Three ways Trump could create a US crypto strategic reserve

Transcript

GM good morning welcome to the milk Road show The Daily crypto show where we break down crypto with the same confidence As Trump announcing policy changes on Twitter I'm your host Jay Hamilton it's Tuesday March 4th we've got to talk about the Strategic crypto Reserve that Trump announced over the weekend yesterday I got all excited in the show and said that we bounced and we were so back and then sorry guys I I really I'm G to cause that plummet yesterday I apologize but we're still here we're also going to talk about Congress and what is going on the legislative side because we've got some really important legal actions that are coming that will hopefully give us Clarity around Defi and stable coins and

the market structure for crypto also we've got the White House crypto Summit this coming Friday we're going to touch on that in order to break this all down we are joined by Jake travinsky today he is the chief chief legal officer for the variant fund a leading crypto fund with investments in Moro swap Phantom and many more he's also the former Chief legal officer for compound Finance one of the leading D5 protocols he's a lawyer but he's not your lawyer so none of today's episode is legal advice before we jump it in here from Jake tomorrow we are going live at 1205m Eastern on YouTube and Twitter with Mark yuso CEO and founder of Morgan Creek capital so join us to ask your questions all about institutional investing that's

happening in this space today's episode is brought to you by definitive Advanced trading on every chain and coin shift powering top crypto treasuries with their yield bearing stable coin CSUS DL without further Ado Jake welcome to the milk Road Show thanks J great to be here super excited to have you my man okay uh before I want to talk about the US crypto strategic Reserve uh and before we talk about you know what should be in it and get into details like that I think the the main thing is everybody needs to understand whether Trump can actually do the things that he keeps saying that he's going to do the ACT process that would need to happen in order to make a strategic

reserve a reality can you can can in an executive order just all of a sudden make this a reality probably not um and as you said I am a lawyer but I'm not your lawyer nor am I the president's lawyer so you know nothing I say here is meant to be legal advice I'll just give you my best sense of what we can expect to happen if the us is going to have some type of strategic crypto reserve and the answer to your question is this would be a very difficult or impossible thing to do through an executive order and the reason for that at the very highest level is because Congress is the body in the federal government that decides how to spend dollars that taxpayers are sending to the government

the president doesn't really get to allocate new spending without Congress approving that type of spending and so through an executive order especially given the limited powers that the president has just by you know uh signing one document from the White House be very difficult for president Trump to do that said there are a couple of theories about how the executive branch under President Trump could try to create a strategic strategic crypto Reserve without having to go all the way through the process of getting legislation through Congress as we all know you know folks who are paying any attention to politics in the US Congress is extraordinarily slow it's somewhat dysfunctional these days it's very hard

for them to get anything you know done let alone something that's you know very new and potentially controversial like a strategic crypto Reserve so it is possible that we could see President Trump through the treasury Department try to create a strategic crypto Reserve but again some legal issues around that too and happy to dive in deeper in any of those different issues yeah so let's talk about I think the main thing that I want to understand and I want our listeners to understand today is what are the different scenarios that we could get a strategic crypto reserve and what are the steps and the timelines that each of those scenarios might take yeah so maybe we'll start with the the

fastest way that you could have something that in theory could be described as a strategic crypto reserve and we can talk about why I say it could be described in a second so first of all the easiest and fastest thing to do is an executive order from the president it takes literally no time other than drafting the executive order and president Trump signing it and we know that President Trump really likes doing executive orders in general so we could see him do an executive order on their strategic Reserve now I will say he already did one executive order specific to crypto it did a whole bunch of different things but one of the things that it did is it created a president's working group on digital assets and it assigned them the responsibility of

analyzing how to create a crypto strategic Reserve so we already have some executive order moving the ball forward on at least analyzing what this could look like now as I said the president cannot by executive order spend money that has not already been allocated to the executive branch and two presidential power from Congress granted he could try but there might be legal challenges to that and I wouldn't expect him to try to do that so explicitly but what he could do which could look like a crypto strategic Reserve is he could order the federal government to stop selling digital assets already in its possession and those who have been following you know

sales of digital assets for example by the US Marshall service who go out and seize crypto in all kinds of different civil and criminal forfeiture actions know that the government already has a whole lot of crypto just sort of sitting around and they've been selling that crypto especially Bitcoin including hundreds of thousands of Bitcoin that the government still has from the silk r days right 10 years later selling those Bitcoin on the open market what the president likely could do by an executive order is just say no more sales of digital assets we're going to hold all these assets we're going to keep them in something we will call a crypto strategic reserve and we could just sort of be done with that and that would be the very fastest way for us to see the government making what looks

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traction at milro docomo SHI and if and if he said that he could say cuz mostly they have Bitcoin right but they obviously have other assets as well through these seizures so he could say blanket all digital assets basically or could he say specifically could he say specific assets he could definitely say specific assets he could say we're gonna sell All Digital assets except for and he could list you know the same five that he just about or some others he could do that now that said I don't know that that's the most likely outcome and again the reason I say that is because he already ordered his working group to analyze how a strategic Reserve will be implemented and what I

just described is sort of a hacky way to come up with some method for the government to hold digital assets it's not really what we've been discussing as acquiring a reserve so the next question is how could the federal government actually go out on the open market and make purchases of digital assets and there's one theory that I'll credit a lawyer named Zach Shapiro for really articulating well on behalf of the Bitcoin policy Institute which is a fantastic nonprofit Think Tank doing work on on bitcoin policy in DC and his argument is that the treasury Department under secretary Scott bessent could use something called The Exchange stabilization Fund in order to make purchases of digital assets so what is

the exchange stabilization fund this is a fund that was created almost a hundred years ago for the purpose of maintaining an even exchange rate between the US dollar and other foreign currencies around the world and so you know not something that was set up to be an investment fund or something that would go out and acquire something like Bitcoin but as of today the exchange stabilization fund does hold a bunch of different assets not just specific foreign currencies so for example it holds sdrs that are issued by the IMF and it could be used if Scott Bessant were to decide that it was appropriate to do so to make purchases of assets like Bitcoin now right now the exchange stabilization fund has something like

200 $250 billion in assets so you could see a significant allocation from that fund however this is just sort of a theory that's been floating around out there I'm sure again there could be any number of legal challenges as to whether purchasing Bitcoin is an appropriate exercise of the authority that the treasury Department has but I think that's the best possible Theory as to how the executive branch could buy Bitcoin or some other digital asset without getting new legislation done by Congress and if if that if that theory were to play out what would you predict would be how quickly could that happen I think it would take some time there would have to be you know some analysis

from the treasury Department first of all as to whether This legal Theory will hold up there could be lawsuits that could slow down those purchases there would then have to in theory be some type of guidance or maybe even Ru making although I I don't think you would have to go through a full public notice and comment rule making process but some deliberative process process at the treasury Department to say look this is why we're buying Bitcoin or this is why we're buying ethereum or salana or some other asset and I would guess that that would take some period of time you know months maybe even longer okay okay any other scenarios that are worth exploring for how the US might buy digital assets there AR Federal level yeah so I mean without action from Congress and we

should talk about that next but you know just thinking about what can the executive branch under President Trump do without going to Congress there might be a couple other theories where you could find other funds that are already managed by various different agencies where you could try to come up with some argument look the appropriate way to manage this fund is to sync some of those dollars into digital assets and you can look at any number of different agencies or you know bureaus departments that have money that could try to make a decision like that I I think the reason why the exchange stabilization fund is the best theory is because number one this feel feels like something the treasury Department would be doing right it's it's hard to think of some other agency in a better position to make an

investment in digital assets like this other than the treasury Department and again The Exchange stabilization fund the purpose of it is in a way to ensure the value of the US dollar and the main argument for creating a strategic reserve and we can talk about you know what is the point of a reserve has to do with managing monetary policy and so I think that's the most likely Avenue if the executive branch is to go and do this on its own yeah before we talk about the Congressional side let's just actually touch on that what is the point of a strategic Reserve generally speaking the point of a strategic Reserve is that there is some asset that the United States national interest benefits from having a certain amount again in reserve as in

you might need it and so you're going to go out and get it in advance and you know one uh sort of Distinction in semantics but in language that the president has used to describe this is either as a reserve or as a stockpile and there's not really a technical distinction between those two terms but generally speaking when we talk about a stockpile we're really talking about something where we're just going to load up on a whole bunch of it hope we never need to use it and just let it sit around when we talk about a reserve we're talking about a more Dynamic type of asset so for example oil where at some points in in the market cycle you might want to reduce the amount of Reserve you know add some supply to the market sometimes you might want to pull

some Supply back to try to manage Market forces of supply and demand so in general a reserve is viewed as being somewhat more actively managed than a stockpile and so if we were to have a reserve of digital assets the idea would be either that the US government wants to be influencing Market forces of supply and demand by sometimes adding and sometimes subtracting Supply from the market or that US government is actually going to use these assets like maybe the US government is doing a large number of transactions on decentralized public blockchains and it needs to pay transaction fees and so it wants to have those assets in reserve in case they need to use those assets in the future and that's obviously the uh the the one theory that might hold weight for why we

would see assets other than Bitcoin in a reserve there's obviously a big backlash to Trump saying oh we're we're going to have eth and Solana and xrp and and cardano in this Reserve that that feels like the only reason why you could see that is if they believe that defi is going to accelerate in the US these are the chains it's going to be on and therefore it makes sense for us to hold what we would need for gas fees in order to basically hold those Commodities in in our Reserve but it doesn't I don't know I'm what are your thoughts on bitcoin versus these other assets being in the reserve well first of all I totally agree with you I think that if

we're describing this as a strategic Reserve then the reason we would have these assets again is because we're going to use them through the federal government Bitcoin I think is a little bit different right Bitcoin is a potential competitor to the US dollar or to any other National currency as a as a global Reserve currency and for the same reason that the United States owns a very large amount of gold it could also want to own a very large amount of Bitcoin just for the sort of the Monet health of the nation I don't know that there's the same argument for any of those other assets I don't think even the proponents of those assets being in the reserve would say look you know ethereum or salana or xrp or cordano are going to be the next Global Reserve

currency the the only other argument you could make and I I think this would fit under some theory of the federal government acquiring these assets but not in the form of a strategic Reserve is that it is literally an investment in an asset that will go up in value over time and tradition Al that is not something that the US federal government does does right yeah no it's not really the federal government's business to be an investor in the market that said in many ways the federal government does invest in assets right whether it's property or you know the equipment that it buys or the gold that it owns or you know when it's engaged in foreign exchange so it's not crazy to think that the the federal government would decide

to be more explicitly involved in making Investments also president Trump has talked about creating a sovereign wealth fund something the United States does not have and has has never had before but you could imagine the president saying we're going to copy the model of many other very wealthy nations in having a sovereign wealth fund this is not good just for how much money we have as a country but also for our ability to exert influence around the world by making strategic Investments and then maybe buying some of those digital assets would make sense in the context of a sovereign wealth fund but again quite different from a strategic Reserve MH he just to touch on that there's so many layers to this if if we did what

would it take to have a sovereign wealth fund that would have to go through Congress correct I mean I I I can't think of any other way you would do that other than by going through Congress that's not to say that there's not some creative lawyer in the white house right now who's thinking about how how to get that done um but look that to me is just a quintessential function of Congress deciding how we should allocate money and I can't imagine the executive branch doing that on on its own okay okay thank you for uh tying that one nicely with a bow for us in the short term uh so two two other directions I want to go here one is I want to talk about the um Federal versus state level of a crypto Reserve because that's also not a

conversation that's happening a ton at on crypto Twitter everybody's really focused on what Trump is saying is going to do but the states are also exploring it and I know you have an opinion that it should happen at the state level not at the federal level so let's let's unpack that yeah absolutely so there is a lot of movement in the states much more so than in the federal legislature to create different opportunities for states to purchase Bitcoin mostly but also other digital assets as well and I guess let me talk a little bit if it's okay about what's happening in Congress first and and that explains why I think this is something that should be happening in the state there is a proposal in the Senate from Senator Cynthia lus the senator from the state of Wyoming to create a Bitcoin

Reserve it's called the Bitcoin act and she introduced it in Congress last year in July so it's an idea that's actually been out there for quite a while and it's a fairly comprehensive plan of how much Bitcoin the US government would buy she proposes buying 1 million Bitcoin in total but also all of the other details that have to worked out in order for the federal government to hold Bitcoin for example literally how are they going to secure that Bitcoin her proposal is that we create facilities all around the country to hold that Bitcoin in sort of a Fort Knox style uh you know security system and also to have a proof of Reserve System so the government can actually prove that it has the reserves

that it says that it has so you know this is a very well thought out proposal but there's a lot of moving pieces to it and also Congress is focus focused on a whole lot of other priorities right now I mean frankly they're focused on priorities having literally nothing to do whatsoever with digital assets they're trying to get a budget done and they're trying to think about immigration issues and yeah you know try trying to keep the the government open and not shut it down right things like that and the the committee that Senator lumus chairs which is the digital assets subcommittee of the Senate Banking Committee also focused on stable coin legislation Market structure legislation so other priorities there what I'm I'm getting to is this is very unlikely to move forward in Congress anytime soon

even if Senator lus wanted it to it's just not a priority and frankly going to be very hard to convince Democrats in the Senate who would be necessary to spend money buying Bitcoin so this is all to say I think where this could really happen is in the states and the reason I say that is because the state legislatures tend to be much more Nimble much more agile much more fast moving much more risk-taking frankly in their approach to testing out different legal and Regulatory and policy strategies you know in the country we've always described the states as being the Laboratories of the United States of America and so having one of 50 states or two or three or five or 10 decide to implement a Bitcoin strategic Reserve or

a crypto strategic Reserve I think is actually quite likely and we see some proposals that are moving forward right now which we can get into a little more if you want to yeah let's you're you're front running all my questions today Jake that's great yeah let's so Utah is leading the way right now so maybe start us with Utah and then give us an idea of the rest of the picture that sounds great and I think you know because there are so many different states thinking about this and so many different proposals it's important just to focus on who's going to be first and then we can figure out what's going to happen after that and just like you said Utah is out ahead on this so in Utah we have House Bill 230 which is a actually a fairly comprehensive Bill about the regulation and policy around digital

assets it does a whole bunch of different things from you know studies about how the state of Utah could be using public blockchains more effectively to a proposal about authorizing the state treasurer to purchase digital assets and this is a little bit different from the type of strategic crypto Reserve we've been talking about at the federal level where there would just be a decision you know we are going to buy this amount of this asset for this period of time in in hb2 30 in Utah what the bill would do is authorize the state treasurer to spend up to 5% of four existing funds already created by state law on investment in digital assets if the state treasurer

decides that that is an appropriate thing to do the assumption is that that would most likely be Bitcoin but it could be literally any digital asset that is quote unquote qualifying under HB 230 so first of all we have to see does the bill actually pass then we'd have to see just cuz it's passed is the state treasurer actually going to decide to acquire any of those assets and to give folks just a sense of where the bill is and what the timeline looks like the bill has already gone through the Utah House of Representatives so it got voted out of the committee that proposed it it then got voted out of the house so it's totally past the house then it goes to the Senate it just got voted out last week from the committee in the Senate that has jurisdiction it is now heading

to the senate floor uh at the time of our recording there's not a specific date when it will come up for a vot for a vote on the senate floor but I think folks who are watching this closely expect that to happen in the next few weeks or so by the end of March is is the expectation it would then go to the governor's desk for a signature there's basically no reason to think that this thing will not pass pass and will not get signed into law so then the question after that just becomes what does the state treasurer do about it and I don't think at least from what I've seen that there is any sign from the treasurer what would actually happen if there would be an implementation or if there would be purchases and if you look at the funds that the treasur is authorized

to deploy it's a little hard to understand how there would be a meaningful allocation of of dollars into digital assets so like one of the four funds is the Medicaid fund and you've got to think the state of Utah doesn't really want to be putting Medicaid dollars into digital assets you know one of them is is a disaster relief and Recovery Fund again a little hard to to imagine that that's going to get invested in digital assets there is an an income tax fund so you know this is a little bit more related to how is the state managing its money maybe it would want to make some Investments there um the fourth fund I'm forgetting the name but also seems maybe a little bit of a a better option um but again this is going to be a sort of wait and see situation

even if and when the bill passes any idea of the size of those funds you were saying that they could spend up to 5% how big are these funds that's a great question I I don't have the the dollar amount off the top of my head would it be enough to move markets you know honestly I'm a little bit doubtful about that for two reasons one is if it's enough to move markets on the most liquid digital assets well the state of Utah and the treasurer might not want to be taking on that much risk you know there is still political risk here and the second thing is the way that those funds would get deployed presumably would not be in a single fat finger you know giant green candle the state of Utah just bought you know all all of its uh you know fired all of its

ammo in in one shot I think they would be very intelligent and intellectual about how to deploy those funds in a way that doesn't affect the market so you know that said maybe the fact that they've started buying makes a change in sentiment in the market but just the market forces alone I wouldn't expect it to make a huge difference for sure they would have to make that public though if they were so obviously we would know that the bill passes that we will know would we know that they were buying so don't don't hold me to this cuz I haven't analyzed Utah law and the bill that closely but yeah I mean this is government transparency there's no way that the state of Utah is secretly buying Bitcoin and people don't find out about it you know whether they're making that disclosure upfront or whether we

find out a little bit later that they've already made some purchases that that I'm not sure about but definitely this is the kind of thing that would be transparent one way or another okay okay so let's continue then down this possible path of State reserves let's say because it sounds like that everybody here is shortterm uh that's just the investor and the Trader's life right it's too short-term thinking sometimes but it sounds like we might have something could happen out of Utah in the next month uh whether or not that actually leads to buying and what buying is and how much that is nobody knows but the there could be a positive announcement that yeah this is now in

state law in Utah would that be a to other what's the state of the what is the status of other states and what could that signal yeah so there are about 30 States or so at this point that are considering some kind of proposal like this and every proposal is unique to the state so you know some of them are just let's buy this amount of this digital asset some of them are more like this authorization that I described so there's not a one-size fits-all and the progress of those bills in every state is a little bit different but again all moving more slowly than Utah in some states I think it's basically guaranteed that there will be a bill that passes uh one such State I would say is the state of Texas Texas has been ex

extraordinarily Pro crypto from the very beginning at both the state and federal level for that matter you know Senator Ted Cruz is one of the biggest champion for crypto uh in the federal uh government so I'd be shocked if the state of Texas doesn't adopt some kind of Bitcoin strategic Reserve there's other states that are deciding not to move forward so for example the state of Montana just voted down a proposal to create a strategic Reserve so it's going to happen differently in every state I do think that once one state adopts it it will send a signal of legitimacy to other state legislatures that are maybe a little bit on the fence about whether crypto is serious enough for them to cast a vote in favor of creating a

reserve but I also think that these proposals will get voted down in many states some states there are no proposals at all and they may decide to just never move forward I guess to to cut to the chase uh know considering folks who are thinking in the next month or so you know how does this factor into to my investment decision and of course I'm you know not here as a financial adviser so nothing I say is financial advice either but I guess what I would say is this stuff is going to move really slowly a lot more slowly than you would think and I think most sophisticated Market participants who are watching this have basically priced in at least in their minds even if it's not priced into the market as a whole the fact that the federal government is going to be very slow to come up with

any real strategic preserve and the states are probably going to do it pretty fast but the purchases they're going to make probably not going to be huge so I don't think it's going to shock a whole lot of sophisticated investors when Utah decides to adopt this bill and Texas adopts its own version and maybe Wyoming because Wyoming Is So Pro crypto maybe you know a few others we can count that are very Pro crypto Florida comes to mind but is that really going to move the markets uh you know can't really say okay very fantastic summary of all of that Jake thank you so much okay let's let's shift gears now to the White House crypto Summit talking about short term this Friday there's a crypto Summit being hosted I don't know if it's at the White House but it's Trump's crypto Summit the

first sort of event that he is doing around crypto to bring together regulators and leaders in the industry expectations there's some speculation that he might announce no capital gain tax on crypto which seems super bullish but also crazy to me but I don't know maybe that actually is a possibility what are your what are your thoughts on this Summit as we lead into that this week yeah so a few thoughts the first is I think this is a really good sign in general for the industry that the White House is seriously focused on moving crypto forward in America you know the president had said during the campaign he wanted to make the United States the crypto capital of the world and he's really following through on that promise so far in his administration I think the

crypto Summit is just another sign that the White House is taking very seriously advancing meaningful legislation and regulation for the industry so I think that's that's very positive in the long term in the short term the question is what will be announced at the crypto Summit and we all know that the president likes to have some kind of meaningful announcement when he has an event like this and for a while there was speculation that it was the Strategic Reserve that would be announced I think it's still possible there could be some announcement about what the path forward is maybe the president does decide to use one of these more aggressive approaches to try to create a strategic Reserve just through executive Authority not through Congress there is also this rumor as you

mentioned about an announcement that there would be no capital gains taxes on crypto I'm a little bit skeptical on that being the announcement if only because that is I want to say almost definitely something that the president cannot do alone uh taxes are very much something that Congress decides uh the president cannot on his own simply cut taxes uh or allow people to to not pay capital gains taxes uh it may be that the announcement isn't that there won't be capital gains taxes but rather that this is one of the White House's priorities in budget reconciliation in the process of figuring out what the budget looks like and what the tax package that will be put forward will look like so it could just be that this

is the the priority of the White House um but I I think it would be a little bit surprising to hear any kind of announcement that is immediately actionable in the sense of changing law the summit I think it's going to be positive vibes it's going to be a strong sign that the White House is genuinely committed to innovation in crypto and that there will be a lot of action moving forward but I wouldn't expect a huge sort of world shattering announcement at the summit itself yeah H how how impactful um is I want I want to just zoom out for a second a couple of um events or things that have happened I just want to understand how impactful those things are on Washington and

behind the scenes uh first is um SEC dropping all these lawsuits over the past few weeks uh coin base Unis swap Open Sea Robin Hood a few more likely to follow uh what's what's the impact of that uh it feels from from my seat it feels kind of like oh yeah I I figured that was going to happen no big deal but I'm not in Washington I'm not there dayto day so does this is this is this a big signal does it lead to end results that matter to to crypto it's a huge deal and honestly I think it's hard to even say how big of a deal it is this comes from the perspective of a lawyer who you know

even though I think to your point we knew as soon as as president Trump was reelected that there were going to be meaningful changes that leadership was going to shift that Gary gendler's days were numbered and that a post gendler world was going to be really positive for crypto that said it is still absolutely shocking to those of us who work in the industry day-to-day and those of us lawyers and other policy folks who've been talking to and dealing with the SEC for years for decades to see how fast they have shifted typically there is some continuity from Administration to Administration on matters of policy even when you have a shift of political party from democratic to Republican or vice versa this has not been like that at all this is I I think

truly unprecedented in a way where the current SEC is simply coming out and saying for the last four years this commission got this wrong and we are going to fix it as fast as we possibly can and that is the best case scenario that we could have imagined coming into this Administration a lot of us thought that the SEC was going to look for some kind of slow playay settlement to some of these cases even in a sort of face saving way to say look maybe we were a little bit over aggressive going after coinbase on all of these different charges of of Securities violations but there still some issues here so we're going to bang out some kind of settlement with them they'll admit some wrongdoing we'll pull back a little bit that is absolutely not what's happening

what we've seen is under the leadership of interim chair marua and head of the crypto task force Hester Pur a total abandonment of the sec's campaign of Regulation by enforcement against the industry and a genuine effort to work with industry to come up with what good regulation looks like so I can tell you from my perch you know not just as Chief legal officer at variant but also as a board member for the defi education fund and for the blockchain association you know folks are going into the SEC through the front door to have constructive conversations with policy makers about what good regulation looks like for the industry that it was unfathomable to us only six months ago

and I think it really does mean that in the next few years and I do mean in the next few years right not tomorrow not next month but sometime the in the foreseeable future we're going to have a real compliant Pathway to put these products into Market to have tokens that are compliant and I think most importantly that traditional financial institutions which are very risk averse and compliance focused will feel comfortable engaging with for the first time ever and I think that's a massive unlock for the industry yeah yeah it's it's it's very true let's talk about Congress and what Congress priorities are right now what they're working on what the status of those things are so my understanding is

that there's sort of three different priorities right now first we've got this um killer D5 broker um law that was I think was came in right at the end of the Biden Administration so you could talk about that and Senator Cruz is trying to repeal that and then we have stable coin legislation and then Market structure legislation can you just sort of like break those three down and give us timelines of status where these at and timelines for each absolutely so the first thing you mentioned that's coming up literally today for a vote is the Congressional review act repeal of a Biden Administration rule that would essentially require defi front ends to kyc all of their users and without

getting super deep into the history and the leads of of what this was it was a rule enacted by the IRS that basically said for tax reporting purposes non-custodial interfaces that allow users to connect to defi Protocols are now going to have to act like Brokers just like your average brokerage you know Vanguard or Schwab or someone like that or also like a custodial crypto exchange like a coinbase or a kraken and they're going to have to identify every one of their users track all of the users trades and then report on those trades to the user and also to the IRS to make sure that the users are complying with tax reporting obligations obviously this doesn't work for defi at

all there is literally no way for a def5 front endend to figure out who their users are without setting up a traditional kyc anti-money laundering compliance system in which now you have to create accounts and give your social security number and passport to every D5 protocol not going to happen so thankfully Congress understands what a threat to privacy this is and how this was not really regulation it was really a ban in the disguise of tax enforcement and so Congress is moving very quickly to repeal that rule that's that's a fantastic step forward it's also going to be the very first crypto bill that Congress has ever passed and it is very likely to go through within I would say the next month or so now that it's getting uh real votes in Congress so not

just a good thing for defi also just a great sign about congress's Embrace of the crypto industry at large so that's what's happening first would would that lead to any changes for actual defi products and US consumers and US users being able to use them like is there geens happening as a result of this right now there isn't yet because the rule wasn't going to take effect until 2027 I see so this is more stopping a rule that would have killed defi in the future but yeah sort of preserves the status quo um but it's a great question and and I'll get to sort of what might unlock some of of those types of products in the future the the next issue that you mentioned is stable coin legislation and that really is the next

thing on the horizon again to boil this down what Congress wants to do and what the industry has been demanding for a number of years is for Congress to create rules around the issuance of centralized stable coins in other words how does the issuer and really this is people like Circle or tether custody assets that are in reserve behind the stable coin right how many dollars do they have to keep what other types of assets can they keep in reserve uh how do they do creation and Redemption of those stable coins what other operational requirements are there for for issues like bankruptcy remoteness right like some of these really basic issues who can issue a stable coin is it only banks or is it also non-bank

issuers and this is a top priority for congress because everyone in Washington understands and agrees that stable coins are the future of US dollar payments in the world it's one of those things where even though a lot of folks don't like crypto stable coins are just the obvious use case that everyone agrees and understands is better by a mile than the traditional payment system so Congress wants to regulate this there are two competing very consistent but a couple differences proposals there's the stable act in the house and the genius act in the Senate so you've got the stable genius acts and one would hope that within the next few months or so those bills will be reconciled and will have

something that actually gets through Congress gets to president Trump's desk and that he can sign there are a couple of of sort of difficult issues that still need to be worked out between those two bills but I would hope that within I would say the next 3 to 6 months we will have stable coin legislation done in the United States and that is a massive unlock for all of the traditional financial institutions that really want to use stable coins but just feel like because of the lack of Regulation there's not enough certainty for them to do so today yeah that would just be huge when we talk about the uh the downstream impact of this can you it's a bit of a difficult question but can you PR predict any what what trends or what impact would happen Downstream

yeah so I I'll give you the short term and then the the long term and I think the short term is much more certain which is you would start to see stable coin payment rails getting implemented beneath all sorts of traditional Payment Systems so things like stripe which is processing an unbelievable number of payments right now you can imagine that all of a sudden those payments start getting processed on on public blockchains now that might be abstracted away from the user in fact it almost would be but I think the two benefits of that are number one it will increase massively the amount of transaction volume on public blockchains right this is a good thing for the crypto space in general it also creates an extraordinary amount of of not only Clarity but also credibility and legitimacy and trust in

these systems to be used for any number of other use cases like transferring tokens that represent real world assets other than US dollars so it sort of unlocks in the mind a lot of other potential use cases in the long term I think the benefit is we would start getting wallets set up for people who are otherwise never going to set up wallets because all of a sudden the person who's using venmo or PayPal or some other type of of app on their phone all of a sudden they've got a web 3 wallet even though they didn't know that that's what they were creating this will onboard I think millions and millions of people into the crypto ecosystem and again that's going to make it a lot easier for them to suddenly start

onboarding into other web 3 apps that otherwise there would just be too much friction for them to get access to so I really do think this is you know massive unlock for the industry at large even though it's just stable coin focused specifically and and do you think that the the banks and the infrastructure providers are front running this because they know this is coming so they're ready to sort of turn this on like day one when this passes or is this another case of oh it passes and then there's months of education and learning the the bill and making sure we comply with it and then this stuff happens both unfortunately both uh look some of them

are are really leaned into this so black rock is a great example right couple years ago Black Rock decided crypto's a real thing Larry fin decided I'm going to get really into this right this might be the reason why we have the ETFs that we have thanks Larry thank you yeah and look it might be why we're going to get a salon ETF soon or xrp F all this kind of stuff which I think is all you know getting getting worked out at the SEC will happen sometime this year black rock is is I think going to be ready for this some of the other risk tolerant or maybe just more Forward Thinking institutions Franklin Templeton for example right like they're ready to go with this kind of stuff some of them Fidelity is another one really you know leaned in on this stuff some of them are

just really risk averse they just don't buy it so like Bank of America probably not going to happen Vanguard probably not going to happen but once it gets worked out they're going to have no choice but to follow along because once you have some of these institutions starting to use these new rails you get network effects that kick in and all of a sudden there's no choice but for everybody else to follow along so I would say it's only a matter of time even though as usual the folks who are slower to the party you're going to take a little bit longer to get on board yeah okay uh I think we're gonna have to wrap there uh because uh we're we're out of time but I do we might have to get you back on the show in a few months to talk about more Market structure and fit 21

and what is happening there now just to be clear though the market structure stuff that Congress is working on that is further out timeline wise yeah I'll just give you the two sentence version as a preview Market structure is all about how do we regulate the issuers of digital assets and the exchanges and other secondary Market participants involved in trading them and it is going to take a very long time for Congress to figure that out so nothing coming around the corner on that I don't think okay Jake thank you so much for your time today absolute pleasure to have you on a show really appreciate it my pleasure thanks for having me thanks for listening in everybody have a wicked awesome day as always if you liked today's episode please hit subscribe and make sure you follow us so you don't

miss out on the next one there's also a link in the description to our free five minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game we're going to also leave a link for milk Road Pro you get access to our portfolio where you can see exactly what we are buying this is your number one resource to help you invest successfully in crypto one final note this show is for educational purposes only and nothing we say is financial advice investing in crypto or any asset is risky and you should never invest more than you can afford to lose thanks so much for listening in my friends have a wicked awesome day