Assets and Taxes - What's Happening to Crypto? The Future of Digital Currency Regulation

Episode Date: July 21, 2025

In this episode of Assets and Taxes, Asset Strategy Financial Consultant Kaelan Fitzpatrick, CFP®, sits down with Magic Eden's Joe Doll. They talk about the regulatory landscape of crypto and how it's evolved over time. They also talk about how people have thrown away millions of dollars in Bitcoin. And talk about what crypto investors can do when it comes to having a good crypto financial strategy.Joe Doll: https://www.linkedin.com/in/joe-doll-820a1a35/Magic Eden: https://magiceden.us/?grOur Financial Wellness Tool: https://assetstrategy.com/myblocks/Financial Guides: https://assetstrategy.com/financial-guides/ Once you're ready, we can offer you some professional guidanceBook a FREE discovery call today to explore how we can help you: https://assetstrategy.com/contact/Call the Asset Strategy Team: 781-235-4426Connect With Asset Strategy:Website: https://assetstrategy.com/LinkedIn: https://www.linkedin.com/company/asset-strategy-advisorsFacebook: https://www.facebook.com/people/Asset-Strategy-Advisors/61573136047425/Instagram: https://www.instagram.com/asset_strategy/

The headlines are kind of splashy. This is an unregulated space, the Wild West. But the truth of the matter is... We hear about, you know, stories people throwing away their cold wallets by accident. People throw away like, you know, a thousand bitcoins in some dump somewhere. That's a real thing. We're early. So people who say that like, hey, I missed the run, I don't buy it. I think we're still quite early. Welcome back to Assets and Taxes. I'm Kailin Fitzpatrick. I'm a certified financial planner

and financial consultant with Asset Strategy. Today we're diving into one of the most talked about and often misunderstood areas of finance, crypto and digital assets. But we're not going in alone. I'm joined by someone who brings a deep legal and regulatory lens to this space, Joe Dahl, General Counsel at Magic Eden, the largest NFT marketplace in the world and largest Bitcoin application in the world. Joe has appeared on major platforms like NASDAQ Trade Talks, Schwab Network, Fintech TV, CNBC, where he breaks down everything regarding crypto policy and regulation. Today, we're going to be diving deep into crypto regulations.

There's some timely updates here. We want to discuss the different types of people holding digital assets and talk to you all about some cool concepts and strategies we see coming out with some of these updates here. Joe, it's great to have you on today. I want to start with this. What exactly does a general counsel at a company like Magic Eden do? I know this is not your typical space and typical workload for a general counsel, so we'd love to start there and kick things off with you. Yeah, it's great to be on, Kalen. This is a fun, it's gonna be a fun chat.

So Magic Eden, one of the largest Web3 companies in the planet. As general counsel, we oversee all sorts of things. You know, we're lucky enough to have an administration now that's a lot more pro crypto. So it's less of sort of dodging regulatory inquiries and more of how can we innovate in a way that's responsible and aligns with the laws and regulations that have sort of

historically been set in place, while also help shaping laws and regulations that go forward. There's a lot of regulations that are coming up in the United States, which is very exciting to see the US sort of be the flag bearer for the future of this industry, which I think is a very disruptive one and sort of the future of finance of finance. So we participate in that process, which has been very rewarding. I love it. And when we talk about regulation and crypto, I know there's some misconceptions about that. It's a very fast moving space. And we've heard it actually being called unregulated at some points in time. Is there a misconception about it truly being unregulated or is there just not enough regulation there

for us to continue moving forward here? Yeah, that's such a, it's a wild moniker because like the headlines are kind of splashy. This is an unregulated space, the wild west. But the truth of the matter is that there's basically two approaches. There's no direct legal framework for a lot of things we're doing in crypto.

So as an attorney in the space, you can take two approaches to that. You can say, hey, none of the rules apply. Wild West. And people do that. And that's really unfortunate because it paints the industry and it's sort of a negative light. Or as the sort of good practitioners in space do, you say, we have to assume everything applies. So we have to assume that the 33 and 34 act applies, securities laws, the commodities exchange act, those rules apply, the bank secrecy act, those kind of rules apply, and any sort of like tax related codes, those all apply. So rather than saying like, hey, we have clear road,

clear rules of the road, clear legislation, it's like, well, because we're not sure which apply, we have to assume all apply and be hyper-compliant with each one of these regimes. So when people say like, hey, you know, there's no rules, there's no regulations. I'm always like, you know, if you're doing the job right, it's actually much worse.

It's actually much more owners of most industries because you're applying with everyone because you're not sure which one will be bookable. Hopefully this will change. You know, in front of Congress right now was the Genius Act, it's a stable coin bill. That's hopefully there's a vote going out Monday, you know, knock on wood that gets passed.

There's gonna also be a market structure bill. Now you have Bill Hines, the White House Cryptic Policy Director, who's really beating the drum that's going to be done by the before the August recess. That seems unlikely, frankly, because the underlying derivative bill for that, FIT21, is great but needs a lot of work. And right now, Congress, per usual, is not super, super productive. So Augustary seems a little ambitious. Maybe Q4 we get market structure. But honestly, I think it'll go into 2026. And why that's important is that sets up all the rules of the road for exchanges,

broker dealers, all these custody, really major fundamental infrastructure issues. So that's going to be a real sort of tailwind once that gets through to just industry adoption and asset adoption as well. Very, very exciting. And I love when I get to see kind of the line starting to be blended or at least thought about how to do that between where I typically reside, which is in something we call TradFi, typical traditional finance, stocks and bonds, wealth managers. But there's also this budding development within the crypto space of that happening as well with things like crypto hedge funds. And obviously, I'm accustomed to the regulations through SEC, FINRA, CFP board. You guys obviously will have to abide by that. But also, and I love this word you used before,

you're in a way a frontiersman here, breaking new ground and treading into uncreated territory in the regulation space. And you yourself are at the forefront of that. One additional question I had here, at this specific point in time, I know there was some issues with our previous SEC chairman surrounding

just the crypto industry as a whole. With the change of administration here, where do you see the SEC currently stands on crypto? And I guess what should investors know about that who might not be kind of studying the updates that are coming out here? Yeah, that's a great question. So a little history, you know, two chairman ago, we had Jay Clayton, who's a Trump first term appointee. And frankly, he did a pretty solid job, provided some guidance, did enforcement actions, famously brought the ripple case on his last

day in office. But you know, Jay was great, you know, tough, but but sort of constructive, some you can work with. Gary Gunzler came in under the Biden administration. And, you know, Jay was great, you know, tough, but sort of constructive, some of you could work with. Gary Gunzler came in under the Biden administration. And, you know, there was a lot of, I remember when it happened, and I think Bitcoin like spiked 20% in price or something like that, because people were very bullish, frankly, on him joining. He was a professor at MIT who taught blockchain classes.

He had a lot of statements saying that, hey, these are not securities, and these are a novel type of asset class, which frankly they are. And then sort of got into the chair role of the SEC, and it became quickly apparent that there's sort of a different agenda here. So just for a little extra context, because there is not really a clear regulatory regime

that encompasses crypto, and there's new asset class, you're not sure where about the fifth of minutes, it's a commodity, a security, that classification is really a determinant of a couple of things. Which regulatory agency, CFC, SEC respectively, will have jurisdiction over these things? And which of those agencies will have the corresponding federal budget to go after these kind of things. So you had essentially a turf war, for lack of a better term, between the agencies where they said, hey, well, we think it's our right to be regulating the space.

So we will sort of articulate that by bringing enforcement actions against people in the industry and claiming ground, putting a stake in the ground saying, you know, this kind of activity is regulated by us and these are enforcement actions against these companies. And you know, the collateral damage in this turf war was the industry, right? Industry players were sort of, you know, on the lookout for actions from both agencies at any given time. There was like moving goalposts, guidance was revoked and it's not really followed. And it was sort of this regulation by enforcement era.

And we can get deeper into the politics behind it, but really that is endemic or symptomatic of a sort of broader heavy regulatory focus of the prior administration that really wasn't based in common sense. The new administration has really walked that back and they've recognized that, hey, this is a novel asset class. Howie's great, the Howie test, investment or profits, efforts of others, common enterprise, passive, these kinds of things.

It's a helpful framework, but it's meant to be for like low liquidity assets. It's not meant to be for things that are doing billions of dollars of volume daily. So it doesn't really quite fit. This is truly a novel asset class. And a lot of the rules, particularly the 33 Act and 34 Act rules, they kind of start breaking down or not really applying very well with respect to these new assets. And then the new SEC administration with now Commissioner Paul Atkins, our Chair Paul Atkins and Commissioner Peirce, who's sort of the head of the

Crypto Task Force, have just been fantastic. Commissioner Peirce especially, she's been, she wrote the Safe Harbor, gosh, six, seven years now, I think 2018. So seven years now. That basically laid out a framework for a regulatory approach for the industry to have her, someone who really truly understands the technology, the stage in which the technology is from developments, innovation and adoption perspectives, which means like, hey, we need some air in the room to let this technology grow. Because we don't grow it here. China is going to be all over it. You make some very great points here as well, particularly with regulation being slow and

there just being different opinions to it and simply just having a framework as a guideline of how do we need to build this? What are the things that we need to be considering? I don't know if we can quite consider a debate anymore, but a lot of what we've seen with this regulation holdup, if you will, is it may have actually slowed down the adoption curve a little bit. And as someone at the forefront of this as well, I'd love to ask you, maybe this is a rumor, but one thing I've heard is actually overseas in Europe has more advanced regulations than we do in the United States. Is there any truth to that statement at the moment?

Yeah. So Europe passed Mika, the markets, infrastructure and crypto assets regulations. I think that's the right acronym. There's this famous saying that goes kind of historically, Europe regulates first and the US regulates right. Though, you know, Mika has sort of a number of sort of issues with it. And I think a lot of people in the industry are having a hard time abiding by some of the rules because they're not,

I don't want to say they're not well thought out, they were well thought out, but they're a bit early. Like I said, this space is incredibly nation. It's very dynamic. Things are changing daily. This is the most competitive space in the world. It's very dynamic. Things are changing daily. This is the most competitive space in the world. It's 24 seven, 365.

There's no like 5 p.m. the markets closed down. Like this thing is going. And it's all built on open source technology. And what's that mean? It means that if I create a new type of, you know, asset app thing, right, in crypto, I open source it. Meaning I let anyone in the world copy and paste it and create the exact same thing.

And in that world, it really breeds a hyper competitive space because you can have this great asset, this great platform, and someone can click and paste your copy and paste your code onto the exact same thing in less than a day. So you really have to be constantly focusing on providing the best experience for your users to really stay ahead. And in that kind of space, things move very rapidly. So to sort of have like a very prescriptive regulatory approach, which Mika is, it's incredibly prescriptive and less sort of like theme based or sort of like a large guideline based. It's not a super helpful framework for the industry at the moment.

But the US, to its credit, is trying to really step into this new administration, is really taking a thoughtful approach to it. I think they understand what it's going to take to make the US the digital capital of the world. I love it. And maybe in my own opinion, but also what we've seen to start the year here is this new bull run might not have taken off as quickly or as far as a lot of people have thought just yet.

And, you know, I've just through my own conversations and even our conversations outside of this meeting, it might have to do with that regulation and whether it's individual investors or more institutions not feeling confident enough to either build new products or put more money in without knowing the direction that the whole industry is going to go in just yet and In terms of the adoption curve we've seen so far I'd love to just talk touch on the types of people that we see who've you know not only been those frontiers men and the very early adopters but also people that maybe feel like they might have missed the bull run and missed the the very early adopters, but also people that maybe feel like they might have missed the bull run and missed the opportunity in crypto so far.

But I don't think that people have necessarily missed the opportunity. We might actually just be on the forefront. So if you can speak towards that, that would be fantastic. Because I know there's not only the adoption curve, but it's also almost a bell curve with the types of people and when they're getting into this new space here. Yeah, I think that's right. I mean, we are, we constantly in the industry,

we're like 1994, 1995 on the internet. It's still very early. It's still, and you know it's early because it's very clunky to use, it's difficult to use. If you ask your average person, hey, can you go online and use a crypto trading application? They're like, how do I do that? I have to download a wallet, I have to put cash into crypto and then I have to transfer around. It's very difficult. And these kinds of things we know, these are very strong indicators

that were very early on in sort of the adoption cycle. Which, it's pros and cons. The cons I think are that, you know, we have some ways to go and we have some bugs to work out. Industry is all kind of working on that. The pros there is that there's opportunity, right? Though it's easy, I think we'd already have price maturation and things where sort of the upside would be relatively capped.

But because it is early, because there is more risk associated with a nation industry, the upside is greater. And that's just sort of like a standard thing for any asset class or any industry. So I think I generally agree with that. I mean, we always debate like, where are we? I think the advent of the ETPs, the like, for example, the iBit ETF, really kind of moved the needle and said, like, hey, now there's a lot more exposure to this. We've seen billions and billions.

It's the most successful ETP in history, even more successful than gold, which is pretty wild. I think that that has kind of moved us past this very early adopter stage, kind of like the early majority stage. And when you have things like the stable coin bill go through, that's just this genius act being voted on. That's gonna basically unleash the ability for money market funds, which is, you know,

10, 13 trillion dollar asset class to come on chain pretty rapidly. The kind of innovation that can happen when you're on chain, we're gonna see products that will generate yield in ways that has never been thought of before. So the kind of financial- Yeah, just through my own conversations,

I've seen people who are exploring, actually tokenizing different floors of malls based on which floor makes the most yield and most money. Something that might not have ever even been a thought in our mind five to 10 years ago. Yeah, so we're early early. People who say that, like, I missed the run, I don't buy it. I think we're still quite early.

There's obviously a lot of risk involved with any type of investment, but I think people hold crypto to be one of the most risky, not only the most volatile, but also maybe digitally the most risky, because they don't know how to protect themselves. And protection is a very important part of crypto. I guess from your personal legal perspective here, what are some of the biggest mistakes that you see people actually making when trying to integrate crypto into their financial life? Because I know there's

not only different ways that you can invest in crypto, traditionally through the ETPs, iBit is obviously a very popular one, but you can also go DeFi, you can go on crypto exchanges, you can trade through a brokerage firm like Fidelity and own things like Bitcoin, Ethereum or XRP. So when we think about all these different options and maybe people not having simply the tech skills in some instances for how to buy this, can you talk through some of the risks or just things people should be aware of for how they can just keep their money safe and protected here?

Yeah, that's that's really a point. There's different classes of users, right? I mean, we, heck, we did 75 million in revenue last year were profitable, but those group of people are very small group of folks, right. Most people are brand new to the space. They don't understand how to hold crypto walls because it takes a long time. I mean, it took me a while. I've been in this space for a long time, but I remember initially it really is a hurdle to get over that learning curve. So there's different ways to do it. Traditionally, people have done this thing called self-custody. The beautiful thing about crypto is that, so say you have Bitcoin, right? Good for you, that's a lot

of money. But the beautiful thing about crypto is that you can hold that yourself. It's like holding a bearer asset or holding a bar of gold. And no one can really take that from you unless they forcibly seize it from you or it has some sort of legal means to do so. That's really powerful because you avoid counterparty risk, things like bank runs, systemic risks in the financial system, stuff like that, basically goes away. And that even sort of the benefits of that multiply when you look at this as a fixed supply asset, when you have a global M2 supply, which is the global money supply, increasing pretty dramatically and no signs of stopping there.

These are all great things. But the thing about holding it yourself is that it's difficult. by increasing pretty dramatically, and no signs of stopping there. These are all great things, but the thing about holding it yourself is that it's difficult. The user experience is tough for people to kind of figure out. So, private keys can be, you can basically lose these assets. God forbid there could be security concerns

where you could be robbed and someone could take this from you. So a lot of people are checking out having trusted financial institutions, advisors basically hold these assets for you. So this is sort of like early crypto people would never do this kind of thing because they're very sort of like philosophically aligned with self custody holding their own assets. But the rest of us are kind of like, hey, it's inconvenient for me to hold this whole thing. It's confusing because my little device I hold it on, it needs updated and I don't know if that's going to lose my money or whatever. It's kind of scary because what if I lose this? There's a lot of user error where people just

lose their crypto. For example- We hear about stories people throwing away their where people just lose their crypto. For example- We hear about stories people throwing away their cold wallets by accident. Oh, it's crazy. People throw away like a thousand Bitcoin is in some dump somewhere because some guy threw out the wrong piece of paper. And stuff like that, that's a real thing. So you see a lot of people sort of looking to trusted third parties to kind of help them with this. One thing that we talk about, specifically in my industry and in wealth management is estate planning. And how do we transfer our assets to our heirs

and or things like charity, for example, how do we help the next generation? We may have seen bits and pieces of that, maybe not the full flow of what we will experience in 20 or 30 or 40 years with crypto assets being passed on. Can you talk through some of the reasoning of why to protect yourself, why to record keep appropriately for the benefit of your heirs in an estate planning lens there? Yeah, I mean, this is a great point. If you're self custodying, if you're owning the assets yourself,

Yeah, I mean, this is a great point. If you're self-custoding, if you're owning the assets yourself, similar to like a bearer asset, if you don't hand that off appropriately when you pass or whatever, it won't be handed off. You'll lose those assets. And that happens all the time. So it's really important if you are self-custoding to work with a trusted third party who has experience with estate planning and space to sort of make sure that these assets are handed down appropriately.

That's critical, can't underscore that enough. And so the most important piece is access to the wallet keys. Someone can certainly leave behind a cold wallet, maybe they can leave behind a hot wallet as well. I'd say cold wallet is probably going to be the most common as people start to learn about these different forms of protection and levels of security. So I guess in essence, someone could die and leave behind their cold wallet, but if their heirs don't have the keys to that wallet, they actually inherited nothing but the

hardware itself and not the tokens within it. Is that kind of the way to think about things there? Yeah, that's right. We can make it a little more tangible for folks. A hard wallet is just a wallet you store your cash in. But in this world, you take your Bitcoin, you put it on basically like a thumb drive, like an old-fashioned thumb drive, a little metal thumb drive, and you type in a secret phrase and that secret phrase basically says you can now access the bitcoin on that on that hard drive. That secret phrase is your private key. We're talking about private keys. It's just like a sequence of six to eight random words or more. You can make it as complicated as you want but if you hand down that hard drive to a loved one

right after you pass but they don't know that secret phrase. It's basically like handing them a stick of glue. There's nothing in there. They can't get anything from it. I'm sure people would not enjoy receiving a stick of glue versus a few Bitcoin. Well, Joe, this has been extremely valuable and extremely helpful as always, as we not only educate our own viewers, but also yours as well. As we inch closer and closer to the blending of lines between TradFi and DeFi, or in other words traditional wealth management and the digital asset or crypto world, very excited to see the possibilities that come out and absolutely ecstatic that you're a partner of Asset Strategies

here as well. I guess for our listeners that may want to learn more about you, the work that you're doing and maybe even just Magic Eden in general, what's the best places for them to go? How do they get in touch? Anything that you recommend they check out first. You guys have a lot going on here. Yeah, thanks. Our website is Magic Eden, like the Garden of Eden, dot US, like United States, the Magic Eden dot US. That's our website. I can be found on Twitter at Shoe Dog, which

is a Phil Knight Nike book. The first O is a zero. And yeah, come check us out. Magic Eden's largest NFT platform in the world. We were the fastest unicorn in history. We got to a $1.6 billion valuation in about seven months. And we think that just like the Internet age, a bunch of companies were really trying to make it and be the Internet companies. There's a whole bunch of us. Some of them actually made it. Some of them were the Amazons, the Microsofts.

And we feel like pretty strongly that we're sort of a front runner for one of those spots. I love it. I think you guys are putting your best foot forward in the space here and you're making it easily accessible to all that be here. Hoping to see Emi around more, your mascot with Magic Eden there,

but thank you again for your time, Joe. Hoping to get you on again soon. If you want our help understanding crypto, incorporating cryptocurrency into your portfolio, or help managing the taxes associated with your crypto holdings, book a 15 minute discovery call with us. We'd love to help.

We'll see you all in the next episode of At Sys and Taxes.