Bitcoin ETFs, the SEC, and Regulatory Clarity (Feat. James Seyffart) – Crypto Critics' Corner
In this episode Bennett Tomlin and Cas Piancey are joined by James Seyffart to discuss what has prevented a spot Bitcoin ETF and why there might finally be one coming soon.
This episode was recorded on May 23rd, 2022.
Other episodes mentioned in this episode:
- Episode 71 – Terra, Luna, and Algorithmic Stablecoins
- Episode 61 – Trying to Think Like the SEC (Feat. John Reed Stark)
Other resources mentioned in this episode:
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00:00:05:06 - 00:00:21:17 Bennett Tomlin Welcome back, everyone. I am Bennett Tomlin, and I'm currently not joined by my partner in Crime Cas Piancey, but he should hopefully be joining us in just a little bit. We are joined by a very special guest today, James Seyffart, an ETF analyst at Bloomberg Intelligence. How are you doing today, James? 00:00:22:00 - 00:00:23:07 James Seyffart I'm good. How are you doing? Better. 00:00:23:27 - 00:00:47:00 Bennett Tomlin I'm doing quite well. The reason we were excited to have you on is because you live and breathe these ETFs and what's likely to happen with them. And there has been quite a bit of discussion and controversy over various Bitcoin ETFs in the crypto space. Can you give us a brief introduction into why you think these spot Bitcoin ETFs have regularly been rejected? 00:00:47:00 - 00:00:50:24 Bennett Tomlin But we have recently seen several futures based ETFs get approved. 00:00:51:00 - 00:01:06:23 James Seyffart Yeah. So I mean, we got to unpack a lot of things here. First of all, I'll just say, well, as you mentioned, I live and breathe these things. I mean, ETF analysts, we write Bloomberg Intelligence is Bloomberg's research arm. We write research about the asset management industry. I also cover a bit of crypto and I have since 2017. 00:01:07:02 - 00:01:34:26 James Seyffart So that puts me square in the middle of these spot Bitcoin ETFs or futures ETFs really. So we had the Winklevoss try to launch an ETF back in 2013. That obviously didn't happen. So it's been a long time that people have been trying to launch a Bitcoin ETF. Bitcoin was under $100 back then. There's been a number of reasons why they were denied we can dove into them but first I'll just explain what happened why a Bitcoin futures ETF was approved in October and that goes back to August of 2021. 00:01:35:08 - 00:02:02:22 James Seyffart Gary Gensler, the SEC chairman, basically gave a speech and said for all intents and purposes that we are looking forward to the application of Bitcoin futures ETFs filed under the 1940 act. Now there's two ways to file for an ETF really there's that you go under the 1933 and 1934 act which all ETFs are regulated and then if you go a step further in the 40 act which is the open end funds and things like that, there's more of a protections if you will, for the investors. 00:02:03:01 - 00:02:21:24 James Seyffart There's a board that manages the fund, there's just more restrictions, more requirements to fill out. And Gensler was basically saying we like the 40 act protections better, we think it affords better things for the end investors. So we like to see applications under this way. And to us we were like, this is, this is the SEC saying we're going to approve and futures ETF. 00:02:22:02 - 00:02:38:09 James Seyffart And we basically wrote a note saying that this was going to happen. A lot of people disagreed with us because they've been very negative on Bitcoin. Fortunately, we were right because we stuck our necks out and they did approve the futures ETF. But again, they kind of leaned on this whole thing of like well it's a 1940 act product and not 1933. 00:02:38:09 - 00:03:00:15 James Seyffart Now to be clear, there were other futures product that tried to launch under the 33 and 34 act and it comes down to the way that the collateral to hold these futures used treasuries and the way that Treasuries are handled under these laws from the 1930s and forties is they can either be seen as securities or not. Securities diversifier and basically depending on how you classify this, the Future Fund could be a 40 act fund or a 33 ACT fund. 00:03:00:23 - 00:03:17:03 James Seyffart Now again the 40 Act, a little more requirements, a little more things you have to do. So typically issuers would much prefer just to launch a 33 act product because it's easier to do. But again so we saw a bunch of filings for 40 act they get approved in November. The big thing here is that there were already filings under the 33 Act for the futures product. 00:03:17:03 - 00:03:34:16 James Seyffart So one huge thing they were leaning on was we like the 40 Act, not the 33 Act. In April we saw a two gram approval for a futures product that's listed under this 33 or 34 act, which again doesn't have those protections that the SEC was leaning on as a reason to to deny these ETFs. And they went through and approved them. 00:03:34:16 - 00:03:56:29 Bennett Tomlin You referenced the ETF I was going to bring up next, which was the Tier three and one, which was the futures based, one that ended up approved under the 1933 framework instead of the 1940 framework that approval surprised me when I saw it because they had previously pushed so much towards the 1940s into instead going like under 1940 and under the 1933 act pushed for the tier one surprised me. 00:03:57:09 - 00:04:13:27 Bennett Tomlin What I have struggled with since that approval is understanding why they're OK with a 33 ACT futures based ETF, but now the 33 based spot ETF, do you have any thoughts on what's still preventing them. Yeah, approving that type of product. 00:04:14:07 - 00:04:40:14 James Seyffart So the way I look at it from a high level is the SEC has essentially lost the forest for the trees, right. They're focused on minutia. They set a precedent in some of these denials way back even pre 2017. If you look at all of these letters, they keep saying they want a surveillance sharing agreement with a market of significant size and that would include like, I don't know, Coinbase, Gemini, actually they might not even be classified as markets between two significant size. 00:04:40:24 - 00:05:07:00 James Seyffart So one, they're not really clear on exactly what a market a significant size they're not very specific and what they requiring the whole thing is that they spent pages and pages with footnotes describing why they were approving this but not approving spot Bitcoin ETFs. So think about that. So the SEC took time to put in literally like I'm talking paragraphs of footnotes under the reasons for approving two gram to explain why this isn't enough to approve a spot Bitcoin ETF. 00:05:07:10 - 00:05:29:01 James Seyffart Footnote 46 I think is the one that I've heard and referenced most the CME market because it's uses what's known as the Bitcoin reference rate. This is the crazy part to me the way that Bitcoin futures are priced on CME, which is a regulated CFTC market for futures, is those prices is an aggregate of underlying spot markets that are the exact markets the SEC thinks can be manipulated. 00:05:29:01 - 00:05:49:22 James Seyffart So they don't want to approve a spot Bitcoin ETF. They're approving a futures ETF almost basically on a technicality because technically it's surveiled by the CFTC. But again, those prices of those Bitcoin futures contracts are determined by the spot market that the SEC is basically saying you need to convince us it can't be manipulated. There's a whole bunch of issues here. 00:05:49:29 - 00:06:17:18 James Seyffart This approval of two Graham in my opinion, basically strengthens what grayscale is likely to do. So grayscale bitwise, they're they're due for a decision on their spot. Bitcoin ETFs in early July and I think July six is the great still decision day GB tax conversion request. I can't see the SEC approving it at this point based on anything I'm reading and if they are denied, grayscale is likely to file what's known as an APA Administrative Procedures Act lawsuit. 00:06:17:19 - 00:06:42:23 James Seyffart Basically without getting too wonky, it basically says you need to treat like situations of like and grace deals. Opinion, which I fully agree with, is they're approving a fund, a product that is using derivatives on an underlying market that they're saying this is OK for investors, which it's an inefficient vehicle. Right. I mean, right now, if you're holding the futures ETFs, it's been OK because for one, Bitcoin has got demolished. 00:06:42:23 - 00:07:02:22 James Seyffart So you've got backwardation and contango, right? So typically this markets and contango with the market getting hit so hard, it actually helped be IPO, Beto and these other ETFs to not underperform the spot market too much. I think it's two and a half percent at this point. But I mean, would you sign up for anything where, you know, you're probably going to outperform the spot market by two and a half, five, 10%, depending on what happens at this point. 00:07:02:22 - 00:07:08:26 James Seyffart If Grayscale's ETF conversion is denied, I'd be shocked if they don't file a lawsuit against the SEC. 00:07:09:04 - 00:07:16:02 Bennett Tomlin Can you talk a little bit about contango and some of the things that contribute to these derivatives in futures based ETFs generally underperforming spot? 00:07:16:06 - 00:07:33:23 James Seyffart So when we look at ETFs more broadly, we've come up with the system we call the traffic light system at Bloomberg Intelligence, my colleague Erik Beltran, SNI and Athanasios, there's a few of us when we when the way we look at it is we don't view ETF the way that like if you're familiar with the Morningstar Fund rating system and other fund rating systems, it's like this is a good investment manager, right? 00:07:34:01 - 00:07:53:14 James Seyffart This is what I invest in. But that's not the way ETFs were created. ETFs were initially created as tools like, OK, yeah, you can probably buy the S&P 500 ETF and you'll be good to go for a longer term investment. But just because VCs like is available and your grandmother shouldn't be holding it doesn't mean that it's not perfect for what somebody might be using. 00:07:53:14 - 00:08:08:09 James Seyffart And the exact is a VIX product, right? So if you want to hedge your volatility risk and you want to buy the exact. Yeah, over the long term, it's a terrible investment. But if you're using it tactically and efficiently and there's plenty of ETFs out there that are built to do just that, you can't just quantify it as whether or not it's a good investment. 00:08:08:09 - 00:08:33:04 James Seyffart So we came up with this traffic light system that basically warns you of any surprises and any ETF that invests in commodities and rolls futures we give a red light in our system that basically says, hold on, make sure you understand what you're investing in, because if this thing goes into steep contango, which again just means not again, I haven't explained it yet, but I'm if basically you're buying a contract, right, one month out or two months out, that's going to expire in a month or two months. 00:08:33:04 - 00:08:51:28 James Seyffart Typically, it's the front month, but most of these ETFs will mix a little bit in the second month to lower this contango, this roll yield cost or roll costs. As we say, basically you're buying the front month contract and you have to sell it before it expires. And buy the next one. And when you're in contango, that means that the price of the next contract is higher than the current when you're selling. 00:08:52:09 - 00:09:14:14 James Seyffart So in essence, when you're in contango, you're constantly selling lower and buying higher. And the difference between those two contracts on every month that you have to do that is loss. So if it's 1%, you're losing 1% every time you have to sell that. Typically, it's not that much, but there have been times where the contango roll costs, which granted the market was more inefficient back then before it really got institutionalized, but it was like 30%. 00:09:14:27 - 00:09:31:22 James Seyffart And also granted Bitcoin was up a couple hundred percent over that time period. But you don't want to be underperforming. It's just an inefficient way to get access to the market. It's efficient for traders. If you want to trade the market, these Bitcoin futures ETFs are probably very, very good. They trade with extremely tight spreads. The fees are not that high. 00:09:31:22 - 00:09:46:28 James Seyffart And again, if you're trading, you don't care too much about the management fees of the fund. So basically trading these things is probably way better than what most people are going to get on the regular spot exchanges, whether it's Coinbase or Gemini or whatever it is, because there's some of the fees and spreads that you're getting on there are crazy. 00:09:46:28 - 00:09:51:06 James Seyffart But again, for long term holding and futures, ETFs really probably aren't the best. 00:09:51:19 - 00:10:14:13 Bennett Tomlin Recently, you and one of your colleagues Balcunas, wrote that you expect that the SEC is going to expand the regulatory framework for cryptocurrency exchanges. And once they've done that, you think it's much more likely that a spot ETF will be approved. Can you talk through what you expect that will require for cryptocurrency exchanges and what that will end up looking like? 00:10:14:19 - 00:10:42:18 James Seyffart Yeah, so there's a few things to unpack here. The one thing I would say is they want to basically expand the definition of an exchange. They they say anything that is a communication protocol that allows for the transfer of securities or assets could be defined as an exchange or this new framework, which is extremely broad, even under the current frameworks that the SEC starts naming a bunch of these cryptos to be securities, all of a sudden these things are exchanges and or ETFs is what's known as an alternative trading system. 00:10:42:18 - 00:11:12:10 James Seyffart Those exchanges or ETFs have to report to the SEC. They would become Surveiled markets by the SEC, and then all of a sudden we probably get these approvals. We don't know for sure that that's going to happen. Also, this rule this exchange, this broadening of the definition of an exchange wasn't created for crypto. I mean, this thing was proposed, I think initially back in 2017 to work on these requests for quote platforms things the treasury markets a lot of OTC type markets where things are trading in dark pools and things like that that they want to bring under a little bit more surveillance. 00:11:12:18 - 00:11:29:13 James Seyffart But what's going to happen is DeFi is going to get pulled in here because I mean if defi even if we take out exchanges the main concern is people looking at these communication protocols which is exactly what defines trying to do would fall under this and then all of a sudden you have a decentralized network that's going to have to report to the SEC. 00:11:29:22 - 00:11:46:24 James Seyffart So there's just a lot of questions up in the air and it's not necessarily going to be definitive that all these exchanges, when this rule expands, are going to have to register as an ETF or an exchange. But this is definitely going to give a little more leeway and power to the SEC to try and to try and do that with these crypto exchanges. 00:11:47:03 - 00:12:06:03 Cas Piancey Sorry I'm late, guys. My cat is officially in the hospital now, so fingers crossed on that. But James, it's I'm sorry to see you here. Yeah, yeah. Thank you. But it's awesome to have you on. I guess as you talk about this regulatory framework that the SEC wants to put into place for DeFi or Bitcoin or for any of these. 00:12:06:03 - 00:12:23:13 Cas Piancey Right. The Fifth Circuit just recently kind of put into place that the SEC is doing things wrong and that they have less judicial power than they think they do right now. Do you think that will affect any of what you're you're discussing right now? 00:12:23:14 - 00:12:39:14 James Seyffart I do know exactly what you're talking about. I won't pretend to be an expert in this situation. I'm not a lawyer by any stretch of the imagination. But I guess time will have to tell and I honestly, I have to look into that more to see how that would impact the situation. One thing I do, I'm actually writing a research note right now on this. 00:12:39:14 - 00:13:12:24 James Seyffart I'm sure you guys are very much aware with this proposal to the CFTC. Basically, they want to change the way that things are cleared and the way you can operate with margin. That's something I'm watching as a kind of a backdoor that could allow us to get a spot Bitcoin ETF. Basically in this proposal, there's something under the Commodities Exchange Act, if there is any sort of transaction and you are offered margin, whether or not you take it, all of a sudden it falls under this category that's regulated by the Commodities Exchange Act, which puts those transactions under the purview of the CFTC. 00:13:13:05 - 00:13:33:03 James Seyffart So it's possible that if this proposal from FTX goes through, all of a sudden FTX is U.S. spot Bitcoin market could theoretically become a CFTC surveilled spot market. So that could be another way that we end up seeing somewhere down the line where I mean, the other problem is that, as I mentioned earlier, you need a market of significant size. 00:13:33:03 - 00:13:51:29 James Seyffart That's what the SEC keeps saying. So for us, it's definitely not that right now. But if other exchanges follow suit or follow this it's possible. And then again, there are some very weird language the SEC uses to talk about the CME market because they say the CME market itself is not a market of significant size but they allow it because it's CFTC surveilled. 00:13:52:15 - 00:14:05:24 James Seyffart That's one of the reasons why they allowed the Bitcoin futures ETFs. So we're thinking I'm thinking that possibly the CFTC proposal from FTX could be another backdoor into getting a spot Bitcoin ETF approved at some point down the line. 00:14:05:26 - 00:14:22:03 Cas Piancey Do you think stuff like this, this Luna tariff fiasco, do you think that actually makes a difference for something? I think it's fair to say that really Bitcoin is totally different than that, truly. But do you think that that plays a huge role in whether this stuff ends up getting a yes? 00:14:22:17 - 00:14:43:13 James Seyffart Bloomberg Intelligence hosted a market structure event, and I did a panel on Bitcoin or cryptocurrency market structure stuff, and this obviously came up as a big topic. And we talked about stock Bitcoin ETFs. Brett Harrison from FTX was on the panel. There was Brett Redfern, who used to run the Division of Trading and Markets which is the division that is the one denying all these spot Bitcoin ETFs was on the panel. 00:14:43:19 - 00:14:59:18 James Seyffart So I got a lot of really good information and we talked about this. I think Brett Redfern referred to it as gasoline for all of this, this fiasco. It's definitely going to be used as a scapegoat, whether by Congress, the SEC, whoever, to really go in and start regulating these markets in a more efficient way and really go after things. 00:14:59:18 - 00:15:23:12 James Seyffart But I would take a step back and say one, I think it definitely is, but obviously if you talk to people at any level of government they understand the differences here. Like Yellen spoke about the different types of stable coins a year ago, that would have been stunning if she talked about like whether or not these she was talking about the de-risking the algo stable coin and a USD backed or like an actual asset backed stable point and all the different things. 00:15:23:27 - 00:15:39:02 James Seyffart A year ago, if you told me she was talking about this, I would have been stunned. So I will say that for the most part, these people in government, they do know what they're talking about. They're not just like going in here, flying blind. I mean, also the Luna terrorist situation it wasn't like it came completely out of left field. 00:15:39:02 - 00:15:59:21 James Seyffart There were plenty of people that are very into the defi crypto blockchain world that were sounding the alarm bells about this thing being not safe. So I don't think it's going to really impact the stock Bitcoin ETF process. And we could talk about whether things are securities or not. Most people, even the most ardent supporters would say Bitcoin, they don't consider it to be a security under current regulation. 00:16:00:01 - 00:16:14:20 James Seyffart I talked a bit before about whether or not things are named securities and they come out of the exchange rule. I don't know how the SEC is going to do that. I mean, look at what's going on with Ripple. How long has Ripple been in the courts trying to decide whether or not it's a security? What are they going to do that with a hundred different tokens? 00:16:14:20 - 00:16:33:04 James Seyffart You almost need Congress to come in and decide what is a security or how we're going to regulate these things. I asked on my panel to all these guys, I said, do we need a whole new framework the consensus answer is the best way would be if we had a new framework for handling these cryptocurrencies. But what's realistic is that's not going to happen. 00:16:33:04 - 00:16:54:16 James Seyffart And honestly, all we need to do is keep working with the existing rules. Even though there are 1930s act laws in 1940 laws, there's enough stuff there to really get into the cryptocurrency world and create precedent for handling it. The next day at the conference, Ken Griffin actually said something that I love. The question was, What is something you would like to see happen right now at the SEC? 00:16:54:23 - 00:17:15:17 James Seyffart And he said, I would love Gary Gensler to stop talking about regulating cryptocurrency and actually do it now. I mean, if you look at his framework for what his goal was in October of 2021, he put out this thing of like 50 somewhat points of things that he wanted to do in regulating financial markets. And not a single one of those points was related to cryptocurrency or blockchain, which was crazy to me. 00:17:15:25 - 00:17:29:28 James Seyffart Now we have Biden's executive order, and obviously a lot of stuff is going on in this front. So I have a feeling if he were to redo that, he'd add crypto and blockchain, but now he's asking for more money to do this. They've amped up their enforcement size. They're trying to hire more people to do more enforcement in the crypto space. 00:17:30:08 - 00:17:54:02 James Seyffart Basically, the SEC is regulating through enforcement rather than offering regulatory clarity, which is what Ken Griffin really asked him to do. He wanted to provide some sort of regulatory clarity because right now he keeps saying, Come in, talk to us and we'll figure things out. And everybody who comes in and talks to them gets hit with a massive fine, which in some instances it was obviously Grant, and they were doing things that probably were breaking securities laws or however you want to look at it. 00:17:54:02 - 00:18:06:12 James Seyffart But for the most part, if you look at a lot of these these companies, they want to be regulated. There's certainly plenty of bad apples and fraud in the space, but there's plenty of people coming to the SEC be like, please tell us what to do, and it's just not happening. 00:18:06:23 - 00:18:27:19 Bennett Tomlin We had John Reed Stark on the show, former head of the SEC Office of Internet Enforcement, and his opinion is that the SEC basically laid out in the DAO report and onward that most of these were securities and should be registered and that these entities were just choosing to ignore that and continue to not register. Do you think there's any validity to that? 00:18:28:08 - 00:18:44:10 James Seyffart I mean, I'll just say it. I'm of the opinion. I think ripple was a security. No one has given me anything that makes me think otherwise. There's plenty of others that are probably securities. Obviously, the SEC would much prefer anything to be a security because Gary Gensler wants to get his hands on all of these things. The SEC wants to be able to regulate them. 00:18:44:16 - 00:19:01:06 James Seyffart I mean, Gary Gensler, he's a political right. He's a political guy. And if he can come in and say that he regulated the wild west of crypto, that automatically is a huge checkmark on his resume that will look good. So I think no matter what, from the SEC's point of view, of course, that's going to be their point of view. 00:19:01:11 - 00:19:13:23 James Seyffart Now, if you talk to the lawyers at any of these other places, they're going to say the opposite. The other side of this is there's so many things happening in the device space where if you think about it from a step back, you're like, oh, that's kind of like an interest rate swap or oh, that's kind of like whatever. 00:19:14:02 - 00:19:43:24 James Seyffart But it's not. It's something somewhat different. But there's no precedent right now. So people can't say those things without opening themselves up to like litigation from the SEC, essentially. So there's just like this huge gray area in the middle of like understanding what's acceptable and what isn't, what technically needs to be regulated what needs to be registered security or what from anyone on that point of view, they're like, well, on my sole point of view is that these are securities or that they should be registering as X, Y, or Z and obviously people aren't going to want to come in and register. 00:19:43:24 - 00:19:46:10 James Seyffart It's a lot of money to do with this and to deal with the SEC. 00:19:46:18 - 00:20:09:09 Cas Piancey It's interesting you say that because I hear a lot of that. Please show us how we're going to be regulated. Please just tell us what we need to do. And then as soon as there's any kind of movement in the direction of actual regulation, they go, Well, you can't do that. That's ridiculous. And and I just wonder if it's a bit of a show, you know, like, yeah, we want the regulation, we want it. 00:20:09:10 - 00:20:13:00 Cas Piancey It sounds better than the alternative, which is we don't want regulation. 00:20:13:05 - 00:20:29:21 James Seyffart If you talk to like people at Voyager and Block and these things, they want to be regulated. They're going into the SEC, they're dealing with the SEC, they're dealing with state local enforcement, all these different things to try and basically make sure that their businesses are in line. But obviously there are plenty of examples like what you're talking about. 00:20:29:21 - 00:20:44:10 James Seyffart Part of the problem is that it's it's all enforcement, right? So there are people are coming in, they're getting fined. And then the SEC is saying, all right, now if you want to come in, these are the steps you have to follow through those enforcement letters rather than coming out initially and being like, these are what steps we want to see. 00:20:44:17 - 00:20:55:26 James Seyffart But I also think part of that is because the SEC, they don't exactly know how to handle some of these things. So that's why Gensler is asking for more money to regulate crypto and blockchain, as he probably should. 00:20:56:18 - 00:21:18:04 Bennett Tomlin Historically hasn't most of the SEC is like regulatory frameworks for like regulatory tests stuff at least come from enforcement actions like both Howie and Reve were both enforcement actions that ended up being said, OK, judicial that establish like these tests to determine whether or not things had to be registered, but doesn't seem historically unusual for the SEC. 00:21:18:17 - 00:21:39:17 James Seyffart No, it definitely doesn't. It's a matter of what is the norm and what the SEC has done and is doing versus what most like. If you talk to pretty much anyone, they just would like to see more clarity in this space. Even institutions that are looking to get in the space want more clarity. I mean, Ken Griffin doesn't need to call on Gary Gensler to provide more regulatory clarity in the crypto space. 00:21:40:02 - 00:21:58:27 James Seyffart I mean, he's doing just fine without the space. So I think you're 100% correct, obviously. I mean, Howey tests all those things that came through, through enforcement. I think we're going to get a lot of it through enforcement. I think just for the most part, people would just like to see the SEC and really being friendly. I mean, they are regulators. 00:21:59:00 - 00:22:15:14 James Seyffart This this is kind of what they're supposed to be doing, but they're definitely being antagonistic more than anything else and that's the way I view it. Obviously, maybe I'm a little biased because I read the stuff that's coming out and denying the spot Bitcoin ETFs and they are just completely missing the mark. They say they're protecting investors, right? 00:22:15:14 - 00:22:36:21 James Seyffart But you have over 800,000 people holding accounts that have BTC. The thing is trading at a 30% discount. All the thing does is hold spot Bitcoin. People are getting access to Bitcoin via their phone. I'm on Coinbase on Gemini, on FCX, on Voyager. Anything you can think of, you can just open an account and buy it. People want to buy it. 00:22:36:21 - 00:22:49:00 James Seyffart Under the SEC's framework, they just let people do it. And also, I mean, they're hurting anyone who's holding cheap BTC. For the most part, they're they bought at X, Y, Z level. Now it's trading 30% below what the value of the underlying holdings are. 00:22:49:09 - 00:22:50:21 Cas Piancey Why do you suspect that is. 00:22:51:01 - 00:22:55:22 James Seyffart That they're not, they're not allowing the approval of GBTC to convert or ETF to approve. 00:22:56:03 - 00:22:59:23 Cas Piancey Well yeah, that but also why it's trading at a 30% discount. 00:23:00:00 - 00:23:20:26 James Seyffart So GBTC was launched a private trust, although all these trustees grayscale trusts bitwise trust, they're launched as private trusts. And then the whole plan from grayscale from the very beginning like we're talking 2015, they outlined in their plan that we're going to launch these trusts, they're going to list them OTC and the ultimate goal was to convert them to ETFs now all these trusts are structured as what's called a grantor trust. 00:23:21:05 - 00:23:39:28 James Seyffart It's the underlying structure, legal structure of the product, GLD, IAU, SLV these sort, these physical silver ETFs, these physical gold ETFs, they are also structured as grantor trusts. So basically they're using a framework that they already know exists in the ETF space and they're using a structure that they know they should be able to convert to an ETF. 00:23:40:08 - 00:24:03:11 James Seyffart That has always been the goal. Right now we're going to get really in the weeds here. Basically, you can't operate a redemption program at the same time as you're operating an offering program. So they were offering shares of BTC. Then they got a cease and desist from the SEC. Actually saying You need to stop your redemption program because under Rule 144 AA, they can't be operating at the same time, which would basically make it like an ETF. 00:24:03:11 - 00:24:24:10 James Seyffart So the reason ETF is such a powerful tool is right now GBTC is like a closed end fund, right? So we'll take a step back. So close in funds, they're basically like companies, except rather than making products like Apple makes the iPhone and AirPods they invest, they have an IPO, they offer shares and you're buying shares, trading at a value on the market of what you believe the underlying is worth. 00:24:24:20 - 00:24:41:14 James Seyffart Now we know what the underlying birth if all they underlying is trading, right? So what happens with the close in funds is you can have these massive discounts and premiums because people are the shares of those closed and funds are subject to supply and demand on the open market. So you get these massive discounts and premiums, which is what's happening with GBTC. 00:24:41:21 - 00:24:58:21 James Seyffart Not to say that's a closed end fund, but it's like a closed end fund because the shares are fixed and if people don't want to buy gee BTC, which one thing you talk about was the redemption window. The other thing is it's a 2% fee per annum. So I mean, even at 2% you can wait 11 years. As long as this thing converts, eventually you'll end up out ahead. 00:24:58:21 - 00:25:16:20 James Seyffart Theoretically, as long as the spot Bitcoin price doesn't deviate too much or fall too much. There's a lot of ifs, ands or buts, but essentially there's a lot of reasons that people don't want to hold this. Now we have spot Bitcoin ETFs in Canada, so I think you could see was used by a lot of institutions. They then went to Canada because the spot Bitcoin ETFs were available up there. 00:25:16:29 - 00:25:40:01 James Seyffart So there's a whole bunch of reasons why it might be trading at discount. Also because people just don't think it's going to convert to an ETF any time soon. All of a sudden we see that this thing gets approved to convert at some point in the next month or two, you're going to see that discount window go very small again, and maybe it won't collapse completely, but it certainly won't be more than 5% discount at that point because people are going to arbitrage away the difference that they know they're going to get eventually when the thing can convert. 00:25:40:11 - 00:26:00:12 James Seyffart Now, an ETF doesn't have these discounts and premiums as long as it's creation redemption program is operating. My boss, Eric Balcunas likes to call the creation depletion mechanism the the flux capacitor of the ETF world, because essentially it's what makes everything go round. Right. I talked about the closed end fund. The shares are fixed, so they're subject to supply and demand with an ETF. 00:26:00:12 - 00:26:21:27 James Seyffart The shares are not fixed. So supply can rise or fall to meet demand. And the way that happens is through market makers and the open market. So if the price of the shares are different from the underlying value, basically what happens is the ETF is made up of a portfolio and you can always either exchange the underlying portfolio for shares of the ETF or you can exchange shares, the ETF for the underlying portfolio. 00:26:22:06 - 00:26:38:04 James Seyffart So those things are always like for like. So if they ever get disconnected, if I'm a market maker, I'm going to buy up all the underlying. If it's worth less than the actual ETF, it's trading, I'm going to hand them the shares, take the ETF shares and I'm going to sell them and I get that spread. So this happens on a day to day basis every single day. 00:26:38:13 - 00:26:56:23 James Seyffart If there's creation, redemptions or any sort of trading, somebody is always in the market kind of making sure these things stay in line because if it's too far, anyone's going to take advantage of it. And we're talking basis point. So when that happens, especially in U.S. markets, U.S. equity markets, it's going to trade very tightly. So that's one reason why we're so bullish on the spot Bitcoin ETF, because of the way that an ETF works. 00:26:57:04 - 00:27:08:19 James Seyffart It's just such an efficient vehicle for pretty much anyone involved. But you want to be a long term holder, whether you want to be a trader what have you. It's just it's just a much better, more efficient vehicle for pretty much every single person involved. 00:27:08:27 - 00:27:12:00 Cas Piancey Is this why you think it's it protects investors? 00:27:12:07 - 00:27:30:11 James Seyffart There's a lot of people that basically, like we shouldn't allow people invest in this because Bitcoin is risky or people don't understand what they're getting into which I understood as an argument in 2017 but I mean people know what Bitcoin is now at this point people want to have exposure to it. If you want exposure to it you probably already have exposure via one of those apps I was talking about. 00:27:30:22 - 00:27:49:15 James Seyffart The other side of it is the way I view the markets. We have like three x levered junior gold miner ETFs that are way more volatile than Bitcoin itself. Like these are highly levered companies. And then we have an ETF that offers two x three x the daily return of those names. So like if you want to talk about risk, like those ETFs shouldn't exist either. 00:27:49:24 - 00:28:05:14 James Seyffart And the way I view it is if you want to invest in something and you want to invest in the SEC's regulated framework, like these products are perfect. Even if you think Bitcoin is worth zero or you think it's worth, I don't know, $1,000, a coin I'm still of the opinion that we should allow an ETF and let people make their own decisions. 00:28:05:14 - 00:28:22:18 James Seyffart And not to mention there's all these other less efficient options out there via the SEC's regulated framework, whether it's BTC, whether it's the Bitcoin futures products which have those vol yields that are negative, people are going to get access to the market like, well, I don't understand what we're talking about here. And then the other thing is they talk about they want to surveilled underlying market, right? 00:28:22:18 - 00:28:41:12 James Seyffart They want surveillance agreements. So the whole surveillance game, this thing would be like it connects and Coinbase and finance or whoever shares their trading data with the exchange that's going to list this ETF. Which one? No one's going to do that free out of their kindness of their heart. It's not cheap to do that. It would be nearly impossible to get it done. 00:28:41:12 - 00:28:43:03 James Seyffart So that makes it very hard. 00:28:43:15 - 00:29:08:03 Bennett Tomlin And we mentioned earlier in this episode before Cas got on, that seems particularly striking when they are willing to list the futures ETF dependent on the same underlying market, but charging an extra fee basically to investors to roll the derivatives. And then you have investors basically trying to invest in a business intelligence company nominally to try to get exposure to Bitcoin because there are a lack of better options. 00:29:08:03 - 00:29:16:12 Bennett Tomlin It does seem it's hard for me to form a coherent argument as to why there shouldn't be a spot Bitcoin ETF, but people should be investing in MicroStrategy. 00:29:16:20 - 00:29:33:11 James Seyffart I'm 100% with you. It's just this would be so much better for all involved. Even if you want a short Bitcoin, this would be a better way to do it. As somebody in the regulated markets, when you open a regulated market, not that virtu and citadel and these other these other companies aren't already trading these markets, but these are the best these are the most liquid markets in the world. 00:29:33:11 - 00:30:01:26 James Seyffart Like every we export liquidity to the rest of the world. Everyone comes to our ETF market, whether you're in Japan, Australia, no matter what, a lot of people come to the U.S. to trade, it will make things more efficient. I mean, honestly, if you want to get your fingers into the crypto ecosystem, the crypto world like opening ETF and regulating that market and allowing market makers and authorized participants to get involved in that market in a bigger, more, more impactful way is one way to like stamp out any sort of like manipulation or fraud that we're talking about. 00:30:01:26 - 00:30:21:10 James Seyffart The other thing, I lost my train of thought before, but I was talking about the surveillance agreements. If you listen to anything that has to a person's written or said like we're creating new requirements to launch an ETF that we've never had for other ETFs before, I mean, I would love to know what the surveillance agreement is for the small cap Vietnam market or some of these CDSs markets, which trade OTC. 00:30:21:17 - 00:30:44:12 James Seyffart There's plenty of ETFs that have markets that are completely OTC traded. I mean, there's some sort of surveillance, but we're applying a higher standard to to launch a Bitcoin ETF than pretty much anything else that I've seen. Now, you could argue, well, there's a lot of fraud. There's a lot of manipulation. That's what you hear from critics, essentially, but I just don't understand the process of applying so much requirement on the underlying market now. 00:30:44:12 - 00:31:04:26 James Seyffart I think mainly that is due to the fact that the SEC set a precedent back in, I don't even know, ten years, eight years ago that they wanted a surveillance agreement with a market of significant size. And if you look at every single ETF denial that has been what they wanted Gemini to the Winklevoss brothers, that they got denied because, one, their process never would have gotten through. 00:31:04:28 - 00:31:25:02 James Seyffart Basically, everything was going to be priced off a Gemini's trading and they got denied because Gemini was in the market system size. Their application was never, never going to get through. I'm surprised that some of these other ones can't get through because even if you look at I talked about the Bitcoin reference rate before for Bitcoin futures, it's based off of a whole bunch of underlying spot markets and all these ETFs, they have the same thing. 00:31:25:02 - 00:31:50:17 James Seyffart We're like, we're going to base our price of our ETF of the spot Bitcoin's we hold on all these different markets and basically come up with an aggregated price. So somebody would have to manipulate like all of these exchanges at once to manipulate our our pricing mechanism, not to mention they're going to be in-kind transactions. So like if you're I talked about that creation redemption aspect, in the case of a Bitcoin ETF, you'd be getting shares, the ETF and you'd be handing Bitcoin to manipulate the market. 00:31:50:17 - 00:32:02:03 James Seyffart You're just going to be handing Bitcoin back and forth. So it's not there's a whole bunch of different reasons that make this really questionable from the assistance point of view. And I think it's just because they've set a precedent back themselves into a corner, they kind of have to stick to it. 00:32:02:12 - 00:32:16:18 Cas Piancey Is there any other reason that cryptocurrency advocates want this so much other than seems like an efficient way to open this up to retail further and traditional finance further? But is that the main driving force behind this? Is that why? 00:32:16:25 - 00:32:39:02 James Seyffart Yes. So I mean, I know people that are huge crypto analysts or crypto believers that don't think we need an ETF, don't care about an ETF, don't want it virtually. They they're basically saying you're centralizing Bitcoin ownership and we don't even want that to begin with. But for the most part, I think they missed the fact that I'm sure you guys have used the U.S. UI on Bitcoin and other defy protocols, met a mask. 00:32:39:02 - 00:32:56:14 James Seyffart I mean, it is not I mean, I like to consider myself fairly savvy. It's not easy to do like you can. I'm surprised I haven't lost money or said something to the wrong address, but I'm playing around with this stuff just trying to understand it. So one, not everyone's going to be able to do that. I mean, everyone keeps telling me eventually the U.S. UI is going to be better me clicking a button here or there. 00:32:56:24 - 00:33:17:15 James Seyffart I don't know how far away that is, but not everyone wants to do that. Right. The other side of this is if you're an advisor, right? So advisors control 26 trillion in assets if you look at advisor surveys on crypto, a lot of them are very interested, like the majority, and many have clients asking about it. And when they ask why they haven't invested there's two reasons they give at the top. 00:33:18:03 - 00:33:45:23 James Seyffart One, there's no regulatory clarity. They're uncertain what's going to happen. Is Bitcoin going to be deemed like some nefarious thing? Is the government going to ban it? So advisors are worried about that. The second thing where sometimes the number one reason is because there's no efficient vehicle for them to actually sit on their traditional financial rails. And they specifically say they want to spot Bitcoin ETF or some will actually say they want a better way to tie into like the back end of like a crypto custody agent, whether it's Gemini or Coinbase or whoever it may be. 00:33:45:29 - 00:34:15:02 James Seyffart But for the most part, they want to swap Bitcoin ETF and they want regulatory clarity. So all of a sudden, if the SEC approves a spot Bitcoin ETF, you get one of those and then that's providing a lot of regulatory clarity because then they're like, all right, the SEC has approved this thing. So it's my opinion that we'll see a lot of money pour into this ETF just from advisors that no matter how you look at the way that Bitcoin is performed, if you look at it in a broad diversified portfolio, I'm sure there's people who disagree with this, but the number state, if you put like a 5% allocation, 1% allocation and you constantly 00:34:15:02 - 00:34:35:09 James Seyffart rebalance, it's been a very good portfolio diversifier, it increases your Sharpe ratio, it does plenty of positive things and a lot of advisors have seen this and they want to get involved. So if you want to put 1% of like one of your clients portfolio or 5% into Bitcoin or a basket of cryptocurrencies, you're not going to want to have to create a whole new like system for getting access to that. 00:34:35:09 - 00:34:52:17 James Seyffart If you can get an ETF and just push a button and keep it in your broken system on the traditional financial rails, you're going to love that. The other side of this is for people who care about the cryptocurrency and obviously want the price to go up. Number go up, right? That's what have this. I wish there was a little bit less of that in this industry, but that's obviously what it is. 00:34:52:28 - 00:35:13:12 James Seyffart Truly. Associates, who's another industry research team they estimate there's about 26 trillion with U.S. advisors. So I mean even if you take to 30% of those advisors and then take 1% of their assets you're talking about tens hundreds of billions of dollars that will be flowing into crypto if an ETF is approved because they're going to want to get some exposure now maybe they'll use it tactically. 00:35:13:21 - 00:35:31:03 James Seyffart I don't know how it'll change the underlying markets, but there's a lot of money still on the sidelines, especially if an ETF gets approved. So all the people who are anti ETF, but pro crypto, you should think about $26 trillion that would likely be willing to put some money some some money in here as a good portfolio diversifier. Obviously not all of them. 00:35:31:05 - 00:35:37:23 James Seyffart It's not going to be that it's not going to I'm not talking trillions of dollars are going to flow in but it's likely to be a significant amount of money. 00:35:38:10 - 00:36:10:27 Bennett Tomlin So you mentioned before that you kind of feel like the SEC was backed themselves into a corner by making this comment earlier about surveillance agreements and the underlying markets of sufficient size. I think it's as much them pushing themselves into a corner. Or is it that the the thing they want right now politically or for whatever other reason, is these surveillance agreements with these cryptocurrency exchanges and they think the Bitcoin ETF, the Bitcoin spot, ETF, is the political leverage they currently hold to try to like pressure these cryptocurrency exchanges to come to the table and talk about that. 00:36:10:27 - 00:36:26:23 James Seyffart So you're speaking my language I literally wrote a note that said that the SEC and Gary Gensler were holding Bitcoin ETFs hostage. I think Gensler, like I said, I think he wants to be able to say he team the Wild West of cryptocurrency. He wants to go after these exchanges. He wants to bring them under the SEC framework. 00:36:27:05 - 00:36:42:26 James Seyffart Honestly, at this point, I think the CFTC is likely to become the market that regulates them. Time will tell. I mean, Bitcoin, as far as CFTC concerned, is a commodity. So time will tell how much the SEC actually gets control of. But again, the even commodity ETFs are regulated by the CFTC and the SEC because they're an ETF. 00:36:43:11 - 00:37:05:09 James Seyffart So I 100% agree with that. Obviously, we had this theory we were calling the higher power theory. I don't know how true it is anymore, but essentially it was just that the higher ups didn't want this thing to go through. There's too much reasoning why we should just allow GBTC to be approved. There's too much reasoning on why it would just make sense to make this a regulated market, a regulated product under the SEC for them to keep denying it for all these. 00:37:05:15 - 00:37:23:09 James Seyffart Like I said, they're losing the forest for the trees, their focus on minutia and precedents. But I guess they're lawyers and that's how legal stuff works. But if you just take a step back, the better way to handle this for pretty much everyone involved would just be to approve an ETF and let GBTC convert I mean, Grayscale wants this. 00:37:23:15 - 00:37:46:20 James Seyffart All of their holders want it pretty much. I don't know anyone that agrees with the SEC at this point, aside from the fact that they've set this precedent and they're going to stick to it until it's met. And then to go back to the higher power theory thing, our whole idea was that basically the Elizabeth Warren's, the Janet Yellen's, the Jerome Powell these higher ups in the in government, especially Manchin, back in the day, they were very against Bitcoin. 00:37:46:20 - 00:38:00:14 James Seyffart So they weren't going to let this through pretty much no matter what. I don't know how much that is the case right now under this administration. It's very obvious that Gensler just wants to regulate and get his hands on everything, especially in the crypto world. I completely agree with you. Gensler just wants control to regulate. 00:38:00:24 - 00:38:10:16 Cas Piancey Do you perceive that Clayton, was it that he was pro crypto or was he just ignoring it to the full extent? 00:38:11:11 - 00:38:12:14 Bennett Tomlin He was anti crypto. 00:38:12:22 - 00:38:33:25 Cas Piancey But he didn't do anything right? I mean, this is this is what I think is is something you've often brought up. Bennett, is that a lot of things that Clayton possibly could have done during his tenure with the SEC to establish some regulations and knock down some of these bad actors. He did nothing. So I wonder what the reasoning is there. 00:38:33:27 - 00:38:38:09 Cas Piancey You know, I've heard he's anti crypto, but it sure doesn't seem like he's anti cryptocurrencies. 00:38:38:13 - 00:38:54:07 James Seyffart And Clayton was there. I know for a fact that Mnunchin and other people at the higher levels of government were anti crypto. So I think from above he was just not allowed to do anything pro crypto but he really didn't do anything that anti crypto aside from under his regime, they denied a bunch of Bitcoin and futures ETFs. 00:38:54:21 - 00:39:03:22 James Seyffart I mean, he's been on he's talked at crypto conferences over the years and he's decidedly, I don't want to say pro crypto, but he's definitely not anti crypto. 00:39:04:06 - 00:39:25:01 Bennett Tomlin My opinion of Clayton, like you can look at the DAO report that came out well he was head of the SEC which basically said that the DAO token was pretty clearly a security and he said in like two dozen speeches after that that basically every ICO looked like a security to him. But Jay Clayton in general was also not big on regulator enforcement or regulator action like as a concept. 00:39:25:12 - 00:39:35:18 Bennett Tomlin And so I think that it was unlikely that we were going to see much of any regulatory action from him regardless of what his thoughts and the actual things themselves were. 00:39:36:00 - 00:40:02:20 James Seyffart Yeah, I mean even Gary Gensler said I mean, I've seen interviews with him from back in the day before he even became an SEC chairman. His view was that when Ethereum launched, it was a security he doesn't think it's secured anymore. He doesn't think it fits the any of the tests now that would make it a security. But back when ICO did when it launched, it was a security, in his opinion, the only thing that really in the crypto space that I can think of that's definitively not a security in the way that it was launched is basically Bitcoin. 00:40:03:03 - 00:40:18:20 James Seyffart But again, what are they going to do? I mean, look, at how long is the ripple case been going on? We talked about this before. There needs to be some sort of like are they going to blanket name all these things, securities and then spend five years and like you're in litigation with all these different tokens to try and determine whether or not it's security. 00:40:19:03 - 00:40:30:21 James Seyffart Something else needs to happen, whether it's Congress stepping in or some other legal framework needs to be created in my opinion, probably to do this because I don't know how else they're going to do it without just flat out saying all of these securities. 00:40:30:27 - 00:40:55:05 Cas Piancey It's reminiscent for me of of two other markets that we've seen at least partially collapsed. It doesn't mean that it all went to zero, but obviously the dot com bubble, you had a bunch of kind of scammy garbage out there. Sure. The Internet is filled with scammy garbage still to this day. And I wouldn't suggest otherwise, but I think a lot of the kind of institutional scammy garbage back then disappeared because the market collapsed. 00:40:55:05 - 00:41:14:09 Cas Piancey After that. We had the great financial crisis of seven and eight. And you have the housing market get ravaged because they were up to no good. So I think generally that's how you solve this stuff, right? Like the market does decide it. Regulators don't as much as I think perhaps people like Ben and I would prefer it that way. 00:41:14:20 - 00:41:30:20 James Seyffart I mean, there's a lot of garbage out there. I mean, one of the way I talk has this like I followed you guys because I've seen plenty of anti crypto posts on Twitter of people that like some of the stuff and like you have no idea what you're talking about. Like that is not even relevant. And you guys were never it was never the case with you guys. 00:41:30:20 - 00:41:57:11 James Seyffart And especially like some of these white papers that come out from academics on the crypto space and Bitcoin. And I read them, I'm like, this is completely irrelevant. You're missing like key factual data points. Two reasons why like this happened or why Bitcoin fees were so high in 2017 and not once in this like 25 page paper about it was anything talking about the fact that there was multi thousand dollar differences in bitcoin prices so people were willing to pay whatever the hell they could as long as they were making a spread on those different same prices. 00:41:57:11 - 00:42:18:02 James Seyffart So Bitcoin fees were through the roof. So I just feel like there's a lot of specifically academia who the space is moving too quick and a lot of people just aren't keeping up. And also you have so many media personalities where I mean honestly one of the things that the whole crypto ecosystem needs to do is stop being so antagonistic, stop being so childish, if you will, at certain times. 00:42:18:02 - 00:42:35:14 James Seyffart Like, yeah, like people are just so pumped up and cheering each other on even like some of the stuff. It's like, this is obviously very scammy. Like, this is obviously very public. I don't know, there's not much you can do about I'm a believer. I love learning about Bitcoin and I'm trying to learn as much as I can about DeFi. 00:42:35:28 - 00:42:59:14 James Seyffart So I wouldn't say I'm truly a critic, but I sometimes I see stuff on Twitter and I'm like, I can't believe I agree with this guy and my investment thesis of this, of this particular asset class or asset. It's like, I can't believe I'm in a company. I'm on the same side of the trade. But then, then I see stuff, like I said, on the exact opposite side and it's just like, all right, well, this person has absolutely no idea what they're talking about. 00:42:59:14 - 00:43:07:15 James Seyffart There's a lot of critics that just literally don't understand anything about this. And I will commend you guys for for not being that. 00:43:07:22 - 00:43:10:05 Bennett Tomlin So thank you. 00:43:10:17 - 00:43:21:25 Cas Piancey James, is there anything else you'd like to add? Like, I guess I don't like to ask for predictions. I don't like to talk about price necessarily. But yeah, I mean, what are your what are your final thoughts on all of this? 00:43:22:02 - 00:43:42:23 James Seyffart I'm definitively not allowed to give price predictions, but for better for better or for worse, we're a research we're a research shop, but we're not allowed to give Vice a hold. But in my research, like, you can see exactly my thesis and my viewpoint on the situation. I'm watching very closely to see what happens with BTC. I fully expect GBTC and Bitwise to be denied by the SEC in July. 00:43:42:23 - 00:44:01:01 James Seyffart I will be shocked if they are not, and I fully expect to grayscale to file a lawsuit, an APA lawsuit violation against the SEC. I don't know what other recourse they have. They want to get this thing approved. They have 800,000 clients roughly that want to get basically get out or get out at par or do something. But good to see that they can't. 00:44:01:01 - 00:44:19:03 James Seyffart So they need to do something. But then again, antagonizing your regulator is never a great idea, but they're kind of as far as I'm concerned, I don't really know what other options they have. Obviously, the whatever conversations they're having with the SEC are not going well. The SEC is stuck. They're their feet in and they're not moving on the situation. 00:44:19:03 - 00:44:42:05 James Seyffart So obviously that'll be exciting to watch. And see how it happens. The APA have to tweet like situations like I don't understand how you can argue that from a high level. We're going to allow a derivatives product and a more inefficient derivatives product. And you talk to anyone in the marketplace, market makers, issuers, traders, anything, and they all say that the spot Bitcoin ETF would be a more efficient vehicle and they're ready to handle it. 00:44:42:15 - 00:45:01:28 James Seyffart So that's what I'll be watching. That could take years to to play out. So my thesis is I think we'll get one in 20, 23 a spot Bitcoin ETF, that is whether it's through stuff with the exchange rule. I talked about the CFTC proposal which I'm writing a research note on now could help things along but time will tell. 00:45:01:28 - 00:45:22:26 James Seyffart I mean part of me wants to like put a percentage out there but like so we were very confident when we issued the percentage that we, I think we put 80% back in August that we thought a Bitcoin futures ETF was going to get approved. Now I just really don't know because there's so many moving parts right now with the spot Bitcoin ETF I'm guessing 20, 23 just because it's been long enough as far as I'm concerned. 00:45:22:26 - 00:45:41:12 James Seyffart So they keep chipping away at different reasons for denying the spot. Bitcoin ETF. The last real bastion for denying is like we talked about surveillance agreements, the underlying spot market. No longer are they leading on the 40 act as a better proposal no longer and they leaning on these all these different things. The real last thing is surveillance of the underlying spot market. 00:45:41:12 - 00:46:01:18 James Seyffart And so if somehow we get some spot markets like regulated by the CFTC, maybe that'll help. If the CME futures market becomes a massive market of significant size, which I'm not holding my breath, I don't think that'll happen, but that might help. But if multiple markets become federal regulated markets, we could see an ETF get approved in 2023 and that's what we're we're watching for. 00:46:01:29 - 00:46:15:29 Cas Piancey Awesome. OK, well it sounds like you're both bearish and bullish on this ETF at the same time. Ben and I don't trade very much so we're not as well versed in this stuff as as you are and yeah we appreciate you giving us a thorough explanation of all of this. 00:46:16:16 - 00:46:19:06 James Seyffart I'm happy to do it. I enjoyed it. It was a lot of fun. Three.