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Before we get into the episode, a quick reminder that the last trade is for informational and entertainment purposes only and nothing should be construed as investment or legal advice. Now for a word from on RAMP on RAMP is a Bitcoin asset management platform built on multi institution custody. We serve high net worth individuals, institutional investors and financial intermediaries with the best in class suite of products which include multi institution custody, a spot Bitcoin fund, Onram Wealth for Rias and private wealth services for high net worth individuals. Leveraging our partnership with Bit Go and other industry leaders, Onram's Multi Institution Custody is a first of its kind institutional grade vault requiring two of three institutions at any point in time to sign once a client's unique permissions have been met. Our multi institution vaults utilize cold storage, key signing and authentication at the direction of the client to maximize security for client assets. This pioneering approach to custody is the foundation of On Ramp's financial products which reduce counterparty risk associated with trusting a single institution. To learn more about how On Ramp can help you secure a new or existing Bitcoin position, please visit our website at on rampbitcoin.com, where you can schedule a consultation and connect directly with our team. What you're telling me is that music is about to stop, and we're going to be left holding the biggest bag of odorous excrement ever assembled in the history of doctors 1974198792972000. And whatever we want to call this. It's all just the same thing over and over. We can't help ourselves. I say when we. Sell hey, I say when we sell. I've always been deeply opposed to crypto, Bitcoin, etcetera. You pointed out the only true use case for it as criminals, drug traffickers, anti money loaning, tax avoidance. And that is a use case because it is somewhat anonymous, not fully and because you can move money instantaneously and because it doesn't go through as you mentioned, all these systems have built up over many years. Know your customer sanctions O FAC. It's didn't get bypass all of that. I if I was the governments, I'd close it down. Let's close it down, gentlemen. I don't even know why we're doing this podcast, Jamie said. We should just close it down. Wrap it up. We'll just, we'll tell. We'll tell one of the developers to flip a switch and turn it off. It's that easy. The government can do it. You just need the government to do it. Crazy week. We're joined by Lee Bratcher from the Texas Blockchain Council. Very apartment timing here for us to have Lee on the show considering everything that's going on over the last week. Last week we had the Treasury Department write a letter of suggestions to the Senate House and the banking the Senate Financial and the House Banking Committees obviously suggesting suggesting some regulations they think should be pushed through on on Bitcoin and other crypto assets. Really honing in on validators which could be read as full nodes and mining pools trying to get them to do a lot of reporting and financial be considered financial institutions that would have to report and follow the rules of the Bank Secrecy Act. That was shortly followed up by this Senate Banking Committee meeting, this hearing yesterday with bank executives in which Jamie Dimon said that we should shut it down. And so it seems like the regulatory pressure is on despite the fact that we have an imminent ETF approval, which everybody's bullish about. But I think these regulatory concerns are something that we should be focusing in on and that is something lead that you do on a day-to-day basis. So before we jump into the particulars of these subjects, I think it would be good for the audience just to introduce yourself what you guys are doing at the Blockchain Council and why you decided to start to Blockchain Council in the first place. Yeah, Marty, thanks for having me on, guys. It's a, it's an honor to have a conversation. So the TBC was started about four years ago. I was a political science professor. My research area is property rights and I was up at the Army War College. I was also an Army Reserve officer at the time. I guess I still am in the reserves and was really studying how when people are secure in their property rights, they're less prone to be involved in Interstate conflict or civil wars or anything of that nature. So I I actually read the white paper while I was up there and thought, hey, there's such a thing as digital property rights. It can be used to secure physical property rights in the world, real world. And from that point on, I I was hooked, right? So I started to organize folks from a policy and regulatory perspective sort of in a grassroots way in 2019 and started the Texas Blockchain Council late in that year because I I foresaw, and it's always been the case I think that because of this revolution, this technological revolution deals with money, it was always going to be fraught. And the the clip that you guys played at the at the outset of the show with Jamie Dimon exemplifies that perfectly, right. He's, you know, JP Morgan is at at this point almost an extension of the federal government. They're tied so much at the hip. So I first saw a a big need and there's a lot of people out there that are builders, that are engineers, software engineers that are, you know, finance professionals that we're going to be building amazing products. But my skill set had to do with policy and politics. And so I wanted to support in that way by trying to clear some obstacles for adoption and just for for everyday companies that operate in the US And so we try to do that here in Texas and create model policy for the other 49 states. If a state like Texas passes legislation, other states pay attention because we're 110th of the US population and and the US economy. So we certainly support what Wyoming does, but it helps to have a state the size of Texas to partner with Wyoming on that kind of policy legislation. Yeah, it's extremely important that's that was a big part of our discussion last week is this jurisdictional arbitrage between states, Texas and Wyoming where probably the two most talked about states in this regard. And so just building on that conversation, like what power do you see the states having in this battle to preserve individuals rights to access and use Bitcoin? Yeah. So there's a couple things that we've done in the past. One is Uniform Commercial Code adjustments, which is essentially business law. And in the 87th session which was in 2021, we passed a bill that said that you can perfect your security interests in a digital asset through possession of the private keys or if it's a multi sig, you know the the majority of the keys. And so that allows people to put use, use Bitcoin and lending arrangements and do so. Of course you could do it before contractually but now it's the default status that you perfected your security interest in that Bitcoin as collateral simply through the possession of the of the keys, which is an important concept. We also have put some pressure on digital asset service providers like exchanges. This past session of course post FTX we drafted the first of its kind proof of reserves legislation that is currently in effect as of September 1st of this year that requires all digital asset service providers in order to retain their money transmission license they have to file quarterly reports with the Texas Department of Banking and the quarterly reports are self attestations. The annual is a third party attestation. Of course we all know that real time proof of reserves audits are the only true. Well I'll I'll say that differently, real time is is perfection of proof of reserves, right. So quarterly proof of reserves is not perfect, but it is a tool in the tool belt if you add it to traditional audit and assurance practices. And so you know there's some things that states cannot do, right? The states can't deem an asset a commodity or security. So thankfully Bitcoin's already been deemed A commodity and and the other thing that we can't do is affect taxation of federal taxation of of various assets. So you know, we can't change the rules around the minimus exemptions, which I think are very important to one day have and we can't change the capital gains legislation. Do you think you could have had as much impact? Because I feel like you'd probably agree there's been a lot of impact in the policy in Texas, but in a different state. If you started Scratch 2019 and do you think any other state would have been apartment to be able to recognize and like, what do you what do you think is the main difference between Texas and another state if you had to pick the next friendliest or culture aligned with getting some of these concepts? You know, I don't. I think it's there's a lot of luck in that, right. So the the Texas Blockchain Council would have been a failure if I tried to start a two years before or two years after. So timing is everything. We got lucky in that sense. Nearly 50% of all US Bitcoin mining is in Texas. That's about 20% of global hash rate. And so that was a huge help to us because the miners did and still do need a lot of regulatory help. And so we, we work very closely with the Bitcoin mining committee industry and they represent between 60 and 70% of total revenue for the TBC. So to be able to have influence, you have to have either numbers, money or passion, right. So Mothers Against Drunk Driving, they have passion and and numbers, but they don't have any money. You know, the defense industrial complex, they have money but no numbers and passion. So to influence policy and politics, you have to have some combination of those 3. And so we've got a little bit of all three. Of course, we don't have as much of any of the three as we would like, but I think the passion, the numbers are going to be there. But without, you know, membership dues from corporate members, it would have been really tough. And I think other states just didn't have the, the necessary backbone of companies that were there to be able to to help you know from that perspective, from the from the lobbying perspective. Yeah, it's awesome to see. It's a derivative of like Bitcoin success of it's all about incentives and in lining incentives. And there's a nice dance happening right now between politics or policy, miners and revenue. And ideally you get more entrenchment. We talked about this earlier in the week about it's kind of a crude analogy but you know the the whole term of you may not care about the war but the war cares about you. I've historically never cared about politics. But now realizing the, you know our our business is going to be defined by it ultimately over time and we talked about it last podcast about the regulatory climate, It's like you better care about and figure out ways that you can start to have exercise impact. So it's it's really recognized the past probably 6 to 12 months the work you guys have been doing and along with the summit that you hosted, it was cool to see it first hand. Yeah the the summit was a good event for us for a lot of reasons of course the presidential candidates that were there but you know those events are are very challenging to put on So it hats it goes off to Bitcoin magazine when they put on a a you know 20,000 person event. Those are not easy of course. Ours was about 1300, so much smaller and and I should say just for for the people in the audience who are kind of maybe they're Bitcoin mining in Georgia or another state. The data that I just quoted was from the Miner mag. Of course if you look at the foundry data from from Pools, Texas is more like 3435% of US mining and about 16% of global. So it does depend on on which data you're using. And you know the Miner mag I found to have pretty comprehensive data. Foundry puts out great data too, but sometimes, you know some miners use different pools and it's hard to really get a a a accurate number. I think it's a good jumping off point to the discuss mining in Texas. Obviously post China mining ban in 2021, a lot of that hash rate migrated here is a large concentration of hash rate in the state of Texas. And this has been a rapid sort of development over the last two years particularly. And so that means that the state of Texas and more specifically ERCOT needs to get comfortable with miners, what they're doing, how they can participate and demand response programs. From your view, what is this sort of marriage of Bitcoin mining in the state of Texas? How's that gone over the last two years? Good question. It it's not gone. I would say that it's it's gone there's there's been seasons of of good and bad right. So the potential for Bitcoin mining to be a a load that helps to shave off the peaks and the and bring up the valleys of the duck curve of like our energy consumption patterns is really strong and it's very much real The and by that I mean curtailing during periods of high prices, high demand and being on overnight and during times of low demand. And there's also geographic component to that too. Like if you're on the opposite side of grid congestion, then you're you're helping to balance out the grid by consuming power in places that there's too much of it and not enough consumers of power like in West TX or certain parts of Central Texas. The the challenge comes with the speed at which Bitcoin miners can curtail. That's actually the biggest problem that we are facing within the ERCOT Large Flexible Load Task Force. Right now. Bitcoin miners can can curtail so fast that the grid, no grid anywhere in the world is built to really sustain that speed of curtailment. So we're we're trying to work with ERCOT now to figure out a way for for them to be able to handle that speed because once those protocols and and those revisions are are in place Bitcoin mining is essentially a tool the tool belt for ERCOT. The the miners are going to be, you know in SCED. They call it SCED. It's it's part of you know Ercot's ancillary services. It stands for security constrained economic dispatch And Ercot's going to know exactly the price point at which the miners were were will curtail and it's a little bit more complex than that. But the problem though is power settled at 15 minute intervals in ERCOT and it can be settled at 5 minute intervals if you're if you're in SCAD potentially right. So if you curtail in 2 minutes your entire load, that's 200 megawatts coming off the grid in 2 minutes or 100 megawatts or whatever. If you're if you're at Rockdale, it's several 100 megawatts. So that's a problem for the grid because they have to be prepared for that, you know, for the frequency of the grid to lose that much load. You know that could be 1% of all load in Texas coming off the grid. In fact if all the Bitcoin miners came off at the same time, which is is you know typically they don't come off usually in the exact same minute but within the same maybe 5 or 15 minute window. That could be 3 upwards of 3% of all power on the grid coming off in a very short amount of time which the the grid is not built for. So once that gets settled though, then you do have this asset that that works as a capacitor or almost like a demand side battery. ERCOT doesn't like it when I use that phrase demand side battery, but it's a it's a it's an easy way to conceptually think about it. Of course it's not a battery, but it's more of a capacitor to use up excess energy when there's no demand or limited demand, and to curtail when there's high demand. Yeah. I mean, it sounds like a good problem to have in the sense like this is just a technological evolution of it'll be out on how to like stagger the curtailing. But I think it'd be helpful just to give a quick elevator pitch on like I think most people don't know that Texas has its own grid. And then why the efficient, like the market is free here when it comes to energy power and why miners have found a home for that. I think that will help, and the help contextualize what you just described. Yeah, that's a good point because it is all about incentives, right. As Bitcoiners we we think in terms of incentives Austrian economics, right. That's kind of a been a passion of mine for many years and sort of the Hayek vonniesis way of looking at things in a free market. So the the ERCOT market is an energy only marketplace where power is is bought and sold in the deregulated parts of the grid and you know, your consumption of power. If you're a wholesale power consumer, of course consumers are shielded from this 'cause they buy retail contracts from retail electric providers and you know, they don't. They're not really subject to they have fixed prices, which means we have higher prices as consumers, but we don't have the fluctuation or the risk of getting, you know, hit with a huge bill during a high price time. So, but Bitcoin miners want to have those lower prices. So they take on, you know, power purchase agreements and energy contracts that allow them to be flexible, allow them to save money by getting that absolute bottom wholesale price, which means they have the risk of a spot, the spot price, the LMP price as they call it shooting up. But Bitcoin miners can curtail to avoid those prices. So it is a real time market and the price signals that are sent by by the grid is actually a really amazing thing because prices going up is a proxy for grid stress. It's it's a proxy for high demand and grid stress. So if the prices go up to $3000 per MW hour, then it's pretty clear that the grid is under stress and that it would be a good idea to turn curtail your operations. Yeah, and it's been fascinating to watch pretty close up on the Bitcoin mining side of things, the particularly the software that's been built. We have Foreman Mining, one of their team members, Mitch, right outside the studio here. In Austin and the Commons and what they've built from a farm management perspective is just a a software tool that takes that pricing data, feeds it to the mining firmware and then has automatic switches that if prices reach a certain level, you turn off a certain amount of miners and then the prices come down again, you turn the back on. On the technological side of things, it's things are advancing rather quickly on the mining side, but like you said, the miners in ERCOT have to meet and figure out a way to do this so that you don't disrupt the grid too much so you're not doing it too, too quickly. Absolutely, yeah. I'll throw in a plug for Foreman and all of the other companies developing software for the miners. That is absolutely critical because for Bitcoin miners to be able to be in SCED in this security constrained economic dispatch program, they need to have a lot of granularity and control and so that software is is crucial. Yeah, Lee, I so I just drove through West TX about a month ago and I saw a whole bunch of flares still out there. And you know, I that whole long journey, many hours of of of seeing that you can't help but just think about how much potential there still is in Texas. And even if Texas is already the the leader in embracing Bitcoin mining, I'm curious if you guys have done any analysis or have any projections about what you think. So if it's if Bitcoin mining's 3% of of demand today, do you guys have any expectations about what's possible for for Bitcoin mining in Texas so or in the country in general? Yeah. You know Marty will know more about the flare side than me. I just saw a graphic that estimated that there's about 180 megawatts of flare gas mining across the US It didn't specify how much of that is in Texas, although we all are aware of certain sites in Texas that are are flare gas mining. And then we worked on House Bill 591 this last session that clarified that you don't have to pay severance tax if you're selling gas for on site consumption at a data center. So if you if you redirect A flare to a generator to mine, you don't have to pay that severance tax. Just clarification in the tax code on that which was really kind of more of a signal to operator oil and gas operators that hey this is actually a really smart economic move and if it's you, but if it's the state, but if it's the environment, I mean it's a win, win, win across the board. So, but in regards to like where we can get on the on grid side, you know with the difficulty level and having coming up and difficulty just going through the roof, we always estimated that you know mining in Texas would probably cap out around 4000 megawatts which is immense. That's a huge amount of power and it's you know slightly higher than where we are now at about 2300 megawatts. I don't think it could go much higher than that. And I don't think, you know there's there's 30,000 megawatts of large flexible load interconnection request in the interconnection queue in ERCOT. The vast majority of those are, it's just people throwing mud against the wall to see what sticks, right. There's not capital for that. There's not, there's a lot of people that that apply for five different sites and it really runs that number up and it freaks people out. If I were at ERCOT, I'd be freaked out too. So getting a, getting the ability to clear out the interconnection queue and make and charging people for keeping their request in the queue is actually going to help us all in the long run. Because that means the real projects that have real capital will get to the the front of the line faster than just, you know, some landowner who's like, well, I've got a substation near my land, let me see if I could sell my land to a Bitcoin miner or a or a data center, you know, an AIGPU compute data center or something. So we've we've got to fix that. That's a huge problem that is causing major headaches across the state with ERCOT and with the oil and gas industry because Bitcoin miners are are clogging up the queue or oil and gas companies are clogging up the queue. It's it's not good for the the industry or the, you know, the environment. It creates a lot of noise to filter through. It sounds like. Yeah. I just overall this is it's funny to see how like in my head Bitcoin mining is still this kind of wildcatting you know find some unused energy go go put a shipping container full of miners there and and and you're in business But you know it's clear from what you're talking about that the bulk of it is really in this way more professionalized and and large scale integration with policy makers and and the the grid then then even I as a as a Bitcoin enthusiast spending all my time learning about Bitcoin I'm aware of I I so I guess it's really more about what Riot and companies like that are doing versus the shipping container you know capping A flare and and channeling that energy into you know mining Wildcat mining off grid. Yeah and to the off grid point Jesse to answer that I think what needs to happen is the maturation of the hydro cooled data centers especially in West TX it's simply too hot to do the air cooled stuff in the middle of summer. And those are the hydro cooled units are coming to market bit main as their S 21 series with a bunch of hydro cooled units in that they'll be releasing to market micro BT Similarly with their M 50s, I think they have hydro cooled units and then just creating the data centers that facilitate the, the racking of those hydro cooled units. But I think it's completely possible to mitigate a lot of that flare with this. It's just on the mining side, the infrastructure side, we need data centers that are able to take the heat, especially in the middle summer. I didn't know that was a limitation at all. That makes a ton of sense. Does that apply to other? I mean that probably applies to like El Salvador doing volcano mining, like are there are there other areas where that you know that having liquid cooled is gonna really help it's. Interesting. It's more more humid than El Salvador. So you can actually take that water from the air and do some things with it as well, I believe. And then and then there's different types of mining. We have Chris Alfano from 360 Mining. They're doing something pretty unique that we haven't described yet which is they essentially have access to natural gas pipelines and they're putting a mining operation behind those pipelines and mining Bitcoin when the price of gas is low. And then when the price of gas shoots up, they're able to stop mining and and sell that to market. So there's many different ways whether it's off grid flare mitigation, this behind the the meter sort of gas price arbitrage play or this on grid demand response that's out there. So there's many ways to implement mining operations in Texas, which is a beautiful thing. Yeah. And maybe taking it back to Jesse's point on like the professional lies nature of it and the consumer side is really fascinating. I think it ties in. There's an anecdote, I think it's with seven bill 1751 on this relation to the House and Senate. It'd be interesting, Lee to explain like that dynamic, but ultimately how it's counterintuitive and that the more miners or more Bitcoin hash rate that hits a market, how it can help in reducing the overall cost from the net consumer of electricity from the the versus like what happened in California effectively. I didn't really understand that until I think you broke it down on I think it was with Peter. But I think that's an important point to know that this is how we actually can regulate an efficient way, the use of energy versus it has to go somewhere at some point. Right, Yeah. 1751 was a targeted bill to remove Bitcoin mining from ancillary services likely pushed by traditional power users in Texas that were able to garner more that income from by or from selling their services to ERCOT in the day ahead ancillary services marketplace. And so if they could connect, if they could kick Bitcoin miners out of that, then they could bid higher because there'd be fewer bidders in the in the marketplace because you're bidding down and Ercot's taking the lowest bids. And so by having more Bitcoin mining and Bitcoin miners being such efficient curtailers, they're able to bid lower on that curve and save ERCOT money because ERCOT doesn't have to pay as much to procure those services. And the ratepayer, the the consumer saves money because ERCOT passes along those costs to everybody in their electricity bills. So you know there's a lot of data that's needed that we'll we'll go into. You know there's three different, there's three different components here as to how Bitcoin miners affect the price of energy. One is this day ahead market that we just described and we know pretty sure we're we're actually fairly confident that Bitcoin miners drive the price down because of the the 1751 wouldn't have existed had we not been so efficient at driving the price down in that market. The other is the simple demand, the demand and and supply equation, right. Bitcoin miners add demand and therefore they should necessarily increase price. So at the aggregate level, if you take nothing else on a simple demand supply, supply and demand curve, Bitcoin miners increase the price of electricity for consumers. So there's one positive and one negative and the third piece, which I think is a positive. And there, this is the part that we really need a lot of data on is Bitcoin miners are not consuming energy at the top of price pressure. So by being off at the highest points price points, we are actually lowering prices for consumers during certain periods. So by being there and consuming power, we're creating incentives for new generation. But then by turning off and not adding to price pressure when prices start to get high, you know those are the that's why it's a super complex. You know, you can't just say that Bitcoin mining increases prices or decreases prices. It's very nuanced. And so the jury's still out on on what it does for that. We do know that it's good for liability and good for smoothing out the energy consumption patterns of the grid. That's 100% verifiable and provable. But certainly we want to make sure that we're doing that in a in an effective way. So did that answer the question, Michael? I'm not sure if I really got at it. Yeah, I think the last part was just the overnight. I think the touching on when things go negative and that somebody has to consume that and that's where like Bitcoin miners can come in at 3:00 AM to be able to support. Yeah, that's the reason why you don't see new fossil fuel generation in really hardly anywhere. It's 'cause there's a $3030 per MW hour subsidy on renewables, and fossil fuel generators can't. They're losing money overnight, so they have to compete with a $30 MW subsidy for renewables and they also have to deal with negative prices overnight, which is a killer for them. One of the things I remember about and learning about the grid just a little bit is that the grid is really designed. Any grid is designed for a few hot days in August and you know that you've got these peaker plants that only come on for a tiny fraction of the time. Have you seen that you know Bitcoin mining and and this demand response capability has reduced the need for incremental peaker plants. Is that something that's flowing through to like the the CapEx requirements for you know the grid going forward it? It absolutely is. I mean we, it's hard to know necessarily. Hey, this peaker plant is getting less, It's being turned on less because of Bitcoin mining. That's really a difficult thing. But it is pretty clear that Bitcoin miners are competing with peaker plants at those those high prices, right? So peaker plants are are going to come on a couple of days in August, probably a few days in the winter. And Bitcoin miners are sort of lessening the need for that and therefore sort of competing in the marketplace against peaker plants. Whereas they're from the supply side, Bitcoin mining is from the demand side. Thanks for tuning in to The last trade. If you're enjoying the show and want to dive deeper, check us out at on rampbitcoin.com where you'll find a full suite of institutional grade research and analytics, including our recently published white paper, Bitcoin's Full Potential Valuation, and our new tool, the On Ramp Terminal. Now back to the show. On the subject of the $30 per MW subsidy that wind and solar get, you think this could lead to some systemic fragility due to disruption in free market operations. That's the one thing I worry about is the over the the focus on building out more wind and solar capacity that yes, at some points in the middle of the night it may drive prices negative. But if we have a situation like the winter storms that we've had in recent years become more normalized, like yes at times those prices are negative but the generation isn't always reliable when it gets cold out the the clouds are covering the sun and sometimes the the wind turbines can freeze up. So like that's a big problem I could see arising on the horizon. There's just this over focus on wind and solar generation at the detriment to more reliable generation in the form of nuclear, natural gas, coal, whatever it may be. And if the market is being manipulated in a way that is making those operations uneconomical, you could see a lot of these be decommissioned 'cause they can't keep the lights on due to these subsidies. Absolutely. There's really that's that. You hit the nail on the head. There's only three ways to get out of the situation. One is you remove the federal subsidies on wind and solar. That's probably not going to happen. Two is you subsidized reliable generation through chief financing or other things which Texas did in the last legislative session, provided some low interest financing for reliable generation to be built. And the third is you match you, you you bring in more flexible load, right. So the only those are the really the only three ways to to get out of the situation that we find ourselves in the Texas grid is overly saturated with with renewables when in solar. And I think the the two mechanisms that we're going to have to use is more flexible load that's green hydrogen, you know hydrogen electrolyzers, they're very flexible Bitcoin mining data centers and and other forms of industrial consumers that are flexible. And perhaps even aggregating consumer demand through like the Google, you know Nest products or other products that actually provide passes on some savings for consumers that are willing to change their energy consumption habits based upon the market. Maybe you get a notification on your phone like, hey, you'll save $3 today if you, you know, turn your electricity down by one or two degrees or something or your thermostat down. So yeah, leaning on those last two I think are the way we get out of this, but we're in a bad spot and it is a function of federal subsidies, Absolutely well-intentioned to be sure. But you know, that's the the road to hell is paved with good intention. So. Yeah, this is something I've been pining on for for some time, screaming into the abyss sometimes it seems, but I'm very happy to see that we're on the same page. Here we have. It's insane. In my mind, I just wrote a piece in the Bitcoin Times, their energy edition. I really dove into this. We have a perfect case study in Germany. They did this over the first two decades of the century and the results have been abysmal for them. And it just is extremely disconcerting as somebody lives in Texas to see Texas making similar mistakes. But I do have hopes that clear minds can prevail and people can recognize what's happening. We just need more people talking about it. Well, I think, I think that that keys on exactly what you're doing, Leah, like be curious on you're talking about intentions and motivations and incentives. It's like across the aisle you got you know Warren Vivek, RFK like what? What gives? I know you you shared a little thoughts but just like curious on their angles of like their in their stances to Bitcoin to digital assets and as recent as the clip this morning with like the you know banking JPMC and rat poison squared ask like what's your what what have you seen. I know, I think there was a letter that was written to you or part you were part in it, about Texas and our colleague. What have you seen in the motivations and intentions across, you know, politics in Texas and the US? Yeah, I'll start with Elizabeth Warren. I mean I think she's obviously the one that we see the most out there with her anti crypto army and you know she's got a, she's obviously brilliant, right. She's a brilliant elected official you know attorney. The problem that I've seen with her is that her staff she quite influential because her staff populates a lot of the executive agencies. So she's got a lot of former staffers that are in the White House, in the administration, in key positions. And she's able to set some of the narratives for other more centrist Democrats that are more interested in level headed policy and and job creation and you know economic development than they are with with virtue signaling and things like that. And and I do think that, you know, she has benefited. She looks for areas that align with her sort of world view where she can become the, the biggest mouthpiece for that, you know for or against that thing, right. So if there had already been somebody who was the anti Bitcoin mining or anti digital asset senator, then she probably would have found some other. You know, thing to to latch onto. So she's she's got some she's winning political capital with certain groups. Although I think she's miscalculated here or maybe hasn't looked at the same polling data that I've looked at. She thinks there's a a winning issue here politically and there. It's also possible I've not looked at her donor you know open open records donor reports of who's donating to her. But I'm fairly sure since she's on Senate Banking that the, you know, the big systemically important banks and and and those companies in that orbit are highly important to her fundraising. So, you know, it's almost like Jamie Dimon was tripping over her, over himself to agree with her in that hearing. And I think those are the three primary reasons why she is the way that she is. She's she's she's incredibly smart and I think we shouldn't underestimate her. Chief Karen of the Nation, Elizabeth Warren, But I I think with that in mind, let's paint an optimistic future. So like with her posturing in mind, how would how do you think is the best way to counter that? What narrative should Bitcoiners in the industry be running with to paint an optimistic future of an America that Braces embraces Bitcoin? Yeah, the the easiest issue that I think we're going to find is the Bitcoin being the antithesis to a central bank digital currency. That issue pulls extremely well in our favor, right. So and we know that it is, but most people don't yet connect that in their minds as two sides of, you know, the opposite sides of the coin. So she, she has been tacitly supportive of a central bank digital currency, which is not surprising because it gives more control, more granular control to the government and I think allows the government to surveil transactions more efficiently, Right, Michael, we were talking about very early in the show that part of the reason why, you know you have these travel rural dollar restrictions and that that dollar amount has been lower recently. You know we're around $600.00 where there's there's reporting on. It's very cumbersome for these different agencies to sift through all of that data. I mean there's the the the amount of transactions is is enormous especially when you to the low dollar transactions absolutely mind boggling how they could sort through that data. If that was on a blockchain and on a centrally controlled blockchain you know sort of a ACBDC if you will. It would be a lot easier for them to sift through look for patterns understand you know people's habits than it is today. And that's certainly disheartening and scary for for those of us that believe in liberty and freedom And so that's our easiest target right is to is to paint anybody who's anti Bitcoin as pro CBDC and Elizabeth Warren already wants to be pro CBC that's fine. That is that issue polls really bad pulls like 95% and to you know negative favorability with Republicans and and even close to 60% negative favorability with Democrats. So no chance for that issue. That's that's really where we want to hang our hat in, in the near term. In the long term, providing more data points around Bitcoin mining and its environmental potential to to, you know, soak up methane at landfills, to soak up flared gas, to soak up excess energy, to, to balance grids. You know, that's I think very clear to all of us. But until there are academics that are willing to set aside, you know, their, you know, the narrative, the media narrative and actually do some, some, you know, robust studies, we're going to have a hard time convincing Elizabeth Warren of that. I think so. I I think the low hanging fruit is the CBDC issue and the freedom issue. Yeah, I think that's a a very important like idea in in the circles we we discuss things and it's like it's already like a foregone conclusion that we're already surveilled. It's like the government can barely send the Stimi checks and how to do public private partnerships like how can they actually with the $600.00 that you referenced in the 10,000 like aggregate that info it's still disparate and the second you put it on like a wholesale blockchain that just instantly you're just turned off. Like Marty says one thing and then his his bank account is is done before he can end the pod. Like that's the kind of like Orwellian thing and the the sad part is I think it happens. It's just like if we can delay it as long as possible to get, you know, kind of awareness and all the things associated with Bitcoin is the is the game. Yeah, it's the CBDC conversation's really interesting 'cause you see a divergent of opinions at, well, Federal Reserve isn't technically federal, but you see Jerome Powell and other Federal Reserve Board members saying, I don't, we don't think ACBDC is worthwhile or something that we would want to implement. And then you have the Elizabeth Warrens of the world really pushing it. So there's not even real continuity in CBDC narrative at that level? It's it's funny because that's the, I was just having a discussion with a firm overseas that's quasi doing you see like bit go has go network upper loop where they do these consortiums within the digital asset like provider and they do net settlement and they want to do their own quasi like private you know currency. But this is what effectively at least the thesis is what happened. A signature. Because nobody talks about like SVB had their deal, Silvergate had their deal, but that was duration risk with the treasuries. Nobody talks about like they just like shot signature in the back at the end of on A. Sunday night. On a Sunday night in the, the comment I think thought in the the understanding is that they were developing the send network and that this was this like competitor between these banks to like net out over you know 24 hours, seven days a week. And so it's coming. It's just like to Marty's point, I think there's their private public partnership and then from a like federal level and they're still trying to like cut out the banks, you know and they're like wait. And so that's I think that infighting is actually helpful in our direction of like it just delays all of this is important. Yeah, our our natural allies in this fight are going to be regional banks. You know the systemically important banks are going to side with the the Fed and the federal government no matter what. But regional banks are getting screwed right now, right. So they're having to offer 4% interest on deposits whereas Bank of America and JP Morgan can offer point 1%. I mean you just can't run a business with that unfair finger on the scale. And so and also regional banks are are you know I think they're against central bank digital, they're certainly against fed to consumer like a retail CBDC 100% talk to people at various banking industry associations, they are against that. I think they are probably indifferent to intermediated CBDC that's just just fed to banks sort of like intrabank CBDC. We certainly still oppose that. It's not as Orwellian, but it's it's certainly a a step in the wrong direction. But we have some natural allies in regional banks, you know to fight against the CBDC and and I think you got also natural allies in sort of the liberty movement writ large that maybe doesn't understand Bitcoin, right. So as I mentioned earlier, some of the survey data, 48% of Texans under the age of 29 own digital assets. Only 6% of people over the age of 65 own them. And the favorability numbers are very similar, right? Young people are highly favorable. You know, a net plus 10 positive positive favorability score for Bitcoin across the board, but that's like net 30 for young people and actually net negative for for old people. So if we have this issue that all old people understand and I say that very, that's crass. I should say people of older generations or whatever as a nicer way to say that. But people in in older generations, they they get liberty and they know they're against CBD CS. So that's really the narrative that I think we should push on. I think those numbers are funny because the other side of it that doesn't hold Bitcoin is whatever the Texas bill or what was going on this past year about the gold backed currency and that the other side hasn't gone far enough on Bitcoin. But there's just this underlying understanding that something's very broken with the money and it's like they just, it's just we're still kind of like that's where we focus on the pawn and the education is because it's helping people see that it already exists. Yeah, I wanted to ask you guys about that. So we we took a neutral stance on the gold backed stable coin that was potentially going to go in Texas. It ended up not making it through both, both chambers. But what are what are your else thoughts on the gold backed stable coin? I mean it. It's sort of like an interesting wrench to throw into things better than a. Solano backed one. Yeah, exactly. Yeah, of of of all the assets you could pick to back something with, it's probably the second best asset possible. But, but then it it still just doesn't in my opinion solve for the the root problem of you know, when you're linking a a digital currency to anything then there's a problem because you you then there's a surface area for attack, for corruption, for accounting error, anything like that where you know if you if you have gold in a vault and you're saying, OK, there's there's so many units of gold here. And then we're going to issue digital currencies that are going to, you know, represent the units in the vault. There's all sorts of problems that can arise from that link from physical to digital. And that's, that's the beauty of what Bitcoin solves is that there is no link from physical to digital. It's purely digital and so. There is a link. Well, OK. So there's a link in the economic cost of creation of that digital unit, but you don't have the, the, the connection of physical asset to digital asset. You have pure digital asset. Energy. Energy is the only place where the physical and digital really connect. From Bitcoin I. Personally, I personally think it's great. I think it moves and this is partially probably Jesse will want to talk on and I think we should like the Overton Window when we talk about politics, but Overton window and this understanding of like what actually backs your unit. And we, we had this discussion last week with Joel from 2 Ocean about you know these kind of free banking style CBD, not CB, CS, free banking style dollars and like what backs them and ultimately like having a sovereign state like Wyoming back the dollars. But then you'll start seeing different people back that currency maybe it's two 3% goes into Bitcoin 4% what you just described believe is like well it's backed by gold and theoretically gold will appreciate compared to the dollar. And so that will actually increase the purchasing power again theoretically in this setup of that. And so at least it starts that question and then if it's backed by the Texas sovereign government and you can always get that you know peg back, I could see it at least having a like it starts to move the discussion, we all know where it'll it ends. It's very similar to like the the Russian and geopolitical stance that we're starting to see or you know coordination of economic activity around settling oil for other forms of currency or what is it backed by. So I think it's in my opinion it's a net positive and just having those discussions, but I think end of the day we all kind of know where things trend towards. Yeah. I'd I'd agree with that. I I think that I think that what we're seeing with the BRICS nations trying to maneuver to find a way to establish a new like reserve currency standard that will be commodity based rather than U.S. Treasury based that you know that's the way the world is moving in and and so having like a a, a gold backed currency in Texas makes a lot of sense for like throwing your hat in the ring in in terms of options out there. But yeah, I agree with Michael. I think it is a stepping stone towards what will eventually be that preferred because because of that that inherent link that remains when you have any kind of physical asset represented in the digital space rather you know and and and you know in in that sense you still have the 6102 problem with gold. There's a vault that holds the gold and the and the government can say, you know, we're changing the rules, we're taking that that, that gold. And that is the beauty of what Bitcoin makes so much more difficult because where is that Bitcoin being held? It's everywhere and it's nowhere at once. I I personally love gold. It kind of pains me. I like, listen to, I know Marty's now this strong stance, but yeah, it's like Matt and they they'll call it a shit coin. And it's like, it's like, it's like I like. Gold too. It's like our, but it's our best friend. Like from a pure like, how do we explain Bitcoin? It's like this thing has existed for thousands of years. It's obviously not as scarce as Bitcoin, but it has the same properties that you can start to build a mental model of how the world was constructed and can go there And to dismiss it as that, it's like, OK, we know where it goes, but we still have like years and years, if not decades to do that transition. And if we can align with that, it's like an easy way to say this is digital gold, then everything else is like whatever it is, copper, aluminum. But it's not money I think is the right mental model to like start sharing with our our boomer friends and folks that are. It's too far to go directly into Bitcoin, at least whole whole hog like we have. I don't appreciate the assumption that I'm not aligned. I I've said it many times before, gold bugs are our friends. We're philosophically aligned. We need to be welcoming the gold bugs and putting up with some of their derogatory comments on Bitcoin. Say, hey, you know, you don't get it, but we're more aligned than you know. I'm just trying to set in your mind for for for Matt so when he when he calls them shit corners it's the the gold the gold bugs as shit corners or gold's a shit coin I think just give them a little and. And I, you know, we we end up in these slightly tribal positions, but I think, I think gold, gold enthusiasts and Bitcoin enthusiasts actually are free market money enthusiasts. That's that's really what we are at the end of the day. We like, we like that there are assets that are better to hold as money and that the free market through time and you know proving out the properties of these different assets can can gravitate towards certain assets being better for money. And that is the entire history of gold winning out over all any other form of physical commodity money over 70,000 years of going from from seashells in cave sites 70,000 years ago to to gold becoming the global standard. And and Bitcoin is just a part of that competition now. It's just a new entrant into free market money. And I happen to think that it will win out because it has superior properties to gold. It's it's gold perfected in many ways. But at at the end of the day we we're aligned that free market money and commodity money makes sense. Yeah. On that note, I'm sure you saw I was on my laptop earlier because I was looking for this chart. I didn't find the exact chart I want it, but bringing it back to the regional banks as our greatest allies, because I think it's important to dive into this because we need as many allies as possible. And so here's the chart of deposits and as you can see, deposits are flat lined as people have been dumping their cash in some money market funds. And there's another chart out there that I couldn't find. But it shows the divergent of deposits at the systemically important banks versus the regional banks. It's completely divergent. Money is flooding out of the regional banks. And so to that point, how do we become allies? How, how could the Bitcoin industry help these regional banks? We had Ron DeSantis mentioned earlier this year, I believe that if the federal government were to crack down on the ability for industry players within the cryptocurrency landscape to get bank accounts, Florida and their state chartered banks would step in and provide those banking services. Lee, in your mind, we think we need more states like Florida or Texas to embolden their state chartered banks and then their regional banks to support the industry. I think that's a great step and absolutely we work with the Texas Department of Banking on those topics and as being Texas, our Texas Department Banking Chairman and that department is very cognizant of their role as a leader. You know Chairman Cooper is on F sock and the president's working group and he is very, I guess I don't want to put words in his mouth but in his actions he's demonstrated A willingness to stand up for state banking regulation and the rights of state banks as set forth in in various, you know, federal statute and and constitutionally as well. So a natural ally for us. I I think we should, this is going to be tough, but I think we should actually begin dialogues with state banking associations, banking associations at the federal level and banking associations at various state levels. Now that might be a culture shock for us and for them, but we're natural allies and if we could create some sort of platform, some areas that we agree, you know that that makes huge waves in in Washington DC and state capitals around the country. If Bitcoin and bitcoiners and trade associations representing the digital asset industry are now allying with, you know, your local, your statewide or even federal, nationwide regional banking associations or independent banking associations. Getting that done, though, I don't know that that takes. That's probably something that we could do if we all put our minds together and get got on a bunch of zoom calls and and met with the the right people. But it's a it's a Herculean effort, to be sure. If you're representative of State Chartered Bank or one of these state banking regulators listening to the show, reach out. We should have a conversation. We should, yeah, no, we could. We could probably link in LinkedIn, stock them, get their emails using Zoom Info, and just say, hey, we need to we need to get organized here. Yeah. You, you, you. Talked about it about the like press for the summit and getting like local. I think this kind of ties into it. It's like the regional banks. So you know they're kind of like the the heart and soul of America when it comes to like agricultural loans and mechanical loans and things associated with that. And then the constituents in these small markets being able to see the presence and then vote. Love to hear kind of like your thoughts on the just the grassroots is a slower burn and it's it's something Marty talks about a lot of like the small towns like you have to have the local you can only start from like your armed distance whether it's like your personal family group, peers, network, professional group, your town and that starts to like grow and bubble up. And it sounds like you have that approach. Lee, be curious like your thoughts on that and what others can do in other markets. Because the idea is this playbook can be can be done anywhere right in the US or internationally from being able to effect political change or at least uncovering some of the things that historically people haven't seen clearly, that the money's fundamentally broken and and there's ways that can be fixed and it just takes somebody taking action. Yeah, yeah. All politics is local, as the old adage goes. So I think that's absolutely right. And there are other trade associations in other states. About 40 of the 50 states have trade associations, and I chair a a steering committee for that entity. It's a loose federation. It's not really an entity per SE. It's a federation of state associations. And we are working to build grassroots networks of people that will go out and block walk and call their representatives. And you know, because it's one thing to get a bunch of people like Anons on Twitter to rail against Elizabeth Warren or to, you know, put put pressure on in that way, that's good, that's helpful. But we also need to have the people that are that person's constituents that that live in that district, that electric elected officials district that can call up and say hey I live in your district and you know that's that's more impactful than a retweet or a like is 150 constituents calling a representative's office is a is a far bigger wake up sign for them than you know a tweet that gets 10,000 or even a million likes and retweets. They they get kind of rattled a little bit more when constituents start calling or go visiting you know visiting their offices. And so you know we put together playbooks around block walking and how to you know if if you get out there for an elected official's campaign and you know that they're supportive of the industry and you block walk for them, they won't forget that because very, you know a lot of people go out and vote but very people will go out and block walk on behalf of an elected official. So we do that every time elections come around and try to get our members to block walk for our allies. You know it's it's a. It's a good practice to to to get in for sure it's block. Walk. Is that like a like a cousin of like tar and feathering? Or what is? It. Sorry that that just means like going around and knocking on doors and saying hey you live in senator you know XY ZS district we think you should vote for to re elect them because we're we've been very impressed with how they've you know voted or whatever. Like, it's basically just going around supporting them, talking to their voters on behalf of them because they can't physically walk around and talk to every voter before elections. Yeah, I think everybody forgets how much power we have. Like from a local perspective, I think about like COVID and all the people even in California, like sheriffs are like, no, we're not going to do that. Like you have to go to work with these individuals. You have to see them every day. Like that's the thing that people feel the pressure when you're able to see physical humans and you're like, oh, I have like a recourse for my actions versus it just be ephemeral. And so, like, oh, some some number on a ballot. That's funny to that point, Michael, Like these pockets exist in every state. Everybody likes to basically paint each state with a red or blue brush, but there are certainly purple areas and blue States and red areas and blue states. When I escaped New York for COVID, we went to Cape May County, New Jersey. NJ is considered one of the the bluest states out there, but the county we were in did not put up with a lot of the BS and the lockdown mandates and stuff like that. So these pockets do exist. It's just emboldening these people. And that's something I've been saying a lot recently on a bunch of podcasts. My my own podcast and other podcasts is it needs to be an instilling of confidence in to the silent majority that is afraid to speak up like you said Lee. I think people would be surprised how far their voice carries if they actually use it by calling their their local official or showing up, yeah. And especially if they can use it in a coordinated way too. If they can get a network or a community of people, you know, in our case it's like minded people who who are freedom advocates and and believe in free market based, commodity based money as Jesse put it to to start making calls. That's pretty powerful. Well, you can. Can you touch on some of the existing politicians in their stances are getting Bitcoin? Like, there's two parts to this it feels like, and maybe I'm wrong, but like Senator Cruz maybe understands Bitcoin probably the best. But then you reference and I can't remember the names but there's a guy in South Texas I think Cuellar and then another one that I hadn't heard from before and I haven't even had a chance to look him up. But I thought it'd be good to reach out and potentially hear their stances and like what's driving the interest of like the these alignment because it's not they wouldn't do it for gold. My assumption is it's like it's not gold. There's something of with the the pulling the demographics and all the things associated would be curious like your take there? Yeah, so people like Senator Cruz, they get it at a philosophical level like down to the, you know, you guys have heard his remarks on on Bitcoin representative Cuellar down in South Texas. I don't know, I don't think he's read the Bitcoin standard or and I don't think he really has had time to give much thought to the philosophical piece of it. But what he does understand is that it's bringing jobs to his district in in the form of Bitcoin mining. And he also understands the polling data because his district skews younger and skews Hispanic at the at that geography of Texas. He understands that his constituents are more likely to like it than older white people. And so he sees jobs and he sees polling data and then you've got people like Vivek and RFK, right? So they have philosophical alignments with portions of Bitcoin like Vivek is very much aligned with like sort of the the concerns around money printing and debasement of Fiat currencies and the way that Bitcoin counters that, right. So he's got a a strong, some some strong talking points on that and he unveiled his, you know, 3 comprehensive policy at the summit. He had three policy points and self custody was one of them, which I thought was great. And then RFK is a big privacy advocate has been for decades and so and and sort of has a a weariness or or or leeriness if you know if you will of big government and government overreach and surveillance. And so that is that Bitcoin has certainly struck a nerve with him and you know, I think I think he that's probably, if if we were to ask him would be his, his most, I guess favorite property of Bitcoin, if you will. Yeah, I I can't help but think about how, you know, how far we've come in in terms of reaching politicians. And and you did a great job there of of highlighting how for different politicians Bitcoin speaks to them for different reasons. You know, whether that's just because it's jobs in their district for Bitcoin miners or because of privacy. But as Bitcoin keeps doing its thing and and keeps making its way through the adoption curve of of just individuals turning to this asset because it's a it's a savings technology and and you know in a time with high inflation in the dollar and that reaches politicians too and and so it not only reaches the you know, the politicians but their their the electorate. And this whole process is is running in parallel together, you know, as we all make our way through the adoption curve of Bitcoin as a society. And it it strikes me as as so important what you guys are doing of of trying to find ways to to in in some ways hold off draconian reactions to Bitcoin at the political level long enough for this organic process of people discovering Bitcoin and and recognizing the benefits that it brings to them for their particular needs, whatever those may be. Because there are so many different advantages of Bitcoin, You know, these efforts help to provide that air cover for long enough for that organic process to play out until we reach that intransigent, intransigent, minority tipping point where, you know, there there's enough of a of a hardcore advocate base for this asset that it becomes pretty impossible to, you know, make it illegal. And so I I I can't help but feel like we're in this window of time where we we need to survive and and help gain little wins in the political process long enough for the mechanics of Bitcoin to inevitably play out in the adoption curve to to defend Bitcoin in its own right. Couldn't agree more or. You just have to wait till they wait till they age out. But we got like 25 years. I was looking at the delta between Warren and Feinstein and it's it's literally she she lived to 99. So we got a we got a good. We got a good way to go. I'll keep my comments to myself and with that in mind, we we want to be respectful of your time. I know you have something here in a few minutes, so before we wrap it up, is there anything we didn't cover that you think we should mention? I think the last thing that I'd say is, you know, part of the reason why Texas has had such a, you know, has been considered a leader in this industry is the energy of bitcoiners and and freedom advocates in Texas. And so it really doesn't happen without a culture that's predisposed to that. And so I I think the work that you guys do and that many others do to continue to spread that message is vitally important. So I really appreciate that. And that helps us in the advocacy efforts because we have strong grassroots to reach back into. Yeah. I would say my big thing was to shout out to the I don't know if you've completely changed the name. Is it officially every year now, the North American Blockchain Summit? Or is it? Yeah, 'cause I know it's the Texas. Yeah, we it's been the Texas Summit the last couple years and we did we did change the name to the North American Blockchain Summit this year and and moving. Forward and we've gone to a lot of conferences. Personally, I thought from a professional standpoint it was the best that I've been to from we're starting to see the maturation of the industry from the people that put on a suit and that are producing like high value across the world frankly. But there was predominantly in the North America and and it's growing and it showed like that. You know ideally I love Fort Worth, we'll save that debate for another day, Fort Worth and Dallas. But like the fact that people could fly in it was a great place. So hats off for doing that and ideally we, you know we'll we'll definitely be participating next year. Yeah, next year. And that if anybody's looking to come to Texas for something like that, it was a great networking event. Much appreciated. For Texans hour and 10 minute podcast, I think we did a good job guys. Lee, thank you so much for joining us. Can't wait to have you on again. There's definitely. A. Lot happening in the market in the next few years. I'm sure we'll have many things to catch up on at some point, Absolutely we'll. Have to do it in person. It's a little bit of a it's kind of messed up. We're all in Texas and I know Lee has a nice podcast studio up in in the Fort Worth Dallas area. So next time we're all up there, we'll we'll get together live. Maybe. We have one here in Austin, too. I'm sitting in it. You can use this place. All right. That's all we got today. We'll see you guys next week.
Transcript source: fountain