Latest / The Starting Block / Will the SEC & CFTC steady crypto industry after the Clarity Act impasse?

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Will the SEC & CFTC steady crypto industry after the Clarity Act impasse? · The Starting Block

0:06
Welcome back to The Starting Block.
0:07
Happy Monday to you wherever you are
0:09
joining us today.
0:10
We are back doing the show remotely
0:12
after a couple of weeks in New York
0:14
City. If you weren't there, we were
0:15
at Avalanche Summit and we had a
0:17
fantastic time.
0:19
Two days of broadcasting with the
0:21
Avalanche Labs team at
0:23
the summit there in New york city.
0:25
We had a handful of
0:26
really great guests, including none
0:29
other than Mr. Wonderful
0:30
himself. If you missed some of those
0:32
interviews, you can find them
0:34
on our YouTube channel.
0:35
Just click on the live tab and you
0:37
can go back and watch both of our
0:39
broadcasts with
0:41
all of those speakers that we had
0:43
in In
0:44
New York City last week.
0:46
And yeah, just to highlight those.
0:48
Yeah, mr. Wonderful himself and
0:50
who's who Hunter Horsley?
0:52
We had Zach handle from a
0:54
grayscale Stanley Kulikov from
0:56
Ave and many many other
0:58
great names Caroline Pham former
1:00
CFTC chair
1:01
or acting chair And Chris
1:03
Giancarlo, who was also a
1:05
CFT chair a few years ago, really,
1:07
really great conversations all
1:08
centered around policy and
1:10
reactions to the Clarity
1:12
Act impasse that happened last week,
1:14
Tuesday. So it was very timely to be
1:16
sitting down with many people in the
1:18
know in the United States to
1:20
talk about that less than 24 hours
1:22
after that news had broke.
1:23
We are gonna be keeping on with that
1:25
conversation today.
1:25
We've got John Modell from Injective
1:28
Labs joining us in the hot seat
1:29
in a few minutes time to talk to us.
1:31
About the Clarity Act.
1:32
But of course, before we do that,
1:34
we're gonna get into the Block
1:36
Briefing, which is our news update
1:38
of the top stories you need to know
1:40
in the last 24 hours curated
1:42
from the Block's news
1:44
team. And let's jump straight into
1:45
it. It's looking very green
1:47
above my head on the livestream
1:49
today.
1:50
Bitcoin just tapped $85,000,
1:53
its first visit to that level since
1:55
January as the rally
1:57
rolls on.
1:58
BTC briefly popped.
2:00
Above 85 before easing back near
2:02
84, 2000, up
2:04
more than 5% on the day with Asian
2:06
and European stocks climbing
2:07
alongside it.
2:08
That's a sharp comeback from around
2:10
$75,000 less
2:12
than a week ago.
2:14
The move torched the shorts of
2:16
more than $750 million
2:19
in crypto liquidated over 24
2:21
hours. Some 648
2:22
million were short positions.
2:25
Ether, XRP and Solana
2:27
all rode higher too.
2:28
So we're definitely going to be
2:29
watching the markets.
2:30
Throughout the day today, it should
2:31
be very, very interesting if
2:33
you are a trader.
2:35
We will be chatting markets later
2:37
this week with a few different
2:38
guests coming on the show.
2:39
So make sure you set your reminders
2:40
to join us at 8.30 on
2:43
Tuesday and Wednesday.
2:44
Then our next headline, Washington
2:46
Isn't Waiting for Congress.
2:48
The CFTC has set its
2:50
crypto rule book covering crypto
2:52
asset transactions and
2:54
markets to the White House's
2:56
Regulatory Review Office.
2:58
It's the agency pressing ahead
3:00
on its own after the Clarity Act,
3:02
the big federal crypto bill died in
3:04
a Senate procedural vote last
3:06
Tuesday with some Democrats citing
3:08
ethics concerns tied to
3:10
President Trump's crypto holdings.
3:12
The same day the SEC rolled out its
3:14
innovation exemption to allow
3:15
on-chain trading of tokenized stocks
3:17
and the CFTC gave software
3:19
developers a no action
3:21
cushion on broker registration.
3:24
Then our next headline, Wall Street
3:26
Journal investigation after this
3:27
weekend. Says Polymarket fended
3:29
off and attempted $10
3:31
million fraud earlier this year,
3:34
and that CEO Shane Copland
3:35
told staff to chase growth and
3:38
worry about compliance later.
3:39
Starting in February, fraudsters
3:41
used stolen debit cards to fund
3:43
accounts, place bets, then
3:44
cash out to clean cards.
3:46
At one point, payment process at
3:48
checkout.com flagged more
3:50
than 80% of you Polymarket
3:52
US deposits as fraudulent
3:54
against an industry norm
3:56
near 1%.
3:57
Polymarket says its market integrity
3:59
framework detects and responds to
4:01
suspicious activity and points
4:03
to cooperation with
4:05
regulators. I haven't reached out to
4:06
Polymarket myself on this
4:08
story, so just keep an
4:10
eye out on the block's platforms for
4:12
more information on that story,
4:14
as this is one we've picked up from
4:15
big publications covering,
4:17
namely the Wall Street Journal.
4:19
Moving on to our next headline,
4:20
Visa's Closing a Meme Coid Rewards
4:22
Loophole and it traces back to
4:24
a block investigation.
4:26
According to the newsletter, Crypto
4:27
in America, Visa is telling
4:29
processes to stop filing meme coin
4:31
purchases under a digital media
4:33
category that let buyers earn
4:35
ordinary credit card points and cash
4:37
back. That follows the block's
4:38
September 1st investigation into
4:40
Crossment, the firm powering
4:42
checkout for FOMO and Robinhood
4:43
Wallet and its process at
4:45
checkout.com.
4:46
The purchases were coded as digital
4:48
media, missing the flags that mark
4:50
crypto transactions.
4:52
Processes reportedly have a grace
4:53
period ending next
4:55
week. And this is a big story.
4:57
And one that I was keenly
4:59
interested in and had conversations
5:01
with the guilty parties.
5:03
X, the platform that Elon Musk's
5:05
XAI bought for $33 billion last
5:07
year is suing two UK
5:09
residents in London, alleging
5:11
they gamed its creator revenue
5:13
sharing program.
5:14
The suit claims the pair ran a
5:16
network of accounts that liked to
5:17
repost it and replied to one another
5:19
to fake engagement and inflate
5:21
payouts with some crypto-focused
5:23
posts landing just seconds
5:25
apart. Ex-put its
5:27
losses at roughly $277,000
5:30
and is seeking another 100
5:32
grand for investigation and cleanup.
5:34
The accounts were suspended in
5:36
August. For now, the allegations
5:38
have not been tested in
5:40
court. One of these individuals I
5:42
had reached out to and had
5:43
conversations with over the last
5:45
couple of years and had previously
5:46
said to him that I had taken
5:49
umbrage with his
5:51
use of content from my previous
5:53
employer. And content that the
5:55
block has been posting in recent
5:56
months. Essentially these people
5:58
were lifting content or downloading
6:00
it and posting it as their own on
6:01
their own platforms and then using
6:03
their network of accounts that they
6:05
own together to inflate
6:07
and game X's
6:09
payout system.
6:10
So interesting story and one very
6:12
much tied to the
6:14
XKOL and crypto
6:16
space.
6:17
Our last headline of the day, Zeta
6:19
Chain is pulling the plug on its own
6:20
blockchain.
6:21
Token holders voted Sunday
6:24
99.4%
6:25
in favor to shut down the layer one
6:27
network and move the Zeta token
6:29
to Solana.
6:30
This is a project that raised $27
6:32
million three years ago to
6:34
connect competing chains.
6:36
Now the teams say it no longer needs
6:38
its own chain, pivoting instead
6:40
to Anuma, its AI app
6:41
on Solana, Zeta becomes a
6:43
native Solana token one for one,
6:45
keeping its ticker and total supply
6:47
and the chain keeps running for
6:49
now. While contributors work
6:51
out the full conversation.
6:53
And once again, all of those stories
6:54
coming from the Blocks news team, if
6:56
you're interested in reading some
6:58
more of our headlines or our reports
6:59
over the weekend and breaking news
7:01
and reaction to Bitcoin going higher
7:03
today, go and check out the Block's
7:04
websites. That is theblock.co.
7:07
And of course, give us a follow on X
7:08
if you are joining us here for
7:10
today's live stream, like and
7:12
retweet the broadcast as well.
7:13
As we continue with the show, we're
7:15
gonna be moving on to the
7:17
hot seat And it's a great pleasure
7:19
to.
7:20
Welcome John Modell to the show from
7:22
Injective Labs.
7:23
John, first things first, it's great
7:25
to have you on the show.
7:26
Unfortunately, we missed each other
7:27
at New York. We were both at
7:28
Avalanche Summit, but we're making
7:29
up for it today.
7:30
How are you?
7:31
Very good, and thanks for having me,
7:33
Garrett.
7:34
It'll be a fun conversation last
7:37
week and this week.
7:39
Yeah, for sure.
7:40
Let's dive straight into it.
7:41
I mean, the news came out last
7:43
week, Tuesday, obviously with the
7:45
Clarity Act reaching an impasse
7:47
on the Senate floor and
7:50
essentially Senators not,
7:52
or the Act not getting enough
7:54
votes to pass through to the next
7:55
stage.
7:56
We chatted to many different people
7:58
at Avalanche Summit last week.
8:00
Most notably, Chris Giancarlo,
8:02
former CFTC Chairman, and
8:05
he was fairly,
8:07
I would say, optimistic.
8:09
That the CFTC and the
8:11
SEC as the
8:13
ruling agencies here would be able
8:14
to pick up the slack and
8:16
drive things forward despite
8:18
politics getting in the way of the
8:20
act on the Senate floor.
8:22
Do you agree with that sentiment?
8:24
I do indeed.
8:26
We at Injective remain quite
8:28
bullish, in fact.
8:30
We as an American company want
8:31
to build, continue to build here
8:33
in the United States, and we
8:35
really are optimistic
8:38
by what we're seeing coming out of
8:40
both agencies and others,
8:42
frankly.
8:43
And there really is a push to bring
8:45
that type of regulatory framework
8:48
that we were hoping
8:50
to get from Congress.
8:51
But.
8:52
We're quite pleased that the
8:54
agencies have not waited,
8:56
have jumped right in and are being
8:58
aggressive with quite a broad
9:00
agenda to bring forth
9:02
that type of regulatory regime
9:04
that the industry really deserves.
9:07
I mean, the very next day the SEC
9:09
put out new rules,
9:11
it does seem like they're moving
9:12
very quickly and perhaps they
9:15
themselves kind of anticipated that
9:18
the Clarity Act wouldn't
9:21
get enough votes in the procedural
9:22
vote and they wanted to make
9:24
it clear that despite that they're
9:26
going to forge ahead and take this
9:28
on themselves.
9:29
Yeah, it's clear they wanna be
9:31
aggressive. They wanna move quickly.
9:34
But I don't think we've seen their
9:36
entire menu in fact yet.
9:38
We are quite optimistic
9:40
that there's more to come.
9:42
And we're looking forward
9:44
as part of Injective
9:46
being part of the industry push
9:48
in this rulemaking process.
9:51
Maybe it's not quite as glamorous or
9:53
sexy as what goes on in
9:55
Congress, but the details really do
9:57
matter. And we look forward to
9:58
having a voice in providing
10:00
that type of regulatory
10:02
framework to make
10:04
sure that people are comfortable
10:06
with continued development within
10:08
this industry.
10:10
I think most notably for me, the SEC
10:11
rolling out the innovation
10:13
exemption, which essentially will
10:15
allow on-chain trading of tokenized
10:16
stocks, is a big one, right?
10:18
Because this is kind of part and
10:20
parcel of what was sort of in
10:22
the rulebook of the Clarity Act.
10:24
They're giving everyone basically a
10:26
green light to go ahead.
10:27
So it's almost as if despite
10:29
Clarity, nothing really changes.
10:32
Maybe that's a bit of a layman's
10:33
view, but perhaps you can unpack
10:35
that one a little bit more for us.
10:37
Yeah, I mean, obviously,
10:39
we would all have liked to have
10:40
the permanence that legislative
10:43
solutions bring.
10:45
That would be the market structure
10:47
legislative piece that would have
10:49
come out from Congress, right?
10:51
But without that, we're still
10:54
quite optimistic that
10:55
the industry will get
10:57
relief from the regulatory
10:59
bodies.
11:01
And you're right, the innovation
11:02
exemption is one big piece of that
11:04
because it really allows.
11:06
People to continue to build in
11:08
the direction that consumers
11:10
and clients are looking for,
11:12
but also continue
11:14
to innovate, quite frankly, and
11:16
create new products and new services
11:18
that we haven't even thought about
11:20
quite yet. So that's quite exciting.
11:22
But there's also these nuts and
11:24
bolts pieces.
11:26
What I'm talking about is a proposal
11:28
on transfer agent
11:30
licensing being another
11:32
proposal coming out
11:34
of the SEC.
11:36
Whether it be big ideas or
11:38
simple, just getting the
11:40
architecture right, we're
11:42
seeing many, many moves from the
11:44
agencies and we support that.
11:46
John, can you talk a little bit
11:48
about perhaps just the
11:49
disappointment of politics getting
11:50
in the way here?
11:52
We had some great conversations over
11:53
the last month with different
11:55
people in the industry kind of
11:57
unpacking what could happen.
11:59
And there was an overarching theme
12:01
that people on the left
12:03
really just didn't want to give
12:04
Donald Trump a win with the Clarity
12:06
Act, even with the ethics
12:08
provisions that were agreed to.
12:10
And at the end of the day,
12:12
partisan politics stepped in here
12:14
and meant that clarity didn't get
12:16
past them.
12:17
Was it surprising to you that
12:18
happened, or did you personally kind
12:20
of anticipate that this might
12:22
be the outcome?
12:24
And is that necessarily a bad
12:26
thing or a good thing? Do we have
12:27
enough agency power to
12:30
move past the politics at play and
12:32
kind of at least just give our
12:34
industry some continued
12:36
stability to keep innovating and
12:38
building in the United States?
12:40
Look, nothing in Washington
12:42
surprises me these days.
12:44
You really kind of have to take it
12:46
as whatever you can get.
12:48
But what I will point out is a
12:50
couple things.
12:51
I don't think we're at that
12:53
stage in time where we debate
12:55
the permanence
12:57
of this technology.
12:59
We debate whether or not there's
13:01
any utility to this technology,
13:03
I think people accept the
13:05
blockchain, people understand the
13:07
importance of having digital
13:09
assets.
13:09
Being part of the evolution
13:11
of finance and frankly our
13:14
economies.
13:15
I think that's no longer under
13:17
debate.
13:18
What really where we are is
13:20
the past year has been about
13:22
discussing and debating
13:24
what that regulatory
13:26
or legislative framework looks like
13:28
and what we've seen over
13:30
this negotiations is
13:32
120 plus
13:34
provisions that were agreed upon.
13:37
An ethics framework that was
13:39
unprecedented, in fact.
13:41
So I think the foundation of
13:43
future work is there.
13:45
I'm really quite bullish that we
13:47
will see a continuation
13:49
of that process.
13:51
And what I'm excited
13:53
about is that a number
13:55
of policymakers on both
13:57
sides have that same agreement
14:00
and their educational level
14:02
has improved since when I
14:04
entered this industry about five
14:05
years ago.
14:06
When we had to talk about what is
14:08
a blockchain and what can
14:10
we do to bring about the evolution
14:12
of this technology.
14:13
So we've moved well
14:15
beyond that.
14:16
I think it remains up to the
14:18
industry though.
14:19
We do need to change some
14:21
of the ways that we continue to
14:23
educate and advocate for our
14:25
issues. I think that's clear
14:27
from the experience of the past year
14:29
and I
14:31
can't say this enough, education
14:32
remains the hallmark of the
14:34
work that remains to be done.
14:37
Especially in the decentralized
14:38
or DeFi space, we really
14:40
have to continue
14:42
that process to help policymakers
14:45
realize and
14:46
understand what it means not to have
14:48
intermediaries and what it mean
14:50
to have to be able to trade or
14:53
to conduct activities without
14:55
having intermediaries.
14:57
So that remains in front of us.
14:59
John, can you talk to us, especially
15:01
our audience out there that might
15:02
not be too familiar with Injective,
15:04
a quick TLDR on Injectiv and your
15:06
personal work, what you're doing in
15:08
DC and what this education
15:10
piece looks like?
15:12
Because I think a lot of people take
15:13
it for granted, especially in our
15:14
industry, that everyone knows what
15:16
Bitcoin is, everyone knows how DeFi
15:18
works, and that's simply
15:20
not the case. And perhaps that's
15:21
also part and parcel of why
15:23
it's been so hard to get a lot
15:26
regulatory clarity, excuse the pun,
15:28
for the crypto industry.
15:30
Indeed.
15:31
Look, Injective is a
15:33
layer one blockchain, a
15:35
decentralized layer one blockchain.
15:37
We're there to build, you
15:39
know, the infrastructure of the 21st
15:41
century.
15:41
And we are looking to partner
15:43
with both Fintech,
15:45
TradFi, and others
15:47
really, in building this
15:49
infrastructure.
15:51
Part of that challenge is being
15:52
able to help policy
15:55
makers, other stakeholders.
15:57
Third-party participants within
15:59
this space, understand what that
16:01
all means, and help them understand
16:03
both the technology,
16:06
how it's evolving, how
16:08
quickly it's evolving, and
16:10
frankly also giving them a face
16:12
of who are these people building
16:14
this technology.
16:16
You know, there's always these
16:17
misconceptions about the industry
16:19
and who we are, and so
16:21
part of the challenge is really just
16:23
helping them understand we're
16:25
regular people trying to create
16:27
solutions to make our
16:29
lives better, and
16:31
frankly also have a discussion
16:33
about how do we mitigate some
16:35
of the bad parts of any new
16:37
emerging technology.
16:38
So that's a
16:40
challenge to try to help people,
16:43
frankly, who are very busy,
16:45
who have a number of different
16:46
issues on their plate, understand
16:48
all that, but we're
16:50
happy to give it a try.
16:51
And the great thing that we've found
16:52
the past year, really.
16:54
It's really been an industry-wide
16:56
effort. So we at Injective have
16:58
worked with everyone from Solana,
17:00
from the Coinbases of the world and
17:02
others, really to try to figure
17:04
out how can we address
17:06
some of these concerns and how
17:08
can bring about the change
17:10
that people want to see
17:12
and deserve.
17:14
Let's talk a little bit about the
17:16
road ahead.
17:17
Obviously, Congress had
17:19
entered recess.
17:20
There's gonna be a big focus on the
17:21
midterms.
17:23
As I understand it, and I'm not
17:25
American, so please forgive
17:27
my lack of understanding of all
17:29
things when it comes to the
17:30
political system in the United
17:32
States, but the
17:34
composition of the subsequent
17:36
Congress might change after the
17:38
mid-terms What does that actually
17:39
mean for the future of the Clarity
17:41
Act and what do you kind of
17:43
anticipate going forward?
17:45
Is this still a chance that it comes
17:47
back on the table and we can
17:49
make some progress?
17:50
Well, first of all, I'll say you're
17:52
probably lucky that you're missing
17:53
all the political ads that are gonna
17:55
be bombarding the airwaves
17:57
over the course of the next 40,
17:59
45 days or so.
18:01
So you're lucky in that sense.
18:03
One thing I will say, whatever
18:05
happens, whoever controls the
18:07
Congress in the next session,
18:09
I think one thing I would keep in
18:11
mind is this, there's gonna be
18:13
a turnover in not just
18:15
which party controls Congress,
18:17
but also generationally.
18:19
I think we're gonna see a lot of new
18:21
blood and a lot new people
18:23
who are open to technology,
18:25
open to innovation and open
18:27
really to new ways to look at
18:29
things. And that's exciting for
18:31
me. It really allows us
18:33
to continue this educational process
18:35
that I mentioned and work with
18:37
people that want to make sure that
18:40
we do jump into
18:42
these new technologies in the right
18:43
way and do it in a way
18:45
that we protect consumers.
18:47
But also allow continued
18:49
innovation and, frankly, job
18:51
creation to continue here in the
18:53
United States and elsewhere.
18:56
Beautiful, John, thank you so much
18:58
for taking the time to join us here
18:59
on the starting block.
19:00
I promise next time we're in New
19:01
York City, we'll hit you up and try
19:03
and do something in person.
19:05
And if you're heading to Token 2049
19:06
or any of the upcoming conferences
19:08
into the end of the year, we would
19:10
love to have you with us.
19:12
Indeed, love doing this.
19:14
Thanks very much, John.
19:15
And thank you very much for joining
19:17
us for the starting blog today.
19:18
We're gonna keep it short and sharp
19:20
as we return to
19:22
offline broadcasting from
19:24
our remote studio.
19:26
We will be heading to Token 2049
19:27
in a couple of weeks time and there
19:29
are a couple of other big
19:31
conferences that we will be
19:32
broadcasting live in the field
19:34
from. But if you missed our
19:35
broadcast from Avalanche
19:37
Summit last week, I just want to
19:38
give you a rundown of the who's who
19:40
that joined us. And if you are
19:41
interested, you can, of course, go
19:43
and re-watch the streams from last
19:45
week if you want to hear from some
19:46
of the big names we had.
19:48
Stani Kulakov, Aave's founder,
19:50
of course, we had Graham Ferguson,
19:52
who's the head of Ecosystem at
19:53
Securitize.
19:54
It was a great conversation.
19:55
If you're interested in the life
19:57
of being a content creator, we had
19:59
Clemente, who's one of my favorite
20:01
funniest KOLs out there.
20:02
He joined us to talk a little bit
20:04
about storytelling in crypto and
20:06
trying to survive the trenches.
20:08
And then, of course, one of my
20:09
favorite conversations of the entire
20:10
week was Chris Giancarlo,
20:12
former CFTC chairman, dropping
20:14
some nuggets of wisdom and some
20:16
really great insights on the road
20:18
that we've walked to get to where
20:20
crypto regulation is,
20:22
where it is in the United States.
20:24
And what the future does
20:26
hold.
20:27
Cody Carbone from the digital
20:28
chamber joined us as well.
20:30
That was a really interesting conversation.
20:32
One of the best VCs out
20:33
there, Haseeb Qureshi from
20:35
Dragonfly also sat down with us.
20:37
A really interesting conversation
20:38
around his thesis on
20:41
AI investing and just
20:42
crypto investing and VCs.
20:44
We had back to backs with Zach
20:46
Pandel and Hunter Horsley from
20:48
Grayscale and Bitwise respectively.
20:50
And then we wrapped up with Nick
20:52
Cerny, who was from
20:54
Janice Henderson.
20:55
Then on day two, we kick things off
20:57
with Kevin O'Leary, by far the
20:59
most interesting conversation of
21:01
the two days of broadcasting.
21:03
We are putting out snippets of
21:04
those, that interview in particular
21:06
on our social media today.
21:07
So keep an eye out on the block's
21:09
socials.
21:10
I really enjoyed conversations with
21:11
Bajie Illuminati, Caroline
21:13
Pam, who of course was the
21:15
chief legal officer at MoonPay, but
21:17
she also was a former CFTC
21:19
commissioner.
21:20
And Meltem Demiroz, who's the
21:21
founder and GP of Crucible, jumped
21:23
on the live stream as well.
21:24
We had a great conversation about
21:25
Bitcoin and her thoughts on
21:27
AI and what that means for the
21:28
industry. And then we had John
21:30
Nahas, who's a chief business
21:32
officer at Ava Labs.
21:33
He was followed by Charlie Cooper,
21:34
who's president of Ava labs.
21:35
We spoke, obviously, all things
21:37
Avalanche, really, really great
21:38
conversation.
21:39
And then, we finished off with
21:41
an interesting conversation with
21:42
Andy Ross from Kalshi.
21:45
So if you want to catch up on any of
21:46
that content, please go and check
21:47
out our YouTube channel.
21:49
While you're there, please subscribe
21:51
to the channel. And if you enjoy the
21:53
broadcast, go ahead and like that.
21:55
If you joined us on X today, please
21:57
like and retweet this broadcast so
21:58
we can get more eyeballs on our
22:00
conversation that we just had with
22:01
John Medel.
22:02
And if don't already set a reminder
22:04
on your calendar, the starting block
22:06
broadcast live right here on
22:08
X on YouTube daily at 8.30
22:10
a.m. Eastern time.
22:11
If you're in the United States,
22:13
that's 2.30 p.m., Central European
22:15
time until the clocks change.
22:17
It's coming soon.
22:18
And autumn's in the air.
22:20
That is it for today's show.
22:21
Happy Monday to you wherever you are
22:22
around the world. Stay warm, set a
22:24
reminder on your clocks, come and
22:25
join us for tomorrow's show,
22:27
until then, bye bye.