The SEC's Attack On Crypto: Binance Stumbles, Coinbase Fights Back | Roundup

Transcript

[Music] valora is the easiest way to send swap collect and grow your crypto on the cello blockchain download the app and start exploring daps like good dollar today at valoraapp.com forward slash Empire what's up man how we doing uh doing great you know a lot to digest this week it's been one of those weeks where there's a lot going on every day um so so there's a lot to cover how are you doing I'm doing great we got these new Lacroix in the office um instead of the smaller thicker can big news for uh block Works uh it's very smoky in New York yeah probably so does it inside does it feel Smoky or do you have filters or is it

um it does feel Smoky yeah it's a little smoky it's um it's actually I think the worst recorded air quality in the history of the US um because I really yeah I was in San Francisco I was in San Francisco too totally blacked out like yeah remember that day it's I was there twice as bad in New York as that day in San Francisco wow I did see the probably the best advertising the world which is the Diablo like New York Welcome to Hell and then the incredible like you just cannot that was impeccable but yeah it looks uh looks pretty so the air quality is going to last I heard for the next two three days we're recording obviously on Thursday June 8th it seems like it's going to last for a few days has it gone Better or Worse

um it's gotten a little bit better since yesterday but um it's I mean it's still pretty bad we we just we were supposed to host blockworks beers today so oh yeah yeah and we just canceled it okay we'll stop they say if it's what did they say that uh spending a day out breathing this air was equivalent to smoking six cigarettes or something like that yeah wow that's funny I was walking on the street so I was coming into the office today and there was a guy who's all he was massed up because everyone's wearing masks in New York again for the smoke he was messed up and then I saw him light up a cigarette and he pulled his mask down starts rips the cigarette puts the mask back up I was like oh buddy you're missing the point here yeah yeah

really nice you've lost the plot my friend so anyways you want to know uh we started starting with binance or coinbase hmm in sequential order Finance chronological right because binance was first let's do binance and uh I mean coinbase we can talk about this but coinbase was basically just a copy pasta at the binance case without all the spicy stuff so um so on Monday I mean it's been a I don't know what the title of this podcast will be probably something about the SEC because uh uh this week the two big things were financing uh coinbase uh uh had suits against them by the SEC so the on Monday we can start with Finance Monday uh binance was sued by the SEC for a bunch of stuff including co-mingling customer funds with the

trading arm um operating in unregistered Securities broker an exchange and then facilitating the exchange of assets that are securities um also importantly in inside of that suit is a really big thing I read I read the whole thing of binance and coinbase I feel kind of prepped to talk about this um they also listed a bunch of tokens such as BNB and busd and Matic and Solana and a bunch of other tokens as Securities um it was uh pretty pretty bad I would say a pretty bad thing from the SEC the really bad thing were these internal chat logs so I actually just want to read some of these um

because this is there's like the the um claims by the SEC in the binance and coinbase case were kind of similar but Finance was had all these like really damning things inside of it and I'm just going to read some of these so this is uh evidence this is a chat log between Samuel Lynn who was the former head of compliance at finance and um and this guy Alvin who was their head of BD Samuel these are just some quotes Samuel Lynn we are he he messages him he goes we are operating as a [ __ ] unlicensed Securities Exchange in the USA bro Alvin doesn't respond he goes later goes tells Alvin to take his BNB bonus and

dump it into usdt as it would just be dumb to hold BNB I won't read the whole chat log but I can we can link to it this uh was uh all of these chats were dated I think 2018. yeah 2018 2018. yeah talks about how the compliance side of binance is a sinking ship like just like the Titanic this was another one this was uh when they were hiring the CCO um Chief commercial officer um uh Sam noted that he feels the risk reward isn't balanced and that he wouldn't feel comfortable signing off on the ofac compliance stuff if he was CCO um this is when so like the binance strategy was basically to like get these American people with connections either

into Finance or really into government like Brian Brooks and like Catherine Coley to come on board um and to like be kind of the face right so Samuel goes that's why I feel the risk reward of this company is not balanced there's no [ __ ] way in hell I'm signing off as the CCO for all the oh facts yet but you know what nobody wants to take up the role as we are to meow which I don't know what that word means um yeah the CFO binance asked him to take the CCO role do the sign off and he would double his pay he wouldn't do it um yeah the whole I mean the list goes on I will link to all this stuff what do you think of the uh what do you think of this binance case what do you make of it

I want to zoom out I think this week is momentous because we I think as an industry saw that there was there was going to be some action coming against the two major exchanges like I think a lot of people are sort of expecting the SEC to come after binance mind you they've got a and coinbase coinbase got a well notice uh a month or so ago um and you know it seems like every other exchange as well has gotten notified I mean Kraken obviously like had an issue with staking so I think that a lot of this was the industry was somehow feeling that it was coming so it came all at once as things tend to happen in crypto the binance um or you're speaking specifically about binance

um you know fact of the matter is I'm not a lawyer I I read a lot of the reports in a lot of the interpretations by other people that are way smarter than me I think there are a couple of things I do think that it is quite different the binance uh and the allegations made in in the binance um kind of suit from the SEC or is much heavier much more has feels to me like more meat on the bone and more serious allegations than the coinbase one particularly because it involves a lot of commingling of funds it feels closer to the FTX is a bottom line why because they sort of make allegations that there are a number of entities much of which CZ

controls and this is all what I think the SEC is claiming correct me if I'm wrong and that a lot of a lot of kind of there were a couple of things in Fault one the binance US was kind of not ring fence really a lot of people and customers a lot of Institutions that were trading in binance us had this sort of Avenue to go trade them in binance of course the number of products that you were able to access in binance um you know we're much more they're they're there's more products you could access and binance right and so they make that claim they also make the claim that there a lot of the funds like uh CZ kind of controlled really and there was sort of this uh puppet show if you will of pretending that they had you know

binance us as a independent entity this is why Brian Brooks stepped down this white cat like Cooley stepped down um so it's a lot of I think it feels more serious on the misappropriation of funds uh then of course the SEC I think filed a motion to um what's it freeze Finance U.S assets yep um that was the day late the following day um and now binance has retaliated they put up a public response and then they retaliate it by saying uh most recently that apparently um Cameron Gensler um had applied or to be an advisor Finance at one point while he was at MIT as a professor in in one of the

directors of the media lab and that he has a conflict of interest and therefore he should kind of remove himself from all of this because there's conflict of interest um and so yeah a lot going on I mean I don't know how you want to parse all of this well I think you make an important point I think let's let's talk about the differences in the cases because I think that's the most important thing to folks I think that actually the bad shame uh here here's my my bias coming in but I think uh the bet the best breakdown of this actually Catherine Ross who's a blockworks reporter uh just published an article saying the fundamental differences between sec's finance and coinbase Suits so I just want to read that with you live um and we talked to a couple lawyers for this for this piece

um the here so I'm just going to walk I'm sharing my screen if anyone's watching on YouTube and we can kind of walk through this basically the uh the uh SEC hit coinbase with a quote straight registration violations case however the binance suit in addition to registration violations includes allegations of fraud Market manipulation co-mingling of investor funds and diversion of investment funds and uh you know Brian Armstrong tweeted this out too he said in case it's not obvious the coinbase suit is very different from others out there they're obviously referring to finance the the complaint filed against us is exclusively focused on what is or what is not a security we're confident in our facts in the law um that's right yeah so I think there's

I think these are very very very different cases um um I think per has been a precedent now the SEC doesn't go directly after some of these projects it it sort of submits them through these um motions uh of what they think is a security um and and so the market reacted pretty aggressively I think there was a big disconnect between how some of the majors like particularly East was not named as Security in both filings which a market seemed to pick up on that I mean these and Bitcoin resisted and traded fairly well relative to alts and some of the other names in there um and so again I think it further

solidifies this notion that it is not a security um and I mean there's just a lot to talk about but let me ask you this why so here's uh so blockworks research tweeted this out binance has experienced 1.4 billion dollars of outflows over the past three days in light of the sec's lawsuit if you look at this chart from our research team you can actually see that this I mean 1.4 billion sounds like a lot this is relatively normal for binance which implies as we tweeted out that a majority of users are really not concerned by the recent action with the SEC so I'd like you to just I'd love to hear your take on you know obviously what Gensler and the SEC was trying to do here is imply that with co-mingling of funds and like those very clear

messaging is that binance is FTX 2.0 but the reaction from both the markets and from users and from the flow of funds shows that users don't actually really care about this so I'm curious what what like what you make of this that's a great point because I was looking at particularly the outflows and right because a lot of people were without data saying this is a bank run and you're going to see the background and we haven't seen that so far and if you look at the data I mean it's a normal kind of outflows right um so um you know of course easy tweeted and said if we're going to see a background we'll we'll fully understand you know binance has all the you know collateral all the assets to to honor these

withdrawals and whatnot so so far it's been fairly interesting um I do think like I don't want to call it early but it seems so far that um you know the market sort of has Shrugged it off um a lot of them were saying look this happened in 2018 have was there some wrong doing here there it's sort of like the bit what bitmex kind of also kind of went through this motion as well I think bitrick was a bit Rex did did get hit fairly like after they settled the doj and whatnot I think it wasn't the same right yeah uh it just it just if you look at their market share you look at their position in the market it was different

um the question now is um is it doj gonna move uh and it seems like it they're I mean I would be shocked if there isn't right the doj has probably something cooking as well for binance at least um so we'll see how how the market reacts to that but um yeah I mean there's a fair amount of um scenarios here that you could think of like so what is the outcome here like I think Finance you as ventially listed a bunch of assets so move fairly quickly um you know my working assumption is that this is going to be a fairly drawn out process both binance and coinbase seem to be willing to fight it and have the resources to do so um I think at the end of the day

I'm just looking at like prior kind of precedent and there probably is a fine for both there probably is binance U.S may just shut down altogether um and uh but I do want to emphasize I think the the the allegations in the case against binance is much different much more aggressive has more substance I think than what it has for coinbase um so the interesting thing about coinbase I think is the market obviously reacted really like the the stock itself like coinbase opened like down 20 on the day um and then rally subsequently allows like it closed higher that day and then

is up like another you know I think it like opened a 48 and now it's up like 53 bucks or so so Kathy Wood from from Arc like bought like over 20 million bucks of it um and so there's a fair amount of support there um yeah coinbase retaliated with a good ad campaign um and yeah it's just really interesting that um I think we're going to I mean we're at this sort of I think the the not I don't want to say the last Innings but we've been wanting regulatory Clarity because a lot of people think they said listen guys we've been wanting regulatory Clarity for less like 10 plus years and this is what it looks like I think we're finally you know coming closer to that event what has been interesting is

and I've we recorded a podcast yesterday eventual and haseeb and avicio says something that I actually believe in and have been saying for a while which is you have to sort of have faith in rule of law in the court system and what was it I think there was a the court responded the day after and said something to the nature of because coinbase and the SEC have been going at it for a while and what was it that the Circuit Court said that by nature of this complaint or this suit did it mean that the SEC was not going to respond to this like producing Clarity or whatnot right there's something there that I found super interesting you probably or know more more about it but basically my

interpretation was I think the course is kind of calling it and saying yeah we understand you're making a lot of noise but you still need to respond to coinbase coinbase has been asking you has been trying to meet with you you know uh Brian alleged that when Gensler came to office he tried to meet with him a number of times and he just kind of was not very receptive maybe it would have been coveted but he didn't want to take a meeting when they finally met over video he was like very what seemed the quote unquote cold and Brian was like Hey listen we want to come and register we want to like have a broken deal license and he's like I'm not here to give you guidance go talk to your lawyer right it was very frustrating because when coinbase says like help us

registered the SEC sends them you know yeah there's a great clip going around by one of the Robin Hood um uh Council or in the team of Robin Hood that you know because Robin Hood also has and supports like trading a lot of these assets right and and he was like he was against I think he was like testifying and said listen we've been trying to like register we engaged the SEC for months nine months process trying to understand how to do this in a you know in how they say come in and like register we try to do that and then we get shut down nine months later we just kind of didn't get really good Clarity right and so you know it's those things are really important because

it's really I think uh you know important to understand that like the court I think is going to see that and say Hey listen like you you you can't just say that there's a process to do so and there's these Securities laws that have been like around for such a long time there's actually not a clear way to go in and register and and to and to claim to like do this in a compliant way oh and by the way what is interesting now some of the strategies of some lawyers we're suggesting is if you take that same thing well then everything becomes a security like luxury goods become a security and then if you take that same kind of strict stance that the SEC is taking on tokens then you can extend that to practically a lot of

other things and so and so yeah it's just interesting as an industry I think I'm optimistic because people are rallying behind coinbase and seeing that there's a a solid effort here to to fight it and to see it through and genuinely people want to do the right thing and there's a whole precedent and track record of like you know coinbase and other folks trying to do the right thing um and it's a us-based business it employs a bunch of people you could argue fine binance you know it's been it doesn't have a jurisdiction it kind of operates in this limbo and Arbitrage kind of like if you could argue that I get it yeah but I am and I think the industry is being rightfully so more sympathetic to

coinbase which is to just try to do the right thing and you get shut down and then slapped in the face for no like you know it's like it's bullying yeah I think there's a bunch of takeaways here so like just to close the loop on the binance side of things because I do want to share a little more info about coinbase and maybe compared to like I just want to talk about what they're actually being accused of here and because I think it's pretty ridiculous um but to close the loop on binance I think the lack of outflows that we were talking about earlier that just shows me that the Middle East and Asia don't care at all about the SEC right they like there is no that and that's primarily where like their user bases are Middle East and Asia and they are they don't

care what what Gensler is doing right now um I also think that it's just a like they're going after the big bosses here and there's nowhere else to go right where where else like users aren't moving off of binance and going to mexc or something or like there's really nowhere else to go so I I don't know I just it's been interesting I'm curious to see what happens specifically with the US brand I'm very curious if they just shut it down or there's this like other kind of long tail thing that could happen which is CZ launches a new brand right and or like someone not CZ but really CZ launches some totally different brand and it's called something else or yeah and then users kind of migrate and whatnot in the US and so I also had a genius con strategy

they announced that this guy Richard Tang who's one of like the stars inside of binance I think he was a head regulator in Abu Dhabi or in Singapore Singapore yeah he was uh he would be they were like he's next in line after CZ yeah phenomenal com strategy they released that the morning of the of the uh of the lawsuit they also one of the big differences between binance and coinbase on Tuesday so the the SEC sued coinbase but they also issued a restraining order to binance to to freeze all the finances assets to quote prevent uh destroying which which has not been approved which has not been approved yeah but they did not issue the restraining order to coinbase yeah so so look I think the most important thing here during this process is to

fundamentally understand is this an FTX situation or not for coinbase not concerned candidate finance a you observed withdrawals and any activity there is abnormal pay attention you know again the best assumption is always be skeptical and curious in this space no matter what and if in this situation if you're a customer coinbase if you're a customer of some of this like custodian that apparently is going under as always just be vigilant if if you're not holding your keys if you're not self-custing and if you're relying on coinbase or binance just you understand there's risks and pay attention to what's going on um don't freak out necessarily but pay attention um and and yeah I mean I think for binance is very clear you know if they can honor withdrawals and they can

continue to operate business as usual then then I'm less concerned you know the the worst case scenario here is that there there's the sort of background and they they are like FDX was just don't have or insolvent and have an issue with honoring withdrawals not just in binance us but just binance regularly generally that would be a big impact is a big big blow to the space yeah otherwise you can argue facts and you can go back to 2018 and maybe there's some wrongdoing maybe there's not enough policies procedures in place or some sort of violation if you will of you know of not registered whatever it is it's a fine but it's but customers don't get impacted that's what I care about

and that's what I think as an industry we should be highly Vigilant paying attention to uh because that's where things get really um you know messy is when funds get locked and or not even there and so you want to avoid avoid your Celsius block by situation you know yeah um to give shed a little more light into the coinbase case what they um almost compared to Capital markets and show how Capital markets works for a sec so the tldr for coinbases they charge them with being an unregistered broker dealer uh They said that the assets on the platformer Securities they said that staking as a service is an unregistered service and I think they also insinuated some things going on with the coinbase wallet right they also this is pretty interesting strategy they it was kind of a coordinated attack with 10 other states who issued cease and desists I

think several of the states issued cease and desist or warned them that seasoned assist would be coming um yeah and they have like uh 20 something days to respond it was a fairly coordinated action from a number of states Alabama and a bunch of others to like uh go after them right here's why this is a funny charge against coinbase there are three groups if you try to simplify Capital markets to like its Bare Bones there are three groups that perform different actions there are the exchanges the broker dealers and the clearinghouses right crypto set up very different oh and and in capital markets so the exchange brings together the buyers and the sellers um it was really the marketplace for the buyers and the sellers the broker dealers represent the customer and bring the trades from the customer to The

Exchange and then the Clearinghouse settles the trades and in is oftentimes the custodian right in defy you don't need to like in D5 the the analogy would be like unit swap is the exchange metamask is the broker eth is the Clearinghouse in C5 the SEC is very confused I think because Market structure is different there's no broker dealer first of all because uh customers and consumers customers and like users basically just park their money with coinbase so there's there's no broker dealer and then the clearing happens on the blockchain on eth right so it's very frustrating when I see a case like this

because it just shows me that the SEC does not understand the market structure here um the market structure at play so I don't know there was an argument to be made like um and this was already kind of intimated a week before where binance was saying hey we're going to allow some institutional clients to custody their assets with an independent provider in the for any trading that happens on the binance platform you're calling sort of on that um custodial to make sure there's proof of funds and then you settle look there is an argument to be made that sure you could probably just intermediate this and move closer to how traditional markets work which is there's a segregation of where customer like the

custodian like you know bny melons of the world and where in like the prime broker and like make sure that there's a separation there for sake of like consumer protection if you will like I understand that argument I think the infrastructure in crypto has been nascent and kind of like not very robust like coinbase has a coinbase custody of course right could you custody that somewhere else and trade and settle with coinbase sure um yeah you can um and so yeah I mean I I don't know I think that the the thing that I was like uh I think it was uh the head of policy at Bain Capital um I think it's tuong Village uh she has Regulatory and policy at

being Capital crypto and she says let's be clear the SEC complaint doesn't mention this this particularly about the coinbase kids there's currently no way for a platform like coinbase to register as a Securities Exchange broker or clearing agent that's why they've been begging the SEC for years to give them path to compliance they haven't gone in Robin Hood same thing and so you know the the the coinbase uh general counsel and Brian and the team just are really of the opinion that they deny like 90 of the assets that they review they are the opinion that all these assets are not Securities for a number of reasons and so you know they kind of hold true to that and are holding a firm ground to that there's also like an interesting uh

observation by a few folks on Twitter that said all the assets that were listed in the complaint are like literally the front page of what you all the landing page of coinbase and so it sort of begs the question did they just kind of look at that and to take them or well I think these people really like if I'm in the like if I'm if I'm trying to give the SEC some advice here it's like don't go after every token because I don't know I I think it was haseeb said this in this episode with this evening will come out in a couple days on on Tuesday but um the uh hasi was like if you put one or two people in timeout then like it sucks for those people if you go to a group of people and you're like every single one

of you are in time out and you move you move that whole group into timeout well then it doesn't have any effect because those people are all still together and they're kind of just like well this doesn't make sense if we're all in time out or I think he used he said jail so if the SEC is trying to enforce something don't go after a hundred percent of things because you're basically just forcing an industry to not be compliant go after one or two things that you really think are breaking the water you know that's a really frustrating thing to be honest which is look there is wrongdoing in crypto as there is in every other industry out there you have banks are fine constantly for violating kycml and ofac and all this stuff it's just human behavior there's just nature there's fraud everywhere and I really object when people say well

this is the problem crypto facilitates crime and it's a space that is like riddled with fraud I'm like hold on a minute look at show me the data coin like chain analysis but produces great reports that indicate that less than one percent less than point five percent of transactions are nefarious unrelated to fraud and whatever that's much lower than Fiat and so to say that crypto facilitates nefarious activity is actually wrong like Katie Hahn from Hanuman consistently says time and time again the only reason they were actually able to catch the people at Silk Road because it was everything was on the public blockchain like smart people will not use a blocking now of course there's a Lazarus group and some of these entities

that like have hacked protocols and have been able to finance themselves because like I understand that that's on a separate issue of like security and smart contracts and whatnot but you know I I think I always go back to and I think this is one of the First episodes that I had with Rebecca and and even in private conversations I asked people it's like the point of the SEC is to stimulate a few things one Capital formation and you could argue that their behavior has really hindered that it has moved capital and Innovation away from the U.S and this is go back to the hearing right that we had against her like a month ago and this is a huge point that like in the in the testimony they were really pressing him on that it's like you fail on Capital formation

like people are really scared the build in the US and this is a growing thriving industry it's going elsewhere it's going to Hong Kong it's going to Dubai it's going to Europe so Capital formation has been really impacted because of these like bullying uh behavior um and lack of clarity and the second one is consumer protection like who's actually getting harmed I understand you my point here is because we don't have Clarity and we're in this limbo it opens a vector for some of the fraudsters to actually take advantage of that FDX prime example it operated offshore in this gray area coinbase on the other hand has been trying to do the right thing in the U.S and you could you you could argue well

wait a minute well they've listed all these assets and they're down 90 I'm like and Equity markets are not and pink sheets are not like let's talk about consumer education and accreditation laws fine maybe there's a better way to understand that people should be trading these things but you can't necessarily take an opinion it's not the role of the SEC is my understanding to take an opinion on whether the companies that they approve to go public whether it's a SPAC which is worthless now or you know true like you know I mean like it is not their opinion it is not the role to take an opinion on the assets on the Securities that they kind of approve or not right they oversee they're not curious we were so beyond trying to be reason like we have gone yeah I mean like regulation by the last

couple years were regulation by enforcement and we were all really frustrated it's like you can't regulate something no I this is a clear signal that we have shifted from regulation by enforcement to trying to ban an industry by enforcement difference in my mind that's where I was going because against her really was um I think in his interview he was interviewed at both CNBC and Bloomberg the day of and he said you know he said something really interesting which is what what I was just saying it's not our role to take an opinion on the particular things that we like supervised and oversee and then he said some and then he proceeded to say but I actually think that basically this industry is

worthless and should cease to exist and the that's the only role here is that's why we have a dollar and the digital that like Central Bank digital currency and he said uh so he's very opinionated and he's not like that in in with Securities right you don't see uh him talking about some of the companies that have gone bankrupt you know and public stocks that have gone to zero you know and in here it's actually it's quite telling right because then he's basically telling you he he wants his industry to you know he's cease to exist and the natural question is we've talked about what is the probability of crypto being banned in the US like gold was banned in the 30s or whatnot I think that probability is shifted dramatically

after the events that have transpired this week it's something interesting I mean you know Mike asked me this week he's like if crypto got banned would you would you leave would you leave the US it's an interesting yeah would you if crypto got banned in the U.S if it was illegal to hold crypto in the US yeah yeah I would I would leave I would leave what does that look like though like if people like I forget what happened when gold was banned but basically he said if you don't what happens if you like don't surrender it you hold private keys um how do they enforce that

uh I think mind you they hold a bunch of Bitcoin that has been seized over the years like what they were well that's the honestly the irony they've been trading on a what they claim to be an unregistered exchange or whatnot broker dealer they're selling their Bitcoin through coinbase the government is so what happens in that point like what happens to the Bitcoin the US government holds like they could just you have to surrender it uh you have to send it to their wallet you have to you get a stable coin like what happens like I'm just kind of really curious practically like what would happen in that scenario you got to go hand in you got to go there's a there's a price that someone sets and you have to go hand it in for

that price right yeah I guess you know um yeah yeah I think this uh what's your I mean I this seems to be like I would assume that it's going to be a fairly drawn out process I just looked it up Americans who did not all Americans were were required to turn in their gold before May 1st 1933 to the FED in return for 20.67 of paper money Americans who did not turn in their gold were subject to arrest on criminal charges and faced up to 10 years in federal prisons an exception was made for dentists who could own up to 100 ounces right because huh yeah

yeah so um here's but here's here's a difference onto um well I guess this isn't a difference with gold but uh the beauty of crypto is you can't kill you can't kill crypto and the reason is the aspect is is the aspect of self-custody so with equities if you want to go create a new let's say they shut down the custodians for equities equities are dead because you can't you can't just go create a new custodian for equities with crypto you can't if you if you kill exchanges you can just you can't kill you can just go pop up a new self-custody exchange right you can go pop up another decks or pop up another metamask or something like that um you can go buy some ledgers like that is the beauty of this so I mean you can

make it really annoying but like you can't kill you can't kill self-custrated assets yeah I mean look at I mean China's been trying to ban crypto for a while so here's the here's the SEC Playbook that I think they're running they started small got some wins ether Deltas of the world then they went bigger bitrix is of the world now they're going for the biggest exchanges coinbase and binance what comes next after this they either stop and focus on coinbase and binance in these in these suits which will take years by the way or I mean when seems like we know Gary Ganser at this point I don't think he's slowing down anytime soon I think this is when they now come for the protocols and uh what that looks like is you send a subpoena to a protocol you say you've

got two to three weeks to hand over every single internal slack message you've ever sent any email the founders have ever sent any emails the teams the exact team has ever sent anything you've ever posted on social everything but they're they're doing that already right I mean they we've known that for a particularly like some like Tara they've been in tornado like they've been like I think it comes for all the for all the D5 yeah my understanding is it's been going on for a while now it has been but I think it it's about to start getting more and more public and also it's been happening for a little little while now so if you give someone three weeks to hand it over that maybe that was two months ago then they need a month or two to review it and then they I think unfortunately for some of these

protocols you have folks who maybe when they were three people they weren't thinking about an SEC subpoena so they probably said some pretty things that will seem very damning on slack messages right yeah well you know look I mean I think I I am of still of the mind that some regulations some policy will be constructed will be helpful for the industry yeah I also think this will speed that up right I think I mean I'm hopeful and I think if if we align on the things that really matter which is I think this will accelerate legislation hopefully consumer protection yeah like there's a bill that we want to discuss in the next regulatory pod that I think is super interesting in the US what is it the McHenry bill or something

and I think that's a great step forward um so ultimately I think we have to make sure that we're constantly thinking about what's a North star here and it's always for regulations consumer protection so what are the things that we can do as an industry to make sure that it's a fair playing Ground that is fair Capital markets right that information disclosures are there um I'm still thinking of that department that the SEC created to allow for issuers token issuers if you will to provide information now if you have a central Repository where you submit the token vesting the token smart contract information like everything a lot of this stuff is on chain like crypto Protocols are

I mean I don't want to say contrary to popular belief but I just want to make sure that people appreciate crypto Protocols are fairly transparent in in the in the amount of stuff that is available on chain to inspect the contracts and the wallets and the move-a-funds and all this stuff I mean you can make the argument well not everyone's technical enough to read these smart contracts point taken well let's let's do something about that right let's create a someone an agency or whatnot a group that interprets that and gives a credit rating like there's a defy score that you know there is a I think a Consortium that the D5 safety Alliance or something that I think coinbase and a bunch of others like created to self-police and

like to rate these protocols um D5 protocols in particular so I mean those are the things that we should be talking about and focused on it's like okay how do we make sure that Ben east of the world like I mean if people want to send money to him like that's like charity but make sure that people understand what they're doing uh make this a more friendly safe environment whether it's interacting through coinbase base and making sure people understand the difference between self-custody and Nod and managing their own private key like these are the things that we should be really focusing on because those are the things where consumers have been hurt not you know it's clear that like people want Access Financial inclusion is a big

point that I will make over and over again uh the amount of wealth that has been created um since the 90s because people very select few a very select group of people been able to invest in private Enterprise because they're accredited on this random arbitrary rule that is outdated and and it's it's so bad that it's just like be if you have a certain amount of money then you can invest whereas maybe you should be focusing on are they knowledgeable enough and can you make some things simple things like a test that they should take on I mean look binance called what it is yeah it has like perks and products that allow you to go on margin and all this stuff but at least they like you have to go

through a test to like Elite you know an investor suitability thing that a lot of banks also make you know are you sophisticated enough to trade these products what's your level of experience and there's a rubric you know that you could argue we could improve for and make it more specific for crypto but nonetheless you know I think those are the things that really matter but unfortunately we're like a lot of this is just a distraction yeah you don't have an opinion is Doge a good asset or not and people think it's worthless well sorry folks but like that's for the market to determine but all you can do is make sure that people have the resources at their disposal and everyone's in an equal

playing field where if there's any information but the devs if there's any information about the protocol and the people behind it it is readily available to everyone on an equal basis that is what matters the most then then people can make a determination whether we want to buy or sell the token or the stock or whatever you know I mean that's it it's all you can do you can't tell people what they're going to spend their money on or where they want to invest if you want to buy meme coin everything is a social construct so that's it like at least arm people with the right resources and avenues to educate themselves you can only lead the horse to the water that's it right and that's a role of regulators and here they're clearly

overstepping they're having an opinion on on whether these things have value or not I'm sorry but like that's not the role of a regulator it's really not it never has been and I think that's where the courts are really gonna are gonna clamp down on and I think that's if if they fail to do that then we have a bigger problem on our hands because it sets a really bad precedent on other things like the state should only protect people but it there's there's a there's you know there's a great name that said like at what point like the US like it started because they tried to tax their tea way back in the day and now you know we have these agencies that are really I think overstepping and telling people where they can and protecting them from crypto

well folks like people are going to do this and you're gonna find a way to because it young Generations want to do this like there's an interest in the public fear to get access to these things all you can do is it's really dumb to to say no you're not going to do this it's like it's like if your kid wants candy and you tell me he's gonna find it here's it's here's why they're doing it now is because it's easy to do all this stuff when everyone's losing money and prices are going down once prices like bull market very tough to do this stuff um this is so I think this is so egregious uh such an egregious overstep that this will actually be good for crypto I think politicians will see this and think that

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purchase a variety of goods on the good dollar marketplace with the potential to impact millions of people download the app start exploring today it's valoraapp.com forward slash Empire thank you [Music] all right shifting gears LV are you a Louis Vuitton guy I don't think I've ever bought anything from there not dollar euro 41 000 yeah 41 000 nft 106.93 now The Collection I'm just gonna read this uh Vogue actually published it the collection of digital oh God I hate that word so much the collection of digital treasure trunks marks the first time

that the luxury brand will sell nfts which will act as an access pass to future products and more um 39K uh and it actually seems to be let me read the fine print Louis Vuitton is guarding access to Via in other ways as holders cannot sell or give it to another person which is a contrast to many of the original high value communities the brand refers to it as a soul-bound collectible which is a New Concept in the past year to facilitate loyalty and discourage flipping I like that it's like non-transfer non-transferable right yeah yeah I like I like the slowbound concept here I think this is cool yeah it's really impressive um you know a lot of people ask me I I'm based in Europe and I've noticed

that people here are just more positive on Space generally yeah even Old-Timers like you know uh which has not been the case for a long time but now like you see like these are the catalysts that I'm looking at that I think these headlines go unobserved and like just in this kind of Market but mind you this is the largest luxury conglomerate in the world and um you know Tiffany did um the pendants for the punks and um you know I think uh again Tiffany's also owned by lbmh and and Louis Vuitton are doing this it's it's a huge milestone I think like to push a space forward like anyone that says that nfts are dead like you

you know like what is what comes next right because when you have a brand like that start doing this it makes a big splash and then all other luxury brands are gonna then pay attention like Gucci I think did a collaboration with Adidas then and also with g money I believe like was it Adidas with g money and then Gucci I think is also experimented with nfts so like these things are percolating I think um you know marketers are appreciating how important this is both from a new type of segment of the market that they're willing to capture the price point that they're well like they're able to capture from a consumer intelligence and retention standpoint makes a lot of sense like

yeah I mean it's a it's a big deal I think and basically this nft like if you were to buy it the the whole the value prop here is you're going to get access to things that before others too you have first access and you get exclusive access to things I love the strategy you're paying 40K to be able to spend more money I mean like mind you a lot of people like uh they do like the first one I don't know if there's a public well I guess it'll be public now that I'm sure the first one is being shown at Fashion Week at Pharrell's fashion week next week this is yeah this is cool and is it um just like getting invited to like special events and products like by holding this access card you

basically get access to the first drop if you will of like limited items physical items yeah I guess so let me ask you this why so I know you think it's cool why did this have to be an nft if it's not transferable um why why do you why does why should Louis Vuitton do this as an nf2 and what you're saying is could they have just done experiment yeah they have just done this with like a membership club membership club names on an Excel spreadsheet with some macros and called it a sure they could they very well could yeah um I think it's the appreciation from the management team

there that nfts the whether you want to believe it or not and whether the customer today appreciates this idea that it is recorded in a public blockchain You could argue is a little far-fetched today but over time it become more important there is a Consortium of luxury brands that have come together I don't know if um Louis Vuitton is part of this but all I think a caring group and a few others have come together to create this kind of Consortium of a standard for nfts um and so you kind of want to have a secive sometimes creates really great

metaphors and I'm going to borrow this term from him a Switzerland in the sky is what nfts ultimately or blockchains ultimately are right you have this like think about Airline points and how fragmented those are in credit card points there's Partnerships between certain airlines and you can use those points but like I think it was this week where like United or some Airline really like demoted the value of your points at on whim there's no freely traded market for that the options again it's all about consumer preference and expanding that right and so you have to create a Switzerland in the sky meaning a neutral standard where these things can maybe it's not transferable today but having it in a an incredibly neutral

kind of environment and public blockchain allows you to do other things down the road right uh you know think about the entire portfolio brands at lvmh has well if you have maybe this nft then maybe you can Port it over to other things and I just think um from an ease of use and like the ability that you have from having all this you know in in an nft format just makes more sense to allow you to do other things in the future um that the customer will probably appreciate um but it certainly comes out like there is there is this friction right users are going to have to create a wallet and on

the back end the security component sure it's not transferable but you can lose your private keys and all this stuff and how can you do it I think there are the front ends are there where like you can abstract away a lot of this complexity today right with wallets well I think they're trying to reach a crowd that maybe is already semi-crypto friendly like I think this is maybe the comparison you might be able to make is a 20 years ago someone or 15 years ago someone saying why should I why should our brand go create an Instagram account or a Facebook account we can go reach our users via email like we can send them the message on email and there's probably some young person on the marketing team that was like no no we need to create an Instagram account because there are these new a new group

of users and we need to meet them where they are and we need to put our stuff in the context of what they enjoy doing um so we need to get on Instagram and the brands that got on Instagram early you know obviously crushed it and so I think this is like lvmh this is what so a thousand nft how many nfts are they selling here let's say they sold a thousand of these things at 39 about the money yeah that's 39 million bucks for a company that made they made he doesn't 79.2 billion dollars does not compute and but not just Louis this is lvmh yeah uh 79.2 billion dollars it's not about the money for them right now I think this is them trying to meet this new cohort of very wealthy younger digital

native folks where they are let me tell you one thing what's the whole point about luxury luxury goods Bedlam Goods flexing exactly is there a better way to flex than having it in a public register where everyone can see it yeah right you could claim you can upload a picture you were at the runway show or whatever but if you have this nft it's a flex it's free marketing for them you know what I mean like that's really it right I mean I think it's cool I think it's cool to say I mean another one of their portfolio companies uh Tiffany's right Tiffany sold out sold yeah sold out those nfts sold out in 20 minutes they made 12 and

a half million bucks so I think you'll continue to see this remote the price point the price point historically of nfts relative to other luxury goods is fairly high like board Apes punks like these are 100 000 purchases you're buying a car as a picture yeah you know it's not trivial like not everyone spends it but even a mint of 25 each that's a lot of capital like that's that's a lot yeah yeah um I think it's cool yeah last thing to talk about actually I said I didn't want to talk about this but I do think it's just for the arbitrum bug I think it's important to kind of dispel some of the fuds so let me just explain it really quickly to folks um on uh there's some like if you're on

Twitter this week you probably saw some some fun uh from other ecosystems about arbitrum like canceling transactions or the sequencer going down that is not what happened basically uh arbitrum stops sending transactions to mainnet for about two hours on Wednesday and the reason uh was the software bug that affected the the roll-up sequencer but if you actually look at it everything's fine with arbitrum basically what happened is so things happen on arbitrum right they're in L2 so things happen and every so often they have to send those transactions to ethereum uh back to the L1 yeah this basically just left there's 2.2 billion dollars that was kind of like in the Lurch basically like sitting on the L2 that wasn't confirmed and sent back

to the back to the L1 and um let me just they posted this good Thread about it hold on I'm gonna read there's one point that I wanted to read from it um in order okay in order for the nodes to send this is my understanding of it in order for the nodes to set send transactions to ethereum there are one of the the wallet that's associated with the node needs enough eth to pay for the transaction fees and um the sequencer spent the five E that it had but the gas refunder which had I think 250 each like plenty of ethernet didn't refill it until it posted the successful batch that's just software bug so yeah I think this is uh I think this is nothing to worry about yeah it's back operational for what it's

worth yeah cool um what else well just briefly touching on two things one there's a great episode coming up next week we've alluded to during this podcast with avici chill and hasid these are great thinkers they don't agree on everything but we talked about the state of the market they're both investing dragonfly and electric both well-respected Venture funds different strategies different geographies but they're great thinkers I think you'll enjoy that discussion so tune into that um I really enjoyed that um it's always good to bring them on and you know I think they a lot of times people um complain that you and I agree on a lot of things um although we've tried to we don't

coordinate or anything we just kind of come on here and talk about stuff but these guys really have a fresh take on a number of things and including regulation including how they're investing macro and a number of things so I just felt like we could go on and on in that episode and some things that we didn't even touch on like uh you know blockchain architecture and is it a multi-chain world and monolithic versus you know other types of design constructs and secondary Market activity there's so much we could talk about and so we're going to bring them on again but I think that was a very neat episode at least from my perspective yeah last thing I wanted to talk about that I forgot to ask you what did you think of uh Apple Apple's Vision Pro any thoughts on this well I I tweeted about this and said

look Apple's the most valuable company in the world because it has turned Skeptics into lovers like uh so many people are skeptical skeptical of the smartphone and I was skeptical of the iPad I said why do I need this like I already have a smartphone and I ended up buying an iPad uh air pods too like I remember I was I I was able to get my hands on an airpod super early and I was walking in the street and people were like thinking I was like mentally insane I was like I thought the airpods were so dumb when I first saw them I was like everyone's horrible my parents are like why are you buying this people at work like you look dumb like remember the Apple watch Dude the Apple watch out shredded people were like yeah yeah yeah

and so I'm reminded of that I think it's um so I've looked at like a number back when I was at stage view like we looked at way back like we were looking at like the the chips for these um for these devices and they were just not there this is like seven years ago um and a big issue with these things is that if there's any lag between what what is being rendered and what you're like and you're how you're moving it create it's super nauseating like any sort of lag in your occipital system which is a balance like the little like things in your ear that like make sure that you don't like totally fall off a cliff if there's any lag with that you immediately get dizzy and so in the initial tests of like

Oculus early versions and HTC and all these devices like the people were puking because it was just super not you couldn't like um you couldn't do this for more than five minutes but it's come a long way like I think the the I'm really excited about it I think I'll buy it um um and it's it's pretty cool like I think at least in many ways like the question is does it replace like your laptop or does it replace your smartphone I don't know but it's kind of like this they are also exceptionally good and they are the most valuable company in the world because they create markets so I think in this case I don't think it replaces anything it just as a compliment Theory but I'm more excited

about like at least standing more vertically upright and seeing things and interacting with my world and like looking down on my screen you know at a minimum I think we're gonna have less like posture problems yeah there's also pretty remarkable to think about this so I have the Oculus and I really rarely use it pretty yeah interesting to see like I mean this technology has been out for a while interesting to see the response to this which is very excited I would say compared to the Oculus um one one takeaway is a man like the marketing is so different it this showed me how good apple is at marketing right like I mean you already know that Apple doesn't Facebook released a product and Facebook talks about the Oculus like a product with things you can do on it Apple

only talks about the vision around something right they like they're just so freaking good at painting the picture um and I think Apple also just has this amazing ability to take old technology like smartphones were around they made it happen or even a like they can take old technology and make it work and a really good example of this is actually is Apple pay right like yeah that was an Android tech that had been around but like you could only use it in like one percent of places um Apple pay I really rarely use credit cards anymore it's all Apple yeah um and I just have a dominant ecosystem of things you know yeah well showed the differences on consumer preferences around privacy too right and like how people perceive Facebook and apple like

when people oh yeah think think about the Oculus they're like oh Facebook can now see inside my living room with like 4K Clarity when people see the like and I don't know people are scared it's such a good point and then and people think about Apple and they're like oh they're like a privacy Ford Company um yeah I mean I think um the other thing to note is the price Point's fairly high but I do think that like the any estimate of how like people are saying oh they're gonna not sell bunch I think they'll quickly recoup all they've invested in r d like first year alone and um yeah it's just gonna be incredibly exciting how people use this and how that you know the entire like you know

the iPhone created an entire App Store and all these different companies and I'm just really excited to see what's going to be that next evolution of games and companies and how they create different experiences because it's you correct me here but it's sort of like I was debating whether to call it VR or ar like virtual reality augmented reality it feels like it is augmented reality because at least in the demos like you see your surroundings and it Blends really nicely kind of your living room if you will with kind of the things that you're seeing um but it also is kind of virtual reality I don't know it's kind of like a hybrid and I think that's the Elegance of this product but I haven't seen it but everyone that has gotten their hands

on it is Raven about it or at least most people yeah AR VR it's Mr it's mixed reality it's all yeah that's right maybe that's the best way to call it what is it what do they call it spatial uh what is it I think there's a specific term that they came out with um the best spatial facial Computing spatial Computing processing yeah someone was saying control F every Venture fund every Venture fund of the space is now updating their uh criteria of things that are investing in spatulations yeah yeah exactly exactly yeah so anyone that's like migrated from investing in crypto to AI now consider maybe also going into uh yeah domain go

definitely going uh funny enough Apple now is a three flirting three trillion dollar market cap which uh is tied with France or largest it's now I think Apple alone is like the seventh or eighth largest economy in the world tied with weapons I was I was in Iceland earlier this year and I was reminded of like the populations like shy of 400k and I was looking at these stats I'm like and I was comparing it so Amazon employs like five icelands that's great like 1.6 million people just it's it's wild it it's uh this uh we always come out with uh books

and documentaries or movies that found interesting this reminds me of the network State when we talk about like companies being this large I mean protocols potentially being this large like it's not too far-fetched I mean these countries will these companies eventually protocols can wield a lot of influence I mean they do right um but you know they have Cults they have values they have systems in place like I'm constantly reminded of like the construct of a nation state is is fairly new and a lot of these countries are fairly new and they're etched by like diplomacy and things like just that may or may not withstand the test of time yeah um and so like do you have a greater affiliation of Apple than to your team

like your national team I don't know like it's just like Blurred Lines now pretty damn affiliated with apple I'll say I'm pretty locked I was just saying like you definitely stand by Apple but right now like oh I'm like why like that doesn't actually make sense you know you're a loyalist to Apple but you know who knows like you're you're more alike to people that buy Apple than perhaps like someone in Middle America because you live in New York you know I mean it's like it's different now anyways uh I saw the movie Air um is that is that the Nike one with like Michael Jordan and I don't know you you saw it you tell me no no I'm I'm black I was not sure that was there yeah

it's the story of the Michael Jordan yeah right amazing I'm just a Nike like I love running I love Nike I've always I mean next time next time we're recording this I'm in the office right now but I'll record it from home I'll turn the camera I have a photo Phil Knight on my wall actually oh shoe dog fantastic book I'm just gonna like best entrepreneur book of all time hands down that book is insane yeah yeah it's it's just amazing so either go out watch the movie air or read the book uh a good great companion shoe dog fantastic like those two make for a great weekend I think yeah anything else you found interesting still reading this book on poverty it's pretty depressing

um guys forget if I told you I'm reading this I mean people should read this book it's pretty pretty eye-opening but also pretty depressing um so it's bear Market I probably wouldn't recommend that go read shoe dog perseverance yeah definitely yeah all right folks well thanks for tuning in a lot to discuss and digest hopefully we've done some we haven't covered everything but you know it's impossible to cover everything on these but we'll be reporting and paying close attention to these things as these things transpire so yeah have a great weekend everyone enjoy the weekend see you guys [Music]