What we have is a very interesting macro backdrop where there's a defiatization.
I think there are some fiat currencies that are in trouble and the U.S. is very clearly
redefining the world order.
All these derivatives games are suppressing the price.
A lot of people think they're buying real Bitcoin.
They're not buying real Bitcoin.
Wall Street will never control Bitcoin in the way that it was able to control gold.
Why?
Why? Because gold was always stored in the bank's vaults.
If you're engaging in a yield play on Bitcoin, you don't own real Bitcoin.
You own a claim to Bitcoin.
And in the event that there is a short squeeze, guess what?
There may not be a chair for you in the game of musical chairs.
You're bringing it into the core of the banking industry,
and people will have the ability to vote with their feet and move to Bitcoin themselves.
Caitlin Long, this is your first time on the new Orbitcoin Dance.
It's so good to see you.
I know, I know, I know, I know.
It's actually been quite a while since you've been on the show at all.
I was just having a look before we recorded.
It was the start.
It was about two years ago.
In fact, no, sorry.
It was three years ago.
Oh my gosh.
Three years ago.
It was the start of 23, I think.
Okay.
And a lot has changed since then.
But I've been...
Holy moly.
Has it ever?
I've been being told off in the comments for not allowing my guests to introduce themselves
properly. So Caitlin, I know everyone will know you. There'll be a very small minority of people
who may be like new to Bitcoin who haven't heard of you yet. But do you want to start off just by
giving your background? Sure. Born and raised in Wyoming, worked on Wall Street for almost 30 years,
came across Bitcoin in 2012 while I was a Morgan Stanley managing director and immediately saw it
as something very special for a couple of reasons. One is it solved the duplication and reconciliation
of data problem, which was a real problem in traditional finance. And then I also, of course,
pretty quickly understood the philosophical aspect of it as well, which is that it's nobody's
liability. It's money that's nobody's liability, and it moves a lot more easily than gold.
So I've always thought that digital gold was essentially the first and earliest use case.
I've been always interested in stablecoins. It's been part of Custodia's business model
since 2020 to be a stablecoin issuer as a bank. And so I'm not one of the Bitcoiners that thinks
that stablecoins is an unhealthy detour. I think it's a healthy detour and we should talk about why,
because I know there's a debate in Bitcoin about that. And I've always been sort of interested in
the macro issues and I know we want to talk about what's going on with gold and silver. It's a very
timely topic right now. Yeah, I think probably the show that I've brought up most since I took over
is the show that you were on in 2019 with Travis Kling.
I don't know if you remember this,
but it was when the repo market was going all wonky.
And you and Travis were both sort of highlighting this
as a major issue.
You were saying, I don't know what's coming,
but something big is coming.
Obviously, it wasn't like you were predicting COVID,
but you did kind of say the system's under some immense stress
and there's going to be a big print.
It is.
Boy, did we see a big print.
Is there anything happening in macro now
that you think is being under,
like not talked about enough, not recognized enough?
The U.S. is okay with the rise in the gold and silver price
and platinum and palladium and copper.
The U.S. is okay with it.
I think, Danny, this is the first time,
probably since 1971,
that a U.S. Treasury Secretary has been okay
with the gold price rising as much as it has.
There has been, in the past,
a desire to try to talk the dollar up relative to gold. And so when gold starts to rise,
the Treasury Secretary has had a tendency to downplay that. But I think anyone who was watching
and listening Scott Besant, even before he became Treasury Secretary, is not surprised that gold and
silver are running and you don't have what you would typically expect, which is a U.S. Treasury
Secretary talking it down. I know you just recorded a session with Larry Lippard, and he was talking
about similar things. I think he's probably more concerned than I am about the near-term implications.
And I admit there are a lot of folks who say the sky is falling. I look at it and think,
okay, the dollar's doing okay here. And part of it is because of stablecoins. We'll come back and
talk about that in a moment. We have a whole new demand for U.S. dollars in the world that did not
exist last time this happened. And that's thanks to what Tether has been able to do in banking the
unbanked of the world. And they want U.S. dollars and they're getting them through Tether. So
what we have is a very interesting macro backdrop where there's a defiatization. A lot of people
talk about de-dollarization. I don't see that. I definitely see a defiatization. And I think it
significant, and nobody's talking about this, that gold has, because of the revaluation that it has
just incurred, gold is now back to being the number one reserve asset in the world. It is the
largest reserve asset by market value among central banks in the world. It just overtook the dollar
for the first time in more than three decades. I mean, that's crazy. So this is something that
I've not fully understood the dynamic of them.
I saw a tweet that Matthew Pines had reposted just a couple of days ago.
And the original post was from before Trump came into office.
It was after he'd been elected, but before he came into office.
And he said in the post that they need to revalue the gold at $5,000 an ounce.
And obviously, that was a very good call because gold is now over $5,000 an ounce.
But why are they okay with this?
What are they trying to achieve?
Well, the U.S. has the most gold.
And I've got to tell you, I don't know if what happened last year was on purpose. But what I'm referring to is there was this kerfuffle in 2025 questioning whether the tariffs would apply to gold.
And so there was a sudden desire to repatriate among the Americans to repatriate gold that was overseas. And there was a lot of quiet repatriation of gold, especially gold, but also other precious metals last year to get ahead of the potential that a tariff would apply.
It's kind of like what I saw in my corporate world when I was at Morgan Stanley, where there were always these repatriation tax holidays. Everybody just built up their earnings overseas and waited for a tax holiday to bring the income back onshore into the U.S. It was a tax-driven event. And that's what I think was happening.
And I don't know, Danny, if it was actually, if they were that smart or they just got lucky, but there was a huge repatriation of gold. And now what's funny is Europe is talking about repatriating its gold from the United States because obviously the geopolitical situation has gotten hot between the U.S. and Europe.
And, you know, the last time that a European country demanded repatriation of its gold, the U.S. closed the gold window. That was 1971 when Nixon told France, no, no, thank you. And I think that's going to happen again.
And so it's kind of funny that it may have been luck that there was this big repatriation back into the U.S. last year, or it may have been planned. But, you know, Scott Besson has never publicly made a big speech about this. I don't think he had to. I think it was better that he didn't. And he just let it happen.
And to your point, the U.S. is the largest owner of gold.
And I didn't know about Matthew putting out that tweet, but it was prescient for sure.
Kudos to him for identifying it, that if the gold was revalued, the hole in the Fed's balance sheet is not as big as everyone thinks it is.
Because the gold on the Fed's balance sheet is still valued at $35 an ounce.
Yeah, so that was going to be one of my questions, actually.
Because obviously, like you're saying, we saw tons of gold leaving London, leaving Switzerland, going back to the U.S.
If that was part of the game plan, I mean, it's a genius move.
But why is it priced at $35 an ounce?
And do you think the Trump administration will reprice that?
It's a good question.
I mean, I think they certainly wanted it revalued, right?
Go back and look at Scott Besson's investor letters from before he became Treasury Secretary.
Look at some of the speeches and podcasts that he did. I am so not surprised that he has been okay with gold rallying. In fact, actually, the thing that surprises me the most is that it didn't happen already sooner. It's just that the dynamic, I think silver's unique because of the silver demand in data centers.
and we know what's going on in data centers.
I'm on the board of Cypher Mining,
and that is one of the companies that has signed,
in its original Bitcoin mining plans,
leases with hyperscalers.
That's all public information that they've signed
with two different hyperscalers,
leases for their sites,
and they're building data centers now,
not for Bitcoin mining, but for AI.
And having been part of a company
that during COVID was scrambling to find transformers and, you know, all the hardware
that goes in to building a Bitcoin mine or now an AI data center. Turns out that, you know,
there's a lot that can be reused in those fields. And you've seen a number of the Bitcoin mining
companies become, you know, a complete pivot to becoming AI data center providers. And so silver
is unique in that regard because it is used in industry a lot more than gold and platinum are.
But all three of the metals are running. All three of those plus palladium are running.
And so is copper. They're all running. And that is, I think, a defiotization trade. So I would
caution painting it with such a broad brush. Usually all the commodities run in one direction,
And we're not seeing that with oil prices.
Oil prices have actually gone down.
And Trump is trying very hard to increase oil production and keep oil prices down because that comports with his affordability strategy to try to help Main Street America.
So you've not seen it across the board in commodities, but you are definitely seeing it in precious and industrial metals for sure.
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and use the code WBD. So with the repricing of the gold on the balance sheet, like there's part
of me that doesn't understand why someone's not done this sooner. But then the big question I have
is like, if Trump doesn't do it, some president in the future is going to do it and then they're
going to reap all the benefits from doing that. So why wouldn't he do it in his terms?
Well, it just inertia, right? You know, there are a lot of folks. I think Trump is different for a lot of reasons. And obviously, his Treasury Secretary has been a believer in precious metals and hard assets.
But a lot of the traditional Keynesian central bankers think gold is just this pet rock and don't think it should have value and don't see why something that is scarce has monetary value and think it's just a vestige of history.
So there are a lot of people who would poo-poo that idea out of the box for that reason. But Scott Besson, again, is different. He's not one of those. And in fact, actually, I think he views it as a competitive advantage for the United States, that he can, that that is a card that he has to play.
And it does look like he's either affirmatively playing it, in which case, as we talked about earlier, it was genius, or he got very, very lucky. But he certainly is not standing in the way of it. And that, to me, is a really big signal.
Oftentimes with the PR game, it's what they don't say that matters more than what they
are saying.
And I think in this case, that is one of them.
He is just letting all these precious metals run, and he's sitting back with a Cheshire
cat smile on his face because the US banks are not in trouble from this.
But it does look like there might be some European banks that could be.
Interesting.
So, they would be in trouble.
Why?
Because the gold is within the US?
Because, yeah, possession is nine-tenths of the law, so to speak, right?
I mean, if you've got the actual physical, then you control it.
And it is a fact.
I know a lot of folks look at the gold bugs and say,
oh, this is conspiracy theory, but it's not.
It's conspiracy fact that the paper claims to the actual physical
far exceed the actual physical, and it's about 100 to 1.
And so that means there's somebody with leverage who's in trouble.
and historically with some of these ETFs,
they've been cash settled.
We've seen this and you've talked about it on your podcast
with the Bitcoin ETFs,
the whole question of physical settlement
versus cash settlement.
And the original Bitcoin ETFs were all cash settled.
Now the SEC has allowed an option for physical settlement,
which is great because that's what keeps the ETFs honest.
But the cash settled ETFs
and the cash shuttle derivatives are a place where a lot of leverage has crept into these systems.
And Trace Mayer was one of the first people in the Bitcoin space back in more than 10 years ago,
was talking about GATA, the gold G-A-T-A.
I can't remember what the acronym stands for.
Is it Gold Antitrust Association, maybe?
Yes. Thank you. Yes.
And Trace, by the way, discovered them when he was a teenager.
And that was pre-Bitcoin, pre-his Bitcoin. So no wonder why he did so well, because he came to Bitcoin through the gold space. But long story short, they've been talking about gold price suppression schemes for years. And they're not necessarily going to all implode tomorrow and we're going to have a crazy short squeeze tomorrow. But you're sure witnessing one hell of a short squeeze today. That doesn't mean that, you know, this is the end.
There are I've seen a lot of people on on crypto Twitter talking about how the financial system is collapsing and this is the end.
I doubt it. I don't think it's the end. I think there will be some problems.
But I think this is I think the U.S. is is I think there are some fiat currencies that are in trouble.
And the U.S. is is is very clearly redefining the world order.
As Matt Taibbi's story out of Davos said, the most important thing that came out of Davos was Howard Lutnick, the Commerce Secretary's speech that said, globalization is over. We're done with this. And we're done subsidizing. He's speaking on behalf of Americans, subsidizing the rest of the world and taking our cues from Europe.
One of the most important aspects that I didn't even fully realize, and I'll give credit to Tom Luongo and his hive mind, is the importance of getting off LIBOR to SOFR. LIBOR is the London, or was, the London interbank offer rate. And it's a U.S. dollar interest rate. So why is it set in London?
Well, nobody thought about it, but the British banks were the ones that were actually setting
the most important interest rate in the U.S. economy.
And so this is John Williams doing at the Fed.
It took almost a decade to wean the bond market off LIBOR and go to SOFR, which is the secured
overnight funding rate.
So LIBOR is an unsecured overnight interest rate set by British banks, of which there
was only one U.S. bank that had a branch of the 14, I believe, in the LIBOR panel. So you actually
had a foreign country setting the most important interest rate. It's kind of amazing that it worked
as well as it did for decades. But the U.S. basically said, nope, we're taking this back,
and we're actually making it, instead of an unsecured rate, a secured rate. And it's set
by U.S. financial institutions. That was a big, huge step that nobody talked about except for,
You know, this group of, you know, people that are interested in alternative theories. And it was through Tom Luongo that I realized that. And once you see it, you can't unsee it. This was basically London controlling the U.S. economy, including at the time of the financial crisis, including arguably putting the U.S. into the financial crisis.
And the U.S. took sovereignty back by completely changing the U.S. dollar bond market, which is the largest market in the world, from LIBOR to SOFR.
And the last LIBOR futures contract expired last October.
So maybe that's a reason for the timing of all this happening.
You had to completely get off LIBOR and have the last futures contract expire.
And now the entire U.S. bond market is priced off SOFR.
and the U.S. is in total control of its destiny
and it can make the break
with the London and European banks.
There's loads of very sketchy,
potentially illegal stories of the LIBOR rate
during the financial crisis as well,
where I think a lot of funny business happened.
I don't know the exact details of it.
A hundred percent.
Yeah, I mean, I was working on Wall Street at the time.
I was working on the Morgan Stanley trading floor
in 1585 Broadway in New York right in Times Square during the financial crisis I distinctly recall you know people running out to try to withdraw cash from their bank accounts And they you know very quickly rumors came back you know no no banks had a hundred dollar bills
anymore. I mean, I lived that on the trading floor in New York. So very much lived it. And
that's what got me. I wouldn't have found Bitcoin had I not lived through that and gotten really
curious because things started to not make sense about what was going on in the world. And that's
how I got into these alternative schools of economic thought and then ultimately found
Bitcoin in 2012 a few years later.
But you're absolutely right.
There were shenanigans.
There were people who went to jail for price fixing the LIBOR interest rate.
And I'm sure the powers that be, they never said it publicly, but they started planning
around that time.
And this is John Williams, head of the New York Fed, to him, who really executed it.
It took years to wean the U.S. bond market off that, to make sure there was no accident, taking the most important reference rate away and completely shifting the market to a completely different interest rate and going from unsecured to secured is also a major, major change.
And yet it was incredibly smooth and they executed it well.
But what did it mean?
It means that, you know, the U.S. is in control of its interest rates.
So, while Trump is out there, you know, blasting the Fed for its building contract issue and,
you know, the Taj Mahal on the Potomac, you know, what's really going on is the U.S.
regained control over the most important interest rate.
So, as Howard Lutnick, who was running one of the primary dealers until he became Treasury
Secretary, he can go into Davos and say, you're not in charge anymore, we are.
Yeah, I mean, I would actually love to do a show with you all about the financial crisis,
because that must have been an absolutely wild year to work through on Wall Street.
But there's probably too much to get into today. With like gold ripping, it's funny to see that
there's quite a few Bitcoiners out there who seem quite angry about it. And I think people think that
like Bitcoin and gold is a very similar trade, like really it is the debasement trade. But
Bitcoin has massively, massively underperformed Bitcoin over the last 12 months or so.
Why do you think that is? Because it is strange to me.
Two reasons. Number one is I saw a very interesting statistic today that only a third of Bitcoiners also owned precious metals.
And I think there's probably a big generational divide because precious metal owners have historically been a lot older.
And so the younger generations, the Zoomers and the millennials are much more comfortable with the concept of digital gold.
The Boomers and the greatest generation absolutely want the real gold.
And so there's a huge skew there.
So number one, it's not 100% overlap.
One would think, and I agree with you, they're hard assets and they should be viewed consistently.
But there are only about a third of Bitcoiners, according to this non-scientific survey, but I think directionally it's probably right. Only a third are supporters of all of those assets in the debasement trade.
So ultimately it became yet another place where the crypto industry could start having tribal fights, right? The Bitcoiners, the hardcore Bitcoiners who don't want gold at all were, you know, picking fights with the Larry Lepards of the world, right?
I'm with you, Danny. We're all on the same side. It's all about hard assets and protecting against dollar debasement. So that's one of the most important reasons is just sort of the demographics and the fact that there isn't 100% overlap. And I totally spaced on what the second reason was. And it was, go ahead.
Oh, that's okay. Well, I would fall into that category that you're saying. I didn't know about sound money before Bitcoin. So Bitcoin is the only asset I own, really. It's probably 95 plus percent of my entire net worth. I'm just all in Bitcoin. I have zero precious metals. But when I see gold ripping, even though I don't benefit from it, one, I'm happy for the Larry Lepard of the world who made this bet decades ago and it's paying off.
And also, like Larry says, gold goes first, Bitcoin runs hardest.
I do expect at some point there to be a move in Bitcoin, partially because of this move in gold.
How much do you think Bitcoin will lag?
And do you think it's going to have a good 2026?
Well, and you just prompted me to remember the second reason, which is the gold price suppression schemes.
Wall Street is here in Bitcoin in a very big way, right?
And they're doing it with the ETFs.
And as I warned at the time, years, actually, I think I wrote a piece in Forbes in 2016, warning that when Wall Street arrives for Bitcoin, it's going to be a double-edged sword, including when Wall Street gets Bitcoin ETFs.
Because it's going to bring in a new demand, new source of demand, but it's also going to bring in all these derivatives.
And just today, we're recording this session on Monday, the 26th of January.
um uh blackrock filed an uh an etf that is going to provide some downside protection is how it's
designing it on the ibit um but also providing some yield by selling call options to monetize
bitcoin's volatility i saw this just before we started recording it's like an income generating
etf right but bitcoin itself doesn't generate any income so if you are getting if you're investing
is something that generates income, you are taking some counterparty credit risk with your Bitcoin
because they're monetizing the volatility, which is a classic Wall Street strategy. But what's the
impact of all of that? It creates paper claims that are not backed by the real thing. And what
does that do? It creates an artificial suppression of the price because there's an artificial
increase in supply. Think about your supply-demand curves. When the supply curve moves out to the
right, the price goes down. But it also creates demand substitution. And I can go back and find
an old tweet thread that I put out a few years ago on this very topic that draws the supply and
demand curves and shows why when you get paper claims that people accept as substitutes for the
real thing, which of course has been happening for decades in gold and silver, and it's only been
happening for a few years in Bitcoin, but that suppresses the price. So this is where Larry and
I may have a little bit of a difference because I actually think that all these derivative games
are suppressing the price. A lot of people think they're buying real Bitcoin. They're not buying
real Bitcoin. And there was just a kerfuffle over the weekend with Jameson Lopp and Michael Saylor
talking about the biggest threat to Bitcoin. Michael was making the point that it's people
who want to change the, I think it's ambitious developers who want to change the code. And
Jameson's response was no, it's concentration of ownership in centralized institutions that
are not engaging in self-custody and that are engaging in these sort of, you know, yield plays.
If you're engaging in a yield play on Bitcoin, you don't own real Bitcoin. You own a claim to
Bitcoin. And in the event that there is a short squeeze, guess what? There may not be a chair
for you in the game of musical chairs. And that's what we're experiencing right now with gold and
silver. We're seeing an incredible short squeeze. I would caution though, before people think that
this is just going to keep running and running and running and running, it may not be different
this time. And if you look at gold, or sorry, silver in particular, there've been, this is the
third parabolic increase in the silver market since 1980. And in each one, the silver price just
goes parabolic for a very short period of time and then collapses back down. Is the third time
going to be different? Only time will tell. I mean, there's some fundamental reasons why it may
be different this time, but there are also, you know, the history in that market is that it goes
through these parabolic rises and that the right trade, if you look back historically, was to take
your profits when they happened. I'm not giving investment advice. I'm just suggesting that folks
go look at the history and use your own judgment and be careful chasing these things because they
certainly can run. But I will also say, when you think back to, it was 1980 and 2011, I believe,
were these parabolic rises in silver. And then they crashed pretty fast. If you go back and look
at what gold and platinum and palladium did during those same parabolic rises in the silver market,
they did not have parabolic rises like silver did.
Now they are all having parabolic rises at the same time.
So, I'll let you draw your own conclusions.
Exactly.
It's interesting though.
I have seen over the last couple of days,
a lot of people announcing that they're opening shorts
on silver on Twitter.
So there's people that are either gonna get completely blown out
or be proven right.
You obviously worked on Wall Street for a long time.
And one of the kind of recurring themes
over the last year or so has been this idea that
is Wall Street going to quap Bitcoin or is Bitcoin this sort of Trojan horse?
Where do you stand on that? Do you think Bitcoin will be okay? Like there's nothing you can do to
stop the adoption of Bitcoin on Wall Street. That's the beauty of Bitcoin. But do you think-
Very voluntary. Yeah.
Exactly. But do you think it's going to survive this in a way,
will it have like a different dynamic to gold when gold became so monetized?
Well, yes, it will, because I think there won't be a executive order confiscating Bitcoin because everyone will just laugh. Right. I mean, if there have been a couple of states that have tried to apply unclaimed, you know, eschewed laws for unclaimed property to Bitcoin and people just laugh because, again, back to the possession is nine tenths of the law. Right.
If you've got your private key, I mean, a lot of people will be saying, you know, come and pry it for my cold dead fingers, so to speak. But it's in most cases in people's brains and you won't even be able to get it out of them if they're carefully doing self-custody.
So, yes, I think that Bitcoin won't be as confiscatable as gold was in 1935. However, Pierre Rochard, I'll give him credit almost every day. He bangs away now at the number one thing that Bitcoin should want is not the Clarity Act. The number one thing that Bitcoin should want is to have capital gains taxes removed from it. That is the biggest impediment.
So right now, as long as Bitcoin has capital gains taxes applied to it in the United States,
Wall Street is going to treat it just like any capital asset.
And so, yes.
But back to what I was saying earlier about the ETFs, it's a double-edged sword.
Yes, there are more people buying it.
You know, the ETFs are sort of the boomer version of Bitcoin to use some of the crypto
Twitter slang.
But by the same token, so there are more people buying it.
But by the same token, you get more paper claims because there's now a deeper derivatives market.
There's more financialization.
I remember having this very debate with Trace Mayer in probably 2014, 2015, more than a decade ago, when he was doing his podcast and talking about the seven network effects of Bitcoin.
The sixth one was financialization.
The seventh one is world reserve currency.
We're in the financialization one right now.
And he thought that that was positive.
This is where Trace and I disagreed. I actually thought leverage-based financialization was
negative. It's definitely going to have, and already is, having some double-edged sword effects
because a lot of people think that they're buying real Bitcoin, but they're not. And
that demand is being artificially satisfied with paper claims.
So do you think with the paper Bitcoin and the derivatives on top of all ETFs that the years of
you know, 400% Bitcoin gains are behind us now? Do you think the volatility is over?
Ah, okay. But let me get to, I guess I didn't really completely answer your question. Sorry
for being so long-winded there. No, that's okay.
Here's the bottom line. Wall Street will never control Bitcoin in the way that it was able to
control gold. Why? Because gold was always stored in the bank's vaults, including the central banks.
So the individual ownership of gold has never been more than a few percentage points, whereas individual ownership of Bitcoin, it's the vast, vast majority. Yes, there have been some whale selling, some OG selling as it topped $100,000, right? But it's still, you know, 70% held in long-term hodlers' hands, give or take, right?
So it's still a relatively small portion of Bitcoin that trades every day.
And the long-term hodlers are not going to be bailing out Wall Street.
They're not.
And so that supply is never going to be available for Wall Street to come in and financialize.
So ultimately, you made a very good point.
And we talked earlier about how Bitcoin is purely voluntary.
So Wall Street can come in just like anybody can come in.
They can play their games.
They can also blow themselves up, which I think they might do.
Somebody will.
But by the same token, you know, just the fact that anybody with an internet connection or even a ham radio, I have seen a Bitcoin transaction done over ham radio.
Okay.
Any way to communicate with another human being.
Was that NVK that did that, I think?
It was done at a conference in New York by Fluffy Pony.
It was, yes, back in probably 2017.
That's awesome.
They did it. And I remember Meltem Demirors brought a toilet filled with gold coins. Talking about shit coins at that conference. I can't remember what the name of the conference was, but it was the Magical Bitcoin Friends Conference. It was still very counterculture at that point. It was before Wall Street and the suits arrived. But it was a fun, really fun conference.
The good old days.
And they did a Bitcoin transaction over ham radio.
So it just literally any anybody can communicate who can communicate with another human being can do a Bitcoin transaction.
That means it's entirely voluntary.
And and that means we can always go around Wall Street.
Nick Szabo made a really important point at the Bitcoin conference in Miami right after COVID.
So this would have been Bitcoin 2021, I think, where he said, we don't need liquidity.
We just need to have some market at all.
And I'm poorly paraphrasing his point, but I thought that was the most profound observation
about Bitcoin, especially given that he might be Satoshi.
It was a very important observation that he's basically saying, we shouldn't be applauding
all these institutions coming in to try to make your bid offer spreads very tight because the
markets are very liquid. All you need is the escape valve. And the fact that Bitcoin is voluntary and
governments cannot co-opt it and cannot ban it, even if they try, they might be able to tax it.
And of course, you know, a lot of people will not go to jail and pay their taxes voluntarily on it.
But again, hat tip to Pierre for staying on that.
It is the biggest point.
And by the way, Nick personally made that point to me years ago, that the number one
thing that we can and should be getting done in Bitcoin is taking taxes off it.
Forget all the regulation.
That's secondary.
Let's get it so that it's not taxed.
But, you know, back to your point, the fact that Wall Street will never really control
it and we can always just voluntarily come and go as we please, that is the escape valve.
and no government can block us from using it
as long as we can communicate with another human being,
whether the internet is up or not.
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So I guess the question I asked just a little earlier
about whether Wall Street will suppress volatility
going forward, would the answer to that be,
yes, they might suppress it in the short term
until one of them gets blown up by this?
Yeah, that's a good way to put it.
And volatility, by the way,
Bitcoin volatility has been suppressed.
That's part of the reason that crypto Twitter
is kind of boring right now,
is the price has actually been pretty much sideways, right?
And it's frustrating to a lot of people
because they look at the other hard assets,
prices going parabolic.
But yes, I think you're onto something there.
With the capital gains,
how realistic do you think it is
that that's actually removed from Bitcoin?
I guess there's two ways.
It's either entirely removed
or they do like a de minimis tax exemption.
And I know there's talk of doing one
that I think $600 being the limit,
which seems way too low to me,
but I guess it's a start. I don't know how you kind of trade those things off.
Like, how do you expect that to play out in the future?
Yeah, well, Ron Paul was the one who got taxes removed from gold.
So, yes, I think. And it used to be until 1974, getting back to one of your earlier questions,
why have we never revalued the gold? It used to be that only institutions,
only central banks and banks got to touch gold, right? That's how they controlled it.
But other than jewelry uses it was illegal for you to own you know specie the actual bullion or coins
And so they were able, Ron Paul was able to get in, I think when he was in Congress in the 70s, he was able to get that changed.
So there is evidence of the fact that it can be changed, but I don't think he was able to get taxation off gold and silver.
It's treated as a capital asset, just like Bitcoin is.
And the accounting for gold and silver, Michael Saylor was able to get that through. There was a big group of us trying to push for years to get the accounting changed. That has not changed for gold and silver. The accounting change is still considered a general intangible. And therefore, you have to, under US GAAP and IFRI standards, you're not able to write it up, but you have to write it down if it goes below, you know, in that case, $35.
So my guess is, Danny, that that's the nominal reason why the Fed has never written up its goal, because it's applying some accounting standard that says you never write it up.
However, we all know that accounting standards, you know, can get changed. Right.
And we're giving examples of where, you know, Bitcoin's accounting standard got changed and maybe the taxation will get changed.
I know Senator Lummis is still working on that.
It's obviously a bummer that we're going to lose her after she retires.
She announced she's not going to be running for re-election.
The woman who's probably going to replace her, though, Harriet Hageman, is a fighter.
And I wouldn't say she's as committed because this is not her number one issue.
But she'll be right there with us.
She'll be great.
And she wants to support Wyoming and all the things we've done to build up this industry in Wyoming.
So she'll be there to help us.
So I don't know is the answer.
I'm hoping that Besant will at least put the de minimis exception through, but we'll see.
It will be a real shame to lose Cynthia Lannis.
She has been unbelievable for Bitcoin.
Good to hear that the replacement is at least slightly pro-Bitcoin as well.
That's good to know.
More than slightly.
Yeah, we've actually had a number of conversations.
This is Wyoming, right?
So everybody knows everybody or is one degree of separation because there are only 600,000 people in the whole state.
But it turns out that my mom and I think it was her cousin or niece taught together in a tiny, tiny rural public school like 30 plus years ago.
So, you know, those kind of connections exist all over in a small state like that.
But she's wonderful. And I think she'll be a great senator and she'll be a great champion.
And one of the cool things about her background is she's made a career of suing the federal government, just like RFK.
He made a career of suing the federal government.
And he sued corporations for dumping toxic chemicals in waterways and the like.
She mostly sued the federal government in her career.
But she's got a long history of rooting out corruption, and she's lived it in her career.
Love that. We need more suing of the government.
I want to get on to custodial, but before, I do want to just quickly talk about the Fed, too.
I know you've had your own issues with, and we will get to that.
But what do you think about everything that's happening between Powell and Trump right now?
Because obviously, the pressure has probably never been higher on Powell.
He's out in May at the very latest.
Out as chairman, not as a Fed governor, right?
Yeah.
His Fed governor, I think, runs to 2032 or something like that, yeah.
Okay. So do you think Trump will be able to take relative control over the Fed?
So this is fascinating because I know some things. I've heard a lot of things. I'm very
plugged in to people who are very close to what's going on. And Trump has announced multiple times
that he was going to make the announcement or alluded that the announcement was coming,
and then it's not coming, and then it's not coming. And here we are at the end of January
almost, and he still hasn't made the announcement. And according to Polymarket, I mean, the lead
changes in this have been incredible. There've been so many lead changes. And right now, Rick
Reeder, if you look at Polymarket, I haven't looked at it today, but last I saw, he was about
at 50% and he was in the lead. He's the BlackRock guy. He's the BlackRock guy. Yeah. Right. Right.
Now, coming back to one of the themes we talked about earlier, right? Wall Street and, you know,
is it healthy that Wall Street is so plugged in and connected to Bitcoin? And over the weekend,
And Larry Lepard tweeted out somebody who I read every Saturday for years, Doug Noland, who had a great line.
And I will paraphrase it that he said, he said, every time Rick Reeder would open his mouth, will the markets look at it and say there's BlackRock talking?
And I think that that's an interesting question.
You know, he's definitely the market's favorite is what Doug Noland was saying.
What I've heard is DC's favorite is Governor Waller, who sits over the payment system, who's been very friendly to Bitcoin.
In the beginning, was not, but is now.
And then New York's favorite was Governor Warsh or Governor Hassett.
And now it's kind of flipped to Rick Reader.
So I don't know.
I mean, I think at this point, the dark horse that I would say is...
And we don't know what's going on behind the scenes.
I've heard some really crazy things about threats being made behind the scenes.
And again, like, what you see in the PR battle is kayfabe.
It's not what's really going on.
What's really going on is a very big power struggle over who's really in control.
And I do believe the story is that when, you know, Powell put out his video, which last I looked at, 89 million views and alleged that or used the word indictment.
And the DOJ had to come out and backtrack and say, we didn't indict you.
We just sent you letters asking for information.
And you're the one who blew this out of proportion.
Well, to whose benefit was that, that it got blown out of proportion, right? So I think it smoked out a few things. And what I understand is that that caused Powell to dig his feet in and threaten not to resign.
The history is that when chairman stepped down, that they also resign their term on the board.
Terms on the board of governors of the Fed are 14 years.
And the chairman terms are only four years.
So by definition, when a chairman's term is up, oftentimes their governor term is still valid and they can stay on.
But no one ever has because it's been deemed to be bad for the organization to have kind of a shadow fed chair, right, a former chair be on the board of governors. And so out of deference to the new person in charge, the old one typically resigned early. But apparently that's not the case here or may not be the case here.
And that's what it has been reported. I'm not breaking any news here. It has been reported that Scott Bessent was not happy with the DOJ because it caused some intransigence on Powell's part, including apparently, allegedly a threat not to resign.
So back to your original question, will Trump get control of the Fed's board of governors?
We don't know.
But there's a really important date, which is February 28th, which is less than pretty much a month from today.
And that is why is that important?
Because that's the date by which the board of governors votes to ratify the reappointment of Federal Reserve Bank presidents.
The FOMC is not the Board of Governors, which is seven Senate-confirmed governors, including the chairman and two vice chair.
There are a total of seven of those, all of whom are Senate-confirmed.
And then there is a rotating group of four.
There's one permanent, which is John Williams from the New York Fed.
So the New York Fed has a permanent seat on the FOMC, and the others rotate through from among the 12 regional reserve banks.
And so the Board of Governors votes to ratify on February 28th. Now, they early voted to ratify in December. But if Trump is able to get control of the Board of Governors before February 28th, he could revote. And maybe they wouldn't ratify all 12 of the governors.
of the governors. And the FOMC, of course, if you look at the composition, it's not difficult to
just ask AI, what's the political leaning of the 12 Federal Reserve Bank presidents? You will very
quickly see it's Democrats. And so Trump, he's got a hostile FOMC. And this is part of the reason
why interest rates have been above the inflation rate. And a lot of people, certainly politically
motivated people, but also economists have agreed with the observation that interest rates,
that the Fed has held interest rates too high. Of course, as you know, that's a huge debate,
so I won't get into that. I don't make predictions on things like that, but that's the lay of the
land. There's a governance fight. The drama is happening behind the scenes, and we will know by
March 1st what the impact of all this is. I mean, it is probably the most interesting thing
happening right now in the macro world. You said a ton of stuff in there that made me think. One,
Rick Reader, if he was the chairman, I think people will just think this is BlackRock speaking,
because he's still got all his allies on Wall Street. He kind of is working. I think it's hard
to shed that history if you've been at BlackRock and then you go in as Fed chair. But even more
interestingly, I think I don't know what it does to the markets if it's deemed as not being
independent. Like, I think Jerome Powell has done a good job in the sense of he's remained
quite independent from Trump, at least. Maybe not from the Democrat side, but from Trump,
he's not done what Trump's asked him. He was not independent from the Democrats,
yes, as someone who personally experienced that. Yeah.
Yeah. But from Trump, he has not just done what he's been asked.
Oh, that's clear.
If someone comes in and they're seen as like a stooge for Trump and he's just doing whatever
the administration want, like, what does that do for the markets if they don't see the Fed as
independent. Is that a bad thing? Right. Well, this is why Scott Besant has fought against,
if you read, and I do believe that it's true, that there's been a battle within the Trump
administration. And Trump likes those battles, by the way. So there's nothing negative about this.
This is a big debate. And Besant has come to Powell's defense and has not wanted Trump to
fire Powell and Trump has not fired Powell. So I think that speaks volumes about Besson wanting to
make sure that markets are comfortable with it. But we'll see, right? Here's my dark horse
prediction. And I have actually put this out on Twitter. I actually think there's a decent chance
that the reasons that Trump has not made the appointment yet is he's trying to wait out Scott
Besson himself. There is historical precedent for Treasury Secretary. It's pre-1935, but there is
historical precedent for the U.S. Treasury Secretary to be the chairman of the Federal Reserve.
And the two organizations used to be a lot tighter than they are now. There was the famous
Accord of 1951, and that's where the notion of Fed independence was born, was 1951. The Fed was
created in 1913, was reformed in 1935, I believe, and then had the big Fed-Treasury accord in 1951 that
created a separation between the two. But there was not separation historically between the two.
There was actually quite a bit of overlap between the Treasury Department and the Fed. And there is,
as Besant himself has pointed out, historical precedent for the Fed chair to be the Treasury
secretary. And by the way, I mean, in some ways, that's what Biden himself did. It just wasn't
recognized as that. But go look at Biden's Treasury appointees. Janet Yellen, former Fed chair. Look
at all of her deputies. They all came from the Fed. In fact, actually, one of the banking attorneys
made a joke at the time that the Fed did a reverse takeover of the Treasury Department
during the Biden administration. And touche. It was kind of true.
It's going to be, so how long have we got?
We've got two months, basically, or just over a month, actually, until we really know what's happening.
It's going to be interesting.
But we should talk about Custodia.
For anyone that doesn't know what Custodia is, do you want to start by just explaining what you're doing?
Yeah, well, we formed in 2020.
So now literally the company is six years old to try to create a compliant bridge between TradFi and the crypto ecosystem
and to try to create durable banking for the crypto ecosystem.
Obviously, we failed at the latter because of all the debanking,
and we got very targeted ourselves with debanking
because we were famously denied a Fedmaster account,
so we had to rely on bank partnerships just like everybody else in the industry.
And so we were not able to deliver durable banking relationships
any more than anybody else had in the industry
because of the Biden administration's Operation Chokepoint 2.0.
By the way, not everybody who executed that is gone. There are still some people in these agencies who were involved with the execution of operations 0.2.0. But Custodia, we survived it. It's pretty incredible. I'm sure there are some people who look at themselves in the mirror and say, damn, we still haven't killed that company. And yet, we're still here.
We've actually partnered with a bank, believe it or not, a traditional bank.
Yes, a traditional bank that, by the way, has invested in a lot of Bitcoin companies and has picked its partners very carefully.
So it doesn't spray and pray, so to speak, in its banking relationships in the industry.
It's been very careful.
And it's kept its nose clean.
And that company is called Vantage Bank.
And we are working together on a venture to bring tokenization to traditional bank deposits and directly connect them to stablecoins.
Now, I've gotten some questions from traditional Bitcoiners.
Why are you working on this?
We alluded to this earlier in the podcast.
I've never thought stablecoins were a threat to Bitcoin.
I actually thought they're an on-ramp into them.
Because once you get the concept of wallets as opposed to accounts inside traditional banks, and you bring that infrastructure into the traditional banking system in a safe and sound and compliant way, all of a sudden the infrastructure is available for anyone to use who has the ability to use it in a compliant fashion.
So bringing wallet infrastructure into the core of the banking system is really important. And the way Vantage looks at it as we're solving the duplication and reconciliation problem, which is a perpetual problem for banks, especially because you typically have what's called deferred net settlement.
So you're constantly having to true up because you don't have atomic settlement of both legs
of a transaction.
There's always a buyer and a seller in every transaction.
And if the transaction isn't settling atomically when it occurs, then there's a delay.
And when there's a delay, there's counterparty credit risk.
And you have to go and reconcile your data to be sure that both parties have recognized
that the transaction has settled.
A lot of the complexity, as Lynn Alden very aptly writes in her book, a lot of the complexity in the financial system has to do with the fact that we were able to move the messaging for financial transactions at the speed of light and have been able to do that since the middle of the prior century.
It was with the transatlantic telegraph that allowed us to be able to have messages move at the speed of light.
But we've not been able to move the money at the speed of light for a financial transaction until Bitcoin.
And so now we're actually at the point where we can atomically settle U.S. dollar transactions.
And so I think that tokenization is a very big deal.
I don't think Bitcoiners should be upset about it.
Some hoped that we would go straight from traditional tradfi into hyper-Bitcoinization.
I never thought that it was going to happen that fast.
I think this intermediate step of getting folks comfortable with U.S. dollars in cryptographic form with wallets is a really important piece of the infrastructure.
And that people, once they actually have wallets connected to their traditional banks and their brokerage firms, it's like the Robinhood model.
So they'll engage with customers wherever they are in whatever format they want to engage.
And we're bringing that technology into the traditional banks.
Stablecoins right now have a little over $300 billion outstanding.
Do you know what the demand deposits in the banking system in the U.S. is right now?
No idea.
$5.7 trillion.
Wow.
That's where the money is, right?
So as successful as stablecoins have been, there's a reason why we're focusing on tokenized deposits at this point.
Because that's where the money is.
And if we can bring these technologies into that 5.7 trillion, then stablecoins will ultimately end up, I think, being kind of an afterthought.
Because you're bringing it into the core of the banking industry.
And people will have the ability to vote with their feet and move to Bitcoin themselves.
Yeah, I totally agree that I think hyper-bitcoinization was always going to need stepping stones to get there.
And this seems like one.
So earlier in the show, you were talking about fiat currencies might be dying, but not the dollar.
Is that because of stable coins?
Because if you're in, you know, Argentina or wherever, I mean, that might be an outdated example now, but somewhere with high inflation, you're going to just move to stable coins instead of using your local fiat currency.
Well, we saw that in Venezuela.
There were stories about people mining Bitcoin to be able to get Tether.
They wanted U.S. dollars.
They didn't want Bitcoin.
So, yes, I mean, right now, that is where people who have voted with their feet in a free market decision, right? Tether offshore was not regulated, and it could go wherever market demand went, right?
And hats off. They figured out how to bank the unbanked by creating kiosks in Africa so that, you know, folks that were in villages that didn't have electricity could walk to a kiosk, swap out their dead phone battery for a charged one, and deposit their wages into Tether.
Well, that is creating a new marginal demand for U.S. dollars that was never there before. And it's more than just new demand. It's interest-insensitive demand. That is a demand for dollars that's not going to turn around and dump them at the first sign of a crack in the financial system, unlike traditional developed markets owners of dollars would.
So, yes, I think that's really significant. And, you know, it's just like the core Bitcoiners. I don't see them really criticizing Tether because they've brought adoption to literally 8 billion people in the world.
And I think they have, last I looked, more than 500 million active monthly users.
As a percentage of the adults in the world, it's incredible.
Just hats off from a business growth perspective and figuring out how to just push decentralization and push low-cost delivery of a service out into the wilds of the planet that did not have access to traditional financial services.
And that pretty incredible And it all dollar demand to your point It yes they making Bitcoin available and they are also making gold available They have a tokenized gold fund a gold token rather
So they're giving choice to people.
And what are people voting with?
With their feet, they're voting for dollars.
Yeah, it's one of those things.
The criticisms of Tether from Bitcoin is I've never really understood.
I get that you can think Bitcoin's a better option than Tether for people.
But if you're living in a country with super high inflation and your option is to move to a relatively stable, as stable as the dollar stable coin, and all you're worried about is protecting the little money that you might have today over trying to invest in the future with Bitcoin, I understand why you do that.
I think Tether's a useful tool for billions of people.
It's funny, I had Brent Johnson on the show probably six, eight months ago, something like that.
And he's obviously the dollar milkshake guy.
And I think stablecoins probably accelerate the dollar milkshake theory faster than anything we've ever had before.
I could totally see a world where, you know, in a decade we've lost almost all of the other fiat currencies.
Well, I think that's what's happening right now.
The de-fiatization, not de-dollarization.
Yes, because there's all this new marginal demand for dollars.
And that gives Scott Besant a lot of operating room, right?
One of the biggest challenges that he had is that Janet Yellen left him with a very short-term financing strategy because she was mostly, she basically was, talk about the Treasury Department dominating the Fed, she was executing her own QE, quantitative easing, from the Treasury Department, right?
And again, most of her staff came from the Fed. But through the Treasury General account, she was executing quantitative easing and she was financing most of the U.S. deficit with three-month and lower T-bills, not with 30-year Treasury bonds. She was not turbing it out.
And so one of the big challenges that Besant had when he walked in was he had all the short-term debt that he had to keep rolling over, right?
Well, so that marginal demand for short-term debt, which is, you know, Tether is what, the sixth largest owner of U.S. Treasuries right now?
It's incredible, right?
That marginal demand had a huge impact and a huge benefit to the U.S.'s ability to finance the deficit.
Absolutely.
There's no question about that.
But it's a funny world we go to then, because I can't imagine the UK, for example, going to,
you know, dollar stable coins as the main medium of exchange for people within the country,
although the way it's going, maybe. But let's say you keep the top five, top six currencies in the
world and the rest end up sort of dollarizing just by, you know, this de facto dollarization.
By people walking with their feet. Yes.
Yeah. But is that kind of a world where the US and maybe some other of the sort of richer
privileged nations around the world keep their traditional banking system, and it's almost just
free banking for everyone else? Well, that's a very good question, because, you know, I think it
was William McChesney Martin who famously said, the dollar is our currency, but it's your problem,
right? But what Tether has been able to do is just go around the governments, right? They're
just going to individual people who are maybe earning less than a dollar a day in wages
in U.S. dollar terms, right? I mean, that's how serving 500 billion people around the world,
with active 500 billion users, you know, no one else has been able to figure out in financial
services terms. Obviously, the internet companies have figured out how to serve them and the
telephony companies, but not financial services. They've been able to push it down and decentralize
it. So it's a very interesting observation, Danny, that functionally there will be businesses built
around Tether in those economies.
We're seeing it already.
And they will probably not be
regulated financial institutions, right?
But the ones who I think will have their head in the sand
and are the most threatened by this
are the developed world.
It's coming back to Europe, right?
Europe is very jealous that the U.S. has Tether,
I suspect, because Europe is in need.
They're running huge deficits too,
and I'm including the U.K. in that.
and doesn't have that brand new marginal demand for debt coming from this, you know, new buyer base that's never been and never had access to these markets before.
So I'm sure they are pea green with envy.
And they're now rushing out.
The ECB is trying to rush out their European version.
And if you look at the regulations, you know, it's I can't remember who to give credit for.
but saying that, you know, what Europe does best is regulate. And that was not a compliment.
It was basically designed to, you know, that the nanny crats, so to speak, were there to just say
no to everything and slow everything down. And that's why there's a sclerotic economy in Europe.
And until you tear down the regulation, and by the way, Trump's trying to do that in spades in
the US, tearing down the regulation to try to increase innovation and increase the economy and
and try to take away the doctor no aspect of, you know, this incredible growth of the federal
government. I think it's something like 20% of the U.S. employee employment is government employees.
It's a lot higher than that in Europe. I don't know what the percentage is.
Oh, it's definitely higher than that.
Yeah, exactly. And, you know, I mean, those 20% are basically getting paid out of taxpayer funds.
So it's the people who produce the real income that produce the taxes to pay the government employees, right? And so, you know, the more you put the regulations and restrain innovation, the less tax base you're going to have to be able to continue to fund the growth of government employment, right?
And so Europe was able to sort of backdoor through all these mechanisms of globalization, back to what we were saying earlier with LIBOR, you know, switching over to SOFR.
They lost control over that, right?
It was kind of a skimming mechanism that was sending value through subtle, hard-to-detect mechanisms from the U.S. dollar holder over to Europe.
And those mechanisms are going away, and it's putting Europe in a real pickle.
And, yeah.
I really hope that the Bank of England and the European Central Bank try and do one of these stable coins, because I think they'll very quickly realize that no one cares about them. No one wants them. And it's not because I want to see the UK or Europe fail in any way. It's just that they then will have to go back to the drawing board and maybe fix things properly, rather than trying to use this cheat code that the US has kind of stumbled upon with Tether.
The US definitely stumbled upon it. It was Tether that created it.
Totally. And one of the other interesting things that happened with Tether last year was
not being able to issue interest through the Genius Act. That was the Genius Act, wasn't it?
Yes.
And when David Sachs came out after that, he was on the all-in pod the week after that went through.
And he was saying the reason they couldn't issue interest was because they had so much pushback
from the banks, especially I think the regional banks in the US. So they obviously know that this
is a massive threat to that. But do you think Tether will have almost like an onshore Tether,
which obviously can't issue interest, and then an offshore which can. Because I think if we're
talking about dollar milkshake theory, dollarization of the global south, that's the thing that's going
to really speed that up. Well, Tether has not been paid. They can pay interest to the offshore
Tether holders right now, and they've not been paying interest because there's no market
competition. Will there be someday a market competition that will force them to do that
In certain markets, I suspect there will. Across the board, probably not, right? Because think about, you know, just the economies of scale and the network effects that they've been able to reach. How hard would it be for someone else to come in and replicate that? Now, there are all kinds of examples of that in tech, right? There's MySpace that Facebook overtook and the like, right? And so it's not impossible, but I think it's improbable.
So will Tether ever have to pay interest?
I don't know.
And in the U.S., to your point, this is a hot button,
but I haven't said anything publicly about this.
There's a really simple reason why.
And it gets back to the 5.7 trillion of demand deposits
in the banking system.
They can pay interest.
You tokenize those, there's no debate.
They can pay interest, right?
So stablecoins are not happy about not being able to compete with the 5.7 trillion of demand deposits that can pay interest.
But when the banks come and start tokenizing deposits, by the way, this is what Custodia and Vantage are doing.
We have figured out a way to connect a tokenized deposit to a stablecoin in the same smart contract.
What is the significance of that?
It means that as that token moves from organization to organization, as the users direct it, that it's in the same smart contract and the obligor will change.
That's, of course, a centralized exposure.
I grant you that.
But, of course, any dollar stablecoin is going to have an issuer, right?
But the point is that we're creating network effects for tokenized deposits and stablecoins to flip back and forth between tokenized deposits and stablecoins.
It's huge innovation, I believe.
And it's a way for the banks to offer this technology without putting their core deposits
at risk.
Now, I am much more of a fan of the community banks.
If you look at my philosophy, so much of it is decentralization of power, pushing power
down to individuals and local governments, because when it gets concentrated in federal
governments, it gets abused, right?
And Tether has done a great job of pushing that decision and economic power down to the
literal, you know, 500 million users.
So it'll be fascinating because the big banks are going to try to co-opt this.
And I'm working with one of the small banks that is, we're bringing tokenized deposits
and stable coins to the small banks.
And if you look at the history of the big banks versus the small banks in the US, they
have fought like cats and dogs for decades.
And the big banks have so many times screwed the small banks. There were antitrust investigations into the clearinghouses when the ACH system was introduced in the 1970s.
70s. And there was a law passed in 1980 that brought the Fed to the table because nobody
could trust the big banks that kept trying to keep their competitors out. Now you look at J.P.
Morgan bringing in their, you know, their Conexus, which is a permissioned chain, right? The New York
Stock Exchange is working on a permissioned chain, right? They're trying to, with Bank of New York
and CME, some of the other big financial institutions. They're trying to create walled
gardens. The history of the big financial organizations in the United States is create
walled gardens to keep little competitors out. And it is wrong. And they're doing it again.
And it's going to be so much fun because the small banks now are rightfully afraid of stablecoins
disintermediating. I put out a reference today to a JP Morgan study. They de-anonymized their
own data in the 2020 and 2021 crypto bull markets, when customers withdrew money to Coinbase,
88% of it stayed there and never came back into the banking system. So once people took money out
of bank accounts into wallets, admittedly, it was hard to bring it back. So there was a lot of
friction, right? And you risk having your account closed if you dared to send a wire or an ACH from
Coinbase into Bank of America, right? A lot of people had their accounts closed. So that 88%
might not be what it is today. But the big point is, it's absolutely right for them to be afraid
that if they don't offer these new technologies to their user base, the users are going to migrate.
And they're going to go to where the better technology experience is. And that's especially
true with the younger generations. So working with the small banks, which is where Main Street
credit gets originated, that's important. Yes, is it fractional reserve banking? Some folks will
just say all banks are bad. I'm definitely looking at the nuance here and saying, okay,
the ones that actually made America strong are the community banks, not the behemoths. And the
behemoths are going to try to come in and co-opt this, and I'm going to be right there fighting.
I love it. So back to Custodia, you obviously, the big sort of battle you had was trying to get
a Fedmaster account a few years ago.
I know that was initially rejected and you then appealed.
Where is that at now?
Still appealing.
Hasn't changed.
Yeah, yeah.
Welcome to the...
Yep, yep.
So the Trump administration coming in hasn't made this easier for you so far?
No.
The Fed has not granted access to its accounts to a single crypto native company.
And why do you need it?
Oh, well, because if you're trying to bridge to Fedwire and ACH, you don't want to have to go through an intermediary.
It's getting at atomic settlement.
That's back what we were talking about earlier in the podcast, tying together so many of the themes that you've brought up.
You've done a great job questioning to bring all these themes together.
We want atomic settlement because if we have to go through an intermediary, we don't get that atomic settlement.
And now we're back in the slow old rail. So if you're trying to bridge these very fast settling crypto protocols with slow settling Fedwire and ACH, ACH, I mean, until recently, it was batch processed. In a lot of cases, it's still batch processed overnight at most of the banks.
You can get some intraday settlement on it, but it's not programmable, right?
So the Fed created FedNow to try to solve all of those things.
But if you look at it, ACH is still by far the dominant small value payment system in
the United States.
And FedWire is by far the dominant large value payment system in the United States, neither
of which is programmable, both of which have delayed settlement.
So you're not going to be able to get atomic settlement if you're trying to build these
bridges.
You want to be able to go direct to the Fed so that you can get atomic settlement.
And so do you think it's the fact that you're obviously trying to use Bitcoin and stable coins with Custodia?
Or is it that they see you as being full reserve done a threat to their system?
Why do you think they're saying no?
No, I mean, well, this is thawing, right?
So you said the Trump appointees haven't been able to completely unwind what Biden did.
I'm putting words in your mouth, but that's really the truth.
They're working on it. Just less than a month ago, right at the end of 2025, the Fed finally unwound a anti-crypto statement that the Board of Governors voted on 7-0 on January 27th, 2023, simultaneous with the custodian denial.
that was this virulently anti-crypto statement that kept all the banks out of crypto.
And frankly, around about that time was when Operation Choke Point 2.0 was born.
And we were right at the front edge of that.
I've had a conversation with Alan Lane at Silvergate saying, you know, he was actually before us.
When you look at the data that came out, we were comparing dates.
We were pretty much denied at the same time.
And they pretty much made decisions behind.
it was all in the wake of FTX. They basically just, Elizabeth Warren basically just decided to
just go through and try to kill the whole industry. And so Silvergate, there was a weekend at the end
of, it's the end of Thanksgiving, a U.S. holiday at the end of November 2022. Silvergate got a
consent order and the decision was made on that Sunday of Thanksgiving weekend to deny custodia.
So it was basically the same time. Didn't get announced until January 27th, 2023. But the Fed finally did unwind that anti-crypto statement that it passed January 27th, 2023, 7-0. It was unwound 6-1. And a number of the people who voted for it in 2023 voted to unwind it at the end of 2025.
The only one who didn't was Michael Barr, who was the main architect of Operation Chokepoint 2.0.
And per insiders, I've subsequently learned, he directed Fed staff to find something to deny custodia.
It's insane.
I mean, Alan Lane is such a good guy.
I really like him.
I feel so sorry for him of what happened at Silvergate.
He had his company taken out from underneath him.
So they had, I think it was 70% of their deposits were withdrawn in that bank run.
I think it was $8 billion. And they survived. They were okay. They managed to make everyone hold.
And then they were just taken around back and shot. I think it's one of the most unfair stories
that have come out of the U.S. in a very long time.
Right. And this is exactly the conversation Alan and I have had. Who got screwed more by the Fed?
Right? And the answer is both of us really badly. But here's what's fascinating.
Silvergate voluntarily, quote unquote, voluntarily unwound.
And then the next day, literally, the bank run at Silicon Valley Bank began.
The Wall Street Journal story that just came out about Fed Vice Chair Bowman yesterday
announced that she has hired a independent firm to redo the assessment of what happened
at Silicon Valley Bank.
Stay tuned, because I think Silvergate, there is a big awakening coming at the magnitude of malfeasance that took place that prompted the bank run itself systemically that brought down Silicon Valley Bank and Signature.
But the wrongdoing that precipitated that around Silvergate, I hope that there's a real reckoning because you're absolutely right.
Silvergate did not. All the depositors got their money back.
Silvergate did not stiff any depositors.
There were deposit losses that were covered by the FDIC's insurance fund at both Silicon Valley Bank and Signature.
But an interesting question that I hope that the independent firm that's been hired by the Fed to review this, I hope they ask the question, had the Fed not pressured Silvergate to, quote unquote, voluntarily unwind, would that bank run have occurred at all?
I would argue no.
And the crazy thing about it is if, you know, JP Morgan or one of the big banks had a 70% bank run, would they have survived?
I think almost certainly not.
And Silvergate did manage to survive that.
Like, they were a very well-run bank.
Yeah, I feel very sorry for Alan about that entire situation.
But...
Well, there's another piece, but I do happen to know, because I'm watching the legal piece,
the CFO did not settle the SEC charges.
The other two executives who were charged by Gary Gensler with securities violations did settle.
But the CFO did not.
So there's going to be a trial.
And this is going to be fun to watch because I think a lot of truth will be coming out.
And again, I feel for the folks who have had to sit and not be able to talk about it publicly.
But by the way, I did not learn from Alan, just in case there are any bank regulators listening, that they got a consent order on the same weekend that the find something order was given to Fed staff to deny custodia.
I learned that from someone else.
The great thing about Washington, D.C. is that it is a sieve,
and there have been a lot of insiders who've come forward,
and there were a lot of people who were very uncomfortable
with decisions that were made by the higher-ups
who were very politicized at that time.
And I hope to God that between that new report
on Silicon Valley Bank's failure and the SEC trial,
where you're going to get cross-examination under oath
and evidence is going to come out,
you're going to learn what really happened.
And I think it's not going to be a pretty story.
And a lot of the people who precipitated
Operation Chokepoint 2.0, including Michael Barr at the Fed,
he was on Nick Carter's Who's Who.
You know, he had pictures of everybody, right?
It was clearly orchestrated by the Biden White House,
but it was Gary Gensler.
Again, I've had multiple Democrats come forward to tell me
So many things. Nothing I'm going to say today is new. I've talked about it before, but they were pro-crypto-Democrats who were appalled. Appalled that they were moving against the industry and that there was just no due process.
And people's careers and businesses and reputations
were being destroyed and defamed just to try to kill an industry
that they didn't like politically and all in the wake of FTX
because they were trying to distance themselves from that fraud And it just wrong What happened is just wrong And I hoping that there a great awakening and that folks can look back at it and say you know that folks can get their
reputations back. We're still here fighting. And I just feel for the folks who had their rug pulled
out from underneath them who couldn't fight and who either were forced into settlements
with the SEC or, you know, or who lost their life's work in the equity that they built up
in their businesses because a regulator decided to try to distance themselves from FTX. It's crazy.
This is another one of the reasons why when I see online that there's, you know, indications to try
to, you know, have Trump pardon the FTX fraudsters,
Sam Bankman-Freed, Ryan Salem, you know, those guys,
no, I will fight that.
And part of the reason I will fight that is I know I know things I said this before there were I was given information from private chat rooms with FTX that made it clear that there was a fraud going on And I was giving that information through an intermediary to the FBI in the summer of 2022 So I knew that that thing was a fraud and was going to collapse at some point
and I was helping. After it did finally collapse, the FBI came back and said,
what else do you have? And I gave them more. And they didn't end up charging the things that I
thought they could have charged those fraudsters with. But when there is an online movement to try
to pardon the FTX guys, no, they were absolute criminals. And my own company indirectly got
caught up in the overreaction by the Washington DC establishment to try to kill our industry
in the name of FTX, and it was wrong.
Yeah, it's totally insane. There's no way that SBF deserves a parlor.
No!
Kaelin, this has been one of my favorite conversations I've had in ages. We'll have
to do it again and we have to try and do it in person next time I would love to Maybe I come out to Wyoming Yeah please You welcome to We be doing WyoHackathon the Wyoming Blockchain Stampede again in September And that always a great time to come to Wyoming It a little cold here right now
but I will probably see you at one of the events. And yeah, kudos to you. You literally
weaved together so many threads that we were able to bring in all this history and talk about,
man, we were going back to 1970s and talked about 1980 and the 30s, right? And the Fed Treasury
Accord in 1951. And wow, you brought a lot together. Kudos to you for giving a great interview.
Thank you, Caitlin. I really appreciate it. Yeah, I'm sure I'll see you at some of the
conferences soon, but September in Wyoming sounds good. But thank you so much, and I will speak to
you soon. All the best. Cheers.
Thank you.