Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Jerry Brito & Peter Van Valkenburgh: Coin Center – The Current US Regulatory Landscape for Crypto

Episode Date: November 10, 2021

Coin Center is an independant not-profit research and advocacy organisation focused on the public policy issues that affect cryptocurrencies and open permisionless blockchain networks. Their mission is to build a better understanding of technologies like Ethereum and Bitcoin and to promote a regulatory climate that preserves free speech and privacy.Jerry Brito and Peter Van Valkenburgh joined us for a fascinating chat about the current regulatory landscape in the US and how that might affect the crypto ecosystem going forward.Topics covered in this episode:An overview of Coin CenterHow the political and regulatory has changed in the past 2 years since the release of LibraThe regulatory topics currently impacting the USRansomware and investor protection lawIs the consumer protection force too tough?The Infrastructure BillThe US vs Europe approachThe future of the ecosystemEpisode links:Epicenter Episode 296 with JerryEpicenter Episode 227 with PeterCoin Center on TwitterJerry on TwitterPeter on TwitterSponsors:ParaSwap: ParaSwap aggregates all major DEXs and makes sure you beat the market price at every single swap and with the lowest slippage - paraswap.io/epicenterChorus One: Chorus One runs validators on cutting edge Proof of Stake networks such as Cosmos, Solana, Celo, Polkadot and Oasis. - https://epicenter.rocks/chorusoneThis episode is hosted by Friederike Ernst & Sebastien Couture. Show notes and listening options: epicenter.tv/417

Welcome to Epicenter, the podcast where we're your crypto founders, builders, and thought leaders. I'm Sebastian Guizio, and I'm here with Fredaike Ernst. Today, we're speaking with Jerry Brito and Peter Van Valkenberg, who respectfully are executive director and director of research at Coin Center. We've had Jerry and Peter on the show before, and today we're going to be talking all about the regulatory landscape in the U.S. and how that might affect crypto ecosystem going forward. But before we do that, we'd like to tell you about our sponsors for this week. Paraswap just came out with a huge update that's even faster and more liquid. It's cheaper than you swap and it comes with a new gas token that can cut your fees by 50%.

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Salana is a liquid staking solution that allows you to stake and participate in DFI at the same time. head over now to chorus.1 and start your staking journey. Jerry, Peter, thanks for joining us today. Thanks for having us. Yeah, happy to be here again. Well, it's great to have you again. You guys are great voices of reason and everything that relates to questions regarding the regulatory status of crypto in the U.S., but also broadly around the world.

For our listeners, you're not familiar with Coin Center and your work, could you please just introduce yourselves and talk a little bit about CoinCenter and the work that you're doing. Sure. So CoinCenter is an independent nonprofit. We're based in Washington, D.C., and we're focused on the public policy issues that affect cryptocurrencies and open, permissionless, blockchain networks. So things like Bitcoin, Ethereum, and the like. We exist because these networks, as we all know, are open and permissionless, like the open Internet. And as a result, they are public goods.

And public goods, typically nobody has an interest in, self-interest in looking out after the interest of the public good, right? Everybody's got their own self-interest or their own company or their own project or whatever. And so we exist to be sort of self-appointed champions before governments for these networks. And at root, we are a civil liberties organization. Our main concern are free speech and privacy. Since we're U.S. focused, these are constitutional rights. And they apply to people who are building with code.

And so that's what we exist to champion it protects. You know, the last time we had, we've had you guys on separately. This is the first time you've been on, I think, together. But we had Jerry on in 2019. And back then you had just written a paper called the case for electronic cash in an open free society, which, you know, very much goes with the mandate that you described. And at that time, you know, lots of people were focusing and we're kind of talking about Libra, which had just been announced.

And certainly regulators were very much focused and concerned about that. How has the political and regulatory landscape change in the last two years? Like, you know, there's been a lot of water under the bridge and like, what's in that water? So Libra really was a turning point for crypto in the United States, which is funny because Libra is neither crypto nor does it exist, right? but the fact that it was announced by Facebook and that you know and Facebook was this sort of monolithic presence for policymakers, especially politicians in the United States. It is a boogeyman. It really just sort of focused their attention for the first time, I think, on the potential here.

Oh, you mean billions of people could use this stuff outside of. of a traditional regulated system that we're used to. And so that really brought more scrutiny to the space than we'd ever seen. And I think it also sort of began a process of making crypto a little bit more partisan than it had been. Traditionally, crypto had always been an issue that was bipartisan, nonpartisan. And now that's beginning to change, I think, also as a result of Libra. And so we've just gotten a lot more scrutiny since then. But really there really hasn't been, it's largely been rhetorical, right?

The couple of times where we've had actual different policy, we've come close. So for example, in late 2020, early 2021, there was an attempt by the outgoing Treasury Secretary Mary Manuchin to basically regulate self-hosted wallets. But that we were able, the community was able to avert that and avoid that. But short of that, Peter, I'm not, tell me if I'm wrong, but I'm not sure there has been beyond a rhetoric, which has gone through the roof. I'm not sure there's been real policy change since 2019, let's say, since Lieber was announced. No.

And even the policy change in 2019. here in the U.S. was not particularly fundamental. FinCEN elaborated on its guidance that it first issued in 2013 that if you're a custodial exchange, you have anti-money laundering obligations. And, you know, the SEC continued enforcing it's somewhat broad, but I think actually quite reasonable interpretation of the Howie test as far as securities regulation.

I think just to put another point on the Facebook thing to jump on the blame Facebook for everything, bandwagon. You know, before Facebook announced Libra, now Diem, policymakers had sort of three reasons to ignore Bitcoin. The first was, oh, well, it's very volatile. And so it probably won't work very well because the price is all over the place. The second is, well, there's no company behind it,

which if you, you know, if you're a regular listener to this podcast or someone in our space, you're like, well, that's what's cool about it. But to somebody who's, you know, used to thinking that their target for or their potential adversary is a big corporation. You know, Bitcoin, there's no big corporation there. So, you know, what's to regulate? And then the third thing is Bitcoin wasn't really used for small payments. And so to the extent you're interested in surveilling and controlling people's payments,

you know, people make some big transactions with Bitcoin, but they don't use it for day-to-day payments. They don't use it for a lot of, like, person-to-person payments even because it's difficult. And so Facebook's announcing Libra was an attack on all. three of those reasons to ignore Bitcoin, if you're a policymaker, it's like, oh, well, now it's a big corporation doing it. Now it is, you know, maybe something people will actually use for payments. We always question that because, you know, they had Facebook pay before. Why is a cryptoversion going to be any better? And so it just made it a lot harder for, you know, people to ignore this

stuff. And it was also unhelpful, I think, that originally when Libra was announced, there was a lot of branding, at least here in Washington, D.C., that it was going to be Facebook's cryptocurrency. And the same rules that you've developed, which are very good for cryptocurrency regulation, should apply to this thing, even though it's centralized and sort of issued by the Libre Association. And so there was this sort of like, well, now we're really interested in stablecoins, and now we're really interested in big companies getting involved in this space. And that kind of trickled later into, now we're also really interested, in Bitcoin and in cryptocurrencies, because apparently those are the same things, even though they're not.

And so we had a lot of re-education, not to use a Maoist phrase, but re-education to do, to say, look, I'm glad you're interested in this stuff in a way that you maybe were disregarding it before, but we've got to know what's different between what Facebook's talking about and crypto, because both have benefits and risks, and we should just be reasonable and not apply a one-shot deal to it all. And then there's also China, which I think, you know, their CBDC, the DCEP program, was a direct response to Facebook's Libra as well. And then that started a whole other cycle of, oh, China's launching a CBDC. What are we doing in the U.S.? All we've got is this crazy Bitcoin thing and other open ones.

And yeah, so it was the beginning of a strange avalanche that we had to deal with. But it's been all, again, rhetorical. And to the extent there's been actual policy change. It's been a mixed bag. The IRS in the United States, the tax authority issued guidance on the tax treatment of crypto, and it was a total mixed bag. Some of it was just completely wrong. Some of it was somewhat helpful, really didn't move the needle much. On the positive side, the Office of the Comptroller of the currency, which is a banking regulator, basically issued guidance saying that federally chartered banks could custody crypto and do other crypto-related things. So that was kind of positive. although that is now being kind of clawed back by the new administration. So the bottom line, I mean, we like to say the U.S. kind of status quo policy stands towards crypto is very good, very friendly, despite the rhetoric, right? And so there's a lot of rhetoric.

And so as a result of that rhetoric, there's a result of, you know, political activity, that might change. But at the moment, it's very difficult to do anything legislatively in the U.S. And so I foresee it kind of staying generally the same way. It's just because people keep waiting. And just last week or just recently, the president working group on stablecoins released its report, which everyone was waiting.

It was going to be this apocalyptic thing on stablecoins. Turned out it's actually quite reasonable and even has a great paragraph saying permissionless networks are kind of cool for certain reasons. And yeah, they might carry risks. But there's no ominous sense of that report that they're going to come for node operators and miners. or things like that, which was, you know, one of our fears.

So we keep waiting and maybe nothing actually bad is going to happen. There's this sense in the air that this epic crackdown is imminent. Do you guys feel the same way or is this something that basically so long nothing's really happened that basically everyone's kind of waiting for it? But do you think it's tangible? No, I think there is definitely a crack. down in the works. And I think it kind of, it's going to come in two ways. So one is, and again, sorry, we're very parochial. So I'm going to be talking about the United States. But I'd love to hear

if it matches what's happening in Europe. But in the U.S., you have Gary Gensler, who is the new, I guess at this point not so new. It's been like nine months, gosh, 11 months, chairman of the Securities and Exchange Commission. And since he took office, he has been, again, really engaged in strong rhetoric around cryptocurrency and in particular around defyce around decentralized exchange, around interest rate protocols. So he's been engaged in this rhetoric saying there's a lot of illegal activity happening. He would say most cryptocurrency tokens are securities, even though he previously said at a MIT conference that they were not, the minority would be. So there's been a lot of rhetoric. And so there's an expectation

that at some point he's got to put up or shut up, right? There's going to have to be some activity from some enforcement from the SEC or some regulatory activity because you can't go on with this rhetoric for months and months and months and years and never do anything. So I suspect, And we've heard that there have been, that there aren't current investigations reported in the press into decentralized exchange protocol developers, into stable coin operators, et cetera, et cetera. So at some point, I foresee that there will be some enforcement actions from the SEC. Some of those, I think, are going to be completely expected. And so really not that surprising or consequential. I mean, it's easy for me to say consequential for sure for the people who are going to be on the other end of that.

But here I'm talking about things like issuing securities without complying, right? So if you've issued tokens or if you issue a stable coin in such a fashion that what you're doing is issuing on a registered security, you know, in a centralized fashion, that's, you know, going to be a securities violation. Where I think it's going to be more interesting is if there are enforcement actions against the developers of decentralized exchange protocols or interest rate protocols, it'll be very interesting to see under what theory that enforcement happens. Because if it's, you know, saying, well, you know, as part of your protocol, there's a token that was issued in non-compliant fashion. Well, you know, that might be pretty clearly against the rules. But if they go further and they say publishing this code is illegal, well, you know, we would have a problem with that.

And indeed, I don't think they would say that because I would be. be a clear, that would be in clear attention with the First Amendment. But they might say that in some way, some of the, some of the activities that developers are engaging in facilitates a violation of the law. And so depending on how, like what actual activity they point to and say, this is the violation. That's what's going to be interesting. So I'll stop there because I want a monologue, but I'll say that the other piece that I worry about is related to ransomware. That's interesting. I mean, so what you're saying is that, if I understand correct, So the publishing of code in the U.S. constitutional context would not be considered, could not be considered legal because, of course, it would be in contradiction with the First Amendment.

But that this activity facilitates illegal activity or activity that goes against securities law or something like that. Is there any precedent for this in other areas of? There's a little. So Jerry's point here is important. the difficulty in deciding, you know, what the SEC goes after is they don't like losing cases. And the fact of the matter is that, to my knowledge, most folks who've created a decentralized exchange tool, for example, have also issued a token. And so if you're the SEC thinking about targets, why wouldn't you just go after those folks for token issuance, which is more clearly something that is not speech, you know, you're actually selling maybe to a, But maybe a couple of unaccredited investors get in there.

Or maybe to just foreign investors, but maybe a couple of American investors get in there. And the fact of the matter is, since 2016, it's been abundantly clear that the laws for securities issuance have always applied to selling tokens in a centralized manner. Like, I'm promising a future platform or I'm promising a platform that will be useful that I'm going to build. Those laws have always applied to those token sales. So that's an open and shut case in most cases. Now, the hard case is an exchange where code has been published that facilitates like atomic swaps or something of tokens on Ethereum or anywhere else. Maybe it has an order book.

Maybe it has some sort of auction principle behind it. And there hasn't been a token sale. Or there's such clear evidence that the token sale never violated any U.S. securities laws because there weren't pre-sales to American retail investors in any. in any extent. In that case, you've got this hard question of, all right, well, there's this thing out there that seems to meet our very flexible definition for national securities exchange or alternative trading system. And those things, national securities exchanges are alternative trading systems, places where people can, you know, find markets for securities,

they have to be registered with the U.S. Securities Exchange Commission in order to have U.S. retail participants using them. And none of them are. Now, this thing that we think is an ATS or a national security exchange is just code running on the Ethereum blockchain. So who can we find who's culpable for that? And that's a really hard question. The precedent here, Sebastian, is if you look back at the 90s, when the Internet first blossomed, there were message boards where people would actually say, like, look, we're setting up this message board. You can join and you can say, I've got some, you know, maybe I want to resell some equity securities. maybe I'm part of it, an old tech startup, and I got some stock options or something like that.

And this message board will help me find a buyer for my security so I can post messages and I can answer bids and offers and things like that. And the SEC had this interesting question. Well, wait a minute. Is this a message board like Craigslist? Is it just like a classified ad page, in which case it looks much more like a newspaper and much more like free speech protected activity? or is this actually some kind of new securities exchange, in which case it's unregistered and violating the law, and we've got to go after them.

And the SEC looked at a few of these, offered a no-action letter, actually, to at least one of them, because I've read this no-action letter, that said a couple of different things. We don't have to get into the minutia, but interesting things like a flat fee for membership in the message board is okay,

but a per-transaction fee is not okay. Then it would be a national security exchange. And a no-action letter is not binding legal press. but it was their opinion of the time. And those questions are now a hundred times more complicated because these things are much more easy to use, much more available, and they all trade these digital tokens, several which are definitely securities like, say, synthetic Tesla stock or whatever, you know. So in the last couple of years, this doctrine kind of took hold of sufficient decentralization,

right? Ever since the Hinman speech, I don't recall which year 2017 or something. right? So the notion that if something is sufficiently decentralized, more or less anything goes, do you think this will carry through? Do you think it will stay like this? So we hope it does. So here's the thing, right? I think it's pretty clear at the SEC and the chairman would say that Bitcoin is not a security. Right. And so if you add, ask him, what's the basis for that? I think there's several things. I think number one, there are no promises ever made related to Bitcoin. But I think another thing is that there is nobody who, on whom you depend for its operation, right? So it is sufficiently decentralized

if you want to label that, right? And so we think that's a useful way to think about it. And I get it that sufficiently decentralized is very amorphous. It's on a black, you know, line that you can identify. But in cases where you do have the developers have made promises, when they've done that, that's clearly a security. But at some point, what they've created, it makes no sense to treat it as a security because you can imagine at some point a developer made a promise, thus they issued a security, but then they built a thing and then they die. They literally are wiped off from the face of the earth. It makes no sense. to then say that the thing that people continue to use that they created by virtue of having been associated with them,

if that thing depends on nobody, if it looks exactly like Bitcoin, to say that it's a security. But I think, and so that's why we think the Hymintest makes sense, and I think if we're rational, it will continue. That said, you know, I can imagine that at the SEC, especially under this new chairman, there might be an instinct to pull back from that. And to say, if promises were made, that's kind of the original sin. And that's kind of the more important thing. Yeah, I also just want to point out in case you've got lawyers listening, especially U.S. lawyers, there's never actually been a sufficiently decentralized test. There is no Hinman test. There is just the Howie test, which is a flexible standard for what is a security.

and some of the prongs in the Howie test, all this stuff meets easily. Like even Bitcoin, there's definitely expectation of profits. Just go look at crypto Twitter about like rainbow charts and you're like, oh, crap, you know, everyone is here expecting their Bitcoin is going to be more valuable. But you need to meet all four prongs of the Howey test. And the sufficient decentralization test is just an interpretation of the expectation of, is just an interpretation of the efforts of others. or more specifically substantially from the managerial

or entrepreneurial efforts of a promoter or issuer. So Jerry's right, when a project is just in its nascent phase and you're still waiting for someone to write a bunch of code and you're holding an IOU for some tokens, of course, strong efforts of others. You might conversely, or by analogy, say, not decentralized. But we're really just looking at the efforts of others problem in the Howie test.

But once that guy or girl public, that code and then gets hit by a bus and the thing is still working, how can you still meet that test? It's not a decentralization test. It's an efforts of others test. And here's the thing Peter's right, that there's no such things as a Hidman test because that was just a speech given by the time SEC official. You can imagine that in the future there will be another speech by, say, Chairman Gensler or an enforcement action that kind of repudiates that. But ultimately what is the test is something that only courts decide, right? It's not something that speeches do or even enforcement actions do. And I think what would happen is that the SEC will

only pick cases to enforce and probably more likely to settle with that, you know, are open and shut, right, where the thing is clearly not decentralized, clearly you're relying on the efforts of others. And they'll pretend that that is some kind of precedent, right? If we're lucky, they will enforce against a good, hard case where the thing truly is decentralized and then a court is going to have to decide. And at that point, I think what we will get, if our court system works, and I think it does,

we will get something that looks a lot like the Hidman test. And we'll call it something else. We'll call it Jawi, you know, versus SEC or something. Can I... Howie Jowie. So if you look at the tone that this administration is setting for crypto, at least the rhetoric is pretty adversarial.

Let's talk about the reasons behind that. So why do you think this administration is so against this? I mean, basically, there's a couple of different alternatives one could think up, right? So one is basically they see their monetary power as the issue of the dollar. They see this threatened. I mean, the alternative explanation you could actually draw up is saying, okay, look, I mean, Janet Yellen, she's a boomer. Maybe she doesn't get this. Maybe this is a generational thing, right?

Where do you think the reasons for this lie? Do you think it's a tactical? No, no, no, no. I think the reason for the hostility is totally reasonable and understandable, even if, you know, we wish it they would. see the bigger picture. So number one, I think you have to understand this is a democratic, somewhat progressive administration. And so they take very seriously investor protection. And the fact is that in the cryptocurrency space, there is a rampant violation of investor protection laws. Right. And so I think that concerns them. I think they are also concerned about, you know,

Main Street investors getting hurt. And so, you know, that sort of fuels a lot of the angst. So it's kind of like a lot of the same reasons why they might be concerned about GameStop type stuff. They're concerned about this too. So it's that general thing. And I think that's what drives a lot of Gary Gensler's concern is just he's looking at this market. He is seeing a lot of activity that as he says goes right up to the edge or goes over, right? honestly, I think if it's going right up to the edge, well, then you're still complying with the law,

so you shouldn't be worried about that. But he might want to tighten the law. And by the way, something I didn't mention earlier when we talked about potential enforcement actions that we expect, look, there's never been, and we've always been very surprised by this, there's never been an enforcement action against a cryptocurrency exchange, a centralized cryptocurrency exchange, for listing unregistered securities. And at this point, you know, some of the biggest Cryptocurrency exchanges in the U.S. List hundreds of tokens. And so I don't know.

I think there's a good chance that the SEC might be able to find one that could be a security. The other reason, okay, which I wanted to get to before and the club we're getting to now, is what they might call national security concerns. And this is not concerned about the dollar. And we can talk about the dollar in a minute. But it is, ransomware is a big piece of it, right? So a few months ago, there was a ransomware attack that really crippled a pipeline company called Colonial Pipeline here in the United States. And as a result, a lot of the Eastern Seaboard, gas stations along the Eastern Seaboard were left without gasoline. I actually very nearly got stuck with my little minivan on the side of a D.C. street, not near where I lived because I almost couldn't make it to a gas station.

I went to five and there was no gas. And then I went the sixth one, thank God, had some. So it was like, it touched people in a real way, and it's ransomware that caused it. Right. And so as a result of that, I think there's been this hostility from this administration to crypto, but that's very generalized, right? And I think that we can, and I think luckily there are a lot of, so the political folks, starting from the president on down here about this, and they're like, we have to do something

about this. Crypto stuff is bad, right? Luckily, within the bureaucracy, there are people who are experts, who's, you know, once it gets down from the very general political folks down to the experts who are actually trying to fight to ransomware actors, these guys understand that crypto is not the problem, right? And that indeed, if you, quote unquote, banned it or put all kinds of other tighter restrictions on it, you're actually going to make it harder on them to fight the bad guys who are the ransomware operators, right? and that at root here, the real problem is poor cybersecurity on the part of the victims, quite frankly, not to blame the victims, but that's a fact. And so that explains some of the hostility. And then lastly, yeah, there's this concern about a challenge to the dollar maybe, I think maybe more to the point systemic risk. But I think that that is not about crypto. I think that there's nobody at the Fed or Treasury who really sees a challenge to the dollar.

or really systemic risk coming from Bitcoin or Ethereum. I think they see it coming from stable coins and not just stable coins, Libra, which doesn't exist, but they see that, right? And so I would say those are the reasons that there's this hostility. And so it's totally, these are each reasonable. And luckily you can address each of those and try to, you know, talk to folks about them. Yeah. So let's just unpack this.

So just to summarize, so this. three aspects here. One is investor protection. The other is the threat of ransomware and then the other is what I would call the ghost of Libra that shows up in every discussion. I mean, like, you know, in our conversations with you lawmakers, I mean, we, when we're talking about Mika, of course, the regulatory framework to propose here in Europe for crypto assets, you know, Libra showed up everywhere. And I mean, not in the document itself, but in conversations we realize that this this thing had been written specifically to block Libra, whereas like Libra no longer existed in the format which it had been presented.

But yeah, but regarding the ransomware, yeah, I think that you pointed to this is like, you know, experts, experts recognize the problem is not ransomware. The problem is poor cybersecurity. And like, for me, that just, you know, even further reduces my confidence in her elected officials that, you know, they are pointing at ransomware and not like trying to harden cybersecurity of like national, you know, things that are of national interest to the security of a nation, whether it's the U.S. or France or anywhere else. And regarding investor protection, I think this point, I think, is the one that can be argued that do you think that investor protection laws as they exist today are sort of aligned

with, you know, the sort of current information landscape where like investor protection laws, as I understand that, and I'm not an expert on like U.S. investor protection laws, but as I understand it, that these things were written and passed into law decades ago when people didn't have access to the abundance of information that they have now. Financial literacy was perhaps much lower. And so, you know, the idea that investors need all this protection is actually what needs to be put into question and that investor protection laws should be reviewed to sort of conform with this new reality that people have access to information and people make decisions based upon that. I think with both ransomware and the way we do investor protection, you should be forgiving of policymakers who are especially more at the high level rather than down in the weeds.

Because they look at these things with an older paradigm and they genuinely would like to just slow down the clock or reverse it even. And that's actually kind of fair. So let's be clear, cryptocurrency payments do make it easier for people to use ransomware to. release it and to get paid when it infects a computer. Now, we know as folks who are really excited about Web3 and building a better internet that isn't vulnerable and building better cybersecurity practices that aren't vulnerable by using blockchains, that blockchains are the answer

to a lot of these cybersecurity problems. Individual self-s sovereign identity is much better than having Equifax hold everybody's credentials or have Target hold everyone's credentials and inevitably get hacked. And so to us, hostilities, towards crypto misses the point in the ransomware context because we would say, no, these things are the answer. And unless we adopt these technologies and learn about them and prosper from them, our problems are only going to get worse. Because you can't put ransomware back in the bottle. It's out there. It's always going to be out there.

So we need to harden our infrastructure using the very technologies that maybe our adversaries are using in order to monetize these things right now. But that's a really hard conversation to have with someone. Because folks of a certain age, or disposition just don't realize how bad the internet infrastructure is, how sort of ramshackle it was from the beginning, how arbitrary a lot of its constructions were, just to make things work kind of well for a time. And they don't realize that we really need to rebuild it from the ground up or else we're screwed, right? So that's an education battle, but it's a hard one. Yeah, and to answer the investor protection piece, Sebastian, yeah, I think if we could from scratch right to security's laws over again. we might write them differently for the current information landscape. But I feel then you'd be rewriting the rules every 10 years. And that's not, you know, a lot of success that we have in our financial markets comes from the stability of the rules. So you don't want to do that. And that's where I think the beauty of a flexible test like Howie comes.

And people hate the Howie test and hate how flexible and amorphous it is because they can't look at their project and know with certainty whether they're inside or outside. But the beauty of it is is that, as you say, this was written in the 1950s. I mean, the securities act was written in the 30s. The Howie test came up in the 50s, right? And people look at this and say, oh, it's a decade's so test. It's unfit for, well, no, it's a flexible test. It's a principle that can be applied at any moment.

And it can be applied by a judge with knowledge of what the current landscape is. And so in that way, I mean, I tell people, look, the Constitution of the United States is centuries old, and we don't say, ah, old law. We should just rewrite it. No, we think it's great because it's got these principles that we can apply no matter the time period. I would argue that the U.S. Constitution, you know, as an outsider, could also be in part rewritten, you know, as far as like software that governs, you know, 300, you know, If you think if democracy as technology, as a governance technology, I would argue that that software badly needs of patches.

Yeah, we got into this last time I was on the show, right? And you definitely had a more European perspective and I had more of an American perspective. That's right. We did have this conversation last. Yep, yep, yep, yeah, inevitably. It's funny, though, at the end of the day, if you compare the two regimes and you took a hypothetical of somebody is writing core code for an open blockchain network, a Satoshi type, a vitalic type. They'd be much safer in the U.S., much safer in the U.S. with our ancient First Amendment

doctrine, which has no equivalent in Europe, no equivalent in Germany, no equivalent in France. The protections for speech are extraordinarily weak when it comes to state censorship. So, you know, so there, Sebastian. No, I think this is one of the things that. I agree. And I think free speech in France and Germany is, you know, the protections for speech in France and Germany are abysmal. I mean, like, but the hard part is, you're right.

It's sometimes frustratingly bizarre how difficult it is to amend the U.S. Constitution, you know, two-thirds majority in the States and in the House and Senate and a process that just doesn't happen very often. Patches are really hard. You know, America's more like Bitcoin as far as updates than it is like Ethereum. and that's bad in some ways. We have some silly things on the books maybe. Although if you take a certain philosophical point of view,

there's wisdom to things that have lasted forever or lasted for a long time. There's a sort of Burkean conservatism. And it also doesn't upset expectations for people who are trying to just live freely in a society where the rules don't constantly change. And so I think the reason why we've got great First Amendment is because we've got a really bad system

for updating the Constitution. It would have been gone in the 60s and 70s when the red scare happened and, you know, people wanted to lock up communists. The first amendment would have been gone if it was easy to amend the Constitution. It would have been gone with the Alien Sedition Act right after Revolutionary War. That's right. Can we maybe, maybe I want to prod you some more on the consumer protection. So because from someone in the crypto trenches, it actually feels. different than just the government wanting to protect consumers.

To me, it actually feels panicky almost. And I totally concede that this ecosystem is fraud with scams. I mean, I constantly get added to super scammy telegram groups to the extent that telegram is basically unusable. So, I mean, yeah, I mean, yes, there's tons of scams going on. But then it seems like the government is going after projects that are useful and not super scammy. And to me, the entire investor argument, it feels outdated to a certain extent in a time where one of the main issues we're facing is inequality. And basically, if you look at what returns people can get on vast fortunes, namely around 10%, and what basically the

average Joe who's not an accredited investor can get. I mean, they can kind of be happy if they get 2%. I mean, this kind of, to me, it seems almost unlikely, unplausible, that this is just coincidental and not driven by the people whose interests it protects. Yeah. So I'll say this. It has been a source of frustration for me to see the SEC begin to start investigations against, for example, decentralized protocol developers who are kind of in a gray area as opposed to going to the 100 obvious scams that I can point them to, and that clearly they're aware of, right? Or the major centralized exchanges that are noncompliant with U.S. laws and offering securities completely unregistered, like obviously securities.

like synthetic Tesla or something like that. And so, you know, that's that kind of thing. I think we may yet see an enforcement action against the trust exchange. But here's the thing. I think what the SECs, I think regulators, they are used to a paradigm where the way that they regulate, right, the way that they have any leverage, because their budgets are limited, right?

And they can't go at, they literally cannot have, they don't have enough manpower to have thousands of lawsuits against, scams. And so the way that they regulate is that they go after choke points, right? And so these choke points are being decentralized. And so this, I think, is what you're detecting. This panics them, right? When they begin to see that the choke points that they are used to being able to go to and control and regulate in order to deal with the long tail of scams, when that's going away, that panics them. And I think that's why you're feeling what you're feeling. does it make does that is that compatible with them also being you know if you're a regular at SEC

you probably came from a centralized competitor to these protocols or will go to in a future employment to one sure I'm sure that buttresses it but but I think it really is hey here's a law in the books here's how it's typically enforced this is no longer going to be an option this makes them panic. And I don't think there's a good answer for that. I think the thing to tell regulators, and I think we have finally, I think over the last 12 to 18 months, we have finally reached a point where this is not just a theory. They're beginning to see that the choke points that they're used to regulating will be certainly decentralized. I think the thing to tell them is you're going to have to come up with new two things. Either you're going to have to come up with new strategies for

enforcement, including maybe prioritizing your enforcement, right, going after the clearly bad stuff first. And number two, maybe you need to start, maybe not the SEC, but maybe Congress, Sebastian, to your point, is going to have to start considering maybe these laws don't make sense anymore. And Frederica, you make a really interesting point that got me thinking about the equality issue. See, I think I was, you know, a baby 20 years ago.

or 30 years ago now. Oh, I'm getting old. Cool. But 30 years ago, if someone was promising your average Joe retail investor or just like a, or even worse, like a grandmother or like an older, more vulnerable person, if someone was promising them 10%, that is a scam. We have no question. Like, there just were not investment opportunities for those people at the amount that they would be willing to invest in the sophistication level that they had that weren't scams. So when folks today see people promising or suggesting that they're able to get 5 to 10%, or more, even, much more in some cases, to somebody who's just investing $500 or $5,000 instead of $50,000 or $500,000, it immediately looks like the same scams from 30 years ago.

And half the time, they are the exact same scams from 30, 50 years ago. But what's interesting maybe is, I don't know, when you talked about this, you talked about it in a halfway benign way, because sometimes I think small investors now can get better returns legitimately from crypto, because crypto allows them to pool their assets together in a trustless environment, which removes the costs of dealing with several small investors as a pool. And now a bunch of small investors can act like a big investor and get the kind of preferential treatment in markets that a big investor. was previously the only person who could ever get that kind of treatment. And so maybe these things actually can be really powerful force for equality. And we just have to recalibrate, oh, actually some of these things are not scams at all and are in fact an inversion of the traditional paradigm of big returns for big investors, small returns for small investors. But you've got to understand that, like, a regulator at the SEC is coming to this

with a perspective that's a decade older. And that's not an indictment. That's just like these things were always scams. If you were only going to invest $500 and someone was promising you, you know, 10% returns, it was a scam. But, I mean, Peter, if you look at the talks that Gary Gensler gave when he was at the cryptocurrency initiative at MIT, I mean, clearly he understands this. Clearly he understands the value proposition of blockchain technology, no? Yes, but when you're in the chair, you have to be different. You have to be careful.

No one wants to, I mean, it's not just selfish, but there's an element here that is you don't want to be the person that was asleep at the switch when a bunch of elderly folks got taken and lost their family fortunes. I mean, it's your job to be much more risk-averse when you have that responsibility than when you're an academic just sort of thinking about big ideas for the future. And I just want to make sure people don't confuse what we're saying. We're not saying that the status quo is fine. what we're saying is the status quo is understandable. And we're much more saying when and optimistic that it's only a matter of time before the world catches up to us, right? To us all. And things change for the better.

So I'd like to talk about the infrastructure bill and some of the more concrete things that are happening, have been happening in the U.S. But I want to ask you first, do you see, because it certainly appears that way in Europe, that there's sort of a double standard, you know, when comparing what that's applied to crypto, like comparing things that are applied to crypto and rules that are applied to crypto companies, you know, compared to other companies and sort of service providers in the more legacy financial world. Do you see this double standard being applied as well? And, you know, what do you make of the attempts by retail banks to prevent users from, you know, sending money to an exchange or receiving funds from an exchange or, you know, like here in in,

Europe, we have like eye ban discrimination, you know, happening like with multiple service providers. Do you see this sort of thing also happening in the States? Yeah, so we definitely see a double standard. And a lot of times it's just sort of in black and white. So in the infrastructure bill, the crypto tax reporting provision, that's part of it, it includes reporting requirements for crypto exchanges that don't apply to other kinds of securities exchanges. Okay. So that's just clear discrimination. You know, if you look at the FinCun rule from last year, that was proposed,

same thing. There would have been certain requirements that only would apply to crypto, would not apply to other financial institutions, would not apply to cash. So, yeah, I mean, that happens all the time. And in each case, we just have to, you know, make the argument that, look, good policy is going to be technology neutral. You don't want to pick winners and losers, et cetera, et cetera.

And that, so I think the instinct is, again, because of this hostility for the reasons that we discussed, is to address the acute problem that they perceive. So that's crypto rather than, you know, than taking a more, for a pragmatic technology neutral approach. And as far as the derisking, debanking, yeah, you know, we continue to see that. You know, I think to some degree, I'm sure that's motivated by competitive pressure, you know, from banks. But largely, I think it's really driven by risk aversion and conservatism on the part of anti-money laundering compliance departments at these things, right? Because it's not just crypto. It's also going to be pornography and sex work.

It's going to be firearms. It's going to be, you know, all kinds of other legal things, you know, marijuana. legal things in the U.S. are also facing the exact same kind of de-risking and debanking. And the other aspect here is that everybody uses crypto and technology as branding for what they want to do. And so if you want to really hammer investor protection or anti-money laundering, you can get more headlines for the work that you're doing stopping anti-money laundering or investor fraud by talking about how you're doing it in the context of crypto. Because crypto immediately adds this sort of sex appeal to the headline.

like, oh, money laundering through crypto, that sounds much more interesting than Deutsche Bank launders $20 billion of Russian oligarch funds, which they did. But, you know, the bigger problem is Deutsche Bank, and yet you're going to get more attention from the press by being tough on this weird new exotic technology that's ultimately setting up a battle between cypherpunks and government. This is all garbage. You know, when you look at the actual numbers involved, money laundering and crypto is minuscule compared to the legacy financial system, but you can get headlines.

And I just want to be fair to the policymakers by flipping this as well. Because if what you want to attack is the age-old investor protection regime in the U.S., the securities laws, instead of attacking it head on and saying, the way we do securities regulation here is wrong, a lot of technologists want to say, you know what, crypto's a whole new world, and therefore we need a whole new investor protection rules. That's ridiculous. You just want new investor protection rules.

you just want to be able to issue a security without doing the old school disclosures, and you're using crypto as branding for your new policy. When your new policy really could have been introduced in the 1940s, as a direct criticism of the policies introduced in the 1930s, as far as securities laws. I see that argument. I mean, I also, I mean, the prospect of requirements and so on. I mean, I totally understand where people are coming from because it is super frustrating and any argument to kind of make it go away, right?

But let me kind of come back to the other point you made, namely that big banks, it's almost their business model to kind of bypass counter-terrorist financing rules. And basically, I mean, sure, they get fines. But, I mean, there's slaps on the wrist. It's still insanely profitable. So why deep bank, you know, harmless in comparison fairly small crypto companies? and not go after, you know, Iran money or oligarch money. I mean, to say something controversial, I would say that we should probably get back to enforcing our criminal laws and arresting people who do bad things and stop trying to stop people from doing bad things

by creating barriers in the financial system. Like, that's a losing game, and it's a game that just hurts a lot of innocent people, along with the few guilty people that you trip up when you block their financial transactions. The money system should be just public infrastructure, structure that works reliably without trying to judge you first as to whether you're criminal or not, because that's something the courts are supposed to do, not the banks. And so we should get rid of anti-money laundering as a policy if we want to actually be smart about how we have a just society in the future.

But that's a very controversial view. No, no, it's a controversial opinion I can get 100% behind. It just feels like it's basically people who have no real interest in enforcing the rules, have to enforce words that basically it would be beneficial to them and everyone else if they didn't enforce. So, yeah, it seems like just passing the buck. This is what's terrifying about China's central bank, central bank digital currency.

DSEP is the tool you would build if you wanted to give all of the decisions about who can do what and what in society to the people who control the channels of commerce, to the people who control the actual payment system. DSEP gives that power directly to the Communist Party of China. they can block people, they can censor people, they can spy on people, they can create credit scores for people. This is not a way that you have a society with a rule of law. That is what Jeremy Bentham would have called dog law. You just watch what your dog does all the time. And when they do something you don't like, you hit them over the head with a rolled up newspaper.

And then they never know what they did wrong. They just realize that they suddenly can't do that anymore. They're going to get punished. You can't have the rule of law and a system of order that's based on just arbitrarily censoring or surveillance. failing people. Yeah. And so, like, we should be better in Europe and in America, and everyone should be better. But our governments, as governments that sort of have been known as open societies for centuries now should do better. And we should embrace these technologies.

I mean, as you guys can clearly hear, I'm not an American. So, I mean, let's bring up the topic of the infrastructure bill again that Sebastian tried to raise just a moment ago. So basically, no, no, no, all good, all good. Super interesting conversation. So basically, I mean, just to recap that, so basically there was a pretty good bipartisan infrastructure bill that basically almost everyone could get behind

because it funded very, I mean, very common sense operations. And then basically the Department of Treasury, I think, tacked on this addendum saying that some of the money to fund this, just a minuscule portion, like less than a percent, should come from taxing crypto. And basically the entire crypto ecosystem went haywire because it felt like a bipartisan attack on crypto without being founded in anything concrete. Can you maybe address that? Sure. So I'd say a couple things.

Number one, Number one is the, you're right. There was a provision added at the last minute to this bill that was a what's called a pay for, meaning that this bill's going to cost money because the bill spends money on bridges and railroads and things like that. And so how do we pay for it? There are different ways that you would do that, right? You would raise taxes maybe tariffs. Maybe you'd stop spending somewhere else.

And so this was a provision that would help pay for the spending. And the way that it would pay for it is not by raising taxes on crypto. I think this is a misconception. This does not impose any new taxes or raise taxes on crypto whatsoever. What it does is that it gives Treasury authority to require reporting from certain actors in the crypto space about their customers saying, This is how much my customer used my service. This is this is the capital gains that they had. And presumably, with this information, the IRS would be in a better position to know how much money it's owed and collect more taxes.

Okay? That's kind of convoluted, but that's what the provision would do. And I think people got up in arms about it, number one, because it – there are many reasons, right? But one reason is that this was added at the very last minute. Nobody was consulted about it. We weren't really consulted about it. And so as a result, the provision has a lot of unintended consequences, right? Among them, the authority that would be given to Treasury is so broad that Treasury could use it to say that minors, for example, would have to do reporting on their quote-unquote customers. But of course, you and I understand that miners don't have customers in any normal sense of the word. and couldn't possibly report. And so if Treasury were to require that, miners couldn't do that, is mining banned, right?

So it's just nonsensical. And purely a result of them not having consulted anybody and trying to just ram this through. The other piece, which Peter can probably, and there are many things wrong with it, but we're just going to focus on two. So one is what I just said. The other is in the U.S.

there is a requirement that applies to everybody engage in any transaction, any trade. Business transaction. Any kind of business transaction, right? So not a gift to your child, but any kind of business transaction. If the transaction happens in cash and is over $10,000, you have an obligation as an individual to collect information about your counterparty and submit it to the tax authority.

Social Security number, physical address, a lot of information. Name, obviously. So let's say that I am, I sell antiques and I'm at a flea market on Saturday morning and I have this beautiful antique desk. Peter comes by and he says, oh, I loved his desk. I say, yeah, it was once owned by George Washington. He says, oh, fantastic. I'll buy it, how much? And I say, $11,000. Peter takes out cash, gives me cash. I now have to collect his name, address, right? Something that I would never ask him for. A flea market. you give me cash, I give you the table, we're good, right?

Well, at least you can pay you $11,000 in cash because I think in most of Europe, cash transactions are limited to $1,000. But yeah, let's continue, yeah. So that regime, which exists for cash, is now going to be, would be applied, if this became law, would be applied to crypto. And so the problem, so you can see the obvious problems here. One is that because so many crypto transactions are for high amounts. And number two, because the transactions are oftentimes crypto for crypto, both parties would have to report on each other to the government.

And the problem here is that this is completely unconstitutional. And Peter, I don't know if you want to explain why we would say that. I mean, briefly, so the Fourth Amendment says that the government needs to get a search warrant from a judge, you know, to make sure that the invent. investigation is legit and not just harassment before they can collect very personal information about American citizens or American residents. And you might think, well, then why are things like this constitutional? Why is the bank secrecy at constitutional where the government can get all this information from your bank about your transaction history? And the courts in the 1970s said, well, the government can get that information from banks because of something called the

third party doctrine, which says once you hand your information over to a third party, you lose your reasonable expectation of privacy over that information, which means there's no warrant required for the government to come and get it from the third party. And when you hand it over to a third party that collects it in their normal course of business, and holds it for a legitimate business purpose, and you voluntarily provide it to them. This is why, for example, we don't really have good constitutional protections for your emails when you use Google and Gmail to store your emails is because it's a third party. You willingly handed your private emails over to Google when you chose to use their service.

A lot of people don't like the third party doctrine anymore. In large part because of technology, because that Google standard where because I choose to use Gmail instead of proton mail or something I host myself, I no longer have unconstitutional right to the privacy of my own correspondence. That seems insane. But this is actually even simpler, the 60-50I, cash and currency reporting regime, because there's no third party here. When I buy the table from Jerry, I'm not voluntarily handing over my information to a third

party for a legitimate business purpose. Jerry isn't a third party. He's a second party in my transaction. And even if you were to treat him as a third party, he has no legitimate business purpose to know my social security number in order to sell me a table or a desk that was owned by George Washington. And I didn't voluntarily provide it to him if the law says I had to provide it to him in order to buy a table. That's crazy. So I think it's just inherently unconstitutional, as is, coin center is not going to challenge it because we're not cash center. There should probably be cash center in the U.S. It'd be a good citizen. civil liberties organization. But if the infrastructure bill passes as it's currently drafted,

this would be something we'd potentially challenge on constitutional grants. That's really fascinating. You know, I am conscious we're running long on time here. You've been very generous as your time. I'd like to maybe, you know, as we move towards like longer term vision here, maybe just kind of talk about, you know, Europe versus the U.S. and, you know, your views on how the U.S. is faring in terms of, like, it's competitiveness in the crypto space. So, you know, for a while now, it's been at least my feeling that, and, you know, this is what we try to communicate with, you know,

lawmakers here in France and in Europe, when educating them about crypto that, you know, if Europe doesn't get its act together and Europe doesn't start encouraging innovation in crypto, that in, you know, 15 to 20 years, Europe will find itself basically in the same position that it is now with regards to big tech companies. And that is that there are no big tech companies in Europe. And so therefore, like, Europe just is constantly just defending itself and regulating. But Sebastian, we have SAP.

What are you talking about? Yes, we do have SAP. But, you know, SAP, I don't think, you know, falls into the category in which I'm just talking about. I don't even know what you guys are talking about. No, so my point is that Europe is constantly defending itself against the fangs of the world and implementing regulation that protects its citizens, primarily in the area of data protection. And it's been our position at Aran that if Europe doesn't start encouraging innovation, it will find itself in the same position in the next 15 to 20 years, only the fangs of the future

are basically like the banks of the future, you know, the crypto banks of the future and the financial infrastructure that underpins are all of our lives. And we felt that the U.S. was encouraging innovation and encouraging crypto, you know, earlier this year, there was this opinion by the, you know, the office of the comptroller that, you know, allowed banks to, I think, receive payments and stablecores and this sort of thing. And we saw that as like as signs that the U.S. US was moving in that in in that direction and now it feels a little bit different it feels like maybe that's that's that's that's uh being inverse a little bit where like the mecha regulation is now in it it's it's it's subsequent drafts much much more friendly towards crypto and like

there's this um there's this uh maybe more uh critical approach to like how to regulate crypto going forward in the u.s like where do you see where do you see this balance kind of playing, how do you see this balance sort of playing out and like, yeah, the balance between sort of like the U.S. approach and the, and the, and the, in the, and the, in the EU approach and who do you think will turn out to be the winner here? Yeah, that's a fantastic question. That's a long question, but yeah. No, but it's a good question.

So I think, so number one, I'll say that the U.S., in my view, is rhetorically hostile to crypto these days especially, but it otherwise is. probably the best regulatory environment for crypto. If you just look, don't look at what the U.S. says. Look at what the U.S. does. I think it's the place you want to be building something. And if you don't want to build it here, you probably have a problem with the existence of securities laws,

right? Not their application to crypto necessarily. I think you're correct that you're detecting a shift in policy. And I think we'll see that more with a crackdown. that we discussed. But I think that is more to do with the fact that we have a new administration, right? So we now have Democrats in control of the House, the Senate, and the presidency. And like I said, earlier, sadly, crypto is becoming a slightly more partisan issue than it's ever been. But I think, you know, it's largely expected that the Republicans will take Congress back next year, next Congress.

you know, it would not be surprising looking at opinion polls today that they would retake the White House again in three years, right? And so you might see that shift back and forth on the margin. More broadly, though, to get to what you were saying about the U.S. versus Europe, I think you're absolutely right. I think, and this is a message that we have for both Democrats and Republicans, for anybody who will listen to us, the U.S. succeeded in the information age because it embraced the internet while France was embracing minitel. Okay. Go, minotel.

Yep. I'm a big fan, but, you know. And we have an opportunity, at least from the U.S. side, to play that playbook again. I hope that Europe and the rest of the world does not play the Minitel playbook, that they play the open, you know, and a, you know, most optimistically, that won't happen. And what will happen is that China will play the Minitel playbook as they seem to be doing. And the open societies, the rest of the world, will play the internet playbook. So, you know, but if Europe doesn't and it goes with a Chinese model, that's, yeah, I think you're going to find yourself back in the same spot.

I don't think it will even play the Chinese model. I think it's just going to, I think it's, it's, it's. It's just going to drag its feet for so long that no real innovation will, or of significant value will come out of Europe. And, you know, we sort of see the hints of this with, you know, the CBDC talking, not that, sorry, the ECB talking about CBDCs, not the CBDCs, not the CBDCs have any, you know, future, in my opinion. But, you know, they're saying, like, oh, we're going to, like, look into CBDCs for the next two years and then decide whether or not we're going to do something. in this field. And it's like, guys, like, you need to start experimenting now. It's not like, you know, a two-year research endeavor into like researching crypto.

In two years from now, you're, you're, the results of your research will be completely irrelevant. And I feel like this is sort of the, the overall approach in Europe. And, you know, also in France, I mean, there's been, there's been, you know, recently there was sort of like the, I guess it's like a new finance law that was being passed. in France and all the amendments, you know, as reasonable as they were were shot down, simply because, like, you know, people are not ready to accept that, like, crypto is a thing yet. And so I'm not hopeful.

Yeah. But so here's, I have sort of a civil liberties theory of innovation. I don't think governments can do very much to promote innovation, short of protecting, aggressively protecting individual liberties. Why was America the home of the internet? And why was specifically the West Coast of America, the home of the internet? It was the sort of rough and ready communities of frontiersmen and immigrants who found a home and a place where they could start a business and have dignity

doing something that is so weird and crazy that in any other part of the world they'd be laughed at or even thrown in jail. That's why the internet flourished. I mean, the Clinton administration did good things by creating a framework that said, we also like what we're seeing perkling up from the bottom of our innovative communities, and we're going to take a light-touch approach to that. But the main driver is that people had, you know, property rights and speech rights and freedom to do these crazy things that literally would have gotten them thrown in jail in other places.

In Brazil, I don't mean to pick on Brazil, but Brazil, there's no truth defense to defamation. If you defame a public official by saying something that's actually true, in the U.S., they'd say, that's not defamation. That's truth. You do not go to jail. You do not have to pay a fine in civil court. In Brazil, they'd say, no, truth is not a defense. You defame the public official. So these base rules of society are much more important than we think they are.

And this is how America could potentially fail and betray itself is by removing. these protections that have actually sheltered immigrant populations, weird people populations on the frontier, and their ability to build things. If we stop protecting our privacy rights by giving up on the Fourth Amendment warrant requirement for a search, if we stop protecting speech rights by giving up on if you publish code, you can't be arrested for that. You simply can't. You're always allowed to publish research. Then we lose. But I think America is the most likely to not give up on those things at the moment. But everything is in question now.

There's a lot of things happening in America that scare the crap out of me right now, so I don't mean to sound ra-rah-ra-America. I'm scared about the whole world, but I still think that this civil libertarian theory of innovation is most likely to succeed here. And hopefully also in countries like Germany, in France, who have fundamental respect for basic human rights,

but you don't have the constitutional tradition, so it's easier to sort of like, wiggle around on the edge cases and be like, that's not speech. That's something else. So basically, if you take this into the present and basically the pitch that you give to regulators and lawmakers right now, when you talk about how the future will look and how the future will look with and without Web 3, what are the key metrics that you point to and say, look, these are metrics that where we can clearly see that people,

people's lives are going to be better with Web 3. It's so hard. It's like if you were trying to convince someone that the automobile was good, if you're trying to convince the police that the automobile was good in the early 20th century, they'd be like, no, they just outrun us when they're robbing the bank. And they just outrun us when they're moving liquor across state lines. And that's what, that's how stock car racing started. NASCAR in the U.S. was from rum runners souping up their cars. I did not know that.

But it totally makes sense in my. I had, you know, when they didn't have a bunch of hooch, when they didn't have a bunch of hooch in the trunk, they were just like showing off to their friends by going around in circles, you know? And so like, how do you convince the authorities that be that this technology that right now, the early adopters are weirdos and criminals is actually going to be the thing that in 10, 20 years is the automotive revolution in the U.S. It's really hard to, you don't have numbers to point to. The thing you have to point to is, oh, look at ransomware. is a really good payment tool. It works. It's working for criminals. Well, with ransomware, it's also a potential solution to it. But I also think it's interesting you ask about what metrics. We stay away from that. And I think that it's a mistake sometimes to kind of point to metrics or overpromise. And we see this a lot in Washington, where you'll have, especially companies and trade associations in the crypto space who will go to policymakers and say this will help the unbanked and this will help diverse populations without access to banking.

And this will increase blah, blah, blah, right? Totally overpromising where, yeah, in theory it could and maybe at some point in the future. But within a year, they'll be coming back to you and saying, okay, so where's the data, right? And we get asked, where's the data? We would never make that kind claim, especially because the key metrics that you could probably see movement on these days, it's not going to be in the developed world where we've got so many facilities already our disposal. It's going to be in the developing world, right? And honestly, policymakers in the U.S. won't care about that.

When I say metrics, you have to bear in mind. I'm a physicist, right? So basically, when I say metrics, I think about things that are measurable. And I mean, as much as I sympathize with the civil liberties argument, it's not something that can be clearly measured, right? So basically things that can be measured to me are things like how well off are people, how much choice do they have and, you know, these kinds of freedoms. So you don't actually like talking about these at all?

No. So we like to sell a vision rather than sell specific improvements that might happen because we can't predict what the improvements will be. Right. So if I was trying to sell the freedom to use and build on the internet in the 80s or 90s, I would want to say Facebook, Netflix, Google, you know, delivery stuff, HBO Max. I would love to say all these things that we use. Google Docs, all the stuff that incredibly improves people's lives. Podcast software. Podcasting, video. We're talking in like France, Germany, D.C. right now. Like it's nothing. That's the stuff that I would point to that would have huge economic value, huge improvement of people's lives.

But you know what happens in 1980, 1980, 1990? I don't know that. I can kind of imagine what it might be, but I don't know it. And if you postulated it and someone said, wait, seriously, you're going to send high-resolution video over the 56K modem or the 20 bond modem? That's ridiculous. And you'd have to convince them, but you wouldn't have any metrics to point to. Right. And they would ask you, you know, year after year, well, where's your fancy video podcasting? Where's your fancy video podcast? Right. And it would take 20, 30 years for it to come.

But you're sure that it's going to come. And so for us, I think it's probably much more effective to explain. explain the vision and explain that the technological primitives are here. And we just need to foster them and let the fire not go out. And explain the vision you did. Thank you, thank you guys so much for coming on. If people are interested in CoinCenter, where should they go to find out more? CoinCenter.org for sure. Cool. Fantastic. It's been a pleasure, as always. Thanks so much. Thanks for having us. Thank you for joining us on this week's episode.

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