WEBVTT - Senator Pat Toomey on the Bad State of Crypto Regulation 0:00:10.960 --> 0:00:15.200 Hello, and welcome to another episode of the Odd Lots podcast. 0:00:15.240 --> 0:00:19.120 I'm Joe Wisn't Thal and I'm Tracy Alloway. Tracy, you know, 0:00:19.200 --> 0:00:23.360 one of the big There is a lot of ambiguity 0:00:23.440 --> 0:00:26.239 and confusion right now, I would say about the state 0:00:26.280 --> 0:00:29.920 of crypto regulation just a little bit, just a tiny bit, 0:00:30.480 --> 0:00:34.760 like I mean, and it's understandable why because it's I guess, 0:00:34.840 --> 0:00:38.920 a new type of asset class. They're not all the same. 0:00:39.320 --> 0:00:42.440 It doesn't seem to quite fit into commodity buckets. Most 0:00:42.440 --> 0:00:45.520 of them don't fit quite into say equity buckets there. 0:00:45.640 --> 0:00:47.879 They call them cryptocurrencies in many cases, but they're not 0:00:47.880 --> 0:00:50.159 really currencies. So you can sort of see why the 0:00:50.200 --> 0:00:53.479 existing regulatory structure isn't quite up to the task, right. 0:00:53.520 --> 0:00:56.440 And often the technology or the things being made are 0:00:56.520 --> 0:00:58.560 changing all the time. So for instance, we used to 0:00:58.600 --> 0:01:00.640 have you know, I c o s Now we have 0:01:00.720 --> 0:01:04.160 tokens and things like that. But I think what you're 0:01:04.160 --> 0:01:07.920 getting at is there has been this long running criticism 0:01:07.959 --> 0:01:11.200 of the way crypto regulation is being done, which is 0:01:11.680 --> 0:01:14.679 it's often just better to launch something and kind of 0:01:14.720 --> 0:01:18.240 ask for permission later, right, like, just launch it, see 0:01:18.240 --> 0:01:21.960 what happens. But if you're a big crypto organization, you know, 0:01:22.440 --> 0:01:25.920 a crypto company with a team of lawyers, and you 0:01:25.959 --> 0:01:30.720 actually go and ask the securities regulators about what you're doing, 0:01:31.080 --> 0:01:34.800 often they just say no, outright, that's the trope, that's right. 0:01:34.840 --> 0:01:36.720 So I've talked to lawyers and this is what they say. 0:01:36.760 --> 0:01:38.280 They say, Look, if we try to be on the 0:01:38.360 --> 0:01:40.240 right side of the law, if we say go to 0:01:40.240 --> 0:01:41.720 the sec and this we want to do, then they 0:01:41.760 --> 0:01:44.600 spend years trying to lawyers. Meanwhile, someone just launches a 0:01:44.680 --> 0:01:47.400 token without doing any of that in the rebillionaire the 0:01:47.400 --> 0:01:49.680 next day. That's going to be kind of frustrating, right, 0:01:49.760 --> 0:01:53.760 It's not a great incentive structure if that's what's happening. Right, So, 0:01:54.000 --> 0:01:56.600 you know, there's this problem. The regulatory agencies don't seem 0:01:56.600 --> 0:01:58.680 to quite have their hands around it, and because of 0:01:58.720 --> 0:02:01.880 how politics seems to be in d C. I don't 0:02:01.920 --> 0:02:04.160 think anyone is really holding their breath for like some 0:02:04.280 --> 0:02:07.720 really clear law to get past, like say the Telecom 0:02:07.720 --> 0:02:10.280 Act in the nineties in which the Internet was coming 0:02:10.320 --> 0:02:12.880 and they passed the law about certain things like maybe 0:02:12.960 --> 0:02:14.840 that will happen, But I don't think it's like obvious 0:02:14.919 --> 0:02:16.600 that like Congress is going to come to the rescue 0:02:16.600 --> 0:02:19.120 with a clear solution here. But also now that crypto 0:02:19.240 --> 0:02:22.840 is so big, it seems kind well, it seems inevitable 0:02:22.880 --> 0:02:24.520 that more people are going to be looking at this 0:02:24.680 --> 0:02:27.480 and discussing whether or not it needs to change. Should 0:02:27.480 --> 0:02:30.000 you have this sort of ad hoc regulatory regime or 0:02:30.040 --> 0:02:32.720 something else? All right, Well, we are have a great 0:02:32.720 --> 0:02:35.240 guest today to talk about that, and a someone in 0:02:35.320 --> 0:02:38.200 d C who has taken a real interest in crypto 0:02:38.320 --> 0:02:40.359 who you're going to be speaking with, Senator pet too, 0:02:40.360 --> 0:02:44.160 me of Pennsylvania and one of the more active elected 0:02:44.200 --> 0:02:47.680 officials with an interest in crypto regulations. So, Senator, thank 0:02:47.720 --> 0:02:50.760 you so much for joining us. Well, thanks very much 0:02:50.800 --> 0:02:54.000 for having me. Senator. Who's to blame for this sort 0:02:54.040 --> 0:02:56.640 of this confusion? I'm not sure you Maybe you disagree 0:02:56.680 --> 0:03:00.000 with our characterization, but who's to blame for this confused 0:03:00.040 --> 0:03:02.799 usian about crypto regulation, the lack of clarity and all 0:03:02.840 --> 0:03:06.080 of the sort of perverse incentive that that creates. Well, 0:03:06.200 --> 0:03:09.680 I think I agree with your discussion with Tracy about 0:03:09.760 --> 0:03:16.760 the inherent difficulty of trying to shoehorn these crypto tokens 0:03:16.800 --> 0:03:22.960 from these various projects into existing law. Uh. You know, 0:03:23.320 --> 0:03:27.679 much of our securities law is based on ninety three 0:03:27.680 --> 0:03:32.840 and ninety four legislation literally and court cases that followed 0:03:32.880 --> 0:03:37.080 that often in the forties and fifties. Can you imagine 0:03:37.080 --> 0:03:40.160 being more far removed from crypto? Right? I mean, so 0:03:40.280 --> 0:03:45.600 it doesn't fit well. There are attributes of these protocols 0:03:45.640 --> 0:03:51.760 and the corresponding tokens that are completely unlike any actual 0:03:52.080 --> 0:03:56.520 security something that we all universally would agree as a security. 0:03:57.080 --> 0:04:04.760 There are ways in which most crypto projects are fundamentally different. So, 0:04:04.760 --> 0:04:08.960 so we have this new technology that came along, and 0:04:09.440 --> 0:04:12.080 you know, I guess you could blame Congress for not 0:04:12.200 --> 0:04:17.720 moving quickly to establish the legislative guidelines that would then 0:04:18.560 --> 0:04:22.839 make it clear exactly what buckets these assets should be in, 0:04:22.839 --> 0:04:26.400 including the possibility that it's an altogether new bucket, and 0:04:26.440 --> 0:04:30.479 what the various regulators authorities ought to be. And in 0:04:30.520 --> 0:04:33.640 the absence of Congress speaking, then you will have what 0:04:33.640 --> 0:04:36.279 we are witnessing, which is regulators kind of trying to 0:04:36.320 --> 0:04:41.039 grab authority here, whether or not they ought to. And 0:04:41.200 --> 0:04:45.039 that's no way to create an environment for a really 0:04:45.080 --> 0:04:49.080 important new technology to thrive. So that's why I'm so 0:04:49.240 --> 0:04:52.400 determined to get something done in the legislative realm so 0:04:52.440 --> 0:04:56.400 that we can provide some certainty and hopefully a rational 0:04:56.640 --> 0:05:01.000 set of guard rails that will allow this innovation to continue. So, 0:05:01.279 --> 0:05:03.800 just on that point, if I could ask a sort 0:05:03.800 --> 0:05:08.560 of big picture question, you have taken an interest in crypto, 0:05:08.600 --> 0:05:13.839 and you've been advocating better crypto regulation, and I'm just curious, like, 0:05:14.560 --> 0:05:19.039 what is the benefit of crypto in your mind, because 0:05:19.080 --> 0:05:22.640 often when I think about crypto's relationship with the government, 0:05:23.160 --> 0:05:25.560 it's almost set up, or at least initially, it was 0:05:25.600 --> 0:05:29.160 set up to be adversarial. Right, this was about censorship 0:05:29.320 --> 0:05:34.880 resistant money and technology things that let you send funds 0:05:34.960 --> 0:05:38.800 or do transactions without much oversight. So it seems to 0:05:38.960 --> 0:05:43.000 me like governments maybe should approach it with some caution, 0:05:43.279 --> 0:05:46.479 but clearly you see some value from the technology itself. 0:05:46.520 --> 0:05:49.520 Can you just explain, like what your position is. Well, 0:05:49.560 --> 0:05:52.440 first of all, I do think that we have a 0:05:52.520 --> 0:05:57.200 privacy right to move value in the form of a 0:05:57.279 --> 0:06:01.360 currency or some other asset without the government watching everything 0:06:01.360 --> 0:06:05.039 we do. There's a reason why I think Congress would 0:06:05.120 --> 0:06:09.080 overwhelmingly insist that we not abolish cash, right, I mean, 0:06:09.200 --> 0:06:11.680 in China, I think they have, or they're they're close to. 0:06:11.800 --> 0:06:16.120 As a practical matter, abolishing cash, it's very very convenient 0:06:16.160 --> 0:06:19.240 for the government to be able to monitor everyone's every transaction, 0:06:19.320 --> 0:06:22.240 to force everything into a digital space that in China 0:06:22.720 --> 0:06:27.440 the government has eyes on. So that's one I do 0:06:27.480 --> 0:06:32.880 think there's a legitimate interest in privacy. There's more practical 0:06:33.160 --> 0:06:37.600 matters because I think a lot of people there'st think 0:06:37.600 --> 0:06:40.479 of the volume of transactions that go on credit cards, 0:06:40.680 --> 0:06:44.400 and obviously that information is not uniquely held by the consumer, 0:06:44.480 --> 0:06:48.760 it's held by financial institutions. But I think the ease 0:06:48.800 --> 0:06:51.320 of transactions, the ability to move money on a peer 0:06:51.360 --> 0:06:56.280 to peer basis and leave out intermediaries that inevitably charge 0:06:56.360 --> 0:07:00.560 a fee for the execution. In particular, that fee extremely 0:07:00.600 --> 0:07:05.200 expensive when you move money internationally. I also think that 0:07:05.480 --> 0:07:09.560 there's going to be very exciting innovations that we probably 0:07:09.560 --> 0:07:12.000 can't imagine yet. You know, when when the Internet was 0:07:12.040 --> 0:07:15.560 first being developed, I don't think too many people envisioned 0:07:15.720 --> 0:07:19.360 Amazon and Uber and Netflix and you know, the things 0:07:19.400 --> 0:07:24.360 that have totally transformed consumption and not not just consumption 0:07:24.440 --> 0:07:27.480 of information, but even consumption of goods and services. Well, 0:07:27.520 --> 0:07:30.040 I think that could happen here as well. I think 0:07:30.200 --> 0:07:35.360 programmable money, for instance, is a very exciting technology. The 0:07:35.440 --> 0:07:40.120 ability to have embedded in a unit of value, a 0:07:40.240 --> 0:07:44.120 form of money, a transaction, a movement of that value 0:07:44.120 --> 0:07:48.680 based on some exogenous but verifiable event. That's really interesting. 0:07:48.720 --> 0:07:53.160 And I could imagine lots of applications validating ownership, um, 0:07:53.200 --> 0:07:57.200 you know, in an immutable way. That's something that blockchain allows. 0:07:57.280 --> 0:08:00.320 So so I think there's all kinds of application that 0:08:00.360 --> 0:08:05.600 are likely to emerge, and we should not presume that 0:08:05.600 --> 0:08:08.239 that can't happen or and we certainly shouldn't do anything 0:08:08.280 --> 0:08:27.480 to preclude it. So you've been very critical of SEC 0:08:28.160 --> 0:08:30.520 Chief Gensler, you know, and there's a lot of reasons 0:08:30.560 --> 0:08:32.520 I think people are critical. There's been there are a 0:08:32.600 --> 0:08:36.040 number of like you know, Central Seed, Sei Fi things 0:08:36.080 --> 0:08:38.440 that went bust. People weren't protected them, like people think 0:08:38.480 --> 0:08:41.760 about stuff like Celsius. And then, as you pointed out, 0:08:42.000 --> 0:08:45.080 this idea of sort of like regulation by enforcement, where 0:08:45.080 --> 0:08:47.079 no one knows the rules and then suddenly there's a 0:08:47.160 --> 0:08:50.280 lawsuit against them. What do you think that right now, 0:08:50.800 --> 0:08:53.800 with the existing laws of the land, that SEC Chairman 0:08:53.840 --> 0:08:57.520 Gensler has the ability to regulate crypto in a more 0:08:57.559 --> 0:09:01.040 meaningful manner, or does he really need you, and by you, 0:09:01.120 --> 0:09:06.560 I mean Congress to grant the SEC better and clear authority. 0:09:07.120 --> 0:09:10.559 That's a great question, and I think the answer is 0:09:11.000 --> 0:09:15.719 there are probably some crypto projects, some protocols and associated 0:09:15.760 --> 0:09:21.320 tokens that really are securities and therefore should could and 0:09:21.320 --> 0:09:25.040 should be regulated by the SEC. But I think many 0:09:25.120 --> 0:09:30.200 many are not. And that's my fundamental difference with Chairman Gensler. 0:09:30.360 --> 0:09:35.880 He maintains that virtually all cryptocurrencies are securities. He will 0:09:35.880 --> 0:09:40.160 acknowledge that bitcoin is not. I don't think you could 0:09:40.160 --> 0:09:43.360 get him, well, I suggest you try. I have not 0:09:43.440 --> 0:09:46.840 been able to get him to identify a single other 0:09:47.040 --> 0:09:51.240 token that is not a security um and I think 0:09:51.440 --> 0:09:55.920 his argument is tenuous. And part of the problem is 0:09:56.040 --> 0:09:58.960 I think there has not been sufficient clarity as to 0:09:59.320 --> 0:10:04.040 what does institute a crypto security and what does not. 0:10:04.320 --> 0:10:08.080 By the way, you could use crypto tokens in a 0:10:08.120 --> 0:10:13.120 transaction that definitely falls under the jurisdiction of the SEC. Right, 0:10:13.200 --> 0:10:17.600 so Celsius and Voyager when they're taking crypto deposits, paying 0:10:17.600 --> 0:10:20.200 an interest rate on it, using those deposits to then 0:10:21.160 --> 0:10:26.800 lend to I suppose hedge funds and other institutions that 0:10:26.800 --> 0:10:33.040 that definitely I think falls under the SECS brief And frankly, 0:10:33.080 --> 0:10:36.520 I think there's questions about why after an enforcement action 0:10:36.559 --> 0:10:39.360 against block Fire earlier in the year, nothing happened to 0:10:39.400 --> 0:10:42.319 Celsius and Voyager until they blew up. But but that's 0:10:42.360 --> 0:10:45.960 a little bit different from the question of why is 0:10:46.000 --> 0:10:50.960 it that every crypto project other than bitcoin is a security. 0:10:51.120 --> 0:10:55.400 I think legislative guidance that would make it clear what 0:10:55.600 --> 0:10:58.600 is and what is not would be very very helpful 0:10:58.640 --> 0:11:00.840 and and I would say to things if I could, 0:11:01.080 --> 0:11:06.199 that ought to cast serious doubt on German Gunstler's argument. 0:11:06.320 --> 0:11:11.640 One is there are many projects where there is no 0:11:11.840 --> 0:11:16.440 centralized authority, right that that Bitcoin is an obvious case, 0:11:16.440 --> 0:11:18.440 but it's not the only one. And if you have 0:11:18.520 --> 0:11:21.920 a truly decentralized platform, you have you have code, you 0:11:21.960 --> 0:11:24.520 have software, that's what it is, and the fact that 0:11:24.559 --> 0:11:27.960 people are using it doesn't mean that there's a central authority, 0:11:28.160 --> 0:11:32.719 And the idea of a central authority really traditionally an 0:11:32.760 --> 0:11:36.679 issuer is at the heart of what makes something a security. 0:11:37.120 --> 0:11:39.320 The other thing I would point out is that every 0:11:39.360 --> 0:11:43.840 security that I can think of involves a claim on 0:11:43.880 --> 0:11:47.359 an issuer. Right. If it's equity, it's a claim of ownership. 0:11:47.840 --> 0:11:51.480 If it's a bond, it's a claim on the assets. Right, 0:11:51.480 --> 0:11:57.640 there's a specific claim, and there's usually also a specified return. 0:11:57.920 --> 0:12:00.959 Either it's an interest rate, or it's a dividend, or 0:12:01.000 --> 0:12:05.559 it's a promise of some share of income. Well, crypto 0:12:05.720 --> 0:12:08.480 doesn't typically have that. There may be some tokens that do, 0:12:08.600 --> 0:12:12.280 and okay, I'll call them a security, but when there 0:12:12.360 --> 0:12:15.000 is no claim on an issuer, when there is no 0:12:15.360 --> 0:12:19.720 built in return, then I'm not sure it should even 0:12:19.720 --> 0:12:23.800 pass the Howe test. So and at a minimum, I 0:12:23.800 --> 0:12:26.280 think you have to acknowledge that it's very different from 0:12:26.280 --> 0:12:30.520 all the securities that we have acknowledged over the years, 0:12:31.000 --> 0:12:33.280 and so that's why I think really Congress should act 0:12:33.320 --> 0:12:38.040 on this and specify how these projects ought to be regulated. So, 0:12:38.679 --> 0:12:43.440 speaking of things being very different, one charitable interpretation of 0:12:43.440 --> 0:12:46.840 the sec S sort of ad hoc enforcement approach is 0:12:46.920 --> 0:12:49.560 that it has to do with the pace of innovation 0:12:49.559 --> 0:12:53.480 and crypto just being different to anything we've really seen before. 0:12:53.600 --> 0:12:57.079 So maybe it makes sense for the SEC to try 0:12:57.160 --> 0:13:01.440 to maintain flexibility and kind of learn urn and develop 0:13:01.600 --> 0:13:05.199 alongside the industry. I've also heard people talk about, well, 0:13:05.240 --> 0:13:08.520 if they codified everything, made it really really clear what 0:13:08.559 --> 0:13:12.200 the rules actually were, then inevitably there would be crypto 0:13:12.200 --> 0:13:15.520 players who start poking around for loopholes and trying to 0:13:15.640 --> 0:13:19.280 exploit those and that sort of thing. What do you 0:13:19.360 --> 0:13:25.000 say to that interpretation of the SEC and Ginstler's approach. Yeah, 0:13:25.280 --> 0:13:27.760 I don't think that's a strong argument, because it really 0:13:27.800 --> 0:13:31.440 seems to be arguing for ambiguity and hiding the ball 0:13:31.480 --> 0:13:35.760 and ensuring that the both consumers and developers just don't 0:13:35.800 --> 0:13:37.800 have clarity on this. Look at it from the point 0:13:37.800 --> 0:13:41.120 of view of a creative developer who has an idea 0:13:41.679 --> 0:13:46.200 for an application of a smart contract. Maybe, but it's 0:13:46.200 --> 0:13:50.040 got to run on a Layer two protocol, and is 0:13:50.440 --> 0:13:54.640 concern is he really doesn't know. Is there a way 0:13:54.640 --> 0:13:56.920 to design this so that it wouldn't be considered a 0:13:56.960 --> 0:13:58.880 security or do I have to go to bed every 0:13:58.960 --> 0:14:01.160 night wondering whether the SEC has going to come knocking 0:14:01.200 --> 0:14:03.720 on my door in the morning and accuse me of 0:14:04.200 --> 0:14:09.000 dealing with you know, I'm unregistered, therefore illegal security. That 0:14:09.200 --> 0:14:11.360 that's where you end up, That's where we are now, 0:14:11.679 --> 0:14:13.720 and that's where you end up when you don't provide 0:14:13.760 --> 0:14:17.800 the clarity that both consumers and developers deserve. Okay, well 0:14:17.800 --> 0:14:21.720 you're working on legislation. What is it going to say 0:14:21.840 --> 0:14:24.080 or what would you like it to say to resolve 0:14:24.120 --> 0:14:27.680 these ambiguities. Well, the first thing I'm working on is 0:14:27.680 --> 0:14:31.360 actually I think of it, at least conceptually, as preceding 0:14:31.840 --> 0:14:33.880 some of the things we've been discussing, and that would 0:14:33.880 --> 0:14:38.760 be legislation that will provide guardrails for regulating stable coins. 0:14:39.480 --> 0:14:42.520 As as you know, right, stable coins are the currency 0:14:42.560 --> 0:14:45.440 that's used to go in and out of crypto generally. 0:14:46.160 --> 0:14:49.840 It's also in some ways I think the easiest and 0:14:49.960 --> 0:14:54.880 simplest challenge for Congress and for regulators to solve. So 0:14:55.000 --> 0:14:59.120 I've I've introduced legislation or draft of a bill that 0:14:59.240 --> 0:15:02.680 deals with the category of stable coins that I think 0:15:02.760 --> 0:15:07.280 could plausibly be widely used as a method of payment, 0:15:07.840 --> 0:15:10.280 and that that would be asset back stable coins. I 0:15:10.320 --> 0:15:13.520 think algorithmic stable coins are in a different category. But 0:15:13.760 --> 0:15:16.680 what what we define? What I define as payment stable 0:15:16.720 --> 0:15:21.320 coins and are backed by assets, I think a regulatory 0:15:21.400 --> 0:15:24.440 regime makes sense. It would it would require, for instance, 0:15:24.520 --> 0:15:26.960 rules about disclosure, what is the nature of the assets. 0:15:26.960 --> 0:15:32.120 It would require that you'd have to be licensed to 0:15:32.280 --> 0:15:34.360 issue it, and then we go through you know, how 0:15:34.440 --> 0:15:37.440 you could go about obtaining such a license, and if 0:15:37.440 --> 0:15:41.000 you have them, then you'd have to have high quality assets, 0:15:41.120 --> 0:15:45.240 liquid assets backing at cash and cash equivalence. We talked 0:15:45.280 --> 0:15:49.280 about the capitalization that would be necessary for the issuing entity. Anyway, 0:15:49.280 --> 0:15:53.240 the point is we lay out the criteria by which 0:15:53.800 --> 0:15:57.040 this could be regulated, and I think it would make 0:15:57.040 --> 0:15:59.400 a lot of sense to start there. I could imagine 0:15:59.440 --> 0:16:03.920 you could start in other places, but that's that's my 0:16:03.920 --> 0:16:07.480 my first ambition in this space. What's the best approach 0:16:07.560 --> 0:16:11.520 in your opinion to protecting consumers when it comes to 0:16:11.640 --> 0:16:17.000 crypto and tokens? So you know, my approach here is 0:16:17.040 --> 0:16:21.080 the same as it is in most in most areas, 0:16:21.160 --> 0:16:24.760 which is to have a lot of respect for consumers. Right. 0:16:25.400 --> 0:16:27.760 I think sometimes some of my colleagues and some of 0:16:27.800 --> 0:16:32.400 the regulators adopt the really paternalistic approach, and they want 0:16:32.400 --> 0:16:34.680 to protect consumers from themselves, and they want to put 0:16:34.680 --> 0:16:36.800 all kinds of regulations about who can do what and 0:16:36.880 --> 0:16:40.600 under what circumstances. I don't I don't view the world 0:16:40.680 --> 0:16:42.600 that way, the way I think we ought. What I 0:16:42.600 --> 0:16:45.400 think we ought to do is make sure that consumers 0:16:45.520 --> 0:16:49.400 have enough information to make a well informed decision about 0:16:49.800 --> 0:16:51.880 what they want to do. So it's about for me, 0:16:51.920 --> 0:16:55.480 it's mostly about disclosure. With the stable points, for instance, 0:16:55.520 --> 0:16:58.280 the heart of the regime that that I'm advocating is 0:16:58.880 --> 0:17:04.920 full disclosure, audited disclosure, attestation of continuity of the assets 0:17:04.920 --> 0:17:08.879 backing the stable coin. That's the heart of it for me, 0:17:09.240 --> 0:17:12.840 and I would take a similar approach to non stable 0:17:12.840 --> 0:17:15.600 coins other other crypto projects. I just want to press 0:17:15.720 --> 0:17:18.359 further on this because I feel like where people have 0:17:18.560 --> 0:17:20.760 lost a lot of money, yes, people also gain money, 0:17:20.760 --> 0:17:23.600 and I think I take seriously your point about respecting 0:17:23.760 --> 0:17:27.639 the consumer or the investor, But where people have a 0:17:27.680 --> 0:17:30.520 lot of risks are not stable coin as their projects 0:17:30.520 --> 0:17:33.119 that have been you know, eye popping returns and big 0:17:33.160 --> 0:17:36.880 ap wise and defy protocols where you can earn ten 0:17:36.960 --> 0:17:41.480 thousand percent, etcetera. And there is no right now from 0:17:41.520 --> 0:17:44.560 as far as I know, there's nothing remotely like the 0:17:44.600 --> 0:17:48.160 equivalent of say like filing a ten queue for those projects. 0:17:48.160 --> 0:17:51.119 So it's very hard to have like should you know, 0:17:51.280 --> 0:17:54.639 should a defy project that someone launches, some sort of 0:17:54.720 --> 0:17:59.280 lending protocol, have some sort of minimum disclosure that some 0:17:59.600 --> 0:18:04.240 kind of resembles what a stock disclosure looks like. I 0:18:04.240 --> 0:18:08.720 would say, if the if the nature of the arrangement 0:18:08.760 --> 0:18:10.960 that you're describing is one in which there is a 0:18:11.000 --> 0:18:14.840 return that is offered or promise, and yes, then it 0:18:14.880 --> 0:18:17.480 starts to look a lot like a security or at 0:18:17.560 --> 0:18:20.920 least the activity is the is the activity of a screen. 0:18:20.920 --> 0:18:23.880 You know, if if you said, give me a bushel 0:18:23.920 --> 0:18:27.240 of apples and I will give you an apple a day, 0:18:27.320 --> 0:18:28.800 and at the end of a month, I'll give you 0:18:28.840 --> 0:18:32.080 the bushel back, I would say that actually looks all 0:18:32.080 --> 0:18:35.359 out like a security arrangement because of the return that 0:18:35.400 --> 0:18:39.640 you're offering, and it probably actually meets the Howie test. 0:18:39.960 --> 0:18:44.080 But it doesn't make the apple a security, right. The 0:18:44.359 --> 0:18:47.639 apple still just an apple it but the activity is 0:18:47.680 --> 0:18:51.080 something that that is appropriately regulated. So if you have 0:18:51.119 --> 0:18:54.960 a crypto project where someone decides, hey, I'm going to 0:18:55.040 --> 0:18:59.119 offer this return to an investor because I'm going to 0:18:59.480 --> 0:19:01.679 you know, I've got this clever way to cover you know, 0:19:01.720 --> 0:19:05.520 on eye popping interest rate it describe it, then yeah, 0:19:05.560 --> 0:19:25.639 that probably requires regulation and certainly disclosure. What's your take 0:19:25.800 --> 0:19:28.840 on the treasury sanctioning of a piece of software, and 0:19:29.400 --> 0:19:33.119 of course talking about Tornado cash. Is it legitimate for 0:19:33.160 --> 0:19:36.879 the Treasury to sanction a literal piece of software? And 0:19:36.920 --> 0:19:39.600 if not, how should we think about I mean, you 0:19:39.640 --> 0:19:42.200 mentioned the importance of privacy and the importance of cash, 0:19:42.240 --> 0:19:43.800 but there are issues you can only you know, it's 0:19:43.840 --> 0:19:47.240 hard to transfer a high volume of cash, and that's 0:19:47.280 --> 0:19:50.760 sort of the protection against money laundering, which is that 0:19:50.920 --> 0:19:54.639 you could theoretically do it, but it becomes cumbersome. Do 0:19:54.680 --> 0:19:57.960 you think there is legitimate for the Treasury, as part 0:19:58.000 --> 0:20:01.360 of either anti terrorism or anti money laundering or going 0:20:01.400 --> 0:20:05.439 after North Korea to sanction a piece of software? And 0:20:05.800 --> 0:20:08.800 is that a worthwhile pursuit in some manner? So there's 0:20:08.800 --> 0:20:12.439 a lot to try to impact there, and part of it, 0:20:12.800 --> 0:20:15.240 you know, in all candor, is this is this is 0:20:15.280 --> 0:20:18.440 new and I am still really trying to make sure 0:20:18.440 --> 0:20:20.879 I understand the implication of this. My first reactions, I 0:20:20.920 --> 0:20:26.359 get very concerned about sanctioning code. That does worry me. 0:20:26.520 --> 0:20:30.160 That concerns me. I think there's significant First Amendment issues. 0:20:30.800 --> 0:20:34.040 I think that is problematic. Having said that, I do 0:20:34.160 --> 0:20:37.720 acknowledge that there is an illicit activity that we want 0:20:37.800 --> 0:20:41.439 to be able to identify, and if we can't prevent it, 0:20:41.520 --> 0:20:43.719 at least go after the bad guys when they engage 0:20:43.720 --> 0:20:46.480 in it. What I would suggest is the wrong way 0:20:46.480 --> 0:20:48.919 to do that is to take this archaic system that 0:20:49.000 --> 0:20:53.600 we now impose on banks and other financial institutions and 0:20:54.520 --> 0:20:57.480 apply it now to this whole new technology you know 0:20:57.520 --> 0:21:01.960 I'm referring to, like the the reporting rules. Every transaction 0:21:02.400 --> 0:21:06.280 over ten thousand dollars has to be reported. So what 0:21:06.320 --> 0:21:10.359 we know for sure is that some percent of these 0:21:10.359 --> 0:21:13.679 reports are are false positives. Right, there's nothing wrong with 0:21:13.720 --> 0:21:16.720 these transactions, but we haven't even raised the dollar threshold 0:21:16.760 --> 0:21:20.520 since the nine seventies, not even to reflect inflation, and 0:21:20.560 --> 0:21:24.200 so we just have this massive reporting requirement. It's quite 0:21:24.480 --> 0:21:27.720 onerous to comply with, and it swamps the Treasury with 0:21:27.760 --> 0:21:30.560 all kinds of this information. What I think we ought 0:21:30.600 --> 0:21:32.560 to do, and I'm not an expert in this area, 0:21:32.600 --> 0:21:36.639 but I've spoken at some length with people who are is, 0:21:37.720 --> 0:21:43.360 use artificial intelligence on an open source blockchain and use 0:21:43.440 --> 0:21:48.000 that technology to discern suspicious transactions. Don't just assume that 0:21:48.040 --> 0:21:51.040 everything is suspicious because it's more than ten tho dollars. 0:21:51.240 --> 0:21:55.040 Don't just import this, you know, completely really in many 0:21:55.040 --> 0:21:59.760 ways obsolete technology and impose it on crypto, but use 0:22:00.240 --> 0:22:02.959 the tools that we have now, and and there are 0:22:02.960 --> 0:22:05.640 private companies that do this already. Right then, we've had 0:22:05.720 --> 0:22:09.919 these great stories of recovering stolen crypto, even because this 0:22:10.040 --> 0:22:14.240 is totally traceable. Now with Tornado, I understand part of 0:22:14.240 --> 0:22:17.320 the purpose is to make it much more difficult to 0:22:17.480 --> 0:22:22.000 trace that. So it does raise some additional challenges, but 0:22:22.119 --> 0:22:24.800 I'm not convinced that the right answer is to apply 0:22:24.920 --> 0:22:28.600 the current bank reging monitor. So just when it comes 0:22:28.640 --> 0:22:31.560 to Congress and crypto, there's been a lot of discussion 0:22:31.560 --> 0:22:36.080 about the possibility of Congress actually, you know, maybe passing 0:22:36.119 --> 0:22:40.800 something to decide who actually regulates crypto. Is that the CFTC, 0:22:41.400 --> 0:22:45.000 is that the SEC? Is it something totally different? What's 0:22:45.040 --> 0:22:49.520 the likelihood of Congress actually legislating on this or the 0:22:49.600 --> 0:22:54.439 legislation getting passed. And then secondly, does political appetite to 0:22:54.840 --> 0:23:00.440 interact and um legislate crypto? Does it change depending on 0:23:00.600 --> 0:23:02.720 what's going on with the industry. I mean, we're in 0:23:02.720 --> 0:23:05.000 a crypto winter right now. A lot of people have 0:23:05.160 --> 0:23:07.600 lost quite a bit of money. Does it feel like 0:23:07.640 --> 0:23:10.640 there's more political appetite right now to do something about 0:23:10.640 --> 0:23:13.440 the industry than before. I think the answer is yes, 0:23:14.080 --> 0:23:18.920 at least in some respects. So for instance, I believe 0:23:19.359 --> 0:23:26.320 that when Terra and Luna collapsed, it seems to have 0:23:26.800 --> 0:23:31.400 elevated the issue of stable coin regulation with the White 0:23:31.440 --> 0:23:36.479 House and with the Administration in general, and with some 0:23:36.560 --> 0:23:41.720 of my colleagues. So that real world event, and even 0:23:41.720 --> 0:23:44.359 though it's an algorithmic stable coin, and I think the 0:23:44.440 --> 0:23:46.920 most likely regulation on stable coin will actually be for 0:23:46.960 --> 0:23:50.280 payment stable coins, the fact that there was a sort 0:23:50.280 --> 0:23:56.520 of sensational bad event did move this up the list 0:23:56.560 --> 0:23:59.159 of priorities, put it on people's radar who didn't have 0:23:59.200 --> 0:24:03.040 it on their radar. So I do think what happens 0:24:03.119 --> 0:24:08.560 in the crypto world does beer on Congress's inclination. I 0:24:08.600 --> 0:24:11.159 still think there's a chance to get stable coin legislation 0:24:11.240 --> 0:24:14.399 done this year. I think the administration would like to 0:24:14.440 --> 0:24:18.439 get something done. There are Republicans pretty overwhelmingly would like 0:24:18.520 --> 0:24:21.280 to get something done. Some Democrats would as well. On 0:24:21.359 --> 0:24:25.640 the broader outside of stable coins, the question of ordinary 0:24:25.840 --> 0:24:29.119 if I can say, you know ordinary crypto project, right, 0:24:29.280 --> 0:24:32.040 what does that mean, but but non stable coin, let's 0:24:32.080 --> 0:24:35.840 say that's that's tougher. I think it's more difficult. You 0:24:35.840 --> 0:24:39.439 do have a bipartisan bill. You have actually two bipartisan bills, right, 0:24:39.800 --> 0:24:44.360 they're they're they're different, the Lummis Jilla Brand Bill and 0:24:44.480 --> 0:24:49.360 the Stavana Bozeman Bill. So you're starting to see some 0:24:49.440 --> 0:24:56.000 engagement by members and members on relevant committees of jurisdiction. 0:24:56.920 --> 0:25:00.199 So my I'm still going to hold out hope we 0:25:00.200 --> 0:25:03.240 get a stable coin build done this year, and next 0:25:03.320 --> 0:25:08.120 year Congress might do considerably more. You know, I understand that, 0:25:08.200 --> 0:25:11.000 you know, stable coins are the low hanging fruit because 0:25:11.040 --> 0:25:14.520 they're pretty straightforward, particularly the asset back lines, where really 0:25:14.560 --> 0:25:17.080 the requirement is if you're going to have a dollar 0:25:17.160 --> 0:25:20.280 stable coin, have a dollar equivalent in a bank account, 0:25:20.320 --> 0:25:23.440 and let an auditor verify that it's that one to one. 0:25:23.800 --> 0:25:26.800