0:00

With Bitcoin ETFs now

0:02

active, you might be feeling slightly

0:04

sheepish to ask what exactly

0:06

is a Bitcoin ETF?

0:08

No need for you to feel sheepish. We're

0:10

going to ask the question for you as we welcome

0:13

Patrick Doherty to the show. A

0:15

teacher of digital assets at Cornell

0:17

Law School, Mr. Doherty has contributed

0:20

several books on securities regulation

0:22

and new financial products. He was

0:24

with the SEC during the Reagan Bush

0:26

years and helped craft regulations,

0:28

which are used today to sell tokens

0:30

and compliance with US securities

0:32

law. Asking questions sheepishly

0:35

doesn't make you a sheep, just an inquisitive

0:38

person. So join the herd at the

0:40

Republic of Bad Cryptopia as

0:42

we discover everything you wanted to know

0:44

about Bitcoin ETFs, but

0:46

we're afraid to ask on episode number

0:49

710. Of

0:52

the Bad Crypto Podcast 54310.

1:00

It's insane. Who's

1:02

bad? And.

1:24

I am feeling she is

1:27

telling me how to vote.

1:31

Man. Are you. Are you too scared to ask?

1:33

Man, I'm too afraid to

1:35

question authority.

1:38

Hey.

1:39

Very good. Well, welcome to episode

1:41

number 710 of the Bad

1:43

Crypto Podcast. We got a good one today, folks.

1:46

We're talking about Bitcoin ETFs and all

1:48

the things around that thing that you might not know

1:50

about.

1:50

And we're going to make it really

1:52

sexy because Bitcoin ETFs

1:55

can be you know this whenever

1:57

you talk about financial instruments it can be

1:59

really boring. But Patrick is

2:01

not boring. And we

2:03

are super sexy. So all the questions

2:06

will be asked with more

2:08

male music going in the

2:10

background.

2:12

Patrick Doherty.

2:14

Oh, yeah. Oh, and stay tuned on the other

2:16

side because all of the crypto bull

2:18

dragons you guys bought them, they're gone. You

2:20

own them. 24 of them are now

2:22

in the firm hands

2:24

of those who own a crypto bull dragon.

2:27

And we're going to announce when

2:29

you're going to be able to join us. Only those

2:31

24 are going to be able to join us for

2:33

a special two hour

2:36

meeting with myself. Sir. Lord

2:38

Travis are going to be there. So we're going to share that with

2:40

you on the other end of this interview

2:42

that happens to be coming up well

2:45

right now ETFs

2:48

ETFs ETFs Bitcoin spot.

2:50

It's all the rage right now. Of course

2:52

we've covered this in the form of the

2:54

latest news on our show. But

2:56

what does it all mean.

2:59

And here with us today to help break

3:01

it down we've got an Irishman. His

3:03

name is Patrick Doherty. Yes.

3:05

And he is. He conceived

3:07

and directs the digital assets practice

3:10

of Foley and Lardner LLP,

3:12

based in Chicago. He also teaches digital

3:14

assets at Cornell Law

3:16

School. He's got a whole litany

3:19

of things that he's done, including

3:21

working for the SEC during

3:23

the Reagan Bush years, all those years

3:25

ago. And he's got a lot to say

3:27

about what these ETFs might

3:29

possibly mean for the future of

3:32

crypto, Bitcoin, our economy

3:34

and blockchain in general.

3:36

Patrick, welcome to the Bad Crypto

3:38

podcast.

3:40

Thanks for having me Joel. Yeah,

3:42

Travis as.

3:43

Well. And other guy Travis to

3:45

you guy over here.

3:45

This is me. Yeah, yeah.

3:46

Don't forget the other guy. Um, just so we

3:49

have a firm foundation to go

3:51

on so people understand the the credibility

3:54

of the thoughts you're going to share, the words

3:56

you're going to say, and perhaps the jokes

3:58

that you'll make with us along the way. Uh,

4:00

go ahead and fill in. Put a little bit more

4:03

meat on the bones of your bio for

4:05

me.

4:05

Yeah. Well, um. As

4:09

you can tell if you're looking at this,

4:11

I've got some age. I'm well

4:13

into my 60s now, and for 40 years

4:16

I was a trad fi lawyer

4:19

doing IPOs,

4:21

takeovers, that sort of thing. I

4:23

still do that work, but about

4:25

seven years ago, I went down the rabbit

4:28

hole of crypto and have

4:30

been since then been advising

4:32

prop traders, exchanges,

4:36

token issuers, funds,

4:39

really everyone across the entire,

4:42

uh, ecosystem. Uh,

4:45

and I do some. Volunteer

4:48

work on the legislation that's

4:50

coursing through Congress right now. I

4:52

teach at Cornell, as you mentioned, and

4:54

I live in Chicago. I also

4:56

lecture at Northwestern

4:59

Law School in Chicago and several

5:01

others when I'm not at Cornell.

5:03

Is the law school in Evanston as well,

5:06

or is, uh, is it actually located?

5:08

No, it's it's it's it's downtown

5:10

in Cedarville. Mhm. Uh,

5:12

and uh, uh,

5:14

you know, along with the medical school, it's

5:17

near the hospital.

5:18

Got it. All right. Well, let's let's,

5:20

uh, let's start at a really high

5:23

level and then we can drill down

5:25

on this, these ETFs of course.

5:27

Long anticipated. Uh, turns

5:29

out the price of Bitcoin had the

5:31

anticipation built into the rumor.

5:34

The news hit Bitcoin's currently

5:36

down. Um, explain.

5:38

For those of us that

5:41

think on a 12 year old level

5:43

what these mean.

5:46

Oh, well, you can think of it as,

5:48

uh. Uh, a

5:51

pot of Bitcoin that's held,

5:53

you know, by a fund, by a sponsor.

5:56

Uh, the fund issues shares

5:59

in, in it, in it,

6:02

uh, and those shares trade on a stock

6:04

exchange in this case NYSE Arca.

6:07

So you buy and sell the shares which represent

6:09

interests in in Bitcoin

6:12

instead of owning Bitcoin directly

6:14

or in addition to that if you so

6:17

desire.

6:18

So we just assuming that they're holding it

6:20

then. Right. So we. So it seems like the

6:23

regulation it seems like they have to be holding

6:25

it. And so as the price of Bitcoin goes, the

6:27

more that they hold like the

6:29

like for example, to me it seems like wow,

6:31

what if MicroStrategy did a Bitcoin

6:33

ETF right. They have so

6:36

many bitcoin like that could be.

6:38

Well that's that that's that's a really good

6:41

point I mean these are

6:43

audited. So yeah

6:45

the Bitcoin's really there because

6:47

auditors confirm it. And

6:50

you're right MicroStrategy owns an awful

6:52

lot of Bitcoin. It is kind

6:54

of sort of like an ETF.

6:56

It does have other business. It

6:58

doesn't only hold Bitcoin.

7:01

So it's not a pure play the

7:03

way these funds are. These funds are pure plays.

7:05

If you own shares

7:07

of a Bitcoin ETP

7:10

exchange traded product you

7:13

own an indirect indirect interest

7:15

in bitcoin and and nothing else.

7:17

Mhm. Uh. So

7:20

it is as if you held

7:22

the, uh, you

7:25

held the, the cash product itself.

7:27

So how do, um,

7:30

how are we assured via

7:32

these audits? We know that

7:34

audits are only as reliable as the

7:36

people who are auditing them, that

7:38

the same thing that's happened with the precious

7:40

metals market, uh, silver and gold

7:42

being traded heavily on paper

7:45

and thereby manipulating the price

7:47

of metals to be as low as

7:49

they are. How do we know that same thing

7:52

won't or perhaps can't

7:54

happen with the Bitcoin ETFs?

7:57

Well.

7:58

Smart question because you know that's

8:00

been a concern of the SEC

8:03

all along. Uh you

8:05

know these these have been proposed

8:08

now for more than ten years.

8:10

That's how long it took to get one through the

8:12

SEC. We can talk about

8:14

that too. But, uh,

8:16

how do we know it's not manipulated? We don't

8:18

know for sure, but there are surveillance

8:21

agreements between

8:23

the sponsors. Well,

8:26

between the listing exchange on the one hand

8:28

and, uh, the

8:30

CME on the other, which

8:32

is where the where the futures contracts

8:35

trade and those

8:37

surveillance agreements,

8:40

uh, you know, help detect

8:43

possible manipulation. Uh, is

8:45

it perfect? No. Is it

8:47

pretty good? Yeah. Probably is.

8:50

Um. Uh, all

8:53

I won't say. Oh, commodities. But many commodities

8:55

are susceptible to manipulation

8:58

because the cash markets

9:00

are very thinly regulated.

9:04

Um, so it is an

9:06

issue. It is a concern. And

9:08

but that's something that investors take

9:10

into account in making up their minds

9:12

whether they want to buy this or not. I

9:15

mean, if these are spelled out as risk factors

9:17

in the prospectus, you know, this

9:19

could be this product could be manipulated

9:21

or the underlying the underlying

9:24

market could be manipulated. And if it is,

9:27

you could suffer for that. So you take

9:29

your chances if you buy. Mm.

9:31

It does sound like the, the

9:33

potential for, you know, some

9:36

corruptions seems to be because it's so weird to

9:38

me, Patrick, about how,

9:40

you know, uh, Larry Fink of Blackrock

9:43

was like no big con. And then all of a sudden he's like,

9:45

oh my God, I'm a big believer in Bitcoin.

9:47

Yeah well Bitcoin like

9:49

what what is going what has

9:51

changed his mind. It's

9:54

weird to me.

9:55

There are a lot of new converts uh

9:57

in the trad fi

9:59

institutions right. The big asset managers,

10:02

the investment banks. Uh.

10:06

You know what changed their mind? I

10:08

don't know, but I know it's a big market.

10:11

Possibly the ability

10:13

to sell a lot of product

10:15

here has got to be a motivation for

10:17

some. Um.

10:20

Uh, the, uh,

10:23

you know, the the the chairman of,

10:25

uh, Morgan Stanley, I should say the

10:27

recently retired CEO

10:29

of Morgan Stanley, still on

10:32

the board, um, said,

10:35

uh, I think just last week that

10:37

he thinks that, um, you

10:40

know, Bitcoin has a place,

10:42

albeit a very small place. Those

10:44

are the words he used. Very

10:46

small place in the portfolio of

10:48

wealthy people. Um,

10:52

but that is highly speculative.

10:54

Um, uh, instrument

10:57

and, uh, needs to be understood

10:59

that way. Uh, so.

11:03

I'm not a finance guy. I don't give financial

11:05

advice, but I think a lot of asset

11:07

managers are saying something

11:10

like 1% of a portfolio

11:13

might be in crypto

11:15

assets and particularly Bitcoin.

11:17

Some say 1 to 5%.

11:20

Again, that's not advice from me.

11:23

I'm just saying that's what

11:25

they're saying on the street now. Um,

11:28

and then others say 0%. Vanguard

11:32

apparently has decided that they're not going

11:34

to allow their customers to buy

11:36

any of these Bitcoin. Uh,

11:39

exchange traded products. And so if you're a Vanguard

11:41

customer and you don't like it, you got

11:43

to open an account somewhere else.

11:45

I think they are too. I mean, at least I noticed

11:47

on X that people are very verbal. They're

11:49

like, okay, fine. I just tell

11:51

you, yeah, that's fine. I want us to be your customer.

11:53

You know, you don't want to sell it. I'll go to fidelity

11:56

or I'll go somewhere else. So,

11:59

um, there is an awful

12:01

lot of demand for this product

12:03

when when grayscale

12:06

proposed to list and

12:08

got denied and then sued. And

12:10

then one. That's a great story in

12:12

itself. But when they did that,

12:15

there were thousands of comment

12:17

letters to the SEC saying, please

12:19

approve this. That came

12:21

from people who really wanted to buy the

12:23

product. And the SEC wasn't

12:26

let them letting them buy it. Uh,

12:28

because the SEC is you basically

12:30

was in so many words,

12:33

we understand this better than you. We know

12:35

what's good for you better than you do.

12:37

And we don't think this is something

12:40

you should invest in. That's called merit regulation.

12:42

And they're not supposed to do that.

12:44

It's so nice that they're there to protect

12:46

us. Uh, you know, I mean, meanwhile,

12:48

they issue a, uh, a fake tweet

12:50

saying that the ETFs are approved, Bitcoin

12:53

goes up a thousand, and then they retracted

12:55

20 minutes later saying that that wasn't

12:58

an official tweet. And 90

13:00

million in Bitcoin were liquidated.

13:03

Yeah. We're supposed to trust that these people really

13:05

not only are interested in protecting

13:08

us, but are capable.

13:10

Well that that that was

13:12

uh, there's a federal investigation into

13:14

that, as you can imagine. And,

13:17

um. Congressional

13:19

leadership, uh, sent

13:22

sent letters to the FCC

13:24

the same day saying, what's

13:26

going on here? And, oh, by

13:28

the way, you demand,

13:31

uh, a great cybersecurity

13:34

from the list of companies who

13:37

whose stocks, uh, uh,

13:39

you oversee, whose stock

13:41

trading you oversee. But you can't

13:43

do it yourself. So,

13:46

um. It. I

13:48

mean, I don't know what happened there yet. I don't think any

13:50

of us know yet. It's under investigation.

13:53

But you're right, it

13:55

did, cause. Damage

13:58

in the market because

14:00

people transacted based on

14:02

bad information that,

14:05

it turns out, didn't really come from the SEC,

14:07

but it sure looked like it had.

14:10

Mm. So let me ask this. So how

14:12

do you think that these um

14:14

the Bitcoin ETF. How

14:17

do you think that that it's going to be overall

14:19

considering that you know Satoshi Nakamoto.

14:22

He doesn't he doesn't really want more

14:24

intermediary involvement from

14:26

big you know big thing. So it's

14:29

like a I don't know it's a paradox.

14:32

It is. Uh, you're

14:34

spot on, correct. Travis. I mean,

14:37

uh. It's ironic

14:40

that, uh,

14:43

the, uh, this

14:45

product which is going to lead, is leading,

14:48

I believe, into deeper retail,

14:51

uh, investment in the asset.

14:54

Is, uh, involves

14:57

all these centralized institutions.

15:00

I mean, Satoshi's idea was

15:02

peer to peer. You know, it was,

15:04

you know, I sell

15:06

Bitcoin to you. You sell it to

15:09

Joel using our,

15:11

you know, our handheld devices

15:13

and, you know, without any custodian

15:16

other than ourselves and

15:19

certainly without any,

15:22

uh, exchange

15:24

or investment

15:27

bank or brokerage fee firm

15:29

charging a commission, by the way. Uh,

15:32

so, yeah, I guess I need to

15:34

own a ledger or a trazer or

15:36

something like that. And I can buy

15:38

one for 50 bucks, a hundred bucks

15:40

to do it. But I shouldn't have

15:42

to pay, you know, an an

15:44

AUM fee to do that. So.

15:47

So that was his idea, right. And that

15:49

but that's not where we are now.

15:51

And the reason we are now is because

15:54

it's so incredibly convenient

15:57

to use

15:59

a stock broker. And

16:02

for the stock broker to be,

16:05

uh, a member of a stock exchange

16:07

where the shares trade.

16:10

And oh, by the way, notice this carefully.

16:12

The SEC is very involved in all of

16:14

that. So part

16:16

of the Satoshi's

16:19

vision was decentralised,

16:21

not just away from the

16:23

banking industry, but also away from

16:25

the government. Mm. And,

16:27

and so some people look at this

16:29

and they say, you know, this is a Trojan

16:31

horse. Uh, Chair Gensler

16:34

has brought us this

16:36

slew of ETFs, and

16:39

I'm not sure he really wanted to, but the

16:41

D.C. Circuit Court of Appeals basically

16:44

said you kind of sort of need to

16:46

do this.

16:47

Maybe part of the Trojan horse, though, to make it seem

16:49

like you don't really want to do this. We don't

16:51

really we don't want to do this. Right?

16:54

Right. But but notice the

16:56

SEC is going to regulate

16:58

these products. That's certainly

17:01

the case. So I mean he

17:03

wanted the power to regulate

17:05

crypto assets. Uh,

17:08

from Congress. They never gave it to

17:10

him. I mean, I think he claims it was given

17:12

to him in 1934.

17:15

But, you know, the reason Congress,

17:17

uh, kind of sort of disagrees with that. So,

17:21

um, he didn't hasn't gotten

17:23

it that way. They've been fighting it out in the courts.

17:26

And then meanwhile they introduced these products.

17:28

And there he is, I

17:30

should say. There they are. The agency is.

17:33

Regulating? Um,

17:37

probably. Well, I

17:39

don't know how big this is going to get, but this is

17:41

a big financial product that a lot

17:44

of retail and investors are

17:46

coming into, and that's all

17:48

SEC regulated. And that may

17:50

well be for the, you know, the good

17:53

that may be the best result I

17:55

don't know.

17:56

So not necessarily regulating crypto per

17:58

se. They're right. No they're not they're not. Yes.

18:00

Right. So it's like they're.

18:01

Regulating.

18:02

Some separation of state right.

18:03

That's right. They regulate the share trading

18:05

and they regulate the, the sponsors

18:08

who who bring

18:11

these products. Um,

18:13

I mean, the exchanges do that too, by

18:15

the way. I mean, it's not only the SEC,

18:17

there's some self regulation by the exchanges

18:20

and there's self regulation by the brokerage

18:22

community, because the brokers

18:24

and the investment banks who buy and sell this, they

18:26

all have supervision. They all have,

18:28

uh, regulatory responsibilities.

18:30

So, uh,

18:32

I'm not saying it's a bad thing, but

18:35

it is not what Satoshi

18:37

had in mind. How's that?

18:38

An ultimately not.

18:39

Decentralized. It's not decentralized.

18:42

We we always encourage people to use

18:44

exchanges as exchanges

18:46

and then take your take it off, put it in

18:48

a ledger or Trezor. This is like

18:50

one step beyond that. You

18:52

know, on an exchange, at least you

18:55

have access to the wallet. But they're custodial

18:57

here. You're not actually owning

19:00

Bitcoin. You can't send

19:02

somebody bitcoin if you're

19:05

the ETF.

19:06

That's exactly right. You own shares

19:08

in a trust that holds bitcoin.

19:11

You do not own bitcoin directly.

19:13

You have. The

19:16

economics of Bitcoin ownership

19:18

for the most part. I mean, Bitcoin doesn't,

19:20

um. Bitcoin.

19:22

You know there are no staking fees for Bitcoin.

19:25

It doesn't pay interest. But if there

19:27

were any distributions you would not get that.

19:30

Um, but it doesn't matter because they don't have it anyway.

19:33

Uh Bitcoin doesn't have it anyway. Um,

19:36

but uh, but

19:38

you're right, you have claim

19:40

against the trust. You

19:42

do not own bitcoin. And oh by

19:44

the way you can do it both ways. I mean

19:47

there's there's no law that says

19:49

having bought shares

19:52

in one of these ETFs

19:55

you cannot buy Bitcoin in

19:57

the cash market. You certainly can.

19:59

You can certainly go to

20:02

the crypto exchanges and

20:05

become customers there. Yes

20:07

they're being sued. I'm not going to get into

20:09

that. But um,

20:11

they're certainly still very much in business.

20:14

Um, and uh, you know,

20:17

one of them is, uh, a custodian

20:19

for about, you know, 8

20:21

or 10 of these products. So they're

20:23

making money that way, too, and

20:25

nothing wrong with that. But that, that,

20:28

that, um, uh, you

20:30

can own you can own Bitcoin in several different

20:32

ways. This is an additional

20:35

option. And by the way, you can also

20:37

say it's not for me. I don't want

20:40

it. You know, I uh, I,

20:42

you know, I, I, I, I think like

20:44

Warren Buffett I think it's worthless. It has

20:46

no value, you know, or

20:49

the chairman of Chase, Jamie Diamond, is worthless.

20:51

It says no value. Um,

20:55

and, um, uh, you

20:57

know, there's there's no mandatory

20:59

investments in America.

21:01

You know, you it

21:03

can be an all cash all day long, if that's what

21:05

you want.

21:06

So this mine, it seems to me it might make

21:08

more people aware of crypto realizing.

21:11

Oh, yes, an entry point into

21:13

it. It's it's finally been validated

21:15

in the eye of the SEC. So

21:18

now we're going to be more well, I want to ask this

21:20

because I was trying to you might've heard me.

21:22

I think you're right about that, Travis. I think

21:24

it will. It's it's

21:27

I don't mean to give it a bad connotation, but

21:29

it's kind of like a gateway drug. You know, if

21:31

you buy some shares of this, that

21:34

may lead to other involvement in the crypto

21:36

in.

21:36

This coin right here, man, I got some. Yeah.

21:38

He's mainlining it.

21:40

Mainline. Yes I want to ask about

21:42

this. So you know I don't know if you

21:44

know what the numbers are. I was over here frantically

21:46

typing to try to figure it out. So I know that

21:48

the global real estate market

21:50

is maybe somewhere 3 to

21:53

$400 trillion, right? Stock

21:55

markets. The numbers that I'm finding is somewhere

21:57

last year around 100 to

22:00

$200 trillion. So let's

22:02

just say for the sake of it all, it's $500

22:05

trillion are in those assets.

22:07

So are they saying 1% of that, which

22:09

would be 5 trillion should go

22:11

into Bitcoin. And if that's the

22:13

case, then Bitcoin is

22:15

is worth freaking $250,000.

22:18

There's, there's saying, uh,

22:21

that 1%

22:23

of your portfolio. Right.

22:25

So if everybody's got 1% of their portfolio.

22:28

Right, right, right. But but not for

22:30

all retail investors, for those

22:32

for whom it's suitable. Okay.

22:36

Uh, and and that's, you know, and

22:38

that's not everyone. Um,

22:41

uh, it's

22:43

well beyond the accredited investor

22:45

category, but,

22:48

you know, it's probably not suitable for everyone.

22:51

And, uh, you know,

22:54

1 to 5% is a is

22:56

a is a rule of thumb that you're starting

22:58

to hear. I think 5% is pretty

23:00

high, but that's but that's just

23:03

that's just me. Oh, unless,

23:05

by the way, you're a professional

23:07

trader or

23:10

you consider yourself very sophisticated

23:13

regarding crypto assets, and

23:16

there are many such people and

23:19

I have, um. Yeah.

23:22

So, uh, I think

23:24

for a novice

23:27

1 to 5% and probably on the low

23:29

end of that makes more sense. But

23:31

but, uh, but

23:34

if you're a fan and you follow

23:36

this carefully. Um,

23:40

and if you do, by the way, you're probably not just

23:42

interested in Bitcoin exchange traded

23:44

funds. You're probably all over the crypto sphere,

23:46

right? Um, and

23:49

those are not exchange traded funds yet.

23:52

You can't even get an Eath ETF yet.

23:55

Um, but I suspect that'll come

23:57

soon.

23:58

Well, whatever we think of Gary Gensler,

24:00

fortunately, there are some voices in

24:02

the SEC that are voices of reason.

24:04

One of them is a crypto mom, Hester Pierce,

24:07

former guest on this show.

24:09

And she has been spot on

24:11

about, uh, crypto, uh,

24:13

for the long haul here. And,

24:16

uh, you've suggested, I think, in

24:18

some of the writings that she should

24:20

be the, uh, chair of

24:22

the SEC, uh, in any administration,

24:25

but especially in a Republican administration.

24:27

Well, yeah, I think so. I don't think,

24:30

um. You

24:32

know I'm I'm not in Washington insider

24:35

but I don't think the Biden administration

24:37

is likely to pick or they like Gary Gensler

24:39

and and the direction he is going.

24:42

Well, they also like SBF

24:44

and FDX donate.

24:47

I didn't say they don't make errors. Jeffrey

24:49

Epstein and I didn't say they

24:51

don't make errors. Uh, yeah.

24:54

You know, I love

24:56

Commissioner Peirce. I think if she didn't

24:58

exist, we'd have to invent her. I

25:00

think no one in government understands

25:03

the digital assets industry better

25:05

than she does. No one cares more

25:07

about the limitations on federal power

25:10

than she does. And,

25:13

you know, she's been in that job for six years.

25:15

She's been right about it from the start.

25:18

You see this very clearly in her

25:20

frequent dissents from

25:22

SEC attempts to expand its

25:24

jurisdiction by making

25:26

unsupportable claims that are ultimately

25:30

fought about in court and rebuffed

25:32

by the courts. The courts have been.

25:35

Pushing back against the SEC's

25:37

claims. Um,

25:39

you see it most obviously in her dissents

25:42

to the SEC's decisions to

25:44

reject Bitcoin ETF applications.

25:48

Um, including one in which

25:50

I was involved as counsel to the applicant.

25:53

Um, but you need

25:55

to be living under a rock not to see

25:57

and hear her presence felt across the broad

26:00

expanse of the SEC's

26:02

war on crypto that Congress never

26:04

declared. The SEC declared it. And

26:07

and not just on crypto. That's what

26:09

this show is about. But she,

26:12

uh, you know, the SEC is also

26:14

undertaking to regulate commerce through

26:16

climate change disclosure rulemaking,

26:20

which is what, uh,

26:22

progressive politicians want to see.

26:25

But as far beyond the SEC

26:27

statutory mandate to protect investors,

26:30

she has been critical of that

26:32

initiative, too. Like

26:34

I said, she is very

26:37

focused on the limitations

26:39

on federal power. Uh,

26:41

that the agencies have

26:44

in the law is a national

26:46

treasure. And in

26:49

a in a Republican administration, she

26:51

ought to be chairman. And,

26:53

uh, by the way, that's not an endorsement of any

26:55

particular candidate.

26:56

No, no, that's an endorsement that we're taking.

26:59

No, I mean, I it's an endorsement

27:01

of her. Okay, but I'm

27:03

not endorsing anyone for president.

27:06

Okay. Uh, and,

27:08

uh, and, uh, and,

27:11

uh, uh, you

27:13

know, uh, I'm

27:15

not going there, but it would be one benefit

27:17

of a change of administration

27:19

in a libertarian direction. I am a libertarian.

27:22

I'll say that much. And she is too,

27:25

so I, uh. Uh,

27:28

you know, can't say enough good things about her.

27:30

And we would this industry

27:32

would be. Hurt

27:34

if she were not in the job she's

27:37

doing now. It's got to be tough

27:39

to be always in the minority

27:42

on these things. Almost always, almost

27:44

always. The chairman voted with her this time.

27:47

But, um. I'm

27:49

awfully glad that she is continued

27:51

in that role.

27:53

I want to ask. I want to ask you something about this,

27:55

because I did some research on some stuff

27:57

earlier today, and it was talking about

27:59

the tokenization of other

28:02

assets. Right. You start seeing more

28:04

tokenization of assets.

28:06

And it was one of the articles

28:08

that Joel deleted. But I thought it was interesting because

28:11

there's some cool stuff that's going on with these

28:13

things. And it's like I've always thought like security

28:16

traded tokens, right? Like instead

28:18

of stocks, like more of these things. Seems

28:20

like they're going to be tokenized over time.

28:22

And it seems like that this is one of

28:24

those first steps. The ETF is maybe one

28:26

of the more official first steps into

28:29

moving more towards tokenization

28:31

of more assets.

28:32

I think that's right. And I think

28:34

that's what, uh, institutional

28:37

investors and what the investment banks

28:40

think as well. Um,

28:43

they're talking about securities tokens. They're

28:45

talking about, you know, for

28:48

example, uh, it's just

28:50

the digitization of the financial

28:52

instrument. So,

28:55

I mean, the classic example, the classic

28:57

example is, is real estate,

28:59

you know, putting, you know, buying and selling

29:01

real estate in digital format,

29:04

uh, or ownership interest in real estate

29:06

in digital format, much

29:08

more liquid than the classic

29:10

way of doing it all on paper, um,

29:13

much more economical, much

29:16

quicker to trade and settle, for example.

29:19

But you can do this with common stocks too.

29:21

You can do it with bonds. There have been tokenized

29:23

bond offerings in Europe. Um,

29:26

and I expect those to come to America

29:29

soon. Uh, uh,

29:31

as well. It's part of.

29:35

I mean, this is internet money, right?

29:37

So part of internet

29:40

money includes tokenized stock

29:42

and tokenized bonds, um,

29:45

which the SEC would regulate

29:48

because those are securities. No one

29:50

doubts that stocks and bonds

29:52

are securities. No one fights over that.

29:54

We fight over crypto assets because

29:58

many of them look more like commodities

30:00

and securities to to us. Mhm.

30:02

But to some of us.

30:04

So how far behind.

30:06

It's actually magical

30:08

internet mining.

30:12

So how far behind are we then on

30:14

uh Ethereum ETFs. Because certainly

30:17

uh Ethereum is price is held

30:19

perhaps on the same rumor

30:21

that it's next.

30:24

Uh, yes.

30:26

There's at least one application

30:28

pending that I think comes due in

30:31

May. If I'm not wrong. It's not mine.

30:33

It's not my client. I'd love to do

30:35

one of these, but I haven't started

30:37

on one yet, and. And,

30:39

um. I think

30:42

it's although the chair

30:44

Gensler said, look, don't think that approving

30:46

the Bitcoin fund means we're going to approve

30:49

anything else. He

30:51

he did say that, but I think

30:53

they're going to be driven to do it because

30:55

the same reasoning that applies to

30:57

the Bitcoin fund probably

31:00

applies to to the ETH funds

31:02

as well. There are futures

31:04

markets that are regulated

31:07

by the CFTC and

31:09

the CME and other exchanges.

31:11

Well, it's necessarily because, you

31:13

know, crypto according to Gary,

31:15

uh, you know, there's all kinds of, uh, criminal

31:18

enterprises that are funded by. Yeah. And

31:20

that never happens with,

31:22

with cash or, you know, other

31:25

that just that doesn't happen at all. Yeah.

31:27

Yeah. Right. You know, I mean, I,

31:30

you know, $100

31:32

bills, you know, I don't know how many of

31:34

them have traces of cocaine, but it's a very

31:36

high point.

31:37

Oh my God. I saw a statistic on that the other

31:39

day. And I was like.

31:40

And I, and I take I take that

31:42

personally because I'm a descendant of Ben

31:44

Franklin, but uh, but

31:46

uh, but, uh, uh, look,

31:50

I don't mean to make light of the criminal

31:52

use of crypto

31:54

assets.

31:55

We'll do that for you. We'll we'll.

31:58

Hear. But but notice this. It's almost

32:00

always bitcoin. No one uses ether

32:02

that way. And

32:05

uh, so if you're concerned

32:07

about that

32:09

and and you're right to be somewhat

32:12

concerned about it. Um

32:14

it's really. Probably

32:17

not a big deal for ether.

32:20

Um, and it is something

32:22

that Gensler mentioned in his separate statement.

32:24

He said, you know, these it's these are not

32:26

this is not like oil. It's not like precious

32:29

metals or real uses for that.

32:31

The real use is for Bitcoin. He says,

32:33

you know, our, our criminal

32:35

uses, which is an

32:39

overstatement of, of the

32:41

I mean, I own Bitcoin and I'm not

32:43

a criminal so I'm just a

32:45

hodler, right. So there are plenty

32:47

of hodlers out there. Uh,

32:50

who don't do, uh,

32:53

anything inappropriate with their

32:55

Bitcoin holdings. Holdings?

32:57

That's good. I just want to say this. So I asked grok.

33:00

Joel, I asked grok, I said, what percentage of paper

33:02

money has traces of cocaine on it, and

33:04

it says it's been found. Studies have shown that up

33:06

to 90% of banknotes in circulation

33:09

in the US have found traces

33:11

of cocaine. That's a pretty high number. Imagine

33:14

all these bills passing around tiny amounts of the

33:16

white stuff. It's like a never ending party

33:18

for your wallet.

33:21

Right? So I guess we're supposed

33:23

to shut down all the banks because

33:25

they traffic in dollar bills,

33:27

right?

33:27

You stick those in a counter, and those little traces

33:30

of powder gets all over everything,

33:32

right?

33:32

I mean, again, that's making light of

33:34

a serious subject. There are things you

33:36

can do with crypto assets you cannot do

33:38

with money. For example, you can

33:40

send it very far, very fast

33:44

to an account that is, if

33:46

not anonymous, is at least pseudonymous.

33:50

And now

33:53

you can be found, though.

33:56

Um. Uh, I mean, there are

33:58

several companies that are very, very

34:00

good at tracking down, uh,

34:04

uh, the proceeds of,

34:06

uh, of ransomware. Uh,

34:09

very, very good at it. The

34:11

government itself is quite good at it.

34:14

Uh, so, uh,

34:17

yeah, the crime is committed, but you may not

34:19

get away with it. And,

34:22

uh.

34:22

Around this. So you were talking

34:24

about, you know, potentially an Ethereum

34:27

ETF. Does that mean that it's quite possible

34:29

down the road we could be having a Binance

34:31

ETF. There could be a Solana ETF

34:34

polka dot ETF.

34:35

I absolutely like

34:37

yes I think it's quite possible

34:40

that they if you take the top 20

34:42

tokens or so, uh,

34:44

and you and you omit the stablecoins

34:47

because, you know, why would

34:49

you make an ETF out of that then?

34:52

Um. Then,

34:54

uh, several of those could be could

34:56

come. Um, the

34:59

it helps. It might even be necessary

35:02

under current law, but it would certainly help

35:04

if they already traded in a regulated

35:07

futures market. And I think the

35:09

only two for that are Bitcoin and ether moment.

35:12

But there are futures markets

35:14

that are, uh, you

35:16

know, away from the regulated agencies,

35:20

away from the regulators as well. And

35:22

there are foreign exchanges

35:25

that that count. Um,

35:27

so I wouldn't say

35:30

that's impossible. Uh, there

35:32

could also be, uh, a

35:34

fund that holds multiple coins, you

35:36

know, some kind of diversified portfolio,

35:39

if you will, of,

35:42

uh, crypto assets.

35:43

Tokens. That's. Yeah.

35:44

Travel tokens.

35:45

Why not an NFT f

35:48

right?

35:49

So, uh, and I

35:51

know of at least one out there now, actually.

35:54

Um, and so I

35:56

don't think it trades on a major exchange yet,

35:58

but it certainly trades over-the-counter. Um,

36:01

so that could come to,

36:04

um. Uh, the other thing we'll see

36:06

is just more

36:08

fund development, private funds,

36:11

you know, um, uh, I

36:13

think we'll see more private funds and different

36:15

kinds of private funds because

36:19

of, because of

36:21

this thawing, uh, by

36:23

the SEC and the fund area.

36:26

And the SEC actually

36:28

doesn't regulate private funds very much.

36:31

Uh, it doesn't have the authority to

36:33

very much, uh,

36:35

so that you can be more creative there. Um.

36:39

Well, I think we have a better understanding

36:41

of what's going on now, Patrick, thanks

36:44

to you, I want to, uh. Uh, as

36:46

we wrap up here, ask you to

36:48

prognosticate just a little bit.

36:50

I know this is not financial advice.

36:52

We have the, uh, you know, these ETFs

36:54

are out there. Now, the Bitcoin halving is

36:56

upon us in April, right? Uh,

36:58

so I'm going to ask you a question. We ask many

37:01

guests and of course not holding you to

37:03

it, but what do you think are all

37:05

time high? If you are going

37:07

to be a guessing man is going to be

37:09

on this, uh, bull run.

37:12

On this bull run. Yeah.

37:13

24 to 25, 2024

37:16

to 2025. What do you think?

37:19

I don't have a view on that. I will not be surprised

37:22

if it tests the all time high

37:24

and. I

37:26

don't think about it much because.

37:30

But I view Bitcoin mainly

37:32

as insurance rather than

37:34

an investment. I view it as if

37:37

prices get very, very high in

37:39

Bitcoin. That means something

37:41

terrible has happened. Probably

37:44

that means that what's very.

37:45

Very high, I mean.

37:47

Well, you know, it's. $200,000

37:51

or more. You know, $1 million,

37:54

if that. If that happens.

37:56

That means we have

37:58

fiscal and monetary chaos

38:01

in the United States. In

38:03

my view, that's what it means. And I don't want

38:05

that to happen. Right. Because

38:07

I have a lot of dollars denominated

38:10

investments.

38:11

Yeah, I was I was watching a guy.

38:13

He was talking about the the overall price

38:15

of Bitcoin. He was like, dude,

38:17

you know, if you're talking about the total value of gold,

38:20

you know, it's trillions five,

38:22

seven, ten. I don't know what the number was because

38:24

Bitcoin's like at the time Bitcoin

38:26

was worth half half a trillion.

38:29

He was like this could go easily to 3

38:31

to 5 trillion. I mean if you start getting the right mechanisms

38:33

in it, that's true.

38:35

I think that's right. I think that's

38:37

like around 200,000. That's what happened

38:39

with exchange traded funds generally

38:41

I, I, I

38:44

was on teams that invented some of the earlier

38:46

exchange traded funds. And at the time

38:48

everyone said these are ridiculous. They're

38:50

never going to get any traction

38:53

against mutual funds. Why would anyone

38:55

buy an exchange rate? But now everyone

38:57

owns exchange traded funds. And

38:59

that was only 1520

39:01

years ago. So

39:03

yes, 3 trillion wouldn't

39:06

surprise me in the least. We were at 3

39:08

trillion, uh,

39:10

before Sam happened. Okay.

39:13

Uh, we were at 3 trillion, so

39:16

that wouldn't surprise me. Um,

39:19

but if it goes up by several magnitudes,

39:21

that's because of fiscal

39:23

irresponsibility and because

39:26

the United States has become a banana republic.

39:28

And I don't want that to happen.

39:30

Well, we've certainly seen signs of

39:32

it. Uh, yes. And

39:34

I think that's, uh, cause for concern

39:36

for everybody. I do want to ask you this.

39:39

You were with the SEC during the Reagan Bush.

39:41

Did you have any interactions with President

39:43

Reagan?

39:46

One time as

39:48

he was leaving office. Uh huh. Uh,

39:52

I remember it vividly. I

39:54

was just in an audience,

39:57

and we waved back and forth, and I

39:59

saw him, and I was never in the white House.

40:02

And, you know, I wish I'd had that opportunity,

40:05

but I viewed myself

40:07

as. You know, I was a

40:09

young lawyer in an important regulatory

40:12

agency, but I worked directly

40:14

for a man who was appointed by President

40:16

Reagan. But I wasn't appointed by him myself.

40:19

One degree of separation.

40:20

One degree of several. But I had just in. Immense

40:24

respect for him, and,

40:26

uh. And, uh, I miss

40:28

him.

40:29

Where, uh uh, where should people stalk you? What

40:31

website or social?

40:33

Oh. Oh, well, on

40:35

Twitter, uh, or X, I'm at

40:37

Doherty lawyer. That's a

40:39

at d a u g h

40:41

e r t y lawyer. Uh,

40:44

but I'm also on LinkedIn. I'm the Patrick

40:47

Doherty in Chicago. If

40:49

you go to Patrick Doherty in Chicago

40:52

and maybe you type in Cornell,

40:54

something like that, because I teach at Cornell Law

40:56

School. Uh, I post

40:58

a lot of material there, actually.

41:00

Excellent. Well, we will, uh, we'll definitely

41:02

link to that. We appreciate you coming on and sharing

41:04

with us today. It's been a very enlightening.

41:07

Thanks for having me, guys. This is an important

41:09

development. And, uh, so,

41:12

um, you know, I'm happy to spend the time

41:14

with you.

41:16

Thank you so much to Patrick Doherty. And you can

41:19

follow him on the Twitter x

41:21

at Doherty Lawyer. Make

41:23

sure to connect with him. Really smart dude,

41:25

doing some interesting things and

41:27

teaching the youngins over there at Cornell

41:29

Law School all about the digital

41:32

assets. And we saw, you know,

41:34

Bitcoin and the whole crypto market has

41:36

gone down. It's like $1.6

41:38

trillion right now, up from

41:40

down from 1.8 something. So,

41:43

you know, it looks like that ETF was actually

41:45

something where oh sell the news.

41:48

And um, but uh that's

41:50

the way it goes. The having is

41:52

coming up folks. We're going to be seeing that in

41:54

early May. So a lot of great

41:56

stuff happening. And it's just calm

41:58

before the storm. Kind of seems to me.

42:00

You have to be in the know

42:02

as the having approaches.

42:05

And uh, for those of you watching the video

42:07

version of the show, you'll

42:09

be able to follow along with the visuals here. The

42:11

crypto bull dragons are gone here

42:14

they all are. Uh, and each one

42:16

is a one of one that has an owner.

42:18

Might be bulls Aldrin. It might be the

42:20

bull market baron. It could be

42:22

opulent onyx. They are all

42:25

in the diamond hands of 24

42:27

people. And, uh, each one

42:29

of you is going to receive an airdrop

42:32

of this NFT.

42:33

Prospero Draconis,

42:36

this is.

42:37

What is this guy? Look at him. He's just

42:39

golden bitcoins everywhere.

42:41

So the whole thought of this is, you

42:44

know, let's create some fun amulet

42:46

stuff of power for this next

42:48

bull run. Right. This is the year of the Dragon.

42:50

It's the crypto bull run is up here for the next

42:52

18 months or so in theory. And

42:55

so hopefully, if you possess this,

42:57

then, uh, the the crypto

42:59

gods will shine down upon thee.

43:01

So along with this NFT

43:03

that we're going to drop to the 24 holders,

43:05

uh, when you click on your

43:08

NFT, if you are a holder, you'll

43:10

see a place in there, uh, which

43:12

I can't from this account because this is the master

43:14

account. If you hold it, then you

43:16

will be able to see a link that says Bonus

43:19

content. And that bonus content

43:21

is only viewable through Bad Crypto

43:23

Dot uncut network. That's going to

43:25

give you a link to

43:27

the zoom. When are we doing the zoom?

43:30

It's going to happen at Travis came up

43:32

with this and it makes perfect sense. Since

43:34

it's 2024, it's going to happen on

43:36

two for 2024.

43:39

February 4th, 2024.

43:41

That is a Sunday. What time?

43:43

2 to 4 p.m.

43:46

Eastern Standard Time makes perfect sense,

43:48

except that I'm Atlantic Standard Time and

43:50

it's 3 to 5 for me. Uh,

43:52

and Travis.

43:53

Is it's 1 to.

43:54

3 for 1 to 3, but it

43:56

makes for a great copy. So on

43:58

February 4th, two for 2024,

44:00

from 2 to 4 eastern, a link

44:02

to the private zoom where you'll

44:04

be able to join us. And we're going to talk about all kinds

44:06

of stuff. It's going to be very spontaneous. We'll

44:08

answer your questions, we'll drop some knowledge

44:11

and, uh, we'll maybe give some

44:13

advice, not financial. Um,

44:16

it's going to be a good time. So I

44:18

want to be there. It's going to be great.

44:20

We're going to talk about Bitcoin ETFs

44:22

and the implications for decentralization.

44:25

You guys.

44:26

Know. And so this should be encouragement for

44:28

all of you. All that don't yet have

44:30

the bad crypto Nifty Club

44:33

NFT that gets you entry

44:35

into this whole world of free

44:37

airdrops. And a bonus

44:39

stuff that we're releasing. You go to

44:41

bad crypto dot uncut dot network,

44:43

and the last NFT on

44:45

there is the first one we created. It is

44:48

the spinny bad Crypto Nifty

44:50

Club card. Um, you

44:52

can pay for it with a credit card if you don't

44:54

want to, you know, pay Ethereum or

44:56

use gas. And right

44:58

now it is $4.43.

45:01

It's pegged to, I think, 0.002

45:03

ETH. And once you have this in your wallet,

45:06

it's yours. You'll start getting airdrops

45:08

as we create cool stuff and

45:10

your world will open to new bad

45:12

opportunities.

45:14

There you go, there you go. And we're grateful

45:16

for you guys for tuning in to the show. Uh,

45:18

we're extra grateful for the 24 that want to be

45:20

a part of the little mastermind group. All

45:22

the rest of you guys do. Not nearly as cool, but that's

45:24

okay. You can become cooler.

45:26

Uh, because all you really need to do is

45:29

to. What is it? What do they need to do.

45:31

Buy the NFT? Oh, no, not that one.

45:33

That will make them cooler, though, if they own

45:35

the bad Crypto Club NFT.

45:37

You don't have the NFT. What you can do instead

45:39

is just stay back.

45:41

Yeah. That's all you got to do. Who's

45:58

bad. The

46:00

Bad Crypto Podcast is a production of Bad

46:02

Crypto LLC. The content

46:04

of the show, the videos and the website

46:06

is provided for educational, informational

46:08

and entertainment purposes only. It's not

46:11

intended to be and does not constitute

46:13

financial investment or trading

46:15

advice of any kind. You shouldn't make

46:17

any decisions as to finances, investing,

46:19

trading or anything else based on this information

46:22

without undertaking independent due

46:24

diligence and consultation with a professional

46:26

financial advisor. Please understand

46:28

that the trading of bitcoins and alternative

46:31

cryptocurrencies have potential risks

46:33

involved. Anyone wishing to invest in

46:35

any of the currencies or tokens mentioned on

46:37

this podcast should first seek their own

46:39

independent, professional financial advisor.

46:43

All you gotta do is to

46:45

stay bad and buy

46:48

a NFT. You won't

46:50

be sad then.

46:52

Wow.

46:55

Who did that? All I want to do is have some fun.

46:57

That. What was that.

46:58

Song? Crow?

46:59

Sheryl Crow, eat some, eat crow. Sheryl

47:02

just busted you out there.

47:04

That was by Joel.

47:05

No, that song would have been a

47:07

huge hit for us. Why are you stealing our melodies,

47:09

Sheryl Crow?

47:12

That's not.

47:12

Nice. Don't do that.

47:14

For future melodies that we're going to come up with in our heads

47:17

years down the road.

47:18

That's right.

47:28

Come, lend me your ears.

47:30

Girls and boys. Bout

47:32

those magic little kernels

47:35

of joy. Versatile

47:38

in the kitchen. Every day

47:40

I'm wishing for that plant that we

47:42

love so much more than soy.

47:45

Yes, it's corn

47:47

syrup or. Boil.

47:50

Grinder. Pop it. Grilled

47:52

or boiled? Yes.

47:55

It's. Need

47:57

it today. It'll

47:59

remind you.

48:01

On down the way.