Regulation & Legal over time

ICOs are becoming regulated, with ideas from Smart Valor, Blockhaus, and Consensys Project Brooklyn on governing the funds.

Once a blockchain lets institutions share a common state, it raises whether central banks are still needed and how decentralized they could become.

Institutional blockchain adoption will start not in America but in small central banks like Barbados and Jamaica that want bilateral swaps instead of trilateral settlement.

Institutional blockchains bring proof of solvency and real time auditing, but also easier capital controls, which interests the Bank of China.

Regulated money carries metadata and attribution that crypto transactions lack, and users have every right to resist that encroachment.

To move money into a regulated ledger you must play by their rules, so the next big conversation is what rights you lose crossing enclaves.

The maturing ICO market and IOHK's edge from the K-EVM giving Ethereum tooling for free on Cardano.

The coming split between security tokens and utility tokens under CFTC and SEC style regulation.

Recaps conversations with Japan's Ministry of Internal Affairs and the FSA's post-Coincheck exchange regulations.

Argues ADA should fare well under Japanese listing rules given Cardano's transparency, audits and Tokyo Tech research lab.

ADA has no US crypto specific regulation to comply with yet since existing rules attach to how a token is used, not its protocol.

Proposes industry self regulation and Wi-Fi style standards for ICOs, citing a University of Pennsylvania study finding 70 percent involved fraud.

Compliance turns the bank against its own customer through KYC, AML and secret suspicious activity reports, and the cost is now so high that foreign banks refuse US clients.

Moving from a few hundred licensed compliance points to millions of entry and exit points breaks the old standard, and pushing harder just produces Zcash on steroids and Tor style anonymity.

Proposes a world where users own their KYC data in a personal vault and grant one off audits instead of handing documents to every exchange.

The existing legal system, not a new blockchain court, should keep handling crypto theft as ordinary fraud.

Security tokens as regulated assets, where compliance rules like accredited investor restrictions can live partly on-chain.

Automated dividend payments and provable, non-repudiable message delivery to shareholders using blockchain addresses.

Argues that weakening cryptography with a government backdoor is dangerous, and prefers a threshold backdoor triggered only by open social consensus.

The decision to relocate IOHK operations to Cheyenne, Wyoming for a friendlier US regulatory environment.

Confirms none of the company's work is patented, released instead under MIT or Apache licenses with documentation under a Creative Commons Attribution license.

The plan to build a massive user base first so Cardano can negotiate fair regulation from leverage rather than begging governments for goodwill, unlike Ripple's compliance first approach.

Vents that Japan's FSA has not approved a new exchange listed token since November 2017 due to an 85 page form and multi layer SRO approval process that bureaucrats can kill at any time.

Praises developing nations and small US states like Wyoming for passing pro crypto laws in months, crediting ranchers who distrust bankers for making Wyoming an easy political sell.

The industry needs a standard for writing legal agreements and embedding them as transactional metadata across Cardano, Bitcoin and Litecoin, and OpenLaw is looking at exactly this.

Wyoming matters because the real problem of doing business in the United States is not regulation but uncertainty, where rules are unknown yet enforced retroactively, so banks derisk and fortune 500 companies stay away.

Japan has clarity but a draconian process with no new listing since November 2017 because of Coincheck, Switzerland has clarity and a workable environment, and states can innovate despite Washington, though the US has about five years before it loses the industry to Malta, Switzerland, South Korea or Liechtenstein.

Hopes the US embraces the crypto industry like the internet, where the National Science Foundation acceptable use policy once banned commerce and Amazon still emerged, though a University of Pennsylvania paper found over 70 percent of 2018's ICOs were fraudulent in some way.

Better that the industry improves itself through technology and self regulatory organizations, because the heavy hand of government just creates black markets, as Japanese buyers now purchase unlisted tokens from foreign exchanges.

Walks through a proposed Texas identity law for crypto payments and how contingent settlement contracts could keep transactions compliant.

Expects smart contracts to gain real legal recognition across a growing patchwork of jurisdictions, recommends following Coin Center and OpenLaw.

Looks forward to Caitlin Long speaking at the IOHK Summit and collaborating with her on the future of regulation.

On investing in IOHK instead of ADA, floats tokenizing IOHK as a security token via a future STO and Polymath collaboration.

Introduces contingent settlement and metadata as compliance tools, prompted by a proposed Texas cryptocurrency identity law.

Calls the proposed Texas identity disclosure law stupid regulation, arguing compliance should follow the transaction rather than blanket rules.

Reiterates the company holds no patents and finds them incompatible with an open ecosystem.

Points to the Wyoming secretary of state site to confirm the company's registration there.

Opens the Tether and Bitfinex story with a question about a Cardano backed stablecoin.

Breaks down the New York Attorney General inquiry into Bitfinex's relationship with Crypto Capital and the $850 million gap.

Tether's reserve backing shifted to a Bitfinex loan after the funds froze.

Calls the situation a symptom of crypto's youth and hostile legacy banking relationships.

The very notion of a security will change over the next 10 to 20 years, and emerging economies such as Mongolia, Ethiopia, Rwanda and Uganda have more freedom to trade securities at the public protocol level.

Rigid markets like the United States and Europe will need special purpose hybrid blockchains that can reverse transactions, freeze accounts and deanonymize a ledger.

Highlights the CFTC running a whistleblower booth at Consensus, explaining rewards of up to 30 percent of a violation, including a past 30 million dollar payout.

Cardano will support a security token standard, but the real challenge is that securities laws are jurisdiction bound and do not travel across borders.

Working with governments is hard because they do not play by normal rules: a commercial partner like Microsoft or IBM can be sued, but a government that defrauds you leaves no recourse, as seen in Venezuela, Africa and Asia.

In those jurisdictions the contract is necessary but not sufficient, it is about politics and leverage: local employment and goodwill make breaking the deal politically costly even for a corrupt regime.

Mongolia refreshes its civil service constantly, unlike the United States which abandoned the patronage system so career staff at the FBI or Department of Energy stay put across Clinton, Bush and Trump, and rebuilding relationships every 24 to 36 months stalls projects like Ulaanbaatar mass transit.

The balance between regional and central government varies wildly: Swiss cantons hold taxation power as if Colorado could tell the IRS what to do, while Rwanda's central government dictates terms.

ADA is an unregulated product, but he talks to US regulators directly including the CFTC, backed by organizational knowledge from the Berkman Klein Center at Harvard and FS Vector.

Regulation kicks in when you hold something for somebody else, act as an unavoidable middleman, or make promises people commit money to.

US regulation is primitive, draconian and byzantine because it came first; functional regulation with a clear set of tests would be far better.

Switzerland gives case by case rulings, which is how Ethereum got a legally binding tax ruling from the canton of Zug in weeks.

The 2020 election will shape crypto regulation: the Trump administration has been hands off, while a Democratic win could install Wall Street people who are hostile.

Crypto may follow the marijuana pattern of states against the federal government, with Colorado, Montana and Wyoming already passing legislation.

Big financial institutions will try to buy politicians and regulation to keep a state sponsored monopoly, but the cat is already out of the bag globally.

IOHK is a software company that does no investment banking or private placements, so regulating it would run into First Amendment problems.

Craig Wright's copyright on the Bitcoin white paper means nothing: there is no vetting process, you file a form and anyone listening could do the same.

Even if he were Satoshi you cannot retroactively change an MIT software license, that is promissory estoppel, and the SV and Bitcoin Cash code is not Satoshi's anyway.

Warns every cryptocurrency needs a strategy for the next three to five years as regulators grapple with metadata and transaction rules.

Dismisses a reported Amazon Merkle tree patent as covering prior art in authenticated data structures.

Enjoyed watching the Libra congressional hearings expose politicians defending the dollar's geopolitical monopoly.

Has not personally received an IRS letter, tells everyone to just pay their taxes.

Confirms ongoing legal research is underway, with details to be announced later.

Exchanges could whitelist withdrawal addresses against a registered DID so a compromised account cannot be looted, which also answers the FATF travel rule and could restore liquidity for Zcash and other privacy coins.

The ICO was run person to person in Japan, Korea and China with passports collected, 9,914 known participants and a published audit report, unlike the recklessness of 2017.

The Fed will digitize the dollar within the next five to ten years.

Wyoming is trying to make it illegal for a court to force you to hand over your private keys, and it played hardball by threatening to repeal the money transmitter act.

Confirms a collaboration with the University of Wyoming, teasing a special announcement.

Confirms ongoing regular dialogue with regulators.

He is not afraid of a US government shutdown like Liberty Reserve faced, since Cardano has no central custodian or company that can be attacked to stop it.

He is not worried about the SEC, expecting ADA to be treated as a commodity similar to Ether.

IOHK holds zero patents and calls any patented cryptocurrency a betrayal of the whole point of decentralization.

Vitalik does not even follow him on Twitter and mostly surfaces to criticize his company's work, and a friend from the Ethereum Foundation, Virgil Griffith, was just arrested for speaking about Ethereum in North Korea, where the Wassenaar arrangement treats cryptography as munitions and 20 years in prison is possible.

Phase one of the restoration was technical and legal: no proper internal control system, badly kept books and an ESA complaint, cleared with Grant Thornton for a fraction of what other foundations spent.

Credits to the existing council for thankless bureaucratic work: preserving bank accounts that would have been closed, dealing with auditors and regulators, restoring the Foundation's commercial reputation in the Swiss jurisdiction and convincing staff to stay.

Confirms state owned quantum computers already exist, then turn to Virgil Griffith's North Korea trip as a serious violation of US policy regardless of his intent.

Details North Korea's cult of personality, multi generation punishment camps, and starvation propaganda, then calls Virgil Griffith a useful idiot for the regime while still liking him personally.

Contrasts North Korea with Iran, saying he'd love to help Iranians use crypto against their government but US policy bars him from traveling there too.

Declines to comment on the Trump Putin relationship, saying he stays out of sanctioned countries and prefers working through technology.

Recalls declining an invitation to a North Korean crypto conference and warning a colleague who ignored State Department advice and was later detained.

Avoiding Iran despite a strong Iranian Cardano community, citing US sanctions and historical parallels to authoritarian regimes.

Fourth, there has to be a good story for metadata embedded in transactions, covering things like the FATF travel rule and contingent settlement, so users and applications can stay compliant with law.

Highlights Wyoming's new special purpose full reserve banks that can hold both fiat and crypto assets, useful for future stablecoins and custody.

Argues Cardano needs decentralized identifiers as a first class citizen to meet travel rule and security token compliance while letting users choose what history to share.

A registered DID could stop exchange hackers from withdrawing funds, since a signed address requirement acts like two factor authentication for withdrawals.

Dismisses a lawsuit and paid think tank reports attacking Cardano as baseless commercial disputes with no technical substance.

The Defense Production Act could theoretically compel IOHK but is unlikely since cryptography cannot cure a virus.

Dismisses a US Senate bill to outlaw encryption as unenforceable as outlawing gravity.

He won't sue a critic for defamation since litigation would take years and gain nothing while attacks continue.

The class action lawsuits against MakerDAO prove that calling something DeFi does not indemnify you from liability, and that anyone with material control over a system will eventually get sued.

Announces a 1.3 million dollar University of Wyoming lab funded partly in ADA to build blockchain authentication chips, with the state treating ADA as legal tender.

Riffs on the IRS's relentless competence, noting it must legally accept even unbanked cannabis cash as legal tender.

Even mailing 1200 dollar stimulus checks was hard, with bills proposing a blockchain-based digital dollar from the Federal Reserve, so actors either entrust a centralized oligarchy to broker trust or use the industry's native technology.

IOHK never pursues patents on things like its VRF, comparing it to Algorand's and Chainlink's own VRF implementations, since the goal is security and performance not novelty claims.

Praises Caitlin Long's fight to launch Avanti, her crypto bank, through Wyoming law changes and a standoff with the Federal Reserve, calling her one of the best entrepreneurs in the space.

Argues staking rewards should not be treated as securities by the SEC since payment requires active useful work, not a passive legal right like interest or dividends.

Rejects any push to ban encryption or build backdoors into Cardano, refusing to give any group the power to freeze funds.

Vow to keep building encryption even if it were made illegal, saying he would rather go to jail than compromise on principles.

Play down fear of SEC or government intervention, arguing that staying honest and keeping a good relationship with the community removes the worry.

Rules out a NASDAQ listing for Cardano on the grounds that ADA is not a security.

Praises Caitlin Long as crypto's best advocate and her work making Wyoming crypto friendly.

Reacts to news the SEC chairman is leaving, calls the succession uncertain, and notes Trump's hostility to crypto despite his gold standard sympathies.

Yes, he would move IOG headquarters to Wyoming.

Developing nations like India ban crypto to protect entrenched power structures from disruption.

He would rather go to jail than accept a US ban on Cardano, framing it as a loss of government legitimacy.

Explains why these systems need a token as a coordination and incentive mechanism, and describes crypto assets as being like stem cells that can function as commodities, securities or currencies depending on use.

Blast a Senate bill to weaken encryption, vowing to fight it to the Supreme Court and fund primary challengers.

Suggests a law student write a legal analysis of proof of burn ICOs.

Patented tech automatically disqualifies a project from being real competition.

Shrugs off ETC community patent attacks, noting they still concede Cardano's novelty.

Speculates the SEC might appoint 'Crypto Mom' Hester Peirce to a bigger role.

Denies facing many lawsuits despite the rumor.

Dismisses a rescission class action lawsuit as opportunistic since buyers already profited.

Warns regulators can and likely will try to cancel crypto.

Wikipedia downplays a VISA digital dollar patent citation without naming the protocol.

Calls former CFTC chairman Christopher Giancarlo a good guy.

Praises Caitlin Long as one of the sharpest people in crypto and jokes about drafting her to run for Senate in Wyoming.

Voices frustration that Cardano is not on Japanese exchanges despite filing invasive applications, promising a big Japan ag-tech surge in 2021 as one of his life goals.

Recounts Japan's exchange history: a 2017 law required a listing process after unregulated days, the Coincheck hack froze listings for two years, then only security tokens were allowed before relaxing by 2020.

Argues regulatory red tape, not science, is why vaccines and drugs normally take years longer than necessary to reach market.

Declines to give a broad answer on crypto regulation and taxes without a more specific question.

On Russia banning crypto staking and trading, predicts Russians will simply route activity through companies incorporated abroad.

Cites New York's BitLicense as an example of incumbents using regulation to strangle competition.

Patent trolling on open source work does not worry him much since prior art should defeat the patent, though he will litigate if needed.

Calls the CFTC and DOJ charges against BitMEX predictable, since serving US customers without a real compliance program invites exactly this kind of enforcement.

Argues the industry's decade of hacks, wash trading and self regulation failures is exactly what invited this level of regulatory scrutiny.

Contrasts Kraken's compliant approach with BitMEX's offshore route, saying any exchange serving US customers should expect to be regulated.

Warns that passive, no effort token rewards look like a security compared to staking, which requires active participation, explaining the industry's caution around security tokens.

On fear of crypto being over-taxed, says the US taxes it as an income event like anything else, so vote for lower-tax politicians since Biden wants capital gains treated as ordinary income.

Reads Biden's tax plan of capital gains as ordinary income, a top rate from 35 to 39 percent, and no payroll exemption above 400000, pushing effective rates over 60 percent in high-tax states.

Crypto gets no special carve-out and is taxed like any investment, since Microsoft and bond dealers cannot escape it either.

His team will lobby Wyoming in 2021 to adopt Cardano infrastructure for voting systems.

He'd welcome a Senate summons, contrasting his open, giving approach with the tech giants usually dragged before Congress.

The FDIC selecting ACTUS to help modernize US financial reporting, and how fragmented data standards created the 2008-style mess that blockchain risks repeating without one.

Dismisses the USPS blockchain voting patent filed in February 2020 as nothing special, just a metadata storage mechanism.

The Wyoming microchip hardware project was largely halted by COVID and hardware being hard, with work resuming in 2021.

Calls for blockchain-based e-voting with preference and ranked-choice voting, starting at the municipal and state level before pushing federally.

Lists requirements for secure e-voting: end-to-end verifiability, paper backup, auditable registration rolls, fully open-source software, resilience against exploits, and forensic accounting checks like Benford's law.

Early talks with the European Banking Authority and UK's FCA and EU Horizon 2020 grant funding.

Doubts Joe Biden personally understands crypto and flags Janet Yellen as incoming Treasury Secretary.

Pushes back on the idea that the SEC is crypto's enemy, comparing regulators to vampires who only enter an industry once invited in, and noting mathematics needs no regulator because self-correction inside the field is enough.

Pharma gets regulated because bad products can physically harm people and the profit incentive doesn't naturally align with safety, tracing the pattern back to 19th century snake oil charlatans like William Avery Rockefeller.

Lists how crypto invited SEC scrutiny on itself through the ICO boom's scams, rampant insider trading, wash trading on exchanges, exchange collapses, and software built on purpose to steal funds.

Points to Ripple as the textbook case, since its principals sold roughly 600 million dollars of XRP to retail investors and paid themselves, exactly the kind of behavior that draws a consumer protection agency's attention.

Contrasts that with Cardano's own restraint, recalling how IOHK held its roughly 2.4 billion ADA presale allocation, worth nearly 3 billion dollars when ADA hit a dollar thirty, without selling any of it because it felt irresponsible.

Block.one sold four billion dollars worth of EOS and only got fined 24 million dollars by the SEC while keeping the rest, which frustrated him at the time compared to how Cardano handled its own holdings.

Argues the SEC exists precisely because not everyone self-regulates, tracing its 1933 creation back to the 1929 crash and Great Depression when speculation, boiler rooms, and insider trading turned unchecked markets into a wealth transfer from the poor to the rich.

Flags it as troubling that Chinese companies can list on US exchanges without the same transparency required of Microsoft or Apple, but put the real blame on Congress for letting cryptocurrency regulation stagnate for a decade instead of updating outdated laws.

Credits the SEC with a relatively light touch overall, having brought only a few dozen enforcement actions out of over a thousand ICOs, mostly against clear frauds or geopolitically sensitive cases like Telegram.