Blockchain & Cryptocurrency regulation 2021

Transcript

so this is this will work automatically okay so from now okay so apparently there was no live streaming so i have to repeat okay so uh i was supposed to talk about the blockchain regulations and what happened this year but as i say my uh opinion is that we don't have much progress of course if you want to know more then you can look in the current cases that are happening and what was relevant probably even at the end of last year

was ripple case and if you scrutinize deeply into it and read what sse wrote and uh water domain characteristics why did they actually want to take down the project then you basically are getting the framework what ssc wants projects to do and this is what i'm mostly when i'm advising projects like what is relevant regardless of jurisdiction where you are incorporated sec has overview of everything and it's practically impossible to do something without taking care of the potential legal

implications also one of the idea was that i prepared something because this year it's all about nfts and defy but i wanted i don't know how many people is still here because it's so nice in paris and you could definitely spend more time out to make more like ama and the water projects currently interested what are the legal troubleshooting so i'm offering some kind of half an hour while i'm here if you have any kind of question we can discuss and maybe i can tell what is my view on the things that might help you and what to think about okay we have number one

hello do you hear me yes yeah uh so my question is uh we we have seen binance basically being forced out of uk we have seen hong kong regulators stopping the uh was it violence again from trading security talk from trading tokenized stocks um so i'm just curious what's your opinion these are all common law jurisdictions um is there is there maybe some advantage to to france or germany should these projects maybe look to continental europe uh for maybe a better regulatory regime

well i would say that it's not just distinction between common law and and uh traditionally what we have here more in europe uh but it's specifically with jurisdictions so what binance is facing that they're practically going into compliance analysis and what kind of licensing they're supposed to have and uh i'm sure they have army of lawyers which are struggling to get this licensing done and and especially for exchanges it might even easier because they can easily describe what they're doing right compared to d5 projects so it's just a matter of some level of compliance that is expected

and what we know that fatf published this year and i think guidelines are still under public consultation for all of us the special industry should participate in my opinion even more uh to contribute like what do we think like that should be regulated in in to what extent because what they are discussing already now is that even uh software developers could fall under the definition of virtual asset service providers which would affect many projects in definitely in a negative way so i'm not worried about uh crypto exchanges that they're more into ml compliance now

with the travel rule and proof of ownership of the wallet which is still not being sold especially there is no standard that is being accepted in any jurisdiction in switzerland i know that uh we are definitely far out with guidelines that uh all the brokerages and financial intermediaries have to implement and what are seen as a weaknesses in aml processes and there is no like a global unique position so this is what has to go with each jurisdiction that you have to get the license i don't know if this uh answers your question i in my opinion there is no like easy answer like that there what what

jurisdictions should projects target like depends what you want to do but still you have to be aware that all the projects in crypto are targeting global audience so that means that where your potential clients or customers however you call them are is where potential legal implications can come so and that would mean that you always have to seek advice in every jurisdiction of course where you are incorporated this brings additional questions but wherever you have people that are participating in any way that even though they consider themselves decentralized uh i think it's not so easy to achieve

actually decentralization i have another question here on your left okay following up on the facebook stable coin proposal and the mika regulation um my question would be what's your take on the regulation the latest one and what you would do if you had the opportunity to talk to the regulators the europe european central bank for example or the commission we also have the representatives of utc so the european crypto initiative here they might actually ask even more a specific question but my question to you would really be just

what's your take on the latest mika draft and what are we supposed to do in european union to actually prevent from going down well i would say that it's very similar to fat uh current position and the difference between a virtual asset service provider and crypto asset service provider both of definitions are pretty broad so from what i read in mika is that whatever actually you're doing with crypto even any kind of marketing and promotion could potentially bring that you have to be licensed which i would say that most of the projects would disagree that this should be regulated in in the same way as if you're dealing in any

financial transactions uh i know that there is a lot of activity and that on national levels uh a lot of think tanks have delivered to eu their opinions so i i hope it will be uh accepted so that especially what will affect d5 sector but again things are so complex that it's also important to understand that explaining to governmental authorities the like technical details and how how this implies

if it's regulated in a certain way uh definitely needs more collaboration between the sector and authorities so what will be the outcome of mika uh probably the drive that is currently on the table will be much different but at the end i'm afraid that they will not back too much from uh ml compliance and what they are seeing on layer 2 a lot of anonymous transactions is what might bring more pressure and surveillance on d5 projects at least this is my view hi just wanna ask a question about the

switzerland framework uh specifically vasps and how this could affect d5 protocols uh you mean uh under swiss jurisdiction exactly so the wasps yeah uh i mean nothing is specifically uh detailed under swiss law so it's what uh what switzerland also has to implement once the fft guidelines will be will be approved then we will see if swiss government will bring some additional clarification on best but currently we don't have any uh defined terminology on this okay the next question then so for a company that's registered within

switzerland to remain legal what would you advise not to do and to do so is there any like no goals for a company registered in switzerland um well what we are doing what i've my practice so far was from the beginning to be in dialogue with finma so you describe what your project is doing and trying to achieve even though some things are in future uh as some kind of future features of the network or protocol and we can see also what finma is recently doing that they're definitely having more technical expertise

and uh it's much harder to get no action letter and tokens to be seen as a utility especially for governance token so what i was actually very surprised that a few projects were recently qualified as securities due to a feature of token to be able that you have governance voting within the project so i mean it's a about explanation and uh every uh new idea of course brings a new light when when you are approaching thin mind when you're trying to explain but of course they have certain framework which they are trying what they're doing

is they're trying to use existing frameworks to put it on your project not to the opposite so it's about putting a lot of effort in this dialogue and trying to explain because every details matters and what projects might be facing that they are not sure what they're doing what they're trying to develop being more clear and having like your project like that everything is understood because then it's easier to explain what is actually happening between my definitely very open for dialo compared to other jurisdictions this doesn't work um yeah there is one thing like protocol

fields so no protocol should take a fee if you're baseball in switzerland and any d5 protocol you come under vasp it was stuff like that so then do you think that d5 protocols will all have to do aml kyc is that what the regulators want uh if you can achieve the centralization in a way that there is no door to knock

on then it's much harder for regulators to take down but of course uh none of if you are creating entity and entities deploying software and any kind of liquidity pools so it's hard to get rid of this tie and if something calls upon liability of course they can always come to entity and ask and uh some kind of proof of level of decentralization is something that we cannot say that exists in the current practice so that okay like maybe comparable to other projects and maybe from the standpoint of scc we can

think like okay in what direction should project go and how many tokens should entity still possess to be able to be seen as more decentralized so this is some kind of uh argument that that you can definitely always use in favor if you can prove that you have certain levels so that if something is going on so software is being deployed protocol is uh living its own life if authorities send some kind of uh motions or c's and disease letters so that you have uh ability to defend that we as an entity have no control over the protocol we have no control over the

deployment of capital into liquidity pools so but and then uh if for instance ssc issues that you have to as an entity which deploy this software to put aml compliance on the protocol and if the protocol has a governance option you can put it for a vote and if community votes against it then i don't know what how uh what kind of uh act could happen upon that we didn't have such actions happening from projects so far i think we are still behind that so that we are facing some regulatory uh actions on that side but this would be something that you can say okay

we as a for instance foundation we put a proposal that the protocol implements uh ml and the community voted against it so what can we do so we satisfied what was uh put as an action towards us but uh we are with the decentralization we are actually fighting against it so woody's pass of course it's hard to tell depends on the also amount of capital as we see all the projects that are that faced so far the biggest legal issue like telegram or ripple those are like multi-billion dollar projects so when it's when under i i believe that you cannot come so

easily under their magnifier if the amounts are not so significant um hello um sorry hi okay so i was wondering since there's recently been a lot of headlines about china banning crypto and also getting rid of mining completely from the country maybe third maybe not but it's been quite a repeated theme for several years in crypto so i was running what is your take on china saying that they have completely banned cryptocurrency if you think that's really possible and what do you think the implications of

that are well it's definitely uh in crypto industry a significant market which gets every move that is happening but i mean we are listening this from the beginning so it's been more than a decade there is always some uh legal issues coming from china but i think they're the anyone who is in the industry will fight find a way around it so not necessarily that they have to be positioned in china um hello um so i'm i'm working with the french

crypto assets association and also on eu european uh initiative on crypto and what we've seen uh during the exchange we had with the eu regulator and the french regulator too is that the the extension the overreach that the fatf wants on you know kyca ml uh seems to be like something in inedictable in in the in principle because they they really see the the lack of coverage of d5 as really like a black hole for potential uh you know uh bad actors but what we've been uh thinking about recently and i don't know how uh

switzerland is is treating this is there a way um where you could really adjust the kcml measures not you know say that you are outside of the scope but say defy is different the responsibilities are different and you are not in control as much as you are when you are developing a centralized entity of course so you should probably create something that would be really specific to defy that maybe something more like a surveillance reporting obligations of things that could happen rather than you know controlling beforehand the identity

things that are really not feasible with a really decentralized model uh is it something that uh rings something like does this make sense for you or is there something i didn't see any progress i i know there are certain projects that they're working on more dkyc type i know also in france right but still this has to be if you are negotiating with authorities has to be recognized as a standard because each of us could come and say we i have some type of you know decentralized solution there is you know we collected data deployed it on blockchain it's

uh like certain qr code connected to ledger or however but if it's not recognized then i don't think that it would be accepted right it until it's start we start using it a certain standard and that you work as a project who is developing this and then you have a product which you can communicate with different protocols if it can be implemented but this again it brings what i said earlier the topic of decentralization like who is supposed to organize compliance like if it's decentralized project uh who wants to take this role because if you're the one who will raise your hand then it brings of course potential liability

for you so this is you know something that it's completely new legal ankle which didn't exist before we were in a world of entities now entering into world of decentralized organizations which still have some main roles and characters that can always be pinned you know you are behind this you were the ceo of this company or i mean people are doing whatever they do with their marketing to leave traces so it's not a problem to find who is behind a project but it will be some kind of balance will we find a in nearly future a solution to satisfy

and the governmental authorities with some different type of compliance i think it definitely has to be user-friendly solution which will be uh well accepted you know some front-ends that governments can understand that what is behind it like did we have you know some kind of a deployment on the blockchain it's then again question of gdpr uh immutability of data whatever data that was deployed it's inaccurate so it's like a lot of different angles that actually have to be taken into consideration when we are talking about new standard of kosc because

currently with banking of course you know it's like id proof of address very simple so now let's see actually from ideas that are on the table what can represent uh something that will be adequate in a world where we know that they're already going into kyt know your transaction that practically we have to provide the knowledge and of the ownership of the wallet so actually we are pressed with more compliance that existed before right so to wrap this up uh i think it's a lot of pressure on the

community and industry to find the solution where we will not have more surveillance than we actually want a lot of chains don't even have ability to be traced of course government is working with chanalysis and similar companies but they don't have capacity for all the tokens and everything would exist on the market so we will see i mean for projects what i see as a additional issues like being listed on exchanges is now also bringing the topic of our uh is token compatible with aml compliance or if not we cannot list it so all this uh is potential problem because then if you are listed

if you were actively being involved then you have issue with ssc so uh being seen as active participant promoting like uh increasing the value of your token potentially by being listed sunday so all these things are different topics which when you're doing legal analysis have to be considered and do the right moves not to end up in more problems hi what's the legal consequences

of hosting a front end for a defy application in comparison to ipfs are weave ic etc well just the fact that you have a web page and even though you're trying to make the ownership anonymous of course with the mpd request it can be found out so who is the person who actually paid for the web page so if if the activity is considered that is promoting some kind of illegal action then of course it leads to the ownership of the of the webpage at least in my opinion this is the first thing what i'm always

when i'm talking to projects like so who who is behind the webpage this is you know step one like oh yeah i bought it with my credit card so yes so it will stay your name uh and things like that so you cannot have this kind of information it's uh it's not easy to stay completely anonymous but is there any legal consequences for hosting a front end well depends on i would say this would be case by case depends what's going on so it's not that necessarily has to lead to liability of the software developer of the webpage thank you so if i can help and provide a

clue to answer this question we we've been discussing with our lawyer we are in france and then our lawyer said that as soon as we advertise something we have some responsibilities so if you advertise some defy mechanism thanks to your web page in france at least you have some responsibility a new responsibility stops at the decentralized mechanism this is where we are finally yeah this is not very clear in fact

because the you know if some problem arises so there will be of course a huge distribution or where are the responsibility of each people working in this process i mean okay if all clear uh i'll do my best to prepare this uh topic which is supposed to be today top 40 legal issues of nft and we will send video to uh everyone

who attended hcc uh as near foundation we are trying to educate community not just for the sole purpose of development of near protocol but uh i think we are all here to learn uh and to do our best to think about compliance but still uh not the price of technical development if no other question then thank you and thanks sonia for this really cool ama

session um we'll start