 My name is Jerry Bredo, I'm the executive director of Coin Center, and first just want to say how grateful we are to the Ethereum Foundation for having us here today to give you a little regulatory update. I think the first thing I'm going to do is tell you about Coin Center and what we are. So Coin Center is an independent nonprofit based in Washington, D.C. that's focused on the public policy issues that affect cryptocurrencies and open blockchain networks like Ethereum, Bitcoin, and Zcash. And we really do three things. We engage in education, public policy research, and advocacy. Education is where we spend a lot of our time. And what that means is we seek to educate policy makers, whether they're members of Congress or staff, folks at different agencies, so that they understand the technology. So much of what can go wrong with regulation is not out of malice but out of ignorance. We want to make sure they have a good understanding. The second thing we do is policy research. So we engage in the policy thinking to develop what regulatory frameworks could exist that help regulators meet their ends because they're going to find a way to do what they want to do, help them meet their ends while preserving as much as possible the freedom to innovate and to avoid unintended consequences. And the last thing we do is we advocate for those solutions. We try to get them into law or we try to get laws not passed. So I guess I should get the clicker from you, Peter. So today, I'm going to give you a little year in review of what we've done over the past year. So the first thing I'm going to talk about is state money transmission licensing, which really is one of the biggest regulatory hurdles or impediments for the growth of this ecosystem. And that's for two reasons. Number one, it's looking at these laws, which are written in the 50s and 60s. It's really difficult to know whether you need to get a license in each state or not. And number two, if you do need to get a license, it's very difficult to comply with those rules. And so we're very happy that over the past two years, we've worked with the Uniform Law Commission to develop a model state act for regulation of virtual currency businesses. And so this would supplant the existing money transmission licenses in the states. This would supplant something like the BIT license. And what we're excited about is that we've been able to include in the model act the definition of control, which is very important. Only if you have control, only if you take control of others' cryptocurrency do you need to get a license. If you never take control of somebody's cryptocurrency, you don't need to get a license under this act. And we define control as the power to execute unilaterally or prevent indefinitely a virtual currency transaction. And the next thing that we're excited about is we're able to get a bunch of exemptions into the act. And among them is something that is a personal exemption. So anybody who is using virtual currency on their own behalf or for personal family or household purposes or academic purposes are completely excluded from any kind of licensing requirements. And so what does that get you? If you do not have control, you don't need to get licensed. That means that wallet developers, validators, state channel nodes, exchanges that are non-custodial, all excluded. And with the personal exemption, it means that if you're an individual holder, of course, but also if you're a corporate institutional investor, an academic, or even if you are creating and selling a new token, and so they're your tokens that you're selling, you would be excluded from licensing. This was not clear at all under the existing law. So now our job over the next coming year is to try to get this model act passed in as many states as makes sense. And what you may think to yourself, look. This is just parochial US stuff. It actually has a global implication. This definition of control, which creates a line about who is regulated or who is not, is going to be valuable going forward. So if you think about, as Europe looks to amend its fourth anti-money laundering directive, they're going to need a definition of who is an intermediary that should be regulated and who is not. And our definition of control helps you get there. If China is looking to regulate exchanges, it's going to help there as well. The next thing I want to talk to you about is tax. So we worked with the blockchain caucus over the past year to develop and introduce a bill in Congress that will create a de minimis exemption for capital gains tax of cryptocurrency. So as you might know, if you buy a cup of coffee with Bitcoin or even potentially if you use some ether to run a smart contract, those events are taxable dispositions of cryptocurrency and technically you're required to keep track of each of those dispositions, report it to the IRS and pay taxes on that, which obviously creates a lot of friction. So this bill that we helped introduce creates a de minimis exemption of $600. Any transaction below $600, you don't have to report it, you don't have to keep track of it, you don't have to pay taxes on it. And so we're hoping we can get this passed as law. It's going to be difficult, but we're optimistic. Next thing I'm going to talk to you about is securities. So last year at this conference, Peter explained to you our framework for securities regulation of cryptocurrencies. And we think that having produced that and having spent a lot of time with the SEC explaining to them what our framework is, how we think tokens, how some tokens are and how many tokens are not securities, and having spent a lot of time explaining the technology and how it works has borne fruit. So recently they produced the Dow report, which you all may have seen. And we think that it was a very thoughtful and very deliberate approach that didn't bring an enforcement action. And it really echoes a lot of the policy thinking that we've been advocating over the past year. And again, it sounds like this is just US-based, but what we see is that once the US acts, once a securities and exchange commission in the United States acts, other countries follow on. And so we saw immediately after the Dow report, the UK FCA issued an advisory on tokens that echoed the SEC. And we've seen other places with even tougher language. The final thing I'm going to talk about is terrorist use of cryptocurrencies or the potential for that. So over the summer, there was just this really strange surge of interest in this potential. There were a couple of reports published, one by the Center for American Security. There were a couple of convenings. And most importantly, there was a new subcommittee in Congress called the Terrorism and Elicit Financing Subcommittee of the House Financial Services Committee. And they decided that the first thing that they were going to really work on was the potential for terrorist use of cryptocurrency. Because we have built over the past three years strong relationships with Congress, we were invited to help them with that investigation. And so we navigated them through the space. We brought experts to town to talk to them. We put on a demo day where we showed them technology and demoed it. We put on a full member briefing for the members of Congress and the committee. And finally, we had a hearing, they had a hearing, which I was asked to testify, and I testified at that hearing. And the conclusion at this point, they're satisfied that this is a serious potential threat, but one that at the moment there's only anecdotal evidence of. It's something that law enforcement has the tools to address it. And I think we may see legislation at some point soon related to this, but it's going to be focused on more fact finding. So that's the state of that. And funny thing, while I was testifying at that hearing across the hallway in a different hearing, and this never happens, at the same time, Peter was testifying a much happier subject about how open blockchains can help the economy. And he was asked by a member of Congress what was the most exciting thing that he'd seen since the last time that we had been in Congress testifying. And Peter said, well, it was the launch of new networks like Ethereum and Zcash. And you should go look up this video if you haven't done so. In two minutes, explain to Ethereum and Zcash masterfully. So it's really remarkable. So with that, I'm going to turn it over to Peter, who is going to talk to you about some issues on the horizon. Thanks, Jerry. So I just want to generally characterize some big issues on the horizon. And of course, that means most of this second half is going to be about tokens because that's where a lot of the regulatory attention and maybe attention in general is right now. So there are two regulatory hot spots to look out for with respect to tokens. One is securities regulation, of course, which I talked about in DevCon last year. And the second is anti-money laundering or financial surveillance regulation. So AML in a nutshell boils down to two questions. First, does AML law apply to your token or your cryptocurrency? Well, the question that answers that in the US, and this will be echoed elsewhere, is, is the token being used as a currency substitute? Now, is it designed as a currency substitute? Is it being used as currency somewhere in the world? Then AML law is something you have to think about. Then the second question says, OK, if it's used as a currency substitute, who's regulated? This gets to our definition of control. But right now, the question with tokens is, is there an issuer who can also withdraw the tokens from circulation? So it's centralized. It's like e-gold or Liberty Reserve. If there is an issuer who can also claw them back out of the network because they keep the ledger, well, then that issuer is a money services business. If there's no issuer, because it's a proper decentralized cryptocurrency, like Ethereum or Bitcoin, well, then there is no issuer for there to be an MSB as an issuer. So it's the exchanges. Companies like Coinbase with GDAX or Polonex, those are the MSBs. Those are the entities who need to effectively surveil their customers, who need to do anti-money laundering, compliance, suspicious activity reporting, and things like this. It's very important to CoinCenter that we draw this line clearly between decentralized crypto currencies and centralized ones. Security's law, I'm too far from my device. Security's law boils down to two questions as well. The first question is, is the thing being sold as an investment? And the second question is, is there a person upon whom investors rely for the profits of their investments? This is a simplification of the Howie test I presented last year, but this is pretty dead on, I'd say. Now, you can think about this like this. Gold is sold as an investment, of course. But there's no one person we rely on to create the value of gold. It's a network of buyers and sellers, miners, and people using gold. There is someone we rely on if you're buying a share of Apple stock. His name's Tim Cook and his management team. A share of Apple stock is a security. Gold that you actually take delivery of is not. And so we can have this two-question classification exercise to figure out dimensions in order to categorize any token. Is it more of a utility or a useful commercial item, or is it sold more as an investment? And what's backing up that token? Is it a decentralized network like gold, or is it somebody like Tim Cook? And this is how we present this to regulators. This is far too pedantic and descriptive. You understand this. Money goes in. More money comes out, it's an investment. Money goes in. A service comes out. Could be cloud storage, compute cycles, could be an number of things. That's something that's more useful. A vote to decide where the cumulative funds should be invested is not a use. That has to do with profit-making and pooling money and growing it. But cloud storage or something like that makes sense as something that's useful. And then this issuer versus network distinction. Again, this is how we explain it to regulators, so I'm going to rush because you understand. If you have PayPal as the service provider, money goes in, you get a service. PayPal's doing a few things. They're checking passwords. They're keeping a record of transactions. And there's a corporate oversight role that makes sure the other functions are being performed well. That's how PayPal works. What if we want to decentralize PayPal? Have an electronic cache for the internet. Well, we have a network of computers. We network them together. We use public key cryptography so that every node can verify passwords effectively. We use a distributed ledger like a blockchain so that every node's keeping track of valid transactions. But where's the oversight? There is no corporation. So who's doing this? Nobody. Every participant in the network is directly incentivized because they're awarded tokens for doing their job well to actually help provide the service. That's how mining works. That's how Bitcoin works. This is still pretty radical, although everyone in the room is pretty comfortable with it at this point. That's more of a networked token rather than an issuer backed token. And we can do the same thing with something else like cloud storage. Again, this is how we explain it to Congress. The only difference is now every node is adding their spare hard drive capacity. So something like Swarm or Filecoin or SIO or all the other projects trying to make this work. And every node is incentivized to behave honestly because of the tokens. So now that we have these two dimensions, we can graph them. Maybe to get a geometric handle on the issues at hand with respect to tokens. We'll put useful tokens on the bottom of the graph and we'll put investment tokens on the top. We'll put network backed tokens on the left and we'll put issuer backed tokens on the right. Now I'm not gonna put specific projects on this graph because that's none of my business really. What I am going to do is show you the background case law. So here's Tim Cook. This is a security. We know that. Upper right quadrant backed by an issuer and sold as an investment. Shares of Apple stock. Here's where gold would be. Some people use it. Some people want it to invest but it's a decentralized network that makes gold valuable. Here's real estate, oil, gas, things that are valuable commodities where there's a decentralized network and markets effectively that create the value. Up here are member managed LLCs. So corporations that could be for profit where every individual shareholder is actually deciding the ultimate fate of the enterprise. Here we have loyalty cards, country club memberships, things like that. We're relying on the person who built the golf course to make it valuable but it really is something you use. You go and you golf. Usually these have restrictions on transferability as well though too to put a stop into speculation about their value. And here we could have theater tickets where there's a group of artists that provide the value and here this is kind of interesting and I put this here because there's a line of cases that talk about this fact pattern where somebody sold someone something like a barrel of whiskey and said, we'll store it for you and it's really good whiskey. Don't worry about it. And we'll find people who will want to buy it in 20 years when it ages. And it's sold as an investment and all you get is a receipt for the warehouse. And it's always claimed like, oh well you can get it and take it and drink your whiskey at any point but nobody does that. And everybody knows what's going on here. The whiskey distillery is selling shares of its profit making whiskey enterprise. And now we have tokens that basically do all of these different things. We definitely have electronic gold tokens. We definitely have electronic gas tokens. We have real estate tokens that are digital which would be digital real estate or gigabytes. We have member run enterprises for profit that may be member run or may actually have centralized control. And here basically is the SEC's possible jurisdiction. The securities regularity of the US. They have a flexible test. So this is an amorphous geometry. It could be like this. Now what's interesting about this? Well if you sell a token that is actually a revenue stream from a corporation like a share of Apple stock, the token's a security. Doesn't matter if it's a token rather than a stock certificate. If you are selling warehouse receipts for a speculative good that is being sold as an investment and no one's actually taking delivery of it or the functionality is never realized, that's probably a security. Now where things get really tricky and interesting is the upper left quadrant and the lower right quadrant. You have a member run for profit organization. If it's really run by the members, it's out here. If there's a few centralized parties that are really promoting it and making it function, it's in the securities area. I think you all know what I'm talking about. And this area is interesting. If you pre-sell golf course memberships before people can go in golf, then it starts to become more of a speculative investment because people can't realize the utility right away and it creeps up into the securities realm. So this edge is very interesting and very dangerous with respect to token projects that are analogs of these old cases. And that's all I'm gonna say about securities law other than the fact that the SEC has a flexible test so that could be their jurisdiction. That could be their jurisdiction. But Coin Center advocates for this to be their jurisdiction where we really have an issuer that people are relying on for the profit of their investment. If we can help them get comfortable with this, I think we can have a much freer and more open and innovative community. But we worry about investor protection. So where this line gets drawn is very important. And that's why Coin Center has spent time working on frameworks for security regulation, which I presented last year, but also on consumer protection and also on any money laundering. And we appreciate all the support we get from your wonderful community. We'll be here all week. So please come and see us and please consider supporting Coin Center. And thanks again to the Theory Foundation for having us.