A Wiser Retirement®

226. SWIFT Plans to Launch CBDC, Binance Founder CZ Sentenced, & Ethereum ETF News

• Wiser Wealth Management • Episode 226

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On this episode of A Wiser Retirement®, Casey Smith is joined by Robert Swarthout, Founder, CEO, and Portfolio Manager of Teton Crypto Capital. They discuss how SWIFT plans to launch a CBDC, Binance founder CZ sentenced, and give an Ethereum ETF update.

Related Podcast Episodes:
- Ep 216: What are alternative investments? Should you be invested in them?
- Ep 220: Is Bitcoin more than digital gold

Other Links:
- Robert Swarthout: Teton Crypto Capital

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Swift and CBDC Launch Discussion

Speaker 1

So Swift is planning to launch a CBDC, so Central Bank Digital Currency Platform. So they're not exactly launching their own CBDC, they're letting a country do that. Their idea is they're trying to stay in the messaging game, if you really think about it like they do for wires.

Speaker 1

They want to be that for the CBDCs. You know, will this be successful? In some cases, I'm sure. I mean like I can't imagine they're going to have no customers, but I don't see it being the standard. I actually see those systems, a CBDC, actually using other blockchains or other blockchain technologies that are more, I guess, open than what Swift may be doing. But we'll see. But we'll see.

Speaker 3

Welcome to Wise Retirement Podcast, where we believe the best financial advice should always be conflict-free. I'm your host, casey Smith, guiding you to financial freedom. Today is my co-host, robert Swarthout, founder CEO, portfolio manager of Teton Crypto Capital. Hey, robert, good morning. So this is a big week here at Wiser. We have officially launched our digital asset models.

Speaker 2

Yes.

Speaker 3

Congratulations. Yeah, we dipped our toe maybe just our small toe into the crypto landscape. I'd say that right now, something around 16% 17% of clients responded to they would like to have a digital asset component to their portfolio.

Speaker 1

Yeah, are they all calling each day to check on the value of their portfolio?

Speaker 3

No, these are more longer term thinkers. And in our video to our clients we talked about. You know, this is a 10 year, a 10 year focus.

Speaker 3

Not cool, not tomorrow, but but yeah if you, if you're in a 60 40 allocation, um, then you got about a one percent allocation. We used we chose, the bitwise yep bitcoin etf with, uh, the fidelity one as the tax, harvest, harvesting alternate right, and then if you had 100 equity, you get a three percent and this is all across the board. It's it not just the size of the portfolio doesn't matter. So, on our FlightPath platform, which is an automated investment service that uses low-cost ETFs in that space, I think someone's purchase was a fractional share and it was like $5. Yeah, but I think on the highest side, as much as sixty thousand dollars. Wow, into a bitcoin etf that's very cool.

Speaker 1

The um, uh, you know, obviously it's just bitcoin right now, so I guess you will dilute a one percent or dilute a three percent if something comes along you know that's a great question for our next um investment committee meeting.

Speaker 3

Is what we do? Because it's a digital asset model, but it only has one one etf option because that's all there is right now. Yeah, um, but yeah, it looks like we potentially have another um etf coming down the pike yeah, etf coming down with a different cryptocurrency which, uh, that's on our agenda today or not, the very bottom yep so we'll get to that. Don't spoil that, but um, but yeah, thank you for your guidance and helping us learn all this. You're headed out, I guess, june what June 1st and 2nd with.

Speaker 1

Andrew, andrew, yeah, yeah, we're going out to the DACFP conference in Austin, so it'll be a fun two days. I'm really curious going. Obviously I'm not a financial advisor, but I'm going kind of with more of the ears of, or curiosity of, what financial advisors are, how they're talking about crypto. Yeah, um, you know it's, you know they're the gatekeepers in most cases. Um, and if somebody potentially wants to invest in my fund, you know they are likely going to have to potentially be on board unless it's outside cash coming in. So it's like that, you know, not necessarily trying to figure out how to market it or talk against a financial advisor, but just understanding how they're thinking about is where I'm at.

Speaker 3

And Andrew is going to be on stage with Rick Alderman talking about the crypto using cryptos inside port.

Speaker 1

Yeah, I look forward to asking the hard questions.

Speaker 3

You'll be the first one on the Q and a. How would you describe Bitcoin versus yeah?

Speaker 1

really get really in the weeds. Everyone in the room rolls their eyes. Yeah.

Speaker 3

Well, that's good, you can report back, you can video that for us and we can either use it for him or against him.

Speaker 1

There you go yeah, all right.

Evolution of Crypto and Banking Regulations

Speaker 3

Well, let's let's dive into our agenda today. Um, you know, everything that we've been talking about for the last couple of years, as we do these crypto additions has been um, you know what's the adoption? Uh, how is this being used?

Speaker 1

or what's it gonna look like. You know, most it's more dreaming.

Speaker 3

It started a lot of it. You can see the, the blueprint kind of taking shape and I think this first, this first uh topic, uh, with swift planning to launch its own cbdc. First of all, let's stop for a second. So what is swift? Yeah, so we can't have global commerce without swift right now, correct?

Speaker 1

um, it's an integral system. It's been around since the 70s. So swift, admittedly, is an acronym that I don't know what it stands for, but everyone refers to it as swift. So, like I mentioned, it's built in the 70s and it allows the communication, the important word. There's communication to allow banks to communicate to if you want to send, whether it's dollars or any other currency overseas. There's this whole underpinning called the correspondent banking model, so it allows banks to have these bi-relational relationships and it debiting crediting accounts effectively right.

Speaker 1

That are in the bank's name, so then you can get the money that is wired to, say, europe or wherever you're sending it. It's an old system, um, built in the seventies, not terribly updated since then, and, like I mentioned a second ago, is a communication standard. It actually does not deal with the settlement, the movement of the money, it's just literally sending. You can think of it as emails. I mean, it's not exactly emails, but you think it was emails saying hey, debit this account or credit this account.

Speaker 3

SWIFT stands for Society of Worldwide Interbank Financial Telecommunications. Yes, there'll be a quiz on this later.

Speaker 1

Yes, and I'll fail it again and it's owned by banks. I think it's owned by like 50 or 60 different banks. It's a bit of a co-op of sorts. So basically they can securely transmit information. Correct Is the idea. Well, and the idea is secure. But there's been periods in the past where you hear about banks getting hacked and money getting stolen because Swift wasn't secure. Whether they've fixed those problems or not, I don't know, but it's an old system.

Speaker 3

They have 11,000 member banks in 200 countries.

Speaker 1

so pretty much if you're moving money, yes, but I think 50 or 60 banks own it versus the other members. Um, and the ones that own it don't want to see it change in the ones of course not the other 10 900 and change. Um, would love to see it change because a lot of times if you're sending a wire from, say, your small community bank and you're sending it overseas, it's going to get routed from your small community bank potentially to a regional and then to.

Speaker 1

There's basically three banks in the us that are basically the exit points yeah um, and then it goes overseas and makes multiple hops, wire transfers can take days. Wells fargo bank of america and jp morgan um, I don't think wells I think it's uh, jp, boa and city, I believe I'll think about bank of american city yeah city's actually global bank in and of itself. Yes, but um, so those guys don't terribly want to see it change. And then you have. You know whatever's happening overseas. There's fees along the way.

Speaker 3

Wire transfers um are expensive and they actually take more than a day. You can't go down. Oh my gosh your bank and wire money internationally and be there that evening Like you can't domestically.

Speaker 1

Correct and, you know, a lot of times people may confuse the idea of a wire that's domestic, that's unfed wire and that stays within the US, rails Right, and that can happen within hours. But if it's an international wire it's certainly unswift and it can take some time. You know, potentially five to seven days, depending on where it's going. Yeah, um, there's a six percent error rate. Money just goes missing.

Speaker 1

wow, that's high that's insane for having practiced doing this since the 70s right right, um, so you know there's a lot of evolution and blockchain has a lot of promise there. So, kind of circling back to why we're talking about this, so Swift is planning to launch a CBDC, so central bank digital currency platform. So they're not exactly launching their own CBDC, they're letting the country do that. Their idea is they're trying to stay in the messaging game, if you really think about it like they do for wires.

Speaker 1

They want to be that for the CBDCs. You know I will this be successful in some cases, I'm sure. I mean like I can't imagine they're going to have no customers, but I don't see it being the standard. I actually see those systems, a cbdc, actually using other blockchains or other blockchain technologies that are more, I guess, open than what swift may be doing. But we'll see. It's fascinating.

Speaker 3

I mean, and the whole point of cryptocurrency in the blockchain is that you can just avoid this whole system to begin with, so why would you want to use their platform?

Speaker 1

Well, you think about it, they have the salespeople, they have the connections, they have the you know the banks are. If you think of it this way, they're comfortable with Swift, True, or at least they understand the beast that they're working with, Right. But at the end of the day, there's certainly going to be banks that are going to take the leap and go all blockchain. Maybe the smaller banks or maybe even bigger banks. I mean, heck, JP Morgan is doing a lot of stuff with his Bitcoin ETFs and behind the scenes, I know that they're know they're doing things, they're testing Ethereum, they have their own version of Ethereum that they run internally, Um, so you know it'll. I just can't wait to like I wish I could like jump in a time machine just fast forward. Um, not because I just want to like skip all all the stuff in between. I'm just really curious where all this lands, Um, and we'd like to kind of short circuit it, of sorts.

Speaker 3

Tell me about SAB 121. What is this?

Speaker 1

Oh boy, this is the hot topic over the last two or three weeks, but last week it came to a surprising vote. So all of Congress, so the House and the Senate, both passed it. And so SAB 121 is staff accounting accounting bulletin. So it came from the sec and in 121 is this they just have subsequent numbers there. It basically says if a bank was going to custody crypto, they have to if you think about it this way double account for it on its balance sheet as a liability. They're basically this was.

Speaker 1

This came down, in my opinion, from the bank regulators that are controlled right now by the democrats, or namely elizabeth warren, who hates crypto and was trying to make it where it wasn't illegal to do business with crypto, but no bank had interest in doing it because they had to keep double assets on hand to kind of account for it. Um, this was in place, I want to say, for roughly a year, something like that. Um and it hasn't been just republicans, but the republicans for the most time have been like this is crazy, this doesn't need to happen. But as it's kind of come through, um, some banks recently, like my fund, um, we just got debanked in the last month Got a 30-day letter saying you know customer's bank is no longer doing crypto. Customers Like that's a pain because there's not tons of banks that are willing to touch crypto and partially because of this, because of the 121.

Speaker 1

So it's just interesting timing, right Like I got my letter on April the 30th and you know they voted on this last week, so it's close timing. I don't think it has exactly to do with it, but this doesn't help. So, even though in our case, the bank is not costing any crypto, it is purely an operating account for cash to pay bills. That's all it is, yeah.

Speaker 1

But they're like Because you're a crypto business, they're worried about liability, but in this case, the liability that they're having as the regulators which wasn't part of SAB 121, is regulators are now requiring the banks to do KYC and AML on any investors in a fund, so they have to crawl down into the entity and do that, versus before they could have taken a qualified like our fund admin does all that for us. They could have taken their word that that had been happened, but now they literally the bank has to go do that themselves. So obviously there's a lot more cost, an ongoing cost, um. So I I think that I view this as a storm that is blowing over crypto right now and I'm like this is the way it's always going to be. Um, so we'll see.

Speaker 1

So the sab 121 um was passed, like I, by both the House and the Senate, and it passed with Democrats voting for it and some big-name Democrats on top of that. So that's what really caught up. You're talking about the repeal of it now. Well, the voting for the repeal. It has to be signed by the president.

Speaker 3

Which he says he's not going to sign.

Speaker 1

He says he's not going to sign it, but I am willing to go out on a limb here and say he's gonna sign it.

Speaker 1

Um, because you had enough big-name democrats, um, that were for the repeal of it, and the reason why is you start to look at like, what's the election gonna look like in november? And you know the numbers that I've seen floating around. There's like 15 million people that own crypto. You know, is crypto going to be that are deciding, or that is the site, the way they decide who they vote for? Probably not, but it certainly could be. It could sway some people, right, and if you kind of flip it around and be like, okay, am I a voter trying to figure out who I'm going to vote for and oh, biden is anti-crypto, i'm'm going to vote for him, that person doesn't exist, right? I mean, you could count those people in the country on one hand, probably Right, right, but 15 million people on the other side could potentially be in a tight election, could be swing some states.

Speaker 1

So the idea is that the Democrats have finally come around to kind of maybe clean up, clean up some house here, um, prior to the election. So I was just happy to see it passed. Um, I think biden will end up signing it and um, you know, this should have never happened in the first place it. It should have not been in place and this is a big cleaning up the mess that was crypto, and this admittedly came out of um the ftx mess. Yeah, it was after that in, like trying to keep banks away from this scary world of crypto Cause they could crypto could take down the financial system the narrative that we heard for a while, which is totally BS.

Speaker 3

Well, along with the news of all this was was a lot of criticism toward our sec chair.

Speaker 1

Correct.

Speaker 3

Well, he's been very anti-crypto and so so that seemed a little bipartisan to me and and yes, and the narrative of it, yeah, and that might be why they would put biden on the defensive. Possibly it's because they didn't just pass it. They passed it and said you're, guys, an idiot right.

Speaker 1

Well that, and there's been some narrative going around for a while I would say six, nine months that ginsler has made himself a political liability to b to Biden because he's been so off the reservation when it comes to any sensible thing around crypto Right, and that's in some ways been good for crypto because it's kind of rallied everyone together. Crypto can be a lot of infighting but, like there's, there's one North star here and it is defeating the the beast that is Gensler, the sec and I guess Elizabeth Warrenren, his, um, his counterpart, right, that's funny.

Speaker 3

Um, all right, so let's talk about the swiss national bank. Uh, tokenizing legacy bonds.

Speaker 1

So basically, when you tokenize something, that means that everyone can buy a piece of it right and you can buy very small fractions of it, um I I just put this on here more of just like showing that it's not just happening in america, it's happening other places. The swiss national bank you know everyone has their opinion about the swiss banking system, but it's a um, it's a big deal when you start to see these. In my opinion, these entrenched um european banks or countries, um, and the banking system start to do stuff with blockchain. You're going to see more of it.

Speaker 3

There's certainly a lot of projects that are going on but are they buying that through their like, through local currency, through tokenization? Are they actually using crypto?

Speaker 1

I don't think. No, they're just purely tokenizing a blockchain right now.

Speaker 3

Um so it so you can do a blockchain without having to do a cryptocurrency. Basically.

Speaker 1

Absolutely. Yeah, yeah so at the end of the day, the blockchain is just a different form of a database and it is a public ledger, so it's more transparent. So there's, you're going to see crossover, but I wouldn't say we're too far away from a world where you know, if you own some of these tokenized bonds and you know off this exchange, sdx, that you could literally take some crypto, probably a couple of years away, and be able to buy into it, whether it's stable coin or actual real crypto.

Investment in Securitize and Tokenization

Speaker 4

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Speaker 3

So let's talk about BlackRock investing $47 million into Securitize, but let's talk about black rock investing 47 million dollars into securitize. But let's talk about who is securitize first.

Speaker 1

So securitize is a, an atlanta-based company, um, a startup. I don't know they're a couple rounds into being a startup at this point, so a more established company, but they are a company that helps issuers, um to use a blockchain platform to tokenize things. It's one of the couple things that they do as a business. So when we were just talking about the swiss national bank using a platform to tokenize bonds, I don't think that the actually I know that they didn't use securitize in this case, but, like, securitize offers a product to help an issuer um tokenize an asset of some kind or security on a blockchain.

Speaker 3

Basically it's the on-ramp to tokenization Correct.

Speaker 1

You can think of it as taking a paper stock certificate and digitizing it on a blockchain. That's not exactly the process.

Speaker 3

Maybe I should take a Wiser stock.

Speaker 1

You could, and then you have an initial coin offering and the.

Speaker 2

SEC would like to talk to you about five minutes ago.

Speaker 1

And that was so 2017 of you by the way, so we joke.

Speaker 1

but it's cool to see A, the Atlanta-based company, kind of in the mix here, and Securitize is one of the leaders in this space, at least from the product that they're offering. But as somebody that may have been an investor in Securitize or the executive team, blackrock's table of approval probably is a big pat on the back there, and I don't know how much of that $47 million was BlackRock's contribution. But BlackRock has been making moves in this whole space since the ETF launch A lot of tokenization stuff, because they had tokenized some stuff recently on a platform that uses hedera, a different blockchain, so they're um they're trying a lot of different things.

Speaker 3

Other uh, esg stuff has failed flat on its face. So I guess maybe they're thinking more forward now. Yeah well, or they need to keep those sales people busy selling something else which I'm, which I guess.

Speaker 2

In this case I'm all for you know, it depends on what side of the fence.

Speaker 1

you're on here, but so it's just. You know, like I said, it's cool to see it and you know you're going to see a lot more of this going forward, whether it's Securitize or other companies. So how?

Speaker 3

how many years did Sam Bateman free get in prison? 25?.

Speaker 1

Something like that. Yeah, I forget the exact number, not enough. I remember being grumpy that day.

Speaker 3

Yeah, I know you you were like, oh my gosh, this guy should have been parked away for a lot longer. I think that CZ should have gotten a heck of a lot more than four years. No, four months, or, I'm sorry, four months, yeah, yeah, so he, I mean okay. So so SPF, like I don't know that I don't think anybody died, like they got all their money back, but well, but not really. Yeah, because the crypto just went up in value.

Speaker 1

It went up four times, but they're getting back.

Speaker 3

You got back your principal plus more right yeah, when CZ is like funding money to the bad guys who who are killing americans yes, that's definitely one lens to look at, I mean, not, not, not directly. He wasn't like a direct contributor, but he was.

Regulatory Restrictions on Crypto Collateral

Speaker 1

He was the highway to so I guess I'll be the um and he gets four months I'll be the ying to your yang here. So um, spf, stole money okay well, yeah um, they stole a lot of money. Cz did not Okay.

Speaker 3

No.

Speaker 1

But he definitely didn't do good for the world. We probably can agree on that, and I'm not trying to defend either one of these guys.

Speaker 3

I mean SPF. Just had some accounting issues. I don't actually believe that, just for the record, but I mean.

Speaker 1

Yeah, listen, you can tell. One of them worked with the government, the other one did not and wait a minute.

Speaker 3

Spf funded a ton of political campaigns right.

Speaker 1

Well, that's why he got those charges dropped. The political um he got those charges dropped because they realized that I'll be guilty, right like 80 of congress received some money from him right exactly which which, if we got rid of 80 of congress, that might have been a great reset um, but that might have been a rough issue for the fire everybody and have reapply we have an emergency election next tuesday um so, but yes, cc um low security or minimum security type situation.

Speaker 3

He's getting money to Iran.

Speaker 1

Yes, listen, like I really think it came down to. He must have A. I know him, quote unquote, stepping down. That's debatable, because his wife, girlfriend, whatever she is still is a high-level executive there. Right right. But I don't know. It just comes down to well, my my here here's my conspiracy theory, like, okay, is there was some form of us um probably CIA type representative companies running money through um finance to fund other stuff.

Speaker 1

Uh and you take four months. We won't talk about that. Um, we know you were doing bad, like we all just kind of get to put this thing to bed um type situation. I have no basis for that, but like the cia likes to do that kind of stuff um and run with their like shell companies, and crypto has been a um but wouldn't you be able to flip that around and say you put me in jail for four months and I'm right?

Speaker 1

well, that's how it got negotiated down from years to months? That would be my guess from 25 years to four months, right, I mean like, but it's easy to try to compare CZ and SPF, but like, cause they were functionally dueling for a while, right Between the two exchanges on Twitter, the two of them, and that kind of stuff.

Speaker 1

It was like it's like you know and but I forget if I've mentioned this in the podcast, like there there's certainly a theory, and it's probably relatively well founded, that, like crypto needed the phase that it went through that cz and spf did what they did like to to in some ways clean out things. Well, the clean out was the back end of it. The front end of it was getting people in the space, getting people interested, like all those things like showing the promise, all the things that was crypto or is crypto.

Speaker 3

Um, you know, in some ways they were like marketing, but in a dark light, right you know, all these guys are walking around with hoodies and and, uh, you know, just wearing gym shorts everywhere and all that stuff, you know. And then, um, we had, I noticed that I don't think anybody else noticed this but all of a sudden you look at all like the Facebook era guys. They're not wearing hoodies anymore, they're all dressed up now. Yes, cause I think they realize that you know what we're. We're not that.

Speaker 3

We're not going to associate with that crowd anymore. We're going to start wearing all the all the latest designer clothing my um.

Speaker 1

What always comes to memory for me when I'm thinking about the I guess the clothing of that era of crypto is um, sam bankman, freed, was on stage with bill clinton and someone else at the world economic forum, bill. And the other guy suit and tie, sam gym shorts and a t-shirt and tennis shoes, and I'm like you're contrasting these worlds. And Sam was there talking about his whole altruistic mentality, where he's functionally he was giving away all his customers' money at the time.

Speaker 2

But no one really knew.

Speaker 1

And I was just like this world. Two different worlds are colliding here so fast, so anyways, we digress.

Speaker 3

All right, so DTCC no longer allows crypto or crypto ETS to be used as collateral.

Speaker 1

Yeah, would you like to explain what DTCC is? No, okay.

Speaker 2

I'll try.

Speaker 1

So it's another acronym. It's basically the settlement of all stocks and bond transactions in the United States and different derivatives. They came out with a literally a letter and it was short depository trusting clearing corporation, yes, so something that you've if you've ever traded stock you've used, but you never knew it.

Speaker 3

Very true, and it's been changing too. It used to be take three days to settle something. Now it takes one.

Speaker 1

Yeah, and I think they're heading to zero, if I'm not mistaken.

Speaker 3

Yeah, yeah, working that.

Speaker 1

Um so and we can talk about that in a second we didn't make it on our notes, but I think it's important. So what we're talking about here is they're no longer allowing crypto to be used as collateral. Um said crypto can no longer be used. It's counted. It basically is zero. You know, this seems more like a regulate. I don't know if they got pressure from the regulators.

Speaker 3

That'd be my guess. My my guess is it's the volatility, because you could have severe margin calls very, very fast. And so if the world starts falling apart, so if the s&p is down 20 over a month and then crypto is down 50, well, 50 percent over a week, right yeah so. So then you run into all kinds of uh, all kinds of issues, so I think it's probably just to maintain stability of the system.

Speaker 1

Yeah, does it make? Does it? Make crypto bad I'm sure that's what they will describe it as. Like to me it's like we've got to work all this stuff out, like we can't just like start ignoring it. Um true, they could have said crypto accounts for 50. You can keep it at 50 cents on the dollar, like yeah they could have done something. Zero is not 25 zero is not a good answer for me but they do the same thing.

Speaker 3

Uh, certain institutions will do the same thing with like I had a client doing uh, I wanted to see how much they could borrow to build a house, uh, and then pay it back if they sold their old house. Yeah, and they had a very high concentration in Home Depot stock, they would let them go 75% margin. Now, this is not the DTCC doing this Right, it was Sunbrook. They would let them go 75% margin on Home Depot stock where the S&P 500 is the standard 50% margin, which I thought was interesting, interesting, yeah.

Speaker 1

You know, at the end of the day, again it's they could have done something greater than zero, but I just it, just.

Speaker 3

It reeks to me of regulator pressure somewhere, or ignorance, um, no, they just don't know no, I, I, I tend to think a lot of these people are smart yeah you can be smart, but you can also still be like I'm not watching these DVDs, I'm watching my VHS.

Speaker 1

Yeah, but I mean fair, the DTCC is a large organization. I know that they're doing some stuff where they're trying to do 24-7 trading and we can kind of that's the thing we alluded to a second ago Like to me, when I read that headline, I'm like oh duh, because it's gonna be tokenized. Like, why do like like?

Speaker 1

but, like they didn't say that, um, and there's no, I guess, public evidence of that, but like I know that they've done research around trying to tokenize basically the us stock markets. Right, and the nyse is the one looking more specifically at 24 7 trading, and it's gonna happen, it'll be there. Um, we, andres and I, were recently talking about this and how the idea that there's 24-7 trading totally changes the news cycle, or potential news cycle. There's no longer. Oh, I'm going to have a bad, anything bad. I'm going to do a press release on Friday at 5 pm when the market's closed and it goes away over the weekend.

Speaker 1

No, or, like, you kind of get some hours to sleep now, I mean, in the crypto land it's 24 seven. If you're an active crypto trader, I don't know how you sleep. Um, you must have good risk controls or you're being rather risky, so I don't know. It's just fascinating to kind of see these things get worked out and you know, I would imagine at some point, um, I would imagine at some point, even the Bitcoin ETFs they're saying cannot be used as collateral. So this will come back to something greater than zero at some point and we will act like it never happened.

Cryptocurrency ETFs and Market Dynamics

Speaker 3

Right Speaking of ETFs so. January 5th of this year, we launched the Bitcoin ETFs. There were six of them, seven of them.

Speaker 1

Six now, I think it was nine or is it nine?

Speaker 1

nine plus um grayscale uh, so now it looks like ethereum yeah, so prior to even the bitcoin one launching, there was some applications for the ethereum, but everyone kind of understood that bitcoin was going to be first out of the gate whenever that was. Obviously that happened in january. And then all of a sudden people felt like they had the playbook on how to get one of these things launched. You had to have a futures one in place first, and then you could get the more spot one correct. There's an ether um futures already in place now, so this whole thing has been happening so yeah I thought we were still debating on whether or not this is a security.

Speaker 1

Yeah, um yeah. But guess what? When it's an ETF, it is a security, so it kind of doesn't matter. But are there pending lawsuits? There's Wells notices going around saying there might be a lawsuit. So that lawsuit it would. But again, I don't think it matters in this case, because once you wrap it in an ETF, it is a security. So what difference does it make? The price may change, but the underlying asset probably doesn't really matter. How does the SEC see Bitcoin?

Speaker 3

Does it see it as a commodity. So does it get taxed as a commodity? I don't think that it does.

Speaker 1

I think it gets long and short-term capital gains treatment.

Speaker 3

Yeah, that's my understanding.

Speaker 1

I know that's the case, yeah.

Speaker 3

Okay, Even though commodities don't. So if you're trading in oil or correct pork bellies this is kind of like a.

Speaker 1

Maybe we need a new definition of what a crypto asset is, or regulation.

Speaker 3

I've said that about ETS for years. It should be called exchange traded products. Well, that's what it is. In Europe it is correct.

Speaker 1

ETPs, yeah, yeah.

Speaker 3

They were a little more ahead of their time back in the day.

Speaker 1

Yeah day, yeah, um, than we were so, so kind of getting back on this etf thing. With eth, there's the whole process of filing for something with the sec. Is you? They have so many days or weeks or months to respond. There's may the 23rd, so we're recording this on may the 22nd, so tomorrow there's one of these dates kind of where there's different applicants that are due to have a response from the sec right in the.

Speaker 1

In the Bitcoin. You know the lead up to the Bitcoin. There was a couple of these days that happened. They got kicked the can got kicked down the road. The SEC denied it. Sometimes they would give answers, but other times they just kick in the can. There's been radio silence on this topic for the last month and a half.

Speaker 1

Everyone's like less than 25% chance we're getting them on the 23rd or the approval of them and partially because the sec has never said whether it's well, officially ever never said that Ethereum is non-secure or a commodity or security Right. Well, so you had to stop and kind of pull things together We've talked about here. You had to sob one 21 vote vote last week. Late last week over the weekend, um, you started hearing rumblings that maybe the sec is going to approve or it's actually starting to have dialogue more specifically with the different applicants. Like all of a sudden everybody's in panic mode, fire, you know, hands on fire type situation because the SEC everyone assumed it was going to be denial or a temporary denial for this this round of timing, and the SEC has been having conversations about filing different things. They're not.

Speaker 1

It doesn't sound like the ETFs which we've talked a little bit about. This. The ETFs with Ethereum are going to allow to have staking in them this version of them. Maybe there's new versions that can. So they're having to pull different things out, update their documents and everyone's now in like panic mode trying to get it all done on time because everyone wants to be first out the gate. Um, so I forget how to say his last name, but eric, the guy um that works at bloomberg that does etf analysis um and he went from thinking that we had a 25 chance of this happening to, he said, greater than 75 percent um chance on.

Speaker 1

He literally said that yesterday, the day before um so huge swing and crypto all of a sudden started running up, popping like I at the end of the day, they'll be in ethereum etf at some point, probably relatively soon, be my guess. He thinks within the next two weeks day. There'll be an Ethereum ETF at some point, probably relatively soon, be my guess. He thinks within the next two weeks they're going to be approved. So how would you?

Speaker 3

play that. You have two. Those are the two dominating currency cryptocurrencies digital assets by market cap by market cap, and there's a lot of. If you do it well, if you do by market cap, there's there's some things in there that I don't think have legs Correct. How would you split that? Would you do like 75-25, Bitcoin being your largest, Ethereum being?

Speaker 1

I mean you could follow the ratio between those two. Just look at the market caps, add them up. My guess is 75-25, 70-30.

Speaker 3

It's not 60-40. What people don't realize is everyone talks about Bitcoin, but everything runs on Ethereum.

Speaker 1

Yeah, so that is true in the sense that smart contracts, that's the most dominant network and it's certainly the one with the next biggest brand recognition Bitcoin, then Ethereum, then you have others. In some cases, doge may have a better brand recognition depending on which part of the public you'll talk to, that being a meme coin. We're not going to talk about that now, but it's a um, it's just interesting to kind of see it. I, I would, you know, 80, 20, 75, 25, yeah, somewhere in there. I would probably look more towards the representation of the market caps, um, to kind of give some guidance there, because the market is speaking at some level there, right, like by bidding them to the prices they're at Sure, sure. So why is this happening? Why is the Ethereum one all of a sudden running? And we have kind of mentioned it briefly? But the Saab 21 vote, I think, is really what put the pressure on here, on Gensler in particular, yeah, Because Gensler in particular.

Speaker 1

Yeah, because Gensler would love to see this stuff go away. He would never want to prove it. But I think Congress, by speaking up and saying we have this opinion that the SEC did this wrong. And then, all of a sudden, how far did that pressure run up the chain? Did it go to Elizabeth Warren? Did it go to the president, all that kind of stuff. You could figure some opinion there. But at the end of the day, I think that it's just crazy to see how much pressure the crypto community has been able to put. There's the SuperPAC that they've funded, like $80 million big number. I'm proud of the community in some sense because it's growing up and it's starting to play the games that congress is used to playing to try to get some attention and get things done. So we'll see. I think by the time we um, I don't know, I'll probably put 80 odds on the time that we do this next podcast a month from now that we will have very clear answer on an ETF, if not one launched.

Speaker 3

So that would be very fast and I think it would catch a lot of people off guard.

Speaker 1

Yeah and that and that's so far. That's what happened. That's the narrative on. This is um, I remember texting you and like I was like he's going to be shocked by this.

Speaker 3

I was. I was like crap. We just decided to do the Bitcoin one. How am I supposed to go reevaluate this now?

Speaker 1

Well, this gives you another opportunity to talk to your customer.

Speaker 3

We have we have found another option. Yeah, Well, I think. Well, honestly, I think when you opt into digital asset portfolio, it would be a less complicated this go around. But yeah, but yes.

Speaker 1

And, at the end of the day, I mean, you guys get to figure out what the mix is going to be between these two and kind of just go just portfolios. You know, I admittedly, I think the real question for you all to decide is, you know, do you do it as soon as you can or do you wait for, kind of this? Because Bitcoin sold off rather quickly when the ETFs launched for a week.

Speaker 1

Yeah, it did, and then it kind of ran up. Are we going to see a similar pattern, or do you just want to kind of wait a couple months and just kind of like let the dust settle?

Speaker 3

the sell-off in bitcoin didn't make a whole lot of sense to me, because you look at the volume that was buying it, correct?

Speaker 1

it was well. It was the sell pressure from the gray scale, um, because so many people wanted out of the trust I can see that and you had different people that were in bankruptcy, um, that were that held the gray scale. We're trying to get out of it. So there was a lot of pressures there that the ethereum will not not have, um, or yeah, not have at all and immediately. Also, I think there's gonna be less general volume in I was about to say, is ethereum has to be explained.

Speaker 1

I think everybody knows what bitcoin is they don't know they don't know what it is, but they know the name and you know, ethereum may just benefit from the general idea that it is a diversification out of Bitcoin, but you want to stay in the crypto market. Yeah, because it's literally a second one. True, but does that hold long term? I don't know. Ethereum is definitely not going away tomorrow. It's got some issues it needs to work through as a network, but it's number two for a reason. Yeah.

Speaker 3

Okay, we've got some other episodes. You might be interested in episode 20 or 216. This is episode 226, which is crazy. Uh, what are alternate investments? Should you be invested in them? We talk about bitcoin there a little bit. Uh, is bitcoin more than digital gold? Episode 220. We've also linked directly to ro Robert's website if you want to learn more about him and his project. Thanks for listening to today's episode. If you're interested in learning more about Wiser Wealth Management, you can always schedule a consultation with us by clicking in the link below in the show notes or finding us at wiserinvestorcom. Thanks for listening. We'll see you guys. Take care.

Speaker 2

Thanks for listening to a Wiser Retirement Podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to wiserinvestorcom and reach out.

Speaker 2

This episode was produced by Rachel Dotson. This podcast is strictly for informational purposes only and is not to be considered as investment advice or a solicitation to buy or sell any financial products, securities, digital assets or any other investment vehicles, or a basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guests may personally own securities, digital assets or other investment vehicles mentioned on this podcast. Neither the host nor guests of the show are compensated for their participation and no referral fees are paid to or received by any host or guest for clients, listeners or similar interests. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor, tax professional, insurance professional and or legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.