Tyler Lindholm (03:34):

Now, granted, I first learned about Bitcoin back in 2012 time period and became a little bit involved in 2013. I mean, right? If you’ve never been to Wyoming, take the opportunity to drive through and you’re going to see nothing but beautiful agriculture everywhere and tourism and some mining, some coal mining, some old-school mining, things that we’re proud of in Wyoming.

Tyler Lindholm (04:03):

We didn’t really have a tech field and we’ve got this budding one now. The big reason why that’s important for us in the state of Wyoming and why it was such a goal of mine was because we had this great brain drain happening. We’ve got all these kids that we spend all of this money on, in public education, or what have you that went on to community college or the University of Wyoming, and we were pouring it on.

Tyler Lindholm (04:30):

It equates over… I mean, if a kid goes K-12 education in the state of Wyoming, and then they go to University of Wyoming and pick up a four-year degree there, that’s a little over $300,000 invested per student, and then they leave. That’s a major bummer. That’s our best natural resource. I mean, that’s it. You’ve got kids that are growing up with the very foundational ideals that Wyoming is all about, liberty, freedom, leave people alone, success, respecting the outdoors, respecting each other, all those types of things.

Tyler Lindholm (05:05):

Then we got to say goodbye to them because we can’t provide them a job, or there’s nothing that can latch onto them or that they find interesting. For me, that’s what it was all about. I’m a father of four. Some of my kids might not want to be cowboys. What do I tell them? They got to move to Colorado? No, I’ve been to Colorado. No. Nothing against my buddies down in Colorado. They’re great down there, but no. That was the why for me.

Preston Pysh (05:34):

Yeah. Jason, when you’re looking at some of the things that have been done there, and also at the federal level, what’s your take on maybe some of the groundbreaking parts of it?

Jason Brett (05:46):

Yeah. It’s so great to talk to Tyler too, by the way, at this point, in terms of all the policy that’s happening and what I hope it was meant to be that he’s ending up supporting this bill. Because what Wyoming did was really break through in terms of working with regulators around the world to help develop this technology, it wasn’t just Wyoming doing it on its own.

Jason Brett (06:10):

I think finding a way to perfect the security interests avoid rehypothecation, taking stands with setting up a SPDI, a special purpose depository institution that would not need an FDIC or insurance as a fallback mechanism, which speaking as a former FDIC regulator, that was a little hard to take, but I get it. Designing a system where you could have an effective bank specifically for digital assets, it created the railway so a Kraken, a Custodia and others that come in can succeed at the state banking level.

Jason Brett (06:51):

It was really ingenious because I grew up from the regulator school at the FDIC, where there are three kind of banks in America. You’re either regulated by the OCC at the Federal Reserve. I mean, excuse me, regulated at the OCC at the federal level or the Federal Reserve or FDIC regulates you as a state chartered bank. To have a state chartered bank where you provide that optionality to me was the real win there.

Jason Brett (07:16):

I also remember Tyler’s associate from Lummis’ office, Christopher Land, when he was going with Al Forkner and they were visiting D.C. to talk to all the politicians. They were reaching out, explaining what they’re doing so people could handle any concerns. I really think the whole package was there, both on the PR side setting them up to succeed, embedding it within the law, which of course we can’t go through this conversation without mentioning Caitlin Long and a lot of her policy to it as well.

Jason Brett (07:48):

Having now this opportunity where neo kind of banks have a home here in the United States. Speaking from a state competitive level, there’s no other state that can really compete with that at this point. They found the right recipe. Again, in terms of the way they figured out digital assets as either tokens like securities or utilities, that was a framework that, correct me if I’m wrong, Tyler, came I think from the Swiss originally so that you were coordinating with an international body that was on the front lines of this.

Jason Brett (08:23):

To me, you surrounded yourself with all the best and the brightest, all the people that are doing things, but then you made it your own.

Tyler Lindholm (08:30):

Yeah. Kind of, and actually kind of a fun story about how the whole Utility Token bill came about. We call them consumptive or consumer tokens at this point, because they’re a little bit of a bastard child that live between two different worlds, between a commodity or a security. They’re not a neat fit into an existing regulatory structure.

Tyler Lindholm (08:51):

The fun story behind that is the first bill that we had drafted we’d done it over the phone in coordination between me and Caitlin Long and like Lewis Cohen. I specifically remember this moment because it was funny. I was on the road for work, and I was staying at a hotel, actually insured in Sheridan where I am right now. We were just finishing up and boy we got that first bill done, guys. Great. Everybody said, “Well, good job. This is October. We got lots of time.”

Tyler Lindholm (09:24):

I said, “Well, hell, we got time. I mean, what’s another wild one we could do?” I think it was Caitlin, Caitlin brought up. She goes, “Well, we can always tackle this utility token thing.” I don’t know if it was Lewis or who else it was on the phone, another attorney said, “That’s crazy, that’s too far.” I said, “Well, hell, that sounds like what we need to do then because if it’s crazy, it’s going to get people’s attention. We want to do it in a manner that does catch their attention.”

Tyler Lindholm (09:58):

To Jason’s point of what he spoke about earlier, everything that was done, was done in a very precise manner, whether it was the hundred percent reserve requirement or the capital requirements or the ability to check yourself out of the FDIC or the qualified custodianship requirements, all of those were poured over. We brought in a lot of experts and we really went through it.

Tyler Lindholm (10:23):

I look back at that time now, on those hours and hours and hours spent drilling down on this issue and making weird decisions that a lot of people looked at us funny for at the time, but they’re not looking at us funny now considering some of the recent news. I think that’s a telling aspect, is we do need to think outside of the box when it comes to finance, especially in this space due to the existing problems that you see in existing finance and how they’re bleeding off into Bitcoin or digital assets now where we’ve got some real issues cropping up and it’s because of existing players, in my opinion.

Preston Pysh (11:09):

Tyler, are you saying that if Celsius was registered in the state of Wyoming, this would’ve never happened? Would you go that far?

Tyler Lindholm (11:19):

I’m not going to go down that. I can’t entertain that, but what I can say is that Caitlin Long put it the very best. I saw a recent post, and I am sure you guys saw it too, where she pointed out there is a huge difference between licensed and regulated and consumer protection is there for a very, very solid reason. I’ve got a very wide libertarian streak. Government should only be there to protect citizens in their pursuit of life, liberties and pursuit of happiness when they cannot do so for themselves.

Tyler Lindholm (11:54):

In this case, I think there’s a lot of stuff pointing… I’m not speaking specifically of Celsius, but there’s a lot of stuff pointing in multiple directions that perhaps government has been lax on their job and has been lax in regards to their putting consumer protections in place. When we’re looking at Senator Lummis’ legislation, I mean, that’s what it’s all about.

Preston Pysh (12:21):

Do you think that they’re lax or they just don’t have the bandwidth to handle the sheer speed at which all of this is unfolding? And the education gap. I mean, there’s a massive education gap here.

Tyler Lindholm (12:34):

Yeah. No. But boy, I mean, here… And I will shout this from the rooftops. I’m a cattle rancher from Northeast Wyoming. If I can debate rehypothecation and I can go to the mat with people on FinCEN, damn the lawyers at SEC ought to be able to get it done. The Federal Reserve should have already been there.

Preston Pysh (12:58):

I like that.

Tyler Lindholm (12:59):

Years ago.

Preston Pysh (13:00):

I like that, sir.

Tyler Lindholm (13:03):

It’s tough, right?

Preston Pysh (13:03):

Yeah.

Tyler Lindholm (13:04):

I mean, how do we get these guys? What’s holding them back? What’s holding them back from getting on the button and saying, “You know what? There are some folks at risk here. Let’s move the ball forward.” I guess I’ve always struggled with the Washington environment. That’s why I work for Senator Lummis and why I respect her so much, is because she gets it and she can handle these folks in a manner that is far more respectful than I can be. She does a good job.

Preston Pysh (13:37):

All three of us.

Jason Brett (13:38):

Well, you-

Preston Pysh (13:38):

Well, maybe not Jason. Go ahead, Jason.

Jason Brett (13:40):

No. But Preston, what’s amazing about this, and Tyler, I think was what’s so key of what you’re saying is where the markets are and what we’ve seen with the recent price action and some of the companies and what they’ve been doing, whether whatever the regulatory regime existed or not, to me, you’re… What was it? The libertarian state legislature? You’re voted by the Libertarian Party is the leading libertarian.

Jason Brett (14:08):

Here you are as a libertarian saying, “Hey, a little bit of regulation might be what we need. I think that hits the point of we’re not saying we need massive government, and I don’t think this bill is about it. But if ever there was screaming from the rooftops that now is the time that we do need some sort of bipartisan leadership bill, whether it’s perfect or not, is you need to have that. You need to have that.

Jason Brett (14:31):

I’m an ex-regulator, regulators get a bad rap sometimes, but you can be inventive, you can be creative, but if you’re able to have that credential regulator relationship with the institution, you actually are almost a consultant to that institution, helping them steer away themselves, where they might blow themselves up.

Jason Brett (14:50):

They always said to me when I went to banks and examined them at the FDIC that they were happy to see me there, but then they were happy to see me leave because it meant they were in business, but then get out of their hair. I think it’s so interesting to me because with that libertarian mindset you’d think, “Well, why would you want any kind of laws around this stuff? Just let the free market happen.”

Tyler Lindholm (15:09):

Well, libertarianism is not anarchist and there’s the deal. I think everybody recognizes the fact that theft is wrong. Stealing is wrong. That’s what government should be protecting from, is ensuring that the average U.S. citizen consumer protection. That’s making sure they’re not being stolen from.

Preston Pysh (15:29):

It’s a framework, right? As I went through this bill, the thing that I liked about this is there’s a lot of just definitions of what is this? Going through a lot of terminology and technology speak that’s out there and trying to frame it in a way that provides a left and right limit for people to understand what it is that they even own, and from the exchange level, how they’re being defined and viewed from a governmental body.

Preston Pysh (16:04):

Then there’s a few spots in here that really call out, which you were saying earlier that you did in Wyoming, which is if you’re a stablecoin, you have to have a hundred percent backing. There’s no rehypothecation allowed. I was surprised at the total lack of government… You’re not calling for new bodies of government to be stood up. There is a little bit there-

Tyler Lindholm (16:31):

We’re definitely not.

Preston Pysh (16:32):

Yeah. At all. There is a little bit in here about various studies, but not a whole lot. Surprising. I didn’t think that there was a whole lot relative to a lot of the other things that you see come through. It was a lot of definitions. It was a lot of defining things and maybe tweaking the way previous definitions are to include a lot of this.

Preston Pysh (16:55):

I was surprised, Tyler, going through it, there’s no call out to any of the validation where in a previous bill… Jason, help me with the name of the representative that was proposing something earlier.

Jason Brett (17:09):

Don Beyer maybe and his-

Preston Pysh (17:10):

Yes. Beyer’s. He got into a lot on the validation of a difference between proof of work, proof of stake. You guys don’t have any of that in here. I was surprised by that.

Tyler Lindholm (17:24):

I guess as far as first explaining Senator Lummis’ mindset when she put her staff to work on putting those together, I obviously worked with Senator Lummis’ general counsel, Chris Land who’s just a genius at drafting. He really is. He got his start in the state of Wyoming working at our legislative service office. He’s the one that I turn to, to draft all of my crazy ideas. Senator Lummis swooped him up.

Tyler Lindholm (17:50):

We worked on this among multiple other people. Jason, we called you, we called everybody under the sun that had worked with us in the past. It was all built on the principle of Senator Lummis’ guiding star. That is this has to be an enabling legislation. It cannot be disabling. For instance, you brought up the stablecoin piece. The stablecoin piece specifically calls out for a hundred percent reserve and banking charters, and those types of things.

Tyler Lindholm (18:24):

It does not mandate that you go through that. It does not mandate that you become a hundred percent reserve body. It just provides a regulated path that says, “This is safe. This is cozy.” The reason why Senator Lummis did that is, first of all, there are good actors in that space and she doesn’t want to have to force them into a box that they might not want to go to.

Tyler Lindholm (18:49):

She wants to provide that opportunity to go down a road that she believes is safe and sound for that type of asset and see if they join the party. If they don’t join the party, well, then that’s fine too but it isn’t enabling only.

Preston Pysh (19:05):

This is so important, in my humble opinion, for regulators to understand from an international lens, that if you don’t approach it that way, you’re just shooting yourself in the foot.

Tyler Lindholm (19:17):

Absolutely right.

Preston Pysh (19:21):

You are not going to complete on an international stage. It’s just not going to happen.

Tyler Lindholm (19:21):

Right. That’s absolutely right. Well, and on top of that, I mean, what government is ever going to keep up with technology? I mean, who knows what five or 10 years from now looks like? And of course the legislation will be out of date by that point. But by creating that enabling scope or lane to go through, we have opportunities that we didn’t have before.

Preston Pysh (19:43):

Here at the beginning, this is page five on the definitions. There’s a term here called person who provides digital asset services. I read this label and I immediately thought about myself running a full node and having lightning channels. I’m thinking, “Am I one of these people?” Then I read what constitutes it. There’s three things here. I’m not one of those three things.

Preston Pysh (20:08):

I’m just thinking to myself, where do I fit here for anybody who’s running a node and let’s just say they have one Bitcoin’s worth of channels opened? Are they considered a financial service provider?

Tyler Lindholm (20:22):

No. Absolutely not. There’s a reason why you can’t find yourself in that bill.

Preston Pysh (20:29):

I like that.

Tyler Lindholm (20:30):

No, so-

Preston Pysh (20:30):

Yeah.

Tyler Lindholm (20:30):

Yeah, no, no, absolutely not. I mean, you’re not interacting in regards to being a financial institution unto yourself. There’s no reason that you should ever… I mean, you’re operating as a node. You’re a network participant. It’s got really nothing for you in that legislation, besides the minimus tax exemption, which is super nice. Unless you wanted to-

Preston Pysh (20:54):

I do want to talk about this. I had this listed in my notes as… What did I refer to this as? Something like the huddle clause? Yeah, here it is. This is under the responsible taxation of digital asset section. I referred to this as the huddler clause and I have this in red. Let me flip through it here.

Preston Pysh (21:15):

Deferral of income recognition for digital asset activities. In the case of the taxpayer who conducts digital asset mining or staking activities, the amount of income relating to such activities shall not be included in the gross income of the tax payer until the taxable year of the disposition of the assets produced or received in connection with the mining or staking activities.

Preston Pysh (21:35):

If I mine a bunch of Bitcoin, I pay my electrical bills by selling some of that. I would realize that as income. But for anything else that I didn’t turn into, let call it U.S. dollars to pay my electrical expenses, I won’t pay any tax on that until I would use it in the future.

Tyler Lindholm (21:53):

Dispose of it.

Preston Pysh (21:53):

Yeah. That’s unbelievable.

Tyler Lindholm (21:55):

Yeah. Absolutely. That’s the way it ought to be though, right? It’s interesting.

Preston Pysh (22:01):

I titled this myself here, the huddle clause, because think about that. You are totally incentivizing businesses. Now, I’m interested in knowing, how does this work for like, if I was a gold miner in the United States, how does that work right now? I would imagine-

Tyler Lindholm (22:18):

Right now, so this is an important aspect that does need to be taken into consideration, mineral excise and how that works is not taken into consideration whatsoever. As far as the sale of those assets, take away mineral excise whatsoever, as far as the sale of those assets, this just mirrors that. It’s the same as any other type of asset. You’re not taxing until you dispose of that asset. It’s really just to make sense play to-

Preston Pysh (22:47):

Makes sense.

Tyler Lindholm (22:49):

Yeah.

Preston Pysh (22:51):

Yeah. It seems so logical and it seems like you guys are leaving enough room for the whole space to really breathe and become its own, but also making it important, like the hundred percent on the stablecoins and in the lending and just the rehypothecation in general. I know this has been Caitlin… I mean, Caitlin has been beating this drum for years on how important this is. It’s almost like nobody even wants to listen. I don’t understand why. Honestly, what do you think it is?

Tyler Lindholm (23:24):

I think it’s because Caitlin’s worked on Wall Street. She knows where the bodies are buried.

Preston Pysh (23:30):

No, no, no. I got that. I’m saying, why does nobody want to listen to it though?

Tyler Lindholm (23:33):

Oh, yeah, because it’s so much easier to ignore the monster in your closet. Pretend that it’s not there. The reality of this monster in your closet is it’s going to wreck you. It’s not only going to wreck you. It’s going to wreck your neighbors. It’s going to wreck your mother. It’s going to wreck your kids. That goes back to, I mean, the whole start of this, to the Satoshi white paper.

Tyler Lindholm (23:56):

This is why we’re here. If we don’t follow that through and actually keep that in mind while we’re participating then we’re doing it for the wrong reasons, in my opinion.

Jason Brett (24:12):

I was going to say, I think people sometimes don’t listen because it’s such an impact on their entrenched interests. They hear it, it’s funny, part of the bill toward the end speaks to that state banks should be able to have access to the Federal Reserve, like use the ACH and use the wires, right? Yeah. I mean-

Tyler Lindholm (24:37):

I don’t know what that’s about. What’s that [inaudible 00:24:41]?

Jason Brett (24:41):

[inaudible 00:24:41] have to do with it. Obviously we know, I mean, Caitlin Long went ahead and sued the Federal Reserve Bank of Kansas City and the Federal Reserve-

Tyler Lindholm (24:48):

I didn’t know that. Did she?

Jason Brett (24:51):

… Board of Governors. Yeah. I know. It’s shocking. Yeah. Just why not? The Creature from Jekyll Island take them on, but if you think about it, to me, it’s when the Federal Reserve couldn’t make up their mind for over almost two years with deciding whether to give this really important thing of having access simply to a payments mechanism.

Jason Brett (25:12):

That they took almost two years to do it, it’s clearly a stonewall situation. There’s these parts of these that… I mean, think about how opposite that is of the Bitcoin network, right? Anyone can have access to it. Whereas here we have… This defines the problem of when we have a body that’s over us that makes all these decisions that can affect and pick winners and losers, you know?

Tyler Lindholm (25:36):

Right. Did you see the routing number piece in there also, Jason?

Jason Brett (25:40):

The routing number came right after and Kraken got its routing number. I saw that, but I mean, yeah, what do you have to do to get a routing number if you’re a bank if these are… I mean, you think like basic rights, but all of this-

Tyler Lindholm (25:53):

It’s wild.

Jason Brett (25:53):

The bill overall is fascinating. Preston, I told you I had a surprise for you and Tyler on the show. I want to take this moment to announce to you.

Preston Pysh (26:00):

Oh, let’s hear it. Let’s hear it.

Jason Brett (26:01):

A really, really cool thing for me that I’m super pumped about. I’m proud to announce on the show for the first time that I am now the policy director of Bitcoin at the Bitcoin Policy Institute, that’s BPI. David Zell and Grant McCarty are there, but they have a website, btcpolicy.org. Michael Saylor was one of the initial donors that’s got this project off. There’s like 12 different fellows. I haven’t met everybody yet.

Jason Brett (26:36):

I just started, but the four main things we’re going to be focused on is going to be national security and geoeconomics, how open monetary networks affect the U.S. interest at home. Financial inclusion and human rights, how these technologies impact that level. Future of money, just questioning how do various forms of digital money interact and compare? Kind of like with this bill, looking at all different things, stablecoins.

Jason Brett (26:59):

Then mining and energy. How does proof of work mining impact the environment, power grids, energy independence, and renewables? What I love about this opportunity and the people I’m working with is not just that they’re also a lot younger than me, but they’re so excited and they’re building themselves into that traditional think tank. There’s lots of critical thinking that they all go through that I think could lead them to be maybe the next Brookings Institution.

Jason Brett (27:24):

But really questioning all sides of it, looking at the proof of stake question and all of that. We want to have debates in D.C. to take on some of the naysayers about Bitcoin too. I just feel like Bitcoin really hasn’t had its own think tank until now. When I was offered the opportunity, I took it and I’m overwhelmed by it. Yeah. Really it’s an exciting moment for me to be director of policy.

Preston Pysh (27:50):

Good for you. Jason, that’s awesome.

Tyler Lindholm (27:50):

Congrats.

Preston Pysh (27:51):

That’s awesome. Good for you, man.

Jason Brett (27:54):

Thanks.

Tyler Lindholm (27:55):

That’s awesome.

Jason Brett (27:56):

Of course, now that I say that. Nothing that I’m going to comment on as Tyler continues about the bill is on behalf of the Bitcoin Policy Institute because [inaudible 00:28:03].

Tyler Lindholm (28:03):

The hell it isn’t. It is now.

Preston Pysh (28:06):

Hey, so guys walk us through the timeline of events here, because for a lot of people that aren’t familiar with the activities on the Hill, they might see something like this hit and say, “Oh, so when are they voting on that? Like next week.” But there’s a big, giant process that’s going to pop out of this. Talk to us about that timeline.

Tyler Lindholm (28:25):

Yeah. The timeline’s tough because Senator Lummis is of course, a Republican, she’s from the great state of Wyoming, the first woman elected by the state of Wyoming as a U.S. Senator. We’re in the minority, the Republicans are in the minority. We do not set the schedule, but that is not why I… And I do want to talk about this because I think it’s such an important piece.

Tyler Lindholm (28:49):

It’s definitely not why Senator Lummis sought a bipartisan co-sponsor, co-leader right off the bat of Senator Gillibrand. She sought that because she was terrified that digital assets unto themselves would become hyperpartisan and that would be the absolute worst thing that could happen in this space is it became a partisan-only issue. It’s not a partisan issue. It’s not a political issue.

Tyler Lindholm (29:17):

I mean, we’re all true believers here. It’s one of those things that she really, really hunkered down on that fact and found a champ in Senator Gillibrand. As we go forward, I mean, the bill’s out there now. There are certain folks on the Hill that would love to do a markup tomorrow and there are certain folks on the Hill that would like to never see a markup on that bill.

Tyler Lindholm (29:41):

There’s going to be a little bit of push and pull that happens. I mean, we’re still hopeful that we can get it in committee for a markup before the end of the year and maybe even see some action as far as individual components of the legislation. Chances are, if I was a betting man, I’d say Senator Lummis is refiling in January. There’s always a chance. She’s got some great friends on the Hill.

Preston Pysh (30:07):

Let’s just play devil’s advocate and say that that’s what happens. Walk us through what that path would lead to assuming that that would play out.

Tyler Lindholm (30:13):

Sure. Well, so this is an interesting aspect is because the legislation does have so many different components to it, that’ll land in different committees. The commodities portion would go to the agricultural committee. Senator Gillibrand sits on that, which is handy. The securities portion would go to the banking committee. Fortunately, Senator Lummis sits on that.

Tyler Lindholm (30:36):

The taxation piece would go to the finance committee and that finance committee, she’s got a great friend in Chairman Wyden, but either way, so that portion would necessarily… I mean, not mandatorily, but should go there. Then the commerce portion of the legislation would be essentially everything else. The cybersecurity portion, those types of things would have to get picked up over there. A lot of different moving pieces as it moves forward.

Tyler Lindholm (31:06):

If it makes it through, whatever committee it’s assigned to, whether it’s all four of those or what have you, at that point, it would go to the floor. There’s lots of different opportunities as far as motions that could be made from the floor. There’s some fun that can be had before the end of the year.

Preston Pysh (31:27):

Jason, on behalf of btcpolicy.org, I want to hear your…

Jason Brett (31:34):

That’s right. I love it. Now, I was thinking about the fact all the ways the bill might get to be reviewed. I agree really with the assessment, we’re going to have to wait till January. While we never want anything to be one partisan way or the other, I do think we’re going to see a Republican Senate have majority after this election and probably in the House too.

Jason Brett (32:01):

That’s going to help it a little bit along as far as maybe that’s not perfect, but I don’t know that you’re necessarily going to have the champions you need of who’s running the show right now versus in six months. That being said, you’d like to think that what Celsius, Terra, LUNA, how much pain do we all need to go through-

Preston Pysh (32:23):

True.

Jason Brett (32:24):

… for someone to say, “Hey, why don’t we get some kind of bill out there that’s going to at least lay a framework. Maybe it’s not perfect. I mean, really, God bless you, Tyler, because I mean, you picked up writing this bill right after the infrastructure package when suddenly it wasn’t just me and maybe six other lobbyists that cared about this space, but everybody, or perhaps we-

Tyler Lindholm (32:45):

Well, to be fair, we were actually writing the bill before the infrastructure package.

Jason Brett (32:50):

Fair enough. Fair enough.

Tyler Lindholm (32:52):

Senator Lummis was ready to ride hard on this thing from day one. The infrastructure package was a double-edged sword. Obviously we don’t like the text that eventually went into law and there’s a piece in this, Senator Lummis’ bill, that fixes that from one of our colleagues over on the House side. Ultimately it got a lot of people looking at that policy matters.

Jason Brett (33:17):

Oh, yeah. No. I just meant, Tyler, that now that it’s introduced, at least from the papers, there’s so much lobbying attention in the space but of course everybody wants their own little piece or wants to change it now. I mean, there’s a lot of lobbying pressure, I think in general, in the spaces.

Tyler Lindholm (33:35):

Yeah. Yeah.

Preston Pysh (33:37):

How would you say that it’s been received so far?

Tyler Lindholm (33:41):

I’d say largely pretty good. We didn’t know. As we talked to everybody and their dog, I mean, honestly, Senator Lummis, she made sure we were scouring and we’ve talked to a lot of folks. There might be some folks that are watching this right now and they’re like, “Well, you didn’t call me.” Well, phones work both ways. Honestly it was great.

Tyler Lindholm (34:12):

I mean, there’s a couple of naysayers out there, but I also think that they’re naysayers based on not completely understanding what the bill does. For instance, there’s a lot of folks there saying, “How dare you define any asset as a security?” Well, listen, if you walk like a duck and talk like a duck, you’re a duck. I’m sorry. There it is. Also, on that point, that’s not the end of the world.

Tyler Lindholm (34:42):

It’s actually a good thing because the reality of the situation is you’ll now have the ability to move your project forward and actually get a response from the SECC and actually be able to file your Reg A or your Reg B or whatever. I mean, you can’t do that right now. You can move your project forward. There’s no more gray space. Yeah. I guess that went down a different road and I apologize for that.

Preston Pysh (35:10):

No, not at all. I think that it fits with what Saylor is recommending, is he thinks that some type of regulatory clarity is going to help everything move forward.

Tyler Lindholm (35:20):

Yes.

Preston Pysh (35:22):

Jason, did you have something you wanted to add on that last one? It looked like you might say something.

Jason Brett (35:28):

Oh, yeah, no, just that to me, I mean, I’d love to hear Tyler where Lummis came from when she first said she wanted to do this and what it turned into and her leadership. Because, Preston, I’m kicking myself because I think we have to remind ourselves, did we ever think we’d have a U.S. Senator who was a Bitcoiner who believed in it, who’s actually introducing bipartisan legislation, leading the space? It’s pretty historic, you know?

Tyler Lindholm (35:56):

Well, so for Senator Lummis, I mean she’s old school. I mean, she first got involved in Bitcoin back in 2013, her son-in-law, Will Cole, who’s a legend in the space unto himself, got his mother-in-law involved and explained the economics behind it. But for Senator Lummis, she’s not your average cat, neither is she your average mother-in-law.

Tyler Lindholm (36:21):

She had a prior history of being the state treasurer for the state of Wyoming. She did that for eight years. Before that she was in the state legislature, both the state House and the state Senate. In 2013, she was in the U.S. House. She’s got all this vast experience of dealing with budgets and she was on the appropriations committee when she was in the U.S. House and did all these things.

Tyler Lindholm (36:43):

The most important experience, the way she tells it, is when she was a state treasurer, and she was always looking for that good store of value for Wyoming’s investments. When she was introduced to Bitcoin, that really was the hook. Then fast-forward a couple of years later, there was this weird Northeastern Wyoming rancher that was starting to run these types of bills.

Tyler Lindholm (37:08):

For her, when she went into the U.S. Senate, it was a natural hook to be able to continue riding for the brand, riding for Wyoming, which is what… I mean, that lady lives and breathes it. But also on top of that, to protect state interest, because this is clearly a state interest at this point.

Preston Pysh (37:25):

Hey, what has been the scuttlebutt on the Hill with respect to the LUNA implosion?

Tyler Lindholm (37:34):

Well, I think the biggest thing that folks are talking about and watching on this whole scenario is the consumer protection angle. Are there funds being moved in a manner that is essentially theft? I don’t know. I’m not saying that they are, but that’s where everybody’s watching right now. It’s a terrifying aspect. I mean, as we explore these different technologies, just like the dot-com era, there’s going to be winners and there’s going to be losers.

Tyler Lindholm (38:05):

There’s going to be stuff that works and there’s going to be stuff that fails. In this situation, while it is fascinating to watch, it’s also really pushing the envelope on why this needs to be moved forward quickly, why the Responsible Financial Innovation Act needs some wheels on it because it would handle situations like this.

Preston Pysh (38:34):

In this general topic area, page 27 in the bill under the responsible consumer protection section, it’s talking about trading and it says, “In general, a registered digital asset exchange may make available for trading any digital asset that is not readily accessible to manipulation subject to its subsections.” When I read this, I immediately thought of NFTs.

Preston Pysh (39:02):

You’ve seen, I think just in the past month, where there’s been a couple of people that have been rolled up with respect to how they were listing NFT pictures on their exchange. When you’re dealing with something that has such low volume and so much marketing in order to spin the price in a direction. I mean, you could list this on one of these big pages on the front page and totally front run some of this stuff.

Preston Pysh (39:33):

When I’m thinking about this in this terminology with digital asset, which I suspect an NFT fits in that category is not readily accessible to manipulation. How are they going to get around something like that as an exchange, I’m looking at these big exchanges and I’m saying, “How are they going to continue to be able to list NFTs based on how that’s phrased in this bill?”

Tyler Lindholm (39:59):

I think it’s got a lot to do with decentralization, whether that’s NFTs or any old digital asset, it’s got a lot to do with the fact that can this asset be manipulated? Could somebody nose-dive it unto themselves? Can somebody flip a quarter of it or even an eighth of unto themselves and either crash or pump the market? That’s really where you’re going to see some… It’s going to take some fleshing out to be certain.

Tyler Lindholm (40:33):

But I would suspect that people should look at decentralization of assets long before they invest unto themselves as an individual and/or if they are an exchange. I think a lot of the bigger ones do necessitate that. Some of those bigger guys, they’re a little bit safer. And I’m not saying the bigger ones are always better, but they also do a pretty good job of digging down on these new assets as they come about and figuring out where they are and how they’ve been issued.

Preston Pysh (41:08):

Jason, any of your thoughts on that one?

Jason Brett (41:11):

Well, I think that I agree with the notion that we could avoid this if an agency like the CFTC actually had the leadership and the authority within it, by this bill to actually start regulating. Not readily susceptible to manipulation is the whole point you think of why we want regulation of the stock markets. It’s been pointed out even by one of the previous commissioners of the CFTC, the CFTC is not walking the beat right now. They’re not like the cop on the beat.

Jason Brett (41:46):

Their main focus is on the derivatives. They’re more like the house inspector that comes by once every few months. If they are doing some sort of action against Tether or Coinbase, it means that something really bad happened, right? What this is going to enable is… And there’ll have to be that reconciliation, right? It won’t be perfect necessarily.

Jason Brett (42:11):

But what you have to understand is by actually having somebody there on a day-to-day basis, the way you have the bank regulators reviewing what’s happening, that’s where I do really agree and I think this will help stop these types of issues. If it’s readily susceptible to manipulation, changing transaction history and everything, that’s what we live in now, right? The products are going to need to adapt, for those that choose this CFTC regulatory environment.

Jason Brett (42:43):

What I think you’ll find is once we get this authority over to the CFTC, you’re then going to see people who are just honest. They want to trade, they want to buy some NFTs, they want to buy some digital assets. They’re going to gravitate toward what they know is a regulated exchange. Because they’re going to know that they’re going to be treated fairly and it’s going to be safe, similar to the way we have the stock exchange today.

Preston Pysh (43:08):

I think a huge language and definition in this bill comes in the responsibility payment innovation section that we were talking about earlier. On page 44, there’s a section 4810 called issuance of payment stablecoins. Here’s what it says, “A depository institution may…” And it goes to the phraseology you were using earlier there, Tyler. “A depository institution may issue, redeem and conduct all incidental activities relating to payment stablecoins.”

Preston Pysh (43:44):

This is basically saying JPMorgan, Fidelity, you name it, these entities can now create their own stablecoins without any type of fear or retribution from the federal government. They can use these to clear and conduct transactions. It also goes into the next section B where they say-

Tyler Lindholm (44:03):

Those big boys would have to change their model a little bit though. If they were to go down this route and decide to issue a stablecoin, they would have to change their existing model on how they handle assets comparatively.

Preston Pysh (44:16):

From a risk standpoint, because it clears immediately. Is that where you’re going?

Tyler Lindholm (44:20):

Well, no. I mean, not only as a risk standpoint, but also I mean, they would be held under the same scrutiny as anybody else issuing a stablecoin in that regulated path, which would be, they would have to be a hundred percent reserved.

Preston Pysh (44:33):

Yes. That’s what you get into in the second part B here, required payment stablecoin assets. Then it says a hundred percent of the face amount of the liabilities of the institution on payment stablecoin issued by the institution. Because right now they’re all fractional reserve is, I think, where you’re going with this.

Preston Pysh (44:53):

As far as what would be partitioned that would be issued as a stablecoin, if that’s got a hundred percent backing and then you still have the other part that’s fractional reserve, would they still fit the description here or do you think that that is something that it would have to almost be like a operational subsidiary underneath of the bank that just handles the stablecoins?

Tyler Lindholm (45:14):

Yeah. I think it would have to be. Then also undoing that a little bit, as far as their risk management and moving forward, it would require some of these bigger dogs to really have to hunker down with their books and figure out if it is even feasible for them. I think probably enough push they could get there.

Preston Pysh (45:41):

They just buy USDC and they buy Tether. Is that really the play?

Tyler Lindholm (45:48):

I mean, they certainly could, but they would have to be a hundred percent reserved. I mean, USDC unto itself I believe is 35 billion.

Preston Pysh (45:57):

Wow. This is getting fascinating. This whole space. I mean, the speed at which this is moving, but this terminology here is so important for them to know and to realize where they stand and where they can operate from a legal framework.

Tyler Lindholm (46:14):

Right. Well, there’s also a really good piece in there that speaks to MTLs, Money Transmitter licenses, and basically Senator Lummis is saying, “Hey, that’s cool too.” Because what these MTL operators have done, Circle for example, they’ve gone state by state and become regulated in each and every state. Now, 49 out of 50 states have an MTL. Montana does not, the District of Columbia does.

Tyler Lindholm (46:46):

They’ve essentially got 50 out of 51 licenses in place where they’ve got to put down capital, where they’ve got to bond themselves, where they’ve got to report back. That’s a definite different route to go. I wouldn’t say that it’s easier, but it’s a different route. That’s something that Senator Lummis recognizes in the bill also.

Preston Pysh (47:10):

I had trouble finding a lot of the discussions around decentralized exchanges. What’s the general take with decentralized exchange?

Tyler Lindholm (47:18):

Yeah. General take on DeFi is there’s really… I mean, that’s peer to peer, so there’s not a lot essentially known at this point, as far as what that would even look like. Does it need to be? I think there’s cases where you can make that point. There’s actually a study piece in there, and I hate to point out studies because studies are non-actionable items, but at least we can learn some more.

Tyler Lindholm (47:44):

There’s a study piece in there as far as really… I mean, we obviously make the case for self-custody and how it’s none of the government’s business in the legislation. But we also point out in that DeFi study piece about the importance of, and why that might be a route to look at as far as supporting in the future, that self-custody piece under DeFi.

Preston Pysh (48:10):

How do you see taxes evolving 10 years from now in your humble opinion? Are we just going further downstream to the transactional level, instead of being able to peer into the rails where the larger balancing is taking place? If you spend a lot of money, then you’re going to be paying a lot of taxes on whatever luxury goods or whatever. That’s where we have to push the taxation piece, is down to the transaction?

Tyler Lindholm (48:42):

Well, I guess as far as a federalist standpoint, I would certainly appreciate more… Or not more taxes, but more of a focus on the sales aspect, because that only goes to states, and I’m here for that. Starve the beast. Starve the fed. No. That’s horrible. I mean, the reality of the situation is when it comes down to capital gains and income in the United States and how we look at those different things, I mean, boy, did we ever get this deal wrong.

Tyler Lindholm (49:14):

I mean, even look at the accounting screw-up, that Senator Lummis is fixing in this bill also. That accounting piece in there, the IRS-

Preston Pysh (49:22):

Oh, yeah, on the capital gains piece and how it’s getting… Yeah.

Tyler Lindholm (49:28):

It’s depreciative. They’re essentially saying Bitcoin’s a pickup truck. That you’re always going to lose money on it. Even though we’ve got a solid over 10 years of history proving otherwise. That was a little bit of a screw-up. I don’t think IRS is going to be too squeaky about fixing that. But on the taxation piece, evolving down the line over the next 10 years, I actually think that cap per transaction, I think you’re going to see that grow.

Tyler Lindholm (49:55):

I hope we don’t see an annual cap put in. Senator Lummis was pretty excited about not having an annual cap put in place. That way if you wanted to transact solely in digital assets, why should you pay capital gains? That’s silly, if you’re utilizing it as a currency.

Preston Pysh (50:15):

Yeah. Hey, the last question I got for you relates to competition between states. Whenever I think of which states are leading the charge in this entire space, obviously Wyoming, Texas, Florida. How do you think about this, Tyler?

Tyler Lindholm (50:34):

I think this is one of the few times in my life I felt like the nerdy kid in class that some jock is looking over his shoulder during a test. I feel like Texas is looking over Wyoming shoulder and… No, that’s… Actually, competition’s fantastic. I think competition… In fact, the entire digital asset space, Bitcoiners, everybody should be fist pumping over the fact that states are competing for their business, because that’s essentially what they’re doing.

Tyler Lindholm (51:09):

When states come out with bad policy, vote with your feet. Take your business to states that support you. God help us, guys. I mean, so this would be the plea for industry. If you want to see continued actions supporting your industry and seeing your industry grow, you’ve got to pick up your bags, man. You got to go. You got to get out of there. When bad policy comes about, exit.

Tyler Lindholm (51:37):

Exit stage left and go to a jurisdiction that supports you, whether that’s Texas or an even better place, Wyoming. Those guys will welcome you with open arms. On top of that, our power’s pretty cheap, so that’s good too.

Preston Pysh (51:54):

Jason, you got any closing thoughts or things that you want to highlight?

Jason Brett (51:59):

Yeah. I’ll just say it’s interesting. We go back to the idea of what the Federal Reserve access to accounts in the banking and the juxtaposition of all the options and you could opt into the stablecoin. You can opt into the CFTC. The one thing that we’re seeing as a challenge now where the federal regulators are starting to throw things out, like SEC put out an accounting bolt in 121.

Jason Brett (52:23):

It’s a question of whether banks might start to adopt this concept that just because custody’s really complicated, you start to custody a billion dollars of Bitcoin, that means you have to have a billion dollars of a liability on your balance sheet. Then what’s good about this bill is it starts to talk about creating the standards for digital asset custody and that’s really what’s needed.

Jason Brett (52:44):

I think at the end of the day, the net positive of a bill like this is we have something to work with. I think that everyone agrees that things may change along the way, but if we at least have a place to say, “Yes, let’s, for once, really promote the economy of the Bitcoin miners.” Don’t make them just sell it right away. They can sell it when they want to.

Jason Brett (53:07):

The $200 is something I think for a long time has been said, any kind of just very small to minimus amount, just to allow people to start using Bitcoin in a way where it’s just not always a taxable event. We have to make some reasonable choices here. I think the bill starts that discussion. A big bill like this doesn’t necessarily have to pass this session to be successful. This is the start of what I hope becomes eventually the law of the land.

Preston Pysh (53:36):

Fantastic. Tyler, Jason, guys, thank you so much for making time and coming on the show today. I’m going to throw it over to each of you guys to give a hand-off to maybe your Twitter feed or anything else you guys want to highlight on the way out. Tyler, go ahead.

Tyler Lindholm (53:52):

Yeah. I’ve obviously worked for Senator Lummis, so everybody go check out lummis.senate.gov. You pronounce it Lummis, not Loomis. Lummis like hummus. Check that out and obviously check out Senator Lummis’ Twitter. You can follow my Twitter also, although I will note on my Twitter that retweets and et cetera are my own, not Senator Lummis’. Please don’t take anything I say as coming from Senator Lummis, especially when I’m shit-talking Jason on Twitter. I wouldn’t do that, but no, that’s it for me.

Preston Pysh (54:29):

Thank you. Jason?

Jason Brett (54:31):

Well, yeah, so @RegulatoryJason on Twitter is where you can follow me and thoughts I have. I told you at the last show, Preston, I was working on a place or a website where I could put a list of all the different bills or impact on Bitcoin and regulations. Now we have that where I actually now work at, btcpolicy.org, but I’m again really excited about the Bitcoin Policy Institute, BPI. I’ll be their director of policy and you can follow me on their website as well.

Jason Brett (55:04):

Again, that’s btcpolicy.org. Looking forward to just continuing to engage a lot of thought leaders in the space and discuss this fascinating world.

Preston Pysh (55:16):

Guys, thank you so much. That was a blast talking some of this stuff. Thank you for your time.

Tyler Lindholm (55:22):

Yeah. Thanks for doing it, Preston. Really appreciate you.

Preston Pysh (55:25):

If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use, just search for We Study Billionaires. The Bitcoin-specific shows come out every Wednesday and I’d love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. It’s something that helps others find the interview in the search algorithm.

Preston Pysh (55:50):

Anything you can do to help out with a review, we would just greatly appreciate. With that, thanks for listening. I’ll catch you again next week.

Outro (55:58):

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