Kevin Rose on Crypto Regulation | The Random Show / The Tim Ferriss Show | Transcription

Transcription for the video titled "Kevin Rose on Crypto Regulation | The Random Show / The Tim Ferriss Show".


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Intro (00:00)

What are the risks that you foresee on the horizon? And this is a common question, but I'm going to ask it because I think people will be interested in your answer. How much do you worry about sort of regulatory overstep or shutdown? And so we've seen what's happened in China. Of course, China is not the United States. But how concerning for someone who invests a lot or for a firm that invests a lot in crypto and blockchain is the regulatory side of things. Honestly, I'm very much looking forward to regulation. I think it's going to be a great thing. The lack of clarity around how to treat certain types of assets in this world is what's holding it back, I believe. There's, I don't think the big question to ask here is the one like you hinted at what China wears it. Does the US wake up one day and say, actually, cryptocurrency is illegal, shut it all down. And I just can't see that being the case here. It's too far entrenched into everything that we're doing. Every major bank, whether they like it or not, is now embracing blockchain in some capacity.

Discussion On Technology And Yield Returns

It's A Fantastic Underlying Technology. (01:20)

It's a fantastic underlying technology. So it would just be odd to say we're banning a certain type of technology. Like I just can't see that happening in the United States.

I Hope That There's More Clarity. (01:31)

I hope that there's more clarity because a lot of it is very confusing right now. And to be fair, a lot of it's being defined in real time. So we don't know how to handle certain types of assets. There's just weird things coming out of this. Like I'll give you an example. There's a protocol called Alchemics that are these self-repaying loans. It sounds nuts, but in the world of DeFi, it's crazy. So basically what I could use some of those self-repaying. Well, basically what it does is it goes out and you come in and you take a certain amount of cryptocurrency. Let's just say it's $10,000, right? And they take that entire principle and they go invest it into yield generating protocols that are out there in this world of decentralized finance. And they instantly give you half of it back in just straight. This is called a stablecoin, like a US dollar stablecoin. So you take $10,000, they give you $5,000 to go do whatever you want with. And because of the yield that they're able to generate on the entire principle, they take all of the interest payments and pay it back into the loan so that the pays itself off automatically. And at the current rates, it's a little over two years and the loan just automatically pays itself back. So you're receiving your interest payments upfront, if that makes sense. But this is only something that would be possible in the world of DeFi where you're having smart contract, work with smart contract and not in traditional lending. It just wouldn't make sense. Because you're taking all of the benefit and giving back to the customer. And in traditional lending, when you have Malzdafy that was mentioned with the Wells Fargo example, they would never give you that full yield back, right?

They Would Never Give You That Full Yield Back. (03:18)

Well, they can't do it. Exactly. So this is like, but the weird thing- They're only making a mere 72 billion. Right, exactly. And the odd thing though is like these repayments are happening in near real time back to the paying down the loan in near real time. And so talk about like all these little micro transactions that are occurring over that two years in change.

How Do You Treat Those Repayments. (03:45)

Now how do you treat those repayments? Who's paying them and where are they coming from and what's your cost basis? And you could imagine like it just makes you go cross that. Like no one in the IRS is going to tell you how to do this. Like this has never been defined before. So and how do you even file something like that with the IRS to explain to them what you're doing? I mean, even handling basic crypto stuff right now with filings is very challenging. Right. You can do it, but it's very involved. So there's some very sophisticated financial just these new tools, these new types of code that is being deployed in these smart contracts. And we don't really have a clean way to even report them, let alone understand what tax rate we should be charged. So I don't know, I'm excited for some of the more regulation to come into place. I think the you asked your question to remove the uncertainty. Exactly. Even if the rules are stringent and punitive in some respect, at least the rules will be clear. Yeah, I mean, I have the I want to pay my taxes. I don't want to go to jail. I just don't know how quite to do it, right? Well, wasn't it in flying? No, no, no, I'm just saying I'm just saying in the world of DeFi, the adult protest. I'm saying too much in the world of DeFi. This is what people are running into is they don't know. They don't know how to handle this stuff. So it's a very exciting space, but it's a very kind of bleeding edge, you know, you know, enter at your own risk kind of world. To answer your question of like, what am I scared of? What are the risks that are out there? I think there's a few. One is you mentioned the regulation side that that's certainly one that kind of is off their lingering in the background, which I'm not so much worried about the what's going to happen on the US, but I'm worried about what if another country bans it because that causes some instability in the markets when other countries ban it. Which would be the most impactful countries were they to ban crypto outside of China? Are there any countries that stand out that one might not expect? So outside of the US, like who are the players who would really move the markets? Yeah, that's a good question. I think China was the big one to be honest and now that that's kind of over. Obviously, the European Union would be huge. Anything with the UK would be huge, but I just don't see those markets cracking down. So there's nothing out there that is like the big scary whale that we're just waiting for that to happen. Like I don't know of any other big countries. If anything, we're seeing, you know, countries now embracing cryptocurrency and making it an accepted, you know, form of tender. So that's happening, which is just fantastic.

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