The Chopping Block Live with Patrick Witt: The CLARITY Act and Beyond

Transcript

being aird drops are kind of pointless. Anyways, >> und trading firms who are very involved. >> Polic is the ultimate >> DeFi protocols are the antidote to this problem. >> Hello everybody. Welcome to the chopping block. Uh we're coming at you live today. Uh obviously all of you know every couple weeks the four of us get together and give the industry insider perspective on the crypto topics of the day. So joining us today we've got Tom the D5 Maven and master of memes. >> Hello everyone. Next, we got Tarun, the giga brain and grand puba at Gauntlet.

>> Yo, >> we've got Robert, Cryptoconur, and Zar of Superstate. >> Good morning. >> And we will have joining us today, but they're not here yet. We will have Patrick Wit, who is the presidential pointman on policy at the White House. Uh, now he today is a very important day, and it's part of the reason why we're doing this live stream is that we're in the final running. Supposedly, the clarity bill language is supposed to drop today. Patrick just called us right before the show is going to go live telling us that he's running around trying to get get make sure the language falls on the right place. So, he will be dialing in before the end of this episode. Um, but just FYI, we're going to be opening with other topics and

we'll get to clarity once he's able to join us. Uh, and I'm see of course the head high man at Dragonfly. We're early stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see chopping blocks. XYZ for more disclosures. Okay, so uh boys, first before we get into any of the meat, it's been a very crazy couple weeks. Uh I wanted to first congratulate Tun uh Tun this was this is a couple weeks ago. We were a little bit late, but Tun raised $125 million >> from SBI Holdings, sole investor. Um, this I think I think these are biggest raise by far. Uh, for those who don't know, SBI is like the they're like the Soft Bank spin-off. It's like an

enormous public company in in Japan. They're like the >> I don't know, they're they're the crypto OGs of Japan. >> Um, huge raise. Drew, what are you going to do with the money? >> Yeah, thanks. Um, you know, I think one thing I've realized being both in crypto and a little bit in traditional finance, uh, I I would say the interesting thing is like historically everyone always thinks about VC as like your fundraising method for, you know, growing a company from the beginning. Um, but I do think like as crypto's matured and it's becoming more sort of trady adjacent, used by Tradfi, inevitably I do think people kind of go back to more traditional big

companies investing in small companies type investment versus a kind of like syndication VC style investment. And I think you know in the process of kind of thinking through you know institutional expansion building products for sort of traditional finance entities that want access to DeFi liquidity um as well as you know being able to provide liquidity to to different types of needs to make the DeFi versus Trady thing a lot more smooth. The natural thing was like, hey, the natural source of capital to actually really kind of look at is people who are in the traditional world who are really looking at uh crypto. And SBI has sort of been around crypto for a

long time. I think they led the series A or seed of Ripple Labs a long time ago. That was their first thing. They also own a bunch of crypto exchanges in Japan. >> They own like three exchanges. I think they're consolidating another one. So they'll be the top uh exchange in Japan soon. Um but yeah, they're kind of they're kind of a a weird conglomerate in the sense of like in the US and you don't really find this type of holding company that owns a ton of different um entities. They, you know, one way of viewing them, I think the thing they're most successful at has been like their online brokerage, no fee Robin Hood like product, which launched at a similar time as Robin Hood, but focused on Japan. Um but yeah, they own a bunch of

banks. They own tons of companies. Um yeah it's >> and now they own a bunch of gauntlets. >> Yes. Now they now they a bunch of us. So >> good for that's the highlight of the portfolio obviously. >> You know I I you know what's funny is I had to I had to wear a suit for which you know I think is a >> Yes, we do know. >> It was very funny. >> Yeah. [laughter] >> Crazy crazy. >> Yeah. It's It's not not easy wearing a suit and being shaved for >> I think you need to tweet if you I think you need to tweet a selfie of Terrun wearing a suit in Japan. [laughter] Amazing.

>> I will retweet that. I'd love to see that. >> Well, you know, also shout out to the the the chairman and founder of SBI, uh Katan, who uh who apparently listens to the show quite regularly. So, >> no kidding. No kidding. Shout out Katan. >> Yeah. So, >> that's good. >> Anyway, uh thanks for thanks for the kind words and, you know, looking forward to to having to learn a lot more Japanese than I know now. >> Cool. >> Although, I I I will say I did learn one really funny thing this week, which is relevant to the show, which is I learned in Korean how to say by the dip, which is jump. And uh apparently it translates literally into picking up

items that have fallen. >> Jump. Jump. Let's go. >> So I need to learn the Japanese by the dip. >> Okay. [laughter] >> I don't know the Japanese buy the dip. Koreans buy dips. I don't know the Japanese are dip buyers. >> Yeah. I I don't know if it's like as funny that it's like picking up things that fell on the floor, you know. [laughter] >> Right. Right. >> It's like you should cry over spilled milk. It could be a could be the next runner. like that's kind of the the the spirit of the Anyway, but >> thanks a lot. Yeah. Uh figured I'd give them a shout out though. Um so, >> well, congratulations. The Chopping Block crew continues to crush. Uh I think both both of you now have raised more actually now that I now I think about this both of you have raised more

money as founders than you have as VCs. >> Um which is actually not easy. That is not easy. That is actually not easy. >> True. That is true. Yes. And it's not because they didn't raise money as a VC. They're both very impressive. >> Yeah. It's not because you're not good to be clear. You guys are top tier VCs as well. So that is that is actually very impressive just as founders. So >> Well, thank you. We are we are the industry insiders, you know. Um >> yes, that's true. >> As we say on the show, >> chopping it up. >> Okay. So speaking of getting chopped up, uh friend of the show, Biology, there's a a story that's been developing that we've been paying attention to. Um hopefully we can get BI on the show to talk about this because this has been very interesting. So for those of you

who don't know Biology, Bali is one of the OGs in the industry. He is um uh one of my personal mentors. He was CTO of Coinbase, founder of 21, previously ACZ partner. He is the author of the network state and the concept of network states which I'm sure many of you have heard of, but the idea of a network state is you know a sort of stateless or outside of the nation state system entity that u comes together and bargains for uh land and or uh collective rights, taxation, whatever. uh in you know different jurisdictions around the world through an online first network. So he created this thing called the network school um and he created it in Malaysia in this area called Forest City. Now they've invested a total of something like $150

million uh is my understanding. Oh I'm sorry no they've invested about 25 million plan to invest another 120 million into Forest City um at this basically it's like a it's almost like one of these abandoned Chinese ghost towns that existed in Malaysia. I actually went there relatively early on and and gave a lecture and met with some of the people there. So, it's kind of like one of these founder resorts uh where people come together, they they they crash there for like two three months, build a startup, and then they might stay, they might leave, they might go somewhere else. So, um so anyway, that's network school. The drama began when there was an anonymous account that claimed that Israeli nationals were living at the network state. Now, for those who don't know, Malaysia is a Muslim country and they do not allow

immigration from Israel. But many of these uh the accusation was that some of these Israeli nationals had dual citizenship. So, they had a second passport and that's how they were able to come in and go to the network state and and stay there in Forest City. Um this caused an immigration raid to come in uh to check all the passports from all the foreigners. And supposedly these uh the immigration raid didn't find that there were any invalid passports. Bology came out, called it a fake story. Um, and you know, many of people from the crypto community kind of rally behind him. He then posted a video, kind of extraordinary video where he basically called out the Malaysian president and asked the Malaysian president for an audience so that he could get a memorandum of understanding with the

Malaysian government that there would be a essentially the equivalent of like a charter city arrangement for um what they're doing with network school and basically say like look, we are allowed to exist. we were invited by the country and um you know we should not be harassed for um you know what what is ultimately not our responsibility which is enforcing the immigration laws that's the responsibility of the immigration agents um he said if we cannot get a memorandum we will reallocate our capital to other countries instead this became a huge drama in Malaysia so this was as far as I can tell it seems to have become national news and uh Malaysians were very very angry at this whole uh uh debacle and This resulted at the end with um the Malaysian government

revoking the license to network state. Uh is it not not the central government but like the local government revoked their their license and then just today they announced that they signed anou with Kazakhstan and they are now going to be relocating network school to Kazakhstan instead of Malaysia seemingly bringing the whole thing uh full circle. Okay, looks like Patrick just joined us. Patrick, can you hear me? I can hear you. Can you hear me? >> We can. We can. Okay. Patrick, welcome to the show. We were just talking about I don't know if you caught any of this.

We were just talking about Bology um and his whole network state debacle between Malaysia and Kazakhstan. Um we'll we'll we'll wrap up the segment really briefly, but just just real quick thoughts from the team about this crazy showdown between Bali Malaysia and him now landing in Kazakhstan. Well, I want Bology to succeed. You know, friend of the show. It is an audacious task to try to build a new network state on any other sovereign nation's grounds, right? You're running into their whims as well, right? Once a network state gets successful enough, I don't think you run the same risks. But

Bology, I think, picked the wrong dance partner to start. You know, the sad reality is he's not at nation state level yet. It's a small experiment. I hope that this next endeavor he's more successful, but you know, I feel bad that he got kicked out. >> Do any reaction? [snorts] many many thoughts and reactions, but uh I think there is something where it's like um I think a lot of like westerners go to non-western countries and they're like well I'm just going to run the same playbook and they assume that's going to be the same kind of you know common rule of law and like trusted system I can depend on and like it can kind of go pretty well for to a certain extent and then and then one day you wake up and there's like a coup and like the government is totally out now

that's what's happening here but I feel like this is you know illustrative where it's like this is not you know Singapore or this is, you know, kind of in some ways the wild west. And it's like it can go, you know, kind of uh uh, you know, turkey turkey chart style. It can look really good and then one day you have this like existential moment. And so ideally, you want to, you know, go somewhere you're not going to have a turkey chart. >> Yeah, turkey chart is a good sub description of it because obviously, you know, the the the world is a complicated place. Not every place has the metropolitan international as effect of the US. Most countries are not melting pots. Most countries have very specific u perspectives on ethnicities and on religious groups. Um and Malaysia is one

of those places. And so even if you know there there's it does seem like uh Kazakhstan is a much better fit given that although Kazakhstan is not only a Muslim country, it is much more secular in its leadership. And that is is just going to result in a very different environment if you are trying to build something like what BI is trying to build. And of course, leadership matters, you know, like my understanding is that he he wasn't um clearly didn't have the same kind of relationship with the government that he now has coming into Kazakhstan having signed an MOU with the country's leadership. Um but I think it's ultimately good because like we're all learning in real time. you know, this will be a lesson to other countries of, hey, if you want to do this kind of thing, if you want to import Silicon Valley into another

country, um there's a certain way that you have to do it and you kind of can't do it too lightly, otherwise this is going to be the result. >> Yeah, he is literally the best immigrant import possible for any nation and he's bringing with him like an entire crew of extremely sophisticated, extremely wealthy, extremely capable people. So hopefully this turns out better. I only have two tiny things to say. The first is um I actually met someone from the Kazakhstan uh department of like AI and blockchain.

They they they bundle them together um recently and >> so do we. >> Wait, just like us. Yeah. Wait, what? >> Yeah. No, no. Hey, hey, hey. I'm not I'm just saying that was that I didn't know that they had such a thing and then I I learned it and uh it did sound like they're really making a pretty aggressive push on bringing entrepreneurs there like they were in doing a tour of Asia and like really kind of trying. So I think the timing actually also matched because they were kind of looking for this around the same time. The second thing is um the state that for cities in Jahore is like one of the largest non US data center buildouts that's fully mainly foreign funded. So I

kind of wonder what that's going to do because like that does a huge amount of capital going into that state. Um but yeah, so anyway, >> interesting. Patrick, any thoughts on this story? I don't know if you're familiar at all with the Kazakhstan AI blockchain strategy. Uh I'm not I am kneede and and trying to get the bill passed. So there are there are many stories, not just this one, that I am completely not tracking on. So when I come up for air uh someday, hopefully in the very near future, um I look forward to getting caught up on that.

>> Well, let's catch up on the bill. >> Let's catch up on the bill. So Patrick, you you uh you you told us earlier that you were running around trying to tie up loose ends. Uh but let's first do a little bit of exposition of just where things are with Clarity. So for those of you who've been sleeping under a rock, Clarity, of course, is the big crypto mega bill. It's the big one, the one that we've been waiting for and working on for years now. Um it was introduced finally uh into the House in May of last year. Um it was it was passed the House in July of last year and basically it's been hanging out in the Senate and more or less banging around uh with many different subcommittees passing it around. It's finally gotten onto the Senate legislative calendar. Uh I think

June is when it first got on the calendar and the deadline that everyone is thinking about is August 7th. August 7th is when the recess happens and then when by the time things come back, it's midterms time and there's a lot of other stuff that's going to be taking up legislative space. So the expectation is that if this doesn't happen within the next couple of weeks, there's a good chance it doesn't happen. Now the the the story about the bill today is that the big fight going on right now is on this ethics provision. Okay, so what is this ethics provision? Most of the bills already been hammered out. There was a stuff between Coinbase and the banks and yield and blah blah blah. We already got through all that. The main final hangup is ethics. And ethics of course refers to presidential ethics which is

Democrats largely are demanding that there be some provision that government employees and or the the the White House meaning the president vice president and or uh congressional members are enjoined from some sets of things. Uh whether it's uh issuing new coins or the trading blah blah blah something we we haven't seen the language actually yet. Um right now there's been already uh quotes in the press we haven't seen the language yet of this new ethics provision. the White House supposedly sign off on language that they're comfortable with. Um, but the Democrats have already given quotes in the press that they're vomiting all over the the language. Um, so Patrick, let me bring you in. Tell us about the state of play right now and

what you see as the prospect for this uh current fight over presidential ethics. >> Well, first of all, appreciate you all having me on. Uh, it's good to be connected. It was great seeing you in London a couple weeks ago. Um >> likewise. >> Yeah, as you as you mentioned um the the White House has signed off with [clears throat] we met with the president uh on Thursday of last week again yesterday morning uh to get final sign off on the first of its kind ethics provision that would apply a conduct restriction to the president of the United States. It's uh uh a coincidence that this is our 250th year uh in existence as a country. This is the first time ever that um a a president White House has ever agreed um to submit

to an ethics provision that would restrict the president's conduct. Now, there's number of constitutional reasons um that uh people have have not done that before, but uh despite Democrats comments, not surprising that they're they're going out there and trying to um you know attack this provision before even necessarily seeing what's in it. Um but I can tell you that that is no small feat and that should not be um uh understated just how important of a concession that is. Um you know how many other ethics provisions applied to the president of the United States? Zero.

How many uh ethics provisions that are currently on the books are enforced by anyone other than the US attorney general? Uh meaning how many of them are enforced by state attorneys general? None of them. Um so these these lines of attack and argument that they're making um you know it's a massive departure from president to subject the president to any ethics provision. This president did sign off on one which is amazing. uh a second departure from president to somehow loop in state attorneys general which constitutionally I don't even you know probably scholars on this issue that uh would would have differing opinion but uh there would be no shortage of them saying constitutionally

I don't know if it makes sense for the state attorney general to be able to sue a constitutional officer potentially uh preventing them from performing their constitutional duties. the president is to, you know, take care that the the laws get enforced if he's having to deal with a a lawsuit from a state attorney general. You can see the the problems that that could lead to. And as we've told Democrats throughout this process, um you know, this is President Trump in the White House now, a future Democrat president would also have the same objections to this. Uh because there would be either 25 red state or 25 blue state roughly uh state attorneys general who are all looking to become governors or senators or future presidents who

would love to to make their careers off of bringing uh lawsuits against disfavored uh uh folks in in the other political party. So this this uh provision is real. It is a a massive concession. Um I applaud President Trump for for agreeing to it. Um it would restrict uh uh all federal officials uh from issuing or sponsoring digital assets for their time in office, including their spouses. Um and it would carry strong uh civil penalties uh associated with that. So um that's where we are right now. We're we're talking with the leader's office on on roll out for not just this provision, but uh the bill text overall uh to get that out there and let people judge for

themselves. And I think what they'll see is that this White House has made a an enormous concession here. And you know, if Democrats are are going to try and hold up the bill over this, saying that they need some other uh unprecedented uh enforcement mechanism, it's pretty clear that they're looking to score political points more than they are about uh doing what this bill is intended to do, which is establish a clear regulatory framework for digital assets, not to just uh dunk on political opponents and score political points in advance of the midterm. So, so let me let me flesh that out a little bit because I think some people might have gotten lost in the details there. So, the ethics provision that's currently being proposed by the White House is that the restrictions against the president, Congress people, uh, vice

president would be enforced by the Department of Justice because of course it's federal law. You're the president. Uh, and okay, it should be federal agency law enforcement that should be enforcing this. Um what Democrats are pushing back they're saying no we want all of the state attorney general attorneys general which of course are 50 one for each state each of them should be able to enforce the same law if the New York state attorney general says hey I think you ran a foul of this uh statute that they should be able to come after the president for that or andor vice president and or congress people. That's the fight that's happening right now. And that might make a little more sense why there's uh this this kind of drama about okay the state attorneys general versus the uh the DOJ.

>> Uh Patrick, let me let me ask >> Oh, go ahead. Go ahead. >> I I was just going to say I mean if you're making the argument that this provision is insufficient because it doesn't have state attorneys general enforcing it, then you're basically making the argument that every ethics provision that is on the books for federal officials is insufficient because it also doesn't have state attorneys general enforcing it. So, um, we we need to have a much bigger conversation if if that is the position of the Democrat party. >> Yeah, that I mean that resonates with me is that it seems very odd for state attorneys general to be enforcing a federal ethics provision. Um, I guess my other question though is like okay, what exactly does this ethics provision enjoin um the the enjoined parties from

doing? You said it was issuing a currency and or sponsoring a currency. can't issue a digital asset um in your your time uh serving. Uh that also extends to the spouse. Uh you can't sponsor a digital asset. No paid uh pro uh public sponsorship of digital assets in exchange for for money. Um and also it would prohibit uh digital asset intermediaries um from listing any uh uh digital asset that was impermissibly issued or sponsored. So hypothetically let's just say that you know somebody serving you know has already created a digital asset right what's the path to sort of enter compliance or are legacy assets you know

um thought of as exempt like what walk me through sort of you know what the action >> how do we think about yeah >> yeah the provision lays out >> took it >> yeah the provision lays out that for uh assets that were previously issued or sponsored by a a covered individual uh the term of art and the the statute. Um you either need to place uh any interest in those assets that you might have um into a blind trust or devest of those assets. So uh making clear that you cannot have a continuing ongoing interest in which you are are taking an active role in that. uh to make clear that look we're we're uh putting this provision in place mid-flight uh in an administration here and there needs to

be a pathway for compliance which this provides for. >> Yep. And that seems to me and again um a layman but from a legal perspective you know more robust than the ethical protections on other financial assets um that already exist today. >> That's right. Um, so this would be uh a huge uh you know, I think Senator Moreno said, you know, this would be arguably the most comprehensive, most aggressive uh ethics provision that has ever been passed by Congress. And I think that's right. Um, you know, certainly going back 50 years to the Ethics and Government Act uh that was passed in the wake of the Watergate scandal. So, um, you know, I think people losing sight of that and and trying to take issue with,

uh, small, you know, provisions or, um, you know, different things about it need to keep in mind that, uh, this is a major, uh, major concession, uh, that's that's being made already. >> So, Patrick, let's assume that Democrats can live with the structure of this term. What's next in line that needs to get sorted out before we can get a bill passed? You know, there's uh we've had the big three issues uh coming out of the Senate Banking Committee. One, ethics. We just discussed um and and hopefully resolution on that uh very soon with the the big uh announcement yesterday.

Second, um law enforcement generally uh concerns about the bill that's really focused on the BRCA. Um and then third is kind of a which is not just one issue but uh that title uh in in general that was passed on a partisan basis and the Senate a committee back in January and so some of those issues didn't get fully fleshed out. Um there have been near daily uh conversations between uh crypto industry uh stakeholders and Senator Booker, myself, uh Senator Boseman's team working through those issues which concern uh vertical integration, uh conflicts of interest, affiliate trading, uh preeemption, provisional

registration, pretty much a lot in there, but uh a lot of those have been checked off. Um so we're we are very close. Uh, I would say, you know, Democrats strategy throughout this bill for those of us that have been working on this for the past year has been to never agree to anything in advance, it seems like. And then, um, you know, they they kind of make you uh, play a game of chicken and, you know, ultimately finally say like, okay, we we can't go any further. This is the the best that we can do and we believe, you know, this is this is the best policy. And then, uh, you you do see, you know, them ultimately cut their deals at the very end. But, uh, you know, it's they make you work for it. I'll say that. That's

probably the the nicest way I can say it. >> Okay. So, do do you is that a way of saying like don't write this thing off until the very last minute because there might be uh sort of, you know, ninth inning surprise? >> Yeah, I think this is going to be negotiated until the very last moment. Um, so again, that's that's just been a strategy of of Democrats throughout this process. I I wish it weren't that way. Um, you know, I think ultimately we should be arriving at the best policy and not necessarily trying to play a game of um, you know, of chicken here or try and you know, one up the other, you know, things like that. I think we should be arriving at what is the best policy. You tell us what uh, your policy objectives are that you're trying to

achieve. Um, we let you know what what ours are, what our red lines are, and let's let's find something in the middle. Um, you know, it doesn't need to be a a lot of gamesmanship involved in my opinion, but uh call me naive. Uh I haven't worked on the Hill before, so this is uh a new experience for me. >> I I know you're, you know, not a part of, you know, the Hill or the Senate, you know, but just to war game, you know, some ideas out, you know, is there the possibility that it goes to the floor without, you know, having complete conviction that there's going to be 60 votes? You know, obviously I think the goal is everybody gets on board, right?

There's so much good content here that there's so much bipartisan support for that it should happen. But, you know, if it goes to the very last second, right? You know, I remember when it was in, you know, the banking committee, like there was deals being cut while it was being debated in committee, right? Like it literally went beyond the last second. It went into overtime, right? um you know, is there a possibility that, you know, it winds up getting a vote before there's, you know, 100% confidence that it'll make it through?

Like, how do you see this playing out? >> I think exactly as I I said, um if you're waiting for there to be some kind of grand bargain deal in which you have, you know, call it 10 Democrats in advance saying, "Lader, please put this on the floor. We can't wait to vote for this." You'd be waiting forever. It's it's just never going to happen. That's not how Democrats have negotiated throughout this entire bill. Um, unfortunately, I I I genuinely mean it when I say I wish that weren't the case. Um, you know, I'd certainly be a lot less uh stressed and have slept a lot more for the past year, but um, [snorts] you know, we we are doing our best to to answer every one of the uh the issues that they've raised, every one of their

policy objectives. I mean that sincerely. Um even on ethics as we saw yesterday, you know, nobody thought that we could actually um you know, produce an ethics provision that had real teeth and that included the president. We did. We've answered every one of their um their issues that they've raised um in in a good faith way. I'm a very transparent person. Anyone that's dealt with me knows like I'm I'm not a good liar. I'm not a good poker player. I'm not trying to play games. I'm telling you exactly uh where we are, where our red lines are, and I'm trying to get creative to find solutions to to achieve the objectives that they want. So, um you know, we're going to continue to to do what we've done for the past year, which is again engage in good faith, address all the the issues that that

Democrats raise um in a way that we, you know, think makes the the most policy sense. And at the end of the day, you got to stand up and be counted. And when they call the question, we'll see if people have just been paying lip service to uh moving off of the the anti-crypto, the war on crypto uh stance or whether it was genuine because this is a truly bipartisan product. I think we've added 200 300 pages to the bill. I can tell you that that was not is not because we were wanting to add them. They were they were in order to address uh Democrat concerns and um you know their caucus's objectives. And so we've we've answered the mail on every one of those. And uh we'll see if it's enough here pretty soon.

>> I mean, what gets me confident is when we've seen this go through the House, right? The House I nobody was expecting to be so bipartisan when it finally came to a vote. We were all surprised by just how many votes it garnered on both sides. And you know, I think there's a lot of broad support for clarity and for market structure legislation. You know, I just feel like there's a lot of politics getting played in the the run-up to it. >> Yeah, this is a it should not be a a political bill. I know people probably say that about all sorts of legislation and inevitably the politics comes into it, but we're talking about regulating financial markets. We're talking about regulating a technology here. Uh, in

some ways it's it's kind of uh inverted the fact that Republicans are leading the the way on a uh a regulatory bill. Um, you know, normally you'd expect it to be the opposite. Um, and this is not a a crypto giveaway. I I spend half of my day having to deal with concerns from uh crypto industry stakeholders who take issue with with uh you know, things that are in the bill or things that are being contemplated. Uh, but we're doing that in order to uh make sure that it's a bipartisan product and that we can arrive at an outcome here, not just some kind of show vote. I'm not I'm not in it for a show vote. I haven't dedicated the the past year of my life to to just getting some kind of uh political victory here. It's about producing an outcome and it's about getting this bill

in place and allowing uh crypto to uh achieve its full potential. It's a technology at the end of the day. We think it holds tremendous promise. the president uh has made very clear on crypto or uh AI or nuclear or quantum you name the technology. We want America to be uh successful. We want it to be number one. We certainly don't want uh you know other technologies and and financial markets to be uh taken over by adversaries uh you know either dictating to us uh what the rules of the game are or taking uh a lead in different areas that potentially put our national security at risk. So that's what this is [clears throat] about at the end of the day. Um and I I sincerely hope that um folks come together and

score whatever political wins they need to, but at the end of the day, you know, they should be voting for this bill because it's good policy. So Patrick, speaking of, you know, spending the last year of your life on this bill, one of the interesting subplots to this whole story was your own uh apparently getting called up at the 11th hour to go serve on the National Guard in Georgia. Um, which you you you previously deferred your obligation to go serve in the National Guard. They called you up, I think like I don't know if it was like a week ago or something. And just I think it was yesterday you announced that you successfully got it deferred right as Harry who I think is also on the White House crypto team um he announced that he's departing in two weeks. So it kind of feels like uh talk talk us through

what's going on there because it sounds like you're pretty short-handed given the the the staff over there at the White House. >> Yeah. So in my case I I'm a member of the Georgia Army National Guard um for the past uh year year and some change. I drill uh once a month like a standard reserveist. Um as part of my commitments, I have some upfront uh mandatory training that I have to go to JAG school basically. Um I've already deferred that uh twice now and uh the next date was uh July 27th. So um Monday of next week I was supposed to report. I had orders uh to show up in Fort Sil, Oklahoma um to uh you know in fatigues and and uh there to uh complete my

training. Um I uh got a call from from inside the building, got calls from outside the building. Ultimately uh you know the the agitant general of state of Georgia, the head of the Georgia Army National Guard um you know reached out and said um we think we need to defer this for you. You're doing important work up there. we want you to be able to complete that and um so I was very very grateful >> to receive that deferral. So um get to see this through to the the finish. Um >> Harry meanwhile uh my my deputy um he's supporting a wife and two kids um on on a government salary and um you know it was a a deal that he had with his wife

to serve in government for one year and that was three years ago. So they they're a couple years overdue um uh to return back to the private sector and and uh bring it close to his public service. So incredibly grateful for all the work that that Harry's done. We have him until the end of the month. Um so you know either we're we're done and we get this passed or we're very close and uh we'll we'll certainly be bringing him back for the signing ceremony if we get there. >> We'll get there. >> I like it.

>> Well, okay. I mean, let's let's let's also be um as investors probabilistic here. So, the poly market, I'm sure you I'm sure you're not going to comment on it, but poly market right now has ticked up over the last day and a half, but it's currently sitting at 46%. The low was something like 30%, the high, I think, was February of of like 70, high 70s. So, right now it's a coin flip uh is what marketers are saying of whether or not this bill passes this year. Now, of course, there is a possibility and I think um I can't remember who it was, was it Lumis or somebody who was saying that like look, there's a possibility that even if it doesn't hit this legislative session, it comes back, you know, post midterms and there's a renegotiation of some of the core terms.

Um how would you handicap it? Obviously, nobody wants to go home without a win, but you know, let's say worst case scenario, bill does not pass. Um, how do you handicap the odds that post midterms there's another crack at trying to get this thing passed? >> Specifically post midterms, I I don't know. I wouldn't even venture a guess on that. Um, you know, we're we're focused on the next couple of weeks. Um, I don't think anyone could tell you with any kind of confidence uh what the appetite would be uh for that after the midterms.

Maybe you have some, you know, the the political pressure gets alleviated for Democrats or depending on how the election shakes out, maybe it increases. I I don't know. So, um I I can't say for sure. Um you know, if you if you end up with some kind of split Congress, you know, it's it's very hard to envision a world in which, you know, one chamber is is pulling in one direction and the other is pulling in the other direction and them being able to come together on a bill. It's been hard enough to get a bill agreed to between House and Senate.

Obviously, House produced a product. Senate, we're still there a year plus later. Um, I can say right now, I would say the the prediction markets are about accurate. It feels like a coin flip. It really could go either way at this point in time. Um, where for maybe for some folks that's a little bit unsettling and they want some more certainty around it. I would say with a piece of legislation uh this important with the macro environment that we're dealing with with the fact that we are rapidly approaching a midterm election um in a a very challenging political environment just just overall where people are are polarized. Um the fact that we have been able to take it to this point where we are at the finish line and it is a jump

ball, it is a a coin flip is a a massive achievement in and of itself. Uh as I mentioned, I'm here for an outcome. I'm not here for um uh some kind of you know consolatory victory, but um I want to make sure that this gets done and I feel like you know the fact that we're here on the cusp of it with a real chance to get it done um is is something that should be appreciated. >> And what does the cryptobench look like? Uh because I'm assuming that you're headed back home to Georgia um after you I don't know how how much longer you can defer your service. Um, what does the cryptobench look like after all this >> in in government? You mean

>> within the White House? Within the White House. Yeah. >> So, uh, the deferral that I received, you know, I'll figure out u at what point in time it makes sense to to go do that training. Um, somewhat open-ended right now. So, I'm not going anywhere. Um, training is is only a matter of months and then I go back to being a standard reser. So, um, whenever the time comes to to go do the training, um, that'll either be time for me to leave government and and start life in the private sector on the other side of it. Um, or or come back to government. We'll see. I I [snorts] don't have any predictions for that right now.

>> Got it. Okay. Tom Tun, any questions for our esteemed guest? >> What are you most looking forward to? Let's let's you assume the best. Um, and and this passes. What are you looking forward to the most in in private sector life? Again, >> h I think uh [laughter] >> it's a great question. Um I think people being very upfront and honest about what their intentions are. >> Private sector people. >> Wow. >> Wow. Wow.

>> People tell you here's here's my objective. Here's what I'm selling. Here's what I'm trying to do. Um I feel like in government it's a lot of misdirection and things held back and everything filtered. So um that's just part of the part of the challenging environment of of managing through a process in which you have uh a lot of different stakeholders that have different priorities and and view things differently. But uh yeah, just some some some real honesty and and just uh transparency about what people are trying to get done.

Uh I I had one tiny question which is uh you know we've mainly focused on all the kind of negative things right like the negotiations hard you know things are people are kind of not being truthful I guess but the question to me is like what has been something that's surprised you to the upside like something that was like a positive change to the current final bill that like in the beginning actually you thought wouldn't have made it in or you like like what have sort of been some of the positive surprises that are you know obviously I think the negative ones well documented but I'm just kind of curious if there's anything that stands out to you is like did not think this would make it in or did not think

you know this part of the bill would be constructed >> good question >> um it's it is a great question I I feel like uh most of my time is just spent battling so uh you I'm I'm kind of myopically focused on all the things that I'm I'm having to uh we're having to >> this is why he wants to go back to the private sector. [laughter] >> We're having to accept concessions on or or make the bill worse or water it down in order to to build enough support to hopefully get it to 60. Um so I I don't know if I've had a chance to to dwell um uh as much on the the positive part of

it. think um maybe you know there there's a provision in in title one around treatment of certain assets u based on their being in exchange traded products um you know which brings some outright clarity and just kind of like doesn't make you go through the steps of you know do you check this box do you check that box in order to get clear regulatory treatment for those it's going to be uh pretty cut and dry. Um so I think that's that's been a positive and um for those people that that have uh you know tokens that um are part of exchange traded products, you know, it it's definitely provided

them a lot of uh clarity and certainty um that they're happy to have. >> My my my question for you is, you know, let's just assume clarity passes because, you know, I think there's so much here that's should be supported by both sides. I I think we're going to get to, you know, significantly more than 60 votes for this when it comes to the floor cloud to get signed into law. You know, I you know, is that the end of, you know, cryptofacing legislation in the US? Is there an appetite to go further? Is there an appetite, you know, postclarity to tackle items relating to a US strategic, you know, Bitcoin reserve? Is there you know any appetite

to sort of you know take you know the winds and keep going or is this you know the end of the road? Is this the mission accomplished or you know is this the destination? It's >> another good question. Um we're planning to to mark up the uh the SB bill ARMA uh Representative Begage's bill in the House uh on the other side of August recess. So that's going to come forward. Um, we are talking about tax provisions uh later this year. There's talk of reconciliation 3.0 uh the NDAA. Those are opportunities to potentially get some of those tax provisions in there uh rather than moving it as a standalone.

So, there's there's still um within this calendar year and within within this Congress an opportunity to get a couple more wins on the board. Um you know, this would certainly be a big one, but uh we've already got the the chamber uh loaded up, so to speak. um for for what comes next. So we very much want to get uh clarity passed and allow the regulators to start uh implementing the rules uh immediately and then pretty quickly on the legislative front we'll turn to the other priorities and uh make sure that the uh genius implementation which is still ongoing and soon the clarity implementation uh stays consistent with the spirit of of the bill and and with the president's procryto agenda.

Well, Patrick, we appreciate all the hard work you're doing and all the lack of sleep you're enduring on our industry's behalf. Um, anything in the closing hours as we're getting to the final negotiations that us or our listeners can help with? I'm assuming that there's a small number of uh angles of attack that you think are really going to matter here or a small number of holdouts on the legislative side who you think are particularly important. Um, floor is yours. I think the main thing is just helping people zoom out. Um, we get so uh so dug in and we're negotiating two words on page 372 of a bill and that feels like uh the end of the world if we don't get

exactly what we want. And you know, I could say that sometimes for myself and sometimes for uh for for Democrats that we're negotiating with. Um we need to remember what we're trying to do here. We're trying to set up the United States uh to be the leader in the financial markets of the future. Uh digital assets are are here to stay. They're already um uh you know implemented into uh our financial system. This would make clear the rules in order to uh safeguard the the wiring in a system that that is already kind of naturally happening but doing so in a way that uh reflects you know good principles of consumer protection and and uh preserves the innovation uh that that blockchain represents. So, um, as much as people

can can impress upon those who are ultimately going to be asked to take a vote, uh, to remember that this is about America's global competitiveness, um, at the end of the day, I think that's the that's the winning message here, um, that needs to be impressed upon people as we get closer to a vote. >> Very good, Patrick. We'll leave you to it. I know that you've got a lot more work to do today and I'm sure you'll be uh, you know, sprinting for the next couple weeks. Um, but you're doing God's work and thank you for all the uh hustle you're putting in.

>> Awesome. Thank you so much for having me on. Sorry I was running a little bit late. Appreciate you bearing with me. >> You're all good. >> No worries. Thank you, Patrick. >> Thanks. >> All right. >> Cheers, Patrick. >> Thanks, guys. >> Ciao. [sighs] Okay. Uh, well, we let Patrick go. Um, reflections now that he's not here. >> Yeah. [laughter] >> Now, go say what you really think. >> Robert Robert has a lot of opium. That's >> I have a lot of opium. Listen. I'm a believer. Robert's a believer. I respect that a lot. >> I'm a believer. In my head, the odds, you know, after that went from like 70 to 75.

>> Wow. That sounds very much. >> Sounds like there's an arbitrage for you. 70 to 75. >> 70 to 75. Right. >> Yeah. It's a small move in absolute terms. Okay. >> I mean, you know, he said he said things that a lot of us have seen in the public domain already. You know, some of the insights around the exact shape of the ethics language. I think there was some alpha in there that people haven't heard before. You know, I think there was new information, but it's not like 70 to 95, you know. I think there was an incremental set of things to make me slightly more confident.

>> Yeah. I mean, so I understand the crux of this. I mean, it feels like ethics is the main kahuna here. I think if you can get ethics, the whole bill comes together. Um, it's very clear that, okay, the first question was, will Trump even make any ethics concession? And I initially kind of sounded like the ex concession was kind of fake of like oh I won't create any new coins and it's like well nobody wants any new coins like there's no right no one like the market. >> Yeah. Putting things in a blind trust and or divesting them outright like okay that's a pretty major concession that feels pretty real. Um, so now the the thing about the the DOJ versus state attorneys general, that seems a little crazy to me, like state attorneys general each picking at the president.

>> Yeah. No, that's a recipe. That's a recipe just to create a scenario where like he'll get sued even if he hasn't broken any rules. like, you know, a random Washington state or Oregon or like some AG is just going to like >> file a lawsuit because they can and they're empowered just to gum up the system, right? So, it seems ridiculous that that would even be a legitimate prospect to allow any state AG in a politicized environment to be able to go after not just Trump, but any federal employee, >> the sitting president. the sitting president. The sitting president already there's a very strong presumption against your ability to go after >> not just the sitting president anybody right like it would literally empower

>> on average 25 Republican or 25 Democrat AGs to go after whoever they don't want >> if they do anything related >> Congress members Congress members uh yeah yeah exactly um so yeah it does sound like a bizarre construction that said I understand where it's coming from which is of course it's coming from the politicization of the DOJ J, right? Is like, okay, well, do you really think that Todd Blanch is going to go after Trump for violating anything? Which I get that that is kind of the own goal that the Trump administration has served, but it doesn't feel like state attorneys general is a good solution to that, >> right? But also like the Senate and the House have investigative powers, right?

If they felt like the DOJ wasn't doing it, like they can literally get involved. They can subpoena, they can, you know, call for special prosecutors, they can do all these things like even with >> Yeah, maybe special prosecutor is like the right answer or something like this like some kind of >> I was going to say I feel like we've we've seen this in other scenarios. Um >> yeah, I mean I feel like also this is not even about necessarily about like worries about some future president issuing another token. It was it's really like and you kind of see this obviously [laughter] it was coming the first. Yes, they don't like the fact that >> I would buy AOC coin personally. I think that would I think it would >> she's never going to do it. Maybe she should, but um >> dollar dollar tag AOC that would they

do. That's perfect. >> Please nobody make that. I'm >> sure. It already exists. It already exists. Yeah. I think Tom Tom has the real reason it does well. >> Yeah. I Well, again, it's it's but it's like how do you retroactively punish this person who, you know, did something which was sketchy and kind of, you know, not super palatable, but like maybe >> Yes. Right. Like we and and and so you know >> he did mint the token two days before his inauguration. So yes, this would not fall under the statute. That's actually a good sort of >> yeah I mean I just don't know if there's like is there any way that I feel like if it doesn't seem like there's the it feels like the strategy for Democrats is

just make them bleed until the end and then midterms hap then recess happens and then make them bleed again. Like I I I don't see any strategy in which they're like, "Yes, we really want this." Especially given that the like >> Well, I disagree. I disagree. The reason why I disagree is if you look at the House side, right, of this legislation, there was extreme bipartisan support for the House side of market structure. Like that is a fact. Like it wasn't even like oh it's >> 294 to 134. But remember that was last summer.

>> I know. I know. And >> that was last summer. >> But Trump had already made Trumpcoin. Okay. Like that was already >> Yeah. The world liberty financial >> not down. >> Crypto market was wasn't down. The world where Liberty didn't have all this other stuff. Like I I >> But I don't think your average politician is like tracking the price. >> Average Democratic senator definitely. Are you kidding me? I get emails like five times a day of like Trumpcoin is down but we're going to get him type of like things that Trump I will tell you I don't I think you are misreading the Democratic party >> even by that point Trumpcoin was down though like that that's objectively true >> it was down from the high it was not down to the same degree that it's down now like I I think it's very clear that

this has become an animating issue for Democrats in a way that it was not last summer >> I agree >> like the story has congealed >> and they know that this is going to play well going into midterms. Like it's already uh it's it's a it's a very very very off repeated line. This bill is now in the center of that story. If like I think the Democrats feel it that if they go soft on this that how are they going to be able to hold, you know, the line to their own constituents and say, "Yeah, you're totally right. You know, cryptocorruption. Let's go after him." >> Right. No, they want they want a bill where they can say we regulated crypto and we put restrictions on Trump so he can no longer profit from

>> I think that's like that's like the Nancy Pelosi Democrats. AOC Democrats want blood. >> Yeah. No, I agree. There's there's the irrational people. There's Democrats that did not vote for Marcus. >> But you only need seven. You only need seven. >> You only need seven. Yeah, exactly. >> That that that's the >> Well, McConnell is like I don't even know if he's voting. So, [laughter] I'm serious. I mean, like, >> can he vote Can he vote by holding today's newspaper with a writing his vote? >> Yeah. Yeah. Like an AI generated newspaper. Um, >> you know, I I think realistically like >> Yeah. People also like their car breaks down and they can't make it to the vote and stuff like you know, I think you need more than seven. I think you need

like nine or 10. By by the way, by the way, we got one comment that I think we should read on air, which came from which which comes from our our our matriarch Lorian, >> which is uh 70 to 75 is like someone saying six minute abs versus seven minute abs. [laughter] >> I thought that was pretty funny. >> That's pretty good. That's pretty good. Well, that I did that sums up the episode pretty well. Um well I I look boys we are in the home stretch.

Obviously this bill matters a lot. >> Um >> look I'm not trying to FUD. I obviously want the same thing but I you know I my personal life index is how how much >> if I meet a random person >> in New York what's the probability that I'm going to tell them that I work in crypto or not if they ask and that thing has just plummeted dramatically in the last 6 months >> because there's no Clarity Act signed into law. Because like the because the media coverage of the Trump crypto stuff >> by all your friends coverage of the Trump lives in Brooklyn lives in the >> Have you talked to them after Robin Hood chain though? You know, have they tried Robin Hood chain? Like you know hey >> Yeah.

>> Yeah. I I have not asked them about their cash. >> Look, baby. Sentiment is starting to turn. >> Let's just see. I mean, look, I I will just say this. I will just say this. Look, clarity uh obviously we we'd love for clarity to pass. This is kind of the last bull work against just having to deal with this [ __ ] over and over again with every administration. But um even if clarity does not pass, a lot is going to change. There's going to be regulations. There's going to be rulem. And it's not the last shot. Um it is the highest probability chance that we pass it now if we're going to pass it. But probability is not zero. Um it's definitely less than 50 if it doesn't pass this year, but you know, it's it's definitely not zero. So, let's cross our fingers and um to the

extent that you are um a constituent, if you are an American, you know, call your representative and tell them that like, hey, you want to see clarity get passed, you believe in crypto. >> Yes. >> Call your senators. >> Call your senators. >> Yeah. But, but realistically, there's probably like 12 of them who are the most important. >> Call 12 of your Call 12. >> Just do it anyway. >> If you're one of 12 states, call your senators. uh because we we want to make sure that this message is heard loud and clear. Okay, >> that is it.