The SEC and Ethereum: legal pressure and BlackRock's $100 million fund

Transcript

let's jump into what's going on with the ethereum foundation and them being investigated Kai bring this up to speed on all the news that actually just came out yesterday or on Wednesday since you guys are listening to this on Friday yeah so yesterday there was some sort of some rumors that came out in the morning that the ethereum foundation was subpoenaed for its first time in history by the way ethereum Foundation was subpoena by a like State Authority but we didn't really know who we didn't really know why the only reason that this rumor came out was I guess there's like this um warrant Canary that is on their website and when it exists on there it means they've never been subpoenaed and when that thing is removed it means that they've been subpoena and it's never been removed before and yesterday it was removed and

so obviously people went to Twitter and started kind of speculating what the heck is going on here we still don't have like clear Direction on like what this is or who exactly this is but then a couple hours later all of a sudden it came out that the SEC was probing crypto companies and basically doing an investig to essentially prove that ethereum is a security which is um a bit insane at this point like we've gone through so much and the SEC has already approved an ether e Futures ETF so if they are right that eth is a security then SEC broke the law so like I don't even know how they're fighting this it's very odd but we'll dive into it but anyway that sort of came out yesterday as well that they're basically launching this big

campaign and so it's a bit misleading I would say I don't really know where this like campaign thing kind of came from ultimately all it was is that the SEC has subpoenaed a few companies in ethereum ecosystem since the merge which was like two years ago because they're saying now that ethereum is proof of stake instead of proof of work it's more likely a security than previously but like this happened a while ago the company's it's already been dealt with it's not really like a big campaign now I think this is actually a little bit more headline news and not as much of a reality as we think though I think there is something here it's not all like fake or something just don't think it's this like big campaign like they said so anyway it's still sort of unfolding the

news so we'll kind of we'll learn more as we go here but there's a few really important tweets that were put out one from coinbase's lawyer and one from the um ex commissioner of the cftc which governs the Commodities so Brian quintes first says reminder when the SEC allowed eth Futures ETFs to trade on its regulated security exchanges it explicitly acknowledged the status of the underlying eth as being a non-security and outside of its jurisdiction importantly this ETF approval decision October 2023 occurred well after ethereum change to proof of stake in September of 2022 meaning that to the SEC eth in its present State as of October 223rd was not a security so basically saying like they they don't

have really any grounds here and it would actually be illegal for them to do this and technically because it's not a security they actually don't really have any jurisdiction to say anything else because it is deemed a commodity and so the cftc is the one that actually has jurisdiction over this asset so it's a weird situation going on and then you had the coinbase lawyer come out as well and he just goes sigh again with the eth misinformation as we await a decision on the eth etps which he means ETFs okay let's talk about some basic facts about ethereum millions of Americans hold eth it has been vital crypto 2015 launch and eth is a commodity not a security basically what he's saying is the AC the SEC has already taken this position so it does not make sense for them to now

go against this so there must be something going on in the background here I don't know if it's like um Banks lobbying or who could be lobbying here or what's going on but the coinbase LA here laid out a bunch of different court cases that have proven that eth is not a security or at least have plenty of evidence to support this case so basically the summary of all this is don't really know exactly why or what's happening assump soon as this is occurring right now because the ETFs are basically they have to make a decision by May 23rd and they can't just say no they actually have to have a reason to deny it's not a delay like we've seen over the last few months it is a yes or no and I have to give a reason or I can get sued and so my assumption is this is

the SEC trying to build a case it just feels like they're doing this a little too late and in a topic around security that just like no longer really is relevant or makes sense so it doesn't seem like they're going to win this one and the SEC has just lost I mean if they couldn't prove that xrp was a security how the heck are they going to prove that etherum is security so I think we're going to see a lot of volatility and a lot of wildness over the next two months because the SEC obviously is trying to do something maybe they're getting paid or there's lobbying or something in the background we're not really sure but thankfully we have people like uh the cftc X commissioner and the coinbase lawyers who are like going to fight for this there's speculation that coinbase is going to

the SEC if they don't approve this because again there's no reason that they don't so we'll see what happens but things are going to get very interesting over the next couple weeks I think oh baby grab your popcorn and buckle up we're on for a ride let's go I think it's the wild stuff about this is just how you step back and you realize how much government authorities are impacted by lobbyists and that is I think you're spot on that is what is happening in the background here we'll never know we'll never understand why they did this because it doesn't make any real sense it's not a fight that the SEC really needs to take like why are they making this fight they've lost so many they've

lost so many times like and from everything as we go go into an election year in America or S we're in an election year I should say at the start the election comes in the fall if you're Gary Gensler you're in a position where your head could roll if you're not on the right side of where this election goes goes and so it would be the last time that you would want to pick a fight with the public and cause anybody to say hey you know what Gary you're not the one you're out it's just bizarre to me because when you look at the political side crypto's not really a big deal to them like most of the politicians are done yes there's bigger issues to the voters let me put it that way and so

when you have bigger issues to the voters you sort of say why does the SEC keep picking this fight I don't know I don't know yeah they also they had a better case in the bare Market because once people lost money so like voters would be happy that they were trying to like regulate and and whatever but now that everyone's making money it's kind of swung the other way and it's like if you fight this stuff that everyone's making money on which I think coinbase said there's tens of millions of Americans that hold ethereum and hold crypto assets right so like these people all want this thing to get go through right like they're pumped about this and so it is not a good political stance anymore it maybe it was like I don't know six mons ago a year ago but it is not anymore so again there's got to be

something going on in the background obviously we don't know what that is but what's funny is it's basically Gary Gensler against who Larry thinkink and the boys over at Black Rock because Black Rock doesn't give a what Gary has to say they've got their ETF that they have launched and they also are launching aund million fund on top of ethereum this was also announced yesterday which is hilarious you've got this like SEC saying that they're going after ethereum because it's security and blah blah blah blah blah and then you've got Larry f and the boys the biggest institution in terms of assets under management in the entire world that goes oh you want to try to go after ethereum well we're actually going to launch $100

million on top of ethereum right now launch fund and so Black Rock partnered with securitize which is like a fairly well like rwa company in crypto so they partner with them along with coinbase fire blocks Anchorage and bitgo to Launch fund called bidd which is basically build but the D and the L are switch similar to hold and the D and the L are switch so that's interesting is Black Rock getting a little bit more Degen it seems and it stands for Black Rock USD institutional digital liquidity fund like it actually stands for something too it's not just a ticker right like it does they were very did very well in the marketing of this yeah quite quite impressed it's interesting

what they've done here so basically what is is bidle seeks to offer a stable value of $1 per token so it's a stable coin essentially but in the version of a fund but what it does is it's a yield bearing stable coin so it pays daily acred dividends directly to investors and I I don't know if this is completely permiss is anyone can buy it that one I'm not completely clear on yet but basically they'll Dividends are going to Auto accr to investors wallet so you'll hold this onchain the dollar stable coin and like it'll just come to you you can trade it 247 365 but basically what they're doing is they're taking the money they they put $100 million in year in usdc and the fund is investing it all in cash us treasury bills and repurchase agreements and so basically it's a yield

bearing stable coin but in the way of sort of like a fund or instead of yield beinging stable coin it's basically a a tokenized treasury I guess is what you could call it but regardless of what it is it's super super cool that black rock is doing this and it's on the ethereum L1 currently but coinbase is involved and so you wonder is the next step here to put this onto base at some point right right now I think this is for bigger investors so doesn't matter if it's on the L1 interesting fact for them to mint the 100 million usdc cost them five bucks so like I know we say ethereum L1 costs a lot but in terms of like comparing that to the trafi world that is insanely cheap so that's pretty cool and then one other interesting

thing and I don't know if we have the Tweet up here Jay to show but we have the wallet that black rock has used to to Mid their usdc and so we can see onchain black Rock's wallet and what they're holding and so they have 100 million usdc on there and then they also have like was it mug coin or something I don't even know what M they have MOG a whole bunch of wallets have sent meme coins to the Black Rock wallet because they want to be seen the Black Rock wallet is holding their mean coin so Black Rock wallet has like over $100,000 that it's gained in free money yeah so someone was like basically they're earn a yield on their on their usdc just by holding it in their wallet because people are sending them like over

$100,000 worth of of tokens like mainly Bean coins and shitcoins and whatever but it's pretty hilarious that black rock is coming in and they just get thrown into the storm of crypto right off the bat it's pretty funny but anyway this is massive news don't know that anyone expected this to come especially from Black Rock right like the biggest thing I see from this is like look it's $100 million is not super massive although it's a pretty decent amount I would say more it's the signal that sends to every other financial institution in the world which is hey we're the biggest we're the best and we're on chain and so what do you think everyone else is going to do everyone is now yeah I mean I'm sure many of them were already in meetings to like already do this but everyone is now taking this

real seriously because this is a really big deal