The Bill That Could Reshape Crypto In America with Greg Xethalis from Multicoin

Transcript

Nothing said on Empire is a recommendation to buy or sell any investments or products. Alright everyone, welcome back to Empire. This is a special roundup. The lads have not shown up, so I've got my good friend Greg X a Thallus. Greg is a the general counsel of Multicoin and I do have to read a disclaimer which is that although our guest this week is a partner of a registered investment advisor, nothing in this podcast should be considered an offer of Multicoin's investment advisory services or should otherwise be confused for investment tax legal or otherwise or other financial advice. So I I do feel like those are usually sped up or read quietly, but you got to listen to me say it fully. With that out of the way, Greg, welcome to the show my

friend. >> Uh as the resident lawyer at Multicoin, uh I appreciate your demeanor in reading the disclaimer. >> Why do we have to actually read those though? Like who's who's out here suing people for what someone said on a podcast? >> Well, we we need to make we need to make certain that we're not soliciting in an in an inappropriate way or providing financial advice or legal advice or certainly not tax advice. Um so yeah, lawsuits can do happen very rarely, but they do happen.

>> Yeah. Well, I am soliciting Blockworks. Is that acceptable? Is that >> That is very acceptable. >> Uh so Greg, I wanted to bring you on because we are in the heart of you know, hopefully maybe the final days of clarity here. There's definitely a lot of movement is what I'd say this week. So definitely a a lot of movement with clarity. I wanted to bring you on. You are the smartest person I know related to clarity or at least one of them. So maybe we can start with just we can start big picture, zoom in from there. Can you remind folks what even clarity is and how this thing came to be?

>> Yeah, I will cite to one of my favorite quotes. Carl Sagan said if you wanted to bake an apple pie from scratch, you must first invent the universe. Uh so we're not going to talk about you know, how financial regulation works in this country, but it's worthwhile to talk about where the origins of clarity were. And uh it actually is only from about half mile south of the Blockworks studio in uh downtown Manhattan in 2014, um New York Department of Financial Services said, "Okay, here's this asset class. We want it to be available to New Yorkers, but we want it to be safe." And so, they started working on the first government regulation

of crypto intermediaries. And we've seen that iterate with the limited purpose trust company structure in New York, the BitLicense. We've seen a handful of other states, most notably Wyoming, develop state-level regulation, but they were all basically fitting crypto into money services businesses, which uh principally are regulated on the state level as money transmitters. This is, you know, rules that were developed when the telegraph was still a thing to move money. And it's basically imposing on companies like Coinbase or uh you know, BitGo, the same types of rules

that or Kraken that the same types of rules that apply to companies like MoneyGram or PayPal. And um it's not a particularly good fit, particularly when you're trying to cover market participants that are engaging in trading activity or custodial activity versus just taking money from one customer and sending it to a third party. Um ultimately, you know, I was around working on the BitLicense when it was first promulgated. Uh ultimately, we all knew that crypto wasn't ready for federal regulation. But when you think about it, when you're looking at a technology that is global in scope and certainly national in

scope, state-by-state frameworks are, you know, a a stopgap. They don't fit this technology. They're not, from a policy perspective, purpose-built for regulating the crypto economy. But it took a time for this technology and the market around it to grow to the point where we could seek federal regulation. And that led us to, um, you know, a a default status of limited licenses with 54 entities if you wanted to operate nationally. That's 49 states, Montana doesn't regulate money transmitters, so 49 states, the District of Columbia, and the four territories.

Um, that's, you know, Guam, Samoa, American Samoa, US Virgin Islands, and Puerto Rico. If you want to work across the country, you had to go to 54 different licensors and get licensed, be subjected to dozens of examinations from teams that, while well-intentioned, were not well-resourced or from either a dollar perspective or human capital perspective, to examine and regulate these types of businesses. And as we saw in 2017, the first federal legislation was introduced, the Token Taxonomy Act, and in 2022, we saw the first real market structure proposal

come out of the Senate, which was the Lummis-Gillibrand Responsible Financial Innovation Act. That was reintroduced in in 2024. We also saw FIT 21, we saw the DCCPA, the DCA, and then eventually the Clarity Act. And we'll get into what the Clarity Act is, but last year, around this time, almost exactly a year ago, Clarity passed out of the House, and it moved over to the Senate. It was always known that the Senate would be a far more complicated process both from parliamentary procedure as well as more eyes from legacy finance on this bill.

And that has played out. A year later in January, we saw the Agriculture Committee pass their portion of the bill, the Digital Commodities Intermediary Act um out of committee and then uh just uh uh 2 months ago the Senate Banking Committee passed their portion, the Digital Market Clarity Act um the Digital Asset Market Clarity Act out of committee and just about 2 hours ago Senator Lummis released the current state of play draft uh which is a 620 or 30-page bill. Uh fortunately I know I I read all 620 pages in the last 2 hours. Um

>> Chewing through cloud credits over here, Greg. >> [laughter] >> It's my speed reading class that my mom had me take in high school. >> And before before you go too much deeper, remind me who um who actually introduced this and why did it get introduced? Is this for maybe people who aren't as familiar with DC? Was this, you know, a company like a Coinbase or a Uniswap goes and says, "Hey, we need this bill." Or is it, you know, lobbyists? Or is it a senator? Or is it a congressman? And how does this actually come to be? >> Yeah, so the Clarity Act was first introduced in the House by Congressman GT Thompson, who is the chairman of the House Agriculture Committee. So they were the two principal sponsors on the House side.

In the Senate, this was uh sponsored on the banking side by Senator Tim Scott and Senator Cynthia Lummis. And on the agriculture side uh sponsored by Senator John Boozman. And but it's been worked on on a bipartisan basis for and in particular we talk about the members, but it shouldn't be lost on people that if this bill passes, when the president signs his name to that paper, it in many ways is a love letter to the staffers who've been working on this bill for the better part of a decade.

You know, this is people like Chris Land in Senator Lummis's office, Bill Rockwood in Senator Gillibrand's office, Allison Behuniak and and Paul Bolzano on the house side, and a number of staffers that I I won't I we don't have enough time to go through them all. And importantly, I mentioned you know, this is a bipartisan bill. This has been worked on by staffers on both sides of the hill for a very, very long time. And there have been versions of them that of bills relating to crypto that have been led by Democrats like Senator Klobuchar with the DCA, which a lot of the agricultural portion of this

bill is drawn from the DCA, or you know, Congressman Soto who was a co-sponsor of the Token Taxonomy Act all the way back in 2017. So, this has really been looked at. And you asked who introduced it and who asked for it. I think one of the things that people struggle to understand is the industry has been asking for this. We have wanted rulemaking, we've wanted clear rules, and there are a few reasons why that's the case.

You know, the first was the morass of the current licensing and regulatory stack for crypto intermediaries. We're asking collectively as an industry for the federal government to create a more robust but singular regulatory stack. We're saying regulate me, daddy. And the reason why you want to do that is dealing with 54 independent and ill ill-resourced or under-resourced regulators is actually a lot harder than dealing with one really good one. And you're willing to accept stronger rules and more robust oversight because you're going to one

shop, not to 54. And I think that's a point that maybe gets lost forest for the trees from time to time that this is an industry that wants rules. And the other two reasons why we want it are one, creating a cognizable regulatory framework allows US companies to compete with international companies that aren't as well regulated. And that's in in two different ways. One, we actually now have a better framework for consumers, but two, passing clarity gives the US government, and there's actually charges for them to do this in the bill, it gives them the ability to pressure

foreign governments to harmonize their rules with what the US has laid out. You can't go to ADGM or the EU and say, "Hey, go copy what New York State Department of Financial Services is doing." >> True. >> And then the third part is you get consumer protections and a better market for consumers is better for everyone operating in it. >> 100%. Maybe we can get a little more specific into the into into the what it what is the Clarity Act? So, the overarching goal, right, as I understand it is to create a clear regulatory framework for digital digital assets. These blockchain-based digital assets. But there are these sub things, right, where there's key definitions, like how do you define a digital commodity? There are these

requirements, there are these carve-outs. Where what where's the best place to start to actually understand what is this I really I think what I'm trying to answer is what is this what does this actually do and what are the what are the takeaways that people need to know? >> Yeah, I I kind of silo it in four or five buckets. And I'll start with what I view as the most important and foundational part of this legislation, which is the agriculture bucket. So, the Senate Committee on Agriculture oversees derivatives markets and agricultural commodities. They typically regulate only futures-based uh derivatives uh future futures-based products on commodity interests, which is done by the Commodities Future

Commodity Futures Trading Commission. Um the CFTC is going to have a new task. They are going to be a regulator not only of derivatives on crypto, but also spot market participants. And this is the how do we regulate intermediaries? There is some role for the SEC in this because not all digital assets are digital commodities. Some of them are on-chain securities or or yada yada or So, that's the first and most important component. That's what I was talking about on the importance of bringing regulation out of the states and up to the federal level. This bill does preempt state regulation of digital commodity activity, meaning we're

bringing these licenses out of the states and up to the federal center. There still may be money transmission licensing for money transmission activity, but the virtual currency or crypto aligned businesses, that regulation comes up to the federal level. It now will regulate exchanges, custodians, brokers, dealers, as well as reporting for large traders. It will also regulate some funds as digital commodity pools and digital commodity trading advisors. So, it creates a framework that will be nested at the CFTC, probably working with the NFA, the National Futures Association,

in helping to administer the registration not only of the organizations, but also of the employees at those organizations who are involved in trading activity and solicitation. Uh in in most many if not most cases and it's going to look like federal regulation that we already have of these intermediaries. Uh there is also a role obviously for some companies to be regulated by uh banking regulators like the OCC uh and whatnot, but fundamentally this framework seats at the CFTC robust regulation of the intermediaries, something that the industry has has wanted for some time.

Uh and now it's at a point of maturity where we can see that. I would note that there was debate. Uh you know, four or five years ago the question was should this be seated at the CFTC or the SEC? The SEC only regulates securities-related activity, but they do regulate spot markets. The CFTC regulates commodity-oriented activity, but typically only the derivatives markets with anti-fraud authority over spot markets. So there was going to be a decision to be made. We're dealing with digital commodities, things that don't look like traditional securities, no matter how many legal theories you know, the Gensler administration tried to to postulate uh to the contrary. These are

digital commodities that don't look like secure traditional securities. The decision was made, let's put this at the CFTC. They will have a a mandate for additional resources to assist them with uh with implementing the rules and then the eventual licensing and oversight of these parties. So that's really square one, which is the intermediaries. The second component is the one which weirdly got more of the attention, and this is the banking side because it's for most builders in the space is the most fundamental, which is the taxonomy and how we define whether or not an asset or a transaction in an asset is a security or a securities transaction.

And this was really a marriage of two bills. It was a marriage of the House version of Clarity and the RFIA version of uh of of title one. Um It takes the best parts of what the Senate had worked on previously and the House and brought them together in a way that really simplifies 90% of digital assets and digital asset transactions. We're not getting 100% clarity where someone launches a token using a smart contract and we'll know immediately what that token how that token will be treated and

transactions in it are, but what we've what the bill does is it shrinks the field. Previously, you know, 3 years ago, we were still in a world where 80% of the field was unknown. Your red zone was 80% 80 yards. Now, we've shrunk that down where you're only going to have to call a big law law firm and and spend a ton of money on the the last 10 or 20 yards, the true red zone. Uh for most of the field, things will be clear and apparent as to whether something is a security or a commodity and whether or not a transaction in a digital commodity is a securities transaction. And that's a a a really important benefit. Um and it's also

something that's unique about this bill is we're actually introducing disclosure obligations that are very, very important uh for market quality and the evolution of this industry. I don't need to tell you, Jason, the importance uh of disclosure because you guys have done yeoman's work as well as Messari. Um and well, now folded in as well as Messari. >> [laughter] >> But it's it's really something that has been missing in the market and in a perverse sort of way, um you know, under the prior administration, companies were punished for for disclosing too much. Um we had

an environment where uh you know, the the enforcement of our federal securities laws promoted companies or pushed them in or incentivized them towards the direction of launching things that looked more like meme coins rather than productive assets with the type of disclosure that Americans expect and international communities expect on a regular basis. >> Robots [snorts] and machines will outnumber humans on chain, and Peak is how they get there. Peak OS enables any machine to do business on any chain. It turns machines into autonomous actors and liquid assets with ease, giving robots access to capital and the ability [music] to compound their value. That

means funds, allocators, and institutions can underwrite, finance, trade, and route capital to machines the same way they handle any other asset. Millions of new potential consumers for any Web3 service from compute to storage to anything a machine may need without a human in the loop. [music] Head to peak.xyz or click the link in the show notes to find out more. >> I know there's a couple more things to cover. I have a few questions on some of the things you mentioned. So, on the on the first a digital commodity that this idea of a digital commodity. Clarity actually defines this, right? And talks about this idea of a mature blockchain.

I think very relevant for a lot of people listening to this. Can you uh in your in your least legalese way define I'm a founder listening to this trying to understand if my token is a mature blockchain my blockchain is mature or not mature and if my token is a security or commodity. Well, how should people think about this? >> Yeah, so the the maturity test was in the house version and it's been reworked a little in the Senate version and it really goes towards a couple of things. So, the core definitions we have in the Senate version of clarity are is something a network token or and is it an ancillary asset? A network token is one where the value and the operation is

defined programmatically by the operation of the blockchain on which it sits and the smart contract or or blockchain code that launches that token. So, it's something where I think the most fundamental way to think about it and narrow it down is is this token something that draws its value and its purpose from things that are hardcoded and its use on a system that is in fact decentralized. When we talk about decentralized, we're talking about is there unilateral control over the blockchain or the smart contract on which the token relies. If there isn't unilateral control

by a party or group of parties operating in coordination to control that, then that system is decentralized. Now, let's be clear. In legislation in the US, typically the way this works is the legislation itself puts out the core foundational principles of the law and then pushes rule making to agencies to promulgate rules that interpret and apply those those those mandates. That's the way it always works. The reason we have an SEC is we had the 33 Act, the Securities Act, and the Securities Exchange Act, the Securities Those two acts laid down the principal laws followed by many other federal

securities laws like my favorite, the Investment Company Act and the Advisers Act, but the 34 Act created the SEC to actually administer the federal securities laws and write the rules. On the commodity side, we had the uh Commodities Exchange Act, which created the CFTC. The CFTC writes the rules. On the banking side, there are panoply of different statutes that have come out, which created things like the Federal Reserve, the FDIC, and the uh OCC. Um, and all of those agencies go ahead and promulgate the rules along with Treasury main Treasury.

Um, so there is going to be a lot of interpretation particularly assigned to the CFTC, the SEC, and Treasury in creating the rules and providing clarity around some of these definitions and how they will actually interact once they hit the market. Um, and there's a lot of rule making in here. >> Yeah. >> So, the lawyers' job doesn't get easier after Well, for everyone who's worked on clarity, we're shifting from focused on legislation focus on legislation to focus on rule making, and we're all going to be very, very, very, very busy.

>> Yep. Seems like the lawyers keep winning, Greg. >> Keep winning. >> the rules. >> Keep winning. >> So, but that that's the nice part about this, and you know, I love my colleagues who are still in private practice, um, but I would prefer our portcos not need to pay for a second summer home. >> Yeah. Fair. >> One summer home is enough. >> One summer home, just one. Um, talk about the uh uh maybe some of the carve-outs and some of the maybe let's talk DeFi um and what has happened as this bill has as moved forward uh with DeFi.

>> Yeah, and that is uh the third component uh the third sort of sort of pillar which >> I would you know that's the you know bring you back here Greg. >> Yeah, it's uh we'll meander a little bit. We're not Odysseus but we'll get there eventually. Um you know one of the core components of this bill is developer protections. And I would articulate that it actually comes back to where we started. The first guidance from any government body in the world around crypto was uh a guidance put out in 2013 by uh FinCEN, the Financial Crimes Enforcement Network which is the division of

Treasury that looks at you know illicit money activities and administers the Bank Secrecy Act. Um FinCEN put out guidance in 2013 that ultimately said in respect of Bitcoin and other convertible virtual currency was the uh ill-gotten name they chose to use. Um they said that if you were a user or developer uh you were not a regulated party.

If you were an exchanger or an administrator then you are. And this is the core component. This is where when we talked about decentralized systems is there a party that exercises unilateral control? If you are launching code regardless of what that code is, if you're writing code, if you're deploying it to a blockchain, you are not an administrator of a financial system and not a regulated party unless you after that launch are actually administering a financial product and operating it.

So, that's the core of the initial starting point for US regulation of crypto and we return to it in clarity and we provide greater definition of it. And the two components that I think are most important in this are the Blockchain Regulatory Certainty Act uh initially drafted by Tom uh Whip Tom Emmer, uh a Republican, and uh the great New York Congressman Ritchie Torres, a Democrat, uh in the House. Uh subsequently introduced in the Senate as a standalone bill by Cynthia Lummis, uh a Republican of Wyoming, and uh Ron Wyden, uh a great defender of open-source software as a Senate Democrat Senator of Washington.

>> Fun fact, I interned for Wyden. >> Aha, that's why he got so smart. Now, he's been developed He's been pro- promoting uh the protection of open-source software developers since you were in diapers. So, uh he is an absolute legend. >> Yeah. >> And, you know, the bill itself gives certainty to software developers that writing code is not a crime. That is a restatement of the law, but it's very important that we have that in in this bill and we take a stand and we, you know, plant the flagpole in defense of developers because I can guarantee you one thing, the best way to lose the future is to loot con- lose

control over science and technology and the best way to do that is to force our builders offshore uh and you know, th- this bill seeks to bring them back on shore. Now, there are other components that relate to to developers and the broader scope of illicit finance. And some of them are really important. I would I would articulate they're actually really important for DeFi. One of them is something that I know you know, Democrat senators including Mark Warner worked hard on with their Republican counterparts, which was a title that actually calls for rule making to define what isn't DeFi.

What isn't DeFi is something that we need to actually lay out in order to be able to protect DeFi. And so that will be a very important rule making that Treasury will go into and that again is expected to touch on this concept of of control. Um So those are really, really important pieces also within the illicit finance side and the DeFi side, there's going to be resources including task forces, studies and allocation of funds for training and this is really about making sure the federal government, law

enforcement and the relevant agencies have the resources and capabilities to deal with the crypto economy and the legitimate concerns that people have. Now crypto's a much poorer or worse technology for bad people to use. It is really hard to to to launder money using crypto and it's really hard to you know, engage in illicit activity generally. We've seen this historically and you'll see a tabloid headline of oh, we caught the you know, this this bad actor using crypto or these bad actors were using crypto. Well, we caught them and that's the core point. The blockchain

introduces radical transparency and a ready availabili- availability of information to be ingested and analyzed. It's why companies like Chainalysis, Elliptic, TRM, Blockade have tremendous products and have invested a lot of money into blockchain forensics cuz there are customers for this because it's a really bad way to do bad things. You get caught. And this repeats throughout history. But at the same time, we have to recognize that we've got to shift the tools that are being used. And this bill does two things quite well. One, it invests in ensuring that the appropriate tools are used for this technology and this economy, not simply trying to use yesterday's tools to fight bad actors on tomorrow's

platforms. Uh you know, the legacy financial system relies on suspicious activities reports, uh currency transaction reports, which are submitted, you know, a couple weeks late and are read by someone eventually three, four, five months after the fact. Well, in crypto, what we need to do is we need speed reading. We need Greg's ability to read 620 pages in 90 minutes. We need the ability to have automated systems using our friends in AI land uh to ingest data, coordinate with regulated centralized actors that will be now regulated at the federal level under this bill, uh as well as the forensic firms and great folks like the the folks over at

the SEAL Alliance, the Security Alliance, who have been begging for public-private partnerships to actually mitigate the use uh the use of blockchain for illicit activity. And it's worked on voluntary and private-driven initiatives and credit to the Treasury Department, particularly Tyler Williams, but also the the folks in uh the various divisions of Treasury uh like TTF and whatnot, that have taken time to work with industry to create these solutions and figure out what they need to do. But the bill in particular creates resources for education both at the federal level and the state and local level, coordination, and most importantly, it opens up the possibility

for these true public public-private partnerships through allowing of information sharing. And I'm still just desperately waiting for the SEAL Alliance to get a Batphone where they can call up Scott Bessent and say, "Commissioner Gordon, put me in, coach." Uh but that's how we win. >> Yeah. >> That's how we win. >> Indeed. Polymarket is getting into what's happening this week. Polymarket I guess, you know, maybe multicoin's a caliche shop here, but uh you know, can still show Polymarket here. So, Poly- Polymarket's showing a 37% uh chance that this gets signed into law in 2026. Uh fun week, right? We went into the week and we were at 31% chance. We popped on a couple of tweets to 49%. So, we, you know, went from 31 to 49% and

now we are back down to 37%. Walk me through, Greg, I think two things. What happened this week? Um and and really, I think the most important is where where does this go? Does this is 37% priced correctly? >> Um So, I refer to it as Schrödinger's bill. I think we will know if it is dead or alive only when we actually see the vote. Uh it's a a scenario where I don't think we'll have 60 people committed to a yes until it's on the floor.

But there's a world where we get yes votes well more than 60. Um and you know, when you're looking at the math and you're counting the whip counts and and just talking for a moment on parliamentary procedure in the Senate, the Senate is the world's greatest deliberative body because it takes 60 votes to get something done. Uh in the House, a simple majority rules the day. In the Senate, there are procedural votes and those procedural votes often call for 60-vote uh margin in something referred to as cloture, uh which is ending debate and moving forward. And so in the in the Senate, we've got to work with how do you count to 60?

Different offices have different issues that they care the most about, and there still are a couple of areas that would be considered open on the field. The two areas that are probably most open on the field is ethics language, which was released to the public for the first time when Senator Lummis released her draft this afternoon. The second component is there's still some negotiation around what you would refer to as as developer protections, but it's really conjoined with illicit finance and you know, negotiations around what is the real appropriate way to apply the law to decentralized systems.

I think there's a clear path to getting to good on all of the bill. What is harder to interpret and articulate is what type of ethics language is a good enough fit for everyone to hate it enough that they pinch their nose and and and vote yes. >> Right. What does this you know that we got a bit of a horse in this race a little bit with the you know the stuff that we're doing on disclosures. And I'm curious like as maybe if you were guiding Blockworks a little bit and guiding the exchanges who maybe have to do more disclosures and the token issuers themselves have to do more disclosures. How should how should folks be thinking about what

this means for disclosures? >> Yeah. So as a first and practical matter, I think we need to accept and understand that if this industry is going to be at the forefront, we need disclosures. It it's table stakes for for operating in a responsible way and to grow the economy writ large. Now, what that doesn't mean is that projects or exchanges should be overly burdened. Uh and, you know, it is possible, if not probable, that we're going to have rules promulgated by the SEC and the CFTC that are annoying. Uh we've seen that with

um you know, public equities markets where we've made disclosures so difficult that companies stay private. Companies stay private not only because there are mega private equity funds that are willing to cut, you know, you know, seven, eight, nine-figure or and sometimes 10-figure checks at huge valuations. We've gotten into this scenario because access to public markets and equities is a privilege, not a right. >> [snorts] >> And the big trade-off is you pay through robust disclosures. Now, whether you're on form S-1 or N-1A or what have you, when you go public in this country, you

are signing up for a lot, a lot of legal and compliance costs. At its core, it's a justifiable cost, but we also need to make sure we right-size that. And I think that's been one of the priorities of Chairman Atkins is trying to bring us down into a world where we're focusing on what are the core disclosures for our public equity markets that the investing community actually needs, and how can we deliver that with what he refers to as the minimum effective dose of regulation. We've gone too far in public equities markets.

Hopefully, we bring back IPOs by by right-sizing that. We're going to be doing this de novo for digital asset markets, which means we need to figure out what are the disclosures that actually matter for projects and how do we get them out in a way [clears throat] that doesn't overburden the parties who are doing that. And one thing that I'm quite passionate about is the need to in that consideration process remember that digital assets by and large are not like traditional equities.

The party that originates the digital asset at the time of origination has access to information that might be more equivalent, not exactly, but more equivalent to a traditional securities issuers. Traditional securities issuers, the information relevant to that security is personal to the issuer. In most cases. In the case of digital assets, the further you get from launch the further away from from TGE the less control both of the token and the information relating to the token because these are open source projects.

Uh and I'm referring only to open source projects at this point, not, you know, tokenizing equity. Um so we need rules that acknowledge that and that also these are open source systems and you can pull rules from, for lack of a better term, the ether. And or the Solana or or or whatever chain is your favorite. Um and so we need to to it it's going to be a lot of hard work. I expe- expect if uh if this bill passes in the next handful of weeks and is signed by the president in a month or two that I'm going to be spending a lot of my time around disclosure rule making and commenting on the process to ensure that this is uh

you know, properly right-sized. But companies should be thinking uh companies that are building in the space, whether you're an exchange or you're an originator or a foundation, you should be thinking about the types of information that um that would be warranted in disclosing, and you should be thinking about engaging with the SEC when rulemaking starts that sets forth those disclosures. Uh the rulemaking will come in two channels. The SEC will have principal rulemaking authority around the uh disclosures uh for network tokens and ancillary assets.

Uh think about ancillary assets as tokens that are being sold in capital raising formation uh in capital raising transactions. And for those types of uh uh for ancillary assets, you will have more robust disclosures. For network tokens, it's going to be a little bit different. Um and you might think of network token that is not an ancillary asset as something that is more mature or decentralized. Passes the Bahamas test, if you will. Um but, you know, thinking about what types of information and, you know, talking to someone who's probably a little actually a little bit more expert on this than me because if you look at stuff that's in the token transparency framework, that's going to be a lot of

the core of what's involved. There's going to be some information that looks more like traditional securities markets information for some issuers, for some originators. That's going to be corporate information, and there might be audited financials, things like that. These are going to be assessed in rulemaking and and really driven, but a good starting point to understand what, you know, the the types of information that are likely to be needed is starting at looking at the people who've been already building this on a voluntary basis, like the token transparency framework.

>> Greg, as we think about wrapping up, anything else that um whether you are investing in tokens or building something related to tokens or just building anything in digital assets, anything that is uh relevant for clarity that we people should know that we didn't cover? >> Yeah, I think you know, there there are some other components that touch on what I would consider the more TradFi side of of crypto. Um there's going to be some rule making around real-world assets uh that'll come out at the CFTC and the SEC. Uh this relates to project crypto, which is the joint effort of the SEC and CFTC tied to their harmonization

process. Uh uh and in addition to that, there's some touchpoints on genius where some tweaks and fixes to the stablecoin-related regulations that are in the process of of being finalized by the relevant authorities. Um but beyond that, also a big unlock from clarity is, to be frank, you know, it it's going to bring more institutions into the space. Um and that's not because the US government is blessing uh crypto. It's just that the US government is creating rules that make it easier for regulated entities to engage with the space.

Clarity does not legitimize crypto. That is only something we as an industry can do for ourselves, and part of that is adopting good behaviors on our own. Part of that is maturing as companies within the space, and part of that is pushing for what we've done for the last 10 years, which is asking for for reasonable regulation to allow us allow us to responsibly innovate. So, I do believe that clarity does advance the ball in that regard, and does a lot also for the intersection of of project crypto, where we're starting to bring more of traditional finance on chain.

Um, and I think that that's important. But again, uh, you know, when when we're looking at the charge for the the people in the industry, this is not the destination. I hope that we are not Sisyphus pushing a boulder up a hill and turning around at the start of the 120th Congress and realizing that the boulder is back at the bottom of the hill. But the the you know, the the journey does not end when we get to the top of the mountain or or the hill. Sometimes it feels like a mountain. Uh, the journey doesn't end there. On the other side of this mountain, we've got a fast-moving boulder, which is going to be rule-making.

And we need the crypto community, uh, both the more tradfi side and the developer side, to make sure their voice is heard. The principal task in making sure your voice is heard is get on the phone. Write an email. Write an a a a letter. Contact your senator and explain to them that, you know, you are making your living in this space. You if you're a founder or builder, you are creating jobs and creating technologies that we don't intend to be, you know, memified. We're creating things that are meant to be sustainable.

And this bill actually allows that to occur. It promotes disclosure. It actually creates a viable path for value capture in tokens themselves as part of the taxonomy work. And those are hallmarks of how we make this a sustainable ecosystem and build products that matter. And if you want to if you want to be legitimized, it's not from a piece of legislation, it's from building a product that works and works long beyond your involvement. So, your involvement right now is letting your voice be heard both to both in advance of the votes that we expect to occur over the coming 2 weeks and also after we pass this bill,

letting your voice be heard in the rule-making process to make sure that the rules are consistent with the reality of your experience building and using this technology. >> Yeah, well said. Greg, thank you for this and thanks for all your hard work on Clarity. Let's hope it passes. >> Absolutely. We are going to win. >> Indeed. >> All right. >> Thanks, folks. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects

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