Innovation in Governance - Panel

all right how's everyone doing let's hear a round of applause for the nft panel we just had one more big loud one [Applause] we are about to kick off some of the most cutting cutting edge thinking about governance government and innovation and so we have some uh true luminaries some true i would say bright minds in big organizations like government the federal reserve's in the house and uh i'll i won't spoil too much i will just hand it over to jeff take it take it from here and introduce this incredible panel before we start a big round of applause for this panel we always like to let everybody out there know that the real action is in here [Applause] hi my name's jeff benson i'm a senior editor at decrypt and i'm gonna let the three panelists introduce themselves i guess i'm up first um hi i'm robin nunn um first of all thank you eth denver 2022 for having us and inviting us thanks to my co-panelist and moderator um for working with us on this panel i'm really excited about today my name is robin nunn i'm a partner at a law firm called morgan lewis i am co-head of the banking industry group as well as an active member of the um sort of digital working group that's there at the firm prior to being in private practice i was in-house at two financial institutions i'm particularly passionate about the underserved and unbanked communities i've spent my entire career working on financial inclusion and access to credit so i'm particularly excited about this panel and what we're about to talk about because i do believe that the innovative in in government and governance is important and crucial and we're at a critical pivotal point right now rachel hi my name is rachel epstein um thank you to the conference organizers denver decrypt jeff my great co-panelists it's great to be here um i started out in this weird amazing industry about five six years ago research assisted on a book called blockchain in the law with aaron wright then uh was at consensus for a little less than two years in-house counsel there from there i went to hedera hashgraph uh got more of experience from a layer one perspective uh in-house council there doing a lot of government affairs and regulatory work and then as of a few weeks ago moved into io global working with cardano and other products that we're building and really trying to better understand how we can work with government to help them innovate and do some really cool things so it's great to be here and yeah thanks sanena hey everyone my name is sunina i'm the chief innovation officer at the federal reserve i'm delighted to be here i know at least i'm not nearly enough not nearly cool enough to follow a panel on nfts but i'll do my best um you know really glad that eats denver saw value in having somebody from the fed to share our perspectives on this ecosystem um a little bit you know before i joined the fed in 2021 which definitely was not on my bingo card uh when i first got the call from the recruiter actually i thought it was a prank that one of my crypto friends were pulling on me because i was like wait the fed me i don't think so um i went down the crypto rabbit hole starting with the um bitcoin in 2010 and have kind of been um investing working and just personally learning uh in the fintech and crypto ecosystem um right before the fed i led digital assets and defy a td ameritrade both in north america and in asia so yeah you know trying to bring a little bit of the the d5 crypto and fintech culture into the fed so yeah so in short everyone here knows their and i'm going to start with sunina because we hear central bank and we think central bank decentralization innovation government that seems like kind of an oxymoron so is it well interested you say that jeff when i as i said when i first got the call and i got over the fact that it was not a prank it was an actual recruiter i was talking to then my very first question was wait central banking innovation that's an oxymoron right what do you need me to do anyways um but i will say i am pleasantly surprised in terms of the target rich opportunity that it is for disrupters and innovators when you get into the fed the one thing i will say that's definitely been an aha for me is how not centralized the central bank is i actually the way i explain it to my canadian parents is joining the fed has been akin to entering a new solar system because you're not just part of one planet there's you know the 12 reserve banks and the board of governors in dc the 13 entities that are required to operate independently right and they all have their own sense of ethos and gravity and language and yet they also have to work interdependently you know to advance the mission of the fed so it's this really interesting i joke i'm like if i could go back and tell my d5 community i guess i am now how decentralized the central bank is that you would all get a kick out of it um in terms of my mandate uh which is the innovation officer for the entire franchise the system it's really twofold one is you know recognizing the volume velocity and variety of new technologies that are coming at us and are pretty much disrupting you know every category every institution of every size how do we as the federal reserve harness the power of these technologies um to level up the work that we do internally but also the products and services that we build that are then consumed by the external ecosystem the other component of my role um which i am just building as i go because it kind of gave me a we know we need your role go figure out what you want it to be so i'm making the most of it but the second part of my role which is very external facing is really around um education and community engagement um so really finding ways to engage with the fintech the crypto and general industry and creating that venue for dialogue and explore opportunities for collaboration a very quick example last week i hosted a series of meetups exclusively with web3 and d5 founders and builders and invited a lot of my fed colleagues to really understand what's happening in this ecosystem both in terms of the use cases and the technologies and what we could learn and i think those dialogues are really important which then helps us figure out how we can collaborate together so robin the other day i was you know mosing along and i came across like this panel that was very very popular and everybody was mobbing you because they wanted to know all about law and regulation and crypto and so i'm wondering sunina's talking about meetups and and kind of reaching out to the projects from your perspective where are the disconnects between innovators and government and what sort of uh roadblocks can we help remove yeah um thank you jeff thank you sanea i really feel like she set forth a lot of really good examples of what the government is doing um right now in terms of taking a look at innovation i guess i have to now be the negative nelly to talk about what is you know where the opportunities so to speak are as you all know the financial sector is highly regulated there's a lot of concerns about stability concerns about consumer protection things like that so there are a lot of eyes on this and as also you know we have a new administration in the government and we have a number of vacancies in our financial regulators so their vacancies with the fdic governors or vacancies of the federal reserve their vacancies at the sec soon to be their vacancies right now some appointments for the cftc all of these sort of alphabet soup of regulators that i've just named really control the financial sector and make important decisions with respect to new rules new regulations new guidelines there is a lot of work being done by the government in this space a lot of good work but there's still a lot of room because our u.s system is set up around regulating particular types of entities more traditional entities like banks like broker-dealers like things like that and they have certain agencies who regulate those agencies so what we're struggling with right now is sort of taking a look at digital assets such as stable coins or cryptocurrencies nfts you name it um and trying to neatly put them into the boxes that the u.s financial regulatory framework has been set up for as you can imagine that's a little tough never fear we have government regulators who are have recognized this challenge you may have heard of the presidential working group um they recently put out a report on stable coins and there was recently a hearing before the senate banking committee maybe just a few weeks ago where they talked about that report in that report they said that what they would recommend is that the u.s house of representatives get involved and come up with legislation now i'm from d.c and i love politics and i'm a bit of a political but i'm sure you guys understand how hard it will be to get the u.

s house of representatives all aligned on legislation in this area so we have our work cut out for us because until we have rules and regulations and things that sort of give us guidance in a framework it's going to be very very very difficult for consumers and investors to feel comfortable in this space we all know that it's not all bad actors we all know that it's not all money laundering and and a lot of the skepticism is possibly unwarranted um but without guidance and without a framework it becomes very very very difficult the good news is that you may have heard in the news is that the biden administration is coming out with an executive order possibly as soon as next week um it's long overdue and there's been a bit of a delay but it is it is supposedly you know coming out any day now which is pretty exciting that should give federal agencies more guidance in terms of how they can work together hopefully and collaborate and come up with ways so that companies will feel safe and less at risk and innovation and rachel i want to bring you in here a little bit because so an executive order sounds good to some people but i think a lot of folks are taking their cues from other folks in the crypto community where they're not sure is regulation good is this regulation good what do we want um and so what sort of what sort of framework can we use for assessing the quality of regulations that are coming within the us yeah thanks jeff that's a great question i personally i think regulation is good we need clarity and we need some certainty without that why would innovators want to build here why wouldn't entrepreneurs go elsewhere i mean we see it's happening we need to make this a friendly environment and that means education you know and briefings with whether it's federal agencies or even on the state level so you know with io we've been working you know in the u.s at a state level primarily you know at this point um very closely with the wyoming state legislator and helping lead the effort to create 20 plus new laws with the recognition of dows um helping with you know crypto companies getting um breaking regulations that will allow for crypto organizations to get bank accounts and and access to capital um and a wide array of things in just educational aspects and working with the university of wyoming wyoming to help with standards and you know the research driven data and then you know that all will lead to data-driven policy making which is hopefully the most effective and you know the way we're going to really grade the quality of what's being drafted by by our government well and then iohk is also working with east african governments you guys have memoranda of understanding with several so i'm wondering what the different experience has been outside of the u.s because of course you know we're talking in denver we're talking in the u.s and you know decrypt is a u.s centric institution um but i think i think it's important to realize that there is a lot of stuff happening uh outside of the borders yeah and i'm grateful for sunya now to be here to have the fed involved at this level with all these amazing you know companies innovators builders but you know a lot of companies in this space are you know very us-centric and we do need to look you know what's happening this is a global technology nodes are hosted everywhere miners are you know so we need to think you know on a worldwide global scale and that's you know looking outside the us looking at countries like in you know african governments where you know they don't have the legacy systems in place or the basic foundations you know americans take for granted the record keeping that we have how easy it is for me to like call my alma mater and yes it's frustrating annoying and it takes forever but it's still like my transcript exists it is there i can access it i don't have to worry about black swan events war anything a pandemic that's going to ruin that that is really lacking in a lot of you know african countries and the governments realize that and they really want to use technology to solve social problems and help empower their people to integrate into society so they're working with iohk and io global utilizing blockchain technology so ethiopia we've been working with for about four years we've already implemented our smaller program which is working with about five million high school age students onboarding them onto the blockchain getting their digital identity and working with all the schools and through the ministry of education i just like to take a step back and just make sure everyone understands working with the government doesn't mean working with all of the government right you can have relationships with the federal reserve with fin hub or you know with in our case in ethiopia with the ministry of education it's not about the politics it's about the work being done and you know how can we empower citizens to be less dependent on their governments and you know in more control of their data their identities um so they can really help grow their own you know economies and um build really cool things so we have this digital identity cr academic credentialing program starting in ethiopia hopefully we'll use that same tech stack to expand to all students that's a 20 million plus and then eventually to all citizens uh in ethiopia this will combat issues that ethiopians suffer which is fake transcripts and degrees loss of actual data from institutes and any you know conflict and wars that break out um and the difficulties they deal with you know so in some ways it's easier working with you know foreign governments that don't have those legacy systems in place um where they're just trying to rely on that just to get by where they're just really like really just want to leapfrog to the front and have that motivation whereas you know in the u.

s and other western countries can be a lot more difficult to get things done as we know and i think that raises a really important point that rachel um sort of raised i think that there's been a lot of concern expressed about china and the fact that they have their own central um currency um that they've leashed out and is the u.s going to do something similar and are we going to stay in the forefront as far as our our financial system um and obviously sinai can talk more more to that but i think that that is that is a real and legitimate concern we definitely want financial stability we definitely as rachel mentioned we do need rules we do need regulations but we also need to keep pushing forward and making sure that we are thinking outside the box as far as you know how we apply these rules and to the entities and the types of you know possible digital assets and and other initiatives that are coming out right now it's a really exciting time and obviously this is very scary we remember in the 60s when the first atm machine came out and what a success that is i mean what would we be without our atm machines but we also remember in 2008 when mortgage-backed securities kind of took us down a bit um with the big bad recession so you know there's there's innovation can be obviously very very good um and we just have to you know kind of approach it um and and get it right well sunina before this we had talked a little bit about how the dollar has a good product market fit it has the ultimate product market fit but we're talking about blockchains and decentralized applications that do more than finance so when you're looking at uh digital currencies from the aspect of the federal reserve what sort of what sort of ways are you are you looking at beyond cbdc's and saying that's something where government has a value-add um yeah you know everything i done in the private sector side was always anchored in kind of the mission of how do we take up-and-coming technologies whether it was fintech or crypto and really break down barriers that still persist in financial systems right so frankly that was the hook and that same mission-oriented ethos of the fed that finally you know pulled me to the fed rabbit hole after i was like wait you don't want me what am i going to do with the fed so kind of just like that really was the common denominator and i think whether it's cbdc whether it's the manifestation in other ways given the innovation that's already happening in the private space right um if for those of you that haven't had a chance i would encourage you to take a look at the cbdc discussion doc that was recently dropped um and in it you know the the perspective that we that the fed really tries to bring to it is number one there is a wholesale recognition that there is a massive digitization and decentralization of financial systems right it's not a matter of if or when it's happening right now right whether that's in the united states whether that's globally and you know in my past life i had the opportunity to work in china in india and to your point like watching them leave frog and sometimes we forget you know they're actually kind of running farther and faster than us right so so that change is already happening the the second thing that's important to think about is really from that customer lens right which is the end consumer is going to gravitate towards experiences and products that are as frictionless as possible right so if the up and coming innovations are going to offer um a pathway for them to accomplish what they're trying to do that's simpler faster easier cheaper they're going to gravitate to that whether you know the regulators have caught on or haven't caught on right and we have to be appreciative of that and i was sharing with jeff i'm no smartypants policymaker i'm still a product owner at heart and the way i really think about you know why we should be leaning in and trying to figure out you know where is the future of money and payments and everything going is you know a simple heuristic right if if you think about it money in some ways is the ultimate consumer facing product everybody in the world has a relationship with money analog digital d5 anything right but we all have a relationship in some ways you could argue today the u.s dollar does maintain a pretty enviable product market fit right having said that if you're the product owner and there's many in the room here builders if you're the builder of a product that has attained that enviable product market fit you don't get to rest on your laurels you actually want to have a healthy sense of paranoia about you better be leveling up your product before somebody comes and disrupts it right so for all of those reasons you know it behooves us as the incumbent to be looking at what work is happening now as part of the cbdc discussion doc and i recognize the word humility is it always associated with the federal reserve but i hope that you will see in the discussion doc and there's a reason we want it is called a discussion doc because yes there are perspectives that are uh put forward uh uh you know from from the fed side but for those of you who have read it it also has like over 30 questions that we're posing because it comes from a sense of humility to say this is a nascent ecosystem an ecosystem that also continues to shape shift we're not going to pretend like we've got it all figured out we are learning these are the questions that we're grappling with and we want to interrogate those questions um you know in partnership with the industry that is closest to the technology in the building that's happening right so this is where i would encourage if you haven't already to consider participating in the open comment period because the one thing about the fed that is staffed with researchers is they will read every public comment that comes in and we do want to present a diversity of perspective as we think about you know this important innovation so right and uh switching gears a little bit you know rachel you had mentioned some other use cases and i'm wondering uh maybe robin can also speak to this uh a lot of those use cases are coming from outside the u.s we're talking you were talking about uh uh transcripts and and what not being put on blockchain um so robin when you're when you're dealing with innovators what sort of things need to be cleared up for some of those non-financial use cases or are we still seeing those are you still seeing those uh use cases come up yeah uh i think that there are some obvious examples in the us in the cryptocurrency community where people are are really engaging and and working closely with the government on pretty innovative ideas um you all may have heard of the occ's national bank charters a number of companies like paxos anchorage pratigo have all been approved for those licenses i know rachel mentioned wyoming wyoming has issued to avanti and kraken a number of licenses making them special um you know i can't remember what the term is special special yes special entertainment yeah special making and so and that's been great and circle has also applied so there's a there's a number of examples here in the u.s where people are really um trying to color within the lines and and trying to be certified and and licensed and under the u.

s federal regula regulatory system and that then sort of alleviates some of the burdens if they if they go the you know national federal route of the state and local rules which you all probably have heard about the patchwork quilt of you know state regulations in this space so i i think that what we need is more certainty and more clarity around what is the expectations of the entities operating in the space and i'm really happy when i read the report that there were so many questions that the government posed to the industry because on some levels these sandboxes these policy runs these testimony these hearings these are really really really important and the more of us that get involved and help with that dialogue by explaining what it is that we actually do here and make that clear so that the government can understand so that they can better provide oversight and regulation the better off we all will be um we're we're in this together um and you know i i can't stress enough that you know i would pay attention to all the things that the folks on this panel have said read these reports go to these testimonies listen to these hearings get involved respond to these questions because they need to hear from us they need to hear from you know all of us in this audience in order to make the system safer and better which is all something we want and i think i started off the top of the hour talking about you know my passion for financial inclusion in the wake of the george floyd's murder and the current pandemic that we live in i mean there's no better way to get involved than helping to bring to widen the inequalities in this country and to change the whole game with respect to underserved copulations than to get involved in these discussions and play a role with the government um and making the whole system better i just want to add one thing the talking about product market fit of the dollar i think you know it makes me think of just you know we have never encountered something as novel as crypto and what it can do the code can just be empowered and go did you do so many things and at once store value means a payment uh you know represent title all all together and when we're encountering something as new as that and looking at what our legacy regulatory framework is they are it's not fit for purpose right we're talking about if we're going to really talk like developers and engineers it's just not fit for purpose so what i loved about the fed paper is that it is kind of making they're making themselves aware in a humble way like we know we we need to know more and we want to get you know more understanding more information more views across the industry and across the board and so let's try to create some legislation and work with the regulators to find something that's going to really be fit for purpose so we can do everything that robin that robin mentioned and really you know are empowered as a country to do so lots of quotes on that panel there the dollar has good product market fit is spinning around in my head we have time for one question anyone have a quick one for this amazing panel all right that was fantastic um as a builder in the space especially working in stable coin field especially in products such as exchanges i know builders are afraid of the regulatory boogeyman right now um and getting raided or shut down what would you say is a good guideline or checklist to make sure a good intention builder don't run afoul of the federal government and current regulations i i guess it's mine um i mean it's hard to have a checklist like i said we are unfortunately in a lot of gray right now and uncertainty i would definitely consult with outside legal counsel talk to her sorry i had to make a plug um but i i think that i would definitely try and look at the decisions that you're seeing unfortunately the enforcement actions and a lot of the settlement agreements that are coming out right now are the road map for what is considered the appropriate you know sort of conduct of you know institutions in this space um i you know obviously leading by you know regulation by enforcement is not ideal but until we have the congress and we have the federal agencies up and running around this space those are going to be the only tea leaves that are available really to read in this area that can tell you the watch outs um i wish i had a better answer but that's where we are i'll add a little more besides just number one talk to a lawyer um my next thing would be get more involved right so there are a plethora of trade associations i think you know blockchain association digital chamber of commerce i think they're all here there's so many more that you know are geared towards you know proof of stake issues or defy issues or this or that a lot of them offer you know i think free membership for developers and things like that that's a great avenue to learn more to see what the problems are and you know kind of even have your two cents in to try to help you know develop that the right way and and get your voice heard let's hear it