Crypto regulation in Q1 2026 reshaped the stablecoin and digital asset markets with the OCC's 376-page Genius Act proposed rule, the SEC's five-category crypto asset classification, and new AML data from FATF and Chainalysis. Tedd Huff, CEO of fintech advisory firm Voalyre and founder of Fintech Confidential, breaks it all down with Robert Musiala, Partner at Baker Hostetler and co-lead of their Web3 practice.

The OCC introduced the PPSI framework that every future stablecoin issuer must follow, while at least 15 crypto-native companies raced to file trust charter applications. The SEC named 18 tokens as digital commodities, replaced the "decentralization" test with a central party control standard, and Chairman Atkins previewed up to three safe harbor proposals under a tentative Regulation CA. On the enforcement side, 84% of illicit crypto transactions in 2025 involved stablecoins, the DOJ seized $61 million in USDT, and North Korea expanded state-sponsored theft into remote IT worker schemes targeting US businesses.

Find out more

1️⃣ Map your Genius Act transition now; the 18-month implementation window is closing fast and companies that filed trust charters in late 2025 are already positioned.

2️⃣ Vet every outsourced IT vendor accepting stablecoin payments for shell company ties to state-sponsored actors.

3️⃣ Audit your tokens against the SEC's five-bucket test before the safe harbor proposals drop.

4️⃣ Stress test your AML program against stablecoin-specific risks like peer-to-peer transfers, multi-hop wallet chains, and shell IT vendor payments flagged by the DOJ and FATF in Q1.

5️⃣ Model your Q3 budget with and without yield revenue in case the OCC's related third-party restrictions survive.

LINKS

Guest

Robert Musiala

LinkedIn: https://www.linkedin.com/in/robert-musiala/

Baker Hostetler: https://www.bakerlaw.com/people/robert-musiala

Blockchain Monitor: https://www.blockchainmonitor.com/

Company

Baker Hostetler

Website: https://www.bakerlaw.com/

Web3 & Digital Assets Team: https://www.bakerlaw.com/practices/web3-digital-assets

Legal Resources: https://www.bakerlaw.com/insights

Host

Tedd Huff: https://www.linkedin.com/in/teddhuff/

Linkedin: https://www.linkedin.com/company/fintechconfidential

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ABOUT

Robert Musiala is a Partner at Baker Hostetler where he co-leads the firm's Web3 practice. He authors The Blockchain Monitor, one of the longest-running legal blogs covering crypto regulation, enforcement, and policy developments. His practice spans both traditional financial institutions and crypto-native companies.

Baker Hostetler is a national law firm with deep expertise in financial services, securities, and emerging technology law.

Tedd Huff is the CEO of fintech advisory firm Voalyre and founder of Fintech Confidential. The show is produced by DD3 Media and brings you the people, tech, and companies that change how you pay and get paid.

CHAPTERS

00:00 Episode Highlights

01:18 Welcome to Fintech Confidential

01:27 Dfns: Wallets as a Service (sponsor)

02:47 Show Intro And Guests

05:30 Genius Act Rulebook

07:38 Reserve Rules Explained

13:08 Charter Rush Begins

18:11 Banks Vs Crypto Score

20:49 Deposit Flight And Yield

25:58 Wyoming And SoFi Models

29:38 SEC Five Bucket Guide

32:49 Digital Commodities Line

37:35 Munchee Vs Meg Prime

39:21 Sky Flow: Building Fast and Secure (sponsor)

40:23 Back To Atkins Agenda

40:58 Atkins Next Moves

43:21 Regulation CA Safe Harbors

45:39 Stablecoins And Illicit Use

50:25 Freezing Burning Reissuing

54:13 Offshore Crackdown FATF

56:24 North Korea Crypto Threats

59:28 Q2 Watchlist OCC Yield

01:05:11 Safe Harbor And CLARITY

01:10:33 Advice For Builders Q2

01:13:20 Wrap Up And Sponsor

01:14:08 Hawk AI - Realtime Fraud Monitoring (sponsor)

01:14:53 Disclaimer

You worked group score for the first quarter of twenty twenty-six.

Do you see a clear winner?

Eighty-four percent of all illicit crypto transactions in twenty

twenty-five were stable coins.

Over seventy percent of illicit stable coin volume flows through

less than one hundred, what they call professional money laundering services.

Last time I checked, there were fifteen new charter applications.

Eleven of them had been approved.

It's going crazy.

Yeah, for every dollar that came into the bank, two dollars and seventy-seven cents

of it went out to a stable coin provider.

Offices full of captive employees who are effectively

slaves that are being forced to engage in these pig butchering schemes

and sending their crypto to the hands of, ultimately, North Korea.

The Munchy token in twenty eighteen, and then Meg Prime in

January of twenty twenty-six, they got a no-action relief on something

functionally extremely similar.

How do both of these things that exist seemingly in the same universe?

Bring stable coins into your strategy, and make it to be

regulated under Genius, because that is your long-term best bet right now.

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If you're asking how blockchain, crypto, AI, or even quantum

computing fits into your business strategy This is Built For You.

We talk with the builders and decision makers who are doing the work.

And whether you're a founder, an executive, or just trying

to stay ahead, this is for you.

So let's go ahead and get started.

I'm your host, Ted Huff, the CEO of Volere, a fintech advisory

firm, and I'm here with the fintech confidential informant, Rob Musiala.

He's a partner at BakerHostetler, where he co-leads their Web3 practice, along

with the blog, "The Blockchain Monitor." And if you haven't yet, go ahead and

check it out at theblockchainmonitor.com.

Rob, welcome back.

I mean, we've been collecting headlines all quarter from "The Blockchain Monitor"

and a number of other different places, and we're gonna go ahead and make sense

of what Q1 of 2026 really has been through that regulatory lens of yours.

The things we're gonna be talking about is the OCC's 376-page Genius Act

proposal and why everyone from Wyoming to Paxos is racing for a trust charter.

Not only that, we're gonna unpack the SEC's new five-bucket crypto guidance,

including how a 1940s Orange Grove case study explains why ETH and XRP are

now explicitly treated as commodities.

And we'll loo- even look into fresh AML data showing that stablecoins

might be at the center of some illicit flows, what that means for

the issuers and banks in quarter two.

Rob, from where you sit, is it fair to say that quarter one of 2026 has been

the most substantive regulatory quarter in this industry that we've had yet?

So Rob, from, from where you're sitting, is it fair to say that the first quarter

of 2026 is the most substantive regulatory quarter that this industry has seen yet?

I'm an attorney, I can debate anything, but that

is absolutely a fair statement.

It was a very, very busy quarter.

Really just between the OCC's Genius Act proposed rule, which essentially provided

a wealth of practical details on how Genius will be implemented, and combining

that with the SEC's interpretation on crypto assets, which is a landmark

piece of guidance and guidance that the industry has been waiting for for years.

Between those two developments, and there's even more that we'll talk about,

but between those alone, this was a major quarter from a regulatory perspective.

Let's start where the money is, right?

Stablecoins, charters, and the Genius Act.

Rob, the big headline the OCC published was basically this

full stablecoin rule book.

And for that person who's watching or listening that doesn't wanna go read those

376 pages What did the OCC actually do?

The first thing to note is that, first of all, this

is the primary proposed rule that will implement the Genius Act.

But I want to note that there are several other proposed rules that have

already been published and more that will be published by various agencies

that will all be involved in Genius Act.

That being said, this is going to be the primary one.

And in plain English, this proposed rule is where the rubber meets the

road in terms of bringing the Genius Act to a practical implementation.

Well, the rule, uh, defines dozens of key terms.

Uh, the most important of those terms is what's called a Permitted

Payment Stablecoin Issuer, or a PPSI.

Uh, and I would say, I'll say-

Dude, I gotta love the fact that we've added yet

another acronym to our glossary.

And there are, there are many, many more

acronyms in the proposed rule.

But, um, the rule broadly sets forth the parameters on what a PPSI

can do and what a PPSI can't do.

And that, uh, will involve things like issuing and redeeming stablecoins,

standards for audits, requirements for custody and safekeeping, the practical

details of the application process.

So how do you become a PPSA?

How do you apply?

How do you write, go through the registration and licensing?

And then importantly, uh, capital requirements for PPSIs.

The rule really got deep and set out the requirements around

the reserves backing the stablecoins.

Help me understand, does, does this take us beyond what the Genius Act did, or

did it just clarify it a little bit?

And, and like help us, help us break that down of what the

PPSIs will have to maintain.

The proposed rule, uh, interestingly stuck almost exactly

to the language of the act, the Genius Act itself, and so sticks with

these very conservative categories.

Uh, there are eight categories.

The first is US dollars, second is demand deposits, third, short-term

Treasury bills with a 93-day maturity.

Then, uh, fourth and fifth, repos and reverse repos, both, uh, overnight

maturity backed by short-term T-bills.

When, when I see tokenized cash equivalents, that, that piece

there makes me start thinking, we, we have these conversations about

tokenized deposits and, and those types of items and other real world assets.

And that starts to get me to feel like that's their, their little nudge, I guess

you would say, to- towards something that, that might be in the future in that space.

I would expect that most of the reserves initially

will be, uh, assets that are b- based off of short-term T-bills.

Another important part of the Genius Act, uh, that bears repeating here is

stablecoin issuers were not, will not be allowed to commingle those reserve assets

or rehypothecate them in any sort of way.

And so, you know, that is all designed, in my view, to create consumer

trust in these new stablecoins.

You, you said it a number of times, short-term T-bills.

And I, I think for the, for the average person, and heck, even for

people who've been in the space for a while, may not understand

the reason for short-term T-bills.

And, and correct me if I'm wrong, but it's really to be able to provide liquidity

at a rapid pace if and when needed.

What other benefits do you think this could provide for, for the PPSIs?

This is all about liquidity, and it's all

about building consumer trust.

And so that when a holder of stablecoins, even a holder of a large

number of stablecoins, comes to the PPSI and says, "I wanna redeem these.

I want my US dollars," that there'll be no issues in fulfilling those requests.

I'm curious from your perspective, what do you see as the

single most important or practical consequence of the reserve language that,

that has been placed in front of us?

Well, look, yeah, from a practical perspective, if you are a

stablecoin issuer or you want to become a stablecoin issuer, um, there's now

a lot of restrictions on how you can do that in compliance with Genius.

And a lot of stablecoin issuers that are out there now that are holding

their reserves in a lot of different assets will no longer be able to do

that, uh, in compliance with Genius.

So that means they're gonna either have to change their business model, change their

reserve, or they're gonna have to make a, a deliberate decision to move offshore

and service the markets outside the US.

And that's a big decision point for any stablecoin issuer.

Um, and you know, even the most conservist-- conservative stablecoin

issuers, you know, may have to make adjustments to meet these very

strict requirements on the reserves.

The T-bills piece of it, right?

The, th-this, in my mind, I'm thinking Tether.

Like, they, they've got a huge gold reserve, and they've got corporate

bonds, and they've got money markets, and they've got other... Like, you meant,

like, there's so many different ways.

What are some of the things that will become a barrier of entry for

them with, with their diversification that they have outside of that?

Well, I think Tether is sort of a case study in and of

its own because they're so large and b- have been operating for so long.

But it's public knowledge that they do intend to launch their own stablecoin

that will be intended to comply with Genius, and the implication there is

that they will continue to operate USDT as we all know it outside the US.

So I think it's a little too early to tell if that is a strategy

that other, uh, foreign-based stablecoin issuers might try to take.

Um, and there is a whole framework specifically targeted at foreign

stablecoin issuers, uh, to be able to issue stablecoins in the US under Genius,

which includes things like having to hold your reserves in a US bank, for example.

Stablecoins are meant to be looked at as low risk.

They're not supposed to be a risky asset.

They're supposed to function just like if you were-- someone were

to hand you a $10 bill, it should function the exact same way.

The risk is in the movement, not in the item itself, is really where

I'm seeing it, and it really starts to feel like a cash equivalent.

This is also intended to make stablecoins as simple as possible.

So, you know, you and I know working in the digital asset space, the builders

in this space are very creative.

A stablecoin that is compliant with the Genius Act will be the simplest of

digital assets on the marketplace, where it really does only do one thing, and

that is give the holder either, you know, the, the right to redeem that dollar

behind it or the ability to transfer it to somebody else as a payment mechanism

equivalent to, you know, the digital equivalent to cash, as you pointed out.

We're talking about how this starts to feel like a digital

equivalent to cash and all these different pieces, and you've talked

about it has to be in a US bank.

Now where my brain goes is

why... This, is, is this why everyone is going for charters?

Because we've seen a race for charters.

Uh, I, I mean, just in the last few weeks, uh, and I, and I think I'm trying to keep

up with it because last time I checked, there were 15 new charter applications.

11 of them had been approved.

From your perspective, 'cause you see these things happening all the

time, why do you believe we're seeing this flood of, of OCC trust charter

applications come flying in right now?

At, since like December of last year, so just in the past four months

let's say, at least 15, maybe more, uh, of these OCC trust charter applications.

My personal view is that this is absolutely related to the Genius

Act, but what the trust charter does under the explicit language of

Genius would, uh, open the door for those companies to become payment

stablecoin issuers under the Genius Act.

I pulled this up on the screen just to kinda give everybody

a- a feeling for, for the section.

It's section number 11 here.

Rob just went through it.

Non-bank entity, uninsured national bank, federal branch approved by the OCC.

I mean, it went great detail.

And them setting out these rules wasn't, wasn't random.

Crypto companies, digital asset companies don't just want these

charters because they're cool.

They're, they're really getting into position for when the music stops.

I, I mean, if I, if I pull up here, we've got what?

Paxos received theirs.

We've got BitGo, they received their approval.

And, and I can't leave out our friends at Ripple.

Um, they also got approved as well.

So there are a lot of things that have gone on in this space.

Uh, I, I'm just, I'm really want to, to better understand from you, how

is this setting them up for when the music starts from your perspective?

If you have your OCC trust charter at the time that Genius

goes into effect, and it will likely go into effect either later this year

or beginning of next year, you are in position to immediately submit an

application to become a PPSI, a permitted payment stablecoin issuer, uh, as soon as

those applications begin to be accepted and processed, and you are first in line.

And will be other ways to achieve PPSI status, but the simplest and

most straightforward is through the OCC trust charter path.

And so I absolutely expect that all these 15 plus, uh, companies that

have recently applied for OCC trust charters, that's the, that's the

initial list of PPSI stablecoin issuers.

You never know whether a company will look to issue a stablecoin right away.

Some of the companies, by the way, ha- already have stablecoins

in the market, as you know.

It really points out, like, the operational advantages of, of getting

inside of the banking frameworks early so that as things are changing, it's

not a wholesale flip over, "I gotta do something completely different.

I've gotta do something here, there." I'm curious, from a legal positioning,

how does that, how does that benefit them from getting into this process earlier?

Even just, let's just say submitting an application.

What does that do for me as a digital asset or crypto native company

to even submit my application?

Well, I, I think one would be that the application gives a

lot of detail on the business and what you're, what activities you intend

to conduct under that- trust charter.

And so you can think about a scenario where the OCC has already approved a trust

charter appli- application, and then when it comes time for your PPSI application,

a lot of that factual detail is, is almost exactly the same or is exactly the same.

And also I'll point out, you know, the, the current OCC is very

friendly to the crypto market.

We don't know what the next OCC, uh, and administration will look like.

We don't know if they'll be friendly, uh, less friendly, more friendly or neutral.

But y- we know what we, we know what we have now, and so I think that's part of

what's creating this race is to sort of take advantage of, um, an environment

where by and large, uh, the OCC has, has been friendly to these applicants.

As we're talking about this, this is really where I think the

first quarter of 2026 really got fun because as these charters are being

issued, I'm just glad that, uh, no one brought a gun to a knife fight.

But it definitely has felt like a knife fight between traditional banks and

crypto native companies, and they've both got a couple jabs in here and there.

But if you were to keep score- ... for, for the first quarter of 2026,

do you see a clear winner?

I would say, you know, if you talk about points, I would say

the first point probably went to the crypto industry, and that relates to

the OCC trust charter applications that we were just talking about.

Beginning in 2025 Q4, so last quarter, the bank sector saw these

OCC trust charter applications.

So they saw what was happening, and crypto native companies should

not be allowed to undertake certain activities under, quote, "fiduciary

duties only." And that was a big, big argument that the banks were making.

Well, in February of this year, so the current, you know, Q1 that just closed,

uh, the OCC issued a final rule clarifying that national trust charters allow for

more than just fiduciary activities.

And this, you know, a lot of people didn't notice this, but ultimately this was

a, a big point for the crypto industry because it allowed them to continue with

these trust charter applications with the knowledge and with the guidance and

affirmative affirmation from the OCC that, yes, a trust charter allows you to m- to

do more than just play a fiduciary role.

That point goes to crypto.

I think the next point maybe goes to the banks, uh, and that

relates to deposit insurance.

So another fight that's been going on is does a stablecoin,

uh, have deposit insurance?

And so far, the answer is gonna be no.

Uh, in, in the current, the recently closed Q1, we had a speech by a

federal banking official as well as pr- language in some of the proposed

Genius Act rules that indicated that, uh, federal deposit insurance

would not apply Uh, to stablecoins.

And so there is- Yeah ... one point for the banks.

And so that, that is an issue that is still being h- very, uh, hotly fought

out and debated right now, uh, both in Congress as well as in the comment,

uh, process for the OCC proposed rule.

So that fight's not over, but the banks did win kinda the first battle there.

I think one of the important things that, that came out was you had a

community bankers association start to, to raise some red flag, or raise some flags.

For every dollar that came into the bank, $2.77 of it went out to

a stablecoin provider of some sort.

Rob, what, what were your thoughts when you saw that come across and

then talking about the flight?

Is that, is this fear-mongering?

Is this, like, the reality and, and do you agree with my position

that this is just something they're gonna have to figure out?

I think n- the reality is nobody knows exactly how

the market is going to react once Genius goes into effect and once

stablecoins are more broadly issued.

My advice has always been that it, it doesn't have to be either/or,

and I do think in the future we're gonna see the traditional financial

sector and the crypto sector converge more and more and more.

A traditional bank should be asking themself, "How am I going to integrate

stablecoins or other crypto?"

And then similarly, you know, crypto natives should be asking themselves, "How

do I better access or allow access to the traditional financial system?" And I

think that is the future if, if it's not, if not the present, and that shows that

retail bank account holders are opening accounts at crypto exchanges as well.

People will typically, I think in the future, most people will have an

account at a crypto exchange or similar company, and the study found that.

That's, that's the one that scares the banks is that they saw that for el- every

dollar coming in, uh, from an exchange to the bank account, $2.77 left the bank

going to the crypto exchange account.

And the worry, I think, on their part is, uh, once Genius goes into effect,

that 270, $2.70 may double, triple.

So we just don't know, but that's the nature of the debate, and that is part of

where the rubber hits the road in terms of the ongoing sort of fight between the

banking sector and the crypto sector.

And it sort of arises or materializes in some of the details of the Genius

Act proposed rules, especially things like the yield debate,

but also other areas as well.

The core argument that we're hearing from these banking

associations is that there are non-banks that are issuing bank-like

products without a full bank regulation and that it's unfair It's unlevel.

The playing field is shifted out of their favor and, and they're

really trying to figure out how to get engaged with that same group.

Honestly, the, I mean, the, the fight over, and you mentioned earlier, the fight

over the stablecoin yield seems like the one that was focused on the most in the

first quarter of this year, especially for people outside of Washington.

Why do you think that this question of should they, shouldn't they offer

a yield matters so much at this point?

My personal view is that when Genius was initially being

drafted and envisioned, a stablecoin would be a payment instrument.

You know, so it'd be sort of the modern day equivalent of an ACH.

What we've realized now in going through the, the process of getting,

bringing Genius to get signed into law now, everyone has realized that there

is a market demand to use stablecoins not just as a payment instrument,

but actually as a store of w- of value, a place to hold your money.

Mm-hmm.

And I think that maybe surprised some folks who w- were working

on the legislation, and that is at, that is, I think is a driver of this issue.

It's partially a consumer protection issue because some would say that

a stablecoin is not intended to be a s- a store of value, and that's

why there's no deposit insurance.

Well, the counterargument to that is, well, why don't you let deposit

insurance flow through to stablecoins?

So that's the counter.

And then, you know, there's even a counter to that, which is, well, maybe those

businesses will actually get the right to issue interest and also the right

to have deposit insurance by becoming a full national bank, and that may be

another area where some of this is headed.

It's still unresolved, but it is going to be one of the most

commercially consequential debates that we have around Genius Act rules.

And as they're being defined and as all these things are coming into play, I think

that, that's gonna be the space where there's a lot of debate and there's gonna

be a lot of pushback from both sides.

Yeah, the economics will drive a lot of it too.

A company, a crypto native company is in position to provide that yield, that's

hard to ignore from a market perspective.

Uh, and then of, of course, the counterargument is, uh, you know,

the consumer protection piece.

Uh, so this conversation and this battle will be continued

throughout 2026 in my view.

The idea around this is it's not, it's not a theory anymore.

I mean, Wyoming has Front live on Kraken.

We've got SoFi with SoFi USD.

Looking at those two seemingly different types of accounts, what

does that tell you About the direction of, of where things are going.

And what I think really makes this interesting, and I'm probably going

down a rabbit hole on this one, is the fact that Kraken got a Fed

account with their Wyoming charter.

What is this tell what is this telling us, Rob?

I'm, I'm, I'm, it's slightly confusing.

You make a really good point in bringing up the Wyoming, uh,

Front stablecoin and then the, the SoFi stablecoin as two great examples.

But most of them by and large are sort of reserves held by US Bank,

audited by a public accounting firm.

The issuer itself, trust charter application with OCC pending

or already has one granted.

Then you've got Wyoming's Front coin, which is very much different

because this is a state-issued stablecoin issued in partnership

with a major US crypto exchange.

So that's a little bit of a different model.

Very much, very different model.

S- SoFi's the, uh, SoFi USD stablecoin is also very different.

Uh, on first glance, maybe it looks the same as some of the

other stablecoins in the market.

The big difference is SoFi is not operating under a trust charter.

SoFi is operating under a full national bank charter.

And so they are the first full national bank- Yeah

uh, to issue their own stablecoins.

And if SoFi can do it, why not any major national bank?

That's the piece that I took away the most out of that, is like the

idea around this is like, "Hey, we're, we're not gonna worry about where--

if the deposits go to stables because we're going to issue our own. We are

going to build an ecosystem that allows this to happen, that allows us to do

this, and allows us to deliver this to our customers the way that they need."

And, and I think that, that's a, a big difference from a lot of the

other players that, that maybe were mentioned in those 98 community banks.

Now mind you, I'm very aware that not every bank has the technology, the staff,

or the expertise to do what SoFi has done.

They are a technology-first bank, so that does change it.

But it is a real world use case, and it shows that by, by both a state government,

a traditionally nationally chartered bank being able to launch these products,

that the pathway already exists if you decide to go down that path as a financial

institution or as an organization in general, that it is possible and that,

that, that you can make it happen.

The stablecoin market is splintering and it's--

there will be stablecoins that are targeted at specific segments-

Yeah

... Robert Musiala: of both the US and global population And so s- it's

not gonna be one size fits all.

It will be st- some stablecoins are better for certain use cases, better

for certain market participants.

Others are better for other participants, whether that's institutional versus

retail or different markets within the institutional space or the

retail space or a combination.

And I think we're, we're absolutely starting to see that already.

I'm glad you went there because while we have all these regulators

are writing the rule book as we go for stablecoins, I mean, the SEC was

doing something just as important on the security side of it, and it finally

told us and the rest of the market what kind of crypto assets it thinks exist.

And I wanna start with the, the biggest picture of this, right?

On the 17th of March, the SEC published, and I gotta read this, it is release

number 33-11412, and it really dove into giving us five separate categories

for what a crypto asset actually is.

So I'm gonna go ahead and have that put up on the screen.

Walk us through what these five categories for what a crypto actually is for us, Rob.

So first, digital collectibles.

Digital collectibles are not securities.

These are crypto assets come to known as NFTs and meme coins.

So these are digital collectibles, not securities.

Mm-hmm.

The next category, also fairly straightforward,

digital tools, not securities.

These are crypto assets that perform a practical function such as a

membership, a ticket, a credential, a title instrument, or an identity badge.

And these are, um, these are, are more emerging use cases for, uh, crypto assets,

but still, um, use cases that I think most people are relatively familiar with using

the digital asset as, uh, an access device or credential, uh, or identity credential.

I mean, I've even used a digital asset to do

that to get to, into an event.

They authenticated it.

I think that's really cool, and I'm glad to see that they put that in

here where it is not a security.

Yeah, and it's a use case for blockchain that I think gets

overlooked a lot that is one of the basic use cases of authenticating a

transaction on a network where everyone trusts the information on that network.

Uh, so those are digital tools, not securities.

The next category, stablecoins, specifically a Genius Act stablecoin.

We just spent all this time talking about the Genius Act.

So a stablecoin that is issued and regulated under the Genius

Act is not a security, so that's great to have that clarity.

And then the fourth category, also relatively straightforward, uh, digital

securities or tokenized securities.

Guess what?

Those are securities.

In, in other words, if it's a crypto, um, iteration of a traditional security,

something that is enumerated in the definition of the term security, uh,

and it is just a crypto asset version of that, then it is a security.

So a security is a security whether or not you put it on a blockchain or not.

So I think that those are all pretty straightforward, those first four.

I do want to, you know, a- as I'm looking at, at the document that

the, the SEC sent out, there's a section where it calls digital commodities.

They gave examples.

It says, "Examples of digital commodities include Aptos, Avalanche, Bitcoin, Bitcoin

Cash, Cardano, Chainlink, Dogecoin, Ether, Hedera, Litecoin, Polkadot, Shiba

Inu, Solana, Stellar, Tezos, and XRP" are the ones that are listed in this.

This is nuts.

Like, a lot of those, a lot of people would've thought fell into securities

because there's so much being done around, around and with them.

So I, I, I thought that was really interesting that they brought those up.

The fifth category, digital commodities.

Digital commodities are not securities under the SEC interpretation.

Here's the definition.

Crypto assets that are intrinsically linked to and derive value from the

programmatic operation of a crypto system that is, quote, "functional," as well as

supply and demand dynamics, rather than from the expectation of profits from the

essential managerial efforts of others.

And we can unpack that, but there is a specific list in the SEC

interpretation of, what is it?

It's, like, about 15 or so, um, specific crypto assets.

There was 16 counted out specifically as examples.

The footnote adds Algo and LBC onto that as well.

So- Right ... we got 18 that have been added to this.

But I wanna get to the part that made everybody kinda go, "What?"

Uh, at le- at least for me, right?

Like, the, the, as I was reading through a lot of this, is the idea

that a token in of itself can detach itself from an investment contract.

I would love for you to tell the Orange Grove story the way

you do for your clients to help them understand this detachment.

I think the easiest way to explain this is actually to go

back to a recent speech by Chairman Atkins where he actually addressed this,

and he, he- He asked this question, "How can a non-security crypto asset

separate from an investment contract?"

And he said, "The simple yet profound answer is that the issuer of the

investment contract either fulfills the representations or promises, or fails

to satisfy them, or they otherwise terminate." In other words, the investment

contract ends, but there is still this piece of property that continues to exist.

And we can think about things like, for example, Ether.

You go back to the original pre-sale for Ether, and that pre-sale event had

investment contract type qualities.

But now fast-forward since, uh, the Ethereum network was launched,

Ether no longer is really tied to those investment contract type

arrangements and it's a, a digital commodity, an asset in and of itself.

Most likely, consult with your attorney, but most likely will

not be a security once that happens.

Is that, is that an accurate way to look at it, Rob?

So a digital commodity typical c- typically conveys to holders

certain technical rights with respect to the associated functional crypto system.

So, as an example, a digital commodity can enable holders to participate

in the system's consensus mechanism by staking or locking up that

system's native digital commodity.

It can act as a governance token, which allows holders to vote on

certain technical or governance matters such as software upgrades.

There's one key sentence that is saying a digital commodity

does not give you passive yield or rights to future income.

Yes.

That's

it.

And that, that feels like the line where some DeFi tokens still are

gonna have some serious problems.

Uh, I, I, I don't think we're ever gonna get away from, from some of these

folks wanting to do this, but I think that's where they're, we're gonna start

to see the, the issues shift over to.

Agreed.

Yeah, and at least it's clarity, right?

It's a bright line.

A digital commodity does not have intrinsic economic properties or

rights, such as generating a passive yield or conveying rights to future

income, and it goes on from there.

But that's a bright line.

If, if it has those characteristics, it's probably very likely, uh, fits

more into the security category.

One of the first ones that popped out and was really used in an

example of this is a security, sorry you guys couldn't see my air quotes,

um, really was the Munchy Token in 2018, and that's what they used.

And then Meg Prime in January of 2026, they got a no action relief on

something functionally extremely similar.

So, uh, Rob, I- I'm, I'm not an attorney.

Um, I don't understand what the heck happened here.

How do both of these things that exist seemingly in the same universe-

You know, the Munchee case, I mean, uh, attorneys like

myself who have been practicing this space for a long time, we

all remember the Munchee case.

This was the, the very first highly publicized enforcement action by the SEC

where, uh, the SEC obtained a-- There was a initial coin offering being done

by a company called Munchee, and the SEC came in and, um, issued a cease and

desist, and that ICO never happened.

And, um, fast-forward and we have Meg Prime, uh, which was the subject

of a recent SEC no-action letter.

And to your point, Ted, it's, it's not exactly the same as Munchee, but

it's, it's got a, it's pretty similar.

Uh, you know, one of the concepts of Meg Prime is that it's this, it's this, um,

token that is earned through activity, uh, conducted by, you know, the retail

holder, and then that retail holder can spend that token in exchange for

various, like, basic consumer items.

A lot of similarities to Munchee.

The big difference in Meg Prime, this was a functional system.

And so this gets to this concept of a functional network, which

goes back to a key term from the recent SEC interpretation.

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So welcome back.

We had to take a quick break for our sponsor, but Rob and I are back

to finish out talking about the rest of the things that happened

in the first quarter of 2026.

So Rob, we, we left talking about the guidance and what was going

on, but I, I want, I want you really to help us understand.

We've seen Chairman Atkins basically, and I think you and I could agree

on this, announce what his moves are gonna be, and then after he announces

them, he delivers directly on it.

What do you think he has previewed next and why should people really care?

If you're paying close enough attention, really

it's no secret, um, and it's, it's been great for the industry.

Chairman Atkins has really, at this point, established a track record of doing

everything that he says he's going to do.

As an example, the guidance that we just finished talking about that, uh, provides

five different categories of crypto assets, Chairman Atkins previewed all of

that, uh, at ETHDenver back in February.

And he gave a speech where he outlined those categories, and sure

enough, when the SEC interpretation was published recently, it's the

exact same five categories that he talked about in his earlier speech.

He's done this enough that, you know, in my view, it really is

becoming, uh, quite reliable.

And most recently, uh, he has indicated in a speech in March that, um,

you know, the, this interpretation that was recently published is

just the beginning, not the end.

And the next move is for the SEC to publish up to three different safe

harbor proposals targeted crypto assets.

They'll call it called Regulation CA, CA, uh, standing for crypto assets.

And it's three different proposals.

We can kind of get into the details, but again, this was

previewed just about a month ago.

If, if we look at the timelines of some of these things, right?

The, the, the pace at which they're happening continues to increase.

Chairman Atkins had mentioned being very clear in bringing out the guidance.

He talks about the next thing he's gonna do because the speed that he is delivering

on his perspectives and the things that he's doing to try and guide the

industry are-- it's at a breakneck pace.

I agree.

I mean, the, we've never seen anything like this.

The SEC Crypto Asset Task Force is moving at lightning speed.

To your point, I would not be surprised if by the time this podcast is published,

we have, um, a proposed regulation with one of these exemptions that

Chairman Atkins mentioned back in March.

If we don't have it by the time this, uh, podcast is published, I think

we will certainly have at least one by the time we do the Q2 podcast.

So it'll be interesting to see what, what comes first, uh, and

how much progress is made, you know, over the next three months.

Without going into a lot of details, can you, can you quickly outline

the three papers that you mentioned?

Like, what are they called?

What are they for?

Let's not go into the technical details.

Let's just give everybody kind of an overview of what, what they should be

looking at and, and what it's about.

The goal of all this, paraphrasing the words of Chairman Atkins

in his speech, is to provide crypto innovators pathways to raise capital

in the US while providing appropriate investor protections at the same time.

So that's the overall goal.

And to meet that goal, there's, uh, Chairman Atkins discussed three potential

exemptions that could be issued.

Uh, the first he, he called a startup exemption, and that would be, you know,

limited time duration exemption from registering under the SEC's rules,

uh, that would be designed to enable developers of crypto asset projects to,

quote, "work toward maturity of their project" and permit entrepreneurs to

raise up to a certain amount of capital.

So it would be like a capped amount, uh, of fundraising without having to register

with the SEC or with having some sort of limited registration requirement.

The next would be a fundraising exemption, and that would apply, you

know, we talked about this concept of, uh, an investment contract

that's, um, tied to a crypto asset.

Well, this, there would be a fundraising exemption that would apply to exactly

that type of asset that would, um, allow us, again, a certain amount of capital to

be raised while that investment contract is sort of tied to the crypto asset.

And then the third, uh, he termed it a, an investment contract safe harbor,

and this would exempt, uh, investment contracts from the definition of a s- of a

security for some crypto assets, uh, after the issuer has permanently ended, um,

all the essential, essential managerial efforts, which as we discussed is a,

a part, a key part of the Howey Test.

Again, intended to just help facilitate fundraising while still maintaining

appropriate investor protections.

Rob, w- thank you for that guidance and, and that understanding.

Um, we're, we're gonna be putting links to a lot of this stuff in the show notes,

so if you're curious about the things that we're talking about, all that stuff,

go ahead and check out the show notes.

We'll get into that deeply.

But Rob, I wanna move on into, we just talked about the SEC

gave the market a map for the Q1.

It looks like it's rolling into Q2, as we talked, as you just talked about.

And I think it's really good when you start to look at applying these to good

actors, and it works really, really well as long as they play by the rules.

But as you and I both know, not everybody plays by the rules.

So the other big story I think happened in the first quarter is when stablecoins are

becoming mainstream, guess what happens?

They start to become that preferred tool for these illicit activities at

the exact same time, just like cash.

I mean, that's the number one use for these illicit activities.

Number, number two, I don't know if this is true, but I, I have

a feeling we're, we're sliding towards where stables may become the

number two for this type of stuff.

Beside that, uh, I do, I do wanna kinda give a sc- stat out for everybody.

84% of all illicit crypto transactions in 2025 were stablecoins Do you

remember where that came from, and what should we take away from that number?

So that stat was published in a report by the FATF,

the Financial Action Task Force, in a recent... The stat itself was, it

was published in the FATF report, but the stat comes from a Chainalysis.

And my understanding is that Chainalysis has a relationship with FATF and sometimes

participates in their meetings and, you know, has sort of a, some level of

information sharing with, with FATF.

And so it, it's not surprising.

But, you know, Chainalysis is one of the primary, most trusted

sources of on-chain data analytics.

And so, you know, when you get a stat like that coming from Chainalysis,

it, I find it to be an interesting stat because up until now, Bitcoin

has by and large always been the preferred crypto for illicit activity.

Um, you can speculate as to why that might be.

My personal view is because it has the, it's got a lot of liquidity.

You know, they're, it, it's the most popular crypto, so it's easy to

find someone to exchange it for you.

It's a trusted network.

It's the mo- arguably the most trusted network.

So, you know, criminals want stability in their, in their value and value

transfer just like anyone else, right?

That's a good point, that transition from something

that's a lot more volatile, like a Bitcoin or any of the other meme

coins that we would wanna mention.

Uh, we mentioned earlier, you know, we gave a list of 16, 17, 18 items that

are, that are looked at, I'll call it utility purposes for payment transactions.

As, as you talk about this, I didn't think about the li- the stability piece of it.

Liquidity makes a little bit more sense to me, but the stability of that is,

un- unless you're a, a HODLer, um, like the stability is gonna be a big deal.

Uh, when, when you look, when we look at this, what percentage of, of these

stablecoin flows have they found are through these, I'll call them

professional money laundering services?

Like, what, what does that, what does that look like?

TerraM Labs published a report finding that, uh, over 70%

of illicit stablecoin volume flows through less than 100, what they call

professional money laundering services.

And so what that tells us is that, uh, you know, I, I think it, there's a lot

of analysis you can put into that stat.

One takeaway out, it tells us that ecosystem around illicit stablecoin

activity seems to be relatively small.

Usually it's gonna be a good thing for the good guys because that means

there's a small attack vector, right?

I have to ask, you say it's small.

These numbers don't seem small.

Why, why do you say small?

Small in comparison to like the global financial system.

At, you know, you look at the traditional financial system as An analogy, you know,

there are still hundreds of millions of dollars that are laundered through the

traditional financial system every year.

It's a cat and mouse game.

You know, banks have their compliance departments and their AML staff trying

to catch these things and report them, and then law enforcement, uh, tries

to take action based on those reports.

And despite all that, there's still hundreds of millions laundered through

the traditional banking sector every year.

And if you think about, like, the global financial system, how many banks

are there that mostly unknowingly, you know, are, are facilitating this?

It's definitely-- I don't know how many it is, but it's a lot more than 100.

The consequences of all this illicit activity, at least one

of them, is this is putting a lot more pressure on the issuers to act like

a financial institution when fraud or any sort of criminal use shows up.

And I think it's important to note that the DOJ seized about

$61 million in USDT this quarter with the support of the issuer.

Now, I feel like this does kind of feed the debate around freezing it,

then burning it, and then reissuing it.

Do you feel the same way?

And if so, why?

And if not, why not?

Well, I, I think that you are getting at one of the-- a

topic that will be a subject of very intense debate in the future, like

in the immediate fr- term future.

What level of monitoring does a stablecoin issuer have to perform

to prevent illicit activity?

For example, someone who's coming to a Genius Act stablecoin issuer and

saying, "Hey, I, I wanna redeem my stablecoins. I'm gonna send you my

stablecoins, you send me the cash," right?

The stablecoin issuer obviously has to do diligence on that party.

If there's ever a illicit activity involved, it's not gonna

be through that primary party.

It'll be one, two, three more hops down the line.

And so the question is, how much diligence does that issuer have to do?

How far do they have to go?

How far do they have to trace that stablecoin to try to detect

potential illicit activity?

That's an open question that I think most folks are not really thinking about now

that we're gonna have to grapple with.

And then the second, which I think is coming more immediate, is the one you

pointed out, which is, um, to what degree should a stablecoin issuer, either

under Genius Act or otherwise, have the responsibility to freeze, uh, stablecoins

that are involved in illicit activity?

And then to take it a step further, not only freeze them,

but burn them and reissue them.

I think that's an issue that is gonna be hotly debated in

the next six to 12 months.

What we're talking about here is a, a permanent

freeze on those, on those assets.

Then when it's identified as being criminal activity

It gets completely burnt.

Think gas fees.

It gets burnt completely out.

And then what the... This is what blows my mind.

Then what has to happen is it, the same amount of tokens that were burnt

now have to be reissued just so that it can get back into the system.

I think that's interesting that the thought process is to go that route.

Am I thinking about this wrong?

A third option is actually to just iss- for the stablecoin issuer

to simply issue the US dollars cash.

I'm sure that the issuers have a preferred method.

However, you know, I think from the victim's perspective, it probably

doesn't matter all that much.

I think the larger question is, should they be required to do this?

If they are required, what does it take to compel an issuer to freeze

and, and then reissue stablecoins?

Do you need a court order?

Do you need, um, s- you know, sufficient evidence that, you know, the stablecoins

are, have been used for illicit activity?

And who gets to decide if it's sufficient?

Is it the issuer?

Is it someone else?

Or again, do you just kind of rely on a court and say

if you can get a court order-

That's actually a good point, too, yeah.

But, and I think all this is yet to be decided, and I

think these will all be topics that we'll be debating over the next 12

months or so, and then, and, and even more so as Genius goes into effect.

And also even on top of that, even more so as stablecoins begin to be seen by

the bad guys as a good way to store and move launder, and launder money.

And so you start to think about all these different things with the US

regulations, and there are a lot of people who are like, "Fantastic. So I'll just go

offshore and avoid all of this fun stuff."

But guess what?

FATF has started to take aim at the offshore companies.

They have really started... And in their report, they really kind of talk

through what this means for this, like the registration and jurisdictions.

And if you're a US person using a, a offshore stablecoin provider,

what, what does that, what does all of this mean for you?

Similar to some of the concepts that we talked about

earlier, you know, h- i-in terms of the stablecoin market splintering in different

directions and different stablecoins being used for different purposes.

On the one hand, Genius Act regulated stablecoins by a US issuer, and then on

the other hand, stablecoins not regulated by Genius that are intended to be used

offshore to the extent that a US person chooses, for whatever reason, to use not

regulated by Genius by a foreign issuer.

But the message is, from FATF is that FATF is looking for foreign-based

stablecoin issuers and other VASPs to start catching up, you know, to

the level of anti-money laundering regulation that we have here in the US.

You know, if the reason why someone is using a foreign-based

stablecoin has something to do with the lax AML controls Well, that's

not gonna be the case forever.

Um, how, how quickly will that gap close?

That's another question.

Certainly hasn't closed as quickly as Factif would like.

Uh, but the, the pressure is there, and I do think that's

the direction things are headed.

If you are looking to figure out a way to arbitrage the regulatory

environment, it's gonna continue to get harder and harder and harder,

especially as we're starting to see these jurisdictions coordinate with

each other better and better over time.

So the, as that improves, it's gonna be harder and harder, is

not gonna be as advantageous.

Zoom out a little bit, right?

So, so North Korea, other organized actors are using, like, an industrialized system.

This, I believe, has the regulators thinking about the

whole market completely different.

I think that's also where some of the coordination comes into play.

How much do you think that this is impacting the way the regulators are,

are looking at the global market?

Uh, I think it's a, a key driver, absolutely, especially

the activities that we're seeing undertaken by DPRK, which is an

arm of the North Korean government.

At, at this point, they really have got... The North Korean government really

has three main sort of, to your point, industrial complexes by which- Mm-hmm

to steal crypto value from the US and other countries.

The first is just straight up hacks.

That's been going on for a long time.

Um, the second that now is becoming equally as dangerous as hacks is where

they're reaching out to individuals and trying to trick them into, uh,

investing in, you know, fraud schemes essentially, and sending their crypto,

you know, to where, uh, it's in the hands of ultimately North Korea.

Um, so that's the second pig butchering.

And now the third, which is actually becoming more of a concern for legitimate

businesses, is these remote IT worker schemes, where you've got a, a shell

business that reaches out and says, "Hey, we offer remote IT services." And they

say, "But hey, we, we, because of, you know, wire transfers are expensive and

stuff, you have to pay us in stablecoin."

So now you're paying in stablecoin.

Uh, it's going directly to the benefit of the North Korean government.

It's not easy to catch because it's crypto, so it's not going through

the bank system, so it's not going through an AML program at a bank.

And so that third one is actually the most dangerous for legitimate US businesses

that if they haven't heard about these schemes and don't have, um, take steps to

uncover them, could unknowingly be, you know, making payments to IT workers that

are ultimately working for North Korea.

It's a totally different ballgame when you start talking about

national security and all these different pieces and state-sponsored actors.

I mean, there's so-- it's, it's so different than the, the con

artist pig butchering perspective.

Like The, the hacking to get in to steal the crypto.

Like it gets, it gets really crazy really fast.

There are new ways that are being brought to our attention, and so

that's why we hear more about it.

At least that's my opinion of that piece

of it.

I'm glad you brought that up, Ted, and I agree with you 100%, and it's, it's

a really important point to bring up anytime we talk about this stuff because

none of what we've just discussed is any reason to be anti-crypto.

You know, to your point, I mean, the vast amount of money laundering, as

we discussed earlier, happens through the traditional banking system.

The vast amount of money laundering happens using cash.

Cash is still king.

Uh, but we don't-- we're not looking to, you know, outlaw

banks or outlaw cash, right?

So same thing.

It's just a new way of value transfer.

Of course, it's gonna be used for, for illicit purposes sometimes, and we need

to try to prevent that, but it's no reason to be against the technology itself.

We've got a real stablecoin rulebook that's being built.

It's in progress.

We're seeing it happen.

We saw the SEC draw lines around what crypto asset types

are and how to look at them.

We're seeing a lots of AML pressure building extremely fast.

What do we need to be watching in the second quarter?

Like, my first thing is will the OCC's reserve asset restrictions that

they've put in place really survive the industry pushback from both sides?

I think that's a piece that I think we're gonna see a lot of movement around.

There, there's gonna be progress and there's gonna be all this stuff,

but we've, we've got major items that have gone out for comment

that are gonna come in in Q2.

Um, Rob, what are you, what are you seeing with, with that piece of it?

Personal prediction is I think that it will remain as proposed.

Uh, I think that, uh, you know, it's a conservative set of res-

of, uh, restrictions, and I think that is intended to build trust

in an emerging stablecoin market.

And I think there are a lot of stakeholders who many might want to

expand upon that list of reserve assets.

I think most people understand the launch of Genius is going to be a critical

period where we need to build trust for consumers, and so it makes sense

to take that conservative approach.

And that list of reserve assets can expand over time.

My personal prediction, while there probably will be a lot of comment and

back and forth and debate, I think we'll e- we'll end up where we're at

right now with the conservative list.

I, I think the, the places to watch are gonna be the stablecoin

issuers that are, that have a lot to lose if it gets too strict.

And then you have the financial institutions and banking associations

are gonna be fighting over ma- trying to do the best they can to make it fit

within the financial institution box.

It's gonna be a lot of fun to watch the comments going back and forth.

A- and so it's super important to also keep in mind is it All of these

comments are publicly available, right?

So you don't, you don't have to, to wait till after the fact.

You don't have to... All of these comments as they come in are publicly available.

You can keep up with that.

And then the last thing that I start to look at, the acting

comptroller, he's made a comment.

He wants to keep it strict.

He wants to make it so that we don't kill innovation.

So his final rule on this could tilt us either direction on that piece of it.

The other piece, I think we need to s- keep, keep our eye on the stablecoin

yield fight, where it lands, how it lands.

Does it, does it stay within the rulemaking?

Does it start to get political?

I think we're gonna see a lot of those things.

Where are your thoughts on, on this piece specifically?

When does it get resolved?

Is it Q2 or is it later?

I do not think it will be Q2.

So it's another great opportunity to try to make a prediction.

And it's anybody's guess, right?

My personal, uh, prediction is I think this debate will continue through Q2.

It doesn't have to be finalized until the OCC issues the final rules implementing

Genius, and I, I do think the OCC is most likely looking to issue those final

rules and implement Genius by the fall.

My understanding is that if they don't, uh, the Genius will take effect of its own

accord through the language in the actual law sometime shortly after the new year.

But I think OCC's looking to enact it sooner.

But I do not think the final rule will be published in Q2, and that means

as long as that final rule is not published, there is still room to debate.

And I, and I think because there's so many perspectives from so many that

that debate is going to rage on up until the point when the final rule is

published and it's, you know, at that point the rules are set, uh, until

Congress or OCC tries to change them through additional laws or rulemaking.

If you look at the OCC's pro- proposed rules, the, the language that's

in there really directly targets specific revenue arrangements that have been put

in the, in the marketplace, those who pay yield on behalf of stablecoin issuers.

If that language survives, it will eliminate a large source of revenue for

players in the marketplace, many players in the marketplace, and I, I think

that's, that's a piece that is something we should be watching really closely.

Not only that, but looking at all the different bank side arguments.

If you look at the letters of comment that have come in from these

associations, th- like, they want a strict reserve interpretation

No creative workarounds, nothing.

It's like it's a one-to-one ratio, no variation, like all

these different things in there.

I, I don't believe it's gonna be that strict, but that's another

area I think we should be watching really, really closely for.

We're still in the thick of these debates, and they could

go in a lot of different directions.

And even when they're resolved initially, uh, they're still really not gonna be over

because, for example, let's say the yield debate ends with the way that, uh, we have

the language in the proposed rule where a related third party, you know, related

to the issuer cannot, uh, offer yield.

Well, that's n- still not the end, frankly, because what ha-

what if that, uh, third party then gets a national bank charter?

Can you pay yield and just call it interest on a deposit

just like any bank, right?

So that's just one example, and there w- will be other ways the crypto industry,

you know, tries to get to where it wants to be from a market perspective.

We should be paying attention to is how the safe harbor drops in the

next few weeks, the changes that happen.

What are you looking for?

What are you watching when it comes to that safe harbor stuff coming into Q2?

It'll start in the form of a proposed rule.

So a proposed rule is just a proposal.

It does not, it's not a regulation, so it has no force of law.

It's a discussion draft.

You know, a crypto asset exemption from the SEC that's in the form of

a proposed rule, that doesn't mean you can go ahead and start following

that proposed rule and relying on it because it hasn't been finalized yet.

So there's still, there will still be that public comment period, uh, just like

we're going through with Genius right now, where there'll be a comment period where

people can propose changes, revisions.

And for that reason, it's something to absolutely watch and absolutely

you can sort of prepare for when that, uh, proposed language becomes final.

You won't be able to rely on it, you know, immediately upon publication.

So we'll still have that interpretive guidance and that will still be sort of

the main piece of guidance to look to from a regulatory guidance perspective.

So the next one is, is really the CLARITY Act.

I've been very open to say I don't think the CLARITY Act's gonna make

a whole lot of movement this year.

I th- I think it's gonna be more of a, a discussion point than an actuality.

Do you see real movement or are you seeing more delays as, as I'm predicting?

I, I think I ultimately have to side with you on

this one in terms of predictions, that I, I do not think we'll have

significant developments by end of Q2.

I do think that there will be a push in Q2.

Will that push be successful?

If I have to guess, I'm gonna say unfortunately no.

Then we'll have the summer recess, and then I think there'll be another real

strong push in the fall to try to get market structure legislation passed,

uh, before Thanksgiving es- essentially.

And that will be the last final big push to see if it can happen this year.

I'm gonna be paying attention to the most is watching

that Senate Banking Committee, um, looking at their schedule Um,

what their publishing schedule is.

Uh, like I'll, I'll give you an example.

Right now, they have no calendar notice on when it's gonna be published or what's

going on, which means, in my personal opinion, is there's not gonna be any

markups gonna be happening before they get back from their summer recess, right?

So there's gonna be a lot of speculation beforehand as it starts

to, to roll when they come back.

There are three sticking points that I'm paying attention to as well.

Sufficient s- decentralization for the SEC and CFTC jurisdiction, that's

one I'm gonna be paying attention to.

How they treat DeFi governance and token holders, that's another one that I'm

gonna be paying a lot of attention to.

And then the scope of the developer in safe harbor for

open source protocol builders.

I think those are the three that I'm gonna be really diving into

and really paying attention to.

That's the places that I think I'm gonna spend the time.

And I think as we see the Genius Act implementation rule advance,

there are a lot of, of people that are saying, "Let's see how these

rules work before we legislate."

I don't think we're gonna wait for that.

So I'm watching for the, how they're gonna frame that up so that

it can continue to move forward.

So that's the, the biggest piece for me.

One of the pieces that you discussed that I find very

interesting is this concept of whether the word decentralization and that concept

will actually make it into, uh, law.

Uh, as you can see, you know, as we talked about earlier in the SEC interpretation,

that word was not really present.

It was in three footnotes.

But ultimately, the SEC used more, uh, sort of plain English descriptions

to substitute for that term.

I tend to like that approach.

It's more understandable.

Ever since this word decentralization was introduced, it's just

caused a lot of confusion.

It's really hard to pin down what it actually means.

To me, it'll be interesting to see if the language from the SEC interpretation

makes it into, you know, the CLARITY Act market structure language, or will the

word, the term decentralization remain?

I also agree with you that you make a good point that, um, some of the, uh,

less sophisticated stakeholders might make an argument that, "Oh, we have ge- why

do we have to, you know, make a push for the CLARITY and market structure bills?

We have Genius now.

Let's see what happens when Genius goes into effect, and then let's

decide." A more sophisticated understanding of the crypto market

shows that, like, these are two completely unrelated things ultimately.

Seeing how Genius unfolds really is not going to help in, in predicting

how the CLARITY Act or market structure legislation will a- unfold in practice.

And so I, I would hope that sort of the clear, more

sophisticated viewpoint prevails.

Genius is not used as an excuse to delay CLARITY Act and market structure.

Uh, but we'll see what happens.

Yeah, those are a lot of things to pay attention to coming into, into Q2.

Most of it probably will not become reality, but keeping track of it during

the process really helps you understand why it ended up the way that it did.

So we're, we'll be happy to keep you guys all in touch with

what's going on in that space.

Rob, I, I've got one last one for, for this episode.

You know me, I, I like to ask the, the so what question.

If you had to give builders and operators in the digital asset space

one sentence of advice heading, heading into Q2, what would it be?

I would say bring stablecoins into your strategy and make

it a stablecoin that is intended to be regulated under Genius, because that

is your long-term best bet right now in terms of what the future will hold.

If you were to give three concrete actions from, from where

you sit and all the things that you see, what would they be they should

be really just taking action on?

Find a way to integrate stablecoins and make it a stablecoin that

is intended to be regulated under Genius, not a different type of stablecoin.

That's number one.

Number two is to the extent that you are looking to launch or have already

launched a crypto project that involves your own crypto asset, you need to look

at that SEC interpretation very closely and find a good lawyer that can help you

interpret it, and you need to use that as your guide as you build out your strategy.

And then the third is take anti-money laundering and financial crime

seriously, whether or not you are required to have an AML program.

Um, if you're required, you absolutely should take it very seriously, but even

if you're not, you should still have a plan for how you're gonna make sure

that your business is not used or, and does not touch, uh, illicit activity,

because that's just good business.

So Rob, I'm, I'm gonna get a little bit more tactical on this piece.

I, I think they need to read the OCC comments before the period closes.

I think they need to get and understand what their transition

window looks like for how they're gonna implement the Genius Act.

We won't... There's only an 18-month window for that thing, so

we really need to figure that out.

Lastly, they need to track the safe harbor proposed rule and

treat it as if it's coming in.

So, like, those are the big pieces that I see happening in there.

Rob, I don't know if we should tease this or not, but I, I think, I think

we're at a point where we may need to do a full episode just diving into the

details of the dedicated SEC guidance and really get into what that means.

So if y'all wanna hear that, let us know.

We'll go ahead and get that staged up for you.

But Rob- Thank you so much for spending time coming back to finish the episode.

I know we had a lot of fun this time, so thanks again, man.

Thanks, Ted.

It's always a pleasure to be on the show.

Uh, I always have a lot of fun, uh, so thanks again.

Look forward to coming back.

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