infrastructure to bring more people into this space. I talked with Jason Brett probably, I don't know, a year ago about the Lummis Gillibrand bill or proposal that they were working through various committees. It seems like that, and I don't know, I'm curious. It seems like that died and maybe some of the language was reused. Is this the new push in D.C. to kind of really get approved and everybody's kind of throwing their weight and their support behind this and that's done?

Starting point is 00:08:27 Or is there other efforts that are still taking place in tandem? Yeah, this is where legislative process is really important to understand. So the fit for the 21st Century Act, this market structure bill, this was introduced by members of the House of Representatives. The Lummish-Gillabrand bill, the Responsible Financial Innovation Act, that was introduced in the Senate. It was introduced in the previous Congress. It did technically die because it didn't make its way through the legislative process before the end of the session. So when that happens, technically all the bills die. But it was reinterested. just a couple of weeks ago. That bill, there's a lot of overlap between the House version and the Senate version. The Longish Gilles-Brand is a little bit more comprehensive. There's sections including an entire tax section that's not in the House version, but all eyes are on the Senate at this point. So the House has passed their bill. It's kind of to be determined what the legislative process is for the Senate bill. If we're able to get both the House and a Senate bill pass, they'll have to be reconciled. So they'll have to kind of figure out what is the same. And, you know, can they get one thing in Udisen that will pass both chambers before it can go to the president's desk for signature? Now, we have a lot more challenges on the Senate side. So the House is controlled by Republicans. And there's a lot of interest in passing, you know, getting a bill passed as fast as absolutely possible by Republicans. Democrats, not as much. We've already heard from shared.

Starting point is 00:09:58 Brown, who chairs the Senate Banking Committee, who would have to put this on the agenda for a markup and pass it out a committee that he has no interest in bringing any bills, particularly any digital asset bills through the legislative process in his committee. So he is particularly a big sticking point and standing in the way of getting legislation passed. So we are, at this point, we don't. Perry Ann, where is he at in the process just so people can kind of understand why he's important in particular? Whoever chairs the committee sets the agenda. So they decide which bills get voted on. So if the chairman of the committee doesn't want to bring a bill forward, he doesn't have to. And that's exactly what's happening for Bitcoin in the Senate. We don't,

Starting point is 00:10:43 you know, we're getting, you know, a blockade from very specific members. Without them, you know, changing their mind or having a change of heart, they're really standing in the way of. If smart policy getting passed into law. When I look at the recent news, the one thing that's been on everybody's mind is just this SEC engagement with Coinbase. And I know the news story that's been shared like crazy in just the past week is that the SEC went in and specifically told Coinbase that Bitcoin is the only thing that you can be trading as a spot market, everything else is a security.

Starting point is 00:11:19 And that was the guidance, basically, that Coinbase had received. And this is all through rumors. I haven't seen anything that this was an FT article that made its rounds here. Yeah, I saw that. So when you look at that and you reconcile against what they're trying to do in Congress, how do you kind of make sense of this SEC grant strategy and the information that they're putting out and how that integrates with what they're trying to do on the hill? I think the bigger issue that we're seeing, like the bigger theme, the challenge that I think

Starting point is 00:11:48 everybody is having with the SEC today is that it's turned into a highly political. organization. And it didn't used to be like that. The commissioners really used to be experts in the markets and equities and understand, you know, how these companies operate, that they oversee and that they regulate. Today, you know, the commissioners are all placed by the president of the United States. They're confirmed by Congress, of course, but they're largely political appointees. And what we have seen is just a huge change and that you no longer really have market experts at the helm. You have people sitting at the helm who really don't have a lot of experience in these markets. And they're perpetuating a political agenda, not sound and safe oversight of the markets.

Starting point is 00:12:33 And that's the bigger challenge. And so the SEC, and this goes for a lot of the agencies as well, I'm not just taking on the SEC, but this one has really been very problematic for the digital asset space. Because it's really subjected to very large political pressures, the agency you see very strong changes from administration to administration. So in the previous administration, which was a Republican administration, the SEC had said that Bitcoin and Ethereum were commodities. They had also put out, you know, the famous Hinman speech, which had said that a digital asset could, you know, first be introduced as a security and it could over time turn into a

Starting point is 00:13:13 commodity. Well, the SEC has really changed its mind. They now have, you know, we're now under a Democrat administration. a Democrat-controlled SEC, and the speeches and the statements and the rules that came out in a previous administration no longer apply. So how does that, you know, this creates a lot of confusion and a very significant amount of risk for businesses. And that's why it's really important that Congress passes the law, really clarifying and defining the jurisdiction of these different agencies. So businesses just know what the rules of the road are so they can operate in a legally compliant

Starting point is 00:13:47 Wade without being subject to the whims of these partisan politics that have really taken the regulatory process hostage, particularly for our industry. When I hear about this market structure bill and it's now going through the House, you have this competing Gillibrand Lummus bill over in the Senate. And I'm just looking at the time that it would take for all of this to get approved in each of those houses and then having to adjudicate the differences between them and then going to a vote, like it just seems like it's going to take forever for any of this to get through. So what are you looking at as far as a viable timeline for any of this? Well, again, because of the

Starting point is 00:14:28 blockade that currently exists in the Senate, unless we're successfully able to break that down, it may be until the next Congress. And the current Congress, the session, every Congress goes for a two-year session. So this one goes to the end of 2024. So it's possible that we will not have the political climate until 2025 to actually pass something into law. But it's really important. I mean, this is why we exist at the Chamber of Digital Commerce. And that's why we encourage everybody who is a user and operator, someone who supports Bitcoin and the digital asset market to be active in the political process. Things can change. If we are successful, we're putting enough pressure on the Senate to bring forward smart policy. It's possible. Right now, it's not,

Starting point is 00:15:14 there's significant challenges to making that happen. But ultimately, our Congress is a reflection of the will of the people. And that's why it's really, really, really important to be active in these conversations right now. When I hear that, I'm thinking, okay, so maybe it goes to the next Congress. Maybe you run into a similar roadblock. I mean, it could be four years plus until you see something actually go through. So in the meantime, it's case law. It's the SEC versus, you know, all these different companies that they're suing right now. And that's really kind of determining what is and what isn't. And that's what's making it so difficult for companies that are trying to either own Bitcoin and put it on their balance sheet or just getting an ETF passed or any of

Starting point is 00:16:00 this type of stuff. It's all just pendant on case law. There's nothing on the books that our legal policy, our elected officials are putting out there for guidance. So is that it? Or is there more to it than what I'm describing. Well, the current situation is really untenable, and it's also making the United States markets very uncompetitive. This is pushing innovation. It's pushing talent. It's pushing investment overseas.

Starting point is 00:16:28 And you're absolutely right. This current environment of regulation through enforcement, it takes a very particular type of company and leadership team to be willing to operate with those types of pressures. Most companies, they want to follow the law. They want to make sure that they are following the law. law and they're not going to go to market until they have that clarity and that certainty. And we just don't have that right now. And that's why so many businesses, you know, American Bitcoin and digital asset companies are

Starting point is 00:16:55 going overseas. And that's a big part of our message is we want to strengthen the United States national security and its economic security and its technological advantages internationally. And a big part of that is, you know, having robust markets. And you have to have sound legal framework for businesses to operate here. if you want to accomplish that. Let's take a quick break and hear from today's sponsors. All right.

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Starting point is 00:21:39 So Kennedy's running on the Democratic ticket. And he made a couple like really massive, I don't know how I would say it. What's the word I'm looking for, Perry? He announced new policies that he's running on. I mean, these are huge, though. So like the one- Policy positions. Go through them for us, if you could.

Starting point is 00:22:00 Yeah, for those who are following RFK Jr.'s campaign just a couple of weeks ago, I mean, when he was at the Bitcoin conference, that's really when he came out as supporting Bitcoin, he was running on a pro-Bitcoin campaign. And he updated his policies to some new, very bold policies for Bitcoin. One was related to tax, where he vows to remove the capital gains tax on Bitcoin. And the other was to back the U.S. dollar with Bitcoin. On the tax side, removing capital gains for Bitcoin would put the U.S. on par, it would make our landscape more competitive to other jurisdictions that allow Bitcoin

Starting point is 00:22:39 to operate as a currency. This would be extremely bullish for Bitcoin. For those who have followed the tax policy in 2014, the IRS issued guidance, saying that Bitcoin would be taxed as property. So that means if you want to buy anything, including a cup of coffee, you have to calculate your gains from when you acquired that Bitcoin from when you sold it and a gain or a loss, and you have to record that and file taxes on that. So it really makes it just logistically pretty much impossible to use it for payment.

Starting point is 00:23:15 So removing capital gains would allow Bitcoin to circulate more freely in a free society. And on backing the U.S. dollars with Bitcoin, the way that he thought about this, I think, really was smart. So it's not just backing the U.S. dollar. He said backing treasury bills and bonds with Bitcoin as well as other precious metals, so a basket of scarce assets. And when he shared this, it was, you know, the goal is how do you strengthen the U.S. dollar? You know, the dollar is dwindling in the international markets. and how do we correct that? And if he was president, how would he go about doing that?

Starting point is 00:23:54 So I thought he thought about this really interesting. If you think about it, a big challenge right now, its interest rates are so high. And that doesn't affect just the treasury markets. That impacts everybody. I just bought a house this year. And highest interest rates in a multi-year time period, we all feel that.

Starting point is 00:24:13 So how do you bring those interest rates back down? Well, there's an inverse relationship between, interest rates and demand for bonds. So because demand for bonds is low, that's why interest rates are high. So the problem you're really solving for is how do we create more demand for bonds? How do you make bonds, treasury bills more attractive to investors? And his idea is to back them a very small amount with hard assets, including Bitcoin and other precious metals. So I think this idea has a lot of legs, I do think it can potentially strengthen the dollar as well as help bring interest rates back down. And I think it was smart to couple Bitcoin with other precious metals because Bitcoin

Starting point is 00:24:59 is still a relatively new and nascent asset class where gold and silver have had, you know, decades of, you know, history trading in international markets. So bringing them, you know, together and using that to strength of the dollar is an idea that really should be considered further. And it also just shows, you know, I think his commitment to helping create a robust environment for Bitcoin to flourish in the United States. Yeah, I think the amounts he was saying that it was going to get backed was like around 1% of the value of the bond. So if it was a $100 bond, it was $1 worth of Bitcoin or like hard assets inside of that as far as once it matures the whoever owned it. It's a 100 year plan. So year one, you back 1%.

Starting point is 00:25:44 near to 2% over 100 years, you could be fully backed by hard assets. So it would be a very, very slow and smooth transition, which I think is important to think about too. I mean, if you think of the current Fiat system, it's a relatively volatile system. And it's an experiment. The whole global Fiat experiment has only been around for a couple of decades. And there's many other nations that are looking to transition out of the Fiat system. And, you know, one of the things that we need to think about is going from a fiat system back to hard assets could create a lot of volatility and the market. So you want that transition to be very, very smooth. You don't want, you know, crazy changes happening overnight. You want that done very, very slowly. So, you know,

Starting point is 00:26:32 I think that is a really interesting way to think about it. And I think we should be talking about this more. You know, I think what's really exciting about all these presidential candidates running on pro-biccoyne and pro blockchain policy platforms is that it's finally pushing this technology to a national platform where we can talk about these really important issues on a much bigger stage. So for me, that's really exciting as someone who's been talking about Bitcoin policy for almost 10 years to have people carrying that on these national platforms. That's important. And we should engage in more thoughtful dialogue on these topics. It's interesting because you're not just seeing it on the Democratic side with Kennedy. You're also seeing it with DeSantis because I saw

Starting point is 00:27:18 something on Twitter just this week where he came out and was saying that he is very pro-Bitcoin and that he thinks that I forget what the announcement was, but he was, it was all about Bitcoin and making sure that Bitcoin is going to be legal in this country and that there's going to be laws put in place that allow it to be used. I don't think he's taking as far as what Kennedy's saying is that it's no cap gains and things like that. But he's still running on a very pro-Bitcoin position. And I find it really fascinating that you have both political sides coming out and being so pro-Bitcoin. And it's not just DeSantis.

Starting point is 00:27:57 You also have Vivek, Ramoswami, and Tulsi Gabbard. So it's pretty much almost all of the presidential candidates are talking about this issue except Trump and Biden. I think that says a lot. Yeah. Yeah, it really does. One other thing on Kennedy that I think I saw was that he was equating this. And hardcore Bitcoiners talk about this sometimes, but it's really interesting to see a political candidate saying this, which is software code is free speech.

Starting point is 00:28:28 And that's why Bitcoin is, you know, a legal form of money is because it's actually free speech. Have you seen this? Are you aware of that talking point that he has? Yeah. So he and one of his recent speeches had noted the Bernstein case, Bernstein against the Department of Justice, where the case identifying software code and protecting it under the First Amendment of free speech that went all the way to the Supreme Court. So he had recognized that because Bitcoin ultimately is software, that it is also protected as free speech under the First Amendment. And this is something we've talked about a lot in our legal work at the chamber. We've referenced this case many, many times.

Starting point is 00:29:11 We've really shut down a lot of potential calls or ideas to try to ban Bitcoin. You can't because it's protected under free speech. So having our elected officials or policymakers and presidential candidates recognizing this, I think is incredibly important to continue to protect Bitcoin for what it is, which is it's not just free speech, it's the freedom to communicate and transact. Perian, this is the question I think a lot of people have that get frustrated with all these politicians. So they say all these things, these political candidates are saying these various things. But when they get into office, let's say Kennedy or DeSantis or whoever gets elected and they come in,

Starting point is 00:29:49 what is truly their ability to implement this stuff without Congress? Because it seems like all of this stuff really requires Congress's vote, correct? Well, I mean, on the tax policy piece, there has been some debate about that. We've had conversations directly with the IRS about how do we change the designation? because we think they got it wrong. And taxing Bitcoin as property means it can't operate as a currency, so it restricts its usage in the United States. And the IRS has said, this requires Congress to change the designation.

Starting point is 00:30:25 Well, in RFK's position, he was looking at the Freedom, the Internet Tax Freedom Act. Sorry if I get the name wrong. I believe that's what it was. But this was the bill that was passed during the act. advent of the internet, which made discriminating on any type of internet taxes illegal. And VoIP is one, the voice over internet protocol is protected under that act. And that act, it was a three-year moratorium, but it was made permanent in recent years under the Obama administration.

Starting point is 00:30:58 So it is illegal to discriminate and add taxes specific to internet transactions. And this bill was enacted into law as a way to encourage the growth. growth in innovation and development of the internet, which led to the United States leading and dominating and commercializing the internet, which created one of the biggest booms in our nation's history. And a lot of those ideas and concepts really should be. That's what has been one of our big messages to policymakers is we should be looking at Bitcoin the same way we looked at the internet several decades ago.

Starting point is 00:31:31 We should be encouraging and incentivizing the private sector to develop this technology So the U.S. leads in developing this. Under that act, his kind of the way he was thinking of it is that Bitcoin has been taxed wrong this entire time. Because Bitcoin is very, it can be looked at very similar to VoIP, which is protected under that act from federal taxes. Where you have voice over IP. Some people talk about Bitcoin as money over Internet protocol. It's a peer-to-peer system to allow the transfer of digital assets. and VoIP is a peer-to-pe is a peer system to allow communications across the internet.

Starting point is 00:32:10 So the way his team has looked at it is you don't need an act to Congress because actually they did it wrong to begin with. And so through an executive order, other executive functions and powers, they should be able to change that on the backing of treasury bills with Bitcoin and other precious metals. That's not something I've looked into in terms of how they would have to go about doing that. I would assume the treasury has the authority to, I mean, They're the ones that issue the treasury bills and bonds. So I would assume they would be able to do that.

Starting point is 00:32:38 And if he directs the treasury to do so, they would have the authority. But I'm not sure if Congress would want to step in or not. But there's a lot. There's a significant amount of power that the executive office holds. So I do think if we had a pro-Bitcoin president, they would be able to make a lot of very real changes in law that could create a more sustainable environment for people to build and invest and operate in the Bitcoin space that could allow the United States to be a lot more competitive jurisdiction for this important technology.

Starting point is 00:33:11 Yeah, totally agree. You were heavily involved in this FastB update. Explain to people what this is, why it's important, what it was like going through this to get this update changed. I'm kind of curious to hear everything you got. All right, Fazby. If we have any like CPAs or accounting nerds, this is, this is the talk for you.

Starting point is 00:33:34 It's funny. This is, you know, when we started getting into, you know, what are all the policies that we can be involved in to help Bitcoin grow? I never really thought accounting would be such a front and center issue, but it really is. So FASB, that's the financial accounting standards board. They are required for setting the accounting standards for public and private companies in the United States.

Starting point is 00:33:56 Unfortunately, the way that they have looked at Bitcoin and other digital assets, is they require companies to treat it as an intangible, which means if your company puts Bitcoin on its balance sheet, if the value of the Bitcoin declines, you have to mark it down on your balance sheet. And then if it declines again, you have to keep marking it down. But if the value over time rises, you can't mark it up. So it's very punitive today to have Bitcoin on your balance sheet because Bitcoin is still quite volatile. This has been, called the number one issue to the corporate adoption of Bitcoin by Michael Saylor. He has met, and we have as well, with a number of public companies that are very interested

Starting point is 00:34:44 and putting Bitcoin on their balance sheet for treasury management purposes. Michael Saylor and Micro Strategy were really the pioneer of that concept. There's a lot of other companies that are interested in following suit, but one of the reasons they have not is because it can be very impactful to the balance sheet and to your financial statements. So we've petitioned the FASB to change the accounting treatment from an intangible to fair market value, which means you would mark the value of the Bitcoin of whatever value it is in the markets at that given time, which is a lot more accurate than treating it as an intangible. We started petitioning the FASB almost five years ago. It's not just this particular

Starting point is 00:35:26 issue of the intangible versus fair market value, but it's also the lack of accounting standards. Today, we do not have any accounting standards for digital assets. And that's been a big problem for some companies, particularly public companies. This issue was first brought to us again five years ago. We had a company. It was a Bitcoin mining company that wanted to go public in the United States and they could not get an external auditor to audit their financial statements because there was no accounting standards.

Starting point is 00:35:55 So we've been asking for these accounting standards for almost five years. And just this year, FASB announced that they are changing the jurisdiction, so they're changing it to fair market value right now. That should be implemented within the next before the end of the year. And they put on their agenda to develop the accounting standards for Bitcoin. This does take time because the financial accounting standards board does not move very fast and they're incredibly thorough. But they are in the process and we're hoping these will be done. the designation should be changed by the end of the year and the standards, those could take up to a couple years, but hopefully it won't take that long. We've really encouraged them to keep the scope

Starting point is 00:36:36 as narrow as possible so we can just start getting standards out and we can expand the scope over time. But this was really the result of a lot of engagement. So we were, we drove over 50 companies to contact the FASB and explain why this was a hindrance to their company. And it really wasn't until we were able to get so many people to reach out directly and to express why this is a problem for their business that we were able to get the treatment change. So this is a really good win for Bitcoin that potentially can knock down a very big barrier for corporations to add Bitcoin to the balance sheet in a way that we can help grow the Bitcoin ecosystem in a whole new way. Just as an outsider, as a person who

Starting point is 00:37:20 likes to look at financial statements when I'm buying companies, like you look at micro strategy as an example. And when they're making this mark every quarter, it's not just on their balance sheet. It's actually flowing over onto their income statement. And so for somebody who's looking at a business and trying to value the free cash flows of the business, they're looking at that income statement. They're like, holy moly, like this company's got a negative $50 million loss or whatever it might be, right? And when you really dig in to understand what that quote unquote loss is, it's just this thing that hasn't even been sold that's getting marked and it's presenting the company as if it's losing money when in fact the company might have made $50 to $100 million on the last quarter or whatever it might be,

Starting point is 00:38:03 right? And so it's not representing reality, which is the whole point of accounting is trying to represent whether you got free cash flows or the company's making money. And yeah, it was so needed. It's just, it's... I think that was ultimately one of the strongest advocacy points that was made to the FASB of that the financial statements no longer fully represent. Yes. And give the full picture of the company that you're investing in. So companies like Micro Strategy were also publishing additional documents for investors to better understand their financials because the official financial statements didn't tell the whole picture. And of course, FASB has an incentive to make sure that the financial statements are the main and the key documents

Starting point is 00:38:53 that investors use as they're reviewing the financials of companies. So that ended up being, I think, a really important part of the conversation. And that really resonated with the board of saying, okay, if we're, you know, if the integrity of the statements is now declining because we're not taking action, that is a problem. And that definitely helps in getting them to move forward. You talk to a lot of representatives and elected officials, and I'm kind of curious your overall, not any individual person, but your overall impression of their understanding of any of this stuff, particularly on the mining side and the energy side, in that we've covered it extensively on this show for multiple years now that Bitcoin is actually very conducive to the environmental impacts

Starting point is 00:39:42 in that it makes things better, that it's this buyer of last resort. They turn off when energy prices go high. It helps build new infrastructure in areas that you might not have people that are willing to risk capital in order to put a power plant into whatever domain, right? So like all of these things, especially on the flaring side, I mean, we could go on and on. What is the general impression that you get from elected officials on the Hill as to understanding any of this technology and in particular the energy piece. Yeah, the energy conversation is one that's very important to us at the Chamber of Digital

Starting point is 00:40:19 Commerce. We started a mining initiative just over two years ago with a specific energy policy focus to address the energy conversations related to Bitcoin. And that group has grown considerably just in two years. Today, we represent over 20 Bitcoin mining companies and those companies are generating over 50% of the hash rate on the Bitcoin network in the United States. So we have a huge interest in this topic and it's something we've invested in heavily and we're investing more in every day. When we really started, we felt like Bitcoin was in this very contentious defensive posture

Starting point is 00:40:52 where you have seen all these crazy kind of environmentalist arguments come out saying Bitcoin is bad for the environment. And we really wanted to approach that from a policy perspective with more effective. and data about how Bitcoin works, and what are the energy policy considerations related specific to Bitcoin? We've had tremendous success with this. I'll tell you a story in the state of New York. So New York was the first state to pass an anti-Bitcoin mining bill that happened last year. This bill is not technology neutral. It specifically targets proof of work mining, and it restricts a certain type of Bitcoin mining in the state of New York. We opposed that bill

Starting point is 00:41:34 because we felt like it was pushing the policy conversation in the wrong direction. And we, it ultimately became law. So we did lose the, we lost the battle, but the war is still ongoing. We had put a whole team on the ground in the state of New York. That team is still there. And the whole goal was just educating every member that was going to vote on this bill and making sure that they were fully informed. there were a couple of offices that their minds were kind of made up and they were just going to be anti-Bitcoin.

Starting point is 00:42:08 And there was really no conversation or information or education that you could provide to change them. That group of people was maybe three people. It was not the majority. There were a handful of people that were big champions for Bitcoin like Clyde Vinell, who really did understand how Bitcoin work, who really did understand why Bitcoin mining is important and how it can lead the transition to renewables. and they were champions for us and really making sure that the community got, you know, fair debate as this bill was being pushed through the legislative process. But the majority of the

Starting point is 00:42:41 people are in the middle. These are people that they just haven't had an opportunity to understand it, to look into it, and they're not sure they're undecided. And that's really been the focus of our advocacy and our education work is focus on the people in the middle and take the time to give them resources to inform them so they can make the best decision for their community. And we saw unbelievable support from that group of people. The people who were willing to sit down and have a conversation, who are willing to take the time to learn, so many of those people ended up moving to the champion side. We didn't have anyone that we sat down ever, sat down and go through the education series

Starting point is 00:43:23 where they came out and went to the other side as full on critics and skeptics. So my analysis is that the critics and the skeptics are purely political in nature. Because if you debate them, which a lot of times they will not debate their position, they can't win them because their positions are not rooted in data or facts. They're rooted in a political motive. But most policymakers, the mass majority of them, are there for the right reasons. They pride themselves in getting to the right answers and doing what's best for their community. So we saw just a tremendous amount of people who ultimately became supporters.

Starting point is 00:44:05 So when that bill came for a vote, it was brought to the assembly floor in the state of New York. The assembly is the equivalent of the house. We had created such, you know, so much awareness and both with educating people on the ground in Albany, but also we had thousands of people across the country, call and write the state of New York and tell them, this is not good, this is why Bitcoin's important, and urging them not to support the bill. It led to the largest debate, or I'm sorry, the longest debate in the New York legislature in decades. And so every single member of the New York legislature, and it was all over the news, because

Starting point is 00:44:45 the phones were going off, we did a whole press campaign where we made sure every member of the press knew what was going on and was reporting on this. Every single member, while not all of them were fully informed, a lot of them had been through the education, but not everybody. All of them fell and walked away of like, I may not understand Bitcoin and Bitcoin mining, but I know it's important because it was such a big event. And I need to understand it. So even that that bill was passed, we saw a team doing education in New York. And that team has gotten considerable inquiries from all sorts of numbers coming out of the woodworks saying, yes, we want to learn. because we don't want to be caught flat-footed where we have to vote on something and we're in the middle of a big fight and we don't understand how to make the right decision because we don't understand what we're working you know what we're voting on so education is our biggest tool and you know we've we've seen big battles for bitcoin mining in new york we haven't seen those on the federal level yet there hasn't been any big effort real effort to pass a bill that would hurt bitcoin mining in the united states we hope that never happens and that's why we are on the ground every day with our policy

Starting point is 00:45:50 are energy policy experts educating everybody about Bitcoin mining, so it never gets to that point. And so far, we've been able to hold that ground. And we've actually been able to turn the dialogue. We have multiple pieces of legislation that have been introduced that promote proof of work mining in the United States. The Blockchain Regulatory Clarity Act, which was introduced by Congressman Tom Emmer, that just passed out of a markup last week as well. So we have made as a community very, very real progress on this anti-environmental kind of narrative towards Bitcoin just through education. And the narrative has really changed from Bitcoin's bad to the environment to Bitcoin can play a role in enhancing our energy security. And we need to study and understand that better.

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Starting point is 00:50:26 financial sector. And anybody who is like, well, hold on, that doesn't add up. I think that incongruency that's taking place between him being an ESG person and him also being a Bitcoin bull is causing some people to ask more questions, I guess. is where I'm going with that. But speaking of Larry Fink and the SEC and ETFs, what are your thoughts on where that's potentially going? Have you heard anything? Do you have a bet one way or the other, whether this thing's going to get approved?

Starting point is 00:50:57 What's your opinion, period? So it's a win, not if. There will be a spot Bitcoin, the ETF in the United States. It will happen. Unfortunately, this process is now being handled by the courts. And the reason why is because the SEC has unjustifiably blocked every single attempt to bring a spot Bitcoin ETF to market. The first time anyone tried to bring one was in 2013, the Winkle boss twins filed the very first spot Bitcoin ETF. There's been dozens of attempts over the past 10 years.

Starting point is 00:51:32 Last year, we did a big study. We looked at every single application and denial, and we analyzed those in detail. And then we also interviewed over 30 market participants. That was the issuers plus other infrastructure providers in the ETF markets to really understand from a comprehensive perspective, like how has just what's happened and why are we in the place we are now. And we documented in our paper. It's called the crypto conundrum. And it's available on our website. Anybody can review it. We documented how the SEC continues to move the goalpost of what the industry needs to provide.

Starting point is 00:52:09 order to bring a spot Bitcoin ETF to market. We also document how the SEC is holding Bitcoin to a completely different standard than other commodity ETF markets. And we make the case that the SEC's approach has been arbitrary and capricious because they treat other commodities differently to Bitcoin. So I would say this is discriminating against Bitcoin. We don't say that in the paper. That's just my personal opinion. This is arbitrary and capricious, and ultimately, it's because of political motives, of course. And Chairman Gensler admitted that himself when he testified in the Senate banking. He was asked by then Senator Toomey, what is it going to take to bring a spot Bitcoin ETF to market? And he said, not until I have jurisdiction over the Bitcoin exchanges, which really makes

Starting point is 00:53:00 no sense because the SEC does not have jurisdiction over Bitcoin in which he is also noted. So this is caught up, unfortunately, into, you know, really he's holding Bitcoin hostage, so he can get his way and getting as much jurisdiction as possible under the SEC, and that's why that's gone to the courts. We supported an amicus brief in Grace Gale's case against the SEC. We agree they've been arbitrary and capricious, and eventually one is going to get through. And we hope it's soon because a spot Bitcoin ETF, will be a tremendous tool to bring more people, particularly retail investors, into the Bitcoin

Starting point is 00:53:41 community. What doesn't make any sense to me is if you're looking at Bitcoin as a commodity and you're looking at maybe the oil market in contrast, it's not like Ginsler has control over all the spot oil market in the world or you name it commodity market in the world. So the rationale or that response just truly doesn't make any sense whatsoever that he has to have control of all spot. What was he meaning by that? Yeah, that's absolutely right. So the 1934 Act is really what, how Congress designated, you know, how the SEC should operate. And the SEC is very clearly a disclosure regulator, meaning companies are required to make specific disclosures with respect to regulated products they're going to bring to market. The SEC, you know, has authority over

Starting point is 00:54:29 that process, but they are not supposed to pick the winners and the losers. That's what merit regulators do. The SEC is very clearly defined as a disclosure regulator. And by picking the winners and losers by saying, you know, this commodity ETF is okay, but that one is not, you are being a merit regulator, which means the SEC is operating outside of its statutory jurisdiction. And so we have made Congress aware of this. We have delivered our report to every single member office on Capitol Hill. We've given briefings to the Financial Services Committee and the banking committee. And we have spurred an oversight response. You may have seen there's been multiple members of Congress that have sent letters to Chairman Gary Gensler asking for more information about how they've come to these decisions.

Starting point is 00:55:13 It's Congress's job to hold the SEC account and make sure they're operating within their jurisdiction and they're not. And so we're helping Congress get to the bottom of that and to support bringing a spot Bitcoin EFTEF to market as soon as possible. When I look at traditional bankers and how well they lobby on the hill and how they are able to influence elected officials. And I compare and contrast that to the Bitcoin space, whether that's exchanges or miners or whatever. And I hope my impression is wrong. But it seems like they, the traditional finance has their act together and they are way more effective in working with elected officials than people from the Bitcoin space. A, do you agree with that? And B, if you do agree with that, like, what can these companies and individuals and people do to get better at this?

Starting point is 00:56:07 Yeah, well, the traditional financial services lobby is very sophisticated. These are companies that have been regulated for a very, very long time. So they've just had a lot more time to build these types of operations. And they invest heavily in their government affairs and lobby efforts. And while you have, you know, all the banks and the financial services companies, they compete heavily in the market, But one thing that when it comes to D.C., when it comes to talking, communicating with their regulators, they get on the same page. They coordinate very, very well.

Starting point is 00:56:37 And they have a unified message. For Bitcoin, I mean, this is the whole reason why we started the Chamber of Digital Commerce. When we started in 2014, Bitcoin, the whole market was just Bitcoin. You had a couple different cryptocurrencies that were out there. But we were founded by very early Bitcoin pioneers. And those people are still part of our organization today, and we've managed to bring in 200 other companies to be a part of our work. And we have built incredible consensus across the community.

Starting point is 00:57:09 We have been incredibly effective in our policy work, not just from bringing oversight to the SEC and how it's handling spot Bitcoin ETFs or getting the accounting issues fixed. We've gone head to head with the Treasury Department on self-posted wallet rules. I don't know if you remember a couple of years ago, but there was a huge scare that Treasury was going to require KYC of self-hosted wallet rules. We've threatened to sue the U.S. Treasury for violations of the Admitted Procedures Act, and they ultimately walked away from that. So that was a very interesting time for us because we saw so many people come together and get organized as a community to address very, very real threats facing our community. in doing so on the Chambers platform. So I think the bigger challenge, like when it comes to public policy and the Bitcoin space is that so many people in this space are just individuals, right?

Starting point is 00:58:06 Where in the financial services space and banking space, you know, the real stakeholders are companies. So you have this very real dichotomy between the users of the technology and some of them are very big investors versus the companies that are building infrastructure for this space. And we really strive to represent everybody. Every year, we host an education day for the whole community. We invite anybody in the space to come to D.C. and go meet with their elective representatives and tell them about why they support this technology and why they should too. So we try to work everybody in. And we definitely encourage anybody who cares about the future

Starting point is 00:58:44 of this technology to make sure you meet with your elective representatives. This could be your mayor, your state representative, your U.S. representatives, make sure they know who you are. and they understand why Bitcoin is important to you. That way, when you have these very real battles, at least you have some kind of touchpoint, and hopefully they start that education now. I do think this community has been very effective over the past 10 years.

Starting point is 00:59:09 We have a lot more work to do. But thanks to a lot of the amazing people who have supported us and who are part of our work, we've been able to bring very real resources to the public policy process to make sure that Bitcoin's voice. is a part of the conversation in Washington. Perry Ann, fantastic conversation.

Starting point is 00:59:29 I really enjoyed learning all this. You are just a wealth of information. If people want to support the Chamber of Digital Commerce, if they want to learn more about you and what you're doing, give them a handoff to where they can find you. Thank you. Everything's on our website. We're very, very transparent.

Starting point is 00:59:46 We publish all of our policy positions. All of our members are listed on our website. our whole team is listed on our website. So we believe in operating in a space of transparency. So there's a ton of information on our website at digitalchamber.org. And if you want to support our efforts and make it either become a member of the chamber or just make a donation to support the work of our team, you can go to digitalchamber. org backslash support.

Starting point is 01:00:12 And then we're also very active on Twitter. So you can get real-time updates on Twitter at Digital Chamber. Awesome. We'll have links to all of that in the show notes. So if you guys want to find it easily, quickly, just go into the show notes, click the links. Perian, thank you so much for making time today. Absolutely. Thank you so much, Preston.

Starting point is 01:00:29 It's great to be here. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that, and it's something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening, and I'll catch you again next week.

Starting point is 01:01:03 Thank you for listening to TIP. To access our show notes, courses, or forums, go to the investorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network, Written permissions must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - BTC142: Bitcoin Policy Update Q3 2023 w/ Perianne Boring (Bitcoin Podcast)

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