Latest / The Paul Barron Crypto Show / CLARITY Backlash Begins!🔥SEC Rallies Solana! 🚀INTERVIEW Solana Policy Institute Kristin Smith

Transcript

CLARITY Backlash Begins!🔥SEC Rallies Solana! 🚀INTERVIEW Solana Policy Institute Kristin Smith · The Paul Barron Crypto Show

• 0:00
  Speaker 1: Clarity backlash is underway. Who is going to benefit from this? Well,
• 0:03
  Speaker 1: it might be Solana coming out in the win category.
• 0:07
  Speaker 1: So we're going to check it all out. Let's just
• 0:08
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• 0:49
  Speaker 1: Tell them we sent you. I want to lead off
• 0:50
  Speaker 1: the show. with a clip before we get to our guest.
• 0:54
  Speaker 1: And this is in reference to how politicians are facing
• 0:59
  Speaker 1: the backlash.
• 0:59
  Speaker 2: Take a look.
• 1:00
  Speaker 3: Can you tell us why you voted against the Clarity
• 1:02
  Speaker 3: Act yesterday? What are your concerns?
• 1:04
  Speaker 4: I'm not prepared to talk with you about that at
• 1:06
  Speaker 4: the moment. Why not?
• 1:08
  Speaker 3: You voted against it, didn't you? You don't want to
• 1:10
  Speaker 3: tell us why? Okay, thank you, Senator. Can you just
• 1:14
  Speaker 3: tell us briefly what your concerns are with the legislation?
• 1:17
  Speaker 2: I think it is a bubble that will burst.
• 1:20
  Speaker 1: The overall crypto, as important as it all is, you
• 1:24
  Speaker 1: and Democrats are willing to hold it back to prove
• 1:27
  Speaker 1: a point about Trump's corruption. Divestment is what was required.
• 1:32
  Speaker 2: And you know what? And this would apply to all
• 1:34
  Speaker 2: elected officials.
• 1:36
  Speaker 4: What are your concerns with it?
• 1:37
  Speaker 5: My concern is farmers in my state are so, so
• 1:40
  Speaker 5: concerned that they won't be able to get loans for
• 1:43
  Speaker 5: their farms from small-town banks, the yields that are available
• 1:46
  Speaker 5: under the bill. I think this is something that can
• 1:48
  Speaker 5: be fixed. Senator Moran, I think who also voted no,
• 1:51
  Speaker 5: has language that would fix this.
• 1:52
  Speaker 4: But you are in favor of it otherwise, other than that?
• 1:55
  Speaker 5: My big issue is just with that. It's with the
• 1:57
  Speaker 5: small-town banks. Who is the fourth?
• 1:59
  Speaker 4: Tom Tillis.
• 2:00
  Speaker 5: No, he didn't. I don't think so.
• 2:02
  Speaker 6: Yeah.
• 2:02
  Speaker 3: Tom Tellis changed his mind at the 11th hour. You
• 2:05
  Speaker 3: reversed course yesterday. You had initially voted yes.
• 2:07
  Speaker 4: I didn't reverse course, but that's what happened.
• 2:09
  Speaker 2: I support the bill. All right.
• 2:12
  Speaker 1: So you can kind of see a little bit of
• 2:14
  Speaker 1: uneasiness there in Capitol Hill with a lot of lawmakers
• 2:17
  Speaker 1: now on the hot seat. You have a group of
• 2:20
  Speaker 1: seven Democrats now coming out, including Jill Abrand. Mark Warner,
• 2:25
  Speaker 1: Senator Ruben Gallego, and also Senator Alsobrooks, who was in
• 2:28
  Speaker 1: that clip, saying that they are committed to a bipartisan
• 2:30
  Speaker 1: fashion to pass the Clarity Act. I think this was
• 2:34
  Speaker 1: more damage control, maybe PR statements to try to deal
• 2:37
  Speaker 1: with either upset constituents or maybe even industry that is
• 2:41
  Speaker 1: really starting to put a little pressure on this. And
• 2:43
  Speaker 1: of course, you had Josh Hawley there talking about this,
• 2:46
  Speaker 1: that he's trying to control loans for farmers at the
• 2:49
  Speaker 1: small community banks. And of course, I won't say this,
• 2:53
  Speaker 1: but essentially Coinbase jumps out and says.
• 2:55
  Speaker 2: Hey, we're going to pay even more yield now out there.
• 2:57
  Speaker 1: Of course, some of this is coming from Fed interest
• 3:00
  Speaker 1: rate hikes, but a lot of this coming from the
• 3:03
  Speaker 1: fact that we have no clarity on any of the industry.
• 3:05
  Speaker 2: And that's where we are right now.
• 3:06
  Speaker 1: So I wanted to bring in Kristen Smith coming in
• 3:08
  Speaker 1: from the Solana Policy Institute to kind of break this down.
• 3:11
  Speaker 2: Kristen, how are you?
• 3:14
  Speaker 4: Good morning, Paul, or I guess afternoon now here in DC.
• 3:17
  Speaker 4: I'm great, actually. We did not get clarity with the
• 3:21
  Speaker 4: capital C this week in terms of the Clarity Act,
• 3:25
  Speaker 4: but I'm super encouraged by the fact that the SEC
• 3:29
  Speaker 4: and the CFTC are jumping right in. And just today
• 3:32
  Speaker 4: we saw the innovation exemption on tokenized equities and a
• 3:37
  Speaker 4: CFTC statement that came out as well. And so all
• 3:41
  Speaker 4: is not lost, but happy to unpack everything that happened
• 3:44
  Speaker 4: with clarity and go into the path forward.
• 3:46
  Speaker 1: I want to go and we're going to talk about
• 3:48
  Speaker 1: that because this that is a big issue on and
• 3:51
  Speaker 1: it's already affecting markets in some places.
• 3:53
  Speaker 2: We'll outline that here in a second.
• 3:55
  Speaker 1: But one thing that is happening is that we are
• 3:58
  Speaker 1: starting to see a big shift right here on which
• 4:01
  Speaker 1: party will win the Senate. Now the Democrats are taking control,
• 4:05
  Speaker 1: a commanding control, at a potential Senate shift. And when
• 4:09
  Speaker 1: you look at that and also the Texas position right
• 4:13
  Speaker 1: now on the potential winner over there, this would be
• 4:16
  Speaker 1: a big win for Democrats, which would put more pressure
• 4:19
  Speaker 1: on and now give us a Democrat-controlled Senate and House.
• 4:24
  Speaker 1: So if that were to happen, Kristen, how does this
• 4:29
  Speaker 1: resolve in a post-midterm situation? era where we're going to
• 4:33
  Speaker 1: have Democrats essentially in control of the House and the Senate?
• 4:36
  Speaker 4: Yeah, well, if you look back over the past several years,
• 4:40
  Speaker 4: particularly in the last administration, a lot of the policymaking
• 4:44
  Speaker 4: was this regulation by enforcement coming out of the SEC.
• 4:49
  Speaker 4: And that was how the policies were defined for the
• 4:52
  Speaker 4: crypto industry. As a result of this very hostile environment,
• 4:56
  Speaker 4: along with the debanking and the criminal investigations of software
• 5:00
  Speaker 4: developers in the U.S., the crypto community and the crypto
• 5:03
  Speaker 4: industry created a political force, both through advocates and through
• 5:09
  Speaker 4: fundraising and through the super PAC, and really came back
• 5:13
  Speaker 4: and made a really strong political play in the last election,
• 5:17
  Speaker 4: which worked. And I think that led to moving the
• 5:21
  Speaker 4: battlefield from the courts to the Congress. We've spent the
• 5:25
  Speaker 4: past two years almost now working through the legislative arena
• 5:30
  Speaker 4: and trying to advance the Clarity Act. But I think
• 5:33
  Speaker 4: what we found out this week is that is not
• 5:35
  Speaker 4: an option that is going to be available to us.
• 5:38
  Speaker 4: There are too many political challenges with the Trump ethics issues,
• 5:42
  Speaker 4: with the community banks, that it's really just not going
• 5:45
  Speaker 4: to be a viable option. And so what we're seeing
• 5:48
  Speaker 4: now is a shift from the legislative arena to the
• 5:51
  Speaker 4: regulatory arena. And we have the and I can go
• 5:56
  Speaker 4: into this in more detail, but we really have until
• 5:58
  Speaker 4: the summer of 2028 to get as many rules finalized
• 6:02
  Speaker 4: from the SEC and the CFTC as we possibly can
• 6:06
  Speaker 4: that provide clarity with a lowercase c for the industry.
• 6:10
  Speaker 4: And then at that point, we'll be able to defend
• 6:15
  Speaker 4: those rules for at least about two years into any
• 6:18
  Speaker 4: sort of new administration. So I really think there's a
• 6:21
  Speaker 4: four year window right now for the industry to have
• 6:25
  Speaker 4: adoption of the technology. And I think as we see
• 6:29
  Speaker 4: the convergence of the traditional financial world with blockchains like
• 6:33
  Speaker 4: Solana and other actors in the crypto space, those rules
• 6:38
  Speaker 4: will probably actually end up having staying power. So I
• 6:41
  Speaker 4: think legislation is off the table. I think it's highly
• 6:44
  Speaker 4: unlikely it's going to get resurrected. That, of course, would
• 6:48
  Speaker 4: have been the preferred option. outcome. But in the absence
• 6:52
  Speaker 4: of legislation, we will look to the regulators and try
• 6:54
  Speaker 4: to get as many rules on the books using the
• 6:57
  Speaker 4: laws that we already have today.
• 6:59
  Speaker 2: That's a big deal.
• 7:01
  Speaker 1: Do you think the rest of the industry has also
• 7:04
  Speaker 1: come to that realization and saying that regulation.
• 7:08
  Speaker 2: Is just, it's over?
• 7:11
  Speaker 7: Yeah.
• 7:11
  Speaker 4: Well, I think if you look at a lot of
• 7:12
  Speaker 4: the statements that came out from different executives in the
• 7:16
  Speaker 4: crypto industry after the failed cloture vote, on Tuesday for
• 7:20
  Speaker 4: the Clarity Act. You saw a lot of people talking
• 7:24
  Speaker 4: about the SEC and the CFTC as being up next.
• 7:28
  Speaker 4: I think if you even look at Patrick Witt's statement
• 7:30
  Speaker 4: from the White House, he said, Atkins and Selig, the
• 7:33
  Speaker 4: chairs of the respective agencies, the ball's in your court.
• 7:36
  Speaker 4: So I think there's a realization that the regulatory agencies
• 7:40
  Speaker 4: have a role Now, listen, if you saw at the
• 7:44
  Speaker 4: very end of the Clarity Act vote, I was actually,
• 7:47
  Speaker 4: I went to the Senate chamber because I really wanted
• 7:49
  Speaker 4: to see this and had high hopes that there would
• 7:52
  Speaker 4: be a last minute compromise that got that over the
• 7:54
  Speaker 4: finish line. But, you know, the very last minute, Senator
• 7:57
  Speaker 4: Tillis changed his vote from a yes to a no.
• 8:01
  Speaker 4: That is not because he doesn't support the bill. That
• 8:03
  Speaker 4: is because by doing so, it allows him to potentially
• 8:07
  Speaker 4: bring up that legislation again within the next 48 hours, right?
• 8:12
  Speaker 4: there's no indication that that is going to happen today.
• 8:14
  Speaker 4: That would be today as we're recording this. But, you know,
• 8:18
  Speaker 4: they could decide to revisit this legislation potentially in the
• 8:22
  Speaker 4: lame duck, but they still need to get the 60 votes.
• 8:26
  Speaker 4: And that means that they need to have an agreement
• 8:28
  Speaker 4: between the Democrats and the White House on what to
• 8:30
  Speaker 4: do on ethics. And there needs to be, you know,
• 8:34
  Speaker 4: an agreement on what to do to satisfy the banks.
• 8:37
  Speaker 4: And And I think the problem is that some of
• 8:39
  Speaker 4: the demands that are out there around the yield issue,
• 8:43
  Speaker 4: but also around some of the other crypto issues like
• 8:45
  Speaker 4: the Blockchain Regulatory Certainty Act and others are almost so
• 8:49
  Speaker 4: extreme that we might not even want those policies as
• 8:52
  Speaker 4: an industry anymore. So I think, listen, the legislative option,
• 8:55
  Speaker 4: it was a good try. And we've certainly gotten a lot.
• 9:00
  Speaker 4: You know, we've got the Genius Act. We've had the
• 9:02
  Speaker 4: rollback of SAV-121. Like there are all sorts of efforts
• 9:05
  Speaker 4: that came out of this. But the Clarity Act is,
• 9:08
  Speaker 4: you know, the reality is that's probably not going to
• 9:10
  Speaker 4: be one of them at this stage. And so, you know,
• 9:12
  Speaker 4: we need to focus on the other avenues like the
• 9:16
  Speaker 4: federal rulemaking process at the regulatory agencies to get the
• 9:20
  Speaker 4: kind of certainty we need. And we've already seen actions
• 9:22
  Speaker 4: on that today. So this is very much a live exercise.
• 9:26
  Speaker 4: And I think there's a lot of hope that we're
• 9:29
  Speaker 4: going to get the type of clarity and guidance that
• 9:31
  Speaker 4: we need.
• 9:32
  Speaker 1: Well, you're mentioning the Atkins announcement in terms of innovation exemption.
• 9:37
  Speaker 1: Let me go to that clip so our audience can
• 9:39
  Speaker 1: kind of get caught up on what is happening right now.
• 9:42
  Speaker 2: Let's take a look.
• 9:43
  Speaker 6: Congress was unable to advance the Clarity Act. So today
• 9:47
  Speaker 6: we are taking a significant step through what we call
• 9:51
  Speaker 6: the innovation exemption, a mechanism to facilitate on-chain trading of
• 9:57
  Speaker 6: certain tokenized stocks. For exempting certain trading venues from the
• 10:03
  Speaker 6: definition of exchange. And second, exempting certain liquidity providers from
• 10:09
  Speaker 6: the definition of dealer. Our innovation exemption is intentionally limited
• 10:14
  Speaker 6: in scope and set to expire after five years. Thank
• 10:19
  Speaker 6: you very much.
• 10:20
  Speaker 1: All right, so some of the things that come up
• 10:22
  Speaker 1: on this are the requirements bad right now that were
• 10:25
  Speaker 1: outlined within this, bad for permissionless equities. If you look
• 10:29
  Speaker 1: at what Carlos Domingo of Securitize is talking about, the
• 10:33
  Speaker 1: sanctions compliance, this is a TSV, must be a U.S.
• 10:36
  Speaker 1: person and comply with economic and trade sanctions programs administered
• 10:40
  Speaker 1: and enforced by the Foreign Assets Control Office. So that,
• 10:45
  Speaker 1: and then you get into permissioned access. This is going
• 10:48
  Speaker 1: into it as well, must set standards, of access to
• 10:51
  Speaker 1: allow only certain participants to trade tokenized stock on the TSV.
• 10:56
  Speaker 1: So with some of these issues, is this bad for
• 11:00
  Speaker 1: permissionless equities?
• 11:03
  Speaker 4: Oh, no, absolutely not. I think this is fantastic news
• 11:06
  Speaker 4: for public permissionless blockchains. And what happened is today, for
• 11:12
  Speaker 4: the very first time, the SEC said that you can
• 11:14
  Speaker 4: actually trade real U.S. stocks online. on-chain through AMM pools
• 11:20
  Speaker 4: on public blockchains. This is a huge deal. And yes,
• 11:24
  Speaker 4: there will be some requirements around that. But the fact is,
• 11:29
  Speaker 4: these are actual shares. These shares will earn dividends. You
• 11:34
  Speaker 4: will be able to vote with these shares. These aren't wrappers.
• 11:40
  Speaker 4: These are tokens that carry the exact same rights as
• 11:43
  Speaker 4: any other stock out there. So I think this is
• 11:45
  Speaker 4: a really big deal. It's the first time We've had
• 11:48
  Speaker 4: a path forward for the trading of these in the
• 11:52
  Speaker 4: United States. And that means that U.S. persons will be
• 11:56
  Speaker 4: able to self-custody their shares. They'll be able to trade
• 11:59
  Speaker 4: them 24-7. They will have instant settlement. They can use
• 12:03
  Speaker 4: stable coins. I think this is a really big and
• 12:06
  Speaker 4: important step forward. It is not the complete step. I
• 12:10
  Speaker 4: think the SEC is being really smart and thoughtful and
• 12:14
  Speaker 4: taking it one piece at a time. But what the
• 12:18
  Speaker 4: SEC did with this is they are providing this innovation exemption,
• 12:22
  Speaker 4: but then they're also conducting a rulemaking process. So this
• 12:27
  Speaker 4: process will take probably about 18 months where they will
• 12:30
  Speaker 4: have public comments. They will see what's happening and learn
• 12:33
  Speaker 4: from the innovation exemption and finalize a framework that they
• 12:37
  Speaker 4: will put into regulation going forward. And those rules are strong, right?
• 12:42
  Speaker 4: Rules can be changed. But to change a rule, you
• 12:45
  Speaker 4: have to go through the same process you did to
• 12:47
  Speaker 4: get that rule in place to begin with. So it's
• 12:49
  Speaker 4: not an instantaneous thing. But I think the SEC is
• 12:52
  Speaker 4: being very thoughtful. They want this to work. They don't
• 12:56
  Speaker 4: want to put the U.S. equities markets at risk. So
• 13:00
  Speaker 4: they're doing it one step at a time. But I
• 13:03
  Speaker 4: think this is a critically important step. I think it's
• 13:06
  Speaker 4: a really big deal. It's great news for Solana. Solana
• 13:09
  Speaker 4: is the fastest, most used blockchain in the world. Great
• 13:12
  Speaker 4: place for issuing and trading stocks. And I think now
• 13:16
  Speaker 4: that this innovation and exemption is in place, we're going
• 13:18
  Speaker 4: to see this technology be available to U.S. persons. So
• 13:23
  Speaker 4: we're very excited about this and very, very bullish.
• 13:27
  Speaker 2: Yeah. So big statement right there.
• 13:29
  Speaker 1: And I think just to be clear, because some of this,
• 13:31
  Speaker 1: if you read what Atkins has put out from the SEC,
• 13:35
  Speaker 1: There is, I looked at it and I saw, but
• 13:39
  Speaker 1: I think you answered it. I saw a little bit
• 13:40
  Speaker 1: of concern in the sense that there might be some restrictions,
• 13:43
  Speaker 1: you know, that would come in, in terms of what
• 13:46
  Speaker 1: stocks could be offered in some of these scenarios. But
• 13:49
  Speaker 1: what you're saying, it's about an 18-month window where these
• 13:52
  Speaker 1: scenarios will get tested under the innovation exemption and then
• 13:56
  Speaker 1: be able to kind of work around that. So essentially,
• 13:59
  Speaker 1: it seems like you've got an 18-month window here to
• 14:02
  Speaker 1: really amp up the innovation And hopefully the SEC can
• 14:05
  Speaker 1: see the results and then come out with real positive regulation.
• 14:09
  Speaker 2: Is that what I'm hearing from you?
• 14:11
  Speaker 4: Yeah, yeah. And to be clear, the innovation exemption itself
• 14:14
  Speaker 4: is valid for five years. So, you know, that will
• 14:18
  Speaker 4: be in place in a while. But what it allows
• 14:20
  Speaker 4: for is for a full rulemaking process. to get underway.
• 14:25
  Speaker 4: That typically lasts somewhere between 18 and 24 months. Sometimes
• 14:30
  Speaker 4: it's more, sometimes it's less. But with the rulemaking process,
• 14:33
  Speaker 4: the agency proposes rules, they take in feedback on comments.
• 14:37
  Speaker 4: There's a lot of back and forth. And it does
• 14:41
  Speaker 4: take some time to do that. So by having the
• 14:45
  Speaker 4: innovation exemption in place, the SEC will be able to
• 14:48
  Speaker 4: observe see how things are working in, you know, in
• 14:52
  Speaker 4: a defined environment and can make adjustments as needed during
• 14:57
  Speaker 4: the rulemaking process. So I think they're being very, very
• 15:00
  Speaker 4: thoughtful and they're wanting to do this in a way
• 15:03
  Speaker 4: that sticks and that lasts.
• 15:05
  Speaker 5: Yeah.
• 15:06
  Speaker 1: Under this, Kristen, for Solana within the platform itself, would
• 15:11
  Speaker 1: any of these not qualify, whether it's X-Docs, Ondo, and
• 15:16
  Speaker 1: even Backpack? Or is that all included within this?
• 15:21
  Speaker 4: Yeah, no, I think there's going to have to be
• 15:23
  Speaker 4: changes to some of these programs for how they operate
• 15:28
  Speaker 4: in the U.S. Now, overseas, you know, things like Xstocks
• 15:31
  Speaker 4: and others can continue. But I think this is, you know,
• 15:35
  Speaker 4: great news for Backpack. I think it's great news for Superstate.
• 15:38
  Speaker 4: I think it's great news, you know, for Securitize. It's
• 15:41
  Speaker 4: a really good step forward for those companies that are
• 15:46
  Speaker 4: really trying to get the actual shares on chain. Because
• 15:49
  Speaker 4: that's the ultimate goal, right? People don't want wrappers. They
• 15:52
  Speaker 4: don't want to bet on the price of a stock.
• 15:54
  Speaker 4: They want to have actual ownership of the actual shares
• 15:57
  Speaker 4: on chain. And so this is paving the way for
• 16:00
  Speaker 4: that to happen on a large scale. The innovation exemption
• 16:03
  Speaker 4: will be on a smaller scale to begin. But I
• 16:06
  Speaker 4: think over time, this is the first step we need
• 16:09
  Speaker 4: for a complete and total upgrade of the way we
• 16:12
  Speaker 4: issue and trade securities.
• 16:14
  Speaker 1: You had Vlad Tenev coming out and announcing, hey, tokenization
• 16:17
  Speaker 1: is coming to America. And thanks to the SEC's leadership,
• 16:20
  Speaker 1: Americans now start reaping the benefits of tokenized instant settlement.
• 16:24
  Speaker 1: So it's a good day for innovation. Obviously, Robinhood going
• 16:27
  Speaker 1: forward on that. In this kind of scenario, and if
• 16:30
  Speaker 1: I read this right, would Robinhood have to go in
• 16:33
  Speaker 1: and they don't have.
• 16:34
  Speaker 2: To get approval, but they have to give notification.
• 16:37
  Speaker 1: Would they have to go in and do something like
• 16:38
  Speaker 1: a delisting of tokenized AMC stock?
• 16:42
  Speaker 2: I just wonder, in your opinion.
• 16:45
  Speaker 4: If they're going to be offering the actual shares to
• 16:49
  Speaker 4: US customers, then they're going to have to go through
• 16:52
  Speaker 4: the new process. And it does require disclosures. And in
• 16:56
  Speaker 4: full disclosure, on my end, this happened a couple hours ago,
• 16:58
  Speaker 4: and I've been back to back all day. So I
• 17:00
  Speaker 4: have not actually read the full proposal ourselves. But in
• 17:02
  Speaker 4: talking to our team, there is going to be requirements
• 17:07
  Speaker 4: around this. This isn't you know, a free for all,
• 17:10
  Speaker 4: there are still securities laws that apply. And this innovation
• 17:14
  Speaker 4: exemption provides the pathway forward for doing so. And so, yes,
• 17:19
  Speaker 4: lawyers will be involved. There will be back and forth
• 17:21
  Speaker 4: with the SEC. But that's a good thing. I think
• 17:23
  Speaker 4: that's what the industry has been asking for. We want
• 17:25
  Speaker 4: to find a way to get the benefits of the
• 17:28
  Speaker 4: technology within the laws we have today. And that's what
• 17:31
  Speaker 4: this does.
• 17:33
  Speaker 1: We were watching Amanda Fisher comment on this. This is
• 17:36
  Speaker 1: former SEC chief of staff, so worked under Gensler. The
• 17:40
  Speaker 1: SEC order requires tokenized venues to alert public companies and
• 17:45
  Speaker 1: give them a chance to object to tokenization, but doesn't
• 17:49
  Speaker 1: require affirmative consent. So this is a very, I think
• 17:54
  Speaker 1: there's some interesting ways that this is being interpreted right now.
• 17:58
  Speaker 1: Because this has just been put out, I'm sure Atkins
• 18:01
  Speaker 1: and his team, they're going to see all sorts of
• 18:03
  Speaker 1: issues that are going to rise out of this, I guess,
• 18:05
  Speaker 1: on these open comment areas.
• 18:07
  Speaker 2: So that in itself would be a big deal.
• 18:09
  Speaker 1: Here was Armani talking about an important step for Backpack
• 18:13
  Speaker 1: right there. Going forward, every stock ETF perpetual listing unlocks
• 18:17
  Speaker 1: the underlying spot asset as a margin collateral. So now
• 18:21
  Speaker 1: borrowing against stocks, trading its This is what the market
• 18:25
  Speaker 1: has been wanting for some time. And you can see
• 18:27
  Speaker 1: Backpack even says it right there. All stocks and ETFs
• 18:30
  Speaker 1: corresponding per markets can now be used as collateral.
• 18:33
  Speaker 2: So a big deal.
• 18:37
  Speaker 1: This goes out, you get maybe good regulation. How sensitive
• 18:43
  Speaker 1: is this to change down the road?
• 18:46
  Speaker 4: Yeah, no, that's a great question. And if we had
• 18:49
  Speaker 4: the Clarity Act and we got that signed into law,
• 18:52
  Speaker 4: anything done within the Clarity Act would be pretty permanent, right?
• 18:56
  Speaker 4: It's very difficult to undo laws because you have to
• 18:59
  Speaker 4: write a new law. If we get through the rulemaking
• 19:03
  Speaker 4: process and there are rules on the books that go
• 19:06
  Speaker 4: through the entire process and are finalized by the SEC
• 19:09
  Speaker 4: and the CFTC has some things they can do as well,
• 19:13
  Speaker 4: it's going to take that entire process to undo anything
• 19:17
  Speaker 4: that's done. And I think You know, one of the
• 19:20
  Speaker 4: problems that we've had with the industry in the past
• 19:23
  Speaker 4: is that there were no rules on the books. And
• 19:25
  Speaker 4: so that led to a lot of the challenges that
• 19:28
  Speaker 4: the industry faced in prior years with the SEC. Once
• 19:31
  Speaker 4: there are rules on the books, and I think once
• 19:33
  Speaker 4: the traditional financial institutions, you know, start getting involved and
• 19:38
  Speaker 4: being part of this process, I think those rules are
• 19:41
  Speaker 4: going to stick. There might be some changes around the
• 19:44
  Speaker 4: edges going forward, but if this technology is good, if
• 19:48
  Speaker 4: it is valuable, if it proves its case, I don't
• 19:52
  Speaker 4: think that future regulators are going to want to wholesale
• 19:55
  Speaker 4: undo what Chair Atkins is doing. Some of this is
• 20:00
  Speaker 4: on the industry, right? This needs to work. This needs
• 20:04
  Speaker 4: to be an improvement over the status quo. And if
• 20:08
  Speaker 4: it is, I think this is going to be incredibly
• 20:10
  Speaker 4: durable and can have the longevity that we would have
• 20:14
  Speaker 4: had with legislation through the rulemaking process.
• 20:18
  Speaker 5: Yeah.
• 20:19
  Speaker 1: I'm looking further into it because there are some other
• 20:21
  Speaker 1: things that could apply to this. This is just in
• 20:23
  Speaker 1: reference to stocks being paired with meme coins. I think
• 20:26
  Speaker 1: if you look at just stocks, what I want to
• 20:28
  Speaker 1: show to the audience is just what we're seeing in
• 20:30
  Speaker 1: terms of growth on the platform. So there's clearly some
• 20:35
  Speaker 1: there might be some action here for you guys that
• 20:37
  Speaker 1: are watching that. I know a lot of stock people
• 20:39
  Speaker 1: are watching. I'm going to go to the CFTC statement
• 20:42
  Speaker 1: this morning.
• 20:43
  Speaker 2: This came out.
• 20:44
  Speaker 1: The position is similar to that provided in the staff
• 20:48
  Speaker 1: letter and is now.
• 20:49
  Speaker 2: Broadly available to such providers. This is in the.
• 20:53
  Speaker 1: Staff issues of a no action position to providers of
• 20:57
  Speaker 1: passive software. So you've got this happening right now. Who
• 21:01
  Speaker 1: would this apply to, do you think?
• 21:04
  Speaker 4: Yeah, well, this was another piece of great news that
• 21:07
  Speaker 4: came out this morning. So, you know, Phantom a while
• 21:11
  Speaker 4: back received a no action letter for the Phantom wallet
• 21:16
  Speaker 4: when properly KYC'd to interact with different derivatives market participants.
• 21:22
  Speaker 4: But the thing with no action letters is they apply
• 21:25
  Speaker 4: to a specific company under a specific set of circumstances.
• 21:29
  Speaker 4: What the SEC today said is that the same type
• 21:33
  Speaker 4: of relief that Phantom has applies to every self-custody wallet
• 21:38
  Speaker 4: and front end for regulated derivatives. Now, you have to
• 21:41
  Speaker 4: do KYC on all of that, but you can ask.
• 21:43
  Speaker 4: It is huge. Now, I think that the CFTC is
• 21:48
  Speaker 4: probably going to also consider doing a rulemaking on this
• 21:52
  Speaker 4: so that they can make this guidance permanent. But the
• 21:56
  Speaker 4: fact that they issued this statement today is absolutely great.
• 21:59
  Speaker 4: I really do think we're going to be okay in
• 22:02
  Speaker 4: the absence of legislation. I think the agencies are ready
• 22:05
  Speaker 4: to go and they've already taken swift action.
• 22:09
  Speaker 1: I am surprised that the market has not responded to
• 22:12
  Speaker 1: this more positively yet.
• 22:14
  Speaker 2: Obviously, it's very early.
• 22:16
  Speaker 1: But I'm also thinking about this now as we're having
• 22:19
  Speaker 1: this interview, Kristen, I just wonder, do the banks realize
• 22:22
  Speaker 1: what just happened?
• 22:25
  Speaker 4: It's interesting because if you look at the way the
• 22:28
  Speaker 4: Clarity Act was written versus some of the things that
• 22:33
  Speaker 4: the SEC and CFTC can do, the Clarity Act was
• 22:36
  Speaker 4: actually a lot more restrictive, I would say, than what
• 22:40
  Speaker 4: agencies can do. And so I think the fact that
• 22:43
  Speaker 4: the Democrats walked away from the table, they really lost
• 22:46
  Speaker 4: an opportunity to put their mark on the legislation. And
• 22:52
  Speaker 4: as a result, I think we're going to have some very,
• 22:55
  Speaker 4: you know, sort of thoughtful and measured policy proposals put forward.
• 23:00
  Speaker 4: And yeah, you know, I think the banks really didn't
• 23:04
  Speaker 4: want Clarity Act, but, you know, that means there's no
• 23:07
  Speaker 4: changes to the way stablecoin yield is offered. And I think,
• 23:10
  Speaker 4: you know, a lot of folks were, you know, lost
• 23:14
  Speaker 4: their opportunity to make their impact. And I think it's
• 23:17
  Speaker 4: going to be fine. I think crypto is going to
• 23:19
  Speaker 4: be fine. I think Solana is going to do incredibly
• 23:21
  Speaker 4: well in this environment in terms of adopting the technology
• 23:26
  Speaker 4: within the existing system and it is not a step backwards,
• 23:30
  Speaker 4: but a catalyst for the industry to move forward.
• 23:34
  Speaker 1: Well, I look at it this way because Solana could
• 23:36
  Speaker 1: be primed as one of the winners for this. I'm
• 23:38
  Speaker 1: just looking at right now, 12.6 times more volume on
• 23:41
  Speaker 1: chain than traditional stock exchanges right now. This, I think,
• 23:45
  Speaker 1: is maybe an evolution for how trading is going to
• 23:49
  Speaker 1: be done by a lot of traders, not just you know,
• 23:53
  Speaker 1: the leading generation that's kind of coming into the market
• 23:56
  Speaker 1: now that understand what's happening in blockchain and what's happening
• 24:00
  Speaker 1: with essentially kind of the next generation of finance. This
• 24:03
  Speaker 1: may start to matriculate down to traditional traders to where
• 24:08
  Speaker 1: this could become a major play.
• 24:10
  Speaker 2: What do you think?
• 24:12
  Speaker 4: Yeah, I mean, listen, I think, you know, people want
• 24:14
  Speaker 4: to have 24-7 access. People want to have instant settlement.
• 24:18
  Speaker 4: That reduces a lot of risk. People want lower costs
• 24:21
  Speaker 4: across the board. People want really fast trades. All of
• 24:26
  Speaker 4: this can happen on Solana, and it's happening in other markets.
• 24:30
  Speaker 4: And now we are bringing the benefits of this technology
• 24:34
  Speaker 4: to the equities market and then ultimately probably other types
• 24:38
  Speaker 4: of securities and derivatives as well. And so huge opportunity
• 24:42
  Speaker 4: to upgrade the infrastructure.
• 24:44
  Speaker 5: All right.
• 24:44
  Speaker 1: I've got one more clip here I want to play
• 24:46
  Speaker 1: because this is in reference to the BRCA.
• 24:48
  Speaker 4: Okay.
• 24:49
  Speaker 1: And because I want to get your opinion as to
• 24:51
  Speaker 1: what is going to be addressed there. This is Tom Emmer.
• 24:54
  Speaker 1: He's been on our show before. And to a certain extent,
• 24:58
  Speaker 1: he's been somewhat pro-crypto.
• 25:00
  Speaker 2: Let me play this clip for you.
• 25:02
  Speaker 7: Now on the Blockchain Regulatory Certainty Act, I am concerned.
• 25:07
  Speaker 7: Haven't really studied it in detail. But generally, I don't
• 25:12
  Speaker 7: like it. I don't like the fact that you literally
• 25:16
  Speaker 7: are giving up that safe harbor of I may not
• 25:19
  Speaker 7: like it, but that doesn't matter. If we move it
• 25:22
  Speaker 7: forward and it works, great. If it doesn't work, guess what?
• 25:27
  Speaker 7: We can always, and I think we will be making
• 25:29
  Speaker 7: adjustments in the future anyway.
• 25:31
  Speaker 1: All right, so this to me is the problem I
• 25:34
  Speaker 1: have with Congress is that they are so uninformed on
• 25:39
  Speaker 1: all of these very critical moves that are happening in
• 25:42
  Speaker 1: our financial structure as we speak. And I just don't
• 25:46
  Speaker 1: understand why we haven't been able I mean, we've been
• 25:48
  Speaker 1: doing this for multi years now, having Congress people and
• 25:52
  Speaker 1: House people and every analyst out there. Why are they
• 25:57
  Speaker 1: not caught up on where.
• 25:58
  Speaker 2: We are right now?
• 25:59
  Speaker 4: He's been a longtime champion of the Blockchain Regulatory Certainty Act.
• 26:04
  Speaker 4: This is the legislation that provides protections for software developers.
• 26:09
  Speaker 4: And what he was talking about is in the latest
• 26:12
  Speaker 4: version of the Senate bill, they focus the developer protections
• 26:17
  Speaker 4: On the civil side, this was kind of the Bank
• 26:19
  Speaker 4: Secrecy Act piece of things and making sure that software
• 26:23
  Speaker 4: developers aren't confused as money transmitters simply for writing code.
• 26:28
  Speaker 4: What the Senate bill did and why he was frustrated
• 26:30
  Speaker 4: in that clip is that there had also previously been
• 26:35
  Speaker 4: protections on the criminal side. And I alluded to this
• 26:38
  Speaker 4: at the start of the podcast, but several years ago,
• 26:40
  Speaker 4: there were a lot of developers of top projects in
• 26:44
  Speaker 4: the United States that were under criminal investigation for helping
• 26:48
  Speaker 4: to contribute to writing code to blockchains. And so this
• 26:52
  Speaker 4: would have stopped that type of investigation that holds somebody
• 26:58
  Speaker 4: accountable as a money transmitter under the criminal statutes. And
• 27:02
  Speaker 4: so his frustration there was he thinks that we should
• 27:04
  Speaker 4: have both civil and criminal blockchains. protections for software developers.
• 27:08
  Speaker 4: But yeah, I think this is a fundamental issue that
• 27:11
  Speaker 4: we do want to ultimately get passed into law. The
• 27:15
  Speaker 4: good news is I think right now there's guidance at
• 27:18
  Speaker 4: FinCEN that's pretty strong on this, but we do need
• 27:22
  Speaker 4: to get that change at the DOJ. And so I
• 27:24
  Speaker 4: know a lot of folks internally here at Solana Policy Institute,
• 27:28
  Speaker 4: our friends at the DeFi Education Fund And many others
• 27:31
  Speaker 4: are looking at alternative legislative vehicles to getting these types
• 27:35
  Speaker 4: of protections in there, because I think they are hugely
• 27:37
  Speaker 4: important for keeping innovation here in the United States.
• 27:40
  Speaker 1: So big statements today, Kristen, coming in from you. I'm
• 27:44
  Speaker 1: kind of blown away that the industry is now backing
• 27:48
  Speaker 1: away from the Clarity Act and moving toward more of
• 27:51
  Speaker 1: a regulatory alignment through rulemaking, which is a huge step.
• 27:56
  Speaker 1: And now obviously we see some of this. I'm going
• 27:59
  Speaker 1: to just get a prediction from you. I'm kind of curious,
• 28:01
  Speaker 1: 12 months from now, what do you see coming down
• 28:05
  Speaker 1: the pipe out of the SEC and the CFTC?
• 28:08
  Speaker 4: Yeah, I mean, I think we're going to see most
• 28:10
  Speaker 4: of these efforts initiated in the short term here, because
• 28:15
  Speaker 4: as I said, all of this process has to be
• 28:18
  Speaker 4: wrapped up by the summer of 2028. And the reason
• 28:21
  Speaker 4: for that is we have no idea what the government's
• 28:23
  Speaker 4: going to look like come January 2029. We'll have somebody
• 28:27
  Speaker 4: new in the White House. We don't know who's going
• 28:30
  Speaker 4: to be in control of Congress or the Senate. They
• 28:32
  Speaker 4: have this Congressional Review Act power that allows them to
• 28:35
  Speaker 4: look back 60 legislative days. Remember, they don't legislate every day.
• 28:39
  Speaker 4: There's a lot of gaps in there. So it's really
• 28:42
  Speaker 4: sometime in the summer of 2028. If there's anything in
• 28:44
  Speaker 4: those 60 legislative days on the rulemaking front, Congress has
• 28:47
  Speaker 4: the power to undo that. That's the big fear. That's
• 28:50
  Speaker 4: the deadline. So I think we're going to see them
• 28:53
  Speaker 4: move forward with some of the rulemakings they've already put
• 28:56
  Speaker 4: out there, the red crypto rulemaking, the transfer agent rulemaking,
• 29:00
  Speaker 4: and now this tokenized equities rulemaking. I do think we're
• 29:04
  Speaker 4: going to see at the CFTC similar efforts around this
• 29:09
  Speaker 4: relief today, this expansion of the phantom relief to self-custody
• 29:14
  Speaker 4: while it's in front ends. I think we could see
• 29:16
  Speaker 4: a rulemaking around that. I think we could see rulemaking
• 29:18
  Speaker 4: about how to do perpetuals in the U.S. And so
• 29:21
  Speaker 4: I think it's going to be a very busy time,
• 29:24
  Speaker 4: very good time to be a crypto regulatory attorney. There's
• 29:28
  Speaker 4: going to be a lot of comment letters and a
• 29:30
  Speaker 4: lot of analysis that needs to be done I think
• 29:33
  Speaker 4: we're going to see a little bit of retooling of
• 29:36
  Speaker 4: our organizations here in Washington that are on the ground.
• 29:39
  Speaker 4: to be less legislative focused, more regulatory focused. And, but,
• 29:44
  Speaker 4: but yeah, I think we're going to, we're going to
• 29:46
  Speaker 4: see those rules being close to finalized. And I think
• 29:49
  Speaker 4: we're going to see a lot of innovation and a
• 29:51
  Speaker 4: lot of leadership here in our U.S. capital markets. All right.
• 29:55
  Speaker 2: Well, there you have it, guys.
• 29:57
  Speaker 1: Breaking news today from Kristen. So thank you so much
• 30:00
  Speaker 1: for coming in today. We appreciate it. We'll definitely have
• 30:02
  Speaker 1: you back.
• 30:03
  Speaker 4: Thanks, Paul.
• 30:11
  Speaker 2: If you like this video, hit like and subscribe.
• 30:13
  Speaker 1: Drop a comment down below and also join our free
• 30:16
  Speaker 1: private member group. The link is in the description.