0/ Clarity has been a very hot topic from a legislation perspective. You can read my entire thoughts in the newsletter and the long form, but the summary is this: Too many cooks in the kitchen No understanding of metapolitics vs localized issues Banks hate themselves A mess!

I don't think this is actually related to AI. Companies are just fat and weak. Having been at some of these organizations, most are bloated, have too much bureaucracy, and have teams that range from neutral to negative value due to principal-agent problems and empire building. However, management doesn't want to get themselves fired, so they also need a "fake because" other than "we are dumb and can't manage well" as a reason to fire people. So they look for fake reasons. Often this happened when you had an adverse business event, when you could get away with hiring McKinsey or whomever to tell you to do it and blame them, or now, because of AI. This is the classic "fake because" to do a thing that should have been done a long time ago.

The bigger problem for polling is the specific nature of the error, as that destroys the usefulness of polls. If you have samples that are representative-ish, you can have reasonable error margins around your polls and it's approximate, but so be it. If you literally cannot get people to respond, that is a different kind of error. It's highly directional, and it's correlated across all the polls. Worst of all, you don't know how big the error is (you can guess, of course, usually by fitting to past results), but you don't actually know until after the fact and you have no good way of estimating it. So to that end, I think the intelligent critique is not that the industry is in a coma, but rather that it faces a truly intractable problem of subgroups of people simply refusing to be polled, and we don't have a great estimate of the difference between the polled and unpolled, only that it's not stable over time. If you adjust, are you now too Democratic? Too Republican? Too... neither and just weird? This sort of uncertainty matters most in close races, of course. In a very wide race, fine, D+20 is not becoming R+1. But D+4? R+2? You might as well throw darts at that point. The core issue is not that pollsters are not aware of it. It's that, for this specific kind of statistical uncertainty, it's far harder to do anything useful with it and they are somewhat to completely powerless.

Tell me without telling me you have not read the Genius Act. Let's take a few things apart here: 1 - Bank Deposit Tokens (hereafter BDTs) in the United States are account-linked, FDIC insured, and function, essentially, exactly like a regular deposit on a different ledger, which is completely sensible since blockchains are, in fact, just ledgers. BDTs are not functionally different from a deposit at a bank working on traditional rails. This has a few implications. First is to that receive one, you must be a customer of the bank. How many non-Chase customers have Chase accounts? To ask is to answer, no? Second is that you have FDIC insurance on these exposures, which is part of why you need to KYC and know who the account holder is, as the FDIC attaches at a legal-person level across all accounts at a bank. If you could get $250mm of FDIC insurance simply by holding 1,000 different wallets to hold your BDT even though you are a single legal person, we would have "same activity, different rules", which is exactly the opposite of the mantra we are going for here. Third is that deposits create both credit and run risk; this is an under-appreciated point with almost everyone, including oddly bank execs and regulators, but a bank deposit is essentially a form of commercial paper with special privileges. You are just a creditor. The bank owes you cash. Only deposits are redeemable on demand, so as soon as the bank looks shaky, people are going to redeem, in size, and this is economically intelligent on an individual basis. Therefore, having some controls around who can own them so the bank itself (and its regulators) can model this risk would be needed. Put differently: bearer BDTs would be an obvious tool for other banks to attack those with weaker balance sheets and destroy them. Not great! 2 - In Genius, in the United States, stablecoins do not have to work this way. Bank deposits are an allowable instrument within the Genius framework, meaning one could create a stablecoin which was entirely composed of bank deposits, but you don't have to do this. What are the actual assets you can use in Genius? Physical currency, reserves held at the Fed, demand deposits of banks or credit unions, t-bills, repo (against bills), and reverse repo (overnight against all treasuries). Then there are the theoretical sub-categories of a gov't MMF that fits within the categories above (e.g. a gov't MMF holding only short dated t-bills) or other similar assets approved by the OCC (not aware of any yet, esp. as rulemaking is ongoing). So where does this leave a stablecoin? One, you could create a stablecoin that is basically composed of uninsured bank deposits, which would have significant credit risk. Yuval waves at that in his post, but I have to question why one would do this, as someone who used to run the third-largest stablecoin in the world at the time and ran away from this exposure at every turn (and when not doing so, bought private market insurance to cover what we did need for 24/7 mint/redeem)? It's a worse exposure for no economic benefit! Instead, what you do is mostly overnight reverse repo. That's daily liquid with no slip, covered by the best asset in the world (treasuries) with a margin of safety), and tri-party so you aren't taking undue credit risk. Failing that, you can also do t-bills, which are easy (but one day slower, usually) to liquidate in size. Does that work? Probably! There's like $7T of these things in the wild and the gov't MMF complex sailed even through 2008 with no issues, so if this exposure is breaking, your entire financial system is Fucked with a capital F. None of the banks are going to make it either. 3 - So how can these trade? They are not FDIC insured, they are semi-bearer instruments, and under Genius, it is explicitly clear you can let them trade in secondary markets without KYC'ing everyone. To actually cross the bridge from tradfi to onchain, or onchain to tradfi, you do need to KYC (and notably, the rules about this in Genius are clear and far more expansive than pre-Genius, so a lot of stablecoin issuers are about to be in for a rude shock about having to face actual customers), which is totally fair as that prevents a lot of the money laundering and financial crime issues by trapping people in a cul-de-sac if they have done it, so you can seize, freeze, and recover funds (as you should be able to). Once you understand this framework, you can get to the heart of what @malekanoms is saying elsewhere: Stablecoins are fundamentally bearer money, looking more like cash out of an ATM or MMF shares, that is to say fully funded, run-resistant, non-levered money. BDTs look more like traditional bank deposits, that is to say highly levered, not run-resistant, and account-based. Those are two different objects with meaningful differences between them. They cannot and should not work the same way, and they don't, because it's already law in the United States. Congress has spoken on this point. Euro stablecoins work very differently, btw. Those do look more like bank deposits and bank objects. The end result of this is that, like many other things in Europe, they are going to be crippled and pointless for anyone outside of Europe to use. Don't believe me? Go look at market share of Euro vs. USD stablecoins and get back to me. Punch line here: these are not the same instruments, they have different goals, they will not converge, and stablecoins are likely to dominate over time as ultimately better for consumers than traditional uninsured deposits. They have fundamentally different properties and a different legal framework than BDTs, at least in the United States and Canada (and likely UAE, HK, SG, and Japan, but less so Europe or South Korea). A bigger, lurking issue is just that banks are awful to deal with for a lot of consumers, but that's more a fintech vs. bank thing and it's not specific to stablecoins. That battleground is clearer on agent vs. non-agent implementations, and a lot of banks choosing to protect their margins at the expense of customer utility. We'll see how that works out for them.

To pile on to my previous point about intergenerational politics, there is also the question of taxes for what. I remain confident that not just how much the gov’t spends but also what it spends it on is about to be renegotiated in very disruptive fashion over the next 20 yrs.

Olivia is on the floor at Money 20/20 chasing around news (about @coinbase and more) and the feeling on the ground. If you are in the payments space, it's worth a look. Primary sourcing always beats the third-hand rumors.

This fault line is going to determine American politics for the next 20 years. Why? Boomers vote for young people before those young people existed to cover a $40T deficit for boomers. If you're a boomer, you see that as "I am owed what I was promised". If you're a young person, you see that as "you guys promised yourselves you'd rip me off and I never agreed to this". Mark my words, the parties will be forced to re-align around this question and take sides. Keep your promises vs. no taxation without representation. You're going to have to pick one, as a politician. And it's going to get really ugly.

This is only hard to square if you think voters know what they are doing. People transparently and frequently vote on vibes or first order effects (see: support for rent control) without any reasoning about the system overall. This is perfectly explicable in that framework.

I can summarize current American politics with the following experiment: If you had a button that would fire every single elected Federal official of the last 30 years into space, would you press it?

Today I was in Washington DC to talk about financial privacy and the narrow path to non-dystopian digital ID. It was great to see @valkenburgh and @secparam, but I want to now expand on a point from our panel: I think it is likely the BSA, as applied today, is unconstitional. This is probably going to be surprising to a lot of you. After all, didn't the Supreme Court uphold the BSA as constitutional when it was challenged in 1974? Why yes, it most certainly did. Have you read that opinion? I have. That same court said that the fact pattern today is likely unconstitional. The case, for those unfamiliar, is California Bankers Assn. v. Shultz (416 U.S. 21). In it, when you read the actual decision, you find some interesting tidbits: Title I recordkeeping requirements were upheld because mere recordkeeping was not a search, and the authorities asking a third party for individual pieces of data was thus not a search. Government access in that case still required orderly legal process. Title II domestic reporting was largely a standing issue, pointing out there were not customers specifically challenging this at the time who had been clearly impacted. Fifth amendment claims by depositors or the ACLU were considered speculative at the time, and did not note specific facts (nor privacy concerns) or even clear intent to engage in transactions in some cases. Powell, who was joined by Blackmun, concurring with the majority, in fact specifically noted that “A significant extension of the regulations’ reporting requirements… would pose substantial and difficult constitutional questions.” First: I think this case was correctly decided on the facts at the time, in the world where banking was largely done on paper, records searches were one at a time or at most small batches, and the amount of information a bank collected was far more limited. On the standing and non-ripeness points, those were probably also correct at the time, but I will note that doesn't make something constitutional, just that SCOTUS has a long history of punting on things until they have to confront it. Second: the fact pattern today looks absolutely nothing like the fact pattern at the time. The expansiveness of a search is far greater, with banks involved in every asset of digital life and the transaction monitoring far more comprehensive than before. Previously, a BSA request could not get every purchase you had made over the past three months (thus also geolocating you at all those times), because that was all done in cash. Now it can. In light of things like the recent Flock decisions at district courts finding Flock database searches without a warrant to be unconstitutional and the cell phone tower decision showing that non-particularized geofence warrants are also unconstitutional, it's hard for me to see how "we see your location constantly through your card always and then we turn tens of thousands of people's wroth of information over to the government with no individual suspicion" is going to pass muster. The second point is in light of government pressure to close accounts, like the @USOCC just found in their report about the debanking of digital asset companies, the standing and ripeness arguments now look very different. There was, in fact, an actual nationwide dragnet at big banks to debank certain customers, partially pushed by regulators leaning on reputational risk, and the standing, harm, and ripeness issues created might be overcome here. The third point is that the reporting requirements have expanded dramatically, exactly the thing the court itself cautioned against. "Hey gives us this one customer's info for transactions over $10k" is now "give us all transactions for all customers at all thresholds", and by waving their hands and screaming "third party doctrine", the Feds think this is somehow magically constitutional. My view: it's not. I think the time is right for someone to challenge this, and win.