Ep 60 - January 14, 2025 - EU enables USD stablecoins
Welcome to the weekly crypto check-in, your go to podcast for navigating the wild world of cryptocurrencies, hosted by Robert Swartout and Andres Sedate. Today, recording on January 14, we're diving into the latest market shifts, blocking breakthroughs, and expert insights to keep you ahead of the curve. How's it going, Andres?
Andres Sandate:Hey. Good, Robert. Hope your week is going well, and good afternoon. I know we don't have a a lot of topics on today's crypto check-in, but some some important ones.
Robert Swarthout:Yeah. And, you know, one particular one that's pretty meaty. So I think we'll spend, I don't know, maybe half the time talking about the market structure, we'll get to it towards the end.
Andres Sandate:So Yeah.
Robert Swarthout:Awesome. But, you know, let's just kinda jump in here. So, you know, now I'll say that front, some of these topics are gonna be probably boring on the surface. But I think that they are fundamentally important, especially where things I believe that they're going, I think we believe they're going. And, you know, it's one of those it's kinda like the plumbing.
Robert Swarthout:You don't care how the plumbing works in your house until it doesn't. Well, this this is one of the cases where this is the new plumbing, maybe for the financial system as we go forward, and we'll kinda get into details here. So this first one so BNY, the Bank of New York Mellon, the oldest bank in the country, has launched tokenized deposit services specifically for institutional clients. What does this really mean? Really, this means that there any sort of cash holdings that you might have at BNY, you could they can give you a digital representation on a blockchain.
Robert Swarthout:This is maybe, like, a half step to getting the blockchain in some sense, but it's a necessary step nonetheless because institutions are gonna be the slowest adopters and kinda getting their not even their feet wet, their toes wet at some level, I think, is a good starting spot.
Andres Sandate:Yeah. I mean, commercial bank moving to put in place the institutional infrastructure. Mhmm. I think the comment you used the analogy of the plumbing doesn't, you know, doesn't doesn't come top of mind until you have a major issue. Well Mhmm.
Andres Sandate:I think for anybody that's probably ever, you know, done a major renovation or to take that analogy a step further or built a house Right. Been involved in something where you had to rip walls out, you you know, especially old house. And I can think of, you know, family member. My sister-in-law and her husband are doing a major renovation in a 100 year old house in Chicago. And as part of that, right, they're taking out all these walls.
Andres Sandate:And one of the things that they have seen is just all the plumbing work, all the piping work. And so when you're redoing all of that, you know, and living in it, it's a big disruption. And that's kinda feel like that's sort of what we're going through. But to see one of these institutions, you know, especially one like BNY Mellon, this Mhmm. Stature, it's, you know, highly regarded, highly respected, and obviously would be an institution that many of its peers would follow and look to emulate Right.
Andres Sandate:Is is you know, it's it's a it's a major move, right, for for the blockchain, you know, based settlement.
Robert Swarthout:Yeah. You know, and I I think it's a totally valid thought that some people might have is this stuff is taking forever to do Yeah. If you if you've been following it. But this is not something that can go wrong. Yeah.
Robert Swarthout:They're gonna have to take the time and kinda get it right from the giga. There's there's no second chances here because the brand of crypto, with air quotes there, would be ruined if it happened or, admittedly, the financial system probably doesn't need that kind of problem either. So but, yeah, it's it's cool to see. So a little bit more on this. You know, those that listen to us know that we follow Ripple closely.
Robert Swarthout:They are one of the early adopters of this with the Ripple Prime, basically, the Hidden Road acquisition that they did. So that's happening. And, you know, more of a partnership. So BNY is partnered with Securitize, and and they're also tied into Ripple. So that that was cool to kinda see, you know, I I would say coming full circle, but kind of the multiple connections going on there.
Robert Swarthout:So.
Andres Sandate:Yeah. Yeah. I I expect to see a flurry of announcements and initiatives if if nothing else. One thing that was exciting here, in addition to the the the the things you mentioned right around this has to work and needs to go well. This is not a pilot.
Andres Sandate:Right? This is actually rolling out this, you know, the the deposit the tokenized deposit services. And I think it's also, you know, cool to circle back to, you know, our first show when I asked you some of the things you were expecting for '26, and one of the areas that you felt like there would be a lot of movement in and advancement in was around tokenization. And, obviously, this, you know, right in line with that prediction. So I would expect, yeah, we're gonna see a lot more funds being tokenized and assets being tokenized.
Andres Sandate:You've made the comment last time we, you know, did the did the did the show that, you know, it just takes one of the major exchanges, whether it's Nasdaq or another deciding to bring everything on chain or tokenizing everything. I mean, the days of the, you know, the trading pits and the things we used to, you know, think about when we thought about Wall Street, like human beings and human interaction. It's that's still there to some extent, but it's it's more or less just a picture and a photo op. So much more is digitized and and is electronic trading. This is a step, you know, probably even better step arguably.
Andres Sandate:Yeah. And so I yeah. I think your prediction's gonna prove to be, you know, prophetic, right, or or what the right word is, but it's pretty exciting.
Robert Swarthout:Yep. Absolutely. So our we'll move on to the second topic second topic here. So the EU put out a policy document basically stating that dollar stablecoins can be treated as fiat equivalents. This is, again, another boring topic, but it it's just slowly pulling in or opening the door to crypto into traditional finance.
Robert Swarthout:I believe, you know, I've long believed this, that the EU, in some level, would be a a leading edge, and they have been. They've had, goodness, laws in place about how to deal with crypto for a couple years now. But they they I think that they wanna use it where they can get a stable coin that has a little more surveillance built into it. So I I there's different motives here, but it is cool to kinda see that they're talking about more specifically dollar stablecoins, not just, you know, a euro stablecoin. And just kinda you know, there's a obviously, a lot of flow between across the Atlantic between the dollar and the Europe on a yearly basis.
Robert Swarthout:So this is pretty important.
Andres Sandate:Yeah. And this is not not a move that you measure in millions or billions. It's it's really trillions, right, in terms of transatlantic capital flows and the financial you know, as I as I saw a quote, you know, transact transatlantic financial architecture. Mhmm. There's a lot there.
Andres Sandate:The, you know, the the movement of of money, again, we take for granted that money moves quickly, settles overnight, and it's, like, not until we have you know, typically, what what we see at more of the individual or individual investor level is you see the fat finger mistakes and you hear about market glitches and those things that impact, like, trading markets. But this infrastructure, you know, kinda takes crypto from, oh, it's like a niche y, cool little hobby thing to now you're seeing, like, major institutions with the first headline and now, like, government and, you know, major trading counterparties adopting the technology, adopting the infrastructure, implementing it. So, yeah, not always headlines that are gonna make the front pages of, like, a major newspaper, but that are going to allow the industry to really become numb not only more legitimatized or legit, but also to bring in more and more volume, more and more participation.
Robert Swarthout:Yeah. And, you know, it's we've used this analogy many times, Domino's. Right? I mean, I think another example of the Domino's falling here is the EU set talking about that. There's a company based out of The UK called Quant.
Robert Swarthout:They're token as QNT. They're all about helping institutions do things on blockchains. It can mean different things. So they're part of that EU document. That same Quant, I saw a news headline today that was talking about how, basically, Quant is helping all banks in in Japan do tokenization of all their deposits.
Robert Swarthout:Well, that's another, you know, $8,600,000,000,000, you know, and that's just another headline. And Japan's an important part of the global economy even though maybe a small country geographically, they're part of that g seven. And, you know, it it to this point, they're just waiting for The US. I think everybody is just waiting. The crypto market feels like it's waiting on it on The US market as well with this market structure.
Robert Swarthout:But we'll get to you here in a few minutes. But it's it just you can feel at some level of the pent up desire to want to move forward, whether that's price action or whether that's just purely using this stuff. So we're getting there.
Andres Sandate:Yeah. We are. And I I you know, one other comment to this is, again, you talked about this a couple of weeks ago was just that '26 could be the year where we see not only hopefully a a this legislation finally get to the president's desk, right, which we're gonna talk about here in in the next couple of headlines, but also the tokenization and actual why does the legislation matter.
Robert Swarthout:Mhmm.
Andres Sandate:You know, that tokenization would be one of the beneficiary stablecoins we've been talking about for, you know, many, many months. Right? And that would be one of the another major area that would benefit from clarity and infrastructure being put in place. Again, I think for individuals and for advisers, they might look at these headlines or listen to these headlines and say, yeah. But what is that what impact's that gonna have on us and me?
Andres Sandate:Well, again, when you talk about money markets and you talk about tokenization of major amounts of financial assets and institutions Mhmm. You know, speed, clarity, security, all those types of things again that we took for granted going back to that initial sort of analogy. And and when you can improve on all those things, like quantum improvements on all those things, it's it's a dramatic change from the old way, if you will, plumbing was set up. So it does take time. You do wish all the countries could move in lockstep, but, you know, at the end of the day, like, we are such an important economy to the world in The US, you know, despite macro headlines and despite all the talk about the the US dollar and the decline, if you will, of US exceptionalism.
Andres Sandate:Like, I think Mhmm. When The US finally gets these bills through, I think, yes, you will see that domino effect. It's a good analogy.
Robert Swarthout:Yeah. You know, and it's you know, people wanna know, like, how is this good for me kinda continuing on your thing there? It's like it it is and it's this is not financial advice. I'll say that front. But, like, good luck finding a financial adviser these days that is less than 60 years old that is probably not recommending at least a small percentage of your portfolio of the end crypto.
Robert Swarthout:Like, we we have we haven't really talked about how that shift has happened so quickly. We've talked about it for, you know, like, BofA a couple weeks ago and those kind of things. But, like, it is quickly flipping to where it's harder to find someone that doesn't recommend it versus, you know, finding someone that does that do. So Yeah. You know, it's obviously the financial incentive there.
Robert Swarthout:I think the the challenge for those that do have it as part of your portfolio long term will be, like, how do you deal with rebalancing? This is an asset class that likely will grow at a at a much quicker rate, at least that's what my belief is, than, you know, some other asset classes. So you how do you keep your ratios and all that kind stuff? So Yeah. It'll be a, you know, I guess, a good problem to have.
Andres Sandate:It will. And I think education, as you and I have talked about a little bit. Right? I think when you ask those advisers the second or third, you know, question about crypto, if it's not Bitcoin, I think there's probably not as much knowledge. There might be a white paper.
Andres Sandate:It might be, hey. Go, you know, read our website. And there's probably a lot of knowledge out there, behind those advisers, institutional knowledge now because a lot of the the advisory firms and a lot of the wealth, you know, wealth advisers and the wirehouses have said, like, we're gonna have to educate people on this space. Otherwise, we're gonna miss out on where demand is. Right?
Andres Sandate:Because, you know, more and more people are asking for it. I think that it's going to take some time, and I think that broad adoption, for example, in 04/2001 k's and for in retirement plans is is still some ways off. But we we are often guilty of underestimating, you know, what can happen in, you know, the the or overestimating what, you know, we can get done in the short term and underestimating, like, progress, if you will, on the longer side. So I I think this is probably gonna end up being, you know, where crypto fits in. Right?
Andres Sandate:I think we may all underestimate, like, how fast things changed
Robert Swarthout:Mhmm.
Andres Sandate:And and and then realize, like, oh, crap. Like, I'm behind.
Robert Swarthout:Yeah. Absolutely. Well, it's I think it's a good segue. So talk about being behind. President Trump, he's got his hands in a bunch of different things these days, but he made the comment recently at a press conference that he or he was doing about how the existing financial system has reached its limits, and a crypto a crypto driven era is coming next.
Robert Swarthout:Okay. You know, set aside your beliefs about him as president. Set aside how much the Trump family is in crypto. I think that that's maybe harder to do. But Yeah.
Robert Swarthout:I I do believe that he's he's making an honest it's common at some level there. There there's parts of the current system that are just immediately antiquated. This newer technology sitting out there, if you take away the financial incentive of holding crypto, I still think that the underlying technology is such a drastic upgrade from the current system that it's hard to ignore. You know, be able to do smart contracts to enforce things without having to go sit in front of a judge, I think, is pretty impactful, is a great example. But, you know, it's a you know, he's been quiet on crypto for a while.
Robert Swarthout:May really, the second half of the year, probably. But he states that the finance is shifting fully on chain and will be and blockchain will be at its core. Like, it kinda mirrors what we've heard from Paul Atkins at the SEC that all US markets will be on chain in two years. So, I mean, granted, they're they're the same administration there, but it's a I start I think you're starting to hear it from more and more places. It becomes more and more hard to ignore.
Andres Sandate:Well, I yeah. I mean, he he wouldn't be the first president in history to, you know, let an issue that's sort of working its way through the legislative branch. Right? And Right. And kinda stuck in committees and being tossed back and forth.
Andres Sandate:Like, I take this comment as an indication that there is progress happening behind the scenes because any president is always trying to be aligned with, you know, what's gonna win points. Right?
Robert Swarthout:What's gonna get more Nudge it along.
Andres Sandate:Right? Yeah. Nudge it along. Right? So and you don't wanna be ahead of that issue because then you're out, right, on on a plank to some extent, and the bill is nowhere close to getting passed.
Andres Sandate:And I think we've seen that a little bit, you know, where a politician makes a comment, and then we don't you know, it gets a headline, but it there's not a lot of follow through. Right? So I'm hoping for the sake of crypto and this bill that there's a little bit more movement in lockstep that the comment he made is an indication that the bill is now it's been pushed back a few weeks. Right? I don't wanna front run the the headline, but we you know, that we are actually making progress and that this crypto era that we've talked about that could get unleashed Right.
Andres Sandate:We, I know you and I, believe it's it's going to be in part driven by the market structure bill. So the but there's no doubt about it. Like, this crypto era that Trump has has talked about is when you add up a lot of the other things from an economic standpoint and some of the domestic domestic things that he's talked about from, you know, in the last, you know, week about affordability and talking about prices for real estate and you look at other areas where, you know, he's, you know, weighing in quite heavily. Right. Not without not you know, around monetary policy, not without some degree of controversy.
Andres Sandate:Mhmm. The, you know, the the maturation of this industry under you know, in his first term, there's only gonna be kinda one of these eras. Right? And and it could be under his watch. Right?
Andres Sandate:So we'll see if, you know, if this if this crypto era that he's talking about, does manifest itself. And I think, you know, my personal view is you're gonna need this legislation to get finished before we really can see the potential.
Robert Swarthout:Yeah. Well, we're in agreement on that, and here's here's our next topic. Like, market structure bill progress. So we got a lot to talk about here. The the senate is the one working on this.
Robert Swarthout:Again, the house did their part last summer. And, you know, I had to refresh my mind on this. There's actually two versions of this bill in the senate right now because the it touches two committees. So the banking committee and the agriculture committee. Mhmm.
Robert Swarthout:The banking committee oversees the SEC and securities, and the agriculture committee oversees the CFTC and commodities. Well, crypto falls in the both these buckets. So it kinda gets to go through both of these committees. They will come together with their drafts. They will do independent mark up, and then they will bring them together, merge them, and then the senate will vote on the combined legislation.
Robert Swarthout:So there's a bit of two paths. You kept hearing about dates in crypto with regards to this bill, when it may be ready for mark up, when it'd be ready for vote. The the senate ag committee is basically been pushed at end of the month to have their markup done because they're trying to get some more by the parties and support and some more some more, I guess, negotiations on. The the one coming from the banking committee is getting voted on tomorrow. Is at least that's the tentative plan.
Robert Swarthout:Tomorrow being the January 15. You know, it's it's progress. There's so many things going round and round about this. But, yeah, we'll kinda start there. You know, did you remember that there was two different committees that working on this on this?
Andres Sandate:I remember yeah. I mean, it's it's there's a lot of things to, like you said, to unpack. You have the CFTC and the SEC that are two regulators that are going to be involved in regulating the space. But then within the bill, the market structural bill itself, yes, I remember that there was a banking committee and there was an ag committee that I don't know if it's tied to that, but are going we're going to be involved in they were gonna have to reconcile Right. The the bill effectively.
Andres Sandate:Mhmm. And it does it does seem like there's going to have to be some agreement. I don't know if it's that's the right word to compromise. I don't know. But it seems like the same footing rule is one of the core issues.
Andres Sandate:And and and maybe you can talk more about this. From what I've read, it has to do with ETFs and, you know, them being basically placed on the same footing as Bitcoin and Ethereum. Is that right?
Robert Swarthout:Yeah. So the tokens that already have active ETFs. So there's only a handful of those tokens, XRP, Solana, Doge, HBAR, and I think there may be one other. They they basically have, I guess, enough visibility, enough liquidity, and they've kinda gone through at least some steps to become an e wrapped up in an ETF that they would end up in the same footing. What's interesting is I don't understand the pathway for x y z token or a b c token to go from being just a token to an ETF and how they end up graduating into that standard.
Robert Swarthout:Do they immediately get that as being part of an ETF? Or is there a time period they have to wait out? Something like that. I don't know. I think there's more of this would come clear as we kinda actually get the real text because as far as I'm aware, we have not even seen drafts from either one of these media.
Andres Sandate:Now the other a couple of the other key debates that are gonna get, I guess, flushed out and if we see a copy, even if it's a draft, I mean, it'll help. But the the things that I I saw too, I'm a let you talk about the stable coin yields, but the one that I thought was interesting goes back to kind of custody and and this notion of they're not being that that you you've gotta have you've gotta have protection for software developers to be able to build Right. Right, EFI applications.
Robert Swarthout:Mhmm.
Andres Sandate:Right? So this is like building apps on the App Store. Is that is that a fair analogy?
Robert Swarthout:Yeah. I think that's fair. And we've already had a case, and this is why everyone cares about this right now or as part of this bill is a a developer. This is, goodness, probably three or four years ago at this point, wrote some software to do a DeFi exchange effectively. So an exchange built into the blockchain, so you don't necessarily have to have an account.
Robert Swarthout:You just bring your wallet. You say, I want I have this token. I want it transferred or traded into this token. It takes care of all that. In this case, it was called Tornado Cash.
Robert Swarthout:The developer did this, and then people started using it for nefarious reasons. Basically, they were, like, washing your tokens Yep. If you wanna use that analogy from the old world. So that happened. And then as part of the war against crypto, specifically during the Biden administration, they came after that developer arrested him, put him in jail, and he's gone through this trial.
Robert Swarthout:Right? Like, did he write this hard to do anything illegal? No. In the analogy that people were using was, well, okay, people with guns they make guns, they're legal. And then all a sudden, someone takes it and does a crime with the gun, doesn't make the manufacturer of the gun liable, at least in some people's minds.
Robert Swarthout:There's some people who wish that was the case. Yeah. But it's a I think that's it's it's a good kind of follow on there. So, yeah. That that that's one thing.
Andres Sandate:Would be and the idea would be that the tor Tornado Cache software developers of the world want people to be able to self custody. Is that right?
Robert Swarthout:Self custody or just be able to, like, use their tokens in a free manner that
Andres Sandate:As they wish. As they wish. Right? Like and
Robert Swarthout:and I think that it's important, like, you know, granted, I I come from a software development background, I kinda sympathize. Right? Like like, you want the ability to have an idea and be able to go execute on it. Obviously, not break any laws in the process, but, like, be creative. I think that that's how we come up with some things that we would never dream of.
Robert Swarthout:If you rewind twenty five years ago or, I guess, probably twenty years ago at this point, I mean, before Facebook, people didn't understand social media. Now people, they spend tremendous amounts of time on it because, you know, different people Mark Zuckerberg is a great example. He was creative. I think the concept of Facebook and kind of, you know, it grew into what it is today. It may be bad at some level, maybe good at some level.
Robert Swarthout:But, you know, creativity, I think, is super important in a in a democratic society. So Yeah.
Andres Sandate:And it kinda goes back to some of the original notions of crypto. Right?
Robert Swarthout:It was a it was a Freedom of your money. Yeah. Absolutely. Yeah.
Andres Sandate:It was more of a, you know in in in some cases, you know, the original notion was that you had autonomy, you had privacy, you had and and we saw crypto and we have seen the the whole crypto digital asset space, like, change tremendously in the last decade plus. But, nevertheless, it sounds like there's some industry advocates who are pushing pretty hard for that. Yep.
Robert Swarthout:Yep. On the topic of industry advocates advocating for things in this bill, so the another angle here is the the banking union or banking, I guess, lobbyist or whatever they were. There was there was them and there was a faction of people that wanted to update the stablecoin bill, so the Genius Act from earlier this year, to allow stablecoin issuers to be able to pass through or pay interest to holders of stablecoins. That's currently illegal. It's a great business to be in if you're on that on that far side of it.
Robert Swarthout:But the banking, lobbyists, seem to have won this round. Bank stable point yield is gonna stay with the issuers for the time being. And, obviously, banks are in the business of making money. This is gonna be if if a fault if all deposits get tokenized, just think, your savings or your checking account that is interest bearing right now potentially goes away. It becomes just cash.
Robert Swarthout:That's why banks want it. Is that good for the consumer? I would in my opinion, I would say no. But I think that this may not be the final answer to the story. I hope we get this bill passed as is.
Robert Swarthout:We don't need to complicate it with this other topic, and then we can kinda go back and clean it up some other time.
Andres Sandate:Yeah. Yeah. Yeah. It's called an amendment.
Robert Swarthout:Yeah.
Andres Sandate:Well, like, you and I always we're wrong about how long these shows are gonna be because you you put in four headlines and you think, oh, this will be a fifteen, twenty minute conversation, and here we are pushing close to thirty minutes. So, you know, a lot a lot of interesting things. Like, I feel I think one takeaway is we're sort of moving from concept or experiment to we're talking now about infrastructure and architecture.
Robert Swarthout:Mhmm.
Andres Sandate:And it's almost like I want a dream home to I'm ready to hire the architect and, like, begin the process of of seeing a blueprint to much less like, okay. Somebody showed up with, you know, materials and we're gonna start construction.
Robert Swarthout:Yeah. It's I think it's a great analogy. Like, I'm in the middle of construction now with this horse property and it's there's days, weeks, or even months that it feels like nothing happens. And then there's a day where or even half a day where it feels like a week's where the progress happens and you're like, okay. Slow down, but you don't wanna slow down.
Robert Swarthout:Like, it it it's a kinda funky a funky feeling. So Yeah. Anyways, well, I think that's all we have to say about this topic. So that's a wrap for this episode of the week weekly crypto check-in. Keep updated with the latest crypto insights by searching Tito Crypto Capital or the weekly crypto check-in on your favorite podcast player or platform.
Robert Swarthout:Leave us a review and or like our LinkedIn page. Until next time. Take care.
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