The Saylor Digital Assets Framework

Michael, welcome to the Network State

podcast. We're going to do a special

episode today uh where we go through

Michael Sailor's new uh roadmap and

digital assets framework. Michael,

welcome.

Yeah, thanks for having me. Really happy

to be here.

Awesome. Okay, great. So, you just

published this digital assets framework,

the principles and opportunity for the

US, right? It's PDF. It's gotten more

than half a million views. maybe you can

talk through it, say, you know, what

what you were thinking about when you're

writing this and and what the goal is.

Sure. Um, so first of all, for the past

four years, I've been watching the the

crypto debate go on, you know, in the

United States and everywhere else in the

world. And I think a lot of times

everybody's uh yelling and there's a lot

of talking past each other and and um

there's a lot of friction. And it seems

to me that if our goal is to move

forward in a constructive progressive

fashion, we'd benefit from a framework.

So I put together a digital assets

framework along with a set of principles

and uh I try to uh talk a bit about the

ideology, what's the vision and what's

the opportunity. And I did it from the

United States point of view uh because I

think the United States really needs to

lead uh in the digital assets uh arena.

And if they do, I think it's quite

likely that'll provide the air cover

that will allow similar digital assets

frameworks in in the Middle East, in

Singapore, in Japan, in Europe, etc. in

South America. So, let's um look at the

different steps. I've got a taxonomy, a

taxonomy of different assets. We talk

about how we legitimize uh these assets

and uh then what are the practices we

need in order to make how do we make

this practical and then uh the fourth

section is on the vision and the fifth

section is really the opportunity for

the United States. So,

so why don't we start with the uh

yeah exactly the taxonomy right so you

have six definitions there most of them

I think people have heard why don't you

go through them commodity security

currency token NFT and ABT I hadn't

heard the last term in that acronym the

asset back token but go ahead

so there's a lot of types of digital

assets a digital commodity is an asset

without an issuer backed by digital

power a digital security is an asset

with an issuer and it's backed by a

security. The third, a digital currency.

It's an asset with an issuer, but it's

backed by a fiat currency. A digital

token would be a fungeable asset with an

issuer. Then you've got digital NFTts.

It's a nonfgeable asset with an issuer

offering digital utility, but the

difference is you could have 10 million

fungeible tokens and we get that. But if

you have a 100 different NFTts and they

give you 100 distinct rights, then it's

something different than the token. Now,

the last one, digital ABT, assetbacked

token, a digital asset with an issuer,

but backed by a physical asset, backed

by a bar of gold, backed by a barrel of

oil. So, that's the taxonomy. They're

all tokenized assets, and we're talking

about tokenizing the capital markets.

And each one of these is a different

form of property. I actually like this

because it carves it at the joints

pretty well. Let me uh let me go through

and you see you tell me if I'm playing

this back correctly according to your

definitions. Right. So a digital

commodity that would be Bitcoin that may

be the only in your view is is do you

think that's the only digital asset

without an issuer?

I won't say that. I won't go that far. I

will say uh it's a very high hurdle to

issue a digital asset without an issue.

It's very hard. Right. It can be done. I

could um I could imagine other digital

commodities. For example, you could I

mean China could take Bitcoin, fork

Bitcoin, create Chinacoin and they could

say uh Chinacoin is like Bitcoin but it

has special tax privileges in China and

it's only interesting to the Chinese

people and 1.5 billion people. May maybe

something as simple as you're allowed to

mine Chinacoin in China with Chinese

power and you're not allowed to mine

Bitcoin. You would have um I if

everything else was the same if there

was no issuer, you would have in theory

a digital commodity. Maybe it's not

global property, maybe it's China

property. But the point is the real key

is if you want to create a commodity,

you need to create a network, disclaimer

beneficial ownership. And you can't

point to anybody that has control of the

destiny of the network or has some major

beneficial ownership of it if you're

going to achieve commodity status.

Interesting. Okay, great. So, so let's

say for now at least digital commodity

is Sweet Janeer. That's Bitcoin. And

then for your other things, all the

other five categories have an issuer. So

an example of a digital security would

be uh we would actually legalize crypto

equities or crypto debt, crypto

derivatives. For example, Uber in theory

could now put its assets on chain and

you know in another world Uber could

have given assets uh you know in its uh

in its company to its driver so that

they grew with the uh with the

organization. Can I offer just simpler

one which is yeah go ahead just micro

strategy stock if it was trading on

Coinbase or Binance 247 365 would be a

digital security right Apple Apple could

be you know a AAPL could be a digital

security now I'm not saying it would

only trade on Binance or Coinbase it

could trade on a it could trade on any

you know layer 2 or any tokenized

network to speak of but the point is it

would be one share a token that

represents a share of Microsoft stock or

Apple stock. It's backed by the stock,

but it's tokenized trading in the in the

crypto world.

Yes. And also, I think one of the things

we had been talking about offline was

you could imagine a site that allowed

mom and pop restaurants or, you know, um

like small real estate operations to

raise equity or debt once crypto equity

was legalized. And you could have people

from around the world do it. Obviously,

you need lockups. You need, you know,

various provisions for alignment, but

conceptually, you could actually get a

cryptographic stock certificate. You

could see all the provisions of it. The

blockchain would enforce time stamps,

all that kind of stuff, right? If I'm

not mistaken,

if you had um just just equity in a

private company, equity in a

million-doll restaurant, equity in a $10

million hotel, you know, any kind of

private equity, venture capital equity,

you know, any partnership interest, uh

any claim on future cash flows,

maybe you own one 100th share of my

Airbnb business, right? any of those

look like uh small private securities,

but if you had uh digital assets

framework, maybe you would publish uh

publish the relevant disclosures, sign

up to the relevant obligations and you

would um put those on uh a digital

exchange and they trade 24/7, 365

globally.

To me, this is so obviously what should

happen because let's say you've got a

hotel in, I don't know, Australia or you

know, an inn in in Brazil or something

like that. They can put up a website.

They can advertise for customers around

the world. And in fact, they can process

credit cards from around the world. Um,

you've got a motel in the Midwest and

they they're already processing cards.

They've already got a website that

anybody in the world can access. What

they can't do is capital formation,

which is obvious thing to do on chain.

And of course, you need all kinds of,

you know, procedures and so on for this,

but that's solvable, right? Is would you

agree with that?

I do agree with that. I I think that the

existing capital markets uh they require

you to take four years and $40 million

in order to create a equity which trades

with a four-letter ticker. And uh that's

the uh 20th century why we did it. But

what if we could do it in four hours for

40 bucks?

And and I think there's another argument

which is you know maybe uh in the 20th

century most businesses uh were uh

municipalbased or state-based or

nationbased. There's a lot of

international podcasters. I could have a

you know I could have an international

chess podcast with 800,000 fans spread

across every country on earth and it and

it would be very easy for me to appeal

to the fans to raise capital. What if I

wanted to sell half the interest in my

podcast to them? They would want to buy

it. I would want to sell it. But right

now, there isn't really a a

straightforward path to legit a

practical path for me to do that in a

legitimate fashion. And so, if I use the

20th century techniques,

I'm at a huge disadvantage and and I

won't be able to raise money. And so

we're really crippling the 21st century

global economy with 20th century rules

for capital formation.

Absolutely. And that actually brings me

to the next definition, the digital

currency. Right. So by your definition,

which is um what we call maybe a stable

coin, right? An asset with an issuer

backed by fiat currency. So example USDC

or um if you put um some other fiat

currency on chain, USDT might be that.

Um but USDC would be the clear version

of this where uh you have an onchain

USDC, you have an off-chain USD in a

bank account. And if you combine that

with a digital security, you could

taking your chess example raise USDC

from people around the world. All those

payments would be tracked on chain and

actually you could potentially click a

button and do your accounting and if

those people had whatever you know

profile information, you could

automatically send them stock

certificates. It'd be the equivalent of

Excel, what Excel was. You know, people

used to do accounting by hand as you may

remember with, you know, piece of paper

before spreadsheets came. I think

corporate accounting is kind of like

that now, but you could in theory have

all the transactions on chain, hit a

button, and it would just prepare your

books for you at least. U you know, you

decide which pieces of that to have, but

if you have both digital currency and

digital security, you could automate a

ton of compliance work. Let let me know

your thoughts.

I I think you've got I agree. what we're

talking about is tokenizing

a fiat currency or tokenizing uh a

checking account. So, I mean, the the

the trick to this is uh there's no

question everybody in the world wants

digital dollars. And there's no question

that if I if I live in China or if I

live in Europe and I have to pay in

euros or CNY, I want tokenized local

currency in those two frames of

reference as well. Just like in Brazil,

you might want tokenized uh real. Um, so

why do you want it? Well, you want it to

be programmable. You want to move it at

the speed of light. You want to vibrate

it a million times a second. You want 8

billion AIs to be able to trade with

each other 97,000 times an hour. You

know, it's like like the utility is

obvious. The challenges are you need the

nation state that issues the fiat

currency to recognize it as uh

legitimate and then you need to overcome

uh the privacy and the money transfer

issues that you know which pop up from

place to place. I think we make huge

progress simply by distinguishing

the difference between uh digital

currency which is really circle or

tether uh versus digital commodities

which is Bitcoin versus digital

securities which is your tokenized Apple

share versus a digital token which might

be any number of crypto tokens with an

issuer that are com you know that have

functionality in cyerspace or digital

utility but they're not securities and

they're not currencies and they're not

commodities. And the entire

cryptocurrency industry has been saddled

by this one name currency. And all four

of those things I just mentioned are

sometimes are sometimes referred to as a

cryptocurrency. And the result is you

just get massive push back and fear and

uncertainty and and doubt. And we need

to break them into four different

categories so that people understand

their four different things for four

different purposes.

I like this a lot. And so an example of

the fourth that'd be what most people

think of when they think of crypto as

opposed to Bitcoin. So that's Ethereum,

Salana, Zcash, Monero, something that

you know a fungeible asset that offers

digital utility that's in a portfolio.

And then something like a digital NFT, a

non-f fungeible asset with an issuer.

Now NFTTS are actually kind of

interesting because historically people

have thought of them as you know a

really expensive piece of digital art

like a million dollars for an NFT but

now you can issue a million NFTs for a

dollar. So you can issue like the

equivalent of likes or um you know

Reddit style up votes. You can issue

those on chain as little markers of

things. You can issue um a ticket for a

uh digital uh for a conference either

online or offline. You can use NFTs to

open digital locks. So um so NFTs I

think are pretty interesting. If a smart

contract is onchain code, NFTs are

onchain data. And uh I'm glad that you

have a distinction between the fungeible

and nonfgeible here at the digital token

digital NFD. Any thoughts on because

NFTs are on Bitcoin too as well.

Yeah, I I think if you if you just

characterize them as digital art, you're

kind of underelling them. I think we got

to think of them as as a unique digital

right. And yeah, I think about I think

about other types of rights like maybe

I'm Tom Brady and I post on uh some

channel like on X and I'm going to

actually sell 10 superfan tokens and

numbers one through 10 actually get

ranked and their response is underneath

me. If you always want to be the number

one respondent, you buy NFT Brady one.

And if you want to be number two, you're

Brady 2. And if you're number 10, you're

Brady 10. And and if you owned uh Brady

tokens 1 through 10, maybe that

guarantees you for all of eternity,

you'll always be one of the top 10

responses in that order. And there might

be some super fan who's willing to pay

$100,000

uh to make sure that their comment is

always number one, you know, underneath

Brady. It's like uh it's a special

right. Maybe it's a it's a it's a key to

unlock something, you know. Maybe it's

um maybe it is a piece of art. But I I

think well I get you know this is not

quite true. Uh, I'm going to give you a

physical analogy, an ABT. If I said to

you, this is a token that represents one

acre out of a million acres in Kansas

and they all look the same, right?

That's a funible token. But if I said

this is two acres, you know, in Palm

Beach on the beach next to the country

club, right? When you get to the point

where it's a specific piece of of real

estate and now we think about specific

real estate in cyerspace I can create

real estate in cyerspace right with

proximity

and priority.

So if you if you start to create things

that have some kind of priority or

proximity or uh or or or providence or

um or some uniqueness, maybe there's

something there that's interesting and

and of course the idea of the framework

is let's just give people the asset

classes and let uh create a Cambrian

explosion of innovation of which 99%

probably won't be economically

successful. uccessful. But on the other

hand, the 1% might be the Instagrams,

the the Metas, the, you know, the the

Teslas of the world and that'll be worth

all of the other trouble.

Absolutely. And I think actually, you

know, one thing I would just say on that

is I think of there being a spectrum of

fungeability. For example, you could

have a one of one like a digital Mona

Lisa. You could have, right, you take

your Miami example. you've got maybe 10

acres of land and each acre is its own

NFT plot. So that's like, you know, a 10

of 10. And then you could get all the

way, for example, to, for example, IP

address space. As you may be aware,

you've got four billion unique IP v4

addresses. And uh in theory, each of

those could be tradable as an individual

NFT. And uh that would be finite. That'd

be capped. There'd be a logic to it. Uh

but it'd be sort of once you start to

get to that point, they're they are

nonfgeable. You can't actually exchange

one with each other, but the pricing on

one might be similar to the pricing of

another. And so then then you get all

the way to like a fully fungeible token.

So I think there's being an interesting

continuum here. Um I don't know if you

have any thoughts on that. Then we can

go to ABT. It's a it's yeah it's just

obviously

a million thoughts part uh spark up and

we probably don't want to go down this

rabbit hole but I just think about all

the domains you know like when you think

about owning owning a domain like I

bought frank.com and emma.com and

hope.com and angel.com

great one yes

yeah like well I don't I don't know if

they're actually physical assets or

intellectual property assets but but you

might very well attach an NFT key to all

sorts of interesting unique things in in

cyberspace and then they start to trade

with the price and they can be

transferred at high speed right it's

just a a license

love okay great ABT so this is um

essentially uh something which is like

gold or silver or oil um it's

interesting you this is what uh it's

useful to distinguish that from a

digital commodity because when you use

the term digital commodity you mean an

intrinsically digital commodity namely

Bitcoin and perhaps uniquely Bitcoin at

least at this point as opposed to a

digital ABT which is often a commodity

like gold or silver or oil that is

traded onchain and so it's uh it's a

commodity but it's basically only traded

onchain as opposed to being

intrinsically digital. Would you would

you agree with that? Yeah, the

distinction is a a digital commodity is

an asset without an issuer. And and in

order to create an asset with an issuer,

you're going to have to back it with

some kind of digital power. Whereas a um

a digital ABT is a tokenized physical

commodity. And that means at the end of

the day, you're going to have a

warehouse with a hundred,000,

you know, little gold coins or or

100,000 barrels of oil or 100,000

bushels of soybean. And that means

there's going to be a custodian. There's

going to be an issuer repping to this

custodian getting audited. And now

you're going to tokenize whatever that

is. And you're going to tokenize it so

that people can move it at the speed of

light. So you can slice it. So you can

fractionalize it. So you can finance it.

So you get liquidity on it. So you get

transparency on so you can program it.

Amazing. So okay, great. You know in

math um one of my uh old professors used

to say you can define your way out of a

problem and if you have the right

definitions lots of things follow like

abstract algebra the group the ring the

field and then you can kind of just go

downstream from that. So with these

definitions, why don't we go to section

two, legitimacy? So like rights and

responsibilities, right? So um what you

want to go through this the path of

legitimacy, issuers, exchanges, owners.

Go ahead.

Yeah. I mean I think this all boils down

to there's three general types of

actors. There are issuers, people that

issue digital assets. There are

exchanges, anyone that trades custodies.

And then there are owners, people that

own the digital assets. Everybody needs

a set of rights that are clear. And then

there's set of responsibilities. If we

do it right, you could in theory have

millions and millions of issuers. And

you could have a lot of owners. And then

I don't know why there couldn't be a

100,000 exchanges dealing with millions

and millions if not tens or hundreds of

millions of issuers dealing with

billions of owners. What are we trying

to do? We're trying to create a global

real time uninterrupted process to

issue, trade, and own digital assets.

So, so in

Yeah, go ahead.

I was going to say I was I was very

closely involved with this at Coinbase

um because when I

joined a CTO at the time, Coinbase only

had four assets which are Bitcoin,

Bitcoin Cash, Litecoin, and Ethereum.

And um an important paradigm shift was

for us to internally realize that asset

issuers were also a kind of customer.

And taking your three definitions, you

can think of it as a two-sided market

where you have millions and millions of

owners and a few thousand issuers or

much smaller number of issuers on this

side. And in the middle is the exchange.

Much like let's say the New York Stock

Exchange has whatever hundred you know

stock issuers on one side and millions

of traders on the other side. It's like

a two-sided marketplace with these three

actors and then realizing that the

issuer is a customer. Sort of like

Airbnb has guests and hosts or or Uber

has riders and drivers. An exchange has

in your you know framework owners or or

buyers and issuers or sellers. And uh

the issuer is like a special kind of

customer. And of course an issuer in one

context could be a buyer in another

context. And you know often market

participants are both buyer and seller

in different contexts. And um I think

that

just having um you know some routines

and some conventions

uh you know with venture capital, one of

the things I learned over the years is

that every term that we had in a deal

was actually something that came from

some train crash in the past 20 or 30 or

40 years ago. Like for example, you

know, four-year vesting or lockups or

co-ail rights, all that kind of stuff is

meant to align, you know, you know,

dozens, sometimes hundreds or thousands

of people towards the same economic goal

where one party can't just dump on the

other party or what have you. all the

all the low trust stuff that happens,

you know, in in in certain parts of of

crypto markets, there are actually

solutions for it if you actually have a

organized two-sided marketplace of

buyers and and sellers of of owners and

issuers.

The challenge here is uh to let all

three of these players operate real

time, uninterrupted globally, but they

need to be able to issue, trade, or own

those assets. and and they you need to

see transactions between individuals,

corporations and machines. So how do you

actually create an API or a framework

such that the machines can trade a

million times an hour with each other

and they're all working for exchanges or

representing exchanges and they're all

representing issuers or individuals. So

you want a high-speed uh low friction

market. I mean, I think about, you know,

where would we be in the world if it

cost $40 million to set up a website? Or

it used to be if if we think about

computing, all the computing was

centralized IBM mainframes and the back

office. Or it used to be with

publishing, you you know, first it was

just the New York Times and the

Washington Post and the Wall Street

Journal. And then all of a sudden people

could set up their own website. But then

you got those blog services where uh I

mean 80 million people or 120 million

people could kind of use some software

as a service blogging service and and it

all comes down to you know to

structuring this the right way. So if

you look at the the next few paragraphs,

right, what we're talking about is

issuers should have a right to create

and issue digital assets and the obvious

responsibility is fair disclosure and

then ethical behavior. The exchanges

should have a right to custody, trade

and transfer assets between their

clients and with the other between the

other exchanges

and uh and the responsibility is is

publish the asset disclosures,

protect their client assets and then

avoid conflicts of interest. And then

for owners, owners want the right to

self-custody, trade and transfer their

assets. So, it's, you know, you're

you're back to the not your keys, not

your coins, but it's not so much an

obligation to self-custody that, but a

right to self-custody and and the right

to trade, the right to transfer. Um,

that's important. And the

responsibility,

comply with the applicable local law,

whatever that might be. And uh of course

what what I think is the big idea here

is create some foundation principles

like nobody has the right to lie, cheat

or steal. By the way, this is kind of

obvious. I I don't even know if you have

to you would have to say it except for

the fact that if you started from from

the observation that people don't have

the right to lie, cheat, and steal,

there's probably a 100,000 pages of

regulations you wouldn't have to publish

because most of them all boil down to

that. And if you simply made those those

three observations and then you noted

that participants are civily and

criminally liable for their actions,

you might very well eliminate a 100,000

pages of regulations, years and years of

review and somewhere in the range of $10

million a year of compliance costs with

lawyers and all the back and forths that

go that go into this process. So, I I

think that that's a place to start.

Well, the thing actually, you know, it's

funny when I looked at this, I was like,

"Wait a second, there's only three

pages." And um but I like how you've set

it up because you're right that by just

articulating those sort of ten

commandment like principles that

actually does distill the the intent uh

or at least the stated intent of so much

regulation is all the disclosure stuff

says you're not hiding something. It's

not a material misrepresentation. Um aka

don't lie, right? or you're, you know,

for example, a disclosure of when an

executive is going to sell what amount

of stock. Don't cheat, right? That kind

of stuff, right? So, lots of specific

things are sort of downstream

implementations of these sort of very

simple ten commandments style moral

directives.

And yet, it's it's back to this issue of

of it pops up in censorship. You know,

the question is,

do I have to hire a hundred lawyers and

file um paperwork with the regulator for

three years before I can publish my

opinion on X? Or can I actually publish

the thing that I wrote on X with an

understanding that if I slandered

someone, you know, if I lied, if I lied

or I cheated or I stole through my

misrepresentation,

I have civil liability. If I publish

something that gets somebody else

killed, maybe I'm going to get tagged

for manslaughter.

But, you know, we have examples in um

product development and in the media.

Yeah. You don't it doesn't take $40

million to design a product and sell it

to someone.

But if if you create a product that's

unsafe and you sell it to them and it

kills them, you do have civil liability

that the thing you sold killed the

person, right? So there's a lot of

industries that function with this this

set of observations and those are

industries where people can do thing in

one day or do something in one week. But

at the point that you implement a nanny

state and you take the position that no

one's allowed to say or do anything

until it's gone through lay progressive

layers of sensors. What you really do is

you choke off 99.99%

of all innovation.

Absolutely.

Everything stops.

It It's a difference between, you know,

pre-market review versus postmarket

review. Um, do you presume everybody's a

criminal or do you um allow people to

transact and then make clear that

criminals will be punished afterwards

and what criminal behavior actually is?

It's not really it shouldn't be a

process violation. It should be a

principal violation. You know, one other

thing I wanted to say is is that um the

the concept of buyers and sellers being

connected by an exchange as a two-sided

marketplace um is so obvious, but there

is actually one very unique aspect of

crypto versus traditional stock markets.

So maybe you have some thoughts on this

with traditional stock markets like when

a tech company files to go public it's

only choosing between NY and NASDAQ

let's say at that time and they do

compete for the business and you know

what have you uh but then after that

it's not easy I don't think it's

actually I'm not I'm not aware of uh

prominent examples um maybe it's

possible but to to move the asset from

one exchange to another from NY to

NASDAQ is not that easy number one and

then number two is there's no equivalent

of send and receive. People can't like

load their NY shares on or their let's

say their FB shares onto NY, pull them

out, self-custody, load them onto NASDAQ

and trade there. It's not the equivalent

that you have with Bitcoin. Now,

conversely, in offline markets, if you

have um let's say a farmer has a bunch

of apples, they can go and sell them at

this supermarket or that supermarket.

They have the send and receive

equivalent, but they don't have the

speed and the global aspect of the

digital. So, this kind of two-sided

marketplace combines the scale and speed

of digital markets with the optionality

of physical markets where you can

withdraw from one market and, you know,

go and sell on another market. Let me

know if if uh you have any thoughts on

that.

Yeah. Well, what we're talking about is

conveying property rights to all of

these 20th century assets that don't

currently exist. For example, right,

like I have a bunch of Apple shares, but

I can't take custody of them. The 20th

century world is is one or two

settlement networks, one or two

custodians, one or two exchanges. you

have a a very limited set of options and

there isn't really a competitive market.

So in a world where you had 1,500

digital exchanges in every place in the

world and they could all handle any of

these assets. Sorry. You might um you

might see someone that wanted to give

you a credit line on your Apple stock or

they wanted to give you a yield on it or

you know maybe your bank will give you

an advanced ratio of 50%. But there's a

bank in Europe that'll give you advanced

ratio of 95% or they'll actually give

you a mortgage where you can top up, you

know, with tokenized, you know, barrels

of oil or right, you could have

competition if there was competition.

But the problem is uh there isn't

competition. The the owner of the asset

doesn't have the right to transfer to

take custody to transfer custody

to uh to shop out the asset to the near

uh to the highest bidder. And maybe more

to the point, what if I had an AI

program and it had my entire portfolio

of assets and every minute of the day

while I'm sleeping, it's actually

gathering a bid from 150,000

corporations all around the world,

asking them for the highest bidder for

me to loan out the assets or custody

assets or or or whatever they want to do

with them. and um and it's just in a

fluid way moving my capital all around

the world in order to get me what I want

within my risk parameters. That that can

happen in a tokenized world, but if your

asset is 100 acres of Kansas City real

estate in the suburbs, there's like one

bank in Kansas City that may or may not

want to finance it. And if that bank is

not interested,

no other not none of the other

hundred,000 banks in the world are going

to want to touch that asset.

Yeah. And I think um one thing that's

interesting is scale enables the

longtail. Scale is actually good for the

small because if there's only 10

lenders, one of those lenders may not

want to take a chance on some small

business. But if there's 10,000, then

one of them may actually want to take a

chance on that small business. There's

more risk tolerance. If you have larger

markets, you know, there's people who

are willing to try out smaller things,

you know, and um it's kind of like, you

know, with enough drivers, somebody will

be able to pick you up at, you know,

they will take the job of picking you up

from this street in this suburb and

drive you into New York or or what have

you, right? Um, so there's a sense in

which the scale is actually very good

for the little guy because it allows

them finally to have access to the same

capital markets that the big guys do,

you know, and I get to that um in my

section four of the framework here on

vision.

So why don't why don't we go why don't

we go to section three and four. So

three practicality, right? Rational

compliance to empower innovation. And so

I think this is related to thou shalt

not lie, cheat or steal. You're really

trying to bring it back to simple,

short, go back to the spirit of the law

rather than the letter of the law. Why

don't you talk about this?

Well, the first principle is we want to

prioritize efficiency and innovation

over friction and bureaucracy. The

existing system prioritizes friction and

bureaucracy. Everything takes too long,

too many lawyers, too much money. So how

do you how do you prioritize efficiency

innovation? Well, you start with simple

principles like don't lie, cheat and

steal.

Then you define data structures for each

asset class. You know what what are the

common data structures, right? This is I

mean this is how you write a computer

program, right? It's not that

complicated. If you know if for example

you want an ABT, you want to know what

kind of asset is it? Where's the asset

stored? you know how do I know the

assets there how many of the assets are

there who's the counterparty

etc and uh you would have a different

data structure for a currency versus a

token versus an NFT versus a you know a

commodity but once you define the data

structures every digital exchange in the

world can support those data structures

and then you can pub you can create a

client that publishes the data

structures you create all the audits so

that's standardized disclosure that

reduces the friction. You know, instead

of like 200 pages of custom legal ease

for every security, you've got one data

structure and you convert a threemonth

process into a 3hour, 3 minute or 3

second process. And the second idea is

industry-ledd compliance. If you define

the data structures

then the exchanges can collect and

publish the data you know as a service

to the in to the issuers to the

investors to the other traders etc. And

that helps you get to the third element

here which is cap the cost. If you want

it to be uh a real business, you can't

afford to spend more than 100 basis

points of the assets you issue in order

to issue them. So if you're going to if

you're going to raise 100

that's a lot, by the way, 100 basis

points for people for people who don't

know like one basis point is 10,000th.

So 100 basis points is like 1% of your

asset. That's extremely expensive uh to

uh Go ahead. What I'm saying is if you

wanted to raise a hundred million, you

definitely can't spend more than a

million. Now, 1% might be a big

investment banker fee or a fee you might

pay. I came public and when we came

public, sometimes, you know, the fees

were up to 6% for a small deal, 3% for a

bigger deal. But, you know, uh we might

pay 1 or 2% for a big deal if we're

doing a bond deal. But here's my point,

the big point. It costs $10 million a

year in order to stay public, to be

compliant, and you might spend 30 or $40

million to get public. And so, it's

pretty obvious that if you want to raise

a million bucks, you can't pay $40

million for an insurance policy. And you

can't spend 10 million a year in order

to raise a million, right? It's kind of

like saying you got to basically buy a

$10 million insurance policy to publish

a website or express opinion on X, you

know, it's it's or or to post a video on

YouTube. You got to buy a $10 million a

year, you know, liability insurance

policy.

They were trying to push the world in

this direction over the last few years,

the establishment was, and fortunately,

they lost, but they were trying to do

this.

Yeah, I I definitely can see it. And

here's the sad fact, Belgi, which is

they did do it in 1933 for all for all

publicly traded assets. They didn't

lose. If you read the history of money

and banking by Murray Rothbard, like

something like 50 years ago in the last

century, he wrote about the formation of

the modern SEC and he writes about the

SEC 33 act. And one thing that he points

out long before the crypto industry was

formed is he says

the SEC uh 33 and 40 acts, they were put

in place to centralize control over the

capital markets in Washington DC and

limit access to the capital markets to a

very small cartel of large issuers that

could be overseen by the government. And

you know he has another observation. and

he thinks it was the Rockefeller's

interest edging out the JP Morgan

interest and shutting down too much

entrepreneurialism in New York City. It

was a DC because I wanted I wanted to

put something on screen for a second

which is exactly this. The SEC

essentially was set up to limit

selfallocation, right? To put allocation

of economy placed under federal control.

A planning agency would assign capital

industries and then aortion the allotted

capital right the need would decline

right so a federal planning agency not

the security industry would operate the

process by which capital is allocated

through the economy so the this was the

whole point of the SEC was step one

control capital allocation in the

economy itself right and just go ahead

yeah you think about it and you know I

think there's a certain Stockholm

syndrome Or you remember in the in Star

Wars they say these are not the droids

you're looking for and there's this Jedi

mind trick.

It's like you know raising money from

the capital markets is not for you.

You're too small. That's not for me. I'm

too small. That's only for billiondollar

mega corporations but you're not that.

So oh raising money is not for me.

Used to be like that. It used to be that

a small cap could you know could get out

there. It's modern Sarboxes make it so

expensive.

Yeah. Yeah. So, it comes down to the

issue of are you going to let adults

take risks and lose their money, right?

Are are you going to impose a $10

million insurance policy to keep someone

from taking a $100,000 risk? And if you

do that, the result is that 99.9999%

of the action can't take place because

of the crippling regulatory burden.

because the government wants to keep

anybody from taking a risk or or losing

their money or making an investment that

might not pay off. And and you know it

comes down to a a free market view. Do

you believe that free markets will make

the right decision?

Or do you want a centrally planned

economy? And do you think a set of

bureaucrats at the headquarters should

just decide every single business

decision and every allocation of labor

and capital, you know, and talent in the

economy so as to quote unquote not make

a mistake.

Well, take a look at this. So this is

the peak number of listings was mid90s

and then especially after Sarbox and so

on it basically just fell off a cliff to

almost you know 70% drop in the number

of you know listed equities because the

price went up so high and I thought your

phrasing just now of $10 million

insurance policy to prevent a $100,000

loss by somebody is really good way of

thinking about it where the insurance is

so expensive basically people are only

thinking about risk they're not thinking

about reward and they're not properly

calculating the cost of that risk and

the whole thing is just a pile of

paperwork versus being rational about

it. Yeah, I' I've lived through it that

Bellagi because I came public in 98 and

I think there were about 10,000 plus

public companies but over the next 20

years

60% of them disappeared and basically

what what happened was with Sarbain

Oxley and and with with the encroachment

the progressive encroachment of the

regulators on the public markets um it

just became so brutally painful and

expensive and risky and anxietyinducing

to be a public company.

People just said, you know, screw it.

I'm just not I don't want to do this

anymore. And they all went private. And

um

paradoxically, that led to the rise of

the great tech companies because it

meant that Zuck and others did not could

not for many years in tech the

wisdom was don't go public. Go public as

late as possible. And the good thing

about that is it meant that they

controlled their companies all the way

up and so they could have voting control

and they could make bold decisions and

so on. For the public, the bad part is

that they actually missed out on the

upside of that. With Bitcoin or with,

you know, cryptocurrencies, they

actually have an ability to get that

upside, but for many of the giant tech

stocks, most the upside happened before

the public markets. There's exceptions.

The big exception being Nvidia but or

Apple arguably but still it's something

where a lot of the upside was not

available in the public markets because

of that. Let me know your thoughts.

Well I you know I think there's about 50

40 to 50,000 publicly traded companies

in the world. There's 4,000 in the US.

But that even that really understates

the problem because of the 4,000 in the

US. There's only about 400 or so that

are well-known seasoned issuers. So that

means there's 400 companies, maybe 600,

that can file a registration statement

and sell securities the next day or

within a couple of days without waiting

for approval from the SEC or from a

regulator. Um, on the other hand,

there's 400 million businesses that can

express an opinion or create a product

or improve a product. So if you look at

if you look at the economy for products

and services, it's evolving at a very

rapid rate. But if you look at the

economy or in the capital markets and

you look at the rate at which we can

develop capital assets, uh they're

crippled and evolving at a very slow

rate. Um yeah, if I want to do something

as simple as maybe I want to tokenize a

Picasso painting, well, you own the

painting. it's worth 10 million bucks

and you want to sell a hundred shares of

it and you'd like to float that, you

know, on an exchange. There's a global

market for it. People would like to own

it, but it would cost you $40 million

to take a company public and 10 million

a year. So you see at some point

it just you can't capitalize

you can't legally practically tokenize

an asset that isn't a billion dollar

asset. So what we've done is we've just

uh we've capped the market such that if

you're not running a billion dollar to

trillion dollar enterprise the capital

markets don't work for you. Right. and

and the crypto economy, the crypto

markets, they've tried to overcome that.

Uh and they've issued millions and

millions of crypto assets, but um they

they haven't been legitimate. They've

been deemed illegitimate, and that's why

we've had the war on crypto. And so this