00:00hi everyone welcome to the a 6 & Z
00:02podcast I'm sonal today's episode is all
00:05about the regulatory landscape in crypto
00:07it's based on a conversation recorded at
00:09our inaugural intro to crypto event
00:11co-hosted with hash tag angels in April
00:132018 you can also find other sessions
00:15from this event as podcasts as well as
00:17on our YouTube channel where there's
00:19also an intro to crypto basics deck
00:21presented by Linda Shea the experts in
00:24this episode however are Robin Wiseman
00:26who's a lawyer by training her early
00:28work on Bitcoin policy issues helped
00:30found quayne Center which is a
00:32non-profit policy research and advocacy
00:33group for cryptocurrencies
00:35she's a lobbyists of the group and so
00:37spends most of her time talking to
00:38policymakers at both the federal and
00:40state level and she's also formerly
00:42director of government relations at
00:44NASDAQ and then we have Katie Hahn also
00:46a former lawyer who teaches crypto at
00:48Stanford Business School and is on the
00:50boards of coinbase and hacker one she's
00:52a former federal prosecutor with the US
00:54Department of Justice where she led
00:56their first digital currency task force
00:58and prosecuted a number of cases in the
01:01space and she was recently announced as
01:03our newest general partner the
01:05discussion that follows covers
01:06everything from a pulse check on what's
01:08coming on regulation lies in crypto to
01:10how people who want to join a company or
01:12build something new in this space should
01:14think about it we also briefly cover who
01:16the regulatory players are and you can
01:18see the slide we referenced even though
01:20you don't have to in the notes for this
01:22episode on our website thanks again
01:24everyone for coming so excited by the
01:26energy in this room so far just a kind
01:28of recap where we're at we started our
01:30morning with building blocks for what
01:32we're looking at the big picture for a
01:34crypto we then talked about building
01:36companies with people and with code and
01:39now we're talking about the regulatory
01:42landscape and building I guess would
01:43like legal code I mean the regulatory
01:44aspect of it but one context note the
01:47story of the internet and we've
01:49referenced the Internet as an analogy
01:50here a lot has been a story about
01:52permissionless innovation government
01:54invented it and universities and labs
01:56built in the early days they then opened
01:59it up for everyone to build on top of it
02:00which led to the world we have today I
02:02mean at the very beginning I don't think
02:04people would have predicted that we'd
02:05have the kind of e-commerce world we
02:07have today and that was because people
02:09were allowed to build an experiment on
02:11it with crypto we're seeing
02:13many of the same kinds of experiments
02:14play out but because money is involved
02:16upfront and this is a question that came
02:18up in the last panel at the end
02:19protecting consumers and how does this
02:22change things on the regulatory front
02:24that is a big question which is why the
02:25first question I want to ask you guys to
02:27kick things off is there's a lot of
02:29noise and if you have to summarize some
02:31of the key principles or mindsets that
02:33people should think about approaching
02:35the space what are some of the big
02:36picture principles you'd share Robin do
02:39you want to yeah I think I'll start off
02:40with just two levels one of the biggest
02:42principles is that when people say
02:44Bitcoin and I say Bitcoin is sort of a
02:46catch-all for decentralized
02:48cryptocurrency x' is Bitcoin regulated
02:50the answer is yeah a Bitcoin is
02:53regulated the underlying technology is
02:55not regulated and it would be very
02:57difficult to regulate but when you have
03:00applications of the technology some of
03:02which we've heard about earlier today
03:03when those applications cross into an
03:06area where there is an existing set of
03:08regulations whether it be money
03:09transmission or something or a custody
03:11of funds there are regulations that do
03:14apply and so the underlying technology
03:17is not regulated but the applications
03:18are so I think the principles I start
03:21out with are that first when you're
03:23talking about regulators you're talking
03:24about a really diffuse set of people
03:26different groups so you're talking about
03:28civil regulators you're talking about
03:30enforcers and then you're also talking
03:31about prosecutors which is what I used
03:33to be and these things are not all the
03:35same so that's the first thing to keep
03:37in mind is there are very different
03:38priorities and objectives between civil
03:42enforcement and criminal enforcement and
03:44the second kind of principle is that all
03:47of the existing laws and regulations are
03:49really really very broadly worded and
03:51they're broadly worded by design so that
03:54regulators and prosecutors have broad
03:57discretion to use their own judgment for
04:00what they think are the best vehicles to
04:02regulate or prosecute and that's really
04:05by design I do want to dispel the notion
04:08that the government is sitting there
04:09trying to trap you know an IC o----
04:11project or a cryptocurrency project and
04:13saying AHA we got you that's just not
04:16the case the fact of the matter is the
04:18government doesn't hurt for business
04:19where fraud is concerned or where crimes
04:22are concerned well so bottom line it for
04:24me though if I'm thinking about working
04:26whether building a company building a
04:28product marketing it there's obviously
04:30all these things that happen in a
04:31company is it fraud is it legal what's
04:34sort of the way to think about that
04:35question well I would say that the
04:37technology is not illegal I mean we have
04:40a long history of technologies that can
04:42be used for illicit purposes but the
04:44actual technology is not illegal so I
04:47would say that decentralized
04:49cryptocurrency is the kinds of things
04:50we're talking about today
04:51not illegal but you can think about ways
04:53that they can be used in an illicit way
04:56and the same thing I mean you can look
04:58at the internet the internet it's not
05:00illegal but you can use the internet to
05:02do illegal things yeah that's exactly
05:05right I mean if you look back even to
05:072013 the Senate held hearings on Bitcoin
05:10and what is Bitcoin and you had three
05:12different government witnesses at that
05:14hearing and they all three went and said
05:16bitcoins not illegal this is a great
05:18technology so that was somewhat of a
05:19surprise I think to some people in the
05:21space yeah we were expecting the
05:22opposite but right I think it's also
05:24important to note that criminals are
05:26often the first adopters of new
05:28technologies very counterintuitive to me
05:31actually because when I think of early
05:32adopters I think of developers right I
05:34mean they're the best beta testers of
05:36new technologies in many ways and that's
05:38been true not just of crypto currencies
05:40right that's been true of all kinds of
05:42things if you think of cell phones
05:44if you think of email social media the
05:47internet and just various applications
05:49criminals are often early adopters and
05:51so to Robyn's point yes of course you
05:54can have it's just like saying cash or
05:56the Internet the technologies themselves
05:57are not illegal there of course could be
06:00illegal uses and that's really what the
06:02government's trying to focus on and what
06:03it frankly should be focusing on I
06:05actually see a promising sign here
06:07development of all these working groups
06:08in the government yeah I think when
06:10people are working on developing a
06:13certain technology or here particularly
06:15in Silicon Valley in San Francisco
06:17there's a lot of focus on the tech and
06:19there's a lot of skepticism about policy
06:21makers and I will tell you that policy
06:24makers really want to understand the
06:27technology in fact at the SEC there is
06:30something called the distributed ledger
06:32technology the DLT working group and it
06:35has members from all the different
06:36divisions within the Securities and
06:39that are focused on just learning about
06:41the technology and also at this
06:44commodities and Futures Trading
06:45Commission the CFTC they have now
06:47something called lab CFTC which was
06:49developed to look not just a
06:51cryptocurrency specifically but larger
06:53FinTech financial technology financial
06:56services to biology it actually reminds
06:57me a little bit of the early days of the
06:59internet where you have companies set up
07:00their own like certain divisions and
07:02working groups that point in the early
07:07early days of the internet the SEC
07:09created an internet division was like a
07:12special thing and eventually that
07:14internet division became more of like a
07:16claims processing area because
07:18everything had touched on the internet
07:20how long do you guys think it'll be for
07:21us to get from that point where there's
07:22a separate dedicated siloed working
07:25group and then kind of immerses omit it
07:27merges into everything else do we have a
07:29prediction on how many years it might
07:30take I don't want to slap a number of
07:31years on it but I think you're still a
07:33few years away from that at least the
07:36one thing we are seeing is that it's no
07:38longer siloed like the very purpose of
07:40these working groups are to go out into
07:42the broader organization because you
07:44know one thing folks don't even realize
07:45is these organizations are behemoths
07:47right you have the Justice Department is
07:49a hundred and ten thousand employees
07:50you've got double that almost at the
07:53Department of Homeland Security the SEC
07:55four thousand I mean being talking about
07:57thousands and thousands of people these
07:59are big organizations so these working
08:02groups they're already kind of going out
08:03within their organization and saying no
08:06bitcoins not illegal or actually in the
08:08government doing a pilot program with it
08:10they're doing a lot of interesting pilot
08:12program and I would also add that you're
08:13seeing increased coordination among
08:15agencies recently in advance of their
08:18joint testimony before the Senate
08:19Banking Committee the chairman of the
08:21Securities and Exchange Commission and
08:23the chairman of the commodities future
08:24Trading Commission I'm a joint op-ed in
08:27The Wall Street Journal about their work
08:28so I think you're beginning to see that
08:31it's where there are areas for
08:33coordination the policymakers law
08:35enforcement are working together
08:37okay let's shift gears for a moment and
08:39talk about all these icos or scams kinds
08:42how would you sort of separate that
08:45headline from what's actually happening
08:47from the policymakers perspective and
08:49what are they taking away from all that
08:50so I have to say it's really
08:53in my line of work super frustrating to
08:56see the headlines that are splashed all
08:58over the place because they're really
08:59often they're very misleading and
09:01they're focused on sort of the worst of
09:03the worst and they're designed to sell
09:05papers and they're designed to get
09:06clicks and they're designed to get
09:07people to read oftentimes if you drill
09:10down even into the actual body of the
09:12story you realize okay that was a sort
09:14of a sensational headline but the other
09:16thing that's really frustrating about
09:18some of the media coverage is that then
09:21policymakers read it and then it becomes
09:23what they latch on to to respond and so
09:26a lot of what we do is we go in and we
09:29try to make sure that particularly
09:30members of Congress who have oversight
09:32over all of these different agencies and
09:34are responsible for making the rules
09:36that then they'll have to implement that
09:39those policy makers understand and have
09:41the facts so that we are trying to limit
09:43the knee-jerk reactions to some of the
09:45sensational headlines I've seen several
09:47headlines that are blockchain has been
09:49hacked yes and we've locked chains never
09:51been Act some of the cryptocurrency
09:53exchanges have been hacked young male
09:55Cox coin check more recently it's Enix
09:59and others but the blockchain itself has
10:01never yet been hacked and so that's just
10:04one great example of these headlines I
10:06think the other fact of the matter is
10:08that cryptocurrency as a community and
10:10as an industry is really under a
10:12microscope in a way that other financial
10:14services companies are not when I was a
10:16prosecutor I prosecuted Wells Fargo's
10:18executives for taking dead people's
10:21accounts and draining them of money they
10:23basically found out who hadn't used
10:24their account for you know many years
10:26and then they would drain the money to
10:27their own personal accounts and it
10:30didn't even really make headlines can
10:31you imagine if a crypto currency
10:34exchange even had one example of that it
10:36would be kind of all over the news so I
10:38think that it's important for the
10:40industry in the community to know it's
10:41operating under that microscope yeah
10:43what are we seeing in terms of legal
10:45actions against some of the things that
10:48are out there I mean what proportion of
10:49the activity is it really well I think
10:51right now we're actually seeing the
10:53relatively small proportion I don't know
10:55Robin what your view is but mine is and
10:57I can tell you that a lot of things are
11:00still under seal that's kind of first
11:01principle so know is you know people
11:04would ask well when is the government
11:05going to do something about X Y Z there
11:07barely breaking the law the government
11:09wasn't able to say oh we've indicted
11:11that case it's under seal we're just
11:13waiting to extradite the suspect or take
11:16down the site so what you have often is
11:18things are under seal brewing so that
11:21could be happening now we have this also
11:23not just in cryptocurrency but a great
11:25example is the fairness case you know
11:27that news broke in 2015
11:29yet it was only in 2018 now where we
11:33just saw the SEC had a case under seal
11:36an action they were working out a
11:38settlement agreement so I think there
11:39are things in the space that we're not
11:41yet aware of the public's not yet aware
11:43of that will be coming that said I think
11:46it's a relatively small percentage a
11:48very small percentage of the overall
11:50activity because as you all know a lot
11:53of the overall activity is lawful it's
11:55great it's terrific very innovative
11:56right so just the worst of the worst is
11:58getting under the spotlight right now I
12:00mean I don't think that you have people
12:02in enforcement at the Securities and
12:03Exchange Commission out looking to get
12:06somebody and be not a gotcha right and
12:08you know it takes an incredible amount
12:10of mean kidding well knows the resources
12:12that are dedicated to investigating and
12:16collecting the facts and deciding
12:18whether or not even if they're going to
12:20bring a case I mean enforcement and the
12:22SEC does a lot of work before they even
12:24bring it to the trial unit and then the
12:25trial unit has to decide to take the
12:27case and then the Commission has to vote
12:28on whether or not the case goes forward
12:30so it's not just like you're gonna see
12:33if the housing cases being brought right
12:35that's exactly right I mean especially
12:37with the SEC you have that function
12:39where they have to bring after an
12:40investigation the case before the
12:42commissioners so there's that step in
12:44between and then they can have the
12:46choice in the case of the SEC to bring a
12:49civil action in a court well what does
12:51that mean that means that a judge or
12:53jury will have to agree ultimately if
12:55the person who's been charged by the SEC
12:58doesn't want to resolve it via a plea
13:01agreement and that means that jurors
13:03just like you know everyone in this room
13:06or judges are going to be deciding
13:08whether they think the law was broken
13:09the same thing obviously is true we're
13:11talking about criminal cases is a jury
13:14of 12 of your peers gets to decide if
13:16the government's proved beyond all
13:18reasonable doubt that what you've done
13:21and in this space especially and I know
13:24firsthand having worked in some of the
13:26earliest cases for the government in the
13:28cryptocurrency space you don't want to
13:30pick the wrong vehicle you don't want to
13:32have someone tell you okay no we'll take
13:35you to trial and then go lose that case
13:37so when you have so many to choose from
13:39you're going to hopefully be very
13:41judicious in which cases you're
13:43selecting yeah and then just to follow
13:46that begins some of the enforcement
13:48actions at the SEC not on the criminal
13:50side but just in terms of what the SEC
13:52has looked at it's through those actions
13:54through their decisions that then you
13:56begin to get a clearer sense of where
13:57the lines are so for example what
14:00constitutes if you're looking at an IC
14:02o---- a registered security you could
14:03begin to look at some of the decisions
14:05that the SEC has put out and you can see
14:07where the line is going to be I'm so
14:09glad you're benching that because you
14:10guys have actually mentioned the SEC a
14:11few times but we have the slide up here
14:13which has a lot of other agencies on you
14:16and we don't have time to go into this
14:17because that would take the entire day
14:18let alone this session we have on stage
14:19but can you help us understand because
14:22we're reading about the SEC saying this
14:23they're doing this this organisation is
14:25doing this what is the SE C's position
14:27and also where do these other players
14:29come in I'll start just by saying the
14:32other thing is a lot of times you see
14:33these agencies teaming up together so
14:36we've seen this recently in this space
14:37when the btc-e Exchange was indicted by
14:41the Justice Department last summer
14:42FinCEN which is up on the screen a
14:44treasury agency came in and assessed in
14:47conjunction with the DOJ criminal case a
14:49110 million dollar penalty we just saw
14:52this also in the case of the Carta ICO
14:55that the SEC brought thirty two million
14:58dollar civil fraud enforcement action
15:00and DOJ the US Attorney's Office teamed
15:03up by bringing a criminal companion case
15:06so we see these agencies working
15:08together a lot also and we talk all
15:10about the SEC today in 2018 and I think
15:14one of the reasons is what agency was
15:16putting out guidance in 2017 the SEC
15:19however if you would have talked to the
15:21community in 2013 the agency everyone
15:25was very focused on was FinCEN which is
15:28the Financial Crimes enforcement Network
15:30part of the Treasury Department
15:31FinCEN was the first US government
15:35put out guidance saying virtual currency
15:36is going to be subject to what are
15:39called money service business laws and
15:41the Bank Secrecy Act so point is that
15:44the different regulators can change over
15:46time depending on who's putting out
15:48warnings or who's putting out guidance
15:50and also just going back to when we were
15:52talking about the overarching principles
15:54when you talk about applications of the
15:55technology I mean as the technology
15:58starts to be employed
15:59FinCEN needed to step up and issue
16:01guidance in 2013 because you have
16:03offering of many service business type
16:05services and then you have the IRS I'm
16:09just kind of going down the list the IRS
16:11designated cryptocurrency is property
16:13and not currency and I think the reason
16:15we're talking about the sec a lot today
16:18is because 2017 saw an explosion in
16:20terms of these ICS initial coin
16:23offerings and so the SCC's work has been
16:25done a lot in the enforcement division
16:28in terms of rooting out fraud and
16:30looking at just basic plain old fraud I
16:32mean some of the early cases were just
16:33regular pyramid schemes it doesn't
16:35necessarily mean that it was
16:36cryptocurrency based someone who's doing
16:39something that's otherwise illegal
16:41that's illegal and the SEC is going to
16:43look at that but the other thing that
16:45the SEC is doing now is really taking a
16:48hard look at icos and whether or not
16:49when you have these initial coin
16:51offerings they should be basically
16:53considered registered securities which
16:55means that they have to go through a
16:57very special set of things and they're
16:59regulated in a certain way and if they
17:01could be traded on exchanges that are
17:03registered with the SEC and it basically
17:04brings in a whole element of all these
17:07things that have to be done so whether
17:08or not an IC o---- is considered a
17:11registered security or not is a really
17:13big deal is it an open question it's not
17:15a closed question if you have a token
17:17that's operating on a fully
17:19decentralized network that's probably
17:21clearly not a security and just this
17:23morning a House Financial Services
17:25Committee the Capital Markets
17:27subcommittee as part of their routine
17:28oversight has directors of the different
17:31divisions of the SEC come in and talk to
17:33them about what's happening and they
17:34have a chance to ask questions and this
17:36morning the director of corporate
17:38finance which is one of the divisions in
17:40the SEC that would be responsible for
17:42issuing an approving certain ETF
17:44exchange-traded fund products was
17:46testifying this morning and
17:48member of Congress who we actually spend
17:50a lot of time talking to representative
17:52emmer asked the director of court Finn
17:55basically is it possible that you could
17:57have a token that's not a security and
17:59my world this is really big news because
18:01he went unsuspected token that doesn't
18:04have the hallmarks might look like the
18:05hallmarks of the security and that's a
18:07token where the holder is buying it this
18:09is I'm quoting him now buying it for its
18:11utility rather than investment
18:13especially if it's a decentralized
18:15network in which it's used with no
18:17central actors and I think that really
18:20reflects that the FCC for example has
18:22come a long way because you had the
18:24Chairman J Clayton saying a few short
18:26months ago that he had never seen a
18:27token that wasn't a security and I think
18:30part of this is just the FCC's
18:32recognition that there are different
18:33life cycles or you're talking about
18:35token right exactly and I know coin
18:37Center doesn't like to call them he's
18:40like I took in that's operating on the
18:41essentially but if not a utility token
18:43what we say we just say it's a token
18:45that's operating on it fully
18:47decentralized network there are a lot of
18:48terms in the space I mean even
18:50blockchain for example when in the
18:53beginning blockchain was used to mean
18:55decentralized cryptocurrency and now
18:57when you talk about blockchain to
18:58policymakers in DC and to people maybe
19:01outside this room blockchain
19:03you have to kind of explain whether it's
19:05an open network or a closed network and
19:07obviously that's a very important
19:09distinction when you're talking about
19:11application of rules and regulations
19:13because the tricky part comes when you
19:15have a decentralized network you might
19:18have an existing set of rules and policy
19:20makers right and just to pause for a
19:22moment and some of the two concepts you
19:23brought up so you mentioned the life
19:25cycle the network and you guys heard
19:26this morning in Linda's talk that the
19:28value of tokens is relying on the fact
19:31that there's a network and that network
19:32is there if you have a good application
19:33innovation happening people building on
19:36it using it and the utility token can be
19:38a case where someone is say you know
19:40buying file storage and they can
19:42actually use that token for file storage
19:44it's not just you're investing in that
19:47network to make money only they're
19:49actually trying to use that tool or
19:51something to point out in the future
19:52right or something to be built in the
19:54future in that time line so you bring up
19:55the future is an important point to
19:57pause on because the life cycle of the
19:58network it's actually there's not one
20:00point in time like if we look at all
20:02landscape of all the you know
20:03technologies of cryptocurrencies that
20:05are out there Bitcoin and etherium have
20:07been around a lot longer there's a whole
20:08lifecycle for how it may start and
20:11evolve over time and I think that's one
20:13of the reasons that we see the
20:14government taking its time it's wanting
20:16to choose the right vehicles to that
20:18point I made earlier but also see how
20:20the ecosystem evolves and see it really
20:22this was actually a utility token yeah
20:25not a good vehicle to make an example of
20:27for example where as you might have the
20:29exact opposite end of the spectrum I do
20:32have a question which is the nuances and
20:34the differences involved because even
20:35here we've heard this talk and it has
20:37all this terminology a lot of jargon and
20:39a lot of layers of meaning behind it but
20:41in this world in a crypto network you
20:43can have users and miners and developers
20:45and designers you can have a platform
20:47that's you know building games and
20:49applications you can also have a
20:50platform for exchanges there's all these
20:52different things where do you see the
20:54pulse check on where they're sort of at
20:56in kind of coming along on that front
20:58well I think they're really relying on
20:59the cryptocurrency community the
21:01industries the companies some of the
21:03trade groups and like yeah groups like
21:05coin Center to come in and do that
21:07education it's really critical and then
21:09on the government side to come in and
21:11say here are all these kinds of laws you
21:13know they're not giving legal advice of
21:15course but it's a two-way street and so
21:17I think that's really important I
21:18remember talking to some folks in DC
21:20last year and they said we just featured
21:23how Bitcoin and then along comes um and
21:26now it's you know app coins and alt
21:28coins and you know we can't keep up with
21:30us so they really are relying on the
21:33community in the industry I mean it's
21:36not the job of people in this room to
21:37keep up with all the different
21:38regulations and what's happening on the
21:40hill and the different hearings and
21:42whatever but you do because it's gonna
21:44inform what you do and I just as an
21:46aside also want to say that I think it's
21:48great that today in a discussion that's
21:50sort of technical that you have brought
21:52in a discussion of regulation because
21:54there is a little bit of a disconnect
21:56between what's happening in DC and
21:59what's happening here and so the more
22:01that people from DC can learn about what
22:04you're doing and the more that you guys
22:05can understand what people in DC are
22:07doing I think it makes for a very
22:09important conversation and I think it
22:11will make for a better outcome in the
22:13long run in terms of how they apply
22:14these rules and we're saying
22:16you see obviously this is a global
22:17technology writing global regulators and
22:19global governments are involved and in
22:21some cases working together with each
22:23other these are just the u.s. kind of
22:25executive agencies we're not even
22:27talking about legislative or judicial
22:28here and nor are we talking about other
22:31regulatory bodies all over the world
22:33some of them are doing a lot of or word
22:35thinking yeah and I would say that
22:37another thing that's not on our list are
22:39the states I mean we talk about the
22:40federal regulation but states have money
22:42transmission licensing and if you want
22:45to be a money transmitter you have to
22:47obtain a license in every jurisdiction
22:48in the United States and so that's been
22:50something - so this is just sort of
22:52scratching the surface well actually
22:55since we do have this slide up obviously
22:56can't unpack all of these in great
22:58detail but could we just do a quick
22:59lightning round through these or at the
23:01very minimum share with us the taxonomy
23:03for what we're looking at here because I
23:04hear this list of names and I just like
23:07looks like alphabet soup you know it's I
23:08don't know what's going on how would you
23:11break it down at a super high level
23:12what's the big thing to know for where
23:14each of these are at and how they might
23:15be involved well just taking Treasury I
23:18mean FinCEN the Financial Crimes
23:19enforcement network they're trying to
23:21assure the integrity of the financial
23:23system against nefarious actors that's
23:25their broadly stated mission so
23:27monitoring the financial systems like
23:30banks and all other kind of financial
23:32services companies for suspicious
23:34activity o fact the Office of Foreign
23:36Assets Control you know the United
23:38States maintains a list of people and
23:40countries or nation-states that is
23:42sanctioned and so a fact makes sure that
23:44transactions aren't going on in the
23:46financial services realm with those
23:48countries or individuals I'm sure you
23:50all unfortunately know what the IRS is
23:52but yet very important of what the IRS
23:54is going to do with cryptocurrency I
23:56mean really it's quite hard for people
23:58who have cryptocurrency gains to figure
24:00out what is the right thing what are
24:02they supposed to do the OCC Robin just
24:06alluded to the fact that you need 50
24:08different money transmission licenses to
24:11do business as a cryptocurrency exchange
24:14in the States OCC is trying to come up
24:16with a federal FinTech Charter so that
24:18only one license would be needed so far
24:21that hasn't gone anywhere do you want to
24:23cover any others I don't do you want to
24:24talk about justice and then I'll go to
24:26the other side of justice yeah that was
24:29there are a lot of other agencies we
24:30didn't list within justice that deal
24:33with crypto currencies - like the US
24:35Marshal Service the DEA the ATF it's
24:38touching kind of all different divisions
24:40but we just chose to list the FBI
24:42because everyone's heard of that the
24:44criminal division and the office of US
24:46Attorney's the US Attorney's are all
24:48over the United States and basically
24:50what they do is prosecute in the case of
24:52crypto currency would prosecute criminal
24:55uses of cryptocurrency and again here I
24:57really want to emphasize you're really
25:00talking about the worst or the worst
25:01because you have the FBI bringing say
25:0410,000 cases they're going to
25:06investigate they're gonna look at 1,000
25:08they're gonna bring 100 to you maybe
25:10you're gonna take ten so this is not the
25:13government trying to do gotcha
25:14these are cases where you know one of
25:17the ones I prosecuted were the corrupt
25:18agents who were looking into the Silk
25:21Road they were themselves corrupt they
25:23were doing shakedowns all over the world
25:25for millions of dollars of
25:26cryptocurrency diverting it to their own
25:28personal accounts federal agents they're
25:30now in prison so that's one of the kind
25:32of criminal worst of the worst cases I'm
25:34talking about and then we can move on to
25:36I think you know the other I've
25:38definitely talked about the Securities
25:39and Exchange Commission but for those of
25:41you who don't know the SEC is
25:43responsible for the equity markets and
25:46regulating exchanges and also investor
25:49protection in that area the Federal
25:51Trade Commission I'm going really
25:52quickly and enforces competition law and
25:55they also do consumer protection they
25:57have some overlapping jurisdiction with
25:58the SEC commodities and future trading
26:01organization at the CFTC Commission
26:04should say is responsible for the
26:07futures markets so where the SEC is
26:09equities markets the CFTC is futures
26:11markets and it's been in one of their
26:13rulings said that bitcoin is a commodity
26:16so it falls under their jurisdiction
26:17they've also done a lot of work they
26:20have something called the technical
26:21advisory committee that is basically
26:24it's a group within the CFTC that is
26:27made up of people that are in the
26:29industry that help inform the CFTC about
26:32developments in the technology space and
26:34in one of their more recent meetings
26:36they had a whole panel about
26:38cryptocurrency and Bitcoin because now
26:40two of the exchanges
26:41trade Bitcoin futures CFPB is a consumer
26:46protection agency that was formed as a
26:47result of the passage of dodd-frank
26:49they are really like a central place for
26:52consumer protection financial area and
26:54then FINRA is a little bit of a
26:57different thing FINRA is not a
26:58government organization they're a
27:00self-regulatory organization that helps
27:03ensure that broker dealers all have like
27:05a code of conduct and they hold that
27:07part of the industry to a standard and
27:08they're also responsible for going in
27:10and doing investigations and making sure
27:12that everybody's keeping up with their
27:14conduct FINRA will self report they'll
27:16report some of their broker dealers to
27:18some of these regulatory agencies and
27:20the FTC we're seeing getting really
27:22involved in the cryptocurrency they
27:24actually also have had a couple of
27:25working groups and some meetings why is
27:27the FTC in particularly well for example
27:29they also cover you know for data
27:31breaches not the blockchain getting
27:33hacked right if you had your exchange
27:35getting hacked they might come in and
27:36examine did you follow proper protocols
27:39in the aftermath of a data breach
27:41because of course a lot of these
27:43exchanges for example or businesses in
27:45the space have a lot of customer PII
27:48personal identifying information right
27:50Social Security numbers dates of birth
27:52sensitive information and so they'll
27:54come in in the aftermath of a breach
27:56like in the case of the target breach
27:58right so same would be true here as well
28:01and the Federal Trade Commission also is
28:03charged with kind of protecting privacy
28:05and protecting against unfair and
28:07deceptive practices so to the extent
28:10that there are consumers in the space
28:12complaining about unfair and deceptive
28:14practices they get those on plates so my
28:17big takeaway from this is that it's
28:18clearly a patchwork of people not just
28:20the SEC which we keep hearing about in
28:21the headlines that this is actually just
28:23a few of the federal agencies it's not
28:25even including the state and
28:26international players because this is a
28:28global scale and that sometimes these
28:30groups work together they're still
28:31forming working groups and being very
28:32thoughtful about it which is actually
28:33kind of great but it brings me to to
28:36wrap up questions one if I'm an
28:38entrepreneur and I hear that I think
28:39it's great because I'm like great
28:41they're thinking about it they're really
28:42exploring it but I'm kind of impatient
28:44to build something what would your
28:45advice be for someone trying to come
28:48into the space who wants to build
28:49something should they wait where there's
28:52a gray area how should they kind of
28:53approach it what's your big take away on
28:55well I don't think they should wait but
28:57I think they should have common sense
28:58and good judgment and one of the red
29:01flags I see sometimes is you know in
29:03they'll publicly state oh we're moving
29:05offshore so that we don't have to comply
29:08with these laws that we can't figure out
29:09but then they're gonna serve you as
29:11customers anyway and you know the kind
29:14of problem with that approach is that
29:16extraterritorial jurisdiction most
29:18countries haven't not just the u.s. so
29:20if you're servicing hundreds of
29:22thousands of US consumers the fact that
29:24you relocate is not gonna save you from
29:27having to comply raised laws at the same
29:30time I think that you know there is a
29:32real question of there is gray area look
29:34I think you have to use your best
29:37efforts to be informed about what laws
29:39might apply to you and how they might
29:41apply to you and be able to demonstrate
29:43how you used your best efforts to comply
29:46with those laws if you know for example
29:48if you find out that the Bank Secrecy
29:49Act requires you to have a compliance
29:51do your best to create your best
29:53compliance program you can it doesn't
29:55have to be perfect but you can't just
29:57say well I didn't know what that would
29:59look like so we didn't do one at all
30:00just try and I think that those cases
30:04where people are demonstrating best
30:05efforts are not going to be the vehicles
30:08that the government regulators are going
30:10to want to choose they're not gonna go
30:11after those what would you say for
30:13people looking to join a company or you
30:16know a start-up figure out where they
30:18are if they want to sort of vet the
30:20regulatory profile of a company how do
30:23they make that decision if they want to
30:25join or not join and this is by the way
30:27not speaking of all the other factors
30:29like the founding team and the Bible of
30:30the product and where they're located
30:31and if they have perks like that's not
30:33the question I would say that you should
30:36use your best efforts to make sure that
30:38wherever you're thinking of joining is
30:41working on contributing in a positive
30:43way not just to the technological
30:45development but also being a responsible
30:47player and doing their part to make sure
30:50that they're complying with regulations
30:51I think we're beginning to see in a lot
30:54of areas an early on coinbase was a
30:56leader in this really priding themselves
30:58on the fact that they do comply with the
31:00laws like I have a salad anyways and so
31:02I think that that's something to look
31:04for that's great so last question you're
31:07both two lawyers and in this face why
31:08are you guys in the space
31:09what excites you well I got into this
31:12face in 2013 and sort of like a lot of
31:17people in this room but then not like
31:19anybody in this room I was really
31:22attracted by the challenge of the fact
31:24that this was something new and
31:27policymakers were going to be looking at
31:29it and a lot of the things that I'd
31:30worked on for my entire career if you
31:32think of policy being like a book with
31:35us several chapters I was coming in on
31:37like chapter 14 and this wasn't a chance
31:39to be on the first chapter and to really
31:41have an impact in shaping something and
31:43so being in on chapter 1 and I would say
31:45five years and maybe even now chapter
31:47two so for me my story was in 2012 I
31:50actually was asked by the Justice
31:52Department to help shut down and
31:53prosecute that coin so in many ways it's
31:55interesting that I'm sitting here today
31:57but having come full circle we quickly
31:59realized that wasn't a thing and wasn't
32:01nor was it desirable but that was my
32:04first experience with Bitcoin in 2012
32:06and through working with some of
32:08prosecuting some of the worst criminal
32:10use cases I actually became really
32:12enamored with the technology and all of
32:14the promise that it holds to combat
32:16things like waste fraud and abuse and
32:18many other things and kind of came full
32:21circle when I joined the board of
32:23last year a year ago I think my thing is
32:26that I started my career at Xerox PARC
32:27and our IP address the number on the
32:29internet it was thirteen point one
32:31something and I almost felt like I
32:32missed the big wave of excitement of
32:35this is something big and I came on the
32:37tail end of that and when I first
32:38started learning about crypto in 2010 I
32:42remember thinking this is super
32:44interesting but I didn't really pay
32:45attention to it and then I went to be an
32:46editor at Wired and it reminded me of
32:49the early days of the internet again and
32:51that sort of exciting energy of
32:52something new something that has great
32:54potential and it makes me excited that
32:56we're here and that we're having this
32:57conversation early on talking about
33:00permissionless innovation in a way
33:01that's thoughtful thank you again for
33:03joining and sharing your expertise and
33:05thank you everyone for coming today
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