# From Banks to Blocks: Unbundling the Next Five Years of Finance | DC Fintech Week 2025

- Channel: [DC Fintech Week](https://streameth.org/dc-fintech-week)
- Date: 2025-12-21
- Watch: https://streameth.org/watch/yt-owgHvoA56j8
- YouTube: https://www.youtube.com/watch?v=owgHvoA56j8

## Transcript

I am also now very very delighted to welcome our next session as I leave the stage with Emily Wilkins, CNBC Washington correspondent and her panelists. >> Well, hello, welcome to everyone and thanks so much to uh to Fintech Week for assembling what is really an all-star panel. I'm very excited to speak with you guys today. Uh so of course uh just very quick introductions. We have Caitlyn Long who's the founder and CEO of Custodia Bank. We have Brent McGintosh with City, the chief legal officer. And we have Manar Hannah who is a believe senior adviser with Appco Worldwide. No one's no one's correcting me. So that's great. I got it memorized. Uh well, we are obviously here in Washington DC. I know this panel we're going to be focusing a bit on crypto, on banks, on the uh the two of them and kind of where things stand. And since we're in DC, I wanted to start off with a question on the market structure bill that's been going through the Senate. Obviously, a top priority for crypto companies. I I think a priority maybe if I can say for banks as well. Um obviously there were negotiations, things seemed to be going swimmingly. There were talks of a markup. There was paper being traded. All of that has now basically ground to a halt when a recent proposal from Senate Democrats uh made some suggestions on DeFi that just seemed to be a step too far and things have frozen. So, I want to kind of pick up there and maybe Caitlyn kind of go to you first. Can you just talk about the importance maybe of market structure? I mean, what is it going to mean for the crypto industry if it doesn't get done this year? >> Thank you. Uh well, custodia doesn't benefit from it. So this is not a a bill that custodia has any particular interest in. Uh the industry does of course uh and it relates to Congress acting so that if the agencies put rules in place they won't be overturned when the next administration comes in. uh and what what from what I understand and I'm not actively part of this is that the big sticking point that there are several but the biggest one the biggest reason why the bill has stalled is not actually the DeFi issue. The biggest reason why it has stalled is that the banks are upset about the crypto industry paying rewards on stable coins and want to uh add language to the cl to the clarity act the market structure bill uh to repeal the the uh stable coin rewards what they call a loophole. >> Right? And this is of course the debate. Are the rewards that a lot of crypto exchanges offer, are they compatible to interest, which crypto is not supposed to be able to offer under the stable coin bill, the genius bill? I mean, Brent, can you sort of pick up on this a little bit in terms of the debate? Where kind of the the cities stand and where do you see sort of the outlook here for is it true that it's not a level playing field unless both can offer interests? >> Yeah, it's a it's a great question, Emily, and thanks thanks for asking it. Um when you look at what has happened over the course of this year, you've seen the artificial divide between the digital assets economy and banking break down in some spaces because we've gotten regulatory clarity. So in the stable coin space, there was an artificial divide there. Um and so banks had a difficult time providing banking services for stable coin providers. and similarly they had a hard time being part of that ecosystem and bringing that into the traditional financial system. Um you're still seeing that in the broader digital asset ecosystem because there is that lack of clarity. Um and so I think that will we're seeing as you get clarity a a breakdown of that artificial segregation. Um but the key to that clarity is uh as crypto gets mature, as the space gets mature, we see the same sort of risks occur there that occur in the traditional financial system. And some journalists have said digital assets learns the same lessons that traditional finance has over the past 200 years, but learns it much faster. And so we're in a space where we believe that where you present a similar risk to the financial system, you should have a similar regulation. And that's been you know that's not just the banking industry you have you can you can talk to the bank for international settlements you can talk to the IMF you can talk to the financial stability board and that's a principle they believe in >> so kind of going back I guess is it how important is it to the banking sector that you do see some sort of guard rails some parameters some of the stuff that was being worked on with this market structure bill? Yeah, it's you're you're not going to see deep engagement in the financial sector until you get those sorts of guard rails and that regulatory clarity on things like the the um AML restrictions, uh resilience, cyber security. Until you have that regulatory clarity, the traditional financial system has a hard time engaging because of the deep uh the deep regulation to which we are subject and the the um the pervasive regulation to which we're subject. Manar, I want to come to you as well. Obviously, you're with Appco now, but at the start of this year, you were with the banking committee with Tim Scott, obviously the the leader uh really right now when it comes to crypto and digital assets. Can you read the tea leaves for us? Is market structure dead? Is it dead for this year? Could it come back eventually? >> Yeah, Emily. Well, uh first off, I want to say thank you, uh for having me here in this room to be able to speak with everyone. Um I'm by far probably the worst person to be up here. I I was general counsel for Senator Tim Scott. Um I did a wide vast a wide um array of portfolio areas. Senate Finance Committee, tax, um uh banking, u police reform, I I was involved in pretty much everything. And I'll tell you something uh that my boss every time we would sit and discuss um uh market structure is you know it's all about opportunity and and it's expanding access uh to individuals in places that might not have the ability to get capital um in neighborhoods where it's harder to gain access into the financial structure. Um so I know market structure still the clarity bill is going to provide clarity. Um, you know, I I also have a construction background. I look at the clarity bill as kind of uh a plumbing. You know, it we're laying the pipes, the foundation. If we want to bring back jobs to the United States, if we want to onshore talent, you want to onore capital, it starts with the regulatory regime with the structure. Um, you know, where do digital assets fit into the financial uh system in the United States? And um I I believe that they're going to keep pushing for this. Um, you know, obviously you look at Republicans, you know, focused more on innovation, on shoring. Democrats are focused more on um what are Democrats focused on? They're focused more on uh you know, consumer protection. Uh so, you know, the key the key that they have to find, I think the pinpoint is how do you spur innovation but also protect the consumer. you know, you don't want to freeze innovation. I think uh especially as nations around the world are setting standards, the United States cannot fall behind. And this administration has pushed that forward and I think uh the United States Senate uh will do their job. Um especially since the House, it pains me to say this since I'm a Senate guy, but the House did their job. Uh they're not in right now, but they did their job previously. >> So, do you think something will be able to get done by the end of this year? >> Look into your crystal ball. you know, uh, >> best guess. We won't hold you to it. >> No, I would say I would say next year. I think there there's a lot on on on Congress's plate, uh, in the next couple months. Uh, probably the biggest thing is getting back open. >> Truly. And and I know we were talking about this a little bit before, but I mean, in terms of like the shutdown at this point, the impacts that it's had, it sounds like it's been pretty negligible for for at least for for you guys at this point. or is there anything that's sort of been a flashing red siren or could become a flashing red siren if this shutdown goes on for a few more weeks? >> Well, I think I think um from our perspective, our regulators have continued to be uh in and available and so that's been important to us and much of the critical infrastructure of the United States has continued to function well. I think um uh from an economic standpoint, people are wondering what the fiscal impact will be. Uh but beyond that, we've seen Washington DC where we're we're sitting I guess we're sitting across the river in Virginia, but Washington DC has continued to function as a city. Uh and so uh we're obviously hopeful that at some point we'll turn the government back on, but uh it has not been catastrophic for for the city or for the economy. >> We got a notice from the US PTO last week about a patent that's being granted with a patent granting date. I was surprised that we received it uh given given the shutdown, but it's we haven't felt it. >> The office is still open, still doing their thing. And Kaitlin, I want to ask uh because you mentioned you have patents, of course, you also have um applied for several other things with custodia bank in terms of things you're seeking from the Fed, from a master account. Can you talk a little bit about how that process is going so far? What are your expectations? What are you hearing when you chat with the Fed about this? Uh well uh uh the the background is that uh Kraken applied for a Fed Master account five years ago last week. We applied for ours five years ago next week. Um uh we we forced a decision and uh got caught in operation chokeoint 2.0. Uh then in an attempt to kill us, we were debanked five times for being a crypto company. But we've never been in anything but good standing with our regulator. We've never had been never even had uh anything from an enforcement action perspective with BSAL. We were onboarded by six banks who onboarded us after the Fed uh put its nasty gram out about us and they knew that it was inaccurate because they onboarded us and of course they went over us with a fine tooth comb. So that's the history. um there is an active lawsuit and uh decision is by some measures if you look at median time from oral argument to decision it's overdue already. So we're waiting for uh for the decision. Um uh I I will say because I've heard this now in multiple places that there are there are conversations going on uh and uh what comes of it uh remains to be seen. There are now several crypto companies that have applied recently for Fed Master accounts. The Fed has not granted a Fed master account to any crypto companies at all ever. Uh and uh there are a couple of us, three of us who have legal eligibility letters. So we have actually cleared the first hurdle. Um none of the other crypto companies have cleared that hurdle yet. Uh and uh and like I said, it's five years and the clock is ticking. I think I I was just joking with someone in the green room. If the Fed could leave it outstanding for 50 years, they would. >> Can I ask you to kind of read the tea leaves on that though? Because obviously if it's been 5 years, four years, it was the Biden administration, I think there is kind of a a widespread consensus that they were not the friendliest towards the crypto and digital asset industries. But then you've seen the the current administration, the Trump administration come in. There's been sort of a huge sea change and shift when it comes to that and yet you are still waiting. How do you interpret that? >> Uh well, conversations are taking place. Um, I'm surprised it it didn't break in the press because it was actually kind of public. A lot of people saw I spent I spent two hours with uh Fed Vice Chair Mickey Bowman at Anthony Scaramucci's conference in Jackson Hole. A lot of people talked about it, so I'm not breaking any news here. It just never never made its way to the press. So, um, >> feel free to break news here, by the way. >> Yeah. the uh but but but I think um it wouldn't shock folks because they saw that that that was happening that uh the conversations have uh have begun. Uh what's fascinating about the dynamic the last two um agency uh uh the the the redefinition of safety and soundness and the reputational risk changes that you just heard FDIC acting chair Hill discuss were proposed only by the OC and the FDI not also by the Fed. That is unusual. A lot of folks in the banking industry would have noticed that the Fed was omitted from those most recent uh uh statements. Usually all three banking agencies act together and that did not happen. Uh and I attribute that to the dynamic of Jay Powell is not a Fed is not a a a a Trump supporter. That Fed board right now is three for Trump and four against. And un until that dynamic shifts and Trump gets another supporter on the Fed board, I don't think you will see anything friendly at all to um to to Trump's priorities going through the Fed. Now, there is an interesting date. Uh not a lot of folks are talking about this. The the Fed Board of Governors reappoints the 12 regional Fed presidents on February 28th of years ending in one and six. So, it's coming up on at the end of this February. Um, the reason that's important is as as some of you will know, the FOMC, which sets monetary policy, is not just the seven Fed governors that we just talked about that are three, four against Trump. Uh, it's also a rotating five FOMC presidents. And so, if and right now, if you look at the FOMC presidents, some of them, there's pretty clearly a a political tilt going in one direction. Uh it's pretty obvious, for example, Austin Goulsby from the Chicago Fed was in the Obama administration. So you don't need to even dig very deeply to figure out where the political tilt is in in in some of those instances. And if Trump does not want that FOMC to be tilted against him, he's going to have to deal with getting control of the board of governors of the Federal Reserve by February 28th. And Jay Powell's term does not end until May 31st. >> Interesting that Mark that one on your calendars. I also wanted to chat a little bit since we have seen stable coin legislation passed within recent months of kind of what that's doing both in terms of banking in terms of digital assets. Brent, I know that Jane Frasier has said I believe that that it is a goal for city to have a stable coin. You guys recently uh supported I believe it was BBNK. Uh talk to me a little bit about where city stands right now in getting the stable coin and kind of what your outlook and perspective is on that. Yeah, it's it. Thanks for the question, Emily. Uh, as my my CEO Jane Fraser has said, we are being led here by where our clients want to go. So, our clients are sophisticated. They are international. And from their perspective, the question of how a particular um instrument or or functionality is is named is not the key. It's what does it do? Um and so our clients we move uh we move trillions of dollars around the world every day. Uh and our clients want that to be always on. They want it to be resilient. They want it to be regulatory compliant. They want it to be crossborder. And so the question of whether that is best done through a stable coin or we we run an internal uh tokenized deposit service that allows us to move liquidity around the world on a 247 basis. Um there's from our perspective and from our clients perspective, there's no magic to what you call it. It's what does it do? And so we look at the question of um should we issue a stable coin uh from that lens. Is it where our clients want us to be? And so we're in the process of evaluating that question and talking to our clients about it and uh at the same time using our our tokenized deposit service, City token services to to move money in a way that is really enabled by the digital economy in a way that couldn't have been done you know it's a private blockchain for us in a way that couldn't have been done a decade ago. So um >> can you give us a small peak behind the curtain? I mean, you say you're currently evaluating it, so understand that there's no final conclusion here, but for those who do seem to be interested in stable coin or digital assets, what are you kind of hearing as the pros and the cons? >> Yeah, so um right now we're our clients are very happy with what they're seeing internally using city token services. Uh and the question then becomes to what extent do we need to scale this outside of our own uh our own payment system and work with other banks? there are ways to incorporate them into that system as it exists and then there is the question of whether we ought to be doing a stable coin separately. So um that's all still to come. I'm not going to prejudge where we end up on that but it is a it's a topic of a great deal of discussion. We were discussing it just this morning actually. >> Manar I want to ask you because you work with with so many different clients in different industries. How are they beginning to think about is there you do you see an increased interest in in stable coins because of the law? Could there be more of an increase in digital assets? Where how are sort of companies sorting out their thoughts on this? >> Yeah, I think I think that's a great question, Emily. Um, you know, when I when I take a look at it and I'm advising clients, you know, there's an opportunity here to bridge traditional finance with DeFi. And and that's that's kind of where we push the conversation. That's what we would like to see. um you know you see banks like like city who are getting involved in tokenization who are getting involved in um uh figuring out custody standards. If you look at um on the other side on defi there's governance that's coming into place. Um there's uh legal standards that are being followed. There's structure that that it's coming. So there's an opportunity to bridge the two and I think that's where we are and that's that's where we come in to help folks advise them you know how do we build that bridge? Um, so it's wonderful to see. I think we're in in a great innovative spot. Um, so you know, I think the structure build then is going to be able to help move it forward. >> And are there some folks who are saying, "Hey, we are interested in more of the digital assets, but we need to wait until market structure gets done like how like what what's the load of folks who are waiting for that >> beginning of the year? Just wait." Well, no. I you know when we when we're talking to folks who are who are still very interested in digital assets is you know patience everything uh in Washington is you need some patience. Um I think what the industry can do you know where we come in and I remember from my time on Capitol Hill is the education phase. Don't don't assume that staffers that even members understand digital assets that understand tokenization because that's simply not true. I think you know there some reporting this morning uh different senators still did not understand the market structure bill. So I think it's it's uh up to the industry you know before you even get to the regulators educate Capitol Hill because that's that's going to help set the standards for for the regulators. >> Yeah. And usually for most of these bills they do take it was very I think interesting with stable coin that it did move as quickly as it did. Normally bills of this side, you need multiple congresses, multiple people involved, multiple consensus building. And I'm wondering if that's kind of the start of the process now we're seeing with market structure. I did also want to ask and and really this is kind of a question for all of you. Um Friday, of course, we saw that that brief crash uh the $19 billion liquidated. I'm wondering sort of what your takeaways are from that. Is there anything that needs to happen from either a policy perspective or within the industry uh to prevent something like that or is that just something where I I think Brent you might have mentioned earlier that you know it's a lot of the digital assets they're going through the same growing pains that traditional finance did. >> I I I think that's right. I I wouldn't say that Friday is is the data point that is the that decides any of this. But what I would say is it is uh it is a data point that suggests that uh digital asset the digital asset economy uh presents some of the same uh phenomena and risks that the rest of the financial system presents. And in those cases, when we regulate those risks in a particular way, we ought to think about whether um there's some magic to not regulating them merely because they're digital assets or whether we ought to be taking a prudent uh regulatory approach that looks at the risks that exist in a particular financial uh part of the financial system and regulate them the same as we would uh in the traditional financial system. a fool and their leverage Bitcoin are soon parted. Uh Bitcoin is a different animal actually and um and and uh one of the problems having been on Wall Street for 22 years before leaving for the crypto industry full-time in 2016 is that the risk models that um Wall Street firms use have have fault tolerances built into them. Uh so so um you know failures to deliver um uh u you know rehypothecation there are things that can be done where if um if an asset is is is short and cannot be borrowed then they can the banks can get it or they can get it the next day they can bridge liquidity overnight. That cannot happen in the crypto markets because no one is ever making more than 21 million bitcoins for example. And so you experience situations where the kind of leverage games that get played in in traditional finance should not be played in crypto and those that roll the dice and play those games unfortunately uh periodically do have situations like we had on Friday. I think it that the ferocity of it was fascinating to watch because volatility has been crushed in most traditional markets and it's not crushed in crypto in part because the mechanisms that we just talked about are are not there in crypto and I think that's healthy. So, do you think this is just to take what you said, do you think what we saw on Friday is kind of healthy in a sense where it's like, hey, you you made a risk, the risk didn't pay off, you knew what you were taking. >> Does there need to be more I was in a panel earlier today and there was some discussion about more transparency uh for some of these markets, these exchanges. I think there were even when I was reading reports on it, there was like kind of an asterk where it's like, well, we think it's this much, but not everyone reports. Does there need to be some more transparency? It's a global market. You'll never get everyone to agree. That's the other interesting thing is the US has such a history of saying, "Well, let's go regulate this." But anyone, it's these are voluntary markets. Anyone with an internet connection can participate. And so, if the US sets a standard like that, uh then then it just gives an incentive for another country not to require that and businesses will move there. That's that's the the difficult reality of trying to overregulate this industry. Well, I know we are just about at time. Um, I just really appreciate you guys. A lot of topics covered. Caitlyn, Brent, and our thank you guys so much for taking the time today and thanks for being here at DC Fintech Week. >> Thank you. Nice welcome. Thank you. Thank you.