The SEC vs. The Crypto Market | Omid Malekan

28:56And if I had already my tokens at Binance, I'd probably be pulling them out. Maybe I would be with Coinbase as well. Like, you know, it does slow down adoption, at least in the US right now, this second. And in fact, I was just reading, you know, Google searches related to crypto are at a two-year low at the moment. So basically, Main Street is doing a wait-and-see approach now to crypto. They pulled out of crypto, and they're waiting. Some parts of Main Street, although there was, I believe, data from the Federal Reserve that came out in the last couple of weeks that showed in the last two, three years, a percentage of U.S.

29:34individuals who own some kind of a crypto asset has gone up. What's the number? I'd have to look it up. So it was one of those that on a percentage basis, it's like the numbers doubled, but doubled might have been gone from like 6 % to 11%. Here, Fed survey, 12 % of US adults held crypto. But this was in 2021. So it could be outdated data. But I think actually, who knows what prices will do. and certainly with part of the challenge now as far as prices are concerned is that you've had two of the biggest gateways that people use to acquire crypto, Binance and Coinbase come under significant scrutiny.

30:20But then there's always this question of how much of that is priced in. I actually at this point think like, because some people were actually surprised that Bitcoin and ETH's price didn't fall that much when this news hit. Bitcoin, partly because it's generally the one coin that's being left alone. The CFTC, another US regulatory body, declared years ago that Bitcoin is not a security, it's a commodity. And that was under Gary Gensler when he ran that agency. He's not going to reverse on that. By the way, Coinbase stock hasn't even really fallen. It's up 4 % today. It did. Coinbase stock, I believe, fell significantly when the Binance.

31:01But that too, like Coinbase stock has gone from 300 to 50 or something like that. So a lot of the negativity is priced in now. And I would actually say at this moment in time, the asymmetric risk as far as regulatory headlines is to the upside. meaning that if the SEC comes out tomorrow and sues Robinhood, and I'm using them as an example, because one of the things that has happened is Robinhood and a bunch of other places where people buy and trade crypto have started delisting certain coins because in the Coinbase or Binance lawsuit, the SEC for the first time said, well, that's a security that's not compliant.

31:45But if the SEC sues Robinhood, I don't know if I'm going to move the needle that much. People are like, yeah, like Gantzler hates crypto and he's just going to sue everybody because he doesn't care about being right or destroying his agency's credibility. That's priced in. But if in one of these ongoing lawsuits like the Ripple one or there's Coinbase actually sued the SEC not that long ago seeking regulatory clarity, there's the lawsuit over Bitcoin ETFs and the Grayscale Bitcoin Trust, et cetera, et cetera. I think there's more potential bullish catalysts that could come out just because we priced in the worst.

32:27Yeah. And the worst has already happened. Like you said in the very beginning of this conversation, it's almost good that finally the SEC has sued everybody because this has been expected for at least a year or two. But the question is like a year from now, what is happening? How does this play out? How do you think this plays out? And by the way, as this plays out, every way in which this plays out is bullish. Yeah. Because crypto is not, they're not going to make crypto illegal. They're just making it difficult. But somehow it'll get resolved. Right. Do you, this is a funny reference, but do you remember when Elliot Spitzer went down?

33:02Yeah, of course. Right? Like, and his thing was, was like, what was it? He was visiting a prostitute. ending. Yeah, well, no, he paid for the prostitute to come to where he was. I think he was traveling from New York to D.C. He was governor. So he paid the prostitute. So it was like over state lines, you know, sex trafficking sort of thing. Whatever it was, it was like my impression of, because if you remember, Spitzer was a bulldozer. Yeah. He bulldozed over. He put a lot of financial people in jail, a lot of very rich people in jail. He put rich people in jail over like, dubious kinds of accusations in the sense that like, you know, yes, I guess like Wall Street analysts were pumping token stocks that their bank traded or was wanted the IPO for.

33:52But it wasn't like, let's just say that other people have not gone to jail for doing far more dangerous things in financial services. And then when he was a governor, so he was attorney general when he did those things and he used that to sort of like catapult his political career. Then as a governor, he was a bit of a bulldozer too. And I am by no means a political expert, but I had this strong impression at the time that one of the reasons he went down was because nobody liked him. Right. And people were celebrating in the street when he went down. Yeah. So even with someone like a Gensler, I would say there's a certain level of assholeness that nobody likes you, even the people who are ideologically aligned with you.

34:38And I think Gensler has really crossed all of those lines. I mean, just the amazing thing. So here's another revealing thing. First of all, the Coinbase lawsuit was intentionally... Wait, let me step back. There was a very positive development in the US in the past week also that the Republicans in two different committees in the House of Representatives proposed a very well thought out and comprehensive crypto regulation bill. And it was so that they clearly took the time to learn about what differentiates crypto assets from traditional assets and thoughtful ways of how something could begin as a security, but if it's sufficiently decentralized and they even have thresholds for what that means, then it becomes a commodity, et cetera.

35:31So they proposed a very comprehensive new law. No Democrats supporting it yet, but a good conversation starter. And Gensler's SEC timed the Coinbase lawsuit to coincide with the hearing that Congress was having in discussing this. And this is one of many times where he clearly thinks he's more important than the elected representatives. And that's not just my opinion. Congressman Richie Torres of New York, who's considered a rising star in the Democratic Party, called Gensler as being, I think, something like he acts in contempt of Congress. Yeah, I saw that. That he doesn't want to let the democratic process come to a solution here.

36:21Then at the same time, so Congress is having a hearing over this new bill. Gensler completely steals their thunder because all the headlines that they were about the Coinbase lawsuit, not about expert witnesses testifying about this bill and so on. And then Gensler goes on TV to talk about why he's suing and all the usual nonsense about cleaning up the industry and there's been too much fraud. But then at one point he says, we don't need any more digital currencies. The dollar is already digital. The euro is already digital. And this is this ignorant comment that some people have been making to me for years.

36:59They're like, oh, well, you know, my bank account is accessible through the internet and the bank uses a database. So isn't it already a digital currency? But I thought this was Gensler really revealing his hand, that he's just trying to kill this thing. And that's the kind of thing that's remarkable for a few reasons. One, this is a guy who taught an entire class on Bitcoin and blockchain at MIT, which I watched a lot of the video for. The content was pretty good. He was involved with the MIT Digital Currency Initiative, which covers crypto, not electronic banking from the 1970s. And now he goes on national TV and says all of that is completely pointless.

37:47So this is what I mean. It takes a certain level of being a low-rent, low-integrity individual to pull a switch like this. As someone who works in academia, I feel bad for all of his former students and colleagues because how are they supposed to interpret this? They're like, wait, he was one of us, and now he's telling me today that everything I do is completely pointless. So that's revealing. The other thing is he slipped up in the sense that while the SEC is supposed to create integrity for financial markets, primarily by eliminating information asymmetries, it's supposed to be neutral on the merits of an investment.

38:33And even Gensler himself has said this in the past, that if a company files to go public, it's not the SEC's job to determine if its product is good. That's a good point. Right? Or if its business model is viable or if they should be charging more. What he's saying, though, maybe personally he's saying the U.S. doesn't need another digital currency. But from a legal standpoint, what he's saying is he's making it – he's not saying crypto is outlawed. He's just making it too difficult for anyone to trade it. But he's saying we don't need it, right? Which is a major, major revelation and slip up because it shows what his real intention is.

39:16It's also a direct violation of the SEC's mandate, which is not just to regulate markets, but to facilitate capital formation. And don't take my word for it to the listeners at home. Just go to the SEC website and look up what their mission is. It's explicitly to facilitate capital formation. In the U.S., among the federal financial regulators, the SEC and the CFTC are generally perceived to be the pro-market, free-market regulators, whereas the bank regulators are more the socialist ones. But that's because when Congress created these agencies, it gave them these specific mandates that you're not just here to be the cop.

40:07You're not just here to crack down on bad people doing bad things, but to enable good people doing good things. And when Gensler said on CNBC that we don't need any more digital currencies, he showed that he's acting to stop capital formation. And I think, I hope, that that level of being an extremist in the position of a regulator comes back to bite him in the ass somehow.

40:52out. It looks like there's a couple of ways this could play out. One is Congress and the courts get so disgusted that they basically say, look, you can't do this. You're trying to ruin an industry that A, is not going to be ruined, and B, it's going to leave the U.S. behind, and C, you just don't have the right to do this. You can't make law. You just have to enforce law. The other way it could play out is all these lawsuits go to trial, and he just loses because you can't sue Coinbase over something which is not law. He's basically saying they're trading these securities, but no one's ever defined how crypto is a security.

41:31Even he refuses amazingly enough, like another way that he's just a bad faith actor. They still refuse to say whether ETH is or is not a security. And all these video clips have unearthed of Gensler and his role at MIT shortly before he took the gig at the SEC where he's like, well, you know, ETH is not a security. Bitcoin is not a security. Litecoin is not a security. And then he says some other things might be. But he was drilled himself in front of Congress like a month ago about whether ETH is a security. And he weirdly alternated between saying the SEC has all the authority it needs to decide that and then refusing to answer the question.

42:14And it got to the point where Coinbase actually sued the SEC. And one of the things it asked for is to provide a list of what is or isn't a security. You know, just like take the top 100 coins and just tell us yes or no. And the SEC's response, his court was that, I'll simplify here, but it was basically, we will not provide a list of what is or is not a security, but we will keep suing companies for trading illegal securities. Yeah. So how can, that doesn't make sense. It's almost like a Babylon Bee article or an Onion article. Like, how can he get away with doing that with a straight face? I don't know.

42:51The straight face part, I don't know. Like I said, he... And I'm not even being pro-crypto here. I'm being anti... This is like typical bureaucratic government stupidity. This is like the post office saying, you're not allowed to use FedEx because those aren't real letters. And only letters, all letters have to go through the post office. And people say, well, what do you mean they're not letters? Oh, that's up to us. Don't worry about it. Yeah, I don't know. And also, I'm not a mind reader. Everyone has been saying, all of this is going to come back on the SEC in a bad way, either because they lose in court or Congress forces them, or frankly, the president just appoints a new, maybe the next president after the election, if we have a change in leadership, appoints a new SEC chair with a mandate to clean all this.

43:40It's going to destroy the credibility of the agency. Gensler is not going to be around for any of that to happen. It just shows you, though, How much of a scoundrel must you be that you have no qualms about single-handedly singing the credibility of a 80, 90-year-old agency just because either you have an ax to grind or somehow he thinks that being the bad guy of crypto will serve his own personal or political ambition? So if you were to guess what are the next things that happens and what are the next catalysts for crypto, good or bad, what would you say? How would you kind of take this? And because I remember initially in the conversation, you said you were implying this is a good thing.

44:30Well, it's a good thing in that like the worst is now behind us in the sense that like we knew we knew the SEC was going to come down hard. They have there'll probably be other suits. A lot of people are waiting for the Justice Department to go after Binance for criminal violations that would be more severe. But so what? Binance has many billions of dollars and it's already hired all the world's top law firms. So they'll fight this to the ends of the earth. And I don't have any personal allegiance to any of these companies. I just think that we should have ways that well-intentioned crypto service providers, exchanges, et cetera, become compliant, register.

45:14But it's not what Gary Gensler says, that literally he keeps saying like, well, you know, the law passed in 1930 is all we need to know how to regulate digital currencies that were invented three years ago. Yeah. So all of that will play out. Well, the other thing is, as the election approaches, you know, it's interesting that Ron DeSantis, pro-crypto, RFK Jr., who's running in the Democratic primary against Biden, pro-crypto. All the Republicans will probably be pro-crypto. But Elizabeth Warren is campaigning, she's up for re-election, against crypto. She actually has like a campaign ad that she's building an anti-crypto army, which is just funny to me.

45:58Why does she think people care about this issue at all? Either you're pro-crypto or you don't care. Yeah, look, I can't imagine a single person who hates crypto enough that that becomes the reason they go vote for a candidate in an election. There are plenty of people who don't believe in it, are skeptical, don't like it. The main argument of a politician is that they say a lot of crimes are committed using crypto. But you could have argued this about, first off, you could certainly argue it about the dollar. A lot of crimes are committed with the US dollar by every drug cartel. Every day, through regulated banks.

46:36Right now, as we speak, there's like$100 million being washed through the banking system. I mean, JP Morgan just settled, I think, for$290 million for victims of Jeffrey Epstein. So, you know, that's the U.S. dollar and the largest bank in the world. And again, the internet started, every new technology kind of starts with nefarious use. Just three months ago, Wells Fargo, one of the biggest banks in America, was ordered to pay a$3.7 billion fine for various violations. And no one batted an eye. No one was like, oh boy, you know that Wells Fargo, it just paid a$3.7 billion fine just for stuff that it's done in recent years.

47:27It's like, yeah, you know, Wall Street commits crimes, gets fined, all is good. But let me put this number in context, right? If I'm looking at like crypto market caps, the Uniswap token, Uni, has a market cap of$3.2 billion. Chainlink is 2 point something billion. You know, Shiba Inu coin, 4 billion. So Wells Fargo paid the equivalent total value, like the 20th biggest crypto coin, one time. And if you go back, obviously, like to 2008, they've probably paid well over$10 billion in funds. And that's normal. No one has a problem with that. But then, oddly, you have Elizabeth Warren going on about how crypto is the thing that enables fentanyl distribution.

48:17I actually have no idea what she's talking about, but that's her new talking point. Yeah. So it's crazy. It's like insane what's happening. Yeah. And the other thing that I think could happen is that as time goes on. First off, I've even covered this on the podcast about fentanyl distribution with General Robert Spaulding, who was the White House expert on China for many years. We know that China's been giving for free fentanyl to Mexican cartels who have then just been showering it into the U.S. at super cheap prices. Wow, I didn't know that. In dollars. So I don't even know what Elizabeth Warren's talking about since there's all the evidence is that, I mean, there's like hardcore evidence that it's China.

49:01Also, here's the other amazing thing. There used to be a time where it was Republicans that if they wanted something to not happen, they would be like, oh, but the drug dealers. And there was always like a hint of racism to this too. It's amazing to me that this is completely flipped, that it is now progressive Democrats like Elizabeth Warren who fall back on these stupid tropes that, well, this is going to enable drug dealing. And crypto is disproportionately black in the US. If you look at it globally, the countries that have the highest per capita adoption are countries that are poorer, the global south, places where you have a lot more black and brown people than you do minorities.

49:51And here you have a progressive Democrat campaigning against it in a fashion that it's like, oh, well, I guess Elizabeth Warren prefers Wells Fargo. The other thing I could think could happen is as the rubber actually meets the road and the campaign gets going, people like her just realize how stupid this position is and how there's like not a single person who's going to vote for you because of it. but a lot of the kind of people who like take my class, right? There are people who are from Latin America and they have both experienced crushing hyperinflation and the fact that remittances to and from their country, you know, 20 % fees goes to intermediaries.

50:36Those are the kind of people that I feel like would otherwise vote for an Elizabeth Warren along for various issues. but they're very passionate about this crypto thing because they see it as a fundamental good. So you're basically thinking that you don't really know exactly the form in which how this plays out, but it's almost certainly going to play out in favor of crypto. Like Gensler is going to lose some power. The head of the SEC is going to lose some of his power and crypto will move forward. We don't really know the form it's going to take. Do you have a sense of how long it will take?

51:10Because in the meantime, I would say public interest in crypto does go down when you feel like you can't trust any institution to put your money there or to trade there. Again, in the U.S. In the U.S., yes. This is a global phenomenon. Timing is always the thing.

51:29Sorry to interrupt, but just to your point, if it's just in the U.S. and eventually it just hits bottom in the U.S., but then the rest of the world, of course, is moving forward. if prices start to go up, the US is going to be pretty insistent that, hey, we need to be a part of this. Yeah. Timing has always been, I've been wrong about many things in my years of working in crypto and timing has always been number one. I generally expect things to happen sooner than they do. So I'm forcing myself to be more conservative. But I think within two, in the next two years, we're going to have significant resolution of almost all of these topics.

52:02I think the election would have happened and we would have seen that there are actually many people who see the core proposition of crypto as good. I think the court system will have had time to weigh in on some of the SEC's more ridiculous charges. And I think global adoption away from America will have really taken off up to and including state level adoption. So I think I talked about this before that I think there are already governments that are secretly adopting Bitcoin, either by mining it or slowly buying it up. I mean, there are smaller governments that publicly have said they've been doing it like El Salvador or even Bhutan.

52:41But I would not be surprised if you look at the access of China, Saudi Arabia, the UAE, Iran, Russia, that they have many incentives already to begin to slowly embrace Bitcoin. and that the U.S. government's crackdown is actually the best advertising campaign for them to accelerate that process. If nothing else, America drove down the price of Bitcoin, so it's cheaper to acquire. And what do you think these other countries see as the ultimate use case? Again, like I said, I've talked to people at other governments. They are moving towards some sort of CDBC or blockchain-based payment system. as many governments have already discussed.

53:30But does that necessarily have to involve Bitcoin, Ethereum, and all the cryptos we know and love? Not on day one, but I think other governments increasingly have a dollar problem. I think they see that so much global commerce now happens in dollars, but the US has gone overboard in weaponizing that fact in order to try to control and influence everyone and everything. Even like the way, you know, the SEC acts now, like if you actually listen to people like Gensler talk, there is this hubris and arrogance that like, you know, well, I am the America's premier capital market regulator. So whatever I say is truth.

54:12And I don't care that my counterpart in literally every other agency, even in Canada, disagrees. You know, I'm Gary, this is America, and we tell you what to do. So the world has this dollar problem. There is no other currency that is like immediately better. You definitely don't want to switch to the Chinese yuan because of their capital controls and their political process is a lot less trustworthy than ours. Right. And this was a concern about two months ago when, oh my gosh, there was oil transactions for the first time done in the yuan instead of the dollar. And then the Brazilian real instead of the dollar.

54:51This is the end of the dollar. And I'm telling myself, do people really want the Brazilian real, like$2 trillion worth of the Brazilian real instead of the US dollar? Right. Like, this is ridiculous. It's not, nothing is, you know, maybe the worst case is some basket of currency is going to replace the dollar. But even then, I don't see how a basket where you're reliant on the value of lots of currencies all of a sudden is going to replace the dollar as a safe reserve currency. Agreed. So I should make it clear. While I believe that de-dollarization is a thing and it's increasingly going to be a thing, I do not think that even within the next decade, certainly everyone's going to hit a switch and dump all their dollars and buy other currencies for the reasons that you alluded to.

55:37However, I do think that countries are increasingly going to try to find regional solutions and bilateral solutions. So yeah, like the rest of the world does not want China's currency as their major reserve currency or Brazil's. But it's not unreasonable for, you know, China buys commodities from Brazil and Brazil manufacture goods or electronics from China. It's not unreasonable for them to say, hey, let's start settling some of this in our two currencies, right? Like, you know, Brazil's like, okay, I'm going to, I'll accept some Chinese yuan for my exports because I'll turn around and just use those to buy chips that manufactured in China.

56:19If this kind of like regionalization starts to take hold, then again, like no one's dumping all their dollars. There are many reasons why the dollar is a reserve currency having also to do with like how easy it is to borrow in dollars. For example, the popularity of U.S. treasuries is collateral. But I do think that countries are going to be a lot more willing to do regional baskets, bilateral trading. And when they do that, they are going to need some way of settling things occasionally. And I think eventually, this might take my entire lifetime to play out, but I think eventually Bitcoin becomes the preferred thing to do that.

56:59You've got to start somewhere. So again, I don't think anybody's going to be like, oh, we're dumping our trillion dollars in treasuries and putting it all in Bitcoin. There's literally not enough Bitcoin in existence. But I also don't think it's unreasonable for a country to say, hey, our sovereign wealth fund has$600 billion in assets, some combination of like currencies, real estate, equities, whatever. A lot of it is dollarized, which we're worried about because if there's like another Russian war situation type stuff, who knows what America will try to sanction. So we decided to put 2 % of our sovereign wealth fund into Bitcoin.

57:37That's where I think it begins. Right. And to be clear, right now, essentially 0%. So a sovereign wealth fund is like the investments managed by an entire country. So a sovereign wealth fund could be hundreds of billions of dollars potentially or greater. And right now, there's essentially 0 % invested in Bitcoin. and forget about the other cryptos, but 0 % because of the exact thing that started last week, which is that every sovereign wealth fund has been waiting for the US SEC to do something. And now you're right. This has now started. This is the beginning of the end of this worry that's been going on for years.

58:22Institutions, Fidelity, they don't want to invest in crypto until it's clear what the US regulatory position is. Now it's going to be forced for everybody to figure this out. And when that happens, this is actually, now that I'm thinking out loud about it, this is really the catalyst everyone's been waiting for, is that what does the regulatory landscape look like? And now we're going to finally know. Right. One way or another, right? Like either America is going to come around and create sensible regulations for crypto or America is going to effectively ban crypto from Americans, which again, which is impossible because it's impossible.

59:01But if they even try to do that, ultimately, like crypto is either valuable or it's not. And if you think Bitcoin is valuable, then America suppressing Americans ability to buy and hold crypto just means that you get it cheaper. Well, this just reminds me again of I I remember in, I guess it was 1994 or 1995, I was explaining this new phenomenon, the World Wide Web to executives at HBO, the media company, the TV company. And one of the top guys who eventually became for a short time the CEO of HBO, he was asking me, he said, do you mean through the phone wires and the cable lines, people could send audio and video and text to other people?

59:55And I said, yes. And he said, well, the phone companies are never going to allow this. And they have the government in their back pockets. The government is just going to ban this. They're not going to let the phone companies go out of business. And of course, it all got figured out and resolved. And the phone companies now own the internet, basically, or the backbone of it. And the same thing's going to happen here. That's amazing. Yeah. Yeah, that's an amazing anecdote. So I want to, I know we've been talking for a while, but I want to go back to a question you posed in the beginning of this conversation, which was, you said you don't want to take it for granted that crypto will be the future.

1:00:33And I said that we've spent enough time discussing the reasons why. So I want to tackle this question in a different way. There are a lot of people who hate crypto. There are a lot of very prominent people who are anti-crypto and borderline obsessed with it. Would you agree with that? Yes. Look at Nassim Taleb, who's a very, very smart guy. And he was pro-crypto all the way through. Up till 2019, he was writing very pro-crypto things and problems with the dollar versus crypto and so on. I don't know. Like only this year, I think, or past year or so, he's been kind of down on crypto. And he says because of the volatility.

1:01:11But actually, Bitcoin has been very unvolatile this past eight months, six months. So in Nassim's defense, and I know Nassim, and he often is invited to my class to come and give the anti-crypto argument because I want to give the students both sides. And he makes some very interesting and often, if nothing else, entertaining arguments. But yeah, there are people like him. what Elizabeth Warren is doing. Like you would think that the most pressing thing going on in America right now is like whether Dogecoin is a security and that we didn't have an inflationary crisis, a banking crisis, chaotic political situation, a war in Russia, et cetera, right?

1:01:58And then they're like reporters. There are many academics, actually. Most people I come across in academia are very anti-crypto, people on Twitter, et cetera. And the question I have for you is, by the way, even the White House, one last data point, earlier this year, they published their like 500 page annual economic report about the state of the U .S. economy. And it had a whole chapter on how crypto should not exist or has no value. Which again, we just had a banking crisis, which I don't think we're necessarily out of the woods with the regional banking issue. Inflation is at multi-decade highs.

1:02:41There are many problems with the American economy, China, reshoring, ships, infrastructure, the environment, climate change. And it's like the White House said, no, we need to have a chapter for why this relatively small industry serves no value. So the question I have for you is, has there ever been anything that got that much negative attention that turned out to be just completely hype and bogus and had no impact in history? It's a difficult question because by saying had no impact, we don't really talk about it now. So it's unlike, for instance, a lot of industries had negative hype when they started, but they ended up having positive impact.

1:03:28So the automotive industry, huge negative discussions in the turn of the 20th century. Oh, all the horse and buggy drivers are going to be out of business. Or you're going to have a heart attack if you go faster than 35 miles per hour. You know, there's going to be pollution. So there was a lot of... But that sort of proves my point, right? So I'm trying to think of the answer to your question. Like, was there anything that had the negative hype that ended up ultimately having negative impact? Where basically the crowd was correct and everybody was magically correct for the first time ever. Right.

1:04:01And it had no impact, right? Like, you know, automobiles ended up becoming a thing. I'm sure like with electricity, I know with like radio, people thought it would fry their brains. But it doesn't even have to be a technology, right? It could just be an idea. Like there have been a lot of ideas that have been very controversial at some point. Had some very vocal critics that stake their personal careers and reputations being against it, right? Like say climate change. You could say most of the social causes that we now sort of accept as mainstream. Like, you know, civil rights, pro-gay marriage, whatever.

1:04:37These are all things that elicited a lot of passion and excitation from certain otherwise intelligent, credible people. But in the end of the day, we learned that ultimately, if it's almost like any kind of attention proves that it's going to be a thing and an important thing, positive or negative doesn't matter. Well, I think climate change is a great example of this because let's say belief in climate change is a spectrum where some people are, you know, 100 % convinced that every piece of manmade pollution contributes to climate change. And other people aren't completely on the other side, which is that climates always change because of nature and blah, blah, blah.

1:05:19And there's no bad effects. And then most people are somewhere in the middle where some things are man-made, some things are just the natural cycle of things. There clearly is some change. We don't know if it's because of man-made. Anyway, most people are in the middle. But I would say regardless of how you feel, the impact has been largely positive, like the development of battery-powered vehicles and technologies. Solar power as an industry and as a technology has grown exponentially in the past 20, 30 years. So these things are net positive. I'm just trying to think if there's any been new technology or discovery or financial innovation.

1:06:00Like even take mortgage derivatives, okay, from the OOs. Not only had a huge negative hype, but created the worst financial crisis in U.S. history. And now they are just the bread and butter of every bank and hedge fund. It's just now normal business, now mortgage derivatives. and I'm trying to think of what else, you know, what had negative hype where it ultimately did not have any impact at all. Yeah. Even if you go back all the way to the South Sea bubble, that was basically the first central bank was basically, you know, the South Sea company. Mississippi, but yeah. Yeah, Mississippi company.

1:06:43No, that was in France was the Mississippi company. Right. I actually don't know, but was the... I know more about the Mississippi bubble than the South Sea bubble. So I don't know. They were related. They were kind of copying each other at the time. They were around the same time, yeah. Yeah. John Law, who is British, kind of learned from the example there and brought it over to France, like exported it to France. I'm trying to think what else. But so, yeah, that's the, and, you know, we could crowdsource this, right? You have a wide audience. Like I would love to be, because what I'm getting at, obviously, is the fact that to me, the fact that crypto generates so much negative attention proves that it's going to be disruptive and impactful.

1:07:23If it wasn't, people just wouldn't care, right? If it wasn't, people would say, oh, well, yeah, you know, the bubble happened. All right, well, people lost money on a dumb idea. I don't care. It's got nothing to do with me. Or like, oh, FTX happened and turned that to be a total fraud. Be like, all right, well, I guess, you know, those who trusted bad technology got what they deserve. And then they wouldn't talk about it. But they're literally like people. I mean, I follow them on Twitter, some of them, who are obsessed. And it's like every day they have to tweet something about like why crypto is bad.

1:07:58And what I'm saying is that that to me proves that it's going to be extremely disruptive. Yeah. I mean, again, it reminds me of the internet, but not in 1995, but in 2001, where, you know, if you weren't like a technologist, even the most diehard internet investors basically said, this is a scam, this whole web internet thing. And they gave up, they threw in the towel, which is why, you know, the NASDAQ fell from 5 ,000 to whatever, below a thousand. But long-term, you know, by 2005, the internet had a billion users worldwide and the rest is history. So my guess is something similar is going to happen here, but I'm just trying to think of if there's any answer at all to your question of something that was discussed a lot and ended up having no impact.

1:08:48That's the question. And it actually, part of this reminds me of my favorite Rick Rubin quote or saying that great art splits the audience. and I think that's crypto, right? You have like a minority, but a sizable minority of people, which I'm a part of, that are just deeply passionate and believe that this is going to be one of the most transformative things to hit society in our lifetimes. And then you have a bunch of other people who are not just like opposed to it, but they're staking their careers and reputations on being opposed to it. And we've split the audience. It's very interesting.

1:09:36So, you know, great science in some ways mirrors great art in that way. But I'm going to think about this. There must be something. But if you think about it, like everything, what else had negative hype? Well, obviously the space program had negative hype, you know, because of all the money that was being spent. Like, what good is it to send someone to the moon? Look at all this money that's being spent. And yet, you know, what we've learned through this is significant. And we're now setting up satellites regularly based on the technologies developed then. Yeah. I mean, there have been things that fizzled, right?

1:10:08Like they had a mini bubble and fizzled often perhaps because they were too early. Like there was a 3D printing bubble in the last 10 years. But now 3D printing is going to change the world. Like this is another exponentially growing industry. Okay. Railroads, you know, there was a bubble and then a bust. Like every railroad Two. I believe there were two. But those examples we know. What I'm looking for is like, what is the thing that got enough attention that the leader of the most powerful country in the world at that time took it upon themselves to stake a claim against it and then ended up having no impact?

1:10:48I can't think of anything. I can't think of anything either. And I need to become a bit more eloquent at explaining what I mean here. But to me, that's the tell. There's a tell that so many people - It's very fascinating that that's the tell. You're right. I know people who like, I'm at a dinner party, right? And the last thing I want to talk about is crypto. Because it's just, you know, that's my job. It's what I do during the day. And now I'm at a dinner party. I'm trying to relax. I'd rather talk about sports or movies or what other people do. Girls. Yeah. But there's always... Whenever you talk about it at your dinner parties.

1:11:24Yeah. But there is always someone who has to seek me out to tell me why they think crypto is a scam. And how they think it's completely, completely bogus. And this actually happened recently where somebody asked me. They're like, oh, what do you do? I said, I teach. I write. Oh, what do you teach? Oh, crypto. I was like, okay, well, if you had to summarize crypto in one sentence, what would it be? And I said, it's a better way to build trust in a digital setting. And they were like, oh, okay. And then some other random person who was standing in the corner, he's like, I have a different summary of crypto.

1:12:00And he was like, it's a complete scam. And it wasn't like, I disagree. It's just ones and zeros. It's nothing. But there's always that person where I go where crypto comes. It's not like I don't care, right? No one ever says like, I don't care about crypto. The people who do are actually my favorite people. But there's always like there are people who are like, oh, I love crypto. I'm a big believer. I own Bitcoin. I love NFTs, whatever. And then there's also the people who are like, it's a scam. It's all nonsense, blah, blah. The guy who was the star of the TV show, the OC, the actor has written a book, How Crypto is a Scam, and testified in front of Congress about this.

1:12:45What? Yeah. How did he get involved? I don't know. I should look into this. But it's like - The OC? Yeah. I only know that one actress became famous. I don't know any of the other actors. Yeah. What's his name? Because I keep - Oh, Ben McKenzie. Yeah. McKenzie. Yeah. Who's that? Yeah, I don't know. But it's like, here's the headline. Ben McKenzie, actor turned crypto naysayer. Like, here's a guy who could have been a naysayer about like, nuclear proliferation, the war in Ukraine, growing political disharmony, deforestation, droughts plastic in the ocean you can go on and on right he picked crypto yeah he wrote and you know it's not easy to write a book like he wrote a whole book on it yeah now it's a scam yeah and that to me is the tell like these people don't realize it but they're not whether it's ben or the guy who was yelling at me at the party, they're not anti this because they think it won't be impactful.

1:13:57They're against because somewhere deep in their consciousness, they think that this is going to matter and it's going to be very transformative. And that's the thing that's triggering them. You think they're afraid of that? Like, because it's out of their control or they didn't make money on it when they felt they should have, and they're afraid they're too late? The money thing was true possibly during the bull market, but during the bear market, anybody who bought crypto in the last couple of years is down. So I don't think it's so much that. I think fear of change is a big part of it. I think this really does represent a way to change the social power structure.

1:14:42And it's not just about money, right? When NFTs first became a thing, there were a lot of artists who embraced it. And then there were a lot of artists who hated it. And I was actually very surprised by like the artists that were hating it because I was like, wait, for the first time, there's a business model now where digital artists could sell their work and make money. It's a new source. You can like monetize existing art. They're fascinating new models, like the fact that you could have built-in royalties that even if your NFT resells in the future, you get a percentage. I was like, why would artists be opposed to this?

1:15:18And I met one artist and I asked him and he said, you know, there's a lot of shitty artists in the world that have never made any money. And they're just jealous that somebody that took the time to learn what an NFT is and how to create digital art and sell it on OpenSea or wherever is now making money and they're not. So I think there's a version of that that's true for a lot of things, right? Like decentralization threatens anyone and everything that has something to do with the centralized power structure. I have no idea why that would trigger a former actor, but maybe he had ambitions of being like a bank CEO or working at the New York Stock Exchange or something.

1:16:04So I think there's something there about it's the fact that crypto could be so disruptive that's making these people so reactive, not the opposite. it. Yeah. Interesting. Well, look, there's a, you bring up so many interesting points as always, Omid. And, uh, this really kind of answers a lot of my questions about what's been going on. Cause it's been, it's been really like a crazy few weeks with all this stuff. And it's been hard to kind of keep up to pace with it enough to explain to people what's going on. But I think, I think, I think you're right. Actually, the most interesting thing is that the fact that there is so much discussion about it is almost the bullish thing about it right now.

1:16:51So I'm going to have to think more about that. But I do agree that this is going to play out. And this is the beginning of the end in the sense that the beginning of the end of a certain stage of crypto where everybody wondered, well, what's going to be the regulatory framework? Now we're going to find out. And this is the main thing that's been holding back every institutional investor, including all these sovereign wealth funds. So at the end of the day, either crypto is going to end, which I don't think it's going to will, or this is enormously bullish for crypto. And I hate to sound almost religious about it because I'm not.

1:17:26I'm waiting for crypto to be easier to use. I'm waiting for it to be... There's currently problems, but this regulatory issue has been an overhang on crypto for a long time, and now it's going to get figured out. Yeah, from your mouth to Satoshi's ears, James. But I think this is, what was that? There was that Winston Churchill, another Winston Churchill quote that was like, it's not the end and it's not the beginning of the end, but maybe it's the end of the beginning. Something like that. But it was a great conversation. And as always, thank you for having me on. Thanks once again. Are you teaching this summer?

1:18:05Are you teaching in the fall semester or what's the story? I'm teaching in the fall. just doing a lot more blogging and writing and learning. Actually, I'm using a lighter schedule this summer to go back to learning. Because aside from all this regulatory stuff, there's some super interesting developments with like layer twos, new protocols, Uniswap just announced its V4 today. So lots of cool stuff for me to dig into. All right. Well, as always, come back on the podcast and I will talk to you soon. Great. Bye-bye.

1:18:39Thank you.