(Part II) Regulatory Landscape for Cryptocurrency Issuance | Former SEC Commissioner Troy Paredes



hello and welcome to the digital assets report I'm Jane King at the New York Stock Exchange and with me today Troy paratus of parade of strategies a founder of that also former SEC commissioner and also podcaster so we'll talk more about that in a second visible and are a CEO of liquid M Capital is always oh thank you let's start with your podcast appetite for disruptions you kind of talk about a lot of these interesting subjects are going to blockchain ease tell me a little bit about what you're looking for that podcast that we're looking frankly and talk to interesting folks doing interesting stuff and my co-host and I thought that FinTech given our background my background focusing on finance regulation having been a commissioner at the SEC and with so much going on and one of these I found particularly interesting is when you talk to folks in the space you do realize the breadth of what people are trying to solve for and the issues that they're focused on and it's everything from the proverbial folks in a garage up to the largest financial institutions on Wall Street who are thinking about how do we take advantage of technology not just in terms of the business but also in terms of the regulatory side of things the compliance side of things a lot of people are familiar with the phrase reg tech that's simply taking technology that's available and the things which are cutting-edge and asking the following question how can we take advantage of those technological advancements and help them and use them to help us better and more effectively comply and that can be natural language processing machine learning artificial intelligence and of course blockchain so I think we really add a very fascinating point where some of those applications have been brought to bear but where I think there's still a whole heck of a lot in front of us an aspect of it too frankly which i think is really interesting that some folks may not appreciate as much is the fact that the regulators are focusing on how they themselves can be using these technologies when it comes to their examination their inspection their supervision and even the development of their enforcement cases yeah so I'd like to tell folks if your regulator is using these technologies you may want to ask yourself how are we using these technologies so that we don't find ourselves behind what the regulator's are capable of doing and the regulators are talking about this space a lot lately what's your sense of what on their heads involving digital assets yeah so I think what's going on in their heads is a couple of things one trying to ask the question you know do do we as to each individual regulator what are our authorities what jurisdiction do we have and do we think that we need additional authority or do we think somebody in the landscape of the federal or state level needs additional authority I think number two it is this question of balance where you want to have you indeed need to have a sound sensible reasonable regulatory environment you need to have rules of the road you need to make sure that those rules of the road are being enforced so in the context of the federal securities laws you know to the extent you have a token which the SEC decides qualifies as a security well then you trigger the federal securities laws on all that that entails at the same time particularly I think when you throw blockchain more generally into the mix what you don't want to do and I say this is somebody thought a lot about this when I was in government what you don't want to do is have an approach that's going to stifle beneficial innovation you don't want to have an approach which is going to cause those things that would actually would time be brought to market and make all of us better off by improving our standard of living be somehow stifled that is easier to identify I think as a challenge that needs to be addressed than it is to address it and the addressing of it does take some time but I'm heartened by I think that that's kind of where the regulator's are focused in terms of trying to strike that evoke these early days of technology it's always feels a little Wild West and it's kind of like what's got promised what doesn't widespread jewel and what's not it's really tough so Vince we've talked a lot about the SEC in the CFTC and the divisions between the two and the regulatory bodies has there been any of that kind of sorted out yet or where does that stand I don't know if it's being sorted out yet but I think it's in the process and I think Detroit makes a couple of great points not surprisingly at all but I think when you look at and now she may be back to the JOBS Act the passage of the JOBS Act and portions of the rulemaking may have been anticipated in 180 days but there was a very thoughtful process although quite a lot of people anxious including myself or what amounted a four or five year period but the outcome of that was very thoughtful rulemaking versus reactionary to what was there at the moment so I think we're seeing so what similar thought process is today and that's why I think you're seeing engagement with CFTC and SEC be thoughtful again to choice point how do we utilize these tools of today to foster greater capital formation in a responsible way while protecting investors I think you're seeing the states get involved I was just gonna ask about that Wyoming has done some thing on this right so can you bring us up to speed on that and what's going on with some states I think you've got a number of issues both going back to enforcement and and cease-and-desist coming from states that are pre-empting and now you have Wyoming holistically looking at a whole new framework intrastate right and that's the key for intrastate so I think there are some challenges when you when you look within a state applaud Wyoming and the thought process and the innovation to say there is not a security token in the state and these are all effectively utility tokens treating tokens as property and having them exempt from taxes well that could be a major boon for Wyoming and innovation interesting but you do get into the challenges of federal securities laws when you start to move outside the boundaries so there is some permissioning layers perhaps it speaks to less open source right where you need some level of centralization to control block chain and tokenization intrastate so this is all awesomely exciting and I think just to touch on Troy's other point because I think it is not often spoken about and I think it's really great to have the lens of a former regulator sitting here with us it's the tools that these bring to bear for the regulators that are helpful so we can then put standardization and best practice into the process where we have audit trails we have order books we have last pricing displayed we have continuity of information across the spectrum I think allows regulators a better access point to do their job but also fair markets so I think it all converges at a great point works if I can just pick up on on that last point has been sitting up on my point I also do think it's important in the discussion around digital assets for the currencies and the light tokens etc but that's not the same discussion as talking about blockchain more generally okay and when you think about the power of blockchain entirely aside from the digital assets and what that's going to mean what it is already starting to mean you really take a step back and put it in probably too simplistic of terms you know blockchain in terms of the power to be a ledger way of reporting and tracking and an audit trail and the like and sharing of information when it comes to G's just about every type of interaction and when you think about that as being the scope if you will of the potential set of instances and use cases and applications of watching that's enormous and there's an incredible amount of potential there that is entirely aside from how other debates play themselves out that's right technology the black player using technology exactly it's a totally different so um looking forward to 2018 what are some things you'll be watching this your toy yeah what I'm going to watch a couple of things well one is I think it's been very notable the way in which very openly and publicly chairman Clayton and and Giancarlo the SEC and CFTC have been they're all bad for example that they did jointly as they testified jointly that's because they did it jointly it was really a cheap it's crucial and I think that is really important to reflecting the conversations that are taking place across government and a big part of the big ass be the benefit of that is again making sure that the regime however it ultimately unfolds coheres makes sense as sensible as sound and strikes the appropriate balances that coordination is really important and I think if you haven't spent time in DC you may you know think oh well what's so special about that well you don't always see that and you don't always see it and that kind of open and obvious way and I think that's a real plus and I look for more of that number to say keep an eye on the enforcement actions I think in terms of rulemaking let alone legislation whether or not there'll be any that will be in the future and again it's not even clear that the decision will be that there is necessarily more than needs to be done but whatever happens on the rulemaking regular regulatory and legislative front keeping on the enforcement actions the regulator's themselves using the authorities they have they've already been using those authorities and we've not seen the last of it okay Vince what are you looking for this year of course I agree with Troy and Keith so wonderfully attune I would just slightly extend the thought process as we see the collaboration here in the u.s. very clearly with CFTC SEC and I think NASA and of course FINRA will be involved in that process I see parallel paths happening globally whether that's within Europe or Asia and I think we will begin to see collaboration with global regulators as its phenomenon is truly a global the ability for smart contracts to transcend boundaries I think will require much more collaboration of global regulators for the first time ok it's going to be interesting to watch I know that you're going to help us navigate our way through all of this is this is really revolutionary changed it certainly could be so thank you so much 23 you're joining us founder of Preta strategies for SEC Commissioner an appetite for disruption I'm gonna definitely listen to that and thank you as well of Vince Molinari let's see okay put in capital and thank you for joining us on the digital assets report i'm jane king at the new york stock exchange have a great day

Leave a Reply

Your email address will not be published. Required fields are marked *