Debanking Is Real. This Is How It Happens.

Transcript

My lived example shows that we have strayed too far. We shouldn't be regularly tolerating as a society that law-abiding citizens can have their bank accounts frozen indefinitely by banks without explanation. I mean, that sounds profoundly unamerican and cannot be squared with the original constitutional rationale for why the Bank Secrecy Act was okay. [Music] Welcome to Web 3 with A16Z. I'm Robert Hackett. Imagine waking up one day to find your bank account frozen. No

warning, no explanation, no recourse. This is not a thought experiment. It's a real situation. And it's happened not just to crypto companies and their founders, but to ordinary people who are just trying to live their lives. That includes our guest today who learned firsthand what it means to be debanked. In this episode, we talk about the unseen algorithms that monitor people's accounts, the ramifications of the Bank Secrecy Act, and how crypto and decentralized finance may offer a muchneeded check and safety net against the opaque systems of traditional finance. Joining us are Uniswap Labs chief legal officer Katherine Minik who shares her personal story of being debanked and what it taught her and A6Z crypto finance and operations partner M.

Westerhold who helps founders navigate these issues and who's tracked dozens of instances of debanking across our own portfolio. A big thank you to Catherine for trusting us to share her story which you can read a firstirhand account of in an op-ed she contributed to a6zcrypto.com earlier this year. Find that and more in the show notes. As a reminder, none of the content should be taken as tax, business, legal, or investment advice. Please see az.com/disclosures for more important information, including a link to a list of our investments.

When debanking entered the public consciousness, there was a lot of skepticism around this actually happening, that this was a thing. A lot of people hadn't heard about it. They were confused. The people didn't necessarily believe that it actually was occurring. What would you say to people who had that skepticism? I mean, I know what I would say, which is that it happened to me and I'm a complete rule follower. And so, if it happened to me, it can happen to anyone. So, that that would be where I would start. And I think then from there, it's easy to start unpacking, well, wait a second, how can it randomly happen to a person?

How can it randomly happen to a business? What has to be at play behind the scenes in order for those decisions to be made? because ultimately it is a decision by the financial institution to debank or to close the accounts or freeze the accounts of a customer. Some people had reservations about sharing their stories publicly because they feared retribution or, you know, endangering their families or other sorts of things. So, I'd like to ask you, Katherine, what got you comfortable sharing your personal story? And I'd like to get into that personal story, too. I guess I got comfortable with it because it helped explain why I think crypto technology and in particular DeFi, decentralized finance technology

is so important and is solving certain problems, certain things that are broken in the traditional finance system. And speaking about anything personally is is often the way to build a bridge to someone understanding or having more of an open mind to something that they're uncertain about. So it became a a really useful way to connect with someone about something that they could understand on a basic level. Even if the technology industry is a little more foreign to them, there's something very real about the fear there almost before fear there's embarrassment like why would why would your bank of many years choose to close your accounts? It it feels like a

black mark on you. And so that's why I jokingly call myself a rule follower when I tell this story. And I mean that, but also I guess that's almost a self-protective signaling of I know I didn't do anything wrong. But even when my husband and I went to another bank to try to open a bank account, it felt embarrassing to say we're here because our bank of 10 years down the street said we can't be there anymore. So there's there's that whole piece of the story. Yeah. like your own personal feelings about it to to get through. But at the end of the day, the story is about something that is broken in our banking system. And there may be good reasons for certain people or certain

businesses not being able to have the same banking relationship with their bank going forward. Right? There may very well be good reasons, but there are countless stories where there is no good reason. where at the end of the day it's regulatory compliance theater in service of no good end and it does real harm to people. And so that's why I'm happy to share the story because I know I'm not alone but I also have the privilege of being able to have other bank accounts to feel secure in my financial life and so I don't you know I don't have to live with the fear that others who have experienced this might have more deeply.

I think it's so powerful to take this this theoretical idea like debanking, you know, okay, there's this theoretical thing that's happening out there in the world, but then to put an actual face on it and to raise your hand and say, you know, this affected me. It enables you to connect with people and and get empathy and and a real reaction versus just kind of hearing about something happening over there. Yeah. An understanding of the problem. And I guess to go to the other part of your your question is share a little bit more about what happened. My husband and I had been banking with a a national bank, a large bank, but at our local branch literally down the street from us for more than 10 years. And we had a

personal banker there who knew us. And one day I was on a conference call my home office and my husband came in the office with a panicked look on his face and he said, "I have to talk to So I hung up the phone and he said that he had just gotten off the phone with our banker who again who knew Wes because his debit card had been declined at a grocery store, something like that. And so he had called her to say, "This is weird. We know we have money in our account. Why would our debit card be declined?" And the banker said called back and said, "I'm kind of embarrassed to tell you this, but the bank has decided it can no longer have a banking relationship with you and your accounts have been frozen." And I do think that's a a really important part of the story

because it's not that I could go pick up a check for all the money that I had at the bank. My accounts were indefinitely frozen. We had all of our savings, all of the money that we used to pay our bills every month was with that bank, including our mortgage and our credit cards were also with that bank. I think at one point we got charged a late fee on our mortgage from the bank because they had all of our money. We had to harass the bank for weeks on end through every channel, through email, through phone calls just trying to find out when we could get our money back. And the reason that that happens, this is my hypothesis, but the reason that this can happen to everyday people is because of

the Bank Secrecy Act, a piece of legislation from the 1970s that over time has kind of ballooned in terms of regulatory obligations on financial institutions like banks about the screening that they have to do of their customers transactions and their customers use of their own funds. And over time, all of these banks have built a stable of algorithms that they use. And if a few data points hit that their algorithm say this cluster says something might be happening that shouldn't be happening, then they can close your account or freeze your account indefinitely. Indefinitely. They

can do that. And there's nothing you can do except beg to get your money back. And the other part of the story that I really like to tell because it's equally scary to me is that they had a mountain of our money and at the end of the day they agreed they were going to give it back to us, but they wouldn't even let us pick it up at the bank or send it by certified check, by FedEx, some mail that we could track. They sent it by regular mail. And so we had to sit on our front porch waiting for our mail person every day for days on end hoping that our life savings would show up safely at our front door, which is another reason why crypto technology is helpful for the transfer of funds so you don't have to rely on that. But all of

those pieces were just really fearinducing and scary even knowing that we have a life with a lot of safety nets for us. That is such a wild story. I can't imagine. I mean, when your husband came into the room, you know, panicstricken, what was going through your mind? Like, what did you feel in that moment when you were discovering that this was happening? I think it was just pure paranoia. Does somebody think that we are somebody else? Is there must be some crazy mixup here. How can we solve this? And how will we pay our bills in the meantime? But there's no real rational or immediate logical thought because it's such an

unforeseeable thing for a normal family in America, you know, who gets their direct deposit every month into their bank account. And I mean, think of that. You can't overnight change your direct deposit to a new bank account. Your company can't rerun payroll so that you can get a paper check within a matter of days. You're stuck waiting, right? even if your job is willing to try to be flexible, they have their own systems as well. But it was just initial panic. The other piece of it though that I did realize because I was working for a crypto company at the time. This was my last job and I have to think that that was one of the data points in the algorithm, right? It's like thumb on the scale. This is definitely, you know, I'm

glad you brought it up. I I wanted to ask retroactively, okay, this happens to you. What like why do you think it happened to you? Okay, it can happen to anybody, but like why did it end up happening to you? Do you did you get any clarity on that? Are you able to No, they won't tell you. And in some cases, they're not allowed to tell you. I think that was the other frustrating thing is I am certain with every fiber of my being that there was no reason to debank my family. I know that have never done anything that is at odds with any law or bank rule or anything in between. And so to not be able to get an explanation so that you could easily clarify what has

to be a mistake on the bank's end when you are a customer of that bank for years and years. That cannot be the right way. Right? But that is part of the banking regulatory monstrosity that we have built. And it doesn't mean that people aren't trying to do the right thing when they want there to be a good regulatory compliance structure. There are a lot of people who want to do the right thing for the system, for customers, all of that. But just because we're trying to do the right thing doesn't mean that a lot of those pieces aren't broken. What's the concern about telling people why they've been debanked? Like why would a bank not be able to tell you the reasons why it kicked you out? It just seems like a

basic courtesy. like tell me why you froze my assets. Sometimes they're not allowed to. If it was like an official action, they're not allowed to. And I think also sometimes there's a distance between the compliance team and the relationship manager where sometimes they don't even fully know. Like there's kind of different people within the bank doing different things. Every instance that I heard where we actually got feedback that it was because of crypto was because the relationship manager or someone at the bank was willing to say something over the phone. It would never be in writing. The notices were always quite vague. I've seen a bunch of them.

Generally when they would pick up the phone and actually say something to the company, it would be like, "They definitely heard, "We're not banking crypto anymore. I'm sorry, there's nothing I can do." Or, "It's just crackdown on the industry." Like, we heard like we heard phrases like that, and that would never be put in writing, but it still happened. I mean the reason an individual might not get told what's happening is because this is one reason some transaction in their bank account history is something that the bank has decided under their algorithms they will report to the government and there could be an investigation of that transaction and certain categories of things the

bank then is not allowed to talk to their customer about it. So that that's part of it. Does sure feel like there could be some fixes there and you can understand again trying to be sympathetic that there are certain categories of transactions the government might not want the bank to talk to their customer about but it does seem like we've gone well beyond that. I mean my husband and I have had no problem in the years since maintaining good banking relationships. We have multiple banks now out of pure paranoia. But it does seem like there's a disconnect in service of everyday people. And what Emma is describing is easier to happen for a business that's had a bigger relationship with the bank

or maybe much more important individuals than I was at the time to my bank. They might be able to get a phone call with an explanation. I don't think my personal banker at our local branch was ever told. I think she just understood it was in the category of things that she was not allowed to say anything to us about. That was her instruction. You know, there's a reason that I have a tracker for the last few years where I keep track of every single portfolio company instance that I'm aware of. You know, this happens in very large quantities on a regular basis and and it would kind of come in waves and yeah, it's not just once or twice, right? So, it doesn't take long, to Katherine's

point, to kind of start putting it together when you hear enough stories and think, okay, like what is the common thread here? Why is this happening? And you just start looking at it with a different perspective when you see it over and over again. I mean, it's just pattern recognition. You can't ignore it. How many instances have you recorded? There's easily over 30 companies, and that doesn't include all the individual founders and employees of our portfolio companies. They didn't always come to us. You know, there were so many that we found out about after the fact, but you know, we we talked to every company about like, would you want to share your story, right? Like Catherine's one of the few that was able

and willing to do that. But so many companies, yeah, thank you. We, you know, we talked to so many companies like, would you share your story? Like, I think it would help. And, you know, people don't want to do it. They're afraid of retribution. Understandably, they don't want their family to be affected. They don't want their business to be affected. There are certainly a handful of companies that have come forward and individuals and we really appreciate them sharing their stories. But there's also the nuance, right? Like I think it's what's debanking, but then there's also what is I would say like extended or unnecessary diligence like offcycle account reviews or just the inability to get banked in the first

place which is another issue but I think it's also related when you start seeing these patterns emerge and when you see companies in our portfolio that maybe literally had to apply to dozens of banks in some cases to be able to find one that would bank them. I mean, probably the average American doesn't even know the names of a dozen banks. Like, can you imagine applying to them and getting rejected like and all the work that comes with that? So, that's not deep bankanking, but I think it's related in terms of just how the industry is viewed by the banking industry. And in terms of the crypto industry specifically, I think there are all kinds of anecdotes out there of

crypto companies saying, "My bank said to me that they're closing my account because they can only have so many crypto businesses among their set of customers." And that is an informal request from a government agency or that they can't be onboarded even though they meet all of the criteria. So that's the other half of what Emma was saying because the bank is already at that capacity, that threshold that has been set for them, but has not been set by their own riskmanagement practices, which are two different considerations.

That's something I've talked to a bunch of banks about too. You know, those thresholds are generally pretty low. Like I know some instances where there's a crypto friendly bank for example and they've banked a lot of our companies and then they started hitting the threshold and that resulted in going back to their existing customers and being like you're not necessarily debanked yet but you need to reduce your balances that you hold with us. You need to move it to other banks. I mean, I think there's some maybe poor operational management there, but also really frustrating for companies, right?

Like they come on board without that expectation and then they have to figure out what to do with their with their funds if they don't have another account. Yeah. Just to put it in really basic terms, a lot of crypto companies are using a bank account to do things like pay their employees, right? And that is not an easy process to set up with any bank that you specifically have. There are a lot of steps to that, some of which crypto can solve, but set that aside. But imagine all of the sudden being put on notice. You're you're running a company, doing everything right, and your bank says, "Surprise, you're going to have to change something fundamental about your banking relationship with us, or we're going to close your banking relationship

imminently or within a matter of a few weeks." you're responsible for all the employees under your care at your company. That's a scary situation for a small business, a growing business. And by the way, maybe you have to conform to some rules that like you structurally can't as a crypto company. Yeah, totally. There's sometimes a misconception when people talk about debanking in crypto though. There's there's the very cryptoheavy companies. There are also your early stage essentially software startups where they haven't really done anything in crypto yet, but maybe it's in their thesis around the business. They're pre-revenue, their pre-token.

There were a lot of companies debanked in our portfolio that fit that profile and they're literally using their bank account to make payroll, you know, I don't know, pay AWS, like pay their legal bills. It's really benign routine stuff and they got caught up in all of this where where you just wonder, okay, how were they specifically flagged? You know, like what happened under the hood at the bank that caused them to get flagged for debanking? There are basically two responses that I've heard from critics, skeptics about debanking.

One is like, is this even happening at all? I think we've moved past that point. Like there are instances on the record of this happening. I think people generally accept, okay, this is a thing that did happen. But then the other thing that you hear is this skepticism of crypto and people just saying, well, you know, it's just a sketchy industry, you know, doing a bunch of shady stuff. It adds risk to the bank profile. It's their own fault for dealing in an industry that has fraud and other sorts of bad things going on. I'm I'm just I want to voice the skeptics first of all.

I mean, I'm glad that you It's like you're ready to go to bed at this point. hit me. Well, yes, any technology can be used for good or less good purposes, right? Any technology that could include a toaster, right? Any technology. I don't mean to be overly facitious, but maybe a more easier to digest example is think about email. Think about how much fraud happens over email. Have we decided that anyone who is an email services provider can't have a bank account because the services the technology services that they are involved with carry so much more risk. I would be willing to bet

that a lot more fraud happens over email than using crypto today. So if we follow that path then nent technologies will never be given space to grow and it doesn't mean that there isn't any risk calculus or balancing of risk but new technologies that have the potential for lots of good should be given a chance to go imagine if we had shut down the internet and all of email because we were concerned about fraud. Where would we be as a society? Imagine if we had just done that in America and let everyone else outside of America grow those services. Where would some of our biggest companies be today? Yeah. And I think if you look at banks that do it

really well versus banks that don't, there are banks that don't do lazy underwriting, like they actually try to understand the underlying business. They're not putting all crypto companies in a box. They want to really understand the risk and partner with those companies because they believe in that technology, right? Like it's a big future opportunity for a bank to just from a business perspective, right? Like if you can figure out how to properly bank the industry that there's a lot of opportunity there.

So when I see the difference, I see sort of banks that are like, well, we just don't touch crypto. And it's like, well, first of all, how are you defining crypto? Like let's just double click on that. Do you know what a blockchain is? Yeah. Right. Like where where are you putting the bounds around this? Right. It goes back to like what is crypto and how do you even define it? Because the more mainstream it gets, it's like you have such a blend, right? What about all the, you know, web 2 companies that start holding more and more crypto on their balance sheet? Well, does that make them a crypto company? Like what does that mean then? So the lines become more blurry over time. And two, it's like, are you even taking the time to understand or are you just making these these blanket, you know, assertions? And

so, I really appreciate the banks there are some that do they have really knowledgeable teams on the compliance side. They they really try to understand the businesses. They properly risk assess. Any shouts for banks that are doing it right? Yeah, sure. I mean, Western Alliance Bank is phenomenal, actually. So they're a great one. You know, Mercury has done really great work on like the fintech side to support the portfolio after when SVB was failing. For example, probably half the portfolio was able to spin up Mercury accounts in a matter of days. And disclosure, that's a portfolio company. I believe it is the ones that do it while they are really thoughtful about it. And there are other ones, particularly the big banks. I've

heard things from the GIBs. What is it? Global, systemically important. Yeah. I think global systemically important banks is what that stands for and it's basically what it sounds like. Like banks that if something should happen to them like the world fall apart. Exactly. I've heard from a lot of them over the last few years especially like they're just like we won't do it. Like we won't touch crypto. And of course they do have some high-profile crypto clients and some of them are starting to come around now for sure. But for a large part, they weren't touching them the last few years. And I had one say to me, you know, everything we do, every potential client that is associated with crypto

has to go to the CEO. So, it's got to be a company that someone is willing to basically stake their career on if they want to bring it to the CEO. Every single one that Well, I think this was sort of post FTX and it's not like a it's not every company. This was specifically related to crypto and it was like for a period of time, right? It was like I need to approve anything that's and this is who knows if it's true or not, right? This is what I was told and it was like so if you have one of your portfolio companies that's maybe just like so amazing in every way.

basically they're like killer management team, profitable, like already a bunch of revenue, high growth, and they were just like listing all these things and they're like, so if you want to bring some of those to me, like we should we can totally talk about it and it might and I'm just sort of laughed. I'm just like, okay, first of all, that's not a way to build loyalty. Second of all, I'm just I'm not going to bring you any companies after that because I want someone that will work with us, you know, and be a good partner. Like I had a bank tell me recently, we are open to companies that have less than 50% of their revenue generated in crypto. And while I thought that was arbitrary and maybe a bit frustrating and lazy, I also appreciated it because it was the start

of a dialogue with someone who wants to actually bank these companies and is trying to intermediate between their compliance team and me and like help figure out what is the bucket. like I don't expect any bank to be able to bank every company but help figure out like what is the scope of those that you can bank and like let's work on that together. So it's like a step in the right direction. Even though it feels arbitrary and frustrating, at least it's more transparent. And I think during the kind of height of debanking, it's the lack of transparency that is one of the most frustrating things because it just feels so unfair. And it feels like as an American, you want to be able to

understand the process by which something is happening and the legality to it. And when you feel like you can't understand that, it's just like a black box that feels corrupt. So, we heard a little bit about Katherine's personal story of getting debanked, you know, as a private individual citizen and you've dealt with many portfolio companies having to get new bank accounts very quickly. What can you tell us about that process? What was it like for them getting the uh you know, kind of the rug pulled out from under them and then needing to scramble and find a place to have a soft landing? It's it's been a journey and it's always really stressful and scary. If we do a little bit of

history, the scariest point for most companies was like March 2023 because it was just the trio of Silvergate and SVB and Signature. These were three banks that all of a sudden had a liquidity crunch. Three banks that all, you know, failed in quick succession. You know, many of our companies actually had several accounts open maybe with all three of those banks and or two of the three, right? And maybe they, you know, they use them for different purposes. Catherine was saying that she now has multiple bank accounts, but these were people who had thought ahead, had redundancy, had got multiple bank accounts, but all of them got

basically yanked. Yeah. And I think we all learned so Katherine learned very, very viscerally, personally. I think, you know, everyone else that maybe didn't realize that before the fall of SVB in the tech industry very much realized like you need banking redundancy if you didn't have it already. Now, we always recommend companies have three bank accounts even if one is kind of dormant at least to have the redundancy of the accounts. But just to take a handful of companies and I know one very specifically that comes to mind, but this this was the case across the portfolio. It's like imagine okay so silvergate fails and you're kind of like okay that was a little tied up

in FTX so maybe you can push it aside a little bit but then SVB you know the bank run essentially starts happening people get freaked out that they can't meet their commitments and start pulling their money out of the bank yeah so everyone starts pulling the money and transferring to other bank accounts so this is where a bank like Mercury was super helpful because they were able to spin up accounts very quickly for companies within, you know, 24 hours and they could wire funds out. But some companies had Signature, too. So, they said, "Okay, I'm going to transfer my SVGB funds over to Signature." And I know many companies did this. Then, I

remember that weekend getting wind. It looks like Signature's going to be shut down. So then it's like, okay, now what do I do? Out of the frying pan into the fire. It's literally like you're moving money around and it's just whack-a-ole. It's incredibly stressful. And I think we've gotten through, I would say, the worst of the sort of stressful environment of March 2023, right? Because everyone was caught off guard and it was all sort of at once. Now people have redundancies. So the debanking incidents that I've seen over the last year, year and a half have been frustrating and a lot of work because all your stuff is set up. You've got all your bill pay,

you've got your payroll, you've got like everything is sort of connected, right? So you're scrambling to get new banks or transfer connections. But at least if you have a redundancy now, I I think crypto companies basically just always they live with that risk now and everyone knows about it. It's not like a secret. So people now just prepare for it and have redundancies, but it's incredibly stressful. Like how are you running your business when you don't know if you can rely on your bank account? And they usually don't give you very much time. Getting onboarded into a new bank takes several months usually. I mean, there's a big process of KYC and data and forms you have to submit and

they go through their whole underwriting process and it's not like you can just spin it up. Even as recently as the fall of last year, there were established good actor American crypto companies getting debanked without explanation. And the behind the scenes explanation that you could kind of get hinted at like that M was talking about earlier was we have too many crypto companies as customers right now and the regulators don't like it. And regulators do wield quite a bit of power and again some may be wielding that power out of good faith concern for the banking industry for

customers. Some may be wielding that power with animus towards a particular category of customers. To go back to that March 2023, I think it's also important to unpack what is causation and what is correlation. Just because a bank happens to bank a large number of businesses in a particular industry does not mean that bank has risk because of association with that industry. It's up to the bank to figure out what the right risk profile is overall. And it's it usually isn't that industry specific. So I I do get a little nervous when folks

say, "Oh, you know, it was crypto that led to banks failing." I don't think that's the case when you unpack it. I do think that some regulatory fear of certain crypto companies added pressure to banks that then created a snowball effect, some of which probably could have been prevented, right? And so it's important to tease out those parts of the story as well, whether folks are acting in good faith or not, but to understand what was the actual cause of how we got to that moment in time in March 2023, as opposed to what are the things that we could have stopped if we had taken a step back to make sure that

we were acting out of care for the banks and customers as opposed to fear of industries that We just had anxiety. And this goes to M's point about lazy underwriting versus more careful totally smart, savvy underwriting. We've talked a little bit about what happened in March 2023, but I wonder, can we unpack that a little bit more? What is it that happened that these three banks failed in quick succession? What was going on behind the scenes? To the extent that you can give a Tik Tok or playbyplay might be helpful for people to understand. To be fair, I think they're all kind of unrelated. It's in different reasons. They just sort of happened at the same time. Bad things happen in

threes. So, it's just a law of the universe. That's true. I mean, if I remember correctly, I think Silvergate was almost completely related to FTX. I do think like at that point in time, think about March 2023 to when the FTX collapse happened. there is a period of several months that have gone by and so the types of funds remaining with any particular bank those have largely settled right and so that's kind of what I mean by causation versus correlation I do think you could trace that back to FTX but was it inevitable because of FTX or was it a series of decisions made that were preventable in terms of that

bank whether from regulators or the bank themselves Yeah. And SVB had nothing to do with crypto. It just happened to affect crypto companies because it was a generally friendly crypto bank. So like from my purview, I'm like seeing the crypto companies and how all of this affected them. And Signature was very very heavy crypto. I've heard in passing that they I mean they were like well over 50% crypto companies. So SVB, they were friendly to crypto and then those companies had to transfer funds over to Signature or other banks. They were sort of like disproportionately affected by

these bank failures because all three of those banks were supporting such a big portion of the crypto industry, even though their failures were not necessarily related and definitely not for the same reasons. People have talked about this idea of a chokepoint 2.0. 0 which is riffing off of the original chokepoint operation which happened under the Obama administration. There was this concerted effort to target certain types of businesses that were politically unfavorable at that time. I think it was like marijuana related companies, firearms. What do you make of what happened in the crypto industry?

What do you make of that in its relationship to chokeoint 1.0? Like calling it Chepoint 2.0 I know that it was like this concerted effort targeting this particular industry. I do think it was a concerted effort by a cluster of regulators to limit traditional finance banking services to the crypto industry as a whole. And and I think it's not even a belief at this point that documents bear it out. In my last job, before my current job, my last job I ran litigation for Coinbase and we could see that happening to the industry and to the Coinbase leadership's team's credit.

They said, "What can we do to shine a light on this?" And one of the things that we did was submit foyer requests, Freedom of Information Act requests, knowing that we probably wouldn't get the information we were asking for. But ultimately, you can sue if you don't get information that you've asked for through FOYA. And Coinbase has in over the last year sued over the records that it sought but wasn't getting from regulators. And as those regulator documents have come out in a trickle, more and more documents show that there was a true effort to limit banking services to the crypto industry. So I think it's helpful to call it operation

choke point 2.0 because it explains that it was a coordinated effort that it wasn't anecdotal. It wasn't oneoff. This was a set of policy priorities and a an outcomed driven campaign and I'm thankful that hopefully it's over, but the repercussions are still being felt and kudos to Coinbase for continuing to see through that litigation. I've seen Paul Grul has been sharing the memos as they come through. Some of them have redactions, but there's enough in there that looks pretty telling. Another thing just to consider is how do we get here?

if we're thinking about debanking or limited access to bank accounts. And we referenced it a little bit earlier, the bank secrecy act, the legislation from the 70s, but I think a lot of people don't know that that was a very controversial law. Now, it it kind of feels part of the traditional finance landscape. It was a very controversial law at the time. Banks were opposed, the ACLU was opposed, like everyone in in between was opposed. So there was a ton of litigation that happened in the early 70s about the obligations of the Bank Secrecy Act, which frankly kind of pale in comparison to the obligations as they've grown today. And it it ultimately made its way to the Supreme Court in a case called California

Bankers Association v. Schultz in 1974. And it was a divided Supreme Court, a very divided Supreme Court that on limited grounds said the Bank Secrecy Act is constitutional. And so I think sometimes it's helpful to shine a light back on how do how did this all kick off and are we on the right course to continue to build on this path or have we strayed too far from the first principles that justified this path to begin with? And I think like my lived example is an example that shows that we have strayed too far of the original purposes. We shouldn't be regularly tolerating as a society that law-abiding

citizens can have their bank accounts frozen indefinitely by banks without explanation. I mean that sounds profoundly unamerican and cannot be squared with the original constitutional rationale for why the bank secrecy act was okay. So as as you know America continues the conversation on how do we make banking safe? How do we protect America from bad guys? But also how do we do right by Americans who want to participate in the financial system. I think it's always good to go back to those first principles and think are we doing right by the limits that we laid down originally when we said mass

surveillance by banks on behalf of the government is okay. Let's drill down there. What is the bank secrecy act? What does it say? Why was it controversial when it was put into place, you know, half a century ago? Yeah. So I believe it was 1970 when it was originally enacted and then a set of regulations were promulgated by the Treasury and other departments and the the law and those regulations were challenged. But at its core, it's it started as requirements for data collection by banks about their customers, surveillance of banking activity by banks of their customers, and mandatory reporting of certain categories of that information to the

government. And so you can see how those pieces might raise things like a due process challenge, like why why can all my transactions be monitored by the bank? And the the Bank Secrecy Act, and I'm blanking on the exact language, but originally was about this is this is in order for banks to provide the government with very very useful information. It was not meant to be mass surveillance. It was meant to only provide information that the government thought would be very, very useful to stopping particularly bad things. Now, it's since been expanded. It was most expanded by the Patriot Act in the early 2000s and that was a time that was a

time after the September 11th attacks that there was a lot of concern around 911 terrorism. Rightly yes. Exactly. Exactly. And so again it makes sense for government to want to address those risks. It makes sense. But what makes sense is addressing the risks with solutions that actually mitigate the risks and not treating every American as if every transaction that they are engaging in is more likely than not a criminal transaction. And that's if you go back to that 1974 Supreme Court case, there's a really great descent by there's a couple great descents, but one by Justice Marshall talking about how unconstitutional it is to presume that

every American is a criminal and to then surveil them on that basis. And that's where I feel like we've gone too far. And it does not mean there aren't right and good ways to protect America and Americans from real risk, but we should be doing that in a way that is constitutional and is actually targeted to those risks. That's not just, as a friend of mine who's a compliance leader often says, regulatory theater because we don't have any other solutions. So, let's just throw the broken tools we have at the problem and pretend like that is going to make a difference.

Regulatory theater is not the answer. Real riskrevention is the answer. I think that's such a great point. And this stuff happens behind the scenes. Most people don't think about it. They don't think about the eyes that are on their bank accounts and all the transactions going on, who can potentially have access to it. Well, and there's so much more information to be gathered and collected now in this digital age. The Supreme Court in 1974 could not have even dreamed up the amount of information surveillance and gathering that we are doing today because there's just so much more of it. It's so much faster. Right? We're talking in 1974 about keeping a copy of a check that you wrote, right? That is very different than every single direct withdrawal use of your debit card

transactions that banks now have on hand. That's a different set of information because we're so much not a cash society anymore. The system's gotten so centralized. The analogy I was going to make to your point about security theater uh to something that might be familiar in people's regular everyday lives is like TSA, you know, um again also sort of like upped after the September 11th attacks in order to ostensibly protect people, but also just jamming up the airport system like it just being a terrible experience for everybody. At least now there's options available like TSA pre-check and things like I don't have to take off my shoes every time. So even that process has adapted somewhat to the circumstances of

reality. Although I'm sure there are many more improvements that could be made. Yeah. And look, it's okay for society to be somewhat inconvenience at time in service of a really important need, right? That's that's why we're in society together because we're we're willing to have some of the benefits that only come collectively by taking on some of the burden by acting collectively. that is okay. But it's when we're not actually getting the benefits yet we are still being inconvenious or worse harmed that we should take a look and think why are we doing this this way? Is there a better way? What would you change? I mean the stuff was instituted to solve a problem.

It has grown and expanded beyond anybody's wildest imagination. What would you do to change it today? Are there practical realistic things that could be done to address this? Yeah, I mean I think one one example of something that is broken and needs to be changed is the reporting of transactions over a certain threshold to the mandatory reporting of transactions over a certain threshold to the government. By all accounts, there are millions of those reports sitting in government databases that are never being looked at or assessed or reviewed. So, we know that there is too much information being

collected to even be useful. It can't even all be looked at. the majority of it serves zero purpose except to be an intrusion on a customer and potentially be the reason why a customer's bank account is shut down or frozen. There is probably enough data to know what is used and what isn't used, what is actually helpful to an appropriate law enforcement inquiry to change dramatically the requirements in terms of what is being reported or what has to be reported. So that would just be one example where we have the data from doing this. Whether you just go back to the Patriot Act amendments, that's still

20 years, right? You go all the way back to the 70s. We have a lot of information about what were we able to do with what information and what have we let pile up because we know we don't need it, but we're just not erasing those regulations off the book. That I think would be a starting point. I love that because it rem what you're describing reminds me of any other company or government body or anything. You implement things and you just layer and layer and layer and you kind of forget the purpose sometimes. It needs to be you know like you you do need to go back to the first principles and be like what are what are we doing here? What is the actual risk? And I think like bringing it back to

debanking, it just leaves you wondering how much of this is just old legacy, imperfection, whatever mess, whatever you want to call it, versus how much is using the banking system as a political extension. I don't know how how those uh strings are being pulled, right? But there's aspects of it that's that's hard not to say that that mess is there intentionally. Yeah. And I do think no matter where you fall on the ideological spectrum, if you were just a user of the financial system and not in the industry, not in the crypto industry, not in the banking industry, you would just an everyday American, you would

probably be shocked to realize how much information is collected about you by the financial institutions that you use and how much information about you may be required to be given to the government. I I think everyday people would largely be shocked by that and uncomfortable with it even if they understood that the original intention came from a good place. And just that gut check helps you know that we might be miscalibrated.

These compliance obligations, you know, whether we're talking about BSA or other sorts of things has led to this enormous consolidation of the financial industry. In our state of crypto report that we put out in the fall of last year, uh, you know, we looked at the number of banks in the US and it's dropped by 2/3 since 1990. That's a lot of banks. There were like 15,000. We now have less than 5,000 in the US. And also another crazy statistic is about five banks control nearly half of all assets in the US too.

So, it's just like this incredible collapse and consolidation of the industry and there's just a few big pillar institutions that have this insane gravitational force of attraction now. And then if you get shut out from one of those banks, it will become increasingly more difficult for you to participate in the financial system at all. Which is why a lot of us are in crypto. And you know, the other part of my debanking story is that something I realized in the days after not knowing I didn't have access to any of my money in my bank account was that I had a self-custody crypto wallet with Bitcoin in it. That I had a a digital safe secure

place where I was holding my own assets and those assets could not be frozen by my bank wrongly. So I do think that having those technology tools available for individuals and businesses to just even hold their own assets as an alternative to your mattress at home or maybe more high-tech is safe at home, right? If we have that technology, it is an important check on the risks of mass bank consolidation. For example, to return to the point I made earlier, which was to sort of rehash the argument you might hear from a crypto skeptic of

somebody who's just like, well, you know, crypto is just like filled with fraud anyway. What's it good for? I'd like to zero in on your point about the value of crypto and crypto wallets. What would you say to somebody who has that sort of opinion where they just like crypto? What's it what's it good for? I think a lot of folks who ask that question also care about access to the financial system and the global economy. And so that is why the example of the benefits of technology like a self-custody wallet are helpful because it is a way for any person who has been unfairly shut out of the American or global financial system to still participate, right? to still have a safe

and secure way of participating. So that that's one answer. The other answer which I think is you know a fundamental question that we have to ask ourselves is do we believe in a future where there can be private peer-to-peer transactions on an everyday basis or are we moving to a global future where every transaction between two individual people is surveiled and assessed. I think there's a lot of danger and risk that comes with the latter. We as America have have always believed in the right of two people to transact with one another on a like free and fair basis and crypto technology is part of the next

generation of solutions to enable that. I don't think that we should shut down that technology and that promise which is so true to the values of who we are as a country. And it kind of goes back to that those dissents I was talking about in the Supreme Court case is are are we going to regulate a future state assuming that every single person in the world is a criminal or are we going to regulate the future state assuming that most people are decent human beings and there are bad guys out there and there are good ways to stop bad guys without criminalizing or treating every individual going about their everyday daily life business as that they are a

criminal as well. I just believe there is a better way. I think it could be harder in certain circumstances, but there is absolutely a better way. In the wake of debanking becoming a topic of national conversation, there have been congressional hearings about it. It is now something that is top of mind for people. People know that it's happening. What is coming of this realization, this acknowledgement that debanking has occurred? like what's being done to stop debanking from happening in the future? Are we past this now that it's been exposed? Is this still a risk? Where do we stand? I mean, I I do know of instances that have happened as recently as a couple months ago. So, a lot has

happened since then. I think it's just time will tell. And I'm I'm still, you know, keeping the radar up. We have a telegram group for our finance folks in the portfolio and you know everyone chats, everyone shares if they get any communication from a bank. We do you know zoom calls and check-in and it's always like anything new on the banking front. It's been a key topic of conversation for the last few years amongst the group. So I think the time will tell. I mean, it feels like it's being addressed though, like the right people are thinking about it in Washington and hopefully doing something about it. I mean, anytime a problem is

getting real attention and folks say that they want to solve it, that is a good first step and I will take it. I think there there's like a a constellation of issues that are hard to solve for here. And when Robert goes back to you mentioning how we have way fewer banks, right, which means that debanking due to political pressure, whether it's, you know, a regulatory combined set of regulatory regulators putting pressure on banks or whether it is one regulator, state or federal, or somewhere overseas, putting pressure on one bank, that creates the ongoing risk

for debanking. being for a disfavored industry, a disfavored population. And I I use the word disfavored deliberately because we're not talking about bad guys in this scenario. We're talking about who has political favor. And I think that's what we want to check is that you shouldn't have access to the financial system only if you are a politically preferred group or industry or set of human beings. So, I think it's a pretty complicated problem to solve for the long term, but I am heartened by the bipartisan interest in the issue. I I wish it had been taken seriously sooner

because it matters. So, as M mentioned, you've been down in DC a bit and have spoken to people there. Uh, what have the reactions been to your story? Yeah, I think it's a range. I think there are some folks who don't want to believe that you can be debanked even if you did nothing wrong. Even today, even with documents in hand, they're like, "What did you really do? Come on, fess up." Yeah. It's like, "Is there some other reason?" And it's not that I felt that anyone was discounting my personal story or the stories of others in the industry that I've had permission to share, but you know, when you talk about something bad happening that there's no good reason for, it's kind of inherent for

some people to be like, really, is it really that bad? Did it really happen? So, there is still some of that. Again, I don't think it's coming from a place of malice or the folks that I'm having conversations with thinking that debanking as a concept is a good or justifiable thing. It's just not wanting to fully face how broken something is. Then there's a lot of folks who are taking it very seriously and are interested in learning more and have have asked for additional as much information as we can provide to them and we're happy to do that. And I think those are the efforts that are going to lead to potential solutions. But it's going to take a lot of digging into the

going back to what we've talked about today. How did we get here? How how could something like this have happened at all for this industry or for this set of people? We have to unpack that and it's going to take time to do it. You never learned exactly what triggered it. No. Sometimes my husband and I try to figure out like what transaction because we do think it was an algorithm. probably I work at a crypto company and then some transaction those two together hit but we are such boring people. I love my husband. I don't mean to call him boring but we are pretty plain vanilla people. I am a Midwestern middle-aged mom, right? What am I doing that is going to hit a bank secrecy act

algorithm? I buy vintage goods off of Instagram occasionally. Right? like these are the transactions that we're talking about and so no we have no idea what it was. I wish I did because I would like to correct my own record for whatever, you know, non use that would serve. But it is the reminder of it's not like we can look at our bank statement and think like, oh, it must have been this, right? There just was nothing weird happening. And that's the reminder that it's overly built, overly constructed algorithms that banks are required to have. If their algorithms

don't overcatch things, they can get in really serious trouble. So, I get why they build these up. I think they should still be refined over time, but there's not an incentive to be as calibrated as possible. And so your best guess is that I mean you were drawing a salary from Coinbase at the time which is a crypto company. Uh your best guess is that this was a factor if not the one of the main factors that could have tripped a wire somewhere. I know other people at Coinbase bank with this bank. So is it the main factor? I just don't know. But I have to assume it had to be a factor given how benign the rest of our financials are. It had to start with a

thumb on the scale. I was not important enough at Coinbase to for that to I think to be the main factor. I think like certain founders of crypto companies were personally debanked and that was the main factor. I just don't know. But again, it's all speculation because we have a system set up that we can't identify mistakes and fix them. Wild. I would love to see I've never seen anything like this, but some sort of report of account closures over the last several years from big banks and some sort of, you know, cohorted data fashion of just obviously not names or anything, but I wish there was something

like that that could help validate some of the trends that we feel and learn from. Right. Exactly. Because anyone looking at that, right? Like wouldn't that be the first place to start when you're investigating debanking? Like I'm sure banks must keep data around account closures. Yeah, we have the ability to learn how to build a better system imminently if we look at that data not in a additional mass surveillance and collection of personal information. No, but in a good data collection and data anonymized you know. Yes. Yeah. Well, presumably that data exists in within the Treasury Department as part of the BSA database or whatever they call it

that uh you know captures all this information about supposedly suspicious activity. Yeah. But not everything is reported to the government. I think that Emma has a great point here. A bank could probably look at their account closures and figure out and and I think some of this learning happens. And I don't want to suggest that these algorithms aren't refined over time. They certainly are, right? I I don't want to have any mischaracterizations of the good work that lots of folks on compliance teams in crypto and in traditional finance are are doing, but there every incentive is set up to over capture as opposed to calibrate. And there is enough information available to

us to be more calibrated. and we wouldn't we wouldn't change the benefits we're getting in terms of risk mit mitigation to be that more calibrated. One thing I want to make sure we get to, we talked about Katherine's story getting debanked and given that you've cataloged a bunch of incidents across our portfolio. What can you share from their experiences? Do any stand out? Any particular stories? There's one similar to how your account was frozen and you were waiting for your check, Katherine.

There's there's one story that comes to mind where one of our companies got a notice that they were going to be closed down, but they couldn't just wire out the funds, right? Like that would be the logical thing, like, okay, we have another bank account. We'll wire out the funds. They had to go in person to the bank branch to get a check. Well, their CFO at the time did not live in or was out of the country, I think, either traveling or or didn't live near the bank branch. Had to travel within this allotted period of time to go to the bank branch. The bank branch, like a local branch, wouldn't let him take the money out and close the account and ended up going to like three different branches within a city until someone

finally allowed him to get a check and close out the account. So, you had to fly, you had to fly internationally to go to a bank in person. Your account's closed. Go fly to get your money and just go to multiple brick and mortar like locations and try and get here by this date or else you're not getting your money. Outrageous. And so, you know, stories like that stand out. There was there are other stories where companies, you know, the founders get started when they're just a small business and they open a small business banking account and you can kind of see to be fair from the perspective of a bank. You like open a small business account with someone and

the company grows a ton over the years, changes, evolves, all of a sudden you're doing reviews and you're like, "Whoa, this is not the company we originally underwrote." and also we're not equipped at a small branch or a you know a small bank to handle this company. You can see how that could happen. But what's interesting to me is there are founders that that happened to where it's just like they've been such good customers of the bank. And what I think is interesting is when they've severed the business relationships but then allowed the founders to maintain all the asset management relationships with the bank, which I

I've seen that happen a couple times where, you know, it's hard to make sense of how that works under the hood. Like your business is not okay, but your accounts are okay. Correct. and we'll continue to bank you and your co-founders for all of your personal needs even though your earnings are like from this company that we are deeming to be inappropriate for our bank. I I just find that to be confusing, right? I mean, I wish someone could explain that to me. Well, and it's like how I don't understand why my old bank closed my bank accounts but not my mortgage. So they definitely know I'm not a criminal,

right? Still have a mortgage. Yeah. And then you're like, okay, so there's something in this for them, right? Like the the mortgage was worth keeping, but maybe the account wasn't for whatever reason, you know? So what's interesting too, it just an anecdote is that I noticed it came in waves a lot and I never knew really what to make of that either. Like if it was the conspiracy side of me being like someone kind of came down this week and was like pass the message like go call the crypto accounts, you know, cuz I would get a handful in a week of notices sometimes even across various banks, not all within the same bank. And then it would be kind of, you know, quiet for a month.

And so I I don't know what to make of that. And then the other part of me is like oh well maybe that has nothing maybe that's just coincidental that I I definitely noticed the waves and that was across banks not all within and the and the bank letters were always the same generic we did a compliance review and for compliance related reasons we are closing your account but then you would call they call their rep right it's like well what because the to your point Katherine like probably how you felt right they're like what do we do wrong? Yeah. What do you mean compliance related reasons? Like what did I do? And you feel attacked. And I know from hearing from a lot of

companies that they felt that they were treated as if they were a criminal. And not everyone made them feel that way, but certainly some of them did. Like they felt like icky, right? Like I did something wrong and I don't know what it was. I'm just running my business as usual. Been a long-standing client. So, I think that's a common sentiment as well. And it's it's just frustrating when you don't know what you did. Well, and just to to build on that, the reason it's frustrating if you don't know what caused it is because you're a good faith actor and you want to prevent misunderstandings, right? Totally. a bad guy knows why their account has been

closed. But like these crypto companies or me or folks in our my situation, it's like this can be cleared up. Right. Right. And then it's scary because you're like is there some sort of black mark on my record? I think you said that earlier too where it's like am I now not going to be able to get through underwriting at another bank because they're going to system. Yeah, there is a system for banks sharing information about customers who they deem unworthy. That is a system that exists. Again, good reasons for a system like that to exist, but also can lead to bad outcomes. Yeah. And I and I certainly don't want to hate on banks, right? like we all rely on them and they're like I

don't know I'm not I'm not trying to hate on you're just calling out you know obser your observations and you're totally and it's hard to see when dealing with dozens of companies that have gone through the same fact pattern to say there's not something tied together here that is a bigger initiative a bigger agenda it's it's just hard not to come out with that conclusion yeah the thing that's that's so shocking to me about your your point about these things happening in waves, whether it is some sort of coordinated conspiratorial action on the one hand or just like totally chance coincidence.

Like the thing that's shocking to me is that there's just so little transparency around it that there's no way to know. Like that's that's wild to me, right? I and that breeds, you know, conspiratorial thinking because it's a vacuum of information. You know what else are you supposed to think? Well, and frankly speaking, this is another reason that so many of us are in the crypto industry and believe in it because one of the core benefits of crypto as technology is its transparency and that it can be trustless. Not meaning that there is no trust in it, but trustless in that you don't have to trust a third party, big bank, corporation, or anyone else to deem you worthy to participate. Yeah. Get rid of

the middleman, the intermediary, the person with their hand on the switch who can decide your fate capricciously. Allow people to control their own fates and destinies. Sort of the the rallying cry for crypto. Building companies is so hard, right? Like we all know that. I think we're all on the side of startups here. We're all very, you know, techforward people. Building companies is so hard. And I've seen in, you know, more the traditional side and the crypto side. And being a builder probably in any discipline, but I'll speak to what I know on like the finance and accounting side. Doing that role in crypto is harder than any industry I've seen. It's

exceedingly complex. It comes with so many nuances and even even just the tech stack that you use is different than I'm comparing to like enterprise SAS or something, right? And it's really complex and building startups is really hard. And when you add in something so fundamental and simple, like you just want to be able to bank and like pay your bills and pay your employees and like I don't want founders to be stressed about a bank account. Like it just seems so crazy to me that this is like a top three item of stress for people. That's like not the hurdle. That's not the hurdle that they

focusing on. Artificially hard. Yeah. one message like it's something you should be able to take for granted that you can have a bank account and be like an entrepreneur in America or wherever you know it's just like crypto is global sure but you know just the fact that you should as a basic right be able to have a bank account for your business is seems like table stakes to me absolutely it's a hard enough industry as it is are there other legal or regulatory happenings that are catching your attention Katherine that we should dig into discuss US the SEC has dropped its case against Uniswap. That's a big one.

UNIS swap Labs was under investigation for 3 years. Um thankfully not ever sued uh but still had an open had a wells notice and uh an open investigation and we officially got our closure notice. Some of the and a wells notice for people who don't know. Oh yeah. Wells notice is when at a certain point in an investigation a regulator Wells notice is a practice of the SEC and CFTC in particular um the regulator says we the enforcement staff are going to make a recommendation to the commissioners that we proceed with an enforcement action that we take you to court. Uh and so you have a chance to then engage substantively a little bit and then you see what your fate is. Almost always

after a Wells notice, there's either a court action or a settlement. And because my opinion, I think most of the industry, a lot of the SEC's actions that they um or wells notices that they were issuing to the industry were not based in a sound interpretation of the law. There was no real path to settlement. It was okay, if we get sued, we're going to have to fight. And so that that was my old job at Coinbase, fighting the SEC. Coinbase's SEC case has now been dismissed with prejudice, which is a remarkable and welcome outcome as well. And the thing that's now happening with Commissioner Purse is that the thing that the industry was begging to happen for four years, uh,

like if you if you go look at the end of Coinbase's Wells Notice response, which is on Coinbase's blog, you'll see it's a an outright plea for dialogue. like we are here, we will come to the table, we will help figure out the right path forward here, but litigation does not make any sense. And those pleas from every good faith American company in the industry were just ignored for four years. And I think to the detriment of innovation in the industry, to the detriment of ongoing relationships that you want regulators in industry to have, right? you want there to be dialogue between regulators and industry because

dialogue helps get you to the heart of any misperceptions. Uh so it's great to see this path towards figuring out what what is and is not in the purview of the SEC and on top of that was just a huge relief to be out from under that cloud I would say with the SEC in particular. Amazing. M are you seeing this vibe shift from where you sit? What does it look like on your end? Yeah, I mean I think vibes are good. People are building again. It's like things that were on the road map that maybe were a little bit paused for a while or companies that just felt like they were sort of trucking along are now

running fast. It just feels like people have a lot of enthusiasm right now. I think now is also the moment where we need ground rules to be enshrined so that we don't go backwards or that crypto doesn't unnecessarily become a political issue every two or four years because that is no way to keep innovation within America's borders. No way at all. It was already at the point of unsustainability and driving so much innovation overseas. And the truth of the matter is, at least right now, it feels like we can come to the table and be a participant in those conversations in a meaningful way. But having the

rules set as opposed to living in fear that you can arbitrarily be sued based on a regulator, an agency making up a new interpretation of a law or putting out a new interpretation of law only in the complaint it files against you. for the first time. Like that is that is a broken way for a regulatory system to work. And when you say enshrined, basically the way to do that would be to pass legislation that provides clear rules of the road. Is that is that right? Do you think legislation is needed at at this point in time?

Especially because the the true reality is that securities law and commodities law and we talk about the SEC and the CFTC as the potential major regulators at the federal level for um the crypto industry. Neither of them maps well onto crypto as a whole. So new legislation is needed in order for those agencies then to play the role that they are meant to play. Uh that way legislation means that even if the agency heads change from administration to administration, there are boundaries on how the industry will be regulated. And so there is a safe

space to grow and maintain a business here in America. There's obviously work to be done there, but let's assume that things happen, laws get passed, there are fair and appropriate rules put in place to govern this industry. Paint me a picture of what happens next. What changes about the world around us, assuming that crypto gets the regulations it needs. I mean, I think that the change is more efficient markets for everything, more transparent and accessible markets for everything.

And we're on that path now. And the rest is in some ways a little bit ahead of us because we've been stuck in this regulation by enforcement landscape here for the last several years. but a systemic improvement of how all value is exchanged and how we can participate in a global financial system. That's the future of crypto. That's the dream and I think we have to assume that we are only on the cusp of what all the use cases will be. You can see the use cases in the payment system because there are so many intermediaries. so many unnecessary

steps. It can be so slow. It can be messy. So, you can see the opportunity for improvement there. But there's opportunity for even more transformational change just in building that like social media platform building on blockchains where users of those social media technologies they maintain ownership of their own content. they can move it easily to a different platform. I think that's a step beyond what people even tend to think of when they think about crypto technology. But that is why a lot of folks in the in the industry, so many of us are excited because we see that

potential even if none of us can envision where it will be if we allow that potential to fully grow. That's the exciting part, right? Totally exciting. And even your point about social networks like even that that is the web two kind of dominant platform idea that is front and center in everybody's mind you know nothing typifies web two more than social networks and social media so even to think beyond that like what is the web going to look like when I don't know everybody has AI extensions of themselves performing all sorts of activities like I don't know what happens to the web then well and just one other piece on that is that blockchain technology is a fundamental check against the risk side of AI,

right? We have both of these technologies growing right now in important ways and they can have a very symbiotic relationship if we let them if we let them both grow and grow next to each other and don't unnecessarily constrain one or the other, but instead use them as tools to bring out the best in the technology. Just to close out this conversation, M, what is your single biggest piece of advice to crypto founders who are trying to get bank accounts and sort of operate financially? Like what would you tell them? What can they do to get ahead of any issues? You need to pay attention to the details and nuances

of buttoning up your business. Like when you're a small company, you don't want to overdo the compliance and red tape and like you don't want to overbuild essentially. But when it comes to getting banked, for example, or showing up for those conversations with the bank, you need to make sure that you can present yourself in a way that is going to be professional, if that makes sense, right? Like you have to have all your ducks in a row. And that's not just speaking intelligently about your business because founders can do that in spades. It's like having all your in order like having your back

in order. Startups are messy messy things. They're messy. They're messy. But just being very clear like what are they asking for? Getting your your details in order. And I guess related to that is it's like having someone that handles that stuff for you and helps you do that who knows what it's like is really valuable. So you don't have to hire a full-time, you know, accountant or anything, but you should probably have someone part-time or outsourced to help you with those things. And they can help you with the banking application process. And they can help you with insurance applications. And they can help you with the things that are, you know,

going to drain on your time that are likely not the highest and best use of your time as a founder. Get support from operators, people who are operationally proficient, uh, who can help you. Yes. Much much more articulate way of saying it. No, you're great. Katherine, same question for you. What is your single biggest piece of advice as somebody who has gone through the ringer having been debanked yourself, debanked and rebanked? What would you tell other people to not by the same bank, but yeah. Yeah. Okay. Well, that I'm sure Yeah. You've sworn that bank off. Um, but yeah, what would you tell other people? What would be your advice to others who are worried about this potentially happening or people who

aren't worried about it but should be? It's good to be a aware of how much trust you are putting in any one institution that is not built to take care of you above their own interest at the end of the day. It's not that banks are not valuable resources, but their interests are not always going to be aligned with their customers interests. And so recognition of that misalignment and then in light of that misalignment, how much trust you want to leave in their hands or how much of your own financial fate you want to leave in your hands. So that my biggest lesson is realizing that I had not questioned the

amount of trust I was giving to institutions that at the end of the day had enormous power over my day-to-day life. unintentionally by me and that I could be more thoughtful about that. And because right now the way our system is built that this could happen to anyone for no good reason, we all should be really intentional about where we place that trust and make sure that we have backup plans. And that can be crypto technology solutions. It can be other banks. that we shouldn't have all of our trust in a a single corporation third party entity because that's just not the way the world works right now. I totally

agree like what is the most fundamental thing you can do is have redundancy plans. You're not relying on one one institution. You're not relying on one wallet. You're not relying on one account. like you just like you should very much make sure you're thinking through all the ways that you can be screwed and I mean you don't want to like live your life like that to the extreme but make sure you have plans for that and you've created the redundancies. I think that's the biggest change that we've advocated for across the portfolio after all the bank collapses too. In a word, whether you're bringing on more help or opening multiple accounts in different places, I

think the operative word here would be decentralize. That's sort of like the whole thing about crypto. But even if you're not using crypto, you're probably going to want to decentralize because it has benefits. Yeah. Decentralize your life. Yes. Yes. Yes. Nice. Well, M. Katherine, thank you so much for coming on the show. Thank you. Thank you. And I hope uh no more incidents going forward. Well, if if if I get debanked after being on the podcast, you'll know it's not over. Apologies if I put you on the in the in the sights of uh the BSA for having you on as guest. We are very candid with all of our banks now. Um and also live in paranoia, right? That like this has happened in in the past, but also that it doesn't make any sense.

It's not paranoia if it's justified, right? Mhm. Yeah. Yeah. Totally. [Music]