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The Wolf Of All Streets
$330 Billion Into Bitcoin, Tokenized Dollars Are Coming! | Caitlin Long
01:01:52
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- [00:00]
Scott Melker
Bitcoin is likely to see $330 billion of corporate treasury inflows by 2029, according to Bernstein. Definitely a topic worth discussing as we see Michael Saylor and strategy increase their buying and plans to buy into the future. And I think we all know that tokenized everything, including stablecoins and dollars are coming. But now there's a bit of controversy as to whether we will actually see that legislation, which we all thought was a layup, coming this year. When we want to talk about things like this, we bring on Caitlin Long. It's really easy, not that complicated. Tillman and Andrew and I will probably just be quiet and ask her questions. I don't know. We'll see. But Caitlin, absolutely leading the charge here at Custodia bank and the best person to give us an update on everything that's happening in this space. Let's go.
- [00:47]
Andrew Tillman
Let's do.
- [01:01]
Scott Melker
What is up, everybody? I'm Scott Melker, also known as the Wolf of all streets. Before we get started, please subscribe to the channel and hit that like button. Good morning, Caitlin, Andrew, and good Hillman. How are you?
- [01:13]
Caitlin Long
Morning.
- [01:14]
Unnamed Speaker
Good morning.
- [01:15]
Scott Melker
We were supposed to have the genius act, the stable act, all the act stable coins were coming, and now all of a sudden, it seems like the Elizabeth Warren camp is kind of digging in and could actually prevent that from happening. I mean, Caitlin, are we now at risk of literally not getting stablecoin legislation?
- [01:34]
Unnamed Speaker
There is some risk, yes. The Democrats have decided to make a lot of noise and the word behind the curtain is it's all about the Trump family's involvement in crypto, and they're making a stand against that. They're actually not far apart on the substantive parts of the bill.
- [01:57]
Scott Melker
So this is interesting. Are they right in any way, shape or form here? Because I had a conversation actually, literally at a Formula One race with Chris Giancarlo, the former chairman of the cftc, two days ago, and he was saying, and I sort of agreed, he said, we love that Trump has followed through on all of the deregulation and the SEC has backed off. But maybe it's not great that the family is so deeply involved in launching NFTs and meme points.
- [02:23]
Unnamed Speaker
Well, Senator Lummis said the same thing. She said on NBC on Friday, the Trump family's making her job harder and she's one of the people running the bill on the Senate floor. So I'll leave it at that. I'll stay out of the political scrum. I've never endorsed anyone. I understand the, the difficult position and I said at the time when Paul Atkins got nominated for the SEC that that Trump meme token was going to create a challenge for him because it was not likely to be something that the SEC was going to be comfortable with once he was in a position of leadership at the sec. And he hasn't said anything yet. They didn't really get him during the nomination hearing. On the record on that, but you can just tell it's uncomfortable for the people in this industry who have been champ in D.C. to have to deal with this.
- [03:19]
Scott Melker
So, Andrew Tillman, I wonder if this is just them playing politics or then a legitimate concern on their side, because this is a different narrative than the reasons that they want to stop the industry before. This isn't the old anti crypto army rhetoric. It's new anti crypto army rhetoric.
- [03:33]
Andrew Tillman
Yeah, I would say it's.
- [03:34]
Caitlin Long
Yeah, go ahead, Andrew.
- [03:36]
Andrew Tillman
It's new anti crypto stuff and it's, it's, you know, it's the same song on a different key is what it is. They're looking to slow down the industry. That probably behind all of this is they're pissed off that, you know, crypto played a meaningful part in the last election. That can't be denied. Crypto will probably play a meaningful part in ongoing processes in D.C. for a while. They don't like that either. What are, what are their, what are their alternatives? Their alternatives are to just kind of throw up their hands, say, yeah, you know what, let's go along with this. Well, that would be going along with Trump. That would be going along with this administration. That would be going along with probably a really good idea in terms of stablecoin regulation. And that, good or bad, is simply not the MO of the Democrat Party at this time. Anything that is coming from this administration, they are against it. This isn't just a crypto bill or a stablecoin bill issue. It's the entirety of the administration. They're going to be anti. Whatever is done, whatever is said, whatever the process is, they're going to be against it. That's what they did four years ago. That's what they're, they, that's what all of them, you know, campaigned on for the four years that Trump wasn't even in office. And that's what they're doing now. I would suggest that hasn't been a winning formula, it seems, but at the same time, you know, they're free to, to, to go down a certain road. My guess is, is there's a lot of noise, but there's also Signal. And I think the signal tells us that this will find its way through the process eventually.
- [05:23]
Scott Melker
Yes.
- [05:24]
Andrew Tillman
What does eventually mean? I don't know. Maybe the timing is, is, is off by a few weeks or a couple months at best, but it still ends up getting done because as Senator Thune said yesterday, I believe, hey, we're gonna, we're gonna move forward on this, you know, whatever you guys do, histrionics and the like, we're gonna keep marching forward on this bill and understand that when it comes from the leader of the Senate, that particular voice carries more heft than a couple of folks in the House. So, you know, if he says it's moving forward, it's probably moving forward. No matter the noise. That's the signal that I'm looking at is what he had to say.
- [06:11]
Unnamed Speaker
Yeah. He controls the floor agenda. And the cloture vote is scheduled for Thursday. It will happen Thursday.
- [06:17]
Andrew Tillman
Yeah.
- [06:18]
Scott Melker
So they would have to rally a hell of a lot of support in the next two days to really stop this at this point.
- [06:24]
Unnamed Speaker
Yeah, I think so. And some of the, some of the, folks that signed the letter over the weekend, which was a surprise, the Republicans did not know that was coming, have already signaled that they are going to vote for it. So they got what they wanted. And, you know, that's this, the sausage making process is never pretty. And this is DC and so I think the Senate vote could be as early as next week. There's definitely also hanging over this. Certain of the Democrats in particular have played into the circle tether fight and are trying to increase the restrictions on offshore stablecoin issuers.
- [07:09]
Scott Melker
Tell me your turn.
- [07:11]
Caitlin Long
I agree. I mean, they pretty much covered all the things I was going to talk about. I was just going to say, and both, I think this is about concessions. I think, you know, Washington is looking for reasons to, you know, introduce friction into bills because it allows them negotiating power. And the Trump meme coin didn't make it easier on us, I think was a blunder in my estimation. Melania Token on, on top of that. And, but I do think bitcoin is going to be the shining example of what this industry is. And no one can change that narrative. Right? No one can stop that train. It's going to keep chugging along. It doesn't need politicians to endorse it for do what bitcoin's designed to do. And so I think the, you know, the real narrative here is temporary bad news so that people continue to accumulate their position on the dips. And, you know, we're Looking still at institutional adoption. The, the stablecoin bill does a lot, I don't get me wrong, I, I, I really want to see that passed. Regulatory clarity is, is, it's, it's a shame we haven't gotten it, you know, six years ago.
- [08:24]
Unnamed Speaker
Yes.
- [08:25]
Caitlin Long
But, you know, you live with what you get and we're, we're fighting this fight as fast as we can. And it sounds like it's on a pretty tight timetable. Even in the worst case scenario, something's going to get done. And even if those concessions mean we have to give a little bit, I think the bet that at the end of the day our political system will work and we will get a better product out of this. Hopefully we will. I do think that crypto has intrinsic dangers if, if you don't think through the process that you're about to kind of put into, into act as the gold standard. Because there are a lot of things that stablecoin introduction does that, that changes the fabric of our society at a base level.
- [09:09]
Scott Melker
Okay, so go ahead, Andrew.
- [09:11]
Andrew Tillman
Think about where we are from where we have been. A year ago, the idea of a cloture vote coming up on Thursday for a stablecoin bill was not even possible. Right. Like the, it was survive. Right. Like how many times did we see, you know, meaningful people during the Biden administration post the survive meme? Because you just had to survive, Caitlin. And Custodia is, is exhibit A of, of that process. Right. So we've moved that, you know, proverbial political ball in a huge way in our direction. Right. And, but, you know, new challenges pop up. So we've moved the ball in a big way. We'd like to keep moving the ball, we'd like to keep inching it forward. And it would be nice if politically every once in a while people would be like, yeah, this is a good idea. Probably most of us should be on board. But it doesn't seem that the, you know, that's how politics works right now. So we'll see on Thursday. We'll see where it goes.
- [10:11]
Scott Melker
Yeah. But speaking of moving the ball. Right, And Caitlin, there's some nuance then maybe as this legislation comes out as to what stable coins will be used, what can be tokenized and how they land on that. And you're obviously moving that ball forward. That's a good segue. Milestone achieved. A tokenized dollar issued on a permissionless blockchain was used Friday within the banking system to make cross border US Dollar payments. Custodia Bank Advantage bank teamed up to do it for Mexico based trucking and logistics company DX Express. So obviously this is you, you can explain it to us. Why is this a big deal? Why is this different than sending them tether, you know, from, from one place to another?
- [10:47]
Unnamed Speaker
Because we did it in the banking system with regulatory blessing and with, with rights and protections that banks give that non banks don't. And that's the bottom line. This is tradfi. This is as tradfi as it could possibly be. And Vantage, God bless them, we teamed up to do this. We couldn't have done it without each other. We both bring the critical pieces. Ironically, if the Fed had made Custodia a member bank, we would be prohibited from doing it because Vantage is a member bank. So they can't issue it, but they can provide the Fed wire and reserve management services and then we can issue the token. And because the Fed already publicly said we are a depository institution legally then this is a tokenized bank deposit because we are a depository institution. So what's the most important takeaway on that bank non bank distinction is that banks issue dollars, Non banks issue claims on dollars. Big difference.
- [11:53]
Scott Melker
So is there a world where this is what is allowed and we do see the tethers or the incumbents sort of cut out, at least within the banking system. Because you told me many times before that you had the patent, I believe on tokenized bank transfers, tokenized bank deposits, excuse me. So this could play heavily in your favor actually if the stablecoin legislation is.
- [12:16]
Unnamed Speaker
A bit more aggressive, yes. What's interesting is non banks can continue to issue stablecoins under the Genius and Stable act. But I have always thought that because banks have direct access to the Fed. Of course Custodia having been cut out from that for now, I do believe that will be resolved in our favor at some point. But the banks are closer to the Fed. What is at bottom a central bank. What made central banking successful in financial history? It's really simple. It's not monetary policy, it's not even the discount window, it's a PAR guarantee. The banks that have direct access have the PAR guarantee. And the closer you are to the PAR guarantee, the less likely your token, whether it's a stablecoin or a tokenized bank deposit is ever going to break par. So it's that simple. And the Wall street folks on this call are seen nodding your heads. You understand the value of that. And so stablecoins, it's stunning the success that they've had without having direct access. In fact, actually it's been a cat and mouse game, especially for Tether in those early years. Trying to keep any US dollar bank reserves and banking relationships was really tough for them. But long story short, I've always thought because of that structural point that the stablecoin market was going to go bankrupt. Why did Custodia bother to get a bank charter? But here's the thing. There is a conga line of crypto companies lined up at the OCC to get bank charters. So it doesn't mean that the traditional banks are going to dominate this. It means that crypto companies are going to get bank charters.
- [14:06]
Scott Melker
Banks.
- [14:10]
Caitlin Long
I like the distinction. I was reading about the distinction between stable tokens and deposit tokens. This is the first deposit token transfer it sounds like Correct we've ever seen. That's.
- [14:21]
Unnamed Speaker
That's phenomenalist. Blockchain. Yeah. Sorry. Because obviously JP Morgan's been doing it with JPM Coin for a while, but nobody in our space would use that. Sorry to interrupt.
- [14:30]
Caitlin Long
Huge precedent set. I mean that's a major milestone and it's probably as, as big of a milestone as what Michael Saylor's been able to do in, in terms of raising debt to buy more Bitcoin at its peaks. I, I would, I would think that a lot of people are going to follow suit. Are you going to be, because you hold the patents, the person who can let people participate at your leisure, or is it more complicated than that?
- [14:58]
Unnamed Speaker
Well, we'll see. I mean, honestly, we don't know for sure if the stablecoin bill is going to pass. What last minute shenanigans might end up getting thrown into that sausage. And then obviously it's going to take some time for the bank regulators to get the rules promulgated. So the bill is not really going to take effect until later this year. But what's fun about what Vantage and Custodia are doing together is we can do this. Now. We've done the work with the regulators. They are. You can look this up. What's called a Fed member bank. What does that mean? They're regulated by the Texas Banking Department and the Dallas Fed and then we're regulated by the Wyoming Division of Banking. When we said in our press releases last month and this month that we worked closely with our regulators. You can read into that what you want, but you can read into it that the regulators absolutely knew and spent a lot of time putting us through the wringer on what exactly we were doing here. And we will be continuing to do more things together. I'm really excited about what we're doing together. And what's so interesting is that Vantage is what's called a community bank. They're not one of the giant banks but because they're located in San Antonio, they do a lot of cross border business with Mexico and have a big. What's so interesting is DX Express is a longtime customer of Vantage. It's a trucking company that moves goods back and forth between the U.S. between Mexico, U.S. and Canada. And so they're a longtime traditional banking customer. It was really fun being on the Zoom call. We did all this on Zoom and I could see their treasury operations and their control, you know, control room in the background while they were transacting with us here. And what I love, love, love, love, love is this is solving an actual customer problem. The CEO wants to be able to pay his drivers within an hour of the trucks arriving at the destination. When you're thinking about cross border payments in particular, there is literally no way to do that unless you're using it a stablecoin like technology which is what we're, what we're doing inside a bank wrapper here. So that's his, he said that's his goal. We're going to work with him to try to make it happen inside the banking wrapper.
- [17:23]
Scott Melker
Yeah, I was just curious really quickly and then Andrew, jump in. But does that mean that if, let's say they pay the trucker, you know, within an hour, do they have to be accessing crypto in some sort of way or does it instantly basically go into their bank account as a dollar? I just want, I'm just wondering what the logistics are, if there's a conversion to make that easier for the truckers.
- [17:43]
Unnamed Speaker
Okay, here's the aha guys. Andrew, I think you in particular, you'll appreciate this. This is getting into some of the difference between what a bank can do and what a non bank can do. We already talked about the par guarantee that banks have. But the other piece is that banks can issue something called negotiable instruments. Think about travelers checks, think about a cashier's check. Those can be endorsed to a different owner and you can actually. It used to be that with a paper check you were limited by the number of signatures you could fit on the back of a check for how many times you could actually endorse it over to a different owner. But in our case this is digital and Tim Scott talks about this, he talks about stablecoins being digital travelers checks. So here's the punchline. We set this up so that the Holder could present it for payment at Custodia, you don't have to be a Custodia customer. So now there are, there are some limitations. We did not disclose it all, but you can imagine what we went through with the bank regulators on this. Right. Because it is very different the way that Tether and Circle and Paxos, I did a lot of work on the legal side. They all require only customers to be able to redeem. Well, a bank with a traveler's check or a cashier's check can allow a non customer to redeem. So we're going to, we'll be talking a lot about all this because think about the impact of that. It means the network effects are far greater because you don't have to be a customer to be able to redeem. So now the way I think that the traditional stablecoin issuers have done this is they wanted only customers to redeem because they just didn't want a lot of redemptions and they wanted the tokens to continue to circulate. But what that means also is that the customers don't have a lot of rights. And we're starting to see some litigation over this. There was just a lawsuit decided against a Circle customer in February because the customer accidentally, they claimed, thought a Capital B was an 8 and sent a million USDC to an ETH address that was incorrect. And then they're stuck. Now the stablecoin issuers have the ability to freeze, seize and reissue, but Circle did not do that. And so the user sued, trying to get them to treat USDC as a negotiable instrument. And the court declined. So we issued this as a negotiable instrument. Exactly. So now start to think about what the market dynamic is going to look like when you have a bank that can guarantee par. Do you really need to have these bank. The tokenized bank deposits registered at exchanges where the issuers have to pay $20 million registration fees? What's the value of that? Why would any bank pay an exchange to register that when anyone can bring the tokenized bank deposit and present it for payment? Now again, there are going to be a lot of details behind this. But Scott, you asked a really good question and I just laid out some of the really market changing dynamics of what we're doing here and why it's so important that we've been working with our regulators on this. Stay tuned. Because Vantage and Custodia are doing some really important things and it's not like the token gets stuck once, once it gets paid to the Driver.
- [21:25]
Andrew Tillman
Everything that Caitlin is describing is really the foundation of, and I've said this for a couple of months now, the conversations we're going to be having about bitcoin and just crypto overall two and three years from now will be wholly different than the conversations we're having right now. So we're going to be having conversations about bitcoin bonds, bitcoin connected mortgages, the movement of money back and forth with stable coins, which will mature and, and turn into, you know, tokenized, basically all sorts of things. Again, reminder that BlackRock and Citadel are moving in that direction. They're creating an entirely new exchange so they can do all of that free of the, you know, strictures and architecture associated with the NASDAQ or the nyse. They want to build it from whole clothes. So where we'll be in two years from now, that foundation was just described by Caitlin and what, what, you know, Custodia did with, with Vantage. So that's really important to, to grab a hold of. It's really important to understand because where we're going to be with the movement of money, where we're going to be with the creation of product and the ability for that product to change hands very, very quickly and liquidity associated with those markets, right? You got to have meaningful liquidity to have bit bonds be anything that matters in the world. That liquidity has to get really, really significant for us to get there. Right? But the options markets will explode on the bitcoin side. Swaps will explode on the bitcoin side. Inside of financial institutions, all of that stuff will be run on the rails of stable coins. And so where we will be in two to three years associated with the conversation around crypto will be, you know, continuing to eat what it is that, that Tradfi does now and again. I always try and tie it to a guy like Larry Fink, who has said two things that I will not forget and I'll keep bringing up. He thinks bitcoin is going to 500 to 700k, which, by the way, is really close to kind of what Berkshire Hathaway's 800k number is right now. So, you know, the question remains, do you think bitcoins is as valuable as insurance companies and railroads? And then on top of that, his, his. I'm. I'm not really connecting, but I'm kind of talking about it in the same couple sentences. Bitcoin is headed towards a world that looks like the mortgage cap and how mortgages work and the growth of mortgages. Those two things that he said over the past six months is just the foundational belief that I have, that we're going to a world where there's product that is very trad fi ish and takes the value of bitcoin and turns it into bonds, mortgages, movement of money, all of that stuff.
- [24:30]
Caitlin Long
Yeah, I, I, number one, I think the fact that everyone can be included in redeeming their money at a bank, I think that is a massive, massive deal. I, I fell in love with bitcoin as a miner. And the thing that I loved about it was the inclusion. There's billions and billions of people that are subject to predatory lending. They're going to ridiculous financial services folks for loans and cash advances and they're unbanked. They don't walk into a bank and have legitimate business to conduct. And this gives every human being the right to walk into a bank and have legitimate business to conduct. And that is the most important thing I've heard today. I mean, that is unbelievably huge. And the inclusion is based upon crypto. The inclusion is based upon this technology that is breaking down access barriers. And if, if you look at, you know, like power and you're into the power law curve of, of bitcoin's price, the, the tightest one, the tightest correlated two values are number of wallets generated price of Bitcoin. Those two have tracked over time exceptionally well, plus or minus a very small variance. And if you look at the, what Caitlyn just described is inclusion in the blockchain for everyone. And it's going to open up those coffers to the people who have never gotten into it. And they're going to start to become aware of this because it's the first time they've ever gotten to walk into a bank before. I mean, that is incredible.
- [26:13]
Scott Melker
Yeah. You don't want to go have to cash your check in a Western Union somewhere in the middle of, you know, like a Central American country where the gang is waiting outside to take your money. It happens every single day. It's a real problem.
- [26:28]
Unnamed Speaker
Right. Well, they wouldn't even need to walk into a physical location. So the phrase that we Americans are used to using walk into a bank, I know that's a colloquial phrase. That's not how this is going to work. This is all going to be done electronically. And the amount of investment I want to make clear, the amount of investment that we have made to build this platform to be able to handle the compliance related to what I'm talking about is not small. So now back to this whole question. When we talk about the convergence of banks and crypto companies, it's not going to be most of the traditional banks. I will tell you. Vantage has made a lot of investment in technology. Good for them. They're now able to capitalize on it because they can do things like this, because their system is secure enough that we don't have to worry about their online banking being hacked every day because they have made the investment in authentication that is required to be able to handle tokenized dollars. The average bank has not. They're still using username and password. And then maybe two questions.
- [27:36]
Scott Melker
Or maybe if only we still had Signature. If only we saw Signature and Silver Gate. I mean, it's pretty crazy. We had this, you know, to some degree, right? We had these Rails built and they killed it on a week and they killed them.
- [27:50]
Unnamed Speaker
Yeah. But I also need to give a hat tip to Tether saying that it believes it has 400 million active users. 400 million active users. Okay. So now they have not been connected to the banking system. They're pretty close because they have their reserves held at a primary dealer onshore in the United States. But Cantor is not a bank and does not have direct connection. So that they're issuing claims on dollars still, there's a claim to a claim on the dollar. That's the way it works there. But again, imagine if we can. I'm not saying we can, but imagine if those systems that have been built by Circle and Paxos and Tether to get the network effects with the very unfavorable legal, regulatory, accounting and tax treatment of incumbent stablecoins. And you fix all that now because you're getting legal and regulatory clarity, the accounting, and I believe the tax clarity is coming as well. And again, I think it's different when a bank issues it, because a dollar is a dollar when a bank issues it. But I can't give advice on any of those legal, regulatory or accounting or tax fronts. I'll just leave you with the thought that the shift has already been made. It's just, it's now going to be ratified. But here's the point. All those successful networks got built outside of the traditional system and they're about to be connected in. And some of the things that the network effects that they were able to build through crypto exchanges offering, and in Circle's case especially, Defi offering, volume and liquidity. You don't need that kind of exchange liquidity when you have the ability to redeem at a Bank.
- [29:36]
Scott Melker
Yeah, I would say most of those people using Tether, obviously using it for. Well, I would say a huge percentage is to trade on exchanges, to speculate and the rest is cross border payments or payments to people, which is primarily happening on Tron, believe it or not. Right.
- [29:53]
Unnamed Speaker
Yeah.
- [29:53]
Scott Melker
Because it's fast, cheap and people don't even know. When I talked to Richard Tang and to CZ previously, they both said, Listen, we have 265 million customers now Binance has 265 million customers. Most of them aren't trading. Like most of those people are using it as a wallet. Yeah. Or they're just using it as a wallet. It's like they have a Binance account and they send money to one another. You're allowing that within the banking system. It's a pretty.
- [30:19]
Unnamed Speaker
Yeah. Again there are some of the details are going to get revealed here. I just gave you some very big hints. So people were asking us about this on, on Twitter yesterday. Jeff Sinnott, the CEO of Vantage and I will be doing an American Banker fireside chat on May 21st and we'll be revealing some, some of, some of these things. I will say it's baby steps, guys, but you now see the vision. You now see exactly, is there a marriage where.
- [30:44]
Scott Melker
I mean, so we obviously, as you kind of hinted to before, all the crypto companies are in line to get a bank charter. So isn't there a world where Tether just comes to you and you kind of wrap this all up? Vantage, Custodia, Tether or Circle.
- [30:58]
Unnamed Speaker
And I think what we did woke a lot of people up. And I think this conversation, Scott, is probably going to make a lot of people go whoa. Because a lot of people did not have this vision, didn't see it. I'll be honest, this has been our vision for seven years and it's taken, man, it's taken a long time to get there and we're not there yet. Right. We still have a lot of work to do, but we are doing it in baby steps with the explicit permission or non objection of regulators, as the case may be, while suing the Fed. Yeah, well, because again, think about that PAR guarantee. Right. The TBAC presentation last week made some noise. Treasury Borrowing Advisory Committee, tbac. They had a stablecoin presentation at TBAC for the first time. Andrew, I know you saw this and it talked about that the stablecoin issuers don't have access to Fed master accounts and that that increases the potential for financial instability. And I about fell out of my chair when I saw that because the Fed's official position was that stablecoin issuers, just the existence of us would, would cause financial instability. And now that whole thing's been flipped on its head and TBAC is saying if stablecoin issuers don't have access to master accounts, which is the par guarantee it will cause financial instability. The world is. Nature is healing, let's put it that way. Because of course TBAC is right.
- [32:36]
Andrew Tillman
I'd really love Caitlin to talk about the shift from one administration to another across regulatory agencies like the sec, the occ, some of those regulators, and also the lack of shift at the Fed. Right. So give us, you know, give us some background there because the Fed has not shifted. We saw a week and a half ago they made an announcement, but it didn't really mean anything and it fooled a bunch of people. So, you know, I think that needs to be talked about too. So, you know, give us your thoughts.
- [33:14]
Unnamed Speaker
Yeah, we've seen a complete reversal of the Biden anti crypto army guidance at the OCC and FDIC and a partial reversal at the Fed. It doesn't, it's not that the Fed didn't do anything. They reversed four of their. The one they did not reverse is an actual regulation. It was voted on by the board seven to zero. And they're going to need a board vote in theory, although the executive order says if any of the guidance violates any of those 10 Supreme Court precedents, you don't need a vote, you don't need a notice and comment process. You just reverse it now. And of course the Fed hasn't done that. And we know that of course there's a battle between the Trump White House and the Fed over independence. Right. But long story short, the Fed did leave, to your point, Andrew, one of its statements in place and it's, yeah, what does that tell you? Senator Lummis really took the gloves off about it and said, look, we got a fundamental problem. The same anti crypto people are still in their jobs at the Fed and that in theory is going to change. There's a very prominent banking attorney that left his private practice and went to work for Governor Mickey Bowman, who is the nominee, Trump's nominee to be Vice Chair for Supervision and Regulation, to head the Supervision and Regulation Division. Her vote, I think is coming up today in the Senate Banking Committee. So she in theory will be confirmed at some point in the next few weeks, presuming that there is support to get, to get her through. Although all this crypto stuff is going to be tied in with all that as well. Right. I think you can see that it's going to be pretty clear the Democrats are going to be coming after all the nominees for financial regulation just like they have for every other one. So she needs all the Republicans to support her. But where I'm going is there is a change happening at the Fed. As Nick Carter pointed out though, when he looked at the composition of the Fed, one of the reasons why the Fed may not have voted to remove that regulation, aside from the fact that all the people behind it are very anti crypto, is that they might not have had the votes on the Fed board because the Fed board is four, three Democrats and that's counting Powell as a Republican and he's not exactly a Trump fan. So you know, it's interesting because the Trump fired the Democrats on the National Credit Union Association Board, which is the equivalent of the Federal Reserve for banks. It's the federal regulator of credit unions and they too have. It's an independent board. Right. And Trump went in and fired the Democrats. So it's an interesting question, is Trump going to do anything he's officially saying, but he's also talking an awful lot. I'm not going to fire Powell. I'm not going to fire Powell. Well, damn. Well, he better raise interest rates. Hint, hint is kind of how it seems like he's talking about it. Right. Doff protests too much for how much. He said he's not going to fire Powell, but he could at any time in theory fire the other Democrats on the Fed board if he decides that he needs to, because that is a majority Democrat board. And that might be the simple explanation, Andrew, for why they left that, that guidance in place.
- [36:50]
Andrew Tillman
There's a stark difference between where the SEC stands now as it relates to crypto and where the Fed stands now as it relates to crypto. And a reminder for everybody that's listening, the SEC is going to move around, you know, every four years, every two years with the movement of elections. Right. There's because politically that that's how the SEC is constructed. There are appointments, they get voted on, yada, yada, yada. On the Fed side, the Fed can decide to move in, you know, 6, 10, 12 year increments and say, well, we're going to go along to get along now on the crypto side. So let's get rid of four of these, but let's leave this one in just in case things adjust and change a little bit and we can go back to kind of how we really want to be associated with crypto, because the reality is stablecoins and the like, bitcoin, the entire movement is an affront to what the Fed actually is. Right. The Fed, for all intents and purposes, controls monetary policy here in the United States, ergo almost the entire world. Right. So a, a, a technology that can upend all of that for all intents and purposes and give power back to the quote, unquote people and allow monetary policy to be more Adam Smith than Jerome Powell. Yeah, they don't like that. They're not going to sign off on that and be like, yeah, crypto's cool. Yeah, let's do some crypto cool stuff. That's not where they're at.
- [38:28]
Unnamed Speaker
Well, with one exception though, which is that to the extent that the market has chosen with its feet for stable coins to be 99% US dollars. Right. I mean, Tether even abandoned it, its Euro, stablecoin, because the market didn't want it. It was only 100 million. That was nothing. Right. What did the market want? It wants dollars. So ultimately every dollar has to settle through the Fed. Every one. Right. Including stablecoins. So the interesting thing is, and this is why I always thought we were so close to getting approved before FTX blew up. That's what the record showed in our lawsuit. Yeah, I know. Thanks, Sam. Stay in jail. But anyway, the reason I said that is that there are a lot of very thoughtful people inside the Fed who recognize that they want this in the bank regulatory perimeter and they didn't agree with the Michael Barr. There's a lot that happened at the Fed under Michael Barr that was not kosher. And I think a lot of folks have realized that some of the things that were said were not accurate and that I'm trying to be politically correct here and that it needs to be overturned and it will be. And so, Andrew, your point is. I don't think that. Well, I do know that under the Biden appointees at the Fed, they were very anti stablecoin, but I'm not as convinced. In fact, actually I am moving the opposite direction. We've got, we've got supporters inside the Fed. Many of them, unfortunately, were run out during the Biden, during Barr's reign, and I use the word reign because he ruled like a king over bank supervision and regulation. He siloed information. There's an awful lot of press about how he prohibited his staff from speaking to any other Fed governor unless they'd spoken to him first. Right. And so he just ruled with an iron fist. And so unfortunately, a lot of the people who didn't agree with him got either walked out or got run out. Right. Which is part of what Lummis is saying, that there's got to be some staff turnover. But again, nature is healing. The Fed is definitely the laggard among the federal bank regulators, but I do believe that it's going to get on board. And to be honest, if the stablecoin bill passes, which I do believe it will, the Fed won't have a choice. And part of the reason that the stablecoin bill, that the Fed has been tepid on the stablecoin bill is they were working with the Democrats. Again, the Fed is a predominantly Democrat agency. Look at its political donations. They were working with Maxine Waters and they wanted to be the sole chartering authority of stablecoin issuers. And that is not the case in the Genius and Stable Act. They are a secondary regulator in the Genius Unstable act. And it was because of their own behavior that the Genius Unstable act has taken some of that power away.
- [41:40]
Andrew Tillman
Well, they haven't been invited to any of the cool parties in the last six months.
- [41:44]
Unnamed Speaker
Well, that was interesting. They weren't even in the room at the crypto summit. Right. The other agencies were, but not the Fed. That was, was obviously a purposeful oversight by the, by the White House. Yeah.
- [41:58]
Caitlin Long
I'm sorry to sound like the dumb guy in the room, but I'm, I'm floored based upon what you talked to us about earlier. And I'm just still, you know, just from just a participant in the space, I don't think that stablecoin act is as important as I thought it was at the beginning of this call. You know, why would we not want to go forward with the most tried and true internal system that keeps the US dollar as the, you know, the object of affection? That seems like the American way. And as much as I would love stablecoin regulation and, and you know, that to, to be passed, it does feel messy and it does feel like a potential black eye in the future based upon people not doing it the right way. Whereas banks can't mess this up. It's backed by the US Government. That is, that is what, you know, like you said, the PAR value that you can provide, it's better than any solution out there, including tether and USDC right now because they don't have PAR value. Right. And, and, and if you talk about like the only thing I'm trying to understand and I guess the question for you is, is like, what is the. If we wanted to implement Your process immediately across every bank in the country. What's keeping that? Is it a technical implementation problem? Is it a regulatory implementation problem? Like what keeps us from going full scale? Let's go make this a reality for every bank.
- [43:28]
Unnamed Speaker
Yeah, it's regulators. This is baby steps, right? I mean again, this has been years in the making. We were so close and then FTX blew up and now we're back. But we're, there's still, there's still regulatory hesitation. This is gonna, this isn't gonna get unveiled, you know, widely and wide open to everyone. It's really fun because we actually had a test of our compliance system that was unanticipated during the, during the live transactions and it worked with flying colors, thankfully. But the point is we had a couple of real world glitches. That's what's fun about banks can't test. Banks don't have a concept of alpha and beta testing. You're either moving real dollars or you're not. Right now you can do controlled transactions, which is what we did here. But we had regulators watching, we had everybody watching this. And what's fun is that we actually had some real world tests of some of these policies. And I don't want to get ahead of vantage and explain some of the things that happened, but my point is that we anticipated the things that happened and we had the policies in place to deal with them. And this is bank level stuff that I'm not sure the non banks. Well, I am sure in the case of the not clarifying the legal status and that lawsuit I referred to for the guy who fat fingered eight to a capital B, right? I mean under the Uniform Commercial Code, who knows, right? Let's put it this way. There are decades of lawsuit precedents over what banks obligations are to replace a lost negotiable instrument. And the consumer advocates, of course one of the biggest criticisms is that this industry has not been consumer friendly. Well, there's an example of the judge kind of threw up his hands and said look, the circle did not define what this is under the Uniform Commercial Code. The customer tried to get it treated as a negotiable instrument. And the judge said, hey, I'm just going to stick with the contractual terms. It didn't get defined. It said in the contractual terms that if you make a mistake, which this customer admitted that they made the mistake, then it's your risk and they don't have an obligation to reissue. But the point is banks do in those circumstances. And there's a whole tried and true Process. The, the customer has to put up a bond, has to go to a court, put up a bond and prove that the instrument is lost.
- [46:12]
Scott Melker
Right.
- [46:12]
Unnamed Speaker
But there are processes for these kinds of things. So think about all of the scams and the fat finger trades that people have just had to eat. And yet the issuers, remember stablecoins, have an issuer. They are not like Bitcoin. They have an issuer. Right. And the smart contract has the ability to roll it back. Exactly. To seize, freeze, and if necessary, reissue. Now you've got to make sure that that's not used against the bank as a double spend. Right. Which is why there are processes for this. You have to go to a court and post a bond in the value of the lost negotiable instrument and then the judge has to order the bank to reissue it. But the point is that, that, that as a tried and true process that's been in existence since the Uniform Commercial code in the 1950s and those kinds of protections have not been available to stablecoin users. But they're about to be because it's going to be done through the banking system.
- [47:10]
Andrew Tillman
Yeah, well, that's why.
- [47:11]
Caitlin Long
Just two seconds, Andrew. If I'm a regulator, it's an easy choice. Like I don't even have to think about it. Like, what do I want to mess with this ball of wax that nobody can agree upon and that there's heavy headwinds against as it relates to stable coins? Or do I want to go the path of least resistance that we've, we're all familiar with and accustomed to? Sorry, Andrew, go ahead.
- [47:34]
Andrew Tillman
As somebody that at times could qualify as, as having fat fingers, I don't know if we should be using that term on a go forward basis. You know, no more fat finger shaming here on this show, you know, but yeah, yeah, we all have.
- [47:54]
Scott Melker
Yeah, but I can't imagine sending a million dollars and thinking that I'm going to type in an Ethereum address rather than copy paste and check it. Like, I've never heard of somebody going through the motions of typing in the entire Ethereum dress. That guy was special. Whoever did that. Yeah, that's pretty intense.
- [48:09]
Andrew Tillman
Indeed.
- [48:11]
Unnamed Speaker
It is intense. But, but, but to your point though, it should be obvious that the Fed should have embraced this because of what you just said. Right. These are the things there, there are tried and true processes, you know, legal regimes that, that stablecoin should have been fit into since the inception, but it was. And the Fed was going in that direction. But then FTX happened and Michael Barr quashed the whole thing and tried to literally kill everyone and all the debankings. Right. And a lot of Silvergate signature Protego gone. Some of us survived and we're here and we've learned a lot and, and we're ready to roll up sleeves and work within the system. We just culturally don't do anything unless we have permission to do it. Now all of these batches of trades, they were real trades, but they were small. It's going to take a while to get to a real scale here and I guarantee there are going to be glitches. We're going to have to work a lot with regulators to get to a real scale. But I think you guys just had your eyes wide open that this is what's coming. And there will be a number of banks that like Vantage embrace this and is it scary? Yes. Jeff and I have an op ed that hopefully will be coming out soon where we analogize what's going to happen in the payment space to what happened in the stock trading space in 1998 and 2001 in that timeframe. It used to be that you had really just three venues. The New York Stock Exchange, NASDAQ and the American Stock Exchange. All stock trades were routed through one of those venues. And now we have 30 different venues with all the dark pools and ATSs. Right. And each one will cater to the different desires. Do you want fast execution? Do you want the tightest spreads? Do you want confidentiality? That's going to happen in payments. And so even the stablecoin market is going to end up being fragmented between those that want the fastest execution for payments that absolutely, positively have to get there. Right. And those that want the tightest, the lowest cost for the smallest payments, those kinds of things. And then I think you will see batches of payments done. And I also think that you will see even though the Stable and Genius act prohibit stablecoins from paying interest, and there's been a lot of conversation about this, that doesn't mean stablecoins won't pay interest. It just means the stablecoin issuer won't be the one that does it. So there will be credit structures where fintechs will drop a stablecoin, a tokenized bank deposit into a credit structure and someone who will take risk with their money to get some yield will invest in those. So I think that's coming and I'm not worried at all. All about the fact that stablecoins can't pay interest while tokenized money market funds can. And that's one of the points that the TBAC presentation made. And they were wondering, are tokenized money market funds going to threaten the banking system because they can be used as payments too? And the answer is, yeah, they can be used as payments. And that goes entirely outside of the banking system because it goes through the securities industry. So these are all big questions. But again, if it's a tokenized money market fund, that's one or two steps removed from that PAR guarantee. And I don't think that tokenized money market funds are going to be the big payments game. It's going to be tokenized bank deposits.
- [52:05]
Caitlin Long
Well, I couldn't agree more. And I think if I'm anyone in Trump's cabinet and I hear this, we can move as fast as we want in this space because it's only going to have errors attached to the speed at which we move and those errors have no repercussions at all. We just try again and keep print. It's, it's printed dollars. Right. So let's absorb the cost of moving quickly in making every bank in America have this advantage over the rest of the banking system. You know, globally we, you know, there's so much talk about us leading the way and yet this, the issues that we're talking about is this marriage of tradfi and crypto. And it's so complicated in some cases that even the guys on the crypto side don't understand the complexity of the tradfi side. The guys on the tradfi side don't understand the pitfalls of the crypto side. And so you get this, you get a lot of friction in that. And I think this, this is something that's, if it's not bipartisanly supported, I'd be shocked. Like, who could stand against this being, you know, the standard by which we, by which we judge, you know, our progress moving forward into like the future of banking. Right. I, I don't think if anybody took a fresh look at this, they're going to see it as a bad thing for America. It, to the contrary, it's, it's in my opinion the path of least resistance to take the center stage globally as the forward thinking banking institutions. Right.
- [53:40]
Andrew Tillman
It's the perfect time to pivot, to yield. And because that's going to be the name of the game on a go forward basis, whether it's stable coins, whether it's product. Coinbase is talking about yield, our firm Arch Public is talking about yield. And how do you go about it? So, so, you know, let's let's talk about yield.
- [53:59]
Scott Melker
You know, we can let Caitlin go. We've kept her about 27 minutes over time.
- [54:04]
Unnamed Speaker
That's good. You guys asked, you got out some of the, the great stuff.
- [54:10]
Scott Melker
I'm not gonna stop it. But now we're three minutes away from the end, so.
- [54:13]
Unnamed Speaker
All right.
- [54:13]
Scott Melker
Yeah, well, everybody give, of course. Thank you so much, Caleb.
- [54:17]
Unnamed Speaker
Bye.
- [54:19]
Andrew Tillman
You know, we. Great conversation with her. Her, yeah, great conversation with her. She's fantastic.
- [54:24]
Caitlin Long
Unreal. I'm blown away. I'm gonna go do a lot of research on this.
- [54:28]
Andrew Tillman
So you know, we, we released yet last week our, our bitcoin yield algo. And, and, and what does that mean? Sure, you're going to get extraordinary performance associated with the accumulation of bitcoin, the intelligent accumulation of bitcoin. But we run into focus on yield. There's been so much conversation about I've got this pile of bitcoin, what can it do for me? So, so yield is the answer answer. But here's the important thing. We're not doing weird funny things with your bitcoin and creating that yield. You keep custody, you keep control in your account with your name. It's, it's all you. We're not doing anything with your bitcoin other than an algorithm is using an arbitrage play to adjust the purchase and sale of different amounts of bitcoin over time. When you get a pop, that's significant two plus percent or more, you're going to sell off a small amount.
- [55:24]
Caitlin Long
Andrew, let me, let me, let me explain technically what, what happens. So we want to accumulate Bitcoin. We believe Bitcoin is something that we should own. And when you are accumulating bitcoin, you, you should be doing it over multiple trades, as many trades as you can, because that's dollar cost averaging into your position. That's just the most prudent way to manage volatility in a market. And so as you enter positions, you should be entering them at, on the dips, you know, have you ever buy the depth? So our algorithm will look, based upon the settings that you put into it, at what you define a dip as. And if you define a dip as 2.1% in a four hour candle, you can set your algo to take advantage of that dip and accumulate a little bit of bitcoin at that point. If that, at that point the price bounces and you tag the bottom and you're in profit at that, there's a profit potential there. So if you set the parameter to sell bitcoin after it's gone up by 3.1%. A four hour candle, guess what, it's going to trigger that event too. And you're in complete control over those settings. You drive the entire software, you're using it on multiple levels and multiple inferences to create these situations. And what the byproduct, byproduct of that is is this. Either the trade that you buy the bitcoin in goes down and you buy some more at the next dip and you have this, this great blended cost average as you accumulate bitcoin on the dips, or as you trade that, it goes up and it creates that yield potential like Andrew's talking about in terms of cashing out in a positive trade and. Or it trends somewhere in between and you're in profit on that until some future event takes place. So the three outcomes are really, you either accumulate more bitcoin or you start producing some cash yield against those trades that you're taking on a daily basis. And all of this is done in a completely automated way. You can set it and we can help you go through setting as many instances as you want so you can take advantage of the market conditions that present themselves.
- [57:29]
Andrew Tillman
By the way, we're doing another giveaway. We're going to give away two more industry passes. If you follow Arch at try Arch Public and you download our free software, just an id, you know, a reminder that your ability to engage with our Bitcoin, Solana, Ethereum and XRP Algos is free to you for the first $10,000 every year. Free, Free, Free. So go use it, try and break it, give us some feedback, do everything you can possibly to it. It connects directly to trading View in Gemini. So you can do a million back tests, you can make it do wild and crazy things. You can do that, all that on your own. And it's free. So go use it, go try it. Got thousands and thousands of users at this point. People love the product and first in class, best in class. You can't go find this anywhere else.
- [58:20]
Scott Melker
People love it. So, and this is gonna be announced, as it says there in the tweet, this could be announced on the show next week.
- [58:26]
Andrew Tillman
Yes, on the show next week. The winner of the industry pass for Bitcoin Bay industry passes. There's two of them, so you can bring a plus one. That winner is going to be announced next week at 9:45. As long as we keep to that 9:45 time frame.
- [58:41]
Scott Melker
Yeah, because we're so good, we're so good at tracking our schedules and topics on this show.
- [58:46]
Caitlin Long
Well, that was pretty groundbreaking stuff, man. I'm glad we went over. That's that.
- [58:51]
Scott Melker
I think you just broke the biggest lack of structure than this particular day.
- [58:57]
Caitlin Long
I think this is as big a news as we've heard in 2025. Honest to God. I think this allows every bank to go, oh, we have an example on Wall street of, of how to do this. That's Michael Saylor. Now we have an example in the banking industry and those are the two biggest sectors that we targeted this year, right. Banking and Wall Street.
- [59:16]
Scott Melker
Really, people can read it. But I do want to just show how good April was.
- [59:20]
Caitlin Long
Yeah, April was great. A lot of volatility in April. A lot of choppy, choppy waters.
- [59:26]
Andrew Tillman
Well, choppy waters. And the truth of the matter is is that over a three plus week period, Bitcoin was up 30% almost. Yeah. So, you know, the, the bitcoin always does a little bit something different than we think it's going to do. We think it's going down underneath, you know, underneath 75. Nope, just kidding. We'll go to 74 and then we'll rock it up to 96.97. So yeah, you got to be in it is the point point. And find a way to be in it. So yeah.
- [59:55]
Scott Melker
Anything else we missed before I let you go?
- [59:58]
Andrew Tillman
Other than you can see it, you.
- [60:00]
Scott Melker
Can see it scrolling there, but you should go to. This is where you do it.
- [60:03]
Caitlin Long
Archpublic.com Yep.
- [60:06]
Scott Melker
People love it, man. I just love it. But it's amazing. You know, like, like you said, literally thousands, literally thousands of people have signed up, right?
- [60:16]
Andrew Tillman
Yeah, we're gonna, we're gonna.
- [60:17]
Scott Melker
Not a joke. I've seen the numbers and that. I don't get any about it, only compliments. That's a first in my life.
- [60:24]
Caitlin Long
You can keep using this for as long as you wanted. The annual cap of $10,000 renews every year. So if you're somebody who just wants to get into bitcoin and see an institutional tool that you haven't had access to, which is trading automation, that's what we're trying to do is show people behind that curtain. And if you're somebody who has a very sophisticated plan and are tired of the manual application, that plan, we, we can, we can literally customize the software to meet your purchasing needs that you set out.
- [60:53]
Scott Melker
So yeah, why would you even simply dollar cost average yourself? Yeah, set it to. Set it and forget it. So there you go. And, and the fees are better. So there's that. All right. Guys, that's all we got for you. Tillman, Andrew and I'll be back, obviously next Tuesday. I don't know if we can best Caitlyn. Sorry.
- [61:11]
Andrew Tillman
But we'll see what we can do. Do.
- [61:13]
Scott Melker
We'll see what we can do, but otherwise, guys, I will of course, be back tomorrow and got crypto. Town hall in 10 minutes and you gotta start coming back on, man. I don't know what happened to you.
- [61:22]
Andrew Tillman
Yeah, I do need to come back on. Yes, We're a little bit busy at Arctic Public.
- [61:28]
Scott Melker
That's probably whatever. All right, guys, we'll see you. We'll see you tomorrow.
- [61:34]
Andrew Tillman
Let's do.