Elizabeth Kirby (4:14)

Thanks. And first of all, thank you guys for having me. I'm so excited to be here, excited to dig into some of these topics with you guys. Look, I agree. The unfortunate truth is I don't think it's terribly shocking that we didn't get this done this year. It's a massive, giant, multifaceted, hulking piece of legislation. And as you guys have rightly mentioned, there are different groups that are focused on different elements of it. There are vastly, vastly different degrees of knowledge and understanding of these markets by the people who are kind of tasked with pushing it through. So there's a lot that has to happen. I think the idea of modularizing it is kind of interesting, actually, because as much as we'd love to just get the whole thing kind of done. If that's not likely to happen, or not likely to happen in as expedient a fashion as we would all like, then maybe there's some merit to trying to kind of break this apart and, and move pieces through that are maybe you know, a little bit more straightforward or a little bit less controversial to certain groups. So I think that's interesting. But I also think, Chris, like you bring up a good point, which is that, you know, the SEC and the CFTC in the meantime are still giving us some stuff to work on and work with, you know, and the SEC put out a no action letter at the end of last week around the DTCC and some of the tokenization stuff. The CFTC has been, you know, really pretty active over the past few weeks, even with the sort of like impending departure of the chair. So I think it's, it's, it's encouraging that both of those agencies are continuing to move forward apace.

Chris Perkins (5:54)

Can I ask a question? So, you know, you're at the heart of institutional execution and you know, do you think that there needs to be a law passed for institutions to come in or you know, are they coming in every single day? How do you think about it?

Elizabeth Kirby (6:09)

When we talk to sort of like our constituents about these markets and we talk to them about, you know, crypto markets, we also talk to them about tokenization of sort of, you know, real world existing, you know, assets. And one thing that I keep hearing is that there is a desire for sort of more traditional intermediaries and whether that's in the sort of realm of like liquidity provision maybe a little bit. I almost think even, you know, it's, that's a more kind of critical ask in the areas of sort of like custody or prime brokerage type activities. And so I think the question comes down to like, are those large kind of entrenched institutions that tend to provide those services in traditional markets going to be comfortable pressing ahead in the absence of like real kind of regul regulatory clarity and certainty? And that's where I'm just not sure there's absolutely progress. For sure there's progress happening and I think there's also a lot of like really good progress that's happening away from those traditional intermediaries. And we see that with you know, the growth of these sort of crypto native PB and custody providers. Absolutely, definitely the continued growth of crypto native liquidity providers and market participants. So things are happening for sure. Will we still have this really interesting inflection point when the more traditional guys get involved. I still tend to think so. And so I think some of those more traditional guys are just going to want a little bit more clarity and certainty than what we have so far.

Austin Campbell (7:52)

Unintended.

Elizabeth Kirby (7:53)

Yeah.

Austin Campbell (7:54)

So I, yeah, I'll pile in there and raise a couple of things. One is if you remember back at the start of the genius debate, the Trump administration at that point was saying we want this link to market structure, we want them to pass at the same time. And I think as the summer went along people realized, well hold on, one of these is pretty achievable and we might have a compromise that we can execute on right now. And the other one of these is, oh boy. And so they did break them apart and eventually have to have that moment of realization of we've got to take the parts we can get because otherwise we're probably going to get nothing. And that compromise was made. I can see a similar process playing out here. But two, I think some of the fight that we're having here is call it legitimate business interests colliding with each other. For instance, if I'm citadel and right now I'm sitting on top of a massive proportion of US equities trading, I don't want this stuff tokenized. Right. I don't want amms taking business. I don't want other market making firms and a new market structure framework to step in. Like I'm the single biggest beneficiary of equities market structure to a point that it's almost a monopoly. Of course they don't want that to change. Fine. You know, and then you have the countervaring like forces from all the non incumbents who want to disrupt them. And quite frankly in this one, and this is a weird alliance, some of the legacy banks who want to get back into the game who have been kind of forced to stout. Right. And that that's a real divergence. But two, I think there's also a stark divide here on just straight up education. Like stablecoins were hard enough to explain and those are, you know, honestly pretty simple financial instruments. Explaining some of the defi stuff to people in Congress who are like still somewhat skeptical of how that magical like payments app PayPal works inside of their phone is like another whole level of Hill. And I say that, you know, Richie Torres has talked about this in Congress, but I say that in the form of some of this is just literally generational. Like if you were 75 years old in the Senate, you did not grow up with the Internet, right. This Stuff is all new to you and you're kind of like feeling your way around in the dark. We may have, I think with market structure, a bigger educational lift to do anything in defi than people realize. Yeah.

Rahm Al Awalia (10:15)

I would add to that. Trump's political capital is significantly diminished after the October elections and there's division in the MAGA wing. He's got to pick and choose his spots. The crypto group is essentially captive at this point. It's unlikely he's going to win or lose support on the margin. So the kind of he has crypto where they need to be and you need to win another election and you have to have a battle to fight for. So I think politically he's going to focus on Main Street. That means tax cuts, rebates, stimulus checks, those kinds of policies, housing affordability. So I agree with all the comments that have been shared. It's just unlikely to see this come together. And then on the policy itself, it is very difficult to make a principle based distinction between rewards and earning interest. We could all get on a whiteboard and stare at it for eight hours and it'd be very hard to demarcate that line.

Austin Campbell (11:19)

I mean, what. On the, on the interest point, I was having this discussion maybe with somebody in the legislative space and I made the point that like, what do you think you mean when you say ban interest? Because like the interest doesn't go away. It's a question of who gets to keep the money. Right. Like, we did not pass a bill saying if like money is it a stablecoin reserve, the treasury itself doesn't have to pay on those T bills. Right. That is not what we did here. So we're having an argument about do Paulo and Jeremy get bigger checks or we do, we distribute that to users. And I think when you start framing the discussion properly, you start sailing into interesting waters. I also published a paper over the weekend pointing out that the banking industry, among many other things in there, literally argued the reverse of this not too long ago to get rid of Reg Q. So it's quite interesting to hear them literally reverse the argument because I will remind everybody, the phrasing was not being able to pay interest in a modern market is uncompetitive and renders our products unusable. And they said that about bank deposits that couldn't pay interest. So this is what I mean. I think there's a lot of complicated forces that are going to be sailing into each other and I think the government is probably provided anti clarity if anything, on this point.

Chris Perkins (12:40)

We have to protect end users from receiving interest. Right. That's, that's the goal. Very, very dangerous.

Austin Campbell (12:46)

Chris, think of those bank executives who might have their bonuses reduced. How can you do that to them?

Chris Perkins (12:52)

Can't do that.

Austin Campbell (12:54)

All right, so before I get myself into more political trouble here, actually, let's just get into more political trouble. So recently the New York Times dropped an article talking about the sec, the Biden administration's efforts under, call it the previous regime around securities regulation, and to some extent defending them and saying that Trump has, quote, co opted crypto and like, brought them in. All right, I have a lot of thoughts about this, but I'll hold my fire first and ask what, what do you think of the New York Times article out there? We could start with our guest if you want.

Elizabeth Kirby (13:33)

Sure. No, thank you. This article, look, I mean, I think it didn't read to me as being like terribly, kind of like objective reporting, maybe to make an understatement to begin with. Look, it's like you're comparing these two administrations, which are so wildly different in their approach. And the article really took this stance of sort of glorifying, you know, the way that Gensler was, was, was looking into these, you know, issues or enforcement actions that he was trying to take. And really, obviously the intent of the article is to draw really a really clear line between the, you know, the sort of fact that many of those enforcement actions have gone away and Donald Trump's personal business interests. I mean, I think even putting that part to the side, there's so much to unpack without even touching the Donald Trump part of it. And what the article, of course kind of like fails to really capture is that Gary Gensler era of regulation by enforcement was in and of itself kind of first, almost unprecedented in its nature and scope, but also was like, not terribly popular. And so certainly, you know, commissioners who were at the SEC at that time, Ueda and Pierce specifically, and Ueda is currently there today, were, you know, during that entire time of, of, you know, Gensler's chairmanship really speaking out about how they were not in agreement with this kind of like, enfor, you know, regulation by enforcement. And so I think they're are plenty of questions that really could be raised around whether the SEC in a number of those cases either exceeded its authority or, you know, in fact, there was basis for a lot of those enforcement actions. So while the article kind of talks about, look, there were all these enforcement actions and now a lot of them kind of went away. It doesn't really get into like, Were those enforcement actions legitimate to begin with? Or, or not? Which I think is like, super important here. Obviously, the Atkins SEC is more deregulatory than Gary Gensler's SEC was. I don't think that's a particularly, you know, scandalous statement. That's a fairly objective fact. I think, like, we, you know, hopefully are getting to a point now, though, where we can be deregulatory in a way that spurs innovation and market kind of evolution at a pace that we all want to see. But, you know, I really do believe, and I'm interested in your thoughts on this collectively, all of you guys. I think if we can, you know, if the official sector can kind of get some of this right, it can really act as an accelerant for these markets to take off in, like, a super meaningful way in the US and we've. We've obviously been, you know, massively kind of stymied here in the US and in digital markets and their ability to grow. So, I mean, I'll pause there. I agree. I could talk about this topic for. Go up.

Austin Campbell (16:41)

Yeah, I'll. All right. So as somebody who's been a longtime critic of the Biden sec, my biggest complaint with that article was the complete and utter lack of context. Right. If you look at the track record over there, the Biden SEC systematically missed or failed to interdict every single major crypto fraud, one after another. Like, they did not get ftx, they did not get Terraform Labs, they did not get Celsius, they did not get Three Arrows Capital, they did not get BlockFi. Not the they're a fraud, but they did go bankrupt. Like, one after another, users just got burned, got burned, got burned, got burned, got burned, got burned. And the SEC did nothing, either because they were way too slow on the draw or didn't even notice it was going on. At the same time, they spent a huge amount of political capital destroying. And I'll go down a checklist here, so people remember this, a decentralized library project, an NFT project to make an animated show about cats that were getting high. They threatened, though, didn't proceed with a musician, like issuing NFTs on the blockchain. And then they went after Coinbase, Kraken, et cetera, none of whom were alleged to have done anything wrong to users. So, like, I'm just going to put it to you this way. Random guessing would have hit more targets among the bad guys than what the SEC did, Right. If you just randomly sent people notices among that group. And so it's hard to look at that and say, well, it's fair to write a journalistic article that fails to mention that context. Right. Because it, it proceeds from, well, the Biden, like, SEC was legitimate, therefore, what? But hold, hold on, slow down. Right? Like, what did you just say? Right? That's like being like, well, Enron was a legitimate company, so how could it have collapsed? Is like, well, maybe the counter reaction. But hold on. And so I look at this whole thing and it just tells me, like, how broken a lot of the reporting apparatus is at some of these places to have an article like that hit a mainstream media publication with none of this context. No quotes from people on the other side of things. And really, like, no informed, formed skepticism at all. Because, like, Chris likes to joke about this. But real talk, when I was on 60 Minutes, right, like, I'll tell everybody, I was sitting with Scott Pelly and the editorial and reporting team there, and we were talking about things like CZ's pardon and they were asking about it and comparing it to, like, what had happened with hsbc. And it really helped them hone in on a story that was more about governance and the pay to play rather than the legitimacy of, like, Binance's actions or not, because they were able to correctly identify, like, wait a minute, some Trad 5 people actually did some awful stuff and did not go to jail. Okay. Right. And there was just none of that in the Times. Right? Like, no context.

Rahm Al Awalia (19:41)

Yeah. I'll be brief on the Times. I don't read the New York Times. I also don't read the Economist. It's a backward looking. It's negative alpha. Modern media is mostly confirmation bias. There was also, like a hit piece on David Sacks on AI the week before. Yeah, I don't think it's a good use of attention.

Chris Perkins (19:58)

I don't know. I think there's still a big battle for the mainstream mind. We talked about crypto being on 60 Minutes, like three weeks in a row between Austin prediction markets and finance. So I don't think mainstream has really got their head around crypto just yet. Looking at the New York Times, and by the way, funny aside, I was actually with Scott Pelley in Ramadi. I almost got him killed. Next time you see him, tell him I'm sorry. But when you look at that article, you always got to go to the referee in the courts. Right. During the Biden administration and Gary Gensler lost. He lost over and over again at the cost of the taxpayer. And so without really diving into that track record, it's awful, right? And the damage that Gary Gensler did, I would say it's directly related to the stress that we saw in 1010 where retail got obliterated because we forced derivatives offshore. That's on him. And then also the things that you specified, Austin. So look, it's shameful, but the biggest issue that I have right now is the polarization and the politicalization of crypto. It makes no sense to me. In 1999, Al Gore came out and talked about how he invented the Internet and he got a lot of flack for it, but he was a Democrat, right. And he was saying, I'm pro innovation, I did this. Right. The Internet is here.

Austin Campbell (21:25)

It was me.

Chris Perkins (21:27)

Right. And now we have a party or elements of a party. I wouldn't say it's a party because I've spoken to plenty of Democrats and they're bullish. But we have fringe elements, right? Yeah. Like you, Austin, that are now saying, wait, I'm anti technology, I'm anti innovation. That's not American. And so I don't know why we're departing from these values. And even when you dissect the ideology of this part of the party, they're progressives. They want to have give people the right access that they've been denied. So it like confounds me that this is like the most progressive technology out there and they. They're more in favor of the way things are, which I just don't get.

Austin Campbell (22:13)

All right, so speaking of the way things are, let's talk about somebody coming from that past world and moving into the future. So JP Morgan just launched a tokenized money market fund on Ethereum. Looks like it's seeding it with 100 million of its own capital. I believe it's called Moni. It is a private fund for qualified investors. You can subscribe via cash or usdc. And to be honest, it seems like one of the instruments that already exists coming out of a blackrock, coming out of a Franklin Templeton, coming out of Wisdom Tree, coming out of Super State. Like time and time again, we've seen people starting to tokenize, call it the raw material, which is money market funds. But what's interesting to me is two things. One, this is an OCC regulated bank, so that's new. The fact that this is coming out of somebody from the bank regulatory framework with how negative they've been is eye opening. And two, although this is a tiny amount of money for JP Morgan, because to be clear, we're talking a well over $3 trillion balance sheet over there for the Listeners like this is an institution where the CEO has been openly skeptical of bitcoin and blockchain technology in the past. So what do we make of JP Morgan in particular starting to enter this space?

Rahm Al Awalia (23:33)

Who's the target customer for this? First of all, Right, so you have to be a qualified purchaser. A million plus. That's right. Go ahead, Chris.

Chris Perkins (23:40)

No, no, that's what it was. You got it.

Rahm Al Awalia (23:42)

So is it institutions or high net worth?

Austin Campbell (23:47)

I think it qualified. It's probably institutions is my guess. Like, or, yeah, or, or they're just guessing. Right. Because I think you've kind of begged the question of do they know who the target audience?

Rahm Al Awalia (24:00)

Oh, I'm sure they know J.P. morgan. You know this Austin. J.P. morgan was a customer first business. They, they know the customer target. If, if it's institutional, then they're going after real time settlement and they're going after capital markets use cases. They're trying to free up the capital that's tied up in Tplus 3 settlement, depending on what instrument you're discussing. Obviously trade web is a part of that ecosystem too.

Chris Perkins (24:28)

Liz, does this make it easier for you to take as tokenized collateral or how do you think about it?

Elizabeth Kirby (24:31)

Yeah, I think, well, the collateral thing is definitely interesting and we've been seeing the other tokenized money market funds too. I think it's a good question around who's the target customer? Because the other issuers, Austin, that you were mentioning, there's been some modest kind of inflows to those products. But you know, I'm not sure that it has been like total, total game changers. So while I think the product makes sense and yeah, again, I don't know who the target customer is. I don't know if it's sort of like a corporate treasurer type person, you know, or somebody who wants to utilize kind of on chain collateral for other reasons, which seems like a slightly like, know more niche audience at this point. But it might also be like, are these just sort of a kind of path of least resistance to start dipping a toe into the water of, you know, tokenized issuance and, and maybe, you know, we're going to see it expand from there. Yeah, I, I, I don't know. I think these are all good questions.

Chris Perkins (25:41)

So my 2 cents you have there. So JP Morgan, this is actually the asset management side of the business. Right. They're about a $4 trillion asset manager, which is separate and distinct but related to the bank. Right. And when you have one of your biggest competitors run by a guy named Larry Fink, saying, I'm tokenizing everything. Well, he probably has a reason for doing that. I think the reason is, amongst other things, better collateral mobility. You're seeing the CFTC coming out saying, hey, this is going to be great. We're going to enhance collateralization. It's going to be faster and real. That provides demand and utility amongst those institutions that need to settle their derivatives obligations. And gosh, if BlackRock's doing it and you're not, you're going to get left behind. Guys, sorry about it. And so it's no surprise, like when's GSAM going to have their tokenized money market fund? Right. And I think everyone is going to tokenize. We've talked about this in the past. The equity market is going to tokenize. But when I think about money market funds, the real utility. Do treasurers sweep them? Yes, they. They sweep into money market funds all the time. And the faster you can affect that sweeping, you can clip additional yield. I think Franklin Templeton has a. Their money market fund. I think they literally capture interest to like the minute or the hour or something. And so if that's your case and you're sweeping it, you know every day you're going to maximize your yield to that product. If you're moving it to your CME or your ICE obligations on the derivative side, there's utility there, so you got to do it.

Rahm Al Awalia (27:06)

No, it's a me too response. Table stakes.

Austin Campbell (27:08)

You got to be in the game.

Chris Perkins (27:09)

I think that's where the industry is. Right. It's not even me too. It's like if you don't have it, what are you doing? Because you're not going to have that utility for your end users. Again, like we go back to like equities markets. Right? There's going to be a day when the equity market tokenizes to $127 trillion. Right. I'm a fiduciary. You're a fiduciary. Rahm. If there's enough liquidity, you got to buy the token. You have to buy the token.

Rahm Al Awalia (27:33)

There should be one standard that emerges, especially if it's used for settlement and clearing. There should be one standard that gains adoption. BlackRock has an incredible edge because they represent the buy side, whereas the investment banks are competing with one another and they don't want to use their competitor's product.

Austin Campbell (27:53)

No, but conversely. Right. I think this is why the things we're seeing tokenized first are the government money market funds. Because realistically speaking, like a T Bill fund run by like a JP Morgan Asset Management, a BlackRock, a Fidelity, a Vanguard, a Goldman Sachs. They're all fundamentally close to identical. Like are they perfectly identical? No, but like you would take one share for another in a way you would not with bank deposits.

Chris Perkins (28:19)

But if who, where are they going to trade? Liz, you know, you have these fun.

Rahm Al Awalia (28:24)

Exactly.

Chris Perkins (28:24)

How's that going to play out?

Austin Campbell (28:26)

Right. So I mean Liz, would it be.

Rahm Al Awalia (28:28)

In your interest to work with a tokenized money market firm issued by an investment bank or a party like BlackRock?

Elizabeth Kirby (28:38)

Honestly, from our perspective, I don't think we really care. We would certainly. Our general thesis is to offer the full suite of products that our customers and or potential customers would want to trade. So we are engaged with all of these tokenized money market fund issuers today. We are, you know, actively kind of working on projects to support transacting and you know, as well as sort of, you know, purchase and sale of these products. We're also, you know, doing a bunch of things around tokenized repo and to allow people to have access to repo markets on the weekends on a 24 by 7 basis when repo, traditional repo markets are shutting down. As of now that the repo trades that we've done, the collateral leg has been a tokenized T bill. But could that be a tokenized money market fund? Sure, definitely could be.

Chris Perkins (29:35)

So you guys are talking about very similar products but with separate companies behind them. My mind immediately goes to stablecoins and when there's stable coins somebody's going to capture the interest and I think there's going to be incredible, incredible tradified demand for stablecoin trading. Liz, is that something you guys are thinking about? I mean, just like, like trade up did $173 trillion in Q3 in volume? Yeah. Like is that a massive area of focus?

Elizabeth Kirby (30:02)

Massive. It's massive. So I mean digital assets writ large are a huge area of strategic focus for us and stablecoins are a huge part of that. I will say, you know, we're still kind of like formulating our roadmap in this space and exactly what that's going to look like. But it's a massive, massive opportunity area for us. And something that I think like Chris, you said it exactly right. Traditional financial institutions are going to want to transact in these products and they're going to want to have access to sort of the best and most robust liquidity pools and widest network of liquidity providers that they can get access to. And that's certainly our sweet spot. So it makes all the sense in the world to us.

Chris Perkins (30:49)

The thing I'll note about this subject guys, is that it was done on Ethereum. And we've talked about how Ethereum, you know, is very appealing to Wall street because of its ten years of history. I just wanted to flag that and I would love to get our guests opinion on that as well.

Elizabeth Kirby (31:05)

Yeah, look, I mean I think Chris, you know this, but we can, we can talk about this for, for the wider audience too. The, you know, the on train on chain transactions that I was just referencing that we've done on trade web have all been on the Canton network. So so far our activities, our on chain activities have, have only been on Canton. Now we definitely will ultimately, you know, have support for other chains and again that will be sort of dictated as and when client demand kind of pushes us in, in those directions. But you know, to answer your question more directly, do I have an opinion on ETH and why JP Morgan chose eth? I think the way that you characterized it makes a lot of sense. It's obviously a very well known and sort of well proven DLT kind of technology that people are aware of. It's a pretty household name at this point. Canton certainly less so. And so I think that's, it's going to be interesting to see how this all evolves. You know, Solana eth, Canton. There's probably room, you know, there is for sure room for multiple winners, but it's early netting.

Rahm Al Awalia (32:18)

The fact that you brought Canton. I think this is a really interesting chain that we should explore more maybe now or later, but they're going after a permissioned use case with institutions including some of the largest investment banks in the world and custodians like BMY Mellon and Ethereum. I agree with Chris's point. It is in a way like Traffic Chain. It is Traffic Chain. It's designed for that. It's got the Lindy effect, it's got the history. But now Canton Network is going after that same use case from the largest players in the land. So it's yet more intensification of competition.

Austin Campbell (33:03)

All right, well I have a few things to say on this topic, but so we don't get ourselves in trouble, I am technically supposed to say we need to do the second set of ads so we can go ahead and run those first and then we'll come back and debate more. Who's going to win among chains, Mantle.

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Austin Campbell (34:10)

All right, let's do this. So I want to start as somebody who's been involved in both public and private private chain activities and say one I'm strongly of the opinion that there will be multiple winners as you look at transaction preferences across markets. These things are not monolithic or even close to it. If you're looking at like real time gross settlement for retail payments or something like sending Bitcoin around, you need a vastly different security model than you would need for something like say 247 interest rate derivatives clearing. And I just don't think it's going to be possible to build the all singing, all dancing chain that encompasses all of these use cases for the same reason that we don't have a single ledger currently in Tradfi is sometimes these things actually functionally need different capabilities and controls around Austin.

Rahm Al Awalia (35:02)

I agree with that. Wouldn't you say though that specialization for a given use case for a given customer target has the edge and will generally win? Canton is specialized on a large TAM use case where you don't need many players. You can get critical mass quickly and make a success and that strips away an opportunity for Ethereum.

Austin Campbell (35:26)

One I kind of agree and the kind of comes with I think to be a better system though you need liquidity, which means you need a better conduit in and out than in traditional markets because like take something that'll be familiar to retail users right now, which is imagine that you've got a Coinbase account. You want to get money to like a Fidelity account which does not take stable coins. You're going from Coinbase to a bank over to Fidelity, which is going to take somewhere between one to like a lot of business days depending on how this thing happens and the a lot may be like 5 to 10, like it's longer than people think. I think RAM to your point, so long as you have a quick in and out. So this is why I'm interested in like the money instrument and like tokenized money Market shares or stablecoins is then you have the ability to move between these specialized venues significantly more quickly. And it's not that. So, like, I. I think here's a thing that people don't always wrap their head around. It's not that all securities need to be able to move or like all derivatives. It's that the money you're using to settle them is what needs to be able to move pretty quickly to make these things work. Right? Like it's the Simpsons thing of like, money can be exchanged for goods and services. Homer. And so if I can get my money from like, call it derivatives chain to like equities, like just vanilla equities chain like that, now these are fungibly, essentially settleable with each other through that conduit that I think matters. I think your point, like, what is the use case matters, But I think the other thing that matters, and this is what I wanted to bring up and is my main point of skepticism about Canton right now surviving, like the test of time, is your ability to essentially build a future coalition matters. And if we look at traditional markets, there's been two methods that have worked really, really well. Number one is get all of the very big people in a room at once. And everybody looks at everybody and says, okay, jump. And that's like the DTC bundle, right? Like, when they started, they got all the major players, and then you just hit go. The other one, a good example is Visa, which is to say the mistake is when you create, create a thing that says other people can join, but future people join on worse terms than current people over time, what you find is instead they just create a thing to compete against you. If you did not have overwhelming critical mass at the start, people take that as a sign. Not, hey, I'm going to pay off the old guard. It's, hey, I'm going to do my own thing. Visa, everybody can join as a bank. They're basically on equal terms. Trade Web, by the way, same thing. If you start a new investment bank today, you could plug into Trade Web and trade the exact same ways like JP Morgan, Goldman Sachs, Morgan Stanley. That matters. I'd be curious, like, what thoughts are on Canton? Like, you need tokens to run a validator. How do you get the tokens? What are the. Like, what is that model here?

Elizabeth Kirby (38:18)

Yeah, I mean, I, I can, I can hop in on it and sort of tell you, you know, from our experience now we've, We. We have sort of. We're coming at it from the experience of having been a fairly early adopter on the can. And so we are a super validator. We run nodes on Canton and certainly have plans to expand the number and type of applications that we're running. The Canton network, in my experience thus far, is still certainly kind of actively soliciting greater participation. And so I think that in all likelihood, the sort of terms around joining at this point are pretty attractive still. I don't know what that looks like necessarily in the future. Now, what I will say about the Canton Network, that again, your listenership may be sort of skewed a little bit retail. So maybe this isn't something that is totally kind of second nature to them the way that it is probably to the four of us. Coming from a little bit more of a tradfight background, which is this notion that in order for large financial institutions to move and transfer risk in significant size, they're going to require some level of permissioning, if not privacy permissioning, of who can actually see what's happening. And so there are many ways to skin that cat, obviously. And so, you know, you can certainly skin that cat on a public blockchain. And as everybody is aware, there are ways to do that and ways to, you know, add privacy layers, et cetera. Is it interesting that Canton was sort of like purpose built to offer this to large institutional players from the beginning, and that's sort of like a core tenet of how this network works and operates? I think that rings true to some of the large institutional players in the market. And I think that that is, you know, a pitch and sort of a, you know, the reality of how it operates resonates with. With large institutional players. And so it might not sound so. So great to kind of like, you know, blockchain, you know, purists. And I get that, and I think they get that too, but this is maybe trying to solve a slightly different problem.

Rahm Al Awalia (40:42)

I agree. Chris, I believe it was you coined the term Empire Strikes Back last week.

Chris Perkins (40:47)

Yeah, yeah.

Rahm Al Awalia (40:47)

I think this is another proof point under that theme of the Empire Strikes Back back, you're the Canton network. They're focused on permissioned privacy first. Let only counterparties see the relevant data. And it's more regulate, regulatory, friendly. Intellectually and philosophically, I'm more Ethereum. Okay. Probably a lot of us are kind of. Doesn't matter though. Canton doesn't need retail adoption and retail doesn't even aware of it, nor do they care, but it matters for the use cases Ethereum is going to go after. And I think what it highlights is Ethereum needs a Stronger, more focused commercial vision. What target customers are they going after with what value proposition? We see that with other chains. Right? You just had Solana Breakpoint. We should have someone come on talk about that. There's the Internet capital markets use case there. Avax is trying to do this. I think Avax is going to hurt a lot of around all of this. Canton is just going to dominate Avax here. The bear case for Canton is that this is the next R3. Right. R3 was a consortium at me, some banks that got together. The banks do this every five years. They got behind R3, they got behind Symphony, which was a response to Bloomberg. Really became a negotiation tactic against Bloomberg. Symphony hasn't had traction. R3 hasn't had traction, but people are trying to. I talked to someone from R3 of the day, a leader there, and he's like, yeah, no, we're on it. Okay, you've been on it for 10 years, but maybe this time. But the investment banks have this other playbook where they like these consortiums to create equity value. Tradeweb was one of them. ICE was another. IHS partners and market partners. They actually fits into the playbook of Visa, MasterCard where the consortium gets together. They say, look, if we can make a kingmaker, we can build this centralized utility we all have equity interest in. We'll give it revenue by being customers. We can set the standards ourselves. Then we take this public. We share in the investment banking fees. That's the playbook. They're looking at that when they're comparing Ethereum to that is a primary consideration. So I think, I do think Canton is a credible bid for the Tradify chain use case.

Austin Campbell (43:05)

Yeah, I think Ram, to your point, it'll come to a question of how do you build that consortium given the starting point on the thing. I think the technology is not the problem for Canton. I think it's the governance of are you going to have some of the early players who are willing to give up some of the gains? They would have to get more people in because if the answer is no, eventually you're going to like JP Morgan who has dipped like a tiny toe in on Canton, but as Onyx and they'll be like, nah, we're good, we'll use our thing. And like you end up in this mutual sort of like cluster. And when that happens, you start to see fragmentation instead because there are other parts of the market where the banks did not successfully pull this off. They just eventually lost the whole thing. See, like let's not go to Blockchain. See, for instance, private credit. Right name for me. Any of the banks who are a top two or three player in that space? No, it's not a thing.

Chris Perkins (43:57)

Yeah. The one thing I think about with with Canton is it's one of the most important golden rules of crypto. Just don't die. Right. These guys started in like 2014 for the. I mean I, I knew them back in the day when Sunil Harani and Don Wilson founded them. And I like learned about Blockchain and, and Yuval and, and Eric. I mean and then they went through their, their trials and tribulations. They had a big dust up with ASX that didn't end well. And then 10 years later, boom, they launched Canton. And like, so like that's the one rule if you're in crypto. Just don't die. Eventually what comes around goes around. Just. You'll make it. Just stick around. R3 is really interesting. Did you see the deal that they recently did Rom?

Rahm Al Awalia (44:38)

No.

Chris Perkins (44:39)

Yeah. Guess what? Who? Solana. Right. Super interesting. Like again, let's see what Solana does there.

Rahm Al Awalia (44:46)

What was the deal was the ls.

Chris Perkins (44:50)

I think Lily joined the board is the Ed of the Solana was money exchanged.

Rahm Al Awalia (44:56)

Who. Who paid who in that one?

Chris Perkins (44:58)

I don't know.

Rahm Al Awalia (44:58)

Remember the Western Union?

Chris Perkins (45:01)

It's always that it's dance partner season here in crypto. Right, Right.

Rahm Al Awalia (45:05)

Yeah.

Chris Perkins (45:05)

Yeah. Really interesting stuff.

Rahm Al Awalia (45:07)

Western Union got $30 million from Solana.

Austin Campbell (45:09)

I want to know like, who's paying.

Rahm Al Awalia (45:10)

Who in all these transactions.

Chris Perkins (45:11)

We should talk about Solana a little bit because that's the other chain that's really trying to find its way. I think you're right. Kanto is trying to go toe to toe with Ethereum for the institutional bid. And then you got Solana. Solana since its beginning has said we are going to be the decentralized nasdaq. And they've stuck to it. They just launched, announced Fire Dancer, which is going to, you know, ultimately give them a million TPS transactions per second. Because why they want to have that high throughput, high volume. And I'd love to get Liz's take to see if she thinks that that's viable. But one of their challenges, they had product market fit with Meme coins.

Austin Campbell (45:48)

Boom.

Chris Perkins (45:49)

And it really helped prove their tech and showed the throughput. But then in the meantime, big bad Hyper Liquid came in and really, I don't want to say they won because Perps is a very flaky market. You go to lighter, you go to Aster. But Solana hasn't seemed to be. They haven't won the derivative space. And really if you don't win the derivatives and you're the decentralized nasdaq, you got to solve for it. Now they have the Internet capital markets, which is really, really interesting in my seat, but that's tough too because Citadel is coming after them. Right. Citadel is not like Internet capital markets guys. And so they're trying, they're going to have to find their way there. So it's a really interesting time for that chain. Every time they've been their backspin against the wall, they found a way like they launched bonk and galvanized everyone. Last cycle Meme Coin season kicked off coming off a breakpoint. But I guess there's like, you know, when you look at a chain like it's like a Solana monolithic high throughput, like designed by traders for traders. How do you guys at trade web think about it?

Elizabeth Kirby (46:50)

Yeah, I mean look, I think this is another area where for us we're going to ultimately take a lot of, a lot of cues from our clients and our users. And so definitely there are some and, and I won't name names, but some of the guys kind of more in the high frequency trading community who are all in on Solana and we know that and they've made that very, very clear to us and that's kind of where they're going to be and they're like, you know, kind of meet me there. So, you know, I think for us it's sometimes a matter of trying to figure out, you know, how can we read the tea leaves and optimize against like if we are, you know, an institutional markets provider, where, where is the right place for us to place some bets for, you know, institutional risk transference on chain. I think Salana is absolutely has to be part of that conversation.

Rahm Al Awalia (47:42)

Yeah, it looks like Solana has the retail use case. Think equity issuance onchain and debt issuance onchain. Like how do you do public capital raises without an S1 filing? At a lower standard of compliance. But you gotta make that square with securities laws which are still not compatible with digital assets. If you have a public offering, then you must fit under an exemption like Reg S for foreign offers of securities or if it's us, then an S1 or crowdfunding, both of which are not really compatible with digital assets. But that is an opportunity for Solana to differentiate from Kantom and it plays into their retail base with Meme Coins.

Austin Campbell (48:28)

And all the rest goes back to the Specialized Venue thing. Right. Like in some ways, you know, I was talking to some folks who have been at Breakpoint and I think Solana really is trying to find its way here. Like people are asking what's the new thing. And what's interesting is when you get a bunch of tech people in a room, the new things they talk about are all like call it more crypto for crypto or very tech related things. And that falls into the story of like what stood out on Solana historically has been like deep in type things, meme coins, like very crypto native stuff. Nobody is built like hyper liquids. Probably the best. But that's very much an alpha version of derivatives trading online. And we've criticized them in the past for some of their like liquidation problems and things of that sort that are not solved. And like Chris has had some very intelligent critiques there. I think Solana exactly as you said Rom right. Is very much in the retail game. And I think if they're going to succeed, it's going to be focusing on that street like they're making phones. That is not an institutional play. Right. As you think of it that way. But on the other hand, name me a chain that's done a better job of genuinely attracting retail and new users. Right. Every, everybody, if they're going to survive, as Chris said, is going to have to find their niche. Me like let me pose a question to the group though. Do we think the blockchain that will have the Most financial transactions 30 years from now has even been created yet?

Rahm Al Awalia (49:55)

Great point. Might not be right on the mark.

Austin Campbell (49:58)

All right, so before we run out of time, one last thing that I'll flip to everybody. This is a global macro show. We should talk about markets for a minute. So. So let's just say that crypto prices in general have not been great. But specifically on bitcoin, so it managed to tag 86k today. Saylor just announced he bought a billion at 92k each. That guy needs to stop buying the top constantly at all these weekly regimes. And Jeff park in particular was out there saying bitcoin's upside is capped by OG holders both continuously selling options and dumping on the market. We've been in a call it slightly chopping downward trend with lower than usual volatility in some ways for bitcoin. I'll start with Rahm. What are you making of the market here?

Rahm Al Awalia (50:48)

Yeah, look, I think you see similarities between AI, which is the primary driver of animal spirits and energy markets and crypto. And the common theme is intensification of competition, which is the enemy of profits. Okay, so OpenAI's got anthropic front running them to an IPO. Google has a better LLM now with new releases that they can actually fund their capex. Whereas OpenAI's got to raise money from the public to meet over $100 billion in future committed spend on 13 billion in revenue. How do you fund that? Either through dilution, you charge your customers. But people are getting free apps from Meta and Google so that OpenAI is the Cisco of this market. When OpenAI doesn't hit their revenue growth numbers, you're going to see a pullback in semis. And you're actually already seeing it now. Marker's trying to price in a discount from the Sam Altman top. They're saying, hey, maybe OpenAI can't credibly deliver against their forecast. We haven't seen public audited statements on this. So in crypto we've seen a lot of movement to the equity markets. DATs were a major part of that. So now you have this crypto investor base in equity markets and they're looking around. And crypto investors focus on momentum. The momentum is not in digital assets. Value actually has momentum now. In my newsletter this weekend, the Lumina Ledger, I wrote about a stock with a pe ratio of 6 times. They provide cable. It's an ancient company. They have dividends. It's called Comcast. Comcast. Comcast. It went up 3% today. They have free cash flow and buybacks. This is the revenge of Warren Buffett. We're going to use two revenge arcs once the empire strikes back. The other is a revenge of Warren Buffett. Overall, what you're seeing is a movement from high beta to the opposite of high beta. So if crypto is intangible, no free cash flow, high beta, animal spirits, psychology, thematic news, the future, the exact opposite. That Comcast. Comcast, that's, that's moving. Insurance companies are moving, Banks are at all time highs now. And I think that trend will continue into the new year.

Austin Campbell (53:14)

Long stable coins.

Chris Perkins (53:15)

When's it going to shift though, Rom? I mean one thing we are seeing from a liquid perspective is we're seeing liquidity starting to look like crypto and liquidity have had very close correlation. And we, you know, we're coming out of QT now. Liquidity seems to be improving, which generally has been a leading indicator of crypto prices. Like what's the impetus that you think changes that trajectory?

Rahm Al Awalia (53:39)

I think what has to happen, People might not like this answer. Okay, don't shoot the messenger, okay, you need to see high beta assets get oversold. People have to hate them and want to puke them. That's one. The second thing is you have to see that the value play starts to top out and that's not happening. It's still gaining traction. People are still rotating into it. It outperformed last week, outperformed the week before. I don't see how that dynamic is going to change anytime soon, especially with the backdrop again of OpenAI and you know the questions around can Oracle deliver on $400 billion in revenue performance obligations of backlog when their current revenue is a fraction of that and their execution risks? It's like the story hangover is significant. Then you also have the US voter isn't actually really excited about AI. They're not, unfortunately. I am, I'm a believer. They're just not. They're concerned about what it means to their jobs. You know, white collar is concerned about it, blue collar is concerned. They shouldn't be. They'll be okay. And they're also seeing, you know, you pointed out earlier around like Trump and Trump coin and the political power around this like those categories just on defense now. So I think you just have to wait for the bad news to get fully priced in that recognition moment to happen across markets. I don't think that's happened yet.

Austin Campbell (55:14)

Yeah, I mean if you look last week at the only one of the previous momentum darlings that had done anything good, it was in the marijuana space because of the rumor that it was going to get reclassified to scale scheduled. So I guess I'm buying like AI to marijuana. But like yeah, I, I agree with ROM values been the thing that's moving like Chris, Elizabeth, what do you make of that?

Chris Perkins (55:35)

I wanted to ask Liz, like, you know we've seen that the these two technologies, AI and crypto are absolutely intertwined. It's hard to look at one without the other. In my mind, you know, look at things like X402 which is a payments capability now with the Internet. The Internet is, is turning into an crypto AI version of itself. But, but Liz, what are you guys looking at? At the intersections of AI and crypto space?

Elizabeth Kirby (55:57)

Yeah, I mean look, I think on the crypto point, first of all, and this is not sort of like you know, necessarily like an immediate kind of commentary on, on, on where Bitcoin is going. This is a much kind of longer term macro comment. But if you are of the opinion, which I am, that as and when and I'm still saying when and not if we can. We can get all this sort of legislative stuff ironed out. We're going to see significant institutional influence with the crypto space in the United States that just don't exist right now. And that's going to fundamentally change how these markets operate and certainly impact the valuation of the assets themselves. Of course. So I still believe pretty strongly that that's. That's coming.

Chris Perkins (56:46)

The flipping institutions in retail still licking their wounds from 10 10. Seriously. I was calling around this week, and I don't think people understand how many people got hurt. Market makers, just like it is really hurting liquidity and risk. But I think, like all things, it gets prepared, it gets repaired in time. You're seeing new people coming into the market. You know, they start with a gateway, like an etf. They're like, wait a second. But to your point, Rom, like, I'm sorry, but I think alts are pretty hated right now. Alts have had a rough go last year, and so it's hard for me to think that we're not near a bottom, you know. That said, we've been talking about a constructive setup for the last three weeks, and we've seen what the markets have done. So now that you're a little bit bearish, it seems, I'll bet you next week we'll be up on bitcoin week over week.

Rahm Al Awalia (57:32)

Can I screen share the David Goggins meme of sellers are exhausted? You know the meme I'm talking about? You see David Goggins in the background.

Chris Perkins (57:41)

It's not an episode if you don't share a screen, man. I don't think we got a screen Share this.

Rahm Al Awalia (57:45)

We'll find a way to do that. What?

Austin Campbell (57:47)

We'll just use that going forward as like the preview for the episode. It's just like Goggins running with this.

Chris Perkins (57:53)

No, Nothing Burgers. Japan is gonna. Is gonna raise rates. Is that a nothing burger? We gotta get a nothing burger in here.

Austin Campbell (57:58)

I was gonna say you're just causing. You're just causing trouble now, Chris. All right. I was gonna say this is definitely the sign that we are at the end of the. The episode when Chris has resorted to trolling Rob about.

Rahm Al Awalia (58:12)

I will accept that. Trolling. I will get the hat.

Chris Perkins (58:15)

Nothing.

Austin Campbell (58:17)

So what? 1. Future merchandise. The Nothing Burger hat. But 2. As always, thank you, everyone, for joining us for this episode of Bits and Bips. We'll be back in one week to discuss more about how the worlds of crypto and macro are colliding. Until then, enjoy your nothing burgers.