Ep 36 - June 11, 2025 - Circle IPOs

Genius Act, is further along, but the Clarity Act is, playing a little catch up here, in a middle. It is further along than I expected, at this point. I you kept hearing rumors that it might happen, and I've learned with congress rumors are probably, about the opposite of what's gonna happen. But it's cool. So the the house ag committee, which is weird that it comes to that, but for whatever reason, they came to the house ag committee.

It got voted out of that. Actually, rather strong strongly, the votes was, 47 to six. So there's a lot of, senators. Well, a lot of Republicans, very few Democrats seem to have voted or however that works. But it made it through that, and then they did a, a markup session, and now it's headed to the floor.

Apparently, like a marathon markup session. And, again, I I'm not too adept at to be able to explain what a markup session is, but I know from everything I read, it did take a while. And then now it's headed to the floor for discussion, which is pretty awesome.

The Yeah. I mean, I think it's likely in that bigger markup that you're going to see whether it's amendments or it's individual stakeholders really start to push for positions. That's where I think the optimist in me is hoping that when it gets to that full markup process, we don't end up with a gutted bill and we don't end up with a bunch of sausage, pork, as they call it, in Capitol Hill in there in order to get it over the hump. But it does bode well that it was more of a bipartisan vote, right? The numbers, as you mentioned, 47 to six in ag and 32 to 19 in financial services.

So yeah, there's going to be conflicts between the CFTC and the SEC until we get some type of clarity bill. The irony is they're calling this the Clarity Act and I'm hoping there is clarity.

But like over time it can morph into a commodity or whatever it may, you know, a new definition we might end up with. And that's what I I think I like about Hester Peirce at the SEC. She has this whole, like, two year period where she talks about the safe harbor, where it can kinda go through that. It has to hit milestones and they can get out of it. If that can get put into, I guess, as a rule that the SEC follows, the the CFTC also understands where the handoff would be and they agree upon that, I think that could be a great thing.

Again, rules can more be more easily changed than laws so that there's a risk there. But I think once there's an established kind of, you know, method to the madness going forward, then maybe it's a little more like a law in some sense.

Right. They have to be backed in a certain way. They're one to one. Interestingly enough, this current version of bill does not allow holders of a stablecoin to receive any yield. So the the issuers of these are the ones making the money.

And we'll talk about that here in a minute with Circle, but it's a it is interesting to kinda see the progress. So again, we just talked about the Clarity Act. It's catching up with the Genius Act. Not quite at the same stage, but close, and it's just good progress.

You want to have something also to address the AML KYC concerns that are out there. And so I think the question to be hammered out here for this one in terms of passing the Senate, and then obviously it's going have to go to the House and then ultimately through a final vote is, know, has the industry done enough or has, you know, more importantly, the elected officials, you know, the Senate and the House, have they done enough to address KYC AML? Because there have been obviously more laundering activities, illicit organized criminal behavior using stablecoins. So it's just a question of, as we start looking at the reality that this will be here being stablecoins, have we done enough to hopefully address some of those lingering concerns? But yeah, it's the summer, right?

So it's good to see that our, you know, our elected officials in DC are are making progress on both both the Clarity Act and also the Genius Act.

Right. There might be concern that if you could get yield on a stable coin, you you would feel more safe because it's backed one to one. So you would not keep your cash in the bank, and you would use a stable coin. Whether that's true or not, you know, I'm not sure. But but it does have some weight to it, as maybe a reason that it could be being enforced the way it is. So

It sounds like an initiative of players that are pulling together. To me, I'm speculating Clearly, there's no public comment here from him, from Moynihan at Bank of America. But think the banks are taking notice. There's likely going to be a role that they're going to want to play in stablecoin.

They gotta make sure they do it right or they could have major problems. Yep. And especially a big bank like BofA that, I guess, we as a country do not want whether whether you like these banks or not, you just don't want them to have problems because they could have huge cascading effects there.

And each one has had a specific topic. But this one, he gave a comment that's saying that he's a big believer that and basically that self custody because that's very important to crypto. But also just the idea that bear assets are something that you couldn't have. They've been trying to they being the system, we'll say it that way, has been trying to kind of make this harder for people to have since 1994, I've learned as part of this process in reading. But it looks like maybe we're turning a corner.

The question is how much of a corner can be turned and how much can be put in place during a four year term. Right? It's, you know, assuming that the Republicans Republicans can kinda keep the momentum here another four years. So

And, you know, look, it is a positive sign. I know a lot of industry participants that have been vocal and notable on this topic came out and said that this is a sea change for DeFi, for open source, for staking and all sorts of other crypto digital asset initiatives. So I think it comes down to, yes, this posture could enable innovation. At the same time, the looser and more, I don't want say less regulated, but the more we enable the sort of permissionless open concept, I mean, just because of the fact that we have cyber criminals and we have that element out there, the more unfortunately folks are going to be susceptible potentially if they're not doing the self custody in a smart way, in an institutional kind of way. It could lead to fraud hacks, poor decisions, bad disclosures.

I mean, there's just a lot of things they're gonna have to get people are gonna to get educated around.

And, you know, for those that have been listening for a couple episodes, you may have heard us talk about how Ripple was trying to buy them. There was rumored that they offered 5 to 7,000,000,000. And then, even crazy rumor I thought at the time is, oh, they offered 20,000,000,000 and rip and Circle turned them down. Well, obviously, that they didn't get a transaction done and they IPO ed, this last Thursday. They priced the IPO $31 a share.

It opened at $69 and closed over a 100. And even today, it's at a 118. So a good gamble on their negotiating skills there.

So I mean, yeah, fantastic opening, for Circle. Obviously, there's got to be a lot of companies crypto that are taking note of this. If an IPO or some type of capital strategic event was on the drawing board for '25, you have to think that they maybe see a window right here where there's crypto investor enthusiasm. And as you've noted, with Ripple and their attempt to, or at least the news that they wanted to buy Circle, I think the comments that Brad Garlinghouse came out with saying that this is bullish for stablecoin legislation when we've been talking about stablecoins here today in the episode is a lot of momentum. We also talked about the fact that the IPO market hasn't had a lot of big notable haven't been a lot of notable IPOs recently, and this has been one of the most successful ones in decades, regardless of industry in terms of performance.

So,

Okay. Maybe that makes sense. So now it's not really about attacking the blockchain or anything like that. It's purely like, you know, it's it's not used. But people often buy stuff and just let them sit in their Coinbase account. There's people that have held stuff for ten years. So, like, what does inactivity mean? There's there's there needs to be a lot of definition around this stuff in my opinion that that that seems to be missing right now.

Is my initial thought. And you get these notices every once in while about unclaimed property. You have 38 in an account from a decade ago. I mean, I get those every 10 And this feels a little different. This feels a little bit more proactive in some respects. I haven't candidly done a lot of work on this, this AB ten fifty two.

Six months ago, it seemed like there was this whole push by states to go and set up Bitcoin reserves. You know, we're not hearing much about that anymore, right? It seems like, if anything, these things sometimes lead to a domino. Somebody gets a kind of a zany, wacky idea from a self interested party and decides to go push, it feels like an agenda, and it turns into a bill. Does that bill ever become law? Who knows? We'll report back, I think, if there's anything here.

But the idea is characteristics that may trigger something to be considered as security. If it's an ICO that is profit centric marketing, k, fine. That's probably pretty obvious. If it's a utility token with financial incentives. So I think that that may be a utility token that has a yield attached to it is another way that I am kinda reading that.

I would like to see more definition around that because there's a lot of definition of yield. Is staking considered yield? That's just really securing a network. My guess is no because they've talked about staking not being a security or a security act. And the thing, we profit sharing governance tokens.

That makes total sense. That's no different than obviously like a dividend if you wanna use more traditionally language and and just legal precedence for other court rulings. So some tokens are part of a DAO, and a DAO could be considered governance or it could be, considered ownership of something else. So I don't know. It's it's it's progress here. I mean, we we were begging for this kind of thing, for four years, and now we we almost get it on a weekly basis. So

What's the purpose behind the project or what's the purpose behind needing the token? And maybe it's a way to preempt and sort of head off some of the uncertainty that comes when these developers and companies are thinking about these projects, right? So that they can remove that shroud or that cloud of uncertainty in terms of enforcement or potential legal action that could come. I think it helps that developer early on that's kind of thinking through the design aspects. There's a reason in most contracts you read there's things like safe harbors, right?

And there's things that spell out for both parties, like what are exempt, what's the terminology, what are safe harbors, what are exemptions? Mean, that all through kind of case law has been developed over time, just haven't had that in crypto. And so I think for me, this allows, the beginnings of that conversation and hopefully that framework from the SEC around go you can go and do this, but you can't do that.

So we talked about the DTCC. The last episode of the one prior, they were talking about tokenization at that point. This is interesting to me because Ripple recently announced their purchasing Hidden Road that has not closed yet, but they're working through that at this point. The membership part gets basically elevates them to an extra higher level is my understanding. And the DTCC is settling $2,000,000,000,000 on a daily basis.

That is a lot of volume. And to think that potentially with Ripple's plans with Hidden Road wanting to settle a lot of the XRP ledger, not saying this is all coming to the XRP ledger, but could be, some of it at least. Yeah.

So obviously, this integration between, you know, like a global clearinghouse like DTCC and and and hidden road, which wants to put in place DeFi protocols to get more instant settlement, etcetera. Certainly big ramifications there. And then just this ongoing, bigger, I guess, discussion between us and hopefully those out there that really care is this convergence of traditional and decentralized finance, right, or TradFi and what we are talking about here is crypto and how these two ecosystems are continually beginning to overlap. Yeah, there's so much legacy plumbing and legacy operational. This is how it's kind of always been done with mental improvements.

And they used to be, you know, we used to use the term back in 02/1011, like the too big to fail, and we used that term moral hazard to mean these banks that took tons of risks, now we just say they're Ziffies. What the hell is a Ziffy? Well, somebody came up with the term, it's a systematically important financial institution. So now banks call that, that's a moniker. They want to be one of them.

Right? I mean, do and they don't. Right? So to me, that's just a way of saying, can't fail. The bank will always back us up, or The government, Right. People will always back us up. I I think that's a way of saying the big powerful financial stakeholders and players are gonna decide what we ultimately call this. Innovative traditional financial institution.

And I only pulled two examples. There's others. One for Ethereum and one for XRP, two separate companies. Webus is a AI driving company or vehicle driving company in China that they're buying $300,000,000 worth of XRP. And there is a SharpLink Gaming.

I believe they're based here in The United States, bought a billion dollars of Ethereum for their treasury. So these seem more speculative. You you can try to, like, find this nuance when you're talking about Bitcoin. Like, it's the gold it's digital gold. I'm not really speculating on the price. Everybody's speculating price, to be very clear. But it's just interesting to kinda see these other ones have to pop up that are not marketed as digital gold. So

I think from the standpoint of just utility, that's a trend, I guess, to pay attention to. You talked about the allocations and some of the names, right? So it's not a lot in the grand scheme of things of corporate treasury assets, but I think the size and scope of those allocations is starting to be a trend. Historically, treasuries have relied heavily on kind of the money market, the treasuries, highly, highly liquid assets. So now you know, the notion of getting into some of these or just diversifying, like even a small percentage away into things that the market may perceive as illiquid is another trend to kind of pay attention to.

Because if they start adopting, they might that might be a signal or a shoot, to use your terminology, that there is more liquidity there than people are giving those tokens credit for. Because if you're a corporate treasury, again, rules and governance and all this is different country by country. But if you start seeing the G8 type markets where these treasuries are saying this stuff passes all of our tests from the standpoint of liquid, etcetera. That's got to be looked at by the market a, you would think, as a positive development, or at least if, for me, a trend you're paying attention to. Because I think that's one of the big question marks about some of these tokens is, is there liquidity?

Right? And is everybody talking their own book? And is everybody, you know, pumping and dumping, you know, if you will? So there's a lot of kind of institutional, I think, people paying attention here and something I think certainly a trend to, you know, three or four trends to watch, you know, beyond just the diversification headline.

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