A Conversation with Kristin Smith, Director of External Affairs, the Blockchain Association

The following transcript is taken from The Scoop, The Block's new podcast. Listen below and subscribe to The Scoop on Apple, Spotify, Google Play, Stitcher, or wherever you listen to podcasts. Email feedback to [email protected]. This transcript has been edited for clarity and length.

Frank Chaparro and Ryan Todd speak to Kristin Smith, the Director of External Affairs at the Blockchain Association in this week's episode of The Scoop. Frank, Ryan, and Kristin discuss the implications of the case against Kik as well as the recently reintroduced Token Taxonomy Act. Kristin also reveals what it's like to represent leading crypto companies on Capitol Hill, and the reception of crypto and blockchain in Washington, D.C.

Frank Chapparro Hi guys My name is Frank Chapparro senior correspondent at The Block. You might know me as Frankie scoops or fintech Frank but hopefully now you'll get to know me as the host of the bloc's new podcast called The Scoop made especially for decision makers and thrill seekers in the crypto market. Each week I along with one of my cohorts here at the block will talk with CEOs innovators and builders across the crypto market. The blockchain Association has an interesting seat in the cryptocurrency and blockchain market representing the interests of firms like Coinbase and and to Washington's congressmen and powerful elite leading the charge there is Kristen Smith a veteran of the Hill who has seen both sides of lobbying working for different Congresspeople and trade firms. She joined the scoop to talk about what her members want from Congress. The organization's flagship token taxonomy Act which defines which tokens should fall under securities laws and the breaking news of the S.E.C. suing kick the company which raised one hundred million dollars in an ICOs in 2017. I'd like to take a minute to thank our sponsor Kashyap Kashyap has been the number one finance app in the App Store for almost two years. It was also the first major peer to peer payments app to start supporting bitcoin and it's still the fastest and easiest way to onramp VR. No more waiting five days for your ICOs payments to come through with cash app you can buy Bitcoin instantly. It's also a favorite of the block. Analyst Steven Zang he used his cash app when he goes to Chipotle and gets money back he saves every time he eats a burrito that keeps Stephen happy that keeps the block happy and that keeps the crypto world informed with the best news and research in the entire market. You can also use it at lift whole foods Chipotle. As I said Chick fil A Starbucks and Dunkin Donuts download cash app today from the App Store or Google Play. I hope you enjoy the episode. Ladies and gentlemen thank you so much for tuning in to the scoop. The Block's podcast for crypto thrill seekers and decision makers today we have a very special guest right off the Amtrak from Washington D.C. Kristen Smith. She is the external affairs director of the blockchain Association and we have back from vacation. Our very special colleague on our research team Ryan Todd. He's back from Alaska. He's ready to dive into things we are going to be exploring all things regulations this thing called the token taxonomy act. Why it's good for crypto. Why Christine is on the Hill beating on doors trying to get congressmen and congresswomen to jump on board with this thing and we're going to be looking at some breaking news today. We have some breaking news out of kick the kick FCC saga. We've got a very interesting 49 page lawsuit that the FCC issued against kick the social media platform and we are going to be looking at you know the other hurdles that are facing the members that pay Kristin and her entity to support them and support the initiatives that they are looking to get signed into law or otherwise. Thanks so much for joining us.

Kristin Smith Thank you Frank and thanks Ryan. It's great to be here.

Frank Chapparro Yeah. So I guess the best place to start is you know what. What exactly. You know when you're explaining what you do to folks how do you how do you do that. What's your elevator pitch to them.

Kristin Smith Well it depends on if I'm talking to Congress or if I'm talking to the industry with the industry. I let them know that we're....

Frank Chapparro You were you were hanging out with your niece this weekend how would you describe it to her?

Kristin Smith I don't think I can describe it to my 6 year old niece.

Frank Chapparro How would you describe it to the industry.

Kristin Smith You know the industry let him know that we're a trade association and that we represent crypto companies before policymakers whether it be Congress or regulators there. I think there's a lot we were talking about this a little bit before the show. There was a lot of confusion out there. I think from folks that are are working and developing and creating and at the heart of the industry is that there are a lot of different organizations that have sprung up in recent years to sort of help with some of these various issues. And I think what's complicating is that they all have very distinct and separate roles. But our role at the blockchain Association is to work on federal U.S. policy to change it and make it better specifically for the crypto industry.

Frank Chapparro And your members essentially pay you on a monthly annual basis to not do their bidding has a negative connotation but but to lobby.

Kristin Smith Right, to lobby

Frank Chapparro So how talked about Amendment. How do they how how many are there and in what industries of crypto. Yeah. Where do they come from.

Kristin Smith So we have 19 member companies. So we have exchanges we have projects and then we have investors and.

Frank Chapparro Who are some of the big names?

Kristin Smith Coinbase circle crack in Interstellar protocol labs. Now the company formerly known as ze cash I'm not not up to date on there. They're branding it digital currency group polishing capital. Union Square Ventures. Organizations like that.

Ryan Todd Heavy hitting list.

Frank Chapparro What do you think. Is the biggest thing on their mind right now. You know when they're when they're reaching out to you about the the impediments the regulatory impediments that they face to operate their business. What is it and how are you guys trying to ameliorate that.

Kristin Smith Yeah. So the number one issue that our members care about is getting not just clarity but the appropriate clarity from regulators as to when these token transactions need to comply with securities laws and when they don't. I think that's top of mind whether it's a project to raise money under a soft and wants to ultimately deliver those tokens or an exchange that is deciding what to list or investors who are supporting this son on the front end that that is the number one question on the minds of my members.

Frank Chapparro And I imagine when you talk about the token taxonomy act that's playing a part in addressing that. What exactly does it outline in terms of defining what is and what is it because that's a question right that I feel like everyone wants an answer to. If I'm doing a token sale from issuing a token how do I know when it's a security when it's a utility token J. Chairman of the FCC. I feel like he's been pretty clear in saying that basically you just look at the...

Ryan Todd Following the regulation that's been around since the 30's.

Frank Chapparro And you know I guess is your point that the how we test isn't enough it's not good enough. We need something new.

Kristin Smith Yeah. Well I think we agree with what the spirit of the we test is and that you know if you take a step back and think about why we have securities laws to begin with the one in the number probably the top concern is bridging the information asymmetry between an investor who wants to invest in a given type of security and the issuer of that security. And that's really I think important role and it was top of mind back in the 30s when these laws came about. So people had good information to make informed investment decisions. And what you know we have today is that this how we test it gives us this definition of an investment contract which is a security and it's it's a facts and circumstances analysis. So you have to look at it on a case by case basis. Now that we're in this world of crypto people sort of dusted off this case that really I think mostly just law students looked at and it's become sort of front and center. And so I guess if you look at a very high level how do we get sort of this this clarity you know trying to pigeonhole it within the 73 year old Supreme Court test is you know not the ideal way for folks. And we've seen them when we've seen just you know a couple weeks ago with Circle's announcement but there's numerous projects out there that are you know distancing themselves from the United States. They're they're not giving people within our borders the same access to certain tokens investors are you know encouraging projects to be developed overseas and so we want to find a way to have clarity so people know you know once they get past that point of no longer controlling a project how do you know for sure that you've met the requirements needed to be under a separate regulatory regime. And so we just think that the how he tests going back to your original question isn't it doesn't really facilitate that process it's very lawyer intensive and we would like a process that's easier to understand so that developers and innovators can do their thing without having to engage white shoe law firms to help them navigate the process.

Frank Chapparro This is the second rendition of this bill that was read that was reintroduced.

Kristin Smith Yes.

Frank Chapparro What what changes did you guys make on that and was that the result of you know different lawmakers reaching out saying this doesn't make sense or regulars make reaching out saying that this doesn't make sense or just make it a stronger bill. How did that sort of...

Ryan Todd Did you work with regulators to form this this bill or process completely flush out.

Kristin Smith Yes. So the token taxonomy Act was originally introduced in December and it was reintroduced again in April. And there were some changes made to it. There were also some additional supporters that were involved in in the new version of the bill and we worked very closely with the offices Warren Davidson and Darren Soto as they were crafting this bill throughout the fall. I think one of the things that is really great about the legislative process. Opposed to the kick case which we want to get into. Or in some cases even the regulatory process is that the legislative process is a very open and accessible process that is easy to be a part of. You just sort of have to know how to engage with lawmakers. But you know there are very very few people who want to be able to just call up their congressmen and go talk to them about an issue. You don't need any special fancy lobbyist to do that any any project any company can go walk in and meet with Congress. And the first version that was introduced we thought was pretty good. We we know that the legislation does a couple of things. The part that we care the most about that we contributed the most to was coming up with a definition of what we ultimately called a digital token and have that excluded from the definition of a security. It's probably by no means perfect but it's a place to start. And there might even be a better way to construct this idea and this concept and we you know are always open to talking about how to better do this. But that's sort of the beauty of the legislative process as you get to throw ideas out and debate them and improve them. The bill also deals with the Investment Advisors Act and some custody type provisions and then it also has some tax policy provisions and they're both a de minimus exemption so that you don't have to pay capital gains if you buy a cup of coffee with bitcoin and also a like kind exchange. The the it's sort of a wish list of things that the folks in the ecosystem would want. And in the bill that was introduced in April in addition to getting a broader set of co-sponsors there was some state preemption language that was included and some sort of technical changes but nothing too substantial on sort of our core issue of what is a digital tokenized. But you know I know from talking with the offices that are working on this bill they're very open to ideas on how to improve it and also are working to to expand the group of supporters that support the bill.

Frank Chapparro It probably. Probably makes sense to tackle everything at once right. I'm thinking you know why not go after something small that can make a big difference like the capital gains exemption which makes a lot of sense right. If you're gonna be using this as money it doesn't make sense to you no tax in the same way as as you know equity that you trade. Why not start small and then maybe you work yourself up to you know completely overhauling you know 80 plus year old securities laws.

Kristin Smith Yeah well I think the issue the tax issues versus the securities issues are a little bit different. I mean we do have some guidance on the tax side and there are some open questions that are out there and the IRS is looking to issue additional guidance. We have this de minimus issue and this like kind exchange issue. Those aren't as immediately as pressing as dealing with the S.E.C. right. Because if you get it wrong with the S.E.C. it's It's strict liability. It's very bad. You don't want to have to go through that process. The S.E.C. is definitely sort of the more immediate I don't say threat but definitely like a concern to the industry that they don't want to get in the crosshairs with regulators and so that just has you know the S.E.C. is like at the door. And so that that's something that I think our members want to try to get that issue resolved first. A lot of the issues you know dealing with like a de minimis exemption and others really the onus there is on sort of individuals who use crypto. So I think it would be useful to get some of these things for for the greater good of the ecosystem but it's not that same level of threat. That being said the you know looking at the legislation the the way Congress is structured is it's a committee system and there are different committees of jurisdiction that have different expertise and you know the token taxonomy act touches on a couple of these different committees and so you know as it moves forward it's very likely that it could get broken off or added to something else as an amendment. And we'll see only pieces of that move. But you know right now if you're a member of Congress and you have constituents that use crypto or you have companies in your district that are employing people in crypto if you want to show your support if you want to take a step to make the US be more competitive in the space you can sign on one bill as sort of a one stop shop. But ultimately it'll probably get broken up into pieces.

Ryan Todd Has there been any pushback or comments from D.C. people who you talk to on a regular basis on splitting those two prongs out from the the tax component and the securities component.

Kristin Smith Yeah. We've talked about it the you know one a quick way to kill a bill is to have it need to go through multiple different committees and we were fully aware of that at the time that that it was getting introduced. But you know in my my discussions with folks on the hill we thought it made sense to have sort of everything under one umbrella at this stage and its legislative process. Is it a little bit of a zigzag. I mean you know to get a bill signed into law it has to be voted on in the house. It has to be voted on in the Senate in identical form and it has to be signed by the president.

Frank Chapparro And so where is it right now. It's in committees.

Kristin Smith It's at the committee level.

Frank Chapparro Which committee is reviewing it?

Kristin Smith When a bill is introduced its so its primary jurisdiction is the House Financial Services Committee which is chaired by Maxine Waters from California and the subcommittee of jurisdiction is the investor protection and capital markets subcommittee which is Carolyn Maloney here in New York. But it also has Ways and Means committee jurisdiction which is the committee that does tax policy and then it wasn't referred to this committee but it could very well touch or need to touch ultimately the House Agriculture Committee because House Agriculture Committee has jurisdiction over the CFTC or potentially the House Energy and Commerce Committee because they have jurisdiction over that Federal Trade Commission which could also play a role in this. So having to go through four committees is not not fun. So if we can break it apart into pieces that would be much.

Frank Chapparro So where is it at. I mean I guess it's going to be at different levels that each one of those committees is it farther along further along in one of those committees.

Kristin Smith No no. So right now it's just sitting in the House Financial Services Committee and you know when bills are...

Frank Chapparro How long could that be in there?

Kristin Smith Could be forever. It's not gonna be forever if we do our job right.

Ryan Todd What's the realistic assumption of success timeline wise.

Frank Chapparro Just pull up that you know that old cartoon what's it if you want to be a bill.

Kristin Smith Yeah I'm just a bill on Capitol Hill. It's yeah it's a little little a little more complicated then that song but it ultimately needs just to sort of follow some of the key key parts of that with that song covers. But I know when a bill is introduced it is always referred to a committee as sort of a automatic matter and then you know the committee itself is divided into subcommittees and so you know the entire committee process in theory could be bypassed if the leadership of the House or the Senate wants to sort of fast track something there's processes for doing that. But the the typically an especially something of this nature which is pretty technical. Most of the work is going to be done in the committee process. So right now it's at a point where we're working to build support from additional members of the committee by getting them to sign on as co-sponsors. We're also looking to get legislation introduced in the Senate. The Senate is quite a bit further behind in the education process than the house but we're working to...

Ryan Todd Is there a reason for that or...

Kristin Smith I think it's just because they're older.

Frank Chapparro It's harder to get them I'd imagine.

Kristin Smith Yeah there is. There's kind of a saying that you know if the House is sort of the tea cup and the the Senate is like the saucer that cools the tea cup so you know the House members are elected every two years they tend there's a lot more of them. They tend to kind of try to find these little niche issues and be you know a little bit quicker to respond. And the Senate is you know that's where the debate happens or they're a little bit more sort of thoughtful and you know there's less of them. And yeah. This happens across all.

Frank Chapparro How do you go about convincing these people to support this bill is it just fancy dinners is it calling their offices.

Kristin Smith I wish I could take them out to family dinners. You can't do that anymore.

Frank Chapparro What does it involve?

Kristin Smith It involves a lot of conversations and a lot of education. So before you can get into the details of the how we test and why we think you know open blockchain projects don't have the same information asymmetry is another project.

Frank Chapparro You probably start with what what's Bitcoin.

Kristin Smith Yeah well or Yeah. What's what's blockchain and what's the difference between an open blockchain network and a permission blockchain network because they hear you know it's a I was a staffer on the Hill for for 10 years and you know you sort of take meetings all day from people and you learn about the world by doing meetings with lobbyists and constituents and other people who are trying to get something done. And so there's you know they hear from a lot of folks that are doing sort of permission type things but you know understanding that it's not just about this ledger but it's about the fact that you can have a whole bunch of different people that are interacting and one has sort of one unit without having anybody be in charge of that. That's a different concept.

Ryan Todd What's been the biggest pushback. Maybe it's a specific item within the bill so far that you've heard.

Kristin Smith Well there are a lot of there are a couple vocal opponents to the state preemption language and you know that is something I don't see sticking in the bill forever. There are some lawyers that have had you know lawyers they have like lots of opinions on things. They have had some concerns..

Ryan Todd The crypto Twitter armchair lawyers I'm sure.

Kristin Smith Yes that have concerns about you know the definition and that maybe it's too tied to a technology or what do you do if a digital token is part of an investment contract and you know oh my goodness you're going to have to litigate a whole new set of definitions and you know I my answer to them is we want to make this as strong as possible. Please send me your ideas and your thoughts and precise language changes because you know are our industry we're very adamant that we need to have change happen but we're not wedded to the specific words and we want to improve it. And but we did put quite a bit of effort in on the front end to get to where we are at today.

Ryan Todd For the state preemptive issue. Is there precedent for that not existing for a bill I guess there's no bill so...

Kristin Smith I've worked you know not none in the crypto context but on other issues battling the states is hard. It's their politically savvy you know the governors know the congressmen and know the senators and they have an incredible infrastructure for influencing federal governments and in Washington. And so it's you know that it can be challenging. That being said it would be a shame. To go through this whole process to the point where we finally got a world where these you know sort of functional tokens that are in these decentralized networks there's a very clear checklists to get people to where they want to be and then have different states pop up with their own sort of securities laws where you know there's now this patchwork that has to be dealt with. So I do think if it's a provision...

Frank Chapparro It's like it's kind of like you know it's a really interesting point I think because that's my opinion on that is you know there's two sides to having states take their own individual approach right. You can actually have certain states drive you know more innovation than others and actually meet the needs the specific needs of of their communities whereas at the same time I'm sure your members you know cry nauseum about just this this patchwork of like complex and varying laws that they have to navigate to operate their business. And from that perspective it must be maddening. But there is this sort of dichotomy or you know.

Ryan Todd It's the world that banks live in. I mean they have to get different state charters to operate these aren't banks.

Kristin Smith Yeah. Oh yeah. Money Transmission license licenses and a lot of companies are just taking it you know sort of one by one. But I think for this you know issue on when tokenized transactions are securities or not that would be one that it would be a shame to sort of undo undo all of that good work if we finally got to where we want it and then and now we have to tackle the states.

Frank Chapparro Let's pivot quickly to the news at hand the big news the pivot. We're going to pivot are going to pivot to the big news at hand which is the S.E.C. lawsuit against kick kick which had a 100 million dollar initial point offering to launch their kin token which would effectively be a token use within their messaging app ecosystem. They were issued a wells notice in November and now basically an injunction and lawsuit today for you know basically issuing what they view as a security Kristen's organization right. Released a defense couple. Let's see what it was February 4th defending them and basically saying what what what you outlined earlier on the show that there are things that should fall under this umbrella. And then there are things that have fallen that that should fall outside of that umbrella given given the utility of a token and whether it meets certain standards. Now Kristen hasn't read the lawsuit yet.

Kristin Smith It only came out about 90 minutes ago.

Frank Chapparro We're putting her in the hot seat and we're going to just sort of go through it and examine what's striking to me is is this idea that let's say there there is a utility to this thing. I'm not a quick expert by any means. I don't know if if anyone really is to be frank but the essentially essentially the argument that I imagine would be made is that if there is utility right then it perhaps should fall outside of these parameters. But what's so striking here is how the S.E.C. outlines how quick was really in financial straits right and they needed money and there's even one quote here that is really fascinating about back in 2017 they had a senior management team and they determined that this was their only option. This is quoting directly from the suit. One member of KIX board of directors soon after discussions began presumably about the ICOs described the plan as a Hail Mary pass. That's a quote from the onset kicks off investors and speculators as a crucial target audience for an ICOs in a meeting on February 16th 2017. Executives can discuss the need to craft an offering that would appeal to quote crypto investors and the growing market for crypto assets. At this meeting can executives and directors anticipated that crowd funders would invest in tradable digital tokens of a non blockchain company if offered good risk return potential. When you hear that in and sort of just passing through that without reading the full document what are just some of your initial thoughts or questions that you might be thinking.

Kristin Smith Yes. So we've had a lot of conversations with Kik. They're not one of our members but we have other member companies that are very interested in what's going on. And I would say that that the team at CEC has been sort of a delight to communicate with. They're wonderful people they've been very sort of open and we've had a lot of back and forth with them. I you know hearing that it sounds that different than the way that circumstances. Were characterized you know sort of to me I mean my understanding is at the time that I think they did a soft originally this this isn't the South but this is sort of a follow on offering.

Ryan Todd there is a reg D for accredited investors and there was also an and there was a public facing.

Kristin Smith Yeah and this this was a sale of tokenized. You know I you know I think that at a very high level businesses that are trying to figure out how to meet cash flow needs and otherwise if they have an asset that they want to tap into in order to do that. In this case you know selling these tokens it seems to me like that that's not horribly offensive but I sort of I think what's implied by what you read is that maybe there was a situation where you know there was some information asymmetry where there is this organization potentially could have you know known that that might be more troubling but yeah it's really hard to know without having read the whole thing and. But I do think that from what I've seen with talking with with the kick folks and others is that you know I think it's it's very brave what they're doing. There are I don't think it's I've never heard of anyone releasing their wells response you know to the Wall Street Journal. Sure they're after they send it that these guys are very organized they have to defend crypto dot org that they're raising money for their legal defense fund even though they are prepared to cover those expenses themselves. They are they are. This case clearly is going to have very broad implications for a lot of people which I think kind of goes back to this point that I don't believe in what we said in our blog post. I guess it was back in February getting policy decisions out of out of courts. It's never too rarely it can be in limited circumstances. It's rarely the best way to get good policy. And you know the courts weren't set up to make the policy they were set up to interpret it and the decisions that these court make are very important. And it could potentially cripple the entire industry or it could set it free and as you know a person who represents multiple industry players. We just have very limited means of influencing that process. And so it's very frustrating that there's something this big is going to be decided by the facts and circumstances of of one single company when you there. There's a much broader you know broader set of points that should be considered. We much prefer an open rulemaking process or to continue through the legislative process than go down this. That being said I think Kik is very right for us for pursuing this. And you know I wish them the best of luck.

Frank Chapparro Can a little after this suit they're going to need quite a bit of luck.

Ryan Todd Definitely gonna ned more than 5 million in my view.

Kristin Smith Well I think the other thing that is a little concerning is courts you know give a lot of sort of deference to expert agencies and how they interpret these. So it really is an uphill battle going into it. But I think it's a battle that's important to be had because you know I think going through this process you know I think we'll learn a lot. Lawmakers pay attention to this sort of thing.

Frank Chapparro The question I would have is. Maybe you know what the we've read like very limited amounts of the suit and and I wish we we had this conversation tomorrow morning right. But but just with what that said. How do you how does your thinking about what to do next. Sort of maybe change or how do you maybe what the token taxonomy act or something else. Try to take into consideration you know and obviously this is all alleged stuff. How do you take into consideration events like like this. As described in the suit.

Kristin Smith Yeah no I think it I think it brings additional urgency to our need to show progress on the legislative front. I mean I am you know as I've mentioned before I worked on the Hill 10 years I was a lobbyist for I guess I got six or seven years since then and I this is an issue that Congress can solve. There is a pathway to do it. It's a little bit of a long pathway and it's going to take a lot of work but we can get legislation done given enough time. Mostly because once we solve this issue of needing to get know congressional staffers and members of Congress educated you know right now we don't have any organized enemies working against us. It's there's not somebody I go in and lobby and do a meeting and somebody coming in after me and I'm doing what I do.

Frank Chapparro Interesting. what would be like a parallel to maybe the world you came from in other lobbying positions where you're you're trying to advocate one thing and then you know.

Kristin Smith Yeah there's net neutrality. I would spend a lot of time working on net neutrality. You'd have the Internet companies come in and be like we need this policy and then you would have the telecom companies and come in and be like this policy is terrible dumb of this policy. That's a situation where and as we've seen the policy has shifted back and forth depending on administrations and and who's in charge and there's a lot of sort of policy volatility if that's a thing. I just made that up. But the this is a situation where it's a very technical issue and and the concerns of it stem I think from a misunderstanding of how it works and what it can do and that over time we'll be able to fix that. And you know if we get this through the committee stage which is gonna be the longest stage this is something that would go fairly easily I think through the House floor. If we can get it through committee they have a fast track processes for these sort of less controversial bills and so if we can get something done on the front end we can we can get this bill done. But having the kit case out there you know that's not going to happen overnight either but it's definitely going to put it puts more pressure on us as you know the blockchain Association to to get some traction in other areas. Now it could be that the kit case ends up going our way. And you know from my conversations they they feel very strongly that they're there in the right and you know I've heard some good arguments out of them and so I'm hopeful you know that the best scenario will happen but I'm also sort of realistic in that as I mentioned before courts tend to give deference to agencies in this situation deceptive situations. And it was it's it's definitely going to be a tough road ahead.

Ryan Todd It's kick through a company to take on the S.E.C.. Do you think there's a risk of whether it's unfairly or not this impacting other other tokens and projects.

Kristin Smith Yeah no I think I think what happens with this case will definitely impact other projects. Even...

Ryan Todd The promising returns or however what we haven't read the... if you remove that aspect from it you still think there's pieces to this that could unfairly impact other tokens.

Kristin Smith Yeah. I mean all this is going to be you know this is going to be sort of a dividing line. I mean my understanding is at the point that they offered this these you know we're selling these talk tokens to to individuals that there there were functional uses for this and that and I could be wrong on this but my understanding was that their code base you know was public it was open source.

Frank Chapparro And that it's also balance with things like you know the CEO saying this is on page 15 of the suit. That's Ted Livingston. This was at a conference in New York in 2017 that this is pro and this is it quoted the primary audience for this initial announcement really is an investor community. So it's like it is a sort of interesting case where like you said you had the code public but at the same time you have these statements it's not exactly so black and white as some were you had some of these products not having anything and going out raising tons of money with with telegram groups advertising it as you know basically sell securities.

Kristin Smith But there are other things out there that you can have gains on that aren't securities right. I mean there's you know I bought this fancy handbag that I have here that it's in limited supply. I could probably go sell it and you know get my money back and then some. We'll do it with watches people do with different commodities all of the time. You know these things aren't securities you know that in you know under securities laws and you can still you know just because you make a profit off of something and that the value of the network grows doesn't mean that it's a security.

Frank Chapparro Let's let's pivot again.

Kristin Smith You love to pivot.

Frank Chapparro Pivoting. Always it's pivot central just so that we do what I want you to read it and then we'll have a follow up conversation on on kik. What do you think is the biggest thing that that's not on maybe your radar or Congress's radar or the regulators radar. That is you know concerning to your members.

Ryan Todd Or even a gap with with industry as well. Yeah the hill to industry.

Kristin Smith The biggest public policy issue?

Frank Chapparro Sure yeah.

Kristin Smith Well I mean I think you know well I would say a lot of these are not on the radar of a lot of Congress. We're working to change that. The you know the tax stuff we were talking about before I think is really crucial to getting right. And but there's still only sort of a small group of people that are focused on that. I think what Vinson did recently is you know sort of bringing up some issues that you know early on in this association. These weren't really a priority for us but all of a sudden they're they're sort of beginning to be so. Yeah. I don't know if there's anything.

Frank Chapparro There's something about Vinson having or minus saying something to do with Vinson having a yellow book of approved Bitcoin or crypto addresses. Is that something.

Kristin Smith Oh I'm not familiar with. No. This yellow book I'd like a copy though.

Frank Chapparro But what were you saying.

Kristin Smith No I'm not sure there's anything that's not on the industries you know that that's a that's an issue that needs to be on the radar other than the issues that we have. You know still for a lot of these folks I I've told this story I have a former member of Congress not current member of Congress I met with once and I told him I worked at the blockchain Association and he said to me he's like Oh is blockchain publicly traded like Bitcoin. And I thought to myself there are so many things wrong with that sentence that I'm not totally sure where to begin. So I think we have I think we have enough enough issues out there. I do think there is one argument out there that is not being discussed that would be good for all of the different issues that we're tackling and this is Union Square Ventures talks about this quite a bit but that you know crypto networks are the solution to any concerns we have about Internet monopolies because you can have these systems where individuals can come together and compete. You can have individuals that can control and sort of port their data to different applications and a lot of what we don't like about the Internet can be solved with this and that is something that I don't think is yet at the forefront of what the House Judiciary Committee is looking at now that they're doing this investigation into some of the big Internet companies. We've had discussions at the staff level but I think that there is an answer to policymakers concerns that doesn't necessarily involve you know traditional antitrust policy interventions or otherwise it's sort of dealing with this obscure securities issue. If they were to take that on that could actually solve a lot of the things that they're concerned about so that that's an argument that we we use. But it's a fairly sophisticated argument and it takes the right background for that to be useful or interesting to different policy makers.

Frank Chapparro You mentioned before we hopped on and turned on the recording equipment that there are kind of three different routes right there's regulatory there's you can go agency and then what was the third.

Kristin Smith Well there's courts the regulatory slash agency I would put that in the same bucket. Others the courts and there there's Congress and we have three branches of government. And there are different pros and cons to taking each route.

Frank Chapparro So what about just the two about I think we either talk about in the beginning or earlier on you know Jay Clinton set to step in the end of his term as the summer I'm pretty sure. Do you see a new person coming in who might be more crypto friendly that they might completely change your strategy in terms of how your. You know you approach getting different you know changing the way the space is regulated and governed.

Kristin Smith Yeah. So the way the FCC is set up. The FCC is an independent agency. And so unlike maybe the Treasury Department or the Department of Energy or the Department of Education those are directly sort of executive branch agencies that are under the control of the president. These independent agencies like the FCC FTC CFTC and others are made up of commissions that are appointed by by the president but have representation for both parties. So Jay Clayton is you know he's the chairman. He is he's actually technically an Independent. He's not a Republican but his term actually goes through June of 2021. So if he decides to stay for his full term he will be around a while. But I think that. In our conversations with him I I don't get the sense that these are his favorite issues. You get the sense that well I don't think he signed up for this. I mean that's just he didn't say that but that's that's that's my personal opinion. But you know he has very legitimate concerns based upon what happened in you know sort of 2017 and 2018. And whereas I think for those of us in the industry we have sort of moved on and we're like oh good. All those you know fraudulent ICOs scams have gone away and now we're left with like the good core group of people and we're moving forward. I think he still remembers those days as if they were yesterday. And I think that's sort of where are our differences are. And so I think that you know when when he moves on and somebody new comes in we might be able to have sort of a fresh conversation where that sort of taint of all those bad actors that swarmed into this place into the space might not be as strong with somebody new. So you know we will continue to engage with the S.E.C. and have our conversations with them. But you know we might be on hopefully a stronger footing with the agency when when somebody new comes in.

Frank Chapparro Do you engage with the CFTC on things is it different than the S.E.C..

Kristin Smith Yeah our immediate priorities don't fall under the CFTC but they are very very engaging to work with. They you know they invite us at the blockchain Association and our members to speak on panels. They have a technical advisory committee that some of our one of our members Richard Gorelick with TRW chairs. They are they're very much sort of open doors. They want to have conversations. It's it's a very friendly sort of welcoming agency there. They're just eager for information and dialogue which is which is wonderful. Now they don't have sort of a direct jurisdiction over you know especially sort of the projects side of things. There is a lot of communication I think between our exchange members and and the CFTC as well as like our traders and the CFTC because of you know there is some limited jurisdiction that they have over those entities so there is a lot of back and forth there. But I would think you know as far as agencies go there you know fairly fairly open minded and very eager to have dialogue.

Ryan Todd We've talked a lot about the Hill. Can we talk about a little bit industry members curious if there's any disparity and members that you currently have whether there's different stuff they want.

Frank Chapparro Yeah that's interesting. Are you kind of like the parents sitting in the middle and trying to figure out.

Kristin Smith I wish I was more like the child sitting in the middle I just do what I'm told.

Frank Chapparro You have to love them all equally.

Kristin Smith I occasionally pull out a favorite depending if they've done something very bold. But no no I I I I have to say this is the group of members with the blockchain Association are wonderful engaged group but I think it's sort of a reflection of the industry everybody's very excited. There is this sense that we're in it together and that you know we need to coordinate on on these efforts. We haven't had any major issues yet where there's different focus obviously depending on the different player different pieces might be more critical than others. But this issue of getting clarity on when securities laws apply is definitely number one. We also have some members that are very interested in getting the FCC to issue guidance to FINRA so that more broker dealer applications can be approved for qualified custodians or just even just sort of more general broker dealer applications can can start making it through the pipeline. So some people are much more focused on that that piece of it but we haven't had any you know if we ever had an issue where there was a major split between the association we just wanted to engage on the issue. That's sort of the standard practice of how these trade associations you know work in Washington D.C. I do sense sometimes with my members there is a sort of a little bit of different you know a difference of opinion of how strong. We're aggressive to be when something happens.

Frank Chapparro So that's great.

Kristin Smith Yeah it's pretty mild it's usually easily addressed by getting on the phone or getting on an email chain with folks.

Ryan Todd Now what about new membership. You mentioned a lot of the members you have now are crypto native companies but with the flurry of announcements continue to come out. More go on Facebook. Global coin. Is there any potential for more traditional tech and financial institutions either. Well I.

Kristin Smith I think we're pretty strong right now because we are fairly focused on crypto. You know there might be a time where it makes sense for for one of those organizations to join. I mean from what I know about JPM coin and I don't know much about the Facebook project. I don't know if that's because I haven't done the research or a fact.Yeah I can't imagine that those are.

Frank Chapparro The interests might be very different. I mean the interests in terms of what they're doing might be very different right. Like JP Morgan with with JP Morgan coin that's a that's like a private blockchain right.

Ryan Todd Yeah yeah. Internal settlement.

Kristin Smith Yeah I mean we we have some members that you know a lot of them are focused on sort of these open blockchain networks we also have some that in addition to that you know are interested in seeing a more vibrant securities tokens market whether that be you know sort of because they want to custody those or they want to trade those because they have an 80 yes or no there is that is we have member companies that definitely have an interest in that too. Now there's not a whole lot of public policy issues there outside of the custody piece. So you know I don't know if companies would want to join a public policy association if they didn't agree with the public policies that we're pursuing. So but if they agreed with us. You know I like I like a more budget. We can we can do more things and speed up the pace at which we can get this. The change that we need.

Frank Chapparro What does it look like on the ground floor. I mean you've seen it from from every. I mean just like lobbying in general and working on the Hill you've got to have some some interesting stories whether when you were a chief of staff for a congressman working working for different congress people and then you know lobbying those on the other side lobbying them. What what did you glean over that. I mean 15 20 years almost.

Kristin Smith No it's some. Have you ever watched Veep?

Frank Chapparro Yeah I know I was just yeah you would Veep. Are you the one guy who's always bothering the vice president. Running for president?

Kristin Smith No I think is it Amy?

Frank Chapparro So you're Amy?

Kristin Smith Yeah I think I'm I think I'm Amy.

Frank Chapparro I think I'm I haven't gone to the part where he actually runs for president is like the Trump figures. Handler.

Kristin Smith No it says so. Veep is the most accurate show about Washington D.C. I have ever seen.

Frank Chapparro Have you ever walked out of a meeting just beside herself like when Amy runs out on. What's the name of the show. Mariah's C.C. Myers. Meyers something else.

Kristin Smith It's. Yeah it's it's a listen. It's a wonderful process I shouldn't I shouldn't sell it short. It's it's really amazing. You know and again my background's on the congressional side so sort of speaking from that piece you have people from all over the country from all sorts of different backgrounds that went to you know all sorts of different colleges and universities that really represent a cross-section of the American people. It's an amazing group. But but yes there's a lot of politics there's a lot of little spats about things that to somebody on the outside seems ridiculous. But to somebody on the inside it's like.

Frank Chapparro What would be an example.

Kristin Smith Oh you know who voted for who for leadership and things like that that you know somebody on the outside doesn't seem to matter. But it's it's it's a wonderful place. There's a lot of energy. I mean I remember working on the hill and you know people would come in and they would sell these fancy words and I understood maybe half of them. But you know you still managed to help them with you know legislation and things like that. So I guess maybe the most surprising thing is how sort of young and not uneducated or inexperienced but you know just maybe an experience is the right word but there's a real desire to do good things. But no. So working with crypto has its own unique set of challenges it's it's complicated but it's also it's kind of sexy. Like once people sort of get into it they're like oh wow you know about blockchain and gee that's like cool and like yeah it's awesome. So it's. But I think what's maybe different is just like I was mentioning before the enthusiasm level of participants in the industry. They're so excited they're happy to come to town they're happy to do this. I've worked with other trade groups in the past representing them where you know everybody's you know 65 years old and they're getting close to retiring and there's not a lot of sort of youthful energy whether it be actual lake youth or youth and spirit. And so I think that's what's fun about crypto is everybody's just eager to learn and excited to be a part of it.

Frank Chapparro What drew you to this space and why do you feel compelled to basically you know advocate on behalf of it.

Kristin Smith Yeah. So I I think of the coolest job in Washington. And it's this is the dream job. I never knew I wanted to tell I had it and I was very interested in technology policy early on in my career which I guess was maybe the result of the fact that I happened to work for the guy who was chairing the Commerce Committee subcommittee on tech and telecom so I got really involved in those issues but I really enjoyed it and did a lot of work on net neutrality in the very early days back in 2006 it was a big fan of the Internet. And then the Internet sort of started to grow up and I was not so much a fan of the Internet anymore. I was very concerned about privacy. Only recently started engaging on social media because I was never a big fan of any of that stuff and so when I was lobbying one of the clients at the firm I worked at was Overstock.com and you know they have a lot of e-commerce issues that I had experience on but they were doing this you know blockchain stuff. And so I think I knew that I had the bug really bad when I actually said no to dinner at Le diplomat which is like one of my favorite spots in D.C. on like a Saturday night with my girlfriends because I needed to finish watching a YouTube video proof of stake or something. And I think that's when I knew I was like I got to be a part of this industry somehow in a more meaningful way. And so I feel so lucky that the blockchain Association came together and that you know I got to help them with this effort.

Frank Chapparro Well you're definitely making a meaningful impact and we're we're so happy that you joined us today to walk us through exactly you know how lobbying works to to kick on short notice and then just you know the tech token taxonomy actress saying that five times but we appreciate it. Get back to D.C. safe.

Kristin Smith Thank you.

Frank Chapparro Ladies and gentlemen. Thanks so much for listening and we'll catch you next time. We'd like to take a minute to thank our sponsor Kashyap Kashyap has been the number one in finance on the App Store for almost two years. It was the first major peer to peer payments app to support bitcoin and it's still the fastest easiest way to onramp VR. No more waiting five days for your HGH TRANSFER TO COME THROUGH WITH CASH app. You can buy Bitcoin instantly when you're ready to take full ownership of your private keys. Just use cash left to scan an external wallet QR code. It's really that simple cash app also comes with standard banking features like direct deposits and others your bank would never even consider like cash card. A customizable debit card that lets you instantly save every time you use it at lift Whole Foods play. Chick fil A Starbucks Dunkin local coffee shops and a whole lot more download cash up today from the App Store or Google Play.

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