On The Brink with Castle Island - Leo Lucisano (Decentral Park Capital) on Regulatory Predictions for 2022 (EP.289)

Episode Date: February 23, 2022

Leo Lucisano of Decentral Park Capital joins the show. In this episode we discuss: Leo's regulatory predictions for 2022 and the beliefs that informed his blog post. Views on how DeFi would evolve in the face of a harsher treatment from the SEC. The emerging crypto lobby and how this will shape future elections and also policy. Lending, derivatives and other financial products in a central and decentralized context. How Decentral Park Capital is investing across the landscape. To learn more about Decentral Park visit their website.

Today on the podcast, I sat down with Leo Lusasano from DeCentral Park Capital. Leo is one of the most thoughtful people that have come across at the intersection of Defi in the legal system. In this episode, we discussed the current regulatory state for defy in the U.S., how DeCentral Park Capital is investing in the space and much more. I think you'll enjoy this one. So without further ado, here's my conversation with Leo Lusisano. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion.

This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the high. housing crisis. The bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. And print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin.

Leo, thanks so much for joining us today on the podcast. Yeah, likewise. Thank you for having me on. Well, you guys are coming off a fundraising announcement. So I want to talk first just about Decentral Park Capital. So maybe we could start there and just tell me a little bit about the firm. Tell me about why you joined and what you guys are up to. Sure. So Central Park Capital, we've been around for about four years. Founder, founded, founder led, specifically focused in the digital asset space, early stage blockchain businesses, now with the focus really on defy. So the interesting thing about the fund were, oh, I guess eight going on nine deep now, half of the team, if not the entire team have founded businesses or have been, you know,

operators or deep in the space now for a couple of years, which having stepped into the role here the last six months has made it, you know, fairly attractive coming on business. board to a team that's well regarded in the space, I think, and frankly, well regarded by other founders in the space that I know, which was, I think, kind of one of the big check the boxes for me. We did just close, I think, publicly our $75 million flagship D5 fund. So we've been deploying out of that now the last few months and are excited about putting that to work here in the next quarter or two. That's great.

What's a sweet spot for you guys? Do you guys invest pre-token launch, post-token launch? How do you think about that? Yeah, given where the market is now, we are in a couple of places. So pre-token, early stage, you know, sitting down with founders that we know or repeat founders, right, who have been in the space for some time. And then there we like to be hands-on, right? So it can be, you know, frankly, hands-on as possible, help drive alpha, help drive infrastructure, and kind of really bring the network to bear. And then obviously, if we're behind broader macro wins, right, we'll get into open liquid positions,

open token positions. And then from an active strategy standpoint as well, we have some very technically enabled and energized teammates where we've built out some pretty fancy infrastructure and like to kind of deploy through that, both quietly. One, because we think we have an advantage there. But then two, you know, it really keeps us plugged in on chain and gives us a nice insight into where the market goes. And I know your background is in law, actually, among other things.

So maybe let's talk a little bit about your path to crypto and how you got interested in the space? Yeah, so it's a wandering one, and I'll try to keep it brief because I always respect the guys that come on and are very brief in a sentence or two, and it's just so concise. But it was a little bit of a laundry once. We started off in traditional finance at PWC, last financial crisis, both before and after, in mortgage-backed securities and CDOs, structured finance, primarily. So I got a good, fresh look kind of on both sides, you know, the ramp up, and then the collapse onshore and offshore. Took a little bit of a break, went the military route for a couple of years, and then landed back at law school and business school.

And kind of there was the foray into my first, what I call, FinTech 1.0 experience. So went out to Silicon Valley, worked for a digital lender, alternative digital lender that was competing against SOFI, and really kind of embraced the kind of unbanked, the democratization of finance approach, right? I think that really resonated for me. Landed in, you know,

kind of the core team at a digital banking startup in Sweden, raised traditional VC money, and we're really marching at building kind of a challenge, bank that started on the deposit side, was moving over into the robo advising side and then lending. And so had a really kind of driver seat view to, you know, that sprint to consumer banking, democratizing consumer banking, ultimately ran its course and landed back in restructuring investment banking. From there, became the CEO of a B to C business, a design business specifically. And so through that process was really starting to think about how to showcase

designers, obviously that was happening in parallel to the NFT boom. And so it was kind of this full circle, you know, had very strong touch points early on with Intech 1.0. And then through this kind of operating role in the design space and thinking through how to showcase both design, design talent, the NFT side, I knew coming out of that, out of that business and out of COVID, that defy really and crypto would be next. And so obviously doubled down on the DEFI narrative, reach back out to the network, pounded pavement as one does in the space. And it was really interesting to see a lot of that fintech 1.0 wave

and the operators that I come to know through that experience several years ago on the West Coast, really come full circle here in New York on the East Coast, Florida, obviously, and then in Europe, this defy really took off here the last year. So you're someone that comes out the space with a really good understanding of the regulatory environment. And I'm always fascinated with people that really understand the space, well from a regulatory perspective and then continue to go really deep and are sort of maybe

unfazed isn't the word, but very constructive. So what's your just general framing on defy as it relates to the regulatory environment right now? Yeah, it's interesting. So I try to bifurcate or look through two lenses really, right? One is kind of my hopeful philosophical lens, right, around the promise of defy and trustlessness, right? And kind of alternative legal systems in governance in terms of how we can both deliver product, innovate in real time, and coordinate human resources. But then there's just having the touchpoints, right, of the last financial crisis by training and a lawyer and a CPA, right? And then also having operated a business, been in FinTech, went through that whole proposed FinTech banking charter and saw that come to

pass. And then obviously now in the defy world and knowing here the last year or two, obviously the regulatory drumbeat getting louder and louder. And as we step into this year, I think as hopeful as I am on a long-term basis, I think near term, right, we've got a lot of problems to solve and a lot of kind of challenges to overcome here in 2022 in particular. And I think you come at these from a couple of different ways, but what I find myself, at least founders that we talk to or investments that we look at, what I find myself thinking more or more, or at least expressing more and more is, it's going to be bloody in the near term

and very hopeful in the long term, but in the near term, we frankly have to embrace regulation or at least median regulators in the middle, right? And I think that's always, at least up until recently, that's been a total non-starter, right, for pretty much what I call not most, but a lot of folks, particularly people

trying to bring products to market, right? And I think that tone has really started to change here recently, I think, in a very good way, Because I think going into this year, there needs to be a real discussion around, you know, how we sit down and meet, whether it's compliant product features, whether it's specific go-to-market protocols, whether it's exchange-type businesses, how we get those close to a regulatory box. Because I think once we are able to kind of fit those into a regulatory box or a legislative box that works, that kind of great flooring event happens. and then we're really off to the races as an ecosystem as an industry. And I think that's been really hard to grasp for folks that have been very heads down now for the last several months and years.

And I think that's very much starting to change in many different ways. So you wrote this great blog post, blood tears, relief, sweat, then exuberance, as you're phrasing. And you had 22 regulatory predictions. So on that sort of first one around regulators coming to the middle, there's a world here where a lot of these tokens, end up being securities in the eyes of the SEC. And I'm curious your view on what the product ramifications would be for something like that.

I mean, you could imagine that a distributed file storage network is not very compelling if every time you use it you're making a securities transaction. Maybe that's totally different from using an exchange. So I think there's some product questions here that regulators will really have to wrestle with. Yeah, I agree. I think, you know, one of the things is the way you think about this from a token perspective than then from a product perspective, right? So when I think about token perspective, I think, you know,

securities offering token sales, et cetera, I think, you know, legal structure of the entity and path towards decentralization, right? That kind of path towards decentralization then brings you into kind of the second part of the landscape, which is really decentralized product features, right? And so fortunately and unfortunately, it's very easy for regulators to reach out and touch the low-hanging fruit, which is the securities piece of this, right, in terms of whether governance, whether utility, how decentralized that actually is from a token dispersion standpoint and how people are using the token, right?

You think about how we and everything that goes with that. On the decentralized product side, you start to get to open source GUIs, right, grant bounty contributions and really a truly decentralized platform. And I think it's a pretty far cry, I think, in the near term, at least, to expect that regulators are able to sit down and scrutinize. the nuance of decentralized product features versus, you know, the actual treatment of these as securities based on how they were issued or how they're used in the marketplace. So when I think about, you know, in the blockpost you mentioned, one of the first bits

or one of the first predictions, if you will, is legislators forcing regulators to the middle, right? And so I'm unfortunately a believer in the power of agency regulation, right? And so what that means is you have agencies that are entrenched. in the financial services industry, the most powerful industry in our economy and the global economy, right? And they have a very long arm of the law, right? And they have been very aggressive. I think they will continue to be very aggressive. We started to see that accelerate in recent weeks. Obviously, I think we're all expecting some things here in February from the administration

and several agencies, but the onus is really on our industry and on our lawmakers to accelerate proposing and bringing smart legislation to the table, right? Because that's going to really be the only cap, I think, on what's honestly going to be a fairly aggressive second quarter here from an agency regulation standpoint. Now, when you say you're envisioning an aggressive second quarter here, are you specifically thinking about the centralized crypto brokers in the spot market or, you know, I'm also curious your view on some of these larger scale defy projects and how they get out of these SEC inquiries? Yeah, it's interesting. And that's, I mean, it's a two-hour question right there. So when you think about what's coming, but we know it's coming, right?

Stablecoin regulation, right? And kind of fitting them into a money market or a charter type of regime, right? I think that's almost a foregone conclusion at this point. That is a whole other philosophical discussion between, you know, permissionless and permission CBDCs versus private stable coins. Obviously headline news last week with the DM project going Silvergate and then, you know, rumors around Silvergate and others launching private stable coins and them being used as a way to exert pressure through their banking charters on the crypto industry in terms of an allocator

still on point. But I think here in the first month or so, right, the low hanging fruits stable coin regulation, right? The second piece of this, which is quickly behind it, is around custody, right? And custody really being the gate to how big banks, traditional custodians, broker dealers, right, interact with the space and really turn on and off the faucet for large institutional dollars coming in, but then very much also using that same regime to apply pressure to existing businesses in the space that purport to be that, you know, custody and assets to defense goes, right, are not securities in the first place, right? So I think that's probably what comes next and there's a lot of headlines there to point that direction. I think a lot of these other

pieces are really around regulating from a consumer protection standpoint, those large protocols you mentioned, doing two things. One, consumer protection and then two, coming out them from the securities angle, right? So the Celsius is of the world, right, that are constantly getting attack vectors from state regulators around issuing interest-bearing products, right, or lending-type products, right, those being regardless of the underlying security, those being within the mandate of state regulation. you're seeing that at the federal level as well.

In the background, those folks are chasing down banking charters, right, so they can kind of eat the system from the inside out. But I think the case for them really starts to see scale when they get a regulatory flooring there, whether that's through legislation, right, or that's through some sort of charter mandate. I think the other component there is to the extent large protocols are resting on the decentralization narrative.

Uniswap is obviously the blue ship example. you get someone who is the flag bearer, frankly, of an decentralized protocol, right, and the functioning Dow, right, which is the whole kind of underbelly, the soft underbelly of this. And I differentiate between hard decentralization and soft decentralization. So legal versus non-legal. The soft decentralization, the Dow component of that, right, we now know that the investigation into Uniswap, right, although it was purported to be around marketing, I suspect, or most people suspect, really, it's around decentralization.

Right. And, you know, the efforts of others component of the Howey test in addition to, you know, a couple of other, what I would say, not myths, I guess you could call them regulatory myths around how people defend decentralization in terms of it falling outside of the mandate of being treated as a security. So let's play this out to maybe the worst possible conclusion is just that the SEC goes after some of the people behind some of these large blue chip protocols and says that the tokens are security. you know, what happens then? Do you just imagine that this is just, we have anonymous developers that fork the code and these projects continue? It's hard to imagine putting the genie back in the bottle here. Yeah, it's interesting you kind of approach it from that angle, right? So there's no turning back the clock, right? And just given the scale of just defy in particular, right, and given the resource capabilities at the primary regulators meeting enforcement attorneys, folks that actually can reach out and run effective enforcement.

I think what you get is maybe two approaches, right? Maybe you get a day of reckoning where everybody wakes up on a Monday morning and there's 10,000 enforcement actions, right, and everybody gets in line, right? And then you see whatever applicable regulator, probably the SEC, right, then starts to go down the roster and pick off and continue to build various features from an enforcement standpoint and put those in their kind of enforcement foundation, right? Pre-settlement, plugging those in, right? So I think you then see what you've already been seen in the space now for several months,

if not years, right, is the pace of innovation taking one step beyond, right, what the law or what the regulation mandates. And I think, frankly, the defy community and the crypto community at large has been very effective at that, right? You know, we're not even getting to NFTs. The financialization of NFTs, right, is a very good. an example of something I think regulatory sits just beyond the cusp of, say, the defy regulation, right? And so to get back to your question, right, there's a day of reckoning approach. I think that's

very easy mitigated by founders out there to then iterate, whether it's through a new project. We both know how easy it is to stand up a new project or at least iterate one that's currently under that mandate and evolve it beyond the scope of that regulation, right? Whether that's, you know, how the security is treated, whether that's a doubt or. decentralization mechanic, whether it's a specific product that fits within a regulatory framework, meaning it's an exchange product, a decks, an AMM, or it's some sort of stable coin. If you think about stable coins, you think about regulators focusing on asset back stable coins, right?

And then you see the proliferation of algorithmic stable coins, right? And then you go down the spectrum of algorithmic stable coins, and then those start to look like voucher systems, right? those start to get down the spectrum looking like publicly traded companies. We all know, and they become to look like Venmo, PayPal, right? So there's a spectrum of, you know, what I would call creative defy and crypto and publicly traded product-oriented fintech companies. And it's very easy for deaf founders to kind of run across that spectrum in real time, which makes it frankly very challenging for regulators, which I think is why you're seeing at least proposals the last few weeks. you'll continue to see the next several weeks pretty expansive proposals coming to market

from regulatory agencies, from Biden, maybe even via executive order that are pretty sweeping and pretty broad purposefully. Because I think they feel that burn when they start to look under the hood from some of these previous supports. It's interesting. One of your other predictions is that we'll actually get the approval of a spot Bitcoin ETF by July. So it seems like you're bullish on the institutional players actually exerting some influence here and actually getting that done? It might be an asynchronous opinion, but I do think it's coming. And I think it's a very good thing. Right. I think, again, it's another fluorine exercise. Right. We obviously had the recent two denials last week or over the last 10 days. But I think you see something move

during summer, right? And I think it moves because, again, the SEC sees it within their mandate to approve that, and they use it to, you know, build what I call another wall of the regulatory box, right? It gives them more of a mandate, more control over flow of funds, particularly institutional flow of funds, right, into SPODBTC, right? The whole narrative that it's for investor protection, you know, why they're denying these applications here in recent weeks and months, is very much in contention with the derivative exposure to BTC through a derivative ETF, right? And so I think this conjunction with a fairly robust push on the custody front, you can see a multi-pronged approach to the SEC and this being a prong of that, right,

that allows them to, you know, in a friendly way, put a tighter stranglehold on how funds flow in it out. Nick and I talked about this on the podcast, I think it was last week. At some point, you're going to have so many financial services firms that are trying to build infrastructure around this asset class that they are going to get very frustrated that they can't build the products and services that they want to do. I mean, how many of these retail brokerages are just really frustrated that they haven't been able to keep up with Coinbase on the spot side? Also, they're building custodians and all sorts of brokerage infrastructure to support this asset class. And so they're going to want an ETF at some point. I'd imagine they'll start to get more vocal. And similar to how people in the crypto industry just writ larger getting a lot more vocal and active on this is just a single issue.

Yeah, I think, and maybe you guys are seeing it too. We're seeing it every day, right? Some of your traditional kind of asset managers, traditional custodians, traditional broker dealers, frankly, who are starting to step into the space, right, who presumably have been at war with their risk committees, right, to kind of get it and both service institutional clients and where does that start in a space like ours, right, on the alternative asset. manager side where we sit, right? And so what you see is some broker dealers who have very traditional finance, you know, street businesses starting to partner with, you know, alternative custodians that are defy native or crypto native, right? And you're starting to see them work side by side in real time now. Obviously, those are easy M&A targets, you know, down the road as things stabilize a little bit and they can pour in some of that blockchain infrastructure, right? But the real challenge, again,

is getting to a point where maybe the traditional broker-dealer gets comfortable with the custodian or the custodial provider and being able to fit that within their own kind of license regime and compliance regime is the tipping point. Right. So you're getting pressure from a couple of different angles, right? Approval of spot PTC, ETF, right, from the custodian standpoint, who can purport to be a custodian, particularly a qualified custodian, right? And how that's applied to crypto is a whole other conversation.

and then how broker dealers are starting to interact in the space if those broker dealers are coming from a traditional street perspective. Yeah, it's one thing to ignore it if you're in the inside of one of these big institutions when it's small. But when you have examples of, hey, Russ Stevens just built Nidig from zero to $8 billion over three years. And, you know, you have a bunch of banks that are just sitting around watching that happen. They're effectively building like Goldman Sachs for crypto. At the other end of the spectrum, you know, you have Coinbase. just the existence of Coinbase and while every other retail broker just kind of ignored it, you know, you get into the spot where if you're in charge of one of these divisions at a bank

and you're eking away custody at two to three basis points, hey, why don't we launch custody in a product line where you can make 25 basis points? You know, the economic incentive to just get really active here and to pressure your regulator to give you some clarity becomes pretty powerful. Yeah, you know, it's interesting because, you know, there are a few primary players that's, you know, regulated banks that play in our space, right? And you've seen them acquire, you know, I just mentioned Silvergate earlier, and that's all public headline news, the DMS of acquisition recently. But they have been several, several banks that look like that have been very effective about building out their own infrastructure, right? Their own

internal blockchain infrastructure that plugs into, you know, the coin bases of the world, the fireblocks of the world, right? And allows for a fairly integrated technology. spec, particularly to crypto. Again, the overlying issue here, right, is the custodial piece of that, right, and where, you know, the finite bumpers are on the custody of assets between how that tech stack builds out around the, you know, kind of the central banking piece of that infrastructure. What's been interesting, too, on the retail side, right, is you have Challenger banks folding into crypto, right, that's piggybacking and also fueling some of that large. or retail growth, Robinhoods is obviously a good example on the Robo-Advisor side,

and then some of the other Challenger banks in the space too. Again, from my experience, going back to FinTech 1.0, where what I call the shadow banking of retail deposit balance sheets was fairly prevalent. It's still prevalent, but less so, given some of these banks have matured into a traditional banking paradigm. You know, you have Challenger banks going and finding a small regional bank with a very stale ballot sheet with a promise to bring them hundreds of thousands of, you know, iOS-based accounts, right, that can frankly revitalize their entire business. That local regional bank has never

even considered the cash outlay to go build a direct-to-consumer infrastructure like that, right? And you're starting to see that not just accelerate, but accelerate within the context of crypto, right? where now I think if you're a regulator, particularly a banking regulator, you start to have to wrestle with a couple of different issues, right? It's not just how assets are treated, the custody of those assets, but really parts of the banking charter in terms of how they can partner who can get exposure to the balance sheet, right? So you're seeing, I think, pressure top down, left, right, both on the consumer side and then on the institutional side as well. And then, you know, obviously, of course, I think we're well past the point of contagion effect, right?

If you think about publicly traded companies, you know, your micro strategies to the world that have fairly strong BTC exposure, right, the coin bases of the world that are publicly traded, obviously held and structured products stateside, right? You start to look at a fairly ingrained what I call a web of contagion, if you want to call it that, that stems from kind of the institutional custodian side all the way to the retail investing side to the retail banking side and everywhere in between. So I think at this point in time, it's almost an impossible nut to crack. You can't align the clock. And again, it's the head wall of enforcement is coming, if nothing more, to kind of punch the industry in the face so that everybody can kind of wake up and grow up in real time, if you could call up that. And how does that translate to what you guys are doing at the fun level as you're dealing

with these entrepreneurs and also curious your view on just KYC. I know you've written about permissioned KYC use cases in DFI. I'm curious the type of advice that you're giving to your founders. Yeah, so there's a couple of interesting things looking at here, right? So on the institutional D5 and KYC piece, right, there's a pretty good argument for a straddle strategy, right? Meaning looking at people that have embraced KYC out of the gate, right? Which is obviously incredibly taboo if you're talking to a founding team, right?

But there are people now that are building businesses with healthy dialogue with regulators, whether or not they're on the path to some sort of licensing regime or they've already got the head nod, right, that are trying to bring, you know, STOs to market or what have you. We've come to learn recently one, SOMA, who you've mentioned before is a good example of that. On the other side of that, right, you have fully decentralized offerings, right? Synthetics is obviously a great example of that, right? Where, you know, KYC is not even within the breadth of a synthetics-based protocol, right? And so if you think about deploying into opportunities on the permission side and then opportunities on the fully decentralized side, right, regardless of where this goes in the near term, in the long term, I think there's a very strong, obviously a very strong notion that KIC compliant entities will see cash, you know, will see flow of funds rather, particularly on the institution side, depending on what the protocol is.

But then on the fully decentralized side, when you think about retail defy use, right, I think there's to the point we made earlier around the ability to innovate just be on the cusp of regulation, I think there's a really strong argument that people that are graceful decentralization will do well or will mean complex enough, right, or crafty enough to live outside of any sort of near-term enforcement box. So that's one theme. And, you know, another one I kind of mentioned earlier is around algorithmic stablecoins, right? And so when we think about this discussion, we can have the philosophical discussion around stable coins and CBDCs, but when we think about private stable coins in particular and asset back, you know, there are some extremely interesting and smart algorithmic plays out there that I think live outside of this next wave of stable coin regulation on the asset back side. You know, there's something we really like to see.

recently on the NFT side. I know you guys are somewhat healthily into the NFT space now, but financialization on the NFT front, I think, provides a really interesting and rapidly kind of accelerating and growing space that I think is beyond what's going to happen here the next couple of months from a regulatory standpoint. Obviously, institutional brands already doubling down on the NFT side, some really interesting NFT protocols coming to market that very much look like some of the traditional defy offerings, whether they'd be exchanges or re-hypublication

protocols, I think there's kind of a really interesting play there. And then from a middleware standpoint, obviously we're big believers right now, and I think this goes hand in hand with regulation. You know, everyone has seen this rotation from growth to value. And I think having

come from a fintech 1.0 standpoint, a true, what I call early stage tech startup type of environment, right? industry now is seeing cash flowing protocols, right? And I think that's becoming a fairly healthy narrative. And to the extent a lot of those provide middleware services across chain, right, and start to very much look like, you know, your AWSs of the world, right, that traditional institutions can relate to. We start to see a pedigree, if you will, or a brand of protocols

that lives as the middle layer, you know, across sectors, NFTs, defy, stables, et cetera, you start to kind of change the narrative a bit, right? I think people understand that these aren't necessarily two to four folks, even though they can be, right? Two to four folks building some sort of wonky next-gen defy infrastructure, they're building just better versions of traditional businesses, right? And us, frankly, having to own that as kind of players in the space, but then also, you know, bringing institutions in the space,

I think it really doubles down, or at least focuses attention on businesses that those types of investors are already akin to looking at, right, or akin to investing in. And so when you pair that next to regulation, I think the same headwinds are there, right? To the extent businesses want to scale, to the extent they want to broader audience, to the extent they want to live within some sort of regulatory paradigm, again, that comes back to the KYC mandate, right? And what level of KYC is necessary, to what extent do regulators understand, you know,

permission list or, you know, kind of ZK offerings, right, where you can verify without truly verifying, right, and getting people to understand that, I think becomes a really powerful scaling tailwind, right, that frankly drives a lot of value here regardless of what happens near term. So, you know, when you think about regulation, you think about tax revenue, you think about consumer protection, and you think about anti-money laundering, right? And those are kind of the three big buckets. And I think, you know, think as the industry grows up this year, regulation comes at those head on. I think we can solve those in real, real ways in the near term. And I think once everybody kind of understands that

and accepts that, I think then you'll start to see a real kind of explosion and growth again in the way that we saw last year. I agree with that, certainly. It's interesting because anyone who has the view that regulation is not coming to the space is asleep at the switch. And, you know, it'll be a net positive if it's done right in the sense that more capital will be able to flow. into these projects and teams. Now, there's some real risk there, obviously. You know, these entrepreneurs that we're backing are building powerful systems that are trying to seek self-sovereignty over money and better financial services and, you know, better internet architecture. So there's some big swings going on here. And I'd be curious your view on

just what is the best way to support the industry from an advocacy perspective and, you know, what groups are doing interesting things? What should investors and entrepreneurs be focused on championing as this industry matures and certainly as the regulators get more involved. That's a good question. So I'll tackle it in a couple of different ways. So I think the lobby has really matured in the last, call it 18 months. I think last year was a banner year for the crypto lobby, right? Chamber of Digital Commerce, blockchain association, obviously leading the PAC. You saw the FTX backed team come to market from a HOTO PAC standpoint. you've got the Bitcoin community coming together too with the legal fund, right?

You've got the defy education fund coming out of the unique ecosystem, right? So you're starting to see real dollars go to work. And I think, you know, we're members of the Chamber of Digital Commerce, right? And I think, you know, we're friends with folks in the blockchain association. They now are starting to talk in a way as well. Kind of cross-organization really is the unified front, right? And I think that's translating into obviously what we saw in Q3 and Q4. last year where we responded very nimbly as an organization to lawmakers as legislation was getting

chopped up in the final mile, right? And so I think you're going to see more and more of that. We saw that last week, removing some of the expansive language around the reach on stalling or, you know, overseeing international crypto transfers out of the U.S., right? I think you start to see those repetitions and get very confident that we have very smart people with a lot of resources at their fingertips and a lot of inroads into political networks and into public offices, right, that allows us to kind of keep a checked on what's traditionally an unchecked agency mandate depending on, you know, who's in office, who's in the highest office. And so to the extent people are not involved in those organizations, absolutely critical, right, to step up,

participate, donate where possible. I think that bleeds into, you know, again this year, we've already started to see it, you know, escalate at the core. But I think you pointed out earlier, this is very much becoming a single voter issue, particularly for earlier generations, right? I think to the extent this touches everyone's lives, you're starting to see now local political cycles very much embrace the crypto discussion, right? And that's showing up on every level, local, state, federal. So to the extent those people raise their hand and they fit your worldview,

let's get behind them, right? I think doing that more and more, we'll move the needle quite a bit because it's one thing for our industry groups, right, to show up and educate. It's another thing for us to put people in office that are already educated, right? You can imagine the pace of adoption, the pace of innovation moves that much quicker, right, when you don't have to spend time educating lawmakers, right? And so when I think about the traditional political environment, that's, I think, a way to go, continuing to sport in that way.

And then the trade-a-call piece, right, I think it's to the extent people sit in our seats, right, where we're working with teams, helping think through whether it's product market fit, right, depending on what the protocol is and the regulatory environment around that, thinking through decentralization mandates and Dow infrastructure and structuring it that way, being very realistic, right, in a way now to kind of prove some of these structures, some of these protocols, some of these products to, have, you know, hedge strategies, right, whether it's around KYC, whether it's around exchange regulation, right, whether it's around true decentralization statelessness. I think if we played by the rules the best we can while innovating, it creates an opportunity to avoid a lot of bloodshed, so to speak, in the near term and the long term, and the reality is this doesn't have to be super messy or super contentious, right? I think we can do a lot with technology, I think we can operate within a lot of the mandates where there's clarity and just making sure people are motivated to do that. I think we'll go a long way. Yeah. I think you're absolutely right

that it's becoming a single issue topic, though. And if you think about the incentives for some of these politicians that are actually leaning into it, you should see the engagement that they get when they start talking about blockchain and crypto on Twitter. It's unbelievable. I mean, they're getting more engagement on a pro-crypto tweet than they've gotten on anything in the history of their campaigns. And so, you know, I think it's going to be that. Politicians obviously like the attention there. Plus, it's the fact that now these industry groups are actually putting money behind some of these candidates and putting money in opposition to some of the candidates that are, you know, the Brad Sherman's of the world, the Stephen Lynch's of the world that are very hostile.

So I think you'll see that start to have an impact on behavior. Well, it's for, you know, from a political standpoint, right? It's forced smart perspective, right? If you just look at the Senate and you think of Loomis, you think of Toomey, right? It's kind of forced them to really, you know, whether they intended to or not, really become advocates of the space, right, in a way that kind of calls out overzealousness by regulators from time to time based on whatever the hot button issue, crypto issue is at the time. But you're totally right. I mean, everybody knows the power of crypto Twitter, right? And I think the community leverages that maybe more effectively than the, you know, previous presidents. And so to the extent they can

continue to deploy and continue to use that as a mobilizing force. you know, more power to us, right? I think it'll keep accelerating in that way. What's interesting, you know, again, is, you know, the themes of, frankly what I wrote about in the blog post, one of the core themes is really 2022 year being the year of the industry growing up, right, in a lot of these ways, right? Not just around compliant products, not just around, you know, single issue voting, not just around, you know, settlement of various banner legal matters. right, but really, you know, the potential for MNA, right, the potential for DOWs to find their place in the world, right? The potential for smart legislation to really take hold and drive

conversation coming out of this year, right? A flooring exercise across the board to really bring in that institutional money, bring in mass retail, and really start to reset kind of the financial services landscape and to end. And I think that's a maybe last two years. That was a crazy thing to say out loud, but I think in a very coordinated way coming out of this year, that's a very real possibility. Totally. Well, I think you have an incredibly unique perspective on this coming at it from a lot of different sides, you know, the regulatory side, the financial services side, and certainly the technology side. So this has been a fun conversation. We'll have to have you back. Where can we send people to learn more about the Central Park and follow you online?

Yeah, absolutely. So we are research driven. We love doing it. We love putting stuff out there. find us at Decentralpark.io. Follow us on Twitter at dbc.io. We have been very purposeful lately about putting out more and more of our thought leadership and are excited to continue to do so. So excited to dialogue with folks out there that are interested. That's awesome. Well, thanks for your contributions and excited to have you on. Yeah. Thank you very much for having me. Enjoyed the conversation. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit Castle Island.V.C. To listen to all of our podcast episodes, please go to On the Brink-Podcast.com

or just click on the tab in our website. Thanks for listening.