00:00 Speaker A
Patrick, uh, welcome on Yahoo Finance. Good to see you here this morning. Let’s start on that Clarity Act, because it’s we heard a lot about it about it last night from uh Coinbase uh CEO uh Brian Armstrong on his earnings call. What is the status of this?
00:23 Speaker B
So the status right now, the House passed the Clarity Act, their version of it last year, uh over to the house in July, I believe. And the Senate has taken it up and made its own changes to it and is uh fashioning their own version. We were able to pass half of the bill out of the Ag Committee that handles the CFTC portions. And now we’re just stuck in the banking Committee uh for the SEC portions, the securities portions of that bill. So, uh there was a markup uh that was scheduled on I believe January 18th that unfortunately got pulled down, uh postponed, but uh we’re working hard to uh address the issues that were raised that led to the postponement of that markup and hopefully get that back on the books soon. And then once we pass that out of the banking Committee, the two pieces of the legislation will need to be reconciled uh before a final vote on the floor. So more work to be done, but uh we’re we’re a step closer with the passage of the the Ag portion of this, um, a couple weeks ago.
01:21 Speaker A
Patrick, who has to bend a little bit ultimately to get this over the finish line? Is it the crypto community or the banking community?
01:34 Speaker B
Uh not to be a cliche, it’s a little bit of both. Um and and we’ve encouraged both parties. Uh we’ve had conversations individually. We’ve we’ve hosted a number of meetings here at the White House. We might host another one again uh next week on this issue of stable coin rewards and yield. And uh it’s unfortunate that this has become uh such a big issue because ultimately this is not the stable coin bill. That was the Genius Act, but um we’ve we’ve heard from senators on both sides of the aisle, uh concerns about uh potential deposit flight from from stable coins on different platforms. And so what we’ve encouraged uh both sides uh to do is is let’s find a middle ground. Let’s let’s use a scalpel heel here to uh to address uh this narrow issue of of idle yield, let’s call it. Um but let’s let’s not take a chainsaw to this. Let’s not let this derail the bill. There is so much goodness uh in this bill, um no matter what your perspective is. The banks, there’s a lot of permissible activities. It allows uh these institutions to now play in the crypto space in a way that uh without that regulatory clarity they wouldn’t be able to. And then obviously from the the crypto side, uh the regulatory jurisdiction, the clear lines between the SEC, the CFTC, uh developer protections in the bill, there’s just a litny of uh excellent measures in here that are critical to future proof this industry, uh from a a future Gary Gensler or uh God forbid a Secretary of the Treasury, Elizabeth Warren. So, uh we want to make sure that that people are approaching this the right way, that they recognize uh the the value of this bill and uh we’re going to keep working to make it better, but ultimately it is a good product at the end of the day.
02:49 Speaker A
In the spirit of of compromise, Patrick, do you think the the crypto industry just has to get off this view that it’s going to be able to pay rewards on stable coins? Is that get it through?
03:04 Speaker B
Uh again, as I said, there’s a way to address this that doesn’t uh disrupt a lot of the business models in the space and also addresses the bank concern. So, um this is a major item. It’s not the only one. Um there’s still some issues on Title one with uh tokenization, the token taxonomy and the authorities between the SEC and the CFTC, making sure that the SEC isn’t swallowing too uh too much of the the CFTC’s jurisdiction. Um and then on Title three with with defi, elicit finance. Um so there are other issues that we need to work through but uh this is a main sticking one, sticking item and um we’re we’re not going to be able to get this out of the banking committee unless we address this issue. So that’s why we’ve taken it so seriously, why we’ve hosted the the different interested stakeholders here at the White House and we’re going to continue to stay at the table and encourage them to find a compromise on this issue because it really is the major gating item.
04:06 Speaker A
We’d love to get your take on this one. You know, when I talk to banking executives on this particular issue, they say that community banks just might struggle to lend to businesses, uh if if uh these these crypto players are allowed to pay these rewards. I mean, do you share those concerns?
04:31 Speaker B
There’s been a number of studies that have pointed in either direction. Um, I think ultimately our our bottom line is consumers win when there’s choice. Um, but we’ve heard from a number of senators. Um and again, it’s bipartisan on this issue that they want to make sure that uh the concerns of the community banks are addressed, uh that we’re not doing anything that would cause deposit flight from their platforms. They are important pillars of the various communities, um around the country. And so I think we can do that. I think we’re we’re fashioning a a compromise. Last week’s meeting between the banks and the crypto companies, um I think broke some new ground, established uh some new uh common ground, some areas of agreement, and we’ll build upon that. Um, but uh whether or not, you know, we agree with that view, um, I again, I think I’ve I’ve seen studies that point in either direction. Um, you know, ultimately, uh this is going to be there’s going to be a convergence between crypto and the banks. Right now, it is a new product. It’s somewhat threatening to the community banks and and not just the community banks, but also the GCs, the larger banks. Um but they’re ultimately going to start getting into the crypto space. They can also offer stable coin products to their customers just the same as as crypto. This is not an unfair advantage in either way. and then many of the banks are now applying for OCC bank charters themselves to start offering bank-like products to their customers. So, uh in the future, I think I don’t think this is going to be uh an issue, but uh we’re managing through an interim period where uh there’s a lot of people on on uh the bank side of the table that are feel threatened by this, but ultimately, I think they’re going to find opportunities to use these products and leverage them and offer new products to their customers and expand their businesses.
05:49 Speaker A
Should a Jamie Diamond at JP Morgan be threatened?
05:54 Speaker B
I don’t think so. I I think there’s tremendous opportunity for the JP Morgans of the world to uh to engage in crypto activities. If you just go to to LinkedIn, uh there’s plenty of job postings at JP Morgan, uh hiring people into the digital asset space. So I think they’re uh they’re indicating that they intend to get into this space in a big way. They were present at last week’s meeting, uh very constructive uh and I I think on the stablecoin part of this, um there’s the consumer banking side, but then there’s also the institutional bank side and as more and more liquidity uh gets added to uh to treasury markets, um with stable coin being backed by T- bills. Um there’s there’s a lot of uh activity and and commercial activity that the banks, larger banks that have rates trading uh operations can get into. So, um I think for for those larger banks that have those kinds of uh business lines and and large practices there, they recognize what an opportunity this is.
06:58 Speaker A
Brian Armstrong over at Coinbase, he sounded a little more optimistic Patrick last night on his earnings call about clarity getting passed at least compared to what we heard from him at Davos in in January. Do you think this ultimately gets passed in the first quarter or is this more mid-year?
07:14 Speaker B
Um we’re definitely on the clock. There’s there’s a window here. Uh the window is still open, but it is rapidly uh closing. and so that’s why we are taking it so seriously, why we’re encouraging folks to to cut the deals that they can to stay at the table. Uh let’s not let any moss grow uh here. Uh we got to get this done because as I mentioned, it’s it’s one step in the process. If we can get this out of the banking committee, it still needs to be reconciled with the ag portion and ultimately, uh there’s going to be a cloture vote and a passage on the floor. That all takes time and uh the most precious real estate in Washington DC is is Senate floor time. So, uh we’re in regular touch with Leader Thune about that. uh but uh he he knows that this is a priority for the president, uh priority for my boss, David Sachs. And I do believe we’re going to get this done. I won’t necessarily put a date on it, um but uh before the mid-terms really start to uh take all the oxygen out of the room, uh we have people engaged at the table that have invested countless hours uh on this bill and uh we’re going to get it done.
08:24 Speaker A
Lastly, uh Patrick, you’re in the trenches on uh on the Bitcoin reserve uh that is being built out here in the country. Where does that stand?
08:34 Speaker B
So with the passage of the executive order, what we wanted to do with that is is get an accounting of what the government held and then also stop the bleeding. So stop these agencies from willy-nilly liquidating digital assets that they had, sometimes at fire sale prices. Um I think by some estimates, um based on the sales and the way that they were conducted under the previous administration, we, we the government may have lost out on, you know, tens of billions of dollars that could have been held on on our balance sheet. Um so right now, we’ve we’ve stopped the bleeding. We’re in regular touch with the agencies, uh monitoring the current status of the digital assets that they hold, making sure that the accounting is complete, not just Bitcoin, but obviously many of the wallets hold different digital assets in there that need to be appropriately accounted for. And then uh on the hill, uh there’s the the Bitcoin Act that Senator Lumis had introduced. Uh there’s going to be a new bill introduced by representative Begich in the house uh that that builds upon that and and allows some of the necessary authorities to centralize, properly safeguard these assets and then explore budget neutral ways uh to add to that stock pile. And then in the future ultimately if Congress uh decides to to move in that direction, uh to allow for us to to potentially add to that with withoutright purchases, but that would need to be an appropriations decision.
09:44 Speaker A
Patrick, good to see you. This is the context we needed. Uh very important moment here for the cryptocurrency industry. We’ll talk to you soon.