This is the only way that banks will survive. Now, unless you've been living under rock, you know that the banks have been under amazing stress. As a matter of fact, we have seen more banks collapsing at a higher level, at a higher dollar value than we saw in two.
Thousand and eight.
And while many people think it's getting over, it is not.
It's only just beginning.
And so I'm sitting down with a banking expert. I'm talking about Caitlin Long, someone who's been in the inner workings of the banking and financial industry and is in the process of setting up her own bank right now. We're going to talk about the problem that's been created, but from a whole different level than.
You've heard before.
We're talking about the way money is flowing, how the Fed is causing this, the only way the banks are going to be able to protect themselves from this damage and destruction that's coming in the way. We're going to talk about the damage that will happen in the economy from centralizing the entire banking process. We're going to talk about her revolutionary bank and why the Federal Reserve does not want to allow it to happen.
We're going to talk.
About the FED now system and the new CBDC that everybody's afraid of, the UCC Universal Commercial Code filings that are making it so you don't own any more money than so much more. We cover a lot of ground. It was amazing conversation with Kitlin.
Long.
Let's go ahead and just jump right into it. Caitlin, thanks so much for taking the time to join me today. I know you are super busy, so I appreciate it.
Dealing with all kinds of banking stuff.
So I want to dig into the banking stuff, past, current and potential future where this is going. And so you're certainly one of the people that are kind of on the forefront that can help with this. But I first wanted to start in talking about you know, I know you're the founder ce CEO of Custodia Bank, and
so I want to get into that. But before we kind of get into that, I just want to talk about like this current banking shuffle that we're in right now, this consolidation of banking, and so we're seeing smaller banks going down consolidating to bigger banks. At this point, we have like eight banks that are probably you know, too big to fail, right and We're starting to see kind of this flow to these too big defail.
And it seems like.
It's almost like the only banks that can survive this type of situation the FED has put them in is these two big defail banks unless maybe one the FED decides to cut rates down below the two to three percent range where where the banks can be profitable, you know, or they greatly loosen the financial conditions.
So one or the other.
And if it's not that, then it seems almost like we would need a fully reserved bank.
Ah wow, okay, yes, well, so I actually tweeted out today. We're recording this on the twenty third of May. I tweeted out today in response to Jamie diamond saying there's going to be more consolidation in banking, And of course I suspect he's looking as chops at JP Morgan because they are beneficiary. They're one of the eight or so banks that you describe as likely too big defail, and because they've been subject to Basil three, they've had to pay attention to their liquidity in a way that all
the other banks that are not subject. The vast majority of the quantity of banks in the United States are not subject to any real liquidity requirements. They'll run some stress tests, but they'll assume, you know that thirty five percent of their deposits get withdrawn within the span of a week as a stress test. Well, we saw in Silicon Valley Bank twenty five percent be withdrawn within the
span of hours. And the small banks in this country have about seven cents now of cash on their balance sheets. Only seven cents for every dollar on their balance sheet is cash. So if twenty five cents gets withdrawn in this short period of time, you start to see the problem. They need to start to liquid aid assets, and they're liquid aiding assets at a loss, which is what took
Silicon Valley Bank down. Okay, so that's the background. I tweeted up today that in ninety four there was a huge consolidation wave and it was something I worked on at the early stage of my career in the bank world. There were more than ten thousand banks back then, and what caused that consolidation wave was that they were very cost and efficient in spite of the fact that green Span at the time had engineered a steep yeal curve. So I would go back to the way you asked
the question. It's not so much rates coming down to two or three percent, it's the steepness of a yeld curve because those businesses, those banks, traditional banks, make money based upon borrowing short term and lending long term, and they don't really care in the grand scheme of things, with the exception of mark to markets, which will come back to in a minute, whether interest rates are you know, five percent short term and eight percent long term and
they capture the three percent spread, or you know, one percent short term versus four percent long term and capture the three percent spread. It's a three percent spread either way. Now that presumes.
Yeah, except go ahead, I could ask, except for the big draw away from the banks is because the FED is paying five percent so well, folks are forced to compete with that, So if the Fed were to bring it down, then it wouldn't be as competitive.
Well, that's absolutely right in the So that's why you can't look at this in a vacuum. First of all, I was going to add that the banks may have marked to market losses on their balance sheet, which is what's killing the regional and community banks right now because they during all the COVID era. The way the plumbing works. Is all that money that came from all the fiscal stimulus had to go through the banking system. So the banks suddenly found themselves flush with cash and there was
no loan demand. And so what did they do. They bought treasuries. But because treasuries had no capital charge, they rolled the dice and played the yield curve. And this is where the management's made the mistake. They didn't have to do what they did. They invested in long term treasuries. Now those long term treasuries have a big mark to
market loss. And your point is also very well taken, which is their something different now that didn't exist back in nineteen ninety four, the last time we came off a big rate rising environment. But the FED had engineered a steep yield curve, and that is money market funds,
ding ding ding ding. You can earn right now north of five percent in a US government money market fund, where you're taking US government credit risk, whereas banks are paying little to no interest and you're taking bank credit risk.
A lot of money is walking with its feet. In fact, actually at one point there was an estimate that eight hundred and fifty billion of deposits had been had exited the traditional banks for the crypto industry back at the peak of the crypto craze, and now we're almost at that amount of money that's been withdrawn from the banking industry to go to the money market funds. It's really stunning how much money has moved from the banking industry, and traditional banks were just not ready for this.
So that's one of the things.
So obviously one the risk that you said bank risk versus government risk. So there's the risk that they're dealing with, and so that has people on edge. And then there's the carrot dangling where like, hey, I can go make five percent instead of the two percent or I'm sorry, the zero point two five.
Or whatever it is.
Yeah, yeah, whatever, And I've got counterparty.
Credit risk, right, so if you adjust that for the counterparty credit risk, it's negative yield.
Yeah, which, while I was thinking, so, if inflation stays where it's at, interest rates and banking regulations remain where they're at, it just seems like there's just no way these small, too big defail or non two big defail banks can stay in business.
It just seems like they're almost guaranteed.
To fail, Like I said, unless something were to happen, and that's what I was saying. If the FED were to bring the rates down, it eases the banks. Also takes away that big demand for people to move like that'd be one thing that I was thinking.
But if they're going to recapitalize the banks, they need to do what green Span did in the early nineties and engineer a steep yield curve, which is what he did, and it recapitalized the banks back then. And that's the last time we really had rising rates and you had a big bank consolidation wave, big banking consolidation wave. We didn't have the giant banks back then that we do today. But right now there's a balance sheet problem in the
banking industry. And so long story short, this is the type of consolidation wave where profits are going to be privatized and losses are going to be socialized, unlike the bank consolidation wave I worked on in beginning of nineteen ninety four, where it was a win win because you had a lot of banks that, in spite of the fact that they were earning high spreads, just couldn't keep up because they were cost inefficient. So it was a win win to consolidate back then. Now this consolidation wave
is more about balance sheet weakness. And you have seen a couple of really strongly performing bank stocks, and as who they've been, they've been the winners of the auction processes, buying these these defunct banks out of the bank auction process and immediately booking again and their stocks go up. Okay, that's that's the privatization of profits and socialization of losses that everybody should be upset about.
Yeah, certainly.
Now, you know, one of the big things with consolidation of bank is through the consolidation getting getting rid of sort of this like local regional relationship of the banker and then potentially pushing more and more like credit decisions up to the larger you know, national type corporations and things like that. I know, about half of US employment is with firms that have less than five hundred employees, so about half of that business environment could potentially be affected.
I mean, these some of the risks that you see with consolidation.
Absolutely, but it's happening anyway. Matt Levine at Bloomberg has been correctly pointing out money market funds are basically just narrow banks. Okay, so the bank, all the almost six hundred billion of deposits that have been withdrawn from the banking system and deposited into money market funds, is maybe permanently leaving the banking industry. And so all the concern about that's implied in your question, which is that that's
where credit comes from. You got to have regional banks that can provide that can make loans, because that's where credit to small and medium sized businesses comes from. It doesn't come from the large banks. They're not set up to do that. And so but yet I look at it and say, it's already happening, folks, because people are voting with their feet to go to money market funds.
This is not rocket science. And unfortunately, if we had to start all over again, we wouldn't structure the banking system the way it's structured today, where you have this enormous maturity transformation maturity mismatch in banks borrowing short term, lending long term, and trying to capture a three percent spread.
Why because it's fundamentally unstable. As Matt pointed out, I think it was in yesterday's column that the assumption that was made for decades is that banking deposits were sticky and they might be withdrawn from one bank to go to another, but that would that was a zero sum game because it all stayed within the banking system. Well, now they're not sticky. The banking deposits are leaving. They left to go to crypto and now they're leaving to go to the money market fund industry, and that is
outside of the banking industry. And here's the irony. This is where those of us who liked to talk plumbing of the money markets. Look at what the FED did with the RRP facility, the reverse repo facility. That's exactly what's allowing the money market fund industry to invest in all of these high yielding US government instruments and they can invest in repail and pick up even extra yield.
And the impact of that is if anybody could get direct balance sheet exposure to the FED, then there's an incentive to there's less credit risk than going through a bank, so you're picking up higher yields and you're getting US government slash FED counterparty credit risk. It's it's you know, this is why money is voting with its feet. And so the concern about credit availability in the small and medium sized businesses. Boy, the bank regulators should have had
that concern in mind a long time ago. It's so interesting because this is bread and butter stuff for the banking industry, and yet it's amazing how many really smart people missed it.
Yeah.
I think banking is sticky. It's just getting less and less sticky.
Right. Technology has made it easier to move.
I've been with my same bank since ever I first been kind of overopened, and it's like still there because it's a pain the butt to go close bank accounts. It's really difficult, and so it is pretty sticky. But to your point, it's getting much easier and money moves a lot faster now than I ever did before. I was reading a report from Christopher Whale, and he was talking about the FDIC report saying that most of the
banking system is insolvent already. Yes, they're just not realizing the losses correct, right, And so a lot of these assets that they have on their books potentially like commercial real estate and regular mortgage backed securities, et cetera, underwater, you know, mortgage loans, things like that. We can see delinquencies are going through the roof cars, credit cards, et cetera.
Things like that.
And so we have this, but every time it seems like they, you know, FED or the banking systems kind of like backs against the wall. It's like another three or four letter letter special.
Yeah, pops up, right. So I mean, I mean, there's really nothing stopping them.
I mean, the FED can just continue to take these assets off the books apar, put them off the balance sheet in some tucked away.
Corner, and just kind of keep this going. Right.
Well, sure, right, but here's the thing, and this is where I think those who thought that the expansion of the Fed's balance sheet is by definition inflationary, the credit creation is what's inflationary. And you know, prior to the financial crisis, the fed's balance sheet was eight hundred billion. It was you know, it was nothing compared to what it's been in the trillions today. And and nonfinancial sector
debt is ninety five trillion ish last I looked. Okay, so there's been ninety five trillion ish of US dollar credit issued in the United States, of which nine trillion ish has been monetized by the FED. Those are approximate numbers. But you see the point where I'm going about ten percent. The FED has monetized about ten percent of the credit that got issued. Okay, by the time this is all said and done, a lot of it's going to end up on the fed's balance sheet through the mechanisms you
just talked about. But what a lot of folks miss is that that's not the inflation. The inflation occurred when the credit got created in the first place. How did it get created. It got created in the banking system, and it got created in the shadow banking system, which is through securities markets, et cetera. But the credit creation was what was inflationary. It wasn't the expansion of the fed's balance sheet per se. That's a piece of it, but it's not the vast majority of it, even with
the FED basically backstopping. So what they're doing is basically filling a hole. Right when you get into deflationary environments where debt is defaulting, the credit outstanding is shrinking, that is small d deflation. The FED has expanded its balance sheet in order to keep credit inflated. Okay, So they're not trying to issue ninety five trillion more of debt. What they're trying to do is keep that ninety five trillion on its normal trajectory. And here's the interesting thing.
If you go look at the data. I haven't updated this in a little while, but if you look at the non financial sector debt in the United States, it's pretty much to straight line up and you can't tell when Republicans were in charge, which is when Democrats were in charge. Okay, so we've had two and a half to three trillion dollars of non financial sector debt growth in each of the last ten years, and it's you know, it's essentially keeping me total economy inflated. Only a small
percentage of that historically has been the FED itself. The real inflation came from the credit that was created in both the traditional banking system and in the non traditional i either shadow banking system. But it all got created in the financial system and then got intermediated out into the real economy. And so you know, basically there's a big debate over the stability of the US dollar banking system. I look at it, and you know, as you said,
the FDIICE is saying, hey, the banking systems in soolveent. Okay, well, it really always has been. This is not new fractional reserve banking is not new. Bank runs are not new. None of this is new. What's new is that people are much more aware of what the issue has been all along. But it was always there, bubbling under the surface, building up, and fundamentally, this is not a stable system. It seems stable because they've been able, as you point out, to pull the rabbit out of the hat with the
latest alphabet soup program. But all that is doing is taking defaulted credit off the traditional banking system's balance sheet and putting it onto the Fed's balance sheet to try to keep the aggregate of total credit inflated.
And while that doesn't cause the deflation, because the aggregate credit is still there, and even though it may be tucked away somewhere, it's still a drag on the overall economy, and it's still a drag on growth and production because whoever owes that debt is still being held down by that, right So even though it's kind of like tucked away, hidden, you know, out ofside, out of mind, it's still there.
It's still dragging the situation down. So it never allows us to kind of heal and start growing again.
Absolutely well, and we don't know what real market interest rates are We have no idea. The one thing I'm pretty confident of, although no one knows for sure, is that they would be hired than they are today right if free markets really rained. But this is why the most important price that needs to be left alone and not controlled by the government is the price of borrowing money, because it is the traffic light that allocates capital across
industries and across time. And when that is controlled, which it is in every major economy in the world right now, because there's something called a central bank, and the central banks have desks that literally buy and sell government obligations to control those interest rates. And so when they're controlling those interest rates to their target levels, you know they're not free market interest rates. And so to your point, we're not allowing all of the dead weight of the
economy to burn. And I like a nessin Teleb's analogy of forest fires. If you don't allow the underbelly, the undergrowth to burn every now and then when the real one comes, you get a conflagration, and it might burn hot enough that it burns all the bacteria in the soil, and nothing grows for decades until you know an elk or a moose comes along and takes you know what, and then the bacteria regenerates in the soil, but it takes decades for that to happen. I'm literally watching that happen.
There were terrible forest fires not far from where I live here in Wyoming a couple of years ago, and nothing is growing back because they didn't let it burn in the more mild years, and when it finally came, everything including the bacteria in the soil, burned. It's really sad.
I recently went out to Wyoming.
I was out there earlier this year for the Bitcoinski Week and boy was it beautiful. Absolutely, Oh yes, sure it is. Yeah, it is wild, big country out there, for sure.
Man, Wow, God blessed.
Whyom I go? I keep it wild's yeah, that's for sure.
It made me. It made me think, I mean, this is off track. But we went. I went.
We were there in Jackson Hole, right and then we went about to forty five minutes out and did a little helly scheme. But I got to kind of drive out and see that that rugged country and just get to meet some of the people that are out there. And I left thinking these people are never going to live in fifteen minute cities in metaverse like correct, these are the cowboys out here, right, And it made me feel a little bit better.
So I'm just gonna say, Hey, I lived on.
The East Coast for thirty years in big cities, so I can move easily from one environment to the other. But I grew up here, and I totally get it. I'm much, you know, much more, much more comfortable here, and you know, boy, there are a lot of people who are moving here who are like that, escaping the cities and appreciating the big, wide open spaces and generally being left alone.
Though. I can say I'm here in southern California and in Orange County along the beach Newport Beach, Corona del Mar, Laguna Beach, I mean some of the most expensive real estate anywhere, and I was completely shocked how expensive it was out Jacksonming.
Yeah.
I mean, I'm like thirty forty minutes from the airport in the in the middle of seemingly nowhere, and these homes are like fifteen million dollars on yep, what is going on us?
Oh? I watched that for years, and you know, they're very land constrained around Jackson. The rest of Wyoming's not like that. When I moved from the New York City area, my cost of living went down by two thirds. It's the rest of Wyoming isn't like that. But you know what's interesting is people Jackson's like a gateway drug to Wyoming.
A lot of people fall in love with Wyoming when they see that, and then they realize, wow, the once you go not far from Jackson any directions, it's equally beautiful, but the real estate prices are a lot lower, and
you don't have the craziness of the resort town. And so now the joke is the billionaires are driving out the millionaires, and the millionaires in Jackson who used to be in Jackson are now really scattered all over Wyoming, and as you can imagine, it's causing a little bit of friction with the locals.
Yeah yeah, yeah, So jumping back onto this, you know what we were saying about kind of setting the price of money. A lot of people don't realize that you actually buy money. You use money to buy things, but you also buy money when you borrow the money. And while most people understand the dangers of price fixing, which of course we're already starting to hear talks of price fixing because inflation is so bad yield curve control. So most people kind of understand intuitively that price fixing.
Isn't a good thing. It's actually a very dangerous thing.
But they don't think to the point that you made, that setting the price of money actually sets the price of everything. And also they don't realize how much information is in that price. So if I'm a business owner, if the interest rate is very low, that means there's lots of excess some money in the system, and people are healthy and wealthy, and I should probably launch a new product or business, and if the rates are high, I.
Might I might know the opposite.
And so when that's all distorted, all types of misallocation, unfortunately, people's lives get ruined, you know, in a small business sector specifically, going back to this, so in this you know, banking situation, as I kind of said, it almost seems like no bank's really going to survive unless either these conditions change or there was like some sort of like a full reserve bank, which of course Custodia Bank was
trying to do. And I know that you and I got to talk about this a little bit in Miami, and I know you can't lay out a whole lot of details, but you had a full reserve bank idea. Seemingly they didn't want that, at least that's what it appears, like, what kind of information can you give us on that?
What it's so interesting because we have full reserve banks. They're called money market funds. They're not banks in the sense that they don't take deposits, but they're really the same thing, right. They have liabilities in the form of fund shares, and they have assets in the form of t bills and repo that back one hundred percent of
the obligations. That's really one hundred percent reserve bank. And again, people are voting the money market funds, taking money out of the banking system to put them into money market funds, voting with their feet because that's what they that's what they want. There's something else out there that is essentially a full reserve bank. It's called a money transmitter. The fifty states have money transmitter licensing regimes. That's how most of fintech's are licensed. They just can't take a US
dollar deposit. A bank is a unique animal. It is a corporation bestowed by law with the right to accept US dollar deposits. But the FinTechs are not banks yet, they're effectively one hundred percent reserve banks. Why because they are not allowed to lend their customer funds. They have to hold one hundred percent of their customer funds in something called permissible investments, and the permissible investments are generally
short term, high quality liquid asset. Okay, So if we want to step back and look at it objectively, we already have one hundred percent reserve banks. They're just not legally banks because they can't accept deposits, but they're effectively the same thing. They're called FinTechs, and they're called money market funds. And so what's funny is.
How do they money market funds not collect deposits?
Well, because deposits are a US dollar that is deposited into a bank. So legally, a money market fund is a security. You're buying a security. Now, you and I look at that and say, it's effectively the same thing, but the plumbing is very different and the legal structure is very different. A money market fund cannot be used to make a payment that has to be done through a bank. Now, if we segregate out what are the
functions of our bank. We really use our bank for basically two things, for storing our deposits, storing our US dollars and for making payments. So the storage of the US deposits that can be handled through a money market fund with arguably higher yields and lower risk, which is why again so many people are voting with their feet. A lot of people have commented that this isn't a
bank run, it's a bank walk. It's the slow bleed of deposits out of the banking system into money market funds just simply because of the economics, the risk adjusted returns okay, And that's a situation that has been created by the FED itself. But we also use the bank for payments, and the money market fund cannot offer access to fedwire and ACCH. In order to get access to fedwire and ACCH as a financial institution, you must be a bank.
Where where do like Charles Schwab and those types, because they offer they have bank subsidiaries.
They either have bank subsidiaries, which is what Charles Schwab and Morgan Stanley for example, have, or they use a clearing bank like a JP. Morgan what would be called a correspondent bank, and basically it's really passing through their balance sheet and that's how they get access to the FED. So this whole question of who gets access to FED accounts is a very interesting one because in other countries,
non banks get access to central bank accounts. So the FinTechs like the paypals and Stripes and squares of the world in the UK, for example, would be eligible to get a clearing account at the FED. However in the US that's not the case. Well, in the UK would be the Bank of England, but in the US that's not the case. The law says you have to be a depository institution. Now, an eligible depository institution. What is that defined as? Number one, it's insured depository institutions, so
FDIC insured banks or NCUA insured credit unions. That's a group number one insured depository institutions. And number two is depository institutions eligible to apply for insurance. Custodia falls into that second bucket. We are uninsured. The FDIC was refusing to ensure any companies applying for insurance that were involved in the digital asset industry. Incidentally, I agree with them. We can come back and talk about that later if
you want to. But the point is that second bucket is in federal statute, and federal law says the Federal Reserve shall provide services to eligible depository institutions. If shall means shall, then that means a federal reserve should or will have to provide those services. Both the FED and the FDIC started to reinterpret the laws that apply to them, shall we say.
And.
Start to pick and choose who they got to serve and who they didn't want to serve. And that has resulted in the politicization of the banking system. And that is something I have spoken out about broadly. Banking should
not be politicized. If there are fights over whether marijuana is legal, or whether abortion clinics should have access to the financial service to you know, to banks, or whether oil and gas companies should have access to banks, those should be fought out in the regulatory realm, not behind closed doors in a bank supervisors exam one.
Yeah, that's a big deal. That's a big deal.
Now what about you'd said the two functions of the bank, But there's a third function of the bank too, which is extending credit. That's to the point that you're making earlier. That's where the money is actually created issues through the bank.
Correct. Not everybody borrows from a bank, right, So now we can actually do we can divide banks into lending banks and banks that are really just payment banks. Or there's a third category, which is custody banks. So custody banks like Bank of New York, Mellon, Stay Street, Northern Trust,
most of their business is providing custody for securities. They do have small lending books, but that if you go if you look at the balance sheets of those banks, they are teeny tiny compared to the assets under custody. It's i don't know, like one hundred billion of on balance sheet assets and twenty trillion of off balance sheet assets under custody at those banks. Directionally, those ratios are right. They really are not in the business of making loans.
They're mostly in the business of providing services. And that's that's that's a well trodden path for banks. So it's not the case that every bank makes loans.
Okay, So custodia is not dead in the water. You're up and running, just not full services at this point, is that correct?
We're not taking third party customer funds right now. We've actually been operating since October. We kept it quiet, but we've been operating since October, and we got our certificate of authority to operate from the Wyoming Division of Banking last October. But stay tuned. We will have announcements coming out relatively soon about a pivot.
Yeah, we'll certainly be hanging on that. I'm curious then, you know, part of I think what custodia and maybe potentially you can tell me about the name, but kind of like custodian I'm guessing right.
Full reserve, but also involved.
Bitcoin and I think maybe other crypto assets as well, and taking custody of those. And I'm just curious, you know, like we're obviously in this transition and most of us alive today are used to banks holding our money for us. Now, of course, we have bitcoin that allows us to take custody of our own assets.
You know, we have this.
We're kind of stuck between generations. Some people are still going to want that custody, et cetera, and especially maybe with institutions and things like that. I'm just curious your take on that, given what's happened over the weekend with Ledger.
Well, look, I mean what Ledger revealed is something that a lot of folks did not understand about the nature of the hardware provider having software control over the extraction of private keys and a hardware device. Okay, So what that's underscoring is that if you are not self custodying literally by you generating a random seed phrase and you storing it yourselves in a secure way, then you're relying
on someone else and it's just a different layer of trust. So, you know, I think a lot of the engineers who said this is no big deal understood it all along. A lot of people who were really shocked just didn't understand that's what that's what the hardware devices were all along.
So there was a really interesting panel that I was honored to be part of that Jamison Lop of KASA hosted with Obe of Fetiment, and it's basically three different models of custody, with KASA being self being a three of five multi sig, with custodia being a structure that is very different than traditional full service third party custody because the legal structure of the Wyoming law allows you to retain title legal title to your assets even when
you turn over your private keys. And then there's the community custody model, where essentially you're segregating out parts of the keys into the your trusted community.
And then of course would you put that third model sort of like with a coinbase kind of model.
Well, no, it's not, because in that case you're keeping parts of your key, as I understand it, with trusted people in your community. Coinbase full service counterparty risk. What you have as an IOU, you don't have legal title to the asset, and as the SEC properly required Coinbase to disclose last spring, and this applies to all third party custody that exists in the US market right now.
The way that legal structure works is when you turn over your bitcoin to a custodian, they give you an IOU back, and if they go out of business because of their legal structure, they're subject to the US Bankruptcy Code and you're stuck in a bankruptcy line getting your money back.
It looks like though, with Celsius and Blockfi they're letting people who are in custody solutions get their money back, but not in their earn or yield products.
Well, again, some of that is a function of just how much money the custodian has. So they were able and willing to be able to pay those out and they were deemed to be senior claims. So now we get into some very esoteric legal structures as to whether the account was an omnibus account or not. If it's an omnibus account or not, you are definitely in a debtor credit or relationship. But if you have a trust
account owned, there's a better argument for segregation. What Coinbase was required by the SEC to disclose, and it was about a year ago. There was a big bruhaha over oh, it's Coinbase going bankrupt. Well, no, I didn't think they were going bankrupt. What they asked. What the SEC made them disclosed is that if they ever did that, there is a risk that that the people who are holding money in their trust company might not find that their assets are segregated right at the moment when they need
the assets to be segregated. Why. Because the US Bankruptcy Code is US bankruptcy Court judges are empowered under the US Bankruptcy Code to be able to break contracts and in a trust company or a money transmitter legally in the United States, the asset segregation is by contract, Okay, big difference with a bank like Custodia or a broker dealer. Banks and broker dealers have special statutory segregation of assets and special receivership regimes. A bank judge cannot break the
statutory segregation of assets. That judge must respect it. Okay. So what that means, and that is that the greater likelihood is that if anything happened to a custodian that was a bank or a broker dealer, you were more likely to get your money back. Ultimately, in the case of Lehman, pretty much everybody got their money back. It took some time, but that's because they had statutory segregation of assets and they paid out the money fairly quickly.
So it does depend on how deep the loss is and whether they recover sufficient assets to start to pay out creditors fast. Bankruptcy judges want to pay out creditors fast, for sure. But the gist is this is complicated stuff. There's one other piece I'll add, which is that Wyoming
offers something called bailman. Bailman is the law of valet parking for your car or a code check you are not handing legal title to your car when you perk it at the garage to the garage, the garage can do one and one only one thing only, which is park your car. They can't take it on a joy ride. They can't, you know, rent it out to an uber driver and pocket the earnings and securities custody. That's exactly how it works. You custody, You deposit your securities with
a custody bank. They take your securities for a joy ride, stick you with the risk, and they pocket the losses. That's the way it works. Okay. So the Wyoming bailment law not only keeps title with statutory segregation with the customer if the customer elects the bailance. However, also it prohibits the custodian from the proverbial joy ride with your assets. The only thing that you can do as a custodian under Wyoming law is what your customer specifically directs you
to do. Whereas in the securities custody world, the Bank of New York's the you know, the the Northern Trust, the State streets go read the fine for rent. They can they can lend out your assets without your express consent and it's called securities lending. These are big, big businesses for these banks. Uh, and they're pocketing profits.
Uh.
And you're arguably getting a lot of risk that you're.
Part of the whole rehypothification and it goes down absolutely right, Yes, without getting going down that whole rabbit hole. But I'm just curious, you know, to the point of the securities. I mean, like, so I don't own the apple stock. E trade owns it and they owe it to me. But then E Trade doesn't own it either. It's owed to them, which is owed to them, And there's I don't know, five five, five six people in this process, this DTCC kind of clearing services that does all this.
It seems like now we have technology that could fix that problem. So you know, whether that be on some blockchain or on top of the bitcoin blockchain, we have like you know, potentially like a taro layer that we could.
Now own securities.
Yeah.
Yeah.
And it wasn't that long ago that stocks used to be bearer instruments. It was a stock certificate. It was actually a certificate. You know, we've we've we've grown yeah, paper and we've grown up. Seen the movies. I don't know if they still do it, but they had, like you know, the criminals, like give me the bearer bonds, right, like bear bonds were like bear instruments and so like. It wasn't that long ago that these securities were bare instruments,
and now we have the technology to do that again. However, there's this whole establishment that seems to rent seek in the middle.
Of every opportunity to hear back.
And not just rent seek taking a piece of the transaction, but actually leveraging them out, use them to your point of joy, joy writing your cart while you're gone.
Do you think I mean, is that going to be a big.
If not almost insurmountable obstacle in the way of letting technology fix that solution.
Well, so this is interesting. This is a broader question. Do the bank regulators want technology innovation in the banking system? And here's what I think happened. I think the answer is no.
I would say no.
And here's why they let the back end systems of the banking industry atrophy. And now here come all these FinTechs with these ferrari front ends that have to plug into the horse and buggy back end. And then here comes crypto on top of that, which is in some ways even faster and more efficient than the FinTechs because they've got their own separate settlement systems. Wow, that's scarce. The banking regulators and here's the problem. They're in a
catch twenty two. We talked at the beginning of this conversation about the catch twenty two they're in with, which is, if they keep raising interest rates and have an inverted yield curve, they cause more banks to go bust. Now they're in a catch twenty two on technology too, that very few people are talking about. People are voting with their feet to use the better technology, especially the millennials and gen zs. They've never set foot in a bank branch.
Yet liquidity and capital in the banking world are calibrated to an analog world. So people are voting with their feet to go digital. They want regulated digital asset service providers. They'd rather do business within the regulated world, but the traditional regulators are trying to shove them backwards in technology. I talked to one of the gen Z folks at Miami. He's never written a check and has only set foot in a bank branch once in his life. So there
you go. Now, try to make somebody like that live in an analog world. Yeah, not going backwards.
Yeah, they're not going back It makes me think of a quote from Christine Legard and she said that innovation is a threat to our financial stability.
Which it is.
I mean, it's innovation. It disrupts the old way of doing things. That's the entire point. And it's actually a conversation I had with Robert Breedlove while we were in Miami, and I was explaining kind of how I was thinking through this, and like from many ways, we had a long rip on his podcast.
We talked about it, but how like.
Our current form of government was built for the industrial age and now we've moved, we've moved to the information age, and we still have an industrial age government, but we
have an information age world. And one of those things I didn't talk about it necessarily with him, but one of those things that I was thinking about is that, you know, we've gone from a slow settlement to instance or not I'm sorry, slow transactions to instant transactions, and so kind of to the point earlier about moving money from bank to bank, I can literally do it with a push of a button instead of driving to the bank and filling out the forms, et cetera, and or
whether I buy things, you know, I used to have to go to the store and I push a button. So now we have instant transactions, but the settlement still is in the dark ages here, right, And so that's kind of the point that you're making. The banks have this cart and buggy back end, and how we have these ferrari or even spaceship set transactions, and so there's just this big gap that's there.
Well, and that's what Custodia set out to solve. We we really truly were a friendly and we're actively working with both sides to figure out how to make sure that neither side caused problems for the other. And in fact, unfortunately what happened is both sides caused problems for the other. Right, we saw the traditional banking system, you know, through the through the d banking, and just like the small number of banks that were willing to serve this industry caused
a lot of problems for the digital asset industry. And by the way, the digital asset industry arguably blew up some of those banks because going back to FTX, there were eleven banks, including three gesibs that provided financial services to FTX, which which appears to have been just a giant fraud and allegedly and yet eleven banks didn't catch that, including three gesives including by the way, three us G SIPs. I think there were two non us G SIPs as well.
These are supposed to be the best of the best at catching money laundering, at catching you know, know, your customer violations, and they were apparently allowing wires allegedly to be sent to FTX that ended up instead being sent to Alameda.
Yeah.
I saw that with silver Gate, and I was just like, I couldn't believe it. I mean, how do you not pick something like that up.
Well, I got to tell you, this is one of the things that makes me sad about the attempt to just shove this entire industry offshore and out of the banking industry, is that there were some of us as I think you know, who actively knew about some of the frauds. Right, let's go back to my public statements against the lenders. It was clear to me the lenders were going to blow up. You cannot take an asset
that is finite in quantity and start rehapothecating it. The moment you do that, somebody's insolvent and it's just a matter of time before they blow up. And there is no lender of last resort, unlike there is in the traditional finance industry. And then I have publicly disclosed that.
You've been about that since you came into the space years now, You've been pounded the table on that, right.
And so those of us who spun all that and who and who also were working with law enforcement, to the criticism of people in the in the you know, the purists, I look at that and say, even the purest libertarians should recognize that fraud is an attack on property rights, and we should want to rid this industry of fraud. And you know, behind the scenes, I've been helping. I just heard of a horrific situation yesterday where somebody was defrauded a substantial amount of money out of their IRA.
And you know the sad thing is it was done through an offshore crypto exchange into a D five protocol. He thought this was a regulated entity, and had there been a regulated entity, he would have been handling his business through the regulated entity. But because of the way the US has shoved this all offshore. What have they done. They've just empowered the criminals and the illicit finance part of the industry and the crazy leverage I'm seeing now
two hundred to one leverage futures come back. I mean, this is just awful.
I wish we could there's certainly that, and there's a complete breakdown in our regulatory agency as well, which I always have to preface this with a disclaimer, I'm not for this. I think we should be free to do what we want with our property and we'll take the responsibility, and I think the SEC should shut down in disgrace.
That being said, they're here, so I guess we got to deal with that.
But you know, back to the FTX scenario, okay, I mean it was part in the US. Part was of Bahamas. It was American investors, and we consider here and argue about that. But they bought what the only US licensed crypto derivatives exchange Ledger, and that went through the CFTC. They don't even have any bank accounts. Everything was commingled like nobody even looked at that, and supposedly they kept everything on a spreadsheet.
Like what kind of compliance are they doing?
Yeah, I don't know about that.
With led Ledterx was not part of the bankruptcy, but that because I was bought by FTX US or whatever.
Yes, but it was a separate legal So here's the interesting thing this is, this is a really important point. Ledger X just got sold. It had positive equity value, it was solvent, and I don't believe ledier X was included in the bankruptcy filing and it just got sold. Of course the equity interest was owned by FTX.
But business the CFTC approved the sell for.
FTX to buy that.
Yes, they did, right, and they didn't they didn't look into FTX.
That that's my that's my point.
I agree. Uh And again like I don't there were so many due diligence failures. But again I got to tell you, like you know, what was going on behind the scenes of this industry. Those of us who had been around for a while were quietly all talking to each other saying, how the hell did FTX make as much money as it did as fast as it did.
We knew what the economics were in this industry, and we were we knew something was wrong there, and it wasn't until until later that evidence started piling up that something was very wrong there, and how is it that the banks didn't catch that? You know? Unfortunately, for better or for worse, the structure of the US system relies on the banks as the government's cop right. They're supposed to do the anti money laundering and know your customer
and O fact checks. And based on what I saw from the FDICS Inspector General report, eleven US banks plus several other non US banks failed on that front. What happened?
Yeah, yeah, so that was a little bit of a rapple.
I didn't really intend to go down to but it is super interesting and it's important to understand as we go through this transition. But going back to here kind of the horse and buggy bank back end and strapping to a Ferrari front end, we now have the launch of the fed now system that's coming up in about forty days, about just a little over a month that's supposed to launch. Now I've tried to do my research. I don't see a whole lot of information on this.
You know, it allows the banks to move money back and forth faster. It's a new rail, it's not a currency. So if we have like the BI we have the bitcoin network, which is the network, and then we have Bitcoin is the asset that SIT's honest, this is just the network, the rail, not the asset.
But when I look at that, you.
Know, one of the things that doing is they're allowing okay, you know now twenty four to seven settlement. But like, if there's no asset moving back and forth, what settlement is there? All there is is a ledger that the Fed's going, okay from bank number one to bank number two. I mean, I would imagine this can happen in a database, a blockchain, a database or whatever. Yeah, I mean yeah, it's not like you need somebody there with like a
pencil like tracking it. So like he went home or took a break to go to lunch or something, and so I was like, okay, so like what are they settling?
I mean yeah, I mean what you.
What you're underscoring is that all money is really just a ledger. System used to be done you know, in caweri shells. Then it was done in you know, pencil and paper, and now it's done in bits in a computer database. But it's just a ledger, that's all it is. And the whole reason why there is such a thing called settlement, is that the adults screwed up with the
kids understood. The kids used to trade baseball cards with both kids holding both baseball cards, and on account of three you let go of the one you're trading right now, that's simultaneous settlement.
Give me the drugs, No, give me the money. No give me the drugs, give me the money.
But obviously it doesn't work that way because of the layers of intermediaries and the way technology has worked and still works at most banks, by quantity is that they're batch processing their transactions, so they're not real time settling. They're delayed settling, and then trying to settle as many of them net, they'll net all the debits and credits together. It used to be when processing power is expensive and when computer storage was expensive, that it made sense to
do it that way. Well, now those two things are not expensive anymore. We can move data at the speed of light. We can go back to what the kids we're so smart about, which is real time grows settlement. Both legs of the transaction happen at the same time. Nobody therefore carries an unsettled transaction, which is really a counterparty credit risk, and we can reduce the risk in the system as a whole. So FED now is designed
to do that. Now here's the problem. Remember when I said that the bank's balance sheets and liquidity were calibrated for an analog world. They were calibrated for the world where you had to go line up and fill out a form to get money out of a bank. Now, with online banking, we've now learned everything moves a lot faster in terms of transaction instructions. The settlement is still happening behind the scenes on the back end in the horse and buggy. But FED now is going to replace
that horse and buggy settlement system. So now we're going to twenty four to seven three sixty five. What do you think is going to happen to bank runs if we can start to settle US dollars twenty four seven three sixty five.
Well, certainly speed it up, you bet.
Big increase in bank runs, big increase in problems in the banks. Ergo, here's the punchline. They're gonna have to gate it. It's not really going to be a widely used real time gross settlement payment system because right now they're proposing to have a two hundred and fifty thousand dollars payment cap. Well, heck, if you've got fifteen employees in your business, your payrolls more than two hundred and fifty thousand. Okay, how useful is this? Really, it's not
going to be that useful. But the alternative is to go to one hundred percent reserve banks and then have an unlimited cap on the payments because everything has to be pre funded and it's real time grows settlement. That that would be a real innovation.
I read this very very interesting article from Deep Throat Deep Throat Ipo.
I think it is.
I sent it to a few people. I sent it Joseph Wing, you know the fed guy. I sent to a people get their opinions on it, and he basically highlights how.
Well.
I won't go into the whole background of the story, but basically, how you have these the four largest banks in the world being Chinese banks having having money offshore. Tong Longo says, yeah, but don't forget about the eurobanks, the Euro dollar banks as well. But let's just say in the point we have we have four for of the largest banks in the world are Chinese banks that are in the you know, Cayman Islands or whatever they're in, and they're trillions and trillions of dollars. They He has
all the math. It's an amazing article, so so dense. He had to highlight just the key points. But in the US banking system, we have like eight hundred billion. So he's like, they have trillions. All they have to do is just move from bank A to bank B with a bank with a push of a button and up that bank's done up.
Now transfer from this.
And he's like, even JP Morgan is powerless to this, and and he goes on to say, like, the only way that the US could defend itself from this is by putting in the gates exactly what you just.
Said, right, They have to get all this right. But remember also what I just said. As the banks fail, it's a swap from the bank's balance sheets when they fail to the FED through these alphabet soup.
Right.
So I have always expected the Fed's balance sheet to expand massively. It's not a shock to me that it went from eight hundred billion to almost ten trillion at its peak. It's going to go a lot higher over time, but that's not necessarily inflationary. This is where the Austrian school folks got it wrong, because all they're doing is filling up the whole from the defunct balance sheet whose credit creation went away when the bank failed.
But that's where I have a little bit of a disagreement with the likes of the Jeff Schneiders of the world that maybe take that viewpoint, because to your point from an Austrian lens, you're not increasing the money supply, you're just moving it. But by making that, by making that policy decision, by putting that fed put into play, it puts people into this easy mindset that makes them, yes, spend more.
Money, privatized profits, socialized losses. Again, this should make every fair minded human angry.
Right, So, even though that's factually correct, it's not. It didn't increase the money supply, it's not inflationary. It's actually not correct because by seeing that, it makes me feel better about going to getting a loan, which then did increase the money supply.
Absolutely, the money'pply already increased. That's the point. It's already there. Right. There's ninety five trillion of non financial sector debt outstanding that all got intermediated through the financial system and it's been growing two and after three trillion a year, and as long as the FED can keep it growing too and after three trillion a year, through turning the dials
behind the curtain, they keep the economy inflated. The moment they can't keep that number continuing to go up to and after three trillion a year, that's when things start to become really dicey. But your point is that that caused distortions. I agree, absolutely it did. So I don't think we're disagreeing. I just think we're talking past each other a little bit on the semantics.
Yeah, so back to the FED now then, very interesting.
I hadn't really thought about that part specifically.
So it's not really real time settlement because they have to put these gates in play. To your point, it's actually a pretty low number. So yeah, I mean, is this then just kind of like the first step that you think this kind of is this gateway drug, kind of like Jackson Jackson Hill.
It's like this gateway drug where it.
Kind of opens up to the FED in the banking system, to these new rails, and over time they'll probably grow it and maybe it moves towards sort of like a CBDC Or is it just like, hey, they updated their software on the back end, We don't care what software they used today.
Why do I care what software they used tomorrow? Kind of thing.
Well, no, we really do care what software they use. But there's not a limit on fedwire. Fed Now is supposed to replace fedwire, but until the banking system's liquidity gets massively increased, then it's not really a replacement. They're going to keep both systems going for a long time anyway, but they're never really going to be able to take the gate off fed now until you get to essentially
one hundred percent reserve system. Why, because the money is going to be slashing around like that old Hoover quote. You know, it's like a cannon ball loose on a on a ship during a tempest tossed era, right, the money. Can you imagine if Silicon Valley Bank weekend, if we'd had twenty four seven three sixty five withdrawls, the amount of money slashing around the banking system from bank to
bank that weekend would have been staggering. Right, But this is exactly why they have to gate it, and so it really isn't going to replace fedwire fedwire is the slow analog system that's basically digitizing analog data. It's not literally paper, so there is a digitization, but it's not natively digital data. And so but it's a slow system. You're still filling out the form in an analog way. Even if it's a form fill on your bank's online
banking website, it's still analog. And as a result, you can't program it to have a wire go through at eleven fifty nine pm on a Saturday night. You can't do that. It settles only during business hours and only when the FED gets around to settling it. So you know it's that's the only scenario in which the FED is willing to have an unlimited transfer value. But not with not with FED. Now where I thought you were going as the CBDC debate, which is is this a
gateway drug to CBDCs? And you know this is a this is an interesting question because the states, the Red states, it started with South Dakota and Florida got involved in now Texas and Alabama. I mean, a number of are saying they're not going to adopt the proposed UCC Article twelve, which is the update to allow electronic controllable records electronic
financial instruments right, including crypto of all forms. It's an important update and it got politicized unfortunately because of the way they handled the concept of a prospective center by digital currency. And so now there is zero possibility of all fifty states having a uniform commercial code on controllable electronic records. But that said, I have said that a CBDC is a hill I'm willing to die on, because it is true that once you get to a digitized
government money, you get to government control. One thing most folks don't realize now is how surveiled all financial transactions are. The government can and will get every financial transaction on you if it wants to without even without having to show probable cost. Doesn't get a warrant. There is no Fourth Amendment anymore on data that you provide to a third party. It's called the third party doctrine. It's been
upheld at the Supreme Court as valid. You have no privacy interests in data that you give up to a
third party. And this was a Supreme Court case, the Miller case in nineteen seventy seven that upheld the Bank Secrecy Act, and then it was started to it's been starting to chip away because cell phone location data is something anyone, not just the government, but anyone can buy so they can track you using your cell phone pings on cell phone towers, and a lot of Fourth Amendment violations, in my mind, have taken place by the government just going out and buying that data from a third party
under the guise that you have no privacy interest anymore because you gave up your data to a third party. Well, luckily in the Carpenter case two years ago, three years ago, now the Supreme Court has started to walk that back and say, you can't live in the modern world without giving up your you know, some data to a third party, and you might not have even realized you did it. And so they started to carve back a third party doctrine. But what I want to the listeners to realize is
there is no financial privacy. You should assume there already is none. And so the CBDC proponents look at that and say it's no different than where it is now. Most people they'll perceive that their bank is only going to give up their give up data to the government if there's a valid search warrant or a subpoena.
Yeah, yeah, and to your point, I mean they already have all that data, even with the whole to your point, your cell phones tracking you and this whole uh, you know, this whole noise being made about the whole TikTok situation, and the Chinese are still in your data. It's like that they're they already sell all that data, like they're probably already buying that data.
It's all out there.
But in regards to this back to yes, I did want to take from the FED noalysid into this UCC filing. And part of what I was thinking I wanted to ask you about on the UCC filing is that it's about who owns the property, right, That's what the UCC filings about, right, who owns the property. And so we kind of already understand that, like okay, well, you know, most people don't put they're waking up to the fact that the money in my bank is isn't my money anymore,
it's the bank's money. And I have a claim and I owe you to that. And in regards to the CBDC versus a bitcoin or another crypto asset, if I have that bitcoin or a crypto asset, then that's my property. But if I have a CBDC, I think per the UCC filing, it's not my CBDC, it's not my money. Is that part of what that UCC was about to basically say that all of the CBDC money that exists in society will actually be owned by the banks, not by us the people.
Well, again, it was set up to recognize that that government issued money isnt io you. So really is it that different than the dollar bill in your wallet if you still carry one, Because if you pull out that dollar bill, it says pay to the order of that dollar bill is in iou.
So it used to be an iou for gold, right, But when they severed the gold standard to iow you for it's not io you anymore.
Turtles all the way down. It's an io you to an io you to an i owe you to to an io Right. What is the full faith and credit of the US government? People would say, well, it's the taxing authority, or it's the you know, warships or you know national parks. Right, there are there are some massets there, but the government itself is insolved.
It's it's only as good, it's only as good as the next person will take it from me.
Well, but that's the point where this gets to. Once you make that leap, you just made the most important leap to understanding why bitcoin has value. And a lot of folks who were trained in a traditional world think that money has to be backed by something. No, what you just said is brilliant. Everything is subjective everything. Okay, once you realize that that piece of paper in your wallet with a picture of a dead president in green ink, the intrinsic value of that is a fraction of a penny.
It's just a piece of linen with some green ink on it. But yet, why is it that I can trade one of those pieces of paper that says a dollar one dollar on it for a can of Coca cola because it's a recognized medium of exchange. What makes it recognized even though it's intrinsic value as virtually zero, It's because somebody else accepts it as that. It's all subjective. It is always all subjective, And once you realize that
it's always all subjective, that's why bitcoin has value. So many people say, so many smart people, so many well trained, including economics PhDs, we'll say bitcoin has no value because they're not backed by anything. What you've got to realize is neither is the US dollar. It's not backed by anything. The full faith and credit of the US government is as ephemeral as anything. In fact, I would much rather trust math than trust the wa of math and trust the laws of man.
The backed by something is when gold was money and the paper was the iou for that.
So the dollar that I.
Had was backed by the gold that was in the bank, and so if I gave it to you, you can go redeem it. So it was backed by that.
But what gave the gold value?
Nothing? It was suggested. Yeah, no, I know.
The point I was trying to make is only debt needs to be backed by something. Oil is not backed by anything. Gold's not backed by anythink Bitcoin's not backed by anything. Only debt is backed and so anyone that says, but what is it backed by? In my opinion, shows that they don't really understand how this system works. They're referring to a debt based system when dollars actually used to be backed by something they're not anymore either.
So well, that's a great point because the way I like to phrase it is slightly different than but it's exactly the same point you just made, which is that you don't want money to be issued by anyone. So Toshi gifted society, gifted humanity with money that is not issued by anyone. And gold was not issued by anyone. Silver was not issued by anyone. Calalie shells, wamp them,
beads were not issued by anyone. They were things that occurred in nature and Satoshi's invention their commodities exactly, and they were goods that exchange, were commonly accepted in exchange, and then evolved because they were so commonly accepted in exchange to be what we know as money. Here's the crazy thing. The vast majority of people working in the financial services industry don't understand money. It took me a long time to figure that out. Took me a long
time to understand money. Most people don't realize what money is. It's the most confusing concept in society, and yet every day we all interact with it. But you know, to your point about social media and the bank runs, More and more people are waking up to realize that the money in their bank is not theirs legally, it's alone. You've lent your money to the bank and the bank goes it back to you. Even fewer people realized the
same is true of securities. You've lent your securities to your broker dealer, and they owe it back to you. And what we realize is that when companies like FTX took money in exchange for bitcoin, they sold bitcoin to their customers, they didn't go out and actually buy the bitcoin. They just pocketed the money. But that bitcoin I owe you was always there. Now that ended up with a lot more people thinking they owned bitcoin than really did.
And anytime an institution goes naked short, that's called naked short. They sold more bitcoin than they actually had. Anytime they do that, it's just a matter of time before that institution blows up. And this is one of the reasons why I'm a big proponent of not your keys, not your coins. You only own the assets that you directly control. And back to the UCC point, that's what's sad about the way this whole thing evolved. The Wyoming original version.
Wyoming was the first state to create an appendix for digital assets, an interpretive appendix to the UCC Uniform Commercial Code. Why did Wyoming do that? Wanted to make a roadmap for judges so that judges had a means by which to adjudicate disputes and not clog up the court system. We want clear obligations, rights and obligations of parties to a transaction involving digital assets, so that the legal system couldn't be used as an attack vector on bitcoin. That
was the concept. So Wyoming started this whole thing, and guess what Wyoming did. Wyoming created an appendix that defines bitcoin in the category of money, So digital assets with no issuer are in the category of money for commercial law purposes in Wyoming. And I think ultimately many of the Red States are going to end up going in that same direction. But it's sad because it kind of got co opted. This whole multi state effort for the Uniform Law Commission, of which I supported and was in
to be an observer. The whole thing got co opted by this central bank digital currency issue. And it's sad because the Uniform Law Commission did a lot of good work there, but because of that one sentence in the draft Uniform Law, it got vetoed. And it's the governors who are vetoing it are not wrong in their sentiment, they were looking in the wrong place. But they were not wrong in their sentiment that they want to avoid having a central bank digital currency recognized in their states
as a means by which to protect their citizens. They are absolutely right in that philosophy.
Yeah, man, that's a lot. We've covered a lot, and I kind of got involved in that UCC and a couple conversations around that, and it was a little bit confusing. But to your point, that's the helial dion, so we have to stay vigilant on that. And so you know, sometimes these laws seem a little bit vague, and maybe the should clean that up and try it again. But I think we'll stop with that. We've gone super long. I really appreciate how your time. You've been more than generous.
Custodiabank dot com. Follow that what's going on Caitlin long underscore on Twitter, will link to all that down below. Anything else you want to call attention to or close it out with.
No, thank you, it's just fun. We missed each other in Miami and we got to actually go a little bit deeper as a result, So thanks for making the time to reschedule. Really appreciate it.
Yeah, it works out all right, Caitlyn, Thank you so much.
Thank you all right. That's a wrap.
Hopefully you enjoy this conversation with Caitlin as much as I did. Now, I've done another conversation with Caitlin, just in the past, not too far ago. We'll link to that down below if you want to get caught up so you can stay at the same pace with us. Otherwise, let me know what you think. Leave me a comment,
give me thumbs up if you like it. If you don't give me thumbs down, that's okay, but at least tell me why I hit that subscribe button so you don't when I put new videos out, and that's what I.
Got to your success.
I'm out.