you put out a tweet the other day the whole crypto market besides bitcoin right now
is unregistered securities what should happen should you know some get fined or should they
all be go to xero and start new what's the solution there i don't know what the solution is i
i think that the industry would benefit if um if the sec and the cftc put out clear guidance as to
how you qualify as a digital commodity for example if you could submit if you want to go public
you actually submit a registration statement to the sec and you negotiate it with them and over
the course of three months or six months when they grant you they when they approve the registration
statement you can go active and then you're a publicly traded company so there is a process
by which you can take a company public as a public equity if you don't get that approval
then you can't go public you can't sell shares to the general public so right now the question
is if you had some crypto the only crypto that's been deemed as a commodity is bitcoin
that's the only one that i think is is certain i mean everything else is a question and and uh
the chair of the sec said that on television a few days ago right so the question then becomes
okay i think that my crypto is a commodity how do i get it certified okay there's no clear process
so if there was a process by which i could submit it to the cftc or the sec and get them to certify
that it is not a security that would be a step forward i think the other step forward would be
um a process by which i could submit a stable coin uh to get it certified as a stable coin
like uh there there's a way you can get registered as an etf right now with the sec right they they
deny or they grant they've granted some etfs they've denied some etfs but there's a process
there's a process by which you can sell mutual funds and and other investment funds
the general public they can grant but they can deny so i don't see the process by which i can
uh spin up a stable coin you know and as you look at it right there's there's stable coins like
um like circle and paxos and you know they're registered registered entities in the united
states and they claim to be 100 backed by cash and cash equivalents so that's one type of stable coin
but the sec is not certifying them the cftc is not certifying them there's no national
certification there i think they're they've got money uh they've got licenses from states
so there's no fdic registration there's no sec cftc i think um i think that's frustration then
you've got tether right which is sitting in the middle right uh it's more opaque popular but
opaque and and the problem is because it's opaque it's getting attacked people are not so much if
people think they can wreck you they'll attack you right i mean it's like it's kind of sad like
like uh i'm not a big fan of hedge funds and short sellers myself but they will attack and so so they
shorted ust and that worked for them and so now they'll short tether they're not shorting circle
and paxos because they perceive that they're not wreckable right then you have ust which
some people thought was a stable coin i mean you could have called it a stable coin you people they
would add up you know the market cap of stable coins they added up circle and tether and ust
but when ust had 18 billion dollars worth of value the question is how much collateral was backing it
right at one point ust plus luna was about a 50 billion dollar ecosystem and i you know they had
a billion maybe two did they have three billion in collateral somewhere between one and three billion
in collateral and against 50 billion dollars of afloat and 18 billion dollars of a stable coin now
instead you know issuing 18 billion dollars worth of the stable coin is like borrowing 18 billion
dollars from counterparties so if you borrowed 18 billion dollars from counterparties and you had 1
billion in collateral you're levered up eighteen to one okay on the other hand if you borrowed it
at fifty percent loan to value then that means you have 36 billion in collateral so you see the
difference between having 36 billion in collateral which is by the way 50 loan to value is risky
25 loan to value probably less risky for a volatile market so in order to issue 18
billion in stable coin and and use uh bitcoin as collateral then the right mix would be i have
72 billion dollars worth of bitcoin and i issued 18 billion dollars worth of ust
okay and that's over collateralized
but still risky so it's pretty clear ust was never a stable coin it was a security
the point of the regulators when they say these you know these cryptos need disclosure is if you
if you'd known that you were buying a token that had a billion in equity and 20 billion
in debt and that a five percent move would wipe you out you wouldn't have traded it like cash
or cash equivalent right you wouldn't have said oh this is like a bank account that yields 20
interest you would have said something different you said this is extremely risky this is like
a 20x margin trade and a bitcoin trades down six percent i'm going to lose my life savings
so there's no way there's no way right now to certify to get like a national certification
for a stable coin if there was it would drive a process and people in the space would go through
the certification process to get that there's no way to create a certified crypto bank right now
right the reason you had uh celsius and voyager and block fi as kind of uncertified you know
unregulate registered bank is because the regulators kind of they were loose with
regard to cracking down but they also didn't give a path to certification uh caitlyn long
you know has created a a crypto bank and she's been trying to get an fdic license for 18 months
she can't get it and there's no path there's no obvious path to to get the right license
but you can imagine if i was running an etf and i said i'm not running a high-tech etf and i'm
gonna buy a mixture of facebook app on amazon and trade it and you're gonna buy my etf well i would
then post on a routine basis like every day or or whenever i change my portfolio i post what i own
in the etf that's complete transparency and if i if we can do that with an etf the question is
why can't we do it with another crypto like why why wouldn't you just say okay you know tether
if you want to be certified you just have to post everything online via this form in 8k form
when microstrategy uh when we buy bitcoin we file an ak it's an sec filing and the a if you
go read it right there are very very talented lawyers that very carefully write those aks
and then they file them with the sec and they're online in their legal documents
and the the management team is legally liable for a lie right we're legally liable the cfo
the ceo probably the general counsel and so you end up with adult supervision and you end up with
since everybody's liable the accountants are liable they're worrying about it the
outside law firm is paying attention there's an army of lawyers there's an army of accountants
and because you do that well you know everybody knows where you stand and then they can make a
decision that's intelligent um we're lacking that in the crypto space and there's uh there's no way
so there's no way for me to issue a token that's a security there's no way for me to issue a public
nft token that's that's regulated there's no way for me to to get a commodity created that's
regulated also there's this issue of exchanges right like either a d5 exchange or a c5 exchange
they're deemed as being unregulated the reason that this sec keeps denying
the spot etf of bitcoin is they claim that all the crypto exchanges are unregulated and there's
and and uh there's no surveillance agreements and there's no transparency but what they're
really saying is they don't trust the exchanges they think they trade against their own customers
right so if you're if you're if you're buying a token like let's say let's say you were buying
some random coin on an offshore exchange and you had a big order in if that exchange actually
was operating a hedge fund and they got your order and then they trade they front run you
and they bought that token drove up the price and then sold it to you you'd be pretty hurt
right well this so so when the regulators are are concerned about that
their view is there's just too many conflicts of interest right like how you you could issue
a token own a bunch of the token and then you could uh list the token on your exchange the
price would trade up then you could sell it and then you could not tell anybody you did it
that's all totally illegal with a security right you couldn't do it ever it's pretty obvious to
everybody that is unethical it is illegal and there would be like a hundred people that would
tell you no you cannot do that in the traditional economy and the crypto economy you know it's not
even clear that they know that it's unethical and illegal right it's like sometimes people like they
just think that's just being creative and so in this particular case you've got a wild west
and uh and what needs to happen is it needs to grow up now we need adult supervision now
let me just grant one more thing in favor of the cryptos which is there's a tension between the 19
the 20th century in the 21st century the 20th century is uh nasdaq you start trading at 9 30
in the morning you end at four in the afternoon you can't trade on the weekends right you can't
take personal custody that's how microstrategy stock trades mstr started trading in 1998
and there has been no material improvement in the way that that stock works on the nasdaq in
24 years okay so that seems kind of antiquated and the crypto world is is why can't i take custody
why aren't there 500 exchanges instead of one nasdaq or why is why can't i trade 24 7 365 why
can't i do things faster so the crypto world wants to go fast and it wants sexy stuff and it wants to
do it in the palm of your hand and it wants to do it everywhere in the world and it wants to do it
on a holiday on labor day okay so those are all admirable right that's 21st century technology
the 20th century technology as well we've got the compliance down and we've worked through
the ethics and the conflicts of interest and it's pretty clear to me for example that
i have an obligation to tell all my shareholders any material thing that i do at my company that
might impact their shares right that's pretty obvious to me so we've we've got adult supervision
in the 20th century world but it's expensive and it's slow and it's not function the functionality
there's low functionality it's very expensive and it's slow right in the 21st century you've
got crypto which is very functional very fast but they haven't worked out the regulations and and uh
the protections for consumers and so you know it's kind of hard to defend it if you watch 50 billion
dollars get torched and go to zero in a matter of two weeks we can see why that's not so good
but what the world wants the way this should end you know what you'd like to see happen
is you'd like to see the regulators embrace the good that's come out of the crypto world
while extending some investor protections that are common sense like thou shalt not lie cheat
and steal common these are not like from 1933 sec act they're not 1940 these are like 4 000 year old
rules right hammurabi's code they're in the bible right they go back to ancient ancient times the
greeks the romans everybody had this idea thou shalt not lie cheat and steal so we need somehow
to introduce those those common sense guidelines into a modern technology framework and right now
uh for better for worse it's the united states regulators the sec the cftc the occ they have uh
the control of this and the rest of the world's going to follow them right is it and probably
going to adopt their broad brush their guidelines once they figure out what they want to do and the
industry is kind of in and betwixt and in between you know we're we're out of the first decade
which is a lot of innovation a lot of creativity a lot of you know mark zuckerberg used to have
on the wall of facebook's headquarters before they went public it's like go fast and break things
okay that was the facebook motto go fast and break things after they got public and after they became
a billion user network and they had the power to change the course of democracies i think they
got rid of that motto right that you know at some point you can't go fast and break things anymore
so i think the crypto world is moving from its first decade which is go fast and break things
to the next decade which is let's try to keep you know the the good that comes from the technology
uh while we introduce uh it into the public policy framework that allows it to scale to the next
order of magnitude and if you're wondering what what do the regulators think is good about crypto
this is not a secret they've said it out loud uh they think bitcoin is good
they think the proof of work such that you create a digital commodity using energy and no issuer is
a good thing it's a it's an innovation it's a brilliancy but what satoshi did the creation of
digital commodity in cyberspace or digital energy or digital property if you will or digital money
using energy and sha 256 or some hashing algorithm that's a brilliancy so there's
a place for digital commodities the second thing they like is digital currency like a stable coin
the world wants trillions of dollars of u.s dollars and probably digital euros and digital yen
to move at the speed of light on mobile phones and on websites that's an innovation and they
haven't we haven't quite got it right right we've got ust which is a defective one we've got tether
which is successful but but opaque and then you've got you know circle you know packs that
are struggling uh and no one there's no fdic approved bank that's issued a stablecoin yet
so that's a new thing we're working on and then i think they appreciate 24 7 365 trading
right that's that's an innovation which is clearly an improvement
over over the 9 30 to 4 in the afternoon five days a week the rest of the world doesn't you know
doesn't necessarily take american holidays off and sunday is not a holiday in the middle east
right and so and shutting down the economy of china because you want to declare a holiday in
california isn't the way to run a global ecosystem so so global access that's another plus and then
the final the final thing is just the idea of of crypto crypto tokens right cryptography zero proof
and the ability uh to do things instantly in a hundred milliseconds right that's an
innovation right now a lot of the world still approves wire transfers by talking on the phone
right and and that that is about 10 000 times more expensive than doing it with by signing with a
private key so so all of those all of those uh crypto capabilities those are innovation
i think all of those things together plus just speed
like being able to spin up a token you know whether it's a tom brady coin or whatever coin
being able to spin it up is an innovation now we know what the innovations are and the question
is how do you merge that uh with regulation and we'll see right we're waiting on that