TRANSCRIPT

David Hoffman:

[0:04] Bankless nation it is the third week of september it is bullish once again clarity died but all the crypto prices are higher just 21 hours later after clarity dies the sec ships the innovation exemption a legal lane for tokenized stocks effective immediately

David Hoffman:

[0:22] so crypto lost but we're winning. We still are winning. The tokens are up. We're getting what we wanted. It is a bullish season in crypto.

Ryan Sean Adams:

[0:32] It was actually double bearish news last week for crypto, and yet prices are up-ish. The Fed also hiked. This is the first time since 2022 Fed Chair Warsh moved the rates up. My question coming to this week was, how mad was Trump about this? We'll talk about that. Also, So, David, you think options might be the next big thing in DeFi? I want you to tell us why.

David Hoffman:

[0:56] Potentially, yes. And then Kraken is bringing Hyperliquid to America via a compliant front end for Hyperliquid onshore. Basically, Hyperliquid with a CFTC license in front of it. Is this how perps make it onshore in the United States? That and so much more to talk about. But I think, Ryan, I think the way to summarize the last week in crypto is just very strong confirmation of a bull market. And the reason why is that good news is making prices go up and bad news is not mattering. And then we saw this in the two things we talked about. We had the rate hike, we had the clarity failing, prices are either flat or higher than both of those events prior. And so this is just a telltale sign of the bull market is that we are, the market is sensitive to good news and it is insensitive to bad news. And I think that that is just even further confirmation that we are in the earliest innings of a bull market.

Ryan Sean Adams:

[1:57] Well, Eric Conner, crypto investor, agrees with you, David. This was his tweet. Kind of nice to flush the double bad news of no clarity and rate hike in the same day, to be honest. Yeah, I think I see that, especially Clarity. Although one might argue to push on that a little bit, both were kind of priced in. I mean, who in crypto actually thought Clarity would pass? And then as to rate hikes, I mean, the market was expecting rate hikes to actually increase. And so maybe no surprise there. It's not like QQQ or S&P took a nosedive on the back of this news.

Ryan Sean Adams:

[2:37] There is a price band that TDR, Michael Nadeau, is watching for confirmation of the early bull market. And he's got two numbers here. Basically, if we stay trading in these two numbers, he feels like we are pretty close to confirming the crypto bull market. And this is Bitcoin price numbers. So the number, you don't like this, David, 69.9K. All right. Nice.

Ryan Sean Adams:

[3:05] So if we stay from 69.9k to 80.4k we stay in that band, we should be good to go both those numbers represent moving averages so 69.9k that's the 200 day moving average and the 80k number that's the 50 week we stay in that band we're still undecided it's not breaking bearish if we go, up higher and we start, breaking the 50 week in a decisive direction. And we sustain that over multiple weeks. He thinks from a price momentum perspective, that's kind of early bull market confirmed. So we're in this middle period of like, we don't know yet.

David Hoffman:

[3:47] Oh, interesting. Okay. So he is saying that so long as we don't go down, we are allowed to be bullish. And then he's waiting and patiently waiting for us to break through $80.4,000 on Bitcoin to confirm a bull market. But he's saying that if we hold, it's still bullish?

Ryan Sean Adams:

[4:06] He's saying if we hold and we don't break down, then the probability points that the low was in on June 30th of this year. And we're not going to lower lows.

David Hoffman:

[4:19] I see. I did invite Ben Cowan on the podcast for when he gets back from New Zealand because I want to ask him this exact same question. It's like we bounced off the 200 week, Bitcoin bounced off the 200 week. It does that all the time in bear markets. Sometimes it does it twice. And if it does it a second time, that means we are going down to the high 60s, I believe, 65, 66,000, which I think at least the participants on crypto Twitter are not positioned for that move.

Ryan Sean Adams:

[4:49] One thing you observed to me is that blue chips on the week,

Ryan Sean Adams:

[4:52] they were somewhat flats. They're not down on this double dose of bad news. But actually, we've had some non-blue chip coins massively outperform lately, particularly on the week. So Zcash all-time highs, am I correct in that?

David Hoffman:

[5:08] Yeah, Zcash all-time highs broke $1,500. And it was just $1,200 last week. So the momentum behind Zcash is just absolutely astounding.

Ryan Sean Adams:

[5:19] And was this like absolutely, there's like no reason why? Was there something about the clarity vote that was bullish Zcash? No clarity vote. We're going to buy Zcash.

David Hoffman:

[5:29] There's two different takes. My initial first reaction was that this is Zcash moving higher on no news whatsoever. It's just momentum, like Zcash earned momentum because it's an insurance on Bitcoin, like the fundamental reasons why you would buy Zcash. You know, it's an insurance on privacy on Bitcoin, like Naval likes it, like all this kind of stuff. Then there's another take, which is that actually the crypto market participants are doing the normal thing of like the Fed hike was actually bullish. It's actually good for crypto. And Zcash is the way that the crypto market is expressing that trade because it's a faster horse than Bitcoin. So one, if you are particularly bullish on Zcash, you would say that Zcash is actually stealing Bitcoin's thunder.

Ryan Sean Adams:

[6:15] This is a bit abnormal behavior because Bitcoin is supposed to go first and then altcoins follow in most early bull phases. And the fact that Zcash outperformed during the bear market and continues to outperform is somewhat abnormal from previous cycles that we've seen. It's not the only one, right? I think Hyperliquid, you mentioned, hit all-time highs. Nier is at $3. I'm not sure if that's an all-time high yet. That's doing well, too.

David Hoffman:

[6:41] NIR has been around for forever, so they have the 2021 God candles that they have to recover, which was like $30.

Ryan Sean Adams:

[6:49] 2021. Those times. Those times of rational bull market behavior in crypto, right?

David Hoffman:

[6:56] Yeah, but as far as near goes, like $3 is the highest it's seen in quite a while.

David Hoffman:

[7:00] And it's had like a lot of momentum. I think like last week or two weeks ago, it was at $2. And so you probably remember me six months ago, 12 months ago. I would just talk about like the middle of the market is drying out. We have meme coins and the blue chip barbells. Blue chips are doing well. Meme coins are doing well. But the middle of the market, which is people's jobs, that's the startups. that's people doing BD efforts, that has just been drying up. It seems to be that this is, we are having a middle of the market recovery in this era of crypto. Not globally, like not every middle of the market token, but the tokens that have deserved to do well are like living under their own weight, are growing, are doing well. So it is really nice and optimistic to see the middle of the market recover. Near specifically is just seeing adoption of their confidential intense products. So $30 billion crossed by NIR in their confidential intense, which is, I kind of put it shoulder to shoulder with Zcash in the privacy angle of things. Like this is $30 billion of confidential, private cross-chain transactions facilitated by NIR. And they also have $70 million in NIR TVL. So these are the numbers that NIR has pushed recently that are doing well, that show adoption. And it's also along in like the whole privacy trade, privacy tailwinds.

Ryan Sean Adams:

[8:25] Yeah, the pivot to privacy and the pivot to perps has been a major theme during this bear market and I guess it's worth maybe doubling down on the winners for the bull market. At least that's what investors seem to think on this week.

Ryan Sean Adams:

[8:40] Speaking of doubling down, not one to ever not double down is Tom Lee and he had some predictions for trad markets for the S&P 500. Let's hear what he has to say. Yeah, I think post midterms.

Ryan Sean Adams:

[8:54] Because this year has been very challenging, and I know it's not been fun for a lot of viewers, I think the fourth quarter could be one of the biggest rallies, and I think it continues to next year to one of the biggest rallies of our lifetime. What's a real number, do you think? We're at 75-85 on the S&P as we have this conversation. There's not that much of the year left. What seems reasonable to you between now and then? I think we could easily be above 8,200 by the end of the year, And that's because tech is going to be doing a lot of heavy lifting. The MAG-7, as you mentioned earlier today, are starting to come back to life. And the software names, which have been important names to be held, are doing better. So as long as the AI trade isn't extinguished, which we don't expect, I think it's going to come out of this correction. We've got a big rally until your end. So if anyone else, David, had said the biggest rallies of our lifetime in a quote, I wouldn't feel great about it. I'd feel like it's just the way he says it. Tom Lee has this like calm demeanor. And when he says bullish stuff, I'm just like, oh, yeah, I could see that, Tom. Sounds like that could happen. It's something about the tone of his voice. Maybe he's not like emotionally invested.

David Hoffman:

[10:04] My parasympathetic nervous system just loves Tom Lee. Tom Lee is just like reaching around my portfolio and just giving it the most comforting hug. I was like, hey,

Ryan Sean Adams:

[10:17] Man, that's a great seat.

David Hoffman:

[10:18] 8,200 by the end of the year.

Ryan Sean Adams:

[10:22] Well, thanks for the hug, Tom. Maybe Tom could go hug the bond market, okay? Because yields are going up, whereas Besant, of course, he's been a war on bonds. He wants yields to go down. This is the tweet. The U.S. 10-year treasury yield breaks 5%. First time it's done that in a while. I mean, not in forever, to be fair, but in a while. And it keeps ratcheting up.

David Hoffman:

[10:47] Like mile-hour lifetimes.

Ryan Sean Adams:

[10:48] No, no, not the 10-year. The 10-year was like just a few years. Here's a chart of the 10-year.

David Hoffman:

[10:53] Uh, well, no, this is... 2008, 2007. Okay, yeah. It's been a while. I was playing RuneScape back then. And I was not paying attention to broad markets.

Ryan Sean Adams:

[11:04] Is this really the 10-year? Okay, in the 30-year as well, a little down on the week. 5.4%.

David Hoffman:

[11:11] It touched. Yeah, it touched 5.4%. It's been trending up in a very dangerous way.

Ryan Sean Adams:

[11:17] So, you know, the scoreboard, I guess, this week is, I don't know if Besant won or Bonds won, but it feels like Bonds are continuing to win, whereas Besant is, you know, he did $6 billion last week in buying the long end there. And not really quelling bond market yields at all.

David Hoffman:

[11:35] Yeah, I think for a moment, people were like, no, Scott Besson, he's the house. Here's the money printer. Well, he said he was the house. He said he was the house. And then people realized, oh, this guy is tiny. He's a tiny man going up against the gargantuan bond market. He's not the house.

Ryan Sean Adams:

[11:52] I don't know. He's kind of the house. He does. He is kind of the house. He could be the house if he wanted to be the house.

David Hoffman:

[11:57] The market is the house. No, not if he's like trickling in $4 billion. He needs to like 100x that to actually have durable impacts

Ryan Sean Adams:

[12:06] On the bond market. David, you never know. He could do it.

David Hoffman:

[12:09] Okay. If he does that, then the debasement trade. My God, Bitcoin will be $2 million.

Ryan Sean Adams:

[12:15] He's threatening to do it. I think there's a question that I've had every week of this bond market war is, is this more debasement or is this more, just a hot economy and cost of capital going up because of investment in infrastructure and AI data centers and all of these things? And I'm not sure I'm fully resolved on that. Of course, the debasement narrative has been pretty hot the past four to five weeks. And they've seen, obviously, crypto had that repricing event. Gold was up a bit and people were like, oh, it's debasement. Once again, but I'm not sure that's the real reason for the yield rising. I think the real reason might just be back to the 1980s. We are in a hot economy. GDP is humming, at least from a nominal perspective. Yes, inflation is still high. We'll talk more about that in a second. The economy's doing pretty well, at least in the U.S. as well. And I don't think people are used to that type of investing environment, right? Because they haven't seen it in their investing career very often, and certainly not within the last 15 years.

David Hoffman:

[13:25] I'm trying to get a grasp on, is it all of the economy? Is it like all of America is doing well? Or is it just like the capitalist side, like investment is doing well? If you're an investor, you are trying to get your hands on capital to invest it. Maybe that's trickling down to Main Street. But is like globally all U.S. Citizens doing well? Because inflation is also still hot. And so we have a hot economy and hot inflation and a hot bond market. All of these things, I don't know how to interpret all three of these things like coming together.

Ryan Sean Adams:

[13:59] This is why, by the way, David, I think you should have Michael Howell on the podcast on the main feed because he has takes on all of these things. And largely, he does think that what he calls Treasury QE, the regime we're entering, is going to be more bullish for Main Street than it will be for Wall Street asset prices. Okay, so he sees a real shift towards the real economy and Main Street with the shift from Fed QE to Treasury QE. And I think you should get him to explain why to the bankless audience. He's got lots of reasons for it and interesting takes.

David Hoffman:

[14:36] I'm not used to the Main Street winning. Like usually always Main Street gets like the short end of the stick. It's like, can good things happen because of downstream of the stock market?

Ryan Sean Adams:

[14:45] Yeah, that is still a question in this era. So it's an unresolved question.

Ryan Sean Adams:

[14:52] The Fed funds rate also went up. This is for the first time since 2023. So Warsh, we thought, David, we were speculating that the new Fed chair Trump appointed would be, I think in your words, Cuddy McCutface. Well, he is not Cuddy McCutface, okay?

David Hoffman:

[15:09] He was Cuddy McCutface while he was presenting to Donald Trump. He was presenting as Cuddy McCutface.

Ryan Sean Adams:

[15:16] Oh, wait, wait, wait. Did he trick Trump? Was this a bait and switch? Yeah.

David Hoffman:

[15:20] Well, the thought is that he did not want to explicitly bait and switch Trump. So he did the thing by removing forward guidance and not having all the Fed governors fall in line so that there could be a diffuse set of people who think that we should cut, think we should hold. So he's passed on the buck. So it's like, don't look at me. I'm just one of the Fed governors. Also, we're a democratic institution. It's a decentralizing of the Fed while Donald Trump comes in and demands cutty McCutface.

Ryan Sean Adams:

[15:49] You know what's hilarious is... Trump might be buying that, actually. The narrative that you just spun up, he might be buying it. So I should say the target rate is now 3.75% to 4%. And it was a open FOMC committee vote, of course. That's who decides these things. 12 to zero. Wasn't even one dissenter in order to raise rates. So 12 to zero. And yeah, I was kind of expecting Trump to just be like, I was tricked. It's the new Powell, Warsh. Warsh, like, you know, bring those rates down. What are you doing? But Trump kind of covered for him. He was like, yeah, the vote doesn't even matter. It's a 12-person, you know, vote. So Warsh may as well have voted. He does think, though, he said this on Truth Social, I believe. What's the quote? You might as well vote with the board because it's not going to matter. The board is very hostile. He's talking about the FOMC board. But he did say interest rates in the U.S. should be 1% or less because we are the best credit in the world by far. So I guess he still thinks that, but he seemed fine with Warsh raising rates. Should we screen him out? Is this just noise from Trump?

David Hoffman:

[17:04] I don't know. There was a prediction market about whether Trump would call Kevin Warsh a name, like a bad name. And like use that, you know, on truth social, Trump throws Kevin Warsh under the bus like he did with Fed Chair Jerome Powell. He did not. He did not call Kevin Warsh a bad name.

Ryan Sean Adams:

[17:21] Wow. What explains this?

David Hoffman:

[17:25] I have no idea. I have no idea.

Ryan Sean Adams:

[17:28] I wonder if Trump can actually rationalize why it no longer matters if Warsh is making the decision. This is Warsh.

David Hoffman:

[17:35] Maybe because like Warsh and Trump and Scott Besson are taking meetings. Yeah. They are talking to each other seemingly collaboratively. And so maybe Warsh isn't like bending the knee, but it seems to be that they are up to something.

Ryan Sean Adams:

[17:51] So you think maybe there's a bit of coordination behind the scenes where Besson's like, yeah, you know, Warsh has got to do this, Trump. We got it covered. We're all kind of synchronized. Whereas Powell was a bit more independent because, yeah, that's one interpretation of things that they're all kind of coordinating. That's why Trump is fine with it. Another interpretation is just if you just kind of read the letter of what's happening. Oh, no, this is Haseeb's take. This proves Fed independence. They're not just going to do whatever the president says. This proves that the Fed and FOMC works because it's not going to bend to the politics of the day. It's going to optimize for its own goals. So you could interpret it that way too.

David Hoffman:

[18:34] Yeah. Yeah. If we're going back to the conversation of like, is this a hot economy or is this a debasement trade? You have to take the bit of evidence out that this is a corrupt Fed out of the debasement trade. The Fed is legitimate. It's not bending to the fiscal policy of Congress and what the president wants. It is remaining sovereign. And that it should be good for the soundness of the dollar. And so if you take that variable out of the wire bonds going up, it would actually point further to it's a hot economy.

Ryan Sean Adams:

[19:07] Well, it does lend evidence to the fact that the Fed is serious about fighting inflation because this is totally the reason Warsh said he was doing it. He said that this was a sober decision, a serious decision, a responsible decision, and that the plain fact is that inflation is too high and has been for too long. So this is the US fighting inflation. Now, what do you think? Is this good or bad for crypto? I think in previous eras, whenever like the kind of the generic investor take is, if Fed funds rate is going up, that bleeds risk on capital out of markets. And so risk-on assets go down. And yeah, crypto is somewhat of a debasement trade, partially. But it's also a risk-on asset class as well. And so risk-on goes down if Fed fund rate is going up. Do you think that simple explanation is valid moving forward?

David Hoffman:

[20:08] I mean, if we go back to the fundamental, like, simple bull case for Bitcoin, it's that we print more money than we take in as revenue. So, like, there's always debasement, there's always inflation. And if you cut yields to zero, then people move just down the risk spectrum because there's more capital out there. But if you raise rates, then the government can't pay its debts. And so there's going to be disbasement. So like Bitcoin wins either way. And so if you ask the question, it's like, okay, we raise rates. Is this bullish or bearish for Bitcoin? You know, to your point, it makes risk capital harder to access, but the government's debt comes due faster. I don't really know. I'm not sure I care. All I know is that we raised rates and crypto prices went up. And so I've been saying this on Twitter, I'll say it here again. Good news is good and bad news doesn't matter. That's just the phase of the market that we're in.

Ryan Sean Adams:

[21:03] Well, we are in the heads I win, tails you lose regime, I guess. David, speaking of losing, we got to talk about the Clarity Act next. So it failed, but before it failed, it seemed like some good news. What happened there? And I know you've had some conversations with representatives at the SEC about, what is it? Did they drop some?

David Hoffman:

[21:25] Innovation exemption that was dropped this morning.

Ryan Sean Adams:

[21:28] The innovation exemption. So I'm wondering, does Paul Atkins love crypto more than Gary Gensler hated it? What's he going to give us? What are the goodies? We'll talk about all that and more. But before we do, we want to thank the sponsors that made this episode possible.

David Hoffman:

[21:41] So early this week, it was announced that Trump actually agreed to the updated Clarity Act ethics provision, which was considered to be the final obstacle to getting the Clarity Act passed. This was a surprise. Everyone on Twitter got really excited. Odds of the Clarity Act passing on Polymark, it doubled. Bitcoin jumped from 77 to 79. ETH jumped from 2,400 to 2,500. Things were looking pretty good. We were thinking about getting a surprise Clarity Act. Then the Senate procedural vote came on Tuesday, and it seemed that the compromises from Trump and the Republicans were just not enough. All Democrats voted no to the procedural vote. The final tally fell 11 votes short of the supermajority needed to proceed.

Ryan Sean Adams:

[22:25] Okay, so why did all the Democrats vote no if Trump relented on the ethics thing? I thought that's what they said they needed. Give us ethics provisions and we'll vote yes.

David Hoffman:

[22:37] I think that the Democrats feel like they're in a very strong position to win the midterms. And so they don't need to compromise. And the Clarity Act passing is a Republican win, no matter what. Like, it's not a it's not a bipartisan win. It is a partisan win for the Republicans. And so like why the Democrats? Why give them a win at all? It's not their bill. It's not their constituents. They don't care. And they're just going to wait this one out until they control the House. And so they're just not motivated. There's no carrot for them to vote.

Ryan Sean Adams:

[23:11] Also, I think a lot of the provisions here and the specifics of the ethics provisions was Trump agreeing to things on a go-forward basis. So the deal didn't really touch the $1.4 billion of all of the Trump family crypto dealings in the past.

David Hoffman:

[23:28] You mean like trying to claw back money from the hands of the Trump family?

Ryan Sean Adams:

[23:31] Right. So from a cynics perspective, right, if you're just like optimizing for Trump, then you could be like, oh, we've already got the things we wanted out of crypto. So we're fine with signing something that talks about ethics for moving forward. But like, there's no way you're touching what we already have. So they weren't really losing anything either, were they?

David Hoffman:

[23:53] Yeah. Yeah, that's fair. I will say that I do think Donald Trump does have a very large role in why the Clarity Act did not pass by just not agreeing to the ethics provision and doing all the grifting in the first place.

Ryan Sean Adams:

[24:08] Like imagine a world where he didn't do any of that. None of it. Totally. Do you think it would have passed?

David Hoffman:

[24:13] I think a lot of crypto Twitter is blaming the Democrats for voting no. And I think we should also be blaming Donald Trump for just making this such a big issue in the first place. Like Donald Trump is the biggest reason why

David Hoffman:

[24:23] Clarity Act did not pass. That is a true statement.

Ryan Sean Adams:

[24:25] And yet, David, and yet his administration with Paul Atkins and Mike Selig, continues to deliver on promises for crypto, not in a legislative way, because they can't, because they are regulators, but in a way that also matters with some of these proposed rules. So this is Mike Selig on the back of this. He is the chairman of the CFTC. And of course, he had this tweet, I'm sure, primed to go.

David Hoffman:

[24:51] Primes to go, that's right.

Ryan Sean Adams:

[24:53] He said the outcome of yesterday's Senate vote was unfortunate. Americans deserve regulatory clarity, legal certainty, and consumer protections in crypto asset markets. And he continues to say the U.S. is and will remain the crypto capital of the world. Paul Atkins made similar statements when it was announced that clarity was not going to pass. He said, I have been unequivocal with or without legislation. We will act decisively within the SEC's statutory authority to deliver certainty for American investors shaping the future.

David Hoffman:

[25:27] And then he ends the tweet with, stay tuned in bold. And so the crypto industry did stay tuned. First, I think Haseeb put out a tweet that I did, I think did a very good job talking about, okay, we're not getting clarity. What can we get? What can we get from the SEC and the CFTC? He says, nothing stops them from doing rulemaking now. Rules aren't as durable as a law. True. But the best defense against a hostile future administration isn't a law or regulation. It's adoption. Did he see he wrote that or AI wrote that?

David Hoffman:

[26:02] This is what protected Uber and Airbnb. Fantastic examples. Adoption is now the mandate for the industry. And so he lists out what agencies can do.

David Hoffman:

[26:11] Exemptive relief. So like carving out exceptions for things. No action letters, like telling companies, hey, we're not going to come after you if you go do this thing. Registration pathways, project crypto and rulemaking. Those are like the big things. So when Paul Atkins at the SEC says, stay tuned in bold at the end of his tweet, what are we staying sued for? Yes. So this morning, the day of recording, September the 17th, this morning, the SEC releases the innovation exemption.

David Hoffman:

[26:40] This is an exemption for allowing tokenized stocks to trade on AMMs and other DEXs on public permissionless blockchains. Now, this is unique and not the same as Robinhood tokenized stocks, you know, Kraken, X stocks, or Bakkt, or Ondo. Those are tokenized stocks in like kind of backdoor-y ways. These like tokenized debt securities, things that have one-to-one economic representation of the stock. What the SEC is talking about is things that are truly one-to-one tokenized stocks that have KYC and whitelisting, and they are giving an exemption to DEXs, things like Uniswap, things like Aerodrome, so that those DEXs, those trading facilities, those exchanges are not considered exchanges as broker-dealers. So these are not dealers. Uniswap is not a dealer. Aerodrome is not a dealer because that's what this exemption says. They're a TSV.

Ryan Sean Adams:

[27:44] They're a trading venue.

David Hoffman:

[27:46] They are a trading venue.

Ryan Sean Adams:

[27:48] What's the TSV stand for again?

David Hoffman:

[27:50] No clue. The SEC added a bunch of acronyms onto our acronyms. The TSV, I think, is like a DEX.

Ryan Sean Adams:

[27:57] Okay. Okay. It's like a DEX. And so some of the, I guess, would these be brokers that might be first users of the exemption? Could be a Securitize or a Coinbase or a Denari or a Robinhood or an Ondo or all the tokenized stock providers that we've talked about in the past, right? Those could be users of this exemption. Is that right?

David Hoffman:

[28:20] That is correct. That is correct. Now, if you go and look at the Securitize asset price on the public stock market, because they went public a few months ago, Securitize is up like 30% today on this news because Securitize specifically is best enabled by this because they are trying to do the one-to-one actual tokenization of a real equity as opposed to just economic rights. And so this is onshore and offshore. And so all of the tokenized stocks that we're talking about being paired with meme coins on Robinhood chain or the tokenized stocks from Ondo that have been online for forever, those are offshore. Those are offshore instruments. Those are not impacted, not relevant to this exemption. Those will still run. Those will still exist. With this exemption, we have the first foot in the door to onshore versions of these things that are KYC, whitelisted, governance rights, economic rights, all that stuff. And that the exemption allows them to trade on things like Uniswap and Aerodrome and other exchange facilities on public permissionless blockchains.

Ryan Sean Adams:

[29:22] Now, you told me that was actually, you found that out because that was your first question to the SEC after you got a call from what, Washington, D.C.? Did you get a call from the SEC.

David Hoffman:

[29:31] David, but in a good way? Yeah, probably in a good way. I got a call from the SEC yesterday saying, hey, we're hosting a little Q&A session for people like you to ask questions like this. And so I was asking, Laura Shin took my question and drilled down even further. We're still cool with the offshore tokenized stocks. And I was like, does this pertain to the existing tokenized stock things that we already have? And they were like, no, no, no. So those are offshore and United States investors are not allowed to access those.

Ryan Sean Adams:

[30:02] We pretend they don't exist, right?

David Hoffman:

[30:04] We pretend they don't exist. This is about getting all of that activity onshore in a compliant and regulated way.

Ryan Sean Adams:

[30:10] And that's great.

David Hoffman:

[30:13] I think the KYC whitelisting burden is going to be just a non-negotiable to the market. The market doesn't want a whitelisted tokenized stock. It wants a permissionless tokenized. Tokenized economic rights no one cares about voting uh and we already have

Ryan Sean Adams:

[30:28] Those but there's no way a company wants a permissionless like okay there's no way an actual company with shareholders wants token holder shareholder votes in the hand of some hacker from north korea.

David Hoffman:

[30:42] Right that's probably true

Ryan Sean Adams:

[30:43] Yeah so that's why these more legitimate tokenized um like shares with all All of the shareholder rights, including governance votes. That's why the SEC is going to bless those. And the others will be available for offshore non-US participants. There's also some language in here in innovation exemption, which, by the way, innovation exemption. It sounds a lot like Hester Peirce's innovation sandbox idea that she's been talking about for like seven years.

David Hoffman:

[31:15] This is Hester Peirce's efforts coming to fruition.

Ryan Sean Adams:

[31:17] Thank you, Hester. People don't remember enough and thank her enough. Permission, also, I guess for the TSV to receive this exemption, the AMM has to be on a permissionless public blockchain. I think there's some language in the actual provision about this, in the actual token exemption. Smart contracts, here's some language. Smart contracts must be auditable, public, and deployed on a public, permissionless, distributed ledger, which kind of implies a walled garden chain where there's not a distributed validator base, would fail that test and so wouldn't be eligible. The AMM on that chain would not be eligible for this type of exemption. Was that covered in your call?

David Hoffman:

[32:08] That is a really good question that was not asked or covered. The definition around what is a public permissionless ledger was not specifically hashed out. Because we haven't

Ryan Sean Adams:

[32:17] Hashed it out in crypto, have we? We know Bitcoin is permissionless. We know Ethereum is permissionless. We kind of think Solana is, right?

David Hoffman:

[32:26] Yeah.

Ryan Sean Adams:

[32:27] What about Canton Network?

David Hoffman:

[32:30] What about single sequencer L2s?

Ryan Sean Adams:

[32:32] What about base? What about Robinhood chain? Who decides that? Some more gray area to work through, right?

David Hoffman:

[32:38] Yeah. Uncertain these questions will need to be hashed out as this comes online.

Ryan Sean Adams:

[32:43] There was also something I found, I guess, somewhat sandboxy, but also still somewhat annoying or a little bit of cold water splashed on this is there's going to be caps too. So for a given asset, there can't be more than 0.25% of daily volume or else it kind of breaks the exemption here.

David Hoffman:

[33:05] So the way that that works is that if there is a thousand shares traded on a day in the normal public equity stock market, then in this version with the exemption on chain, only 25 shares can trade as a volume cap per day.

Ryan Sean Adams:

[33:22] Yikes. I mean, that makes it like, so you can't have size, you can't have large institutions. It really limits this to kind of a small retail type environment. So it truly is a sandbox, and this is not going to be massive volume. Like, I mean, even compared to perps, you can't really get massive volume if you're only 0.25% of trading volume daily.

David Hoffman:

[33:44] Yeah, yeah, this is, like, I think the offshore permissionless ones are going to work. And this is like, I'm sorry, I don't want this. I don't want a KYC. I want to be able to go straight to Uniswap. And I don't want to be capped on the volume. And, like, size is not size here.

Ryan Sean Adams:

[34:03] Yeah. So are you somewhat worried that, yes, they've legitimized this approach, but this has got too many rules and handcuffs to make it actually practical versus TradFi?

David Hoffman:

[34:16] It's the expected approach. Like they were like the SEC is never going to do away with KYC for tokenized equities. It's just like they're competing with some of the fundamental properties of what makes a blockchain a blockchain. Right. Permissionlessness, you know, global access, you know, instant settlement and the current versions of the offshore tokenized stocks have all of those things. And the KYC onshore compliant ones are strictly an inferior product. Maybe I say that as like a retail participant and somebody at BlackRock can come and tell me why I'm dumb and wrong. But like I know me and all my friends what our answer is, which to which product we prefer.

Ryan Sean Adams:

[34:55] Nate Drossi has a take that might signify this is just a sign of things to come. He said this, I think there are a number of politicians who are going to wish they passed Clarity Act by the time regulators are done pushing crypto forward. So what he's saying is basically all the people that voted no because they don't want tokenization or don't want crypto infused into the traditional finance system. Well, it would have been much more conservative for them to pass the Clarity Act because regulators are just full steam ahead now on everything. It's almost like Atkins and Seelig just got out their capes and they're like, we'll save the day. We'll do clarity and we'll do even more than clarity. We'll go above and beyond is what Jirasi is saying here.

David Hoffman:

[35:37] We have an early rumor. This didn't get any sort of official press release by the CFTC, not one that I found yet. But just in this one, watcher guru, CFTC permits developers to build passive derivative software without registering as brokers, including for crypto markets. And so the CFCC also has their thing ready to go. Same with the SEC.

Ryan Sean Adams:

[35:57] And there's also this roundtable for 24-hour trading that's happening as well from the SEC.

David Hoffman:

[36:05] Yeah, that's happening today. There's a discussion with industry participants from the crypto side, but also from the TradFi side, simply to discuss what 24-7, 365 trading looks like in market structure. And so things are moving. Balls are moving.

Ryan Sean Adams:

[36:20] This also might be a type of answer to the concern that the AMC CEO had last week with the fact that AMC stock was tokenized in some form on Robinhood chain. He clarified his concern, by the way. He said his biggest concern was that Robinhood stocks lack the voting rights that token holders had. So that was the thing. He really wants his token holders to have voting rights.

David Hoffman:

[36:48] He's very disappointed that the people buying AMC shares on Robin Hood chain aren't able to vote in AMC governance. That's what he's concerned about.

Ryan Sean Adams:

[36:57] That's what it came down to once pressed. All right. Remember he had all of these paragraphs of tweets about how much he hated it.

David Hoffman:

[37:03] Lots of words.

Ryan Sean Adams:

[37:04] How vile and disgusting it was. And it came down as vile.

David Hoffman:

[37:08] So right before hopping on to record with you, I was talking to Johan from Robin Hood. Yeah. I brought this up. So like the AMC CEO called you guys like vile and contemptible. What do you think about that?

Ryan Sean Adams:

[37:18] Well, he thinks an asset without any voting rights is just disgusting. It's just like vile. It's just like should not be allowed to exist. Anyway, it's interesting because the SEC exemption also says the same thing. All of the SEC exempted tokens would also include shareholder voting rights. So he gets it that way. Also, Vlad said that he would do that too, right?

David Hoffman:

[37:45] Yeah. so he's just making so Vlad said Robinhood tokenized stocks the offshore ones will also have in-kind redemption and voting for Robinhood stock tokens okay so like we're basically approaching feature parity with real equities except for the KYC which like Cry me a river. I don't want that. It's a feature to not have KYC.

Ryan Sean Adams:

[38:08] Well, I guess that's resolved then. I don't know what the AMC CEO was so worried about. It almost feels like a big attention hijacking game. You think this was like an underground thing to put some more light on Robinhood tokens? It was like a PR campaign to have.

David Hoffman:

[38:24] The AMC CEO. I don't think so. I don't think so. It's just so weird. Do kind of we are in the very early stages of something that may never manifest but something that could manifest is like all of these tokenized stocks coming on chain and then degen's doing weird things with them and then grabbing the attention of the relevant ceo in question if if like crypto ever got big in a cycle once again like that would be a fantastic movie to watch and i hope it plays out

Ryan Sean Adams:

[38:51] What's coming up next.

David Hoffman:

[38:52] Coming up next, I'm going to give a take about why options might be the next meta in the crypto industry. A lot of attention is going on options these days. It's actually a pretty competitive field. Hyperliquid is trying to build options. Lighter is trying to build options. Derive is already building options and already got options. And options are kind of like the last derivative that we haven't really produced on the crypto industry. So we're going to talk about that. We're going to talk about Hyperliquid coming to the United States. We're going to talk about growth in Venice and also the ARC chain launch. But first, let's hear about some of these fantastic sponsors that make this show possible.

Ryan Sean Adams:

[39:22] Okay, we've had perps in crypto for a while, decentralized perps, hyperliquid, lighter, they have popularized that. Massive successful products. We've never had successful options in crypto. And previously it's been like illegal, but there've been a lot of teams that have really tried to do this. Nothing has taken off.

David Hoffman:

[39:42] There has been a graveyard of startups trying to build options in crypto. And so, you know, but maybe. This time is different. This time is different. And so I recorded with the Drive team. That episode came out on Monday. And I asked him this question, like, why haven't options worked in crypto? The Perpetual has worked so incredibly well. We have other derivatives. We have other. Why not options? And his answer, I thought, was actually pretty good. Like for the first time, you need a pretty diverse set of market participants with different directional opinions that all cross in a double coincidence of wants. But you need like a large set of very diversified opinions. And we don't really have that yet. We've really just had kind of concentrated retail and then crypto native funds. The claim now from Nick is that we are finally in an era in crypto where we have a sufficiently large set of market participants. And then also, this was also probably the most interesting take of that episode that he gave me, was that 1010 showed a lot of perp traders how much extra risk encumbrance a perpetual position has that an option does not. And so an option, you pick your asset, you pick your price point, you pick your date of expiry, and that's it. You don't get liquidated along the way. So with a perpetual, you can be directionally right, but still get liquidated due to volatility.

Ryan Sean Adams:

[41:07] Right.

David Hoffman:

[41:07] Whereas an option, you can be directionally right and not get liquidated along the way because you can go deep, you know, deep out of the money, deep in the red. But so long as you have time left in your option contract, you can wait it out in a way that a perpetual can't. And so you also you also remove yourself from risk from the platform itself. Yeah. So like if your platform goes down or there's contagion or ADLing or whatever, if you own an options contract, you don't have that worry. And so.

Ryan Sean Adams:

[41:39] That was like my big question going in. It's just like, why do we need options when we have perps? Aren't perps better? But Nick's answer was that they're different. This almost reminds me of like. The gang learns about options.

David Hoffman:

[41:52] Right? That's exactly what's going on.

Ryan Sean Adams:

[41:56] Oh, that's why options exist in TradFi. Oh, okay. So perps can't do everything. It's like a different product. Because Derive also has perps as well.

David Hoffman:

[42:07] In a small way. They also have perps as well. Yeah, they are. Ironically, they dominate on hype options. And so the most liquid hype options volume is on Derive. So the Derive token has done incredibly well this last week it is up 150% in the last month and 50% in the last two weeks and so I kind of think this is like a starting pistol for the options race Lighter is definitely trying to get into the options world Hyperliquid has enabled options so they are like Derive is kind of like this David versus Goliath versus Hyperliquid I don't know if Lighter counts as a Goliath yet but there are three players in the options world and I think like the options meta could be like a theme for the rest of the year.

Ryan Sean Adams:

[42:51] It's like everyone is converging into on-chain Robinhood. Even Robinhood is

Ryan Sean Adams:

[42:55] converging into on-chain Robinhood. That's right.

David Hoffman:

[42:57] That's right. That's right. Meanwhile, still on the hyperliquid front, Kraken is bringing perps to the onshore U.S. market via a compliant KYC permissioned HIP3 marketplace. And so onshore U.S. citizens and entities are going to be able to trade perps that basically route through, that are hyperliquid, but through Kraken as a front end. Wait a second. That's pretty cool.

Ryan Sean Adams:

[43:24] Is this similar to the Lighter and Robinhood relationship or is it different?

David Hoffman:

[43:31] Different in the sense that that was not Robinhood core app. That was Robinhood wallet. Right. And I think that's only available to people in the EU. I could be wrong about that. But this is like the Kraken exchange, whereas Leiter and Robinhood was on the Robinhood wallet app, which is everyone wants to be in the Robinhood core.

Ryan Sean Adams:

[43:51] Wow. Okay. So that's a big deal.

David Hoffman:

[43:53] It's a big deal.

Ryan Sean Adams:

[43:54] Onshore perps, hyperliquid, decentralized, coming to the U.S.

David Hoffman:

[43:58] Yep. That's right. The other cool bullish chart that I saw was this chart from Eric Voorhees talking about the rate of token consumption on Venice. it is a

Ryan Sean Adams:

[44:08] Wait wait accelerating which tokens which tokens we talk to make you.

David Hoffman:

[44:13] AI token consumption on Venice and so I was just I kind of loosely did some math on this chart the chart is doubling every two months so it was like six months ago it was at 50 million tokens a day or is that billion 50 billion tokens a day, and we are now at 250 billion tokens a day. So I think like the game is, can you model the growth of Venice token consumption to VVV? Because it's like reductively one-to-one in terms of token consumption versus VVV value capture. And so if this continues to accelerate up and to the right, you would see like a repricing of VVV to account for like this accelerated growth.

Ryan Sean Adams:

[44:54] I'm really hoping for some superstar tokens to just like that have strong value accrual properties investor alignment to just, dissolve the current narrative and token curse that all of these things are lemons, and they can't be owned. they're uninvestable. We have to make tokens investable again. And what that requires is tokens like, VVV, tokens like hype, tokens like lit, value accrual tokens to be successful.

David Hoffman:

[45:25] Derive even takes 25% of their fees to buy the token.

Ryan Sean Adams:

[45:30] That's the model. And we need to have some successes, huge successes there, not just one or two, more than a handful. You have like a dozen, two dozen kind of just successes there, then you got the market back and you have the asset class back and that's what it's going to take to rebuild from the sins of our past.

David Hoffman:

[45:49] Speaking of rebuilding from the sins of our past arc chain has launched with about a hundred meme coin launch pads on day one oh wait doesn't seem very rebuildy that's a that's a corpo that's a good sin with baby isn't it doesn't it kind of a isn't it oxymoronic to have arc the uscc basically fed coin chain launch with like a hundred meme coin launch pads.

Ryan Sean Adams:

[46:11] You got to give the people what they want, David. How are you going to get product market fit? That's what we do here.

David Hoffman:

[46:17] So I was kind of wondering, like, is ARK going to take the tempo path and like integrate into e-commerce websites, optimize for payments, just like not compete in the alt layer one landscape? Or is it going to try and compete in the Alt-Layer 1 landscape? And the answer is firmly, it's trying to compete in the Alt-Layer 1 landscape. And I don't think they should be competing there at all. That is not their arena.

Ryan Sean Adams:

[46:42] It's interesting because it seems like they're doing the Robinhood play, but they don't have the Robinhood distribution.

David Hoffman:

[46:50] Distribution, that's right.

Ryan Sean Adams:

[46:51] Or the Robinhood front-end user interface. At its core, USDC is a back-end asset. And backend bank plumbing and it doesn't have the front end experience. So it seems a little follower-y, like fast follower-y to try to do this.

David Hoffman:

[47:12] The Venn diagram between USCC as a product and ARK as a product overlap very little. Like I get that all tech companies want to have like a second season, like a second act, but I don't get why ARK really adds to the mix.

Ryan Sean Adams:

[47:28] Look, you could just say it's permissionless. This is what permissionless things do. That hot bubbling vapor is going to boil off. And once it boils off, then we'll have all of the infrastructure for egenic economic workflows and trading and liquidity and payments and settlement and tokenized assets, all of the things that ARK is advertising that they want to do in the future. So, I mean, it's just a short-term speculation thing that allows them to build the plumbing for later.

David Hoffman:

[47:58] Okay. It's hard to build a layer one.

Ryan Sean Adams:

[48:01] It's really hard to build a layer one.

David Hoffman:

[48:03] It's hard to build a layer one. Yeah.

Ryan Sean Adams:

[48:05] Yeah.

David Hoffman:

[48:06] Last bit of news before we close these things out. S&P Global acquires OpenZeppelin. OpenZeppelin, probably some of the best smart contract writers and auditors in crypto. They've been around for forever. Purchased, bought by S&P Global.

Ryan Sean Adams:

[48:21] Do we know how much? How much? There's a number here. It's $37 trillion, but that is not the number they were purchased for. That is $37 trillion in value transferred from OpenZephlin.

David Hoffman:

[48:34] That's how you know we're at the end of the episode.

Ryan Sean Adams:

[48:38] A headline like this, though, seriously, would have blown my mind, I think, in original bankless thesis, decentralized finance, circa 2021. And if you gave me the headlines for September 17th, September 18th, 2026, and you said Bankless was reporting that S&P has acquired OpenZeppelin, I'd be like, wow, we have really made it. I'm glad ETH is at 10K. That's fantastic.

David Hoffman:

[49:14] I was about to ask you, does it feel like we made it?

Ryan Sean Adams:

[49:17] You get one or two of those at least. We've kind of made it. And that feels very much like crypto in 2026, doesn't it? It feels like we kind of made it. We didn't like make it, make it, but we kind of made it.

David Hoffman:

[49:31] We kind of made it.

Ryan Sean Adams:

[49:32] Yeah. We made it in a way that a little bit different than I think the...

David Hoffman:

[49:36] We made it in a way that kind of hurts.