I think Phantom has the best product, but our no Action letter provides basically a blueprint for others as well, and we wanted to put that out there in a public way to serve others in the industry because that competition is very healthy. The most important thing is that defied developers are protected because right now there's some ambiguity in how the twenty nineteen Sins and Guidance imports with the DOJ's interpretation of the Money Transmission Statute.
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the biggest players in crypto trust Bitgo. Hey, folks, welcome into the Thinking Crypto podcast. I'm your host Tony Edward and joining me today is Marissa Coombel, who is the Assistant General Counsel at Phantom and Phantom is one of the most popular self custodial crypto wallets for use on Solana and other major blockchains. This is not Marissa's first time in the podcast. MURSSA has been on many times at her role at Blockchain Association VERSA. Great to see you.
Thanks for having me on again, Tony.
Yeah, Marissa, we were talking before the recording. You know, last time we saw each other and spoke, you were at the Blockchain Association and now you're at Phantom, so it's great to reconnect again.
Yeah, it definitely is. I joined Phantom in August, so I think the last time we spoke must been at least like a year ago maybe.
Yeah, and big news around Phantom, Marissa, where the CFDC gave no action relief, but I would love to set the table for those who don't know about Phantom, tell us a bit about the company and what you guys do.
Yeah, so Phantom was started in twenty twenty one and we are the most popular non custodial crypto wallet out there. But we're more like a money app now where people can manage all of their money that they keep on chain. And I think the no act letter is sort of an indication that you know, there's this bridge between crypto and tradfi and yeah, I mean it's just going to give us more opportunities for people to manage their money through through our app.
So take us at a crux of the issues, so to speak, Why did the CFTC need to issue a no action letter? What were you guys like connecting or what services were potentially going to be flagged as something that might be an issue.
Yeah, So we wanted to provide our users with an opportunity to access registered or CFTC registrants, So like a DCM or an FCM like Calsh is a DCM for instance, we wanted to give them an opportunity to access that directly through our interface. And ordinarily, without this no action relief, we would need to be registered as an introducing broker,
but that registration regime doesn't totally fit our product. The regime was started basically to protect against, you know, conflicts of interest and other dangers that come from think about like a whole room of people that are soliciting customers over the phone and creating their trading strategies and like more actively having a role in managing their trades, and that's just not what Phantom does. We're a software development company. We provide an interface that allows users to manage their
own trading activity. So the registration regime just like didn't really fit. But you know, these regulations have not totally kept up with the technology, and in our no action letter, the CFTC was very transparent and was saying and staid basically that they are planning to do either rulemaking our guidance on this topic, so I would expect that to come at some point in future, but until that comes, we needed some release in order to provide this this product.
You know, this situation is kind of a microcosm of what's happening on the larger scale of crypto legislation, because to your point, what many of these crypto apps and platforms are doing, and blockchains and so forth don't fit the mold of trad FI totally. There's there's gaps. We need rule making, and it seems these agencies, the SEC and the CFTC, they have to go about kind of doing it at hoc and then eventually, like you said, put out the full rules or.
The rulemaking right totally. And one example of this that has to do with our no action letter is obviously we are a non custodiam wallet, so our users have control over the keys, which allows them to have control over their assets that they're they're storing in that wallet.
And historically, before that technology, you know, was created, and with this introducing broker regime, a user would need to or a customer would need to basically connect one financial institution that had custody of their assets with the other
financial institution that was registered with the CFTC. Now it's like a totally different paradigm where the user is the one that is directly connected to the registered entity, and you know, the money is flowing from the user directly to the entity, not from one financial institution to another financial institution.
Yeah, and this is so significant to Merissa because there's been a lot of you know, friction when it comes to DeFi and maybe something like this and a rulemaking from the CFTC can really be applied to DeFi regulation. To your point of self custodial wallets, you're not involved in any way, the user's transaction transacting with another user, and it's decentralized.
Right for sure. And importantly, our no action doesn't allow like DeFi perpse for instance, like the user needs to become a customer of a registered entity which is like a centralized entity. But I do think that the framework within the no action letter and the recognition that self custody works differently will definitely play a huge role in how the regulations are adapted to like defive purse or defive predictions.
Pardon the interruption. Hi, I'm Tony. I'm the host of the Thinking Crypto podcast. I wanted to ask you if you can please support the podcast by hitting the like button subscribing. If you haven't as yet, you can leave a comment below as well. And if you're listening on a podcast platform such as Spotify, Apple or wherever you get your podcasts, please be sure to follow and hit the five star rating. I'll let you get back to the content. Thank you so much. Yeah, that definitely makes sense.
So talk to us a bit about the process of getting this no action letter that it involve multiple conversations with the CFTC kind of present seeing the blueprint of how this technology works for them to understand it.
Yeah, exactly. So we presented a blueprint with regard to how the tech would work and the flow of funds, and we also explain to them why the introducing broker regime didn't fit and also like what we were capable of doing from a compliance standpoint, And you'll see in the no action letter they lay out a bunch of different compliance requirements that we will have to abide by before we launch a product under this letter. So one, for instance, is we have to abide by the NFA
marketing rules. Another one is our users have to become a direct They basically have to direct the onboard with the registered entity or registered exchange, and you know that can happen within the phantom universe, but they will become like an independent customer of that registered entity. Another one is that we have to agree to c FTC jurisdiction and allow them to investigate us or bring enforcement actions against us if we violate the terms of the no
action letter. So there's a whole host of compliance requirements that you know, frankly we are capable of doing that we believe are very important in order to keep our users safe.
Yeah, and I'm assuming the rest of the industry is waiting for the rule making around this, you know, seeing that you guys got this no action relief and maybe CFTC they've been moving pretty fast. So has this sec we get the full rule making a bit later this year.
Yeah, I think so too. And I do think it's going to impact the centralized providers first and then they'll hopefully do something with regard to DeFi but I do think that in the interim, our no action letter is very instructed and helpful for others in the industry that want to launch these types of products, Like, you know, we certainly are not going to be the only one, and I think we'll you know, have the best product, but just because I think Phantom has the best product.
But you know, our no action matter provides like basically a blueprint for others as well, and we wanted to put that out there in a public way to serve others in the industry because that competition is very healthy.
Oh absolutely, And where as we've seen incredible progress on the SEC side as well. And look, both the SEC and cft S have been working closely Project Crypto Chair Sea leg as well as Chair Atkins. You know, they did a whole summit or meeting or something along those lines, and you know you talked about working closely together. And recently the SEC put out guidance on cryptosecurities providing four categories.
What are your thoughts on that, especially you know you and I who talked under it against the regime.
Change.
Time to change.
Yeah, I mean, I think it's great. I think that you know, Chair Atkins was waiting for quite a while before cher Selig was officially in his seat, and pretty much right away, I think in January they signed that MLU that that detailed that they were committed to working together and also committing to approach regulating this industry with
like an innovation mindset. So they were, you know, committing to essentially regulating what needed to be regulated, but then letting innovation happen as well, which is like a total you know, different approach than what we were dealing with for the past few years.
Yeah, it's it's a breath of fresh air. It's so good to have actual rulemaking and clarity, you know, keyword there for the larger bill, of course, but to have that guidance, and I feel like it's going to help kick off a lot of innovation. People can start building. They don't have to worry about getting a well's notice, a lossuit, you know, as long as they're not breaking a law of course, Yeah, totally. And they're just you know,
they just want to build. And I feel it's just going to unlock crypto Web three to go to higher levels of innovation. I can't wait to see what people come up with in the years to come.
Yeah, I mean, and this is how the regulatory process should work. Like right now, we have two regulators where their doors truly are open to people coming in and explaining their projects to them and genuinely wanting to be compliant. And I think are No Action letter is a perfect example of that. And that's just totally different than how the chair Genistler, you know, how his agency worked, where he would say and can come knock on our door.
But then when people did that, they were served with a wells notice basically, so it's definitely a very welcome change in that respect.
I don't know if you can answered this, but are you guys currently meeting with the SEC for anything you know that you can share, you know, nothing bad, but like as far as new things that you're looking to develop and so forth.
Yeah, I mean there's been an open line of communication with them, and it's there. You know, they're wanting to do things and I think many people in the industry are talking to them, and you know, the meetings mostly are public to public record, at least they have to publish their calendar.
So oh my gosh, that is in itself just amazing to actually have that transparency who they're meeting with and all that. It's like night and day.
Yeah, for sure.
Now the agencies you know, doing a lot of this work and providing the rulemaking and so forth. Obviously we need the Clarity Act itself, the the overarching theme to be passed in the Senate, signed by the President of course too, you know, make sure that it's law and it doesn't get reverted by another next administration down the line. Right now, the Claritiact is being held up because of
the banks, fighting stable coin yield and so forth. I guess the first question I want to ask is, you know, are you guys looking at the Clarity Act and along with the rest of the industry to make sure that's copasetic and it has all the things that are needed for crypto to have that balance, right, because I know they're going to have to find a balance that crypto to survive and to grow, and there need to be innovation, but also not to destroy the entire TRAT five system
and things along those lines, right for sure.
And yeah, we definitely are and we are involved in policy conversations. We have talked to many different offices on the Hill about this. I think from our perspective, the most important thing is that defied developers are protected because right now there's some ambiguity in how the twenty nineteen Since and Guidance imports with the DOJ's interpretation of the
Money Transmission Statute. So we're hoping that there's a fix there and that adds clarity to protect software developers, and that that's like written in legislation, so the DOJ, you know, can't come up with their own interpretation that's contrary to what the guidance has said for the past almost seven years.
I think, oh yeah, Marissa, hard question. You think this bill makes it passes by the beginning of summer?
Oh man, I mean this is the month if it's going to happen. The markup, I think is supposed to happen. Maybe it's the tenth today, So I think in a couple of weeks it's supposed to happen. And I think if it doesn't happen this month, there's the chances are low if it doesn't happen this month because this is also an election year, so members of Congress are going to be focused on the election. So this is I hope it does, but we'll see, and this is sort
of our chance. Just in terms of the composition of Congress, there's like people that are very committed to getting this done, and it's not clear whether that will be the case with the next Congress.
Yeah, I'm so hoping they can get this done. But also I was talking to someone, I think Austin Campbell of zero knowledge proof or zero knowledge consulting excuse me, And you know, one of things he was saying is that, Okay, let's say we don't get the bill passed. As long as the SEC and the CFTC are putting out the rulemaking that that's going to be a huge win. But definitely by the end of President Trump's term they need to get the belt passed, so maybe we have twenty
twenty seven. So I try to remind people that obviously the ideal case is a scenario. It is we need to get it done now. It would be so great for the industry in the market.
Yes, I totally agree with that. I do think that relying on rulemaking is not ideal, especially given that rule making can take a long time and there's always the potential that there will be a lawsuits, you know, as we saw in the Blockchain Association sued the SEC after finalizing the dealer rule and that rule ultimately was repealed because of the lawsuit. So there's that potential. With rule making and legislation is just much more concrete and it's like much harder to challenge.
Oh absolutely, I know we talked about the two major agencies, the SEC and the CFDC. Are there other agencies that you're engaged with that may not get the spotlight as much, but they are important for crypto and certain guidance yeah.
I mean, I think the genius rulemaking that's happening across a number of different agencies illustrates which agencies are important. The OCC, for one, there's a comment period that's happening right now that closes at the beginning of May about how the OCC will regulate stable coin issuers that they're gonna have a huge role in stable coins and the market there. And then also Treasury place a huge because Treasury is the umbrella agency over OPAC and Finnsen. So
that's another especially with regard to DEFY. You know, Treasury really does impact DeFi a lot.
Oh yeah, definitely. And boy, I know there's a lot of talks about taxes and center Cynthia Lummus has put forth some bills and things like that. I feel once clarity is done, I feel like we got to figure out DeFi and then taxes.
Yeah, I know, I laugh because I'm just so not a tax lawyer, and it's a subject I often actively avoid because it's so it's just so complicated. There are some great tax lawyers out there that's specialize in crypto attacks, but it is a huge area of ambiguity, and right now, you know, everyone is essentially responsible for reporting their gains through whatever however they're using their assets, their crypto assets.
But there's just a lot of ambiguity that probably needs to be solved through legislation.
Yeah. Absolutely. What's on your roadmap for the remainder of a year. I don't know if you can talk about product at all, maybe not, but maybe on the legal side you can probably share that. Yeah.
I mean, one thing on the product side that's exciting is we have opened the wait list for Phantom Cash and US. Anyone in the US now can access that product, which allows them to hold the cash stable coin within their wallet and then access fiat features so you can have a debit card, you can on or off ramp. We've partnered with Stripe to be able to to do that. Like we have KYC that enables users to connect their bank, they can put direct deposit, you know, into their Phantom wallet.
It's really becoming like a full money app. So I think that's really exciting on the product side. On the legal side, I mean, still working on all of the policy, the policy work and engaging regulators. I also do most of my job, honestly is the product counseling. So I work very closely with our product team and making sure that we're making products that are compliant and working on the development of those products, which is really fun.
Oh that's exciting. Well, I'm sure we're going to have another conversation sometimes this year as things progress we get further rule making and so forth. But thank you so much, Marissa. It is great to see you again. And I don't know when we're going to get to see each other in person again. Maybe at a salon at cryptoconference or something like that.
Yeah, definitely, let's aim for that. Thanks Tony, Thank you so much for tuning in. Please hit the like button subscribe if you haven't as yet. If you're listening on a podcast platform such as Spotify or Apple, please follow and leave a five star rating.
Thank you so much.