What Bitcoin Did - The US Government Vs Bitcoin w/ Zack Shapiro

Episode Date: May 9, 2025

Zack Shapiro is a lawyer and Head of Policy at the Bitcoin Policy Institute. In this episode, we discuss the Samurai Wallet case, how the U.S. government is using outdated laws to target non-custodial Bitcoin tools — and why the outcome of this case could criminalise running a node or writing open-source Bitcoin code. We also discuss the DOJ’s “regulation by prosecution” playbook, the fact that FinCEN explicitly told prosecutors Samurai was not breaking the law, why prosecutors hid that fact for a year and why he believes a political fix — not just a legal one — is urgently needed. FOLLOW: Danny Knowles: https://x.com/_DannyKnowles or https://primal.net/danny Zack Shapiro: https://x.com/zackbshapiro P2P Rights Fund: https://p2prights.org/ THANKS TO OUR SPONSORS: IREN: https://www.iren.com/ RIVER: https://river.com/wbd ANCHORWATCH: https://www.anchorwatch.com/ LEDGER: https://www.ledger.com/ CASA: https://casa.io/

The laws that were written that presume there is a financial intermediary hit the reality of the 21st century where blockchain is a thing and there actually isn't an intermediary. You can pretend that the software developers who write non-custodial code that allows people to move their own Bitcoin with their own keys are the equivalent of that financial intermediary that, by the way, doesn't exist. And you can throw them in prison because they are not doing the K-Y-C that the bank that doesn't exist would have had. to do. If this becomes the law of the land, then basically all non-custodial tools are at risk in the United States. If you run a node, you can be put in prison. There hasn't been a more important moment, you know, at least as far as law and policy is concerned in Bitcoin than right now. What Bitcoin did is brought to you by our lead sponsor, a massive legend, Iron, the largest NASDAQ listed Bitcoin miner using 100% renewable energy.

Iron are not just powering the Bitcoin network. They also provide cutting-edge. computing resources for AI all backed by renewable energy. So whether you're interested in mining Bitcoin or harnessing AI compute power, Iron is setting the standard. Visit iron.com to learn more, which is iri-en.com. Zach Shapiro, welcome back. Thanks for having me again. No, thank you for coming on. I think this is a really important topic in Bitcoin. While everyone's out here fighting about op return, there's an actual attack on Bitcoin going on. The US government's actively attacking, open source Bitcoin developers for writing code. So we're going to get into this.

I don't think it gets covered nearly enough, which you must find frustrating. But probably the best place to start. We recorded a show in December on this with Roger, who's representing, is he representing Bill? Yes. And I thought that show was great. It's one of my favorite shows I've done so far on the podcast.

But let's start with you just give me some background. What's going on with a samurai case? Lay out some context, then we'll get into the changes. Yeah. So first let me zoom out. and give my brief pitch, notwithstanding the operand drama. Why I actually think this is the most important issue in Bitcoin right now. Look, in my view, even more important than the SBR than the dev stuff.

Okay. So why did Bitcoin succeed in the first place? There were attempts to do digital cash before Bitcoin. There was DigiCash. There was Eagle. There was Liberty Reserve. Ultimately, these all failed because there was a centralized party that administered these digital currencies. and what Satoshi figured out in the white paper, especially, you know, through proof of work,

is that you could actually create genuine peer-to-peer digital cash. And the peer-to-peer in the title of the white paper is important, and the cash is important in the white paper because what is different about Bitcoin than its predecessors is it is much more like handing, when you transfer Bitcoin, handing a dollar bill, physical bill from one person to another, than it is like sending money through the traditional banking rails like through Venmo, where it feels like it's instant, but really it's, you know, lots of banks talking to each other and weeks to settle on the back end. And because this is a

peer-to-peer system, because there is no financial intermediary, Bitcoin figured out a trustless system for people who don't otherwise trust each other to be able to reach consensus. There was no company to go after. They were able to have a pseudonymous founder who could go away. And at this point, it doesn't matter who Satoshi is. And that is why Bitcoin is amazing. and that's where all of this came from. Now, our laws in the United States that regulate movements of money were written before a time where there was a possibility to move money electronically without an intermediary. Before Bitcoin, that just wasn't a thing.

And so necessarily there would be some intermediary that you could regulate. And what the samurai wallet case and the tornado cash cases are about is this conflict we have hit where the laws that were written, presume there is a financial intermediary hit the reality of the 21st century where blockchain is a thing and there actually isn't an intermediary. And so either you can write new laws that deal with a world where Bitcoin exists, or as is happening in these cases, you can pretend that the software developers who write non-custodial code that allows people to move their own Bitcoin with their own keys are the equivalent of that financial intermediary that, by the way, doesn't exist.

and you can throw them in prison because they are not doing the KYC that the bank that doesn't exist would have had to do. And if this becomes the law of land because, you know, judges don't understand this and prosecutors don't understand this and they don't necessarily understand what the stakes are and they're okay with the collateral damage of setting this bad precedent, if this becomes the law of the land, then, you know, basically all non-custodial tools are at risk in the United States. If you run a node, you can be put in prison for not KYCing all the transactions that go through your node, despite the fact, of course, you can't KYC transactions go through your mode. Bitcoin miners could be thrown in prison for not KYCing the transactions that they add to the blockchain, although, of course, they can't KYC those transactions. You know, ditto lightning routing nodes, just basically, you know, non-custodial wallets.

If you write a wallet that allows people to generate their own private keys, you know, you could go to prison if people use that wallet. you don't K-Y-C them. So I want to start and then perhaps end with the most important part of these cases. We're going to talk about a lot of shocking developments that came out recently. It's deeply unfair to the defendants in these cases who are facing years or decades in prison. But the thing that, like, I want listeners to hear and the reason why I keep pounding the table about these cases is, like, it, you know, delves from this complete misunderstanding about the way that Bitcoin works. And, you know, we run the risk of setting bad laws. that can ban, you know, backdoor ban the direct usage of Bitcoin and crypto in the US.

Yeah, and we saw some of those chilling effects after the rest of Bill and Keone. Phoenix wallet pulled out of the US, Wasabi pulled out of the US. The Wasabi one probably makes more sense because it's kind of similar to Samurai. We've now seen Phoenix come back into the US market, so they must be seeing something promising on that side. I want to get into all of this, but just before we get into the Blanche memo, which has recently come out, can you just take. explain what happened with Bill and K.O.N.A., their arrest and what they're actually faced with.

Yeah, so maybe one more step, sorry, of table setting before we get there. So back to this story about, right, Bitcoin is this peer-to-peer thing. Then we have the banking laws. We have the Bank Secrecy Act. And, you know, it was very unclear in the beginning how these laws applied to Bitcoin. So the U.S. regulator that determines how the executive branch interprets the Bank Secrecy Act is called FinCent. It's a part of the United States Treasury Department, and they put out guidance when new technologies arise about how they think the laws apply and how it should be enforced by federal law enforcement. And so they put out guidance first in 2013, essentially saying that Bitcoin itself is not a money transmitter, but Bitcoin exchanges are. And then they put out much more comprehensive guidance in 2019 looking at different business models, specifically wallets, multisig, you know, ICOs, which were big at the time, you know, privacy tools.

etc. And, you know, saying which of these, you know, Bitcoin ATMs, which of these business models are money transmitters and subject to the Nax Secretaic and which are not. And this is, you know, what lawyers and startups in the space have looked at to figure out, okay, when do we have these obligations and when, don't we? And most lawyers who are familiar with this technology and who read FinCEN's 2019 guidance came to the conclusion that the guidance, you know, which says you are a money transmitter if you accept and then transmits funds on behalf of the public and looks at what they call hosted wallets or we would call custodial wallets and said these are money transmitters and then unhosted or what we would call non-custodial wallets said these are not this guidance draws a distinction

between custodial and non-custodial tools. Custodial tools are services, right? They are like a bank in some ways and so they are subject to the Bank's Act. Non-custodial tools are just software, right, that users use their own keys, users use their own funds. It's just a tool. That's not like a bank, and so that doesn't have to comply. So Samurai Wallet is a coin join. It is a piece of software that helps a bunch of people send the same amount of Bitcoin at the same time to make that transaction more private, harder to figure out where the Bitcoin is going from and to on the blockchain.

Specifically, it's, you know, their tool called Whirlpool is a coin join coordinator. Think of it like a sort of digital cork board where you can say, hey, listen, I want to privately spend, you know, 5 million Satoshis. and you find five other people that want to do that, and then you can all do that transaction at the same time. Again, just a piece of software. Samurai wallet had a lawyer, Raphael, someone who's pretty well known in Bitcoin circles,

who, of course, looked at the 2018 guidance and said, you guys aren't money transmitters, right? I, as your lawyer, looked at the tools, it's non-custodial, looked at the guidance. Guidance says that non-custrial tools aren't subject to the Bank Secrecy Act, and so, of course, you don't have to K-YC people. Okay.

fast forward, you know, to 2024, April of 2024, the developers from Samurai Wallet are thrown in jail for two crimes, but most currently here, for the crime of failing to register as a money transmitter with FinCEN. Now, recall, the 2019 FinCEN guidance says, essentially, if you do not accept and then transmit money on behalf of the public, which, you know, if it sounds like there's an intermediate step of having that money that's not, you know, necessary if you're accepting and then transmitting it, you know, certainly that's what it sounds like to me, failing to register despite the fact that their software is custodial and never controlled user funds and really doesn't seem to fit in that guidance. So this, you know, immediately raised alarm bells. This is when at BPI we started the peer-to-peer rights fund because this seems like the government deeply misunderstanding what's going on. And there's been so far a year-long fight in this case about whether the Bank Secrets Act applies to samurai wallets tool. Now, moving to the Blanche memo, on April 7th of this year in 2025, the incoming Trump administration, the new Trump administration,

put out a memo through the Deputy Attorney General of the United States, Todd Blanche. So the Deputy Attorney General is the number two person in the Justice Department, which is part of the executive branch, answers to the president, but they are in charge of law enforcement in the United States. They are in charge of the FBI. They're in charge of federal prosecutors. They're in charge of the policy that DOJ sets. And so they put out this memo called the Blanche memo that says that, you know, listen, there were a lot of missteps in the way that the Department of Justice acted in the Biden administration. And the worst of these offenses is, you know, regulation by enforcement. It's, we're going to tell you what the rules are by going after you. And then the

very worst most pernicious form of this, which is regulation by indictment or regulation by criminal prosecution, where we're going to teach you what the rules are by putting you in prison and saying, guess what, these are the rules now. We're not going to do that anymore. And specifically, we're not going to do it with this statute called Section 1960, which is this failing to register with FinCEN as a money transmitter. And specifically, we're not going to do this with non-custodial mixing or tumbling tools for crypto, which obviously looks like it was meant. And to be about the tornado cash case and the samurai wallet case, which are the only two cases that fit that description. So Blanche MMO comes out on April 7th of this year. Three days later on April 10th,

the defense lawyers, including Roger, who was on the show with us last time, write a letter to the federal prosecutors in this case and say them, hey, our case seems to be what this Blanche Mimo is about. This case you're continuing to bring in this new Trump administration, which has said that it wants to be friendly to crypto in a hospitable place for, you know, developers in America, this is completely inconsistent with the DOJ's new set of priorities. We think you should drop the case. And they met with the prosecutors and prosecutors said, okay, we'll pause the part of the proceedings we were at, these motions, and we'll decide whether we need to drop this case under the Blanche Memo. So one month after that, early May this week on Monday, the prosecutors still

haven't decided whether the Blanche memo, which seems to be about their case, applies to them, which is pretty strange. The defense counsel also filed what's called a motion to compel, you know, or a Brady motion. Can I just jump in one second? I do want to come back to this. I don't want to ruin your flow, but you said something before that. I want to just ask you a little bit about. So you said this is like regulation by indictment. Can you actually explain what that means. Is that because normally prosecutors have to go off laws, pre-existing rules and laws, and this is them prosecuting someone on something that doesn't exist in any kind of precedent? Yeah, so let's start with what regulation is in the American system in the first place, right? We have three branches of

government. We have the legislature, the two houses, Congress and the Senate. Their job is to write the laws. And they are the most democratic branch. They're elected by the people. They're sort of supposed to be, have the most power. And they're called, you know, the first among equal branches. then you have the executive branch, which is supposed to enforce the law, and then you have the judiciary, which is supposed to, you know, figure out disputes or when there are different, you know, interpretation of the law challenges, the judges do that. Okay. However, our laws have gotten really complicated and Congress has gotten really lazy, and sometimes there are laws that, you know, the way they are written by Congress don't answer how they apply in every situation. And the courts can only get involved when there's called a judicial dispute, right? When there are two parties that have like an actual real dispute, then judges can get involved. But then there's this sort of middle space of cases where there's not yet a live dispute for judges to decide. But it's not necessarily super clear from the text of some law that Congress wrote. And that is what the regulatory agencies do or the departments. And so those are in the executive branch, right? They ultimately answer to the

President of the United States. The SEC is an example. The Department of Justice is an example. The Treasury Department is an example. And their jobs to promulgate regulations, which basically shape the enforcement priorities for the executive branch. Here's how we sort of understand the laws that Congress passed, and here's how they're going to be enforced. And so the sort of regulations we're talking about here are interpreting who is a money transmitter, who is subject to the Bank Secrecy Act, which is a law that Congress wrote. And Treasury, the relevant regulator here, specifically FinCEN, which is the subpart of Treasury that's relevant, put out that 2019 guidance, and they said, you know, you are a money transmitter if you accept and transmit funds on behalf of the public.

Most of us who are lawyers who look at that think that's actually pretty clear about you need to be custodial in the context of crypto tools. To the extent that there is any ambiguity about that, the regulation by enforcement point is that it should be FinCEN. You know, the Department of Justice should go to FinCEN and say, hey, you regulator, who is an expert in this topic, you tell us, with this specific fact, pattern whether you think this is money transmission. Is this or is this not what you meant by the 2019 guidance? And, you know, instead, you know, until Monday, what we thought happened is that the, you know, DOJ didn't go to FinCEN and they just kind of decided on their own. We would like the 2019 guidance to be broader than everyone understood it to be. So we're just going to take our own interpretation of the guidance, you know, forget what, you know, Treasury may or may not say. And we are going to

try and get this broader interpretation to become the law by bringing these criminal cases by throwing people in prison and trying to get a judge to agree with us. This episode is brought to you by River, the best place for Bitcoiners and businesses to buy Bitcoin. With River, you can set up zero-fee-requering buys, making stacking sats effortless. And while you're waiting for the perfect buying opportunity, River lets you earn daily interest on your cash balance paid in Bitcoin, which outperforms most high-yield savings accounts. sets River apart is their unmatched dedication to security. You have peace of mind knowing the River has monthly proof of reserves and holds all Bitcoin in multi-sid cold storage. And with US-based

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Financial Freedom Report.org. But that's terrifying, not even just within Bitcoin, just in general, that's a terrifying thing to happen. Essentially, you can be running a completely legal business. You're following the law. You get black bagged put in prison, and they'll try and prove that you're not following the law. Yes, they'll try and expand the law through criminal prosecution because we have what's called a common law system.

So it's the same thing you have in the UK. When a judge says something in a legal decision, that becomes the law. And so you can use either civil prosecutions like the SEC was doing with crypto or criminal prosecutions like the Tornado Cash and Samurai case to try and get the legal result you want. And the Blanche memo says like, this is absolutely terrifying and not appropriate and we're not going to do this anymore to the crypto industry. And is the Samurai case and the Tornado Cash case the first example of this happening? Certainly not the first example of regulation by enforcement, right?

I think there is, you know, I don't know the full history of this, but that's something that has been alleged and has probably happened for a long time. And look, you know, as much as I think there's a lot of bad behavior in like crypto VC land, there certainly was a pretty good example of regulation by enforcement happening with Gary Gensler at the SEC with his interpretation of the securities laws, right? So even within crypto, there are other cases of this. But it is one thing, a bad thing. It's one thing to do it through civil enforcement actions by the SEC. It really is another thing to do it by criminal prosecution as happened here. Yeah, that's terrifying. Okay, sorry, I could you off there. You were talking about the pause that was happening. Do you want to carry on from there?

Yeah. So the pause is happening. We're a month in to the prosecutors trying to decide whether this four-page blanche memo that seems literally about their case applies to their case. And then we learn this just incredible thing on Monday. So other background here, there's this old United States Supreme Court case called Brady. And Brady says, if you are a prosecutor, if you're the government and you're trying to put someone in prison, and you become aware of some fact that would make it on balance more likely that the person you're prosecuting is innocent, right? It is some good fact for the defense. You constitutionally, at least before trial, have to turn that over to the defense so they can use it to make their argument. On top of the Brady decision, sometimes you hear a Brady violation. Technically, you can't have a Brady

violation until a trial has happened. But on top of that, there is a rule of course. criminal procedure 5F, which allows judges to set their own more stringent Brady rule. So Judge Berman, who is the federal judge in the Samurai Wallet case, had a 5F rule that you have to turn over any Brady material within two weeks of the indictment or of when you learn about that information. Okay. So there wasn't any Brady material or at least nothing important to speak of that we had heard about until Monday. And then on Monday, apparently post-Blanche memo in response to a specific Brady request because the defense is allowed to say,

listen, we think X, Y, and Z thing is exculpatory. Do you have it? Does it exist? And so one of the things the defense asked, quite recently, of the prosecutors, was, did you actually talk to FinCEN, right? FinCEN wrote this guidance that lots of people, including the Keone and Bill's lawyer, thought meant that, you know,

non-custrial tools were not subject to the regulations you're charging them with breaking. did you ever talk to FinCEN about what they thought about this applied? And shockingly, the answer was, yes, six months before the prosecutors brought this case in August of 2023, these specific prosecutors who are prosecuting this case today went to FinCent. They asked FinCEN. They said, listen, we're thinking about bringing this Samurai Wallet prosecution. Here's what Samurai wallet is. Here's how it works. Here's what the technology is. Is this money transmission? FinCEN said, no, it is not. The way we decide whether something is money transmission is whether it's custodial or not.

This is not custodial. It's not money transmission. We don't think you can make out these charges. Prosecutors said, thank you very much, waited six months, and then threw the developers in jail anyway, and hid this conversation that they had with FinCEN for a full year from the defense, despite the specific rule from this judge that you have to turn over this type of material within two weeks. And that is what came out on Monday, and that's just insane. sane. And by the way, in the meantime, there was this tornado cash case, which is further along than the samurai wallet case, where there was a motion dismissed. So in the federal system, judges decide issues of law, juries decide issues of fact. And so if there's like a purely legal

question, the judge gets to decide it. And in tornado cash, they said, listen, purely as a legal matter, because the tornado cash smart contracts are non-custodial, even if we assume all the facts the government's alleging are true, right? North Korea, laundered funds, et cetera, you can't make out a charge for money transmission because it needed to be custodial. And there was briefing and arguments back and forth between the defense and the government and the prosecutors, six months after the samurai wallet talked to FinCEN and got this answer from FinCEN, the Tornado Cash prosecutors argued actually under the FinCEN guidance, what FinCEN meant was that you can prosecute non-custodial privacy tools. And so that raises the fascinating question of, did the Tornado Cash prosecutors know about the

conversation the samurai wallet prosecutors had with Fincent and were deliberately misleading the judge in that case leading to the awful ruling we got in tornado cash, or did one set of prosecutors in the same U.S. Attorney's Office, the Southern District of New York, it's like a pretty small building, did one set of prosecutors working on the same really important legal issue as another set, not tell them, which is also really bad, but it's one of those two things. I mean, that's just awful. So you said before, you thought, like one of the things that you were fighting for was to try and help them understand this because you thought they had a deep misunderstanding. But they clearly didn't. They clearly knew exactly what was going on.

They were told that this was not money transmission, but they went, fuck it, let's arrest them anyway. Yep. I mean, there's no other interpretation at this point. That's what the Brady disclosure said. And then in terms of them holding that information back for 12 months, in that time, the defense has just burned, I don't know, millions of dollars presumably. The life savings of the defendants, yes. How is that a lack of And assuming that's not allowed because they're meant to disclose this earlier, what will the judge them think of that? Surely this is going to piss the judge off. So, I mean, it's not allowed, right? We talked about this 5F rule. It's just they're not allowed to do this. And obviously, it's horrible for any number of reasons. The judge yesterday did what's called a memo endorsement, which is, you know, this really shorthand way. So the defense filed this letter on Monday saying, this is what we got from the government. This is really shocking. We want to have a hearing before you judge and make the government explain themselves, right? Like, why didn't they tell us this? Why did they think it was appropriate to go forward? with the prosecution. And the judge basically stamped that and said the government has to reply

by noon on this Friday on May 9th. So yet to be seen. Legally, the judge has a wide array of things the judge could decide to do here. The judge could decide to do nothing and it could just be a slap on the wrist. The judge could personally sanction the government lawyers, right? You know, slap a fine on them. Or the judge could go as far as to dismiss the case. If, so this is going to go out Friday morning, so go and check out Zach's Twitter. I'm sure you'll be covering it. But if they fine the prosecutors, I assume none of that fine goes back to the defense in order to help cover some of the funds that they're spent pursuing something they never need to pursue. No, I don't believe so. Okay. So in terms of dismissal, you said that's like one of the options the

judge has. How likely do you think that is? To be honest, I'm not holding my breath. I mean, if I were the judge, I would be livid about this. I, you know, like, this is just insane that the government is saying with a straight face. These guys were failing to register with FinCEN when they knew that FinCEN didn't think they were money transfers. I mean, just imagine, like, the government is putting you in prison for not registering with FinCEN if they had gone to register with FinCEN, right? And I've actually had these conversations with clients where we're like, do we have to register? There are closer cases out there. And if FinCEN thinks that you're not a money transmitting, they won't let you register. You're not going to get a money transmitter license, right? And so

FinCEN would have said no. And the DOJ would have said, well, what does FinCEN know about this? We're going to put you in prison for not register. Like, it's just so absurd. In addition to what we talked about at the beginning, which keep remembering, this is going to set ruinous precedent that will basically ban using crypto if this goes the wrong way. It's also just deeply insane that you would bring this case under those set of circumstances. In my completely naive, non-lawyer perspective, from my, like my perspective, I can't see how, even if this case doesn't get dismissed,

how is this not enough for the judge just to throw out when it does get to court? I mean, I really hope it is. So, you know, assuming the judge doesn't dismiss either of the charges, the next step in this case will be a motion to dismiss, and the defense will definitely move to dismiss the money transmission charges. And certainly a big part of that argument will be, this was called a notice defense. So under the United States Constitution, you can't throw someone in prison for a law that they didn't have adequate notice applied.

But they couldn't have even followed if they wanted because if they went to FinCent, they'd have told them to do one. Exactly. I think that is going to be a very big part of the motion dismiss, you know, if it comes to that. And I hope the judge will do the right thing. I mean, I will, you know, with Peter Van Valkenberg at Coin Center, we're going to do an amicus brief and try and make this point. I hope the right thing happens. Last hearing I went to on this, you know, admittedly before all these revelations,

but after, you know, two bipartisan senators, Cynthia Lemmis and Ron Wyden wrote a letter making some of these points, the judge didn't really seem to understand or be impressed by this argument. So, you know, really rolling the dice there, but yes, I hope it gets dismissed. I hope if it doesn't get dismissed

that a jury comes out the right way on this, but it's pretty scary. Yeah. talk a bit about the judge? Who is he? And do you think they've been given a fair judge who does understand what's going on here? So, you know, it's Judge Berman. He's in his 80s. I don't think he's like a radical partisan judge. I do think in general, particularly in the Southern District of New York, where I used to work there, right? I was a law clerk for a judge, you know, sitting on the same bench. I also worked in the Second Circuit, which is in the same building, which is the appellate court

that sits over the Southern District of New York. I will say there is a little bit of a systemic bias in favor of the government. Many of the judges there, this is starting to change a little bit. Many of the judges used to be SDMI prosecutors themselves. And so I think there is a tendency to kind of, in the absence of like really deeply understanding this yourself, kind of trust what the SD&Y prosecutors are saying. And to be clear, like, SDMI, it's the best prosecutor's office in the United States. It's the very smartest lawyers from the very best law schools. I have friends who work there. And so by and large, like, these are pretty trustworthy lawyers, but this case is one of these aberrations where both the theory doesn't make any sense is a miscarriage of justice. And it looks

like there was just plain prosecutorial misconduct. So, you know, maybe I'm really curious, like, if and when there's a hearing about this, which I expect there will be to see the judge's tone. And, you know, that'll be a better time to ask me about, you know, how likely is the judge do the right thing here? But the last hearing I went to was not hugely confidence-inspire. Okay. And then in terms of, from the prosecutor side, like, why are they doing this? What's the agenda that they're trying to follow? Is this basically like a hangover from the Biden administration, the kind of like anti-crypto army Elizabeth Warren stuff? Yeah, look, the cynical, but oftentimes I feel like the cynical part of me tends to be to be right. The single part of me thinks that the biggest factor here is that this is a case that these people have worked on for years. And, you know, they think that it's striking a blow against money laundering. And they think that it's striking a blow against money laundering. And they're. And they think that. they don't want to have to back away from this case that they worked really hard on. They don't want to lose.

I think this is in some ways absolutely a hangover from the sort of, you know, Biden administration, specifically the like Gensler-Waron anti-crypto axis. So one sort of interesting parallel with this case is Elizabeth Warren is probably the largest enemy of Bitcoin in the government. And she's actually a pretty smart person who I think understands Bitcoin and Crypto pretty well. And she came up with a pretty clever idea. She knew that it would not be popular on Capitol Hill to just ban crypto, right, to ban Bitcoin. But she came up this idea, what if we create a law that is effectively a ban on Bitcoin and

crypto? And then we convince a bunch of other mostly Democratic senators that this is a light touch regulation. And I'll tell you where that term comes from in a second. And she did that. She created this bill called the Digital Asset Anti-Money Laundering Act, or Damla, and it is an effective ban on crypto by specifically pointing out all of the relevant actors in the crypto space, so Bitcoin miners, node runners, DFI, Fri-Frontends, et cetera, and saying, these are all money transmitters. And she knows perfectly well that if they're money transmitters, the Bank Secrecy Act applies, they can't comply with that. And therefore, they have to leave the

country or go to prison, right? This is exactly. the precedent that we're staring down the barrel of in tornado cash and Samurai wallet. And that was the, you know, what Elizabeth Warren used to try and kill crypto. And, you know, I went to one of the co-sponsors of this bill, uh, who's a Democrat. I said, listen, I'm not sure if you understand like how damaging this bill is. And they're like, oh, don't worry. We'll massage it in the final version. We think this is just light touch regulation, but that's the intent. And it's just like, you know, look, couldn't figure out a, you know, a better advertisement for BPI about how necessary education is in Washington. But like, what a sales act to ban Bitcoin

and crypto and convince your colleagues that this is light touch. I don't think that. So Damlow is an intentional shot at killing Bitcoin, or at least like sovereign usage of Bitcoin. I don't think, but, you know, I could be wrong. I don't think that this prosecution was exactly that. I think this was a mandate from the prior DOJ. that, listen, we don't like money laundering using crypto. We don't like money laundering. We also just don't like crypto. And so we need to find legal theories that will allow us to shut this stuff down. And this seemed like a good target, right? It is true. The defense in this case tweeted some unwise stuff at some point in time. And they just don't care about the collateral damage and they don't

care about, you know, whether the theory makes sense. This is, you know, a legal theory that for the same reasons that we should be very worried about it, right? Because there's no end point to this and it can apply to everything in Bitcoin. That's a very powerful tool for prosecutors. And if they can just call software developers, you know, money transmitters and throw them in prison, then it's very easy to get them to, you know, rat on whoever. And it gives you a lot of power as a prosecutor. And so I think this may or may not be a direct attempt to kill crypto as a whole. But I think at least it is an attempt to gain a huge amount of leverage at the industry's expense to be able to go after whoever they feel are bad actors. The DOJ is technically independent. Is that right?

That is a really important and hotly debated question right now. There is an important sort of governmental, philosophical question about the executive branch and to what extent various agencies, right? everything from the DOJ to another hot button one is the Fed, whether those are, you know, truly independent or whether, you know, because they're in the executive branch, ultimately they answered the president and serve it the pleasure of the president and anyone can be fired by the president. And so far, the new Trump administration has taken, you know, about expansive a view as you possibly could about the how much of the power of the executive branch flows to the president. This is sometimes called the unitary executive theory. And to

steal man it. Their argument is there is exactly one person in all of the executive branch who's elected. It's the president. Nobody else is elected. People elect the president because they have a set of issues that they presumably agreed with the president on when he was running for president. And to the extent that the president, as the elected representative, wants to do stuff with the executive branch, and there are unelected bureaucrats who say, no, we don't really think that, you know, we agree with the president on this. So we elected by no one are going to do this other thing, that that is not a real reflection of the sort of democratic American system. So that is the argument in favor of like there really isn't or shouldn't be much independence. The other side of the argument

is like you have experts and you have people who are lifetime appoint, you know, bureaucrats and they know better about their subject matter and they're maybe sort of less blown around by the winds of politics. And so they should be able to do their thing sort of free of whatever the day's political considerations are. But that's an incredibly sort of complex legal and political issue playing out right now in America. Yeah, I can see that side of the argument in the sense that they're not confined to like the four-year term and they're not trying to constantly look for re-election, that they have a longer-term view on this stuff potentially. But if it's not technically, or sorry, if it is technically independent, in practicality, how much of an impact will the

administration have? And the reason I ask that is because obviously this whole prosecutor, started under the Biden administration, Trump's come in claiming to be pro-crypto, pro-Bitcoin. Do you think that can change the sort of dynamic in this case? Yeah, so I think here we need to distinguish a little bit between law and policy. I think there is an interesting legal question about whether the Fed is independent or not. I do not think there is so much of a legal question about whether the DOJ is independent or not. It is legally basically not independent. There is a policy that the DOJ had an prior administration had about giving independence to the DOJ and having not sort of served the pleasure of the president.

If you ask either political party, they will always accuse the other political party of violating that. And, you know, in the Obama administration, people said that Eric Holder was doing whatever Obama said back and forth each administration. But at the end of the day, the president is in control of the DOJ. And, you know, we saw a lot of this in the prior Trump administration where Trump fired the head of the FBI, who, in the Department of Justice. So ultimately, at the end of the day, as a legal matter, whatever the president says, unless the president is breaking the law or going beyond his powers, goes with regard to the DOJ.

So if the White House wants to get involved, ultimately, that really can and should carry the day. And spoiler, I think that's where we would like this to go in this particular case. There's another important distinction here between what is called within the DAJ, what's called Maine Justice, which is the Attorney General and the folks who are in D.C., who sort of set policy, and then the U.S. Attorney's offices, which are the satellite offices, they're like little law firms of the DOJ, and they're in each sort of judicial district in America. Here in New York, we have four of these federal judicial districts. We have the northern, southern, eastern, and western and western and western. And so the one we're talking about here is the most famous one,

the Southern District, New York, which covers Manhattan and the Bronx and parts of Westchester. I live in the Eastern District in Brooklyn. But anyway, so the prosecutors here first answer to the U.S. attorney for the Southern District of New York, who there is a new one, Jay Clayton, who interestingly was until recently a crypto VC, so he really should understand these issues. And then Jay Clayton, the U.S. attorney answers ultimately to the Attorney General Pam Bondi, who ultimately answers to the President Donald Trump. This episode is brought to you by CASA, the leading Bitcoin self-custody solution. I've been using CASA since 2019 and I can't recommend them enough. CASA have options for all Bitcoiners from a 2 of 3 multisig to a 3 of 5 and a private client option

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or new to the world of Bitcoin, Ledger makes it simple to keep your assets protected. If you want to find out more, visit ledger.com and secure your Bitcoin today. that's LEDGER dot com David Bailey's on the board of BPI He is obviously close with the Trump admin He was very instrumental I think

Probably in getting Ross freed Do you think you could potentially go down that track Try and go directly to Trump with this And try and have this case kind of I don't know what he could do Whether he could dismiss it or if he can have influence over this directly Yeah so Ross Albrecht was a different case, different sort of legal posture. So he was already convicted. He'd already served a

bunch of prison time, and then he was pardoned by the president. I think there were good reasons for that. Two life sentences, I think, was very harsh for what they were able to prove in his case. That could happen here, but that really wouldn't be the optimal outcome. We actually want the Department of Justice to drop this case before it gets anywhere close to that. Now, is that because then it says legal precedent? Yes. And the pardoned. doesn't necessarily erase the legal precedent. And, and, you know, later, perhaps we should talk about the more permanent fixes, because even dropping these cases doesn't erase all of the damage from the already existing tornado cash decision that is still quite bad. But the immediate sort of emergency thing here

is especially in light of these revelations, especially in light of the Blanche memo, these cases need to go away. I think before it rises to the level of Donald Trump himself, right, I don't know if Donald Trump understands the sort of nuance of the legal questions involved here, you know, he's certainly a busy guy, and this is a somewhat of a technical question. I would think the most logical person to intervene if SD&Y doesn't do the right thing and drop the case would be Todd Blanche, who wrote the Blanche memo, who said explicitly, you know, we're taking Donald Trump's mandate, we're taking Donald Trump's executive order about how we're going to treat the crypto industry going forward. And here is how we're expressing it

through DOJ policy. Specifically, we're not going to do regulation by enforcement, especially not regulation by prosecution. And that is specifically going to apply to these types of money transmission prosecution against privacy services. The DOJ seems to just not be listening to the memo. They're flying in the face of department policy. And by the way, they were undergoing deep prosecutorial misconduct. Like, if I were Todd Blanche, I would certainly want to be involved in this case and take it out of the hands of the blind prosecutors who it's hard to understand as to do anything other than insubordinate at this point. I don't know if you can say, but have you had any conversations with him? With Todd Blanche directly? No, I mean, we're certainly sort of pursuing all angles here,

and I can't get into the details there because, as you know, sort of politics is messy, but I will say at this point, I think our best path forward is a political fix here, and I think a political fix here is entirely appropriate. Okay, so let's sort of project forward a little bit. What do you think are the next things to happen? Like, what will happen with this pause? Do you think there's a chance the case gets dismissed? Like, how do you see this playing out? So the pause will last until the prosecutors give the defense an answer about whether they're going to drop the case or not. I will say my guess is they're not going to do that. I think if they were going to do that, they would have done that. I don't think that is going to be the resolution. Then there's,

in all likelihood, going to be a hearing with the judge about this Brady disclosure. That's going to be fascinating. I very much hope to be able to be there in person. And the judge could decide what remedy the judge wants to pursue up to it, including dismissing the charges. I think that is more likely than the prosecutor is doing it, but I think ultimately pretty unlikely there. And so then the question is what we're just talking about. is the Department of Justice or above them is the White House going to intervene to say, you can't go forward with these cases that, A, are unfair and against our policies, but are also going to just completely directly create an in-hospital environment for the

crypto industry in America when we've said that it is a priority for that to be here and not in China. So, again, like, that is really what we're hoping for and trying to bank on at this point. I think that is the most likely favorable resolution. But then if that doesn't happen, then, you know, the cases go forward. There's going to be a trial in tornado cash. There's going to be a motion dismiss and then a trial in Samurai wallet and the chips are going to fall where they may. But that's going to be a pretty scary scenario.

Now, let's say that things do go the right way, right? Let's say, for example, that Deputy Attorney General Blanche does step in. The prosecutors do drop the case under his direction. What are we left with? So it's great for the defendants other than what they were put through and the expenses and the trauma. But at least these cases are not going to go forward and set continuing worse precedent. But there is this bad decision hanging out there in Tornado Cash where Judge Fela, the federal judge in that case, also in SDMI, said that the bank secret act doesn't require custody or control. And that's just hanging out there as case law.

So how do we fix that? And there, there are two responses. Peter at Coin Center put out a good piece on this. I'd recommend that listeners read, but he gives what are the two more permanent fixes, which I think are the two things. One is, CoinCenter has supported this case called Llewellyn versus Garland. Llewellyn is a, you're allowed to bring a case against the United States government if you have a live dispute or if there is reason to think that the thing you're going to do is going to get you in trouble, including being criminally prosecuted. So Llewellyn is a software developer who wanted to create a non-custodial protocol, but he's saying, I'm afraid to do that because I'm going to be treated as an unlicensed money transmitter, and I can't comply with the money transmitter regs, and I don't think that's what the guidance says. And so I'm suing the government to get a judgment from a judge that the Bank Secrecy Act does require custody and control. So if they win on that case, and especially if they win at that case in an appellate court, that will erase the bad precedent in the tornado cash case.

that is the first sort of longer-term solution, and so that's important, even if tornado cash and samurai go the right ways, we want to be supportive of that case. Another thing that, you know, would be a good short-term fix before we get to the big fix, is FinCEN putting up new guidance, right? The last time they did guidance was 2019. They should, I think, do it again and be unbelievably clear that in order to be a money transmitter, you know, you need custody or control. We all thought they meant that in 2019. We now know they did mean that in 2019, but I think they should, you know, say it six ways from Sunday. So there's not any way a judge or a prosecutor could possibly ever be confused about that. But then the big fix here, and what I expect to be a priority, you know,

at BPI over the next, you know, couple of years is getting into federal law, right? So we started this conversation with the federal laws that apply to illicit finance were written at a time before Bitcoin, and they didn't contemplate the possibility that you could have electronic transfers of money without an intermediary. Well, we need new laws that deal with the technology as exist today. And there is such a draft bill from Tom Emmer called the Blockchain Regulatory Certainty Act, which would solve this problem in the most robust way, which is an actual law passed by Congress that makes clear whatever FinCent thinks, whatever judges think, et cetera, et cetera, the Bank Secrecy Act definitively as a matter of U.S. law does not apply to non-custodial tool.

and best case scenario is to get that passed, and that is the most permanent solution to this issue. In terms of how long this, like specifically to this case, how long do you think it will take to play out? Because Bill and Keone, obviously they're not in jail, but they're under house arrest, I believe. Would they want this to go through quite quickly, or are they happy to sit and wait for this whole thing to play out?

I think they want this to go quick. I mean, if it's going to be a political solution, If it's going to be the prosecutors drop the case or the judge dismisses the case or the Department of Justice or the White House intervene, that's soon, right? There is a short window for that to happen, hence the urgency of my finding every possible outlist to shout this from the hills. And so we want to create a movement around this. We want to create sort of political momentum.

I've already heard that, you know, there have been legislators who have taken interest in this and reached out. So like all of the attention on Twitter and from Bitcoiners, it actually is making a difference. But now is the time for that solution. And I would expect that to happen quickly. If it doesn't happen now, it's going to be a very long drawn-out process, right? It's going to be, you know, another year or two, at least for this case to resolve. And then there's going to be an appeal, and that's going to be another year or two. And then who knows what the next administration is going to do with this stuff. Yeah. Okay. So in terms of anyone listening to this show who wants to

help, what do you want them to do? Do you still want people to donate to the Pea-to-peer Foundation? Yeah, I mean, absolutely. We want to be able to help the defense counsel here fund as much as they can do right now. But the other thing, I think that is incredibly time-sensive. I mean, listen, if you can make noise about this on social media in a way that people can see, that's great. Even better if you can call your elected representative and say, like, listen, this is a huge issue that affects lots of digital asset users in the United States and then get your elected representatives to put pressure on the administration or, or at least tell them. This is a thing that, like, you know, American bitcoiners care about. I do think that will make a difference. I do think that Donald Trump cares about Bitcoiners as a constituency. I do think that Deputy General Todd Blanche meant what he said in the memo, that it's the department's policy not to do these regulation by prosecution cases, that they do want to create regulatory clarity and not have sort of prosecutors run wild. And I think making sure that this rises to that level, that they see, this is something people care about and matters,

that's incredibly important. So, you know, letting your voice be heard, there hasn't been a more important moment, you know, at least as far as law and policy is concerned in Bitcoin than right now. It's a big claim, but I really do think it. Yeah, I wholeheartedly agree with that. Okay, cool. So Friday, we're going to find out at least one of the decisions. Not necessarily decisions. We're going to find out the prosecutors have to respond. So the, the, The defense requested that there be a hearing in front of the judge where the prosecutors have to explain themselves. The prosecutors are going to reply to that request in writing. And that reply has to be by noon on Friday.

Okay. So we'll get something that'll happen on Friday. This show will go out a little bit before. So head over to Zach's Twitter if you want to find out a bit more. I'll make sure that's linked. But Zach, before we close out, I do want to just talk to you a little bit about what's going on in D.C. at the moment. Because I remember last time we spoke, which was Trump had been, he'd won the election, but he hasn't actually. been inaugurated yet. So at that time, you were fairly skeptical, I think, about the SBR. What is your

take on that now? Like, obviously, they've said a lot of stuff. They've not really done a lot of stuff. What do you think is going to play out over the next year? First of all, I was absolutely surprised by how successful the SBR efforts in the time between when we last spoke and now. And I think, you know, even the executive order we got is a huge step and a huge, you know, shift in the Overton window. And that itself is an incredible accomplishment from the Bitcoin community and specifically, you know, policy folks and my colleagues at BPI and like, awesome. There is a bigger legislative version of the SBR, which still is a bit of an uphill battle, right? The form we have right now is Senator Lemus's Bitcoin Act, which has the government. buy a million Bitcoin over five years and hold for at least 20 years. And then there's now a companion bill in the House and there are co-sponsors. And so that's all great. And, you know, there's the mechanism to pay for the Bitcoin and the Bitcoin Act is a revaluation of the U.S.'s gold certificates. And that's actually become quite a big political issue in D.C. around what's

called the reconciliation bill. So if you have a budget-neutral fiscal bill where everything sort of is paid for you can get it through with 50 votes through the Senate instead of 60, which means that you could pass it with all Republicans without any Democrats. And some of the Republicans have started to notice that there is this accounting trick you can do where, as a legislative matter, the gold held at the Fed is valued at $42 an ounce, and it's trading at something like $3,400 on the open market. And so if we change that law, that creates about a trillion dollar credit from the Fed to the Treasury that the Treasury can spend on basically, whatever, right, fund the sovereign wealth fund, buy Bitcoin, do also, you know, retire debt.

And I think the Republicans have started to think to themselves, this is a one-time thing. We could do it now, or we could let, you know, the Democratic Congress under prison Alexandria Ocasio-Cortez do it. And perhaps now is preferable. And so one thing to watch on the legislative SBR front in D.C. is with reconciliation, are they going to revalue gold? And then are some of those proceeds going to be used to fund the now existing SBR in a big way. And so that's exciting. The thing that I've not quite understood about the revalting of the gold is at some point in time, someone's going to do it. So surely the current administration think, well, why not us? Why not free up all this money instead of letting it go another three years and then the next administration

doing it? Like, is there not an urgency just to do it now because someone's eventually going to do it? Yeah, no, I think that is the conversation that's happening. Now, it's not the administration. It's Congress that has to do it, right? So you got to- convince 50 Republican senators to get on board with this. I think for exactly the reason you said, I think there's actually a pretty meaningful chance that'll happen. The counter argument is essentially a form of money printing. And with all this tariff stuff, with Trump running on trying to lower inflation, is now the time to print a trillion dollars. You know, that's the debate. I see. And if they do that, what are the actual chances at the

that goes to buying Bitcoin. I think it changes every day. And probably at BPI, we're a little bit too close to that conversation to have like an objective stance. But, you know, real, like real chances. We are, you know, this, I think this idea came into popular consciousness through the Bitcoin Act. And we're, you know, working very hard to make sure that Bitcoin doesn't get forgotten as a

priority, you know, if and when this revaluation happens. Do you think it has been forgotten just at least in the interim with all the tariff stuff happening? Has this been pushed kind of like to the back burner, really? I think the Bitcoin Act is maybe not the thing that is at the forefront of people's mind in D.C. right now. But among the people who are considering revaluing the gold and then what we're going to do with those proceeds, I think Bitcoin is very much a part of that conversation. Okay. Interesting. Sorry, I cut you off when you were getting onto the stable coin bit, which is very interesting. Like when I was in D.C. at the summit a couple of months ago, Paolo was obviously there. I'm sure he was there exactly for this reason.

So will you give us a bit of an update? Tell us what's going on. Absolutely. So the administration has said that the first legislative priority that they want to support, and at this point, the sort of Democratic Party, which controls both houses in the legislature, really does answer in a big way to the White House. It's a very top-down Republican Party. And so Congress follows is stablecoin legislation. Sort of background on stable coin legislation. You know, stablecoins are currently legal in the United States, right? They're the, I think the only thing other than Bitcoin that's found meaningful product market fit, both as a store of value abroad for people that don't have access to dollars or U.S. bank accounts, and domestically, mostly internationally,

as, you know, mediums of exchange, right? I have international clients. I'd prefer to get stable coins as payment than an international wire that takes forever. So you don't need the Stablecoin Act to legalize stable coins. What you need it for is, you know, arguably two things. One is consumer protection. There's a lot of concern, I think sometimes bordering on FUD, about what is backing the stable coins, especially you hear a lot of this conversation around Tether. Although I think that conversation has moved on a little bit. You'd be surprised. You'd think, given that Tether is now the most profitable company like ever in history per capita, and, you know, you've got Lutnik in the cabinet that that conversation would have moved on, but you still hear a lot of it.

And so one of the big parts of the Genius Act, which is the sort of dominant version of the stablecoin bill, is about what kind of instruments you can back stable coins with. It needs to have essentially one-to-one backing. And there's the consumer protection that if you're going to call something a stable coin, you're going to say, this is pegged to the dollar. Like, what is backing that promise? And it's pretty strict on that front. And it doesn't, for example, allow you to pay yield on your stable coins. You can't tokenize treasury bills under this act. The other thing it does is to give regulatory clarity to the rules of the road.

And some of this is about KYC, AML stuff. But, you know, a lot of this is there are traditional financial institutions, right, whether those are banks or huge asset managers like BlackRock or, you know, online payments companies like Stripe or exchanges like Robin Hood that would love to use stable coins as their rails because stable coins are a much more efficient way to move money, just like Bitcoin, it's a cash-like asset. You know, yes, there is the Oracle problem and you need cash in a bank account somewhere to give it its value. But in terms of the way it settles is like, you know, basically instantly and for free, right, not necessarily on Bitcoin main chain,

but, you know, tether is coming to lightning and that will basically be instant and free settlement and on, you know, other blockchains, Tron, Salana, like it's pretty fast and pretty cheap. And so using stable coins as rails and having large financial institutions issue their own stable, coin, I think would add a lot of legitimacy to the crypto industry, which, you know, you may or may not, if you're a listener to this podcast, think is a good thing. But certainly the crypto industry is jazzed about it. And Wall Street is like really jazzed about it, right? They like, they don't really understand why, you know, Salana or Shiba, you know, is valuable. But they get, you know, stable coins. Oh, it's worth a dollar. And we can move it on blockchain rails. And, you know,

it settles right away and we don't have to pay, you know, network fees. So this is something that I think the main effect of stable coin legislation getting passed will bring traditional finance into crypto in a big way. Now, the behind the scenes drama in DC for months now about the stable coin bill has basically been a not-so-secret knife fight between the two biggest stable coin issuers, Circle and Tether. Circle has positioned themselves as the Wall Street darling, the heavily regulated domestic, you know, wrap yourself in the flag American Staplecoin Company, and Tether is all about bringing the dollar abroad to people that don't otherwise have access to the dollar. And Tether is bigger and, you know, and like each of them have done some lobbying, but certainly

Circle has had a much bigger and more intense lobbying ground game in D.C. And so they've been trying to put provisions in all the draft stable coin bills that try and push Tether out of the way. And so the last sort of big compromise was the leader put out a updated version. version of the Genius Act that had a fairly anti-tether section that says that if you are a foreign stable coin issuer, if the OCC, which is the banking regulator, decides, you know, at the end of three years they don't like you, you have to be delisted from all U.S. centralized exchanges. Anyway, this was the compromise that was reached. It's somewhat protectionist from Circle.

It's not an outright ban on tether. The only outright ban on stable coins are ones that don't have the technology. to follow court orders. So the Department of Justice and courts can issue orders to freeze stable coins to confiscate them. They can issue warrants, and you need to be able to comply with those. And you can't be at all in the United States, you don't comply with it. But you can be a foreign stable coin issuer. And if you're in the good graces of the OCC, you can even be on exchanges. So it looked like, you know, this was the price of getting it through, is making these concessions to, you know, Circle and Circle's allies. And it was going up for a vote on Thursday, which

is now tomorrow and will be yesterday by the time this podcast comes out. And that was totally going to happen. In the meantime, Donald Trump announces, you know, first, I guess he had previously announced that, you know, the top 220 holders of his meme coin were invited to a private dinner in the White House. And then his Defy Project, World Liberty Financial, announced that they were doing a stable coin. And the Democrats, nine of them, which are relevant to this bill getting through or not, said, we're not going to vote for the stable coin bill anymore. They wrote an open letter. We think that the stable coin bill will just allow Donald Trump to corruptly make money. And so we're out. And by the way, we also think the KIC requirements aren't enough. That latter part, I think doesn't make a lot of sense.

It's actually a pretty stringent KYC restrictions in the act. I think this was the Warren camp trying to, you know, knife it a little bit. But where we are now is scrambling to see if any of those Democrats who had previously said they were going to vote for the bill, right, which was a bipartisan bill can be won back and what are the concessions that need to be given to them so that they can have political cover to once again vote for this bill. So far as I know, it is going for a vote on Thursday and so we'll find out and whether or not it's likely to pass now really depends on who you ask in D.C., but it's coming down to the wire. I want to know why Trump thought that was a good time to announce it. Would you not let this all go through and then announce?

Yeah. Interesting. So you talked about yield before, which I think, is really interesting when it comes to stable coins. Obviously you said Tether are one of the most profitable companies ever, the more profitable than BlackRock, and they get that because of the yield on treasuries. Do you think it's likely that in near future they will be able to offer yield to the customer? So on the path we're on, so here's the problem with yield for the customer. There's a legal issue. There was a question for a long time whether stable coins were securities. I think if Kamala Harris had won the election, I think there's actually a pretty good chance the SEC would have come out and said, we think

all stable coins are securities and basically shut down the stable coin market. As it stands, we have guidance from the new Trump SEC under Paul Atkins that non-yield bearing stable coins are in their view, not securities. And I think that makes sense, right? If you run the various like securities law tests, there's the Howie test and the Reeves test, it's not an investment, right? It's, you know, it's just a dollar asset. Not true of yield-bearing stable coins, right? If you look at what is a yield-bearing stable coin, you can either look at it like a money-market fund, which is a type of security or a bond, a fixed-income instrument, which is also a type of security. So there are things like tokenized treasuries, right? There's a company called Ando

that does this. BlackRock has, you know, through their build-all project, they have tokenized treasuries. And those are available and legal, but they're securities. And so there's not a way to do public securities on the blockchain. There just isn't a legal framework for that yet. That would have to be created by a market structure bill. So the, you could have sort of made an exception to the securities laws in the Genius Act to say, by the way, notwithstanding everything in current U.S. securities laws, we're going to deem yield-bearing stable coins, not securities, but that wasn't part of the political compromise that was reached. So whether or not, Yulele Bering Stablecoins are going to be legal for retail, right? Whether they can actually trade on the

blockchain in the way that regular Stable Coins will is going to depend on the market structure bill that ultimately gets passed, which we think is going to be the next legislative agenda. And so, you know, we just got a like yesterday or today the first potential draft of such a bill. It's likely to change a lot. I don't remember what it says specifically about this. But I think at the end of the day, if we get a market structure bill passed, it probably ultimately will allow for tokenized treasuries, which is sort of the same as a yield bearing stable coin. So I've literally never used a stable coin. But the reason I think that would be quite interesting is like right now, it's a winner take all market. Like tether dominate. U.S.D.C. obviously have some market share. And if they were

allowed to offer yield, I think that would really throw a cat among the pigeons and allow for probably better competition in stablecoin markets? Because I'm sure Tetherin Circle don't want to have this. They would rather keep all of it themselves. Well, I think they'd like to, yeah, I think that's probably right. But you know who really doesn't want yield bearing stable coins, the banks? If you hear most of the anti-yield bearing stable coin talking points, I was just having it back and forth with someone on Twitter about this today, banks are like, this will suck the liquidity out of banks because we like having people's money in a checking account where they can spend it easily, but we keep all the yield as the bank. And if you literally have an instrument you can spend,

right, on the blockchain or through one of these like crypto credit cards, and that gives you vastly more yield than your bank account, why are you putting money in the bank? And so I actually think there is like, this is like terrible, terrible for the banking industry. And I think that is going to be the relevant political fight more than like Circle and Tether. I think Circle and Tether, ultimately, you know, if the rules change, we'll pivot to yield-bearing stuff. Yes, their margins won't be as high, but they'll have some good sort of incumbent advantages. I think the real loser will be banks, like just deposits will be sucked out. And then the real winner here will be the U.S. debt, right? I mean, there's like yields have gone up. This has been a huge issue.

And we had Scott Besant today talk about he thinks there's $2 trillion of demand for treasuries coming from stable coins. Like, you know, if we want people to buy our long-term Fiat paper, there is no better policy I can think of than going, you know, whole hog on stable coins and tokenized treasuries. Yeah, I think the other winner there is people in the global South who are using stable coins to get out of hyperinflation, and then they can also get a yield on that.

I think that's pretty cool. There's a lot of obviously conversation where basically, like in this stable coin market, USDC, as you said, regulated. They're very much like the good boy in the scenario. And then you have Tether who are kind of sat outside of it a little bit. They're now

obviously working very close through the US government. How do you think of that in terms of them being like a de facto CBDC? That's obviously a big conversation at the moment. Which one of the two? I think both. Yeah, well, I think this is a very relevant question this week. So, you know, we talked about where we

are with the stable coin bill. We had a defection by these nine Democrats. And what we're waiting to see is what, if any, concessions will need to be added to the bill to appease these Democrats, they'll sign on to it. So briefly, there was a discussion on tacking on the Blockchain Regulatory Certainty Act, which would have just been, like, amazing, right? Like, oh, we're going to solve the samurai and tornado cash problem, and that doesn't seem to be happening. Two of the things that are being floated, though. One is a amendment that would prohibit government officials from benefiting from starting a stable coin, right? It's just aimed at the president. I don't think that this is going to be, like, if that's the thing they add, I just don't know that that's good politics for Republicans to sign

onto it, given the way Trump is with a Republican Party. So we'll see. I think that might be mostly a political stunt. But then the other thing that they could add is much more strict KYC, Bank Secrecy Act controls on peer-to-peer transfers of stable coins, which is the only area where there is not that in the bill right now, where you, like, you know, if I'm giving you stable coins, I have to know something about you. You know, there needs to be reporting to the stable coin issuery. There are all sorts of ways you could construct this.

If that is the concession, which I really hope it's not, because that would create sort of an Orwellian nightmare. Yes, now any of the regulated stable coins in the United States start to look more like the bad parts of a CBDC. They're not subject as directly. It's not the Fed that's pulling the strings in the same way with an actual CBDC. It's not actually run by the government. But it becomes much more at least a surveillance dragnet. And that opens the door to, I think, other, like, bad stuff. But I think the likelihood of sort of private stable coins creeping into CBDC territory, you know, whatever the Genius Act ends up being is the biggest threat to that, I think, more than decisions by people. at circle or at tether, although, you know, time will tell. I could be wrong about that. Yeah, it'll be interesting to see how it plays out. Well, thank you so much for this, Zach. Is there anything that we didn't cover, probably especially on the samurai case that you wish we did?

No, I mean, I think we covered it pretty thoroughly. I want to go back to the point I started with, though. I mean, we talked about a lot of what's ridiculous about this case, right, putting people in prison for not registering with a governmental agency that didn't think they had to register, you know, what the hell that these personal, you know, defendant had been dragged through. But bigger than that, zooming out, we really do need there to be this legal distinction between custodial and non-custodial tools. If that distinction goes away, basically all, you know, Bitcoin-related software devs and tools and users are at risk. If you run a note at home, you personally are at risk of criminal sanction. if you can't rely on the 2019 FinCin Guidance.

So this is an incredibly important precedential issue. And it just makes sense, right? Like saying that we have laws that apply to financial institutions and we can't find a financial institution, so we're going to hold the devs responsible and put them in jail, is just an absurd way to go about things. It's not how the law should work. And, you know, folks should be outraged.

And hopefully we get to the right solution here. But, you know, it's remarkable to think about the reason we're asking this question the first place, you know, goes back to this amazing invention by Satoshi, right? It is like we figured out how to actually do peer-to-peer cash online. And that's why we're even, you know, having this conversation today. Yeah, so we need people to scream about this on Twitter. Like I said at the start, I really do think this is the most important story in Bitcoin at the moment. Op return is a small footnote when it comes to this. But I massively appreciate your time, Zach. I'll be following up,

see what happens, and potentially we can do something again in a few months. Likewise. Thanks so much.