Unchained - DEX in the City: Is Now the 'Perfect Time to Launch a Crypto Scam'?

Episode Date: February 13, 2026

The market structure bill introduces a "control" test for DeFi protocols. The problem: nobody agrees on what control means. Figure is giving away $25,000 in USDC. Deposit into Democratized Prime, earn ~9% APY hourly—and every $1 you keep in for 25 days is 1 entry. Enter here Peter Van Valkenburgh of Coin Center sits down with Jessi Brooks and Vy Le to confront a question that will determine which DeFi projects can operate in the United States and which ones can't.  The Blockchain Regulatory Certainty Act creates a carve-out for non-custodial developers, codifying the principle that if you never hold customer funds, you shouldn't need a money transmitter license. Simple enough on paper.  But Vy presses on the hard cases: what about an admin key, an upgradeable vault, or a pause function built for security? Where exactly does "non-custodial" end and "control" begin?  Meanwhile, Jessi raises the tension the industry rarely wants to discuss. The DOJ just charged cartel brokers moving money through crypto, yet simultaneously dismantled its own enforcement teams.  If Congress clears developers, who pursues the actual criminals? The answer matters for every builder, investor, and victim watching this play out. Hosts: Jessi Brooks, General Counsel at Ribbit Capital TuongVy Le, General Counsel at Veda Guest: ⁠Peter Van Valkenburgh, Executive Director of Coin Center Links: ⁠​​Crypto Market Structure Bill Clears Senate Committee — But the Hard Part Is Still Ahead⁠ ⁠Senators Move to Curb Passive Stablecoin Yields in Market Structure Push⁠ ⁠Mastercard in Talks to Buy Zerohash for $2 Billion: Report⁠ ⁠How the GENIUS Act Creates a Built-In Advantage for Banks and Deposit Tokens⁠ ⁠How Nansen’s New Trading Agent Makes It Easier to Follow the Smart Money Onchain⁠ ⁠How the x402 Standard Is Enabling AI Agents to Pay Each Other⁠ ⁠Reading is Fundamental⁠ ⁠Stablecoin for Babies Learn more about your ad choices. Visit megaphone.fm/adchoices

But the average American feels like they were rough. They were told that this is going to be a force for financial freedom, and all it is is just online sports betting without a regulator. That's stupid, and everyone in crypto should be ashamed of that. Hi, all. Welcome to Decks in the City. I may look different today because I am not Catherine Kirkpatrick, but we are still Decks in the City where the wallets are cold and the takes are hot.

KK is out today, and I don't have her gorgeous red locks, but I'm going to try and fill her shoes. I'm your temporary host, Jesse Brooks from Rubik Capital, and luckily I'm here with my co-host V. Today, filling the shoes of KKK is our wonderful guest, Peter von Vulcanberg from Coin Center. He does not need any introduction, so I won't do it. I'm sure you all know about all the amazing work that he's done to protect software developers in the crypto industry, which we will get into in detail. V's going to also ask him some specific questions about what's happening with the crypto market structure bill. There's a White House meeting happening right now about it. And so we'll

get into all the details there, although I cannot believe it. We're still talking about it. But before we get going, remember, we're lawyers, but we're not your lawyers. Nothing you hear on decks in the city is legal or financial advice, and it doesn't create an attorney-client relationship. For the fine print, always check on chained crypto.com. So now I'm going to pause for a word from our sponsors. Did you know that figure is giving away $25,000 in USDC? They're a decentralized digital asset platform for earning, borrowing, and lending. Download the Figure Markets app using our link. Figure Markets.com slash unchained DP.

Deposit into their democratized prime pools and earn about 9% APY paid hourly while you enter. Every dollar you keep in for 25 consecutive days. days counts as an entry. Again, the link is figuremarkets.com slash Unchained DP for full details. If crypto taxes feel overwhelming, you are not alone. That's why Crypto Tax Girl, a team that's been helping crypto investors since 2017, is offering $100 off on one-on-one crypto tax help. To get $100 off your crypto tax services, go to Cryptotaxgirl.com slash unchained. Again, that's Cryptotaxgirl.com slash Unchained. Okay, we're back.

Let's get going. So first, delay the land, so you just know what to expect today. First, we're going to give you the play-by-play on market structure and let Peter sort of do his thing, walk through what he's been working on and ask him a bunch of questions about it, maybe challenge him a little bit. And then we're going to jump into what this means for the DOJ and then hopefully hit on some Super Bowl crypto fund here at what V thought about the halftime show. and then maybe get to AI agent security if we have time. So V, I'm going to turn it over to you to get us gone. So cool. Thanks.

So Peter, you've been at Coin Center for a while now. We're so happy to have you on today. You're actually, I think one of the first people I started following when I joined the industry, like over four years ago. And I've honestly learned so much from you over the years. And I got to know you a little bit better because you were really helpful in the samurai wallet case where the developers there were charged by the DOJ for conspiracy to operate an unlicensed money transmitter and conspiracy to commit money laundering. And they're both now in prison. So we'll talk a little bit more about that today.

But you were just so helpful to the defense team in that process. And so just in addition to all of the work that you've done for CoinCenter, over the years around developer rights and civil liberties more generally. It's just really great to have you on. So for those of you who aren't, those of our listeners who aren't as familiar with you in CoinCenter, can you give us just some really quick background on what you guys do and what your focus is these days? Thanks, V. And that was very kind of you.

I've been working in this space for 11 years. So CoinCenter was founded in 2014. It's actually my first job out of law school, my first big job out of law school. And at the time, you know, there wasn't really a mature voice explaining and educating and representing these open source technologies in Washington, D.C. And the Coin Center's mission was to fill that void, was to be a voice for the technology, which at the time was, you know, primarily Bitcoin. That's really all we got questions about when we would go into a congressional office or

into an agency. This was before the Ethereum ICO and before Ethereum launch. This was before ICO summer, NFT summer, Defy Summer, Name Your Summer. So we've been around for a long time. We're mission driven. So, you know, there are now a number of mature and some of them, quite successful trade associations in Washington, D.C. that represent crypto interests, but Coin Center is not a trade association. We think of ourselves and we are a civil liberties firm that's focused simply on guaranteeing that people who want to develop the free and open source software that makes these technologies, you know, the open innovations that they are, are protected from undue prosecution or regulatory treatment. We're not nihilists, to quote Senator Warner,

actually, in a recent hearing, who suggested that there are some people in the industry who are nihilists who don't want any regulation, or that might have been Bessim, actually. It was in an exchange between the two of them. It was really interesting exchange. We do believe in common sense regulation of trusted persons in the space, of companies like Coinbase, and even of projects that claim to be decentralized and trust minimized, but actually are still performing basically the roles with a centralized financial institution. What we are against is attempts to license and permission software development or the operation of truly neutral infrastructure. And we sort of model ourselves after the Electronic Frontier Foundation, which for those of you

who don't know, is this amazing internet policy-focused civil liberties organization that started in the 90s by greats like John Perry Barlow that fought to say, look, you know, aspects of the internet deserve regulation, but just connecting computers together and making a global network possible and writing the software to do it is not something that we should police into the ground because otherwise we'll lose this beautiful new freedom that we have and a global communication somehow this is not the first time that barlow has come up on this podcast good he should come up on every podcast i guess there's something good there i have a question for you on the sort of coin center foundation and thesis because we already get into AI agents we talk about it

all the time here um when you guys talk about protecting software development Is it purely related to blockchain and crypto, or are you beginning to expand sort of to other areas? Because in my mind, and I've touched on it before, you know, I've engaged on the market structure bill on this issue too. Like, it's hard to separate the two as, you know, AI and crypto both become part of infrastructure. I think it's hard to separate. You know, Coin Center, I think part of what's made Coin Center successful over the last 10 years is that we have this narrow mission. We're not here to represent, you know, a quasi-centralized online casino for, you know, perps or something like that. We're here to represent like an actual open source tool for privacy.

And we're also not here to opine on a whole bunch of other technologies. We're supposed to be cryptocurrency focused, blockchain focused. Maybe you could call it decentralized computing focus. So there are touchpoints there with AI. Like frankly, I would be more comfortable of the way AI was built out over the next few years was as much as possible with decentralized systems for both like who owns the compute resources and how do we reward, you know, training data and things like that. It'd be great if that was built on more decentralized protocols because I think it's a decent use case for blockchains. But on the question of just like AI and liability for developers who are building these models, I think we would shy away from that. But it would also be

hard to because the exact same precedents that will be set in the world of crypto, like whether your smart contract for privacy is worthy of First Amendment protections when you publish it or deploy it to the blockchain are going to be identical as far as legal standards that are developed under the First Amendment as whether you can write the same code and publish it widely or distribute it widely for AI, right? So there's a lot of overlap, but we take as our mission defense of the crypto stuff specifically. We talked about the, you know, the business. that have been going through and the updates, etc., pretty much on every episode over the past few weeks. Why don't you tell us what's been going on in the past week or so when it comes to developer protections

and particularly 1960, which for everybody who somehow hasn't hurt that in the crypto space, that is a statute that has been used to prosecute on licensed money transmission. Federally, it's complicated statute. There's not a lot of precedent associated with it. It was associated with the samurai wallet case that V was talking about tornado cash, but also a bunch of very useful cases that will get into associated with cartels and also like centralized mixer. So know that that has had a centralized acting position in this bill and especially in the

past week or two. Well, so it's interesting. So, you know, back in 2017, I think, we published a long form report arguing that the state money transmission licensing regime is a strange fit for crypto businesses. It's odd that a coin base would be regulated exactly the same as a money gram or a Western Union, right, because their risk profiles are different, consumer protection issues are different. And it's inefficient to force these companies to go get 53 licenses from different states and territories that all independently regulate their activities. Right. So the question back then was, why don't we have a

federal framework? And that's mostly what market structure is about. It's about can we establish and house at the SEC and the CFTC some unified national oversight for trusted companies that hold people's crypto that are deserving of regulation because people trust them with their crypto and they trust them with say best execution in a trade or something like that. And mostly that's something that Coin Center supports but doesn't get deeply involved in because if you walk like a duck and you quack like a duck, if you're kind of like a bank or other financial services provider, we just think there should be equal treatment. You know, we don't think the banks should get special treatment.

We don't think the companies in the crypto space should get special treatment. Where we get really involved, though, is on this developer liability question. So if you're not a traditional trusted entity, you know, someone who's taking custody of funds or someone who's making, you know, enforceable promises of things like best execution, if instead you're just providing software that allows people to transact on their own, you know, relying on your tools. but not relying on your discretion or judgment. Can you be regulated as a money transmitter and forced to get a license before you publish that software?

Can you be regulated as a broker dealer under the SEC? Our argument is that when you're truly just publishing software or providing truly neutral non-discretionary infrastructure that other people are using, you should not be forced to register or license. And there may even be actually pretty serious constitutional issues with forcing you to license or register before publishing your software because that would be a prior restraint under constitutionally protected speech rights. Additionally, those regulations,

setting aside the constitutional concerns, are not usually fit for purpose. Broker dealer registration is about information asymmetries, as is most of the SEC's statutory purpose. And in a world where your software is simply scraping publicly available information, automatically and allowing a person to find, say, a trading partner somewhere online using that publicly available information, you are an information broker. You're not a stock broker in the traditional sense. And so the information asymmetries that we would normally worry about in a broker registration context like, are you going to find the best trading pair or are you actually going to prefer someone that is internal to your brokerage firm or your larger fund?

are you going to make public the information that you based your decision on how to route and order, those questions start to fall away when we're talking about truly decentralized systems. Similar with money transmission and anti-money laundering rules, when you are in a position of trust vis-a-vis your customers, your Moneygram, Western Union, PayPal, Coinbase, it is a fair bargain, I think, to then obligate you to know those customers and report some of their information to the government for crime-fighting purposes. But when you are a stranger to those people, you are more like a person who wrote a really good book

that a bunch of people are reading, the thought that we would force you to learn all the people who bought and read your book and report them to the government, it starts to look very Orwellian, and it's problematic, I think, fundamentally. So where we have truly decentralized activities, truly software-based activities,

I think we need to avoid prior restraint and registration. And that's not to say that there's no regulations that apply, because the last thing I'll add to this, there are things like unfair and deceptive acts and practices. So if you publish software and it turned out it did things that you said it didn't do, either because you were negligent. And certainly if you were intentionally committing fraud or deceiving the users of their software, you should be prosecuted, right? And there is jurisdiction to do that under unfair and deceptive acts and practices at the FTC and at other agencies. but registration and licensing is a step beyond that.

It actually starts to get into the realm of prior restraint. Can we drill down a little on the concept of truly decentralized, right? So like in the market structure bill, the 1960 provision and the BRCA, they both like kind of turn on this concept of control, right, which is a concept that I think like we've all been struggling with for years in crypto. So like what does control actually mean? Right? So from my perspective as the GSI

company, this is something I think about like literally every day, right? In our case, we operate vaults, which are just programmable smart contracts, but users can connect their self-posted wallets to and then the vaults deploy those funds into defy yield strategies. So one of the questions we're constantly grappling with is how do you maintain the non-custodial nature of this kind of arrangement, like, what does it mean to have control? You know, if we can upgrade the vault, does that constitute control? What if we can pause withdrawals in order to respond

to security incidents? Does that constitute control? What if you have something that is not 100% immutable because there are certain admin functions you need to have just to, like, be able to operate the thing. So like you do read the provision, the proposed language in the market structure bill to mean that something really does have to be like 100% autonomous and immutable to the constitute no control or if you have any at energy whatsoever. Does that mean that you're subject to regulation? So there's a couple different moving parts actually. And it's a big bill. And this is part of what's made it difficult for it to move through the Senate because a lot of people have a lot of education to do before they can be comfortable with it.

But there's a couple of different provisions. The first provision to focus on for this question is the Blockchain Regulatory Certainty Act, which was a separate stand-alone piece of legislation that began in the House in 2018, I believe, when Representative Tom Emmer, now majority whip Tom Emmer, introduced this piece of legislation. And it was intended with Darren Soto at the time. So it was bipartisan as a Democrat and Republican. And it was intended to create a safe harbor from unlicensed money transmission prosecutions for people who are truly not doing money transmission, as defined by FinCEN at the time, the relevant federal regulator for figuring out who is a money transmitter.

FinCEN had issued guidance. At the time, it was multiple letters to multiple companies who asked for further information, for administrative rulings, and later it was official guidance in 2019 on all different kinds of of entities in the crypto space. And FinCEN said, if you do not accept and transmit by which we understand at some point in between, you'll have independent control over customer funds, if you don't do that, you're not in our jurisdiction, which I think was a very good and faithful reading of the underlying regs for the Bank Secrecy Act, which is our financial surveillance rules, and the Bank Secrecy Act itself. And so Tom Emmer's bill, the Blockchain Regulatory Certainty Act, simply took that

Finsen, guidance, and codified it and said, we're going to make this a statutory rule so that it can't be ignored, because guidance is guidance, and it's important. Companies sometimes rely upon it, but prosecutors can ignore it. They can say the underlying statute is different and the guidance shouldn't be followed. And in fact, that's exactly what the prosecutor said in the tornado cash prosecution when they went after Roman storm. They said, yeah, FinCEN said you're not a money transmitter if you don't have total independent control, but FinCEN is only defining, only offering guidance on the statutory definition of F5330, the Bank Secrecy Act, and we're talking about the criminal code,

where we think money transmission is basically whatever we want it to be. Hold on. To back up my uncharitable reading, though, they said a frying pan transfers heat, even though it doesn't control heat, which is, to me, verging on chicanery. I understand that it's... I'm not sitting up for the DOJ in this prosecution,

or that brief. which I disagreed with a lot of it. I think that the bigger problem of that charging of tornado cash was the fact that they weren't specific enough with the facts because tornado cash obviously changed over time and they should have charged it accordingly. But I want to make sure that I'm challenging you in the ways that like that... Let me close the loop quickly on the market structure discussion

because I know I go off on these tangents. So the BRCA ultimately got attached in the house to clarity the House's market structure legislation. And that was important for Coin Center because we basically said, look, we want trusted companies to be regulated in a sensible way, but part of the bargain for our support and for like what we care about

is that you offer some clarity to software developers that they're not going to get unjustly prosecuted. And the House passed that with the BRCA attached. Then it came to the Senate, which is why we're discussing it now, and it got subtly changed in ways that I'm generally comfortable with. But now at this last moment where we're sort of dithering,

on the precipice of maybe getting a vote in Senate banking to get it out of committee to get it voted on the larger Senate. There are renewed doubts by some folks who are going to need the support of to get the vote count to actually pass this thing as to whether we're unduly restricting the ability of prosecutors to go after bad actors by providing this insulation from liability for software developers. Yeah. On the question. Yeah.

No. that's really helpful background. I think like the frustration for like someone in my position, right, where I'm actually trying to advise like developers and builders around like, you know, if we have an admin key, like what actual functionality can we retain or give up, right, in order to constitute no control? And right now, like, and I get that it's the statute and so it's not necessarily going to drill down on what like the different factors are. Like that will come with rulemaking, I assume. But that's what I think is frustrating.

And it's hard, right? Because until we understand how control is actually defined, it's the language right now is not actually that helpful for us. Like we are potentially at risk of being criminally executed. I think the BRCA's definition of non-controlling blockchain service or service provider or software developer is much clearer than, anything we've had in the past, except maybe that 2019 FinCent guidance, or in line with that 2019 FinCENSend guidance. And so this will hopefully codify what has become a clear standard,

had it not been for some prosecutions from the Southern District of New York, like the Tornado Cash prosecution that I think went off the rails, or were prosecuted in the wrong way to be, to be fair to Jess's excellent point, which there probably were good ways to prosecute this, and this happened to not be one of them. And then the other thing I'd say to answer your question on sufficiently decentralized and admin keys and, you know, emergency security councils and things like this. I think the BRCA gives you a fair amount of clearance that if what you or admin key allows you to do is rewrite the smart contract in certain discrete ways, you don't have day-to-day ongoing control of customer funds and so you're not a money

transmitter. But there's more. You might be a broker dealer. You might be a digital commodities broker dealer, which will be soon within the jurisdiction of the CFTC. And so there's a secondary question, the BRC gets you out from money transmission liability if you don't have control. But are you regulated at the federal level by these other competent authorities that will require registration and licensing? And so in the Senate banking amendment in the ANS draft, all this is darken, there's section 301, which is an interesting. thing to look at if you're a lawyer working in the space, which is about non-decentralized protocols. And so that sets up effectively a rulemaking for determining what is a non-decentralized protocol

with a number of important factors for what might be non-decentralized. If you are deemed non-decentralized after that rulemaking sets up those factors, you can then also be deemed obligated under existing securities laws or existing, treasury rules like the Bank Secrecy Act as an obligated entity, either as a broker-dealer for securities or as a money transmitter, or not as a money transmitter, or as some other BSA regulated entity under the Bank Secrecy Act. But if you are insulated by the BRCA, you can't be treated as a money transmitter. So this non-decentralized rulemaking is important. And one thing that, you know, the first time I saw this text from its drafters, I was concerned because there's a lot in

there. And there's a lot, you see technical terms in legislation. You think, well, this probably won't age well, or it will create the clarity that you hope. It should be more of a principles-based standard rather than a specific technical standard. But once I dug through it, I got comfortable with it. There's things that I would potentially change if I was, you know, if I was the Senate, to quote Star Wars, but I'm not the Senate and the process of legislation is a process of compromise. And so I think where that ended up is pretty good. To your specific point, there is a section in 301 that deals with the admin keys used for cybersecurity vulnerabilities, things like a loss function to address a known bug. And so they don't intend to call that non-decentralized. They intend to say,

like, we don't want to disincentivize this food cybersecurity practice. We just want to go after the people who are calling themselves defy, but are really just, you know, your traditional broker and dealer and security. Yeah. And I think that's, important to clarify, right? That like decentralized, sufficiently decentralized and like not having control does not mean you have to be

100% like immutable and autonomous. There actually is some room in there for some admin functionality. And I think like that, you know, that was kind of right, that was the feedback that I gave some of the staff on that, which is that we should want to incentivize

just kind of like ordinary responsible measures. that honestly, every DFI protocol out there pretty much is already doing a lot of this stuff now. Right? Like, this might be a surprise to some people who talk about this in the abstract a lot, but there actually aren't that many DFI-Py protocols out there today that are 100% autonomous and mutable. So, like, this would really protect no one if controlled meant or no controlled meant that you really just have no admin fashions and all. Vee, you've said this before, but I think that part of the problem,

that the crypto industry and lawyers in the crypto industry, so we are to blame as well, have created is this binary conversation of control and not control. And that puts developers like the place that you work and many other developers in this place of when I build this project. How do I build it to be secure from prosecution and ensure that I'm protecting myself? But it simultaneously, I think, puts policymakers in an odd situation. because like when you talk to the Dems that really want to get this done like a Mark Warner who supposedly said this week that he's in crypto hell that is trying to figure out how do we

sold crypto. Like all of us. How to ensure that he's in, you know, protecting national security and also like speaking for victims, which I definitely want to touch on here as well. Like he's trying to come up with rules that protect national security and ensure that, you know, billions of dollars don't continue to be. stolen by, you know, DPRK, just to name one aspect of this. And so the concept of binary doesn't really work for them either. When you have conversations with, you know, Warner staff and other

Democrats, they seem to be really trying to find a solution that allows developers to succeed and protect First Amendment rights, but simultaneously, like, ensure the proper protections are in place. And what I struggle with is there are a lot of ideas out there. And I know, like, Peter, you and I have talked about liability statutes before. Like, maybe it's using money laundering more than 1960. Like, maybe that solves a lot of it if you just take 1960 out, which we can get to. But, you know, just sort of saying, like, well, if you're completely decentralized and you're, you know, not touching anything, it's protected by First Amendment. And if you're not, you're not.

like I think that sort of escapes addressing a lot of the intermediary side because you know the book analogy you talked about is like one that I think is really interesting and like strictly in the First Amendment you can publish a book but you publish a book with you know plans to build a bridge

maybe this isn't a great analogy but like I sort of came up with it a few minutes ago you know to build a bridge and the bridge has all these problems with it and you set up a toll on it that automatically collect some sort of fees and the bridge collapse is like where at what point in those steps do you become responsible and i don't know if there's an answer i don't know when i mean but it's when you actually like reached into the physical world and built the bridge i don't work um so i take your

point yeah so i'm not quite sure what to say back to let's say a mark warner i'm not meaning to pick on him but he definitely no One, he was my first job, was interned for him. Oh, really? Yeah, so. I mean, I think I was in high school. But, you know, he really seems to be trying to get this done while simultaneously keeping the space safe. And he seems to be focused on the national security side.

So, like, what it was for him? I'll say, I'm very grateful for Merk Warner's involvement in this, actually. I said at the beginning to Jesse and be that I wasn't going to mention any members or staff. by name, but I will do it in the positive in that, like, Mark Warner has been a very honest broker on these topics, and it does feel like he's genuinely trying to get to a fifth vice. And what you teed up is exactly the difficulty. And, you know, Coin Center is even guilty of this

in that we focus pretty narrowly on, like, truly open source software than doing things in the world and people being held viable for publishing the open source software. And that, I think, is black and white. That should be off the table for any kind of permissioned regulation. But that makes me sound like an absolutist unless you realize that that's a very small segment of the crypto space. That is actually a narrow carve-out. Like that's like Bitcoin core developers, Ethereum core developers,

probably some other L1 core developers, but I won't name names because this starts to get very, you know, you know, dodgy. it's a small number of people. And we also stand up for miners and validators who are truly not in a discretionary position vis-à-vis the users of their protocols that they are maintaining by mining and validating transactions. This is not a wide swap of people

that we think are truly off the table. Then there's this giant intermediary gray area of people who are building defy tools, they retain some control, they may make certain promises to their users. This set of people, there are a very hard questions over. And I think they may not be protected by the BRCA.

And I want to make that clear if there's any staffers for any of the offices that are noodling on this text, I don't think all of those people are protected by the BRCA. The BRCA is meant to be a very narrow piece of clarity for just people who are truly engaged in activities that don't engender trust. from their users that don't trigger the normal regulatory obligations that we would expect

because it's more like software development in a pure sense or infrastructure in a pure sense. For the people who are actually in some position of quasi-trust, they may not be excluded by the BRCA from anything, and they're going to fall into or out of this 301 rulemaking on non-decentralized protocols. If they, if as Treasury and the SEC developed this 301 rulemaking, they, they develop in a way that catches some of those people, those people will be treated as obligated entities for things like the Bank Secrecy Act. And then in general, there's also all of the truly centralized businesses out there who don't pretend to be decentralized, but previously have been regulated in a somewhat ad hoc manner by squeezing them into existing regulatory structures

like money transmission. This bill will create new categories of federally regulated financial institution that will have BSA-A-M-L obligations. So this bill, is not a deregulatory bill. It's actually a strongly regulatory bill that will create a lot of new data and data collection for law enforcement by the creation of these new BSA obligations for these new types of entities like digital commodity brokers and dealers. The part that we're now discussing that carves some people out from a licensing requirement and a surveillance requirement is really limited to carving out just those people who never should have been obligated to collect information on the users before because it would be like asking an author to collect information on the people

who read their books. Yeah. I mean, I think that's a great point. We obviously haven't solved anything yet, but we do need to take an ad break. So I'm going to jump in and let us do that. Maybe when we're back, we'll have all the answers. Want a chance to win $25,000 in USDC? Figure, a platform to earn yield, borrow against crypto, and access lending markets is running a $25,000 USDC sweepstakes tied to their democratized prime product. Here's how it works. Download the Figure Markets app using our link, figuremarkets.com slash unchained DP, deposit into a democratized prime lending pool, and leave your funds there for 25 consecutive days. Every dollar equals one entry, so $1,000 equals $1,000 chances. While your funds stay in the pool, you're also earning around 9% APY, paid out hourly. To learn more

and enter, go to figuremarkets.com slash unchained DP, which is also available in the show notes. If you're looking for help with crypto taxes, Crypto Tax Girl is offering $100 off for unchained listeners. They provide personalized crypto tax reports and returns, and spots before April 15th are limited. Go to Cryptotaxgirl.com slash unchained to save $100. Once again, the link is Cryptotaxgirl.com slash unchained. Okay, we're back. Turning it over to V to talk a little bit about how money laundering fits into all this. So we mentioned, you know, that there have been various charges in cases like tornado cash and Samurai Wallet. Right. So there's the 1960 conspiracy to operate an unlicensed money transmitting business.

But I wanted to focus on the conspiracy to money laundering charge. The reason I think it's important is because, like, you know, even if we talk about, you know, even if we totally got rid of 1960, wouldn't developers still be exposed to criminal liability under, in my view, the very broad and incorrect way that the prosecutors have been applying the conspiracy to money laundering charge, right? So just for background, like, the developers, you know, they wrote and published non-custodial software. The software, I think, you know, this isn't and just be, right? The software can be used to facilitate illicit finance, and it was by bad actors. The developers, in some of these cases, knew that that was happening, and they didn't do anything

to shut the protocol down, block users, redesign it to help, like, stop illicit activity, right? So I think it's important to note that the DOJ here did not allege that the developers in any way actually coordinated with the illicit actors. Like they didn't come to an agreement with them to money laundering. They didn't direct money laundering activity. They didn't share any of the profits from the money laundering. Right. So what they're basically saying is if you continue to maintain or publish software, after learning that illicit activity is happening using the software, you've joined a conspiracy to money laundering. Right. So to me, that was always really highly problematic, a highly problematic reading of the federal conspiracy statutes, which, like, if you guys

don't know, right, just on a very basic level, it requires an agreement between two or more people to commit a crime. It requires knowing and intentional participation in that agreement, and it requires an overt act in furtherance of the conspiracy, right? So, like, if you went to law school, you probably remember covering this in criminal law. And I just, I've never seen how we have, all of those elements in these cases, right? Like, where was the agreement between Roman Storm and Lazarus Group? Where was the knowing and intentional participation? So, like, I feel like we just haven't, we haven't focused on that part of these cases enough as an industry, especially because in my view, I actually think that if this issue ever got to the Supreme Court, that they would

agree that this is a radical application of the federal conspiracy law. And it has implications for like more than just how it's been applied to these crypto developers. So I want to be very careful here because it is my hope that actually some, you know, staffers on the Hill are actually listening to this and are thinking about the Blat-A regulatory certainty act and whether it should stay in market structure or not. And one thing that I will say is, like, when CoinCenter has talked about these issues, we emphasize how the BRCA doesn't change 18 U.S.C. 1956, which is the money laundering statute.

It only changes 18 U.S.C. 1960. And it doesn't get rid of 1960, to your earlier point, V. It simply says, look, 1960 is something that can continue to be prosecuted for things like Hawala, which is actually kind of what originated 1960. It was years over these networks of quasi-money transmitters in communities to move money from person to person ultimately to a destination. The BRCA doesn't touch Hawala. It doesn't touch any kind of informal network where the people moving the money actually do move the money, actually have control of the money. It wouldn't limit those prosecutions. It wouldn't limit the state's ability to prosecute

1960 at all, except in the very narrow case where they try to prosecute someone under 1960 for creating tools that other people used to transfer money. And that's what I would describe the tornado cash developers doing. They didn't move any money for people. They did create tools that other people used to move money. And some of those people turned out to be North Korea, you know, unfortunately. That said, like the Linux operating system is definitely powering centrifuges that enrich uranium in Iran. But we're not going to say, that like Linus Torvald is responsible for Iran's nuclear program. That's nonsense. Like software and tools when they're good get used by a bunch of innocent people, including tornado cash, which people

use to donate to Coin Center to support our mission, which people use to support the defense of Ukraine, our co-plaintiffs in our lawsuit challenging the sanctions on tornado cash, a John Doe, including people just get paid their paycheck in crypto and don't want the person in the cubicle next to them to know what their salary is. And yes, Yes, good software also get used by bad people. But you shouldn't be found to be guilty of money transmission and unlicensed money transmission, simply because other people used your software to transfer money. Now, money laundery is a different actus.

It's a different criminal or guilty act. And it means that you conduct or attempt to conduct a financial transaction involving the proceeds from some specific or from some specific unlawful activity. You transport, you transmit that, you know what it is. And they have to actually identify that when you started handling it in some way. Maybe you didn't have full control over it, by the way. But when you started handling it and facilitating it, you knew exactly what you were doing. You knew who you were helping and how you were helping, right?

And so there are hard questions there, vis-à-vis software developers who do more than just one-time deploy code to the blockchain. Maybe they maintain servers that are front-end. Maybe they maintain some sort of advertising or technical support feature. Maybe somebody emailed them and said, hey, I'd like to use your software to launder these proceeds of crime. Will you help me? And they foolishly said yes. At some point, that factual pattern should probably lead to a prosecution for money laundering. Not for unlicensed money transmission, because what you were doing was not money transmission in the traditional sense.

but based on the facts, it may be money laundering. And so my point in going through this is we didn't get a verdict on the money laundering charges in the Roman Storm case, in the tornado cash case. We just got a hung jury. That could be re-prosecuted. It probably should be re-prosecuted. And I, you know, I don't know enough about all the facts to make an educated, a strongly educated guess on whether it could be successfully prosecuted or not because it's highly fact-dependent.

As I said, if there are certain emails from North Korea to the developers, that could be the nail in the coffin. I don't know what those emails exist. The government should have to prove that knowledge on the smart developers, though. That is. Those emails did not exist. Well, there was no communication between roaming and Loster's group. That's fine. I'm speaking in the abstract, though, that what the law should demand is prove it.

Right? Absolutely. And so if they have the ability still to re-prosecute, they should go and. find better evidence and if that evidence doesn't exist, then they're going to fail again, and I'll be happy that they failed. Yeah. Pludge intent. ATUSC-1960, the unlicensed money transmission prosecution, they don't have to prove intent.

They don't have to prove mileage. They don't have to prove marriage. They don't prove. They basically say, if you were doing money transmission, which we define as basically everything, and you didn't have a license or a registration, you're guilty. It's basically a strict liability federal felony. And that's a problem. That's the kind of liability that will stop even.

the most innocent, good-hearted, good-natured developer from publishing code because they're afraid they're going to get prosecuted for something that's effectively a strict liability felony. The last I'll put in is we have a lawsuit that we're helping support, we're paying the legal bills for. His name is Michael Llewellyn. He's a developer. He lives in Fort Worth, Texas, and he wants to write privacy software. And he's afraid to publish the results of his research and development because he thinks

if he publishes it and deploys it to the blockchain like Roman Stormdud did, he'll get prosecuted for unlicensed money transmission. We're not arguing in that case that he should be free from 18 U.S.C. 1956 money laundering prosecution. We're just asking for clarity on this narrow issue. And that's also the only thing that the RCA touches. It doesn't touch heavy laundry. I frankly, I don't think it should. I think it would be a very difficult political lift to reform the money laundery statutes.

And all I want from Coin Center's perspective is to get some clarity on this other statute, 18 U.S. and 1860, that is so badly abused by prosecutors. Yeah, but so, Jesse, I actually have a question for you. on this point. So I wasn't saying that like the money laundering statute needs to be reformed. I was saying that the way that just the conspiracy charge, like whether you can be charged for conspiracy for not actively helping someone, but just knowing that your tools being used for something and doing nothing to stop it. Because that's a very novel application of the law of federal conspiracy. But to the 1960 point, Jesse, I actually had a question for you, which is, like, in practice, do prosecutors ever bring standalone 1960 charges, or is it

almost always attached to something like a conspiracy to money laundering? It's incredibly rare and conspiracy to money laundering or just straight up money laundering. I never charged it solely, and I wouldn't have. And in fact, part of that reason was because there wasn't a lot of background on it or understanding of what it was supposed to be used for other than jurisdictional hooks. And so that's why keeping more clarity in clarity on 1960 is something that I'm a fan of and that I have expressed being a fan of because prosecutors want more clarity here. But something I could just like speak to is that this conversation is very important. And I think that software developers are rightfully protected by CoinCenter.

But a group that is always dismissed and not given a voice in these conversations is actual victims of crimes. And that is something that really bothers me that when we talk about clarity, there's no coalition of victims of crime. And people say the word elicit finance. They say they don't want elicit finance in crypto, but it always is followed by a butt. And there are so many bad things happening on chain. Yes, there are bad things happening in the entire financial system. But that is a cop out in my mind for that to be the response that we give. So I think it's important. So I think it's important. to get a little bit more tangible here, especially because we can talk about this forever. And I think it's actually really important. And we've been talking about it for years. So obviously,

it's a really hard problem. But I do want to focus in on one case that is sort of utilizing these statutes in the ways that we talk about it. And that's the cartels announcements that came out in the past day or so. So just staying on the 1960 and 1956 money laundering, how they sort of go together. This week, the DOJ announced that it's doubling down on prosecuting cartel use of crypto. And they backed it up by bringing charges against four money brokers, which are essentially Hawala is the phrase that Peter was talking about for the Halisco cartel. And they charge them. And they charge them for laundering drug proceeds with crypto.

For people who don't know, the cartel that is at issue here is like the worst of the worse. Like, I'm going to get graphic. The bodies are hanging in the street. They're shooting down military hot helicopters. Like, I want to make this tangible because it's not just the phrase elicit finance. And lately, their money pipeline has been instables. To me, this is the good news is that we're going after the people who are actually using crypto for bad. And I think most people in crypto can agree. This is where 1960 and money laundering should potentially be used. But my issue is that, despite this DOJ announcement and like let's go after them, this important goal may not be achievable anymore because we're pretty much gutting the expertise for these types of prosecutions in the government.

You know, I think the Blanche memo did a lot of great things. So I'm not speaking of the memo as something that, you know, did not talk about how prosecution should not be used as enforcement. It had really good principles. But it also disbanded the onset, which is, essentially the only specialized crypto prosecution unit. You might not agree with every prosecution they brought, but they brought really amazing cases too that we don't have time to talk about here,

but you can look them up and the kind of stuff that I just mentioned. And when this memo came out and the ENSET was disbanded, a lot of ENSED had to leave. And they had to either go back and prosecute other cases just led to government. So the expertise left with them. And what we heard yesterday is it's not just the DOJ, Just yesterday, it was reported that the CFTC Chicago office, which is a hub for dealing with

enforcement in not just crypto, all CFTC issues, is reportedly down to one enforcement attorney. And I know V and I were talking about it too. And someone said on their way out as an enforcement attorney to someone in the press that this would be a perfect time to launch a crypto scam. So it just sort of feels like regardless where you stand, we can't have it both ways. we're focusing so much on making sure that like 1960 is properly written and properly, like, legislated around, which is very important. And like, Peter, you focusing on that is very important. But in the conversations with clarity or with any of this market structure and the illicit finance

worries of a lot of Dems and Republicans, I don't think this narrative is getting out there. And the cartels, per example, aren't waiting for us to figure it out because I heard that 90s, 7% of fentanyl precursor manufacturers that you need to make fentanyl now except crypto. What does that tell us right now? So that's where I'm sort of stuck here. Is that victim's need voices too? So this is a great discussion. I just want to add two things to your excellent point, Jess.

One, and you hinted at this earlier, the reason why I want clarity on 1960 is because law enforcement has always had finite resources. The DOJ doesn't have an unlimited pocketbook. And so you need to prioritize those resources into the kinds of law enforcement actions that matter that protect victims, right? If you send DOJ on a wild goose chase to arrest everybody who wrote software that bad people used to do bad things, you're not going to be going after the bad people anymore. You're going to go on a wild goose chase to collect people who are writing software. And that is a misallocation of resources and it betrays victims of crimes. And so the thing that the Blanche Memo did that was excellent was it said, we're going to stop going after people who are developing

tools that supplant intermediaries, assuming that they're not acting as intermediaries themselves, assuming that they're really just writing tools. And we're going to refocus on the cartels, on the narco-traffickers, on terrorists, which is where the resources should be focused. The second thing I'll say is that we do need more resources for law enforcement. And so it's good to refocus your priorities on the bad people, but if you're simultaneously cutting those resources, like you said, just or disbanding, you know, institutional knowledge by closing long-held, like, working groups within the DOJ or other agencies, you're going to end up with a problem, wherein you can't even go after what should be low-hanging fruit, which should be, which should generally

be non-controversial prosecutions. And so one thing I will say about clarity, the bill, in the Senate right now that passed the House is the BRCA rightly forecloses the wild goose chase of going after software developers. So hopefully DOJ scarce resources will be spent correctly on policing actual bad behavior that's hurting victims in a way that will actually discourage that bad behavior rather than just whack a mole with software developers. And second, it actually does increase. It does, it doesn't appropriate funds because this is not a funding bill, but it does direct Congress to fund Finzen, and I believe other agencies to accomplish

the much larger regulatory role that we expect them to play, these are the actual trusted entities, vis-a-vis actual criminals who are truly brokering money laundering money laundering. Like the Hylisco money-laundry brokers are not, they're not, you know, shadowy super coders who are finding a way to move people's money without ever touching it. They take it. They take fault caption.

cash shipments. They have control the money and then they decide to route it through a little through crypto, a little through payment, uh, store value cards, a little through these other channels, right? That person has no reason to expect that the blockchain regulatory certainty act is going to insulate them from liability. It definitely won't. They should still be prosecuted. And they need the resources. The DOJ needs the resources to prosecute that. So it's an incredibly important point. And it is under discussed. But when we go into offices in the Senate over the last few months, we do bring up the importance of funding FinCEN better, of making sure that we have the resources to do these hard prosecutions, to do these hard, you know, rulemakings that will

have to happen. Because every time Congress assigns an agency a new rulemaking or a new report on something, it's basically a book report for somebody who probably should be going out there and actually like arresting the bad guys. And so you really need more people there. Totally. I think we can all end on that agreement. We're not going to have good meat. Peter, we have to be happy back because there's so much more desire. We didn't cover us to. I want to quick.

That's the most of you, what your favorite part of the Super Bowl was and whether it was a coin base commercial that made every millennial that doesn't work in crypto not happy. So Peter, you go first. Quick roundabout. I'm a millennial who works in crypto, and I enjoyed the coin base commercial. Not because I enjoyed the commercial. I'm a parent of young children, so I have no social life anymore. we don't watch the Super Bowl with friends.

But watching other people in the viral videos afterwards, being in rooms of a bunch of people, singing along, and then just being fucking angry that this was Coinbase was amazing. I think Coinbase knew what it was doing, what it teed up that ad, because it gets you thinking about crypto, and we should just be honest,

that crypto has a terrible reputation right now because it's mostly just like a giant online casino, which is unfortunate. That was appearing. It's not a takeaway. Yeah, it's still important. And it should act like we should talk about how people don't like it and find a way to like build it better so that it's something worthy of being liked

because the fundamental level, it needs to be, it needs to replace the existing financial system or we're always going to be slaves to banks. I don't even like I love crypto, obviously. And I hated the ad because I felt like I was rubbed. But the average American feels like they were rubbed. They were told that this is going to be a force for financial freedom and all it is is just online sports betting without a regulator. That's fucking stupid. And everyone in crypto should be ashamed of that. I am every day when I continue to do my job. But I continue my job because I believe very fervently that ultimately the only defense against totalitarianism and all the oppression that we could see from global financial surveillance is crypto.

But that's not what most people know about crypto. And so we should admit that most people, what they know about crypto is that it's a bunch of, like duchy sports betting and that it needs to change. Well, with that, I'm going to say my favorite part was the puppy bowl. Everyone needs to go watch those clips because that's actually what I was. Which less consensual. Your thing gives you joy. Thank you guys so much for listening. Peter, thank you for being on and dealing with all of our questions and really engaging with us.

We really appreciate you. And we can't wait to do this again next week. So tune back in. Thanks to you. Thanks to you. Bye. Thank you. Thank you.

Thanks.