a16z Podcast - a16z Podcast: The Regulatory Landscape for Crypto

Episode Date: July 17, 2018

with Katie Haun (@katie_haun), Robin Weisnman (@robinweisman), and Sonal Chokshi (@smc90) What’s going on, regulation-wise, in crypto? How should people who want to join a company or build something new in the space think about the regulatory environment? What to make of all the headlines, or the "alphabet soup" of agencies potentially involved in regulating crypto? This episode of the a16z Podcast shares principles -- as well as key players/acronyms to know -- for sorting the signal from the noise in the regulatory landscape for crypto. The experts in conversation with a16z editorial partner Sonal Chokshi include: Robin Weisman, who helped found and is a lobbyist for Coin Center, a nonprofit policy research and advocacy group for cryptocurrencies; and was formerly a director of government relations at Nasdaq; and Kathryn (Katie) Haun, who teaches crypto at Stanford Business School; is on the boards of Coinbase and HackerOne; is a former federal prosecutor with the U.S. Department of Justice, where she led their first digital currency task force and prosecuted a number of cases in the space; and was recently announced as general partner.  The discussion is based on a panel that originally took place at the “Intro to Crypto” event that Andreessen Horowitz and #Angels put on in April 2018. You can see other talks from this event -- including a video on the building blocks of crypto; as well as sessions on the big picture of decentralization to building companies in crypto, from people to code -- here. This panel also presented the below slide, which is referenced in (but is not necessary to follow) this episode: https://a16z.files.wordpress.com/2018/07/regulatorylandscape-acronyms-introtocrypto_a16z.png photo credit: Erin Brethauer

Hi everyone. Welcome to the A6 and Z podcast. I'm Sonal. Today's episode is all about the regulatory landscape in crypto. It's based on a conversation recorded at our inaugural intro to crypto event, co-hosted with hashtag Angels in April 2018. You can also find other sessions from this event as podcasts, as well as on our YouTube channel, where there's also an intro to crypto basics deck presented by Linda Shea. The experts in this episode, however, are Robin Wiseman, who's a lawyer by training, her early work on Bitcoin policy issues help found Coin Center, which is a nonprofit policy research and advocacy group for cryptocurrencies. She's a lobbyist of the group and so spends most of her time talking to policymakers at both the federal and state level. And she's also formerly

director of government relations at NASDAQ. And then we have Katie Hahn, also a former lawyer who teaches crypto at Stanford Business School and is on the boards of Coinbase and Hacker 1. She's a former federal prosecutor with the U.S. Department of Justice, where she led their first digital currency task force and prosecuted a number of cases in the space. And she was recently announced as our newest general partner. The discussion that follows covers everything from a pulse check on what's going on regulation-wise and crypto to how people who want to join a company or build something new in this space should think about it. We also briefly cover who the regulatory players are. And you can see the slide we reference, even though you don't have to,

in the notes for this episode on our website. Thanks again, everyone, for coming. I'm so excited by the energy in this room. So far, just to kind of recap where we're at, we started our morning with building blocks for what we're looking at, the big picture for crypto. We then talked about building companies with people and with code. And now we're talking about the regulatory landscape and building, I guess, with like legal code. I mean, the regulatory aspect of it. But one context note, the story of the internet, and we've referenced the internet as an analogy here a lot, has been a story about permissionless innovation. Government invented it and universities and labs built it in the early days, they then opened it up for everyone to build on top of it,

which led to the world we have today. I mean, at the very beginning, I don't think people would have predicted that we'd have the kind of e-commerce world we have today. And that was because people were allowed to build an experiment on it. With crypto, we're seeing many of the same kinds of experiments play out. But because money is involved up front, and this is a question that came up in the last panel at the end, protecting consumers and how does this change things on the regulatory front, that is a big question, which is why the first question I want to ask you guys to kick things off is there's a lot of noise.

And if you had to summarize some of the key principles or mindsets that people should think about approaching this space, what are some of the big picture principles you'd share? Robin, did you want to... Yeah, I think I'll start off with just to levels. One of the biggest principles is that when people say Bitcoin, and I say Bitcoin is sort of a catch-all for decentralized cryptocurrencies, is Bitcoin regulated?

The answer is, yeah, a Bitcoin. is regulated. The underlying technology is not regulated and it would be very difficult to regulate. But when you have applications of the technology, some of which we've heard about earlier today, when those applications cross into an area where there is an existing set of regulations, whether it be money transmission or something or custody of funds, there are regulations that do apply. And so the underlying technology is not regulated, but the applications are. I think the principles I start out with are that first, when you're talking about regulators, you're talking about a really diffuse set of people, different groups. So you're talking about civil regulators,

you're talking about enforcers, and then you're also talking about prosecutors, which is what I used to be. And these things are not all the same. So that's the first thing to keep in mind is there are very different priorities and objectives between civil enforcement and criminal enforcement. And the second kind of principle is that all of the existing laws and regulations are really, really very broadly worded. And they're broadly worded by design so that regulators and prosecutors have broad discretion to use their own judgment for what they think are the best vehicles to regulate or prosecute. And that's really by design. I do want to dispel the notion that the government is sitting there trying to trap, you know, an ICO project or a cryptocurrency project and saying,

aha, we got you. That's just not the case. The fact of the matter is the government doesn't hurt for business where fraud is concerned or where crimes are concerned. Well, so bottom line it for me, though, if I'm thinking about working in this space, whether building a company, building a product, marketing it, there's obviously all these things that happen in a company. Is it fraud? Is it legal? What's sort of the way to think about that question? Well, I would say that the technology is not illegal. I mean, we have a long history of technologies that can be used for illicit purposes, but the actual technology is not illegal. So I would say that decentralized cryptocurrencies, the kinds of things we're talking about

today, not illegal, but you can think about ways that they can be used in an illicit way. And the same thing, I mean, you can look at the internet. The internet's not illegal, but you can use the internet to do illegal things. Yeah, that's exactly right. I mean, if you look back even to 2013, the Senate held hearings on Bitcoin and what is Bitcoin. And you had three different government witnesses at that hearing. And they all three went and said, Bitcoin's not illegal. This is a great technology. So that was somewhat of a surprise, I think, to some people in the space. Yeah, we were expecting the opposite. But I think it's also important to note that criminals are often the first adopters of new technologies. That's actually very counterintuitive to me. Actually, because when I

think of early adopters, I think of developers. Right. I mean, they're the best beta testers of new technologies in many ways. And that's been true, not just of cryptocurrencies, right? That's been true of all kinds of things. If you think of cell phones, if you think of email, social media, the internet and just various applications, criminals are often early adopters. And so to Robin's point, yes, of course you can have, it's just like saying cash or the internet. The technologies themselves are not illegal. There, of course, could be illegal uses. And that's really what the government's trying to focus on and what it frankly should be focusing on. I actually see a promising sign here development of all these working groups in the government. Yeah. I think when people are working

on developing a certain technology here, particularly in Silicon Valley and San Francisco, there's a lot of focus on the tech and there's a lot of skepticism about policymakers. And I will tell you that policymakers really want to understand the technology. In fact, at the SEC, there is something called the distributed ledger technology,

the DLT Working Group, and it has members from all the different divisions within the Securities and Exchange Commission that are focused on just learning about the technology. And also at this Commodities and Future Strait and Commission, CFTC, they have now something called Lab CFTC, which was developed to look not just at cryptocurrency specifically, but larger FinTech financial technology, financial services technology. It actually reminds me a little bit of the early days of the internet where you have companies set up their own like sort of

divisions and working groups like let's figure out the internet. Digital social. And that's funny to that point. In the early, early days of the internet, the SEC created an internet division. was like a special thing. And eventually that internet division became more of like a claims processing area because everything had touched on the internet. How long do you guys think it'll be for us to get from that point where there's a separate, dedicated, siloed working group

and then kind of it immerses, I mean, it emerges into everything else. Do we have a prediction on how many years it might take? I don't want to slap a number of years on it, but I think you're still a few years away from that, at least. The one thing we are seeing is that it's no longer siloed. Like the very purpose of these working groups are to go out into the broader organization. Because, you know, one thing folks don't even realize is these organizations are behemoth, right?

You have the Justice Department is 110,000 employees. You've got double that almost at the Department of Homeland Security, the SEC, 4,000. I mean, you're talking about thousands and thousands of people. These are big organizations. So these working groups, they're already kind of going out within their organization and saying, no, Bitcoin's not illegal. We're actually in the government doing a pilot program with it. They're doing a lot of interesting pilot programs.

And I would also add that you're seeing increased coordination among agencies recently in advance of their joint testimony before the Senate Banking Committee, the chairman of the Securities and Exchange Commission and the chairman of the Commodities Future Trading Commission, authored a joint op-ed in the Wall Street Journal about their work. So I think you're beginning to see that it's where there are areas for coordination that policymakers, law enforcement, are working together. Okay, let's shift gears for a moment and talk about all these. ICOs or scams, kinds of headlines, how would you sort of separate that headline from what's

actually happening from the policymakers' perspective? And what are they taking away from all that? So I have to say, it's really often in my line of work, super frustrating to see the headlines that are splashed all over the place because they're really often, they're very misleading and they're focused on sort of the worst of the worst. And they're designed to sell papers and they're designed to get clicks and they're designed to get people to read. Oftentimes, if you drill down, even into the actual body of the story, you realize, oh, okay, that was sort of a sensational headline. But the other thing that's really frustrating about some of the media coverage is that then

policymakers read it and then it becomes what they latch on to to respond. And so a lot of what we do is we go in and we try to make sure that particularly members of Congress who have oversight over all of these different agencies and are responsible for making the rules that then they'll have to implement, that those policies, that those policymakers understand and have the facts so that we are trying to limit the knee-jerk reactions to some of the sensational headlines. I've seen several headlines that are blockchain has been hacked. Yes. And we blockchains never been hacked. Some of the cryptocurrency exchanges have been hacked. You know, Melkox, coin check more recently, Bitfinex and others. But the blockchain itself has never yet been

hacked. And so that's just one great example of these headlines. I think the other fact of the matter is that cryptocurrency has a community and as an industry, is really under a microscope in a way that other financial services, companies are not. When I was a prosecutor, I prosecuted Wells Fargo's executives for taking dead people's accounts and draining them of money. They basically found out who hadn't used their account for, you know, many years, and then they would drain the money to their own personal accounts. And it didn't even really make headlines. Can you imagine if a cryptocurrency exchange even had one example of that, it would be kind of all over the news. So I think that it's important

for the industry and the community to know, it's operating under that microscope. Yeah. What are we seeing in terms of legal actions against some of the things that are out there? I mean, what proportion of the activity is it really? Well, I think right now we're actually seeing a relatively small proportion. I don't know, Robin, what your view is, but mine is, and I can tell you that a lot of things are still under seal. That's kind of a first principle, Sonal, is, you know, people would ask, well, when is the government

going to do something about X, Y, Z? They're clearly breaking the law. The government wasn't able to say, oh, we've indicted that case. It's under seal. We're just waiting to extradite the suspect or take down the site. So what you have often is things are under seal brewing. So that could be happening now. We have this also not just in cryptocurrency, but a great example is the Theranos case. You know, that news broke in 2015, yet it was only in 2018 now where we just saw the SEC had a case under seal and action. They were working out a settlement agreement. So I think there are things in the space that we're not yet aware of, the public's not yet aware of, that will be coming. That said, I think it's a relatively small percentage, a very small percentage of the overall activity. Because as you all know, a lot of the overall activity is lawful. It's great. It's terrific. Very innovative. Right. So just the worst of the worst is getting under the spotlight right now. I mean, I don't think that you have people in enforcement at the Securities and Exchange Commission out looking to get somebody and be like, oh, gotcha thing. And, you know, it takes an incredible amount. I mean, Katie well knows the resources that are dedicated to investigating and collecting the facts and deciding whether or not even if they're going to bring a case. I mean, enforcement and the SEC does a lot of work before they even bring it to the trial unit. And then the trial unit has to decide to take the case. And then the commission has to vote on whether or not the case goes forward. So it's not just like you're going to see a thousand cases being brought. Right. That's exactly right. I mean, especially.

with the SEC, you have that function where they have to bring after an investigation the case before the commissioners. So there's that step in between. And then they can have the choice in the case of the SEC to bring a civil action in a court. Well, what does that mean? That means that a judge or a jury will have to agree ultimately if the person who's been charged by the SEC doesn't want to resolve it via a plea agreement. And that means that jurors, just like everyone in this room or judges are going to be deciding whether they think the law was broken. The same thing obviously is true where you're talking about criminal cases is a jury of 12 of your peers gets to decide if the government's proved beyond all reasonable doubt that what you've done is clearly

illegal. And in this space, especially, and I know firsthand, having worked in some of the earliest cases for the government in the cryptocurrency space, you don't want to pick the wrong vehicle. You don't want to have someone tell you, okay, no, we'll take you to trial. And then go lose that case. So when you have so many to choose from, you're going to hopefully be very judicious in which cases you're selecting. Yeah. And then just to follow up on that, that begins some of the enforcement actions at the SEC, not on the criminal side, but just in terms of what the SEC has looked at, it's through those actions, through their decisions that then you begin to get a clear sense of where the lines are. So for example, what constitutes, if you're looking

at an ICO or registered security, you could begin to look at some of the decisions that the SEC has put out and you can see where the line is going to be. I'm so glad you're benching that because you guys have actually mentioned the SEC a few times, but we have the slide up here, which has a lot of other agencies on it. And we don't have time to go into this because that would take the entire day, let alone this session we have on stage. But can you help us understand because we're reading about the SEC saying this, they're doing this, this organization is doing this.

What is the SEC's position? And also, where do these other players come in? I'll start just by saying the other thing is a lot of times you see these agencies teaming up together. So we've seen this recently in this space when the BTCE exchange was indicted by the Justice Department last summer. FinCEN, which is up on the screen, a treasury agency came in and assessed in conjunction with the DOJ criminal case a $110 million penalty. We just saw this also in the case of the CARTA ICO that the SEC brought $32 million civil fraud enforcement action and DOJ, the U.S. attorney's office teamed up by bringing a criminal companion case. So we see these agencies

working together a lot also. And we talk all about the SEC today in 2018. And I think one of the reasons is what agency was putting out guidance in 2017, the SEC. However, if you would have talked to the community in 2013, the agency everyone was very focused on was FinC, which is the financial crimes enforcement network, part of the Treasury Department. FinCEN was the first U.S. government agency to put out guidance saying virtual currency is going to be subject to what are called money service business laws and the Bank Secrecy Act. So the point is that the different regulators can change over time depending on who's putting out warnings or who's putting out guidance. And also just going back to when we were talking about the overarching principles

when you talk about applications of the technology, I mean, as the technology starts to be employed, Finson needed to step up and issue guidance in 2013 because you had offering of money service business type services. And then you have the IRS. I'm just kind of going down the list. The IRS designated cryptocurrency as property and not currency. And I think the reason we're talking about the SEC a lot today is because 2017 saw an explosion in terms of these ICOs initial coin offerings. And so the SEC's work has been done a lot in the enforcement division in terms of rooting out fraud and looking at just basic plain old fraud. I mean, some of the early cases were just regular pyramid schemes. It doesn't necessarily mean that it was

cryptocurrency based. Someone who's doing something that's otherwise illegal, that's illegal. And the SEC is going to look at that. But the other thing that the SEC is doing now is really taking a hard look at ICOs and whether or not when you have these initial coin offerings, they should be basically considered registered securities, which means that they have to go through a very special set of things and they're regulated in a certain way and if they could be traded on exchanges that are registered with the SEC

and it basically brings in a whole element of all these things that have to be done. So whether or not an ICO is considered a registered security or not is a really big deal. Is it an open question? It's not a closed question. If you have a token

that's operating on a fully decentralized network, that's probably clearly not a security and just this morning, House Financial Services Committee, the Capital Markets Subcommittee as part of their routine oversight as directors of the different divisions of the SEC come in and talk to them about what's happening and they have a chance to ask questions.

And this morning, the director of corporate finance, which is one of the divisions in the SEC that would be responsible for issuing and approving certain ETF exchange traded fund products was testifying this morning. And a member of Congress who we actually spent a lot of time talking to, Representative Emmer, asked the director of Corp Finn basically,

is it possible that you could have a token that's not a security? And in my world, this is really big news because he went unsuspecify what a token that doesn't have the hallmarks might look like, the hallmarks of the security, and that's a token where the holder is buying it. This is, I'm quoting him now, buying it for its utility rather than investment, especially if it's a decentralized network in which it's used with no central actors. And I think that really reflects that the SEC, for example, has come a long way because you had the chairman, Jay Clayton, saying,

few short months ago that he had never seen a token that wasn't a security. And I think part of this is just the SEC's recognition that there are different life cycles where you're talking about tokens. Right. Exactly. And I know Coin Center doesn't like to call them utility tokens. What is like a token that's operating on a decentralized? What do you call it if not a utility token? What we say, we just say it's a token that's operating on a fully decentralized network. There are a lot of terms in the space. I mean, even blockchain, for example, when in the beginning, blockchain was used to mean decentralized cryptocurrency. And now

when you talk about blockchain to policy makers in D.C. and to people maybe outside this room, blockchain, you have to kind of explain whether it's an open network or a closed network. And obviously, that's a very important distinction when you're talking about application of rules and

regulations because the tricky part comes when you have a decentralized network, you might have an existing set of rules and policymakers, right. And just to pause for a moment on some of the two concepts you brought up. So you mentioned the life cycle, the network. And you guys heard this morning in Linda's talk that the value of tokens is relying on the fact that there's a network. And that network is there. If you have a good application, innovation happening, people building on it,

using it. And a utility token can be a case where someone is, say, you know, buying file storage. And they can actually use that token for file storage. It's not just they're investing in that network to make money only. They're actually trying to use that token for an application. future. Right. Or something to be built in the future in that timeline. So you bring up the future is an important point to pause on because the life cycle of the network. It's actually, there's not one point in time. Like if we look at all this landscape of all the technologies and cryptocurrencies that are out there, Bitcoin and Ethereum have been around a lot longer. There's a whole life cycle for how it may start and evolve over time. And I think that's one of the reasons that we see the government taking its time. It's wanting to choose the right vehicles to that point I made earlier, but also see how the ecosystem evolves. see, really, this was actually a utility token, not a good vehicle to make an example of, for example, whereas you might have the exact opposite end of the spectrum. I do have a question, which is the nuances and the differences involved, because even here we've heard this talk and it has all this terminology, a lot of jargon and a lot of layers of meaning

behind it. But in this world, in a crypto network, you can have users and miners and developers and designers. You can have a platform that's, you know, building games and applications. You can also have a platform for exchanges. There's all these different things. Where do you see the pulse check on where they're sort of at in kind of coming along on that front? Well, I think they're really relying on the cryptocurrency community, the industries, the companies, some of the trade groups and like Coinsenter to come in and do that education. It's really critical.

And then on the government side, too, come in and say, here are all these kinds of laws. You know, they're not giving legal advice, of course, but it's a two-way street. And so I think that's really important. I remember talking to some folks in D.C. last year, and they said, we had just figured out Bitcoin, and then along comes to Ethereum, and now it's, you know, app coins and alt coins. And, you know, we can't keep up with this. So they really are relying on the community and the industry. I mean, even we feel like they can't keep up. It's not the job of people in this room to keep up with all the different regulations and what's happening on the hill and the different hearings and whatever. But you do because it's going to inform what you do. And I just as an aside also want to say that I think it's great that today in a discussion that's sort of technical that you've brought in a discussion of regulation because there is a little bit of a disconnect between what's happening in D.C. and what's happening here. And so the more that people from D.C. can learn about what you're doing and the more that you can learn about what you're doing and the more that you can. guys can understand what people in D.C. are doing, I think it makes for a very important conversation, and I think it will make for a better outcome in the long run in terms of how they apply these rules. And we're saying D.C., obviously, this is a global technology, right? And global regulators

and global governments are involved. And in some cases, working together with each other, these are just the U.S. kind of executive agencies. We're not even talking about legislative or judicial here. And nor are we talking about other regulatory bodies all over the world. Some of them are doing a lot of forward thinking. Yeah. And I would also say that another thing that's not on our list are the states. I mean, we talk about the federal regulation, but states have money transmission licensing. And if you want to be a money transmitter, you have to obtain a license in every jurisdiction in the United States. And so that's been something too. So this is just sort of scratching the surface. Well, actually, since we do have this slide up, obviously can't

unpack all of these in great detail, but could we just do a quick lightning round through these? Or at the very minimum share with us the taxonomy for what we're looking at here, because I hear this list of names, and I'm just like, it's like alphabet soup. You know, I don't know what's going on. So, like, how would you break it down at a super high level? What's the big thing to know for where each of these are at and how they might be involved?

Well, so just taking Treasury, I mean, FinCEN, the Financial Crimes Enforcement Network, they're trying to assure the integrity of the financial system against nefarious actors. That's their broadly stated mission. So monitoring the financial systems, like banks and all other kind of financial services companies for suspicious activity.

OFAC, the Office of Foreign Assets Control, the United States maintains a list of people and countries or nation states that is sanctioned. And so OFAC makes sure that transactions aren't going on in the financial services realm with those countries or individuals. I'm sure you all unfortunately know what the IRS is, but yet very important of what the IRS is going to do

with cryptocurrency. I mean, really, it's quite hard for people who have cryptocurrency gains to figure out what is the right thing. What are they supposed to do? The OCC, Robin just alluded to the fact that you need 50 different money transmission licenses to do business as a cryptocurrency exchange in those states. OCC is trying to come up with a federal fintech charter so that only one license would be needed so far that hasn't gone anywhere. Do you want to cover any others?

Do you want to talk about justice and then I'll go to the other side? Oh, justice. Yeah, that was my old. You're all stomping ground. There are a lot of other agencies we didn't list within justice that deal with cryptocurrency. too, like the U.S. Marshal Service, the DEA, the ATF, it's touching kind of all different divisions, but we just chose to list the FBI because everyone's heard of that. The criminal division and the Office of U.S. attorneys, the U.S. attorneys are all over the United States

and basically what they do is prosecute in the case of cryptocurrency would prosecute criminal uses of cryptocurrency. And again here, I really want to emphasize you're really talking about the worst or the worst because you have the FBI. I bringing, say, 10,000 cases, they're going to investigate, they're going to look at 1,000, they're going to bring 100 to you, maybe you're going to take 10. So this is not the government trying to do, gotcha. These are cases where, you know, one of the ones I prosecuted were the corrupt agents who were looking into the Silk Road. They were themselves corrupt. They were doing shakedowns all over the world for millions of dollars of cryptocurrency, diverting it to their

own personal accounts, federal agents. They're now in prison. So that's one of the kind of criminal worst of the worst cases I'm talking about, and then we can move on to some of the other. I think we've definitely talked about the Securities and Exchange Commission, but for those of you who don't know, the SEC is responsible for the equity markets and regulating exchanges and also investor protection in that area. The Federal Trade Commission, I'm going really quickly, and enforces competition law, and they also do consumer protection. They have some overlapping jurisdiction with the SEC. Commodities and future trading organization at the CFTC Commission, should say, is responsible for the futures markets. So where the SEC's equities

markets, the CFTC is futures markets. And it's been one of their rulings said that Bitcoin is a commodity. So it falls under their jurisdiction. They've also done a lot of work. They have something called the technical advisory committee that is basically, it's a group within the CFTC that is made up of people that are in the industry that help inform the CFTC about developments in the the technology space, and in one of their more recent meetings, they had a whole panel about cryptocurrency and Bitcoin, because now two of the exchanges trade Bitcoin futures. CFPB is a consumer protection agency that was formed as a result of the passage of Dodd-Frank. They are really like a central place for consumer protection financial area.

And then FINRA is a little bit of a different thing. Finra is not a government organization. They're a self-regulatory organization that, It helps ensure that broker dealers all have like a code of conduct, and they hold that part of the industry to a standard. And they're also responsible for going in and doing investigations and making sure that everybody's keeping up with their conduct. FINRA will self-report. They'll report some of their broker dealers to some of these regulatory agencies. And the FTC, we're seeing, getting really involved in the cryptocurrency space.

Yeah, they actually also have had a couple of working groups and some meetings. Why is the FTC in particular? Well, for example, they also cover, you know, for data breaches, not the block. and getting hacked. But if you had your exchange getting hacked, they might come in and examine. Did you follow proper protocols in the aftermath of a data breach? Because of course, a lot of these exchanges, for example, or businesses in the space, have a lot of customer PII. Personal identifying information, right? Social Security numbers, dates of birth, sensitive information. And so they'll come in in the aftermath of a breach, like in the case of the target breach, right? So same would be true here as well.

And the Federal Trade Commission also is charged with kind of protecting privacy and protecting against unfair and deceptive practices. So to the extent that there are consumers in the space complaining about unfair and deceptive practices, they get those complaints. So my big takeaway from this is that it's clearly a patchwork of people, not just the SEC, which we keep hearing about in the headlines, that this is actually just a few of the federal agencies. It's not even including the state and international players because this is a global scale. and that sometimes these groups work together,

they're still forming working groups and being very thoughtful about it, which is actually kind of great. But it brings me to two wrap-up questions. One, if I'm an entrepreneur and I hear that, I think it's great, because I'm like, great, they're thinking about it, they're really exploring it. But I'm kind of impatient to build something.

What would your advice be for someone trying to come into the space who wants to build something? Should they wait where there's a gray area? How should they kind of approach it? What's your big takeaway on that? Well, I don't think they should wait, but I think they should have common sense

and good judgment. And one of the red flags I see sometimes is, you know, and they'll publicly state, oh, we're moving offshore so that we don't have to comply with these laws that we can't figure out. But then they're going to serve U.S. customers anyway. And, you know, the kind of problem with that approach is that extraterritorial jurisdiction, most countries have it, not just the U.S. So if you're servicing hundreds of thousands of U.S. consumers, the fact that you relocate is not going to save you from having to comply with these laws. At the same time, I think that, you know, there is a real question of there is gray area. Look, I think you have to use your best efforts to be informed about what laws might apply to you and how they might apply to

you and be able to demonstrate how you used your best efforts to comply with those laws. If, you know, for example, you find out that the Bank Secrecy Act requires you to have a compliance program. Do your best to create your best compliance program you can. It doesn't have to be perfect, but you can't just say, well, I didn't know what that would look like, so we didn't do it at all. Just try. And I think that those cases where people are demonstrating best efforts are not going to be the vehicles that the government regulators are going to want to choose. They're not going to go after those. What would you say for people looking to join a company or, you know, a startup, figure out where they are? If they want to sort of vet the regulatory profile of a company, how do they make that decision? if they want to join or not join. And this is, by the way, not speaking of all the other factors, like the founding team and the by the way of the product and where they're located and if they have perks,

like that's not the question. I would say that you should use your best efforts to make sure that wherever you're thinking of joining is working on contributing in a positive way, not just to the technological development, but also being a responsible player and doing their part to make sure that they're complying with regulations. I think we're beginning to see in a lot of areas,

an early on Coinbase was a leader in this, really priding themselves on the fact that they do comply with the laws. Like they have a selling point. And so I think that that's something to look for. That's great. So last question, you're both two lawyers in this space. Why are you guys in the space? Like what excites you? Well, I got into the space in 2013 and sort of like a lot of people in this room, but then not like anybody in this room. I was really attracted by the challenge of the fact that this was something new, and policymakers were going to be looking at it. And a lot of the things that I'd worked on for my entire career, if you think of policy being like a book with a several chapters, I was coming in on like chapter 14. And this was in a chance to be on the first chapter

and to really have an impact and shaping something. And so being in on chapter one. And I would say five years in, maybe even now chapter two. So for me, my story was in 2012, I actually was asked by the Justice Department to help shut down and prosecute Bitcoin. So in many ways, it's interesting that I'm sitting here today. But having come full circle, we quickly realized that wasn't a thing and wasn't possible, nor was it desirable. But that was my first experience with Bitcoin in 2012. And through working with some of prosecuting some of the worst criminal use cases, I actually became really enamored with the technology and all of the promise that it holds to combat things like waste, fraud, and abuse and many other things. And kind of came full

circle when I joined the board of Coinbase last year ago. I think my thing is that I started my career at Xerox Park and our IP address, the number on the internet. It was 13.1 something. And I always felt like I missed the big wave of excitement of this is something big and I came on the tail end of that. And when I first started learning about crypto in 2010, I remember thinking, this is super interesting, but I didn't really pay attention to it. And then I went to be an editor at Wired. And it reminded me of the early days of the internet again. and that sort of exciting energy of something new, something that has great potential.

And it makes me excited that we're here and that we're having this conversation early on talking about permissionless innovation in a way that's thoughtful. Thank you again for joining and sharing your expertise. And thank you, everyone, for coming today. Thanks again. Thank you.