Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Yaya Fanusie: Bitcoin and Terrorism – How Compliance Will Shape Cryptocurrencies

Episode Date: January 28, 2020

Many within the cryptofinance industry have been patiently waiting for regulatory oversight to deliver the clarity required for institutional adoption. Recent updates by the Financial Action Task Force (FATF), which issues guidelines for 200 countries and territories, attempts to apply the same rules and regulations required of traditional finance to the world of virtual currencies. Yaya Fanusie's background as an intelligence analyst at the CIA, and research on the national security implications of cryptocurrencies, provide valuable insight into the necessity of regulation in the space to mitigate the risk of bad actors. Yaya discusses the history and evolution of “Know Your Customer” and where he believes the industry is heading as it faces policymakers who attempt to regulate such rapid technological change.Topics covered in this episode:Yaya’s background in the CIA and how he became interested in bitcoinBitcoin from a national security perspectiveHow terrorist organizations leverage cryptocurrencies for fundingThe evolution of AML/KYC and complicance regulation in the financial sectorThe cost of AML/KYC on business and societyTrying to regulate rapid technological changePrivacy in communication vs. Privacy in paymentsThe travel rule and how it affects cryptofinancial companiesCryptocurrencies over the next decadeEpisode links: Yaya Fanusie's websiteYaya Fanusie on TwitterFinCEN’s Regulations to Certain Business Models Involving Convertible Virtual CurrenciesFoundation for Defense of Democracies (FDD) PodcastStronger AML Enforcement Might Actually Save Crypto (FDD)Crypto Rogues (FDD)Anti-money laundering and counter terrorist financing (European Commission)Cryptocurrency AML StrategiesKYC in Stablecoins (Bits on Blocks)Rhythm of Wisdom PodcastSponsors: Pepo: Meet the people shaping the crypto movement - https://pepo.com/epicenterThis episode is hosted by Sebastien Couture & Brian Fabian Crain. Show notes and listening options: epicenter.tv/324

This is Epicenter, Episode 324 with guest, Yaya Finusi. Hi, welcome to Epicenter. My name is Sebastian Quikuyu. Today our guest is Yaya Finuci. Yaya is a research fellow at the Center for a New American Security, which is a think tank in Washington, D.C. Previously, though, he was a counterterrorism expert and economics analyst at the CIA. He served seven years with the agency and was deployed for three months in Afghanistan to advise military personnel, law enforcement, and policymakers. So this idea that crypto is used for terrorist financing is one that gets thrown around a lot

and many times to discredit crypto. Well, in this area, Yaya knows what he's talking about. He is an expert in counterterrorism and terrorist financing, and when he became interested in Bitcoin in 2015, he started researching how terrorist organizations were using crypto to fund their activities. Brian and I hosted this conversation, and we talked with Yaya about the history of AML KYC policies and specifically their acceleration since 9-11. We debated on the ethics of enforcing compliance on the financial industry. This is something I generally take issue with, especially when it comes to crypto startups because they usually don't have the resources or experience to do so.

We talked about the FATF of the Financial Action Task Force, which is the organization that defines global policy guidelines for the financial sector. We talked about the travel rule, which puts compliance requirements on the financial industry to send over any identifying information with all money transfers, and this travel rule is slowly being rolled out and applied to crypto in many jurisdictions. And we discussed privacy and censorship and the risk of too much regulation and oversight. I really love this conversation, firstly because Yaya is extremely knowledgeable and articulate when it comes to this stuff, and we were able to have a thoughtful philosophical debate on these issues. And secondly, because we got to see a counter perspective on AMLKYC and compliance policies from someone who's an actual fan of crypto. So Yaya takes the position that compliance can actually help the industry, which is an unpopular

opinion amongst people in the space. But as you'll hear in our conversation, the answer isn't so black and so black and so. white and maybe lies somewhere in the middle. Before I go to the interview, I'd like to tell you about our sponsor for today's episode, Pepo. Pepo is where the crypto community comes together with short video updates and tokens of appreciation. So whether you're a crypto developer, a podcaster, an analyst, a blogger, or just an enthusiast, there's never been an easier way to showcase your work, earn appreciation, and connect with the community. So a few people know this, but about a year ago, I really got into electronic instruments and I bought a drum machine, a couple

of synthesizers and a sequencer, and I started playing electronic music, analog electronic music. And I moved last year, and I hadn't set up my gear yet. And I finally set it up last weekend. And I've been posting little video updates and little clips of the things that I'm playing. I mean, it's mostly not very good. But, you know, I'm learning and I'm getting back into the groove of things and stuff. So it's really fun. So I've been posting that on PEPPO. So if you're interested in seeing that and the other things that I'm posting, you can go to pepbo.com slash epicenter. That lets them know we sent you, and there you can download the app for iOS or Android, and you can find me at Seb 2.0. That's S-E-B-2-O-I-N-T-0. So we'd like to thank Peppo for those support of the podcast. And with that, here's our interview with Yaya Funnusi. We're here with Yaya Finusi. Yaya is an adjunct senior fellow at the Center for a New American Security, which is the think tank in D.C. And previously was a counterterrorism analyst at the CIA. for seven years and actually did a tour in Afghanistan advising personnel on the ground on issues

regarding counterterrorism and economics. Yeah, yeah, thanks for joining us today. Thank you. Glad to be here. Tell us a bit of your background and specifically I'm interested in learning a little bit more about what you were doing at the CIA and your area of expertise there. Well, I had a bit of a transition in my career. I was actually hired by the CIA, by the agency, as we call it, in 2005. I started there in 2005. I was hired as an economic analyst. And as an analyst, it meant I was someone mostly behind a desk doing analysis on all types of intelligence and information that came in and providing my analysis or providing that analysis to policy makers. And you're talking the highest levels of the U.S. government, mid-level.

personnel. And my initial job was to look at economic threats, economic risks, to look at issues like corruption happening around the world and energy, energy issues, energy security. But sort of in my first year, year and a half, I made a change. I decided to become a counterterrorism analyst. I was really interested. I mean, this was a few years after 9-11. After the London bombing in 2005, I decided that, you know, I wanted to use my skills to combat terrorism and terrorist attacks. So I became what we called a CT analyst, a counterterrorism analyst, worked for a few years, countering and following plots mostly by Al Qaeda. This was before the days of ISIS, looking at al-Qaeda plotting against the United States, following issues like radicalization.

And so that's what I did. But I left government. I left the CIA. in 2012, and I started working on another sort of investigative, in another investigative realm, financial investigations. I worked with a consulting firm that was doing an investigation on a recovering illicit assets, basically looking at kleptocracies and trying to locate funds that were squirled away by dictatorships. And this involved, and this was all out, out open source, using open sources, using contacts. This was not a government operation. But that's actually what got me into this whole realm of finding when people are trying to hide illicit proceeds. What do they use? How do they use the banking system? How do they use front companies? How can you

try to investigate and cover their trail? Or not cover their trail. How can you uncover their trail? From there, I eventually started working in the think tank community. You know, here in Washington, DC, you've got these think tanks a lot of times are staffed by former government people. So I sort of fit in. I had my government experience. And I joined an organization called the Foundation for Defense of Democracies that had a center dealing with sanctions and illicit finance. And I was a part of that center. And it was while working at a think tank and thinking about national security issues, engaging policy makers, writing articles and briefs, that the question came to me in, I guess around 2015, the question rose, what is Bitcoin and how does this deal with

national security? How does it impact national security? And I was someone who knew little about Bitcoin. I think my introduction to Bitcoin was probably more the movie dope, which I think came out in 2015. It was sort of an indie film. And so someone recommended that movie. And I mean, I had heard of Bitcoin before that. But that was the first time I saw, you know, an in-depth portrayal as cinematic as it was about what Bitcoin is or what it could be used for. But I didn't really know, you know, I wanted to understand the context, right? There were a lot of policymakers that were saying things like, this Bitcoin thing is going to be used by terrorists.

And, you know, Bitcoin is all bad. It's all for illicit stuff. And as someone who worked for the CIA, right, you're supposed to get to the heart of the matter. You're supposed to look at things objectively. You're supposed to understand all the reporting, all the context that's out there about a particular subject or a particular threat. And that started me down this voyage of trying to understand this technology, trying to understand how it was used, and trying in a very, in a very, like I say, more objective way to understand it in a security context without being alarmist. and in that manner.

That's how I started looking at this for my own research as part of a think tank. That's actually really interesting that you bring this up and definitely triggers my curiosity. So you mentioned Bitcoin and national security and looking at Bitcoin kind of through that lens. What were your big impressions or takeaways when you did this early, you know, look at Bitcoin from that perspective? And maybe how, what does that look like today? how do you think, what's the impact of Bitcoin and cryptocurrency on national security from a U.S. perspective? Well, good question. It definitely was a journey. So in 2015, not knowing much about Bitcoin, I just asked the question, right? What is this? How does this relate to national security?

And the first thing I noticed was that in the press, there were a lot of assertions about things like ISIS using Bitcoin. But as an investigator, I can never really confirm this. I never could verify how much this was true or if it was true. Now, there were attempts, 2014, 2015, there were attempts of people that supported ISIS to teach or instruct others to try to use Bitcoin. But this was just like, you know, people posting on social media. I can never confirm, you know, if there was an effect and if terrorists were actually using it. 26. So it was something I sort of left aside. But at the same time, this was also when you had people talking more about Bitcoin and talking more about blockchain. So I just sort of naturally became

more interested in this technology that I was hearing about. I started to research it on my own. But in 2016, something came up. In 2016, there was a media report coming out of the Middle East that there was a designated terrorist group that was fundraising through Bitcoin. And what I did was, I actually remember it to this day because I saw the report. It was just sort of a passing report from some obscure media outlet. And I said to my interns, I said, you know what, this is probably just another one of these reports. You know, we probably can't verify it. So why don't you just take a look at it? I'm going to go to lunch and then, you know, let me know what you find. So I came back. And one of my interns, again, my interns were much younger and more adapted and aware of

technology. They showed me the social media post. Basically, they were able to find the social media post post that this organization had put up. On the post, it was saying, hey, you know, send us money for for guns and for weapons, et cetera. And there was a QR code. And that QR code went directly to, you scanned it, went directly to blockchain. info and you can see the address. You can see the wallet. You can see what they had raised. And right then, it sort of hit me. I said, oh, wait a a second. This is interesting. We can verify that this social media account is run by this organization, because it has a history. And they've posted this address.

And now we can actually see something here. And a light bulb went off in my mind. I said, this is, from a security perspective, this is great. You know, we can actually look and track what's going on here. Let's learn about this. And that was the beginning of me looking at these types of campaigns. And in the subsequent couple of years, there were a few others like that that came up. I mean, especially when the price of Bitcoin skyrocketed,

in 2017, you started to see, you know, like anything, you started to see more people engaged with crypto and you started to see some jihadist websites, propaganda sites, all, not all, but many of them soliciting Bitcoin payments. But let's, I guess, jump ahead to where that is now and what I think about it now. You know, a lot of people ask, well, okay, you know, will terrorists use Bitcoin or terrorists using crypto? And my response is the adoption, of Bitcoin or crypto by terrorist organizations, it's going to mirror the adoption that you see in the regular world. What I would say is that we've noticed in recent years different groups experimenting with crypto, particularly as fundraising. We've seen different campaigns. We've seen organizations

try to get money for their computer service servers. We've seen a few examples of these. These are sort of sporadic examples. But what it's clear to me is that, they're experimenting, they're learning. I've noticed an increase in sophistication with some of these campaigns. But also, what I've noticed is that this is, this is sort of just one tool in the toolkit, right, for any of these types of organizations. For many reasons, cryptocurrency is not good for terrorist crowdfunding because it is so transparent. So I think that keeps a lot of these fundraising campaigns from really earning a lot of funds. But there are probably other uses other money laundering uses, other use cases that it is good for, quote unquote, and is being used for.

Now, you spend some time in Afghanistan when you were at the CIA. Can you tell us a bit about what you were doing there and how that prepared you for what you're doing now and so your transition into the world of crypto? Well, my time in Afghanistan was, you know, I would say that it connects to my, current experience more in sort of the mindset that you have, particularly in dealing with issues like war, issues like security. You know, my role was as an analyst. I was providing analytic support and understanding of what was happening on the ground. And not even just, you know, militarily, not just necessarily what the Taliban was doing, but of course, just even what was going on in the country. You know, the U.S. there obviously was a military one, but what a lot of people don't realize is also there was a

reconstruction one, right? I mean, not just the U.S., but coalition. So the military needed to understand what was going on, and I helped to provide senior military personnel that sort of analytic support. But in terms of what does it do or what did it do for me today, goes to this question. This, I think, might be relevant for your listeners. it's one thing to look at foreign policy and national security sort of, you know, from a sort of individual perspective, like this is what I think should happen in the world. This is how I think foreign policy should run. It's different when you are in an environment where you actually see, you know, when you see the risks, when you see the threats, we see the political

developments happening, when you see, you sort of see the repercussions of corruption, you see policy going well and policy going wrong. And so I think it gives. me a sense that foreign policy is not a one-way street. It's not always simple. Whether presidents or military, political leaders, they make, they make, they have successes and mistakes. That's the way of the world. And so my, you know, the way I see the world is that, you know, often we're given a world, we have to figure out how we're going to best manage what we're dealing with. And also that there's a sense of responsibility, right? So when you think about foreign policy from the mindset of, okay, if I was responsible, right, for people's lives, how would I act,

right? When you're not responsible for people's safety, security, or well-being, you have a different mindset. You just sort of think, well, I wish the world would work this way. But if you're actually tasked, and as an analyst, as a CIA analyst, you're really tasked, you're not tasked with making policy. Like, that's actually what you're not supposed to do as when you're in the CIA as an analyst. You're supposed to check the survey the situation, see what's going on, and provide the best insights. And when you do that, you really think not so much about what do I want, but what are the people who are going to have to make the decisions? What do they need to understand? And that's how I approach the issue of crypto and illicit finance,

anti-money laundering risks. I mean, that's my mindset. I see the world that way. And I try to not get, even though I'm intrigued by blockchain technology, right? I don't think that technology should be over people. I'm concerned about people. So I have a mindset of one who's focused on supporting those who have responsibility to keep people secure. You know, one of the main things that we really want to dive in here is AML and KYC. And, you know, everyone in the crypto space, of course, is familiar with AML and KRC. And, you know, you sign up from exchange.

You have to go through that. And, you know, we kind of understand on some high level why it's there. But I think what's really interesting to dive into here is, you know, try to understand this topic a bit more deeply, try to understand, you know, where does it come from? What are some of the thinking behind it? You know, what are the trajectory? Where is it going on a high level?

What's the impact this is going to have, you know, all the cryptocurrency space, you know, in the short and the long term? I thought one way we could like start off this question is, is by asking a little bit about, you know, the history of AMA and K.C. So, you know, Sebastian pointed out, people have been exchanging things, right, for forever, right? Like you would have somebody like gold and, you know, buy something else. And you'd have this kind of monetary exchange. You had, of course, cash for a very long time. So there was kind of maybe little of this. So, what's the history of AML and KYC and how have what's the sort of the evolution it has taken? Great question. I think the one thought to think about all of this is all this AML stuff is when it relates to crypto, all this tension is because there have been rules that have evolved, like you said, for how financial institutions should run and how you deal with financial transfers. That's that's evolved. And now we have the situation where there's this new technology and people want

it to be a new way, sort of a new way of transacting. And there's this tension because there's an established order for how you deal with it. And I'll go into that evolution. So let's start by thinking of a fictional situation from the 1980s, right? This is how these rules evolved. So let's say it's 1985 and you're in Miami. Picture Miami Vice, the old TV show. And the guy named Tony Montana, also known as Scarface. He walks into a bank and he has a briefcase. Now, this guy's name is Tony Montana. He walks to the teller, he, you know, or sits down at the desk with this person, and he says, you know what? I'd like to open up an account. And the teller says, oh, what's your name? My name is John Smith. And he opens up the briefcase, you know, he says,

say hello to my little briefcase, and he opens up his briefcase filled with dollars, you know, a bunch of dollars, you know, maybe, I don't know, $500,000 worth of dollars, and he turns it over and he says, yes, I'd like to deposit this. And the teller says, okay, Mr. Smith, I'll sign you right up, here's your account, nice doing business with you, and he walks out. Okay, fictional portrayal, but in essence, you could maybe do that or something close to that in the 1980s in Miami. That obviously had led to some issues.

It led to banks being used for money laundering, cartels using them, people washing their money right through financial institutions. And then also when they wanted to send money to and fro, they could do it to unknown people. So it became a big problem, right? So by the end of that decade, by the end of the 80s, there was a sense amongst a lot of countries and the G7, the group of seven countries in particular, were looking at this. And they said, you know what, we have to sort of codify some rules around how banks deal with their customers and how we deal with financial transactions so that we minimize these things. So we make it difficult for a Tony Montana, Scarface, who says he's a different name, for him to use the banking system.

So out of that came really this coordinated effort by different governments to raise anti-money laundering. standard. And that came in the 90s, the early 90s. And through this one organization, they formed this organization called the Financial Action Task Force. And Faddaf, you know, it really didn't have much power except the power of each government to say, okay, Fatif, you guys get together, all the financial people in the countries, the heads of the ministries and central bankers, you get together and you come up with the rules for how the banks should manage, how they should manage themselves to prevent the use by criminals. those institutions. So they came up up with a group of standards. And that sort of evolved. It was, again,

the idea was to have standards so that each jurisdiction would then have standards and then that jurisdiction or that country, right, would then go to its financial industry and it would make sure that all of its banks followed these rules. What are some of these rules, right? I mean, you talk about AML, KYC, you know, know your customer. Banks have to make sure that they know who they are dealing with. So you say your name is John Smith. Okay, let me see you. your ID. Let me get two forms of ID. And over time, this actually evolved after 9-11 with more completeness. After 9-11, there was another effort, a ramped-up effort, to make FATF standards not only just be about anti-money laundering, but also combating the financing of terrorism. And you hear people

say AML, CTF, or CFT. So the early 2000s, you had basically clear standards that, you had, that all governments that should belong to this organization, FATIF, all standards for them to regulate and manage their financial sector. And I'll give one quick anecdote so you understand why these standards are relevant, particularly on the terrorist financing. So the 9-11 attack, I forget the numbers, but it was funded with less than, you know, less than a million dollars. I forget if it's 500,000 or 400,000, something like that. Now, when that attack happened, investigators went back to try to figure out, well, how did these 19 hijackers, how were they supported? Because they didn't have jobs, right? They were going to a flight training school. They were in the U.S. for however long. But they had money that came from the outside. After the attack, investigators were able to go back and identify how the funding happened, where funding came from, because

really of some of these rules that were in place. And I'll give just one example. Now, 9-11 attack came through the banking system, came through the conventional banking system, right, more than anything, not necessarily even like hollas, but mostly, you know, the banking system. And investigators were able to see that there were payments from like a money exchange. And I forget the exact one, whether we're talking like a money gram type or Western Union, right? But the financiers that were in the Middle East, mostly, transmitted money to the U.S., to the hijackers. And there were lots of payments that went back and forth. The investigators were able to pull up those records and see that a lot of times they

were, the financier was trying to hide who they were. But guess what? Even when someone is trying to, even when a terrorist financier is trying to send money, he may put a fake name, but if you go through the AML procedures through those exchanges, you have to put either an address, you've got to put a phone number. And even some of these guys, they would put a fake name, but they're going to put a real phone number. Why? Because they want to make sure that transmission goes through. And if it doesn't, they want to be reached. So these are little, you can say slip-ups. So they were able to use that

identifying information to then build a network, figure out who would send the money. And that actually helped the investigation of those attacks. So again, that's after the effect. But it's those rules that are in place that law enforcement is going to want to use to go and, you know, to investigate when illicit activity is happening. So would you say that there was like a clear trend towards more AML and KYC rules after 9-11? Is that when really things accelerated? Yes, absolutely. I mean, I remember, I mean, I'm older than I look. You know, I'm in my mid-40s. And I actually remember in the 2000s, you know, when I got a bank account because I graduated from grad school and I remember moving to a new city, moving in D.C. And I remember that getting a bank account seemed to be much more, not more difficult, but they would require more IDs like a passport and, you know, a birth certificate or whatever.

You didn't have that in the 90s. I mean, I can see that you didn't have that at all. But the rules were much more strict. So the financial sector, not only that, be also the issue of sanctions. You had North Korea sanctions that were implemented. You started to see more of an effort to clamp down on a lot of the loopholes that allowed, whether it was terrorist financing, drug cartels, you know, nuclear proliferators who also would try to use the banking system or the shipping system. Yes, a greater effort to ensure that financial institutions followed certain rules to make it difficult for people to use this system illicitly. Do we have a sense today of the cost, the sort of global cost to business of AML and KYC? Are there any figures on that? Does that exist?

I don't know offhand, but I do know that I may have seen them because I do know that people have complained about that, right? The cost of what we call compliance, right, the term that gets thrown out. compliance from a banking perspective or financial institution perspective, compliance is simply you make your institution making sure that the bank is following all these rules. It's not onboarding customers anonymously. It's looking at use of funds that you're doing due diligence on your customers. That is a, and also that you're not sanctions compliance, which relates to the AML compliance, right? You're making sure. OFAC sanctions, etc. Yeah, OFAC sanctions, right? treasury the treasury department that that puts out these sanctions you have to make sure as a bank

that hey your customer comes up that says his name is john smith that his real name is not kim jong un or that he's not kim jong un's you know uncle uh using the bank on behalf of that you have to make sure that you're not violating sanctions or that through your through your institution so there's a huge cost there's the financial cost there's also the the cost of you know someone say the issue of financial inclusion, right? If you have all these standards, you raise the bar for who can use the bank, you make it difficult. You make it more difficult, right? If you don't have an ID, these are some of the other costs. That might not be financial, but could even counteract some of what you're trying to do with terrorist financing. These are all issues. And the thing is, I think a lot of times

folks in crypto are engaging these issues, particularly this issue of derisking and the problems of compliance. Some people will say, well, anti-money laundering, you know, all these standards aren't good because so much money laundering occurs. I mean, Treasury, U.S. Treasury acknowledges. There's money laundering that goes on in the system. It's not like this is a zero, you know, no 100% successful thing. And many people criticize and say it's very unsuccessful. But again, this is what you have to think of.

Okay, how do we deal with this? Is the issue that because of the cost, that we turn off these standards, or we turn down these standards, that we turn off these restrictions and controls? Or do we still just have to address them through, policies through, you know, whatever, whatever ways society has to figure out. Yeah. I mean, the way that I tend to look at this and my thinking about this is change. And I think it has mostly since I've been in the crypto space and I've been working for and alongside companies that are having to do compliance is that the systems that have been

put in place are meant to, of course, prevent money laundering, which may be used to fund terrorism, to fund crime, you know, all these bad things that society doesn't want. And, like, I think we all, we can all agree that, like, these things are not undesirable in society. But in a sense, states and the police and sort of, like, authorities have failed to control these things and have failed to properly police these things. And so what's been done is they've essentially deputize and give, you know, pass this responsibility and this cost onto industry where they've failed.

to, you know, properly prevent terrorist attacks and things like this, they say, okay, well, you know what? Here, banks, now you're under the authority, you're authorized and obligated to do all these compliance and do all these things where we have failed. And all that cost is now on to you. And by the way, we're not going to, you know, pay you for this work, which is meant to be, you know, it should be our work. We'll just fine you if you don't do it. If you do it wrong. Right. Well, just fine you if you don't do it. Like, if you were to, you know, just change the names of the actors in this sort of in this scenario, it sort of looks like a mafia organization, right? That is itself trying to get others to do their bidding. From that perspective, I think,

I don't know if it's unethical, but it's highly questionable, right, that states would impose this on companies. And when you're looking at the crypto space specifically, and we'll get into Fadov and the travel rule and this sort of thing, you're talking about small companies, many of whom don't have the resources, you know, the resources, the know-how to implement these sorts of this compliance, and that might end up causing tremendous harm to the crypto industry. I mean, as we're recording this in France, there's a new lobbying association that is being launched. It's being announced actually tomorrow as we're recording this. And one of our goals is to lobby the French government and say, hey, like, French companies

can't comply with the travel rule. it's too much. Like we need to really like take this, take our foot off the gas here and really assess the situation before we start imposing all of this compliance on French companies, which won't be able to,

you know, who won't be able to implement them and we'll end up closing up shop and well, who's going to come in? Well, the coin bases, the companies that have money will end up monopolizing the market. So that's just sort of like

a bit of a rant on that. But, rant heard. Rant acknowledged. You know, your thoughts, acknowledge. And maybe I would pose the, I mean, I don't know if you want me to respond with the, please, yeah. Okay. So I think my, my thought on that is then, well, there are two thoughts. One is, does the crypto, I know we haven't just been talking about crypto, but, you know,

does the crypto space want its cake and eat it and wants to eat it to? Meaning, okay, so we're going to say, I'm going to say we with the crypto space, because in a sense, I feel like I'm part of the crypto space, even though some people would probably, you know, revoke my crypto pass. We're taking your ledger. Take my ledger, right? Hey, I thought this was decentralized. Come on. So in the sense that, okay, we want to say we have a new way of transforming the way we deal with money, the way we deal with transfer value.

We've solved the double spending problem and now we can, you know, make a new way for the financial system to work. So, okay, all right, we acknowledge that. But the other side of that is, okay. So how do you then take that idea of how transacting financially could be cross-border peer-to-peer decentralized? Then how do you then take that and really make it scale without dealing with some of these things? I mean, so in the midterm, maybe you, in the short-term midterm, maybe you can create something, right? Maybe you can do all these great things and you see the benefit. But there are these other external forces that you have to address that anyone's going to have to address when you get into the issue of scaling.

I don't have a solution for de-risking, for the impact on business. I acknowledge it. I think the way, the question that I pose back to those that make that, that have that complaint is, well, then what is the technical solution for this? Is there not a technical solution? You know, if people are so creative to come up with these, you know, totally creative, you know, protocols and platforms, well, are they putting time into maybe a KYC platform that does preserve a privacy in some sense, but then also allows you to authenticate someone.

And, okay, now that if you've created it, how are you going to scale that? What is the work? Maybe there's policy work. Maybe there's lobbying work. There's a whole bunch of work to make that be. You can't just create the software and then think that's going to reshape society, which I think a lot of people think. It's a lot of other social, political work that has to go on.

So I'm not saying I have a prescription for how, you know, how to make the changes anyone wants to make. But I'm just saying that, okay, yeah, these are these are issues. These are policy issues. And there are some people that are dealing with it. Some people are thinking about financial inclusion. Maybe they need to, and how the technology could help that. Maybe they need more of a platform. But these issues don't just go away because we, we see them. I mean, I guess there's also sort of a, you know, a fundamental, maybe a clash, right, the values and a vision that's at hand here. And I think if you look at the cryptocurrency space,

you know, many people have this view that, you know, financial privacy is like very important, right? And that's something that, you know, needs to be protected. And, you know, that's in a way that is very important. And of course that means, you know, some terrorists will use it. Right. Of course that means, you know, like some people will end up, you know, doing bad things, right?

which is sort of, you know, the consequence of freedom in a way. And then I think you have on the other side, you know, let's say somebody in counterterrorism, you know, who's like, I'm going to, you know, I don't care about that, right? I want to prevent terrorism, right? And whatever to take prevent terrorism and like financial privacy, you know, that's not my problem, right? Like, it's about preventing terrorism. So how do you see that playing out? Do you think that there's just a sort of a fundamental incompatibility and, you know, there's sort of going to be like this kind of clash of forces and then, you know, we'll see which side ends up prevailing?

Or do you think there's some things that could happen here? Well, I think that there's a different way to look, or there's a way to look at it, which I think is different, which is that this clash does not have to result in a zero-sum game or it isn't a zero-sum game. And so here's a perfect case. And this is particularly true, I think, with the way U.S. regulators have dealt with it. So I'm going to talk really from the perspective of what I see, how the U.S. has been. because really, I'd say the U.S. has been more forward-leaning and ahead of other jurisdictions, especially Europe. I mean, I must say, I think, with guidance, which is clearer, so the privacy aspects of cryptocurrency, whether it's privacy coins or whatnot, the U.S. approach has not been to ban privacy or to ban privacy coins or to make it illegal

to work on these things. The U.S. approach of, let's say, FinCEN, right, the U.S. financial regulator on these matters, the U.S. approach is really focused on the business of money transmission, how to regulate the business of money transmission. So the U.S. isn't even outlying mining or anything, right? It's not saying that you can't, you know, you have to register if you're, if you're mining, that you're a money transmitter. The U.S. has a pretty clear cut definition of who is regulated and what activity is regulated. So, What do I think this is going to evolve into? I think because you can't ban open source software,

I mean, you can try to ban it, but it doesn't, you know, it's not going to do much, right? These tools are going to be here. They're here. The genie is out of the bottle. You know, blockchain software is not going away. It can't be banned out of existence. So just like you have software like Tor, like you have other types of software that

helps with privacy, it is going to be there. It is going to be in existence. So if Sebastian has Monero and Brian wants to send some Monero to, or I shouldn't pick on one, you know, but send a privacy coin to someone, that and if, you know, Brian's in the U.S., you know, that's not illegal. And I don't think it's going to be illegal in the U.S., right? What the U.S. is going to address is, okay, well, Sebastian, are you now starting a business where you're you're pretty much the guy that has Manero and people come to you and they

get their Manero from you. Well, if you're going to do that, Brian, you need to register with FinCEN, you need to file, you know, suspicious activity report. Like you are a money transmitter. You need to be regulated. So if someone wants to transact, you know, it's going to be available, just like it's available for people to use Tor or to use, you know, VPNs or whatever. Now, it may be difficult. it may be harder, but that's just the nature of that's what we have today. So I think for those who value privacy so much, they're going to be able to move around anonymously or suit anonymously on, you know, using crypto. It's not going to necessarily go away and the government is not trying to ban privacy. But let me add, if you're saying, so you have to think about the other

alternative. So if someone is saying, well, you know, these rules, they, you know, they're going to, someone's perspective or their one government's perspective, and I don't think that we should have these restrictions. Okay, well, so here's the thing about having your cake and eating it too. So crypto space, you've created this great new way of transferring value across borders, peer-to-peer in a decentralized way. Okay, so let's take things to their logical conclusion. So now when Tony, you know, back in the 80s, when Tony Montana wanted to ship millions of dollars across borders, Tony Montana had to, he had to bribe the border guards, he had to have a middle man, he had to get pallets of cash. He had to use a plane. It took him a lot to move millions and millions

or billions of dollars in the old days. And in today, if he was using cash, right? Because a lot of times we say, well, hey, it's the same as cash. Okay, but today, now, let's say crypto scales in the way where now Tony Montana 2.0, he can move billions of dollars with no friction, anonymously from an anonymous point to an anonymous point. And we've evolved in that. way where now that is possible through a decentralized matter. Now that may be a technological achievement, but you also have to realize that there are going to be some externalities that not only will it just be a case of maybe a couple of terrorists using it or a couple of bad people, you are now enabling the potentially total anonymity of illicit proceeds across the world in seconds. That situation

has never existed before. So you would just have to think about, okay, well if that happens, how would you deal with that? If anonymous transactions, totally private transactions scaled in that way, what would you do? I mean, that's not going to be just a case of a few bad people using it. It's going to, you're probably going to have to create some other infrastructure to deal with that. Someone's going to have to. So I just pose that out there that if we take things to the logical conclusions, these issues don't go away. And privacy, now maybe other jurisdictions are going to ban privacy coins. Maybe they are going to say, you can't download such and such protocol. And that's a matter where then that, you have to do that society and that government has to deal with it.

But I actually think the way the U.S. has addressed this is more balanced than people are giving it credit for. That's an interesting point. I tend to see the evolution of money going in similar ways as sort of the evolution of communication. So, you know, Bitcoin is simply the transmission of information. And you made a statement somewhere in one of the articles you wrote stating that your position on privacy with regards to written communication was that you thought that it was reasonable to allow people to have privacy, but that payments you were less favorable to sort of full privacy and payments. Can you explain why you think this is the case? and don't you see the, I mean, I see sort of a, I sort of take issue with this because to me, you know, the transmission of money going forward is simply just another form of communication,

you know, much like we send, you know, messages or have APIs or whatever. It's just a continuation of the evolution of money. Yeah, I'm glad you pointed that out. And the reason why I take my perspective is I just make a greater distinction because of the role of money in the world compared to communication. Now, you know, I guess you can make the case. I mean, if I want to, you know, answer my own argument, right? I could say that, well, hey, right, communication is probably more powerful than money in many ways, right? I mean, you, right? Communication has led to revolution. I mean, hey, the Declaration of Independence is like one of the best communication documents

out there that has changed society and changed, you know, civilization, you could say. And there's more more like that. So it's not to say that communication does not have relevance. I'd make a distinction with money because think even more about how critical money is to motivating people and incentivizing behavior. I mean, communication is you transmit something and you need a little bit more than just information. Like you need a lot of support. I mean, you need a lot of social stuff that goes with communication. People can be bought and people will do things for money that they wouldn't do for without money, even if they had an ideological commitment. And so I think I'm just concerned that if money became as frictionless at scale as communication is, that I guess what I'm

saying is that the repercussions would be greater than we are thinking about. And so I'm going to stand, I'm going to sort of stand in that, that I would not make that connection. I would not say, I wouldn't make that parallel, that comparison and say that, well, it's just the same as speech because speech doesn't pay people. So that's just a distinction. I mean, and I totally, I totally get it. I totally get, I understand it. I don't feel that makes a lot of sense, to be honest. I mean, if you take your example before of Al-Qaeda on 9-11, right? Like, I mean, if you look at, imagine all that communication that went on to facilitate that. And, okay, they also send some money, right?

But, like, you know, in a way, if you think of, like, the amount of information, the amount of work, the amount of thing, like the people being able to communicate, you know, certainly a much greater part than sending some money to pay for flight school or something. Well, I mean, think about, it all has to do with resources, time, energy, attention. I mean, if you think that, so let's just say this. Like, that's an interesting point, right? Because we actually do see that a lot of the plotting that ISIS has done in the recent years, right, have not involved money. What ISIS has done is it's done these virtual planners, which people kind of do what you're saying, which is they've used communication, secure communication, propaganda to try to inspire people to do plotting in Europe, in the U.S., right? this is actually what we've seen. And so here's the thing, though. That has happened because we have encrypted communication, because we have free communication, because we have the internet. Much of that

plotting, particularly, you know, towards the U.S., has been very unsuccessful because there was not a transmission of resources along with that, because it's so hard to do that, because it's so hard to use the banking system now to fund some sleeper cell, some cell that you're trying to work with. So, if you had more money, or it was easier to transmit money to those guys, value and for that value to be used for services, honestly, you would have a lot more havoc. So I actually think that makes my point. I don't think you can discount money and say, you know, if they had, you know, that money wasn't a factor. Money is a huge factor in providing for the resources for people to do bad things. And without the money, it's going to be a lot harder.

So I live in France where we've had our share of terrorist attacks in the last couple of years. And for the U.S., there's a number of things that have protected, I think, that are not the case. Say, in Europe, for instance, like the proximity, there isn't an ocean between immigration laws. All of these things contribute to making the U.S. a much safer place in terms of counterterrorism than, say, France or the UK or Germany or places like that. And I don't know, but I don't think that the, like, Kawashi brothers and, you know, Kudibati and all these guys that perpetrated the Paris attacks in recent years had received any direct funding from any of, like, the Daesh organizations, no.

So what you have had is, and, you know, again, tangential topic, right? Because we're talking about terrorist plotting, which I even said with 9-11, right, does not take much money. 9-11 didn't cost a whole lot of money, relatively speaking, and the plotting happening more recently in Europe, again, not a lot of money, right, to do these types of attacks, to get the, even the weapons. And in fact, what you've mostly have had is you've had a lot of people using, you know, legitimate systems or illegitimate system, but right, but not stuff that's crypto, right? They found ways to support themselves or to pay for what they need. So correct.

But what I think I'm trying to do is you're arguing here in the same way that when people talk about the banking sector, they'll say, well, wait, we have all these laws and don't you see their criminals are able to circumvent the criminals are doing X, Y, Z. If you take those laws away, you have to admit that just logically, as much money laundering is already occurring, you're going to see an increase. for someone to say to go to the conclusion of, well, so they're not really working, so let's get rid of these laws, then everything will, it's not going to be a change. When actually it's going to be, no, there is going to be a change. That particular problem may be worse, probably is going to be worse. And I would say for a lot of these issues also, it depends on your perspective, right? I mean, I encourage people, what I gain from working on financial investigations and as a

counterterrorism analyst is I honestly try to think, like an illicit actor so I can stop them. And so when you think like an illicit actor, I mean, it's funny, when we have these conversations, often I think my issue with the crypto space is because the space is reacting to what they feel is maybe overhandedness or just constraints or unethical constraints they'll accuse, they will dismiss the risks or minimize them. I think you have to, you can't minimize or dismiss them, right? You have to accept.

And if you're going to say that there exists, you have to say, how are you going to deal with them. That's absolutely a fair point. And maybe it kind of brings us into another topic that, you know, we really wanted to discuss with you. So I think it was last year that there's this organization that you just mentioned before called the Fat F. Some people say FATF.

Yeah, FATF. So that they put out this recommendation around the travel rule. And I think the travel rule is something like, okay, some banks and some fund to another bank, they have to kind of send along like, you know, information about the origin of the fund or like who the fund owns. They made this recommendation. I think that this should also apply to cryptocurrency transaction. And this has caused quite a bit of, you know, I would say confusion, maybe fear, maybe

disturbance, maybe responses like this is totally ridiculous. These people have known. But I'd love to kind of get your point about what does this guidance say? And what do you think the impact is going to be on the cryptocurrency space of this travel rule that's now supposed to apply to crypto? Well, on this, as you might guess, right, I have a contrarian opinion compared to most in crypto. And I have a different way of looking at it. Most people will say, they'll echo your sentiments, which is, hey, this is, is this doesn't make sense because one, crypto doesn't work this way. How could you order people to

share information, right? The travel rule, I mean, you somewhat summed it up, but just to be specific, the travel rule is specific to if you're a financial institution, you know, or money service business, and you're sending a transfer, you have to make sure that the user that you know who they're sending it to, both sides, you have to retain that information. You have to make sure you share that information. So it's this communication of really the ID of the people, the customers that are transacting through your institution. And so that's what the travel rule is in a nutshell. And so FATIF came out with the FATIF rules or the guidance were basically to set the standard, almost to include cryptocurrency businesses, they call them virtual asset service providers, but to

include them in the standards, the AML standards that we have to this day. My contrarian opinion is that this is not bad for crypto, but this is good for crypto. In the sense that, okay, if you want this stuff to scale, if you really want it to be used internationally globally, you want it to go from just being a fringe thing that just a few people do, it's not really, you know, widely adopted, really the only pathway to do that is to reconcile these laws, rules, and standards for how we deal with international transfers. And the reason why is because of all the stuff that we've been talking about before at this point, right, in terms of the history, the evolution of money laundering. Like, these standards for transacting financially don't go away just because now you have a new

way of transferring. I would say that this is more of an opportunity because unless you reconcile these constraints, I just don't practically see how you're going to build platforms that are going to be used in the way that folks in the crypto space say they want them to be used, unless they just want to be the niche group that they are now, which is just a few people that can do one-to-one, a few transactions here and there, but you're not going to get global adoption. So I think this is actually an opportunity. There's going to be pain, and there's probably going to be consolidation. I'm not a heartless person, but I'm just thinking practically, yeah, I mean, if people

built a business model that totally neglected this stuff, probably because they felt, well, hey, there's no real rules or guidance. And now they're reaching the wall that was always there in terms of scaling. And now they're going to have to figure out how to address that. Or maybe they need to figure things out and reconfigure their vision. So you said, okay, there's going to be paying. And of course, there are questions, right? Like, let's say somebody develops a wallet, right?

That's like a non-custodial wallet. You know, maybe it's an iPhone wallet. and people can just receive funds and send fund. And, you know, you don't have to make an account. You don't have to give your... Another example would be, you know, there are things like, you know, Bitcoin wallets like Electrum, right? Like you download in your computer, run it on your computer.

You know, people building Electrum have no idea, like, how many users are there and stuff. How do you think the travel rule will play with those kind of non-custodial wallets? And what are the other, you know, these points of pain? that you think are going to come because of the travel rule. So in the sort of short and medium term, those examples that you brought out aren't going to be touched too much by the travel rule or impacted

in the sense that, let's say from the U.S. perspective, right, the travel rule deals with financial institutions or these organizations that are now money transmitters. If a Coinbase actually customer transmits with a non-custodial wallet, based on the travel rule, that's not a travel rule transaction. maybe a lot of people don't know this because it's not institution to institution. It is financial institution to just a non-custoda wallet. So the Coinbase may be saying, oh, okay, well, I don't have to worry about that.

But Coinbase is going to have to worry about if it's going from Coinbase to Bitrix, right? Because those are two money transmitters that now have to sort of take account and follow the travel rule. And that's why I was saying a lot of the software that's being created that people have access to and they can use, if it's their choice, they want to use a clunkier. They don't want to use the cryptocurrency exchange. They want to use some sort of other, their own non-constitutional wallet. They can do that. So all this is doing is it setting the standard for those institutions that are acting as money

transmitters. So in the short term, it's not going to do much. In the long term, I do think there will be an impact indirectly. Because, honestly, I think what a Coinbase, what a Bitrix, or name your favorite exchange, I do think that there is going to be more scrutiny on non-custodial wallets that have no K-Y-C. I just don't see how you can get around it. Because, yes, the privacy enthusiasts that want to keep their money away from the banks that don't want to be part of a, have a third party, they want to use non-custodial wallets. But you have to admit that elicit actors, what's going to be their preference?

Do they want to use a coin-based wallet or do they want to use a non-custodial wallet that keeps everything private that has mixing software built into it? they want to use the latter too. So a Coinbase compliance team, whether they say it or not, I mean, they're going to have to assign greater risk, I think, to non-custodial wallets, even if it's not a travel rule issue. And I do think that is going to impact years ahead in the next, you know, several years. That may make non-custodial wallets the thing of privacy enthusiasts. But in the U.S., I don't think they're going to go away. I think you can still use them, just like anybody can use Tor and use all types of security software, you can still use it. You wrote this other, in one of the article, you talked about, you know, this potential kind of divergence.

And you're talking about how we might have a sort of, you know, good crypto and bad crypto. And yeah, like, is that kind of what you're talking about, you know, let's say that Coinbase says, okay, you know, we're only going to let you withdraw your bitcoins to some, like maybe they won't let you withdrawal to maybe some wallet that really favors and tries to emphasize non-constitutional privacy-centric approach and that you then have this more kind of isolation where you may have the same blockchain, right? Like let's say Bitcoin. And some of the Bitcoin's kind of like moving in this regulated realm and then some more

in this other realm. Is that something that you could see? Or like, what do you mean with this division of good versus bad crypto? Or here's another scenario, perhaps, just to add on to that, where, you know, you have perhaps, you know, companies that are operating in a jurisdiction that is, you know, not part of the FATF or that is, you know, deemed unfavorable by these more regulated space. Yeah, sanctions. But it could be just like someone who moves their company to Panama or something. I don't know if Panama is in the FATF. And then all of a sudden, like you sort of have these tokens that are, like Brian said, right, they're no longer fungible.

that are sort of like these two realms operating within the same cryptocurrency. It's not funny, but in essence, this is the problem, particularly with a right of public blockchain that is invisible. The fact that now you can see the origin, right? You can see the provenance of your crypto. You've hit the nail on the head, which is from the standpoint of folks who are looking at risk, who are trying to minimize risk, who don't want OFAC to come after them or, authorities to come after them. Yeah, it's sort of a logical conclusion is that you're going to try to minimize that. You're going to minimize situations where it's likely illicit activity is going through

your platform. And the biggest factor is, do you know who that person is? And if you don't know who that person is, yeah, you are incentivized, again, not to drop them, but maybe you're going to put in measures, right? Maybe you're going to put in a threshold where you only allow certain amount to go through a non-custodial wallets because you don't want to get rid of them and you want there to be financial inclusion. I think you can see those things. And so the two crypto ecosystem that you mentioned that I wrote about, I mean, it's funny because this was like, I think I wrote that in 2017. It was just this idea that it just makes sense. As crypto gets more institutionalized, as it gets more accepted, right, you're actually going to have institutional money going into it. You're going to have a more

of a formal use of it. And a lot of people don't like that. You're going to have people that want things to remain quote unquote dark or to stay anonymous. And there are lots of blockchain projects that are doing that to this day. Right. Mimble, wimble, like there are all these protocols that are trying to maintain anonymity. And I just think that if the broader sector grows, there's going to be the clash that we talked about at the beginning of this. That clash out of all the things, it's great because we're having this very spirited conversation, I would say, not even a debate, but a good conversation. My thing that I will push back for the crypto space is, okay, you have to reconcile these issues and your argument cannot just be that they're going to be bad people

using crypto regardless. It's just not enough when you're talking about things on a large scale. So I would put it again, back for the crypto space needs to think more about these issues. And I'm not saying that they have to do what the government. Like the U.S. government is not telling people what sort of protocols to make. U.S. government is just saying this is the financial sector. This is how we deal with finance globally. These are the standards. you want to do something on your own one to one, but government has a role in terms of business and finance, and if you want to create something different and new

that's going to go against that, you've got to figure out how you're going to reconcile it. I don't have the answer. I do want to talk about the kind of a related question. And, you know, Sebastian mentioned Panama before. I think there was just like last week or something like that. There was this cryptocurrency derivatives exchange called Deribit, which is one of the largest,

they were in the Netherlands and they announced, okay, we're moving to Panama, you know, because we don't like the new AML rules that are coming. And, you know, we think it creates too much of a burden for people to, like, onboard and use the platform. So, of course, the crypto space, probably more than any other industry that I'm aware of, at least, is very global.

And, you know, companies almost from the start, like Target, customers all over the place, protocols, you know, they're also completely open, right? They can't even enforce things like sanctions rules. How do you think it's going to play out? Do you think that we will see an increasing maybe regulatory divergence, right, where you have, you know, companies go to favorable jurisdiction. Some of them use this as a competitive advantage. They get business, right? They get attract startups. Others try to crack down. But we have just this ability for people to go where it's favorable. then that kind of prevails, which I would say is kind of what we're seeing today a little bit, right?

You have BitMex, Binance, many of the biggest platforms tend to kind of take that approach somewhat. Or do you think that maybe large players like the US, maybe the EU will actually and we managed to, you know, almost create a greater harmonization and impose these rules across the globe? Well, I think you're in the midst of seeing this sort of transition. One, I mean, you mentioned Europe. The funny thing about Europe is I'm pessimistic about how Europe can manage all of this or the EU because I mean, I visited just a couple of places in Europe, but I was in Germany recently a few months ago. And there's just, I think, just so much confusion, right, between what the EU says and then what the local country is going to say and how do you coordinate? that. I think what we're seeing now is crypto being welcomed to the issue of regulatory arbitrage, right? That happens in the financial sector in general, which is certain jurisdictions,

certain countries have, quote unquote, good or high levels of AML standards and certain ones don't and are questionable. That's really what FATIF is about. FATF is about trying to bring all these countries to a certain standard. The U.S. sees it as an ongoing problem. Don't mention crypto, not even with crypto, but with money service businesses in general and with banks. It's already an issue for the U.S. perspective that certain jurisdictions, you know, allow so much private, you know, shell companies. Actually, the U.S. is bad with shell companies. I should acknowledge. So this is already an issue with AML regulations writ large. I would actually just say that all that's happening now is crypto being welcomed into it and that crypto business

have had the benefit of their regulators not really knowing what to do with crypto and they're not being clear guidance. It's a new technology. So people have been able to create businesses that have customers and that are earning money. And now the landscape is shifting because regulators are catching up. And so what is going to happen? There are going to be people moving to Panama. There's going to be people moving to these other jurisdictions. And it's going to be a bit of a, for regulators, there's going to be a cat and mouse game because crypto is global. And how do you crack down on this? How do keep, it's going to be difficult to. I'm not saying that, you know, this is a easy sort of issue. This is regulatory arbitrage that occurs in the banking sector, even.

You mentioned Europe. With regards to the ML5 directive, which came from the EU, how does that relate to the FATF? Is it the FATF puts out recommendations and then the EU also then applies them in these directives and then that gets kind of trickle down into the different Euro. European countries? The way to think about this is, which can be confusing, is a lot of this is happening or has happened simultaneously, and they're not always directly connected. It's almost like different authorities are responding to the same set of problems. I would put it like this. I would actually say 2013, the U.S. actually put out guidance about how cryptocurrency businesses should be run or should be regulated. And that was actually before European countries had done

anything like that. So the U.S. had already sort of put out a model. Then there were conversations with FATF, which, you know, the U.S. had probably informed because the U.S. is a big player in FATF. So there have been conversations in FATF about how should all countries deal with this. At the same time, Europe and the EU was also thinking about the same question and it came up, they figured out, well, we need to have like a new way of anti-money laundering. So a lot of this is happening concurrently. They're having the discussions at the FATF level. EU is having discussions. And then the countries are having the discussions. 5 AMLD is already voted on.

That was already in train, I guess, before FATF came out with its thing. And now what you're going to have is with FATF, the 5 AMLD and FATF, right? They're sort of both ordering something. I think the way you can see it differently, though, is that FATF doesn't have any ability to enforce. It's just these are the standards. 5 AMLD, I mean, that's the EU's thing and whatever powers the EU has over the actual central banks, right? There's power leverage there. Fadoff does not have the authority to enforce what a

country does. The only thing FATF can do is FATF can say, oh, well, this country doesn't meet the standards. It's not making you do anything, but it can assess you, it can put you on what's called the FATF gray list or the blacklist, which there aren't a lot of countries on. But FATF can do that. So they're all sort of interplaying at the same time. Right. And we should point out that individual EU countries like France and Germany are part of FATF, but also the European Commission itself is a member of FATF. And so these recommendations are then making their way into EU directives that then make their way into nationalistic regulations.

There's a lot of layers here to unpack. So before we wrap up, I just want to sort of get your high-low thoughts on where you think the space is going and where do you see cryptocurrencies in the next 10 years with regards to all this stuff. Well, I'll just put the caveat there, right? no one knows and whatever I give you, right, is obviously not a prediction could happen. We'll hold your cheer words, sir. I don't think this is going to be a do-or-die thing for crypto.

Honestly, I think the world evolves. I think the space is going to evolve so that there is, I won't say a happy medium, but I will say that I'm not one of those, what, blockchain, not Bitcoin people at all. So I don't want this to be misconstrued. I think there's going to be a role for crypto. Once a lot of this AML stuff gets worked out, that some of the features of crypto that people do like, like real true public blockchain crypto,

that some of those features will be integrated and will be part of the global financial way of doing things, the global financial system. I actually think, again, if we're looking further out there, that there may be a place for public blockchain cryptos in financial transactions that maybe even banks will allow their customers to use them. Now, it's not going to look the way it is,

now. Maybe, you know, we haven't talked that much about privacy coins. Maybe there's going to be an adaptation of things like the Zcash type of protocol, right, where there are private transactions and shielded and unshielded transactions. I actually see that there could be value in that. I don't know how it's going to look. But I think that at least in the value transfer, the somewhat decentralized transfer of value, I think there's going to be a place for it. I don't think that the anonymous aspect that some folks advocate for is going to scale. I don't think it's going to scale very well. You're going to still have it, but it's not going to scale like many people want it to scale. And maybe that's fine. Maybe that's the happy medium.

The other thing that I would say, maybe this is a good thought to leave with, which is, again, more philosophical, maybe somewhat unpolitical, maybe, a lot of this back and forth that this crypto space is having on these issues is going to have to be dealt with by society at a societal level. maybe there has to be a compromise. When you look at the banking sector, it's interesting because earlier you were talking about this clash with banks being deputized and banks having to do what the government doesn't want to do itself. Now, there's another way to look at that, right, which is, yes, it's burdensome on banks.

Not that it doesn't want to do, that it can't do it. Okay, right, that the government can't do, right? The government can't do it in most of the societies that we're in, where we're broadcasting from because there would not be much openness to a government policing in real time all of your financial transactions. In most of our societies, what we have is we have this sort of interesting compromise where banks actually have access to your financial activity. They know what you bought, the credit card you're using, pay, but like they all know. Fortunately, though, the government is not seeing that data in real time. And they have to go through certain things in order to get

that information. And when they show up at the bank store, they can get it, but it's not in real time. And that is, that came about because of the way our society is structured, the way government is structured, the way industry is structured. That sort of evolution may need to happen incorporating crypto into that. How does that fit into that framework where we don't give the government 100% insight into everything everyone is doing, but there are, you know, there are these stopgap measures so that people that have authority can get that. Maybe that needs to be developed somehow in crypto. What I'm fearful of, and not to take it to very dark places, but, you know, let's have a look at this through a more dystopian lens is that effectively as governments and through the FATF and its reach, as things become more complex and governments want more and more access to people's financial data for under the guise of anti-terrorism and anti-money laundering, that we may get to a point where in fact governments have complete access, you know, in real time to everyone's financial data.

records. So that's one thing. And then the other thing that I think is potential risk is that these tools of surveillance might not have that much effect on us who live in affluent societies and have the means, et cetera, but they will most likely have more adverse effects on like the tools of oppressions are often used against more vulnerable populations than less vulnerable population. And so that's where I see the risk of this thing going is one, governments, in fact, inching their way into having more and more access to our financial data in real time and then also these tools being used to oppress people that really shouldn't be oppressed. The question is, then, how do you deal with it? Is it we're tiptoeing into a non-technical

conversation? How do you have a society that respects that? If there are settings where there's authoritarianism, do you change that with technology? Or do you, do you change that with technology? or does that change or evolve in a different way? And it's a tough issue to solve, but I think it should make those of us who care about those issues need to think more about the non-technological things at play. That's an excellent way to end it. Before we do, though, I want to direct our listeners

to anywhere where they might find your excellent writings. And why don't you tell us about your podcast briefly? Well, in terms of the crypto stuff, I'm a contributor to Forbes. So if you, you know, Google my name and Forbes, you should see a lot of my articles. I try to reproduce an article every month or so. And we'll link to many of the articles we referenced here. Great.

You can find me on Twitter at Sign Curve, although I'm taking a Twitter break right now, but S-I-G-N-C-U-R-V-E. Sebastian, thanks for mentioning my podcast. So, yeah, I created a podcast actually a few years ago, which is sort of a personal storytelling podcast that talks a lot about my podcast. own journey going, you know, working in National Security, a lot of personal stories. That podcast is called Rhythm of Wisdom, the Rhythm of Wisdom podcast, and you can find it on your podcast platforms. Be great if you want to hear more of my personal story. This is a couple of episodes. It's

really cool. It's like a storytelling of your time and the CIA and that stuff. It's really cool. Well, thanks a lot. Yeah, yeah. And it was great to talking to you. It was a really fascinating conversation and I look forward to speaking again sometime. Thank you both. Thank you. Thank you for joining us on this week's episode. We release new episodes every week. You can find and subscribe to the show on iTunes, Spotify, YouTube, SoundCloud, or wherever you listen to podcasts. And if you have a Google Home or Alexa device, you can tell it to listen to the latest

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It helps people find the show, and we're always happy to read them. So thanks so much, and we look forward to being back next week.