# Clarity Act Markup and Crypto-TradFi Convergence Analysis

**Podcast:** The Milk Road Show
**Published:** 2026-05-12

## Transcript

Morgan Stanley may be the best example just of...
recent of many recent ones.
But the fact that not only are they recommending a two to four percent Bitcoin allegation for their clients, they're also launching their own Bitcoin ETF.
And I don't know if people realize this.
I think Morgan Stanley directly only manages like 20 to 30 ETFs total.
Obviously, they think this is bullish.
A draft of the Clarity Act has dropped and is scheduled to be marked up in the Senate this week.
It seems like this might actually happen.
But did the banks win?
What's in the bill and what do investors need to know about this?
Hello and welcome to the Milk Road Show, the podcast.
that knows that the real Clarity Act is hodling your Bitcoin even when Michael Saylor sells his.
I'm your host, John Gill, and today is Tuesday, May 12th, and today we are joined by Alex Thorne.
Alex is the managing director and head of firm-wide research at Galaxy Digital, where he leads a team of researchers analyzing and reporting on the digital asset and blockchain industry.
Alex is going to give us a ton of alpha and insight on the Clarity Act today as much as anyone can.
He's been following this very closely.
He's really informed about all these things.
So if that sounds good to you, make sure you like and subscribe.
Share this episode with somebody who's going to enjoy it.
Today's episode is brought to you by CAPE, the privacy-first mobile carrier.
Pharos, the Layer 1 built for RealFi, and Nexo, Earn Interest, Borrow, and Trade Crypto.
Without further ado, welcome to the Milk Road Show, Alex Thorne.
Hey, John.
I'm well.
Thanks for having me.
I'm really excited to talk to you today.
As I said at the beginning, Alex, you have been personally closer to the process than I think anyone I've interviewed on this podcast about the Clarity Act.
Can you just give me your perspective as to where things stand today on this bill and how we got to here?
Yeah, many people have been working on this inside the government and on Capitol Hill in the industry for a long time now.
It's a very important bill.
But I would say where we are, the House passed Clarity last July with all Republicans voting for it and 78 Democrats joining them, almost half the caucus.
So very bipartisan passage last summer.
Then in August, Senate Banking and Senate Agriculture started working on their versions.
The fall Senate banking released its own draft and then ultimately did hold a markup in January.
Sorry, Senate Agriculture did.
And then in early January, Senate banking released a draft.
And people will recall probably if they've been following this, was going to hold a markup in sort of the third week of January, which got derailed and indefinitely delayed at the time, primarily because Coinbase publicly pulled their support.
over disagreements over the treatment of stablecoin yield in the bill.
And then for the last four months, the industry and the crypto industry and the banking industry, Capitol Hill and the White House, the Republicans and Democrats have been all negotiating to try again with new text, not just on stablecoin yield or rewards, as it's called.
But also on other issues, and just as we record this on Tuesday, May 12th, just last night, actually after midnight, so early this morning, at like 12.30 a.m., the Senate Banking Committee finally released their updated amendment in the nature of a substitute ANS, which is just a new draft of the bill.
And there's some changes between this version and January's.
So now it's this week in two days on May 14th, Thursday, Senate Banking is scheduled to try again.
to mark up the bill, which is the process of moving the bill from the jurisdictional committee, in this case, the Senate Banking Committee, onto the floor of the Senate.
So I think this is a crucial, crucial vote.
It is possible that the outcome of the vote is not...
completely consequential.
The outcome of the hearing, sorry, the markup, which is not even a hearing, the markup vote, the committee vote is not consequential for the ultimate prospects of the bill, but it's also quite likely that it is.
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Okay.
So I really appreciate you kind of framing how we got here.
As you said, a lot of different participants, both in and out of government, have been part of drafting this legislation.
And as you noted last night, I haven't had a chance to read it yet, but somehow Elizabeth Warren did.
A new draft of the bill has dropped.
Any initial reaction to you from this current language that we see in the bill and just what stands out to you from the draft that just came out?
Yeah, we just released a report, which I worked all morning on, summarizing the differences between this version and the January version and also talking about some of the key stakeholders on the Senate Banking Committee and what they want and what their equities are and what the likelihoods are.
I would say it's a very...
Very good bill.
It was a good bill in January.
It's still a good bill.
In some cases, it's a better bill, both just from a technical standpoint, but also it's quite favorable in many ways to both crypto and things like investor protection broadly.
A lot of the stuff that was directionally supportive of investor protections and innovations in the January draft has been improved, right?
So not just that it's better for crypto, but it's just better legislation.
some key items, obviously the stable coin rewards question, right?
The debate had been whether or not a stable coin issuer or a third party could pass through the interest that the issuer earns on the underlying treasury collateral that collateralizes the stable coin.
Could they pass that interest onto holders of the stable coin, effectively creating a yield bearing payment instrument?
The Genius Act, which was signed into law by President Trump last July, July 25, expressly prohibits the stablecoin issuer from doing that, but it doesn't quite prohibit a third party from doing it like a crypto exchange.
That's where a lot of that debate has been.
Senator Tom Tillis from North Carolina and Senator Angela Also Brooks from Maryland, famously, if you follow this space, hammered out a compromise over these four months, which restricts the payment of such yield by those third parties like a crypto exchange.
to only those activities that are activity-based or those instances which are activity-based.
They may not pay that yield on the stablecoin solely in connection with holding the crypto.
So they can't just pay passive yield to stablecoin depositors.
That was something banks are very upset about.
They thought it looked too much like a yield-bearing bank account that could threaten the banking system.
So that compromise that they released two weeks ago, that's in the bill.
That seems like a pretty reasonable compromise, I think, to everyone except for the American Bankers Association, which is still quite mad even after having negotiated for months.
And, you know, according to Patrick Witt in the White House, is skipping some of the meetings that he hosted to help negotiate such a compromise.
Other important things.
protections for non-custodial developers are in this bill.
The Blockchain Regulatory Certainty Act is in the bill, almost completely intact, in fact, completely intact, with only a tiny, narrow carve-out for developers who have specific intent and knowledge of crime.
So they mean to facilitate crime, and they know it's occurring, which I think, frankly, we can all believe is crime.
I mean, if you knowingly help someone commit a crime, that's a crime.
That's not what the BRCA is meant to exempt, right?
Like no one's trying to say criminals shouldn't be tried for crime.
It's the instance of like, say a Bitcoin core developer or the Bitcoin core developers release open source software.
It may be used by criminals.
In fact, it almost certainly is.
It's also used by millions of other people who aren't criminals.
They don't have specific intent or knowledge of any criminal use of it.
It's not their fault if DPRK runs Bitcoin Core and uses Bitcoin.
So they should be protected from liability in the case that the government is mad about a criminal use of the non-custodial software.
It also extends to things like...
You know, certain protocols, layer one blockchains, certain applications on blockchains.
Right.
Key, key piece of the legislation is the BRCA.
As of now, it's intact.
This is a this is one of the trickier issues.
I mean, there are senators and also equities like law enforcement, states, attorneys general who want it weakened.
It hasn't been weakened and I don't think it will be.
So that's that's a huge positive.
Other interesting stuff in there as well.
that matters, clarification of where the line is between DeFi and centralized exchanges.
Some movement there, but again, mostly thoughtful.
So I think the bill's really good.
The big question is how many Democrats in the Senate Banking Committee are going to vote to send it to the floor?
I think if it's none, and now it, of course, can advance.
The Republicans have a majority on the committee.
So it can advance to the floor with a purely partisan vote.
I think the view is that if it does in just a partisan vote, then the ultimate odds of passage are severely diminished.
So we're hoping that some of the Democrat champions of innovation and open source software and blockchain will vote yes on Thursday.
Mark Warner, Angela Alsobrooks, Ruben Gallego, perhaps.
And so that's what everyone's working on right now is.
You know, seeing if those Democrats will join here.
And if they do, I think that this is when I say it may or may not be consequential.
I think if there's about five, I think, who could vote for it, Democrats.
If they do, if all five vote for this, I think the odds are very high that it will ultimately pass.
If none vote for it, the odds are pretty low that it will ultimately pass.
It's very possible we'll get somewhere in the middle where two or three vote for it.
And that's when it may not be consequential.
But still, that would be a pretty good sign.
I think it still would pass.
But I think most people...
think that it really does need to be bipartisan on Thursday in order for the chances to be very high.
It wouldn't be dead if it's purely partisan.
Of course, it would literally not be dead.
It would still have progressed to the floor, I think, but as a directional indicator, that's what everyone's working on and thinking about.
Alex, this has been really helpful already.
I want to take some of these things that you laid out here just like one at a time, starting with the biggest sticking point, which you talked about was this compromise on stablecoin yield.
As you pointed out, the American Bankers Association, among others, are still not happy with this compromise, which Coinbase and the crypto industry seems to be very happy with.
Do you think that this continuing objection from the Bankers Association might derail this at some point this week?
Or do you think that despite their objections, this is still going to go through?
move forward here?
I mean, it's very possible it could still derail it.
I mean, this is not a done deal at all.
I think, you know, I'm saying maybe 55% chance that this becomes law this year, which some that I work with, both the Galaxy and the industry, think I'm being very, I'm very low.
But I'm like, this is a very complicated bill.
You know, 55% chance for an extremely complicated bill with this number of competing equities and stakeholders.
I think those are pretty good odds.
I mean, legislation is really hard.
I think that, you know, Coinbase is probably not as happy as they may be saying, right?
They are being meaningfully restricted here.
I think rightly they recognize that this is still an incredibly important bill and that they're getting plenty on the rewards in the scheme of things, right?
You know, you open a bank account at your local, you know, bank of East Dogpatch and they'll maybe give you a toaster, right?
Like you can't really prevent that.
And so that would be like an activity based reward, right?
You did something.
You didn't just park your money there and earn yield.
And, you know, while I'm sure crypto exchanges or stablecoin issuers might like to be able to do that, I think most realize the stakes are a lot bigger than that.
And because this bill, you know, you can imagine the crypto industry is probably good for the next two and a half years.
during this administration.
We're getting a lot of what we want and the innovation exemptions and stuff from market regulators like the SEC and CFTC.
But these genius and clarity back to back, it's kind of like the 33 and 34 Act, which set the stage for U.S.
capital markets.
Two and a half years is good, but two and a half decades would be better.
And that's, I think, what you can get, that type of long-term integration and clarity out of this legislation.
And I think people realize that.
I think the banks could still derail it.
I mean, frankly, I think they're being disingenuous.
I think they're playing a cynical game.
I think that the evidence that they cite for this fear, which they, quote, repeatedly deposit flight, right?
I think the evidence is very thin.
They're worried, right?
If you take them at their word, what they're saying is that if stable coins are too good, they're too good.
They're too good of a consumer product.
No one's going to want to use their product, the bank.
And by the way, their product, it's so important to America that if people don't use our product, the American economy will collapse.
That's basically their argument.
The reality is that, you know, we just published last week what I think is the most comprehensive model on the impact of yield pass-through on stablecoins.
So like a Genius Act-compliant stablecoins that paid yield.
And we found that the net inflows, foreign inflows into the U.S.
banking system would vastly exceed any interbank domestic deposit migration.
So two to one, it would also increase credit.
availability in the US.
I think we came out around 32 or 39 cents.
I can't remember the number per dollar of stablecoin issued.
So it will also create a massive new buyer of US treasury debt.
So it's great for, I don't know, the national debt, which is pretty high, right?
And it is a major tool for US geopolitical and monetary maintenance and dominance.
This is a very good, stablecoins are phenomenal, and I just don't trust, I don't believe this argument that they're making.
I think that the underlying facts are incorrect, and I think they know that, so I think they're being a little bit disingenuous.
All right.
There are a lot of other people who still have some outstanding objections to this bill.
Obviously, Elizabeth Warren echoed this this morning, but Senator Gillibrand, who has worked closely on this legislation as well, also said at Consensus, I think, recently that without an ethics provision that basically prevents people in government from enriching themselves from crypto activities of some kind, that a lot of Democrats may not support this bill.
This seems directly targeted at Trump and therefore a very big sticking point.
for ultimately getting the bill signed.
Talk to me about this in terms of your analysis for the likelihood of this passing, because like you said, like a lot of Democrats you would hope need to come along to get this through or just walk me through that as a as a as a next hurdle here.
Yeah.
So the ethics issue, as it's called ethics in congressional parlance.
And as it relates to this bill, so that that will likely not come up in the markup this week because it's not seen to be it's it would be under the jurisdiction of the Ethics Committee, is my understanding, in the Senate.
So it's not jurisdictionally appropriate for the Senate Banking Committee to add that text to the bill.
It will almost certainly someone will probably make the amendment in this markup process, but it wouldn't.
We won't succeed there or really probably have much debate on it because of the jurisdictional issue.
It will absolutely come up on the floor of the Senate if and when the bill gets there.
I think, you know, I understand the, you know, worry about this.
I think government officials, you know, doing things in industry is, you know, can be a tricky thing and it can be a very bad thing sometimes.
What I would say is that this bill.
has tons of things outside of an explicit prohibition on certain officials' activities that would materially make the market more safe, less manipulatable, and more durable, right?
So disclosure requirements, regulatory oversight, compliance regimes.
This bill is loaded with that stuff, right?
So if you, whether it's the Trumps or somebody else, if you have fears about, you know, manipulation or whatever else it is like the bill is a materially material step forward across the whole spectrum of that issue set so to actually kill that bill over the lack of some explicit prohibition uh you know what would happen is well you'd have the status quo so like to me this is also political it's more political than real i think when it comes to like you know an intellectual argument about how these markets function and what the market structure of them is, that will be an issue.
And so luckily, I think a lot of senators on both sides of the aisle, while even if they have big equities or cares about this ethics issue, they also recognize that the bill is better than nothing.
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Some critics of this bill on the crypto side have actually pointed out that just a lot of the things you just outlined there, all the compliance requirements and all these structures and specifics that are given in terms of regulatory structure around the digital asset industry could be used as a weapon to bog down and to, you know, hinder the crypto industry if we get an anti-crypto army representatives coming back in.
And, you know, it would be different from the Gensler era where he was relying on the lack of a law or lack of, you know, all this ambiguity.
Whereas now they would have like a weapon to be able to create bureaucracy to bog down digital asset space.
What do you think of those objections?
Do you think that there are any credence to that?
Or do you think that's missing the point here?
I mean, America is a great country.
This is, of course, of course that's possible, right?
I mean, the OCC and the FDIC and the Fed, they could use existing bank laws to go after banks right now.
And in fact, they did during Operation Chokepoint 2.0.
That wasn't the lack of rules, right?
It was the utilization of their existing power.
So yes, that theoretically is a risk, but you know what's a lot easier to do is say, hey, there's no law that says you can do this, so you're breaking the law, right?
And that's what they did during the prior administration.
That's not a good reason to oppose the bill.
I think enshrining the right, for example, for a digital commodity broker to get a CFTC license and buy and sell spot crypto with their clients in federal statute, it's not that easy to get a regulator to just overrule federal statute, especially since the Lopper Bright.
Supreme Court ruling, which severely limits the regulators, you know, straying from what's written in the statute.
This statute, these statutes that are amended or written here in clarity are very specific.
Many of them, there's not that much gray area.
And so I think, you know, codifying these rules, compliance requirements and innovation capabilities in federal law will provide a lot more.
safety to the innovative companies trying to build in the space than risk in the future.
Alex, we've seen a lot of moves from this administration and from Wall Street to adopt and to integrate digital assets.
How strong is the anti-crypto army still to this day?
Is this more of like a shrinking movement or do you think that there's still a real contingent in the government or in industry that wants to try to push digital assets out of America?
I think it does exist.
I think it's certainly been on its back foot the last year or two.
But part of the energy around pushing a really harsh version...
of some ethics provision into the bill, which I don't know exactly where Senator Kirsten Gillibrand stands, but I do know she's been a big proponent of innovative and investor protecting rules for crypto.
But those who might want the worst, the harshest possible language, so much so that it would kill the bill, they're very clearly part of the anti-crypto army that still exists.
I saw Senator Warren tweeted just...
shortly after that bill came out, that it would turbocharge the Trump family corruption.
And, you know, if you're in the crypto, if you're in, if the general of your army says that your enemy is going to be turbocharged, that sounds very scary.
So they're obviously trying to whip up, right, the anti-crypto sentiment.
Ben McKenzie's been back out on podcasts reiterating Gensler and Warren talking points.
They're clearly active, right?
Let alone the former Gensler officials at the Consumer Federation of America or at Better Markets, who I won't name, but I have a weak spot.
I love to read their stuff.
They're active, right?
So it exists.
I think the big question that Democrats who are wondering about this issue should ask themselves, do they really think they're going to be driving people to the polls on a negative issue like this?
I personally don't, especially when you see how powerful the crypto voter coalition was in 2024.
I think you're much more likely to see pro crypto voters outweigh anti crypto voters.
So if it's a purely political consideration, I would think twice about it.
Alex, let's say it's July 4th.
The president gets the Clarity Act.
He signs it into law.
What happens next?
Who are the big beneficiaries from this?
What does this change in terms of digital assets in America?
Talk to me about a post-Clarity world and what that's like.
Well, there's a lot.
I mean, this bill is very comprehensive, right?
It has rules for big OTC firms, crypto exchanges, DeFi protocols, developer protections, right?
Stablecoin issuers.
It covers a huge gamut, commodity side, security side, tokenized securities are in here.
There's so much, but I would say at the core, what you're really doing is normalizing and creating similar regulatory frameworks as those that govern the current US capital markets.
That's why I referenced the 1933 Act and the 1934 Act, which The first one is for primary issuance.
The second one governs secondary trading of securities.
The entire U.S.
capital markets are built on those two statutes and others, of course, that later came.
But like that is the core.
And that was almost 100 years ago, right?
And by the way, that regulations, those regulations that those statutes established are what propelled America's capital markets to become the deepest and most liquid and safest and fairest in the world.
So I think, you know, I don't think right after, we're not going to immediately, it's going to, I mean, that in defense has taken what, 90, you know, 92 years, 93 years to get to where we are today from those bills.
But these are similarly formative and foundational laws that will help blockchain technology, crypto assets, digital assets, however you want to.
talk about it, integrate directly into our capital markets, which are the safest and deepest and most liquid in the world.
And that's going to have a lot of beneficiaries and disruption, positive disruption, both on the traditional side and the crypto side.
I think one of the things we call the great convergence, it's already happening.
All the big banks and brokerages are working on a bunch of stuff, frankly, most of them, ranging from pure custody to private blockchain tokenization, but also like ETFs of crypto assets like Bitcoin, right?
And other much more crypto native things in DeFi.
They're all already building that stuff.
So the great convergence is happening.
These bills would codify it.
And I think the exciting question for what happens in a post-Clarity world over the next one to five years after it becomes law is where does that line between decentralization and centralization end up, right?
Because both sides are tugging at the other.
I'm of a believer that not only should it be pulled more towards decentralization, I think it will.
Alex, this is a great segue because this is the next thing I wanted to ask you about here.
For those who don't know, Alex hosts a podcast called Galaxy Brains, and you did a recent episode, I believe, on this exact topic of the great conversions of crypto and TradFi.
And you spoke a little bit about this, but I'm curious your thoughts about who is winning that right now.
Is crypto pulling Wall Street towards decentralization or is Wall Street co-opting crypto to just extend and expand their control and their power?
That's why it really is one of my favorite questions here.
And I don't know the answer, right?
In fact, we're all actively playing in this game to find out, right?
So I think broadly, it's pretty clear that crypto would prefer TradFi look a little, you know, be pulled closer to it or said another way that crypto would...
be able to integrate some of Tradify into its architecture, infrastructure, ethos, ideology, whatever.
And then, of course, the banks and the brokerage firms would prefer that, well, they want to offer these products, but they certainly don't want someone else to offer them other than them, right?
So that is a tension.
I think they are overlapping already.
Obviously, the Bitcoin ETFs are the first huge, successful, big example of that.
I think both crypto, obviously, Bitcoin, I think, benefited certainly in terms of market cap and ownership.
But I think, you know, crypto firms also benefited.
Most of those ETFs are also serviced by crypto firms, right?
They're custody at Coinbase or Bitco or wherever.
They're traded by Galaxy and who knows what created and redeemed by, you know, sort of hybrid TradFi crypto traders, right?
So there's plenty of winners from even just that one example.
I think, you know, one of the things we're seeing is that the crypto industry, they're sort of like, let me put it this way.
I have this view that In a way, crypto, it's not a monolithic thing, but I'll pretend it is the crypto ecosystem community kind of gave Bitcoin to TradFi in exchange for higher prices in the form of the ETF.
I mean, we didn't give it really, but I mean, the Gemini twins were the first to ever file for a Bitcoin ETF.
So it's not like it was taken from us, right?
Crypto firms wanted and Bitcoiners wanted the ETFs to be approved.
But I think it's kind of like, well, I mean.
you've gotten this thing from us, and it'd be nice if you gave something to us in reciprocity.
Like, for example, tokenized stocks, which obviously so many people in crypto, including myself, are working on.
But they don't want to give them to us, you know?
They don't at all.
They want to take from us and not give.
But we're also having a lot of success, you know, creating new forms of finance and savings technology like Bitcoin, yield-bearing, you know, instruments and things like stablecoins.
And, by the way, tokenized stocks, which already exist.
They're in many cases, maybe not all and maybe not all yet, but in many cases, they're a materially better user experience or better back office, better settlement, better trading, better send and receive, better custody.
Right.
So I think a lot of crypto firms like Galaxy, we are competing if we can't, you know, take it from them.
which in some cases I think crypto people are trying to, tokenized equity securities being an interesting one with a lot of back and forth in Washington as well between the two sides.
And by the way, a specific section in Clarity, section 505.
I think then I think the next idea is, well, then they should buy it from us or build or we'll build it for them.
So there is a gold rush happening now among the big crypto firms to.
not only perhaps compete with banks, but also maybe build it for them, right?
Like, and so again, that is the convergence.
It's like, well, you know, if we can't take it from them, then we should at least be the ones that build it for them and not only build it for them, but also teach them about it, right?
People used to ask me if I was worried that the Bitcoin ETFs would harm Bitcoin's ethos, right?
Or, you know, the institutionalization of Bitcoin.
Like, what happens, I mean, concretely, like what happens if a big asset manager proposes a hostile hard fork of Bitcoin, right?
That doesn't follow or honor the true underlying features of Bitcoin that actually make it valuable.
And that's a risk.
That's always been a risk.
But I think the best answer is...
Let's make them advocates.
Let's bring them on the team.
Don't ostracize them.
Let's make sure that the BlackRock's and Fidelity's, you know, Invesco's, Morgan Stanley's, that they have Bitcoiners there working on those products.
Well, and luckily I can tell you they do.
Alex, I'm really interested to see this convergence between Wall Street and crypto and how that plays out.
Another thing that we've been focused on at Milk Road is the convergence of AI and crypto digital assets, which I know Galaxy is very focused on as well.
And it seems like you guys are kind of uniquely situated between these two industries as they start to come together here.
And I just wanted to hear from your perspective as head of research, how do you see these two major emerging market players, like digital assets and AI coming together?
What is that looking like from your seat today?
What do you think happens there?
Well, there's such a fun backstory here.
Like, all of a sudden, AI finally becomes real, I don't know, two or three years ago, three years ago.
I mean, consumer demand skyrockets for chatbots, right, and LLMs.
And the AI industry is looking around saying, gosh, you know, if only there was an industry that we could partner with or someone that's been developing stranded energy at low cost where we can build data centers.
And, of course, Bitcoin mining has been doing that famously for a decade at scale.
I mean, truly.
And that's how we got into AI because we were a big Bitcoin miner and we're now converting our main giant Bitcoin mining site into an AI data center business.
And it has been, well, the conversion is going to take a long time for a lot of these.
These are massive infrastructure projects, but we're already, I think, flowing 200 megawatts to CoreWeave.
We've got 800 megawatts contracted to them and we've got another 800 megawatts approved by ERCOT.
So 1.6 gigawatts, which...
I don't know.
I'm not the guy for analogies on energy, but like, it's a lot.
It's a massive, I've been to it.
It's just enormous.
And so that's how we got into it.
I think if we go, we look forward, what the overlap looks like.
I've got both pragmatic and philosophical.
I'll start with the philosophical.
If you take AI, it's literally like digital abundance.
I can say, you know, Claude, like, you know, write me 50 versions of this article so I can pick the best one, right?
Or whatever.
Or like, you know what?
I read this article.
Can you rewrite it in like, you know, 1980s slang, right?
You can just have it do anything.
Go into image generator and say, make 10,000 versions of this and I'll pick one or I'll use them all, right?
I mean, the only limit really is compute and energy.
And there's a lot.
I mean, at least now, we're probably going to need a lot more, it seems like.
So in that world of digital abundance, though.
And that has some scary implications.
Decline of trust, inability to understand provenance, deep faking, obviously cybersecurity, right?
You know, you used to have to find vulnerabilities.
You got to have 10 of the best hackers in the world.
Well, now you can have one of the best hackers operating like a thousand sub agents, right?
And we've seen fears of that.
We may, it's not clear if we've actually seen it used effectively in the wild, but certainly people are worried about that for cybersecurity, all part of digital abundance.
And then.
You look at something like Bitcoin, it's by definition digital scarcity.
And not just Bitcoin, other blockchains too, although I think Bitcoin's digital scarcity fundamentals are the most pure and powerful.
So you can imagine just from a philosophical standpoint, things tend to rise as a dichotomy, and you're going to have what's a perfect counterbalance to the digital abundance of AI.
I think scarcity proven on...
Sequential blockchains is a great example.
And you could imagine that being used for timestamping to prove authenticity or digital scarce commodity money in the face of never-ending money printing, right?
Which is probably going to go up further because of AI.
I haven't done all the work on this, but if you ask me what the impact on monetary policy AI will have, I'll tell you it's probably going to print money, right?
So I think there's a very philosophical counterweight here between AI and blockchains.
As a pragmatic answer, there's agentic payments.
I mean, that's, I would say the first, you know, I wouldn't call it quite a breakout hit yet, but quite a lot of activity on Stripe's platform, on X402, on L402, on the Bitcoin Lightning Network.
It's quite a lot of activity.
Agents sometimes need to buy stuff.
I mean, mostly I think it's right now buying access to APIs, paying tiny little micro transactions for per call access to certain APIs.
But you can imagine, of course, like the more autonomous these agents get, like they need digital balances to do stuff.
You tell it to go, you know, book a doctor's appointment for you.
Well, that's not a good example because we have insurance.
You tell it to go like, you know, you know, hire a plumber to come to your house.
Like, how does it do that?
It doesn't have money.
Right.
And, and, and native digital money is, makes the most sense.
It's not going to open a bank account.
I know some people, mostly banks are working on, Ooh, our agent bank account.
I struggle to believe that.
I think a native digital wallet powered by digital assets is how that will go.
It already is happening.
So agentic payments is one.
There's also early experiments in decentralized compute markets and things like that.
But I do fundamentally believe these two technologies will rise together.
Alex, there's going to be a proliferation of products and services from legacy companies, from tech companies, from finance companies, and from crypto native companies as we get...
this clarity act through and as all these things start to emerge i'm curious galaxy's strategy to continue to differentiate differentiate itself and compete in that space because you know if you have a world where meta and jp morgan are suddenly coming into your industry and trying to you know what i'm saying like assert themselves and launch products to compete how do you think about that and what's galaxy's like differentiating uh strategy here yeah i think um you know those companies are kind of like jacks of all trades and masters of none I think we're highly specialized at digital assets and AI.
So, you know, those are two big categories, no doubt.
But, you know, we're not trying to do literally everything.
No offense to these guys, but let's not forget that Meta renamed their company after the metaverse and then just a month or two ago completely shuttered their entire metaverse business.
Right.
So, yeah, they might have more money, you know, than God and can just, you know, try a billion things.
That doesn't mean they're going to be good at them.
And we're quite good at.
these two things.
We've got, you know, almost a decade of experience leading in the digital assets market.
That's not in dispute, right?
You know, AI, everyone's new to AI, really.
I mean, but, you know, we and other Bitcoin miners, by the way, have been operating massive, super-scale data center architecture now for a while.
You know, the pure play new data center companies.
They didn't have eight years with the harshest, most competitive market in energy in the world, which is Bitcoin mining.
Literal race to the bottom, like by design, right?
So I think, you know, we have a lot of expertise in both.
And, you know, that's what we rely on, our talent and our assets.
You're head of firm-wide research at Galaxy.
I'm curious what you and your team are most closely focused on right now in terms of research and where those energies are going.
Yeah, so we've only just really started as a...
actual segment covering AI.
We've done a bunch of work on energy and agentic stuff so far.
Initially on the direct current overlaps with crypto, increasingly beyond that, just into pure AI research.
So we're like everyone, we're following it closely.
We're building with it at work.
I think we're all building on my team with it at home.
I am building basically a massive personal research pipeline and assistant in my basement.
So we're working with it a lot.
We're writing about it.
We're learning about it.
We're sharing our insights on AI.
In crypto, I mean, the story...
It's like the never-ending saga, right?
The interesting narratives have evolved so many times.
I think fundamentally a few core ones that we continue to follow, I think the great convergence in a different way is one, really the overlap of TradFi and DeFi.
The institutionalization, the normalization of decentralized finance, vaults, yield, on-chain lending.
I mean, I'm kind of of the view that DeFi is really...
There's really like three core product market fits that have been established in crypto.
Bitcoin.
People love to own Bitcoin for whatever reason.
We don't have to go into all the great reasons to own Bitcoin in my view.
But all around the world, people love to own Bitcoin.
I mean, like if, you know, so I think most people would agree that's probably a product market fit, you know, stable coins.
You know, increasingly, I think everybody realizes they're great for payments.
Everyone wants to use them.
The Genius Act codifies them in the US.
You're about to have probably a wave of new issuers and other integrations because of the Genius Act and the OCC granting a bunch of new trust charters, some of which are two stablecoin issuers.
And then DeFi.
But in DeFi, I'm really talking about two primary metas, trading and lending, right?
Or swaps and lending.
These things are pretty time tested at this point.
They're used widely by institutions, including us.
And, you know, there's still learnings, I think, for a lot of people that use them at our scale.
We've done a lot of that work.
We've published a giant risk framework that we use to assess on-chain credit risk and counterparty risk as it relates to protocols and stuff.
So I think others need to do a lot more of that work as well, but they're widely used.
The big problem for DeFi.
has been that the assets in them aren't very good, right?
You know, you've got native layer one blockchain tokens like ETH or Solana or something like that.
They're okay, right?
I mean, if you want to be long a specific blockchain, you know, they're not like, but then, you know, meme coins, NFTs, like a bunch of junk also in there, right?
I think this is one of the big reasons why everyone is pushing so hard for, you know, real world assets.
And in particular, why I focused on tokenized securities.
Because I think there's real benefit.
I think we've sort of dog-fooded these DeFi protocols with our own tokens, some of which are great, and that's fine.
But a lot of us are like, well, gosh, this thing's working great.
I'd love to put my stocks in it or buy and sell stocks there or occasionally lend and borrow stocks there.
Again, maybe not always, but we see the value every day, those of us who use these tools, and we'd like to expand the universe of assets that can be part of them.
So I think that's a key thing that we look at in general, that trend and all the things around it.
Trillions of dollars in real world assets are stuck off chain.
Real estate, commodities, private credit, all locked behind outdated systems that weren't built for a global 24-7 economy.
The fix?
Bring those assets on chain.
Problem is, most blockchains weren't designed for that either.
Feros is.
It's a layer one purpose built for RealFi, a real world financial infrastructure that lets assets be tokenized, verified, and traded at institutional scale.
We're talking parallel execution for serious throughput, compliance baked in from day one, and infrastructure that actually connects on-chain and on-chain systems.
They've got a $10 million incubator backing builders who want to make RealFi a reality.
Join the Atlantic Ocean testnet and start building at milkroad.com slash Feros Network.
Gotcha.
So we're seeing exponential growth in stable coins, tokenization, on-chain finance, DeFi, and the third thing, which I think was the first thing you listed, was Bitcoin.
I want to ask you about, Alex, has Bitcoin bottomed here?
Is this bear market over?
And where do we go from here?
Yeah, I don't know.
I think it is probably, you know, we're at...
What, 81K?
How could you not know?
You're the head of firm wide research at Galaxy.
You're supposed to be omniscient.
That's the beautiful thing.
We're at 80,000 right now.
That's the beautiful thing about Bitcoin.
It's not a monolith.
I might have more deeply informed ideas than the next guy, but I certainly don't know.
And I would say, look, at 80K, we're up 25%, 30% from the 58K February 5th wick there.
pretty durable feeling right now.
No doubt.
I think Bitcoin trades pretty well right now.
It looks pretty good.
I think if we look back, if later, there's a conditional hypothetical.
If later we look back at February 5th and it was the bottom, I think that could make a lot of sense.
It was a capitulation day.
Tons of fear.
We went from like 75K to 60K in like three days.
I will say the reason I'm hesitant to say that it was the bottom, I'd like to see Bitcoin retake some key levels.
The you know, the 100-day moving average, the 50-week moving average.
And I'd also like to, I think, just 100K is a psychological level.
You know, below 100K, people were sort of like, well, when we went below 100K, you know, at the end of last year, it didn't take that long to go a lot lower, right?
So I think people want to see that before it's like sort of we're not in a bear market anymore.
It doesn't have to retake a new all-time high just to not be in a bear market.
And then the other thing I would say is just the macro environment.
Very uncertain.
Beginning of the year, we put out our predictions and I declined to make a price prediction for the end of this year.
I said that the investing environment's too volatile and that I think I made a prediction of $250,000 by the end of next year.
Some people gave me crap and said that was a cop-out.
I said that the volatility markets at the time were pricing an equal likelihood of $150,000 or $50,000 by the end of this year.
I don't have the...
the vol markets and the options markets in front of me now to say what they're pricing at this moment.
But I think that's been largely panned out.
Like we went a lot lower after we said that.
And, you know, so I think, you know, with, I think with oil markets, unfortunately, even if, you know, snap our fingers and the entire Strait of Ramos issue literally wraps up in whatever the best version of it you can imagine is tomorrow, still could take six to 18 months to unfreeze these, unstick these oil markets.
restart or rebuild damaged refineries and production.
So I think that's a clear question mark.
I think you're also, that is leading to significantly higher inflation expectations that also could take a while to play out.
Most other economies are hiking rates right now.
You've got Kevin Warsh, who he's set to be voted on Thursday also, I think likely to become the next Fed chair.
You know, obviously it had been widely thought to be dovish.
You know, markets now in the U.S.
are pricing like not even quite one cut between now and the end of the year.
So, you know, no matter how a Fed chair's personal monetary proclivities are, you know, markets can force that.
And so like inflation is a risk here, not to mention, you know, a fracturing geopolitical world order into an...
recent history, unprecedented, multipolar type of order.
There's just a lot of uncertainty.
I like to think that in the face of uncertainty, Bitcoin should perform very well.
It hasn't.
It has sometimes on sort of spikier events, but in long-term risk asset downturns, it hasn't done that well.
I do think eventually it will.
I really believe that.
I believe it is fundamentally similar to gold in that way and should.
But gold doesn't just wake up every day and perform like a hedge asset.
It trades that way because people trade it that way, right?
And Bitcoin at $1.5 trillion market cap is pretty big as a standalone asset.
If you believe the stories I've seen out of private markets, it's worth one anthropic.
But it's an important and big asset.
It's on the screens of every macro trader, but not everyone is trading it.
I think it'll reach a point one day when...
It doesn't need everyone to own it, but everyone needs to have decided how they want to trade it.
And it's just, it's still only a 17-year-old thing.
And so I think, I don't know if we're there.
So I just caution, we could be in for tumultuous times.
I'm not really predicting that, but I think you have to be very wary of the uncertainty in markets today and be realistic about how Bitcoin might perform if markets take a turn for the worst.
I appreciate that sober outlook.
And yeah, I think I think that read of saying like, I'm not sure it's the bottom, but if it turns out it was the bottom, I get it.
I also think that the price range of 50k to 150k, it would be crazy if we ended up getting near both of those in this year.
But it seems like it is possible.
By the way, I agree with that.
I'm not I'm not trying to be bearish.
I think it absolutely is possible.
You know, we're up a lot from the from the bottom and we could go higher.
And by the way, like there are catalysts that could.
specific even to Bitcoin that could take us higher, right?
We're waiting on the Clarity Act.
I think that could be a big positive catalyst for Bitcoin and crypto markets.
Also, Patrick Witt has been teasing some forthcoming announcement about the Strategic Bitcoin Reserve.
I doubt highly that it will be that they've bought or are about to buy Bitcoin, but I think it would more likely be a formal declaration that the US government and thus the people of the United States collectively hold this much Bitcoin, which I think is a...
affirmative statement would be quite powerful.
And, you know, maybe they'll propose legislation to try to buy more Bitcoin.
I don't know, but that could be a big one.
And then, you know, just the tide of corporate and institutional adoption.
It is real.
I think Morgan Stanley may be the best example just of recent, of many recent ones, but the biggest wire house in the world, right?
Wire house, like a platform for registered investment advisors, obviously a big bank and a GSIB, as they say, globally systemic, important.
bank.
So that's important.
But the fact that not only are they recommending a 2% to 4% Bitcoin allegation for their clients, I don't know for all of them yet, but it's clearly coming.
They're also launching their own Bitcoin ETF.
And I don't know if people realize this.
I think Morgan Stanley directly only manages like 20 to 30 ETFs total.
Obviously, they think this is bullish.
Bitcoin is bullish.
They think their clients are going to own a lot of it.
And smartly, I think they'd rather just own the whole stack of the fee stack there.
I think they also applied for an OCC charter, so they might self-custody it.
The only other one that does that is Fidelity.
And Fidelity is among, first of all, dear to my heart since I worked there for 12 years.
But they're among the absolute most Chad-like Bitcoiners in institutional finance.
And so this is Morgan Stanley.
This isn't...
It's not Galaxy.
I mean, it's not a small little Bitcoin company.
This is the largest investment advisor platform in the world.
And I know people have been saying this, but it's still early in that game.
They haven't, you know, think about if it's like a gold, all right?
Not everyone owns gold, but like what percentage do you think like a Morgan Stanley portfolio owns gold?
I don't know.
And I'm sure I probably could get this answer.
Instead of research, I probably should have brought it with me, but I bet it's like 20 plus percent.
of every portfolio bitcoin it can't i would be shocked if it's in more than one percent still I did an interview with Rick Edelman, which is dropping on my Milk Road Macro channel today.
And he said he pointed out that a two to four percent recommendation of an allocation from a seven trillion dollar asset manager is a lot of capital.
So, yeah, a lot of alpha in that answer.
Alex, I really appreciate you coming on the Milk Road show, sharing so much so much insight and alpha and wisdom and being circumspect, keeping people's feet on the ground and their eyes clear at this very, like you said, volatile time in the markets macro wise and digital asset wise.
Where can we send people to find more of you and your work on?
Yeah, thank you, John.
Great to be here.
You can follow me at intangiblecoinsonx, my team, GLXYresearch, on X, or go to galaxy.com slash research to read all of our public research content an enormous amount.
I mean, the team's been absolutely cooking, by the way.
So go look at our latest reports and listen to Galaxy Brains.
It's a good pod.
John listens.
All right.
Well, thank you, Alex, for joining us.
Thank you all for being here and listening.
We hope you all learned a lot today.
So until next time, stay...
Stay bullish and we will see you all on the next episode of the Milk Road Show.
Thanks for being here, everyone.
Bye.