How to Navigate the Legal Landscape in Digital Assets | European Blockchain Convention

Transcript

foreign [Music] so good morning everyone I'm happy to see you here some of you hopefully also see you again next time and maybe we saw each other also last time and you may remember the last time when we had this similar panel with Josh and Thomas myself uh I I started the panel with saying okay let's prevent and now I'm starting to say let's print out because last time we talked about uh Terra Luna celgios and I remember I was I think I

was ending the the panel by asking you Josh if uh SPF is the next JP Morgan because he's like really helping the crypto industry um so I'm not gonna start with the same question because I think the answer is obvious but I would like to start to just give you a brief two sentences about what we are going to talk here today we're going to talk about regulation we're going to talk about regulation from a Global Perspective and also from a European in perspective because there is the so-called Market in crypto assets regulation going to come so don't work out stay here it's it's not that boring um so and we we're gonna look into that

and we're gonna look into that from different perspectives from lawyers from people who are active with their business uh inside and outside of the European Union and uh yeah and this is I think a very interesting because we have great insight and I would like to start with giving the speakers the opportunity to introduce themselves and then I will ask the tricky questions so Josh please start thanks so much hi I'm Josh I'm at a law firm called link leaders where I'm U.S head of fintech and head of blockchain and digital assets and I'm also one of our Global Tech sector co-heads I've been in the digital asset space for the past eight years prior to that I was leveraged finance and corporate and securities lawyer for

about 10 years outside of my firm I do a lot of things one of them is that I'm on the board of senior advisors for Wharton's Cipher accelerator which is the non-dilutive accelerator in the digital asset space and I also since 2016 have chaired the legal working group of the Wall Street blockchain Alliance and I'm on their board so that's enough from me hi I'm Kevin from Malta I'm a lawyer by profession as well but I I practice law for a number of years which my main focus was on advising clients on compliance on regulations and how to obtain licenses and to be compliant after a number of years doing this work one of one of my

clients approached me to to actually change my let's say hat and enter the market and now I am CEO of veneer CEO of a cryptocurrency exchange called kyrex and we operate within the EU and also outside of Dune we have different licenses and we're in the process of obtaining new ones so this is a very interesting topic for us for me both from a legal perspective but also now as an operator hello my name is Thomas hegele I'm a lawyer from Liechtenstein I started with Bitcoin 2011 started my PhD about the topic in 2013 I run a law firm in Liechtenstein helped the Liechtenstein government thinking about their regulatory approaches do that now in

several other jurisdictions currently because now everybody wants regulation that was not the case a year or two ago outside of my legal practice I am the President of the crypto country Association Liechtenstein I'm a board member of inatpa that's the European Association for trusted blockchain applications yeah and all of my life since more years than I than I can think of is dedicated to blockchain and DLT and Innovation and technology and law hi everyone um I'm Oliver I'm CEO of it's Global which is one of the world's largest crypto exchanges but I'm also a lawyer don't worry I'm allowed to be here I spent over a decade doing

Financial Services regulatory law in UK and Europe in the US as well and then quite a lot of fintech stuff uh in the Middle East so I joined benchex Global as general counsel and I still maintain that role and we're regulated in Liechtenstein um we have our lawyers here who's now contractually obliged to make me look good on this panel uh and we're also regulated in Bermuda so um have a sort of Global Experience uh with that too thank you so I'm going to ask you some questions and you can be very honest and straightforward no one is listening no it's not recorded it's not recorded it's not going to be on YouTube because I'm going to start with the US and asking

about how the US regulation is now developing I heard about Thomas he's a very smart lawyer so he was starting to ask about the duck test so you take a duck you tear it apart you look in the dark and then you put it together and then in the end if you can trade the deck it's a security or how is it in the U.S so what is Josh so what I would say is one of the big difference other jurisdictions is that you don't just look at the digital assets and the rights that are ascribed to them it's not just a matter of that you can't just classify them you have to actually look at the activity and the sales and the offer the marketing so that all goes into play so your result may be very different from what you may find in

another jurisdiction and by the way in case you're not aware the SEC has taken the view very publicly for the past few years that nearly every digital asset offered and sold for fundraising purposes is likely to be a security means you should assume it is unless you have reason to believe it's not similarly there's a lot of debate and I'll keep this quick because I know there's a lot of us on the panel there's a lot of debate between whether something is a commodity or a security in the U.S but guess what the cftc has said that basically they're all Commodities in a letter to the telegram Court in 2019 so you can have them be both just because something's a commodity doesn't mean it's not also a security so I'll stop there thank you Josh we're gonna we're gonna deeply with deeper

later but um for me I'm also a German lawyer and European lawyer so for me the law in in U.S seems to be very sophisticated very complex and therefore I would continue with talk about the European market and for those of you who don't know Malta belongs to the European economic area and I was doing some work in the past in 2015 and 16 when I was still with PWC where I actively advise people either to go to Switzerland or to Malta to start their business I think even binance started with some office in Malta not that many people know that can you a little bit explain from your experience not just from a lawyer but now mostly from someone who's really running the front business how it is to

to do business from Malta and is Malta like the gate to Europe or is it rather the the door to the world um in reality what is um at least our experience with Malta because we also have other another license in the U is that the regulation is very stringent and very let's say um comprehensive so to be compliant and us as a license holder in Malta it is also a sense of let's say Pride that you are actually obtaining this license and retaining it why because the thresholds for example are higher than what we are going to have with Mika being introduced into the EU so in reality we're already um

currently compliant with obligations that are at a higher standard than what is going to be introduced through Mika I mean we now know what's going to be introduced and this has set us let's say into also a culture because certain licenses are approached as a way to start a business I want to start a business I want to accompany and I need a license and that's it the approach of the regulator in Malta is entirely different we have constant visits we have um multiple um let's say checks both by the financial intelligence unit and the regulator but also at the same time whenever we're going to introduce new

products Whenever there is something that is not clear in the law we find a lot of cooperation as well so we meet the regulator on a constant basis like they are very helpful and therefore it has been a positive experience but it creates also in us a culture being compliant isn't just a set of let's say tick boxes we've done them now let's look at the business even the way we operate even from onboarding monitoring the transactions activity treating customers and all activities our mindset is now let's say geared up to always be compliant and that has made it easier for other license currently we're applying in the US as

well I I want to comment a bit about the U.S legislation because I don't feel it is it is clear but also different different states different so that creates a bit of maybe Mika will harmonize for the EU for example something like that for the US would help operators like us to introduce ourselves into the market but we found that our experience in Walter helped us a lot so it does open up also to the world in that sense thank you thank you I think it's also important to understand that marker Malta or the malta business they're not afraid of risks therefore I think the the gambling industry is very well known in the malta and uh but still I I think that Mata is a good jurisdiction for for

doing or starting the crypto business and continuing a crypto business however another very good jurisdiction within the European economic area some of you may Asterix and Obelix and The Galleon Village would fight against the Roman Empire is Liechtenstein from that perspective and before asking you Thomas I would like to first ask you Oliver is is Lichtenstein the new crypto heaven or the capital of our crypto business or how can we say that well uh crypto Heaven God who can who can imagine what that would look like um I think Liechtenstein has a bunch of things going for it and and probably first amongst them was that they were probably the first jurisdiction to

really establish a European regime that was fit for purpose and they got to grips very early on with establishing a regulatory framework that treated crypto as crypto so it kind of goes back to what Josh was saying the US is engaged and other jurisdictions are engaged in a rather unedifying conversation trying to categorize crypto into existing old categories so is it a commodity is it a security is it a derivative and the answer is like sort of kind of maybe all of them um but but no like it's its own thing it's crypto and the most successful regimes we have seen are the ones that engage with crypto on that basis and Liechtenstein was was probably the first

in Europe and therefore probably the first globally to do so the big challenge of course is Mika coming now and we're going to have when the European Parliament finally get around to actually adopting the damn thing we're going to have a situation where all 30 eea member states will have the same rules so that incumbency that kind of default status that jurisdictions like Liechtenstein and motor and uh and France that goes away um and so they're kind of in a fight for their lives really because you know Liechtenstein is a small country um quite a lot of my time when I first joined the country at the company was learning how to spell Liechtenstein

that's quite difficult um and there are a lot of lots of companies out there that think okay well regulation is the way forward regulation is what we're going to be doing I know the buff in in Germany I know the Dutch regulations I know the Luxembourg Regulators up until now it hasn't been an option to go and get regulated in those jurisdictions but now I can so I don't need to bother with Liechtenstein I can go to my normal friendly bathroom I don't think anyone's ever called buff in friendly but my normal like regulator and go get a Mika license so it's a really interesting time because that incumbency that default status is about to be swept away

yeah I mean the reason why I asked you to speak first before I asked Thomas because Thomas I think he supported you in entering the European markets religionstein with his law firm and besides being Dr token Thomas you have also great knowledge of how the regulation of token is from a civil law perspective I mean what most people don't understand is the listening blockchain act or the tvdg deals a lot with the with civil law aspects but at the same time passed away for regulation and I mean you you even did your PhD I think on on that matter and I think you have your publication in with you for those of you who are interested maybe you can shed some light on um how how the civil law and the

regulation from a European perspective must intact to have a proper environment for for crypto business sure so when we started in 2016 the work group the question was not uh like should we stop all of that business or should we just like create a marketing law to attract business and everybody wants to to come to Liechtenstein to start his crypto business out of our country the idea was to define a strategy and analyze this Innovation first and we spent quite some time to understand how disrupt this technology could be and in which sectors and then we came up with the strategy and division of the token economy the token economy is way more than just regulate

exchanges or custody service providers it's the vision that this technology will be used in our economy to digitize our transactions to transfer value over the internet in a way more efficient way as we do it now without or with less intermediaries and that's the efficiency gain we were thinking of right and then we thought of okay how should we where do we have to change laws where do we have to implement and new laws to actually to allow for that Innovation and that was the the overall strategy with with the with the vision of creating the legal framework for the token economy and then we said what we need from a civil law perspective is if you tokenize something and we hear a lot

about digital art nfts and then digital artery presenting real physical object Arts not a lot of people think about what is the like the legal title behind it and Liechtenstein created a framework which I refer to as the token container model so you can let a token represent for example ownership rights directly for example to Mona Lisa so you can issue a token which is representing the ownership right to a piece of art and the interesting part there is if you then transfer the token also the ownership right is represent is then transferred so you become an owner if I transfer you the Mona Lisa token you'll be performing the Mona Lisa it's a bad example I know but everybody knows what the Mona Lisa is so therefore I would

say everybody has a picture in his mind so then you become the owner of the Mona Lisa and that is huge right that is really huge because it's not only about ownership it's a lot about a lot about more any other right like IP rights and you can think of a lot of rights which can be tokenized and that is crucial because without that legal certainty this will not happen and and that was the second part we also said okay if this technology is able to do things which we anyway do for decades in a different way and the risks are different then we have to treat it differently coming back to what Oliver said it's a crypto asset it's not a security right but if you tokenize the security it still stays in security so that was our approach and then we said okay we need serve if you provide if I

Pro if I do my custody myself if I have my Hardware wallet and I custody my my crypto assets myself it's my problem if I lose my key but if I trust Oliver and I send Oliver Mike um my tokens and Oliver does custody I mean he's a service provider I somehow have to trust it has nothing to do with the use of blockchain he provides services for me so yes he has to get regulated that's obvious right and it's not something new and so we came up with a supervisory concept which is very similar to the one we have in mecan we are actually currently preparing for the Mika adoption we are amending our tvtg they have Financial Market authorities doing the Gap analysis and our service provider hopefully can make use of the article 123 to easily change your local

license to a micro license I don't want to bore you with more details if you have any question about that happy to to approach me afterwards but it was more of a strategy and a vision of of the government to implement that than just saying yeah let's have another law now thank you thank you for that I mean I would like to look at not just the European regulation I also want to look at the U.S because we saw FDX we saw Luna we saw Terra it all somehow is related to one thing I would say I don't want to blame the US and the U.S Regulators I want to actually blame the missing harmonized regulation from a global perspective because what people don't understand is many say oh FTX was

not regulated that's the reason why everything went wrong that's not true FTX was regulated in Europe there was regulated in Cyprus at the Cyprus entity so they were actually really regulated to to run the method business and they were even passports to the entire European economic area therefore the European regulator cannot hide and say oh it's not our business it's the US I think the problem is that we have a missing harmonization when it comes to crypto assets and this is actually what the asthma the European Market Authority and enabled the European Bank Authority already highlighted for the European economic area and their papers called crypto advice crypto asset advice so look at to these papers and my question to you now Josh

um do you think that we're gonna see in a new future some more harmonized is there any regulation coming in the U.S which is not just differentiating between security and not security because I think this is very stupid honestly because we have so many other assets which are not Securities but still maybe need some regulation from the European perspective is there may be some regulation coming for crypto assets not for securities so I'll answer that in a few different ways one I think that in my view the likelihood that the us is going to be harmonizing with the rest of the world anytime soon I don't think that's likely right the SEC and various other

Regulators actually take the position that they have extra territorial jurisdiction so if you are dealing with U.S customers and you are in another country somewhere else you know or even if you're not dealing with U.S customers but you haven't prevented the flow back or flow into the U.S of digital assets you know the SEC and other Regulators they may think that they have jurisdiction over you and I think that's something important to remember I I don't see any kind of harmonization with the rest of the world yet maybe someday but I think within the US The Regulators are frustrated I mean at least with folks with whom I've spoken and I've spoken with a lot of them and pretty frequently just in their personal capacity there's a feeling of

disbelief in many cases that the industry just isn't listening to what they feel they're clearly saying within the U.S which you know your mileage may vary you know reasonable people may have different views about what is clear and what is not um I will say in terms of future legislation and this is something I actually feel really strongly about and it's maybe a bit controversial to say I think sometimes the media and those who are lobbyists were really strong proponents of change in our space fortunately they do have big voices right and they are helping to persuade certain legislators what I think has is not always the best is that there was a lot in the media about

certain bills very high profile bills in the U.S which were very well-intentioned comprehensive you know and really well thought out bills including for example the lemus gillibrand bill the dccpa ETC what I don't think people necessarily understood was and it took me a long time to to learn this as well is that these bills were not likely to pass even before FTX so you had a whole bunch of people in the industry including lawyers skating to where they thought a puck would be where it wasn't going to be and I think that that's very important to remember I think right now post FTX and you know you you mentioned Terra Luna just today it was announced that the SEC brought in action against terraform labs in dokwan right so that saga continues

the SEC will come and get things even if it's a year later um but I think next if we're going to see legislation at all which I think we will I think it's going to be focused on transparency and disclosure I think the next thing that we would see from a U.S federal perspective would be about stable coins right maybe something akin to what New York already has mandating Fiat backing and disclosure I don't think we're going to see things more liberalized in the U.S with respect to digital assets anytime soon I think a lot of legislators are kind of feeling like maybe they have a little egg on their face because they received contributions from Sam bigman freed or you know various

other things but I think SBF was very closely associated with the dccpa and I think even though that may have been legislation that could have passed potentially of all the ones that were proposed I think that makes it very unlikely now so those are my thoughts uh I I think you know we're all moving forward but I think one should consider closely that the SEC the cftc fincen all the Regulators you know they really have felt that the actions and and the occurrences including the many bankruptcies and solvencies Etc that has emboldened them to enforce even more so even though we're seeing a lot of enforcement actions I still don't believe we've seen anything yet

yeah I I agree I don't blame the SEC like their job is to be the SEC and regulate Securities and and they're doing that but I think you know Bishop's Global exists but the explicit purpose of serving the non-us world so we don't allow us customers onto our platform uh regardless of where they are in the world we don't allow people in the US regardless of their nationality and and I think probably unfortunately the reason for that is until the U.S stops trying to fit things within a category that was created in in 1933 like 90 years ago it's quite it's unlikely I think that when FDR signed the 33 act he had envisaged that blockchain would exist

right if he did he was an even greater Vision reading people give him credit for but that seems quite unlikely to me so what do you do well in terms of global standards to my mind I look at Global meaning everywhere but the us and we are seeing movement on that front so you know my background is advising traditional exchanges the first place you go cpss iosco you get the cpmi the the principles from Market infrastructure and so you know that if you're trading shares on the London Stock Exchange on Deutsche boss in Australia in Japan yes there'll be local variations and implementation but the basic principles are the same I think we're now getting to a stage where enough countries and enough

jurisdictions have actually got to grips with what crypto does and means and works and all the ownership stuff that Thomas was talking about that we can actually move meaningfully forward on that and end therefore this regulatory Arbitrage um that has absolutely been plaguing the system now you mentioned that the FTX in Europe was regulated and that's true it was the biggest problem was very often people weren't facing that regulated entity so these these regulated statuses were held up and put into a trophy display case and say oh isn't it brilliant I have 487 different regulated statuses oh only 487 I've got 493 it's pathetic right it's embarrassing that

they were used in this way regulation has to be meaningful it's about substance it's about quality rather than quantity and so that quality is what we need and it's probably global standard Setters maybe it's iOS so obviously batif on the AML side that would impose that on the rest of the world and as for the US I I don't know I don't know what you do the political situation I trust Josh means that we're not going to get legislation out of them there um but as an old quote from from Antonin Scalia the uh the former Justice Supreme Court uh who was very texturalist he said it must be fascinating uh to be a judicial activist because you wake up every morning and you think gee I wonder

what's unconstitutional today and I I think there's a possibility that Gary Gensler wakes up every morning and goes gee I wonder what's the security today thank you Oliver so um looking at you Kevin so what would you would you agree to Oliver what would you see like say from a from someone who's running the business is it easier to do the business in Europe within Europe is it easier to face the U.S regulator so what would you say to be honest it it got from both sides in the sense that sometimes it's easier when everything is clear and you know exactly that is regulating your operation and you know exactly what you need to do in order to comply and

that's it rather than having different let's say interpretations of as we said the law does not particularly or specifically created to regulate the cryptocurrency let's say um as for example we're seeing now with Mika what what I completely agree though with Josh is that the the legal framework because they were discussing this should not be seen as something that is regulating crypto because this concept of regulating crypto is I mean nothing regulates freely crypto crypto is what it is it is more uh let's say taking it from a consumer point of view because getting a license fine you said the rules you get the license and you can work and that's from an operator's point of view but from the consumer point of view

following especially FTX and Other Stories that we have we have seen over the past years um protecting let's say the vulnerable uh user of the trader the the the inexperience or the person who is placing as well trust in others things like for example having adequate reserves for a stable coin or for example rules against Market manipulation inside the trading these are all found within Michael just as one example so the Lord shouldn't just focus on did India regulate crypto as a concept the U.S regulate crypto just stopping at that I believe that the laws should be focused on um the user experience of let's say participating in this market and how it

can protect the vulnerable let's say user in that scenario and how therefore we are not just complying as I said before to a set of rules to operate but also ensuring that the rights of those who are participating within our business are being protected yeah I mean I think that the problem what we Face nowadays is is not that we need to regulate blockchain and crypto because most of the incidents we've seen with FTX and Tara and Luna they're not related to blockchain they're not related to crypto um and even what is it right now happening in the US um I'm sorry to say so I mean yes you talk about extraterrestrial jurisdiction and stuff like that but at the same time why do we need that for for crypto we didn't need

that for the classical for the traditional financial industry I talk about reverse solicitation I talk about freedom to choose what you want to do and stuff like that and now suddenly because we do not really understand what it is I mean people say what is taking is taking something some Act of like security trading or something like that and I think this is a big problem and I think this is also the problem what we Face uh looking at YouTubers just shrink a sip of water because it's going to be your turn right now what we face when we talk really about about that we need on one side I think appropriate regulation like balance regulation but at the same time I think it's also a little bit of educational work what we need to do for the lawmakers and for the authorities to

to explain to them what what is the business what is the crypto business you're trying to regulate here I'm looking at you Thomas because you're talking now to other jurisdictions outside of uh Lichtenstein which wants to introduce new laws and I think this is also very important to help those lawmakers to do the right decision and then we're going to talk about Mika because we all all of us we said something about Mika but before that maybe you can elaborate a little bit on that you can you can imagine if you talk to these regulators and that really depends a lot of like or some of them they are quite educated when it comes to blockchain so they have an idea and some of them are really very well educated

even the the lawmakers but there are others where they now get just the task you know what the next nine months you have to create the best virtual asset regulatory environment you can think golf that's going to be the world leading best legal framework for for digital assets and then like this law making team is looking at you and say like I have no idea like how blockchain Works in like reality I I never I never transferred a token I never I never I never had an nft or whatever like they they just don't understand and the problem is and I think that is totally true you should the regulator should educate themselves first if they

are not there yet right because if you don't do that you you tend to create legislation uh which is using the same principles as we had them for for decades and for the service providers that might be accurate actually in quite some some in quite like some ways but if you the the detail is the challenge where you have to understand where you don't need to regulate where you have to understand that this technology itself creates the solution for a challenge and address the risks properly and therefore yes the I I strongly and and actually it is possible you can educate yourself it's just it takes time and that is the that is actually at the

moment that's what I hate about the situation it was obvious that we were going to have we will have a big Scandal but the problem with the Scandal we have now is that everybody wants to have regulation now we don't have time we have to have our framework within six months within nine months the problem is that they don't take the time which is actually needed to create for a sound legal framework for for digital assets and there is a saying bad cases make bad laws and I'm really afraid that this is happening now globally in a lot of jurisdictions by the way I know this wasn't one of the things that you said you were going to talk about but if it's possible if we have a moment at the end to talk about staking I would really like to hear from a U.S perspective

we will talk about staking so we know we now have like six minutes left we're going to talk a little bit about me can't how Mika's jumping in and how we regulate staking in Germany or in Europe um instead we're gonna also see how you do it in the U.S but I just wanted to continue at what you said to Thomas I mean um bad examples make bad laws that's true but I think that many lawmakers because of a lack of understanding about crypto they somehow all jump on trying to regulate crypto but we have also other troubles in the world which brings me to the Mika because we had a good good start with Mika the Mika is a draft law which is for the last past two years

existing and we had really good communication with the European commission with Eva Kylie before she just got brought out from that position as a president of that and uh so and yeah if you look at that example of evacaili for example if you would have used the blockchain for that donations of her that cash settlement we wouldn't have that problem we can also argue from that direction anyway so the Mika which is hopefully going to be effective with its publication in April we all hope yeah so let's hope that it's not going to be postponed again we'll bring at least for the European economic area some harmonized regulation on crypto assets not on Securities not on nfts but on

true crypto assets and looking at the the gentleman on my on my left you all are aware of the Mika so would you say that once the Mika is coming is this something positive for the crypto environment or is it rather something again challenging and not the right step yeah I think overall my view is that micro is a step in the right direction a big step in the right direction uh when they actually get down bands are passing the damn thing um and we a business Global one of our key principles is that regulation is essential part is a feature it's not a bug of crypto it's something that we need in order to make the industry successful and it's something that you

know back in 2013 14 when bittrex was founded in the US was a hugely controversial thing to say um you know our Founders literally got death threats from people saying you know this is anathema's crypto it's it's we don't stand for regulation we don't want it I think in the last decade we've improved right regulation people people try and say there's a attention between regulation and Innovation are you over regulating over strangling of course those are concerns but done properly and I think Mika in many ways does do it properly actually done properly at regulation can foster Innovation because it can create an environment for people to innovate for people to create new ideas in a safe secure and and

respectable way and that means that if you were an individual or if you're institution you've got risk committees to get through you can actually meaningfully invest in crypto with the same confidence that you can invest in in other financial services so that's where I think we need to get to Mika is a big step forward the timing is just a problem by the time it comes in in realistically 2025 well that's a very long way away from now and I if if you're thinking about um you know two years in the Horizon in the future a two-year Horizon I you need to be Nostradamus to have an effect there and people are already frankly talking about Mika 2 what might come next and to tell you what you're

seeing the opportunities are other jurisdictions saying well okay we're going to do it better and we're going to do it quicker to the UK Dubai you know all these actors are moving in and saying like the EU is really at risk of snatching defeat from the jaws of victory so would you agree I mean I'm looking to you Kevin I'm going to be very short yeah um I definitely agree that it's a seventh right direction um especially for operators who want to operate in the EU and it makes life easier to understand where we stand and what we should be offering and how we should be doing it what I definitely agree as well that it's going to be a bit outdated in the sense that now we're

already seeing an introduction of things that regulate matter is that will probably be introduced in mikato but however what I like about Mika so far at least from what we've seen it just doesn't try to control the market as such but is only regulating it in the sense what where I completely let's say the secretary is where the like for example Canada's reaction to FTX and stop envirging trading up to certain limits Etc when the law becomes I believe uh trying to control let's say that wouldn't happen on the classic stock market for example you know when you're trying to control a field let's say the market I think then the law becomes oppressive so the law must always be regulating but not trying to control because finally it's not only

made up of let's say amateur or newbies orders or professional Traders it is also a big market so let's respect it may I dedicate my time to Josh and ask the question if I have a duck and it's not a security and I take my duck myself it's not a security but if I give my dog to Oliver and Oliver takes my duck for me it's a security did I get that right so well let me say this I think in my view kraken's staking as a service was an obvious security had someone done the analysis they would have seen that I I just think this whole rabble rousing of the SEC is trying to kill staking is wrong I have sat before I've been with finhub with proof of State clients for

years some I've sat with for years with the FCC never once was native staking of your own digital asset to secure a network something that was said was not okay what is not okay is pooling digital assets investing without disclosure that's what the registration is about to give disclosure about the risks right and then giving a return that bears no resemblance to what that individual digital asset did now whether coinbase has a different model which they're saying they do this is all facts and circumstances but I I think we actually should be differentiating the SEC at least these people they are very experienced with digital assets they have a lot of knowledge and I think rather than as an industry saying oh no

no don't attack staking we need to say wait this is native staking this is more akin to mining right it's it's for a consensus mechanism mechanism these large Enterprises that have staking as a service can defend themselves they have lots of money you know and they can they can do so if they do get attacked by the SEC and they do have a defensible argument and then honestly for the last thing and this is very controversial what I'm going to say um but I I believe it or I think it's at least think important to think about you know Gensler has come out and said with respect to one particular digital asset that previously you know the SEC had indicated was not a security that some of the staking looked like lending well you can kind of differentiate that I'm

not saying that he's right but you can kind of differentiate that between staking your native natively staking your digital asset to a secure a working proof of stake system with locking up your token and essentially receiving interest when there is no proof-of-stake system up yet so I I think we should be differentiating these things and this is the very last thing I'll say in our industry a lot of times we have these catch phrases which are very helpful in some ways but you know looking at for example another catchphrase stable coin that covers everything from Terra Luna right and that an algorithmic stable coin that may even the algorithm might not work might be double minute you never know from from ecosystem to

ecosystem all the way up to a fully Fiat bat and that doesn't help Regulators that makes you know that makes things less clear for The Regulators thank you Josh thank you gentlemen our time is up thank you for audience for listening to us and see you next year [Applause]