Crypto regulation in 2022: DeFi, DAOs, stablecoins and token classification

Transcript

what's up friends welcome to web3 academy a place for entrepreneurs creators and marketers to explore and learn how to use web3 to transform business models and create thriving communities enjoy this next episode gmgm welcome everyone back to another episode of web three academy we have another web three doer spotlight today but we have two people on the podcast with us uh we have lisa rubin and adam garrett's garrett son did i say that right garretson garrettson you got it perfect perfect these are two lawyers in the blockchain and crypto space um and which we've never done on this podcast yet so we're excited to to have you both on here um to dive into this this uh crazy landscape of regulatory and just legal action going on in this space um let me

give a quick intro of each of you and then we will start to dive into some of the details but first we have lisa rubin who's a blockchain and fintech attorney at paul hastings which is a top global law firm she represents major digital asset trading platforms investment firms digital asset project teams and developers navigating the regulatory complexity presented by crypto in blockchain which i'm sure is not an easy thing but lisa welcome to the show thank you great to have you here and adam garrett is general counsel and chief legal officer of toronto stock exchange listed wonderfi technologies inc um so adam oversees all material legal matters across the wonderful group of companies uh which includes c5 platforms like bit

by coinberry as well as wonderful's defy platform um and uh adam has over a decade of experience providing legal expertise and regulatory advice to public companies across i think various sectors so a wealth of knowledge here today adam welcome to the episode thanks great to be here amazing so uh just a quick question wonderful technologies is this mr wonderful is this kevin o'leary's uh company you got it that's right yeah kevin is one of our strategic investors and and a brand promoter so we're very happy to have kevin with us okay nice so kevin o'leary is the uh he's on people may know him from dragon's den and then what's the american one uh shark tank um but actually funny story um i have some

good friends that have a cottage up in muskoka and it's right across the uh the lake from kevin so i've uh i've had some drinks with kevin multiple times and i've met kevin old times and he's you know what he's a great guy he's nothing like the uh like nothing like the show yeah he's a fantastic guy he is he loves he loves muskoka and uh he does great things for the company so we're super happy to have him here and have him supporting us it's been great he's a lot nicer than he shows on the show that's for sure so listen as we always do we want to kind of explore how people went down the rabbit hole how they found out about crypto or web3 or nfts or whatever it was that got you into the space so lisa i'm going to start with you

why don't you give us just a walk-through of your of your rabbit hole story yeah definitely so um i had heard about bitcoin and blockchain but had never dove into it or anything like that but so i started my career as a litigator in los angeles and it was really exciting and i liked it a lot but after a while i really wanted tech focus work and i really wanted to do something that was really fast-paced and innovative and so i started looking around and i joined paul hastings which has a top fintech practice and when my litigation cases um didn't have too much going on on the side then i would do some fintech work and i started taking blockchain work more and more and i realized like this is exactly what i was

looking for it was it's incredibly exciting i personally think it's gonna take over every aspect of everyone's life in the future and so i love that the laws weren't created yet and that we could like kind of help advise on what the current laws are and be watching congress and just seeing how it all plays out and it's just like super super fast pace so now i am blockchain all day every day and i love it amazing i love it thank you for that adam what about you what was the thing that like got you interest in the space anything yeah yeah thanks for me it was a little bit of a slower burn so you know i started off practicing big law at the big law

firm you know doing m a in public company governance and then i transitioned into rbc which is the basically the biggest bank in canada doing their capital markets work and through that you know i started seeing the bank transition into the blockchain space um and i thought that was really interesting because having focused on you know capital markets trading equities futures and investment banking you know it was it was this new world of this developing technology and how it could affect you know so many different areas of finance and people's lives and everything like that so you know i came into the space a little bit later than a lot of folks but for me the rabbit hole was wow you know the

traditional industry is really taking notice of this they're starting to think about how to integrate it and for me you know i had the day job that was a box but all the periphery stuff like the technology the blockchain aspect looking at crypto that just kept pulling me and pulling me into it and i you know looked at the industry where it was going how everybody was innovating what regulators were doing and thought you know that's what i want to do all the time i want to be part of that conversation help grow some you know grow a company and really be able to you know have an impact on how the laws and the regulation in our country are shaped so at that i made the jump and came into wonder five

love it very interesting it's funny both of you like usually it's like someone came in because of investing like i put some money in this thing it went up or it's like a hobby you know got these nfts for whatever and you guys were both both of you basically were like work uh kind of led me in that direction and we were like oh this is actually really cool there's so many ways that people get into this space it's interesting so let's start with kind of high level um i'll be honest uh i don't know a ton about regulation or legal things in general so i'm excited to learn from both of you here but let's start high level and just look at um you know we hear a lot of the news about what's happening with regulatory uh both in the u.s and canada honestly across the

entire world right now it seems like crypto's been on the you know as a hot topic for really every country right now and they're trying to figure out what do we do with this stuff and previously it was like okay we need to regulate bitcoin and crypto now it's like okay well now there's these nfts there's dows there's tokens there's like all these things and i'm sure that countries are probably just so confused they're like what the hell do we do with this so give me an idea of like what is the regulatory landscape right like right now and lisa you can start and i guess you could start with the us then adam maybe you can come in with canada or if you guys know elsewhere as well that would be great um but just curious like are we heading in the right direction what are

you guys seeing just give me that high level overview first definitely so i'm based in san francisco so i will speak to the to the u.s laws it is really interesting i think a lot of people have complained that in the us the regulation has moved pretty slowly like there aren't a lot of laws or really you know some argue any that really focus on crypto and provide any clarity and because of that i think some other people are complaining that a lot of companies are trying to move abroad where they're safer because no one wants to get an enforcement action when they're not really clear if they're following the rules or not um but the other side of that is that i would say people in congress that will be creating these laws i think they are

trying to make an effort to learn and educate themselves and it's just um i think that a lot more people in congress do understand more about blockchain and crypto than they did years ago so we are progressing definitely in the right way i heard a few years ago maybe like five people uh understood about crypto and blockchain and now there's probably like a a at least a hundred so it's it's like it is expanding i do think that it is better that if they don't fully understand it to fully learn it so besides just like if they just have laws left and right that end up hurting crypto more than helping it then it's really kind of hard to take those laws

back so even though it is taking a long time i think the plus side of it is at least they're waiting until they really understand it so they can provide regulation that is effective and allows innovation but also does protect consumers so but because congress is taking a while to actually pass something that gives the regulatory agencies like the sec more leeway to go after what they believe are the projects that they should go after so they have kind of a lot more freedom because they don't necessarily have rules that they're following so they're almost kind of creating the rules by default by enforcement actions and like things that i do as a blockchain attorney is we're looking at these

enforcement actions we're looking at the cases in that are in trial we're seeing how judges are ruling how the sec what factors they find risky and help advise companies to help avoid those risks while and provide some kind of clarity well you know the the legal process in the us to developing laws can be a little slow do you think adam before you jump in here i'm just curious like of course this stuff is slow it's slow in all industry not just crypto right like that's just how congress works it's such a you know a massive uh organization they've got a um it takes time but what's what's interesting though is like crypto doesn't take time crypto moves and whip three move fast

right like they were probably trying to create laws in 2020 and all of a sudden 2021 comes in and now something of nfts and there's dows everywhere and they're like okay all the laws we must have written probably we need to rethink them is that do you do you see that that's happening and like is it a good thing that they're taking their time so that maybe they're gonna get it right and allow some of the innovation to flourish first or what are your thoughts on that speed was this for me or forever adam this is for you lisa then we'll go then we'll go over to adam absolutely so i am optimistic that this is a good thing i mean it's true it's like once they start learning one thing that and something changes there's nft there's d5 like they can barely wrap their heads around you

know and it just takes time but i like i said i think that they are learning about it and i think that is really great that they're taking their time i mean hopefully it does go faster i do understand or have heard um based on certain senators that they are going to pass stablecoin legislation first i think stablecoin is the easiest for people who are new to the space to wrap their head around and um so i think that would be a great starting point people are saying that by the end of this year i don't know if that's too fast or not but people are saying that like by the end of this year there should be stable coin legislation in congress that may be passed the um it's just it's kind of just like a wait and see game and in the meantime the sec

announced recently i believe in march or may that they are adding 20 new enforcement agencies and they're going to go after projects such as i mean they listed nfts because they haven't necessarily gone after nfts too much and not all of them but the ones that they find risky and so i think it is kind of just a waiting game and we're gonna just have to see how it plays out but i do think it's better that they learn about it and feel comfortable with all aspects of it before issuing regulation that will be difficult to pull back right right and adam what are your thoughts i mean you're in canada and as far as i know canada seems to be moving actually much faster from what i've seen i mean we already have an etf for bitcoin uh that is that is spot is it

spot in canada yeah yeah spot bitcoin etfs you got it yeah exactly so we we seem to be like in terms of regulatory we seem to be moving faster but maybe i'm wrong on that what are you seeing and uh what do you think that that is like versus us no you're 100 right and it's funny because it's it's somewhat night and day between canada and the us right now in terms of where we are on the regulatory side so like you were saying i mean we've had spot bitcoin etfs for the past three or four years in canada and that's still something the us regulators haven't really been able to get their heads around we also have a really comprehensive set of laws that define what a crypto asset trading platform is as well as a crypto marketplace so at wonderfi we own two we

have a we have two crypto trading platforms and a crypto marketplace and those are subject to all of the same traditional laws you'd have for any other broker dealer or trader or actual marketplace for any traditional type of equity security so we we run own and operate those here at wonderfi and we do it on a fully compliant basis you can see our you know orders from our regulators they're publicly available all the terms and conditions on which we operate and what that means is you can come onto our platform and you can buy you know 20 or 30 different types of coins bitcoin eth etc and that is 100 vetted by canadian regulators and pursuant to a number of different standards so you know we're we're

relatively lucky up here that we do have progressive regulators they have innovation mandates and they really executed on that and worked very well with the industry so you know what that allows us to do is offer compliant crypto to canadian citizens that you know our citizens up here will know have gone through all the regulatory hurdles the compliance with all the aml requirements um you know and also what our company is is it's listed on the tsx so we've got full public disclosure on our financial statements on our operating models on our business on our principles that's been through all the regulators through the exchange listing etc so you know what we have in canada and

we're really lucky to have is the ability to operate in this environment that allows us certainty with respect to our business right so we're not expecting any you know material uh pieces to come down from the regulators with respect to our cfi or centralized finance trading platforms and what wonderfi also does is we have a d5 platform as well so d5 is one of the more emerging spaces in the industry from a regulatory perspective and we are in constant and active dialogues with regulators to explain defy explain what we offer and you know try to shape the conversation around regulation so it's a very very different landscape up here in canada we at wonder fire also one of the

founding members of an institution called the canadian web 3 council and that's a group of companies in canada that's an industry advocacy association that directly speaks to legislators government officials you know ministers of finance so it allows us that dialogue and the ability to shape the regulation and operate in a compliant way go canada number one so totally lisa you mentioned that it went from like five congress uh congressman that understood crypto to like a hundred now and when you say that i'm just curious when we're talking to regulators um do they really get it like do they do they understand what's going on here and

do like do they see what's happening in the future with us all and what do they think about it are they okay with it like a big thing with crypto and web 3 is it's removing power from centralized entities and centralized organizations um which may in the future mean removing some power from potentially government but definitely you know centralized companies like are they just are they okay with it are they afraid of it like what are they what are they saying yeah so i think that it's i mean people in congress are all all over the spectrum some people don't understand it at all some people think it's a fraud and i've watched some like congressional hearings or committees trying to understand it so one good thing is that the committees of congress are trying to hold more

hearings and bring in like the ceos of different crypto and blockchain companies and asking them questions and picking their brain and then sometimes they're kind of like attacking them and just really not really interested in learning they're just kind of saying like this whole industry is terrible what do you have to say about this and so it's like i've definitely heard in some hearing some congress people are saying well crypto is used for money laundering and they help the the drug cartels and you know and on all the stuff but the thing is you could say that about cash too it's not specific to crypto you know whenever there is a medium of exchange it could be used for good or bad it's just a tool so um i think that there are some people in congress who are really trying to get this across when they see

the benefits of blockchain and they want the us to be a leader in innovation and not just be completely left behind where all these other countries and especially sounds like canada are moving fast with the technology and that is really good for the industry people are going to want to go where they have regulatory clarity and like sometimes like big things in the news for example you know the whole terror thing happened then the regulators like their attention is caught and some people who already didn't like blockchain and crypto they're like cec like it look how bad it is it's like hurting people um and then it's like at the front of their their agenda they're trying to like work on legislation but then other things in the us happen like bigger things like a big supreme court case comes out and it's

talking about people's rights taking taken away and so then now the people are focused on that because elections are coming up in november for congress so they're kind of like starting to focus on the most hot ticket items for their constituents so they can make sure that they get voted into office again and so perhaps crypto may fall to the waste side again it's kind of you know it's a lot of things that are a place to see how this kind of plays out but i do think there are some people who love crypto and blockchain and see the benefits and others who are fearful of it yeah and lisa you make some some really good points there and i'll just jump in i mean like from our perspective at wonderful you know we we love the regulation right like compliant crypto is our mantra tell us what to do and

we'll do it and we'll get it done and we'll bring crypto to the masses right and you know those are goals that we have that really align with a lot of the principles that regulators are focused on like marketplace integrity investor confidence disclosure transparency right those sorts of things are what we bring to the industry and i think a lot of what both industry participants and people in in the regulatory space want right so you hear those complaints of like oh well crypto's used for money laundering well yeah so is everything yeah but we are subject to all the same anti-money laundering regulations that all traditional financial institutions are subject to so up here that arguments have the window right so that's one of the things that that we

really like and you know you can contrast what the sec is doing with what the ontario securities commission in particular up here is doing where they haven't led by enforcement they've led by regulation so they've spoken to the industry and said look you know here's the rules here's what here's what we're going to put out comply with them get on side and you'll be able to operate they're not just kind of taking the gun and shooting companies here and there and people can't come up with anything consistent we actually have a framework and what that allows us to do is operate in an environment where we have some certainty that if you're not a regulated entity you could be subject to the jurisdiction of the regulators and what we're hopeful for is that you know more

unregulated participants in the marketplace in canada will be subject to regulatory scrutiny because we have to comply with all the laws it helps you know canadian citizens and really the ecosystem develop but the counterbalance to that is you know it also helps when unregulated players are actually subject to sanction but they know why and they know where it's coming from and there's written laws and rules behind it i can only imagine that there are a lot of and maybe you guys can can tell me the inside scoop here but i can only imagine there's a lot of companies on the sidelines that want to get into crypto as uh i think adam you mentioned kind of the beginning um but maybe they're just not because there's no regulation yet um and i'm curious if

that's something you are both seeing with either clients from your um from your organization or just you know in talks with others um because i know there's a lot of people listening that are like uh screw regulation we don't want regulation and maybe not as much in the space anymore but definitely when it was like fully bitcoiners and it was like they had this libertarian view of this is your way to opt out like i mean i don't see that i think regulation is a good thing and we need it um but are you seeing that there's actually a lot of companies that can't even get in or just won't because they're like afraid until regulation happens or what does that area look like um yeah so i have i've worked with a bunch of companies either like large or small just emerging and just talking to

a lot of the smaller emerging companies they are very confused and they don't know about like when they're designing their token should we wait should we you know and it is causing a lot of uncertainty and i think a lot of projects are moving trying to move to a different jurisdiction for example we hear a lot of people say like well what if we form our entity in like the british virgin islands or cayman and things like that and those are options for some but um like as adam was saying that if you kind of work and do you know transactions with people in a country and you're kind of you know uh let's say the owners are all based in the us you're transacting with u.s customers and it kind of doesn't really help you to try to be based in a different

jurisdiction or country if you're still transacting you know there's a lot of factors involved but i think a lot of people are kind of scared and looking for other ways out and i think it is really great that and as adam was saying i do think a lot of companies are trying to comply with the law they want to so i think it is great that canada provides these laws that they can comply with and i think that it would be great for um a lot of people to be able to follow the laws in the us too whenever they come about i don't have anything to add yeah yeah totally i mean from from our perspective it's been a race to regulation like once the door was open for licenses the influx of companies trying to get them was massive and right now there's eight licenses available in

canada and we own and operate two of them so you know that just kind of goes to show you how reticent the regulators are to dish out these licenses until you've gone through the actual hoops there's tons of players trying to get them and we're lucky that we've got all of the infrastructure and ecosystem together to be able to have have two of them and and just to kind of layer on some of the comments that lisa was making you know what the certainty up here gives us the ability to do is be a canadian incorporated company employ canadians keep resident data on shore keep funds with custodians that are approved right you know our our customers don't have to worry that their information is you know being transported out of the jurisdiction or

being sold somewhere or for a company that's in a country that you know you're not quite sure exactly what the you know regulation or the system is that all leads to an investor confidence um but you know one of the things we're also focused on at wonder fi is certainly the the c5 side and we also do the d5 aspect too right so you know there's a lot of traditional enthusiasts in the space that say i want to have my own wallet hold my own things and be able to do that independently and that's something that you're able to do through the wonderful ecosystem on the d5 side right you can bring your own wallet you can connect it you can interface through dows and dexes through us but maintain control right but there's a another

subset of people that want to get into the space they don't know how owning and operating a wallet is tricky for them so we have a dfi platform that allows you get a d5 wallet we've got a c5 platform that allows you to trade in c5 so what we're really trying to do is be able to bring compliant crypto to anybody who wants it on either side and then it's pick and choose right what i'm trying to understand of where this this whole regulation thing goes is we we have so there's there's tradify right so your fintech okay which is nothing to do with crypto it's just fiat currencies uh you know like paypal and whatever else all that then you have cfi which is like this is using crypto but it is not real web3 it is not the real ethos of crypto

right it is just crypto but packaged in a traditional typical company whether that's in the u.s or canada and then you have like your d5 which are like decentralized protocols on the blockchain they don't have a location they don't have a centralized owner um they don't have any of that and so you can compare like you have a uniswap that's your d5 protocol then you have like your i don't know coinbase or your binance or your whatever ftx then you have something else it doesn't matter what that robin hood right um so like right now it seems most of the regulation is focused on the cfi side of things um or are you seeing like i don't really know how they're even going to do any regulation to to defy it doesn't really make sense to me i'm wondering if you guys can sort of

just like talk about that a little bit and i wonder do the regulars even understand that enough because even with everything that just happened with like celsius and all these like uh liquidations that just happened and going bankrupt like i feel like a lot of the regulators are confusing that with d5 when that's not d5 that's not crypto that's just a normal entity that's holding crypto can you guys differentiate between that just maybe talk about what the regulatory landscape is like in comparison with those lisa maybe you want to start sure i mean i think that d5 is even perhaps beyond what most people and the lawmakers are understanding like they're still kind of catching up on that on the general blockchain but of course like it's splashing in the news when companies are going down and customers

funds are locked no one wants to see that so i think that if they didn't understand it before the lawmakers are going to try to understand it um but i don't think we're close like i was saying i think stable coin will be the first one it's the easiest to wrap their head around and i know the us is also interested in creating a cvdc and having kind of their own um foot in the blockchain door so i think that it's going to be baby steps in the us right makes sense what are you seeing adam yeah i think the c5 side is very easy for regulators to get their heads around and i say easy but understanding that you know there's still a couple of steps

to be taken in the us before that before that actually happens but you know we we operate a lot like like an exchange a marketplace that's how we're regulated so you know regulators have a model it's you know a stock exchange it's the nysc it's nasdaq it's it's the tsx it's our company it's our company bit by right so that's the same model that's been applied on the c5 side um but d5 is a bit of a taller order for regulators to get their hands or their heads around so you know what what we're doing is actively engaging with the regulators and explaining it to them like literally we've got tech people who are so fluent in defy speaking to people who make laws and explaining to them this is how it

works this is what this means here's what it does and here's you know i come in and it's like you know here's how it applies to traditional sets of regulations and this is why we think it should operate in a particular way um it's a slower burn to be honest right but at the end of the day what from our perspective from my perspective what you want is people who are gatekeepers to be able to get their heads around it right and then the decision is okay we leave it alone and let it do its thing or we try to put some guard rails around it right so the things that to me are the most important for creating guardrails are industry consultation right like unilateral action from regulators that

really don't know what's going on is to me one of the worst ways you can approach the space right like the people on the ground who are in it day-to-day are the ones who should be from the ground up influencing what's actually happening so whether that's you know through investment in companies supporting particular organizations advocacy etc that's the way like anything else you affect change and what you know we're trying to do what i'm trying to do is advocate for people who are bringing those perspectives and be able to be a voice upwards into the regulators and luckily we've got this environment here where we do have that reception and we're able to you know project that voice so uh hopefully other jurisdictions see

what's going on in canada and and try to follow the lead but you know like i said bit of a slower burn on the d flat side yeah and i think that right now for the us like the biggest thing that they're focusing on at least the sec is whether a digital asset is a security under the us federal securities laws so the biggest thing like you know that we're looking at is the howie test which has four prongs like is there an investment of money in a common enterprise um with the expectation of profits from the efforts of others so we're looking at that test a lot and some you know sometimes it fits and sometimes it doesn't and so i think that's where congress can come in and kind of make

laws that you know this test the howie test is from like the 1940s and so some people you know many people say it doesn't fit digital assets perfectly especially if something maybe was more like a security at the beginning because you have to buy it to help the company fund the company as they're building but then later the token is fully functional the company is fully functional so you're not buying it for like the common enterprise purposes and it's no longer a security so i i do think on the us side they there are some laws and that's what we provide regulatory advice upon but it i do think that canada is doing a great job by making it very clear

well let's dive deeper into that for just a second here because this is this is a a big one right i mean we have gary gensler all the time talking that everything's a security and you know he's kind of going after everyone um on this and you know they really are trying to make a put crypto into this box that was built in the 1940s as you said which to me is a little bit crazy um do you i don't know how regulation works like do you think they create a new law and new regulation for a crypto like for a digital asset or do you think they just they maybe changed the like the laws of a security or like how do you think they go about this um so my personal opinion is that they i think they will have to create a new law

but not necessarily create it from scratch kind of take the us federal securities laws and other laws and see how it best fits i think one of the most comprehensive laws that have come out in the u.s obviously it hasn't passed but it was introduced into congress so it would still need to be like voted on by the house and the senate and eventually to the president so it's kind of a long process but one bill that had bipartisan support is the senator lumus and gillibrand bill that kind of laid out all these clear definitions like this is when a digital asset is a security and that's when it will be regulated by the sec in these cases which seem to be more broadly it would actually be a commodity and it

would be regulated by the cftc and so kind of laid out a lot more clear instead of like let's say this scc cfdt cftc two regulatory bodies in the us kind of fighting to regulate over it it's like congress says you get to regulate this and then you agency get to regulate this one these are the definitions and it's really specific so i think that's honestly such a great bill i'm sure you know it's the first one of its kind that has supports from the democrats and the republicans so it can potentially get far a lot of people saying this is just a good start and it needs to be built upon and amended and perhaps have a new bill but it's it's a really really good start and one of the

most comprehensive bills so far that that and i think that's in the right direction of what we kind of need absolutely adam what are we seeing in in canada you said it's less of of the i forget what you called it in ontario but the sec version of in ontario they're not really going after anybody they're instead trying to create a regulatory framework is that is that really the gist of it yeah yeah but there's another really interesting kind of nuance that flips between the countries and we've kind of got this cool comparing contrasting going on here um so in the us you know you've got this you've got this fight between the sec and the cftc it's kind of like a game of whose jurisdiction is it anyway right we we don't have that here right

we've got one regulator that regulates securities and derivatives and commodities so you know basically what regulators here have said you know we we kind of don't care security derivative we're not trying to put like bitcoin and crypto into a we're creating a box right and it's called a crypto asset so for us on our c5 platform as long as we're not trading a security as long as we're not trading a derivative we're not trading a traditional commodity all those old school tests from the 20s and 40s as long as we're not definitively hitting one of those we're trading a crypto asset and we've got certainty as to what that is bitcoin is e it's a number of different other ones you know we are as a company required to do product due

diligence and reviews to make sure that you know what we're posting for trading on our marketplace is not a traditional security so everything lisa was just talking about in terms of that actual test right we got to go through that and when we come to the end of it and say yeah this doesn't look like any of those because it's based on blockchain and it's got all these features right um we put it up on our marketplace as a crypto asset and we trade it there and do you think it remains that way because i mean there now that there are so many tokens and so many different use cases for tokens like there's definitely a way to differentiate between tokens these days maybe back in the day they didn't really know it was like well everything's just trying to be a cryptocurrency but like a lot of them

now like you have tokens for dowels right you have you have social tokens you have uh tokens for smart contract platforms you have bitcoin which is the zone kind of thing do you think it remains that way or they start to build up more and then you have nfts does are nfts considered under the same box there in canada or what's how does that change yeah yeah no exactly so you know we're still working through all the processes up here right but you know we know certain ones are in that crypto asset box like bitcoin and ethan whatever right the the dow tokens right the nfts those are still falling into our general d5 bucket um and yeah you know for us those are you know accessible through our d5 platform on wonder fi and then we've

got the other the other c5 products on our on our traditional platforms more traditional platforms um but you know i i think you know to your point right there's going to be various categories some new like icos they operate as securities offerings right people have known that for a while like it looks a lot like you're doing an ipo and it looks like your token is a security and then from there you know it's like okay well how decentralized is your asset you know does that kind of get you outside of the definition of a security or commodity or derivative and then from there it's like well maybe there is another bucket right so we're trying to put like rails around the areas of buckets but again they keep

changing they keep coming up etc so you know what we're trying to do is say how do we you know get our arms around this whole ecosystem as it's constantly developing it's really tricky but the ones that you can kind of put a pin in do that put those regulations around it right make it happen test it see how it works um and then and then go from there so that that's how i see it basically developing but like lisa you may have a different perspective maybe uh you know regulators and lawmakers in the us are trying to do more of a shotgun approach and take everything all at the same time i don't know yeah i think right now the lawmakers in the us are mostly concerned with like just securities and the digital token

they are looking more nfts but they haven't in the past like as far as i know the sec hasn't issued any enforcement actions or issues really any guidance on nft companies but when in may they said they're going to add 20 new enforcement agents and pretty much double their enforcement team um they said that nft projects are one of them that they're going to look at and i think that one of the defining features of this security in the us at least is whether it has passive income and so that could be true of an nft or uh just a general cryptocurrency and um you know that's that's kind of a has been a red flag for regulators a lot of the times i think obviously this is

not true of every nft but i think many nfts that are more like art collectibles are generally safe the regulators aren't really concerned with that it doesn't really fit the definition of a security and so you know those are okay but it's when the nfts start kind of having features of passive income or um you know fractionalization um start marketing themselves marketing is a really big thing if they if you know projects any type of crypto starts marketing themselves let's say on twitter medium youtube like in the new you know sec complaint that recently came out they have listed factors why they thought nine securities were and it was interesting that they laid out their

reasoning more than a lot of people have said in the past because they had gone through a mini analysis of the howie test and they were concerned they went on people's youtube and see like on an ama how is the founder talking about the token and they had quote so it's like they really are looking at all kind of marketing statements to see if it's marketed as an investment and saying things like hi apy and things like that they're kind of sensitive to statements like that i just i can't help but think uh like picturing congress just reviewing and looking into nfts and just seeing these like crazy apes and all this stuff they're just must like what is going on in this space like it must be just hilarious to watch them try to learn

try to learn what's happening it's interesting that they're taking potentially looking at nfts as a security i never thought about that of course you think about it on the token side of things um but i didn't necessarily think of nmt let's say they did call this stuff a security and they're like yeah a lot of this stuff happens to be security is there a pathway like is that is that an issue like we have a lot of things that are securities like that are companies right like is there a pathway then if you have a token to just go and like i don't know get it regulatory compliant or are we completely screwed if they're all securities um yeah so that is a really good question it's like okay so what happens if it is considered the security so the problem is that right now with the current us laws to

register as you know a company under the securities laws and get registered and all of that stuff it's extremely expensive and time consuming and you know you're going to need big law firms involved and so that really cuts out a lot of smaller projects that are just starting out like it really is you know the smaller projects just can't they just can't right right now it's like they they if they have to comply they won't be able to have a business or be successful so um yeah so that's kind of where it is right now so it's not like a security is a bad thing it's like there are securities that exist it's just that right now for a lot of projects that are starting out

it's just the hurdles are too big yeah and and that's the same in canada too right like you can think about a publicly traded company like wonderfuy our shares are listed on the tsx right so you can buy and sell our stock in a very traditional sort of way you can buy and sell securities of our company that are 100 not crypto assets although you know you get the benefit of having exposure to the space in a traditional security but you know what you're able to really then see from our perspective is you have to run you know the company and the security like a traditional company under all the traditional rules right so we also have to comply with all the tsx rules about listing our security how we run our

company all the disclosure like the disclosure is massive right like quarterly statements annual statements annual general meeting like our shareholder meeting our agm's coming up pretty soon so we've got to do circulars and all those filings so if you have an nft project that becomes a security welcome to the world of uh you know especially publicly traded securities right i mean the statements part is easy because it's all on a public transparent blockchain so i mean you can get that real time whenever you want you can see what's going on with the protocol so that's that's the one benefit i guess but yeah i see all the other legal stuff and and that must be very very difficult so let's let's move to daos we just talked nfts um we talked already kind of tokens in the howie test um daos is kind

of the new exciting thing there's so many people getting into this and these require tokens and so i'm just curious um and i don't know if you guys are both like involved in dao's or if you've like gotten really into this this area but what do dows need to be thinking about when they go to start if they're going to launch a token or they're going to do whatever should they be like you can file i think as an llc you can you can go as like um a non-for-profit i guess you can put your dow under you can do combinations um what are you guys seeing there i guess we can do both in canada and the u.s and like any advice for those that are starting downs and what what they should be looking into in terms of the legal aspect or regulatory

um lisa maybe you can start yeah so um we have a few dowels as clients so we deal with this issue all the time and it is really interesting of course it's an emerging area of law there is no clear answer yet but i think a lot of things depend on like what kind of transaction does the dow do where are the majority of the owners what does their token do things like that kind of play into the analysis but i think that overall it is helpful to get a traditional legal structure in the u.s potentially some people do um like a corporation in delaware and then maybe or i have a foundation

in the cayman islands because you technically don't need any owners that kind of fits with dao so there's wyoming has a law but as far as i understand it's a really great law but people haven't tested it out yet and haven't really done that if a project is kind of looking for investors sometimes the delaware c corp is really preferred because investors are comfortable with that they understand the laws of delaware it's very friendly to businesses so a lot of factors depend on it but i think sometimes people think that if they don't get any type of legal entity structure that it might they might be safer but the thing is the u.s regulators at least you know they determine someone to be a us company or subject to us regulation

if they are transacting business in the us and using us customers so it's it's like the default would be a dow could be considered a general partnership which actually has pretty much unlimited personal liability for all the dow members so it's not favorable so let's say if you don't have a legal entity and someone from the dow signs a contract on behalf of a dow but it doesn't have a legal entity structure they could potentially just be putting themselves liable for their contract so i think that if they you know it's a lot of people would not prefer to have a legal structure but i think that it actually is better than having not no legal structure and then the regulator is kind of just

assuming the worst yeah lisa like yeah i think you nailed it like that's that's 100 accurate from my perspective you know i think for people starting projects one of the things to keep in mind you know is really first of all what's your perspective are you more of a traditionalist and a purist or you know uh are you uh more focused on what we think of as legal certainty right and i think that's what lisa's kind of driving at um you know if you're more comfortable playing in this in a you know space where you don't have legal certainty as to what the nature of your entity is you run the risk that a regulator is going to come find you and apply treatment to your project that is the least favorable of the options to

you which as lisa was saying could mean that you and all of your members are personally liable for not just the amount of money you put in but other stuff you've got as well and that's obviously a negative outcome but if you're like you know if you take the first foot forward and you know you take a proactive step and kind of putting a flag in the sand and saying we are going to be treated as for example a limited liability company that you know theoretically means that the members and the creators are only liable for what you've put in and you've got more certainty around that angle um you know regulators will find you whether you

want to be found or not generally from my experience particularly in the us so as much as folks like to think that they can be you know outside of the scope once the scope shines its light on you there are things that could happen to you that you may not want so it's again i think you know from perspectives you know of founders and members what's more important to you right testing the system testing the space playing in that unregulated zone or having certainty and having you know more of a proactive stance of who you are and what you're doing you know it's interesting i'm trying so we just launched the dao over the last month our community our podcast

community and our newsletter community um they just came to us and said hey we want to launch a dao we want to further the mission of what web3 academy is doing we want to build resources and products and things in the space and we're like okay sounds cool like there's a bunch of people in the community and everyone wanted to do it so we're like all right but it's a bunch of people in a discord a lot of them are anon we have no idea who they actually are i have no idea where they're from uh so it's like okay we have this token it's valueless right now so it's not even on open markets or anything so we're fine for now um but it's like i wouldn't even know what country we should get you know regulation in because i don't even know where our members are from you know so

it's like it's almost it's not that easy i feel like and i don't know if regulators quite understand how weird and crazy this world is of dao's right now and he's just internet communities like you know just joining up over a token so well i guess we'll see how that that one plays out um okay i have one more on the side of like just the different sectors we've kind of gone you guys both mentioned stable coins um and uh lisa you said you think this is gonna be the first um you know piece of regulation that we get um maybe we can just kind of dive into that a little bit on what sort of regulation we're gonna see like obviously we had the big collapse of tara luna uh and the ust and so i'm sure that's one of the reasons why this is getting sped up um i

think also i mean there's a lot of benefit to the us for example having really good regulation because uh if everyone's gonna use a stable coin where we're going to hold the us dollar and we're going to spread it around the world on crypto rails that's really good for america why would they not do that is that the reason why you think this is going to go first or why do you think stable coins is kind of the the first area here um i do think that is one of the reasons that you know the the u.s regulators and lawmakers do want the us to be ahead of the innovation the if the stable coin is pegged to the u.s dollar that is really beneficial for the us in general so perhaps that is the reason why one of them i'm sure but i mean i'm not certain

i also think that the stable coin is the easiest to understand because it doesn't fluctuate in volatility it doesn't have like you know i mean sure the algorithmic stable coin is is a little more complicated design but um i think for the most part i do think that's going to be the first uh regulation to pass and from what i understand one of the laws that is has been introduced which would still have to be voted on um has a kind of uh it like one of the big questions for stable coins in the us is do you have to be a bank to issue the stable coin and the reason is because banks are heavily regulated and so they would make it you know theoretically safer for the consumer um so i think there is a lot pending right now saying

that you know it could be banks or non-banks that issue stable coins but if it's a non-bank i think there's going to be stricter regulation like you need to have a certain amount of reserve to make sure that something like tara doesn't happen again and i'm not really sure how the regulators are going to treat algorithmic stable coins but i don't think that they particularly like them right now so nobody does at the moment what do you see yeah no but i think that's right i mean we don't we don't have any particular stable coin legislation specifically here in canada but i think the principles that lisa outlined apply generally right like that like a lot of these assets they're global in nature so you know you can put specific guardrails in specific

countries but in terms of you know the actual operation of the asset it does have a global reach so you know my my personal view is that you know a usdc stablecoin um would really become the primary method of transfer of payment globally if the regulation were to come in and there was to be stability and from a regulatory perspective that is definitely something that you could see you know treasury departments being self-interested in to further validate the us dollar as the leading global currency even if it's 2.0 in stablecoin right so you know you pair that with recent collapses in the space and then you've got this argument to say oh well we need to protect investors and hey at

the same time we can further validate our own currency to be the global leader so why don't we do that first as a priority so that's why i think the regulation is going to go towards stable coins first but from a frankly you know um commercial perspective that'd be a great development generally for the space and for the industry participants like once you've got a coin that you know is pegged and it's going to be consistent and it's going to be able to be transferred that offer that allows for so much more interoperability of other coins that can similarly reference that or be exchanged for it then you have you know ability to do more in the fx space for you know foreign exchange purposes

so that'll give a lot more certainty and allow for more interplay in the industry as it continues to evolve so definitely support it and hopefully the timeline of the end of year is is a reality but we'll just have to wait and see yeah it definitely unlocks a lot i'm curious why are we saying end of the year what what makes what's your hunch there um well for for me personally i've heard of senators for example senator toomey who has his own stable point legislation he has and he has like made the statement at consensus which i was at the you know the conference okay in june he said that we will have a stable coin legislation by the end of the year so i don't know how accurate

that is but i know at least he's trying to go for it and i know that there's i've heard it said by a few different congress people publicly announcing that that's they believe that's going to be the next one and they believe it's going to be by end of this year who knows if you know things happen i mean some other issue that is maybe more important to constituents may come up and get it may get pushed but at least i think that they're trying for the end of this year i'm curious i'm sure there's a lot of regulatory stuff that goes unnoticed or that's you know maybe in the private industry and stuff um that you you two might be familiar with so i'm just curious what are the big wins that we've had in regulation in the last let's say year or two years if any uh and maybe

what is what are the big losses if any as well uh maybe you two can can break down what you're what you're seeing right now um adam let's start with you yeah yeah well i mean the wins in canada are are pretty big i think globally right we're really a global leader in in regulation in web 3 in the space but i'll just talk about some of the wins for wonderful because once you have regulation you can see exactly what companies like ours are able to do so we started as a d5 platform and we purchased a c5 regulated crypto asset trading platform that needed regulatory approval so we had to go to the securities commissions and get them to bless that we did and we got the license transfer we had to go back again and

convince them that we could operate two under the same roof and we did in connection with our recent acquisition of coinbury we had to approach we had to approach the canadian antitrust regulators the canadian competition bureau because our total client assets under management would pass certain merger notification thresholds big legal terms but essentially we had to get another regulator to blast this m a for us so we had to explain to them what the crypto market was what crypto is and essentially get another set of approvals which we were able to do then we had the tsx call us and say you know you guys are operating on a fully regulated basis come list on our exchange one of the biggest in the world and have your stock publicly traded

right so you know we i am not aware of companies that are able to make that claim really anywhere other than from canada and with wonderful's position we're able to accomplish all of those things literally in the past like three or four months so the space is moving super fast um the regulation is there and we're taking as full advantage of it as possible to drive it forward um you know i can certainly talk about some of the drawbacks too but i'm sticking to be the positive guy in the room right now well and it sounds like those wins are as much as they're for wonderful you're kind of paving the way for other companies to be able to do the same at least in canada and maybe it sets a precedent or example anyway for other

countries like the us and wherever else right yeah that's what we're hoping and we're hoping to export the model too right like wonderful has aspirations to you know do business outside of canada as well so we're hoping our regulatory framework can passport very nicely into other jurisdictions that may be able to follow our model and the canadian model as we you know consider taking it around the world cool lisa what are you seeing what do you think the big wins are um i think the big wins are that congress is taking time to learn about it like i said it went from maybe five people a few years ago even really understanding crypto and blockchain to now many people in congress and whether they have different opinions i mean at least they understand it enough to have

opinions so that's great you know they're holding um committee hearings they're having people from ceos of these top blockchain companies come in and explain things to them they're really trying to learn and i also think that there's a lot more um a lot more crypto money and the us companies have put into uh let's say like lobbying or types of firms that interact with dc so that they're going in to teach and educate about the space and they're being open and they and they're really like trying there's a lot more money and attention on this issue so it is getting a lot more attention so i think that we are heading in the right direction and there is probably like last time i look at least 40 different bills that have been

introduced into congress about crypto and that's just been in the last few years so people are really thinking about it drafting laws like of course the majority of these won't actually end up passing and get signed into law but i think that that is a really big one is that it's like in the last few years it's really picked up speed and um education is 40 even a lot versus other industries like i hear 40. i'm like okay sounds like it's great but other industries like thousands or can we compare i guess i don't really i ca i can't say that i have no idea like what um is the general amount of bills but considering it used to be zero a few months ago or not months ago years ago i do think that 40 is a significant number and it does

show a lot of progress right absolutely okay thanks to the both of you we're gonna start to wrap up here um and so we're gonna do two more things one i'm gonna let you both shill anything you want where we can find you on the internet uh where we can find your companies on the internet um you know or wherever it doesn't necessarily just be on the internet uh and then i'm gonna do a speed round so we have a few questions we asked all of our guests at the end so hopefully you guys are okay with a couple quick speed rounds um they're just kind of fun um but let's go uh adam if you want to start um just tell us you know i don't know if you're on twitter or where we can find you but feel free to take the the show here for 30 seconds

yeah thanks no the best place to find me is on linkedin and you can find my profile just by searching my name and wonderfuy you can see us on our website wonder.fi learn about the company learn about the industry you know check us out see what we're all about um that's uh that's what the best place to find me is perfect we'll put the the links to that in the show notes of course lisa how about you um yes so i am uh also on linkedin and twitter uh for linkedin i don't know the actual link but feel free to it's like lisa reuben r-u-b-i-n and then twitter i think i can't remember my handle exactly i think it's it's either l-e-ruben or at lisa

um and then paul hastings if you just um google paul hastings is a top global law firm there's experts in every different area of the law i'm particularly in the fintech practice which is ranked band one um in the us for chambers so uh that's kind of the world that i live in amazing thank you and again we'll put the uh we'll put your actual twitter handle uh and the link to it in the show notes so we'll figure out what that is okay let's start our speed round real quick here um hopefully this uh you guys can answer this um i don't know if either of you two have purchased an nft before but if you have what is an nft that you would never sell lisa we'll start with you um so i'm more of a spectator when it

comes to nfts i really love the technology but i don't have one i'm pretty careful about buying tokens just for so i don't get conflicted out of any cases as an attorney but um if i had one i think um one of our clients is a really cool project crypto chicks and i probably love one of those cool yeah i don't own any sorry i don't know nft's uh myself but certainly you know um our company supports a number of them i i'm waiting for a traditional artist like banksy to drop one and then i'm gonna be all in one love it okay cool uh this one's gonna be for lisa cause i guess you don't have twitter right adam so lisa who's your favorite person to follow on twitter

um honestly i love following stuff about regulation so one of my favorite people to follow is this person ron hammond who's the director of government relations at blockchain association and the blockchain association is doing some really cool projects by educating um people in congress and lawmakers about blockchain so i like to get some updates of inside scoop of what people in congress are saying about legislation or what is going to be introduced yeah nice adam you said you don't have twitter right so you can't answer that no i can't but i'd say follow kevin o'leary i'm sure he's there he's got good content yeah that's a good answer okay last question then and this one actually has nothing

to do with crypto or nfts or any of that but something you've purchased recently for under a hundred dollars that brings you joy it does not need to be crypto or web3 or nft related uh lisa we'll let you go first under 10 under 100 under 100 under 100 sorry um recently so i love reading novels i recently bought this novel in an airport called book lovers and i finished it last night it was a really really good fun like romance novel based in a small town and it was really sweet so i love it i would say that that's it for me books are are a perfect one under a hundred dollars adam what are you

uh i'm a sports guy and it's the summer so a jay's ticket uh the watching blue jays game that's gonna come in about 100 for a half decent seat so i'll take that totally i was gonna say i don't know if that fits i mean i went to jay's game a couple weeks ago when i was home and uh and it was a hundred dollars i was like oh damn tickets used to be so cheap back in the day right at your threshold so yeah all right well lisa adam thank you both for so much for for joining us uh on the podcast today this was amazing uh as i said it's our first one on regulatory on legal um so really appreciate your insight and uh i think as the regulatory you know landscape unfolds um we may want to have you both back on to kind of

update us on on what's happening because i'm sure it's going to change a lot in the next let's say year or two but again thank you both so much for your time i'm sure you're both very busy uh and uh i wish you all the best yes thank you for having us thank you listeners thank you all for listening hope you enjoyed the show and i hope you all have a wonderful wonderful day thank you for listening to web3 academy we hope this helps you along your web3 journey if it does please share this episode and subscribe so you don't miss the next one by the way if you have yet to join the discord community you are missing out this is where all the magic happens this is where we learn where we ask questions where we network uh you want to be in

there the link to join is in the description below and finally a quick disclaimer nothing in this podcast was financial advice crypto and web3 can be risky you can literally lose it all in fact if you invest on account of what we say you probably will lose it all so don't do that in all honesty the point of this podcast is to remove the noise of markets and price and focus on utility and implementation anyway so you should not take any of this as financial advice thank you friends and see you in the next one