1 00:00:05,000 --> 00:00:10,200 Welcome back everyone. I am Cass PNC and I am here as 2 00:00:10,200 --> 00:00:13,700 usual with my partner in crime Bennett Tomlin. 3 00:00:13,700 --> 00:00:15,800 How are you? I'm doing well Cass. 4 00:00:15,800 --> 00:00:18,200 How are you? I'm doing good today, we're 5 00:00:18,200 --> 00:00:22,300 going to be talking about the report put out by the 6 00:00:22,300 --> 00:00:26,100 president's working group, which includes Janet Yellen. 7 00:00:26,200 --> 00:00:30,700 So I think it's fair to say this is kind of a treasury report. 8 00:00:30,900 --> 00:00:34,900 On stable coins and there's a lot of concerns buried Within 9 00:00:34,900 --> 00:00:37,500 These 26 Pages. Do you want to outline? 10 00:00:37,500 --> 00:00:39,900 What you what your takeaways were from this? 11 00:00:39,900 --> 00:00:44,600 Or the major points of it? Sure it seems the federal 12 00:00:44,600 --> 00:00:49,300 government is going to want most stable, Queen issuers to become 13 00:00:49,400 --> 00:00:55,100 OCC chartered and fdic-insured Banks, effectively. 14 00:00:55,200 --> 00:01:00,000 So they will no longer be allowing trust companies. 15 00:01:00,100 --> 00:01:04,300 It seems Like paxos to continue just existing as trust companies 16 00:01:04,400 --> 00:01:08,100 and other ones like u.s. DC and tether would have to find 17 00:01:08,100 --> 00:01:11,900 a way to get Bank Charters, and not just any Bank Charters. 18 00:01:11,900 --> 00:01:14,500 Because for example, paxos already has conditional 19 00:01:14,500 --> 00:01:19,200 approval, but as an uninsured trust company, which would not 20 00:01:19,200 --> 00:01:23,200 match up with the standards that the federal government seems to 21 00:01:23,200 --> 00:01:24,500 want. There's a couple of other 22 00:01:24,500 --> 00:01:26,700 important details. I think we should bring out 23 00:01:26,700 --> 00:01:30,000 before we really get into it one, they recommend that 24 00:01:30,000 --> 00:01:32,800 Congress. Passes legislation outlining 25 00:01:32,800 --> 00:01:35,400 these new requirements. There's a couple of bills in 26 00:01:35,400 --> 00:01:38,100 Congress right now that this would apply to that. 27 00:01:38,100 --> 00:01:41,000 This could potentially apply 2 Episode 16. 28 00:01:41,000 --> 00:01:45,300 We had Rohan gray on, one of the people behind the stable, act to 29 00:01:45,300 --> 00:01:47,800 discuss, some of the importance they are. 30 00:01:47,800 --> 00:01:51,700 And why treating these money? Transmitters these stable coins 31 00:01:51,700 --> 00:01:54,800 more is Banks helps promote, stability and security. 32 00:01:55,000 --> 00:01:58,500 And so this would seem to be a very positive development for 33 00:01:58,500 --> 00:02:02,300 that bill. The other one is the Digital 34 00:02:02,300 --> 00:02:05,800 asset in Market structure, investor protection act or 35 00:02:05,808 --> 00:02:08,300 something, which was the surprise when that was revealed 36 00:02:08,300 --> 00:02:11,000 in a house committee. A couple months ago, that rumors 37 00:02:11,000 --> 00:02:13,300 are basically came directly from the treasury. 38 00:02:13,500 --> 00:02:16,500 So considering yellen's involvement in this report and 39 00:02:16,500 --> 00:02:19,300 that bill supposedly coming basically directly down from the 40 00:02:19,300 --> 00:02:22,100 treasury. My guess is, they are leaning 41 00:02:22,100 --> 00:02:26,200 towards that type of structure. The other Last Detail is they 42 00:02:26,200 --> 00:02:29,900 make very clear that if Congress does not pass legislation. 43 00:02:30,400 --> 00:02:33,500 And Even potentially, if Congress does the SEC and the 44 00:02:33,500 --> 00:02:38,400 cftc still definitively have jurisdiction over any stable 45 00:02:38,400 --> 00:02:41,100 coin, that is being used for Commodities trading or any 46 00:02:41,100 --> 00:02:43,800 stable coin. That any stable coin issuer? 47 00:02:43,800 --> 00:02:46,700 That's purchasing Securities to back the stable coin. 48 00:02:46,700 --> 00:02:50,500 And so, regardless of whether or not Congress X, it seems that 49 00:02:50,500 --> 00:02:53,900 the federal government and especially the SEC and the cftc 50 00:02:54,200 --> 00:02:57,800 are going to be more proactive than they have been. 51 00:02:57,800 --> 00:03:01,300 In regulating stable coins, a lot of people are Talking about 52 00:03:01,300 --> 00:03:05,000 how stable coins as a whole represent. 53 00:03:05,000 --> 00:03:08,200 Very little, not, not even just in terms of overall, crypto 54 00:03:08,200 --> 00:03:11,700 currency market cap. But in terms of like the US 55 00:03:11,700 --> 00:03:15,800 Financial system, I mean, they are not a risk to the US 56 00:03:15,800 --> 00:03:18,800 Financial system. And I, I do think that, as of 57 00:03:18,800 --> 00:03:21,100 right now, that's quite a fair assessment, right? 58 00:03:21,100 --> 00:03:26,700 Like tether collapse ain't gonna cause the S&P 500 to dump. 59 00:03:26,700 --> 00:03:29,800 It just is not going to happen, but I don't think it's 60 00:03:29,800 --> 00:03:34,600 unreasonable. Able to start creating these 61 00:03:34,600 --> 00:03:38,000 suggestions and these working groups because the reality is 62 00:03:38,000 --> 00:03:42,600 this has been moving really fast already and they haven't done 63 00:03:42,600 --> 00:03:44,300 anything. People have been dying for 64 00:03:44,300 --> 00:03:47,400 clarity. People want to get the US 65 00:03:47,400 --> 00:03:49,400 government to say something about it. 66 00:03:49,700 --> 00:03:52,400 And now that they have I feel like they're the pushback has 67 00:03:52,400 --> 00:03:54,100 been. Why are you guys harping on 68 00:03:54,100 --> 00:03:56,500 stable coins? They're not that big a deal and 69 00:03:56,600 --> 00:04:00,500 I'm wondering what your personal feeling is to to that 70 00:04:00,500 --> 00:04:03,700 assessment. I meant I think they're right in 71 00:04:03,700 --> 00:04:06,800 a sense right now. Stable coins are primarily used 72 00:04:06,900 --> 00:04:09,300 as casino chips at the casino. Right. 73 00:04:09,300 --> 00:04:12,100 But I think from the perspective of the federal government seeing 74 00:04:12,100 --> 00:04:16,600 this growth of basically this Shadow banking sector has to 75 00:04:16,600 --> 00:04:18,399 make them somewhat nervous, right? 76 00:04:18,500 --> 00:04:22,500 We've seen tether over the last year, grow several fold, u.s. 77 00:04:22,500 --> 00:04:26,000 DC grow at an even faster rate and assuming they continue those 78 00:04:26,000 --> 00:04:29,400 rates of growth, they become these very major problems 79 00:04:29,400 --> 00:04:33,300 quickly and yes, I still don't think they represent a threat to 80 00:04:33,300 --> 00:04:37,200 the Global Financial system or anything like that but there are 81 00:04:37,200 --> 00:04:40,700 increasingly some strange Dynamic if we assume these 82 00:04:40,700 --> 00:04:44,000 stable coins represent like this major source of liquidity to 83 00:04:44,000 --> 00:04:48,100 crypto and it drying up would be bad for crypto, especially due 84 00:04:48,100 --> 00:04:51,600 to the amount of Leverage in it. And even the amount of embedded, 85 00:04:51,600 --> 00:04:55,400 leverage in things like tethers lending agreement with Celsius. 86 00:04:55,900 --> 00:04:58,800 It becomes increasingly probable that a problem with a stable 87 00:04:58,800 --> 00:05:02,600 Queen could cause Significant issues across the crypto 88 00:05:02,600 --> 00:05:05,300 industry significantly larger than the market cap of these 89 00:05:05,300 --> 00:05:07,600 coins. The more crypto becomes 90 00:05:07,600 --> 00:05:10,700 integrated in accepted into a broader economy, the larger, the 91 00:05:10,700 --> 00:05:13,800 potential shockwaves of that becomes the other problem. 92 00:05:13,800 --> 00:05:16,800 I think they're trying to get in front of is we increasingly see 93 00:05:16,800 --> 00:05:20,100 stable coin issuers trying to position themselves as tools for 94 00:05:20,100 --> 00:05:24,200 payments or remittances for a broader population outside of 95 00:05:24,200 --> 00:05:27,300 this primarily outside of this much smaller group of crypto 96 00:05:27,300 --> 00:05:30,500 investors and speculators. And we see this with like paxos 97 00:05:30,500 --> 00:05:33,200 and you SDC partnering with these major payment providers 98 00:05:33,200 --> 00:05:35,400 like visa and MasterCard and things like that. 99 00:05:35,600 --> 00:05:39,000 But more broadly used. These are and are expected to be 100 00:05:39,000 --> 00:05:41,200 at a dollar. The more regulations there needs 101 00:05:41,200 --> 00:05:45,400 to be on it because failure to maintain that represents a much 102 00:05:45,400 --> 00:05:47,800 larger issue. This is also part of the 103 00:05:47,800 --> 00:05:49,400 problem. Historically with things like 104 00:05:49,400 --> 00:05:53,600 money market funds, right is they act so much like cash until 105 00:05:53,600 --> 00:05:56,900 they don't and when they don't, because they're this source of 106 00:05:56,900 --> 00:05:59,600 liquidity in this trusted thing that looks like a dollar. 107 00:05:59,900 --> 00:06:03,000 It causes the Is knock on consequences as that liquidity, 108 00:06:03,000 --> 00:06:07,200 dries up and at some point, Regulators have to get involved 109 00:06:07,200 --> 00:06:11,300 with all of this. I mean, it's an inevitability if 110 00:06:11,300 --> 00:06:14,900 these things intend to continue to exist at all. 111 00:06:14,900 --> 00:06:20,000 You would expect Regulators to come in to regulate them. 112 00:06:20,000 --> 00:06:24,800 So I'm not exactly sure why. Anyone is surprised that the 113 00:06:24,800 --> 00:06:29,800 treasury is interested in u.s. dollar, derivatives and is 114 00:06:29,800 --> 00:06:33,100 perhaps Concerned about US dollar derivatives, I would 115 00:06:33,100 --> 00:06:37,700 suggest that it's almost bullish in comparison to what we saw 116 00:06:37,700 --> 00:06:42,000 with the reaction to like, Liberty reserve where the 117 00:06:42,000 --> 00:06:45,700 reaction to Liberty reserve was not to do a working group and 118 00:06:45,800 --> 00:06:48,900 examine it thoughtfully. And try to figure out a way to 119 00:06:49,000 --> 00:06:51,000 create a regulated market for it. 120 00:06:51,000 --> 00:06:55,500 It was to shut that the down, they aren't suggesting that 121 00:06:55,500 --> 00:06:59,600 actually in this and I think that that could be perceived as 122 00:06:59,600 --> 00:07:01,500 bullish for the space. In general. 123 00:07:02,000 --> 00:07:06,600 Yeah, though, I do think it's probably pretty bad news for 124 00:07:06,700 --> 00:07:11,700 paxos tethering, U STC, mainly because it is very challenging 125 00:07:11,700 --> 00:07:16,400 as I understand it to get an OCC Charter and then also to qualify 126 00:07:16,400 --> 00:07:19,300 for FDIC insurance, right? And there's a whole bunch of 127 00:07:19,300 --> 00:07:23,000 existing entities like JP Morgan and all these other places that 128 00:07:23,100 --> 00:07:24,900 already meet those characteristics. 129 00:07:24,900 --> 00:07:28,900 And so there's going to be potentially a window and 130 00:07:28,900 --> 00:07:32,700 opportunity in which each pack cents USD seen, especially 131 00:07:32,700 --> 00:07:36,700 tether may not be able to compete with more traditional 132 00:07:36,700 --> 00:07:39,000 Financial entrance into this space. 133 00:07:39,400 --> 00:07:43,300 But I do want to say that that is still a much different tone 134 00:07:43,300 --> 00:07:45,900 and take than what we saw with Liberty reserve, where these 135 00:07:45,900 --> 00:07:48,800 people are still in prison, or one of them is still in prison. 136 00:07:48,800 --> 00:07:51,900 And one of them was released shortly after he was in prison. 137 00:07:52,000 --> 00:07:55,600 My point being that these people won't necessarily have to worry 138 00:07:55,600 --> 00:07:59,200 about that kind of consequence, even if they have to unwind the 139 00:07:59,200 --> 00:08:03,300 business and move on Because they've been profitable, they've 140 00:08:03,300 --> 00:08:06,400 many of them have done. Very sketchy accounting 141 00:08:06,400 --> 00:08:10,500 practices and kind of business practices in general. 142 00:08:10,900 --> 00:08:13,700 And if they can get away with that without going to prison or 143 00:08:13,700 --> 00:08:17,300 having their money taken from them, I would clock that as a w, 144 00:08:17,300 --> 00:08:19,400 but I don't know what that means for them. 145 00:08:19,400 --> 00:08:22,000 I think for them if the business fails they feel like they're a 146 00:08:22,000 --> 00:08:25,600 failure. Yeah, and I think also that 147 00:08:25,600 --> 00:08:30,600 tether May occupy a unique space different from USDA. 148 00:08:30,800 --> 00:08:34,000 See and paxos just based on the existing information we have 149 00:08:34,000 --> 00:08:37,500 from enforcement and stuff and beyond that, I actually, this is 150 00:08:37,500 --> 00:08:41,100 part of what my main point was going to be on this discussion, 151 00:08:41,100 --> 00:08:44,900 which is the, you can look through this whole document from 152 00:08:44,900 --> 00:08:48,400 the president's working group. And it's very interesting and 153 00:08:48,400 --> 00:08:52,300 there's a lot of explanations of what stable coins are how they 154 00:08:52,300 --> 00:08:53,800 operate. I mean, these are things that 155 00:08:53,800 --> 00:08:57,400 people who are in the ecosystem in general already, understand 156 00:08:57,600 --> 00:09:01,100 because you have to because they're being discussed Lie. 157 00:09:01,200 --> 00:09:05,600 But more interestingly for me was the footnotes and that seems 158 00:09:05,600 --> 00:09:09,200 to always be the case with whether it's court documents, 159 00:09:09,400 --> 00:09:12,100 the president's working group, whatever, when you start getting 160 00:09:12,100 --> 00:09:15,200 into the footnotes of this, you start getting into some really 161 00:09:15,200 --> 00:09:18,300 crazy stuff and stuff. I'm learning for the first time, 162 00:09:18,300 --> 00:09:21,700 which is, for instance, the pass-through deposit insurance 163 00:09:21,700 --> 00:09:23,700 coverage. I don't know if you read that 164 00:09:23,700 --> 00:09:27,300 little bit, but they talk about how oftentimes accounts that 165 00:09:27,300 --> 00:09:30,700 are, you know, a fund are not insured. 166 00:09:30,800 --> 00:09:33,800 Word for each individual up to 250,000 dollars. 167 00:09:33,800 --> 00:09:38,300 But rather the fund itself is just ensured FDIC for 250,000 168 00:09:38,300 --> 00:09:40,200 dollars. And so all the people who are 169 00:09:40,200 --> 00:09:44,800 within this fund, if this fun goes under something happens, 170 00:09:44,800 --> 00:09:49,100 like the insurance is 250. It is not 250 for every single 171 00:09:49,100 --> 00:09:51,100 person and I was not aware of that. 172 00:09:51,100 --> 00:09:55,800 That is fascinating to me. Additionally, some of these 173 00:09:55,800 --> 00:10:00,600 footnotes seem to be explicitly referring to tether. 174 00:10:00,800 --> 00:10:05,600 Like they talked about how most holders of the coin in some of 175 00:10:05,608 --> 00:10:08,900 these cases aren't able to get a Redemption because Redemption is 176 00:10:08,900 --> 00:10:11,700 only one hundred thousand dollars for instance or more. 177 00:10:12,200 --> 00:10:15,200 And most of the people who hold the coin don't have that much, 178 00:10:15,600 --> 00:10:17,900 who could that possibly be referring to I wonder. 179 00:10:17,900 --> 00:10:22,100 And like the fact that they're implicitly referring to tether 180 00:10:22,400 --> 00:10:26,500 over and over and over again, leads me to believe that as much 181 00:10:26,500 --> 00:10:30,500 as tether wants to play this whole like we're so happy to 182 00:10:30,500 --> 00:10:31,900 hear. R from the president's working 183 00:10:31,900 --> 00:10:34,800 group and we're looking forward to meeting these requirements. 184 00:10:34,800 --> 00:10:40,700 They are fucked. Yeah the tether casts a large 185 00:10:40,700 --> 00:10:43,400 Shadow over this documents and like you're saying you see it in 186 00:10:43,400 --> 00:10:47,100 so many of the comments in here. Stable coin, Redemption rates 187 00:10:47,100 --> 00:10:50,500 can vary considerably, not the passed through Insurance. 188 00:10:50,500 --> 00:10:55,600 The potential for fraud they discuss how a certain laxness in 189 00:10:55,600 --> 00:10:58,200 accounting standards are in record-keeping, could cause 190 00:10:58,200 --> 00:11:02,300 there to be a mismatch between the As in the number of issued 191 00:11:02,300 --> 00:11:05,400 tokens there, a lot of the behavior they describe as like 192 00:11:05,400 --> 00:11:09,300 the potential risks of stable coins there just directly 193 00:11:09,300 --> 00:11:13,500 listing things tether has done that part to me while I'm 194 00:11:13,500 --> 00:11:17,500 bullish on this response compared to against a Liberty 195 00:11:17,500 --> 00:11:22,100 reserve or some other quite obviously criminal entity. 196 00:11:22,200 --> 00:11:25,900 It doesn't sound good for tether to me because it sounds like the 197 00:11:25,900 --> 00:11:30,100 treasury has a really Keen interest in tether and we know 198 00:11:30,100 --> 00:11:31,800 the SEC. He is interested in them. 199 00:11:31,900 --> 00:11:34,600 We know the cftc has been interested in them. 200 00:11:34,800 --> 00:11:38,100 We know the New York AG is still interested in them and we know 201 00:11:38,100 --> 00:11:42,300 that the doj is interested in them, so it becomes this weird, 202 00:11:42,300 --> 00:11:46,200 like you guys can pretend to be bullish, but I don't know how 203 00:11:46,200 --> 00:11:50,300 this document could possibly be perceived as bullish for, for 204 00:11:50,300 --> 00:11:52,200 tether. I guess I'd be interested to 205 00:11:52,200 --> 00:11:55,800 hear how they could could kind of finagle it that way. 206 00:11:56,200 --> 00:12:00,600 I would love to hear vandevelde discuss exactly how he feels. 207 00:12:00,800 --> 00:12:03,000 This is going to impact, Heather, and I welcome. 208 00:12:03,000 --> 00:12:06,200 Vanderbilt at any time to come on this podcast to discuss, that 209 00:12:06,200 --> 00:12:11,300 kind of thing with us. And even like in tethers 210 00:12:11,300 --> 00:12:13,800 statement. This was one of the Tarsus tin 211 00:12:13,800 --> 00:12:16,900 shortest statements I've ever seen tether issue in response to 212 00:12:16,900 --> 00:12:19,400 something. I'm 100% sure was a troll. 213 00:12:19,600 --> 00:12:23,700 It was a response to Hindenburg research saying now you're 214 00:12:23,700 --> 00:12:26,600 supposed to say we welcome this and so what do they do? 215 00:12:26,600 --> 00:12:30,600 They immediately said we welcome this and they think it's funny. 216 00:12:30,700 --> 00:12:33,600 Any it is funny. You're just making fun of people 217 00:12:33,600 --> 00:12:37,400 who are criticizing you. I mean, it's funny until your, 218 00:12:37,500 --> 00:12:41,100 you know, under investigation for bank fraud or wire fraud 219 00:12:41,500 --> 00:12:44,900 until the treasury is calling you out by name. 220 00:12:45,000 --> 00:12:49,400 Until the SEC says, we can't respond to your voice your foil 221 00:12:49,400 --> 00:12:52,100 request because we're investigating that entity. 222 00:12:52,300 --> 00:12:54,900 When those things start happening the tether leadership 223 00:12:54,900 --> 00:12:58,600 can feel free to laugh it off if they want to I hope they do. 224 00:12:58,800 --> 00:13:05,000 Yeah, this report. Me seemed bad for tether, just 225 00:13:05,000 --> 00:13:07,100 let out bad. I can't imagine together with 226 00:13:07,100 --> 00:13:09,700 their history with their settlements, with all the male 227 00:13:09,700 --> 00:13:12,900 Behavior, with what the reserves are invested in ever being able 228 00:13:12,900 --> 00:13:15,700 to get an OCC Charter? I'm looking through this and 229 00:13:15,700 --> 00:13:17,600 again I just want to re-emphasize. 230 00:13:17,600 --> 00:13:24,100 This is it to me is bullish for cryptocurrency and indeed stable 231 00:13:24,100 --> 00:13:26,900 coins. Also the idea is they are 232 00:13:26,900 --> 00:13:30,500 accepting almost that. This new industry is. 233 00:13:30,700 --> 00:13:33,700 Going to exist as long as they can see. 234 00:13:33,700 --> 00:13:38,700 And they're looking to try to regulate it and figure out some 235 00:13:38,700 --> 00:13:42,900 way to understand it. And that's, that's a really good 236 00:13:42,900 --> 00:13:45,000 thing to think. Like that that means your 237 00:13:45,000 --> 00:13:48,400 industry is a force and the government cares more than they 238 00:13:48,400 --> 00:13:51,600 ever have. Before again though, it does not 239 00:13:51,600 --> 00:13:54,800 seem good for tether, it does not seem good for tether because 240 00:13:55,000 --> 00:13:58,200 everything they're worried about are the things that tether has 241 00:13:58,200 --> 00:14:03,600 done to lie. And deceive and trick, the 242 00:14:03,600 --> 00:14:08,400 general public at large not once or twice or three times or four 243 00:14:08,400 --> 00:14:11,500 times like over and over and over and over and over and over 244 00:14:11,500 --> 00:14:13,600 again. It's this is not like a one-time 245 00:14:13,600 --> 00:14:18,400 off thing but it's nice to see the treasury of the US 246 00:14:18,400 --> 00:14:22,900 government being like, yeah, we're aware of all the stuff. 247 00:14:22,900 --> 00:14:25,500 Get that tether is doing. We see it? 248 00:14:25,600 --> 00:14:27,700 We're concerned. They should be concerned. 249 00:14:28,100 --> 00:14:30,500 Yeah, they should have probably been concerned a little bit. 250 00:14:30,700 --> 00:14:33,600 Earlier than they were but you know, better late than never. 251 00:14:33,600 --> 00:14:35,500 Honestly, some of the new information. 252 00:14:35,500 --> 00:14:38,200 We've got to know about together in the last several months to me 253 00:14:38,200 --> 00:14:42,200 really make something like this. Seem inevitable, like early on 254 00:14:42,200 --> 00:14:45,000 into others history. At least the story is that 255 00:14:45,000 --> 00:14:49,200 tether was fully backed by cash and a Trust Company holding a 256 00:14:49,200 --> 00:14:50,500 bunch of Assets in trust to back. 257 00:14:50,500 --> 00:14:53,300 A token is one thing. But for a lot of its history 258 00:14:53,300 --> 00:14:56,300 tether has been engaged in basically outright Shadow 259 00:14:56,300 --> 00:14:59,700 banking, doing lending creating deposits, doing all these things 260 00:14:59,700 --> 00:15:02,200 that are so very Very Bank like that. 261 00:15:02,200 --> 00:15:05,700 It really seems inevitable that some day someone was going to 262 00:15:05,700 --> 00:15:07,600 say. It really seems like you're a 263 00:15:07,600 --> 00:15:10,300 bank. Why are you not a bank? 264 00:15:10,300 --> 00:15:12,000 Why do you get to do these things? 265 00:15:12,000 --> 00:15:14,900 That only banks can do? And there's a whole bunch of 266 00:15:14,900 --> 00:15:17,200 people in the cryptocurrency ecosystem right now, worried 267 00:15:17,200 --> 00:15:19,500 about the fact that stable Queen issuers are going to have to 268 00:15:19,500 --> 00:15:24,000 become Banks, basically, because becoming a bank is not easy, and 269 00:15:24,000 --> 00:15:26,600 the regulatory load on banks is much higher than it is for 270 00:15:26,600 --> 00:15:28,200 these. Kind of trust companies, isn't 271 00:15:28,200 --> 00:15:31,900 this when you would go and buy a bank Charter, Are like from an 272 00:15:31,900 --> 00:15:35,100 existing Bank. Maybe, I don't know you. 273 00:15:35,300 --> 00:15:38,000 You think so? I mean, I would suspect that if 274 00:15:38,000 --> 00:15:41,300 these guys have as much money on the books as they claim they do, 275 00:15:41,600 --> 00:15:45,800 they could buy some, you know, at least medium sized Community 276 00:15:45,800 --> 00:15:51,600 Banks and get the charter. They need to do most, if not all 277 00:15:51,600 --> 00:15:54,700 of what their Desiring to do, but I think a lot of them aren't 278 00:15:54,700 --> 00:15:58,400 operating even the way a bank would really, I think they're 279 00:15:58,400 --> 00:16:01,700 operating the way a hedge fund. Would ya? 280 00:16:01,700 --> 00:16:05,300 And I think this is kind of what might be frustrating. 281 00:16:05,800 --> 00:16:09,600 Paxos in circle, is that they do not seem to be engaged in the 282 00:16:09,608 --> 00:16:11,800 same. Kind of lending practices, the 283 00:16:11,800 --> 00:16:14,500 same kind of Securities investment, the same kind of 284 00:16:14,500 --> 00:16:17,600 things that tether has so brazenly, done, I should caveat, 285 00:16:17,600 --> 00:16:20,800 that was saying, there was a period where Circle was invested 286 00:16:20,800 --> 00:16:24,000 in a whole bunch of Securities, but we've not seen reporting 287 00:16:24,000 --> 00:16:26,600 suggesting that they're doing, like, what tether is in creating 288 00:16:26,600 --> 00:16:29,500 tethers in response to like these secured lending agreements 289 00:16:29,600 --> 00:16:33,300 or especially not doing the type of unsecured lending and stuff. 290 00:16:33,300 --> 00:16:38,600 We've seen tether doing and so it seems that tether casts a 291 00:16:38,600 --> 00:16:42,000 shadow over this report. That tether might be one of the 292 00:16:42,000 --> 00:16:46,200 main animating forces Behind These governmental agencies 293 00:16:46,200 --> 00:16:50,500 being worried about this. And so now everyone gets to be a 294 00:16:50,500 --> 00:16:52,700 bank like they probably always should have been. 295 00:16:52,700 --> 00:16:57,400 So if you're over at paxos or Circle or Center, I can see you 296 00:16:57,400 --> 00:17:00,200 being frustrated because you perhaps hope to have a few more 297 00:17:00,200 --> 00:17:02,500 years. Before you had to be that and I 298 00:17:02,500 --> 00:17:06,099 think that like they knew they were going to at some point have 299 00:17:06,099 --> 00:17:08,700 to become a bank. And that's why paxos already 300 00:17:08,700 --> 00:17:11,700 went through the process to get a conditional, OCC Charter, as a 301 00:17:11,708 --> 00:17:14,500 trust company. And why circle is trying to get 302 00:17:14,500 --> 00:17:16,599 a bank Charter. And I discuss this when I was 303 00:17:16,599 --> 00:17:20,099 writing about this is, I think they knew it was inevitable with 304 00:17:20,099 --> 00:17:21,900 the things that they wanted to do that. 305 00:17:21,900 --> 00:17:25,000 The federal government would at some point, say that sounds like 306 00:17:25,000 --> 00:17:28,000 a bank. Here's something I want I wanted 307 00:17:28,000 --> 00:17:35,000 to touch on which is Tara, Sarah USD and the Tara company do Quan 308 00:17:35,000 --> 00:17:39,900 and some others seem to have been served by the SEC recently 309 00:17:40,500 --> 00:17:46,300 for what they're doing, do Quan done went on flourish in and 310 00:17:46,300 --> 00:17:52,000 said that there is no chance that the SEC can stop Tara and 311 00:17:52,000 --> 00:17:56,500 that he can't really be prosecuted for this and is 312 00:17:56,500 --> 00:17:59,200 countersuing. I want to clarify neither of us 313 00:17:59,200 --> 00:18:02,800 are lawyers before we A word about this. 314 00:18:03,000 --> 00:18:07,100 But for me, it was actually very interesting to see that like Not 315 00:18:07,100 --> 00:18:11,400 only would, I think you don't want to say those things is 316 00:18:11,500 --> 00:18:14,800 countersuing, just like a move to be like, come on, let's just 317 00:18:14,800 --> 00:18:19,200 settle quite bold and if it if it pays off, it'll be quite a 318 00:18:19,200 --> 00:18:24,300 signal to the community and so I am actually interested didn't 319 00:18:24,300 --> 00:18:27,400 telegram countersue the SEC to isn't that what the defend 320 00:18:27,400 --> 00:18:30,100 crypto fund was for? Well, I think specifically, in 321 00:18:30,100 --> 00:18:34,100 this case, Case the claim by Daquan was that the service was 322 00:18:34,100 --> 00:18:36,300 improper that the way they served him. 323 00:18:36,300 --> 00:18:39,500 The document was not appropriate and as such he had not yet been 324 00:18:39,500 --> 00:18:42,000 served. And so basically, the case could 325 00:18:42,000 --> 00:18:44,300 not proceed because he hadn't been served pursuant to the 326 00:18:44,300 --> 00:18:46,400 appropriate. Regulations was the first claim 327 00:18:46,400 --> 00:18:50,800 he was making, is that accurate? I don't feel qualified to answer 328 00:18:50,800 --> 00:18:56,500 that. My intuition is that the SEC and 329 00:18:56,500 --> 00:18:59,800 the whichever judges would end up on this case would probably 330 00:19:00,100 --> 00:19:02,600 not be Mince pie that but I haven't looked at the specific 331 00:19:02,600 --> 00:19:06,700 details or the specific laws. So I don't want to go too far in 332 00:19:06,700 --> 00:19:09,600 my opinion, in there. The other part that Tara can't 333 00:19:09,600 --> 00:19:12,600 be stopped? I hope that's true, right? 334 00:19:12,700 --> 00:19:15,100 I mean, the entire point of these partially collateralized 335 00:19:15,100 --> 00:19:20,300 and all these like, defy stable coins, is that the entire reason 336 00:19:20,300 --> 00:19:24,600 for them to exist is that they should be unstoppable, right? 337 00:19:25,100 --> 00:19:28,400 There should be no way for the SEC or anyone else to arrest, or 338 00:19:28,408 --> 00:19:30,500 serve anyone and stop these tokens. 339 00:19:30,600 --> 00:19:34,000 Tokens from circulating. It's really bold. 340 00:19:34,000 --> 00:19:36,300 I think. And, and fair enough, I'm not 341 00:19:36,300 --> 00:19:41,900 suggesting no one should do it, but I think it's really bold to 342 00:19:42,000 --> 00:19:45,300 create something that can't. You're like, this cannot be 343 00:19:45,300 --> 00:19:48,300 broken. Like, this is shatterproof, and 344 00:19:48,300 --> 00:19:52,400 like, once I release it into the wild, it will go on its own and 345 00:19:52,400 --> 00:19:56,800 it will be fine. And I think that's almost always 346 00:19:56,800 --> 00:20:01,700 wrong and you can just look it. Like most A of people saying 347 00:20:01,700 --> 00:20:08,400 something is Unsinkable or not breakable or a totally safe 348 00:20:08,400 --> 00:20:11,400 investment and see how false that is. 349 00:20:11,400 --> 00:20:17,700 Now, I also understand that when people say to a degree that like 350 00:20:17,900 --> 00:20:23,100 Dow is the stable coin, sorry, the stable coin, Dow is only 351 00:20:23,100 --> 00:20:26,200 within that the the cryptocurrency ecosystem and 352 00:20:26,300 --> 00:20:30,400 therefore like it's less of a risk in general. 353 00:20:30,500 --> 00:20:35,100 All but also it's mostly collateralized with us DC which 354 00:20:35,100 --> 00:20:38,700 is exposed to the general ecosystem of finance and 355 00:20:38,800 --> 00:20:43,500 therefore helps expose like it does it does create exposure to 356 00:20:43,500 --> 00:20:47,000 the general system I believe. And so it's hard for me to 357 00:20:47,000 --> 00:20:51,400 imagine any of these are unbreakable my general opinion 358 00:20:51,400 --> 00:20:54,500 that I've expressed previously on a podcast and stuff. 359 00:20:54,500 --> 00:20:58,800 Is that algorithmic stable coins are basically never unbreakable. 360 00:20:58,900 --> 00:21:03,200 There are pegged currency. Are often going to suffer under 361 00:21:03,200 --> 00:21:05,900 an attack by a sufficiently. Well, capitalized attacker, 362 00:21:06,200 --> 00:21:10,400 certain over, collateralized ones and even partially 363 00:21:10,400 --> 00:21:13,900 collateralized ones like fraks expose themselves to basically 364 00:21:13,900 --> 00:21:18,100 US Government intervention by, like you mentioned using USD see 365 00:21:18,200 --> 00:21:22,100 which can be Frozen whatever and become effectively worthless. 366 00:21:22,200 --> 00:21:26,700 However, my favorite things in cryptocurrency are the contracts 367 00:21:26,700 --> 00:21:29,100 that cannot be stopped right now. 368 00:21:29,100 --> 00:21:31,800 This isn't to say that they'll never Ever be flawed or anything 369 00:21:31,800 --> 00:21:38,000 but often I think the best parts of cryptocurrency are the really 370 00:21:38,000 --> 00:21:41,700 censorship resistant resilient ones and those are often 371 00:21:41,700 --> 00:21:46,600 dependent on their being very little intervention you can do 372 00:21:46,700 --> 00:21:51,100 after it's been deployed. Yeah I mean I don't know they're 373 00:21:51,100 --> 00:21:56,000 constantly intervening in Bitcoin and etherium you have 374 00:21:56,000 --> 00:21:58,700 teams of developers working on it all the time. 375 00:21:59,000 --> 00:22:02,400 So this idea that you're ever Hang up, like you're giving up 376 00:22:02,400 --> 00:22:06,400 control as an individual. But there's constantly people 377 00:22:06,400 --> 00:22:09,100 working on it to try to, like, make it better. 378 00:22:09,100 --> 00:22:12,000 And, and fair enough like Dow has that, right? 379 00:22:12,000 --> 00:22:16,100 Like, Tara has that they have teams of people who are working 380 00:22:16,100 --> 00:22:20,500 on their products, but like you said, there's always an 381 00:22:20,500 --> 00:22:24,200 attacking force that could look George Soros is the classic 382 00:22:24,200 --> 00:22:28,500 example of someone attacking a currency and winning just 383 00:22:28,500 --> 00:22:32,800 through having the Amount necessary, the liquidity 384 00:22:32,800 --> 00:22:36,200 necessary to destroy it, and all of these things suffer from that 385 00:22:36,200 --> 00:22:40,200 same, same exact issue, which is, if anyone like George Soros 386 00:22:40,500 --> 00:22:43,900 decided, fuck it. I'll throw a billion dollars in 387 00:22:43,900 --> 00:22:46,600 to destroy this thing. They could probably do it. 388 00:22:46,700 --> 00:22:48,300 I just think. No, billionaire has that 389 00:22:48,300 --> 00:22:51,200 interest right now. And often there's no direct 390 00:22:51,300 --> 00:22:54,200 incentive for it though. And we discussed this with 391 00:22:54,200 --> 00:22:58,200 Francis, like in the example of a partially collateralized, one 392 00:22:58,500 --> 00:23:01,700 like fracks often there. Incentive, right? 393 00:23:01,700 --> 00:23:06,500 Because if you can attack the peg long enough to drive the 394 00:23:06,500 --> 00:23:11,300 value of the supposedly stable token, underneath the amount of 395 00:23:11,300 --> 00:23:14,000 collateral backing, it you can basically redeem it for the 396 00:23:14,000 --> 00:23:16,300 collateral and make profit that way. 397 00:23:16,600 --> 00:23:19,700 And so there are potentially profitable attacks on some of 398 00:23:19,700 --> 00:23:21,900 these systems. They just require a sufficient 399 00:23:21,900 --> 00:23:25,000 amount of capital to basically sustain the attack. 400 00:23:25,000 --> 00:23:29,300 I think Daquan is probably being overly optimistic about the 401 00:23:29,300 --> 00:23:31,800 resiliency of Terror. Our but as like, one of the 402 00:23:31,800 --> 00:23:34,900 creators of it, he kind of has to because the worst thing you 403 00:23:34,900 --> 00:23:37,100 can do to an algorithmic stable Corner. 404 00:23:37,100 --> 00:23:40,900 Partially collateralized stable coin is to express doubt and its 405 00:23:40,900 --> 00:23:43,400 continued functioning because that doubt will cause it to 406 00:23:43,400 --> 00:23:46,700 cease functioning, right? These are perpetual motion 407 00:23:46,700 --> 00:23:48,300 machines. If you look at them too hard, 408 00:23:48,300 --> 00:23:50,800 they'll stop moving. And so you need to make sure 409 00:23:50,800 --> 00:23:54,000 they keep moving on that. Thank you for listening and 410 00:23:54,100 --> 00:23:55,200 we'll catch you next week.