ZK Podcast: Coin Center’s Peter Van Valkenburgh on crypto regulation

Transcript

[Music] welcome to xero knowledge i'm your host anna rose in this podcast we will be exploring the latest in zero knowledge research and the decentralized web as well as new paradigms that promise to change the way we interact and transact online this week josh cincinnati and i chat with peter van volkenberg from coincenter coincenter is a non-profit research and advocacy group focused on the public policy issues facing cryptocurrency and decentralized computing technologies in this conversation we cover the

various branches of the us system how they interact with the crypto blockchain communities what the process is for making regulation and how coincenter gets involved but before we start in i want to say thank you to this week's sponsor the interchain foundation interchange foundation is a group focused on the research development and promotion of open decentralized network technologies like cosmos cosmos is a decentralized network of independent scalable and interoperable blockchains it focuses on scalability sovereignty and usability now one of the most recent developments in the cosmos ecosystem is the stargate upgrade stargate is the largest cosmos upgrade to date enabling blockchains to connect with one

another using the fast standardized protocol for inter blockchain communication or ibc we've actually had chris goes on the show i think last year to talk about ibc so i can add the link to that in the show notes if you want to find out more so the icf is currently looking to fund projects that want to develop in this ecosystem if you're looking to develop on the internet of blockchain submit a funding application to the interchain foundation grants program at apply.interchain.io i've added the link in the show notes and the deadline for this is february 14th a bit of a side note i'm actually a member of the icf's technical advisory committee and help to give follow-up feedback on these grants so if you're submitting and your grant gets through selection i

should get a chance to see it as well so thank you once again to the icf for sponsoring this episode now here is our interview with peter from coin center [Music] so today josh cincinnati and i will be chatting with peter van volkenberg who's the director of research at coin center welcome peter yeah thanks for having me anna josh yeah great to have you on man this isn't the first time you're actually on the show you were the first guest of a combo episode i did back in 2018 i want to say at z con zero in montreal yeah it was great i remember we like sat on some like crappy little

hotel couch with a tascam recorder and anthony it was it was pretty fun it was pretty good now a lot has changed since then we're talking three years ago i think almost three years ago wow and actually for today's episode we're going to be talking primarily about the work that you're doing at coin center but i'm very curious to hear like what what's happened for you from that point to now what's your journey been strangely all indoors and with no travel no more croatia that's very sad so yeah my day job for those of you don't know is coin center i'm i'm a board member of the zcash foundation

which is why we um chatted in croatia but i don't spend particularly a large amount of time on that you know it's a fiduciary just make sure that like josh isn't screwing up when josh was the ed and make sure that our new edie doesn't screw up you know that kind of thing but most of my time is spent at coin center and coin center is a six-year-old organization based here where i live in washington dc and we are exclusively focused on public policy issues that affect cryptocurrency technology so when someone in congress wants to talk to bitcoin because they have a constituent in their district that's like ah bitcoin you know uh the ransomware they get

angry and often rightly so and they want someone to talk to and bitcoin and also ethereum and zcash these networks are shared public goods so they are available to all but unowned by you know anyone and so who does a congress person call or who does someone at the sec call when they want to talk about one of these permissionless networks the goal of coin center is to be their first call we're a non-profit we're not a trade group or a membership association so it's not like we have member companies we get donations from some companies in the space but we don't represent their interests our mission is to represent the raw technology itself and the rights of users to access and

freely use those technologies and the rights of software developers to develop and maintain those technologies assuming it's happening in open source development in that case i mean in the case of bitcoin this makes absolute sense because it is so very decentralized there is no particular leader but in the case of some of the other networks you mentioned like there there is a foundation often associated with them so like that actually has the founders like and the people who originally created it they're they're around they're known do you still fill a role for those for those other networks yeah i mean you know it's important not to be too pedantic about these distinctions decentralization is always a spectrum right

uh and there are projects with sort of like more granular contributions and projects with more lumpy contributions as a general litmus test as to whether something fits within our portfolio of things that we're interested in representing to government and defending from you know bad policies in government the litmus test would be something like it has to be you know fully based on open source software so we're not going to go out and talk about some proprietary protocol that's developed by a consortium of banks and the software's not you know released the general public under common open source licenses and we're also not interested in repping permissioned blockchains we don't have any issue with that technology like i

don't think it's bad technology but if it's a permission blockchain there are identified as inhuman identified rather than sort of pseudonym or machine identified there are human identified participants upon whom we rely for the continuation of the blockchain and the validation of the transactions or the data in the blockchain those people can speak for that tech now you're right with a project like zcash for example there's the zcash foundation there's electronic coin company they can talk to government and i'm sure they do but they don't speak necessarily for the rights of the users of those networks and they don't speak necessarily for individual minors or unaffiliated software developers on those networks and so i think it's right that

you know if it is open source based and permissionless blockchain based you know it has sort of a an entity that's a non-profit that's dedicated to repping the interests of the of the more dispersed parts of those communities so yeah yeah i for one think it's i mean just knowing what i know about the people in the past that have supported coin center and the work that you've done it seems to cut a clear line through many what you might consider even tribally opposed crypto communities uh so i i i mean i i think from my perspective there does seem to be this recognition that there's a common shared ground for this kind of advocacy and communication channel

to to regulators yeah one metaphor we use to help people who are internet native but maybe not crypto native understand the work that coin center sets out to do is by comparing ourselves to the electronic frontier foundation which i'm almost nervous to do because they're my heroes and i hope i'm living up to that comparison but you know the efs f was founded back in the 90s by uh greats like john perry barlow and amazing technologists and lawyers who felt that the internet was going to be this technology that would provide massive benefits for human society for human dignity individual agency things like that and i think they're right um although it's gotten more complicated than any of them

or us could probably have imagined and it makes sense that the eff was there it's not like a trade association like google is not a member of the eff necessarily it's not like facebook and the isps that are the constituents they represent they represent the internet itself as a broad-based protocol that has a lot of different moving parts many of which are built for for-profit but the thing as a whole the system as a whole is this open resource available to all and we think of permissionless cryptocurrencies as this open resource available to all and we then are self-appointed guardians of that shared and common resource of that public good so you mentioned that coin center was actually

founded six years ago were you part of that original group or was it done old i'm old too i mean to be really accurate coin center's even a little older than that in spirit so jerry brito and robin weissman our executive director and senior policy council respectively who are incredible people were sort of going door to door informally in the halls of congress seven years ago or even eight years ago and a few cryptocurrency enthusiasts and people who wanted to see more mature representation in government reached out to them when they were at their respective organizations at the time and said hey you guys should take this show pro if

you will and dedicate an organization just to the work you're doing to represent bitcoin and technologies like it to government and so that's when coin center was sort of formally incorporated but jerry and robin had been doing this work for years who now is the team like it's it's changed it's grown it's yourself and the these are kind of original founders so the team actually hasn't changed much as i said jerry and robin were doing that work before coin center was officially founded and then coin center was officially founded six years ago i was hired as the director of research not too long out of law school to make some of my my colleagues at nyu jealous like this was my first job out of law school and

it's the best job i've ever had and i don't intend to leave it ever and i'm super happy i didn't have to do like a stint as a tax attorney or something like that not that there's anything wrong with tax attorneys but so yeah i was hired as the director of research which is this amazing opportunity that jerry the ed gave me because especially six years ago but even to this day the legal questions surrounding applying existing laws or developing new laws that could apply to cryptocurrencies are the hardest and most open-ended questions in all of legal academia i think so it's sort of like i hope i'm doing well with this great gift but it is a great gift to have such freedom to do research into all

areas of law so we look at constitutional law first amendment speech rights fourth amendment privacy rights we look at administrative procedure law like the recent fincen rule making and whether they were following the strictures of the administrative procedure act and just the way they announced the rulemaking and the period of time they were accepting comments whether it was sufficient we look at financial regulatory law both from an anti-money laundering standpoint which is all of the kyc requirements which i sometimes prefer to use the word financial surveillance rather than anti-money laundering because it's less euphemistic and more honest it's about warrantless data collection we look at consumer protection laws so like state licensing for money transmission businesses to make sure that people don't run away with people's

bitcoins and things like that and we look at securities laws because people started selling new tokens as if they were some sort of promise from a developer to make people rich which is kind of the colloquial definition of a security so you know like you can build the most incredible elegant and terrifying law school exam hypos from this technology because exams in law school are all about issue spotting right when you come out of the exam you talk with your friends and you're like did you spot the tort law issue or the contract law issue and someone else is like that was all about administrative procedure and everyone's like oh god i didn't mention all of these well with crypto if you had a crypto exam question

you've got to go through like every course you took in law school and talk about the issues and hopefully do it in a written exam that's only two hours long or something like that it's a nightmare but it's also it's also fun do you do you only focus on the us like i know the primary focus of the us you're based in washington but are you looking around at other jurisdictions we've done work in other jurisdictions for example the uk about a year and a half ago had a call for information regarding how they could potentially expand their anti-money laundering and they said some slightly ominous things in that call for information like should we expand it to open source software developers you know obligations for open source software developers to build their tools

in certain ways that enable surveillance or things like that and that that is right in our wheelhouse of things we don't want to see in the world as far as government policy is concerned because it will not work and it will be very bad um so when something very bad happens overseas we'll reach out and either work with competent lawyers in the jurisdiction or we'll submit a comment or or a letter from coin center as this you know us-based organization with some experience weighing in but generally speaking you know we're all u.s attorneys we're all you know educated here and we can have the biggest impact here and that is both good because american policy

can affect americans but also good because american policy ultimately gets exported to a lot of the rest of the world through intergovernmental organizations like the financial action task force which takes our anti-money laundering policy and applies it to the rest of the world or other international standard setting bodies so if we can make a big difference in the us it's probably the easiest way to make a big difference globally not to be jingoistic but that's how the u.s still works but i i'm wondering like do you would you say that there's also an influence from outside like if if some like really novel and smart regulation is passed in the uk say like would would you take that and try to champion it within uh the us or is that even what

you do like would you bring things or are you more like reflective of what's already happening so when you start studying comparative legal analysis which is like a nightmare of a of a body of of courses in in law school you realize that like there's a lot of path dependency in the law and for software developers which might be most of your audience this kind of makes sense it's like once you start writing a program in a certain language and the idiosyncratic nature of that particular coding language it's a hell of a effort to port it to something else right because a lot of it doesn't even make sense unless it's in the context of of where it was born and us law is very unique

and the us regulatory system is very unique so the policies that we develop are impo in part path dependent on the way our system has evolved our system has evolved with a lot of respect for constitutional rights which is great but also with a deep fragmentation between state governments and federal governments and even within the federal government between subject matter specific agencies so whereas the uk and this is how i'm bringing it back to your question about uk policies the uk has the um the fca the financial conduct authority and her majesty's treasury and they kind of it's so badass to say her majesty's treasury and the two work very closely together their their unified effectively when it comes to policy about financial regulation

and they deal with financial regulations that include anti-money laundering concerns so-called market integrity concerns but also include securities regulation like whether people are being sold you know fraudulent uh shares of a publicly traded organization or something like that and they also do um the commodities derivatives laws and things like that to the extent the uk has laws that govern those transactions in the u.s that alone is three separate um regulatory bodies it's the securities exchange commission the sec commodities futures trading commission the cftc and fincen a subdivision of the us treasury and none of those organizations even do the chartering of banks and things like that which the fca also does that's the occ or the states which can also charter

state banks that can then operate federally so it's like like like the fca can like with this sweeping wand like her majesty's treasury can just be like this shall be bitcoin policy in the us it's like okay you got to get 52 states and territories on board and eight different executive agencies at the federal level to have a unified approach and that just doesn't happen which means we'll always have a fragmented approach which can be bad it means like if you want to hold people's bitcoin you have to get licensed in 53 states and territories rather than just one license in the eu or something like that and it can also be good sometimes though because it means that without a coordinated response if there was to be a coordinated

response to do something bad the lack of a coordinated response in the us is an impediment to that you know the inconsistencies and that fragmentation uh i i'm i'm wondering if you think whether any of the like if that didn't exist in the us whether there would have been as much development in the cryptocurrency industry for like the first you know five years after bitcoin became an open source project for example you're you're asking if it was if the government response was less fragmented would have there would there have been less development yeah like would there have been more fear of of a sort of enforcement um you know because i i mean i'm just thinking about the rhetoric that one would read

on the bitcoin talk forms right and seeing the uh ascension of some of these assets uh i i just wondered at what degree not that it's primarily bait you know not the development is primarily based in the u.s but uh you know i think i think that there's something to be said about the good side of that fragmentation that it takes a longer time for regulations to catch up and by the time that they do the innovation will have maybe been allowed to happen and then there can be a more sensible regulation sensible regulation yeah yeah i think there's an element of that that's definitely true um but it's also worth pointing out that in some areas the us despite having a more fragmented

regulatory system was on the vanguard of imposing rules and regulations onto this technology one thing that's always bothered us at coin center is when people go around saying like bitcoin the unregulated cryptocurrency our response is well no actually it's pretty heavily regulated and has been for various purposes since sometimes as early as 2012 2013. so fincen the u.s regulatory agency that focuses on anti-money laundering regulations like suspicious activity reporting and know your customer rules for for money transmitters they issued guidance in 2013. they were one of the first agencies globally let alone within the us to say anything about bitcoin they said

look if you are moving people's bitcoin around for them you are a money transmitter just like paypal moves people's dollars around for them assuming you have control of the money and that's very reasonable but it took a lot longer in europe to reach a similar conclusion and i think the reason for that is not that the us is fragmented but that also we have flexible rules so there's another comparative legal analysis distinction you can draw apart from federalism and fragmentation whether it is a civil or a common law jurisdiction and civil law was like french and louisiana here in the us which is that's what it is yeah it's in quebec as well in canada right that's right where it's

all about the code it's all about what was written down by the legislature and judges and to a lesser extent but also true executive officials they're allowed to interpret what was written down by the legislature but they're really not allowed to make it too flexible and to bend it too much to fit things that the legislative legislature didn't imagine it would fit to in common law jurisdictions there's this tradition of judge made law where there might be something that a statute says about some behavior like the height of a curb should be five inches and if it's below five inches and somebody trips because it was too small of a step to expect then there might be liability

but a judge can also take that rule and through the common law process evolve it so create different standards of liability case by case and leave a record of that opinion and this creates this flexible standard you're like yeah the curb was too short but it was well illuminated and there was a sign so actually there shouldn't be liability in this case and then the next judge will say okay this one was well illuminated but there wasn't a sign so what will we set the rule out and it kind of evolves in an organic process like wikipedia or something weird like that and that is something that's actually i think very good um not to be like sort of an anglophile because this is anglo-saxon common law um but i think it's something very good about the american and british systems

because it allows for flexibility so when fincen which is not a judge in this case it's a executive official looks at the money transmission rules that were laid down by congress they have wiggle room to say look this is about moving currency or currency substitutes value from one person to another we can interpret that to apply that to bitcoin because it fits in there even though the legislature wasn't thinking of bitcoin when they wrote this it is a flexible standard that the legislators set out and we can apply that to this new thing and that has again its benefits and its risks it allows for early responses it allows for sort of equity when something fits or doesn't quite fit you can make arguments one way or the other you're

not bound by the statute and it also creates uncertainty which is another problem so in securities law context this is why people often complain about american securities laws because we have such a flexible test for what is a security that a lot of cryptocurrencies may or may not fit into that bundle which means they're subject to a whole different suite of regulations from the sec so you know i think sometimes we've had earlier responses from u.s regulators because they're able to operate in this flexible common law like legal tradition and sometimes we've had later responses because at the end of the day they have to coordinate with other agencies and other and other states and jurisdictions in order to come to some policy decision as you know peter i have a bias of being

a bit more on the cypherpunk side of the spectrum on these sorts of things and i uh you know i'm maybe not the biggest fan of any kind of regulatory action a lot of the time and and what i'm wondering is i mean you're from your perspective there's obviously i i mean i think there has been positive engagement with regulators on the part of coin center obviously you guys are doing tremendous work uh but i am wondering your own personal opinion you know going back to the technological development over the last five or six years uh and especially you know on this being the zero knowledge podcast the kind of privacy and scalability improvements that are being pioneered by these new zk systems

suggests that you know one day it will be possible to have a private decentralized exchange of equity assets on blockchains that you know literally cannot be surveilled upon because of the cryptographic primitives and systems being used and and i'm wondering like to what degree you feel like how are i mean how are regulators going to face that you know what responses will they have and and is it is it possible that like this technology will really will eventually evolve to a kind of escape velocity where you know my my own personal maybe cypherpunk dreams might come true but it might be a bit of

a nightmare for people trying to draft legislation and the like yeah um so the first thing to point out is financial regulation especially but almost all regulation is done through pressure points through intermediary regulation or intermediary liability or intermediary chartering like a bank is allowed to do the things that banks do because they're effectively a government corporation they're chartered by the government and you're allowed to be a sort of marketplace for equities if you register with the sec as a national securities exchange now your cypherpunk future

involves a necessary lessening of the power of intermediaries right right like we want to be our own bank we don't want a bank and it also involves not just a lessening of the power of intermediaries but to the extent that you replace intermediaries with some sort of data structure which is a blockchain it also involves making that data structure not publicly auditable or or not fully transparent like you want everyone to be able to see certain facts like yes i received this transfer from this other person i know that i have it now and they don't and i know that there's maybe only so many units of this in circulation all the sort of economic guarantees that

we hope we get from bitcoin but we shouldn't be able to see individual transactions right so it should be more like zcash or monero and less like the bitcoin blockchain ideally so where does regulation fit into that picture you've removed the ability of the regulator to apply regulatory pressure through intermediaries because they can't really apply pressure to a data structure it doesn't make sense and you remove the ability of them even to use open data to get a sense of what's going on in the economy from a regulatory perspective and so yes you know if these systems succeed which i think lots of people even lots of people in government you'd be surprised hope that they will because they see the

obvious benefits of these systems as far as privacy and individual human agency it will necessitate a lessening of some of government's power over markets now there are nuances to that statement though because i don't think we'll ever get rid of intermediaries and i think that's the most important part of the message that that we have for government is even as the internet evolved we kept intermediaries we kept you know google and other powerful corporations and that has its risks that can be used to exert some some consumer protective or or regulatory policy upon the users of those intermediaries and so

even as we go into a cypherpunk future with markets i don't think coinbase is going away anytime soon i don't think kraken and other exchanges are going away other time soon even as decentralized exchange gets better and better it's not going to be the tool that mom and pop necessarily use to deal with their bitcoin right they're gonna want the legal comforts of having a an entity with their interests in mind acting acting in their interests hopefully and legal recourse to sue that entity if that entity's not acting in their interests and so the cypherpunk future hopefully allows someone like you josh to be on the like the burning hot edge of the tech

and do everything yourself like a mountain man in the wilderness you know like downloading the entire ethereum blockchain that's right that's why i have this beard i wouldn't have it otherwise but you will be a special person uh you are a special person and the vast majority of people that government is there to protect especially like those who are more vulnerable because they're less technologically competent or sophisticated will continue to use intermediaries which can remain a proxy hopefully for the interests of their customers and also a pressure point for regulation yeah to make sure that they remain a proxy for the interest of their customers so i think there's a balanced way forward that allows us to have the best of both worlds you know for people who need it you can have individual sovereignty over your

financial existence like for people in mainland china who are not favored by the communist party they need bitcoin right they need and they need bitcoin with privacy so they maybe need zcash or something something like it um but for you know your average mom and pop in america maybe they shouldn't be holding their own keys and maybe they won't want to and so that's where regulation will still be important and what regulation will still find purchase an ability to affect the world i i mean i actually as as a cipher pump bearded mountain man running nodes and holding keys and the like i i think it's a that's a reasonable path forward and that makes sense to me uh but there is this constant nagging

fear i have and especially i mean as you've seen recently with lots of particularly on the bitcoin side all these big name financial institutions effectively you know voting with their portfolio distribution and saying this is a legitimate asset so we're going to include it um you know on our books and we're going to bring this into the traditional financial system uh i i think in the world that you portray i definitely feel like as long as the mountain men can have their exit option then it is a good path forward but i wonder to what degree there will be a a kind of um a division between those two systems where the effective fungibility guarantees of some of these assets

are called the question because you have the good uh you know clean bitcoin or other assets in the regulated financial system but then as soon as any of that touches my mountain man node or addresses on my mountain man node the government says oh wait a second that that that person there is a you know he's a mountain man we have him on a mountain man list we we keep this long mountain then list of sovereign individuals touches my mountain man node is one of the more disgusting phrases i've heard in a while and probably should trigger regulation stop touching by mountain man node man good point no so you raised a very valid concern

um and we do worry about this we worry about so in the most recent fincen rulemaking that uh has caused a bit of a kerfuffle here in dc because it was being rushed by the trump administration short answer for your audience that's following this current event it's now been slowed down but not frozen by the biden administration so that's good news we get more time to sort of give input and hopefully make it sensible what's the name of that do you want to just yeah so so the the we've referred to it as a sort of uh icon as the midnight rule making because it was promulgated during the midnight period between the trump administration and the biden administration so if you google fincen midnight rulemaking you'll find more information about it uh the official name of the rulemaking

it's a notice that was filed in the federal code regulations and i actually can't even remember what title they chose something about uh reporting and record-keeping requirements for convertible virtual currencies or something like that lots of abbreviations and things that get complicated quickly and what does what does that one do so the original the original proposed rule and this is all still proposed it's not going to be finalized for at least another 60 days during which time we can affect its outcome hopefully but the original proposed rule would have required a few things a fairly common sense thing which is currency transaction reports that are equivalent to cash transaction reports in the traditional financial system

so this rule only applies to intermediaries it applies to like coinbase and it applies to a bank to the extent any normal bank wanted to deal in crypto it says if your customer takes in or withdraws more than ten thousand dollars worth of cryptocurrency you have to report that transaction to fincen which is the financial crimes enforcement network it's the part of the government that monitors for illicit funds transfers through the economy and things like that and it's just a report it says peter van volkenberg withdrew more than ten thousand dollars in assets right now that's already the law if i withdraw ten thousand dollars in cash from my bank it's going to trigger a report if i structure a bunch of transactions to equal 10 000 or more it will also

trigger a report that's just the way things are it happens without a warrant it happens without individual suspicion and because of that i don't like it because it kind of seems to go against the fourth amendment rights that i have to privacy and rights against warrantless searches and seizures of my private papers but that's a whole nother debate to have that includes the whole financial system not just crypto stuff like do we like this kind of surveillance but so even that surveillance was i mean it was originally for a lot more money right because that's inflation right yeah when when the bank secrecy act which is the law from congress that started this surveillance regime was passed was passed in the 1970s and in the 70s 10 000 was i i looked this up once before i think it's it's at least forty thousand dollars

back then it's a lot of money like you're talking like i'm buying a car not i'm buying uh you know i don't something that's ten thousand dollars i can't think of it air conditioner that's an expensive air conditioner i guess you're right like like whole house hvac and i'm actually renovating right now yeah yeah yeah there we go yeah yeah got a steam pipe system for your heat maybe about how poor i am because of this house thanks josh so so inflation has whittled that threshold down because it's still nominally the same amount 10 000 but what does it actually buy you a lot less so it means there's a lot more data collection on the part of government per transaction because smaller transactions are now swept up into this

reporting regime but anyway this is all sort of an aside to say look that that regime has been in place since the 70s the supreme court actually rubber stamped it as constitutional despite the fourth amendment although there's some counter arguments that we can get into later if we're gonna have this in crypto because right now we don't right now if you remove ten thousand dollars in bitcoin from coinbase it doesn't trigger a report at the very least let's just say it's equal treatment with cash because crypto is a lot like cash uh it should be at least bitcoin should be electronic cash c cash should be electronic cash and so the same reporting requirements for for regulated intermediaries makes sense as long as they're not more burdensome or more invasive of people's privacy than

the reports that already exist for cash so that part of the rulemaking i don't love because it still is warrantless surveillance but i don't hate it because it's parody with traditional traditional financial systems and with cash withdrawals the other half of this rule making is the really problematic one which gets back to josh what you were saying about fungibility and a bifurcation between the mountain man crypto land and the you know grayscale or bank of america crypto land the the institutionalized crypto land so the other part of the rulemaking would have done this it would have said any intermediary that handles crypto if they have an incoming transaction or an outgoing transaction over three thousand dollars so even lower than the ten thousand dollar

threshold they need to know the name and physical address not just of their customer who who they're receiving it or sending it on their behalf but also their customers counterparty the person who's paying their customer or the person their customer is paying so like you guys are making like confused faces because you're absolutely right like that's not how bitcoin or any of these systems work when i tell coinbase i want to pay this bitcoin address they don't know nor do they have any way to discover the name and physical address behind that bitcoin address indeed it could be a robot it could be a multi-sig account for five people or it could be a smart contract that is not a person with a physical address at all so this is not just

nonsensical in the context of cryptocurrencies because it would involve them getting information they don't have the ability to get it's also highly invasive of privacy because now the intermediary is being deputized by government to spy on someone who isn't their customer which is weird on a new level and probably unconstitutional from a fourth amendment perspective on a new level because that person never agreed to hand over their private information to coinbase simply because a coinbase customer paid them at their personal address and it could lead to this bifurcation of the financial system this lack of fungibility because what is coinbase going to do they're going to say you know if we can't comply with this we're just going

to block transactions from addresses that aren't other financial institutions and that means that what we end up with is coinbase and kraken bitcoin which only goes between the financial institutions and mountain man bitcoin which only goes between the josh cincinnati's of the world and that's not a good system for for several obvious reasons well the most compelling point i think we made in our comments to vincent explaining why this was a bad rule is not only is this bad for many reasons it's bad for law enforcement law enforcement doesn't want a world where these systems get fragmented and bifurcated in two because yeah they'll have tons of visibility into you know the institutional side of

bitcoin but if that side never crosses this boundary to the peer-to-peer side of bitcoin then you lose all that data you lose the ability to track what's going on in the peer-to-peer side you get a real going dark situation over there and so i think that's a that's a compelling argument that this isn't even something you'd want for your purposes as a you know surveillance organization as a financial data collection organization this is just bad for everyone and you know the bright side is it looks like this rule is getting slow-balled now it's finally it's not you know it's not this rushed process over the christmas holidays that it originally was when we first started fighting it and i think there are reasonable people at

vincenne who now with a longer process can have their voices heard and say look we should just have parody with cash we shouldn't be going for this extraordinary requirement that would break these technologies would you out of curiosity because i i fully agree with your um your statement that the the original bsa laws is borderline unconstitutional and you know that that ultimately that that uh law has enabled so much financial surveillance if if let's say if if vincent does create this parody um to cash would it be within coin center's purview to to fight to change the cash policy there or do you think that that's sort of the role of another organization

uh to work on that so i would want to but this gets into something that's increasingly an issue for us there are things about the world from a crypto policy standpoint that exists solely to cryptocurrency right sure and it's obvious that we want to affect those things and usually that means not arguing for special treatment not arguing for special pleading like hey regulator you've always done this with the bank of americas of the world so treat coinbase the same hey regulator you've always done this with physical cash like dollars in circulation so treat

bitcoin that's moving peer-to-peer the same but then there's things about the world that are just bad for you know the way banks have traditionally been regulated or the way cash has traditionally been regulated and it's hard as an organization that's really dedicated to crypto stuff to be on the vanguard of changing those policies which affect everyone even outside of crypto because it weakens our ability to just focus on good crypto policy yeah so you know i i'm especially sympathetic to this idea that we should just fight the bank secrecy act we should go back to a world where law enforcement just needs to do good old-fashioned policing in order to stop crime rather than making the movement of

money related to crime itself a crime like because that gets orwellian really quickly yeah but there's also areas where like in the securities law context and this is i'll go into this briefly because i think it's instructive of this problem lots of people in the crypto space want to be able to raise money to fund projects that have tokens right and they want to be able to promise tokens to fund the development of those tokens and that's seen as an innovation in this space by some and by others it's seen as like uh sacrilege like you know no pre-mine no pre-sale fair distribution anyway there's religion here and i don't want to get into that but for the people for the people who

want to raise money on a promise of a token they see the sec getting involved here and charging them with things like unregistered securities issuance as an attack on crypto it is not an attack on crypto because that law which says you can't promise people things that are going to make them rich without registering with the sec is not crypto specific it applies to anyone promising sure future value to investors and so your problem isn't with the way people are treating crypto the way the sec is treating crypto your problem is with the way the securities laws have been drafted in this country since the 1930s you know full stop and it doesn't matter

if you're selling like a paper token or a digital token or a paper stock certificate or a digital stock certificate your problem is with securities laws and there are legitimate arguments that there's something wrong with u.s securities laws they don't have this problem in europe per se in europe the definition of what is a security is pretty black letter again the civil code versus the common code distinction in international comparative legal analysis so in europe we know more clearly when something's going to fit into the definition of security and when it's not and if you're someone trying to do something on a crypto network you can more easily work around that definition do the things that won't sweep you

into securities regulation for better or for worse maybe that's better for innovation but a little worse for investor protection i don't know in the u.s we have this flexible standard for what is a security it's it's court made it's common law it's called the howie test from a case of the same name that the supreme court heard in the 1950s and that just says is there an investment of money in a common enterprise with an expectation of profits reliance on the efforts of a third-party promoter and so yeah most icos fit directly into that flexible standard so of course the sec is going to apply this stuff to crypto stuff and so if you don't like that you don't have a problem with what the sec thinks of crypto you have a problem with a 70 year old supreme court case and a hundred year old almost securities

law tradition in this country and maybe we should overturn that and be more like europe or maybe not i don't know but that's well beyond like the more small questions that coin center needs to focus on to defend this tech and much more into the realm of like what should an ideal government b i want to quickly make a distinction though because so earlier on you were just talking about the fincen ruling and then you mentioned the fcc these are two different bodies and they focus on two different things i know earlier on you did actually kind of run down what they were and what the distinction was but can you do it again because i know that like so simple yeah right one is financial and the other one's

financial somehow yeah yeah so so you know in the uk or or in most eu member nations there's like one financial regulator um in the u.s the sec focuses on securities regulation and anything that is a security is therefore subject to the sec when you issue it like when you create a new promise to your investors and sell that as a tradable stock uh or share if you will or when you're an intermediary that helps people trade other people's securities like apple stock for tesla stock or something like that you know but like wallets would they fall under sec rules do they help to exchange a good question

so less so um you know you are allowed in u.s securities laws to hold your own stock certificates nobody really does they all trust the dtcc which is a clearinghouse that there's a whole history here that even that i'm not particularly well versed in about dematerialization stock certificates used to be all paper there used to be like giant basements in manhattan full of paper and people would just lose the paper all the time and they're like pushing the paper with the broom and like why like in 1929 people threw papers into the air were those stocks probably yeah maybe who knows it was crazy times back then people throwing paper into the air

that might be the ticker tate too which had the prices on it yeah um but it could add a glass but so so so we got rid of paper stock certificates in most cases but you can still technically have your own custody your own stocks so far as i know it might be difficult from a practical standpoint but there's no law against that so the sec is generally not going to look at like whether a wallet is helping people secure their own stocks in the right way but they are definitely going to look at a place that sets itself up puts a shingle out that says we'll help you trade crypto token a for crypto token b if either of those or both happen to meet the definition of a security so they're much more interested in the exchange

side and an awkward thing as far as what's going to happen the next few years with securities laws is the definition of exchange from this from the sec is not as focused on whether someone actually has custody of the certificate of the stock being traded and more focused on just making the marketplace which means a lot of quote-unquote decentralized exchanges that are non-custodial still might be centralized in some way where they're making the marketplace keeping an order book or maintaining the software that keeps an order book and so they kind of start to fit into that definition of securities exchange which is going to be very weird do you think do you think there's there will be a case for the sec

actually like mandates like a smart contract update yeah so this is where it gets really tricky with constitutional law so the sec has already gone after a decentralized exchange they brought a settlement against um oh shoot i've forgotten his name the fellow who was one of the developers or the main developer of ether delta and he had already sold ether delta to someone else which is why ether delta is still running today as a decentralization i don't think it's widely used in fact it might have finally given up the ghost just in the last six months but it continued to be used for a while after this settlement agreement the settlement agreement was between the original author who was also maintaining the website for a time had the dns

in his name and things like that and the sec and it said like i won't do this again i'm sorry for creating an unregistered national securities exchange uh here's a little bit of money i think there was money involved in settlement uh please please please don't hurt me and so that happened and the question is like what's what's next because there are lots of other decentralized exchanges yeah and they may fit into the sec's definition now a lot of them might be able to um be okay if the centralized parts of their systems like the person who registers the dns or does other things really genuinely intends their decks only to be used

for non-securities trading because that is okay you're allowed to set up a marketplace where people trade oranges and apples yeah those aren't securities you're allowed to set up a marketplace where people trade bitcoin and ether because those are almost certainly not securities uh even according to the sec itself but once you start helping people trade uh tokenized versions of tesla stock let alone maybe a cryptocurrency that had a big pre-mine and somebody owns all of it or most of it and is profiting off of it by promising things to investors then you run into trouble and so in those cases where there is a smart contract that is facilitating let's take the easiest case literally tokenized real

securities like a tokenized version of tesla stock that somebody somebody has the stock certificates and they've created erc20 tokens one to one with all the stock certificates that they have if those things are trading on an unregistered exchange the sec is going to have to do something about it to to save face and to just you know enforce the law that congress sent them to enforce and so josh to your point like does that mean they're going to tell someone you need to rewrite the smart contract so that it doesn't deal in these assets that's hard the counter argument that they can use at that point is if all they did was write the smart contract right let's assume away dns and a front-end for the smart contract and things like that

then telling them they have to rewrite this code a certain way now first of all it's going to live on the ethereum blockchain and you can't take it down right so that's a problem but telling them they need to create a new version and direct everyone to that one instead of the other one is really compelling them to speak it's saying you have to write code that does that looks like this instead of code that looks like that and compelled speech is one of these things in the u.s that we think is unconstitutional the government can't tell people to express certain beliefs in writing or in code or in song or in even in cigarette packaging so like an interesting thing to show you the gravity and the complexity of the first amendment compelled speech law

in a lot of parts of the world when you buy cigarettes and i don't buy cigarettes um i swear i don't uh but there's nothing wrong with it if you do well no there probably is lots wrong with it but anyway i've gotten into a normative territory that i shouldn't have gone into but when you go for fun to buy cigarettes just to see what it's like uh in most of the world you'll find a package that has like like decayed teeth on it or like like a lung that's like withered and become black and there's these like graphic illustrations that are meant to frighten people away from buying cigarettes and there probably is very good reason for frightening people away from buying cigarettes if you notice and you buy cigarettes in the u.s there is no such graphic pictorial warning of all the terrible

things that are going to happen to your body when you smoke these cigarettes there's just like a nice uh you know well type set font you know surgeon general's warning you're gonna die but no pictures and the reason for that is the us constitution the first amendment which says that the government can't um censor people in certain ways prior restraint and says that it can't force people to speak in certain ways was found by the supreme court to say like laws that force cigarette companies to disclose facts about their products found to cause cancer those are okay laws because you're just forcing them to disclose facts but laws that force those cigarette companies to express a creative viewpoint or something that's not purely

factual which these frightening images of you know cancer patients are those are unconstitutional in the us wow yeah so so wild so what is forcing somebody to rewrite their ethereum smart contract so that it only trades asset a instead of asset b is that facts no that's viewpoint that's like we want you to to white list these assets with your software to write a book about how these are good things that people should learn about and write a book about how these are bad things they shouldn't learn about or deal with weird so you can make a credible argument that that would be unconstitutional to force that kind of speech there's a lot more nuance to this um but we don't have

like like sometimes things that our speech aren't really speech they're technically conduct like nude dancing or flag burning and then they can be regulated a bit more than just pure speech like writing a book and so maybe computer code is more like nude dancing josh you would know a lot about that why why are you following me on tick tock that's a separate world for me all right very good i wanna i wanna bring it back to this comparative thing because i think you've just given some fantastic examples of places where the sec or things objects that the sec potentially has some reach over but going back to that comparison sec and fincen what does

fin like what are the parts that fincen might have oversight onto like would they look at wallets what is their exact purview they don't deal with securities i guess so fenson has a different subject of its regulations instead of securities they're focused on more traditional monetary assets moving through the economy not these equity assets and they also have a different purpose behind their regulations they're not there to protect people from bad investments they are there to surveil the financial system the movement of non-security assets through that system in order to detect the flow of illicit funds both funding of terrorism and money

laundering from crime in order to ultimately interdict and stop those those bad flows of funds through the economy so fincen is interested to an extent in wallets because a wallet may not be a place where you exchange bitcoin for ethereum it may just be a place where you park your bitcoin in order to move it later and so that's part of this flow of funds in the economy and vincent has to this date been very good at narrowly interpreting its rules to avoid too broad coverage of their regulations beyond obvious intermediaries so they've made this distinction and a

lot of people in the space don't like it and i understand because it makes it sound like these things are more real than they are between so-called self-hosted or unhosted wallets and so-called hosted wallets uh and and what they mean by that distinction is simply look sometimes a company holds your bitcoin for you and sometimes you hold your own bitcoin and that's true we even you know even cyberpunks agree that that's a a good portrait of the space although it's a better way to just say i hold my own versus i have a company hold it then it's unhosted it's like yeah it's like the wallet in my pocket with a hundred dollars and it is an unhosted uh leather wallet but anyway so we're actually lucky uh that fincen has been careful about

drawing this distinction thus far because it's always made this distinction in the context of we only regulate companies that hold people's bitcoins we don't regulate individuals who hold their own bitcoins and you know they're doing that because they're taking a sensitive reading of the law that that gives them power the bank secrecy act which says that this is a law to regulate financial intermediaries for the illicit flows of funds it doesn't say that every american needs to spy on every other american to collect information about the flows of funds and so this is the right distinction for them to be drawing now it's getting more complicated now when vincent says yes we only regulate intermediaries who hold people's bitcoins versus surveillance purpose

but we want them to know about the name and physical address of their customers counterparties which is the rulemaking we described earlier even if their customers counterparties aren't financial institutions are individuals and that's why we need to stop that part of this rulemaking and also challenge it under perhaps the fourth amendment which says that you know the government can't search and seize information that we keep in our homes or that we keep private to ourselves and if i'm not giving my information to coinbase that information is still here in this beautiful attic uh on a ledger or a treasure or something i mean i'm kidding that's not what's here it's not here don't try and come here uh but but i should get the fourth amendment protections that i would have for any other private

papers in my house and that means there can't be this bulk warrantless surveillance um uh collection unless i start handing information over to a corporation at which point maybe there's an argument that there can be this bulk collection of information and yet this is something that they're the the case that you mentioned before this is what they're actually trying to change then they're trying to rethink that if you're actually calling for the disclosure of an address of one of these unhosted or self-hosted wallets correct uh and i'm just going to be a little bit politic in how i say the next thing that i say but you know when you say they are trying to change that agencies are people there's lots of

people and there are some people that i know in treasury and in fincen let alone the rest of the government that might have been in favor of this and there are some that are not and we've seen already just in the first few days of the biden administration a pretty profound change in the way this rulemaking is proceeding it was originally a rushed 15 day this is going to happen give us your input but we don't even necessarily need to read it to actually we're going to extend this to another 60 days and we'll want a flexible approach if you make good arguments about why this doesn't make sense technologically or from a public policy standpoint the final rule might not include it so like government is a bunch of people and i

think a lot of them actually have the right idea about this tech i know that's surprising to people in the cypherpunk community but but we might still be okay as far as um what fincen chooses to regulate and not regulate where is the stable act in all of this this stablecoin tethering and bank licensing enforcement act i think they got it into an acronym hilarious um yeah they did yeah which is impressive yeah and are you and are you and rohan still friends peter i yes yes okay we haven't chatted much uh since since then but i i still hold him in high esteem yeah um josh is referring to rohan gray who is probably the most visible

advocate for this stable act on twitter um he's a very smart guy he and i agree um a lot with respect to privacy um in fact he thinks the bank secrecy act is just an abomination should be immediately overturned so he he he doesn't mince words like i've been missing words on this podcast oh yeah and actually if if people want to see more about that there's a great podcast that you and rohan did that i listened to that's some time ago yeah i think through coin center so i'm sure we can probably add the link too if people want to hear more about that yeah yeah now where rohan and i probably do disagree pretty vehemently is with respect to um how money that is actually

like the government's money dollars should be regulated rohan takes what is referred to as a charterless view of money which is if the government accepts as taxes that is the only thing that is really like money money uh he has a modern monetary theory background which is you know we don't have to get into but it's certain principles of how macroeconomic policy can be done and should be done basically that the government should get much more involved with financing um like public works and other projects using money creation uh fiscal policy and he in the stable coin act helped representative uh talib in the

house of representatives come up with a policy for how this state money so we're not talking about bitcoin but anything that claims to be a dollar or dollar backed should be regulated when it is issued by stablecoin exactly so that law what it would do is it would put anything that is a stable coin and that's not just like usdc like a asset-backed stable coin issued by a corporation but also in theory anything that claims to maintain parity with the dollar so possibly even something like die make or die anything that claims to be pegged to the dollar shall only be issued by a federal reserve bank so it would put all

of that activity into the exclusive purview of the banking regulators of the federal reserve and maybe the occ and state banking charters so not fincen and not the sec to answer your question the other suite of federal regulators that focus on banking but not financial surveillance and not equities i see yeah yeah and this was something that for obvious reasons was very controversial in the crypto space and the coin center spoke out against it's still only a bill that was introduced in the house last legislative session so it could be introduced again this session but this is nowhere near becoming law that said it's from a democratic representative

in the house and the dems now control the house and the senate and have the presidency so there's a slight slightly better chance that something like this could become law but this is still very speculative and quite honestly um it's coming from the left wing of the democratic party rashida taleb she's um very vocal about the need for very strong consumer protection regulation with respect to the financial system and there are good reasons for that but this is this is not necessarily the mainstream of of of the democratic party so that's all to say this this is still very remote this might not become law but it's problematic because of how broadly it sweeps

it basically says that die because it's not issued by a federal reserve bank and obviously never would be because that doesn't even make sense it's a smart contract-based asset it's not it's not issued by any company corporation public or private is not allowed to exist because the only things that can claim to be dollars or maintain parity with dollars must be issued by the federal reserve banks and beyond that in order to enforce that it shall only exist if issued by a federal reserve it would create liability for people who assist in the transactions that facilitate this other thing so if you were in theory a minor or a staker on ethereum

and you promulgated or even just relayed a new block on the ethereum blockchain that includes a die transaction you have probably without knowing it because you probably didn't look at every transaction in your block facilitated this transaction which is not supposed to happen anymore because it's a transaction of a dollar-based asset that doesn't come from the federal reserve so creating liability for people who maintain open blockchain networks is one of those sort of lines that we don't think government policy should ever cross because these people are simply like relaying data on the internet it's not an activity where they have intent to defraud it's not an activity where they have intent to break the law it's really a function that is necessary

if we're going to have these shared networks and just as we don't impose liability on an internet server because they're relaying other people's data and that's why the internet works we can't have that kind of liability on a person just relaying you know blockchain data yeah the government shouldn't be piercing the mountain man node veil stop piercing my mountain node man yeah it's in the mountain for a reason um okay so when you say this though i i mean this is so fascinating to start to see this picture emerge in the kind of american ecosystem of the sec the fincen the banking you sort of said the ba

when it comes to banking there's a number of institutions there's there's there's the occ the federal reserve the fdic which does insurance and the three of them always need to agree with respect to federal banking policies and that's that's a hell of a thing and then there's state-chartered banking regulators like the new york department of financial services or i don't know the kansas financial chartering authority you know like there's a lot lots of them but why why is the stable act an act why is that already like why wouldn't they be able to use one of these kind of government organizations like when you talk about the work that fincen's doing like those aren't laws that are going to congress are they aren't they just sort of internal to the organization yes

so this is another uh complicated area of legal theory is that i'm learning a lot about the american legal system right now or the government and this is something that goes beyond just the american legal system it's pretty global but so legislatures are the democratically elected representatives of the people at least in theory right and we have this idea in open liberal societies that only those democratically elected legislatures should be making laws because if random people not elected make laws there's no accountability and there's no voice of the people in the political process now the problem is that legislatures are made of

generalists there are people who come from all works of walks of life and they're not specialists in crypto or securities or the way that fedwire moves money between banks or all of these idiosyncratic nuanced parts of the global economy and just the world that we might want to regulate and so congress has a tendency ever since the 1930s i'll just leave that out there as some important crap happened in the 1930s that you might want to like look into ever since then congress has started passing these much more general laws that empower an executive agency that's probably also created by a law from congress to sort of fill in the gaps of how to make policy because we can't

learn about all of the details that we might need to regulate as far as like the stock market that's hard and so we're going to create a law that says you people in the executive branch the presidential half of government or third of government not the legislature can fill in the gaps in order to protect markets or surveil for illicit funds and then those executive agencies whether it's the sec fincen or whatever they make rules based on the power that came from the laws passed by congress to enforce the will of the legislature and that is not a democratic process because that's just people appointed by the president who is

elected but the appointees aren't elected choosing exactly how to enforce the laws and what we've said in this country and in most other modern democracies is some amount of gap filling is okay but the agency the unelected people can't simply make up all new policies they have to stay faithful to the original intent of the statute in creating this gap filling of how exactly to achieve the policy mandate that they've been sent by congress to do and so with respect to financial surveillance the bank secrecy act actually offers the um treasury and fincen a division of treasury extremely broad authority to just do whatever you think is right from a rule-making

to stop the flow of illicit funds and to detect money laundering and terrorist financing and in fact the breadth of the power they've been handed to just make rules undergirded by that law from congress is probably beyond the pale of our constitutional system where we say only congress makes laws because effectively they can use that power to do almost anything because almost anything as far as surveillance of our financial system could be justified as stopping money laundering or stopping the the flow of terrorist funds and so it's sort of this unbound principle that if they were to take too far they'd be in jeopardy of a constitutional challenge saying

this violates the separation of powers only congress can set this kind of fundamental policy you the executive branch are allowed to fill in the gaps like this report should have you know this kind of information on it versus this you're not allowed to generate whole new sets of reports that require whole new entities like say a bitcoin node operator or something like that to file a whole new sets of information because that's beyond the gap filling that congress enabled you to have the stable act would empower the federal reserve one of the banking regulators with a new set of powers that they probably don't already have they might be able to look at the existing national bank act the nba which goes all

the way back to like the 1850s or something crazy and empowers the occ and the federal reserve and a few others well not the federal reserve because it didn't exist back then but but anyway there's a lot of legal authorities um that empower them to regulate these chartered entities called banks that do certain things but it probably and i'd have to look at the entirety of the banking laws to tell you for sure and i don't want to do that but it probably doesn't empower them to to make a legal uh the relay of data related to a dollar-backed asset on the ethereum blockchain that would be too much of a stretch of the existing authority congress has granted the banking regulators and so that's why the stable act needs to be passed as a law in congress rather than just create it as a regulation by

the banking regulators got it this leads me to kind of one of my last questions that i have for you today we've done an amazing journey by the way through this entire thing but it comes back to josh's earlier point about privacy privacy tech and privacy regulation because now that we've sort of mapped out some of these groups that you know we hear a lot about i hear about them i'm canadian living in germany i have nothing to do with the american system but um i i know about the sec and i know about fit like i've heard these names it's really helpful to see where they live but now say we go back to that topic of privacy and regulation say you are looking to create a system where individual privacy like your

your personal financial records could be kept private but still potentially give authority for auditing purposes if need be say that's what you want where how do you go about that like which organization should you start talking to who could use their rules to help enable something like that i'm basically speaking right now for like a lot of the privacy projects who maybe aren't yet doing the lobby and stuff but yeah you know it's interesting despite all this talk of regulation the u.s is still a country that believes in private enterprise i think right and still believes that a lot should be done from an

innovation standpoint in the private sector and doesn't need to be government sanctioned to proceed right there's this principle again in common law of that which is not prohibited is allowed um because you don't want that statement to be reversed because then you have to ask permission whenever you do anything right you could you should be able to assume that if there isn't a law specifically outlawing what you want to do you're allowed to do it and so you know it's tough because we've ended up with this mess of financial regulations and there are still gaps that allow for innovation and those gaps are critically important

and that's like bitcoin fit into that gap there was no law that said that you can't create i mean it would have been quite the uh omniscient legislator who would have seen bitcoin coming before it existed and said like you can't create a blockchain of hash linked transactions that would be based on proof of work in order to solve the civil problem you know so so the brilliant people out there and if you want to do brilliant work you need to become good at finding the gaps and building in the gaps and that's sounds uncomfortable and awkward because you're going to need a general counsel or some friend who claims to know the law and isn't a general counsel but hopefully he's right or she's right

um telling you like oh you could try going here but don't go here you're gonna get sued you're gonna get ruined but but that's still i know this sounds bad that's still better than china like i don't mean to be you know to just call out a whole nation of millions of people but the chinese government not the people is the reverse there yeah you can't start a business without being or having a member of the communist party in your inner circle effectively sanctioning what you're doing if you try and do that sure and do something that the communist party of china doesn't want built or doesn't want changed you will be in a world of hurt you know you will lose access to all of your power from whether from the the ability to

transact or the ability to just move freely within the country and so like there's lots of talk about china's building a new central bank digital currency right and there's there's even some level of detail as far as the technical architecture of all that but like honestly that's the wrong approach we should not be hoping that american innovators get jobs at the federal reserve and then the federal reserve issues a new digital dollar even folks at the federal reserve agree that that's not the way we do things in america we should have companies that are experimenting with this tech either from a centralized standpoint like usdc or from the glorious like truly american rough and ready i'm just gonna do it

myself make a smart contract in ethereum make or die type world i don't know if those guys are mostly european they might yeah i think they're european something american about the there's still something kind of like core to the american experience there as well because it's a little bit like like there's something missing i'm gonna build it yeah yeah yeah like like like the frontier the electronic frontier if you will and you know if these systems get battle tested doing things that are somewhat toy-like and granted actually some of these things aren't very toy-like anymore because they're moving billions of dollars one day i am i do not think it's unrealistic in if we continue to have somewhat enlightened politicians and that statement is giving

me a pause but that that that american regulators might at one point say okay i see we have these options we have these options with respect to kyc and aml where there's now self-sovereign identity because there's identity systems built on open blockchains and we can use that to tokenize identity and you know credential people but do it in a private way that respects their dignity and doesn't give one corporation like facebook the ultimate power to decide who is who or we could see regulators say okay we've got this new technology that allows you know people to lock certain valuable assets and algorithmically adjust them to equate to a dollar and it's going to take a long time before we get there but

maybe that should be some component of our national monetary system and that kind of work combining government authority with innovation and and free enterprise is should be what america the american system's about it shouldn't be about um convincing the fed to use this technology or that technology it should just be the private sector builds things and the government you know regulates them by putting guard rails up by putting safety rails up and that's how we get the tools in the world that we want not that they're just descendant from some enlightened um politician or communist party or what have you i think that's a that's a super useful thoughtful answer to the

question that i had about how to kind of incorporate privacy and i wonder i mean i i feel like that's potentially going to speak to a lot of the people who are listening to this show who are working in privacy but also on the building front that they they need to be smart about it but they should kind of keep going hopefully that that space for innovation remains open um not only in the states but all over the world and that's that more than anything is coin center's mission is to preserve and to open and widen that space as much as possible so that innovation can continue so let's just come back to coin center um what can someone do if they actually want to like participate or be part of this work that you're doing

or may potentially support it yeah so all of our public resources from an educational standpoint or from a policy advocacy standpoint we make public because we believe and i think rightfully that we're doing public work we're doing work for for the general good and so you can see everything that we provide to regulators and we provide to lawmakers in congress at coincenter.org and if there's something missing there as far as a resource maybe or you something that you think is is not well phrased like maybe you're working intimately with self-sovereign identity technology and you think that there should be a better explainer on our site for how that tech can be built using a particular protocol you know reach out i'm peter coincenter.org

if you think that something should be different this is how we build this advocacy effort is by bringing brilliant people in front of government to help them explain things uh so that government doesn't get the wrong idea and doesn't make policy out of ignorance and then the other way that you can help is um we are a 501c4 nonprofit so that means we're publicly funded by donations and if you like the work that we do now february is actually a great time to donate to coin center because grayscale has generously agreed to match every donation we receive in the month of february up to a million dollars in addition to giving us a million dollars they're um sort of making a tradition

out of what kraken generously did two years ago in supporting coin center's efforts and doing a matching campaign so we can't thank them enough and those donations are what helps us keep the doors open hopefully for years to come so that you know when someone wants to call bitcoin they're not talking to some rando they're talking to this rando cool well peter thanks so much for coming back on the show and sharing all of this with us yeah it's been my pleasure yeah thanks peter this is super fun and josh thanks for co-hosting yeah of course my pleasure and to our listeners thanks for listening