Layer 1 Stage | Exporting Innovation? How US Crypto Policy Impacts Everyone Else

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1. 0:02

   good morning everybody uh I'm Dave Rodman I'm the managing partner of the Rodman Law Group uh our biggest practice area is web 3 and we represent clients in every vertical from uh Venture funds like bankless Ventures to defi trading platforms like parcel most gerine to this event uh we represent proximity uh have room up there uh keom and our fearless leader Ilia um with me today are uh leis aloud uh executive uh director of The Secret

2. 0:36

   Network Foundation and Tina Baker of um Baker Taylor sorry uh of circle uh and I'm going to let them uh introduce themselves hi everyone I'm Lisa loud executive director of secret Network and um I'm really honored to be on this panel today because uh my illustrious fellow panelists know a lot I have been in the crypto space since 2017 and I'm one of those people who has been affected by the US policy changes

3. 1:08

   and the ups and downs um I come from Big Tech PayPal and apple and have been in I was a leading shape shift for a while and now um really focused on privacy in in blockchain and how it's a good thing how it can be a good thing um not necessarily the bad thing that everyone seems to think it is but I have learned so much in our backstage conversations and I'm really excited about this panel so I will pass it over to you Tiana thanks Lisa can you guys hear me yes yes

4. 1:41

   okay um I'm Tina Baker Taylor I'm the vice president of policy and strategy at Circle for the Europe Middle East and Africa um so I lead our engagement with government and Regulators outside of the US um however prior to that I've I've been in the the policy space in this industry for for about 7 years um and my job before Circle was the chief policy officer at the Chamber of digital Commerce which is the largest um kind of trade body and advocacy arm for the

5. 2:13

   digital AET industry um based in DC so I spent a lot of time um on Capitol Hill and with us Regulators as they were thinking through um what their reaction might be to something like M so we just heard on the panel before that um Europe has progressed with regulatory um Clarity for this region which has a lot of benefits there's some conss for sure um but I think around the world we're seeing jurisdictions um really attack um or

6. 2:44

   approach uh how they're going to put rules of the road in place um in some cases very proportionately and practically in sou other cases um with a little bit more kind of focus on risk and and and strict rules um but what is clear is that as the US kind of sits back um and and struggles to get their arms around what to do the rest of the world is not yeah so I mean that that's what we're talking about here today uh so we're sitting in a European city and

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   show of hands how many people are American maybe like half a little bit less uh how many times have we heard Gary gendler's name today or yesterday or or have we heard discussions about uh intricate IRS code um you know I would I would pait that there is no other industry that International and focus and permissionless in nature that spends so much time uh thinking about what it

8. 3:44

   is America does and what it is America says because it really it really does impact everyone um and I think uh Lisa uh you had some very specific ways that uh non us exchanges were treating you your project can you tell the audience about that a little bit yeah sure um well with in this last year it has become very difficult to maintain a bank account as a crypto company and I actually have a company in Canada as well so I can tell you it's even worse

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   in Canada um just the the risk appetite of the large institutions like the the banks in Canada is very very low so most of the crypto projects I know in Canada have been debanked recently um K coin has withdrawn from Canada uh binance has and these are all reflective of what's happening in the US with the failure of the big Banks Silicon Valley Bank and and the others signature um

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    we're seeing that the rest of the world especially in Canada in my case is very much like taking a okay hands off let's see what's going to happen um I think that's what you were referring to it's also as um from the point of view of a secret Network we are seeing that um exchanges are deciding that even though secret network is our token is not a privacy coin we have clear transactions we do confidential Computing we've seen

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    companies like binance want to delist us threaten to delist us because we have that name secret right and they're withdrawing from Canada and the US and they're saying okay we can't have anything to do with anything that is privacy related because it funds money laundering it you know it's it funds terrorist activities we need to take a step back or we're going to get consequences so that's been really

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    challenging even as um even as a confidential Computing platform layer one we are seeing the problems that are happening with the the US enforcement by regulation by enforcement actions yeah and uh Tina you work for a true multinational um how to how toes Circle think about uh us regulations as it pertains to its operations in Europe SE for SE yes well obviously we um are a pro regulation company we're a very

13. 6:13

    centralized company um and you know as the issuer of a fully backed onetoone uh reserved digital dollar there is certainly a US Nexus for our company um which is impossible to deny um so one of things that um circle is obviously very committed to and focused on is working with policy makers to um Implement uh very specific uh guidelines and rules for stable coins and there is a a bill at the moment that has passed the house Financial Services committee um and we're hoping that that bill

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    progresses through Congress ideally this session um there's been a lot of focus on stable coin um policy in the US and and and around the world and I think that has to do with that Nexus right um so you you are creating an an asset that is reflective of an underlying currency um Circle also has uh a digital Euro um Euro coin and so that's also backed by Euros just like usdc is backed by dollars and so when you're operating in

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    those contexts and you're able to plug into potentially the the traditional payments ecosystem um there needs to be very clear understanding of obligations and and um the earlier panel was talking about segregation of assets and where those reserves are held and how Etc um so we're uh very supportive of the US progressing with with those um guidelines and hopefully um we start to see countries around the world looking

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    at how they're going to um regulate not just stab coins but crypto assets more generally with a with a lens of equivalence right um or harmonization to some degree because as we're you know we're talking about Ma and the panel before there's very strict guidelines for how stable coins can be offered in Europe um and those depend on whether or not it is a European denominated stable coin or us or other denominated stable coin um and so how do those rules then

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    align with a home jurisdiction for a US denominated stable coin there could be a lot of of oversight and supervisory friction there if the rules are so so different um and we're starting to see that in other jurisdictions where you know hopefully regulators and policy makers are picking up the phone um and calling each other or working through you know the the global government bodies that we have like the bis and the

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    financial um stability board and uh a good example of this would be fatf right the financial action task force which a couple of years ago um created these guidelines for every country in the world basically um to put in place money laundering um prevention uh specifically for crypto assets which is very reflective of the bank secrecy act and which already existed right and I think it is um you know no coincidence that the US was uh the president of the fatf

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    during this period right when these guidelines were enforced um so but what that did do was create a Level Playing Field around the world for um crypto asset businesses to understand and what their money laundering and and counterterrorism prevention obligations were and so hopefully as we start looking at bringing other types of specifically centralized um crypto asset activity into the regulated perimeter like Josh mentioned earlier um we're doing that in a way that's consistent

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    that allows global companies and not just you know a global company but digital assets by their nature are borderless and so they're going to move around um and if we don't have um some level of harmonization of those rules I think it's going to create a lot of friction and more potential regulatory Arbitrage like we've seen previously I I just wanted to add to that it it can also create this sort of Walled Garden where certain people are walled off from

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    participating in like some of the the US regulations I've been looking at with um exchanges being proactive in repor rep in who's interacting on their platforms and then if any wallet is um is touching a mixer it has to be um walled out right yeah so these these are things that could potentially prevent certain groups and certain regions from participating in the global economy which is you know

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    is meant to be borderless I think people will still participate it's just they won't have the legal right to do so I mean that's that's one of my fears is we end up into uh like a true dichotomy of crypto in the US crypto everywhere else it can go one way but it can't go back another way you know you touch a tornado cash wallet and you can't use that the rest of the assets that are in that wallet in the US I mean that's that's

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    the sort of thing that keeps me up at night because uh as an American citizen proud of our tech industry to an extent that they're not evil uh but really it has driven our economy for the last 20 years um the idea of what we would be currently like if in the first year of operations Google had been told no you have to go to the Cayman Islands or sorry you have to go to maius uh we wouldn't have the products that we have now uh so that that is my my fear as a

24. 11:47

    someone who supports the space is this exact thing but see I think what's happening is that um the the way that this capital is able to be deployed in this borderless way we're seeing Capital now deployed in you know southeast Asia and the Middle East and you know areas of you know Japan other G20 G7 countries and so you know if we have G7 countries like the UK um and the US which are

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    approaching this on a very activity specific Case by case um and leaning into as mentioned you know that case law where the precedent sits as opposed to kind of looking at this as net new economic activity that is Deployable in a way that was not previously available to us before you you're going to have challenges in being able to apply this type of activity into the existing Frameworks and so what happens to those

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    countries um and I think that there is the potential for um the those jurisdictions that don't kind of pony up to the table and start um addressing this in a proportionate practical way um that that the capital will just leap over those countries and I think that's one of the challenges we're seeing in the US where companies are thinking about leaving or indeed leaving and moving to places like you know Portugal for example um as a as a key attractor

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    but we're seeing that happen now with companies looking looking to move to South Korea looking to move to Dubai looking to move to Abu Dhabi um because there's a clear framework there's access to Banks bank accounts um there's access to other Professional Services it's not just enough to put in place um a regulatory framework but you know we we've seen these challenges in the UK where there's rules but then you can't

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    get a bank account and you can't get a an auditor and you can't get insurance and so how is a regulated business supposed to operate without those um Professional Services that that everybody needs um so I think that there is the potential for I the idea that everybody's going to pack up and leave the US I also think is a bit absurd um but it becomes a real capital investment both in um time uh money and just a lot

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    of energy for those businesses that continue to show up in the US and try and push forward you know practical balanced policy well yeah I mean like how many Founders do we have in the room show of hands you know normal us startup uh Canadian startup 100 bucks to incorporate uh a C Corp uh you know standard crypto incorporation in the Cayman Islands $12,000 BVI $4,000 this the sheer friction to that that is uh well and that's not

30. 14:51

    necessarily going to change either even when those rules are in place you know I think Mary Beth mentioned it's not just enough to go to Spain and apply for a vasp license you now need a general manager you now need a head of Finance you need a a money laundering reporting officer you need a chief compliance officer those are four senior expensive people and they need to live in Spain and they need to be running that business separately agnostically from the parent right so you know when you're

31. 15:20

    thinking about relocating there's a lot of considerations um but if companies are looking at that and still deciding that it is a good move for them because the situation at home is so um untenable I think that really speaks to the challenge at the in the US at the moment well I I think how realistic is it to expect that the US I mean regulation in the US moves very very slowly and the rate of acceleration of technology is increasing and increasing defi today is

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    nothing like defi was a year ago and five years ago it didn't exist so how is it even possible like what else did we expect right except that Regulators would not know would not have a clue what to do with this new thing these new asset classes and how realistic is it to think that we can solve this like what does the future hold really in the US well I mean I think the answer to that is we need to see the pruning of the gerontocracy and a bunch of senators who are over the age of 70 need to die or

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    leave office so that younger people who understand these things can take uh elected office and actually have uh practical rules that's just my own personal view not not my firm's view or anything like that but uh oh and I didn't start with this uh some of us are lawyers up here but we're not your lawyers this is all just educational information um that's my standard disclaimer uh but yeah truly I think

34. 16:50

    that the the real change is going to happen when there's a regime change in in the US so I I certainly um um as an American who hasn't lived in the US for 20 years I mean I I sit back and kind of watch some of the things that are happening and um am baffled by um you know the idea that there's no speaker of the house and it takes weeks to get one right it's it's we put these people in office to govern and sometimes I

35. 17:17

    question whether or not they remember that that's what they're there to do however having said that I think that there are um ways in which the industry can show up participate have a place at the table um and and actually proactively um contribute to these policy discussions in a meaningful way I look at Ma and through the the lens of it's it's it's a successful um regime or you know it purports to be we'll see what happens once it's implemented um

36. 17:55

    but there's a number of things within it that are just impractical or or maybe actually technologically impossible to comply with and the reason some of those things are in there are because nobody was talking to the European commission as these things were being drafted and then when it got to kind of the end and this trialogue period then everybody was like oh my God this is like really bad

37. 18:21

    but it was too late right so you know I I think on the panel earlier Josh mentioned the Department of Commerce there there are areas of government that are getting involved in these policy discussions uh the National Institute for standards and technology is another one um they have an open consultation out they're looking at AI they're looking at crypto assets they're looking at kind of the future of money um so

38. 18:45

    there are ways that the industry can contribute to education that I think are absolutely imperative and especially in areas around privacy versus secrecy just because something is private doesn't mean that I'm doing something wrong or that I'm withholding information that you should have right I have a right to privacy and being able to distill um privacy preserving Technologies and what those are and how they're used I think is a a critical area where we can

39. 19:15

    educate um I think identity is another area um so I think that if we take those areas where they're not specifically battling about what's decentralization and what's not and we start to focus on education across a broad piece instead of kind of hiding in the corner and waiting for something to happen to us I think we'll get potentially better results well Lis I think you had some uh I just wanted to interject a funny story um in what you were saying about not talking to the regime I there was a

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    funny story in one of the states they had a bill proposed that um if anything happen on the blockchain the the government would have the the ability to force a fork of the blockchain which is just a I mean if you're in blockchain obviously it's an absurd idea but the fact that lawmakers thought that that was a possible response to force a blockchain a layer one blockchain to actually fork in order to correct something that had happened that was illegal is just like a really good

41. 20:23

    example of how you have to you do have to talk to the lawmakers but I didn't want to interrupt you about the Privacy difference between privacy and secrecy I think that's what you were about I was actually you you were talking ear about your efforts on the hill with uh lobbying uh yeah so lobbying um recently was Global encryption day and so we're part of the universal privacy Alliance Group which um together with stand with

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    crypto from coinbase um had a congressional briefing with Tom emmer on October 17th so we went to talk about privacy why privacy is important why it's not a bad word and uh how important it is to have private privacy preserving Technologies and uh I've heard even today I keep hearing this this note of well I don't have I'm not doing anything bad so I don't have anything to hide even regular people think that that is a reasonable thing to say but it's not absolutely not it's not reasonable

43. 21:22

    because you don't keep your curtains open all the time in your house because you you do need privacy we just take privacy for for granted right now and I think we're sleepwalking into a future where that priv our all our rights to privacy could be eroded away and suddenly we're like wait what kind of a world do we live in now oh the the uh end result of a cbdc is an absolute uh dystopian future where uh you know you have one too many Big Macs and your

44. 21:54

    insurer sees that you've paid 100% And and then your your health insurance goes up I mean that's a real outcome that could happen and I know that circle's working really hard to to have that not be our outcome but I yeah that that is a very real uh possibility when you look at the amount of data that's about running around around running about around us already right so if you look at you know payment apps like you know

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    Apple pay Apple has an awful lot of information about you um they're probably one of the better uh privacy Advocates uh among their kind of competitive set right um but being able to combine the information that is out there about you that you're not even consciously aware of um and start to make algorithmic decisions about how much you should pay for insurance or you know whether or not you know this comes into um money in in the through the lens of cbdcs right so

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    if you have government issued digital currencies that have potential limits on how they can be spent and the ability to have programmability within this money um and you show up to the grocery store and you decide you know having a Super Bowl party and you're buying a couple cases of beer and computer says no because you've drank too much this month I mean that that is a potential I think

47. 23:17

    the other thing that I would really encourage people to do and and I know that this is hard if this is not kind of your area of expertise but this is why we have trade bodies um join a trade body because they'll be looking at other types of policym or legislation that might not be specifically crypto related so for example a bill just passed in the UK it was called The Online safety Bill

48. 23:42

    and it had been around for years and years and years and it was one of these Christmas tree bills where people have all their ass that they keep adding ornaments to the bill so it was taking a really long time to get past and by the time it was ready to get past there was some extra additions right at the end around encryption and what they were trying to do was prevent child pornography being exchanged on Telegram

49. 24:03

    and WhatsApp um and through covid um uh inquiries they also realized that MPS were avoiding communicating on official channels because they were using WhatsApp and they're like What's this WhatsApp what what is all this information being shared on WhatsApp we should lock that down right now there might have been ways to put measures in place to prevent child pornography that didn't necessarily attack encryption but because this Bill had been out there for so long and people had kind of lost the will they just wanted to get it done um

50. 24:38

    there were several areas um around the language around encryption that I think potentially could have some impact on Smart contracts down the road right and so you know now the the whole process starts you know speaking to the law commission to get them to go back and take a look at this right so I think we get very focused on crypto policy but I think that we need to be a little bit

51. 25:00

    more broadminded in how disruptive Technologies are being potentially policed and how it could impact things like privacy decentralization and some of the other tenants that you know our industry is built upon that that's a great point I I looks like we're out of time unfortunately I would say for everyone utilize AI to generate letters to your representatives send them in people are forced to read them at least in the US you can make a difference and now you don't have to actually write the letter you can just use chat gbt to have it right for you so yeah that's a great

52. 25:33

    point I think people don't realize that really quickly if the the offices your Congress people and your Senators they keep track of the that people call on they have to so um make that an issue they care about yeah well thank you for talking with us today guys thank you ladies for this uh wonderful panel um everybody have a great rest of newon