In this week's installment of "Money Reimagined," host Michael Casey discusses the anticipation surrounding the approval of a spot Bitcoin ETF. Casey is joined by Hermine Wong, Founder of herminewong.xyzand Principal at Berkeley School of Law, a regulatory expert offering insights on the topic. They explore the potential impact of ETF approval or disapproval on the relationship between the crypto industry and Washington. They also discuss the regulatory frameworks in Asia and Europe and the need for the US to catch up. The conversation delves into the importance of driving adoption and the challenges faced by disruptive tech in engaging with policymakers. They also touch on the opportunities for adoption through tokenization and NFTs.
Takeaways:
The entry of institutional investors into the crypto space indicates their belief in the long-term value of Bitcoin, but it may dilute the policy argument for the democratization of access.
The US regulatory framework for crypto lags behind other jurisdictions, but many startups still prefer to domicile themselves in the US due to the flow of value and customer base.
Crypto industry advocacy should focus on demonstrating the value of crypto in terms of access and opportunity, rather than taking an adversarial approach with regulators.
Tokenization and NFTs present opportunities for driving adoption by accessing new populations and empowering artists and creators.
Links |
If a Bitcoin ETF Is Approved, Here’s What May Happen
Bitcoin ETF Looks Very Likely Given These Bureaucratic SEC Steps
Bitcoin ETF Approval Expected Soon, Bears Lose $100M
BTC Blasts Past $47K as Bitcoin ETF Excitement Gets Feverish
Money Reimagined has been produced and edited by senior producer Michele Musso and our executive producer is Jared Schwartz. Our theme song is “The News Tonight ” by Shimmer
Audio Transcript: This transcript has not been edited and may contain errors.
Michael Casey
Hello and welcome to Money Reimagined. I'm Michael Casey. My co-host Sheila Warren is at an event today in St. Moritz, Switzerland for the CFC. So unfortunately she won't be here for this fun ride on Money Reimagined. The first that we are recording within the new year. So it's great to be back. On that note, please do not forget to subscribe. Give us a thumbs up, leave a review, all that sort of good stuff. We do value your feedback. So share your thoughts with us at
podcasts at coindesk.com. Use the subject line, money reimagined. Let us know what you think. And of course, every week we're here, Coindesk Podcast Network is where you can find us or on Apple, Spotify, or your preferred podcast platform.
Well, this week, it is the week of the Bitcoin ETF. I am going to, I think, hope that this thing, this particular episode goes to air before we know because right at this moment, 1pm Eastern time on Tuesday, we are anticipating some sort of response, at least from the SEC, to the much anticipated set of applications for the approval of a spot Bitcoin ETF from a number of significant institutions. And so, you know, we'll see. We'll see what happens.
Certainly the market seems pretty riled up about this, but my guest today is somebody I think is going to weigh in on this. Again, hopefully we'll be able to get some thoughts with her before it goes out and this won't seem a little redundant. But her name is Hermine Wong and she's the founder and principal of Hermine Wong.xyz. She's a lecturer from UC Berkeley School of Law and she's a renowned expert and thought leader in regulatory issues, policy, fintech, crypto,
web3. She's had a wealth of experience in the policy world with...working with first public listed crypto exchange in the US. And she's worked with the US Securities Exchange Commission and the White House and been given all sorts of advice to entities such as that and has spent some time in China as well. So I'm looking to have a great conversation with her. Hermine, thank you for joining us. Welcome to Money Reimagined.
Hermine Wong
Thanks so much for having me, Mike. It's great to be here and great to start the new year.
Michael Casey
It was and like, there's a very good reason why this has been a great start to the year because go big blue.
Hermine Wong
Go Blue! It was a big win yesterday. I was watching it from a movie theater here in San Francisco, which would not have been better.
Michael Casey
Oh, wow. That's like, that's yeah, my daughter's at Michigan. So I'm sort of being sort of dragged into this for the first time to sort of pay attention to it. But wow. I mean, yeah, exciting. So. Yes, I'm saying, yes, you got she lucked out. You don't usually start out your, you know, your university experience by having national champions in the second year that you there. But she's yeah, she's thrilled. I think it was a lot of fun up in up in Ann Arbor last night. So.
Hermine Wong
It's a good time to be dragged into it, goodness.
Michael Casey
Yes, because you were there, you studied law at Michigan.
Hermine Wong
I did, I did. I loved my time at Ann Arbor. I will tell you, unlike your daughter, my very first game at Michigan was a fairly notorious loss to Appalachian State in the fall of 2007, which has been hard to live down for many, many years, but redemption has come.
Michael Casey
It has definitely come. I think I see Tom Brady out there saying that he thinks JJ McCarthy is the, uh, the grass, the best quarterback they've ever had, which is saying something. Cause Tom Brady himself was a Michigan quarterback. Um, anyway, listen, let's, we don't, we don't, uh, we won't wallow in that. And not anyone who was sort of out there going for Washington. Um, sorry, too bad, but you know, here we are reveling anyway, on to crypto matters. Um, look, yeah, as I said, he was a Michigan man.
Hermine Wong
That's right.
Michael Casey
Hopefully this episode is before we know, So I'm going to ask you to tell me, I mean, do you think we get an approval from the SEC for an ETF spot? And what does it look like? What sort of conditions may or may not be on there?
Hermine Wong
It's such an interesting question because I would have given you a different answer two months ago. When those first meetings started coming through, I thought that what the SEC was doing was asking for more data so that they could rebut that data later on, right? Because after the grayscale loss in court, the SEC was asking for more data.
The SEC was given marching orders like you have to explain yourself from the DC circuit. You have to explain yourself about why you're rejecting this data. And so I thought that that's what they were thinking about. Having worked at the SEC myself, I remember when I used to work on rule-makings over there, data was the thing that we really wanted to have from the industry for that very reason of like, how do we think about those assumptions? How do we think about what they're saying? And then do we want to rebut that? If we do, what can we offer to rebut that?
Now, we've seen a lot of these meetings come and they've almost looked like they were pro forma meetings. Like even looking at the attendee list and the frequency that they were happening at, it suggests that we're probably going to see an approval. What I don't know is whether or not we're going to see an approval of all of them at once, or if it's going to come in batches and then what those batches are going to look like.
Michael Casey
Hmm. Yeah, I mean, that might seem unfair to some people, right? If somebody gets the first chance to head out of the gate and to grab all of that initial interest. So I think that's been one of the reasons why people think there might be a group. But yeah, maybe some meet muster and some don't. But let me throw a different question at you then. Like, what is the impact if they don't approve? And not just the price, obviously, there may be some disappointment there and the trade happens. But likewhat would it like with all the detail you were just describing and all the effort they went to then turn around and disapprove? You know, what would be the impact perhaps on the relationship between this industry and Washington, which hasn't been in great shape, really, I would say for the last few years?
Hermine Wong
It hasn't been in great shape. It would be interesting if the SEC were to disapprove without additional, we would wanna see from probably the general counsel's office a lot more of a policy statement about why they are disapproving, right? Because those would be fighting words almost to disapprove at this point. And we already know that the industry is willing to foot really large legal bills to make sure that this gets in front of courts, these kinds of...fights with the SEC. Having said that, the SEC hasn't been shy about appearing in court either. So I don't know exactly what would happen with a disapproval. I would imagine that a disapproval has both short-term and long-term consequences. And what I mean by that is on the short-term, I think Mike, you're absolutely right. There'd be some sort of market fervor about it, drop in the
Hermine Wong
What I think I'm still curious about is what does a Bitcoin ETF really mean about the long term of Bitcoin and crypto's trajectory at full scale? And that's because a Bitcoin ETF to me does not mean Bitcoin adoption per se. Right? Like it's not the same thing because what you're allowing with a Bitcoin ETF is you're allowing investors tohave a way of investing in Bitcoin, but what they're not doing is holding Bitcoin themselves. And if you are really bullish on crypto and Bitcoin generally, you want those people to hold Bitcoin themselves. So, you know, I think that there's still a tension about whether or not this is going to be a huge watershed moment for the industry if you do a Bitcoin ETF approval, or if it turns out to be a little like, yeah, it's going to make some money, but like some people more money, but in the long term adoption, it's not going to be all that meaningful.
Michael Casey
Yeah, you could argue that it is a departure from the spirit of what Bitcoin was all about. I mean, the initial concept was that people would sort of own the network. And in the end, that, I think, also, to some extent, to a large extent, is undermined by the fact that mining became so industrialized. But at the same time, you know, the spirit of people owning their own coins and being able to trade on those. And that, of course, you know, was undermined or at least changed by the...idea of hosted wallets. But the idea that these large institutions end up owning a bunch of coins on behalf of all these other proprietary claims on it is interesting. I mean, we saw during the famous New York agreement phase when there was a big debate over whether there would be upgrades to competing with the idea of an increase in the block size. This idea of a UASF, the user... Oh my God, I'm blanking on it. It's a soft fork, but a user-organized soft fork, essentially, so the users... I can't remember what the A is. It'll come to me in a minute, but the point is that this idea that users were able to then themselves play a game of controlling it seems like it ultimately won, that the miners were not able to dictate where, what upgrades were or weren't going to happen with regards to the protocol. And they sort of essentially blocked any increases in the block size. And so the users took control essentially, which is a very interesting way to think about the dynamics of who controls the Bitcoin network, which then begs me this question, like, what do you do if all of a sudden there are these very large institutions that have meaningful pieces of the actual float of Bitcoin, the...that's out there. I don't have any thoughts on that.
Hermine Wong
Yeah, so I have more policy level thoughts about that, right? Which I think makes the policy argument for some of the value of Bitcoin a little diluted when you have these large institutional holders. Having said that, having the large institutional holders in the crypto and Bitcoin space tells you that they believe...at least, that this is something, that they're banking on this, right? This is something that they're willing to put their money in. They believe that there is long-term value in the Bitcoin space. I think that is not something that is easily dismissed, regardless of some of the policy arguments of the value of Bitcoin. And that's just because when you're trying to reimagine a financial infrastructure, it's not quite the same.
You know, when I was sometimes making my own advocacy appeals about the value of this stuff, it's easy to make some of those comparisons to like a day of Uber. And you're like, no, you don't, you don't see that like with Uber adoption, for example, and that kind of gig economy, you saw people actually adopting Uber instantly as opposed to what you could imagine, um, shipping companies trying to, or, you know, trying to take over that industry.
That is quite different than trying to reimagine the financial infrastructure. So I having said that, I think that it's worthy that institutional investors, institutional, traditional financial companies are betting on the long-term prospects of Bitcoin. And I think that at the end of the day is going to make people a little more comfortable. It's interesting because when I was still at Coinbase, there was a survey that
the University of Michigan was doing. And one of the things that it told us was that, I don't know if this is in published, this was something like, it was still in the nascent stages, but they were saying that people who were just generally crypto curious, a lot of them would be flipped to being users of crypto if they saw that big institutions, including the government, were somehow using crypto because that to them was credibility enhancing. So I think that when you see large additional, traditional institutional institutions getting in, you might actually see, and we don't know this, we won't know until these Bitcoin ETFs go live, you might go see in a few months time, additional Bitcoin holders as unique holders. And that I think will be more interesting. We're not gonna see it immediately, but we might see it in time.
Michael Casey
Yes, it will certainly change the conversation about what it represents, right? It will be, I think, to a degree, a legitimization from the eyes of those who see it in traditional terms. But there'll be a lot of diehards who may see this as a dilution of its of its spirit, right? The idea that this is supposed to be a decentralizing exercise, not one that actually, you know, gives greater weight to these large centralized institutions. So, you know Is it a battle for the heart and soul? I tend to think not. I think in fact, to your point, it may just spur more interest that then leads people down that rabbit hole and they end up saying, you know what? I gotta own my own coins and I'm gonna do it that way. And it starts legitimize things. You know, this is really, I've often thought Bitcoin is a cultural movement as much as anything else. It's about an understanding of an idea and its idea is, it's not necessarily a cookie-cutter financial investment concept.
It's something that requires participation and involvement, and it's really a way of thinking about the world. So, you know, will it drive that? I think it does. Prices tend to spur interest, and prices are gonna rise, I would think, or at least they have been, and that is certainly gonna impact the way this is perceived in various ways. But why don't we move to some other topics here. So you've had some interest, you've worked in China in the past, and so I take it you've given some thought to the way things are playing out the regulatory front in Asia. You know, big contrasts really, not just in Asia, but also in Europe, people have been looking for the last couple of years at the kind of more deliberate, seemingly progressive way in which framework legislation and regulation around crypto has been developed in other parts of the world in the way that the US hasn't. And that's led to a whole bifurcation and some people suggesting that it's time to move off overseas. Do you see the US catching up to those parts of the world? And do you see, what do you make of say, you know, the regulatory framework in Singapore and Japan and elsewhere?
Hermine Wong
I think that the regulatory frameworks is, it's helpful to have those models in some of those other jurisdictions to see what people are coming up with. Having said that, the reality is that most of the founders, most of the flow of just value comes through the United States. So when I'm advising startups, one of the things that they really struggle with is where should they domicile themselves? And the reality is that they want to domicile themselves here in the United States because that's where their customer base is, that's where they know the audience best, and that's where the flow of value is coming through for the most part. So it's helpful to have those frameworks. It is a wake-up call, I think, for the United States about...how long they're willing to sit on the sidelines while other countries are slowly, I think, stealing some of that human capital away. But it's not happening immediately, right? We're not seeing this huge exodus of crypto startups from the United States. I do think though that a lot of crypto startups and Web3 startups are giving it a closer look than they have in the past.
Michael Casey
Um, and I suppose if it drags on longer to the degree to which, you know, we, we see these other jurisdictions develop and, uh, framework that people appreciate and the U S doesn't do so. Um, the, the bigger that risk and saying it's not happening in a flood yet, but like, we're going into an election here. We are an election. It just began. Um, you know, not a lot of hope I would think within that context for any landmark crypto legislation to happen anytime soon. So what's your outlook for that?
Hermine Wong
So I agree. I don't think that anyone's going to expect any sort of crypto legislation this year I think that what the crypto industry really needs to do in this year knowing that there's not going to be legislation is Try to find opportunities for general adoption more and more the more adoption you get the more that people show up to Townhall events right the more that they show up to any sort of potential candidates speaking event and ask about crypto, demonstrate their curiosity and where they're willing to ask questions, right? Because you've got to think that these legislators, they've got a lot of noise that they themselves are battling about the kinds of issues, right? There's Ukraine, there's Israel and Gaza, there's abortion, there's gun violence, there's taxes, there's inflation. Those are a lot of the top of mind issues. If you're able to get crypto or Web3 to break through that noise at those kinds of events, they think that represents, oh, my constituents actually care about this issue. I need to learn more about that issue then. That is in some ways the building year for the industry in being able to get that to resonate.
Michael Casey
So what do you make of the various crypto firms that have taken the fight to Washington? You know, you've had a number of lawsuits that have been filed against the SEC and there's this stand with crypto movement that Brian Armstrong is championing from Coinbase who you worked with previously. You know, is that the right stance or should we should people be, you know, trying to be more accommodating and compromising with, you know, with Congress or with the agencies?
Hermine Wong
Yeah, it's one of these themes that is actually quite challenging with any disruptive tech. And I will say that whether it's crypto or whether it's the internet of the 90s or whether it's AI, there's always been kind of at its root a nasancy of adversarialness. And I think that that's because at the very beginning of these conversations, often these startups or these disruptive techs, industries, they don't have anyone to put in front of policymakers, but for the founder, CEO, engineer, or their IP tech lawyer. And the IP, you know, more often than not, it's going to be your IP tech lawyer who's trained to be much more sophisticated in the tech than their peers. So they can come off as patronizing, or else they're trained as being talking in court or talking to opposing counsel by its nature adversarial. And so I think that
It's unfortunate that is true of disruptive tech, time and time again, and that's what we're seeing now is that the crypto industry is maturing, but there is a bit of a deficit that it dug itself in the very beginning because it probably wasn't thinking about who can it have as the ideal advocate in front of these policymakers. So is this the right stance to take right now? I think that hopefully what we'll see is with the fights like certainly the legal fights are important to have it comes up with new law always great But then the advocacy strategy I would hope that in time It's less of an adversarial advocacy strategy of hey if you don't do what we say We'll come for you because of X but rather hey we represent all of these small businesses, we represent all of these people who are have access to financial opportunities that they didn't before. We represent all these ways of doing new value that could not exist but for us. And I'm hoping that that's the message that will resonate in time in this 2024 period.
Michael Casey
Yeah, and that gets to your point before I think about the need for adoption, right? If you've got adoption, you're able to bring those people with you to say, hey, these are the people affected by this. And it's a much more kind of constructive conversation than a basarial, although I do think you're right that I mean, yes, disruptive tech always does come at it from a position where it is up against the establishment, I would argue that crypto is even more so because philosophically, it's sort of like, it exists with a very purpose, if you like of decentralizing away those intermediaries. So it's an interesting challenge because I do think that the spirit of crypto needs to be that. And yet at the same time, without some sort of accommodative position from regulators, that desire for adoption, this need for adoption that you're referring to is also held back. And so you're stuck with this chicken and egg kind of problem.
But at the same time, prices keep rising and that's, you know, it seems to be the way in which we, we have an impact here. You know, I actually wish it were more use cases and stories and individuals and human beings who were affected by it than, Hey, number go up, right? But you know, this is what we got. So, so we'll see.
Hermine Wong
Yeah, yeah. I like, you know, and I think that the idea that crypto spirit is anti-establishment. Like I think that that's true to some degree, but I also think that it is about access and opportunity as well, right? Like it is part of the anti-establishment was to democratize access. Like, and that I think is a theme that I consequence of that is to break some of those bonds of the traditional establishments. But that's that I think of as being a true spirit that becomes as a policy person, that's the bipartisan part of the policy themes for crypto.
Michael Casey
Yeah, I think that's a good way to put it. I would agree. Like it's, yes, it's by default, you end up anti-establishment when it comes to those institutions that get in the way of that. But ultimately, you know, we need to drive adoption. And in doing so, yeah, it's democratizing. It's increasing access. So what do you see as the biggest opportunity with that regard? Like where should adoption be driving? Are you interested in the, I don't know. There's a lot of conversation and tokenization, of course, but we've still got all the other use cases, the DeFi use cases, the NFT use cases. Where do you see adoption being driven?
Hermine Wong
I do think that tokenization, it seems like the term du jour, but it's a term du jour that I think is meaningful to a new population. Again, when trying to drive adoption, you want to access new populations that haven't already entered this space naturally. And I think that tokenization represents that. Whatever real world asset that may be, whether or not it's...the holy grail of real estate market, right? Or if it's going to be art world, or if it's going to be securities, whatever that may be, I do think that if we can get that solved, that will open up access to new populations that we haven't seen yet come into the market. I have not given up on NFTs either. I think that...
I talk to a lot of startups and a lot of here in San Francisco, especially, there's still a lot of artists, creators who are bullish about NFTs and NFTs giving them access to their direct audience in a way that, again, they're in a really like crap situation of being owned by the galleries, owned by the production companies, whatever that may be, and so in the studios.
The artist community is still trying to figure out how do they make NFTs take off? I'm hoping that this is the year where they can figure that out
Michael Casey
Yeah. All right. I tend to believe it as well. I think there's this real, real meaningful impact from NFTs when you bring it into that creative world. All right, listen, I'm going to wind it up there. First of all, I'm going to say that the, it's a user activated soft fork. That was where my brain default happened. I was trying to get to remember the A in the UASF. That's what I was referring to. It's an interesting period in Bitcoin history. It's worth looking back on it. Really, I think, you know, and it raises questions about where the real power lies within the structure of all that the ecosystem represents. Right. There's the users, there's the investors, there's the miners, right. There's people who are running nodes. They all have some impact on what Bitcoin actually is and how it develops. And the question of how that power is distributed, I think, is very interesting. It's going to be a very important question. And these new big institutions come in.
I think the beauty of this, sorry, I'm just going to wax lyrical on this for a little bit, but like, I think one of the beauties of it is that, you know, Bitcoin has had a chance to grow. Like it really is much more widely owned than people realize. You know, it's almost a trillion, I think it probably is pretty close to passing a trillion dollars in market cap right now. So it is a very large, you know, institutionally, uh, diffuse, uh, ecosystem and sure a black rock and a fidelity of this coming in and taking up a chunk of that ownership is going to be meaningful at the margins. But I have hope that the spread is just impossible now to actually take charge of. It is sufficiently decentralized, which is the beauty of Bitcoin in many, many ways. On that note, having my last word as I attend to, I'm going to call it quits now.
Hermine thank you so much for being with us. That was HermineWong from herminewong.xyz. And a prominent lawyer and advisor in this space. It's been a pleasure talking to you. And thank you to all of you for joining us. Do make sure you come back next week for another episode of money reimagined. Please do not forget to subscribe, give us a thumbs up or leave a review. We do value your feedback. And we'll see you next week, which is likely to come to you from Davos actually. So where Sheila and I will be attending some you know, that usual shenanigans in that part of the world. So looking forward to that. See you next time.
