Speaker 1: I think Phantom has the best product, but our no
Speaker 1: Action letter provides basically a blueprint for others as well,
Speaker 1: and we wanted to put that out there in a
Speaker 1: public way to serve others in the industry because that
Speaker 1: competition is very healthy. The most important thing is that
Speaker 1: defied developers are protected because right now there's some ambiguity
Speaker 1: in how the twenty nineteen Sins and Guidance imports with
Speaker 1: the DOJ's interpretation of the Money Transmission Statute.
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Speaker 2: the biggest players in crypto trust Bitgo. Hey, folks, welcome
Speaker 2: into the Thinking Crypto podcast. I'm your host Tony Edward
Speaker 2: and joining me today is Marissa Coombel, who is the
Speaker 2: Assistant General Counsel at Phantom and Phantom is one of
Speaker 2: the most popular self custodial crypto wallets for use on
Speaker 2: Solana and other major blockchains. This is not Marissa's first
Speaker 2: time in the podcast. MURSSA has been on many times
Speaker 2: at her role at Blockchain Association VERSA. Great to see you.
Speaker 1: Thanks for having me on again, Tony.
Speaker 2: Yeah, Marissa, we were talking before the recording. You know,
Speaker 2: last time we saw each other and spoke, you were
Speaker 2: at the Blockchain Association and now you're at Phantom, so
Speaker 2: it's great to reconnect again.
Speaker 1: Yeah, it definitely is. I joined Phantom in August, so
Speaker 1: I think the last time we spoke must been at
Speaker 1: least like a year ago maybe.
Speaker 2: Yeah, and big news around Phantom, Marissa, where the CFDC
Speaker 2: gave no action relief, but I would love to set
Speaker 2: the table for those who don't know about Phantom, tell
Speaker 2: us a bit about the company and what you guys do.
Speaker 1: Yeah, so Phantom was started in twenty twenty one and
Speaker 1: we are the most popular non custodial crypto wallet out there.
Speaker 1: But we're more like a money app now where people
Speaker 1: can manage all of their money that they keep on chain.
Speaker 1: And I think the no act letter is sort of
Speaker 1: an indication that you know, there's this bridge between crypto
Speaker 1: and tradfi and yeah, I mean it's just going to
Speaker 1: give us more opportunities for people to manage their money
Speaker 1: through through our app.
Speaker 2: So take us at a crux of the issues, so
Speaker 2: to speak, Why did the CFTC need to issue a
Speaker 2: no action letter? What were you guys like connecting or
Speaker 2: what services were potentially going to be flagged as something
Speaker 2: that might be an issue.
Speaker 1: Yeah, So we wanted to provide our users with an
Speaker 1: opportunity to access registered or CFTC registrants, So like a
Speaker 1: DCM or an FCM like Calsh is a DCM for instance,
Speaker 1: we wanted to give them an opportunity to access that
Speaker 1: directly through our interface. And ordinarily, without this no action relief,
Speaker 1: we would need to be registered as an introducing broker,
Speaker 1: but that registration regime doesn't totally fit our product. The
Speaker 1: regime was started basically to protect against, you know, conflicts
Speaker 1: of interest and other dangers that come from think about
Speaker 1: like a whole room of people that are soliciting customers
Speaker 1: over the phone and creating their trading strategies and like
Speaker 1: more actively having a role in managing their trades, and
Speaker 1: that's just not what Phantom does. We're a software development company.
Speaker 1: We provide an interface that allows users to manage their
Speaker 1: own trading activity. So the registration regime just like didn't
Speaker 1: really fit. But you know, these regulations have not totally
Speaker 1: kept up with the technology, and in our no action letter,
Speaker 1: the CFTC was very transparent and was saying and staid
Speaker 1: basically that they are planning to do either rulemaking our
Speaker 1: guidance on this topic, so I would expect that to
Speaker 1: come at some point in future, but until that comes,
Speaker 1: we needed some release in order to provide this this product.
Speaker 2: You know, this situation is kind of a microcosm of
Speaker 2: what's happening on the larger scale of crypto legislation, because
Speaker 2: to your point, what many of these crypto apps and
Speaker 2: platforms are doing, and blockchains and so forth don't fit
Speaker 2: the mold of trad FI totally. There's there's gaps. We
Speaker 2: need rule making, and it seems these agencies, the SEC
Speaker 2: and the CFTC, they have to go about kind of
Speaker 2: doing it at hoc and then eventually, like you said,
Speaker 2: put out the full rules or.
Speaker 1: The rulemaking right totally. And one example of this that
Speaker 1: has to do with our no action letter is obviously
Speaker 1: we are a non custodiam wallet, so our users have
Speaker 1: control over the keys, which allows them to have control
Speaker 1: over their assets that they're they're storing in that wallet.
Speaker 1: And historically, before that technology, you know, was created, and
Speaker 1: with this introducing broker regime, a user would need to
Speaker 1: or a customer would need to basically connect one financial
Speaker 1: institution that had custody of their assets with the other
Speaker 1: financial institution that was registered with the CFTC. Now it's
Speaker 1: like a totally different paradigm where the user is the
Speaker 1: one that is directly connected to the registered entity, and
Speaker 1: you know, the money is flowing from the user directly
Speaker 1: to the entity, not from one financial institution to another
Speaker 1: financial institution.
Speaker 2: Yeah, and this is so significant to Merissa because there's
Speaker 2: been a lot of you know, friction when it comes
Speaker 2: to DeFi and maybe something like this and a rulemaking
Speaker 2: from the CFTC can really be applied to DeFi regulation.
Speaker 2: To your point of self custodial wallets, you're not involved
Speaker 2: in any way, the user's transaction transacting with another user,
Speaker 2: and it's decentralized.
Speaker 1: Right for sure. And importantly, our no action doesn't allow
Speaker 1: like DeFi perpse for instance, like the user needs to
Speaker 1: become a customer of a registered entity which is like
Speaker 1: a centralized entity. But I do think that the framework
Speaker 1: within the no action letter and the recognition that self
Speaker 1: custody works differently will definitely play a huge role in
Speaker 1: how the regulations are adapted to like defive purse or
Speaker 1: defive predictions.
Speaker 2: Pardon the interruption. Hi, I'm Tony. I'm the host of
Speaker 2: the Thinking Crypto podcast. I wanted to ask you if
Speaker 2: you can please support the podcast by hitting the like
Speaker 2: button subscribing. If you haven't as yet, you can leave
Speaker 2: a comment below as well. And if you're listening on
Speaker 2: a podcast platform such as Spotify, Apple or wherever you
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Speaker 2: the five star rating. I'll let you get back to
Speaker 2: the content. Thank you so much. Yeah, that definitely makes sense.
Speaker 2: So talk to us a bit about the process of
Speaker 2: getting this no action letter that it involve multiple conversations
Speaker 2: with the CFTC kind of present seeing the blueprint of
Speaker 2: how this technology works for them to understand it.
Speaker 1: Yeah, exactly. So we presented a blueprint with regard to
Speaker 1: how the tech would work and the flow of funds,
Speaker 1: and we also explain to them why the introducing broker
Speaker 1: regime didn't fit and also like what we were capable
Speaker 1: of doing from a compliance standpoint, And you'll see in
Speaker 1: the no action letter they lay out a bunch of
Speaker 1: different compliance requirements that we will have to abide by
Speaker 1: before we launch a product under this letter. So one,
Speaker 1: for instance, is we have to abide by the NFA
Speaker 1: marketing rules. Another one is our users have to become
Speaker 1: a direct They basically have to direct the onboard with
Speaker 1: the registered entity or registered exchange, and you know that
Speaker 1: can happen within the phantom universe, but they will become
Speaker 1: like an independent customer of that registered entity. Another one
Speaker 1: is that we have to agree to c FTC jurisdiction
Speaker 1: and allow them to investigate us or bring enforcement actions
Speaker 1: against us if we violate the terms of the no
Speaker 1: action letter. So there's a whole host of compliance requirements
Speaker 1: that you know, frankly we are capable of doing that
Speaker 1: we believe are very important in order to keep our
Speaker 1: users safe.
Speaker 2: Yeah, and I'm assuming the rest of the industry is
Speaker 2: waiting for the rule making around this, you know, seeing
Speaker 2: that you guys got this no action relief and maybe
Speaker 2: CFTC they've been moving pretty fast. So has this sec
Speaker 2: we get the full rule making a bit later this year.
Speaker 1: Yeah, I think so too. And I do think it's
Speaker 1: going to impact the centralized providers first and then they'll
Speaker 1: hopefully do something with regard to DeFi but I do
Speaker 1: think that in the interim, our no action letter is
Speaker 1: very instructed and helpful for others in the industry that
Speaker 1: want to launch these types of products, Like, you know,
Speaker 1: we certainly are not going to be the only one,
Speaker 1: and I think we'll you know, have the best product,
Speaker 1: but just because I think Phantom has the best product.
Speaker 1: But you know, our no action matter provides like basically
Speaker 1: a blueprint for others as well, and we wanted to
Speaker 1: put that out there in a public way to serve
Speaker 1: others in the industry because that competition is very healthy.
Speaker 2: Oh absolutely, And where as we've seen incredible progress on
Speaker 2: the SEC side as well. And look, both the SEC
Speaker 2: and cft S have been working closely Project Crypto Chair
Speaker 2: Sea leg as well as Chair Atkins. You know, they
Speaker 2: did a whole summit or meeting or something along those lines,
Speaker 2: and you know you talked about working closely together. And
Speaker 2: recently the SEC put out guidance on cryptosecurities providing four categories.
Speaker 2: What are your thoughts on that, especially you know you
Speaker 2: and I who talked under it against the regime.
Speaker 3: Change.
Speaker 2: Time to change.
Speaker 1: Yeah, I mean, I think it's great. I think that
Speaker 1: you know, Chair Atkins was waiting for quite a while
Speaker 1: before cher Selig was officially in his seat, and pretty
Speaker 1: much right away, I think in January they signed that
Speaker 1: MLU that that detailed that they were committed to working
Speaker 1: together and also committing to approach regulating this industry with
Speaker 1: like an innovation mindset. So they were, you know, committing
Speaker 1: to essentially regulating what needed to be regulated, but then
Speaker 1: letting innovation happen as well, which is like a total
Speaker 1: you know, different approach than what we were dealing with
Speaker 1: for the past few years.
Speaker 2: Yeah, it's it's a breath of fresh air. It's so
Speaker 2: good to have actual rulemaking and clarity, you know, keyword
Speaker 2: there for the larger bill, of course, but to have
Speaker 2: that guidance, and I feel like it's going to help
Speaker 2: kick off a lot of innovation. People can start building.
Speaker 2: They don't have to worry about getting a well's notice,
Speaker 2: a lossuit, you know, as long as they're not breaking
Speaker 2: a law of course, Yeah, totally. And they're just you know,
Speaker 2: they just want to build. And I feel it's just
Speaker 2: going to unlock crypto Web three to go to higher
Speaker 2: levels of innovation. I can't wait to see what people
Speaker 2: come up with in the years to come.
Speaker 1: Yeah, I mean, and this is how the regulatory process
Speaker 1: should work. Like right now, we have two regulators where
Speaker 1: their doors truly are open to people coming in and
Speaker 1: explaining their projects to them and genuinely wanting to be compliant.
Speaker 1: And I think are No Action letter is a perfect
Speaker 1: example of that. And that's just totally different than how
Speaker 1: the chair Genistler, you know, how his agency worked, where
Speaker 1: he would say and can come knock on our door.
Speaker 1: But then when people did that, they were served with
Speaker 1: a wells notice basically, so it's definitely a very welcome
Speaker 1: change in that respect.
Speaker 2: I don't know if you can answered this, but are
Speaker 2: you guys currently meeting with the SEC for anything you
Speaker 2: know that you can share, you know, nothing bad, but
Speaker 2: like as far as new things that you're looking to
Speaker 2: develop and so forth.
Speaker 1: Yeah, I mean there's been an open line of communication
Speaker 1: with them, and it's there. You know, they're wanting to
Speaker 1: do things and I think many people in the industry
Speaker 1: are talking to them, and you know, the meetings mostly
Speaker 1: are public to public record, at least they have to
Speaker 1: publish their calendar.
Speaker 2: So oh my gosh, that is in itself just amazing
Speaker 2: to actually have that transparency who they're meeting with and
Speaker 2: all that. It's like night and day.
Speaker 3: Yeah, for sure.
Speaker 2: Now the agencies you know, doing a lot of this
Speaker 2: work and providing the rulemaking and so forth. Obviously we
Speaker 2: need the Clarity Act itself, the the overarching theme to
Speaker 2: be passed in the Senate, signed by the President of
Speaker 2: course too, you know, make sure that it's law and
Speaker 2: it doesn't get reverted by another next administration down the line.
Speaker 2: Right now, the Claritiact is being held up because of
Speaker 2: the banks, fighting stable coin yield and so forth. I
Speaker 2: guess the first question I want to ask is, you know,
Speaker 2: are you guys looking at the Clarity Act and along
Speaker 2: with the rest of the industry to make sure that's
Speaker 2: copasetic and it has all the things that are needed
Speaker 2: for crypto to have that balance, right, because I know
Speaker 2: they're going to have to find a balance that crypto
Speaker 2: to survive and to grow, and there need to be innovation,
Speaker 2: but also not to destroy the entire TRAT five system
Speaker 2: and things along those lines, right for sure.
Speaker 1: And yeah, we definitely are and we are involved in
Speaker 1: policy conversations. We have talked to many different offices on
Speaker 1: the Hill about this. I think from our perspective, the
Speaker 1: most important thing is that defied developers are protected because
Speaker 1: right now there's some ambiguity in how the twenty nineteen
Speaker 1: Since and Guidance imports with the DOJ's interpretation of the
Speaker 1: Money Transmission Statute. So we're hoping that there's a fix
Speaker 1: there and that adds clarity to protect software developers, and
Speaker 1: that that's like written in legislation, so the DOJ, you know,
Speaker 1: can't come up with their own interpretation that's contrary to
Speaker 1: what the guidance has said for the past almost seven years.
Speaker 2: I think, oh yeah, Marissa, hard question. You think this
Speaker 2: bill makes it passes by the beginning of summer?
Speaker 1: Oh man, I mean this is the month if it's
Speaker 1: going to happen. The markup, I think is supposed to happen.
Speaker 1: Maybe it's the tenth today, So I think in a
Speaker 1: couple of weeks it's supposed to happen. And I think
Speaker 1: if it doesn't happen this month, there's the chances are
Speaker 1: low if it doesn't happen this month because this is
Speaker 1: also an election year, so members of Congress are going
Speaker 1: to be focused on the election. So this is I
Speaker 1: hope it does, but we'll see, and this is sort
Speaker 1: of our chance. Just in terms of the composition of Congress,
Speaker 1: there's like people that are very committed to getting this done,
Speaker 1: and it's not clear whether that will be the case
Speaker 1: with the next Congress.
Speaker 2: Yeah, I'm so hoping they can get this done. But
Speaker 2: also I was talking to someone, I think Austin Campbell
Speaker 2: of zero knowledge proof or zero knowledge consulting excuse me,
Speaker 2: And you know, one of things he was saying is that, Okay,
Speaker 2: let's say we don't get the bill passed. As long
Speaker 2: as the SEC and the CFTC are putting out the
Speaker 2: rulemaking that that's going to be a huge win. But
Speaker 2: definitely by the end of President Trump's term they need
Speaker 2: to get the belt passed, so maybe we have twenty
Speaker 2: twenty seven. So I try to remind people that obviously
Speaker 2: the ideal case is a scenario. It is we need
Speaker 2: to get it done now. It would be so great
Speaker 2: for the industry in the market.
Speaker 1: Yes, I totally agree with that. I do think that
Speaker 1: relying on rulemaking is not ideal, especially given that rule
Speaker 1: making can take a long time and there's always the
Speaker 1: potential that there will be a lawsuits, you know, as
Speaker 1: we saw in the Blockchain Association sued the SEC after
Speaker 1: finalizing the dealer rule and that rule ultimately was repealed
Speaker 1: because of the lawsuit. So there's that potential. With rule
Speaker 1: making and legislation is just much more concrete and it's
Speaker 1: like much harder to challenge.
Speaker 2: Oh absolutely, I know we talked about the two major agencies,
Speaker 2: the SEC and the CFDC. Are there other agencies that
Speaker 2: you're engaged with that may not get the spotlight as much,
Speaker 2: but they are important for crypto and certain guidance yeah.
Speaker 1: I mean, I think the genius rulemaking that's happening across
Speaker 1: a number of different agencies illustrates which agencies are important.
Speaker 1: The OCC, for one, there's a comment period that's happening
Speaker 1: right now that closes at the beginning of May about
Speaker 1: how the OCC will regulate stable coin issuers that they're
Speaker 1: gonna have a huge role in stable coins and the
Speaker 1: market there. And then also Treasury place a huge because
Speaker 1: Treasury is the umbrella agency over OPAC and Finnsen. So
Speaker 1: that's another especially with regard to DEFY. You know, Treasury
Speaker 1: really does impact DeFi a lot.
Speaker 2: Oh yeah, definitely. And boy, I know there's a lot
Speaker 2: of talks about taxes and center Cynthia Lummus has put
Speaker 2: forth some bills and things like that. I feel once
Speaker 2: clarity is done, I feel like we got to figure
Speaker 2: out DeFi and then taxes.
Speaker 1: Yeah, I know, I laugh because I'm just so not
Speaker 1: a tax lawyer, and it's a subject I often actively
Speaker 1: avoid because it's so it's just so complicated. There are
Speaker 1: some great tax lawyers out there that's specialize in crypto attacks,
Speaker 1: but it is a huge area of ambiguity, and right now,
Speaker 1: you know, everyone is essentially responsible for reporting their gains
Speaker 1: through whatever however they're using their assets, their crypto assets.
Speaker 1: But there's just a lot of ambiguity that probably needs
Speaker 1: to be solved through legislation.
Speaker 2: Yeah. Absolutely. What's on your roadmap for the remainder of
Speaker 2: a year. I don't know if you can talk about
Speaker 2: product at all, maybe not, but maybe on the legal
Speaker 2: side you can probably share that. Yeah.
Speaker 1: I mean, one thing on the product side that's exciting
Speaker 1: is we have opened the wait list for Phantom Cash
Speaker 1: and US. Anyone in the US now can access that product,
Speaker 1: which allows them to hold the cash stable coin within
Speaker 1: their wallet and then access fiat features so you can
Speaker 1: have a debit card, you can on or off ramp.
Speaker 1: We've partnered with Stripe to be able to to do that.
Speaker 1: Like we have KYC that enables users to connect their bank,
Speaker 1: they can put direct deposit, you know, into their Phantom wallet.
Speaker 1: It's really becoming like a full money app. So I
Speaker 1: think that's really exciting on the product side. On the
Speaker 1: legal side, I mean, still working on all of the policy,
Speaker 1: the policy work and engaging regulators. I also do most
Speaker 1: of my job, honestly is the product counseling. So I
Speaker 1: work very closely with our product team and making sure
Speaker 1: that we're making products that are compliant and working on
Speaker 1: the development of those products, which is really fun.
Speaker 2: Oh that's exciting. Well, I'm sure we're going to have
Speaker 2: another conversation sometimes this year as things progress we get
Speaker 2: further rule making and so forth. But thank you so much, Marissa.
Speaker 2: It is great to see you again. And I don't
Speaker 2: know when we're going to get to see each other
Speaker 2: in person again. Maybe at a salon at cryptoconference or
Speaker 2: something like that.
Speaker 3: Yeah, definitely, let's aim for that. Thanks Tony, Thank you
Speaker 3: so much for tuning in. Please hit the like button
Speaker 3: subscribe if you haven't as yet. If you're listening on
Speaker 3: a podcast platform such as Spotify or Apple, please follow
Speaker 3: and leave a five star rating.
Speaker 2: Thank you so much.