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Anna Delaney: Hello and welcome
to the ISMG Editors' Panel. I'm

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Anna Delaney and this week we
have a cryptocurrency special

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for you. So fasten your seat
belts. It's going to be quite a

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ride. And to lead us on this
adventure, we are joined by

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Captain crypto - Ari Redbord, a
former Treasury Department's

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senior adviser, and now head of
legal and government affairs at

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TRM Labs. And of course, Tom
Field, senior vice president of

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editorial; and our very own
cryptocurrency reporter, Rashmi

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Ramesh. Also, senior sub-editor
for ISMG's global news desk.

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That's a long title, Rashmi. I
got there. Well, what a stellar

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team. Good to see you all and
Ari, thank you so much for being

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with us.

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Ari Redbord: No, love being with
you guys. Thank you so much for

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having me.

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Anna Delaney: So before we
launch into this grand debate,

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we have two important
anniversaries this week. Tom,

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congratulations. 15 years at
ISMG.

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Tom Field: Ever since I was a
lad. Thank you so much.

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Anna Delaney: And this is the
80th editors' panel. Can you

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believe?

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Rashmi Ramesh: Oh, wow.

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Anna Delaney: Wow. So Ari, if
you hang around for the 100th,

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we'll have a bigger celebration.

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Ari Redbord: I'm incredibly
honored to be a part of this. It

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looks like, Anna, you're already
celebrating something.

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Anna Delaney: I am. In fact I
got the disco ball out. I am at

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Poco in London. This was a gig
last week in Camden, with

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spectacular interiors. But as I
said, to celebrate. Ari, where

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are you?

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Ari Redbord: I am in Utah. I
spent about a week at the end of

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the summer with my family on the
Colorado River and through some

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of the amazing national parks.
So I thought this would be a fun

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background for today.

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Anna Delaney: Awesome. Rashmi,
you the same place. It looks

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quite similar really.

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Rashmi Ramesh: I'm actually very
far away. It's about a couple of

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hours from Bangalore city. It's
a place called Uttari Betta. So

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there's a fort on this hillock,
which was apparently constructed

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back in 1534 by Kempe Gowda, who
was credited to have founded the

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city of Bangalore.

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Anna Delaney: Very good, very
informative. Love it. And Tom, I

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spy a few peacocks on your
shoulder.

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Tom Field: Yes, as a philosopher
named Fogerty once said, "look

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at all the happy creatures
dancing on the lawn." My front

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lawn.

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Anna Delaney: Alright, this is a
party. I've got to say.

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Ari Redbord: It's a party.

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Anna Delaney: So, Ari. We have a
few questions for you. I hope

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you got some water handy. Tom,
lead the way.

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Tom Field: As John Fogerty or
not?

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Anna Delaney: Absolutely.

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Tom Field: Ari - captain crypto
- the peacocks and I would like

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to know, given everything we've
seen over the first eight months

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of this year, what are the most
meaningful crypto related

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regulatory actions that you have
seen so far globally?

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Ari Redbord: You know, honestly,
it's a tough question. There's

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been so many. And it's really,
you know, normally that we live

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in a world where things slow
down a little bit in the summer,

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I think what we've seen over the
last three or four months is

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really things accelerating in
many respects. When I think

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about sort of the real
regulatory milestones, you got

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to start with MiCA, which is the
markets and crypto assets

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regulation coming out of the
European Union. You know,

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implementation is still to come,
you know, ultimately, but what

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we've seen now is an agreement
on really the first

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comprehensive framework for
digital assets globally. And

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what that means is, you know,
what's so extraordinary about

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crypto is crypto really affects
every aspect of policy, right?

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Environmental, consumer
protection, anti-money

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laundering, it affects taxation,
and you know, domestic finance

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globally. So, what we've seen
out of MiCA is really the

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attempt by the European Union,
the European Parliament, to come

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up with a truly comprehensive
framework to address all of the

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different issues. Currently, a
bill has been proposed very

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early days in the U.S. Congress,
that sort of has a lot of the

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same aspects. In other words,
sort of this comprehensive

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framework, but that is
potentially years away from, you

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know, passage and ultimately
implementation. So today, I

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think if you're talking about
sort of what is the big

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regulatory story over the last
few months, it's certainly been

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MiCA. But really, I mean,
there's been so much more. You

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know, we've spoken before about
the U.S. Treasury Department,

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rolling out sanctions against
really a first sort of truly

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decentralized entity or if you
will, software protocol, Tornado

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Cash and sort of the
ramifications potentially of

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that. What does that look like?
We've seen North Korea continue

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to go after, you know, DeFi
protocols/bridges within the

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crypto space. Rashmi has written
extensively on these topics and

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done a wonderful job of really
covering this space, but there's

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so much going on. Hard to just
pick one thing, but from a

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regulatory perspective, it's has
been pretty extraordinary this

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summer.

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Tom Field: Excellent. Ari, I
want to get into Rashmi

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territory here for a moment, and
she'll forgive me. And NFT

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showing support for the Islamic
State has been circulating

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online, as you know. It's been
inciting fears of a potential

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revival of the terrorist
organizations funding. So, if

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the blockchain technology behind
NFTs makes it nearly impossible

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for them to be taken off the
internet, how do you see this

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sort of potential terrorist
activity ever being controlled?

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Ari Redbord: Yeah, no, I think
it's important that, you know, I

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definitely don't want to sort of
overstate the significance of

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what we've seen, but basically,
based on a TRM investigation, we

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identified an NFT that was
clearly created by a supporter

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of the Islamic State. And then
over the course of the same day,

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we watched the creation of
another three NFTs, with sort of

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similar propaganda. You know, we
have not seen these NFTs move,

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we have not seen them
necessarily be used for

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terrorist financing. But, and I
think it's the big but, why I

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believe this is very significant
is, look, in the age of the

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internet, you had centralized
services, you had intermediaries

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like Facebook and Twitter. And
these were go to places for

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terrorist organizations like
ISIS, like Al-Qaeda
, to spread

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propaganda. However, those
platforms were able to

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deplatform that information and
those entities that were sort of

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involved in it. So that was sort
of in the age of the internet.

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But look, in the age of crypto,
in this sort of world where NFTs

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and cryptocurrency move on an
open immutable ledger, when you

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put something on a blockchain,
it is forever. And what I think

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we're seeing here is terrorist
financiers, particularly ISIS in

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this case, or ISIS supporters,
move with all the rest of us to

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a decentralized world where
there aren't intermediaries,

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where it's much more difficult
to deplatform. So the reality

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is, look, when something's on a
blockchain, it's forever. Now,

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you know, to the credits of sort
of intermediaries in the crypto

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space, we've seen NFT platforms
remove this content. But the

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reality is, you can only move it
from those centralized services.

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You cannot move it from a
blockchain. And I think you

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know, the significance here is
really this is the first case

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that we've seen of this, and we
are likely to see more. And I

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think what we could be seeing
here is a sophisticated

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supporter of ISIS sort of
testing a little bit. Hey, is

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this someplace we should sort of
go next? And I think it's really

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early. I think it's significant
in some respects for it being

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the first time.

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Tom Field: Very excellent
insight. And since I stepped on

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Rashmi's toes a little bit. I
want to defer to Rashmi. Now I

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know she has some questions as
well.

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Rashmi Ramesh: Sure. Thanks,
Tom. I know you mentioned MiCA

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earlier. Then there's the
Responsible Financial Innovation

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Act in the U.S. So what do you
think are the limitations of

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these much anticipated
regulations?

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Ari Redbord: Yeah, no. Look, I
think they're both extraordinary

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to the extent that they really
sort of take on this idea of a

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comprehensive framework where
they are touching all of the

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issues. I think in the U.S., at
least, you know, look, with

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MiCA, there's an agreement on.
So I think we're going to start

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to see over the next few months,
you know, maybe next year

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implementation, I think the
limitations there are really,

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it's critical that regulators
within Europe. I think have the

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sort of expertise and the
capabilities that the European

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Parliament envisioned when they
reached agreement on this bill.

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So I think that, you know, it's
obviously always one thing to

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pass significant legislation.
It's another thing for

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regulators to implement it, you
know, across a pretty diverse

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continent of, you know,
expertise or capabilities of

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resources. But I think that like
you're in a great place when

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you've at least reached
agreement. I think the

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limitations that we see today in
the United States, is that we're

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in a political environment where
it's very difficult to reach

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agreement on something that's
comprehensive. And I think

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that's why we may see component
parts move much more quickly

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than we'll see sort of a true
comprehensive framework. For

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example, I think one thing we're
seeing in this space right now

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is relative agreement on stable
coins. You know, in the wake of

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the collapse of Terra, a stable
coin, really, we've seen global

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regulators start to move to this
idea of "any stable coin project

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must be backed by non-crypto
reserves of some kind," at

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different levels, potentially
100% levels. We've seen the New

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York Department of Financial
Services say you can't be a

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licensed stable coin issuer in
the state of New York, unless

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you actually can show reserves.
We've seen in other

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jurisdictions. The U.K. has put
out some guidance that may

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eventually end up as policy or
as law on the same topic. In

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July, I think we really thought
we were going to see a bill on

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stable coins move out of the
House Financial Services

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Committee within the U.S.
Congress. We did not see that

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based on what was reported to
some concerns from Treasury. But

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we're likely to see some
movement on that this fall, as

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Congress sort of comes back. So
I think the limitation of the

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Gillibrand and Lummis bill in
Congress is really just the

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broad nature of it in a
political environment where it's

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very difficult to get anything
passed. You know, we have

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elections coming up in November.
You know, I think that there's a

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lot of focus on that, as opposed
to necessarily passing

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legislation at the moment. But
if there was one area where I

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think we could see some
movement, at least, it's on

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stable coins, because
interestingly, even industry

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now, I think, for the most part,
has come around to this idea of,

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you know, consumer protection,
requiring some level of reserves

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for these projects to ensure
that there's not a terror, you

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know, 2.0.

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Rashmi Ramesh: Right! So
something I hear very often out

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there is that there are barely
any platforms that are truly

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decentralized. But for those
that are, how do authorities

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enforce regulations in a space
that does not rely on the

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presence of intermediaries?

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Ari Redbord: You know, what I
love about you is that you ask

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the easy questions, Rashmi. So
look, there's no question, this

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is the question of the moment.
Right? You know, how do we

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regulate a truly decentralized
space? And the reality is that,

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you know, many, even DeFi
projects today, and this is what

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FATF - the Financial Action Task
Force - the sort of global

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standard setter on AML has said
is, look, just because you call

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yourself DeFI or decentralized
doesn't mean you necessarily

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are. But there are truly
decentralized projects today.

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And the question really, for
regulators is, how do we

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regulate in that space? And I
think, you know, we could look

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to the fallout from sanctions
against Tornado Cash I mentioned

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earlier on the show, and that is
really, you know, the question

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is, are sanctions effective when
they just involve the software

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protocol? And, you know, while
you can screen for sanctions,

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and this is what we do at TRM,
we screen for sanctions on the

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front end, we work with, you
know, DeFi protocols in order to

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do that. You know, there's
always a way in directly to the

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smart contract when you're
talking about software that

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lives on blockchains. So I think
it's a combination of things.

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But I think you will see more
and more discussion by

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regulators, I would say, you
know, in the next year or so, in

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the DeFi space, and really sort
of how to think through these

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challenges. If folks are looking
for something to read, and

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beyond FATF, there's a really
good guidance coming out of

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ADGM, which is the Abu Dhabi
Global Market, on exactly this

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issue. How should we be thinking
about DeFi? What if it is not

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truly decentralized? And how do
we deal with it when it truly is

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decentralized? So that's just
one place that we've seen some

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really good guidance, or at
least discussion on DeFi right

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now. But it's still something
that really there's not a whole

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lot of guidance on. And I'll
just say, lastly, look, I think

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what the DeFi space is looking
for, from our conversations with

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clients and others is some of
that regulatory guidance. You

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know, what is the expectations
for sanction screening by a

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decentralized protocol? And what
can and should be done? So, you

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know, I am not entirely sure
that's a satisfactory answer.

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But the reality is, it's very
much a work in progress and

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something that regulators are
discussing, you know, all the time.

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Rashmi Ramesh: Thanks. So on
that note, I want to plug Anna's

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interview with you earlier, on
Tornado Cash, and I know she had

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more questions for you on
sanctions. So over to you, Anna.

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Anna Delaney: Nicely set up,
Rashmi. Thank you so much. So

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moving to the U.K. now, it's
only fair. This week, we heard

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news that crypto exchanges and
must now report suspected

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sanctions breaches to U.K.
authorities. Now, this comes

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under new rules brought in
surrounding concerns that

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Bitcoin and other crypto assets
are being used to evade

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restrictions imposed in response
to Russia's war in Ukraine.

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Using cryptocurrencies to dodge
sanctions was already legal in

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the U.K. Ari, what's unique
about these changes?

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Ari Redbord: Sure, yeah, no,
it's important. Look, I mean, we

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had some really robust
conversations, I think,

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including with this group, when
Russia invaded Ukraine and sort

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of what was going to be the
impact or the use of crypto to

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evade sanctions. And I think the
reality is that Russia cannot

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use cryptocurrency to evade
sanctions at scale. Right? This

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is a country that, you know, had
its central bank designated.

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We're talking magnitudes, you
can't, you know, prop up a G20

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economy overnight using
cryptocurrency. But what we will

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inevitably see is Russian
oligarchs sanction Russian

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individuals attempt to use
crypto to evade sanctions. Why?

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Because they've used everything
historically to evade sanctions,

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you know, high value art real
estate in London, maybe the club

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that Anna's sitting at. No, I am
I'm kidding. That's not cool.

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But, you know, I think that the
reality is that yes, anything

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that can be used will be used.
So what the U.K. is saying, and

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honestly, this is not a sea
change in policy of any kind.

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With the U.K. saying, look, if
you're a cryptocurrency

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business, you're just like any
other financial institution. And

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this has been said before in
other context, and that is, you

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have a reporting obligation when
it comes to sanctions exposure.

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You know, it's one of your
clients, a sanctioned entity or

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individual Have you engaged with
a sanctioned entity or

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individual? And what they've
really done is just said, "Hey,

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look, crypto assets, and crypto
asset providers, are our money

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service businesses, they are
financial institutions with

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those same reporting
requirements. OFAC for years in

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the United States, which is the
sanctions regulator at the U.S.

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Treasury Department, has made
clear that those same reporting

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requirements exist for crypto
businesses as they do for other

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financial institutions. So look,
I mean, I think it's

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interesting, you know, but I
don't necessarily think it's a

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sea change in policy. I think
it's really probably just

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putting down on paper, what the
expectations have maybe been for

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some time for crypto businesses
in this sort of sanction space

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Anna Delaney: Great, nice
clarification there. So not a

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in the U.K.

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week goes by where we don't hear
about yet another cryptocurrency

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scam, and we see lawmakers
reviewing whether consumers'

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protections are sufficiently
robust. Last month in the U.S.,

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Representative Krishnamoorthi
wrote to five cryptocurrency

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exchanges, asking for details
about the written policies and

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efforts to combat crypto-related
fraud. So Ari, are we likely to

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see steps from the federal
government to protect consumers

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and investors and curb crypto
fraud anytime this year?

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Ari Redbord: Look, you know, I
think that we've already seen

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it, you know, happen. And you
know, regulation can really only

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do so much I think what you're
also seeing is there's always

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going to be bad actors. I mean,
look at cash, right? You know,

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when I was a prosecutor, I used
to only focus on bulk cash

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smuggling and networks of
hawalas and shell companies and

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high value art and real estate
and all these other ways people

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launder funds. You know, if
crypto is actually going to grow

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and succeed, you're going to see
more and more financial crime,

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not less. That's just the nature
of a growing economy. If you're

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seeing less, quite frankly, it's
probably because the economy is

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not flourishing. Right? So I
would say that there's only so

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much regulation can do. But what
you really have seen is a true

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focus by law enforcement in the
U.S. and globally, to stop or at

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least investigate fraud and
financial crime. I mean, this

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has been an incredibly busy
summer, when it comes to the

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U.S. Department of Justice,
bringing cases involving scams,

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fraud, in the ICO space - the
initial coin offering space. We

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saw DOJ and SEC bring actions
involving insider trading by a

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former coin base employee. So
we've seen a ton of activity in

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this space to kind of go after
this stuff. I will say that I

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think one thing that's lost in
some of this, because I hear all

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the time is, "Oh my gosh,
there's so much fraud and

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financial crime in crypto." I
think one thing we're seeing now

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actually are the fruits of kind
of building up that law

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enforcement capability. You
know, over the last year or two,

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this is sort of shameless plug,
but we're doing a TRM Talks next

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month with part of the National
Cryptocurrency Enforcement Team

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00:18:52.760 --> 00:18:56.150
(NCET) from DOJ. And as I was
sort of putting this together, I

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realized that it's exactly a
year since the DOJ set up the

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National Cryptocurrency
Enforcement Team. And exactly

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two years since we saw the
cryptocurrency enforcement

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framework from the DOJ. So I say
that because I think we're just

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starting, you know, they build
out these capabilities within

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the Department of Justice. We
talked, I think Rashmi even

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wrote about the SEC building out
their enforcement capability,

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right? We've seen all this over
the last year, 18 months. Now

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we're starting to see the cases.
So I don't know that there's

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like this proliferation that is
new, but we're seeing more

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prosecutions, more
investigations. And I think

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that's honestly a good thing.
Because, look, I'm a strong

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believer in the crypto economy.
But in order for any of it to

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work, we have to stop these
hacks. We have to stop bad

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actors from taking advantage of
it because no one's going to put

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their money in crypto or
transact with crypto if they

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don't think it's going to be
there the next day. And I think

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that's what's so critical and
that's why these enforcement

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actions and prosecutions are so
important.

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Anna Delaney: Well, this has
been absolutely fantastic, Ari.

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We have one final question, but
I'll give you a break for a

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moment. I'll ask Tom and Rashmi
first. What has been the most

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ridiculous, bonkers, craziest
crypto story of this year?

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Tom Field: Razzlekhan. We all
know who we're talking about?

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00:20:11.000 --> 00:20:26.420
Anna Delaney: Are you going to
play?

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Crocodile of Wall Street, I
still can't get it out of my head.

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00:20:27.740 --> 00:20:29.570
Tom Field: Not appropriate for
the ISMG audience.

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00:20:30.350 --> 00:20:32.540
Anna Delaney: But that video's
got the makings of Hollywood,

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00:20:32.540 --> 00:20:36.590
hasn't it? The occasional
magician and Dutch Lichtenstein

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and then of course rapper,
Razzlekhan.

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Tom Field: Look at all the happy
creatures dancing on the lawn.

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Ari Redbord: Yeah, I'm going to
have trouble topping that down.

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But there's a really terrific
piece by Nick Bilton in Vanity

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00:20:48.950 --> 00:20:53.300
Fair, really on sort of the deep
dive into that story. And I

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think it's certainly more to
come. It looks like they are

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likely negotiating a plea
agreement of some kind, I think

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we'll get a lot of interesting
information once there's a plea.

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So, it's super interesting
story. And, I mean, you know,

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the color on it is so is
amazing. But look, I mean, at

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the end of the day, what we had
is the largest seizure of

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anything in U.S. history. I
mean, just stop there. Right,

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hard stop. That's what I mean.
It's just extraordinary story.

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Anna Delaney: And as you say,
Ari, I think in that same

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article in Vanity Fair, the
journalist compares them to the

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modern day Bonnie and Clyde. And
I think it's rare that you have

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massive criminal operations
conducted by a couple. And when

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they are, they're always
fascinating. And there's a great

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backstory.

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Ari Redbord: Well, my wife
doesn't let me get into anything

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that'll amount in trouble. So
no, a little every once in a

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while, but nothing like that.

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Anna Delaney: Rashmi, what's
taking your interest this year?

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Rashmi Ramesh: I cannot top
that. But here's a good one.

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It's a recent one. A Web3
security company, which offers

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smart contract auditing
services, did not audit its own

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smart contract, and became the
victim of an exploit. So two

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people ended up taking about 450
NFTs instead of the two they

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were supposed to. And ironic
still is that the NFTs that they

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took were from a collection of
art featuring bad guys stealing

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00:22:25.760 --> 00:22:29.000
NFTs. Ironic is a theme of the
day.

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Anna Delaney: Not so smart,
after all. It's great.

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Tom Field: Alright, yeah, that's
from the club scene.

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Anna Delaney: Ari, well, you
must have the craziest one,

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00:22:40.070 --> 00:22:40.670
surely?

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00:22:40.650 --> 00:22:43.592
Ari Redbord: Oh, gosh, that's a
lot of pressure here. Yeah,

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00:22:43.656 --> 00:22:47.750
look, I don't have a crazy one.
But sort of some really, I think

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Anna Delaney: Look at Ari,
always bringing it back to

390
00:22:47.814 --> 00:22:51.652
some really interesting ones.
You know, I think goes to kind

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of my last point, I hate to be
like the serious guy. But in

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your last question we were
talking about sort of the

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renewed or sort of now we're
starting to see prosecutions and

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sport. That was great. Always
fun to have you with us, Ari.

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00:23:02.910 --> 00:23:06.364
investigations. Homeland
Security Investigations did a

396
00:23:06.428 --> 00:23:10.138
really cool investigation,
something called the Baller Ape

397
00:23:10.202 --> 00:23:14.104
Case, which was an NFT rug pull,
where, you know, people were

398
00:23:14.168 --> 00:23:18.262
really excited. The FOMO around
this was huge, about the sort of

399
00:23:18.326 --> 00:23:21.844
like, Bored Ape Yacht Club,
like, sort of profile pics,

400
00:23:21.908 --> 00:23:25.298
where, you know, they were
basketball players. And it

401
00:23:25.362 --> 00:23:29.136
resulted in a rug pull, which
are very hard to investigate,

402
00:23:29.200 --> 00:23:32.782
but we're now seeing law
enforcement have the tools that

403
00:23:32.846 --> 00:23:36.748
they need to actually track and
trace the flow of these NFTs.

404
00:23:36.812 --> 00:23:40.330
And they built a case and
actually charged individuals.

405
00:23:40.394 --> 00:23:44.168
And, you know, so I think that
like, what we're seeing now,

406
00:23:41.440 --> 00:24:05.710
Thank you so much. It's
fascinating to see how the

407
00:23:44.232 --> 00:23:48.198
again, is that the NFT space for
a long time in particular, is

408
00:23:48.262 --> 00:23:52.100
sort of in the Wild West. I
think what we're seeing more and

409
00:23:52.164 --> 00:23:56.130
more capability to investigate
and ultimately prosecute cases.

410
00:24:05.710 --> 00:24:09.220
crypto space is evolving.
There's certainly no dearth of

411
00:24:09.220 --> 00:24:11.500
topics to discuss. So we
appreciate your time.

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00:24:11.590 --> 00:24:14.050
Ari Redbord: No, absolutely. You
know, and just sort of build on

413
00:24:14.050 --> 00:24:18.340
that really quickly. My favorite
collaboration that I just saw,

414
00:24:18.760 --> 00:24:21.400
involves those. When you said
apes, it sort of triggered me.

415
00:24:22.000 --> 00:24:28.210
We just saw M&M's come out with
Bored Ape Yacht Club guys on the

416
00:24:28.210 --> 00:24:32.800
actual physical M&M. And my son
said, like, "that's an NFT?" I'm

417
00:24:32.800 --> 00:24:36.700
like, "No, we have the M&M's
now, like we can eat them." And

418
00:24:36.970 --> 00:24:41.170
it's fun to see sort of these
real world and NFT

419
00:24:41.170 --> 00:24:44.500
collaborations out there, for
sure. And I got to eat some

420
00:24:44.500 --> 00:24:45.220
M&M's out of it.

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00:24:46.380 --> 00:24:47.850
Tom Field: The blockchain, not
your hands.

422
00:24:47.000 --> 00:24:52.831
Anna Delaney: Well, thank you
again, Ari, Rashmi, Tom. Always

423
00:24:52.955 --> 00:24:54.320
a pleasure.

424
00:24:54.740 --> 00:24:55.430
Tom Field: Thank you.

425
00:24:55.760 --> 00:24:56.510
Ari Redbord: Thanks, everybody.

426
00:24:56.840 --> 00:24:58.820
Anna Delaney: Thanks for
watching. Until next time.