Layer 1 Stage | Regulating the Open Web: Chris Donovan and Michael Casey in Conversation

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1. 0:00

   and I'm you still got a little bit more of me unfortunately but uh I'm going to invite Chris Donovan out on the stage to join me you course you may have heard from earlier on the COO of the the foundation and we are going to talk about uh everybody's favorite topic regulation good to see you Michael regulation let's do it all right people are going to think we coordinated beforehand with our talk it is kind of interesting I was sitting there watching your talk and thinking wow in many

2. 0:34

   respects the book I'm writing it seemed like you were just s of yeah you must have been reading the manuscript you thought i' had ni your manuscript I did I thought that somehow but as you can tell we're both from the same part of the world uh and you know Aussie's in our blood there is a certain convict you know criminality so yeah my suspicions are running pretty high yeah all right so look you're you uh were the GC at

3. 0:57

   near found at near Foundation you um and now the COO you um that's right were a GC at outli ventures you have been involved in the legal side of things for quite some time yeah and as I said at opening of my presentation it's been quite a year in terms of that regulation and one one man in particular has featured heavily Gary Gensler um I I have a certain connection to Gary I was at MIT media lab where he and I were

4. 1:23

   both part the digital currency Initiative for a couple years and I used to talk to Gary um you know once once a week basically and he was never nearly as strident in this position that he's taking now at the SEC but we would argue um and my point was always look Gary if everything's a security then how on Earth are we going to allow for people collectively to participate in these systems we want to have an open web and one that doesn't have these Gatekeepers

5. 1:50

   and he was always very opposed to to Gatekeepers as a concept and Regulatory capture and rent seeking he'd used these words about and I said how on Earth are we going to to uh to to create that yeah you're going to have all these barriers in place so I mean how do we get that message across how do we turn this conversation away from a very narrow Financial one to know we need to do this if The Regulators would kill the dream that you and I are talking about here

6. 2:16

   what are we left with well I think that's a very good question and it's um it's a serious problem you know I think our view at the foundation is that you know we want for the for the industry and for the open to be successful we need fair and proportionate regulation right there's there's no question about that I I think you know and many and I would say most of the people in the industry are also clamoring to have that Clarity

7. 2:40

   right we're not all running around being scoff laws trying to break the law and that actually is one of the most disappointing elements of how Mr gensa presents the argument is if our industry is just for the criminals and you know that's that and and we get written off so I think one of the things that we need to do is is to be quite honest behave a little bit better as an industry set better examples that you're right it's been a big year don't steal

8. 3:04

   your customers funds ideally don't do that right don't be an out andout criminal that would be that would be great and like I said it's unfortunate because you know a small number of of individuals that have caused a huge amount of of of damage and harm to people have come to paint our entire industry with a very broad brush or at least allowed individuals or Regulators or lawmakers who maybe have these suspicions maybe they have their vested interest whatever it is to to

9. 3:28

   essentially jump on that bag wi and say yeah you know you're right it is just for it is just for Crime it is just for people running around trying to do naughty things when actually as as you and I have been talking about and as we all in this room know it is about so much more than that and the financial use case is one part of what web 3 represents and I think we do need um you know true decentralized permissionless Financial infrastructure to be part of this open

10. 3:53

    web but it's also not the only reason why we're here right and the giant Casino of web 3 is is you know it's damaging and limiting the perception of what we as an industry are capable of so I think education and frankly the work that we are doing here and you know in the near ecosystem and across the industry genuine use cases genuine users showing people why there is value for

11. 4:18

    them in the stuff that they do every day with this technology right because ultimately this is a political question right I mean it has been crypto regulation has become highly politicized and well in the particular in the US in particular but I mean it is it's it's Laden with this and therefore getting through that and being able to reach people to understand the value I think is is is critical um I mean just just to pick on that the problems therefore with

12. 4:43

    the community itself or the industry it does seem that to me that sort of uh some of the problems with the tribalism the the sort of the desire to drive tokens higher and my token not yours um contributes to this right it contributes to this kind of mania that I think feeds feeds bad behavior so how do you guys view that because clearly you know the vision behind the open web the the stack that you're building that is really

13. 5:07

    trying to look at the multi-chain solution on interoperability you know how how are you approaching that problem in particular the sort of this tribalist yeah look I think it's it's a it's a big problem as you say it kind of it's a scourge of our industry in a way right and we've we've grown up fighting each other and actually you know we're still there's still such early days right and

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    we have so much that we need to do and frankly we're fighting such a big battle against much more organized well better funded more influential opponents that I think the infighting is um an utter waste of time right and I think it it distracts us from the mission if we were all working together and sharing these goals and I think you know many other ecosystems would also agree that this is the future that we want we don't want

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    the dystopian surveillance State future um I think we would be much more powerful as an industry I I accept that it can be hard sometimes to put aside differences or at least perceive potential competition but again what's the point in fighting over the tiniest slice of the tiniest Pie when actually we could be building something bigger and sharing it together right and I think that's how we as an ecosystem think about this right in our technology

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    stack that ier is going to talk about straight after this I think is all about putting interruptibility at the heart of everything right so we want we want uh Founders and projects and and applications in every ecosystem to come and and and see how they can leverage different bits of this modular stack that is kind of the heart of of the near ecosystems technology and and I think productizing interoperability will help

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    eliminate that tribalism because people realize there's no need to be scared of each other but we can we can share and we can grow together and still serve that broader mission of avoiding as you put it the dystopian you know surveillance state right um you know so let's just look at this from the perspective of of government then right I mean Europe in particular um H has taken I think a more aggressive and sort of constructive view of the ver the real

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    problems uh around this this structure of the internet and threats to privacy and so forth um but at the same time when you use terms like you know an open permissionless architecture you know permissionless almost runs counter to the bank secrecy Act kyc all these things that ingrained in the way that our financial system is is structured so given that dichotomy you know how are you approaching conversations with you know Regulators either here or in the US how do you get them to sort of embrace

19. 7:42

    this idea of an open permissionless architecture well it's it's not always easy especially in the US I mean there are plenty of people who want to have that conversation but I think like we were touching on earlier it's it's become very politicized in the US not so much in in other parts of the world World um but you're right that the idea of permissionless systems um and no intermediation at all is literally the polar opposite of how the regulatory state has functioned pretty much since its Inception right and and that was

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    because at that time when these systems were being brought about they did not have the the technological infrastructure ability to do it any other way they had no choice right and and the key thing is that now we do have a choice and actually part of convincing lawmakers and Regulators that they should embrace this stuff is to help them understand the benefits to them as as governments right and I think one argument that i' I've found sometimes

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    helps to to get a bit of traction is you think about how much money governments spend every year maintaining trust trust in all of the institutions of government trust in infrastructure Public Service all of this kind of stuff right it's it's it's an enormous amount of money it's a huge amount of GDP I don't have the the stats off the top of my head but it's it's it's it's huge and actually this technology can help reduce that burden for example that's just one more

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    powerful tangible use case for governments to think well actually I don't necessarily need to be scared about thinking about this new paradigm actually maybe it allows me to do you know do the things that I want to do run the country effectively provide for my citizens provide high quality public service and infrastructure more efficiently and more effectively and Empower my citizens to do the same thing right and we were having a conversation

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    before talking about how you know natural open market competition forces hopefully will also Drive some governments to realize that there are massive economic advantages to embracing this technology right and there are some jurisdictions globally you can think about places like for example Singapore Switzerland is another one that have completely embraced this technology right and they've managed to at least

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    take some steps on the path of creating some Frameworks that are a little bit more open and sensitive to the unique features of the technology right not trying try to remove them or treat them as bugs but actually lean into them and embrace them you know actually uh hold up th those unique features and and these jurisdictions have been benefiting as a result Dubai would be would be another one right so I think some of

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    this will happen naturally right because we're a mobile Bunch web 3 we we move around the world a lot we're happy to go where governments and Regulators are willing to sit down and have proper conversations with us do is it also incumbered upon the industry to Think Through whatever applications Solutions they're building that can be sort of friendlier to the needs of government and and and I think one of the ways to I would I would frame this is that you

26. 10:37

    know part of the ethos in the early days of of Bitcoin of course emerge out of the cipher Punk tradition of you know just zero compromise on things like privacy um and I think that I'm not suggesting at all that that's not a Ruth while position to take but I I figured like when we think through say Co and there was um an opportunity to actually you know have a zero knowledge proof kind of structure for how we would check whether somebody had had a vaccine or not um I felt like the community's just it got in its own way

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    there was a real opportunity there to work with governments try to figure out a way to have a a a a private and yet constructive Data Tracking System that would have our cake can eat it too yeah uh but ultimately the fear of Big Brother the idea that you know IBM and others were just stepping in and providing these Solutions anyway way I I felt like the community just went n we don't want to be part of this this is all this is all too spooky um and I

28. 11:35

    think there was possibly a missed opportunity I don't know if you need I well I would definitely agree I mean I was in the UK at the time of Co and and the NHS is still is literally still using fax machines to send around information right and I'm I'm not joking I think they have like the last five fax machines in the whole country and they use them every single day which is mind-blowing but I you're right I think there is definitely I mean and it's ironic given that we're trying to build this technology that kind of productized

29. 12:01

    trust right and guarantees trust there is not a lot of trust in the industry towards government either and I think part of that is because of how certain governments and Regulators have been behaving towards our space there's definitely a sense if we bring it back to the US that you know Chen is not acting in good faith right he's not he's not setting up and presenting the position reasonably or fairly like I said when scof laws like I said the system in the US is not fit for purpose

30. 12:25

    for this technology despite the fact that he seems to think that it is or at least he presents it to be you know so for us as an industry to me it's about figuring out a how we can try and rebuild that trust and like I said there are some parts of the world where that seems like it's at least a possibility but I think we also need to accept perhaps that at least around the edges

31. 12:47

    we might need to make some compromises initially right and we need to decide where we make those compromises and what we don't right and you know I was talking before about you know permissionless open infrastructure to me that's a compromise we we can't ever make right because that is the core that is the technological platform for everything else that follows but there might be other areas where we feel that yes it is not the absolute perfect

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    cyberpunk um manifestation of a particular right program or whatever but maybe it's it's an important First Step because we need to start somewhere and we need to rebuild that trust so you mentioned earlier um you know Dubai and the idea that you know this is a borderless tech technology you can you can go anywhere so in the light of that I mean how are you viewing the what some people said almost like a competition

33. 13:35

    amongst different jurisdictions right now what you got you mentioned Dubai you know Europe has got the the ma regulatory framework Japan is even doing things Hong Kong Australia Australia Australia various different you know flavors of it the UK seems to be going back and forth I'm not quite sure where they stand right now but oh that's that's classic UK but um but the US sort of way way behind and and so are we indeed in this world where we're sort of regulation shopping and is that

34. 14:00

    something to the industry's advantage I mean how do you how do you approach that aspect of thing I mean I think I mean regulatory shopping makes it sound almost cheap I guess and I don't think that it it is I think we have to make the best of what we've got right and and you know I do think that the way that the US has been behaving the last two or three years towards our spaces uh cutting off its nose despite

35. 14:23

    its face in many ways right and it is a unique political feature of the environment in the country for all the reasons that you were talking about before um but my view would be why shouldn't we take advantages of opportunities that are presenting themselves in other parts of the world why shouldn't we you know one of the things that the foundation is doing is working with governments and Regulators

36. 14:41

    in some of those jurisdictions to actually create proof of concept things like sandboxes and and um safe harbors and stuff that we can then take to the us and we can take maybe to the UK if it ever makes up its mind and say look guys this stuff does work and actually it does bring demonstrable benefits and again one of the things that we need to do as an industry as an ecosystem is

37. 15:04

    be really good at shouting about what we are good at and like what is the value of this stuff it is not just the giant casino right I just got to make a point is I see G clay down the front R he's going to he's going to hit me afterwards for not mentioning Bermuda as as one of the jurisdictions that's been out and my my good friend David Bert the premier who's been driving this uh very sort of innovative approach to these things and

38. 15:27

    I know you guys are looking areed yeah I mean it really is interesting seeing all of these different jurisdictions uh wake up and see almost like seizing the opportunity that the US is I have a question for you though I mean have you caught up with with Gary GZA lately and how how how has that changed since your hey days at ml it's really been tough um yeah I'll tell you I mean I don't know I I don't these

39. 15:51

    I wouldn't have answered these sorts of questions a while ago cuz I always trying to was trying to maintain the relationship but it just doesn't work anymore so I I happily talk about it um all right yeah look I figured when Gary came into office that uh this was it Coes was going to get the first interview we were going to get the you know he was going to come and keynote consensus and everything else um and he didn't answer my calls didn't didn't respond every single request we had was

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    know finally two years later Nick day who was the best policy reporter covering crypto Bar None anywhere in the world um finally got an interview with Gary on coind Des TV um it has seemed to me that in itself was just completely deliberate like there was just he saw no upside in being associated with a crypto publication yeah it was it just it just occurred to me that you know somebody said to me look there's there's MIT Gary and then there's Washington Gary and

41. 16:44

    they two different animals and so it felt like this was a very calculated political decision to uh associate himself with the folks who were attacking this industry and therefore to disassociating with anybody else who'd been part of it before so no haven't had any speak at consensus haven't had any interview since that one um we don't really talk much anymore all right well I'm sorry to hear that but um he genely

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    a nice guy when he's out of Washington I but I think it's it's it's also a shame that that that's the position that the industry is in and it shouldn't be in my opinion it shouldn't be a political question right it shouldn't be something that's divisive politically because we should all want an open permissionless Future truly including governments and and everybody else including whatever side of the aisle you have going to be sitting on and and so I think you know

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    one of one of the other jobs we have as a as an industry is to um feel at home with a fly of course you Aussies we I need my hat with the cor um you know I think we we also need to try and help find Common Ground politically and to find use cases and and and demonstrations of value that can help unite people politically too right and again that's a huge it's a huge challenge I don't and honestly I I don't know what the answer to that is do you think the trial of Voldemort um is actually something that will help in

44. 18:02

    this that like you know it's cathartic it gets it all forgotten about and and also an opportunity for this industry to learn from its ownace yes well I think I think it's definitely that I think it it also like we said we need less people stealing customer funds and and actually focusing on bringing value to to their uses and building legitimate um sustainable businesses and obviously

45. 18:19

    people who are you know doing criminal things should be punished right absolutely unequivocally and I think again the whole industry is United as as being you know in that view and I think that now that we've had a at least initial conclusion to everything and perhaps it can be put behind us I do think it is an opportunity for us to show how we can do better as an industry um and also how we can unite like you

46. 18:42

    said across all of these kind of tribal boundaries to actually focus on the stuff that's that's really important um running short on time so just maybe just one sort of final message to these what is the one thing that you would ask people to do in support of a constructive you know lobbying uh you know action for change appro to regulation that's a good good question I wish you'd told me before that you were going to so I could have have to think something the one thing yeah yeah well I

47. 19:12

    so I think um to me it would be try and maintain hope don't lose trust that there is a constructive path we don't have to write off interactions with lawmakers and Regulators period just because there are some out there who are making our lives very difficult as an industry um there are many others who are genuinely curious genuinely believe in the technology are doing their best to try and bring it to the full from a policy perspective trying to make things happen um so I think yeah

48. 19:44

    don't lose stay optimistic they're human beings hum too like lawyers as well yeah I mean that I think it speaks a little bit to what you're saying like this tribalism well you know being able to actually step back and see that there's probably folks with with good intentions and that that that can definitely uh you know that can be used in some way to move this thing forward okay well well thank you so much for of Applause for

49. 20:06

    Chris hovan everyone thanks very much everybody and I think we've got the amazing up next thanks very much everybody