CLARITY: What’s in It for Web3? | John Paller

Welcome back everybody. Here to uh host our next conversation, clarity, what's in it for web 3, is John Per, founder of ETH Denver and co-founder of the Blockchain Cooperative Coalition.

Thank you. [applause] Friday morning, day three. Everybody get some sleep last night? No, maybe. Uh, so we're going to go ahead and bring out our panelists.

We're going to have a conversation about web 3 and the Clarity Act. Uh, it's no secret that uh there's a lot of stuff in there for fintech and big banks and exchanges and things. But, uh, without further ado, uh, Connor, come on out, Kyle, James, and Chris. So, uh, why don't we just start with you, Connor? introduce yourself and we'll just go down the line and then we'll get into the conversation.

Everyone, Connor Spely. I'm the head of global policy strategy at the Ethereum Foundation.

Greetings folks. My name is Aky Blige and I'm the head of policy and public affairs at the Decentralization Research Center.

James Wigington. I am an attorney at Oric and also work with the Blockchain Cooperative Coalition.

Uh good morning everyone. I'm Chris Land, uh, general counsel to US Senator Cynthia Lumis and staff director for the Senate Banking Subcommittee on Digital Assets. Great. So, we got a lot of guys here that know a few things about what's going on in Clarity. We also got a lot of guys here that know a thing or two about web 3.

So, Connor, let's start with you. The Ethereum Foundation has a very um, I guess you could say decentralized approach to policym and has been somewhat hands-off, but you're new to the foundation. but not new to policy. So tell us a little bit about what the foundation's international position is on web 3 as it relates to policy and how are you thinking about that strategy as it relates to clarity in your work with others in the community?

Yeah, I think as a lot of people know the Ethereum Foundation really hasn't been involved very materially in policy globally, particularly considering it's been around for such a long time as compared to other foundations in the space. And that's part of the you know the instincts and culture in the foundation. And the thinking is that there are many other representatives of Ethereum critical stakeholders because Ethereum is such a decentralized community who are the best people and organizations to represent Ethereum particularly in the jurisdictions right like generally speaking in Korea they want to hear from a Korean staker of Ethereum about what Ethereum is more than they want to hear from the Ethereum Foundation. And that's that's exactly what the community is about. The Ethereum Foundation is not, you know, is one of many representatives of the community and and that's been their view for a very long time.

And so I'm not head of policy at the Ethereum Foundation. I'm global head of policy strategy. And that was very deliberate.

That's right.

Right. Because the idea here is that we're not going to be engaging in the kind of traditional way. We are instead trying to help lift up others who in their like own geos want to be part of the process of advocating. Um, and on this front, something you and I were chatting about previously, too, is, you know, what are some of the things the Ethereum Foundation cares about, and I think a lot of people in this room probably have some sense. You know, there are there are true values around things like decentralization, security, robustness of the protocol.

These are all absolutely critical to the foundation and have been for a very long time. And that is typically what they're focused on implementing. And we see the incredible use cases that are cropping up everywhere. and all of the you know financial institutions traditional and kind of new that are building on Ethereum and we think it's fantastic of course but there are other you know other goals we have and I think they resonate with a lot of the builders in the room today the financial use cases are fantastic and and I personally speaking on my own behalf I think you know stable coins are critical looking forward um and we also are very excited about all of the the next use cases decentralized AI um thinking about sort of Dow house at a further scale. Thinking about decentralized digital identity, there are so many use cases that we've kind of touched on a little bit, but really haven't seen scale in the in the same way that we've seen stable coin scale.

And we need to as a community continue to care about all of those things because those are some of the critical unlocks that I think are part of the the vision for the Ethereum Foundation and enabling the builders like those at Ethereum at ETH Denver to um to get there, you know, and and I think it's why it's so important that you put this event on every year.

Well, we're happy to have you and we're glad that you're at the foundation. And I think from my point of view as a one of the people who have I guess you said you could say volunteered myself to be going back and forth to DC trying to push on you know clarity previously genius trying to like really make advancements. U I think it's important that the strategy still be there. So thank you for doing that. Now Kyle you're at the decentralized research center.

um you guys put together on on one of the core topics that I think is very important to the Ethereum community here is privacy and tell us a little about uh tell us a little bit about your work with SEAL and the memo that you guys created and how that collaborative process happened and um maybe as a framework for more issues like that.

Yeah. So well first off John thank you for putting together this panel and this amazing organization. It's been a pleasure uh working with our team, meeting with builders and uh so many entrepreneurs in this space. Um one of the key sticking points right now in the clarity act from both sides of the aisle are ways in which we can address the concerns of elicit finance, right? And so many of the conversations um in Washington DC from the policymaker perspective uh was focused on wrongly focused on uh protocols um and builders.

Um and we obviously want maxed out uh developer protection so that the folks um in the audience and people that go to this congress I mean that the people go to this conference continue to build and and develop innovation here and all across the world um safely um with with the protections you need. Um but a lot of individuals uh in Congress recognize that there are bad actors in the space that want to hack protocols, take assets from consumers. So we took a very very nuanced and niched approach. uh we put together a coalition of organizations uh including SEAL uh Ribbit Capital and um chain analysis to actually look at who are the nation state actors like Russia, Iran, China that are actually going after protocols trying to take assets from US consumers and builders and put together a a concept of a whole of government approach in which the government can create a strategy to actually go after the bad actors that are trying to destroy tech and innovation here while preserving privacy as as opposed to overburdening protocols and and destroying innovation here in the United States. And so we took a kind of niche, nuanced perspective there, worked on both sides of the aisle.

We've gotten great feedback from ours and we're hopeull hopeful that that proposal can ultimately end up in the final version of the bill.

Yeah, I think this is a good example. So for those of you in the in the in the audience here who have issues or topics that are important to you, um I'll say it like this. Up until about two years ago, I would have said I was politically agnostic. And the reality though is that was kind of Uh, excuse my my uh solidity French there, but code is political. Bitcoin's political political.

Ethereum is political. It's all political. Money is political. And so, I've evolved my thinking a little bit um to have to think about being involved in some way. Like, what do I care about?

And if I'm not willing to fight for it, who is? Okay. So, these guys are here. And I think this is a great example of how community collaboration can actually come through where you know relationships and different channels and you know writing good smart legal you know insights or memos to like education is key cuz I think a lot of the R&Ds as you said they just don't know they don't know what we care about because they don't hear about it. What do they hear about?

They hear about how you know exchanges want to be treated because that's who has the money. Seriously. So, um, next up, let's let's talk a little bit about the future of onchain organizations. James, you and I have a passion for the future of, I guess you could say, ownership really. Uh, so the blockchain cooperative coalition, tell us tell us a little bit about that, why you care about it, and then what it like the particular issue that we're actually trying to advance.

Yeah, you bet. I think, you know, maybe the best way to describe what we're trying to accomplish is through a story. So, a few years ago, you probably remember Project Liberty um launched this thing called the People's Bid for Tik Tok. Congress passed a law. They said that Tik Tok had to be sold.

Project Liberty thought, hey, this is an interesting opportunity to see if we could have the American people own a social media platform. And so Project Liberty reached out to my law firm. They said, "Hey, how can we actually make this happen? How can we allow the users to be owners of Tik Tok?" And so we worked and worked.

We wrote a big fat memo and we found that the main obstacle for the users to become owners of Tik Tok was securities regulations. And there is long-standing precedent both at the federal level and at the state level that certain types of ownership interests are not securities. And in particular cooperatives um they have ownership interests that grant dividends based on your own efforts. They give voting power to their members and because of certain conditions and restrictions that are on cooperative memberships, these have not been considered securities. So what the blockchain cooperative coalition has been trying to do is advance legislation that would recognize cooperative memberships as nonsecurities which would allow project liberty or if there is ever you know another opportunity to buy a social media platform or a sports team or an insurance company

or US constitution

or the US constitution I don't know if Graham Novak is here but constitution dow tried to do that right so if there's ever another opportunity to do that we will be ready because we'll have the legis legislation in place to do it.

So speaking from somebody who's been on the inside with you of this, you know, when I think about the future of ownership, there's this concept of like if you talk about just the metaeconomic design right now, the capitalistic the pure capitalistic design that we have is you have capital and you have consumers, right? And what is it something like 90 some odd percent of people don't have any assets in this country.

No, we are a we are a nation of renters, not owners.

Correct. And so the the notion of like and forget the cooperative nomenclature because I think that sounds boring and old, but like when you talk about the functionality of this particular piece of legislation, what what what excites you about the idea of giving people ownership? I mean, what what's the functional outcome when you say we're going to move people from the consumer class to the ownership class and we're going to give them opportunity to particip as participants in business to become owners. From a web 3 perspective, where does that go? Well, I mean this really is this really is foundational to the philosophy of web 3.

Web 3 is about not just, you know, getting rid of boards of directors and officers and all that, but it's decentralization of power. It's decentralization of wealth. And you know what this legislation would do is allow wealth to circulate

instead of sharing. Exactly.

So the securities registration stuff that we've talked about, you can't share profits with nonacredited investors. They can't participate in offerings. They can't invest. Right. Right.

So there's there's a it's a walled garden, right, for people with capital, which is why the capital gets richer and other people don't get to participate. Right.

So all the tokens that we've seen and you're an attorney that works up in startups.

Mhm.

Right. So you've seen a lot of tokens.

Lots.

How many of them have actually been able to share profits with their users?

Zero.

Exactly. Okay. So this is the important part.

Yep. Right? This economic sort of sharing stakeholder capitalism, we talk about it in web 3, positive sum games, stakeholder capitalism, all this. This is the legal plumbing for that.

That's right. And I was I was grateful to Commissioner Pur who yesterday recognized that you know here to for

um a lot of the tokens whereas Thank you. I'm a lawyer. I have to um you know many of the tokens don't have the full package of rights that you would normally get with equity and we're looking to change that. We think that equity is the gold standard of ownership and it should be more available to people.

Chris, uh, Wyoming is known and obviously you work at the federal level, but you know, you're a Wyoming citizen, resident. Um, thank you for coming, by the way, and thank you for um, demonstrating and showcasing our regional coalition. We're very uh grateful for Senator Lumis' support and uh Governor Gordon and you know guys like Tyler Lindholm and the crew um and yourself. When you think about Wyoming and some of the laws that have been built there like the DAO legislation, the DUNA, you know, these are about these are in that sort of epicenter of trying to deliver, you know, better sort of frameworks, more flexible frameworks for ownership, um less regulatory red tape. What are you seeing at the federal level around clarity if anything even as it relates to like I mean DeFi is going through some of this like there's like all sorts of like green field things that are happening.

What do you see as the most important? The most important from Senator Lumis' perspective is that we, you know, enables we build on the good work that's been done in Wyoming and other states in Colorado and other states to provide flexibility and legal certainty for those states to continue to grow their own economies to continue to build their legislative frameworks and to give flexibility for, you know, new modes of technology and new modes of regulation to really, you know, rise up. Senator Lumis has been really focused from the beginning of taking what Wyoming's done and exporting it nationally and making sure that we have enabling legislation that at the same time provides legal clarity and protects consumers but also enables innovation. We, you know, we love to provide safe harbors instead of being too prescriptive. Um we're we we're just trying to make sure that we are not hamstringing economic development and the development of technology in this country.

Um the most important thing is also that we don't want a bill that in 10 years is stale or you know outmoded or has to be replaced. We're really in clarity. We're really focused on trying to pass legislation that will stand the test of time 20 25 years, 50 years. You know, something as fundamental as the 33 act or the 40 acts. You know, we've in the office we've started an anecdotally calling the Clarity Act the 26 act.

And um you know, you hopefully it finds that way into the to the lexicon at some point in the next few years. Um but yeah, um that's kind of our approach to how we're working on legislation. If there were a interested citizen, contributor, person, community folks that's interested in uh actually advancing a topic, Chris, um you're on the inside. We're all on the outside looking into the black box. What's the best way from your point of view?

Some some states have very anti-crypto senators or whatever. Uh they're maybe not so ripe for talking to them. How do they get involved? Um, you know, it all it all starts just like, you know, in I'm just a bill, Schoolhouse Rock, um, which is one of my favorite shows of all time. It's, you know, making your voices heard to your your state legislators.

In general, state legislators have more time and more, you know, have more of an open door policy and, you know, we'll meet with you and hear your concerns and see if there's something that can be done. Um, starting at the state level is a lot more a lot more beneficial usually than going straight to Congress. Uh, Congress has a lot of issues on its plate. Um, and Congress typically reacts to legislation that's done at the state level. Um, so I would say, you know, reach out to your state legislators, get involved politically, write a letter to your state legislator and, you know, go from there.

That's good advice. Decentralized AI. We have centralized AI. We've seen it. Everybody knows what that looks like.

um open clause sort of it's open source right is it decentralized not sure about that exactly but there are lots of people working on it from a policy perspective I'm curious to hear your guys's individual views and Connor let's start with you I think when you say when I if I were to say AI is going to change everything I don't think I'm underestimating that from a policy perspective as it relates to web 3 and really driving things like decentralized AI and privacy and ownership in these things. How do you see AI fitting into this tapestry? And then after you go then, you know, Kyle and James and Chris.

Yeah. And I I have to say I'm I'm certainly no expert on AI, but I I am fearful of a world in which a very small number of companies have massive centralized AI into which we put all of our data as I'm sure a lot of people in this room are. And we had a great conversation.

It's like the banks for intelligence and that's a bad thing.

It's very challenging. And we had a great conversation with the commissioner Pur yesterday and she brought up decentralized AI as something that she was really interested in. And you know one of the major impediments of course is competitiveness of the product. Like from my perspective as a user in order for me to use decentralized AI I need to know that it is still a good tool and I might defer to another product that's centralized if I feel like I can get a lot more done. And that's why we have all these amazing builders in the space and why I think it's critical that we continue to think about what blockchains can do outside of exclusively the financial use cases because the ways in which blockchains can be critical to you know a rails for agents but also decentralized AI and we have a lot of builders in the space who care a lot about this.

The Ethereum Foundation has a decentralized AI team. I look forward to seeing what everyone can build because in order for it to be something it needs to be competitive. We can't just want it to exist.

Great. So let's uh we we're slightly over time so let's rapid fire down the end.

Yeah, I would say decentralized AI is going to be policy priority for the DRC uh moving you know past crypto. I think one of the key uh policy areas need to be resolved for policy makers and for the general public is how can individuals delineate between agents and actual humans operating on chain while still preserving um private private data during those transactions. And so the DRC will be dropping some research and some policy positions on that uh forthcoming.

James,

so if AI is coming for all of our jobs, including attorney's jobs, and we're all out on the street, the only people who are going to be able to use AI are the people who own AI. And so we need to put in place systems that allow people to own AI models and everything else. Um because otherwise we're going to have this twocl class system that everybody's so worried about.

Chris, well I'm happy to say that AI is going to be someone else's problem. Um I'm going to have I'm going to be on a ranch and be tending some cats and horses uh in a couple years and I'll look with great interest on what y'all are doing in the AI space.

Yeah, crypto crypto's uh crypto has been a lot. Um, and we're looking forward to getting the Clarity Act across the line so that we can let builders um, build um, and we can, you know, see how crypto is going to transform um, economic opportunity in this country.

All right. Well, round of applause, guys, for our panel here. Thank you.

Thanks, John. Thank you.

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