Unchained - Sandra Ro: Why Crypto-Friendly Laws Are Coming in the US - Ep.133

Episode Date: August 20, 2019

Sandra Ro, the CEO of the Global Blockchain Business Council and former head of digitization at CME, explains what the GBBC does, how it chooses partners, and what level of involvement they have with projects under the GBBC umbrella. We discuss some of the more controversial projects, such as the Voatz pilot that conducted election voting using blockchain technology, as well as how she responds to people saying many "blockchain" projects could instead use a database. She also reveals why she believes that the US will eventually lead the world on crypto regulation, why she thinks that there's strength in the fragmentation in US regulations and what she thinks is the best way forward on the BitLicense. Plus, she gives us the inside scoop on what it took for her to get CME to launch Bitcoin futures.  Thank you to our sponsors! Crypto.com: https://www.crypto.com/ Kraken: https://www.kraken.com CipherTrace: http://ciphertrace.com/unchained Episode links: Sandra Ro: https://twitter.com/srolondon GBBC: https://gbbcouncil.org/ Previous Unchained interview with Sandra: https://unchainedpodcast.com/what-is-one-of-the-worlds-largest-derivatives-exchanges-doing-with-bitcoin/  Controversy over Voatz: https://slate.com/technology/2019/07/west-virginia-blockchain-voting-voatz.html Episode with Jake Chervinsky: https://unchainedpodcast.com/all-things-crypto-regulation-with-jake-chervinsky/ Jeremy Allaire on Unconfirmed on why the US needs a new category for digital assets: https://unchainedpodcast.com/jeremy-allaire-on-why-the-us-government-needs-a-new-category-for-digital-assets/ Fred Wilson on crypto regulation in the US: https://avc.com/2019/05/defendcrypto-org/ Ted Livingston on why Kik set up DefendCrypto.org: https://unchainedpodcast.com/kin-sets-up-5-million-defendcrypto-org-to-take-on-the-sec/ Unchained interview with Juthica Chou: https://unchainedpodcast.com/ledgerx-on-the-reasons-to-trade-bitcoin-options/ Patent for physically settled cryptocurrency derivatives contracts: https://www.coindesk.com/cme-explores-cryptocurrency-derivatives-contracts-in-patent-filing Ro named to New York State Digital Currency Task Force: https://www.coindesk.com/new-york-legislature-names-initial-members-to-crypto-task-force The Libra Association's Dante Disparte on Unconfirmed: https://unchainedpodcast.com/libras-dante-disparte-on-why-we-should-trust-a-financial-system-designed-by-facebook/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey everyone, a couple quick notes before we start. Today, my guest is Sandra Rowe, one of my first sources to appear in the show back in the day. This episode starts a bit slowly, but really picks up when Sandra gives us not just one, but two contrarian takes on regulation and reveals the inside story on how she got Bitcoin Future started at CME. It was great fun having her back and we'll see if her predictions bear out. I also wanted to repeat some news in case you didn't hear, I decided to cancel the Crypto Weekend Retreat. at Omega because I really could use that time to work on my book, but I do hope to offer something similar at some point in the future. Now, here's my conversation with Sandra. Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin. In case you haven't heard, I have another crypto podcast called Unconfirmed. It's shorter, newsier, and comes out Fridays. If you haven't taken a listen, go check it out. Also, I publish a newsletter on the top stories in crypto every week. To sign up, go to Unchainedpodcast.com, where you can enter your email address right on the home page. Grow your crypto and earn up to 8% per year with

crypto.com. It's the place to buy over 40 coins at true cost with no fees and no markups. Download the crypto.com app today. Cracken is the best exchange in the world for buying and selling digital assets. It has the tightest security, deep liquidity, deep liquidity, and a great fee structure with no minimum or hidden fees. Whether you're looking for a simple fiat on-ramp or futures trading, Cracken is the place for you. CipherTrace cutting-edge cryptocurrency intelligence powers anti-money laundering, blockchain analytics, and threat intel.

Leading exchanges, virtual currency businesses, banks, and regulators themselves use CipherTrace to comply with regulation and to monitor compliance. My guest today is Sandra Rowe, CEO of the Global Blockchain Business Council. Welcome, Sandra. Hi, Laura. Thank you for having me on. What does the GVVC do? The GVC was conceived about three years ago. It's a Swiss-based nonprofit focusing on three pillars, education, advocacy, and partnership to drive the business of blockchain. And so what does that mean exactly? Like, who do you work with and on what types of projects? Like, how do you decide what the organization will work on? Sure.

And I'll give you the short version of how it all started. So as you've been on the island, Sir Richard Branson's blockchain summit occurs every year. And back in 2016, a group of entrepreneurs got together and decided that it would be important to create a nonprofit that would help focus education primarily to spheres of influence. And what do I mean by that? Government, legislators, leaders, central banks, regulators, and also executives, some of the biggest companies around the world, and then bridging that gap with the entrepreneurs who are doing the most cutting-edge, leading-edge work in the blockchain space.

And so with the launch at Davos in 2017, the group has evolved quite considerably. We started with 35 country ambassadors with a handful of members. Now we have over 100 across. more than 50 countries, and we rely very heavily on distributed network of influencers and supporters and ambassadors to help us get the word out. We've been most recently two countries like Kazakhstan, where we were with the AIFC and the government there, focusing on how to grow blockchain initiatives, entrepreneurship, and also foreign direct investment into that region, especially considering how important it's going to be in the one belt, one road, China

initiative. And so, and then obviously in the U.S., we've been stepping up our engagement not only on the hill, but also at the state and city levels. So we've evolved quite a bit in the last couple years. And I came in as a founding board member when I was still at CME Group. And now in the last year and a half have taken the role of CEO. And we have definitely broadened our mandate, but we still focus on being the bridge and the convener of lots of different stakeholders to make the business of blockchain happen. Give some examples of some of the types of projects you're working on. I mean, you mentioned the Kazakhstan thing. It just isn't clear to me off the bat how blockchain technology would be used in this like one belt, one road initiative. Yeah. So at a very high

level, we spend our time behind closed doors educating governments and different agencies around everything from e-voting to cryptocurrencies to practical use cases. At a more fundamental practical level, you know, in the case of, I just gave an example around the AIFC, they have basically the Astana International Finance Center is focused on effectively, it's like an economic zone. It's English law. It's English speaking inside of the main capital. So where you have basically entrepreneurs and companies that are foreign, they can come to AIFC and basically get space, get support, and also effectively an English-speaking English law governed zone inside of Kazakhstan, which is pretty unique. And it only launched last year.

year. And one of the big focus points is on technology. And it involves everything from blockchain to other types of emerging tech. And so we've spent our time in the last couple months focusing on helping them build out a conference. And then beyond that, we've had meetings with them around how they attract more blockchain entrepreneurs, not only locally, but also externally. So just to give you couple examples. Bitfury, Orbs, Soramitsu, and a number of others from Switzerland have actually set up shop in what was called Astana is now called Nursatan. The city name has actually changed in the last couple months. And so the AIFC houses all of these companies, and they're looking to grow that. And then from a separate city perspective or a country perspective, they're really looking

to figure out what use cases can be used to implement blockchain. And they are looking at everything from land registry to record keeping and improving systems around that. So in a way, it sounds like more like GBC right now is more of an educational resource for different governments and businesses that are interested in learning about the technology. Yeah, we spend a lot of our time around the education piece because there's still major gaps. You've got countries where, let's say, for example, the home country for GFORG. GBBC, which is Switzerland, quite sophisticated, lots of use cases going on. You don't need to do blockchain 101 to most of the officials there. But you go to other countries and you do have to start from ground zero. And unfortunately, there's still a lot of confusion around a conversation

around Bitcoin and cryptocurrency versus a conversation around how identity plays into this or how a health care use case would be utilized or supply chain. And so what we tried to do, do is unpack it in a way that people who do not do this day and day out understand and then can walk away and at least have a high level understanding of what is possible. And on the GBB site, there are a number of different use cases that are listed on a page under different categories such as energy, government, financial services, healthcare, business processes, supply chain, agriculture, real estate, and media. And I was kind of poking around at the examples. And they really run the gamut. There's digital identities for displaced Rohingya

Muslims to a system that fidelity developed to enable charities to receive donations of Bitcoin. There's, I think that Orb's thing you mentioned, which is a public blockchain, there's a project on that to help prevent the spread of fake news. And, make sure that creators are credited for their work. So, like, what is the level of involvement that GBBBC has with these different initiatives? So, again, we are a convener of those who are building on the blockchain and building blockchains, as a matter of fact. So when you look at all these examples, we have either they are members or their partners or their people who are supporters of GBC who have offered up their use cases to us. We've obviously vetted them. We

curate it. And then we make sure that we highlight them. Again, GBBC is a neutral entity in the sense that we are, yes, absolutely pro-digital and pro-tech, but we will not be pro-a-particular blockchain. It's way too early. There are too many different applications and problem sets that can utilize different types of blockchains. And so we don't sit there and dictate to any one group, oh, this is the one that should be used. What we do, however, provide our balanced pros and cons around a set of blockchains or a type of use case and say, these are the things that are available. And this is what's out there. So you can think of us as the group that knows what's going on in the space at a macro level. We look at lots of different countries and

entities and verticals, and then we bring that together in one place so that people can take that information and understanding and networks and collaborate with each other. So we're a convener, we're a curator, and we build bridges. And so then when one of these groups does commit to doing a pilot, are you very involved in getting that off the ground? That's an excellent question, Laura. I have to say we have stayed away from that for the most part in the last, you know, at least since the beginning of the creation of GBBC. But in the last year, we've been increasingly asked to participate, especially by governments, on different initiatives. And one area where we have pivoted and actually grown is public-private partnerships around blockchain center. And for example, New York City, EDC, we're an operator of the New York City.

City Blockchain Center, have partnered with the Economic Development Corporation of New York City to launch a physical center. And that center has its own specific mandate around blockchain. We are also talking to other cities in the U.S. as well as around the world. It wasn't in our original mission, but it actually does tie very much into community building and a physical space. As much as all this tech we talk about is virtual. at the end of the day, people still like to come together.

And we've actually seen some pretty cool things happen already with entrepreneurs who've met at the center and are now working together and collaborating with two very different companies in some cases. But they have found common ground and are looking to actually work on projects together. So again, you know, it's different. The sort of physical space around a blockchain center

or a blockchain lab, but we have delved into that space right now. And then you will hear in the near future that we've got several projects going on that involve more or more direct involvement in certain projects. But again, are we a consultancy firm? No. Are we trying to, you know, run projects ourselves? Not really. We're here to support.

And if anything, what we're doing is trying to get our membership to, who are actually the builders, who are looking for business development opportunities and connect. the dots for them. So what we would like to do is create the opportunity set for our entrepreneurs and also big enterprises who are looking for startups. And earlier when you mentioned that you vet the different projects that you feature, how do you decide which types of projects to work with? Yeah, we spend a lot of time just making sure that the projects are real. You know, in the last few years that I've been in the space, I will have to say, I've been really, and maybe I shouldn't be so alarmed with the shocking number of vaporware that's out there, just things that don't exist.

People have raised money for projects where there is no product. And so what we've tried very hard to do is to make sure we've seen the demo. We understand who the people are and that they're credible and the projects are actually have a chance of succeeding. Look, failure rates for startups are very high. But what we want to do is to say at least we've taken a look at something that's very interesting. We believe that it's got enough legs for it to be viable and frankly to be broadcast to the world that, hey, take a look at what's going on here. We have a few more that are really

exciting in the healthcare space, for example, I think that are really coming to fruition that are not in the headlines. These are startups, one out of Australia that we know about, another one hopefully percolating quite well in the U.S., and we'll be able to highlight those. And I think healthcare is going to be one huge vertical that is really going to be. to start setting the tone for a lot of amazing use cases that will impact the lives of everyday people like you and me. And to me, that's exciting. So healthcare is such a broad area. Is that like around health data privacy or around, you know, pharmaceutical counterfeits or like what are, I mean, there's just so many.

Absolutely. I agree with you. There's so many different areas, right? So I think, you know, we are really excited about the ones that are already public, like around, you know, Medellager, Chronicle, Medi-ledger that's doing the pharmaceutical tracking and they've got, you know, a half a dozen really big pharmaceutical companies involved. And let's see how that goes, right, from a supply chain perspective. But we're also hearing about, and I'll just give you one example of how to deal with opioid responsiveness. So here's an example of something that's a very, you know,

U.S. problem, folks' problem across many different states. you've got many stakeholders, you've got law enforcement, you've got hospitals, doctors, and nurses, you've got people in the communities that are suffering, and how do you get better at the responsiveness? So one example I've been given, and again, this is something that's in progress, that's not been fully, you know, baked in and vetted yet, but the point being is it's coming, and so I'll give you a window into that, which is, how do you, if you're a nurse, and you see, four patients who come in and their profiles are very different than the four patients who came before with drug overdose problem. Well, what if you notified the law enforcement agency or the law

enforcement in your community immediately that this was the case and you logged that in? And then the law enforcement could then take a look and see that actually what's happened is the reason why you've got the different symptoms is because there's a new product on the market and it's recently hit the market and it's quite, let's say, a bad strain of whatever the drug is that's in question or as a derivative of that.

This kind of ability to share information to secure way more quickly actually helps with decision making and also just understanding amongst different stakeholders and to facilitate that it's really actually I think exciting

and how will blockchain play a role in that and there will be different pieces. It won't be just blockchain. It will be many other components of tech that are knit this together. But can it be done on a blockchain backbone infrastructure to share that information securely in a way that works? That's what's being explored right now. And believe it or not, there are cities and politicians I've spoken to who would be very interested in supporting an initiative like this. That's interesting. Yeah, it's sort of like a Google Trends. There are those people who say,

well, that could just be done with the database. So why? Why would you use the blockchain for that? I have a couple different layers of, well, let's unpack that, a couple different layers when people give that argument. So what can a database do? Database can hold information really well. And if you have, you know, let's say good APIs and good user interface, you can probably have those access points to that database fairly easily.

And from a user standpoint, could be pretty good. So I'll give you that. Okay. What can you do beyond that? Well, it's actually kind of limiting. It stores data and you can access data at a central point. The whole point of a blockchain solution is that you distribute this information in a way that is a secure architecture so that you could have across city, state, and multiple stakeholder lines the ability to access this data. And from a security standpoint, from a easy, of information sharing standpoint. And also, and this is, I think, the most important piece, which is around the verification and then securing of that information so that it is very difficult, and it is what people use the term, immutable. I use that very carefully.

That information once secured is there, you know, and hard to be tempered with. I think that's not to be underestimated. People monkey around records all the time. People manipulate records all the time. And so let's take one level up from the data manipulation and the record keeping manipulation. At the next level up is around what else can you do with that data? Well, data analytics overlaying whether it's, you know, and I'm just thinking out loud here, whether it's overlaying smart contract ability to automate certain functions,

I don't know where we would go with that, but you have the option to do that in a blockchain world. You do not have really that kind of option in a just database world. And if there is some reason we wanted to embed a payments layer, a crypto payments layer or a digital payments layer, that's possible too. And so my argument to all the people who always say, well, you could just use a database. Absolutely. If it's a very simple use case and it really is just around, you know, a centralized database having information and everyone accessing it and that's fine, fine. so be it. And that's all you need. But in a world where you have the ability to build on blockchain infrastructure and you can add all these different other layers of functionality and automation

and application, why would you build on just a plain database? Well, another thing that I was noticing from digging around the site is that there are some initiatives that are under the GBBC umbrella that work with private blockchains and others that work with public blockchains. So when you're kind of like educating these different organizations that come to you. Like, how do you guide them on either which blockchain or maybe you don't go that for, you know, or at least which type of blockchain they should use for their project? Right. So, again, what we try to do is level set, make sure the hype or misunderstandings are, you know,

cleared away. And then we start with, okay, this is the world of public blockchains. there's a whole scale and spectrum that go all the way over to then private permission blockchains, right? Because we've got hybrids now. We've got also blockchains that are trying to build into other blockchains and create interoperability mechanisms. And I think there's a lot of cool stuff happening there. But what we try to do is say, look, what is your problem first? What are you solving for?

What are the really important mechanisms that you need or business, requirements that you need or regulatory requirements that you have that you need to satisfy. And then we then try to present, you know, these are the types of blockchains and these are the types of similar use cases where this could apply. But ultimately, it's up to a government or people to choose what they want to do or which blockchain they choose. And when you say, you know, one of the first questions is what is the problem you're trying to solve? Are there any particular guidelines that you follow for which types of problems are better suited to private blockchains versus public ones?

Or any of the other combinations. Right, right, right. Look, I think inherently, when we start talking about use cases that involve regulatory hurdles and data privacy or financial privacy issues, you then immediately move to a different set of guardrails in my mind or a different set of criteria.

Because if you know off the bat, for example, that you have to safeguard because of regulatory reasons, your customers' data and their identity and their financial transactions, then you cannot apply it at least carte blanche on the Ethereum network, right? It just there are things that you cannot do on a fully, fully public blockchain. So again, does that mean you go completely private permission? No, not necessarily. And this may not be a very satisfying answer for most people,

but I would actually argue that we do need to have those kind of levels of detail to understand what makes sense. Yeah. Talking about this, of course, reminds me of the Facebook Libra issue, which we'll talk about later. But yeah, there was a lot of commentary about what type of blockchain it was and how it was different from these other ones. And well, so there was another initiative on your site that I wanted to ask about, which is what, that was probably more controversial and really hit the mainstream news. Like I even saw acquaintances I have from just being a journalist, you know, other journalists that I know were writing about this. And that was the pilot in West Virginia with the votes platform to enable blockchain-based voting. What were the objections or concerns there?

And when you guys, you know, were vetting that, were you aware that it would be so controversial? Yes. I think there are certain hot topics, right? I think e-voting is definitely a hot topic. And I think it's actually going to crescendo into 2020. And believe it or not, we are working on a state of global e-voting report. And so we'll have that out. And we're also going to supply that not only free for everyone, but also to Congress.

Because we think this is a really important topic. And it's not one view catches all things. So what I mean by that is what did that particular use case tackle? It tackled actually a very narrow subset problem for military overseas who are registered in West Virginia. So I don't know the exact stat on how many military there are overseas or how many expats there are, but I used to be one of those expats sitting in London. and you would mail in your vote whenever there was an election. You'd get the mail-in ballot and you would have 15 different things that you'd have to do to make sure that, you know, you got it right, and then you'd literally mail it in and hope that it got there.

Couldn't we have a better system than that? And what the West Virginia use case did, by the way, they did a pilot before they ended up actually running it during the midterm elections last year, was to work. with the military and get that small subset of people who happened to be registered in West Virginia and apply a blockchain pilot that would help them to vote using a blockchain solution. Again, it was done small scale just to see if it would work in the precursor to the actual launch. And then once any of the kinks were smoothed out, they did implement that during the midterm elections. And that was beneficial. easier for the folks who are out there, you know, serving the country abroad and could then vote

with some relative ease. Now, the immediate question to anyone who's been looking at this space at all would be, well, who controls the data? Who controls the data? What happens to that data? Did they record the votes? And again, I think these are very valid and important things to that. My understanding is, no, your vote was not recorded. And I don't actually think anyone's vote should ever be recorded as in you voted for the Democrat or the Republican or whoever else was out there. I think that would be pretty dangerous for the government to know how you voted in every election. Personally, I think being able to vet that someone is a legitimate voter in that state and verifying that data without giving up all your private information again and over and over

again would be a way to actually help simplify the process and secure your ability to vote. I think there's a number of different places where blockchain does make sense in the voting process. But let's face it, there's a number of different things in the voting process that you need to unpack. There's an identity piece. There's a verification piece. Then there's the actual voting piece. And then there's the post aftermath of the voting record keeping. And then the question is, at what point does blockchain actually participate?

Is it in the entire end-to-end? And who controls that? Who runs that? What's the governance around that? And again, I think we've only scratched the surface. And identity plays a role on this, a huge role. Yeah. I imagine that's actually the number one most important thing. So one other thing, I mean, you've kind of been alluding to this throughout the conversation, but I know that you talk frequently with regulators and legislators. How would you characterize their views on crypto? And let's limit this question first to the U.S. and then we'll talk about the rest of the world. Sure. I'm a convert. I'll put it that way. I used to be pretty negative U.S. relating to anything crypto and that it would change. I will have to say in my dealings most recently with Congress,

certain members of Congress, New York State in particular, and New York City and even DFS, I will tell you, I actually think that we need to step up engagement and we can actually over the next, you know, year, year plus have real movement and the U.S. can lead. I'm more bullish now about the U.S.'s ability to get its act together as house in order to lead than before. And I know for me, that's even surprising for me to say that. And so what's changed? A couple things. I actually think all of us, and I do, you know, emphasize any of us who've been in the crypto space, having gone through crypto winter, having a lot of the bad actors just flushed out

of the market, plus with the crushing amount of, you know, I have to say, lots of people have been advocating and letting legislators know in pockets that the U.S. is falling behind is finally actually falling upon years that are listening. They're pro-digital. They may not understand all the nuances around blockchain and the technicalities of it, But guess what? They get it. The U.S. is behind.

The U.S. has the deepest, most pervasive capital markets. If it wants to maintain its role in financial markets in the future, it needs to get with the program. And job creation. Who doesn't want job creation and leadership in that space? So I actually think, and also I will thank for good or for bad, the Libra conversation has accelerated the urgent. in the U.S. All right. And do you want to make any predictions on how this will affect regulation going forward or any new laws going forward?

I'm probably going to upset some people by saying this, but I will tell you if the U.S. sets the tone, especially at the federal level, and then there are a couple key states that we need to get in line, which is obviously New York, California. I would even argue Illinois because of Chicago and HFT trading. and Washington, D.C. and a few other states, you know, Wyoming's already led. But if we get this done, including IRS, the U.S. will set the tone for the rest of the world. And I understand Singapore, Switzerland, UK have done a tremendous job of providing clarity and definition. But I'm also a pragmatist. The U.S. has the deepest global capital markets. It has the largest financial wallet share still. And when I talk to Asian, sorry, Asia-based entrepreneurs in the crypto space, they all want beachheads in the U.S. They're just waiting or they're now starting

to tiptoe in. So from what my, you know, my view is, is the U.S. will lead. And that's going to be very controversial. I know. People will disagree with me. It's all happening in Asia. This is like completely different. I get it. I get it. I get it. Laura, I, I wanted to go on and say something different. So here you go. I would expect nothing less from you, Sandra, actually. And so for more on Sandra's contrarian takes and how she really led the initiative to get Bitcoin futures at CME

long before anybody else was thinking about this area, we're going to have to talk about that. But first, we're going to have a quick word from the sponsors who make this show possible. Will the world follow France and advocate banning privacy coins? Will government-backed stable coins become the new fiat? Are distributed and peer-to-peer exchanges just a flash in the pan? The answer is maybe.

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crypto.com app. Available on the app store and Google Play. Back to my conversation with Sandra Roe. So yeah, so let's keep talking about this regulatory issue. This is completely different from what like Fred Wilson of USV is saying and Jeremy Lear of Circle. And there are a lot of people, I mean, obviously you can look at the kick lawsuit with the SEC. I mean, there's, so, so it seems like you feel like there's enough of a recognition that the US is falling behind, that things are going to like radically change that they're going to be leading. Right now, they are quite, yeah, I would say like laggards maybe. Yeah.

So I'm not telling you it's going to happen tomorrow. It's not. I'm not going to tell you it's going to happen even in a month. But I see a momentum change that is different than the last five years. And I do actually feel really badly for all of those people who have been knocking on the doors of Congress, of, you know, regulators. And basically hitting their heads up against a wall for quite a while. And sometimes life is about timing. And I'm being very plain speaking here.

And I know there will be people who will vehemently disagree with me. And I think that's wonderful. Disagree with me. Let's have this discourse because, frankly, I think that the U.S. is waking up. We've got noise around the presidential 2020 elections. But I will tell you, based on the conversations that I am. having with people on the ground who make the laws, they are looking for the tweaks in the laws that they can make to create an environment where there is innovation and there are guidelines for

crypto. And this is where I want to also emphasize to people. And I see this again and again because I feel like the community forgets this. Legislators write the laws. Regulators do not. Regulators oversee and enforce the laws. So if you want a law change, you need to go and speak to the legislators. Otherwise, yes, you are then talking to the regulators about oversight and enforcement.

And I just sometimes feel that people forget this fundamental fact. And they rail on regulators on things that they cannot do, which is change laws, right? And so I think we need to have a very sort of frank conversation about what the community needs from the legislators versus is what the regulators are doing. And here's the other thing. And again, I'm going to give you another controversial one, which I know people will not be happy about to hear, but I actually think there's strength in the fragmentation that is the U.S. Think about the U.S. regulatory environment. I know. Surprise. They're strengthened this. Okay. Wait, I'm sorry, what? What did you say? Yes. They're strengthened this. Believe it or not. Really? Okay. Yes. Okay. But we do.

need to guide this in a way that works for the crypto and blockchain community. But wait, how is that, how can there be strength in that? I mean, like, you can even look at Coinbase, which has, I can't even remember the amount. It's like some astronomical amount of VC money they've raised, and they still don't have licenses in all 50 states. Yes, that is true. Okay. So there is strength in having different bodies be responsible for different aspects. of the financial system and not have it be concentrated in one centralized body.

In my mind, that's no different than a distributed network of bodies who are responsible for different things. So, for example, the SEC being responsible for X, FINRA being responsible for Y and, you know, IRS, you know, CFTC, et cetera, being responsible for different things. that actually, in my mind, is not a bad thing. Hold on before people start getting really upset. But here's the issue. Here's the issue. What is and where does crypto and digital assets sit? The problem is it doesn't have a home with one. It actually looks like it's got homes with all of them, right? And there's almost a power play and maybe turf. going on about who controls or who's going to regulate crypto. That to me is the problem. And frankly, I think there probably needs to be an overarching convening body that coordinates

with all of these different, and I'm being very practical here, you're not going to get the SEC to step off or the CFTC to step off or any of the other agencies that just step off. They're not. They're not going to. They've already stake their ground, right, in many ways. So how do you get this to work? Well, on my mind, you get this to work by having an overarching convening body who will then coordinate across all of these, you know, major institutions. I'm talking at the federal level here and coordinate this across and have that be the convening body that ultimately works with those agencies, allows them the power that they already have in their given jurisdictions, but then also that this convening body is the coordinator to make sure that there are sensible rules around digital assets. because let's face it, one digital asset versus another can have different profiles. And this is the constant challenge that we have. And I know there are people working on token taxonomy and standardization, or sorry, standards, and definition setting.

And I think those things are very good and we need that. But ultimately, digital assets shape shift, and that's very uncomfortable for people. Like all of a sudden, it can be a utility and a security, and it could actually be payments and money. what do you do with that? Maybe you embrace it. We just have to figure out how to make that work. I like what you're saying. I recently had Jake Chervinsky, a lawyer who specializes in the crypto space,

and I did ask him if there should just be one regulator. And his answer, which I agree with, is that it doesn't make sense because it is true that some tokens are securities and others are commodities. And so the idea that, like, you know, you just kind of create this other definition. definition, because I think this is what Jeremy Allaire has proposed that there just be this other definition for digital asset and that they're sort of like exemptor. They have their own laws. But, you know, what Jake was saying, well, they actually do, many of these do fit within one of these categories or another, but just having maybe one, like, as you called it, a convening body

where the entrepreneurs can talk to, you know, the same set of people all the time instead of having to kind of explain themselves redundantly, maybe with different regular. leaders. Yeah, but we, I actually want to go back to just earlier when you were expressing hope about how the laws might change. So are you saying that you're seeing this in a bipartisan way? Because one of the dangers is, of course, especially with this big presidential election coming up, that you could see one party embracing the technology and then the other party just reflexively opposing it. But you're not seeing that? Well, we're what we're trying to, well, first of all, In most cases, we find that when we present an overall balanced view of blockchain, digital assets, and cryptocurrencies, it becomes embraced in a bipartisan way.

I know that was not the case when you looked at what was going on with the Libre hearings. But I think also people miss out if they just get very narrow about all the focal points. And I know cryptocurrencies is super important. and, you know, you know I'm a big advocate from early days. It's just, I feel like if you start with that dialogue, you then shut people down because they already have preconceived notions, and it doesn't help you to make the case for other things. And in many ways, we do the opposite. We actually start with use cases that are very human, that have a blockchain element,

and that may or may not have a token element. And then we bring in the component pieces, which include, potentially digital payments and uses of tokens because they represent something physical or something, you know, that gets used on the platform. And in our world, it's been more effective and actually absolutely bipartisan building to do it that way. And when I mentioned before about healthcare being a dominant vertical in 2020, I absolutely agree with that. And it's what gets politicians interested. That education and identity, really. And to me, that's the gateway to have these frank conversations, not just railing on them because they're not changing laws to make crypto easier.

I think we need to articulate in a little bit more of a sophisticated way, why this is important to the world, to their constituents, and ultimately it needs to be important for them to be focusing on. Let's face it, they're focusing on many other things in the world, right? and how do we get them to actually focus on this? Yeah, yeah. I mean, I think, you know, just thinking about it in a non-emotional, a non-political way, it is, it would be strange. I feel like if one party said they're for this technology and then another party said they were against the technology, just because, you know, that's like one political party saying they're against the internet and the other one saying therefore, like it sort of doesn't make sense. I really hope we don't end up in that world.

Yeah. Yeah. So in that regard, like I feel like it's probably not going to happen. But actually, just from hearing you talk about this, and I did want to bring out more of your history of creating or being, you know, one of the people to spearhead the CME Bitcoin futures. I just wanted to hear stories from you about like what it was like to try to advocate for Bitcoin among, you know, I mean, I just imagine CME, you know, it's been around forever. It must have been. Stodgy is probably too strong of a word, but just, you know, it's this very established financial institution. It's huge. And back then, when you were advocating for it, I think that's really when

Bitcoin had this huge association with Silk Road. So what lessons, like, what was that like? And then what lessons did you learn from that that you're using now? So I know this is going to be very frustrating for people who are really, you know, quick moving and are sprinters. but you've got to play the long game always. My view is always play the long game. So we started really small and we were just researching and I happened to run FXN metals research and product development at the time. So I could put cryptocurrency research under my purview as just, you know, work that we were doing like we were supposed to do, which is to look at anything interesting and new, even if it didn't fit in a particular bucket. We were looking at cryptocurrencies fairly

early on. We managed to collect lots of different groups around the firm, and that's everyone from technology to clearing, to operations, to legal, who were interested in the space, and we effectively taught each other and create our own little internal network. And once we did that, I had a couple really good peers who ran different groups in different parts of the firm, who could be advocates, and we not only educated ourselves, but we started educating. And we started educating our board and our leadership. And I'm talking the C-suite and, you know, fell on deaf ears for a year or two. But that's where persistence comes in, right? If you really believe in something and you think it's interesting, you have to keep at it, even if no one's paying attention to you and you're

not getting any limelight. Because unfortunately, like, you may never get that limelight. But if you really believe in something, you have it on record that you've done that work and that you have advocated for it. And so we would send research reports or, you know, occasional assessments around the crypto space. And we're like, hey, we need to look at this. Hey, we think this is going to be interesting and disruptive to financial services. We need to think about this. And finally, and I will thank media for this, when Wall Street finally started reporting on it, asking about it, and because we had customers and board members asking, that's when we got inquiries about what are we doing in this space. And luckily for the firm, we had already created a body of knowledge. There

were very few big firms out there that had already met with like several hundred startups around the world. Like we'd go to meetups in some of the dodgiest places you wouldn't believe. You know, I'd go to Berlin and be in like these crypto, what do you call it, you know, underground bars where you can only pay in crypto. And this was like back in, I want to say like 2015, 16. And, you know, what corporate was doing that? I'd literally be the only corporate person who'd be like in these meetups but I think a lot and it's the way to go and frankly like when Ethereum was just starting I mean we would be sitting there in Berlin and I just be like wow this is just like you knew something amazing was happening and you just maybe couldn't put your finger on it

but you knew something was really going to like grow and and this is this was borderless and this is going to be huge and look this many years on I can't tell you that I predicted any of this because I didn't. But when you have that feeling and you just kind of sit there and you're patient and you just, you know, do what you can do in your corner, you can affect change. And, you know, we started with the Bitcoin pricing products. We knew that was the first thing we needed to get out the gate in order for it to even think about the futures. That took well over a year for us to really focus on. But we had advocates inside the firm, you know, I have to tell you, when you sit in sort of middle

to middle senior management, you need the person above you and the person above you and the person above you actually advocating as well. Otherwise, you come up with all kinds of roadblocks at a big corporate. It's really hard. And even then you still come up against roadblocks. Yeah, I was going to ask you about the pricing products because you guys launched the Bitcoin Real Time Index and then the Bitcoin reference rate early. And so when you did that, did you have in mind that you wanted to build Bitcoin futures like off of that, that that was kind of a angle? Yeah. I mean, look, we didn't know that it would happen, but we knew that we needed that.

And here's the other thing. And again, play the long game. We knew that you need at least 12 months of data around any pricing index in order for any of the hedge funds or anyone who's going to look to trade this to have data to do back testing. And so you need that lead time because most firms will need at least, some will go with six months, but most really need 12 months. So again, you kind of need to map that stuff out. And then, you know, we've been talking to the CFTC on a very sort of, I don't want to use the word casual, but on a non-pushy basis. Like, it was more informational. We were like, hey, let's talk about Bitcoin. You guys are looking at this. Let's talk about that. Let's do a teaching session. So we did a lot of this collaborative work

on the ground in D.C. as well as on the phone. And the nature of the relationship, obviously, it's different because seeing me, it's the known item. And, you know, the conversations with regulators are, don't get me wrong, they're still very tough. And at times, you know, you do want to hit your head up against the wall. But the conversations are different because these relationships have been built over years and people know each other and have at least gotten into a working relationship cadence. And therefore, if someone brings up, hey, let's look at this. How should we approach this, let's take a look at the metrics and the core principles that we need to satisfy. What are the problems here? You end up having a very sober, real conversation around how do you mitigate

price susceptibility to manipulation? How do you make sure that you can risk mitigate that? Because that's one of the key core principles that you have to satisfy for any CFTC derivative product. And I think, you know, it takes time. You just can't push it. So how long did it take you for, you know, to get the Bitcoin futures launched, like from the time that you proposed it within CME to the time of launch? I think we had the kernel of idea back in what, 2000, I want to say late 14 or 15, early 15. And the pricing products came out. We announced it at consensus that May 2016 and then we launched it in December, November, December, 2016. And then...

Wait, the futures? Oh, the index. The index. And then, by the way, I'll let you guys in on something, which I'm enough years out where we can talk about this. But I remember, I think it was CoinDest 2017. It was right before I left the firm because I left CME in July of 2017. And we had already, you know, written the specs. And we were going through with a whole bunch of people around what that would look like and potential traders.

and we're working on the design of it and then how the mechanics would work and how people would get connected because there's a whole host of things that need to happen for this thing to trade. And I do remember at one point we organized a meeting with sort of the top, I think, 10 to 12 trading houses who would do this crypto. And, you know, it's all the, a lot of the famous names you can think of now in the early days who would have traded this potentially. And I remember we like convened this meeting and we were. We were like, do not tell people, because it was during consensus. And we're like, do not tell people.

We don't want people gate crashing this. Keep this under wraps. And I will tell you, I was so proud of all of the traders. Nobody said a word. The meeting happened. And it was great. We went over the specs. We talked about the problems of physical versus non, you know, cash settled US dollar basis risk.

Like it was a very, it was a really great conversation. It was a very constructive conversation. and we got good feedback. And I will say I was singularly shocked. I was, I swore somebody would leak it. And no one did. Hmm. Hmm. Hmm. I wonder if I know any of those people and why they didn't tell me. But anyway, I actually, but I did want to ask. Sorry. I did appreciate it. I mean, that everyone kept their mouth shut. No, because we couldn't have, we, it could have actually blown up our ability to do this properly, you know, with the confidence of the CFTC. And that's the other thing is that. that trust is every we need trust right and ultimately this is all built on trust and human trust of each other right as much as we're talking about trustless systems yeah but that's a thing

they're not trustless it's software replacing i know that's my take i'm like why is this called it's like i agree with you it's a system that enables trust but anyway i i completely agree with you on that point so anyway yes um but i did want to ask you about this physically settled versus cash settled. So as you know, so obviously, CME Bitcoin futures are cash settled, meaning that the payout happens in US dollars. And so obviously at the Bitcoin price is fluctuating, you know, depending on when you settle, you can end up with a different amount. But Back and Ares X are launching physically settled ones where, you know, if it's a contract for one Bitcoin, you get one Bitcoin, which is just one Bitcoin. So I just wanted to get your opinion on physically settled versus cash settled and maybe

explain a little bit about why the CME ones were cash settled. Yeah, I will tell you, it's a very practical problem, which is you have in CME, for example, how is it made up? You've got the market infrastructure firm, CME, it's got the platform, you've got clearing members, which are attached or connected to CME's platform. You've got brokers, right, attached and linked to CME platform. You also have customers. It's very rare that a customer is a customer and then a clearing member and also directly connected. So you go through several layers, right? And imagine, you get a new product out there. How are you going to get all of those clearing members to set up custody solutions for digital assets when they don't even know what digital assets are.

We're talking about 2015-16. You tell me how you're going to move all these people to change systems or buy new systems. By the way, they don't even exist and risk manage this stuff. And oh, by the way, they're regulated too, to some degree. And they're going to go to their respective like risk management board or committee and get sign off for something called Bitcoin that nobody. really understands or knows about. I mean, think about the awesome amount of friction you are causing to launch a physically deliverable solution. No, it was a non-starter in 2015. So the very pragmatic

decision you can make then is do you get a product out the door that may be imperfect because it does introduce basis risk? And I completely agree it does. A physically deliverable product is always the best solution if you can get it. But in a world where you don't have the infrastructure, what's your next best bet? Well, the next best product is a dollar settled one because people know how to deal in dollars and they don't have to hold the crypto and they can margin in dollars. This is a very practical, pragmatic path. And that's why we took that path. We were hoping that once it becomes successful, that it would then be the gateway for physically deliverable to come in. Yeah, at CME, you mean, or just in general in this space?

In general, for the market. Yeah. For the whole space. I just had, I just had Ju Thicka Chow of Ledger X on my show. And they're in the process of launching physically settled Bitcoin futures, but they already have launched options. And she was saying that they started this process. I actually, since I don't have the facts right in front of me, I don't want to miss

speak, but it was a very long time. And she even said that like in a way they probably started too early because they basically just spent so long educating all the regulators. Yes. So I remember speaking to them way back when when I was at CME and we were starting our journey. I mean, they were one of the companies that we met with and we were like, hmm, interesting. They want to do Bitcoin options. Why would you do options before the forwards or futures? We thought that was interesting. I have to say, I respect their tenacity and perseverance and all the work that they've done educating, but I will have to say they were extremely early. And frankly, I'm not sure that I agree with the approach to go with options before forwards or futures,

but I get it. All right. So one thing that I wanted to ask you was there are a lot of people who say that blockchains without assets, you know, don't make sense. And this, we kind of touched on this a little bit earlier. But, you know, obviously when you were at CME, you were very Bitcoin focused. So why did you kind of make that shift to kind of embrace more different types of blockchains instead of just focusing on ones with crypto assets at the center? So two things. What's very public to the world about what?

what CMU is doing is obviously the Bitcoin futures. And as you recall, also the Royal Bank Gold with the UK government was announced. And unfortunately, that's been shelved since I left. But behind the scenes, there were many projects, either in-flight or under consideration, that involved DLT efficiencies and working with our customers, clients, around efficiencies in the post-term. trade space, which obviously still may be happening, may or may not be happening, cannot speak to that, but that was not known. And we spent a lot of time on the permission blockchain space for quite a while, just by the nature of the fact that we were dealing with

banks and custodians and other market infrastructure firms. Now, my pivot is very conscious, one where I wanted to focus on blockchain for social impact. I still believe in a world where tokens and digital assets are absolutely necessary in a blockchain space. Can you exist in a world where you just have DLT where there's no token, no digital asset? I'm probably a little bit more forgiving than others about that. Yeah, I think there probably are a few. Are they the majority of these cases? No, and I hope not.

But again, my view is it's so yet to be seen. We have use cases and different types of blockchains evolving every year. We're into year 10 plus of Bitcoin. But yes, what Bitcoin is done, and I really have to think, you know, all the early pioneers is look at what it's unleashed already. I mean, you wouldn't have imagined this 12 years ago, unless you were one of the ones building it, perhaps. But all the derivative blockchains or DLT or DAGs or non-blockchains, whatever you want, whatever you want to say about that, it's because of the inspiration of what started first, right? So in my mind, let the best ones win. I believe in absolutely a Darwinian market's efficiency over time play, meaning it may not be the best technically.

it will be the best for a given situation or a given group of people. And for me, what works best for that and solves for X, Y, and Z is what should prevail. I don't believe that there's one pervasive only. We're going to have a lot of them. We have too many right now. More being formed every day. But eventually a lot will fall away. And that doesn't concern me at all. So I want to circle back to regulation because you did bring this up briefly. You were recently named to the New York state legislature's digital currency task force. And what are, what do you intend to do on the task for, or what does the task force intend to do? And will you be revisiting the bit license? Yep. So, number one, I have, I'm one of six on the legislative side that have been appointed.

There are seven to be appointed by the governor side, which will then comprise of 13 total. I do not know who the seven are on the other side. So we're waiting for that. And then we're also waiting for instructions on the exact requirements of us. Other than obviously we know we need to have a report done answering the questions that have been delineated. But frankly, given the choice I would like to have, and I've already proposed internally, and not been given sign off, but we hope to do this. I've asked for us to do a much more public and open communication line with the crypto community

around in the form of, let's say, like, town halls or virtual feedback around what we're doing and what people and entrepreneurs need to flourish in New York State and New York City. Frankly, with regards to the bit license, again, I'm a pragmatist, and I'm saying this as a person in the crypto space, not with any particular agenda or a hat. I'm just saying that I don't see a world or trying to repeal it is the path forward. I think the path forward is actually, how do we make this now that exists, and it's been around for God knows how many years, how do we make it as frictionless as possible and also bring down the cost to be properly licensed? How can we make it more entrepreneur and user-friendly.

And to me, that is a more pragmatic path in terms of helping businesses than saying we're just going to try to repeal it. I don't know actually any politician. Maybe there was one before. If someone can convince them, go for it. That's great. I'm just not going to fight that battle. I'm going to be more pragmatic about can we make change that helps people who already

have the existing bit license, but also more importantly, can there be a more efficient path to those who would like to get one. So we're running out of time a little bit, but we didn't even get into your history pre-CME. And I know you worked in financial services for a long time doing structured products for Morgan Stanley. And you did also talk about how, you know, financial inclusion and social impact are kind of some of the big goals that you have right now. So I just wanted to ask you, you know, given your background in financial services, when you look at the crypto space and all the different trends like maybe in defy or around, you know, things like what Facebook's trying to do with Libro or any other initiative, frankly, like, what do you feel

like is quite promising, particularly from the pure crypto space, you know, not talking about like voting or whatever, that you feel like, yeah, draws on that experience, but also accomplishes that goal? First of all, crypto is like no other group industry I've ever encountered in my career. in the sense that think about how global, borderless we all are as a community. I know that people think that crypto is very, you know, dogmatic and alienating, but actually anywhere I go in the world, if I meet a group of people who are in the crypto blockchain space, they are some of the most welcoming and wonderful people.

So I think the culture of what's been developed is amazing, but from a very practical nuts and balls financials point of view, I think we have the rise of grassroots focus on reducing social and financial inequalities. And I think that's one of the most important things. I'm sorry, but big finance, if they could find a way to make money, you know, to service the people who are not serviced today. And I'm not just talking about people who are unbanked. I'm talking about people who have very limited access to financial services. And I'll throw a couple things out at you because I was just with the World Federation of Exchanges.

And even I was a bit shocked by this. You know, in the U.S., you've got double-digit ownership of equities and people own stocks. A lot of them mostly in their pension funds or whatnot. And it gets kind of managed for them. But in the rest of the world, it's single-digit at best. And I think it's actually low, single-digit. It's not even high single-digits. You'd have to double fact-check that.

I don't know what the exact figure is. But, you know, one of the stuff. exchanges said, how do we help democratize people ownership of stocks and equity? Because let's face it, if you're going to have wealth creation for people who are really needed the most and not just the rich getting richer, we've got to figure out how people get access to investments. And this is where the system right now just does not work. All right. Well, and do you want to name any kind of particular project that you feel like is going to help achieve? Well, more inclusion or trend.

Yeah, I mean, look, for evil and bad and all the stuff that people rightfully should slam Facebook on, if Libra Association itself or some other group like it could have the scale that it does, it's bigger than any country in the world, you know, 2.3, 2.7, whatever number billion that you want to use, nobody else could have that kind of lasting impact on people who have no voice, right, in terms of financial access. If some group can do that, and maybe Libra is the answer, maybe it's not, we'll see. We're definitely, and just for full disclosure, you know, we are keeping an open mind about Libra Association and working with them. I know Dante personally, who's the head of policy incomes, he is a genuinely decent,

good person, and so we'll support him because we know who he is and what he's trying to achieve. But whether they manage to do the right thing, I think we'll have to see. but my view also to the community always is just let's keep an open mind because it's trying to solve for a major problem that none of the banks and governments can't seem to solve, then it's incumbent upon us to do it. Who else is going to do it? All right. I will also vouch for Dante. He was on the show, unconfirmed, and I agree. He is a wonderful person. I will link to that interview in the show notes. All right, Sandra, well, where can people learn more about you and GBCBC? Well, go to our website, GBCC, well, sorry, GBBCounsel.org. And then also you can follow me on my Twitter handle, SR London, or find me on LinkedIn.

Great. Well, thanks for coming on Unchained. Thank you so much, Laura. And again, even watching from the early days of how you grew your podcast, I mean, you're amazing. You're a tour to force. Thank you. Thanks.

I'm actually, and I don't want to forget to tell people that you were on the show, I think it was almost three years ago. It feels like a decade, though. It's probably only three years ago when I was at CME. So thank you again for the opportunity. I never got to reveal to people at that time, but do you remember that I had to do that show from a closet? Because, um, my gosh, that's right. You're at your sister's place. You went into a closet. Her company. Yeah, yeah. Long story. I meant to reveal at the time because it was funny. And I think I might have a photo of myself in the closet performing the, uh, conducting the interview. But anyway, now, now things are much better.

I'm like much more. Laura is committed. Laura is a true pioneer. Most of the world knows this in the crypto space. But honestly, Laura, you are a tremendous voice for the community. And just thank you so much for being, you know, the balanced, um, sensible and also, um, really just, uh, what's the word I'm looking for, like the light that we need sometimes. I mean, seriously. Oh, Sandra, you're too sweet. Sandra, you're such a gem. That's why I wanted to bring out more of your history because I feel like people don't know it. But anyway, all right, well, I'm so glad we got to reunite. And yeah, thanks again for coming on the show. Well, thank you and good luck with everything and see you soon. Thanks so much for joining us today. To learn more about Sandra and Gpbc,

check out the show notes inside your podcast player. If you're not yet subscribed to my other podcast Unconfirmed, which is shorter and a bit newsier, be sure to check that out. Also, find out what I think are the top crypto stories each week by signing up for my email newsletter at Unchainedpodcast.com. Unchained is produced by me, Laura Shin, with help from faxored recording, Anthony Yoon, Daniel Ness, and Rich Truffalino. Thanks for listening.