Is the future of crypto under attack? Caitlin Long, Founder and CEO of Custodia Bank, joins Anthony Scaramucci to reveal how political forces and regulatory battles are creating a challenging path for the crypto industry in the U.S. From the difficulties facing crypto entrepreneurs to why Bitcoin could power the AI economy. Caitlin shares her insider perspective on what must change for America to reclaim its leadership in financial innovation — a movement she and her home state of Wyoming are spearheading.
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Caitlin Long 0:00
Of the mess in the financial system is ultimately caused by one simple problem, which is that the data leg of transactions moves at the speed of light, but money was gold, it was physical, and so it was limited by the moving the speed of matter. And we’ve basically abstracted that very time difference away with all these layers of, you know, netting and settlement that settle in sequence to try to solve that very problem. But this technology cuts through all that so that the money leg can settle at the same speed of light that the data lake can settle on every single transaction, and we will get there during our lifetimes. So Sorrentino
Anthony Scaramucci 0:43
media, and welcome to speak up. I’m Anthony Scaramucci. Our guest today is a dear friend, Caitlin long founder and CEO at custodia bank, and also a Harvard Law School graduate alongside of me. Can you imagine that’s too long ago, though, Caitlin, I got like lying about my age before we get into the show. Don’t miss wealthions, live coverage of the fed with Maggie Lake. That’s next Wednesday, September the 18th, at 2pm we know the Fed’s going to be on the move. We don’t know which way, but we think they’re moving for an interest rate cut, and I think that’s going to be a great show. So please join us there. You can find Caitlyn on x at Caitlyn long, and then there’s an underscore right after the G. So it’s Caitlyn long with an underscore right after the G. Search her. She’s got a great feed. She’s a great friend. She’s the founder and CEO of custodia bank, 22 year Wall Street veteran who’s been active in Bitcoin and the blockchain since 2012 Caitlin, I needed the phone call in 2012 You should have said, Hey, mooch. You got to get into Bitcoin. I got there late. Girl,
Caitlin Long 1:53
in 2018 back then,
Anthony Scaramucci 1:55
I know I didn’t understand that. I probably, I was, I was, you know, I was probably told about it and I didn’t understand it. I’ll tell you. I’ll tell you interesting story about me and Hal Finney in one second. But anyway, in 2018 and 20, she led the charge to make her native state of Wyoming, which is literally one of the most beautiful places in the world, okay, and oasis for blockchain companies in the US. And she helped Wyoming enact 20 blockchain enabling laws. Okay, so many other things that she’s done. Katie from Harvard Law School, Kennedy School of Government. She went to the University of Wyoming. I hope I’m flattering you with this bio, by the way, because it’s an it’s an incredibly impressive bio. And one thing about Wyoming, in addition to being so beautiful, it punches over its weight, and I think when we eventually write the history of Bitcoin, 50 years from now, it’s going to be Caitlin long in the state of Wyoming led the United States back towards financial innovation at a time when we had some ancient fossils in Washington that didn’t understand what was going on and was trying to block the innovation. It would be like, it would be like horse and buggy riders saying, hey, drop that horseless carriage thing. We need to stick with the horse and buggies. But, but anyway. Um, Caitlin, thank you for for coming on. I want to start with your personal journey. Tell us a little bit about the arc of your career and how you ended up on the blockchain. Well,
Caitlin Long 3:22
born and raised in Wyoming, like you middle class kid who, you know, just did well, and, you know, made it to Harvard Law School, that was the launching pad, and went to Wall Street to pay off my student debt. Stayed there 22 years, and got the Bitcoin bug in 2012 like you were alluding earlier, back then, I had to keep my head down, because, you know that I wasn’t sure how the tradfi world would be thinking about it. And then Jamie Dimon came out and said he’d be firing anyone who worked for JP Morgan. I was at Morgan Stanley at the time who got involved with it, so I was keeping my head down. But it was kind of fun that there was a chat group that got started at Morgan Stanley, and I had the proverbial gray hair. I was the only one who did most folks were, you know, pretty Junior in their careers. And because there’s definitely an age skew on on the especially the early adopters here, and the CTO of Morgan Stanley called me out of the blue and said, Hey, I see you in this chat chat room. This is probably 2014 and said, Get up here and tell me what this is. And so we started working together, and I left left tradfi In 2016 to work on on this full time.
Anthony Scaramucci 4:32
Yeah, it’s phenomenal. And I have to ask you this question. I ask a lot of people. I was with Michael Saylor earlier in the week. We both spoke at a conference together. Michael’s writing the forward to my new book, and I asked him about his eureka moment. What was your eureka moment? You know, where did the rock hit you? The Apple hitting you on the head? Saying, Okay, this is transformative. This piece of technology. Other people are going to think it’s worthless, but this piece of technology is going to be worth trillions of
Caitlin Long 4:58
dollars. Well, it started. It’s two things. Actually, it started with after the 2008 financial crisis, I got very curious about the inner workings of the financial system, because the mainstream explanation for what happened back then just didn’t make sense. It’s blamed on the subprime mortgage market. But I figured out that that was the symptom, not the root cause. The root cause was interest rates had been held too low by the Fed and Geithner back then the treasury secretary said that. But then on Charlie Rose, but then two weeks later on, Meet the Press. I think it was he said that he was trying to urge the Fed to cut interest rates even more. And that just was a contradiction. So that got me going down alternative schools of economic thought, and that’s where I first started to see Bitcoin talked about in 2012 but I was also working on the first ever very large pension settlement transaction between General Motors and Prudential in 2012 and you know from your business, the back office of of the financial system is a mess. It’s just a jumble of of just in the tech world. They call it tech debt. It’s really operational debt. Why do we have all these layers of intermediaries? Why do they have to settle in sequence? If something goes in this so called swift black hole, an international payment, it gets lost and you can’t track it for days. It’s a mess. And so I pretty quickly figured out that the mainstream application of this technology was to cut through all that cruft and simplify. Lynn Alden likes to say that all of the mess in the financial system is ultimately caused by one simple problem, which is that the data leg of transactions moves at the speed of light, but money was gold, it was physical, and so it was limited by the moving the speed of matter, and we’ve basically abstracted that very time difference away with all these layers of netting and settlement that settle in sequence to try to solve that very problem. But this technology cuts through all that so that the money leg can settle at the same speed of light that the data lake can settle on every single transaction, and we will get there during our lifetimes.
Anthony Scaramucci 7:05
I want to, first of all, it’s a brilliant explanation, but I want to add something and get your reaction to it. At the same time that you’re creating this speed of light transfer, you’ve also got something that these people created, or maybe it was one person, Sebastian Nakamoto, feels like it was maybe a programming team, but they figured out a way to create hard money. Yep, and so money is you and I both know because we’ve studied it, uh, ad nauseam, is a database. Your bank is just a very big database. Money itself is a database the digits in my pocket or database, I give them to you, you give me something for it. Now your your database goes up, my database goes down, but I’ve gotten the servers or the good and so we know this, and so they created this incredibly hard, beautifully transparent, openly, dispersed database that can be verified by the hundreds of 1000s of people on the database. And so therefore it becomes trustless, because we’re trusting the system. Yeah, and what you and I both know about prior systems, the money. It gets corrupted. The money gets cheapened by the government. The money gets weakened. But here is this database. It’s incorruptible because there’s only a fixed supply of it, yet it can be broken down at the 100 millions of Satoshis per per Bitcoin. So I want you to react to what I’m saying, and and then I want to ask you a question about that. So is that okay? Because if we go through a boom bust cycle, what the governments have done, and boom bust cycles, they make more money. Is it okay to have this hardened database, as opposed to have that flexibility that the government has had in the past? Is that, is that flexibility good or bad?
Caitlin Long 9:02
Well, ultimately, to your point, that flexibility is bad because it gets corruptible. And if you look at the history of reserve currencies, of which the US dollar is the dominant one right now, what does that mean? It means that’s the currency of international trade and and the dollar dominates by a long shot and so, and I don’t see that changing in the short term, but Bitcoin, to those who have financial privilege, including in the United States and the developed world, is digital gold. Those who do not have financial privilege are using it as money, but for the most part, it’s not used in in, you know, consumer transactions in the United States, because our system is as as horse and buggy back end as it is, does have a Ferrari front end, and it’s good enough, right? When you go to dinner with your friends and you split the bill, Venmo makes it look like it’s the transactions have settled. So immediately, what’s going on behind the scenes is very different. It takes a couple of days for those things to settle, and there’s credit extended by one bank to another while those transactions are weaving their way through the spaghetti of the back office of the financial system. But you don’t see that, and so most Americans don’t look at this, this uncorruptible money and say, That’s great. I want to start transacting in it. Most of most Americans, if they’re using it, are using it as a store of value, which is also a use of use of money. But back to your question, fundamentally, the dollar has been corrupted. Look at how much I mean. The Fed’s balance sheet was 850 million before the financial crisis in 2008 and and it’s topped 10 trillion. It’s shrunk back down. Now, I haven’t looked at it recently, but, but that’s not good. What is that that’s diluting all of the dollar holders in the world of which most of us are American. We have gotten away with it because they’ve been able to suppress interest rates and keep the cost of the debt down. But that won’t always be the case, and so that’s one of the reasons why so many people are looking at Bitcoin as a better version of gold, not saying that it’s I’m not recommending one or the other. There’s room for both. And I think just like we’re going we’re really in a multipolar world, geopolitically, where the US is not as dominant as it once was. That’s going to happen with the dollar as well, precisely because we just abused it.
Anthony Scaramucci 11:31
You know, I obviously, you know, I love hearing you talk Caitlin, because I completely, I’m in total intellectual syncopation with you. And I, I agree with I agree with it, I guess. I guess one of the things that I’ve troubled with in my life, and I want to get your reaction to this, we have and our founding fathers figured this out. We have to live in a society where people think differently than we do. We have to actually live in a society that has Gary genslers and Elizabeth Warrens, and we have to live with these people Yeah, and so, so, so, how do we win the argument, and, and, and, since you went to law school and I went to law school, we have to understand their argument, right? We have to understand their argument in some ways better than our own argument, so that we can, we can have our argument the winning arguments. Tell me their argument, tell me what their argument is. And if you don’t mind, point out some of the flaws in their argument, and if you think some of the things that they’re saying make sense, tell me that too.
Caitlin Long 12:29
Sure. Sure, absolutely. Their basic argument is what Elizabeth Warren told Chuck Todd on Meet the Press. She wants a central bank, digital currency. That’s what is at bottom really going on. She believes the government should control all of this technology, and we should not have private sector versions of it. Another point that I would concede from their argument is that anytime money is involved, you’re going to get criminals and fraud, and that the this technology has not because it’s a bearer instrument. At bottom, it is especially susceptible to fraud and and, and there hasn’t been a regulatory apparatus at the federal level built to essentially do what I like to use the analogy of voice over internet protocol. Bitcoin, to me, is money over Internet Protocol, and it’s part of the the group of protocols like TCPIP that are that are the foundation of the internet, and we will get to the interaction of Bitcoin and AI in a moment, but it is a foundational technology, just like Voice over Internet Protocol. What happened when Voice over Internet Protocol became pervasive 15 years ago, the tech companies adopted it. Their regulators let them, in fact, let them, let them get rid of their old copper wire networks that they used to have to maintain and replace it with this new technology. And what did what did the end user see? Virtually nothing. They probably didn’t even know that their phone calls. They knew their bill was going down, but they didn’t know that their phone calls were going over an Internet Protocol instead of the copper wire networks. And that’s going to happen here as well, but only if the the regulators allow for people to voluntarily stay in the regulated, so called lit system. There’s no genie that can be put back in the bottle with these technologies. You do not need an intermediary to transact in them, but intermediaries provide value for things, the same things your phone company does, security, user interface, they make it easy to interact with these complex protocols, and that’s what our financial institutions are going to do. They’re being blocked right now because Elizabeth Warren wants the Fed to be the only provider of these technologies, and she wants all of the private sector companies to get rid of them. What she’s to fail, what she’s missing, though, is that into that vacuum, the fraudster stepped, and so she has allowed because of that policy. See The FTX is and the block fives and the Celsius is of the world to exist. Had we had the regulated financial system be able to provide these technologies, those companies would never have succeeded for as long as they did so.
Anthony Scaramucci 15:16
So it’s the old versus the new, though, right? I mean we look at it, I mean Democrats and Republicans. And, you know, I’m for bipartisan commitment to crypto and bipartisan regulation, and obviously, and I, and I’m a fair person, so I applaud President Trump now, Candidate Trump, siding with the crypto enthusiasts and siding with the blockchain and Bitcoin and but what I don’t want to have happen is it becomes this polarizing, partisan issue. I want it to be holistic and bipartisan, and we know that the younger Democrats are for it. Rocon is for it. Gillibrand is for it. Even Schumer has spoken out about trying to get legislation passed. What? What? What are we missing? What? What are we missing? See, it’s for me. I’m going to say this to you. I think Elizabeth Warren is one of the most powerful people in Washington. You say she’s never passed, never passed a law. She’s ineffective as a US senator, representing her state, but she has figured out a way to get her accolade acolytes and minions into the White House, into treasury, into the Fed, into the SEC correct, the result of which her agenda is being prosecuted through the administrative state. What’s your reaction to that?
Caitlin Long 16:29
It’s 100% true, and I didn’t know that until custodia was unlawfully denied by the Fed, and it was a very public denial in january 2023, for your listeners, the most important piece is that we started to have insiders come forward as early as that weekend to tell us this was all Elizabeth Warren who orchestrated the whole thing, and that she was pulling the puppet strings at the White House and at the Fed and at the SEC and the FDIC and the OCC So these federal regulators, and it took me a while to figure out what was really going on, but I think it’s now not even a secret. It’s openly acknowledged that she had a deal with Biden, that she dropped out of the race in 2020 I can’t prove this, but it’s again, now openly known she dropped out of the race in 2020 and endorsed him if she got control over financial services and economic policy, including all of the political appointments, there are enormous separation of powers. Problems with this. To your point, history is going to vilify her and vilify Biden for what they agreed to here. It was never disclosed to the public. Had people known that she was going to be the acting president of the United States in these areas, they would not probably have voted for him. It was a close election, but the press didn’t do its job, and they and, you know, apparently she and Biden kept that secret, and he is an old school politician where he apparently keeps his word. And multiple people have confirmed, including insider Democrats, that that was a one term deal, so even if Biden had been reelected, that she she was not going to be able to keep that power. And here’s to looking forward now, the Harris campaign is not honoring that. It’s been really interesting to talk to both sides. As I’m doing, I don’t make endorsements, and I try to help the including the Harris folks who’ve been talking to me, they are actively working on her campaign. The Pro crypto group is crypto for Harris and women for crypto who are talking to her campaign, trying to get her to to just get these Warren knights out. But she’s if she wins the election, Anthony, she’s going to have a tough job, because the Warren has put her accolades deep in these in these departments, and there’s going to have to be not just a house cleaning of the political appointees, but the senior staff levels. And I just saw an article this morning that there’s been an allegation of Gary Gensler having a political litmus test for for job seekers at the SEC and I absolutely believe it. I think that’s been across all of the financial services agencies. So whoever wins, even if it is Harris, she’s not in alignment with Warren, she’s got, she’s got to do some serious house cleaning, because it’s going to take at least a year for whoever wins to get all this, get all these people out and get the policy changed. It’s gone pervasively. I won’t even share some of the details that I know of just how deep it’s gone into these agencies. It’s nuts. You
Anthony Scaramucci 19:30
know, I listen, I’m I worry about it. I’m aghast by it. I’m going to say something here that is going to get me in trouble with some people, but, you know, I think John Deaton can beat her. And what I worry about is that if vice president Harris ascends to the presidency and Deaton beats her, she’s going to end up with a agency, she’ll end up at the SEC, she’ll end up at the Fed, God forbid, you know, or she’ll end up as Treasury secretary. Matt. Imagine that. How bad would that be? So, so, you know, it’s just one of these really weird things in politics now, where instead of focused on what’s right or wrong, some people are focused on control and America. America is at its best when it thinks like Wyoming, okay, and what? How does Wyoming think? Free? Freedom, libertarianism, have your own plot of land. Do your own thing on your own plot of land. Let’s obviously, we don’t want to hurt each other, right? As long as they’re not hurting each other, we should be able to do whatever we want. So, so, so I want to, I want to go to custodia for a second. So for people that listen into this podcast or this show on wealthion, may not know custodia, so start from the beginning. Tell us what custodia is, and tell us what the Fed did to you. Yeah, we’re
Caitlin Long 20:50
a business bank designed to serve this very industry that is our mission, the digital asset industry. And in the beginning, both the State of Wyoming and custodia had great relationships. We were going down the process after custodia got chartered in 2020 and it had making progress getting set up as a bank. It takes a couple years to set up a bank. Incidentally, there are about 4500 banks in the United States. Almost no new ones have been set up since the 2008 financial crisis, and when I started in my Wall Street career, back in the 90s, there were 10,000 banks. So the consolidation that has happened in the banking industry has been pretty extreme in the last 40 years. And frankly, these regulators don’t want small banks to exist. They want to they want the Canadian or European model, a very small number of very, very large financial institutions that they control. But I digress. So for custodia, we were set up to service this industry. We were trying to bring this industry into the so called bank regulatory perimeter. Wyoming worked with the Fed for more than two years, meeting weekly about this new initiative, and it was all going great, and then all of a sudden, rug full. And that happened. We got we got blindsided. It happened in January 2023, we now know from discovery custody, sued the Fed and its public information that Vice Chair for supervision, Michael Barr, who is a wara Knight, one of her appointees was the one who made the decision to deny custodia two weeks after FTX failed. And if you look at the public disclosures, it’s a parade of horribles, mostly about how risky crypto is. And I have to say, Anthony, this is pretty crazy, because you’re aware the SEC this week confirmed publicly what we’ve known for a couple months, which is that the Fed is letting the big banks get into the digital asset business. So while they’re saying that crypto is so risky, what they’re really doing is blocking all of the innovators and letting the big banks get in first. Yeah.
Anthony Scaramucci 22:57
So I mean, but this is going on Big Pharma, big food in the country, which is obviously puts limits on innovation. We need to foster small business growth in the country. We both know that that’s really where the jobs are, sure, and so, you know, I appreciate, I wanted you to come on, because I wanted you to explain this to people and get to get your voice out there as much as possible. But, but sab 121, which, if I understand it correctly, has basically prohibited these large banks from holding Bitcoin because they have too much of a capital charge. If they’re it’s sort of ridiculous, but I just, I’ll say it. I mean, if I have my bitcoin and I put it in custody at a bank, they get charged capital for that, so therefore they can’t really hold it. Banks want to get rid of it. Where does the SEC and the Fed stand on that? Obviously the Biden administration said, let’s leave it exactly the way it is. Where do you think that’s going?
Caitlin Long 23:52
Well, let’s step back. What was sab 121, it was the SEC breaking with us. GAAP with the Financial Accounting Standards Board and creating its own rules because it didn’t like an industry. It was designed to throw sand in the wheels of the private sector getting involved in the digital asset industry. That was what it was really all about. And it’s like the old Rules for Radicals approach, ends justify the means. This crew, this warrant crew, in charge of the Federal Financial regulators, including the SEC and the Fed, were looking for anything they could do to throw sand in the wheels of the digital asset industry in the United States, and this was one of many tools that they use. So the details of it aren’t even important that it’s called sab 121 staff accounting bulletin 121 the shocking thing is that this didn’t come from the Financial Accounting Standards Board, and so this created some upheaval in the the the accounting profession, because the accounting firms all strive for equal acquisition, equal application of accounting rules nationwide. But the SEC. Created this thing only for publicly traded companies, so it was aimed at the big banks, but now they’re giving special exceptions to several large banks, and it’s now been been confirmed by the SEC that the Fed approved, at least one New York large bank that got that got confirmed this week. So look, the bottom line is, all of this stuff should be cast aside. I hope whoever wins the president, presidency comes in, cleans house and reverses all of those things. It was an outright abuse of power. It was it’s the kind. It’s the weaponization of accounting rules against a disfavored industry. This is just crazy.
Anthony Scaramucci 25:43
So you literally one of the smartest people I know. Okay, and I, and I’m not saying that the flattery, I’m saying it because you are bold. You see things before other people. You put yourself out there, where would we be? I’m going to ask you to speculate. Where would we be if we had not left leaning legislation or right leaning regulation, but just right up the middle regulation? Where would we be if somebody like you or me was running that process and was just really just trying to make sure that the US maintained its mantle financial services leadership. We’re I guess what I’m asking, if we get this right, where could we go, well
Caitlin Long 26:30
and also so maintaining leadership, but also protecting consumers against the fraudsters? We do acknowledge, of course, that there’s been a lot of that. The answer is, Wyoming set this up in 2018 2019 and it was again going down the path to execution until, until, basically, the warrantites got in slowed it down. There’s, it’s in discovery in our lawsuit, that the Fed wanted to buy time, so they slowed it all down. That at the time, we didn’t think meant that they were really gonna rug pull it, but then after X FTX, that was their excuse to rug pull it. Okay, so we but here’s the point, if we roll backwards and you had been in charge, or I had been in charge, what would have happened, we would have ended up basically taking that regulatory regime, which is enabling so it does things like say that Bitcoin is property, so if it’s stolen, then it’s theft. Basic thing, some of the foundational work that you as an attorney know about the Uniform Commercial Code, what are the rights and obligations to parties in a transaction involving digital assets? It didn’t fit within the existing Uniform Commercial Code, which, believe it or not, still required financial transactions to be in writing wet ink. There was, 20 years ago, an addendum to it that it’s called the uniform Electronic Transactions Act that allows us to have things like DocuSign now and electronic signatures, but the original law was still requiring it to be in writing. That all had to be redone. It did get redone. Wyoming led the way, but, but, but that’s what would have happened. Frankly, we would have, we would have avoided the FTX is and the Celsius is, because we would have actually had, you know, a path for the coin bases and the custodians to get inside the regulatory perimeter, and they, instead of being shunned and sued out the wazoo and all this money wasted trying to crush innovators and small companies like custodia, it’s we would have actually had, it’s like, like I mentioned earlier, with the voiceover Internet Protocol. Yeah, there would have been the large banks like the atnts and the and the Verizon’s by analogy. But there also would have been the small providers who would have been able to compete, and are competing and are stealing share, but everybody would have adopted the new technology, and collectively, everybody would have been better off. The only people who would have been upset by it are the federal regulators who want total control and wouldn’t have had total control under that regime, and the incumbent banks who have done so much and have to stymie this and who have who have been so protected by regulatory capture, I’ll give you a statistic that stuns people. Do you know the the number of women owned banks in this country is 0.4% of the total when you add minorities into that, it’s still less than 1% How does that happen when women and minorities are more than 50% of the population? The answer is, it’s because they’ve been protected by regulatory capture, because the old school got shielded and and that’s still happening today, and we would have broken through all of that had we actually had a serious federal regulatory apparatus.
Anthony Scaramucci 29:48
I have, I have a smaller, bit, small ish business and asset management. Skybridge is a couple billion dollars, but it’s not, it’s not Blackrock or Blackstone. But even even. Myself, Okay, I am protected. Because if I had to start skybridge today, I’d have to have nine attorneys. They would be the first nine people that I hired to go through the regulatory rigmarole that has happened since 20 years ago when I started the firm with three people in a room. And so when you have to have your first nine employees in any business being lawyers and regulatory processors, you can’t get the innovation. You just can’t get it. You know, there was a very famous article written by George McGovern. You and I, unfortunately are old enough to remember George McGovern. So our younger listeners, he was from the Dakotas. He was a senator. He was quite liberal. He ran unsuccessfully against Richard Nixon in 1972 as a presidential candidate. But he was a strident regulator. He went and left the Congress, and he built a bread and breakfast up in New England, and he got destroyed. And he wrote an op ed in the Wall Street Journal, and he said, You know what? I got destroyed by these regulations. All these regulations that I put in place I thought were helping people and protecting people were actually destroying entrepreneurship in the United States. And here I am as a legislator and a policy wonk getting these things wrong. When I converted over to the free marketplace. I converted over the private sector. I realized how impairing this was. What What message would you have given? What I just said, what message would you have for regulators about Bitcoin, the blockchain, custodia, bank, etc,
Caitlin Long 31:36
the regulation should be enabling, and it should be designed to prevent the basic crimes like fraud. That’s it at a high level, that’s it. Don’t be too prescriptive. Elon Musk said something a couple weeks ago that was really profound. If you have too much regulation, eventually everything becomes illegal, and that’s essentially where we are in the banking world right now. So the the because everything’s so prescriptive, I mean, holy cow, the Wyoming. Wyoming is great. They did a they created an enabling regulatory structure that is designed to allow act to innovate, but within guardrails including consumer protection and preventing fraud. So where should the government money go? I think it should be massively increasing law enforcement to go after the crimes that are already on the books, like fraud, like money laundering, right? Those kinds of things. It’s there’s not enough money for enforcement of those kinds of crimes. But we’ve, we’ve spent trillions on these armies of regulators who are the who are really operating the government, right? We don’t know who the president United States is at the moment, right? But why does, Why do things keep going? Because there’s just all these, you know, just army of, I think something like 15% of the United States workforce works for the federal government, and they just, they just keep going. But the point is that they’ve been given power to abuse. It started with Operation choke point 1.0 that started against during the Obama administration. They thought the payday lenders were abusing poor people. They probably were. But the instead of going to Congress and getting the law changed, they used bank regulation behind the scenes. It was insidious, and the bank regulators at the time were lying about it and saying, we weren’t doing this. Well, it turns out that they did. They were doing it, and they did expand it to 30 different politically disfavored industries. This is dystopian. It’s It’s Orwellian that bank regulators, behind closed doors, can pressure banks to say, Hey, you gotta you got a nice bank there, as Tyler Winklevoss put it, sure would be a shame if you were banking the firearms industry or the abortion industry, or you, you name whatever politically hot button industry it is, 30 different industries got caught up in that there was litigation they got it came out that the bank regulators were lying, and they were actually doing this behind closed doors. Well, there was a settlement with the FDIC back in, I think, 2018 and they said they wouldn’t do it again. But Anthony, you and I both know they’re back at it. It’s just that they’re doing it to the digital asset industry, which wasn’t included in the FDIC settlement back then. So here we are. It’s it is Orwellian. You’ve got to tear down that regulatory state. I am sympathetic to those who really, truly on both sides of the political party, by the way, political aisle, who really, truly see that there’s something very, very wrong and it has to be fundamentally restructured very
Anthony Scaramucci 34:38
well. Said, we’re going to take some questions before I let you leave. Okay, first question, Caitlin, what’s the biggest misconception about blockchain technology? This is Kevin from New York.
Caitlin Long 34:51
Candidly, it’s really, it’s a really simple technology. It’s, it’s just a database. You said it earlier, and people get confused, and they you know. Start going down the rabbit hole. And unless you’re a technologist yourself, think it’s super complicated at a high level, it’s not. It’s a brilliant idea. It’s just a shared database that multiple users can use. I like to to analogize it to Google Docs. Most, most folks use Google Docs. You can, you can group edit a document and see in real time where your colleagues are editing the document. That’s what’s called a distributed system in computer parlance. Except here’s the problem, Google owns your data. A blockchain is just Google Docs without Google owning your data, because all of you share it. It’s really it’s a really simple concept, and it’s not as complicated once you get down into the technology. Of course it is, but but at a high level, it’s just a database. It’s just like money itself is just a database entry.
Anthony Scaramucci 35:47
Go to the next question, how do you see artificial intelligence intersecting with Blockchain tech in the future? That’s a great
Caitlin Long 35:56
question. I knew we were going to cover this and I’d forgotten to get to it before the question. So, Maria did it? Yeah, thank you. So, so, as I said earlier, Bitcoin is part of the collection of protocols of the internet, which is itself fundamentally decentralized. Doesn’t recognize borders. TCPIP doesn’t care whether you’re in Guatemala or Antigua, right? It’s, it’s, you know, it doesn’t recognize borders. And so, so AI is the same. It’s an internet based technology, and these large language models are, I think, going to become part of the the group of open source protocols on which the internet operates. And so is Bitcoin. And I I’m not singling out Bitcoin per se relative to other technologies that just think Bitcoin is so narrow to do one thing really well, which is money, and the others are more broad, touring complete, to use the parlance, they do more things, but Bitcoin in particular, does one thing, and that’s money and so. So what is the intersection between Bitcoin and and AI, Bitcoin is internet native money. The dollar is not internet native. It’s created by a central bank, so it’s not internet native. And if you have internet native money, again, back to what we talked about earlier, the data leg, which is your instructions, and your money movement leg, both move at the same speed of light. That’s the AHA. So Bitcoin will be the money of AI. It won’t be the US dollar or euro or yen. Next question,
Anthony Scaramucci 37:30
very well said. Any advice for small bit? I feel like when I’m talking to you, by the way, I don’t own enough Bitcoin, I will point that out. Any advice for small businesses thinking about accepting crypto payments. This is Rachel from Illinois,
Caitlin Long 37:43
yeah. So Bitcoin itself has become relatively expensive in terms of transaction fees at various times, the fee market will will move up and down, but it’s it basically costs you about the same amount as a cup of coffee to transact on the Bitcoin network. So for small businesses, it doesn’t make sense for you to accept Bitcoin itself as a payment for a cup of coffee. This has turned into a large value payment network that moves money globally. But where I’m going is there’s something called a layer two technology, and that’s the Lightning Network. I would encourage you to look at the Lightning Network providers. They are getting integrated actually. David Marcus, the former CEO or COO of PayPal, started a Lightning Network company. Jack mallors at strike is a Lightning Network company. So this is layer two because it’s cheaper, and all they’re doing is essentially opening what’s called a payment channel to lock Bitcoin temporarily, where two parties can transact both back and forth at no fee. So when you think as a small business about your swipe fees, most people don’t realize the businesses pay swipe fees, whether it’s debit or credit fees, they can be two to 5% and for a lot of small businesses, your business margin, your profit margin, is maybe one or 2% so if you can actually get rid of those two to 5% swipe fees, your profit margin goes up by a lot if you’re still charging the same price for your for your product or service. So there is actually an incentive for you to integrate the Lightning Network. We’re just at the beginning of getting things like cards issued on the Lightning Network. It’s still pretty nascent, but I’m really excited about it, and that’s where I would spend time looking not so much the Bitcoin payment processors themselves, especially if you’re in a relatively low margin and small value per payment business, I would look at the Lightning Network. All
Anthony Scaramucci 39:44
right, we’re going to take one more question before I let you go, Caitlin. Let’s see Caitlin. You think Bitcoin will remain the top digital asset, or could another one overtake it? This is Brian from Florida,
Caitlin Long 39:58
so I. You believe Bitcoin will be the top digital asset? Like I alluded to, these are this actually been very good questions leading up to, because I can build on the answers previous leading up to, yes. I do believe Bitcoin will be, will be the, the one it’s got the network effects. These are network effects. Businesses. Are there potentially harder money than Bitcoin networks that might come out in the future, maybe. And so I’m, I’m, I’m intellectually honest enough to say I don’t know for sure. But when you look at, and I would encourage you to read, Lynn alden’s Broken money, when you look at what Bitcoin is as a network, and realize it’s so far ahead of every other other digital asset. Ethereum, being the number two, Bitcoin is so much further ahead in terms of network effects as money, it’s going to be very, very difficult for others to catch up. I don’t I’m not such a Bitcoin Maxi that I poo poo all of the other transactions. I was just at a Cardano conference a couple of weeks ago, observing the business applications of this technology. And there was someone from one of the biggest package delivery companies talking about using the Cardano network to track the provenance of something. And they were talking about medical devices that there were, there were knockoffs appearing under the name of the brand in Africa, and they and they weren’t the quality of the medical devices. And so tracking provenance, you don’t need Bitcoin level security and Bitcoin level cost to track the provenance of something, but the users would all like to know that the package actually was was delivered by we it was picked up by the manufacturer and delivered to the end user. And that’s the kind of of application for this technology that it does call for a distributed database so that you actually know you don’t have to go go back to the original person who might change the data to try to make it look like again, this is where the fraud comes in. Make it look like that. They were, they were, you know, sending the the real thing when it when they were actually sending a cheap knockoff. So provenance matters, and yet it’s not, it’s not money. You don’t need to pay the level of Bitcoin, level security to have that. And so I do believe that these others, they’re legitimate competitors. It’s just that what’s evolving is very different use cases for these other coins. All
Anthony Scaramucci 42:32
right, well, you’ve been absolutely terrific. You got to come back. You got to promise me you’re going to come back. Thank you. You’re the best Caitlin, and thank you for such great information and such a really good understanding of what’s going on from a regulatory perspective and where innovation is in the world of financial services. And, of course, my favorite asset, and I’ll just leave with this one thought. So I’m writing a book called The Little Book of Bitcoin. Sailor wrote the forward for the book, or the, you know, the introduction of the book. And this week, he said to me, Well, how much Bitcoin Do you own? I said, Well, it’s 55% of my net worth. He said, Okay, well, don’t be recommending to people 2% then could be one of the best ideas. Why are you gonna have, you think people are gonna have 50 other great ideas like Bitcoin, right? 2% being, you know, being the number. So I had a, had a had to change the conclusion of my book as a result of Michael sailors input and so. But every time I talk, every time I talk to you and him, I might I just don’t own enough. But thank you so much, and we’ll see that next time on speak up. Gonna do one more quick promo here, and this is for our live coverage. Okay, please don’t miss Maggie Lake next Wednesday, September the 18th, at 2pm Eastern Standard Time. We think the Fed is cutting rates at least 25 basis points. I obviously think they could be, should be cutting more, but they’re Frady cast, so they don’t want to probably do more than that before the election. So let’s see what happens. But join Maggie lake for this great analysis. Wednesday, September 18, at 2pm live on the wealthy on network and Caitlin. I’ll see you soon.
Caitlin Long 44:10
See you soon. See you back in Wyoming for assault, Jackson Hole next year. I hope. Amen,
Anthony Scaramucci 44:15
we’ve already, we’ve already signed the contract, by the way, so Amen. That
Caitlin Long 44:19
was a great event, really amazing. Thanks for coming on.
Anthony Scaramucci 44:22
I want, I need, I need you there. Girl, okay, make sure you know it. If you like this video, you’ll like this video as well. Check it out. You.
