Episode 90 – Draconian Financial Regulation and the Argument for Tether (feat. Boaz Sobrado)

Draconian Financial Regulation and the Argument for Tether (Feat. Boaz Sobrado) Crypto Critics' Corner

We're back! Today Bennett and Cas are joined by Boaz Sobrado to discuss Tether's use in Cuba and why people turn to assets as volatile and risky as Bitcoin and stablecoins in sanctioned countries. Follow Boaz @sobradob. This episode was produced by Bennett Tomlin.

In this episode Bennett Tomlin and Cas Piancey are joined by fintech Analyst Boaz Sobrado to discuss financial deplatforming, sanctions, and Tether.

This episode was recorded on August 2nd, 2022.

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English Transcript:

00;00;05;05 - 00;00;11;28
Cas Piancey
Welcome back, everyone. I am Cas Piancey and I'm joined, as usual by my partner in crime, Mr. Bennett Tomlin. How are you today?

00;00;12;05 - 00;00;13;10
Bennett Tomlin
I'm doing well, Cas How are.

00;00;13;10 - 00;00;40;08
Cas Piancey
You? I'm doing good. We are joined by a special guest today, Boaz Sobrado, a London based financial analyst, and he is joining us to discuss a few different topics, mainly centered around cryptocurrency use in countries like Cuba, in Latin America in general, how how they work, why they don't work, etc., with a focus on on tether. But to start.

00;00;40;11 - 00;00;41;21
Cas Piancey
Boaz, how are you doing?

00;00;41;21 - 00;01;00;03
Boaz Sobrado
Very well. Thank you very much, guys. It's an honor to be here on this show. I'm a very, very big fan. And as you guys probably suspect, I'm a little bit more of a subject among the enthusiasts than you are. But nevertheless, I feel that you guys provide the whole industry with a very, very valuable service and your podcast is one of my favorite.

00;01;00;03 - 00;01;00;14
Bennett Tomlin
Thank you.

00;01;00;14 - 00;01;19;26
Cas Piancey
Well, thank you. We appreciate that. But so so let's start off, first of all, I guess I don't I don't like doing back stories of how someone got into crypto. I'd rather like to understand how you came to understand its use case in places like Cuba, which as far as I know, most people haven't been to.

00;01;19;26 - 00;01;50;19
Boaz Sobrado
So the whole Cuba story for me personally is one where, you know, you have to rewind back to 2016, back when Obama was in power, he goes to Havana. Right. And this historical trip and it looks like there's this great reset and the relationship between the US and Cuba. And as a young person that was entrepreneurial and spoke Spanish, I said, Wow, this is a fantastic opportunity to go to Cuba and try to start something that this was a terrible mistake for reasons that you're going to find out about soon.

00;01;51;22 - 00;02;12;25
Boaz Sobrado
But that's what I thought at the time, actually. Basically, I went to Cuba, made some contacts, etc., and I ended up with, you know, within the two years I kind of had a business there that had employees that had suppliers. What we did was basically sell tourism services online. So it was mostly accommodations and transportation by by the peak of things.

00;02;12;25 - 00;02;42;02
Boaz Sobrado
We're running something like 25% of Cuba's. So and hostel bed inventory online, we're doing all the online marketing and inventory management, all of that stuff. And 2018, I kind of fell down the rabbit hole as people, I have to say, for two different reasons. First of all, I discovered that it was a lot cheaper for me to to move money into Cuba via cryptocurrency.

00;02;42;13 - 00;03;03;06
Boaz Sobrado
So what I did back then. Why is that? I will give you. Yeah. Take a step back I'm will give you audience a little bit in the context of around the Cuban situation what Cuba is, the laws around Cuba, etc., because I think particularly the American audience, my view for where and so the business that I was running which is a tourism company see is completely legal.

00;03;03;10 - 00;03;30;23
Boaz Sobrado
Like I had a European registered company that was cutting taxes, I wasn't breaking any US laws around sanctions, etc. I did no business with the Cuban government. I did no business with Cuban government, military hotels, etc. These are all activities that the US government encourages. In fact, I were part of Obama's big plan and to this they were illegal and they always I mean, they have been for a long time, etc..

00;03;30;23 - 00;04;02;02
Boaz Sobrado
So, so let's get that out of the way. I don't want to be accused of being a sanctions violator, etc.. So, yeah, so, so I was, I was running this business and then I discovered that for me as a, as a European person, as a European company, the cheapest way of actually moving money into Cuba that I needed to do to pay off suppliers and pay off the people that I pay their employees, etc., was actually to buy Bitcoin in Europe and sell it in Cuba.

00;04;02;02 - 00;04;04;05
Boaz Sobrado
So that was one of the things that's kind of my eyes.

00;04;04;07 - 00;04;10;22
Bennett Tomlin
So what's what's the process of selling Bitcoin in Cuba look like? Like where do both ends of that transfer look?

00;04;11;03 - 00;04;34;14
Boaz Sobrado
Okay. So, so I'm going to caveat this with the fact that this was like in 2019 since for me, I have not been familiar with the market, but basically the way it works is you kind of often in a telegram group or something like that and you message them and you built a relationship and they agreed to either give you the cash in person or to wire you the money.

00;04;34;14 - 00;04;40;06
Boaz Sobrado
You sent them the coin. There was no exchanges operating at the time, I think, to this day or any exchanges operating.

00;04;40;13 - 00;04;59;03
Cas Piancey
So my my question here is, why is it so expensive to move fiat currency, whatever? If you're using pounds and you're in London, if you're using U.S. dollars in America and I assume I know the answer to this, but let's I would like to hear the the I'd like to hear you explain it.

00;04;59;14 - 00;05;19;16
Boaz Sobrado
So it's it's very expensive to move money to Cuba because Cuba's sanctioned a lot of the economic sanctions under U.S. laws. So even if you're doing something that's completely legal, if you're a big dog like your booking dot com, you have your lawyers and type of bankers and get in relationships so you can actually figure out how to move money there.

00;05;19;22 - 00;05;42;19
Boaz Sobrado
It's actually quite interesting the way Airbnb moves back to Cuba right now is they have I mean, I'm not entirely sure this is true, but I know it's true that they use a company called Baku, which has some dodgy Miami links. And the the rumors I heard, I'm not sure these are true, but what I'm told is they literally fly someone over from Miami to Havana every single week with a bunch of cash to do that.

00;05;43;14 - 00;06;06;18
Boaz Sobrado
So the US sanctions make it very impulsive. You can't really use Swift to wire on to Cuba. The only European banks that allow you to do them are the state owned European banks. So state owned European banks will use a swift messaging service to send money to Cuba because as you guys know, Europe is not sanctioned by the US and state banks are brave enough to try to do this effectively.

00;06;07;05 - 00;06;22;22
Boaz Sobrado
The cheapest way that we'd found to move money to Cuba was literally like I sent over a bunch of debit cards to the people that work there and they went to an ATM and withdrew cash and that cost us roughly 5%. And you can think of that as 5% of your expenses as a business is quite a lot.

00;06;23;11 - 00;06;42;21
Boaz Sobrado
When we're doing the Bitcoin transactions, we were actually getting paid 10% of the market value to sell Bitcoin because at that time the market was so new and one of the biggest players there and we ended up making significant profit on that.

00;06;42;22 - 00;07;01;13
Cas Piancey
Is that due to arbitrage like you would purchase it for some price in in let's say London and then you would send that Bitcoin over. And essentially, I assume and tell me if I'm I don't want to accuse you of any but essentially a market a little bit because demand is higher in Cuba for it or both.

00;07;01;21 - 00;07;24;15
Boaz Sobrado
At the time that was the case at the time. This is no longer true, by the way, but at the time there was such little liquidity and so high demand for cryptocurrency in in in Cuba that you could sell it for more than the spot rate internationally. And by the way, if you guys follow a peer to peer markets, this sort of thing is uncommon but not unheard of.

00;07;24;15 - 00;07;30;24
Boaz Sobrado
This happened quite a lot. The kimchi premium is known, right, in two years. Well, you get premium book Iran.

00;07;30;29 - 00;07;47;17
Cas Piancey
Iran for a while had a very nice big thick premium as well. Yeah. Sanction countries that don't have access to U.S. dollars tend to see a bit of a spiked premium. Although Korea is different, I don't know. It's a weird case.

00;07;47;28 - 00;08;01;01
Boaz Sobrado
Korea capital controls mostly. And then there's a very, very interesting case of countries that have a discount. Columbia has had a persistent discount for a very long time. I haven't really seen anyone write about it, but it's been there. And why is that?

00;08;01;21 - 00;08;02;17
Bennett Tomlin
Do you have any theories?

00;08;02;28 - 00;08;03;21
Cas Piancey
I don't know.

00;08;04;12 - 00;08;17;07
Boaz Sobrado
I don't have I mean, my my theories are basically speculation, but there's someone in Columbia that really needs to sell Bitcoin through peer to peer markets. I don't know. I don't know what that means.

00;08;17;07 - 00;08;19;28
Cas Piancey
I wonder who that could be.

00;08;19;28 - 00;08;29;08
Bennett Tomlin
So but on the other side, can you talk about some of the things that drive demand in places like Cuba and why there is so much demand for cryptocurrency in places like that?

00;08;29;08 - 00;08;51;24
Boaz Sobrado
Okay. So so basically in Cuba, if if if you want to get your money out of the country, you don't really have any other way of doing it if you want to, you know, if you're like, you know, Cuba is not the way that many people in the US in Miami imagine it to be there. Many people who are small business owners in Cuba that may have amassed a substantial amount of money.

00;08;51;24 - 00;09;11;26
Boaz Sobrado
They're not by no means multimillionaires. But you know, the people that own the restaurant or a hotel and they make money because they sell to foreigners. And if you want to stay in the country, go to Miami, go somewhere that doesn't work every day. You need to get your money at the country. Now, that is impossible in Cuba because they are capital controls.

00;09;12;08 - 00;09;49;10
Boaz Sobrado
So the only thing you can really do is you can you can sell some cryptocurrency and go there or you can use sort of an official many miles and people that will do this as a service. So that's one one of the sources of demand in Cuba that we were selling. And 2018, 2019, there was another source of significant demand which which I've written about, spoken about, which was people who were wanting to buy cryptocurrencies to participate in MLM and Ponzi schemes.

00;09;50;04 - 00;09;57;28
Bennett Tomlin
So can you talk a little bit about the dynamics of how crypto feeds into those multilevel marketing and Ponzi schemes in places like Cuba?

00;09;58;03 - 00;10;21;24
Boaz Sobrado
Yes. So that this is a very, very interesting question because you kind of saw something similar, you know, in the 1990s in Eastern Europe when, you know, it was the fall of the Berlin Wall and all of a sudden all these countries that were you know, there's no market economy, there's no business. It's just they get flooded with all these opportunities.

00;10;21;24 - 00;10;46;19
Boaz Sobrado
You know, new Western companies, everything looks amazing, new technology and there is no sort of societal antibody towards Ponzi schemes or the land schemes. Right. You know, you had in Romania, I think case you wrote about carrot, this Ponzi which is like, you know, between one and $5 billion worth of a Ponzi scheme. And it was a small civil war in Albania after a Ponzi scheme blew up.

00;10;47;28 - 00;10;48;13
Boaz Sobrado
And I.

00;10;48;13 - 00;10;49;00
Cas Piancey
Mean.

00;10;49;00 - 00;10;49;22
Boaz Sobrado
Just in itself.

00;10;49;22 - 00;11;13;22
Cas Piancey
MMM Was the other one. MMM. Was the other one. That's a Russian Ponzi scheme that appeared after the fall of the Berlin Wall and went on for several years. There's like a second version that's crypto based now as well. But yeah, these, these certain places that are ripe for Ponzi schemes like obviously we have our fair share of scams in Europe and in the United States of America.

00;11;13;22 - 00;11;37;05
Cas Piancey
Canada, like the Western, the Western world, we definitely have that, have that. But I would suggest that there's places where when you're introduced to new capital flowing in and you don't understand how certain concepts work because it's been so long since you even have had to interact with like free market economy that you just think like especially in the case of Caritas.

00;11;37;11 - 00;11;49;15
Cas Piancey
I think it was a lot of like, well, this is just how capitalism works, right? Like we just make money. So I think that at least that's what I'm kind of hearing here, is that that's a bit of the issue in these places.

00;11;49;16 - 00;12;11;04
Boaz Sobrado
Yeah, 100%. 100%. In fact, there's this other Ponzi scheme, MLM scheme called Force Age, which is sort of Ethereum smart contract based Ponzi scheme, which basically is I mean, it's an MLM scheme right, you get recruited and then you get incentivized to recruit more people, etc. And there's a beta that came out recently that was super used with two reasons.

00;12;11;04 - 00;12;45;02
Boaz Sobrado
First of all, they actually did the chain analysis and they proved that. Yeah, I mean, it's obvious to us that like 88% of users lost money in this. Secondly, they actually did some pretty clever analysis to figure out where the users were actually from, people that participated in this. And they found that it was overwhelmingly, you know, in countries like Nigeria, Indonesia, India, you know, places where, you know, first of all, they might not be as familiar with this sort of thing.

00;12;45;02 - 00;13;27;16
Boaz Sobrado
It's hard to differentiate technology from from from an outright scam. And there's less economic opportunities sometimes for people. So this is they decide to participate in these things. There was there was a very there were two very big was in Cuba back when when I was, you know, I got to be there. One of them was called Carat Bars, which which was run by a German former vacuum cleaner salesman who eventually he got, I think, some charges pressed against his I don't know if he ever went to jail, but basically they had events in Miami and Amsterdam, etc., and they managed to recruit the very, very wide audience of of Cubans.

00;13;27;16 - 00;13;52;06
Boaz Sobrado
And they had their own token which which as you can guess, it went to zero and a lot of people lost their money. But the bigger one and this is this is one that kind of blew my mind, is one that was called trust investing, which was a very, very simple crypto Ponzi scheme in the sense of you deposit money, we're going to do magic arbitrage to give you 10% yields.

00;13;52;06 - 00;14;15;18
Boaz Sobrado
And they tried to do this in perpetuity. And the Cuban authorities, despite, you know, Cuban being a police state, only moved against one of the local organizers in April of 2021. So for a very, very long time, this guy was operating it with impunity only after they started having issues, they actually moved to arrest them and then they actually let them go a little bit.

00;14;15;18 - 00;14;37;03
Boaz Sobrado
So I'm not sure what's going on there, but the reason why I bring this one up is because it was very, very devastating in Cuba. Tens of thousands of people who didn't have that much money. You know, keep in mind, the average salary in Cuba, something like 20, $30, if you work for a state company a month. And they didn't have that much money, but they were putting all their savings into this scam.

00;14;37;17 - 00;15;09;26
Boaz Sobrado
And, you know, something like 44% of all the trust investing users were based in Cuba with the rest around wherever the Cuba Cuban diaspora was. So when that's one of the the big old themes of cryptocurrency is that these Ponzi scheme operators can can tap into, you know, so-called virgin markets. Right. And even if even if you Cubans don't have that much money, if you can if you can get 7000 to participate in your scam, you're probably already doing quite well.

00;15;10;03 - 00;15;16;02
Boaz Sobrado
Right. And this whole OneCoin thing that came out a few years ago that was also going around developing countries as well.

00;15;16;20 - 00;15;45;10
Cas Piancey
And in a country as small as Cuba, I mean, there's only like 11 million people there. If it affects 50,000, 70,000, 100,000 people, like, you know, one of these people, you know, one of these people if you live there for sure. So, yeah, that's that's a lot that's crazy. But now that we've kind of run through some of the offensive parts of this stuff and and also spoke of why you were personally attracted to using Bitcoin in Cuba when you were working there.

00;15;46;18 - 00;16;05;16
Cas Piancey
I'd be interested to hear your takes on tether in places like Cuba, because I suspect we're going to disagree, or at least if not disagree. I at least will begrudgingly admit that you might be right while saying Tether is not the right vehicle for that purpose. But please, let's, let's let's hear it.

00;16;05;21 - 00;16;20;26
Boaz Sobrado
Okay, so. So when I said tether, I want to step back because I think I've given you guys half my crypto story. So how might you know? The part of the story I told you is like, okay, I found that crypto is the best way for me to do. You know, bitcoin was the best way for me to do cross-border transfers.

00;16;21;05 - 00;16;49;00
Boaz Sobrado
I mean, I think there's a fairly well-established literature on that is it is kind of evident that that's a thing that people are doing. But the the other part of my story of why I and using, you know, and becoming somewhat of a cryptocurrency enthusiast is that, you know, so in 2016, I first go to Cuba. By 2018, we had a business, we have employees, we have suppliers, we have hundreds of guests staying with us.

00;16;49;19 - 00;17;10;17
Boaz Sobrado
And the other thing that happened in 2016 is that Donald Trump gets elected. So you're from from the Obama years of within the many things and we're going to encourage to you I mean the US embassy was encouraging Airbnb and Stripe and other companies to set up shop in Cuba and then with Trump's election, things kind of change.

00;17;11;02 - 00;17;31;18
Boaz Sobrado
And in 2018 I get an email. So I was using Stripe as a payment processor, right? So Stripe had been brought in by the Obama administration to deal with this, to deal with businesses, Cuban businesspeople that wanted to do business in Cuba and on the 5th of March of 2018, I get an email, I'm checking it right now.

00;17;32;18 - 00;17;57;04
Boaz Sobrado
And they say, you know, as you know, in the on the 16th of June 2017, the US Government announced new restrictions for firms, businesses and businesses with connections to Cuba. By the way, the actual law had was no substantial change. It was a very Trumpian or we're going to do this, we're going to do that. But when you actually looked at the new laws and the new rules, nothing actually changed.

00;17;57;04 - 00;18;23;17
Boaz Sobrado
And they continue to you know, they say as a result, we made a decision to deactivate user accounts that may conflict with this new policy or and here I'm quoting them or where we may be unable to meet increasing compliance oversight obligations. So the way I understood this was basically you are too small for us to matter. This is kind of an unprofitable business for us that it was going to have to get all these lawyers involved in this just a little bit sticky.

00;18;23;27 - 00;18;34;05
Boaz Sobrado
So we're going to give you how much do they give us? They gave me if I give it today. So they gave me nothing. 0 hours to figure things out. Oh, right.

00;18;34;16 - 00;18;45;21
Cas Piancey
Yeah. I have some friends at Stripe I would love to hear them. Tell me a little bit about why you were given like 24 hours. That's not a good look. But sorry.

00;18;46;06 - 00;18;48;07
Boaz Sobrado
I mean, but these things happen.

00;18;48;07 - 00;19;10;07
Cas Piancey
This in 24 hours is pretty intense. What if you just don't check your email? You know what I mean? Like that? That's. That seems pretty unacceptable to me. You're being really laid back and chill about it, but for me, that that is really unacceptable. So I'd love to hear we have we have some I know there's a couple listeners out there who work for Stripe, and I would love for them to talk to me about why this happened.

00;19;10;07 - 00;19;13;05
Cas Piancey
It doesn't have to be on the record. I'd just like to understand what I mean.

00;19;13;07 - 00;19;33;21
Boaz Sobrado
I mean, listen, from their perspective, it makes total sense. This is no longer a profitable business. It's a compliance risk. This is a big company. And I'll be honest with you, I've been I've been deplatformed by Stripe, by Revolut, by PayPal. By far the best experience is Stripe. So I'm a Stripe fan. Okay. None of them were as essential as Stripe.

00;19;33;21 - 00;20;00;11
Boaz Sobrado
And I'm going to tell you what happened after this. So keep in mind, I have suppliers to pay and employee salaries to pay in Cuba and I cannot charge cards. So I do some desperate searching, Googling. I'm on the phone all the time trying to find payment processor that's willing to take this. And the first one that says yes is an Argentinean company called Smile Wallet.

00;20;00;17 - 00;20;32;08
Boaz Sobrado
So I signed up to Smile Wallet in June of 2018. Keep in my mind, between March and June, I can't charge you a single card. So I'm plowing in my savings, I'm borrowing money, I'm doing all this crazy stuff so I can pay off the suppliers. Only I get this deal signed with with Smile Wallet and I start using them and it kind of dodgy like you can kind of tell from the conversations you're having with and they're telling you to keep their money in their accounts and charging you a lot of money.

00;20;32;08 - 00;21;00;25
Boaz Sobrado
You call them these people like baby screaming in the background like something's not right. So as soon as I can, I find another supplier. Less than six months later, and Treasury of the Department of Justice, the DEA, basically shut down Smile Wallet because it turns out that that was a money laundering of over heroin and opium smuggling operation.

00;21;00;25 - 00;21;25;09
Boaz Sobrado
Okay. So, so so so what did I learn from this? Basically, frivolous political rules push me. And by the way, I got away scot free because because I was fine. But there's articles on the Internet about this. Tens of thousands of people lost all their money because they didn't know that they shouldn't leave their money in in you know, with these Argentinean money laundering.

00;21;25;14 - 00;21;50;17
Boaz Sobrado
The guy in the family was called Enrico Ferrari, by the way, which is a crazy country, means that if your money you know, the conclusion I draw from this is like, okay, so we have these rules change. All of a sudden you push innocent people into the hands of these criminals and you're constantly at risk of being the platform and seizing your, you know, losing access to your funds.

00;21;50;17 - 00;22;13;14
Boaz Sobrado
All of a sudden, what happened to me with Revolut, which is a very, very similar story, I basically lost funds, access to the company funds for a year, for six months. They said nothing to me. And it was only when I took them to court that I managed to get access to my funds back. Now, why I was going through this process, I spoke to a bunch of people that were similarly affected.

00;22;13;21 - 00;22;32;18
Boaz Sobrado
It was articles all over European press. Basically what I think had happened is Revolut, KYC and AML standard super, super LAX. They got in trouble with regulators and they just wrapped them up at some point to like, okay, we're going to go through this backlog of things. We sort of fly on the past and their own customer service.

00;22;32;18 - 00;23;08;19
Boaz Sobrado
People didn't have time to actually go through with them, etc.. So they had this like very blunt force way of dealing with things. But basically a lot of people lost access to money that they needed to pay a deposit for a mortgage, to pay for employees, to pay for rent. You know, so, so these sort of experiences have helped me kind of understand why it is that people value platforms like tether that much because, you know, if you're using tether, you know, you guys know more about this backing than I do, you know, tether.

00;23;08;20 - 00;23;11;26
Cas Piancey
No one knows anything about Tether's backing, but please go on.

00;23;12;11 - 00;23;32;16
Boaz Sobrado
Okay. So September tether might disappear next month, right? And then, you know, there's going to be billions of dollars that are lost and it's going to be terrible. But what tether won't do is tether won't see please your friends capriciously for no good reason. And then you have to get a lawyer and etc., etc.. Right. Tether doesn't do any of that.

00;23;32;17 - 00;23;37;10
Cas Piancey
Well, they they do freeze they do freeze tethers regularly.

00;23;37;10 - 00;23;39;26
Bennett Tomlin
They freeze more than Circle and Paxos combined.

00;23;39;27 - 00;23;52;21
Boaz Sobrado
They, they do freeze them. But as a percentage of like users is such a small amount it's just it literally just like the the, you know, how many is it like 20 something hundred something addresses.

00;23;53;01 - 00;24;02;13
Bennett Tomlin
And I mean well you and there's another dozen or so on Omni another bunch on Tron, a separate set like you have to go on all the blockchains.

00;24;02;14 - 00;24;05;28
Cas Piancey
You hope there would be some on all of them but

00;24;06;06 - 00;24;15;22
Boaz Sobrado
Right. But like, as, as a percentage of accounts to get me platforms and platforms like in a trial or a pay power whenever, that's very, very so.

00;24;15;22 - 00;24;45;03
Cas Piancey
But on that, on that same note, so on that same note, I wonder how many people are getting deplatformed like in European banking or American banking as a percentage of the total population. Like I would suspect it is also insanely low, especially when people talk about a KYC, AML processes and how they are expensive and monolithic, but and yet we look at how many big operations get flagged and it's few and far between.

00;24;45;11 - 00;25;09;18
Boaz Sobrado
I think I think I think the issue is that it matters who you are. So if you're if you're like the the Mexican cartel that is doing business with HSBC or here, you know, you're a big company with, you know, a lot of money in the bank account and influence and lawyers, then you're probably going to be fine if you're a small business.

00;25;09;18 - 00;25;54;22
Boaz Sobrado
So in there or a solo entrepreneur or something, it's just the banks and the financial institutions. Cost benefit analysis of, okay, we're going to sit down and actually figure out what's going on versus when you know fuck with his customers cost his business is kind of the calculations kind of different right so so effectively what you end up with is a system that doesn't stop the the big wide scale money laundering and those guys get away with impunity, but it imposes substantial costs on on, you know, small businesses and individuals, particularly if you happen to be unfortunate enough to not be born to one of the countries of what is known as the First

00;25;54;22 - 00;26;17;06
Boaz Sobrado
World. Right. Because if you're you know, I was born in Hungary. I was I grew up in Costa Rica. I have to go through all sorts of KYC nonsense. So, for instance, let me give you an example. Guess like when I lived in Costa Rica and I how did it because we get the past very often you sign up to a service and be like, okay, like give me your like street name and address.

00;26;17;17 - 00;26;43;14
Boaz Sobrado
Now, here's the thing, guys. There's no street names in Costa Rica like we don't exist, you know? And then and then you're like, they're in this sort of situation. We're like, okay, like whoever thought about this KYC process, they didn't think about this. What do I do? You get flagged, there's all sorts of things, etc.. So listen, I don't have like clear numbers as to how many people or inconvenience might these KYC processes anecdotally I think is quite a lot of people.

00;26;43;14 - 00;27;04;13
Boaz Sobrado
And when they impact someone, it can be substantial because it can be the miss. Of course, mortgage payment, it can mean a missed salary, etc.. But I do know that the U.N. put out these numbers about, okay, what percentage of illicit funds do we actually manage to write? And it's Lester Rosen and I and I know that people are spending hundreds of billions of dollars.

00;27;04;23 - 00;27;18;21
Bennett Tomlin
And we talked about this a little bit when Josh Cincinnati was on and our, you know, one of my issues that well, at the very least, most of the transaction monitoring is not achieving what it's purported to.

00;27;18;21 - 00;27;42;06
Cas Piancey
Right. I but I do I do want to say, though I like that. Okay. So here's here's my next sorry. This is my next question for you, Boaz. Is so your suggestion is that for a lot of people where perhaps this KYC, AML process is burdensome, if not impossible, to complete this suggestion that they use tether mean that tether doesn't do that?

00;27;42;06 - 00;28;03;06
Cas Piancey
Or are you suggesting instead, which I believe is what you're suggesting, that these people are using tether that they trade for. They're not going out to tether and minting new tethers themselves. They're not they're not going and redeeming tethers with tether. They are simply holding tethers and trading them for other goods at some point in time.

00;28;03;16 - 00;28;25;22
Boaz Sobrado
Exactly. Exactly. So so you think it'd be use case think that you're you're someone in Cuba who wants to move money to the U.S. You want to pay you. Wouldn't you rather be well off? You've done well in business. You have a grandmother that lives in Miami. You want to send her some money for a birthday, 800 bucks or something, right?

00;28;25;22 - 00;29;01;03
Boaz Sobrado
Or you have an uncle or cousin, some family member. Right. So you could like, you know, trying to to open like a fake PayPal account and somehow grow and send money to their bank account or PayPal account where you can use Zelle or they know a lot of people do that kind of stuff. Now, the chances of you getting caught on like this whole KYC thing are, I mean, you might get through, but there is I think the substantial chance is that, you know, they'll ask you to prove your identity and then you lose that access to those funds because you cannot prove that you're not even resident because you are a Cuban resident and

00;29;01;03 - 00;29;23;14
Boaz Sobrado
they don't want to serve you. Right. And the other alternative is that you buy tether off someone on an exchange or something. In some telegram group, you buy a hundred bucks worth of tether and you simply send it over to someone's, you know, Coinbase account, whatever they can sell it locally in the U.S. and then they have the $100.

00;29;23;22 - 00;29;47;22
Boaz Sobrado
So you as a tether user, you're not actually holding tether for that long. So even if you don't believe in the backing of tether, you have your own, you know, skepticism around you wouldn't necessarily keep your money in it for very long for, you know, purposes of a transaction. It takes 10 minutes. Just so you know, most of these people are using Tron, which is why Tether on tries is is.

00;29;47;24 - 00;29;48;19
Cas Piancey
Oh, you're killing

00;29;48;19 - 00;29;53;29
Cas Piancey
Me, Boaz. Fucken killing me, man. Damn it.

00;29;53;29 - 00;30;13;09
Boaz Sobrado
So. So that's the thing. I mean, like, if you're not holding for very long, you don't care about the backing of it that much beyond redeeming it. You're not, you know, you're not getting it right, just transferring the money very quickly. And, you know, you pass on the risk to someone else that is happy to take tether 1 to 1 to the dollar.

00;30;13;09 - 00;30;15;09
Bennett Tomlin
So I think that like.

00;30;15;15 - 00;30;19;06
Cas Piancey
Yeah, that's how I mean but that's, that's how schemes work right.

00;30;19;07 - 00;30;55;18
Bennett Tomlin
Well yeah I think that there is probably a use case in tether and other stablecoins for remittances, especially in place where more regulated payment processors are not able to operate or choose not to operate because of the difficulties. But part of my struggle is like if Stablecoins get adopted in that way, I imagine they would keep working for a lot of the small users, but for businesses and larger users that started using it, why wouldn't government start putting pressure on the stablecoin issuers to start going after once they identify and address is tied to a certain business?

00;30;55;18 - 00;31;02;20
Bennett Tomlin
Why should they not freeze that address? Right? Why shouldn't the Treasury call up circle or center whatever and tell them to do that?

00;31;03;01 - 00;31;22;19
Boaz Sobrado
I agree with you 100%. And I'm going to give you another scenario. What if what if it spreads? And what if it becomes a dominant medium of exchange? Where, you know, almost everyone, the grandmother uses it, and then we discover that the backing is not what we thought it was, is a bank run. A lot of very, very innocent people are going to get hurt.

00;31;22;19 - 00;31;45;06
Boaz Sobrado
And I don't necessarily care about crypto. They don't necessarily know what they're getting themselves into. I mean, to a certain extent, you kind of sold out already with the old school, right? A bunch of people who didn't know what they were doing, who heard something about Stablecoin returns, ended up getting very, very hurt. And so I think that's definitely a double edged sword.

00;31;45;24 - 00;32;03;11
Boaz Sobrado
The point I'm trying to make is not about long term sustainability of it or whether it's a good thing or a bad thing. And the point I'm trying to make is that as a consumer, there are situations in which the rational choice for you is to use the stablecoin over any other means of payment.

00;32;03;19 - 00;32;26;24
Cas Piancey
Yeah, I totally understand the idea of like I've, I think I've said this before on the, on the, I think when we did an episode about Bitcoin, for me I understand deeply just via the people that I know in certain countries, even though I haven't had to resort to that. Thankfully, I do understand and I could perceive a world where I would need to.

00;32;27;05 - 00;32;47;02
Cas Piancey
The only way I could possibly get them money in any way, shape or form. It could be cryptocurrency. And obviously if you're going to be trying to do a remittance, you don't want it to be highly volatile because by the time it gets over there, it could lose 20 or 40 or 50% or more or, you know, whatever.

00;32;47;21 - 00;33;17;03
Cas Piancey
So I think I do understand that. I guess I just my issues are that the inherent risks that are being pushed us pushed aside to accomplish that, that feat seems to be kind of, I don't know, like it's almost insane to me to think about where blockchain and cryptocurrency started and how it was about decentralization, privacy, censorship, resistance.

00;33;17;09 - 00;33;44;15
Cas Piancey
And then everyone's like, Hey, fuck it, let's use tether on Tron. It's like, Guys, holy shit, not decentralized. The worst blockchain explorer I've ever tried to utilize, like Justin Sun, is the, I don't know, like the bane of my existence here. And Tether, like you're combining all the worst parts of, of the space and the industry and being like, this is what crypto stands for, not you.

00;33;44;15 - 00;34;03;09
Cas Piancey
I'm not suggesting you're saying this, but I am saying that like knowing that this is what people are utilizing in places where they need cryptocurrency, air quotes, they are for everyone not watching. So yeah, I don't know. It's like I, I struggle to kind of like, match those two perspectives, you know what I mean?

00;34;04;16 - 00;34;30;27
Boaz Sobrado
Okay. So I have I have two answers to that. So first of all, if you're a consumer that wants to send over a couple hundred bucks in one country to the other and you use tether for you functionally, there is no difference between typical apps while you're making that transaction or you getting stuck in some KYC, AML, black hole at PayPal or any other company, because in both cases you've kind of lost your man.

00;34;31;05 - 00;35;12;00
Boaz Sobrado
Okay. So that's that's one point. You both you take a risk in both cases. To the other point as to how have we gone from fully decentralized Bitcoin is running the node on their own. So to people, you know, basically transacting with a trusted coin called tether and Justin Sun's, you know, quote unquote decentralized network. Now, I have a theory about this, which is that in the last couple of years, cryptocurrencies have discovered that, okay, so I don't know if you guys remember, but like at the very beginning of blockchain and crypto and Bitcoin, people were like, Oh, the government is going to shut this down immediately.

00;35;12;06 - 00;35;35;02
Boaz Sobrado
You know, the government won't stand for this. I think in the last couple of years people have realized actually the government doesn't really know what's going on. They're too slow to react and not be doing anything about it. So we don't actually need to make that censorship resistant. We can like as long as it's like a lawyer regulated to resistance, we might be able to get away with some crazy centralizing things.

00;35;35;07 - 00;35;56;29
Boaz Sobrado
Because just remember, like, you know, decentralizing these platforms comes at a terrible expense. Yeah, right. You know, with, you know, bitcoin pays miners a lot of money so that it can stay relatively decentralized and the nodes, you know, the whole, you know, how many megabytes is in the block. You know, there's a lot of design constraints to making the system actually decentralized.

00;35;56;29 - 00;36;02;12
Boaz Sobrado
Right. But if you don't need it, then you're going to drift towards more and more centralized. But I.

00;36;02;24 - 00;36;23;29
Cas Piancey
I wonder, I guess here. So sorry to interrupt, but I just I wonder if you're not fully decentralized, right? If you're not, like, actually legitimately decentralized, such as bitcoin, which like, who knows who Satoshi was, but if he or she or they revealed themselves tomorrow, I don't think anyone could do anything to prosecute them. What's done is done.

00;36;24;20 - 00;36;54;14
Cas Piancey
Good on you, man. Like, Oh, well, there you are. Obviously, it'd be a prime assassination target, so I don't know. That would be a bad move if he decides to do it. Other than our boy Craig Wright. Who obviously is Satoshi. Right, boys. Anyway, um, other than those platforms, sarcasm for anyone who is wondering, but other than, other than that, if I think about like Tron I'm like it feels like I don't know how many nodes there are, but I feel like it would be easy to shut that shit down.

00;36;54;23 - 00;37;17;21
Cas Piancey
I feel like it would not take that much work. And also when it comes to this, people talk about tether and how it's on all these blockchains and therefore, like, maybe it's impossible to stop. I'm like, Dude, it's just a company. It's not impossible to stop. It takes, like arresting three people and it's over. So I like I guess I just wonder if you're not fully decentralized, are you regulatory resistant?

00;37;17;22 - 00;37;20;02
Cas Piancey
Are you lawyer resistant? I don't think so.

00;37;20;05 - 00;37;45;13
Boaz Sobrado
I, I tend to agree with you. I think that what you achieve is you you buy yourself some time. But eventually and I think the regulators and the lawyers are going to come for you. And listen, it's no coincidence that just since Sun has acquired this diplomat status. Right. You know, he's probably he's probably feeling the heat. Yeah.

00;37;46;10 - 00;38;30;27
Boaz Sobrado
Listen, I think I think I think what's probably going to happen in cryptocurrency is that there has been this sort of push to centralize further. I've spoken to two exchange operators who who won't be named that run their own nodes for all of their their and the blockchains that they support. And they told me and I'm not sure if this is true, but I heard that, for instance, with Solana, unless you're physically co-located with all the other Solana nodes, there's basically no way for you to catch up to the tip because their block speed is basically so close to the speed of light that it's just not possible for like the node that's not located

00;38;31;05 - 00;38;59;27
Boaz Sobrado
to actually operate in a satisfactory manner. Right. And so there's this drive towards efficiency and getting rid of these decentralization constraints, which inevitably leads to centralization. Right? So, so, so here's the thing, then. At some point, you know, the, you know, the regulators are going to come knocking. There's going to be the whole some crypto, whatever that event was when they when they got rid of the.

00;39;00;09 - 00;39;00;25
Bennett Tomlin
Black Friday.

00;39;00;25 - 00;39;30;26
Boaz Sobrado
Poker site and all that, there's going to be a Black Friday and it's going to be some event where we're going to see who's left standing right. And and I think, you know, a lot of the the crypto projects that seem to be super successful because, you know, they're they're really quick, really good like Tron might turn out not to be as decentralized and censorship resistant as they possibly identify themselves to be.

00;39;31;11 - 00;39;49;07
Bennett Tomlin
Yeah. And this is really kind of one of my fears with tether being used by more retail, by more normal people is that it works well if you are liquidating it on the other end of the remittance rate and you aren't holding tether, but the longer tether exists, the more people start to believe it really is basically always worth the dollar.

00;39;49;07 - 00;40;10;27
Bennett Tomlin
The more they start treating it like that and storing wealth and stuff in it, the more dangerous it becomes for those same users. And it's and you kind of see a parallel with that in crypto with the spectrum between decentralization and centralization is you get all these gains by pushing yourself closer and closer to centralization. Well, you're able to do it until it breaks and then everyone's ruined.

00;40;11;05 - 00;40;48;03
Boaz Sobrado
Yeah. So, so on that point, I'm in the I'm going to mention two things. So first of all, I think the fact that retail consumers around the globe feel the need use standard to transact in remittances is effectively a you know, it's it's it's a regulatory failure, you know, the fact that legitimate people cannot use, you know, the existing financial infrastructure to move money around for the different reasons without excessive red tape and capital controls and etc., etc..

00;40;48;24 - 00;41;22;28
Boaz Sobrado
I think that's regulatory failure and you wouldn't see it if we had reasonable KYC, AML regime. That's that's one point. The other point is going to be slightly more controversial here on this this podcast. I think that we are probably past and the peak of the when tether was a substantial systemic risk to the whole crypto currency ecosystem.

00;41;23;14 - 00;41;54;20
Boaz Sobrado
The the market cap of tether relative to other stablecoins has been going down and for while two or three years and it made in two years already it's it's increasingly less much of a less of a systemic risk. Moreover, there is a very, very interesting podcast with. I don't know how to pronounce it Galois Capital, the guy that shorted Alumina, basically when when when that happened.

00;41;55;05 - 00;42;28;13
Boaz Sobrado
And he came up with a thesis, which I've kind of cited entertaining and gave him, I don't know anything that you guys don't you guys know tether better than I do and that basically his thesis was that tether probably didn't always have the money they did you know, when they claim they did. But at this point they did a bunch of wild shit and they're actually probably well-capitalized, if not over capitalized by now, and they should probably stop doing it.

00;42;28;16 - 00;42;29;16
Boaz Sobrado
Those are okay.

00;42;29;16 - 00;42;47;10
Cas Piancey
So I just want to I want to say something that Bennett and I both been saying for years, as long well as Bitfinexed, who has also made sure that this is I want to make sure people don't think that our our only theory on this is that there is $0 backing tether. That is not the theory. That is not their running theory.

00;42;47;13 - 00;43;23;12
Cas Piancey
Yeah, there is it is it is very possible that there is essentially in terms of assets, obviously it isn't dollars, but in terms of assets, a 1 to 1 backing of sorts, how that capitalization happened, how they got that 1 to 1 backing is the biggest problem they face because if it was highly illegal, like, let's say insider trading or bank fraud or wire fraud or who knows, like any number of things that they shouldn't have been doing, then they can never get an audit like the audits that they keep fucking promising to everybody.

00;43;23;12 - 00;43;24;09
Bennett Tomlin


00;43;24;20 - 00;43;48;19
Bennett Tomlin
I also struggle with like saying tether is very well capitalized because they published transparency reports. We know their capital cushion is 160 million and greater than 75 billion in assets, and that's assuming they're valuing all of their assets fairly. I think the statement that tether could redeem all tethers in circulation is not something that most people would agree with and I don't think is true based on what we publicly know about tether.

00;43;48;28 - 00;44;07;07
Bennett Tomlin
I think that plenty of evidence from Tether's own materials to suggest that that is likely not true. And so I think anyone suggesting that tether is over capitalized and has more funds than they're suggesting when they're capital cushion is as small as they disclose better have a compelling reason to suggest that.

00;44;07;07 - 00;44;36;14
Cas Piancey
And this is as they get into things like Keet and other weird ideas that are like, oh, this is what you're pivoting to a video messaging app. Okay, I don't know, man. Like, it sure raises a ton of red flags. One other thing I did want to add onto onto your statement, though, is that besides those two failures you mentioned, for me, the most glaring failure regulatory wise is that these guys who maybe they do have all the assets they claim they have and everything is A-OK over at tether.

00;44;36;22 - 00;44;58;29
Cas Piancey
But as far as anyone knows, they've been counterfeiting all the money that they've ever, ever had. And if that is the case, they were able to do that for years under the under the nose of regulators who did nothing nothing. So like that is the biggest failure in my mind is like, oh, if you want to fucking counterfeit $1,000,000,000, go right ahead and do it.

00;44;58;29 - 00;45;10;25
Cas Piancey
No one's going to stop you, even though I'm not recommending anyone do that. Let me be clear. But yeah, like, for me, it was it was a horrifying example of regulatory failure.

00;45;10;25 - 00;45;42;02
Boaz Sobrado
I think I think we can all agree that there is there is a lot of regulatory failure here. I mean, the whole moving of chaos could have probably been avoided if they you know, if it was nipped in the bud. There's a lot of things that the regulator didn't do and there's a lot of things that they're doing instead, which is kind of going after small fish, you know, and companies like Coinbase and OpenSea and not dealing with the real problem.

00;45;42;02 - 00;45;43;21
Bennett Tomlin
Those too aren't really small fish.

00;45;43;21 - 00;45;45;16
Boaz Sobrado
Then what? I'm not saying what these guys did.

00;45;45;20 - 00;45;49;08
Bennett Tomlin
I mean, both of those are multiple billions. Both of those are like deci-unicorns.

00;45;49;16 - 00;45;51;02
Boaz Sobrado
Coinbase.

00;45;51;02 - 00;45;53;16
Cas Piancey
It was one of these that they've been compared to.

00;45;53;24 - 00;46;09;23
Cas Piancey
Compared to tether. Sure. Compared to TETHER'S $80 billion. It's fucking nothing. And I agree with him on that. It doesn't mean anything. 100, $100,000 or a million or 10 million like that is a drop in the bucket in cryptocurrency for sure.

00;46;09;23 - 00;46;34;11
Boaz Sobrado
Yeah, I think I think one product manager at Coinbase in insider trading is probably on the balance of things, you know, not as impactful as the actual huge issues of the doing, etc., etc.. And this and I mean, they should probably go after this guy. What he did was wrong. I'm not saying they should and I'm saying I'm not entirely sure they got the priorities right.

00;46;34;21 - 00;46;39;03
Boaz Sobrado
So, you know, for for what they decided to warn against and step up against.

00;46;39;03 - 00;46;56;08
Bennett Tomlin
Well, yeah. But even that insider trading case seems to be part of a larger push towards the SEC going after some of the unregistered securities. Right. Bloomberg reported after the indictment came out that the SEC was looking into Coinbase and they're listing process to see if they listed unregistered securities. So I think it's part of a broader regulatory push.

00;46;56;08 - 00;47;15;02
Bennett Tomlin
It's the part we can see right now, but it's also clearly part of them going after some of these actors for that bad behavior. And like we're talking about Luna and Terra Luna and Terra was clearly a failure on multiple levels, but it's one of those ones that's kind of tricky to figure out. What's the point of articulation that the government should have pursued, right?

00;47;15;02 - 00;47;35;01
Bennett Tomlin
Like should it have been that Coinbase FTX any other exchange that has any nexus to the U.S. should have much higher standards on what they're listing because that's going to have consequences for a whole bunch of other assets across the ecosystem as well. Is it that like they should have tried to aggressively pursue these international persons for selling unregistered securities?

00;47;35;08 - 00;48;04;05
Bennett Tomlin
Because that's a challenging case for the SEC to try to bring, like there was at many points in something like Luna Internet before. Yeah, no, it certainly can be done. But like if you look at like Terra it was small, it was relatively small for most of its existence until like the last year of its existence when they really started leaning into anchoring the higher lending rates and putting together an international unregistered securities case might take longer than Luna like existed during that blowup.

00;48;04;05 - 00;48;17;12
Bennett Tomlin
Right. And so it's kind of challenging like it's understandable why Coinbase and OpenSea are targets because they're in the U.S. and they are doing things that are clearly wrong. And there is that clear point of articulation for U.S. to go after.

00;48;17;19 - 00;48;44;08
Boaz Sobrado
And I agree with you 100%. I think you pointed out a few very, very important things. One of them is that regulators can go after OpenSea and Coinbase because the US based companies, however, that kind of, you know, it is an malincentive towards, you know, maybe not being a US based company and maybe doing the whole Binance's strategy of being based everywhere and nowhere.

00;48;44;08 - 00;49;12;24
Boaz Sobrado
Right. So that's one part of it that's probably not what the regulator wants. Secondly, I think what you pointed out is that, yeah, the regulators don't have a clear and easy solution to these problems. Right. And and I think this sort of demonstrates is that, you know, the laws and the regulatory framework and the thinking that inspired the regulators in the 1930s might be outdated.

00;49;12;24 - 00;49;44;12
Boaz Sobrado
We live in a world that's increasingly more globalized, where money can move from one corner of the world to another within minutes. And that's going to have to require a new regulatory thinking, a new that may look very different from the one we have currently. Now, I don't have the answers. I don't have the solutions, but I believe the you know, a proactive regulator could come up with some sort of approach where, you know, they they can.

00;49;44;12 - 00;50;10;10
Boaz Sobrado
Why use about these sort of things or, you know, perform some sort of advisory or some other function where, well, hopefully less people can get hurt by by this these this sort of activity. And it's not easy, I'll grant that. You know, the regulators aren't we in the easy spot? Because all of a sudden this they don't have the tools and framework to deal with this.

00;50;10;10 - 00;50;21;03
Boaz Sobrado
Right. And they're also humans. Right. Nevertheless, I do think it has been overall in many ways, not not not an efficient.

00;50;21;03 - 00;50;42;03
Bennett Tomlin
Way or absolutely agreed. It's just like I struggle a lot with things like Terra because like in that case, you had a lot of people who could have conceivably been like tapped by regulators as subject matter experts as or as domain experts who were like until the end, still promoting and treating terror and Luna as if it was going to be a sustainable thing that would continue to exist.

00;50;42;12 - 00;50;51;01
Bennett Tomlin
And so, like, it's not clear to me that even if they were acting in some kind of advisory capacity, capacity, that they would have recognized the problems and been able to act on it.

00;50;51;01 - 00;51;11;29
Boaz Sobrado
I think it's quite interesting because a lot of people within the cryptocurrency industry who are generally cryptocurrency enthusiasts did speak out and did say, Hey guys, this is not good, this isn't going to work, etc.. But then again, you're right, a lot of people who are, you know, VCs in this space were were very.

00;51;12;09 - 00;51;13;29
Bennett Tomlin
And a whole bunch of Bitcoin Maxis.

00;51;14;08 - 00;51;15;06
Cas Piancey
Lawyers too. Yeah.

00;51;15;11 - 00;51;35;09
Bennett Tomlin
And like a whole bunch of Bitcoin Maxis said Ethereum was never going to work or that the merge was never going to happen, or that like and so like the other issue there is that because cryptocurrency is so tribal that the experts, the more deeply they are affiliated with a certain tribe, the more likely they are to describe anything outside that tribe as clearly going to fail.

00;51;35;15 - 00;51;39;16
Bennett Tomlin
And when most of the things in the space do fail, a lot of them look right. A lot of the time.

00;51;39;22 - 00;52;02;26
Boaz Sobrado
It's definitely true. I mean, these are very, very complex situations. Absolutely. And it's it's it's hard to know within the cryptocurrency space and you know what? You know, how how do you make sense of this whole thing? Right. Because it is a complex topic. It is a fascinating topic, you guys have been following it for a couple of years.

00;52;02;26 - 00;52;27;18
Boaz Sobrado
I have as well. It's fascinating. It's extremely entertaining to read and pursue, etc., but there's a lot of complexity and it's just not possible to stay on top of things. And if you're an individual that doesn't think about this every day like you and I do, and, you know, you might end up putting your mind to something where where you will lose all your money, right?

00;52;27;18 - 00;52;36;29
Boaz Sobrado
So how how do we get to the point where people understand, you know, you could lose all your money back, right? You know, because I think most people can realize that.

00;52;37;14 - 00;52;51;08
Bennett Tomlin
Yeah, at least, at least, at least some of them didn't. It was there was a lot of people who did it, including three arrows capital just they didn't realize that it could do that.

00;52;51;08 - 00;53;39;19
Boaz Sobrado
So here's the other point that I'm very glad you brought that up, because that's actually, in my opinion, kind of also an example of regulatory failure. So the reason why doing that got so big is because a bunch of these deposit taking schemes like Celsius and Voyager, some of which were claiming to be FDIC insured and were lending out their customers assets unsecured to funds like 3 Arrows Capital who then did these mad high leverage trades and that's that's what caused Luna to get as you know that's partly what caused them to get as big as it did.

00;53;39;29 - 00;54;12;02
Boaz Sobrado
Now we can sit here and discuss about, you know, what can the regulators do about it. It's international unregistered security, etc., etc.. Yeah, that's kind of complicated. But on the other hand, these deposit taking institutions which let's face it, they're not really crypto shadow banks you're not decentralized, are you giving your money into some random guy is there's no smart contract involved you know whatever is basically you all giving your money to some guy that processes to give you more.

00;54;12;07 - 00;54;34;12
Cas Piancey
This is a common refrain from from many skeptics and and critics is that it sure feels like we're speedrunning the past thousand years of finance right now. It's like, oh, man, yeah. You're not your keys. Not coins. Oh, man. But liquidity kind of sucks. Why don't we have a centralized exchange where we can all meet up, and that way we don't have to find each other peer to peer anymore.

00;54;34;17 - 00;54;52;18
Cas Piancey
Oh, wow. Okay, that seems pretty cool. Well, yeah. What if I want to make a trade, but I don't have the money to make the trade. Well, what we could do is loan you some money, but what you have to do is deposit some money and make sure that we have some sort of collateral to collect. In case you don't pay back, you're like, Wow, this is exactly the system that we already have.

00;54;52;26 - 00;54;55;25
Cas Piancey
What are we doing? What are we doing? Really?

00;54;55;25 - 00;55;15;09
Bennett Tomlin
No, I think you're absolutely right, Boaz, as that going after some of those shadow banks, these institutions taking these deposits, these lending things are one of the best targets for regulators and is one of the best places to do harm reduction for retail, because they look so much like familiar structures but have a vastly different risk structure.

00;55;15;14 - 00;55;33;23
Cas Piancey
Here's my last question for both of you, is that we all can agree like, oh, wow, well, Three AC should have stopped doing that and someone should have done something about that in Celsius and Voyager and and all of these institutions that were lending them money and gosh, they shouldn't have been allowed to do that. Okay, cool. I'm glad we can all agree on that.

00;55;33;23 - 00;55;58;24
Cas Piancey
But then what what what do we do about it? And now, especially considering that, you know, Kyle Daviez and Sue Zhu fucking ran with their tails behind their asses to Dubai where they can't be extradited. So, so like what is the solution here? Especially when scammers are actually thinking far enough ahead to be like, let's start building a yacht and move to the United Arab Emirates?

00;55;59;05 - 00;56;02;02
Cas Piancey
I like if you're not stopping them before then, is it too late?

00;56;02;09 - 00;56;34;19
Boaz Sobrado
I think the the cryptocurrency industry needs to sort this since the doing a collapse basically I think the cryptocurrency community and industry needs to look themselves in the eye and, you know, a serious think about, you know, what happened to the principles that created this entire industry, what happened to the principle of self-custody? What happened to the principle of not your keys, not your coins?

00;56;34;19 - 00;57;09;12
Boaz Sobrado
And, you know, do not trust, verify what happened to, you know, censorship, resistance and the need decentralize these protocols and applications. Because what I see is that in many of the cases where people are getting hurt, you know, a lot of these core ideals of the whole cryptocurrency movement have been violated. And you had you had influencers. And I'm not going to name any names just because I don't remember them, but I know that they were doing this.

00;57;09;24 - 00;57;35;00
Boaz Sobrado
You had influencers who on one hand were professing, you know, self-custody and, you know, not your keys, not your coins, but on the other hand, were taking sponsorship deals and all me all sorts of announcements about why you should deposit coins to to whatever centralized black box you generate the instrument. I think people should look at themselves in and think, okay, like why are we actually here?

00;57;35;07 - 00;58;17;22
Boaz Sobrado
Right? What is it that we actually believe in? And because and I'm I think that at times we we may have lost sight of that. You know, and I'm particularly concerned with, you know, with with the more time elapses and and the further and further away that we get from, you know, the original founding principles of Bitcoin in terms of in time, you know, the more coinage people are willing to cut and the more, you know, kind of aimless certain parts of the entire movement become.

00;58;18;02 - 00;58;48;02
Boaz Sobrado
Right. So so in the U.S. right now or actually even I was I was at the Hungarian Grand Prix last weekend and I saw these ads by Crypto.com. You know what, Crypto.com and FTX and all these companies are they really, you know, cryptocurrency sort of, you know, movement and ethos, etc., know self-custody and decentralization companies or are they made out of something else?

00;58;49;12 - 00;58;49;21
Boaz Sobrado
Yeah.

00;58;50;20 - 00;59;19;15
Cas Piancey
Yeah. I mean, I think that's an important point and probably a fair point to to end on. So thank you both for joining us. It was wonderful to finally get you on. And and yeah, if anyone is interested we're starting Two ARrows Capital we will be moving our headquarters to Pyongyang, North Korea. And we are accepting all forms of cryptocurrency.

00;59;19;15 - 00;59;24;19
Cas Piancey
So if you want to jump in, hit that like hit that subscribe button and send us all your tethers.

00;59;26;09 - 00;59;34;13
Bennett Tomlin
Or okay, I'm okay if you don't, Cas one of these times you're going to get us in trouble with that outro.

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