Unlocking Climate Impact: Policy and Legal Foundations for Decentralised Energy

Transcript

I'm happy to introduce this panel on more the legal regulatory governance and economics element when it comes to decentralized energy markets and more generally you know decentralization as we saw the conversation was going in many different direction earlier on. So thanks again for being here. I will quickly introduce you. So we have Matias from Twist Economics and senior senior economist from crypto economics and cryptoicon.

And then we have two tax advisors basically which are specialized in web three. So Stephanie with her home company and Alex from Vector Advisors and uh yeah so feel free to add a bit more on yourself if you need to and happy to start you know breaking the ice asking you from a policy legal or you know the elements you're working on what do you believe are the elements that are hindering the development of decentralized energy markets Yeah, I'm happy to start uh just uh to give um a broad picture also what I'm

doing. So I'm we are economists basically um and we support um on the one hand protocols but also applications decentralized applications and governments when they have questions about economics. And yes, so um coming back uh to your question basically what what are uh problems or issues that we face at the moment and for decentralized energy I think one particularly from my point of view these are two points which which I think it's very important so one hand is education um so what we've seen in past projects um basically um there is a lot of mix about what is the

technology ology, what is cryptocurrency, um which uh technology has which kind of of um energy usage? Um all these kind of questions I think is is very important what we see in in the discussion so far. Um which also hinders then discussion in policy and regulation um about how to have a good framework basically um on the one hand this and on the other hand I think the the infrastructure on the financial side. So I think it's missing like or with many other not only energy but also in different fields. Uh what we have is basically two worlds. We have the crypto world or the blockchain

world. We have the traditional world. Um and as long as these two are not very well connected, it's difficult for use cases uh to fully use the potential of the blockchain technology. And uh from this perspective, how do you think you're somehow able to take away you know the fear and uh have companies start you know experimenting on these elements and maybe individually maybe with us more proof of concept. How do you see that could work take away the yeah the fear and start doing something?

Uh yeah, as said for education, I think we we need to talk like that on the one hand uh researchers needs to provide um information on the blockchain technology on the other hand also like governments need to understand and policy makers um we need um association as we have here to provide information about about the blockchain and the different aspects of blockchain technology and I think this this from my point this is is important. Mhm. Good. What about from your perspective, Stephanie?

Yes. I think from a tax perspective, the word decentralization already says a lot, right? I mean, we're talking about decentralization. We're talking about crossborder structures, crossber business. And the point is taxes are still very centralized in the meaning of they are bound to countries and countries need taxes, right? when we see that developments um that that are still hindering is really this international perspective. We saw we saw it already before and we were talking about this minimum taxation. Actually at an event we were talking to one um uh someone from the OECD and we asked him hey what could we

do that this could actually work and told us yes we would need a global understanding actually how to apply it and then when we asked him how how do you see it that this will be working and he told us yeah well um not while he is still alive so I see and that's a topic where we're not talking about technology and decentralization I think that's one point and we've disced Ed yesterday what I see and and what I feel is that countries feel that they are losing taxes because we are getting more mobile. We're getting more decentral.

Yes, you're you're laughing, Alex, because you know it as well because um we see it in the discussions with the different countries and then we also see it in the double tax treaties that we have higher taxes actually in the countries when we talk about dividends and interest and so on. And it's probably usually you know do do not work with double tax treaties you don't really see it but it's important to understand that we see that the rates are getting higher and at the same time just for you to know that there is a power struggle going on between the OECD and the UN and this means when these two do not align this can really result in a bit of a chaos on international tax

level and when we are talking about decentral ization especially in the energy sector. It is really important that we find an international dialogue and understanding on taxation that we don't run into double taxation or triple taxations. Uh yeah, interesting. And I mean connecting to what you were discussing yesterday, I was wondering whether you believe somehow taxation is going to change in the future also from the perspective okay maybe not just you know taxing the individuals just individuals and companies but maybe you know as there is this discussion about robot taxation agent taxation you know that's

another potential element or is there such a thing you know as decentralized taxation. I don't know just happy to hear your your view on this. This is exactly point we have on it has started I say it has started that we are discussing robo tax meaning you see it's we are creating value with these agents and the more autonomous they are um the more we need to ask the question okay who is actually now creating value and then the question follows where is it actually created and there it becomes interesting and um who would then

actually be the subject to be texted. I think this is a discourse that has started on academic level and I think it's very interesting and I think we'll be talking about it later but just to think about it when we talk about um agents robots decentralization we also talk about data and data has a value and in the end um value should be tax and I guess the development from a tax perspective should be more and more to tax value and to follow that route in and break up our old structures of you know localizing

persons and infrastructure what's your view on this Alex or few experiences from your perspective well first of all I agree with what been said by the co- panelists second just a small remark it's interesting to have like an legal panel after you know Lily before like criticized the people with JDs uh for over complicating things and like right away we're just confirming it. Yes, very complicated but you know in the energy sector I get I would say like are two points like and like those are important like point one and that was was now mentioned right policy education policy making you know why

every L1 and I guess like reason why I'm here today is just like because we do actually quite some policy work for the L1's I mean not that long time ago we were like for the head with the head policy of like Solana we were organizing a policy event in Paris and and so on. So like that's what the you know blockchain industry or like L1's at least like you know serious institutions have checked you know you need to talk to the policy makers you need to educate them you know that's how you get like more or less like some progress on you know you have at least hope that some meaningful legislation will appear at some point and that's like one um though why all those reputable institutions all those L1s you know Solana M foundation Ethereum why they invest ing into that.

Why they have like headers of policy where there's like entire like departments running this? It's because the industry wants it. You have like user cases that like they need it, right? They need like some regulations or like like or deregulation can you call it what you want but they want to know you know if we do staking are we going to prison tomorrow or not right? Like it would be helpful to know. So like there is like real need from the industry for like those major actors to represent them in those meetings with the policy makers like point two though like you know for the climate change right that's that's an interesting point I mean who like assuming you run a you know like blockchain based solution for you know and it's amazing tool in the

interest of you know sustainability you know like positive impact on the climate and so on like you have like now the question right like now you see like it's very regulated it's highly regulated industry I mean like try to enter you know like the um you know greed uh you know quarter distribution market in Switzerland it's uh you know it's it's multi-billion businesses right here like that that are players in that space so the question is from the business perspective if you want to go to talk to the policy makers about blockchain now being introduced into this industry who are you representing who is who is in whose interest Are you talking about are those big businesses interested in like blockchain being introduced or are the end users you know

like who paying electricity bills are interested I mean like is there a demand from the from from the market side you know like from someone who is paying at the end is there any interest for you to go there and talk to the regulators and I think that's like very interesting because um there is like a study I'm not sure how public it is so just like you don't have to believe But like I saw it and I cannot verify. I'm not anyhow qualified to verify it. But there is like a study that shows that people who are in general very pro- sustainability, you know, like that's like the majority of like European population today, you know, people like to have their coffees from Starbucks from like recycle recycled cups. Um the same people are very skeptical when they get the

electricity bill from Swiss EWZ with like it says green on it but it's more expensive and the same people saying well no that's like it's from government that cannot be true I better still use the you know not green electricity because I don't trust this one and that's like it's interesting you know so probably if you like working on a solution for you know for blockchain in the energy space maybe you first want educate the customers, the end customers, those people who pay electricity bills that you're doing something in their interest. So you overcome this skepticism and then maybe the bigger players following the markets uh appeal will kind of start investing

into the policy work and then we going to like have like some productive discussion with the policy makers same as like today the L1's are having discussions with European Parliament and so on. Good. And I was wondering from that perspective as you're talking about regulation for the two tax guys we have tonight whether is there such a thing as too much regulation because my feeling is on the one hand companies are not starting to do something if it's nice to see her laughing therefore it's an interesting point probably you know so on the one hand the feeling is companies are not doing something when something is not regulated because their fear here

is to do something wrong eventually. But on the other hand, and it's particularly relevant in the European Union context, you see now companies are really struggling to manage regulation because there's way too much already from a sustainability perspective. How do you strike like the right balance between too little or no regulation or too much regulation from your perspective? Um well personal opinion not in the name of any clients and Astonia oh yeah it's totally too much regulation I mean like that's like iconic right you know all the AI startups are in the US European Union has AI law I mean like no startups

but the law like immediately right because all those people need to do something right they need to come to the office in Brussels at 8:00 a.m. and they need to produce some papers right like Monday till Friday again like personal opinion and and then we need to react right same like you know compliance and everything it's it's it's uh at the same time right I mean like in any of those discussions there will be like always this neutral phrase that means also now be like yeah well some regulation is important but where do you draw the line and you never know and you know that's just so happens and we need to react I I mean at the end right is just like talking about climate we already talking about like from the

beginning of times you know highly regulated industry I like in Switzerland alone I mean like I don't know there like I think like 12 laws regulating you know like the grid power grid distribution like it's it's it's I couldn't even like I wouldn't even know all the names of those laws it's it's just like historically has been like there you cannot minimize regulation that will not happen you already like entering the industry which is like highly regulated And now like you coming from the decentralized perspective where people also like kind of all the time talk about regulation.

Yeah. I mean like that sounds like a lot of regulation. How to minimize that? I guess um I guess like you know in the Yeah space we already have all the laws. I mean like we've seen like Switzerland was quite good with DT act you know where they said all right let's not like override like let's not create another law. that just like modify functionally the previous ones. I'm quite sure that the energy se in the energy sector is like quite possible again like they take this bunch of laws you know like and just like add in each of them a paragraph allowing for you know decentralized power distribution I mean quite simple right whether someone will come out and oh no but like and customer

protection prices and we need a special law I guarantee to you there will be like a political voice calling for like another four additional laws to regulate only that but I guess like yeah that's the problem of Europe since the last 20 years. It's just like yeah, we're just producing bureaucracy unfortunately. I see. What's your take on this Stephanie? You have something to add? Yeah, I think from from a tax perspective, I look at it a bit from a different angle because if I talk about taxes or if we talk about taxes, we have to think about incentives and what incentives are driven with taxes. I mean we see it with the carbon

credits and it can have a huge influence because the problem is um it's sometimes tricky to think it through until the end but with taxes the government directly has actually the power to guide action and to make certain things happen or actually also to yeah maybe not support certain initiatives and now exactly with climate change and decentralized energy. I think we have to be very careful how we introduce taxes and to think about okay what incentives are behind it. In parallel we see these reportings. I mean I see where we are coming from. We are

trying to kind of you know guide certain behavior. We see it with tobacco tax, alcohol tax and so on. I mean it can be very influential but at the same time it's a very tricky thing because then maybe you didn't think of a second market like with the carbon credits and then you actually then undermine your initial soul and I think that's a complexity behind taxes and then in parallel we have VAT VAT where we don't have tax treaties anyways and I think that's another little level you have heard before inflation as as tax I'm still thinking about it that's why and I think it's a form actually you can think of it as form of an iterate

that's like value add text and I think that's yeah I see you looking at me I think it's fine yeah yeah yeah fair enough and I also understand the point you know with tokconomics the creation of incentives whether they're from the tax perspective or not that's definitely an opportunity what we need however ever is we need guidance and that's the problem we have internationally at the moment that in in in most of the countries we don't actually know how do you qualify these tokens for whether you have a tax that's especially important we don't know how are they taxed and so suddenly you have a taxation and maybe you declared it wrong all these years before and so on

what we really need is guidance and a practice and of course as an advisor I prefer not to have too I I I love to have you know room for interpretation but at the moment we have too much of it and it's it's not very helpful neither for investors nor for the companies. I see. And uh as you had a strong reaction on the overregulation I'm I'm interested to hear your point of view from an economic economist perspective. Yes. Sure. Should like So we as economists we don't think that regulation is bad. is actually needed.

Um basically whenever there is um markets don't solve the problem and we have that in in the environmental sector. Um so obviously if there is no regulation we would pollute um or companies we all pollute um the world way more than it is efficient. So regulation is needed but like what is not good is basically just regulate everything um and especially not in in a in a targeted way like in regulation or in the economics it's important that there are general rules and that these rules apply for different um technologies for example it doesn't make sense to for example only regulate bitcoin but not other um financial assets um etc etc because what happens

then you you distort the markets and there might be unwanted um results. So for example, one example is if if a government like China there are other reasons why they've done they done it but if if if for example Bitcoin mining is forbidden in one country this has an impact on the other countries because like Bitcoining is decentralized. So what happens is just that miners go to other countries and if we forbid it in a country where the energy mix is very good then it could have a negative impact. So uh what I'm as an economist from our perspective it's very important that um it's not overregulated. Regulation is good but needs to be like general rules and and not not specific targets and not

specific technology for each technology specific regulation. Yeah. Yeah. Yeah. Yeah. Interesting one. And then I'm trying to connect as well a bit from the to the panel from before. And I was thinking you know as it happens many times like with railways or actually electricity infrastructure there's a separation between you know the infrastructure the ownership of the infrastructure which we can define as a public good in a way and on top of that building you know providing the the possibility to private company to run actually the business model on top of it. I was wondering whether you have some point of view something to

yeah to elaborate on this on division like similarly to many business model like Airbnb division between you know management of the energy infrastructure and ownership of the energy infrastructure I let the economist go first. Yes. No. [Laughter] Uh okay. So um yeah like so with many infrastructure this is the case and the separation basically between the infrastructure layer um and the the application so to say in blockchain. Um

and the reason there is often that like the infrastructure layer is often monopolistic. um in a sense of it doesn't make sense to have or it's very costly to have several rail lines um of different companies side by side or several electricy wires side by side. So it's more efficient to have one network. Um yeah. Um and then but on top if there are services on top of these infrastructures um if this is not separated then what happens is that uh the infrastructure owner just um leveraged its its um force to the next layer to layer where the the services are operated to the

applications. Um and then we have a big monopoly. So which is not good for consumer. So we won't have competition on the service layer. So that's that's the economic view on the separation basically. I mean has also problems etc. But it makes sense from an economic point of view and I think here um at least for now we don't I don't see that issue in in blockchain because the infrastructure layer is not well there might also be some subsidies etc. But like Ethereum is not building applications um decentralized applications um and and distorting the competition on the service layer up to now they want

competition on their service layer. Yeah. Yeah. Yeah. And do do you want to add something or you have your take on this? Uh yes I I agree and I think the energy market especially is very interesting and um it has its own driver and one point we heard before is really energy is power and it's growing this we we need to keep this in mind right and I think um what is interesting to see is when I talk with with UNITV about the ega projects where actually now we are building this this foundation layer and actually to incentivize that this is built up and I think this is now

something where we see where this structure is built from ground up and we see a new dynamic there because there we have different players and actually we need to incentivize them to actually build it and I think it's um it's then the other question will be at one point also to control it and how do you make this intersection right and you need some kind of control to make sure that you have this competition and it's it's also um I think a tough um comparison because you have two completely different markets. you have the service markets with its dynamics and then you have the underlying market and I'm not sure that it's that easy to compare both

of them because it has some complexity in it and as I said energy is power more and more and I think we will see that especially these two dynamics that can lead to interesting discussions in the the future. Yeah. Yeah. Yeah. Giga from UNICEF is a very interesting project and as I'm aware a bit aware aware of time and you know we are somehow separating us from the upper of time I was just willing to go for the last question of what do you think are somehow the biggest lowhanging fruits you see for decentralized energy market that should be taken advantage of from your experience

whomever wants to start as you let's come on go yes I I can do like like example right we had like the request two weeks ago it's a quite a known institution they have like massive government grants to actually you know do something on the Swiss you know electricity markets power market so like to to work with those excessive you know electricity which are not being used um I mean and we we're talking to them and they know that we're like you know tech lawyers years and work in the blockchain space like they had no idea like what is blockchain like never like apart from there is like bitcoin and they heard about this like you know from from you know from a newspaper in the evening they just just

parallel universe I mean that's not like educating policy makers that's not even like educating the mass customer this is like educating like a few big players who have the funds who even have interest and you know because it's all like half government institutions ions they're not even like that you know greed in terms of profits at least in Switzerland you know that that that would be like you know go and talk to them you know organize a round table a seminar and see whether there will be synergies I mean there was like one project like you know a while ago uh with like you know they they did like they tested uh this grid distribution they did with 37 households like 37 not 57,000 37 I would call it rather limited and it's like the only public project in

Switzerland it was like between blockchain and electricities that's like a very low effort. I mean for any like you know major institution in this space like power ledger I mean question for me for them are you guys like B2B are you B2C or you just like a nonprofit for you know to enable all things that would be you know like first thing you know like the first policy effort like then is the question like well in Switzerland actually have like this problem less but like in Germany people paying half of the rent on top of the rent payment you know with electricity bills and everything people like really suffering if there was a real you know real, you know, solid enough solution on the markets for like households like save costs on that like the whole country

would be doing it right but like it seems not to be in existence right so it's like probably also like we need to wait a little bit and you know like keep developing the technology the adoption the you know user usability like chain abstraction that you know like the L1's like instead of competing with each other you know like join the efforts more and more Um and then you know like the more professionalized the industry gets the the the you know the more the adoption will happen. Yeah Steph uh I think um from a tax perspective it's a bit similar. It's just um that you're finally on authority level are accepting that decentralization is

actually happening and it's here to stay to have a look at it and just accept it and use it. Yes. Yeah. Um I from an economic point of view it's it's not it's not trivial and that's why I also have like a second thought what to say now because I think it's something you said before like uh that mean it's like it's not only the energy sector which is needed but also the financial sector like as I said in the beginning like these two worlds um but I think we should just try um basically try in different sections um so let the competition play um and the innovation play and also um try maybe

there where the adoption is high um and where the need is the highest and this might not only be here but also in other parts of the world. Yeah, I like it as a concluding thought you know giving it a try you know a small P with limited potential consequences and from there everything gets easier. So, thanks a lot for our great uh panelist. [Applause] [Music]