How regulators are shaping the future of crypto | Interview with Sheila Warren

Hi everyone, it's Rachel Wolfson and I'm here today with Sheila Warren. Sheila is the CEO of the Crypto Council for Innovation. Hi, Sheila, how are you?

Hey, Rachel, it's great to be here. I'm doing well.

Yeah. Good to see you, Sheila. So you recently started a new position with the Crypto Council for Innovation. Could you tell us a little bit about that?

Yeah, sure. So I started in February, which feels like in crypto time, like 10 years, but really kind of very, very quick. And yeah, we're a global alliance of industry leaders focusing on providing evidence based advocacy. So we work with global policymakers all around the world to make sure that we are enacting sound policy and inclusive regulation to make sure that the benefits of crypto will be available to everybody all around the world.

Okay, can you elaborate a little bit more on that? How are you ensuring that the benefits of crypto will be available to everyone?

So I think we're at a critical time. I took this role because I felt like the next two to three years, certainly on the outside, five years, are going to determine the trajectory of this technology for generations. So the policies we set up here are going to determine what can we do and what can't we do. So when I was thinking about maybe it's time to leave the forum, I looked around and there's so much amazing build and innovation happening. But my concern was if that innovation and build can't be affected if we get cut off from what we can do, and if you can't offer certain kinds of products and services in certain parts of the world, then kind of what's the point of any of this? And the biggest threat that I saw, but also opportunity was in the policy making space. So what we do is we really say that we've been around as an industry long enough, we have the ability to actually create evidence, real evidence, using real hard data as to why crypto is beneficial, what the remaining challenges are, what the opportunity is, and to demonstrate how the technology itself can actually help achieve public policy goals that we can all agree are important for society. So how do we do that? We do lots of conversations and lots of education is laborious, painstaking, pretty unsexy work, to be really honest. Lots of research, lots of curation of content, lots of really listening. Frankly, I'd say that the biggest part of my job has always been just listening to people. What is it they're concerned about? What are the challenges that worry them? And how do we demonstrate how the technology can actually help, but also what Kinds of policies will realize that technology's implications. Right. Like how can we leverage the benefit of the accountability, the transparency built into our systems in a way that accomplishes those goals.

Got it. Now, with the goals, can you elaborate what those goals are?

Yes, it's a great question. It depends on the jurisdiction and frankly, the person. So part of what I'm doing is really listening very closely to what people are telling me is important to them in these policy positions. Right. So is it consumer education or protection? Is it rooting out illicit activity? Is it leveling of a playing field? Is it equity and access? Like, there are all these different public policy goals, most of which I think are quite laudable. But the problem is if people who don't understand the space really well, which is most people besides, like a handful of people, right, are really confused about how do we get there. And in some cases, they actually think the technology undermines those goals, when in reality it actually can help support those goals. So an example I'll give you is access and equity and financial services. Well, right now, legacy financial systems and institutions, we call them tradfi in this space are not serving a lot of people. Crypto can serve those people, but it won't serve those people if we port in the rules from legacy financial over into crypto, because most likely similar guardrails emerge that prevent people without wealth privilege from accessing these kinds of services. So right now we're seeing opportunities for tremendous inclusion in this space, but those are predicated on the right regulations coming in that protect the opportunity for those people, those communities.

So in terms of regulations, I'm assuming you're working a lot with regulators in this space.

That's right.

So can you explain maybe what are their main concerns and how you are allowing those concerns to be overcome? What are you doing to kind of reassure them?

Yeah, it's a great question. And again, it depends on the regulator, the policymaker, the elected official, whoever it is. And we're looking globally, so this really has a high variance. So speaking very generically, what I would say is we're trying to identify what are the core concerns or challenges that any particular, really, honestly, an individual level or agency level are seeing with this technology. Now, a lot of times what this is is about criminal behavior. Kind of the usual talking points that you hear. Criminal behavior, bad actors, being able to exploit people, hacks, this kind of stuff. So we're demonstrating with the support of our members who represent some of the industry's global leaders, just how those things aren't true. If they aren't true if in fact they can demonstrate proven to not be true. In some cases, that's the case. So, example is around Russian oligarch sanctions evasion, provably false. Right. Provable. That that is not a thing that anyone should be really concerned about. Right. For all these reasons that we all know well and can articulate. So let's prove that and write the case up. In other cases, it's things like, well, is it really going to provide access and equity to people who are poor? That is a case where we have examples from around the world where that's happening. But is the adoption curve slow? It has been slower than we'd like to see. Why is that? We can be honest about that and say, here are the things that a policy could do that would spur adoption by these populations. Part of the reason we're seeing slow adoption, especially the United States, by these communities, is because they're not being targeted. Because there's a lot of concern that regulation will come down and penalize people for trying to promote that kind of access. Right. Because they'll be seen as, I don't know, we see that it'll be painted with a bad brush like exploitation of the vulnerable or not enough education or whatever it is. So it'd be nice, wouldn't it, to have regulatory clarity or policy clarity around if we want to enter some of these communities that are already in droves turning to crypto, how can we do that in a safe way? How can we increase adoption in communities without getting targeted by a regulator and saying that we're doing something that's wrong? Right. So these are the kinds of protections like the industry is looking for to say we want to encourage access, we want to create a more equitable system. To do that, we need some certainty. We can't build on quicksand. We've got to understand what is going to be considered appropriate behavior, responsible behavior in the ecosystem. We know it when we see it. We want to know that regulators and policymakers understand that to also be the case.

I see. Yeah, that's amazing. And we need that because I believe that cryptocurrency and digital assets can help so many people in the world. But people are afraid. And I think a lot of that has to do with the regulatory concerns.

I think that's exactly right. So no one here is trying to create a system that's only for wealthy people. It's not why any of us. Maybe there's some people, but not any of us who are real builders in this space. That's not why we're here. We want to make sure that we preserve this opportunity. People that haven't had other opportunities. That's a core tenet, I think, of the entire Web3 ecosystem. Right. Is full fair access. But if we can't do that because we're concerned that our company will get shut down or God will get fined in some crazy way or whatever, we're going to be necessarily cautious. Right. Responsibilities to our employees, you know, to those in our ecosystem as well. So how do we get to a place where we have enough clarity that we can, with confidence, engage in this super equitable way that all of us want to see come to fruition right now?

Based on what you just said, just a relevant event was the fidelity for a 1K with Bitcoin.

That's right.

That's kind of opening access to a new class of people with Bitcoin. What are your thoughts on that?

I love it. I think it's a really amazing opportunity. Shelly is actually a member of cci. I think it's an amazing opportunity to kind of say you should have the opportunity to determine what goes into your retirement portfolio. Right. And if you deem this a better asset that's going to serve your family and individual needs better, you should have that opportunity. I find, you know, Rachel, a lot of the language around disclosures and other things to be a little condescending, frankly. Right. And I think the entire frame of consumer protection tends to be a bit condescending as well, with the idea that consumers have to be protected from themselves. Right. It's not just protection from bad actors. Bad actors exist in this industry, in every industry. We have to just acknowledge that that is the case, certainly the case. There are malicious people who have bad intentions in our world, unfortunately, as the case may be, but we're not protecting them from themselves. The idea that I am not capable or anyone, forget me, like I've no crypto, but somebody who is not capable of understanding what's being best for their family financially, I find that fundamentally kind of offensive. What we want to say is we are arming you and equipping you with accurate information about the choice that you're going to make, how it fits into a broader portfolio. What is what the risk profile is? What is your risk profile within crypto. Right. All these things really matter. And then I honestly feel like we should trust people to make the right choices for themselves. So I love this inclusion. I think it's really exciting. I think that bitcoin's been around for A long time. You know, I think there's, there's enough proof point here that this can add a lot of value to someone's portfolio. And the idea that you, you haven't able to choose that thus far I think is a shame. And I love to see that this is the direction we're going.

Right. So yeah, it's a step in the right direction.

Yeah.

I also wanted to get your thoughts on stablecoins, the stablecoin adoption, because I think stablecoins have a lot of potential, what you're doing. So what are your thoughts on that and then the regulatory thoughts behind that?

Yeah, well, there's a different, A lot, a lot to unpack there.

Yeah.

You know, so I've always said, I said this at the forum and I believe this now that, you know, cbdc, stablecoins and crypto all have a role to play in the financial system. And so the question is, what are the appropriate use cases for each of these? And I do think that those differ a bit depending on the jurisdiction that you're in. Right. So in some cases a CBDC might make a lot of sense because you have a kind of contained financial system. You've got a lot of, I don't know, you have appropriate controls, whatever it might be. In most cases, I think I remain skeptical about the use cases of CBDC beyond interbank settlements and cross border efficiencies and things like this. I remain personally, and I can be convinced, I remain personally unconvinced of the value of a retail cbdc, the use cases there, and how much that's actually going to change anything. I'm just personally not convinced. So we'll see how it plays out. Stablecoins, I think, in contrast, I think have tremendous potential to make a lot of things more fluid and easier and provide that programmability of money. That is something that I'm not sure the Fed or a central bank as a general matter should be in the business of having to control. I don't know if that's the right thing to task those kinds of bodies with. And again, I, you know, I, I go back and forth a bit on this, but stablecoins, I feel like by leveraging the private sector you're able to provide a lot of the benefits but still have the accountability that I think some regulators in particular want to see. And I think that's really exciting. Right. So I think that there's a role to play for stablecoins that's crazy. Critically important, I would argue that, I think USDC is one of the most important innovations that we're actually seeing in the ecosystem in terms of the bridge it can provide between different kinds of assets. The way it can enable that programmability and smart contracts that can make things very efficient can realize the efficiencies we talk about a lot in this ecosystem. So I guess you could say I'm. I'm bullish on stables and I kind of want to see how the regulatory environment treats them. That's obviously a really important question for our entire ecosystem. And so, you know, that's an open, open up in the air, you know, ball in the air kind of question. But certainly I think a of education is happening and I do feel like there's more understanding about stablecoins and about pure crypto, if you will. Right. In. In the regulatory environment. Right, right.

And that's good.

Yeah, I think that's good. I'd like it to be parallel the same knowledge of crypto to be there as well. But you know, I'll take what we got. Right.

I mean, we'll get there obviously with what you're doing.

That's the goal.

We're also seeing this trend now, kind of a tokenization of everything trend. It seems like everything is being tokenized.

Yeah.

What are your thoughts on that and are there any regulatory concerns?

Again, two different questions. So my thoughts on that are it was somewhat inevitable. Right. You were going to see people getting super creative and kind of like creating these chains and strings and threads of things that were going to kind of go into infinity. Right. And so it seems to me like there's no limit on like what is being tokenized. I do think this is going to be a challenge from regulatory perspective. And I think that what we're. I worry it's going to raise alarm bells. It shouldn't really be raising. A lot of these things are ultimately not going to make a lot of sense and they're going to kind of like die in the market. Right. Because it's like, it sounds fun and kind of kitschy and cool, but like no one's actually. The utility of it is maybe not as exciting as it sounds at first blush. Right. So I think a lot of this will wash out and it's again, it's a kind of an exciting, very creative ecosystem. So it's not surprising to me this is happening. I do worry there'll be over indexing on this kind of thing by regulators when I don't think that they should. So trying to kind of, I don't want to say right size. It but trying to kind of keep it in perspective about what this is in the phase of building that we're in, I think is going to be important in any discussions with regulators and others these topics, right?

Definitely, yeah. Any additional comments or industry trends that you're seeing that you think are important or any regulatory.

I mean, I'll just say it is like regulatory madness. I mean, there is not a jurisdiction that I am in touch with, you know, that's not focusing on this big time the next couple of years. It is a time where I personally think this is the most important effort of our time in this ecosystem. And so, you know, I'm really happy to have jumped in to be a full time part of it, but it's a lot. And so, you know, if you're thinking out there about jumping into policy, you know, this is. We could use talent. We need more people who are smart in a space like you, Rachel, and others to be telling the truth about what's happening here and making sure that the policies that get put into place are going to lay a foundation so that my great grandchildren could benefit from crypto and they won't be cut off. Whatever choices they might make, wherever they choose to live, however they choose to, whatever wealth they might have, they're going to have access to this critical innovation.

Right. That's so important. Thank you so much, Sheila.

It's been a real pleasure as always. Thanks, Rachel. Thanks. It.