00:00Brooke, it's great to speak with you. And of course, I know that you were listening to our conversation with
00:04Alex Thornton just before you.
00:06From where you sit, what did the banking industry get out of the Clarity Act bill that is now headed
00:10for a full Senate vote?
00:12Yeah, well, thank you very much for having me. You know, a couple of things.
00:17One, the banking industry has a really great opportunity with the Clarity Act in terms of engaging in digital assets.
00:24And, you know, I spend actually a lot of my time talking with a number of banks about the opportunities
00:31there to engage.
00:32But I know, of course, the issue that we've been very focused on is that around interest in yield.
00:37And I think it's important to recognize how far that section has come since the markup that ultimately was canceled
00:45back in January.
00:46This agreement in principle around prohibiting the payment of interest and yield on payment stable coin balances while still allowing
00:57for certain types of reward or transaction-based, activities-based payments is really important.
01:03And that's, you know, that is an improvement in our view since that January text.
01:09Now, to be sure, we think there are opportunities to strengthen this bill further.
01:14And I think you'll continue to see advocacy from us on that point to kind of seek several technical refinements.
01:21But, yeah, it's come a long way.
01:24So just to push on that a little more, Brooke, did banks get what they wanted?
01:27Or is this compromise vague enough that Coinbase could find a way around it just within a few months?
01:32Coinbase, for example.
01:34Sure.
01:34So, unfortunately, I think it is a little too vague at this point.
01:39You know, it's kind of ironic, I suppose, the Clarity Act, at least for this particular section, I think there
01:45is still too much ambiguity when it comes to how this provision can be interpreted.
01:53You know, you have a prohibition with two prongs solely in connection with holding a payment stable coin.
01:59Well, the use of the word solely there is extremely constricting, I think.
02:03And it's pretty easy to imagine how one would design a program with, you know, some other de minimis requirement
02:09that all of a sudden this payment is no longer solely made in connection with holding a payment stable coin.
02:15And then similarly on this economic or functional equivalence test, you know, there's different people, you know, from different sectors
02:24have read this text since it's been released and been in the public domain and drawn very different conclusions about
02:30the types of payments that would be allowed or not.
02:33And so it's precisely that ambiguity that I think our technical refinements, the specific words, really, it's a handful of
02:41words that we are seeking to have changed.
02:44It was just to try to make that a little more clear, a little more airtight.
02:48Got it.
02:48Got it.
02:49All right.
02:49Well, we'll be watching to see how that results.
02:51You've been making the case, Brooke, for tokenized deposits as banks' answers to stable coin.
02:56Same blockchain technology, but with FDIC insurance and no deposit flight risk.
03:01But if tokenized deposits are so compelling, it seems still like every bank is launching a stable coin strategy rather
03:08than a tokenized deposit product.
03:10Is the banking industry building the thing it says it wants?
03:14So I think it is.
03:15And I love the question on tokenized deposits.
03:18I think there is a lot of opportunity for the banking industry to pursue tokenized deposits.
03:23And perhaps I will, you know, I'll acknowledge, you know, in a hybrid format with payment stable coins that this
03:29concept of tokenized money that includes both tokenized deposits and payment stable coins is really where the market is going
03:36to land.
03:37There's going to be a place for both instruments.
03:39But I think you do see banks and different bank consortias and the ABA is looking at it, many state
03:46bankers associations as well, exploring, you know, how can we support our members?
03:51How can we support the industry in pursuing and implementing tokenized deposits, you know, as a strategy?
03:58And it really does come down, Scarlett, to, you know, what you said, these blockchain as an infrastructure.
04:04What are the advantages that that can offer in 24 by 7 availability, instant settlement, programmable money?
04:12The banking industry understands those strengths and is very eager to implement them and to better meet our customers' needs.
04:20Brooke, I want to switch gears.
04:22Just about 30 seconds left here.
04:23The Fed recently granted crack in a limited purpose master account.
04:27It's the first crypto firm to get one.
04:28You've called it, quote, putting the cart far ahead, so far ahead that the horse will never catch up.
04:33What are you specifically worried about could happen if crypto firms get Fed access before rules are finalized?
04:39Yeah, thanks.
04:40I mean, look, access to the payment system is a very important privilege and it needs to come with the
04:49right set of regulations.
04:50And insured depository institutions are regulated by prudential federal regulators, you know, subject to extensive.
04:58We're the most highly regulated industry in the world, basically.
05:02And so I think it's important that we ensure a company like Kraken, you know, that's not an insured depository.
05:09It's still subject to the right safeguards in order to protect the payment system.
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