Trump signs Genius! Grateful for @CampbellJAustin's tireless work championing sensible regulation for stablecoins and blockchain technology. As a longtime friend and recently his partner at Zero Knowledge over the past year, I've had the privilege of working alongside him while advising some of the industry's most influential companies. After nearly a decade of hitting regulatory and banking walls with crypto and stablecoin payments, this feels unreal. The US will finally provide the clarity needed to build solutions that scale and unlock the technology's potential—including bridging the financial systems of the Global South and Global North as other's take note, the very reason I got into this space. This is a massive step forward.

The Genius act has passed. 306-122 with 4 NV remaining on the R side. 102 Democrats in favor after also bringing in massive support from the Democratic side in the Senate. This is the most important piece of bipartisan financial legislation since Dodd-Frank. A new era begins.

A great argument in favor of regulation, as regulated stablecoins under the NYDFS have had zero stability problems and can always be redeemed for coin on old rails. Glad to see Brad support Genius.

One of the most disappointing parts of crypto has been watching Elizabeth Warren evolve from the champion of the little guy to a defender of rent-seeking intermediaries and an active purveyor of misinformation to achieve their corrupt goals.

Currently, there is a bit of chaos in the House of Representatives around the Genius, Clarity, and anti-CBDC bills that are passing through Congress. I wanted to take a moment to frame both what is at stake and some of the moving parts here, and what the optimal path forward is for most of the parties getting most of what they want (as always, a good negotiation will leave some people unhappy about some things). Those who know me know that I am a big advocate for stablecoins, and I’ll try to explain why as I explore this. Some might also think that I am simply a crypto booster, or alternatively, just politically motivated. You might even think I hate crypto (if you are some of the permissionless maxis in crypto). I find it ironic I tend to catch slings and arrows from both sides on this topic, but I have tried to put aside any political leanings here and certainly I’m not trying to do favors for the crypto industry (as many will disagree with parts of what I am about to say). So first, what is at stake? Genius has already passed the Senate, meaning that if it is passed, it ends up on President Trump’s desk. That’s not a small thing! On the other hand, Clarity and the anti-CBDC bill have not passed the Senate, and to hint and some of what I have to say later, I do not think if they pass they are moving this week, or even during the summer, in the Senate. So there, we are playing the long game to create things that will be the basis for future work by the Senate exactly like how the work that many individuals in the House, ranging from previous chairs McHenry and Waters, to Democrats like Ritchie Torres and Wiley Nickel, to Republicans like Warren Davidson and Mike Flood, lead to the Genius bill. With that state of play, I would first suggest the single most important thing that could happen is moving Genius. That is live! It’s something that could become legislation as soon as possible, and it’s critical that we move that and get it right for America rather than get stuck in the mud. Why? 1 - The rest of the world has noticed America has woken up on crypto. Did you know that China has begun reviving their own stablecoin projects? That regulatory frameworks are moving in Hong Kong? That various pieces are being put in place to compete on a global level? If the United States fumbles the ball at the 1 yard line, right before we were poised to win the game, by not passing this legislation, we are going to give other countries the chance to steal the future of the financial system from us. Putting everything else aside, if you are an American, Republican or Democrat, this is probably something you can agree is mission essential from a national and economic security perspective. We have to get this done. It’s not just China, either. Christine Lagarde and the EU are increasingly coming out pushing the digital Euro as a competitor to stablecoins. Everyone is awake now. We can’t stay asleep when the game has started. 2 - If you are opposed to CBDCs and state control of financial rails, the best way to compete against this in the long run is not legislation. It is the private market. America does not have a government-run AI company, nor does America have a government run set of grocery stores. Yet we have some of the best tech companies, supply chain and logistics firms, and overall economic outcomes anywhere, bar none. Why is that? The private sector. To paraphrase many market economists, and referencing the recent economic miracle occurring in Argentina under Javier Milei, the best thing we can do as government is sometimes to get out of the way. I certainly, as a long-time banker, believe that here. In fact, the root of many financial crises and problems we’ve had in the US starts with government intervention into markets (mortgages and student loans, anyone?). Less is sometimes more. 3 - Equally so, if you are worried about a CBDC, we aren’t starting in a vacuum. I testified earlier this year for the investigations subcommittee of House Financial Servies (thank you again for the opportunity, chairman Meuser, and for taking the reforms I proposed seriously). The current banking regulatory framework is not great. Consumers and businesses can be abused behind closed doors by our regulators, locked into unfair economic agreements, and the third party doctrine is sweeping up huge amounts of information. In some ways, we already have the surveillance part of a CBDC. Thus, if you want to fight that battle, I would suggest banking regulatory reform and reform of the third party doctrine would be the hill (no pun intended, chairman) to die on, not the one of banning a potential future CBDC that… would have the properties our current system already has? Let us reform what exists so future generations receive a financial system that cannot be abused by any political party! That’s the right battle. 4 - Finally, stablecoins are simply better for consumers. If you accept you’re not going to get paid yield on deposits, would you prefer that the underlying entity take a ton of risk lending to commercial real estate billionaires to pay themselves huge bonuses, or that it would just buy t-bills and go home? Banks do the former. Stablecoins do the latter. It is hugely pro-worker and beneficial to the average American in places like Ohio, Mississippi, Arizona, Idaho, and Oregon to move stablecoins. The only losers will be the rich bankers. Now, moving to the tactical reality of politics: Clarity is not going to move quickly in the Senate. The educational effort there will be significant (as staffers on both sides of the aisle have told me). The concerns about the bill are material. Some are largely unexplored, like the potential regulatory arbitrage issues when you start tokenizing many existing exotic financial products in ways that might fit some truly shocking things into “decentralized” frameworks, and let me assure you that absolutely nobody is going to be happy if the big winner of Clarity are desks like my old desk at JPM when they figure out how to decentralized and automate really bizarre stuff like mortality swaps to dump huge amounts of that risk on retail investors. It’s not perfect. It is a really good first draft and effort, and I salute both the crypto firms (like Coinbase and a16z) and legislators and staff (America overall owes a debt of gratitude to Allison and Paul, and yet the supermajority of Americans will never know who they are). However, this is not a time to let perfect be the enemy of good in legislative terms. Moving Clarity, with or without the anti-CBDC provisions, is not going to turn it to law. It’s going to hit the Senate, require a ton of work, and may or may not eventually move there. The dynamics are totally different when you are going down dais in the Senate banking committee and trying to coordinate with the ag committee as well to get enough votes on both sides to move something. It’s going to be hard. It’s going to be complicated. Lastly, craftsmanship matters. The current anti-CBDC bill I think is incredibly well-intentioned (I am very much against super-surveillance currencies, and I’ve also spoken publicly in the past about my doubts around the constitutionality of the BSA in a world with ubiquitous electronic records and the third party doctrine, as that seems like an end run around constitutional rights), but it mechanically has problems. My read of the current legislation indicates it might ban the current electronic ledger of the Fed, which sounds fun until you realize that could brick Fedwire, ACH, and thus trap a bunch of money in banks. That’s not great! Which is not say we shouldn’t be trying to move something, but it is to say conditioning the passage of Genius, specifically, on moving that would be a crippling mistake and is the kind of thing that China is praying the US gov’t stumbles on. So let’s not do that. Move Genius, that’s important for America, across all people. Do it now, so the calendar does not also become an enemy, and so our geopolitical adversaries cannot claim the upper hand while we dither. Clarity and the anti-CBDC bill matter, but they are not immediately actionable matters critical to national security in the same way. There should and can be compromise or future debate on those (apologies to those who wished to combine them, but the political reality of the Senate makes that impossible), but it’s not worth nuking the greatest expansion of the dollar and human rights of the past 40 years to quibble about niche securities esoterica. In fact, I will go one step further. I've met all of @WarrenDavidson @ElectFrench @BryanSteil in person. Americans have this caricature that politicians are mustache twirling villains, but they are not. Every single one treated me with respect, has thought deeply about these issues, and is trying to get the right things done for America and their constituents and supporters. But also, having meet all of them, I'm certain they can get in a room and get this done, as it will be legacy defining for everyone involved to get it right.

We talk BTC, stablecoins, and I call out the financial nihilists.

False. This is the opposite of what’s likely to happen. And I say this as someone who got in trouble at Citi talking about stablecoins as far back as 2018. (I was also on calls with Circle management where various bank MDs mocked the very idea of a tokenized dollar). Fraser is correct that there are many profitable things banks could do to service stablecoin issuers, and crypto in general. They should do all of those things, in part to offset the coming competition for payments related services. This was the overall pitch the few of us on the inside who understood crypto made post 2020: embrace bitcoin, custody, trading etc, to offset the inevitable losses from when the “sell side” no longer controls the rails. The notion proposed by Citi, JPM etc that they’ll use tokenized deposits (that are restricted to their customers) to improve payments is nonsensical. Banks don’t need blockchains to do this, they could do it with an excel spreadsheet or Oracle db or whatever. Permissioned blockchains are just bad databases. Bank-based payments across borders aren’t slow and expensive due to a lack of better tech. They are that way because there are too many intermediaries, and it’s profitable for each one to slow things down. If a wire takes 3 days to settle, who gets the interest on it? And who decides the F/X rate? Etc etc Part of this friction is regulatory (AML, etc) and part of it is due to liquidity constraints (banks have capital/reserve requirements in every country they operate, so they batch and net payments to save money). But you know how you eliminate both? By getting rid of some of the intermediaries! A stablecoin enables P2P payments on a decentralized rail. It also enables fierce competition likely to lead to the issuer paying out most of the float. Banks can’t compete with that. Deposits are meant to be a cheap source of funding. If USDC pays 4% and can be sent to anyone, and a CitiUSD pays only 1% but can only be sent to Citi clients, which coin would you want? Fraser is correct that for now, there’s lots to be done in terms of on and off ramps, servicing the reserve, and so on. But that’s like AT&T arguing in 1998 that their long distance phone franchise, one of the most profitable businesses in history, was safe because “if customers want VOIP, we will be the ones to give it to them” LOL, sure. What they left out was how calls on the internet would be free, and that would blow up the business model. Payments on the blockchain will also be effectively free. Banks make a killing charging for payments. For a bank like Citi, the payments franchise has been the crown jewel for a while. Their profit margins are stablecoins opportunity.

Ironic given I think the biggest winners of CLARITY as currently written are not going to be the big crypto players, it will be the big banks (and some hedge funds).

Personal news: after four incredible years as President & COO of @Uniswap, I’m starting something new. This is a new chapter for crypto. We’ve come a long way since I started digital assets at BlackRock in 2015, and building with @haydenzadams was an awesome adventure. I’m excited to scale from here. Stay tuned :)

I am currently in possession of the @AFLCIO letter opposing Genius and Clarity, and let me say, wow, do they need to do better work. It's chock full of falsehoods and misrepresentations, and comes across more as a handful of staffers with a personal vendetta that their part in the anti-crypto army tanked the Democratic party in the election and that their insane, burning hatred of ledger technology has not lead to the entire financial system turning against one type of electronic database to instead use a slightly different type of electronic database (weird hill to die on, but they seem intent on it). However, leaving that aside, let's confront some of the lies in the piece about Genius. I'll leave aside Clarity, as I do think there is a bigger discussion there, but if you want to trash talk stablecoins and bank regulatory frameworks, congratulations, you have entered my wheelhouse, @AFLCIO. I hope you came prepared. First, they say that pension assets are better regulated than the regulations in Genius. This is fascinating, given that there are many, many billions of money market funds and stable value funds in retirement funds right now, and those are less stringently regulated than what Genius stipulates. Some of them can be in vehicles that are not BK remote (we have a pension rescue fund for a reason!), and they can invest is vastly more broad assets than what Genius allows. To argue that Genius is not a sufficient regulatory framework is to say that all pensions are orders of magnitude too risky and should be abolished. Is that what you are arguing, @AFLCIO? If not, what specifically do you think is wrong with a bankruptcy remove government money market fund structure in economic substance? Second, they say tech companies can become the de-facto issuers of corporate cash, despite the fact that: 1. All Genius stablecoins must be backed with Treasuries and 2. The bill literally and specifically prohibits this. Maybe they read the wrong version? Maybe they aren't literate? I'm not sure what happened here but Section 4(12)(B) literally prohibits this. You guys read that part, right? Like, that they can't do this and only primarily financial companies can? Third, they argue that the assets backing stablecoins are not sufficiently strong. Guys. These are bank deposits, t-bills, and repo secured by treasuries. Exact same stuff that's in a government money market fund. So if you want to make this claim, please explain to me which of the following you believe: are US banks unsafe and should not be used by anyone, or is the US Treasury about to default on its debt? Because if you don't believe one of those two things, this looks incredibly deranged to put in here (unless you just didn't understand how the bill works, in which case you probably shouldn't have an opinion on it), and if you do believe one of those things, why did you wait for a last minute hail mary on a crypto bill to warn everyone about the impending collapse of the US banking system? Seems odd! Again, we can tell this is a few niche staffers who still struggle with email raging against the dying of the paper check era, and yearning to go back to a world where banks were actually still failing all the time, there was just less news about it because the internet didn't exist. What are we doing here, people? Why have we declared war on gov't MMFs and the internet and then expect people under the age of 45 to take the Democratic party seriously? This is not a serious letter. It was not written by serious people. Everyone involved should be fired and should go home in shame. Sad.