Bees, Ts, and NFTs: Remarks at the Coin Center Dinner

Thank you for that introduction and thank you to Coin Center for inviting me back. I am sorry that a regulator-rather than a developer, founder, or funder-stands before you today. Let's hope that we can make quick progress to a place where people are free to build interesting and valuable projects without a regulator like me at the front of the room. Speaking of regulators, before I begin, I must remind you that my views are my own as a Commissioner of the Securities and Exchange Commission and not necessarily those of the SEC or my fellow Commissioners.

The number of times I have repeated that disclaimer is one of many indications that I have been in this job too long. Even my own very patient mother has tired of hearing me say the same thing over and over. All who share her perspective should draw comfort from the fact that my days at the SEC are numbered; my term ended in June, but don't put your party hats on just yet-the statute allows me to serve until I am removed, my replacement is confirmed, or the start of the next session of Congress, whichever comes first.[i]

A lot of people have asked me what is next. I could leave the government and do a 180 on crypto, but that career path is too well-trodden for me. My plan long had been to transition to beekeeping-honey is delicious and nutritious, and bees sting with less glee than most of my Twitter commenters. Casting doubt on the practicality of that vocation, however, was my encounter with my parents' actual beehive. Dressed in a white suit, gloves, and beekeeper's veil, I attempted to lift a screen out of the hive as my family looked on. My normally kind father could barely contain his incredulity at my ineptitude; my mother was incensed that I was killing her "precious bees"; and my brother, unprotected by a beekeeper's suit, pushed me aside to finish the job with an enviable nonchalance. A natural beekeeper I am not.

After considerable thought and with a little nudge from Coin Center, I have found an alternative profession. With no effort at all, I can be an exchange! The uniform is much more casual for this profession-no suit, gloves, or netted head covering. All I need to do is wear this T-shirt. The way the old SEC was trying to contort the law, merely wearing this T-shirt, which reprints code included in a Coin Center comment letter would have been enough to require me to register as an exchange.[ii] This code enables people to swap tokens (including tokens that are securities-and all of them were treated as securities back then) and so my T-shirt would have been covered by an SEC proposal to amend the definition of "exchange" to bring into scope communication protocols.[iii] The SEC has moved on from such legal contortions, happy news for all except those with an inordinate affection for intermediaries and for me, who will now never be able to achieve exchange status solely through questionable sartorial choices.

For post-SEC life, therefore, I must turn to Plan C, or more precisely, Plan NFT. Several years ago, the SEC managed to squelch NFTs with some strategic guidance in the form, of course, of an enforcement action: Digital cats, at least stoned ones,[iv] and other NFTs were securities.[v] A more sober view of the securities laws now prevails. Chairman Atkins recently has acknowledged, most digital assets are not securities.[vi] Artists, musicians, and other creators seem to be tiptoeing back into NFTs. I am no artist or musician, but I have a lot of material with which to work up an NFT collection-this one is not cats but, as the saying goes, is for the dogs, which is why this collection will be called The Dog's Breakfast.

My NFT collection is going to be a set of characters that I have encountered in the world of crypto, especially at its current, often uncomfortable intersection with policy.

I have to start by looking in the mirror. The first NFT is CryptoMom herself. This middle-aged, bespectacled techno-incompetent wears an unglamorous suit and a slightly befuddled expression as she encounters concepts that challenge her no longer malleable, nearly boomer brain. She's not shaking the hand of someone who wants her to endorse his crypto project. She is relying heavily on a brilliant Crypto Task Force that more than compensates for her many limitations. People call her "candid," which really means her views-minds, mouths, markets, and money should be free of government control-strike people as out-of-step with CryptoMom's pedestrian persona.

Next comes T-Squared: Terrified TradFi. He too wears a suit, but a more expensive one, a fancy watch, and, unlike CryptoMom, is perfectly coiffed and never disheveled. T-Squared is hitting the send button on his latest missive to the SEC. If you squint, you can make out the words: "Ignore what I said in all my previous comment letters. All the existing securities rules are working great! Do not change them for those upstart crypto firms." A thought bubble coming off T-Squared's head proclaims, "Don't change the rules now, but do change them once my firm launches a competing product or service." Check back in six months; T-Squared will be working in crypto.

My third NFT is HyperTyper. He is wearing a backwards baseball cap that has an SEC seal with a slash through it. The rocket emoji that graces his social media profiles reminds him that "Number always goes up!" An energy drink and nicotine pouch are close at hand as he hunkers in front of a basement computer posting, trading, posting, trading. One X post insists crypto assets are not securities, so the SEC should stay away. The second post-which comes after his bags have been emptied by a scammer-screams: "Why isn't the SEC doing anything about the people manipulating crypto assets?"

HyperTyper's twin is Maxi. Maxi's fingers form the shape of a heart. He loves [insert name of his favorite crypto asset] and hates the rest. Behind him is a poster that extols the importance of freedom from paternalistic government overreach. But the hoodie he's wearing bears the slogan: "Outlaw all crypto assets except [insert name of his favorite crypto asset]." Some fresh air, in-person interactions, sunshine, and a copy of Hayek's Road to Serfdom might be good for both HyperTyper and Maxi. Touch grass, Bro, touch grass!

Next up is AuntieAnti. She is wearing lots of buttons, including "Blockchain Won't Solve This, You Blockhead" imposed over a clenched fist; "What Has Blockchain Ever Done?" with a picture of an Excel spreadsheet; "Keep your Bitcoin off my Grid"; and "Fiat or Bust; Crypto will Bite the Dust!" She has steam coming out of her ears. She is mumbling something about crypto being unregulated while ripping to shreds a draft crypto regulation. She needs a puppy.

AuntieAnti is not the only anti. She is joined in the NFT collection by BanMan. He is reading a book called, "Bitcoin is for Bad Guys" and is pulling his hair out as he thinks: "If only crypto didn't exist, crime would stop. We should ban it." Little does he know the cash in his pocket was just given to him by a criminal out of the proceeds of her crime, and the check he's about to drop in the mail will get stolen by a fraudster.

AntiAuntie loves talking about Me-Me. Wearing the scanty dress of an influencer, Me-Me steps out of a Lambo in Miami. She holds a designer bag into which she can stuff the money of her memes. She wears a sash that says "Don't Build Anything Real. Keep Crypto Fun and Vapid!"

AntiAuntie loves talking about not only Me-Me from Miami, but RugPull too. A sinister figure, RugPull carries an AI-generated white paper and a moneybag ready to receive the fruits of his post-pump rug pull. He stamps belligerently on an industry-devised framework for disclosing key information about tokens, their allocation, their project teams, their market-making arrangements, their future development plans, and planned token sales.[vii] RugPull hops successfully from one project to another, yet HyperTyper keeps buying.

Lost-in-Law is an attorney, who dresses in a hoody and white sneakers and knows all the right crypto lingo. He carries a securities law book, which he has yet to open. A trap door is on the floor behind Lost-in-Law. Unwitting crypto founders lining up to see Lost-in-Law will fall into it after they follow his bad, but expensive advice. To be fair to Lost-in Law, until this year, the only good advice he could have given was to go overseas or shut down.

Another character in the NFT menagerie is Dapper DAT. He is dressed in a suit and looks like a Chief Financial Officer. He hums quietly, "A DAT is an ETF in more flexible form, challenging every financing norm. Yield generation is the name of the game. If something goes wrong, someone else is to blame!" A diploma behind him reads "Financial Engineer." A second certificate reads: "Master of Regulatory Arbitrage."

Imanotta Patient, CEO of a crypto company, is a very antsy NFT. She is jumping up and down outside the SEC. She carries a stack of papers and is yelling loudly into her phone that the securities laws don't apply to her company. Imanotta's company did develop some pretty cool technology, but what she really wants to build is the "make securities laws disappear" machine. I hear the House and Senate are looking for common ground on crypto legislation, so maybe Imanotta will find an audience there.

Next in my NFT ranks is DINO. From one angle, DINO appears to be composed of many disparate dinosaurs, each with its own wallet addresses, prattling on about decentralization. But a closer look shows him to be just one dinosaur holding all the keys to the multi-sig.

MiddleMan likes DINO because DINO gives MiddleMan the confidence to shout "purported" every time he hears the term "decentralization." MiddleMan's sweatshirt says, "No transaction is complete or safe for investors without intermediation." He has a mannequin under his arm, which he stands ready to force into the middle of any peer-to-peer transaction he spots. I might have to send MiddleMan one of my T-shirts to remind him that we don't need no intermediation.[viii]

Greasy Veacey is another member of the NFT crew. She sits at the wheel of a dump truck full of tokens. Her eyes are peeled for a crowd of retail investors on whom she can unload her tokens as soon as her brakes unlock. Greasy Veacey likes to roll right over VCs who are trying to create incentives for good practices by crypto projects.

Minty is draped in dollars. She is all-out sprinting to pass a growing field of rivals in the post-GENIUS stablecoin race. She's looking for ways-legal, lobbying, and logistical-to trip up her rivals. But watch out, Minty, the Bank of England is coming for you![ix]

Then there is the Alchemist. He has a chemistry set. He drops illiquid real-world assets into a beaker, and out pops an asset that he can fractionalize and market as highly liquid and appropriate for Mom and Pop. And, he claims-unconvincingly-it's not even a security! Another of his tricks is taking a security, dropping it into an opaque pool, and marketing ambiguous rights to HyperTyper for DeFi deployment. "Disclosure, schmisclosure . . . the future is onchain!" he says when asked whether he plans to tell investors what exactly they're getting when they buy what he's selling.

Pontificator is another favorite. "We need clear rules," he says incessantly. His hollowed-out figure shows nothing of substance exists beyond that single line. He's the dog that caught the car-he doesn't know what to do with a favorable policy environment now that he has it. Perhaps, there's a bit of Pontificator in all of us.

I am joking, of course, about becoming an NFT creator. A far less glamorous future awaits especially now that I have both demonstrated my lack of creativity and offended everyone. I am sorry if any of my NFTs hit too close to home. Add the latest offendees to the list of people angry at me for something the Crypto Task Force has done or has not done, and I will have no friends left at all. Maybe I'd better give those bees another try.

Let me close with a real apology, a word of thanks, and some motherly advice. As large as my imaginary NFT menagerie is, the number of people earnestly working to get crypto policy right is even greater. I am grateful for their patience, creativity, and generosity in sharing their time, talents, and insight with the Crypto Task Force. I especially appreciate the members of the crypto community who put their noses to the grindstone to serve other people-even when doing so requires them to take career, financial, legal, and reputational risk. Many people who have taken such risks are here at tonight's dinner. You have built or are building solutions to seemingly intractable problems, you have ignored the noise so that you could think deeply about how to improve people's lives, and you may have faced government investigations for doing so. I am sorry that over most of my tenure at the SEC I failed to convince my colleagues in government to give you a chance. I hope that you and others whom you have inspired will use this time-a time in which regulatory clarity has replaced ambiguity as government's objective-to build good things that will enhance the safety, security, happiness, and prosperity of your family, friends, neighbors, and nation. Show the skeptics that technologies that enable us to engage permissionlessly and privately with our peers are worth preserving and celebrating. Building valuable things in this moment when government is not trying to stop you is the best way to ensure the durability of sound crypto policy. Thank you and have a wonderful evening.