Scott (3:22)

How long would that normally take for them to get paid?

Caitlin Long (3:24)

Well, it's typically ach, or if it's a foreign exchange transaction, it's typically going through Swift. So you're talking about usually next day is the fastest. And the CEO said he wants to be able to pay his drivers within an hour. Now what's also interesting is Vantage's CEO, since you and I did that podcast, did a fireside chat with American Banker and he disclosed some of the things we're working on, which is fun. So I'm not going to make news here, although admittedly to a different audience, it probably is news. We have a network of banks in Mexico that are working with us. And he also disclosed that we are in conversations with the stablecoin issuers for swap arrangements. What are we trying to do here? We're trying to create a network of networks, a mesh network. Now, from the stablecoin issuer's perspective, an Avid, which is our tokenized bank deposit, is a dollar. It's a bank deposit. And bank deposits are of course permitted reserves even under the New York regime. And so if we can actually get into an arrangement where we can provide swaps to each other, then we really do multiply the network exponentially and the different users have different options. So Vantage will give bank accounts to, for example, the truck drivers in Mexico. This is typical. But US banks will give corporate accounts to the employees of non US customers. And so that's one way that they could use the dollars. But of course the end user is going to be interested in pesos. So what if they could put it into PayPal? What if they could swap it to Tether? What if they could swap it to usdc? What if they could put it in a new bank account in Mexico that they may not currently have, all of those things are possible. All of those things are what we're working on.

Scott (5:08)

Okay, so two questions. They obviously have different banking laws in Mexico.

Caitlin Long (5:13)

Yep.

Scott (5:13)

Do they need such a complex arrangement for them to participate in this or can one bank do it in Mexico? You obviously had to partner with Vantage because of the Fed master account.

Caitlin Long (5:22)

Right. And because they can't issue the stablecoin right now.

Scott (5:25)

So how does that work on their side?

Caitlin Long (5:26)

Yeah, so that's a good question. I'm not an expert in Mexican banking law, but my philosophy, which is very much overlapping with Vantage's, we're very tech forward and we're also very interested in networks of networks tearing down walled gardens, maximum interoperability. It was fabulous to listen to a community bank CEO speaking to the American banker audience, which is mostly bankers and preaching permissionless blockchains. Because of their interoperability and because of the network effects and the developer tooling that's been built up around these systems. It's hilarious to listen to the big bank CEOs talking about their wild garden networks and how they all think that JPM COIN or Citicoin or Wells Fargo Coin are going to be the ones that are going to win and everybody else is going to join their networks. I think it's the opposite. I think our technology is so much better and our network effects are so much greater.

Scott (6:17)

Do you think they think that because they have inside knowledge of what's coming from the stablecoin bill or contributing in crafting it? Or do you think they just think that's where the puck is headed?

Caitlin Long (6:27)

They think that's where the puck is headed. I will tell you they're not irrational because they are very concerned about the cudgel that is used by the bank regulators around the Bank Secrecy Act. There's so much subjectivity around BSA AML compliance and enforcement actions. And that was if you go look at the banks that service the crypto industry, that is how a lot of them ended up with enforcement actions. It was consent orders for problems in their BSA AML programs. And so I think probably it's kind of a Stockholm syndrome situation where the banks are so afraid to go outside of the walled gardens. But by the way, this has happened so many times in banking history. It's when banks at first were willing to use intranets, first they would only use direct connections with the actual cable. That wasn't even fiber back then. And then it was, oh well, let's do intranet connections. And now it's tear down the walled gardens and use the Internet. And banks are now just now really moving to cloud. So we're kind of along that same development timeline, although it's accelerated timing wise. But that's what's ultimately going to happen with the banks. They're still most comfortable dealing with closed networks. But what's great about what Vantage explained, and again, it's out there for anybody to watch the video, it's a 20 minute fireside chat, is you actually have a traditional bank CEO speaking our language and that's just, it's not common. And I salute Vantage. That's why they're leaders in the field.

Scott (8:04)

Your product is somewhat competitive with the traditional stablecoins though. Right. So when you say creating the swaps and interoperability, you're a competitor, but actually you're making their lives a lot easier by making them compliant and putting it within the banking system. So.

Caitlin Long (8:18)

Correct. And again, it's the concept of a network, mesh network. It's a network of networks. Right. People are going to transact with whoever they want to transact with where they want to transact. And some people are still comfortable and want to have a physical bank branch and a person that they can go talk to. Others have never set foot in a bank branch or written a check and everything is online. You meet the customers where they are and that's where we're focused. I love the idea that Custodia and Vantage are very aligned on that concept of we don't want walled gardens. We're actually very focused. We've talked a lot about the go to market strategy and it would be easy for us to go do some of the same things that others have done, which is bring in intermediaries. Right. And have the intermediaries just gum up the system and take their cut. But Jeff Sinod and I are very aligned. We don't want that.

Scott (9:13)

That's just the system.

Caitlin Long (9:14)

Exactly. We want to try to cut out the intermediaries. And then you asked the question about the traditional stablecoins. Are we competing with them? First of all, we don't think so. This particular market nobody's serving. This is the traditional regular way ACH payment flow. That's not where the stablecoin issuers are. So this is not a market, frankly, that already has this technology. We view it as a greenfield. Which is why I think Tillman was so excited because he understood there is such an enormous flow of traditional ACH regular way business and traditional swift business. That has not yet had the ability to take in this technology. Most businesses that have auditors and that care about filing gap financial statements or ifrs financial statements as the case may be, they're not going to touch stablecoins because of the adverse accounting. Right now stablecoins have adverse tax. This is why when you trade with a stablecoin you're going to get 1099 at the end of the year and it's going to keep track out to eight decimal points whether when you transact with a stablecoin because technically you're paying a capital gains tax or loss out to eight decimal points every time you use a stablecoin. Those issues are what gum up the system that traditional stablecoins can't break into the real big money flow regular way banking business. But that's where Custodia and Vantage want to play. We're not interested in competing with the existing stablecoins. The crypto market, they're doing great. Most of the banks by the way, don't have the ability to serve the high frequency, fast settling crypto trades anyway. So it's the regular way business that we're very focused on. There's an awful lot of fraud and believe it or not, one of the things that we believe is that when we approach traditional banks, this is not a hey, join this new technology because there's a big revenue opportunity as much as it is. If we can help you solve your fraud problem, then join our network and you'll have lower fraud losses. That's profound.

Scott (11:17)

Lower fraud, better, faster, cheaper too. Correct? Right. So all the things of the blockchain promise plus anti fraud. You said something in passing that I want to touch on.

Caitlin Long (11:26)

Yeah.

Scott (11:27)

You said the Fed, which has not changed its anti crypto stance or regulations. I think there's a the idea that everything is peachy now that we have the Trump administration. We've seen by and large contentious regulators replaced with regulators who understand or are more likely to be favorable towards the industry. The Fed maybe not so much.

Caitlin Long (11:52)

Yeah.

Scott (11:53)

Is that accurate?

Caitlin Long (11:54)

That is accurate. In fact, just this morning JD Vance gave the speech. I was upstairs at a breakfast and watched the replay. It was a great speech. But I did have to call him out on something that I think he exaggerated when he said operation choke point 2.0 is dead and that he was here to give the obituary for it. It's not dead yet, unfortunately, because the tools that were used to target our industry are still in place. And as Senator Lummis correctly pointed out, the people who did it for the most part, are still in place at the federal banking agencies as well.

Scott (12:27)

How do they fix that? I mean, is that something that can wave the magic presidential wand and it changes, or is it sort of systemic?

Caitlin Long (12:34)

Well, it's interesting because there are a number of very high ranking political folks here, Senators, congresspeople from the administration. Right. Vice presidents, et cetera. And they all want to know who are the people. And it's so funny because yet again, I sent the list. So it's funny. I was talking to one of our attorneys who was saying to me, there are several people that are constructing the list. So it's no secret who did all this. But the interesting question is what, if anything, can be done to move those folks out of positions of power? And Trump hasn't gotten his people in yet. To be fair, the Senate confirmation process for occ, fdic, and even Fed Vice Chair for Supervision has been slow. We do have nominees for two of those roles, but they're sitting, waiting Senate confirmation, so we'll see how fast they're able to get in. But. But one of the other truths about the federal agencies is the senior career people have been there, in some cases, 30, 40 years, and they're just used to every four years a new political appointee comes in. But I watched this even when we were in Wyoming passing the bills back in 2018, the senior career staff, they've outlasted seven or eight bosses in their careers, and they're where the real power is. And I wouldn't have known that had I not seen it from the inside.

Scott (14:05)

Will that change with the people who are currently nominated, assuming they're appointed?

Caitlin Long (14:12)

I hope that's what I was calling.

Scott (14:14)

I'm old enough to remember when we thought Gary Gensler was going to be a great SEC chair.

Caitlin Long (14:18)

Right, right. Well, J.D. vance even said we fired Gary Gensler and we're going to fire. Why are all the people just like him? And I thought, great. Why is it taking so long? I mean, you know who they are, right? So some of it. I mean, the Fed obviously is asserting its independence. So. And just last week, the Supreme Court said that the Fed, from a Fed governor's perspective, is institutionally different for historical reasons. This was in the case where some of the Democratic appointees to independent agency boards that had been fired by Trump were challenging whether he had the power to do that. So we'll see. The Fed is a different animal, as we know, and it is asserting its independence. But we've also seen the Treasury Secretary say that the Fed should not be in the business of supervision and regulation of banks. They should just be in the monetary policy business. And it's the supervision and regulation of banks that got very, very politicized. And I was just sharing, we just had a training session with very senior congressional staff. There are a lot of them here that are here to learn. And I was just sharing with them that some of the war stories about what happened with us. And I'm aware that several of the senior people at the Fed are Warrenites. And in one case, one of the Fed officials told me that a senior Fed official always quotes Rousseau or very left wing philosophers at the end of his emails. Well, that tells you where the philosophy is of the person in that role. And that's a career staffer. So in a position of extraordinary power.

Scott (16:04)

If it's not the Fed's job, then I assume they're saying it's the FDIC and the occasional.

Caitlin Long (16:09)

Well, the treasury secretary said, he said two things. He said one, that the federal we have too many banking agencies and that supervision and regulation needs to be consolidated. He did not specify whether it would be at the OCC or the fdic. And those agencies have been fighting with each other. We have three federal banking agencies in the US and they all fight with each other for jurisdiction. The other thing he said that I think a lot of folks haven't really keyed in on, though, is he talked about a program of radical privatization. And I he's never said this, but I actually think he's very focused on potentially privatizing the payment system. Privatize Fedwire, privatize Ach. Why is this run by a fiefdom that is politically unaccountable and weaponized its power against an industry and, you know, in the case of the Trump family and religious organizations that it didn't like because it was so left wing in its philosophy and its approach. And again, Senator Lummis is out there warning these tools have not been torn down. So I thought it was premature of the vice president this morning to say that he had written the obituary for operation choke wind 2.0.

Scott (17:16)

So interesting. I know that you have to run momentarily, but what's next for Custodia specifically, with Vantage, I guess we talked about that. But for Custodia as a whole, you're still trying to get a master account. Obviously, you're still litigating with the Fed, right? Yeah.

Caitlin Long (17:30)

Yep. Waiting for the lawsuit decision. Oral argument was January 21st. If you look at the 10th Circuit, the median period of time between oral argument and a decision is 4.2 months. So 4.2 months from January 21 is right about now, Scott. So we'll see. I mean I'm hitting, you know, refresh on the, on the website several times a day to see.

Scott (17:50)

Well, you know, they'll go to the last possible moment.

Caitlin Long (17:53)

You know, I don't know, it's interesting. In suspense, we'll see. When the district court decision came out, it came out on the afternoon of a holiday weekend, Friday. Right. And by the way, there was a decision that came out in a related case the next day of a three day holiday weekend on a Saturday. So you just never know when the decisions come out. We're anxiously awaiting it. And then the stablecoin bill, this is a big deal. And just the amount of opposition that has been garnered from the stablecoin bill tells you a lot about the way the power structure of the United States works. I was just at this congressional lunch laying out one of the best things. The community banks I think in general are afraid because there's an irrational fear, I think it is irrational that this technology is going to threaten them. Frankly. We want them all to join us. Right? Let's bring this new, better technology to the system so they can keep deposits in the system. But I was laying out some of the alternatives that are much more meaningful to community banks, that if there's anything we can do to help the community banks. Because that is where the vast majority of credit for small businesses in particular in rural parts of this country come from. Which is why historically Congress has been so focused on helping the community banks. And I laid out a list of things that could be done to help the community banks and allay the fears that they have of this technology. But again, I will underscore Vantage is a community bank and there are several very tech forward community banks. They're the ones I think that are going to win in the marketplace. And we are trying to bring this technology to other banks, believe it or not.

Scott (19:35)

I can't wait to see it. Thank you so much. I know you have to run.

Caitlin Long (19:38)

It's a pleasure. Thank you. Great to see you again as always. Thank you.

Arch Public (19:41)

This incredible conversation was recorded live in the Arch Public lounge at Bitcoin Las Vegas. To dollar cost average into Bitcoin efficiently. And to check out all the other algorithms go to archpublic.com.