Policy, Regulation, and Institutional Adoption of Web3
Margaret Croke, Illinois State Rep.
Nathan Dean, Sr. Policy Analyst, Bloomberg Intelligence
Paige Bolinger, Associate, Croke Fairchild Morgan & Beres
Dan Gunsberg, Co-Founder and CEO, HXRO
Margaret Croke represents the State of Illinois’ 12th District. Margaret comes from a robust background in politics where she worked on a few campaigns such as Hillary for America and JB Pritzker for Governor until she ultimately joined the Illinois Department of Commerce and Economic Opportunity. After her undergrad at University of Michigan Margaret spent nearly a year and a half working in business development at Proper Suit.
Nathan Dean is a senior policy analyst at Bloomberg Intelligence. There, he helps provide political intelligence and research to over 300,000 Bloomberg Terminal clients on government policy and its impact on equity, commodity, and debt markets. Nathan is a senior advisor skilled at disseminating political intelligence to the C-suite, institutional investors and risk managers. Prior to that Nathan worked at CME Group as a Government Affairs Manager.
Dan Gunsberg is co-founder and CEO of Hxro, an exchange that includes several new ways to trade crypto options and derivatives. Dan has refined knowledge in cryptocurrencies, blockchain based derivatives, and other digital assets. Before Hxro, Dan was a co-founder of Gordian Block Capital LLC, a multi-strategy cryptocurrency hedge fund. Just before he started at Gordian Block Capital LLC, Dan worked as a chief operating officer at DV Trading LLC for over 6 years.
Paige Bolinger is an Associate Attorney (VC) at Croke Fairchild Morgan and Beres. Paige helps founders, emerging companies, investors, and funds achieve their goals by advising, strategizing, and executing on matters including venture financings, corporate and fund formation, and growth strategies. Prior to her time at Croke Fairchild Morgan and Beres, Paige worked as an advisory board member at BlkArthouse for roughly a year and a half. And a year before BlkArthouse, Paige worked as a corporate associate attorney for Katten Muchin Rosenman LLP.
The State of Blockchain Regulation Today
The panel gave a lot of clarity on the current state of regulation, and what this means for the industry. Nathan Dean talked about how much of the conversation around regulation today is fixated on the 1933 Securities Law.
“There is a large debate of are tokens securities or not and does 1933 securities law apply? Chairman Gensler takes the view that 95-98% of the tokens out there are securities and therefore 1933 securities law applies.”
In Paige’s experience as a lawyer, a lot of the questions she gets are around this piece of legislation. Many times compliance with this law is such an important question to builders that they are really interested in finding a yes or no answer to whether their protocol or token is a security or a token. She clarified that, while it’s important to be pragmatic, this is not necessarily a black and white issue. This point sheds light on the diversity of digital assets that can be created with blockchains, and why that would naturally lead to a very complex and uncertain regulatory environment.
Dan Gunsberg alluded to the fact that there is simply too much focus on 1933 Securities Law relative to KYC and AML. He believes that the keeping bad actors out of current blockchain applications is something we don’t spend enough time discussing in today’s regulatory discussion, which is a shame because of blockchain’s unique ability to be digitally native and transparent which allows for us to vet the reputation of participants without having to compromise many aspects of their identity.
At Decasonic, we believe in responsible innovation. Responsible innovation of the sort that Dan alludes to here will be the guiding path to mainstream adoption. Innovation in KYC and AML protocols is something we are incredibly excited about that will encourage mainstream adoption as consumers feel that they are less at risk to exploits and bad actors.
The Way Forward
As Margaret pointed out, the way forward seems to be less black and white than shades of gray, which will require a lot of education and honest conversations between builders and policy makers.
“The tide has really changed. And I think that if we can just get ahead and talk about smart regulation and have these larger conversations with all the stakeholders, it's going to benefit the industry as well as consumers.”
Nathan and Dan alluded to the fact that blockchain regulation is not as much of a partisan issue as it is a generational issue. The blockchain industry certainly skews young and this generational education gap must be addressed. FTX and Coinbase are leading a lot of initiatives in Washington on this front and have been praised for their outreach.
The existing SEC ripple case and Coinbase insider trading DOJ investigation were unanimously agreed upon to be very large catalysts for further regulation in the digital asset sector:
“By this time next year, more likely than not, two out of those three catalysts will have gotten to a point where we know what the regulation is going to look like, it may not be implemented, but if you're a builder or an investor, you at least will have a 2 to 3 four year horizon that you know what the rules are.”
It is clear that the regulatory environment in the US is so uncertain that many participants would rather avoid entanglement in the US altogether. The panelists largely agreed that this is a huge loss for American technological innovation, and we need to combat this through increased forward guidance and collaboration from policymakers.