a16z Podcast | The Regulatory Landscape for Crypto

TL;DR

Crypto technology itself is not illegal or directly regulated, but applications such as exchanges, ICOs, money transmission, and fund custody may fall under existing laws. In this April 2018 a16z Podcast discussion, Robin Weisman and Katie Haun distinguish civil regulators, enforcers, and prosecutors while explaining why broadly written rules give officials discretion. Read on for practical guidance on regulators, compliance, and building responsibly in crypto.

Transcript

hi everyone welcome to the a 6 & Z podcast I'm sonal today's episode is all about the regulatory landscape in crypto it's based on a conversation recorded at our inaugural intro to crypto event co-hosted with hash tag angels in April 2018 you can also find other sessions from this event as podcasts as well as on our YouTube channel where there's al... Read More

Key Insights

• 🔉 The media coverage of the crypto industry often focuses on sensational headlines without providing a nuanced understanding of the regulatory landscape.
• 🎯 Regulators are focused on targeting instances of fraud and illegal activities in the crypto industry, rather than pursuing legitimate projects.
• 🥡 The US government agencies responsible for crypto regulation, such as the SEC and CFTC, are taking a careful approach to understanding the technology and its potential impact before implementing comprehensive regulations.
• 👋 Entrepreneurs and individuals looking to join the crypto industry should be informed about existing laws and regulations, demonstrate best efforts to comply, and seek out companies that prioritize compliance and responsible practices.

Questions & Answers

Q: How does the regulatory landscape for crypto affect entrepreneurs and companies?

The underlying decentralized cryptocurrency technology is not itself regulated, but applications can trigger existing rules when they involve activities such as money transmission or custody of funds. Entrepreneurs should understand which regulated activities their products perform and make their best efforts to comply with applicable laws.

Q: Is Bitcoin or decentralized cryptocurrency illegal?

No. The speakers say decentralized cryptocurrency technology is not illegal, although it can be used for illicit purposes, just as the internet can be used to do illegal things. They also note that three government witnesses at 2013 Senate hearings said Bitcoin was not illegal.

Q: Is the underlying crypto technology regulated?

The underlying technology is not regulated and would be very difficult to regulate. Regulation instead applies when applications built with that technology enter areas already governed by existing rules.

Q: Which cryptocurrency applications may be regulated?

Applications involving money transmission or custody of funds may be subject to existing regulations. Cryptocurrency exchanges and ICOs can also face regulatory scrutiny depending on the nature of their operations.

Q: Who are the main types of government actors involved in crypto oversight?

The discussion separates government actors into civil regulators, enforcers, and prosecutors. These groups are not interchangeable because their priorities and objectives differ, particularly between civil and criminal enforcement.

Q: Why do regulators and prosecutors have broad discretion in crypto cases?

Existing laws and regulations are written very broadly by design. That wording gives regulators and prosecutors room to exercise judgment about which regulatory or prosecutorial tools are appropriate.

Q: Are regulators trying to trap legitimate ICO or cryptocurrency projects?

The speakers reject the idea that the government is waiting to trap legitimate projects. They say government attention is directed toward fraud and crimes, while lawful projects should focus on understanding and complying with existing rules.

Q: What should someone consider before joining or building a crypto company?

They should become informed about existing laws and regulations and demonstrate best efforts to comply. When choosing a company, they should look for one that prioritizes compliance and responsible practices.

Summary & Key Takeaways

• The discussion covers key principles of regulation in the crypto space, including the distinction between regulated applications of cryptocurrency technology and the technology itself.

• The panel explains the importance of understanding the priorities and objectives of different regulatory bodies, such as civil regulators, enforcers, and prosecutors.

• The conversation highlights the need for clear communication and collaboration between industry players and policymakers to ensure effective regulation without stifling innovation.