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- [00:00]
A
Morning, everybody, and welcome to Crypto Town Hall. Every single weekday here at 10:15am Eastern Standard Time. Obviously, all eyes once again are on the most important FOMC meeting of all time. Until of course, the next FOMC meeting, which will be the most important FOMC meeting of all time. But we all know at this point that we're getting a 25 bit rate cut. I guess we can discuss here whether anybody believes it might be 50. Nobody believes it's zero. It's effectively fully priced in at this point. Our title crypto surges on eve of FOMC decision. Factual Bitcoin went up to about 94,000 yesterday before settling in at 92,000 today. But I don't think that the move had anything to do with the Fed. Happy to argue that or discuss that point. I think that bitcoin's just kind of floated here, small moves up and down, waiting for a bigger direction. And we do have, I think, much bigger catalysts actually right now than just what's happening with the Fed and what's likely priced in. But I think we need to at least start with the Fed and start with Jerome Powell. What we are predicting for today, since that does in some way, you know, affect prices of all markets and then we can move on from there. I see we've got. I see, I see Lawyered Austin, Carlo and David. If there's anybody else on stage, I do not see you.
- [01:26]
B
I'm here to.
- [01:28]
A
Is that Tomer, is that you? Yeah, that's me. Oh, see, I know the voice and don't see the face, but I identified you by your voice. Pretty, pretty impressive at this point. Shows that we're basically all family here at this point. All right, so I mean, guys, what do you think? Is the Fed meaningful? Is that what's impacting prices for bitcoin and crypto right now? Do we think, you know, we get 25 basis points, but he's kind of hawkish. Does any of this matter when we know HACCP is going to come in and unleash the fire hose anyways?
- [01:59]
C
No, I think it matters. I think Jerome Powell on the way out is going to be probably doing far more to encourage dissent to come from the different governors. And if you look at a parallel between the Fed and the bank of England.
- [02:15]
Bank of England has 5 to 4 votes all the time. And it's really hard to figure out their path of monetary policy just from reading their transcripts. We may be descending into an environment with the Fed where we have far less certainty Going forward, although we do believe whoever goes in as chairman is going to be trying to drive rates down.
- [02:39]
A
Austin, I know you've got thoughts.
- [02:42]
B
I was going to say, I'll pile it on this one.
- [02:45]
1. I think 25 bips is almost locked in. 0 is probably more likely than 50, but both of them are like infinitesimally small compared to 25 basis points. The Federal Reserve, as a general statement, does not like to massively surprise the markets on these things. And you do see telegraphing in advance of what's going on. And so I would be shocked if we get anything other than 25 bips. Also because of the current economy. Right. Like, if you look in to things from the perspective of somebody voting at the Fed, you can find data to support whatever narrative you already had in your mind. If you're worried about the economy, you're looking at jobs, you're looking at consumer confidence, and you're saying we need to cut. If you're worried about cutting, you're looking at things like liquidity conditions, like asset prices continuing to go up, inflation still being above target, even if it's not terrible, and saying, hey, hey, hey, slow down, why are we doing this? And there's been nothing in the data that will cause either side to diverge from their current views. And if you looked at the last meeting, it was pretty clear we're going to get a cut this time around. I think the thing everybody should be paying attention to is the future path, though, because I agree whoever Trump puts in is going to be a vote to cut. But the regional banks at the Fed are very independent and there's sort of like a thermostatic type behavior here. It's almost like putting. Putting somebody who's super dovish in probably pushes other people more hawkish at the regional bank level. They do not like being told what to do on a political standpoint. And so I would be watching the future dots. And if the market is going to continue to react further, I think that, to be honest, is more predictive than specifically what happens with the cut at this meeting.
- [04:36]
A
Yeah, I think that's a great perspective. I think that.
- [04:40]
Whoever Trump puts in is going to do whatever Trump says. So I think it's just a matter of time. But I do think that there might be pushback along the way. But I think we're very clear on the at least general path here. Right? I think we can pivot off the Fed. It's boring. Nobody cares. I hate Jerome Powell. I hate talking about the Fed. I think The Fed shouldn't exist, so let's move on. Carla, we've got you here.
- [05:06]
We've got a world of stablecoin adoption here. I'm not sure if we ever talked about that IMF report last week. That was definitely on my docket. But along the lines of stablecoins and tokenization in general, we have Larry Fink saying BlackRock's Larry CEO Larry Fink says that tokenization can have a greater impact than AI. I would argue that tokenization, the first iteration of that is stablecoins and you're our stablecoin guy. But we also had Paul Adkins yesterday saying that he thinks that everything could basically be on blockchain rails and tokenized in two years. I think that's absurd, but I'm here for it.
- [05:45]
Carla, what do you think?
- [05:47]
D
First off, good morning Scott.
- [05:48]
A
Good morning, Carla.
- [05:50]
D
So the Kylo Ren meme comes to mind where I just scream more and more. I think you're absolutely right. I think that stablecoins are the gateway because they're the most logical pivot for anyone who wants to bring in blockchain infrastructure, do it in a regulatory compliant way, but doesn't have an appetite for crypto. The IMF interestingly enough, wrote a report. I covered it. I discussed what I think is essentially, obviously we all know the IMF has a reputation for going into nations that are struggling with their own monetary infrastructure and bailing them out. And they tend to have very huge influence over those nations and how they run their economies and how they value their currency. And there's no doubt that stablecoins are a threat to the IMF loan process. Because if a nation has an ability to off ramp to their own native currency and on ramp to digital dollars seamlessly, then it kind of presents a nice alternative to having to take on more international debt. With respect to tokenization of everything, I can't disagree. I mean, I think the SEC is waiting for clarity. And although we don't know if that's going to come across the goal line before the new year or after the new year, I think we can all agree we're going to get market structure clarity. The SEC is indicating more and more each day that they want to distance themselves from non security aspects of tokenization, which means we're going to see a bigger footprint from the CFTC and we're going to see less of a regulatory overreach from the sec. And I think this makes everything bullish. So yeah, more, more of it all. Scott, let's bring on more stablecoin Solutions.
- [07:46]
A
I like that Atkins is on a tirade right now. Just an absolute tear. I mean, he made that comment on the news about tokenization being at full force in two years, which although isn't necessarily true, but awesome. He also, I mean, went on to say that ICOs should not be treated as securities and thus fall outside the SEC's jurisdiction. I mean, he's been hunting a lot of things that Gensler thought were his arena out of the SEC's jurisdiction consistently here. I mean, he basically said that everything in crypto is not a security unless it's a tokenized security, which is already a security. Right.
- [08:22]
D
And including my beloved NFTs.
- [08:25]
A
Yeah, that's right. And he went on another tirade about future proofing US Crypto rules in a major regulatory overhaul, basically saying not only do I want to make sure that we get this regulation right, but I want to make sure that the next people don't come in and fuck it up. So, I mean, he's. Guys, really, really got our back right now. Lawyer, go ahead.
- [08:45]
D
Well, that's why we got to. I mean, Scott, that's why we have to lock it up with, with actual legislation because anything that comes out of guidance from the SEC with the change in administration or change in leadership is obviously vulnerable to be replaced. But legislation, just like the Genius act, is really hard to unwind once it's been signed into law. So we're getting set up pretty well here for very, very clear regulatory lanes. And I think that's just going to translate the number go up. I know you hate to talk about the Fed, but I think the Fed is largely being marginalized at this point because we're seeing a transition in monetary policy to the treasury via stablecoins, which is going to marginalize the impact the Fed has. And look, I just saw yesterday that Trump is suggesting that the auto pen may be.
- [09:35]
At play here and that much of what's been appointed to the Fed may have been auto penned in. And he's looking and he's tasked Besset with revisiting that. So one way or the other, he's going to get his rate cuts and he's going to get his liquidity and we're going to run it as hot as possible going into midterms because his economic rating is in the 30s and. And he can't have that going into the midterms.
- [10:00]
A
Yeah, I mean, it's a bigger question because I'm not sure how many more levers and buttons. I mean, I'm always impressed with how many buttons and levers they can push and pull. But I mean, how many will be left? If we kind of go into a stagflationary environment here and inflation ends up running super hot into the midterms, it's going to be a really, really hard needle to thread, I think in the middle of 26, but I guess we'll see. Lawyer, do you had your hand up?
- [10:27]
E
Yeah, I think. Well, you know, when you thought. When you think about the question of AI versus stablecoins in terms of the most influence, I guess you look at the short term like AI is going to be massive. And it is massive. Stablecoin. I think one of the biggest things that stablecoins will do because of their adoption is just sort of destroy any de dollarization talk. I think it really just like the more that stablecoin, like if you imagine that we had moved into this sort of tokenization without stable coins, other countries would have this gap to fill. And you know that maybe it would have an effect. But the way that we are, the way that stablecoins will be adopted will have this effect that you may just see. The US Dollar is the reserve currency for the next million years. And that's why. And you may not be able to point to it, but, you know, it may be there. And what's really interesting to me is there's, you know, there's a poly market on. On whether AI will be times person of the Year. And yesterday it shot up from 40% to 70% as AI so I don't know if that means someone knows something. I don't know how big of a bet they would have done to move it. But I'm interested to see if that's who they pick.
- [11:37]
A
That's not a person.
- [11:41]
E
Who is that? Someone who worked. There's Time magazine.
- [11:44]
A
Just saying, it's so funny. The AI actually AI would be Person of the Year.
- [11:49]
E
Oh, no, They've done that before. It's not always they've done.
- [11:51]
A
They once made the Personal computer Man of the Year. So.
- [11:56]
Personal computer actually did pretty well. So I guess I can't argue against that.
- [12:00]
D
Meanwhile, Sarah in the Terminator world is obviously freaking out that we're about to make AI Person of the Year and the machines are coming for us. So this is a great plot setup for the next dystopian movie.
- [12:16]
E
I mean, AI is not a person yet, right?
- [12:18]
A
Yeah.
- [12:19]
B
Well, as a longtime user of AI and a former resident of the beautiful city of Philadelphia, I am going to be super thrilled when the transcript of this Spaces can't understand why we're so upset about Allen Iverson being the President Person of the Year.
- [12:37]
A
Practice, Austin practice.
- [12:41]
D
But hold on, I, I want to.
- [12:42]
B
Pile in with one more point on the tokenization thing before we go too far off the beaten path here. I think if you're reading what Atkins is saying, and this is very important for all the market participants looking at this stuff, I don't think what he's saying is that in two years, literally everything will be like, tokenized on chain and trading that way. I think what Atkins is trying to telegraph to people is that over the next two years, we want to have rules and frameworks done so that everything can be tokenized. Right. That, like, the possibility exists and maybe small amounts of it are happening and people can do it. And I think that's an important, like, flag to understand because in addition to some of the stuff, like ICOs to some extent are on the easy side of things. But, like, how do you think about reg, nms? How do you think about nbbos? How do you think about, like, centralized cloud clearing agencies in a tokenized world? Those are big questions. And Atkins saying, I think these things will be happening in two years is actually planting a really big flag for the sec.
- [13:44]
A
Oh, I, I think it's a huge statement, and I think he knows exactly what he's doing. I think we just kind of unpacked it yesterday that it's absurd to think that all that could actually happen in two years. Right.
- [13:55]
B
The rules may be there whether people will be using them or not. I have a different question.
- [14:00]
A
There you go. I, I agree with that. Go ahead, Dave.
- [14:05]
F
Yeah, sorry, I. I was having technical difficulties this morning. Not really sure why everything broke, but it did. Can you hear me now? Just to be sure?
- [14:12]
A
You sound spectacular.
- [14:14]
C
Loud and clear.
- [14:14]
F
Okay, great. Okay, cool. So, you know, two things. First, you know, I said it yesterday, but I'll repeat it bears repeating that it could, you could actually get to Atkins goal where it's a change under the covers that doesn't really mean very much in the beginning. Now, I don't think that's where he wants it to go. But you could have tokenization inside DTCC with none of the other rules changing. So that is something that is possible. But I think the bigger question is going to be will they come out with rule proposals and be able to get through the process of changing the things that really block crypto from moving? I think he's hedging his bets because yesterday when he talked about how most crypto are not securities. That's his way of basically saying, listen, if I can't change the securities rules, such as the accredited investor rule, the need for transfer agents, you know, and I have to use exemptive relief, I'm not going to be able to get the kind of capital formation that he thinks should be or the kind of free and open trading that he thinks should be getting done, you know, in a tokenized world. Because make no mistake, the true benefit of a tokenized world is that you can trade from one asset to another 247 through a variety of different platforms that will compete for, you know, for investor interests with basic disclosures and basic protections. And when I say basic, I mean things like best X. So you know, exactly what does it cost you? And things like, you know, anti manipulation that if you're running a platform you are, you know, you, you can surveil for that. And if you're a defi platform that on chain you can find, you know, what you need to find to see if there's manipulation going on. Those are the things that people that he cares about. But it's going to take a long while to get there and it takes multiple steps. And I'm curious, you know, between Austin and Carlo, what do you think about that? Because obviously these things don't happen overnight. Stablecoins is key and the ability to make on chain transfers within the financial system is key. And all of this together is as you said. I can't remember whether you said it or somebody else did. It's not really your words that I'm used to hearing from you, Scott, but someone made the point that if you basically looked at all this news two years ago and said this was going to be true, you'd think that you were dreaming and just assume that the price would be 3, 4, 5x where it is today in terms of bitcoin. I don't know what to make of it other than the fact that, you know, we're seeing, you know, we're seeing the, the transformation of the market and these trends are really important. And we're going to look back five years from now and say, oh my God, you know, why didn't we know X was going to happen?
- [16:55]
A
Yeah, I mean, I tweeted yesterday, like jokingly, you know, at the meme of the big Chad guy doing a one arm handstand and it says 1%, like up 1%, you know, on his laptop that we were up 1% on the year in bitcoin. I mean, it's absurd when you look at what's happened in the last year. The fact that bitcoin's trading at the same price as it was a year ago is pretty crazy. But if you go back three years and you're in the Biden administration, you say Bitcoin's at 92,000, you're pretty excited. So I guess that timeframe.
- [17:25]
D
I'd liken it, Scott and Dave, to what we're seeing now with RIAs finally getting to the point where they're comfortable recommending exposure to cryptocurrency assets in investment portfolios. Bank of America, Charles Schwab, all these institutions are coming out vanguard. We went from the approval of ETFs to it took some lag time for this adoption on the RIA level. I think this two year Runway with respect to tokenization of all assets is going to be the same thing. It's going to take time for the plumbing to be implemented because we have to totally revamp how trades are settled and run markets now 24 7. And then we have to get everybody who's already ingrained in institutional trading to now pivot to tokenized trading 247 on blockchains. And I think there's going to be a lag time there after the plumbing is implemented where these institutions are going to be comfortable. Full porting.
- [18:25]
A
Yeah, I had a conversation Monday, which will be out on Sunday. We usually don't do them six days in advance, but with Johann Kabrat from Robinhood is the head of crypto at Robinhood. And to say that they as an institution are all in tokenization would be the understatement of the century. I can just tell you that they squarely believe that that's where the puck is moving. Exactly what you described, Carlo. And they're not waiting for it to happen either. They're going to find ways to do it whether the Rails are fully in existence or not. And I think that we're seeing going to see that across the board. I mean, you know, it starts with news like we had today. You know, PNC bank is offering these, the full crypto services with a partnership with Coinbase. It starts with those things and it ends in all these things being tokenized and moving on those rails. Right. So Austin, go ahead.
- [19:20]
B
So I think part of the important thing to think about as we're tokenizing things though is there are. Now what's the right way to say this? There are some very basic primitives needed to make things work that don't really exist in a form on chain and in some ways are antithetical to the ethos of crypto. So one good example is net settlement, right? Like crypto likes to think that real time gross settlement, AKA like everything is pre funded, the dollars move around is a feature, not a bug. And in some cases that is 100% true, this is a significant upgrade. But in other cases that thing is actually extremely bad. And I think it's important here to zoom out from the retail perspective and start thinking of like institutional perspectives if we're moving everything on chain because rtgs settling equity trades makes at least some degree of sense to me from a retail perspective. But like real time gross settlement for institutional repo defeats the purpose of the entire bank funding market existing. And what I mean by that is I think over the next two years, as this process happens, and people like Robin Hood are not well situated to see this because they play mainly in the retail space, we're going to see a more radical transformation of the kinds of things that are valuable in crypto than many people fully understand. There are a lot of forms of functionality that unlock a huge, huge amount of value that simply do not exist and have not been addressed in this space yet.
- [20:52]
F
I, I, I have to push back Austin, because you and I usually agree, but I think you're missing it. Look, even in crypto trading, less than 20% is in fact way less than 20% is atomic settlement.
- [21:05]
B
Yep.
- [21:06]
F
Today, right now, all of the major players, all the institutions, if you're trading on exchanges, if you're trading with any of the big OTC players, if you're trading in the institutional markets, they all, and they vary, right? You have eight hour settlement windows, you have 24 hour settlement windows. You can do it differently. The key to crypto and the key to on chain isn't that it forces anything, it gives you the optionality to have on demand settlement which allows you to create flexible settlement processes based upon what the participants want. So for example, there is no reason in the world why Coinbase or Robinhood, you know, via bitstamp or Kraken or Gemini would ever force a settlement process when they can keep it internal in their own system and only allow for on demand settlement when people actually ask for it. What will happen and is virtual certainty when you talk about equities is you will have, you will absolutely have time period based settlement so that market makers can trade in, out, in, out, in out. What you will not have in a world is you will not have the absolutely idiotic, in fact, you know, just horribly bad process of locate A borrow and then actually do the borrow on settlement. What you the fact that you have to prove that you have the coins or the equities or the tokens, whatever to sell, you know, if you're selling short first is completely economically viable in a tokenized environment. And it is not economically viable in the current batch settlement environment for a whole host of reasons. The accounting becomes much, much easier. And so it's a massive change, but it's one that will actually improve the current system. So if you just ask people, are you happy with the way locate and then borrow works even on a even if they went to T0 in the current batch scenario, people would be no, because you could have something called fails to deliver. Fails to deliver. And I started my career automating trade entry systems and what's called the PNS system purchase and sales inside Wall Street Fails used to employ thousands of people across Wall street to try to clean it up. It's still hundreds and it's a very big problem. And so, you know, on chain fixes, all of that and will dramatically cut the cost of the back office. But you're going to take away the monopoly power of the current prime brokers and you're going to take away the advantages of some of the hedge funds who can get away with quote locates and then not necessarily be able to find the stock to borrow at at the time. All of that will go away. But what you're not going to lose because it doesn't make sense to, as you so adroitly pointed out, is you're going to have sessional settlement. You're going to be able to trade from the morning to the afternoon once. As long as you could start off by selling and then buy it back and sell and buy it back and sell and buy it back and sell and buy it back. Market makers will be able to trade in and out for a period of time. And then there will be a time when the markets will probably say, okay, now is the time that we're going to net for settlement and then we'll start the next day or the next session. That's how it's going to evolve. And there is literally nothing in the technology that stops that. Does that make sense?
- [24:30]
B
No, and it does. But I want to go back to the point I was making, which is I actually largely agree with what you've said about equity markets. And the particularities there, I think are pretty addressable. Like borrow locate is a hideous process. Just period, full stop right now. And that would be a giant improvement to current market structure. I am saying where I think people are going to need to have a much sharper view of the market and where we have a lot of work left to do is look, leave like equity markets and go look at like global FX settlement where if we're trying to do rtgs or even certain forms of time based netting, you're going to have huge operational drag on people that makes it capital inefficient. Or go look at like certain forms of fixed income trading with the banks where the problem that you have with long dated settlement windows is the counterparty credit risk charge just means you don't do the trade. Or like for instance, here's, here's a good example of a netting problem that is not well captured by crypto. I agree with what you said about equities netting. Somebody explained to me how you want to net interest rate derivatives right on a blockchain right now because that functionally has the problem of future dated exposure not represented in spot prices existing. And so I think the core problem I'm trying to point out for the crypto space is we spend a lot of time thinking about opportunities of launching tokens or doing linear things for call it equity style settlement. I guess I'm just saying I don't think that's where the money is in many ways going forward because the gnarlier stuff is going to get more and more interesting as we have these rules.
- [26:02]
F
Yeah, now that is a great point and I think people should understand that when you start talking about where is the total addressable market for crypto. It is unbelievably large if one could fix.
- [26:18]
What Austin was talking about. But we are not there yet. And in fact the market has to change too. You need much more standardization of isda. So is, does, you know the International Swap Derivative Agreement? I think that's what it is. Or International Standard Derivative Agreement. And anyway they are the bilateral agreements that make up what is, I think a quadrillion dollar market in terms of global derivatives on all things. And just to give you an idea of how effed up the process is right now, the Lehman bankruptcy is still not finished, it's still not resolved 17 years later. And, and that's because they had so many derivative contracts between them that they haven't been able to unwind everything. So that should give you an idea. And so the notion that you can bring all of that on chain without making, you know, without standardizing or fixing the process, etc. You know, is. Well, I mean it's premature the technology underlying on chain technology is clearly better than paper and clearly better than each bank having their own spreadsheets and everyone keeping everything under control that way. But there's a lot of work that needs to be done. The same is true with the massive multi trillion dollar interest rate swap markets. The same is true with, as he said, the FX markets. Although it's funny, it would be interesting to talk to the folks at Ripple prime, formerly, primarily formerly Hidden Road, because that's quite literally what their focus was, was trying and focusing. And I know of a few others who are doing the same, trying to leverage on chain tech to promote more efficient FX Prime Brokerage.
- [27:56]
A
So this space was downloaded via spacesdown.com visit to download your spaces today.
- [28:01]
F
Which prime brokerage will allow, you know, funds to actually disintermediate themselves from a lot of the hairy, gnarly stuff that Austin was talking about. So look, there's a lot of there and there will be opportunity, but it's not at all clear where or how that's going to benefit, you know, investors in the crypto market. There probably are startups and other companies working on things that matter. Would you say that's a fair assessment, Austin?
- [28:26]
B
I would. And it also leads to the point of the crypto companies that instead of trying to replace the incumbents, sort of like build off of the incumbents, might be some of the winners. Like you mentioned, Hidden Road. But I'll just leave this here as a nugget that people don't normally talk about. If you really want to see people doing on chain to off chain fx, somebody should go have a look at Zodia Markets.
- [28:49]
F
Yeah, yeah. Oh, I know those people know those guys too. Right. And, yeah, and, and people should understand Zodia is mostly owned by Standard Chartered. One of the bigger. It's Standard Chartered, right? I think it's them.
- [29:00]
B
Yeah, it's Stan Chart, right?
- [29:01]
F
One of the bigger FX players out there.
- [29:03]
A
Oh, Stanchar. I didn't know we were on a nickname basis. Yeah.
- [29:09]
B
All of them, all of them have their street nicknames. Like nobody says the whole bank.
- [29:14]
A
There's a couple things, a couple nuggets I've caught here. Stan Char was one and then in passing, I was zoned out and Dave said something about PNs and I thought he said penis.
- [29:23]
B
No, he said besides that.
- [29:25]
A
Yeah.
- [29:27]
F
Get your mind out of the gutter, dude.
- [29:30]
A
It's just what I heard, man. I don't know, the penis department. So anyways, yeah, go ahead.
- [29:35]
F
Yeah, no, but, but I think that the important point here really is, and you talked about it this morning, Scott, the real news, the bigger piece of news, the one that I think is it's close to inconceivable. The OCC is allowing banks to offer Bitcoin trading before the SEC and FINRA are allowing brokers and so expect to see movement there. But that is not a small thing. I'm curious. Yeah, Lawyer Carlos and then the PN.
- [30:05]
A
And then the PNC news. Right? It's just a lot.
- [30:08]
F
Yeah.
- [30:09]
D
I was at PNC yesterday to open an account and I told them the reason I chose that bank is because they are going where the puck is going. Integration of cryptocurrency purchase within bank infrastructure is huge. I mean there's no way to downplay that.
- [30:27]
A
Did you tell them to rebrand as PNS Anyways, but Carlo. So maybe somebody can explain or unpack Dave, one of you, why that actually matters. Like what's the nuance there? Because a the OCC news, I can say people saw it and I think a lot of people's default was, I thought this was already the case. And then the PNC news, I think a lot of people looked at it and thought we already have banks doing this. And then at the end of the story it says, you know, this is the first bank to be able to do this. So there's obviously some nuance in both these stories.
- [30:56]
F
So first of all, even when Robinhood would build their, their, their crypto, they had to put it off into a separate affiliate. What the OCC guidance is, it allows what's called riskless principle trading. Now riskless principle trading is essentially agency trading, but what it means is you can buy Bitcoin in your own account and at the same price.
- [31:22]
Trade it to a customer with a commission or not. So you can make two transactions, go out in the market, buy, sell to customers. What does this mean? I'm going to make an unabashed plug here because it's just so freaking obvious. So if you're a bank and you want to have get a absolute professional ability to offer low cost, documentably low cost with transaction cost analysis trading, it used to be that you would have to find somebody who would give you an account that you can then aggregate for and use their technology. Now every bank in the United States can become a customer of Coin Routes or a customer of Talos and say, okay, give me your system, I will open up. So PNC can open up an account on Coinbase, an account on Kraken, an account on Robinhood and trade Bitcoin there using state of the art algorithms or state of, you know, for customers that are sophisticated or just pure smart order routing for customers that aren't and be able to then transfer that back to a customer legally. And it was totally illegal up until two days ago. Totally illegal. They couldn't do it. Now they can set up their own accounts with these entities, trade and flip it to a customer and charge them a fee.
- [32:47]
A
That, okay, that's crazy.
- [32:48]
F
So it's a massive thing. I mean, I will be amazed if the banking industry, if the large banks aren't picking up the phone and figuring out that, oh my God, we can buy the technology and get into the business as fast as PNC within weeks. I mean literally weeks. Does the technology exist to do this? The only thing they would need to do this is that. And obviously you need a clearance or settlement provider. You could do it yourself with something like Fireblocks. There's lots of ways that you could do it, but all of it is available off the shelf. That is a massive difference. I'll tell you. I was surprised by the news because it effectively means that every single bank can offer it. And frankly, I can't believe that FINRA isn't going to allow brokers because brokers have been blocked for years. I mean, you know, we're going back to, you know, Trump won. Brokers have been blocked. FINRA has a designation of non securities trading that brokers used to trade FX for customers or trade gold or silver for customers. They've never been allowed to use that for Bitcoin. Once that goes away, and they can the exact same thing, riskless principle trading could become possible. And none of that was even contemplated a year and a half ago, not even thought about. They just said, okay, we're never going to be allowed to do this. And I know because I've talked to a lot of these, a lot of people running broker dealers and banks, they didn't think this was possible. So underestimating the importance of this news.
- [34:20]
I'm telling you, it's seismic and yet the market doesn't seem to care, which is always funny. You know, it's like, you know, but the four year cycle matters more. I, I don't, don't even know how to phrase it.
- [34:30]
A
Yeah, I mean, Cathie Wood was on tv, like answering for the four year cycle.
- [34:34]
C
So Dave, sure. But Dave, what would you do with Coinbase on this?
- [34:38]
F
What do you mean?
- [34:40]
C
If you've got all these banks coming in, arguably it says spreads are going to narrow. You've got a lot more competition for the flow.
- [34:46]
F
Well what'll happen is, is the banks, the easy thing for the banks to do is open up accounts on all four of the large US regulated spot exchanges and then let the best exchange win at each individual point. Let's see where the market share really goes.
- [35:00]
A
And obviously so it's good for Coinbase.
- [35:03]
F
It'S, it's okay for Coinbase but what will happen and because Coinbase doesn't care, Coinbase will, will is very competitive on, on profit margins, on rates, on commissions, on, on exchange fees for large players. Where Coinbase is stupidly expensive is for retail. And so it's not good for Coinbase when all the banks can compete with them. But the truth is is the banks are going to only offer Bitcoin. They're going to be very, very, you know, very, very focused. They're gonna offer Bitcoin and Ethereum probably and not much more. And Coinbase has, is going to all be offering a suite of products to try to, to, to out compete the bank. So it's going to be a very interesting dynamic. I think Net Net is good for Coinbase but it's, it, there's positives and negatives.
- [35:46]
Is that that fair David? Does that make sense?
- [35:47]
C
No, no. Appreciate that.
- [35:49]
F
I mean it's nuance, right? You can't, you who it's absolutely good for. It's absolutely good for the infrastructure players in the crypto market and it's good for the crypto market because unlike ETFs, when someone buys riskless principle through the bank, now the bank's going to probably offer a custody product too, but they don't have to. They could offer the ability for customers to self custody and just use the bank to be able to offload an offering. They, they probably won't at first, but they could.
- [36:18]
C
It'd be better for the crypto market if the banks could have inventory.
- [36:23]
F
Well, inventory you have to understand step one is, is this the reason they're not going to have inventory? David has nothing to do with the occ. It has everything to do with Basel. That's the next big domino to fall. And the reason for that is this it right now if the banks have inventory, they have to reserve. Even if they are, let's say for the sake of argument, just pick a simple example. The bank is long, you know, ten thousand, ten thousand, a thousand Bitcoins. I have a huge monster position. But they hedge it in swap markets or futures markets so that they're not really taking the bitcoin exposure, but they want the inventory to be able to price products or, you know, lend or whatever. Right now they have to reserve 100% of the capital on both sides, the long and the short, against their. Against their reserves. That's untenable. It needs to be haircut based upon volatility and volume. And that is not legal right now. When that happens, when the bank rules and capital rules change, then you get what you want literally within it with almost instantaneously. But that's the issue.
- [37:26]
A
Anyway, how about the PNC news?
- [37:29]
F
I mean, PNC is basically first. They're. They're getting pole positions. So that's good. I think it's. It's a good thing, right? I don't know. You know, you got, they got Carlos account, so, you know, good for them.
- [37:40]
C
And Carla likes them because they give a puck.
- [37:44]
D
Bingo. Brilliant.
- [37:48]
B
Yeah.
- [37:49]
A
Actually, Mauricio, you're here and I know we were going to chat anyways in the context of all the things Dave just described. So what's happening with the banks, obviously opening the doors to all of these services, which of course will eventually be, I think, universal usage of Bitcoin and eth and crypto as collateral. Like you guys at Leden being crypto native and being kind of first and being here in general, like, how do you handicap that? How do you prepare for that? Like, where does the edge for the crypto native companies like you? Because we can sit here and talk about banks all day and I think it's generally good for the market, but like also short the banks long Bitcoin. Right.
- [38:32]
G
Thanks, Scott. Thanks, Dave. Yeah, I mean, the first thing I'll say is when we were thinking about this product in the early days, we believed, because we believed that this product would work and that people would not want to sell their Bitcoin and keep it as a collateral asset as they do with every other hard asset like homes, gold, stock, et cetera. So if you play that out, even in the early days in the future state, we always believed that the banks, once they understood this product, would want to participate. And it's been a funny journey. You know, in the early days, they would shut down our bank account. And we have, you know, frame letters from pretty much every major bank in Canada shutting down our bank accounts. And today, you know, as of, as of, I would say two years or so, they are, you know, one. No, banks are our partners. We borrow from banks and we work with them, you know, fairly closely. They've started dipping their toes and now they, you know, they're starting to signal that they are want to come in more with more of a direct strategy. So to, you know, B2B or to companies or clients where I think the. So first of all, this is par for the course for us. Like we've always believed the banks would would come in.
- [39:51]
Where I believe the edge lies for the crypto natives is in a few places. So number one, banks are used to operating in a zero reserves world or full rehypothecation world. Countries even like Canada have no reserve requirements for banks. So they're used to rehypothecating pretty much everything under the sun, everything they own, everything they have. So they only know how to operate in a sort of rehypothecated world. And that is to me, a big disconnect with what bitcoiners want.
- [40:27]
A
Right?
- [40:28]
G
Bitcoiners want transparency. They want to know their assets are in custody. They want to know that you have proof of reserves in a sort of rehypothecated world. That cannot happen. And if you're doing so, you're taking a massive amount of risk. Now, banks can try to tell you it's different, we're bigger, we've been doing this for longer, et cetera, et cetera. But the reality is that they're rehypothecating or they would be in essence rehypothecating an asset that cannot be printed right. And this is very different than the model that they're currently used to working under. And then the second one is banks are built to service one jurisdiction during market working hours. Banks are not built to operate 24,7. They're not built to operate in clients in different jurisdictions. If you have an account with say, HSBC in Hong Kong and you try to set up an account with HSBC in Canada, they'll tell you there's no overlap. They're not the same accounts, they're not the same banks. There's no history that can transfer from one bank to the other. And so conversely, at Leeden, we have clients that take out loans in countries like Canada and decide to move to places like El Salvador. And we're built to operate 24,7. We're built to operate for a global client base over the weekends.
- [41:45]
There is no working hours for Bitcoin, if that makes sense. And then the last thing I'll say is that bitcoiners and crypto natives in general, typically if given the option of two sort of equally qualified or similar credit quality options, one being a crypto native, another one being a bank, my view is that the natives will prefer working with the people that have the proof of work, that understand their preferences and that can build products for them. The reason we exist and the reason stablecoins exist is because banks haven't done a great job to date. They've let people down.
- [42:25]
A
Yeah, I don't think you're average bitcoiner who's already your customer is leaving for State street or Goldman or bank of New York Melon. Right. And so you're basically just expanding a massive pool of potential customers of which I would imagine the natives will get a bigger slice, slice of the pie without losing the existing one. I mean that kind of a fair way to.
- [42:49]
G
Yeah. And listen, like will they take some of their legacy clients that want to get into the space and want to have some exposure and don't really care too much about the values and the principles behind bitcoin? They just want to basically be along for the ride. Of course they're great. And they're also going to legitimize the activity.
- [43:08]
It gives people comfort when one of the challenging things about 2023 and 2024, after every single lender went down other than Lenin, was this idea that we had to explain to people that it wasn't that bitcoin backed lending was broken or wrong. It was just the people that were doing them were bad actors.
- [43:29]
Or with very shady operations and very poor risk management. It's really beneficial to have the top companies in the world or the top financial entities in the world trying to follow on a product that you've innovated on, if that makes sense. It's a very powerful idea. The fact that you know, JP Morgan is talking about launching something years down the line that we've been doing for seven years, so. So I think it's, it's super. And plus we have a seven year tape of managing through volatility. And again, I don't think banks that have desks that lend against equities and lend against commodities and such, but I don't think they've ever had to deal with a beast quite like bitcoin. And that'll take some time and some adjustment.
- [44:16]
A
You mentioned the 2022, 2023 crypto credit collapse, which I know is everybody's favorite topic. But looking back, what differentiated Leden or you guys in that scenario where you continued to hum along without any issues?
- [44:37]
G
Yeah, I think there's so many things but I think what I would bucket or combat compartmentalize the differences are number one is focus and simplicity. Lennon was always a bitcoin only company.
- [44:53]
We lend against one asset, we keep the collateral in custody. We don't accept things like Ripple or smoking chicken fish as collateral for good reason. And that kept our business very simple. It also allows us to roll out things like having a simple business makes it simpler to execute on things like proof of reserves. So we were the first lender to ever do proof of reserves. We were have. We have the longest running proof of reserves program.
- [45:21]
A
I also saw that now you also disclose full loan book size and collateral ratios in your last one. Because I happen to check at these things. So, like, transparency is obviously important.
- [45:31]
G
We do 100% and in a few days you're going to see that our proof of reserve is going to become even more, more transparent and we're going to set the bar even higher than where it is today. So, number one, simplicity. Number two, discipline and carrying out proof of reserves. Not a single firm that went down during the collapse had proof of reserves, which I think is a very interesting data point. Lennon's never had a token. We don't plan to have our token. It allows you to play with basically financial engineering and taint your incentives. It allows you to raise dilution free and board of directors free money. And that just doesn't lead to a good culture.
- [46:14]
And so I think focus, discipline, simplicity and very strict risk management and underwriting. Like, you know, we never lent to groups like Three Arrows that even though they came by our desk three times because they do not do something as basic as share financials. Whereas you had first firms like Voyager with, I think, 63 billion lent out to three arrows without any collateral, without any diligence by the time they went under. And, and just to mention that was.
- [46:43]
A
That was. That was actually my money. Oh, yeah, it's cool.
- [46:47]
G
Sorry, man.
- [46:49]
F
Scott.
- [46:51]
A
It was literally my money, like, quite.
- [46:53]
G
And then one of the other points I was going to make, you know, behind just going back to the banks for a second. You know, everybody talks about the banks as these giant, you know, forces, but what I think is very interesting is if you run the math on. If you look at Tether's recent rumored round, I have no confirmation, but I've seen the news and I'm sure others have too, the headlines that they're rumored to be raising at a $500 billion valuation. If you take that valuation and you look at the banks, there's only one bank in the world bigger than that and it's JP Morgan.
- [47:34]
Today, Leden is backed by a company that I would argue Tether is a leader in the space, they know this better than any bank. And not only that, they're bigger than almost every single bank out there. And so we have aligned ourselves with what I believe are very, very strong and key partners. And to ensure that we're going to maintain our lead in this bitcoin back future.
- [48:02]
A
I mean, Tether just increased their investment, correct?
- [48:07]
Or like. Yeah, sorry.
- [48:09]
G
We announced the strategic investment that was announced, I believe a few weeks back.
- [48:13]
A
Right, but you've already had a relationship with Tether to some degree, correct?
- [48:16]
G
We did, yeah. So we did borrow from them institutionally, but this was basically taking the next step and then having having them come in as strategic investors.
- [48:27]
A
So we keep talking about how your average, I guess.
- [48:33]
Investor is going to use their Bitcoin or other assets as collateral now that the banking system is coming in. Like, can you give us some, since we've got you, give us some color on how your users do it. I mean, I'm assuming from you know, being a customer and doing all these things and using it that your users like basically save in bitcoin, but they're borrowing USD and doing that through stablecoins to live their life. Right. I don't want to sell my bitcoin. I'm going to lend it to live my life. Kind of like a lifestyle loan to myself. Bitcoin tends to appreciate. I mean, is that how people are using it and how you think it will be used in the future?
- [49:15]
G
Yeah. So the, the way people are using the products, I mean they use our products for a very wide range of things. Like I've, I've seen people use our products to purchase properties and I've seen families use our products to do fertility treatments and grow their families. Like that's how broad the use cases are. And, and it's, it's one of the most, one of the funnest things about doing this is like I don't consider that Lennon doesn't sell loans, quote, unquote. Lennon sells the things you can do without selling your bitcoin.
- [49:46]
B
Right.
- [49:47]
G
So nobody gets excited about a loan. They get excited about buying a home. You're not excited about a loan. You're excited about starting your business without selling your bitcoin.
- [49:55]
B
Right.
- [49:55]
G
And so the way most people use our products today is.
- [50:01]
So bitcoiners don't typically fit in the nice neat little boxes that banks like to underwrite you on when you want to take a loan. Most people think that loans, even a mortgage, is a loan based on the value of the property. It's Not a mortgage is a loan based on your debt servicing capacity, it's based on your income, it's based on your credit score. And they also take your house as collateral. So many bitcoiners that work with us are people that have hundreds of thousands or millions of dollars worth of Bitcoin. They are self employed or they run their own business and they want to move to a bigger house and they go to the bank and try to apply for a mortgage and the bank says no. And the person will say why I have millions of dollars worth of Bitcoin. And they'll say, you have no income. And we don't consider that bitcoin to be an asset. So therefore you have no access to credit.
- [50:55]
At Lenin, your bitcoin is your credit worthiness. We lend you solely on the value of your bitcoin and ensuring you could pass kyc. But other than that, all we look at is your bitcoin. And so people come to let in, take the loan they need, buy property. That's a big use case. Expanding families, buying homes. Another big one is funding businesses. So whether these are bitcoin businesses that are funding expansion projects, et cetera, or traditional, increasingly more traditional business like construction companies that have Bitcoin on their balance sheet and they don't want to sell their bitcoin but they have to pay their contractors. So they'll come to us and put their bitcoin as collateral, borrow the dollars they need to make the payments and then once the project sells, they can come back and repay the loan. Now that's in the US and North America. What's happening more in emerging markets is more and more of our loans, the disbursement of the loans are going out in stable coins. And the reason for that is that number one emerging, you know, people in emerging countries. Speaking as a Venezuelan, you know, Venezuelan banks have always failed us, right? Every single time. There is zero trust in the Venezuelan banking system. And so when you ask for a loan, you don't want to get that dispersed into a local bank, you want to get it in stablecoin. And in Venezuela, for example, my aunt who's like not a crypto native, she's like a 67 year old lady that lives in a condo. She called my mom the other day because she was confused about where she needed to get her tether to pay for her HOA bill. So barber shops take tether now in Venezuela, some boutique, not every grocery store, but a lot of grocery stores take tether. And so more and more of people's lives outside of the US dollar economy are happening in stablecoins. And more and more of our loans are being dispersed in stablecoins. So it just makes a lot of sense for us to be getting closer in our partnership with a group like Tether who produces assets that all of our clients very much use and love.
- [53:16]
A
Okay, so did you see the news, by the way, as a total aside, the news from Argentina today that they're going to allow banks domestically to transact in crypto and stable coins? I mean, from bank to bank, like absolutely something we've never seen anywhere on the planet. So I think that just illustrates your point. I mean, you know, if a bank can send money to another bank or customers between banks without Swift and ACH and these systems literally directly through StableCo.
- [53:46]
G
Yeah. And this is happening. So one very interesting.
- [53:50]
Thing that happened not too long ago, I don't know if you guys were following the elections that happened in Bolivia, but Bolivia had an election about three, four months ago. And in the run up to the election, there was this massive wave of inflation. And the reason that a lot of these waves of inflation get so acute is because when government instills capital controls immediately, it creates a parallel market for cash transactions. Right. The challenge is that cash is very limited in these economies. So when you have a plethora of pesos chasing a very small amount of cash dollars, the rate for those cash dollars in the parallel market shoots up. Okay. And it creates this anxiety in the market. What the Bolivia government did was very interesting because basically what they did in the run up to the election to ease inflation is they allowed people to start trading in stablecoins. And what that did, funny enough, is that it brought inflation down. Because what accepting stablecoins and embracing stablecoins in these markets does is that it allows for supply of dollars to come in without you having to fly in planes of cash. Does that make sense? How do you increase the dollar supply in an international market without access to cash?
- [55:08]
C
Right.
- [55:09]
G
And with no trust in the banking system, you have to do it through stablecoins. And ironically, a lot of these governments are finding that by making dollars more available by way of stablecoins, they're actually helping tame the rate of inflation, if that makes sense.
- [55:27]
A
Yeah, it makes perfect sense. I'm realizing we're getting close to time here. But you guys, obviously we talked about before, you've had like a crazy year, right? I mean, bitcoin, we joked earlier, is like only up 1% on 2025. But your business has absolutely exploded. So I mean, what do you think accounts for that? And I guess, what are you looking forward to in 2026?
- [55:48]
G
Yeah, thanks, Scott. Yeah. This year has been a blockbuster year for us. We've done over a billion dollars and loans originated year to date. Q3 with the 392 million in loans originated, which was almost all of our originations for 2024. So the speed of growth in our business has been really, really taken off. It's, it's gone exponential this year. And I think it's really what accounts for that is people realize you shouldn't sell your Bitcoin. And when you're looking for places to take a loan with your bitcoin, you're looking for places that have been tested and proven and have been around for, you know, seven plus years. You want a place that has proof of reserves. You want a place that's, that's safe and has a history of being safe. And you know, Leden is a regulated, you know, transparent, audited firm with a perfect track record. So yes, there's a, you know, new lenders coming into the space, but they're all untested. They're all coming in because of an opportunity they see in the market. They're pivoting into this like Lennon has never pivoted. All we've, it's in our name. Our name hasn't changed. All we do is lend dollars backed by Bitcoin. And I think it's that focus, that consistency, that discipline. The discipline is, is why we're, you know, reaping the rewards of, of staying focused and delivering and standing by our clients for the last seven years. So I'm, I'm really excited about the future. I think rates for these products are going to continue to drop. I think as these rates drop, more and more people will use these loans for more and more things. And I do believe in the world where the bitcoin backed loans will be the cheapest, fastest and most efficient way for anyone globally to access credit. And that's why we're here.
- [57:40]
A
Amazing. So where can people participate?
- [57:43]
B
Check it out.
- [57:44]
G
Yeah, Night in IO is our website. You can.
- [57:49]
Otterwithlet is our, Our X or Twitter. You have mine here. You can. My DMs are open so if anybody has any questions, feel free to reach out. Yeah, let' in support IO if you want to send in any questions. But both the account, the Latin account, my account are open for DMs. We always obviously welcome anybody with questions and yeah, would love to, would love to help out anybody that's interested.
- [58:15]
A
Absolutely. Love it. Thank you so much, Mauricio. Thank you to the rest of the panel. Thank you to everybody who's listening. Great conversation, man. I'm glad that you. You jumped up. Can't even imagine what we'll be talking about tomorrow. I'm sure it'll be how Jerome Powell did exactly what everyone thought Jerome Powell would do. Very exciting. Very exciting, but ever. Thank you, everybody. We'll be back. See you tomorrow. Thanks. Bye. Bye.
- [58:37]
G
Bye, everybody.
- [58:56]
A
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