← The Wolf Of All Streets
The Wolf Of All Streets
Crypto Slides | Fear Grows Over Stablecoin Legislation | Crypto Town Hall
00:59:49
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- [00:01]
Scott
Morning, everybody. It is Tuesday. I seem to be losing connection. Sorry you're having a glitch here. I'm not sure if you could all hear me or not. If not, let Dave take over. But we've got crypto slides. Fear grows over stablecoin legislation. I had Caitlin Long on my show this morning, and she really broke this down. Obviously, we had a bunch of Democrats seemingly turning at the last moment over the last couple days, potentially putting a wrench in the odds of stablecoin legislation getting through. Seems like we're still going to be okay. But a concern there, obviously the topic today when talking about the market, everything pretty much flat oil under 60, but, you know, NASDAQ down 1%. Bitcoin roughly continues to trade right around 94,000. I guess we can start with the stablecoin legislation. Zach, you're always on top of this. What are you. What are you seeing?
- [01:00]
Zach
What I am seeing is there is a, you know, I guess probably what a lot of you have seen. There's a panel of Democrats who are defecting. Last moment here.
- [01:08]
Scott
I can't hear Zach if he's talking.
- [01:10]
Zach
Can others hear me?
- [01:12]
Austin
I hear you.
- [01:14]
Dave
Okay, so there's a.
- [01:15]
Zach
There's a group of Democrats who are. Who are saying they're now not going to vote for the stablecoin bill. They're being a little bit vague about, you know, from a policy perspective, what they want to see different. I think that is because this is politically motivated. The two concerns they are raising. One is that the stablecoin bill will allow for corruption by the Trump family because World Liberty Financial announced that they are going to do a stablecoin. And so this is a anti Trump move, a way to bring attention to what the Trumps are doing. And, you know, I think that's sort of a political agenda. The other stated concern is around anti money laundering provisions. Now, the Genius act that's being voted on actually is pretty strict in terms of anti money laundering. You're not allowed to have any kind of stablecoin in the United States unless it has the technology to allow it to be frozen by court order. You have full bank secrecy act protections for creation redemption of stablecoins. And really the only thing you could do differently is to add KYC to peer to peer transfers, which, you know, I think would be a terrible idea. It would basically turn regulated stablecoins into the kind of surveillance nightmares that CBDCs are. I don't think that's in the offing. And so the question is, what could give political cover to these Democrats. I do think, you know, based on her comments, Elizabeth Warren is behind this. She doesn't like the crypto industry. She's using the World Liberty Financial as sort of a cudgel here to drum up opposition. What can give cover to the Democrats who were previously going to support this bill to change their mind? Another thing that people are looking at is industry support behind this bill. So far, you know, the major players and recent Horowitz is strongly coming out in favor of the Genius Act. Coinbase is giving somewhat tepid support. I think Coinbase's beef with this bill is that it doesn't allow for yield bearing stablecoins. And so, you know, they're focused on the update to fit 21 market structure.
- [03:09]
Dave
Bill coming and they would rather a.
- [03:12]
Zach
Better version for them of the stablecoin.
- [03:14]
Dave
Bill that allows basically, you know, treasury.
- [03:17]
Zach
Securities with the blockchain, which the Genius act doesn't altogether. I think the sponsors of the bill are pretty optimistic. I think it still will go up for vote on Thursday and it still probably will pass. But the real question is what will provide the political cover for moderate Democrats to get back in the pro Genus act camp?
- [03:44]
Heather
Well, Scott's not here, so Austin, why.
- [03:46]
Scott
Don'T you go next?
- [03:48]
Austin
Sounds good. Yeah. I want to pile on to Zach's comments and say I think there's a couple of dynamics at play here. One, if you look at some of the Democrats coming out against this, these are the same people who in the prior Congress were pushing bills like Damla and Shanzi, which Zach, your comments do essentially create a surveillance diet there. Right? That's saying let's take the current financial system, only make it orders of magnitude more invasive with the way that we want to design things, some of which are, to be honest, just functionally illiterate, not even possible at blockchains. It raises to me the question of was support from some of those folks always fake and were they always lying and this is going to be a political tactic to try to jam those in at the last minute. I think the folks who are kind of caught in the middle on the crossfire and the ones that people should watch to determine if this is going to pass become the more junior Democrats who came in saying the right things. If you look at like Gallego, you know, he had an A from stand with crypto. There was a lot of support from the industry for him. So if he were to backtrack now on this bill over at best vaguely formulated policy concerns or pointing at the Trump World Liberty thing without I would say making a better argument as to why the opposition is or addressing the core point that some other Democrats have raised of if your concern is corruption, wouldn't you want things regulated here instead of offshore? Seems like you have that one backwards then. I think what's really going to happen is this will be sort of right out of the gate, the allegedly pro crypto new Democrats sort of stepping on a landmine immediately with the industry because stablecoins are certainly the lowest hanging fruit. And I think the tactical mistake for coinbase is if you can't get stable coins, you're definitely not getting market structure. So focusing on that as a second step when you cannot take a first step seems, I would say, counterproductive.
- [05:50]
Heather
Yeah, I mean one of the things about this whole scenario, I mean, yeah, I, I really hate to get all horribly political and considering I think the center right and center left actually have more in common than either of us. You know, Austin, you know, have with, with the extremes of the parties who tend to be in control. But it's pretty clear that if Gallego defects and is willing to go so far as to filibuster, which obviously is the only way the Democrats can really stop it is by filibustering, filibustering, cloture, blocking, you know, etc. If they're willing to go that far, then we're 18 months away from another election cycle and staying with crypto is going to effectively be pushed to say, listen, we can't trust you if you're a Democrat because here you go, you're less than six months away. And don't think that that's not part of the calculus. So I think that's why the Thune basically thinks that he will get it through because he doesn't think that they'd be willing to take that step considering what happened in the last election. I mean, what do you think? Do you think I'm crazy about that or just overly optimistic or what?
- [06:56]
Austin
I don't think that's crazy. I mean, I. Look, if I was a center right Republican, kind of a functionalist, trying to work with my colleagues across the aisle. So let's, you know, thinking of crypto, say that I'm somebody more like Tillis, that I am one of the fire brands, like really far to the right who just wants to eliminate the entire bsa, what I would do here is kind of exactly what they are doing, which is force a vote to see what is actually going to happen. Right. Like you want to put people like Diego and Kim in the position of if you guys really want to go vote against this and demonstrate to everybody that there are only two Democrats in the entire world we can trust on crypto, and they're Gillibrand and Richie Torres, then feel free, you know, to go put your name on that. But it will have dire consequences for you in the next election. I think this is why I said earlier I'd watch the junior Dems because here's a point where their interests, their personal interests and likely the interests of, call it the up and coming members of the party diverge from some of the senior leadership. Like Elizabeth Warren is willing to go down with the anti crypto army ship because at some point she's going to be out of Congress. You know, we'll see how long she continues for, but she's already well into her 70s. That's not true of somebody who's just joined and is looking at a long career. And so here is where if you're a Republican doing tactical politics wisely, you're going to try to drive a wedge between these two groups of people or make them betray the people who they thought were their allies and then essentially weight the deck in your favor for the midterms.
- [08:36]
Scott
Dave, I'm catching up, so continue please.
- [08:39]
Heather
Yeah, well, I can't see who. I can't see hands or anything so from anybody.
- [08:42]
Scott
But yeah, there's not.
- [08:45]
Robbie
I guess I'd like to hear someone's perspective on how this impacts the kind of more on chain like crypto native stable coins like DAI or some of these other kind of synthetic collateral based stable coins that are used as part of different defi protocols. Say it goes in the direction of a non favorable environment. Does that kind of unleash a wave of innovation and opportunity around some of the more native on chain stuff or what do you guys think the relationship is between those?
- [09:19]
Austin
Well, I'll hop in there. As somebody who's been looking closely at that, I would tell you. So ignoring the language in stable, which I think is pretty bad for some of the on chain implementations, but I also think doesn't survive in its final form. So leaving that aside, if you look at genius, what's really going on there is they're trying to draw a distinction between what is a stablecoin and what is not a stablecoin. And so what you're going to have happen relatively quickly in the United States if that passes is everything within the stablecoin box can keep calling itself a stablecoin and operating the way it was and everything outside of that box probably rapidly needs to change its name and how they do, like descriptions of products, consumer protection, etc. That is to say, I would not want to be running around calling myself a stablecoin and saying that I'm safe if I wasn't something that fit nicely within the genius box. Now that's not to say you can't do it, but it is to say maybe you should be very careful about what you call yourself and what consumer representations you make. On the other hand, to your point, I think in either case, given the new administration and given the way things are trending, so long as you're not committing fraud or lying to people about safety, they've seemed significantly more tolerant about letting people experiment. So really what I think this is boiling down to in the current administration is a question of just consumer protection. Where my fears are is if in 2028 we get, you know, President Elizabeth Warren without legislation passing, there's nothing that stops us from flipping back to sort of the Biden administration anti crypto regime. I think that's true and I think.
- [11:01]
Zach
That'S an accurate description of what happens if the bill passes. But if this bill doesn't go through, at least for now, the status quo is that stablecoins are legal. There was a, you know, sort of existential legal threat to stablecoins in that the SEC theoretically could say that they're securities. And I actually think there's not a terrible argument under the law that they are securities. But the SEC has already put out a memo saying that they do not consider non yield bearing stablecoins security. So we know that's not going to happen, at least in this administration. And you know, I think, you know, when the bills being negotiated here, like the main effect of federal stablecoin legislation I think is not that it will change the like existing incumbent stablecoins all that much, it's that it will give the regulatory clarity needed to like traditional financial institutions to get into the game.
- [11:46]
Dave
Right?
- [11:46]
Zach
Where you start to see BlackRock coin and you know, bank of America coin and all that stuff, that's the big change that this bill unlocks. So I think from the industry's perspective and certainly from Heather's perspective, you know, the, the best alternative, the batna, right, like if this bill doesn't pass, you're actually in an okay spot and there's only sort of so much you should be willing to eat in terms of onerous provisions that could be added. You know, I think the bill as it stands seems like a reasonable ish compromise But I don't know why you would go further to appease this bloc of Democrats.
- [12:21]
Heather
I mean I think the one thing that I'd add to that is that if the bill passes and people have to rename yield bearing instruments that the real question will then be pre market structure bill, will the SEC grant no action relief for people to call these tokenized money market funds and be allowed to interact in with the stable coins? And if the answer to that is yes, then it's going to open up a lot of new business models and help them. But I completely agree with Austin. I actually gave this advice to a project that is a nascent project that, that calls himself a stablecoin. But I basically said to them listen, you know what you're doing, it's not a stable coin based on in this language. So you might want to just think about just renaming. But opening up those sorts of products and increasing the velocity and access from traditional finance into them could be a very big deal. So I view the this legislation as being incredibly helpful to those products, presuming they don't do anything dumb and they represent themselves in the right manner.
- [13:34]
Scott
Austin.
- [13:37]
Austin
The other big problem we've had in the United States is getting banking access for stablecoins. And part of sort of the difficulty and the teething is you want these things to be backwards compatible to the old system and work with a new system on blockchains. The other side benefit of the stablecoin act is it's going to tell all the very large regulated financial institutions. So take like a JP Morgan, a Bank of America, that one, you could launch your own stablecoin if you want within these rules. But more importantly you can bank the stable coins that currently exist if they're following these rules and it's fine. And I think that's an underrated point here as well.
- [14:17]
Heather
Yeah. When you say that Austin, are you talking about. And I think the answer is yes, being able to use stablecoins inside of products, whether it's Zelle or Venmo et cetera, you know, effectively instead of using the ACH older systems, migrating your payments infrastructure to something that's faster and cheaper.
- [14:37]
Austin
And lower risk, I mean that's half of it. Honestly, I'm a little bit less excited about that and that I think all of that's just going to go to stablecoins anyways, regardless of what people think in the long run. I'm also saying very basic things like they could have bank accounts with me and I can do 24, seven ledger entries between different people so they can mint and burn at all hours. I can do things like, I don't know if I know a stablecoin has a ton of treasuries, give them essentially repo lines against all that stuff to make mint and burn orders of magnitude more efficient. Between all the stablecoin issuers, right. There's a lot of fundamental banking things that need to happen on the back end with the reserves that are very boring, fixed income stuff that people don't think about. You know, I say that as somebody ran an over 20 billion stablecoin at one point, that stuff is the brain damaging part. And having really first class banking access there would be incredibly helpful.
- [15:36]
Scott
Yeah, sorry, I'm trying to see who's everybody's showing as a listener for me as usual, just to make it as interesting as humanly possible. So I don't know if you got into it while I was off, but do we think that there's a fear or any risk right now for the tethers or offshore crypto incumbents to be excluded from this legislation? As Caitlin Long kind of put it on my show this morning, there's a huge line of crypto native companies now actually in line to get banking licenses like Coinbase and such who are going to obviously want to participate in this stablecoin economy. So I guess the question is how does this actually shake out and who gets to participate and who doesn't? Would love everybody's thoughts on that, Zach here.
- [16:23]
Zach
That could affect foreign stablecoins. One is a blanket prohibition on basically being in the United States at all in any capacity if you do not have the technology to be able to respond to court orders. Right, to be able to freeze and confiscate when there's a lawful order to do so. But that's not directly a problem for Tether. They have that technology, they're already complying with those court orders. So I don't think that's an issue. But then there is this, you know, basically anti Tether provision that was added to the latest version of the bill. I think most people understand that to have been added in response to lobbying by Circle that says, you know, in three years, if the OCC takes issue with Tether's governance or any foreign stable COIN issuer with governance, with their responsiveness to orders with their reserves or really anything that the OCC and its broad discretion decides, they can require all centralized U.S. exchanges to delist Tether. So that could be a problem. But as long as Tether maintains the technology to be able to comply with lawful court orders, you can still exchange tether peer to peer. It's not a prohibition of tether being held or used in the United States, but it would be a prohibition of exchanges listing it, which is pretty significant.
- [17:40]
Scott
I was just going to say because we know that the primary usage of tether is speculation on foreign exchanges. Right, right.
- [17:48]
Dave
Tether's main use case. Well, both speculation and store value. Well, I think specifically store value in places where it's otherwise hard to get.
- [17:55]
Zach
Dollar access and I expect that to continue. It's not, it's not a ban on tether. It would not shut down.
- [18:00]
Scott
Yeah, that's not happening at this point. Yeah. Austin and Dave.
- [18:06]
Austin
Yeah, I do want to add a little bit of nuance to that which is the bill. It doesn't just say you have to have the capability, it says you actually have to be responsive. So the hooks in that bill would basically ensure that tether is going to have to comply, which usually means pretty quickly and by sharing information among other things with US law enforcement for all of these things they currently do to some extent. What's not clear from the outside is exactly how far that goes. So one thing that I would sort of caution, slash, remind people, slash point out there is that could be, you know, a pretty big window into the activities of tether because the U.S. government, you know, treasury is going to have very broad discretion of what non compliance is there.
- [18:58]
Heather
Yeah, I think it's worth pointing out why tether is listed on Kraken and Coinbase etc. Etc. And it had to do with, and, and it kind of makes it all almost irrelevant from a user perspective. Obviously very relevant for tether. And that's because once Silvergate and Signature were, were assassinated by Elizabeth Warren Hunter goons that the, the, the ability to trade the dollar pairs, Bitcoin dollar, Ether dollar etc were really, really hamstrung, particularly on weekend periods etc and so a lot of liquidity migrated to the bitcoin tether pairs. And so the US exchanges listed the tether pairs in order to compete to make it easier for people who couldn't compare the two pairs on their screen and do the simple arbitrage. The upshot of all this is with a properly functioned stablecoin regime, what you'll see is in the US being able to get money into and out of dollars, that weekend problem will go poof. Based on what Austin was saying and what I've been talking about. And so within three years, honestly I'm not sure that tether needs to be listed on US Crypto exchanges. From a user point of view, obviously Tether themselves will want to be here, but you'll end up with a situation where it doesn't really impede the market. And I think it's important to understand that the reason that it took off and gained even more importance was, and this is funny, the irony is Elizabeth Warren and effectively helped Tether become the most profitable company on the planet by doing what she did and by reversing that to allow instantaneous movement of dollars 24.
- [20:43]
Scott
7.
- [20:45]
Heather
Much less of a need.
- [20:49]
Chris
Yeah.
- [20:49]
Robbie
And maybe one outcome with tether specifically, because I just looked per defi Llama, there's $240 billion of stable coins across all chains, and 79 billion of that is Tether on Tron. And so maybe with that, like, if there's things that Tether, you know, if they want to tap into markets that put these requirements on them, maybe Tether, you know, because Tether on Tron may is different than Tether on Ethereum. Right. And so maybe there's some kind of. I don't know if that'd be kind of like global arbitrage or just how they treat their stable coins that they issue on chains that are primarily for international, South American or South Asian markets. Maybe the stable coins that Tether themselves issues in those markets remain different in terms of their operation and what types of legal interoperability that they will maintain. Maybe there's some type of bifurcation there at some point.
- [21:56]
Scott
Yeah, I think that makes sense. Either way, I think we can probably move on from the stablecoin conversation. I think everybody here is in consensus that we still are likely to get something done. I mean, is that fair to say? If Caitlin. If Caitlin believed that when I talked to her this morning, I think it's pretty. Pretty sure because she's obviously a skeptic and has been on the wrong side of a lot of this over the years. So not. I'm confident. I just hope that they get it right. You know, I mean, it could be worth discussing where they could get it wrong. But nothing in the act seems glaringly terrifying. I mean, Zach, have you seen anything before we wrap this up that, like, needs to be glaringly either omitted or fixed in the proposed stable or genius acts?
- [22:40]
Dave
No, not.
- [22:41]
Zach
Not at the moment.
- [22:41]
Dave
I would say the.
- [22:43]
Zach
The terrifying stuff is more in the.
- [22:45]
Dave
In the realm of the samurai and.
- [22:46]
Zach
Tornado cache situation currently.
- [22:49]
Scott
And maybe that's worth discussing. What do you see that's terrifying there seemed for. You know, I've been sort of a casual observer of the news over the last week, because I was traveling. But it seemed there was some sort of favorable news on the samurai side, beyond the. Or beyond the fact that. Are you talking about. They covered it up, basically. Is that. Was that the story? Zach, you're glitching. I think it's your. Your mic. Yeah, unfortunately. Can't hear Zach. Is anybody else on top of that news?
- [23:27]
Austin
Yeah, I'll hop in. If Zach glitched out, Basically, what happened is. So there's an entity called FinCEN, who's in charge of financial guidance rules. Essentially, their job is to tell people how to comply with the law as it comes to things like money transmission. And they had a meeting with the Department of Justice about Samurai Wallet, and one would also presume Tornado Cash, where they basically told the Department of Justice, hey, your money transmission theory does not hang together and is contradictory to the guidance we've issued because we focus on, you know, who actually has control of funds and custody of funds. So FinCEN, the branch of the government responsible for promulgating guidance on how to do all this stuff, told the doj, we don't think your charges are justified by what we, the government ourselves, have said. And the DOJ helpfully ignored them, went ahead and filed the charges anyways. And that appears to have covered that up, because if you're thinking about your duties in criminal prosecution and under Brady, that probably should have been disclosed to the defense in both cases during sort of the preparation stage for the trial, and they did not do that. So it's going to be very interesting to see how this shakes out. But this is shades of what was happening with Debt Box versus the SEC in Utah previously. That did not end well.
- [24:49]
Chris
So, yeah, if I can add a.
- [24:50]
Dave
Little bit more context. So the first, like, important, much more positive piece of news we got was about a month ago, on April 7, the DOJ, through Deputy Attorney General Todd Blanch, put out a memorandum saying that they would not do more cases like Tornado Cash and like Samurai Wallet. Right. They did not want to do regulation by criminal prosecution. That's not how our system is supposed to work. Right. The Congress is supposed to make the laws. In some cases, we have agencies that promulgate regulations after a notice and comment period. But you're not supposed to learn what the law is by the government throwing people in prison. And that's what happened when, you know, nobody understood the Bank Secrecy act to apply to noncustodial tools. And the DOJ took the position anyway that they could imprison Developers for launching non custodial tools. So after that, the defense counsel and samurai said, listen, prosecutors, this case is inconsistent with your boss's stated priorities here. We need to pause the case and you need to consider dropping it. The prosecutors actually agreed to that. And so there was a stay on the motion briefing and the prosecutors said they're deciding whether or not to drop the case at around the same time in response to what's called a Brady request. So Brady is an old Supreme Court case that says that if the government's prosecuting you and they have a piece of evidence that is exculpatory, meaning it makes it look less likely that you are guilty, they have to turn it over to you so you can use it in your defense. In response to a specific request by the defense counsel for did the Prosecutors talk to FinCEN? We learned. The prosecutors, sorry, the defense counsel learned about a month ago, we all learned publicly yesterday that in August of 2023, which is six months before the Samurai Wallet case was brought, and it was around the same time, I think the same day that Roman Storm was arrested in the Tornado Cash case, the prosecutors that would go on to bring the Samurai Wallet case went to FinCEN and they said to FinCEN, hey, we're thinking of charging these Samurai Wallet developers with running an unlicensed money transmission business. Now, what does it mean to be unlicensed? It means you didn't go to FinCEN and get a license. And FinCEN since 2019 has had guidance out saying who they think needs a license or not. And so they said, listen, here are the facts of Samurai Wallet. Are they a money service business? Are they a money transmitter under your regulations? And if not, we want to charge them criminally with failing to register. And FinCEN said, no, we do not think this is money transmission. We do not think this is a money service business. The prosecutor said, okay, thank you very much. They ignored that. Then six months later, they brought this case. And despite the fact that the judge in this case has a rule that you have to turn over any Brady material within two weeks of either the indictment being brought or that information coming to light, this information, which the prosecutors had six months before bringing the case, they basically hid, they concealed till this recent breeder request post the Todd Blanche memo.
- [27:41]
Chris
Right?
- [27:42]
Dave
So the crime here, the principal crime that these guys are charged with, is running an unlicensed money service business. Unlicensed with FinCEN. FinCEN doesn't think they did money transmission. The DOJ says that you can't bring these types of cases and it's been a month that this case has sort of been on pause while we've been waiting for the prosecutors to make up their mind about whether they want to keep trying to imprison these software developers. And it's a pretty shocking scenario, you know, both deeply unfair, obviously for the individuals whose liberty is at stake in this case, but also it's much bigger than them. Right. If, if a judge notwithstanding, you know, FinCEN's beliefs, decides that a non custodial tool can count as money transmission, then, you know, that could. You know, we talked before about the DAMLA bill, Elizabeth Warren's bill. Elizabeth Warren tried to ban crypto through this bill called damla that did so by treating everybody in the crypto space, whether you're a node runner or a miner or someone who operates a defi front end or whatever, as a money transmitter, knowing that it's impossible to comply with those laws. And therefore, other than maybe holding Bitcoin through an etf, you basically can't use crypto in the United States. We could get that same result through bad case law created by judges here. And so, you know, this is, I think, like the most important thing going on in crypto right now. It's critically important that at least the money transmission charges, but really all the charges here should be dropped. And the value of all of these instruments that we're talking about, I really do think derive from the fact that we can have these, you know, peer to peer bearer assets that depend on the bank Secrecy Act. Not going to sort of self custody, Austin.
- [29:24]
Austin
So I'll hop in and say I think it's important to draw some distinctions as we discuss this between the case with Tornado Cash and with Samurai. So in Tornado Cache. I basically agree with almost everything that was just said. I do maybe think there are regulatory theories that could apply to this conduct, but all of them come from the world of software development. They do not come from the world of money transmission. Right. That is to say, if you start creating things that are primarily used by criminals and making profit off it, blah, blah, blah, blah, blah. But that's not going to put people in jail for the most part. The one thing I want to point to, and this kind of is evidence of how insane the overreach was under the Biden administration and how the goal was exactly as was just said, you know, essentially to find a backdoor way to ban crypto, is that in the Samurai Wallet case. My reading of the materials, if I was thinking as a prosecutor, is that there's actually a Pretty good conspiracy to commit money laundering charge that exists in there. And to be clear, that does not rely upon any sort of licensing. Like not legal advice. But it's illegal for all of you if you're in the United States to launder money. Just period, full stop. That's a thing two legged humans cannot do. And that is a charge that does not rely upon licensing, it relies upon conduct. And in the case of samurai, there are certainly some things you could point out that I'll say raise questions. So when you have that and then you go and deliberately put in this money services business type argument that FinCEN has already told you that they disagree with, I would also suggest this is continued evidence of the lawlessness of the Biden administration where now we're getting stuff piling on here and Operation Choke Point and what happened with the SEC to the point that, you know, I, I, as a person who cares deeply about rule of law, start saying, if this has happened in like four or five different cases, at what point do we just need to investigate this?
- [31:27]
Scott
Yeah, but Austin, like why haven't they just dropped this if they now know this FinCEN sort of DOJ controversy exists? Grounds to just throw this away.
- [31:38]
Austin
One, it should be grounds to throw the case out. Like the Brady violation alone is enough for many judges to just punt this thing into orbit. But two, this is continued evidence that in a lot of these regulators, you have people on the ground who don't really think they're answerable to the people in charge of the agencies and are just doing what they want. You know, definitely been a problem at the fdic, for instance.
- [31:59]
Dave
So if I give nitpick on two points. So one is it is not, and this is a real nit, it needs to be a Brady violation, it needs to be post trial, it's pretrial. However, it is a violation of, you know, criminal procedure rule 5F, for which the judge could, you know, take any number of remedies, including dismissing the charges. I think more likely here, and what I think a lot of us are advocating for is a political resolution where the DOJ and especially Deputy Attorney General Blanch go to SDNY and they say, listen, you've screwed this up. This is going to create bad case law. This is not in keeping with, you know, our principles. And so, and so, you know, make the case go away. I, I want to briefly though address the, the conspiracy charges. So aside from this money transmission charge, the defendants here and in Tornado Cash are charged with conspiracy to commit money laundering in order to be guilty of that crime, the elements of that crime. You need a specified underlying act, some criminal activity where you knew that that specified underlying activity happened. You helped that person hide money. And then because it's conspiracy, you agreed with others to help that person hide money. You actually don't need to have successfully hit it because it's a conspiracy charge, but you have to have known that you know someone was doing a underlying activity and you have to purposefully have helped them. The only fact I have heard in this case that people point to on this conspiracy charge is what sounds to me like a bad joke. But you could take it however you want. Where the developers Tweeted, after the 2022 Russian sanctions, some of you will remember where we like froze a lot of assets of Russian oligarchs and we froze Russia's T bills. The developers tweeted, welcome new Russian oligarchs to our coinjoin. That really seems to me like a joke. Even if you're not taking that as a joke, having that alone prove that they intentionally wanted to help people break the law beyond a reasonable doubt seems like a real stretch. I think the money laundering charges are a lot easier to make stick if you also have the illegal money transmission charges because the whole business is illegal. But I think if you force the government to take this to trial and they have to do a fact intensive case where they prove what was in the defendant's mind, where, you know, it meets this bar for conspiracy, I think that's a real uphill battle. And really that that charge I don't think could have or should have been brought in isolation.
- [34:20]
Scott
Wow. As exceptionally thorough. Zach, thank you. I really wasn't up on this, but it seems like we're so focused on legislation and regulation at the moment that we forget that some of these cases are still outstanding because we've sort of had this narrative that the SEC was dropping everything. But this isn't the sec and this is still massively important for the future here. What are the odds you think they get this right?
- [34:48]
Dave
I don't know. I'm very close to this right now. You know, I really hope the DOJ gets this right. I don't think the prosecutors at this point are going to do the right thing on their own. And I don't think that the judge is super likely to do it, but. But I think we've got at least, you know, 50% or better odds that the DOJ will intervene given that, like, I really think at this point, allowing the case to go forward, especially in light of you know, the prosecutors wrongfully withholding this Brady material. It's just so counter to what the Trump administration has said they wanted to do. And such a clear example of, you know, Biden era regulation by. By enforcement, that I think there are, you know, pretty decent odds that the DOJ will do the right thing.
- [35:28]
Scott
Are there cases regarding this cash specifically outstanding outside of the United States as well?
- [35:34]
Dave
So this is specifically an issue under the Bank Secrecy act, which is a US Law. There is the Netherlands Tornado Cash case, which is completely different law, and their case would never stand up in the U.S. basically, the theory of the criminal case in the Netherlands is that the developer Semenov wrote software that he know could be used by criminals, and he didn't add features that would stop that, which, like that type of legal theory, would squarely be unconstitutional under the First Amendment in the United States. So that is unfortunate what's happening in the Netherlands. The precedent doesn't matter to us crypto users in the same way as these two Bank Secrecy act cases.
- [36:13]
Scott
Austin.
- [36:15]
Austin
Yeah, I'll pile in with Zach there and say I think, unfortunately, the Tornado Cash developer of the Netherlands is probably guilty under the laws written in the Netherlands. But that is a commentary on the law in the Netherlands. Hilariously, one of the things that may work hugely in our favor is if we get this right and the doj, you know, intervenes and all these charges get withdrawn and Europe continues to go down the path of essentially maximum state control, we could be stealing even more tech business from Europe over time into the United States. It's a big competitive advantage.
- [36:51]
Scott
Interesting nuance. I know. Buzz, we're going to get ready for a separate conversation in a moment with. With a sponsor. I want to ask Robbie a question. Robbie, were you at Token? I didn't see you, but I saw yat. I can't hear Robbie. I'm not sure if you all can.
- [37:07]
Buzz
No, I can't hear him either.
- [37:10]
Scott
It's unbelievable. Robbie, you'll have to drop and come back. This. This has happened to me about 10 times today. If it makes you feel any better, I missed the entire first 10 or 15 minutes trying to get on and. And couldn't. Couldn't hear anyone. Buzz, were you there?
- [37:25]
Buzz
Yeah. Can you. Can you hear me?
- [37:27]
Scott
I can hear you, yeah. Were you at the conference?
- [37:29]
Buzz
No, I wasn't there, but I know that a lot of Mario's team in IBC was. I. I heard they threw a pretty big party there. A lot of people were just pretty positively about. You were there?
- [37:40]
Scott
Yeah, that was. That Was my, uh, I literally was there, uh, on my way to the airport at that specific event, uh, his party. But my flight was at 2:00 in the morning. But yeah, I wanted to get, uh, Robbie's take on the, on the conference. What? Seems he's not there. I also think we're. We don't have the, the sponsor up on. Up on stage yet. Buzz, anything else right now that's sort of on your radar as we bridge this gap till they come up.
- [38:04]
Buzz
The one thing that it's a little bit Meme coin, but did you see the Zerebro dev? There was a lot of drama going on around that. And Zarebro was obviously one of the hottest AI tokens of. I mean, I almost said last cycle, but it was just a few months ago where it was Zarebro, Truth Terminal and a few other tokens that were taking off. And since then the token's gone down almost 95%. And supposedly the developer actually took his own life and in the Meme coin space they've been creating coins trying to commemorate him and some other talks about his, his wallet still being active and purchasing these meme coins. So I know that I've been wrapped up following that narrative this morning. It is quite sad. I mean, I hope that he did not take his own life, but just kind of goes towards how dark sometimes this space can really be.
- [38:56]
Scott
That's totally off my radar. But that. That's wild. And is the conjecture that that happened because of the price action or criticism.
- [39:05]
Buzz
Or because it seems definitely he was. Zarebro was definitely a project that a lot of people were excited about three or four months ago, right along the lines of AI16Z and True Terminal. And Zarebro was actually the first project to use AI, an agent to set up a validator on Ethereum. So that was part of the innovation that they did. And he worked closely with Shaw from AI16Z, but got a lot of flak because the token went up to, I think it was around a $500 million market cap and was down about 95%. I believe they even got a Binance listing at one point. But just a lot of flack towards the developer and the conjectures. That's why he took his own life. But it's also conjecture that it may not be true.
- [39:53]
Scott
So. But in these cases, didn't most of these tokens have the same drawdown? It's not unique to them.
- [39:59]
Buzz
No, it's not. I mean, I think Zarebro was one of the tokens that got Hit the hardest because it pumped the hardest too. So there was just a lot of criticism thrown his way. Also a 22 year old kid just fresh out of university. So quite sad.
- [40:18]
Robbie
Yeah, I saw that. And it almost kind of further kind of confirms how some of these kind of more exotic spaces in crypto, I think they really are kind of a canary in the coal mine to just like broader global psychology like that. I think if he. I'm, I'm not assuming that it's like fake, but you know, just that general angst that people have and that really high pressure and then the pressures of, you know, kind of like the online mob just coming at, you know, a coin goes down because people rotate out into the next thing because the game in that space is just rotate to try to be in the first 1% of buyers and once something's exhausted. So it's like just that anger, even if it's misdirected, combined with just general angst and kind of uneasiness. I think that, and this is the second time that a kind of meme coin personality had and apparently there was a video of this one you're talking about with I think his name is Jeffy. But there was a couple months ago there was another one where someone took his life on camera. And I think something about send this coin up. Just that kind of crossover between just high risk speculation as a way to cope with general angst and just some of the really negative outcomes that can come from that. It is quite sad.
- [41:50]
Buzz
Yeah. Definitely hope that the story is, is not true. And he's, he's okay, but definitely speaks towards being a little bit kinder in this industry. I hope it's not true. But on a more positive note, we do have a sponsor today. Chris, before I do my intro here, do you want to just give me a mic Mic test? Because we've had some, some issues today with mics.
- [42:14]
Chris
Okay, let's try. I hope you hear me clearly.
- [42:17]
Buzz
Yeah, loud and clear. So before we get started, Mario's company ibc does marketing, incubation and investing. Sponsors on the show are sponsors working directly with his company ibc, not necessarily crypto Town Hall Scott or myself specifically. So Chris, as we're getting started here, why don't you give us an elevator pitch on pay accept?
- [42:39]
Chris
Yeah. Okay, let's get started. Three years ago, we asked a simple question. What if you could carry an entire financial system in your pocket without a bank, without middlemen and without borders? That is how PayXapp was born. Fast forward to today. We are launching the next generation of our platform which is a Web3 wallet. And it's not just a wallet, it's a self owned financial operating system with pay to tap payments. So you put two phones together and you make payments can be in fiat or in cryptocurrencies. We cut out the card processors so we do nothing with Visa or MasterCard. We just cut them out and have our own blockchain to do the transactions. With that proprietary blockchain we are able to process over 65,000 transactions a second. That's like the speed of Solana but we have our own blockchain and we build also a full payment terminal just on your phone. So we are available at the moment on Google Play Store and I hope next week we, we will also be on on Apple phones so everyone can be a payment terminal and get accepted cryptocurrencies and stable coins. So.
- [44:04]
Buzz
Yeah it's as a, I'm a developer in in. In the space and have been since about 2016. I can definitely understand the, the challenges of getting on the the iOS store. I know Android is. Is a lot easier but definitely wish you all the best in getting on iOS because it's, it's not easy.
- [44:25]
Chris
Yeah, it's a pity because they ask a lot of questions about do you have license, which exchanges are you using? So that's, they ask a lot more than than Android. Android is also looking of course about this because it's cryptocurrencies and we're also become web3new bank. So yeah they ask a lot of informations but we are almost there because we already now two, three weeks busy with with Apple to get on the stores and yeah we are close to that one week I think and then it will be also up and running.
- [45:02]
Buzz
That's awesome. I remember during the last cycle doing some contract work for an NFT marketplace that was trying to get in the iOS app store and the account rep at Apple who just could not wrap their head around how you can sell digital assets. But Apple can't necessarily get 30% of the revenue. So if you're buying an NFT for $10,000 it's a peer to peer transaction and Apple just wanted their, their clause on that that 30% so kudos to you for getting that across the finish line. But I was looking at your materials and for anyone who is tuning in, I did pin a tweet from Pay accept up into the nest so you're welcome to click their profile and follow along during the ama. But it seems like multi Chain expansion is definitely something that you guys are prioritizing on your roadmap. Did you want to speak a little bit about that? I thought I found it very interesting that you guys are even prioritizing. Dogechain.
- [46:02]
Chris
Yeah, I think we will put more blockchain into the application but we must start somewhere. So today we have onboarded Ethereum, Binance, Smart chain, Solana and Dodgechain and Dogecoin as well, giving users seamless access to both high liquidity and low fee networks. On Ethereum we are also having the alternatives blockchains like Optimism, Avalanche and that Layer two networks used to get low fee experience. Today it's if you look at the gas prices it's also low. But there were moments that you paid around $100 to do a transaction on Ethereum. But okay, over the next months from now we will add more blockchains that can be new blockchains, upcoming ones, small ones. It's just we own our own infrastructure so so we can put more blockchains to the application and that bring of course fresh liquidity pools, unique DAPP integrations and local communities together with it. And in that way we hope to accelerate our ecosystem and get the broad wallet adaption to support all these multi chain architectures.
- [47:23]
Buzz
Well, I have a role within the Shiba Inu ecosystem. I often see a lot of folks from that community follow me into to spaces and I know that all those folks would be very excited about you guys integrating Shibarium which is the Shiba Inu L2 and would certainly support you guys quite a bit if that were to be integrated. So I appreciate the multi chain approach there. But you guys are also really doubling down on stablecoins for payments and you like. What I see here is that you already have 1,000 plus assets and a lot of different stablecoins. So is that a big part of your strategy to integrate most stablecoins to capture some of that payments market?
- [48:05]
Chris
Yeah, I think it's easier for the merchants to have stablecoins also integrated because it's a one on one conversation. $1 is $1. So with Bitcoin you never know. It can go up or it can go down, but when the merchant wants to convert it it can be 20% up or down. So that's a big risk for the merchant if he sells something. So it's better to have it directly in stablecoins. So that's why we are having kind of stable coins like usdt, usdc, Dai Busd, among others which are directly can be hold into the wallet. But what we do also that we do the conversation for them. So if they receive stable coins and they say in the application we want to have it directly in fiat converted we also doing that so they have less risk about fees, conversion rates, etc. And the stablecoins that we embed are also embedded into our ecosystem. So you can put it also on credit debit cards, I mean crypto debit cards and also for merchant payment gateway so they can directly also see okay, pay me a stable coins or whatever is accepted with the merchants. So I think it's good to have that integrated as well. Also it's easy to just enable instant cross border settlements and it remove also the friction of FX conversions. So it's just giving away for immersions to accept stable coins, cryptocurrencies or whatever he wants.
- [49:55]
Buzz
I love it. It's I, I also see that you guys are focusing on what's said on your materials. Comprehensive asset support that would cover RWAs like tokenized bonds and stocks.
- [50:08]
Chris
Yeah.
- [50:09]
Buzz
What, what, what is your strategy to. To tackle the RWA vertical?
- [50:14]
Chris
Yeah, it's just a part of the wallet which we have because we have crypto, you have memes, you have a lot of tokens which we accept. And real world as it is the next big thing, what will come besides NFTs. So that's what we are onboarding at the moment. And also the big parties are like blackrock are focusing now on the real world assets. So that's also a way to get it into your wallet. You must store them somewhere. So that's what payexcept is all about. So what we do is we bring the regulated yield generating assets into the defi ecosystem which we have can be through partnerships. But at the end we want to support the tokenized real world assets like treasury bills, like corporate bonds, real estate backed tokens people can put not work into pieces and put it on sale as a real world in payexcept. So that's what we all developed in the last years and maybe in the future there will be also more new asset classes to integrate. So we just want to get the newest innovations into the wallet. And I think also if you look in the in the near future why not tokenize companies or stocks like Apple, like Tesla, you name it and have it all in one wallet. So that's our vision which we have with payexcept.
- [51:50]
Buzz
Are there any specific AML or KYC controls in your infrastructure that allow you guys to scale to enter verticals like tokenized stocks or Anything like that?
- [52:03]
Chris
Yeah, we need to be apply on the regulations but also need to have the license because you cannot just do security tokens which are real world assets. You need license for that. So at payexcept at first level we are looking for our smart contracts which we are developing. Are they audited? And we do it with companies like Certex to make sure they are really secure and they are not getting hacked. The assets are away that we want to prevent. So we hire really top level audit companies to make it very secure. Also AML and KSC protections are there and for transactions we integrate artificial intelligence to look at. Are there strange things happening? Is there somebody which wants to hack the system, that kind of thing? So that's all in place to make sure we meet the global standards. On the license level. We are now busy for the United States because we also opened our US headquarters three months ago to have a money service business license in Europe. At the moment we are busy with Lithuana to have a VESP license to offer our services. So we are in the final stage to get that and I hope at the end of this year we have these license on the long term we want to have an E MONEY license so we can also give bank accounts to people from our app. And that's where the nice things are happening because Moonpay is an option now to onboard on chain of off chain. But if you can do it all in one application to say, okay, I have 1000 USDT in my wallet and with a click I have it on my bank account. So that's a huge advantage of the platform which we are building today and regulations and compliances are part of that to have it very good secured and integrated.
- [54:13]
Buzz
And you guys recently just announced your Series A which was led by Mach 5. I assume that was part of this expansion to be getting all these licenses and build out the technology. Did you want to talk a little bit about that Series A investment round?
- [54:30]
Chris
Yes, we did three years of development. We built our own infrastructure, built out the blockchain, built out the app. Everything we did by ourselves, it was a three years development. So from a technical side, we are up and running, we have everything in place. And now we are into the major ground growth phase to expand into the markets in Europe and into the United States. And that's why we opened last month our Series A which is led by Swiss company Merc5, to get this all up and running, to finance it and to expand the company into the markets. Because this is the next stage. It's nice that you have the technology, but it's also nice to have the community, the merchants and the users. And you need to do marketing for that. And you need us to have big deep pockets because components are banks which don't like what we are doing because we're taking their customers away. We do it without Visa and MasterCard because we have our own blockchain which can replace them. So it's not a small thing what we have. And for that we do our series at the moment to get enough finance to take on and to do the global expansion at the moment.
- [55:50]
Buzz
As part of that expansion, you guys also talked about upcoming features like invoice billing or subscription payments. Do you have anything else that you'd like to highlight on your roadmap that people could be excited for over the next coming year?
- [56:03]
Chris
Yeah, on the website we have already a big roadmap which we place okay, this is what we have done in the last three years and this is what we are going to do in the upcoming three years. So we at pay accept we are more than just a payment wallet. We want to do more. We want to have everything in the wallet and one application. That's why we built the Rails for it by combining crypto debit cards to have a multi chain wallet, tokenized real world assets. And also we want to integrate artificial intelligence because we think it will be a huge role to say to the artificial intelligence agents at payexcept hey I want to go on holiday. I think about this country, what do I need to open, how many money I need to save for that? So these are all unique features which we are building at the moment which are on the roadmap and a lot more because pay to tap payments at the moment. If you look at banks, that's mostly business to business. And what we are doing is we are making it available for everyone which have a mobile phone. So if your neighbor have a phone with pay, except that you have it, you just can make a payment, whatever it is in fiat or crypto. So that is what we really want to integrate to become that application which is doing it all. And for the long term we want to become a full web 3 neobank. So let's say a revolut but then in cryptocurrency to support everything what's possible on the digital asset side.
- [57:41]
Buzz
Wonderful. I appreciate you for joining today. For people who are tuning in, make sure that you click on the pay accept account up here. I've posted a tweet of theirs up into the nest in their bio. You can go directly to their website. Make sure that you're following those official links. But Chris, as we're wrapping up here, is there any specific call to action that you'd want listeners to do? Whether it's download the app, visit the website, join the community or anything like that?
- [58:12]
Chris
Yeah, I think the best is to go to the website which is payaccept.net There you have a button to the Google Play Store to download the app. All information is there for personal use, for business use to get more about what we are doing for the defi space. So everything is there. So yeah, I would suggest visit the website and learn more about us. And I'm happy to hear more from the, from the community about what they think about Pay Accept.
- [58:44]
Buzz
Wonderful. Well it's payaccept.net and again their account is right up there. Then NASA. If you want to click their link directly, just go to their profile there and make sure to give them a follow. But Chris, I really appreciate you joining today and introducing Pay Accept. Any final words?
- [59:03]
Chris
Yeah, thank you for the invite of course to be on your show and yeah, I'm looking forward for building out the application to be on more shows of IBC Group. So yeah said I'm happy to be here.
- [59:21]
Buzz
Well, kudos for everything that you guys have been able to build thus far. Congratulations on the Series A and I hope that we get an update about you guys getting successfully into the iOS app store because I know that's no small feat. So congratulations on that. But for everyone who's tuning in, thanks for tuning in and we'll be live Tomorrow again at 10:15am Eastern Time for Crypto Town Hall. So with that everyone have a great day and thanks Chris again for joining.
- [59:49]
Chris
Thank you.