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- [00:00]
Jen Rado
Foreign.
- [00:08]
Nick
Fund President Chris Perkins is joining us now. Chris, how are you doing?
- [00:13]
Chris Perkins
Doing great. Jen. Rado.
- [00:15]
Jen Rado
Nick.
- [00:15]
Chris Perkins
Great to see you guys. Yeah, awesome.
- [00:18]
Nick
Awesome to see you too. Now, I just want to set the stage here. I know you're a part of the CFTC's Global Market Advisory Committee. You heard all of our comments on, you know, what we're expecting to see from the SEC roundtable. And my first question to you, Chris, is something I've asked several guests who've joined our roundtable pre games is why do you think that the CFTC doesn't have a voice at these round tables? Or should they have a voice? Should there be representation there as we're discussing a way forward for the industry?
- [00:49]
Chris Perkins
It's a great question. And Nick, I first wanted to commend you for your comments. I think it made a ton of sense to say, you know, a lot of eyes are on the Chairman right now and he really sets the agenda. And having known Commissioner actions, Chairman Atkins, I think his agenda is the right one. In his first speech after he's confirmed, he talked about how excited he was to work with Brian Quinten, who's, who's been nominated and going through confirmation here. Right. Very shortly. And this is an entire departure from what we saw during the Gensler era where they actually unwound this joint rulemaking committee for novel rulemakings. But gosh, like why would you unwind that thing? And it sounds like both Atkins and Brian Quinten are going to work closely together now. I commend the sec. It makes sense for them to have dedicated round tables to think about how they can apply their rulemaking to this emerging asset class. And there's a ton of things where they're going to be involved in defi that we'll talk about the cftc. I've been party to plenty of round tables on the CFTC side as well. I mean, they're going to focus on things through their perspective. And I absolutely am excited about when we bring these two agencies together. And I expect that to happen under these two chairmen.
- [01:59]
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- [02:43]
Nick
Renato brought up this stable stablecoin bill that is making some progress. We also talked a little bit about market structure. But Chris, paint a picture for us. I mean, how does the stablecoin bill fit into this broader conversation we're having about defi and more specifically in the.
- [02:58]
Chris Perkins
U.S. yeah, so when I start listening to this and what I'm listening for on defi is how we can separate the activities from the tech and hopefully we get out of here much better. Better clarity rather than mashing these things together. Here are the activities. We're going to regulate those activities. Here's the tech. We're going to leave it alone. Now, the stablecoin bill makes defi really, really exciting. And why is that? Well, today the genius act, we think it's going to suppress interest like many other regimes have. And we can argue whether that's right or wrong. Let's just put that to aside for a second. But if you are not able to take on a stable coin and it doesn't bear interest for you, what are you going to want? You're going to want to take that stable coin if it's not just used for a payment. And I think there's plenty of folks that are looking for other purposes. You're going to take that stable coin into defi. Why? Because you want to get that yield back. And so having good rules and a good foundation around defi is very important. Because look, I've already projected, I think there's going to probably be about 500 billion in stable coins by year end. I'm probably going to be under. But as stable coins start coming in into the market post this legislation, I think it's going to be an incredible opportunity for the defi ecosystem to do what does best. And in many cases that's drive, yield or maybe even to buy alts.
- [04:19]
Jen Rado
Chris, if you could ask the SEC to be focused on one thing or multiple things to try to spur the growth, particularly of stablecoins. But the defi space in general, what would you be telling the SEC to be focused on?
- [04:35]
Chris Perkins
Yeah, my primary focus would be definitions across the board. And when it comes to defi guys, in the past, I get it. Like companies built tech and we regulated those companies. Here we have something different. We have this thing called decentralized technologies come up with clarity around that, because that's tech. You don't regulate tech, you regulate activities. So would love to see definitions and clarity for market participants so you can define what, what serves as that unregulated, decentralized tech. And then where do we draw the line with activities that should be regulated? And this feeds into a lot of things, like even national security. I'm sure you're going to hear Commissioner Crenshaw today talking about, oh, national security this, national security that. Well, guess what, Bad guys use the Internet all the time. It's not about indicting the Internet and defi is the new Internet. It's about going after folks that use that technology. Wrong. And so what I'm really looking for is, is, is that bifurcation.
- [05:38]
Renato
So one thing I'm kind of curious about, and I've been talking to, you know, various people about on the CFTC front, looking at the market structure bill, if it's passed into law, you know, as it stands now, would give the cftc, you know, not just broaden your authorities, but also a mandate to kind of, you know, start working on some of these definitions I think that you're describing. But at the same time, the CFTC is, you know, a fraction of the sec size. What I'm curious about is, is the CFTC in a position now to take on this, or does Congress also need to start looking at, you know, staffing it up, making sure it has the resources to actually take on the crypto industry?
- [06:16]
Chris Perkins
Yeah, great question. I think one of the biggest challenges in, in this environment is again, taxonomy. How do we define what is a security and what is a commodity? And I'm going to talk about this because that's the current regime. What's a security? What's a commodity? I put forth a recommendation to the cftc. I hope that they adopt it at some point. But it talks about various parameters that if met, something would be a commodity. And I said, you know what, you guys need to adjudicate this in like 60, 30 or 90 days, depending on how complex it is. You can get an extension. And they're like, people said, oh my gosh, this is so hard. They just don't have the staff. Well, guess what? I worked with a researcher at mit. We designed an AI bot in like a day. And, and you can literally plug in the white paper and it'll tell you based on those definitions whether it's a commodity or a security. And so I would encourage the agencies, just like every other agency is to use technology to bring in efficiency and to reduce cost. And I think that's totally achievable. Now this bill does something. When you start pivoting to clarity, it does something for the first time and it really starts regulating what we call now digital commodities. Look, there's a lot to unpack there, probably not for this session, but that would result in more direct regulation by the cftc. I'm not sure it currently passes in the current form, but one thing that I do want to see is I want to make sure that agencies are empowered to stop fraud, manipulation and abuse. Frankly, they're already empowered to do that. They have full rights to do that. And I think a clear taxonomy where you define accountability and responsibility helps get there. And I honestly think the tools are already out there to adjudicate these things pretty quickly. One, once we have agreement.
- [07:57]
Nick
Coming back to the roundtable, Chris, just like from, from your lens, sitting as the president of Coin Fund, what language are you listening for? What language is going to indicate to you that we're going to see more capital flowing into US based DeFi firms? We're going to see innovation incentivized and encouraged.
- [08:17]
Chris Perkins
Yeah. So clarity would be huge. And if we can get any degree of clarity of how we think about technology versus front ends or activities, wonderful. The real alpha for me would be to listen for how they're talking about things like direct listing of. Direct listing of equities on chain. Right now I would say US capital markets have a pretty big problem. Our public markets are in really bad shape. If you look at the IPO market last year raised about $30 billion. And if you go back the last 20 years and you take you account for Covid, you're actually down like 5% ker for the last 20 years in the amount of public capital raised. What's happened is private markets are buoying things. But like 81% of of companies right now, over $100 million, they're private. And so what's happened is we've really deprived Main street of having access to these companies. They're private. They're private. So what I'm really listening for is how can we use DEFI to distribute listed equities? How can we work with the SEC to allow direct listings on chain? How can we get those exemptions? And think about it, the IPO market was $30 billion in 2024. This is a little bit of an apples to orange relationship. But the meme coin market cap was $140 billion at its height. Right. So how can we re galvanize our public Equity markets by using this thing called decentralized technologies and DEFI to access that pent up global demand. And of course you can't just do it. You have to solve for things like disclosure. And last thing I'll say is that back in the 90s this new thing came out, it's called ETFs. And the SEC was a little bit concerned, but then a very brave chairman said we're going to get this done, get it done. And with a little bit of help from the SEC, that's now a $14 trillion asset class ETFs. We can see the exact same thing happen here with tokenization. So I'm really excited, I'm listening for that Public Markets P piece. How do we directly list equities on chain?
- [10:21]
Jen Rado
Wow, those are some really smart comments, Chris. I will also shout out to Matt Shank has been adding some very smart comments to our chat. So thank you Matt for doing that. Some. We're definitely looking at your feedback. You know, Chris, there's a lot to unpack from what you just said, but one thing that you know, you mentioned and you talked about is having what would be under a new legislation that may or may not pass digital commodities that have that, that are, that are related to equities, let's just put it that way. Right. And that have a connection to equities. To me that screams sec, CFTC cooperation and coordination. And this is a topic that, that Jen touched on earlier when she was asking you about perhaps collaboration on roundtables. You have, you've worked with the cftc. You have relationship as you mentioned, with the incoming chair. You obviously also have a fondness for SEC Chair Atkins. But you know, this new legislation that is out in Congress contemplates joint rulemaking. The last time that happened in Dodd Frank, it took many years for anything to to come out of that. What can we do as a practical matter to encourage and incentivize cooperation between these two agencies?
- [11:34]
Chris Perkins
Yeah, I think it starts at the chairman level and at the personal level. And I'm really encouraged by these two chairmen, both of whom I know and I think that they have the personal relationships where they're going to put aside ego, ambition and whatever else we've seen in the past to get things right and refocus their agencies on a principles based approach for the good of the country, the good of the economy, the good of our entrepreneurs. And so I do remain encouraged. I was there in Dodd Frank when we were trying to figure out how to coordinate these two agencies. Coming together. I had to deal with it in the credit derivatives markets. It was nearly impossible. But I do think with, you know, these two chairmen, I think we have a real possibility to get things right. And this is going to set the precedent for years to come. So I'm sorry, I feel bullish.
- [12:22]
Nick
I want to come back to the equities piece, Chris. I was recently talking to the folks at Ondo Finance, which I believe is a portfolio company of yours, about tokenized equities. And it, it got me thinking. You know, it's historically taken the SEC very long to come up with any kind of clear rule making. And that's not really the fault of the agency. But there's so much to tackle in this industry. Right. Each roundtable looks at a different vertical in this industry, looks a different topic. How would you advise the SEC to prioritize these things? And do you think we get clear rules that are broad enough to allow each vertical of this industry to innovate?
- [13:10]
Chris Perkins
Yeah, look, rulemaking is gotten more challenging post this thing called the Chevron deference rollback, where, you know, the courts used to just, the Supreme Court would give deference to the regulator. Now with that back, they have to be really thoughtful about operating within their explicit legislative mandate. So it really starts with legislation, as Nick stated, super, super important. It's also really important to have a thoughtful rulemaking process where there are protracted comment periods. One thing we saw Chairman Gensler do was shorten that, that comment period, which was the wrong way to do it. Like you want to have these types of dialogues with industry experts. By the way, I was kind of blown away by the SEC and the panelists that they chose for today. These are some very, very sophisticated, knowledgeable defi experts that, that, that are going to bring a really interesting perspective to the table. But this type of engagement with subject matter experts, this type of public comment periods, they need to be thoughtful and, and it takes time to go through every single public comment. And so, yeah, maybe the byproduct of that is it takes a little bit longer, but you have to get it right, otherwise you're going to end up with all kinds of issues like we've seen in the past and probably end up in the courts. So I, I think it needs to be thoughtful and, and done right.
- [14:28]
Jen Rado
You talked a little bit, Chris, about stable coins. Obviously you're not the only person bullish on stable coins. We just had, I think, the first stable con, I think ever a lot of people very excited about that space. There's also of course, what I'll call tradfi actors who are very, also very excited about that space and looking to enter. And it's no secret. So what, how do you, what do you view their role being and what do you view the relationship between innovators in this space and more traditional entities who have obviously pre existing relationships and have had favorable regulatory treatment over the years?
- [15:08]
Chris Perkins
It's a great question. So generally what happens when you pass regulation is that it levels the playing field in a way that because you have this like common fixed cost. And what's going to happen is everyone's going to pour in and why? Because they saw that Tether made $13 billion in profit last year and they're like, wow, if I can just get a little bit of that, I'm going to be set for the banks. It's like the ideal business model because you don't have to worry about regular, you shouldn't have to worry about regulatory capital. It's a fully reserved asset and you keep all the interest. It's like the best product ever. If you're, and I used to work at a bank, I could see how their, their mouths are drooling. So what's going to happen is as follows. Everyone's going to pour into the space and I'm working on an article right now. I'm calling it the stablecoin Hunger Games because people are going to try to take other people's stable coins, dump them and issue their own. Right? Why? Because you want to capture that interest. Over time you're going to see the profitability of these businesses get squeezed near zero because maybe the end user doesn't get that interest, but they're going to pay distribution agents and everyone else to try to get their stablecoin out out. In the end you're going to have a couple of stable coins. I don't know if it's going to be two or three or four, but it's not going to be this massive number because the margin is going to get squeezed and it's going to be a business of scale. And so right now the question is, can these early incumbents like the tethers, the circles or whomever, can they move faster than these incumbents? Because the banks are coming and I hope that we'll see how it plays out. But let's see if some of these startups can move faster and drive that utility and distribution. But that's generally how it's going to play out. It's pretty obvious to some of us who've Been around for a while and made the best couple of projects win.
- [16:50]
Nick
I know you talk to your portfolio companies a lot. Chris, when it comes, I guess, to the regulatory landscape in the United States, is there anything that they're still anxious about? I know in the past year, things have really changed for people who are building in the States. We've seen people who've gone offshore come back to the, to the U.S. is there anything startup founders are worried about?
- [17:11]
Chris Perkins
Yeah, you're not going to believe I'm going to say this, but I think regulatory risk is kind of off the table now. Right. Like, let's be honest, we're in a great favorable regulatory environment. Legislation's coming. And so when you think about people who haven't entered the space to date, it's because of one thing. It's because of reputational risk. And that reputational risk to date has been about regulatory risk because you don't want to put your money into a project, that project gets in trouble, and then you look silly because you told the firm it was time to come in. So with regulatory risk coming off, that's a huge part of eliminating that reputational risk. However, and by the way, it's the same for developers. Remember, there's like 30 million developers in the world. There's like 10,000 in crypto. If that's not the bullish that you've ever heard, I don't know what there is. But now with that reputational risk coming out for them, it's a good thing, too. The one thing that remains that I would love to see regulators in the government focus on is operational risk in the form of cyber hacking and cyber risk. We have companies like Lazarus running amok. And to me, the only solution there is to go back to our history, go back to the Constitution and for the government to start authorizing privateers again. Because right now we've been on offense. The North Koreans have been ravaging our startups, and so we need to fight back. And I presented a paper with Christian Carlo. We're hopeful that we can really address the security situation, which I think is one of the last obstacles to true mainstreaming of the asset.
- [18:39]
Jen Rado
So one thing that we haven't discussed but is a frequent topic on our, on our discussions in CoinDesk is the role of the states. State regulators and enforcement enforcers are becoming more active as of late. And of course, with legislation pending in Congress, leading some to question whether or not federal preemption could potentially constrain what states have been doing in, let's say, Money transmitter area or other areas. What do you think is the right role for states, if any, in regulating this space going forward?
- [19:11]
Chris Perkins
You know, I don't have a ton of experience working with 50 different states for a reason. The markets that I've worked in are pretty big material, federally regulated markets. And, and it's very hard if you have a young startup for them to go to 50 states, you know, separately. Applying some are much harder than others. So personally I'm in favor of thoughtful federal regulation that makes it easier on our startups to comply and to scale. There will always be a role for the states not trying to take away anything, but it's all about unlocking scale for our, for our startups. And I'm hopeful that like a really thoughtful principle based federal regulation will allow them to navigate more smoothly.
- [19:52]
Nick
All right, so this roundtable is supposed to get started any minute now. We are one minute past 1:00pm it's, it's gonna get started at some point. Chris, I'm gonna ask you this while we wait for them to get this thing kicked off. You know, you mentioned that the folks who are participating in the round table are, are really at the top of their game when it comes to D5. I'm just going to name a few. We have Venice, AIs, Eric Voorhees, Coin Centers, Peter Von Falkenberg, Wharton Schools, Kevin Warback. You said you took a look at the list. You know a lot of people who are speaking on the list. Who are you excited to hear from? Who is really thinking about Defi in the future of Defi?
- [20:33]
Chris Perkins
Thoughtfully, yeah, I don't want to take away from anyone that I fail to mention, but gosh, like check out somebody like Rebecca Redding. Like this lady has been in the trenches from day one. And yeah, that there are a ton of really sharp folks, you know, across the board. But I always love listening to Rebecca. She's a friend and you know, she's been at the forefront with many of the other people as well. And, and I could go through the list but they're, they're really sharp and a lot of them are contrarians. They've been, you know, fighting the good fight for a long time. I don't always agree with all of them but, but they are, you know, they have strong views. They have, they have know Defi like guys like Gabe Shapiro. Dude knows Defi. And so I'm super excited to hear the comments today and it looks like we're about to start.