Tech Intersect #15: Drew Hinkes: Cryptocurrency Lawyers Talk Regulation and Innovation

In this episode, I welcome Andrew Hinkes, an attorney with Miami-based law firm Carlton Fields working in the firm's National Blockchain and Digital Currency practice. He is also a co-founder and the General Counsel of Athena Blockchain, a professional services firm focused on tokenized investments.

We discuss what Bitcoin and blockchain are, about other cryptocurrencies including stablecoins and government issued digital fiat, and regulations and regulators in the United States and around the world, given that public, permissionless blockchains--the rails that support the issuance of many cryptographically-secured tokens of value--are borderless. We also talk about what a "crypto lawyer" is and does.

Previously nominated as one of Coindesk’s Most Influential People in Blockchain in 2017, Drew is frequently quoted and cited in articles related digital assets and blockchain technology, and regularly speaks at legal, industry, and academic conferences. Drew’s areas of expertise focus on legal and business issues related to public network cryptocurrency systems, decentralized system governance, and legal and ethical issues related to cryptocurrency systems. Time to LISTEN, LEARN and LEVERAGE. So let’s get started.

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Transcript

spk_0:   0:07
Welcome to Tech Intersect. I'm your host, Tanya Evans, and my life and work exists at the heart of law, business and technology. Yeah, I've earned a few fancy titles in degrees over the years, but the bottom line is I'm a writer, speaker, teacher and lifelong learner, and I'm really excited that you join me on this journey. So what is Tech intersect? Well, it's authentic, empowering conversations with really interesting guests who demystify complex topics to prepare you for the future. Because your future is now and it exists where law, business and tech intersect. Get ready to listen, learn and left change. Let's get

spk_1:   0:50
started. In this episode, I welcome Drew him Kiss. He is an attorney with Carlton Fields, based in Miami, Florida, working as part of its national Blockchain and digital currency practice. He's also a co founder and the general counsel of Athena Blockchain, which is a professional services firm focused on token ized investments. Previously nominated as one of coin desks, most influential people in black chain in 2017 Drew is frequently quoted and cited in articles related to digital assets and Blockchain technology. He regularly speaks at legal, industry and academic conferences, Druze areas of expertise focused on legal and business issues related to public network crypto currency systems. That's a mouthful and decentralized system governance and also the legal and ethical issues related to Cryptocurrency systems. Less, but not least, he's a dear friend. He's wicked, smart and funny. I know you'll enjoy this conversation and learn a lot in the process. Time to listen, learn and leverage. So let's get started today. I welcome to the show Andrew, also known as Drew Pincus, a Blockchain and crypto assets attorney and professor at N Y. Use Leonard in Stern School of Business. He's also one of my most favorite people in this space and fun packed. He's an expert tweeter, which is actually his most important skill set and accomplishment. I'm sure he agrees. Drew Pincus. Welcome.

spk_2:   2:27
Thank you so much, Professor. How you doing?

spk_1:   2:30
I'm doing really well. I'm so glad that we were finally able to find time in our mutual schedules to connect and have this conversation. I know it's obviously one of our most favorite topics in the world for all things cryptographic Lee secured, but also you're one of my favorite people truly in the space and one of our for most thought leaders, particularly with respect to the intersection of business and law and technology. So is really a thrill to have you on. And I looked for it our conversation.

spk_2:   3:00
Oh, thank you so much. It's ah, it's a pleasure and delight to be here. And I'm looking forward to a ah, great chat.

spk_1:   3:06
Excellent. So some might refer to you. And in fact, in my introductory remarks, I refer to you as a crypto lawyer. Um, that's probably not the way that admit you Correct me If I'm wrong, it may not be the way that you normally refer to yourself. I don't ordinarily refer to myself as a crypto professor, for example. But I know people in general tried to distinguish between those who have some expertise in other areas and also in cryptocurrencies crypto assets distributed ledger technology. So talk about what being a quote unquote crypto lawyer means to you what that even means and and also how you got into this space.

spk_2:   3:47
Sure. Well, not everybody gets to have a cool nickname for their practice. So calling me a crypto lawyer, saying that I practice in the crypto area. I take that in stride. It's a reflection of the fact that there's a tremendous amount of interest in the area, and it's also ah, reflection of the fact that the area suffers from some really bad nomenclature. The words that we use are very imprecise, and they're very poorly confused, poorly understood and and in some ways confusing. But what does it mean to be what they call a crypto lawyer? What it means is I'm practicing law for private clients in this case through my law firm, Carlson Fields in matters that relate to crypto assets, digital assets that use Bach chains or Blockchain technology in some way. And these matters range from tax litigation to securities to my transmission. Regulatory licensure state planning a tous 0.11 years into Sarkozy's experiment, crypto pretty much has influenced or some sort of impact in almost every part of the law. And I'm very fortunate that I met a firm that supports me, where I've got partners and teammates who have experienced, some of whom actually have been in crypto about as long as I have been, um, and for those who are not, we've got folks that are very hungry and eager to learn the firm believes in the area is one of growth, and their investments appear to be paying off really nicely.

spk_1:   5:10
It's really important what you have built at the firm and and this practice area, this track that you continue to pursue. You also teach in a JD MBA program and it, you know, as someone who teaches myself at the J. D. Level as well. It's critically important that this next wave of lawyers knows how to meet the demands of those innovators in this space in particular. What are some of the skill set? So our knowledge bases that you find are critically important in order to service clients who are working specifically in crypto and the Blockchain space that ah lawyer who is just entering into the space would need to know of or a business person moving into the space would need to know of or be acutely aware of

spk_2:   5:58
sure. So having the opportunity to teach at N. Y. U has really been one of these Pinch me. I think I'm dreaming sorts of experiences becoming an adjunct professor both at the law school and at the business school at N. Y. U is one of the most wonderfully serendipitous things ever happen to me. I'm eternally grateful to my friend Professor Sarah Kaufman, over at the Wagner School into Professor Your Mac at the Stern School, with whom I co teach the class for giving me the opportunity. Onda students that we have in the school are just remarkable there, as you might imagine, being in why you students unbelievably bright and many of them are really interested in becoming active members off the crypto community. Some of the former students have gone on to join significant law firms and are working with clients in the area, and some of the business school students are also working in financial services. So to directly address your question, I find that having familiarity with the technology and being able to really understand how these systems work beyond the hype that's being sold is probably the most important thing that you can learn. And our class both looks at tries to put all this technology in a in the context of sort of the evolution of financial services, but also tries to situate the technology and impact in the context of existing law and whether we need to change, replace or come up with new law in order to accommodate these assets and systems within the existing law. Azaz, the professor who is primarily responsible for the law curriculum A Z you can imagine, given the speed at which things change in crypto, I basically have to junk my syllabus every semester and start over from scratch,

spk_1:   7:47
right? Absolutely. I found that myself and I'm even mawr conscious and sometimes anxious about that very point because things literally change every day. So I teach in the online context, so there's a certain portion off the content that I deliver that I have recorded. But the magic is really in one having to reassess everything on an ongoing basis and to responding in time to the things that hit our new cycle, which, because the crypto spaces 24 73 65 our understanding are learning the evolution the responses to and what is appropriate at any given time certainly changes. That makes it very exciting. I have never been more excited, personally or professionally about a space as this one in 10 years from now, but it will be speaking about something else, but something that you've hit on is critically important to understand that we are not only training minds for to respond to business and law and technology today, but I often talk about for the space and the jobs and the clients that don't necessarily even exist yet. But being mindful of that being just far more nimble in the 21st century than I think, we as attorneys were in the 20th century, where we had the luxury of sitting around and waiting for months and maybe delivering a legal opinion that's 50 pages long and obviously legal opinions matter, and being thoughtful and mindful and including all the information, is important. But the business person of today in general and particularly in the technology space that is moving at a meteoric pace, doesn't respond well to waiting for months for the 50 page legal opinion. Have you found that as well and have you discuss that with your students?

spk_2:   9:37
But we can go way down the rabbit hole of how business in law are interacting and the changes with respect to business use of lawyers and how the sort of power dynamics have really shifted and law firms have responded by becoming innovative and their fee structures. I think bigger picture because of the relative youth of this industry and in certain cases, the amount of reliance upon lawyers for those who are practicing in this area. Your clients are going to be really relying on you for a tremendous amount of context in addition to the legal services. And so in the way that we try to teach this class and explain to the students, we hammer how important it is to move past the marketing hype and to really understand the substance of what these systems and assets promise versus how they are marketed. We're still seeing a significant delta between those two things. But I think as the markets and the professionals that provides services in these markets maturing evolved that that gap is going to narrow. And we're gonna start to see perhaps riel use, which is exciting.

spk_1:   10:47
Yes, it is a really exciting time in the space. And just remember so many people saying, you know, 2017 in particular, there are a lot of quote unquote use cases, and we did have a lot of that right. Ah, lot of white papers, A lot of all hat, no cattle. As they might say in Texas, we are in a completely different space and time now where it really is exciting. And I think that I see, oh, boom and bust as it were, as as things recalibrated left in the space, people who continue to build and that narrowing to really focus on the viability of projects has precipitated a really interesting time that we're entering into now. We're really excited about a lot of the projects that have gone from use case to the beginning of use actual use that in a really exciting way. So let's switch over to something that you have a decided expertise in, and that's the regulatory landscape. And I know you received questions all the time and is a part of a substantial part of your practice. I certainly received questions as well about what the regulatory landscape is currently. Um, we could spend an entire semester or several years or an entire practice talking about all of it, so I know it. You know, we're painting it a bit with a broad brush, but I do want to stay at a high level toe one. Um, well, let's start here. What agencies are implicated, you know, the ones that immediately come to mind. When you think about regulation in the space both here in the United States, Well, let's start here in the US I don't think that we have the space in our 30 minutes together to talk about all of the landscape. But what's the regulatory landscape in the in the United States and any others at a maybe an international level, that immediately come to mind that people should be aware of sure. Well,

spk_2:   12:37
the obvious ones for the United States of the I. R s. We've seen tax guidance in 2014 and 2019 Vinson actually came out with the first guidance. They are the arm of Treasury, which is responsible for money for money transmission and for financial sanctions. They came out of guidance in 2013. We've seen a a significant uptick in criminal enforcement activity by the department justice. Obviously, the SEC, into a lesser extent, Finn ra became very activated by the sales of tokens that mushroomed from 2015 to 2018. The Commodities Futures Trade Commission has essentially asserted that in his jurisdiction over Bitcoin and apparently Ethereum on. And there's a really fascinating interplay between the SEC and CFTC, with respect to these assets A little bit less known. But still active is the FTC, which has addressed certain fraud types of matters with respect to crypto assets. And then you've got state level regulators. The NASA, which is the state and provincial Canadian provincial securities regulators, have been exceptionally active through their Operation crypto sweep. Um, something like 200 plus active investigation is still ongoing. And this doesn't even address state level litigation or the sort of pseudo police work being done by the plaintiff's bar bringing class actions against certain issuers and certain intermediaries. So if you would ask me in 2013 this was a really easy, quiet answer, its fins, and then that's it. Now it it. There's a really complicated environments, and it seems like on a pretty regular basis another regulator is, ah, certain some jurisdiction getting involved on an international level. We started to see primarily the Financial Action Task Force, which is a organization of some 50 some odd major national economies that work together to establish policy through something called recommendations, and they have been active since I believe also 2014 and addressing crypto assets. And this summer this past summer they came out with regulation. That suggests that crypto systems like Bitcoin in and others that are used primarily as a means of exchanging value may start to function very differently. So that's definitely one to keep your eyes on as well.

spk_1:   14:57
This is a really important point for listeners to understand that because of the the characteristics of distributed ledger technology block chains of being in and now, you know, speaking from a pure and public permission lis chain, for example, that we have to extend our understanding beyond borders because one of the key characteristics that was presented by Satoshi and and others as we continue to build in the space that we're talking borderless. Of course, we have geo fences and all sorts of other things that at certain chokepoints and and I think of moments like where one would onboard from Fiat, into the crypt a world, for example, there a number of places in spaces where regulation is key and obviously this technology is not developing in a vacuum, so those early on. Who said, You know, we don't need The laws are law is the code, and I certainly understand Lex cryptographic A. But it doesn't exist or develop in a vacuum. And so having a full appreciation, not just for where something is being developed, but its impact globally is critically important. And I do think that more people in the space have, for lack of a better word, resigned themselves to this reality about how to, if we are really focused on, or those who are building in the space really focused on mass adoption and scaling beyond the fringes of what might be the cipher punk movement, how to mange have this be mainstream and to scale to make sure that it is a compliance with existing laws. Another thought always comes to mind. Um, I'm sure you've given it a lot of thought as well about what, if any laws need to change. But if there is no new law, if there is no new taxonomy act, if there is no new law or regulation that applies in the space and in the United States in particular, we have the laws we have and we have the regulators who were involved in a multi layer level. And you have to be responsive to that. Which means that your practices is probably quite robust in navigating all of these spaces.

spk_2:   17:11
Well, eso I view Cryptocurrency and Blockchain systems at least the public network systems the same way that I view the environment in privacy. One nation deciding it wants to pass laws is, you know, somewhat effective. But if you want to have an effective way of dealing with problem, it needs to be global because the environment has externalities that affect others crypto. If you decide that you're gonna regulate one market decidedly differently than another, then all you're doing is creating arbitrage is for those that know how to get to these other less regulated markets and same thing with privacy. Data is insidious, and it travels across boundaries. And so if there isn't sort of international consensus on how toe regulate these three problems and there might be others, but these are the three that come to mind that ultimately all you're doing is incentivizing. Those to find arbitrage is or sort of sneak around the fences, and that's ultimately the best outcome. But from a sort of, ah, bigger picture. Do we need to change the law that we need new laws? We need to just sort of insightful e interpret our existing laws. Um, you sort of stumbled into the framework that I used to teach my class, which is the debate between Frank Easterbrook, Judge Easterbrook and Lawrence let as to whether there needs to be a law of the horse. And this was in the context, off the early days of the Internet when there was a conference at the University of Chicago off, they invited, You know, most of the best, most of best legal minds to talk about what the law should be of cyberspace. People were very concerned about intellectual property issues, the ease of copying information and all of the challenges that you would have thought about when you realize the Internet was gonna thing. But it's 1993 and we're basically watching it emerge from the primordial ooze and Frank Easter, who's ah, very brilliant man. A long term federal judge basically said, You don't need the law of the Internet, just like you don't need to teach the law of the horse anti tour starts if you can teach horse transactions. But if you want students to learn, you teach them the law of general application, and then once they understand the law, you teach him how to apply it to specific fact scenarios. And that, you know, generally makes sense. Lawrence Lessig, professor Harvard, was in the room, and he thought about it apparently and came to something of a different conclusion about the Internet, which is that when you can create a space that is governed by the rules off software, the software, it's in a sense, creates the law there. And of course, folks in our beloved crypto community have taken that concept and contorted it, misconstrued to mean a bunch of other things that are basically nonsense. But the the crux of the disagreement between Professor Lessig and Judge Easterbrook is when there's new technology that creates new situations. Do you need to adapt the law, or do you need to make new law? And in the context of the Internet, I always ask my students who was right and who was wrong. And as you might imagine, the answer is, they were both right, right? Privacy long. We have some new intellectual property law, and we have domain name arbitration to address new assets that didn't exist prior to the Internet. And so in that respect, Professor Lessig was obviously correct. But we still use that Corbyn book from back in the day, and we still have property law. We just sort of had toe twisted around a little bit to make it make sense on. And I really think that's what's gonna happen with those

spk_0:   20:31
way. Hope you're enjoying this addition of tech intersect. Our conversation will continue in a moment, but first, a word on an exciting opportunity. Tech Intersect Podcast is released to the public every Friday, but as an advantage Evans member, you'll receive first listen. Access and live tech Intersect connect video chats. Premium members also receive a copy of My E book, the Gen Xers Guy to up Skilling in a wet three Point of world and unlimited access to the video chat replays and bonus episode. My pro members, ready to leverage what they listen to and learn, receive access to the up Skilling self guided course and V i. P Group coaching calls. So as you can see advantage, Evans membership adds substantial value to your podcast experience, and there are three ways to take advantage. See what I did right there? Of all that the tech Intersect podcast has to offer. So subscribe now and let's listen, learn and leverage together and now back to the conversation. That makes

spk_1:   21:45
a lot of sense, because when we think about the infrastructure that is being developed at this point of time, obviously crypto, graphically secured assets and distributed ledger technology is a part of the Web 3.0 build right and put on top of that artificial intelligence machine learning a R V e r i o t all the things that are part and parcel of the Web, 3.0 build and things that will be built on top of that. So when we talk about the development of the rails, the infrastructure, it just makes sense, as you said, that it would follow the lead of every iteration of technology in this space, right? With 1.0, Web two point. Oh, and as we move forward that we will have this combination. There's a certain part of it that needs to be the structure that is agreed upon at an international level. And then there will always be this over the overlay of some international rules, regulations, guidelines where you have countries who are signatories and we have certain conventions and best practices that are adhere to. And then you have how things playoff play themselves out at a federal level. And, as you say, we get down to the state level. I compare New York to Wyoming and all of the innovation going on at the state level here within the United States. And so that is part of I can imagine what the concern is of those who are innovating in the space about whether or not the United States would be their home and, if so, what particular state or whether they take their project overseas. That's a a story for another day, but I often have these conversations with people. Yeah, it's a lot easier for a smaller country that has one regulator that does everything. It's, you know, it's We're comparing apples to oranges sometimes, and we can compare those countries to the United States. I recently had the opportunity to also sit in on the labour coin hearings at least on the House Financial services side and toe also talk with people they're about, even the committees, the wrangling as between committees about who gets to say, what happens, what hearings air called or how legislation is even offered. So it's complicated. I think it's improving and time will tell, but I think we're actually right where we're supposed to be. I understand the impatience in the technology space, but I'm less concerned about that and more hopeful about how we're developing. Um, and that leads me to the next topic. I want to cover with you because I know recently you moderated a discussion around stable coins, one that was obviously at the four, and getting all of the attention was Facebook's liber corn. But I'm more interested in talking more at a higher level, just about one. If you could provide a definition for what a stable coin is as we compare and contrast it to Bitcoin, for example, and then what it how stable coins fit into the overall taxonomy of crypto assets?

spk_2:   24:50
Sure, so stable coins are once again a sloppy, marketing driven term for a German. I enorme so jaded.

spk_1:   24:59
I'm trying not to laugh because my producer said, I'm not supposed to laugh or say This is not supposed to be calling response. I'm just supposed to be quiet when you speak, but that just gave me life. Continue.

spk_2:   25:09
This has been a This has been an industry that's been heavily marketing driven. And so you get things that sound great. That may not be reflective of reality and stable coins. Here is one of them. The idea of a stable coin is that you're going to create a digital instrument that's not gonna fluctuate in value. This is a absurd proposition because everything fluctuates in value. The U. S are fluctuates in value. Medals fluctuate in value if everything is valued relative to other things and nothing with it. Without government, price fixing stays stable. But stable coins are essentially an attempt to try to preserve our stabilize as much as possible, the value of an instrument. And so you can think about it as an instrument that is supposed to mimic the stability of a Fiat currency or something similar. And remember, these digital assets generally take on the attributes of the promises made upon issuance or upon sale. So if you um, if you say that something is going to represent equity than it represents equity. If you say something is gonna be legally considered to be a debt instrument, then you probably are taking on some obligation to pay some interest in and perhaps pay back the some that was invested long term. When you say that you have an asset, that's gonna be a stable coin. What you're really saying is one of a couple of things we're gonna try we is the issue are going to take some action or to try toe keep the price of this asset in the market mawr or less at the price you bought it from. And so there's essentially three ways that this is done. The first is the instrument issued that Digital Asset issued is backed in air quotes by a thing that has some value, whether it's backed by a dollar in a trust account, which is the model of folks like Paksas and Gemma. Neither trust companies that hold assets an issue one of their instruments for dollar. You can say that you're gonna hold on asset of value at 1 to 1, and maybe not do it like is alleged to have happened with tether. And then there are all kinds of other five forms and products that say that they're backed by gold or diamonds or buy real estate or commodities of all hunts. That's kind of one bucket. Then you've got a bucket where you've got an instrument where somebody's promises that they're going to manipulate the markets so that they're always buyable at the same price. Always sellable, same price. And so some of these you'll hear called algorithmic coins because they basically use, um, trading patterns that are done by is sort of automated by computers on the relevant markets so that you can always buy it at a dollar if Ellis Ellis at a dollar. But then you have some that are sort of programmatically stabilized. And that's what I call maker now, which is really confusing but super interesting defy project whereby you essentially deposit some value and have an entitlement to take out a certain amount of another asset, and it works sort of like a collateral collateralized debt swap way too complicated for our discussion. But essentially you've got things that are maintained at a price. Things that air synthetically algorithmic, Lee maintained at a price and things that are nominally backed by some sort of asset of value. There's lots of problems with all of these approaches, but they're tremendously interesting, and they're very, very important,

spk_1:   28:33
absolutely, and I know that. So we've described some that are some of these projects or the ones that I think that have come up are outside of a government structure. And then we have the discussion within various governments. Some governments have are yours or will talk about moving their Fiat government issued currency to, ah, fully digital issuance, right thes thes digital Fiat currencies. I'm wondering if you have any thoughts about those, as you compare and contrast between when I what I call more of a corporate currency versus a digital Fiat currency.

spk_2:   29:16
Yeah, as you'd imagine, I have a lot of thoughts, but I'll try. I'll try to keep it to a low. Rumors. That way the government issuing its currency as a digital token is incredibly interesting. It could provide the government with a tremendous amount of savings in the form of seniority for the issuance of their currency. It could provide them with unparalleled insight into transactions, you think automated tax withdrawal. But the flip side of all that is that it would also provide them with on made attacks, withdrawal and tremendous insights into transactions, which in some places is sort of what happens already. But here in the US, it really implicate significant privacy concerns. The central bank digital currency plan that most people talk about is a a remnant off the Chicago plan from Post Depression, which called for everybody to have a depository account with the Federal Reserve and everything clears through the Fed. The problem is that if you do that, then the Federal Reserve of the Government Bank of Choice knows everything that you've done and we would. As Americans, we've got a bunch of privacy rights which are unique and compelling and worthy of protection. And one of those rights is the right to have, you know, toe the right to use currency in a way that's private. We've got cash right that allows you to more or less engaged in private transactions, and almost every digital form of value transfer create some kind of record that increasingly is easy for the government to get. And so, if you value privacy and think that it's important that I certainly dio the drafters of the Fourth Amendment. Also did. Then you need to be gravely concerned about central bank digital currencies, providing the government with a panopticon on its people full surveillance at all times, of all their economic activity. And as the Supreme Court has observed, if you know everything, a person does it, they're money. You basically know everything a person does. So I look at Central bank digital currencies as absolutely inevitable as a potentially very useful tool for governments, but also as one that needs to be implemented in a thoughtful way to preserve our rights. A central bank digital currency that does not preserve the same privacy rights as you have with cash to me could be a real disaster and should be avoided. And I've talked to folks that are interested in designing these systems, And the good news is there is thoughtful discussion going on as to how governments can provide systems and create these products in thoughtful ways so as not to create sort of these pent up pecans because I don't think it really anybody. At least United States wants that

spk_1:   31:54
really great points, and I even, you know, separate in. Aside from the government aspects of it, even when I think about public permission lis chains and folks who described crypto currencies as being anonymous there, you know, I think of the manera rose of the world. But most times when people say that they are misunderstanding and misrepresenting. Bitcoin, for example, is being sued Anonymous. But one of the easiest way to track things is to track public addresses and bottle the quote unquote money and from, ah, forensics point of view there. A lot of people, we're going to spend a lot of time in jail if they're not already doing so, thinking that they were operating. And that is on the bad faith criminal side. There are a whole host of reasons to move money without involving yourself in and Inmet, money laundering or some nefarious activity, and your comments have hit on that precisely. Privacy does not equate and track criminal, and

spk_2:   32:58
there's this wide suspicion that if you have nothing to hide, why you need to hide it and thats nonsense. That's not what this country was built on. With all due deference to the memory of Justice Scalia. Brilliant man. It's not only the wicked that hide there are. A lot of people may have a lot of reasons that they do not want to engage with law enforcement at a given time. Similarly, there may be a lot of people who feel like they should have a choice in how they transact There are. There may be people who decide that they would rather save money and not use expensive slow systems in order to transact value from place to place. And, um, the messaging is somewhat concerning. But most privacy advocates are gonna articulate the arguments much better than I will. My only take away for the listeners at home is if central bank digital currencies do not provide us with same features as cash. We're giving away something very, very important,

spk_1:   33:51
really powerful. Thank you for those words on Guy want us switch over in the time that we have remaining to transition into innovation in this space. Recently I saw a bunch of tweets, but I know that you had something to say about the Winkle Voss twins who have the own Jim and I are They launched Jim and I the crypto exchange. But they also have set up now their own insurance company to cover potential loss of crypto held in cold storage. Ah, there's, you know, possibly this record breaking $200 million limit, which is critically important. And you noted that insurance in the crypto space is like the next cross industry to explode within the crypto ecosystem. Some wonder if you could talk a bit about that one. If you could define most, some will know what cold storage even is if you could just say what that is in particular, and why you think insurance in custody is a critically important topic and, um, sector within the space.

spk_2:   34:57
Sure, so crypt. Alas, it's used in their natural environment, which is controlled by public and private keys. Using software or hardware, wallets are prone to loss. And unlike most systems of value transaction that were used to, there's no customer service to call to reverse the transaction or, in certain cases, to reset a password. A lot of modern systems include things like see phrases or other ways you could back up a wallet, but it is gonna happen over time repeatedly that people will lose private keys and find themselves shut out of their assets. And that's a problem, especially if you want institutional investors. Investors who have fiduciary duties toe others to engage with this market and with these products. So there are a few things that folks are looking at in order to help get this industry more in line with other areas of attractive investment. One that you said that you mentioned was custody in custody and depending on what you were doing, give me in a couple different things. Custody in the sort of on trading crypto for crypto sense is how do I know that it's mine and that it's protected and there are a variety of different ways that you can do this? There are a lot of custody providers who you can contract with who, for a fee, will hold your assets in a way that is not connected to the Internet and is otherwise not accessible without certain appropriate steps being taken. And that right now is sort of the standard as to how people look at it. If you have something that's in cold storage, it's unlikely to be compromised and taken away from you and you know, for now that's good. There are a bunch of new ideas out there. Multiparty computation is the newest one that we're starting to see a lot of attention paid to. It's the idea that numerous people have to compute a key in order for the key to be used. This is sort of multiple signature wall at the next generation of that from investment standpoint. However, if you're a 40 act company or if you're doing certain things that require you to be a registered investment adviser, then you have a completely separate set of or the impeccably separate set of obligations. As far as how you custody things in the industry is looked waiting for the SEC and FINRA to get their acts together and figure out how they want us to custody stuff. And I say, Get their acts together. I don't mean that to sound disrespectful at all. These are complicated issues. These are very difficult questions to answer because these assets are super new and work very differently than other assets that these regulators are used to working with. And so it's a big challenge. We've seen at least one state taking on, and their model is interesting. That's Wyoming and their models interesting and something that no doubt the regulators are studying. Brief Segway. I keep talking about the regulators. You probably are interested in what I think about this, and I'll tell you in a sentence. The regulators, the United States are doing a great job. We've been out love the decisions that they make, but their decisions have been mostly principled and have not killed the industry. I'm proud to be an American and proud to see what our regulators have done, and I look forward to getting continued good service out of our government employees who are tasked with difficult task of trying to figure out how to make the old rules in this new technology makes sense together pivoting back trip Russian about insurance, part of getting in institutional and more conservative investors comfortable with this. This ecosystem of assets is what do you do if you screw up? You need to have insurance, but insurance requires that there be underwriting, which means that there needs to be an insurance company that understands and can evaluate and put a number on the risk. Insurance companies have been looking in this industry for years and for a variety of reasons, have mostly come in on the directors and officers and Arizona omissions area of policy coverage. Of course, if you're willing to pay Sky high premiums, I'm sure that there are certain underwriters of Lloyd's at all. Right, you an excess policy for excess policy for just about whatever you want, right? We're coming in, and providing captive insurance is a really significant area that I think a lot of companies we're going to start Teoh look at. And if you have a crypto company and you've been having a difficult time finding insurance, I suggest that you educate yourselves about what captive insurance companies are and how they can be helpful very quickly. They are essentially the ability for a company to legally create a structure where they self insure, and so they are, in a sense, taking on some of the risk. But also being able to use insurance policies as a way to mitigate that risk in captives is a whole separate topic that's really worthy of exploration. But what we see with the Jevon I announcement and certain other announcements that we've seen from other important intermediaries in spaces that we are finally getting policies out there that can get people comfortable with these assets. And as the song goes in crypto the Mawr institutional by in into the industry, the more likely it is that people who are in the industry will be successful. And I have kind of an interesting view on that. My goal is a lawyer is to make sure that we don't, um, way don't mess up the implementation of the law to this technology, to the point that the technology is no longer usable. And I believe that this technology ultimately is something that we need to keep viable. Encase. The 50 year Fiat experiment crashes and burns in some, you know, unfortunate event where we need to try to figure out a new way to rebuild the economy. A lot of the tools that Satoshi has given us and that we've built from Soto she's gifts have the potential to help us sketch out a new way of order in the world's economies, and I think it's really critical that we can preserve that on and innovate on top of it going forward.

spk_1:   40:55
It's so well, said I am really, really encouraged about where we are. I think there are a lot of really complex problems and or I'll say, challenges but a lot of really exciting opportunities with this technology in particular, I wholeheartedly agree with you. And when I think about, ah, regulators and legislators with regulators in particular who have had the good fortune of either they're coming onto to speak to my class or interacting with the various conferences and behind closed doors sessions to really understand how they're thinking, I think they're being really thoughtful. You know, I think that they serve a nim porton purpose. When you think of the SEC, for example, of of finding the sweet spot between encouraging innovation but protecting and consumers investors, that's the rule. And it doesn't matter what kind of sophisticated or exotic investment interests and products that come alone that the rules are. The rules in the purpose in the goal is the same. I see a lot of carrot. I suspect there will be a lot of stick as well for the bad actors, and we don't need bad actors in the space because they don't do us any favors. Yeah,

spk_2:   42:10
we are just parenthetically. We are heading into about four years of very heavy litigation. We're gonna In my view, we're probably going to regulators, Really? Step up, enforcement. We're entering a special time on Statue of Limitations for certain claims. And so I to see the next four years to be exceptionally busy. Um, in the sort of regulatory defense litigation site

spk_1:   42:34
I see that I see that Well, that means you will have to come on on multiple occasions to tech intersect to talk about what's going on in the spaces. We continue to learn and grow as well. Drew him. Kiss. I appreciate you, sir. You're a friend, your colleague, your one of our really important thought Leaders in the space. And I thank you very much for joining me for this conversation.

spk_2:   42:57
I appreciate you having me. If anybody is interested in being in touch, you can find me on Twitter. My handle is at propelled forward, Pierrot. Pl forward. You can also find me on my website, Andrew pincus dot com. And of course, you can find me on my law firm's website Carlson fields dot com.

spk_1:   43:19
Wow. I hope you enjoy this conversation. Withdrew one of the top crypto lawyers in the industry. I know I did. I really enjoyed it. We covered a lot of ground, to be sure. From what a crypt, a lawyer is too plain English explanations of crypto Bitcoin and Blockchain. No small feat, I might add. And most importantly, we covered the regulatory landscape that applies to crypto currencies and what agencies air implicated here in the United States and given Kryptos borderless features around the world. And what regulators should innovators in the space and the lawyers who represent them be aware off. And I really enjoyed our conversation about stable coins, what they are, how they're different from other cryptographic Lee secure digital tokens of value. And this is particularly relevant because a recent stimulus bill introduced in response to the cove it 19 crisis introduced by Nancy Pelosi For the House Democrats, it included a provision to create a digital dollar or digital Fiat as we talked about the final version of the economic stimulus package offered by Speaker Pelosi on behalf of the House. Dems, no longer as of March 24th includes the U. S digital dollar proposal. However, the language, as proposed by chairwoman Waters of the House Financial Services Committee still does contain this language, so I'll include a link in the summary and a deeper dive of this topic in the Advantage Evans Show notes. Please everyone, stay safe in the midst of this pandemic. Wash your hands. Stay home if you can, and be good to yourself and each other

spk_0:   44:54
until next time. Continue to shine. Stay in touch with host Tanya Evans via your favorite social media on Twitter at at Tech Intersect and on Instagram via the handle. Tech intersect. This'll by cast has been produced by Stephanie Renee for Soul Sanctuary Incorporated.