EB137 – Siân Jones: Regulatory Update - The Brexit, The EU And The DAO

Transcript

[Music] this episode of epicenter Bitcoin is brought to you by Jax Jax is the user-friendly wallet that works across all your devices and handles both Bitcoin and ether go to J ax. and embrace the future of cryptocurrency wallets and by Ledger makers of the Best Hardware security devices half piece of Mind in knowing your private keys are protected by industry standard physical security go to lal.com to see the full range of products and use the code epicenter at checkout to get 10% off your first order hi welcome to epicenter Bitcoin

the show which talks about the technology projects and startups driving decentralization and the global cryptocurrency Revolution my name is seasa and I'm M Roy today we are joined by uh shaon Jones who is a regulatory correspondent and currently the head of edcap which is the European digital currency and blockchain Technology Forum we'll be this episode is a regulatory update episode we'll be talking about the kind of regulatory themes going on in the European Union the United States and the rest of the world before we start let's have an introduction from Shan Shan a bit about your background oh hi there guys nice to nice to be back it's been a long time about a year now I think so uh lots to catch up on uh yes

so so I'm a regulator compliance uh specialist and I've been working in the virtual currency and blockchain space now for about three and a half four years um seen it through the various phases and the last year and a half I've spent a lot of my time um working in uh edab which is a public policy platform uh based in Brussels focused on uh on the uh European Union um trying to help legisl and policy makers uh understand what virtual currencies are what distributed Ledger technology is and uh I suppose hoping that um and I think

we're succeeding as well in getting um uh those policy makers and Regulators to understand uh how to approach regulation and the whole policy issues around uh around the subject so um that's what I do and can you tell us a bit about some some of the members of edab and uh yeah who who Who's part of this well so we we we'll we'll take on anybody um at the moment we're fairly informally based I'm pleased to say but uh as the activities have been growing this year we going to have to formalize a bit more but if I give you an example um we ran a uh an expo inside the European

Parliament building so that was focused on the members of the European Parliament all 751 of them and their staffs and the um representatives from the different uh EU institutions uh and that included uh um a set of round taes that we had uh three roundtables one on Virtual currencies one on blockchain and the other on regulation uh we had about 70 people there representing um all kinds of traditional and new Finance world so not only large Banks but also um uh U startups new folks in the virtual currency and in the

blockchain space um and we also had folks from the World Bank the international monetary fund the IMF oecd the bank of international settlement uh from um Academia we had folks from Harvard from the S Bon from universities in the UK we had folks from the European institutions such as esma the European Securities and markets Authority and from the European commission as well as MEPS and their um assistants so very um you know very broad Church um participating in in Ed cab at the moment we'd like to try and keep it that way because that um Fosters a a very uh free

and Frank exchange of views which right now is is important no I I definitely agree that it's it's important to have that sort of representation at least at the European level um now let's uh let's on the topic of of Europe uh since you are here uh in a pretty well I guess timely um it's it's quite timely since uh last week uh Britain's went to vote and decided that the uh that uh that there would be a brexit um I'm not sure if it's the UK or just England or but um Can Can you let's not spend too much time on this uh but maybe

tell us a bit about what impacts this might have on um on the blockchain space in the UK and perhaps as well in Europe okay so ju just to clarify what's happened is there was a referendum the UK so that's the whole of the UK that's made up of England Scotland Wales and Northern Ireland and uh the outcome of that referendum was uh that um I think it was 52% of the electorate it was a high turnout um uh voted to leave the European Union so up till now and still today um the United Kingdom is one of

the 28 member states and one of the largest member states uh it's been part of the European Union for 45 years or thereabouts approximately 40 OD years and now it's decided or its electorate has decided that it wants to separate from the union so um a very significant probably one of the most significant events in in my long 63 years so that that that's what happened the outcome of the likly impact I should say um is is probably too early to say um it's a n first of all it's a non-binding referendum so um it doesn't Force our legis uh legislators in the UK to to

press the exit button there is an exit button uh in the current European Union treaty the Treaty of Lisbon there's a provision article 50 that says you know press this button and um and you start a two-year process to leave um the European Union uh that um exit button hasn't been pressed yet and um our prime minister who was uh campaigning to for for Britain to stay in um has announced his resignation in the Autumn and he says that he'll leave it to his successor to uh to do whatever is necessary so we're now in a very much a state of limbo it's never been done

before and nobody quite knows what the real impact will be it's going to be profound it's going to have a huge impact on the economy of the United Kingdom and it's probably going to have a knock on impact on the economy of the whole of the EU and then this intervening period That's until the exit button is pressed and then during the period of negotiation um that uncertainty is certainly not good for any business generally H in terms of blockchain and virtual currency businesses um my guess is that it's going to have some slightly different impacts um but probably um not as

profound as in other sectors of the economy I think fintech generally will um is is always very Adept most startups are very good at um pivoting and changing and adapting and being very versatile and agile and I think that will mean that they'll be able to deal with this situation quite well for technology companies P pure technology companies probably not going to have much impact in fact staying in a an exited UK which tends to be um very supportive of innovation of fintech generally very supportive of uh

of light regulation and so on on uh it's probably going to be a good place to stay or still to come but for uh businesses that are focused on payments um who are in the regulated space or expect to be in the regulated space that's going to be problematic and the reason there is that in the European Union um most regulated financial service providers are able to um passport their what amounts to their license to do business that means that they get a license effectively in one of the 28 member states and that entitles them um in general terms anyway entitles them to to to passport that to the other

27 member states without you know having to get relicensed in every one of the EU jurisdictions so it's obviously a big Advantage a lot of companies have come to set up um in the UK uh because of that passporting capability and of course the prospect is that that passporting facility might not exist in a couple of years time and that means they'll have to start in another EU member state for those who aren't dependent on the regulated space um I think probably the UK will still be a very good place to be based we have things like uh the um Financial conduct Authority sandbox which is very novel um

allows small startups and Challenger businesses vintex to operate um in a regulated space but without having to uh to apply all the regulations to try out if you like um and the UK has that as probably more advanced than anywhere else there are a couple of other jurisdictions Singapore Netherlands have plans along those lines too but the UK is is is already open for business and um so it will be it will be different for different players okay and uh you you mentioned like before the show that um the brexit news has kind of overshadowed some really positive news coming out of the

bank of England so yeah let's get into that well very quickly the the governor of the bank of England so the bank of England is the central bank in the United Kingdom and uh so it's the issu of pounds and it uh it's governor who's that head of that of the UK's Central Bank uh so anything he says carries a lot of significance and he um he had a speech prepared for a week ago just over a week ago um that he was to have delivered in the city of London a center of if you like the financial um Hub of of the country unfortunately um there was a a political

assassination in the UK um I think it was that early that day or the day before and so the speech was switched at the last minute to a tribute to the um MP who lost her life um Joe Cox but um the speech was nevertheless published and it had some really good news um especially for virtual currency and blockchain businesses particularly um probably there were three things of significance I believe one was an announcement that um e-money institutions and payment institutions so these are the regulated entities that that that can operate uh in the payment

space uh so they're effectively licensed to operate in the payment space but they're non-banks um would be entitled to open settlement Accounts at the central bank now this is very important because in a any payment system um to fully participate you need to be able to settle with other payment institutions with other Banks um and in the UK um it's uh been limited to only those Banks Who provided them availed themselves of that facility there only 40 of them and of those 40 only three um encouraged handling the

settlement uh the daily sort of settling between banks that goes on only three of those those Banks acted on behalf of all the other payment institutions and smaller Banks and Challenger Banks and so on so small banks that have been actually very supportive of virtual currency businesses and other fintech uh businesses have not been allowed effectively to open accounts for say Bitcoin exchanges and other virtual currency businesses and even some blockchain businesses by association um because the three big Banks were very risk averse in that space so it basically meant we had a wonderful

wonderfully encouraging uh landscape for innovation in the UK for fintech but those businesses couldn't get bank accounts or found it really hard to get bank accounts and in fact the UK was I mean it's difficult everywhere in the world but it was particularly bad in the UK and what Mark Carney the Govern uh announced in that speech was that he would open um open Accounts at the bank of England for the over a thousand uh e-money and payment institutions so that's if you like the non-bank payment institutions if they wanted to apply so that's now opened it up it means all the the Challenger Banks all of the payment

institutions that would were beholden to these three Mega Banks um and their risk of burst policies can now be more um um more challenging and that's good news that's really good news um uh I I believe once the necessary laws have been changed that may take some months and of course brexit may change the whole legislative timetable in the UK but once that's uh enacted and uh um all these thousand odd companies can can can do this it will change the whole banking landscape in the UK and make it a very attractive place for Bitcoin and virtual currency businesses to be based that sounds like

really that's really great news I mean do you are there any other jurisdictions in the UK in the in the EU where uh where smaller financial institutions and payment service providers have access to the central bank directly actually um yes it is less restrictive in some places um Germany for example has a much more um um decent calized approach to banking there are local banks and Regional Banks and Cooperative Banks and a much broader network of Banks and so small Banks can participate in the settlement system um and and and that's then supported by Seer and other um infrastructures makes it a lot easier so

in Germany for example there's a small Munich Challenger bank called Fedor that's been really supportive of virtual currency businesses um they've been um you know it doesn't mean that they have just opened accounts um without performing all the proper due diligence but nevertheless they have uh opened accounts for virtual currency businesses um I think we'll see the UK um probably leap from Germany in that um so it's really good news there've been some other jurisdictions where Bitcoin businesses have been able to open accounts but um this is the first big big na I think that um that that's going

to make it easier so I'm I'm particularly upbeat about this I think it's great news for the industry there are a couple of other things that Mark Carney mentioned that I'll just touch on one was um he announced more detailed work that's been done around the so-called digital pound around a Fiat based digital currency based around the pound um the bank of England see this as as an important part of the the future and uh they've been researching this for a couple of years now um it's fair to say the FED in the states and and the uh European Central Bank have been doing similar work uh but the bank of England was well ahead and

it's now upped its game um it's now got its Governor talking about it they've recently done some work with PWC on a proof of concept around this and uh they're really serious about uh coming up with a a digital pound this could be really exciting news and certainly a shot in the arm for the uh for for the industry it's not a is not a pure virtual currency not certainly not a decentralized currency by by its nature if it's issued by a central bank but it's certainly um good news and the other thing that that Mark Carney talked about is um the bank of England using blockchain technology for some of its core activities so it's not just looking

at using blockchain in some of the peripheral areas but using it in um in its core activities now it's still early days it's still researching this but it's obviously got some serious use cases it's uh it's looking into and the fact that it's talking talking so openly about it that its head is talking about it is I think amazingly significant it's good news for blockchain good news for virtual currencies um a lot of a lot of stuff that uh that that we should be very pleased about in this uh in this community all sounds like like really big news right like so our listeners

might want to check out our episode with David andol fat where he kind of explains uh kind of two- tiered structure of how B of how the conventional banking system works and why a virtual currency issued by a central bank is such a big deal like as Sean said right now only three big banks have really access to the let's say The Ledger of the Central Bank of England now they're extending it to 1,000 and like a central bank back digital currency would extend it to millions of people right absolutely effectively every single person who holds pounds will have a central bank settlement account because that's what it is it's

it's profound and if you think of this in sort of waves where where it's opened up to to new kinds of Institutions and at some point in the future a digital um fiat currency then that that well there is a population of 60 million in the UK potentially every one of them and everybody abroad would would have a central bank account it's brilliant it's it's it's it's phenomenal it's profound let's take a short break to talk about Jax Jax is a cryptocurrency wallet designed by the people at D Central maybe you've been thinking of buying ether but haven't gotten around to it because he didn't know what wallet to use which one is easy which one is secure Etc well there's an easy way now and that way it's Jax Jax easily and securely stores both Bitcoin and ether

not only does it store those currencies you can convert them right in the app so the with built-in shape shift integration you can for instance transfer Bitcoin into the wallet and directly convert it into ether or vice versa and since there's only one seed it's easy to back up and it's easy to sync Jax has wallets for literally every platform every device device for Mac Windows Linux iOS Android or extension wallet for Chrome and Firefox Jack is made by the people of the Central and they have a proven track record of Awesomeness in 2013 they created crypto kit that was the very first a browser extension Bitcoin wallet at the time and the way to think about ja is that it's crypto kit on steroids if there was

doping controls for cryptocurrency wallets Jax would be illegal highly illegal fortunately they're not and the great thing too about the decentral team is just they keep putting out new features and new features for Jack and it just keeps getting better and better at a at a disturbing Pace I would like to add so go to ja.io that's jxx doio to download your wallet and you'll understand what it's like to use a Next Generation cryptocurrency wallet we would like to thank Jacks for their support of Epic Center from my from my background there that there's like two observations so once once you have a a country like the UK issuing pounds on a blockchain and

accessible on a mobile device in the developing World in India I I just I just think like lots of people in the developing world are just going to switch to the pound from their uh conventional money and it it it just might be a big you know geopolitic it could be a big geopolitical move as well uh in addition to just totally agree yeah I couldn't agree more I think the if you sort of think about this over the long term let's say that you know the top tier currencies uh in the world all start doing uh blockchain based Ledger Technology based uh currencies then all of the you know hundred any whatever over 100 currencies that are sort of the low ranking currencies they they they

cease to have uh any any purpose in in in in in the real economy and then the other thing I guess is uh also once you have direct access to a central bank um what role do payment service providers uh play then I mean banks are still there to loan money but if you if you have direct access to the Central Banking you have a you have basically a payment system embedded onto your local currency why would you need to use PayPal why would you need to use a Visa why would you need to use any type of uh a payment service provider at least within your own bound the boundaries of your own country but then if you can extend that outside of the country using some sort of you know interconnection like interledger or something like that

absolutely it's um it it has a uh it's going to be hugely impactful on the whole payments industry I'm actually speaking to you today as we record this from Liverpool and I'm attending the emerging payments Association um sort of annual conference and and they're running it uh some panels today and we were we were talking about this because obviously this is this is new news and it it's still thinking in so the the challenges to the traditional uh Banking and payment system um uh those sort of Challenger providers are generally speaking members of the emerging payments Association and now they are being challenged by what might yet come in a few years time so it's it's uh it's

enormous um and it's also going to bring potentially bring about those the that notion of um of Austrian economics that's all about complimentary Curren you know complimentary currencies competing currencies because if Ordinary People anywhere in the world might be able to just hold central bank money very easily without going to to get it exchanged or stored in a bank or whatever but just interact with digital pounds or digital dollars or digital Euros or other currencies there will be real competition I mean yeah this is this is like big news and who knows maybe the future of our industry might just be you know writing smart contracts on The

Ledger operated by the bank of England for all we know and that might just be a way bigger Market than we have at our hands today but let's see I'm not sure we can use the word smart contracts for the moment can we I mean bit taboo right now as we record this n come on it's I don't think it'll ever be taboo at ENT of Bitcoin I'm I'm only teasing it's uh we we're still reeling from what the impact of of of um of the Dow hack and whether or not it is even um you know as some call it a theft and others you know say no just availing themselves of the contractual terms and conditions oh

let's not go in that that's another discuss for another day so let's uh let's go into the regulatory update so um let's first Focus start on the European Union and then we'll move to the United States for the European Union can you give us like a very short overview on how regulations are made in the European Union what bodies do it and what are kind of some of the things they have been up to in the past you you can't use the word short update and Shan Jones in the same in the same sentence I'll do my best um right uh there have been some some significant things particularly in the last uh six months so the first uh first half of 2016

um the European Parliament um started talking about virtual currencies uh in the latter part of 2015 and decided that uh its one of its committees a very influential economic and monetary Affairs committee should undertake some research and come up with a report which um um it has now done uh I was one of uh very honored to have been one of the few people asked to give um evidence and and make an address to the parliament back in January its public hearing and it published a draft report in February um it went through various um uh s stages of revision and

was finally published in April and That Was Then adopted by the parliament in its um May plenary session the end of May uh and so that is now um you know that's Now official that is is the the European Parliament it's leg the legislature's uh report and it it basically it's not a long report U but it's uh it it's significant in a number of ways firstly it started life being a virtual currencies report and um by the time it had worked its way through the final draft it was about 5050 in content between virtual currencies and blockchain and I by which I mean the non-payment related blockchain use cases

and I think that itself is quite profound because it then went on to explain that although there are some public policy challenges and other challenges possibly uh obviously around anti-money laundering and U uh terrorist financing that are of concerned generally especially in the wake of the um the par horrible heinous attacks in Paris and Brussels um you know these are obviously of concern to to politicians and probably in that sense rightly so so they at least should be thinking about them those those kind of issues but also around credential um regulation and and this kind of thing so they they were

looking at the that there being you know some issues that needed addressing might need addressing on the one hand but on the other hand saying that you know blockchain and distributed Ledger technology was hugely powerful um has massive potential for being trans formational and being used in ways that at the moment it's too soon to to fully evaluate in other words um uh the the the the the the takeaway from the report was um you know don't stifle this stuff with uh with regulation but um rather allow Innovation to to um to flourish and so it it it proposed U um what it's

termed a smart regulation rather than um light regulation uh and by smart regulation it's saying um they the parliament endorses the uh European commission which is the the kind of civil service the administration of the um the administrative branch of the um European Union uh to its plan its action plan to bring in some measures around anti-money laundering that will affect um virtual currency exchanges and also custodian wallet providers and leave that if you like as the extent of any regulatory measures uh at the same time not turn a

blind eye to blockchain but let it flourish but at the same time keep a watchful eye in case it becomes systemically important what they're saying is as legislators unusually they don't want to create some new laws um around the technology not just yet but equally they don't want to turn a blind eye and find that you know in five years time or whatever blockchains are running three quarters of the financial services world and it's become systemically important and they didn't if you like keep that under review so they've proposed a task force uh to be set up under the European commission uh to watch over virtual currencies and and blockchain and keep

it under review for a changing risk profile make sure that uh uh that that they don't miss a beat if if if that profile changes um as it happens I don't believe that there will be a dedicated virtual currencies task force I think what will happen um um is that the um the uh commission's task force that was already being initiated to deal with fintech generally will have its mandate amended to include virtual currencies and blockchain Technology um I had lunch recently with um the uh it happens to be the UK's

commissioner who uh European commissioner who is the commissioner for uh financial services financial stability and capital markets Union um and uh uh he is certainly of the mind to include uh include virtual currencies in the in the fintech um task force however there is an impact already on from brexit and that is that Jonathan Hill the commissioner has just tendered his resignation as a result of the referendum result he has been uh obviously of one mind it doesn't mean that his successor will necessarily be of the same mind so this all might

change and in fact this whole approach to Reg a of virtual currencies and blockchain Technology might be different in a year's time because someone who's been extremely influential if you like a kind of minister of um of financial services if you want to think of it like that um is changing and he's been a very he's been very much uh someone who has supported fintech and someone who has been um one not to support regulation just for regulation sake so that could all be different in a few few weeks time today's magic word is brexit b re XI T head over to Let's stock

bitcoin.com to sign in enter the magic word and claim your part of the listener award now regarding this uh this uh plary s sitting and and this task force on on distribute ledgers and virtual Curren and blockchains it it seems sort of um ill advised to I mean I I certainly wouldn't lump together uh Bitcoin as a virtual currency and the use cases that can be uh that you can you can make of Bitcoin uh Bitcoin as a store of value Bitcoin

as a means to notarize information using oppert turn which is you know something that strum does uh and then uh blockchains as in terms of digital uh distributed ledgers uh with consensus um it seems that the issues that may arise around regulation for all those different use cases of blockchain Technologies may be different and some of the risks Also may be completely different do you think that it is a good idea for um for the EU to consider all of those Technologies and all the different use cases that you can make out of them uh to consider those in one in in one body um where I mean in reality the the use cases are completely

different than the uh the the the outcomes as well yeah I um actually I do think it's a good idea that it should they should all be considered together but I don't think that they should be regulated together the reason that I think they should be considered together is that um uh it is very easy for there to be spillover from one from regulation that is designed for one particular um for one particular use case um especially if it's if it's built up around say definitions and then spill over into other kinds of use cases that might might still have for example a a token

um as it's as its fuel or as it's um yeah as it's fuel so um if if if if poorly defined because of a lack of understanding of these non sort of Bitcoin type um use cases um if if if it's not properly understood and the definitions are poor then you could find unintended consequences that you drag um nonpayment related um uh use cases into regulation that wasn't actually meant for them so I think it is a good good thing that the technology is reviewed as a whole and I think it as it

happens I think the EU have approached it very well because they clearly Parliament and I believe the commission as well in my discussions with with various uh commission officials I think it's well understood the distinction between these different um use cases and that one rule doesn't necessarily have to apply them all and that they have to be very judicious in the way that things are defined when when there is um when when when there is some regulation in the future so I think it's right that they do look at the whole picture and understand it uh and I think it's obviously right if the their conclusion is that uh they should regulate differently for different types of things and be very careful about how

they Define um say what is a virtual currency and what are some of the conclusions if any uh around things like smart contracts and decentralized autonomous organizations I don't think there are any conclusions at the moment probably the organization who's looked most at um smart contracts is esma the European Securities and markets Authority um it's been following blockchain and distributed Ledger technology uh for two or three years now it put out a call for evidence in 2015 and it's just um very recently so this is being recorded in June so I

guess it was probably earlier in June put out um a discussion document which you can get on the esma uh website esma European Securities and markets Authority and they um that's a a very well thought through and reasoned discussion document that invites feedback and anyone with an interest in the use of um of blockchain distributed Ledger technology for uh Securities um in uh or any markets based activity um is invited to uh give feedback by the beginning I think it's the 2nd of

September there's a there's a couple of months to to consider it definitely a recommended read um so I think there's good understanding where the understanding needs to be but in terms of if you're implying you know um has much thought gone into things like the Dow and uh the sort of problems um only to the extent that these kind of problems could arise um uh but I don't think there's been any deep deep thought about what the implications are um one thing I would say is that as a consequence of the Dow hack a lot of Securities Regulators are definitely looking at

this stuff far more closely I know that the Swiss regulator is looking at it uh because um the ethereum foundation is based in Switzerland um I know that uh the SEC is looking at at the implications and I think we'll see a lot more Regulators um you know dusting off files around uh around smart contracts and really trying to see uh what is a security and what isn't a security and what the implications might be so probably over the next 6 to 12 months we we could see a lot of Enon around this area I I hope that some people haven't found you know found themselves in trouble as a result of the um of of of

what's happened over this Dow hack but I fear some are on a very fine line but time will tell so uh one question I had about the plenary sitting in the European Parliament is that after the report was issued by the committee on E Committee of Economic and monetary Affairs I think there was a vote on whether to adop adopt this U report as a as a guiding document or not so in in that sort of vote do you do you feel there's a difference uh in the approach different political parties across the European Union take for this technology that's a really good question and there wasn't um there was amazing unanimity across the eight political

groups that are represented in the in the European Parliament um very little um broad very much broad agreement ment very little disagreement there were okay the original draft I think was about eight pages and it gave rise to 62 pages of amendments but they were fairly trivial in uh there were more you know detailed textual changes and there were some compromises made in committee about the precise words but there was nothing profound in that um and in the debates in the open debates in in the economic and monetary Affairs Committee in the internal markets and competition committee which also reviewed the report and in the main parliamentary hearing um

sadly it was at 11:00 at night uh with about um very few MEPS actually in the parliament which great shame didn't get a lot of time for debate and in fact there were more MEPS wanting to talk than there was time allotted so it was popular but you know um broadly speaking um not much political disagreement at all we spent a lot of time on the EU uh let's now take it over to to the Americas uh it's been about a year and a half since bit license was passed in um in New York and since then we haven't really well we haven't really talked about here on the show uh can you

give us an update about what uh what has been happening there in New York how what have what have been the impacts of bit license remarkably um few applicants for a bit license so my understanding is that only two have been issued and the second one was only issued um quite recently what has happened is that a lot of the startups have left New York State um it's not been a it's not been a very good environment for them and so they've walked they've gone so essentially that license uh that that bit license is pretty much just stifled all all innov

around Bitcoin there there in New York certainly the you know the small startups that are you know the lifeblood of new newly in new innovation they it's not been a good environment for them because it's very expensive to operate there right because you've got all of the you know the regulatory implications which have huge regulatory costs um complexity um which they don't need to face in either other many other parts of the United States or indeed elsewhere so we've seen um number of uh of small businesses startups move to other

locations and um very few companies but really only the some of the best funded ones able or wanting to um uh to to to sign up to bit license so um it's had certainly more of a negative effect than a positive effect in my personal opinion and what are some of I guess yeah that's you know who who depends on who you ask uh but uh are there any other states uh in your knowledge that have tried to pass similar uh regulation to B license or perhaps uh regulation but with a lighter touch or a different approach and and are startups you know going to those locations uh as opposed to New York well um there certainly are um

other um states in the in in the US that have had a much more encouraging um uh environment for for startups the obvious one that comes to mind is California because it's home to Silicon Valley that's where so much uh so much development in in blockchain has happened and it continues to happen um California in 2015 tried to um Tred to to pass a much in my opinion a more pragmatic piece of um legislation um I think bit license regulations were when they were first published around 40 something pages long and the California bill was I think around uh six or seven pages something

like that did grow a little over over time but that it was it was uh much much more pragmatic much more limited in scope affected much fewer businesses as well the the New York regime is very Broad in in its scope and um and the range of activities that that are caught by it um it passed the lower uh legis legislature in California and uh was partway through um being debated and discussed in the upper house so that was in the Senate and um then by some political maneuvering was kicked into the long grass and um has yet to reemerge so they

never quite made it but um it was certain the if if you're going to have a regulatory regime that was encouraging in on the one hand U light touch um pragmatic and um all all all all at the same time then californias was certainly probably a good model um but it it it it never happened there are others um but I think I think it's gone off the boil a lot in the US um since a lot of the emphasis moved from Bitcoin to blockchain um over the last 12 months I think there's been less it's been less

urgent um having said that now that we've seen things happen in the uh in the um in with ethereum and and the Dow I rather suspect there'll be renewed interest in that area so um I suspect we may may see some new things starting yeah I was I was just just going to I was just going to ask you if if if that was your impression that because we've sort of moved from Bitcoin to currency to now uh much more of an emphasis on blockchain whether that had an impact and I mean I think you're right I think that now that uh we're seeing applications emerge around smart contracts and decentralized autonomous organizations and specifically after

what happened in recent weeks uh that uh so this wave of scrutiny on uh on public blockchains that you we had back in 2013 2014 might start to reemerge uh now but you know around um things like smart contracts and specifically ethereum as I say I think I think the emphasis is changing and we will see uh we will see um renewed interest from from Regulators let's take a short break so we can go to Paris I stopped into lame ojb coin situated in the heart of Paris a startup scene and I met with Eric lar Ledger CEO to talk about The Ledger Nano The Ledger Nano is a Bitcoin Hardware

wallet based on a secure element it is on a USB form factor that you plug directly inside your computer and it will manage all your private Keys the signature of transaction will be done inside the secure element thus never revealing the private keys to the host computer it is compatible with our own Ledger Chrome app which you can also use for multi signature with cop or coin kite and a large range of third party application such as melium electrum green bits green address and so on the Nano also exists as a cool bracelet wearable so you can always wear proudly

your Bitcoins on your wrist the lger Nano is an easy to use Hardware storage option which doesn't compromise in security if you want to get a secure setup for storing your Bitcoins go to Ledger wallet.com and use the offer code epicenter to get 10% off your order we'd like to thank Ledger for their support of epicenter Bitcoin like you you mentioned that uh the Swiss Regulators were looking at specifically the the Dow episode and uh perhaps the SEC would also investigate into it are you aware like what what specifically what features of the Dow they would be investigating like for example like one aspect of the Dow that that I I I I have my doubts about is the way in which uh Investments were

solicited like on on Facebook um targeted at all kinds of people maybe even young people without maybe even proper disclaimers as to what what it was and so you could have investigations directed on the crowdfunding side you could have it my guess is exactly that um that that they'll be looking to see if if if this was an unregulated um and therefore unauthorized security um and if it was um in their opinion then then then we're likely to see some action taken I think it's very early days but uh you know people have potentially lost money and um Regulators get very

interested when something in their space means that um the people they're supposed to be protected or whose interest they supposed to be protecting um you know so if citizens lose lose money on investments um then they they they they they they get concerned so early days but I mean the other the other aspect obviously that's that's now interesting is uh like does the Dow form give any protection any protection against personal liability for the people who are involved in it right so like we see like in this episode you have uh the authors of the code the curators of The

Da uh the people that solicited these Investments you know put the ads on Facebook and slack and Etc so we they're all publicly known and do they get any any P like any protection against personal liability from from this whole episode should things come to that level no no the whole point about uh a dow um and any of these virtual organizations ifone wants to call them that um is that they have't got the benefit of uh of of a jurisdictions um limited liability uh Corporation type um

structure uh and as such they are unassociated sorry um unlimited associations so um groups of people like a partnership and uh essentially um the partners the members of the association are all jointly and severly liable in most in most jurisdictions uh that's going to be very interesting as we may see a number of lawsuits around the Dow you know um it's all very well that this um Brave New World of dows and acts um um is

uh not encumbered with the structures of the state and uh these wonderful protections of of of of of limited liability and so on so long as everybody's making money when folks start losing money then you start to find out that actually it really does matter and um but there will certainly be I think some folks who will Who will take out lawsuits and um potentially um you know for the full limit of their uh their losses um we shall you know these are early days but this is of some obvious concern probably shows that in the long run

pure pure Dows and Dax won't won't be the be all and end all uh that what we'll need probably is some kind kind of hybrid um that's my personal opinion as to what's likely to happen over the next few years but these these are very very early days um it's interesting that the main proponents see this as something that's above nation state laws and something that's very separate and and and and then um they'll be looking to the those very self-same laws to uh to cover their

their their financial losses um we shall see I don't early days I mean like what I've kind of become aware of is that it is certainly possible to merge the The Da structure with a traditional corporate structure like the example I have come across u in Switzerland is um like one of one of my associates was trying to kind of create a company and he wanted to build a Do and he consulted with multiple lawyers and what they said is you could have a traditional Swiss corpit structure the AG and maintain all of your shares on the ethereum blockchain and enter into smart contracts on the ethereum blockchain as

long as you comply with the incorporation requirements of the arain sell so you could have basically defense against personal liability as well as benefit from whatever you want to benefit from on the on the eum blockchain so these kinds of structures are definitely possible right I I believe so yes I I think that kind of hybrid is a much more practical way of of uh of operating so um the idea of a distributed autonomous Corporation I think is is is unlikely really to take hold um a traditional corporation that where the shareholders exercise their rights through uh a dow

type mechanism and where the operation of certain things in a company happens within um a consensus uh system I think those are feasible they're not without challenges though uh for example um the moment you have a traditional uh AR isan gazel shaft that's a company with limited liability the similar structures in most Juris itions um the the the moment you have an entity like that you have to have people who are responsible so typically their directors and those directors have have duties to the shareholders as a whole and uh and

responsibilities now that that will be quite interesting because then you you say well you know someone is accountable for the actions of this entity if the actions are automated through smart contracts um that are not directly controlled by those directors how can they be fully responsible and so there are a lot of areas of challenge but if a dow was properly constructed with I don't know forms of kill switches and overrides that allowed directors to fulfill their legal obligations under the law um then I think it would you know it is possible and that's why I say

I think in the future the pragmatic approach is probably going to be a hybrid I mean yeah like like I think I think this kind of conclusion is something that um let's say the crypto Anarchist in me doesn't like that much but but on the on the other side like what this da episode has clearly shown to me is uh it has raised this question in my head that if I have like a pure organization just based on code on ethereum and something like this episode happens which could right our technolog is very immature even with good intentions it could happen then uh and I'm involved with an entity like

that then the then the problem is that I might be liable in a jurisdiction in which I've never set foot so let's say let's say let's say you know I I'm the creator of a purely code based Dow and some it goes Belly Up some some person in Finland let's say ends up losing $100,000 now that guy could sue me under finish local law and then I would be liable inside Finland even though I have probably never stepped foot inside it and I could be liable in so many jurisdictions by so many local standards that it might be just impossible for me to uh to survive if if a tragedy like that happens right well we want this

Brave New borderless World that is facilitated by um by crypto um that transcends um uh traditional jurisdictional boundaries um but in the real world those borders exist those jurisdictions exist and laws exist within those jurisdictions and it's amazing you know people and businesses are still subject to those laws um the place you really don't want to uh uh to mess people around in is uh is the USA which is why even in the in in because the laws are very very much um uh um wider in scope and also their jurisdictional reach so

um uh you often in particularly in the in the financial space um laws are designed or written in ways that uh they don't only affect the people who are in the US and so so even in the traditional um Financial Services world you often see disclaimers that say you know uh this is not for advertising in the United States or this that that check your IP when you connect to a website say sorry you can't access the information about this investment because you're you know in the USA or or or you have to you know tick a box and confirm that you're in no way connected with the USA and you're not a US citizen

those kind of things before you can get into the detail of the investment um uh so definitely avoid any uh anything in the US because they have um an endless supply of orange jumpsuits and some very wide um legislation wide reaching so before we wrap up here let's uh let's sort of come back full circle and and perhaps talk about some of the jurisdictions uh that uh are more more enlightened than others uh that aren't ready to put you in an orange jumpsuit if you uh do something that's seemingly you know doesn't warrant that type of uh

punishment uh are there any jur jurisdictions right now in the EU or outside of the EU that uh you feel are particularly open and where they're thinking about blockchain Technologies and uh whether they be public or or permissioned uh where they're thinking around the evolutions of of those Technologies are are are more advanced than others or um there probably are yes I I think there probably are I don't necessarily think that um enlightened um should be should should be thought to mean um where there's little or no regulation uh because um there are lots of places where there's little or no regulation around blockchain and virtual

currencies but that doesn't mean that they want to encourage it so places that are encouraging of um of of innovation and giving a good um they may have for example some light touch regulation or they might be planning some but where they doing so in order to Foster Innovation give it some stability and credibility um they would include places like the is of man uh which is one of the first jurisdictions it's a small jurisdiction but um um Ashley has been very successful in encouraging new technology and eame gaming and um uh uh space and and biof farer and so on so um they're definitely very

encouraging of crypto um in the more traditional World well the UK itself has been very encouraging it's it's been talking at the highest levels of government about encouraging it had lots of reports and high level ministerial backing and money that's um um that's been poured into it government money that's been poured into say research uh in the space where they've had um uh you know positive statements uh around regulation so giving clarity as to um regulation without necessarily introducing um uh any um so UK has definitely been one of those places and

I guess in a in a in a post EU world that that might well be accelerated outside there Singapore has been very encouraging um and uh I I and Australia um I'm not saying that's an exhaustive list but those are definitely jurisdictions that would uh would like to see um uh uh virtual currencies and blockchain distributed Ledger Technologies prosper and flourish I definitely agree that having a light touched regulation or at Le it give gives the technology some uh some means to be recognized by the state but also by large companies that may want to

invest in in building on these Technologies and I mean for for instance uh I mean you mentioned the UK aisle of man Etc you know those are I think we all agree are um pretty um um you are places that Foster Innovation around blockchain uh here in France we've seen recently the M or the uh on government and specifically the economy minister uh encourage the use of blockchains um for the issuance of debt obligations for uh uh Equity crowd lending um now that's so it is encouraging but it's still um uh how do I say I mean

this so uh news like this is sometimes it can be interpreted in different ways because uh well for instance they had to translate blockchain to like some French equivalent of blockchain because in French law you have to have everything in French and proper French and so the the the translation of blockchain and it's like this you know six-word term that you know could be interpreted as so many other things and do you do we think it's a Bitcoin blockchain like a public blockchain or do we think it's uh you know distributed Ledger like more like a permission blockchain so uh it it it does definitely have some advantages and that it gives the technology some legitimacy but on the other hand it can be sometimes a little frustrating reading through some of this um some of these opinions uh and not really knowing

what it is that you know it's very subject to interpretation and it's mostly I think in my opinion because of a lot lack of understanding of the technology by these people and I think that highlights another point which is that it takes time for the world to catch up so you know we we three of us have been immersed in blockchain for a number of years we we're we're the Pioneers um if you like but the mainstream World takes time to catch up and um one has to factor in that it will take time for the rest of the world to catch up and to understand this uh this tough and to be able

to um see what its place is in the world and what actually what what benefits there are to understand better the the challenges and the risks but also to see those benefits and opportuni is and that takes time so I know we would all like it to have happened already and we should all be using Bitcoin by now in our daily lives and um the whole world should be run on blockchains and uh the referendum in the UK should have been uh carried out on a blockchain and and so on and so forth we would have all loved that but realistically we have to have a a more a more well yes a a a longer time

frame in mind so 5 10 15 years is a is a time frame for the rest of the world to catch up I certainly hope it doesn't take that long but uh let's let's say that's a good note to end on to be patient we have to be patient in this space like old I I that's all I do is just wait for for God's waiting room uh well that it was great to have you on again Sean um thank you for coming on and and hopefully we'll have you on again soon and May maybe not in a year uh we'll hope that there's some interesting regulatory updates that uh that we can um pull your your your knowledge and intelligence of the space and and have you come back on the show

at that point well it's always my pleasure I love I love doing these shows with you guys and I look forward to uh to many more of them even when you have to wield me in on my uh in my in my wheelchair [Laughter] and uh and is there anything you want to add any well if folks to know a little bit more about what's happening in the EU they can go to uh the edab website edcc.edu that's EDC a.u and there's loads of information there about what's uh what's happening in the European Union and uh sort of more General commentary else on the regulated space outside of the EU you can always look at my personal um uh my personal website uh Coin Salt c i n s LT

coin salt. EU so loads of information and I'm sure you guys will have some uh some show notes as well yeah we will we'll add Al those things for the show notes uh so thanks again and thanks you to our listeners for tuning in we are part of the LTB Network you can find lots of great shows on bitcoin blockchain distribut Ledger Technologies decentralized all kinds of stuff at lalk bitcoin.com uh you can find us on YouTube at youtube.com/ BTC you can also download the show on iTunes SoundCloud or whatever podast app you choose to use and of course uh if you're interested in uh tipping us you can do that the link will be in the show description and finally if you would like t-shirt such as this one uh you can leave us a review

on iTunes and just send us an email at show atent bitcoin.com to let us know and we'll send you a T-shirt and some stickers so thanks so much and we look forward to being back next [Music] week [Music] n