Stable coins are the next payment system in finance. But part of that is you need adoption, and that's the important thing about why revewards exist, why exchanges are using those. You want people to adopt these payment stable coins so the innovation can grow.
So what happens next summer? Is it a big dialogue continues, we have more hearings before the markup and get a new draft of the bill in place.
I don't think you'll see more hearings.
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visit the link in the description. Hey, everybody, welcome into the Thinking Crypto podcast. I'm your host Tony Edward and joining me today Summer Mersinger, who is the CEO of the Blockchain Association and also a former CFTC commissioner. Some are great to have you.
Yeah, no, thanks for having me on. It's great to be here.
Yeah, Summer, I thought of you after this crazy week in DC around the Crypto Market Structure Bill to get your point of view and to help break down what happened this week and what we can expect moving forward. I'd love to start with you know, what were some of the hiccups with the Crypto Market Structure Bill that kind of caused the markup delay.
Yeah, there were a couple of issues outstanding that just really difficult to get consensus on and get to a compromise. Still dealing with a few issues around decentralized finance and how certain listed flinance laws apply or don't apply to code. There's still some questions around tokenized stocks and equities, and then probably the biggest one was the question around yield with stable coin yield if the third parties can offer
rewards to customers. You know, there's a yield ban in Genius that does not allow issuers to offer yield, but nothing is preventing the third party exchanges from paying rewards just like you would on a credit card. So that is still an outside any issues. So I think these are just really tough issues to get consensus on. There wasn't a ton of time with the language. I think people are still working through it. And this isn't that
abnormal of something that happens in legislation. There's always bumps in the road. There's always, like you said, hiccups, and it's just kind of part of legislating.
That's perfect summary of what happened, and also your ending thoughts there that this is not unique to crypto. Any legislation that's going through Congress. You have parties that are going to fight each other and tit for tad and I need this and you need it right. It is the common thing. How do sausage is made? Right?
Yeah? Absolutely, I think I said that a few times this week, Like and here's how legislation is made. It's some messy process and there are usually other political issues at play. It's like a giant chess board and you never know what the next move is going to be. So it's one of the it's a process and it's you know, you can try to control the process. You can try to schedule it out, but inevitably that doesn't always work out the way you plan. But I think
Chairman Scott he's in a good place. The bill is continually getting getting to a better place, and I'm hopeful that we'll get something that can be passed out of the Banking Committee and sent to the floor.
Now, at the crux of the issue, or who's behind some of the language that is not copasetic with what the crypto industry needs. Is it the banking lobby or is it also folks like Elizabeth Warren who you know, any any chance she gets to throw something against crypto or it's a combination of both.
Yeah, this is mostly the banking lobby, just kind of entrenched traditional finance trying to uh prevent competition and making it really hard for innovation to to flourish. I mean, when you think about it, stable coins are the next payment system in finance. But part of that is you need adoption. And that's the important thing about you know, why why rewards exist, why exchanges are using those You want people to adopt these payment stable coins so that
it can the innovation can grow. So banks just want to shut that down. They don't want to be they don't want to compete. They don't want consumers to have a choice between the banks and between you know, something different, and it really is it just comes down to competition. And at the end of the day, I always say we're on the side of the consumers because if you shut down these reward programs, all you're doing is taking money out of the consumer's hands.
Absolutely and speaking anecdotally, like I personally put a good amount of money into stable coins on platforms like uphold and coinbase, and I'm getting a higher interest than what for example, JP Morgan, who's my bank is offering me? They give me zero point zero one or something on my savings, but I'm getting higher yield there and it's insane,
Like the banks are trying to cut that off. And but at the same time summer they're also planning to launch their own stable coin, So why don't they compete and just offer the same thing or you know, on par or even more than what these exchanges are off.
That's been our argument all along. You know, this is the banks want to issue stable coins, they can, they can compete if they want to give more interest on the positive accounts, there's nothing stopping them from doing that. So this is just you know, trying to stomp out any competition, and that's that at the end of the day. It is just they don't want to have to compete with the new innovative financial services technology and the way things are moving towards a new payment system. Yeah.
Absolutely, So what happens next summer, is it the dialogue continues, we have more hearings before the markup and get a new draft of the bill in place.
I don't think you'll see another more hearings. I think that eventually Chairman Scott will feel confident enough to schedule another markup. Markup is when they kind of all go through the bill, read it, decide what language stays in, what language goes out, and then vote out of the committee. Senate Agriculture Committee next week they're going to release text, and then the following week they're going to have a markup as well, so you've got Senate Agriculture moving forward.
I think Senate Banking takes that time to work to refine some of those problems that are outstanding and try to solve some of those issues, because at the end of the day, you need both of these bills together to combine them to go to the Senate floor. So I think it's you know, it's one of those things where you know, Banking what's going to go first, and then Agriculture. It's just going to be a different order.
It's not going to change the fact that they're still work being done on legislation and we expect something to get to the Senate floor this year.
I don't know if you can answer this question. It might be a hard one. If you were to. Are there more folks who are pro crypto in the Senate than there are anti crypto or who are being influenced by the banking lobby, or if you want to call them detractors of the bill? What's the breakdown like between the two.
I think there are quite a few pro crypto senators. I think there are a lot of senators who understand the importance of innovating our finance system and not stifling technological advances. The problem here lies in the way the banks are approaching this. This is one of their tried and true methods. Is they use this the community banks to carry the message. And a lot of senators are very They've been very close with their community banks for
a very long time. These are their neighbors essentially and their home state, and so the banks are using those community banks to tell these senators, hey, we're worried about deposit flight, and it is that now they're trying to decide, Okay, who's telling me the truth? Here's what's the real situation. So I think it's more's not so much people are anti crypto. It's that they're having to choose between their small banks and crypto. And honestly, there's a way to
do this without having to choose. I think if they could come to the table and do so in good faith and compromise, we could get somewhere. But so far they just haven't been willing to do that.
Would a compromise potentially be that we can allow consumers to do this, but maybe we put a cap, temporary cap that only x amount of dollars can be moved from your bank account to these exchanges to do the stable coin yield. Could that be something that could work.
I mean, you got to think about it in this like you got to put yourself in the consumer's shoes, right when I look at the stuff, I'm like, and you know, we are consumers ourselves, But think about it, and you know, would you want a law limiting the way you move your money and where you move it? I mean, yes, there are certainly some laws out there, you know, around de listed finance, around know your customer that you know, do put some sort of you know,
kind of parameters around moving money. But you wouldn't want somebody to say, well, you can only buy so much stable coin or you can only move so much money out of your savings to buy something that you think there's a value and you see that it's going to be used for you know, payments in the future. So some of this is kind of really comes down to
consumer choice and we don't want to limit that. The idea is, let's expand the options for consumers so they can have more control over their finances.
Absolutely. I was just thinking like maybe it's a twelve month gap, but then it's unlimited beyond that. Right, Uh, it's a fun to get the bill through if if it's gonna this is gonna be a big sticking point for these banks, right and they're going to fight tooth and nail. But we're gonna have to wait and see what what the compromise might be. I know it's a hard question, but you know, what do you what's your best guess about the compromise.
I think there's a way to do this where you're focused more on activities than you know, a lot of the the senators who have concerns are worried about paying rewards on on the payment stable coins that are just sitting there idly. In their mind, that looks a lot like a deposit. And so you know, there's probably a way to do this where you're focused more on the activity the use of the stable coin there. You know, there there's a utility to a stable coin, so maybe
the rewards are associated with that. I think Crypto has put up or the stable coin stakeholders have offered a number of options. They have spent a lot of time trying to come up with options that would work based on their current business models, based on their current contracts, and it's just been rejected over and over again.
So why aren't the banks concerned about staking? Because again, anecdotally, I do both. I stake on Ethereum, Solana, Cardono and so forth, so I have capitals sitting there earning, and I also I do to stable coins. Why are you not so much concerned about staking?
Well, it's funny. Even when you think about stable quains and you think about Genius, this wasn't something that was part of Genius, you know, the rewards and yield issue that was all discussed in Genius. And I think they got caught flat footed in their bobbing efforts. I just don't think they were fully informed as to what they were looking at, and they weren't prepared to, you know,
take on crypto at all. They didn't realize the kind of political power that crypto now has because so many Americans own and use crypto, and so they were just kind of caught flat footed in their in their negotiations.
Now on staking, I mean, I think again, this is a this is something that's unique to crypto it's not something that banks do, so they probably would say, you know, maybe maybe it has to do with the fact that, you know, they don't know how to do it technologically, or they are unaware of some of the ways that it works. Sometimes it's hard to understand if you haven't been in this business and in crypto markets, it's hard
to understand what staking is. So I think it's maybe a combination of not fully understanding the the what staking is and you know, this isn't the this isn't what they're fighting right now. They've got a lot of fronts that they're fighting on and I think they've got to pick and choose where they want to fight.
Yeah, I think the keyword used there they got caught flat footed, right. It seems like because the Genius Act passed and then after they're not trying to re litigate, like, oh no, wait, what's just happened. So to your point, maybe you haven't gotten to the staking component. But if they were really thinking about all fronts of where capital potentially can leave the bank accounts and go into certain
things that er a greater return. Staking is another big one, especially you can do it in et apps and much more. But maybe to your point, the stable coins US dollar back stable coins are easier for them to understand, and and you know that folks can move money easily too with the with the utility of the stable coins.
I also think that it's part of it. You know, they have a lot to deal with right now, you know, the genius yield thing, and they got caught flood footed. They kind of were coming from behind to fight against us. And then you've seen some of the recent true socials from the President about capping credit card fees, about crapping interchange fees, and so it is. It's probably a bit of a bandwidth issue, but again the arguments are the same.
Consumers should have choice. We shouldn't try to entrench traditional finance by stifling innovation.
Absolutely, now, potentially some are there could be a government shutdown I think at the end of this month. Are you hearing anything about that? And could that delay uh, you know, the negotiations around the Market Structure bill and even the passing maybe if it's going to happen Q two or whatever it may be, you know, could that affect the time.
The appropriations process is going much better this time around than it did before the government shutdown feels like it was just yesterday. I know it's been over for a little while, but they have passed some appropriation bills, so there are certain parts of the government that they have, you know, already decided on their their funding for the fiscal year. They are in the process of negotiating others, and I think that both sides recognize another shutdown is
not helpful to anyone. So let's get this done so that we can, you know, move on to other important issues like crypto legislation.
Some are best guess. I'm not going to hold this to you because we are all guessing here. Do you think this bill, maybe by the end of Q one or early Q two, is making its way to President Trump's desk.
That's my hope, and I think it can be done. I never put a percentage on anything that's going through Congress because there are so many things that can disrupt the process. But I think that they are on the right track to get this done in Q one maybe Q two. It still has to go back to the House. Whatever the Senate passes, that'll take a little of the time. But the parties that need to be committed or at
the table negotiating. The steps that need to happen are happening, and you've got the right players in place, people who really do want to see this framework become law. So you've got all the right pieces of the puzzle in place, and it's just a matter of putting them in the right place so we can get this bill done and get it signed by the President.
Absolutely. I wanted to ask you about a new bill that was introduced by Senator Cynthia Lummus and as well as debt with Democrat Ron White in supporting it, the Blockchain Regulatory Certainty Act, which is to help protect DeFi. You know, I recall a letter from Citadel to the SEC about DeFi and it seems there's a big push against it. What are your thoughts on this bill? And you know, I'm worried we're going to lose some of the ethos of DeFi because of the big pushback we're seeing.
Yeah, that's a big concern in the bill. The legislation you you talked about is part of the Senate Banking Bill, it is part of the House Clarity Bill. It's very important to defy and I think what we've been fighting back against is this kind of thought that there's a way to you know, that this isn't that people forget. This is code. This is code, open source code. This
is not somebody operating and operating in exchange. And when you put certain rules on top of DeFi that don't work for DeFi, you force an intermediary and that's going backwards in kind of the innovation here. So it's important to have those protections in place. It's important for those parties involved to remember that we're talking about open source code. We're not talking about any person or any company that's
controlling this code and how it operates. And at the you know, I think it's important for them to remember that. You know, you can put certain rules in place, and what's going to happen is you're going to drive all this liquidity offshore. People are going to be able to do the same thing offshore, and you'll lose this market, this innovation in the United States to someplace where there's more friendlier laws.
Yeah, and you know, right across the pond, the e you they've got their legislation in place. It's not perfect, but they've got it in place. And you know, folks that are able to know what they can do, how they can invest and build, and I can't wait for that to happen here in the United States and we can unlock a lot of growth.
Yeah. Absolutely, Mica. In the EU too, it's been you know that we have a lot of member companies that are global, many of them have you know, registered under MECA, and you know some of the disclosures and the way they handle new tokens is I've heard people say it's cleaner, it's easier than the way we're approaching it. So there's probably something we can learn from what they've done in Europe and in the UK and use some of those best practices to try to get to a good place in the US.
Absolutely. I did want to ask you about new CFDC chairman Mike Sile getting confirmed and how you're feeling about that. And you know, I know he's got to fill in the commissioner roles and all these things, but what were your thoughts on, you know, your old agency having a new chairman.
Yeah, I think it's great. He brings a fresh perspective to the CFTC. He has a great background in the crypto markets. He understands the regulatory issues that the markets are up against. From his time at the SEC and on the task Force. He's a brilliant lawyer. He knows these bills and these the legislation and the law that backs up the CFTC and the SEC. And he's going to be a great kind of new energy to the
CFTC that it needs. He's coming in fresh, and I think he's going to have like a new set of new set of eyes on what the way things are being handled and how to make sure that the agency is fulfill in its mission. And part of their mission is to promote responsible innovation, and I think he's going that put that at the top of his list of important things to think about when he's when he's running the agency.
Yeah. Absolutely, I see. He was also setting up the council with the CEO's innovation, I forget what it's called, but includes crypto companies and other set companies as well.
So it's really great. Yeah. And the CFTC has a long history of engaging stakeholders. You know, not all agencies welcome their stakeholders in the door and ask them to, you know, help them do their job better. I would say the CFTC has done that for a long time. They have a lot of advisory committees and they really rely on the product that comes out of those advisory committees. So this this CEO Council, I think is going to
be a really good thing. It's going to be really helpful to Stealing because he gets his kind of feet under him. But it's just again, it's an opportunity to hear from stakeholders to make sure that what you're doing on the regulatory front doesn't hurt what being you know, what the where the innovation is going, where the technology is going.
Absolutely, final item here I wanted to ask you about was the anti CBDC bill and what's the status of that. It didn't make its way into the Defense bill that was passed, but is there optimism that that could pass this year as well?
Yeah, I could see that passing It has brought support. It's just sometimes it's hard to find the right place to put legislation to get it out the floor, and sometimes you can have a bill that a lot of people support that can't quite move on its own. So they have been really trying to put this bill on you know, they tried to put it on clarity, you know, a couple different places I think they'll get there. I think it's an important message. We don't want the government
creating any kind of centralized, you know, digital currency. That's for the private sector to do, not the book sector, and so it's an important message in the bill. I think there's broad support for it. It's just its time has not come yet, but I think it will.
Well for sure summer. I know you had a busy week, and I'm sure you're gonna have busy weeks and months ahead as things continue with the negotiations around his bill. I'm looking forward to seeing the updates on the Blockchain Association. Thank you so much for taking the time.
Yeah, absolutely, anytime. Happy to be here.