From the White House to Wall Street: What's Next for Crypto?

Transcript

Hi everyone. I am Jacqueline Molinek. I'm the founder and CEO of Strata Media and more importantly, I am joined as the MC said with some very big people in the space. We got Jake Chervinsky, the CEO of Hyperliquid Policy Center, Charles Cascarilla, CEO and co-founder of Paxos, and Scott Law, and the president of Pantera Capital Management. Guys, welcome. Thank you. Um maybe starting at a 3,000-ft level, you guys have unique perspectives, very different companies, I would argue. Do you feel confident with where the industry is now that clarity essentially is dead?

>> Yes, I do. >> All right. We feel good. >> I do. Yeah, look, I'm we all wanted the Clarity Act to pass. It would have been great if it did. I think it's clear, especially after it failed and the agencies started taking action, that we didn't need it. The agencies have all the statutory authority they need to make sure that the products that we care about can get into the market in the United States, and they're ready to be unleashed and they're clearly wasting no time. So, the Clarity Act I I think was a nice-to-have but not a must-have. What really matters is our industry creating products that people really want to use and then making sure that they are compliant in a clear way, and I think we're going to get there.

>> I would love to be provocative and disagree with you, but I couldn't agree more, actually. Um I don't think um clarity unfortunately not passing really changes much for the industry. Uh the SEC and the CFTC can probably pass better rules uh than you would get in the law. The law obviously is more permanent um and I think it sets a tone, but I haven't heard one potential institutional client, and that's all we focus on, say, uh "You know what? Clarity didn't pass. We're going home." Uh it Nobody even mentioned it. >> Mhm.

>> Yeah, I agree. I mean, I I think the story really fundamentally changed in the last election cycle, right? All of the regulatory and legal headwinds that, you know, sort of kept the industry down, you know, enforcement by regulation essentially, you know, choke point 2.0, everything that, you know, couple years ago we were talking about were the things that we were sort of the most concerned about existentially. That fundamentally shifted, right? Everything that sort of happened along the way from a administration's perspective and, you know, from the regulatory action.

It doesn't feel like the genie's going to get put back in the bottle. You know, bummer that clarity didn't pass cuz we nice to have it written into law, but it feels like even if we have another sort of fundamental change politically, we're we're probably not headed back to where we were. >> Mhm. Chad said it didn't really affect institutional interest. Did it affect any founder uh interest capital? >> Not necessarily, right? I mean, I think the big story, right, that you know, we'll talk a little bit more about and everyone's talking about it has been institutional adoption and and how it's been embraced both as product and infrastructure. Um this was essentially about politics.

You know, if if Patrick Witt was up on the stage with us, you know, he would sort of give us the inside baseball of, you know, kind of how it all went down. But at the end of the day, you know, there wasn't going to be a win going into the midterms. Um but, you know, to Jake's point, the regulators have sort of lined up now and have taken very rapid action to give everyone comfort that, you know, things are going to continue to move in the right direction. >> And I'll and I'll just add to that from the perspective of founders and builders, what they needed was clarity about clarity. Because they were asking, well, how do I build a product that is going to satisfy whatever section of the draft of the Clarity Act that might come into effect after rule making some

number of years from now. And the answer all along was kind of like we don't even know if this is going to pass. Even if it does, we don't really know exactly what the rules will look like. And now they have clarity that they can build under the current rules and regulations, and they can see what the agencies are putting out. So I actually think a lot of people were waiting until they had certainty about whether the bill was going to pass or fail, and pass or fail it was going to be positive. And I think that's why we've seen a lot of excitement coming out of the the death of the Clarity Act. >> And by the way, I think that's what you see in the price. >> Yeah. >> Uh you know what I mean? It's kind of ironic the bill didn't pass and prices

have been rallying. And um you know, I think in some sense that what is probably going to be the biggest help uh of clarity is that you thought you would just get a price rally and that would be able to unlock a lot of business models and capital flow into the space. And it turns out you didn't need that. Uh the price uh rallied anyways and very counterintuitively, which is usually very bullish. Um and uh at the same time you're going to get all the rules uh in a better way. So I think it actually ends up being better. >> Yeah, the only thing I'd say maybe it is a negative is I think if clarity had passed, you might have seen an acceleration of other regulators around the world sort of lining up to you know, to match that. I mean ultimately what we

want is we do want harmonization, right? Um you're never going to get that 100%. Um that might slow things down a little bit, but that would have been maybe another benefit that we didn't get in the short term. >> Yeah, maybe building off of that, the title of panel is White House to crypto, which are both American places. Um so how do you guys think about adoption both in the US and then when you travel to places like Singapore within the APAC region, Europe, etc., is there different kind of levels of momentum in these places for each of your respective businesses or is it all kind of growing at the same time?

>> The US administration has completely changed the temperature. Uh you went from de-banking to like a really embracing of the industry. And so that means the US um in many ways is leading adoption at least as we see it from institutional perspective. That doesn't mean that you're not getting adoption in Asia and getting adoption in Europe, uh but US institutions um really felt like they had the regulatory clarity and the administration um behind them and I think we're seeing this in a lot of different ways. You can see that Charles Schwab has first launched crypto trading, um Morgan Stanley has launched it. A whole host of other firms are looking at launching crypto trading.

Uh you know, I think you're going to have almost every single large financial institution in the next year probably have some version of crypto trading crypto wallets um enabled. That's a big shift. I don't think you're going to see that same penetration outside the US, uh but they're coming. I think they're probably operating outside the US at more or less the same velocity they were before, uh maybe a little bit faster and instead you just have the US kind of like uh having a lot of amplitude to it. Uh you went from basically nobody touching it to now everyone uh being involved.

>> Mhm. >> Yeah. >> I was going to say outside the US, I I do think you have pockets where you've got, you know, countries and jurisdictions that have actually leaned in quite aggressively. Um you know, Kazakhstan's a a pretty interesting, you know, uh case study there. Um and other jurisdictions that have said this is an opportunity for us to, you know, establish innovation uh and uh essentially future-proof our financial markets. They just don't have the scale, right? And so it the US is ultimately going to lead and will largely define, I think, what the framework is that, you know, most of the rest of the world adopts.

>> Yeah. And I mean, it's interesting for Hyperliquid because Hyperliquid is in sort of the opposite situation. You know, the the purpose of the founding of the Hyperliquid Policy Center this February was to bring Hyperliquid onshore to the United States, one one only jurisdictions in the world where it's not available. So, it already is available in many other countries in compliance with local law, but it's much more complicated to figure out how a front-end interface provider or a designated contract market and exchange or a futures commission merchant, a broker can offer this type of product in the US. So, we're in sort of a reverse situation where we're trying to figure out how to get hyper liquidity into the US even though many people around the world already have access to the

product. >> Are we going to get hyper liquid in the US? >> I certainly hope so. That's that's definitely my job. I was very hardened to hear the president mention a month or two ago that the CFTC is working very hard on bringing hyper liquid into the US in a legal and compliant fashion. I think that it's a great sign that this is such a high priority for the administration that it has risen to the very top. You know, we're here to talk about from the White House to Wall Street and the White House, you know, is clearly aware of this as a priority and I think hyper liquid is, you know, one of if not the most exciting products that the crypto industry has been able to produce thus far. And so, I think it

would be a real shame if we don't figure out how to make sure that Americans have access to that product. So, I'm pretty optimistic. >> Okay, we'll see. Hopefully it happens. I think a big thing that I've noticed is that a lot of the times in like the past two to four years when a big institutional client like BlackRock or KKR or Apollo did something, it moved markets. And now we have all of these different players from asset management firms to banks really getting into the space or as like we like to call it like a catch-all institutions. Do you feel that the public perception of the institutional relationship with crypto is actually as deeply embedded as some of these headlines try to make it seem or is it

still very very early days and that they're kind of just testing the waters still? >> Testing the waters. >> Mhm. >> Um I do think we've been in a crypto winter for a long time and it's been an institutional summer. Uh but that institutional summer is you know, still very short uh compared to how long the crypto markets have been around. You know, if you took away all of the traditional institutions and said none of them are involved in crypto, what would happen? I mean, I think it would probably have an impact because of the ETFs, but aside from that, it's still pretty small. Um it's really still getting ramped. And by the way, to me, that's maybe one of the most exciting things.

Uh you haven't really had institutional adoption kick into gear yet and that could be true in not just crypto markets, but also true in you know, for instance, RWAs. You don't have to look that far to prove out my uh kind of a point here. There's 900 trillion dollars of assets in the world. What percentage have been tokenized? Uh when you take away stablecoins, it's basically zero. Uh so, how much can institutions really be involved in what's going on uh outside of crypto and then even within crypto, they're still really just getting to the point of turning it on.

So, I think it's very early and that actually is one of the reasons to be bullish because there's so much to come. >> Mhm. >> Yeah, I I totally agree. I I think, you know, the saying is it takes a while to turn the battle battleship. And, you know, this industry is used to hyper compression, right? New products, you know, uh spiking in value and volume, etc. Institutions by definition uh move slowly, right? They want confidence, right? They want clarity, which is why, you know, the the regulatory and the legal framework is quite important. But even in that context, you know, if you just look at what has happened over the last, call it, 18 months, there has been a fundamental shift how the largest asset managers and the largest financial

institutions have approached the space. On the product side, you know, 18 months ago, if you were a client of a big bank and you wanted to own crypto, you couldn't do it, right? Um even with a 40 Act ETF. Then suddenly they shifted their stance a little bit, you know, post-election, where suddenly now you could buy you could own it if it was a reverse inquiry. Now you have a firm like Morgan Stanley, largest wealth manager on the planet, that not only is actively offering uh ETFs to their clients, they just put uh our fund five, which is the first blockchain venture fund on a platform. And so, you know, what you'll see, right, as the industry is evolving, right, as the product set

has gone from super early-stage venture speculative to liquid tokens and public equities, the street, you know, wants to make money, want wants to onboard clients, and so the the adoption of the product set has fundamentally changed. On the infrastructure side, I think what's happened is um the people who were the degen's who, you know, were trying to get things started in the bank were sort of put in the innovation center, right, basically the back office skunk works, that has now started to permeate into the core business. And so, I do think uh you know, as you're saying, Chad, you haven't it's still early. We haven't seen the impact, but the wheels are in motion.

>> Yeah, and any time it's like in the innovation centers, uh it's not in the business. >> Yeah, no, exactly. That's why I was kind of laughing when you said, "Yeah, the innovation centers." >> Yeah, but that means we're going to try this out and we can shut it off really quickly, right? Now it's in the core operating business. >> Yeah, no, I I agree with all of that and I just to emphasize one thing that Scott said, I think it's it's uh hard to to estimate correctly, over under, uh how long it takes for institutions to really understand this stuff and want to adopt it. And I also think it's important to realize, you know, we spend all of our time in crypto, but this is still very early. And I think there really wasn't a product category that most serious institutions wanted to

adopt because a lot of what the industry was building was the sort of early idea of DeFi, decentralized finance, which has at its core the premise of disintermediation. So, what the industry was saying to these institutions was, we don't need you, we're going to replace you with code. And I think that's a a very beautiful ideal, but I think that the industry now has settled on a new and different and much more interesting for institutions product category that a lot of people are calling on-chain finance. And on-chain finance, unlike decentralized finance, is not premised on the idea of eliminating trust by making everything permissionless and having no intermediaries. It's premised on the idea of building the most

competitive product possible, period. And the idea is using a public blockchain will give you the most competitive product, period. But, you're still going to have an institution that is trusted, that is standing by the product, and that's really what's going to bring millions of people on-chain. I think stablecoins are the the best example of this, right? Stablecoins use the benefits of public blockchains, and yet there are phenomenal companies that are standing behind them and that are performing a regulatory function in order to make sure the product is as good as possible. I think Hyperliquid fits into this category. It's a fully on-chain order book as opposed to an automated market maker, which a lot of institutions have historically not been that interested in using. And so, I think that we're going to see more

adoption as we see this new product category on-chain finance develop further. >> Yeah, I mean, I think if you draw a circle around, you know, Washington and policy, Wall Street and financial infrastructure, uh and then blockchain technology, right? You know, for the last 10 years, those three bubbles have kind of been separate, right? They bumped into each other in certain areas, and now I think we're basically seeing real convergence between those three things. And, you know, that's when things get exciting and and get big. >> Mhm. So, do we ultimately drop the word on chain and just call it finance?

Because the amount of the I guess blockchain technology and these financial stacks built on chain are being baked into the traditional systems. So then we ultimately we just become one. Is that the the end goal? >> be that. I mean you shouldn't even know that you're on chain. >> Yeah. >> Um in some sense. I mean >> So where does that put Paxos then? Like it's not like Paxos stablecoin, it's just like Paxos moves money. >> Yeah, I mean definitely. I mean how do you use the internet, right? I mean you know it like you know you know TCP/IP protocol you're using?

Nobody knows. You don't need to know those types of things. It's what problem are you solving for customers? And that's what it should be about. The technology is cool because it's allowing you to solve problems in a new way. It's not that we care about the technology and in of itself or in a vacuum. You can't you you're here because customers have problems that you can do unique things to solve. And that's how I look at Paxos. You know, we're providing financial infrastructure. You know, we're creating a regulatory wrappers around products that people can trust and build on and be able to use as the basis for a different type of financial system.

You don't have to say blockchain any of that. >> Yeah, at some at some point in the next 5 to 10 years, right? We'll sort of the industry will have and and maybe we're there now. It's Intel inside moment. Right? Where ultimately we're not just talking about blockchain businesses, we're talking about blockchain we're talking about blockchain enabled businesses, we're talking about blockchain adjacent businesses and it'll just be the new world of financial services, the new world of agentic finance, right? And the technology just sits behind it. It's not differentiated.

>> Are you seeing that with the founders that you invest in right now? Where they aren't really calling themselves crypto founders, they're just founders using blockchain technology to build things. >> Well, they're saying AI, right? >> Exactly. >> [laughter] >> Whatever gets the people in the door. >> are, right? I mean, listen, we we as a firm don't actually say crypto that much, right? Crypto is an application of a blockchain, right? And so, at the end of the day, you know, what what founders are trying to do is they're trying to provide solutions, right? They're they're trying to create new products, and they're using this technology because it's, you know, better, faster, cheaper, right? In in most of the places they're applying it, but, you know,

whether that's in, you know, finance, whether that's in distributed compute, whether that's in identity, right? Whether it's in authentication. I think the the word crypto, certainly from an institutional perspective, still sort of has, you know, the the whole industry gets painted with this brush, which is either attached to the price of Bitcoin, or it's sort of tainted with, you know, some of the events of the last couple of cycles. And so, you know, for institutional investors or for institutional users, this is really just about a disruptive technology and how it can sort of make their business better, and that's what founders are gravitating towards.

>> Yeah, and I think this is this is not new or unique to crypto, right? There was a long period of time where companies were internet companies, and it was like the fact that it was on the internet was the unique thing, and that wasn't really true, right? These companies were just providing a product or a service, and once the internet became ubiquitous, they dropped that from the the sort of pitch that they were making. I think it's the exact same thing for crypto, and you know, we've been experiencing this quite a lot because a lot of the advocacy work that we do in Washington is around perpetual futures. That means that we work in the futures industry, not in the crypto industry, right? Hyperliquid is infrastructure that enables the trading of futures. So, it's not a crypto product, it is infrastructure that

enables a product in a totally different and very important industry, and I think that's true across the board, and we're going to keep seeing that as time goes on. >> Mhm. So, which area would you guys bet on being the most disruptive over the next like 12 to 18 months, whether it's stable coins specifically, uh tokenization, which does include stable coins, but I'll kind of like silo them separately, uh perpetuals, or something else that we haven't really discussed? >> Yeah, I'm not sure I would I would characterize any of those as like truly disruptive at this point, right? Like I I think the the answer is is that there's a real use case for stable coins, right? There's a real use case for perps. Um there are real use cases for this technology and I'll sort of go

back to that convergence theme is what we're going to see over the next 12 to 18 months is just increased volume, increased adoption, and, you know, that's a good thing, right? In in some ways, like the previous 10 years were about speculation and proving that this technology works and has a real use case, right? The next 12 to 18 months and the next 10 years is about, you know, essentially redoing the, you know, the global financial plumbing um up and down the stack, right? That may be less sexy, but it's a lot more permanent and more powerful, right? And so, I mean, you should chat talk about your business, Chad, right? I mean, that's essentially what you were doing in a lot of ways.

>> Yeah, I mean, we've been building a regulated financial market infrastructure business uh for a long time. And uh that's a kind of a lonely place to be uh until institutions wanted to come in and start adopting. And that's now that's now definitely happening, uh but it's only just beginning. And so, do I think that, for instance, stable coins being adopted by banks is hugely disruptive? Absolutely, but uh that's disruptive to the way the financial system works today. It doesn't necessarily mean it's disruptive to their business models. Uh I'm not so sure that that's actually what'll happen. Um it really depends on your ability to adopt technology as opposed to um your business itself being disintermediated. Um someone has all the

end users today in the world. They all have financial relationships more or less. Um it's just that if you can't meet customers where they're at because what they're able to do or what they want out of their financial lives is changing, uh then you're going to get disintermediated. And that's what happens. And so, stablecoins will just change what type of rail you use. It might enable someone to have a relationship they didn't before. Purpose is definitely a much better version of futures products. Uh I could disintermediate like, you know, the oil uh West Texas Intermediate uh crude contract. Uh but that's not necessarily disintermediating the CME per se. I mean, they could launch perps if they wanted.

>> Sorry, Jake, you had said it earlier and I think it it it it's sort of a the right framework, right? Which is the early days of the industry here. I think the financial institutions sort of looked at it and said, "Hey, wait a second. Those guys are trying to blow up our business, right?" The ethos of this is, you know, kind of libertarian view of the world with no middleman and you know, that is a lot of what powered, you know, the builders and the innovators, right? That sort of energy. I think the institutions now have said, "Okay, we we we understand that, but this isn't about blowing our business up. It's about improving our business, right? And ultimately adopting this technology."

>> Yeah, I agree. I totally agree with that and I think Chad really nailed it and to to to say again what he said in different words, I think it's not that the technology is disruptive. It's that the technology empowers disruptors to do a better job of disrupting the incumbents. And I think this is also true across every industry. You have sort of two categories of participants. You have the innovative challengers that are trying to take market share away from or expand the market in comparison to the incumbents. And often the incumbents who have been around for a very long time become very large, bloated, and inefficient, lose the ability to build new products and services, and then they attempt to compete not by having a

better product or service but by defending a regulatory mode to exclude the innovators, the challengers from the market. And I think what this technology does is it empowers the challengers to go after the incumbents who are not capable or not interested in adopting the new technology. We're seeing this right now in the futures industry where you have the Chicago Mercantile Exchange, the CME, which could if it wanted to offer perpetuals or integrate on-chain markets like many others want to do, but instead they want to defend their current business by stopping anyone else from developing new market share in a brand new category that hasn't existed before. And so I sort of see it the same way for the stablecoin space. I actually think stablecoins can

be extraordinarily disruptive where you look at many of the banks who went to war over the Clarity Act because they were so concerned about stablecoin yield as a threat to their business and still talk about tokenized deposits as the solution to upgrading the payment system rather than stablecoins. So I think it's a a very powerful technology and potentially disruptive. >> And you know, there's a 21 bank consortium that's going to launch a stablecoin. So it just shows you that there's clearly a sense that they need to use this technology and it's not clear exactly how you do tokenized deposits or how you tokenize a lot of different things.

Stablecoins have found a unique fit because you're putting cash on chain and everyone needs to move dollars. >> Mhm. So what would you guys say is maybe the next phase of crypto look like with not necessarily the perfect storm but a good storm right now and a lot of dominoes in place of like what would be the North Star opportunity that if you didn't take advantage of it, you would later regret it? >> I think it's RWAs. I think you're still just barely scratching the surface. Forget stablecoins.

You're starting to pull real world assets on. I think the way it starts is that stable coins need reserves. They need T-bills, they need money market funds, they need repo. You're going to pull that on chain and that's kind of then bring on all types of other yielding assets and you're going to start the process of getting adoption and it's going to look sequential and then it's going to all happen at once. And so you're just starting to crack open that seal right now. There's a bunch of different pilots, the DTCC, what they're doing with tokenized treasuries.

You're going to see tokenized repo and I think that's really going to be an enormous shift in how the financial markets operate and I think it's going to not just change how you can access assets, but it's going to create some fundamental changes in the financial system around democratizing for instance the risk-free rate. It's going to be a huge game-changer where today, you know, not everyone can get access to it and you'll be able to and these are going to be very big and powerful shifts that are going to happen over the next couple years. >> Yeah, I mean I think from our perspective, agentic finance is, you know, one of the biggest sort of surface areas that we're interested in and excited about. Obviously, you know, most of the venture dollars in the world have been sucked into that space. If you, you know, to your point, Chad, if you slap

AI on it, you you can raise money. But if you do believe in the future of that, right, that does not function at scale without blockchain rails living behind it and so there's a lot of interesting opportunities there. I think the RWA story is the other big story, right? Ultimately, every asset should ultimately move on chain. And you know, the benefits, certainly there are benefits from a retail perspective, but the benefits from an institutional perspective in terms of freeing up collateral, real-time margining, things like that, have massive implications. So we're excited about that, too.

>> I might I also agree about real-world assets. I think of them sort of like when you said we're going to drop the on chain from on chain finance. I I we're going to drop the real world from real world assets, right? They're just assets. And I think I think what we've learned is that public blockchains are clearly good for finance. That they may be good for many other things as well, but I think that the the clear product market fit for a public blockchain is doing finance better than the traditional system can do it. But if you want to do finance, you need assets that people want access to in the system. And that's not to say that there aren't many valuable crypto native assets. I think that there are many of them. I don't think that there are hundreds of thousands of very valuable crypto native

assets. So I think if we want to have the financial system move on chain, which is the opportunity and the one that I think we're all pursuing, then what we need is for the assets that matter to be on chain so that people can trade them and hold them and interact with them in a meaningful way. So that I think that's what we need to see happen in the next 1 to 2 years. >> Mhm. Want to bring it back before we wrap to what we were talking about in the beginning. Obviously, we're talking about clarity, but we have the midterm elections coming up in the US as well. How should the audience and people be thinking about that and how important is that political cycle in terms of growth, policy, investment state side?

>> Hopefully not that important. >> [laughter] >> You know, and the reason I say that is because it really should be a non-partisan issue here about what's going on. Um now, I don't know that that's how it's going to end up playing out. Uh but that's what you would really like is that this no longer is going to be about uh the pendulum swinging politically and that everyone can see the value of what this technology is doing, but uh that's probably a little bit too Pollyannaish and so we'll we'll find out what happens here. >> I I don't think it is too Pollyannaish. I You look, we have Chair Atkins and Chairman Selig in place through the end of this administration assuming they want to stay where they are. It does not matter who controls either chamber of Congress. If we were dying to get a

market structure bill done, it would matter to maintain Republican control of the chambers just because I think it's unlikely from what we've heard from congressional Democrats that we would as an industry support a version of clarity they would put forward, but I don't think we're working on that anymore. So, I think we've got a two-year window here to to really get the work done and that'll happen no matter what happens in November. >> All right. >> Yeah, agreed. >> Amazing. Well, Jake, Chad, Scott, thank you so much for taking the time and thank you to everyone for listening in.