Ep. 577 Regulation Update From Washington DC with Bill Hughes of Consensys

— TRANSCRIPT —

 

SPEAKERS

Bryce Paul, Bill Hughes, Brendan Veihman

 

Bryce Paul  00:09

All right, ladies and gentlemen, boys and girls gather round. I don’t care if it’s the mobile phone, you’re on your way to work. I don’t care if it is the TV, you got us on Spotify, wherever it is, you guys are in the right place. Turn it up. We are excited. We are passionate about the crypto revolution and all of our guests who come on here and we’ve got an incredible guest you guys know me? I’m Bryce. Brendan, how’re you doing today? My man?

 

Brendan Veihman  00:37

You know, I’m doing pretty good friend of

 

Bryce Paul  00:39

mine texted me earlier. I hope you’re, you’re feeling a little better.

 

Brendan Veihman  00:43

You know, I am feeling a little bit better. I think that the bull market is helping me out. It’s like my pocket vitamin D.

 

Bryce Paul  00:51

Yeah, it’s it’s crazy, you know, Bitcoin, a theory of the whole market trading really well.

 

Brendan Veihman  00:56

Poof,

 

Bryce Paul  00:57

we’ve been here for several years. And it’s, I felt like a big breath of relief kind of today as the market just continues to roll roll higher, you know, coming out of just a bear market. And the bear market breeds skepticism, and it breeds all sorts of stuff. But what a bear market also does is it cleans up the space. We’ve had just complete liquidations of leverage and bad actors from the DocQ Juan’s, from the SPS and CZ from by Nance just kind of made his his departure. And so, you know, the bull markets are fun. But you know, we really earn it during the bear market. Because, you know, it’s it’s been a long time coming when we see really, really fun, you know, high rate of change to the upside prices. But things are good. And things are evolving on many different fronts. And we’ve got an incredible guest today. And I want to introduce you guys to him. His name is Bill Hughes. And he works for an awesome company called consensus where he’s Senior Counsel and director of global regulatory matters. And we’re going to have a wide ranging discussion about crypto policy and regulation. Bill, thank you so much for coming on to the crypto 101 podcast, we really appreciate it.

 

02:10

My pleasure to be here. It’s nice to be with you guys.

 

Bryce Paul  02:13

Yeah, and we really just want to, you know, have this podcast, be a, you know, be one of those things that people could kind of look to and say, Hey, I’m kind of confused about crypto policy or regulation or what I should care about, right? You know, what, what are those things that I should be looking at? So we’re going to try and get that from you. But before we do that, we want to, we want to know about your background. I mean, you’ve got in in very impressive background. I’m gonna save my words. I’ll let you you tell the audience but go for it. We’re really excited to hear about the things that you you’ve been doing leading into crypto,

 

Bill Hughes  02:45

well appreciate it. Whether it’s impressive or not, I’ll, I’ll let the listener be the judge of that I’ve hopefully too modest to express it one way or another. I started out as an attorney joining the legal marketplace back when the financial crisis was happening. I clerked for a year and joined a prestigious firm. As a litigator up in New York City, the firm of Sullivan and Cromwell. It has a name that that has been playing a little bit in the in stories about various crypto controversies. So far they’ve they’re a longtime Wall Street firm. I was there for a while both in New York and DC I left because a friend and a mentor of mine asked me to take on an operational role at the White House when Donald Trump entered office. He was not previously affiliated with President Trump. So it was quite a shock to me that he was given a very high level position running operations for the White House and asked me to help him. I took a little Zega out of the normal, tried and true legal path. To work with him for two years, enjoyed that immensely. Running a operational unit of the White House itself, left from there to join the Department of Justice when Bill Barr became Attorney General. worked with a lot of friends and associates in the upper echelons of the Department of Justice. I worked for the deputy attorney general who’s sort of like the chief operating officer running the day to day of the department. And I covered a number of areas of the of the department related to a lot of the civil litigation. It the Department of Justice is responsible for on behalf of the federal government. I also helped run a task force and other sort of strategic response to the COVID-19 did a pandemic and the government responds to it and in Part. That’s where I started to get my feet wet a little bit into nasty subjects like money laundering and default defrauding the government in the like, during my time there, not much in terms of sudden subject matter did I do with crypto, there was a crypto report that was put out in late 2020. My next door neighbor, who has who has left the Department of Justice, and now works in crypto himself, was sort of the lead author on it. And I got to comment and complain that it wasn’t sufficiently supportive of what was the paper called? I’m sorry, what was the paper called? I forget what it’s called. But if you can look it up, it was November December of 2022. It was like an analysis of like criminal activity and crypto assets. And essentially, it does what a lot of the Department of Justice Report to do. It’s essentially a book report, that rehashes a lot of old cases in which digital assets were the mechanism through which money laundering was executed that it was a platform on which criminal activity was conducted. You know, Silk Road being the preeminent example. But I didn’t really work on this stuff individually. What I didn’t know is that starting in 2017, I just found the whole space fascinating. I’m not a tech native guy, even though you know, growing up in DC, and being around Northern Virginia, where it’s a big hotbed of like internet, tech activities, specifically, never really had much of a touch point to it. I did decide to maybe give I didn’t want to go back to the firm, I did want to decide to give the crypto thing a go got hooked up with consensus pretty quickly because I cold LinkedIn messaged, a former Sullivan and Cromwell attorney who moved over to the product side at consensus, hit it off with him after reconnecting with him. And then you know, several months later, and talk after talking to a lot of crypto companies back in 2021, when the market was really hot in the market for hiring lawyers was really hot, I ended up joining consensus, and it’s just turned out to be a fantastic place to be I love being on the software development side of crypto. And I love being in a place where we’re we’re building a lot of tools and infrastructure, and on the cutting edge of a lot of those aspects which make the programmable blockchain ecosystem so fascinating and so challenging. So that’s my job. And I also get to dabble in policy and, you know, have to think about new and challenging questions. And if I’m lucky to come up with a coherent answer, or even an approach that’s worth further discussion among policymakers in the community in general. So that’s what I do now.

 

Bryce Paul  07:53

It’s incredible. I have to ask, and I don’t know. I got to ask what it was like working at the White House. I know. That must be a huge honor to serve your country in that capacity. But yeah, any any thoughts you can, is

 

08:08

you show up every day at work, pinching yourself. It was actually my second stint as a White House employee. And what first was right after I got out of college, I did advance which is so impossibly cool for a kid that edge it’s beyond words. But this time I came in, I was set up with a very fancy office in the corner of the Eisenhower Executive Office Building. The room used to belong to Dean Atkinson, who is the system secretary of state during the World War two very famous official from, what 7090 years ago by now or 80 years ago. The the organization Iran is almost entirely civil service. So these are the people who are the backbone of the operations of the White House, were very closely with White House Secret Service, the the Presidential protective detail, which secures the compound and secures the president, a lot of whom I remembered back from my days in my days in my early 20s, who were just shift guys, and now they had run, risen to the level of like running the Secret Service itself, which was really cool to see. And a lot of the folks in the White House Military Office who are in charge of Air Force One in charge, Marine One and the helicopters in charge of all of the military support that the President gets working shoulder to shoulder with those guys on everything was tremendously rewarding. So both of that time and my time at DOJ working with, you know, federal law enforcement agents and other federal officials on a slew of issues, I think has served a greater purpose very well, like I’m very comfortable talking with law enforcement, very comfortable talking with senior officials because it’s what you had to do, you know, the White House you you’ve sat in the Situation Room for classified meetings, and once you’ve done that, Um, you know, not a lot of stuff can get your blood pressure to rise. Yeah,

 

Bryce Paul  10:04

it’s crazy. Because, you know, having done that, and with kind of all that knowledge that you have and all that experience and really that view into the world that most people don’t have you decided to work at consensus and kind of dive feet first into crypto insane, right? No, what was it? What what do you see in crypto?

 

10:29

I think crypto captured my imagination, unlike anything else previously had, and I had not the biggest criticism I leveled at myself is that I becoming a litigator, the only thing you’re really going to be an expert at, unless you really specialize in a particular area is litigation. And let’s just say it wasn’t my mother, it wasn’t my life’s Grail to be some expert litigator. And so you didn’t really know a space all that well. I just came to crypto sort of organically and on my own and found that I was had to voraciously learn about it, and learn about stuff that normally I wouldn’t care about, like trying to understand all the cryptography around Bitcoin, which, you know, I tried very hard at and can’t pretend that I came close. But it made I was, from my time in government, I knew precisely what I did well, and when I didn’t do well, I really had to like a subject to do well at it, because I needed to be obsessive about learning about it, and being able to communicate effectively about it. Otherwise, if I don’t care, I literally don’t care. And I’ll go through the motions. I think there’s probably two about a lot of people, I just started to listen to myself when I was telling myself that. And so I just started to lean into what I would enjoy gaining, building some sort of expertise. And once I did that, and I sort of jumped off the boat with no life raft, and no life preserver and had to start swimming. It’s sort of built upon itself. And I enjoyed the process as much as anything else. And I think that’s helped me tremendously. And so it really was a subject matter, it was the opportunity to everyday continue to learn something that not only was very tech specific, but also it dovetails so nicely with the regulatory and the legal background that I have. And really now more than anytime that there’s a confluence between the two and unnecessary one, where the hardest questions and the hardest questions still are on the tech side. And on the market side. But short second place is or close second place is what from a public policy standpoint do we do with all of this that’s getting built, and how people are using it? It’s an incredibly difficult set of problems. And every answer yields more problems and upsets other other things that you thought were already solved for. So some days, I’d love a more quiet, pastoral, even keeled, professional article, there aren’t these constantly nagging existential questions around every corner, but

 

Bryce Paul  13:24

where we’re at right now,

 

13:25

I think picking something where you do have them is kind of more exciting and more rewarding. So I feel

 

Bryce Paul  13:30

like it’s also probably like how a lot of people felt during like, when the internet was just coming out. It’s like, every, every time it expands, you know, it begs a new question. And there’s new application begs new question and every, like you said, it’s existential everything, you know, this is we deserve this technology, do we not should? How do we, you know, you know, Shepherd it in the right direction, and how do we stay hands free?

 

13:54

Right. I think that’s I think that’s true. And the the analogy, it’s a good is as good an analogy as we have. The problem is, it is incomplete. The disruption of the internet is not as serious as the disruption of crypto on the internet simply because new mechanisms to create and share information or to access information is one thing, it’s revolutionary, changes us society, how everything works tremendously, but once you add to that how we transact like actual economic activity amongst people in a way that is is truly cross border, the mind reels the level of regulatory framework around economic activity and financial activity is to such a greater degree than simple information sharing or communication or the like, although communication is very heavily right regulated space. So the I, maybe I was

 

Bryce Paul  15:06

bigger. Crypto is bigger than the internet, it

 

15:09

is in many respects and some of the problems and the processes to get to solve them are going to look like you know what happened in the 80s and 90s. And some are going to be entirely new. Do

 

Brendan Veihman  15:21

you ever see a world where blockchain has a place or a use case? And the US government or really any government for that matter?

 

15:32

I mean, the government using Blockchain? Yeah. Oh, absolutely. Absolutely. I think to a certain extent, well, the clearest use case right now is that it’s a transaction record of markets that they need to supervise. So you can use it even though you yourself don’t control the record. You know, the Department of Justice and other law enforcement agencies use the blockchain to track and identify and track criminal activity. They use it as a record for and that that is evidence in court to use it for its own operational purposes. Absolutely. The vaunted, but but also, you know, also elusive use cases, such as record keeping and the like. I think we’ll eventually see them. And we’re not just talking about the federal level two, I think there’s there’s a lot more that, you know, when we’re talking about how does government use blockchain? A lot of the general welfare stuff that the federal government does not do in the United States, state and local governments do. And the reason why it’s local governments don’t do it very well is because the infrastructure to do it, well, it’s really expensive. Well, guess what? Great thing about a permissionless blockchain is a lot of the infrastructure is there for you, you just need to tap into it. This is why permissionless blockchains generally do better than permission chains, permission chains, very expensive on the infrastructure front. permissionless, you pay as you play, because you don’t have to do the infrastructure. So it’s plug and play for if you have the right applications, the right services built in it’s plug and play for federal, local and state governments for a variety of activities, which, you know, have yet to be developed. But I believe will. And so it’s I think it’s going to be pervasive, maybe not everything goes to it. Right. CIA is not, you know, run classified classified things necessarily on public, public blockchains. But I think it’s everybody’s going to use it. The question is like, when, and for what, it’s not going to be everything to everybody. But the government’s are always looking for a cheaper, smarter, more reliable way to do stuff. And that will include blockchain. Yeah,

 

Bryce Paul  17:47

absolutely. And hopefully, you know, we could even get more more transparency around voting on the blockchain, or having some kind of solutions around that. There’s so many things to just clean up even fighting fraud on some entitlement payments, or, you know, being able to have just much more verification around who’s receiving, you know, and where your taxes are going. And all this. This

 

18:09

is where it really requires a change in mentality. Let’s start let’s keep on the government low on the federal government level, a change of mentality with respect to how new ideas are ingested and scrutinized and then applied by government. said simply, the federal procurement process is an utter nightmare. But the way blockchain is going to improve is that government gives it the space essentially comes up with like a central problem, a set of problems that blockchain projects can try to solve. And once they start solving them, that they can be part of, you know, procurement officers, policymakers, operational people in government can aren’t aren’t taught that there’s a stigma with Blockchain technology, to where those sorts of solutions are cut out of the mix of things that you can consider. So that’s going to take some time. Many, many, many years, I would imagine, but it’s gonna happen.

 

Bryce Paul  19:13

Yeah. Wow. No, do you think that like, like, kind of with that stigma and all that stuff governments in some way shape or form fear, crypto, or maybe as matters of national security, or maybe even as an existential thing? Is that a legitimate fear? Or is it kind of just a pipe dream of us? Crypto kids.

 

19:35

They fear a system which creates more problems for society than benefits and changes the dynamics aware the the tools and methods that government has to reduce risk or eliminate risk and make things better Mmm are rendered useless. So that’s the problem. Despite what a number of loud, notably loud, people in the community have to say, you know, government, at least in the West, at least in liberal, democratic societies like ours are designed first and foremost, to protect the population and ensure that they are given a space that allows them to sort of, you know, operate as productively as possible, both for themselves and their community. Sometimes government over does it, sometimes it under does it but it’s generally the right mix, right. There are people whose charge it is whose mission it is literally to keep people safe to disrupt bad people from doing bad things that hurt us collectively or individually. You can think of a million different tools, or systems that have been created that in the end fail because they generated more risks for society than benefits or the risks were more pronounced. And thus, it just simply wasn’t something that society generally or policymakers specifically said, we want to we don’t want to have any part of this, right. This is the way it is like, think about air travel. We’re at the dawn of the aerospace age where you can make your own airplane and there were no rules against flying around yourself. That’s crazy. Because no one had plans and the people who had to build plans, who build plans are very specialized people, and then you had to like regulate it, because very dangerous, and you couldn’t just let anybody fly. And if people wanted to run a business using an aeroplane, and that was then the government was thought it should be responsible for ensuring that the business is reasonably safe, and people were in art. This is a key. And the reason why I point to analogies is like that is like there’s this huge stigma to regulating crypto. My problem with regulation is is the how. And that gets almost to be an infinitely complex question of the how, but

 

Bryce Paul  22:17

the courts are telling us how not with the SEC failing three in a row. I guess

 

22:22

that is true. But my point is like, I think we should recognize that that there are risks in the crypto ecosystem with intermeeting intermediating our economic lives with software instead of intermediaries, and that the ways to mitigate that risk isn’t just going to be in the tech. Right. So public policy, can and I believe should play a role. The question is what? And also the question is, how do we answer what role? Some people want to prejudge the question, I think of more deliberate processes, right.

 

Bryce Paul  22:57

But there’s a lot to think about. And I’m sorry,

 

23:00

I get very philosophical about this stuff. But that’s really, it’s good. You’re

 

Bryce Paul  23:04

on, you’re in the right place to philosophize and all that stuff. Our listeners love it. And we love listening to it. And we get so many of our questions answered. And, you know, when it comes to, you know, crypto policy, in consensus, you know, what are you working on, on maybe a day to day or week to week basis at consensus? And how is that kind of furthering your vision of what what the world should be? So

 

23:30

my job is to both give in house legal advice and to think about the policy landscape. And I view it from the like, what do we do, we create software and software as a service offerings that allow people to use the peer to peer programmable blockchain ecosystem, which is in first and foremost, Aetherium. But anything that you can has a programmable digital ledger space where you can make a programmable accounting system programmable money. That’s the sort of software space we’re operating in. And so Question one is, what do current regulations say about what we are doing now? How people are using our software, or, or projects we’re working on areas and of the space we may want to enter into? And then question number two is, well, what’s the regulatory landscape going to be? And I’m not talking about just in the United States I’m talking about around the world. Next question, so that’s half my job. The other half is thinking, Well, where are where the regs going? What are the laws doing around the world and where we’re going to be in five years and what how does that affect what we’re building today how we’re operating today? Because we all know that the way we operate today, a regulator or law enforcement five years from now may look back and say, Huh, we actually have a new one. reputation of our law and what you were doing five years ago doesn’t seem to be consistent with it. And we want to talk to you about that. That’s always something that people in this space have to deal with have to live with. But, you know, to the extent that we can ever say or have some influence over how regulation is thought about how a public policy is thought about as it pertains to space, both both in the United States and overseas. That’s also what we do. So I have to, you know, read a lot and write a lot, a lot of what what agencies want consultation about. You know, there’s in the United States, there have been a number of proposed rulemakings, or requests for comment where we’ve sent in our thoughts, making points as it relates to educating as to, you know, what our software is about and how it’s used, but also how we see what they propose affecting the greater ecosystem and pointing out those areas where we think it may be problematic in a way that they care about.

 

Brendan Veihman  26:05

And what’s your like? What do you think that our listeners should be calling their congressmen about? Like, what are the most important ongoing issues that are being voted on or that are maybe coming up to be voted on inside the United States? Because especially when it comes to the area of crypto, there is, it seems like two very strong sides to these arguments. So I’m curious to just kind of get your thoughts on that.

 

26:30

Sure. I think First things first, you regulate the intermediated crypto ecosystem before you regulate the disintermediated. Part. And what that means is exchanges and stable coins. regulate them. There’s a bill right now regulate stable coins, it looks potentially like it could get reanimated, get new energy behind it at the start of the new year.

 

Brendan Veihman  26:54

I’m sorry, what does that talk about when it comes to regulating stable coins? Like what would that look like for the stable coin space

 

27:01

to be able to offer stable coins in the United States, it would need to be regulated in a certain way. It’s more akin to a financial institution. So being transparent with your reserves, how and how you’re operating to ensure that there’s some we’re not just taking your word for it, that everything’s on the up and up. A lot of talk about it too, you know, people talk about blockchain is trustless, and all that stuff. There is no organization in the history of this ecosystem, or in perhaps tech that is more trusted than tether, because everyone just has to take it on faith that they’re doing things on the up and up, and they have 10s of billions of dollars under their control. So it’s a very important company. And they aren’t nearly as regulated as they should be by any stretch of the imagination. So stable coins should and it makes sense. They are a business running a service that relies on software relies on blockchain, but there is centralized service providing. And they given their size, if something went wrong, do present systemic risk. There’s a lot of reasons why public policy would say we need to regulate you just to make sure that because you’re acting appropriately and there’s nothing unduly risky to hurt, that would hurt a lot of people entirely fair. I also think it would be good to do that. Because then you know, once you have the imprimatur the blessing of regulation, that means a lot more people can get involved, maybe more banks and financial institutions start using stable coins, because it’s better than their wire transfer system, which it is. So I think it really also opens the door to a whole new class of participant that has been standing on the sidelines because they don’t want to mess around, they can’t mess around with entities that maybe on the fringe of the

 

Brendan Veihman  28:55

law. So it almost seems like crypto should be regulated, like different areas of crypto should be regulated in different ways, like stable coins should be addressed one way, maybe defy should be addressed in another way centralized exchanges should be regulated differently than decentralized exchanges. Because when you look at a lot of the implosion that happened over this bear market, a lot of it was because of centralized sources causing the problems. And when you look at the true decentralized protocol, and the true decentralized platforms, a lot of those came out near pretty much unscathed. And then then all the ones that had centralised interference, were the ones that imploded whether it was because of Mal intent, whether it was because of fear or greed or anything else in between. That is where we saw the problems. I really liked this idea of saying, instead of just broadly getting a really broad brush and painting regulation across the whole board of crypto, we need to get these fine tuned brushes for each specific area. And, you know, I truly do believe that that’s the proper way to regulate this because all these different industries are working for different things in the same way that you wouldn’t have someone say, hey, because this is applicable to Microsoft, we’re all the sudden going to make it applicable to like out like a big chain like Best Buy, right? You know, two completely different business models, they’re not going to be they’re not going to have the same rules, because they’re two separate entities and two separate, you know, industries. So, yeah, like, Well,

 

30:22

I mean, when you think about energy, or wind turbines regulated the same as coal fire power plants are regulated the same as nuclear plants is regulated the same as ethanol, hydroelectric dams know, there everything. There’s an act, there’s a recognition that based on the level of the type of activity, even though they’re genuinely producing electricity, the way in which they’re doing it presents different risks, and different benefits. And so the regulatory regime around each one of those activities needs to be unique. Same thing with crypto stable coin bill, really sensible. It should go first. There are there’s a market structure bill that Chairman Patrick McHenry has put forward, it’s not perfect in all respects. But what it does get right to a large extent is a mechanism through which Patrick McHenry and Chairman Thompson from the Agriculture Committee, I don’t want to leave the Agriculture Committee out of it. But it puts First things first centralized intermediaries like exchanges, we need a regulatory structure for them beyond just them being money services, businesses and money transmission businesses. That should be second, so much activity goes through them. And then we need a new framework for the question of how should software that allows that is on chain or their software tools that exist off chain, but facilitate on chain transactions? How do we regulate if, if at all the development and use of that software and that is where the conversation gets really tricky? Consensus, we make smart contracts for various services, we may obviously make off chain tools, like the Metamask wallet, we have the inferior node service, which is basically you know, a node that you use for free if you use Metamask. But if you’re a developer, and you use it enough, maybe you got to pay for it, like it’s a pay to play service. There are a variety of different things you can build. And then the question of smart contracts on chain, what is the smart contract doing? Our legislative approach so far has been it all appears to be generally the same. So we’re just going to say blockchain software, and we’re going to regulate it in some amorphous black, like block some monolithic thing. It’s clearly wrong. And I think that while there are efforts that we will see go forward and 2024 to regulate blockchain software, particularly in the anti money laundering context, I think that other proposals that call for a more cautious, thoughtful approach are actually better. And you actually see these approaches being taken in Europe where they have a report on how to deal with defy, which is kind of sort of how they’re describing or categorizing this entire concept of regulating software. Those reports that are the first part of a regulatory process are due at the end of 2024. So Europe has taken his time to think about this, and I think rightfully so I think we should as well. But you’re exactly right. It’s a heterodox ecosystem. And it really requires a particular arised analysis of the various things going on, in order to smartly tailor real solutions that mitigate risk without just killing everything. Yeah,

 

Bryce Paul  34:01

no, it sounds like, you know, kind of this approach that they’re taking, I think it’s kind of touching on something you just said, maybe like two minutes or three minutes ago, where they’re kind of gonna go on after the intermediated areas first. And I think some of the notable actions we’ve seen greyscale for one, we’ve seen Coinbase, which I always thought was funny because Coinbase went public under the same kind of reasonings they were getting sued for. That’s a whole different thing. And then who’s the other one? Oh, Pay Pal, right? They issued a stable coin and here they’re thinking Pay Pal, they’re a public company fortune 500 or something, and then they get sued for a stable coin. So we really do need these, these bills to come through because these intermediated choke points are simply getting choked out right and America there. It’s getting stifled everywhere but elsewhere, right. We just got off the phone with somebody in Dubai doing another podcast. This is the this is the place to be everything’s going taka somebody in Singapore, this is the place to be everything’s going on. And so, yeah, hopefully we get it all get it all going in the right direction soon. Are you feeling confident that America is going to get its act together, either under this administration? Or is it going to take a whole new administration?

 

35:16

I think it’s going to take a new administration. But if I think back to 2017, where the concept of crypto regulation had not even come up yet. And back then the trope was, well, this is all fun in a cool hobby. But once regulation comes, it’s gonna blow all this silly internet, money stuff out of the water, and there’s no and quote unquote, serious people said, You guys are gonna be banned. Like why don’t you just ban it? This is dumb. Shut it down in 2020. I go back to that DOJ report. Where it was for the first time while while they didn’t belabor this point, the thrust of the report wasn’t Kryptos for criminals. That wasn’t the thrust of the report. The thrust of the report was this is a new technology. And this is how criminals are using it. If you look at the recent reports, and I believe me, I marked a shift if there’s a complete shift in in framing from across the government. I was at the blockchain policy summit, I convened a panel of DOJ FinCEN. And FBI, they very much do not view crypto, both from the the onstage conversation I have with them and all the conversations I’ve had off stage with them view crypto as the problem. They view North Korea as the problem they right view hackers as the problem. And I’m blaming the technology and even Deputy Secretary Odhiambo who came and, you know, gave a speech which is not without its share of problems. But again, his message isn’t the purposefully antagonistic message of like, again, slur. His message is, this is here to say, we need to make it we need to mitigate risks, we have our method of doing it the way the way that we think works based on our experience. And we’re happy for new ideas. But make no mistake, we cannot live with this risk profile that we’re currently facing. So we need Congress to act we need to work with other countries. And the simple point is like, look, this is this is explicit or more often implicit adoption of crypto as a thing that’s here to stay in. The question is the method of its greater, more broad implementation across a larger adoption pool. Crypto, people think it’s going to happen or want it to happen a certain way, the end, look there, the powers that be are going to have an influence in how this evolves. And so which is why I think engagement with them seriously and soberly. And not in sort of like the sneering Twitter way, actually can yield real dividends and more importantly, avoid some very nasty outcomes.

 

Bryce Paul  38:25

And I really do think, like, you know, this is kind of tangential, but this Bitcoin ETF, I think it’s going to change the psychology of people, you know, worldwide, I mean, now that you’re gonna be like, I was talking to my dad about it, right? He’s like, Oh, now we’ll be able to finally buy bitcoin, just in my, you know, Blackrock or what, what is Charles Schwab account and his fidelity account, like, that changes things, and I think it changes the minds of regulators, it changes the mind, you know, outside of just even, you know, the SEC, it, you know, changes the mind of, you know, people all around the world. So, I think that, you know, when that comes, it’s, it’s really going to help policy, you know, kind of, you know, tip the scale in that direction. It will make it less of an uphill battle, I guess, is what I’m trying to say. We’re no longer fighting our case that hey, this thing’s legit, like no BlackRock and fidelity already kind of put their stamp of approval on like the financialization of this, this asset class. You know, we’re not fighting that battle anymore. So it’s just crazy to see how far we’ve come in.

 

39:21

Look, when regulators say being regulated will be good for you. They’re, they’re correct. In this regard. It’ll be good because normal people, people who are obsessed will will view it as a vote of confidence. And regulators notice this is why when they’re not comfortable with a new ecosystem, they don’t want to get out ahead of themselves and supported by by acknowledging it through a regulatory structure because if it’s still under if it’s still rotten underneath the regulatory structures, not going to fix it, and then they’re blamed for for signal and everybody that this is good again, but to say come in and read get regulated, it’s good for you has been more often than used by, by some regulators as a dodge to the more serious question, the important question, regulated how? And they’d like us to just bow out of that conversation and let them just apply whatever they’d want to apply, which we’re just not inclined to do. Nor should we be. Amen.

 

Bryce Paul  40:31

We got to keep fighting the good fight. That’s all. And hey, I mean, closely behind the Bitcoin ETF, I have to ask since you’re a consensus, gentleman and scholar is there an eath an ether and Aetherium ETF? Shortly behind it? Potentially? I saw there’s seven filings for the same structure here.

 

40:48

I don’t know. I think the nice thing about consensus is that we are like, purely a software company and not dabbling also in making trying to play in financial markets as an intermediary, like a like a exchange traded product issuer would be. But I think what you’ll see is that those crypto tokens that are more established as investable assets and seen as more credible investable assets, invariably, you will have Exchange Traded products on all of them. as to which ones I’m not sure, I mean, I view when I when I talk about and when I view like ether, I’m looking at something that has value because fundamental value because the Aetherium computer is a valuable machine, and you need this ether to put into the slot of the Aetherium computer to make it run. And that’s where its value derives from if people want to ascribe dollar figures to that, that’s fine. And if people want to sort of buy and hold those Aetherium tokens because they think the market for them will go up in price perhaps because the Aetherium virtual machine becomes so much more important to the world. That’s fine to how that happens when that happens. I care less about to some degree. But yeah, all the all the incredible assets that tread faiz starts to warm up to. I mean, from what I know about the financial system, you’d expect there to be multiple ways to expose yourself to products like that. Yeah.

 

Bryce Paul  42:39

And it sounds like, you know, price aside, something that you do care about is kind of retaining the core values of decentralization. As all this regulation kind of trickles through the market? Do you think that would be fair to say and?

 

42:56

Yes, I think, because

 

Bryce Paul  42:59

I think you mentioned that you couldn’t foresee a future where some of these big institutions are actually building on the permissionless public chains. Due to the cost effectiveness and infrastructure society,

 

43:09

general sock, Jen just issued bonds on a theory,

 

Bryce Paul  43:13

right? Like hundreds of millions of dollars worth. That’s crazy. And so the Bank of China did to they tokenized some debt. And so these are all sort of like

 

43:24

sonar pings off the Aetherium ecosystem to see you know, what it’s good for, what they can you know, how it works, whether there’s any sort of market appetite for further experimentation in it. That’s what we should be like these these within their specifications, these these programmable blockchains are just whitespace. Right? What I what I don’t agree with is sort of this sort of religious like dogma around what should and should not be built on these structures. If it should not be built, the specification should prohibit it. And if people are not building to the full permissionless if they’re building things which are like protocols or smart contracts or whatever, that are themselves not permissionless, that’s fine. You can build a smart contract which can be used by anybody or by nobody. That is up to you. I think it is distasteful on one hand, and ludicrous on the other to have folks insist that only certain types of software should be made on this space in this space. And only certain types of people should be using it for certain types of functions. It’s big whitespace I think it’s the market but the market itself is going to dictate the greatest uses and that’s what’s really exciting about it and you know if it does succeed, the weird D Jenny crypto stuff which is ubiquitous today is going to be the smallest corner of crypto. And I think frankly, a lot of people are going to be really sad about that. But the point is that corner is probably still going to exist. So And whereas everybody else, there’s going to be a new flourishing blockchain based ecosystem, where all sorts of factors can build software and offer software built on rails that are more get egalitarian and who can participate in building them and maintaining them. That’s what this is about. And I think it’s really powerful and really inspiring. And you don’t need to be a dogmatic iconoclast, to get into this blockchain stuff, you can see for what it is, and think, Man, this stuff is cool. There’s something for everybody. And I think that’s the biggest insight I could hope to offer. Man.

 

Bryce Paul  45:52

I love it. I think that’s an incredible note, to kind of end things on. This was a tour de force. I just genuinely appreciate your time and sharing so much insights on the policy front. Just really, you know, kind of views from the guy who’s really been on the other side of things, right. So it’s been incredible. And I guess the last thing I want to ask, before I let you go is just is there anything that we didn’t ask that we should have anything that might not be on our radar right now that you’re seeing, you’re out there on the tip of the spear, something that us crypto guys, US crypto one on one listeners might might actually start needing to pay attention to or learn about?

 

46:34

At the fear of getting too technical or wonky? I do think 2024 is in the United States is the first year we’re really confronted head on by legislation which purports to regulate the development and use of blockchain software. There have been in recent reports, use, you know, hacking and money laundering by North Korea, there is some laundering by terrorist organizations, which I think has been blown way out of proportion compared with how they actually fund themselves, right. But this is all added fuel to a fire of like, we can’t just regulate the intermediaries and then wait on defy, we need to do something now. And this makes sense, because in terms of fighting, illicit finance, the US is way out in front on it in most situations and most spaces. The problem is the manner in which there the current legislation, in many respects is seeking to do it is take a very broad brush approach, which greatly chills, software development and blockchain in the United States and use of software in the United States. There are a number of different legislative vehicles, none of which I’ll go into depth in right now. But it for the first time, is will be a major question for congressional policymakers to consider. I think it’s incumbent on everybody in the crypto ecosystem just to be attuned to these currents. And to try to productively add to the conversation on my part, I really want people to understand that there are if your goal is to eliminate terrorist financing eliminate funding North Korean nuclear missile programs, there are cutting out the United States from the crypto ecosystem is not going to serve either purpose. All you’re going to do is create two ecosystems one a highly regulated, very centralized ecosystem in the United States, and then the rest of the crypto ecosystem out there in the world. And and I think this is a serious issue for 2024. And one that I hope I hope we can have a meaningful impact on it. But the last thing I say I do see it also a tide turning. It’s important to have permissionless blockchains. But it’s also important not to turn a blind eye to the problem of there are good people in the world and there are bad people in the world and the bad people should we be okay with bad people using Blockchain to further their activity which hurts good people or threatens good countries. Or worse. Have the bad people actively hunt good people online and victimize them online. Are we just okay with this? Do we say oh, it’s the law of the jungle. It says Hobbes’s and reality which we’re trying to construct and force the world to adopt. I don’t think That’s the way it’s going to end one way or another. And I think it’s putting blinders on. And so it creates another existential question. The purpose of these chains to some degree is to prevent censorship. But the problem is, you’re letting a fox into the henhouse. And if you’re okay with that, then we got a bigger problem on our hands. And I think it really goes to it’s an existential problem for crypto, because if we don’t solve these problems, the powers that be will, and their solutions will not be elegantly tailored, there’ll be broad sorts. And we can have faith that crypto will just soldier on and grow into a world changing behemoth otherwise, but that’s not how history plays out generally. I

 

Bryce Paul  50:52

hope that we look back on this battle as kind of like the crypto wars of like, you know, the the late 90s, early 2000s, where there were good men and good women fighting the good fight to make it so that cryptography and encryption was was legal right to make, you know, to make it legal, and to secure internet applications and passwords and all that kind of stuff. But the government wanted to ban encryption, and instead, it was military grade technology and stuff. And so I’m hopeful that, you know, again, the people will rise up and fight the good fight for human sovereignty and civil rights. And, you know, at the end of the day, policy is made by people, it doesn’t just pop out of thin air, and it takes guys like you, Bill Hughes and all the other people in DC and Arlington and everything taken care of us, you know, and fighting for us. So we again, we appreciate you taking the hour out of your schedule. I know you got a million things to do. We’re gonna let you go back. But um, yeah, thanks for fighting the good fight and for informing us and we sincerely invite you back anytime you like. We’d love to have you back on there’s there’s so much to cover. But for now, Bill, we, we hope that we chat with you again. And we’d love also for you to leave your Twitter handle or maybe a blog or whatever. So we could attach that in the show notes. Where can people stay in touch?

 

52:08

At bill us DC is where I’m on Twitter. We just created a new regulatory webpage on the consensus.io website. A lot of our writing, a lot of my writing is there especially. I’m frequently in coin desk. They asked me to write stuff and then I’m sure as we go more and more my stuff will be uploaded to YouTube as I do podcasts and panel experiences. But it’s been great talking to you guys. You have a great show. I love the enthusiasm and I love the sincere interest. I think it’s it’s it’s great to see the ecosystem, having resources like you all because it’s important. And we all take it seriously and learn as we go.

 

Bryce Paul  52:49

Thank you much appreciated. All right, everybody at home listening, hope you guys had fun. And we’ll catch you guys same time same place next