Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
We are live in
zap. Stream. Oh, Twitter's live. It works.
It works. Very nice. Let's see. Twitter. Are we on there? Yeah, we are. We're live. Are we? Oh yeah. There we are.
Let's do some beatwits. The whole gang is back.
Yeah. How many weeks has Ben? We're live. Oh, yeah. There we are.
(00:23):
All of us did we? Or two?
Two, I think. And then we all split ways. Yeah. We timed that
incredibly poorly.
Like, let's launch this live podcast. And then it's like, oh, yeah. By the way, me and Kiera are gonna be gone three weeks.
We carried it.
(00:44):
And, it was quite nice having Jordan on as well. Couple a few bits.
Although, we didn't have that in the post release. It was just only if you were there actually live. Did you catch that? Oh, I like that. Like a little Easter egg. Yeah.
Mhmm. Yeah. That's right. Very cool. Very cool. How's it going, guys? It's been, it's been a minute, like we said, since we've all been together. So everybody,
(01:06):
surviving?
Definitely.
Definitely.
Not a fun week
in terms of news, which I know we're gonna get into. But
some silver linings, some good things to touch on.
Staying busy as always.
Good. Glad I don't live in The UK.
Oh. The normal things. Yeah. The
(01:28):
normal things. It's nice, isn't it, sir? It is. Yeah.
Alright. Alright.
Well, I'm fresh back off a a family holiday,
feeling nice and relaxed and ready to to get back to to the grind. Would like to say I'm feeling happy and and refreshed and and ready to raring to go, but,
not been a great news week for for those of us in the Bitcoin and Freedom Tech space, has it guys? So, yeah, we're gonna dive into that in a minute, but
(01:56):
just wanna quickly, welcome everybody to Freedom Tech Friday. If this is your first time here, welcome. Thanks for stopping along. This is a weekly live show focused on Bitcoin, cryptocurrency, and all things freedom technologies.
We usually structure the show in two parts,
although it is very much fluid as you're about to find out.
The first show is, sorry. The first part of the show is where we cover off the latest and greatest or or worst as this week has proven to be,
(02:23):
in Freedom Tech related news and news news topics.
And then we will be taking some audience questions.
We have a long list of pre submitted questions, so thanks once again to everybody that, gets involved on Twitter and Nosta by, posting those questions ahead of time.
But of course, we've got live chats. You can comment on Twitter. You can comment on YouTube. And you can also comment on zap.stream if you're on Nosta.
(02:47):
If you have any comments, feedback,
or questions or topics on anything that we're
talking about, during today's show.
We've got three
main news topics for this week.
All a bit well, not even a bit. All pretty doom and related news, unfortunately.
The headlines are,
the results,
(03:07):
or pending result of the the samurai world developer case.
We've also got a non result
or non no verdict from the tornado cache case. So we're gonna dive into that a little bit.
And then there was, an update
to the White House's
digital asset report,
that came out this week as well, which, once again, provided some doom and news for us all to talk about.
(03:32):
So without further ado,
let me just quick do do a quick audio check, and somebody in the comments just let us know that you can hear us, and that you're here. Oh, awesome. I see Bitcoin Derby here. Howdy, gents and vibrant subtlety. Seth is hot. What's up,
Seth? You've got a fan, Seth.
I've made it, finally. No more Linalden comparisons.
(03:54):
Oh, wait. Wait. Maybe that is a Linalden comparison.
Well, I see. She is hot. I see the bugle boys always talking about her. So I know. I feel like every other tweet from them is,
Lyn Alden is hot. So
Yeah. At what point does it get creepy? Thanks, thanks for confirming the the audio. It's a little bit kind of a I think it got creepy when he posted his, the screenshot that had, like, a Lin Alden gym shot as his background.
(04:18):
I don't know if y'all saw that. I did not see that. So
That was definitely where it crossed the line into creepy, I think. But, Yeah. Yeah. It's commitment. It's commitment.
Mhmm. They're creepy, but in a kind of sweet way.
Yeah. That's what creepy people want to think. I think.
I mean, maybe.
(04:39):
It's not you, is it, Maxine? You're playing defense for them here.
I'm not smart enough to do what the bugle does. You know that.
I suppose you've already got your hands forward the ungovernable,
empire.
Throwing in the bugle, stuff would probably send you over the edge.
Empire is a bit weird, though.
Indeed. Yeah. Ever growing.
(04:59):
Okay. Down to down to the serious stuff, guys.
Yeah. So we've had some further developments in the Samuai Wallet's,
developer
case
this week.
I think it was early in the week. We had some news that they
wanted to change their plea,
from
not guilty to guilty.
(05:20):
Up until that point, earlier in the week,
they had maintained the not guilty
plea,
throughout all of the the submissions and the the hearings and whatnot.
And then somewhat out of the blue earlier in the week, the both of them decided that they wanted to change their plea to guilty.
(05:40):
We have since had the the kind of final,
hearing if you want to to call it that where they did actually submit,
and they've plead guilty to,
unlicensed money transmission,
inside of the New York courthouse.
This was dated July 30, so two days ago.
(06:00):
The developers were were charged with conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmitting business. That was last year and could have they could have faced up to twenty five years in prison each.
As a result of, a clearly a backroom deal that's been made, the money laundering charge is gonna be dropped,
(06:21):
and the plea agreement is expected to be finalized by October,
where we will find out the details of, you know, the final amounts of fines. And, I believe, correct me if I'm wrong, guys, that sentencing is scheduled for early
November,
one day after the other.
As it currently stands, the court has ordered,
(06:42):
the the two to pay personal fines of $250,000
for for Rodriguez,
and, he'll face as a fine of up to $400,000.
Confusingly, there's also some additional,
monetary kind of penalties that have been banded around.
(07:02):
In total, 237,000,000
will be forfeited to the government,
and sentencing, as we've said about the sentencing,
and both also are facing a maximum
of five years in prison
with three years of supervised release.
Rodriguez has been allowed to go home, but unfortunately
(07:22):
Hill, who currently resides in Portugal, is not allowed to leave The US,
and his passport has been confiscated. And I believe he's got to stay
in the
SDNY,
district,
until he gets his sentence
passed. So came as a bit of
(07:43):
a bit of a shock to me personally. I don't know about you guys. Like I say they they maintained their their not guilty pleas throughout.
There's been quite a lot of talk around
the the timings here,
because,
during the exact same days, this week, the tornado cache has been having its final
(08:04):
final hearings or final days in court, and we're gonna get onto the details of that shortly. But I've seen quite a few people kind of try to tie these two dates up really where,
as to why this deal might have been made because we are kind of low on details right now.
There's been some people saying that,
looking at it from the samurai developers
(08:25):
case, side of things, should I say, that,
you know, they're they're apprehensive around a negative result in the Tornado Cash trial
creating some,
some precedent,
which could then be used against them in their case, which I, you know, completely understand.
And then I've also seen some people talking about the fact that the tornado cash
(08:48):
has not gone well from a prosecutor perspective.
So perhaps that, the prosecuting the samurai wallet case from the same district, you know, the SDNY district,
is kind of hedging their bets and thinking, well, maybe we don't want this to go all the way to the end of the trial,
because we might have a similar sort of, you know, unfavorable
(09:09):
kind of,
trial essentially and make ourselves look look a fool twice, so to speak. Mhmm. So from my perspective,
I kinda think that both of those
show a bit of merit or those theories show a bit of merit and that both sides are kind of hedging and want to feel like they've got a bit of a win. You know? If I was to put myself in the developer's shoes, the the the thought of twenty five years in prison,
(09:32):
versus a maximum of five
seems like a pretty, you know, an okay trade off considering how bad it could be.
And then, you know, flipping my head and not that I would ever do this, but putting my prosecutor's hat on, You know, if you've had your your I don't I don't wanna say they've had their ass handed to them because we've not had this had the,
had the the jury decision yet from the Tornado Cash case. But, you know, all of the stories or many of the stories that we've seen coming out this week have have been somewhat embarrassing for the prosecutor,
(10:02):
from from where I see it. So they, once again, are trying to hedge their bets and
seem that they have, you know, they they've locked up these guys in the samurai case and, you know, they've they've seized x amount of funds. So it feels like it's a win without them having to take it all the way through to the end of the of the court trial.
Yeah. I mean,
(10:22):
both theories hold water, don't they? But we won't know until we know.
And like you said, putting yourself in the developer's shoes,
not only you potentially facing twenty five
years,
but you've also just been dragged for the last, whatever it's been,
(10:43):
three hundred days or more,
through, like, immense stress and pressure on on you and your families. And you can see why some type of deal would be
tempting
with, you know, with the potential,
alternative outcome.
(11:05):
Now a quick question for you, Seth. I I hope you'll you'll be able to help me,
kinda straighten this one up.
I'm quoting from the rage article here. Hill and Rodriguez plead guilty to have engaged in conspiracy to knowingly transmitting funds
on behalf of the public that would derive from criminal activity
under count two of the indictment.
(11:26):
During the hearing, the government presented evidence of a tweet listing funds from Russian oligarchs. I'm sure sure sure we're we're all well aware of the the tweet in question.
During the hearing, Rodriguez stated to have operated a service called samurai wallet, which allowed users to move bitcoin from one address to another and obscure the transaction.
He stated that he came to know that some proceeds came from criminal activity and continued samurai oil operations
(11:49):
and marketed the service to the public. He additionally stated that he knew the criminal proceeds would be obscured.
Now I've I've seen a couple of comments on Twitter about this one.
Is this
a kind of downgraded or partial
comparison of the initial conspiracy to transmit funds, like the
(12:12):
money transmitted one. Is this kind of been down dialed somewhat? Or because I'm just a bit bit confused around the wording that's been used.
No. So it it this is still the same
original second count that they were indicted on. The first one was,
conspiracy to commit money laundering.
That's the one that was seemingly dropped as part of this plea deal. So that's no longer on the table, which is the one of the twenty year sentence. Mhmm. But this is still the full conspiracy to commit unlicensed money laundering,
(12:40):
that they were initially charged with, which was the second count in the indictment. That is the one that carries five years. The the weird thing here and
I think, like, it's hard to find a silver lining in something this
horrifying. But the silver lining here is that,
like, a lot of the talk before
this plea was in when this was looking like it was gonna go to trial
(13:02):
was that the concern would be that the precedent on this count would be the most harmful. So the money laundering one is
is more years, but it was less harmful for the broader industry. Whereas if there was a, like, a conviction by a jury or a judge on the
the money transmission,
that would essentially mean that, like, lightning nodes and potentially even just name lightning nodes and wallet providers that, like, lots of entities theoretically could be claimed to be liable
(13:30):
for how their services are used.
Since this is a a plea deal and is not going to trial, this doesn't mean this means that it doesn't actually set a legal precedent,
which is important, but it it is still that full
that full charge. And the, like, the weird thing is that there's it was never even argued
that this was money transmission. That's another silver lining is we don't get any statements from the judge or anything like that that could be used in other cases,
(13:55):
to construe that this was money transmission. Obviously, they're admitting that it is, but in the legal sense, it carries less weight because it can't be used directly as a legal precedent.
But it is it is very
odd because it would seem to me that, like, if theoretically they were doing what they were doing, it sounds a lot more like money laundering than money transmission to me in the thing that they're admitting to. Like, they'd as far as I saw in the actual things that they that Hill and Rodriguez said,
(14:21):
they were more saying that they knew about illicit funds flowing through the platform. Not that they knew they needed a license and didn't get one.
So it's a very odd like, how the admission fits with that is a little confusing to me, but
that is, that is kind of the the interesting thing here. I will also just make one kind of comment or revision to to what you said initially. So this isn't the court ordering these specific judgments, the five years, 6,300,000.0
(14:46):
forfeiture,
250, and $400,000
fine, respectively,
but rather a guideline that this the judge will decide at the sentencing on November 6. So I've heard that it could be more or less than this, but a very
good to know or, like, important
tidbit here is that,
the defendants, Hill and Rodriguez, have agreed to not be able to appeal this
(15:09):
if they get,
that five year sentence or more. So it it looks very likely that this won't be something that they could appeal later on,
is an interesting piece of the plea deal as well. A sad one because you'd like to be able be able to see them appeal it as if there's some change in the DOJ or something like that. But that seems to be a piece of this as well that they won't be able to do any appeal afterwards.
(15:33):
Okay. Appreciate the clarification.
And and just finally on this, from my perspective at least,
what's your take on
like, they've pleaded guilty to to basically essentially being a money transmitter,
but there's been no mention,
in any hearings,
of FinCEN,
who were providing the guidance,
(15:53):
which seems like,
again, not a lawyer, not a not a, you know, legal expert in any way, shape, or form. But it it seems as though that could be,
like or could have been great from the defense perspective to be able to mention that and to leverage that. Perhaps I'm missing something here, but they seem to be pleading guilty to something that they they,
(16:15):
like, would would not one. Yeah. Exactly that. Yeah.
Yeah. And that's I I think it's easy to forget that only, what, two months ago was when we had that, like, that bombshell of a discovery that the prosecution had reached out to Fenson
and said, hey. We're gonna these guys.
You agree that they were breaking your guidelines? And Fenson basically said, no. I don't don't think they were breaking our guidelines. And the DOJ continued to indict them anyways. And, like, that seemed like that was gonna be a huge, huge piece of this case to show
(16:45):
even Fenson themselves who set the guidance, who Samura Wallet thought that they were following,
didn't immediately agree, at least, that they were breaking the guidelines that had been set up. So that's definitely like
that's why it's I mean, there's gonna be so much speculation around this case because one of the downsides of this not going to trial is that none of the discovery or anything like that will probably ever come to light.
(17:05):
But it's very odd to me because it seemed like things were looking up for the defense. Tornado cash trial seemed to be going very well for Roman storm,
and yet there's this sudden flip to pleading guilty to taking a plea deal. So I'm like, I again, it's pure speculation. I'm curious if there's something that was more of a smoking gun that just hasn't come to light, some internal admission or something that would have been
(17:28):
much more likely they could get a conviction than what we knew, but it's very hard to tell. But, like like you said at the beginning, the the timing here is the most, like, suspicious and odd piece. I mean, I don't know if I don't know if you all remember, but the week when samurai wallet was indicted,
we got the samurai wallet indictment.
This was last April. We got samurai wallet indictment. We got a statement by the prosecution on Tornado Cash that was horrifying.
(17:51):
We got a statement by the FBI on not using any services that don't do KYC and that aren't licensed money service businesses,
essentially saying don't use things like samurai wallet.
We had this, like, storm of a week where so many things came out all at once. It seemed very orchestrated. And then now, again, we have what is what was supposed to be the last week of the Roman storm trial.
(18:13):
Obviously, that deliberation has been delayed, which I know we'll touch on.
But that was supposed to wrap up on Thursday, so we could have had a verdict as soon as, yesterday.
Then
the samurai wallet plea deal happened very quickly out of nowhere
right before that, which is also odd. Like, I'm I'm not sure why that needed to be done now. But like you said, there's some incentives for both the prosecution and the defense
(18:36):
to get it done now depending on which way this storm trial, swings. It can
it can affect the verdict there. But on the flip side, you can also like, something that I've been hearing from from lawyers that I trust is the the one thing that this plea deal can be used for is that the sentence laid out in this deal
can be used to inform any sentencing of Roman Storm if he is convicted by the jury.
(18:59):
So that could be something where, like, the DOJ is trying to use this to get a harsher sentence for Storm
if the jury does convict him. But, obviously, that's seeming uncertain now. So there's so many things going on at play. I think it is very suspicious that this stuff happened all in the same week,
and I think will will be cause for a lot of, conspiracy theories and deliberation and thought around it because it's it's an odd odd aligning of things
(19:23):
almost exactly like they aligned at the beginning of all this mess.
Yeah. I I think, obviously, it's all gonna kind of, I guess, come out in the wash in the weeks and months that follow. And we'll probably
there'll be some admissions from either side as to as to some of the decisions that have been made.
But for now, I guess, like I say, we we can only kind
(19:44):
of draw, you know, some some guest based conclusions to to what's going on and to as as to the incentives as well, behind all of these decisions.
So I think that's probably a good time to to move across to the tornado cash case that we've we've referenced a couple of times already. But,
the, the the the trial has now,
finished this week.
(20:06):
On July 30,
the,
the defense and the prosecution gave their closing statements.
I believe the the prosecutions was nearly a two hour long closing closing state closing statement, excuse me,
by the prosecutor Benjamin Gianforti.
He his closing statement, was essentially trying to paint a picture where Roman Storm,
(20:31):
was aware,
and did nothing to prevent,
you know, illicit funds from flowing
through, the Tornado Cash Service.
And prosecutors
have continued to kind of characterize
messages and things like that,
in such a way to to make it as damning as possible that, you know, that they essentially knew what was going on, and that,
(20:56):
that that that they kind of washed their hands of it and that they did nothing.
Similarly,
to the the samurai wallet case, there's been some, I I guess you could call it,
bad taste jokes that have also been leveraged by the prosecution.
The obviously, with the samurai case, we referenced the the Russian oligarch tweet in in the tornado cache. We have something somewhat similar where there's actually a photo of Roman Storm wearing,
(21:21):
essentially a t shirt, of a of a washing machine with the Tornado Cash logo in the center. I'm sure we can all imagine the the kind of connotation that that could, you know, how that could be received. And unfortunately, that has been used against him as, you know, his knowledge of of, like, how the service operated or or the the purpose of this
(21:41):
the the service, should I say.
The defense has also kind of,
done their closing statements,
and basically just try kind of flip it on its head and saying that, you know, the prosecution is essentially
flipping the laws upside down and just reading way too much into,
into some, you know, poor bad taste jokes or into some messages that have been sent between, you know, parties concerned with, with with Tornado Cash.
(22:09):
The the defense attorney,
surname is Patton. He emphasized
that collecting no u user information was key to Tornado Cash's promise of complete and non custodial privacy.
He also posed a kind of rhetorical question here. He said, you know, to the jury, did they make did this also make it very useful for criminals? Yes, of course it did. You bet it did. But he continued, so did many other everyday products, including your cell phone, which is full of features. We all find it useful and so do criminals.
(22:39):
So again, like, nice to see a common sense approach. And I guess you could call it a kind
of dumbing down of of, like, you know, the the, I guess, incentives
of any type of privacy
tool or software is that, yes, criminals are obviously going to find those things useful.
But that doesn't mean that you should stop the common man from or woman from, you know, being able to use such tools.
(23:05):
We've got another quote here from Patton, the defense attorney. In order to be guilty, it is not enough to just know a criminal is using a product you make. You have to act willfully with purpose with the goal that the underlying crime be committed.
The goal has to be furthering
crime.
So,
the, like I say, closing arguments are done.
(23:26):
We
thought we may get a,
jury decision yesterday, Thursday.
That did not happen,
and I believe that the jury has spent all day yesterday deliberating. And then just at the end of the day around 3PM eastern time,
the, they have requested some transcripts from some of the, witnesses that took part in the case.
(23:50):
Those were, you know, obviously, they they gonna get those, but they were strangely gonna take more than twenty four hours to to get to the jury. I'm I'm a bit perplexed as to why it would take that long, but I guess, you know, there's no in inefficiency like government inefficiency.
So the the jury was told to go home early yesterday on Thursday. They are not in court today,
(24:10):
whilst the, transcripts are being provided.
And then the jury is gonna get copies of those on Monday of next week where deliberation will continue.
And hopefully, we will, have a result by then.
So that's kind of where we're at at the moment.
I've just before I hand it over, I've also seen some commentary from people like,
(24:32):
Zac Shapiro,
and other people that are, you know, closer to this in terms of regulation and and from, you know, the the legal perspective.
And,
seen many people saying that this is actually could be seen as a as a positive,
step that the jury is, you know, they haven't reached the decision very quickly.
Once again, not a legal expert, but the the theory goes that, you know, the the jury is actually
(24:57):
kind of taking this case seriously. And they haven't just had the knee jerk reaction of, oh, you know,
money transmission sorry. Money laundering, bad. Put them in jail. It seems as though they are kind of
wanting to understand the the viewpoints of the witnesses and,
kind of get get to grips here, and and just
push back a bit on the, kind of, bullish way in which the the the SDNY has, kind of, or the DOJ
(25:23):
has, kind of, tried to, you know,
use broad brushstrokes in terms of how this, or why this type of software is used.
So,
yeah, bit of a waiting game now. Kind of annoying that we've got to wait over the weekend because I'm sure there's many, many people, you know, both close and tangential to this case.
All of the people on this call included that are very interested in this and the impacts that it's it's gonna have on the on the industry. So,
(25:49):
have I missed any key details there, guys? I'm I'm, hope hopefully, I've not. I don't know.
Yeah. I think you covered the main ones. I mean, it's, like you said, the the broad consensus is and this is a quote from Jake Chervinsky, who's another fantastic lawyer in this space. He says, it's dangerous to speculate about what this means, but in general, most lawyers think longer.
Speaking to the deliberation of the jury and then waiting until Monday, you know,
(26:13):
that longer is better for the defense, but it's not an open and shut case. Mhmm. So definitely encouraging, like you said. Like, if they had just seen the picture of Roman in a washing machine t shirt and thought, yeah. He's a bad guy. He could've he was doing bad things.
It could have been a very quick deliberation, but it's a very encouraging sign that
they've taken so long that they've requested things from both the prosecution and and defense, not just one or the other.
(26:38):
So I'm I'm thankful that it it does at least seem like a jury that actually cares about what they're doing.
It's definitely one of those things where I'm sure as a juror, you're haunted either way and trying to make sure that you're doing doing the right thing. And it it seems like they are really deliberating and thinking about this, which is which is a good sign for the defense,
but we will see. It's hard to really hard to know much until they come back Monday and
(27:01):
potentially have a verdict.
But it has been very encouraging how the case has gone overall.
The broad consensus among people I trust and follow has been that it's gone very well for Roman Storm and very poorly for the DOJ.
So that's that's very encouraging. I'm I'm hopeful there can be some redemption of The US justice system here, and he can be he can be cleared, and that can set a very positive legal precedent,
(27:24):
which is is a very important part of this. Like, if we do have this and then a plea deal for samurai wallet completing,
that's a very good legal precedent on the the,
Tornado Cash side and no legal precedent on the samurai wallet side,
which is is not a bad outcome for the space, but, obviously, would still be incredibly sad for the samurai wallet devs themselves since they still have a sentence to serve. But I think it's it is important to keep in mind both things, both actual individuals facing this
(27:53):
insanity,
and the potential impact to the the broader industry.
Irrespective of our kind of personal sort of allegiances and whatnot, would it be be fair to say that the tornado cache,
or the result of the tornado cache case,
has a much bigger,
impact or could have a a much bigger impact on the wider ecosystem in terms of the precedent that could be set because there is no no plea deal. Would that would that be a fair assumption to make?
(28:23):
Yeah. It absolutely would. And I think something that
maybe people who aren't as in the weeds don't don't understand or don't know is that the the Tornado Cash case was actually a much better one for the defense because Tornado Cash itself as a protocol was immutable. Like, they they could not actually change the protocol itself to prevent illicit usage.
They could do some things on the front end, which they did, but that was one thing that would have been incredibly damning is if if it was actually a crime
(28:49):
to create
a tool that provides privacy that you then cannot stop or censor how it's used.
Like, you you could see the liability that
becoming true of essentially anything. Like, the Linux kernel, could that be could Linus be held liable? The Linux kernel is is an able to see needs? Could Linus be be responsible for the Linux kernel being used
(29:10):
in centrifuges in Iran to create nuclear weapons? Like, would he be breaking sanctions laws by doing that? Like, some of the the ramifications of this case could have been even more insane than the samurai while at one. And I don't I don't say this to throw shade or, obviously, say that the samurai wallet devs were guilty of anything, but the the unique differences between Tornado Cash and samurai wallet the samurai wallet was a centralized service that they had more control over even if it did not ever take custody of users' funds and did not have
(29:37):
clear mechanisms to prevent illicit users. The Tornado Cash one was absolutely out of the control of the Tornado Cash developers. So it was always a a better case for the defense, but also a more
I I hate to say more important because I know how that's gonna not gonna sound right, but
a more, influential, maybe is a better term, a more influential case
in terms of what precedents it could set. So a positive precedent there would be massive because it would it would reinforce
(30:02):
code as free speech with the core underpinning of the The US legal system when it comes to building things,
like Bitcoin, like Ethereum, like Trinidocache, like Samara wallet.
Okay. I appreciate the clarity there. Max, any anything else on the the Tornado Cash side of things before we move on to the the third and final news piece?
(30:25):
I think you covered it perfectly there.
Okay. So, obviously, you know, we're waiting for the the result of that one. So I'm sure we'll be talking about this, this next Friday because, you know, that should give the jury plenty of time to,
to get the the jury sorry, the the decision out. I'll be very surprised if it runs on, you know, for a full week given that they're already
(30:46):
in deliberations.
But, I guess there are such thing as hung juries, and, I've got no idea whether that would be a positive thing or not or how common that is. But,
obviously, we will, of course, be reporting on that next week as well.
So the final piece of, doom and news that we've got for you guys this week,
is the White House digital assets report.
(31:10):
This,
was a a report obviously on digital assets produced by the White House. I'm not sure exactly
who, is behind it.
But, Low Elites from, from The Rage, which, you know, if you guys have never heard of that, is a fantastic publication that covers everything that we've been talking about today in great detail, both in written,
(31:31):
content
and also,
in video,
snippets by people like David Morris as well, who's, you know, in the courtroom for for both of these trials, and reporting back. So if you if you wanna stay up to date on a day by day basis, would urge you to go and check out check out the rage.co.
So, yeah, as I was saying, Lowell Elites yesterday,
published a a great breakdown kind of, scratching under the surface of the new,
(31:57):
digital assets report, which was released on Wednesday.
The the digital assets report was kind of clarifying
what policies
it's urging the the treasury, to take to solidify,
a digital assets regime.
Many people expressed disappointment that the report has lacked clarity on how much bit Bitcoin the US government owned.
(32:19):
Couldn't care less.
Earlier in July, the rage published that the number of Bitcoin owned by the US Marshals Service,
they were sitting on a stack or most people thought they were sitting on a stack of about
200,000 Bitcoin, which they'd essentially, you know, stolen from other people and kept their hands on.
Yeah. But it turns out, thanks to a Freedom of Information Act that Lola submitted that they're actually they've actually got 30,000 Bitcoin, which, many people who were were bullish on the Trump admin and the the whole strategic Bitcoin reserve, we're not very happy about.
(32:50):
So it turns out that they probably sold well, they've sold well over half, of this the Bitcoin that they've they've they've stolen from other people.
Also, as part of,
of,
this report,
it was also very woolly on the,
lack of strategy to, you know, establish their strategic Bitcoin reserve over and above keeping a hold of the stuff that they'd already stolen,
(33:15):
which it seems that they're not doing a very good job of job of. Excuse me.
So
what else have we got here? Yeah. So,
according to the report, the White House is very concerned with how, quote, illicit actors such as peep the Democratic
People's Republic Of Korea and ransomware actors continue to use mixers,
(33:37):
to obfuscate and launder funds.
In 2023, the Financial Crimes Enforcement Network, FinCEN, spoke about those earlier, proposed a rule that would require financial institutions to monitor and report transactions involving cryptocurrency
mixers.
The White House is now, as part of this new report, urging FinCEN to finalize the Biden era mixer rule, which applies to section three eleven of the world famous Patriot Act.
(34:05):
And this is gonna apply to certain cryptocurrency
transactions, and this is where we get to the juicy bit.
FinCEN's Mixer rule, and I'm using Mixer in quotes there, that's their words not mine,
would deem any transaction facilitated in a manner that obfuscates the source, destination, or amount involved in one or more transactions
(34:25):
as a
quote primary money laundering concern
regardless of the type of protocol or service used.
Here comes the examples.
Number one, pooling or aggregating
cryptocurrency from multiple persons, wallets, addresses, or accounts.
So reading between the lines, that's obviously
coin joins.
(34:47):
That could be pay joins.
That could be,
just sending from two addresses in your own account if you wanted to, you know, interpret it quite literally,
because it says pooling or aggregated
from multiple persons or wallets.
So you could construct a a stonewall
transaction
all from within one wallet. But it could be argued that you are
(35:10):
creating that in such a way to
obfuscate the source, destination, or amount.
Number two, using programmatic or algorithmic code to coordinate,
manage or manipulate the structure of a transaction.
Kind of another way of basically saying what I've just said. Number three, splitting cryptocurrency for transmittal and transmitting the cryptocurrency
(35:32):
series of independent transactions.
So that could be like your your stereotypical
kind of peel chain where you're sending to yourself through different kind of hops as we sometimes call it.
Number four, creating and using single use wallets, addresses or accounts
and sending cryptocurrency
through such wallets, addresses or accounts through a series of independent
(35:56):
transactions. Now correct me if I'm wrong here, guys, but that's how pretty much any non custodial Bitcoin wallet works.
You have single use addresses,
and every time you press receive, you see or you get generated a new one.
So this is, you know, the the the the terminology being used here is intentionally
(36:16):
kind of vague and wide ranging as is always the case with, these types of situations.
Number I forgot what number I'm on now. +1, 234.
Number five,
exchanging between types of cryptocurrency or other digital assets.
So using something like bolts or,
swap services.
And then finally,
(36:37):
number six,
is facilitating
user initially
initiated delays in transactional
activity.
So, you know, the way I interpret that is it's something like ricochet, where, you know, you have time based delays where you,
send to yourself and then onto a third party.
So basically,
(36:58):
as you can see how broad and wide ranging those kind of
criteria are, what this means essentially is that the the the quote, unquote, mixer rule is not really a mixer rule, but really a rule that would criminalize any attempt at privacy on a transparent
blockchain.
Not even privacy, any attempt of of use. Use it. That's how we do it. Exactly. Yeah. Like literally
(37:21):
anything.
Yeah. Just a quick recap for the one with point number four that we're talking about here. Creating and using single use wallets,
addresses, or accounts,
and sending cryptocurrency
through such wallets, addresses, or accounts through a series of independent transactions.
Mind blowing.
(37:42):
This I mean, not mind blowing Well because Yeah. You know, not surprising,
but
absolutely disgusting,
as expected and
not fucking good.
Yeah. It feels like a huge rug pull for for,
add an an administration that was trying to paint a picture or or did successfully paint a picture because they got elected and were, you know, were backed by most of
(38:09):
of the politically
charged people within the industry.
They tried to paint themselves as, you know, the pro Bitcoin, the pro crypto administration.
You know, there's all sorts of quotes from Orange Man,
saying, you know, you're gonna be able to play with your Bitcoins, and we we respect the right to self custody, blah blah blah blah blah.
And, you know, then you get rug pulled with something like this, which is coming directly from the White House. It's,
(38:35):
like you say, Max, we we shouldn't be surprised.
But, you know, we've talked numerous times around kind of precedent here and impacts to the industry.
And this seems
to potentially have just as big of an impact, if not more in my opinion,
than, the two
legal cases that we've just been talking about. Like, this could really,
(38:58):
really kneecap
sovereign Bitcoin usage.
Yeah. It's well, it's the end of,
Bitcoin, the Bitcoin and cryptocurrency that we care about.
And I think maybe part of this is there's been this shift that we keep talking
about,
where people who are only concerned with price and caring about buying ETFs and holding companies and all the rest of it,
(39:27):
it doesn't affect them. It doesn't even necessarily affect the price. It affects
freedom. And
I think
Trump managed to rally people and managed to trick people.
I'd like to say, I don't think he tricked us in any way or any of these politicians do. We know the direction they're going.
(39:47):
But it's, it's pretty, pretty scary. I mean,
especially coming out of America, I kind of like, if this was in The UK, I'd be like, yeah, of course
we had, we had a few, we did have a few months where where we were like, oh, you know, things are looking a little bit better here. Like, they look like,
pulling back a little bit. Like, they're they're loosening up a little bit.
(40:10):
Yeah. It's it's a it's a huge slap in the face.
I I will caveat with the fact this is,
quote, unquote, just a report.
So this isn't law. This won't necessarily
change anything.
But I think the
the biggest takeaway initially should be that we
realize that the suits are not on our side. Like
(40:32):
Sure. Just begging for an an,
institutional investments and begging for government adoption
and
strategic Bitcoin reserves. Like, these people do not they don't want you to use Bitcoin
reserves. Like, these people do not they don't want you
to use Bitcoin itself.
They're fine with you making money that they can then tax
and Yes. Making transactions that they approve of. Like, why would they be upset with that? Bitcoin's transparency is actually an aid to them in way. Oh, yeah. Like, it's it's it's not
(40:59):
I don't know. This should have been apparent all along. I think some people are surprised by this, but they shouldn't be surprised by this because Trump was also never
he clearly had no idea what he was talking about when he was in Vegas talking about Bitcoin. Like, it's one of the stupidest speeches I've ever heard in my life.
It was the only full speech of Trump's I've ever ever listened to, which maybe is why I've just never even
bothered to watch a full one because we could do nothing in our booth when that was going on. We watched it, and it should have been clear to anyone that he doesn't actually care about you using Bitcoin in a self sovereign way. Like, they just care about fitting Bitcoin into the broader system. The push with stablecoins lately should make that even clearer. Like,
(41:35):
they're very much okay with things being used in a way that doesn't harm them. And Bitcoin being held by a custodian
and you getting fiat profits that they you pay your taxes on benefits them. It doesn't harm them. It doesn't take power away from them. You buying Bitcoin on Coinbase or Cash App does not at any way affect the US government.
It doesn't give you any more power unless you actually take custody of it and can use it in a self sovereign way. And that's clearly the next step is that they'll they'll try to target that. Again, hopefully, we'll get a very good precedent in the Tornado Cash case, which will help pro protect developers.
(42:08):
But, Yeah. It should be clear that they're not
they're not fighting for us. They're fighting to increase their hegemony, the hegemony of the US dollar, and increase tax revenue.
Yeah.
Yeah. Nailed it.
Like I say, three three very,
dark news,
(42:29):
articles for us to cover off this week, guys.
Just wanna remind people that, if you have any questions or comments,
feel free to throw them into the live chat, into the comment box on YouTube or Twitter or Nosta.
We'll get to them if we we can. And obviously,
when there are future developments on on anything FreedomTech related, especially the the three as three
(42:52):
news items that we've been talking about, today, we will, of course, do our best to to keep you guys up to date. But if you guys
hear or see anything, please feel free to to let us know via the usual channels. We we try to stay abreast of this stuff, but,
we do have day jobs and families as well. So, be sure to keep us up to date as well if you see anything new.
(43:13):
With that said, guys, we got a little over 15. So I think we should hop into
into some questions, some audience questions. We have a a load of pre submitted questions that we're still working our way through. So once again, thank you to everybody that does get involved.
Really does help kind of drive the show and
see what you guys are are passionate about and what you want us to cover off as well, as well as, you know, allowing,
(43:37):
Seth to sound smart and Max to sound a little bit less smart.
So kicking it off It does.
We we have a question from Avren,
apologies if I've mispronounced that, on Nosta.
And this is,
Well, one sec. Before we do that Oh. Should we make a rule that anyone who's in the chat gets their questions answered first? Because they're joining us live. Absolutely. Yes. Yep.
(44:03):
So I saw one fly past about the 51% attack on Monero or potential 51%
attack on Monero.
I'm not gonna jump into that properly now because me and Seth covered it a couple of days ago, and the Monero monthly is gonna go live
maybe tomorrow or the next day. And we we do go into that,
(44:24):
fairly deeply. So,
jump into that one. But I just didn't wanna ignore the people in the chat.
Thank you for keeping me honest there, sir. I appreciate that. Alright, mate.
Yes. So first question on our list
Novta.
And this is,
this is literally the top of our list, but seems very apt considering what we've been discussing,
(44:47):
today for for most of the show.
Avrin asks,
which bitcoin privacy technologies
leave a blockchain footprint and create
tainted
coins?
There's a quote around tainted.
In bitcoin all on chain activity is permanently visible and most privacy enhancing techniques leave recognizable
patterns.
(45:08):
These can lead to quote taint where coins are flagged by blockchain surveillance tools like Chainalysis,
Elliptic, or TRM Labs
as suspicious
or high risk.
Max, I'll let you take this one first.
I mean, yeah. Basically, all of them.
(45:28):
Yeah. Yeah. I was I was waiting for that bit. Not quite. Yeah. I mean Not quite. But yeah. There is there is some we do have some, cards up our sleeve.
Yeah. I I would say
probably,
Lightning
is one that doesn't currently get flagged as much as the rest of it. Like, if you've been through
Whirlpool or
(45:50):
done a swap or done
something like that, and then you're
spending with Lightning to,
let's say, exchanges
or these type of things that are regulated and and, like, leaning on these,
chain surveillance by companies.
Probably a lightning spend is
pretty difficult to unwind and currently
(46:12):
viewed as a normal payment.
Yeah. I think I think that's fair to say. Obviously, you've got to get into Lightning,
you know, which does have an on chain footprint, which, you know, we've discussed on previous years. So I won't go into that now.
But, obviously,
things like,
coin joints,
coordinated coin joints, doesn't matter whether it's Wasabi,
(46:33):
Whirlpool,
or even Joy Market, like, they all leave a very, very distinct footprint.
Even naive stuff like Peel
chains are are, again, you know, that's that's bread and butter for for for chain analysis companies to kind of unwind.
The the ones that don't,
and the ones that, you know, I guess are probably gonna become the more prevalent ones, moving forward would be things like
(46:59):
Bit 47 payment codes, silent payments.
All of those kind of leave no no footprint,
which is, you know, obviously a good thing. Go on, Seth.
Yeah. I I will just call out that that 47
payments
or just reasonable payment codes do leave an on chain footprint. Because of the notification transaction. Right? Yeah. So I I know in theory, they could not leave,
(47:23):
on chain footprint. But in practice, all of the implementations do leave an on chain footprint. So that one could technically get you flagged.
Transaction from your wallet that's making the notification initially. The the subsequent transactions
wouldn't have an on chain footprint, but the notification would. So that that one is kind of a a copy out there. But you're right that settlement payments leave
caveat there. But you read that silent payments leave no on chain, footprint.
(47:45):
And then, of course, the the obvious one would be, a pay join
Mhmm.
Where, you know, pay joins, they, you know, they've got two very beautiful,
properties. They
they obfuscate the amount,
that is being transacted,
and they also look the same as any of the typical transaction.
So quick quick recap here. A pay join is where,
(48:08):
your person a is sending to person b.
So person b is the recipient.
But unlike in a traditional transaction where, you know, it's it's only person a's coins that are kind of heading over to to person b. In a pay join, person b would also contribute at least 1 coin to the transaction,
which breaks what we call a common input ownership heuristic.
(48:32):
And as I said at the outset,
that is achieved in such a way that anybody looking on something like mempool dot space,
would, you know, the the look at the at the the footprint
of that transaction, it looks identical to the footprint of a traditional transaction
a single participant. So those types of transactions really do,
(48:57):
kind of hide in plain sight, and that's part of, you know, what makes them so powerful.
The unfortunate thing here, and I'll I'll let Seth chime in because I know he is a little bit closer to this, than I am, but,
is kind of user adoption unfortunately.
We've we've got the PageOne v two standard,
but we're we're kind of in a bit of a chicken and egg problem here where, you know, it's a powerful tool, but you just can't leverage it in that many places. And I'm hoping Seth's gonna be able to save me now and and let me know kind of where you can actually do that.
(49:27):
Yeah. I mean, there's there's two big caveats. One I'll say is Page One v two is fully backwards compatible. So, like, Cake Wallet, you can pay a Page One v one from, like, a BDC pay merchant or a Sparrow Wallet user.
So there there is backwards compatibility there. You won't have the, like, the not having to always be online benefits of Page One v two, but there is that to keep in mind.
(49:48):
The other thing I'll say is just that page one v two has a fantastic SDK with great documentation,
a fantastic team behind it, and should be implemented by everybody. Like, if you have another wallet that you use that does not have page one v two implemented,
you should be harassing them into implementing it because it's something that is
relatively straightforward,
has a good SDK ready for it with bindings to multiple languages,
(50:13):
and is something that has some pretty immense user benefits and should just be able to happen in the background. Like, I mean, our our goal at cake is that we'll we'll make page one v twos the default for Bitcoin transactions, obviously, between cake users, but the goal is that every Bitcoin wallet will support it. And so we can make the norm page one v two rather than the norm be totally transparent transactions, which has a snowball effect of
(50:34):
breaking that common input ownership heuristic, like you mentioned, q. For other users who aren't even using page join, they actually get knock on effects of privacy
when PayJoin usage increases. So, yes, the adoption is relatively limited. It's just Cake Wallet and Bull Bitcoin,
their mobile app right now,
but that is going to grow. If you have a wallet you use that doesn't support it right now, go harass them.
(50:57):
Definitely make sure they do that.
Did you like how I teed out for you there to do a little bit of a cake show?
It was beautiful. It was beautiful. Too easy, honestly. I'm a terrible show, so I need the I need the setup.
Shill. As as I as I stopped talking and, after I'd said, I hope Seth can save me here and and tell me where it's available, I'm I bet Seth Seth sat there thinking, what? He doesn't know we've got it in Kegala?
(51:23):
So just to clarify, yes. I'm well aware that it's in k quality. I was just teeing it up nicely for you. Professional show. There you go. There you go.
I I don't think we've missed anything else, really. I think, you know, we could band in anything kind of layer two related, albeit they all come with their own different trade offs and are all kind of in different stages of user adoption. But I'm gonna guess that something like ARC, again, probably gonna bat this over to you, Seth, in a second, but would come under this where,
(51:50):
I guess well, anything where you hop onto a layer two, you know, you you you kind
of somewhat mitigate that on chain footprint. But, again, any true layer two will be anchored into the chain. So how you get from zero to one is kind of the important step I'm gonna I'm gonna kind of summarize. I think that's fair to say?
Yeah. I definitely think that's fair to say. I mean, the the benefits are definitely when you're into that layer two. Your transactions are not stored forever. You don't have necessarily perfect privacy even within Lightning.
(52:19):
But, like, I think a good example is, like, Arc and Spark. Most users won't be actually sending on chain funds
in, rather, they'll be onboarded via Lightning.
And so you'll never actually have an on footprint unless you have to unilaterally exit. Now that, again, does not mean you have perfect privacy, but it means that you have good privacy.
Not good privacy. You have okay privacy because of the ephemerality
(52:41):
of the your transaction is not living forever. But if there's a a bad actor as a Spark operator or an Arc service provider,
they can keep track of where all those transactions go. Everything is is visible within Spark and Arc. But as you aren't ever sending in funds from on chain Bitcoin and, hopefully, you're not doing, like, KYC
funds somewhere,
it it should provide good privacy as well.
(53:05):
Appreciate that. Thank you very much. Thank you to to Alvarin for your question. That was a good one. Very, like I say, aligned with the discussions we've been having today. Probably got time for for one more.
This one also comes from, a Nosta user, that goes by Nepsis.
I orange pilled my mother last year. Congratulations.
I am holding for her currently.
(53:27):
Slowly gearing up for her to for her own cold storage.
Undecided on the best way because she's she old and tech illiterate. Do you have any suggestions?
And then there was a subsequent comment from the same guy or girl. So just to add a layer of complexity to the situation,
she lives in England and I live in The States.
She's visiting for a month
(53:48):
on in The later on in the year. I'd like to stamp her seed in steel, but I have concerns about her flying home with that.
I have some ideas on how to mitigate risk, but I'd like for you guys to chime in.
I'm gonna if it's alright with you guys, jump in on this one first. And and before I do what everybody's expecting me to do and talk about passport,
(54:09):
I'm actually gonna say something that most people might not expect.
And if you think it's controversial that I'm wrong, please do let us know in the comments. Or or if it's, you know, shout up Seth or Max.
If if she has no interest in
kind of custodying herself,
just keep doing it for her. Like, that's probably if you're if you're a competent Bitcoiner
(54:31):
and you are comfortable
with, you know, self custodying that on her behalf,
and she has no great desire to be spending Bitcoin regularly,
then I would say just keep doing it for her personally.
I I don't know whether that is see.
Yeah. I don't know whether that is a controversial opinion maybe that, you know, just because, you know, Nexus, the the the the guy or girl behind the question, you know, clearly passionate about bitcoin, they're on the list that they've they've orientaled their mother.
(54:59):
If you know your mum's old and tech illiterate as you say, and maybe she's just kind of gone along with this because you know, she's seen that you do it or that you've badgered her enough and she's not that
kind of motivated to to fully understand the risks,
then I would say just keep doing it for her. You know, if you can safely custody those funds and, you you know, she's clearly your next of kin,
(55:21):
and trusts you not to to run away with that, then I don't think it's a bad thing that you custody it for her. And, you know, maybe you might be putting her
in harm's way potentially by forcing her or or persuading her to do it herself. What do you guys make of that?
I think that's fair.
Yeah. I mean, I think the Uncle Jim model is good. Like, I don't know. There doesn't need to be this fight for necessarily every single person to take self custody, but not trusting a, like, random third party custodian is a good thing. But if you're the if you're the tech bro, I mean, I'm I help family members with self custody. That's I think that's totally fine. You should you then need to take even more personal responsibility and time
(56:13):
fun
Thanksgiving
meal. Oh, cool. No. So I wouldn't recommend that. But, if you're willing to take on even more personal responsibility and deal with the fallout there, the Uncle Jim model is fantastic. And there's the the tools are getting better and better for doing the Uncle Jim model in a way that's not that,
time consuming time consuming for you. Like Max said, child seeds, PIP 85 seeds are a fantastic way to do that, which you can do with Passport, many other hardware wallets. It makes things really easy, so you don't have to have 18 seeds backed up. You just have your master seed and then restore the others whenever you need to.
(56:47):
You could give them like, you could have a middle ground where you could give them, like, a a micro
SD, an encrypted micro SD,
backup that they keep hold of and another family member the code or something like that. Or, you know, you could have some sort of,
situation where if you get hit by a bus or something that isn't all lost. But, yeah, I don't think you need to stamp it into still and have something that's,
(57:10):
readable visible. I think,
you know, if it's if it's you looking after it for your mom, it should be fine.
Yeah. I
I kind of agree there. I I wouldn't,
let let's assume that she does want a self custody. I wouldn't be sending her back on the plane with the with the steel plate with the seed stamped in in plain text personally.
(57:32):
The yeah. Again, the the encrypted backup solution that that you can get in Passport and I believe also in a cold card and maybe one other,
where essentially you have the the seed words encrypted onto a micro SD card, and then you have a password to to access that SD card. Sometimes the password can be six words, sometimes it could be 20 digits.
That's a much safer way and a way which I would feel much more comfortable crossing a border with, because, you know, an SD
(57:57):
because, you know, an SD card is a very inanimate object.
Millions of people travel with them every single day. They they're multipurpose.
You use them for cameras, phones, laptops, like no you know border agents are not going to bat an eyelid if they see an SD card in your bag. You could even
hide it in a camera, although you're not really hiding it because that's where an SD card lives in a camera. But you know you you're you're hiding in plain sight and the the seed words are encrypted such that even if somebody does find the SD card they can't access anyway because you know you're
(58:28):
naturally not going to keep the password
in the same place or location.
Again,
having access only to the password
is useless.
So you can be a little bit more liberal as to how you get that across the border. You could have it in a piece of paper and a book. You could email it to yourself. You could store it in your iCloud.
You could store it in your encrypted notes app. You could, I don't know, send in a letter or something. Again,
(58:54):
having just the password is useless. You need physical access to the SD card as well. So you kind of separated the risk here, and you could, in theory, also have multiple copies of of both of these items or albeit if you're you're crossing a border, you know, you the place in which you're gonna be able to keep those are obviously limited. But what it means is that you're not traveling with a single point of failure that's written in plain text that anybody, you know, any border agent that knows what 12 or 24 words are for could easily confiscate, you know, take a photo of it, memorize it, and, you know, that that's a a very big risk.
(59:29):
Understandably, that is nowhere near as simple as just carrying 12 words across. So as always, there's trade offs all the way down, and you just need to kind of think about what's the bigger risk here. Is it is it theft from a border agent? Is it your your mom in this case kind of
doing something stupid and letting the 12 words fall into into the wrong hands? Is she gonna lose them?
(59:49):
Again, it's a very personalized thing, but hopefully, you know, some of the stuff that we've,
discussed will give you some ideas. But to cap it off, if she's not a 100% invested in the the
the the aspect of self custody, then I personally wouldn't be forcing her, into that until she's ready.
Alright, guys. We are at time. That one went very quickly.
(01:00:12):
Lots of, doom and news, unfortunately.
But hoping that we did a good job of keeping you guys up to date. Thank you to Avrin and to Nepsis on Nosta for your questions.
And, we will be here at the same time next week. I will be live from Riga, probably sat in a hotel room somewhere, but we're gonna make it happen again as always week by week.
(01:00:34):
Thanks for stopping by. Appreciate everybody in the live chat, and, yeah. We will catch you at the same time next week. Cheers, guys.