Policy Series: Why The US Is Falling Behind | Rebecca Rettig, Jake Chervinsky

Transcript

[Music] this episode is brought to you by chainalysis the leading blockchain data platform that powers investigation compliance and risk management tools used by both businesses and government agencies around the globe you'll hear more about chain analysis later in the show welcome back to another episode of Empire this is a really special episode because we are joined by Jake and Rebecca who have both been on Empire before but this is a I guess episode one of what will be many many episodes over the next couple of years of this regulatory podcast series and policy podcast series that we are super lucky to be joined by uh Jake and Rebecca for so uh to both of you welcome welcome to Empire again thanks thank you I think let's start high level and then

zoom in on some of these bills uh both in the US and and abroad um Rebecca can you just give us the give us the setup maybe for this episode like what what is the current state of uh crypto regulation and crypto policy as as we see it we're recording this on May 2nd today like what what are the big things on your mind today sure I think in the United States the big takeaway is that it seems like all parties involved are very far apart from each other I think industry may be far apart from certain um policy makers and certain Regulators I think certain policy makers may be far apart from each other uh there's been a long-standing debate in DC about whether and how to regulate Tech like in terms

of big Tech generally and it seems to be filtering over into crypto I think after the events of last year the debate has really ticked up even more about how and whether to regulate crypto I think some agencies are doing a lot of private Public Partnerships and really trying to drill down on the best ways to close regulatory gaps or think about how to handle this new type of Technology um so that's in the US I think the US is very different from where the rest of the world is right now and I know we'll get down into the micro points but the macro points is everywhere else for the most part they are building out various types of Regulation both on the

centralized crypto side and then really studying the more nuanced crypto native technological Innovative side of things and thinking about whether and how to build out a regulatory scheme around that so that's that's my tldr great tldr um yeah it's kind of it's kind of a shame actually I was talking to a really really amazing founder last night and he said that uh he said look risks just aren't worth it for me anymore to build a U.S focused crypto company plain and simple he said it's just really not worth the risks here so maybe we can get into actually uh the EU with Micah right so um I think it's two weeks ago the uh the European Parliament voted I think pretty substantially there's like 500 in

favor maybe 30 or 40 against to pass the markets in crypto act or better known as Mica right now and the legislation I think it does it basically what it does is it kind of provides in my understanding like this kind of clear more clear framework than we have in the US for kind of operating and running a crypto business was this a like would love to hear both of your thoughts just on this on this mic uh I don't know if it's a bill or or what they're doing in Europe sure it's a comprehensive piece of legislation um that looks to regulate centralized crypto actors what they call casps crypto asset service providers but identify identifiable companies right like a coinbase or uh you know custodian or an OTC desk or any of those types of

things and also stable coin issuers and uh they also deal with issuance of tokens in general um but you know it does give you some certainty now it doesn't give you certainty today yes the parliament voted there are two other votes that have to happen um that make it actionable so I think everyone expects that to happen in July and then it doesn't come into full force in effect until 2024 anyway just given how the it's built out but yeah and they've scoped out D5 they've scoped out nfts um so makeup on its own and I'll let Jake jump into is a good jumping off point for thinking about how you build out a business and what regulations may look like in the EU but there are going to be attendant pieces of Regulation

that we should look at too but Jake you go first let me say I'm super excited to be doing this recurring series with you guys I'm a huge fan of Empire I always have been I rarely miss an episode and um Rebecca and I have these conversations all the time anyway so doing this live you know on recording um and to do it without with you guys I think is going to be super fun so I'm really excited about this on um on Mika all that's exactly right and I think there's sort of two different pieces to this one is the industry wants Clarity right we talk about regulatory uncertainty and lack of clarity all the time and I think the great thing about Mika is it is a genuine attempt to actually tell the industry what the rules are so they can figure out how to

comply and in many ways the end industry almost doesn't care what the rules are as long as there is a way to comply with them right we're a bunch of really smart lawyers and Professionals in the industry we can figure out how to comply just tell us what the rules are I think the second piece of it though is can the industry actually comply with the rules right are the rules designed and tailored in a way that work in a disintermediated environment and I think that's still the open question with Mika and I think there's a lot that still has to get worked out as time goes on um and and as it gets implemented and I I think to the extent that I have some fear about what that process looks like it's because at least as far as I've been involved um the process in Europe

is somewhat opaque it's kind of hard to know what's going on and how it's going to come out so I think we still have to you know do our work there and um and make sure that it comes out the right way but I think it's a huge step forward and frankly it's a little bit sad for those of us here in the US to have to say Europe is leading the way and the U.S is falling behind it's very rare that we're in that situation but that's definitely where we are now well one thing that is uh striking to me about Mika is how far we've come since it was introduced and I remember maybe a year or two ago I think Jacob might have been a conversation we had but you were saying the Mika situation is is horrible actually is like there was this

environmental sustainability standard that kind of looked like the a pretext for the for for like a Bitcoin ban or at least a Bitcoin mining ban um and and I remember you saying like I fear that we are underestimating this like huge Global impact that Mika could have and now now here we are we are a year and a half later saying go go Mika like we're excited about Mika so like how did I think the quest like the second order impact of that is like how did the how was the EU able to get from here on the Spectrum all the way over here whereas in the US I'm like how do we get these folks from here all the way here like what what happened with Mika I'm gonna let Rebecca jump in on that because I think that she is largely responsible or at least has been very

deeply involved in in moving Mika from what was going to be basically a ban on everything to being something that looks at least as far as a framework goes like it could be pretty great so I mean I guess my only answer is it's the hard work of people like Rebecca and many others explaining what's actually going on and how these rules work and how they can work and why they should be made to work instead of to operate as a band that can sort of move it in that direction but Rebecca why don't you explained to us how did you do that I mean Jake did a good overview of it what I'll say is there was a lot of deep engagement by myself and many many others through Jake's point this was a big group effort for sure in the EU especially by native Europeans who

really understand the system and really understand crypto as well and to really explain how the tech Works uh to really they don't call it lobbying in Europe because I don't I think that's a not a great word but to consult and really uh go deep but the one thing I'll say um and the system as Jake said it's much more opaque in the EU but there was a lot of Engagement and there was a lot of willingness to engage and there still is a lot of willingness to engage because as I said there are these other pieces of Regulation that are coming down now that may touch on blockchain or crypto and may actually be an opposite Tamika and there is still a lot of willingness to engage and they actually do care how the technology works because they want to get it right and to Jake's point this

isn't some easy breezy you know Skip through piece of Regulation it is hard and especially for stable coin issuers there are especially U.S dollar denominated stable coin issuers it is there are a lot of Hoops to jump over and a lot of restrictions but you know what they are um to Jake's point there are going to be implementing regulations from esma which is the European Securities markets Association and the EBA the European banking Authority but I can tell you the European banking Authority is doing their due diligence and their education to even understand things like operational resilience and blockchains and um wrapped tokens and a lot of these more detailed and nuanced issues to really think about how does it make

sense to put any of these implementing regs into place but it's deep engagement and true intellectually honest ways to want to get it right yeah I mean it feels like that's the big the emphasis here is like they're it's still it's still tough for crypto companies in the UK potentially but at least there's clarity unlike in the US where it's tough but no Clarity on what to do what I mean if you are a uh maybe if we can get like a little more tactical here like if you are a company if you're a crypto company whether that's like a centralized crypto entity or or a D5 platform or entity whatever you want to call it how does Mika change how you should operate and think about your business well it lets you as of today you at least have some

guide guard rails on what it looks like in the future so you can make decisions about how you're going to set up your business and where you're going to set up your business the other thing is various different countries in the EU are going to have their own set of implementing regulations as well so France has been very pro-innovation and they have been engaging a lot with industry Germany which was originally not as friendly of a jurisdiction really seems to be coming around so you'll have ideas too of what countries you should be setting up in and what types of steps you need to take now to be able to comply with Mika later I I think this all gets back to this point about Clarity right if you have rules then you can hire a law firm and say to them here's what we want to do here's the

business that we want to launch here's the service that we want to put into the market and then they will tell you okay fine here are the things that you need to do in order to be certain that you are complying with the laws in the jurisdictions where you're operating right that's not how it works in the U.S in the US it's kind of like well here are the sort of vague things you might do to mitigate the risk that a regulator will show up at some point in the future and say that you violated the law but there is zero chance that you will ever have total certainty that you are complying with the law and so I think that's you know the big difference with something like Mika is even if you don't love what those rules are even if it's going to be very expensive or there are

some Services you can't launch um the way that you might want to or in the places where you want to at least you understand what the rules are and you can comply with them without worrying that you're going to get a Wells notice and all of a sudden need to spend a few million extra dollars fighting the SEC over something that you never thought would be an issue analysis is the Premier blockchain data platform crypto businesses financial institutions government agencies regulators and policy makers all utilize chain analysis's data and services to make sense of what's happening on the blockchain to analysis demystifies crypto by providing industry-leading compliance Market intelligence and investigation support for all crypto assets for organizations like square and Barclays and bny Mellon as regulators

and policy makers work together to pass legislation that provides Clarity for crypto businesses and protects consumers they have the chance to do so with unparalleled data and Research into the entire crypto ecosystem gain greater visibility and insight with the leading blockchain data platform by visiting chain analysis.com forward slash Empire if you are looking to compliance and you need blockchain compliance there is no better place it is chain analysis.com forward slash Empire when you see companies like coinbase making an announcement about like an offshore offshore I think it was derivatives exchange and a couple of

other things like that what is your read on that is that like they're kind of almost flexing their muscles showing the US Regulators like hey we can do this we don't need you we can do this without you or is this like actually a strategic uh thing on on the product roadmap basically well I mean I'll give you my my speculation maybe Rebecca will have different um speculation and I don't know anything about what their thought process was to just my my sort of um gut instincts I just think it was a commercial decision and I don't really think it was regulatory at all I think that FTX has left a massive Gap in the market for derivatives and the question is who's going to take advantage of that opportunity and there's no reason why someone like coinbase should not be the one to take advantage of that

opportunity in compliance with the laws in the jurisdictions where they're going to offer that product there's no way that you can offer that type of product in the US even FTX wasn't doing that right you just cannot offer those types of derivatives to U.S citizens no matter what I think there actually is pretty clear you know laws and regulations on that from the cftc under the commodity exchange Act so I think this is one case where it's just hey they're making an intelligent business decision and they're doing it in a compliant fashion more than anything else I do think one of the takeaways is that media is sensationalizing it to especially to to set up as I was talking about at the beginning of the call these various different groups sort of pitting it against each other and just reading the headlines it's very like coinbase goes

offshore and and to Jake's Point like no you couldn't have this on Shore but I don't think the other thing to keep in mind is coinbase is operating in lots of different jurisdictions and under lots of different licenses for lots of different products um so this isn't the first time they've done something internationally and they've talked a lot about their International work and their International Teams too so this is just an expansion of their business but it's not the first time they've ever done anything overseas yeah Rebecca before we wrap before we move back into the states anything else on the um on the international front that you're paying attention to and that we should talk about of the UK I was going to ask uh there was a a number of responses from a16c polygon had one a number of other folks had on you know what was my

interpretation was the the treasury uh Sarah said hey we're open to feedback please give it to us and so I know you're instrumental in that so maybe you can comment on that sure so about a year ago the UK announced it wanted to be a global crypto asset Hub and I do think that the UK now with brexit and not having to be beholden to whatever steps the EU is taking understands and has a real opportunity especially as the world becomes increasingly digital and you know moving forward in a technological basis they're a head of consumer uh protection or something like that just gave a big speech on how to properly regulate AI from an innovation forward perspective so they're not just focused on crypto they are focused on and taking opportunity in all forms of

technological innovation but the treasury Department on February 1st put out what they call the crypto asset consultation and call for evidence they spent most of it explaining how they would handle very much like in line with Mika centralized crypto asset service providers and token issuances um but they really gave as Jake was sort of alluding to just generally what the rules of the road are going to look like and also really gave a clear view and asked for feedback on how this would intersect or how could this intersect with their current Financial Services regime so that was the first part of it and then the last part was the call for evidence on things like defy um you know staking and Mining um sustainability standards and things

like that but that was really to say we need to do more study point us in the right direction industry and then in the first part of it they asked all sorts of questions do you think crypto assets should be what's a financial instrument there or a specified investment there and did ask for industry feedback they got overwhelming response the other thing that's really interesting that just happened too is that the hmrc which is the UK's version of the IRS just put out a second call for evidence on the taxation for defy lending and staking and they have changed the approach that they originally proposed to show that they really understand that when you are engaging with a platform like Ave or compound or something like that they're not undergoing a disposition of assets

which requires tax station and so they're Gathering more evidence there but all of this is very much consistent in line with them wanting to be a crypto asset Hub and then engaging very meaningless very meaningfully with industry which they've been doing for a long time yeah I know timelines are really hard to predict especially in crypto but how do you see kind of the next six to 12 months in both the EU and the UK playing out given everything with Mika and the EU being kind of that UK moving fairly fast it seems yeah the ew it's just gonna be what Jake and I alluded to earlier where it's gonna get um formally enacted and probably June or July for Mika and then there will be these implementing regulations that need to come down and you won't have to

comply with me until about 20 24. so there's this but the other pieces of legislation that are coming down like the anti-money laundering regulations the data act things like that that's going to touch crypto and so everybody should be paying attention to that too because as Jake said we're all a lot in Mika but a lot of the devil is in the details and you know it is important to have a good stake in the in the ground for that but it's not going to be perfect for sure which nobody is expecting any regulation to be the UK really has to move it forward and like any other country regulation and legislation takes a long time so they are under some time constraints especially because of the potential change over in the leadership there too and then there are the pieces in the EU right Rebecca that are scoped out of

Mika for now but they'll come back to so like defy I think they said they'll come back to that in 2027 or something like that so I mean this is a long road for sure yeah yeah before we Tran maybe as a transition into the U.S um could you talk about some of the things that you've noticed EU or UK Regulators be most sensitive to is it stable coins is it defies it like terrorism like you know what is it sure in the I mean everyone is very focused all over the world about illicit finance and anti-money laundering because I think that's probably the biggest challenge um because it's synonymous nature of everything and then in the EU U.S

denominated stable coins are obviously a hot button issue and uh should we transition over to the U.S or anything else uh on the international front no I just there are lots of jurisdictions that are really coming forward and coming forward fast Hong Kong Japan um I had a call with someone from in Africa today like they're they're all thinking about it very meaningfully and seeing this as a real opportunity mm-hmm great so the U.S uh I know there's a lot going on so where should we start what a tough question I guess we can start with our French air Gensler since he seems to be the one on our minds more than anyone else let's go there Jake how are you feeling

about uh gensler's April uh showing um it's uh it was it was entertaining for sure I mean look I think um what I will say is he's very talented at this particular exercise of testifying in front of Congress so I actually testified the day after him and I was up for about 90 minutes in front of the digital asset subcommittee of the house Financial Services committee and I will tell you after 90 minutes I was pretty tired and that guy has a few years on me and he went for like five or six hours without um without breaking a sweat so I give him credit for that I I think look we didn't learn anything new he's sticking to his talking points which are the law is clear and the crypto industry simply is not complying with the law and

the SEC does not need any more Authority from Congress to regulate this industry everyone just needs to come in and register and when you point out how long he is in sort of each part of that of that um uh you know view that he espouses he's just really good at ignoring all of those attacks from members of Congress so there's some really great Great Clips of uh you know chairman McHenry and um you know Tom emmer and some other members of Congress going after him and he just sort of deflects because he's very committed to this this approach that he's taking toward crypto which is he thinks that he should be the sole regulator for everything related to a blockchain and he basically thinks that none of it should exist in the US and

that's sort of where we're stuck um it's unfortunate but it also isn't something that I think will work out for him because he's wrong about having authority to regulate this industry and that's why I think we're going to be stuck in the courts for at least the next couple years until his tenure is over I'm sort of fighting over these minute points and and not making the progress that we were just talking about seeing and all those other jurisdictions a sad State of Affairs but that's where we're at I actually think um I know it's going to sound a little strange I think this is a missed opportunity there are I think we can all agree we've been in the space for a long time there are parts of it that I would like to see go away I'd like to see straight up scams go away I'd like to

see rug polls go way like all of that goes away it should go away and then you'll see this really I think clear streamlined vision for what this industry looks like and how it can build out and really create space and room for real Innovation and I think a lot of the fear that I think Jason you were talking about with people saying like I don't even want to set up my business here um comes from the the uncertainty and the unknown that Jake was talking about too and I think if there was a focus on those types of things the low-hanging fruit of what's not great in this industry um which does need enforcement and does need some some uh I think weeding out we'd be in a much different place but I think going after a company that seemingly uh based on a lot of their

public statements and even their most recent Wells notice response has been engaging in good faith with the SEC and trying to come I mean I'm basing on it on their public statements but making actual proposals for how digital access asset exchanges can register and become National Securities exchanges in the United States and taking that and turning it in on its head doesn't seem to be the best way to move this industry forward and so you have to ask sort of what is the end game here but I do think it's a missed opportunity to to be basically putting uh the industry on the right track and streamlining it seems to be like there's three different kind of main regulatory kind of uh tracks going forward one is the

Ripple case it's been ongoing for quite a bit of time I don't know if there's anything noteworthy there but nonetheless it's been ongoing for quite a bit of time the second one is kind of grayscale you know going to see taking the SEC to court saying around the ETF rejection uh which has been ongoing for a long time and the third one perhaps most importantly that I'm paying attention to is this coinbase um it seems well there's a lot of things going on there of course their response to the the wells notice saying hey look you approved our business when we went public and now you kind of basically are coming back at us saying that you know you know uh it's not legitimate or whatnot so uh there's a great clip um from another attorney in the space

and blanking on the name uh who said basically you know on the on the E physical security kind of piece it's like it doesn't really matter what his position is because it's sort of already expired where like the prior commissioner said that it wasn't a security and he seemed to think that it was kind of outside was it the the window to contest that so anyways uh maybe if we can I don't know if there's other stuff but the coinbase one is most interesting to me perhaps you guys could like share your perspective on what are the things that you're paying attention to that is most interesting on everything that's going on in coinbase and its fight with the SEC yeah um I give so much credit to coinbase I mean I think they are

um sort of writing a new playbook which hopefully no one else will have to use but I you know I I can't think of another company that's been in a situation like coinbase getting this kind of scrutiny from a regulator despite a total lack of clarity about how the law applies to them and then having to figure out sort of a novel approach to deal with that and honestly I don't think they could possibly be doing a better job I I think they're doing an extremely good job of explaining not only why the law is not the way that the SEC claims it is but also um as a matter of policy and just as a matter of Optics and atmospherics showing why they're right and why the SEC is wrong like why this is not the right approach of a US regulator to any

industry let alone to this specific situation I think people should just read the first eight pages the preliminary statement of coinbase as well as a response and watch the video that Brian Armstrong and Paul graywell put out along with the wells response it speaks for itself and I think it's just clear that this is a crusade by leadership at the SEC right now and and for better or worse I think for worse uh the SEC is a share run organization the views of one unelected person completely dominates the approach of the entire regulator um to to an industry uh like crypto or to a company like coinbase and there's been a a seismic shift in the sec's

views toward crypto before and after chair Gensler took his position even while chickensler has been there he sort of changed his own tone about whether the SEC has authority to regulate these markets he used to say congress must act because there is no one who has authority to regulate crypto and now that he sees a political opportunity to go after coinbase saying the exact opposite right the law is clear I don't need any more Authority coinbase just needs to come in and register um I think the one of the most amazing pieces of this is coinbase is a public company they already went through the entire registration process the SEC already kicked the tires on every piece of coinbase's business and the SEC did not stop them from going public if the SEC had thought that the core of

coinbase's business right the listing of secondary markets for digital assets was de facto a Securities violation there is no way that they would have let coinbase register and I really do think that this is more political than it is legal after the collapse of FTX piano chair Gensler and the folks at the SEC are saying well we have more political support to go after a company that sort of seems like maybe it's kind of like FTX in that it's also a crypto exchange even though there's no resemblance whatsoever to what FTX was doing and that's why we're in the situation that we're in I think that the big question then I'll I'll stop rambling and curious what Rebecca thinks about this the big question is what happens next right does the SEC go through with the enforcement action they

don't have to right and that's what the wells process is it's a discussion about whether enforcement is appropriate or not and the question is has has coinbase raised enough um in terms of a legal defense but also in terms of just a you know a political pressure right showing that it would be a political mistake for the SEC to file an enforcement action that the SEC will put off by the be put off by it um and then if they do move forward with the enforcement action what's it for right is it coinbase's staking service is a security in which case I don't really think we have to worry too much about broader impacts on the crypto markets or is it of the 240 assets that coinbase has listed 239 of them are

securities as they trade today right that would be um World War III for the industry so I think that's uh that's what's most interesting to watch now but what do you think I think there's the Nuance to the listing process that coinbase did a really good job of explaining um right and you know there's been people out there saying like oh this was a ratification of coinbase's business and crypto was okay then and it's not okay now but the SEC has the power to take up and review applications um to go public versus not at their own discretion it's not like everybody who puts in an application to go public gets reviewed and approved by the SEC and what coinbase made very clear and as well as notice is like all the cannabis companies who wanted to go public

they're they're um s1s their registration statements didn't even get taken up for review so the SEC has a lot of power to do that and I will say that there are a number of outside Council industry players who said we're not even going to pitch coinbase you know for the registration process because we just think it could never happen in the United States even back when it was happening um and I think we're very pleasantly surprised when it did go through so this was a at least deliberate decision to take up the registration statement and review it so I think that's an important part of the Nuance I think you know I don't have a lot else to add to what Jake said except I think you have two very sophisticated actors on both sides um coinbase has for sure the best

lawyers in the country working on this um and also the best policy people who are really complementing their sorry not to exclude any other policy people I just mean they have very sophisticated and Savvy policy people who understand all different parts of that this is both a policy issue and a legal issue at the same time so it is a very well coordinated effort and I don't think we can I mean I don't think we can deny the fact that chair Gensler is certainly being Savvy about how he is going through this um whether it is legally correct or not as I think something we'll see probably go through the courts because coinbase made the point in their Wells notice that they are well capitalized and ready to take this on if this does get brought

as an enforcement action yeah Jake um I want to move into and Rebecca want to move into um uh some of some of the noteworthy policies and bills uh that are on the hill right now so there's a couple that we've been keeping our eyes on at blockworks there's the war in Marshall Bill there's the lumus Jilla brand Bill and then there's the um I think it's called the financial technology protection act of 2023 I think it's bud and gillibrand and heims I think it is or none and none yeah um maybe we could start just with the Warren Marshall Bill just because Jake you had this kind of scary tweet that you put out into the world which said uh Senator Warren's bill would impose a de facto ban on crypto in the USA criminalizing all sorts of legitimate

activity like Mining and staking while doing nothing to actually combat illicit Finance this is a nice tweet this was a ripper of a tweet but uh tell us what's behind the Tweet here okay you shouldn't be scared by that and you left out the last sentence which is the most important which is that she can't find any co-sponsors for the bill she was supposed to introduce the bill last week nobody else supports it so so yeah I told this to Jason he he brought this up yes I said well this is typically how Jake's tweets go but I said yeah so the question is before we get is it getting any traction um it's getting more traction than you'd like but I will say the likelihood that it will pass and become law is so infinitesimally small that it's not something that I think we should be

worried about right now and look this is is frankly pretty typical for Senator Warren she's introduced hundreds of bills in her time in the Senate I think she has passed exactly one of them in her entire tenure in Congress so this is pretty typical of her right she likes to put out messages through bills she's not necessarily um doing it because she thinks that it's going to become law the the sort of disappointing thing with the Warren Marshall Bill is that it's not just the Warren bill it's the Warren Marshall Bill she convinced Senator Marshall to sign on with her um I I you know I think that Senator Marshall like many other members of Congress has very reasonable concerns about Bad actors abusing decentralized technology right public blockchains to

conduct illicit Financial activity and I think that is a very valid concern and it's one that we spend a lot of time thinking about and trying to figure out how do we maximize the benefits of the benefits of this technology while making sure that it can't be abused by Bad actors the problem of course is this bill does not actually address that concern right it's basically as I said a ban on many different aspects of the industry uh in the guise of anti-money laundering compliance what it basically says is if you are a minor or a validator of a public blockchain you are now going to be treated as a financial institution under the bank secrecy act with anti-money laundering compliance obligations which include collecting the

personal identifying information of every person for whom you facilitate a transaction meaning minors and validators have to kyc have to identify the people behind every single transaction that they validate or add to a block that is obviously not possible Right you cannot be a minor on bitcoin or a validator a Staker in ethereum or any other public blockchain and know the identity the name physical address social security number Etc behind all of the you know public addresses for which you are validating transactions so really what it means is you just can't be a minor or a validator in the United States and it's the same thing for a whole bunch of other Market participants right it might also ban protocol governance it would say if you hold a

governance token for a D5 protocol you too are a financial institution and must identify all the users of that D5 protocol not going to happen so it just means you can't own or participate in governance if you're in the United States and obviously this is not the right way for us to approach anti-money laundering compliance or combating illicit Finance in crypto and I think the vast majority of members of Congress understand that which is why it's the Warren Marshall Bill not the Warren Marshall and a whole bunch of other Senators who might actually pass this thing into law bill so I think it's disappointing but not something that we need to worry about too much so if this was just Warren we would not be worried at all but because you've got this Republican in Marshall and he sits on the I think he sits on the agriculture

committee which has these like weird ties in with crypto as well now we get worried a little bit Jake yeah I think that's right and and it's not so much that the bill will pass but it's that she is getting through to people and spreading her sort of you know anti-crypto Vibe right she talks about launching an anti-crypto army or at least that was something that that she had in one of her um recent uh campaign messages and what we don't want is for other people to sort of think like her because even if this bill doesn't become law there are going to be other bills that really matter where we've got to get in front of members of Congress uh who are gonna you know vote Yes or no or have a say on what those bills look like and if they're thinking that Elizabeth Warren is Right broadly

speaking that crypto is just for criminals and there's nothing interesting going on here that's a problem so we have been working extremely hard to explain to all the people that she's calling up personally to try to convince to join this bill to explain to them look we understand these concerns but this is not the right way for us to to address them Rebecca it feels a little bit like crypto in the United States right now is just kind of this waiting game until the the 2024 elections where if you talk to a lot of Founders and a lot of investors were like yeah it seems like it's going to be like this for another 18 months and then we've got the elections and like hopefully some people get pushed out in the elections and things get more positive on crypto what's your but that feels

like such a pessimistic take in my mind and like what is your view on this you've come to the right place I'm an optimist I direct the question to you I know you'll have a better take than that yeah um look I understand why people take that view makes a lot of sense um things do feel very hard but we can't lose Steam for precisely the reasons Jake was talking about at the end to the last question which is you need to make sure people understand the right ways to bring you know various different and novel technology technological systems under laws and regulation that make sense and so I would say the crypto policy efforts have really come together and are

um being well coordinated and people are out on the hill in the United States and also engaging with some of the Regulatory Agencies not the SEC um but other types of regulators in the these public-private Partnerships and even just doing normal stakeholder engagement and that's critically important because it's not like in 18 months we're going to wake up one day and write a new bill um even last week at consensus when he spoke virtually chairman McHenry said that he expects to put out a comprehensive Market infrastructure bill for crypto in the next two months people need to understand what that bill means and why it's important when it comes out so everyone should stay mobilized and everyone should keep moving their efforts forward because either chair

mchenry's bill or one of the other bills you mentioned will come to the fore and it will either get marked up or you know people will discuss it and people need to be educated and understand how important it is to pass something like this when it comes up so maybe we won't have to wake up in 18 months and try to start from scratch but we'll really have moved the needle meaningfully um either to get something passed between now and then or to get people really close to that I know we only have a couple more minutes here anything else uh whether it's any of these other pieces of legislation these other bills or any any other big things that you guys are thinking about right now yeah I can I can give you sort of a um a lay at the land in Congress and this so Santi

mentioned those two other bills I think worth touching on briefly one is the financial technology protection act this is actually the right way to address illicit finance and crypto right and this is you know part of the argument that we make when it's like hey if it were a Marshall Bill not the right thing here is an actual proposal that would work and what it would do is it would create a working group which would be led by the undersecretary for terrorism and financial intelligence at the treasury Department right that's the office that's responsible for keeping the bad guys from abusing the financial system but also would include other members of law enforcement and very importantly people from the private sector right fintechs and members of the crypto industry forensics firms and

others to to come together in a working group to analyze what are the unique risks in crypto and how do we address them without just throwing out all the benefits of the technology and deciding we don't get to do peer-to-peer transactions because it's too risky to let other people do it so no one will get to do it right so I think the the financial technology protection act is definitely a step in the right direction let's be thoughtful and considerate and then come up with Solutions rather than just you know doing policy by Panic essentially which I think is what the Warren Marshall Bill would do um then there's the lumus Julia brand bill so lemus gillibrands initially came out in the last Congress it's a comprehensive effort to regulate the

entirety of the crypto industry I think that um it's a a really important discussion piece if nothing else I think it's going to be pretty hard to get comprehensive regulation done in this Congress especially with Republicans in control in the house and Democrats in the Senate but to have a you know bipartisan discussion piece that touches on all the issues that we need to sort through I think that that is is really productive and constructive for us and I think we're still waiting for that um to get reintroduced but we should see that come through pretty soon um and then the last two pieces are um one which Rebecca mentioned is Market structure legislation so we spent a lot of time last year talking through the

dccpa right the digital Commodities consumer protection act and the Senate agriculture committee which would give the cftc jurisdiction over spot markets in crypto and I think we're going to revisit this issue that's what chairman McHenry says that they want to do in the house Financial Services can be a market structure bill that would say here's what the SEC regulates here's what the cftc regulates here's how other federal agencies are involved and that could be the clarity that we need to solve some of these uh these questions that have been nagging the industry for so long the other one is stable coin legislation so at the same time chairman McHenry wants to put forward a bill to regulate centralized custodial stable coin

issuers right the circles and the paxos's tethers you know those folks of the world and I think that also is ripe to get done that's what we at the blockchain association have been saying should be the first priority this is not complicated we understand the business model very well of a company that holds Assets in reserve and then issues a liability backed by those assets and stable coins are extremely important for you know U.S interests domestically and and globally so hopefully that's something that we'll see come forward as well I want to ask you a question going back to just kind of mixing both you know what's going on in the international front which seems more Progressive than what is happening in the U.S and when we talk about the US I think it's in my opinion there's sort of like

it's unfair characterization to say that the entire us is against crypto I think there's individuals that have made it and carry more attention but by and large I think there's still a lot of entrepreneurs here there's great businesses that have been built here continue to be built here there's more fear in the space but that doesn't you know it doesn't mean that the US is against crypto in my opinion um but I'm curious you know in the event where say that something were to be radicalized in the U.S say that some sort of Bill goes through or you know there's a ban of crypto how much are inner how much are international Regulators overseas paying attention to what is going on in the U.S landscape and are they reacting to that or are

they seeing that as an opportunity to be more sensible and saying hey this is an opportunity for us to rise to the occasion and you know at the end of the day governments are also like corporations they have certain targets to meet and I think there's a great interview that said Capital formation is one of the most important things of the SEC which it has not done given its recent kind of stance on this uncertainty so I'm curious to get your take on how this kind of regulatory you know game of chess is going to unfold I can tell you that they are definitely paying attention to what we are doing because I've had three different International Regulators in the last five days ask me why things are like

this here or ask me when the us is going to understand uh different sorts of things so they see what's happening and they do think it's an opportunity for them especially more developed markets um because there is this financial and this Tech aspect to both but I think the financial aspect is very attractive to a lot of different markets who've been trying to sort of even become more um more prominent uh financial markets or places to go and build and even to think about where you would like to IPO so I think that those are important things so they're definitely paying attention um and they definitely see this as an opportunity but to your point you know you know there's been a lot of talk of

is the US dollar going to be undercut significantly because of crypto and is the US going to lose out materially I don't think D dollarization is going to happen as fast as we are talking about for a variety of different reasons I think other different parts of the you the international and Global Financial system may be undercut first because there are a lot of different efforts out there to do settlement in non-us dollars among various countries and all that really does is maybe it undercuts the US dollar a little bit but actually what it does is it weakens our ability to sanction Bad actors by cutting them out of Swift and stuff like that and I think that's a scarier concept than just having the dollar weaken a little bit

because it's never going to weaken where you at least not you know in the next five to ten years to the place where somebody else is the general Reserve currency so I think those types of issues are things we need to be thinking about and focusing on and international Regulators are definitely aware of that as well I think this is a good first episode first episode of the Regulatory and policy podcast brought to you by Empire and Santi and Rebecca and Jake so uh yeah thank you all [Music] foreign