Unchained - Anthropic's Mythos Is More Powerful Than the U.S. Government's AI. Does That Make Sense?

Episode Date: April 17, 2026

Can a private company be trusted to decide which 40 firms get access to the world’s most dangerous AI model? And separately — is the SEC’s new Reg Crypto finally the framework the industry has been waiting for since 2020? Thanks to our sponsors! *⁠ As Bitcoin's application layer, Citrea gives you access to the first trust-minimized BTC on a fully programmable platform and a native stablecoin for Bitcoin, ctUSD.  You can now participate in Bitcoin capital markets with lending, privacy, payments, Bitcoin yield, trading and predictions. You get expanded Bitcoin utility without sacrificing its security.  Citrea mainnet is live. Put your BTC to work at citrea.xyz/unchained.  *⁠ Ether.fi is giving Unchained listeners 15% cashback on food and ride apps — and that's on top of the 3% you get on everything else.  Your bank is charging you to use your own money. Laura switched and loves her card! Go to ether.fi/unchained to claim your offer. The week StarkWare’s chief product officer published a paper proposing a quantum-resistant mechanism for Bitcoin that doesn’t require changing Bitcoin’s code. The crew discuss the the threat quantum computers pose to bitcoin, which raises philosophical questions about what it means to “own” bitcoin. “Not your keys, not your coins” has long been the catchphrase — so what happens if a quantum computer wrests your keys away fro you? Plus they discuss the fact that Anthropic decided not to release its most powerful model to the public at the same time its technology is being removed from the government. What does it mean when a private company has greater capability than the U.S. government?   Also, the SEC’s Division of Trading and Markets quietly released major guidance clarifying when DeFi front ends need to register as broker-dealers — and Chair Atkins announced what could become the first actual crypto rulemaking in the agency’s history.  Katherine, Jessi, and TuongVy work through what each of these developments means for builders, lawyers, and founders navigating crypto right now — and why the question of who gets to make these calls is the same whether you’re talking about AI or regulation. Hosts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Katherine Kirkpatrick Bos⁠, General Counsel at StarkWare. Previously held senior legal roles across DeFi and centralized exchanges. ⁠⁠⁠⁠⁠⁠⁠⁠Jessi Brooks⁠⁠⁠⁠⁠⁠⁠⁠, General Counsel at Ribbit Capital ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TuongVy Le⁠⁠, General Counsel at Veda Learn more about your ad choices. Visit megaphone.fm/adchoices

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So we are your hosts. We're ready to get into this. First, we have Jesse Web3 prosecutor turned Web3 Protector at Ribbett Capital, NVE from the SEC to Web3. And I'm your host, KK, Catherine, fluent in TradFi and Conversant in Deep Tech over at Starquare. So speaking of Deep Tech, it is the perfect time to talk about this. One of the words that has been talked about a lot in Tratify, not just crypto, is quantum, quantum computing. And last week, Starkware's chief product officer, who I must say is not only brilliant, but a really nice guy, a VU Levy, released a pretty groundbreaking paper that solves a problem or an area of stress for all of crypto. And the question and the problem really is, can quantum computing break Bitcoin?

And first, let me square this and speak in English for a second. Yeah, I think the real question, KK, is what is quantum computing? And why does every time I learn about it, I feel like I understand it less? Yeah. Great question, Jesse. So quantum computers are supercomputers. Very easy, very easily understandable. They can solve things a thousand times faster or don't quote beyond that way, way, way faster than regular computers, regular technology.

So they change or promise to change a number of things fundamentally. And obviously one of the big vulnerabilities of crypto, I guess you could call it a vulnerability. It wasn't really a vulnerability until we were talking about quantum, is that it relies on cryptography. And standard Bitcoin transactions rely on a type of cryptography called E-C-D-S-A. And I'm not even going to define that. We're not going to go to that level of depth. And that's basically based on the fact that it's really hard to solve certain math problems

on elliptical curves. So it's based on the hardness. But a sufficiently powerful quantum computer running this mathematical thing called Shores algorithm can solve these problems, meaning someone can forge Bitcoin signatures and steal all of the Bitcoin. So this narrative has really proliferated lately. And it started to scare Tradfye, frankly. I mean, I had coffee this past week with a very senior individual who isn't Tradfai and dabbles in critical. And the first thing that this person asked me is, what do you think about quantum? Are you worried about Bitcoin? And it was really interesting because it followed some speculation that some of the downward

price action we've seen on Bitcoin is due to quantum fears. And there was one notable, I believe it was a Jeffrey's analyst that recommended dumping all Bitcoin because of quantum fears. So there's been a lot of discussion as like, should we be afraid? And Sarkware CEO, who is one of the foremost cryptography researchers, his response has been like, no, because as quantum computing advances, there will be equal advancement in cryptography, right? So a VU's paper proposed a really clever mechanism that effectively makes Bitcoin transactions quantum resists it. And how does it do that? Like, okay, it's really complicated, but it effectively hides a brilliant hash puzzle inside Bitcoin's existing rules. So you don't need to change Bitcoin. And rather than replacing the cryptographic tools

that Bitcoin uses, you get security from hash functions. And this means it's basically finding a lock hash functions that quantum computers can't break. Because when you look at hash functions, it's kind of on the same page technically as any computer and quantum computers. Like quantum computers don't have an advantage. So I'm going to stop and answer any questions from the two of you, but more so that why does this, why do we care? Why does Dex in the city care? A, we care on behalf of crypto. I'm thrilled that a view is at the forefront of this kind of research. This is an answer to our fears. It is very computationally expensive. I'll mention that, but look, we can figure that out later, right? And the question that it raises for me as a lawyer is, and I know this will

resonate with Jesse in particular, Bitcoin's entire legal claim to ownership, really rests on the idea that only you, like you own the Bitcoin, you can sign a transaction with your private key. So all of a sudden, if we have an environment where a quantum computer lets somebody else orge that signature, it raises some really interesting intellectual questions, like, whose Bitcoin is it? Like, who's powering the computer? And the law really hasn't dealt with anything quantum yet. Like, there's been post-quantum cryptography standards by the National Institute of Standards and Technology NIST. And regulators are starting to require quantum resistant encryption for financial institutions.

So that's actually a big growth area on regulation. But this is actually come from mess. And it's so interesting because Rivett invests in quantum computing and we do it in realms that have nothing to do with crypto. And we do that because, you know, the potential of quantum computing is pretty immense. I mean, taking how classic computers calculate with bits to. understanding how to leverage sort of the electron status and not using zeros and ones only. And I don't want to get too technical here because I've been down a lot of these holes. And as I said,

I learned about it. And then someone asked me a question and I realize I don't understand enough about it. But, you know, the reason that Rivet invest and the reason why so many people are excited about it is because quantum computing has the potential to solve so many of society's issues, right? But just like with all, and, you know, one of them that people talk about a lot is like, you know, healthcare development and pharmaceuticals, et cetera, how to, you know, cure diseases. And there's a lot of good potential research there. What interesting to me is it's sort of just like every tech. AI being the one that I think about a lot, crypto as well, is like with all these benefits are repercussions that I don't even think we can fully understand right now.

And luckily, the government has been thinking about this for a lot. little bit in the security realm, although it obviously has had problems dealing with non-quantom computing attacks. To me, the larger question is like, do we really even understand what vulnerabilities quantum computing is going to create? Like, no. Do we really know what the problems are going to be? And I really appreciated this article because the truth is, is like, we need to think about these issues now before it actually comes to fruition because people have been talking about quantum computing happening for decades, right? People have been working on this problem for so long. And so eventually, hopefully, I think for society, we're going to get there, I think. It's hopefully. And so once we get

there, it's going to be too late to sort of pull back the infrastructure of all these like systems and foundations that we've built and the entire internet is based on, let alone Bitcoin. I just sort of wonder, looking at our historical record as a society of understanding how to like rip out old infrastructure and improve it for new tech, I wonder if we're going to get there fast enough. Yeah. And you know, you're right. It's really interesting. There are some major incredibly exciting use cases for quantum computing. Like you mentioned drug discovery, huge. The other thing, the other one I really like is climate, meaning quantum computing can help model climate oriented scenarios and extreme weather much better, thereby theoretically allowing people to have more

advanced notice in climate emergencies. And that just scratches the surface. But the threat to cryptography is really scary, right? Now, I think the beauty of crypto is you do have a number of projects in the space, obviously starkware included, that are really at the cutting edge of deep tech. So in some ways, in the same way that, well, Crypto likes to think crypto and AI are cousins. Like sometimes it's like crypto's yelling like, hey, cuz. And AI is like, stop talking to me. Stop talking to you. I guess the family barbecue.

Exactly. And I'm like, come to me out of this conversation. It's like the cool older cousin, you know, and Cryptos is like the little one wearing glasses. Like, but in the same way, like I sometimes think of quantum and crypto as cousins, you know. And Starkware, in addition to abuse scholarship, we also. have Scott Aronson, who's one of the foremost quantum computing experts. He joined us as a scientific advisor in February 26. We, along with other projects in the space, are really figuring out

how to make this work. And this is a crypto issue, but it goes way beyond crypto. And it goes to national security, which is why governments and regulators are focused on this. I'm just glad we're talking about it and thinking about it. I, so like with all of the kind of like, AI like Dumer news that we have been seeing lately. Like I feel the same way about quantum. I unlike you guys have not gone down this rabbit rabbit hole. So like I'm relying on you to tell me when it's time to panic. And also on the crypto point like AI will realize that it needs crypto like someday. I actually think they are starting to realize that like crypto is really necessary for a lot of AI applications to to work and be effective. This like this whole thing really feels to me like. This whole thing really feels to me

like something that like 50 or 60 years ago would have called for really like intense kind of government research and resources and like a public sort of public private partnership. I feel like we don't see that as much these days. Right. Like this has this. I mean, it sounds like it has societal implications and maybe implications for humanity. like maybe that actually is something that the government should be working with the private sector pretty closely on. But I mean, I feel that way about like AI and crypto and other sort of revolutionary like technologies too.

So I would like to see more of that. And I'm always just kind of confused why or not. Well, luckily our government is now run by AI overlords that are acting as like the robber barons of tech. So they're making our decisions for us. But I think, V, your point is really well. taken because Bitcoin is just one issue that needs to be solved. There are so many. And it can't just be that we're putting out papers and we're debating crypto and quantum computing on crypto podcasts and AI quantum computing on AI podcast. Like we need to figure out a way to like make a larger solution here. And obviously like we've all said many times, this isn't only the US, but this kind of technology is global and does not look at a border and say, no, I can't cross that. So I think it's good to have this idea

out there. I guess to just push back a little bit, you know, the financial side of it to me is a real problem. I know it's something you mentioned KK to like deal with later. But the whole point of Bitcoin is financial freedom. Well, not the whole point, but a big part of it, right? And how are people going to pay for, what was it, $150 a transaction? or something like that, you know, for the people that are looking for financial freedom, particularly in other countries, let alone in certain parts of our society, that's like a whole month of wages. Well, you're right. Computational, it's $75 to $150 in cloud GPU time for this Bitcoin solution and mentioned in a VU's paper. But I will say, like, quantum is not here yet,

meaning it's not a threat for Bitcoin right now. And we have seen historically a solution. of technology that makes things cheaper. I mean, L2's being a great example, of course. That was the original use case. So that's why I'm saying we'll figure that out later. I just think this is a good starting point for discussion. But I mean, to answer V's question about like should we worry, TLDR, no, calm down. I want to say that to Wall Street. I want to say that to anyone who's selling Bitcoin. Like, calm down. We're working this out. We have a theoretical solution. Like the advances in cryptography are also incredibly compelling along with the advances in quantum. So that's my takeaway. That's my positive takeaway.

I need to record that so I could like meditate it to sleep at night. You can play it over and over and over again. Calm down. I mean, I'm still, I'm still buying Bitcoin. So it's fine. Okay. You know, that reminds what you just said reminds me so much of like a lot of like a lot of the arguments that scientists make in response to like the climate crisis and climate change. They're like, yes, climate, you know, the climate is going to change. Sorry if this is like a politically hot topic. But like you hear that a lot in response to like climate change, right? Like a lot of scientists, like I think there's this really famous scientist at Princeton

named Freeman Dyson who writes about this a lot. And he says, yeah, climate change is maybe happening, right? And it's maybe going to continue to happen. But technology will also continue to advance. And we may end up like finding a solution that will allow us to keep up with it. So what you just said about cryptography, like having confidence that cryptography can keep up with whatever happens with quantum, just reminded me of that argument. I don't want to make climate change here. And I've heard that argument for sure. But I guess I just worry that increasingly technologists can use that as like a cop out.

We could say that about anything, right? I remember in college, when I used to go to, like, the tanning beds. And I would always say, like, guys, it was really bad for you. Don't do that. You know? And, of course, I was like the mom of the group. And they were like, well, by the time I get cancer, there's going to be a cure for it. And I just think that, like, we can excuse so much behavior by saying, like, well,

someone's going to solve this problem in the future. Like, are we doing great at solving every problem all the time? That being said, that's why these ideas like papers, et cetera, and anyone putting an idea out there, I've said this before, Catherine, about your and my paper, V, about all your scholarship, is someone who has the guts and energy to research a topic and put it out there and, you know, take feedback, whether it be criticism or positive, is like something I really, really value because that's how we grow in all of our thoughts and thinking. And like, I'm not a big Twitter user, as you know, but like when that's the content on Twitter,

you see how this can be really, really valuable. 100%. And, you know, that's a great point and a great point to wrap on because we have a really meaty episode. So I want to move to another topic. But really briefly, I will mention on Saturday night, my babysitter who's in high school showed up. And she was very tan and she was talking about tanning. And I gave her like the lecture like you would not believe. I was like, you would. will get wrackily and I have had melanoma and I'm like showing her my scars you know so PSA to everyone out there scare your children don't go tanning the sun is not your friend a little bit of sun a little bit of vitamin D said from the redhead from the group so this actually the tech deep tech conversation segues

perfectly into our next segment that I like to affectionately refer to you as jesse scares the hell lot of us with the latest AI robots are taking over the world move. So, Jesse, tell us more about what the hell is going on with Anthropic these days. Okay. Great. I will try and not make this too much of a rant, but it's fascinating. And it's not just an AI story. It's like an everything story, just like this quantum computing one is as well. So Anthropic, as we know, private company in San Francisco just built what they say is the most powerful potential cyber weapon on earth and they decided not to sell it. And so you can either say this is a responsible thing for tech companies to do or really, really scary. And so I want to sort of discuss that side of it today

because I'm sure you've heard about this topic and I want to take a bit of a different angle. But I'm talking about the model called Mythos, which I think is a pretty good name actually. But it's a new model for Anthropic that they're deciding to hold back from the public and instead give it to 40 companies that they selected. We don't really know how, but thanks Cisco, Microsoft, Apple, Amazon, some banks, et cetera. And they're giving away about $100 million in credits for these companies to test out the model and make sure that their software systems are safe if this model is deployed, right? And this group of 40, they're calling Project Glasswing, which is a butterfly that hides in plain sight, like a bit on the nose. But for what that's worth. So why

is this more worrying than other prior announcements or any time I come on here and say like, hey, I's coming for your smart contracts. Or why is it more worrisome than when chat GPT2 was withheld for a little bit? Well, I think it's worth going back to how the foundations of software work. So as many of y'all know, every app you use, every browser, every operating system, you know, in the internet, it's all built on very similar and overlapping building blocks. They're open source tools. They've been around for decades. They've been tested for decades to look for vulnerabilities, et cetera.

So companies start. They grab these open source tools. They plug them into their products. And they rely on them. And they sort of just like let their company build off of them, right? As a foundation. What mythos of Pierce have done is found cracks in those foundations that have been hiding for decades, as we said, that these foundational tools have been tested

five million plus times, right? And I guess they needed six million because the foundations may be broken now. And so for anyone who's done a remodel, Catherine, I know you've talked about yours or me watch HGTV, you sort of know that like foundation cracks are very dangerous and can screw up the entire house and the entire system we've been built up. And it's not just finding old bugs. Like we've talked about that a little bit. It's also that the model is making exploits. and then covering its tracks secretly to hope that nobody finds it. It's just so crazy. This whole thing is so crazy.

And with all that, AI's AI company Anthropic is deciding that it's so scary, we're not going to release it publicly, right? And we don't know why they made that decision other than what they said. We don't know how they picked these 40 companies. We don't know what was the level that made it too dangerous. And we're just supposed to accept that this private company, it can be trusted to make this call. What's happening here is starting to look like the AGI dictator moment, which is what Sam

Altman initially said was what the labs and the nonprofit entities you were building were supposed to prevent. So are we there? But what is he and what do I mean by that? So Anthropic, in my mind, is like acting as our benevolent dictator. And you know, Claude is my best friend. And you know I like Dario. But it gets to decide who gets access when in house, sort of like putting an export

restriction on these tools. So it's a private company performing a national security function in many ways. And maybe you agree with this one, but what if we don't agree with it in the future and some sort of other like robber baron of tech is making that decision in the future? We have no regulation. We have no law. We have no oversight mechanism to deal with this, right? We're just sort of letting these companies make these huge decisions. And like just to push it into crypto for a second. It's really interesting because crypto sort of has an answer or a proposed answer for the benevolent dictator, right? Like decentralization. Don't trust the dictator, remove him or her and build systems that, you know, don't have the power to do that. You just have to

trust the code. But that doesn't seem to be super secure either, right? The track record on safety with all of our billions of dollars of hacks, bridges drained we've talked about, like, doesn't seem more secure either. So we're in this impossible tension, right? Like, Anthropics model is trust us. We have your best interest at heart. We understand this better than you do, right? And we will be responsible. And maybe there are, but like that's not a policy. That's like a prayer into the world, right? So I'm just not sure which of this side of the tension we should be thinking about. And like, how do we continue to allow this tech to develop while we're just sort of trawl. We're just sort of trusting these overlords to tell us what's safe or not, particularly private companies that we may or may not

agree with. I love that you, Neck, using the word overlord. Also, I am going to say, as a result of the naming of this project, I realized what a glass wing butterfly looks like. Oh, I love it. We need to put this on the screen. It's actually a crazy butterfly. So everyone needs to go check out what these butterflies. I digress. I think you make some great points. The one thing that I just wanted to add is, It also raises a really interesting question. Like, if a crypto company had technology that it thought it was dangerous, would it release it or would it go to that? So it's an interesting question. I don't know.

Depends on the company, depends on the people behind it. It also raises a question, too. There's a double-edged sword there. Like, when do we branch out into kind of a paternalistic question as well? Like every cutting-edge technology can be used for good and for bad. And we have seen a very long history of nascent spaces, emerging technologies that are grossly misused. And then it coalesces to get to an industry to a better place. Like we go on and on and on.

Yes, cars kill people, but we aren't riding horses, et cetera. So, you know, I share your concern or your worries about how do we deal with this or grapple with this technology correctly. I don't think that there's really an answer or a roadmap or a trusted party that I would ever trust to hardest as technology. Well, so, so I had one question and then a, and then a thought. My question was, were there any crypto or crypto adjacent companies included in the 40 that were selected for like testing us out? No, I mean, I think like J.P. Morgan was there. And so you can say like there were financial institutions, but no, it goes back. to our like, this is a family barbecue. And Julia is not thinking about us. Yeah. Well, okay. So, and

then my other thought was like going back to my comment earlier about how to me, this seems like the kind of thing that really needs to be like a public, private like partnership. The reason I say that isn't because I like love the government and just want the government to be involved for its own sake. It's because we live in a democracy and the government is the way that the people, like people, right, like citizens that are being ruled by these private sector overlords, the government is the way that the people express their preferences. And like, right? So that's really the only way that we can have influence over what these companies that have like very powerful technology, like what they are and aren't allowed to do with it. Like call me.

crazy, but I think society should have a say in that. I would never call you crazy. But I mean, that's like crazier about this whole thing and maybe even more terrifying is to have this all happen in the juxtaposition of what's happening with Anthropic and the DOD right now. They want to be called DOW, but I'm sticking with DOD. So obviously the U.S. government unclear whether they're also doing it because there's a lot of reports about what's happening with the Iran war. AI tech, but they're pulling anthropic out of all the systems and of all contractors to the government. And let's say that this tool is the most important, dangerous potential cybersecurity tool of all time. And the government is specifically saying, no, we don't want it because we don't

like that you're not putting our restrictions on it. And so that is sort of crazy too, because now is it going to be the case that this private company has much more powerful capabilities, than are all national security realm. And what does that mean for international security? What does that mean for future warfare? What does that mean for the entire globe going forward? And who has access to technology where? Not to mention, like, how do we feel about this company getting to decide who are the

winners and losers here and who has access to the technology? And it gets us to like a larger conversation about what's going to happen with AI and people who can afford, you know, to have access to all the tools and build. their life in a way that is more automated and helpful and they can make money off of it, versus the people in more like impoverished areas that are having the data centers built in their space. That's a separate rant. But, you know, it's like who gets to decide access here? Well, and it is interesting. You references, Jesse, but they named 12 launch partners. And 11 of them are like tech infrastructure companies. And then there's JP Morgan.

So candidly, if I were trad by, if I were city, I might be kind of pissed, frankly, especially because there's only one tradfai representation. Now, there are 40 other organizations involved. They have been publicly named as far as I know. So I would love to see a crypto native company involved because I do think that there could be value on both sides as part of this conversation. But we'll see if crypto gets invited to the barbecue, you know. But maybe not a barbecue. That's a bad metaphor. To the party, to the party where we do good things for the world. Okay. So, So on that note, we are going to move to break. And when we come back, we have more jam-packed action to discuss. Bitcoin changed how money works. Satraya changes how Bitcoin scales.

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groceries and restaurants right now, which honestly is kind of wild for a card like this. On top of that, I'm getting 3% cash back on every single transaction, using my actual crypto. No conversion fees, no nonsense. My bank never once did that. And it goes beyond just spending. You can borrow against your holdings at 4% or less, which is super useful if you don't want to sell your assets. You can also earn on all major assets, up to 8% APY, just by holding. And moving money is just easy. No hidden transfer fees. fees, no friction. It just works globally. If you want to check it out, go to ether.fI slash unchanged to claim your offer. That's ether.fi slash unchained. And we're back. And some major news broke recently.

So the SEC staff, this is, to be precise, there's staff level guidance and there's commission level guidance. So the staff of a particular division, in this case, the division of trading and markets. It's not as powerful as commission level guidance, like the whole commission hasn't come together, but it's still very, very, very important kind of educational guidance for the market. So the division of trading and markets just released a statement regarding broker-dealer registration of certain user interfaces utilized to prepare transactions in crypto asset securities. So what does this mean? It's major news for front ends and interfaces on the question of whether they need to register as broker dealers when they're engaging

with tokenized securities. And from my reading of the guidance, this actually seems to pretty explicitly allow front ends to permit defy swapping of crypto asset securities. So basically, if you build an interface and follow very specific rules advanced in this guidance, you can sleep at night and not be worried that someone's going to come and say you should have registered as a broker dealer. The SEC has been crazy productive. As, you know, my friend David Adlerstein said in another chat, like basically every few weeks, the SEC is flipping over another card. So they are really pumping out guidance. I want to get everyone's take on this, but a couple other really interesting points. One, this is interesting because it explicitly expires in five years.

years, this guidance, five years with a specific date. So obviously there's a sense of this is here for five years. In the interim period, we're going to work on law and rules and more kind of guidance with legal force, or I shouldn't say legal force because we obviously need legislation, but more of beyond this guidance. It's also open for public comment. So I'm sure we'll see a lot of comment from legacy tradfite entities on this, probably some angry comment about how they should be regulated. The other thing is, this actually reminds me a little bit of the no action letter vis-a-vis the phantom wallet, no action letter that we saw from the CFTC a few weeks ago. Similar but different, of course. But the question, the core question was the same. Does this

infrastructure, does this front-end interface infrastructure have to register when they're dealing with regulated markets? Obviously, the CFTC, it was derivatives, the SEC, it's tokenized, And here, much like the no action letter, the SEC is saying, no, you don't have to register as long as you meet super specific parameters. Like if you're basically just helping users set up their own trade, you have to educate users, you know, no pushing specific trades or soliciting, like a lot of transparency oriented requirements. We don't have time to go through all of them. Like I highly recommend those involved in this, read the guidance,

with a fine-tooth comb or read the seven different law firm client alerts that we're going to get as a result of this guidance. Some of which will be released in three weeks. I love it. But it's actually huge. And it's fantastic, again, to see the commission be so productive. Like, it's actually blowing my mind. I don't know.

I mean, Jesse, what do you think on this before we turn it to V for more SEC news? Yeah, I think it's a pretty big deal. And it seems like a big move forward. and the SEC is sort of helping with it. So that's my positive side. There are endless questions this is creating and a bunch of gray zone that I hope the comments will help, you know, sort of resolve. Like, it seems like they're making a distinction between preparing the transaction and executing the transaction, right? There's bound to be stuff that sort of falls within there. And so trying to understand where you are. But that's like every rule in guidance. So I'm not super concerned about that.

I also, you know, it's like applies to centralized parties, it seems like. Like I'm still a little bit unclear on how like a more decentralized front end, maybe like a Dow treasury that launches something or like a front end that's open source or a developer who deploys code and sets the initial like default parameters and then sort of lets it go. Like how are they supposed to comply with this and do they need to comply with this? you know, there's just so much coming out of the SEC and trying to figure out like where you sit in all the different rules and guidance. I think it's going to be an interesting challenge that's going to keep a lot of lawyers employed.

Oh, yeah. And part of the question is, you're right, like, who is responsible to when it comes to meeting the terms of these requirements? I mean, that's always the question in decentralized crypto or partially decentralized crypto. Like, who's responsible? And if those obligations aren't met, you know, who is. is going to be the one that has to grapple with inevitable enforcement action or, you know, liability. But I think the crazy part is, I think I said this in another episode, but I got so used to 2022 and 23, every few days, my day-to-day workload would be violently disrupted with the news of another lawsuit and I would have to stop what I was doing and read the complaint and analyze and, you know, report to my senior management and change regulatory strategy. Well, now I feel the same way.

but the news is positive from the regulatory front. So it's very disorienting. I'm not complaining about it, but the regulatory wins have just changed so dramatically. And credit to the regulators for having this open line of communication and dialogue and comment. So, you know, they're opening this up for public comment. Like, people have the right to articulate any opposition they have with this guidance. So I want to shift gear slightly, but say on the SEC, like obviously our resident SEC veteran expert, guru, whatever you want to call her, is here to tell us about other things that the SEC

is doing. Because honestly, we could fill a whole episode, B. Wait, you just gave me, like, really bad flashbacks to, like, all of those years where it really was, like, regulation by enforcement. That was, that was what life was like, right? Like, something would, like, an enforcement action would drop. And then all of us would have to just spend, like, the next 24 hours trying to figure out what it meant for everyone. It was just like chaos. So this is like a much more orderly way to regulate right through actual, through actual regulation. Like imagine that. Yeah. So I think just a real quick comment on the on the user interface stuff. I mean, I need more time to dig through it. But I think like the high level takeaway for me is like the more

neutral you are, the less likely you are to be deemed a broker. And then the more more discretion you have over user like orders, the more likely you are. And then all of the different factors sort of go right, one way or the other. Right. So I think that like for me was the main takeaway. The other really cool thing that the SEC did recently was last week I was at the Vanderbilt Law and Blockchain Association's first annual digital assets and emerging tech the summit. Shout out to Yesha and Lindsay for putting on a really amazing event in one of my favorite cities, Nashville. KK., we need to bust out some of our line dancing moves this week in Karen. Although I don't know if their French will get it. It was recorded. Yeah, I took a line dancing

class in Nashville a few months ago and that class was recorded and will probably be used against many of us who I know. I was like, that made me realize like we've never actually, I don't think we've ever actually got in the video. I don't know where that's pretty great. Yeah, we need to the best, though. So much we need to punch your music this week. They're excited about this now. Totally. No, it was so fun. So anyway, at Vanderbilt, Chair Atkins announced something called Reg Crypto, which is a great name, by the way. And he said he had sent it to the White House for review. So specifically, it is going to something called the Office of Information and Regulatory Affairs, which I believe is in OMB or the Office of Management and Budget,

which most of you have probably never heard of. But the way it works is that before the SEC or any federal agency can propose a rulemaking, it has to pass through this office. And the SEC is an independent agency, but anything with like potentially big economic impact has to get reviewed for like a cost-benefit analysis, market impact, political alignment, things like that. And so that's why it's going to this office. And so what is the rule, right?

So there hasn't been a lot disclosed about it. But it sounds like what it's going to do is create a workable regime for crypto fundraising through a few safe harbors, which include things like early stage crypto projects get up to four years of breathing room. There's a time limited exemption from full SEC registration. and the idea is that it's designed to let networks decentralized before being regulated like full-on securities. And then the disclosure that the token projects have to make are going to be principles-based, right? So not as like rigid as a traditional IPO, but probably heavier than, you know, the white papers that token projects typically put out. And then still TBD on whether the rule will

address trading or secondary markets. So we'll see on that. So this sort of like token like registration token disclosure thing is it's been something that's been talked about for literally years. Like I don't know if you guys remember, but in 2020, Commissioner Perce we had on last week put out her first token safe harbor proposal. So that was like six years ago, right? It's wild that all these years later, we may finally have a real framework to finally like legitimize token launches in the U.S. without four. forcing projects offshore into convoluted Kamens and BVI and BVI and like Gibraltar and like the Cook Islands. I don't know. Who knows what structures under reg S and all of this other stuff. Right. So to me,

this is a really big deal. And it would also be the first actual crypto rule to come out of the SEC, right? And I think just the startup more to come. So, you know, it's what all of the like meetings and engagement and roundtables and guidance for the past year have really been building up to. And I think like we like we were just saying, right, it's going to like finally mark a shift away from regulating crypto by enforcement to regulating it by rulemaking, which is really amazing. So Jesse, I actually had a question for you. So one of the things in this proposed rule is there's going to be a $75 million fundraising cap

in order to qualify for this like registration light regime. So you work at a VC, right? Does that seem realistic to you? But also the other question I had was like, is anyone even like launching tokens anymore? I think it's not realistic, but it's at least a start. And the truth is, is people are still launching tokens. Whether those tokens are doing as well as before is a little bit unclear. And there's increasingly problems with structure, et cetera.

And some of these tokens, I think, have matured and the kinds of stuff that we would invest in. You know, it's matured past the, I don't want to say just, but I'm putting it in quotes, right? Just a mean token or just something that they know will profit or just something that they can argue as a utility token. But rather, the good news here is that the idea of using a token for something legitimate and tangible that, you know, actually has utility, and that's just like an argument for utility, is increasingly becoming an interesting component of this. What I think is. is sort of interesting here is like that wouldn't fall into the SEC anyway necessarily. So perhaps it

just gives a little bit of leeway that we don't have to argue is a security. Is it not a security anymore? On the threshold, I think it's a start for sure. I mean, we're a bigger VC and a lot of these, you know, smaller VCs do smaller checks for, you know, for sure into smaller token projects. And that seems to be the goal, right? It seems to be more directed to the smaller projects that are trying to innovate and not have be suppressed by the larger projects and the larger tokens that are taking off. Yeah, totally. I mean, it is really interesting the amount of conversation that I've seen lately talking about are tokens fundamentally broken, meaning the revenue model. But from the legal perspective, what I really like about this conversation is I think we're finally at the

point where everyone acknowledges that the company that issued the token, token cannot control the token price. Like even if it wanted to, like even if ex-company that issued a token CEO went on crypto Twitter every day and said like, we're working really hard to drive the token price up. Like the token price wouldn't necessarily go up. And we've seen all this behavior with tokens where they act fundamentally different from equities, from a, you know, a macro perspective. So why do I like that because finally we have equal acknowledgement from regulators that tokens are not a security. Like they should not be securities. They are not securities. They don't act like securities. If we use the old duck test, and this was the other test, test advanced by, you know, certain individuals

within the SEC at one point in time where it's, you know, if it looks like a duck, quacks like a duck, walks like a duck. A highly evil. They do not look like quack like or walk like equities. So why are we still talking about this? Luckily or not, we're moving on. Also, you have a bunch of, not a bunch. You have some projects now that are just like announcing, like we hereby declare our tokens are now equity, right? So I'm like, okay, that's interesting. And I think you're going to see more of that.

So this is sort of just like, you know, like bringing it into the regulatory perimeter because it seems to be happening anyway. It's a great point. It's very confusing. So I think we're going to run out of time on a couple, one of our topics. We were going to talk a little bit about CZ's memoir. but I'll just shout out that I personally can't wait to read the memoir slash watch the Netflix series. Like who is going to play him?

Like we could have a whole conversation there. It's very interesting. It just came out. We'll put a pause on that because we have one last media. Well, I'm not going to read it, but I really like to you to be the voice on the audiobook. And then I'll listen to it. I feel like I could have a second career as an audiobook narrator and I would really enjoy it. Like, I love to read.

I will read fiction, nonfiction. I could do a dramatic voice. Yes. Out of prison. Crypto's richest billionaire tells all. Okay, so anyway, moving on. Our last topic is an awesome topic because it's also our good news. So I want to pass it over.

We're going to have a slightly more substantive good news portion at the end of this week's episode. The, tell us about this good news. Yeah, so this week's good news is a little different than what we usually cover. It doesn't involve puppies. Sorry, Jesse. But I think it's just, it's really, it's so important to highlight. I think especially, especially in light of all of the recent exploits and just security incidents we've been seeing in both CFI and DFI. So there's this wonderful organization called SEAL or the Security Alliance. Most people know them as white hats who spring into action and help work. cover funds after hacks. But they've also been quietly publishing some of the most practical security frameworks for Defi that I've seen. We'll link to their website in the show notes, but we encourage all of you to check it out. It just has really practical stuff on best practices around operational and security. I was just looking at the multi-sig piece the other day. And like, for example, on multi-sigs, which everyone, you know, was talking about after the drift

protocol hack two weeks ago. They don't just ask, like, you know, is it two of three or four of six, right? They really push teams to think about it more deeply, like really mapping out what privileged actions should exist with the admin, like upgrading contracts or pausing the protocol or moving funds and then designing the right controls around those. So they also have playbooks for incident response, like who has the authority during a live exploit, exploit to do what, how to coordinate disclosures, how to safely pause the system, and guidance on access control, key management, and minimizing single points of failure. And, you know, I've been a critic of how just kind of ad hoc and chaotic the response to security incidents can sometimes be in Defi. So I love their resources

around incident response in particular. So anyway, the point is defy security is really, really hard and it's not binary, right? It's easy, of course, to just say, oh, just be immutable, don't have an admin key or else it's not defy. But it's like, okay, that's like five projects that has no user. So I think that's just not realistic or representative of defy today. Defy as it exists today involves a lot of tradeoffs between security and flexibility on the one hand and user safety. And so I think what SEAL is doing is really trying to help the industry move forward towards shared standards and best practices and just more honest and transparent design decisions. Because as we know, North Korea is getting better at what they're doing every day.

And especially as more institutional capital comes in and also as more retail users like normies start to engage with defy, I think that kind of clarity is going to become even more important. So anyway, Seale, we see you and we appreciate you. And we hope every team checks it out. I personally refer to their resources all the time when I'm advising my own security and engineering teams at Veda. So they're really great. So that was our good news. I think every every legit crypto project security team works with them. I think this is such an important topic, V, especially with all the exploits we're seeing. Like, this goes to a broader point. Like, this is crypto maturing into critical infrastructure. So, you know, obviously we're seeing a lot of

legitimacy. We're seeing crypto and the U.S. government working together. We're seeing crypto and trad-fi and entrenched institutions working together. Crypto needs to level up its security. And these types of organizations are helping to facilitate that, which is essential. And, you know, we're seeing also, you know, Treasury's Office of Cybersecurity and Critical Infrastructure Protection, like, you know, the fact that they are now sharing data with eligible U.S. crypto firms is fantastic because that is yet another sign that they're extending the same cyber intelligence to crypto that banks already receive. The government is now viewing crypto as part of America's, or at least on the path towards America's critical financial infrastructure.

We're all in this with the same goal to improve the technology, to improve the rails. No one ever wants to see retail harmed. And a big part of that is security. I completely agree. I'm so glad the security folks are people who care about it like us here aren't just yelling into a black hole at this point, but there are a lot of entities sort of doing work here. I want to shill a few more just because I think if you're building in this space, you need to have access to as many tools as possible. So there's also the two things that Rivet help incubate, just like as a caveat, which is the blockchain security standards council, which has a bunch of people and companies you've heard of sort of, working together to put out actual standards on how to build things. There's the rec test that Trail of Bits put out about a year and a half, two years ago. That's sort of like the basics of what you should do in order to be able to create a safe blockchain. There's the crypto ISAC, which is much more about like entities coming together in the private

sector space, sort of creating their own like 314B information sharing about hacks, et cetera. TierM Labs is doing the beacon network. I could go on and on. This is all just to say that like, despite all the billions of dollars being taken out of defy and what you hear on Twitter all the time, there are entities that are trying to make this safer.

And when we walk into rooms with regulators and with people writing this legislation, we need to talk about them and be proud of them and be on our front foot and explain what we are doing to solve the problem. Yeah. And shout out to some of the awesome crypto lawyers, like Mike Mosier,

Bechoretic, several others who have been heavily involved in this effort. So this is where the lawyers are adding value guys, okay? Helping the builders build, right? That's our mandate. So sorry, B, were you going to say something? No, that was good. I think that was great. Thanks for sharing all that, Jesse.

Yeah. Next week, we'll be back with the usual good news about puppies. No, no, for real. I am on the hunt. There's a robot. There's, oh, my God. Okay, I have one. I have one.

Robot seeing-eye dog being created in order to be able to help blind people. I love that. Yeah. Okay. Let's see. Now we have to end because I just, you know, I'm going to live in the apartment pleasies. Jesse B. and I will be in Paris this week at Paris blockchain. So if you're there, check us out.

Our panel will be filled with hot takes. But until then, if you can't make it to Paris, thanks for joining us for Dex in the city and remember as always we're lawyers but we're not your lawyers we'll be back next week with more cold wallets and hot takes until then thank you so much