Why Wall Street suddenly wants the Clarity Act

[00:02] ethics language and Democrats are predictably pushing back and we are on a tight timeline to get it passed. We're going to discuss that and a lot more today with a very special guest from Coinbase, John D'Agostino. Let's go.

[00:25] Daily Wolf on Yahoo Finance. I'm your host Scott Melker, also known as the Wolf of All Streets and we've got 15 minutes to dive into the big stories of great insight today from Coinbase's head of strategy and institutional, Mr. John

[00:39] D'Agostino. We're here live. We don't usually do this, you know, on on site. see you. Love Yahoo. Happy to be here. >> Yeah, man. So, we've got a lot to dig big elephant in the room, which is Clarity. As I kind of mentioned there in

[00:53] the intro, the White House proposed some ethics language, which I think came as a surprise to many. Democrats predictably pushing back. Right now, the reporting is that they're pushing back on whether it's the state attorney or the DOJ who's

[01:06] seems like we're getting down to some real nuance here. about this and just to be clear, I'm I'm not in policy at Coinbase, so I have no good inside intel, if you will. But, I have noticed that the spread

[01:20] consensus, the folks who are actually talking to the lobbyist and involved in the conversation, versus say general sentiment has kind of flipped. Like 6 months ago, internally everyone was very optimistic and externally people were

[01:33] neutral. So, I think we're still at a coin flip. The reason I'm relentlessly optimistic is I think we've seen this before. So, Genius, everybody remembers Genius passing flawlessly, but it was argued until the very, very last minute

[01:45] and it was up in the air. I I I really do believe that ultimately these five or six holdouts that are the pivotal votes will do what's right for the American consumer. We know that people want cheaper, faster payments. We

[01:58] know stable coins work. Um we know that once genius passed, even though it's not even in effect yet, we saw stable coin usage just explode. It's better for the horse trading is over, I do think they'll do the right thing.

[02:11] challenge is more the language or the timeline? Because we really are getting right up to the August recess, and after that we know that everybody's just >> it's the political brinksmanship. I mean, they're all aware of the timeline.

[02:23] trying to see what they can get into the last possible minute. But I think, look, everyone I know who knows what's going on has said that genuine concession has It's worked on both sides. Crypto's given in, the banks have given in. I

[02:37] think I I think last time since I spoke to you, I got invited down uh by KPMG to speak to 20 community banks. Private session, no press, behind closed doors. These community banks are aware it's not crypto that's stealing their customers.

[02:51] And so, they most of those banks reached out to me to partner with us to help them offer that next generation uh tool. So, because that's the reality behind all of the BS, that's why I'm confident. >> So, why is the prevailing narrative that

[03:06] stable coin yield would cause capital flight from banks? You have see Jamie Dimon getting uh even emotional on TV and specifically emotional about Brian >> Cuz it's a good argument. I get it. It's It's an emotional argument. It's a tough

[03:18] argument to disprove. Who else has the data that we have? Uh the average person I would ask your your viewers to just say intuitively. My my mother's a great example. My mother's 84 years old. She was with her community bank for almost

[03:30] banking. Finally, her community bank even said, go online." And so, she said, "Well, I might as well be with uh another big bank then." Do you think my mother, who has trouble still controlling her Alexa,

[03:45] went to Coinbase? No, she went to a G-SIB. So, the notion that we're the reason that there's this flight is just is just kind of nonsensical. And I think >> So, we're obviously waiting on what will happen with clarity over the next few

[03:57] in the world that's legislating or regulating crypto. We forget that sometimes, I think, because the conversations are so heavily focused on just got back from Japan. Maybe talk about what's happening there and why

[04:09] >> Yeah, I mean, I've I've been to Japan, uh Japan, Singapore, Hong Kong, and Dubai all in the last 3 months. Um so, what seems to be happening is what I'll call global regulatory harmonization. But, not in the way everybody wants.

[04:22] means everyone follows the same rules or people copy the same rules. That's not What's happening is a harmonization of direction. Everything is moving towards that specifically is uh just got back from Japan. Uh they're dramatically

[04:38] redoing their tax laws. So, Bitcoin's going to go from being taxed at close to 60% to being long-term capital gain 20%. We're seeing shockingly thoughtful policy coming out of the UAE around decentralized finance. Like, who would

[04:53] ever think of put yourself back 5 years and say, "Which country, the US, um uh China, or UAE would move fastest on allowing people the freedom to choose of us would say, "Well, of course, the US will lead with that." We've actually

[05:07] know, we're we're doing a tokenized equity tokenization effort. Um we've had enormously productive conversations with offshore jurisdictions about allowing a bridge between um centralized trading and decentralized trading of tokenized

[05:20] equities. That is I'm I'm I'm I'm glad to hear it. I'm depressed that we are happening. I will say the CFTC's no-action letter has been fantastic. So, moving fast, but we're still playing catch-up.

[05:33] equities and what that look like here. Because, as you said, a lot of countries seemingly moving in a positive direction, which came out of which came out of left field, you know, really backing off a lot of contentious

[05:47] some sensible things. So, it seems like tokenized equities are going to happen, going to happen here or who's going to have access to them. now because I think it's really really important. A lot of countries that took

[06:00] these very rigid stances are backing off now. And I think look in fairness to them, we've seen that before. Like in 2001 when Napster came around, the existence and they they were successful in doing that. And then eventually all

[06:13] the companies backed off because they realized the technology was overwhelming partisan case, the civil case. So, I think that's what we're seeing there. is fascinating. So, if you think about kind of the value stack of a company,

[06:26] companies that it's very very challenging for the average person to And so what we've seen a lot of is tokenized funds, tokenized venture capital funds. And that's that's wonderful, that's great. But when I hear

[06:39] the term democratization of finance, that's not exactly it for me. What true democratization of of capital is is the the allowing people to make their own choices about which companies they're betting on pre-IPO. And so you have

[06:52] pre-IPO perps which Coinbase is doing and others are doing. So that provides that angle. Then you've got post IPO. And again, for most American is not is not challenging. You open up a Schwab account, but there's a lot of

[07:07] people around this world and we know this because the US equity tokenization numbers are growing at the rate of stable coins. So we know we have the proof. There is a rabid desire for access to US capital markets. This is a

[07:20] good thing for everyone. It's especially good thing for us as Americans. Why do we not want everyone in the world with a with a smartphone to be able to buy cheaply and simply access to the economic miracle that is the US capital

[07:35] market. Why do we not want Why we not actively pushing people betting their futures on the viability of our capital markets and country. That is a the the best I'm not a marketing guy, but that is the best marketing for the US the

[07:50] >> That's also how we can grow our way out of our problems. I mean but listen, it's this. We know that stable coin issuers are some of the largest holders of we're exporting hyper dollarization to the world through stable coins. Places

[08:06] that people could not access dollars now they can do it simply, fast, cheap, easily in their wallet. So when you think about how broadly that >> Yes. >> Right.

[08:18] everybody's like I mean I've heard I've heard talk of dedollarization for >> And and I don't dismiss it because it is true. We're starting to see more oil I've seen this these attempts many many years. But eventually that could be

[08:33] successful. And so when you when you this when when your product when people things you want to do is make your product easier for people to buy. And so we should be making it easier for people to hold the US dollar. Stable coins

[08:48] easier for people to invest in vibrant accomplish that. >> So markets exchanges for a very very long time. What do you make of the market

[09:00] broadly right now? The price of Bitcoin, the situation with all coins. I I I everything all the time. It's kind of my life view and I I think >> I think we've been bottoming since February. But I would love your take.

[09:14] you said very very very long. I didn't like that last very, but um but we'll go past that. Um so what I what I love what I love is irrational pessimism. I because that that I'm always a nervous bottom. I I I I never want to pick the

[09:30] brilliant investors who told me flat out you can never predict the top or bottom. So don't even try. Um and so I I hate trying to do that except when I see um, irrational pessimism. And for me, irrational pessimism's fairly simple.

[09:44] It's it's pessimism in the absence of every any evidence to be pessimistic. If I just look at where we are now structurally, internationally, from 6 months ago, there is nothing structurally worse about this asset

[09:56] class. And arguably, lots of things are structurally better. So, the fact that makes me very happy cuz I don't want to try to bottom tick. I'd rather dollar >> You made a really interesting point when we were talking before we were on camera

[10:10] pessimism to apathy. period and happens every time of time-based capitulation rather than capitulating because price is low. >> Time-based capitulation, I really like

[10:23] is, you know, we we've talked we've talked about this. This is talked about don't think it's the majority, even close to majority of crypto investors who are sort of trend chasing, so they've moved on to, uh, you know, some

[10:36] penny stocks and and, uh, AI stocks. Uh, that's fine. That that that element, by They exist in junk bonds, pennies, whatever. Um, they'll come back cater to them. What Coinbase doesn't cater to that that market. Um, so I'm

[10:50] in some ways is good because I do think in some in some sense crypto we could do well by maybe taking up less air. Um, you know, we still are asset class that represents less than 5% of global US equities. Maybe we shouldn't be on the

[11:03] think AI to some degree is getting that is getting those arrows flung at them it means when you're on the front page of of every media every day. So, it's not the worst thing in the world for us to quietly build, and that's what most

[11:16] >> It's funny, I feel feel like AI is getting the same contentious arguments boiling the oceans, the data centers, you know, like New York literally banned greenage, you know, Bitcoin mining on Seneca Lake, and then they uh, I ahead

[11:30] and did a pause on data centers in the exact same way. It's the cyclical narratives for a new technology. >> I have a lot of buddies deep in AI and quote. Remember, welcome to the party, pal. Like this is so unfortunately when

[11:43] that, you know, you get shots taken at it. The good news is I think they'll through to push back against some of the more there were some valid issues with AI. I'm not dismissing all of it. But a lot of the stuff particularly

[11:58] doesn't just disappear, right? It just flows through a system to cool it and then it goes back to where it came from. A lot of this stuff is just kind of silly. And I think they saw the crypto playbook of how to be like thoughtful

[12:10] about it and it just takes time cuz cuz the the counter the silly counter narrative is easy for people to grasp and it takes hold. And you can't just rush in with facts. People don't want to be dissuaded with

[12:22] take time. >> I thought you were going to say yippee ki-yay. >> [laughter] >> Who's a high-class establishment? >> Yeah, I know we got yeah, two two and a

[12:35] half-ish minutes left. I I have to ask you one of the biggest stories last week Trump social selling you know, millisecond early access for 100,000 bucks a month to high-frequency traders. I think it's reignited the

[12:48] >> around insider trading what that is which I think is also been compounded by wild west. >> Okay. So so I'm not trying to hedge my was around the last time we had a national conversation about the impact

[13:02] fairness. That was when the book Flash Boys came out. And and people just kind of learned about this this this this thing called low latency trading. So technology, you have to have a national conversation about what that means. And

[13:16] I think now with everything from like mention markets to 24/7 trading to nano latency atomic latency, it's probably maybe time to have a conversation. So Swift had said, "I'm going to start selling time bifurcated access to my

[13:31] "Oh, but a Taylor Swift tweet can move So, so maybe it's time that we had a conversation about this because now cuz 10 years ago someone writing something on their phone could not move markets.

[13:46] Now it can. So, maybe this is a good way to open up that conversation. it say you got a Bloomberg terminal or you pay tens of thousands of dollars for Bloomberg terminal terminal is faster news.

[13:58] >> Exchanges bifurcate data. Jane Street gets better access than you or me. And for that. They provide liquidity. They provide a value-added service. So, if intuitively understand. If you go to a store and spend $10,000 and you get a

[14:10] discount, you can't expect it if you spend five. Right? We understand that. So, I think it's just time to have this conversation. What's final thoughts? >> Just keep it doing what you're doing,

[14:24] man, cuz I think a big thing we need to do is sober, thoughtful, intelligent, better than anyone. >> Well, I appreciate that, John. It's a pleasure to have you here out here at the Audi Summit. Absolutely beautiful.

[14:37] Clarity Act. The question is whether we're going to actually stumble and fall on our faces or we're going to get this thing done. Looking forward to seeing what happens with that and we'll dig into that more obviously on the next

[14:50] episode of the Daily Wolf tomorrow. Peace.