Why Authorities Can't Freeze Crypto Fast Enough: DEX in the City

**Jessi Brooks** (0:00)
So now it appears to be trying a different angle.
It's whether the government not can stop the publishing of code, but control who uses it, which is probably even more burdensome, right? Because they're saying, let's use the same export laws to control access to something that has been published under the First Amendment. And that has not really been decided, but to be honest, it hasn't been decided because it doesn't have anything to do with export law. They're trying to control who gets to log in and use something. And for crypto, that's really everything. So the winners and losers are being chosen without a process or a real law that applies to this. And you know me, like national security is something I care a lot about. But we can't just say national security close our eyes to reasoning. We need to have a real understanding of what's happening here because we can't say to everybody, build your life using these financial rails and crypto, using stable coins. We can't say to them, use Claude, it will make you more productive. If at a second, all this stuff can be cut off just because of national security or export laws, like that, it just doesn't make sense to me. And I'm honestly a little bit shocked that the crypto industry isn't more up in arms about this because this is our fight, like let's go.

**Katherine Kirkpatrick Bos** (1:23)
Hi all and welcome to DEX in the City, where the wallets are cold and the takes are hot. Before we get going, remember, we're lawyers but we're not your lawyers. Nothing you hear on DEX in the City is legal or financial advice and it doesn't create an attorney-client relationship. For the fine print, as always, check unchainedcrypto.com.
We are so excited to be here with you this week. A great episode as always and it will begin right after we hear from our sponsors.

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**Katherine Kirkpatrick Bos** (2:10)
And we're back. So first we have Jessi, web-free prosecutor turned web-free protector at Ribbit Capital, and V from the SEC to Web3. And I'm your host, KK, Katherine, fluent in TradFi and conversant in deep tech.
So today we are going to jump right in with something that feels very TradFi, not very crypto at all, but it's actually a super big deal. So last week, the besties, SEC and CFTC, issued a joint request for public comment. And remember, that means basically market participants now have an opportunity to kind of make their voice heard. We get 90 days to weigh in on working to further harmonize regulatory frameworks applicable to portfolio margining across a bunch of different assets, securities and commodities. I'm going to explain what that means in one second. But this is actually kind of the nerdy regulatory thing that often escapes notice. People don't really understand it at first glance. So there's not a lot of discussion, but it's a very big deal. So we've discussed in the past that basically securities and derivatives, and derivatives can be commodities, they can be securities, are regulated somewhat separately. So what does that mean? It means that basically when traders trade all of these assets, they often have to post more collateral than necessary because of risk exposure across both markets. And traders hate that. It's like anyone. You don't want to have your money sit somewhere when it could be put to use, earning somewhere else. So these agencies appropriately want to see if closer alignment could mitigate that and just increase overall market efficiency.
So there is a little bit of really interesting background here. They signed a memorandum of understanding back in March to kind of modernize margin rules. And in mid-June, they released formal joint requests for comment on harmonizing derivatives, product definitions, with this kind of margining as a priority or a focus. But before someone says, oh, the agencies are going nuts again, like there's been obviously a lot of criticism levied at the CFTC in particular, I also want to point out that the agencies actually issued a joint request for comment on this back in 2020 And there were a ton of comments, but it didn't ultimately result in anything. So this is actually fantastic that the agencies are picking this back up to kind of get something done. And it's super important now because clearing mandates for US Treasury securities and futures are supposed to take effect by the end of 2026, which will push tons of volume through central clearing houses and change all of the margin requirements. And again, I'm going to translate here, like water clearing mandates. A big chunk of the US Treasury market has not historically been required to go through central clearing. But regulators decided a while back that that was unacceptable, given kind of the systemic risk of the US Treasury market. So the SEC adopted new rules mandating that most Treasury trades have to go through these clearing houses. So boo, centralization. We're not going to get into that topic.