How Tokenization Could Change Stock Trading Forever (ft. Matthew Hougan)

Zaid Admani (0:00)

Welcome back to The Rundown, interview edition. Today, I am talking to Matt Hougan, the Chief Investment Officer at Bitwise, one of the largest crypto-focused asset managers in the world. And Matt is joining us at the perfect time because this was a big week for crypto, and we got into it all. Matt explained why he thinks the Clarity Act failing in the Senate won't be a huge setback for crypto. He also explained why the new exemptions by the SEC for stock tokenization is a big deal, and other reasons to be optimistic about crypto moving forward. This was an awesome conversation. I think you guys are gonna really enjoy it. So let's get into it.

All right, guys, today we are talking to Matt Hougan, the CIO of Bitwise, one of the largest crypto focused asset managers in the world. Matt, welcome to The Rundown.

Matthew Hougan (0:48)

It's amazing to be here. Thanks for having me.

Zaid Admani (0:50)

Well, I'm so happy you could join us this week. There's a big week for crypto, I gotta say. There's a lot happening. I wanna start with the Clarity Act. That was like the main headline this week. The Clarity Act did not fail to advance in the Senate this week.

I just wanna get your take as someone who follows this stuff all the time. How big of a setback is this for the crypto industry? Because for the last year or so, I've just been hearing nonstop buzz and hype around the Clarity Act. And if it's gonna get done, doesn't get done. Now, where does that lead the crypto industry?

Matthew Hougan (1:22)

Yeah, it's a great question. It depends on your timeframe. That's why it's a little bit frustrating. So the reason we wanted clarity is because legislation is hard to change. So if you think about the history of crypto over the last seven or eight years, we had a very anti-crypto SEC led by Gary Gensler.

And then we have today a very pro-crypto SEC led by Paul Atkins. And in the anti-crypto SEC, it was hard to get things done. It was hard to launch an ETF. It was hard to have big institutions move into crypto. It was challenging for the price. In the pro-crypto SEC that we're in now, it's easier to get things done. We have a large variety of ETFs. We have regulated futures. You see BlackRock and NASDAQ and NYSE building on crypto-based rails.

What the Clarity Act was about was putting in place legislation that would last multiple administrations, that couldn't be overturned by a change in the SEC. So that's what makes this moment so interesting, because the reality is with the Clarity Act failing, the people setting the rules for crypto are the SEC and the CFTC, who are very pro-crypto. So for the next two and a half years, we're gonna have very pro-crypto rules. But the worry is what happens in two and a half years. So it's sort of timeline dependent.

It's we're in a great place now. If we had Clarity, we would have been a great place forever. Now we're in a great place, but with some uncertainty in the future. And that's what makes it interesting to be an investor in crypto right now.

Zaid Admani (2:44)

Right, so you were trying to lock in some certainty in some, without having the rules changing every two to three years based on who's in the White House. Now there's that uncertainty again, depending on who's in charge of the SEC, CFTC in two and a half years.

Matthew Hougan (3:00)

You got it, that's exactly right. It's all about certainty versus uncertainty. Make no mistake, it would have been better if it had passed. I think if it had passed, crypto would have been the consensus hot trade in the fourth quarter of this year. It would have been a runaway bull market.

Now I still think the situation is pretty good for crypto. But as you said, there's more of this downstream uncertainty that we're just going to have to wrestle with as an industry.

Zaid Admani (3:22)

Well, I saw that you said before the vote that you were less worried about its failure than you were earlier this year. You still thought that it wasn't going to pass, but you weren't as concerned about it not passing anymore. What changed between everyone was wanting it to pass and how it was so important for crypto and then now not being as worried about it?

Matthew Hougan (3:42)

Yeah, there are two things. Great question. The first was that the market priced it in failing. Going into the vote yesterday, before there was this little blip up, the market had, if you looked at PolyMarket or Kal-Shee, the odds of it passing had fallen to like 15%.