SBI and XRP vs. Wall Street Ft. Rebecca Walser

[00:00:07]Welcome back in to the podcast. Today, of course, joining me is Miss Rebecca Walzer coming in here on the digital street again. So, how are you?

[00:00:14]>> I'm great, Paul. How are you?

[00:00:17]>> Excellent. Excellent. I see you're not in your home digs, so you must be in New York.

[00:00:23]>> Back in New York.

[00:00:25]>> Do you like traveling? Is this something that you is enjoyable to you? Well, I used to travel for fun and now I don't.

[00:00:33]So, if that tells you anything now I'm getting work.

[00:00:37]>> Yeah. I mean, a lot of travel has become work, but there's still there are still fun trips, but you know, they're much more rare. So, it's I find you adjusted.

[00:00:45]I'll say that.

[00:00:48]>> Well, listen, I hate it when I'm traveling to, you know, it's I don't know. At one time, traveling was kind of the greatest thing. You know, I loved it and enjoyed it, but over the years, I just got to a point that I was just like just not ready for it anymore. So, >> we get it.

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[00:02:04]Hey, listen. We want to lead off today.

[00:02:06]We're going to be talking about bank earnings, but we'll also get into the clarity probability, >> the CPI impact, also a little bit about the Fed as well. Rebecca, I want to share this first uh tweet and really kind of hits on a pretty big point for today and that was JP Morgan's Q2 earnings which came in adjusted revenue at $ 51 billion.

[00:02:30]This is crazy.

[00:02:32]>> Yeah.

[00:02:32]>> Then they had uh FIC sales, trade revenue, their equity and sales revenue.

[00:02:38]Basically, they won on almost every area including increased deposits. So, or at least held straight on deposits. When you look at the bank performance and you look at in general what JP Morgan has done to really reduce costs because they've also come in and cut a lot of the jobs, 40% of their jobs right now are down due to AI. And then the banks are fighting against what's happening in Clarity. It seems like they just want all the chips.

[00:03:12]You know, it reminds me of and we haven't even seen the the real bad side of this yet, Paul. As it becomes more closer to becoming reality, I think we're going to see even more consternation by these banks. I I hate to say it, but it's any kind of old legacy system that is dying that starts to put up these protectionist mechanisms like they're trying to influence the Clarity Act. We are very talked about it about the no yield on passive on passive which is kind of crazy. But if you really look at these massive beats, you know, anywhere from a small amount on the traditional banking side, which I would put Bank of America, Wells, and City in that category, if you didn't have a massive investment banking arm, if that's not really more of your capital markets heavy is where your your focus. So, you'll notice that JP Morgan, which obviously has a big one, obviously Goldman, they're at the top. Morgan Stanley, they're at the top of the of the beat. You know, they all six beat.

[00:04:06]So we're talking about these six companies all six beat but the massive outperformance obviously is on the investment and capital market side and so when you're looking at just NII of course Wells Bank of America City did better because interest rates have been elevated for longer but you're looking at these massive increases it's all about the capital market functionality Paul and as we know this is a huge IPO year we've had a lot of activity already we had you know just the uh South Korean equivalent or not equivalent but you know in semis of >> skyh highix yeah skhinik >> so so you know you you've had basic obviously went back and had earlier so we we've had a lot of activity and that activity breeds activity so you're just seeing these investment capital market side of these banks and that that shouldn't go away Paul right the clarity act is really talking about transactional banking as We know it. And that's why the bread and butter of these traditional banks, it's a it's a huge threat. And so they have to do everything they can to to uh obviously still have some kind of parameter uh almost like a parameter fence around the new technology that's coming and I think it's a mistake and I think that if we allow it to happen then it will reroute outside of the United States which is the last thing that we can have happen.

[00:05:30]That's why you see with poly market we had a nay about a 70% chance of the clarity act passing this year. That's dropped according to my last book at 48%. So it should drop because we do not have consensus and this is such a huge benchmark like this is going to set the tone for what happens in the next 36 months with the transition of between traditional banking and and moving to to decentralized you know blockchain. And that's really important that we get it right. So I hope that we can put as much I hope we can obstruct their obstruction of the future as much as possible. We cannot allow them to pass something that will really make this have to go outside and circumvent the United States. And the other issue that we have and and you're seeing it already with New York and California is the state regulation.

[00:06:20]Just like you know Trump really came out and said, "Hey, we want AI to only be regulated at the federal level. It's too much." we have already got the state, you know, New York State and California already have laws about blockchain that will impact. And so that's something else that we need to know. Do we need to make this a federalist issue and that's hard to do a little bit harder because banking and insurance is state by state.

[00:06:43]So that's going to be a little bit of a difference than we see. But we we can't have it all. We can't have a federal law in the Clarity Act, you know, basically basically making passive holding. And I know that's a That's kind of the agreement that they've kind of agreed to right now. And it's kind of like you agree to something that is restrictive so that you can get them used to it and then push the gold bar. I don't know how we're kind of maybe acquiescing um for that reason. But at the same time, we've got to figure out the state regulation as well because we it doesn't do us any good if we have restrict especially California and New York u being super restrictive or or requiring licenses requiring that if you're a crypto provider you get a license by the state regulator. We just can't have this. this is a patchwork of regulation that will regulate to death our crypto um and you know in innovation and ingenuity and we can't have it.

[00:07:32]>> One of the things that uh we were just showing on screen there in terms of Goldman was their performance their return on on earnings and one thing that stuck out within the report was the fact that there was concern that there would be consumer pressure and in terms of investing right now consumers are continuing to put money in the markets. We're seeing obviously the S&P performance uh al also now starting to see a little bit of crypto performance as Bitcoin's trading above 65K again and ETH is knocking on the 2K door.

[00:08:04]>> So those are some good signs. My question is, are we in a very unusual point in history where the market continues to to dredge up slightly, but yet the macro headwinds are continuing to push through and it's as if the market doesn't care. Why do you think that is?

[00:08:30]I think the I think you're 100% right on your assessment and I think the reason the only reason that makes sense is that we the market I don't know how okay there's all the efficient markets hypothesis there's all these economic theories about what the market knows and and disseminate but I really believe that the market just understands that the technology revolution that is birthed from AI from quantum from robotics and from blockchain all sort technologies working in tandem to move us to a completely different way of life and I think that it's hard for the human mind to assess that but I believe that the market has so much input into into it that it it is telling us this seems crazy it seems unrealistic I mean when you've got you know the mag seven and you've got all of these hyperskalers changing how they're financing like you know you're talking about you used to finance your capback tech budget with just your free cash flow. And that has completely changed. Now we're re we're reissuing stock. We're we're issuing debt. We're we're we're realizing that we were not going to just be able to finance this large of a technological it's not a transition. It's a transformation. And so when you're talking about the financing of this large of a transformation of everything we do, I think the market knows that this is big enough to handle it and to push past temporary headwind. That's what I think.

[00:10:00]>> Well, okay. So, you hit on something that I think a lot of people forget and that is that the market itself has a kind of a life of its own. When you look at the infrastructure of how people invest, just think about this for a second, guys. You're watching capital flow from one category many people would say it's semiconductors and chips right now we've we've seen that rotation of capital coming out of some of the hyperscalers and AI but at the same time we start to see the emerging categories that circle around that and that could be everything from infrastructure and you name it that that could include you know dozens if not hundreds of companies that also integrate into the next level.

[00:10:42]This gets into things like Bitcoin mining. We've talked about on our show quite a bit where a lot of these Bitcoin miners are now shifting over to basically become use cases for additional compute power for AI.

[00:10:55]>> So they're alternating.

[00:10:57]>> Then you've got the crypto markets >> finally getting a little bit of light.

[00:11:01]The real question is is does this hold?

[00:11:04]And then energy oddly is not going up extremely fast and with all the things that are happening in the Middle East.

[00:11:12]So it's I I agree with you. I think that the market on its own seems to understand what's about to happen.

[00:11:18]>> Yeah, I totally agree.

[00:11:20]>> Do you think Okay, so you look at what Kevin Walsh is up against now. We had CPI print come in here recently, very light. Kevin Walsh, of course, has been on a couple of times talking about the issue that we're facing right now, which is kind of a new policy for the Fed.

[00:11:39]>> And my question is, how does he approach this new policy? I know he was at the US Financial Services Committee and the Fed doesn't this was an amazing statement to me when he said Fed doesn't want to be in the bailout business and he said for anybody he doesn't have to be at the earnings numbers that I saw coming in from the banks here recently.

[00:12:01]So >> that's right.

[00:12:02]>> How does he manage the policy side of this going into the next because we have FOMC next week. I think that he did a really good job this week um in in front of Congress. If you I don't know if you saw it, Paul, but it felt like to me like both sides weren't as combative as I seen them be with the Federal Reserve before trying to like politicize >> the Federal Reserve themselves, you know, as they testify before Congress.

[00:12:27]But he's so measured and so >> that's the best word I can think of for him is just so measured. I'm going to say calm, but like just like this is we have no tolerance for this. And I think that with with his with just how measured he is, he has a lot of much more leg to skin on. So I'll just give you an example at the be at the end of last week. I always check the FOMC Fed watch tool to see the probability directly on the Fed. You can check poly market, all these other things, but I check their Fed's watch tool directly. We had a third over a 33% chance last week of getting a 25 bit hike next at the at the next meeting at the 28 29 meeting which was I was like there's no way there's a 0% chance of that it's not going to happen. So thank god PPI and PPI this week came in for June very light. I mean that was a substantial drop Paul from 42.

[00:13:16]>> It was a surprise I think to see that big of a cut >> is astronomical. And what that allows him to do is to say even though the Iranian situation is not completely resolved, we can see we already have a tell that as soon as the market interprets that the straight will be reopen and flow will resume as normal or somewhat normal. However, because there's been a lot of rerouting um you know outside of the of the straight since this all has happened as we know.

[00:13:45]But what the encouraging thing for him was that he did see a very fast uh deceleration in the numbers which gives him some wiggle room that he possibly might have not have otherwise had. The other thing that we obviously also had was we had the and it was kind of buried because of the Fourth of July holiday in the 250 years of America. But if you looked at the Jim jobs numbers, we were expecting 110 to 115. We got 57,000 and then we got a re a rewrite of the last two months of a negative 74,000 over the last two months. So what you're seeing is lab labor softening which gives him more ability to be more accommodative normally and then you see CPI and PPI.

[00:14:23]PPI went from fixed >> to 5.5. So both of them uh uh precipitously dropped as soon as we thought that there was some kind of resolution when we got theou signed and even though it not in that situation anymore and he might have to again see the flare up and he will he now at least knows how much of it he can and and the Fed as a whole can say hey this much of this number and this print is directly tied to this and we see resolution or we don't I don't know what the ultimate outcome will be but at least he can say, "Listen," and and and to your to answer your question directly, Paul, that was not the answer to your question. The answer to your question is he was so strategic to come in and say, "I'm creating five task forces, and those task forces are going to deal directly with what the issues are." And I think the two main task forces that are absolutely applicable right now of course are the AI jobs task force because that lets us have an insight like should we be expecting but like we just had up the the JP Morgan 40% we can reduce 40% because of AI. You know I love these people that come on and say AI is going to create jobs and that's wonderful and maybe it will eventually but what first happens before you just create the new way is the old way gets destroyed. That's the beginning of the new. So I think that his task force I would I would point out the task force on AI and jobs and then his targeted task force on the inflation number and what it should be. Can we carry a $6 trillion balance sheet and a and have you know as a result of how much accommodation we have had many bailouts we have done really starting with the GFC and I would state my opinion is that we really morphed from a country that did not believe in MMT modern monetary theory to a country that fully believes in monetary theory with the GFC. So we have a huge balance sheet that he's walked into that he has to deal with.

[00:16:23]And so I think that it's very appropo that he's at Congress saying I don't want to be the bailout of anybody. I have to deal with this big balance sheet. And this is why the task force because it's not him, you know, universally Paul coming in and saying we need to change the way we're doing everything. It's him saying let's get consensus around this is failing and what are the next steps to do with that.

[00:16:40]And I love that. So, okay. So, with what you're saying, you you look at the pressure valve release that's happening with just core inflation and in general inflation. We've got more numbers coming in. We'll see some of the market sentiment, consumer sentiment coming in tomorrow on Friday. But then you have the jobs being a little bit softer. So, to your point, are you expecting a cut this year as opposed to a hike?

[00:17:10]I don't know if I can go as far as a cut. And the reason I I would hedge my bet on that, only reason I would hedge my bet on that, to be honest, would be because we know that Trump really wanted this guy to be doubbish, right? And and and he wasn't didn't like him framed as hawkish at all. And a lot of people did a lot of analysis on his previous term and said, "No, he was hawkish." But, uh, we think that, you know, Trump has said publicly this year he wants 300 bits cut. So, that is not who is going to appoint a hawkish new chairman. But I am cedging my best because this Iranian situation, Paul, like we can't we can't look at a rate cut if we're still in the middle of some kind of energy and you know involved crisis. It's just not going to happen. Even if all things being equal, how do you cut rates in the middle of an of a war that involves energy and 20% of the world's energy supply? It's just very difficult.

[00:18:00]>> Yeah. Well, and I think what we're dealing with right now, there's a lot of things happening in the strait and within the GCC countries where they're trying to sidestep some of this for future because they I think they see that this is potentially going to be an extended possibly multi-year, you know, issue that would continue to face, I think, the energy situation much greater. So, it's something that that I just don't know. I I feel like there might be a new normal.

[00:18:32]That that was kind of what I was getting at on the oil prices not surging. And you would think that oil prices would be surging with the rhetoric that's going on in the Middle East right now, but yet we're still holding it around 80 bucks a barrel. It's up a slight bit, but you know, my old baron friends are telling me that this is kind of normal markets right now. So, very interesting times.

[00:18:56]Hey, I want to play this clip for you.

[00:18:58]and and kind of jump to crypto for a second. This was of course Larry Frink.

[00:19:03]He's talking about the leverage positions that were in crypto which caused a lot of the pullback and where he thinks this is going. Let me play this clip for you. Okay, here we go.

[00:19:14]>> There's no question, as I said it in earlier times and I would hear, I was always worried about the leverage in in Bitcoin and crypto. There was too much leverage players in it. That's why we had the wash out. And I think there's more stability at these levels here. But um no, I we don't see that much implicit leverage for the scale of the capital markets today. The leverage is not as large. I mean that that that doesn't mean there's not pockets. Uh but no, I I I as I said in my prepared remarks this morning, I'm very bullish on the markets over the >> All right. So bullish 12 months, not worried about the leverage problems that crypto has had here recently. So has it finally come to a time, Rebecca, where Wall Street has normalized at least the core of the crypto market with Bitcoin?

[00:20:07]What do you think?

[00:20:09]Well, I that is a very broad question and the one granular spur and my boot if I if you will is is the reverse carry trade with Japan.

[00:20:22]Like I I understand what he's saying and he's saying there's less leverage and but what he's talking about are margin calls that happen and and that's why people obviously were forced even out of their positions and that he doesn't see that reh happening. I'm shocked that he said this when we have the yen at its weakest, you know, I literally right now, you know, 16244 yen to dollar. I mean it is >> this is the beyond the point 160 is the point of them to manipulate and get involved in their in their markets and they already have and they've said that they're so I I'm really surprised that he >> so I know I'm trying to answer a very broad question with one very specific thing but what I'm trying to indicate is that the dollar being so strong and what the the if we're looking at the globe and what has happened with the globe and the middle of the Middle East not being resolved involved and having Japan at the weakest point with their currency that tells me that there is more wash out to happen and unfrank and frankly I don't want to see the carry trade reverse reverse carry trade is is astronomically bad for us completely >> well yeah and you're talking about US treasuries kind of falling through the floor would be a major problem interesting that you say that with this right here I want to show you something And this is now uh Japan has reclassified their cryptocurrencies as financial assets. So, so you've got potential for spot bitcoin ETFs. All of this is getting ready to jump forward and they've reduced their capital gains tax which used to be 55 now down to 20.

[00:22:03]And they did all of this like almost overnight.

[00:22:07]>> So they've accelerated this almost flanking the US markets with what we're dealing with with clarity. That's is what is we're leading into here. But is there an angle where Takayichi >> could be in a position to try to be repositioning Japan's economical financial framework because of the Japanese stable coin? What do you think?

[00:22:33]>> This is exactly the playbook for Japan.

[00:22:36]They see what's happening with the currency. They understand that the cheap because, you know, they were negative interest rates for so long, Paul. Then they went moved to yield.

[00:22:46]>> This transition has moved them to yield.

[00:22:48]So now they don't have American and investors around the world, Europeans and the they don't have people going over there borrowing yen and investing in dollars. That's not happening now.

[00:22:58]>> At least you know it wasn't happening.

[00:23:00]So the the bottom line is if they're if that period is over, they're saying to themselves, what's the new period?

[00:23:08]What's the new offer? What's the new entitlement to the world? This is exactly my point. This is exactly my point. They're doing this while we're trying to offiscate Clarity Act and put parameters around new technology. This is what I'm saying. We get this wrong.

[00:23:23]You get a country like Japan. Now, this is not some small This is a massive >> Oh, yeah. Major economic power, >> massive institutional player basically saying, "Choose us. Come here. We'll we'll treat you fair. We won't we won't try to keep the legacy banks protected.

[00:23:37]Come here." And this is what I'm talking about. This is what I've been saying. We cannot do this. And this is exactly why and Japan jumping out and doing it exactly at the time when they're they had to go from negative returns to actually paying a yield makes 100,000% sense for their economy.

[00:23:54]>> Yeah. And you look at that and this is another indicator I think that aligns with your theory here Rebecca is that SBI this is one of the largest banks out there one of Japan's leading financial institutions they are now in collaboration which covers tokenizing Japanese assets with distribution >> okay because that's the problem when you start to tokenize and get to real world asset tokenization distribution well the SBI ecosystem is now all going to be settling that. So you got Ando involved, you've got Ripple involved in this with uh SBI.

[00:24:31]And it's interesting right now because SBI is a big big I mean this is like JP Morgan of Japan.

[00:24:40]>> This is what I'm saying like they're taking a different approach. They're saying, "Hey, we can actually pick up market share. We can be the bank that allows and brings in we can usher in crypto. We will become we might lose the traditional way of doing business but we're going to more into the more morphicize ourselves into the new way of doing business and get business in the world. The global world is going to come because they're going to see this capability whereas we're out here trying to protect our banks. And to my point that I made earlier about the six banks that have all reported we have had a massive earning season just just this week just with the financials. But if you look, there's a clear demarcation point, you know, Paul, between the investment banks, the capital market activity that really led to a over 44% EPS surprise versus Wells Fargo, Bank of America. See, you're at the bottom of that with 2% of 2% surprise, you know, plus on the wealth pharma side because it's just net interest income is an old business model that is not going to carry you through the fourth industrial revolution. I'm sorry, it's not.

[00:25:42]>> Yeah. Well, and that's the point. I think Japan sees the writing on the wall. they've already in a position. The fact that they're moving so fast on all this regulation clearly >> yeah it clearly puts it into the front >> and they have the infrastructure like if FBI have the capabilities for the distribution as you talk about then that means they are literally already imple integrating their infrastructure.

[00:26:05]>> Yeah. Think of it this guy. Guys, if you and ladies out there watching, if you were in if you were, which by the way, we need more ladies watching this show.

[00:26:17]We're we're so maledominated in the investing world. So hopefully >> in general for sure.

[00:26:23]>> It's it's terrible.

[00:26:24]>> Yeah.

[00:26:26]>> But however, I see a lot of young women now coming to the game.

[00:26:29]>> Good. They need >> I You need You need to help these ladies through.

[00:26:33]>> I try. I've got a scholarship at my local university to get more women in finance. It's called the women finance.

[00:26:38]I mean, we try. We really are trying >> for sure.

[00:26:41]>> Well, the point I was getting at is if ethics or I should say if clarity I'm so stuck on ethics within clarity. If clarity were to get through and the banks were actually in agreement with this, that would essentially be the model that Japan is putting through right now.

[00:27:00]>> Yeah. which is their government has basically led the way on making it so easy for businesses and then also reducing capital gains tax on this was >> uh that was a huge huge huge >> because that's going to get every investor in Japan active in the market quickly.

[00:27:17]>> Absolutely. Yeah.

[00:27:18]>> Okay. So let's talk about this and we'll we'll get into clarity and wrap this up because there this is the issue I think we are facing right now and all of this is leading to what could be uh one of the biggest issues that the industry but not only the industry maybe the the world finance finance markets will be facing and that is clarity and whether or not it gets through it. It seems to be held up right now on in the Senate Banking Committee. And what we'll see coming out this week is the new verbiage coming in between the aligned of the two, you know, the two committees bringing their bills together. But the top three areas right now is the ethics provision which is going to restrict officials primarily Trump administration and then the developer protection clause which is really a big one uh which is opposed by law enforcement right now and then the last one is still a fight over stable coin yield. These are three major pillars and my concern is that ethics is probably going to be the sticking point.

[00:28:22]Do you think, Rebecca, that we can get our lawmakers to come to a compromise on ethics?

[00:28:34]>> You know, it's so sad. [laughter] >> It's so sad because I feel like, you know, we are all kind of into the inside the beltway now where we see what they've been doing to gain the system on the inside or trading size.

[00:28:47]>> Yeah.

[00:28:48]>> You can't go in. I I mean, unless you're just clearly, and I hate to say it this way, but if you're clearly on the tape, you can go in as someone who has a net worth of less than a million and come out with someone who has a net worth of 250 million, you know, over a 15-year career. I mean, it goes really fast. So, you're on the take. Okay, we get it. But if you're not on the take, if you're not getting bribes, if you're legitimately ethical, how do you go in as a millionaire, just $1 million net worth, and come out with, you know, a $75 million net worth at 15? How does that happen when you're getting paid a salary of only six figures a year? You know, I'm just confused. And so, I think that we all understand that there's massive insider trading and and we know it. I mean, there's there's portfolios out there that mimic the portfolio of Nancy Pelosi, for example, because she's made so much in gains or whatever. So what I'm trying to say is if we haven't been able Paul to get insider trading controlled and it's been blatant and o overt agree on this ethics provision on new new frame of new stuff that hasn't even actually come into fruition in the market yet. I mean that's the thing is like you're trying to prevent this and I just I don't know. I don't know. And even if they could get past that, if we bootstrap or handicap ourselves with this stable coin passive yield situation, if that gets agreed to, again, we're already away from Japan.

[00:30:12]Japan is already standing on a hill by itself as come here. Come here. We'll reward you with capital gain taxes that we were going to reward you. It's insane to me that we cannot and if you think about this Paul, if you look through every historical example of moving from legacy technology to a new frontier of technology, this always happens. The people that are at the top of the of the old legacy try to figure out how they can build a perimeter around their their domain and they always end up losing.

[00:30:41]They always it's it's the it's the beginning of the end for them when they try to start protecting themselves through these kinds of regulatory measures. Yeah. Well, I mean it's showing right now and I think the interesting part is that the world is watching and I hear this more and more is that uh and it's mostly coming from international investors saying listen we think that the American investors are very smart they'll start going to where the markets are and that's a problem because now you're talking about international investment and unfortunately that kind of locks out the average American you know it doesn't lock lock out high net worth, family offices, etc. They can move internationally and set up international bank accounts, you know, at the drop of a hat. So, >> this, I think, is going to be a concern.

[00:31:30]Right now, we have on July 17th, uh, the House Financial Services Committee is going to be taking a very unusual step.

[00:31:36]They're going to hold a new field hearing in New York and it's called building the future of finance. All right. So, and how clarity unlocks innovation, which we all know, but the real question I think is how this gets done both from the Senate side because if they align something that is a little bit edgy on the ethics side, do you think that the Senate would let this go through? If if the we'll call it the Dems, but there are also Republicans that are trying to push for an ethics provision. Let's say that the the copy is dropped today or tomorrow and it goes to that basically to the Senate in a position where it would probably get denied. Kind of like what genius remember that's how genius happened and then it got revamped >> and it was voted on. But we just don't have the time is the problem. I know that's I think why the the the probability of getting it done this year went from 70% midmay where you and I talked and we were like it's supposed to be on Trump's desk for July 4th.

[00:32:42][laughter] Exactly.

[00:32:43]>> We don't even have it out yet.

[00:32:45]You know, the thing that I wish is and I understand that that people want an eth.

[00:32:50]It's just it's just to me, Paul, it's it's so disingenuous when you h when you haven't don't even have ethics around insider trading, right? When that has never even been dealt with and now you want to put an ethics provision in this.

[00:33:03]Again, I think it's any way they can to bootstrap or handicap what we are doing and to make it as restrictive as possible. So, I'm not anti-ethics and and under any circumstance. But what I can tell you is that I believe the blockchain as publicly acceptable as it is is a lot more ethically open and disclosure friendly than insider trading. I so I in other words I think you can hear that I have a much bigger problem with the fact they haven't dealt with insider trading and yet all of a sudden now they're trying to put an ethics provision on new technology that doesn't come to proportion that by the way is going to be blockchain based and therefore reviewable searchable knowable and so for me I feel like again I believe it's being used as a way to one get confessions of what you want on your side i.e be passive gets no yields, you know, less. This is all a negotiation.

[00:33:56]Well, I really don't care about this and I'm going to pretend like I do because I want you to give me my provision on the yield which will protect whatever. Yeah.

[00:34:03]>> For me, I don't I I just find it completely disingenuous because we know we have a massive insider trading problem in Congress and they've done nothing about it. is open when you have portfolios that track the investment buy and sell girrations of Nancy Pelosi's and I know that you everyone should know we have an insider trading problem period and yet they do nothing but they want to put ethics in this and and and prevent uh you know specific um ability to make money on a certain type of you know whatever.

[00:34:35]Well, and I mean, you look at this, lawmakers have about four weeks before to advance clarity before the August recess. So, this is pretty much the last realistic chance out there. You look at the updated Senate text, which is expected this week, but that's, you know, we go back to the disputes right now, developer protections, the ethics issue, and you've got to secure 60 votes that remain unresolved right now. So, >> and and you had some um that you know passed out of Senate Banking initially that said this doesn't mean that I'm going to vote for it on the mail.

[00:35:08]>> Exactly. Gyos and also Brooks both.

[00:35:10]Yeah.

[00:35:11]>> Exactly. This is just us voting now, but this does not mean like they already telegraphed that they're reserving how they feel really about the bill for later. So, >> I just don't see it. And then so the question is Paul if it doesn't happen this year on the one hand it's a it's a positive in the sense that we don't have the banks getting this parameter of protection but on the other hand what does it do to slow down the innovation and the framework and the infrastructure that we need to develop to actually make America the center of the universe for the blockchain.

[00:35:43]>> All right. So, okay. So, I think a lot of people will say, "All right, it it's it's a very outside chance that this gets done."

[00:35:51]>> Yeah.

[00:35:51]>> Uh or at least before the midterms, you know, and at that point, if >> the House looks like it's going to flip to the Democrats, >> the Senate could still remain with the Republicans, which essentially will lock it up again. And I think we're going to be in a position after that. Now the question is is can we get enough compromises built in between now and then that maybe even by end of year this could still be talking about. I anticipate we'll be talking about clarity post midterms coming in from this. The problem is as we've talked today is the advancement of all these other countries are moving into pole positions. Yeah. So when you're advising clients and they're watching everything that's going on because let's say clarity doesn't go through, it is clear now that the SEC and the CFTC will start to issue guidelines.

[00:36:44]>> Yep.

[00:36:44]>> Because that's their job.

[00:36:47]>> Yep.

[00:36:48]>> Granted, those guidelines could be reversed on the next administration.

[00:36:52]So getting clarity and would lock these into law. That's the issue that we're facing with right now. What do you expect coming out of the SEC? Let's assume that clarity does not get through and the SEC has to start to act.

[00:37:06]>> Well, I do think that, you know, we do have a a different standing SEC now that Trump has got his person in there. We don't have someone who's so, you know, we don't have someone who thinks that uh the blockchain and crypto should be secure considered a security necessarily, you know, by definition and therefore regulated by the SEC. The fact that it's going to be >> the fact that we have agreement and consensus I believe between the SEC and the CFTC that says yes this is a commodity and it belonged on that side is a huge is a huge win I believe for this administration and for the framework of what is going to be solidified into actual reduced to actual law you know and going forward but I'll just go back to Japan for just a quick second so the listeners can understand like this is exactly the threat that I was that I've been harping on we cannot let this happen we cannot be such a slow moving be mammoth of a of a country and regulation out the wad zoo and prohibitions out the woo and then you got the state issue on top of it you know now I've got to get a state license now I've got to do this I got to do all of that it's just too many layers and you've got Japan saying oh my gosh our old way of living you know being negative returns and now having to you know moving and shifting from that to yield we've got something else now that we're bringing to the marketplace other than just cheap currency something else has got to you know, to the marketplace and and they're stepping up and they're making it. So, already with the regulations, they're already saying our banks are going to do it. They're our bank is going to do it. So, why can't we have Jamie Diamond, you know, come up and and I I know, I know, I understand it's not going to happen, but at the same time, one thing that he's really good at is reading the global chaos. I think he's the most globally connected CEO that we have and I just wish he could understand that it it's beyond the banks. It's beyond you. Let's then like Japan has done. Let's not acquies but let's melt it. Let's more metamorphosize ourselves to the new technology instead of trying to through restrictions and regulator regulation and laws prevent this from happening. It is going to happen. It is unstoppable. It is >> Yeah. And I think one thing to consider here, guys, and this is kind of a prediction that I've been working around, and that is if you look at Larry Frink and where he was on the ESG front and I'm sure you know, okay, he did a big pivot.

[00:39:36]>> Absolutely. Absolutely.

[00:39:38]>> Total pivot on ESG.

[00:39:39]>> Pushing that very >> and he's also pivoted heavily on crypto.

[00:39:43]So, is it possible that maybe some slight alignment here with the banks could pivot Diamond, could pivot Bank of America and many of these others which already seem to be weighing in on trying to get things under at least to an essence of getting blockchain technology integrated more.

[00:40:05]They're hiring digital asset leads, etc. >> Right? But my question is, why wouldn't the bank just do like what SBI has done in Japan and eventually lead the way out for distribution? Because that's going to be the biggest part of this is distribution. I mean, honestly, Paul, with what you just said, I think that is the only possible way that they have to remain relevant for the next 20 years if they try to protect themselves in the old way by by what how they're actually going about it right now through clarity and other regulatory scenarios. Yeah, >> I I do believe that it will the innovation will occur outside of them and around them. And so I wish that Diamond would be as forward thinking as what you know Japan has done with their their largest bank because if you make yourself a part of the future then you don't have to write the regulation against it.

[00:41:00]>> Bingo. Yeah. Well, listen, we're going to be covering this a lot because, as you guys know, here on the digital street with with Rebecca and I, we break down a lot of what's happening in the macro side of the markets, but also when you think about what this means for investment strategies in the future, this is a very, very key part of our financial future, I think, in history.

[00:41:25]This is going to go down in history, Rebecca, this era right now.

[00:41:29]>> I mean, we're part of it. So, you know, capitalism, people forget that capitalism is creative destruction.

[00:41:35]That's what it is. That you create the new as you destroy the old. And so, you're destroying the old and creating the new. And we all bought into this and we've been in the I don't know if we've been the most innovative country in the last 50 years, but at the beginning when we came >> I think we have I think we have. Yeah. I mean, come on.

[00:41:54]>> You don't think there's any other country that's been a little more than us in the last 50 years? I would say that you look at the internet, the rise of mobile, the rise of AI, the rise of crypto and blockchain. Those are all American ideas.

[00:42:08]>> True. All true, >> you know. Or at least executed on America outside of Satoshi Nakamoto, who's knows if that guy is an American or not, >> but the point being or >> Yeah. Or it could be DARPA. Who knows?

[00:42:20]>> Probably.

[00:42:23]>> So anyway, hey Rebecca, it was good catching up this week. Good luck in New York. I know you've got a lot of interviews on the on the cable news show, so [music] thanks for coming in today. We appreciate it.

[00:42:32]>> Thank you for having me. You so love it.

[00:42:33]Thank you, Paul.

[00:42:50]Heat. Heat.