Biden & Crypto

What will a Biden Administration mean for the crypto industry in the United States? Like every new administration, Biden's will bring a raft of new political appointments that will change the composition of key regulatory agencies, including the Department of Treasury and OCC, the CFTC and SEC. Who stays and goes remains to be seen. Equally impactful will be who controls Congress, with recounts and court battles likely to determine the outcomes of key Senate races that may tip the balance. Could a unified government pave the way for national policy innovation? Or will a divided Congress lead to more gridlock? From digital asset investment and trading, to digital securities, to digital dollar stablecoins, the crypto industry is clearly at a tipping point. Will the political and regulatory dynamics of a Biden Administration accelerate crypto's mainstream moment?

To help us answer these and other questions, we are joined this week on the Money Movement by two Washington insiders who live at the intersection of the crypto industry and DC policymaking: Kristin Smith, Blockchain Association Executive Director, and John Collins, Partner at fintech-focused advisory firm FS Vector, both deep inside the discussions around the future administration and its impact on crypto and fintech.

[00:00:09] Hello, I'm Jeremy Allaire and welcome to the The Money Movement, a show where we explore the issues and ideas in this brave new world of digital currency and blockchains, it's been a momentous couple of weeks in the US political environment. [00:00:28][19.3]

[00:00:30] We now see President elect Biden and Vice President elect Kamala Harris beginning to chart a course for a new White House administration. We're seeing minor shifts so far in the House and the Senate. And most importantly, we expect to see major new appointments announced for critical roles in this new anticipated White House administration. The implications for this for crypto are somewhat unknown. The last four years has seen an evolving political scene with respect to crypto regulation, with respect to active interest from congressional committees. [00:01:23][53.1]

[00:01:24] We've certainly seen a significant increase in the education of policymakers on this issue and a lot of marginal changes, but not any kind of sweeping policies or initiatives around crypto. [00:01:38][13.6]

[00:01:39] What does the Biden administration portend for crypto broadly for digital dollars, stablecoins for innovation in the blockchains sector for for so many different dimensions? This is a major question and ultimately, I believe blockchains infrastructure, the innovation of crypto assets and crypto currencies and and stablecoins and the like represent one of the most important infrastructure opportunities for the United States in decades, akin to the fundamental innovation of the first wave of the commercial Internet. [00:02:18][38.8]

[00:02:19] Will the Biden administration embrace it and see forward a path where the United States can be a champion and an innovator in this space? Or will they seek to rein it in? These are many of the questions that a lot of individuals and companies and others in the industry are asking. I'm very excited to dove in and explore these more today. I'm really excited to be joined by Priya The Money Movement guests, John Collins, who is the co-founder and a partner at FX Vector, a leading advisory firm in the fintech crypto blockchains and other. Otherwise a deep history as well on the Hill. And Kristen Smith, who is the executive director of the Blockchains Association, one of the most important industry groups and very, very close to what's going on in DC, both John and Christine. Very, very pleased to have you here this week. We hear so what what does this mean, President elect Biden, assuming that we don't see a miraculous situation happen for for for President Trump, assuming we're moving out? [00:03:43][83.6]

[00:03:45] That's what that's what that's what various spokespeople still say. But I think, you know, looking at President elect Biden, he's forming a transition team. [00:03:55][10.3]

[00:03:56] Yesterday, there was the Democrat led House Financial Services Committee hearings with key financial regulators in the United States. Crypto is in the discussion in different ways. And we're getting maybe a small taste of how the both incumbent Republicans and Democrats are asking questions around these topics. I think some interesting indicators, but why don't we just start, Christine? What are the what are the big questions that that you're asking that your constituents are asking about what this new administration might mean for crypto and blockchains? [00:04:31][34.9]

[00:04:32] Yeah, I think everyone's trying to game out how this might impact the development of crypto policy over the next four years and what it means for organizations operating in the crypto ecosystem. I mean, I think the one thing that we do know is that it is going to be different, but we don't quite know yet how different it's going to be and whether it's going to be better than the current situation or sort of worse than the current situation. Because I there's a phrase that was coined during the Reagan administration that personnel is policy. [00:05:04][32.3]

[00:05:05] And we we've seen this at the regulatory agencies that matter for the crypto space right now, that if you have a regulator who's sitting in the seat who doesn't care for this, this set of issues, you don't see anything happen. Right? It's just stalled. In fact, maybe they're negative things that happen. [00:05:25][19.7]

[00:05:25] But when we have somebody in one of those seats who's motivated and interested and excited about it, then we do see things happen. So I think the big thing to be watching over the next couple of weeks and months is who are the people who are going to fill some of these key positions that matter for the industry, because the policies that are going to be coming out of those agencies are really going to be a reflection of the priorities of the people in those seats. [00:05:53][27.6]

[00:05:53] Now, let's talk a little bit about that. You know, we have you know, we have a number of people who are whose names are being thrown around for a lot of a lot of a lot of different. And, you know, Gary Gensler, who has spent the last couple of years at MIT teaching fellow at the Digital Currency Initiative there, has published and spoken a lot on this topic, appears to be advising President elect Biden on who to appoint in these financial regulatory positions. John, what are you what are you seeing and hearing just given that background? [00:06:27][33.9]

[00:06:29] Well, I mean, I think we missed one big point, which is we elected a Delawarean president. [00:06:32][3.4]

[00:06:33] So as we're very excited to have one of our own, I first my first testimony to to Congress was courtesy of you, Mr. Collins, and and yours. And you're, I think, very, very dear and wonderful senator in Delaware many years ago. [00:06:50][17.1]

[00:06:51] And I think Delaware is a is a is also a state which has blockchains laws for blockchains based corporations. And so hopefully that will translate somehow. [00:07:04][12.8]

[00:07:05] Yeah, absolutely. And I think, you know, I agree mostly I think with what Christine said and obviously Gary Gensler makes a lot of sense as an appointment for all kinds of reasons outside of Blockchains and crypto. But this is someone who has done some really serious thinking and been briefed and spoken with some very serious people in the cryptocurrency and blockchains industry. So and he is, you know, pretty positive. I mean, I think he has a lot of views on the securities and capital formation side of it, but he's probably coming in at a position higher and more informed and we've seen before for sure. [00:07:42][37.8]

[00:07:43] So Gary was a guest at an all hands at Circle years ago, and we vigorously debated in front of my company securities laws and various types of crypto assets. [00:07:54][11.2]

[00:07:55] And I think at the time we were advocating that we need a new classification. [00:08:01][6.4]

[00:08:02] We need to define digital assets from a policy perspective rather than interpret currency, commodity and securities law. We need to actually come forward and define a policy for digital assets and how the country is going to embrace that. [00:08:15][12.8]

[00:08:16] This gets to the bigger question. Like, you know, there's regulators, right? And who's appointed and how constructive are they with guidance or other rulemaking, as it were. But. What about the policy side? I mean, is there any chance that we're going to see a Congress that wants to take up this as a policy matter and look at, you know, blockchains technology and digital assets as in the same way that the Congress in nineteen ninety six looked at the Internet? [00:08:46][30.1]

[00:08:48] I think there's a growing interest in Congress, I'm not sure we're yet to the point where we're going to see something go all the way through the process and become signed into law and then in the next Congress, the Congress being a two year period. But we have heard that the Democrats still control the House. We've heard from our conversations with committee staff over there that this is an issue that will be on the chairwoman chairwoman's agenda for the House Financial Services Committee next year. We don't know what form that's going to come in, but they're there. I think the fact that it would make her agenda is a is a positive step forward in the Senate. [00:09:31][43.0]

[00:09:32] I think we still have the Republicans in control over there, which I think is actually a really good thing for crypto. [00:09:40][8.0]

[00:09:41] We have been working through the Blockchains Association to try to get some positive crypto legislation introduced in the Senate over the past couple of years. [00:09:52][10.7]

[00:09:53] And the Senate is sort of by its nature is, you know, they say it's the the software that cools the hot cup of coffee, the cup being the house and the saucer being the Senate. It takes the Senate a little bit longer. Time to get interested in some of these issues. So I think that this this year ahead, we'll actually see some positive legislation introduced in the Senate, which is important because it could tee up for an eventual negotiation between the House and the Senate, which I think would lead to actually really good policy. But maybe even more importantly, it sends signals to the regulatory agencies as to what Congress is thinking about. And if there are policies that regulators already have the authority to do, it gives them the political cover to move forward with those policies. [00:10:38][45.0]

[00:10:38] So I think we will definitely see legislative activity, but I'm not yet confident that that we'd be able to cram through something like the Telecom Act of nineteen ninety six that really laid the the the foundation for our kind of modern communication system that we have today. [00:10:54][15.7]

[00:10:54] I guess just building on that and and, you know, you know, it's hard not to look at the current situation in the country, just a enormous public health crisis, frankly, a still a very severe economic set of challenges which, you know, presumably will get worse before they get better. [00:11:17][22.2]

[00:11:17] That's the word from Jerome Powell. [00:11:18][1.4]

[00:11:20] And, you know, a an apparent president elect who who has a an ambitious agenda to try and rebuild things, wants to, you know, this this vision of let's invest in infrastructure. Let's that's some form of green new deal. We're going to we're going to galvanize the public sector, the private sector. We're going to we're going to try and build our way out of the economic situation that that many parts of the country are in. I guess the the question there is, is, could our digital infrastructure, whether it be the infrastructure that we use to secure and have, you know, tamper proof voting, for example, on blockchains infrastructure, could it be that we think about the infrastructure of of the payment system so that the way in which funds can be distributed, new basic income models, who knows what may emerge out of the current situation and whether that could be an impetus for. Bipartisan, hopefully, efforts to embrace a new infrastructure because fundamentally crypto and blockchains is a new infrastructure, it's essentially laying that down. And I and I wonder, you know, will the the ambition to build our way out of some of the challenges that we have aligned with the potential for more sweeping policy like the 1996 Telecommunications Act. John, I'd love to hear your thoughts. [00:12:55][94.4]

[00:12:56] Yeah, no, I think you're right, Jeremy. And I think when Democrats when the Biden administration comes in in January, you know, they're going to be focused on getting the economy from stopping bleeding. [00:13:08][12.7]

[00:13:09] Right. I mean, that's that's the first priority. They've got other priorities, climate and finance and ESG and that sort of thing. But what covid and we talked about this, I think a bit last time we covered it, revealed, among many other things, is how poor payments work in this country and at least how much better they could work. And there's been a significant amount of interest from Congress on that piece. It dovetails with a huge focus of what this administration is going to focus on, which is financial inclusion and access, which is also a huge focus for Chairwoman Walters and I stablecoins COVID Blockchains that that plays a huge role in those conversations. So do I think we're going to have some significant legislation or action as it relates to capital formation or securities laws in this administration? Probably not. But do I think there's going to be higher level attention and perhaps some action that supports the crypto in blockchains industry when it comes to payments modernization? Absolutely. Absolutely. [00:14:13][64.1]

[00:14:14] Yeah, I would building on what John says for your average policymaker, you know, sort of a rank and file member of Congress or maybe a regulator who's not one of the key agencies for this space payments is really the only application of the Blockchains networks that that that they understand. Right. And we've tried the discussion about Web 3.0 and some of the other applications that I think are really going to change the way that we do so many things online. And those are really, really hard to get into their minds. One, because they don't understand. [00:14:53][39.0]

[00:14:56] We've gone in to talk about Orchid and which is a cool project and it's like, oh, it's a decentralized VPN first. They don't know what decentralization is and they don't even know what it is. And so it becomes a really, really tough conversation. [00:15:08][12.3]

[00:15:09] But when it's like, hey, it's actually a dollar that moves around faster and has all these programable features and then they're like, OK, like I can I can get that. That's a step that policymakers can make. And when we try to bring in some of these other use cases, it's just it's a step too far. So I agree with John. I think that payments is going to be the biggest focused, at least from the administration side in the years ahead. [00:15:35][26.0]

[00:15:36] So it raises an interesting question. And we see this play out in the committee hearings yesterday, right where where where we saw a discussion around the dollars. And there's the sort of, you know, Comptroller Brian Brooks very clearly pointing out that private sector innovation in the space is happening at a very fast clip, obviously on the first party to that and can speak to that as well. But it's happening in a very fast clip. Digital dollars are here is the point. The innovations here, there's the the crypto industry driving this. They're more mainstream financial industry participants getting involved in this. You are saying technology companies getting involved in this. So this is here, this here and now. And there's, you know, I think one one view, which is, well, maybe maybe a new administration is is going to say James out of the bottle. We don't like the genie and we're trying to put the genie back in the bottle and we're just going to box this in and we're going to make it tough. I think that's the pessimistic view of it. I think the optimistic view is that this is a moment in time. And I think if you think about president like Biden, where there's an opportunity to have very significant public sector, private sector collaboration and to envision public sector, private sector collaboration that is in in addressing the climate crisis, that is the essence of what's being talked about on a massive scale. It's really not scale. Right. But I think in the financial system and in these areas, that certainly presents itself. And I think the optimistic view might be there is an opportunity to say we want to we want to allow open innovation to flourish here. We. To allow private sector innovation to flourish here, we're not just going to answer to the big banks and do what the big banks are saying, which is to tighten the screws on this, because guess what? It eats into their profit margins and it eats into how they currently conduct their own business. So I think there's a there is a key element here, which is about building a more open, inclusive, efficient financial system. I had an opportunity to meet with Senator Warren years ago, and this was before Stablecoins. And I think I remember her being very excited about the vision of crypto restructuring, the economics of the payment system and and frankly, giving meaningful competition to big banks who monopolize these payment systems at an enormous cost to society. And so I wonder whether there's there is an opportunity here with this public private sector collaboration and from the the kind of left center, an opportunity to also look at this as a way to bring more fairness to to access and not do that by the government building something big, but by embracing what's happening out there. [00:18:47][191.1]

[00:18:48] Yeah, no, and all jokes aside, about about Delaware, I mean, Joe Biden was a senator from Delaware, Allaire from 1972 until 2008, and he during that time, Delaware became the credit card capital of the world. Right. Which he gets a lot of criticism for his support and interest in that industry. But that was fintech at at the time. Right. So, I mean, this is this is a guy who at least historically has seen financial innovation in different ways. So, you know, and he very much is going to govern from the center. He always has. And he's definitely going to have to with a Republican Senate. And on the congressional side, just really quickly, do I think we're going to move some massive crypto bill of some sort? No, but, you know, Senator Toomey is going to be chair likely of the Senate Banking Committee, gave an interview this week, already said that crypto is very much on their agenda. They're going to hold hearings. The House FinTech task force, I think, is expected to come out with their report over the next few weeks. [00:19:47][58.9]

[00:19:47] And crypto is definitely on that on the agenda there. And it's setting the table for what they're going to focus on next year. I think there's going to be a lot deeper dives by staff and committees into all of these issues that hopefully will set the table to do some significant legislation at some point. Kristen? [00:20:04][17.0]

[00:20:06] Yeah, no, I mean, I. [00:20:07][1.1]

[00:20:10] Yeah, no, I think I agree with John, I'm not sure I have anything to add there other than, you know, the the you know, I look at Biden himself. [00:20:19][8.5]

[00:20:19] I just I don't know if he actually understand that. I think going back to what you're saying before and what our challenge is going to be is when we go and we talk to policymakers on financial inclusion, they sort of look at us like, are you sure that this is the tool and what we need to see more of our actual real life examples where people are being brought into the system using using the technology. And I think we might see that in a in a few areas, maybe with like Kashyap or something like that. But what we need to see that evolve a little bit further. And then I think that we can get the type of support we need. But, you know, as we've looking back over the past two years, when we engage with Republican offices and Democrat offices, they the messaging that appeals to them is very different. And the financial inclusion angle has been our single best discussion point that that has allowed us to build relationships with with Democratic offices on the Hill. And so I think when we look to a Democratic administration, then we will be able to hopefully use some of that same messaging. But we still are. It's still received with a little bit of skepticism. So we need to figure out some of the better use cases or actual applications that people are using that that are bringing them into the system. [00:21:51][92.0]

[00:21:52] I mean I mean, I think this is where, as you were saying, Kristen, you know, sort of proof's in the pudding, right? People need to see that you can actually deliver something that is superior from a financial inclusion perspective, like we're we're seeing literally every month we're seeing more products in other parts of the world that are connecting to things like USDC, that are connecting to foreign currencies like peso or Brazilian real or or in Indonesia or India or other places. And, you know, the reality is, if you have USDC, you know, you can you can transmit it and convert it into those currencies in minutes. And there's not a five percent fee. There's not a three percent fee. There's not a one percent fee. It's actually almost zero. And and it's vast. And that's a financial inclusion message that's embracing the relationship with between the United States and the rest of the world economy and embracing immigration and the fact that we have a diaspora, people that that are sending funds home. And I know that is part of the financial inclusion story that resonates as well. And so I think in many ways it's really incumbent on the industry to deliver some real results there. I know that was one of the key promises of Libra, and I think that's something that the Libra Association and Facebook and tried to continue to emphasize that to bring policymakers over. [00:23:18][86.0]

[00:23:20] Yeah, and Jeremy, I think the letter yesterday that the congressional Democrats are at least a few of them from financial services sent to the controller, had had more to do, less to do with crypto. The crypto was mentioned heavily, I think more to do just with their criticisms of some of the things that the controllers done. But, you know, they very clearly were, to me, pretty centered on crypto and actually made note that they think there is some advantages. And they I forget what the language was, but basically was urging the industry to work more with minority owned depository institutions. I mean, I think that is a really good idea. And, you know, I'm sure that's happening maybe to some extent, but there needs to be a really authentic effort happening because I do think there's skepticism. Not only that, that may be the story isn't being told well enough, but that it's, you know, to be honest, like a bunch of white guys in Silicon Valley talking about how they think poor people live. And I think there needs to be a real, authentic effort to work with minority owned depository institutions to really get on the ground and figure out what are the problems that we need to solve. [00:24:31][71.6]

[00:24:32] And I think that will that will benefit the industry for short. [00:24:35][3.2]

[00:24:37] Absolutely, I think, you know, the the DFI space, the the the sort of birth of credit markets that happen on Blockchains, the theoretical possibility of things like identity and reputation, but but interacting with credit markets, all of that sounds really powerful and interesting. And you're seeing steps towards that. The bottom line is like, is that just going to reinforce an existing set of implicit biases? [00:25:08][31.6]

[00:25:09] This is this discussion around EHI and credit decisioning, or is this an opportunity to actually see some real breakthroughs in terms of access like real access? Can an individual who doesn't have a credit score, access credit can a small business that is likewise, you know, trying to access credit do that more effectively because of Blockchains based payments of banking or or not? Like, again, proof's in the pudding. [00:25:37][28.3]

[00:25:38] Right. I want to turn a little bit to the to the international dimension here, which I which I think is is also really important. And we touched on it when thinking about cross-border payments and to the degree that that's an important issue in improving access in the financial system. But more of the the the you know, the evolution of our of our trading relationships, the acceleration, apparent acceleration of digital currency efforts by by the eurozone. Christine, the guard saying this week they're looking at as soon as two years to have a digital euro China in beta launching, you know, certainly in twenty twenty one. You know, the two biggest trade areas for the United States marching ahead. [00:26:29][51.2]

[00:26:30] Does the clearly a Biden administration probably more forward leaning in terms of globalization and global integration and global trade relationships, at least in a different form and substance than we've seen in the last four years. [00:26:43][13.0]

[00:26:44] Do all of these how do these impact the digital currency outlook? [00:26:47][3.2]

[00:26:50] I mean, I think there is a level of competition that that we'll see emerge between the different international jurisdictions to become leaders in this space, and we haven't totally embraced that as a as a priority for the government in the US. I don't think there's still a lot of uncertainty when it whether it comes to just regular traditional cryptocurrency like Bitcoin or a sort of a US digital dollar, USDC type dollar. But I think the advantage the US has is there are a lot of innovators and entrepreneurs like yourself and others that are out there doing this and thinking through how how can we have innovation. [00:27:39][49.5]

[00:27:40] And that is that's the American way, right, is to have people go out and experiment with ideas and not have government get in the way of that. [00:27:48][8.0]

[00:27:49] And I think what I haven't fully played out in my mind is how does this work as a public private partnership? Is this something that will lead to an actual digital dollar down the road that is sort of issued by the Fed that, you know, either the institutions use or individuals use? I don't know the answers to that, but I do know that unlike, you know, sort of China or even, you know, European and other jurisdictions, it's not always like a top down type of a way we have. It's really just this this innovation that happens, that drives these things. So I think a lot of that is happening sort of under the radar right now. And that as we begin to see some of these partnerships and projects take off, I think we'll become more aware and and and the US will realize that they need to catch up. [00:28:44][55.1]

[00:28:46] I think that's right, John. Thoughts on on on this kind of the competitive international dimension? [00:28:51][5.1]

[00:28:52] Yeah, no, I totally agree with Christian. I think, you know, there are many factors that that are kind of coming together to help this. We talked about payments and covid. I think the international competition is certainly there, too. And, you know, I think that is something that, at least in this last Congress has been a big concern for Senator Cotton, for example. But, you know, and so everyone will have their different reasons. What I hope happens is, you know, we have another covid package at some point and there were already proposals and could come with the vaccine or two. [00:29:33][40.5]

[00:29:34] We'll see maybe their package. Yeah, exactly. [00:29:37][3.0]

[00:29:39] But now that we have another one and there were digital dollar proposals made in the last one, they didn't go anywhere and they were primarily ideological, but it got people talking about implementation and thinking about implementation. So that is driving a lot. A lot, too, especially when they're learning more about what China is doing especially and Europe talking about it more in a substantive way. And the thing is, and you know this better than anybody, Jeremy, there is real stuff happening, like the Fed is doing stuff. I don't know if Congress has learned about it as much as I think they will in this next Congress. And, you know, talking about public private sector collaboration, a number of people that are literally, you know, building the tech stack and researching this tech stack used to work in industry. So, I mean, it's it's there's there's a lot of good stories to tell. [00:30:29][50.2]

[00:30:29] And my hope is that there's further attention to implementation, that Congress invests more in it like serious R&D and pushes this public private collaboration. [00:30:38][9.2]

[00:30:40] And that, you know, the Fed is is more open about what they're doing because I think that's important. [00:30:44][4.3]

[00:30:45] Yeah. We're obviously, you know, we expect the private sector innovation in the space not to slow down. [00:30:52][6.4]

[00:30:52] And I think one of the things that we're tuned in to and really part of the discussion here today is, you know, is there a risk of a you know, of actually an administration or Congress or or regulated regulators who are actually hostile to this space? What is the risk that the bank lobby also is hostile to this space and just tries to kind of put this to a screeching halt? What do you see as the risk there, Kristen? [00:31:22][30.0]

[00:31:23] I mean, I think those are risks. I think where we if we look at our current administration, we do have some bright spots with Acting Comptroller Brian Brooks and Hester at the SEC. But we we have a lot of people working against our industry right now in the government. And we only have a couple of months to go. I we're watching closely to make sure nothing bad happens between now and January 20th. But but that is always something we're keeping an eye out eye out for because we could see action from Treasury or statements from the administration that try to shut this down there. There is a feeling among in a in a sort of a position among some very senior political appointees that, you know, this any sort of Blockchains based network that either has self posted wallets or that is built on open infrastructure is bad. I mean, these are huge misconceptions that we we need to work against. And so the hope is that whoever comes in in the binded administration doesn't share these views and are more willing to have these conversations because they're there's I mean, the equivalent that I can think of right now is that, you know, back in the early 90s, everybody said, we can't have Internet. We can only have Internet like that. [00:32:51][87.9]

[00:32:51] That cuts off all of this and that the public infrastructure will have open public networks. [00:32:58][6.5]

[00:32:58] I think there's there's an education gap here. Right? This is a huge part of this is like the giant education gap. It's it's hard for people to imagine a financial system that's built on open infrastructure. It just is sort of it's almost counterintuitive to people. And so that that's this bridge, that gap. [00:33:15][16.3]

[00:33:15] And I am and has been doing this work much longer than I have. But the two plus years of the Blockchains Association's existence, I feel like we've been pretty fortunate in that we've been able to do some education work, which is very slow. By the way. It takes a lot a lot of time to get through to individual policymakers. But we've been very fortunate in that we really haven't had enemies. We've been able to throw our ideas out there and nobody's really pushing pushing back, but. We're starting to see we're starting to see a shift, particularly with the Bank Policy Institute, they put up a couple of blog posts recently that I think are really aimed at going after after cracken, going up because of their Wyoming bank that they have or going after Comptroller Brooks for trying to make payments. Charter Bank Charter is accessible to payments companies. And and so we're starting to see that they realize there's a whole kind of wave of innovation that's coming into this space that we might not control. And it hasn't come to a head yet. But we're I'm starting to see a shift. [00:34:31][75.2]

[00:34:32] Yeah, it's interesting. [00:34:33][1.7]

[00:34:34] I guess, like this this kind of concept of the private sector is continuing to march forward. Regulators oftentimes, you know, they respond to things when they go badly. But there's also a situation where the private sector is sort of saying, hey, look, we need clarity so that what we're building, which is a new technical possibility, that we've got clarity, that we can do this. And I think one of the interesting things to observe is I think a lot of times we talk about like the crypto in the blockchains industry. That's sort of the the innovation space. But clearly, you know, we've got, you know, JPMorgan making major investments in blockchains infrastructure and and looking to stand up different products. [00:35:14][40.3]

[00:35:14] They have a particular view on that. You've got Goldman Sachs making very clear with with a new a new set of leadership focused on digital assets, making many significant public statements about public blockchains, about stablecoins, about the concept of various assets, existing assets becoming crypto assets. That's you know, that's non-trivial when you're hearing that from, you know, JP Morgan and Goldman Sachs, you've got, you know, the biggest money manager, I think one of the biggest money managers in the world, fidelity, aggressively moving in this space. You're hearing rumblings from some of the biggest ETF companies, some of the biggest money market funds, others who, you know, we believe are focused on tokenization. This idea of using digital assets on public chains to create forms of digital securities. And this is stuff that's happening now. This isn't a bunch of, you know, San Francisco startups, sorry to use the metaphor, but it's it's it's, I think, significant players who want to use this and move forward with it. And I wonder if some of that is actually going to force more engagement from the SEC, for example, and not just what has been a lot of reaction, but actually, you know, let's work this out. Let's figure out how this this market infrastructure is going to work for our economy. [00:36:39][84.9]

[00:36:41] Yeah, I mean, I think, you know, look, and obviously we live this every day, so we know the companies and but, you know, for the average person doesn't follow the cryptocurrency industry, even a company like Circle or Coinbase they've heard of but don't know a lot about. Now, when PayPal allows for the purchase of Bitcoin, we're square. I mean, or JPMorgan, you know, that is that is a that is a totally different thing. And that authenticates the industry in a major way. [00:37:08][27.0]

[00:37:09] And I think it requires policymakers, if they did not feel compelled to learn more about what's going on and why these institutions are interested in this, they feel much more the need to do that. So I think that's that's it's a net positive for sure. For sure. [00:37:25][15.9]

[00:37:27] Well, I do think to get any of these policies done, the coalition of the people interested has to grow. And I you've heard me say this before, but the little crypto lobby in D.C. is is little. I mean, it's a tiny, tiny, tiny force compared to other industries. And I think we're all doing the best we can with the little amount of resources that are being devoted to this. But, yeah, the the larger established, highly regulated industries have teams of people on the ground that can mobilize, that can be thinking about these things. They can use all of the tools available to influence policy change. And crypto alone isn't going to be able to do this. [00:38:19][52.0]

[00:38:20] And it's going to have to be getting the right partners and with some of these other larger established players in order to move the ball forward. [00:38:30][10.1]

[00:38:32] I buy that. Another I think overlay on this is, is the national security lens. [00:38:38][5.7]

[00:38:38] So, you know, we've had we've had, you know, I think in particular the intersection of national security and financial crimes enforcement and, you know, sort of the phatic agenda, the the US Treasury agenda on that. Obviously, you know, there are just there are laws and there's enforcement of those laws, but there's also interpreted guidance and we've seen more of that out of Treasury on a number of fronts. But but in particular in this area. And we've seen international work in this area. But it also it it gets to the fundamental issues that that exist, which where I think there is not there's not a clear either side of the aisle view on some of this stuff. For example, encryption policy is one of these topics where maybe you could say on the conservative side, it's more aggressive anti encryption or law enforcement back doors, but it's certainly bipartisan sometimes in those issues as well. And I think when we're talking about crypto and we're talking about, you know, Blockchains, there's a complex interplay between privacy, cybersecurity, the resilience of the data itself. You know, people want resilient, secure data with Blockchains guess what? They do that better than anything else. But at the same time, they give greater levels of privacy and they cut against the grain of existing frameworks for how financial crimes enforcement happens. [00:40:14][96.2]

[00:40:15] Complicated set of issues overlay into national security. Does a Biden administration. [00:40:20][4.6]

[00:40:22] Manage from a different kind of center on that, or do they or do we do we see policy shifts in any of those areas potentially that could impact crypto? [00:40:31][9.0]

[00:40:34] I worry about this a lot. [00:40:35][1.0]

[00:40:36] I think that I don't think we're going to see much of a change in terms of the philosophy of law enforcement, right. [00:40:46][10.2]

[00:40:47] I mean, law enforcement has a very specific mission, and that's to get the bad guys and they want all of the information they can to get the bad guys. [00:40:53][6.9]

[00:40:55] But the problem is the we're on this trend right now where there's this expansion of reporting requirements that are on the table fence and right now has a notice of proposed rulemaking that would change the reporting thresholds that for crypto is particularly bad because it's hard to tell the location. So it's sort of like by default is going to be a significant burden for for crypto companies. So I think that that is kind of a trend for more information is out there. I think the problem is more information doesn't always actually lead to better results. And there is there is a huge cost to individual privacy when they when these policies are in place. So I continue to see as we look to the years ahead, efforts to expand reporting requirements and potentially even limits to sort of sell posted wallets, which could be an entire hour discussion itself. [00:41:56][60.6]

[00:41:56] But I worry that, you know, regardless of which which party is in charge of the White House, that we are sort of on one pathway to to slowly erode any any privacy that an individual has. So that's that's something we're thinking a lot about at Blockchains Association. [00:42:12][15.8]

[00:42:12] A major issue, obviously. Yeah. [00:42:15][2.3]

[00:42:15] I mean, I agree with Kristen. I don't think the you know, the national security apparatus, the intelligence community, law enforcement, you know, it's not going to change. Right? I mean, the personnel is not really going to change significantly. You know, the people on the ground that are that are doing this stuff. And I think they're going to have the same take that this administration has and the one before, which is general skepticism about the possible threats that this technology can have for terrorist financing and money laundering and a bunch of other things. You know, the travel rule guidance from Vinson is is a very good example of of lowering thresholds, which is not only of concern to the crypto community, but to the entire financial services payment system. And we're we'll see how that ends up. But, you know, a good argument for why going from, what is it, three thousand twenty five hundred to two, fifty three thousand to 250. You know, the fact of guidance called for one thousand. So, you know, in the in the US and every international body in the world that's focused on the stuff has made abundantly clear time and time again that international consistency is of utmost importance, not even separate from running a company where it makes it a lot easier, but it works better for the countries who actually are trying to implement this policy because they don't have regulatory arbitrage and leakage and all kinds of other stuff. [00:43:38][82.4]

[00:43:38] So I think a focus on international international consistency is going to be really, really, really important. And the US drives a lot of this at these at these various bodies. And I think with this administration against nothing against the current administration. But I think there's definitely going to be a more a larger focus on global relations perhaps than than than we've seen. And I think, you know, there's going to be opportunities there. [00:44:05][26.8]

[00:44:06] Yeah, I think it's it raises an interesting thing. I was having a conversation with someone yesterday thinking about this this very specific issue, this travel rule issue or whatever you want to call it. [00:44:16][10.2]

[00:44:17] Let's just call it the intense, more intensive recordkeeping obligations, et cetera. You know, this interplay between, you know, privacy, you know, the financial inclusion, openness, innovation, the national security, all of these interplay, they're all tradeoffs against each other. [00:44:39][22.0]

[00:44:39] And, you know, one of the things that's attractive about the Blockchains space is that as a as an underlying infrastructure, crypto creates the possibility to achieve fundamental improvements in how those trade offs work. [00:44:58][18.2]

[00:44:59] Right. Right now, things like the record keeping rules, they're like a blunt instrument that just gets applied. And you just say you got to keep all this information, you got to send all this information. It's this huge undertaking. And you know what? Who cares if it creates the risk of more data breaches or it jeopardizes personal privacy in different ways? We just got to do it. We've got to do it. It's just a huge thing. [00:45:22][23.8]

[00:45:23] But blockchains actually identity mechanisms on the blockchains the ability to do things like crypto based. Identity attestations where you don't actually have to reveal all these records, but you can prove, in fact, that someone's been KYC, you know, these are breakthrough's. And what I'm saying to this person was, you know, there's policy and there's guidelines and there's regulation and then there's just straight up innovation. And so from my perspective, if the industry is concerned about this, the industry needs to build better. They need to demonstrate we can do this better. We can protect security. We can provide the we can manage against the concerns that law enforcement has. We can do way better than the current system. And so we're going to go do that. We're going to build that. We're going to demonstrate that. And then, yeah, we'll adapt the rules because they need to be because the technology is just blew past it in a better way. So to me, it's a it's a call to action for for for innovation. I think one lesson out of this industry perhaps is if you think that policymakers are going to somehow, you know, rule make this this innovation into existence, that is not going to be the case. [00:46:37][74.3]

[00:46:40] So well, very, very interesting times ahead, I'm sure we'll continue this conversation. And as you know, as appointments emerge, as agendas reach legislative committees and others, I'll be excited to have you guys back and talk about where things are headed. [00:47:02][21.5]

[00:47:03] Thanks, Jeremy. Thank you, guys. Jeremy, good to see you again. Good to see you. [00:47:08][4.6]

[00:47:11] So a lot of exciting things happening in the space of Krypton policy because unlike Biden incrementally making new appointments, we're going to be paying very close attention here and to listening very closely to what's happening on the ground. We'll be tracking that closely with folks like John and Christine. And, you know, Will, we'll make that a key topic as twenty, twenty one comes around with that. We're going to conclude today. [00:47:38][27.2]

[00:47:39] So I hope everyone can stay well, stay informed and stay all. [00:47:39][0.0]


John Collins
Partner, FS Vector
Kristin Smith
Executive Director, Blockchain Association