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Galaxy Brains
Crypto Market Structure Bill Hits Roadblocks with Alex Sternhell & Chris Maneval
01:00:06
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- [00:01]
A
Welcome to Galaxy Brains.
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B
An infinite amount of cash. Cash.
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A
I'm your host, Alex Thorne. The US Banking system is sound and resilient. Bitcoin meeting new, all time high. If you're not long.
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B
If you're not long, you're short. Satoshi is going to come on there,
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C
laugh hysterically, go quiet.
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D
All bitcoin's gonna be erased.
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B
Bitcoin. Bitcoin's the best crypto.
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A
Bitcoin is going to zero. Welcome back to Galaxy Brains. As always, I'm your host Alex Thorne, head of firm Wide Research at Galaxy Bitcoin. Not zero. We have a great episode for you this week. Alex Sternhill from the Sternhill Group and Chris Manaval from PFS two experts in Washington politics and legislation. Consultants and lobbyists from dc. They join us this week to talk about the market structure bill in the U.S. senate. Its prospects for being passed there, what timelines would look like if it is or isn't passed, likelihood of passage, what it would mean for the crypto industry and for Congress. You know, big, big vote on Thursday, January 15th in the Senate Banking Committee has been scheduled. Today is Wednesday the 14th. You know, we hope it'll happen, but we don't, as we record, know the outcome. But fear not. These two experts, Alex and Chris, we talk in scenario planning. So if, then what? And give you a good idea of what to expect in the case that it passes or doesn't pass the Senate Banking Committee. We'll also check in with our good friend Bimnet Abibi from Galaxy Trading, as always to talk about markets. Cpi, current rally in bitcoin, is it sustainable geopolitics and how it's affecting the dollar. And, you know, it's always a good conversation with Bimnet. Before we get into any of that, I need to remind you to please refer to the link to the disclaimer in the podcast notes. And note that none of the information in this podcast constitutes an investment advice or an offer recommendation or solicitation by Galaxy or any of its affiliates to buy or sell any securities. Hello, Phineas. It is another week we are here and this week is all about Washington stuff.
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B
A lot about Congress.
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A
Yeah.
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B
The passage of bills and what it means for the future of the industry.
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A
And we met, Chris, I think for the first time our second guest today when we interviewed Congressman Tom Emmer, the House Majority Whip in his office. I think that was in 23, because it was our 100th episode.
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B
Absolutely. Go back and listen to that episode.
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A
It was cool.
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B
We actually went to Washington, set Up at his office, which is pretty cool.
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A
And we raft on the steps of the Capitol.
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B
We sure did.
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A
Which was quite fun. But yeah, a lot of Washington stuff, crypto, really trying to get, you know, get this last thing that it wants before the midterms. Yep, I think they're worried, rightly so. Most predictions have the Democrats taking the House, but the Republicans holding the Senate. And so it could just be about, you know, the elections are in November. You got about 10 months of a Republican controlled Congress to try to get this done. It's kind of like the last big push here.
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B
What do you think the prospects are for the passage?
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A
Well, I'm optimistic, but I'm also realistic as I hope for the best and plan for the worst.
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B
Okay.
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A
I happen to think it's more likely than not that the bill does not get to the President, President's desk this year for a variety of reasons. It is a tricky, I described it a little bit as a Christmas tree bill. It's got the core that was this market structure stuff. Who regulates which tokens, how and when, which regulator under which circumstances. That's sort of the core of the bill. That's the tree. Now everybody has come in out of the woodwork, all the, both advocates for and critics of crypto to hang their ornaments on this package. Right. So it's got a whole bunch of competing stakeholders, some of whom want to destroy the, the people they're competing with. Others are less contentious, but nonetheless, a lot of cooks in this kitchen very, very hard to pass a bill.
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B
Yeah.
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A
No, under any circumstances.
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B
You hang enough things on a bill, it'll probably fail.
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A
Yeah, I mean, you know, you put too many ornaments on the tree and it's liable to fall over. You know, cat's going to be batting at it.
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B
That's right. Exactly.
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A
Well, this is a good one. It's a fun one. Two experts, Alex and Chris, really know what they're talking about. These guys are in the weeds, in the mix in the day to day. Both of them work for firms that advise clients, companies, individuals on Washington policy. And so they've got great insights. But before that, let's get to our good friend Bimnet Abibi. Let's go now to our friend Bimnet Abibi from Galaxy Trading. As always, Bimnet, welcome to Galaxy Brains.
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D
Thanks for having me.
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A
Exciting times. We'll talk cpi. Was CPI good or bad? I missed it. I've been busy with this market structure bill.
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D
It's, it was good core. CPI came in 0.2.
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A
So inflation was is it down or is it decelerating?
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D
It is decelerating. Prices are still moving higher, just at
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A
a slightly, slightly slower than expected. Yeah.
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D
And like the big part of it is like, you know, shelter prices have come off a lot. Right. Owner's equivalent rent. And I think that has to do with a couple of different things. But a lot of it is because, you know, there's supply coming on and so there's just more apartments that need to get rented and similar amounts of demand. And then you've also like, in terms of the supply side, there's fewer people in the country because we're deporting a bunch of people. But I think generally speaking, prices have been cooling at a rate that is acceptable and the labor market, you know, while it has shown a little bit of weakness, is actually still pretty strong. You know, you have an unemployment rate at 4.4%. There are some caveats to that. You know, obviously underemployment is incredibly elevated at 8.3%.
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A
And a lot of the hiring has been in like, you know, home, like healthcare services. Right. Not like long term growthy.
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D
Correct, correct. And if you look at like fresh college grads, like I think.
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A
Yeah. How are they doing? How are the kids doing?
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D
Very poorly. Like 40% of them are doing jobs that are, aren't relevant to what they studied.
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A
That's terrible.
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D
And so the youth unemployment rate is ticking massively higher. I think it's actually pretty close to 10%. So fresh college grads are having a difficult time in the job market. But high level growth is strong. I think Atlanta GDP now forecast for Q1 GDP is at like 5.3%.
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A
Wow.
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D
It's super elevated. And you know that there's going to be a fiscal impulse from the big beautiful bill and AI productivity gains. I think those are going to be substantial. And so from the economic standpoint, I think things are okay. Where there are some concerns and rightfully so, is in the geopolitical arena where tensions are really elevated. I think the US is on the cusp of intervening in Iran probably in the next 48 hours, given some of the communications that have been sent to diplomats and some of the military movements and the price action today in things like equities and volume and gold and oil. So yeah, you've got a shifting geopolitical dynamic and taking a step back, I think the world order that has existed in my lifetime has probably fundamentally changed in the last 12 months. And so you're starting to see Europe kind of detached from the US Particularly over some of the Greenland stuff. You've got the rise of, you know, kind of imperialistic tendencies out of the US in terms of just taking, potentially taking oil from a sovereign nation. And so, you know, it's very like, you know, there's just, there's a lot of tension.
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A
They even put out the White House in their updated strategy document. I know a lot of people didn't really have a chance to read this. I think they put it out in like November. But they did say that they were moving from a world we the country and the national strategy is moving from a world of global large power competition to one of spheres of influence, which is sort of an admission and adaptation. Now, whether they're adapting to it or enhancing it is I think perhaps up for debate. But it's an admission that it's a more realist foreign policy based on power and projection rather than international agreements and old sort of big, big blocks of allies. So even leaving aside any particular specific recent event, there's no doubt the world is fracturing into a more multipolar world. Is that the main impetus and catalyst behind the rise in gold and the rise in silver and commodities?
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D
That's part of it. I think there is an emerging narrative, and it's been happening for the past couple of years, of just de dollarization not being so tied to the US
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A
from we've talked about the deleverag hedging and tariff tantrums in April and how the DXY actually depreciated during that. People looked for non dollar hedging instruments for one of the first times ever.
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D
And then you also just have Trump proposed a defense budget that was $500 billion higher. And so that has to come from somewhere. And then the Supreme Court arguably is gonna rule down tariffs. And so you're not gonna have that
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A
is the expectation for a lot of analysts. I've seen that they will.
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D
And the prediction markets, like the legal analysts, as well as the markets are saying that, so that's less revenue. I think the run rate's like around $300 billion or something like that. And so, okay, so you want to spend $500 billion more dollars. You also potentially want to send Americans $2,000 checks, tariff checks. And so the math doesn't add up. And the math hasn't added up for a while. And so I think people are looking to hedge themselves from that risk because spending money endlessly and pretending like tariff revenues are gonna cover it can only go so far. And I think if people were just take a step back and if you denominated your life in gold terms or silver terms or any of these precious metals that have been rallying a lot, you'd be like, oh my God, my wealth is fading because the S and P last year in gold terms was down 35%. And like, oh, bitcoin, even relative to gold, it's down a lot. And the reason why people like gold is one, it's been around for a long time. The Romans were using it for.
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A
What I was saying before was like, in these times of uncertainty, humans say, well, what should I invest in when I'm uncertain? It's like me, like shiny rock.
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D
Yeah. But you boil it down, it's a flight the quality it is.
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A
And it's been around a long time. Hold on, let's talk about bitcoin just before we wrap here because we're short for time. But you know, interestingly, today as we record on January 14, Bitcoin is up pretty substantially while equities have been languishing. Not that that means anything necessarily long term, but gosh, I haven't been able to say that in quite a while. Bitcoin, as you can see over my shoulder, trading at 97, 360 as we talk. That's the highest level since like early to mid November. So people feeling decent about it. This is not out of line. I should point out with sort of what you've been saying, which is a structural medium term trend lower, but that could include reversions. And you've said that you want to see Bitcoin retake its 50 week moving average to get constructive again, to get generally bullish in the trend, which wherever it is, also another over 100, 105 and hold it as support does this. So my view of what you've said and this price action is that this is in line with what you've explained. But how do you look at this bitcoin price right now?
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D
To be honest, I look at it as a tremendous opportunity to de risk. If you're still long and if you're keen to play for downside, you're getting into very positive risk reward territory. But fundamentally, in markets for things to go down, a lot people have to be in the trade and you need price to move higher and folks to feel good in order to accumulate longs, potentially accumulate leverage.
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A
They can't sell if they don't own. And a lot of selling has already happened. Correct.
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D
And so what you've seen happen to start the year is just the basic calendar effect where there's a lot of folks whose mandates include bitcoin and other crypto assets. And going into the start of the year, folks were underweight. And so when you have a move higher and you're underweight, it's okay if it only moves up like a couple percent, but when it starts moving up 10% plus you're almost forced to buy back in because you as a manager, that's expected to.
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A
Then you're even more underweight.
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D
More underweight.
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A
Yeah.
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D
And I think you've had liquidations happen, but I still think there's a little bit more room for this rally to go in the near term. But that 50 week moving average, this 100 to 105k area, 98 to 105. That's kind of where I would expect the rally to stall out. And so I think we're following that path pretty well. But yeah, right here, right now, I think it's time to be cautious. Back to your point, Bitcoin is fundamentally still a risk asset. And maybe that is debatable for certain people, but I think it's risk asset first and foremost until proven otherwise. And right now you have the NASDAQ that's down 1.5%, was down almost close to 2% today. We've seen bitcoin underwhelm in an uptape in stocks. God forbid you have a downtape in equities. How's that going to look? And then on top of that clarity act like, if that doesn't go through, how does the market perceive that that probably puts an end to the legislative agenda for crypto for the next three years, basically?
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A
Well, it depends on the outcome of the midterms. But definitely for this Congress. Well, not definitely, but likely for this Congress. I agree. I mean, if you don't get it now, there's other stuff that Congress has to work on and the calendar is pretty short.
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D
So this is sort of the last
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A
big push, I think.
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D
And even if it does go through, which hopefully it does, you know, depending on what's in it, but it's still not like crazy relevant to like where bitcoin is going to trade in the next, I think nine months.
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A
I think that's right. I think most of the stuff just, you know, from a fundamental standpoint in the bill and generally in various versions of the bill, doesn't really touch bitcoin specifically that much. Right. Yeah. Tokenized securities. Yes. You know, defi. Yes. What is a security and what is a commodity? Yes, but bitcoin's firmly a commodity.
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D
So I agree with that and I just Think that there's just been too much pain felt for folks in the last couple years in crypto. I mean, Octent alone liquidated pretty much anybody that ran long leverage in crypto. So they've been burned. The institutional community has also been burned by last year's price action. A lot of folks went in being like, this is the year, and it did end up being the year.
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A
That's right.
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D
And so I think there's a lot of scar tissue that you have to overcome, and I think that's a really high.
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A
Some of that takes time. Yeah, it just takes time, too.
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D
And it's also, I mean, just think there was the long leverage, and then the guys that got in the DATs, they're also, you know, hurting a good amount.
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A
That's right. That's right.
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D
And, you know, these dads have less firepower to, like, effectuate the market, at least right here, right now.
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A
Yeah. Well, there you have it. We'll check in with you again next week. Of course, my friend. Bim Nhedibibi from Galaxy Trading.
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D
Thanks for having me.
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A
Let's go now to our guest, Alex Sternhill, founder of the Stern Hill Group. Alex, welcome to Galaxy Brains.
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C
Thanks for having me, Alex. This is going to be a difficult conversation. Alex on Alex and Alex, over and
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A
over again, I say a tale of two. Alex is. So if you don't like the name Alex, if.
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C
If you want to refer to me as good Alex and you can be bad Alex, I'm good with that. So just let me know.
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A
So Alex is a lobbyist and a consultant in Washington for companies and constituencies, I guess. Is it primarily on financial services?
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C
Financial services and tech represent a bunch of folks in that space.
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A
And Alex was previously a top aide to the Senate Banking Committee and lots of experience on Capitol Hill and has worked on many consequential financial services and other legislations. And I asked Alex to come and talk to us about this crypto market structure bill. You know, the House passed their version, the Clarity act, in July 2025, and the Senate has been really struggling and trying hard to get something moving on this since, I don't know, since then, basically, maybe just at a high level. Alex, you know, if you're listening to this right when it comes out, then there'll be a very consequential hearing in the Senate Banking Committee later Today on Thursday, January 15th. But if not, it may have already happened. So maybe just could you set the stage for us for crypto market structure legislation, Alex, and where we stand?
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C
Sure. No, absolutely. And I spent a significant number of years in both the House and the Senate. What often happens is exactly what's playing out right now with respect to market structure, which is that the House has done a lot of the hard work. It's led, it's passed an important bill in the Clarity Act. It was able to do it on a big bipartisan vote with 78 Democrats on the floor of the House and it shifted over the Senate and it stalled. And I think it's something about the old line about the, the saucer cooling the tea. It's definitely the case here. I think though, what we're looking at is a product that the Senate, if it's able to report it out tomorrow, will go to the floor and will likely be the primary, if not the complete thing that goes to the President's desk for enactment. So there's some really hard, difficult decisions that are being made, being made right now. The markup tomorrow is scheduled currently for 10am on Thursday. And last night 105amendments were filed, 38
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A
of them just by Senator Elizabeth Warren. I saw.
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C
You know, it's difficult, it's difficult to. You know, you raise a great point, Alex. It's difficult because Senator Warren really has not been involved. She's the ranking member of the committee, so she's obviously got a strong opinion here. She really hasn't been involved in the negotiations of this bill. She doesn't really have a seat at the table inside these negotiations. It's really been the self identification of 12 between a couple of committees and else, and the six Democrats on the Senate Banking Committee that have really said we're trying to get a bill done and have engaged with Tim Scott and Senator Lummis and other members on the committee to try to get there.
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A
Why is it specifically. So let me actually take it here. You mentioned that the saucers cooling the tea, it is sort of a Clarity pass with overwhelming support. But you think that if something gets to the President's desk, it will look more like the Senate version. So let's say the Senate passes one, what then happens? I mean, in your mind.
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B
Sure.
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C
No, it's great. I mean the, the problem here is really not whether which product is better than the other. It's simply procedure. If this bill were to pass out of the Senate Banking Committee, you're then looking for floor time on the Senate floor. It probably takes a minimum of two weeks to get on the Senate floor. Cloture votes, amendment, get off the Senate floor. That's two pretty valuable weeks of Senate floor time. That that bill would then head to the House. The House has a couple of options. It can take up that bill and amend it and then send it back to the Senate or it can pass it and send it to the President's desk. Again, much of the work inside the Senate bill is based off of the foundational work that was done in the House. So another two weeks, another a month of floor time in the United States Senate just on crypto is probably a very difficult thing to ask for. So what comes out of the Senate floor in my view probably becomes law with some coordination along the way with senior House leaders who put so much time and effort into it.
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A
That makes sense. And you know, I know our audience is pretty well versed on this issue. But you know, the crypto sort of industry and advocates really wanted like two core pieces of legislation. They wanted stable coins and they got that with the Genius act and they wanted this market structure legislation. And the way I think of market structure is that at its core it was really about which types of tokens are regulated by which market regulators under which circumstances and how. But it feels like that's become a bit table stakes. Like we kind of, most everyone kind of agrees with the sort of delineation between SEC and cftc that's sort of that clarity set teed up and that is sort of reproduced in the Senate version where however have. But then all these other things have sort of come up as issues. Would you describe maybe what are like, sort of like the, I don't know, the top three like controversial issues that are sort of at the tip of the spear for negotiating between the parties on this?
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C
Sure. No Alex, that's a great question and we all have short memories because a couple years ago the title one of this bill, this determination of what's a digital commodity, what's a digital security. That was not an easy question. That was a really, really hard question and somehow we've turned it into a relatively thoughtful process with solid real rules that will direct innovators and direct give them the certainty they need to understand exactly what the nature of their token project is. So but that is, that is more resolved, not fully resolved, but more resolved in this bill than we've ever seen before. There are a few other issues that per your comments that are not fully baked yet. Number one, we have a, a significant disagreement on, on. On the ability, on. On what stable coins can do with respect to, to paying yield or rewards inside, you know, four, four stablecoins and it's a, it's a stakeholder fight between banks and stablecoin issuers and their, and their JVs. And it's a massively unresolved issue. Three amendments were filed by on a bipartisan basis with Senator Tillis and Senator also Brooks. So that is an open question that the committee is going to have to adjudicate tomorrow or Thursday depending on when you are watching this podcast. So that's a top issue, number one. Number two, a proposal that was put out by the committee for the first time that was negotiated largely with Democrats dealing with the application of the Bank Secrecy Act. So illicit finance concerns, they put in a new framework for dealing with that in 301. Is that right? I think it's 301. So that is being combed through right now by the stakeholders by people who are going to be affected by it. And a number of amendments have also been filed by a number of members trying to navigate some of the concerns that have been raised by the defi community.
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B
Primarily.
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C
That's number two. Number three, there are, there are two or three issues that aren't in this bill that are clearly going to be important drivers of this bill, which is concerns have been raised by Democrats about the ability to create some standards for all public officials, including the Vice President and President regarding some ethical concerns about their role with respect to crypto. And then secondarily there's a big push for representation on the CFTC and the SEC from a commissioner level perspective. Currently the SEC and CFTC and a few other commissions don't have Democratic representatives. And that's something particularly as you promulgate rules on the implementation of this bill were it to become law. You really want sort of minority input as well as you write those rules.
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A
Yeah, that makes sense. So I'm hearing you a stablecoin yield illicit activity powers or obligations and then ethics and quorum they call it. Right. As the issue quorum.
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C
It's a, it's a little bit different. It's, it's, it's highly related. But you know, in order there would be some sort of requirement potentially that in order to get a quorum at one of these agencies you have to have a Democrat.
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A
I see, Right. Because technically. Right. Like the SEC has five commissioner slots. Currently only three are filled. The last, I think was it Crenshaw that just retired off in January.
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C
Yeah.
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A
Rolled off in December under Gensler there were two non chair Democrats. Then Gensler the chair made it three Democrats. And then of course you had Mark Ueda and Hester Purse as the two minority Republicans. Can you. I'VE never actually known this. The President nominates commissioners. Right. And the Senate confirms them and he's nominated Chair Atkins to become Chair. And Mark Guada and. And Hester Purse were already there. And then the two Democrats that had been there have since resigned or retired. Whatever you want to describe it. They're no longer there. Is it a law or anything that there be a majority three minority party two or like, is that sort of just customary?
- [26:15]
C
So statutorily that's the case. But there's no. The, the assertion from. I believe this administration has been. And I believe it's under. I think it's the unitary. I forget what the term reward is. The President, everyone serves at the pleasure of the President. He can choose to nominate or fire at any point. He chose not to fire anybody at the CFTC or the sec. It's not been the case with respect to other agencies. Members serve their full terms and then they have 18 months after the expiration of their term to stay on until they're replaced. And that's what happened with Crenshaw. A couple of other commissioners at the CFTC fulfilled their term and then decided to leave. So you know, there, this is a, this is a. There's currently sort of legal consideration as to whether or not there needs to be minority representation or not. It's an open issue. But for the short term, you know, it's part and parcel to this negotiation on crypto.
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A
Yeah. And the President hasn't yet nominated people to fill those slots. You would have to nominate Democrats if minority representation was. So. Yeah.
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C
So Alex, traditionally the way this works, and I've been a part of it, is the leader of the, the minority party or whoever's not there is. Is sends names up to the President to the White House for their consideration to nominate. Usually that is done with the buy in of the Chairman of the committee of jurisdiction or the ranking member of the committee of jurisdiction. So in this case Senator Warren would have some input into that as well as other senior members or, or Senator Klobuchar on the AG Committee for the cftc.
- [27:57]
A
Interesting. Okay, so we don't have that yet. And I guess, you know, it's not unreasonable, of course, I think to want that if you're about to create a giant law that instantiates enormous amounts of rulemaking at the market regulators, which this does. Right.
- [28:11]
C
The truth of the matter is that in good faith negotiations there's good ideas and good thoughts about why if three people just agree on the same thing in the same way, they sometimes don't think about other things. It usually doesn't impact whether or not a reg is going to pass or not because it's a three do by design. But it's always sort of a positive way to get multiple sides of an opinion as you're making very substantive, foundational decisions on about how to regulate an ecosystem.
- [28:40]
A
So we talked about some of the controversial issues that are at the tip of the spear from a negotiating standpoint. What are some of the good things that, you know, again, notwithstanding the fact that we're recording this before we see amendments actually voted on in this committee, it feels like, though, the Senate Banking Committee released a discussion draft, albeit a majority discussion draft, but on Monday night. But it did appear to include, you know, some of the negotiating items that had sort of been settled or closer to a compromise. And it seems pretty good. And crypto, at least in that draft text from Monday, seems to have gotten a lot of stuff that it wants. Like, could you highlight some of the things that, you know, are sort of less at the tip of the spear of negotiating perhaps? I don't know if they're settled, but, you know, that made it into that draft that we think, you know, are consequential, that, you know, probably would get in if this passed.
- [29:29]
C
Yeah, no, that's a, that's a great point. The usual negotiating tactic, particularly between Democrats and Republicans, is that nothing is agreed till. Until everything's agreed to. And I think that's the case here. I think the chairman released this amendment in the nature of a substitute, which has turned into the chairman's mark of which all amendments are going to be based off of. There are a number of things. There's been significant progress in a number of areas, including some of the things we talked about. So this Title one process that deals with what is the path for a token, in terms of its status as a digital security, digital commodity or elsewhere or ancillary asset in the case of this legislation, is really sort of the baseline imprimatur of clarity that is necessary for innovation to occur in this country and to hopefully bring people back from overseas that have left so that certainty, it's the gold stamp or the blue seal of approval for the fact that the federal government believes that you should be in this business and gives you certainty on how to proceed, to raise money, to execute, to develop. So that's certainly a clear win here in a number of instances. Number two, there have been some concerns regarding the relationship between this latest innovation in traditional tradfi markets on the market structure side and on DeFi with respect to how do you deal with tokenized securities? Obviously the chairman of the, of the SEC has been very forward leaning on, on his belief that securities need to go on chain and when that happens, the application of securities laws to those, to those tokenized securities. There, there was a tremendous, I think, concerns about how to, how to navigate that from a statutory perspective. And I think a bunch of stakeholders worked very, very hard to try to come to at least some direction to the SEC on how that should happen and they were successful generally in doing so. Not perfect, not agreed till everything's agreed to. Generally very, very positive. I think from that perspective, the other concern, and I think I don't want to say that this is a done deal because it's certainly an outstanding issue and there are concerns that have been raised by the defi community, certainly the concerns on illicit finance that have been raised. A tremendous amount of work has been done for a significant period of time by the Chairman and the six Democrats and 12 Democrats total six on the committee, six, six not on the committee to try to find a way to make sure that digital assets are not used or at best we have a clear understanding of how to prevent, mitigate or forensically go after folks that are using digital assets for illicit purposes, particularly on the terrorism finance side, which, which has been the biggest issue. So again, hey, you know, you have certainty to build. Hey, here are the require here. Who has to report BSA requirements, know your customer requirements and who doesn't. That line was drawn here. And then, you know, looking forward, the impact of crypto digital assets on the broader equities options futures market structure. This sets the table for, for, for how, how they think regulators should go forward on it. And it's. Those three things are tremendous accomplishments.
- [33:11]
A
Yeah, yeah, they have made a lot of progress on illicit finance. You know, there's a, I think if you're a, you know, libertarian anarcho maximalist, you might not like where it's landed because it does have, you know, significant new financial surveillance powers and obligations for the government. But I agree, I, I am of the view and I, I know the D5 community has, you know, valid concern. I mean it, it, it, frankly it's, they're pretty significant powers and so Democrats have I think done quite well in the Senate adding these well beyond what was in clarity. But I, you know, I, I think they're, they're kind of okay, they're not too bad. I mean that's what's. They've actually found some creative ways to give New powers as the sort of people to help placate and address the fears of people who worry about illicit finance usage of digital assets while still being pretty good. Got the Blockchain Regulatory Certainty act in there at the moment?
- [34:02]
C
Absolutely. I don't know how I didn't put that in there. It's an absolutely critical piece that protects developers publishing and distributing software. So big, big piece.
- [34:11]
A
You're absolutely right. Okay, before we wrap, maybe just a high level step back. Let's say if the bill does get out of committee and ultimately pass the Senate, how big of a deal is that in your mind for the crypto industry or for the markets in general? And then on the flip side, if it doesn't pass the Senate in this sort of latest push for it, what's the likelihood that it can at some point later in 26? And if that doesn't happen, is that very bad for crypto? Sort of two questions there, but yeah,
- [34:45]
C
as a, as a former Senate staffer, I always take the opportunity to answer a question by talking about myself. So in 2014, I started for the first time walking the halls of Congress advocating on behalf of Bitcoin because there was no crypto. And ever since that moment, all of that, all of the work that started then for me is culminating in tomorrow in this Thursday markup, trying to create the basic rules of the road so this ecosystem which has taken off can really, truly flourish. Tomorrow is really important. If it doesn't go tomorrow, it's not the end of it. But if it does go tomorrow, and it goes tomorrow on a bipartisan basis with buy in from Democrats and Republicans, I would, I would say that that probably means that the President's going to be signing it in the next three months. There's going to be some ugliness now and then subject to the bill, subject, you know, issues, subject to the bill, issues extraneous to the bill. This bill has a lot of, will have a lot of momentum if it gets out on a bipartisan basis. But you can definitely see extraneous issues like a 10 credit card cap being tried to be amended to on the Senate floor. Things like interchange could be amend, tried to be amended. So there are some pitfalls. This thing goes tomorrow. I, I, the likelihood of passage of final passage and enactment is very, very high.
- [36:21]
A
Yep. And if it doesn't go tomorrow.
- [36:23]
C
Yeah, if it doesn't go tomorrow. Alex, it's a good question. Here are the risks. Number one, the House November elections will decide who's in the majority next year. Congresswoman Waters who is the ranking member of the of or currently the ranking member of the House Financial Services Committee would be chairman of the committee and she would have the ability to take up a bill or not take up a bill. It certainly feels like this would not be a top priority of hers given her opposition to both the Genius act and into this bill. She might try to write a different bill. It would be difficult to see that under her leadership this would be a top priority. So you, you know, the countdown starts. And while. And by the way, the Senate could also flip, it's a much more difficult prospect in the Senate for Democrats to take over. So despite the fact that you have significant support, support on the Democratic side for doing good legislation, if the House flips, it's probably not going to happen in 2026, 202027 or 2027. 2028.
- [37:24]
A
Yeah. So what about like a last minute attempt this year though, in the case, you know, is it. I know the calendar gets pretty, you talked about the floor time on the Senate required if it goes back and forth. But calendar is an issue. Right. And then the midterms, I mean they kind of always stop working on substance, you know, in, I don't know, like by August, usually right at the latest. And it's a midterm year.
- [37:45]
C
The year is done by August. So if you don't get anything done by the August recess, it's very, very difficult. Now there is a chance post election, post November election, there's often a Senate a session that gets called. We've done stuff in the past, but it's a very, very narrow frame.
- [38:02]
A
I see. Maybe you can hang it on like a end of year package that might, may or may not go. But, but. Right. That's like a Hail Mary at the last chance.
- [38:08]
C
It's a lot harder.
- [38:09]
A
And if we get nothing as a crypto industry. Okay. Like is, is that really bad for us or, you know, I mean, because part of me is thinking, you know, obviously it's long term good and it has other good things and it prevents a rollback. And if you can codify in federal statute some of these things in the case of a more hostile administration, it also, like you pointed out, gives that sort of last final leg of clarity for businesses and people to confidently enter the space and use the technology. But I feel like if it doesn't happen, I mean, at least while this administration is in charge, like at least for the next few years, crypto's mostly okay. I mean, would you agree with that?
- [38:45]
C
I think that's right. I think you have a very forward leaning SEC chairman and a very forward lean CFTC chairman that will do the best they can through exemptive relief, through rulemaking, through guidance to try to give as much certainty and clarity to the ecosystem to move forward. I mean, the problem is that it can be undone pretty quickly by the next SEC chairman. Hopefully that's not the case. But certainly I think in the short term you're still in a pretty good posture. If you're building in the US on chain, it's going to be a pretty America is going to be a pretty good place to do it for the next few years.
- [39:25]
A
All right, I'll leave it there, let you get back to the phones. Alex, I know it's a busy time. Thank you so much, Alex Sternhill from the Sternhill Group.
- [39:32]
C
Thank you, Alex, for having me.
- [39:34]
A
Let's go now to our guest, Chris Manifold, Vice President at PFS in Washington, D.C. chris, thank you so much for coming on Galaxy Brains.
- [39:41]
B
Yeah, thanks for having me, Alex. It's good to see you.
- [39:43]
A
Yeah, it's, it's what an exciting time for in Washington. I guess it is always kind of exciting, but for crypto specifically, Chris, you work in consulting business in Washington and, but previously worked on the Hill for Congressman Tom Emmer in the House, the majority whip. And so I thought it would be great to check in with you. While most of the action this week on this crypto market structure bill, of course, is in the Senate, in particular the Senate Banking Committee this week, the House did pass the Clarity act with an overwhelming bipartisan majority in July of 2025. What's your sort of take on, you know, it took, it's taken the Senate like nine months or I guess six months to just get something moving. Yeah. What's your take on just the current state here?
- [40:26]
B
I mean, tomorrow's going to be a big day. Tomorrow's going to be a big day for the OR for the Banking Committee. And then next week the Senate Ag Committee has said they're going to mark up their section of the Clarity act and the whole market structure discussion. The fact that we're in this position is huge. Everyone looks at the stablecoin bill genius that was signed into law in July and the pace at which Senate Banking worked on that for the first half of this year, with the administration obviously prioritizing that pretty highly. But the House passing the Clarity act as well and kind of getting the Senate in this position. They've been deliberating since August on what the Senate's language was going to look like we have seen that they have amendments filed, they're going to mark it up tomorrow. That's huge. And you know, clarity in and of itself getting that through the House was remarkable. And prior to that, I mean, this has been a multi Congress effort. I mean, we had fit 21 in the previous Congress where Patrick Khenery is chairman of the Financial Services Committee, did a lot of work to educate members, put policy forward, get an overwhelming, very bipartisan vote. I think it was 72 Democrats that came across the aisle when fit 21 passed. And then to come back again in the new Congress and get 78 Democrats in the House to support the Clarity act and move it over to the Senate. So there's still a very long way to go. The policy is extremely complex. You're dealing with politics on specific issue sets as well. In addition to it being a midterm election cycle and then, you know, the Senate in some respects with a 53 seat Republican majority, you know, they have a little bit of wiggle room on the majority side, but you still need 60 to get any policy moving. So it's going to have to be bipartisan. And then you flip it over back to the House and you know, if the Senate is able to get their bill through banking and then through AG, and then schedule floor time, which is always at a premium in the Senate, get it back over to the House, if that is able, if that occurs, then you're looking at a House of Representatives where Republicans, depending on the day, may have only a one seat majority. And you know, the hope is that like clarity, this final package will also be bipartisan. But you know, there are still a lot of dynamics that are going to make that a challenge as we get deeper, you know, into the spring and early summer.
- [42:39]
A
You know, if it does pass, well, the Banking Committee in a, in a encouraging way, you know, with a sufficiently bipartisan vote that eventually leads to a floor vote on the Senate. I think there's a, as you pointed out, like both in calendaring and obviously in the, for the complexity of the bill and its issues and stakeholders, that none of that's a foregone conclusion. But if it does.
- [43:02]
B
Yep.
- [43:02]
A
How, how long like does it take for the, the bill to go from one side of Congress to the other and then like how, how fast might the House take it up and like, you know, what's the timeline in like the most optimistic scenario in your mind?
- [43:16]
B
Yeah, I mean, most optimistic. And this is based on a couple of assumptions which I can walk through, but you know, Hypothetically, if the committees clear the bill in the Senate, the Senate schedules floor time. It took the genius act in the Senate about three and a half weeks to get through genius on the Senate floor. So, you know, if and when the Senate Majority Leader schedules polar time in the Senate for, for the market structure bill, expect day long and drawn out, maybe multi week process like we saw with Genius. Hypothetically, if they pass it through the Senate, it's going to have to be a bipartisan vote. And so you send it over to the House. A couple of things. One, from the physical standpoint, I was fortunate to work for Mr. Emmer in the House Leadership Suite for a couple of years. You know, they can transmit the papers pretty quick between the chambers, sometimes snail mail.
- [44:05]
A
They can like, they can like walk it over, right? It doesn't take that long.
- [44:08]
B
It depends on who is pushing what buttons and how high of a priority the issue is. Sometimes it takes a long time to transfer the papers, other times they can move very quick. But I think the bigger challenge is going to be what does Chairman French Hill think about the changes that are finally agreed upon if the bill clears the Senate floor? Because there are some, you know, differences in how the Senate has gone about drafting market structure legislation than from what the House has done and all also, again, understanding that it will probably be a bipartisan vote or need to be a bipartisan vote in the House. You know, there are going to be Republican issues for starters, because in order for the House to clear anything, they need to pass their procedural votes, we call them rules. But in order to pass a rule to then consider an actual bill on the House floor, rules are typically partisan votes. Very rarely do you see House Democrats helping House Republicans to pass the procedural vote. So depending on what the final Senate product is, if French Hill were to say, okay, Mr. Speaker, I'm good with this language, Mr. Leader, Mr. Whip, let's run it, let's go as fast as we can. We're getting deeper into the election year and this is a priority for the administration. They still have to make sure that they have 218 Republicans to support this legislation. And I don't think that's going to be a given right out of the gate. So the Chairman has to look at this and make sure that he's comfortable with it. He's going to have to canvass his members, not only of his committee, but of the Republican conference to figure out if they're comfortable with it. And then, you know, they will engage with Democrats to figure out what a bipartisan vote total might look like. Does this bill get 78 Republicans like we saw earlier this year? I don't know. You know, does it need to get 78? No. However, you know, those dynamics are going to dictate the pace and the tempo. And if the chairman, if Chairman Hill looks at this legislation after the Senate has passed it then, and he's not happy with it, then you'll hear different opportunities to go into a conference committee, which takes ages, and that brings the House and the Senate formally together to adjudicate the differences. They can do an informal conference where you'll have the committees kind of behind the scenes and the staff working to reach a final product that they can once again move through the House and then move through the Senate before it goes to the President for his signature. So there's a couple of different scenarios that could take place. I don't just given where we are and how long it has taken the Senate Banking Committee to, you know, get to this point, I don't see a scenario where it's a relatively quick turnaround. So, you know, if hypothetically the Senate is able to clear this thing by the end of February, early March and send it over to the Senate, I don't think it's going to be an end of March vote and everybody is, you know, claiming mission accomplished. I think it's going to take a couple of other months because the same industries that are hitting the Senate right now, either in support or opposition of certain provisions of the bill, they're going to flip all their attention over to the House and they're going to do the same engagement effort. If they're not happy, they want to see changes, or if they are happy, they are going to say you need to move very quickly. So the same forces we're seeing at play right now, they're going to be replicated in the House if and when the Senate's able to get this thing done.
- [47:16]
A
So your best case scenario for getting out of the Senate, though, sometime maybe like mid February at the earliest. Right. Is that that's like if it passes tomorrow, AG marks up and passes.
- [47:25]
B
And that is, I, I think, I, I think a very optimistic view. But if, you know, because the, the Senate, their floor schedule works differently from the House, in the House, you essentially have unlimited floor time to run votes whenever you need to. And the procedural hurdles are fairly, fairly small. As long as you have majority support in the Senate, floor time is a scarce commodity. So Leader Thune is then going to have to take a look at what the final committee approved products are, figure out where the landmines are going to be if and when he brings it to the floor, determine what the amendment process is going to be like on the floor. So the Senate clearing this by the end of February would be an absolute miracle in my opinion. However, this is one of the President's biggest crypto priorities. You know, we are going into a midterm where crypto equities have, you know, from the last political cycle to the one that we're about to go into, they have put up significant sums of political dollars. They have a lot of interest in candidates and also key races that, you know, they want to be able to hold people accountable or thank for their support and make sure they come back in the next cycle. So, you know, there are dynamics that will help push this along. I think the complexity and the nuance, though, of the topic and the subject matter. And then, you know, you're looking at the. The bank versus, you know, crypto divide on yield, for example. You know, those are also political issues that both the majority leader in the Senate will have to navigate as this goes to the floor, in addition to when it goes over to the House as well.
- [48:58]
A
So, okay, let's say it gets to the House in March. Okay. Sometime in March, which is optimistic. I think you're right. But also more reasonable than mid February. Okay. And then let's say there's pressure. You know, you talked about Chairman French Hill of the House Financial Services Committee. Obviously this is his committee's jurisdiction, and they sort of led the drafting and ultimately passage of Clarity. Let's. And this is substantially different than Clarity. I'll point out. There's differences both on the core topics, like even, you know, most. One of the most notable ones is that the Clarity act takes a mature blockchain test approach to whether or not an asset might be sufficiently decentralized to not be a security, whereas the Senate version uses this ancillary assets versus network token idea. But let's say that there's pressure or whatever Congressman Hill says, all right, just, you know, whatever. Let's vote on it the way the Senate sent it over. Maybe they're pressured by the White House or, or the Senate to just swallow whatever the Senate has sent over. How fast can the House actually move, assuming they get that 218 for the rule in the first place? I mean, are we talking, if the decision is made, go, let's vote on it. Like, are we talking two weeks? Like it's faster than the Senate? Right.
- [50:11]
B
Well, we've seen this with Spending bills, major appropriations bills in the past, where you're either running up to the end of the fiscal year and you want to avoid a shutdown or you need to move a continuing resolution or what have you. The House and the Senate have moved bills within hours of one another. So if, if that scenario that you just laid out, if Chairman Hill gets this bill, the speaker gets this bill, House leadership looks at it, everybody's in agreement, and all 218 Republicans needed to move forward on the procedural vote are there. I mean, they, they couldn't. They can move extremely fast, like matter of hours, maybe days to get it done, depending on what's on the floor floor and what's on the calendar. That rarely happens. You know, it has to be a lot of these discussions, especially when it comes to spending bills. They will have 95% of the substance ironed out and they have to resolve those 5% items that once they know they're going to get to a good spot eventually. They've already communicated between the chambers that, okay, once we iron this last issue out, we're going to hit go. We need to avoid, hypothetically, a shutdown. You guys go. And it makes it over to the President's desk. So the House can move very quickly, as can the Senate in some respects. But I think on this one, to your point about the substantive differences between the Senate produced product and what the House produced, with clarity, you know, getting to that 218, first and foremost for Republicans is going to be the biggest step. You know, and obviously, you know, the Chairman has been very thoughtful in his negotiations on, you know, how he's approached market structure, how he, you know, built off of the work that Chairman McHenry did. The other dynamic, though, that I think is important to keep in mind in this case, separately from market structure, Chairman Hill also has significant priorities in the financial institutions in the banking space. From a legislative standpoint. Housing as well, is a huge topic that also Senate Republicans and Democrats have been engaged on, as has the President. There are a number of different items in Chairman Hill's jurisdiction that are ready for some sort of consideration in one or both chambers. So those are also, I think, in some cases, going to factor into the pace and the success of market structure. And then the other thing, competing priorities
- [52:16]
A
that are unrelated theoretically to market structure as well.
- [52:19]
B
Exactly. Jurisdictional items, but maybe a little bit separate from digital assets specifically. And then the last thing I will say, the central bank digital currency issue is one that I think people need to keep an eye on. You know, that was One of the reasons why Crypto week in July was as rocky as it was. You know, there are Republicans that are adamant that there be a ban on or prohibition on central bank digital currencies. Based on the amendment roster we saw for the Banking committee markup tomorrow, Mr. Hagerty has a bill to prohibit CBDCs. We'll see where that goes. I don't know if they're going to consider it in the markup or what that vote will look like. But you know, the central bank digital currency discussion was, you know, a major focal point for Crypto week in July for the House. It was supposed to be attached to the National Defense Authorization Act. It was not. It is still an unresolved item that a lot of Republicans feel very strongly about, as does the administration to some extent. So you know, you're also going to have crypto kind of adjacent items that may not be part of the market structure bill. But members in the House will want to at least find a way to get something like an anti CBDC bill across the floor that historically has not been a bipartisan topic. So that's, that's where the challenges will come as the House leadership team tries to assemble a package to, you know, keep this alive and get it to the President's desk.
- [53:43]
A
Yeah, interesting. That is a good point. I saw Senator Haggart, he does have an amendment. You haven't seen the text, but I've seen the title or the note of it that it is to do the CBDC ban. Also Senator Hagerty has an amendment to strike the prohibitions on yield from the. Which makes sense as he's the, he was the primary mover in the Senate, author, co sponsor of the Genius Act. So it makes sense for him to defend sort of the integrity of the stablecoin bill as he got it passed in the Senate. So it sounds like again, just to close out on timing, an absolute best case scenario in your mind, best case, earliest possible delivery of, you know, a piece of legislation passed by both the House and Senate would be like mid March. Mid to late March is like absolutely the earliest and that's with the Senate moving pretty fast and the House just racing to a vote pretty much right when they receive it both. All of which is unlikely, but yes,
- [54:36]
B
I would not bet the kids college tuition on it. And that is if all of the sun, the moon, the stars, planets align. That it is, it is dual. Now is it, is it, is it a possibility, high likelihood? I think not because again, I just
- [54:49]
A
want to define the sort of the contours of the possible outcome. Right. So like in a, in an absolute best case upside scenario, you're looking at the president signing this bill at the end of March. More likely in an upside scenario, we're talking what, April or even possibly May. Right. And, and, and then in a downside scenario, I mean, I guess nothing gets passed at all from one or two both of the Houses.
- [55:12]
B
And that that is a very real scenario that, you know, they've pushed as they pushed as far as they can in this Congress and they just can't reach an agreement. And whether that's because you have external industries pushing in a political way, given it is an election cycle, you know, where the community banks are relentless on a topic like yield and they're not going to let it go and you have enough Republicans in the House or even in the Senate that, you know, can't get there on a, on a bill, on final passage. You know, the nothing scenario is also, I think, a very real scenario in a lot of respects.
- [55:44]
A
I think personally and I want to be optimistic. And obviously, you know, if you're listening to this, then most likely the Senate banking stuff has already occurred. But I still think the most likely outcome, not that it's very likely, but more likely than not a bill does not reach the president's desk on this. And we said that as long ago as last year year. In fact, in my 24, December 31, 2024 predictions for 25, we said this bill would not pass in 25. That was true. The calendar is just so tight as well.
- [56:14]
B
It's so tight, there's a lot of forces working against them. Right. The calendar generally, they have 15 fewer legislative days this year than they did last year. And then on top of that, the competing priority discussion, you know, does cryptocurrency fit into the broader affordability agenda of the administration? It is an administration priority. And crypto voters are defined, very active and effective voters. But on the other side of it, you know, full time in the Senate is at a premium and if this becomes a long drawn out thing, you know, it's going to take even, it's going to be a heavier lift to keep momentum because momentum is everything. And the only thing that I will say, because I think I very much have thought the same way you do as well about the likelihood of this thing, I think a fair amount of pessimism that we'll see a market structure build this Congress as well. The only thing that I will say is this is very much part of the legislative process where you have significant issues that will die five to six deaths before they're revived, brought back to life, and ultimately make it across the finish line. And the margins in the House are extremely tight. The bipartisan dynamics in D.C. right now are pretty fraught. So, you know, there are a lot of factors working against this thing. There are folks that are looking beyond 2026 though, and going post midterms, depending on the outcome of the midterms. I think a few people are asking themselves what a Chairwoman Maxine Waters run Financial Services Committee will look like for crypto. And I think it's going to be vastly different from what Chairman Hill has put together. And even in the Senate, you know, there are significant races. I think the general consensus is Republicans will hold the Senate. However, you know, you look at a state like Ohio where Senator Sherrod Brown was defeated during the last cycle by Bernie Moreno and the crypto community put in, I think 40 million plus into that race. And there is, he's running against John Husted and Senator Housted. You know, he has good state name ID as well. But Sherrod Brown is also a known commodity. If he returns, Sherrod Brown returns to Senate banking, he'll still be a ranking member. However, you know, that's another vote that you're going to have to figure out how to compensate for when you're trying to get to a 60 vote threshold in the Senate. And again, going back to that momentum, not getting it done, this Congress really slows a lot of momentum, not just, you know, between now and the end of the year, but also then maybe for an entirely separate Congress after this one. So I think folks are keeping that in the back of their minds as well. But you know, this is, I think the crypto community generally and a lot of folks in D.C. are seeing the legislative process play out in a very raw and ugly way in a lot of respects. But, you know, things tend to die a couple times before they come back to life.
- [59:03]
A
All right, that's what I'm hearing from Chris Manaval, that this is normal. Well, I really appreciate it, Chris, for your insights and thank you so much for coming on Galaxy Brains.
- [59:12]
B
No, it's great to see you. Thanks again, Alex.
- [59:14]
A
That's it for this week's episode of Galaxy Brains. Thank you to our guests Alex Sternhill of the Sternhill Group and Chris Manaval from pfs. Both of those gentlemen with great insights on what to expect for timelines, likelihood, importance of passage of a crypto market structure bill, and of course, our good friend Bimnet BB from Galaxy Trading. Everyone have a safe and happy weekend and we will see you next week.
- [59:35]
B
Foreign.
- [59:40]
A
Thank you for listening Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, Head of Firmwide Research at Galaxy. Follow me on X N Tangiblecoins. Follow Galaxy Research on X LXY Research. Read our written reports at galaxy.com research and don't forget if you like Galaxy Brains to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple Podcasts and more. We'll see you next time.