00:00Where do we stand right now? I mean because there's been a couple of developments here that have actually at
00:04least over the last few weeks that have had led to some of the softness that we've seen in Bitcoin.
00:07One is whatever whatever legislative progress was being made. That seems to have stalled. And then now on the regulatory
00:14side. I know there's been a revamp here of Project Crypto. Are we any closer to seeing a more I
00:21guess a finish line in this whole process. So Project Crypto is an issue that was started by incoming SEC
00:27chair Atkins last year in November.
00:29He announced it. But even before he was elected as SEC chair we already saw the SEC's crypto task force
00:35rolling out guidance proactive guidance on a lot of the initiatives of the industry was looking to see. And then
00:41a lot of those issues got rolled into Project Crypto. And some of those since last year we've already started
00:46seeing guidance on. One example is tokenized securities taxonomy that we just recently saw released a few weeks ago. What
00:54we in the last month have seen is the Project Crypto SEC initiative coming together
00:59with the CFTC and now that the CFTC has an incoming chairman that's also focused on regulation in this area.
01:06Project Crypto is now becoming a coordinated effort among the two agencies which is consistent with the legislation in this
01:12area.
01:12But what's the time frame too because I mean we talk about the Winklevi and all these folks micro sale.
01:16I mean these are kind of the gunslingers in the wild west. And the whole idea of having the regulation
01:20having the legislation was that it would provide enough guardrails for kind of the more traditional folks.
01:25So more risk averse folks finding institutions I'm talking about to enter this space full on in a way that
01:32they haven't really or at least felt like they haven't been able to do.
01:35Yeah. And the regulatory guidance and clarity and anticipated rulemaking has started coming out of the SEC and CFTC. And
01:42we're going to see more formalized rulemaking I think in the coming year most likely.
01:46And that has brought a lot of the institutional financial institutions a lot of investors into this space that otherwise
01:51weren't participating.
01:52A few examples is we've seen tokenized securities in the form of tokenized money market funds. We've seen tokenized gold
01:58products. We're going to see a lot of tokenization in different use cases of this technology across different sectors.
02:04It just takes time for the formal rulemaking process to really see its true potential. And that just requires patience
02:11for a lot of the industry to kind of wait and see how it gets shaped.
02:13Well what do firms within the industry do between now and then because you make the point I mean progress
02:18is still being made you're seeing you know products launch here but it feels like a little bit of purgatory
02:24as we wait for that clarity on the regulatory front.
02:28What companies are doing and we're bringing them in is really to go to Washington to meet with the regulators
02:34to meet with SEC crypto task force provide formal submissions provide education what the technology is what the capabilities are
02:41and what rules of the road will help these companies navigate into the future and provide a flexible framework for
02:48the technology to evolve and develop.
02:49That is all happening in real time. The regulators and the SEC and the CFTC are open to those meetings
02:54and many companies have taken advantage of that.
02:57We've seen already out of the SEC no action relief issued on areas from guidance on stable coins not being
03:04securities to proof of work and proof of stake blockchains and that those activities not falling within the SEC's jurisdiction.
03:10We've seen deep in decentralized infrastructure provider guidance and we'll see more in the form of no action relief. Just
03:18this past Friday we saw the current director of corporation finance saying the next coming months and into the summer
03:25will be busy for the division of corporation finance and to anticipate releasing exemptive relief no action relief letters.
03:31So we're going to see a lot more in the near term and the long term we will see rulemaking
03:36which which may align and I think we'll see what happens on the legislative front as well.
03:40Well let's talk about what the ideal vision for the long term might look like because you know you think
03:45about some of the different things that we're talking about when it comes to project crypto between the SEC and
03:50the CFTC it feels a little bit like alphabet soup and it has for a while and then you have
03:54Congress you know pursuing their own things when you take a look you know at some sort of end goal
04:00here I mean
04:01what would true clarity look like when you think about how that framework might knit together.
04:06Well the SEC and the CFTC is coordinating with Congress and the Senate in terms of drafting the the legislative
04:13market structure bill which if that moves forward that will provide clarity for the SEC and CFTC how to shape
04:22their rule book.
04:22In the meantime they're not waiting they are shaping rules that are within their existing jurisdiction and that's and and
04:30it may fill some gaps that the legislation hasn't even contemplated.
04:33So I think it'll be interesting to see how how all that plays out in the in the through through
04:37the next few months and in the summer.
04:39I'm just curious though to about this idea are we adding unnecessary complexity to this market.
04:45I know there's this idea of guardrails and people want to have a little bit more clarity but is it
04:50starting to get muddled to the point where we're adding so much complexity to it that it could actually hamper
04:54some of the growth in the industry.
04:55I think the objective is not to hamper innovation is really to allow innovation and practicing this area primarily on
05:02securities law issues over the years.
05:04There's been you know not necessarily clear guidance on what activities fit within the SEC jurisdiction versus what fits in
05:11the CFTC jurisdiction and this joint initiative of project crypto really is intended to provide that to provide a taxonomy
05:18of there are securities tokenized securities fit clearly within the SEC jurisdiction digital commodities.
05:24Those fit in with the CFTC jurisdiction and there's certain products that could potentially overlap and that's where there's me
05:32a memorandum of understanding between the agents to figure out how can entities operate in this space and have a
05:37clear roadmap in this gray area.
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