Roman Storm's Retrial Delayed as Treasury’s Crypto Warning Looms

Transcript

by prosecuting this guy, actually just villainizing this guy that created a great technology or battle tested a great technology and I I think should be treated as as more of a hero than a villain, frankly, because we need to we need to have bold people who try these technologies in novel novel places like the Ethereum blockchain. And once we stop doing that, we're going to stop innovating and stop building the systems that we actually want. Hey everyone, I'm Kane Wark and welcome to Uneasy Money because what happens on chain never stays on chain. Before we begin, here is a word from the sponsors that make this show possible.

>> This episode is brought to you by 1 in Aqua, the shared liquidity layer from 1 in. Back multiple liquidity positions with one wallet balance and keep your tokens in your wallet until a swap fills. See how it works at 1in.com/aqua. >> All right. Hey guys, I'm here with my co-host Taylor Monahan, security expert, and we have a very special guest today, Peter Van Valenberg, the executive director of Coin Center. Welcome, Peter. >> Thanks for having me. Happy to be here. >> Yeah, thanks. I think uh I think we've got a good show. Uh we were lucky to get you this week cuz uh we got lots of interesting things to talk about. Uh >> I'm good every week, but always about sanctions, you know, that's everyone's

>> Yeah. Yeah. Absolutely. Absolutely. Um, all right. Well, let's uh let's get into it with the first uh segment here. So, uh Bessent um the Treasury Secretary um one of the best so far. He's been he's been uh an exciting Treasury Secretary from my perspective. Um in, you know, uh all kinds of crazy stuff. I I It's funny. I was catching up on money. >> Do you have like US Treasurer trading cards or >> Yeah, I wish I did. when you him with a good Fed share, you know, >> I want the hollow I want the hollow version of uh of um Scott Besson or like Scott Besson like you know like nuking Iran or whatever. Um so so uh it's funny

I was catching up on on money stuff because I'm like super behind and so I'll like cherry pick like little ones and and uh I was reading um one from like a year ago around about the the tariffs, right? and he's making this joke about how like someone was like, "I can't believe that the Treasury Secretary is having these like secret meetings and and um Matt Lavine's like they always have secret meetings. It's just they don't usually make the economy go up and down every 20 minutes that they're so market moving that like you can trade on it, right? Like usually you talk to the treasury secretary it's like in two over the next two years things will h know it's like this guy is like

in 20 minutes we are going to wipe out the middle east. Um so yeah it's uh it's pretty pretty good times. Uh very entertaining. So um the the Treasury Secretary uh is threatening um economic uh D-Day um on Iran um pushing sanctions on countries and entities that do business with them. um basically trying to you know uh fullcourt press on the actual bombs and economic bombs um and you know the straighter form was uh blockade and all of that stuff. Um, but I think the most important thing is as as I think many of us in crypto know,

uh, Iran uh had or has or still does have like a pretty big Bitcoin economy, um, you know, due to to, uh, currency controls and and all kinds of stuff in in the country. So, um there's there's been I think like a number of uh of pretty big Iranian centralized exchanges that have like existed over time and and you know um had issues. So, uh Bessant is basically saying stop doing that. Um anyone who's like buying Iranian gold or oil or Bitcoin is going to have some problems. Um, and I think the the interesting thing that I saw raised on X

was like they left the door open for even DeFi. So, you know, is is uh unis swap allowed to interact with Iranian uh people? Is is Ethereum allowed to interact with Iranian people? What are the implications of this? Um, so yeah, I it was um it wasn't it wasn't like they said like def you know DeFi is in trouble or anything like that but no uh they didn't say that DeFi wasn't in trouble which >> you know probably should be somewhat concerning. So I don't know Peter what's your what's your take?

>> Yeah to just start with the release itself um it's got a lot of heightened rhetoric. It's about economic DAY. One doesn't normally announce D-Day before they have a D-day but I mean I get >> it's a new era, Peter. It's a new era. >> You want to say that this is this is going to be significant and uncompromising. I get it. Um so the release does not um call out DeFi. It does not call out any particular crypto project. Does not mention say unis swap or anything like that. You raised the question. It's a good question, but I want to be clear that the release is fairly neutral. It does say that digital assets and digital asset intermediaries

are part of the suite of entities that they're looking at potentially imposing secondary sanctions on. And um so you know probably what that's going to look like the most obvious the lowhanging fruit the place where the administration if you if you ask me should focus its energies are things like Iranian exchanges front companies you know um money networks brokers the people who actually know exactly who they're dealing with are happy to deal with them have agency and fiduciary sort of control over the money as it moves and then you know help the the arrangement help the arrangement ultimately happen

and help the money laundering or the sanctions evasion happening. So like that's that's the obvious target here and and you know sanctions is a contentious subject in general and I have trouble here because I believe we overuse sanctions generally. Um that said sanctions is probably a great alternative to just going all out in war, right? You know economic >> economic um effort. Why not both? And why not both? >> You know, it's the 21st century. We can do whatever we want. No. Um, >> and so you so, you know, setting aside whether you think this particular use of sanctions is a good or bad. Those kinds of targets to me are legally and sort of

um constitutionally reasonable targets for sanctions because they're people who really do have control over illicit funds or sanctioned funds and probably should feel the brunt of willfully and knowingly violating sanctions or helping someone else violate sanctions. This is secondary sanctions. I'm helping somebody else get around the sanctions. Now the release however doesn't as as you mentioned give anyone a clear pass. now question whether anyone would >> be weird if they >> yeah they'd be like by the way you can use Monero you know that would be fully insane >> it'd be bullish it would be bullish for Monero but >> depending on your worldview um

>> but it didn't it didn't put any hard limit on who might bear the brunt of secondary sanctions and it did have some intentionally broad language I think the the line was effectively any source could be a target any source of the regime's illicit revenue and every economic lifeline that the regime has could be a target for these secondary sanctions. And you know, we have to ask ourselves just a very obvious question, which is, you know, there have been reports of um Iran trying to use the Bitcoin network, trying to use DeFi tools, all sorts of things in order to monetize oil reserves that they have trapped in Iran or otherwise move funds in and out of Iran. So if that is one of whatever counts as every economic

lifeline then we will come to this difficult position where if the administration really wants to take take apart that are they going to go after the centralized institutions which I would agree are the reasonable targets of sanctions or are they going to actually try to shut these networks down by targeting non-custodial infrastructure you know nodes relayers miners or even at the more extreme and software developers who make these networks possible. So, they haven't ruled that out. But again, who would who would put forward a press release saying, you know, we're not going to >> go do the crazy thing, right?

>> And that that could be because they want to reserve the right to do the crazy thing or it could be because they believe that that is a crazy thing and so they don't even need to say they're not going to do it, right? >> Yeah. Yeah. Yeah. Fair. And and I think you know the the uh the thing about um Bessant that that I I have liked is you know he he does come across as like very uh pragmatic and like resultsoriented right and so you know trying to shut down Ethereum is not very resultsoriented like even if you have no idea what you're doing right like you know that's probably not going to >> impact Yeah, bang for your buck is not going to be the right strategy and it's

going to cause tons of collateral damage. So you you you can either say that, oh well, they're aware of collateral damage and they're sensitive to that. That'd be great. I hope that's true. But at the very least, you can say that they're efficiency maximizing and they know that they're going to cut, you know, in a sort of paro's rule, you're going to take out 80% of the viable avenues by targeting the the entities who are like human brokers, >> right? uh rather than some sort of decentralized protocol. And I'd draw a parallel and I I think you want to get to some of the tornado cashache stuff later in the show. But I would draw a parallel generally to the administration's approach on quote unquote ending regulation by prosecution. There was a memo from the Department of Justice last year um that

said, "Look, we're going to we're going to stop some of the ongoing investigations and targeting of people for unlicensed money transmission if they otherwise seem to fit Fininsen's um uh guidance which said that, you know, if you're non-custodia, you're not a money transmitter, >> right? >> Which seems like totally non-controversial and reasonable, but >> it is true that the previous administration did actually >> it was once controversial. Yeah, it was >> so this this fits that pattern of and that was right around the same time that the administration got really serious about cartel money brokers as well and they were saying these are the people and they're real people. They're not an autonomous robot on the Ethereum network or something like that. These are the real people that we can exercise real

jurisdiction over and put a stop to their moneyaundering efforts. >> So pragmatic approach Yeah. >> Yeah. So, so you know speaking of pragmatism like one of the vectors that you would imagine if you were going to try and you know use uh these decentralized networks would be stable coins right and and so you know uh stable coins are this interesting thing because they're in many cases both centralized and also this thing that you know moves freely uh through decentralized networks. So, um, you know, you would imagine there'd have to be a conversation with Circle and Tether and, you know, uh, various other issuers to to be like, "What can you do here?"

They're going to have to put some pressure on on them. >> I I think that's right. But I also, you know, I have no um non-public information about the sanctions compliance programs at any of the big issuers like Tether or Circle, but you know, I would be surprised if they didn't already have lots of these kinds of conversations, right? I mean, we're dealing with public blockchains by and large. I know there is a USDC that's moving on to Alio, but even there they have view keys, right? So, we're dealing with public blockchains that are auditable where we can watch in real time as money flows to known sanctioned addresses. There can be certain amounts of information sharing that can be done.

There are some there's some red tape around that, but in in general, um you can you can have information sharing and and on a public blockchain, you don't even need a lot of like non non-public information sharing. You have the public information, you can do chain analysis. And so I I think these entities and and you had mentioned unis swap earlier as well. These entities and unis swap has a decentralized protocol but it has a website right and unis swap on its front end that it controls has been doing sanctions compliance for a long time and so does berkel and so does tether. Now >> this is all also happening right at the same time that the administration's doing its genius rulemakings. So the Genius Act created a regulatory

structure for stable coins and now Treasury and the OC have to implement it. And one of the big things that's come up in the regulatory comment period for the OC and for Treasury is you as an issuer have a lot of very specific obligations to know the people who you're issuing and redeeming from to do AML KYC in the traditional sense. What are your obligations on the secondary market? This is the term that's used, the secondary market, which would be, you know, like not someone who's coming to circle saying, "Hey, I want a dollar for my USDC," but rather a person with an Ethereum wallet who got a USDC from someone else with an Ethereum wallet.

That truly, you know, off their balance sheet, off their centralized protocol part of their operations, what is what does it mean for the secondary market is is the interesting question. and ingenious in the law itself and in the regulations that are being developed right now in the rulemakings there's this talk of freeze and seize capability right so the issuer has to be able to reach out into the secondary market and stop the flow of their funds wherever they exist on the blockchain but they do not need to and this has been reiterated in all of the rulemakings treat those people as their customers that they need to do full customer uh due diligence more like learn their their their full you know name address, social security number, all that. And to me, that is

probably the appropriate balance. Uh I think it would be inappropriate to treat Circle as somebody whose customers include anybody with an Ethereum address >> that has USC in there. >> The whole purpose of stable coins, right? At that point, you might as you might as well just be Venmo. And it also has some pretty nasty privacy implications in that a for-profit company that you have no relationship with but for holding a token that they issued a while ago has some legal obligation to collect a bunch of intrusive information about you >> and not to you, right? They didn't issue it to you. They they issued to some other person.

>> You're assigned to them. They're they're just a company to you. They shouldn't be holding your personal information because they don't owe you any duties even if we think it would be good for AML or national security or something. >> Yeah. Interesting. Interesting. Um, so one one thing uh that came out of this, maybe it's been mentioned before, but uh Bessim was like, "Ah, we uh rugged a billion dollars from uh Iranians." Um I at least I I I knew that there was like some seized funds, but like what's the deal with that, Tay? like were you out that you know that that happened?

>> I was surprised to hear >> I was um I do know of some freezes that have happened. Um the ones that you sort of generally know most about and can kind of like backtrack and see yourself are the Tether freezes. Tether's very tether does a lot more actions than than Circle does. They also when they do actions I find tether to be much more they like we're going to get you [ __ ] rather than rather than just like like a gentle like whack-a-ole >> quietly like neutral right there. Yeah.

So um you know and like it is a public blockchain and that has obviously like upsides and downsides for whenever you're freezing money right uh the freeze itself becomes public very quickly and so yeah sometimes there's a bit of a chase that that happens and you know there's things that can be done to make sure that you you know when you're going to take these actions you do so like as effectively as possible. However, I was I was shocked to hear him just come out with this billion dollar number. Um, >> yeah, because like there hasn't been a billion dollars worth of Tether freezes in recent times for the best of my knowledge. Right. Like >> I don't think we've gotten to a billion.

There have been some big freeze days, very big freeze days, but in like the hundreds of millions of dollars, but Right. >> I was not under I was not aware that they were Iranian either. Um because there's been a lot of like the Chinese money laundering, Chenzi, these, you know, there's there's there's a lot of different moneyaundering networks. I was not aware that like any of the the super bigs were were Iran, but I don't know, maybe they were. Maybe I just missed it. Um it's Yeah, it'll be interesting. I think Iran Iran in general their crypto has been sort of really top of mind for a lot of people in the last say six months to a year. We've been hearing a lot more

lately than we have probably ever before. Um and like Wall Street Journal and people did all this this huge breakdown on finance and those networks. So, you know, people obviously have opinions on there's a lot of people that like to like play the blame game. You know, I think at the end of the day, after doing this for so long, my impression is that it sort of you have to have the intelligence, the base intelligence there and it has to be shared between all of the different providers, right? I think people like believe that like analysis, for example, is like just magic and has perfect intelligence and all the answers to everything. They don't like it's a

collective effort to sort of get a good feedback loop going between the people that have like the human intelligence on the ground, the cryptocurrency companies, the stable coin guys that can freeze, you know, some of the bridges can freeze, the custodians can freeze, right? There's a lot of different actors that play, but you have to get a good >> cooperation across those those entities, right, for it to >> right and again like we don't have to dive into it right now, but a lot of people have this impression that like ch analysis just magically knows who which addresses Iran at the time that the >> impression they just >> I wish that would make everyone's life >> good marketing I guess, right? Um, yeah.

>> And I I certainly don't have any ability to independently verify those numbers, but if they're accurate or semi-accurate, it would be a good portrait of how the system probably should be working. Right. Right. Like the best approach for America and American power globally is to embrace that these new technologies exist accept that they can't be regulated out of existence and instead find as many paths to legitimize the businesses building on top of these networks as possible so that you can then have oversight over them when they're actually you know when there's a human in the loop which more often than not there still will be like DeFi is not going to eat the whole world >> and then you combine all that intelligence because as Tay said chain analysis on its own is not enough, but you take it and you combine it with a

lot of other information and you can actually then get a lot of leverage over the the money brokers and the bad actors who are who are using these networks, right? And that's that's just a good approach and it's much better than trying to outlaw this stuff or or drive it underground because you'll just lose visibility and people will continue to use it. >> Yeah. I mean, you know, the the less gray that Tether has gotten over the years, right? like the better the better relationship the US has with Tether, like the more useful an instrument Tether is for like, you know, the dollarization of of the world and, you know, sanctions and and all of that stuff, right? If you force Tether into, you know, a position where they're like avoiding the US government instead of going to DC, like that just seems worse,

right? But I guess that was that was what we were doing for a while. >> We were trying that that one. >> Yeah, there's a fine line. You don't, especially in crypto, I think there's a fine line between driving legitimate people who are doing legitimate things to be just basically black in every way, shape, and form, right? Like that generally gets worse outcomes. >> Yeah. >> However, based on history and this and the crypto industry's attitudes, it's also you have to be careful not to uh let everyone off their leash. so to speak, because we tend to >> we tend to like sprint all the way with

any give us an inch and we're like 10 miles down the road. >> Well, some constraints. Yeah, fair. >> So, it's it's definitely a balance and um obviously I think this administration has taken a very different approach. We've seen I would say I don't know some improvements or some there's some optimism here. Um but yeah, I think it's the the biggest question for me is like yeah, how are we going to how is this industry going to evolve over the next few years on its own, not necessarily working with the admin or like the future admin or rebelling against them like ultimately I think the industry needs to to step up and find solutions

that work and and actually >> and not be reactive to whatever you know. >> Yeah. Yeah. Fair. Fair. I I think one one interesting thing about this though is, you know, talking about like, okay, we've already seen a billion dollars. Uh presumably that's like the equivalent of, you know, a team coming out like on their series C and putting the cumulative raises that they've done, you know, over the last five years as like the the raise amount, right? Like they didn't, you know, seize this billion dollars yesterday, right? Like this is probably been accumulated over over some amount of time. Um you you have to assume, right? Um uh but like just putting that you know talking about pragmatism putting that against the

scale of like the cost of you know keeping the straight of America I think that's what we're calling it now uh closed right per day must be >> calling it >> I guess so I don't know um uh so so you know um it's it's must be in the hundreds of millions of dollars right to like maintain this blockade and it must be in the like singledigit billions in terms of like the the amount of money that it's stopping from flowing or or you know constraining flowing you know into and out of Iran right so um you know on a daily basis right so the cumulative amount of like crypto that they've they've seized from from uh is probably like eight hours worth of like

the oil money movements right so I don't know um >> yeah I think scale is is important to keep in mind Yeah. Well, and Laura just put in our chat that there was I did forget about this. There was 344 million worth of USDC frozen. It's USDT on Tron frozen back in April. They're saying that that's all the Iranian there's 344. >> Um I totally I did. >> Oh, I remember that. Yeah, I remember that because there was a bunch of wallets. It wasn't like one one wallet.

They froze like 20 wallets or something, right? So, >> yes. Um, and I can't uh I won't speak on it, but I think there was a couple freezes that then some some then some guys got unfrozen. There were some mistakes made. Uh, I don't know if that's this one though. Um, but yeah, I mean freezing is tricky business sometimes. Uh and that's why like again like when we hear uh we see the pressure being put on all the different entities and you know that intel sharing is going on behind the scenes like that's what gives me hope that the industry and like both public private sector can actually get their hands around it and you know make a difference without

uh arresting developers and and things like this. Um but yeah, when >> we'll talk about that in a second, right? So, uh yeah. >> Any any final thoughts on on uh this one before we go to ads? Peter, anything? All right, let's uh let's take a quick ad break um and then we will come back and talk about uh Roman and Tornado Cash. >> $540 million. That's how much concentrated liquidity sat idle in a given week in the first half of this year. About 30% of the DeFi TVL if you're wondering. That's according to Dune Research commissioned by 1 in. But

there's a solution. 1in Aqua is the new shared liquidity platform. It lets LPS back multiple positions with the same token balance and keep their tokens in their wallet till a swap comes. Why does that help? Because LPS don't have to split their tokens across positions. They can cover more market conditions and pairs with their full balance. That means more activity across deeper liquidity. See how it works at 1 in.com/ aqua. Remember that providing liquidity carries risk and fees aren't guaranteed. >> All right, we're back. Uh let's talk to um so uh a quiddle or delay. Um the uh the retrial of um Roman Storm on sanctions violations and money

laundering charges um has been rescheduled to April 2027 from October. Um uh because the judge is now considering uh his motion for a quiddle. So what's the latest on this one? Um >> Peter, you want to take it? You want us to slow down? It's sort of like a hurry up and wait situation. And this trial's gone on for a long time. We're going to have a whole second one in April. Now Roman's waiting for his rule 29 motion which calls for a mistrial for the whole thing to be ruled on. You still that's still resolved after I think about four months. Um so you know it's difficult because there's really hard legal issues

at play here. A lot of people in the space would like to understand better how those legal issues are going to shuffle out, right? I mean, it's pretty fundamental this question of whether you're a money transmitter or not and whether you can have a simple answer for that, like can you control customer funds? Yes, you're a money transmitter. If you can't, no, you're not. or is the answer going to be much more complex, something along the lines of what the um Southern District of New York has argued um in Roman's case and and he was found ultimately um guilty of a jury on that on that count, which is something like uh I think they argued that a frying pan doesn't hold the heat, but it transmits the heat. Like what does that mean? How

do I know based on that kind of legal reasoning? Um for us it's it's a struggle as well on the sanctions count and the money launderering count because again for those who haven't followed this closely during the first trial the jury just couldn't reach a deliberation on either of those counts which doesn't mean he's innocent doesn't mean he's guilty um it means it's a mistrial. Um those counts are difficult as well as the money transmitting count um for sanctions evasion conspiracy to evade sanctions.

You know there's no clearly presented evidence that Roman as a software developer and someone who was involved with say paying for servers and things like that to run the system um but didn't have control over funds. There's no evidence that he ever made a transaction with a sanctioned party, right? which would be the typical way that you'd end up on the wrong side of sanctions. >> Yeah, >> you have to have a very complex sort of I think over broad interpretation of conspiracy to commit sanctions to think that by building these tools and knowing that others would use them to evade sanctions, he's ultimately actually a part >> knowingly. Yeah. Yeah. Yeah. Yeah.

>> And the other thing that we talk about a lot at Coin Center that I don't hear a lot of people talking about is that our sanctions laws actually have a pretty clear carve out. It says that the president in his sanctions powers doesn't have the authority to sanction transactions in information that carve out the statutory. It's called the Burman amendments because it came from uh Congressman Burman who thought that the sanctions laws were good and important but that we shouldn't use them as a blunt instrument to restrict free speech. So he wanted a statutory protection for speech as well as a uh constitutional protection and transactions and information, you know, back when that stuff was was was new in the sanctions laws was about like Cuban art dealers in Miami who were selling

paintings in violation of our embargo of Cuba. And and you think, well, that doesn't really apply here. But actually, you know, the courts have repeatedly slapped the administration down for treating that information exemption too narrowly by saying that even like rebroadcasting a soccer game and making a ton of money off of it or publishing a novel written by the Ayatollah, there isn't actually a case like that, but there's a similar case. Publishing a novel by by an Iranian official and making a bunch of money off it in the US would not be a sanctionable offense. And so >> there's not a direct analogy here again because Roman didn't actually make any transaction with a sanctioned person, >> but to the extent he transacted in anything, it was publishing software and

uh information on the blockchain, right? That that's what the smart contracts did. And that's all information. And I'm not saying that in the sort of naive way like, oh, you can't regulate Bitcoin because a Bitcoin transaction is just information. I mean it in a real way like you you can't regulate the guy who wrote software that other people use to move Ethereum because that is information even if the Ethereum movements are transaction >> is is money right yeah like the the thing with moving money it's just a question of like was he >> holding a sack you know carrying it to Iran no right like nor was he even courting you know like if you if you had uh you know and and they do right like they've got like a bunch of uh you uh

kind of logs of transactions and and conversations and stuff like you know it wasn't like they're out there being like wouldn't this be great if Iran started using it and you know would make a bunch of money >> nothing >> some some centralized players that you know we know about right who like how do we get more Iranian dollars through this thing >> to to draw compromise I mean you can look at the um Samurai wallet developers >> and and that is also a hard case I don't want to suggest that wasn't a hard case because there your people or are running a coin join um server that matches people who want to mix their Bitcoin transactions.

>> Uh that's not custodial. It is maybe closer to the metal of like connecting people to make transactions. Um but of course the really bad fact in that case were tweets about we welcome our new Russian oligarch users, right? >> Yeah. the funny but not >> it's >> guys. I had to I I literally had to go on Twitter yesterday and call someone out for in response to the Iran news. Someone tweeted something about another favorite service of money launderers everywhere and basically was like, "Hey, new business use case." Yeah. Yeah.

Trying to pump that protocol coin thing. >> Like come on, man. I am begging you. I am begging you guys. >> But but yeah, >> stop creating content for the [ __ ] US government. I am begging you. Like >> just don't say it. Okay. >> And and in Roman's case, there isn't even such like >> Yeah. >> Either bad jokes or or or actual >> actual just no there's nothing. So >> yeah. >> Yeah. I don't know. Peter, I want to ask >> Yeah. Why won't they just let this one go? Like, they've spent so much energy on this. They've spent so much money on this. They got the mistrial.

Like, >> they got the guilty verdict on money transmission, too, right? You know? >> Yeah. >> Um, you know, I I I wish I was better at psychoanalyzing folks. And >> I'm not going to do it. I I I'll say the things that people that a lot of people already know and you might have heard, but you know that >> the Department of Justice is is >> is siloed. Different offices, different offices of prosecutors have different perspectives on things and that can be bad and that can be good. I mean we we would we would not want like tight unified executive control over the entire department of justice because the department of

justice is supposed to police and investigate the executive you know so having some decentralization here is good but at the same time >> you say we um the executive might be to differ that's that's the royal we of the peasantry right >> who who Can you blame them? >> But the seven district of New York has this reputation for being the global financial cop on the block. It goes all the way back to when finance really meant every dollar that goes across international trade and borders goes through Wall Street at some point. So, it's a great place to interdict and stop transnational crime.

>> And so, that's the SDNY's that's the chip on their shoulder. And they've got some good reason to have that chip on their shoulder. and they see something like Tornado Cash being this tool that's dealing with large quantities of illicit funds from a hacking organization that's probably in North Korea and money that might end up financing nuclear weapons. You think that's my bread and butter? I'm going to go get that. And I I feel for them up until the point that they encounter what is this thing? How does it work? Will our prosecuting a developer who built it actually stop that bad criminal, you know, financing?

And if the answer is no, because it's an immutable smart contract that if you throw Roman in jail for 30 years is still running, then what are you doing? Do something else, you know? I don't know. >> Yeah. No, that's my that's always been my since day one. So, the news broke on the sanctions and then then when the news broke that he had been arrested, it my question has always just been why? Because it actually and now we know, right, the the volumes were impacted by the sanctions. Um they were not actually really impacted by the arrests and the prosecution of Roman. Um but also they weren't that impacted.

>> No. >> DPRK's use of tornado cash uh let's call it it is not really they've never really used it as an actual off-use scooter. Uh they've used it as a just another thing to do because when you launder money, you have to do things otherwise it's not laundering. >> Yeah. All kinds of tools in your tool bag. But like losing this one, if it was even possible to take this one away, and I'd argue it's actually not, >> isn't change the battles and kind of like move the front lines one way or the other.

>> And um you know, this kind of goes to what we were saying before the break about pragmatism. Like to me, I think this is a misallocation of scarce government resources that could be much better spent going after actual human u moneyaundering networks um >> or things that have a direct impact on North Korea, right? Like we've seen actions or frankly any actor, right? When we talk about incentives, I think there is value in in if someone hacks something, if some someone steals the money, there there is value in immediately whacking that that down and saying, "No, no, you don't get the money, right? Because it actually changes the incentives very quickly."

Um, and when you create risk for the threat actors, right, you create risk of say arrest or social ostracization or sanctions or whatever, right? When you do those things, that also changes the incentives. None of these things are bad. They're actually quite good. But again, when we talk about tornado cash specifically, that did that do that, right? If the goal is to have North Korea not uh like not not double up their efforts to hack people, right, and double up the amount of money that they're stealing, double up their nuclear program, what's the most effective action? And you know, there's a lot of answers, but like one little service that they've

been using has has never been that answer, >> right? Especially when taking down that service doesn't actually result in more funds being taken from them or getting to them. >> And and and you're right, Tay, and and the other thing I'd add is little service as far as stopping it. And if you could stop it, what its impact on elicit finance would be small. On the other end of the ledger for me, Cornado was the first proof of concept of zero knowledge cryptography that saw like truly large volumes. Zcash of course and I've been involved with the Zcash um project on and off in an informal capacity. I was at the

foundation for a little while was the first like scientific test of this stuff like can we use zero knowledge proofs to actually have a verifiable blockchain without revealing everybody's transactions to everybody which if you >> if you believe in this technological arc we're on is probably what everybody wants you know like we're not going to want to do global finance on a fully public ledger for all eternity and you know Roman and his uh co-developers were sort of bold enough to say like, "Oh, that Zcash stuff is cool, but it's kind of isolated in the Zcash island right now. Let's see if it works on Ethereum.

Let's like run it live and battle test it." And they did it at great personal risk for themselves. And so to me, it's it's doubly offensive that, you know, the small anti-moneyaundering benefit you think you might get or anti-sanks or sanctions evasion benefit you might get by prosecuting this guy actually just villainizing this guy that created a great technology or battle tested a great technology and I I think should be treated as as more of a hero than a villain, frankly, because we need to we need to have bold people who try these technologies in novel novel places like the Ethereum blockchain And once we stop doing that, we're gonna stop innovative innovating and stop building the systems that we actually want.

>> I mean, the the chilling effect like the reason why this feels so weird the longer it goes, right? And like you know, in April of next year, I think it will feel even stranger as you know more clarity or whatever is is you know, put put to bear. at the time that this was announced in in you know the that era of crypto it was unsurprising to anyone. I I feel like you know people people were like of course this is the escala you know there was this escalation of just like going after everything and it's like oh now they're going after like people actually writing the software like they genuinely are trying to you know uh have this chilling effect to shut everything down right >> now in the cold light of day you look at it you know two years later and you're

like that was crazy like it it did it was like of course this is happening it doesn't feel fair but >> and and people back then didn't even know all the facts I'll be the first to admit that I and all the all the facts. I was at um a Zcash conference in Las Vegas when the when the arrest was when the sanctions were first announced, not not Roman's arrest, although Alexi was arrested in the Netherlands the next day. And I didn't know enough about Tornado Cash. I had to like rush to find uh a guy Michael Llewellyn, he's developer at Open Zeppelin at the time, uh smart contract security expert, and be like, "Can you help me look at the actual tornado cast pool contracts and like are they immutable? are they or is this just like some some other crappy money like Tumblr?

>> And and so at the time I understand like the the prosecutors probably didn't have good information as to what they were um >> they definitely did. >> In fact, we know that later because they ended up citing our own explainers for how to cash works before they realized that we were going to be some of the people suing the government invalidate the sanctions. >> Yeah. And you'd think, well, now that we've learned so much, why are you going to double down here? The facts just keep to me getting clearer and more obviously worse for the prosecution that this old address was built in a very robust way to be immutable, to be just a privacy tool for anybody to use, not something that you'd have to like call up Roman and be like, "Hey, Roman, I'd like to

move some money from Iran." Like, that's obviously not how it works. >> Exactly. >> And that's not a secret now. So why? Yeah. Why? Yeah. You know, it's interesting because because uh when um like I I'm I met uh all of the guys uh like pre- Tornado Cash, right? Like before it was even launched. Um and and uh you know, they weren't they were like maybe looking to raise, but they weren't really sure what to do. But um you know, there were these like super cracked guys that had like solved this thing, had like figured out how to do it. Um, and you know there was the the only vibe you got from them was that like they were just like in love with the technology,

right? Yeah. >> Um, and you know, I remember >> that's the most dangerous vibe though. >> I know. I know. I know. >> I know. But but they were not >> people, >> but they were not unaware of uh of like the risks of this, right? Like everyone in crypto knew, you know, you couldn't be in crypto and not know that like, you know, uh something that was going to obiscate, you know, uh uh >> Yeah. True. >> So, cuz I I mean I've known them for I've known them all forever and I also remember like Vitalic and like Am and stuff talking about this way before Tornado Cash launched. I would say like they didn't they like there was like a vague awareness of the risk >> but even that is not the same as like

what we know now and today >> the 2018 2019 conversations >> from a regulatory standpoint at that point had just come out with its clearest guidance yet saying that an anonymizing software provider is not a money transmitter it's like Jesus and >> why big white shoe law firms like Cravath have written on the tornado cash prosecution, at least the money transmission charge, and been like, "This is insane. The regulator at the time says it wasn't money transmission. Who were they supposed to license with?" >> Yeah.

>> Yeah. And I think it was just >> we just I mean, part of it was was being naive on on just the depths of say like the hacks and what was to come, right? Um, but I think also there was just a lot of I think the whole world didn't know what was going to come, right? Like the hacks and the moneyaundering that happened like that happened on Bitcoin. Like no one came to Ethereum. Ethereum was just like this ICO land. >> Yeah, exactly. >> You know, like every once in a while >> it wasn't on the radar.

>> Um, I'm trying to think like the big Ethereum hacks like Well, it would be like the centralized exchanges would get hacked or like every once in a while like an ICO wallet would get hacked. Some of those we now know were North Korea, but at the time we actually didn't know. >> No. >> Right. There was there was huge swabs of activity that we did not know until much later like who was behind it and sort of Yeah. how these how the like the networks worked. I think that's one thing I try to remind developers today is like it's you're you have to be aware of what you're building. Not because you're scared of the government, but because like if you want to build something valuable for this world, like let's let's be real about what the risks are.

>> Then it'll change. It'll it'll change as you build it. You'll get users you didn't know you were going to have. You'll have vulnerabilities and other things you didn't know. >> Yeah. And so I don't I don't tell people not to build things, but I certainly tell them that when they're building things there like and I still, by the way, the number one risk is you getting hacked whenever you're building something, >> right? It's your protocol being hacked. That is the number one risk. >> You're the target. Yeah. >> Um but you know there's there's a million other things and if you have uh I think today is just a lot different too. like tornado cash just it's so hard to reason about because it is actually immutable.

>> It is actually like >> it's one of the few most people do not choose to build like that today and therefore the conversation is completely different. Um but yeah it's >> but that was the brilliance of it is that like you know you would have said you would have said this would not be possible to do it in an immutable way right like it's too complex I would have said that right like it's too complex you're going to need to have some you know uh ability to to constrain things and they they found a way to solve that problem and and it was the same thing with the token design right like you know um I said to them >> and by the way they're one of the few that actually did an immutable and actually didn't get hacked.

>> Yeah. >> Like there's only three there's only three things that have like successfully well there's probably only like three things that have are immutable have not been hacked and like actually got a lot of usage. >> A lot of usage. Yeah, exactly. it most of the times they you know yeah most of the times it's well yeah I mean things are still being hashed so that never could go down but yeah I just I hate I hate this case I hate I hate what's happened to Roman and all the guys and I don't know I wish there was a a better path forward that's all >> all right let's let's move on to the next topic here um so SEC is uh ICO season. Let's Let's go.

>> I missed this one. Catch me up, dude. What the hell? >> So, uh yeah, the SEC is proposing two exemptions um for certain crypto companies looking to raise capital um and it would allow a one-time offering of up to 5 mil over four years. Um and a second path that would allow companies to raise up to 75 mil in any 12-month period. Um, so yeah. Uh, what's what's your take on this one, uh, Peter? This feels this feels right up your lane.

>> I mean, it's good. It's good. It It's, um, it's at an awkward time in Washington DC because if you've been watching the um the debates in the Senate over clarity, the Clarity Act, which would >> Yeah. give clear new legislative authority to both the SEC and the CFTC and in some cases to Treasury um to regulate crypto in a more I think straightforward way and to allow for like reasonable things like uh a a an ICO of sorts that has guardrails around it that has some like claims to decentralization that has some claims to to um real work and running

code and all that. You you want these kinds of like again the pragmatic approach is is not to deny that this stuff is happening and try to arrest a handful of people you can get your hands on to discourage it because that won't work. The pragmatic approach is to put guard rails around it and actually you know celebrate these innovations and find a ways to make make sure that they're done in in a safe way. So, you know, the SEC's been playing with these ideas, if you will, for a long time, or specifically Commissioner Hester Pur has been playing with these ideas for a long time. So, you can go all the way back to uh Hester's original >> safe harbor. Um, >> when she was the sole voice of reason in

the world. >> Well, now >> I'll at least say she drew a sharp contrast with some other folks at the SEC at that. >> Fair. Fair. Yes. This is the Gendler era when there was a lot of very aggressive prosecution and there weren't a lot of people sticking their head out and saying, "Hey, maybe we can we can just put some guardrails around this activity and call it a day rather than try to uh prosecute it into the ground." And so, REGG crypto, which is sort of the shorthand for these two exemptions, is now going to be it's a notice of proposed rulemaking. So, there's a 60-day comment period. It's got a lot of good stuff in it. Some of it goes all the way back to Hester's original safe harbor, which is there should be a way for a project that has legitimate

designs on being decentralized to raise some money to build that network um with some disclosures and some other things that will make sure that they don't just, you know, take the ICO money and then deliver nothing or that it's not just some garbage thing like a banana coin like you're buying a share of a plantation or something like that, >> right? >> Um and so it's good. We'll see. I say it's kind of an awkward place in DC right now because clarity stalled in the Senate. So clarity wouldn't >> Yeah. So So this is the this is the interesting point, right? Like this is the SEC rule making um which you know is more ephemeral I guess than uh you know uh

>> yeah I I you don't need to be delicate with that. Unfortunately if it's a good rule and fortunately if it's a bad rule um you know these rules. Rules can change. A future commission could come in and say, "We're scrapping reg crypto and we're going to have a very different regulatory regime where like all ICOs are fully illegal and proceed you to the ends and we hang >> the we hang the criminals to do them." Yeah. Exactly. Whereas whereas if Congress passed the Clarity Act and gave explicit uh legislative authority and and actually ordered the agency effectively to do things a certain way, you would then you would have to have a future Congress rewrite that law, which is a much bigger proposition than a

future regul regul uh regulatory body rewrite their own rule set. That said, it's not hopeless because, you know, once the SDC puts out a rule, they do it in a in a hopefully a very like buttoned up way. They dot all the eyes and they cross all the tees. They're they might get sued. I could see them being sued by Tradfi, which would be interesting, right? You know, yeah, especially on things like tokenized securities or some other things that they might want to do. If they survive those lawsuits though, they say actually the original securities laws give us a lot of breath to do this kind of thing. And and I think the original security securities laws do give them a lot of breath.

>> And this isn't an arbitrary and capriccious thing which is the uh administrative procedure act standard for whether the regulators sort of like operating within the bounds of their statute and following the rulemaking process correctly. If they pass those hurdles, this thing gets pretty permanent at that point. and then a future SEC comes in and they mercilessly scrap it while there's a lot of like actual US uh investor money wrapped up in some of these things >> makes it a lot harder, right? >> It's a lot it's it makes it economically harder from an inertia standpoint because you'd actually be hurting US investors probably and it makes it legally harder because then you really would have that arbitrary and capricious claim for the future action that tries to remove the past rule. you'd say like what do you

>> on what basis are you are you you know uh basically nuking all of these tokens that you previously allowed to raise money right >> so it's good like if you ask me like would I prefer at chair Atkins and commissioner pers's rag crypto to the clarity act as it's currently drafted but hasn't yet passed the senate no I'd prefer the clarity act because of its permanence and I think it's mostly well balanced but if we can't get the senate to pass legislation because we can't compromise on certain things or things like the presidential ethics concerns about the Trump family in crypto become an insurmountable barrier which I'm sorry to say might be true then I'm very

happy that this SEC is is is going forward with a reasonable safe harbor uh and a way for >> as a hedge effective right like >> as a hedge and as just good policy. Yeah. >> Yeah. Nice. Nice. All right. Um so I mean you know the the I guess the final thing uh about this uh is you know assuming these rules go through whatever and now there these these two paths um you know the the challenge that I think that we've had for a while now in in trying to like raise money in a decentralized way um you know to to bootstrap a network um has been that the hangover from that is like so you know problematic for teams that that want to

try and do it that like you have to be very bold to be willing to to try it, right? Um and you know it has created this uh this environment where you know it's better to not try and do anything, right? Like still launch a token because you want to sell tokens, right? Um but you know you're better off uh having you know some memecoin that you've launched that's just a joke, right? than actually trying to build a thing. Um, which is like the worst perverse like like you know outcome that you could have possibly imagined. And you know I think you you said this earlier, right? Like you're not going to stop people from doing a thing. You

>> it just gets dumber and more >> gets dumber and worse, right? Like and it's like man like I don't know it's so so yeah that >> I mean so so right. So I I I think back to like 2017 2018 when there were a lot of folks, this was before Gendler got really aggressive. There were a lot of folks taking advice from big law firms. I won't name any names, but you might have heard of some of them about like doing a SAF, a simple agreement for future tokens or doing some sort of regggd offering, right? And this was the the we're still going to try and comply with the securities laws, but you will be able to do this massive ICO and like Telegram did a huge ICO or was actually

about to and the SEC like stepped in on that one. So that that that one got interesting, but there were a bunch that raised tons of money far more than something like Ethereum raised and they were only in the United States if they had any US investors selling to accredited investors, right? And it was sort of a sad state of affairs because you ended up with the v venture capitalists having huge token bequests, if you will, or or purchases and a bunch of foreign people having some and then like >> no retail could access it really, >> which maybe is the point. You could argue that is the point of securities laws is that these investments are too risky for retail to have access. But then I think of Ethereum, which is like the paradigmatic early ICO. It wasn't the first. I think

it was like Masterpoint or something like that, but it was they raised $30 million actually kind of like small potatoes compared to the ICOs that followed in that regggd era in that like quasi regulated era. >> And to me it's like so wildly decentralized actually the way the token ownership ended up like >> like a bunch of random people Ethereum. Yeah. And then of course, Bitcoin is the prime example. Like, oh god, if we could just do fair starts again, >> but mining is a whole another, you know, technological issue. But like those are the those are the token launch events or or token distribution strategies that actually did achieve >> sort of like a reasonable distribution and a a nice way to start a network, not

just handing something to a bunch of venture capitalists and and strange foreign investors. If we can get back to that, that would be great. And I think the way I react to that is to put reasonable rules in place and not try and like bend the old rules or fully outlaw the thing. Right. >> Well, this is kind of the the the funny, you know, I remember being like, "Oh man, this like what Gendler has done, right, has created this environment where, you know, token concentration is so high. It's concentrated in VCs. People can't get access." And I was like, "This is the end state." No, the end state is memecoin. memecoin launchpads, right? Like it's far worse the actual end state than than we thought. You know, multicoin owning 30%

of every Salana project seemed really bad at the time, but like every Salana project is a memecoin is a far worse end state to to land in. So, um all right. Uh let's let's uh move on to uh next topic here. So, um I was pretty surprised by this. the Hyperl would uh you know being discussed by um President Trump uh wasn't on my bingo card um that that that would happen in a in a press conference. um you know obviously hyperlquid uh is um you know the most successful uh project of last cycle right so you know if if there's going to

be a this is a new thing and we should embrace it and you know make sure it's available in the US and it's built by US people and you know they're have to live in in you know Panama or whatever in order to to do it right um it it kind of makes sense that this would be the the thing that would be used as as the example Um but uh I mean a no KYC purpose exchange you know uh the path to making that fully compliant and and you know available in a legal fashion in in the US uh seems interesting. Um like there wasn't much detail about how to

how to kind of you know land this but um if they do it's obviously going to be very very interesting. So, um, yeah, like what's what's the take on how does this happen? Like is this just, oh yeah, we're just saying words or like we actually think that there's a pathway to allow purpose dexes that are, you know, sufficiently decentralized to just operate. >> I mean, that's a loaded question, right? And >> that's what we do here. Come on. And so a lot of it comes down to like what what we think of as sufficiently decentralized and what we think of as hyperledger. And just straight up I'm

just not going to have an opinion on those two questions for this purpose. Um >> it is challenging just from a legal standpoint. Um because you know per look a lot like derivatives right and the CFTC has plenary authority over derivatives markets in the United States and it's in some ways even less forgiving than the SEC in that you know you think of the accredited investor uh rule for for um unregistered securities it's like a million dollars um the um authorized contract participant or eligible contract participant rather rule which is sort of equivalent in the derivative

space is is is a much higher threshold I think it's like 5 million it's like big inst it's like real institutional money >> you will lose I mean there yeah you know you will lose all your money you need to know what you're doing is is essentially the the theory behind that right >> and you know the CFTC has this authority for deriv derivatives it doesn't unlike the SEC doesn't have authority over spot markets for the underlying right so the SEC you handles securities and securities derivatives in conjunction with the CFTC. The CFTC only handles commodities derivatives. It doesn't handle commodities markets. Part of the purpose of Clarity was to fix this in the digital commodities space to say like, yeah, well, digital commodities

aren't exactly like corn. There's a lot of retail investors who are participating at a high frequency and a high rate, and so market supervision makes sense for manipulation for other purposes. I thought clarity was a reasonable approach and it would also give the CFTC sort of like a good perch to sit on and say like Kraken, Coinbase, whoever else you have spot markets, you might also want to trade derivatives, you might want to trade perks and things like that. And we just sort of are a one-stop regulator for you unless you have some securities on your platform and then we'll have to work with the ICC, right? without clarity.

The the CFTC has continues to have what it's had for a long time this sort of like hard question of where its jurisdiction lies, which is we definitely have authority over margin and and um derivatives. We don't have a lot of visibility into the spot markets that can influence the prices and can be manipulated for those derivative products. And we don't have a tradition of um sort of regulating re retail type investors like we normally regulate CBOE or whoever like a bunch of like you know strangely pork belly obsessed people in Chicago right who are throwing a bunch of paper around not not your your mom and pop um speculator. So, I I don't know. I I I've sort of thrown

a lot at you here and maybe I'm dodging the question, but I I I don't know exactly what to expect as far as how the CFTC ultimately um deals with things like Hyperledger. Um and and that's going to be hard, especially given the political climate, especially given the fact that CFTC, you know, still doesn't have a bipartisan set of commissioners at it. I I think you know the the thing um not that this will make it any easier for you to answer the question um but but like you know we now live in a regime where something like unis swap which is you know immutable um you know let's call it unis swap v1 right um doesn't require KYC anyone with a wallet can

turn up like that is kind of grandfathered in like there were periods of time where different people at different points were like maybe we should try to impose KYC um you know uh things like this and and we seem to have gone beyond that people understand enough about you know uh how these things work right so uh >> well that and it's interesting you bring up KYC because the main job of the CFTC is not to do KYC on commodities market >> that's historically they're there for market manipulation supervision data collection this >> efficient markets and fair markets >> and historically it's the treasury that handles things like anti-moneyaundering at financial institutions And it would be some combination of

authority between the SEC and Treasury if we're talking about knowing your customers and having anti-moneyaundering controls with securities broker dealers and some combination with the CFTC. And so the the question of whether you need to identify people on a network is it really a fully and fundamentally different public policy question than whether you should be doing some sort of market supervision and um way to address manipulation concerns. And you also have a very different regulatory framework. You have Treasury, you have the CITC, you have inter agency coordination, but that always is more difficult than you'd hope that it would be. So, >> right.

>> It's it's just a whole Yeah. But there's but but so like I I think the the interesting kind of um intersection there is like can you in the current regime of everything must have KYC you must know your customers you must you >> that's not the current regime >> that's not the current regime as you said that's not the current regime for something like unis swap that's not the current regime for a >> protocol >> for sure. Yeah. Yeah. Yeah.

>> So, so, uh, but you know, arguably unis swap is not regulated because it's not a derivatives platform in the way that you know, say, uh, say so like it's kind of this interesting thing where like how can you regulate a platform that doesn't have KYC in the way that you would regulate a platform that does if KYC is one of the like baseline assumptions that a venue must have, right? and and you know, unis swap doesn't have KYC and it's okay, but no one's really trying to regulate unis swap. it's sort of assumed that it doesn't need market uh you know it is its own efficient market and we've kind of accepted that

um in a way that like a derivatives venue needs more uh oversight maybe you might say or that that people would say like you can't have a venue like Hyperlquid or BitMEX >> that you know is prone to manipulation or or could be manipulated without having you know some oversight or watchdog dog. Um, but then if you're going to allow if you're going to, you know, step in and be that watchdog for BitMX, right, table stakes is you guys got to add KYC. you can't have a no KYC thing that we're like overseeing and now and that I don't think that's like legally required >> again because these things are actually fragmented across different regulators

and right and different ages when when particular rules were written and what the concerns were or I mean like an SEC broker dealer doesn't have like bank grade KYC obligations >> right yeah >> they have very different um obligations as far as like knowing who their customers are and and controlling for AML risk So you could imagine a hybrid regime actually and that's probably the right way to approach the problem because when we we shouldn't be thinking like oh we need to regulate crypto that's a disaster. You you don't want to regulate a technology. You want to regulate to prevent money laundering.

You have a public policy problem. You want to address it and that's going to have a very different solution to like oh we have to police market manipulation. You might need to have some customer information to effectively police market manipulation, but maybe not. There's a lot of like really cool stuff that you might be able to do with pseudonyms or zero knowledge proofs or any number of other things, right? And so I don't know if you just come at it from first principles, these things don't necessarily always follow. Um the reason why we have state money transmission licensing rules is because people used to run away with money orders, right? You'd be like, "Ah, money, please, please pay my utility bill." and then they take your money and they don't pay your utility bill. Like, [ __ ] you. That's why you need to get

licensed with Texas because you're claiming to be a state money transmission. And now Coinbase is regulated as a state money transmitter, you know, in in most states in addition to having federal obligations for AML. I I don't know, like the bricklage of the way the US does financial regulation is profoundly weird. Um, and we don't have like we don't have her majesty's treasury, which just handles everything. And that's sometimes for better and sometimes for worse. I actually think the UK has gotten a lot of things wrong over the last few years. And and our weird inertia caused by our fragmented approach like we have like seven different federal credential financial regulators has had some advantages and had some pitfalls but it does make the

specific question you're asking as to like where does Hyperledger fit in really hard to answer um irrespective. >> Yeah, agree. And you know, I mean, to your point, right, like the last thing you want is a very concentrated power center of a bad regime, right? Like, yeah, you know, the diffusion of power throughout the US, like even when we had our worst regime ever from, you know, uh, Gary Gendler, um, there was only so much pain. They inflicted a lot of pain, but like they still had limits to, you know, they got in fights with the CFTC about like, what are you doing? like you can't come and shoot people in the head who are doing stuff that has nothing to

do with you, right? And they're like, "Ah, watch me. Let's see what we do." Um, so so you know, like the the checks and balances of power in the US, you know, as much as it is hard to navigate, is is one of its features, I would I would argue, as opposed to the UK where they can just do dumb [ __ ] continuously and there's no one to stop them. >> I I agree. But I also have a certain like I like the Wild West situation. >> Yeah. >> I want I want a bunch of sheriffs. >> Yeah. Okay. >> Yeah. Well, so that's So my question is this with with this with this the the I guess this story specifically, right?

They're specifically calling out the CFTC as like we're going to bring this thing and make it compliant or whatever. What What is the CFTC's job then? Like what is that like? What is a regulated legal entity look like under the C like solely the CFTC? Because it's not AML moneyaundering laws. It's not KYC. No, it's it's it's it's like you're a DCM or you're a SEF, a swap execution facility. Like there's very there's lot the CA is is as much a bible as the securities laws. In fact, it might even be long.

>> Okay. >> Uh we don't write short laws and the in underlying statuto authority is pretty broad. Um, and you know, we could, we probably don't have time, and this isn't a show about predicted markets, but we can get into a whole discussion about how this CFTC is sort of claiming authority over all gaming now because >> uh a derivative is >> everything is a prediction. >> Everything Yeah. Everything isn't is a is a is a payout or a not payout based on a future event. And so like that that's everything. what we're really so the best I could tell you is like >> CFTC probably has the statutory authority to craft a much more flexible rule. It may or may not have the kinds of traditional AML requirements that we

would expect from a financial institution if it can be justified to not have those requirements or it may and then there'd be hard questions as to how to implement them. And then there will be multiple rounds of lawsuits because there will be those who are in the more traditional derivative space or who are in more traditional finance in general who think that the CFTC has misused its broad legislative discretion to craft rules that are friendly to a particular >> preferential to that what they're doing is actually outside their statutory scope and then we'll have to read the statute and be like what did Congress really mean when they said you swap or or derivative or things like this and and then it'll just get long and drawn out and messy and

sometimes it's a war of attrition too because like keep the markets open and and once your regs are in place you regulate and then people start using it and then ripping it away again would have economic consequences for real Americans. >> So that's that's the game. Um, >> okay. That's actually helpful. Even though that that's that's >> it was helpful context for me to understand like the landscape and what this actually is. >> DC swap person finally came up with something that was actually, >> you know, it it is funny though, right?

Like because there's a there's a world you can imagine where like a new technology emerges and you know the the regulator uh goes oh this is a much more efficient uh you know mechanism for doing the thing which is our job making markets making markets efficient right um let's craft rules that are preferential to it because it is a much better tool and you should be using it right and then the guys who are like throwing pork belly papers around in Chicago are like Whoa, whoa, whoa. Like we don't have time for this stuff, right? Like it's it is it's an interesting uh you know, whereas it tends to be the inverse, right?

>> Go back real briefly to what you said about unis swap. I I kind of realism swap thing wasn't just oh we've built a very efficient mechanism and therefore there's no need for our normal uh efficiency maximizing or anti-manipulation mechanisms. It's also that the immutable the unis swap pools are immutable. We we talked for a long time about how tornado got us one of a few projects to do it right and make it immutable. Unis swap did too. And I I think there you just have a good you have such a golden claim there that's legitimate to saying we built some infrastructure. We built pipes. And you know you'd be crazy to think that we should, you know, regulate pipes the same way we regulate a delivery van service, right?

>> Or a fry pan. >> Or fried pan that conveys heat. Some people do think you should. So you. Yeah. >> Oh man. Yeah. >> Yeah. Um Yeah. Awesome. Uh I think I think that is it for uh this week. Thank you very much, Peter, for uh joining us. We had a a very good uh block of uh topics to cover there. That was that was amazing. We'll have to get you back on next time the FBI comes after Shane to >> It would be a pleasure. Uh no, no. I don't want to be on that episode.

>> We're not prediction markets then. >> We're not prediction markets. Yeah. Fair, fair, fair. Um, all right. Thank you very much for joining us on this episode of Uneasy Money. Remember, what happens on chain never stays on chain. We will be back next week. Until then, do your own research before aping in. See you guys. Nothing you hear on Uneasy Money is financial advice. We're just three builders talking about what's happening on chain. And we want you to always do your own research before aping in. You can find all our disclosures at unchaincrypto.com/unemoney.