Conversation

1) As promised: My current thoughts on crypto regulation.

Possible Digital Asset Industry Standards

Draft of a set of standards that we as an industry could enact to create clarity and protect customers while waiting for full federal regulatory regimes

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RYAN SΞAN ADAMS - rsa.eth

@RyanSAdams

Oct 19

Replying to

@SBF_FTX

Sam. With respect. This absolutely sucks. You're saying DeFi should be OFACed. You're saying onchain freeze's should be normal. You're saying DeFi front-ends to register as a broker-dealer. No, this is not reasonable. This would eliminate the U.S. from the crypto race.

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OFAC doesn't get to regulate email, it shouldn't get to regulate DEXs.

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miles jennings

@milesjennings

Oct 20

Applying OFAC sanctions to protocols is both impractical and unnecessary. If the U.S. demands a right to censor users of web3, other countries will do the same. So, instead of an open and free internet, we'll end up with one encumbered by geopolitics. a16zcrypto.com/web3-regulatio

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and

OFAC isn't regulating DEXes and wouldn't under my proposed standards *but* it is in fact true right now that OFAC makes it illegal for people to ignore sanctions lists in crypto

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and

Agree that those who host apps/frontends in the U.S. should have to monitor/use IP blocks for sanctions compliance. That's a baseline that the vast majority of U.S. companies already comply with. But applying regulations lower in the tech stack is unworkable.

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yeah don't really think the regs should hit lower in the tech stack? I think that's what I was arguing for

12:28 AM · Oct 20, 2022Twitter Web App

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We'll see how they handle Thorchain $rune. That target is lower on the stack.

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That's great. I think the confusion comes from the call for an on-chain sanctions list, which sounds like the protocol-level blocking that Tornado was doing. A frontend wouldn't really need a blocklist to be on-chain in order to block sanctioned addresses.

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Obviously Treasury will run mixers. They can collect a tax for the service! Expansion of on-chain taxes will drive real adoption. Chains that contribute to physical security and rule of law costs will win out.

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All crypto moat is temporary. Soon as you get “compliant” you slow down. See Coinbase v Binance

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This begs the question of what happens with decentralized front ends. Anyone can build one on-chain with

@icme_app

. It is difficult to impossible to know who built it or who is running the relevant nodes, and will only become more difficult as nodes further decentralize.

Replying to

Agreed. But, we don’t place content restrictions on email protocols even though that makes the protocols susceptible to use for illicit purposes. There’s a distinction to be made between decentralized frontends like you describe and centralized frontends operated as businesses.

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