Navigating the Legal Landscape of Decentralized Exchanges - ItsDevilCrypto | GMX

okay hello everyone it's devil crypto you see and in this in this industry you can choose the name you want and nobody question that in my old jobs in the legal traditional industry that's never happened to me by the way you can call me Maria I'm the general counsel at GMX that is a decentralized exchange and it's amazing by the way um now that I got your attention big disclaimer here with super big letters all the opinions that I'll be sharing here today are my own and this not reflex GMX opinion of course you shouldn't be taking everything or anything of this like a legal concealing and if you need a lawyer please consult and pay one Okay so today I'm going to be speaking about the legal landscape of decentralization changes they Challenge and the opportunities and let's start saying that we are not Crossroads because Pioneers in the cryptocurrency will are crashing with Regulators we are all trying to figure what's happening and how we are going to resolve all of this so you know regulators and a little bit like parents when you think that everything is okay they jump and they say not so fast so let's continue first of all basic hi Mom this part is for you what is a decentralized exchange and what is a centralized exchange well as Internet is exchange is a third-party platforms that facilitate cryptocurrency trades normally they are subject to the jurisdiction where they operate and of course they are subject to The Regulators onto the regulation in this place so they need to comply with antimony laundry loss and with kosc or know your customer rules too a significant risk associated with Texas is that usually the users do not control the funds son of the example of centralized exchange or binance Krakens among others [Music] now regarding centralized exchanges they operate without a central Authority using blockchain technology they automate and secure through the blockchain and Well normally if they are decentralized enough the customer or the user keep the responsibility to their phones and the security of their own funds due to the lack of Regulation some users discover theirselves without knowing not complying with the laws so some of them are GMX uni swap among others so um from a legal's perspective the primary difference from Texas and dexes are that Sexes are subject to Legal regulation anti-money laundering law kosc laws and the centralized exchange no because of the lacks of the irritations so um let's speak about this in a funny way okay this interest exchanges are like the cool kids in the school the ones that are here for a while they are like king and queens of the prom they are subject to regulators and they have their own instructor but thanks are the new kids in the block we are more independent and we don't like Central Authority so we are trying to figure out how are we going to do that you know it's like wild west but it is or Wild West and we are going to shape in it so next here you may be are asking yourself why is this lady speaking about the SEC and not Mika for tourism I'm not going to talk about Mika today first is because of time and second Mika has not enough time yet to demonstrate how is going to be applicated in different territories so maybe in the future and of course as you may know the SEC with xcc is trying to touch everyone even if they have jurisdiction or not this is debatable so um you know evolving industry sorry the the CC is the Security and Exchange Commission of United States and well they decide that they want to be the new sheriff in town so um they start with this proposal that is Root in the SEC chairman that Isler that he is trying to include um decentralized Exchange in the definition of Exchange um why you may ask um this is a way to apply the old rules to The decentralized Exchange even if the fits or not um of course if this redefinition finally applies um this could have a lot of consequences indexes like uh making this subject to a scrutiny of regulators anti-money laundry loss and Kai YC laws and you may know that if Dex is enough decentralized it's impossible to enforce this online Smart Control level but of course um every action has a reaction right and the Crystal the crypto industry as resilient as it is uh didn't stay silent after the SEC proposal and pushback they said that the all rules does not fit with the necessity of dexas and the sector need fresh rules and this scenario creates an amazing legal landscape of course with challenge and opportunities so the specifically Critics on dexes that you could be reading over there said that dexes need a different design that they need to rely on the protocols and the automatical process rather than acting as a term as intermediaries and well there is like a goal for a fresh rules that are tailor-made that could comply within ones that in the in this new technology the pushback has created an intriguing ever-changing legal landscape where they next move from both from regulator and the industry they find the future of the access Okay so now folks fasten your civils because we are about to delve into a tricky Terrain challenge we have plenty there is a question of Regulatory Compliance how do you comply when do you don't know how you are going to comply and what you are going to comply with there's a tricky matter about antimony laundry and kaiyc and let's not forget about the jurisdiction question when operations are worldwide where does the law apply first the Big R Regulatory Compliance how do you comply when do you know where you are complying again rules aren't clear inconsistent they buy a lot from one region to another um it's like the center is Wonderland and we have the king of heart or rather the regulatory bodies that are still figuring out what are the rules of the game are and remember these rules change quickly all the time every day you can blink an eye so staying up to the day is crucial now let's talk about antimony laundry and now your customer traditionally traditionally financial institution verify the identity of their customer to prevent fraud that's it but there is the coach how do you do that when your customers are anonymous some Protocols are proposing optional identity verification methods and they are considering to use blockchain analytics to trace illicit activities however you cannot do identification identify identify verification when the protocol is enough decentralized so also we have the issue of the jurisdiction here's a riddle for you if adex operates everywhere where exactly is it located traditional laws are based on geographical boundary but Texas transcend those boundaries they are likely they are like digital nomads and they are hoping from 1 Bill to all place to another the implication here are bust which law supplies where should this put visual resolve there are complex question with no easy solutions and some dexes are trying to restrict assets from certain regions on a front-end level but with vpns the pseudonymous nature of blockchain and anyone being able to run a front-end such liquidity thus enforcement is a challenge so it's a well right but remember every challenge is an opportunity an aspironer in this Brave New World is up to us to find the solutions we should work with regulation educate people and pave their way towards a future where the taxes can Thrift into a fair and efficient legal framework are everyone ready for this inventor um let's spark dexes and fixes for a minute and let's review how clear has the xcc their own definitions okay let's speak about Ripple case um the xcc classify xrp as a security but Ripple thought however in a 3D prints of the things documents and internal discussion reveals that not everyone in the sick in the SEC is okay with this definition so this conflict inside the xcc highlight the need for a clear and fair regulation it's like a legal TV show isn't it so taking all of this into account what about the future of the decentralized exchanges as we navigate this complex legal landscape we need to find The Sweet Spot we need to think to find the balance the balance between encouraging innovating and protecting user the balance between decentralization and regulator and regulation sorry is a challenging Journey but I believe we can find a way so the future is complex but for me it looks bright crypto resilient and I think that we are in a middle of our we are in a middle of something big we are trying to get the power back to the people we are giving them again deserve that traditional Financial Service are not given to them so I think that as Pioneers regulators and legal Scholars need to ensure a future that is inclusive Innovative and just compliant a world with every coin on every token has its place so we are going to make sitting journey and to insert this shift we are going to live into the future thank you for your attention today if you have any question or concern in the next few minutes I'll not be changing my face [Applause] any questions oh sorry hello thank you for your presentation uh you told that pioneers and regulation have to collaborate but how do you see collaboration when for example GMX team is totally Anonymous how to communicate with whom how do you see this process okay Anonymous team you know normally they have core contributors and if you are integrating to the community you are going to Fan us um if you are worried about how being anonymous could be tricky in this time is an advantage for us because you know you never know when a notification is going to be sent to you so being anonymous is a way to protect ourselves foreign so we were mentioning before you started about the GMX dydx and and similar decentralized platforms and their regulation right so um can can actually like currently when there's no regulation can anyone just create like a product like GMX and get away with to it without any licensing um and and you know a special Regulatory Compliance stuff that they need to take care of or is it like a risk for them and for the project account the gray areas that we are facing currently in the different jurisdictions um it's quite difficult to have an appropriate answer every project should um analyze the risk that they are going to take of course when you want to when you want to be in contact with the mid World you'll need some certain structure where maybe you will need to include any license or you are going to be registered in some territories um it maybe it also depends on where the team is located um the different protocols take different strategies regarding this some of them decide to not be incorporated at all this is a possibility some of them try to do some rubbers legal wrappers when you have different companies in different places trying to comply the best as you can but now there is not an absolute answer to not being on a risk to not be not at risk of the SEC or any other authority going after you because we don't know what to do to comply hi my name is Luka um do you know who is giving the license away for services like this English jurisdiction well you're talking about America right now so SSC so in in that case I'm actually more interested in in Europe but I don't know well regarding American some days ago I just saw a meme that is like I want to comply okay how comply how and they are not answering we have all this stuff regarding hobby test and all of this but the truth is that when you try to register a protocol in United States you can't you can't you can't comply with all the things that they are requesting so in United States the reality is that if you are trying to register a DEX you are not going to be able to comply in Europe um in some jurisdiction that I'm familiar with if if you are inside the European Union um I know you know I just mentioned makeup uh this is going to depend how the difference jurisdiction are going to apply Mega itself currently they are doing what they think that is the best in France they are registering some protocols also in Switzerland but you know what are you going to do when you have users in another country you are not going to be able to comply in this country what are you going to do you are going to that here also is like a problem of the philosophy of your protocol do you want to block someone or are you going to be close to the crypto philosophy Dead one that thinks that they should be censorship resistant I'm going to start to church right now you mentioned uh that you know like one possibility is to block certain countries or users from the countries um but is it is it enough to just have like a disclaimer on a website to say that you shouldn't use it if you are in I don't know Vietnam or do you actually have to block them good question that's even of the interpretation of the regulators and we don't have a clear answer now um because imagine you block users on a front-end level what are you going to do with the code is you're just blocking on a front-end level so our users able to use it yes they can use it um so the consideration of if you are doing enough or not is also not clear we don't know we don't know we are just seeing every day that well today this project is sweet for this or for this on another thing so we don't know we don't know currently there is no clear guidance where you say okay if I do this this this this everything is going to be okay for me currently the things that most of the programs are doing are the best that they come based on the interpretation and based on what other prayers are doing and what are other points having problems with any other question okay so I hope everyone enjoys foreign