Crypto vs. Banks: Who Controls America’s Money? | Summer Mersinger

David and Ryan:
[0:00] You can get a 4% or more reward for having stable coins versus your bank deposits,

Summer:
[0:06] which are, you know, less than 0.7% yield. It's a competitive thing now and they don't want to compete. My feeling is, you know, let's have an even playing field here. If you want to give that APR in your savings accounts, great, do it. Then we can compete on, you know, a level playing field. But this idea that they're going to kind of hamstring us because they don't want to compete, I think, is really unfortunate.

David and Ryan:
[0:36] Bankless Nation, we are here with Summer Mercinger, the CEO of the Blockchain Association, previous CFTC commissioner. And we're going to talk about banks today on the podcast. Summer, welcome to Bankless.

Summer:
[0:47] Thanks for having me on today.

David and Ryan:
[0:49] Summer, I want to start by just kind of setting the table here about this conversation that we're going to have. because there is a battle brewing. There's a war afoot. Maybe to really kind of set the context for why that is happening. Can you just talk about the win, the victory that crypto took from the banks with the Genius Act? What victory did we grab that the banks are now upset about?

Summer:
[1:11] Well, it's interesting because this was a negotiation. So at the end of the day, you know, we came across, came away with Genius, which is great for the market. It brings clarity. You've got customer protections there. You've got a clear regulatory framework on federal side, state side. So a lot of great wins. But the issues the bank has, the banks are having right now with the ability to give rewards for stable coins. Let's say if you're buying them on Coinbase or some other exchange and they're able to give you rewards, the banks think that's a loophole. But what's interesting is the stable coin issuers were not allowed to give yields. And that was something that was compromised. So, you know, this kind of suddenly, this is the worst thing in the world. I mean, this was all compromised. The banks were in the room. Everyone agreed to this. And now we're going to reopen it and relitigate it. So it really is, there's a lot of wins, but there were a lot of compromises too. And in my mind, this is one of the compromises that were made. And there's no reason we should be relitigating it at this point.

David and Ryan:
[2:17] What did it take for the banks to realize that they gave away more than they wanted to give away? Did they just not realize the loophole? On our end, the word that Ryan and I have been using is they have been caught flat-footed about this. Maybe you could talk about why they are now reconsidering this.

Summer:
[2:38] Yeah, I say flat-footed, too, because I don't think that they were prepared to go up against crypto, to be honest. I think they were a little intimidated because we have, you know, the American voice behind us. We have voters behind us. And so I think they realized afterwards, you know, there's competition now. They have to compete. And this idea that, you know, you can get a 4% or more reward for having stable coins versus your bank deposits, which are, you know, less than 0.7% yield, it's a competitive thing now and they don't want to compete. And, you know, my feeling is, you know, let's have an even playing field here. If you want to give that APR in your savings accounts, great, do it. Then we can compete on, you know, a level playing field. But this idea that they're going to kind of hamstring us because they don't want to compete, I think, is really unfortunate.

David and Ryan:
[3:40] I guess that's a really good point, right? They could also just offer on, you know, they have stable coins. they could offer to their customers that 4% reward as well. They could just compete with crypto.

Summer:
[3:53] Exactly. And you think about it, they take your deposits and they lend that out. So they use your capital to make other money and you're getting less than 1% APR. The stablecoin issuers have to hold that in reserve. So they can't use your money in a way that the banks do with lending. And yet they're able to give a 4%, you know, and this is the exchanges giving a 4% reward. So you would think the banks would be able to compete a little bit better in this space, given that they are actually taking our capital and using it to make more money.

David and Ryan:
[4:29] Is this just kind of an interest trying to protect its interests? Is this basically the bank saying, hey, we have a lot of checking account deposits. We're making that nice rent-seeking 4%. We want to keep that. We screwed up in the genius bill. We thought we blocked issuers from doing interest, but I guess we didn't read the fine print. And now crypto is looping around that. And we're worried because we're going to lose our 4% if crypto is successful and more checking accounts kind of flee to stable coins with 4% yield. They're just trying to collect their rent.

Summer:
[5:09] One, there's been a lot of discussion about this, you know, kind of outflow of deposits from banks because of stablecoins, but there's no proof of that. In fact, stablecoin, the reserves either have to be held in treasuries or at a bank. So the stablecoin reserves are going to be held, in deposit in a U.S. bank. So there's no proof that somehow this will mean that deposits are going to flee the banks. There are still reasons that people are going to have their savings accounts, their checking accounts. This is just a new opportunity to, you know, kind of reimagine how we move money, how we pay for things. And the banks just don't want that competition right now.

David and Ryan:
[5:52] Is this how bills work in D.C.? I think I was sort of naive to this process, right? I took my civics, of course, and Congress is the body that creates laws. And I thought they did this on behalf of the people, basically. So the people in my jurisdiction, I'm representing a specific area of the U.S. And the people want some sort of law passed. And so I work with my colleagues and we draft legislation. I pass this law. It feels like when you get into how bills are actually made, they don't teach this in civics, but it seems like it's a lot of interest groups that basically sit with lawmakers and their staff and they negotiate and hash things out. You described the banking lobby, basically, the banking interests were right there with the crypto interests negotiating some of these terms. Can you take us into the inside here for people who aren't in these rooms and don't understand how every bill actually gets passed? How did the Genius Bill pass? Is it just like lobbyists that kind of work together and represent different interests and tell Congress what to write? Do they get a say? Do the people

Summer:
[7:05] Get a say? So we're getting into how the sausage is made here, and it's not always pretty.

Summer:
[7:11] Yeah, I think in the perfect civics world, you know, Congress would be able to sit down, write these elaborate laws. Everybody would understand how they work, and they could get that through and to the president's desk. Unfortunately, you know, you've got a lot of members who are covering a lot of different policy, a lot of different policy issues. their staff. You know, there might be experts in some areas, but not every area. And so a lot of times they need some help from industry. They need to go to industry and say, if this is what we want to accomplish, how do we write this? How do we make sure we amend the law properly so we don't do more harm? And that's how you end up with a lot of the interest groups in the room working on these bills. A lot of it is bringing that kind of technical expertise. You know, at the end of the day that it's it's a form of speech so you know certainly you know you don't want to somehow block them from being in the room and they I would say you know for us crypto we bring a lot of value because we have so many experts in the field who can look at this language and say yes it does what we want it to do or it doesn't.

Summer:
[8:21] Usually there's going to be a negotiation between, you know, the different interest groups. And I always say if everybody walks away a little unhappy, then they probably got the compromise correct. And, but usually you get through that compromise, you get the industry to back the bill, which the bankers didn't, they basically said it was fine. You get industry to back the bill. They kind of help get it across the finish line through Congress as well. So what's unusual about this is you usually do not pass a law, get it signed by the president, and before rulemaking even starts, you want to open it back up and change major parts of the bills. Sometimes there's technical corrections that happen after a bill's passed, but that's literally technical corrections. This idea of changing entire parts of the bill, negotiated language, that's unprecedented. and it's a dangerous kind of path to go down.

David and Ryan:
[9:22] And just so that's not clear, that's in fact what the banks are trying to do at this point in time. So Genius Bill has already passed ahead a clear bipartisan support. And now what they're trying to do is what they're trying to prevent exchanges from passing those rewards, basically that kind of interest, that Fed funds rate, you know, three to 4% yield back to customers. So they're actually going to Congress and they're lobbying and they're pushing lawmakers and they're having private meetings to try to get an amendment passed to the Genius Act? Is that the current state of play?

Summer:
[9:55] That's the current state of play. They also are not fans of the smaller issuers that can be state regulated and, you know, still issue stable coins across state lines. They don't, feel like they say that's a some sort of loophole. That's exactly how the federal banking system is set up. It is a, there are state charters or federal charters, but you can operate across state lines. So it's really the bank saying, well, we don't want you to compete with us. And we're worried we're going to lose. And so we're going to try to stop any, you know, put a stop to any place where stablecoins might compete with the products that bank offers.

David and Ryan:
[10:39] So Summer, it seems like it would be difficult, a difficult barrel for the banks. Like the ink is already dry, right? It's hard to get Congress to go do anything. So when we talk about the probability that they could have the, I guess, political power, especially when it's not in the public's interest, it seems like. There's special interests that debate these laws all of the time, of course. Sometimes they're aligned with what actually is best for citizens, and sometimes they're just aligned with whatever the rent-seeking special interest. In this case, it feels pretty clear, and I think you can make the case to the American people, that crypto is on the side of citizens who just should be able to get their 4% yield on their cash reserves, right? Anyway, what can the banks actually do about this? Is there any threat? I mean, how could they get Congress to meet and pass an amendment on this thing? Would they pass it through PORC? What are the types of conversations that are happening behind the scenes right now? And do you actually think this is a credible threat?

Summer:
[11:39] So they're trying to, bring in this amendment through what will be market structure for crypto. This idea that we need a federal regulator over all of crypto markets, not just stable coins. And so they are saying we need to reopen Genius and make these changes. And we can do that through the market structure bill. Or they also would like to see this done on its own.

David and Ryan:
[12:04] That's the clarity bill that House passed. It's now in the Senate. That's market structure. So they're trying to get it into market structure.

Summer:
[12:12] Exactly. I see. And what's concerning is the bank lobbying has been around for a long time. They have very deep ties to a lot of Congress. If you think about the crypto world, we've really just kind of come to the forefront of the campaign donations and being politically active that way. The banks have been doing this forever. And so they have very deep ties to a lot of members. And there are a number of members of Congress and senators who just don't understand crypto. And so there is a real threat that they could side with the banks because of their relationships with the banks, because they have worked with them for so long. And so it's on us, Blockchain Association and others, to get to those members and educate them on this and make sure they understand that this is the banks trying to protect themselves. And it's not... You know, closing a loophole, as they call it.

David and Ryan:
[13:13] I definitely want to expand on this section, particularly the way that I am

David and Ryan:
[13:16] imagining this in my head somewhere. We have two armies here and they're meeting on the battlefield and the army of the bank lobby versus the army of the crypto lobby. Earlier, you said that banks are actually intimidated by crypto because we had actually we've just actually gone and fought some pretty tough wars. And we're a brand new industry, but we've been we've had to chew glass in the regulatory apparatus for a number of years. So yes, we're young, but B, we have a lot of money. And C, we've been fighting some very hard fights. And also, you know, I think crypto lawyers are pretty chads. Like they're kind of like the coolest people in this industry. And so that's what we got going for us on our side of the battle. On the banks, you have this incumbent industry that's massive, large, but they haven't had competition. They haven't had competition in the market. They haven't had competition lobbying. And so, yes, like old, entrenched, incumbent, you know, empire, but, you know, older, senile, a little bit more decrepit on the end of its lifespan, probably, I think. That's kind of how I stack up these two forces. Maybe you could add a little bit more color. Like, how do you think we compare? How do you think we're going to do? What are our odds here?

Summer:
[14:30] Yeah, I mean, crypto is kind of the young, scrappy fighter in this. You know, we are using new tools where, you know, I think the banks are still kind of stuck in the 80s and 90s way of lobbying, bringing in members from their communities, going with some talking points, reading the talking points and thinking that's good enough. We are educating members, we're educating staff, we're up on Capitol Hill all the time. We have grassroots organizations that are, you know, mobilizing voters who really do believe in this technology and want to see it flourish. So we're using that grassroots support. We're coming at it from a lot of different angles. And like I said, the banks kind of have a playbook that they've been going by for a long time. And it, you know, it's not working the way it used to for them. And I think they've realized that.

Summer:
[15:24] And they are a little intimidated by what crypto has been able to do in a short amount of time.

David and Ryan:
[15:29] What about on the actual political front? So crypto has allies in Congress, the banks have allies in Congress. How do those generals of these two armies compare? I know we probably have Elizabeth Warren on the side of the banks. We have people like Richie Torres on the side of crypto. How does this stack up?

Summer:
[15:48] Yeah. You know, it's interesting. Elizabeth Warren hates banks too. You know what I mean? Like she's kind of carrying their water, right? Yeah, she's carrying their water, but she says she hates them. It's very confusing.

Summer:
[16:01] But yeah, I mean, it is, you kind of start to see a bit of a generation gap where some of the new members that have come in, certainly on the Senate side, we're really seeing this with the new senators coming in, some of the new Democrats, But Gallego, also Brooks, they are very pro-crypto and they are having a hard time kind of staying in line with the Elizabeth Warren crowd because they realize that their voters want to see this technology thrive. So it is there's this interesting kind of divide in generations. But you also see, you know, people like French Hill and G.T. Thompson being very pro-crypto on the House side. So it's, you know, I would think, my belief is that the crypto proponents are in maybe the areas of power right now in the, you know, whether it's majority leader and majority side on the Senate side, the speaker, the, you know.

Summer:
[17:04] Republican leadership in the different committees, they're on our side. That's very unusual for the banks. They usually don't have, they usually have those folks on their side. And then, you know, the people like Elizabeth Warren, they're really losing their, you know, she's just doesn't have her, the same level of control that she used to have over the other Democrats in her, especially on her committee. Right. So it's it's interesting to watch this play out on clarity and the banking committee. You know, normally you would have the chairman and the ranking member if there's going to be a bipartisan bill work very closely together.

Summer:
[17:44] They're just completely going around Elizabeth Warren and going straight to kind of down-diased Democrats who are pro-crypto. So she's being completely cut out of the process. And this is a real possibility that there will be bipartisan market structure legislation, some form of clarity coming out of the Senate. And she will not be able to get her fingerprints on it because of the way she's, you know, because of where she stands. So, again, it is a shift. She's like, you.

David and Ryan:
[18:13] Just expanded a lot of her political capital, right?

Summer:
[18:15] Yeah. Yeah. I mean, people are running from her on the left. They don't necessarily, you know, Warren, Gensler, that kind of, you know, thinking on the left. People are trying to get away from that because they realize that doesn't help when you have to get reelected.

David and Ryan:
[18:32] I like David's army's analogy because I very much see it in these terms. It's almost like, you know, the end of Endgame, the Avengers movie, whatever. We have Thanos and his generals, and then you have the Avengers on the other side. Of course, we're the good guys, right? Crypto's the Avengers. We're the heroes here. Obviously, we're the good guys. But there's Thanos, and he has the gauntlet, okay?

David and Ryan:
[18:55] There's a lot of power on the banking lobby. I'm wondering if we could talk a little bit about some of these figures. We actually had former OCC. He was in the OCC during, I believe, Biden administration. Charles Calamaris on Banklist recently. we're talking about stable coins and such. And he had some very interesting remarks about this group I'd never heard of. So apparently it's a banking lobby group called BPI, Bank Policy Institute. All right. I was looking into this. This appears to be one of the bank lobbyists, maybe on kind of the Thanos side that our Avengers are stacked up against. I was reading some more. Apparently the banking lobby spends, with financial services, et cetera, spends about $700 million per year in D.C. So they have really like the story of them running that town for a while from a lobby perspective and getting what they want seems to ring true. Can we just stack up the different sides here? So I don't know all the banking

David and Ryan:
[19:53] lobby, but like there's this group called BPI. Maybe that's one of the chiefs. Maybe there's a few others.

Summer:
[19:58] And then on the crypto side.

David and Ryan:
[20:00] I'm a bit more familiar. So of course, Summer Blockchain Association doing fantastic work for us. We also have Coinbase that has gotten over the last couple of years involved in crypto. And thank God they did. Because before that they were not at the table. They were on the menu. And it seemed like Sam Beckman-Fried was running things and he's not the representative we want in crypto. And then we have really interesting initiatives. We have PACs, which are spectacularly funded. We have an initiative that we were really excited about talking about last election cycle, which is standwithcrypto.org. I've never seen this on the bank side. So Stand With Crypto, of course, it just not only tracks legislators and what their record is for crypto, it tracks the community. And there are 2.3 million crypto advocates, citizens. So it's not just dollars for politicians, it's also votes that we're doing. So, I mean, we've injected a ton of energy on the Avengers side here recently. I think we have some tools that maybe the banks aren't used to, but they are still a formidable force. How do you stack? Who are the different associations involved in the different players in these respective armies that you think about?

Summer:
[21:15] Luckily, I have preteen boys, so I understand your analogy here. I don't know if that's the reason I've seen Avengers Endgame. It's a long movie. It is a long movie. I might have slept through a little bit of it, but I watched the end. I did. The way it stacks up, the bank lobbying is very interesting because they can be very fragmented themselves. So there's the American Bankers Association, there's Bank Policy Institute, there's the Community Bankers Association, there's the Credit Unions Association. So there's a lot of different bank interest associations out there that have been doing this for a long time. Now, sometimes you'll see friction between, a lot of times you'll see frictions between the credit unions and the banks. Because again, it's a competition issue. Credit unions are tax-exempt. The banks feel like they are taking business from them and getting tax-exempt status. Again, a competition issue. Community banks and big banks are not always on the same page either.

Summer:
[22:17] Here they've united. Here they've come together and said, we're going to fight this battle together as, you know, kind of one industry, not these fragmented groups. And it's always interesting when they're on the same side because it does not happen a lot. I always said if the credit unions and the banks are agreeing on something, then they must be really threatened because they usually do not agree. And then, yeah, on the crypto side, you know, we've got Blockchain Association, Digital Chamber, Crypto Council for Innovation.

Summer:
[22:46] The three trades have been working very closely together. We have very strong members. You mentioned Coinbase, A16Z. The other thing we have going for us is we have small businesses. The job creators are on our side. I like to make that point when I'm up on Capitol Hill. We are bringing the new jobs to communities. We're the small businesses. We're the ones that are the job creators, not the banks. And I think that kind of plays in our favor as well. But yeah, the banks have not typically had grassroots levels campaign. They had their kind of old playbook is let's bring in our bankers. Let's bring in bank presidents, not even like run-of-the-mill bankers. Let's bring in our bank presidents, sit them down with a member of Congress, and that'll be good enough. It doesn't, it just doesn't sell anymore. Nobody wants to sit down with a bunch of bank presidents and have them tell you why, you know, all the crypto voters in the world are wrong. It just doesn't work anymore. And that's part of the reason we're winning on this is because we are tied with the people. We're the economic engine here. and we are creating a new playbook that the banks have never seen before.

David and Ryan:
[24:04] I am kind of wondering, I had always suspected that this type of thing would play out, but at a certain point, the banks would say, well, if you can't beat them, join them. And what they would do is, as you were suggesting in I think the article you wrote for CoinDesk, is they would actually stop whining about this and stop trying to play the lobby game and start trying to compete. And maybe some of the more savvy banks will actually, as they're doing the lobby play, defect from the strategy and go try to compete with their own stablecoin types of initiatives and their own yield on deposits. Or maybe they could just do the thing that big banks do, which is go acquire a crypto native company. I'm waiting like every year to sort of read a headline like, you know, Jamie Dimon, JP Morgan, Acquire Circle. It's something like that. Right. I don't know what regulatory issues we get, but like they have the capital. They could do this. Do you think that this is how it will eventually play out? If they stack up enough losses against crypto, they will eventually have to, I don't want to say bend the knee because they're still the bank. I mean, they're still huge, but they will just play in the crypto space and

David and Ryan:
[25:21] start getting more crypto native themselves. Is that like a success outcome for us?

Summer:
[25:26] Well, we saw this with fintech a few years ago, right? The banks really fought anything that was a non-bank institution doing, you know, whether it was moving money, small business lending. They were very, they really tried to stop these fintech companies from coming into their space. And eventually they stopped fighting them and started buying them up. And then we, you know, that was kind of how that played out. Here, you know, you are hearing some of these banks want to issue their own stable coins. Great. Compete with us, right? Like, don't try to shut us out. If you want to issue a stable coin and compete with crypto, great. Do that. But, you know, at the end of the day, I think this technology is more efficient. There's less friction. It's better overall for the system. And I don't think the banks can avoid this technology integrating into our financial system and kicking out a lot of legacy systems because it's just a better way to move money. So I do think at some point this is going to be very much, you know, kind of run of the mill financial services will be running on blockchain with stable coins, with with digital assets. And that's how we are going to transact in the future.

David and Ryan:
[26:39] Ryan, one problem I see with like some banks defecting and just giving 4% back to their customers or just competing in the market. One problem I see with that is, well, that's what they don't want to do. And the only way that they can really keep their margins is if they lobby and fight the fight in Congress and win. And so they lobby and lose and they lose the 4% or they compete and they also lose the 4%. Competing is hard is what you're saying. And they're looking at the gauntlet of competing and being like, wow, we can't win against these scrappy companies. And so they have to rent. They haven't had to compete ever. There's never been a parallel banking system that has been more aligned with the consumers before. There's only been the traditional like old model style bank. And so like I said, they never had to compete in the market and they've never had to compete a lobbying. And so I think it makes sense that they first try to compete lobbying because at least they've done that before rather than competing in the market. That way, if they win, they get to retain all of their margins. And if they lose, well, then they can capitulate and they can start buying up crypto companies or giving 4%. Does that make sense to you, Summer?

Summer:
[27:50] Yeah, I think that's the case is that they don't want to lose those profit margins. They're going to fight, you know, battle that they've fought on Capitol Hill. And, you know, I think, you know, at the end of the day, when they lose, they're going to look for ways to, you know, hopefully better compete and, you know, offer those products that people are going to want to put their money into. But, you know, I look at this, it's very similar to, and this is coming into this discussion as well, the interchange fee debate with credit card companies and retailers. This came up in Genius. It was almost an amendment to Genius. The banks make a lot of money off of transactions on credit cards that are paid by the retailers. They've been fighting this for years, a cap on how much that would be, whether or not a retailer could say, I'm just not going to take a credit card because you're taking.

Summer:
[28:44] 1% to 2% of all of my margin, and I'm just a small grocery store. So this has been a fight that's gone on for quite a while between the banks and the credit cards. I think they see, again, stablecoins as another option where people can move money. And you're hearing retailers really interested in taking stablecoins because they can move money without paying additional fees. And it's cheaper, it's faster. And at the end of the day, some of the benefits of interchange fees like fraud prevention, those sorts of issues go away when you have something on the blockchain. You've got an immutable ledger. So you don't have those same problems that you have with credit cards. So it's, you know, it's the battle they fought with the credit cards and won for a lot of years. Now, they're trying to fight that battle and fight crypto, and they're just losing on both fronts.

David and Ryan:
[29:40] Okay, so there is also another lens we could look at this, and this is the international lens. And I'm not sure some or to what extent Blockchain Association thinks about this outside of the bounds of America. Obviously, you guys are focused on the US. I recently saw a tweet from Brian Armstrong, and it was a tweet to Canadian citizens, basically. And he was saying, hey, Canadian residents of Canada, you guys are making 0% in your Canadian bank accounts. At Coinbase Canada, you can convert that to USDC, American dollars, and receive 4% yield rewards on that. What a good deal. And I can imagine that if that is successful, that type of offering, buy exchanges like Coinbase, that the Bank of Canada is going to have something to say about it. You're going to have a similar reaction to the banks in the US and TDs. There's Bank of Canada. There's some pretty large banks in Canada that might have something to say. I also recently saw something in the UK, and this was effectively what I'd call a lightweight capital control around stablecoin. So the Bank of England was instituting a 10,000 pound limit on what individual UK citizens could hold in stablecoins.

David and Ryan:
[30:59] Why were they doing this? Some sort of fear of an erosion of, I guess, the banking system in the UK? So I guess what I'm saying is this appears to be a threat to banks, not only in the US, but also internationally. And how do you think that's going to shake out? What do you think is going to happen to banks in other countries? How are they going to react?

David and Ryan:
[31:21] Is it going to be capital controls? Is it going to be something else? Is it going to be banks in these other jurisdictions spinning up their own stablecoins to try to compete? Do you have any sense of this?

Summer:
[31:31] Well, from my previous role at the CFTC, I spent a lot of time meeting with global regulators, talking with global banks. All of those markets are global, just like with crypto. These are global markets. So you do have a lot of different jurisdictional kind of developments that, you know, you worry it could fragment the market. But one thing I noticed with a lot of European banks is that they were very paternalistic. They were very much about we tell you how to best to use your money. We tell you how to best invest. There seems to be a kind of lack of letting the consumer have some control. And I think when consumers really start to see the benefits of stablecoins and having control over their own money, being able to invest it the way they want, being able to move it the way they want, not having to wait three days or however long to move their money, I think that is going to be a threat to some of these countries where the banking system has been very much kind of a, almost like a state run, we tell you how to do things. So I do think for the international community, they're probably pretty worried about the fact that this is going to be a new way of looking at money for a lot of their citizens.

Summer:
[32:49] Their people are going to take back control. And, you know, they're going to have to find a way to deal with that. Because at the end of the day, this is a good thing. People should have control over their own money. They shouldn't be told, you know, we know better than you of how you want to spend your money or invest your money or move your money. It really should be more in the hands of the people. And I think you're going to see that play out. And what you're seeing in England and elsewhere is kind of this, you know, concern that people are going to say, I want to use my money freely. I don't want the bank controlling how I move money. So I do think this is going to be an issue that some of the international banks, financial services companies are going to have to deal with, not just within the U.S., but outside of the borders too.

David and Ryan:
[33:36] The incumbents are going to have to find a way to compete. That is the healthiest

David and Ryan:
[33:40] for customers and consumers and citizens. You mentioned paternalism. The last time I think we had you on Bankless, you were commissioner for the CFTC. We had a different SEC administration there, complete with a different Jer, as you look at the CFTC and the SEC now from your vantage point, I guess, you know, September 2025, what do you see? How have things changed? I recently saw there was actually a joint statement made by the CFTC and the SEC. I can't recall what exactly about, but in previous years, I would have never expected a joint statement made about anything in crypto. Is there more cooperation? Are you more optimistic? What are your thoughts as you look at this new administration?

Summer:
[34:26] Yeah, there's definitely more cooperation. There's more focus on being pro-innovation, finding ways to let the innovation grow and kind of become part of the markets versus keeping it completely out of the markets the way the previous administration was approaching it. So, you know, the recent announcement from the CFTC and the SEC was it's kind of restating what's already allowed about using, you know, buying and selling leveraged cryptos within registered exchanges. A lot of that under the law is valid, but under previous administrations, they found a way to, you know, shut that down. So it's this idea of we're not going to reinterpret the law. We're going to follow it the way it says. We're going to work together to make sure one agency isn't, you know, stifling innovation while the other is, you know, being more open to it. And it's a really good thing that they are working this closely together. I think there's a lot they can do at the CFTC and the SEC while we wait for Congress to act. But, you know, one of the things I tell our members is it is great. Everything the CFTC and the SEC is doing is great. Paul Adkins is so pro-crypto. I think you had mentioned like he had the most pro crypto speech, you know, ever. And that was just after his most pro crypto speech ever coming out of the SEC.

Summer:
[35:46] So that is all great. They're going to do great things, but we need a permanent fix because everything they're doing can be undone by a new administration. You could have Gary Gensler back and undo all that work. So you need this change in the law to make sure future administrations don't

Summer:
[36:04] undo all the good work that the CFTC and the SEC are doing right now.

David and Ryan:
[36:07] Yeah, Chris Dixon mentioned to me that what we need is to get positive crypto legislation hard-coded in our system. And that requires not executive action, not action through regulators, but a literal act of Congress. And maybe this brings us to the market structures bill that's happening in the Senate. How much are you following that? What's your sense of that development? I know clarity passed again in a bipartisan way in the House. Very enthusiastic about that. But at some level, the Senate is the harder body of Congress to actually get things through. How's it going right now? What's your sense of whether we get this done in 2025 and what the outcome will be for crypto?

Summer:
[36:53] Yeah, this is where I spend a lot of my day on this, working with Congress, trying to get the legislation to a place where industry is, you know, happy, happy-ish, and Congress feels like they can get something across the finish line. So it's a lot of negotiating of text right now. I used to work, I worked on the House side for a while, worked on the Senate side for a while. So I don't have a bias for either one, but the Senate is slower. They rarely take what the House has done. They almost always have to go their own way, which is frustrating here because Clarity had good bipartisan support. I do think they've realize they have to take some parts of clarity. They can't completely rewrite it because of the fact that this has to go back through the House because they're going to change it. So right now you have Senate banking working through a discussion draft that's pretty flushed out. So we're kind of in that area where we're just making minor, you know, negotiations, minor changes. You probably saw there was a meeting of a lot of CEOs with Chairman Tim Scott yesterday and really, you know, kind of coming to an agreement of, you know, how we're going to define assets from the start. That's, you know, it's kind of like step one and we've got to get that right.

Summer:
[38:06] The banking covers the Securities Exchange Act and the security side. A lot of this is on the commodity side, the CFTC side. Senate agriculture is moving a little bit slower, but they're moving. They should have a discussion draft out soon. My hope is it's not too far from clarity that, you know, we worry that we lose House votes. And then they have to take those, the Senate banking and the Senate agriculture bills, marry them up, get them across the Senate floor, and then figure out how to get it back through the House, who's already voted on legislation they were happy with. So it's a lot, there's a lot of hurdles to get over to see market structure done this year.

David and Ryan:
[38:49] So probably not going to happen this year?

Summer:
[38:52] I try to be optimistic, but I've been around Congress for a long time, and it is very hard to get legislation done. I mean, even Genius, it almost fell apart before we got it across the road. So it's difficult. I used to work with some songwriters, and they were trying to change the law from the time that streaming music came online. And it wasn't until 2016 where they actually got the law changed to adapt to that. So if that tells you how slowly these things move, it just is a, it's a difficult process. So, you know, I'm not going to say it's not going to happen because I've seen things come together when you have the right parties involved and people really do want to get to the finish line. It's just going to be very hard. There's going to be moments where it looks like everything has fallen apart. There's going to be times where industry is frustrated. Commerce is frustrated with industry. But it's that idea of you just got to keep pushing forward. You got to keep the momentum going forward. We can't go backwards at this point.

David and Ryan:
[39:54] What do we get on the other side of the market structure bill that's good for crypto?

Summer:
[40:00] A lot of it is just that certainty, that regulatory certainty, the fact that you can operate with federal regulatory oversight and not have to worry about each state laws. You know, each state has slightly different laws. And right now, a lot of these companies are operating on money transmission license in all states. And they've got to know, you know, the nuances of the laws in every one of these states. It's really hard to do. It's really expensive to do. You spend a lot of money on lawyers. The advantage of having a federal regulatory system is you've got one regulator, maybe two here, but you've got one set of rules and you can operate across the entire country. You don't have to worry about each state's individual nuanced rules. So that's a big part of this is having what they call federal preemption. I think the other piece is you have certainty and that is so important to this market right now, having that certainty to know you can invest in this space, you can bring those jobs back to the U.S., you can bring this volume back on the U.S. Shore, and you don't have to worry about another hostile administration undoing all of that.

Summer:
[41:11] So it really is why this is so important. It's having that federal preemption, but also having that certainty going forward.

David and Ryan:
[41:19] Who are we up against in this bill? Is there a group of incumbents? Are the banks on kind of the anti-market structure side of things or like who do we have to convince and why are some of the parties still not an automatic yes on this?

Summer:
[41:35] Yeah, there's a lot of different reasons. Some of it is just trying to get people to understand, the members of Congress and senators to understand why it's important. They're not following this issue very closely. there's a lot of them that they just don't want to learn about crypto. And they are kind of saying, I just don't care. I've got other things to worry about. You know, there's that kind of, you know, fraction of what we're up against. So it's a lot of educating. It's a lot of getting into those offices explaining why this is so important. You've got the Democrat narrative around conflicts of interest and the concern about Trump family operating and some of their, you know, some of their decisions and businesses around crypto. And they're using that to me, that's just that they're using that as a reason not to support it. At the end of the day, wouldn't you rather have laws in place that everybody operates under rather than say we should have no laws because we're mad at the president? I mean, that makes zero sense to me. So we're trying, you know, we're fighting back against that narrative. We're fighting back against, you know, lack of education. And then, yeah, the banks are going to be very, They're going to be leery of anything that looks like competition And, you know, I think this is less of a concern than genius was.

Summer:
[42:55] They're going to be trying to put the genius fix on the market structure, and that adds one more issue into the already kind of broad number of issues that we have to get past here.

David and Ryan:
[43:07] I feel like it's just my read of the situation being just outside of Washington, but just as an outside observer is if it feels like market structure will fail because of not substance reasons. It seems like the substances like make sense probably for everyone as they look, but like more political reasons, more of kind of the vibe type reasons, more of the conflict of interest things where I think we had for a brief window of time. Crypto seemed to be a bipartisan, nonpartisan type of issue. And on the back of that goodwill, we got the genius bill done. Now I think there's this framing around, maybe crypto is a Trump thing, right? You have a Trump meme coin, you have many of the Trump investments that are in Bitcoin companies, publicly traded things. And so it could seem that any vote for pro-crypto legislation is kind of a boost to Trump. And I think that probably complicates things politically for all of us when we want our legislators to actually look at the substance of the bill and not kind of the political wrappings of it. I mean, do you get that feeling too? Has this just all complicated our jobs, these conflict of interest things?

Summer:
[44:20] Yeah, I do worry about this issue somehow being labeled as a Republican issue because it has been bipartisan and it has to be bipartisan to get anything done. And you saw how well the House did with their vote and how much bipartisan support they had. And that was even getting around some of this rhetoric. It was kind of interesting to see, you know, Maxine Waters, down dais members totally just ignore all of her rants about conflicts of interest. You know, they recognize the importance of this legislation and that she was out of touch. So that is a big fear that this becomes a partisan issue when it needs to be bipartisan. And at the end of the day, you think about it. You know, some of the Democrat ideologies, this solves for some of that. You know, helping the unbanked, giving people more control over their money, making sure the financial system is available to everyone, not just the elite. There's a lot of messages in there that are, you know, really fit within the Democrats ideology. And so it's, it would be a shame if this somehow became just a Republican issue.

Summer:
[45:28] And that's something we have to think about a lot. We're very careful about that. We try to make sure that we are spending time equal sides of the aisle, political spending, the same thing, you know, you give to a Republican, you give to a Democrat. You just don't want this to become a partisan issue.

David and Ryan:
[45:46] Summer, just asking with your former CFTC hat on, why do we not have a CFTC chair at this point? I haven't been tracking it closely, but we still don't have our equivalent of the SEC's chair Atkins for the CFTC. What's been the holdup there? What's going to happen? Are we likely to get someone who's pro-crypto in that position?

Summer:
[46:06] Yeah, this has been, you know, Washington has its drama and sometimes it, you know, resolves itself and other times it kind of bubbles up. And this is one where this has been way more dramatic than I expected. You know, there was... Brian Quintens has, he's still the nominee from the White House. They sent his nomination up to the Senate. He went through a Senate hearing. They were going to vote on him and they got a call from the White House. This is a Senate Agriculture Committee got a call from the White House saying don't vote. That is very unusual. And, you know, the kind of you read all the stories, it sounds like there was some concern from the Gemini founders, the Winklevoss twins, about, you know, where Brian Quintens fell on some issues. And they probably, it sounds like they went directly to the president and that's how this got stalled. I've seen this, you know, watching all these nominees over a lot of years.

Summer:
[47:02] Usually if there's a concern about somebody's politics or their policies, that gets worked out when there's, you know, before the nomination is sent to the Senate, you know, that's what the vetting process is for. That's why they float these names out there early to see like, where's the pushback going to be? Where are we going to run into problems? All that is usually flushed out before a nominee goes through a Senate hearing and gets to a vote. So this is a very unusual situation. I don't know how it's going to come out. I do think that this is probably a leadership position that's maybe not in the bag, as people thought, for Brian Quintens. I think there are now some others in the mix that the White House, they're thinking about. And it is affecting market structure to a certain extent, because you have a number of Democrats, again, I think sometimes they're looking for an excuse not to be supportive. And they're using the excuse of the CFTC not having leadership, permanent leadership, as a reason to say we can't give the CFTC more authority. So it's now affecting the legislative process. So I hope the White House kind of figures out how they want to move forward. I think at this point, they just have to move forward. Love to see Brian confirmed.

Summer:
[48:22] If that's out of the cards, let's get a new nominee up. Let's move forward. The easiest thing would be to confirm Brian, and he's very great for the crypto industry. But I think this kind of position of limbo is not helpful and certainly not helpful when you're looking at how we're going to get market structure done. So it's unique. It's something I've never seen before in my 20 some years in DC. And like I said, sometimes there's just drama in DC and you never know where it's going to come from.

David and Ryan:
[48:54] All right. So I guess we have some DC drama on that. People might recall Brian Quintence has been on Bankless before when he was a commissioner at the CFTC. He's also currently A16Z policy and leads kind of their crypto policy initiatives, right? So pretty crypto favorable resume. But regardless, whether it's Brian or someone

David and Ryan:
[49:14] else, it's going to be someone that is pro-crypto, correct? Like we'll be in a much better position than we have been in like previously, I suppose. That would be my thought. Is that right?

Summer:
[49:25] Yeah. Yeah, absolutely. It's going to be someone pro-crypto. It's going to be somebody that the crypto industry is comfortable with. You know, again, that we thought that was Brian, but it's going to be somebody who gets crypto, understands the importance of allowing this innovation to thrive, ensures that they don't have an enforcement team that is going after you know people who are just trying to bring new products to market and you know it's it's going to be a better place than you know where they were interestingly cftc under russ benham he was pro-crypto that's right when it came to when it came to you know things within the agency when it came to enforcement when it came to rulemaking he wasn't as pro-crypto as he seemed kind of publicly. So a number of times I had to dissent on enforcement actions because we were basically trying to hold crypto to laws that, weren't meant for them and they could never, ever possibly, you know, abide by. So, you know, we've had pro-crypto leadership in the past, but, you know, you need somebody who's going to not just kind of talk it, but walk it as well. So hopefully we get the right person in there and hopefully soon.

David and Ryan:
[50:40] On one of those issues, are we in a better place with respect to the CFTC and prediction markets? Like, is that mostly resolved or what is still kind of missing? Now, you know, Polymarket is legal in the US. I think by route of acquisition. So that's a big step. Kulshi as well, I guess, has a license and is legal. What do you think is still left to be resolved on prediction markets?

Summer:
[51:06] You know, I think we are in a much better place. And I always argued that wouldn't you rather have these markets in a federal regulated space than offshore? And we knew there was a lot of interest in these markets. Again, this goes down to like consumers should be able to decide how they want to spend their money and invest in their money. And this is how they want to invest. So let's bring them under the umbrella of the federal regulated space. And so it's great. I think it's wonderful that we're seeing polymarkets come back into the space. We're seeing CalShe thrive. We've seen there was a predicted that was a kind of a smaller exchange that

Summer:
[51:45] had some no action relief that the CFTC pulled. And then there was a lawsuit. The lawsuit has been dropped. They're able to do more. And really, it has, we've seen this space just, you know, kind of like just go gangbusters. It's amazing how much activity there is and how many contracts we're seeing. You know, I think there's still that fight between the some of the state gaming regulators, some of the tribal gaming authorities that could bubble up and become an issue where Congress gets involved. It's it's an interesting kind of constituency that, again, you know, we talk about the banks not being for the people and crypto being for the people and prediction markets.

Summer:
[52:29] You kind of have, this is, you know, the state, some of these states really rely on their gaming, you know, money that they get. And so if they start losing revenue, I think, you know, they're going to have a strong voice on Capitol Hill. So I'm not convinced that we are completely settled, that the law is settled here, that we're not going to see people come out against some of the, you know, some of these contracts, some of the way they operate. I could see Congress trying to amend the statute at some point. But for now, they're doing great. And I think people are seeing the real value of prediction markets.

David and Ryan:
[53:06] I hope the incumbents remain a little bit sleepy so we can make even more progress and don't wake up until we've made some of that progress on crypto. Summer, thank you so much for joining us today. Maybe I have like one last question from your position at the Blockchain Association. So I think crypto from a US regulatory perspective has had a historic year. I mean, 2025 will probably go down in the history books, at least in our circles, as a great reversal of our fortunes, basically, where the U.S. Has pivoted from being largely anti-crypto, ambivalent at best, but largely anti-crypto to pro-crypto. Let's map out 2026 or the rest of 2025 and into 2026. Can you describe if we had an equally good or almost as good, 2026. What would happen for crypto in 2026? What would you like to see happen?

Summer:
[54:00] In a perfect world, we would have a federal market structure law in place, clarity or some version of clarity, and we'd be to the point where we're starting rulemaking, which is going to be a really important process, in this space, making sure that, you know, we got the law in place, but the rules get done correctly. So it will be a lot of engagement from the industry with policymakers, makers, which I think it's great. It keeps the industry motivated. And I think it's just, we're just going to continue to see more products, more opportunities to invest, and it's just going to be more widespread throughout the financial services sector. I think another one of those things I see coming up is, you know, being able to have certain retirement accounts, have, you know, cryptocurrency held in it. We're going to fix some tax laws that are holding back the industry right now. So there's a lot of positive things that can done on the policy side, I think we're going to see, you know, we're going to see progress and it's going to be very motivating for the industry, but we've got to keep on our toes. We can't like, you know, we can't get too comfortable thinking that we've won all the battles because the battles will continue.

David and Ryan:
[55:08] Completely agree. And please, please help with some of these tax laws. Sometimes the IRS just throws one at us and it kind of throws us for a loop.

David and Ryan:
[55:16] Okay. So lastly, what is the Blockchain Association doing here? And how can Bankless listeners help support your initiatives?

Summer:
[55:23] Yeah, absolutely. I mean, if you have founders who are listening, those who are out there, you know, creating new businesses, creating startups, you know, we encourage them to reach out and consider membership. We've got big and small, we've got 137 members, and everybody has a voice in the association. So it's, you know, we bring people in to try to go up and meet with Congress as well. It's very powerful. So I, you know, kind of on that side, I encourage people to consider membership and working with us. From, you know, the individual crypto investor, crypto holder, people who are really interested in blockchain technology, make sure your elected officials know that it's an important issue, that you vote on that issue, that it matters when they go to the polls for the next election. That this isn't a fad. It's here to stay. And it's important to voters. So whether it's calling or writing or going to town halls that members, members of Congress and senators have, working with your local legislators, making sure the states don't try to fill the void and cause problems for the industry now that we have a pro, you know, pro-industry administration. But make your voice it's heard. I think that's the most important thing, you know, anybody can do in any policy area, but certainly here it's super important to make sure that you are voicing your opinion.

David and Ryan:
[56:48] Let's end it there. A lot of battles ahead. Summer, thank you so much for joining us today.

Summer:
[56:52] Thanks for having me on.

David and Ryan:
[56:54] Gotta let you know, of course, Bankless Nation, none of this has been financial advice, not political advice either. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless Journey. Thanks a lot.

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