Latest / Monero Talk / Crypto Legislation and Digital Cash w/ Zack Shapiro of the Bitcoin Policy Institute | EPI 357

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Crypto Legislation and Digital Cash w/ Zack Shapiro of the Bitcoin Policy Institute | EPI 357 · Monero Talk

• Doug All right, Zach. What's going on, man? How you doing? Zach Doing pretty well. A little better now that we know the outcome of all these crypto bills in the house. Doug Yeah, I mean you're you're you're kind of like on the front lines type of guy or the guy in the background making the things happen Right is that is that first time? Zach time. I don't want to take too much credit because there are a lot of folks involved, but yes, increasingly, I'm spending time in policy circles trying to make sure that we have crypto policy moving in the right direction. Doug Why don't you go ahead and give a quick intro. Somebody in the Monero community that I know I've met in person. I've actually met at meetups here in New York City. It was like, you got to get Zach on the show. I think maybe he met you at Pubkey or something as possible. And I looked up and was like, oh yeah, I would love to get this guy on the show if he'd have me and you agreed to do it. And it's awesome that you agreed to do it at this time when things are really coming to a peak zenith in terms of crypto legislation. So I really appreciate you taking time, jumping on. So yeah, why don't you go ahead and tell us who you are and why I'm so impressed that you took the time to jump on today. Zach Well, it's an honor to be here. I do two things in the industry. One is I run a law firm called Rains. I work with crypto startups and investors and help people start companies, offshore foundations, and navigate regulatory hurdles related to crypto, which are always ever-changing and a challenge, and then help folks raise money for VCs for projects. I'm also the head of policy at the Bitcoin Policy Institute, which is a DC-based think tank, which has a mission to educate policymakers about why folks on the Hill should care about Bitcoin and the administration and what good Bitcoin policy should look like. And then as part of my work at BPI, I founded a nonprofit fund called the Peer-to-Peer Rights Foundation in the aftermath of the tornado cash and samurai wallet prosecutions, specifically to get involved in court cases where peer-to-peer transactions are at risk from sometimes older federal judges that don't understand that the whole idea of the blockchain is that you can move money in a peer-to-peer fashion without a financial intermediary in between. And when there's no one to regulate, you either need to come up with a new regulatory framework or you end up doing something stupid like putting software developers in prison, which seems like a bad outcome for all of us. Speaker 2 Do you love coffee and Monero as much as we do? Consider making gratuitous.org your daily cup. Pay with Monero for premium fresh beans and if you like what you taste, send a digital cash tip directly to the farmers that made it possible. Proceeds help us grow this channel, gratuitous and Monero. Doug I love all the things you're saying and working on, especially with regards to the samurai stuff. Very, very important work. Obviously, I see there's really two approaches, right? There's the crypto anarchist, cypherpunk approach, which is kind of ignore the rules, ignore the state, and build something that's unstoppable. And then there's the second prong of attack, which is kind of interface with the state and try to make the state more amenable to cryptos. How do you, where do you stand on that spectrum? Zach Well, I don't know if it's bad. I think you absolutely need both. Look, the state is there. It's real. The Bitcoin blockchain, and I guess the Monero blockchain don't really care about what a judge says, but people do and the police do. And just because they can't necessarily confiscate your assets doesn't mean they can't arrest you and throw you in prison. And it doesn't mean that it's not better to live in a world that has good policy and where the state's not coming after you than where you're being persecuted. That being said, the reason why Bitcoin succeeded and started this revolution that we're all part of where previous attempts in DigiCash, eGold, Liberty Reserve failed is because Bitcoin is unstoppable. It used the proof-of-work consensus mechanism to solve the Byzantine generals problem in a way that can't really plausibly be regulated out of existence, especially at this point in time. And that's the cypherpunk dream. So really, the way I think about it is that the sort of policy stuff and the legal stuff is really important, but I view it as a rear-guard action. My job is to buy enough time for the developers to create decentralized, unstoppable tools that are ultimately going to be the solution. Because when you think about what blockchain technology does, what Bitcoin does in separating the money and the state, at the end of the day, it's hard to imagine that the state is going to give up power voluntarily. And so there's going to be some sort of struggle. And the only way eventually for this sort of peaceful revolution to play out is to build technology that stands on its own two feet. But it might take some time to get there. The UI for a lot of this stuff is still pretty bad. Onboarding people onto this technology is still really hard and doubly hard in authoritarian countries around the world where you have governments taking a much heavier hand than the United States government takes in stopping people in capital controls. And that's where we need these tools the most. So I think the work I do and the work my colleagues do is probably pretty important at this moment in time, but it very much needs to be in conjunction with that sort of cypherpunk ethos. Doug Yeah, I mean, it was that adversarial thinking that got me to Monero, right? So I started off as a Bitcoiner, was a Bitcoin maxi, you know, in my early journey, in like 2014, when I first discovered crypto and understood what Satoshi Nakamoto had done, right, solving the Byzantine generals problem. And then is when I started to use Bitcoin a little bit, you know, just sending it to friends, using it for some odd online thing just to like, see what it's like to use Bitcoin. And when I'd go look up on the blockchain to see if my transaction went through, I would think to myself, huh, this is cool, while transaction went through verified. But who else can see this? And why is my friend that I just said Bitcoin, you know, sending me back a message, hey, thanks, oh, by the way, it's cool that you already have, you know, X amount of Bitcoin in your wallet, like, whoa, wait a minute, I've never given somebody cash before. And then they turn around and tell me how much I have in my bank account. So it was like those moments that then started me down the untraceable digital cash path, the privacy coin path, and ultimately Monero and other reasons to things that I think make it unstoppable. So kind of how did you it sounds like, I mean, correct me if I'm wrong, but it sounds like you're more of the Bitcoin route, maybe, I don't know, maybe you're other things, I guess, give me give me give us your your take on that. And, you know how you know what technologies you're essentially choosing, given that you are interested in tech that can't be stopped. Zach Yeah, absolutely. In terms of my personal focus, I could split it up into different parts. My legal practice, I'm very interested in digital assets as a whole, not limited to Bitcoin. In fact, a lot of the most interesting legal questions are specifically outside of the Bitcoin arena and some of the more exotic technologies out there. In terms of my policy work in DC, the Bitcoin Policy Institute is really mostly focused on Bitcoin. We think that because there is no Bitcoin company because it's truly a decentralized community, that's an underserved area, even though Bitcoin makes up 60% of the market cap of the digital asset ecosystem. Bitcoin has unique properties that really need advocacy in DC that are separate from the crypto lobbyists that are out there. Personally, as an investor, I have venture investments, but really, I'm mostly a Bitcoin guy. My view when I look out at the technology that's out there right now, the two things that seem to me to have robust product market fit, one is Bitcoin is a store of value. I think at this point, that's pretty mainstream. It's a multi-trillion dollar market cap. I think there are a lot of folks out there, certainly a minority of people in the world and a minority of people in America, but a lot of folks out there in the world that really understand the properties that make Bitcoin sound money. It's being used as such by a large number of people. I also think stablecoins for international transfers, moving a stablecoin is just better than an international wire. If you try both, it's just so much more of a pleasure to use stablecoins, whereas international wires could be just an enormous pain in the ass. Then there's all sorts of interesting technology out there. I think a lot of what's happening in DeFi is very cool. I think automated market makers are really interesting technology. I think DAOs are a really interesting concept. DAOs in particular, what Bitcoin did separating out the money from state, it took something that was enforced either through a physical property like gold or fiat currency, the monopoly of violence by the state, and it changed it for something that is powered by game theory in the form of mining and cryptography. I wonder if DAOs can do the same. The current state of the arc for moving people and capital together is the Delaware C Corp in the United States. The sort of promise underlying Delaware C Corp is contract law, which is backed by courts, which is, again, backed by monopoly of violence by the state. If we can have international peer-to-peer cooperation through something like a DAO, that'd be very cool. The state of the art of DeFi is just much worse than a centralized exchange. The state of the art of DAOs is just much worse than a Delaware C Corp in terms of how they actually function. Zach I think they're both really great experiments. I don't personally use privacy coins all that much. I absolutely understand the privacy concerns you're talking about, and I work with a number of different companies in the Bitcoin space that are trying to add privacy back to Bitcoin payments, whether that's people building infrastructure on Lightning, whether that's e-cashments. I've worked with both the cashew folks and the Fediment folks. There are all sorts of attempts in Bitcoin to add more privacy back to what's going on, and certainly my fund has supported the defense in the samurai wallet prosecution. I absolutely think that peer-to-peer coin joins should be legal, and you need not be a criminal to have use for technology like that. I have nothing against privacy coins like Monero and Zcash. I think they should be perfectly legal in the same way that Bitcoin is. I personally don't think that they're as good an investment, either the fact that you can't audit the blockchain, which is a trade-off in the way. I understand that you need to make to have the level of privacy that you have with these tokens makes it a less compelling store of value, but if you're using them for payments and you have a real need for privacy, you're an activist somewhere, you are a source for a tip to the news, you need to make some sort of payment where you don't trust the privacy tools associated with open, pseudonymous public blockchains like Bitcoin or Ethereum. I totally get why you might turn to something like Zcash or XMR or any of those tools. Doug How about, I'm sure you've been asked this as well, but the fact that Bitcoin lacks fungibility and something like Monero, arguably, is fungible, private by default, not opt-in private, private by default, so that every traction is equally untraceable. There's no trail to go look up. And before you answer that, I will note before I forget that I think there is a lot of misinformation out there in terms of with regards to Monero's audibility. It is arguably quite audible and arguably as technically audible as Bitcoin. At the end of the day, you're relying on code and that that code was properly implemented. And everything is in the blockchain. It's just encrypted. So if you believe encryption, the math is correct, it's all there. But yeah, we don't need to go too far down the road, I do want to note that. But yeah, the fungibility aspect. Don't you think money, cash, for it to work as a tool like digital cash, for it to work even as digital gold? Gold is one of the most fungible assets known and used to man. Every atom of gold equals every other atom of gold. You very easily distill it back down to its gold components. And that's another thing that makes it good sound money. So what is your response to that? Zach Yeah, so I actually think maybe a different time. I don't know if you know, but it would be interesting to go down the rabbit hole of auditability. One of the things that gave me conviction in Bitcoin actually was that the block size wars and the proven bottom-up governance of the Bitcoin ecosystem and the unwillingness to make a compromise on something relatively modest in doubling the block size in the New York agreement because it's important to have everyone be able to run a node for auditability. So I think that actually is pretty important for scarcity. Is fungibility important to good money? Yeah, 100%. I agree with you. That's critical. I think I would just resist your premise. I think in the way we care about as money, Bitcoin just is fungible. If I want to sell Bitcoin, I've never had, I mean, other than some of the silliness around ordinals where maybe there is some rare sat that's worth more than others. I think that's mostly done. I've never had anyone care this UTXO versus that UTXO. I actually think functionally Bitcoin is fungible. But fungibility is very important. And from a policy perspective, I'm really wary of anything that we would do that might undermine fungibility. So any government policy that instead of if you're going to sanction Bitcoin that is held by a rogue nation, by a North Korea, by a terrorist organization, whatever, it's one thing to sanction a wallet or an address. I think sanctioning specific UTXOs and saying, this is dirty Bitcoin. That would be wrong and very harmful for exactly the reason you mentioned. Doug Yeah, even Marjorie Taylor Greene commented today, she was upset with the bills that were passed, primarily the fact that there was nothing against, put in there to eliminate a CBDC and kind of referencing the issues that we saw with the Canada strike, the freedom of convoy and the ability of banks to essentially censor transactions. And effectively, that comes from, arguably, I would say, from Bitcoin's lack of fungibility as well, allowing the states to potentially do things like that. And you're now thinking of it not in terms of cypherpunk or crypto-anarchist terms, but with your legal hat of saying, well, that's a case where we make arguments to the state to treat it as fungible, as opposed to building tech where it's fungible without permission from the state. It is just default fungible. Zach Yeah, so a couple of things to react to there. So one is, I think very much at the code level, the Bitcoin protocol treats Bitcoin the token as fungible, right? Doug Right. But the fact that practically speaking humans can basically attach based on the history of Bitcoin transactions, which is all there saved on the blockchain permanently, which is surveilled by chain analysis companies. That data is not hypothetically, but in a very real way, I mean, it's a billion dollar industry. I'm sure you know about it probably better than I do. That they are effectively attacking Bitcoin's lack of fungibility and using that data to distinguish between Bitcoins. Zach Yeah, I just I don't think that's true. I mean, I am worried about the extent of blockchain analytics. Like I said, I'm in favor of Bitcoin privacy tools. I do think there are privacy concerns for Bitcoin users, like real privacy concerns. I think a lot of this is surveilled both by the chain analytics firms and other firms. You know, I think Palantir has, you know, quite the apparatus to surveil public blockchain. So I don't want to I don't want to dismiss privacy concerns. I think I think they're real. I just don't think they make Bitcoin not fungible. I think functionally Bitcoin has money is I've never seen it or, you know, and look, I hear all sorts of stories. Right. But like you said, we've seen we've seen sanctions, sanctioned wallets. Right. Sanctioned wallets is different than sanctioned Bitcoin. Right. I don't think that Doug But if you put up a donation address and you got a donation from North Korea from their Bitcoin wallet, what are you going to do? Zach Well, you'd be in violation of OFAC at that point, right? So, you know, the legal answer is you have to... Right, so that... Doug coin is not fungible, right? If it were, you wouldn't, there'd be no question. You'd be like, oh, I got another donation. Well, I mean, it's the last- Zach No, I just I don't need a fungibility. I don't think that's a fungibility means you're right use that use the example of gold, right? So if Doug If I sent you a Bitcoin from my wallet, and I'm not a sanctioned individual, you would be able to accept that Bitcoin, right, not have to report it. This Bitcoin is treated differently. It's not fungible, as opposed to if I gave you a hundred dollar bill that came from me or a hundred dollar bill that came from a known drug dealer, right? And if somehow you could see that when the hundred dollar bills pass you, we can't, we don't know that. And that's what allows dollar bills, hundred dollar bills to be fungible. Otherwise, every time you go to the Chinese restaurant here in New York and you pay with a hundred dollar bill, wait, uh, sorry, can't accept this one. This one comes from a sanctioned person who passed. Zach I just think we might be getting our analogies mixed up here, right? So I think we both agree that gold is fungible, right? You can melt it, you can smelt it, you can turn into coins and bars and whatever. And yet, if the FBI catches you receiving a envelope of gold from Kim Jong-un, they're going to also charge you with OVAC sanctions. It doesn't mean the gold you received isn't fungible, right? Both the Bitcoin and the gold in our analogy, right? So let's say you go to prison for receiving the gold or the Bitcoin from North Korea, the Marshal service takes away that gold or Bitcoin, and then they sell it at an auction. The person who buys that gold or Bitcoin in the auction, it's not dirty gold or Bitcoin at that point, right? It's fungible. It's treated the same as any other gold or any other Bitcoin. The thing that's illegal is not receiving dirty, non-fungible Bitcoin. The thing that's illegal is doing business with North Korea and the government is surveilling addresses to know who's doing business with North Korea. So I just don't think that that really bears on fungibility, at least the way I understand the word fungible to me. Doug Yeah, I mean, I would disagree even from a legal standpoint. I'm kind of surprised given your, you know, your strong legal background. I forget the the bona the bona fide that maybe you know, the legal term, the bona fide buyer principle, basically, like this idea when you use when you use cash, right, it's treated different than property, right? So we see states from the earliest times when money first existed, that by law, they treat money different than property, they treat it as a fungible asset, right? And so that that does not currently exist with Bitcoin because of its traceability is treated like property, it's not treated like money because of its lack of fungibility. Zach Yeah. After that, I don't really understand what that means. Sometimes when people talk about the difference between money and property, they're talking about legal tender and do you owe capital gains when something goes up and down in value? Property is a very broad concept. Property is like a thing you own and there are types of property that are not fungible like a home. Home is a specific home, it's not fungible. There are types of property like commodities, oil is fungible. One gallon of oil is in the market treated the same as a different gallon of oil and their gradations. As between those two, when I want someone to pay me in Bitcoin, which I do from time to time, I don't really care which UTXOs they give me. I just think it is practically fungible. Now, your point that it's less private by default is true. We can also talk about stablecoins. What concerns are there with that? Doug I, let me get, and I don't want to be labored anymore, but honestly, I just, I want to pick your brain because you're, there's few people that have the expertise in this area and you're, you're one of them. Yeah. So like this idea, if I, if I use, if somebody used stolen cash to buy my used Volvo and I sold it to them and I sold them for $5,000 in cash. And then, you know, a couple of weeks later, somebody comes up to me and say, Hey, that cash was actually mine. It was stolen. And then that guy used it to buy the Volvo. Do I have to give, do I have to give the cash back? Zach So it depends on, this is the worst lawyer answer, right? But it depends on the circumstance. And I think I do now understand what you were alluding to. Doug If instead he had paid with Bitcoin, right, where it's traceable, you could see that that Bitcoin was in fact stolen. The guy has very real proof. It comes to me as property in exchange for my use Volvo. There's definitely much more of an argument that I would have to give that Bitcoin back as opposed to give it back. And the law has clearly defined in those instances had come down in favor of the person receiving the stolen cash, essentially not having to give it back. Where with Bitcoin, I doubt that's what we will see. And I'm pretty sure we've already seen that not be the case. Zach Yeah, so I actually don't think there's that much specific case law on this, but what you're talking about essentially is a perfected property interest, right? And cash moves through the system and the government, there's a remedy in law called specific performance, which is, I don't just want the value I've lost. I want the specific thing I lost, right? And so if someone is squatting in your home illegally and you want to get them out and you are looking for an order from a judge, you're not just looking for the value of the home from that person, you're looking for the home back, right? You want the judge to tell them to do a specific thing, whereas if they cause some monetary damages, then you get damages instead of specific performance, you get made whole in the amount you lost, but not necessarily in the thing that you lost. If someone has their wallet hacked or they get defrauded by someone and they lose Bitcoin and then that Bitcoin leader gets spent on something, right? Or goes to an exchange, right? I think the question would be, does someone along the chain, this is a facts and circumstances specific thing. So a judge might rule different ways depending on the facts and how many sort of handoffs there were and how innocent the person was who ended up with the Bitcoin. But certainly at some level of distance between the person who lost their Bitcoin, the person who has the stolen Bitcoin, it's not on them, right? If they came by the Bitcoin honestly, and there are a certain number of hops in between, very confident a judge would rule in favor of the person who has the Bitcoin. If you run a block explorer and you look at the... Doug Just in that example I gave you though, I mean, just comparing the cash to the Bitcoin situation. I think a judge would come down on the side of give the Bitcoin back. So, I think you got to give a specific hypothetical. So, what was the hypothetical? So, you're buying used Volvo from somebody, right? You pay in cash, then two weeks later, it's discovered that that cash was actually stolen. Does the guy selling the... How did you come by the stolen cash? Well, okay. So, now we're going to go into detail on each. I'm saying compare that to... What matters? Compare that to you've paid in stolen Bitcoin. Sure. Zach How did you come by the stolen Bitcoin? I think that's the part that matters. Doug Okay, like you stole it from somebody, you put it on somebody's head and you stole their Zach Okay. And I try and pay in stolen Bitcoin, right? And then, sorry, what's the legal question here? Doug which scenario does the seller who received the cash or the Bitcoin have to give it back? Zach I'm saying it depends on what the law would treat as a perfected interest if you're buying the car for fair market value Right like look if if the Doug You get what I'm getting at though, right? I mean, we don't need to belabor it, but... Zach On my point, my point is there's nuance, it depends on the facts and circumstances. Is it easier for a like judge to say you have a perfected interest in cash than in Bitcoin? I actually don't know that off the top of my head. It might be that the answer to that is yes. It could be. Now I'm actually interested to look at- Doug Yeah, my understanding is that there's actually very old, old legal doctrine, you know, and it's in US case law as well, but it's even doctrine before that, that basically comes down the side of treating cash like a fungible asset. And with all the arguments made as to how an economy wouldn't work if that weren't the case, because now anytime somebody received the cash, they'd have to be all of it as to whether Zach I see what you're saying. It may be that in that limited instance, it is easier. Again, the legal term is to have a perfected property interest in the cash as opposed to the Bitcoin. It might be. We can grant that's true. I still don't think that means that Bitcoin is not fungible as a monetary property in the way that we want good money to be fungible as a store of value. Doug Ghost tip $5. Example, if you gamble on a site, then try to move those funds to a sex. The centralized exchange can flag your account as high risk and ask for information, thus putting people at risk and not fungible. Zach Well, my bigger concern, you know, if we're comparing digital assets here is, aren't you going to be treated as suspicious by default if you're moving Monero, if you can find a centralized exchange that will take it in the first place? Like, I really actually do like, well, you have it in privacy. Doug I hope that's not, I mean, so, I mean, Kraken, Liss, Liss Venero, right? It's a, it's a US based exchange. So you're saying that exchange. Zach If I try and move a couple million dollars a Monero into a centralized exchange, I think I'm going to get pretty scrutinized. I'm not saying it's right or wrong, I'm just saying that would be a concern I would have in that case too. Right. But don't. Doug Don't we want I mean, I don't need to be like so you you just do not agree with the non fungibility aspect Yeah, I just don't agree with which is fine. It's not you're not the first Bitcoiner I've met that makes that argument because at the other day that is like the fundamental argument that a Bitcoiner can make as to Why Monero essentially isn't as important as everybody makes it out to be? Because that's really the primary difference. I say the other difference is Other ways in which it's arguably more unstoppable. It's mined with CPUs as opposed to ASIC So the mining tends to be more decentralized over time. Anybody can compete in the mining network. It's more permissionless You just use a CPU. It's not Centralized companies that are potentially and not even potentially we're already seeing it that our potential that kind of interface with the state Because the state has regulations and then you see regulatory capture and you see essentially Bitcoin miners working in concert with the state Worst worst case being that they eventually censor transactions or blacklist transactions any comment on that because I would say that's probably another big kind of argument difference between Zach about the centralization of mining? Yes. Doug and what that could potentially lead to in terms of the Bitcoin mining industry being controlled by the state and having to follow the Bank Secrecy Act and having to implement things where they now affect the mining network. Zach Yeah, so that's a real concern. I mean, a couple of parts of this are real concern. So one, under the current law, I don't think anyone understands minors to be subject to the Bank Secrecy Act. That doesn't mean you couldn't get a future administration try and do that. And so there's language in one of the bills that passed today, the Clarity Act, that would make very clear that the Bank Secrecy Act does not apply to minors. That's in Section 110 of the Clarity Act. And I just don't think that the best interpretation is that the Bank Secrecy Act applies to minors now. But that would be very troubling if the government tried to apply the BSA to minors. That would mean minors functionally have to leave the United States because there's not a way for Bitcoin miners to comply with the BSA. Now there have been some proposals for things like OFAC compliant blocks that I am also against and I think are troubling. And the truth is, if we had much more mining concentration in the United States, I'm not sure I'd be super comfortable with that. I think there is some concern about regulatory capture. Now, the nice thing about Bitcoin mining is that it works the same everywhere in the world. You're running the same hash function. You can plug a machine into the wall and Bitcoin mining seeks out the lowest marginal cost of energy. And I think that ends up being global just based on the economics behind it. And the idea behind ASICs in particular in these big companies is you want enough hash rate that Bitcoin, which has a very large market cap and would otherwise be a really large target, it'll be expensive to attack. And so that's the other side of the equation and their tradeoffs. I think if you talk to Bitcoiners about what they are concerned about in terms of mining dynamics, you're actually going to hear more concern about mining pools. Those are less decentralized than hash rate at this point. Doug Yeah, Monero has something called P2P pool. Actually, I'm vented by Bitcoiners, obviously, but it's been implemented in Monero. It's getting... Zach ocean with Bitcoin and the new, I forget what they're called, the bid axis are meant to be sort of a grassroots movement. I don't think that mining centralization is a very serious concern at the moment. If you were to ask me, what is the biggest threat to Bitcoin? It's not regulatory. It's not mining centralization. Really, the thing that I'm a little bit worried about is quantum moving faster than we think it will happen. Likely, we'll move to quantum resistant cryptography in time, but if we don't, that's a real problem. If I'm steel manning sort of like what might be wrong with Bitcoin, the other thing I would look at is the fee market. I think that if Bitcoin gets valuable enough, which it's on the trajectory for, block space will be valuable and fees will go up and that problem will solve itself, but it's not there yet. That is a thing that needs to be resolved at some point. I think if you sort of project out, mining is going to chase the lowest marginal cost of energy and that's probably going to be stranded renewables all over the world. Doug Yeah, I would say that's the other two differences between Monero, Bitcoin and things that arguably make it more unstoppable is Monero's dynamic block size. So it doesn't have a fixed block size, it scales dynamically up or down based on usage. And it uses an algorithm that basically allows it to do that in a pretty seamless way. So there is no block size war that will ever happen in Monero. Monero arguably scales on chain because of that as more people use Monero, the transactions actually get cheaper because you have more transactions in a block. And then the last major difference I would say is Monero's tail emission. So the fact that Bitcoin is capped at 21 million and Monero just has a nominal cap of like 18.6 million and then thereafter just a constant rate of Monero that is emitted a small amount over time. Digitally scarce, but also allowing an incentive for the miners to continue to mine. So yeah, we'd love to get your takes on those things as well. Zach I think it's great. Look, I have no desire to shit on Monero. I wish the best for the Monero project. I don't see it as a good investment as I see Bitcoin as a good investment, in part because of things like tail emissions, in part because when you have dynamic block size, what you need to be able to verify things. I'd be interested to learn more about how you can audit the blockchain. But I think Bitcoin is pretty optimized for being a store of value. And absolutely, the Bitcoin base layer is not going to be as private as we want it to be. Maybe with certain softworks in the future, it'll move in the right direction. I think privacy is going to come on layer twos. I think there's a lot of incredible stuff happening in and around Lightning and eCash. But there are absolutely, I think, use cases where you need to spend very privately where Monero might be a better tool. The concern I have with Monero is given that its brand is the privacy tool and its association fairly or unfairly, and I'm very sympathetic to unfair associations because Bitcoin has plenty with criminality, the amount of suspicion that just you automatically encounter as a Monero holder. I don't know how big your privacy set is compared to people who hold Bitcoin, but nothing against Monero. I don't think the Monero community is a bad actor in the space that if I'm being honest, I feel like the Ripple folks are a bad actor. Doug Definitely. We definitely agree on that one. Yeah, I'll just bring this. I don't know if you've probably never heard of XMR Bazaar, but just to kind of give you insight into... It's not just dark markets. Granted, XMR Bazaar is only about a year old, but it's getting some good traction and people use Monero on there for all sorts of things, selling all sorts of legal goods and services because there is value in being able to transact, peer-to-peer for legal goods and services with digital cash, right? I'm sure you... Absolutely, yeah. That's a real utility. It doesn't have to be just for nefarious things, just for bad things that you don't want people to see that you're buying, but there's value in cash and using cash when you make purchases. For sure. So yeah, people are definitely using it for those purposes, but I hear you. And yeah, we don't need to... I feel like I did get your full Monero take now and we got it up front. I'm glad we did that. So now let's get into your expertise. We could talk about what happened on the floor of Congress today. My understanding, essentially, it's three things that were being discussed. Votes were had and now things are moving on. But if you want to kind of give us an overview of what the three bills are that are being discussed and where they're at. Zach Yeah, absolutely. So there are three bills that were voted on today on the floor of the House of Representatives, which is one of the two parts of the legislative branch of the US federal government. One is the Genius Act. The Genius Act is a federal regulatory framework for stablecoins. It primarily does two things. One is consumer protection for US stablecoin users. It says if you're going to offer a stablecoin to US users, it needs to be fully backed by dollar or dollar equivalents. A lot of this, I think, comes from Tetherfud. But fine. For now, we'll have full reserve stablecoins. Hopefully, that will make people feel more confident if they want to use stablecoins. And hopefully, it will make it less likely that there are rug pulls. And then maybe in the future, if fractional reserve is appropriate, the law might change. Notably, the Genius Act, while it was quite bipartisan, was fiercely opposed by the banking lobby. The banks are pretty terrified of stablecoins in general, especially yield-bearing stablecoins. It is if you can hold something that is both a payments and a savings technology where you get the yield, that's just vastly superior to especially a regional bank checking account, where if you've been into a bank branch, right? So I have to go physically into the bank for the client escrow account for my firm because of ethics rules. And it's just like pulling teeth every time. It's just a fucking nightmare. Whereas stablecoins are very easy to use. And the idea is that if Americans can just hold yield-bearing dollars on their phone, why would they ever go into a bank? And maybe that's a fair concern, but that just seems like regulatory capture by the banks. And so the pound of flesh the banks were able to extract is the Genius Act does not allow for yield-bearing stablecoins, but there now will be federally regulated normal non-yield-bearing stablecoins. Your listeners are probably relatively familiar with stablecoins. In the United States, they're used for payments, especially international payments. Abroad, they're used as a means to have the dollar as a store of value. In the US, it's largely USDC. Abroad, it's largely Tether. And the business model of these stablecoin companies is to sell tokens for a dollar and they put treasuries in the back end and they keep the float. So it's super profitable. Before it was voted on the House today, the United States Senate had already passed its version of the Genius Act, which means it's now passed through both houses. And so tomorrow, Friday, it's going to be signed into law by President Trump. And so that is like happening happening. We're going to have a federal stablecoin law in the Genius Act. The second bill that was passed is called the Clarity Act passed through the House. That has not yet been voted on by the Senate. The Senate is going to do their own version of this market structure bill. The market structure bill does a lot of different things. Mostly, it's about defining the difference in law between a security and a commodity on the blockchain. Zach This is something that the crypto exchanges really care about and the crypto VCs really care about because it legalizes token launches. Right now, there's just not a way to legally offer blockchain assets that are legally securities to retail. It's very easy under a 100-year-old case law called the Howey Test that your listeners probably heard of for a blockchain-based asset to qualify as security. And so there are all these safe harbors where if you do X, Y, and Z things, you won't be a security. And so that's the main thing that the Clarity Act is about. However, especially for this audience, I'd want to draw your attention to Section 110 of the Clarity Act. So I would say putting on my it doesn't really help Bitcoin. Bitcoin is clearly a commodity. And on the margin, it's bad for Bitcoin in that it gives the CFTC, which is the commodities regulator, more authority over Bitcoin than it has now. Normally, the CFTC regulates commodity futures, doesn't regulate spot commodities. So if I were to sell you buckets of oil back and forth, the CFTC doesn't get involved in that transaction, but it would if we're selling oil futures. So bad for Bitcoin except for this one good part of the Clarity Act, which is Section 110, which is a direct legislative solve to the problem that we're seeing in the tornado cash and the samurai wallet prosecutions. And at the highest level, this problem is that our illicit finance laws, mostly stemming from the Bank Secrecy Act and the regulations around it, were written at a time where if there was going to be an electronic transfer of money, it was done via an intermediary. So you send Venmo, it feels like the money is going from your phone somewhere else's, but it's going through correspondent banks and those are regulated BSA entities. Not so with the blockchain, right? You have an actual peer-to-peer cash transfer. And there is a question sort of in the early days of Bitcoin and crypto, like where did the Dank Secrecy Act apply? And we got two pieces of guidance from the regulator in the Treasury Department called FinCEN that oversees illicit finance and administers the Dank Secrecy Act, one in 2013 and one in 2019, that to any reasonable lawyer, I think that looked at it drew a distinction between custodial and non-custodial technology. If you're holding someone's crypto, if you have control over it or custody of it, then you are acting as a money transmitter or a money service business and the Dank Secrecy Act applies to you. If you're just writing software that allows people to sign with their own keys and move their own crypto on a peer-to-peer basis, then no, you're just a software provider. You're not actually anything like a bank. And that was the line everyone understood until the tornado cash prosecution where the tornado cash smart contracts were immutable and non-custodial. And so the defendant, Roman Storm, just didn't have custody or control of anyone's funds. Zach And then Samurai Wallet is a coin join, right? It's collaborative transactions by the users. Those are the ones who are transmitting money. If you have the private keys, you're the transmitter. It's not the person who wrote the software using to do the transmission. And if these cases were to come out the wrong way, and all of a sudden, we can't rely on the simply facilitating someone's movement of money makes you a money transmitter under the Dank Secrecy Act, then we're in real trouble, right? Because who else facilitates the movement of money in a non-custodial way? Well, anyone who develops wallet software, anyone who runs a node, right? If I use Ledger to send my crypto, my Ledger hardware wallet, I use Ledger Live software in their node to broadcast it. Well, Ledger is on the hook with BSA. They have to join miners that day. Doug XMR XMR bizarre, right? Zach Enter one. There is no limiting principle to the government's theory in the Torreo Cache case and in the Samurai Wallet case. That has changed a little bit due to political obviously. But really, they were going for the juggler. And so Section 110 of the Clarity Act, it draws these two categories. There are non-custodial developers, so people who create this technology, and non-custodial service providers. So these are people who do front ends or develop wallet software that allow people to use non-custodial technology. But that technology doesn't itself take custody of people's funds. It says, specifically, those will not be deemed as money transmitters under FinCEN's rules under the Bank Secrecy Act, etc. And so that's drastically important. So it is a great setup. Doug But that is a big win actually because I run XMR Bazaar and I'm working in this gray area. Obviously it's my legal opinion that I'm not a money transmitter because I'm not a party in between the transaction, but it's nice that they're giving us clarity on that. That is a big win. Zach A lot of my law practice is working with people and founders will come to me and be like, listen, I want to build this cool thing. I don't want to end up behind bars, is what I'm building a money transmitter or not. Sometimes these things are really nuanced, especially with cutting edge technology, especially with privacy tools. The Clarity Act, aptly named, would provide really important clarity on that front. I really hope that that will get through the Senate. That my understanding of the timing is that there will probably be a discussion draft of the Senate's market structure bill by the end of the summer. They're hoping to vote on a sort of more final version by the end of the year. But there's going to be a lot of political headwinds in the Senate. Elizabeth Warren is rallying the troops against it now, and that's going to be a real fight. So that's the second thing that passed. And the third thing that passed is a bill that would ban the Federal Reserve from creating a CBDC that also hasn't passed through the Senate. Apparently, this has become a very partisan issue, and I don't think it's particularly likely the Democrats in the Senate will allow that to go through. But today, the House voted in favor of that bill, and it narrowly squeaked through. So those are the three pieces of legislation that made it through. The only one that's going to imminently be enacted into law is the stablecoin bill, the Genius Act. And that's going to happen tomorrow, I think at 2 30 p.m. Eastern. Doug Okay. Thank you for that. That's a lot happening on one day, a lot of big moves, a lot of... Zach Meanwhile, by the way, the the tornado cash trial is ongoing this week, right in your crazy Doug And so yeah, if this clarity act eventually does go into law would I mean that would kind of make the case moot Right for samurai and for tornado cash now Zach Well, the law was what it was when they brought it, unfortunately, but I think it would provide a really compelling reason for the government to drop the charges or drop an appeal or maybe to have a pardon or commutation at that point. Doug Okay. That's pretty crazy. Wow. We'll see. We'll see if he gets through, right? You said, I mean, I'm hoping for a quittle. I mean, something that they're, they're waving in front of us, this the clarity act that is ultimately, it's not going to end up being part of it. Just like ultimately banning the CBDC is not going to be part of it. And what we end up with is a bill in support of stablecoins and kind of the, those that are concerned about this are arguing that it is potentially, or it is, and I think you disagree here. It is a backdoor CBDC allowing governments to basically control these stablecoins and then force them to follow the bank secrecy act. And in effect turn them into a pseudo CBDC, maybe not as directly programmable and instant in terms of what the government wants to achieve, but still allowing them to ultimately have their way with people because of their ability to control these things. Zach Yeah. So I said two things to say there. So one on the Clarity Act, I get people's skepticism of government. I am a strong believer in privacy rights and the right to use peer-to-peer technology. And I think that the Bank Secrecy Act has become a too broad dragnet. That being said, I've spent a lot of time on Capitol Hill, specifically in the Senate, and I think there are strong advocates for the Clarity Act and specifically the protections for noncustodial tools who really do understand it. I mean, that's something that's been really awesome to see over the last couple of years is lawmakers that get it and they put in the time and they are believers. And I think, like I said, they're going to be political headwinds. It's not going to be easy. I think it's probably like a coin flip, whether it passes or not, but I think there's a real chance. And I don't think we should be nihilistic about the chance of this happening. I do think that political advocacy, even if you think like I do, that the ultimate solution is going to be a cypherpunk solution, the regulatory solution will sure make that a lot less painful over the coming decade or two if we can get it done the right way. And then with regards to the backdoor CDC stuff with the Genius Act, what the Genius Act does, I mean, it does address the Bank Secrecy Act and it applies the Bank Secrecy Act to stablecoin issuers. So when you create or redeem stablecoins, if you're a circle or tether or whoever else is going to do stablecoins, you do have to KYC, you are subject to the BSA. But importantly, what it doesn't do is apply the BSA to peer-to-peer transfers, to secondary transfers. So there's not other than chain analytics, which are powerful but imperfect. And there's no way to know individuals who are receiving stablecoins. And I think there absolutely will be ways to hold stablecoins privately. And if I give you a stablecoin, the Bank Secrecy Act does not apply to us. And there actually is language, even in the Genius Act, in addition to the anti-CBDC bill that passed that specifically denies the Fed the authority to do a stablecoin. And so I kind of get the concern, but I just don't think that I think private stablecoin, you got to compare them to the status quo. Our status quo is pretty bad, right? You use the example of the Canadian truckers, right? Where funds were frozen. I remember one time I used Venmo back when people would post stuff and I wrote the Cuban sandwich and someone got me for lunch and I got my funds frozen because of OFAC concerns because it had the word Cuban in it. Our current financial system is pretty surveilled. It is pretty manipulable by the government. And the concerns around the CBDC are that, yes, privacy concerns, but also control concerns. It's not just that the government can, like it can under the Genius Act, have a lawful court order to freeze funds that it has reasonable cause to say, are criminal proceeds. Zach But if you have an actual CBDC that's run by the government, they can do Orwellian things like a personal inflation rate. We want people in this part of the economy. So we're going to dial up inflation there so they have to spend their money. We think that you've spent too much stuff on products that are heavy in their carbon footprint. So we're going to stop you from spending because you hit your carbon footprint quota for the week, right? It ends up being, I think, a much scarier system. So I actually think there's a strong argument to be made, and I've tried to make this argument, that the Genius Act and moving from the rails we have now to private stablecoins that run on open permissionless blockchains is actually a step away from a CBDC-like system and really just isn't analogous to a Federal Reserve CBDC. Doug I mean, so what's your response to Marjorie Taylor-Green here who's saying, Congress is passing a bill today that the Genius Act that opens the back door to a central bank digital currency, you basically just gave comment on that. The Fed has been working on this for years. What do you think of what you're saying here? The ultimate goal is to move us to a cashless society and digital currency. I mean, there's a lot of us. I agree with that. Zach on on Marjorie Taylor Greene but like if you're familiar with her she's kind of never met a conspiracy theory she doesn't like right like I think some of this he formed and some of this is so she's a cute or so you don't Doug think you don't think the state is trying to eliminate cash I mean we see it happening and oh I do think this Zach states trying to eliminate cash. Yes, but the Genius Act isn't trying to eliminate cash. Right, Mr. Act. Doug given it's a step towards that. It's a step. Zach I don't think it is. And it's not just that this is unintentionally a step. She's saying this is a conspiracy by the Federal Reserve to move us towards the CBDC. I just think that that's wrong, bordering on silly. Doug Yeah, whether or not it's whether or not it's a conspiracy or it's just the natural tendencies of states, especially as they work with interested parties that are benefiting from it financially to just tend towards more surveillance and, you know, more ability for government to control us and use technology to control us. I mean, I think that is very real. That's who's behind it, whether it's just a natural, you know, state of things as technology increases, governments take advantage of it and corporations take advantage of it. Or if there's some darker thing going on, doesn't even matter. But I'm sure you agree that that is the state of things. Zach I probably agree with that. I just think net-net, the Genius Act, is it is positive for the value of the dollar and the prominence of the dollar on the world stage geopolitically. I think that's true. But in terms of the state's control over the monetary system, I actually think it is a diminishment of the state's power relative to the status quo, not a step in the direction of more control like you'd see with the CPC. I just think Marjorie Taylor is just totally wrong. Doug Okay. Yeah, we disagree there. I do think it's a step in that direction, and that these things will effectively be used in ways that allow them to become pseudo CBDCs. It's definitely not the same as using Monero, right? We could agree on that. Yes. It's not the same as using Monero. Yeah. Or Bitcoin, of course. So what do you think Satoshi would be saying? If he was around and he saw this, would he be like, oh yeah, we passed the Genius Stablecoin Act? Or would he be like, God damn it, didn't anybody read the R, read the white favor, and don't they know what this is all supposed to be about? Would he be cheering this on? Obviously, you're not Satoshi Nakamoto. I'm curious if you're going to take us there. Zach I would say I both don't know, and I actually don't think it's particularly important what Satoshi would have thought. I mean, if you want me to speculate on it, like, I think from what we can see in Satoshi's writings, so she is someone who like this wasn't like a random experiment, whoever Satoshi was, whether it was a person or group of people knew what they were doing, right? They understood they were steeped in the cypherpunk tradition. The cyberbunks had been thinking for decades about how important it is to have like real digital cash, right, out of control of the state. And they've thought through a lot of the implications of what that would mean. Right. And the idea that we're going to go straight from this thing is posted on message board, you know, to a cypherpunk wet dream where the state is just not going to look at it. I don't think that's realistic at all. I think Satoshi was well informed enough and smart enough to also know that that that wasn't the way it was going to play out. And there are different stages of Bitcoin adoption. And right now we are at the stage where the state is really starting to take it seriously for the first time. And that can go a number of different ways. A lot of my work, you know, both with private companies, but also my policy work is to try and soften that blow and shepherd that in the right direction and not the wrong direction. But I imagine that Satoshi probably did foresee that governments were going to do things like holding Bitcoin and they were going to have Bitcoin policies. And to the extent that Satoshi could have imagined stablecoins or, you know, the blockchain vision as a way to move dollars, which I suspect Satoshi absolutely could have imagined that something like this would happen, right? The governments would want to regulate the way that fiat currency, which is a creature of the government, right, who's fiat is. It's the government's fiat that they were. But I mean, I think Satoshi absolutely. Doug No, no, man. I think Satoshi should be a little upset when he sees that the amount of transactions that are made using stablecoins versus using Bitcoin. And seeing that essentially stablecoins have become what crypto is supposed to be in terms of transactions. And what do you have? You have the ability of now governments to potentially integrate with these systems and track and trace and they're not Bitcoin, they're not Monero, they're not decentralized. And we're seeing these regulations that are passed that are giving governments these tools to do it, creating regulatory capture for these companies that basically run these stablecoins and strengthening the dollar, not weakening the dollar. I mean, do you not think that Satoshi wanted to end fiat with Bitcoin? I mean, I'm pretty sure that was his goal, his hope. He wanted to be a fiat killer and now crypto has turned into a fiat booster, right? And it's fully, it's like the dollar will be on fire now as more and more of it's moved into stablecoins and then more people use the US dollar stablecoins around the world. And right now, this trajectory is people transacting with US dollar pseudo CBDC stablecoins instead of the initial vision of using something like Bitcoin. Yeah, I have to imagine this is Hoji Minap. He's so happy with that. Zach I mean, look, so for Money101, Money famously has three primary functions, store of value, media exchange, and unit of account. Some people would also add standard of value, which is sort of a hybrid. But the reason why people use stablecoins is the unit of account. It's that it is relevant in time. And so people abroad use that as a store of value that can't take Bitcoin price risk relative to goods and services. And people in the States that want to use it as payments rails, they need to be able to price things and dollars. And that just is the reality we're in. And so people are going to use stablecoins as a free market, right? Bitcoin and Monero are just too volatile to be very useful, you know, units of account right now that may well do. Doug Yeah, I get why stablecoins took a Zach I totally so I think this is a temporary moment in time But if you think about the long-term trajectory of the dollar right the reason the real reason why Bitcoin Was invented is that by? 2008 it's very clear that the fiat Ponzi is not going to last forever, right? But we just are an is helping this is arguably helping the field It arguably is actually at least the dollar the dollar relative it may I think its strength is a dollar relative to other fiat But the story of like there are six trillion unencumbered dollars in the world and there's over a hundred twenty trillion dollars of dollar denominated debt Anytime there is a credit crunch We're gonna print more dollars the dollar is not magically going to become a good long-term store of value because of stablecoins It just isn't right like people are not going to save in dollars for the long term no matter how popular stablecoins become And so if Bitcoin is going to eat fiat it's gonna eat fiat does this bolster the dollar store of value? In the short to medium term, I think yes against other fiat probably not against Bitcoin But we'll see I don't think the story ends any differently though because of stable Doug How does this bill affect stable coins that, you know, like algorithmic stable coins, for example, so stable coins that haven't essentially been sanctioned by this bill? So are they now saying that these other types of stable coins are illegal? Zach Kind of, yeah. In order for something to be a stablecoin, if something is going to be a stablecoin, it needs to fit within the regulation, and the regulation requires actual fiat backing, which is different than algorithmic backing. What a definition under the bill of stablecoin is, is something that reasonably gives someone the impression that it's going to hold value stably relative to fiat. Yeah, my read of the bill is that actually it is in the United States a ban on algorithmic stablecoins. Doug Wow, I mean, that's so what is your feel, you know, what's your opinion of that? Do you think that's I mean, that's that seems very, you know, whether or not ultimately they work out to kind of kill that part of the ecosystem and not just let it fairly compete and let the market decide definitely does not feel cypherpunk to me. Zach I don't really know how you do an algorithmic stablecoin that works. Some people point to DAI as an algorithmic stablecoin. It's absolutely not. In the backend, it's backed by USDC, which is backed by dollars. Doug So yeah, is you die you affected by this so Zach So you can have basically a stablecoin that wraps another stablecoin. So I don't know off the top of my head exactly how DAI will be affected by this or how they will enforce this or not against DAI. But you do need things to be backed by dollars under the Genius Act. This would stop something like the Terra stablecoin. But you know, the Terra stablecoin stopped itself before this bill could be passed. If there is a genius way to do an algorithmic backed stablecoin that actually is safe, I help people form Cayman foundations and BBI subsidiaries and Panama stuff. People will find ways in crypto. We're very good at trying stuff overseas. And if there's a great way to do algorithmic stablecoins that is more efficient than fiat backed stablecoins, great. I have no doubt someone will find a way to build that. And then if that's a better product, we'll find a way to bring it on shore because in America we'd love capitalism. But I just don't think that algorithmic stablecoins are like a serious thing that's being crushed. Doug OK, yeah, I mean, I I kind of see that as a loss. I mean, nobody's nobody's really proven the ability to do a pure algorithmic stablecoin. Yeah, like I. Zach think this will be a different conversation if this was not a hypothetical thing and there were actual algorithmic stablecoin. I just don't think it exists right now. Doug Yeah, I mean, there's one that recently launched on the XANO blockchain called Freedom Dollar. And it's gaining some adoption and it's basically backed by XANO. Whether or not it's supposedly over-collaterized with XANO, could that fundamentally not work and it breaks down? Sure. But do I want the US government telling me that people can no longer use this? Um, you know, a decent The ban is on Zach issuing not using. Doug on issuing, not using okay. Zach Now, there is the one part that like is a little bit more draconian is if you are going, whether or not you're based in the U.S., if you are offering stablecoins to U.S. users, they need to have the technology to be able to comply with a lawful court order. That is the like sort of most state control that is under the Genius Act. Now, that is requires of the lawful court order that you can challenge and the company has to comply. It's not the government has a direct backdoor or direct control like they would with a CBDC. But that is the that is the stronger constraint on what you can do. Doug Right. In this instance, there is no company. Right. So. Zach Look, at the end of the day, as with their coin, if you manage to create something that is purely based on decentralized game theory and there is no company, then there's no throat to choke and why do you care what the genius axis is? Doug Yeah, as long as it's not saying, Doug, you're going to jail because you accept, you know, you... No, no, no, there's no... You just had to use it on XMR Bazaar. Like, okay. Zach No, no, no. The GIS act just doesn't punish users of not empowering stablecoins. Doug All right. And it probably we probably don't head in that direction. Like this is this is where we're at with the Stablecoin Act with the Genius Act. It's it's being signed in a lot of tomorrow. Awesome. Well, not awesome. I'm not a supporter of it, but awesome that you're able to cover it so well. So I think I think we covered that one pretty well. And then the Clarity Act for me. Yeah, I mean, I'd say thumbs down on the Genius Act and thumbs up on the Clarity Act based on my understanding of these things. Zach Keep in section 110. What I most want your audience to hear is when this goes to the Senate, Elizabeth Warren and the Anti-Crypto Army are going to try hardest to kill the Freedom Tech part of the Clarity Act if they can. Right, that's that's Doug part that sounds most important. And so then what are the other aspects of the Clarity Act? Zach of the rest of that is about legalizing ICS. Doug Okay, okay, so I mean all these I mean, there's definitely companies that are walking away that are getting very rich over They're already very wealthy, but they're coming extremely more wealthy and powerful because of these these regulations that are being passed Zach Specifically, the Clarity Act, the Market Structure Bill, the bulk of it is about enriching token issuers. Doug Yeah. So that's, I don't know, what are you, so then what is your opinion of that? Is that, is that cool? Zach Well, I'm not super excited about it, right? Like what I want actually from our securities laws is to rewrite all of them. Uh, I don't think that pretending things that look like securities or commodities is helpful. I think we should rewrite our securities laws to allow people to create the type of securities they want. Uh, you know, I think we should use things like blockchain technology to create like securities, Lego bricks. If you want to create a token that represents a hundred square feet of upper West side Manhattan real estate, and you want to airdrop stablecoins to the holder that when the tenants pay rent and you want to stake that on the fine, like I'm pretty libertarian. I say, I say do all of that stuff, but like the, you know, the bulk of the clarity act is sort of just like a quick fix, which says, Oh, if you make these disclosures, right, then you will treat you as a commodity. And I think that really is more for the benefit of the large exchanges and the large crypto VCs. And so I'm not super excited about that. On the other hand, the status quo is very bad where like most of these things legally, probably our securities, whether we want them to be or not. And there's no way for them to legally trade. So the bulk of the clarity act, I would say is better than the status quo, but it's not what I would hope for. If I got to choose what goes into market structure bill, however, the section one 10 freedom money stuff that is worth. Doug Get that right right that's that's a word that's worth the bargain there. I agree. I agree with you there We are at almost 300 live viewers guys not guys like and share retweet. I hope Zach could stand a little bit longer I have I have a few more meaty questions. I love to yeah, I can probably Zach you five or ten more minutes. Doug All right, all right, all right. Guys, send your Monero-based Super Chats to xmrchat.com slash MoneroTalk. See if I can pull them up if we have time for that. So, CBDC thing. Ultimately, do you think we don't see a ban on the CBDC? Zach I, based on the politics of this, I do not think that that gets passed and I mean, it got passed through the House today. I don't think that gets passed through the Senate. Doug What is your feels on that? Is that something you care about or yeah, honestly Zach Honestly, look, I am anti CBDC. I think CBDCs are bad. I think we're going to see really dystopian shit in Europe and in China with CBDCs. And I don't want a CBDC in the United States. And if I got to choose, does that bill pass or not? Absolutely. I would love for a ban on CBDCs to be passed. I'm totally in favor. That being said, I just don't think there's a meaningful effort to have a CBDC in the United States. I don't think that's a meaningful threat anytime soon. And so I just don't think that's as much of a priority as protecting noncustodial tools, which is a threat today. Doug If I were to see, you know, if I were to be the ruler of the land here and if I was going to see any legislation pass crypto related, these things wouldn't be the things on top of... Banning CBDCs would, sure, but I wouldn't want to bolster or help stablecoins. I guess the clarity act that we said is good if that 110 thing is passed, but I would be more focused on things like eliminating capital gains for the usage of crypto, right? I feel like that would really allow crypto to compete as money not being treated like property in terms of how people trade it. So it can truly compete with dollars and people can use it for peer-to-peer transactions. What is your thought on that? Any chance we see something like that? Zach Yeah, all in favor of at least a de minimis exemption, right? I don't know that we're going to get fully no capital gains. We don't have fully no capital gains on foreign fiat currency either, right? If you trade FX, you pay capital gains on that. But in terms of spending it, absolutely, I'm in favor of some exemption that you can spend without having to track every capital gain on every purchase. I think there is a good chance of that just today. I my friend Frank Corva, who now pretty cool has White House press credentials, asked the press secretary, is the Trump administration in favor of that? And they said, yes. And I don't know that's something that the administration can do unilaterally, but I would not be surprised to see that. That did get attached to the spending bill, the big beautiful bill, and it got shut down at the last minute. I wouldn't be surprised to see that attached to some future bill. And Senator Cynthia Lummis has an outstanding proposed bill that would do exactly that. I just don't know how likely it is to pass on its own. Doug How likely is it that we ever eliminate the Bank Secrecy Act? Zach I think there would need to be a catalyst, right? I think, unfortunately, the world in which I can see that being most likely is when we have some sort of catastrophic data breach that hurts a lot of people and people are forced to see in graphic fashion the harm that is created when you do a data dragnet and you have these government honeypots, if everyone's information. Doug Yeah. I think the state, as we know, no longer exists by the time you get to the point where they're eliminating the vaccine. Zach Yeah, I wouldn't hold my breath. Doug How about some, do you think we need some legislation around privacy coins and privacy tech? Like, the Trump put out an executive order, right, that basically, in my opinion, announced protection for these technologies that the government shouldn't be going after these things in name and error by name or privacy tech, but just like open source, decentralized, things like that. But do you think we need some kind of extra protection for things like Monero, Zcash, Samurai, that the right for people to transact peer to peer freely without censorship or surveillance, the right to use those tools, right? Zach We do need that and it's called Section 110 of the Clarity Act. Doug Okay, that covers that. So I mean, so this would be obviously very bullish then for is it fair to say we can be bullish in Monero land if that passes in that there shouldn't be a concern that one day government may come after you in the United States if you're using Monero or developing Monero. Zach If we pass Section 110, look, I actually think the United States Constitution should already protect you, right? If you're developing a Monero that I think is protected for some amendment activity, if you're using Monero, I think there are a host of constitutional protections, I would assert if the government tried to claim you didn't have the right to do that. If you're committing crimes with Monero, then you're committing crimes, right? And the state will come after you. Right. But this is- Doug This idea that through the Bank Secrecy Act, they're putting pressure on exchanges and whatnot. Zach content would alleviate the Bank Secrecy Act concern for developing on or using Monero. Doug That's tremendous. That's, that's fricking tremendous. So let's, let's all get behind that one. That's, that's. So yeah, when that more Monero bro should be out with like Cheerios, like I know they don't like the cheer on, on the state, either do I, but if the, if what Zach is saying here, and I think he's like the guy who could actually answer this question. Zach And read it for yourself. As I keep saying, this is action 110. You can pull it up in the Clarity Act. Doug So do we then see, because right now, Monero, are you in New York, by the way? I feel. Okay. So I'm in New York as well. I'm sure you're aware that Monero is not on any centralized exchanges in New York and never has been. Yeah. And that's primarily because of the bit license. So obviously, that's a state law, not a federal thing. But there's this clarity act move us towards a world where Coinbase would be listing Monero because like we said, they shouldn't have any of these federal concerns any longer. Zach I don't know. So the bit license is his own concern. We need to get rid of the bit license. The business license is an unmitigated disaster. How do we Doug How do we get rid of that, by the way? Is now the time to strike? Zach Yeah, I mean, so I've had a number of conversations about this. I actually don't think it would be that hard. We just need an organized effort. That's a state politics thing. You just need to whip. Doug what I need to do, Zach. You got my, you got my content. Zach Yeah, more to come on that. But I think the thing that's keeping, I don't think it's illegal at all for Coinbase to accept Monero. It's a reputational thing. I think Monero has a really bad reputation. Doug Yeah, right. They don't they want they don't want to deal with the regulatory pressure from Zach I don't think we're going to get a law passed that forces Coinbase to accept Monero. Doug No, not that forces them, but that gives them the regulatory clarity where they don't feel like they're taking an extra risk listing of Monero. Otherwise they have no reason to listen. I mean, it's one of the oldest... But I don't think there's a... Zach If I'm being honest, the reason why Coinbase doesn't take Monero, it's not that they're worried about the Bank's Secrecy Act applying to Monero. In fact, the FinCEN guidance, I think, is actually pretty clear. It talks specifically, 2019 guidance, you really should read it if you haven't done that. There's a section on privacy coins, and it said decentralized privacy coins are not money transmission. I think that's pretty clear that Monero is not covered by the Bank's Secrecy Act. I think the concern is- But we also- Doug So then saw them go after tornado cache in spite of some of the things that are in there as well. But I hear what you're saying. Zach Yeah, look, no one is angry about that than I am. But arguably, Monero is more clearly covered in the 19 guidance than Torrance. But I think there is a perception that a large percentage of Monero transactions are illicit and that Coinbase doesn't want to incur the compliance burden, not of the Bank Secrecy Act applying, but of like just the amount of that they'd be concerned that they're accepting a bunch of dirty funds, right? From Doug They hold zcash though Zach Yeah, I think that my get is that Zcash might have to do with a relationship with DCG, but. Doug Right. So that's what I don't know. It's so maybe it's more like the kinds of different it's just it's a business decision, more of Zcash versus Monero thing than Zach Maybe, but I think a lot of it is they're a public company, they have a lot of compliance infrastructure and they do not think that the money they would make from opening up to Monero would adequately compensate them for the compliance costs and risks. Doug Yeah, which seems pretty crazy to me. Right. So which kind of gets back to if they clarify things, then. Zach But it's pretty clear that Monero is not subject to the banks' existence. The problem is the perception that Monero is largely used by criminals. It's not that there's a regulatory frame. Doug but that makes no sense. That's crazy. That makes no sense. Minero's used on XMR Bazaar. So that's literally just a framing thing. So that's just people realizing that they're wrong. Zach Well, look, I think that is something, you know, if there is, if there is a Manero Policy Institute, right? The number one order of business is to teach people that would be the Doug like me having to be out navigate like no cash should be allowed guys we shouldn't eliminate cash yes criminals use cash but we should be like yeah I Zach I guess the percentage is the relative percentage of people using XMR relative to cash or Bitcoin or whatever is much higher, is just a much higher percentage of criminal use. That may well be wrong. I have no idea, but that's something that I think if the mineral community wants to have a big impact, you want to fight that FUD piece. And look, certainly this was a big FUD piece on Bitcoin for a long time after the Silk Road. I certainly have empathy, but I think the reason why centralized exchanges don't want to touch it is the perception that a lot of it is criminal. Doug And honestly, it's kind of a blessing in disguise, arguably for Monero as well, because it keeps it off of more centralized exchanges and allows the ecosystem to exist outside of the state system and get strong on its own using decentralized exchanges and all that stuff. But it does sound, for me, what they're saying with the Clarity Act, it does sound like at least a step in the direction and that maybe then we also then see the elimination of the bit license. And if we saw that, we would see Kraken back in New York and they would be off with customers. Zach Lots of folks come to New York. Doug Yeah, yeah, yeah, yeah. And yeah, truly, please do let me know if there's anything I can do to help that effort in terms of, you know, even getting the word out to the Monero community, if there's donations. Zach Yeah, the biggest thing you can do is call your, I mean, look, two things you can do. One, you can donate to policy groups that are on this. The groups that I think are doing the best job, they're three. There's us, the Bitcoin Policy Institute. There is Coin Center does a terrific job and the DeFi Education Fund does a terrific job. And those are the people who I trust most if you were going to donate. The other thing you can do is call your senator, specifically your senator. Don't write call. It's not that someone is going to state senator. You're not your state senator. You're federal United eliminated from your state. What? Right. Okay. No, no, no, no. Oh, sorry. I thought we're talking about the Section one to the Clarity Act. Yeah. Doug I thought we were talking about a bit of license. I'm sorry. Go ahead. Yeah. Yeah. Zach Oh, sorry. So for the Cardiac, you call your United States Senator, and you tell them that this is an important issue for you. And the staffers may or may not understand what you're talking about, but they do tally up the calls they get on different issues. So calling actually makes a difference if enough people call. With a built license, you know, we just need an organized effort to do that. Yeah. Doug Yeah, and I will be happy to help that. And I've started. And maybe I'll- Zach I gotta act on when we take that on. Doug Okay. Yeah, I ran for Congress, U.S. Congress in 2020. So I kind of know the workings of New York State and the parties and how they all work and access to the assemblymen and the state senators and maybe the governor as well, obviously, could be a player, especially as we see the next governor's race. I don't know, maybe we see a Republican governor in New York. I don't know if that's something you'd be rooting for, but I would bet. Eliminating the... Zach There are rumors about it, it's a Democrat, but Richie Torres running, and Richie Torres is really good on all of these issues. Doug Okay, that'd be great as well, if he would be anti-bit licensed. Zach And I think that swipe with a pen would maybe be a central pillar of his campaign. Doug Oh, okay. That is, that's good to hear. So then I'm sure the Republican will have to put that on their platform as well to compete. This could be, this could be good. Uh, that sounds fantastic. Let me see if there's any, any other vital things that I wanted to get. Obviously, uh, you want to give us any update on summer. We're seeing everything that's going on with tornado cash. Um, the trial that's happening. If you want to give us kind of your quick up, if you can provide any update. Zach The trial's ongoing now. They did opening statements, I think, on yesterday. The question is, all sides are going to put evidence. It's going to largely be about, did Roman Storm intend to help criminals launder money or not? It's going to be what's called mens rei evidence. I think one of the big pieces of evidence is to be this t-shirt Doug Yeah, I was going to say that t-shirt didn't help much, right? It didn't help. Zach So we'll see how we're going to respond to that. Doug I mean that's that's that is what do you think of that from like a legal standpoint the fact that they're using that? to determine his mens rea Zach I mean, look, if I were him, I wish the T-shirt didn't exist, but I'm hopeful that the Defense Council can put that T-shirt in context as a joke and not as a, you know, beyond a reasonable doubt indication that he intended to help people commit crimes. Doug Yeah, that's great. And then samurai. Can you give us any updates? Zach samurai, there's a new judge. So things are a little bit in flux there. The old judge had been really a stickler, did not allow any of the policy organizations to submit amicus briefs. And there's briefing on the sort of substantive, the motion dismiss, whether they are a money transmitter, whether they should drop the money transmission charge or not. And so there's a lot of sort of movement there, but we'll have to see how the new judge reacts, judge Cote. And then there's a really important, the next thing that'll happen is the motion dismiss, which is a really important legal ruling. It'll be the second ever ruling on kind of non-custodial tool, be money transmission. We got the bad kind of ruling in tornado cash from Judge Feila. Hopefully we'll get a better ruling, but it was not super optimistic with the old judge. And then the other case to draw people's attention to is called Llewellyn versus Bondi. This is a private lawsuit brought by a developer who works at a company called Blockade backed by Coin Center, where they are suing the federal government, specifically trying to make good case law that you can't be a money transmitter if you're building non-custodial tech. So that's something to keep an eye on. That's in the early stages. We're submitting an amicus brief there too. But the government tries to bring its cases where it thinks the facts are useful for it. The samurai guys maybe had some less than ideal tweets. In the tornado cash case, there's this whole business with North Korea and the Axi Infinity hack. And so the idea behind the Llewellyn litigation is we're going to bring a clean set of facts with someone where there just wasn't any even alleged criminal activity. It's a developer who wants to build a non-custodial tool. And he is worried that the government will say that he's a money transmitter. And so therefore he is suing the government to get clarity on that. Doug Very interesting. That's also, I mean, good news. Great that he's doing that, right? He's putting his efforts forth. What is his company or thing that he's trying to get clarity on? Zach He was building a non-custodial privacy tool. Doug What do you think of XMR Bazaar while I have you in terms of potential? Obviously, if the Clarity Act passes, I feel like there's no concerns. I mean, it basically functions like a Craigslist. It's centralized. It's not some decentralized thing where people are running software. It's like a Craigslist. And then it puts buyers and sellers together. And then their transactions happen peer to peer, just using Monero between each other. There's more things to it. But I'm just curious if you see any potential issues there for something like that. Zach I wouldn't want to give individual legal advice. I'm a favor of circular economies for digital cash in general. Broadly speaking, the legal line under the Bank Secrecy Act and my transmission law is, are you in custody or control of other people's money? That's generally what these things turn out. Doug Zach, Matt, thank you so much. Thank you for allowing me to put you through this for almost an hour and a half. I know it could be a little tense here on Manero Talk. Zach Oh, no worries. I came up in this space in the early days of Clubhouse. And so I love a good back and forth. Thank you. Doug So much, man, super cool that you're local, love everything you're doing in the scene. I think you're doing great work. Obviously, we have some disagreements, I think, on some things, but that's fine, man. You are, you're absolutely fighting the same battle I am and you're making real ground, real headway. So greatly appreciate those efforts, man. Zach Thanks for having me. Doug Yeah, and if you want to put anything out there, people can find you, or if there's anything you want to shill, that should be there. Yeah, exactly. You should be right. Zach on Twitter. If you are building something in the space and you do actually want personalized legal advice, hit me up. I'm happy to help with that. Consider a donation to BPI or Coin Center or DeFi Education Fund if you want to help fight the fight for non-custodial technology. Doug Awesome, man. Is it cool if I reach out to you with the bit license efforts here in New York? Good kid. Awesome. All right, brother. Thank you so much. I will close it out here. Adios. Thanks a lot. Speaker 2 Hi, Monero Land. Thank you for joining us on this week's episode. We release new episodes every week. You can find and subscribe to our show on YouTube, Odyssey, iTunes, Spotify, or wherever you listen to podcasts. Go to MoneroTalk.Live for a full list of places where you can watch and listen. 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