Digital Asset Summit 2025 - NYC | Investor Track | Day 3

Transcript

I love the idea of the fund that holds the most spot Bitcoin at the end of the cycle is the winner I love that um I I think you need to see the wirehouses put Bitcoin into model portfolios to really have the ETFs blow up and as you know black Rock's got them in a couple model portfolios um and I think you're going to see that if we're just talking about straight up institutional adoption still most advisers can't or won't put their customers into Bitcoin and it's you know it's a legitimate very large ETF F that class let alone the market itself so um that is coming that is finally coming and that that is going to change then you start having passive permanent passive bids on bitcoin right like people who as the you know need to

rebalance in in by the way and out that lowers volatility and makes it a lot more like honestly like an equity like investment or an index investment and so that that's pretty contentious in the Bitcoin Community idea of Bitcoin uh defi um generally just you know not buying and holding your BTC but potentially staking it elsewhere and uh putting it at risk um for what are at the moment relatively light yield so what has developed in Bitcoin yield land we'll keep it pretty high level for the purposes of this conversation but um obviously firms like caniford cherl just announced they're doing Bitcoin base lending but you have obviously um some forms of defi you could say most of the there was a huge

Bitcoin run q1 Q2 last year where a ton of Bitcoin defi related protocols were funded at huge valuations but most of them look like their own l1s with a bridge to bitcoin um so I guess what are are there any you know I don't know strong views for or against um Bitcoin lending both centralized or decentralized so I have a pretty strong take on this as a creditor to several Estates uh of last cycle um I think there's this natural tendency in Bitcoin to want to earn yield like you would with any other asset and historically the only option you've had is to take some sort of counterparty risk right and you've gone to blocki Genesis Celsius Etc last cycle and we all saw how that wound up now there's some new spokes

popping up and it's usually a good like start to sell everything when centralized lending gets really popular in crypto again like it's just a general good top signal um but now with the Advent of of Bitcoin staking where you can actually take no principal risk right so what you can do is just use Bitcoin itself to earn passive yield that's going to set a new Benchmark for the galaxies the world Etc that now they have to go out there and beat that rate and need to have the right assurances behind that offering right and whether it's like a personal balance sheet from one of the founders of one of these places that gets in front of it or whatever needs to happen to ensure that there is you know risk minimized on this lending side I think it's just making in making sure that there is proper

compensation but we shouldn't kid ourselves that like as soon as Wall Street really gets it hooked into Bitcoin there's going to be rehypothecation everywhere right like like that's just how this is all going to work and it's going to be what sort of guarantees can you get and ultimately what yield can you get but it's a part of the system and we all have to live with it and that's why since 2016 I've been predicting that Bitcoin will cause a blow up at a g because it is not the same asset as traditional Financial assets and ultimately the the biggest difference is not just the scarcity of Bitcoin it's the fact that the vast majority of it is in the hands of long-term hodlers and we're not letting go and the there is no lender of last

Resort therefore and to the extent that you start to see the GBS do the same things that they do with other asset classes like comingling in collateral pools and allowing collateral substitution the prime brokerage units are going to find themselves short and they're not even going to be aware of it if they don't segregate and that's what's going to blow somebody up someday okay okay I'm going to do a quick poll who here owns Big coin okay keep your hand up if you own Bitcoin in your self- custody Wallet not via ETF okay so it's probably about a quarter of the people that own Bitcoin

own it outright is that is that a risk so I listen I love I love Capital flows and I think it's the ETFs have been fantastic for the price of Bitcoin I've always felt concerned that it's created um a potential risk uh in for for what Bitcoin stands for for a lot of least the early holders um and also just generally for consensus you know for Network upgrades and and a lot of the potential changes to uh the protocol in the future that is driven by a few superpowers of the financial Community um anyone have a very contentious view on ETFs you know s positively or negatively it's a double-edged sword and

one of the biggest challenges for with the ETFs one of the the black Swan events that could really disrupt is if the North Koreans get at the custodian the ETF custodian hacked that would just be a disaster so I'll take a I don't know how contentious it is but like for most people in the audience maybe you're aware that Bitcoin has these having cycles that puts a lot of pressure on the miners we're like 48 years away from that being a real problem in Bitcoin probably unless we can get a lot more volume on the network and I think there's actually an end state where these ETFs are really the minors of Last Resort where they're the only ones that can actually run at a at a loss to actually keep their products uh open because they're making money off these

fees and I think that's actually a very large risk to bitcoin because I think the minor economics are pretty inverted we had a win right before this panel where putting your Bitcoin with or mining with Bitcoin mining pools is actually not a security which is a big win but I think in general like these are kind of I wouldn't call it a Black Swan but these are like some of the big risks that we have with centralizing Bitcoin I I agree that by the way that question about um who will operate the infrastructure of the network in the future I think it is also a question for all the proof of stake protocols as well I think validator economics will Trend to zero as well over time and so you see the Unis and AES and compounds actually run the ethereum validators and you maybe see the maybe it is the ETFs maybe

it's um it's so that's a fascinating question um just sort of echoing Caitlyn and and also thinking about the ETFs as centralized honey pots you're right they're absolutely at risk like anybody is but they've got a lot of Bitcoin you know in in in proof of work owning Bitcoin doesn't give you any particular vote on the governance of the network and proof of stake capital is consensus right so I think it's actually a much bigger risk to the governance of the networks for proof of stake ETFs than it is for a proof of work ETF that being said um bit economic nodes do have a significant sway over the governance

of Bitcoin right and whether those were big exchanges or big giant ETFs you think about a simple scenario where there's a contentious Fork scenario and like what do we think is going to be the Bitcoin after that fork it's probably most likely going to be the one that micro strategy ibit and fbtc say is the one as Andreas once called it that would become the corpo coin right and and it could it could I think one thing that's really great is that if you talk to Robbie mitnik at Black Rock or the folks at Fidelity or all the other folks at Invesco and Galaxy like we believe in Bitcoin I think it's the the you really the other answer is you really can't stop anyone including a asset manager

from buying and holding Bitcoin it's one of the things that makes it great so you just have to reckon with this and I've always argued that you it's better let's bring them in and make sure they understand why Bitcoin is valuable so that they don't do something to or propose a change to it that would harm it but still the vast majority of Bitcoins don't change hands so um in our audience is the gentleman who coined the term not your keys not your Bitcoin sitting right there um and uh and and I think as Wall Street has come in and the concept of self- custody has uh because of the 40 act requirement to segregate C custody from Asset Management um that has kind of faded be especially with the ETFs uh that still that not not your keys not your coins uh Mantra is still

absolutely there all of us have had to learn especially those of us who've been who were in the early years and before ledgers and treasures existed had to learn how to self- custody and we also in my case I got goed um in 2013 U and lost coins there uh it it was the cheapest tuition I ever paid was losing those coins and understanding that those were not really my Bitcoins okay I think we're we're almost at time this one pretty quickly um okay well we're going to take an extra 60 seconds so what's the most important thing people are not discussing about Bitcoin publicly that are the most vital parts of private conversations hard money that's a good one um yeah I would

like to see a Resurgence of Bitcoin as a monetary phenomenon and not so much as a market phenomenon it would be great to see that um it certainly I mean as a narrative it certainly is that to be clear but um you know there's a lot of number go up and a lot of 1 to 2% in a portfolio talk these days which is okay but um would like to see a little bit more of the core thing that people I don't know because it's we're suit coiners now you know and we got suits on and I think people forget that bitcoin's I did the sweatshirt I like that suit coiners it's incredibly disruptive Bitcoin is incredibly Innovative and disruptive and you know we have explained to the world that it's

it's a really good thing that they should have a piece of and and it they should feel safe doing it and black rocks got it locked into the Vault for them and it's easy to do and safe but let's not forget like this is a hyper Innovative disruptive technology for the world so I'd like to see people really recognize that again you kind of forget it when you get a bunch of suit Corners talking about it but it is still very disruptive so I love the suit coiners I'm definitely stealing that um I I I think to double down at Alex's point it's actually how we put our Bitcoin to work and I think what got me excited about Bitcoin in 2013 was building an all- term traditional Financial system and I argue we've totally failed at that but we built a really sick gold and like

that's a huge win but what we need to do is now use Bitcoin not as a money I disagree on that slightly I bought a lot of really expensive coffees over the last decade um what we need to do now is we need to go use Bitcoin as a collateral asset and that's actually how so many Emerging Markets participants can get Bitcoin on a solution like core borrow against it for stables and now you actually have like a pristine collateral save account and you can pay your kind of local Fiat denominated liabilities and I think that's actually how we push forward what we tried to do you know 15 16 years ago but I think now we actually have a path to do it yeah I agree with Rich I think uh people need to recognize that BTC is much more than just a store of value it

is a super useful Financial tool and for this cycle hopefully there are there will be a lot more Innovative products where people people can build like yield on their BTC or they can lend it so rebasing the world's debt to a universal reserve of Bitcoin Universal collateral of Bitcoin that's the goal all right that's it thank you everyone thank [Applause] you test test okay uh our next panel of suit coiners is going to tell us about lending staking and onchain capital

efficiency sounds very suud uh let's have a warm welcome to Sebastian Deo Lucas Brer run Christensen Sid Powell and sarapin Leon Engle okay I think I'm gonna have to add lib for the next 20 minutes this is going to be fun oh wait no oh we got we've got a

couple of suit coiners without the suit without the suit okay we've got one sweat suit coiner uh do we have do we have a quorum is the question there's Lucas I mean these are three I think we should just go for it who thinks we should go for it we've got a good crowd this is the afternoon of the third day of a conference so I think we should just go for it all right let's go great thank you very much for starting early everyone's going to get to go go home 20 minutes early so thank you everyone for being here so

this panel that we will start live uh and hopefully the other people will will join uh is about staking landing and onchain capital efficiency so I'm super delighted to uh to moderate this panel I'm Sebastian duu from cofounder from the company stos Financial or Mission actually is to bring trfy on defi ra and this panel is really discussing about that uh it's a wide topic but actually it's really about what I called crypto banking taking all those activities uh Landing staking and capital efficiency on chain and I think that's quite an interesting topic

because Landing obviously is one of the biggest activity in trfi I mean a few few trillions or are something quite significant scking on the other side it's quite interesting because obviously in trfy you don't have cryptocurrency taking not last time I checked but that might be or might not be and that will be part of the discussion today a key a key component for for the future Financial system are the staking cryptocurrencies or the crypto cryptocurrencies themselves part of the collateral pool for instance for Ling and the last point which is capital unchain Capital efficiency I'm quite sure a lot of people heard why well crypto is great but it's always over

collateralized lending so it's not Capital efficient let's the let's see in this panel if we can uh go a bit deeper on this one and I'm super delighted to be helped to navigate you on those topics with one of some of the smarter brain in uh in Defi and I will let let them introduce themselves and before just going a bit more deeply in those questions hey everybody my name is sarapin I'm the co-founder CEO of stet we're the largest yield aggregator in um web 3 so we effect uh essentially unify staking in all defi yields into one unified product we make it very very easy for our clients to bring more than 1,000 yields across more than 75

networks into their products be it wallets DBS uh neobanks Etc um and so uh yeah we just we we remove the complexity from accessing everything that web through has to offer and we make it very easy for people to find new yields to manage existing yields um and to uh yeah effectively make the the access layer to alls way way more um efficient awesome um so I'm Sid poell I'm the uh CEO and co-founder of maple Finance so we are an onchain asset manager um with a focus on institutional lending so we currently do loans against Bitcoin eth salana other defi coins um we have about 700 mil assets on the

platform and we've got a loan book of about 250 mil um but if you look at the core of what we're doing I view it as to effectively it's a form of tokenized private credit and my background was institutional Banking and securitization prior to this but I think we all have the view that most Financial products are going to move on chain for the liquidity the composability and the speed with which you can operate Financial products like lending or staking or Asset Management um yeah very happy to be here my name is Lucas Bruder I'm co-founder in CEO jto Labs we help expand and channel Solana's GDP to validators and stakers we most well known for building me infrastructure on

salana but we also built a liquid staking protocol goo Soul it's the largest LST on salana with $2 billion of tvl and roughly 40% market share so yeah excited to talk with you guys and thanks for having me nice excited maybe let's start with you Sid as you are a OG in term of real asset landing and real asset is more let's say TR TR let's start on this angle uh can you tell us the story so far from theet Landing uh where where it started where we are currently and what this audience can can learn from someone that was here in the trench for the last uh I don't know how many actually but a lot yeah almost almost five years now uh so if you look

at where crypto lending began it was it very much began with the over collateralized loans against Bitcoin and eth and other Lodge caps then in 2021 2022 it transitioned into doing under collateralized lending so effectively focused on the credit and the balance sheet strength of counterparties and then following the the credit collapse or or the pullback in credit appetite in the sector from 2023 we saw a real focus on lending or um extending yield against tokenized T bills and so you saw you know 15 different projects launch tokenized T bills offer effectively Market funds on chain very low yield and this corresponded to uh the FED increasing rates along with people who

are operating in crypto being largely debanked and not having access to the the the regular versions of these products but if you look from there it's then expanded and so you've seen uh receivables backed credit being a big Focus because it's short duration reasonably high yield so it's offering kind of a comparable cost or at least hitting the cost of Capital hurdle of people who lend or invest on chain um but the real blocker that we've had if we look at like what does the space need to grow another 10x from here is there's very little uh duration on the buy side so most crypto people if you offered them a product that was yielding 15% but

they had to invest for 3 to 5 years you would find very few takers in the onchain space and so I think that is kind of the next lock and hopefully something that comes out of a more favorable regulatory environment and a more Pro admin pro-innovation Administration is that you start to see more institutional allocators who can you know invest for a 3 to 5e duration and that then I think you'll start to see more things like tokenized real estate uh real estate backed credit Middle Market type lending on chain but so far that's where we sit today um I mean if you look at the overall amount of Leverage in the space this year versus 2022 it's orders of magnitude

less leverage um the largest uh the largest lending players like blockfi Celsius and Genesis last cycle collectively had about 55 billion um in loans outstanding I would say there is barely even 10 billion in sort of lending onchain happening today so we have a lot of room to grow from here and maybe let's uh shift gears because here KET lending is starting to grow that was eups but it's starting it's actually The Narrative of 2025 do you agree yeah I I think I mean you saw firms like black rock made huge inroads um there's over uh over a billion dollars of um tokenized T bills on chain

today and a lot of people are are saying this is kind of the Forerunner of tokenizing funds Apollo is looking to tokenize their credit fund with securitize um we've also seen Hamilton Lane as another example of a fund manager who's who's tokenized their fund and so I think real world assets very much remain an InFocus narrative today it's it's to my earlier point it's still largely sells side driven this is largely asset managers who want to distribute their product on chain on the thesis that there's a marginal buyer who's just not accessing these products because they can't purchase them with stable coins um and coming back to my earlier point so what I think the Gap is

still firmly remains on the buy side but I think as we start to see we're already seeing more High net worths and family officers who are generally going to be earlier adopters of financial products start to invest in credit on chain um Maple had an announcement a couple of weeks back where bitwise who's a 12 billion regulated asset manager um used one of our lending pools so that's an early example of of a real institutional asset manager um deploying onchain into a strategy and I think we'll see more from there and the advantage of real world assets is that they are um these institutional investors are familiar with them they all understand if you tokenize you know commercial real estate they've probably dealt with or invested

in that asset class before so it's just kind of it's a familiar product that they can participate in yes thanks and many Luca you can explain a bit more now we have theet on one side and as you explained at the beginning it was only lending against cryptocurrencies but now we have a lot of lending against uh uh staking assets staking cryptocurrencies mainly uh can you can you walk through what happened in the past and where we are today what is the situation yeah we're seeing a lot more interest in institutional lending for lsts and staked assets so um I don't know what the staking rate is on ethereum like three to 4% or so yeah 2% something like that yeah so on salana

today it's and between 7 to 10% depending on the activity on the network and that is a pretty uh pretty large increase in uh yield for those that are holding lsts compared to the normal assets so one instance of this Falcon X launched uh support for your goo soul on their platform so that's kind of like the first uh kind of Dipping toes into the uh institutional lending for the lsts yeah thanks and do you see that uh staking Stak asset will replace Z Vania cryptocurrencies or do you still see a place for those Vania cryptocurrencies

to be used as collateral that's a good question I think um I see a world where the lsts are used more than the native asset but there's a lot of barriers to get that to happen I think the main one is taxes and uh you know unfortunately in the crypto world you can move a lot faster than the IRS but um there's a there's a big question there's a few questions out right now on taxes that I think are the barriers to entry here one is around staking rewards so when you acrw staking rewards is that income right away do you have to sell that or uh is it uh not income and then for lsts in particular

uh Salon is a pretty institutional heavy chain and so there's a lot of very low cost basis Soul holders that maybe they bought salana under a dollar or something like that and uh there's a big question on like if I convert my soul with this cost basis under a dollar to jto Soul or one of the other lsts where soul is at 120 right now am I going to have to cover my taxes is that like a like kind Swap and uh you can get legal opinions on that and I think it's kind of the like Cutting Edge on the tax side and uh yeah you can I think there's ways around it but it's you know you're a little more out the risk curve so I

think that if we can get past those barriers or get people and institutions comfortable with that then there will be a lot more LST adoption and I think we'll see hopefully we'll see more clarity around the staking taxes soon to Lucas's point we we actually did a lot of lending against soul and we would put it in jto Soul and other staking providers and so the advantage for somebody who's holding Soul um is that if they provide it as collateral if your counterparty who's lending to you can stake it then they'll give you a lower borrowing cost you know if if I can lend if I can lend at uh 10% and then I can take goo 2x over collateralize and earn 8% then I'm getting an Allin return

of 26% so I can actually drop the interest rate down to four or five which is what we were doing a lot with different institutional counterparties in 2024 yeah maybe Sim you can help us to zoom out a little bit have a wider perspective on the staking what are the trend you see what are the yield component is it something that is Shifting or is it something stable I mean we spoke a lot about sing soul but there is a is but is there some some some other stuff that are moving around and becoming more usable as collateral for landing yeah so I think you know obviously staking has um pretty broad adoption already um and I think that it's cool to see that there's still a lot of um innovation in the space I

think that you know with um Li V3 for instance and stuff like that I think that there's cool there's cool stuff happening I think the entire concept of users effectively uh end users stakers choosing their own I mean I'm talking about like retail at large right not like whales or anything like that not institutions but retail users at large kind of like finding the right uh validator to to the stake with a delegate to it's just such an Antiquated concept um and I think think that most most people don't really perform any degree of due diligence at all um and we we'll simply delegate it to validator that they have heard of right and so there's a certain weird um Dynamic where where validators have an incentive to really invest a lot in in marketing and building brand equity and I think that is not necessarily not positive for the

uh for the networks uh that they're looking to ultimately also secure right so I think um what we are kind of like taking this off to a tangent here um but what we're kind of like focusing on is is kind of like providing multiv valid infrastructure to make it easy for for end users for retail users in particular to delegate to any validator to really be able to see all of them side by side to be able to compare apy to be able to understand what what the commission rates are um that they charge um and um so yeah we're trying to get people to really rethink how they have staked and and also seeing if they can optimize their stake but in terms of like um where we see Trends um we definitely see a lot of Trends on the stable coin side stable coin yields real world asset um

so you know we talked about um bidd obviously that's still kind of like an Enterprise grade product you need to you need to kyc um there's a very very heavy burden like a 5 million initial deposit in order to actually uh have access to Biddle so I think um we're seeing a lot of uh stable coin demand and and yield unstable coins and and and we like when when yield unstable coins is kind of like composable within the issuing protocol itself I think that's a that's a really strong um differentiator um but yeah definitely a lot of adoption that we're seeing on the stable coin side about 70% of the volume that we're seeing on defi through our platform 70% is for stable coin denominated yields um but yeah um stable coin yields huge topic of the day and and and and we're

excited for it because stable coin adoption in general is soaring and I think it's a very good Focus like a very good focal point for defi to to H in on yeah thanks and I guess that's a great segue to come to a co-founder of Sky because sky is the biggest defi stable coin or one of the biggest stable coin started with Landing well very long ago and can you walk us through a bit more on why being your own stable coin is onbling better Capital efficiency you're also doing a lot of work with the hward assets maybe if you can draw a picture on this front about Capital efficiency because you can you are able to allocate Capital more efficiently that it was

just Market driven sure yeah so Sky formerly known as maker Dow is uh just in general probably the oldest D5 project in the whole world and so when we started back in 2015 the the space was very you know everything was was viewed through this like original crypto Bitcoin ideological lens really and the the the original objective of stable coins and decentralized stable coins was to like create a dollar that's like completely out of the reach of the government or something like that and that uh early on proved very popular with with um with the die stable coin

which was then the first decentralized stable coin ever but the problem is um something called a St stable coin trilemma which basically prevents you from scaling up the collateral of a stable coin once that you get enough demand unless you can tap into basically correlated assets as collateral so you can basically choose to either have a stable coin that is is basically stable um or decentralized in the sense of like the collateral being like purely decentralized right so with maker and ultimately this led to the transformation to Sky the Rebrand the sort of repositioning of the whole project uh ultimately the decision was to focus on just giving users what they

want which turns out to be stability first and foremost but also uh what's known as the sky savings rates so delivering uh return to users through the stable coin rails um and rwa is just I mean it's one of many great options because really from my perspective and I think this is well I mean I guess just the the rational approach to how you um deliver the best returns is that you simply tap into whatever the best risk adjusted yield is out there period um so it's all about developing the right risk models um and then um yeah basically executing based on what those risk

models tell you uh around what are the assets you should be deploying into so actually what's really unique about sky is that it dynamically adjusts so it's not like sort of fully backed by rwaa and t- bills um it's also not completely backed by um like staked eth and like a Bitcoin and that kind of crypto exposure either uh but but right now it's like it's more or less like 50/50 so it's about 4 billion uh in crypto assets 4 billion in in trafi assets uh but that's actually changing quite a lot all the time and it depends on where the the big opportunity is and this is just I mean ultimately this is the key to success I

think especially in like web 3 Finance or whatever we call it Finance 2.0 like the the the way that now the the financial system and blockchain is starting to like properly integrate to each other you have to be extremely fast and you have to be you know natively digital uh and also what's so important is um like sort of decision making in all of these things right it's like every single time it's a decision between should I allocate into this asset this you know should I allocate into t- bills rwas or should I go into uh like a lending protocol and that's like itself a very complicated question that is a matter of having you

know you have to integrate a lot of data to figure out what the answer is um and yeah we've been working on this problem in sky for more than 10 years at this point and I think the sort of final um model uh that that uh we we basically launched um seven months ago with the with the launch of sky and then about three months ago we released the details of this framework which is called the the sky agent framework and it provides I think the most flexible solution to sort of solving this General problem of how to basically um you know maximize risk adjusted returns across all these

possible Dimensions right basically eliminating all constraints and just um like fully uh focusing on how to deliver the best possible savings rate as we call it like the best possible return the most stability possible to the end user holding a USD denominator asset um as a stable coin yeah thanks maybe uh just to go a bit further on on on that front I mean you are seeing that you also invest in real world asset Al of the balance sheet that was a Grand Prix where black rock for instance is one of the winner so that's kind of the coming of the institution I think it was saying it's mainly on the sell side but if we move now on the B side uh see you are

there was a news recently saying that bitwise which for me would be a crypto try because it's not onchain directly initially is now investing or exposed to some Maple product which are fully more defi defi product let's be honest yeah so that's great you we also see coinbase allowing their own user on their centralized exchange to be able to borrow against BTC on chain through moru so can you go a bit more deeper on if you see that institution or of Shain people are now coming and now it's start the time where the supply side will come to defy I think I think offchain institutions are starting to come to to

defi uh if you like if you look at uh bit weis's case so um they have uh you know 12 billion assets under management but they have the thesis that asset management is going to eventually shift on chain and what they like about the you know the product that the product that we provide which is over collateralized lending against Bitcoin is the additional liquidity and transparency that you get by doing this on chains you get a token um that you can shift around between wallets but all of the loans that you're participating in or lending against the back your position are visible on chain and uh the token provides additional liquidity um

in that product in particular we don't really have you know they don't have the ability to pledge that token as collateral elsewhere but we have syrup usdc which is much more Defi and permissionless and with that you can you can take it if you're an asset manager and pledge it or you will soon be able to pledge that in Moro to Loop the strategy or to use that as collateral in order to borrow so I think it gives an asset management an asset manager who's sophisticated um additional tools and levers that they can pull whether it's additional leverage or the to to reh hypothecate the collateral that is extremely appealing to those um to those managers particularly when you look at trading firms as well so one of the

products we're very excited about is yield bearing Bitcoin so we are working with core Dow and we're going to produce a liquid staking token uh for Bitcoin that's going to generate a yield in Bitcoin but trading firms are extremely excited because they're currently already posting that as collateral Bitcoin this is um in centralized exchanges and other defi protocols um but with this they'll have the ability to earn a yield on their collateral so it starts to become much more appealing and uh I hate to use the term but Capital efficient for them in order to do that so I think over time you will see more and more institutions try this and the biggest competitive driver for them is Alpha if they can generate an

extra couple of percent of returns that's enough to attract more LPS for them and and um and so that's the that's the competitive angle that they're trying to uh to work with I think with coinbase their incentive with um CB BTC and Moro is that it generates more AUM for them so um by allowing somebody who holds Bitcoin at coinbase to wrap that Bitcoin and then borrow through Moro it helps bring more AUM for them more fees and it's stickier because then that collateral the Bitcoin is then pledged somewhere else in order to borrow it so people aren't going to then take it out of coinbase thanks Sim I have a question for you the1 billion do question at least for me

I hope it will interest other people as well but currently there three at least three rates in uh in this industry you have the TR rates and that's why for instance sky is investing in t builds to to harness those trfi weight or TS weight when the yield in defi are too low you have the def RS which is kind of depending on is it a bullish or a bearish environment are people will willing to l rage on cryptocurrencies and you also have the staking yield do you see an interplay with between all those yield sources and will it be arbitraged away at some point or is it impossible and yeah how do you see those those the yield going forward if at some

point the big player the institution will come on chain to yeah I think um to be frank it all ties into um liquid sck assets right we always feel like uh the first step in any yield Journey should be liquid staking um and then taking that liquid stake asset and and basically leveraging the the the Lego capabilities of the defi stack in order to to find the right follow on yield sources and I think um you know there were comments made about okay who's going to be the the incremental buyer and I think the Inc incremental buyer still needs to be unlocked to a certain extent because right now all of these products are obviously certain to a certain extent behind kyc Gates um if they're really um insti or you know obviously this this syrup which is like NC but even that it

needs to be accessible right and so um clients that work with us so we for instance with with xiron ziron did not have any yield products at all in their product um zero right and they they integrated our like with with st kit and they brought staking and defi yields to the tune of like 800 yields into their products within a matter of weeks right and I think um you know unlocking that incremental buyer is is is is super critical um and then once you have that buyer which is a question of access right which again we we're looking to solve that we're looking to make it extremely easy to take any to bring any of these guys' products and make them available to the incremental buyer but I think um at that point in time it's really about providing access and then also helping users understand what what

are the different yields um making it making them easy to find and I think that's kind of like the next generation of what we're what we're working on which is making it very very simple for you to compare yield side by side understand because apy is also not apy right the the term is kind of like perverted to a certain extent because you have incentive tokens that get thrown into the mix there's certain like Leverage strategies sometimes underpinning some of these Structured Products which um end users might not be privy to so um again making it easy for people to to access as number one it should probably start with staking it should then compose into some sort of like defi product uh and from there on out it's about you know making it very very simple for people to to to find the next yield source and I think that is

about education to a certain point um it's about like labeling risk labeling defi yields making that easy for people to understand and I think ultimately that's going to um to lead to full automation because we cover more than 1,000 yields across more than 75 networks I think ultimately this is a very very cool I'm critical of this kind of like you know def niai intersection or crypto ni intersection but I think like for automation of of yield generation it's really really powerful um and I think this is ultimately where it's going to go so in terms of is this going to get arbitraged away yes most likely by agents right but I think it will also like make the entire yield stack like very meritocratic because right now it's it's um you have a fixed buyer pool that that

needs to be privy like there needs to be techsavvy enough to actually access find these yields access these yields manage their positions um and I think ultimately uh you really want to bring this to absolutely everybody make it extremely simple to use effectively turning everything into an onchain savings account uh and I think that should be you know fully meritocratic um and the best protocols the best products will rise to the top yeah your point is that if you have a b access if you if you have B better information you can pick the right shield and then obviously underneath that means that there will not be a yield discrepancy because no one will choose well I will take the lowest yield even if you if you present me all the best options correct and I think ultimately we also yield to the better quality yield products winning

out because I think there are too many yield products that that promise very high apy but they're playing around with the with the taxonomy with with their not being like clearly defined taxonomy with users I mean of course this is like previous cycle but if you take a look at for instance like all the OM Forks promising 100,000% apy Etc right um it looks laughable like in retrospect but at the time it was it was a real thing and I was um you know talking with some institutional money managers who who were basically trying to tell me that even if you know the token Drew Down by 90% they were still earning 100,000 apy so they'd be able to make that up overnight right and I think that is exactly what what needs to um yeah we need to shine a line on that a light on

that right and it need to be easy for people to understand where the yield comes from and everything needs to be accessible it should probably be automated such that real quality yields went out um and and everything else kind of flag Falls by the wayside yeah it's quite interesting because that goes in in what was saying earlier in some ways you are providing the access to all the yields people can choose and people will choose the best yield for a given risk appetite but on the sky side there is one product SDs that will automatic allocate to the best source of capital which which would it be T bills crypto back loans basis trade I think you have many few others maybe you can expand a bit more about how do you see the trend

going forward do you think it will be more well we will add more crypto back loans obviously if there is a lot of speculation or will it be new kind of CET do you have a perspective on what will drive the yield of ssds yeah so I definitely agree that in the short run it's just about picking the super low hang fruit of just equilibrating the stuff that's already there and that's like completely mispriced which is very much like um I don't to call like in like crypto native stuff and what's interesting is there's not really like all crypto native things that pretty much go back to like Bitcoin or Stak e or Stak sa and that's that's about it I mean then you have a lot of these like small

opportunities for where it's about basically subsidizing the creation of new protocols that potentially can build build up modes and that's one thing where I see that's that's not necessarily going to go away ever as long as we're innovating new stuff what is going to happen though is like the price of this kind of I guess you could call like Venture TBL or something like that is going to go down dramatically because it'll get easier and easier to figure out okay there's some new protocol they're willing to sort of overpay to uh get a bunch of of uh exposure um and and that's the kind of stuff that sky and usds and the sky agent framework that sort of agentically does all of this will will try to

rapidly sort of extract all the alpha out of right and sort of equilibrate it as fast as possible and then what I think will happen is once this is like totally equilibrated and it's like this complete sort of like amorphous AI process and it feels sort of posthuman in a sense uh then um what we'll realize is this is just like actually like a really small Market because in the end it's like Bitcoin and Ean like it's a it's actually like relatively small part of the world we're talking about here but it's just the first place where um like really endtoend AI integration can happen with finance and so the actually exciting Frontier is when we start actually to do something

real with this stuff in the real world right and so after a long time I've strongly believed that like blockchain is like how we deliver the benefits of AI to real stuff because it's like the most tangible way basically to sort of take things in the real world processes businesses business models transactions and then transform them into something that is digitally native and starts to become like a like basically starts to become something that AI can sort of directly interact with in the sense of you can get that real-time data 24/7 uh and then eventually I mean um you will see efficiency improvements

of the whole world right as as everyone is just deploying agents automated systems and really it's just a you know it's just the basic process of trying to get a better yield but over time that will mean solving more and more complicated real life challenges um and yeah I think I mean I think it's super exciting that that uh that it actually looks like crypto will be to play a major role in this um and uh so you're saying that crypto will help Finance or at least stable coin I assume more than the crypto currencies will help Finance the real world and it will be integrated with agent to find the best allocation in a way yeah I mean I think that's that's guaranteed I think

I mean and I and I really believe that when you see finally this moment happening where you know probably 90% of all the old world Legacy institutions are wiped out and then 10% of them survive they will adopt Ai and blockchain in parallel effectively right like those two technologies it it's such a just unbelievable Paradigm Shift right that you have to go back to the 80s and like change your code from the 80s and then you do that you're going to you're not going to do that for some like small thing you're going to have to do it for like the the whole package and it will basically be blockchain native and AI native simult mously yeah maybe Luka we can take a similar question in a way

there a source of yield for staking I mean and may maybe you can explain a bit the terms but there is a part that is uh just protocol inflation there is a part me is there other kind of source of yield that might come and might me survive is there is more optimization at the chain level what do you think yeah I think uh shout out to Dan Smith at block works but he's been building a lot of reev dashboards it's all about rev uh if if there's no rev then like the chain has no usage what are we doing here so everything's about rev all of that will go back to stakers I think something salana had a crazy year as I'm

sure you guys saw all the meme coins and trading and fees uh jto softwares produce 1.1 billion to valers and stakers that's insane amount of money and that is uh driving that's going to be a major source of staking yield especially as the way that these networks work is when you start out and you launch a blockchain typically you have a really high inflation curve you want to incentivize people to stake you want network security you want validators to run the software and take a commission on that that inflation will go down over time because uh you don't really you're kind of just emitting tokens you don't really need to continue doing that if

the chain is going to be successful so over time any successful blockchain the percentage of staking y that comes from inflation will go down and the Rev will go up so I definitely think a lot about rev of course apps are going to focus more on capturing value and redirecting value to the devs or the token holders of the app uh whether it's a DEX or something else but uh I think on Salon uh on salana specifically you will see more and more block space being created and um the meme coins are a big battle test for salana too so salana Engineers are learning a lot from that two or

three months later chain gets better more block space more rev and so on and do you have a view on the fact so your answer is it's really blog space there would be more blog space more demon for the block space because it will be kind of more valuable obviously the question is do you create more block space or are you creating some scarcity and do you see a value or a source of yield from the LRT so the r taking of already your LST which is a liquid staking token yeah I think uh every blockchain has to continue increasing block space no there's I can't think of any Tech in the past that is like okay we should just stop here like we're good there's a

uh a pattern of Technology getting better getting faster becoming there's more abundance that's certainly the path that salana is on and so Mev and priority fees and the this payment for hot state is going to increase and we're definitely that happened on Salon in the last year I think that will continue to happen there's certainly more kind of uh risk taking out on like the vrts uh we call them vrts on the jetto reaking protocol some of the lrts um but yeah I think that like Mev and priority fees and this rev going to stakers is going to increase going to increase in proportion

you mean or just in absolute numbers uh both yeah I mean we're you know we're kind of in a low right now things got a little crazy cool enough taking a breather everyone sticks in their Tech debt but uh you know I'm pretty confident it's coming back and Salon Engineers are working pretty hard on making more block space yes and sfim do you have a broader perspective to bring here do you agree first with the statement or do you see things a bit differently no I think um salana is definitely leading the charge in terms of like um onchain Innovation um and also to a large extent obviously to what the Cheeto guys are building um I think it's cool to see to see um cool to see more defi um come to Solana um I mean

bit by bit but 2.3x year over year is pretty healthy while um you know obviously ethereum has kind of like been now year to date kind of kind of flat um but yeah I mean we're excited to um to see more aent Innovation we you know I mean obviously given that there is going to be more institutional demand and um be it even on the just like on the sales side for now like and on we're excited to support it that on the r taking do you see at more Capital efficiency or do you see that's a trend that will continue to grow and grow and becoming something a bit more tangible or is it something that will be only part of the sticking it's a good question um I think for the kind of like super crypto native

cohort it's going to be uh a major source of Alpha and can continue to be I think that for everyday users like we're we're we're kind of like we straddling uh servicing clients like Ledger and zerion which are very cry which are very Crypt native user bases to now even like Ci applications and like Neo Banks so I think to be frank for the very Crypt native cohort uh yes it is going to it's going to continue to be a source of alpha I feel like for the more average user it is um you know they're just going to be happy to liquid stake their soul right um and get some additional rewards on that or um you know potentially deposited into a defi app defi protocol but yeah I think for the everyday user probably not so much it's going to it's going to be probably be

still pretty Crypton native even if everybody has access we've seen a couple of proposals for lrts or liquid restake tokens like eth on igen layer to be used as first loss capital for Lending so I think as long as the fee income coming through is relatively di Minimus at the moment people looking for other utility and one of the ones proposed has been to effectively provide it as Outsource collateral for borrowers which could include market makers or other onchain funds and then that would serve as collateral to protect the position of lenders who want to get a stable coin yield so it kind of helps power more sort of onchain lending and and onchain credit origination I've seen two two proposals for that so far

yeah and so that means that the the cryptocurrency side the staking could help provide some protection for Lending against World asset so there will be a complimentary between the world asset and the staking yeah so staking can both secure the network and then it can also be used to secure credit as well yeah that's an interesting perspective does anyone wants to add something on this particular point no overwise I have a question for you and that's the alpha part of the panel what is for you exciting for the let's say 2025 2026 what are you super excited about that maybe this audience is not aware of or not paying enough

attention to maybe let's start with you I'll have to probably go back to uh real world asset yields just making them super accessible for for everyday users um in kind of like crypto first products um I'm I'm very very bullish on this new cohort of C5 products um funny enough just because um and and obviously also Innovations such as like infinex Etc that just make it easy to be super Crypt native um but yeah real well asset yield um things such as bidle which hopefully will cross over into retail at some point soon um very very bullish on that I think for me I'm looking at the the Bitcoin yield space so things like core liquid like liquid Stak Bitcoin I think this unlocks a lot for uh lending

and borrowing so as I as I said before if you can accept it as collateral you can lend at lower rates and it becomes a real competitive Advantage not to mention the fact that there's a ton of people who who are sitting on bitcoin or holding it and they're not really getting any yield at the moment and so I think it's a large addressable Market it's been relatively underserved to date but it also has a lot of crossover for the lending and and the credit space so that's what I'm most excited about I'm most excited about two things I think one is institutional adoption of lsts there's a few barriers in walls to run through to get there between the uh security status which the jeto foundation put out a report about the security classification of jto Soul

talking about how it's an not of security hopefully we'll see more insight from the SEC soon on this I know it was on Hester P's list of things to get clarity on and hopefully it uh looks something similar to the the mem coins are not Securities uh document that sheot wrote and yeah I think just like more policy Clarity for builders in the US I think from liquid staking angle and also just like being an entrepreneur and the operation choke point 2.0 and we saw Trump uh give a a video presentation earlier today and he's definitely thinking about it and there's a lot of people in DC thinking about it so I think it's something that people from the outside it it seems like something

small but for builders in the US it's really big uh you spend the past few years like worrying about these things and wondering if you need to leave the US and now it's like okay we're it's coming back home and I think uh there's a lot of builders in the US that are excited to see that quickly a prediction or something that is super exciting I mean in Sky uh the most exciting thing is definitely the launch of the first couple of Sky agents that is uh coming up I mean actually just well you mentioned it the sky the spark tokenization Grand Prix so the very first agent Co spark just announced uh yesterday that they're doing this 1 billion deployment into black rock and a couple of other really interesting

tokenized assets but it's just the beginning of of spark reaching this escape velocity of a lot of autonomy and a lot of agency in deploying the8 billion plus uh Capital pool out of uh the USS stable coin and there's just going to be more and more of these agents launching and every single time there's another one is just another kind of accelerant on this process we've been discussing the whole time right of equilibrating yields increasing efficiency uh and and starting to have an impact on the real world thank you very much we have to close here but it was a super enjoyable to have you on this panel thank you very much thanks for having us thanks I think the early start worked out there

there was a lot of knowledge I don't think we were going to pack that all into 20 minutes so that was that was good uh our next um for our next panel uh you there's a there's a law of headlines it says that any headline that is uh phrased as a question the answer is always no so I'm curious to see if that applies to panels as well because the next panel is do VC still matter our panelists are Bachi who is one named like Madonna or Ronaldo kesi and Mike dudas let's give him a warm welcome

testing great um Mike hasib great to be here with you both thank you so much for taking the time to chat with me thank you yeah let's do it um today we're going to be talking about crypto and VCS specifically if VCS still matter before we get started do you guys want to give a short introduction of yourselves uh short introduction I'm a VC yeah I'm an extremely consequential VC very I still matter that's my that's my intro um to get started why do you still matter I guess this oh I feel attacked I will say I feel attacked um so maybe we should

start with like why VCS don't matter um because obviously I think this question would have seemed very strange even just a couple years ago uh the we've seen the rise over the last couple years of a few trends that are kind of these anti-c trends that that have emerged one of them of course being the rise of these crowd sale platforms like Echo and of coinless pre-existed for a long time but echko is kind of defining the current meta uh the second trend is the rise of meme coins and you know launching startups not through VCS but through something like pump. fun uh Beyond just mem coins and then the third has been the rise of these uh purely quotequote Fair launched projects like you know the two most prominent examples have been

Jupiter and Hyper liquid which were entirely self- financed aird dropped to community no VC allocation whatsoever uh um so these three Trends I think are defining something different about this meta that feels not like previous Cycles where VCS were just assumed to be part of the the baking process of how startups get created and there's a fourth one I believe uh which is the way that VC coins meaning VCB projects have launched uh looks to many people and based on price action to be extractive but what we'll argue in this panel I will is that that's not solely or even may you know perhaps primarily due to VCS but to structural things about

exchanges Etc I mean I think that Vibe shift has already swung back just because like mem coins are down so much from the high and VC coins have outperformed over over basically the last three months so I feel like I'm not feeling as much of that of like oh VC coins High FTV low float blah blah blah that was that kind of hit a crescendo like mid last year um but it feels like that's really come in since the beginning of this year just because all the mcoin financial nihilist people are just kind of down so bad they don't they don't speak up much anymore okay fair so we've checked one off already good we solved that yeah yeah yeah um so I think those are the reasons why people say oh hey do VC still matter um so I can summarize my counterarguments and

curious curious what what your take is so uh on so the first prong is Echo and you know these kind of crowd sale platforms the reality is that if you look at Echo so actually the the recent Echo sales that have happened in in the last like month or so most of them have actually been pretty shitty so they've kind of underwhelmed they didn't sell out um so that's been disappointing but if you look at the really big ones they were all VC backed right so like the probably the most famous one is Mega eth which we actually LED Mega eth's uh most recent round before their their Echo sale and so you know if you notice like on Echo or you look on Legion or whatever almost every single one of the projects that are listed there are VC backed literally I'm an angel investor

in Legion and they ask me before they offer a token uh or Equity to you know folks on the platform hey is this a legitimate project so VCS are basically I would say the single best signal of what should be listed on these sort of open Community launch platforms exactly so like VCS I mean obviously VCS have multiple different functions in the market the reality is that one of the functions of VC's is kind of as underwriter and it's obviously you know hope there are no regulars in the room but like that's that's that's kind of the way that the market looks at it it's like oh well this is a dragonfly quality project this is a hack VC quality project and okay what does that mean those are the same right yeah exactly that's that's what I'm applying um and so that uh that

signal the market takes that signal very seriously right you go look at something on Legion or Echo first thing you look at is who are the VCS you don't look at oh well let me read the white paper and like look in the background of the founders and like go Trace their LinkedIn and read every tweet they've ever written we do that retail investors do not do that right because they don't have time there's no like this is specialization this is what the foundation of every Market ever is that some people specialize and do certain work that other people don't have to so so that's that's one thing is that the these and you you just mentioned you're an angel investor in Legion Legion is VC backed so like VC backed and incubated yeah exactly and coinless VC backed almost all these platforms are also themselves VC backed

so the idea that like oh there's the there's all these things that are circumventing VCS entirely is kind of a narrative by the time the thing gets to the point where it's a community Fair launch project like hyper liquid thing's been in development for multiple years uh in the case of hyper liquid fortunately you know there was a wealthy set of Founders who could sell fund the thing to the point where it could get to a public launch uh in most cases that's not possible and you need folks who will underwrite with a Time Horizon of more than three weeks because let's be honest like the things today that people are excited about is not the same things they're going to be excited about one month from now uh you look at anything that's quote unquote hot right now this

could be a social F project a game f project um this could even be I mean we're getting to the point where like stable coin projects uh have if somebody invests in it the uh they literally are people are expecting returns uh they're expecting growth they don't want Founders to be heads down for even 6 9 12 months they want a product that is is growing that they can talk about that people can see tangible results uh within literally days weeks months from the moment that they put money into it and they're expecting many investors today you know this goes back to the Ico days uh liquidity they're expecting that

within months and that's simply not the way that long-term durational businesses are built if you look at the best Ico projects many of them a would be an example of this right I think what was the Ico like 2018 a is hitting its absolute best stride today you know six plus years later um and frankly because it's had support from wait a moment VCS in the liquid markets uh in Foundation sales uh I guess I'm getting ahead of the point we were talking about sort of early private VC but what's happening now is we're seeing many projects that I would argue got sort of CAU up in this

Fair launch meta you look at pretty much any AI agent project that launched a token uh the token went up to X the token's down 95 to 98% from X and the company was not able to sell there was no buyer um they didn't even get any portion of supply and they're sitting on like hey we've got a couple hundred thousand dollars and we have a team and like what are we doing like I I don't know how we're going to do this um hey you know Mike or you know hey h are you guys willing to invest uh at a precede valuation and you know let's get out there and let's jump start this business uh here's our pitch deck and we're like uh what do you mean like you you

literally already put your value out into the world you have a community you have a product out there um people speculated on it they perceive the token as the product and there's probably a really good platform here that you want to build that you can build um but you you sort of shot it out there there's nothing there's there's there's not a second chance all right I made like 10 points there they weren't coherent I see bring me back to coherence yeah look I I I think you made an excellent set of points and starting no no no starting with the with the hyper liquid thing like hyper liquid was funded to the tune of like 10 million plus dollars before launching their token the number Founders who can do

that is basically zero right like almost nobody is basically hyper liquid and Jupiter both self- financed huge amounts of money that basically their Founders were independently wealthy almost no Founders are in that position so that makes it very very difficult for people to really follow their footsteps now you look at most of the other Fair launches like I I don't know why people still think that this is a good idea you go back to the last cycle the the classic fair launch was year right that they they literally invented the term and Andre cronier to this day complains about what a horrible idea it was to Fair launch right he's now like five projects later being like man I should never fair launch anything you people are animals like you guys treat Founders like I should have just raised from VCS right

he's the guy who made the whole thing he still can't help himself though yeah no totally totally so like I I think uh if if you look at I mean I see the same thing that you see which is that a lot of these projects that were like hey Fair launches are cool we should do Fair launch they do a fair launch they have a token out there retail speculates on the token tokens worth 100 million they come to us and they say hey I own like nothing of this token because I I don't know I just it just happened we got excited we did a thing and like I think I might have a business can we can we raise VC money and I'm like for what you don't own anything you there's a meme coin that's out there that's like trading and they're well well but we'll

we'll like change the to we'll like make them give us some more token like dude do you see what happened with Jupiter when Jupiter was like hey uh our team doesn't own enough of this token we would like to ask the community to give some tokens to our team and the community is like you your token's already down what are you doing to us right like it okay well yes this is what happens when you basically put corporate governance in charge of random people who got free money right they yeah they're they don't know what to do they're just like that sounds like a lot of money and my token down so you're a dick you okay this is why companies are not run by shareholders because like yeah people are emotional people get mad people are like yeah I'm down and I'm

mad and I want you to pay for it and this is this is this is not how VC's operate right anytime you see one of these class action lawsuits against a token founder it's almost all it's a retail investor it's always a retail investor who spent $77 who spent $7 yeah yeah a retail investor who spent $7 that's often also the case so like the reality is that when you're building something it takes a long time to build something and crypto is volatile as hell it's crazy to try to build a crypto startup so you're going through these ups and downs sometimes you're a hero sometimes everyone hates you sometimes things are going well sometimes you're going terribly and the value of VC is that we get it we're patient we understand what you're building and we can actually help we're not just in your

Discord every day asking when token yeah and the only reason or one of the reasons that it's that VCS are not viewed that way we should delineate like dragon is a great VC I think six-man Ventures is a great VC there are a lot of really atrocious VCS right there are Prop Shops there are you know scammers there are tremendous number of people out there giving money to projects market makers active market makers who are supremely some market makers do we have any active market makers oh okay all right can you please leave um fine we don't need we don't need the do market makers matter that should be the um you

know depends on if the coin has any value if not they do um so sorry um but the point is there are a lot of folks who are called VCS who aren't I think what we're just to be clear talking about are folks who have built businesses before who have built protocols uh and are going to be with you for three five seven 10 years whatever the journey is and sure hey may sell tokens at some point or Equity along the way but in conversation with the founding team explaining the reasons for it continuing to hold generally unless the founders unless situation change and and bad things happen or

whatever the case may be um but the point is long-term Partners in your growth Journey uh and so that's not the default still there's probably I would argue there's probably only 15 to 20 firms that operate like that in crypto so I think good VCS matter bad ones don't okay um you only asked one question so far right okay sorry I thought he was going to like more chill than me but I'm here for it all of the questions I had written down as well so I'm going to have to take the opposite side and say what is valid criticism of good VCS right now uh what's a valid cism of good VCS um I think one thing is that a lot of

VCS uh and a lot of what what I would call even good VCS um they a lot um and this is one thing that I think we um I I I can I can see it this is one of the reasons why we've grown in popularity as a firm is that we say what we actually think if you look at a lot of firms in crypto um even like some of the most stalwart firms that you think of as like okay these guys are these guys are great good actors in the space they've been good stewards of the of the industry they've been helping us on the regulatory side a lot of really great stuff but they don't own the mistakes of the industry and the reality is that we have up so many times like if you just look back of like nfts or play to

earn or Tera or FTX or like all this stuff and like there's a reason why a lot of people look at what VCS do and are like you guys are you guys are not that different from us you're also investing in scams you're also doing a lot of stupid and enabling bad behavior um and and it's true for a lot of VCS and um being able to talk lucidly about it is something that most VCS just do not do and I think that's one of the reasons why a lot of VCS have lost trust with many people in the community is because the community sees it it's like yeah obvious we were hearing you guys talk about play to earn constantly and then it just totally collapsed and no one like admitted it that like yeah you guys were helping enable this thing um and I think that is at at that's a large

part of the heart of why people find VCS to be so distasteful absolutely like another example would be hey we need to sufficiently decentralize and like the entire thing here is we're doing that over time and then like let's be honest like you saw the Unis swap proposal like like we've seen a bunch of others that are controlled by a very very concentrated group of folks who are basically putting out research papers thought pieces tweets this that and the other thing who are funding you know the 70th L1 of this year who are like literally if we look at like the biggest L1 that's like going like story protocol for example while we're saying like it's like why does that exist I don't know it doesn't exist organically in any way

shape or form wall putting out a bunch of really high futin moralistic pieces about everything else in the ecosystem it's be honest about the industry and I'm getting tired of it it sounds like AAS too we're very honest about the things we support we're investors in pump. fun I believe that pump. Fund in the long run will be a very positive protocol a very positive product for the industry and I'll stand behind it and I'm not going to you and tell you I don't stand behind it the same time we invest in stable coin products but I'm not going to put out a bunch of pieces not talk about things publicly that seem somewhat you know like or say this thing's unsavory while in the background I'm voting for

extractive things for the protocols I've invested in and then investing in a bunch of l1s that are useless and propping the price up so would you say that we have too much infrastructure right now of course I disagree go for it um so the whole the whole idea of invested in a few more l1s than I have guys a pump out fun guy yeah we'll get into monad versus uh pump that's right that's right um so look angel I think it's a very simple I think it's a very simple equation which is that are we done are we done building blockchains right is this the final form like right now salana all we had to do is get Trump to launch a meme coin and salana

collaps it on itself like you know Phantom fell over nothing was working the rpcs are all dying and you're really going to tell me that yeah we're done that's cuz Phantom misconfigured a bunch of like look the reality is that if we want more than 10 million people to be using public blockchains we're not done we're nowhere near done there's no technology Mega E the answer what's that is Mega eth the answer I think it's it's a shot on goal to try to come up with an answer and there's G to be many people trying to answer it but like it's it's like saying well who could possibly want more than like you know uh a gigabyte of RAM and the answer is like yeah the entire world needs way more RAM way more scaling way more everything so no technology stands

still and says you know what we we have too much infrastructure we're done now we're not going to make more computers we're not going to make more gpus we're not going to make more RAM We're Not Gonna you know no the answer is obviously no and by the way the reason I can take your answer seriously is that you guys do invest in some of the biggest applications in crypto as well I'm not gonna kiss your ass too much but like Athena and a bunch of consumer stuff defi so you know dpen right Dawn which we invested in so I think you earnestly believe that I do think there are some other large cynical investors who would Default about 80% to infrastructure investment and I think that's a problem I think too I I take the other side of that too like uh so let's say there's a VC out there who

doesn't invest in applications they only invest in infrastructure um I I think there's nothing wrong with that VC I mean at the end of the day if they're investing in bad infrastructure okay that's Mal investment that's bad but like they internalize the cost or they the problem is there's no bad infrastructure Investments right now because of the artificial that is not true had your salon piece and then I saw you saying look you don't hear about the ones we invested in that didn't work out but the issue is that the structure of the market as such that it only takes a couple infrastructure Investments that get hot that capture the imagination of global retail not that much liquidity in the grant sche of things to actually return go look at the portfolio of like a random Chinese fund that's backing random infrastructure projects and look

at but get back to your earlier point on because dragonfly blessed this thing people will invest in it and I not because dragonfly invest in this thing right like we invest in this thing because it's good and Retail investors see that as a signal but it's not causal right if we didn't invest some other great VC maybe you guys would invest and people would look at that that might be true actually you've done a good job you actually maybe the best but the l2s like they're are straight down like look at scroll look at a bunch of these other ones um and these are ones that retail invested in at a very high valuation uh because of that check mark and honestly that's the trend like the aggregate

value of all these things since launch is massively down absolutely but that but that's true of everything right that's true of everything what is what what is the exception to that rule Bitcoin in the same time period Sal doing well Al are doing badly so like okay yeah l2s are down but like salana look at applications like what about gaming tokens what about you know any of these other things that you could have said I don't want to own l2s I'll own this instead go own some iot tokens go own some what's interesting is like yeah yeah yeah so um own a GPU Marketplace so it's a question about tokens now we're getting a little far field the VC but I will go with tokens I think we're a question of whether yeah the question is whether there's

sustainable token value right like we we invest in steppen and you know play to earn yeah um we invest in something I I believe I'll actually address this one head on like the pitch was move and earn and you know we're going to have syns and by the way they didn't create the sinks like they created something that was what we invested in um is that the VC's fault I don't know uh there are by the way a bunch of mechanisms trying to come to Market to try to correct for that the reason gaming hasn't worked I would argue over the last two three years I think it is a segment or a sector that will work is because crypto is inherently speculative these are things that trade 247 365 that's the point it is the product for these games

we've been investing much simpler things right so things that people like you've seen we're investors of magic Eden it does well because there's just constant flow through it um again Steen did incredibly well because they had their own amm they took fees there was just constant flow pump. fun non-stop flow um we're doing one called football. Fun which is effectively so rare but the actual players are liquid tokens I think that's a good like people want to actually have fun speculate and use these things nonstop um but but to your point we've as an industry had a horrible track record of creating longterm sustainable durable value for tokens yeah outside of

infrastructure kills me to say that well I I'll take I worked through that in real time you're wel like I just actually work um but I will look I will say this is that like I don't fault people who invested into play to earn at the time that it was hot right I think like there's fog of War nobody really knew how it was going to play out but once it's over and everybody sees very clearly okay play to earn doesn't work play to earn is a disaster like giving people free tokens to play your game is stupid right it's like the opposite direction of how the flow of capital supposed to work is that gamer supposed to pay money to play your game not get paid they did buy nfts but then the value of those nfts was exactly so like this whole like yes okay there

were there were multiple steps in this process um but like that concept is just it was it was backwards land you know it was just like ass backwards stuff that we all collectively just sort of wound ourselves up and like oh this this kind of makes up metaverse this kind of owner ownership economy sir yeah what what's that ownership economy ownership economy yeah absolutely and so look the collective delusion we all had it right and I and I found myself even when I was criticizing play to earn and I was like this unsustainable and it obviously doesn't make sense I was like Maybe I'm Wrong you know like these guys are making all this money steen's going up and a Infinity is going up like maybe I'm wrong and of course you you cannot be human and not have that voice in the back of your head

that maybe I'm wrong and financial Alchemy has totally worked and like the laws of physics have been reversed right you just never know you just never know so turns out it didn't happen but like what's the learning what's the learning did we learn like okay if we learned tell tell them what did we learn you know like I I think the answer is that of course the economics of any system need to make sense from the beginning correct yeah so you have to have an actual buyin like a real buyin um the the earn component can't be Juiced so much that it becomes economically like irrational and there have to be real syns um and the syns could be I have to stake or pay to earn

more value in XYZ um that being said it's yet to be Dem I can't think of a protocol that's actually demonstrated this in gaming yet yeah dat I'm I'm generally pretty skeptical of Gam ging but I will say that I think you're absolutely right the core the like the the Beating Heart of crypto is always about money yep and the the best game you can play with money is gambling correct and so I I think in that sense pump. fun is the the best game in crypto yes and I think if you if you think about it as a game suddenly it's like really obvious why it works so well is that it you you're sort of role playing being a crypto Trader but the crypto Trader tickers are all stupid pictures of memes and the vol ility is like jacked up to 11 liquidity is basically

zero everything turns over in like 24 hours and they're going to and they're going to move I mean you saw they launched amm today they're going to move into reward like they reward creators the whole design is reward creators who create these pools it's effectively going to be Tik Tock with money we'll see if that works but like the amount of time people spend on these Creator platforms there's a plausible like there's a plausible scenario in which just time equates with time that fun is another one by the way like I I don't know why it needs a token per se um I don't know like maybe I can make more money than $40 per tweet or sorry per DM um but I do think this like sort of time for money and attention does have you

know some element of okay now we're slightly off topic what what are we supposed to be talking about we have one I think we can do one more question which should be on Meme coins I think where do you guys think that is going we've had the past year and a half dominated by meme coins will that last I know we touched on it a bit but I feel like this will make you guys fight so like Austin Campbell at the back of the room I think mcoin is the most important innovation in crypto you know since Bitcoin the most important innovation okay okay all right I was he hates them you start okay um yeah I think meme coins are basically um I think they're basically fine I think the the the philosophy that generated around meme coins was extremely destructive like this idea that well nothing we built

here matters all this financial nihilism I think that was really really bad for the industry I think it's clearly already peaked and it's on the decline I think you know I'm telling you things you already know which is that m coins are down bad everybody suddenly feels stupid uh like you know all the all the generational wealth that people thought they had like they they lost it all back which is always what happens in every single one of these Cycles people think they're now unfathomably wealthy and like there's five people who actually cash out and everybody else is just greedy and just keeps playing the game until they lose it all back um and so I I think the the story one is that pump up fun made an game that game was very popular um I don't think the long-term equilibrium is going to be well mcoins

go away obviously the big we're not talking about the big m coins like Doge or or things like this these are these are very different from the mem coin game the meme coin game is played with these low cap that are coming out every single day that's the mean coin game and that's what we're talking about uh doge is Doge it will always exist it'll never go away um I think for this game the mean coin game uh I think it's going to Pancake over time uh probably not yet probably there's another uh there's going to be another uh run-ofthe-mill when we have you know some macro reversal and risk assets go up and it's like oh suddenly everything's okay again and we have like a second hump I think it's probably going to happen with them coins but like people have already lifted The Rock and

they see all the little bugs of like oh kelse your Ventures and Melania and like oh all these like all these snipers and grifters that are taking a piece of the action and suddenly like doesn't feel quite as pure and quite as rebellious anymore now it kind of feels like oh I'm like I see the supply of the casino and I see all the little fees that the and I see all like the the the the firms that are optimizing the casino uh slot machines to extract the exact right amount of money from me every time uh oh I I read a book about it and now I know it's there and I can't unsee it I think more and more people feel that way about mem coins and that kind of means that the movement can't quite you know get all the way to where it was previously

uh but my claim is that when this stuff pancakes and me memes don't automatically make money anymore there will be some cord of people who will just keep playing this game forever even when it stops making money it stops being cool it stops being the thing that everyone's doing in the same way there's still people buying nft Ms you know there there like there's not a ton but there's still people buying those nft mens and like they're just going to do that forever um I saw a documentary recently like a short video documentary about um Cookie Clicker how many people know do anyone know what Cookie Clicker is only a few people okay you know cookie click so Cookie Clicker is this like really terrible Idol game it's basically like a browser game where

you click on a picture of a cookie and you click enough times that you can like make things that automatically will click the cookie for you it's the stupidest game ever invented but it's like I there was a moment in like 2015 where this was like a viral game that everyone played for like 10 minutes um there's people who still play Cookie Clicker and they they interviewed one of these guys and one of these guys are like I will play Cookie Clicker until I'm an old man and I want my kids to play Cookie Clicker and like for any game no matter how stupid it is there's somebody who's just like they're just never going to let go of that game and for memecoins I think there's probably like 50,000 people for whom they will never let go of mem coins no matter what like there

will be a new hot thing in crypto there'll be a new trend everyone's GNA be making money and getting unfathomably rich on the new thing and everyone else is going to feel stupid and and you know way too old but the mcoin guys will be like but I I just love trading pictures of the coolest me so I think they're going to evolve a bit uh talked about the Tik Tok thing creators are going to put their everybody's going to have their own coin in the same way like dude if you told people 20 years ago that people were like my kids like want me to buy like Roblox you know Roo and you know fortnite skins and this and the other thing it's wor like you would we would have said 15 years ago this is completely worthless um I believe that Meme coins are sort of the evolution of

attention by the way even getting more specific like it's not a perfect analogy but like 90% of the S&P 500 is an intangible value right there's just like there's just not that many hard Assets in the world anymore um there's brand value there's like attention value there's IP value like whatever bottom line is we're moving to a world of like very few in my estimation and like the actual data hard assets and just a lot of value around attention things that are cool things that are hip things that people talk about and things that people are paying attention to I think the number will more than the 50,000 people I think it's that Meme coins tied to or tokens again value tradable value tied to attention tied to personalities tied

to the things we cared about tied to communities will actually be an increasing a significantly increasing um portion of where people are allocating their you know hard hard earned um McDonald salary too it's just going to happen because there's the potential as we talked about a speculative economy for 100x and that's increasingly what people are looking for whether it's sad or not it's the reality all right I just wanted before we wrap I want to take a quick spot check of the room so given our two views on mem coins how many people raise your hand agree with Mike's view of meme coins okay how many people agree with

you guys are getting it my view of me points relatively split it seems pretty even yeah yeah this is what makes markets okay okay that's good that's good all right I guess we'll see uh we'll see in a year or so who's going to turn out to be correct what about digital didn't that go away digital land sandbox he's the guy buying sandbox still there's there are a thousand of those there's somebody still buying everything that existed in the last my friend Drew Austin is still buying sandx that's beautiful that's beautiful wonderful note to end on I'm sad we have to end it but M thank you for coming on thanks for having us for having [Applause]

us all right well that was awesome which makes me sad to report that this is our very last panel of the three-day conference uh I don't know Mike can we do one more day we'll see we'll see I check back check back tonight maybe we'll have one more day uh fortunately our last panel is a good good one we're going to talk about where macro and crypto Collide uh Felix Javin Austin Campbell and Joseph Wang let's give him a warm [Applause] welcome well in the great words of Monty Python and Now for Something Completely

Different um we're going to be talking about macro and crypto and how those Worlds Collide so I'm excited to be join joined today by I'll let them both introduce themselves but maybe we'll start with you Joseph oh hi my my name is Joseph Wayne some of you might have seen me on Ford guidance before so I run an registered investment advisory called monetary macro and also I write a Weekly Newsletter at Fed guide.com so my background is in Central Banking and Financial markets Austin all right hello I'm Austin Campbell um I am a professor at NYU I unfortunately know more about stable coins that is probably healthy for any individual human being um having run and built some myself in the past

and I have a long and somewhat tortured career in traditional Finance as well nice well that really sets the theme Here for what we're going to be talking about of tying those two worlds that seemed very different and separate just a couple years ago or even just six months ago and seeing how those two worlds are colliding so I want to start by just digging into getting everybody up to speed on how what what's a what's the right way to think about macro as it stands today so obviously we had the fomc meeting yesterday there was no real surprises there in terms of the rate cut changes but there was a lot to dig into so I'm actually going to pass it to Joseph I would love for you to just explain what were your main takeaways there how are you thinking about the FC

today in light of what's going on on the fiscal side as well uh I think the fomc meeting could be summarized by so basically chair PA if you look at his uh projections March fomc was one of those special fomc meetings before we get dotplot projections you can see that the fomc is really really uncertain as to what the world will look like in the future uh in the dotplot basically uh members there say that the risks are to the downside for unemployment and um you know very high uncertainty and for inflation risks are to the upside and also very high uncertainty we have a lot of things happening in the world that make macro super interesting when it comes to policy you have changes in fiscal policy through Doge you have

changes in immigration polic through enforcement of the Border law uh you have changes in regulatory policy which many people have been discussing today but that actually impacts the whole aspect of industries from oil to Banking and of course we have some changes in um trade that we will find out on Liberation day on April 2nd so we have all these things happening right now and so no one really knows what's going on so the FED is basically committed uh to be reactive committed to be basically be late no matter what happens so what they're going to do is that they're going to wait and see what happens look at the data and then react now my best guess is they're going to find out that the data doesn't actually look so good because of all these changes and uh we'll have some um aggressive round of

cuts but at the moment the market is only pricing in two cuts this year which is also what the FED guided towards at their Dot Plot now one other thing that happened at yesterday's FC that was pretty interesting was The Stance of the fed's balance sheet policy a lot of people build investment strategies as to whether or not the balance sheet is increasing or decreasing and so for well for for you guys Rejoice because like yesterday the FED effectively ended quantitative tightening uh which is to say that they are not going to be shrinking their balance sheet at least as much now quantity of tightening was going on at a pace of about 15 25 billion a month for treasuries now it's just five billion which is really small I I would say QT has virtually ended so uh the FED is markets like that a bit

you can see the treasury market feeling a bit more supportive of that um but overall it was a meeting that is you know wasn't that impactful because going forward all the macro is going to come from the White House from Congress so the FED is is really not going to be as important as it used to be so I I think that's that's how we summarize the meeting yesterday um Austin so before you got wildly obsessed with stable coins you did used to be a rage Trader that was your world so I'm going to tap on that world for just a little bit here before we get too deep onto the stable coin side of things but what's your high level framework for how to think about macro today is it just you know being fully focused on the fiscal side of things what's your current perspective

on monetary how are you characterizing that yeah I think all right so let's zoom out a little bit from the United States actually which I think is a useful exercise right now we're used to thinking in the United States of ourselves as a country that has a relatively clean relatively clean fiscal situation and clear monetary policy and historically so if you're thinking '90s 2000s you would look into Emerging Markets to find most places that we would think were in significantly worse shape but one of the things I've been observing from a macro perspective is lately the United States itself has started to trade more like an em sort of exposure and maybe the best example of this was when we cut rates in the short

end of the curve and the long end of the curve went up right like I remember having a long discussion with a friend of mine who traded Brazil about that exact Behavior there and the other thing I would Point people towards is we now have corporates in the United States funding cheaper at the 30-year Point than the federal government right so let me let me repeat that corporations are less likely to go bankrupt than the federal government okay what that means to me and back to what you were saying is that this kind of puts the FED in a no-win position and that's why they're very reactive because if you cut you're going to control the short end and lose control of the long end if you raise rates you're going to Crater the economy but maybe the long

end looks a little better and so we're in a position where quite frankly the fiscal is leading the monetary in a way we're not used to in the United States all of this comes down to until people have confidence that the deficit will not be like 200% of GDP then all of this Behavior gets much more like you would expect from em countries than the US and that's kind of the framework I'm viewing everything through yeah Joseph taking that mantle of this Dynamic of what happened in in September where yeah we got you know we we started off with the 50 bips cut and we saw the long end um sell off quite significantly you're calling for four or so cuts for for 2025 and to your point the fed's only at two the markets around there as well if we were to move forward

into these accelerated Cuts what do you think is the impact on the long end there in that respect because to what we've already been saying here is that the FED has been burned a couple times too many where now they're somewhat complacent and slow to react what does that do to the market is like the fixed income Market well first off I really like Austin's idea of the EM fication of the United States because you can kind of see that in in a few ways right we have a rampant fiscal deficit we have uh you know some some people perceive it to be uh weakening rule of law and so and and a lot of times the fisal authorities seem to be much more influential than the monetary authorities now one other thing that's very common in is you have

these tremendous boom and bus Cycles whereas you have let's say high interest rates in an Emerging Market foreign Capital rushes in Harvest those higher returns and then you know one day they all rush out and that causes the financial markets of theem to tank uh kind of have this happening right now right so this past month you have a huge amount of repatriation of foreign flows moving out of the US into places like Europe because of uh rearmament uh maybe to China where there's been a lot lot of interest in the tech sector there so you kind of see uh the US financial markets tanking because Farm Capital leaving basically just what would happen uh in an em boom and bus scenario so that's definitely something we want to keep in

mind as we go forward now thinking about what would happen to the short end so my base case what would happen this year is a replay of 2018 now the US is uh the US is still I think has a lot of things going for It ultimately it still has a reserve currency still the dollar is the international currency of choice we still have very deep in liquid Capital markets and are perceived by many to be a good destination for Capital so I don't think we are fully going to um change that anytime soon but in the event that we do have a signicant riskof event like we did in 2018 now for those of you who don't remember in 2018 the markets were probably down 20% from from Peak the 12 basically sold every single

day into December and there was some real Panic uh everywhere but um at that time the markets began to price in a lot more rate Cuts because they were afraid of recession or or something worse and so I think that's going to replay right now so if we were to have a significant correction given that the trade policies today are much more severe than they were in 2018 we'd have you know a big correction in the market I think that would still give us a flight to safety bit at the moment or at the very least the market would pric in more rate cuts and I think that should put downward pressure uh throughout the curve I don't think it will last I think that going forward given all the you know trappings of em ification we could see higher longer

dated yields in the future but uh for this year I think there's still a good um good safety bet if we do have a big Market correction like I think we we have and we were down 10% but I I don't think that's big guys are either of you guys in the camp of so okay we've had a 10% correction so far in equities um you know the cost of that was significant compared to the 50 bips uh Bond rally that we've had so far we've we've been hearing this notion that they want to get get the 10e yield down we were joking earlier about how it you know they're making it very explicit that that is the you know all all intense and purposes goal of the administration right now which is quite significantly different from the last

term so you know there's this idea that they can they can see some pain and then just beautifully come underneath and catch it with a with a nice soft cushion and there won't be any sort of recession you know at most some sort of growth scare so I want to ask you both How likely do you see that scenario as occurring versus you know if they're playing with fire here How likely is it that that could get twoo carried away all right so I'll give something of an off-market opinion I don't think recessions are necessarily a bad thing right creative destruction exists for a reason um you don't want an economy where you have relatively inefficient and failing firms terms that just stumble along forever as zombies right

that's that's not a good way to run things and using monetary policy right or or fiscal quite frankly to immunize your markets against volatility doesn't get rid of the volatility it just hides it and then eventually it's going to show up all at once see for instance 2008 and I would suggest that I don't think it's a good idea to be thinking about exactly when to catch this thing I think the right thing to do is think from a first principal basis about what is good fiscal and monetary policy period full stop and just do that consequences be damned with the caveat that there is of course some level of

consequences that is too severe and people start like oh I don't know collapsing your government and things like that don't let it get that far but the barometer should not be recession or no recession or growth scare or no growth scare those things are fine right the thing should be are we putting the country on a longterm like sound set of fiscal and monetary policies that when we look back 20 30 40 50 years forward we will say laid a foundation for sustainable growth I completely agree I mean uh so a lot of things that are being done right now are very disruptive but so the government accountability office under the Biden Administration gave an estimate that there could be as much

as500 billion dollars a year in fraud in in the federal government right so if we were to have that to be better distributed you know that's a good thing and of course having a recession we move some resources from where they're poorly used to where they can be better used that's better for long-term growth right and looking at trade policy so the administration wants things to be made in America it wants to regrow rebuild the uh industrial capacity of the United States now that's important for security reasons but if you look across the world other countries that have very restrictive trade policies like China for example have been able to build a very successful manufacturing economy right literally lifting hundreds of millions of people out of poverty so there is a path towards this that could

be uh leave leave the United States in a much better position than it is today I think the market is too dismissive of that and that is definitely a possibility depending on depending on many factors but you know with Administration and staff with smart people so hopefully we'll get there so one of the major dynamics that characterizes this em ification that we keep talking about is when a country starts to issue more short duration than long duration and that has been the theme of the past few years we've seen the the Yellen Treasury and the Biden Administration heavily weight t- Bill issuance so now we're getting into this Dynamic where we have a lot of this short duration that just keeps having to be you know rolled and refinanced here

and then the big question of and I think it's related to this idea of of of of the Scott Bassin treasury talking about trying to lower yields so you know underlying a lot of these themes is this idea of okay who's going to become the next great marginal buyer of duration and the way I see it is that there's a lot of different existing levers that can be pulled but there's two new Innovative ones and the first one and I'm going to ask this one for you Joseph um is this idea of you know we've heard it be called the mar Lago Accord we've heard this idea of centry bonds being potentially issued to other countries in exchange for security guarantees you know 100 years zero coupon Bond that's a terrible deal for anybody but the idea is that's just the cost of doing

business um How likely is that and then I'll come to the next lever to you Austin after so the marloo Accord comes from a paper written by Steven Moran who is now the chairman of the White House Council of um economists also a former guest on former gu guidance and and in that paper he discusses one of the solutions the us could deploy to try to uh create demand for debt and that is to say we go around the world and say hey we protect you protecting you is very very expensive so how about you share the burden and maybe buy some of our debt so that I think is a strategy that could work for some countries but probably not very many if

you look across the world a lot of countries simply aren't very dependent upon the US security umbrella and I think some of them would actually say that the US is the greatest threat to to their security but there are countries that are highly dependent upon us security for example in Japan always been a very good Ally with the US very close military ties maybe a country like Japan would be willing to sign up for something like that a Maru Accord but you know I think the amount of juice we could squeeze out of this probably isn't that much a much better way would be the banking reforms that maybe we could talk about later on and also another very new and ingenious solution that I guess Austin would tell us about Austin tell us about stable coins and how's that become the next great marginal buyer of

debt yeah so if we think about marginal buyers um a lot of foreign governments have been reducing their Holdings of stable coins and the great irony of that is that the counterveiling weight is that the people in those countries are increasing their Holdings of us treasuries through stable coins so look people greatly over complicate the discussion around stable coins and also call a lot of things stable coins that shouldn't be called stable coins but a properly constructed stable coin is just a box that basically holds stuff that looks like T bills and treasuries very simple and it's just represented on a blockchain now the important part of that is that there's two criteria right for you to get your hands on that one is

that you've got the internet and the other one is that you have something of value to exchange for it so like when I was at paos and running B USD the only country in the world where I was relatively certain no citizens owned our stable coin was North Korea because it fails that first test of people having access to the internet everywhere else they were using it and when you go and look there's actually a very significant preference still for the US dollar internationally compared to almost any other currency at the base level for people right it's a little bit like Churchill on Democracy where the dollar is the worst currency except for all the others and what that means is you know what tether is probably I think I saw the stat today the seventh largest buyer

of treasuries globally now and growing and so if we pass stable coin legislation in the United States you have larger and more sophisticated financial institutions that are able to issue these because look whether you trust tether or not most people probably trust I don't know Fidelity right Black Rock JP Morgan to manage these things well and that means whether other countries like it or not which is kind of an important point on its own we can now sell treasuries directly to citizens in other countries and let them opt out of their local system local currency into US dollars at size there's a very significant chance that the single most

important thing Congress will do over the past 10 years and next 10 years is pass the stable coin bill and we could be looking at this 30 years forward is oh well that's the moment where they destroyed all but the G8 currencies right everything else just got completely run over by this being generally available obviously that is a very large source of funding for the US TR treasury if we do that properly what changed in Congress and government you know they were pretty against stable coins for a while was it just you know it was being bucketed in with all the other stuff of crypto and there wasn't this this deep-seated realization of the potential to you know further out US dollar hemony like

explain to us how how has this track this timeline where where we are at now where there's bipartisan support for the stable coin legislation well so I'll start by saying I think there's been bipartisan support for stable coin legislation in the house for a long time right because if you look at people who are opposed to stable coins versus in favor of stable coins the number one predictor is not political party it's age right like Richie Torres was on Unchained and talked about this and literally said the problem is the gentrac that we have on top of the democratic party right because if you're 75 years old and still think it's 50/50 that PayPal is a scam then certainly you're not going to be

cool with stable coins all right fine but the house I think has had the votes for a long time the change is the Senate flipping Republican because there's nobody in this country who hates changes to the financial system more than Elizabeth Warren all right and so when the Democrats and the specific Democrats so this is not Democrats at large it's literally Elizabeth Warren and shered brown were in charge of Senate banking they were an absolute Blocker on legislation the fact that they they are out of the way means that if they put the genius act to a vote today in the Senate and it could actually get to the floor now I think there's 70ish votes for it and you'll notice there's only about 50 Republicans so what does that tell you about the Democrats right I I

think it's just the blockers being moved out of the way and the regressive party leadership on technology being pushed aside is giving the younger Democrats a chance to voice their real opinion um Joseph I want to ask you would that said is a context of what's occurring on you know the technological side of the innovation of US dollar you know Reserve currency hedony there's a lot of people that you know talk about this this idea of like the brics currency coming forth the end of the US dollar Reserve currency as as an entity but in the same vein you know you used to be at the New York fed you were on the trading desk there you were deeply involved in money markets Etc and you know over there for those that aren't aware but there's been a very very

significant shift in recent years over there you know we used to be on an secured standard liore and now we're on a secured standard Sofer how do you think about this idea of the continuation of the US dollar hedge money you know because now if we're on a world where lior was a global Landing rate and now Sofer is very much tied to us treasuries so like how do you view that Trend continuing and especially you know taking into consideration some of the ideas of stable coin Innovation all the president has said bricks if you want to use a new currency we're just going to t you sanish you 100% so that you'll never be able to do that that again so I don't know how effective that would be but I think what the administration would like is although you don't necessarily have to have a

strong dollar because you want to boost your manufacturing you do want the dollar to be a reserved currency and the way that they're trying to do this is to move away from the sanctions and towards things like tariffs so sanctions are different from tariffs and that let's say back in the Russ Russia Ukraine war you could just confiscate someone's assets right if you're you if you are sovereign or if you are foreign National you could you could potentially lose everything that's very different risk than saying that you'd have to pay an extra 10 or 20% to to use the dollar or to use the US Financial system so if the US were to shift away from that standard of sanctions trying to basically take someone else's money if we if uh we don't like you then you know moving away

from that towards something that's kind of more of a toll more of a tax I think that is that is positive for maintaining the dollar Pim as a global Reserve currency now as you rightly note the the standard has moved from an unsecured to a secured system uh the reason for that is that one of the things we learned from the great financial crisis is that you know unsecured can be very risky it could have systemic risk so when the banking system goes down you know all that unsecured stuff that that's not looking too hot you can lose everything if we have a secured system and it sounds like the stable coins are going to be backed by very sound collateral so maybe they could be perceived to be secured as well right T bills and and other aspects so uh having a secured standard is

something that could further strengthens I think the the role and assets role as a reserve currency in widespread use Austin I want to ask you so let's get to this you know macro crypto colliding moment here you know we we've already talked about this a couple times this week but I'm asking you again publicly but you know around that idea of of Sofer and all of that is the great complex of money market funds and now we're talking about stable coins so you know where do you see this going are are stable coins just a digital version of of money market funds and is it going to replace everything that is existing over there or you know complement it how does this all start to fit together yeah so I I guess as a starting

point stable coins in the genius act are almost literally money market funds right if you look at the form factor it's a bankruptcy remote vehicle inside of a specific specific legal form factor that can't use leverage but can buy T bills and do repo and reverse repo on government securities I've just described Fidelity's government money market fund okay like literally it's a money market fund um and stable coins are just a wrapper that gets those onto a blockchain now where does this start moving things well one of the trends we've seen post 28 RIT large before we even get to blockchains is a move away from opa credit risky Bank deposits is something people prefer and a move away

from Risky short-term commercial paper for which you don't pick up much yield that was Prime money market funds and they've been shrinking into one of two things which is government guaranteed money market funds which have been growing or the balance sheets of the largest banks because there's this perception that if Wells Fargo fails the government's going to bail them out so I'm not going to be in my local community bank I'm going to be in Wells Fargo and by the way both of them are paying me zero yield on my checkin account so who cares um my personal view is where these things will move is to realign sort of the framework of the financial system and that the current modern bank is actually an incredibly dense entity that didn't really exist like 50 years ago where your bank would

be the one who held your deposits and gave you your mortgage but like that's it it wasn't also the biggest source of all your electronic payments and managing all of your assets and like handling all sorts of other stuff these are incredibly dense entities and one of the things stable coins will allow for is the unbundling of the banking services which is not to say the big banks will get smaller but at least you'll have a better choice of the services that you take from them and the other thing it's going to do is in the current system because we tell Banks only you guys can do electronic payments for the most part okay so like all of you are deputized and all of the banks have decided okay well we're going to offer the following deal to Consumers we pay you zero on your deposits we're

going to go lend that money to other people often quite risky and when that works we make a ton of money and pay ourselves huge bonuses and when it doesn't work well you're going to lose your money on the deposits that's not fundamentally a great economic arrangement for people who want to use the system for payments but they're stuck with it because you've only got Banks giving another option for that is going to force Banks to compete for deposits at fair prices in a way that probably moves this sort of very large and implicit subsidy that we're giving to borrowers in the current system back into the pockets of people using the system for payments and again if we're thinking about a country that in general has significant levels of indebtedness and trying to figure out

why this sort of Market shift is probably not the worst idea Joseph I want to get your take on that and also characterize it around you know your experience being in in repo markets and money market fund like you know we've gone from this era of along with going from liary to suur is this idea of going from you know this this Corridor system for for the FED funds rate to this modern era where we have the reverse repo protecting the lower bound and there you know there's still some some tweaks to work on on on the upper Bound in terms of the the standing repo facility for protecting that upper bound but do you do you see any major improvements that need to continue to occur in that realm or as things are good and do you see any you know interesting solutions that come forth

from from digital assets such as stable coins that might help complement some of the you know wacka issues that have occurred over the last few years you know like the September 2019 repo crisis that now has mostly been fixed but yeah how are you thinking about all that so from what I hear the description of a stable coin is basically like a it's basically like a shadow bank right it's like a money market fund it's it's uh maybe a potentially more efficient form of money market fund that depending on how the adoption is for these stable coins could be more liquid than actual money market fund shares now as you know the FED has had a increasingly large footprint in money markets uh in the past the FED would try to set interest rates by controlling the amount of

reserves in the financial system but now it's very much done through administered rates on the lower bound it's reverse repo facility on the upper bound there there is a standing repo facility that could potentially put some some sort of a ceiling now I think these two are related because when the FED is active in the money markets that creates greater stability and that actually makes anyone who's in the money markets a bit safer so if you are a stable coin fund and your assets are in t bills and repo you know you have the FED there basically backstopping this entire Market that makes on the liability side your stable coins safer and so I think that's that would be I don't know if they intended it to be but anything that's uh linked to money market space

to be a safer asset because there's less volatility and an implicit back stop I think another important point there as you look at how money market funds are constructed post financial crisis is you don't have leverage in them either right like if you're thinking about systemic liquidity issues right we have a live example of this which I think people forget so in the nydfs has been regulating stable coins since 2018 and basically been using a framework very similar to what's in the genius Bill and they had a stable coin that was I think at the peak like 23.5 billion doll which was BD that went basically to zero in the course of three months it was shut down and what happened in markets nothing right and who lost money

on that stable coin nobody right like you can build these things correctly to the point that the only way you're going to have a stable coin collapse and disorderly fashion unlike say Banks which actually fail way more often is if the US Treasury itself is the problem given the collateral which is where the FED providing liquidity is effective because the collateral is collateral you can provide liquidity against we're not sticking a bunch of like really junk rated ABS in this we're actually using a government money market fund and so to me that is a fundamental restructuring like you've been saying of some of the building blocks here but in a way that knock on would so long as the treasury doesn't blow itself up is probably in

favor of systemic stability you know there's actually a secret backup plot that in case the treasury kind of runs hits a de sing but the FED will still step in and back stop it so you're good even in that case so you're saying instead of like an auction failing they would step in for that no no so one of the one of the potential disruptions in the treasury market is something called the debt ceiling so what happens is that uh the United States spends more money than it receives in taxes so in order to pay its bills it has to continually issue debt that's why our deficit continues to grow but what happens if we hit a debt ceiling then bills come due but we can issue more debt to to uh to to pay to finance that uh in that case so there is actually the house

Bank of New York and they were gaming it out what they could do uh what they could do is something called payment prioritization so the United States again all this tax revenue and all these expenditures you got to pay you know military you got to pay you know grants and stuff like that you know everywhere what they would do the the amount of inflows from taxes is more than enough to cover uh principle of interest for treasuries so they would prioritize payments to make sure that the debt holders received their interest payments received their principal but basically default on say the post office workers or someone like that so even if we were to hit the debt ceiling the etroy market would be okay all right not political

advice but let's not try that yeah let's not touch that Beast U okay last question for you both here is is a two-pronged one but the the final two big you know components of this idea of of macroon crypto colliding is one this this recommendation than this talk about a sovereign wealth fund for the US and paired with that is also this and I don't think there's going to be any answer here that gets you know people excited if if if wants them to pump their bags but the Strategic Bitcoin Reserve um how do you both think about those two potentialities and what are they trying to solve and is it even a good idea Austin yeah fine just I'm gonna get into trouble again um all right so one I

am on record of having said in the current environment I think the Bitcoin strategic Reserve is an absolutely pants on head stupid idea um so I'll just lay that one out there and the reason is let me walk you through the logic okay we're spending too much money and so the way we're going to solve that is by spending even more money to go buy some lottery tickets okay any financial adviser would tell you for the love of God don't do this um I would argue a Bitcoin strategic Reserve at state level might make sense there's some logic around that and a Bitcoin strategic Reserve if we were running a surplus I'm not personally in favor of it but like fine whatever do what you

want but a Bitcoin strategic Reserve while our problem is we're already spending too much money and by the way the primary thing that's going to pump the price of Bitcoin is continuing to spend too much money like you can kind of see the circularity inherent in that problem and what's going on there how about instead of starting a reserve we just okay I know this is going to be shocking have we considered spending less money right so I I think this is sort of the classic you know it's like the alcoholic trying not to admit they have a problem about drinking Behavior like we really just need to get to the core of the problem here guys so I guess I'll on the US Sovereign wealth fund you know at first blush it sounds like a very strange proposition right usually countries that have

Sovereign wealth funds uh have tremendous trade surpluses or some kind of windfall from their natural resources like Norway for example they have all sorts of oil and gas they earn a lot of hard currency that they deploy for the benefit of their citizens but in the US obviously that's that's not the situation here um from from what I hear from say secretary lck the the goal of that is to maybe capture some upside on companies that the US invests in for example let's say that the US offers tax incentives or grants to certain companies or certain sectors maybe the Maybe in exchange for these benefits these companies could offer The Sovereign wealth fund some warrants or shares so that you know maybe the the

the US is able to benefit from some of the um subsidies they offer certain sectors or Industries so in that in that sense that sounds like a reasonable idea it will all come down to execution so you know the administration is trying different things I will give them the benefit of the doubt maybe you know trying something new we get a better outcome all right so as a final point it's too bad mikee dudus left because I'm about to give a rejoinder there um the other thing that I think is fun watching macro and crypto Collide is how you can see like the different asset classes in crypto starting to mimic the actual behavior of asset classes in traditional Finance right and one that I would say to people like back to the

Bitcoin analogy it is actually starting to behave like digital gold which is how you can predict the thing but I'll say my most fun analogy that I hit somebody with earlier today is one of the greatest parallels is actually between the Art Market and the meme coin Market because the primary purpose of both is actually still just money laundering Arthur are you gonna go on I'm GNA ask you for this this analogy as well but uh you say one of the big lessons for for crypto is to you know not just keep repeating the same mistakes that the finance industry has already figured out because you know I'm gonna let I'm gonna let you finish it and make sure you touch on the French the French Quant blowing up too oh boy um all right so Felix is picking on me

for my views on stable coins again um yeah it crypto like in another parallel is just speed running the history of traditional Financial products like I I was having a conversation with somebody about terraform labs and he's like isn't it weird that like we built this unique thing and it failed and I'm like it's not unique right this is self-referential equity note there's nothing in crypto I haven't already seen a French Quant blow up is what I said to him um but but the idea here and what I think is important to move the industry forward in a meaningful way is that the discipline of finances certainly not perfect and there's a lot of dumb things that happen there but that doesn't mean over the many hundreds of years thousands of years that we've been doing

it we haven't learned any lessons and trying to reinvent a car from first principles when you can just walk outside and look at a Toyota is probably a bad idea right in the modern world and so the other thing that I'm actually hopeful for that we continue to have a collision on is the crypto people actually bringing technological innovation to banking at the same time the banking people can bring like oh I don't know risk management to crypto because it would be really nice to have a system that has both instead of neither well said all right that's all the time we have last panel of Das hope everybody had a great time it was a great few days thanks so much [Applause] thanks e