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- [00:00]
A
Welcome back to the Bitcoin Treasuries podcast. I'm Tim Kotsman. I'm joined today by Eleanor Terrett in the studio.
- [00:07]
B
Hey, Tim.
- [00:08]
A
Eleanor, as the audience may or may not know, you are formerly at Fox, you're a journalist and host of Crypto in America. So you're keeping busy. We were talking beforehand, maybe spending about half your time in D.C. these days.
- [00:24]
B
That's right.
- [00:25]
A
So looking forward to diving into what's happening really at the intersection of so many things. Bitcoin, capital markets, public companies, regulation, and the institutional adoption that we're seeing across digital assets. So maybe let's start with the Clarity act. For those not familiar that aren't following what's going on in Washington. What is the Clarity act and why does it matter?
- [00:54]
B
So the Clarity act and why does it matter? It's a great question. It's essentially the crypto industry's biggest piece of legislation ever. It's market structure. So it's going to basically dictate which regulators are going to oversee which portions of the cryptocurrency market. So if you think about the traditional stock market, right, the securities and Exchange Commission is a big regulator of the traditional equities market. So when it comes to crypto, there has never really been a true regulator that has legally been able to oversee it in statute. If you think back to a couple years ago under the Biden administration, the SEC under Gary Gensler was pretty adamant that the fact that a lot of digital assets, with maybe the exception of Bitcoin, were securities and that the SEC should oversee all of these potential securities and bring them under its own remit. This administration, under the Trump, Trump administration second term, there is a full on effort to really kind of divvy that up between the securities and Exchange Commission and the Commodity Futures Trading Commission. So basically what has happened is they are splitting the remit between the two agencies. The Clarity act decides which digital assets are securities, which are digital commodities, and then which kind of fall outside of, of those two things. You know, you think about mem, you think about NFTs, this bill kind of really sets the parameters for what digital assets are and really answers the question, you know, the industry has been looking for the answer to for, for many, many years. Because if you remember, regulation by enforcement was, you know, a big part of the industry's history for the last couple of years. Lots of lawsuits, lots of uncertainty. The Clarity act really brings a lot of certainty to the future for the crypto industry in the United States.
- [02:48]
A
Where does the legislation Stand today. I mean, I'm seeing things on social media as we're walking into the studio here about we have the votes, Something's happening on July 17th. Like, what's the current state of play?
- [03:02]
B
Yeah, so there have been a lot of dates thrown out there, a lot of timelines given over the last year or so. If you think back to, it's actually almost a year from when this podcast goes out. It'll almost be a year from when the House passed the first iteration of the Clarity act, and it also passed the Genius Act. So the Genius act is now in law. We're seeing a whole bunch of rulemakings come out around that the Clarity act was passed by the House. And then once the House passes a piece of legislation, it then has to go up to, if it originates in the House, that is it has to go up to the Senate for approval. The thing with the Senate is there are a lot of pro crypto Senators like Senator Lummis, Senator Haggerty, who have been working on crypto issues for a number of years. Senator Dilemma, specifically, who saw this piece of legislation that the House put out. And keep in mind, 78 Democrats voted in favor of the Clarity act in the House. So it was a bipartisan product. There was a lot of, you know, support for it. Industry liked it. I think there were some changes that was, you know, were trying to be made. I think there are things that industry wanted to see change in the Senate version. So what the Senate did was kind of what the Senate does really is sort of take this piece of legislation, rework it, and then put their own stamp on it. And that's exactly what they have done. So it's taken a year for the Senate to really do that. And I think there was a lot of ambitious timelines thrown out there in the beginning. You know, we kind of heard the Senate Banking Committee put a timeline off September 30th for getting that initial product out of the Senate banking committee in September 30th. Now we just saw the Senate Banking Committee put the product out last month in May. So it's taken that long just to get a bipartisan product from the committee out. And also the Senate Agriculture Committee had to weigh in as well and put their own product out, voted out of the Senate Agriculture Committee. Now those two bills are waiting to be reconciled. So it kind of gets confusing for your listeners who might not understand sort of how the inner workings of Washington really go down. What kind of gets confusing is, and I mentioned before, the SEC and the CFTC Right. The committees that oversee those agencies in Congress are the Senate Agriculture Committee. They oversee the CFTC and the.
- [05:29]
A
I was wondering what Agriculture had to do with technology.
- [05:31]
B
Right, right.
- [05:32]
A
Or like digital assets specifically.
- [05:33]
B
Exactly. So think of Bitcoin as a commodity. Right. Pretty everybody has kind of come to that same conclusion. Bitcoin is a commodity. Ethereum might be a commodity. You know, you've kind of got. Following the release of the SEC CFTC Joint guidance in March, they put out a list of, I think it was 12 or 16 tokens that they believe are true digital commodities that are decentralized, that do not have any sort of operator at the center of them kind of really controlling those operations. So digital commodities fall under the CFTC's remit and the Agriculture Committee is the one that oversees that. So that's why they're involved. Kind of gets. You're kind of like, why they oversee, like, cattle and corn futures. Why would they be so. But that's why, because Bitcoin and other tokens are now considered commodities. So you've got that part and then you've got the Senate Banking Committee, which oversees the securities and Exchange Commission. So that's why these two committees are working on the legislation. And basically, to cut a long story short, now it has been almost a full year to get this product out of both committees. They have yet to put the bills together. They've got to merge these two texts and then put it on the Senate floor. That is increasingly becoming a point of contention because time is running out. If you look at the Senate calendar and you look at the House calendar, we are coming up on a deadline of the midterm elections. As you know, the midterms are in November. It's only a couple months away. And really there's a lot of time for the midterm elections. But if you look at the calendar, with the amount of recesses that Congress has, the House and the Senate are both out in August for the whole month of August. They're only back in September for about three weeks, and then they're off all of October as well. So you're cutting down that key window of time to bring a big bill like clarity to the Senate floor, to the House floor. As we think about timelines, Right. We've got from today, 21 days until the August recess starts. And that really is sort of the. From industry perspective, from Republicans perspective, that sort of is the unofficial deadline of really getting this done. There's been some talk about July 4th. Right. It's not going to happen by July 4th. Logistically, from a logistics standpoint, just a lot would need to happen for the bill to be able to pass on July 4th. There's a lot of outstanding issues left to be able to reconcile that bill and bring it to the Senate floor, which we can talk about. But from a timing perspective, what is left to do? 21 days until the August recess. The Senate will need to pass the bill, get it on the floor, get the 60 votes necessary to pass the bill. First of all, the Senate is a different creature than the house. You need 60 votes in the Senate to be able to pass a bill. Basically, that means Democrat support is key here. They need at least eight Democrats, I believe, to move this bill through. And so that all comes down to the work that's going on behind the scenes to make some of these Democrats, who are still a little bit, you know, worried about the ethics provision, what's going on with some of the illicit finance talks behind the scenes, which we can get into. It is a behemoth of a bill, tim. It's over 300 pages. There's a lot of man hours, a lot of feelings have gone into this bill over the last year. So basically we're coming up on a deadline and the White House really wants to see this done. This is one of President Trump's big initiatives. He said he wants to get this done, and that's kind of where we stand right now.
- [09:12]
A
What has surprised you the most, spending half of your time now in D.C. watching all this unfold, talking to, I'm
- [09:21]
B
sure countless people surprised me the most. I think honestly that a lot of the work, I'd say maybe 85% of the work on these bills is done by the staffers. So people on the Senate staff, the House staff mostly. I mean, I've been, since we've been talking about the Senate this last year or so, the bill really has been on the Senate side. They do so much of the behind the scenes negotiations and the lawmakers kind of come in towards the end and really sort of shore up the sort of, the outstanding issues. But I'd say, yeah, 80 to 85% of it is all done by the staffers. And I feel like you really have to have a set of very knowledgeable people on your team, you know, so like the, the Hagerty's, the Lummises, the Bernie Moreno's, and even on the Democratic side, you've got, you know, Ruben Gallego, you've got Senator Angela, also works from Maryland, you've got Kirsten Gillibrand, people on their staff really have to know what they're talking about. And these are not easy issues. These are matters of securities law. I'm talking about how to figure out ethics as well. And you've got Patrick Witt at the White House who's kind of trying to thread the needle between satisfying the White House ethics team. President Trump trying to go between the Democrats and the Republicans, trying to be that sort of go between the. There's a lot of work that goes into this behind the scenes. And deadlines also mean nothing in Congress. I will say maybe that shouldn't be a surprise to me, but as someone who is relatively new covering Capitol Hill in the last maybe two years, yeah, you can set a deadline and it means absolutely nothing.
- [11:05]
A
Let's dive into brca. Blockchain Regulatory Certainty Act.
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B
That's the one.
- [11:12]
A
What is it? Why has it become such a focal point and maybe dive into illicit activities? Ethics, all the interesting items there.
- [11:23]
B
Yeah. So we can talk about how ethics and the BRCA are two of the key sticking points still left to get over before the bill can be brought to the Senate floor. Ethics. I think it kind of is self explanatory. Right. The Democrats have said they really want to put some guardrails in place to prevent President Trump, his family, his kids from profiting off of cryptocurrency while in office. And not just the president, but also other government officials, potentially members of Congress and the administration. It's been a point of contention. Obviously, at the end of the day, President Trump is the one who has to say, sign the bill into law. So there's a question whether, you know, if there's too many restrictions in there that apply to him and his family, is he going to sign it? There's a question of constitutionality. Is the ethics provisions, are the ethics provisions in the bill, you know, are they, are they constitutionally sound? There's been some questions from constitutional lawyers whether, you know, how far can you stretch the Constitution to apply to the president and, you know, his children? And I'm not an expert in constitutional law, but there has been concerns raised about that, about just how far you can kind of apply the law there. So there's been a lot of back and forth on what an acceptable ethics agreement will be to Democrats that the White House and President Trump himself will also be able to accept. It's been called the poison pill for the Clarity act because it is arguably the hardest thing to deal with. And I think that's why it's been left to pretty much the last thing to, to be able to figure out. So as far as I know, when this recording goes out, there is still no deal, quote unquote deal that has been made. But talks are ongoing and as lawmakers head into the July 4th recess, I think there will continue to be calls and discussions going on behind the scenes to, to make that happen. So we'll have to see on the brca, the Blockchain Regulatory Certainty act that has emerged as a key sticking point because it is sort of a non negotiable. It's become a red line for industry players. And the reason for that is because it invites basically it's a protection for software developers, validators, miners who operate and write code and maintain the blockchain but do not take control of customer funds. And what the BRCA would do, it was introduced by Rep. Tom Emmer of Minnesota. It would basically create legal protections for these non custodial developers who don't take control of money on these platforms that they create, prevent them from being classified as traditional money transmitters. And that's important because there have been cases in the past and we've seen pretty public cases, the Roman Storm case, the Samurai Wallet case. Those defendants were accused of operating money transmitter businesses even though the platforms that they had set up had created were, quote, unquote, non custodial. And so what the BRCA does in a sentence is essentially create protections for software developers who do not operate like a traditional financial institution, prevents them from being targeted as such. And it also, in Tom Emmer's words, invites innovation to come back onshore in the US because in the past developers have been scared to innovate here because it's basically a, it's a criminal, it's a criminal offense if you operate a money transmitter license illegally. It can. Well, all right, let me start that over because actually it's not, it's an add on to a money, money laundering case. Let me start that over in Tom Emmer's words. So in, in Rep. Tom Emmer's words, it's also a, an invitation to, for software developers to come back onshore and innovate here in the United States because for so long, developers and validators and people who build blockchain technology were scared to operate here because of that potential for getting prosecuted criminally because you can be held criminally liable for those kinds of activities. So basically the BRCA is a protection that would help out software developers. In that sense, law enforcement has taken a stand and basically come out and said we think that this element of the Bill, which is actually, it's section 604 of the bill, the BRCA, we think it's going to actually hinder our ability to go after bad actors on the blockchain. We don't want it in there. We don't see the need for it. We want it taken out. And industry has pushed back and said no, it's a non negotiable. If it's taken out or watered down significantly in any way, we're going to walk away from the bill. So you got these two sides really kind of competing and saying, no, we want this, we want this. Why law enforcement say is important because there are certain Democrats who have said that they would like to see the needs and wants of law enforcement addressed before they can sign on to the bill. So it's a lot of politics, a lot of politics going on behind the scenes here. But it may or may not go to whether we can get to 60 votes in the Senate if these law enforcement concerns are addressed or not. So that's why the BRCA has become sort of this tug of war between industry, the administration. The administration is in favor of it. Last week, the week before, we've seen meetings between the acting Attorney General, Todd Blanch, he's been holding meetings with law enforcement groups basically saying this provision is not what you think it is. It's, you know, it gives us the tools to go after bad actors. It's not going to water down your ability to prosecute, to go after these, these criminals. Patrick Witt over at the White House Crypto Council has held meetings at the White House to try and rally support for the brca. As soon as this past week, the law enforcement officials sent a letter to the administration basically saying that despite all those efforts, we're still not convinced. So it remains a key sticking point. Whether that will be resolved. We'll have to see how, what kind of compromise they can come to. Industry has opened up a little bit lately and said that they would be open to some small changes, you know, like not technical changes, not fundamental changes, but maybe some linguistic changes, if that makes sense. Changes around the language that doesn't actually affect like the core intent of the brca. So the scope. But it's, it's, it's quite interesting how that has emerged as sort of a key, a key thing to watch in this, in this debate over the bill. But it's, it's very important to people who build technology, to miners, bitcoin miners, validators and actually I was talking to Miller, Whitehouse, Levine, who is the CEO, founder of Solana Policy Institute. And he said, this really is the only topic that builders talk to me about. This is kind of the only thing that they care about in this bill because it pertains so heavily to them. And before. I feel like so many folks in this space have not really cared about what has gone on in Washington because they built anyway. Crypto has been around for so long. It's still survived, it's still thrived, even though thrived might not be the right word under the prior administration, but it still existed. It's existed offshore, a lot of it, but it's still been able to exist. And now there's the chance of this potential for it to come onshore. And people are asking about it, people are interested in it. So that's why people care.
- [19:39]
A
I'm thinking about three buckets, three buckets being bitcoin, crypto and stablecoins. Would you choose different buckets or add any buckets to those three? And what areas of this industry, bitcoin, crypto, stablecoins, would the Clarity act impact the most? If that makes sense, benefit the most? Or is it all one happy family and more capital flow into the industry is, you know.
- [20:16]
B
Yeah, I think you can look at it as sort of a net positive for the. For the whole industry.
- [20:20]
A
So it would bring the most clarity to crypto. Do you think that's a fair sentence? Because I've had individuals who maybe are not familiar at all with bitcoin and crypto say, oh, there's. There's no regulatory clarity around it yet. You know, bitcoin's been deemed a commodity by the IRS since, like, almost a decade ago. Something like that.
- [20:41]
B
Yeah.
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A
And so I've had some conversations where people say it's kind of a nothing burger for bitcoin. It's more about crypto. Is that fair or are we missing something?
- [20:53]
B
I think it's probably fair to say that bitcoin has been viewed as a commodity for quite some time. And I think for bitcoin, what this will do is it will just invite probably more, you know, capital to come into the United States. Bitcoin platforms, Bitcoin, you know, validators and miners. There's going to be a lot more activity here in the US Once that finally happens, if it finally happens, if the Clarity act gets passed. And I think bitcoin tends to lift other cryptocurrencies. Right. So what's, you know, what's good for bitcoin might also be good for other cryptocurrencies.
- [21:33]
A
Being able to build across. Yeah, the sector.
- [21:36]
B
Exactly.
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A
Got it.
- [21:37]
B
I think, you know what's actually interesting is it will give institutions more clarity to be able to work with Bitcoin. Like banks, which they previously were not able to do in the past because there were restrictions in place at places like the Fed and the occ. The prudential regulators were very against holding any kind of digital asset. And under clarity, there are provisions in there that will make that easier for institutions to be able to custody hold Bitcoin and other cryptocurrencies. But Bitcoin, I think even before it was considered a commodity, but it was still considered a digital asset.
- [22:22]
A
Yeah. It reminds me of the meme or the trope that everything is good for bitcoin. It's like when you see the Ethereum and the Solana and I'm making this up now, but the Dogecoin ETF come out, it's like, okay, well, let it come out, out and let the market decide how much capital wants to flow into that. And bringing more attention to this economy lets the market decide. There's a lot of rhetoric around kind of a patriotism around the golden age for so many things is kind of the tagline of the current administration. How much, when you're talking to people in D.C. is this a crypto thing versus a crypto issue versus about financial innovation and American competitiveness?
- [23:17]
B
It's probably another kind of American ingenuity.
- [23:21]
A
Yeah, American. Just America in general. Just America first, America leading in these in technology, really.
- [23:31]
B
I think a lot of it is to do with AI, actually. I think a lot of people are excited about the prospect of AI if you look at crypto, we have not been leading in the US on that front. I think President Trump likes to say he's going to make the United States the crypto capital of the world, and has said recently he wants to keep America the crypto capital of the world, but not entirely sure that the US Is that. And I think it has a lot of catching up to do compared to other jurisdictions who have been operating in the space for much longer just because of their regulatory openness to it. I mean, you look at, you look at Europe, you look at Mica, you know, there's a lot of complaints about the regulatory framework over in Europe, but they have been operating a lot longer just based on the fact that they were able to do more things than we were in the in the United States, Same in Singapore, same in Hong Kong. You go to apac, it's a thriving digital asset economy over there. I Think AI has really ramped up the enthusiasm. And I feel like now you can't really talk about crypto without talking about AI as well. I feel like the two are very intertwined, but it's definitely a combination of payments, innovation. I mean, that, you know, you talk about the genius act and kind of really reworking sort of the. I know it sounds cliche, but the inner workings of Wall street, right, kind of resetting the rails, making everything faster, easier, working in real time, settling. That's what Wall street is really excited about. And I think that is really translating in terms of crypto investing. I don't know, the market's pretty, pretty dismal right now. I think there's sort of a lot of pessimism from a retail standpoint about that. I see a lot of, a lot of talk about, you know, well, what has Trump been good for? You know, my bags are still terrible, like, but it's. You've got to kind of think more long term about, you know, who he's put in place to, you know, really set these rules of the road for cryptocurrency in order to sort of long term, allow the industry to thrive in the future. Come on shore. But I think it's kind of a combination of crypto, AI, Wall street updating its payment systems. We've got the Fed talking about implementing payment accounts, operating on the back end, putting stablecoins in. It's an exciting time because I think people are really sort of waking up to the fact that there needs to be a shift in how things are done. And that's what I'd say. And also, you've got the America 250. I mean, that's on top of people's minds right now.
- [26:15]
A
What is, what is America 250? And what's the, what are the conversations? What's the vibe around it?
- [26:24]
B
Well, in D.C. in D.C. yeah. Well, it's, it's.
- [26:27]
A
Or anywhere.
- [26:28]
B
It's pretty big in D.C. i'm going to be there this year for the 250th anniversary. I just became a citizen last year, so that's pretty cool. So I'll be spending my second anniversary of becoming a U.S. citizen in D.C. it's, it's electric. I mean, you saw. Was it last week or the week before President Trump had the UFC fight on the White House Lawn for his 80th birthday? There's a lot of, you know, good feeling, I think, about, you know, America and, you know, it being the 250th anniversary of the founding of the country. It goes a lot, speaks a lot, I think, to kind of what's going on in, you know, building here in the US and sort of that good feeling about could the Clarity act passed? If it does, you know, there's a whole lot of opportunity that's going to open up, but there's also reservation, I think, you know, there's. President Trump is pretty volatile when it comes to, you know, his, his decisions. You just saw recently that he pulled the plug on the housing bill just because he really wants to get the Save America act passed, which is the voter ID law. There was a signing ceremony set for. Set for Friday afternoon, I believe it was, and he pulled the plug on it very last minute and said we can't have the signing ceremony until the Save America act gets passed into law. So is he going to do the same thing with the Clarity Act? He said he was not going to sign any bill into law until the Save America act act is passed. Not entirely sure if it has any path to being law. That's not something I typically cover, but I just, I cover it in the sense that, like, could this have an effect on the Clarity act potentially getting passed? And there's a lot of obstacles in the way of Clarity, actually. You know, there's a ndaa, the National Defense, the spending bill that they have to take up when they come back from August recess. There's the FISA reauthorization they have to take up. There's. Or they're considering taking up. There's a appropriations bill they have to take up. So there's a lot of competing interests that will also have to kind of compete for floor time with Clarity. So all of this gets kind of thrown into the narrative as well. And you have to kind of think about, you know, where. Where are we going to stand in, you know, next month or so when it really is sort of crunch time for Clarity to be brought to the floor? We'll have to see.
- [29:02]
A
Has there been any rulemaking that
- [29:06]
B
you
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A
thought was notable on the Genius act since it's been law? And what's been the conversation around how much rulemaking and enforcement, let alone promotion and championing of the Clarity act, might there be? I mean, obviously the administration's been strong on their social media game and wanting all of this, but do you have any indication as to what the reality has been when it comes to really making the Genius act part of the narrative and the conversation and creating that dialogue, which might be informative to what we might see if and when clarity passes.
- [29:56]
B
So the Genius act has been high on the list of the regulators to do lists. And we've seen a lot of rulemakings come out in the last year or so. We've got a bunch of different Alphabet soup regulators working on it. Something that was notable that I saw recently was some of the prudential regulators, including the Fed, the occupation. The FDIC came out with a proposal that would basically allow stablecoin issuers or require stablecoin issuers to follow the same KYC rules as traditional institutions. There's some question over that, whether that is what crypto players want to see. But I think in this kind of. When we're in this debate around, should crypto be being regulated the same way as traditional financial institutions? I think it doesn't hurt to have stablecoin issuers who are being regulated in a good way, especially when we have so many hacks in defi going on and uncertainty around what's going on on that side of the spectrum. You know, that was definitely notable. There's going to be a lot of feedback on that one, I feel like. Because, you know, I think a lot of folks feel that stablecoin issuers should not be regulated in the same way as traditional banks. But it kind of shows that I think the regulators, the prudential regulators are taking this rulemaking very seriously. And also the stablecoin yield debate, that's been a hot one too.
- [31:38]
A
Can you kind of unpack that a little bit for people not familiar?
- [31:41]
B
Yeah. So essentially the crypto industry wanted to. The Genius act had a provision that would essentially let stablecoin not issuers. So issuers were banned from providing yield under the Genius Act. So think about circle. They could not provide yield to customers, but exchanges were allowed to. So coinbase could provide. If you're a coinbase one customer, you could provide yield to customers if they signed up through the program. You stake your. You stake your stable coins, you can earn a certain percentage back. The banks didn't like that because they believe that it is competitive to their business model. They think that if a everyday person puts their money into stable coins just to earn yield on that, then they will move away from the traditional bank accounts because, let's be honest, the banks don't really give much of a yield on the savings accounts or the checkings account. Checking accounts. So there was a big lobbying effort to make that go away. And because it's the Senate Banking Committee, they have jurisdiction over both crypto and the banks. And so they kind of had to make nice with both sides. Senators Tillis, Thom Tillis in North Carolina, and Senator, Senator Angela also Brooks of Maryland were kind of the two senators who were spearheading these talks. And the White House was involved as well, very heavily. It took about three months of negotiations and that took a lot of time out of what would have been normal negotiations around other aspects of the bill. And where they landed was essentially the crypto industry say they gave a lot, the banks say they gave a lot. But what came out of it was crypto companies like Coinbase can no longer offer yield on stable coins on, on idle balances. So if I put my money into Coinbase, I cannot earn yield on just my balance in there. I can earn yield on an activity if I sign up for something or if I, you know, stake something. If it's an activity, then I can earn a reward, but not a yield. I can't earn like money on my money.
- [33:54]
A
Isn't that kind of just a workaround in reality?
- [33:57]
B
Banks would say it is. Banks would say it is. But you, there's, there's language in the compromise that says you cannot have anything that is economically or functionally equivalent to an interest, interest bearing, bank deposit.
- [34:10]
A
Okay. So it has to be a different function.
- [34:13]
B
It has to be a different function. So think about like credit card rewards. So if you sign up for, you know, a Delta credit card, you get a certain amount of miles, but you're not getting cash. Like you're not earning money on your money.
- [34:25]
A
And they change, they change the terms all the time. Like, oh, my points aren't going as far.
- [34:29]
B
Why exactly?
- [34:30]
A
Inflation.
- [34:30]
B
So. Right. So this is kind of what happened with crypto. So you can still get rewards, but you can't get yield. And the banks are still lobbying against it. They're not happy with it. They think that crypto can potentially work around that still. And when Clarity goes to the floor in a couple weeks, they are behind the scenes right now targeting certain off committee senators of senators not on the Banking Committee, senators not on the Ag Committee, just other senators who will have to vote on the bill when it comes time to vote on the floor to really tell them how they feel and how it's going to draw deposits away from community banks. Especially because they're the ones where, you know, where the, where the lending happens the most. They lend out to small businesses, to small investors. They really think that if stablecoins take off that the deposit flight will, will hit the lending capacity. And there's been studies, you know, the White House Economic Council came Out with a study a couple months back that kind of rebutted that. It said, you know, there's real, there's no real economic study because we haven't seen the, the effect of stablecoins really take placed yet. That growth really hasn't happened to the extent where we can say oh yeah, that really did affect that community bank. And there's concrete proof. But based on economic models and data that the White House Economic Council uses, they were able to kind of do a look ahead and say we believe that the bank's concerns are overblown. We don't think it's actually going to make much of a dent in community lending, community bank lending. Um, so it's still. That is another issue in the Clarity act that we have to watch, that I will be watching going forward. Ethics, the BRCA and stablecoin yield, which like I said took three months to come to a compromise and may or may not come up as an issue in coming weeks when we get to the floor.
- [36:21]
A
So you mentioned it's about 300 pages. What else is in there? Is there anything AI related in there or anything else of note or. We've covered most of it right now
- [36:33]
B
as the bill stands. There's a housing bill in the Clarity act. The last I think like 10 pages. There's a, there's a bill that is pertains to housing. I can't remember exactly what the upshot of it is, but it was put in there to, from what I was told to appease Senator Kennedy who was kind of on the fence about whether he wanted to get on board with voting the Clarity act through the Senate Banking Committee. He was very gung ho about housing and so they put a bill that he sponsored into the Clarity act so he would vote yes in committee. A lot of horse trading that goes on behind the scenes in Congress as you might imagine. You put this in there and I'll vote for it. If you don't, I won't.
- [37:22]
A
What are you hearing, if anything, around issues like the de minimis exemption for everyday transactions? Is that something that is part of the conversation? How important do you think it is?
- [37:37]
B
So the de minimis for bitcoin was not included in the recent round of proposals that came out of the House Ways and Means Committee. And I believe it was because it was creates a whole bunch of paperwork that the IRS just does not want to deal with because bitcoin's volatility is such that, you know, it would be hard to record keep if you know you were having to Write down all the time when you use Bitcoin to pay for a cup of coffee. Even though that is technically why the de minimis is supposed to be such a great thing. That's why bitcoiners want it, right? Because they want a cup of coffee to be able to be bought with Bitcoin so we can start using it for everyday transactions. I also think that the lawmakers are, they seem to think that payment stable coins are going to be the common use case for everyday transactions and not Bitcoin because Bitcoin is seen as more of an investment and stablecoins are going to be what we use for buying a cup of coffee. And I think, I know bitcoin advocates are not very happy about that. They are happy with a couple of provisions that were in there, including the fact that you can aggregate transactions. So you know, when it comes time to report to report, you don't have to note every single gain or loss that you've made on Bitcoin. You can aggregate some of those transactions to make the reporting easier. The industry is happy that it is being talked about and picked up as an issue now. It's kind of always referred to as the third leg of the stool when it comes to crypto policy. But clarity is really the main focus right now. And they're hoping that once that passes, if that passes, then they'll be able to reach a bipartisan consensus on some kind of crypto tax reform. But right now it's not bipartisan. It was just the Republicans who came out with those proposals. And I know there's some efforts to try and get Stephen Horsford, who's the Democrat from Nevada who's been behind the PACE Act. Him and Rhett Max Miller were the ones who came out with that try and get him on board with some of the proposals that were in the recently released ones from the Republicans. So whether it could be bipartisan by the time that the House maybe flips or the Senate flips and you can actually get some real progress made there, it'll remains to be seen.
- [40:24]
A
What are you seeing as far as stakeholders and influence? Are there certain stakeholders that have outsized influence? Do you see a parade of Michael Saylors and stablecoin issuers and crypto project executives kind of like, you know, helicoptering themselves in and out of D.C. or like moving to D.C. quote, unquote? Or is it, is that not really the reality day to day?
- [40:54]
B
So the advocacy groups definitely have a big presence on Capitol Hill. You've got the digital chamber blockchain Association, Crypto Council for Innovation. They represent hundreds of companies in the space, not just crypto companies. They also represent, in some cases traditional banks who really want to see this crypto legislation passed. So they spend a lot of time on Capitol Hill advocating. They had a fly in recently, a couple of fly ins, one on market structure, one on crypto taxes and they basically set up meetings and one of the BRCA actually recently, but they set up meetings with lawmakers and their offices and they basically just come in and say how important they think this legislation is, why they want it to be passed, and then listen to the concerns of the lawmakers, kind of take that back with them and then use that to shape their lobbying efforts going forward. I say Coinbase as well has a big presence on the Hill. We know this from priority elections too, obviously. We Coinbase has donated a lot heavily to, to Fair Shake, which is the leading crypto super pac. So not only do they have a big presence on Capitol Hill physically, but they have one. You know, they have deep pockets as well. We're seeing that play out in some of the early spending for the primaries in the midterms this year. It's not just Coinbase, it's Ripple, Andreessen Horowitz venture capital firm as well. I'd say a lot of these players are pretty common fixtures on Capitol Hill when it comes to lobbying efforts around the Clarity Act. And then it really is down to the advocacy groups. But keep in mind they do represent a lot of these crypto companies in the space.
- [42:45]
A
Are there any very obvious use cases or what's the primary intersection that you're seeing in conversations between Bitcoin and digital assets and AI? Is it the very simple, oh well, these AI agents are going to want to transact in stablecoins? No, they're going to want to transact in bitcoin sort of conversations or is that very simplistic and there's other more just other or more sophisticated sort of ideas or conversations happening.
- [43:23]
B
It's very much agentic payments and what the future is going to look like around agents doing our transactions for us. And there's a big question right now over how many of the next wave of on chain users are actually going to be bots slash agents and you know, building for that future because they say blockchain rails are sort of the perfect use case for these agents. And there's going to be so many transactions that happen between agent to agent. Some agents going to have wallets and cards that they use and we're Just going to be able to kind of say, hey, Siri, go and buy XYZ from me from Amazon and. Or, you know, hey, Siri, go and invest in Google or Coinbase for me on XYZ platform.
- [44:14]
A
And does that scare you? Like a teenager with a credit card? Or how do you think about that?
- [44:18]
B
So I've asked this question to people who've come on crypto in America. It's like, you know, their AI is essentially for human usage, for like, agentic usage. You think about ChatGPT, you think about Claude. It's relatively new in the last, like, handful of years, right? I'd say like five years, people have really been using ChatGPT. But these are the platforms that have been used in legal cases and then cited in, you know, people have had to apologize to judges for getting cases wrong because the AI is hallucinating cases. Sullivan and Cromwell was a. Was a particularly notable case in the last couple months where they, you know, that's a top law firm. You charge lawyers like $3,000 an hour to do your legal work. And they're putting it through ChatGPT. It's hallucinating cases. Right. So would I really trust it to, to do my investing or my, you know, shopping for me? But when I ask this question, they say, oh, well, there's parameters you can set, you know, there's, you know, very clear sort of instructions and it's all written in the code. Right. It's kind of similar to, you know, smart contracts and what you can do with. With crypto. But.
- [45:28]
A
And there's never been a crypto hack, so we're fine.
- [45:30]
B
Oh, right, exactly. Yeah, 100%. But they are building for that future. And that has been a really interesting. Like I said, I feel like crypto and AI are just increasingly becoming intertwined and banks for agents, wallets for agents. It's just like agents are really going to become sort of part of this future. Yeah, it's fascinating.
- [45:55]
A
Let's talk about the midterms and what's at stake. Okay, what's at stake for Bitcoin and digital assets? How different could policy outcomes look depending on who's in Congress after November?
- [46:11]
B
So there's already a pretty pro crypto congress in place thanks to the 2024 elections when we saw Fairshake sweep in there with a lot of crypto money and oust folks like Senator Sherrod Brown, who, who's the head of the Banking Committee last Congress. Although he is coming back for a second bite at the apple, he is taking on John Hustedt, who replaced him in the Senate, actually he replaced John Newstead, replaced Vice President Vance when he went on to become the vice president. However, Sherrod Brown is coming back, so we'll see how that race plays out and whether Fair Shake actually gets involved in that race. I've heard there's some reasons that they might be holding back for now. Whether Clarity passes or not might have something to do with that. But basically it is a pretty pro crypto Congress. So we talk about the anti crypto politician. Is that really a thing anymore? I think there are some special cases. We see Brad Sherman in Congress. He's a congressman from California. He's one of the few who's still running on an anti crypto platform. There was a couple of flyers he put out, mailers, they call it, to people in his district, basically bashing the crypto industry for being aligned with Trump, and Trump lining his pockets with crypto money and bashing his opponent, opponent, who he ended up defeating in the California primary for being aligned with crypto because it's dark money. It's basically rhetoric that you would have heard in the 2024 election. So you have some special cases, but when it comes to like an anti crypto Congress or group of politicians, I don't really think that is a thing anymore. So you've got Fair Shake spending this cycle because there are, you know, there's a chance that the midterms will yield, actually quite a big chance that the midterms will yield a House that turns from Republican to Democrat. And what does that mean for crypto? Well, I think there's people of the opinion that crypto is sort of established enough. It has become established enough in these last 18 months or so. It's made enough progress to be able to kind of survive an administration that is perhaps not so friendly towards crypto. There's people who vehemently disagree with that and would say that's why we got to get the Clarity act passed is because if we, you know, if we don't get this thing signed into law, then all of these, all this progress we've made, all of these, you know, great guidance proposals, things that have come out of the SEC and the cftc, which is sort of a placeholder for real legislation, right? You've got regulation and then you've got real legislation that will all get potentially rolled back under a future administration that is not so friendly towards crypto, which is actually possible. And I was actually thinking the other day, like, well, because people say this all the time, And I'm thinking, well, has this actually happened before? And it has. We saw the defi broker rule. One of the first things that the, this, this Congress, the Republican led Congress, rolled back from the prior administration, SAB 121, which was that, you know, that SEC rule that was very unfavorable towards crypto, that was rolled back. So if you put the shoe on the other foot, then it's possible that a future administration could do the same thing to all the pro crypto policies that have been put in place under this administration. And if the House turns blue, then the Clarity act, if it's not passed by the summer, there's a chance that a House Financial Services Committee, who is run by Maxine Waters, who is currently the ranking member but would likely become chair if the House turns blue, she has pretty much vowed to go after the Trump family and crack down on Trump crypto corruption, which is what she calls him. So investigate all of the, you know, crypto family dealings that have gone on and kind of really just like haul them all up in front of Congress. There'll be a lot of hearings that go on and whether progress on crypto in general will continue to be a priority will kind of remain to be seen. So in terms of midterms, they're trying to put as many, you know, pro crypto folks in there as possible to try and, you know, boost that outcome. But I would say that there is not as much of a anti crypto feeling in this Congress as there was in 2024. But you're seeing Fair Shake spend heavily. They've got 100. They just came out with a statement they have $150 million left to spend out of 193 million they started the year with. They've deployed about 40 million of that so far on pro crypto candidates. They're on pretty much a bit of a winning streak. They spent 12 million on the Alabama Senate race. The guy that they backed ended up winning the primary. Now, a lot could happen between now and the general election, and we may see them come in and spend some money on some of these more contentious races, like the one with Sherrod Brown and John Husted, potentially come in and spend some money on Brad Sherman. But then you also have to kind of look at the possibility that some of these people, like Sherman, are in entrenched Democrat areas. So is it worth spending money on that when you, you know, is the money going to go to waste just because that candidate is likely to get chosen anyway? So Fair Shake is Definitely. And other crypto packs, too, have popped up. You've got sort of these grassroots ones that. That are being spun up by members of the crypto industry. You have the Blockchain Leadership Fund, which is backed by Anchorage Digital and Chainlink. You have the fellowship pack, which is an interesting one, that is funded by Cantor Fitzgerald, the former company of Commerce Secretary Howard Lutnick. And the guy who chairs it is Jesse Zbiro, who is the. Basically the. The lead policy guy for Tether here in the US So some interesting dynamics going on there. They've backed a whole bunch of Republican candidates. They also backed a couple of Democrats as well. So they're spending heavily. Bo Hines, the former White House crypto counsel executive director, is now working for Tether, and he's involved in that initiative as well. So lots of crypto money being spent. I don't know whether we will see quite as much dropped on this election as 2024, but money is being deployed.
- [53:14]
A
If we're sitting here one year from today, can you count three big policy developments that you expect to have happened
- [53:22]
B
a year from today? If I'm an optimist, then I'll say the Clarity act is signed into law. The House Ways and Means Committee will have made some bipartisan progress on crypto tax reform, and the Fed will have rolled out its completed guidelines for master accounts, or payment accounts, as they're called. Basically, skinny master accounts is. Yeah.
- [53:57]
A
Can you tell the audience what are skinny master accounts? What's going on with, you know, so the regular ones, the skinny ones. All of them, yeah.
- [54:06]
B
So the fat ones and the skinny ones. So the. Increasingly this past year, we've seen crypto companies want to gain access to the Federal Reserve's payment rails. What does that mean? It just makes it a lot easier for banks to settle payments faster. They don't have to go through intermediaries when, you know, they're doing these. These settlements. This money movement makes it a lot cheaper for the banks, but it also ends up reducing the cost for consumers at the end of the day, because a lot of these banks will pass that cost down to the consumer. And so with the Fed Master account, the. The traditional banks will tell you that giving crypto access to these coveted accounts is bad news because crypto is not as highly regulated. It creates systemic risk to the traditional financial system. We should not be letting crypto anywhere near these accounts. Christopher Waller, who's one of the Fed governors, came up with an idea in October to allow crypto to get access to skinny master accounts, quote, Unquote, which would basically be a lighter version of the Fed master accounts that would carry the less risk. Less risk. And so they wouldn't get access to the Fed's lending window. There's a couple of other things in there that would kind of restrict crypto from getting the same kind of access as traditional banks would, but it would get the job done. It would basically allow crypto firms to be able to settle their payments faster, not have to go through interm intermediary banks and basically give them what they're asking for. There's a lot of back and forth right now. They are currently in the rulemaking phase. They've asked for public input. Crypto has given them input. They want more out of what the Fed is proposing. They want to see ACH payments be included in there. And the traditional banks are obviously, like I said, lobbying against it pretty hard. And Christopher Waller said he wants to put this out by the end of the year. So this could be. You know, we actually saw Kraken, the crypto exchange, get early access to it back in March. They were the first ever to be able to say they've gotten access to a master account. They actually applied for one in 2020. So six years later, they were granted access to this payment account, Skinny Master Account. There's sort of the pilot, if you were, if you will, sort of the. The company that's sort of testing this skinny master account payment system out. And then when the rules are kind of written and rolled out and everybody can apply and sort of get access, after this year, you'll see likely more companies apply for these accounts. But basically, in a nutshell, it just makes crypto companies lives easier to get access to the central banks.
- [57:12]
A
Where can people follow your work and stay updated on all these issues?
- [57:18]
B
You can follow me leanorterrot on Twitter. I'm very active on Twitter. I post most of my news and scoops there. And I'm also Crypto in America. That's my newsletter, comes out Monday and Wednesdays. Thinking about moving it to Thursdays actually, so maybe Monday and Thursday, so stay tuned for that. And the Crypto in America podcast comes out every Wednesday. You can find it on anywhere you get your podcasts. And we have a Friday show too, which is also available wherever you get your podcasts. So, yeah, just type in my name on Google and they'll come up.
- [57:54]
A
Speaking of Crypto in America, what's been like the most unexpected thing or your favorite guest or just something that really took you off guard when it comes to a Lot of very notable people that you've interviewed.
- [58:12]
B
I think my favorite guest has been. It's a great question. We've had so many.
- [58:21]
A
We're not playing favorites, but.
- [58:22]
B
No, of course, no, I'd say I really enjoyed, since we were just talking about it, having Christopher Waller on the Fed Governor, we actually went to the Fed on their payments day. They had a payments day conference back in October when they announced the Skinny Master Account initiative. And we sat down and did a live episode with Fed Governor Waller on crypto in America. And that was just definitely a highlight. I'd never been to the Fed before, so that was a first for me. And also just to be able to kind of sit down and pick the brain of a Federal Reserve governor talking about crypto, innovation and stablecoin. We asked him about Bitcoin too, which was quite funny actually. He doesn't invest in bitcoin. Spoiler alert.
- [59:10]
A
What was the Fed like? Did it feel like a college campus? Did it feel like a regular office? Did it feel like some hallowed place? Like, what is the Fed like when you're walking through the halls?
- [59:24]
B
It just. So actually the, the big Federal Reserve building as we know, is under construction right now. So we were in the Martin Building, which is behind it, just felt like a regular government building, kind of, you know, lots of glass, lots of marble, but yeah, regular government building. But what was cool was I was in the same room that they hold those press briefings in and yeah, that got to see where kind of all the action happens there.
- [59:49]
A
And good morning, good afternoon, good day.
- [59:51]
B
And I was, I was, I was the only one in there. So I was kind of sitting in the back and just imagining what that, what that room is like on those days. And that was back when Chairman Powell was still chair.
- [60:04]
A
Now we got Kevin Warshat's your take on Warsh so far? So many different, like very different takes of. He's dovish. He's not dovish. I mean, the first meeting he just says no more forward guidance. What's your take on all of that? So super interesting.
- [60:23]
B
Really shaken up the Fed. I think as a reporter I have to sympathize with some of those Fed reporters who will no longer kind of get the same gossip, I guess, from previous Fed chairs. I feel like it was sort of a, you know, he's taken a lot of the hype out of covering the Fed, I think with some of that forward looking guidance and, you know, not giving his intake on the intake, not giving his input on dot plot, potentially not even holding press conferences. I think I speaking to someone recently about it, they said we need to make the Fed boring again. And I don't necessarily have a problem with that.
- [61:08]
A
But do you think that's better for markets, worse for markets?
- [61:12]
B
I think the markets are so volatile and I think they really do live and die by some of these Fed projections. What is the Fed going to do? Is it going to raise rates? Is it going to lower rates? Is it going to hold the same to the point where I think we see it really affect the price of bitcoin too. I mean, correct me if I'm wrong, but a lot of times now I feel like a lot of the macro trends and when I'm reading about it, it's usually, what is the Fed going to do? Dictates if it's a bump or a fall for bitcoin. And I feel like if that is maybe not as visible, then maybe it would take some volatility out in the market, who knows? But I think it's an interesting approach. I think he's. He's clearly not. It's not his first rodeo. He's been a Fed governor before and so he's. He's got the. He's got the bona feeds to be able to kind of make those calculated decisions. So we'll definitely be interesting to see how, how that goes.
- [62:16]
A
But he seemed very comfortable and crisp at the podium.
- [62:20]
B
Yeah, definitely not.
- [62:22]
A
Not shy, not nervous, well spoken. Yeah, yeah, very well spoken.
- [62:26]
B
Yeah. We'll be. We'll have to see how if he holds true to his independence, like so many people are probably wondering the same thing as well. We will see.
- [62:39]
A
Thank you so much for all your time and covering all of this. I know, you know, so many people are going to really appreciate it, to really get an idea, all in one hour of what's going on in D.C. really appreciate it. Thanks, Eleanor.
- [62:53]
B
Thanks for having me, Tim.