White House's Patrick Witt: CLARITY Is 'Not a Giveaway' to Crypto and Trump's 'Historic' Ethics Concession

**Patrick Witt** (0:00)
What the president has done, which is agreed to subject himself to restrictions on conduct, no other president has done that. This is a historic provision here, and let's not lose sight of that.
You know, Democrats now also asking for some kind of state attorney general enforcement. I'm sorry, but you don't get to hit two home runs with one swing of the bat. This is a historic provision, and it should be recognized for what it is.

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**Rebecca Rettig** (1:07)
Welcome to The Policy Protocol, your weekly espresso shot of the latest in crypto law and policy. Not just what happened, but what actually matters. I'm your host, Rebecca, here with my co-host Renato. Welcome back, Renato.

**Renato Mariotti** (1:21)
It's great to be back.

**Rebecca Rettig** (1:23)
What happened last week in your life that was not crypto related?

**Renato Mariotti** (1:27)
Well, I was on a cruise in Alaska with my wife, which was just awesome. So I saw everything from whales doing bubble netting to eagles, like up close, bears, seals.

**Rebecca Rettig** (1:41)
It was pretty neat. I was going to say, did you see bears? Because hopefully if we pass clarity, we won't have a bear market anymore.

**Renato Mariotti** (1:49)
I love it. It was great.

**Rebecca Rettig** (1:52)
Well, good. I'm glad. We're happy to have you back. Tell us, what's your hot topic of the week?

**Renato Mariotti** (1:58)
Wow. Well, I imagine everyone's read SEC Commissioner Hester Peirce's statement that she issued yesterday on crypto vaults and on-chain lending. If you're not familiar with vaults, you should be. They're a specific smart contract where you deposit, you get shares, the contract pushes your money out to lending markets, your shares appreciate. Sitting on top of that, it's a curator, an outside risk management firm picking which market, setting the caps, taking the fee.
Two points that jump out. I mean, first of all, it's always stunning to have crypto mom warning us all. It reminded me of her warning last year about tokenized securities are still securities. But look, we spent a lot of years arguing, Rebecca, about whether tokens are securities. I mean, I think what she's trying to say is the wrapper can be a security, even if the token isn't, which is kind of interesting. A vault holding nothing but stable coins is not automatically outside their reach. I think, secondly, I'd say, the curator's defense really is that they don't touch your money. It's like locked into the contract. But picking where the money goes can be the job, right? I mean, your financial advisor doesn't hold money either.
Obviously, they're regulated by the SEC and FINRA. I think that's what she's getting at. It's interesting and it's going to have implications beyond lending, things that look a lot to me like commodity pool advisors.

**Rebecca Rettig** (3:29)
Interesting bringing the CPO question in because I know there's been a lot of behind the scenes discussion on that on Clarity. My take on this vault guidance is, vaults are such a rebrand.
We had compound back in the day and Aave, I was the first GC at Aave and we thought a lot about what the receipt tokens, when you, let's say you put in USDC and then you borrowed against it, you borrowed ETH or something, but when you put in the USDC, you would get a C token, so like A USDC or C USDC, so a receipt. We did a lot of Reeves analysis and thought a lot about that. Whereas tokens we did, how we till kingdom come, I think there's a whole new Sheriff in town and the Sheriff is the Reeves test. That'll be interesting to see.
I think with the rebrand, there's so much more focus on what are these vaults and who and what may fall under the relevant securities laws.
My hot topic of the week is the London Stock Exchange launched or announced the launch of something called LSE24, which is a 24-5 market, supposedly AI-driven, but it looks like it's really meant to compete with the likes of things like TradeXYZ and other types of all-on digital trading that we see in our crypto markets. It won't be launching until the end of 2026, and that's just for testing by clients. They're just going to start out with ETFs, and then they're going to go into equities, and I assume they'll be tokenized or digitized equities. And so, I think it's really interesting that LSAC, the London Stock Exchange, is thinking about digital securities, digital issuance, and doing 24-7, 24-5 markets in a way to really try to compete with the evolution of digital finance. What is your take on that?