Latest / The Starting Block / Will CLARITY Act pass in September? Ft. GSR

Transcript

Will CLARITY Act pass in September? Ft. GSR · The Starting Block

0:06
Good morning, good afternoon,
0:07
wherever you are joining us today.
0:08
Welcome to The Starting Block.
0:11
We are into week number eight of
0:12
the show, nearly two months down
0:14
of The Block's new daily
0:16
show. If you don't know who I am, my
0:18
name's Gareth Jenkinson.
0:19
I'm the host and head of multimedia
0:21
here at The Block.
0:22
And it's been a great pleasure
0:23
entertaining you and informing you
0:25
these past two months.
0:26
We've had some fantastic
0:28
conversations in the last few weeks.
0:30
And if you missed it last Friday.
0:32
I think we were the only ones lucky
0:34
enough to get Paolo Arruino from
0:36
Tether on the line to talk about
0:38
their full
0:40
audit with KPMG
0:42
US, something which the
0:44
industry has been calling for for
0:46
years saying when is Tether gonna
0:47
get an official audit by a
0:49
big four accounting firm, that's
0:50
finally been done.
0:52
If you wanna go and watch that
0:53
interview, you can find it pinned on
0:54
the Blocks X profile,
0:57
or you can go onto YouTube.
0:58
While you're there, please go ahead
0:59
and subscribe and you can check out
1:01
some of the other big interviews
1:02
that we've had.
1:03
In recent interviews with
1:05
the likes of CZ and
1:07
several other big names in the
1:09
industry. If you're joining us for
1:11
the first time, we usually start the
1:12
show with the block briefing, which
1:14
is our rundown
1:16
of the top stories you need to know
1:18
in the last 24 hours.
1:19
Obviously, it's a Monday, so a
1:21
little bit slower over the weekend
1:22
in terms of news.
1:24
So we'll have a fairly brief block
1:26
briefing update today, and
1:28
then we're gonna be jumping into
1:29
conversation with...
1:30
Josh Reisman from GSR
1:32
to talk about the Clarity Act being
1:34
pushed out to September and what
1:35
that means for the bill and
1:37
the industry in General so
1:39
we've got a very sharp very
1:41
insightful show for you today And
1:43
we're gonna kick things off with
1:45
our top headlines of the day the
1:47
first one The prediction market
1:49
to fight is heating up in Wisconsin
1:51
sports focus platform Novig
1:53
has gone on the offense of suing
1:55
a state attorney general Josh call
1:57
and gaming administrator John
1:59
Dillett before they could sue Novig
2:01
first.
2:02
The company's exchange subsidiary,
2:04
Ludlow Exchange, filed a 45-page
2:06
complaint in federal court on
2:08
Friday, just a week after it began
2:10
offering events contracts to
2:12
Wisconsin customers.
2:13
Novig says enforcement looks
2:15
imminent, pointing to the state's
2:16
earlier lawsuits against rival
2:18
prediction markets back in April.
2:20
It's the latest skirmish, rather,
2:22
over whether sports event contracts
2:24
count as legal trading or
2:26
illegal betting.
2:28
Then moving on to our next story,
2:29
crypto wallet maker SafePAL is
2:31
dealing with a data breach.
2:34
In a post on X on Sunday,
2:35
the company said an authorization
2:37
flaw in its order tracking system
2:39
let attackers reach the personal
2:40
information of nearly 40,000
2:43
customers, about 39,800
2:45
people.
2:46
The exposed data includes names,
2:48
email addresses, shipping addresses,
2:50
phone numbers and purchase details
2:52
for anyone who ordered between March
2:54
last year and this
2:55
April. SafePAL says the breach did
2:58
not touch seed phrases,
3:00
private keys, wallet passwords, bank
3:01
details, or card numbers, so wallet
3:03
funds themselves weren't at risk,
3:05
though the exposed contact details
3:07
are the kind of data often
3:08
used in phishing.
3:10
And obviously, we've seen a
3:12
spate of range attacks and
3:14
similar bad crime
3:16
here in Europe where I'm based.
3:18
So obviously, not good news for the
3:20
industry there. And then staying on
3:23
the crime note, Mac users need
3:25
to take notes.
3:26
The Netherlands National Cyber
3:28
Security Center says hackers have
3:30
been hijacking Apple computers
3:31
through a flaw in the Mac OS screen
3:33
sharing feature and quietly using
3:35
them to mine privacy coin Monero.
3:38
According to the Dutch agency's
3:39
advisory, attackers took full
3:41
control of multiple Macs that
3:43
were reachable over the open
3:44
internet and installed crypto mining
3:46
software.
3:46
The agency didn't say how many
3:48
machines were hit or who's behind
3:50
the attacks, but the fix is already
3:52
out. Apple patched the flaw on
3:53
August the 6th.
3:54
So anyone who has updated is
3:57
protected.
3:58
Onto our next story, Bitcoin miner
4:00
Hive is leaning harder into
4:01
artificial intelligence.
4:02
It's the latest big miner to do so.
4:05
The company signed a five-year GPU
4:08
cloud services deal worth
4:10
$350 million,
4:12
run through its buzz
4:13
high-performance computing arm,
4:14
its second big AI contract in
4:16
just two months.
4:18
Hive didn't name the client,
4:20
describing it only as an
4:21
investment grade Enterprise
4:23
customer.
4:24
The deal adds roughly $70 million
4:26
in annualized revenue, pushing
4:28
Buzz's total annualized
4:30
run rate to about 180
4:32
million.
4:33
It's the latest sign that Bitcoin
4:35
miners repurposing their data center
4:36
capacity for the
4:38
booming AI compute market.
4:41
Lastly, our final story of the day.
4:42
We don't even have a cover image for
4:44
this one because it was hot off the
4:46
press.
4:47
Just a few minutes ago, Michael
4:48
Saylor's strategy is back with
4:50
another treasury update.
4:51
We're getting used to these late.
4:53
In the morning on a Monday,
4:55
which usually has me and
4:57
my producer Jordan tearing our hair
4:58
out In a post a
5:00
couple of minutes ago The company
5:01
said it added a hundred and fifty
5:03
million dollars to its US dollar
5:05
reserve and bought back
5:08
132 million dollars of its
5:10
STRC preferred stock that
5:12
extended its dollar duration to 2.8
5:14
years up 41 days
5:16
and tightens its STRC
5:18
Bitcoin credit spread to 114
5:21
basis points As of August 16th,
5:23
Strategy says it's holding a Bitcoin
5:25
reserve of 840,447
5:30
coins alongside a $4.8
5:32
billion cash reserve.
5:34
So that's the latest update from
5:35
Michael Saylor and Strategy.
5:37
We're used to those on a Monday
5:39
morning.
5:40
That's it for the block briefing.
5:41
We're going to move straight into
5:42
the hot seat today. We don't have a
5:43
market pulse. I think we'll be
5:44
calling up some of
5:46
our favorite analysts a little bit
5:48
later in this week, but it's a great
5:50
pleasure to welcome on the show.
5:52
Josh Reisman from GSR.
5:54
Josh, thanks so much for taking the
5:56
time to join us this morning all
5:58
the way from New York.
6:00
Absolutely. Thank you so much for
6:01
having us.
6:03
Josh, let's jump straight into the
6:04
meat of the conversation.
6:05
Obviously, all eyes have been on the
6:07
Clarity Act for months now.
6:09
And I remember sitting down
6:11
with Paul Gruehl from Coinbase,
6:13
a consensus. And he was telling me
6:15
that he was 100% certain that
6:18
Clarity act would be passed in
6:20
the summer.
6:21
We're getting very close to autumn
6:22
and that hasn't happened.
6:23
And we now know that that's been
6:25
pushed out to September already.
6:27
Were you surprised by this or were
6:29
you one of those people that kind of
6:30
cottoned on to the fact that this
6:31
might be how things play out?
6:34
I think I did an interview actually
6:35
with the block I thought long ago
6:36
where I suggested it was more around
6:38
50% a few months ago.
6:40
So I've long been in the camp that
6:41
this is gonna be very difficult
6:43
to get clarity over the line, less
6:45
so probably on substance,
6:47
more on politics but there's some
6:49
specific areas where those two
6:51
things interact that made it
6:53
hard. Look, legislation is always
6:54
like incredibly difficult
6:57
and this topic and.
6:59
And crypto generally has been
7:01
unfortunately politicized which has
7:03
probably made it even harder.
7:05
So I've been on the pessimistic
7:07
side but not the impossible side
7:09
that we're gonna be able to get
7:10
something over the line.
7:12
Let's talk about the timing here.
7:14
In September, as I understand it, I
7:15
mean, for the audience out there, I
7:17
am South African, not American, so
7:19
the ways of the Senate are not that
7:21
familiar to me. As I understand,
7:23
there's only about three weeks in
7:25
September that the Senate will be
7:27
returning. So it actually provides
7:29
a very narrow window through which
7:31
the Clarity Act can be passed when
7:33
everyone is back. Can you talk to us
7:34
a little bit about why that
7:36
might be too short amount of time?
7:38
And if you do think there is a good
7:40
chance that it will.
7:41
Pass in this window.
7:43
Look, I think if there was text
7:45
that was agreed,
7:47
effectively that could get over the
7:49
60 vote threshold,
7:51
it's enough time.
7:52
I think what we're really hearing if
7:54
you read between the lines, and I
7:55
hate to be too much a pessimist this
7:57
early in the morning because I think
7:59
the long-term is pretty broad,
8:01
but I think reading between the
8:03
line, there are some both
8:04
substantive and political issues and
8:06
we can talk about them that are
8:08
probably preventing this from
8:09
getting over the line. And you may
8:10
see a situation.
8:11
Where it passes closure, right?
8:13
So this is kind of the motion to
8:14
proceed, right, is saying enough
8:16
centers say, hey, let's at least
8:17
debate the substance, and
8:19
then see it potentially up
8:21
for a full up or down vote.
8:24
That would be our preference, but
8:26
I think there's a lot of pieces
8:27
between there that we can touch
8:29
on, which may prevent that from
8:30
happening.
8:31
Yeah, let's let's talk about that.
8:32
What do you think is the biggest
8:34
hurdle right now?
8:34
Where do you think everyone's still
8:35
butting heads over the actual text
8:37
and the specifics?
8:39
Look, if you zoom out,
8:41
the hurdle is politics, right?
8:43
In that ultimately Senate
8:45
Democrats have to make a tough
8:46
decision, right, which is one,
8:49
even the large number of Senate
8:50
Democrats that look at this as a
8:52
bipartisan issue that know we
8:54
need to progress legislation in the
8:55
United States for the benefit
8:57
of U.S.
8:59
Competitiveness, they're looking at
9:01
the situation where the Trump
9:03
administration has really kind of...
9:05
You know, enjoying themselves
9:07
to the crypto issue.
9:08
They've made it a priority of their
9:09
administration and Trump
9:11
and his family have no doubt been
9:13
very involved in various aspects
9:15
of the digital asset ecosystem.
9:17
And so if you're looking at bare
9:18
bones politics, I think the
9:21
Democrats have to and enough
9:22
Democrats to get over that
9:24
gap.
9:26
Do we want to give Trump a win,
9:28
right? This is the unfortunate,
9:30
like, you know, political nature,
9:31
and then face their own base in
9:33
the coming midterm elections, then
9:35
eventually, you know, the
9:36
presidential election two years then
9:37
after that.
9:39
And I think the, you know,
9:41
what's changed over the past six
9:43
months, some of it's crypto, but
9:44
some is just general politics, and
9:45
that, you, know, I think I would say
9:47
you look like this is why
9:48
everything's kind of related, at
9:50
least in my view, in that,
9:52
Trump's falling kind
9:54
of favorability in the us,
9:56
partly due to issues around the Iran
9:58
war,
10:00
you know, the interest rates all
10:01
over to inflation, things that may
10:03
have nothing to do with crypto, may
10:05
embolden certain Democrats to feel
10:07
like we shouldn't be giving Trump a
10:08
quote unquote winning.
10:10
And I hate to be that kind of
10:12
crass about it, but that's the
10:14
political nature. That doesn't mean
10:15
that there's not real bipartisan
10:17
work going on, and that there hasn't
10:18
been a whole host of
10:21
Democratic Senate and staff
10:23
really engaged in finding a
10:24
workable item.
10:25
But to get this really over the
10:27
line, that's a problem.
10:28
And then the second piece is, even
10:30
on the Republican side,
10:32
I think what you're seeing is as
10:35
this looks less likely
10:36
to pass.
10:38
Certain Republicans are listening
10:40
a little bit more to their bank
10:42
constituents that continued,
10:44
especially at the local level, that
10:46
continue to raise this issue around
10:47
stable coin yield and
10:49
you know, we talk about whether
10:50
that's a legitimate issue, their
10:51
position in this fight,
10:54
but are finding more receptive
10:56
ears as this looks less likely to
10:58
pass because why go on a limb and
11:00
vote for Clarity Act that's going to
11:01
piss off your local constituent,
11:03
local bankers? I get all that.
11:05
And so, I think the politics is
11:07
reasonable and understandable,
11:09
but incredibly unfortunate to be
11:11
this unclosed and not find the
11:13
energy.
11:13
To push it over the line because
11:15
it's very rare in DC to
11:17
get bipartisan attention
11:19
on an issue that's not like
11:21
you know national security,
11:23
pass the budget in life or death
11:24
type things.
11:25
And so to have the focus outside of
11:27
a crisis is a tremendous success
11:29
but getting line is going to be very
11:31
difficult in this short window.
11:33
Yeah, and that short window, do
11:35
you foresee it kind of being like it
11:37
gets voted through and then they go
11:38
back to discuss the final,
11:40
you know, specifics in the text
11:42
or do they have to break everything
11:43
down and everyone be in agreement
11:45
with what's in the actual act
11:47
itself before they
11:49
cast the final vote and
11:51
it's three weeks enough?
11:52
My sense is that I'm not
11:55
whipping the votes, but
11:57
my sense is they don't have the
11:58
votes to even get through
12:00
culture now.
12:03
And so I think we could see a quick
12:05
resolution come
12:07
the 15th of September.
12:10
But there might be enough to say,
12:11
hey, let's get to the actual text
12:13
and identify what the real problem
12:14
is. So again, I give that a 50-50
12:17
of probably getting over that line,
12:19
maybe 40-60 is
12:20
where I'm at today.
12:22
And some of the ethical concerns, do
12:24
you think there will be any sort of
12:25
budge there? Because obviously a lot
12:27
of back and forth in the last few
12:28
weeks has been around, as you
12:29
mentioned, these, you know,
12:31
how much Trump and people
12:34
involved in all their business
12:35
interests in the crypto industry
12:36
have gained in the past
12:38
two years from all of this?
12:41
Is that the kicker, do you think?
12:44
And how easy will it be
12:47
for everyone to come to
12:49
some sort of consensus?
12:51
I think there's a compromise
12:52
proposal that's been made to the
12:54
administration.
12:54
My understanding is still with the
12:56
administration to decide
12:57
whether or not that's something that
12:59
they can live with.
13:00
And even if they live with that, is
13:02
that enough for enough votes?
13:04
I think is probably a little bit
13:06
unclear.
13:07
But I think we're going to find out
13:08
a lot this week in that, you know,
13:10
my understanding is the White House
13:11
has invited a lot of folks from
13:13
the crypto industry to come and
13:15
have a discussion.
13:16
And that discussion is probably, you
13:17
know, cover a few things, but I
13:19
think there's two important threads
13:20
that we can look at to see how
13:22
they address. One is, is the
13:24
compromise something that's
13:26
discussed and comes out of this
13:27
meeting, meaning the ethics
13:28
compromise, and, you
13:30
now, giving us a path forward on the
13:32
bill? Or in fact, is a discussion
13:34
like, hey, they're asking too
13:36
much, what else can we do?
13:39
Via the CFTC and the SEC
13:41
and out of the administration that
13:43
might address the concerns of the
13:44
crypto industry as we're looking at
13:47
a potential negative
13:49
outcome on clarity.
13:51
And so to me, it's not clear, but
13:53
we're going to learn a lot this
13:54
week.
13:55
When it comes to, obviously,
13:57
these ethics concerns, I was
13:59
having some interesting conversations
14:00
with people over the weekend about
14:02
this.
14:03
And we've seen plenty of
14:05
fingers pointed at senators in the
14:07
US that have had vested interests or
14:09
made millions or tens of
14:10
millions of dollars trading
14:12
on privileged information.
14:15
And it does beg the
14:17
question, have we been here before
14:18
and what kind of lessons have we
14:20
learned in the past about
14:22
kind of taking a step back
14:24
and letting business be business,
14:26
but also push forward regulation
14:28
that does allow the industry to
14:30
do what it needs to do within
14:31
reasonable bounds.
14:34
I mean, look, multiple things can be
14:36
true here. I think what's true
14:37
from an American voter
14:41
perspective is I don't
14:42
think we love, generally,
14:44
our politicians.
14:46
You know, earning great
14:48
windfalls from inside
14:51
information or
14:53
from, you know, influence
14:55
peddling. I think that's like
14:56
generally the idea.
14:57
The problem is we really haven't
14:58
even addressed it on the equity
15:00
side. And we see a lot of
15:01
people, a lot representatives
15:03
that are amazing
15:05
traders, it turns out,
15:07
on the end of the side with
15:10
the, you now, kind of
15:12
maybe unrelated but potentially
15:14
related to information they
15:15
receive while in office.
15:17
I think generally Americans don't
15:18
like that.
15:19
And so when you look at something
15:20
like the ethics proposal in
15:22
crypto, you know,
15:24
especially the one that was
15:25
initially agreed by the White House,
15:27
that goes much farther than we've
15:29
seen, even on the equity side.
15:31
And something probably most American
15:33
voters can get behind.
15:34
And so I think the issue is not,
15:36
hey, should we have an ethics
15:38
package agreed
15:40
as it relates to dealing in crypto
15:42
assets, as it leads to dealing
15:44
inequities?
15:45
But should that be the issue that
15:47
holds up comprehensive crypto
15:49
reform?
15:50
I'm not sure because what
15:52
happens if this doesn't pass is
15:54
not as if the ethics issue gets
15:56
solved.
15:57
And so I think there is
16:00
a reasonable compromise on
16:02
the table that maybe doesn't get
16:04
the Democrats everything they
16:06
want and that doesn't give the
16:08
Trump administration everything
16:10
they want.
16:11
And so the question is, do they both
16:12
want to deal with it?
16:13
But to say that we
16:15
need to solve comprehensive
16:18
ethics.
16:19
Issues as it relates to elected
16:21
officials solely for crypto
16:23
but not for equities is
16:25
where I think the industry gets a
16:26
little frustrated because we're
16:28
pro-ethics reform and
16:31
very much agree there should be
16:33
limitations on profiting from
16:35
your position on office and
16:37
let's address that but should
16:39
that hold up and prevent
16:41
comprehensive regulation
16:42
over an industry that's unregulated?
16:44
I think that's where it seems a
16:45
little uncertain.
16:46
Yeah, definitely.
16:48
A really good perspective there.
16:50
Let's talk about the perspective of
16:51
the crypto industry.
16:52
I thought it was really interesting.
16:53
You know, Brian Armstrong back in
16:54
January, really sticking
16:57
his neck out and kind of saying,
16:58
you know, the banking lobby was
17:01
subverting the Clarity Act and
17:03
trying to make sure that it suited
17:04
their interests because there was a
17:06
lot of thought around the
17:07
legislation that was being passed
17:09
being very disruptive
17:11
to the traditional banking sector.
17:14
Obviously, GSI is a market maker.
17:16
From your perspective,
17:18
is the Clarity Act in its current
17:19
form good for the industry?
17:21
Do you think it's a well
17:23
put together piece of legislation
17:25
and does it tick all
17:27
the boxes that our industry needs,
17:28
especially in the US?
17:30
Yeah, so like the Clarity Act's not
17:32
a panacea.
17:33
Like I tell people this because what
17:34
you'll hear from, you know,
17:38
certain senators especially is,
17:39
this is something drafted by the
17:41
industry for the industry.
17:42
This is a tremendous piece of 600
17:44
page legislation that will
17:46
be incredibly onerous on
17:48
firms like GSR, right?
17:50
Have to be regulated, new compliance
17:51
upgrades, customer protection.
17:53
I think what we net out
17:55
though is this is ultimately.
17:57
Good for the industry, that it's
17:59
never gonna progress to
18:01
the size and
18:03
expectations we want to progress
18:04
without being regulated effectively
18:06
like the rest of them.
18:08
I think where you worry about the
18:10
line is because of concerns
18:12
of a certain folks, are we
18:14
going to over-regulate the industry?
18:15
And that can still force it
18:17
elsewhere outside the United States.
18:19
We see this in Europe, right?
18:21
Europe passed comprehensive crypto
18:23
regulation in the MECA
18:24
legislation, but you
18:27
can ask anyone, and I know you're
18:29
sitting there in Europe.
18:30
How robust and liquid are
18:32
the crypto markets in Europe?
18:33
I would tell you not very robust and
18:35
not very liquid. And the crypto
18:37
entrepreneur ecosystem hasn't
18:39
really taken off.
18:40
And so you have to find that right
18:42
kind of level of focusing on
18:44
customer protection, but allowing
18:46
entrepreneurs the flexibility in
18:48
a nascent and growing industry to
18:50
develop. We think the
18:52
cardiac...
18:53
Is a better
18:55
representation of
18:57
potentially Mika and allows some
18:59
more kind
19:01
of creativity and
19:02
growth in the industry, but still
19:04
focusing very heavily on customer
19:06
production and AML.
19:09
Uh issues without you know
19:10
demonizing developers and and
19:12
kind of creating a wallet garden so
19:14
to long answer your question
19:16
which is i think it strikes the
19:18
right compromise i think it'll
19:20
be very difficult and expensive for
19:22
firms to comply but that was always
19:23
going to be the case and so
19:25
if we're going to have comprehensive
19:27
legislation outside of
19:29
a crisis is when
19:31
you normally see this kind of thing
19:32
happen we think this is a good
19:34
opportunity to get this over the
19:35
line, and if there's issues that
19:36
need to be tweaked, you'd hope are
19:38
responsible.
19:39
Congress could tweak those, although
19:41
we know that's very complicated, so
19:42
let's get it right and let's get it
19:44
through right now. We have the
19:45
chance has been the goal, but we
19:47
have to look at the reality
19:49
of politics and say it might be very
19:51
hard.
19:52
Do you think the current state of
19:54
the crypto ecosystem and
19:56
how advanced things have become
19:59
suggest that Clarity Act should have
20:01
come a long time ago?
20:03
Just considering the sheer amount of
20:05
tokenized securities we now have on
20:07
chain on a number of different
20:09
blockchain protocols,
20:11
it just seems like the technology
20:12
makes a lot more sense than what's
20:14
out there today.
20:15
Monday to Friday, set opening
20:17
and closing times, whereas we have
20:19
the infrastructure now for things to
20:21
just trade 24 7.
20:22
All year round it
20:24
kind of makes it makes me wonder
20:26
as a sort of a layman like we should
20:28
have been here already is
20:30
is there the same kind of
20:31
interesting as all things you
20:33
mentioned
20:34
are not dependent on the
20:36
Clarity Act, right?
20:39
And I think what you're talking about
20:39
is the amazing kind
20:41
of innovation that's
20:43
occurring in the industry is all
20:45
despite what
20:47
we look at as this comprehensive
20:49
regulation.
20:50
And really, the regulation isn't
20:52
so much of an unlock to
20:55
the things we're doing, but it's
20:56
rules of the road so that firms
20:58
large and small can invest.
21:00
With confidence that they're,
21:02
you know, law abiding citizens,
21:04
right? Because what do we want to do
21:05
as serious and mature customers is
21:07
we want to comply with the law
21:09
within the scope of the law and
21:11
build companies that are good for
21:13
our employees, our customers, our
21:14
users, and you know
21:16
the industry at large.
21:18
But what happened in the previous
21:20
administration is the lack of
21:22
the Clarity Act allowed the
21:25
vagueness to be weaponized.
21:26
By an aggressive administration
21:29
to engage in this wide
21:31
enforcement dragnet that
21:33
was ultimately, I think,
21:35
unfair, un-American.
21:38
And did not allow
21:40
folks to really build
21:42
and invest in the US and in
21:43
the industry as we like.
21:45
So the real hope of the industry is
21:46
not really to unlock the invasion.
21:48
I think we should come back to all
21:49
the cool things happening and how
21:50
those can continue to progress.
21:52
But it's about giving that certainty
21:54
around investment and
21:56
saying, hey, here's the line between
21:57
good actors and bad actors.
21:59
Because again, in the previous
22:01
administration, the focus a lot was
22:03
on the good actors, which is, hey
22:04
here's all these people trying to do
22:06
the right thing.
22:07
And engage, and they found
22:09
themselves with enforcement actions.
22:10
Meanwhile, folks
22:12
offshore and
22:14
more unscrupulous actors were
22:17
not targeted necessarily in the same
22:19
way.
22:20
And that's a bad situation.
22:22
You want to encourage the best
22:24
actors in the industry to have
22:26
a path forward to comply with
22:27
regulations and focus on things like
22:30
customer protection and AML, and not
22:32
so much get credit for it,
22:34
but to have confidence that
22:36
you're acting within
22:38
the scope of allowable activity.
22:41
And, you know, I think that was
22:43
the big shame, and that's the real
22:45
hope of Clarity Act.
22:46
So we kind of drill that
22:48
into kind of stone now, so
22:50
that exists now and into the
22:52
future.
22:53
Josh, just in terms of the current
22:54
state of the markets, I think
22:55
everyone knows 2026 has been pretty
22:57
brutal and we're all kind of looking
22:59
around taking stock of everything.
23:01
GSR works with a lot of different
23:04
sort of touch points in the
23:05
industry. Can you give us your sense
23:07
where people are at right now and
23:09
do you have some sense of optimism
23:10
that the worst is perhaps behind
23:12
us and we might be
23:14
moving on to some better times for
23:16
the industry again in the next six
23:17
months to a year.
23:18
Yeah, there's this big divergence
23:20
going on between price
23:22
action and
23:24
developments in the industry.
23:26
We've been calling this like the
23:28
noisiest bear market ever.
23:29
Normally, in previous bear markets,
23:31
people are pretty down and out.
23:34
You see a lot of concern
23:36
about the future of
23:39
of blockchain.
23:40
I think where we're sitting today,
23:42
both at GSR and I would say most
23:44
folks involved, there is no doubt
23:46
that the blockchain
23:48
industry is going to
23:50
permeate both the traditional
23:51
finance industry and grow from here.
23:53
And so if you take that as your
23:55
premise that – and we
23:57
talk about why – but if you think
23:58
that as a premise that the
24:01
amount of investment, the amount of
24:03
clear utilization in buy-in by,
24:05
again, the entire
24:07
kind financial stack.
24:09
It's going to grow, there's no
24:11
doubt. Now where is that value going
24:13
to accrue?
24:14
I think that's probably the change
24:15
that we're going through and that in
24:18
2021, you know, you go all
24:19
the way back to Bitcoin and ETH and
24:21
ICO booms, right?
24:23
And then we had this explosion in
24:25
what's called altcoin experiments,
24:27
we could call them.
24:28
A lot of those were our crucial
24:30
elements of the infrastructure
24:32
of crypto as we know it
24:34
now, but the ability to...
24:37
Accrue value to those tokens,
24:39
I think has been challenged.
24:41
Now part of that was because
24:43
of the lack of legislation, meaning
24:44
if I kind of, you know,
24:46
the fee switch example is always a
24:48
great example. If I create a
24:49
protocol that pass back fees the
24:51
users, there's always this concern
24:53
that that might be a security
24:55
therefore regulated in a specific
24:56
way and not being offered in
24:58
the correct path.
24:59
And so I better do XYZ
25:01
to make my token somewhat less
25:03
useful. So if we're specifically
25:06
talking about tokens and
25:08
price action, I think what we're
25:09
going to see here going into the
25:10
future is tokens that are more
25:12
focused on how do I design
25:14
it such that it at cruise value and
25:16
GSR, you know, working with
25:18
our kind of advisory team are really
25:20
focused on that.
25:21
When we work with projects early on,
25:24
is you have to kind of come to the
25:25
right design, is that the area of
25:26
kind of, let's call it governance
25:28
tokens alone, I
25:30
think is probably beyond us,
25:32
and that if your token is
25:34
not really creating network value
25:37
or some sort of other fee
25:39
value, then you have really wonder
25:41
what's the value of that token
25:43
going forward, and we
25:44
hope to work as close as possible
25:46
with the industry to help
25:48
kind of define that.
25:49
Now the rules have to be clear where
25:51
those tokens then line up, but we're
25:52
going to see that. And you see even
25:54
some tokens now that are switching
25:55
from sort of a token model to
25:57
a tokenized equity model actually
25:59
representing a right on the
26:01
future income streams.
26:02
And so there's going to be a lot of
26:03
experimentation about accruing
26:05
values to the token.
26:06
And that's super exciting when it
26:08
comes to just pure price action.
26:11
A lot of that is macro.
26:14
Obviously, interest rates have been
26:16
rising.
26:18
We've seen a lot of the hot
26:20
trade and what's called hot
26:22
money move more into the AI
26:24
trade. We saw that very clearly,
26:26
obviously, where all that money was
26:27
in the situational awareness blowout
26:29
and the liquidations you saw in
26:31
South Korea.
26:33
What you probably need to see is
26:34
somewhat of a change in,
26:36
by the way, and crypto volatility is
26:38
about as low as it's ever been.
26:41
And that tends to
26:43
lead to us in some sort of bottom
26:44
signal.
26:46
When that switches, you would expect
26:48
to change it in the kind of price
26:50
action related to tokens, but that
26:52
tends to be much more macro related
26:54
than I think what in regulatory
26:56
related, sometimes people like to
26:58
say on X and elsewhere.
27:00
And so we're paying a lot of
27:02
attention to where the flow is
27:03
going.
27:04
Where's the activity and where are
27:06
the volumes? And there's some really
27:07
interesting reaches.
27:08
You see it in places like Robinhood
27:10
chain, like people want to trade
27:11
crypto.
27:12
And as crypto volumes come back,
27:13
people are going to want to launch
27:14
tokens. That's our base case and
27:17
we think designing that
27:19
such that they're better for
27:20
projects and better for users and
27:22
investors.
27:22
Is the future of cryptology and
27:25
something we're spending a lot of
27:26
time focusing on.
27:27
Yeah, sure. And I think a lot of us
27:29
in the industry that have been
27:30
around for a long time do take
27:31
notice when you have, you know, the
27:32
hyper liquids in the Robin Hood
27:33
chains, like launching
27:35
fairly recently and
27:38
seeing a large amount of success and
27:40
activity and generating fees and,
27:42
you know, everyone looking at some
27:43
of the legacy chains and altcoins
27:44
and those kind of things.
27:45
And it's like, is there a use case?
27:47
Is the actual usage on chain?
27:49
Are they generating fees?
27:51
And if they're not, we have to ask
27:53
those, those kind hard questions and
27:54
I do think we are.
27:56
Actually just seeing the industry
27:57
change in real time.
27:59
And a lot of the, yeah,
28:01
I guess a lot of the excitement over
28:02
things that promised to have a use
28:04
case, but didn't quite deliver or
28:06
making people think very seriously
28:08
about the industry.
28:09
And it's kind of
28:11
growing up.
28:12
Josh, my final question, your
28:14
day today as chief legal and
28:16
strategy officer and the
28:18
firms that you're interfacing with,
28:19
are you seeing a lot more sort of
28:21
TradFi players come into the
28:22
space?
28:24
Who are you largely interfacing
28:26
with, what does that look like?
28:27
So.
28:28
We're at a great place where we get
28:30
to kind of interact with both sides
28:32
of the market, right?
28:33
So one, we're interacting with some
28:35
of the most interesting
28:36
entrepreneurs. We're looking to
28:37
launch tokens, and we'd like to be
28:39
their partner on that whole
28:40
lifecycle, right.
28:42
And how do you engage in crypto?
28:43
And that could be a stablecoin.
28:45
That could be a new type of
28:47
token. That can be RWA, saying I
28:49
want to tokenize my
28:51
project. What does that look like?
28:53
And GSR is able to work with them.
28:55
On the other end, for sure, we
28:57
are seeing a greater involvement by
28:59
the traditional finance part than
29:00
we've ever seen.
29:01
And so they're interested
29:04
mostly in how do we package these
29:06
into investments, but also
29:08
in the areas that are working in
29:10
crypto, right?
29:11
Payments you're seeing obviously
29:12
explode.
29:14
And we know that led by
29:16
USTC and Tether and Palo who you got
29:18
on Friday, which
29:20
is moving money over the internet,
29:22
especially cross border, it's just
29:24
better on blockchains.
29:25
And so that's going to permeate the
29:26
industry and everybody is scrambling
29:28
to have their stable coin
29:30
or payment strategy for
29:33
crypto.
29:34
PURPS is another
29:36
example, right?
29:37
Which is, hey, 24-7
29:39
dirge exposure.
29:40
It's just a much better way to trade
29:41
than a quarterly rolled future.
29:44
And it's permeating the industry.
29:46
It stealing mindshare and it's
29:48
stealing volumes.
29:49
And most traditional finance folks
29:51
now want to see they need to be
29:53
involved in this type of activity.
29:55
And we expect that to continue.
29:57
So these areas that are working are
29:59
being engaged very clearly
30:01
and every single bank,
30:03
a large bank, every single large
30:04
financial institution, it
30:06
has somebody focused on Pronto.
30:09
Even Vanguard has now said
30:11
they're having folks work
30:12
on Bitcoin.
30:14
So it's no
30:16
doubt that there's been
30:18
this convergence.
30:19
What I think that we have to
30:20
continue focusing on as an industry
30:21
is great, the convergence is
30:23
upon us. What are the special
30:25
properties of digital assets
30:27
and blockchain technologies that
30:29
opened up new use cases?
30:31
I think about Chris Dixon's
30:33
rewrite on a lot and that
30:35
some people write it off as
30:36
something that's never going to
30:38
happen. But I think we haven't
30:39
really even begun to explore where
30:42
blockchain is going to continue to
30:43
take us. But first, we do have to do
30:44
this integration.
30:45
It has to be interchangeable in your
30:47
Schwab account to go from,
30:49
you know, dollars to stablecoins to,
30:52
you know, to Bitcoin to Solana,
30:53
right? That all just has to do in
30:55
there. And then all of a sudden that
30:56
explosion can occur on a much
30:58
wider TAM.
31:00
And so let's work on getting
31:01
integrated. Let's work on getting
31:03
clear rules, then let's work on the
31:05
next phase of crypto.
31:06
As we're just almost kind of
31:08
focused on them.
31:09
My last, last question, just because
31:11
it's something that's been topical,
31:12
and I've been talking about it so
31:14
much, especially in our block
31:15
briefing news updates that
31:17
I wanted to pick your brain a little
31:18
bit. Obviously, there's kind of
31:19
weird legal uncertainty from a
31:21
state level versus a federal level
31:23
for prediction markets in the US.
31:25
We know that there's a load of
31:27
big names from the prediction market
31:29
industry that are expected to be at
31:30
the White House for this upcoming
31:33
crypto meeting that's
31:35
scheduled. Um,
31:37
do you think that that
31:38
space also needs a lot more clarity
31:41
in inverted commas around
31:43
how these prediction
31:45
markets can operate in different
31:46
states and across the United
31:48
States in general.
31:49
I think, I mean, you have to kind of
31:52
bifurcate the prediction markets,
31:53
right? For non-sports prediction
31:55
markets I think it's pretty clear
31:57
that the CFTC has unilateral
31:58
authority and I actually don't think
31:59
that's being challenged very
32:01
clearly and you should
32:03
be regulated by the CFPC like any
32:05
other derivative exchange.
32:06
I think where the big challenge is
32:08
coming from is on the sports side
32:10
and very much amongst the
32:12
sports incumbents and the ability
32:13
for states to regulate their own
32:16
betting markets.
32:17
And I think that type of question is
32:19
going to end up at the Supreme
32:21
Court. I think there's no doubt that
32:22
there's arguments on
32:25
either side under
32:27
the text of the Commodity Exchange
32:28
Act of who gets to regulate that
32:30
contract and can you create
32:32
a derivative relating
32:34
to a sports outcome that's different
32:35
than state-regulated betting
32:37
outcomes? I think the CFCC
32:39
commissioner has made it very clear
32:41
his position on this and we
32:43
saw this in Cal she in New York
32:44
where New York issued an order,
32:46
and then the CFTC came with
32:48
emergency order and ordered
32:50
Kowshia to continue operating for
32:52
the benefits of stable market.
32:54
So we've never seen anything like
32:55
this in the history of kind of
32:57
state versus federal derivatives
32:59
regulation. So for derivatives
33:01
attorneys, this is like nerd
33:03
a thousand, and
33:04
we're going to see a lot of folks
33:06
win and just make it likely to
33:07
the Supreme Court.
33:09
And I think have your popcorn ready
33:10
because this is one of the most
33:11
legal interesting, like purely
33:13
academic.
33:14
Legal battles that we have in the
33:15
space right now.
33:16
Yeah, definitely.
33:17
And something that Paul and I from
33:20
Coinbase before he left spoke
33:22
about back in consensus as well.
33:24
Josh, thanks so much for taking the
33:25
time to chat to us.
33:26
I think we'll probably have to get
33:27
you on in September
33:29
as clarity goes back to Senate and
33:31
we need someone to break it down a
33:32
little bit further for us or react
33:33
to whatever happens.
33:35
But we appreciate you chatting to
33:37
us
33:38
Awesome. Thank you so much for
33:38
having us and stay tuned.
33:40
It's going to be an exciting fall
33:41
here in crypto.
33:42
It definitely will be, Josh, thank
33:44
you very much.
33:45
Thank you for joining us today for
33:46
the starting block.
33:47
We will be wrapping up the show now.
33:49
We've got some interesting guests
33:50
coming up this week on Wednesday.
33:52
I've got André Cronier.
33:53
A lot of people know him in the
33:55
industry as someone very influential
33:57
in the DeFi space.
33:59
Really looking forward to chatting
34:00
to a fellow South African.
34:01
He's done a lot for the industry.
34:03
Keep it locked on the block socials.
34:04
We'll let you know who else we've
34:06
got on the agenda for the rest
34:07
of the week, but that's it for
34:09
today's show.
34:10
We'll be back tomorrow.