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Hello and welcome to another episode of the Odd Lots Podcast.
I'm Jill Weisenthal and I'm Tracy Alloway.
Tracy, here's two things that I know, or I think that I know. One is that a lot of people in the crypto industry are excited about the new Trump administration and perhaps regulatory changes that may come about. And it also seems like a lot of people affiliated with the Trump administration have an affinity for the crypto industry, but beyond that, I don't know what any of that means.
Like it's one thing for different groups of people to like each other have some affinity, but what it means in terms of substantive changes in the world or at least in regulation, I don't have a clear idea.
Yeah, there's definitely been a vibeh the vibes, yes, but in terms of what that means concretely in the real world, I am also unclear. I will say I'm looking at a chart of bitcoin right now, and I mean you can see, like beginning of November it shoots up. And obviously there have been some things that are sort of happening all ready. So for instance, you know Gary Gensler is out at the SEC and he's going to be replaced by Paul Atkins, who is a I think he's
generally considered a crypto proponent, So that's one thing. Crypto kind of hated Genstler, So there's that expectation. But beyond that, there's talk of like a strategic bitcoin reserve and all these other things. And I guess I guess the difficulty is crypto is never a unified body like everyone wants different things, and there's all this infighting, and so I'm just curious, like, what is it that the different factions are basically after at the moment.
Yeah, there's a really great way to put it. And it's clear even as you described, there's a range of ideas that are sort of some seem more perhaps realistic, or in the short term, some strike me as sort of fantastical. But I would never count out anything. If we one day have a strategic bitcoin reserve in the US, Like I don't know, it's twenty twenty five. Anything could happen, but there is possible. Is like a range, right, there's a range of what's pursued. Maybe is it more regulatory
clarity on certain sort of like token projects. Is it a way so that some sort of stable coin regulation can be resolved in some way that expands their ability to be a source of payments? Many big questions, many interesting possibilities. So, as you know, with the new administration, I think we should get a better sense of what people in the industry are actually substantively looking for.
Absolutely, let's do it.
Well.
I'm really excited to say we have I believe the perfect guest. Someone we've had on the podcast before, and I said at the time we were talking about stable coins specifically that time. But I think I said at the time, this guest should really be the crypto industry.
It's only you said the crypto industry should shove everyone else in a boom close.
Yeah, that's right. I just have this guest be their spokesperson at least when talking to the mainstream media like us. Maybe like on crypto podcasts, they could have other people, but when they sort of address someone up for the mainstream media and want to be presentable, I really think this is the only guest that they should have. Very excited we're gonna be speaking with Austin Campbell. He is an adjunct professor at the NYU Stern School of Business, and he is also the CEO of WSPN USA, where
he does stable coin stuff. So, Austin, thank you so much for coming back on the show.
Yeah, well, I'm glad I'm not stuck in the broom closet.
Thank you for coming out. I think the WSPN job is news since the last time we talked to you. What's going on there?
Yeah, it is new. So WSPN is an up and coming stable coin Issuer. I think one of my observations about the industry right now, and the way I sort of try to say it to people who are not deep into it, is we've got a whole lot of MySpace and very little Facebook when it comes to stable coins, which is to say, I do have immense respect for the work people have done so far with things like you know, tether Circle, etc. But the reality is none
of these are, in my opinion, fully formed implementations. Yet I think the industry still has a lot long way to go to get genuinely professionalized. So WSPN is an effort started out of Singapore really and expanding globally to take a run at that problem. So Knock on Wood hopefully will be a little bit more Facebook. But til tell.
Okay, so let's talk about what's I don't know what crypto is excited about, because it does seem to be very excited, and a bunch of different coins have been rallying off the back of Trump's When what's going on here other than the vibes?
So I think some of this is just the expectation that people can do business potentially with some degree of clarity. So Trump coming in and keep in mind the Trump administration in particular is just one piece of this puzzle. Has the industry pretty hopeful that we're going to get a significantly greater degree of regulatory clarity around what you're allowed to do in the United States without breaking the rules, which is something that it transparently has not had. And
like a good example of this is the SEC. So recently, Coinbase, in their case against the SEC, was just granted an appeal which is going up to the Second Circuit now, And if you read the judges ruling a lot of the reason for that as well, you know, we have my case, and then there's a case against crack In, and a case against Finance, and a case against Ripple, and helpfully, multiple federal judges are all coming to different conclusions on what the law is and what you're allowed
to do here. So if people were saying there's regulatory clarity, you have at least four federal judges who disagree with
you on that point right now. And it looks like, honestly, if you understand how like circuit splits work, a fast track to scotus to get some clarity on this, which could be exciting, But I think the idea is that with turnover in the leadership of the SEC, there's at least a non zero probability that they'll like write the rules down before going after people for not obeying them,
which would be helpful. There's probably going to be significantly more access as in maybe any access to bankings in the United States for crypto companies, which would be particularly helpful. And then the other part of the puzzle is beyond the admin. Having the Republicans take the House and the Senate means that you have a much more friendly environment for actually passing legislation, and I would say even more
than the Biden administration. If you want to know why we're currently in the case we're in, it's the inability of Congress to pass laws. Because if you're trying to use the forty Act to regulate crypto, I will remind people that was written closer to the Civil War than the current day, and before the creation of the Internet.
Certainly before the creation of big clin.
Correct, So I can see why that may be a little bit complicated.
So this really gets into a core thing, which is that it might be nice to have some sort of clarity on, say, what constitutes a security in the crypto age, and because of how hard it is to pass laws period in this country, especially on big things, let alone sort of small or more traversial things, basically been gridlocked.
So maybe there's a chance of getting legislation if I recall the issue at coinbase in the SEC is basically like the SEC said, you're selling or your platform for the dealing the trading of unregistered security.
Right.
So it's one thing, and I guess this gets to the question about legislation. It's one thing to say, Okay, regulatory clarity is good, but what does that regulatory clarity look like in the good version?
So I'll say, to echo something Tracy said earlier, there is never one opinion out of the crypto history. But I would say if you talk to like the mainstream exchanges and some of the more call it regulated, call it non libertarian maximalist people in the space, here is fundamentally what they want. They want to know what the rubric is for understanding when a token is a security
and when it is not. Because the reality is there's been an overwhelming focus on the use of ledger technology, which, if you step back and leave crypto is kind of transparently insane, right, Because if I'm at JP Morgan and I'm trading a book and it's got securities in it, and i just move my back end ledger from like Microsoft Excel to Microsoft Access, that shouldn't change whether those
things are securities or not. It's an economic substance test, and the theories promulgated around this have been overly focused on the ledger, and you need to ask tokenized gold is pretty obviously not a security, but tokenized applestock pretty obviously is. And where is the dividing line between these two sorts of things as you start mixing stuff. That
question we need answered. Then the second question you need answered is crypto dispenses with some of the traditional functions of a securities market, Like we don't need a clearing agency when we have a blockchain. The blockchain does the clearing, So how does that work? Can somebody just write it down? Which is a problem similar to like when the abs market came into existence. A lot of the original securities issue where things are kind of meaningless, like who is
the senior management of an SPV? It's like a sort of weird question, and so the sec helpfully at the time, and they are totally capable of doing this if they want, created a whole rubric for registering asset backed securities, and that's gone from not existing to like a trillion dollar market because of that. So I think what the industry wants in a responsible way is just like, listen, any vaguely reasonable set of rules are fine, Just what are they? Can we write them down?
Is there any concern there that when you get regulatory clarity, it might not be the regulatory clarity that you want, right like, it might go the other way. And in particular, I kind of I always think of, you know, elderly politicians gathered in rooms trying to wrap their heads around blockchain and all this new technology. It seems like there's a risk there.
Well, the good news is most of this stuff is going to be written by twenty to thirty year old staffers instead of the elderly politicians. Right just talking about how the sausage is really made you make a good point, which is, you know, always be careful what you wish for. With Washington, I would say, in the current situation where you've had an administration trying to just wipe out the industry and make it illegal. Almost any regulatory framework is
better on a forward basis. I think there's also at least some degree of hope with the current crop of Republicans that they won't make the mistake of overspecifying a particular approach or technology, because that's the way you could
really get into trouble here. Like I was talking to somebody who's a staffer recently, and my caution on this is, imagine if the United States in the mid nineties canonized AOL right as the tool for accessing the Internet and using email right, that would have been a big mistake. So principles based regulation focused on economic substance is probably
the best outcome. If you get something worse than that, there will at least hopefully be enough attention on it that you could start chipping away.
Sometimes a bit when I think about alternative histories of the Internet, like I wonder if there could have been a situation in which it's still largely like the darp in it they are, and they are like furious debates like should we allow commercial access to the Internet, you know, in the year twenty twenty five, It's like, oh no, It's kind of actually easy to imagine these other versions.
What's wrong with the Howie test when we're talking about like a rubric or something to determine what is a security? You know, it looks to me like many things that are tokens that get traded, there's an investment contract, expectation of profit, common enterprise, a lot of these things. I don't know. I'm like, guess, I'm not convinced that it's so ambiguous that these are, oh these are securities, like they kind of look like they are in many cases.
Yeah, So I would say my personal view again, there are some tokens that to me are pretty obviously not securities, and some tokens that are pretty obviously.
Rather than bitcoin, what is what are some tokens that are obviously not securities?
Well, great example like dollar backed stable coins that don't pay interest, like, somebody help me out with that one token gold, the things that purely do governance and have no expectation of cash flows, because what.
About a governance token for a decentralized crypto trading platform.
So here becomes the question what are the underlying economic characteristics that it might give you access to? And you've gotten to the place I was going, which is the annoying part is a lot of these tokens do exist at the gray area of Howie in general, because like, again, let's zoom out from crypto and create one that I think actually sort of reveals the problem.
Is.
Let's say that I buy some sort of collectible shoes, right, Jordan's or something like that. Okay, so if I'm purely a buyer of the shoe, I'm probably not in a
collective enterprise with Nike. But the ecosystem theory from the sec that they've raised as well, hold on, if there's a whole network of brokers and promoters and Nike is sponsoring events and all of this hype around that you are buying with the expectation of profit, Like, where really is the boundary between that and form owning a share
of Nike stock. If you're genuinely buying hundreds of thousands of dollars of Jordan's a year to resell them with an expectation of profit, are you not in a sort
of collective enterprise? And I would say you can take that principle and pretty transparently ported onto DeFi and I think the problem that people in crypto have had if you talk to the really savvy lawyers in this space, like for instance, Lewis Cohen who's in New York wrote a paper about this called Inteloctable Modality of Securities Law. And what you run into is there are things in traditional markets where they haven't gone after this, but they
did go after essentially the same activity in crypto. So now one, where is the dividing line? And then two, even if you agree that what I just said might be a securities arrangement, does that make the Jordans themselves a security? Not necessarily right to go back to Howie the oranges are not the security. So one of the big dividing lines is take the ripple case. XRP may have and sold as part of an investment contract, but it does not necessarily follow from that that XRP itself is a security.
Can I ask a provocative question? And crypto people on Twitter slash x please don't come at me for this, but was Genstler really that bad for crypto? Like I know he went after Coinbase and like prosecuted a bunch of other frauds, but he also approved the ETFs. And it's not like the crypto industry necessarily shrunk under his tenor Crypto seems to be doing pretty well.
So I'll answer that question in two ways. I do think Genszler intended to be quite bad for crypto, and the things I would point at about the SEC at the time and the heart of my past critiques of them are one, you somehow managed to go after preemptively like Coinbase and crack In and meta mask and people like that, but you missed all of FTX, Celsius, Terraform Labs Block five, like basically, if you were a fraud, they didn't preemptively enforce, and if you weren't they did,
and that's a pretty poor track record. And then number two is that complete inability to just write the rules down. I think even if Crypto didn't like the rules, if they had just written them down and said this is what you do, they would have been at least tolerable, because, like I would tell you, that's where the CFTC is, Like people in crypto don't love the CFTC, but don't feel like they're being treated unfairly because they'll at least just tell you what they mean to a much greater extent.
And again, when we're in a point where four federal judges who are all individually very bright people, can't agree with each other on the rules. That's kind of a problem. Now to answer your question literally, actually, I think Kensler might have been good for crypto. And the reason I say that is it sort of by swinging the pendulum that far, it brought a lot more public attention to this sort of thing than you otherwise would have had
had shot the streisand principle. Yeah, like his trying so hard to kill the industry ironically may have won Trump the election, right if.
You look at it.
So Stand with Crypto mobilized literally over one hundred thousand people to go vote and was pushing them to the polls, And if you look at the margins and some of the swing states, it's entirely possible, especially because I mean, remember it looks like men under the age of thirty just straight voted Republican and a shocking number of those are registered with Stand with Crypto. So I have questions. I kind of buy it. I kind of buy it.
Actually talk a little bit more about stable coin regulation when we hit you on last time, and I'm like kind of a stable coin convert at this point or at least potentially because just the idea that this could be like a very like powerful like to find software rail or payment rail that could not be done under traditional legacy rails because you couldn't coordinate the different parties. I find that actually pretty compelling. I'm still a little not sure. I'm not sold how big the use case
will be. But as for other people to argue about what regulatory ambiguity today in your view, holds back stable coin growth.
So there's kind of two parts to that. One has been the banking regulators, primarily led by the FDIC, but to a lesser extent, the OCC and the Federal Reserve kind of saying you just can't do these things right.
There was a note in the Federal Register in early twenty twenty three where they essentially said public blockchains are not compatible with safe and sound banking practices, which is kind of a blocker if we're being totally honest, and I think has really inhibited the United States's ability to
approach new technology. And to be clear, this kind of rides on the back of the technophobia of banking regulators in general, because I don't think in their case there's singling out, you know, cryptos so much as they're singling out any new use of technology because they're still angry with the traditional FinTechs as well. The other thing that's really held it back is the complete lack of any
federal legislation. So I'm dealing with fifty states on a state by state basis that kind of all vaguely disagree with each other about how to do things. And one of the things I'm most optimistic about in twenty twenty five is federal legislation on stable coins moving, and part of that is back to just how the sausage is made.
In Washington, we've had McHenry Waters in the House, Lumus Gillibrand in the Senate, and Senate Banking is working on a draft of something like there's legislation that people know that they're reasonably comfortable with where the ven diagram overlap is pretty significant, Like it's not perfect, there's things they're
fighting about, but it's majority agreed. That's something you could pass, unlike say market structure, where I don't think if you look at that bill, there's majority consensus even on how it should work or what they should do with it.
Could you ever envision a future where the big banks get on board with stable coins, because I think generally, like right now, they're kind of considered competition in terms of payments technology. But on the other hand, they could, as you've laid out in a previous episode, allow them to make payments more efficiently.
I do think so, and I think banks in general need a path forward where they can do something new. You know, we talked about last time how it's hard to take a current bank balance sheet and create a stable coin with it because they're not fungible between each other in terms of assets and liabilities. But in theory, like legally, there would be nothing stopping people with federal legislation. You know, a JP Morgan and Wells Fargo a b of A from starting a segregated trust company and just
using that to launch a stable coin. They can totally do that. And you know, what the banks do have is a ton of distribution. Chase has a lot of customers.
I don't think that's news to anybody. And so to answer your question, could there be an effort like that, Yes, and also it could take many forms, Joe, to your earlier point, I think I'm very pro stable cooin technology winning in the long run, I am not yet convinced on the exact form that's going to take commercially, because could it be that each bank has their own stable coin and they're roughly fungible and they all accept them. Sure.
Could it also be the case that they do something like DTCC, where there's a repository of all the securities and everybody uses it. Sure could that even be bigger than banks if you get asset managers and insurance companies in there. Sure.
I don't know, well, you know, I think by the way, it was just a few weeks after we recorded our last episode, Stripe made a one point one billion dollar acquisition of a stable coin startup called Bridge, which I hadn't been familiar with, but I was familiar with Stripe, and that strikes me as a pretty big endorsement. Maybe two parts. Actually, can you just sort of give a twenty second description of what that deal is all about
for Stripe? But also more importantly, I certainly get stable coins for the purpose of crypto trading, Okay, I get that, Like that's pretty obvious. And then you sort of like, all right, there's probably some like cross border stuff where stable coins are better, faster, cheaper than other rails, But like, how big are we talking about? Like beyond that? I guess this is the part I'm not totally sold on yet in terms of like how big this market gets out of a couple of fairly obvious niches.
All right, So I'll give you by super hot take, which is, I think, over the next call it twenty ish years, probably the entire euro dollar market is moving to stable coins.
All right, that's a hot take.
Say more so the euro dollar market currently, if you're outside the United States and you're leaving dollars in foreign banks and institutions that are trying to get access to dollar rails, is a little bit of a patchwork and janky market. It's got poor standards, it could be hard to move money around. It's highly suspect in times of stress, see like the Federal Reserve doing the dollar swap lines and the Great Financial Crisis to bail essentially foreign banks
holding dollars out. I think that entire market moving to stable coins removes a lot of the correspondent banking issues. It becomes much easier and cheaper to send money around, and standardizes and makes safer the reserves for the entire euro dollar market. That seems like a very large upgrade to the entire system, and my prediction is just based on the commercial forces over time will be overwhelming to push you there. So if you want a use case euro dollars, I would also say zoom out of the
money and think about standards. Brazil is maybe a great example for this. If you think about picks, where they created a uniform standard that everybody had to use because the government was promoting it. Suddenly you've got all of these new apps, new ability to move money around, and interoperability of a system that you don't have in a
very fragmented and bespoke system. So the other important part of the blockchain part is that open access part where if everybody's plugging into the same ledger and can move dollars on the same ledger, it just creates way more ability to innovate, to build and act access.
By the way, on the topic of euro dollars, if you haven't listened to it already, you should definitely go back and check out our three part series on the history of euro dollars with Lev Menon and Josh Younger. It's really fun. Anyway, Moving on from euro dollars. The other big thing that people seem fixated on, again some people, because crypto is not a monolith, is the strategic Bitcoin Reserve, which seems, you know, a little bit far fetched to me,
but as Joe suggested earlier, anything is possible. Is that realistic in your opinion?
Well, Austin, by the way, it has done some great threads on Twitter about how silly this idea is in his opinion. Anyway, keep going.
Yeah, I will say I'm going to file that entire idea for the crypto community under be careful what you wish for. I don't think that people who are promoting a technology where the value proposition is that there's not government interference with the technology should be advocating strongly for significantly more government interference in their technology. To me, the easiest way to send bitcoin to zero in the long
run is to push for the strategic reserve. And the reason I say that is if you understand the thinking of nation states around financial rails. If you tell the United States, hey, bitcoin is highly strategic, their thought is not. Well, that means we should buy coins to go up in value.
The United States can print its own money, and there are people at the very top who are very aware of this, they're going to think, oh, well, we should control that network if people are going to use it to transfer value, which will eventually, even if not at the start, lead to things like commandeering or nationalizing miners and having legal authority to take control of them in
times of crisis. And by the way, like, if you read between the lines and look at our activities in the Middle East over the past twenty years, how do you feel about drone strikes against foreign miners and things of that sort. If you're telling them it's strategic, careful because they may actually agree with you and then start doing these.
Doing the types of things that governments do. And a resource is strategic, correct, that's it's a it's grim, but also seems I forget who said it on Twitter. If the if we're going to have the government by a bunch of bitcoin for strategic reason, then the least we could do is apply a special excise tax on existing bitcoin holders, because if they're so, if it's so important for strategy, let's at least make sure it's not just
some money grab. That could be the test. Are all bitcoiners willing to pay a tax because of this important aspect of having a strategic holding.
I will remind all bitcoin people that the government confiscated gold.
There you go. Another thing that actually sort of dovetails with a lot of this conversation, including the politics and including you specifically. Sometime I think it was late last year, Mark and Dreesen went on Joe Rogan's show, and in the middle of a broader conversation he talked a lot about debanking and how debanking the crypto industry, and there's all this talk about how like maybe for political reasons,
maybe not. And I think there were some details that some people pugged holes in, but this idea that the government had gone after the crypto industry perhaps for political reasons. First of all, let's just start with this sort of neuro question of what has been the status of a crypto company's ability to just have a bank account?
All right, So in the United States from twenty twenty two onwards, the answer to that question is probably not,
but maybe yes. And also be careful, and what I mean by that is starting in twenty twenty two, after FTX, it probably originated with what I think is a legitimate effort to look into where was FTX banking and how the hell did this happen, which is a reasonable question to ask in the wake of a collapse like that, but then quickly metastasized and to actually, you know what, just get rid of all the bank accounts of all the crypto companies, with the FDIC doing things like telling
companies you can't have more than fifteen percent of your deposits in crypto. But also if you want to bank anybody in crypto, you need permission from us, and we're just going to ask infinity questions and never actually give you permission and make very clear we're essentially going to torture you to death with you know, scrutiny if you do these kinds of things. And that led to it being nearly impossible to get accounts for handling customer money.
But it also led to, in my opinion, much more questionable things like if you're just a regular way operating company in crypto, not being able to get a bank account to like, I don't know, make payroll right, or like pay your rent, and that starts getting into the realm of hold on what are we doing to people. I also specifically know of individuals who had their personal accounts and accounts of family members closed for taking jobs in crypto and these are not like I'm coming from China,
I won't disclose the source of my money. This is like somebody who's a lawyer admitted to the bar in an American city in leaving a bank to go to a crypto company and having her daughter's accounts closed. So that seems to me excessive. Now, he raised Mark being on Joe Rogan's podcast. Mark, when he was on there, I think kind of revealed something the average person doesn't understand, which is that understanding banking regulation in the United States
is really complex. Like I used to joke with people, there was this slide at JP Morgan when I was there on who regulates us? That looks like the Pepe Silva conspiracy theory from It's Always Sunny And the answer is yes, like eighty two different regulatory agencies and so Mark on Joe Rogan tagged the CFPB. I'll just transparently say sorry, Mark, I know we've talked about this. I
don't think that's correct. I think the drive came from the FDIC, the OCC in the Federal Reserve, and it was highly variable in its understanding and competence ranging all the way from very granular I think correct and legitimate supervisory concerns all the way down to if it says blockchain in it, you're banned from doing it.
So I get that you find some of these crackdowns excessive, but the FDIC ultimately ensures these deposits. And when I hear something like fifteen percent of assets in crypto, that doesn't seem insane to me to want to limit something. Yeah, something that is notoriously volatile and could go down to zero for no reason. How would you design those types of guardrails?
Yeah, I would say. I think the problem there is the FDIC is basically stuck in the nineteen seventies. And what I mean by that is one, crypto assets are not monolithic. If you're telling me I'm worried about the hot money liquidity posits of a stable coin reserve, I'd be like, no, yeah, that's totally legitimate. But if you're telling me that uniewap making payroll is somehow a hot deposit, that's very scary. That's different, and they threw them in the same bucket.
Wait, well, what about what about if a bank has fifteen percent of its assets in bitcoin, and another bank has fifteen percent of its assets in doge No.
No, no. So to be very clear here, we're talking about banks giving dollar accounts to crypto companies. This is not banks holding crypto. Oh I see, yeah, of course, And I want to be clear. I think that's quite risky given the volatility in crypto, and it should have very large risk weights. I'm talking about like uniewap having a checking account.
Okay, this is just the payment system, yes.
I get that. Okay, Clearly a bank's assets should be you know, mostly dollars or safe things like treasures, et cetera. But the liability side, who is there? So the fifteen percent is your captive fifteen percent of basically your liabilities are crypto related companies. Oh that was the is that statute is just regulatory like.
That was kind of regulatory fiat And so to me, I would say two parts to it. One, this is the classic problem of your only looking at one side of the problem. Right. What I mean by that is, so say I'm a bank, and I say, well, hold on, crypto is my main business, and I primarily make money off of facilitating payments for crypto companies, not doing large
scale commercial lending. So, hey, FDIC, if I tell you I'm only going to hold T bills to back the crypto deposits, would you still hold this fifteen percent threshold? And they say yes. I have a lot of questions because that's not an asset liability matching issue unless you think the treasury market just to go on.
So, like, I mean, SVB got into trouble because it had a tremendous concentration in one industry, right, correct, And and isn't part of regulatory well supervisory preventing too much concentration on the liability side on the depositor side.
Well no, So here's where I was going to go. SVB got into trouble because they had a high concentration in one industry and then yoloed into like fifteen year duration mbs as rates went up. Had SVB been and T bills, they would still be solvent and operating today. So what you're really looking at this is something I thought a lot about at JP Morgan running a bank capital book, is it's the asset liability matching part where
people get it wrong. The more concentrated your deposit base is, the more liquid and safe your asset base needs to be and that needs to exist in balance with each other. So like, you know, let's take one of the extreme examples that the FAD hates. But like if I ran a narrow bank, I should in theory be able to
have one hundred percent concentration. What does it matter? And so my point about the whole issue is, if you're only going to look at the deposit side of the balance sheet, I'm actually terrified about your competence as a banking regulator because you're not understanding this is a multivariate system.
You're just overfixating on one thing and two By the way, if you're going to say individual banks are limited to fifteen percent, but then you also go tell other banks you can't get in, now you've created a systemic level probable where are those deposits going?
Yeah, speaking of multivariant systems, At the very beginning of this conversation, you said that Trump was only one piece of the puzzle. What are the other pieces?
So I think the other big pieces here are the judicial system as we're about to experience, because as the SEC sort of loosed these torpedoes in the water, you need to be very careful because those get out of your control very quickly when they encounter the federal judiciary,
who will have their own opinions on things. And one of the I've been saying this since the litigation started, with the current makeup of the Supreme Court, you should be really careful about taking securities litigation stuff all the way there because there is a non zero chance you are going to get very strict rulings that nobody likes.
Is it so far beyond the pale with the current somewhat literalist Supreme Court that they look at the forty acted say guys, we don't see anything about the Internet in here. Why did you think any of this was okay? Not to do with paper trading? Right? And I'm not saying it'll go there, but I'm saying you're opening a Pandora's box, and that's open right now. The other part
is Congress. Right as we've come back to. I really think the biggest shift there, which people have not talked about, is control of the Senate moving from the Democrats to the Republicans, because the biggest crypto opponents were the Senates, like Democratic War on the.
Bank Shrod Brown, who lost his election in Ohio. Those two come to mind.
Correct, and so Senate Banking was serving as a bottleneck for a lot of legislation, Like even if the House had moved stable coins, the Senate was not going to take it up. You saw what happened with fit right, even SABE one repeal, which I think kind of everybody agrees is a good idea now couldn't get a super
majority because of the Democrats and Senate Banking. With the Republicans in control of that, I think the pathway is open for legislation, and I think that maybe a bigger change in the long term than Trump.
Just to be clear though, going back, Sorry I keep hammering on this question, but having a diverse depositor mix at your bank is a principle of banking regulation.
Right.
You don't want to have all your depositors be biotech startups, etc. Right, because then something bad happens to the industry and everyone pulls their money out at once. I get your point about, Okay, you want to balance the depositor mix with the safety and yes, SBB had only been in T bills, But this idea that it's something novel that you want to not be too concentrated in one area does not seem new to crypto.
No, but that is kind of why I refer to the FDIC being stuck in the nineteen seventies. I agree with you, that's a principle. But the problem is when you say, well, new technologies are scary, so don't bank them, and we're going to apply a huge amount of scrutiny, and you've got to be a deep specialist to bank them at all, which means a lot of cost, a lot of effort, a lot of build out. But then also you can't do a material amount of these things anyways,
an industry level ban on innovation. Okay, that's what I mean by the multivariate part. Any one of these principles is fine on its own, but it's like if you tell me that I can only have a car that has space for eight car seats, but also my car can't have more than one row of seats, Like, how the heck do I build a car? Ita'st the interplay of these rules together, that's a problem.
Austin Campbell perfect, Gosh, thank you so much for coming back on online.
Yeah, thank you, really enjoyed being here.
Crazy. I still stand by my point about Austin. It's just like the best avatar, the best spokesperson for the industry.
No, I agree. I did think I have a lot of sympathy with the idea that if you're in crypto and you sort of did all the right things in terms of regulation, yeah, you were often the one that was most likely to get cracked down on, whereas someone who just you know, did whatever and didn't follow the rules kind of got away with it.
That's really been a huge story, and that does not seem good, which is that you did have these endeavors that tried to be like the you know, Coinbase made it right, they did, they played good, and then then now you know, now they're a publicly listed company doing phenomenally well. And I don't know, it seems like a good chance perhaps that things will turn in their favor from a regulatory perspective. On what's lingering. Here's something that
I'm still confused about. Okay, let's say they establish a securities framework for crypto, which seems possible securities law. I think it as all kinds of obligations about like disclosure and all these kinds of things like what's that even gonna mean for someone in their living rooms somewhere, maybe in Singapore or Vietnam. Who like creates a to own the US, who creates some token for decentralized trading network.
I get the macro premise, oh, we need rules, But the idea of then applying these rules to the industry, which is sort of like famous for like it's just code, strikes me as it's going to be very.
Difficult, Yes, very difficult. The other thing I'm wondering about is, you know, it seems like there's a desire to have more nuance in the rules, and I wonder, at what point do you end up with regulators having to basically evaluate new technology. Yeah, and you know, regulators don't necessarily seem best place to do that. That seems like a risk as well.
In the end, I do think there are some exceptions, like maybe stable coins, but a big part of crypto is essentially this idea that you can have things that have value that exist on the Internet outside of the regulated banking system or the regulated finance system or whatever. And the idea like it always sort of seems like once you try to mix it with the financial system, it's like oil and water. But I guess We're gonna see how they can mix it.
Yeah. The one thing I'll say is bitcoin especially has this tendency to really go with any narrative. It's that narrative flexibility, right, And so there is an irony that a lot of crypto proponents and bitcoin proponents now want more legislation and they want you know, that strategic bitcoin reserve, or at least some of them. But so far it's resonated in the price.
Right.
It's like bitcoin has seized on that narrative and that positive momentum, and here we are.
I loved Austin's point that if you convince the government that bitcoin is strategic, the government might start doing things associated with other strategic resources and it may not be so pretty.
So also the through line from Gary Gensler cracking down on crypto and Trump winning the election.
I think there's you know, I'm like, I think there might be something to it. I think you would have said that to me six months ago. It would have been more skeptical. I think I'm less skeptical now.
Yeah, all right, shall we leave it there.
Let's leave it there.
This has been another episode of the odd Lots Pott. I'm Tracy Alloway. You can follow me at Tracy.
Alloway and I'm Jill Wisenthal. You can follow me at the Stalwart. Follow our guest Austin Campbell. He's at Campbell j Austen. Follow our producers Carmen Rodriguez at Carmen armand dash Ol Bennett at Dashbot and Kelbrooks at Calebrooks. And for more Oddlots content, go to Bloomberg dot com slash od Lots. We have transcripts blog in the newsletter. You can chat about all of these topics twenty four to seven in our discord where we have a crypto channel Discord dot gg slash od lots.
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