The Bill That Could Reshape Crypto In America with Greg Xethalis from Multicoin

**Jason Yanowitz** (0:00)
Nothing said on Empire is a recommendation to buy or sell any investments or products. All right, everyone, welcome back to Empire. This is a special round up. The lads have not shown up. So I've got a good friend, Greg Xethalis. Greg is the general counsel of Multicoin, and I do have to read a disclaimer, which is that although our guest this week is a partner of a registered investment advisor, nothing in this podcast should be considered an offer of Multicoin's investment advisory services or should otherwise be confused for investment, tax, legal, or otherwise, or other financial advice. So I do feel like those are usually sped up or read quietly, but you got to listen to me say it fully. With that out of the way, Greg, welcome to the show, my friend.

**Greg Xethalis** (0:43)
As the resident lawyer at Multicoin, I appreciate your demeanor in reading the disclaimer.

**Jason Yanowitz** (0:51)
Why do we have to actually read those though? Who's out here suing people for what someone said on a podcast?

**Greg Xethalis** (0:56)
Well, we need to make certain that we're not soliciting in an inappropriate way or providing financial advice or legal advice or certainly not tax advice. So yeah, lawsuits do happen very rarely, but they do happen.

**Jason Yanowitz** (1:13)
Yeah. Well, I am soliciting Blockworks. Is that acceptable?

**Greg Xethalis** (1:17)
That is very acceptable.

**Jason Yanowitz** (1:20)
So Greg, I want to bring you on because we are in the heart of, hopefully, maybe the final days of clarity here. There's definitely a lot of movement is what I'd say this week. So definitely a lot of movement with clarity. I want to bring you on. You are the smartest person I know related to clarity, at least one of them. So maybe we can start with just, we can start big picture, zoom in from there.
Can you remind folks what even clarity is and how this thing came to be?

**Greg Xethalis** (1:45)
Yeah, I will cite to one of my favorite quotes. Carl Sagan said, if you wanted to bake an apple pie from scratch, you must first invent the universe.
So we're not going to talk about how financial regulation works in this country, but it's worthwhile to talk about where the origins of clarity were. And it actually is only from about half mile south of the Blockworks studio in downtown Manhattan. In 2014, New York Department of Financial Services said, okay, here's this asset class. We want it to be available to New Yorkers, but we want it to be safe. And so they started working on the first government regulation of crypto intermediaries. And we've seen that iterate with the Limited Purpose Trust Company structure in New York, the BIT license. We've seen a handful of other states, most notably Wyoming, develop state-level regulation. But they were all basically fitting crypto into money services businesses, which principally are regulated on the state level as money transmitters. This is rules that were developed when the telegraph was still a thing to move money. And it's basically imposing on companies like Coinbase or BitGo, the same types of rules that are cracking, the same types of rules that apply to companies like MoneyGram or PayPal. And it's not a particularly good fit, particularly when you're trying to cover market participants that are engaging in trading activity or custodial activity versus just taking money from one customer and sending it to a third party.
Ultimately, I was around working on the BIT license when it was first promulgated.
Ultimately, we all knew that crypto wasn't ready for federal regulation. But when you think about it, when you're looking at a technology that is global in scope and certainly national in scope, state-by-state frameworks are a stopgap. They don't fit this technology. They're not, from a policy perspective, purpose-built for regulating the crypto economy. But it took a time for this technology and the market around it to grow to the point where we could seek federal regulation. And that led us to a default status of limited licenses with 54 entities if you wanted to operate nationally. That's 49 states, Montana doesn't regulate money transmitters. So 49 states, the District of Columbia, and the four territories.
That's Guam, Samoa, American Samoa, US. Virgin Islands, and Puerto Rico. If you want to work across the country, you had to go to 54 different licensors and get licensed, be subjected to dozens of examinations from teams that, while well-intentioned, were not well resourced or from either a dollar perspective or a human capital perspective, to examine and regulate these types of businesses. And as we saw in 2017, the first federal legislation was introduced, the Token Taxonomy Act. And in 2022, we saw the first real market structure proposal come out of the Senate, which was the Lummis-Jillibrand Responsible Financial Innovation Act that was reintroduced in 2024 We also saw FIT 21, we saw the DCCPA, the DCA, and then eventually the Clarity Act. And we'll get into what the Clarity Act is, but last year around this time, almost exactly a year ago, Clarity passed out of the House, and it moved over to the Senate. It was always known that the Senate would be a far more complicated process, both from parliamentary procedure, as well as more eyes from legacy finance on this bill. And that has played up. A year later in January, we saw the Agriculture Committee pass their portion of the bill, the Digital Commodities Intermediary Act out of committee. And then just two months ago, the Senate Banking Committee passed their portion, the Digital Asset Market Clarity Act out of committee. And just about two hours ago, Senator Lummis released the current State of Play Draft, which is a 620 or 30 page bill.