Charles Hoskinson on why the Clarity Act misses crypto's real needs

0:00I'm Ashton Addison from the Crypto Coin Show, and today on Blockchain Interviews with back with us Charles Hoskinson, co-founder of Ethereum, Cardano, Midnight Network, here to talk on everything in the industry and the latest updates and launch for Midnight and privacy infrastructure and institutional adoption and much more. Charles, welcome to the show and

0:21thanks for taking the time. Great to be here, Ashton. How you been? Very well. Yeah, despite maybe what the retail would consider the market conditions, things are going strong. We seem to still be building and Midnight's having successful launches. So, we keep pushing forward and I'll take it. So, I'm excited to dive into all of that today. You know, you and me both have been

0:47through multiple cycles in the industry and don't seem to lose any faith whether the price of Bitcoin, Ethereum, Cardano are up or down. We just continue to build. Maybe you can start by, you know, touching on that why and sort of phasing the putting the price aside in why are you still continuing to build despite what some people, you know, might might get tired or give up if I

1:14think the going gets tough. Yeah, I mean, it's too hard if it's about money. You know, I made enough throughout the years. I mean, if you've been in around dollar Bitcoin and you're still here, you can't be here for the money. Either you're the world's worst businessman or you got to be here for philosophy. So, I'm here for philosophy and at the end of the day, the job is not done.

1:36You know, when you look at Satoshi's vision, there were some very clear extractable action items from that vision. One, you need to have a world financial decentralized financial operating system. So, do we have that? Are all the stocks and bonds running on it? You know, are we doing all our lending? Is everything happening that way? No, we're getting closer like with

1:57the RWA and stablecoins and all these other things. We've made enormous progress in the last 15 years, but we haven't achieved that yet. Number two, it has to be resilient and decentralized. Okay, so have we achieved a resilient decentralized world financial operating system? No. In fact, if anything, they're re-centralizing for efficiency purposes and that's

2:19problematic for us as an industry. So, the core technologies aren't there. Number three, we're missing key things that are required for this to be safe for everybody to use. Number one, we don't have privacy. That's a huge problem cuz every single thing you do in cryptocurrencies will be and is recorded for people to use later on against you whenever it's politically

2:43convenient for that to happen. So, we see all this de-platforming occurring on YouTube and this de-platforming occurring on, you know, social media and everybody's like, "Oh, that's unfortunate." Well, imagine if you could be de-platformed from your entire economic agency where somebody can just push a button and basically they can take your money away from you at any

3:02given time. That's real bad. And if you don't have privacy, you're not going to have that. Nor do we have identity inside these systems. So, when you look at these systems, you have to have the ability to sort out regulated from unregulated business, safe from unsafe business, permissioned business versus permissionless business. You can't just say everything fits very

3:22cleanly into the Bitcoin paradigm of, "Well, it's all following exactly the way Satoshi designed it." There's very complicated things. For intellectual property, for example, you may want to charge a royalty structure to one group of people, but to another group of people, you want to charge a different royalty structure. For example, let's say that you're a rap star and you want

3:42to have a royalty structure for African-Americans in Chicago that's totally different than a royalty structure for everyday people cuz you want to incentivize the neighborhoods you grew up in as an example. That's your prerogative, but you then would need to identify a lot of things, right? The person lives in Chicago, they're of a certain ethnicity, they

4:01have the background that you desire, all this type of stuff. How do they prove that but preserve their privacy at the same time? So, there's a selective disclosure component. So, when you look at all these things, we're making forward progress, but we're not making forward progress in a balanced way. It's asymmetrical. You know, there's there's spikes of brilliance and

4:23then some of the systems are anti-patterns where they're regressing back either because they're becoming centralized or because the systems actually cannot be made private by the way they're designed. So, what we did is start from first principles and say, "Okay, what are the missing pieces to fully realize this world financial operating system and fully realize these

4:41these things that are required for everyday people to use it and let's build a project to do that for everyone, not Cardano, but everyone. So, Bitcoin, Cardano, Ethereum, Solana, as well as the off-chain stuff as well. So, it's a very very different mindset cuz you go from that layer one wars where we were at in the last 5-10 years to kind of a like get along and work with everybody,

5:05which is great, but it's also really hard and complicated. There's a lot of moving pieces to it. So, Midnight kind of came from that thought process of let's finish the job. Let's get it done. Let's get the last generation in place and then once we have something like this, we're in a really really good position to basically build on top of that and deliver the vision and get

5:26everybody into this new system. What's been fun about it has been how welcoming everybody's been. You know, it's been very easy to work with the Solana side of the house and the Avalanche side of the house and you know, all these different ecosystems. And what's been fun about it is that there's great technology and great standards that are are cross-chain. When

5:47you look at the intent standards, the chain abstraction standards, when you look at things like the OWS or the Ethereum name service or any of this other stuff, it's not like they just built it for just one chain, one idea. They actually started thinking what would a multi-chain world look like. So, the industry as a whole actually agrees that we need our Wi-Fi moment, you know,

6:06the standard where everything just kind of works and we need to make it super easy for a consumer to use. been very encouraging as well and it's great to see that there's still some builders around there that want that original vision to be fully realized and it's really the last major thing I think I'm going to work on before I retire and I don't know how long it'll take. Cardano

6:24took me 10 years. So, I might be here for quite some time, but it is the most important and meaningful thing cuz it's the thing that makes it real. It's what's going to onboard the billions of people and get the unbanked banked and it's also what completes the vision in a way that has principles behind it. I love that and it's encouraging to hear

6:43the different protocols are so easy to work with and everyone has understood from that the future needs to be multi-chain and that different protocols need to work together if we're going to grow adoption to people that are outside of this decentralized world, but that's always sort of been like, "Well, we just need to move the assets from one chain

7:02to another." But, it's it's there's still that transparency issue and that centralization issue where, you know, as you said, you know, it'll come back to bite you whenever the time is right. And so, to have Midnight working on something that's not just for Cardano or that it applies to Bitcoin, Ethereum, Solana, I think that's super important and that's an aspect that's different

7:25than just being able to move your assets over there. Yeah, and you know, you've done it wrong if people have to care about the experience. If they have to know how crypto works, they have to know what chain they're on, they have to know how that chain works, you've done it wrong. You have to do it right and then doing it right is the consumer doesn't even

7:45know they're using crypto. And the example I like to give is make make it simple for people. Like, for example, let's think Tinder. You know, that's that's the ultimate trust engine. When people think about that, swipe left or swipe right. Your only basis is the picture and the chat log, but how do you know any of that's real? How do you know it's not a bot and how do you know it's

8:05the real picture? So, you have this concept of selective disclosure but verification of the selective disclosure. And you'd like to be able to make that a safe encounter for everybody involved and you like all the things that you think you're getting into to be real. And you know, I use it as an example because it's it's pervasive. Like, everybody under the age of 30 instantly

8:26gets it and they instantly have a bad experience with that. You say, "Well, what does that have to do with crypto?" It has everything to do with crypto. You want privacy. You want data custody. You want self-sovereign identity. You want selective disclosure. There may be a payment system, who knows, you know, for stuff there. You know, all all kinds of

8:44stuff. You know, and so there's there's there's all these things and that's just not crypto, but it could use a crypto rail and it can influence and help the lives of millions of people very quickly. Then you also have other things, too. Like, for example, you can use that same concept. You go to a conference. Okay, well, let's say you want to meet somebody at a conference. Well, you

9:06don't want to waste your time. And so, instead of if there's 50,000 people at Token 2049 and I'm an investor and I'm only looking for DEXes on Solana, how do I sift out and only talk to DEXes on Solana? And those DEXes on Solana, they don't want to meet with randos. They need to make sure the person they're meeting with is a real VC with real assets who can actually invest in their

9:27thing. So, both sides have to decide that and then they have to meet each other in a safe location. Now, we have a geotag. So, the very same technology that can enable a Tinder can enable that experience. Or let's say you're a software developer and you have a desire to do a selective disclosure and bug bounty for responsible disclosure and bug bounty for flaws in

9:49your software. So, you can build a marketplace for people to sell zero-day exploits back to the companies. Okay, so there are marketplaces for black hats to sell zero-day exploits on the dark web, but there's no marketplace where you can actually create an auction or a bidding system to prove that you have an exploit and sell it back to the company in a lawful way.

10:10Because you know, like you know, Microsoft, oh, well, we have $500 for a bug bounty. I just found a zero-day exploit for Windows update and this is like a billion dollars worth of damage I can cause with it. You're going to give me $500 for that? you. I out of principle, I'm just going to release it online. So, why don't we create a marketplace for this?

10:28Well, that's exactly what blockchain is built for. It's a payment system. It's a selective disclosure system. So, these are three radically different use cases. One professional, one personal, and one security related, but all of them could use this idea. Now, what if you want to be paid in stablecoin? What if you want to be paid in ether or ADA? Why should

10:46this be chain specific? It shouldn't be because these things have nothing to do with Ethereum or Solana or anything else. They transcend that. So, the first step is abstraction. You know, you step away from the chain, you step away from the cryptography, and then you create a beautiful UX on top of that called the Midnight Passport. And then it's multi-chain by default, and so

11:08it's very easy for people to decide what they want. And then once they have it, then it's just a question of where should it get solved? In some cases, it's infrastructure A that's best or other cases infrastructure B, but there needs to be a coordinating function to get to get all these different things to talk to each other, and there needs to be provability. The other thing that

11:26people are missing is that the majority of users in the future are going to be robots. They're going to be agents. They're not going to be human. Okay, so when you look at the internet of 2035, overwhelming majority of internet searches, overwhelming majority of internet commerce, internet advertising, internet consumption will be agents working on behalf of a human.

11:50The language you and me have is nonverbal communication. Okay, so when I talk to you, I can see do you smile? Do you frown? Are you interested? Are you bored? I'm programmed and you're programmed cuz we're human beings. We have brains. They're designed for this. That's how we assess credibility, but agents don't have that. So, what's their language? Their language is proofs.

12:10And so, when agent A talks to agent B, agent B is going to be like, all right, well, that's great what you're telling me, but you need to prove that you have the right to do that. Well, blockchains are a proof regulation system. They're a trust engine algorithmically. Okay, there's their signatures and zero knowledge proofs and all these other things, and really it's sorting out who

12:30has the right to do what and what is the policy behind the asset. So, agents live in blockchain land. This is actually their commercial layer. And you're already seeing standards like the OWS and the X.402 and other stuff like that forming that are basically doing all that. The missing piece is there's no proof layer right now. So, it turns out those very same things that give you

12:51selective disclosure and zero knowledge proofs for commerce can also create a language for agents to talk to each other. So, that's another direction that we've been building Midnight in, and it's something that we emergently discovered throughout the years, and we realize is a missing feature. You got to build something for them because at the end of the day, they're the ones who are

13:09going to be doing everything for you. And by the way, the more you share with agents, the better they can do the job, but the more you share with agents without rules means the more whoever runs the agent knows about you. And so, creepy Sam Altman gets to do all kinds of crazy and that's that's a huge social problem. It's much worse than Google. You know, these agents are so

13:29invested in nestle in their reasoning systems, so they can act on that data. So, you need controls and guardrails, and where do controls and guardrails come from? Blockchain technology. So, it really is the missing part when you think about it, and that's why Midnight's the most exciting thing we're working on cuz it touches everything, and it's kind of already future-proof

13:47for where the world is going. Definitely. And I completely agree, and it is creepy, and because the AI is getting so good, it gets personal. You start asking very personal things to it, and all of a sudden Sam has a huge database of your whole life outside of work as well. And I would love to see some blockchain solutions that can help put in those barriers

14:08to protect people's not just financial privacy, but just their privacy in general. Yeah. And you mentioned X.402. As more people start using AI AI agents and the other standard standardizations as well, payments are going to become, you know, probably AI agents will start doing more payments than than people in crypto potentially. And I feel like stablecoins

14:31is a major part of the types of assets that they're going to be using. You mentioned, you know, you should be able to send any types of other crypto as well, but with stablecoins are at at least with USDC and USDT, and legislation around stablecoins is right now, how important is that for keeping that in mind as Midnight's being built out on the stablecoin side?

14:54Well, what's nice is we have the genius act, and you know, it did create rules of the road. MiCA has rules of the road, and the rest of the world does. So, stablecoins are here to stay, and they're fully regulated now. So, we're very good with stablecoins. You know, it's not a problem anymore. The bigger challenge is less about are stablecoins here to stay, and it's more about the

15:12broader ecosystem of cryptocurrencies and DeFi and all this other stuff because stablecoins are seldom used as a stablecoin. It's used as a mechanism to conduct commerce and activity. And so, it always has to be in reference to some other digital asset. So, it's it's kind of like having one without the other. It's like going to the Fun Factory when I was a kid in Hawaii. There was an

15:32arcade called the Fun Factory in Maui, and we had these little tokens we would buy. So, you put a dollar in and you get all these tokens out, and then you put them in the machines. So, stablecoins are the tokens. But if you don't have any of the arcade games to put the tokens into, there's like no real point in having them. So, unfortunately, that's the Clarity Act, and we

15:52haven't been able to get there as an ecosystem. So, we're working. We're trying. Yeah, and at some point something will come through. But at the end of the day, as these things start maturing, the crux of it is compliance. The legacy people are saying, well, you got to be a bank to use cryptocurrency. They want to ban non-custodial wallets. They want

16:14everybody to be regulated. They want to centralize all the DeFi. They'll just take the D out of DeFi and make it Fi. How this is any different than what we have before, I don't understand, but maybe you shouldn't have 80-year-old people involved in lawmaking. You know, it's it's a problem, right? And then the other people say we don't want any regulation at all. There should

16:31be no rules whatsoever. It should be a complete laissez-faire market like the baronial age of banking in the 19th century. And so, there's got to be a middle ground there, and that's that's where the zero knowledge stuff and the identity stuff really fits in because then you can have your cake and eat it, too. You can kind of have selective disclosure. You can have self-sovereign

16:47identity. You can use zero knowledge proofs to settle. But that unfortunately is not compatible right now with US law. So, you have to do that through sandboxes. So, we have been. You know, we have sandboxes in Argentina and the UK and Abu Dhabi and other places where we can kind of explore the art of the possible, but it's a process, and it takes time to

17:05kind of work their way through and do things to get this done. But that the reason we built Midnight is we wanted to have something that could keep up with it. So, basically, as law evolves and as the standards evolve, we can kind of co-discover what regulated transfer value looks like. And there's already great partners we have that are exploring the art of the possible of

17:27this. Like zk.me is one. If you go to zk.me, you could kind of see what the art of the possible is. And they've already kind of built a ZK KYB and a ZK location disclosure, things like that. Like all the time you'll say, okay, US customers are not allowed to participate. Well, how do I prove that to you? Well, I have to prove that I have an IP or something that's not in the United

17:48States and I'm not under US jurisdiction. So, the problem is by doing that, you know where I'm at. And you didn't ask me the question where you at. You asked me the question, are you under jurisdiction? It's a different question. Well, what if I could do a zero knowledge disclosure that proves that I have an IP address that is not and I am not a US user?

18:07That's it. But I didn't reveal if I'm German or French or any anything else in the process. That's the kind of granularity where then you can start building a very safe system. And you look at the United States, there's been a big thing in pornography right now with like Pornhub blocking state by state as they pass laws people's IP addresses. Oh, you're a Texas resident,

18:27you can't access this or you're a Utah resident, you can't access this. Well, nobody really wants to create an account cuz like who wants a Pornhub account, right? And so, so ZK disclosure is an example of how you resolve that in an account-free way. You can provide a zero knowledge proof and prove that you're not part of that location, but you don't

18:45have any other knowledge transfer that's occurring. And I use these examples. They're kind of edgy, but at the end of the day, it's like it's not small potatoes. You're talking about billions of people you know, in these vice economies or non-vice economies, and it's an everyday flow, and it's self-evident why privacy is required. You know, some of these use cases,

19:06you're like, I don't know. In other ones, you're like, yes, we absolutely need pri- privacy. Delete my browser history, right? People get that. They understand that use case is there. And the beautiful thing is it doesn't matter if it's that use case or medical records or supply chains, whatever have you, it's self-evident that all these things are covered. Now,

19:26it has to be able to seamlessly move between the individual, the company, and the government. So, the problem with privacy right now is that the stacks are different based upon the emergence. So, what you would do as an individual are very different from what you do as a company, very different from what you do as a country. And what we're trying to

19:44do is unify that with Midnight so that those stacks are one set of technologies. Now, you'll do more as you move up to higher risk, so you go from a single user to federated to you know, to lots of other technology that you layer on top, but use one family of technology, so you get economy of scale. And that means that investments made by the Fortune 500, investments by by

20:09governments, they percolate down to the end user. And you get all of that. We saw this a lot when government started adopting Linux at scale. They put a lot of money into hardening the Linux kernel and hardening Linux itself. In fact, the NSA had a program called Flask, which turned into SE Linux, because they wanted to use Linux, so they hardened

20:28the hell out of it, so they could use it for their own operations. Now, we all benefit from the NSA's investments into making Linux stronger. So, similarly, when you look at Midnight, you know, one of the things we've been trying to do is that unified approach, so as we get large users or we collaborate with large companies like what we're doing with

20:45Google Cloud or MoneyGram or Vodafone or these other things, all those lessons and learnings can percolate down to the end user, and then you have a huge lift in the overall privacy of everybody. Definitely. It's super important. And with the back and forth on the Clarity Act right now, you always mention, you know, we need clear rules of the road.

21:07And when there's different parties that are are trying to agree, what are what do you think is needed for good crypto legislation, and how do we balance the privacy with compliance? You know, is that ZK a part of the discussion right now? And you do you think clarity the powers that be probably think clarity means total transparency, and we want to see everything

21:31including what's beyond the ZK. We want to know the other stuff, so we can know as much as we can about you. Where's that balance? So, I think the most important thing to understand is that you can't do big legislative packages in a world that it doesn't have any bipartisanship. You know, if you have both parties agree and there's good faith and you

21:51have the ability to rapidly fix things, and the legislative process is working in a healthy way, you can do a lot very quickly, because if you screw up, you can go back and fix it. But there's this perception that once we pass something, it can't be changed. And the evidence point I have for that is that the Securities Exchange Act of 1933 is unamendable. We can't change the

22:11definition of a security. It's 93 years old. FDR was president. JFK's dad was the first chairman. We were in the middle of the Great Depression. Hitler was in charge of Germany. I mean, this gives you a sense of like how old this legislation was and what was going on in the world at the time, okay? We just gotten out of the Roaring Twenties. Different time. Radically

22:32different time. So, why in God's name can we change that? But then we have this illusion that we can pass a law and if we don't like the Clarity Act, we can always just go back and fix it. So, the very first thing you need to do is start with the definition of a security and update modernize to add an extra category of a concept of blockchain-based or digital security.

22:52Okay? Then once you have that, then you can use the blockchain as a disclosure mechanism, and that's a hook that you can then use for rule making to allow ZK disclosure all these other things. You shouldn't by statute prescribe technology. The European Union tried to do that, and they prescribed that you had to use USB 2 as a standard. Well, what happens when USB 3 comes out? Oh,

23:12I'm not allowed to use USB 3. I'm sorry. The rule making said I'm only allowed to use USB 2. But that's an old standard. It's like, yeah, well, we got to go back and the European Union has to go and update the whole thing. Doesn't make any sense at all. Rule making is how you do that, where you can prescribe approaches and technologies in consultation with

23:29the industry through a self-regulatory model. But on the statutory side, you have to create updates on the law to recognize that technology has moved on. So, right now, how does disclosure work with securities? There's a company, and there's the SEC, and then there's the market. So, the company has to disclose all these things, and they have to have

23:47a direct relationship with the Securities Exchange Commission, because that's how we did it in a paper-based economy in 1933. But it's 2026, and the security can be decentralized and doesn't have a single company that speaks for it. So, anybody, any entity can disclose. An exchange could potentially disclose on behalf of a decentralized application like MiCA

24:07does with its disclosure regime. So, that's the starting point, and then once you have something like that and the cost of compliance is low and the technology of compliance is easy, then nobody would care if they were a security. Right now, the problem with being a security is you can't comply and you have no liquidity. So, if you're labeled as a security, you're

24:27effectively dead as a project. There's no path forward. You have a competitive disadvantage over everybody else. Furthermore, there's no path to decentralization, because you have to stick around to keep disclosing, so you can never shut down. If you go out of business, the security is no longer legitimate. So, how is being a security compatible with decentralization? There's no path.

24:49So, you have to create a concept of a decentralized digital security, so you can stay in that security status and have some sort of disclosure regime, but you don't have to have a centralized entity. That alone would resolve about 70-80% of the issues we're having with DeFi right now, and also Brian Armstrong's issue with his yield-bearing stablecoin, because

25:07what he would do is just create two instruments. You'd have the regular stablecoin regulated by the Genius Act, and then you'd have a secondary token connected to it that's a security, but it'd be under that new thing, and that would pay a yield. And he'd have the same liquidity. And every US people could own it. You wouldn't have the SEC stuff or any of these other things. But

25:24because there's no construction for that, he has to somehow sneak into the Clarity Act this idea that a yield-bearing stablecoin based on a centralized business's activities is somehow a commodity. And then the commodities people, the CFTC has to become the SEC. They have to build a miniature Securities Exchange Commission within the CFTC without any

25:47funding to do it and no mandate to do it, and culturally it's incompatible. They're a principles-based regulator. They're not a statute-based regulator like the SEC is. So, so, the CFTC is just different animal, but we have to now make it work there because nobody wants to be a security. And why not? Because we can't update something that's almost 100 years old.

26:07So, you have to start with your ability to update language from the past and bring it into the future. And then you have to understand what level are we operating at. There's the statutory level, there's the rule making level, and there's the industry level. So, the statutory is the law that the Congress passes. The rule making level is the agencies, okay?

26:27So, that's the CFTC and the SEC and all these other guys. And then the industry level is how does the industry interface with the rule making? And how do they change the rules over time? So, that can be done through a self-regulatory organization like a FINRA. That can be done with direct consultation, where they're actually in the rule making room, okay?

26:47Okay.

This is nothing new. It's how people do it. And the problem is that every level the process has been horrifically corrupted. On the statutory, the law making side, nobody knew what they were doing, and there was no leadership from the crypto czar. He didn't never done legislation before. He's very bad at it. I've done legislation, and the legislation that I

27:08pushed forward passes unanimously, like the Stem Cell Freedom Act that we passed in Wyoming, or the 30-plus crypto laws that we passed in Wyoming. They were non-controversial. Democrats voted for them, Republicans voted for them. There's a process you go through, and the prep work in getting to legislation is very important. Takes about several months. You got to bring everybody

27:28together. You got to kind of talk and get some sense of what they're willing to do, not willing to do. You got to talk to the industry as well. Okay? Now, none of that was done. They just went straight to the rule making and straight to the law law making, and they excluded the Democrats from the process. And the problem is if the Democrats aren't included, they have no

27:45incentive to support or vote for this bill in any way or capacity. So, that already was a massive issue. And then the other side of it is there was a conflation of layers. You already have to kind of plan out how the industry is going to interface and how the rule making is going to happen before you write the legislation. You don't try to figure it out real time

28:07inside the legislative process, because then it's a bum rush. All these different agencies show up, and they're like, well, we want some more funding, so we'll take care of this, and we'll take care of this. And then the industry will show up, and then what's your inclusion-exclusion criteria? Does Ripple get to be in or not? Does IO get to be in or not? Does ConsenSys get

28:24to be in or not? And what constitutes an American cryptocurrency business? Currently, CZ, a Chinese guy living in Abu Dhabi, has more to say about the American cryptocurrency business than any American. Okay? Cuz he controls 80% of all the liquidity of altcoins in the market. He's not at the table. So, we're going to regulate the American industry, but we forget that we live in

28:48a global environment, a global world. It's like trying to talk about oil without talking about Saudi Arabia or Russia or any of these other producers. No, we're just going to talk about the American oil business. So, it's not a global market? Well, it is a global market, but we're only going to talk about America. Okay, so you never ship oil to another

29:04country? You don't build pipelines to other countries? It's like it's it's just so patently absurd. And there was no attempt to globalize. Not once did David go to Europe and talk to the MiCA people. Not once did he go to Japan and talk to the JFSA or to the Singapore or any of the other people. There's no fingerprints for this. And they're about 5 to 10 years ahead of us.

29:22Almost every major nation has a full cryptocurrency regulatory framework, for better or for worse. Some are very permissive, like the Abu Dhabi and ADGM regulations and the Dubai VARA regulations. Other ones are very restrictive, like the European MiCA regulations or the JFSA whitelisting standards. Okay? So, where do we sit? The president says he wants America to

29:45be best place to found, fund, and run a cryptocurrency business. Okay, so how do you build a competitive matrix? You know, you always do this in sales. You're like, this is their product, this is our product. So, where's our checklist of criteria to compare what we do? But also, you have to normalize regulation. Why do you have to normalize it? Because

30:04guess what? When I create a cryptocurrency, I'm going to have a European try to use it. And I'm going to have a Japanese person try to use it. I'm going to have a Korean person try to use it. Go figure. Oh my god. How do I stop these people? Oh, they just do. It's decentralized. So, it doesn't work just to have a US-only regulation. It has to be normalized globally with regulation.

30:26Again, they didn't do any of that. So, that's why it failed. You know, it's it's one of those things where garbage in, garbage out. If the process is wrong, the output will be wrong. Why Clarity is having so much problem is because the process was fundamentally tainted in the beginning. It was a patronage system. People paid between 1 to 5 million dollars to be in the room.

30:49Some paid even more. The people that are in the room, they didn't really systematically think about it. They were just addressing their personal needs for their personal business as opposed to what is an industry-wide need. And also, there was no recognition of global work that had already been done and what had failed and succeeded. And there was no

31:07recognition of the regulatory realities of these things. For example, very early in the process, I tried so hard to get NIST, the National Institute of Standards and Technology, involved. Why? Because they set all the standards for the United States government. And I said, "Guys, at some point, maybe, I don't know, the US government's going to want to buy a

31:25blockchain system." But it has no definitions of what is a blockchain, what is an asset, any of this stuff. So, who are they going to do? They're going to go to NIST to ask them to do that. Just like they go to NIST as for post-quantum cryptography standards or any of these other things. But they weren't in the room. So, there's no engineers, no scientists,

31:44no nobodies in the room. And then you got a bunch of lawyers sitting in a room trying to figure out what the is a blockchain. And what is a cryptocurrency? What does all this technology mean? And they're just like feeling in the dark, you know, an elephant for this thing. So, maybe just maybe you should put some engineers and scientists in the room with those

32:00lawyers who, by the way, work for the US government. They don't work for me. And they don't work for Coinbase. And they don't work for ConsenSys. So, they're not bought. They're objective in their discussion. And they're thinking about how would the military use this? How would the Department of Commerce use this? How would the State Department use this for refugee relief and all this

32:18type of stuff? They're thinking it globally about this technology in both financial and non-financial ways. Did they do any of that? No. They didn't do any of that. Again, because they picked the wrong crypto czar. He had no idea what he was doing. And it just created this horrible outcome for everybody. So, now we got to clean up the mess. And if we don't pass

32:35Clarity, then we have to wait till 2029 to pass it cuz the Democrats going to shut everything down in 2027. And if we do pass Clarity, everything is a security by default that's a new project. That's the bill that they've given us. And with no updated security, this effectively will kill all new American cryptocurrency projects. There's no path to liquidity or

32:54decentralization. Cuz you can never grow if you can't get listed on exchanges. You can never grow if you can't broaden the ownership of the project. And you'll get no VC investment if you're a security by default. So, you get no VC, you get no community building, you get no exchange listings. But then somehow you're supposed to grow to become a mature blockchain and

33:12escape. It's a bill for the incumbents. Cardano will get a pass. XRP will get a pass. Ethereum will get a pass. We're already commodities under the mature blockchain standard. So, it's good for me. It's horrible for the industry. You see, and this is this is my issue with it. You don't pass legislation this way. No, it's it's a little backwards. And

33:34I think the blockchain industry understands, you know, multi-chain future. We need to work together between different protocols, which also is in different jurisdictions potentially to grow. And with the US saying we want to be the crypto capital of the world, crypto is inherently global. We need to work together in other jurisdictions. Otherwise, we it just won't work. It's

33:56like, you know, fitting a square peg into a round hole. It's like you need to do commerce globally. There's no such thing as only inside the US for any kind of crypto payments. That just doesn't make sense.

Yeah. And it would have been so easy to bring those guys together. Be like, "Hey, you can come to the White House." Instead of having this little vanity

34:15fest of whoever donated the most comes to the White House and Trump gives a 5-minute speech and then off. What you do is you go to these regulators abroad and you say, "Hey, we'd like to have a workshop in Washington, D.C. at the White House for a few days to go ahead and talk about" or the Treasury Department to go and talk about normalization of regulation. And you

34:33know what? It's a great honor if you're some mid-level bureaucrat in some small country to get invited to the United States to be at the White House. You're going to say, "Yes. When can I come?" And you bring all those people together. And what's nice is you get a sneak peek of all the different regulatory frameworks. And then you get to ask them the same set of questions. What worked?

34:51What didn't work? Are where you getting tax compliance? Where you're not getting tax compliance? Where are criminals using it? Where's this and this and this? And then what you do is you have an interagency show and tell. So, you invite FinCEN, the DOJ, the SEC, the CFTC, all these other people to go and interact with their counterparts in the other

35:09jurisdictions. Okay, so then you start that cross-pollination. And you extract from that process through a workshop some basic principles of interoperability. And say, "Okay, we think if we adhere to these types of things that we're going to be okay. And this is how you translate from one system to the other system." And then you ask what type of statutory

35:27flexibility they have. So, if the United States did pass a law, would you guys change your laws to be compatible with the United States' law? We saw that with Sarbanes-Oxley. We passed it in 2003 on the back of Enron. The next day, Australia and all these other countries passed the exact same law cuz they wanted to be interoperable with the US standards.

35:47They didn't want to deviate. So, you can use that leadership to be able to normalize the world. And in many cases, the United States then gets to set the laws of the world. In fact, a lot of countries held out from full rule-making because they were waiting for the United States to set a standard so they could be compatible with the US standard. You see? And we

36:05have that default power across the world to do these things. But we didn't use it. We didn't call upon it. We could have easily pulled that lever. At the same time, when you get the interagency task force, what you're really doing is you're getting each agency to put down on paper what are they concerned about? Okay? And you know that up front. Then

36:24you go to the industry in parallel. And you send a questionnaire out to all the major companies. And you say to each company, "Okay, you guys got 90 days. This is your chance to participate. Here's a list of a few hundred questions. Tell us everything about crypto from your perspective. What's working? What's not working for you? Where have you been hurt? Where have you

36:44been hindered and helped, etc. etc." Then you get a nice sampling by category. You look at the layer ones, you look at the exchanges, you look at the wallet providers, you look at the NFT sector, the meme coin sector, the DeFi sector. You go down the list. Okay? And then here's the thing. The people who participate the most, the carrot is they get to be on the steering

37:04committee. Okay, it's a merit-based system. If they put in the time and effort and they really wow you and they have some great feedback, then you call them up and say, "Hey, we're creating a crypto steering committee. You want to come join it?" And you're going to be part of it. So, you have an agency interagency working group. You have a steering committee

37:19amongst the industry. And then you also have a government intergovernmental working group. Those three things come together. And then you sit down with key leaders from the Congress and the Senate. And you say, "This is what we've learned. What's on the table for negotiation? First, how do we make it bipartisan? Second, how much horse-trading we got to

37:39do to get this done? Third, what's the path to get this done?" When I was working with Senator Lummis's office and Gillibrand's office, we talked about the FIA in 2022, the Financial Innovation Act, which was the Biden era attempt. And we almost got it done, but then FTX blew it up. We wrote the bill to be modular. So, it had to be this giant omnibus bill, but every part could

38:01be extracted out and you could have them individually passed section by section because we expected it to take about five to six bills over a 2-year period to get it fully done. But then comprehensively, it would regulate the entire market. And that's what you talk to key leaders and their staff about. And guess what? You have a whole framework. You know what the industry

38:22wants and all this other stuff. And then the horse-trading is basically donors. That's the money. That's the language of politics. And it turns out, I know it's news to you and maybe to me, that there's Democrats in the cryptocurrency space. It blows my mind. They're here. Oh my god. And some of them are billionaires. It just blows my mind. So, you know you do is you go to

38:45all those Democrats who are on the left and say, "You know, 2026 is coming up. And I got all these guys here that really want to cut 10 million-dollar checks to your re-election campaign, Senator Wyden and Senator so-and-so and, you know, Congressman Khanna and all these other You know, maybe just maybe if you agree on some basic principles, they're going

39:06to be really happy to hold some fundraisers for you." And the crypto czar can do that. And then suddenly, you go from 50 votes to 70 votes in the Senate. And suddenly on the House, you got a supermajority. You know what that means? the banks. You've done all of it. Because you've created a perpetual donor class for the right and for the left. You've created a new constituency. And

39:26you know what? No one's going to have problem with it. The IRS has been brought to the table. The SEC has been brought to the table. CFTC has been brought. The DOJ has been brought to the table. And you know ahead of time it's going to work for the industry cuz you asked them. And you know ahead of time it's going to work globally because you asked them.

39:42And you know how to pass it, whether you have to break it into five bills or 10 bills, and you know basically how it's going to work with industry cuz that steering group that you created with all that industry participation, those are the founding members of your self-regulatory organization. So that helps you with your industry interface when you're making the rules

39:59cuz it takes two to three years to make the rules. That's how you do it. 101. You know? But no, instead let's just do it patronage and then have a executive director that is an executive director of a non-existing steering committee cuz they couldn't figure out how to do that and then just around and masturbate for 18 months and then we run this thing and the only thing we're

40:20fighting about is yield-bearing stablecoins, not the definition of a security. And everybody's just apparently okay with it security by default. It's just sad. And it just shows that nobody involved really understands the rule-making process, the legislative process, or is a student of where things failed and succeeded. The internet regulations of the '90s

40:42were great. They succeeded wildly and they led to the creation of Silicon Valley and it you know these internet companies and now we have Google and Amazon and this other stuff. The regulation post-2008 failed miserably. The CFPB was the biggest failure in history of regulation. 15 years later they're still trying to make rules for it and there's no consensus at all

41:04whether the Financial Protection Bureau should be around or not and they keep trying to kill it. That's a failed rule-making. If after 15 years you can't get the thing running and nobody wants it and they're all trying to kill it, that's that's not that's not right. Don't work. You see? So we have examples of where things worked well and things didn't work well.

41:24You don't have to be brilliant, you just have to say how do we avoid that from happening? The number one thing you can do to it up is make it partisan. If there's a perception that this only benefits one political party, when the other political party gets into power, they will make it their mission to kill the thing. And they will get in power. You know,

41:442000 to 2024 we had 12 years of Democrats and 12 years of Republicans. So and we've during that time period had Democrat majorities in the House and Senate and Republican majorities in the House and Senate. We've had a liberal Supreme Court and a conservative Supreme Court. In every decade things cycle. So if you write partisan legislation, your partisan legislation will die. That's

42:10what Obama learned with the Affordable Care Act. When he had his supermajority, he passed Obamacare and then the Republicans it was like a fatwa. Every day repeal and replace, repeal and replace that with their chant. Eventually they killed all the meaningful components of Obamacare. And it was the same with the Consumer Financial Protection Bureau. When they

42:27created it's like the Republicans said this is evil and wrong, we do not want this. So what do they do? They've been trying to kill it for 15 years and slow roll it and do all these things. Do you think the Democrats have any incentive to support anything in crypto right now? All they see with crypto is TrumpCoin and World Liberty Finance and a process that was exclusionary and a

42:47fundraising mechanism that only benefits the Republicans. So if that's your position, they will kill it when they get back into power. So that's why a lot of people aren't expending a lot of resources on clarity because they don't think there's any durability with this type of legislation. They think it's going to be a slow rolled or destroyed or the

43:07rule-making will be weaponized. If the Democrats get control of the rule-making and everything's a security by default and they get to control when it's not a security, do you think they're not going to just lock it all down and pull a Gary Gensler and keep things as perpetual securities? In fact, I made a video where I showed four different attack vectors using the

43:27existing language of the bill that the Securities Exchange Commission could use to keep things as a forever security under the current language of the bill that they have in clarity. Does anybody care? No, because they're incompetent. Yeah, that's not being talked about at all. It's just this you know, it's such a bigger picture of a 100-year issue. They're just talking

43:50about stablecoin yield and probably their personal interests with Coinbase, I'm sure. You know, they wanted it their way to benefit crypto industry but also themselves. Yeah. So well, it seems like I don't know if I could would say a long shot, but there's a lot of things to fix besides that issue. You know, if we can choose, you know, let's at

44:14least get some of this done because it sounds like getting the Clarity Act in it is better than than not at least at at the stage it's at right now. And as you mentioned, you know, if it doesn't happen then it's going to take many years and the Democrats will get in and then it won't be

What I'm trying to tell you, if it does happen, it will kill the American

44:35cryptocurrency industry in its current form. There this is this insanity that keeps being propagated especially by the XRP side because of Brad and it's wrong. It's materially wrong. Guys, under the old ambiguous way we were winning court cases. XRP won its court case under the ambiguous laws. Under this law, if Ripple was founded today, XRP would be a

44:59security. They're not understanding that. Ethereum would be a security, XRP would be a security, ADA would be a security. And a Gary Gensler-esque SEC would have the law on their side. They didn't before. They had ambiguities so they were losing court cases. So they would have the law on their side, there would be no mechanism to not be a security because

45:20under the mature blockchain test as described in the current version of the Clarity Act, the one they're trying to pass, there'd be no way to grow into a mature blockchain. You wouldn't get the community growth, the liquidity, or all these other things. So your first test in legislation is to ask under this legislative framework, would the winners still be winners?

45:41And if the answer is no, then you really have to double-check that. Like if we had internet legislation in the '90s that would have made Amazon impossible and Google impossible and Facebook impossible and all these other things, is that good legislation? You know, you have to really ask yourself this. You say like, wait a minute, am I really doing something that

46:00makes sense? By the way, it used to be illegal to do Amazon under the internet. Under the NSF AUP until 1992, when it was repealed, you couldn't commercialize the internet. Okay, so there was real bad policy that existed. And what I'm trying to tell people is if you pass this bill, you're not going to be able to change it and the Democrats will have at some point

46:21the ability to weaponize it. And when they do weaponize it, they can structure it in a way that every new project will always be a security. And if being a security is not a problem, then why is Brian Armstrong fighting so hard for his stablecoin not to be? You know, it so they can't have it both ways. They can't say it'll kill us if it's a security,

46:43but then everybody else has to be a security.

[laughter]

Just doesn't make any sense. Definitely. It's sad that, you know, it has to come to this and you know, being a researcher and a builder, you have to also be like a political lobbyist to ensure that, you know, the technology is there, but getting it adopted is just so many hoops that you have to jump

47:05through. And you know, it brings all these extra jobs that I don't know if you if you enjoy doing that, but I would rather just be, you know, building the thing that I love. Yeah, but it's always that way. You always have to be an advocate and a lobbyist for your industry and your ideas. And if you're creating a new industry, you have an obligation to kind

47:22of set the rules up for it. And it doesn't matter what the endeavor happens to be. And I don't mind it. What I do mind is if nepotism and corruption leaks its way in. And what I also mind is when people know better. I know the difference between when somebody is advocating for the industry as a whole or advocating just for their company. Let me be very clear here.

47:40Clarity is good for me in its current form. If it passes, the things I've built are not securities and my competitors will be. So that actually helps me and I get that. So if I was just advocating for myself, I'd be like, yeah, well, it's not a perfect bill, but we just got to pass it. Haha. You know, like certain other people. But when I look at it as

48:02an industry, I say, well, I don't I have these ecosystems like Cardano and Midnight and the other thing. I want people to build on them. Part of building is they're going to issue their own tokens. I can't allow everybody who builds on Cardano and Midnight to be faced with the scrutiny of being a security. That's an unfair thing cuz I didn't have that scrutiny.

48:20The reason why Cardano and Bitcoin and Ethereum and XRP got to where they're at today is that ambiguity gave us the freedom to be ourselves and to grow and to build a large base of holdership. If we take that away from them, what we've basically done is said, we were allowed to succeed, but then we pulled the ladder up as an industry for all the other people. That's what the banks do.

48:41That's what Wall Street does. It's immoral and unjust and it's literally the antithesis of everything the industry was created to avoid. So you know, somebody's got to be the guy and you know, it don't win me any favors. I don't get invited to the cocktail parties now and I get left off the list, you know. It was it when they created the rule-making advisory group for the

49:00CFTC, it's basically everybody and their uncle was on it, but they left us off. I don't get any access. It's petty and vindictive. This administration's probably the worst I've ever seen. You know, Biden was pretty bad and I never thought it was going to get worse and this one has definitely been worse. And you know, and I get attacked all the

49:18time on the internet. There's a lot of people from the XRP community all over me. They say horrible things, you know? But at the end of the day, by me saying it, I'm saying the quiet part out loud and there's a lot of people that are staying silent that are very excited about it because they don't want to take the hits. So I'm happy to be the guy to

49:38take the hits and say these things these quiet parts out loud and I'm happy to fight for the industry as a whole. And at the end of the day, guys, if this industry is going to be around for 100 years, we can wait till 2029 cuz I'd much rather fight a court case with ambiguity than fight a court case where the law is not on my side. Man, it's hard. And by the way, the SEC's already

49:57done a lot for us. Under Akins, he's done a great job as the chairman. He released clarity and it released a framework for what's a security, what's not a security. Once that gets rolling, it's really, really hard for a future SEC to turn that back. You know, it's really hard for them to do that. So, that alone is enough for us to operate as an industry for the moment. To get

50:20clarity done right, we got to globalize it. We got to get it interagency. It's got to represent the non-financial use cases. We got to update our securities law. The carrot for that is a $10 trillion of real-world assets entering our space and we can do this, but it has to be bipartisan. And it's going to be bipartisan cuz it's going to fail likely this month and then

50:39the Democrats are going to shut it all down. And if you actually want to pass something in the next 2 years, you were going to have to pass it with a Democrat House and a Democrat Senate cuz they're going to win in a landslide in November cuz it turns out like bombing Iran is horribly unpopular. Not releasing the Epstein files is horribly unpopular. Bad

50:56bad economy and $5 gasoline is horribly unpopular. $100 barrel oil, horribly unpopular. And you whenever you're do that as a ruling party, guess what? You get punished at the ballot box. So, the Democrats are going to own the House and Senate. And when they do, then, you know, if you want to get anything done, you have to make a deal with them and they're going to ask for

51:15some concessions. And reasonable ones like maybe the President of the United States should not be a participant in the markets. I agree with that. Kind of makes sense. I don't care what party you belong to. You're the President, you have the ability to up the markets in any direction you want. You can open up the Strategic Petroleum Reserve and lower the price of oil. You can go bomb

51:36Iran and double the price of oil. So, maybe you shouldn't be an oil speculator. You can launch a stablecoin. You can launch whatever. And then, you know what you can do is you can manipulate the cryptocurrency markets. You can make an announcement, "I'm arresting this person or I'm pardoning this person or I'm doing this thing." And the market goes up and the market

51:53goes down. If you're allowed to take positions in the market while you're doing that, then you basically can make billions of dollars on the backs of retail investors every time you do it. So, there should be rules that the President shouldn't participate. Most presidents didn't. They had put their money in blind trusts and they understood precedent, but this one

52:12doesn't seem to care. So, you need to now pass rules to say they can't do these types of things. It was just like releasing the tax returns. It was axiomatic. Most presidents would do that since Richard Nixon. This one decided not to do that. So, we have no financial transparency in these types of things. And again, you say this stuff, the MAGA movement's like, "You're

52:32anti-Trump. You have Trump derangement syndrome." No, I just have basic rules that I want to apply. You guys complained about Biden and Hunter Biden and Sin Hawk and all this other stuff. And that was fair. You complained about the Clinton Global Initiative and the $100 million that Hillary and Bill made from all the speeches that they gave. Complained about the relationship

52:52between Dick Cheney and Halliburton and the no-bid contracts they got in Iraq. Corruption's corruption, no matter if it's Republican corruption or Democrat corruption. And the problem is it's coming to my industry and the Democrats are going to use this as a political McGuffin and they're not going to say there are good cryptos and bad cryptos. You go to

53:11Blue Sky, if you go to all their their places they talk to each other, they're throwing the baby out with the bathwater. They're saying crypto itself is a scam. Crypto itself is corrupt. Not this particular cryptocurrency is corrupt, but this one's good. Crypto itself is The brand is badly damaged. You can't have half of America believing our industry is

53:36illegal, corrupt, and should be banned. You can't have that and be sustainable. So, this was caused by Trump coin. This was caused by World Liberty and these other things, for better or for worse. And it makes me sad because it wasn't the case in December of 2024. We didn't have these issues. It was a bipartisan thing and we had progress. So, we have

53:55to reset. Concessions have to be made. People have to pull out of the market and stop being involved or put these things in a blind trust and when they leave office, come back to it. We have to agree to have the same standards. It's the same with a Nancy Pelosi. For love of God, how much did we hear about Nancy Pelosi's stock trades and all this other stuff? So, it's okay

54:14when we do it on the right. That's fine. He's a private citizen, whatever the and it's the family or whatever, but it's not okay when the other side does it. I'm sorry, it's either okay or it's not okay. It doesn't matter the person and the place for it. And when you look at clarity or the participation or how we got here, that's why we're in this particular mess

54:35because people want to have their cake and eat it, too. Whether it be industry participants or be the White House or be the legislative process or this America first junk with crypto, there is no America first. There is no concept of American cryptocurrency. Either it's a cryptocurrency or it's not. If it's an American cryptocurrency, guess what? It's centralized

54:54as it belongs to a person and to a nation. Okay? You can't say something is that it doesn't make It's senseless. It's against the entire ethos of the ecosystem. So, anyway, that's where I sit and it's just It's been frustrating. It's been a very frustrating year and a half, man. Yeah, it's tough and you're holding it together well and you

55:15know, kudos to you and I want to support and I feel like the viewers want to support. On like the legislation side, is there something that people can do, you know, besides, you know, reaching out to their to their local rep? You know, how how can people help make this vision happen that you're talking about? Well, you know, just embrace decentralization. The more money, the

55:36more people that get into truly decentralized protocols, whether they be Ethereum or Cardano or what we're doing with Midnight or Bitcoin, that's really how you get it done. You know, get in, understand what makes these systems special. They're They're not special because somebody passed a law to make them special. They're not special because a politician endorsed it.

55:55They're special because of what they do. And you have to understand self-custody. You have to understand self-sovereign identity. You have to understand the idea of owning your own keys, your own wallet. Get your assets into that. You know, get get your philosophy into that. Propagate those systems and use truly decentralized systems. That's all you

56:13have to do. If more and more people get there, guess what? The political cost of shutting it down gets too high. It's already gotten to a threshold where they can't shut crypto down. If crypto was at 2013 levels today, it would be illegal. They would ban it. But they can't. There's too much money in it. So, now they're trying to figure out how to

56:34control it. And how they're going to control it is convince you to give it away. Hand it to a bank. Hand it to a regulated financial actor. Buy an ETF. All this other stuff. Custodial, securitized, well-regulated, all this type of stuff. They can't control it if every American has their crypto in their own wallets that they control. They can't control it if every American

56:55actually takes some financial agency there. They can't ban non-custodial wallets then. And guess what? The longer it lingers, the more powerful it becomes. So, that's really what you do. It's not by vote for politician A or vote for politician B or write this representative. Trust me, I've talked all of them. They don't give a at all. They listen to me sometimes cuz they

57:13think I'm going to cut them a million-dollar check. I know. That's about it. I mean, that's That's like 50% of half the time, right? You know, it's like They don't give a at all. They don't understand it. They have no integrity or principles. I'm old enough to remember when MAGA was anti-war and was going to not going to have any foreign wars. The very same people

57:31shouting that from the highest rooftops are now saying bomb Iran. Mhm. And let's go spend $400 billion. By the way, give free health care to pretty much every kid in America. But let's go spend $400 billion and destroy another nation and then have to pay to rebuild it. Didn't we learn our lesson in Iraq and Afghanistan? So, these same politicians

57:51that campaigned that they wouldn't do that are doing it now gleefully. So, they don't listen to you. They won't listen to you. You know, politicians in diapers are exactly the same. Eventually, they get full of and have to be changed. Okay? So, don't even think about it. Vote with your feet. Leave the US dollar into crypto. Leave the legacy financial

58:09system into crypto. Hold your own wallet. Have your own keys and embrace protocols that are truly decentralized. And you know what? We will grow globally and eventually get too big to fail and then there's too much power inside that system and it'll overcome the other system. The other thing is use these systems to enforce transparency on the other system. Selective disclosure is

58:29not just about getting laid on Tinder or proving how big your dick is and how much money you make. Selective disclosure also would have solved the Epstein files. Cuz if I can prove I'm in the FBI or the DOJ, then I can releak as a DOJ member or an FBI member the Epstein files in their entirety, unredacted. Of course, getting rid of the victims, but all the

58:50perpetrators. And we know they're authenticated documents, but you can't prove who in the FBI or the DOJ did it. That's the magic of it. You see? So, if you had selective disclosure, you have truth to power. You have transparency. All these other things. Okay? Our government knows that when we were bombing Iran cuz we were using AI very heavily for the targeting data that we

59:11accidentally bombed a school of 150 girls. We killed over 150 children in the opening days of the conflict. It was a Tomahawk missile, but we can't admit it. We have a truth problem. We're addicted to lies in the US government. But, you know, the people who know that happened, they're sick to their stomachs. And they just anything they could do to

59:32try to get some remorse because they don't want to live for the rest of life knowing that they pushed the red button to go kill 150 kids. That's not what they signed up for. It's not who they are. So they'd love to reveal that. But they can't. So these disclosure systems are very powerful. You know what happens is they force honesty in our government

59:50and they force people to actually admit that there are problems and there are issues whether it be a politically motivated persecution of person what happened with Trump or what's happening with the current DOJ to his political opponents or it be when a military makes a mistake or it be when we have documents that the American people are entitled to see. We need to have that.

1:00:10So elective disclosure is another big concept. Well, once you have people using those systems, nobody's can ban them. Cuz the minute they try to ban them, they'll be like, wait a minute here. We use this to hold you guys accountable. Absolutely not. The same for our voting systems. I'm just so tired of every single time we have an election, the loser basically says that the other

1:00:29side cheated. Great. Let's build a voting system where we can prove that our votes were counted. I do it every day. I've built six of them now over my career of the last 15 years. I've debated people at MIT about it. You know, it's a big deal. So I would like for once to have a shot at actually building a voting system that's honest for the United States.

1:00:51Okay? And we could go so far beyond showing an ID to prove you're a citizen. We can prove the integrity of the system as a whole meaning that no more votes were counted than registered voters. And we could prove that every registered voter was authenticated inside the system without revealing anybody's personally identifiable information. And they say, oh, well, you know, like

1:01:12minorities don't have driver's licenses or something and even though like they fly and other stuff and you have to show it there. Yeah, it's Come on, guys. You know, it's yes, we could build an identity system and let's fix problems while we're doing it. The exact same thing that could build us a secure election system can prevent the 56 billion dollars a year in

1:01:30identity theft. I had a friend. They broke into his car, stole his wife's driver's license and other things and he's now 3 months into this where people are impersonating his wife going into bank after bank cashing fake checks and making 2600 $5,000 impersonating the wife. The police won't do And our identity system is so broken that it's super easy to do this and they just cost

1:01:57of doing business write it off. So it the same thing that would fix the election system would fix our identity system so you'd never have identity theft again. It's almost impossible to do. And it'd still be secure and self-sovereign. And you can't be shut out or anything like that. But we just can't get there. You know, we just can't get there. So you got to get people into

1:02:18these new systems and they're going to ask a basic thing, why is the voting system I use for dog with hat or coin better than the United States election system? This doesn't make any sense at all. Does that make sense to you? And they'll say, no. We got to change it. There you go. Why is the disclosure system I have for my blockchain governance for my NFT project better

1:02:40than the Department of Justice's internal disclosure system for these satanic pedophiles?

[laughter]

This is crazy, man. This is so crazy. And the absurdity grows to a point where people break down and say, you know what, we're done. You know, we want the new system and then the next generation of politicians are forced to implement that system. So what can you do? It's

1:03:00not about voting. It's about participation. You have to yourself get into the system. Use the systems. Get a self-sovereign identity. Get a non-custodial wallet. Move more of your wealth and time into it. More Americans do it, the more use cases there. Eventually leaks its way into every aspect and you have a revolution and it takes over. It's why the Soviet

1:03:20Union could never beat America cuz capitalism leaks in. You no matter how many people you kill or gulag, people want it. It leaks its way in. I one of the people work for me for a long time. He now runs a company called Palmyra, Dan Friedman. He talked about how a lot of his friends would smuggle in 80s movies into the Soviet Ukraine. You know, and it was big penalties. You get

1:03:4215 years in the gulag, but people be like, have you seen Sylvester Stallone in Rambo? It's like, oh, yeah, yeah. And they'd be selling it on the thing trading meat and other for this. No matter what you try to do, you can't get rid of the blue jeans. You can't get rid of the Rolling Stones. You can't get rid of Rocky. It's going to leak its way in. You know, cuz it's so seductive and

1:04:01appealing. Well, self-sovereign identity and non-custodial wallets and these other things, let's make them seductive and appealing and then they leak their way in just like freedom did to the Soviet Union and it eats the structure away at its roots and it collapses that structure. And I don't care how repressive you think the US government is, we're not the Stasi collecting scent

1:04:20samples of people and storing them in jars and you know, having this policy of gradual degradation of people. You know, it's we're not that bad. And if these guys can collapse these guys can collapse, but you have to attack them at their roots to kill them. Yeah. Yeah, it I love what you said about just going back to it's almost like just the first

1:04:43principles of crypto. You know, the way to help is to just do what we've been doing since the very beginning is hold digital assets in your own custody and it don't think you know, tell your your parents and your grandparents that you know, buying the Bitcoin ETF is not crypto. It's not self-custody. It's it's not digital assets at all. You're you

1:05:04know, it's and I'm sure the powers that be wish that 99.9% will all just be in their own custody. But what we need to do to grow the industry is to do what we did before ETFs and all of this other institutional adoption happened was go back to the roots of you know, peer-to-peer system holding the assets yourself. Yeah, and actually I let me see if I can

1:05:32share my screen real quickly. Okay, so what's really cool about this is this is a way to make it super easy for consumers to use a cryptocurrency. Not midnight, but all cryptocurrencies. So what you do is you look at it as a seven-layer stack and you start with a trusted execution environment. So every phone has these now and it's basically like a ledger or a treasure and it's

1:05:55built into your phone and they use it for the kernel and all other like high security things inside the phone. So Android has strong box and iOS has secure enclave. And then what you do is you create a seed and then you can use that to spawn arbitrarily many wallets. And then you can put an identity system on top of it and then you can put a naming system on top of it and then a

1:06:17chain abstraction system on top of it. So with naming for example, you don't send to an address, you just send to like the Ethereum name service or what we're doing with midnight is like Ashan@midnight and then you can send a thing there. And what's really cool about this is with identity and credentials, you have a did connected to it, then you can use this to basically

1:06:35do all this elective disclosure. So the user experience is super simple. It's a cell phone. You're authentication with a fingerprint or a pin code. You set up the recovery service at the exact same time and then the recovery service allows you to restore it if you lose the device, but you never have to manage 24 keywords. You don't have to know how the

1:06:51crypto works cuz you have chain abstraction. You just say what you want to do and then it does it for you. And then all of your offline stuff, you have an encrypted key chain and that encrypted key chain can go and work with one drive and Google Drive or a local storage any of these things and it's encrypted before it goes to Microsoft or Google. So they don't know you're using

1:07:09a cryptocurrency. They don't know what you're doing with that cryptocurrency and you can sync it easily between your different devices with a good user experience and you never have the keys directly. They live in the trusted execution virus so there's no keys to lose or get hacked or these types of things, right? Cuz you're going to it up. At some point if you have it,

1:07:26you'll it up. We all do. And then the last part of it's the app connectors. Like how does this connect to the different parts of the system? So then you think about personas. You know, you say, okay, well, here's like Nadia and she's a very new person. She's never done anything like this before. And then you have like enterprise IT and then you have a compliance officer and power

1:07:47users and these things. But the long and short is in 60 seconds you can go from a QR code to a fully functioning wallet end-to-end. And it's got principles and here's all the different flows that you can go through. You know, so this is how we think about product development. And what this allows us to do very quickly is to think around what is the user

1:08:05experience of the future cuz I want to onboard billions of people. I understand what people are trying to say. There's like Charles is telling me have a non-custodial wallet. Charles is telling me use crypto. It's hard to use crypto. It's hard to understand. If I have to know how Ethereum works or Cardano works or Solana works to be able to use this

1:08:22we're done. If I have to know how a key works, we're done. No, I should never know how a key works. It should just work and it should just work on my phone and I have a fingerprint and you know what, nobody knows I'm using it. That's my business, okay? Not your business, not anybody's business. That's my business. Nobody should know how this thing works. So that's

1:08:43that's the way you get it done and as a builder, that's what I'm supposed to do is to create this type of stuff. And then as a user, once I have it, adopt it. Scan the QR code. Get into the system and then once you're in the system, guess what? If enough people get in, they can't pass bad laws. If cuz who's going to be the guy to pass the law to go ahead and take money out

1:09:04of your pocket? It's like old people and social security checks. Like who's going to be the guy to tell the old people, I've got your social security check. It's like, no one's going to be that guy. And you know, like Aunt Sally, she's like, I don't care what's going on with them wars in Iran, but I got to get my $619.23 every 2 weeks for my prescriptions or

1:09:24else I'm going to be very upset. You know, they got to do that. So once the money's in the system, they can't take the money out of the system, and that's how you get the regulation. That's what happened with the internet. It got too big too quickly, and by the if they could get a do-over, oh my god, they'd be like South Korea. You have to connect

1:09:40your actual real-life human identity to your IP address in South Korea. So, every single person is ID'd on the wire. And in countries like China, Iran, they have a national firewall. So, the government gets to decide what you get to see and what you don't get to see, but they couldn't do that in America cuz too many people got online too quickly, and the regulations were built in a way

1:10:00where it was to open. So, they had to figure out different ways to regulate. So, now they regulate at the Google endpoint, and they regulate the Facebook endpoint, and they try to go with social media and deplatform people, but they can't regulate you at the ISP level cuz the network's got too big. Mhm. That's amazing, and I love that demo. There's there's always

1:10:18These reasons when you try to onboard, you know, grandma. It's like, " the seed the seed phrase, you know, I'm going to lose it." It's like, "No, we've we've solved that." And then, "Oh, you know, the password." No, biometrics. And now being able to encrypt and store into Google or your cloud drive encrypted, this solving a lot of the endpoints that

1:10:39are have been the barriers to adoption that you've probably seen over the last 10 years.

Yeah. Yeah, cuz I've lived it, you know, and I've done so many demos, and I've had so many people come up to me and try to use it, and then you know, I'm just like, "Okay." It's like that's thing with the Principal Skinner. He's like, "No, the children are wrong." You know,

1:10:55it's "No, you're wrong, Skinner. You're out of touch. You know, you [snorts] can't go to people." I'm friends with Phil Zimmerman, and I ran into him once at a conference in Israel, and I said, " Phil, what did PGP not take off?" All we're working on PGP 2. He's like, "Okay, you had since 1991 to convince people to encrypt emails, and had people done it, we'd

1:11:16have a password-free internet right now. And instead, you know, we don't have that. Why? Because it was too hard to use PGP." And that's why it didn't become the thing and Web of Trust didn't take off. So, you can't say the kids are wrong. The kids are always right. Even when they're wrong, they're right. That's what Brendan Nick talks about. Sometimes the wrong way is the right

1:11:32way. You have to meet people where they're at, not where you want them to be. So, when we talk about things like Midnight Passport, I ask a fundamental question, how can we make that the easiest way to have a Bitcoin wallet or an Ethereum wallet or a Solana wallet? Not just a Midnight wallet, but all of the things. You has to work multi-chain. And we're making progress on it, and

1:11:52what's fun about it is if we get it right, then, you know, you can get a billion people into that really quickly, and then that solves the problem. Once we have that, there's no Clarity Act. There's none of this garbage. Cuz no one's going to say, "Wait a minute, you just made the assets in my phone illegal? So, you just took money away from me?" No no politician wants to be the guy to

1:12:09do that against 100 million Americans. Mhm. Yeah. And I would love to see, you know, this be adopted quickly. I know that, you know, we're at start of Q2 2026 here, and the Midnight network has just launched. So, with these functions that you're talking about, onboarding the wallet, getting all of the different assets, and the digital identity, which hopefully could

1:12:33solve that issue with having a million accounts and passwords as well. That's that's something everyone hates. Where are we at with me and the viewers being able to start using this? So, you know, you build in stages, and the first stage is to do some demos and get people aligned, and then really it there's kind of different dimensions you have to wire. And one is how does

1:12:55this connect to chain abstraction? So, how do you use this on multiple chains at the same time? Then the other is how does it connect to the DApp layer of the system? So, we have great strategies there involving WASM and all this other stuff, and then NEAR has been very informative with the intense side of the world. But then you also have to say,

1:13:11"Well, then how does this connect to the actual devices and execution?" So, we have a dedicated trusted execution group that's been doing nothing but programming with these various things and figure out how to get access to stuff on the iPhone and get access to stuff on Android devices. So, demos all throughout the spring and summer, and then eventually it starts rolling out.

1:13:29You what you try to do is build an end-to-end experience with a partner. So, would somebody create a Midnight Passport just because they want a Midnight Passport? Like, when's the last time you woke up and said, "You know, I need to create a PGP key just because." What are you going to do with it? Well, I don't have a use case for it yet, but I need to go create that

1:13:46thing just in case I could ever need. No, no one's going to do that. You bundle it with an experience, whether it be a gambling application or a game, or you bundle that. So, Midnight City is an agentic civilization that we created. It's So, if you go to midnight.city, it's really cool. You can buy your own agents and embed them inside the city, and they can play with each other. And

1:14:05the agents have jobs, and they go and do cool stuff. You wake up, your agent's married. You wake up, your agent's divorced and paying alimony payments. You're like, "God, this game sucks." but we're going to connect the Midnight Passport idea to Midnight City. So, to play Midnight City, you can create a passport. Once you have a passport, it's ubiquitous. So, it'll

1:14:22work across all the others. So, the key is to get five or 10 experiences in different verticals, and then connect it to the passport back end. Then once you have it, then people can easily port to other things. It's that concept of one-click install. That's what we want to get to. So, when you have a DApp or an app, whatever one you use, once you're on board, it's one click for the

1:14:42rest. Like, the regulated flows are a great example. Some of the exchange partners we've been talking to, we said, "Could we get to a point where there's one-click account creation?" So, if you want to create an account on an exchange, if you've already done a KYC step, there's reciprocity there, and then boom, you can instantly create an account, start trading instead of going

1:15:00through another KYC/AML stack and linking all these types of things. So, you know, getting some regulated partners in, we're real excited about that. We have some phenomenal relationships like the Monument Bank deal that we just announced that we tokenized deposits on the Midnight blockchain. That's very instructive for all of these Web 2.5 banks, where they have one step in

1:15:20crypto, and they're also regulated legacy business. So, there's already some American counterparts that we've been talking to, and if we can get it right, then the passport system should be able to seamlessly work, and the customer of one can become the customer of the other. So, that's the carrot cuz they get new customers, and they get new more value flow, more liquidity, and it

1:15:40also helps them with the compliance side because you can really get it done right, and then it just works across the board. So, throughout spring and summer, you'll see a lot of demos, and then you'll see some supported apps that are linked, and then it'll become ubiquitous, and then our hope is to say the easiest way to use cryptos with a Midnight Passport. And so, then

1:15:58everybody's like, "Oh, if you want Bitcoin, download that Midnight thing, and it's safe and easy." Cuz it also has a recovery solution as well, and there's recovery partners that we've been discussing and onboarding with. So, so when you create a wallet, you also create a recovery schema at the same time. So, it's very straightforward for how to get your stuff back. Cuz after 15

1:16:15years, the number one thing every cryptocurrency user says to me, skilled or unskilled, "I'm afraid I'm going to it up and lose all my money." Mhm. It's the number one thing they tell me. So, you got to get recovery right. And if you do that, then it's a it's a lot easier for everybody. Definitely, that's super important, and I'm definitely going to follow along

1:16:35with this because, you know, it's it's the magic key that can open all a lot of doors. So, I appreciate your insights into all of the stuff that needs to be done in the industry. And at the same time, people just need to continue adopting and using decentralized technology, you know, whether the politicians are are arguing against each other or getting

1:16:59together, continue to use this technology because it is it is the future, and eventually it's going to get in there. Or at least if enough people start using it, they'll be forced to, you know, you can't say no once just like like you said with the internet, it becomes so ubiquitous that you can't shut it down. Yeah. We're already past that point with crypto, but the nuances

1:17:19of the legislation in there's still a lot to be done. So, I appreciate your hand in getting us in the right in the right direction. And but there's there's there's still a lot to be done, and yeah, 15 years is a great start, but as it faster, especially with artificial intelligence and robot payments, which I would love to talk about more in our

1:17:40next call. That's Yeah. And you And you got to think we didn't have anything before. We didn't have anything before. You know, we just sat there, and we were consumers of the news. Oh, Trump's bombing Iran, Bush is bombing Iraq, Obama's bombing this person. You couldn't do anything about it. You just sit and listen to it. Then you see the bank bailout happen,

1:17:59and you just get angry, you throw your remote at the TV, but you had no agency. This is the first time in any of our lives where we actually have a seat at the table. Might be a small seat, but you know what? It's the same table as the big guys sit at for the first time ever. And so, never let anybody tell you to be cynical or that you don't have a say, you don't have a voice, you don't

1:18:19have a You do. It ta- it's going to take some time, it's going to take some effort, but this is the first time where we've actually had the tools of liberty at our disposal as a species where everybody plays by the same rules. I've never seen a stack in my life that the nation-state plays by the same set of rules as the individual. What's so cool you think about Bitcoin,

1:18:41you know, US government holds it. When they send it, they have to send it in the exact same way that I send it. Yeah. That's not the case for any other asset. Their their user experience is very different for all those But here, they have to play by the same rules that some person we don't even know set. So, that's that's something to give you your agency back. When you think like, oh,

1:19:04what choice do we have? Like, one guy created that, and the US government has to follow it. And they have no choice in the matter. So, the key here is to never let anybody take your agency and never let anybody take your power, and keep it as long as you can. And if you get enough people inside of it, you force the world to follow that mindset and then you end up in a much

1:19:25better place. Just like the internet has to the government uses the internet the same way I do. You know, they use the same TCP/IP, they have the same IP address. whitehouse.gov works exactly the same way as, you know, iohk.io. You know, all these things work exactly the same. And that's because of standards and because of the way the internet grew up. So, we have living

1:19:46examples of where this can work for the benefit of everybody, big or small, and we need to do the same with money and we need to do the same with our ownership. So, for my part, I think, "Okay, well, what is missing?" We're missing privacy and selective disclosure and we need to make sure that decentralization's preserved and provability's at the core of everything

1:20:04we do. That's a protocol thing. It's the smart cow effect. Once it's solved, it's solved. We did it with Ethereum. Now, everybody's got smart contracts. Is smart contract like an exclusive Ethereum capability and only Ethereum has it? No. We, you know, we had a small window where that was the case, but now it's gone. And it's the same with scalable protocols. You know, like

1:20:23there's only one cryptocurrency that's high throughput and has that's not a differentiating feature. So, when you get these ideas of selective disclosure and zero knowledge and other stuff out, everybody will have it within 5 or 10 years and somebody will figure out how to commercialize it. All we have to do as consumers is make sure that we value decentralization and pick the

1:20:41decentralized options and then, you know what, we win by default. The default position is people want freedom and the default position is people do not want to be controlled by authoritarians. Authoritarians rule by fear and what these systems do is they take the fear away cuz you can't kill everybody. Think Think about a person showing up with a gun. It's really effective when it's you

1:21:03and that guy. But when it's you and a mob, that guy has no power at all. The mob can grab him from all the different angles and tear him apart. You see this was like troops. You know, a few troops come in try to disperse a mob and but then the mob gets bigger and bigger and bigger and then the troops are all like, "Yeah, this is not going to work at all." You

1:21:22know, we saw that with January 6th when the police opened up the capital, there was just physically too many people there and they're like, "Well, we could try to keep them out, but if we don't open these doors, they're just going to tear us apart." just opened the doors and they tried to, you know, moderate it down for that mob. And you saw it with the Soviet Union.

1:21:42There was a concert that Metallica played at right at the collapse of the Soviet Union and it was the To this day, I think, the largest concert in the world. And so, yeah, you got all these Western rock bands for the first time ever come to the Soviet Union and I think it was '91. And it was so big and normally the Soviet Union would just crack down on

1:21:58this Instead, they looked at it and they're like, "If we try to crack down on this, we're all going to die. There's just too many people here." So, they just let them rock. You know, AC/DC was there. You know, Metallica was there. It was one of the greatest parties of all time. And like a bunch of people got trampled in the audience. It was like a proper mosh pit you know,

1:22:15experience and Soviets had never done this before. So, they're just learning how to do it. But eventually, the soldiers joined in and they were part of it. So, you just got to make the concert You got You got to You got to take it up to 11, make it too big to fail and then you win. And the default state is freedom. You just never forget that. So, never let anybody take that power for

1:22:33you. The worst thing you can do is buy into cynicism. If you start believing, "No, they will never let me. They will" Who the is they? They is the people that put George Bush in. They is the people that, you know, do all this crazy nonsense around here. They're not smart. They're evil, okay? And they're not capable of running the entire world anymore. They failed. If they were so

1:22:56capable, the world would be running pretty well. And they would skim 5% off the top. They're incompetent and they're evil. Never give your power to them. Take it back. And you do that by self-custody. You do that by embracing decentralization. The blueprint's there. You just got to be willing to endure a little bit of suffering along the way, but trust me, it's like losing weight.

1:23:17It's a lot easier to just go to the gym and lose the weight and do this stuff than get really, really fat and get the diabetes and all the other stuff on the other end cuz when you're on an oxygen canister and they have to cut your feet off and everything, you ain't going to the gym, man. And there's nothing you can do about it. You know, so put in the time now and when you get

1:23:34to the other side, you'll live a healthy, happy life later. And it's the same deal here. You got to put a little bit of effort in, get some agency, remove the cynicism and don't consent to this to this craziness and then when you come to the other side, you'll be a lot stronger. Well said, Charles. Thank you so much for the time. I'm looking forward to following

1:23:56through and up with Midnight Network and I'm I'm going to be a evangelist of this cuz I know this kind of technology is going to help bring people into the industry. And you know, you and me both have been and fighting for this for myself over 12 years and you even longer. So, thank you. I appreciate the insights. It really paints a good picture for people

1:24:19that don't know what's going on inside the US and how that relates globally. It's super important and the things that need to be done to keep crypto strong and growing and, you know, make that evolve in the way that the internet did so that everyone in the world can use it and be more fair and decentralized. Thank you so much, Ashton. This was a

1:24:40lot of fun.