The Pomp Podcast - #1466 Paul Grewal | Regulators Tried To Kill Bitcoin?!

Episode Date: January 8, 2025

Paul Grewal is an American attorney working as Chief Legal Officer at Coinbase. In this conversation we talk about it all, why regulations have been so abrasive toward the crypto industry, what is going on with de-banking, Operation Chokepoint 2.0, what happened with Tornado Cash, why Trump administration is so bullish for crypto regulation, and what milestones Paul looks forward to in 2025.  ======================= This episode is brought to you by Bitdeer (NASDAQ: BTDR), a global leader in Bitcoin mining and high-performance computing for AI. Led by a seasoned management team, Bitdeer is driving innovation with its proprietary SEALMINER ASICs for Bitcoin mining and has a massive 2.5 GW power portfolio across three continents. Learn more about Bitdeer at www.bitdeer.com ======================= Meanwhile is the world’s first licensed and regulated life insurance company built for the Bitcoin economy. Protect your loved ones with sound money built to manage life’s uncertainty and a broken financial system. Their BTC-denominated Whole Life Insurance policies allow HODLers to pass more BTC on to their loved ones and a tax-advantaged way to access BTC for liquidity during their lifetime. Visit their website at https://meanwhile.bm/ to join the waitlist for a policy and to learn more. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's going on, guys? Today, we've got an amazing episode with Paul Graywall. He's the chief legal officer at Coinbase. In this conversation, we talk about it all. Why

regulators have been so abrasive to the crypto industry? What's going on with debanking? What is Operation Chokepoint 2.0? What happened with Tornado Cash? Why is President Trump and the new administration so bullish for crypto regulation? And what Paul looks for in the milestones in 2025? This conversation is full of inside information, unique insights, and tons of things that will give you a peek behind the curtain of what's happening between some of the biggest companies in the industry and regulators and why that relationship may be changing for the better coming into the new year. This conversation will give you tons of those unique insights and make you think more critically. So here's my latest conversation with Paul Graywall.

Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by NASDAQ-listed Bitdeer. They trade under the stock ticker BTDR. They're led by a seasoned management team. Bitdeer is a global leader in Bitcoin mining and high-performance computing for artificial intelligence, and they are backed by technological innovation and a massive 2.5

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and to learn more about the world's first Bitcoin life insurer. Again, that's meanwhile.bm. Go check them out today. All right, Paul, I thought a great place to start the conversation is just like everyone's heard regulation has been this massive issue. It's a big abrasive kind of friction point for the success of Bitcoin, crypto assets. And the best description I've heard is that this is like holding a beach ball underwater in a pool.

And so when we lift off that abrasiveness, like the beach ball is going to explode upwards. But in order to understand what could happen moving forward, I think we have to understand what's already happened. And so you are in the thick of it. You're like on the front lines of kind of dealing with this stuff. Why has there been so much abrasiveness? What is the abrasiveness? Like what is slowing down Coinbase from actually operating? Well, I think it's important, Anthony, to appreciate that much regulation is not only tolerable, but important.

It's important that we have protections for investors. It's important that people who buy and sell things like cryptocurrencies, digital assets, understand what it is they're getting into. But what's happened over the last several years, particularly in the last three and a half years of the Biden administration, has been a massive overreach by agencies like the Securities Exchange Commission, by parts of the United States Treasury, that have gone way beyond what Congress said to regulate, to keep people safe. and have been essentially appropriated by individuals, I think, who have a very harsh view of crypto and are committed to undermining it by whatever means they can. And when you're in the room talking to these regulators, is this a situation where they're like nice to your face

and then they send like a nasty letter later? Or is it pretty clear, hey, we're not best friends and we don't like what you're doing? Well, it's interesting. There are certainly those situations where they smile at your face as they stick the knife in your back. There's definitely been more than one conversation where I've had that feeling. But by and large, by and large, regulators are government bureaucrats just trying to do their job. Just to give you an example, the Securities and Exchange Commission, it sits for the most part in a main building right off of Union Square in Washington, D.C.

If you've ever been to the train station down in D.C., you're walking right past the SEC. When you walk into that building, if you observe everybody around you, you'll see people coming and going into the lobby and up the elevators who are there to do their job. They come in the morning, they go home at night, and they've been told to do a certain discrete set of tasks. And so in that mindset, for the most part, they're relatively friendly, they're always professional, and the tone is always measured. But you have to look beyond the conversation and the friendly approaches and ask yourself, are many of the rules, are many of the actions that they're taking intended to protect investors to keep markets operating in an orderly and efficient way? Or is there something else going on here? And what I have observed over the last three and a half years in my interactions with the SEC in particular is that there's been a much more concerted effort to use these seemingly neutral rules to undermine an important American innovation, an important American industry with no particular connection to keeping investors safe. Why do you think that they have taken the approach that they've taken?

Is this a certain regulators don't like this? Is this a lack of understanding? Is this politicians, either congressmen or senators that are applying pressure? Is this a presidential thing? Maybe there's law enforcement. Why is it that there's been this abrasiveness? Well, it largely starts from the top. And the top of the SEC is the chair of the SEC, who currently is Gary Gensler.

Mr. Gensler came into office three and a half years ago with a lot of promise. He taught blockchain technologies and regulation and policy at MIT. He understood how these networks and how this industry generally work. There's a lot of hope, a lot of optimism that having someone who understood this particular innovation would be good for promoting that innovation. But what quickly happened, it seems, is that Mr. Gensler took on the mandate of elected officials who were overtly hostile to crypto and frankly wanted to drive it out of the United States. And at the very top of that list of politicians is Senator Elizabeth Warren. And so as Mr. Gensler quickly flipped from his early views that there was very little regulation that constrained this industry, that in fact, if anything, he needed to go back to Congress to get more authority, and he took on the position that he had all the authority he needed to drive crypto underground or out of the country altogether, we started to see lawsuits being filed. We started to see new rules pass that weren't connected to the statutes that Congress provided, and this overall framework, this overall approach extended even beyond the SEC to other agencies like the FDIC, which provides for insurance for bank accounts and other parts of the government that could be used to undermine crypto in ways that were not just contrary to law but frankly un-American.

The FDIC, the OCC, they have touch points with the banking system. They have oversight over the banking systems. One of the things that people have started to talk about now is this Operation Chokepoint 2.0. Nick Carter, I think, kind of coined that term, was very early to understanding this. We've dealt with it in terms of we've had bank accounts they tried to take away. They've tried to make it very difficult to open bank accounts. I have plenty of friends who lost bank accounts, businesses that lost bank accounts. When we see something like that happening, it seems to only be focused on a specific industry. And I think that's what really opens people's eyes. Wait a second. I get that you're trying to do your job, whatever, but why is it this industry in particular?

And really, it's been crypto. And then the other one is cannabis seem to be the two big ones. Maybe you can make an argument that some of the kind of gambling or sports betting companies as well. What do you think is driving that? Is that kind of all coming down again from the politicians saying, let's attack in multiple vectors. And so let's use regulators to go directly after the companies from a security standpoint. Let's use the banking organizations to go after the bank accounts. And, you know, let's kind of just wrap our arms around an industry and try to suffocate it. Well, if you think about it, if you're a politician or a bureaucrat aiming to do a politician's bidding, there are very few tools that are more powerful than the ability to choke off access to the financial system, to bank accounts, right? In modern life, there's nothing more important for a small business, an individual, than having the ability to write a check, to pay employees, to make payroll, to fund suppliers. All of that matters to just running your operation day to day. And this idea of using the financial system to cut off access to crypto was actually born of earlier efforts, as you're getting at, to cut off access to the banking system for the cannabis industry, to sports betting and gambling industries. Again, companies and industries that are somewhat out of favor socially and politically, but that are perfectly legal here in the United States. And so as the crypto industry came to experience this phenomena in the last several years, where people suddenly found that when they wanted to renew their mortgage, they weren't able to do it. When they wanted to open up a new checking account, they were denied.

Or when banks themselves sought to offer crypto services and were told, stand down. I think a lot of people took notice and were surprised. But there's actually a long history of this that goes back many, many years. We were interested in Coinbase and shining a bright light on this in large part because as we read stories by Nick Carter and others, when we heard stories like the one you just told, we became concerned that this was not just a conspiracy in a few people's minds or a very narrow effort to kind of deny basic services to one particular industry, but part of a broader effort to frankly operate outside of US law in ways that we thought were, again, frankly un-American. So we decided to shine as much of a light on as we could. We say shine a light. What's that mean? Well, that means filing requests under something called FOIA, which is a law Congress passed that gives all of us as Americans the right to know what documents exist inside of agencies that ultimately are operating right in our name. That's our government at work.

And so we filed these FOIA requests. And when the agencies that we served in our case, the FDIC and the SEC, refused to give us the documents that we were entitled to, we went to court. We sued them, and a court ordered them to produce these materials. Why did they refuse to give the documents? Did they have a reason? They did. The law provides for a number of exemptions or exceptions to the general rule. You can imagine, for example, if certain documents were part of an active investigation, it might be appropriate to withhold portions of them while that investigation was proceeding.

But over and over again, we saw these exemptions being claimed where they had no basis. And as we challenged them, the FDIC in particular had to essentially admit or acknowledge that there was no reason to claim that these documents would do any harm if they were disclosed. And so when we went to court, we asked the judge to issue an order. The judge ordered them to be produced. And we've now seen that in example after example, bank regulators were telling their regulated institutions, stand down from offering crypto services. And if you insist on proceeding, we're going to ask you questions. We're going to poke and probe in ways that will make this very painful for you. Is that legal?

It's absolutely illegal. There's no basis in law for that, and they have no right to do it. What's going to happen? Well, we have a lot more work to do to shine a light on whether and to what extent individuals were denied personal bank accounts, the extent to which banks were prohibited from offering crypto services like, for example, cussing digital assets on behalf of their customers or offering other support services to customers interested in having access to crypto. There's a lot more we have to do here, but the first step was the most important step, which is to show that over three and a half years,

the current administration decided to not just go after crypto head on and in court or through rulemaking, but all through all these sort of indirect ways that were much more nefarious. What happens to the people who are doing this? Is there ramifications? There ultimately could be. I mean, anyone who will who will have shown to have broken the law, you know, could potentially be at risk of going to jail. I think we're a ways from that. The first step is really just to understand the extent to which this effort was undertaken. So is there a protection like, you know, I think that obviously with Trump and a bunch of the cases, people have said, oh, there's like the presidential immunity. If you work at any regulator and you do things that you're acting in your official capacity, are they immune from these legal ramifications? And it's more of like maybe there's a fine or some sort of issue to the organization, but not the individual.

Or are the people individually liable for the actions that they take? Well, there can be immunities for certain actions that people take within the scope of their job. But when people operate outside of the scope of their job, or when Congress specifically says, don't do X or don't do Y, and the individual proceeds to do exactly X or exactly Y, they can be exposed either to civil liability, as you say, in the form of judgments and fines, or potentially criminal liability if there was a specific plot. I don't want to suggest sitting here today there's any evidence of a criminal plot to debank crypto. I haven't seen it yet. But I also know that when we asked for documents, we were stonewalled, and ultimately it was shown that the documents were something that we were entitled to. I also know that when we got the documents, they were initially redactions, blacked out page after page of withheld information that turned out to be information we were entitled to. So I don't want to prejudge anything at this point, but I do think it's important that we run this to its logical conclusion and full course because the people deserve to know this.

You said that you don't think that there's a criminal effort to debank. Could there be a intentional effort to debank that isn't necessarily? I have little doubt there was an intentional effort to debank. I don't yet have any evidence to prove that it was criminal. But I think just to take a step back, it's important to ask, again, the question you asked earlier, why would they do this? Why wouldn't they simply go to Congress and get the authority they need if they actually believed there was a systemic risk from crypto to the banking sector? Why would they rely upon off-record communications or innuendo as opposed to clear direction? What does that mean? Off-record communication? Well, that means calling up your regulated bank and instead of sending a formal letter instructing them specifically not to bank crypto customers, suggesting, hey, you know, I can't stop you. But if you were to proceed, you may find yourself on the receiving end of an audit of 97 questions that need to be answered by next Monday morning at 9 o'clock.

So it's like basically bullying. Yeah, it's exactly what it is. It's bullying, but when it's done by the government, it's called aggressive due diligence or investigation. but it's bullying fundamentally. We all know this. Many of us have had this experience in our lives of an individual with power in a position, exerting that power in a way that has nothing to do

with legitimate purpose or aim. I think it meets that definition. Has Coinbase gone through that? We have certainly been on the receiving end of a lot of bullying behavior on the part of the SEC. I will give you one example. You know, when the SEC made it clear that they believed that cryptocurrency exchanges

like ours needed to register. They said, come in and register. And so we took them at their word and we went down to Washington literally and tried over and over again to define a way for us to meet the requirements of registration and to follow their instructions. 30 separate times, more than 30 times, actually, Anthony, we engaged with the SEC with our ideas on what registration could look like, what disclosures issuers would have to make so that people know what they were getting into when they bought or sold a digital asset, what restrictions might apply dealing with conflicts of interest for an exchange like Coinbase, a whole host of issues that we presented in formal papers, in presentations, in live meetings, over the telephone,

you name it. And after 30 plus meetings with the SEC, we were finally ready to get their response. I mean, at some point, right, you run out of things to say. And at that point in time, they simply thanked us for our time, told us that they were not interested in pursuing this any further and invited us to leave. I would say that's bullying. And so when we hear about experiences like the ones you described and many others described dealing with the banking sector and other parts of the regulatory state, it rings true to us because that's been our experience as well. Now we're fortunate. We have lots of lawyers, lots of resources. We can go to court. We can fight these things, but most Americans can't. And I just don't think that's right.

How many requests do you think Coinbase gets on a weekly basis from law enforcement regulators and various other organizations? Well, we have a wonderful relationship with law enforcement. This is the irony of this regulatory assault, this regulation by enforcement campaign by the SEC. If you look at other parts of the government, like the FBI, like the IRS and so forth that rely upon formal subpoenas and warrants, Coinbase has a terrific, positive, productive relationship with those agencies. To answer your question, in a typical year around the world, we get something like 10,000, 12,000 formal requests for information that are rooted in a legitimate suspicion that unlawful activity may be taking place in a customer's account or there may be evidence of that. And so it's important that the government have legal access to that information. We fully comply with the law and those formal requests. And, you know, I always invite members of Congress or members of the public who are more skeptical of our relationship with the government to talk to the agents that are responsible for making those requests. I think across the board, you'll say you'll find out that they have a very positive view of Coinbase, frankly, a very positive view of the crypto industry as a whole, because crypto offers a very unique way to perform investigations and understand what's happening that, you know, isn't true with the traditional financial system. I've met a lot of investigators over the years. Many of them were just regular people doing something else. They were into crypto. They became an investigator. Some of them, after they left kind of their investigative role, and they all say the same thing, is that we love crypto.

Well, it's true. Right? It makes our job a lot easier. It's also why at Coinbase, for example, we have hundreds and hundreds and hundreds of people who are responsible for compliance, for investigations, for responding to the government. And many of them are former agents of the FBI, former federal prosecutors, former federal public defenders. They see what's happening at Coinbase, and when their term of public service is over, they want to come be a part of it. So I don't do public math, but based on the numbers you just said, I believe that you guys are getting more than one request per hour throughout the year. Sounds about right. Yeah. How do you handle that volume?

Well, Brian Armstrong, our CEO, made it very clear when he started Coinbase over a decade ago that we were going to be a company that was grounded in trust and trust meant making the investments necessary to have an effective, productive response to these types of requests when they came in or when they come in. And so in our case, look, we spend a lot of money hiring a lot of people, as I said, hundreds, even thousands of people, if you include outside partners and contractors, all of whom are responsible for tracking inbound requests. First and foremost, making sure that they comply with the law. If they appear to be outside the bounds of legal process, we reject them. If they follow legal process, we go through the exercise of collecting the information, vetting it, validating it, and ultimately producing it in a safe and compliant manner. It's a lot of work. It keeps a lot of people busy, but it's important because that's our responsibility. What percentage of Coinbase employees do you think is dedicated to kind of the regulatory and law enforcement apparatus versus traditional product, you know, marketing, sales, operations? Yeah, it's hard to know. I mean, I would say that, you know, I'm going to do some public math here as well, which I always try to avoid.

Don't worry. Everyone knows not to hold you accountable for it. Well, look, it's well over 10% of the company is responsible for what we call trust and risk functions, which I look after, legal, compliance, investigations. Those are people who day-to-day are involved directly in making sure that we follow a legal process and comply with the law. But there are hundreds of other employees who build the technology that allows us to process these types of requests, to perform the investigations, to make sure that we have the controls and checks in place that our regulators expect. So, you know, I like to say that compliance and regulation at Coinbase is everyone's responsibility. And so even if only, you know, a few hundred of the few thousand employees are working on that explicitly and exclusively, many, many others are touching upon those responsibilities in their daily work. Talk about kind of Coinbase's role in a lot of these investigations, right? So obviously people are going to do bad things.

They do it with dollars. They do it with real estate. they do it with many assets, including gold and glass beads. It's an ancient story. They even do it with cars and airplanes and all kinds of crazy stuff. When somebody comes to you from a law enforcement organization, are they usually just looking and saying, hey, we believe that, you know, such person has conducted an illegal transaction or is using stolen funds or whatever the claim is. We need information on the transactions that they made or like what's kind of like an average request. And then maybe talk a little bit as to, you know, you also have

users who I think they want to work or use an exchange that they can buy and sell and do so at an affordable price and kind of all the normal stuff. But also they want to feel like they're not using an exchange that regulators or law enforcement is going to come and be like, oh, there's a bunch of money launderers using this and introduce risk to the good actors. But then there's like the privacy and the, hey, is all my data getting turned over to the government? And so I've always said that Coinbase, it's very obvious you guys were an important business to the kind of adoption of Bitcoin, right? And probably the single most important business in terms of Bitcoin adoption. But also, it's very complex. It's not as easy as like,

we got an order book, just everyone have at it, right? So how do you think about the kind of complexities of that type of role? Well, it's a strike and important balance between all the different considerations that you identified. And look, I think it's important to also appreciate, Anthony, that, you know, the percentage of individuals or transactions on any exchange, whether it's Coinbase or anybody else that are involved in anything remotely suspicious is tiny. It's tiny. It's a small percentage of 1%. It's very small. But for those, you know, situations where law enforcement has a legitimate belief that someone may be transferring funds in a way that violates the law or supports criminal activity, most typically, they will

come to us in a very formal way. And that formal way takes the shape of a warrant, a subpoena. This is legal process that a federal agent or a state law enforcement official has to follow. And it usually involves going to a court, getting a judge to agree that there's probable cause and defining what it is in a person's account that law enforcement is entitled to. And we run all sorts of checks to make sure that that process is being followed. And if we are satisfied that the law obligates us

to produce the information, we do. But we perform all of those checks because we take customer privacy very seriously. And it's absolutely the case that we would reject any kind of casual phone call or visit by a law enforcement officer. this is, you know, effectively would say, hey, we'd love to just like poke around or take a look around to see what's going on in this account or, you know, in this particular set

of transactions. That's not something we. So there's no government back doors. There's no back door. It's very much a front door defined by law and we follow the law. All right. Let's talk about Tornado Cash. Sure. A big case that I probably know just enough to be dangerous about, but you're an expert. So you kind of give us what happened and then what is the legal claim as to why these guys are in trouble and this was a kind of violation of the law. Well, tornado cash is a very well-known, quite popular protocol that people use to conduct transactions on chain where they have concerns about privacy. You can imagine, for example, if someone is looking to make a donation to a charitable organization in an area that's been

struck by war, Ukraine being a very recent example, they may have concerns about retaliation And if through their on-chain activity, the Russian government or others could understand that they were supporting people who had suffered as a result of that war. You could imagine people just not wanting to have the world able to see who and what amounts they're paying to their employees to run their small or medium-sized business. And so Tornado Cash offered a very convenient way for those transactions to be conducted in a privacy-protective manner. Now, like every good tool, every neutral tool, particularly those involving personal privacy, there are many, many use cases that are positive. And then there are other use cases that are less positive. There are bad actors out there. There are criminals out there who can take advantage of these tools. And so as the U.S. government became concerned that money launderers and others were using tornado cash to shield their transactions much in the same way that all the other individuals I described earlier were using the same protocol to shield their transactions, the government did something very unusual, Anthony. Rather than saying we're going to go after the bad actors by sanctioning the individuals or the organizations for their actions using this particular tornado cash protocol, what the government decided to do instead was to designate the software itself, tornado cash itself, as sanctionable. And what that meant in practical terms was that anybody using this technology, this protocol, this software could find themselves at risk of violating U.S. federal law and all the consequences that follow from that could fall upon them.

We became very concerned at Coinbase that that was a massive overreach, not just because it seemed strikingly unfair that people who are just trying to conduct their daily business could somehow find themselves having to hire lawyers and defend themselves in court against claims that they were somehow violating U.S. sanctions law. But we also became concerned that in doing so, the government, again, had acted outside of the boundaries that Congress had set. Because when the U.S. Treasury, which is responsible for these sanctions programs, designates a particular individual or organization, it has to do so in strict compliance with the law that Congress passed giving them that power. And it was obvious to us that the U.S. Treasury in this particular case did not do that. And so when we learned that a handful of these individuals were interested in bringing a court challenge to the U.S. Treasury's actions against Tornado Cash, Coinbase decided to support that. We provided resources for the lawyers. We helped coordinate the communications among these individuals in ways that would allow them to mount a substantial challenge. And over the course of the year, year and a half that followed, the case proceeded. And recently, a U.S. Court of Appeals ruled that the U.S. Treasury had violated the law, that the designation of Tornado Cash was contrary to law, and therefore that these individuals could finally understand that they were not violating the law when they were simply trying to run their lives in a privacy-compliant way.

Has a piece of software ever been sanctioned like that? This was a first. This was a first. And that's why even if the facts and circumstances surrounding Terranio Cash weren't so egregious, we thought it was important to support this challenge in order to establish a very important precedent. So that in the future, if the government ever wanted to target software code in this way, there would be court precedents that made it clear they could not do so. And do you guys sit at Coinbase and just like look for legal cases to throw your weight around? A little bit. I'm not going to lie, Anthony. We take our responsibility pretty seriously. Look, we were the first publicly listed cryptocurrency exchange. We're the largest in the U.S. And with that comes a certain set of responsibilities, I think, to make sure that the industry as a whole, the community as a whole is protected. And so, yeah, even though

So most of my day and my team's day is spent defending against cases that are filed against us and, you know, managing the legal work and the compliance work of the company as a whole. On occasion, every now and then, I do sit down with my team and ask, what else is happening out there where we could offer a unique response or provide unique resources in ways that most people can't? What do you think will be the conclusion of the Tornado Cash case? Well, we want. But it stops at the appeals where they can go – In theory, the government could ask for further review, most typically by the Supreme Court. I'm hopeful that logic and cooler minds will prevail here, and the government will realize that they made a mistake, and that's okay. People make mistakes.

A court called them out on it, but it's time to move on from this. But even if that weren't so, I think that with the new administration coming in after January 20th, there are going to be a lot of fresh eyes on all of these cases at the Treasury, at the SEC, and elsewhere. And so I'm hopeful that we're going to see a sea change in attitude coming in very, very short order. You mentioned the people who are using Tornado Cash. I believe that the developers of Tornado Cash have been arrested, maybe still in prison, if I understand correctly. There are criminal cases pending, yes. Okay. And so, if the software is no longer deemed sanctionable, does that have an impact on those criminal cases? Well, the judges in those cases are going to have to sort all that out.

The issue in our case was a fairly technical one about the immutable smart contracts of the tornado cash protocol. So, it was a part of the broader technology. Whether or not the ruling in our case has implications in these criminal cases is something that the courts are just going to have to sort out for themselves. Yeah. Yeah. One of the things that I've been thinking about for years now, and I don't know if we have enough legal precedent yet to know how this will end up, is there are developers who write decentralized software or systems every day. And we see what happens with open source and, you know, all this. But what is the liability that somebody who writes code for Uniswap has for the actions people take on there? Like, you know, Coinbase, a centralized entity, if you let bad people do bad things, it's very clear, hey, you guys aren't doing your job. And people will take issue with that. But if you create a piece of software that you no longer control, it's kind of this weird thing, right? Like, so how does that get worked out? Well, it feels new and uncharted in software because, you know, open source software, even though we've now had it for several decades, is still a relatively novel concept. If you think about it, the idea that strangers over the Internet could work collectively and cooperatively to make something fantastic and innovative, it's an amazing thing.

But the law has been dealing with this concept of neutral technologies and tools and the liability for the people responsible for making them for a much longer period of time. I do think that there will always be new facts and circumstances that we're going to wrestle with. But the basic idea that the manufacturer of a hammer could be responsible for all the ways in which a hammer could be used to harm someone is kind of ridiculous. right? I think where things get tougher with open source software is there are projects where people contribute code anonymously or synonymously and have no further involvement in what that code does or how it's used. And then there are other open source projects or software development projects where there's more of an ongoing involvement on the part of the developer. And I think that's where the law starts to get a bit more murky and unclear. You know,

I think, though, that what we've seen over the last several decades, most recently with blockchain technologies and crypto, is that open source is a powerful way to build important innovations. And so I don't think it's going away. What about this kind of concept of code is speech? You are just writing words in a database, but it doesn't seem like that gives carte blanche immunity. And you can just say, I'm expressing my free speech, even though maybe bad things are happening. It doesn't. But I do think that there are speech elements of code that need to be protected. You know, what makes software code so magical is that it is, on the one hand, an expression of creativity. But on the other hand, it can do things, it can perform important functions. And so this is why the law constantly wrestles with this question of, is the behavior that's being targeted more in the functional categories? Is it more expression and creativity? and, you know, we have a first amendment, it protects speech explicitly. And so to the extent code is performing as speech, it is entitled to protections, but there are going to be outliers

in other cases where that may not be the case. It's why lawyers like me have fun jobs and get to do fun things. You know, there's an endless number of things we can argue about, but I do think that code is speech is an important concept that's been recognized in many contexts and will continue to be by the law in the years ahead. When you think about where we've been and the abrasiveness of the regulators, there's a lot of optimism now that I think part of it is Trump coming in as the next president, but it's also the administration he's bringing with him, Paul Atkins at the SEC. We see Bassant coming in as treasury secretary. We obviously have David Sacks is kind of this AI and crypto czar. And you can go down the line of a bunch of these

appointments and say, OK, this seems like we're going to be in pretty good shape. I also saw a breakdown of how many people own Bitcoin or crypto in the incoming administration. It's a lot of people. But it feels like it's not just the administration, it's the way in which they got mandated by the American people in such a landslide victory that is leading to a lot of this optimism. And so what do you expect to happen? Do they just go remove all rules and it's like the wild, wild west and crypto can do whatever they want? Is there some nuance? And then what's the impact of the changes to these rules? Well, I am certainly among the optimistic. At the same time, I don't think we should expect on day one, every rule to be lifted against crypto,

nor do I think we want that. I think it's important for all of us to understand that many rules serve many important purposes. And I think crypto has benefited from a number of those rules. But there's no question about it. The American people just elected the most pro-crypto administration in history. And just as importantly, they just elected the most pro-crypto Congress in history. Something like 52 million Americans have now owned or have transacted in a cryptocurrency or digital asset. And the crypto voter spoke with a very loud voice, Anthony, just a few weeks ago in November. And I think what we're going to see over time, not necessarily on day one, but over time, are sensible rules from agencies like the SEC to

govern how securities transactions involving digital assets can be offered lawfully here in the United States. I think we're going to see new legislation passed by Congress in short order that defines a market structure for crypto and provides for rules for things like stable coins in ways that will promote those innovations. And then I do think, though, that it's important to acknowledge the other element that you touched upon, which is there's just a more productive, positive attitude among so many of the nominees and individuals who've been elected to office in the last several weeks and months. They understand they have a responsibility to keep Americans safe and to make sure that consumers are protected. But they want to see crypto flourish

here in the United States. They're looking around the world. They're seeing other countries, other jurisdictions race ahead with sensible rules, sensible standards. Governments are encouraging crypto developers and companies to come build in their countries. And these American elected and appointed officials are saying, what are we doing? We invented much of this stuff here in the US. Why are we giving away this commercial and strategic advantage for no apparent reason? And I think we're going to see a return to a more balanced view and a more pro-America, pro-innovation view that applies to crypto as much as any other technology in ways that's going to be extremely productive and exciting. What you're talking about there is I think

innovations and advancements in rulemaking and in the actual, like the rulemaking process, but also the rules themselves. Yeah, for sure. Another area that's interesting is we talked about Coinbase's kind of legal team and your ability to not only defend Coinbase, to participate in various legal cases for Coinbase. Also, you are helping people in the industry, but you guys do it in a very unique way. You know, Brian will get on Twitter and he'll fire off a thread and he's, you know, communicating directly. I've seen you tweet, you know, a lot about certain cases and explain directly to two people. Here's what's going on. Here's our position. Here's what we think should happen. It feels like it is a strategy shift over the last couple of years

to talk directly to the industry, to the market. Why? And is it working? um look i i will i will say um i do think we have a unique approach to engaging with the crypto community at coinbase i think a lot of it has to do with um brian's vision that um in this modern climate in this modern media environment um we have the tools available now to go directly to our customers and community members and to speak to them um as as peers as opposed to top down and through intermediaries. I will tell you, Anthony, I'm now in my third decade of practicing law and I love being a lawyer every day. And I'm proud to be the chief legal officer at Coinbase. Never in my wildest dreams when I took this job, do I imagine that so much of the most important

advocacy I would be engaged in would be in the form of a tweet or a post on LinkedIn or having a conversation on a podcast as opposed to in court, at the podium, you know, making formal arguments. It's critically important that the crypto community understand where Coinbase stands, what we're doing, and why we're doing it. And so I think Brian, more than anybody else, has made it clear that part of our responsibility is not just doing the work, which of course is critically important, but explaining the work.

And there's no better way to explain it than to get on X and post about it, to come on podcasts like yours and talk about it. And so that's a big part of what we do. One of the things that you all have recently directly communicated is you will not be engaging any external law firms that hire individuals who were complicit in this kind of abrasive behavior. Explain a little bit as to like the revolving door and like how this works. And then very rare for a company to take this position, but was quickly followed up with a number of other exchanges and businesses saying, hey, we're signing on as well. How do you see this playing out? Well, you mentioned the revolving door, and this is a longstanding tradition in Washington, D.C., of people going into government, regulating industries for a period of time, and then leaving government to go represent those same industries in interactions and against the very agencies that they were just working at.

That's the way things have worked in Washington for many, many decades. Crypto prides itself, Coinbase certainly does, in doing things its own way and I think in a more principled way than maybe some others. And so when Brian Armstrong, our CEO, observed this practice and saw that it had now come to crypto and that many of the individuals responsible for this regulation by enforcement campaign of the SEC were now leaving the SEC, going to law firms and approaching us, asking to represent us in our engagements with that same agency, the SEC. see that they had just been working at, it struck him as off. It struck him as unprincipled. And even though there were many who counseled us that this is exactly the way you play the game, you go hire the people who just left the agencies to go talk to their friends and their peers to represent you. He said, we're not going to do it that way. And not only struck him as unprincipled, So it struck him as contributing to this swamp that so many across the country have had such a negative reaction to.

So Brian and Coinbase, we just want to have any part of that. The piece of this, though, where we went a little further, I think, is that we not only said to ourselves we weren't going to be a part of this. we thought it was important to be very public and explicit in sharing that view with the wider with the wider legal community and the wider business community so that everybody understood clearly where coinbase stood and so that's why we spoke um so explicitly about this and you know i will confess i was i was a little anxious about that because it's just not normally how things are done but i've come to learn over working for many years now with brian that um you know that's not ultimately what matters, what matters is what's right. And the reaction, the response from others,

including many others in crypto, you know, following our lead has been extraordinarily supportive and positive. And that's, that's, that's been a tremendous, tremendously gratifying for us as a company. What are the things that you're looking forward to in 2025 as milestones? You know, obviously Trump assumes office, new SEC chair, what else is kind of on that list? Well, we're very excited about Paul Atkins at the SEC, in large part because Mr. Atkins is a man of integrity, his reputation within the legal community, but in the broader business community is one of integrity. And we just think he's going to bring a semblance of balance and measure to the SEC that's been missing for the last three and a half years under Gary Gensler. Certainly the election of Donald Trump, I think, suggests we're going to have a much more pro-crypto attitude across the federal government. And if anybody was in Nashville the way I was when President Trump gave that speech, there was no doubt about what he was going to do if he won that election.

I think we're going to see support for legislation that I mentioned. I think we're going to see support for a fresh look at all these lawsuits that have been filed against crypto and asking, basically, is this really in the public's interest? Is this really in the interest of the country in supporting and developing a strong cryptocurrency industry here in the U.S.? And all that has me very positive and encouraged. But the main thing I'm very excited about, Anthony, is I think 2025 is going to be the last year where guys like you are going to want to talk to guys like me. What I mean by that is the lawyers, the regulators, the policymakers, people who do what I do every day, we've had to take a more prominent role in the conversation around crypto over the last several years because of all the hostility from the U.S. government. I'm hopeful that with new laws, new rules, and more of a balance at the various agencies, the lawyers are going to be, frankly, much less interesting. And we can go back to why so many people got into crypto in the first place, to build, to create. And we'll continue to do our work, but we'll do so in a much less prominent way. Well, I appreciate you coming here. I'll want to talk to you anyway. So even if everyone else doesn't want to, I want to. I think that it'd be very easy for you all to just focus on Coinbase and build the business, kind of keep your head down, hire the people coming out of the agencies, and frankly, not fight. Right? It's kind of the way I think about it.

And there's a lot of businesses that have done that for a long time. But I do think that it takes kind of a principled stance to do what you guys are doing. I'm sure it's harder. I'm sure it's maybe the lawyers think it's more fun, but probably there's more headaches along the way as well. And I think it's important work, right? And one of the things that I've said, I've said it on national television, I've said on this podcast a million times is the beauty of the American justice system is that both

sides get to hire lawyers. They go into a courtroom and they argue their best case. And a decision is made, whether it's by a jury or a judge, most of the times they get it right. Sometimes they don't. But there's appeals and there's all this stuff. And probably more so than not, we end up getting it right. And that process is something that is, frankly, pretty unique to the United States compared to many places around the world. But we need people who are willing to go and put together the arguments and go in there and debate, right?

For sure. And I'm glad that you're doing it. I'm glad that Coinbase is a company that's doing it. But also I think that it is having the appetite is one thing, but doing it and doing it well is kind of a whole nother thing. And so maybe you guys will be focused on different things in 2025 if some of the regulatory stuff changes, but either way, it feels like you guys will still be there in the fight and we appreciate it.

Thank you, Anthony. We're not going anywhere. And there's a lot of work ahead for sure in Congress, in the courts, and in general, making sure that we have sensible rules for crypto here in the United States for all of our benefit. But it's not just a privilege and an honor. It's a lot of fun. And it's meaningful that my team and I get to work at a company and in an industry that takes its responsibilities seriously and a commitment to the rule of law seriously. So we're going to keep fighting, but hopefully in a much more positive way. Given my many interactions with the legal team

and the compliance team at not only our companies, but other companies, I know not to ask you for a Bitcoin prediction price. So we'll leave it there. Where can we send people to find you on the internet? You can find me on Twitter. I am Paul Gray wall. I'm on LinkedIn and I'm on podcasts like this one. Thank you for the opportunity. Thanks so much.