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Peter Van Valkenburgh and Muneeb Ali on Crypto & The Law
June 28th, 2019
About this Episode
This episode features a conversation between Peter Van Valkenburgh - Director of Research at Coin Center, the leading non-profit focused on the policy issues facing cryptocurrencies like Bitcoin - and Muneeb Ali, CEO of Blockstack PBC.

Peter and Muneeb discuss Coin Center's mission and recent work, Facebook's Libra Coin, the case for a true electronic cash, and more.
Show Notes
  • 0:00:50 Peter's bio
  • 0:01:09 Peter: "[Coin Center] was my first big job out of law school."
  • 0:02:58 Muneeb: "You're OG now. When did Blockstack start sponsoring Coin Center?"
  • 0:03:18 Peter: "Coin Center got its start in 2014. We got some really generous runway from a couple of donors who are just individuals who wanted to see a more adult advocacy organization in Washington, D.C. focused on this stuff."
  • 0:04:56 Peter: "Coin Center is supposed to be an independent digital civil lIberties organization that goes and represents the underlying open technologies to Congress or to regulators."
  • 0:06:08 Muneeb: "I simply say [the people at Coin Center]... actually understand this technology and they understand the regulations and the law, which is a rare combination. And they can be the right bridge between this technology and the various regulators or lawmakers."
  • 0:06:29 Peter: "I think that's right. A lot of what we do I often think of as translation."
  • 0:07:13 Peter: "More often than not we're explaining the law to lawyers in this space."
  • 0:08:51 Peter: "There's no company - and all previous financial regulations - almost all - rely on finding a regulated entity and obligating that regulated entity to achieve the policy result that government wants."
  • 0:09:37 Peter: "In the Bitcoin case, who's the issuer of the Bitcoin security?"
  • 0:09:52 Peter: "Who in the Zcash space should be obligated for money laundering compliance?"
  • 0:11:38 Muneeb: "One of my working theories is that Satoshi Nakamoto - whoever that person or group of individuals were - not only understood computer science, distributed systems, applied cryptography, and game theory, they actually knew securities regulation as well and that's why we don't know who is Satoshi Nakamoto."
  • 0:12:42 Peter: "The policy objective that securities law seek to address are correcting the asymmetric information between issuers who are promising things to investors and the investors who've paid money to the investors."
  • 0:13:51 Peter: "There are still the potential for information asymmetries. And I've sort of gotten into this debate with Angela Walch before about whether there's information asymmetries between software developers and the users of a software."
  • 0:15:35 Muneeb: "Speaking of securities regulation I should just make a note here: we have a public filing with the SEC."
  • 0:16:13 Peter: "From my perspective [Blockstack] has taken a really responsible and conservative approach to securities law compliance."
  • 0:17:06 Peter: "I'm not a huge fan of the way we do investor protection in this country because it's very permissioned and it also excludes a lot of investors from participating."
  • 0:18:58 Muneeb: "We actually had you host our Blockstack Summit in Berlin, and you interviewed Edward Snowden there. How was that experience? And has he been more active in the space? Or was that a one off thing?"
  • 0:19:32 Peter: "That experience was awesome - it's still probably one of the craziest things I've ever done."
  • 0:22:36 Peter: "I do think [Edward Snowden] has been quasi-active in the Zcash development community."
  • 0:24:43 Peter: "He's worked on something really cool with the Freedom of the Press Foundation, which is if you have an old cell phone and want to turn it into an alarm system."
  • 0:26:16 Muneeb: "Have you checked out any of the latest stuff that's been built on Blockstack?"
  • 0:26:24 Peter: "I have a real interest in Graphite, which is the Google Docs type app."
  • 0:27:05 Peter: "We've been looking for a long time for some sort of non-Google "Can't Be Evil" alternative to Google Docs."
  • 0:29:29 Peter: "Network effects are a bitch, to put it a somewhat grotesque way. If you're talking about a communication system or a system where people pay each other, the systems that succeeded are not the ones that were best architected."
  • 0:29:55 Peter: "Just look at all the attempts and failures at doing encrypted email."
  • 0:30:16 Peter: "You're just going to default to the one everyone's on, even if it's not great for privacy."
  • 0:32:32 Muneeb: "We're super excited to have [Neal Stephenson] at the 2019 Summit in San Francisco. I think Naval Ravikant is going to have a fireside chat."
  • 0:33:40 Peter: "The Diamond Age describes Zcash."
  • 0:36:01 Muneeb: "Coming back to this idea of decentralized applications - one model I have in my mind was when Linux was starting."
  • 0:38:51 Peter: "Maybe decentralized apps will have their best success early on in those sort of niche enterprise / highly technical persons use-cases."
  • 0:40:16 Peter: "Good luck getting a bunch of lawyers even to this day to group edit a Google Doc, let alone use Graphite."
  • 0:40:24 Muneeb: "I think we knew that Linux won the server wars when even Microsoft started using Linux in their data centers."
  • 0:40:32 Peter: "[Microsoft] has done a total 180, probably because they saw the writing on the wall as far as their consumer software business."
  • 0:40:56 Muneeb: "What do you think of Facebook Libra?"
  • 0:41:05 Peter: "I have a lot of thoughts about Facebook Libra. I should be careful about what I say because I don't want to be unfair."
  • 0:41:30 Peter: "It's a really complicated system they're building that is still nonetheless permissioned. It's a permissioned blockchain."
  • 0:42:29 Peter: "[Libra] is not an open blockchain. It's not a blockchain where anyone can add transactions to the ledger and independently verify the transactions."
  • 0:43:15 Peter: "With Bitcoin, there's a lot of regulations that don't apply because it would be nonsensical to apply them because there isn't a centralized intermediary who you can trust to achieve the policy result you want."
  • 0:43:32 Peter: "With Libra, that's not true at all. There are identified parties who you could trust to achieve the policy result you want."
  • 0:43:56 Peter: "Even if you're an individual, you're not allowed to transact or interact economically with someone on the SDN list, like everyone in Iran."
  • 0:44:42 Peter: "The Libra association is going to be this group of identified persons, which are really just corporations, including Facebook, Visa, and Mastercard. Whose laws are they going to comply with with respect to sanctions?"
  • 0:45:21 Peter: "[Libra's] not censorship resistant cash. It's not really a cryptocurrency. It's just another payment rail. Why build it in such a complicated way?"
  • 0:45:43 Peter: "Another thought is the whole reserve thing. So aside from being permissioned vs permissionless, Lbra is going to be asset-backed."
  • 0:46:36 Peter: "If you are a company that has assets in a reserve, and people are trading - effectively - a pro-rata share of the value of those assets? That sounds like a security to me."
  • 0:47:16 Peter: "And yet, I don't think there's plans to register Libra as a security because, frankly, if you did, it would be very useless as a currency, because it would only be allowed to be traded on securities exchanges."
  • 0:48:09 Peter: "I've never seen such a rapid and aggressive response from members of Congress to a new tech project."
  • 0:49:28 Muneeb: "Do you think the reaction from Washington is linked with some of the antitrust stuff as well?"
  • 0:50:07 Peter: "Maybe they thought, 'This is us proving that we're investing in being less powerful'? Kind of like how they talk about WhatsApp a lot now."
  • 0:51:03 Peter: "People in Congress ... are gonna say, 'This is Facebook, who some of us are already talking about anti-trust issues, and now they want to become the global reserve currency for all payments everywhere?"
  • 0:51:40 Peter: "If any company is going to build a payments tool, they should build cryptocurrencies. I'm just disappointed they didn't basically fork Bitcoin or integrate it."
  • 0:52:13 Muneeb: "That's what they say in the whitepaper, 'We're giving ourselves five years to figure out how to build an open system, but in the meanwhile - because of scalability - the only way to scale to a billion users is to use a closed system."
  • 0:52:54 Peter: "I've heard a lot of people say that Move, the smart contract language [Facebook's] architected, is apparently extremely elegant."
  • 0:53:17 Muneeb: "The motivation for Move is very similar to the smart contract language that we launched yesterday, Clarity."
  • 0:54:38 Peter: "God knows that Solidity has had this particular issue where it's hard to know exactly what you just wrote in a smart contract until you launch it on Mainnet and someone breaks it in the DAO hack example."
  • 0:55:44 Muneeb: "Ethereum is very interesting. They have a large community and kind of started everyone in the industry in a certain direction from a technology perspective. And I believe that most of those things were wrong."
  • 0:57:05 Peter: "Maybe the network effects are just age-based, but it could also be this willingness to push stuff out there maybe before it's fully manicured or even fully compliant with the law."
  • 0:57:51 Peter: "I should disclose that I'm a member of the Zcash Foundation's Board of Directors."
  • 1:00:00 Muneeb: "I swear we're not doing this on purpose, but every decision we make ends up being the exact opposite of Ethereum."
  • 1:04:13 Muneeb: "What's the biggest project you're spending your time on these days?"
  • 1:05:50 Peter: "We were faced around a year and a half ago with, 'What's going to be a big issue in a year or two years? What do we need to start laying the groundwork on from a policy perspective now in order to have good policy outcomes later?'"
  • 1:07:12 Peter: "Bitcoin, I think, ultimately needs to change and be more private and a lot of the privacy coins that we now see were originally proposed as amendments to the Bitcoin protocol."
  • 1:08:38 Peter: "Any of the very public blockchains will ultimately need to find ways to obscure that transaction graph because, otherwise, we're gonna just be giving totalitarian states the best tool for mass surveillance that anyone's ever developed."
  • 1:08:52 Peter: "So, with that in mind, we said 'What are the policy issues here?' And the big ones are anti money laundering law."
  • 1:09:18 Peter: "Bank robbers use getaway cars. Even terrorists use encrypted messaging. This is just a reality, but that doesn't mean we should ban automobiles and encryption."
  • 1:10:06 Peter: "We use the term 'electronic cash' because it's really like cash then. You can send it from one person to another, no one is in between, it's censorship resistant, and it doesn't leave a record."
  • 1:10:23 Peter: "What if we get some sort of overbearing, overzealous response from policy makers that says we can't have these things anymore?"
  • 1:11:51 Peter: "Most people have written about First Amendment issues here: ... if you're writing in computer code... it's still speech."
  • 1:12:44 Peter: "What I don't think is a well enough explored area are the Fourth Amendment issues. The Fourth Amendment in the US says you need a warrant if you're a law enforcement and want to search somebody."
  • 1:13:43 Peter: "Banks have been reporting our entire transaction history to governments whenever they ask, without a warrant, since 1970."
  • 1:14:12 Peter: "The reason why that's constitutional in this context is because people willingingly hand over those records to banks during the regular course of business. ... You lose your reasonable expectation of privacy because your sharing it with a third-party."
  • 1:15:09 Peter: "There's no reason for a developer to have all that private information about the users of their software. There's definitely a reason for a bank to have a bunch of information about the users of the bank."
  • 1:15:48 Peter: "From a constitutional law standpoint... the only reason why it's okay for banks to bulk collect, surveil their users, and report that to government without a warrant, is that they have a reasonable business purpose to collect that information."
  • 1:16:03 Peter: "There's no reasonable business purpose for an open source software developer to collect information about the users of their software - it just doesn't make sense."
  • 1:16:29 Peter: "If it's interesting to your audience, I highly recommend you pick up our report. It's explained much more carefully and you don't need to be a lawyer or to have gone to law school to understand it."
  • 1:17:33 Muneeb: "Where can people find you?"
  • 1:17:37 Peter: "All our work at Coin Center is made public and made available at CoinCenter.org. And we rely on donations from people who are just excited about the technology and want to see good advocacy in DC."
  • 1:18:18 Muneeb: "Blockstack is a supporter and we've been extremely happy with our involvement with Coin Center. They've been super helpful whenever we need them."
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About Our Guest
I'm Director of Research at Coin Center. JD from NYU, and a 2013 Google Policy Fellow. I write about how legal theory can help us understand the development of self-regulation and self-governance within online communities, and, conversely, how network technologies can improve traditional legal systems.
    Peter Van Valkenburgh