The Bill That Might Actually Move

In this episode of Saffron Files, Justin Roberti and Dingo examine the renewed momentum behind the Clarity Act, the bipartisan compromise over stablecoin rewards, and whether regulatory certainty could unlock institutional adoption while still preserving DeFi.

Transcript

Justin Roberti (00:01)
Hello, everyone. This is Justin Roberti, and welcome to Saffron Files. We’re very pleased to be talking to you again this week.

I’ve got my co-host Dingo with me.

Dingo, how are you doing today, man?

Dingo:
Hello, hello, hello. I’m doing pretty well, Justin. How are you?

Justin:
Good. It’s wonderful to have you back with me.

I know you’ve had a busy life lately. You’ve done a couple of shows.

Dingo:
Yeah, and we’ve got some crazy news this week.

I think we’ve been talking about it here and there over the past few weeks, but it seems like there’s real momentum behind the Clarity Act.

Justin:
Yes.

Dingo has been buzzing about the Clarity Act in our news meetings for the past couple of weeks, and it is an extremely big deal.

I’m sure everyone listening at home has been following along to some degree, or has at least passively heard something about it.

The Clarity Act is the U.S. government’s most important attempt yet to define how crypto, especially stablecoins, fits into the traditional financial system.

The bill has already passed the House and has been stalled in the Senate.

But a fresh bipartisan compromise this week on stablecoin rewards, which are similar to staking rewards, may have unlocked a path forward.

Markets reacted immediately. Circle stock jumped nearly 20% on the news. That’s USDC.

At the center of the debate is a deceptively simple question: can crypto platforms offer yield without becoming banks?

How lawmakers answer that question will shape who controls deposits, who controls lending and who controls the next generation of financial infrastructure.

What’s your take on it, Dingo?

Is this a situation where TradFi is expressing genuine concern for our rights and needs as consumers, or is it a contest over who gets to remain in charge and make money from a closed system?

Dingo:
I think the answer lies somewhere in the middle.

It’s really interesting.

With Saffron, we did some work with the Digital Chamber in 2022, 2023 and 2024. We were getting a feel for advocating for our industry.

To see other people pick up the torch and carry it this far is surreal for me.

I’ve been glued to my screen watching this unfold.

It’s difficult to separate rumors from speculation when you’re looking online, especially on crypto Twitter.

But as of May 5, the apparent consensus is that stablecoin yield, especially on exchanges, may have to be given up because it directly competes with TradFi.

This was one of the main sticking points for some of the most prominent advocates in our industry, including Brian Armstrong and the people at Coinbase, Kraken and other exchanges.

They’ve been working hard to secure fair regulation.

At the end of the day, I think that’s what we all want.

We don’t want FTX- or Sam Bankman-Fried-style regulation that is favorable only to one company while hurting everyone else.

The development is interesting.

I hinted at this in the chat, but I think a lot of people are deflated about exchanges potentially having to give up yield on stablecoins.

Right now, before this bill passes, you can hold USDC in your Coinbase account and earn around 3.85%, depending on the current rate.

That’s roughly comparable to some of the best high-yield savings accounts. For a while, it was even better.

As rates have come down across the board, that has introduced competition into a sector that hasn’t seen much of it.

It’s interesting to watch traditional finance, especially the banking side, feel threatened for the first time.

I think there is room for us to coexist in many ways.

It’s also not all doom and gloom.

Even if exchanges have to give up passive yield on stablecoins that aren’t involved in market activity, I think people would be surprised by the amount of institutional capital sitting on the sidelines waiting to invest in this industry.

A lot of institutions cannot or will not participate because they don’t have the right framework yet—or any framework at all.

Passing this bill would be a huge, monumental step.

I’m genuinely amazed by how far we’ve come as an industry in such a short period of time.

Justin:
Absolutely.

Yield has been a major sticking point.

I tend to be cynical because capital always consolidates. That is the nature of capitalism, after all.

TradFi is a fairly closed system. That’s something we’ve discussed throughout the history of crypto.

Opening that system was always part of our original reason for existing in the digital-asset space.

It doesn’t surprise me that banks want to push back.

If they’re the source of loans, why would they want to share that business?

They haven’t had to deal with disruptive competition until now.

Competing with them through a U.S. dollar-backed stablecoin is probably a challenge they didn’t anticipate a few years ago.

On May 4, Senators Tillis and Alsobrooks reportedly reached a bipartisan compromise on stablecoin rewards.

Circle stock jumped around 20% that day and continued to climb after hours.

Circle’s year-to-date gains now exceed 50% on regulatory optimism.

The market reads this as the strongest signal yet that the Clarity Act may finally move forward in a way that allows some forms of rewards.

The immediate takeaway is that regulatory clarity has become a major price catalyst.

When you look at the advancement of our industry, Dingo, are we waiting for the technology to arrive?

Are we waiting for adoption?

Or are we simply waiting for regulation?

Based on how the market reacted, it looked as though we were waiting for regulation.

Dingo:
Yeah. You have to follow the money in that sense.

I think adoption will follow regulation, and it will happen at a scale that retail investors cannot achieve on their own.

Before I get into that, I think it’s great that there was a bipartisan compromise on stablecoin rewards.

Seeing both sides of the aisle come together makes me optimistic.

People who entered crypto only in the past few years may not remember this, but when I first went to Washington in 2022, the Democrats were generally more skeptical.

Then FTX happened.

A lot of politicians had received donations from Sam Bankman-Fried, on both sides of the aisle.

Suddenly they were confronted with new technology they didn’t fully understand, combined with something resembling a Lehman Brothers-scale fraud.

Their instinct was to protect everyone and shut it down.

There was an intense amount of pressure during 2023 and 2024.

We were under a different administration, and we didn’t know which way the wind would blow.

We were experiencing a lot of regulation by enforcement from Gary Gensler and the SEC.

It was a tumultuous time.

I did speak with several Democratic representatives who were very receptive to crypto. They were usually younger, so I think there was a generational gap.

I just want to geek out briefly over the fact that we’re now seeing bipartisan compromise.

It makes me happy and optimistic about the future.

My biggest fear is that the next administration comes in and creates a knee-jerk reaction to this knee-jerk reaction, leaving us tossed back and forth between two political parties.

But bipartisan support would be a strong signal that we might finally make it.

I could be high on copium, but I think we might make it.

Returning to your original question, I think a lot of people are waiting for regulation.

That’s the main driver.

People know the technology exists. We’ve seen use cases and applications for it.

With the market potentially moving next week, during the week of May 11, and with all this compromise language emerging around yield, traders are no longer positioning broadly.

They’re reacting within minutes to specific legislative signals.

We may be entering a period of policy alpha as a new short-term narrative driver.

It will be an entirely different ballgame if this bill passes.

I don’t want to get ahead of myself.

We’ve been told before that something was going to happen next month or by the end of the month.

We’ve never been as close as we are now, but I still don’t want to jinx it.

We need to pass this because we may not get another opportunity for a long time.

It’s a very interesting phase of the market.

Justin:
It has become common for people to take the opportunity to criticize Gary Gensler, and I understand why.

For a while, I memorized a collection of Gary Gensler facts because I knew they would annoy people on my panels.

Did you know he ran a 50-mile ultramarathon, Dingo?

Did you know he has an identical twin?

Dingo:
I did not know that.

Is he the good twin or the bad twin?

Justin:
I assume crypto considers him the bad twin.

But I think you make an excellent point by tying the situation back to Sam Bankman-Fried.

Gensler may have been misguided.

He may have been trying to preserve his reputation, increase his authority or play a political game.

He certainly wasn’t a great friend to crypto in that position, and he caused harm.

But Sam Bankman-Fried did immeasurable damage to our space.

He put Gensler and every other regulator in the hot seat.

People started asking, “Why didn’t you catch this? How did you allow this to happen?”

The entire FTX story seemed to involve everyone assuming that the company must be trustworthy because someone else had already said it was trustworthy.

It turned out to be supported by a terrible, nearly meaningless spreadsheet and an incredible amount of ego.

But look at the market shifting instantly based on policy alpha.

That doesn’t necessarily make digital assets look like the stable, maturing asset class we would like them to become.

What do you think?

Dingo:
That’s an interesting take.

I think a lot of the maturity will arrive once legitimate policy and regulatory guidelines are in place for institutions to follow.

No matter how immature we might look in the short term, people will eventually forget this brief period of policy-driven trading.

This is an abnormal phase.

I think policy alpha will be relatively short-lived.

If we can get this legislation through, maturity will follow as institutional adoption begins.

Then we’ll find out how many institutions have wanted to enter this industry all along but couldn’t because there weren’t sufficient guidelines.

I suspect that number is much larger than people think.

Justin:
Definitely.

The compromise language reportedly bans stablecoin rewards that function like bank interest.

Regulators will define which reward activities are permissible.

That is still a future-tense gray area.

I’m not a fan of anything being built on vaporware. We’ve seen too much of that over the past several years, especially in the AI sector.

Banks warn that this could trigger deposit flight from traditional accounts.

Don’t you love the way they phrase that?

When streaming first started, did Blockbuster release a warning that streaming would cause DVD-rental flight?

They phrase it as though banks are the Rock of Gibraltar and deposit flight would be a terrible tragedy.

Dingo:
Blockbuster, to my knowledge, also didn’t have especially strong ties to the 2008 financial collapse.

Justin:
No. I’m only saying that because something has always been done a certain way, the incumbent can frame any change as inherently dangerous.

The claim is that yield-bearing stablecoins could reduce lending capacity across the banking system and the broader economy.

Crypto firms argue that banks are overstating the risk and misunderstanding the technology.

Are they misunderstanding it intentionally?

It feels like McDonald’s warning about burger-purchase flight to Burger King.

It’s suspicious, don’t you think?

Dingo:
Yes, as the kids would say.

I briefly went on a tangent about Gary Gensler earlier, but there is a human being behind that role with his own history and reasons for acting the way he did.

I’m trying to put myself in a similar position regarding the banks.

But as someone who has advocated strongly for DeFi for almost seven years, it seems to me that they’re attempting the Blockbuster approach.

They want to discourage people from moving their money and trying this new financial system.

That represents a major loss of control for them.

Once you use DeFi, even casually, it can feel like the moment in The Matrix when the code becomes visible.

You realize you can facilitate all these transactions without middlemen taking fees, slowing things down or imposing waiting periods.

It’s difficult to go back once you’ve experienced that.

Restricting passive stablecoin yield may push a lot of activity toward DeFi.

The thing I’m cautious about is how they define legitimate, permissible reward activities.

They haven’t defined that yet.

What will it include?

Will it change with every administration?

Will it seesaw back and forth?

There is still a lot we don’t know.

Part of me worries that banks may be attempting death by a thousand cuts.

First, they get the industry to agree to no passive yield on stablecoins.

Then, at the eleventh hour, they demand another concession, followed by another.

We’ve become so desperate for government approval, which is strange when you think about it.

We’ve convinced ourselves that approval will pump the markets.

I don’t know whether it will immediately send the market into the stratosphere.

We could see a push upward, followed by a pullback and more consolidation.

But it’s fascinating how much sentiment within the industry has shifted toward welcoming government involvement.

Justin:
That’s absolutely true.

I used to host two or three panels a week and repeatedly ask what the appropriate level of regulation should be.

Five years ago, at least half of my respondents would say the desired level was no regulation at all.

I always pushed back on that.

No regulation creates its own problems because it gives certain parties the opportunity to monopolize the market.

What we’ve complained about throughout the existence of crypto is that TradFi operates within a closed market.

It doesn’t face meaningful or disruptive competition.

That disruption is what crypto brings to the table.

The Clarity Act aims to formally define the rules for digital assets in the United States.

It has passed the House and stalled in the Senate because of the yield issue.

Coinbase is now supporting the bill after previously stepping back.

The political timeline is tight. The midterm elections could kill the momentum if the bill is delayed.

The core tension is innovation versus financial stability versus control of money flows.

What do you think the appetite is right now?

On one hand, the cost of living is out of control, and people are looking for ways to improve their financial situation. Yield could be what they want.

On the other hand, the news is chaotic and people may simply want clear rules rather than another prolonged political fight.

Which way do you see public sentiment moving?

What are you seeing in crypto groups, Telegram and Twitter?

Dingo:
It’s a very strange time.

Everything is expensive, and I don’t expect it to become cheaper anytime soon.

I’ve heard fringe theories that quantitative easing is being rebranded so it can be quietly reintroduced.

When governments have that lever available, it’s difficult not to pull it.

History has demonstrated that.

I think people who expect everything to go parabolic the day after the Clarity Act passes are being too optimistic.

I suspect there are already a lot of press releases and announcements written and waiting to be published.

But the actual capital deployment behind them will probably take months.

It isn’t enough for regulatory guidelines to become official.

Institutions still need compliance reviews, internal approvals and product structuring.

We could see a genuine rally later this year if the bill passes, but I’m not certain.

This needs to become a win because I don’t think the current administration has had many of them lately.

I don’t want to get too deeply into politics, but this would be a strong win for the voting base the administration appealed to during the election.

I also don’t think we’ll return to someone resembling Gensler, even if the other party takes control again.

They’re aware of how many brilliant innovators and creative people left the United States because they wanted to build DeFi instruments, projects, exchanges and blockchain tools.

They felt unfairly targeted despite believing they weren’t doing anything wrong.

In cases such as Sam Bankman-Fried, the enforcement was justified. I think he received an appropriate prison sentence.

Justin:
People have to understand that the damage Sam Bankman-Fried caused wasn’t limited to the people he personally defrauded or the embarrassment he caused the industry.

He also made regulators look terrible.

That made regulators extremely jumpy afterward.

On my conspiracy corkboard, I would draw a direct line from SBF to Gary Gensler.

I think that’s part of why we got some of that behavior.

Regulators felt they had to prove that they were paying attention and weren’t allowing people to do whatever they wanted.

FTX was a terrible day for them.

Dingo:
That’s an interesting point.

I’ll admit I hadn’t really considered it from his perspective, but you may be closer to the truth than you think.

Justin:
I’ve thought about it a lot.

I’m not trying to rehabilitate Gary Gensler’s reputation.

Dingo:
Neither am I.

But it is interesting because everyone has their own side of the story and their own reasons for acting as they do.

At this point, people often remember emotions more clearly than events.

A lot of people in crypto remember the uncertainty, fear and feeling of injustice.

Democrats are aware of how popular crypto has become, and I think the administration could get a major win from this.

It may be the perfect alignment of incentives.

But if we don’t pass this in May, I don’t know what happens next.

Justin:
It could become another insufferable situation where both sides fundamentally agree but can’t say so publicly because they’re too busy fighting each other.

Dingo:
Right. You have to love politics.

Justin:
Who ultimately benefits if we do get clear regulations?

Is it bullish?

Could it pull us out of this bear cycle?

Dingo:
I think it will be the initial catalyst.

When people say “catalyst,” they usually mean the inciting event.

I think we may look back six months, 12 months or a year and a half later and say that the market changed because this bill passed.

There’s an especially interesting bull case for DeFi protocols such as Saffron.

If passive yield is restricted on stablecoins and regulators have to define permissible reward activities, we’ll pay close attention to what that means.

From what I’ve gathered, it appears to include rewards generated through real market activity, such as earning fees from a Uniswap v3 position.

That is something Saffron Vaults does. Saffron Vaults are built on top of Uniswap.

The demand for yield isn’t going away.

If people can’t earn it passively from stablecoins sitting on an exchange, that could be bullish for DeFi.

It could expose people to innovative instruments and opportunities while allowing them to enjoy the final days of the Wild West before everything becomes modernized.

Justin:
I’m a huge fan of Deadwood.

For anyone who hasn’t watched it, there are three seasons, and it’s full of profanity, but it’s one of the best shows ever made.

There is this sense in the background that the trains and telegraph lines are coming, and that everything is about to change profoundly and almost overnight.

I think crypto is approaching that kind of sea change.

When I started, this was very much a Wild West space.

Soon, it may simply become another asset class within the relatively buttoned-up financial-services and fintech industries.

That seems to be where this is heading.

For anyone wondering, Gary Gensler now appears to be on the faculty at MIT Sloan School of Management.

If you take a class there, perhaps you can ask him personally what he was thinking.

He’s still listed as active.

When I attended graduate school at Rutgers’ Mason Gross School of the Arts, Avery Brooks, who played Captain Sisko on Star Trek: Deep Space Nine, was still listed on the faculty.

I never saw him once.

I’m convinced he was still collecting a check simply to remain in the promotional materials after he had moved on.

Maybe Gensler has done the same thing and is traveling around giving speeches to people who hate crypto.

We intended to devote this entire episode to the Clarity Act, folks.

I hope we’ve given you something to think about.

One way or another, progress appears to be happening. It’s just a question of when.

How desperate is this market for good news?

As soon as someone suggests that progress might be happening, Circle jumps 20%.

Dingo:
I think people are desperately looking for it.

We were denied the 2025 bull run that everyone expected.

A lot of people are still in denial and believe it’s going to happen at any moment if we receive one piece of good news.

I’ll restate this.

If the bill passes, I think we’ll see an initial pump based on the market reaction.

We may know by next week.

But I don’t think it will immediately become the massive rally everyone is anticipating.

My guess is that the larger rally will happen when the government starts creating significantly more money again.

That may be when we see another 2021-style run-up.

I just hope it doesn’t happen on the back of a war, because that would be awful.

Justin:
I’d be happy if it happened on the coattails of a war ending.

That would be great.

Dingo:
I meant because of a war escalating.

Justin:
Right. I know what you mean.

Unfortunately, I’ve heard that even if the Strait of Hormuz reopened today and nothing else happened, we could still face elevated gasoline prices for a year and a half.

We would also see record gains for oil companies.

Dingo:
There’s the silver lining.

Justin:
The oil companies are going to be okay.

If you ever feel worried, folks, just remember that the major oil conglomerates will be fine.

We’re going to wrap it up there.

Dingo:
We’ll probably know by next week whether the bill is going to make it through.

We’ll keep everyone updated.

We wanted to put out a special episode of Saffron Files because the Clarity Act is integral to our entire industry, one way or another.

I’ve already explained the bullish argument that even this concession on stablecoin yield could become a positive trade-off.

Overall, this is positive momentum.

I think we’ll eventually look back at this moment and say that an incredible market run began because of what happened here.

Justin:
I agree.

What replaces the crypto market we’ve known may look a little different.

It may become steadier and less capable of producing instant thousand-times returns around individual assets, but perhaps it will also become more reliable overall.

That is a future worth working toward.

Hopefully, more people will gain access to financial services.

Millions of people in the United States are unbanked or underbanked.

One of the longstanding missions of this space has been to expand access to financial services for people around the world, including here in the United States.

That remains a worthwhile goal.

Creating another opportunity, even if it competes with traditional savings deposits, is valuable.

I love that banks can issue a press release with a straight face suggesting that it would be a dire circumstance if people used them less for loans.

I’m sorry, guys. All this Pepsi is causing a higher incidence of no Coke.

That’s terrible.

Dingo:
Competition is always good.

I think it’s healthy, and at the end of the day, people benefit when there’s more of it.

Justin:
Yes.

Dingo, thanks, man. It’s been great talking to you.

I look forward to talking again soon.

Dingo:
Awesome, man. Good to see you.

We’ll talk soon. Goodbye.

Justin:
Everyone, take care.

Peace.