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stable coins or tokenized stocks
or dollars on blockchains rivals the size

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of the Visa network. Trillions of dollars
transacted. If you have a dollar

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of that stable coin, there is a dollar
sitting in the bank. And that's why the

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Clarity Act working its way
through the Senate is so important.

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>> One of the biggest opponents
to the bill is Senator Elizabeth Warren.

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>> And why why are we working on this?

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>> She says that North
Korea and terrorists

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and ransomware hackers, they're going
to run wild if this bill passes. The

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national security people I talked
to typically don't agree with that because

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there's a trail. >> Another
debate that has been opened with

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respect to the clarity bill. Developers
should be held more liable for the

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software that they write.
>> If you saddle people who build products

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that get used by many people for many
reasons. It's a kill shot to the

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industry which is clearly the goal.

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>> Volumes are now rivaling the Visa
network which is insane. Lots of

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gigantic financial institutions have
rushed in. Black Rockck, JP Morgan, Visa

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itself, Mastercard.
What happens if clarity does not pass?

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>> Um, [music]

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>> welcome to the A16Z Crypto Show.
I'm Robert Hackett and I'm here with Mark

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Andre and Chris Dixon who, if you
watch the show, need no introduction.

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>> Great to be here. >> So,
uh, today we're talking about

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regulation. Congress is currently
hashing through some legislation, once

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in a generation market structure
legislation that could determine where

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the future of the financial system and

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internet get built. Um, it passed in the

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House last year with bipartisan support

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and it has been making its way through
the Senate ever since. Now, there's been

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lots of fights and obstacles over it
which we'll get into. Um, but before we

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do, I want to zoom out and go big

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picture and talk about why regulatory

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clarity matters. Um, what the status quo

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costs us and what's at stake for the

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country and for anybody who may end up

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using this technology. So, uh, Mark, I'd

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like to start with you. Back in January

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2014, you wrote an op-ed for the New

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York Times called Why Bitcoin Matters.

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Things were a little bit different then.

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Um this was a pretty contrarian position
to stake out. Uh the crypto industry

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which if you could even call it that

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back then looked very very different.

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How have things changed from then to

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now? >> Yeah sure.
So 2014 so 2014 was so long

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ago um that the New York Times actually

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ran a positive piece on crypto um from

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you from right and from me with my name

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on it. Um and so yes this was in the
distant past. This is for the kids

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watching this. This is when dinosaurs
roam the earth uh 13 years ago. Um might

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as well have been in the 1500s. Um but
yeah, I'm actually really proud of that

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piece. So if you read that piece today,
I think it holds up really well. Um I

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think it holds up in in in a few respects.
Um so you know, one is and I

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should say this, like it's actually
fairly amazing. Uh you know, the Bitcoin

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white paper, you know, this piece
is even 5 years into the you know, macro

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trend. Um and you know, it was still
the kind of thing where it was still, you

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know, big news to even, you know,
believe that this technology matter

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mattered at all. So I I think it was,
you know, I I think I think I was preing

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not that Bitcoin was going to matter,
but I think I was precious and kind of

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forecasting that we were still in the
beginning of the adoption curve, like

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there was still there were still a lot
of people that were going to have to,

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you know, they were going to have
to learn about this, want want to learn

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about this, uh, and be part of it.
And so I think that that holds up. Um I

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spent a lot of time you know in the piece
and and around that time trying to

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really educate people on the nature
of this technology um uh uh you know with

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with with Bitcoin with the blockchain
because that you know that was new and

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you know for people who are not you know
don't have computer science degrees or

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math degrees like that that it's kind
of a well for people that do have computer

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science degrees it's kind of a weird idea.
So for people who don't have

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computer science degrees like it's
a genuinely new idea. So and I think the

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importance of that has held up really
well. Um you know I think the thing that

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uh you know in retrospect um uh you know
is needs to be changed about the piece

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is you know every time I said Bitcoin
you just swap in crypto right um which

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is like at that time Bitcoin was crypto
like it was you know was essentially the

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only game in town um you know Chris you
can correct me on the timing if you want

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but I believe at that point there
was the proposal for what were called

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colored coins um >> around then yeah
>> around then so people don't remember

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there there was a proposal for this thing
called colored coins which by the

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way is the single worst branded uh uh uh

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proposal of all time. Um you know, much

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much much worse than New Coke. Um uh but

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the concept of it was actually Bitcoin
bitcoins bitcoins that were going to be

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tagged basically with properties
that would let let them represent other

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things. Um and so the the that sort
of idea was that bitcoin would be extended

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to basically enable both tokenization
of real world assets and also uh you know

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virtual assets like NFTs. You know
of course what happened was that didn't

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happen. uh and what happened instead
was the creation of of new blockchains and

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and then and the creation of of new
crypto platforms and and then

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ultimately, you know, Ethereum and then
everything else that followed. And so,

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you know, what what started as a
technology became an industry. Um and

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and so I think if if you read that piece,
you'll see that I I projected

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many of the use cases and the the future
development of the technology, but it it

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it it took a different path.
Now, Bitcoin obviously has been very

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successful uh since then, but you know
what we've really seen since then is

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this explosion of innovation. um say
this explosion of innovation that has

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both happened and that wants to happen
around all the other use cases that we

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uh that we talked about at the pieces.

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>> Yeah, it's actually remarkable how well
that piece holds up. Um but there is one

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forecast in there that I want to cite
in particular that stands out which is uh

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and I quote you say the uh the coming
years will be a period of great drama

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and excitement revolving around this new
technology. I think you were spot on

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there. >> Um >> Chris uh
you've been there since the

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start as well. you were an early
advocate and acolyte of crypto.

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>> How have things changed
from the early days to now?

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>> Well, as Mark
was saying at the time, so

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way back sort of 2014 in the early days,

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it was mostly kind of hobbyists and uh

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you know, super enthusiasts and kind of

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a kind of a subculture cultish thing. Um

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the technology was um bit you know
Bitcoin was sophisticated but a lot of

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the things Mark alluded to like kind of

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the newer blockchains were early um had

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performance issues scaling issues other

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other kinds of things. Um fast forward

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today uh you know every day you'll see a

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new announcement from a major bank
or fintech company announcing a platform

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involving stable coins or tokenized

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stocks or other kinds of digital assets.

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um the stable coin volume. So, you know,
stable coins for those don't know are

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basically what Mark described with Bitcoin
except they're dollars on blockchains.

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That that is now a you know rivals the
the size of the Visa network. Trillions

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of dollars transacted. You can go into
WhatsApp and send money anywhere in the

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world uh for almost free in the same way

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you'd send a text message um using
stable coins. It's you know really the

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way money should work. It was was I
think Mark Mark could speak to this as

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one of the pioneers of the internet,
but I think was one of the kind of ideas

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that early internet pioneers expected to

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happen honestly much sooner um and for
a variety of reasons took a lot longer.

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But we're now finally kind of seeing

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that dream um you know come alive with

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with money moving as easily as bits.
Um so now it's a very mature industry. The

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technology the underlying infrastructure
has gotten much much more sophisticated.

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even three years ago might cost what
I just described might cost a couple of

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dollars if not tens of dollars to do
that transaction. Um now you know on

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most of the popular blockchain Salana
Ethereum and so forth it's sub one

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second to close to settle
the transaction sub one penny to to send

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something right so and and that's due to
kind of the equivalent of Moore's law on

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blockchains which is you've got you've
gotten sort of more and more performant

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chains um you know you read about hacks

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and things in the newspaper um about uh
crypto the reality is Bitcoin has never

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been hacked. Ethereum has never been
hacked. uh organizations that use these

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things have had lack security and have

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been hacked, but the chains themselves

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highly secure, highly performant now. Um

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and you have, you know, big institutions
and you know, trillions of dollars

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moving around on these things. Um which,
you know, of course brings us to our

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topic, which is you need, you know,
when you have that going on, you need

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regulatory clarity. You need
you need a framework around that.

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>> Let's talk about that. Um because you
know you cited that stable coin volumes

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are now rivaling the Visa network which
is insane. You know this is trillions of

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dollars per quarter uh turning through

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this system. Um lots of gigantic

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financial institutions have rushed in.

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Black Rockck JP Morgan uh Visa itself,

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Fidelity, Mastercard. I mean you could
rattle off just any number of names and

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they're all building on this technology

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right now. Um but we've gotten this far

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without rules. So there's been very
little in the way of regulatory clarity

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or guidance. >> Um why do
we need why do we need rules

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now? >> Well, so yeah,
so good question. Um so

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for a variety of reasons, uh the kind of
for political and policy reasons, uh the

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regulation around crypto was broken
into two components, stable coins and the

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rest of the market. So stable coins are

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roughly 15% let's call it of the market.

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Uh 85% is is the rest. Um there
was a bill >> and that's by market cap.

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>> That's by market cap. Um last year
a bill passed Congress was signed by the

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president called the Genius Act which
provides a comprehensive regulatory uh

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framework for stable coins. Um, and it's
not a coincidence that stable coins are

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also the area that's taken off the most
in the last year because once you have

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regulatory clarity, that means that you
know builders have certainty, consumers

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can know if if you're a American

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consumer and you use USDC or another

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genius uh compliance stable coin,
you know that if you have a dollar of that

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stable coin, there is a dollar sitting
in the bank because that's the genius

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regulation that that bank is audited
and that's sitting in short-term uh

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treasuries which is, you know, the
basically the safest thing the financial

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system can offer. Um, and so you know
that dollar, you can be assured that

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dollar is there. It's not an FTX, it's
not a Luna Terra situation where it will

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disappear tomorrow. That gives you as
a consumer confidence and protection. If

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you're an institution, if you're a bank,
if you're Stripe, if you're PayPal, and

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you want to go and go and enter
this market, you want to know there are

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predictable rules that there's
a framework around it. There's not going

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to be an FTX, that what you build will,

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you know, be compliant, not just the next
year, but next 10 years, right? And

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so the for and then if you're
an entrepreneur, of course, it's similar

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kind of logic. You want to know their
certainty. You want to know their their

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rules. You know, you're all our
entrepreneurs are happy to hire lawyers

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and pay a lot of money to be compliant.

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They just need to know, you know,
what they're aiming for. Um and so as a

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result of that bill, um we've seen a a
takeoff in in particularly around stable

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coins. And then kind of the close cousin
of stable coins is like once you put a

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dollar on a blockchain, you can put
a stock, you can put a treasury bill. And

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so that's also um you know been there's
been a lot of adoption there with people

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kind of you know relying on agency
guidance and other not non-legislative

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uh regulatory levers to give them
guidance on how to do that. But the big

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kind of hanging problem right now
is that you've got sort of this this other

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section of the market including
blockchains themselves which stable

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coins are built on uh which don't
have a comprehensive federal regulatory

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framework and that's why the clarity act
which is being working its way through

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the senate is so important because that
provide that's sort of the other 85% of

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the market. So you can kind of imagine
it's like as if we had a regulatory

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00:11:10,400 --> 00:11:14,237
framework for cell phones but not
for cell towers or something like half the

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00:11:14,320 --> 00:11:17,757
half the half the technology is regulated.
The other half has this sort

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of uncertainty around it. Um people are
still building there. People are trying

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to do their best to kind of you know
understand uh um what the rules are

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there. You know there's this other lever
of policym which is the agencies such as

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the SEC and CFTC. They they've provided
some guidance and things but ultimately

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you know what industries are built on as
you alluded to in the beginning with the

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internet is they're built on legislation.
Legislation is solid ground

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to build on. It's immutable. You know

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has the stamp of approval of the US
Congress. It's you know the result

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importantly legislation is the result
of a lot of smart people getting together

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people from different political parties
compromising you know uh finding the

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right balance between industry and

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consumer protection and so forth um and

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um and you know so we think ultimately
that's that's what is required and why

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the clarity act is so important. So,
as you mentioned, we do have some rules.

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It's for stable coins that covers
a sliver of the market, but there's this

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gigantic swath of the market that

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remains largely unregulated. Um, Mark,

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why why do we need rules for all of this

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and why do we need them now? >> Yeah.
So, [laughter] so, you know, we've

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been in this just kind of bizarre
twilight state for the last several

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years. um you know where sort of crypto
was developing you know largely without

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rules you know for better or for worse
in kind of you know what I would

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describe as sort of experimental ways
um you know between uh between sort of

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inception through 2020 and then we had

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um you know between 2020 and 2024 we
had a an administration you know in the

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white house that just like absolutely
just decided to just kill the industry

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like just you know flat out you know
declared war specifically by the way

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declined to regulate refused to regulate
um and instead decided to prosecute um

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and you know this kind of really
remarkable thing happened which the

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industry didn't die through that process.
Like crypto is still standing.

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And the sort of most bizarre sort
of aspect of that for me is I've had these

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conversations with some lawmakers in DC
where they say, "Well, um, you know, I'm

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going to support crypto now because
like if it didn't die during this whole

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period when we tried to kill it, then
it must be good." Um, and you know, we

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should probably support it. Um, which,
you know, is is sort of the most, you

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know, kind of reverse logic way I
can think of to end up positive on

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something, but I guess I'll I guess I'll
take it. Um and so and then that also

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led in this kind of bizarre situation
where people said well you know crypto

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hasn't you know materialized in the way
that you guys all said you know you

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don't have all these use cases that you
know so where are all the use cases why

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you know why why isn't everybody using
crypto and it's like well because there

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was like a 5year like regulatory

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prosecutorial assault you know that

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tried to kill it. Um and you know
in most areas of tech you know most areas

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tech industry never go through that.
Um um occasionally you get one that does

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and when they do you know they they
they say they live a very different life

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under very different different kinds
of pressures. Um and then you know along

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the way you know when that sort
of assault was happening in America um you

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know against American companies
primarily the you know overseas

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companies by and large you know ran
in whatever way their local jurisdiction

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allowed and that culminated in the
catastrophe of FTX right you know

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stealing you know just outright stealing
customer funds. Um, and then that led to

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a catastrophic blowoff. And then people
look at that and they're like, "Well,

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see that's, you know, you can't trust
crypto." And the and of course the real

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answer is you can't trust like fully
unregulated crypto. You like actually

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have to have a framework and you have
to have life risk controls of these

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companies and you have to have
compliance and you have to have auditing

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and you have to have all the things that
a grownup, you know, financial services

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business has. >> Um,
and so anyway, long-winded way of

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kind of getting to the point which
is like we need a regulatory we need a

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stable permanent regulatory structure
for crypto in the US the same way we

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have for stocks and bonds and everything
else. Um and we need it both because we

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need this industry to succeed. Uh which
we think, you know, and many people

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think is extremely important. Um we can
talk about that. Um and then uh we also

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need it so that it doesn't lead
to catastrophe. We need it so that it

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doesn't result in where FTX is.
And so we and we need it so that people's

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money, you know, doesn't get stolen.
And we need it so that, you know, the

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winners of the market aren't fly by night
operations operating on, you know,

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yachts off some coast somewhere. Um
and so so in a lot of ways, it's like the

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most obvious thing in the world. The US
financial systems been through this many

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times before. The most famous case is
the you know the the the securities acts

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that created the SEC regulated the stock
market after which you know the US

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capital markets in the next uh you know
100 years you know 90 years became that

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you know the envy of the world you know
we're not looking for a free lunch we're

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not looking for subsidies we're not
looking for you know protectionism we're

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not looking for support in that way
we're just looking for a basically a

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permanent framework that lets people do
business in a responsible way um and you

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know I think it's in a lot of ways
it's the most obvious thing in the world

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>> so you mentioned mentioned something
in there which is FTX. I think everybody

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might remember that exchange and its big

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implosion and collapse and all the

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fallout from it. Um what what is inside

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of the Clarity bill that would prevent
something like that from happening again?

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>> Yeah. So well right now there's there
is no f federal regulator for crypto

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exchanges as an example. So the you know
New York Stock Exchange, NASDAQ, they

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have federal regulators. Right now there
is no the Coinbases, Krakens, FTX, you

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know that for every good company like
Coinbase there are many offshore ones

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that are not good. There is simply no
regulator. They there is no and this is

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one of the very important things. It's
it's a it's a big chunk of the Clarity

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Act is to provide that. So that the SEC

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and the CFTC have uh oversight. They put

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in, you know, disclosure regimes,
anti-fraud regimes, uh, insider trading,

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uh, rules, all the things that,
you know, that you are, we are used to, as

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Mark was saying, with the with other

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financial markets. It's just the same

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kinds of rules with the same uh,

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agencies overseeing them. Um,
that would, you know, so for example, FTX

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wasn't audited properly. Very simple.

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This is what ultimately happened, right?

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They were moving apparently moving money
between different entities. They didn't

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have all the money there. um you know if

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you're a federally registered crypto

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exchange you are you have at an absolute
minimum you're being audited you have

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00:17:00,800 --> 00:17:03,677
all sorts of controls they have
surveillance regimes they you know

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00:17:03,760 --> 00:17:06,637
there's a whole you know suite of of

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things that are in the in the in the act

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00:17:09,200 --> 00:17:14,797
that would um empower federal regulators
to do their job and and if you're not

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compliant with these things you couldn't
operate in the US is how it works right

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so um it would have prevented that you

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00:17:20,800 --> 00:17:25,437
know um other big catastrophes. Terral
Luna was a big one. It was a stable coin

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that wasn't stable. It didn't have
dollars or or any other kind of stable

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currency behind it. It was essentially
this kind of, you know, self-reerential

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thing where the token has valued by the
token and would, you know, should never

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00:17:38,240 --> 00:17:41,677
have been presented to the stable coin
and would be illegal. It is illegal

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under, you know, the genius framework.

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Um, >> works well when
things are going up.

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>> A lot of things work well when things
are going up and then uh um don't work

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otherwise. So, um, yeah, these are these

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are not I mean, it's not, um, look, the
details are hard, which is why it's been

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seven years or so that some of us have
been working on the Clarity Act, and

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00:18:00,240 --> 00:18:04,157
it's now been a year, I think over
a year since the House passed its version

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00:18:04,240 --> 00:18:06,877
of it, and, you know, a year
the Senate's been working on it. There's a

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00:18:06,960 --> 00:18:11,437
lot of hard details. Um, it takes a lot
of kind of working across the aisles.

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This has been a very bipartisan effort.

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Um, so I'm not to say the details, but
you know, this is has been done before,

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00:18:17,600 --> 00:18:21,677
right? financial industries have been
regulated and the principles that that

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00:18:21,760 --> 00:18:25,757
are used in other industries are applied
here and it's a very robust what's in

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00:18:25,840 --> 00:18:30,557
the clarity act now the text that was
released um you know it's frustrating to

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00:18:30,640 --> 00:18:34,077
read some of the news coverage which
apparently just doesn't they you know

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00:18:34,160 --> 00:18:36,797
they don't read the bill as far as I can
tell because they say things like there

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00:18:36,880 --> 00:18:39,837
aren't um you know sort of safeguards

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00:18:39,920 --> 00:18:44,077
for example AML and you know uh
sanctions regimes and all this is simply

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00:18:44,160 --> 00:18:46,557
not true there's a very it it there's

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00:18:46,640 --> 00:18:48,397
very you know it has strict definitions

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of who is who who is subject to to you

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00:18:51,600 --> 00:18:54,237
know these requirements. Um it applies

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00:18:54,320 --> 00:18:56,477
all the same kind of money laundering

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00:18:56,560 --> 00:18:59,277
and um you know treasury other kind of

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00:18:59,360 --> 00:19:04,237
treasury rules to crypto intermediaries
that are applied in other markets. Um

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00:19:04,320 --> 00:19:07,997
the Fraternal Order Police just came
out with their endorsement of the Clarity

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00:19:08,080 --> 00:19:12,877
Act. um the largest law enforcement
organization in the country. Um you

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00:19:12,960 --> 00:19:16,237
know, so people are sort of opponents
are saying it doesn't have proper law

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00:19:16,320 --> 00:19:22,157
enforcement uh uh you know, clauses and
and and uh rules, but this is simply not

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00:19:22,240 --> 00:19:24,477
true. >> Yeah, let's let's
talk about that. Well,

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00:19:24,560 --> 00:19:27,597
let let's go over the fights that are
going on with this bill. By the way,

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00:19:27,680 --> 00:19:31,277
it's like 600 something pages,
I think, at this point. But um

348
00:19:31,360 --> 00:19:34,157
>> so drag it into chat GBT and ask is

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00:19:34,240 --> 00:19:36,317
there money? It's not that hard. If you

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00:19:36,400 --> 00:19:39,277
know we if uh if people want to actually

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00:19:39,360 --> 00:19:41,677
learn about this, you can do that.

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00:19:41,760 --> 00:19:45,677
>> Um but uh so so
let's let's go over each

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00:19:45,760 --> 00:19:48,477
of these fights, each of these debates
that's going on. You you talked about

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00:19:48,560 --> 00:19:50,797
illicit finance.
That's one of the big ones.

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00:19:50,880 --> 00:19:54,317
>> And in fact, one of the biggest
opponents to the bill uh is Senator

356
00:19:54,400 --> 00:19:59,277
Elizabeth Warren. Uh her and her camp,
she's called it a ticket to sanctions

357
00:19:59,360 --> 00:20:02,077
evasion. Yeah. >> Uh that's
a quote from her. uh you know,

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00:20:02,160 --> 00:20:06,877
she if you hear her describe it, she
says that North Korea and terrorists and

359
00:20:06,960 --> 00:20:11,037
ransomware hackers, they're going to run
wild if this bill passes. What do you

360
00:20:11,120 --> 00:20:15,037
what do you say to that?
>> Uh I mean, right now there it's

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extremely unclear,
for example, which entities

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00:20:18,880 --> 00:20:22,797
um are subject to what rules. And so
what you have is, you know, essentially

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00:20:22,880 --> 00:20:25,997
a dynamic. What what what I've
learned is when you have gray areas in

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00:20:26,080 --> 00:20:29,437
regulation, you have essentially a race
to the bottom, right? because you'll

365
00:20:29,520 --> 00:20:32,317
have, you know, look, I was on the board
of Coinbase for a long time. Mark's on

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00:20:32,400 --> 00:20:36,157
the board. Coinbase is a USbased company.
They're, you know, they take

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00:20:36,240 --> 00:20:39,757
regulation and compliance extremely
seriously. But for every Coinbase, look,

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00:20:39,840 --> 00:20:43,117
it's it costs a lot of money and it
slows down your product development. And

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00:20:43,200 --> 00:20:46,077
so, you know, every year a new offshore

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00:20:46,160 --> 00:20:50,157
competitor will pop up that doesn't do
those things and becomes popular because

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00:20:50,240 --> 00:20:54,717
they can offer lower fees or, you know,
whatever f better if you iterate their

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00:20:54,800 --> 00:20:57,597
product faster because they're not doing
all the kind of compliant things, right?

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00:20:57,680 --> 00:21:00,397
And so over and over again we've had
this phenomenon where there's sort of

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00:21:00,480 --> 00:21:03,197
the good actor that that you know this
is one of the things that frustrated us

375
00:21:03,280 --> 00:21:06,797
frankly is that we try to bet on the good
actor, the compliant actor and then

376
00:21:06,880 --> 00:21:10,877
for every one there's kind of this evil
twin you know the doppelganger offshore

377
00:21:10,960 --> 00:21:14,397
that sort of copies all the features
but doesn't do the compliance

378
00:21:14,480 --> 00:21:17,917
>> um and and gets Yes. and and gains
popularity and so what you end up having

379
00:21:18,000 --> 00:21:21,117
is just you end up the the the ambiguity

380
00:21:21,200 --> 00:21:23,357
ends up favoring the bad actors, right?

381
00:21:23,440 --> 00:21:28,157
Um, and so what the important thing
to do with good regulation, I think the

382
00:21:28,240 --> 00:21:31,677
Clarity Act does this is you very
clearly define the regulatory perimeter

383
00:21:31,760 --> 00:21:35,357
like who's subject to this and who isn't
and and if you're not subject to it, you

384
00:21:35,440 --> 00:21:37,677
can't do business in the US. So like if
you're in the US and doing business, you

385
00:21:37,760 --> 00:21:40,397
have to be subject to it. you give
clear definitions and then you have clear

386
00:21:40,480 --> 00:21:43,517
rules and and and so as an example in in

387
00:21:43,600 --> 00:21:45,677
the Clarity Act, if you're a financial

388
00:21:45,760 --> 00:21:50,557
intermediary, if you're a, you know,
somebody like a Coinbase or like a

389
00:21:50,640 --> 00:21:53,917
company that's holding customer funds,
you're subject to all of the same

390
00:21:54,000 --> 00:21:57,437
regulatory same rules that a you know,

391
00:21:57,520 --> 00:22:01,597
fintech, a company like Stripe or PayPal
or anyone else and it's simp it's black

392
00:22:01,680 --> 00:22:03,757
and white in the bill. So I don't
know how to argue with people that just

393
00:22:03,840 --> 00:22:05,437
simply are saying things that aren't

394
00:22:05,520 --> 00:22:08,637
that factually untrue like that. Um uh

395
00:22:08,720 --> 00:22:11,117
it's just uh you know and and as I

396
00:22:11,200 --> 00:22:15,677
mentioned, you know, the endorsement
of the various law enforcement agencies um

397
00:22:15,760 --> 00:22:19,757
a bunch of very you know look it's not
just there's there's a lot of Republican

398
00:22:19,840 --> 00:22:24,557
senators who are very strong on national
security sanctions North Korea who who

399
00:22:24,640 --> 00:22:27,037
support the bill including a number
of Democrats who we think will end up

400
00:22:27,120 --> 00:22:31,677
supporting it who similarly are. Um so
I I don't think it's it's it's neither

401
00:22:31,760 --> 00:22:36,077
true nor is it shown by the kind
of the range of support for the bill.

402
00:22:36,160 --> 00:22:39,517
Mark, what do you think about
this criticism that the bill enables

403
00:22:39,600 --> 00:22:42,717
sanctions evasion? >> Yeah,
so it's really so, you know, spent

404
00:22:42,800 --> 00:22:45,677
a bit, you know, spent quite a lot
of time, you know, kind of in in in in

405
00:22:45,760 --> 00:22:48,637
national security world, and I would say
the national security people I talked to

406
00:22:48,720 --> 00:22:51,677
typically don't agree with that. Um,
and in fact, they they typically say

407
00:22:51,760 --> 00:22:55,757
something quite different, which
is ironically they're hoping that more ter

408
00:22:55,840 --> 00:22:59,037
criminals and terrorists use use crypto
and use blockchains because there's a

409
00:22:59,120 --> 00:23:02,957
there's a there's a trail uh there's
a blockchain um and there's a trail and

410
00:23:03,040 --> 00:23:06,797
that is contrasted specifically um
with how a lot of for example terror

411
00:23:06,880 --> 00:23:08,957
financing happens today. And so I'll
just give you an example of this.

412
00:23:09,040 --> 00:23:11,997
There's a thing in kind of middle
the Middle Eastern kind of terror worlds

413
00:23:12,080 --> 00:23:15,117
these terror organizations there there
there is an existing legacy payment

414
00:23:15,200 --> 00:23:18,717
system that by the way is is is not
the banks. It's not any any any piece of

415
00:23:18,800 --> 00:23:22,637
technology. Uh it's a system called
the Hala system. Um and it's a it's an

416
00:23:22,720 --> 00:23:26,237
ancient, you know, centuries old
uh system. It's basically sort of in

417
00:23:26,320 --> 00:23:30,397
informal peer-to-peer peer-to-peer uh
payments. Um and it operates flu fluidly

418
00:23:30,480 --> 00:23:33,437
across borders. And the way that it
works is you'll have like two cousins,

419
00:23:33,520 --> 00:23:36,637
one in one country and one in the other
country. And you go give money to the

420
00:23:36,720 --> 00:23:39,917
cousin in one country and then it
and then that the money never actually

421
00:23:40,000 --> 00:23:43,357
moves, but like that cousin tells
the other cousin that the family now has

422
00:23:43,440 --> 00:23:46,237
that amount of money. Um and then as a
result, the money, you know, effectively

423
00:23:46,320 --> 00:23:47,997
becomes unlocked in the other location.

424
00:23:48,080 --> 00:23:51,117
And so you you literally have peer-to-p
peer payments happening around the world

425
00:23:51,200 --> 00:23:54,877
with actually no no no no no actual
transfer no actual transfer of physical

426
00:23:54,960 --> 00:23:58,477
cash. So you you can't like catch
it at the border. Um no digital trail

427
00:23:58,560 --> 00:24:01,357
whatsoever because nothing is nothing
has happened digitally. No paper trail.

428
00:24:01,440 --> 00:24:05,117
No nothing. And and and and that's I
think for example that's actually how uh

429
00:24:05,200 --> 00:24:08,637
a lot of terror plots are are are
financed. And so it would be there was

430
00:24:08,720 --> 00:24:10,957
actually a term a while ago that
national security people were kicking

431
00:24:11,040 --> 00:24:13,117
around. they called uh they called
crypto they called it prosecution

432
00:24:13,200 --> 00:24:17,277
futures uh which is if we could just get
the bad guys to use crypto uh instead of

433
00:24:17,360 --> 00:24:19,517
using the other methods like we would
actually be able to then mine the

434
00:24:19,600 --> 00:24:22,877
blockchain to be able to prosecute down
the road and so this is one where it's

435
00:24:22,960 --> 00:24:25,037
just the whole thing has just been
incredibly confusing the whole time

436
00:24:25,120 --> 00:24:28,077
because it's kind of this upside down
backwards you know kind of thing and you

437
00:24:28,160 --> 00:24:30,877
know quite frankly you know not not
talking about anybody in office but

438
00:24:30,960 --> 00:24:33,517
there have been even people in industry
who have said things like well you know

439
00:24:33,600 --> 00:24:35,997
crypto is inherently anonymous and you
know tra you know you can't trace

440
00:24:36,080 --> 00:24:38,797
anything you know which is just like you
it's just like you know just like upside

441
00:24:38,880 --> 00:24:42,637
down bizarre world you know kind of claims
um which which I think frankly just

442
00:24:42,720 --> 00:24:46,717
stands for people you know not
understanding the technology. Um and so

443
00:24:46,800 --> 00:24:51,037
I I think just the actual reality of it
is if if if more bad guys were running

444
00:24:51,120 --> 00:24:54,717
more money through crypto I think more
more bad guys would get caught not fewer.

445
00:24:54,800 --> 00:24:57,437
>> Right on. Yeah. And uh you know there's

446
00:24:57,520 --> 00:25:01,837
this thing that happens on TV shows. I'm
sure you watch them. Crime procedurals,

447
00:25:01,920 --> 00:25:05,357
cop procedurals where they're like
I'm the criminal, you know, wire me the

448
00:25:05,440 --> 00:25:10,077
money in in Bitcoin. Nobody's going
to know about it. Is that totally crazy?

449
00:25:10,160 --> 00:25:12,797
>> Yeah. So, there's a couple things.
So, yeah. So, one, so one is so, so the

450
00:25:12,880 --> 00:25:15,117
traditional thing that they do in TV
shows, traditional thing they do is they

451
00:25:15,200 --> 00:25:17,677
say, "Well, you need to put a gun
to somebody's head. They say do a wire

452
00:25:17,760 --> 00:25:20,717
transfer, like wire transfer the money,
right?" Um, and then they'll literally

453
00:25:20,800 --> 00:25:23,517
show a digital display and it'll show
digital display and it'll literally like

454
00:25:23,600 --> 00:25:26,717
have one of these things where it's like
zero to 100% as the money moves and the

455
00:25:26,800 --> 00:25:29,037
whole thing happens within like 2
minutes, right? And then in the real

456
00:25:29,120 --> 00:25:31,677
world, it's like, okay, try to try
to move money through the banking system

457
00:25:31,760 --> 00:25:36,877
across borders, you know? It good luck,
right? like days and days and days, you

458
00:25:36,960 --> 00:25:39,437
know, cuz the systems are shut down
and they don't work on weekends and the

459
00:25:39,520 --> 00:25:42,477
paperwork and the this and the that it's
just like it's just like you completely

460
00:25:42,560 --> 00:25:45,197
flat out and blow. So, so you're
exactly right. What's happened is they've

461
00:25:45,280 --> 00:25:46,957
extrapolated that straight to crypto.

462
00:25:47,040 --> 00:25:50,157
Um, and it's all in and yeah,
so you know, it's like any of these things

463
00:25:50,240 --> 00:25:51,677
which is like yes, it works it's we're

464
00:25:51,760 --> 00:25:55,277
straight on TV. Um, you know,

465
00:25:55,360 --> 00:25:58,957
contra contra maybe what what what a lot
of people think. You know, television is

466
00:25:59,040 --> 00:26:02,797
not actually real life. Um, uh, and uh,
yes, it it very much does not work that

467
00:26:02,880 --> 00:26:05,997
way. both existing payment system does
not work that way um in real life and

468
00:26:06,080 --> 00:26:08,007
and crypto does not work
that way in real life.

469
00:26:08,090 --> 00:26:10,157
>> [snorts] >> It's it's
actually a it's actually a

470
00:26:10,240 --> 00:26:13,197
non-trivial kind of research problem
that's going on today. Research and

471
00:26:13,280 --> 00:26:17,517
product development um to to build
blockchains that do have privacy because

472
00:26:17,600 --> 00:26:20,957
they are so they are so public. Uh
and in fact one of the funny things that

473
00:26:21,040 --> 00:26:24,397
happened was you know we we think that's
important just not for nefarious reasons

474
00:26:24,480 --> 00:26:28,157
because if you want to like pay you
know whatever I want to pay you for some

475
00:26:28,240 --> 00:26:31,277
service maybe it's a private you
know maybe it's a medical thing or a

476
00:26:31,360 --> 00:26:33,917
financial thing you don't want everyone
to know about it just like we do in the

477
00:26:34,000 --> 00:26:36,637
regular financial system you'd want
to have some privacy and that send someone

478
00:26:36,720 --> 00:26:39,917
a digital dollar you want some privacy
right it seems like a natural thing it's

479
00:26:40,000 --> 00:26:43,437
funny because you know uh for for a long
time everyone said well why would you

480
00:26:43,520 --> 00:26:46,717
want to build privacy it's only
for criminals since genius has passed and

481
00:26:46,800 --> 00:26:50,077
now dollar denominated stable coins
have gotten more popular. We've actually

482
00:26:50,160 --> 00:26:52,797
heard in DC now people are saying,
"Well, what about privacy? You need to

483
00:26:52,880 --> 00:26:55,117
have privacy." I'm like, "Yes, we agree.

484
00:26:55,200 --> 00:26:59,117
We agree. It's not always, it actually
is very reminiscent of the early um

485
00:26:59,200 --> 00:27:00,797
internet, you know, when Mark when you

486
00:27:00,880 --> 00:27:02,877
guys added didn't wasn't Netscape at you

487
00:27:02,960 --> 00:27:06,397
guys invented SSL, right?" Or you did

488
00:27:06,480 --> 00:27:10,477
>> and so yeah, for the kids don't know
this that HTTPS, that was Nescape. That

489
00:27:10,560 --> 00:27:13,117
was an invention. [clears throat] And
at the time it was like, well, who would

490
00:27:13,200 --> 00:27:16,477
need that? Why would you need to send
secret stuff? And and at the time

491
00:27:16,560 --> 00:27:18,637
probably some bad guys did use it maybe.

492
00:27:18,720 --> 00:27:20,717
But of course over time we all realized

493
00:27:20,800 --> 00:27:23,997
that was an important and and 99.9% of

494
00:27:24,080 --> 00:27:27,837
it is like good behavior right it's just
people interacting with their bank or

495
00:27:27,920 --> 00:27:30,557
something right but you guys had to go
you got did to go in front of Congress

496
00:27:30,640 --> 00:27:33,997
and didn't you have some >> it
was a four-year fight it was actually

497
00:27:34,080 --> 00:27:36,957
quite analogous to this and so when
when we started so when we started so

498
00:27:37,040 --> 00:27:40,637
Netscape was the first uh uh Ncape
was the first piece of consumer software

499
00:27:40,720 --> 00:27:44,317
that got w that got widely used that
that incorporated u public key public

500
00:27:44,400 --> 00:27:48,157
key encryption modern encryption uh
with public keys um and at the time we

501
00:27:48,240 --> 00:27:50,717
shipped Um we actually had to ship two
different versions. We had to ship the

502
00:27:50,800 --> 00:27:54,157
strong encry we could ship a strong
encryption version inside the US. Uh but

503
00:27:54,240 --> 00:27:57,437
we uh we were we were classifi
encryption was classified as ammunition

504
00:27:57,520 --> 00:28:01,357
um under what called ITAR export control
rules at the time. So encryption was

505
00:28:01,440 --> 00:28:04,717
encryption was classified in the same
category as a tomahawk missile. Um which

506
00:28:04,800 --> 00:28:07,117
meant that the Netscape browser
was classified in the same category as a

507
00:28:07,200 --> 00:28:11,357
tomahawk missile. Um and so we had
to ship deliberately deliberately insecure

508
00:28:11,440 --> 00:28:13,277
versions of of the product um overseas.

509
00:28:13,360 --> 00:28:15,917
And you can imagine how much
our overseas customers enjoyed that right

510
00:28:16,000 --> 00:28:18,717
they get this and you know by the way
we simply label in the box right which is

511
00:28:18,800 --> 00:28:21,597
like weak encryption you know basically
do not trust this and you can imagine

512
00:28:21,680 --> 00:28:25,357
how that how that went for sales and of
course immediately what happened was of

513
00:28:25,440 --> 00:28:27,757
course foreign competitors immediately
then stepped in and you know started

514
00:28:27,840 --> 00:28:30,397
cloning it and started making strong
encryption you know so people outside

515
00:28:30,480 --> 00:28:33,037
the US just didn't use our product they
used products that were made outside the

516
00:28:33,120 --> 00:28:37,037
US um and so you know we went
to Washington you know as as as as you do

517
00:28:37,120 --> 00:28:39,597
when you're a kid you go to Washington
you kind of explain things logically and

518
00:28:39,680 --> 00:28:42,877
they and they and they you know they
kind of you know they tend to stare at

519
00:28:42,960 --> 00:28:45,757
like you've grown a third eye and so you
you start to you know really kind of get

520
00:28:45,840 --> 00:28:48,157
into the you know
specifics and details of it.

521
00:28:48,240 --> 00:28:51,517
>> Um but then you you you get into this
like fundamental dichotomy which is as

522
00:28:51,600 --> 00:28:56,157
you said which is like okay is encryption
>> bad because you know bad guys are going

523
00:28:56,240 --> 00:28:58,397
to you know do do bad things with it. Um

524
00:28:58,480 --> 00:29:03,277
uh or is it good because it is the key
to establishing trust and being able to

525
00:29:03,360 --> 00:29:07,197
do business and for law-abiding you know
citizens um you both here and overseas

526
00:29:07,280 --> 00:29:09,437
to be able to you know cooperate
together and be able to conduct

527
00:29:09,520 --> 00:29:12,557
business. Um, and so, you know,
it's like, do do you want to completely

528
00:29:12,640 --> 00:29:16,077
eliminate the risk of of, you know, any
sort of ever cyber criminality or do you

529
00:29:16,160 --> 00:29:20,237
want to um or do you want to make like
Amazon.com possible, right? And and and

530
00:29:20,320 --> 00:29:23,997
and those questions are kind of deep
deeply intertwined. Um, and so anyway,

531
00:29:24,080 --> 00:29:27,277
it was this it was this very long, you
know, kind of education process. Um, it

532
00:29:27,360 --> 00:29:30,877
it took took four years. It took a very
very long time to unwind. Um, you know,

533
00:29:30,960 --> 00:29:32,637
they did ultimately make that change.

534
00:29:32,720 --> 00:29:36,077
Um, you know, by the way, the world did
not end. Um, and and the world did not

535
00:29:36,160 --> 00:29:37,677
end for, you know, for several reasons.

536
00:29:37,760 --> 00:29:40,077
you know, one is as you said,
the overwhelmingly the use cases were

537
00:29:40,160 --> 00:29:44,317
positive. Um um and then you know the
the the sort of intelligence services uh

538
00:29:44,400 --> 00:29:47,597
uh you know adapted in many ways
and then and then then the other just

539
00:29:47,680 --> 00:29:51,597
incredibly positive thing that happened
was American industry won right and and

540
00:29:51,680 --> 00:29:55,357
by the way not just state but like you
know many other you know the the the

541
00:29:55,440 --> 00:29:59,997
global internet economy is dominated
by American companies and by the way if if

542
00:30:00,080 --> 00:30:02,877
you're in the national security state
and you ask them the question of would

543
00:30:02,960 --> 00:30:05,917
you rather have this giant industry
be dominated by American companies or

544
00:30:06,000 --> 00:30:09,117
non-American companies 100% of the time
they'll tell you they want dominated by

545
00:30:09,200 --> 00:30:12,077
American companies because they can deal
with American companies, right? Whereas,

546
00:30:12,160 --> 00:30:14,637
you know, some, you know, they can't
deal with some company that's running in

547
00:30:14,720 --> 00:30:17,677
some other jurisdiction. Um, you know,
they a lot of times they can't even talk

548
00:30:17,760 --> 00:30:21,997
to them. Um, and so anyway, so it was
this it was this classic case study. Uh,

549
00:30:22,080 --> 00:30:25,037
you know, that one took four years.
You know, this one, Chris, this is like a

550
00:30:25,120 --> 00:30:27,117
you know, we're now in what, year seven.

551
00:30:27,200 --> 00:30:30,557
Um, and so for people who think
the modern world is speeding up, it's at

552
00:30:30,640 --> 00:30:34,717
least in this respect, it's not. It's
slowing down. Um but I yeah I and this

553
00:30:34,800 --> 00:30:36,797
is why by the way there's so much
pressure right now on clarity to get

554
00:30:36,880 --> 00:30:39,357
clarity pass is because you know se
seven years to work these through these

555
00:30:39,440 --> 00:30:40,797
issues I think is clearly enough.

556
00:30:40,880 --> 00:30:44,557
>> So let's talk about some of the other
objections to the bill. Another big one

557
00:30:44,640 --> 00:30:49,517
is ethics reform. So the president his
family members they have interests in

558
00:30:49,600 --> 00:30:51,437
crypto businesses. This will come as a

559
00:30:51,520 --> 00:30:53,517
surprise to nobody who's been reading

560
00:30:53,600 --> 00:30:58,877
the news. Um h how do you uh and so the

561
00:30:58,960 --> 00:31:02,637
critics say that this bill will
enrich the people who are most vocally

562
00:31:02,720 --> 00:31:06,717
supportive of it?
>> How do you address that?

563
00:31:06,800 --> 00:31:10,717
>> Yeah. I mean I would say first of all
like like it's not my area of expertise

564
00:31:10,800 --> 00:31:14,397
but like I'll say as a citizen I
think there should be ethics rules for

565
00:31:14,480 --> 00:31:17,757
government officials. I don't think
those should be exclusive to crypto. I

566
00:31:17,840 --> 00:31:21,837
think there should be ethics rules
around trading stocks and other crypto

567
00:31:21,920 --> 00:31:23,917
for sure other financial assets. That

568
00:31:24,000 --> 00:31:27,517
seems reasonable to me. Um, number one.

569
00:31:27,600 --> 00:31:31,517
Um, number two, um, the Clarity Act,

570
00:31:31,600 --> 00:31:35,757
even without specific ethics provisions,
will add significant restrictions to

571
00:31:35,840 --> 00:31:38,317
anyone in crypto, including requirements

572
00:31:38,400 --> 00:31:40,957
to, uh, for disclosures around, you

573
00:31:41,040 --> 00:31:45,517
know, the risks and holdings of a crypto
asset. It will add lockup requirements.

574
00:31:45,600 --> 00:31:49,357
So, it's only an increase in the
restrictions that would be applied to

575
00:31:49,440 --> 00:31:53,117
anybody, including government officials
is point number two. And then point

576
00:31:53,200 --> 00:31:55,517
number three, I think what's been
frustrating from a political point of

577
00:31:55,600 --> 00:31:58,557
view is that is that the you know the

578
00:31:58,640 --> 00:32:01,837
the specific ethics kind of provision

579
00:32:01,920 --> 00:32:04,477
around crypto has been coupled with the

580
00:32:04,560 --> 00:32:06,157
topic we've been discussing which is

581
00:32:06,240 --> 00:32:09,357
regulating this industry. Um this bill

582
00:32:09,440 --> 00:32:11,597
as proposed right now would be the first

583
00:32:11,680 --> 00:32:14,717
bill in US history I'm told that

584
00:32:14,800 --> 00:32:18,797
regulates an industry and also
add specific ethics provisions for

585
00:32:18,880 --> 00:32:22,157
government officials in it. Right. This
is very exceptional. Normally government

586
00:32:22,240 --> 00:32:25,517
ethics rules are done separately and an

587
00:32:25,600 --> 00:32:29,597
industry is regulated separately. Um so

588
00:32:29,680 --> 00:32:33,437
you know so I you know I think that
we're being held to this industry is

589
00:32:33,520 --> 00:32:35,917
being held to a completely different
standard than other industries. That

590
00:32:36,000 --> 00:32:39,757
said, I look I think that a very
reasonable debate for people to have and

591
00:32:39,840 --> 00:32:41,757
for and for politicians and policy

592
00:32:41,840 --> 00:32:43,757
makers to figure out is what what ethics

593
00:32:43,840 --> 00:32:47,597
rule should there be um for you know all

594
00:32:47,680 --> 00:32:51,197
financial assets including crypto.
Uh specifically on the you know right now

595
00:32:51,280 --> 00:32:54,717
there is an active negotiation. I hope
obviously I hope there's a resolution.

596
00:32:54,800 --> 00:32:59,277
It's not you know it's between
the various politicians not not sort of

597
00:32:59,360 --> 00:33:03,037
industry. Um, obviously I hope they can
come figure something out so that we can

598
00:33:03,120 --> 00:33:05,517
move forward because we want
to regulate this industry.

599
00:33:05,600 --> 00:33:09,437
>> By the way, this bill puts controls
on government officials um use of crypto

600
00:33:09,520 --> 00:33:13,037
that do not that are stronger than
apply to government uh officials stock

601
00:33:13,120 --> 00:33:17,677
trading. [snorts] Um and so uh if you
if you don't like how uh government

602
00:33:17,760 --> 00:33:20,957
officials trade stocks, uh this bill
puts in place uh something that is much

603
00:33:21,040 --> 00:33:23,917
stronger than that uh for for crypto.

604
00:33:24,000 --> 00:33:28,077
>> Yeah. And and one other point I would
add is right now we think of crypto most

605
00:33:28,160 --> 00:33:31,517
people think of crypto as a thing
you can trade. You know I I think what

606
00:33:31,600 --> 00:33:34,877
they're missing in that is that
increasingly like the stable coins we've

607
00:33:34,960 --> 00:33:38,957
been discussing it's a thing you
can use. Um and if the industry is

608
00:33:39,040 --> 00:33:42,557
successful it will get more you'll have
more and more use cases and more and

609
00:33:42,640 --> 00:33:45,357
more ways in which it's sort of embedded
into our financial life. It'll be a

610
00:33:45,440 --> 00:33:47,597
normal thing for a kid to buy tokenized

611
00:33:47,680 --> 00:33:52,397
stocks instead of going to some you know
traditional stock broker. Um and so I

612
00:33:52,480 --> 00:33:56,397
also think it's important with these
rules to make sure you separate that

613
00:33:56,480 --> 00:34:00,397
kind of trading behavior from the use
behavior because you know I think it's

614
00:34:00,480 --> 00:34:04,317
important for you know for government
officials to be have access to modern

615
00:34:04,400 --> 00:34:08,317
technology and I think this
is the future of finance. So

616
00:34:08,400 --> 00:34:12,877
>> okay so there are government ethics
rules in the bill and also it's a

617
00:34:12,960 --> 00:34:16,637
separate issue from uh creating
market structure rules for

618
00:34:16,720 --> 00:34:19,917
crypto. Maybe these are separable issues
>> like like the reality of where the

619
00:34:20,000 --> 00:34:22,797
politics are right now is that this is
that there are ethics provisions in the

620
00:34:22,880 --> 00:34:25,677
current bill. They're still being
kind of negotiated. I hope they come to

621
00:34:25,760 --> 00:34:28,877
resolution. But I think from our
perspective, the important thing is that

622
00:34:28,960 --> 00:34:32,237
after this many years of kind
of regulatory gray area and an environment

623
00:34:32,320 --> 00:34:36,157
that favors, as I was describing before,
kind of a race to the bottom. The

624
00:34:36,240 --> 00:34:40,237
important thing from our perspective
is we get a regul regulatory framework

625
00:34:40,320 --> 00:34:44,477
passed. And you know, we think
the clarity act while not perfect is is

626
00:34:44,560 --> 00:34:47,917
significantly better than the status quo.
And so I hope that those issues are

627
00:34:48,000 --> 00:34:52,477
resolved. >> Got it.
You mentioned you mentioned

628
00:34:52,560 --> 00:34:56,477
stable coins again just now. Um and one
of the big fights has been over the

629
00:34:56,560 --> 00:34:58,317
treatment of stable coins in this bill.

630
00:34:58,400 --> 00:35:00,957
In particular, the banking lobby. Um

631
00:35:01,040 --> 00:35:03,677
most notably uh JP Morgan Chase has been

632
00:35:03,760 --> 00:35:06,157
very vocal about this. Uh they are

633
00:35:06,240 --> 00:35:09,117
unhappy with the idea that you could

634
00:35:09,200 --> 00:35:12,557
earn interest on stable coin holdings.

635
00:35:12,640 --> 00:35:17,117
Now, the the fear, the concern,
the worry is that uh if consumers can earn

636
00:35:17,200 --> 00:35:20,317
interest on stable coins that they're
going to pull their money out of banks

637
00:35:20,400 --> 00:35:24,717
and keep them in these other accounts
that's going to cause deposit flight.

638
00:35:24,800 --> 00:35:26,877
>> Um and they don't want that to happen.

639
00:35:26,960 --> 00:35:30,157
So, what's the state
of that debate right now?

640
00:35:30,240 --> 00:35:33,997
>> Yeah. In the bill, >> I would
Yeah, in the bill essentially, I

641
00:35:34,080 --> 00:35:37,917
would say the banks got mostly what they
wanted, which is that in the bill, you

642
00:35:38,000 --> 00:35:40,317
cannot pay uh you you cannot pay

643
00:35:40,400 --> 00:35:43,437
interest on balances. um you you can pay

644
00:35:43,520 --> 00:35:48,157
there's it's I think the exact language
is anything that's functionally or

645
00:35:48,240 --> 00:35:50,237
economically similar to a bank account

646
00:35:50,320 --> 00:35:53,517
and there's further legal clauses. Um uh

647
00:35:53,600 --> 00:35:57,197
what you can do is uh sort of more

648
00:35:57,280 --> 00:36:01,117
complicated things like if somebody did
multiple transactions and if they did

649
00:36:01,200 --> 00:36:04,877
sort of a formula that's not
functionally or economically similar to

650
00:36:04,960 --> 00:36:06,237
paying out on a balance like you can

651
00:36:06,320 --> 00:36:08,637
give them rewards for you know using

652
00:36:08,720 --> 00:36:12,877
their uh stable coin wallet twice a

653
00:36:12,960 --> 00:36:17,197
month at Walmart. Walmart could give
them some kind of reward back. So it's

654
00:36:17,280 --> 00:36:20,317
more like a credit card kind of >>
which is what they'd asked for the banks

655
00:36:20,400 --> 00:36:24,157
that's basically asked for and the
industry uh you know there was there was

656
00:36:24,240 --> 00:36:25,597
a it's all been sort of in the press.

657
00:36:25,680 --> 00:36:30,157
There was a you know sort of a prolonged
discussion and they kind of got what

658
00:36:30,240 --> 00:36:33,437
they it seemed like they got what they had

659
00:36:33,520 --> 00:36:36,317
asked for but then remained I don't know

660
00:36:36,400 --> 00:36:39,837
seem to then want more. So, um I think

661
00:36:39,920 --> 00:36:45,277
going any farther you start to ban,
for example, I think in you know you start

662
00:36:45,360 --> 00:36:48,317
to ban things like Starbucks rewards
points and things, right? So, I mean

663
00:36:48,400 --> 00:36:52,877
it's uh um I think it's kind of gotten
to the as far as it can go and

664
00:36:52,960 --> 00:36:56,957
essentially, you know, was a compromise
that was some somewhat painful for the

665
00:36:57,040 --> 00:37:01,357
crypto industry, but you know, in the
context of the broader bill, uh we think

666
00:37:01,440 --> 00:37:04,637
it nets out, you know, still very we're
still very supportive of the overall

667
00:37:04,720 --> 00:37:08,317
bill. The thing that I find so
interesting is, you know, uh, this

668
00:37:08,400 --> 00:37:12,237
debate has been embodied by Brian
Armstrong versus Jaime Diamond. They're

669
00:37:12,320 --> 00:37:17,597
kind of the two leading >> voices
on this. Um, but JP Morgan has a

670
00:37:17,680 --> 00:37:20,077
big blockchain unit.
They're working on this stuff. Yeah.

671
00:37:20,160 --> 00:37:23,917
>> They they have tokenized
deposits that are live onchain.

672
00:37:24,000 --> 00:37:27,117
>> Yeah. >> Um, so it's
just interesting that, you

673
00:37:27,200 --> 00:37:29,517
know, they're trying to slow
roll clarity, but also

674
00:37:29,600 --> 00:37:32,557
>> I mean, these are Yeah. These are
massive organizations I guess with many

675
00:37:32,640 --> 00:37:35,597
there you know like this they're almost
like countries or something with JP

676
00:37:35,680 --> 00:37:39,117
Morgan so there many different factions
and things but yes every as far as I

677
00:37:39,200 --> 00:37:41,197
know every big bank including JP Morgan

678
00:37:41,280 --> 00:37:43,117
have significant blockchain efforts and

679
00:37:43,200 --> 00:37:46,717
I think um if clarity passes you'll see

680
00:37:46,800 --> 00:37:51,197
a lot of those efforts um are are will
roll out in a in a significant way.

681
00:37:51,280 --> 00:37:55,037
We're way past the kind of the way
enterprises kind of use new technology

682
00:37:55,120 --> 00:37:59,197
sometimes they kind of dip their toe
in and do experimental stuff. We're way

683
00:37:59,280 --> 00:38:02,797
past that now. We speak to a lot
of these organizations on a regular basis.

684
00:38:02,880 --> 00:38:06,157
Like they have real significant
deployments that are going to go live.

685
00:38:06,240 --> 00:38:09,117
Some of them are live, some of them are
going to go live with greater regulatory

686
00:38:09,200 --> 00:38:12,957
clarity. Um they, you know, I think they
see significant opportunity. I mean, you

687
00:38:13,040 --> 00:38:17,197
have to remember the banking system
is um for a bunch of reasons. I'm not, you

688
00:38:17,280 --> 00:38:19,997
know, not necessarily their fault.
It's just that they're very, these systems

689
00:38:20,080 --> 00:38:22,877
are very complex and very intertwined
with each other. But a lot of the

690
00:38:22,960 --> 00:38:26,477
technology is very antiquated. I mean,
it's not it's sort of a joke in Silicon

691
00:38:26,560 --> 00:38:29,757
Valley that they still have cobalt
programmers at banks, but it's actually

692
00:38:29,840 --> 00:38:33,437
true because they a lot of them have
very old code bases. Um, and in their

693
00:38:33,520 --> 00:38:36,957
defense, it's because it's a very hard,
you know, these they're so intertwined

694
00:38:37,040 --> 00:38:40,557
that you you can't just sort of um
upgrade your software by yourself. You

695
00:38:40,640 --> 00:38:43,277
have to do it all together. And so, one
of the things that blockchains have done

696
00:38:43,360 --> 00:38:47,437
for the financial industry is it sort
of given them a unified framework where

697
00:38:47,520 --> 00:38:51,277
they can all kind of say, "Hey,
together, let's move into the 21st

698
00:38:51,360 --> 00:38:55,277
century." And um it's so it's kind of
solved not just a technology problem but

699
00:38:55,360 --> 00:38:58,317
a coordination problem. And I think if
you speak to them and I but as we have

700
00:38:58,400 --> 00:39:01,597
they they're all very excited about that.
[gasps] Um and so you'll see I

701
00:39:01,680 --> 00:39:03,997
think as a result the the other thing
I'll say is just like the simple way to

702
00:39:04,080 --> 00:39:07,917
think about blockchains is they just
remove layers of mediation sort of you

703
00:39:08,000 --> 00:39:09,517
know they're disintermediation machines.

704
00:39:09,600 --> 00:39:13,277
They remove you know many of these
things now like Mark was saying you send

705
00:39:13,360 --> 00:39:16,237
money through a wire. We had a case
where we funded a portfolio company. It

706
00:39:16,320 --> 00:39:19,597
was international. Literally two weeks
later we couldn't find the money. like

707
00:39:19,680 --> 00:39:21,597
this is a significant financing, right?

708
00:39:21,680 --> 00:39:25,837
And it turns out if you if you actually
dig into it, there is no international

709
00:39:25,920 --> 00:39:29,357
wire system. Like it's basically you
wire to a bank, the bank has some piece

710
00:39:29,440 --> 00:39:33,117
of paper that gets moved somewhere else,
they wire another bank. Like there there

711
00:39:33,200 --> 00:39:37,277
is no financial like global network
the way there is a global internet or a

712
00:39:37,360 --> 00:39:42,157
global WhatsApp network. It's it's
a patchwork of systems. Um, and so one of

713
00:39:42,240 --> 00:39:44,957
the beautiful things with say stable
coins is you're just sort of you're

714
00:39:45,040 --> 00:39:47,117
building something just the way you
would build it on the internet, which is

715
00:39:47,200 --> 00:39:48,797
this one big thing that kind of goes an

716
00:39:48,880 --> 00:39:53,197
over-the-top network. Um, and so um, the

717
00:39:53,280 --> 00:39:56,877
banks see that opportunity. They say,
"Wow, this is this is um, you know, we

718
00:39:56,960 --> 00:40:01,357
can save a lot of money. We can provide
better products. Um, you know, we can,

719
00:40:01,440 --> 00:40:04,877
you know, modernize a whole bunch
of things." And so we see that across the

720
00:40:04,960 --> 00:40:07,917
board that all that that a lot of these
organizations are very excited about

721
00:40:08,000 --> 00:40:12,077
this, including JP Morgan. So this is
an opportunity for a big technological

722
00:40:12,160 --> 00:40:14,877
upgrade. Uh all these
systems you mentioned

723
00:40:14,960 --> 00:40:18,317
>> they have parts of it that are still
running on cobalt many decades old. Uh

724
00:40:18,400 --> 00:40:20,797
and this is a chance to >>
and and don't take it from me. I mean

725
00:40:20,880 --> 00:40:23,197
Goldman just came out you know CEO David

726
00:40:23,280 --> 00:40:28,557
Solomon Goldman Sachs endorsing Clarity
Bill Fidelity Black Rockck um a bunch of

727
00:40:28,640 --> 00:40:32,077
other kind of major financial
organizations. They all have major

728
00:40:32,160 --> 00:40:35,597
efforts. Many of this is public.
You know the most innovative fintech

729
00:40:35,680 --> 00:40:39,597
companies like Stripe have gone in a big
way. Um, so you don't have to listen to

730
00:40:39,680 --> 00:40:42,397
me. Just look at the look at the news.
I mean, it's we're at the beginning we

731
00:40:42,480 --> 00:40:45,517
were talking about the early Bitcoin days.
It's we're very far away from that

732
00:40:45,600 --> 00:40:50,717
now. These are very big organizations
and the technology is, you know, on the

733
00:40:50,800 --> 00:40:53,677
verge of going very
mainstream with the regulation.

734
00:40:53,760 --> 00:40:56,797
>> There are a lot of endorsements, a lot
of support. Uh, the one that sticks out

735
00:40:56,880 --> 00:40:59,677
for me you mentioned earlier is a
lot of the biggest law enforcement

736
00:40:59,760 --> 00:41:03,277
organizations are for it,
which I think is a major tell.

737
00:41:03,360 --> 00:41:06,157
Um I want to shift over to another

738
00:41:06,240 --> 00:41:08,237
debate that has been opened uh with

739
00:41:08,320 --> 00:41:10,557
respect to the clarity bill which is

740
00:41:10,640 --> 00:41:14,637
over liability for developers. Um

741
00:41:14,720 --> 00:41:17,597
there's a former White House cyber
security official Carol House. She's

742
00:41:17,680 --> 00:41:19,757
raised this concern that developers

743
00:41:19,840 --> 00:41:24,717
should be held more liable for the
software that they write. Um she argues

744
00:41:24,800 --> 00:41:27,677
that this if you don't hold them
liable that this could set a dangerous

745
00:41:27,760 --> 00:41:29,837
precedent for other areas of technology

746
00:41:29,920 --> 00:41:32,717
like AI. So Mark, I know you spend a lot

747
00:41:32,800 --> 00:41:35,757
of your time in the AI world working on

748
00:41:35,840 --> 00:41:40,157
this stuff. What do you
think about this argument?

749
00:41:40,240 --> 00:41:42,877
>> Yeah, I mean it's a kill shot
to the industry. Like it's just like it's

750
00:41:42,960 --> 00:41:45,037
impossible. It makes software
development impossible because how can

751
00:41:45,120 --> 00:41:48,717
any software developer anticipate
the use of the software down the road? And

752
00:41:48,800 --> 00:41:51,197
you don't even need to think about
this in terms of software. Just think in

753
00:41:51,280 --> 00:41:54,397
terms of anything. You know, if I run
a hotel and a criminal stays at the hotel,

754
00:41:54,480 --> 00:41:57,357
they use the hotel, you know, and they
they plan their operation. Does that

755
00:41:57,440 --> 00:42:00,957
make me part of their conspiracy? um you
know if I'm an engineer in a car and the

756
00:42:01,040 --> 00:42:04,157
car is used in a bank robbery does
that make me you know accessory to bank

757
00:42:04,240 --> 00:42:08,477
robbery like it's completely insane you
cannot if you if you saddle people who

758
00:42:08,560 --> 00:42:11,837
build products that get used by many
people for many reasons uh if you saddle

759
00:42:11,920 --> 00:42:14,797
them with downstream liability
for the uh for the uses it just kills the

760
00:42:14,880 --> 00:42:17,517
industry which is clearly the goal

761
00:42:17,600 --> 00:42:22,077
>> and just to add to that that it's
important not to conflate like in some

762
00:42:22,160 --> 00:42:25,437
of these like core cases I think there's
been some conflation of if you go if

763
00:42:25,520 --> 00:42:29,677
you're to use Mark's analogy if you make
build a car and then you actually like

764
00:42:29,760 --> 00:42:34,157
knowingly help a criminal do it like
then you then you are in trouble. Okay.

765
00:42:34,240 --> 00:42:37,117
And no one's debating that. Okay. And so
if you build a piece of software and

766
00:42:37,200 --> 00:42:39,197
you're like hey criminals come use it
and they send you an email and you're

767
00:42:39,280 --> 00:42:41,597
like how do I do a crime? And you're
like here's how you do a crime. And

768
00:42:41,680 --> 00:42:45,117
there have been cases like that in the
software world like that is a crime and

769
00:42:45,200 --> 00:42:48,237
no one's debating that. Okay? like no
one like what we're talking about here

770
00:42:48,320 --> 00:42:51,757
is you're making software like open
source software whether it's AI or

771
00:42:51,840 --> 00:42:54,237
crypto and you're making it for a you

772
00:42:54,320 --> 00:42:58,637
know like a a constructive use case um

773
00:42:58,720 --> 00:43:01,277
you're making a car you're making
a hammer whatever you're making an AI

774
00:43:01,360 --> 00:43:06,077
model you're making a blockchain um
and you know and then you for example make

775
00:43:06,160 --> 00:43:08,237
it open source if you add unlimited

776
00:43:08,320 --> 00:43:10,077
downstream liability or criminal

777
00:43:10,160 --> 00:43:13,757
liability or civil liability or any kind

778
00:43:13,840 --> 00:43:17,437
it's as Mark said you just you simply
like how could you ever make the calc

779
00:43:17,520 --> 00:43:20,877
how could you ever decide to do that as
an open source developer with that kind

780
00:43:20,960 --> 00:43:23,677
of risk? you couldn't they almost I
think and Mark you know better but in

781
00:43:23,760 --> 00:43:27,357
the AI world I think there have been
a few bills including California um that

782
00:43:27,440 --> 00:43:30,477
almost passed that would have imposed
that kind of basically unlimited

783
00:43:30,560 --> 00:43:34,957
downstream liability on AI models which
I mean how the these people aren't they

784
00:43:35,040 --> 00:43:39,597
aren't big companies that can afford
defending themselves like some five guys

785
00:43:39,680 --> 00:43:42,637
in a garage are going to take unlimited
liability like it's going to kill it

786
00:43:42,720 --> 00:43:44,957
it's going to kill the whole
it's going to kill open source

787
00:43:45,040 --> 00:43:47,757
>> yeah this is the thing so that's
the thing so the first thing and this is a

788
00:43:47,840 --> 00:43:50,397
very live issue in AI policy also
and people are trying to trying to do this

789
00:43:50,480 --> 00:43:54,717
in AI I think very clearly shows what
they're what they're trying to do. Um so

790
00:43:54,800 --> 00:43:57,597
first is open source dies right so just
like right out of the gate open source

791
00:43:57,680 --> 00:44:00,557
dies because like open source developers
aren't getting paid to start with. Um

792
00:44:00,640 --> 00:44:03,597
you know they certainly can't take
on you know enormous negative liability.

793
00:44:03,680 --> 00:44:07,917
You know they certainly can't you know
even if there were insurance available

794
00:44:08,000 --> 00:44:11,357
to cover unlimited downstream liability
for product used by millions of people

795
00:44:11,440 --> 00:44:13,757
you know you still couldn't you know
open source people can't afford to do So

796
00:44:13,840 --> 00:44:17,117
open source dies because open source dies,
academic research dies, right? Uh

797
00:44:17,200 --> 00:44:20,077
because without open source there is no
there is no computer science research in

798
00:44:20,160 --> 00:44:22,877
any of these fields. It's entirely
dependent on open source. So it kill it

799
00:44:22,960 --> 00:44:26,397
kills computer science as a field.
And that's just a start. Then it kills uh

800
00:44:26,480 --> 00:44:29,837
venture investing, right? Because like
we we can't we obviously can't invest in

801
00:44:29,920 --> 00:44:33,037
a company if they have you know
a million times the level of exposure uh

802
00:44:33,120 --> 00:44:35,757
because somebody does something that they
didn't even know about. Um and then

803
00:44:35,840 --> 00:44:38,637
it kills all the companies, right? all
the startups and then and then it kills

804
00:44:38,720 --> 00:44:41,037
the big companies and it just kind
of you know because they they also can't

805
00:44:41,120 --> 00:44:44,397
they also can't take that on and so it
rips right through and so and so this is

806
00:44:44,480 --> 00:44:48,237
the thing where it's just like the the
level of misunderstanding of what it

807
00:44:48,320 --> 00:44:52,077
takes to actually like run a business
or do anything productive is is is either

808
00:44:52,160 --> 00:44:54,637
like just completely absent when
people make that argument or they are

809
00:44:54,720 --> 00:44:58,157
deliberately trying to kill the industry
which by the way I think they're trying

810
00:44:58,240 --> 00:45:00,477
to deliberately kill the industry

811
00:45:00,560 --> 00:45:06,477
>> maybe maybe um let's move on to one of
the last objections that I've heard most

812
00:45:06,560 --> 00:45:10,477
often um which is that
this bill would punch a

813
00:45:10,560 --> 00:45:14,797
hole in securities laws. Uh you know,
Marky mentioned that securities laws

814
00:45:14,880 --> 00:45:19,437
have allowed US capital markets
to thrive over the past 90 some odd years,

815
00:45:19,520 --> 00:45:24,397
uh and have made the US the envy of
the world. Um so some people say that if

816
00:45:24,480 --> 00:45:27,917
this bill gets through, a company will
just go, hey, I'm going to just tokenize

817
00:45:28,000 --> 00:45:31,437
whatever. I'm going to tokenize some
asset. I'm going to, you know, put it on

818
00:45:31,520 --> 00:45:33,277
a blockchain and that is going to exempt

819
00:45:33,360 --> 00:45:38,877
me from SEC oversight and securities law
in general. What do you um what's your

820
00:45:38,960 --> 00:45:41,037
response to that? >> So,
if you take a stock and you to this

821
00:45:41,120 --> 00:45:43,997
is in the bill, if you take a stock
and you tokenize it, that's a security and

822
00:45:44,080 --> 00:45:45,677
it's and it's regulated by the SEC like

823
00:45:45,760 --> 00:45:47,677
a security is. It's very black and white

824
00:45:47,760 --> 00:45:53,037
and clear. Um the the only thing that is

825
00:45:53,120 --> 00:45:55,277
different in with respect to blockchain

826
00:45:55,360 --> 00:45:59,917
regulation is um that there it it

827
00:46:00,000 --> 00:46:04,317
delineates in certain situations that uh

828
00:46:04,400 --> 00:46:09,357
blockchains like like a token like
Bitcoin or Ethereum um in the Clarity

829
00:46:09,440 --> 00:46:12,557
bill it delineates in some cases it'll
be regulated by the SEC in other cases

830
00:46:12,640 --> 00:46:14,797
it'll be regulated by the CFTC. In all

831
00:46:14,880 --> 00:46:19,677
cases they have a federal regulator. Um
and now this by the way this is even the

832
00:46:19,760 --> 00:46:23,757
sort of the uh the last administration
that was opposed to crypto implicitly

833
00:46:23,840 --> 00:46:25,037
agreed with this framework. Okay?

834
00:46:25,120 --> 00:46:28,557
Because let's just let me just walk
you through it. So um Bitcoin when it

835
00:46:28,640 --> 00:46:31,197
started was presumably one or some set

836
00:46:31,280 --> 00:46:36,317
of people whoever Satoshi was um and
by definition when something starts it's

837
00:46:36,400 --> 00:46:37,917
centralized. There's a person behind it.

838
00:46:38,000 --> 00:46:41,597
They have sort of inside information and
control and the way that the Clarity Act

839
00:46:41,680 --> 00:46:45,357
works at that point you are regulated
by the that token is regulated by the SEC

840
00:46:45,440 --> 00:46:47,917
right? Um, so a new someone creates a

841
00:46:48,000 --> 00:46:49,837
new blockchain, you know, they have

842
00:46:49,920 --> 00:46:55,117
control over it. Um, and you know, they
have rules like if they, you know, they

843
00:46:55,200 --> 00:46:57,837
have lockups, for example, they have
disclosure rules, they have all the

844
00:46:57,920 --> 00:46:59,277
kinds of things you expect in securities

845
00:46:59,360 --> 00:47:03,117
lost. Um over time when you hit certain

846
00:47:03,200 --> 00:47:06,797
thresholds of decentralization and start
to look more like a Bitcoin of today or

847
00:47:06,880 --> 00:47:10,717
an Ethereum of today where there is no
central actor that controls it has

848
00:47:10,800 --> 00:47:15,197
inside information and so forth
the Clarity Act designates that the CFTC

849
00:47:15,280 --> 00:47:18,877
oversees that token. So it's regulated
as a commodity and not a security

850
00:47:18,960 --> 00:47:21,837
because at that point you still need
regulation to make sure that people

851
00:47:21,920 --> 00:47:25,357
aren't you know dumping on the market
or cornering the market and all the other

852
00:47:25,440 --> 00:47:28,957
things that sec that commodities
laws regulate. Um but it's a different

853
00:47:29,040 --> 00:47:32,797
regulatory regime depending on sort
of the the nature of the asset. Um

854
00:47:32,880 --> 00:47:35,837
>> so it becomes more like things
like uh like gold precious metals.

855
00:47:35,920 --> 00:47:37,597
>> That's right. Yes.
It's like Bitcoin and

856
00:47:37,680 --> 00:47:40,797
and even the last administration
who was anti-crypto

857
00:47:40,880 --> 00:47:45,037
they said at some point that Bitcoin and
Ethereum were sufficiently decentralized

858
00:47:45,120 --> 00:47:46,557
to be regulated as commodities. Right.

859
00:47:46,640 --> 00:47:51,597
So this has been implicit in court cases
and in uh agency decisions from both

860
00:47:51,680 --> 00:47:56,317
parties for the last 10 years.
All clarity does is uh enshrine it in law

861
00:47:56,400 --> 00:47:59,997
and and make the definitions really
specific so that people know exactly

862
00:48:00,080 --> 00:48:02,557
where they are so you don't have to go
to court to figure it out. Right? So

863
00:48:02,640 --> 00:48:06,077
it's really just kind of taking what's
been consensus across the courts and the

864
00:48:06,160 --> 00:48:11,357
regulators and making it sort of hard
coding it and making it specific. But at

865
00:48:11,440 --> 00:48:14,077
every moment, so first of all,
all existing assets by putting on the

866
00:48:14,160 --> 00:48:16,957
blockchain, they're still have they
still are securities, number one. And

867
00:48:17,040 --> 00:48:19,757
number two, all assets, digital assets

868
00:48:19,840 --> 00:48:22,397
are have a federal regulator, right? And

869
00:48:22,480 --> 00:48:27,597
have a framework. And today, today, if I
create a token and you know, and this is

870
00:48:27,680 --> 00:48:30,637
the biggest issue you'll have with like
a lot of these things is there's no

871
00:48:30,720 --> 00:48:34,957
rules for disclosure. There's no rules
for insider trading lockups. Um if the

872
00:48:35,040 --> 00:48:38,877
Clarity Act passes like our investments
will we our effective lock up period

873
00:48:38,960 --> 00:48:40,237
meaning that the period in which we can

874
00:48:40,320 --> 00:48:43,357
sell will will increase significantly

875
00:48:43,440 --> 00:48:47,517
um because a product we'll invest
in someone they'll launch a product it'll

876
00:48:47,600 --> 00:48:51,597
have a token and until there these
criteria are met for sort of hitting

877
00:48:51,680 --> 00:48:55,357
sufficient decentralization there
are lockups on venture capitalists and

878
00:48:55,440 --> 00:48:58,317
founders and so forth right which is how
it should be. I mean, it should, you

879
00:48:58,400 --> 00:49:00,077
know, it's a it's a it's a smart

880
00:49:00,160 --> 00:49:03,037
riskbased regulatory framework and um we

881
00:49:03,120 --> 00:49:08,397
think will allow for people to build
products that are long-term products and

882
00:49:08,480 --> 00:49:12,237
build trust in the market. Consumers
will, you know, consumers, investors,

883
00:49:12,320 --> 00:49:14,637
and so forth, all the market
participants will have trust in the

884
00:49:14,720 --> 00:49:19,197
market because it's regulated because
there's a framework around it. Um and um

885
00:49:19,280 --> 00:49:22,637
and that's how you build
a real industry long term.

886
00:49:22,720 --> 00:49:25,997
>> All right, so we've walked through
a number of the live fights. All of these

887
00:49:26,080 --> 00:49:30,317
things are being debated right now.
Um, any one of them could potentially tank

888
00:49:30,400 --> 00:49:34,557
this bill. What happens
if clarity does not pass?

889
00:49:34,640 --> 00:49:39,037
>> Yeah. Um, [gasps and sighs] well,
well, one is we'll keep working on

890
00:49:39,120 --> 00:49:41,037
it and someday it will pass. Number one,

891
00:49:41,120 --> 00:49:44,717
it will pass. Um, uh, number two, um, a

892
00:49:44,800 --> 00:49:48,637
lot of these things can and and are
being done by at the agency level,

893
00:49:48,720 --> 00:49:50,317
meaning the the, you know, the agencies,

894
00:49:50,400 --> 00:49:53,437
the SEC, CFTC, Treasury, and so forth.

895
00:49:53,520 --> 00:49:56,157
Um and so you know I think that the big

896
00:49:56,240 --> 00:49:59,437
difference is legislation is you know de

897
00:49:59,520 --> 00:50:02,237
facto permanent in a way that agency

898
00:50:02,320 --> 00:50:06,877
rule making is less so. Um and that's
important both to you know make sure the

899
00:50:06,960 --> 00:50:08,877
rules are there and you know for the

900
00:50:08,960 --> 00:50:14,077
long term for protecting consumers
um but also for industry to have uh

901
00:50:14,160 --> 00:50:16,717
confidence is you know you you want
to make an investment you want to build

902
00:50:16,800 --> 00:50:20,397
something those things can take many
years to build and so you know if you

903
00:50:20,480 --> 00:50:24,237
have to try to build that on like
shifting sands um you're [clears throat]

904
00:50:24,320 --> 00:50:27,837
you're much less likely to make that
investment of time and money um and it's

905
00:50:27,920 --> 00:50:30,957
just much harder to kind of um you know

906
00:50:31,040 --> 00:50:35,757
you've got enough to worry about as an
entrepreneur already without having um

907
00:50:35,840 --> 00:50:40,397
you know kind of a shifting maze
of regulatory changes. So um so that would

908
00:50:40,480 --> 00:50:43,597
be the downside. It would be just it
would just sort of prolong that. But but

909
00:50:43,680 --> 00:50:47,517
also look we're going to I think I'm
optimistic it will get passed in the

910
00:50:47,600 --> 00:50:50,397
near future but if it doesn't
we will keep working on it.

911
00:50:50,480 --> 00:50:53,837
>> Some people have this idea that
regulation and innovation are just

912
00:50:53,920 --> 00:50:57,917
opposites. They're at odds with one
another. They're opposed. Um, Mark, you

913
00:50:58,000 --> 00:51:02,557
spend a lot of your time on what you
call the little tech agenda, advocating

914
00:51:02,640 --> 00:51:04,557
for startups, for builders, for

915
00:51:04,640 --> 00:51:07,357
developers. How does all of this fit

916
00:51:07,440 --> 00:51:11,197
into that regime? Uh, and and why why is

917
00:51:11,280 --> 00:51:15,277
regulation good in this case?
>> Yeah. So, I would say the political

918
00:51:15,360 --> 00:51:17,997
political theorists talk about all
the different forms of government. And the

919
00:51:18,080 --> 00:51:20,477
thing that they you know different
debates about the different forms of

920
00:51:20,560 --> 00:51:22,957
government, how well they work and the
one that I think everybody agrees on is

921
00:51:23,040 --> 00:51:24,717
there's a specific degenerate form of

922
00:51:24,800 --> 00:51:27,837
government um called anarot tyranny. Um

923
00:51:27,920 --> 00:51:31,837
so anarco from anarchy and then and then
and then and then tyranny and the naroty

924
00:51:31,920 --> 00:51:35,117
is a system of government by which
you regulate the law-abiding people to

925
00:51:35,200 --> 00:51:39,837
death. The anarco part of it is you let
the rule breakers uh go absolutely nuts.

926
00:51:39,920 --> 00:51:42,957
Um and then the tyranny part of it
is you regulate or prosecute the the the

927
00:51:43,040 --> 00:51:45,997
good actors to death. And so you
basically encouraged the criminals. Um

928
00:51:46,080 --> 00:51:50,397
and you uh you you you condemn the uh
you know the law abiding. Um and and so

929
00:51:50,480 --> 00:51:53,437
that you know that that was the the
governance regime under the under the

930
00:51:53,520 --> 00:51:56,397
prior administration. Um you know
that you know that that was the system and

931
00:51:56,480 --> 00:52:00,477
and you know to your question like
startups selfact like very directly. Um

932
00:52:00,560 --> 00:52:03,357
and and by the way in in two segments
which is startups outside the US just

933
00:52:03,440 --> 00:52:04,877
went wild and did whatever they wanted.

934
00:52:04,960 --> 00:52:08,957
Um you know which as we as we discussed
led to FTX. uh startups inside the US

935
00:52:09,040 --> 00:52:13,277
got brutal punished um with with no
route to safety with no route to a way

936
00:52:13,360 --> 00:52:17,117
to actually safely conduct business.
Um and so like if you were designing from

937
00:52:17,200 --> 00:52:20,477
scratch and saying like what's the worst
possible policy um what's the worst

938
00:52:20,560 --> 00:52:24,237
possible approach like it would be
a naroty uh which is what we had you know

939
00:52:24,320 --> 00:52:26,717
what do you actually want you want
you want predictability you want

940
00:52:26,800 --> 00:52:31,037
predictability you want stability um you
want prudence uh you want reasonableness

941
00:52:31,120 --> 00:52:34,797
um you want you know protections at the
right level of protection you know you

942
00:52:34,880 --> 00:52:38,237
know you want consumer protections you
want investor protections um you know

943
00:52:38,320 --> 00:52:41,597
you you want things to be happening
in a in a in a in a in a fair way but you

944
00:52:41,680 --> 00:52:44,877
also you also want innovation you
want freedom you want the ability to

945
00:52:44,960 --> 00:52:49,357
innovate. You want the ability to u
deploy high quality products um that

946
00:52:49,440 --> 00:52:52,797
work in the way that that that that they
say they do. Um you want to be able to

947
00:52:52,880 --> 00:52:55,837
have customers be able to trust you
and and you want to be able to know that

948
00:52:55,920 --> 00:52:59,357
you're going to be in business in a year
um and not being sort of wantedly

949
00:52:59,440 --> 00:53:03,037
attacked and and and destroyed by a system
that gives you no way to to to to

950
00:53:03,120 --> 00:53:07,277
do it legally. Um and so it it you know
like a lot of things in life it it turns

951
00:53:07,360 --> 00:53:09,037
out there there is a middle ground.

952
00:53:09,120 --> 00:53:11,197
There is a there is a centrist position.

953
00:53:11,280 --> 00:53:15,597
uh you know the cent's position involves
the correct level of regulation. Um you

954
00:53:15,680 --> 00:53:19,437
know without that uh you know e either
side of that is is is just you know

955
00:53:19,520 --> 00:53:23,197
absolutely devastating. Um you know none
is devastating too much is devastating.

956
00:53:23,280 --> 00:53:25,597
And so you want to you want to kind
of folily locks it right in the middle

957
00:53:25,680 --> 00:53:26,957
which is what we think this which is

958
00:53:27,040 --> 00:53:29,597
very much what we think clarity does.

959
00:53:29,680 --> 00:53:33,517
Let's zoom out to and talk about what

960
00:53:33,600 --> 00:53:36,557
what's at stake for the country and for

961
00:53:36,640 --> 00:53:40,717
American leadership passing the Clarity
Act. Why is it why is it so important

962
00:53:40,800 --> 00:53:43,597
for the country to do this?
What will it lead to?

963
00:53:43,680 --> 00:53:46,957
>> Oh, I mean, so this is in the long
we would argue this is in the long

964
00:53:47,040 --> 00:53:49,997
tradition of American technological
leadership and I would say American

965
00:53:50,080 --> 00:53:53,837
technological supremacy. Um, which is,
you know, do you want to be the country

966
00:53:53,920 --> 00:53:57,357
that leads the world in technology or not?
Um and and by the way there's two

967
00:53:57,440 --> 00:54:00,397
parts of that which is one is do you
want the technology to exist when you

968
00:54:00,480 --> 00:54:03,357
know some people argue that you know you
better off without certain technologies

969
00:54:03,440 --> 00:54:06,717
but then there's another part of it
which is technologies do tend to exist

970
00:54:06,800 --> 00:54:09,197
uh you know once they get invented and
then you know do you want that to happen

971
00:54:09,280 --> 00:54:11,117
inside your own country or do you
want do you want to have that happen

972
00:54:11,200 --> 00:54:14,157
somewhere else and you know we we we
always make a very strong argument on

973
00:54:14,240 --> 00:54:18,317
this which is you 100% uh every American
citizen should want America you know

974
00:54:18,400 --> 00:54:21,677
regardless of political position
or whatever uh should want America to be

975
00:54:21,760 --> 00:54:25,997
the technology leader in the world um
that has many benefits it has you direct

976
00:54:26,080 --> 00:54:28,877
economic benefits in terms of the wealth
of the country and the ability to you

977
00:54:28,960 --> 00:54:33,037
know pay for all the things we want
to pay for. Um it has enormous uh benefits

978
00:54:33,120 --> 00:54:37,437
um in terms of um also our security um
our ability like let's put it this way

979
00:54:37,520 --> 00:54:41,197
like for the crypto industry to be
based in the US is overwhelming good for

980
00:54:41,280 --> 00:54:43,517
United States security like
and overwhelmingly good for United States

981
00:54:43,600 --> 00:54:46,797
law enforcement overwhelmingly good
for United States uh national security uh

982
00:54:46,880 --> 00:54:49,597
because then you know if you're the FBI
or if you're the you know if you're any

983
00:54:49,680 --> 00:54:52,477
any agency of government you're dealing
with American companies which is which

984
00:54:52,560 --> 00:54:55,837
is a much more straightforward thing
to do uh when you when you need something.

985
00:54:55,920 --> 00:54:59,517
Um and so it's it's good from a security
uh perspective. Um I by the way I think

986
00:54:59,600 --> 00:55:03,197
it's also good for you know
opportunities for kids you know are are

987
00:55:03,280 --> 00:55:05,677
your kids able to get educated
in state-of-the-art uh you know

988
00:55:05,760 --> 00:55:08,237
technologies to have lots of career
opportunities and are they able to work

989
00:55:08,320 --> 00:55:12,237
in those fields um and you know American
kids for 100 years have had that edge

990
00:55:12,320 --> 00:55:16,637
kids uh you know all over the planet
and and and hopefully that continues. Um,

991
00:55:16,720 --> 00:55:19,597
and so like, you know, it's just one
of these fairly amazing things where in

992
00:55:19,680 --> 00:55:23,197
some ways this is like like we're so
used to America being the technology

993
00:55:23,280 --> 00:55:26,157
leader that it almost feels embarrassing
to make this argument because it's such

994
00:55:26,240 --> 00:55:29,757
an obvious argument like America has
so clearly benefited from this for, you

995
00:55:29,840 --> 00:55:33,037
know, for the for the last hundred years.
Um, and and and in my view, we

996
00:55:33,120 --> 00:55:36,077
should all want that to continue
for hundreds of years to come.

997
00:55:36,160 --> 00:55:39,677
>> Chris, you literally wrote the book
on this stuff on blockchains, read, write,

998
00:55:39,760 --> 00:55:40,797
own.

999
00:55:40,880 --> 00:55:43,997
Tell us what does clarity unlock if it

1000
00:55:44,080 --> 00:55:49,357
passes in a year,
two years indeterminate future.

1001
00:55:49,440 --> 00:55:51,757
>> Yeah. Well, as I mentioned before,
I think of a a simple way to think of a

1002
00:55:51,840 --> 00:55:54,317
blockchain is is a dis disintermediation

1003
00:55:54,400 --> 00:55:56,237
machine. It lets you build internet

1004
00:55:56,320 --> 00:55:58,797
services where instead of having kind of

1005
00:55:58,880 --> 00:56:01,837
a bunch of, you know, uh, organizations

1006
00:56:01,920 --> 00:56:04,157
in the middle, taking pieces of the sort

1007
00:56:04,240 --> 00:56:09,117
of the take the money along the way,
you can build advanced internet services

1008
00:56:09,200 --> 00:56:11,117
where it's, think of it as peer-to-peer.

1009
00:56:11,200 --> 00:56:14,237
I can send you a dollar. Stable coin
is a simple example. I can send you a

1010
00:56:14,320 --> 00:56:18,957
dollar. There's no intermediary taking,
you know, if you send to Mexico right

1011
00:56:19,040 --> 00:56:22,157
now using a traditional financial
service provider, they'll take 8% to

1012
00:56:22,240 --> 00:56:25,837
10%. stable coin, it's almost zero
because there's not someone sitting in

1013
00:56:25,920 --> 00:56:29,197
the middle, right? So, that's
the simplest uh case. What's worked so far

1014
00:56:29,280 --> 00:56:32,557
has been financial use cases. Um, stable

1015
00:56:32,640 --> 00:56:36,637
coins, we're seeing now uh people,
you know, stocks and bonds and treasury

1016
00:56:36,720 --> 00:56:40,797
bills and other kinds of financial
assets, lending. Um, I think that will

1017
00:56:40,880 --> 00:56:44,157
in the next couple of years be the
dominant use case. So, I think we'll see

1018
00:56:44,240 --> 00:56:49,437
what I hope is a significant upgrade of
the financial system. Um uh by the way a

1019
00:56:49,520 --> 00:56:52,317
lot of the benefits are global but you
know I think we take for granted here

1020
00:56:52,400 --> 00:56:57,197
that we have a very high functioning
currency and financial system. This

1021
00:56:57,280 --> 00:57:01,837
makes us accessible um you know globally.
um longer term and what I kind

1022
00:57:01,920 --> 00:57:04,877
of talk about in my book, I think that
that you could take this technology and

1023
00:57:04,960 --> 00:57:08,717
apply it beyond that. And you can you
could imagine for example a world where

1024
00:57:08,800 --> 00:57:13,437
um you know if if AI agents uh
proliferate the way that that you know

1025
00:57:13,520 --> 00:57:16,077
we hope they will and I think a lot
of people in the AI industry think they

1026
00:57:16,160 --> 00:57:18,237
will, you can imagine internet of you

1027
00:57:18,320 --> 00:57:23,117
know billions and trillions of AI agents
um conducting economic transactions and

1028
00:57:23,200 --> 00:57:27,437
the natural way they would do that would
be through crypto assets. Um you can

1029
00:57:27,520 --> 00:57:31,037
also imagine just you know all sorts and I
talk I kind of you know allude to this

1030
00:57:31,120 --> 00:57:34,237
at the end of my book where I speculate
about future use cases other you know

1031
00:57:34,320 --> 00:57:37,197
other kinds of things from um you know

1032
00:57:37,280 --> 00:57:41,517
uh ser services for creative people
social networks games all sorts of

1033
00:57:41,600 --> 00:57:45,277
things I think you can you know um but
but I think for the next couple of years

1034
00:57:45,360 --> 00:57:47,117
mostly what we'll be focused on is is

1035
00:57:47,200 --> 00:57:50,637
this sort of finance 2.0 upgrade um that

1036
00:57:50,720 --> 00:57:55,437
we talked about. All right. Well,
time will tell whether policy makers uh

1037
00:57:55,520 --> 00:57:57,437
listen to you guys, heed your advice,

1038
00:57:57,520 --> 00:57:59,757
and uh realize that rules are better

1039
00:57:59,840 --> 00:58:02,557
than no rules, that the time is urgent,

1040
00:58:02,640 --> 00:58:07,757
and that the benefits will acrue
to whoever sets the standards first. Um,

1041
00:58:07,840 --> 00:58:09,437
thank you both for coming on the show.

1042
00:58:09,520 --> 00:58:13,800
>> Thank you. Good. Good. Thanks, Robert.