Speaker 1: You know, there has been so much focused, particularly in
Speaker 1: the Senate around the stable coin issue, is that they
Speaker 1: haven't had time to really fully comprehend, like you know,
Speaker 1: what is DeFi like, what are the issues related to
Speaker 1: market structure? Why do we have this like long standing
Speaker 1: battle over what's the security? What's a commodity?
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Speaker 2: welcome into the Thinking Crypto Podcast. I'm your host, Tony Edward,
Speaker 2: and joining me today is Kristin Smith, who's the president
Speaker 2: of the Salona Policy Institute. Kristin, great to have you.
Speaker 1: It's great to be here, Tony.
Speaker 2: Kristin. We were talking before the recording. I've wanted to
Speaker 2: interview for a very long time. I'm glad we're getting
Speaker 2: around into doing this to get your perspective on everything
Speaker 2: that's happening in DC around crypto. But let's kick it
Speaker 2: off with your background, you know, tell us about where
Speaker 2: you're from and how'd you get involved with government.
Speaker 1: Sure, I grew up in California, and then I went
Speaker 1: out to Washington, d C. To go to college at
Speaker 1: George Washington University and ended up doing an internship on
Speaker 1: the Hill and realized I was actually into politics and
Speaker 1: policy and stayed for about ten years. And so a
Speaker 1: lot of what I worked on when I was on
Speaker 1: Capitol Hill back in the early two thousands was internet policy,
Speaker 1: we were dealing with a potential rewrite of the Telecommunications
Speaker 1: Act and net neutrality and privacy issues and things like that,
Speaker 1: and so I was really into the emerging Internet. This
Speaker 1: is kind of as Web one was going to Web two,
Speaker 1: and I found that just intellectually very interesting from a
Speaker 1: policy perspective. And then after I left the Hill, I
Speaker 1: went to business school and got an MBA in finance,
Speaker 1: thinking I would sort of transition into the world of finance,
Speaker 1: and actually the really hard time doing that. I interviewed
Speaker 1: at all these different investment banks and I basically got
Speaker 1: no job offers. And so through this process though I
Speaker 1: stumbled in to bitcoin and blockchain. Nobody called it crypto
Speaker 1: back then, and I became very interested in that because
Speaker 1: it seemed to be kind of an intersection of both
Speaker 1: the Internet policy work I had done in Washington with finance,
Speaker 1: and it seemed to be sort of the next iteration
Speaker 1: of the Internet. And so yeah, so that led me
Speaker 1: to the Blockchain Association and now to Salanta Policy Institute.
Speaker 2: It's so amazing that you were part of the Internet
Speaker 2: eraror in kind of you know, trying to get policy
Speaker 2: and get things going for the Internet, and now you
Speaker 2: ended up in crypto and for this next layer on
Speaker 2: top of the Internet. Do you see any similarities in
Speaker 2: some of the political legislative things you were doing back
Speaker 2: then to what's happening now.
Speaker 1: I mean yes and no. I would think some of
Speaker 1: the similarities include members of Congress have a very low
Speaker 1: education level when it comes to crypto, so it used
Speaker 1: to be that same way for the Internet. I remembered
Speaker 1: when I was working for a senator and I was
Speaker 1: trying to explain to her what an application was and
Speaker 1: what this YouTube thing is and what Facebook was, and
Speaker 1: she had no idea because she was on her phone
Speaker 1: all day long and on her emails all day long.
Speaker 1: But that was kind of the extent of her interaction
Speaker 1: with the Internet. So you know, it's it's similar with crypto,
Speaker 1: right like most members of Congress aren't, aren't, you know,
Speaker 1: using stable coins to pay for something or you know,
Speaker 1: borrowing something in the defray protocol or you know, they're
Speaker 1: not doing that kind of stuff, So so you it
Speaker 1: requires a lot of imagination. So I think that is similar.
Speaker 1: I think what's actually very different is there genuinely was
Speaker 1: this sort of sense that the Internet, at least among
Speaker 1: people in government there's this sense that the Internet was
Speaker 1: something special and that we needed to sort of preserve
Speaker 1: and protect and let it flourish. You know. This again
Speaker 1: was the early two thousands before some of the issues
Speaker 1: with big tech, because there wasn't big tech yet had emerged,
Speaker 1: and we've never really seen that with crypto. We are
Speaker 1: seeing it with AI. Interestingly, I think there is some
Speaker 1: language in the Reconciliation Bill right now that has a
Speaker 1: moratorium on any sort of AI regulation for a period
Speaker 1: of time. But crypto was always sort of treated differently,
Speaker 1: and I think a lot of it has to do
Speaker 1: with the fact that it can look and feel like money,
Speaker 1: and money is like so important to so many different
Speaker 1: different things and so so. Yeah. So, but I have
Speaker 1: been able, I think, to use some of the knowledge
Speaker 1: that I gained early on in my career to try
Speaker 1: to figure out how to apply that to this industry
Speaker 1: going forward. And we've had some success. So none out
Speaker 1: of the woods yet, but we're definitely making progress.
Speaker 2: Yeah, and obviously kudos to you and you know your
Speaker 2: time at the Blockchain Association. I think we wouldn't be
Speaker 2: at the place we're at now with more members of
Speaker 2: Congress educated and legislation and all these things moving forward.
Speaker 2: And I think Christian, you got a book to write
Speaker 2: here because you've seen these two major technological innovations which
Speaker 2: obviously changing the world, and to have that Internet from
Speaker 2: the Internet earon and how crypto and blockchain. I mean,
Speaker 2: I'm sure a book has to be in the works
Speaker 2: at some point.
Speaker 1: It's it's definitely not a book. It's it's a sitcom.
Speaker 1: It's the Silicon Valley meets Zeep like all matched into one.
Speaker 1: And it's uh, there's a lot of hilarious chapters to it,
Speaker 1: but but interesting stories I think at the same time.
Speaker 1: But but no, it feels like more like a comedy.
Speaker 1: There there are moments where we move forward, we move backwards,
Speaker 1: and and the characters both in government and within the
Speaker 1: industry I think are amazing. But yes, it's been a
Speaker 1: very interesting story.
Speaker 2: You know, you brought up the idea of this technology
Speaker 2: not being very accepted initially because of the disruption of
Speaker 2: money and currency and the movement of value. And it's
Speaker 2: you know, in our minds and the way we've grown
Speaker 2: up in the fabric of society, we've accepted money to
Speaker 2: be a certain way or the exchange of value to
Speaker 2: be a certain way. And while the Internet changed the
Speaker 2: way we did communication and transacted, that wasn't so much
Speaker 2: of it had disruptions, but not so much of a
Speaker 2: departure from the control that governments have with currency. And
Speaker 2: that's kind of why you're seeing this heavy attack on
Speaker 2: crypto or used to be that way.
Speaker 1: Yeah, well, you know, currencies are very much the business
Speaker 1: of governments, right, And I mean you look at the
Speaker 1: US dollar and all of the you know, sort of
Speaker 1: thinking that goes into how to control those money supplies,
Speaker 1: et cetera. And then you look at the regulation that
Speaker 1: goes around the intermediaries in this space, and this is
Speaker 1: this is very much you know, traditionally like the government's business.
Speaker 1: Where the government hasn't at least in you know, in states,
Speaker 1: like they haven't been the source of information, right, whereas
Speaker 1: you know, some country where you know the government you know,
Speaker 1: is controlling all of the information might have been much
Speaker 1: more threatened by the Internet than than the US government.
Speaker 1: You know. Yeah, money, money is record coword to what
Speaker 1: we do or what the government does, I should say,
Speaker 1: And so yeah, I think there's been a lot of
Speaker 1: concern that you can move very large amounts of money
Speaker 1: very quickly in a way that you know, doesn't require
Speaker 1: any sort of government intermediary has been a very, I think,
Speaker 1: sort of scary thing, and there have been different chapters
Speaker 1: of it over time, and I think where we are
Speaker 1: right now, we've landed in like a pretty good spot.
Speaker 1: I mean, I think the progress we've seen with stable
Speaker 1: coin legislation shows that, you know, this is not a
Speaker 1: technology that's threatening to the dollar. It's now something that
Speaker 1: can enhance and support the dollar and help us help
Speaker 1: the US export the dollar all over the world. And
Speaker 1: so I think that is you know, obviously like a huge,
Speaker 1: a huge shift, and you know, as we get into
Speaker 1: other parts of crypto, I think, you know, it's interesting
Speaker 1: there's been a pretty big focus on stable coin legislation
Speaker 1: this year, and I was talking with one of our
Speaker 1: lobby and consultants this morning, and there's a really deep
Speaker 1: understanding of how stable coins work, and there's not as
Speaker 1: much of a deep understanding anymore about how DeFi and
Speaker 1: some of the other elements work. So we almost have
Speaker 1: to go back and do that re education again because
Speaker 1: there's been so much turnover with staff. We've got a
Speaker 1: lot of younger members who have entered the conversation, and
Speaker 1: so it's you know, it's a never ending process here
Speaker 1: of trying to get Congress and regulators to keep up
Speaker 1: with where crypto is at. But we do make progress,
Speaker 1: and you know, I think it's listen, we don't want
Speaker 1: the government to move so quickly that they do it wrong, right,
Speaker 1: and so it's important to have that understanding before committing
Speaker 1: to policies that are going to impact innovation here for
Speaker 1: decades to come.
Speaker 2: On the note of stable coins, I mean, the Genius
Speaker 2: Act getting passed in the Senate, there seems to be
Speaker 2: not just from a technology or payment standpoint, but a
Speaker 2: geopolitical urgency here, because if you have US dollar back
Speaker 2: stable coins, like you said, it helps the US dollar.
Speaker 2: Any stable coin issues, it seems, according to the legislation,
Speaker 2: will have to back their reserves with US treasuries.
Speaker 1: Yeah, I mean that's huge, right. I mean, I think
Speaker 1: I haven't seen the number just lately, but as of
Speaker 1: a couple of months ago, you know, Tether I think
Speaker 1: was the thirteenth or fourteenth largest purchaser of treasuries, which
Speaker 1: is pretty crazy if you think about it, and you know,
Speaker 1: especially at a time Wren, you know, we've seen interest
Speaker 1: rates going up in the in the treasury market, and
Speaker 1: we see that, you know, there's not as much interest
Speaker 1: from other countries around the globe, like we need to
Speaker 1: backfill that somewhere, and so this seems like a really
Speaker 1: natural place. And then I do think there are you know,
Speaker 1: individuals and countries around the world that are far less
Speaker 1: you know, their currencies are far less stable than we
Speaker 1: have here, and they would gladly want to hold their
Speaker 1: their savings and their money in US dollar back stable
Speaker 1: coin because because it holds its value and they know
Speaker 1: that it's strong. And so it turns out that this
Speaker 1: is this is a really really great way to promote
Speaker 1: the dollar and not one that is competitive with the dollar.
Speaker 2: And we're seeing signals from different companies across the US
Speaker 2: Airbnb and Uber and so for they're talking about integrating
Speaker 2: stable coin payments. So it seems everybody sees the direction
Speaker 2: to puckets heading and they're skating towards it. Banks are
Speaker 2: like Bank of America, they're saying they're going to launch
Speaker 2: your own stable coin. There's rumors of a joint stable
Speaker 2: coin from all the major banks. So do you think
Speaker 2: once this legislation gets signed into law. We're going to
Speaker 2: see a burst of innovation.
Speaker 1: I think we are. I think we're going to see
Speaker 1: a lot of adopt I think when we look at
Speaker 1: you know, traditional companies or traditional financial institutions, they've been
Speaker 1: very hesitant in engaging in anything that touches crypto rails
Speaker 1: because the signal that the government was sending is don't
Speaker 1: go here, this isn't welcome. And to have that regulatory
Speaker 1: framework and the rules of the road are sort of
Speaker 1: exactly what they need in order to come in. And
Speaker 1: if you think about you know, I think the US
Speaker 1: user experience on payments is not that bad, right, Like
Speaker 1: we can all pay for what we want. We can
Speaker 1: you know, send money via Venmo. It feels like we've
Speaker 1: received it. But when you get underneath, like there's a
Speaker 1: lot of inefficiencies there, it takes a lot of time.
Speaker 1: And so if we could move to a payment system
Speaker 1: that is available, you know, twenty four hours a day,
Speaker 1: seven days a week, you do very teeny tiny amounts
Speaker 1: or very large amounts Like these are improvements that I
Speaker 1: think people will be to build new business models around,
Speaker 1: or just lower the cost of what it takes to
Speaker 1: do business and engage in payments with customers. I mean,
Speaker 1: it's it's very expensive to do if you're using credit
Speaker 1: cards and things like that today. So yeah, so I
Speaker 1: think I think we're I mean, I think that's probably
Speaker 1: the reason that I mean, I'm not a financial analyst,
Speaker 1: but if you look at those the run up and
Speaker 1: price of the Circle Stock Sensor IPO, I mean, there's
Speaker 1: a lot of people that a lot of investors that
Speaker 1: I think are looking to be a part of where
Speaker 1: the future is going. And and and stable coins I
Speaker 1: think are clearly going to be a part of that.
Speaker 2: Oh absolutely. And you know, I often talk about on
Speaker 2: the podcast the implications of micro payments and because of
Speaker 2: the instant settlement and whether it be web monetization being disrupted,
Speaker 2: paying your toll or just simple things with a top
Speaker 2: of a button and settle instantly and there's no lag
Speaker 2: and there's no high fees. I mean, it would just
Speaker 2: open up so many benefits and opportunities.
Speaker 1: Yeah, and there's you know, kind of this concept that
Speaker 1: people in the Slana ecosystem talk about of payment finance,
Speaker 1: and it's it's the payment themselves, but it's also when
Speaker 1: there is a lack of time, you know, how can
Speaker 1: I monetize my accounts receivable, or if I'm a creator
Speaker 1: and I know that this video is going to get
Speaker 1: so many views, you can you know, take advantage of
Speaker 1: receiving the benefit of that on the front end, because
Speaker 1: some day else will want to buy, you know, make
Speaker 1: that trade. And so I think there's a lot that
Speaker 1: opens up for every day individuals that is far outside
Speaker 1: of you know, kind of what we see to stable
Speaker 1: coins being used for today in terms of like trading
Speaker 1: and things like that. So a lot of excitement on
Speaker 1: the horizon.
Speaker 2: Absolutely tell us a bit about the Salona Policy Institute
Speaker 2: and what you guys are doing.
Speaker 1: Yeah, so Salona Policy Institute is Our CEO is Miller
Speaker 1: White hel Slovine, who I used to be the CEO
Speaker 1: of DeFi Education Fund. The fun part about that is
Speaker 1: I hired are several years ago, shortly after he graduated
Speaker 1: from college at the Blockchain Association, and now he's hired me.
Speaker 1: So I knew, I knew I'd be working for him someday,
Speaker 1: and then that day has come. But we have there's
Speaker 1: six of us. That's a very small team, but we
Speaker 1: have a lot of resources to work with the top
Speaker 1: lobbying firms the top law firms, the top public affairs
Speaker 1: firms in Washington to make sure that we're advancing the
Speaker 1: goals of the Solana ecosystem, Like we want the policies
Speaker 1: that are being created to have you know, Solona have
Speaker 1: been considered in the making of those policies. I think
Speaker 1: still today. You know, most policy makers in Washington they
Speaker 1: all know Bitcoin. Now they've got that, they know there's
Speaker 1: these other cryptocurrencies out there. But what we really want
Speaker 1: to do is tell the story of Solana and explain
Speaker 1: the different things that are building in that ecosystem and
Speaker 1: make sure that it isn't disadvantage in any way in
Speaker 1: any of the policies that are crafted going forward.
Speaker 2: Yeah, that's great, it seems you know, at one point
Speaker 2: I was talking to someone and they're like, it looks
Speaker 2: like the work is done. You know, we got legislation
Speaker 2: in place, it looks like things going to open up.
Speaker 2: But we still got to keep the education and the
Speaker 2: advocacy going right because there's new members, there's new forms
Speaker 2: of technology being innovated in this asset class. So it's
Speaker 2: a continuing journey and work that has to be done here.
Speaker 1: Yeah, I don't think the work is done and we
Speaker 1: can get deeper into some of the policy issues. But
Speaker 1: I think I think stable coin is obviously very close
Speaker 1: and we should get that across the finish line soon.
Speaker 1: But you know, the Senate Banking Committee just recently issued
Speaker 1: principles on market structure. That is very different than the House,
Speaker 1: which is you know, passing legislative text on the House floor, right, Like,
Speaker 1: those are very different places in the process. And I
Speaker 1: think that you know there has been so much focused
Speaker 1: particularly in the Senate around the stable coin issue, is
Speaker 1: is that they haven't had time to really fully comprehend
Speaker 1: like you know, what is DeFi like, what are the
Speaker 1: issues related to market structure? Why do we have this
Speaker 1: like long standing battle over what's the security? What's a commodity?
Speaker 1: I think there are a lot of really complex issues
Speaker 1: that they need to unpack there, and that's going to
Speaker 1: take time and and you know, you can't force that.
Speaker 1: You can help facilitate that, but you know, people, you know,
Speaker 1: policymakers in the Senate, they can't do everything simultaneously, like
Speaker 1: they can you know, only focus on so much at once.
Speaker 1: And the Senate traditionally really really likes to put their
Speaker 1: their fingerprints on legislation and so they're not going to
Speaker 1: blindly take what the house comes over to them. So
Speaker 1: I think there's quite a bit more work to do.
Speaker 2: Oh yeah, and the market structure, like you said, it's
Speaker 2: much more complex. There so many aspects of this asset
Speaker 2: clause right, staking, DeFi, NTS, tokenization, there's just so many things,
Speaker 2: and you know, that's kind of the meat and potatoes.
Speaker 2: Almost seems like stable coins are an easy thing. It's
Speaker 2: like not really complex.
Speaker 1: Yeah, yeah, no, stable coins are about as simple as
Speaker 1: it gets.
Speaker 2: Now. I read that recently the Salona Policy Institute, phantom
Speaker 2: Orca and super States submitted a compliant tokenized securities framework
Speaker 2: to the SEC. I'll tell a little bit about that.
Speaker 1: Yeah. Well, well, first of all, the SEC is a
Speaker 1: great place to be these days, and you know, for
Speaker 1: the last four years under Gary Gensler, you know, we
Speaker 1: stayed as far away from it as we could. My
Speaker 1: very first meeting with Gary Gunsler when I was at
Speaker 1: the Blockchain Association, he essentially accused my entire membership of
Speaker 1: the Blockchain Association, which at the time was about forty companies,
Speaker 1: of violating securities laws and you know, not even giving
Speaker 1: us the benefit of the doubt. This SEC is completely
Speaker 1: different and we have the SEC's Crypto Task Force that
Speaker 1: fled by Commissioner Hester Purse. It is staffed with people
Speaker 1: throughout the Commission with expertise in different areas, and they
Speaker 1: have been very very thoughtful and focused on first getting
Speaker 1: all the old policies off the books right like they
Speaker 1: stopped the litigation, they pulled back the role makings that
Speaker 1: were open. They sort of cleaned the slates, and now
Speaker 1: they're starting to put out guidance on specific areas about
Speaker 1: what's not a security. But one area that they've expressed
Speaker 1: interested and is the tokenization of securities. And they held
Speaker 1: an entire round table at the SEC and sought input
Speaker 1: from the industry and they're thinking very very deeply about
Speaker 1: what if anything needs to change within the regulatory regime
Speaker 1: to make it easier for open public blockchain like Solana
Speaker 1: or any other blockchain you know, to be sort of
Speaker 1: the rails by which you issue and trade securities. And
Speaker 1: so this is this is very exciting. I think I
Speaker 1: last numbers I saw that it's increased since since last month.
Speaker 1: It was about twenty billion dollars worth of real world
Speaker 1: assets including securities that you know, are issued on public blockchains,
Speaker 1: and I saw a report that mckenzy has estimated that
Speaker 1: number to path to trillion in the next five years.
Speaker 1: So I think there's a tremendous amount of growth here.
Speaker 1: And some of the benefits are like stable coins, you
Speaker 1: have a speed issue in that you can instantly settle
Speaker 1: these things. You could potentially trade them twenty four hours
Speaker 1: a day, seven days a week. You know, there are
Speaker 1: those types of benefits just efficiencies, cost benefits, et cetera.
Speaker 1: But then there's some other benefits that if you bring
Speaker 1: down the cost of doing this, that means opening up
Speaker 1: the capital markets to smaller and smaller companies becomes available.
Speaker 1: So you don't have to be you know, worth a
Speaker 1: billion dollars to go I p O. You can you know,
Speaker 1: be a small business and be able to access the
Speaker 1: capital markets. You can also, you know, due to the
Speaker 1: composable nature of blockchains, you know, maybe use your securities
Speaker 1: as collateral in a totally separate system, you know, for
Speaker 1: something else. Right whereas today, yeah, I can go to
Speaker 1: Merrill Lynch and get a loan from them, but it's
Speaker 1: not doesn't transfer to you know, other companies and things
Speaker 1: like that. So I think I think there's a lot
Speaker 1: of innovation that could open up there. And I think,
Speaker 1: you know, the United States has traditionally, like been known
Speaker 1: for having the best capital markets in the world, and
Speaker 1: I think that this will bring us into the next,
Speaker 1: you know, sort of generation of capital markets and allow
Speaker 1: the US to be the home and the leader for
Speaker 1: for decades and gates to come. And so I think
Speaker 1: it's super exciting and it's actually one of the reasons
Speaker 1: I wanted to come to Salana Policy Institute and have
Speaker 1: more of a focuser as opposed to working with the
Speaker 1: entire industry.
Speaker 2: Yeah, and on that note, Solana has been getting a
Speaker 2: lot of adoption with folks tognizing whether it be treasuries
Speaker 2: or funds or even just the retail aspect of NFTs
Speaker 2: and different things. So that's really great. And on the
Speaker 2: note of the SEC, I mean, it's like a breath
Speaker 2: of fresh air.
Speaker 1: It's how it should be. Yeah, we went in and
Speaker 1: met with them, and you could tell them ideas and
Speaker 1: I'll give you feedback, and yeah, if you go to
Speaker 1: their website you can see everyone they've met with and
Speaker 1: all of the submissions. I mean, it's just absolutely it's
Speaker 1: just it's as different as it could possibly be from
Speaker 1: how it was before, and very much welcome change.
Speaker 2: I don't know if you can speak to this, but
Speaker 2: I'm curious, Gary Ganser. I saw the man teach crypto
Speaker 2: at MIT and videos and he absolutely understands it. He
Speaker 2: goes to the SEC and it's a complete one eighty.
Speaker 2: Everything's bad, It's all securities.
Speaker 1: Right.
Speaker 2: Do you think that wasn't the real Garagancer but just
Speaker 2: simply he was? It was political Elizabeth Warren put in
Speaker 2: the battery in his backpack and pushing him in the SEC.
Speaker 1: Yeah, I mean, I think it was largely political. You know,
Speaker 1: you have to look at his time at the CFTC, right,
Speaker 1: and one of the things he did, you know, he
Speaker 1: was at the s CFTC prior to being at the SEC,
Speaker 1: and one of the things he did at the CFTC
Speaker 1: was work to make that agency stronger and more powerful.
Speaker 1: I think when he got to the SEC he had
Speaker 1: that same sort of mindset. He also had, you know,
Speaker 1: back then, political ambitions to potentially be Treasury Secretary or
Speaker 1: something sort of higher up in the pecking order of
Speaker 1: the of the Biden administration. And you know, at the
Speaker 1: time the sort of de facto financial services are, for
Speaker 1: lack of a better term, was Elizabeth Warren and so,
Speaker 1: you know, I think there was some feeding off of
Speaker 1: one another there where he was like, well, let's go
Speaker 1: after this thing, and she's like, oh yeah, I like that.
Speaker 1: And there was some positive reinforcement that allowed him to
Speaker 1: go deeper and deeper. But then there was FTX, which
Speaker 1: I think left egg on the face of him and
Speaker 1: others who had been openly, you know, sort of engaging
Speaker 1: with Sam and you know, obviously didn't see the fraud
Speaker 1: that was coming. And so you know, the worst of
Speaker 1: the crypto cases came, you know, after FTX, when I
Speaker 1: think there was a real, real effort to crack down
Speaker 1: on crypto. And I do truly believe that there were
Speaker 1: people in the in sort of the small bubble of
Speaker 1: crypto haters. I guess that the anti crypto army of
Speaker 1: five or however many of them met there are they
Speaker 1: you know, I think they really truly believed that that
Speaker 1: was our moment to shut down this technology. And it
Speaker 1: didn't work. I mean, I think the industry bought back
Speaker 1: in a really smart way. They fought in courts, they
Speaker 1: fought in at you know, with the elections and and survived,
Speaker 1: and so you know, we're here. This is very clear.
Speaker 1: This technology isn't going away, and I think policymakers across
Speaker 1: government realize that and that it's better to figure out
Speaker 1: how to do smart regulation than it is to to
Speaker 1: just fight the technology head on.
Speaker 2: Do you think with the market structure that the SEC
Speaker 2: will have to create, in conjunction with Congress, a new
Speaker 2: how we test for digital assets? Or will it be
Speaker 2: an additional section that's attitude existing how we test?
Speaker 1: Yeah, well, I think I think it's a little bit
Speaker 1: unclear how how it's going to work, right I mean,
Speaker 1: the House has its its legislation right now, which which
Speaker 1: looks at defining what it means to have control and
Speaker 1: putting some obligations on those who do. The Senate, you know,
Speaker 1: they're in principle stage right now. We don't We don't
Speaker 1: have legislator text and so it's a little bit hard
Speaker 1: to see where it's going to come out. But I
Speaker 1: don't think anybody wants to go in and fundamentally rewrite
Speaker 1: securities laws. I think what what the industry? You know,
Speaker 1: I mean, people in industry want different things, but I
Speaker 1: think in general, what the industry is looking for. It's
Speaker 1: just some sort of clarity that if they meet a
Speaker 1: certain fact pattern that they they're not going to be
Speaker 1: facing investigations by by the SEC. And and you know
Speaker 1: that if they are indeed a digital commodity or whatever
Speaker 1: they you know, term to whatever they decide to define
Speaker 1: the term, they you know, there may be certain regulatory
Speaker 1: obligations around the secondary trading of that asset or whatever,
Speaker 1: but that you know, the commodity can really flow through
Speaker 1: the ecosystem and not have to you know, notify the
Speaker 1: SEC every time there's there's something of transaction or something
Speaker 1: like that. And so I think it's a little bit
Speaker 1: hard to know exactly how it's going to play out,
Speaker 1: but I don't think anyone is looking for some sort
Speaker 1: of carve out that is inconsistent with the current laws.
Speaker 1: And I think I think if we look at the
Speaker 1: Howie test, the way that the crypto industry has been
Speaker 1: interpreting it over time was largely right and the SEC
Speaker 1: was largely wrong in their analysis. And so so you know,
Speaker 1: I think whatever is done should be consistent with that.
Speaker 1: Things that you know, have a centralized entity that is
Speaker 1: impacting the value of the company will continue to be
Speaker 1: you know, regulated as such. But you know, but if
Speaker 1: that you know, token isn't representative of some sort of
Speaker 1: equity or debt, then you know it's not going to
Speaker 1: be a security, which which is probably how it should be.
Speaker 2: Yeah, it's I've thought a lot about this and talking
Speaker 2: to different folks, even Hester Persa the set many times
Speaker 2: over the years, and former SEC officials, and you know,
Speaker 2: it's interesting because with Howie it was just this specific
Speaker 2: era in Florida and Orange Bear. But now you have
Speaker 2: these globally distributed blockchain networks and there's tokens distributed globally,
Speaker 2: and it's I don't envy the regulator's job and trying
Speaker 2: to figure this out because it is a very complex one.
Speaker 2: And if a token is issued outside the United States
Speaker 2: and it comes to you, you know, how do you
Speaker 2: Even the SEC doesn't have jurisdiction globally, So man, it's
Speaker 2: a tough one.
Speaker 1: Yeah. Well, I think it's also part of the problem, right,
Speaker 1: is what did we see over the past four years
Speaker 1: everyone would just go overseas to issue their tokens and
Speaker 1: avoid the United States. And that's like that's not the
Speaker 1: right answer either, right, because we want to have that
Speaker 1: kind of activity here, both just from like an economic perspective,
Speaker 1: but from from a regulatory perspective, because if it's here,
Speaker 1: then you know, as you know, the regulators can can
Speaker 1: have more oversight of it if it's appropriate for them
Speaker 1: to do so. And it's uh, yeah, it's these are
Speaker 1: not If these are easy questions, then we wouldn't be
Speaker 1: having these, these these battles and these uh, the legislative
Speaker 1: and regulatory and legal debates that we've had over the
Speaker 1: past you know, four plus years.
Speaker 2: I do love hester Perse's idea of these sandbox where
Speaker 2: they're not going to issue a well's notice and not
Speaker 2: going to hit you with a lawsuit, but just come in,
Speaker 2: show us what you're doing, play net sandbox, and then
Speaker 2: we'll kind of give you advice on the path to
Speaker 2: decentralization if you want to call it. I don't know
Speaker 2: if that's the right terminology, but if you need to
Speaker 2: get your books in order a bit better and to
Speaker 2: meet the standards.
Speaker 1: Yeah, And I think I think it's I think it's
Speaker 1: a good idea. You know, she has you know, specific
Speaker 1: criteria laid out in her proposal, and I think it
Speaker 1: is something that could potentially move on going forward. I mean,
Speaker 1: I think in general, if you go back to our
Speaker 1: our project open submission that we did on tokenized equities,
Speaker 1: it's kind of we're proposing that same idea, right like,
Speaker 1: let's let's try this, let's look at it, let's study
Speaker 1: it as we go, and then you know, at the
Speaker 1: end of it, maybe make some more permanent rules going forward.
Speaker 1: But it's yeah, I think it's a good idea, and
Speaker 1: it'll be interesting, I think, to see what the SEC does,
Speaker 1: you know, in the next six months, because so far
Speaker 1: they really just kind of pulled back the old stuff
Speaker 1: and issued some some guidance. I think it will be
Speaker 1: very interesting if they put out, you know, some exemptive
Speaker 1: relief or do a more full rule making, because it
Speaker 1: will be hard to it's it's it's very hard to
Speaker 1: change rules. It takes a lot of time. There's a
Speaker 1: big process to do so. So if they succeed in
Speaker 1: putting some new rules within their existing authority, forget even
Speaker 1: having new authority from Congress, but within their existing authority,
Speaker 1: if they succeed in doing that, that'll be a very
Speaker 1: lasting framework because people will start to utilize it, and
Speaker 1: it's it's just not something you can you can change
Speaker 1: and you know with a new a new chair or
Speaker 1: you know new someone new coming into the White House.
Speaker 1: So the regulations are fairly fairly permanent.
Speaker 2: Oh absolutely. And then on the flip side of the
Speaker 2: token to get this c FDC, uh, it seems they're
Speaker 2: going to have a bit more what's the right word
Speaker 2: here control of of these crypto markets. I know that's
Speaker 2: something Gary and Gary against it didn't like. And then
Speaker 2: you got Brian Kinton's who's up for I don't know
Speaker 2: if he's been confirmed yet, but I'm a fan of No,
Speaker 2: he has not.
Speaker 1: Been confirmed yet. He made it through his committee hearing,
Speaker 1: but he still needs a vote in the committee and
Speaker 1: on the floor. But yeah, he's fantastic. And the problem
Speaker 1: he's going to have is a couple fold. Well one,
Speaker 1: when he gets there, he might be the only commissioner
Speaker 1: of a five persons the FTC, which is going to
Speaker 1: sort of test the limits to what one man can
Speaker 1: do until they, you know, get a few additional people
Speaker 1: over there. And I would say I think there is
Speaker 1: a decent chance that the CFTC has a big role
Speaker 1: to play. It's a little bit unclear. I think the
Speaker 1: Senate has more interest in giving the CFTC a clearly
Speaker 1: defined role. But I think what's going to be interesting is,
Speaker 1: I think where a lot of this is going is
Speaker 1: we're going to be going to the same place as
Speaker 1: consumers to buy or trade our Solona tokens, our bitcoin tokens,
Speaker 1: whatever our digital commodity is, as well as our you know,
Speaker 1: tokenized Tesla sock, tokenized Apple stock, et cetera. Like that
Speaker 1: may end up being like housed in one place. And
Speaker 1: so it'll be interesting because on the security side, you're
Speaker 1: always going to need to have the SEC involved. So
Speaker 1: I think we're going to see very few companies that
Speaker 1: are purely CFTC regulated and are going to have this
Speaker 1: sort of dual regulation. So I I think as the
Speaker 1: policy discussions evolved, I think, you know, there's going to
Speaker 1: be pushed back on this idea that the CFTC is
Speaker 1: the only place that can do this, because the SEC
Speaker 1: is probably going to end up being in the room
Speaker 1: regardless of how it plays out. But but I do think,
Speaker 1: you know, I think, you know, I don't want to
Speaker 1: speak for Brian Quinton's but I think that you know,
Speaker 1: he knows the CFTC very well, and I think that
Speaker 1: he will look at what its role should be and
Speaker 1: be a really good you know, I don't want to
Speaker 1: say advocate, but a good uh you know. Congress can
Speaker 1: get I think a lot of support out of him
Speaker 1: as to what the role of the CFTC CFTC should be,
Speaker 1: and he'll be able to, you know, I think, connect
Speaker 1: with them in a way that's very uh informative and
Speaker 1: you know, help help determine the future of what that
Speaker 1: regulatory agency should look like.
Speaker 2: Yeah, for sure, I'm very fascinated to see what the
Speaker 2: balance is going to be and how this is all
Speaker 2: going to play out, kristin what you're experiencing government, And
Speaker 2: obviously we still got ways to go. We got to
Speaker 2: get the legislation passed into law. Do you see government
Speaker 2: integrating blockchain, whether it be for voting? And this could
Speaker 2: be like ten years from now, because I know government
Speaker 2: uslow even paying our taxes, our ideas and so forth,
Speaker 2: will be all digital and connected to the DMV and
Speaker 2: the federal government passports and all that. Jazz.
Speaker 1: I think, so, I do think. I mean, look at
Speaker 1: the irs today, right, there's a lot that they don't do.
Speaker 1: I mean, there's still documents that you have to send
Speaker 1: in via regular mail. There's not always the option to
Speaker 1: do every piece of your interaction with the IRS online.
Speaker 1: So I'd like to think that I mean, listen, these
Speaker 1: these public blockchains are very good ledgers. They're very good
Speaker 1: at keeping information, and a lot of what government does
Speaker 1: is keep information. And if you do it in a
Speaker 1: way that protects an individuals privacy with you ZK proofs
Speaker 1: or whatever else is out there, I think that, you know,
Speaker 1: I think that that's a place the government should be looking.
Speaker 1: I do think, you know, governments are it's going to
Speaker 1: take a while for them to get used to the
Speaker 1: idea of public blockchains versus these sort of permission databases.
Speaker 1: That's something that has been discussed for a long time,
Speaker 1: and I think that that's you know, there's ways to
Speaker 1: do permission services on public blockchains, and I think that's
Speaker 1: probably where they where they need to go in the future.
Speaker 1: But I think we are a ways off from that.
Speaker 1: I think I think, I mean, look what Elon tried
Speaker 1: to do with dose, right, these sort of tried to
Speaker 1: come in and make these like quick rapid changes, and
Speaker 1: I don't think that that is going to have staying power,
Speaker 1: and so I think it'll be a natural upgrade of
Speaker 1: technology over time, but not something that the government is
Speaker 1: going to immediately jump on.
Speaker 2: Yeah, and sometimes it takes generations to make changes in government.
Speaker 2: It just moves so slow.
Speaker 1: Yeah.
Speaker 2: You know, on the topic of public blockchains versus private
Speaker 2: permission ones, recently, you know, we saw the world's largest bank,
Speaker 2: JP Morgan capitulate and they moved from their private quorum connectus.
Speaker 2: They've rebranded it many times to a public blockchain, and
Speaker 2: of course the likes of black Rock and other firms
Speaker 2: have been launching on public blockchains. So do you think
Speaker 2: that we're at the tipping point of folks realizing, yeah,
Speaker 2: you know, if I build another wall garden, why should
Speaker 2: I trust your centralized blockchain? Right, but the public blockchains
Speaker 2: is the way. Yeah.
Speaker 1: Well, I think that as people start realizing that that,
Speaker 1: you know, there are superior benefits to using public blockchains,
Speaker 1: right as the underlying infrastructure. You know, they're much more resilient,
Speaker 1: they're faster, they're cheaper, you know, you don't have to
Speaker 1: operate your own nodes and things like that, and so
Speaker 1: I do think, you know, over time, that this is
Speaker 1: an idea that's going to win out. And I think
Speaker 1: as we see institutions in tradfy and you know everyday
Speaker 1: business is starting to adopt them. Then then I think
Speaker 1: we'll see the governments come in after that fact.
Speaker 2: Kristen H. Do you think we're going to be able
Speaker 2: to get these two bills a stable coin and market
Speaker 2: structure sign into law this year? President Trump gave the
Speaker 2: mandate before the August recess. Do you think it happens.
Speaker 1: Yeah, I think that we will get I would think
Speaker 1: we'll get stable coin legislation done before the August recess.
Speaker 1: I think Trump's tweet that he put out was incredibly strong.
Speaker 1: He wants it to happen lightning fast, like he was
Speaker 1: very clear or just sent me this fill Let's take
Speaker 1: the win. And I actually think that's the right position.
Speaker 1: If you look at our securities laws, we have a
Speaker 1: thirty three Act and a thirty four Act, Like we
Speaker 1: shouldn't hold up one piece that is very important for
Speaker 1: consumer protection because the other piece isn't ready yet. Like,
Speaker 1: I think we can dual track these and I do
Speaker 1: think though that market structure could take some time. I
Speaker 1: think that this is not a popular opinion. I think
Speaker 1: a lot of people will be mad at me for
Speaker 1: saying this, But you know, as I was saying earlier,
Speaker 1: the Senate is just in a different place. The House
Speaker 1: moves very quickly, and they have done a tremendous amount
Speaker 1: of work on this, and they've come a really long
Speaker 1: way in their process. But when I go and talk
Speaker 1: to both Republican and Democratic offices in the Senate, they're like,
Speaker 1: it took us four weeks to get market structures or
Speaker 1: to get stable coined, and excuse me through the Senate floor, like,
Speaker 1: give us a minute here. We need to take a
Speaker 1: breath and regroup and start at the beginning. And you
Speaker 1: know they're just now starting to do hearings over on
Speaker 1: the Senate side. We haven't seen any legislative text. And
Speaker 1: the Senate is just not the type of legislative body
Speaker 1: that takes with the other one gets. The Senate usually
Speaker 1: really wants their mark on whatever bill is passed. And
Speaker 1: so I think that that could push market structure into
Speaker 1: next year. And I think that's fine. I think this
Speaker 1: is a bipartisan issue. I think everybody wants to get
Speaker 1: it done. This is not something that asks to go
Speaker 1: as one big package. Like I don't know where that
Speaker 1: idea came from. People like to use it all the time.
Speaker 1: But like I think we're totally fine going separately. And
Speaker 1: you know, once stable coin becomes law, then you know
Speaker 1: we're going to see massive adoption of stable coins. And
Speaker 1: by the way, those stable coins are issued on top
Speaker 1: of public blockchains, and so it locks in the use
Speaker 1: of public blockchains. They'll never be able. You know, the
Speaker 1: SEC isn't going to be able to go after a
Speaker 1: layer one blockchain ever. Again, like they're going to have
Speaker 1: you know, this is this This is going to lock
Speaker 1: in the use of this technology for something on a
Speaker 1: level of adoption we haven't seen anymore. That's a good thing,
Speaker 1: and so I think that gives us time to get
Speaker 1: market structure right, because market structure is really really hard
Speaker 1: to do because you're trying to solve a couple of
Speaker 1: different things. Right, there's this sort of how we test
Speaker 1: with the security commodity issue that we discussed. There's a
Speaker 1: how do you regulate the spot market for non security
Speaker 1: assets like digital commodities, because right now there isn't a
Speaker 1: spot market regulator. There's questions of how do you do
Speaker 1: fundraising around token projects, and then there's a what disclosures
Speaker 1: are required and do you do that retroactively or do
Speaker 1: you do that going forward or there's just a lot
Speaker 1: of questions, and then there's this whole like what do
Speaker 1: we do with DeFi question? Yeah, and I am shocked.
Speaker 1: I am not a lawyer, but I work with a
Speaker 1: lot of lawyers. There are so many different ways to
Speaker 1: kill DeFi. You put one wrong word into one wrong
Speaker 1: place and a bill and it can be life or
Speaker 1: death for DeFi. And so I think we really want
Speaker 1: to be thoughtful and ensure that whatever we do protect
Speaker 1: DeFi because DeFi is kind of the whole point of
Speaker 1: all of this, and so we don't want to, you know,
Speaker 1: regulate our way out of having the sort of composable
Speaker 1: benefits of DeFi that that we would like to see.
Speaker 1: And so so yeah, long story short, stable coin this
Speaker 1: year market structure I think is going to take some
Speaker 1: more time.
Speaker 2: I'm in a one hundred percent agreement with you. I
Speaker 2: think logically and realistically it absolutely makes sense. Stable coin
Speaker 2: is the easy when and you get the domino to fall,
Speaker 2: and I think it'll be easier to get the market
Speaker 2: structure passed at a later time versus trying to package
Speaker 2: it together. Yeah. Yeah, and it's just so much so
Speaker 2: many moving parts and pieces of the market structure that like,
Speaker 2: I'm even trying to wrap my head around certain things
Speaker 2: and talking to different people. So yeah, I think you're
Speaker 2: on point with that.
Speaker 1: Yeah, no, it's I mean, it's my full time job,
Speaker 1: and there are moments where I'm like, what the heck
Speaker 1: does this do and what is the impact? And maybe
Speaker 1: we should think about this a little bit first, So
Speaker 1: I'm with you.
Speaker 2: Yeah, absolutely, all right, Chris, and I got some wrap
Speaker 2: up questions here for you. Okay, if you could create
Speaker 2: your own metaverse, what would the theme be?
Speaker 1: It would probably be something about like shopping at Bergdorf's
Speaker 1: in New York? Can I do that all day long?
Speaker 1: I don't know.
Speaker 2: Nice rapid fire questions.
Speaker 1: Favorite food, Oh gosh, probably macaroni and cheese. I don't
Speaker 1: get to eat it that often.
Speaker 2: But nice, favorite musician or band.
Speaker 1: I don't have an answer to that one. I mean,
Speaker 1: I like any anything that makes me dance would be
Speaker 1: the answer to that.
Speaker 2: Favorite movie.
Speaker 1: I did not prepare for this section of the interview.
Speaker 1: I don't know if they have a favorite movie. Again,
Speaker 1: I think I really prefer TV shows. I recently rewatched
Speaker 1: The Sopranos and I'm like, this is the greatest thing
Speaker 1: that I think I've ever seen made on television.
Speaker 2: Yes, Sopranos are great. Favorite book.
Speaker 1: I would say Atlas Shrugged. That's going to sound very political,
Speaker 1: but I think when I read that at the age
Speaker 1: of twenty five, that was kind of changed my whole
Speaker 1: whole worldview, and so it was probably maybe not my
Speaker 1: favorite because it's so freakin' long, but it was definitely
Speaker 1: the most impractical.
Speaker 2: I don't think I've read that, so I'll check that out.
Speaker 2: When you're not working at the Salon of Policy Institute.
Speaker 2: What are you doing for fun?
Speaker 1: And I love to travel, though I do a lot
Speaker 1: of that for work, but I love the actual personal travel.
Speaker 1: I love going to the gym. I do that a lot.
Speaker 1: And then I definitely hope you go shopping. Going back
Speaker 1: to the metaverse comment earlier.
Speaker 2: Christen, absolute pleasure. I'm so happy we got around to
Speaker 2: doing this, and I'm sure, well, I will definitely want
Speaker 2: to have you back on as things progress in DC
Speaker 2: and get your take. And like I said, I'm looking
Speaker 2: forward to your book whenever you get around to doing that.
Speaker 1: Awesome. Well, thanks, Tony. I appreciate it and look forward
Speaker 1: to coming back soon