WEBVTT

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<v Speaker 1>I think Phantom has the best product, but our no

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<v Speaker 1>Action letter provides basically a blueprint for others as well,

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<v Speaker 1>and we wanted to put that out there in a

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<v Speaker 1>public way to serve others in the industry because that

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<v Speaker 1>competition is very healthy. The most important thing is that

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<v Speaker 1>defied developers are protected because right now there's some ambiguity

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<v Speaker 1>in how the twenty nineteen Sins and Guidance imports with

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<v Speaker 1>the DOJ's interpretation of the Money Transmission Statute.

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<v Speaker 2>This episode is brought to you by Bitgo, the trusted

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<v Speaker 2>but accessible to for thinking players across the space. So

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<v Speaker 2>So learn more at bitgo dot com and see why

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<v Speaker 2>the biggest players in crypto trust Bitgo. Hey, folks, welcome

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<v Speaker 2>into the Thinking Crypto podcast. I'm your host Tony Edward

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<v Speaker 2>and joining me today is Marissa Coombel, who is the

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<v Speaker 2>Assistant General Counsel at Phantom and Phantom is one of

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<v Speaker 2>the most popular self custodial crypto wallets for use on

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<v Speaker 2>Solana and other major blockchains. This is not Marissa's first

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<v Speaker 2>time in the podcast. MURSSA has been on many times

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<v Speaker 2>at her role at Blockchain Association VERSA. Great to see you.

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<v Speaker 1>Thanks for having me on again, Tony.

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<v Speaker 2>Yeah, Marissa, we were talking before the recording. You know,

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<v Speaker 2>last time we saw each other and spoke, you were

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<v Speaker 2>at the Blockchain Association and now you're at Phantom, so

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<v Speaker 2>it's great to reconnect again.

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<v Speaker 1>Yeah, it definitely is. I joined Phantom in August, so

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<v Speaker 1>I think the last time we spoke must been at

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<v Speaker 1>least like a year ago maybe.

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<v Speaker 2>Yeah, and big news around Phantom, Marissa, where the CFDC

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<v Speaker 2>gave no action relief, but I would love to set

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<v Speaker 2>the table for those who don't know about Phantom, tell

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<v Speaker 2>us a bit about the company and what you guys do.

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<v Speaker 1>Yeah, so Phantom was started in twenty twenty one and

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<v Speaker 1>we are the most popular non custodial crypto wallet out there.

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<v Speaker 1>But we're more like a money app now where people

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<v Speaker 1>can manage all of their money that they keep on chain.

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<v Speaker 1>And I think the no act letter is sort of

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<v Speaker 1>an indication that you know, there's this bridge between crypto

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<v Speaker 1>and tradfi and yeah, I mean it's just going to

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<v Speaker 1>give us more opportunities for people to manage their money

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<v Speaker 1>through through our app.

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<v Speaker 2>So take us at a crux of the issues, so

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<v Speaker 2>to speak, Why did the CFTC need to issue a

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<v Speaker 2>no action letter? What were you guys like connecting or

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<v Speaker 2>what services were potentially going to be flagged as something

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<v Speaker 2>that might be an issue.

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<v Speaker 1>Yeah, So we wanted to provide our users with an

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<v Speaker 1>opportunity to access registered or CFTC registrants, So like a

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<v Speaker 1>DCM or an FCM like Calsh is a DCM for instance,

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<v Speaker 1>we wanted to give them an opportunity to access that

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<v Speaker 1>directly through our interface. And ordinarily, without this no action relief,

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<v Speaker 1>we would need to be registered as an introducing broker,

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<v Speaker 1>but that registration regime doesn't totally fit our product. The

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<v Speaker 1>regime was started basically to protect against, you know, conflicts

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<v Speaker 1>of interest and other dangers that come from think about

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<v Speaker 1>like a whole room of people that are soliciting customers

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<v Speaker 1>over the phone and creating their trading strategies and like

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<v Speaker 1>more actively having a role in managing their trades, and

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<v Speaker 1>that's just not what Phantom does. We're a software development company.

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<v Speaker 1>We provide an interface that allows users to manage their

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<v Speaker 1>own trading activity. So the registration regime just like didn't

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<v Speaker 1>really fit. But you know, these regulations have not totally

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<v Speaker 1>kept up with the technology, and in our no action letter,

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<v Speaker 1>the CFTC was very transparent and was saying and staid

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<v Speaker 1>basically that they are planning to do either rulemaking our

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<v Speaker 1>guidance on this topic, so I would expect that to

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<v Speaker 1>come at some point in future, but until that comes,

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<v Speaker 1>we needed some release in order to provide this this product.

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<v Speaker 2>You know, this situation is kind of a microcosm of

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<v Speaker 2>what's happening on the larger scale of crypto legislation, because

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<v Speaker 2>to your point, what many of these crypto apps and

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<v Speaker 2>platforms are doing, and blockchains and so forth don't fit

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<v Speaker 2>the mold of trad FI totally. There's there's gaps. We

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<v Speaker 2>need rule making, and it seems these agencies, the SEC

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<v Speaker 2>and the CFTC, they have to go about kind of

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<v Speaker 2>doing it at hoc and then eventually, like you said,

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<v Speaker 2>put out the full rules or.

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<v Speaker 1>The rulemaking right totally. And one example of this that

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<v Speaker 1>has to do with our no action letter is obviously

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<v Speaker 1>we are a non custodiam wallet, so our users have

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<v Speaker 1>control over the keys, which allows them to have control

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<v Speaker 1>over their assets that they're they're storing in that wallet.

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<v Speaker 1>And historically, before that technology, you know, was created, and

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<v Speaker 1>with this introducing broker regime, a user would need to

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<v Speaker 1>or a customer would need to basically connect one financial

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<v Speaker 1>institution that had custody of their assets with the other

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<v Speaker 1>financial institution that was registered with the CFTC. Now it's

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<v Speaker 1>like a totally different paradigm where the user is the

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<v Speaker 1>one that is directly connected to the registered entity, and

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<v Speaker 1>you know, the money is flowing from the user directly

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<v Speaker 1>to the entity, not from one financial institution to another

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<v Speaker 1>financial institution.

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<v Speaker 2>Yeah, and this is so significant to Merissa because there's

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<v Speaker 2>been a lot of you know, friction when it comes

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<v Speaker 2>to DeFi and maybe something like this and a rulemaking

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<v Speaker 2>from the CFTC can really be applied to DeFi regulation.

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<v Speaker 2>To your point of self custodial wallets, you're not involved

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<v Speaker 2>in any way, the user's transaction transacting with another user,

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<v Speaker 2>and it's decentralized.

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<v Speaker 1>Right for sure. And importantly, our no action doesn't allow

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<v Speaker 1>like DeFi perpse for instance, like the user needs to

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<v Speaker 1>become a customer of a registered entity which is like

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<v Speaker 1>a centralized entity. But I do think that the framework

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<v Speaker 1>within the no action letter and the recognition that self

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<v Speaker 1>custody works differently will definitely play a huge role in

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<v Speaker 1>how the regulations are adapted to like defive purse or

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<v Speaker 1>defive predictions.

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<v Speaker 2>Pardon the interruption. Hi, I'm Tony. I'm the host of

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<v Speaker 2>the Thinking Crypto podcast. I wanted to ask you if

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<v Speaker 2>you can please support the podcast by hitting the like

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<v Speaker 2>button subscribing. If you haven't as yet, you can leave

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<v Speaker 2>a comment below as well. And if you're listening on

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<v Speaker 2>a podcast platform such as Spotify, Apple or wherever you

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<v Speaker 2>get your podcasts, please be sure to follow and hit

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<v Speaker 2>the five star rating. I'll let you get back to

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<v Speaker 2>the content. Thank you so much. Yeah, that definitely makes sense.

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<v Speaker 2>So talk to us a bit about the process of

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<v Speaker 2>getting this no action letter that it involve multiple conversations

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<v Speaker 2>with the CFTC kind of present seeing the blueprint of

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<v Speaker 2>how this technology works for them to understand it.

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<v Speaker 1>Yeah, exactly. So we presented a blueprint with regard to

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<v Speaker 1>how the tech would work and the flow of funds,

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<v Speaker 1>and we also explain to them why the introducing broker

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<v Speaker 1>regime didn't fit and also like what we were capable

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<v Speaker 1>of doing from a compliance standpoint, And you'll see in

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<v Speaker 1>the no action letter they lay out a bunch of

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<v Speaker 1>different compliance requirements that we will have to abide by

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<v Speaker 1>before we launch a product under this letter. So one,

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<v Speaker 1>for instance, is we have to abide by the NFA

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<v Speaker 1>marketing rules. Another one is our users have to become

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<v Speaker 1>a direct They basically have to direct the onboard with

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<v Speaker 1>the registered entity or registered exchange, and you know that

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<v Speaker 1>can happen within the phantom universe, but they will become

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<v Speaker 1>like an independent customer of that registered entity. Another one

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<v Speaker 1>is that we have to agree to c FTC jurisdiction

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<v Speaker 1>and allow them to investigate us or bring enforcement actions

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<v Speaker 1>against us if we violate the terms of the no

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<v Speaker 1>action letter. So there's a whole host of compliance requirements

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<v Speaker 1>that you know, frankly we are capable of doing that

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<v Speaker 1>we believe are very important in order to keep our

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<v Speaker 1>users safe.

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<v Speaker 2>Yeah, and I'm assuming the rest of the industry is

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<v Speaker 2>waiting for the rule making around this, you know, seeing

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<v Speaker 2>that you guys got this no action relief and maybe

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<v Speaker 2>CFTC they've been moving pretty fast. So has this sec

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<v Speaker 2>we get the full rule making a bit later this year.

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<v Speaker 1>Yeah, I think so too. And I do think it's

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<v Speaker 1>going to impact the centralized providers first and then they'll

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<v Speaker 1>hopefully do something with regard to DeFi but I do

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<v Speaker 1>think that in the interim, our no action letter is

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<v Speaker 1>very instructed and helpful for others in the industry that

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<v Speaker 1>want to launch these types of products, Like, you know,

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<v Speaker 1>we certainly are not going to be the only one,

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<v Speaker 1>and I think we'll you know, have the best product,

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<v Speaker 1>but just because I think Phantom has the best product.

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<v Speaker 1>But you know, our no action matter provides like basically

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<v Speaker 1>a blueprint for others as well, and we wanted to

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<v Speaker 1>put that out there in a public way to serve

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<v Speaker 1>others in the industry because that competition is very healthy.

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<v Speaker 2>Oh absolutely, And where as we've seen incredible progress on

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<v Speaker 2>the SEC side as well. And look, both the SEC

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<v Speaker 2>and cft S have been working closely Project Crypto Chair

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<v Speaker 2>Sea leg as well as Chair Atkins. You know, they

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<v Speaker 2>did a whole summit or meeting or something along those lines,

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<v Speaker 2>and you know you talked about working closely together. And

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<v Speaker 2>recently the SEC put out guidance on cryptosecurities providing four categories.

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<v Speaker 2>What are your thoughts on that, especially you know you

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<v Speaker 2>and I who talked under it against the regime.

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<v Speaker 3>Change.

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<v Speaker 2>Time to change.

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<v Speaker 1>Yeah, I mean, I think it's great. I think that

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<v Speaker 1>you know, Chair Atkins was waiting for quite a while

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<v Speaker 1>before cher Selig was officially in his seat, and pretty

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<v Speaker 1>much right away, I think in January they signed that

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<v Speaker 1>MLU that that detailed that they were committed to working

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<v Speaker 1>together and also committing to approach regulating this industry with

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<v Speaker 1>like an innovation mindset. So they were, you know, committing

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<v Speaker 1>to essentially regulating what needed to be regulated, but then

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<v Speaker 1>letting innovation happen as well, which is like a total

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<v Speaker 1>you know, different approach than what we were dealing with

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<v Speaker 1>for the past few years.

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<v Speaker 2>Yeah, it's it's a breath of fresh air. It's so

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<v Speaker 2>good to have actual rulemaking and clarity, you know, keyword

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<v Speaker 2>there for the larger bill, of course, but to have

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<v Speaker 2>that guidance, and I feel like it's going to help

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<v Speaker 2>kick off a lot of innovation. People can start building.

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<v Speaker 2>They don't have to worry about getting a well's notice,

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<v Speaker 2>a lossuit, you know, as long as they're not breaking

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<v Speaker 2>a law of course, Yeah, totally. And they're just you know,

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<v Speaker 2>they just want to build. And I feel it's just

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<v Speaker 2>going to unlock crypto Web three to go to higher

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<v Speaker 2>levels of innovation. I can't wait to see what people

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<v Speaker 2>come up with in the years to come.

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<v Speaker 1>Yeah, I mean, and this is how the regulatory process

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<v Speaker 1>should work. Like right now, we have two regulators where

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<v Speaker 1>their doors truly are open to people coming in and

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<v Speaker 1>explaining their projects to them and genuinely wanting to be compliant.

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<v Speaker 1>And I think are No Action letter is a perfect

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<v Speaker 1>example of that. And that's just totally different than how

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<v Speaker 1>the chair Genistler, you know, how his agency worked, where

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<v Speaker 1>he would say and can come knock on our door.

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<v Speaker 1>But then when people did that, they were served with

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<v Speaker 1>a wells notice basically, so it's definitely a very welcome

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<v Speaker 1>change in that respect.

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<v Speaker 2>I don't know if you can answered this, but are

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<v Speaker 2>you guys currently meeting with the SEC for anything you

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<v Speaker 2>know that you can share, you know, nothing bad, but

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<v Speaker 2>like as far as new things that you're looking to

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<v Speaker 2>develop and so forth.

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<v Speaker 1>Yeah, I mean there's been an open line of communication

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<v Speaker 1>with them, and it's there. You know, they're wanting to

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<v Speaker 1>do things and I think many people in the industry

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<v Speaker 1>are talking to them, and you know, the meetings mostly

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<v Speaker 1>are public to public record, at least they have to

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<v Speaker 1>publish their calendar.

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<v Speaker 2>So oh my gosh, that is in itself just amazing

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<v Speaker 2>to actually have that transparency who they're meeting with and

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<v Speaker 2>all that. It's like night and day.

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<v Speaker 3>Yeah, for sure.

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<v Speaker 2>Now the agencies you know, doing a lot of this

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<v Speaker 2>work and providing the rulemaking and so forth. Obviously we

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<v Speaker 2>need the Clarity Act itself, the the overarching theme to

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<v Speaker 2>be passed in the Senate, signed by the President of

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<v Speaker 2>course too, you know, make sure that it's law and

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<v Speaker 2>it doesn't get reverted by another next administration down the line.

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<v Speaker 2>Right now, the Claritiact is being held up because of

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<v Speaker 2>the banks, fighting stable coin yield and so forth. I

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<v Speaker 2>guess the first question I want to ask is, you know,

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<v Speaker 2>are you guys looking at the Clarity Act and along

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<v Speaker 2>with the rest of the industry to make sure that's

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<v Speaker 2>copasetic and it has all the things that are needed

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<v Speaker 2>for crypto to have that balance, right, because I know

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<v Speaker 2>they're going to have to find a balance that crypto

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<v Speaker 2>to survive and to grow, and there need to be innovation,

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<v Speaker 2>but also not to destroy the entire TRAT five system

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<v Speaker 2>and things along those lines, right for sure.

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<v Speaker 1>And yeah, we definitely are and we are involved in

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<v Speaker 1>policy conversations. We have talked to many different offices on

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<v Speaker 1>the Hill about this. I think from our perspective, the

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<v Speaker 1>most important thing is that defied developers are protected because

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<v Speaker 1>right now there's some ambiguity in how the twenty nineteen

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<v Speaker 1>Since and Guidance imports with the DOJ's interpretation of the

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<v Speaker 1>Money Transmission Statute. So we're hoping that there's a fix

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<v Speaker 1>there and that adds clarity to protect software developers, and

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<v Speaker 1>that that's like written in legislation, so the DOJ, you know,

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<v Speaker 1>can't come up with their own interpretation that's contrary to

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<v Speaker 1>what the guidance has said for the past almost seven years.

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<v Speaker 2>I think, oh yeah, Marissa, hard question. You think this

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<v Speaker 2>bill makes it passes by the beginning of summer?

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<v Speaker 1>Oh man, I mean this is the month if it's

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<v Speaker 1>going to happen. The markup, I think is supposed to happen.

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<v Speaker 1>Maybe it's the tenth today, So I think in a

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<v Speaker 1>couple of weeks it's supposed to happen. And I think

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<v Speaker 1>if it doesn't happen this month, there's the chances are

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<v Speaker 1>low if it doesn't happen this month because this is

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<v Speaker 1>also an election year, so members of Congress are going

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<v Speaker 1>to be focused on the election. So this is I

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<v Speaker 1>hope it does, but we'll see, and this is sort

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<v Speaker 1>of our chance. Just in terms of the composition of Congress,

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<v Speaker 1>there's like people that are very committed to getting this done,

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<v Speaker 1>and it's not clear whether that will be the case

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<v Speaker 1>with the next Congress.

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<v Speaker 2>Yeah, I'm so hoping they can get this done. But

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<v Speaker 2>also I was talking to someone, I think Austin Campbell

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<v Speaker 2>of zero knowledge proof or zero knowledge consulting excuse me,

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<v Speaker 2>And you know, one of things he was saying is that, Okay,

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<v Speaker 2>let's say we don't get the bill passed. As long

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<v Speaker 2>as the SEC and the CFTC are putting out the

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<v Speaker 2>rulemaking that that's going to be a huge win. But

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<v Speaker 2>definitely by the end of President Trump's term they need

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<v Speaker 2>to get the belt passed, so maybe we have twenty

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<v Speaker 2>twenty seven. So I try to remind people that obviously

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<v Speaker 2>the ideal case is a scenario. It is we need

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<v Speaker 2>to get it done now. It would be so great

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<v Speaker 2>for the industry in the market.

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<v Speaker 1>Yes, I totally agree with that. I do think that

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<v Speaker 1>relying on rulemaking is not ideal, especially given that rule

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<v Speaker 1>making can take a long time and there's always the

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<v Speaker 1>potential that there will be a lawsuits, you know, as

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<v Speaker 1>we saw in the Blockchain Association sued the SEC after

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<v Speaker 1>finalizing the dealer rule and that rule ultimately was repealed

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<v Speaker 1>because of the lawsuit. So there's that potential. With rule

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<v Speaker 1>making and legislation is just much more concrete and it's

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<v Speaker 1>like much harder to challenge.

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<v Speaker 2>Oh absolutely, I know we talked about the two major agencies,

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<v Speaker 2>the SEC and the CFDC. Are there other agencies that

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<v Speaker 2>you're engaged with that may not get the spotlight as much,

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<v Speaker 2>but they are important for crypto and certain guidance yeah.

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<v Speaker 1>I mean, I think the genius rulemaking that's happening across

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<v Speaker 1>a number of different agencies illustrates which agencies are important.

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<v Speaker 1>The OCC, for one, there's a comment period that's happening

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<v Speaker 1>right now that closes at the beginning of May about

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<v Speaker 1>how the OCC will regulate stable coin issuers that they're

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<v Speaker 1>gonna have a huge role in stable coins and the

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<v Speaker 1>market there. And then also Treasury place a huge because

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<v Speaker 1>Treasury is the umbrella agency over OPAC and Finnsen. So

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<v Speaker 1>that's another especially with regard to DEFY. You know, Treasury

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<v Speaker 1>really does impact DeFi a lot.

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<v Speaker 2>Oh yeah, definitely. And boy, I know there's a lot

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<v Speaker 2>of talks about taxes and center Cynthia Lummus has put

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<v Speaker 2>forth some bills and things like that. I feel once

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<v Speaker 2>clarity is done, I feel like we got to figure

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<v Speaker 2>out DeFi and then taxes.

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<v Speaker 1>Yeah, I know, I laugh because I'm just so not

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<v Speaker 1>a tax lawyer, and it's a subject I often actively

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<v Speaker 1>avoid because it's so it's just so complicated. There are

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<v Speaker 1>some great tax lawyers out there that's specialize in crypto attacks,

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<v Speaker 1>but it is a huge area of ambiguity, and right now,

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<v Speaker 1>you know, everyone is essentially responsible for reporting their gains

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<v Speaker 1>through whatever however they're using their assets, their crypto assets.

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<v Speaker 1>But there's just a lot of ambiguity that probably needs

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<v Speaker 1>to be solved through legislation.

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<v Speaker 2>Yeah. Absolutely. What's on your roadmap for the remainder of

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<v Speaker 2>a year. I don't know if you can talk about

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<v Speaker 2>product at all, maybe not, but maybe on the legal

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<v Speaker 2>side you can probably share that. Yeah.

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<v Speaker 1>I mean, one thing on the product side that's exciting

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<v Speaker 1>is we have opened the wait list for Phantom Cash

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<v Speaker 1>and US. Anyone in the US now can access that product,

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<v Speaker 1>which allows them to hold the cash stable coin within

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<v Speaker 1>their wallet and then access fiat features so you can

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<v Speaker 1>have a debit card, you can on or off ramp.

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<v Speaker 1>We've partnered with Stripe to be able to to do that.

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<v Speaker 1>Like we have KYC that enables users to connect their bank,

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<v Speaker 1>they can put direct deposit, you know, into their Phantom wallet.

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<v Speaker 1>It's really becoming like a full money app. So I

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<v Speaker 1>think that's really exciting on the product side. On the

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<v Speaker 1>legal side, I mean, still working on all of the policy,

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<v Speaker 1>the policy work and engaging regulators. I also do most

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<v Speaker 1>of my job, honestly is the product counseling. So I

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<v Speaker 1>work very closely with our product team and making sure

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<v Speaker 1>that we're making products that are compliant and working on

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<v Speaker 1>the development of those products, which is really fun.

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<v Speaker 2>Oh that's exciting. Well, I'm sure we're going to have

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<v Speaker 2>another conversation sometimes this year as things progress we get

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<v Speaker 2>further rule making and so forth. But thank you so much, Marissa.

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<v Speaker 2>It is great to see you again. And I don't

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<v Speaker 2>know when we're going to get to see each other

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<v Speaker 2>in person again. Maybe at a salon at cryptoconference or

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<v Speaker 2>something like that.

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<v Speaker 3>Yeah, definitely, let's aim for that. Thanks Tony, Thank you

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<v Speaker 3>so much for tuning in. Please hit the like button

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<v Speaker 3>subscribe if you haven't as yet. If you're listening on

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<v Speaker 3>a podcast platform such as Spotify or Apple, please follow

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<v Speaker 3>and leave a five star rating.

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<v Speaker 2>Thank you so much.