Episode 108 of the Public Key podcast is here and this is our “Live from Links” series, where we showcase our podcasts recorded live at the Chainalysis Links Conference in NYC! Crypto regulation is changing from NYC to Louisiana and across the globe. We speak with Thom Hook (Global Chief Compliance Officer and U.S. Chief Compliance Officer, MoonPay) who breaks down the crypto regulatory framework and what needs to change in the US for it to be a safe space for innovation.
You can listen or subscribe now on Spotify, Apple, or Audible. Keep reading for a full preview of episode 108.
Public Key Episode 108: Building Compliance Programs in the Crypto Industry
“I think what’s interesting is there is a lot of regulation in the US. It’s just not cohesive and specific to this space except for places like New York and soon to be California, Louisiana.” – Thom Hook
In this episode, Ian Andrews (CMO, Chainalysis) guest Thom Hook (Global Chief Compliance Officer and U.S. Chief Compliance Officer, MoonPay) summed up in one sentence what the crypto regulatory framework is like in the USA and how its impacting crypto businesses and innovation as a whole.
Thom goes on to discuss his experience working at Circle during the early days of crypto and the challenges of building a compliance program in a rapidly evolving industry.
He provides insights into MoonPay’s unique business model, which focuses on retail on and off-ramp services for cryptocurrencies and NFTs and their role as a noncustodial platform.
He also touches on topics such as banking relationships, regulatory frameworks, pig butchering and other scams in the industry and the new demand for crypto lawyers in the face of increasing regulatory pressure.
Quote of the episode
“I think what’s interesting is there is a lot of regulation in the US. It’s just not cohesive and specific to this space except for places like New York and soon to be California, Louisiana.” – Thom Hook (Global Chief Compliance Officer and U.S. Chief Compliance Officer, MoonPay)
Minute-by-minute episode breakdown
2 | Thom’s story of building compliance programs from Joining Circle in 2014, transitioning to Bitstamp to landing at MoonPay
4 | MoonPay’s business model of not being a crypto exchange and making it easier for innovation to have payment rails
7 | Importance of compliance and transaction monitoring in obtaining and maintaining banking relationships
12 |Differences in regulations between the US and other countries
15 | Importance of reputation and risk assessment for partner selection and key
17 | Key takeaways from the conference panel discussion with other compliance experts
19 | Using education to combat pig butchering scams and the impact of sanctions
22 | Teaching a class on crypto regulation and its focus on regulations that have the most impact
25 | Prediction of increased demand for crypto lawyers due to regulatory pressure and excitement for innovation and growth in the crypto industry in 2024
Related resources
Check out more resources provided by Chainalysis that perfectly complement this episode of the Public Key.
- Website: MoonPay: Your gateway to Web3 – Experience the best of Web3 using MoonPay
- Blog: We’re live in Louisiana! MoonPay is back in business in the Bayou State
- Blog: Crypto On-Ramp: Boost your revenue with the world’s #1 crypto on-ramp
- Registration: Digital premiere of Links 2024 (NYC Main Stage Content and more – Register Now!)
- YouTube: Chainalysis YouTube page
- Twitter: Chainalysis Twitter: Building trust in blockchain
- Tik Tok: Building trust in #blockchains among people, businesses, and governments.
- Telegram: Chainalysis on Telegram
Speakers on today’s episode
- Ian Andrews * Host * (Chief Marketing Officer, Chainalysis)
- Thom Hook (Global Chief Compliance Officer and U.S. Chief Compliance Officer, MoonPay)
This website may contain links to third-party sites that are not under the control of Chainalysis, Inc. or its affiliates (collectively “Chainalysis”). Access to such information does not imply association with, endorsement of, approval of, or recommendation by Chainalysis of the site or its operators, and Chainalysis is not responsible for the products, services, or other content hosted therein.
Our podcasts are for informational purposes only, and are not intended to provide legal, tax, financial, or investment advice. Listeners should consult their own advisors before making these types of decisions. Chainalysis has no responsibility or liability for any decision made or any other acts or omissions in connection with your use of this material.
Chainalysis does not guarantee or warrant the accuracy, completeness, timeliness, suitability or validity of the information in any particular podcast and will not be responsible for any claim attributable to errors, omissions, or other inaccuracies of any part of such material.
Unless stated otherwise, reference to any specific product or entity does not constitute an endorsement or recommendation by Chainalysis. The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Views and opinions expressed by Chainalysis employees are those of the employees and do not necessarily reflect the views of the company.
Transcript
Ian:
Hello, we’re back with another episode of Public Key, live from Linx. This is your host, Ian Andrews. I am joined by Tom Hook, who is Global Chief Compliance Officer at MoonPay. Tom, welcome to Public Key.
Thom:
Thanks for having me. Really excited to be here and chat.
Ian:
You’ve got a pretty incredible career trajectory. I was perusing LinkedIn before our chat started out as an ADA, and now you’re Global Chief Compliance Officer. Give us the walk from your early career to how you ended up in crypto.
Thom:
I appreciate that. It’s been quite a journey. If you asked me back when I was an ADA one, what was compliance and two, whether I’d be running a compliance program, I would’ve laughed at you. I started out my career. I did everything. I was doing violent crimes, drugs, the whole gamut. And through… You pick up cases randomly, and I picked up a fraud investigation that kind of snowballed into a bigger fraud investigation. And next thing I knew I was doing large-scale identity theft investigations. Really liked it. And had ultimately made the decision that I needed to get in the private sector. And I thought to myself, what’s the closest thing to what I do? And so ultimately that became AML. And so there was a network of folks from the New York County District Attorney’s office and was able to get into anti-money laundering compliance.
So, got into that space, really enjoyed it. Didn’t know what a SAR was, but quickly figured that out. And from there, it was just a matter of life taking me where life took me. I left Amex, went into consulting, which I think is a great training ground for anybody. You just see so many different places. But one of the things I quickly learned there was technology was really important, and if I wanted to remain relevant as a compliance officer, I needed to figure out the tech. And so I moved into tech a bit, got into that, and that’s where I came across blockchain and crypto and got really excited about that. And in the Boston area, the biggest company was Circle.
Ian:
What timeframe was that where you came across Circle?
Thom:
It was 2014, 2015.
Ian:
So, early?
Thom:
Yeah, it was early. So, I watched them for a bit and kind of made inroads, connected with folks, and ultimately had the opportunity to lead their AML function.
Ian:
Amazing.
Thom:
And so-
Ian:
Now what was Circle like in 2014, 2015? Very different company than today.
Thom:
When I joined, they had just bought Poloniex, they were getting ready to launch USDC, and I knew very little about crypto. It was wild. They were going from a peer-to-peer investment app with a little bit of crypto in the background to a very big crypto company. And their risk profile changed pretty dramatically. So for me, it was one, big learning curve, thrown into the deep end and continuing to build out that cultural compliance and those controls as it relates to these new products. It was fascinating.
Ian:
I can’t imagine there was a playbook at the time for-
Thom:
No.
Ian:
You had to design from scratch. What does compliance even look like for a company operating in cryptocurrency? It didn’t exist at that point in time.
Thom:
A hundred percent. They did some… Well, I’ll say this, they did some really good hiring. They hired a bunch of folks from TradFi who we all worked together really well. And we all remain in touch, people who are mostly still in this space. I actually spoke on a panel earlier today, Dan Roseman, used to work with us there. A guy who works on my team used to work there. So we brought in a bunch of people who were ready to be problem solvers and figured it out. And we hired some really good crypto-talented folks who knew the space, who weren’t necessarily compliance people, but understood, came from traditional finance, understood the need for controls. And so we kind of built around that and we went from a team of three to 25. And so it was this really good growth of… This was pre-travel rule. So interesting times.
Ian:
And this has become obviously Circle’s brand, so you kind of laid the foundation for what they built the company around now, in a lot of ways.
Thom:
I like to think I had some involvement.
Ian:
I’m going to give you credit for it because you’re the only one here.
Thom:
Deal. I’ll take it. I’ll take it. I’ll take anybody giving me credit.
Ian:
Take us from Circle to ultimately MoonPay. How did things evolve from there?
Thom:
Circle went through obviously a big business change and ultimately focused really on USDC. I decided to make a switch. I said, let me check out payments. And so I worked in payment facilitator for a bit where I quickly realized that from a use case perspective, payments is ripe for disruption. And I also realized that I missed crypto very quickly. And so Bitstamp came looking and got along really well with the team there and took over the compliance function there. For me, it was fun to stretch, kind of looking always for ways to stretch. And so for me it was an opportunity to stretch beyond just AML and to build. I think a theme in my career is building. I like to build out a program. And so I got the chance to do that at a bit licensed company and working with some premier regulators. It was exciting.
That was back in Bitstamp, oversaw their program for two and a half years. And MoonPay, I hadn’t frankly really heard of, and had some interesting conversations with their team, my boss. What was quickly evident there is they were innovating, they were building, they were exciting. And again, the building aspect. I had laid the foundations and built a program that I was really proud of at Bitstamp that is being run by others now and I’m really proud of them holding that going. But I got to do it again. And so that brought me to MoonPay and combining payments with crypto and the ability to build a program now on a global scale was a really exciting opportunity.
Ian:
Talk to the listeners about what MoonPay’s business looks like today. I think people probably, they might’ve seen the logo where they’re able to pay with crypto, but give us the corporate side of that story. How big is the business? Where are you operating? What’s driving the business today?
Thom:
So, global business, we are primarily a retail shop. We’re an on and off ramp. We allow customers to buy, sell or swap cryptocurrencies. So, we act a lot like an exchange, but we’re not because we’re noncustodial. For us, we’re the counterparty to all the trades with our customers. We deposit funds into noncustodial wallets or receive funds from noncustodial wallets. It’s an interesting business model. I like the fact that we’re dealing with customers in the, it’s your keys, it’s your wallet, it’s your funds.
That’s a big part of what we do. You’ll see us with some of our partners, Uniswap, MetaMask, Trust Wallet, you’ll see us as an option for buying and selling. So, we’re kind of the biggest in the space. And then we also have this kind of interesting NFT side of the business as well, which again, for me, the on-ramp off-ramp core business has an interesting twist for me as a compliance officer. But the NFT side’s really interesting, and it’s obviously went down for a bit, starting to come back. Another interesting use case. How do you build around that? Is it regulated? How is it regulated? Things of that nature.
Ian:
So, in the NFT space, is it basically facilitating people buying with-
Thom:
The checkout. Yeah, exactly.
Ian:
With Fiat or credit card, rather than having to convert to crypto and then use a crypto wallet to buy.
Thom:
Exactly. We’re trying to make it easy for people to participate in the space. Cut through the complexity.
Ian:
And you’re not operating your own marketplace, you’re partnering with all the marketplaces that are out there.
Thom:
Exactly. We’re like the picks and shovels behind them. For us, it’s helping the innovators innovate, giving them the opportunity to do that.
Ian:
Now, I would imagine one of the challenges for your business is because you’re intermediating between the digital asset and non-digital asset worlds, credit card companies, banks, they’re looking at you as an important link in the compliance trust chain, basically of the transaction, right?
Thom:
A hundred percent. I think what’s interesting about being a compliance officer in this space, especially in the wake of Terra LUNA and FTX and now Binance, is I’m pretty important. The first thing that regulators and banking partners ask about is compliance. It’s table stakes at this point. And so I really… To me, that’s kind of the fun conversation is being that ambassador and educator there. So it’s evolved. They are looking to us to reassure them that our link in this chain is well-protected and derisked.
Ian:
I would imagine one of the other things that’s interesting is the noncustodial aspect of it. You’re not an exchange where you’re holding customer assets and you can block a withdrawal or freeze a transfer or something like that. You’ve got this intermediary role. How does that change what your team is doing on a day-to-day basis?
Thom:
From an AML standpoint, what’s really interesting is one, because we’re the counterparty, our ability to pre-screen transactions is huge. So if it doesn’t pass the smell test, we’re not doing the transaction and likely not keeping the customer. But at the same token, once we do conduct a transaction to a wallet that is sufficiently safe, we do still monitor what happens to those tokens.
Ian:
Interesting.
Thom:
This is the gift and the curse of the blockchain is we use tools like Chainalysis to see what happens to what we’ve sent our customers. Now, it doesn’t happen on our platform. We’re not involved in that. But from a risk and reputational perspective, if I then know that my customer sent funds to a bad place, I do want to know that, and I do want to take an action on the customer. Making that determination of whether that action was taken by the customer or this is just kind of down-chain on blockchain. It’s an interesting and complex place, but it’s a fun challenge for us to work on.
Ian:
It’s interesting that even after you’ve processed a transaction, you might potentially file a SAR or you might block that user from future transactions. You’re actively taking action based on what you’re seeing on the broad-
Thom:
Exactly. I call it the gift and the curse. It’s really good for us in the intelligence standpoint, but as I’ve always said, regulators expect you to do with the information that you have. You don’t just get to ignore it.
Ian:
Well, I think that perspective though, its maybe becoming more common. But I would say when I got into the space three years ago, there was a lot of, well, I don’t want the information or I’m not looking, I don’t want to look over there because then I have to do something about it. So please don’t show that information to me.
Thom:
The genie’s out of the bottle to some extent. And the question is really where does that obligation lie? I think that’s an ongoing conversation that I think hasn’t been wrestled to a real answer yet. And so that’s where I think we can be on the bleeding edge of these conversations and using tools like Chainalysis KYT, to do that.
Ian:
That’s great. I’m curious about banking relationships because of where your business sits. Obviously we saw collapse of a number of the very crypto-friendly banks. Not all of them, but a number of the ones in the US are no more. And it seems like the situation was kind of anti-banks participating or being involved in crypto, at least in the US market. How has that impacted your business? Have you found this to be kind of tough waters or have you been able to navigate it?
Thom:
I think everyone was real skittish for a bit, but I think that’s where the compliance as table stakes, it becomes really important. It’s literally the first conversation we have with new banks. They’re like, “Great, what’s your compliance program look like?” So, that is where we have to educate them that we have the same control framework that you have at your own institution, we just use different tools. And we are experienced people whose careers are in compliance. We’re not winging this. And so a lot of it, I think they know who the good actors are. I think most of this industry is moving in that direction. This isn’t, like I said, it’s table stakes now. If you want a banking relationship and you don’t have a good compliance program, they’re not even going to start the conversation. I think the conversations are open to those who are compliant and regulatory forward.
Ian:
What’s the situation outside the US? You mentioned MoonPay is operating globally. There’s been a lot of progress, I think, in the European market, some generally friendly crypto regulations seemingly coming out of the Middle East market, Singapore, Hong Kong are moving forward on potentially some positive [inaudible 00:13:27]. That’s all what I read in the headlines. What does it feel like actually operating the business?
Thom:
It does feel that way. I think… I teach a course in crypto regulation in the US-
Ian:
Interesting.
Thom:
So, I’ve had some funny comments like, “What do you teach them?” And my response is, there’s a lot of regulations that actually apply, they’re just not at a federal cohesive level for the most part. So, I think what’s interesting is there is a lot of regulation in the US. It’s just not cohesive and specific to this space except for places like New York and soon to be California, Louisiana. Whereas outside the US we are seeing, in Europe, the UK, the jurisdictions you’ve mentioned, they’re focusing on the space and building specific rules. That’s what we’re looking for. And it makes it easier and take some of the guesswork out. Frankly, as a compliance person, I love the gray area, that’s what exciting. But it helps when they give you a little bit more of the rules to the road. We all want to get to the same place. So, I think there is a… It feels more like they’re, it’s not catering to the industry, but recognizing the industry and helping it continue and further legitimize in a way that we’re not yet seeing in the US, at least on a larger scale.
Ian:
You mentioned New York a couple of times. We had Superintendent, Adrienne Harris, on stage this morning. New York, famous for being an early adopter of regulatory framework with the BIT License. You said you took Bitstamp through that process. What’s your perspective given the logjam in Congress? Should we have more regional or state by state frameworks adopted? Should we be pushing for that regulatory clarity at that level?
Thom:
I think that’s where we are. I have over 40 regulators that I have to deal with in the US-
Ian:
Wow.
Thom:
And interact with. I think that goes to that, it is regulated as money transmission, for the most part. Those state regulators are getting more sophisticated, and I think in the absence of federal regulation, they’re filling that gap. Now as a business that’s really complicated because as I said, it’s 40 plus regulators that you’re satisfying the individual nuances, and it’s a significant compliance burden. I think they are doing things to understand that burden. So, whereas you used to have individual state exams, they’re now banding together and you’re having multi-state exams, and so you’re getting a little bit of that. But ultimately, in the absence of federal regulation, they are filling the void in a way that I think is protecting customers. I think some states are obviously more tuned to this space than others like New York, which I think is helpful.
Ian:
I’m curious about the other side of your business. So we’ve talked kind of the retail-facing side. If I’m bringing Fiat into a transaction, you’re converting it to crypto for me. How do you evaluate or vet the partners that you’re going to allow to use the MoonPay service?
Thom:
So, it’s interesting. So the way our business actually works is, so our partners are just referral partners.
Ian:
Okay.
Thom:
We actually don’t facilitate any transactions with any entities, any institutions.
Ian:
Interesting. Okay.
Thom:
We’re retail only. And so for us, it is a referral avenue. They say, if you want to buy crypto, here’s one way, one avenue you can go. We have a direct relationship with every retail customer that comes through us.
Ian:
Got it.
Thom:
They have to pass our KYC, but then they’re in our ecosystem. We know who they are. We know we can verify their identity, and we can transact with them as they want to. But the partners that we deal with, they’re still, there’s a reputational concern. There are risks associated with that. So we do levels of review to make sure that the partners that we’re dealing with are those that we want associated with MoonPay. We work with some of the biggest brands in the world. We have a partnership with MasterCard, we work with Universal Studios, Nike, Fox, Puma. These are names that have come to us because of our reputation and our knowledge in the space. So, we don’t want to risk that by any stretch.
Ian:
That’s what I was assuming. And there’s so many sort of fly-by-night organizations, unfortunately in crypto. And some that are intentional rug pulls some that are maybe accidental where they just blow themselves up by being maybe not competent in operating a business. But I would have to imagine that there’s a fair amount of effort that goes into vetting and validating anybody that you’re going to allow to carry the MoonPay logo on the site, right?
Thom:
A hundred percent. For us… It’s twofold, right? If we only stuck with the largest corporations, we wouldn’t be holding to the ethos of this space, which is supporting the growth of innovation. And so that is where the most work goes in, is it’s easy to vet universal. It’s harder to vet XYZ Crypto company that started last year. Some may be good, some may not. And we’ve got to dig into those because we do, for those the innovators who were trying to do the great things for the space, we want to help them.
Ian:
Absolutely.
Thom:
But we got to separate the wheat from the chaff.
Ian:
Yeah, exactly. Exactly. Now, you were on a panel with I think some other compliance experts from Robinhood and Bank of New York Mellon. What were some of the takeaways from the session? Give us a preview.
Thom:
I think one was, I think it’s not strength in numbers, there’s comfort in numbers. We’re all kind of going through the same exercises in different places. We’re not alone. Even though that the panel was three very different businesses, Robinhood, BNY Mellon, MoonPay, three very different businesses, but we’re all thinking about things in similar ways. How we execute and what our risk profiles look like and how our customers interact may be different, but ultimately, we’re all trying to move this space forward in a compliant way. So, I think that’s an interesting takeaway. What I loved afterwards is just how many people came up to talk about, “Yes, it’s really interesting. I’m in that same boat.” Wanting to talk about their experiences. Because being a compliance professional in Fintech, but then crypto Fintech? It’s very different than being a compliance professional in a traditional financial institution.
Ian:
How so? Give me an example.
Thom:
A big part is you do a lot more from a variety standpoint. You can’t be a siloed compliance person. You have to be mindful of the customer experience, the business impact, and be more partner focused with your business counterparts. Not that it changes the way that you look at risk, but that you are communicative with them. And we all work together for the success of the business and so focusing on that piece is really important. And I think what I have seen in the six years I’ve been in the space is the type of people getting into the space. There are now crypto compliance professionals. I count myself as one of those, I think after six years, I get to say that. Maybe, I don’t know.
But there are folks who, their career, their compliance career, started in crypto and that’s what they’ve done and they are lights out on this stuff. I think data is becoming really important. And so the data that Chainalysis through Reactor is serving up, is getting better and better, and what we can do with that is getting really exciting and interesting. I think those are some of the fun things that we talk about is how we’re the same and how we’re different.
Ian:
It’s amazing. One of the big topics, we actually had a customer advisory board session yesterday that had a number of compliance professionals from some of our banking customers, crypto exchanges, a couple of Fintechs were in the room. And one of the seeming hot topics is on the topic of scams and specifically pig butchering. Is that affecting your ecosystem directly at all? Are you seeing your platform being abused in those scams?
Thom:
I think it’s prevalent and sadly prevalent in the industry. So, it’s definitely of high mind, and I think a big part of what we have to do is what we are doing better, I will say. And I think there are organizations popping up, a couple of which I met today, that are big on the education front. And I think that’s a part that we… It’s about putting up warnings. It’s about educating people that these scams exist so that we can get ahead of it. You can’t always stop people from doing things. Identifying these transactions when clean wallets are involved. It’s hard to, like I said, sometimes from our business model, it’s not clear on the initial data that something bad is going on.
Ian:
I would assume a lot of the first transactions for a newly created customer, you’ve got nothing, right? It’s really blank.
Thom:
It depends on what they’re kind of dealing with. And as a new scheme, that data’s getting more and more now, but it is one that as an industry as a whole, that everyone is trying to grapple with. And I do think that education is big because as they talked about on the main stage today, with the broader adoption, we’re not dealing with only crypto-sophisticated individuals. It’s folks like my parents, folks like other people’s parents. People who have questioned this industry before are now stepping in, but they are more susceptible to the scams. And we need to do… We all need to do our parts to kind of protect them there.
Ian:
I’m getting more and more questions lately about. “Ian, should I buy some Bitcoin?” And I’m like, oh, no, here we go again.
Thom:
I tell this funny story how when I joined Circle back in 2018, my parents were like, “You’re doing what?” And then when I joined Bitstamp, they were like, “How do we get an account?” And I was like, “Oh, how the times have changed. And it’s no longer my dirty secret that I work in crypto. It’s kind of a badge of honor to work in this space. And I think it’s good for the space, but we have a responsibility to protect everybody in there.
Ian:
Chainalysis is my first job in the crypto industry, and I joined in January of ’21 and immediately thrown into the quickly ramping bull market experience. First time ever that at cocktail parties or around the pool in the summer, anyone ever wanted to talk about my job.
Thom:
Yes.
Ian:
Suddenly my job was the conversation topic because they all wanted to know about crypto. And then strangely, that went away last year. But I feel like it’s starting to come back again, which is, it worries me a little bit.
Thom:
It is coming back. It is funny, when I… I started my career as a prosecutor in Manhattan and a lot of interesting stories, people want to hear all that stuff. Then I went into traditional finance compliance. Nobody wanted to hear those stories. And then in crypto again, it’s like, oh, all right, crypto guy. Tell us some stories.
Ian:
I’m curious on sanctions. So this is a thing that in the three years or so that I’ve been Chainalysis, initially there was very little direct sanctioning by OFAC of crypto. There was a handful of addresses they had ever designated. In the last year, this has become a tool of choice and they’ve started to designate some very big systems like Tornado Cash, that are widely used. Garantex, this big Russian exchange. How much of a challenge is that for your business? Do you see a lot of potential sanctions activity that you have to get involved with?
Thom:
I think whenever the regulators are super active, it adds overhead and stress. But it’s good. It’s what we’re here to do. And so I think what we have had to do more and more, the more active it has come, is relying on vendors. Relying on Chainalysis to make sure that we are… Sanctions is not a thing that you mess around with. This is really important. Along with a lot of other things. But using the right tools that’s giving you reliable data so that you can take those actions quickly and swiftly.
So it is, I think where for us, because we don’t hold assets when a designation is made overnight, whereas in other spaces where they’re holding people, all of a sudden, holding assets, all of a sudden there’s, I don’t know, 6,000 alerts that you’re dealing with. We’re not holding things. We’re going to take an action if and when a customer then tries to interact. So, we have a little bit of a privilege there that kind of makes it a less dramatic impact, but it’s still impactful. We still have to identify if our customers are dealing there and kind of take action as needed.
Ian:
Yeah. Now you mentioned that you teach a class on crypto regulation. I’m a student in your class, what am I learning?
Thom:
That there is crypto regulation in the US. That’s the biggest point that I make. So, I love the class. One, it keeps me really sharp. You got to be ready to answer the questions. But two, I think with the students there, they cut to the hardest part in a very simple question, very frequently. The way that the class is structured is we give them a primer. I teach the course with another guy in the industry. We give them a primer on what is crypto, what is blockchain-
Ian:
I was curious-
Thom:
What are the use cases.
Ian:
Do people walk in having basic background in blockchain?
Thom:
You do get… Especially with this younger generation, I’m now feeling old, they do. There are some who come in and frankly they probably know more than I do about the ecosystem-
Ian:
Wow.
Thom:
And how it works. There are a lot who walk in and have nothing.
Ian:
Okay.
Thom:
So, we’ve got to kind of work that balance and give them enough to kind of understand generally how it works in the important ways, what are the use cases that matter. And then we take them through class by class, the different types of regulations that apply if you are in a crypto company. Now, I teach at a law school, so these are all law students. I am a lawyer, but I’m a compliance professional. And so I come at it from a different angle than I think they’re used to, which is a lot more, I can say this as a compliance person and a lawyer, more practical perspective. That here’s the law, but here’s what that means for you on a day-to-day basis.
We have a class on securities law. We have a class on commodities. We have a class on AML. We have a class on what we call the silent killers, which is all of the other regulations that you don’t really talk about that can end a business. Whistleblowing, abandoned property, anti bribery, anti corruption, consumer protection, privacy, all these things that aren’t as sexy and as exciting as AML. Yeah. But are just as important to the success of your business. And then we take them through tax. It is part of a tax program. So we take them through how US regulators, the IRS and the Treasury, are looking at it and how they’ve done enforcement. The class, frankly, for the past couple of years, we’ve taught it through enforcement. There’s been lots of actions that we talked through. And the beauty of this space is every class, we can start with crypto in the news. Just like, “There is a thing that happened yesterday. Let’s talk about that.”
Ian:
There is always crypto in the news. It never stops. I’m curious on the tax piece. As we’re recording just ahead of us tax filing day, what’s your perspective on US tax regulations at the current moment?
Thom:
As it-
Ian:
As it relates to digital assets.
Thom:
I pay my taxes.
Ian:
[inaudible 00:29:45] Exactly.
Thom:
But yes, there is… I think there’s guidance forthcoming. I think the IRS and Treasury have been kind of working on this guidance. And I think the industry’s, it’s one of those things you have to be careful. This is an area you can regulate an industry away. But I think it’s fair to regulate and kind of draw a line in the sand as to how everyone should be thinking about these things in a way that is practical. I think that’s the part that if anybody has angst around this is, this guidance, how practical is it going to be? Because again, it goes back to the gift and the curse of the knowledge of an asset may have come to me. I don’t know where it originally, what it was originally bought for. But I can see where it bounced around on the blockchain. So where does that knowledge, where does my requirements as it relates to knowledge?
Ian:
Is MoonPay in a position with the new broker reporting rules that are proposed, would actually have to start submitting information to the IRS?
Thom:
So, other than paying my own taxes, I’m not a tax professional. We have tax professionals in the company that-
Ian:
Fair enough.
Thom:
I partner with who are much smarter than I am in that space. No, we certainly keep an eye on it, and we’ve got a crack finance team that is on top of all of this and work together to make sure that whatever reporting we have to do, we get done and same for our customers.
Ian:
Now, you recently wrote something on Cointelegraph that said crypto lawyers are going to be a hot commodity as regulatory pressure increase in 2023 and beyond. Tell me more about that prediction.
Thom:
I think it’s holding true. The lack of certain clarity that still exists, at least from a federal level, you need lawyers who are going to think through these things practically and do an analysis and be able to kind of parse this apart. I think it’s the more gray area there is, the more you need lawyers and compliance professionals paired together to kind of build this through. And I’ve been lucky enough at each of the organizations that I’ve worked at to have really, really crack regulatory lawyers, both from a US and global perspective. But they’re really important to the success of a business because every product and service that you want to launch, any adjustments you want to make to it, you’ve got to make decisions or understand what are the regulatory impacts? Is that bringing in new regulations that you didn’t originally have to deal with? Or is this something that’s not regulated? Well, what does that mean? How do we approach that? So, I think they’re still really, really important.
Ian:
Well, anybody listening out there that’s trying to make a career choice, sounds like go to law school. Study regulatory affairs.
Thom:
Yes. If you’re at BU Law, take the crypto reg course.
Ian:
There you go. Amazing. My customary closing question. What are you excited about in 2024? Either inside of MoonPay with maybe new products or services you’re bringing to market or in the broader crypto ecosystem, if you want to take it that way.
Thom:
I think from a broader sense, I’m excited, obviously, we’re ideally on the cusp of a bull market and things are looking positive. I think that’s exciting. I think that’s driving the innovation and the new products and services and bringing more people in. I think it is… We talked about our comical stories about it. With the ETF launch, this is here. So, I think seeing that adoption curve grow and the interesting use cases, I think now with more people involved, I think this is going to be an exciting year for innovation and growth of the good actors. I think as an industry, we have been dragged down for years by the bad actors and what they have… Those are the headline grabbing news. And my hope and my excitement is that that’s not what’s driving the headlines anymore. And I think that we’ve gotten there.
Ian:
Here’s to that.
Thom:
Cheers.
Ian:
Thank you for joining us on Public Key.
Thom:
Pleasure. Thank you for having me. Appreciate it. It was great.