This discussion is about the network layer, right?

This entire discussion is about the network layer for the most part, because we say you can put the compliance where your apps are, which is where you have almost all your compliance today.

Mike can weigh in on some more nuance around that.

But this is like, can I use the open Internet? Or do I have to use a closed version of the Internet? And the answer is you can use an open version of the Internet because, of course, you are putting your compliance tools around your products.

And so you can do the same here.

And it goes back to a very early question that you sort of dug in on a bit with Mike on the enforcement side of things like, OK. you might pay gas to an unknown validator, not even a sanctioned validator, but somebody where you can't 100% KYC the validator and thus...

You know, could you have potentially violated the sanctions laws? And again, this goes to, if you're not doing it in a knowing, repeated, intentional way, then you can create systems where your products are on these networks, just like they're on the open internet, where bad guys may be, you know, running around too, possibly, and you can go ahead and move forward with your products.

What do you think the future bringing institutions on chain will do for DeFi, for example?

Tell me a little bit about why you did it, ultimately what it's about and why it's important in this moment.

Well, thank you for the opportunity to talk about it.

We also have a third co-author, Omid Malikin, who's an adjunct professor over at Columbia and two and a huge proponent of the benefits of permissionless networks.

I would make one tweak to this, which is I don't think the network layer counts as DeFi.

Actually, just speaking of Jake, he and I just had a whole discussion about this.

I think the network layer is very, very different than the app layer.

And I would put...

And how do we think about managing risk in a way that is also helping protect people?

Um, and I'm curious if you could just tell us a little bit, for those who maybe aren't super familiar with what Jito is and why it's such an important part of the Solana ecosystem, just a little bit about the project and, and what you guys do at Jito.

Yeah.

So, um, our CEO, Lucas Bruder, j- put out maybe a few months ago something called the Market Layer Manifesto, and it was really about how Jito operates at many different layers of the Solana ecosystem.

And our next evolution, which I'll talk about at the end, was really getting up to the consumer layer or the trading layer.

So the first thing Jito built that was very successful was something called the block-- the Jito Block Engine.

It was really about how to move transactions, right, for a very high throughput chain back to find, you know, settlement, finality, all of those things efficiently, very, very quickly, uh, and making sure that you can, uh, actually get your transactions landed quickly.

And that really changed the trajectory of how Solana worked and how transactions could be landed on Solana.

What's helped you guys get traction in those markets?

would you guys describe the risk today? Would you say it's more risk averse given the current market or that people are like, you know, starting to dip their toes in more and more and they're like more open to maybe zanier things? I love the

word zany.

I'm going to tell you what.

TradFi, like real, real deep TradFi, because I was at a small conference of buy side equity traders and I was there to teach them about tokenization, perps, prediction markets and sort of crypto in general, but anything that was like digitally, financially forward.

They do not think that the current equities market or, you know, securities market needs to glow up and like this.

And I will be honest with you, but I will tell you, I think the securities market is really, really efficient.

It works really well.

How would you kind of categorize maybe like the crypto edge here?

Yeah.

Okay, fine.

Token prices might go down if clarity doesn't pass.

That's a factor of, like, our own, you know, bag holding this and our own crypto, uh, I guess, traders who want to or think that clarity is necessary to move forward.

But if you think about the crypto industry on its own, we have not only prevailed, we have become a critical part of the digital financial economy, not only when we didn't have regulation, but when people were pushing against us, and we did some of our most innovative work then.

And I actually think with the institutions coming in, that clarity will put everybody on an even playing field.

And so we will have to compete with the likes of JPMorgan and Citigroup and banks, and that may be very challenging.

Yeah, what's your TLDR?

Can you give us a bit of a status update? Where are we? What are some of the progress moves that have happened at committee ethics language? How important are those and how much further forward does it put us closer to ultimately getting this thing through?

Yeah.

So I actually think 38% is pretty high when it comes to thinking about passing a bill.

The other interesting note is that maybe a month or two months ago, congressional staffers were banned from using prediction markets.

So you don't have people who really know what their bosses are thinking participating.

Also, depending on the prediction market, maybe US persons are not supposed to be on there.

But you don't have the specific information that's necessarily flowing in from a day-to-day perspective.

What is it in the Clarity Act that you think is going to be the biggest help to the on-chain industry?

So how does this affect what's going on right now?

Yeah.

So yesterday the SEC put out its number of priorities for the rest of what it's going to work on for 2026.

And there were three big categories that related to crypto assets.

And one also about rule 144, which is under which tokens were sold for a very long time.

One of which definitely looked, one of the other priorities definitely looked like it was going to be the innovation exemption that we've been waiting for.

on tokenized securities.

When you consider that and you look at other projects out there, even if you went to something like a Klanosaur project, What's your take on this? How do you see this playing out?

Mm-hmm

... uh, Section 1960, where people were being charged for failing to register as a money services business when they were DeFi developers.

Obviously, some of the facts of the cases I mentioned are very specific, and we're, we're not gonna paint everyone with that brush.

But we do need to have developers in this country have those protections.

And so stripping out protections for non-controlling software developers will chill innovation in the United States.

And one of the things that Clarity is really meant to do is to give us all, who are builders in this space, the ability to move forward and innovate, uh, without fear, and just be able to run our businesses like many other tech companies in the United States.

Why?

The crypto policy, uh, sort of power structure has come from X.

Explain to us and our audience why MEV is better than a TradFi system, because that's kind of the core issue here.

Yeah, I mean, I think that's an interesting framing.

I'd put it a little differently.

I think MEV has just taken on a life of its own and only been used.

It started out on Bitcoin, minor extractable value.

Then as it moved over to Ethereum and other permissionless chains like Solana, it means maximum extractable value.

And people only use it now to mean something negative, right? To mean you get front run or sandwiched where you don't get the price you expected and somebody's done something by seeing your trade in advance of actually settling it at the validator level.

All right, so you can kind of see, we broke it down to kind of give you guys a little bit of breadth behind this and really what Yuval, and I was trying to get Yuval to answer that in the sense, when you look at Reg NMS and how it benefits incumbents like Citadel, explain that for the audience, because this seems like it's a little bit lopsided here.

It seems like we're a lot less focused as an industry on getting something across the finish line.

Yeah.

Okay.

I'll try to remember all different parts of that question.

That was a very big multi-part question.

So the first thing is, yeah, so right after the banking markup was off and didn't happen, I think everybody tried to get some sleep for a little bit, both on the staffer side and on the industry side.

And I think then you saw the yield meeting two weeks ago and then earlier this week.

Can you maybe just for the audience talk a little bit about what those few other kind of major points of contention still are?

It's a huge endorsement of crypto and it's, I think, disruptive and I think pretty transformational impact.

Yeah, I think that genius was so...

Once...

the administration changed.

You could see that everyone wanted stable coins, right? Like, yes, traditional financial players, of course, all of us in the industry, but also you're seeing people like Walmart and Shopify and all of these other types of, not even fintechs, like, but just traditional businesses recognizing how much this is going to change their business.

I had a call with somebody earlier this week, a huge player in the space, like very, very traditional, very consumer oriented, who was basically like, being able to use stablecoins cuts all of our fees down.

We make more money if we start taking stablecoins.

And when we talk about the Clarity Act, there's a self-custody provision in there that protects individuals' right to self-custody their own assets.