← The Wolf Of All Streets
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- [00:00]
A
Of support as bitcoin trades down today alongside tech and of course the Korean stock market that plunged down 10% just today and hit a circuit breaker again. We're going to talk about that, but we've got, I think, far more interesting things to talk about today with Andrew Tillman and very special guest Caitlin Long. We're going to dive into all that right now.
- [00:21]
B
Let's go, let's go.
- [00:37]
A
Good morning, everybody. Welcome to my mountainous retreat in Middle Earth. I literally never know what's going to be back there behind me until it happens. And that one really looks like I'm living among the elves. Good morning to Telvin, Andrew and Caitlyn. Good morning. All right, so Liz, I, I guess we can start really quickly with what's, with what's happening in markets and then we'll be able to move beyond it. So here, you know, bitcoin falls under 63k as a tech sell off drags risk assets lower. We got SpaceX down again. I think this has been dragging the entire market or at least defining what's going on. Of course, we have strc down at 87 bucks. All good things. And South Korea down nearly 10%. I don't know if you guys saw the recent story at the beginning of June that South Korean retirees had decided to sell off all their insurance and savings to buy the top of AI tech with leveraged ETFs. So I don't think we can be particularly surprised that that's down now.
- [01:41]
C
There are short term stories and there are long term stories. So you go ahead and with those headlines and I'll raise you this headline. In 2016, the NASDAQ was at 4900. It's up 600% since then. So I always find it interesting that on any given day, in any given show, the one right behind me in my ear, the news is always slanted to the downside, like the next problem is coming or is here or the next or the next, the next. And meanwhile, over any given year, almost any given quarter at this point, markets go higher. And so, you know, take any possible opportunity with downside of any kind and, and invest, get involved. I think we're also at a really, really unique moment as it relates to crypto assets, Bitcoin and others, where there's a continued malaise, continued downside. You know, I see Hunter Horsleys out there, you know, talking about just the building that's happening. And we've got a meaningful builder on the show here today. No, that's not tillman it's actually, Caitlin, The amount of building that's going on in our space is going to bear huge amounts of fruit. That. That's just the truth. And so, you know, there may be, you know, negative news, there may be malaise in the space, and there may be people that have exited. We've seen people exit, but at the same time, people that build in bear markets have just an enormous bounty waiting, waiting on the other side. So I'm encouraged. I'm encouraged because I. I live. I've lived through times. You know, I live through the fact that up until that 2016 number at 4,900 back in, like, 1999, the NASDAQ was at 5,000. So there was, you know, there was a long period of time where the NASDAQ took to get back to that number. And we may be in that space right now in our industry. It may take some time, but once the switch flips, the foundation will have been laid to go meaningfully higher.
- [04:10]
A
Okay, so to that end, instead of discussing the market, you're talking about, obviously, all of the fundamental things that are being built that will be exciting when you zoom out. And Caitlin, you're always building them, as you said, but I think you've built one of the most exciting right now. I would love for you to obviously give us the context. This was the press release Vantage bank and Custodia release white paper unveiling Hazel Network. But it seems that you have addressed the biggest elephant in the room of the clarity fight, and nobody's paying attention because they're all too busy arguing about ethics clauses and politics.
- [04:41]
B
Yeah, we stayed on the sidelines of that whole debate because banks can pay interest on deposits, and if the deposit happens to be in token form, the FDIC has already said they're technology neutral. If it's a deposit, it qualifies for all the things that. That bank deposits qualify for. And what we did was link it through a toggle to stablecoins. And so you don't actually have to exchange a stablecoin back to a bank deposit. It's the same token, literally the same ERC20 token in our first implementation. And it toggles automatically with the reserves moving in the background on the bank's balance sheet. It's all plugged into the Fed through Vantage's Fed account. So it's a. It's. This is not a situation where we plan to list the stablecoin. In fact, actually, to get access to this token, you actually have to go to a member bank in the consortium, have A deposit and then tokenize the deposit. There will be in the UX in the background. A lot of tokenization will happen without the necessity for. For the individual to elect to tokenize the deposit. But at some banks, depending upon how they set up the ux, they will give you the option to do that. And I expect that some banks will actively market this. It depends on what the bank's customers are. But the fact that something is seamless and has a path from the stablecoin back to the bank, that is a true bridge. Right now, the stablecoin issuers, they were making no bones about it. They want to actually grab deposits away from the banks into stablecoins. And when they deposit the reserves, it goes typically to one of the largest banks. So it's interesting how the banks have had a united front against this whole stablecoin yield debate, because actually the ones who are the most at risk are the community banks, which is our target audience. And the ones who benefit the most are kind of piggybacking on the whole debate while they're actually happy that stablecoins exist because more deposits are coming into the bank of New York, to J.P. morgan's, the cities, et cetera.
- [06:59]
A
I don't want to interrupt, but that's so interesting because I've made the point. When you look at Jamie Dimon's comments right now, he is trying to kill Clarity, obviously, at least on the front line, that's what it appears the banks are going to fight. He is dropping S bombs about Brian Armstrong on the Daily. But from the surface, it looks like they're in a worse situation with just Genius than if Clarity got passed. Because their narrative is that genius does not prevent the coinbases and such from offering a yield. And they basically messed up. But what you're saying is the. If you're playing 340 chess behind the surface, JP Morgan's doing just fine with Genius because they're, you know, or the big banks because they're basically holding the reserves.
- [07:43]
B
Yeah, we're at the table. I alluded to this in the press release. With Vantage, we have multiple things in the hopper that are in the pipeline. We're in due diligence right now. For one of them, that's pretty significant. One MOU just got signed. I don't know when Vantage is going to announce it, but we're at the table with some of the biggest banks in the world because we are so far ahead. And because it is an actual bank tokenized deposit, it's not a stable coin. It's not.
- [08:12]
A
Aren't you the only ones who also. Didn't you get a patent? I don't want to misquote it. But you have a patent on the tokenized deposit. Correct. So like you were the first and only who could actually do that in a certain structure.
- [08:22]
B
We've got multiple, we've got multiple granted and multiple in process pending in multiple patent families as well. So more will come out about that. But yes, this is one of the benefits and Scott, you and I have been talking for years, it's been crazy what has happened to us from the Fed. But at the end of the day, one of the benefits of being so early, and you saw this in the securities industry from the Tzero announcement last week that the early movers got the patents just like what happened to Tzero. We got stymied by regulators. They got stymied by regulators being so early. Obviously there's a saying in financial services that being early is the same as being wrong sometimes. And that happened. But by the same token, the one thing that being early did was allow certain companies to grab patent territory. Yes, the Hazel Network gets the benefit of these patents. Vantage and Custodia have signed a joint IP development agreement to continue to build them out on a joint basis. Before we made any announcements about this token that changes its stripes that toggles between a tokenized deposit and a stablecoin. We had the patents already. Already in process.
- [09:43]
D
Two markers. I would add that. I just think we talked about this a year ago and I was excited then. I'm even more excited now. It sounds like we're. It's on the precipice of being launched and or close to it and we can start using it.
- [09:56]
A
But yeah, tell me just add that also like it. The banks really can't say, hey, like we don't like stable coins if it's a tokenized deposit when it's on their ledger and it's a stable coin on the other.
- [10:06]
D
You're saying you don't like US Dollars at that point is that's what you're. That's what it is. And so that's, that's what I love about this and that's what got me excited. If there's one thing that we should all be able to rally around in the crypto space and the traditional space is that we want dollar dominance. We want US Economy being in the forefront of the conversation as it pertains to technology and banking and finance. And this puts us smack dab in the most unique spot to deliver the most unique technology from a top down distribution method which we want, that we've ever seen. Like, I don't understand why we can't make this the center of attention. Because it's positive for everyone, literally everyone maybe with the exception of Coinbase and some of the exchanges. But that's not really a reason. In fact, I would argue that it's, it's been a lot a pretty slanted table for quite some time. I mean, Coinbase has operated kind of within a vacuum for over a decade as it pertains to true competition within the United States. And local banks, you know, unfortunately or fortunately were built brick and mortar on the corner of every community street in America. And that's how a lot of people want to interface with them in, you know, going forward. They like people. And so you can't, you, you can't argue with the customer. You deliver to the customer what they want in the way that which they want it. And so this does that in spades. And it hearkens to, you know, something that I've heard from some very smart people in the space, which is crypto will eventually fade to nothing. We won't ever call it crypto. It will just be being used in the back end.
- [11:49]
B
Correct
- [11:52]
A
tokenized deposit or a stable coin.
- [11:55]
D
And so I just think this is the 2.0 of cashier's check, which. Yeah, and a cashier's check is literally the, the most riskless way in which you can take liability off the individual and put it on the institution as it pertains to transfer of payments and money. This is it, guys. Kudos to you. When Scott, we had a private webinar with just arch public concierge members, one of our concierge members asked Scott who's the most impressive guest you've ever had on the show besides Michael Saylor.
- [12:30]
A
I hope she's in the right position.
- [12:32]
D
And, and, and Scott's response was very quick and very succinct. He said, came along 100.
- [12:39]
B
Oh my gosh. Thank you.
- [12:41]
D
So the point is, is like we should all be talking about this. We should be putting America in the, in the A Place to Succeed. This cuts through the noise. This gets us to where we, where, you know, if we could adopt something like this, it actually would be clarity. It'd be everybody doing the same thing they've always done, which is as clear as it gets. So, you know, kudos to you. I, I love having you on the show because it's so great to hear about all the innovation and the, the you know, the ways in which you're really changing the banking system.
- [13:13]
A
Actually you like you directly crushed the narrative that the thing, I mean it's just unbelievable. It's like same token, call it what you want.
- [13:21]
B
Right, Exactly. With the reserves moving in the background, the legal structure changing. Tillman, this is really interesting that you called it out because I didn't prompt you for this, that it's a cashier's check 2.0. We solved something. And this is interesting being at the table with some very large banks in some of the pilots that are underway in financial markets. And we're a mid market company, we're working with small banks, we're very focused on the community and regional banks. Not the GC SIBs, not the fintechs and the paypals and the like. We're working with the, to your point, the corner banks. But what they're saying is a couple of things. They're working with JPM Coin, but the other banks of course don't want to trade JPM Coin. They're looking for tokenized deposits. Right? Because when you're tokenizing securities, and this is one of the insights I had, you guys know I came from the securities industry. If you can't have a tokenized dollar, you don't get the real benefit of the tokenized securities or tokenized loans or tokenized commodities because you've got to be able to settle the dollar leg in tokenized form to be able to get atomic settlement, which is how you get the real benefit. So that's part of the reason why I switched to focus on the tokenized dollar. But they've got their walled garden versions and, and they love the fact that this is an ERC20 token. And so I love, and I have to give incredible credit to the Vantage team. And it's really interesting because if you guys saw the press last week the Vantage CEO and I were honored as number one and number two in the ranking among the 50 most innovative people by American Banker in the financial industry. And it was the two of us, which is Hazel Network and then Big Bang, Big bang, Big bang kind of thing. Very, very few fintech, very few small bank people. But apparently the big banks were mad about this, that two small bank people ended up at the top. But you know how we got there? They, they announced it, they used AI and what had been public is a couple of our presentations about this in you know, small conferences, but they were public. And our patents and our smart contracts and our comment letters to the agencies on the genius act where we talk about the structure that we're pursuing because it really does check so many boxes for banks. AI would have picked all that up. And so when the banks were complaining, what they were complaining about is that we actually did have a better innovation and the AI model picked all that up. And just because we hadn't made a lot of noise about it, we were kind of in stealth about it. We dropped hints along the way. But the Vantage CEO deserves to be number one and his team is phenomenal. We've had a long term working relationship. They helped us refine this tokenized dollar idea for solving real world problems. But let me come back to Tilman. You said it's a cashier's check v2.0. You'll see in our white paper a legal structure that is different than traditional stablecoins which exists in a gray area. And in defi. Of course nobody really cares because people don't sue each other. But in TradFi everybody cares about getting clear title to the asset. And if you have a cloudy title to the stablecoin because the legal structure isn't clear, then the banks can't touch it. So back to one of our partners that is looking for tokenized deposits. Okay, JPM Coin is great, but only JPM customers want to use that. The other banks and other customers don't want to touch that. So then USDC is on their platform but the banks can't touch it, the big ones, because they don't have clear legal title. And again, some of the crypto companies haven't taken on that very issue. We actually solved it, I believe and it's explained in our white paper we are using the same legal structure as a paper cashier's check in electronic form. What does that mean? It means banks can have greater confidence that they get clear legal title to the asset, to the stablecoin when it's in stablecoin form and they can be more confident in lending against it. So this is one of the problems with tradfi using the traditional stablecoins. They just don't have that legal structure around them. We also embedded into the actual SMART contract and you guys are going to love this because you're in the agentic trading world, embed in into the actual smart contract the bank level operational and compliance controls. And I asked AI before we released the white paper just to be sure that nobody else had changed anything in their smart contracts. Not a single other stablecoin has done that. So what does that mean? It's trust me bro, in the background now they're becoming regulated, which is certainly helpful to banks looking to partner. But they've had to rely on the stablecoin issuers. Almost every single one of them has had compliance problems in the past or have paid fines for that. Right. And here we come with a clean record working with a bank. And the banks know what that means. It means we've been combed over with a fine tooth comb, not just by our bank regulator, but also by our bank partner who also. And we know because we've worked with Vantage for so long, they got incredible scrutiny. Every single custodia payment was reviewed by their regulators. And we knew that because we kept getting questions from them about it. And so it was pretty obvious the magnitude of scrutiny that we had was over the top. And we have never had a compliance problem in our past. You can ask the Wyoming division of Banking. We have a clean record. So it's a really interesting situation where we've just been working, working, working in the background and, and solving real bank problems with a real bank partner. And here we are.
- [19:36]
C
By the way, I've been in the offices of American Banker in Manhattan. They don't love giving out, you know, top awards to people that aren't, let's just call it legacy banking, folks. So the fact that you guys, you know, were number one and two, not surprised at all that it kicked up meaningful dust in, in that industry.
- [19:59]
B
I love it.
- [19:59]
C
Yeah, yeah, yeah. It is a, again, once you do something that is impossible to ignore and is clearly, you know, on an adoption curve that's moving much faster than really anything else in, in the industry, you know, either get kudos or you get side eye or you get both, which I think you, you've described as, you got a little bit of both.
- [20:26]
B
But we're a frenemy, right, because we want to work with every single bank. Every single bank can work with us. There's a, we have an API based
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A
enterprise, but you're also killing their narrative, you know, so. Yeah, I'm gonna have to work with you.
- [20:39]
D
Yeah, disruption's hard for some people, but I, I got a couple of things that I, I want to point out and I've got a question for you. Number one, you know, we talk about on this show a ton about how the new future of finance, especially with agentic agents out there, is going to be blockchain based and that collateral is going to be the primary use case for crypto as, as collateral, like Ripple's case in terms of liquidity against volume of trades and whatever they're doing with Hidden Road but in this specific instance it's collateral for loans with banks. That's. That is the biggest use case we could offer to the banking sector to jump right into the deep end and start using this technology in an impactful, meaningful, profitable way. Day one that's going to be monumental. So I'm excited about that. Is this going to be. I see. Is this going to be covered by FDIC right out of the gates? Are you guys going to have to get special provisions for that or what? How does that look?
- [21:47]
B
So the stablecoin is not FDIC insured to be clear. So genus act Stablecoins by law are not FDIC insured when it is a tokenized deposit. The FDIC has already said if a bank elects to account for a deposit on a different ledger that happens to be a blockchain, it's no different than a traditional deposit. So the answer is yes. The toggle happens within the network. If it's inside the bank network it's a tokenized deposit with all the rights and privileges and obligations that come with that, including being able to pay interest. When the token leaves the perimeter of the network is when it programmatically changes to a genusact stablecoin. But Tilman, you also asked, you hit on something really important. We have a partnership that we announced back in February with a fintech called Participate that is automating loan participation. Some of these loan syndicates there are 100 banks easily sometimes that participate in large loan participations and they're automating that. They came to Vantage and asked to be able to use. We're getting back now to this whole automation point. You need a tokenized dollar and so they partnered with us. The MOU has been signed for a while. We announced this back in February and they have a network of 600 banks. So that particular use case is bank to bank and we're about to announce the pilot, the first pilot with them with banks and I will, I think it's okay for me to drop the hint because we got endorsed by the Texas Bankers association around that same time. The first banks are Texas base. So this is a Texas, definitely a Texas initiative. It's been 18 months in the works with regulators. Yeah, exactly. Hook em horns, right? No, I guess that's not the right because didn't you play for Texas?
- [23:42]
A
There you go, you got the right guy.
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B
You love it. You love it, right? This is definitely a Texas, a Texas led initiative but it is nationwide. It's been really interesting to see where the next States are that, that the banks have come up and I can't announce them yet, but it's not, it's far outside Texas. So it's really fun. How many banks are looking at this because they know they need a solution. They don't want to let the fox in the hen house with stablecoins because the stablecoin issuers, the incentives are all wrong. In stablecoin issuers, their incentive is to try to grab the deposits and not ever have them come back. Our structure has the piping for the deposit. When the money gets sent out of the consortium, it automatically routes back to the originating bank. When it comes back in, that piping doesn't exist anywhere else. And so that helps the banks get comfortable with letting this technology into their core deposit base. Because now instead of this being a threat to the core deposits, this becomes a tool that they can offer their customers.
- [24:52]
A
And deposits, yeah, they get more deposits. This is a plus coin can just cross over and become a bank deposit.
- [24:59]
B
That's the whole idea, right. It's basically a big technology upgrade that has been needed in the banking industry for frankly decades. And we've got now programmability, composability, some of the things we say on the front page of the white paper that the banking industry has needed. And I think it's interesting to look at the history of the. Because you guys are securities guys looking at the history of the securities markets. I think the history of technology upgrades in the securities market was really touched off by the fixed protocol which fidelity in the mid-90s was pushing to try to integrate in the back office of Wall street so that it could settle trades a lot faster. The securities industry went with an open source standard in the back end that helped massively increase technology and therefore massively increase trading volume. And even though margins went down when we went from fractions to decimals, the actual revenues of the financial intermediaries went way up because volume went way up. That's going to happen here again. What stopped it in the payments industry was that the Fed bestowed an oligopoly on what's called the banking core providers, fiserv, Fis and Jack Henry, all of the small banks, every single one of them was required to plug into the Fed through one of those. So unlike the dtc, which is the intermediary at the center of the securities industry in the same analogy that the Fed is the clearinghouse at the center of payments. So you had two clearinghouses, DTCC in securities, Fed in payments, DTCC said, okay, we're not going to force you into our preferred middleware. We're just going to tell you what standard to use to connect to us. The Fed forced most banks into their preferred middleware. What do you think those three companies did? FIS 5 servant Jack Henry over those 20 years they got fat and happy and they stopped innovating and now they're scrambling to catch up. But what we designed, and this is where again Shaun main advantage is phenomenal. I wish he could have joined us this morning because he designed what's called a side core for the banks. You don't have to do a big upgrade, you don't have to get rid of your existing cores. You just operate this on the side and you can ingest data however you want to ingest it. We've set it up with a basic advanced and enterprise model so that we can deal with banks that are far bigger and deal with the very smallest banks of literally every size.
- [27:35]
C
People, people keeping score at home. Let's connect a couple of dots. Right, so we're talking about tokenized deposits down at the community banking level. Morgan Stanley and blackrock aren't out there talking about stock stable coins. Tokenization. Tokenization. Tokenization. Tokenization, right. So Caitlyn is out there with community banks and banks that aren't J.P. morgan, right. But mid level banks and building this technology that's tokenized and then way up at the top, frankly, at her previous firm, Morgan Stanley, they won't shut up about tokenization. In fact, they've come out and said tokenization is the next wave of finance. Like you. You don't say that. She knows this. You don't say that at that firm unless the document that says you're allowed to say that has gone through like seven hands. Right. So, so they're completely on board with this. They're all in on this, as is BlackRock. So that's why they're talking about it and have been approved to talk about it in the press. Yeah. So one has to wonder in a very serious way outside of the silo that is crypto Twitter, where do stable coins ultimately go? Because at the top end and at the middle and lower end of how money moves, it's tokenization. Right. That, that's the whole thing. So you know, that's, that's a, that's a question worth considering and answering, right?
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B
Yeah, absolutely.
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D
Oh, go ahead, go ahead.
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B
Just related to that, I had a very interesting conversation with a super smart banker at a relatively large bank yesterday about how fast tokenization will replace. Ach. She's not as optimistic as I am, part of the reason is because ACH is so cheap as a way to move small dollar payments and so many companies have spent so much money to build their infrastructure. So she agrees for certain use cases, tokenization, tokenized dollars are just going to completely just take over certain niches of the market. But she thinks it's going to take a lot longer for ACH to be replaced than I think. However, we both ultimately agree it's going to happen. So the question is, is it five years, is it ten years? Right now in the securities world, nobody uses ach. It's all Fedwire.
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A
Right.
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B
And you were talking earlier about. And then by the way, there's a giant amount of netting that takes place. So there's all this intraday credit, a due from an IOU intraday that literally just accounts for timing differences between when the securities settle and when the dollar settles, that can be wiped away. And I am so optimistic that frankly the financial system will get a lot more stable as we start having atomic settlement of securities and dollar transactions as opposed to having all this intraday exposure and having collateral move so much faster. You can settle even if you have slight differences like a 15 minute window in between a dollar settling and a security settling. It's not a full day anymore. Right. And so you can just. The velocity of collateral is going to increase. And anybody who thinks about in a widget business, when your inventory turns a lot higher, what happens? Your return on invested capital goes up. This is going to be happening. And this is part of the reason why I love that Scott Besson is behind all this. Even though some of the bank regulators at the federal level, particularly the Fed, are still very negative on this. It's coming and they're going to be forced into it even if they're not ready.
- [31:27]
D
I think one of the things that's really fantastic is that you haven't forced the banks to abandon their entire system. That was what really hit me about Ripple's narrative that I just couldn't buy into is like these banks are just going to shift and abandon their legacy systems overnight. And even if they choose to, it wouldn't be at scale because it's too big of a risk and too much of an endeavor. Maybe newly developed banks would and things like that, but it was not going to be a big, you know, rush on the bank, so to speak, and everybody do it. So the fact that everyone can dabble in this on the side to the degree that they want to, allows them a beta test that's going to prove valuable is the point. Like if anything shows you value, it's using blockchain. And so very excited about just the natural law of adoption that we're going to see on this from, you know, every bank out there that wants to adopt this but doesn't know how. But more importantly, like the, the thing that you said about every stable coin that's issued is replacing the US dollar. It's taking liquidity out of the US economy and it's putting it in a separate economy. And that's the reason why there's been so much turmoil and discussion around interest because we're supposed to be supporting the US Dollar being the place of, so that, you know, if you're not, if you're taking away from that, you're not doing good by the US Banking system. This is allowing everyone to issue something that has, it's like what you said about the open source. It's open source to some degree because it's, it's a, you've built it for enterprise adoption purposes and not for native issuance purposes. That's a massive distinction that allows everybody to play the same game. And it makes me believe that this technology could be easily adopted even overseas, which would support their fiat, which would support the existing system. I think there's enough resistance right now to a CBDC that we can all see this as being exceptionally valuable. Keeping dollars inside of our own countries
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A
story today, actually, just for the record, worth showing because you mentioned it, 21st century road to Housing act, which, so funny, there's a CBDC language embedded in the Housing act which includes a temporary CBDC ban through 20, 30, passes Senate 85, five heads to the House for consideration this week.
- [34:07]
B
So, yeah, I love it. And it's probably going to be enacted. I think Trump is going to sign that. And so, yeah, the pro CBDC crowd at the Fed, of which there are several people still in positions of power and you can see it, Michael Barr every time is dissenting on everything and basically saying, you know,
- [34:33]
C
we've got to get, we've got to get Caitlin into talking about the Fed. Please.
- [34:36]
A
I was going to say as a broader topic, it's not like, I mean, you guys might not know this, but Caitlin and I actually sat in a room with Robert Kennedy when he was running for President and we were like, let's work on the language where you're going to say that you'll abolish the Fed.
- [34:49]
B
I didn't say that. But you did. You definitely did. He, he was behind that.
- [34:53]
A
Yeah, I'M saying we couldn't quite get there in the language, but I think, you know, where we all kind of stand on the Fed generally and Caitlin's been at war with them. So I would love your take since we haven't gotten it on war, obviously his first FOMC conference, sort of the clearly wholesale strategy change here and how the Fed's going to approach things and you know, just the. And also I would love to know what the Fed thinks about you going around the Custodia issues straight through Vantage to do what you wanted to do anyways.
- [35:19]
B
They've known about it for a long time. Remember, Vantage is a Fed member bank and so Vantage is directly regulated by the Fed. I can't speak for them, but what I will say is Vantage is super careful and the Fed has trotted Vantage out at their community bank conferences as a success story. So the CEO of Vantage was one of, I think only two or three community bank speakers at the community bank conference last October. And it was actually funny because he's sitting there on the stage being interviewed by Chad Cascarilla from Paxos talking about Custodia with the people in the front row at the Fed who, you know, who, who were, you know, behind what happened to us. So we have our fans at the Fed. I've said that all along. We've known for a long time who our fans at the Fed are. And we have a lot of people that we talk to at the Fed who are afraid. I'm always careful to protect their identity because they are afraid because there are some powerful people who are still very anti crypto at the Fed and they are afraid of them. What will wars change in that Fed staff is a very interesting question. And Andrew, you tweeted about the partisan underbelly of the Fed. If you look at the data, it's I think the most Democratic leaning agency among all the federal agencies in their staff political contributions. So the data plays that out. How is Warsh being a Trump appointee going to be received by that staff? I think there is always palace intrigue at the Fed. There's always dysfunction at the Fed. I mean, there are a lot of people who talk about this. There's an interesting dynamic of the fact that you've had some holdovers. Michael Barr did not resign when he stepped down as vice chair for supervision, by the way. Over the weekend there was a hit piece that came out in the Wall Street Journal. Hit pieces like that don't come out without the Fed's press office.
- [37:27]
A
Correct.
- [37:28]
B
Functionally being Winking and nodding that it's okay for those hit pieces to come out. Which tells me, okay, the daggers are out for the person that they went after in the Wall Street Journal, because the Wall Street Journal doesn't publish stories like that. They can't lose access. Right. So to me, that was an indication of the magnitude of the warfare against the Trump appointees inside the Fed by the staff who are either outright Democrats or not fans of Trump. And then, of course, there's Jay Powell, who stayed over. The history of the Fed is that the Fed governors, when they step down from their positions, like Chairman or Vice chairman, they leave. That is not what happened here. And that's part of the reason why Trump, you know, picked the fight with Governor Cook. I don't think that was a fair fight to pick. And frankly, the fact pattern is difficult for the President because the allegation is that what he went after as cause occurred before she got onto the job. That's a pretty big distinction. It wasn't cause on the job. I think he had plenty of cause to go after others to fire them for cause and test this. For example, Michael Barr, over the whole spring 2023 bank runs, he produced the report critiquing himself and didn't allow any of the other Fed governors to comment on it. And so there were a couple of dissents, as I recall back then, that this report has not been circulated within the Fed for others to comment on. And he just pushed it out. And of course, it absolved the Fed of any wrongdoing. So his successor in that role, Mickey Bowman, has hired an independent firm to review. And we all know from being in the crypto industry, silvergate got rug pulled by the Fed and it touched off the bank run at Silicon Valley bank the next day. Okay, so is the new independent firm going to be able to corroborate that story? And it's come out in. How do we know it's come out in the bankruptcy filings of Silvergate, that the Fed directed Silvergate to liquidate? I happen to know from some of the people who talked to me who was in the room, who made the direction, who gave that directive. Right. All that's going to have to come out for there to be a fair hearing. And what I read over the weekend on a hit piece against Bowman is that the staff is afraid that that independent review is going to reveal that there actually were balls dropped by the Fed and that the initial review of that spring 2023 bank run period was whitewashed because the people who wrote the report. Were the people critiquing themselves?
- [40:17]
C
Well, it's a story of lack of accountability at the Fed for years, if not decades. And so now a whiff of accountability is making its way through the halls of all of the Fed locations across the, the country. And it's, of course, it's not going to be well received. And so to me, what I find really compelling is that Warsh and Besant are tied at the hip and they seem absolutely committed to making meaningful changes and adjustments to really the structures associated with both the Fed and Treasury, how they work, what they do, and then the, the influence they have, you know, sort of cross across each other. So it is, you know, you, you mentioned the term palace entry. Palace intrigue is doing a lot of work in the commentary that you, you just talked about because there's, there's a lot going on behind the scenes there. And by the way, the effort that the Fed has put into Fed independence over the last 12 months is extraordinary. I mean, they, they have done everything in their power to convince, quote, unquote, the public that the Fed is an independent agency. So, you know, don't, don't look behind the curtain in any way, shape or form. Thus the concern about any level of accountability. It's going to be very, very interesting over the next 18 months to see where it goes. And I'll say this from a political standpoint, if Republicans hold on to either of the House or the Senate, then Warsham Besant will continue to push forward in a, in a fairly aggressive way. So it's, it's going to be, going to be really interesting.
- [42:10]
B
Well, you brought up the midterms, which I think is really important to the Fed Skinny Master account proposal. It is not designed for implementation until year end. What happens right before year end? The midterms.
- [42:28]
A
Right.
- [42:28]
B
So why did it happen that way? Why is the can being kicked past the midterms? Again? A lot of people inside the Fed really don't want to do this at all. They don't want change. They, they, they don't, they're perfectly happy with paper, you know, with the banking industry being in paper form and they don't like technology. A lot of them don't understand it. And for example, it came out in discovery in our lawsuit. One of the decision makers didn't know what an API is and they're a decision maker. Right, okay. So I mean, just this is a fact. And, but that's the, it's the incentive structure that's been set up of inside the Fed Right. So I think one way to read that is potentially that they're hoping that the Republicans lose the midterms and that the momentum for all this slows down and they don't actually have to implement it.
- [43:22]
C
Yeah, yeah. Am I wrong in saying there's more like more than 200,000 people that are, that are actually employed by the Fed? Isn't it closer to 300,000? Isn't it sort of a crazy number?
- [43:33]
B
Actually, I don't know the answer to that. It's a good question across the whole system. Across, across the 12 regional.
- [43:38]
C
Yeah, it's a, in other words, it's a, it's a huge number. Right. Given where we're at in, you know, the world of innovation and frankly, organizations generally getting smaller because they should be more effective. Certainly across government, we've seen that the opportunity for that to happen and should happen, one has to wonder, if there's two or three hundred thousand people that work at the Fed, what do they do all day? You know, I don't know.
- [44:04]
B
Well, I can answer. What a lot of them do is bank supervision and regulation. And it's so interesting because there is a delicate balance between the three federal banking agencies. The FDIC is the Insurance Fund, the Deposit Insurance Fund, and a regulator. The OCC is a chartering authority and a regulator. The Fed runs the payment system and is a regulator. So the three of them end up in battles between each other and that balance. The Fed keeps trying to grab authority. Part of the reason that Congress did not give the Fed much authority, if you notice, most of the authority in the Genius act is given to the occ, which has been very positive towards crypto. And the fdic, which has also been very positive, is that the Fed was so awful, frankly, so awful to Custodia and the Senate banking folks. Powers that be understood that story and understood some of the, some of the untoward things that senior Fed officials did behind the scenes, including with Congress in being anti crypto and essentially doing Elizabeth Warren's bidding. Right.
- [45:13]
A
So
- [45:16]
B
it's not a coincidence that some of the biggest Fed defenders are on that side of the aisle. So, long story short, it's an interesting dynamic. And Warsh is definitely, he of course has been at the Fed, so he came from them, knows how to, knows how the system works. Very smart guy, obviously ex Morgan Stanley and ex Harvard Law School. He and I overlapped in both places, but we don't remember meeting each other. So we overlapped for two of the three years in law school and then I think three years at Morgan Stanley, but I didn't do M and A, so I was on the security side and capital markets and so just didn't have any reason to cross paths. But anyway, he's got a hostile staff, what he's able to do with that and a board that's stacked with people who are, let's just say, not pro Trump. It's an interesting dynamic. And how much of that is he able to build bridges versus versus target some of the bad actors and move them out and it'll be interesting to see. I have not heard announcements of him laying off some of these people who have grabbed so much power and caused so much harm. They're still there.
- [46:39]
D
As it pertains to Hazel and how the Fed and all of those regulatory bodies see this innovation. Have you gotten feedback from, from them? It seems to me like you would be the single greatest opportunity or a lifeline to them to maintain governance or control over the market by which they control. I mean it.
- [47:00]
B
Wow, I'm so glad you said that because some people inside the Fed see exactly that. We have not directly talked to the Dallas Fed. That is, that's Vantage. And again they have a great response relationship. And the data point that I can point to to prove that is that Jeff Senna gets invited by Mickey Bowman to speak at the Community bank conference. Right. That's a signal. And what I do know is that we don't do anything, neither of neither Vantage nor Custodia does anything without our regulators knowing in advance and having the opportunity to object or in a couple of cases outright approve. So we waited, by the way, some folks probably wondered why did we release our white paper on a Thursday before a three day holiday weekend. And the answer is we got the non objection we needed from our respective regulators at that particular time. Right. So everything banks do is very. By definition the regulators know in advance of everything like that that happens. Right. And part of that is voluntary, it's not required. But the regulators appreciate it. And again, I can't speak for Vantage, we are not in the room when they're talking to their regulators, but we are also talking to the Texas Department of Banking because actually the two states, Wyoming and Texas were the first two to sign a joint supervision agreement. So Texas gets access to the Wyoming Speedy Bank's reports of examination. So they've seen everything. They've seen all the work papers. Right. They've seen into Wyoming's examinations of Custodia. They know exactly what our ratings are that we're not allowed to talk about publicly. Right. So long story short, I mean there's so much combing over by regulators here. And unlike the fintech world or the tech world, which isn't regulated at all, the fintech world is more lightly regulated. We are heavily, heavily regulated. And everything we're doing, as I said in the press release, there's nine months of testing. Our networks are already live. You can't use it yet because there are four gates we have to pass through and we have to check boxes before we can pass through the next gate in order to have this go live. Why is it that tech companies can build a lot faster and get to market faster? Because we're banks, we're doing settlement. It's the single singleness of money, as the economist would say. Right. A bank deposit has to trade at par, has to be redeemable at par.
- [49:46]
C
Right.
- [49:46]
B
That's not true of a stablecoin. But what did we just do? We just connected the two. So it is finally. Yeah, exactly.
- [49:54]
A
Right.
- [49:54]
B
And again, by the way, our regulators have known about this very structure since we started doing our proofs of concept in 2025. We started working together in February. I think we got our first proof of concept out in March. We started working together on this particular topic in February of 2025. Right. And so just now that I've explained to you how involved the regulators have been or how at the table from a knowledge perspective they've been, that any anything big we do, including our press releases, they get advance notice of and whether they approve or whether they just don't object depends upon which regulator we're talking to. But long story short, it's there's nothing done without full visibility by the regulators before something big happens. And that's the way the banks work. And fintechs just don't have that level of scrutiny.
- [50:48]
D
Yeah, I guess my point is more centered around getting approval is one thing, but getting endorsement and getting a bell cow within the organization to, you know, essentially spread the message inside of the banking community is another. And this seems like a natural way to protect the very governance that keeps them an agency. Because in a world where anyone can issue stable coins and the collateral that that issuer has and the trust that it can build is the where it trades against par versus the US dollar. That's a massive, massive distinction. And it seems like one you they're losing territory and one, they're maintaining and or growing territory in terms of their governance, wouldn't somebody see that as a means of survival, if you will, and really spearhead making it kind of known throughout. Or am I too optimistic?
- [51:50]
B
No, Tillman, some absolutely do. Absolutely do. Like I said, we've got our big fans within the Fed. We submitted an idea, I'm not going to get too specific here. We submitted an idea to really help community banks and the feedback that came back from some of the people who were really critical of us was, wow, that was impressive. Okay, so I mean us trying to navigate the roller coaster here, it's been incredible, right? Because you know, the official view is, you know, no, we're not letting, what
- [52:26]
D
the Navy Credit Union, maybe that's the door in.
- [52:30]
B
Well, I mean, but, but at this, at this point, the Hazel Network is running through Vantage's Fed account and, and Custodia is a service provider to Vantage. We don't have a direct relationship with the Fed in that regard. However, there, there are structures and I'll, I'm going to drop a hint here. The Clearinghouse shares a master account for the top 21 banks. Now what is the impact of that? They actually have some special capital exemptions. Did you guys know this? That the capital requirement for the Clearinghouse is six months of operating expenses. The Clearinghouse is not a bank. It's not subject to the prompt corrective action capital requirements of banks. The community banks. Right. And the Clearinghouse is owned by the top 21 banks in the, in the, in the US the community banks don't have anything like that. And the way correspondent banking works, it double counts the capital requirement.
- [53:25]
D
Ding, ding, ding, ding, ding.
- [53:26]
B
There. Exactly. There's a gigantic capital arbitrage in, at the center of the payment system in favor of the large banks.
- [53:35]
D
If you're in the club, you're in the club. And if you, you're getting cheaper money is the point.
- [53:39]
A
As a bank, you know, everyone wonders
- [53:41]
B
why the big banks keep getting bigger. Community banks are getting hurt by this. So guess what? Some of us are actually trying to sell, solve this and stay tuned because this is a, this is a big, there's a, an even bigger initiative going on behind the scenes that has been formally proposed to the Fed to multiple parts of the Fed. And so it's getting at what you're talking about, Tillman, that there are some people who are like, wow, there is something really important going on here. And these are friends, not folks, certainly advantages.
- [54:16]
C
Case.
- [54:16]
B
They are absolutely friends. They're friends to us too. And I say us meaning those of us who are innovators and in the crypto industry. Did you know that Vantage in 2020 offered the ability to pay its employees in Bitcoin if they elected to. And the Fed, this has been public that Jeff Senate talked about at the Community bank conference last October. The Fed asked them to close that down and they did. Okay, but I mean, that tells you where their head has been. They've understood the value of these new ledgering systems all along. And so they've been navigating an even, in some ways even finer line than we have because they operate a very successful community bank that has proven to be incredibly strong in both innovation and safe and sound growth. And that's been a hard line for, for banks to walk. And they've walked it. And that's why they've, they've, they keep getting highlighted. And again, hats off to Jeff and Sean, they deserve to be number one on that list. And there's a reason why the AI picked him.
- [55:24]
D
So if we're going to use this when it goes live, we just need a bank account advantage. Is that the bottom line?
- [55:31]
B
Any of the member banks.
- [55:32]
D
Oh, any of the member.
- [55:34]
C
Okay, yeah, it is. Again, the innovation is fascinating and the pace and speed that you guys have done it, given the structures that you have to work through, is also fascinating. It's also, you know, a direct line associated with, with what we do. We, you know, we're on the cusp of launching equities and ETF capabilities across all of our algorithmic and agentic products. So again, diving into the traditional markets as they exist now. And then also, you know, we're preparing for the tokenized world. Right? So we're going to allow folks to use just the traditional equities as they exist and trade them magentically and ETFs, by the way. And then also we're preparing on the tokenized side as well. And again, all of these things have connection points. And so what, what Caitlin and, and, and, and her folks are doing at the base layer of all this is the base layer of all markets. Folks like this is, it's literally the foundation of how both banking capital markets and then, you know, stock markets, the markets all actually work there. There has to be, quote, unquote, you've heard her say this word probably a dozen times on this show. Settlement. Right? She's at the settlement layer. And so it all connects. It all connects. And so our customers are thrilled to be on the cutting edge of innovation. And frankly, our customers have spent time with you at different venues and have been just uniquely impressed.
- [57:11]
D
API connectivity and OAuth and OAuth 2 and all of these websockets and the ways in which apps are going to communicate with financial institutions and with brokerage accounts. And it's, it's customer centric, right? It allows the customer to stay in control from the start to the finish. It allows them flexibility across, you know, multiple and various markets. It allows all the benefits of crypto. This is just the, the Bitcoin standard being adopted and its characteristics being implemented across the financial markets, both from a markets and stock market perspective, but also from a banking perspective. I think personally, and what makes me so excited about what y' all are doing is that there's more banked people than there are traders. And so how do you get adoption? How do you get utility? Will you meet the customer again where they don't even have to learn anything new and they're just getting the benefits of the technology and that, that's, that's a hard thing. If you look at crypto and you look at even what we've done, it's, it's been a very brutal adoption curve. I mean it started off exceptionally clunky and cumbersome and difficult from an interface perspective. And all that is being now, you know, it's putting the user interfaces have become exceptionally good across the front, across the board, even defi. You can interact with defi now through, through your central exchange and not have to deal with defi. And there's another, like, there's, there's just all sorts of things that are offering the customer what they want and I just love that.
- [58:49]
C
Scott's been a spectator on his own show for like an hour.
- [58:58]
A
I've sent you a few messages. Andrew is back in front of me in my desk. So everything.
- [59:06]
B
I knew you understood this from the moment the three of us, really, the four of us were together in, in Las Vegas and I was dropping hints to you before we recorded about what we were actually up to that we hadn't announced yet. You guys would understand the value of this because of the business you operate. And there's a whole section in our white paper on agentic payments and how hard it's going to be for banks to allow bank deposits to be used in agentic payments because of the compliance issues. However, we embedded the operational and compliance controls in the smart contract itself. Therefore, the agent can't beat it. The agent can beat all kinds of any kind of behind the scenes, trust me, bro, stuff, but inside the smart contract, the agent can't beat it. So that gives banks higher degree of confidence. That doesn't necessarily mean they're going to allow their deposits to be used on your system. But I'm confident that eventually they will get there. And so if you guys give it some time and find one of the partners in the Hazel network, then I think you may be able to use this. But that's what's great about what we're doing. We're the foundational layer. We don't issue directly. You've got to go to a member bank to be able to get the token. But right then and there you know that there's KYC done on every customer. Right. So the banks are a lot more comfortable knowing that the entry point, all the minting is happening to customers who are known to the banking industry. This is different in that regard than stablecoins.
- [60:35]
D
Phenomenal.
- [60:36]
A
It's 1003. Thank you for hosting. Some days I just want to relax under my waterfall. That's not make my life easy. So obviously everybody checked out Archbishop Public as Andrew alluded to their stocks and tax harvesting. Coming, coming. And of course look at everything Caitlyn's building with Hazel and beyond. So you guys have some homework to do before next week. Otherwise thank you, Caitlyn, we appreciate it. I know it's probably very early as always.
- [61:11]
B
All good, all good. Good to see you guys. Thanks so much. That's dope.