Fighting for Crypto's Future: The State of Regulation & Advocacy by Connor Spelliscy

foreign [Music] okay to start off with thanks everyone for being here today I appreciate that uh crypto Regulatory and legal is not the sexiest topic being discussed at Dev con and you had a lot of choices so thank you for joining us um I'm Connor spelsi as my fabulous host mentioned and I do a lot of stuff in crypto advocacy I co-founded two industry Association the space which are the blockchain association the Canadian web free Council I work with foundations on advocacy and then I also work with the git coin grants round and help lead their advocacy around um why I think it's so important and I'm so excited that so many of you are here today is that crypto advocacy while doesn't get too much attention gets a little bit of attention on crypto Twitter is going to be one of the most critical considerations for this community going forward and for it to be successful and this for this industry really to continue to look like it does today we're going to have to do a lot together very quickly I'll start with the fact that I'm a formerly lawyer but none of this is of course legal advice so I won't bury the leader the lead here over the next two years regulation will have a greater impact on crypto's future than technological innovation particularly in the US and the EU and I know that's a fairly big statement but unfortunately I think that it's true and while I think technological innovation will play a huge role in getting us past some of the pitfalls of Regulation it's going to be something that really very much materially impacts your use of crypto day-to-day in the next two years so for our agenda today actually can I get my notes up here I don't I don't see them on the right here um what we're going to discuss today is essentially the fact that while that is a big statement it's fairly nuanced right it's not as Doom and Gloom as it initially appears there's a lot that we can do to steer advocacy in the right direction but we're going to have very limited time in order to make that happen and we really need to work as a collective to go forward with it change is coming is something we're going to discuss right there's impending legislation coming in the United States and there's already much happening in Europe which we're going to discuss in a bit more detail because it's important to get a sense of exactly why advocacy matters why we're doing what we're doing and why we need to invest so much of it in the very short term ultimately we end up talking about strategies that we need to use in order to really take advocacy in this space to the next level right now there are a lot of fabulous organizations that are doing very good work but there's much more to be done and they really need your support now there's a lot of a lot of fun potentially in the first few slides here and I don't want to leave you with that at all there's so much that we can all do as a community I'm going to save the last five minutes of the presentations to go over questions and hopefully allay any fears but if we run out of time feel free to find me after or find me on Twitter so as a former lawyer advising crypto companies I can tell you that one of the major concerns for crypto companies is legal and legal Clarity and I'm sure all of you had to deal with this in some capacity in whatever role you have in this space that fact was very much reinforced for me when I started running the Dow research Collective which is an organization where we talked to Dow stakeholders about the key issues facing their organizations and we help to try to solve them but over and over again legal and legal related to employment to Securities to icos to any number of things was really holding back a lot of the organizations that we were working with those they're kind of like two big related issues here right there's one which is that that lack of legal Clarity really slows what we can do today it slows the development of the industry because Founders and operators need to second guess themselves over and over again with every choice they make because legal is this ever present uh fear and risk the second issue with this is that the clarity we are starting to get in the space is not really the kind of clarity that we want new policy is very much over indexing to limit risk and to maintain the status quo right kind of square square pegs into round holes instead of thinking about what crypto can do what the industry's potential is luckily blockchain is very much not the first disruptive industry to go through these growing pains right we've seen it happen many times before and we could check take a look at the Playbook of how other emerging Technologies did this so a few examples of what those would include would be AM radio FM radio film television and even the internet of course it all went through this growing pain into these regulatory hurdles I'll now jump into a bit more detail on the strategy that the crypto Community should employ in order to generate those more favorable outcomes that I'm talking about based on what we've learned from those past Industries but in case you want a primer I highly recommend this book by Tim Wu Josh Stark also recommended it it's called the master switch it'll give you a sense of how those Industries started and how they got through the regulatory hurdles which they had to battle all along the way and Josh also wrote a post about how this book in this like sort of philosophy applies in crypto which I highly recommend you read he co-authored that post so zooming out to be here from where we are in crypto today it helps to understand how the cycle of innovation and regulation works in the United States and also just in the west generally now this is a global problem crypto regulation is a global thing and we can't just Escape it by moving from one jurisdiction to the next exactly my experience is is kind of in with Western countries so I'm going to focus primarily on those also those jurisdictions particularly the EU and the U.S when they pass something it has a way of trickling down into the laws of other countries so they're particularly relevant to our discussion today and the us as we know has a very major enforcement arm so government blessing has been critical to every 20th century information Empire while governments have no master keys that they can use to shut crypto down what they can do is make it so high risk for their citizens and their institutions to interact with crypto that they simply leave and we've seen this already a little bit in the ways that different institutions are already flip-flopping with crypto right they're making different statements every day about whether or not they support crypto they're attracted by the money in the bottom line and the potential but they're scared off by the risks of hacks but also the reputational risk of being associated with crypto we shouldn't let the limited government intervention to date lull us into a false sense of security and I imagine some of you are thinking like has there been limited government intervention because we feel like there's been a lot right but really good actors in crypto have had relatively limited antagonism from Western governments that has started to change in the last six months and as more regulation is passed we are going to have to change the way that we work and think about the space it's also critical here to kind of think about the ways in which your organization you know is going to represent itself for the Greater Community here now regulation is not necessarily problematic governments can play a very important role in supporting and overseeing industries for instance right the crypto industry could have benefited a little bit if Regulators had focused more on the scammers in this industry and some of the irresponsible Founders who've really created reputational issues for our industry the failures of Celsius three arrows capital and Tara have heard a lot of people but but those organizations were led by a very tiny fraction of those who are working in this industry of course but unfortunately their sins have dug us a massive reputational hole both within media also with policy makers and regulators and now it's up to us to get out of that hole so if you're you know an organization too that's thinking about the ways in which you're operating make you know make sure this this is in mind for you right if you if you your Bridge gets attacked and you lose 400 million dollars it's going to be a huge issue for your users and for your product and it's going to be a huge issue for you it's also going to be a massive issue for the future of this industry because hearing those stories over and over again doesn't do us any favors and I think I just saw a tweet from chain houses that said that October had the highest volumes of hack of any month right that's pretty sad at this point there is hope of course that we can push towards good regulation but only if we start working together and become aware of this now knowing how to navigate the political environments of Washington and of Brussels is not necessarily the average crypto stakeholders wheelhouse and that's totally fine we have a number of fantastic advocacy groups that do a ton in this space already and you can really easily plug into those organizations so that you don't really have to do much work but they do absolutely need your support I'm going to plug a bunch of them at the end of this presentation but for now let's jump into some of the very real changes that are coming up and will impact all of us as a result of Regulation and to help us understand why we so desperately need to invest in advocacy so the first thing I'm going to talk about is the dccpas in the next three months a bill could be passed in the United States that may ban much of a defy in the U.S now here I'm talking about the digital Commodities consumer protection act also known as the dccpa this isn't a bill that's just an idea or at an early stage of drafting or as something that some obscure Congress member has thought up and has introduced and is going nowhere this is a robust piece of legislation that has been supported by a number of very influential members of Congress and also other influential backers who are very interested in seeing it pass and there is a very good chance that it could pass this is unlike anything we've seen in the US so far this has the greatest chance of becoming law and it could happen in the next three months policy makers and Regulators have taken years to learn about crypto there's a huge learning curve but now that they're kind of over that learning curve they're interested in regulating the space and it's happening right now the core focus of the DC CPA is to provide the Commodities Futures Trading commission the cftc sorry for all of the acronyms the exclusive jurisdiction over certain crypto spot markets the bill also gives the cfdc new authority to regulate a type of asset called digital Commodities and also to regulate a new entity category called digital commodity platforms which would include Brokers custodians dealers and exchanges this is a critical Bill to be aware of once again because it stands a very real chance of passing by the end of the year in part expedited by the election that could happen in the United States and also by its very much influential bipartisan backing in the U.S if it does pass it will have enormous implications there are many positive things about the bill and the drafters should be applauded for their diligence in in working Within history and working with different industry associations to to improve the bill but there are some issues and we need to talk about them the first one is of course the potential ban on D5 so the digital Commodities platform's definition in the bill is designed for centralized custodial markets however the definition of of um of the digital commodity platform could also be interpreted to include defy and given that many D5 protocols cannot adhere to the same standards as you know centralized exchanges it could be impossible for them to comply and it could really Crush much of D5 in the united states banning defy likely isn't the goal of the drafters of this legislation but it could be an unintended consequence of applying of course the same rules to centralized and decentralized entities the second issue with the bill is that it's digital commodity definition is very vague and this is maybe asking a lot of the drafters because it's a pretty difficult issue to tackle but the biggest unresolved question for so many folks in crypto is what is my digital asset what is my crypto is it a security is it a commodity is it something else entirely if we had legislation that provided a bright line test it would really help you understand how you could operate your business of course we want one that was a little bit more favorable to our community but at the very least that Clarity would be helpful in knowing where you stand and it would also encourage maybe the security Exchange Commission to to change its approach to its enforcement in crypto to set a more specific jurisdiction for that regulator the bill also gives two examples of digital Commodities Bitcoin and ether which is in some ways kind of great I think that a lot of us would say yeah we agree that both of those are not Securities but it does narrow the scope of what we might expect would be included as a digital commodity and we might want the cfdc to have more jurisdiction than it's giving itself in this bill another Associated problem of course is that it doesn't distinguish uh jurisdiction between the SEC and the cfdc as much as we'd like there could be a little bit of a turf war between these two regulators and crypto could kind of be a victim of that battle so as we move away from this I just want you to keep in mind what this could mean for your company if you are in the United States and starting a D5 company or if you will have American customers for your D5 company or you're someone in the United States who uses defy this could impact you right and if it's passed in three months the net won't necessarily immediately become effective it could take a little bit more time but this could have major implications to your company and you need to think it through now for something even more tangible in April of 2024 centralized stablecoin use will be capped and algorithmic and collateralized stable coins may not be legal in the EU while we just discussed a U.S bill that might pass now we're talking about a bill that was already agreed upon and will change the way the industry works we know this with certainty the markets in crypto assets Bill Mika for short is a comprehensive framework for crypto asset issuance and service providers that was just agreed to by the European Council and published last week these regulations will massively alter the stablecoin industry Mika is too comprehensive a framework for us to get it in much detail today but we'll dive into one of the areas that is most like going to be most effective which is stable coins specifically Mika is putting a cap on the daily volume of transactions for non-eu denominated stable coins at 200 million euros per day in the EU while the details are still a little bit hazy what it likely means is that in April of 2024 USD denominated stable coins like usdt or usdc will only be able to do 200 million euros worth of transactions per day in the EU while we have to wait for further rulemaking for absolute Clarity given that both usdt and usdc do billions of dollars a day in transactions they would probably exceed that cap on particular days or maybe every day I'm not totally sure it appears very much that these issuers that Circle and tether might have to find ways to limit their stable coin use within EU countries to stay compliant with Mika which might require them to look to new Solutions of geoblocking or performing some very cumbersome kyc or create an entirely new tool it also makes U.

S stable coins much less competitive in Europe do not than euro-denominated stable coins right for instance if you're in the EU and you want to use a payment in usdc what happens if usdc has reached its cap for the day do you have to wait for the next day it's not totally clear yet but these kinds of issues flag for us that maybe this bill and this level of specificity is coming a little early considering the market is still very much nascent at the very least what we know is according to the language in the bill if you are an issuer and you issuer rather and your stable coin has exceeded the cap per day then you need to go talk to the regulator and stop issuing new stable coins and you can start issuing them again potentially once The Regulators agreed that your new strategy for reducing your volume per day is satisfactory to them stablecoin issuers will also have to have offices in the EU report consistently to EU regulators and meet reserve requirements that will likely require them to hold the vast majority of their funds and Fiat now we don't know this for sure but that is what it's looking like those requirements will likely make it all that impossible to have a compliant algorithmic or collateralized stablecoin in the EU in the way that we know them today while the future is not as clear in the United States there have been several several stable coin bills that have actually gotten a lot of traction and it they're looking not totally dissimilar from this their impact on algorithmic and collateralized stable coins in the industry could be very similar in the United States as we're seeing right now in the EU and it seems like there's a very very good chance of stablecoin Bill will pass the United States in the next year so take a second to stop and think about how you staplecoin today and how this is going to impact how you can use them as the future like if you are paying contractors in Europe if you are you know paying service writers in Europe you may completely have to change what you're doing if you're collateralized or stable coin or algorithmic stable coin issuer you might have to change your business model the this is something that you should really jump into right now so I've been honest with you about all of the issues with crypto and all of the hurdles we're facing when adequacy side but it is not all doom and gloom because there are a ton of things that we can do to get over this right and steer regular regulation rather in the right direction how can we do it well luckily we have a list right here Number One Fund crypto public goods funding and promoting initiatives that highlight the crypto industry's potential for good helps the narrative for crypto people when we're talking to regulators and policy makers that increases the likelihood they're going to progressively adopt a more favorable approach to crypto now think about the merge and the impact that had on crypto's perception in the media and particularly with Progressive media we saw a ton of great highlights about how the crypto ecosystem was reducing its energy use by 99.95 which is an incredible feat something that no one no other industry has done we need more stories like that and we also need a bunch of killer apps that create a lot of jobs so please focus on developing both of those things number two fund think tanks and or activism groups think tanks fund and promote research concerning topics related to one or more social policy political strategy or economic theory while advocacy groups participate in activism focused on similar subject matter that could include things like lobbying or organizing Grassroots campaigns some of the great ones in crypto that you've probably heard of already are coin Center fight for the future and the Electronic Frontier Foundation the internet archive is also kind of working in our space as well they're another fabulous group and Brewster spoke yesterday their founder number three fund and participate in Industry associations industry associations are founded and funded by organizations in a particular field usually to collectively represent their interests some of the great ones in crypto include the blockchain association in the United States the Canadian web 3 Council in Canada and the European crypto initiative in the EU the these are organizations that are specifically focused on going to policy Mega policy makers and regulators and really fighting your fight for you and you can choose to engage in them however you want you can become very active and help steer the direction of the organization or you can just pay them a little bit of money and thank them for being the ones to go to talk to staffers every day it's up to you but I highly recommend that if you have an organization in any of those jurisdictions you join because they absolutely need your support number four directly encourage Community participation and advocacy so policy makers can be heavily influenced by vocal individuals and organizations particularly those who are based within their constituencies a relatively recent example of that was the infrastructure Bill battle that we fought last year so this was a campaign run by groups including fight for the future the blockchain association and the coin Center and coin Center rather to encourage more U.S citizens to call their representatives to encourage them to support pro-crypto positions while the campaign was ultimately unsuccessful it did lead to more than 40 000 calls to senators and demonstrated to policymakers and Regulators that crypto was really a force and that a number of their constituents were interested in this technology it very much announced that there was a reason to pay attention to crypto number five is Lobby directly right lobbying is an attempt by individuals or private interest groups to influence decisions of regulators or policy makers the practice has a lot of very negative connotations of course but it's actually a really fundamental part of rulemaking in many jurisdictions policy makers and Regulators have an abundance of different things being thrown at them they are thinking about space programs and hospitals and they're thinking about pensions and crypto is something on their list too crypto is particularly annoying to learn about at first potentially if you're not interested in it right so we need to get in front of them we need to educate them about it so that they don't misunderstand what we're doing and so that they can understand the public goods upside of crypto and build that in when they're making a decision number six support organizations that fund crypto legal defense a number of organizations have start started to participate in funding legal defense their goals are generally to provide support for those in the industry who have been targeted another goal which is really critical to all of you is to create legal precedence that make the industry stronger and provide us with a more favorable position from which to build our organizations a great example of this is the defy education fund which recently filed an amicus brief in a defense of the contributors to okidao okidao which was sued by the cfdc but would likely not be there to defend itself just yesterday the judge in the case accepted their Amicus brief so they can essentially participate in parts of that hearing in order to make a case for okidao and others out there so we're not saddled with a bad precedent because of the bad facts in that case lexpunk also filed a similar brief and I believe they were accepted yesterday as well in case the previous list of options was very dense I apologize I'm going to make the this really easy please take out your phone and take a picture of all these amazing organizations because these are the organizations that are fighting for crypto to stay the way that it is or to improve regulation in the space is really important there are a lot of problems that we have and we do need some oversight but we want to make sure that policy makers and Regulators are very well informed and understand what crypto can do for the world before they start passing legislation that could completely alter the course of this industry another quick start to advocacy so you could also send your contributions to these organizations in part or enroll through gitcoin's advocacy round so this is a some information on the first git coin advocacy round that we ran we raised more than 1.3 million dollars from 22 000 different contributors helping all the organizations that I just listed if you put your money through the Bitcoin matching round of course there's a chance that you could get a dollar more for that organization or two dollars or five dollars or eight dollars so um another option for a place to spend spend your money and participate in advocacy and that is it so if there's one thing though that I would love for you all to take away from today's talk it is that we are definitely facing an uphill battle for crypto to continue to exist in the way that it does today or in an improved form there is a ton of Hope though but only if we act collectively we invest a lot of resources and we do it now so if you want to connect with any of these organizations I listed just reach out to me see me after or just DM me on Twitter I think we'll now have a few minutes for questions but thank you very much for your time I really appreciate it [Applause] yeah thank you thank you for your talk it was very nice um some of the rules are just ridiculous that they're just employing I I it's no better just to focus on building the Technologies and just making them more resistance for these kind of attacks it wouldn't be better to just focus on uh Building forward and if they come with these ridiculous rules of like 200 million volume that's just like ridiculous like I don't know you can make a think tank for that but that is going uh with their ridiculous way of thinking right I mean I hate to say it but that is like not a compelling argument for The Regulators right unfortunately yeah but so I think it's a thing that then you just they cannot just comment these ridiculous rules it's right I mean the thing is that they can and if they don't get any feedback from advocacy groups like euci in Europe to tell them this is ridiculous this can't be done this is going to have a huge impact there are negative externalities which you're not thinking about then we as a as an industry will be in a position where we just keep getting hit by these pieces right and so I agree building is really critical in this space and we need to keep building technologies that are compelling and convince regulators and policy makers that there's a reason reason that they should care about crypto and wanted to exist in their jurisdiction and it could be as simple as you know if this is what you're doing crypto in your jurisdiction well someone else is going to take it over South America is going to take it over China's going to take it over um another another jurisdiction with which you're competing is taking over so those are the kind of narratives you use right to try to convince them you need to participate in this now and pay attention to it but we need someone in the room telling them that they won't just know it on their own but I agree with you I mean it is frustrating but the part of the problem is that not enough people see that this is coming because it hasn't happened before but it is happening now and it will change the way that we engage with uh with crypto thank you so much I really like everything that you said my question is related about the politicians and Regulators that we have right now in all the world and specifically here in Latin America the things that you were saying is so interesting but what could we do when we have bad politicians people who doesn't have idea about what is a wallet what is a cryptocurrency right or they are for their own interest then how we can find a keep working to have a better space into the yeah the politics no that's a great question I mean um I mean we have a lot of politicians are self-interested but part of it is thinking about like the first step in this whole process which is very much education so you mentioned politicians who don't know about crypto walls about crypto generally and that was certainly the case when we started the blockchain association and I no longer work with the blockchain association though I'm I'm close to the organization but Kristen Smith there did an amazing job of spending so many cycles educating regulators and policy makers I think when we first started the organization we thought oh we can just immediately begin and push for policy that could be really impactful and provide Clarity but we needed to stake many steps back and spend years teaching these policy politicians about the benefits of crypto what is compelling to them specifically right because you think about policy makers from the left or right some are motivated by competition with China some are motivated by Financial Equity you got to think about what incentivizes them to want to participate and want to support your position and that's largely what I mean lobbyists helped do advocacy groups industry associations that's something that they're always keeping in mind when they make these kinds of decisions it's a great question though and I I unfortunately don't know as much about how to make it happen in South America but I certainly want to learn more yeah right here so I just want to thank you for the presentation it was very informative and especially highlighting some of the groups that are fighting the good fight my question is as pertains to the U.S um I guess regulations are there any particular politicians and neither a congressman or Senators that you feel that they're doing a good job of be getting informed and putting good legislations and maybe in the opposite side maybe some that are not so friendly um well I wouldn't want to name names at the moment because I'd probably forget somebody um but I can tell you that there are a number of like amazing members from both side of the aisle bipartisan support um for crypto we do have a number of Champions but we really need many more I'd highly recommend following the blockchain association because they do a great job of amplifying the voices of those policy makers in the states who are supportive of our positions so that would but I'm happy to chat more after thank you thanks ever so much everyone [Applause]