New SEC Crypto Proposal Could Finally Fix Tokens

Transcript

Nothing said on Empire is a recommendation to buy or sell any investments or products. All right, everyone. Welcome back to the roundup. I am looking at I'm looking at a new place for Santi. Santi, a little pop bottle of champagne behind you. Are we celebrating? And then Rob, I'm looking at your pants seem to be drying or >> uh Oh, no. It's a [laughter] jacket. It's a jacket that's there. It's a It's a little cold. I'm in Jackson Hole. I'm in Wyoming. You know, it gets He's at the he's at he's at the conference. Are all the central bankers there, Rob? And are you are you here to feed us the alpha?

>> Yeah, CZ I did see a picture of CZ there. So the central bankers are in, you know, in fact in attendance. [laughter] >> You know, it's funny the So this is I'm here for Salt and then Salt kind of leads into the um the Federal Reserve meeting and this week was like just supposed to be jam-packed with like all the regulators, you know, a lot of the the bankers um and all the exchanges, etc. like it's a very institutional conference and then the white house decided to do this dinner tonight and they um with all the crypto people around the clarity act then the the innovation advisory committee for uh the CFTC is meeting tomorrow and so a lot of people canled um but uh oddly CZ was not one of the people invited to the white house uh for that that dinner tonight so

he is still here >> noted noted how long you staying Rob I'm flying out tomorrow actually >> you're flying out where to Jackson Hole >> oh okay well I'm going to miss you because I'm flying out of >> everybody is leaving for what it's I'm going the wrong way but it's okay. Um, >> you know, the the interesting thing about Jackson Hole airport, there is now a direct flight at United, right, at Newark. Uh, Jackson Hole, >> if the flight is delayed, you cannot land aircraft in the Jackson Hole airport after like 8:00 p.m. or so because the Buffalo need to sleep.

>> And it's like this whole environmental um thing that if your flight gets late, you just cannot land in Jackson Hole after a certain hour because the buffalo need to, you know, be in peace. Well, so they've always had they've always had the winter uh non-stop flight like during ski season, but the the summer non-stop flights are always like kind of hit or miss. Uh I I um I I I connected on the way here and I'm I'm passing through Chicago on the way back, although I'm going to stop in Chicago and see some founders. So, uh but yeah, it is one of those places where like they're very thoughtful around like there are no lights at like it's just like very dark, you know, at uh you know, at late at night. So, >> great ski resort.

>> All right, tell us about tell us about it, Rob. tell us about the make it this year unfortunately but >> uh salt is always a great time it is um it does tend to be very focused on the legislative and regulatory side very focused on the institutional use cases uh so you know I've had meetings like Patrick Whit is here and Tyler Williams who just le left Treasury is here um I saw uh there's you know there's a number of other people from um you know different parts of the government that have been here uh Chair Atkins is here on the SEC side of them that he came and kind of left right away. Mike Sely was supposed to be here, the chair of the CFTC, but he canceled because of the innovation advisory committee. And so we we've there's a lot of that happening uh

which has been great because obviously it's top of mind. We've had a very long discussion on uh on Monday night uh with a number of of high level people about are there still ways that we can try to make sure that the Clarity Act gets passed. So that's a big part of the conversation right now. Uh and then there is also a lot of the conversation is you know what is the future of crypto look like and it still continues to be very much uh you know this kind of traffic crossover right and so you know they I was talking to um to the co-CEOs of Kraken uh earlier this week uh who were both here on Monday and then and then left and you know obviously a lot of what they're leaning into right now is the payment side the exchange for everything side that seems to I was also

talking to to Mike Novrats on Monday about this a little bit as well and you know they're spending a lot of time in the data center side, the AI side, and there's uh, you know, a general belief. I think that people are excited about a lot of the fundamentals for, you know, the stuff that we're talking about. Like this is a sort of a broken record now on this point at this podcast, but like a lot of those fundamentals are doing well, but it now has to be parsed with or or, you know, kind of complemented by um some of knowing and understanding what's happening in AI, what's happening in broader, what's happening in broader capital markets. And that is really the the conversation right now. Le let's um let's talk maybe there's actually a lot of topics for a late August podcast but the first big one is probably SEC and

regulation project crypto but um before before getting into that one question on clarity Rob what is the sense because I saw um the people I was texting with who were at salt said look there's actually still a decent bit of optimism around clarity right now and so I think you on one of the last podcast said there's absolutely no way we're getting clarity we will get rules and regulations from both the CF uh CFTC and in the SEC, but clarity specifically before we get into the SEC, like what is your feeling coming out of this week? >> Well, I I don't think I said there's absolutely no way. Uh so I I um I wouldn't speak in such absolutes, but I I I I do Yeah, I do think that the um you know, you can look at the poly market today, right, and it's you know,

20% or 18% something like that, right? >> Um I I there is actually a broader range of things that I am hearing from people than I have in a while. Um, some of the people close to the government are still telling me, "Hey, we think it's a coin flip. We think we can get this done. Like, let's figure out a way to rally the troops. Here are the things that we can negotiate." And I think that's awesome. Like there is such hard work being put into this and there is no quit and the people who have been you know in the administration in Congress who have been working on this for for many many months and also among you know the companies who have been spending a lot of time on this and and their you know government agency arms the inreions of the world the coinbases you know

ripple's very involved you know you know the defi um uh alliances here you know a number of other people and so that's awesome and so you know we we continue and I've been continuing to figure out ways of which I can also be helpful uh on that side. Um but you know I think among people who are you know maybe less close to what's happening happening in in government but are maybe you know um uh kind of seeing what's what's happening uh on the ground from you know a lot of the way that the the posturing and the positioning is happening on the day-to-day at the companies. Um there's an expectation that it's it's the chances are pretty low right that poly market side. So I, you know, we'll see.

Like I I think we'll definitely get a vote in September, but I also thought we would get a vote before the recess and it didn't happen. >> Um there but there's there's work being done. So like listen, I remain um you know hopeful, but uh you know I'm not positioning as if like this is definitely going to happen. That said, I think the market has positioned itself as such that this is not going to happen. And so I I think you know any surprise to the upside is good for the market. >> Yeah. Let's get into the SEC and then we can maybe talk markets. So we can talk, you know, some of the more >> exhilarating stuff for the markets people, which is Stanley Stanley Ducken Miller. Stanley Ducken Miller buying purr. I know everyone wants to talk about that. We can get to that. But

Santi, I do Santi, last week or two weeks ago, you were talking about like catalyst, like what are the catalysts? I will give you a catalyst, my friend, which is the SEC proposing new regulation crypto assets. This is what I was, I think, hinting at a little bit last week. Um, not that I knew it was coming this week or anything, but I said pretty clearly, you know, if we don't get clarity, we're still going to get rules and regulations with from the SEC and CFTC. I've, you know, I think Rob had good points on that as well. Uh, the TLDDR for people who didn't read the it is a uh how how big is this page? It is 402 pages for what it's worth. So, I think everyone is rapidly, you know, just chewing through cloud credits trying to actually figure out what this

means at the moment. Um I was trying to figure out what it means for our token uh transparency framework and command f disclosures and got 130 uh times that they mentioned disclosures in here. So I still have not obviously gone through the entire thing. Um but just to give a quick TLDDR basically they proposed two these two exemptions for token offerings. There's the startup exemption which is up to $5 million in one time uh and a fundraising exemption which is up to $75 million. uh both of them require issuers to publish these principalbased uh narrative disclosures about the token and the investment contract. The $75 million tier also requires uh financial statements and ongoing reporting and then there's a safe harbor which is once

a team completes the you know managerial efforts that it promised to the market. Uh the token can exit securities treatment entirely. That is my uh layman understanding of this not having gone through obviously the whole 402 pages just having spoken with people who are uh kind of close to this. Uh Rob maybe fill in the gaps if there's anything I missed and then Santi would be curious from the put your investors hat on. Is this a catalyst that you would look at? There's also some stuff happening with you obviously there's Fed meetings and you know we're the market that's we're recording this on a good day. I think Bitcoin's around 68 69K today. So curious if this is a catalyst that you're looking for. But before that, Rob, tell me if I missed anything important here.

>> I think those are the most important things. I I would call out that, you know, the $75 million is actually quite high. People are excited about that. Uh there I don't think there was an expectation that that would be um you know, near as uh as large as as it is. So I think that's great. uh there's you know I think one of the things that's you know here that is very clear that has maybe not been talked about again but there is again a a sort of a an understanding that there is federal preeemption uh versus the versus the states which I think you know continues to be a topic conversation among a lot of uh topics and a lot of you know different asset classes and other ways the federal government's thinking about the world but that is uh again good because it provides more clarity and it

we can't be in this situation where you know all of a sudden then you know the the states are deciding that they don't like um you know what is happening. Uh there's also I think a you know there's going to be a 60-day comment period uh and then there's going to be drafting after that. So we're probably not with like an actual full ruling. We're going to get to a little bit more details. Probably not until 27 at some point. Uh and so we're going to continue to see some some evolution here. But I I would just say that generally this is the first sort of like fitforpurpose like federal offering that we've ever had. like the what has happened before and the way there's been this hodgepodge of you know enforcement uh by you know regulators that you know seem to to not want to legislate or seem to want to

legislate through regulation like that has uh created the situation where we have these like offshore not for-profit entities that kind of hold the token and they're they're you know kind of pulled apart from the labs entities which maybe do a lot of the actual you know engineering work and it creates you know bad uh incentives and economic um kind of misalignment uh in a lot of cases and you know should this work and should people take um uh you know kind of advantage of this which I think they will you know it creates a green space now for innovating around token design back here in the US and so we should just give you know I think the SEC and the CFTC a lot of credit for this uh and it it and it also it puts it directly into uh these directly back to the

companies themselves to self-certify that they are decentralizing um and if they that allows for these people to try to figure out the best ways possible to do that decentralization versus fitting into like really rigid structures that you know might not um it might make it hard for you know anyone but like the most wellunded or you know best resource companies to do that. >> I mean do I like it? Yes. Does do I think it moves the needle? I mean you could look at like the market's responding favorably. I'm not sure it's because of this to be honest. uh >> probably because the Treasury announced uh you know increased sizes of uh long end liquidity support which I think was announced earlier this morning. I I think actually the market didn't move

much in reaction to this to be fair and the market is completely moving on the back of uh you know the the treasuries move. So >> yeah I mean everything else like the market and whatnot. Uh the thing is like okay like we've had these safe harbors like you know was it Hester Pearson introduced that number years ago. I think it was very it made a bigger dent because you were in a much more hostile regulatory environment. There hasn't been this hasn't really been an issue certainly not in this administration. >> The >> you're saying you're saying positive comments your thesis here haven't Yeah.

>> Correct. What what we needed is the biggest um bottleneck. We're gonna use that. The biggest bottleneck is can you tie cash flows to the token? >> Okay. I I got to I'm going to I'm going to let you go into that, but like I got to push back here a little bit on the first part, which is that like yes, the administration and the regulators were not going after, you know, people for uh things that were, you know, kind of gray area. Of course, they were going after, you know, bad actors, but the like what we have now is an actual ability to collapse the labs and the uh and the foundation entities and do so in a US Delaware doicile company, right? And issue a token on top of that like that.

Like like I understand that the market didn't move yesterday and the market we've all talked about this, but the crypto market is very flows driven. And so I but the just because it didn't move, you know, on day one doesn't mean this doesn't have a drastic change for the way tokens are designed in the future and then we'll probably solve some of the problems that you were just about to go in and talk about. >> It's not a durable structure is my point. This is like an agency coming out with a ruling. Yeah, I get it was 300, but it can be reversed in a heartbeat. This is not regulation. This is not clarity. And so it's a nothing burger in my mind. like it is good signaling and posture, whatever, but we haven't had this issue in a long time.

>> I I cannot imagine like how it could be a nothing burger that the SEC and CFDC came out and said, "Hey, like you can do this thing that is new and novel and was never allowed before." Right? Just because of the fact that is not it is not yet enshrined in legislation doesn't mean what we're not going to see over the next couple of years is is a lot of companies trying to innovate around this structure. that and by the way if this becomes a thing that like I'm not just talking about like oh like you know offshore crypto protocol you know comes to the US like we're talking about real live large companies with revenue and distribution who say let me figure out a way to use tokenization for part of my my you know go to market part of my capital stack uh and go and issue a

token in the US that is going to change the way people think about the world and if the world is different in two and a half years it doesn't matter that I mean it certainly would be better if it was it was enshrined legislation but it will be true that you can't just whip all of this out of the economy. Like it just will not happen. >> I mean, we could be in a I think the biggest risk continues to be if you're in a much more hostile administration. This is something we've talked about in the pot time and time again. It's like this is why passing some of that clarity is so important because you in a couple years time you might be in a much you might be in a situation where we'll look back say gosh we probably should have passed clarity because this can be

reversed right if if you if you change administration then you can go back to this gets repealed and you're back to square one. So it doesn't matter and that's my point. The biggest the biggest uh issue has been the market's criticism of tokens is that you can't tie cash flows to a token. This is not solving any of that. None none of it. It's just it just to your point collapse is this like bifurcation between labs and entities and having to go to Cayman or Panama or whatever. Is it marginally like is it margin going to improve things? It doesn't hurt but it doesn't I don't register it as like this is hugely impactful.

>> Well, I want to say two things. One is uh there's a huge chasm uh between the difference of like it makes it doesn't matter at all and like it'd be better if it was you know the Clarity Act got passed, right? like there's a huge huge cas between those two things and we're obviously like you know somewhere in the middle of those two things. Not it doesn't matter at all. Number two, I I don't know how you can say this hasn't changed the way that you can tie cash flows to to um to tokens because like they're kind of mum on that point and we already see you know tokens that are doing things like buybacks, right? Which does tie a cash flow to a a token itself. Uh and now that you can do it in a regulated Delaware entity and you can

collapse the two, you can have more aligned economic incentives and you can do a buyback. like those things aren't going away. There is still obvious questions around actual ownership and what it means like M&A scenarios like and I don't think that's like and I and I understand your point there but I I don't think it's the same thing to be said as like oh like there's not a way that you know tokens can align with with cash flows and there can't be better economic incentives than there were before. There is something that's being changed there fundamentally. >> Santi let me ask you this. Um so you so four-year cycle would say that October of this year would be the bottom. That would be the time to start buying is in October. So you know we there's a lot of conversation is the four-ear cycle

intact is it not intact? The numbers would say it is intact so far right I think everyone who said that there's no four-ear cycle well it actually performed exactly like the four-ear cycle would say. So there's going to start to be conversation around mid this mid-occtober point and for those watching on YouTube I'm showing this chart of you know mid-occtober coming up and then what happens starting in around the October time frame we have not only this regulatory thing but we have sailor capitulating we have miners fully pivoting to AI we have the the DATs basically just I mean they've they've they've all sold most of their you know like I mean not all of it but like there's been a lot of force capitulation and DATs is now around the time when you

would start nibbling or you're still staying far away from this market. >> Uh, Bitcoin different from other tokens. Um, I I mean I don't know if the four-year cycle is intact or not. Uh, maybe this is something that is just me'd existence and therefore you should be >> like the resistance line or Fibonacci number Fibonacci numbers should not exist, but Fibonacci numbers exist because so many traders think the Fibonacci numbers exist. Yeah. Uh I'll be interested in understanding like what the yeah like option leverage is a good as IB is super low. So like what are like maybe we should have uh Josh or someone come in and talk about like hey is it worth like buying like 100k contracts in December going out to December or January like interesting.

>> Um but yeah TVD I mean the >> not not nibbling yet is what I hear. Not nibbling. >> No no not not not nibbling yet. I think there's more interesting there's more interesting uh sectors to park capital um than going out um there's like um we should talk about stand drug buying hyperlid um and what that means because it could be like I think we were recording when the war in Iran kind of broke out and we're talking about like hyperlid really being like a huge cat again a very big catalyst. Um it sort of traded sideways from there. Um, and maybe we should just focus our attention on that because um, I've always felt you

need like one asset to really carry forward like and maybe reignite interest. Hype has sort of been sideways for a bit and may it does feel like the entire crypto market is consolidating and stabilizing on certain levels. Um, and yes, I definitely agree with you. is sailor capitulating. His videos are getting more and more cringe cringey by the day and the market has sort of absorbed that really well and we're not at 50 or 40k where I thought we candidly may have gone >> after sort of that sacred promise was broken.

>> But this is a big catalyst like Stand Miller filed 13F. All the big hedge funds had to file that and he has a 20 million $23 million position in perr. Yeah, I will show you actually. Uh there's a fund called hedgefollow.com and it's you know it's based off the 13Fs which are not you shouldn't just go like if someone owns 13F doesn't mean they're gigalong in their in their fund. >> Yeah. I mean it's it's yeah we should point out that this is a June 30th 13F. So like theoretically he he was holding this on June 30th but like he could be out of it by now.

>> He could be out of it. He could have been short on the other side of it. There's a lot of >> Yeah. >> It makes for >> I mean Purr has been trading under and for a while trading quite under NAV for a while. So there are like a lot of things to be thinking about there. >> Yeah. That being said, if you look at the shareholders of PUR right now, you've got the, you know, Draen Miller, you've got uh Rob Satron, you've got David Greenspan, you've got D1, which is Daniel Sunheim, you've got Jim SC, you you know, Renaissance, let's remove that because they're up, you know, they're trading in out of this thing all all day long. You've got uh Citadel, right? You've got you got a lot of the names.

This kind of I maybe you could see something in hype. you you guys remember um what was it May of 2020 when Paul Tudtor Jones comes in and calls Bitcoin the fastest horse in the race. Um there's always one or two things each cycle that just kicks off these Yeah, Rob you said at the beginning of the podcast it's a flows driven market. There's always something that kicks off the flows and uh yeah, maybe it's not the SEC regulatory thing, but it's um yeah, maybe it's drunk and Miller. Who knows? Yeah, I mean just to tie regulatory components here like don't necessarily the ability for hedge funds to express uh their views on a project like hyperlquid is a big catalyst through this structure of a DAT. Um that's more impactful in my opinion than the

SEC coming out um by far far and away. But the question is like this has been around for a while. I think PER has been out since earlier this year or late last year. So we've known that the a lot of these groups have owned it for quite a bit of time now like a couple quarters now. So ownership if you look at like D1 D1's pretty good like they've owned it for a couple quarters. >> You do see some a couple of new positions of most most importantly like stand. Um question is like why you would have probably sat there thinking that hype would have been at like 80 90 bucks by now but it's not. What's your reading of that? I mean we tal I mean listen we talked about this when uh it sort of ran

up to like mid60s right that was April I think right if I have my my time in right and I said then that I thought it was fully valued right and I thought it was great project but that it was fully valued on a relative basis uh and like the market basically you know uh agreed with me right it's been sideways has been range balance since then right uh it's you know we are now looking at we're in a situation where the uh I mean essentially what has happened is like trading flows in crypto more broadly have just like completely died in a lot and you know on a relative basis to what they were before. We saw it in the public disclosures of Robin Hood and Coinbase and you know all the big guys. We've seen it you know inside um you know a lot of the DeFi protocols.

You know one of the things that a lot of people have been talking about lately is like oh look like you know DeFi as a percentage of of total volume is like you know continues to go higher like you know what is why is DeFi killing uh CFI? And like the reality is is like it's that's more of a denominator effect than it is a numerator effect, right? Which is just about like all volume generally is is getting killed. We're at this point in time right now where hyperlid is actually more there's more RWA volume today now than there is anything else, right? And so this story around how you can do price discovery on hyperlquid over the weekends and um in you know other types of asset classes like SKH highix and there was actually I heard this from a um a uh a big large market

maker yesterday but there was more volume in a there's I'm blanking on the name of the ETF now but there's a kind of a lever Korean US ETF uh that had more volume in the crypto exchanges pers than it had in the underlying ETF on the US on NASDAQ, right? Uh last week, right? And so what you're seeing is you're seeing kind of insatiable demand for these derivatives and these per products in these kind of you know offshore exchanges where you know on the centralized side that's people who are very um you know are KYC and but and obviously on Hyperlid it's not but like there's clear demand for for this. I I think however the like the market is catching up as well and so one of the

things that we have to think through about the future is okay what is the future regulatory regime going to look like how is hyperl going to you know kind of evolve with you know and we've seen a lot of this with hyperl policy center trying to figure out how they might fit into some US framework also we just got an announcement I think it was yesterday that NASDAQ is going to launch 245 uh by you know either the end of the year or next year um that 245 they're going to try to figure out a way to get to 24/7. So we're going to start to see a lot of interest in um you know from the institutional institutions on that side as well. And so I think there is a question today on just a little bit of the durability of the onchain products

if it's not you know kind of this regarb right and so um I'm a huge you know call it you know hyperlquid uh hyperlquid uh bull I think they're doing an incredible job like they clearly continue to to execute and like the tech is you know kind of bestin-class but there there's they're serving a need where no one else is serving right now essentially and now some of the central centralized exchanges are starting to serve. Um, but that that market is going to continue to get more saturated. And so I think this is huge and it's great that everyone understands that this is the the way the market is changing and that Drunken Miller is doing stuff like this. But I also just think it's a market that is um from a just a product access perspective is going to get way way more competitive

over the next 18 months. >> Hey um just going back quickly to the this regulatory piece. One question for either of you guys. Is there a version where it's actually uh so like we're in an environment where there's ambiguity and if it's ambiguity and like enforce like um what is it regulation by enforcement the agency is like critically understaffed and underfunded. So it can only go after certain projects like and it it has gone. If you clarify this piece like does it make it um does it present issues for like the projects that were like now it's very clear if you are a security because if like I think my

understanding is like it it ties like if you there's no economic rights attached to it if it's just a token based on network command what have you but doesn't this actually really just make it harder for tokens that were like in this gray zone of fe and now it's like unequivocally like you are a security, you're not a commodity. >> Uh I mean there's tons of ways. I don't I don't think that's true, right? Like there still is this like guide book to how to like decentralize and like how to make sure that um you can uh you can fit into this like US framework and you know it is also by the way sort of a safe harbor for people to come back on shore.

Like we'll definitely see people who won't do that to be honest uh and who will just continue to stay offshore and like a labs and and um foundation structure. Um I think the big the more interesting question here right is like so Khi filed yesterday to do a S&P 500 per right um where right now in the the markets team at CFTC and the the SEC are trying to figure out you know what are pers exactly like you know how do you define a swap um and or are they swaps versus futures um and you know whose regulatory regime should this fit under and then on top of that they obviously are trying they want to make there has to be KYCI ML there has to be um this uh you know there has to be certain

reporting out of safety regulated DCM um and uh but also the like the broader range of you know call it um you know real world asset linked per they just fit into a derivative market that's very different than like a Bitcoin per or an Ethereum per right and one of the things that I think that you know is like the tailwind for Hyperlid right is obviously oh like it's great that like now we're seeing price discovery on skinex overseas like in on this this DeFi protocol like that's amazing like this is an incredible technology but the other side of that is that offering the perp on the listed single name equity is a much more regulatory murky situation

and today is definitely illegal right and so like that that is the problem that I that the two sides of this you know kind of story um I think that the CTF has been incredibly ly thoughtful about how they regulate that market and how they want to bring innovation on shore and I think we're going to get to a good place but um it is going to require a lot more um thoughtfulness around regulation and disclosures and registration than just like a Bitcoin per right where you can probably self-certify today to do that.

>> Sante I think I'd answer that differently than Rob. I think your question is really like when you have regulatory clarity, >> is there going to be a losing cohort as well? >> Yeah, exactly. >> Right. I think that's I think that's your question because there's a lot of people operating in this gray zone. My my take on this is that there will be I I actually do think that there will be a losing cohort here. I think the teams that were trying to get away with basically like nobody's checking on me um and the law is murky. Well, now the law is no long it's it's the rules in the rules of the road are no longer murky, right? So, let's say you're doing something like um that you think is maybe a gray zone like a I don't know like uh driving revenue back to your

token or like uh buybacks or something. I'm not I'm not a lawyer, so don't fully listen to me on this, but here here's my uh layman's take is um doing the thing but saying nothing is now a very risky path where in the past that was probably the only path. The outcome now that you have to do is you have to to you know to take the exemption right you have to accept the disclosures and accept ongoing reporting um or or you have to finish decentralizing right to hit the safe harbor and um both of those I would argue are much better for the market.

They're much so >> yeah I I agree it's better for the market because you have disclosures. >> I think it's much better for the market. And by the way what is the goal of the SEC? The goal of the SEC is to protect investors. So now there these teams that were operating in this gray zone. Sure. Getting away with some stuff. And now they have to do disclosures and on uh uh report for the bigger ones, the $75 million exemption. You have to report financials and do like yeah ongoing reporting. Um which is clearly modeled after what traditional capital markets look like, which is not a broken system. It really works doing an S1 and 10 QS and things like that. And so uh that I would argue that there will be teams that will get hurt from this and those are the teams that should get hurt from

this because if you can't do basic disclosures and you can't do financial reporting and you can't do you know quarterly updates of what's happening like yeah there's probably something under the hood there where investors probably shouldn't be buying your thing in the first place. >> Yeah. So definitely agree there. I think the my understanding is uh buyback and burn is okay. Uh but as I understand it, you have to if you're the officer or whatever of the foundation or the project, you have to s publicly certify that there's no managerial efforts attached to the project. So you can imagine there's a cohort of projects that are going to if they're going to want to go through this, you're going to have to publicly certify that there's like no managerial efforts.

Um, and so if you breach that, then that's historically there are projects that have just operated under some sort of like lawyer opinion and gray zone, but now that's very clearly defined. I still think that projects that publicly certify might potentially get away with after three years or so there's like a decentralization that happens and then there's some sort of fee switch or what have you that happens in the decentralized network and you know at that point there's like no managerial effort and I think that's historically how it's happened but to bring it back to hyperlquid for instance hyperl does rob correct me if I'm wrong buy and burn right >> yep >> so how in that scenario I think buy and burn projects are fair like fairly okay

under this construct and even before it's just not >> there's nothing explicitly present uh preventing it right and so like you know there's no explicit prevention I think it's like people are mute on that topic >> yeah yeah okay there's al by the way there's also a 60-day comment period so I would really encourage people like if you go talk to the SEC and the CFTC what they will ask for when they release things like this they're not trying to go just like be like this is how it works they really want the industry to engage. So, I would just say for people who are listening to this, if you have thoughts on what the three of us are talking about or thoughts on, you know, what the SEC just released like you you should really you have 60 days to go file this uh you have a comment window

and um this is not something this is part of the process of how this works and I would just I would encourage people to go uh file yeah respond to the SEC and give them your feedback. and Rob and others. I'd be really curious to maybe hear the perspective of some of the the big law firms in the space of like how are they going to advise their projects because you are publicly certifying that there is like you've permanently seized to have a manage like a what is it a uh the quote the you have permanently seized all promise managerial efforts and making that public certification to the SEC. I'd be very curious to understand how lawyers are advising their projects

and what are the >> people are sort of >> Yeah. Go ahead. Sorry. >> Yeah. Just are uh is it better off not to do anything and see it's sort of like a who goes first and how they do it and uh yeah I I know the dialogue with the SEC is much better now and they have like a but yeah just would be very like who's the first project going. That's the key thing by the way here Santi is before it was by the way anytime there's new rules and regulations it'll always be let's see who goes first let's see how they've done it the difference between this regime and the last regime is if you went first you could get in serious serious like a you get in serious trouble if you did anything wrong or if you did anything at all. Um,

and now before I would guess how this is actually going to happen is before teams do anything, they're going to go meet with the SEC. Because by the way, this SEC is they're not trying to get you in trouble. Like it's not like someone's like tattletailing on you. Like I would guess people are going to go read this, consume the 402 pages, then go meet with the task force, go meet with the team, go meet with the, you know, the working groups and say, "Hey, this is how we're thinking about it." Um, >> how how would that land? >> Yeah. The project that comes top of mind is unis swap >> because they have been on the more hostile side and I think they they won that against the is my understanding and now they've sufficiently decentralized in terms of uni holders that I wonder if

they are one of the first ones to go because they've had good dialogue with the SEC you could argue that it's fairly like they've ceased all like you know said differently there's been a discussion around the fee switch that is you up to the community and uni token holders. I wonder if they are one of the first projects to go in there and be like, "Hey guys, like we've been in exist operating for x amount of years. We've had this track record. We're now going to publish whatever your certification." And then if there morally to cover their ass because if there is a fee switch, you've sort of now I don't want to say absolved or like reduced a lot of the risk that might happen if there's a fee switch, right?

>> Yeah. I don't know Uniswap specifically. So Hayden just came on the on Empire this week actually, right? We just had this Monday episode with Hayden. So I'd recommend people look at that. I think um the teams that have been uh unis swap is a very good stress test for the system as you mentioned because they have this unification effort which is like unification. Um it very deliberately moved them in the in one direction and they you know I look I I don't know who UNIS swap's lawyer is. I don't know who their outside council is internal, but like I would I think they're one of the more active teams in DC and um so yeah. Anyways, I I actually don't have a specific take there.

>> Last last Oh, >> go ahead. >> Go ahead. Well, I wanted to I was going to go to you because we've I wonder like if we're going to move more in the direction of token transparency and disclosures like is it really that much of an issue to like I think the golden state is to tie cash flow tokens. I feel like that's a very big unresolved and if they're going to be securities [snorts] my read is that the SEC sort of like has no problem in network demand tokens but the secure like the cash flow piece they have continue to have like they were silent on it so they have an issue. What if there tokens are securities and maybe what is a token security? Maybe we should be focusing our attention on what is a token

security and >> there is a ton of conversation happening around this right now. There's a ton of work been done. I I think the the wrong way to view what came out of the SEC this week is that uh this is the product. The right way to view it is that this is the start of building an incredibly robust framework. Right? And the SEC came out with what was an incredibly robust 400page document to kickstart the future, kickstart the conversation, to provide as much clarity as they thought they could. They've been working on this for a long, long time.

But this is an evolving thing that's happening right now. And like you know, uh both Yano and I mentioned the 60-day comment period. Um probably all of the major firms will be submitting comment letters. We will be and and I'm sure you everyone else will be as well. Um, there will be a lot of conversation around this. There will continue to be rulemaking after that comment period. Um, and this will go well into 27. And it it's not the last thing the SEC is going to be doing on this topic. And so getting more, you know, direct ruling around specific edge cases or specific topics around cash flows, etc. Like that will continue to happen. Um, but what we are seeing is we're seeing an understanding that tokens are different than equities or at least need to be

treated differently within the structure that they exist and not all tokens are the same. And so the idea that like all tokens are the same is is clearly not a way that we can go and regulate these and let's go and figure out how to find a new framework. Uh and so that's what we should all be excited about is that there is an actual movement forward in this you know topic and trying to provide something where we can don't have to have all of this uncertainty and we don't have to have founders who are legitimately scared to launch tokens who want to do so for you know very specific reasons for their business. I we we literally have a founder in our portfolio, an American guy who uh you know moved to uh out of the US because because of this specifically I mean Jeff

Yan from Hyperlid is a dual citizen uh and he you know he moved out of the the US because of this right the uh there's a number I mean I I had another a couple of founders who you both know well who uh ended up not moving but we literally had a conversation around hey we're having our first child and like should we move like we're scared Right. And like that has gone away and we can't underell what that does for the market. >> Yeah. 100%. Um guys, I'm going to have to jump soon. Any other topics you guys want to take on your own or you want to wrap early as we are? Uh >> you don't you don't want to go and you know talk about uh you guys being in Bloomberg now. Token transparency.

>> Go check your terminal. We got the we got the TTF inside of we we have a so we're recording this on Wednesday. We actually have I don't know if this is going to go live on Thursday or Friday. We have uh two big token transparency framework updates. This week it was a good week for the token transparency framework. So we're now up to 111 filings. They're now inside of the Bloomberg terminal, which is great. But the announcement later this week is actually even more important. I think by the time this is out, we'll have launched it, which is that uh right now it's a total pain in the ass to go file a disclosure. Um, we are launching a way to file your disclosure in five minutes or less using uh AI to basically pull every single piece of public information that's available about uke and then

combine it with our private uh data from our entire data warehouse which is snowflake pull in every single data source that we have which is you know tens of terabytes here and uh basically go build this disclosure for you using entirely using AI. So basically just it's a it's free we don't charge for this thing. It's basically just trying to say look there is zero reason that if you are a protocol you can't go file a disclosure today. Um and if you are scared to go file this disclosure we will do it for you or our new thing that we are launching that I hope will have launched by the time that we release this will will can do it for you with with AI.

>> Very nice. Yeah I don't know I know you got to drop a content of the week for you. I I do want to touch Robin. There was an interesting chart with one of your guys about stablecoin holders, but I think I know the answer to that which is go look at the Artemis reports around B2B stable coin transfers and the growth that's happening there. Not so much like retail holders owning more than $10 of stable coins. [snorts] But >> yeah, I mean it's a it's a it's like an onchain trading thing, right? Like there there just is less on like people trading and holding and doing stuff on chain. But we're definitely like like if you go and look at the card uh the transaction volume, you go like the number of people are using like the onchain neo banks, you go and look at

the number of people who are doing um uh you know call it like B2B transa uh uh stable coin transfers like all of that is growing but you know what's not growing is like people doing other DeFi stuff, right? And so like there are just less stable coin holders. Yeah, I will um I will give you a content of the week on this which is actually um uh Connor Dempsey who is a fantastic marketer and content marketer in crypto. He now works at Rain uh wrote a piece. Um so it's actually this is very rare for me. Um and I'm not showing R's bags because he told me to here but uh I thought Rain put out a nice article on Twitter. Uh, so if you just go to the Rain Twitter account, you can, it's a whole, it's a detail. I actually learned a lot about

how all of this stuff works and what's happening under the hood. And Rob, this is all uh information that you have read, you know, a dozen or so times, I'm sure. Um, and know by heart, but for me, a lot of this was actually new. So I I thought the Rain article uh that Connor wrote was quite good. >> The way payments work is hard. Payments is very complicated. And so like I think they did a good job of trying to distill it down for people who are thinking about doing this stuff. And so Um, I I I got that article brought up to me multiple times yesterday, but >> Oh, okay. Sorry. Not to be cringe, the the Travis Kalanick episode on David Senra. I I I I feel like we need to put a ban on mentioning David Senra or Invest Like the Best because But I mean,

they're just on absolute content heaters right now. Um, this was a this was the most uh I think uh this is the most I have ever seen a podcast get forwarded around the founder group chats in the in the history of podcasting. The founder group chats were must listen mandatory like this is the most I've ever seen a podcast get sent around and this is also uh I think the I've seen a lot of investors saying you know this is we have reached peak you know founder mode this Travis. So there's there's starting to be a split between, you know, the investors are like this has gotten ridiculous.

>> You know why? Because he was like he he trashed Excel and was like just get passive. >> No, he trashed benchmark. He trashed >> benchmark and XL too, I think. >> And he trashed Bill Gurley who's like one of the most successful investors of all time. >> He also he also made fundraising seem very much like a game that he has m you know he's he is a total thing that you can gify and the VCs are just lemons. Like it is a uh I I see why that the investors didn't like the episode. >> Yeah. Yo, did you um did in those founder group chats where people are like all like, "Yeah, the VCs. Like they don't know Like we we got to go founder mode and just like play them like is that the conversation?" Because that's basically what said.

>> No, I don't. That was not the conversation at all. That was not I think people said there's good fundraising advice in here, but there was no >> I don't think people actually feel like um I think it's a Twitter narrative that people hate the VCs. And I think it's a you know, even you can hear David Senra being like these guys are useless. Like I think there's a I think it's a really healthy I actually think most founders like nine out of 10 founders are like would probably agree with Travis's point that VCs are not that helpful. But I don't think VCs would even say that they're that helpful. I think VCs are there to like I think I think Rob I've seen what you've done with your port codes. Not many VCs do what you do by the way. Um, so I think that most

people would say like look it just you you are helpful because you're providing me a service which is capital that I need to scale the business. But like uh Travis's point is correct which is I spend 23 hours a day thinking about block works. There's no possible way that you spend as much time thinking about block works as I do. >> By the way, I mean that there's like what what's the divorce rate in America now? It's like 50 50% >> 50%. Same with like you're basically entering into a partnership with someone and a lot of times it might not be the right partnership. Doesn't mean that the other 50% is not they're happily married with kids, you know, and so um you're always going to just hear the the probably the horror stories, but there's it cuts both ways. Like there's good VCs, they're not so good VCs. It just it

just >> I mean why why does Travis not like Bill Gurley? Because Bill Gurley ran an campaign and got him removed from his company. So yes, if a VC did that to me, I would be very unhappy with that VC and I would forever hate VCs. Um, but like >> but meanwhile he he he raised he raised a ton of money from from A16T. So we we have we have many like our you know our biggest investors are like you know 50T um parify reciprocal ventures like I have truly nothing but good things to say about all of them and would if we ever raised again would love to have all of them in that like I think I think that is a more standard thing actually with VCs right now is just like yeah I like them they're great. Yeah, I actually had a number of founders send

that to me and one of them even sent me the clip about like oh like VCs are like you know completely useless uh or whatever that clip um and then you know I kind of laughed and and uh and I was like listen like I I agree with a lot of what Travis says right which is that like if the founder doesn't know the business better than I do that that is a bad sign like that is absolutely a bad sign. Um and the uh it's funny because I these people sent it to me and then they're like oh no but you're great but like I agree that like all the other VCs are terrible. Um, but they um I I think it is very clear that a lot of what Travis says is specific to Travis and who he is and a person who built Uber,

right? And a lot of the advice that he gives is absolutely terrible advice if you're a random uh series A first-time founder, right? And so like the there's a there's stuff to be learned there. and Travis obviously had this like you know incredible success and sort of this like fall from grace and this rise and uh you know I I actually personally invested in SBV in in Adams uh and so like you know I'm excited about what he's trying to build uh but I um I I laughed a little bit at like how much it got forwarded around because it's such a specific story for such a specific person and a level of success that like to pull a lot of advice out of it I think is actually like pretty hard for most people.

I met Tra I met Travis once at a uh at F1 maybe [clears throat] two years ago. He's an he's an N of one person is what I'd say too. Um yeah, I think Rob you are correct. If you are I think founders the more that you run a business the more you realize that the business has to become an embodiment of who you are. So if you are like and tra Travis has deeply figured out who he is and he runs the business and he runs the fundraising and he runs the storytelling and he runs the podcast circuit based on who he is. And I think as a founder if you just try to go copy >> Elon uh let's say you try to copy Elon for a year and then you listen to some Travis episodes, you're going to do a totally different thing. Like you who

like what's your style? Who is your style? You have to figure that out. And I actually just think that takes time. You just need to you just need to go through it to figure that out. I I I think the thing he said about we are you know we are like grand masters of chess right when we you know know our business that well I think that is very important uh because like that is what you endeavor to do as a founder you endeavor to be the expert I think the reality is for a lot of first-time founders they're not actually the expert yet they're really figuring it out and the best companies I said this on a different uh podcast the best companies over time are dictatorships but there are long periods of time where Even Travis will admit he didn't really know what he was doing,

right? And like so you have to kind of move into learning and sourcing information from a lot of people and trying to figure out, you know, exactly what is happening in your markets, being deeply deeply involved, you know, having high conviction and bringing people along with you and and and being a great you sort of visionary. Uh and then over time to what a point that he said is he got way more comfortable and the more comfortable he got the more willing he was able to tell everyone else like you don't know uh better I know better and that's clearly the right move most first- time founders don't have that yet. Yeah, my my my two cents on this Yanu is the most important thing you you said which is a lot of this is just an evolution of understanding discovering your identity and then how are you going

to run the firm based on that and and I think that does that reveals itself over time at least in my experience like like it takes takes time to figure out who you are how you gonna like culturally and and that's not like day one you know >> some people get closer to it or not but >> yeah it takes time >> yeah agreed um I do think one thing that founders can take away from that that I didn't see anywhere on Twitter. Everyone's talking about the fundraising advice and the you know different things like that. He is amazing at these analogies. Um and I think that there is a I think that is a takeaway that founders can use. I've been pitched there's a seeing a lot of I think pitch like I you know there's a a lull in pitches now I'm seeing a lot of pitches

again and they're just like wildly they're just people are over complicating it. you get 28 slides on a deck. Because of AI, people just send these like memos that are 14 pages and the deck is 28 pages long. Like don't just send a one pager like give me the analogy because I have a smooth brain and just simp simplify simplify simplify. And I think Travis does such a beautiful job at that. Um and that's a yeah takeaway I'd have. Rob Santi, what do you guys have content? Unless Rob you have a >> Well, I was just [snorts] going to say I was talking to a founder, a guy you guys know last night. Uh and uh he he just moved into he he left a firm to start a new business. Uh and uh I was like, "Oh, like tell me what your new business

does." And he's like, "Oh, we'll need like an hour to sit down and talk about it." Uh and and I was like I was like I was like honestly like if you can't give me in the next minute like what you do and I understand it like you've got to refine. You got to think about it more. You've got to spend more time on it because because that is the reality is like if you can't pitch it in a minute to it's not even about a venture capitalist. It's about an employee. It's about you know a a partner. It's about a customer. Like you have to be able to boil it down and that is a skill that is learned over time. So I tell you like >> summarize it into a meme. Good point. >> It can't be a meme. You're doing something wrong.

>> Yeah. Or or Rivet has the napkin, you know, put it on a napkin. So Rob Santi content of the week. What do you guys got? >> Uh I'm reading Kland the book about uh the Coke industry >> brothers. Um really really fascinating story. >> Is that a double dip? Didn't you say that last week? Am I misremembering? >> Did I? >> I may have. It's a It's a big book, so I feel like I can >> I think you're allowed to double dip with the books. I think you >> I'm allowed No, no one ever after week. Okay. I feel I feel Robert, do you see him? I'm a slow reader. No, listen. Um I uh >> I am a terribly slow reader.

>> I like I read so slowly. >> I got I got a day job, man. Uh but um no, it's a really good book. Uh I feel like uh you know, a lot to learn about that. Most people would be surprised. Isn't it the largest private enterprise? Well, I guess before SpaceX and some of these, but it's like the largest, it used to be at one point the largest uh privately held company in America. Has its hands on most products that you touch on the day-to-day from plastics to oil to packaging, everything. It's uh it's a pretty remarkable operation. Um it obviously has a New York Times spin on it. It's like very politically charged book. So, if you if you can tolerate that, it's worth a good read.

It's uh I like reading older like 1980s 1990s stuff and so it's worth reading. >> I mean they are the most probably you know the Koch brothers are probably the single most politically uh influential people in the world that are not >> we got to get the Ko we got to get the Koch brothers to buy purr and [laughter] spin out DC man got the dog going crazy right now. >> Rob Yeah, I know the dog's going crazy. Why don't you go and fly from Jackson to Witchita and, you know, have a sit down with Charles or whoever's in front [laughter] and convince him to buy per. >> You know, I've I've driven through Witchah once.

>> Honestly, if someone could do it, I think Rob could do it. I think Rob >> couldn't we already decide Rob is the new sailor of this cycle. >> God, [laughter] >> we've been talking about we've been talking about catalyst here. Rob, we need you to rise to the occasion. You're in Jackson. When Gandhi was talking about be the change you want to see in the world, this is I think what he was referring to. >> This is it. >> This is it. >> Of the week. >> Bring us home. >> Uh well, so okay, I'm going to lighten it up a little bit. Uh and I there is a um this is a little bit specific because it's a Broadway show, but if you're in New York or if you're in London next year, it'll be on the West End. There's a on there's a onstage version of

Paranormal Activity which is like I don't know if you guys remember that movie but it was like like it was like one of the first um sort of like found footage that and play was one of the first found footage horror movies I like what I loved as a kid. Uh and the Broadway version is awesome. So like if you're in New York you like horror or you're in they're going to be on they were all on the West End and they're going to be back on the West End. Uh go go see it if you like uh plays. >> Nice. Good. So, so Rob, uh, how did you know that crypto was the calling for you? It's like, well, I love horror and naturally I felt right at home in crypto. [laughter] At that >> Jesus, >> that was it.

>> The sides were there. >> I love to have nightmares. So, [laughter] >> awesome stuff. >> All right, folks. Good stuff. Um, for this Monday's episode, >> 20 minutes after Yano said he had to leave, we're still going. But >> I know I've gotten so many texts being like, "Where are you?" Um, I'm enjoying it too much, you know. Um, we were supposed to record with Matt uh Matt Prince who's the CEO of Cloudflare uh for but uh we uh that just got rescheduled. So, we may or may not have a Monday episode. If we don't, I apologize and we'll see you the week after. If we do, it'll be with someone good. So, thanks.

>> Yo, if I can if I can co-host that one like I want to be on. Raising my hand. >> You want to join me? Join me for it. >> Yeah. >> Great. Done deal. >> I'll be right here in the background all the in the [laughter] world. sending you my support from across the ocean, guys. You bring it home. >> Bring it home. All right, folks. Enjoy the weekend and uh I'll see you next week. >> Nothing said on Empire is a recommendation to buy or sell any investments or products. [music] This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Block Works team may hold

positions in the company's funds or projects discussed.