Is Crypto Winter Over? Crypto M&A and VC Fundraises Suggest Yes: DEX in the City

Transcript

Hi all and welcome to Dux in the City where the wallets are cold and the takes are hot. Before we get going, remember we're lawyers, but we're not your lawyers. So, nothing you hear on Dux in the City is legal or financial advice and it doesn't create an attorney-client relationship. For the fine print, as always, check unchainedcrypto.com. So, first we have V from the SEC to Web3 and I'm your host Katherine KK, fluent in TradFi and conversant in deep tech over at StarkWare. Jesse is out today, so we are absolutely thrilled to have a fantastic guest for you today. And we are welcoming Josh Reismann, Chief Legal and Strategy Officer at GSR. I have known Josh for years and he is really, honestly, sharp

as a tack. Um he spent years in TradFi at Deutsche Bank and SocGen and then worked on product at and regulatory legal at Circle before he moved to GSR. He's also a board member of a digital asset treasury company, so that's a conversation for another day. We're going to mine your brain on that. Josh, thank you so much for joining us. Thank you both for having me. It's great to be here with you. This is super exciting. We're going to We're going to keep it spicy, but we're going to be kind to you, I promise. So. >> [laughter] >> I expect nothing less. Yeah, yeah. Tons to talk about and of course our plans for the pod went out the window this morning when we all woke up to see a new draft of clarity drop. Oh my goodness, it's what what every uh crypto legal

person what what every crypto strategy person loves to see. It's like I had stuff to do today. Now I'm going to have to squeeze in reading and analyzing uh new draft, which is over 300 pages on my agenda, which is but but it's fantastic. So, just as a refresher before I turn it to Josh to give his thoughts and then V because we have three very different perspectives here, a lot to say on this. Obviously, the Clarity Act is the comprehensive crypto market structure bill that we are all hoping and praying for because it is very difficult to future-proof this current regulatory environment without legislation. The next step after this new draft is for a markup this week where committee members

will debate amendments and vote on whether to advance the legislation to the full Senate. This is really important because this bill needs to move. It It really needs to advance before the Memorial Day recess. So, the Senate needs to vote. Then the bill needs to be reconciled with the House version. Then if all goes well, the president signs the bill. We are already seeing major banks and Democrats trying to kill it uh despite a compromise with banks, with TradFi and crypto on the yield provisions. Um the Democrats are really upset about this bill basically on ethics grounds. They want a specific ethical provision added.

In fact, Elizabeth Warren already released a statement damning it, which I think she probably should have waited a little bit longer because it's very clear that that no one was able to read the bill. But, we'll put that aside. So, all that being said, I still think we have quite a long road to go before this bill actually passes. But, Josh, let's start with you. What are your thoughts on this? I mean, I assume that you've had a minute to read all 300-plus pages in the middle of the night, right? Exactly. Well, I I think it's just like worth appreciating for a second where we are. It's a super exciting time. And for [clears throat] some extent, we've been I'm going to since we're on Duxford City, I'm going

to be a spicy. We've been held hostage by the bank lobby to address uh stablecoin yield, which was already addressed in genius, but we're we're we're readdressing it. Uh and there's been a bipartisan compromise reached by senators. This And this has been held up as the main issue holding back um you know, clarity coming out of banking and then the full draft coming um at together with the House Ag version out of the Senate. But what what we all know is that was just really one issue um and not the final issue that we're going to need to get to to get this over the line. But we can't take away the fact that we just got a new draft today.

There is serious bipartisan engagement in crypto market structure bill in the in the Senate. I think this is one of if not the only bill really moving. And so there is real energy and we're closer than ever to clarity. Uh to getting you know, a clarity act passed out of the Senate uh at the very least and and comprehensive legislation. But we're we're still we still got a lot of work to do. And I think it you know, I think our view at at a super high level is it's hard to to look at this that better than 50% yet. But that this was a crucial step to get the draft out today.

We're all going to have to dive in again and now start addressing what are some of the remaining issues. And we know and you and you touched on some of them. We know conflicts is an issue. It just will be an issue. If at the end of the day we need eight Democrats at least to come over and and vote for this legislation. The Democrats are not going to give the Trump administration an easy win. That's just the political dynamic on the house and there's going to have to be some some issue to address ethics. Maybe not directly as it relates to uh you know, the administration's involvement in in in crypto or the administration you know, the president's family.

But at some level to address conflicts both out of the executive and the judicial branches. We know that in the crypto industry protections for developers are critical. And to to really gain um uh you know, widespread support of the crypto industry that there we get this these protections kind of enshrined in a way that the industry feels at least comfortable is getting us something. Um a That's a huge one, Josh. And And sorry to interrupt, but that is one point that I saw specifically, you know, Peter Van Valkenburgh called out the fact that this draft has a small change to the Blockchain Regulatory Certainty Act, the BRCA, which is sponsored by crypto's friend Tom Emmer.

It's legislation designed to clarify that developers and non-custodial service providers are not money transmitters provided that they don't control user funds. It has a little small change. And it preserves the ability to charge 1960, the criminal statute, only in cases where a person acts with specific intent and knowledge to help someone else move criminal funds. So, there is a sense that one really jumped out at me. I think that's incredibly important from the crypto perspective to have that, you know, specific intent requirement in there to charge developers. Everyone's fine with with charging a developer if they had specific intent to violate money laundering. That's, as we know, a higher

standard. Until then, like I I think that's a that's a material change. I don't know if you have any other thoughts on that, but that was like a big view from certain sectors within crypto. I I Yeah, sorry. Go ahead, Amy. Go ahead, Josh. I have a thought, but you can start. No, I I was just going to say that my sense is without, you know, being uh deep into the the actual drafting yet is on this topic specifically, we again go for whatever. And that we're we're actually reaching a point where I think um this part of the industry can support the bill. And uh that's not where we were several months ago. So, again, super excited. Yeah.

Yeah, I was just going to say on the specific intent point, I think it's a a really important addition. My thought though is that I think in practice, I don't know if it will make a big difference, right? I think in practice prosecutors sort of like knew that they had to prove specific intent anyway, and that's actually what they tried to do in um the Tornado Cash case, right? Like their argument was they created this thing with the intent of, you know, having bad actors use it to launder illicit funds. And And you know, in practice also, like when you have a a requirement in a criminal statute like specific intent, a lot of times like

you're not going to have direct evidence. Like there's not going to be an email between North Korea and like Roman Storm, right? Like there there there actually is not an email that exists like that. Like it's not like the prosecutors are pointing to that kind of evidence. In practice, specific intent is almost always going to be proved through circumstantial evidence, Yeah. which is what they tried to do in in like a case like Tornado Cash. So, I don't know how much it'll matter in practice, but I do think it's good to have that specific element included in the in the language. >> You're right. They they doesn't None of this is going to stop aggressive prosecutors necessarily from bringing you know, the the >> [laughter] >> accusation indictment. Although, I will say, we don't have Jesse here to put

this from the prosecutorial perspective, but as a long-time criminal defense attorney, I give prosecutors the benefit of the doubt. Like prosecutors don't bring cases that they think that they don't win. They don't want to waste their time. It's also a department uh resourcing question. I think also we need to define specific intent here for our non-legal listeners. I have to say I was so heartened and excited when a member of my business development team, who is a very young Degen, told me that he listens to every episode of this. So, I was so excited cuz I was like He's like, "This is the only pod where I don't just summarize it on AI." So, shout out to you if you're listening, you you who you are. But I'm going to explain specific intent really quick for

those degenerates who are listening to this that aren't lawyers. We You're an important part of our audience. Specific intent is different than intent. Intent is just like intent to do the act itself. Like I'm going to hit somebody. Specific intent is the mental state where you not only intend to hit somebody, but you also intend to bring out bring about a particular result. So, like for example, I intend to hit you to murder you. That's specific intent to kill. Whereas that You can see You can see the distinction between general intent and specific. You want to bring about a certain act. So, this term seems kind of nerdy and niche, but it's actually really important for developer protections. Yeah, it's also important to distinguish specific intent from mere

knowledge. Right? So, like it's possible that you could create like some sort of privacy tool for legitimate purposes knowing that maybe it could be abused by bad actors, but that is not enough. You need specific intent to want them to do that. That That must be the purpose for creating it. Right? So, that's actually I think a really important distinction. Right? Because, you know, like I think a lot of the developers of these tools would say, "We didn't create this because we wanted bad actors to use them. We created it because people legitimately need privacy tools, right?

For transactions." Um and if the prosecution can't prove that, you know, like that that's not true, then they won't meet that element. And so, that's the other reason it's really important to have that element. >> Yeah. Yeah, totally. So, one question I wanted to ask, Josh, you had a long time TradFi background before you went to crypto. Uh So, I I think actually it's really interesting. We talked about this before on the pod, but people like Josh, um and and, you know, and myself who also has a TradFi background, but Josh is more of a TradFi background, are uniquely valuable at this point in time because you can speak both languages. Like you understand having grown up in a bank.

You understand how TradFi thinks. What are your thoughts around how TradFi feels about this bill right now? Aside from obvious the obvious fact that >> [laughter] >> it's not good to have crypto market structure legislation that's going to help all these upstart crypto companies disrupt market structure. >> [snorts] >> I mean you we I think the the the kind of simple argument is banks don't want crypto because crypto is some kind of competition. I I would tell you and I think for those of us that were just in consensus in Miami for consensus would tell you is I think most larger financial institutions are licking their lips and super excited about engaging digital assets. When you walk into the

main hall in consensus, you used to see Uniswap, um other DeFi protocols. Now it's JP Morgan with one of the largest things. And we could we could talk about what that is, but I think and when you engage with them and at and at Morgan Stanley and at BlackRock, I mean these folks are all in. They're hiring across the board. Um in fact I have a colleague on our team who's just tracking the hiring from TradFi to kind of see where they're where they're focusing. Um but this is a real growth opportunity. And it's not just uh I kind of the investment in the assets, it's the overall infrastructure.

So I'd say two things. Well, one is how can they kind of create new products to sell? Look at the new Morgan Stanley uh uh Bitcoin ETF, right? Hundreds of millions of dollars right out the bat. Um because they have a distribution pipeline, there's demand for these products. That's a new asset. The second piece is is is painfully obvious to anybody who worked a long time in TradFi is how can we use blockchain rails uh to improve our business, right? Increase the time of settlement, um make uh money uh make assets more creative, uh increase the velocity of trading.

These are all things that are made possible by blockchain rails. So forget about crypto assets themselves, but that traditional finance stayed away from because of the the, you know, the the gray the grayness of the markets, which which was kind of never really justified. And so now with the kind of the guidance coming out of Congress and with clarity, I think I think they're all ready to go. So, I think what the the real concerns you've seen have been in the smaller banks and in the smaller institutions that are going to have a tougher time competing with more competitors. But at the larger scale, I think it's a it's a huge opportunity.

Yeah. We're at a critical point and I it's so you're spot-on in that for the longest time, I would always say econ 101, Bitcoin has all the attributes of a successful currency, but the one thing it's been missing is a clear set of legal and regulatory guidelines. So, if we have clarity in the mix, that's that's the puzzle piece. Like that's the last piece to unlock all of the attributes of a successful currency. And I I think we're seeing that real time. We're seeing the TradFi DeFi convergence. I absolutely felt the same vibes at Consensus. Like there were so many suit jackets. Like there were ties, but there were suit jackets everywhere.

There were so many vests. Like so many vests. Like a lot of Patagonia in the room, which is fine. It's comfortable. But into your point, it's like, all right, so I think it's worth level setting again on clarity. What is it that I mean, I'm going to give you the GSR perspective. What do we what do we hope is achieved here, right? And it goes back to is is is a bill better than no bill? Here Here are my my two main tests. One, are we making the US a center for innovation in the blockchain industry, creating the conditions? And that's part one. Um two, are we um creating a scenario for deep and robust markets in the US that draws liquidity that is otherwise offshore? Right now, most of the volume in both crypto spot

crypto and crypto derivatives is happening outside the United States. That's unusual in the context of any financial asset. And so, what what we hope to see in clarity, and I think was initially addressed, was being more specific is where is the line between a security and a commodity? How do we know what we can deal with and in what markets such that by engaging with crypto assets, you're not automatically caught offsides by making a mistake. So, in the initial drafts of uh clarity, we had we they introduced this kind of through the Lummis draft, the concept of an ancillary asset. And you'll see that in the the latest draft as well.

That's now been modified over time, but the idea is when you issue a crypto asset, the asset itself is set to be separated from the offer and sale. It's super important to crypto that we have clarity on the secondary trading of crypto assets and whether those continue to be uh you know, classified as securities or can be or they're they're designated as commodities. And so, one of the things we're going to be looking at really closely in the draft that was released this morning is how are they treating this secondary market and when does that separation occur if if it needs to occur, right? And and and there's been some modifications over the past several drafts and we can we can go into some of this if it's worthwhile, but the crucial point is do I know by looking at it or do I have to do kind of investigation?

Listen, just our spent millions of dollars doing Howey uh analysis on tokens under the previous administration. >> [laughter] >> I was like every project. Exactly. And and at the end of it, I think you would look at it and say, "I'm not sure I know much more had I not done that analysis." cuz these are very subjective analysis done without subpoena powers, right? Just based on public information. So, any uh kind of outcome that requires third parties and intermediaries, uh maybe other than exchanges, to somehow do an analysis, I think it's a tough outcome for the industry and not something we have to do in in other markets. And you know, I'll just give you one example to to touch on the tri-fi point. If you think back to our our futures days, right?

The Cosby future was a index commodity that would sometimes switch to be cuz if it gets so narrow, it becomes a security. It's one of the few products that would switch back and forth and it created tremendous agitation. Exactly. And if in crypto that's happening across the board, that's not a suitable basis for which to rely industry. But it's tough. We can't We have to make sure obviously and people have raised good points that what you don't want clarity is some end around the securities law and that's not the goal, but we do need to know what we're dealing with and have some some confidence that in the secondary markets you're not accidentally getting caught off sides. So, interesting you guys thought but but that this to us is just

crucially important if we're going to have a bill at all. Yeah, and this is actually a perfect transition point to our next topic because we're going to touch on public companies releasing tokens, which is obviously a unique aspect. But before I moved on to our our second topic, very quick lightning rod, V Josh. I am shocked that Polymarket has passage of this bill. I believe it's 70%. I want to hear both of you very quick lightning rounds. Like I would say I'm going to put myself at about a 35% chance of passage at this point in time.

What is your What is your bet Wow, okay. So, the last Okay, last episode I think you were at like 25. I was at 20 to 30. Now I'm at 35. Like in I was at 60 last week. So now, I think I'm at I'm at 90. Passing? I think we all have to actually spend time with this latest draft, but the feedback that I'm seeing so far and the the or two sections that I have we're going to dig into I think are real improvements Wait, but to be clear really good about this. I'm at 35 not because I don't think the bill is good.

Like if if I I I am I am dying for the passage of this bill. Like I please pass. Please pass because I'm terrified about the prospect in 3 years of this not passing, but I think like this percentage is I just don't think it's going to work out because I think everything a multitude of things need to fall in place for this to have the kind of momentum that it needs to pass. So I just want to say that I I think we are there or very close on pretty much everything. I think the two things that could hold it up, right? Is if the bank lobby does not back down and Congress feels pressure to give them even more than they've already given them and then of course the ethics stuff, right? Yeah. Those are the two

things but I I don't I think those are doable. Okay. Fingers crossed. I think we're close. Fingers crossed. So I don't know. Maybe I'm being like way too optimistic and we can Let's revisit this next week and see where we are but I I'm feeling so good about it right now. Josh, where where are you? I'm at 45. That's up from my previous 30 on the basis that I think there's going to be a lot of support for this legislation and in fact a lot of money that is going to be behind it, right? To to push this legislation forward but I am dubious at the end of the day that given the current political situation the Democrats will be willing to give Trump a win here

because ultimately he's tied himself very close to crypto and passage of the Clarity Act would be I think a success for the administration but I think as you know, overall American citizens interested in the crypto industry, I hope it passes and I think it'd be good for everybody but it's it's it's a tough political um, like like any like any good bill. And so, uh, you know, let's see what happens. Better, better, closest than we've than we've ever been, for sure. 100%. Okay, fingers crossed, fingers crossed, cuz I keep joking about this, but, you know, in 3 years, I really don't want to have to sell myself to a law firm and go make $10 million a year defending all the crypto companies that are getting sued by various regulators, guys. Like, don't make me do that. Don't make me do that.

>> [laughter] >> Anyway, okay, so, on uh, positive note, I mean, actually, we have multiple topics this week. Like, what is going on this week? I want to talk about crypto spring. Is it crypto spring, right? So, the reason I'm raising this is, obviously, prices, especially with altcoins, have been extremely anemic. I think there's definitely a sense that we're in crypto winter. But, all of a sudden, we're seeing a slew of activity that can only be described as bullish. One, M&A season. Like, last week alone, we had MoonPay acquiring DFlow, Bullish acquiring eQointee, I may have butchered that name. Kraken's uh, parent company,

Payward, acquired Reap. These are big acquisitions, big numbers. Every week, it's multiple acquisitions, very strategic acquisitions, crypto companies acquiring companies to fill the gaps, to enhance their offerings, to make them more comprehensive. And at the same time, we are also seeing huge raises. For a while, there was a lot of chatter about how crypto funds were over. You know, all the money was leaving crypto and going into AI. We're And And to be fair, we're definitely seeing that to a certain degree, but we had absolutely massive funds from a16z and Haun Ventures announced last week for crypto, not for AI. And we're also

seeing some pretty significant raises, one from Digital Asset, which built Canton, the company all of crypto loves to hate. Um and then boom, a Circle raise of 222 million. I love that that nice round number. I mean, I wonder if that was done by design, like a real estate broker, you know? From BlackRock, Apollo, other premier names in Arc token pre-sale valued at 3 billion. So, a reminder, the Arc uh it is basically Circle's layer two, and they're doing some really interesting things with it. They're building a lot of quantum resistance into Arc. Uh it was a little bit controversial for them

to be building their own L2 as opposed to, you know, I don't know, building on StarkNet or other great L2s, but fine. So, obviously, enormous buzz around Arc. But, we're in the situation where we're having all of this great news, we're breaking new ground, we're seeing actually a public company releasing a token. I never thought I would see this day back in '22, '23. But, Josh, this actually goes to your point of what you were referencing earlier about how we're now finally seeing some clarity from the SEC.

The their recent guidance on how, you know, first of all, most tokens are not securities, but the token is distinct and different from the investment contract, and that can be broken apart. So, my take on the Circle news in particular is that Circle, as a public company, has gotten the confidence from the regulators to say this token is not a security, we have a legally defensible position to sell this token, to work with this token in a way that de-risk it risks it. Do you agree?

Yes, there's kind of the legal side and the and the commercial side. I think I think the interesting part is this is let me kind of frame it up for a second. But, this is just ours like fourth bear market. Every bear market in the crypto industry gets together and it says, "Is this time different?" Meaning, are it is the industry going to come back? Are token prices going to come back? And, you know, each time we've come back bigger and better. But, you again you ask the question as you should when you're underwriting any business or endeavor, is this time different? And when we when we look at the market, we we definitely see the industry changing in really exciting and profound ways. So, at some level, there's no doubt to us this time may be different, but that doesn't mean, you know, the major asset prices aren't

coming back. And that doesn't mean that projects are not going to release tokens when it makes sense either for them or their project. I think what we I think what we'll see with the increasing uh clarity is projects releasing two different types of tokens. Real true value accrual tokens that may in fact be security tokens depending on the guidance that comes out and trade in securities markets, and then true utility tokens that make sense and that ultimately, uh you know, releasing tokens uh in in ICOs has proven to be one of the fastest and and uh uh most lucrative ways to raise funds, right? We've seen it since the ICO days that releasing a token that's in high demand is an incredible way to

raise money. And so, the the the desire for companies to do that, even public companies that have their own equity, will be really high. And so, it's hard to sit here and say uh either one of two things, either innovation in crypto is over, which at the eve of of clarity seems I would take the other side of that bet, or that uh token projects won't look to use a token to raise funds and or um you know, uh you know, bootstrap their ecosystem. And I think we're going to see more of it and I think we're seeing some kind of big players uh kind of line up behind that thesis.

And I think we're going to see some larger players step in as well. And you know, it's so interesting because I've always railed against the concept of crypto native companies solely relying on tokens as their revenue model. And we're seeing the breakdown of that real-time. You know, obviously, you have a slew of crypto companies where the old coins aren't doing well and I don't actually know if that pricing is going to recover. But so this is a bit of a learning experience. But I agree with you, there's still inherent value with with tokens if they're structured correctly, if they're done correctly, and they can accompany and be complimentary to inappropriate revenue models. So like this there should be a path forward for for tokens and maybe we're seeing it

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And we're back. We're talking about crypto spring. The tulips are out. Like the flowering trees are blooming and >> [laughter] >> The The nice part about this pod is I will say both Josh V and I have been in crypto long enough to understand that this was inevitable. It's It's funny. I mean, I'm so unfazed now. I don't even check prices. And I I Maybe I'm unique in this, but so many people like my tradfi husband will be like, "Did you see the price of Bitcoin?" I'm just like, "I don't I don't check prices." Like I think if you're in this space long enough, if you're a true hodler, you know that this is all part of the evolution, the cyclical evolution. And to to hearken back what we were talking about earlier, this winter-spring feels different because there's massive

interest in institutional infrastructure that I think is driving us to spring. And the crypto casino part, which there's still a large contingent, of course. I mean, I definitely think it's also like perps, prediction markets, maybe less activity with things like gaming and meme coins and NFTs, but the the crypto kind of casino part of this is now no longer the main event. It's it's like the opener, the sideshow for kind of the institutional conversation where real massive money is beckoning. So, that's my take on kind of crypto. Frank, V, what are what are your thoughts? Where are we right now?

>> I think that's definitely right. I mean, we touch on this theme so much on this show, but I think it really is like this is the year that crypto and DeFi like really started to mature. And you know, I I think that was always going to be a natural evolution, but I but I think institutional adoption and interest has accelerated it. Although, I it's kind of like a chicken and egg thing, too. So, but I but I mean, I think there's no denying that that is like kind of the dominant narrative this year. What do you think, Josh? Yeah, I mean, I I just go back to the incredible energy we're seeing I'm calling it the noisiest bear market in history, right?

Which is dramatic investments. I've had more incoming at GSR over the past 3 months around RWA than in the history of the firm, right? And so, people are looking how to get on chain, right? Whereas, I think, you know, 2 years ago, that was not the discussion. We were still building infrastructure. And so, now it's build bringing the world on chain. This is if if you had asked us, "Where do you want to be, you know, 2 years ago?" I think we would be pinching ourselves that we have bipartisan support uh in Congress to move forward legislation, that we have real institutional uh engagement. We have unique and cool crypto projects happening kind of below water level that we're working closely with uh a across

the board. And we have, you know, billions of dollars trying to find their way on chain. And and I I think it's such an interesting time to be in the crypto industry as we kind of go through this evolution. Reminds me a little bit of the Dodd-Frank era where we kind of launched a whole new set of regulations and being whether it was an attorney or a builder in traditional finance like hey we're bringing a whole new way of doing business. It feels very similar in some respects now and I think it's a good analog to where we are. I I think you're absolutely right and a lot of people in crypto aren't old enough to remember that. I mean I had just graduated from law school but the other thing to remind people, you know, Dodd Frank was a was a massive bill that

resulted from the financial crisis but it's also a learning for clarity. Everyone expects clarity if it passes for things to change overnight. No no no no no no. It's the beginning of a multi-year process of rule making, interpretation, litigation. It's the starting point for discussion but it gives all of the lawyers and policy people and people in strategy and regulatory strategy and institutional strategy a kicking off point to start interpreting the law, not a speech. So, that brings us perfectly to our last topic which is a speech and it's an important speech. And just also say the final point on the crypto spring is all we need to do is get rid of the strippers at official events. Like we're

so close to being grown-ups that I'm just going to put it out there. You know what? Like maybe we should just not have strippers at official events. So, you know, I'm just going to put that and no one needs to respond. We'll move on. It's a very reasonable proposal. Reasonable. >> Maybe maybe we should just you know, I don't know. Maybe because strippers make men uncomfortable, too. Like it's not just a woman thing, guys. Like you know. [laughter] Yeah, it's not it's not hard. Like can we just I mean I'm not anti-strippers. Hey, men, women, women, if you want to go to a strip club or a club with strippers to be precise after an event, by all means do so. That that's great.

But maybe We're kind of doing traditional finance all over again just like we are in blockchain. We're we're reliving all of the same lessons that that kind of made its way out of traditional finance before it and I think you're going to see the same cycle with this. >> the true full evolution of the growing pains of TradFi are happening real time in crypto. Great great point. Great point. I always say that. It's like we're learning all the lessons just in fast forward and in a very public like way. Yeah. Um exactly. We need to stay away from the embarrassing memes. That's also a lesson that we should we should definitely learn. But so we just talked about speeches or I just referenced speeches.

Vee called out a very important speech that Chair Atkins recently made. And you know, it is interesting sometimes the speeches by regulators get lost because a lot of them they they happen quite frequently. A lot of them are very high level. A lot of them touch on the same themes. But occasionally you do get real insight and um you know, real like a a very palpable preview of of things to come from these speeches. Vee, tell us more about Chair Atkins' recent speech. Yeah. So so before I jump into that, I I wanted to just point out something that you touched on which is like, you know, when when not if, right? When clarity passes, it'll be like exciting and

historic and all of that. But I do think it's important to keep in mind that like you said, it really is the starting point. There's going to be years of actual rule making that has to happen after that before much of it gets implemented. Right? But I think the good news is that market participants like often don't need to wait around for that. Like they can start sort of like making big business decisions and organizing their behavior like once the legislation actually passes because they know that clarity and certain rules are going to come. And so I think that's you know, ultimately it's still a really good thing even though we still have a long road ahead. Um so this the speech I I was like looking at notes from the speech and and thinking of like what my

takeaways were and then the clarity draft came out today and I was like, it's actually so clear that the SEC and Congress have been talking this whole time because they're like it feels to me like they really are in lockstep on a lot of the stuff from the legislation that touches on the SEC. Um so, last week Chair Atkins gave remarks at um an event called the SEC's AI Plus Expo, which I had never heard of this, so it must be something new that they're doing. It's supposed to focus on uh AI and emerging technologies, but honestly, like a lot of the time was just spent um on digital assets and blockchain infrastructure and talking about how do we modernize regulation for decentralized software-based markets.

And I think this speech was really important because to me, it gave one of the clearest signals yet about where the SEC is heading, sort of like conceptually philosophically philosophically. The big theme for me was that modernizing securities regulation for on-chain and software-based markets through actual rulemaking instead of just enforcement is like the way that they're going to proceed, right? And I think that, you know, has been obvious for like the past year, but I think he really laid it out clearly in this speech, right? So, specifically, he talked about revisiting how concepts like exchange and broker and clearing agency, like how do those things apply or not apply, right? In in the context of blockchain-based systems.

Um and I think like, you know, for years, as we all know, and I'm sure we've, you know, like either worked on this or or have been involved in policy around this, the industry's frustration has been that these categories were, you know, obviously designed for intermediary-based markets, things like centralized exchanges and brokers and custodians, and the previous SEC had really tried to stretch those definitions to fit into decentralized software-based systems where it just didn't really make sense, right? So, like I was saying earlier, I think the way that the chair and the SEC are trying to approach this right now is very consistent with what we're seeing in the latest draft of clarity, right?

There's I think this growing recognition that on-chain infrastructure actually can perform a lot of the same functions and achieve a lot of the same investor protection and like market integrity and fairness goals that intermediated systems do. They just can do it through code. Um, and that the law needs to adapt to that like practical reality. So, um, like I said, I think it's very clear that the SEC and Congress have been communicating on a lot of these issues. And then I would be remiss not to mention because I'm at Beta and we do Vault. We were all really excited to see this morning that, um, in this speech and in the Clarity Act, um, they recognized Vaults for the first time

publicly. And and like that was just really exciting for us because I think it it just shows how cutting-edge and forward-looking they're trying to be. And and they're really recognizing, like I said, like decentralized programmable on-chain infrastructure as as like real technology that can underpin sort of this next generation of financial markets and capital markets. Um, so I think this is all really promising. I think it's really exciting. I like that it's consistent with the legislation we're seeing. And honestly, like I think that's part of the reason why I'm so optimistic.

It feels like all of the pieces are kind of falling together, right? Obviously, we know the CFTC has been like charging ahead on every front. So, it really does feel like everyone is kind of in lockstep. Obviously, the White House, you know, really wants to get this done and has has wanted to for a long time. So, it really feels like all of the pieces are kind of falling into place finally, which is why I'm so bullish on the process that's happening. And the momentum like the momentum is there and everyone knows that's like the most important thing, right, when you're trying to get a deal done. Totally right. And like, you know, >> [clears throat] >> I think about going back to the pinch-me moment. If you would have said we had a regulator that's going to be in place and be so uh innovation-minded

to to recognize that maybe this new technology doesn't fit in the exact same box that was developed in the '30s, um you we would all not believe it. And And that sounds like uh an easy thing to do, but in fact, it would reckon it would have probably be one of the most advanced ways of looking at this in the world. Even if you look at uh regulatory treatment in Europe, or you look at in Asia, this approach kind of outlined by uh Commissioner Atkins suggesting that we may need to in fact create tailored rules for this new technology. I think it's probably the way of the future, um but it but regulators have really no incentive to adopt that unless they're pro-innovation. And so, we're seeing a

really kind of an American-minded, pro-innovation mindset that there's it's very it's very fun to be proud of um and be and be excited about. I would just say what's what's interesting, what's so hard about it, right, is how do we balance um creating new rules for the new entrants without disadvantaging the legacy players. And that's going to be what they're going to be tackling, I think, from both the CFTC and the SEC over the next few years. If you think about it, and maybe you're you know, maybe a lot of people think it is or they don't care. But you're sitting there at the CME uh and you think um you know, an uh uh you know, an a regular kind of a a derivatives platform, pure blockchain, is going to be regulated much uh in a

way that's much less expensive or onerous than you are and be able to draw volume while you're subject to super high requirements, I think that may create a a perception of unfairness that is going to be uh very strongly pushed back against. So, the regulators have their job out in front of them to say, "How do I recognize the capabilities of this new protection?" But to your to this new technology, but to your point of view, ensure that I'm addressing customer protection, market integrity, fairness in market conduct in a way that's similar to the traditional market such that we're technology neutral. It's really the consumer shield to decide, but ultimately receive the same level of protection. So, tough tough road ahead. I think but like

the absolute perfect mindset you could ask for. Yeah. I mean, the incumbents are always free to innovate themselves, right? It's not the regulator's job to make sure that their business models are protected. And they I mean, they should like we welcome that. So, I think that would be my response to that. Absolutely huge, and this is also I mean, look, I love your optimism. I hope you're right. I I also I'm a little bit worried what we haven't talked about is the fact that I think we forget that there are still a bunch of legislators that really don't care about crypto. Like it's just not on their list of priorities. It's not on their top. And and I'm to be clear, I'm

not saying they hate crypto. They just don't care about it. Now, the more institutional engagement we see, the more that actually improves that dynamic and that mentality because TradFi talks. I also saw a really interesting point on Twitter, unverified, that you know, it was a photo of Brian Armstrong, you know, basically walking through DC and going to various legislators' offices this morning. And I was like, "Yeah, absolutely." Like if you're a crypto CEO, you want this bill, you're on the ground in in DC or at least your GC or your policy people are on the ground. Um cuz that kind of like guerrilla tactic to get legislators to focus on this is is huge.

>> Well, there's still lot of education, right? I would tell you most you know, maybe it's changing slightly, but most folks in Congress are probably still at the Bitcoin level of knowledge about crypto and blockchain, right? So, for those of us who've been working in the industry for years, it's easy to take for granted what you don't know about, you know, uh Veda Labs and and the circuit, right? Like but but ultimately, I don't think uh they they're there yet. And and so, they're still saying, "It's just a casino. It's just a new investment asset. It's It's just another way to kind of uh for retail investment." And it's incumbent on the industry to do the education, to take the time to to speak with our representative and say, "No,

this is a kind of a a parallel financial system we're building with entrepreneurs mainly now in the United States, and we hope we hope to keep it that way. But that education needs to happen so that we don't, you know, revert back to kind of a an incumbent only kind of protectionist mindset. And and and and kind of going back to Akin's speech, I think there is a set of regulators now um we're very lucky to have that are saying, "Let's get some in writing guidance down to at least start talking about what it looks like to address the the new world." And America can can lead on this.

Um and really draw in a lot of talent and capital. And and that's becoming my default position, which is really 180° away from where we were, you know, 18 short months ago. You're so right on the education piece because we're in our bubble, right? We assume that everyone knows what a vault is or what a crypto market maker does, and that's just not the case or what zero knowledge proof technology is. No. And you know, I'll give a shout-out to my CEO. He just published a book, I think today actually, with Wiley. Um and one of the things I like about this book is I read it, you know, before it was published, and it's written in English, meaning, you know, StarkWare CEO Eli is

one of the foremost cryptographers. You know, he was a long-time academic. He's so smart, it's frightening. But this book was written in a way where I could hand it to a legislator and say like, learn more about crypto from this book and why it's going to change things. I felt the same way about Chris Dixon's book a couple years ago. I was like, I could give this to my mom. And so, you know, you have individuals that are doing that with their scholarship, with their thought leadership, with their policy efforts. We need to make legislators understand what this is and why it's important and why it's not all bad. So, huge.

And on that point, it brings me perfectly to our crypto good news. So, I'm cheating a little this week. This is not crypto good news. This is AI good news. But as as our listeners know, occasionally we branch out into emerging technology. And I just thought this was so incredible. I I needed to, you know, actually shout out to Jesse, who the AI gigabrain on this pod, brought this to our attention. But it's actually incredible. So, I think we've all heard about how generative AI can really be incredible in the medical field. But a new AI system called Redmod may be able to spot pancreatic cancer long before doctors can actually see it. And it

works by identifying faint tissue changes linked to pancreatic ductal adenocarcinoma, which is actually the most common and deadliest form of pancreatic cancer. And these very early warning warning signs are just invisible on scans. Uh and I think that this is so incredible because anyone who's familiar with pancreatic cancer in particular, it's one of the deadliest cancers cuz it's incredibly hard to find it. You know, you can't feel a lump. It's hard to do, you know, proactive scans. So, I just love this use case because what is more impactful than health? I mean, I often joke in crypto, I'm like, at the end of the day, take a deep breath, Katherine, no one is dying based on what we do. You know, no one is

saving babies. Like, okay, well, privacy technology is very important for physical safety. We'll talk about that another episode, but really, when push comes to shove, we're we're talking money, we're talking technology, we're not talking health. Uh so, I love the fact that we're looking at emerging technology and how that's having an incredible impact on public health. Uh incredible. Uh I would love to one day spotlight a crypto use case that can, you know, help save people's lives. It does exist, it's there somewhere, we'll find it, we'll bring it to your attention on Crypto Good News.

So, I really want to say, as as we close out, first, a huge thank you to Josh for joining us. Um great to have you, great to have your intel, your strategic insights. And thanks so much to our listeners for being with us on Dacs in the City. Be sure to stick around because in a few minutes, Laura is up next on Unchained with Arthur Hayes, who will argue his Tehran tollbooth scenario is now playing out, that the AI CapEx boom guarantees more money printing, and that hype is still his highest conviction altcoin call. So, you won't want to miss it. I'm sticking around for that one.

on Dacs in the City, so stick around for that. Thanks, Josh. Thanks, all. We'll see you next week. Thanks, everybody. Great seeing y'all. Thanks, Josh. >> Mhm.