LEGAL ENVIRONMENT FOR OPEN SOURCE DEVS IN THE US WITH TENNESSEE ATTORNEY GENERAL JONATHAN SKRMETTI, ALEX GLADSTEIN, AND ZACK SHAPIRO

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Transcription provided by Podhome.fm
Created: 8/13/2024 1:14:24 PM
Duration: 1621.865
Channels: 1

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We have a very special conversation today with a very special guest.

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We have Jonathan Scrimetti,

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Tennessee Attorney General here at the park. Thank you for coming.

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We're also joined by Alex Gladstein,

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Chief Strategy Officer of the Human Rights Foundation,

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and Zach Shapiro of Bitcoin Policy Institute.

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And we are going to be talking about

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code as protected speech specifically,

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liability for open source contributors,

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in terms of the code they write and

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the

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vague regulatory environment that they tend to find themselves in right now particularly because bitcoin is money

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and this idea

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of

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open source software that the developer is not taking custody of funds,

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but they might be treated as a money transfer business. This is something that hasn't it's like on the edge of technology

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and legal dynamics. This type of conversation rarely really happens. It's starting to happen more and more and it's been very promising on that front. I think America and Tennessee,

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can be at the forefront of that and I think

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it can lead to

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you know many, many great projects being built here in the state and also throughout the country. So, it's probably more important than ever.

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I think

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a great place to start

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would be with you, Jonathan.

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You know, I think

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for some of us we're familiar with with you and and your work and your career. Can you is it possible for you to just give us a just like a quick

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a quick backstory on how you got here? How how did you become attorney general? Who are you? Sure. Sure. Real quick. Real quick. I'll I'll talk fast and and leave out a lot of details.

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So, I grew up in Connecticut. My dad was a,

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an engineer. He did AI research, like, 30, 40 years ago.

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Am I on? Okay. Okay. So I I grew up nerdy. We had an Apple 2e from when I was about 4 years old. I still really like video games, have for basically the entirety of my life.

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So I've I was a programmer a little bit when I was in college, did nuclear,

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safety programming, if you can believe it. No accidents. So apparently, I did a good enough job,

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but I ended up going to law school after majoring in philosophy. I thought I was gonna be an intellectual property litigator, and then I got in and ended up being a prosecutor, which is far less lucrative.

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But I I had a really neat career working for the Department of Justice, started in the civil rights division. They kept sending me to Memphis, so I moved down to Memphis,

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did a bunch of work down there,

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met my wife.

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We got married, had kids. I could no longer afford to be a prosecutor, so I went to private practice for a while,

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doing some data privacy work, along with a lot of government investigation stuff, helping people who are dealing with regulatory state.

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Got recruited by the last attorney general who is looking for a new chief deputy because he wanted someone with some familiarity with technology law. Actually, taught cyber law as an adjunct at the University of Memphis purely for geek purposes. I thought it was really interesting.

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So he brought me in. We started looking at the social media companies, started looking at antitrust

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opportunities involving some of the really big tech companies.

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Then the governor scooped me up to be his counsel for a little while.

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And in Tennessee, we have a really weird system.

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The the Supreme Court of Tennessee picks the attorney general.

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So when the spot came open, I wasn't even gonna apply. I was trying to talk other people into doing it. They didn't at the last minute. I was up till 3 in the morning finishing my application,

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got it in just under the wire, ended up getting the job. And it's an 8 year term, so

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so I'm in till 2030. So that that is my story in a nutshell.

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Wonderful.

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We have Alex here. Alex has been

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building out the Human Rights Foundation since since its beginning.

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And you do a lot of work globally,

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with activists, particularly living

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under authoritarian regimes. When you think about this issue,

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what is your perspective on it? Where do your priorities lie? Why is it why is it so important?

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The,

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the overarching

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idea, is it is it American

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for

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a blacksmith to make a knife and for the knife to be used in a crime and for the government to go after the blacksmith.

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That's just the that's, like, the overarching idea. Is that an American thing to do? And obviously, the answer is no.

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You go after the criminal, not the person who made the tool.

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So that's one conversation point or piece.

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The other one is that,

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look, the reality is most of the tools and this is starting to change, and and we're trying to work on it. But

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most digital Internet privacy tools so far have been created in frees freer societies. Right? I mean, from what we understand, Bitcoin was probably created in a democracy,

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you know, PGP. Most of the foundational Internet privacy tools were mostly created in in free societies because people have protections here,

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is the idea. I mean, that's one of the reasons why,

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if you look at, like, patent rates, like, any creativity and entrepreneurship,

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with stronger rule of law and protections, you tend to see higher business creativity and higher entrepreneurship.

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You know, North Korea, South Korea is an obvious example. But, basically, dictatorships, you know, are pretty bad at

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creating a a climate for people to express themselves freely, whereas, you know, our society is certainly not perfect, but but we have a lot more room and and people can be a lot more creative. And that has lent itself to a lot of advances

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in in Internet privacy, which is great. The the problem is when when that starts to to stagnate or even backslide, and that's kind of what we're worried that what we're seeing right now. So I'd say that, you know, a, we're we're we're interested in the just general idea of,

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you know, not going after people who make open source tools, but also cognizant of the fact that the people that we work with in authoritarian regimes rely on, in many cases,

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people in the Western societies making these tools. And and if you attack somebody making a tool in America,

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you're hurting the ability of everybody in the world to use that tool.

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Wonderful.

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Now I'm gonna go to Zach. Zach,

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is very focused,

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working with Bitcoin Policy Institute, one of the preeminent

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policy,

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organizations based in America,

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and and proudly based out of Bitcoin Park.

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Zach, from your perspective on the American side or you're you're you're not necessarily clients, but like you're

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the the constituents that you represent are are Americans. How do you how do you focus on this? Like, what is where do your priorities lie? How do you think about this issue?

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I would say 2 things. The first is,

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raise your hand if you've heard of DigiCash or Egold or Liberty Reserve.

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A lot of people here. These were all attempts to create digitally native cash before Bitcoin. They all failed. They were all shut down. Why is it that Bitcoin worked when these things didn't? The answer to that question is that through proof of work, Bitcoin was able to solve the Byzantine general's problem and became the first digital currency that is operated truly on a peer to peer basis. There isn't a company that runs Bitcoin. There isn't a group of people that runs Bitcoin. Bitcoin is run by its users, for its users. And when you send a transaction, if you're validating that through your node, you are operating as a small node in a big network. And

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regulation thus far, thankfully,

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has recognized

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that Bitcoin is a peer to peer technology. We have guidance from the federal government saying that to the extent that you're operating on a decentralized network, that you're operating in a noncustodial way,

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we are going to recognize that basic fact that there isn't a company in the middle that could be regulated as a financial service business to which the Bank Secrecy Act and the Patriot Act and the 2020 version of the Patriot

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Act, apply.

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And that's been a cornerstone,

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you know, at least in my work. I I run a a small law firm that represents Bitcoin startups.

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That's been critical for people who want to build useful tools for Bitcoin.

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There is this bifurcation between people who run a business model where you're costing other people's funds and you're entrusted with that, and then there are a bunch of regulations that apply to you. And, you know, I I think in some ways that is totally fair. And then people who are just building a protocol, right, that is operated on a peer to peer basis, you are just creating software, just code that other people will use to send funds to themselves, perhaps, for privacy preserving reasons or send to other people through the application.

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But like Alex said, you know, it's just a neutral tool,

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and it is the actions of the people who use that tool that are subject to the laws. It's not the tool itself that gets punished.

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Recently,

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through 2 federal prosecutions of Tornado Cash, which is a privacy preserving smart contract in the Ethereum network, and then Samura Wallet, which is a privacy preserving

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protocol

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for the Bitcoin network.

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The Department of Justice seems to have departed from the last, you know, 11 years of guidance we've had from,

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FinCEN, the the part of the treasury department that regulates,

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these types of tools. And in each of these cases, the founders of these protocols who wrote the code and then operated some services around the code, which is, of course, distinct from running the code itself. The users run the code, not the people who wrote it.

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They're being charged with the crime of running an unlicensed money service business. Now, what does it mean to run a licensed money service business? Who do you get a license from? FinCEN. FinCEN has been unbelievably clear that non custodial tools are not money transmission. They're not money service businesses, and we have federal prosecutors who I think are rightly concerned with, you know, money laundering. Certainly, in the tornado cash case, it looks like the North Korean government used that tool to launder a lot of money. But instead of sort of doing the difficult legwork to find the exit nodes to disrupt the, you know, operations of the North Korean agents,

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they're trying to go after the code itself. That started with OFAC, which is the part of the treasury that sanctions,

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entities that are primary money laundering concerns, sanctioning a piece of code, which is completely

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unprecedented, and then a criminal prosecution

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of the founders.

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And let me tell you, in the in the week after these cases dropped, the number of calls I got from founders, specifically in the Bitcoin community, that are building non custodial tools that everyone was under the impression

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are just software,

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has had an incredible

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chilling effect. And and we've done our best to say, listen, our our best understanding of the law is the way it's been for 11 years, and, you know, you should feel good building what you're building. Understandably, people have left the country. They've shut down their protocols,

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and there's just been this horrible chilling effect even before these cases have had the chance to work their way through the court. So that's why we we care about this fight. It's it's both about the precedent that gets set in these cases, and it's about what that precedent or even the perception of the precedent could be set means for people that are building important technology on the Bitcoin network.

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Awesome.

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With the understanding,

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that the attorney general hasn't been briefed at length about all of these issues,

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and and considering that this is really I'm treating it as a first touch point of something that we see often in the developer community, particularly when we're trying to encourage them to build in America and build in Tennessee.

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I'm curious on on your, you know, first impressions and and

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perspective here? Sure. So the most important thing that the law can be is clear.

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Whether you agree with it or not, you know, we have mechanisms that let people give feedback and change the law when they don't like it.

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We have processes that are tried and true for changing the law, but people need to know what the law is. And it's the uncertainty

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that really stifles innovation.

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You know, chilling effect is exactly the right terminology here,

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and, you know, it is it is just fundamentally not American

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to go after people with the heaviest guns that the federal government has if they don't know to expect it.

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There are mens rea requirements for crime,

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you know,

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there are situations where somebody might create a tool and they know what it's being used for and they're they fall under the criminal conspiracy law, but but they know that. They know that they're dealing with bad actors. They know that the tool is part of a larger project that is doing evil, and the government has to prove that beyond a reasonable doubt for them to be convicted. What you want to avoid is the Aaron Swartz model where the government just starts hammering people to make a point,

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and and scare everybody away from trying anything around the edges of the law,

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because that it's authoritarian,

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and it reduces the opportunities for innovation and prosperity.

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So,

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you know, I I have a variety of disagreements with the current Department of Justice,

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and it sounds like this is another one,

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but, you know, at a time when

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there is so much overregulation

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in so many parts of the world, there's a huge opportunity for the United States to capitalize on that. You know, Tennessee tries to be the most business friendly state. I think we do a pretty good job most of the time,

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and

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and, obviously, there are federal preemption issues.

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But if you compare us to, say, New York,

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the odds of us piling on when the feds don't are are virtually nonexistent, and we're not gonna be getting creative at going after people,

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unless they are clearly engaged in either a scam

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or something very deliberately designed to to do something illegal.

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So I think the neutrality of technology is is fundamental

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unless and until the government can meet its heavy burden of proving that there's something more going on. And I think we need to make sure that we have a very light hand with regulation.

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Let the problems develop. And, again, like, there are people out there just, like, straight up scamming. Right? Like, everyone is well aware of that. You know, the community, to some extent, polices itself, and there are there are well established roles for the government to step in and clear that up. But all these areas where you have

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creative reading of the law, where you have hyper,

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burdensome regulation

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being imposed, whether it's the SEC asserting its primacy

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or,

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you know,

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the the I know there are some facts being debated, but the the Silk Road case where there was a a really strong,

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government intervention,

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You know, the government needs to make absolutely sure it has its ducks in a row, that it's moving clearly in ways that people can expect, that it's acting within the confines of the law. And if people in the government don't like the fact that the laws don't reach as far as they would like them to, the answer is not to try to bully courts into expanding the law. The answer is to go to congress

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and say we don't think this law is effective. Have public hearings, hear from all of the involved parties, hear from people who can explain the benefits of the technology,

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and make an informed decision, and then you'll keep making the decision. If If facts change,

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make the law better. But, you know, you don't have a small group of people deciding what the law should be and then inflicting pain on others

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because they're not complying with that.

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Thank you.

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So we need to be very aware of,

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the attorney general's time. So we do have a there's a very tight conversation.

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Alex, I mean, I think you have

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out of out of all Bitcoiners, I know you have some of the most experience in terms of working in

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incredibly difficult regulatory environments.

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Where do you think what do you think is the the the best way for,

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this conversation to go going forward? What are what are some, like, actionable steps? How should we be thinking about that? I just think it's it's

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great for you to be involved in this conversation

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because there's gonna be parts of America that are gonna be way more

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open to Freedom Technology than other parts of America. And that's one of the beautiful parts about America is that it's not just a monolith.

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But if Tennessee, you know, can be a warm welcoming place for people working on open source tools free and open source tools. That's that's that's it. There's no you know, they're working on free and open source tools now. They may have a business, and that's different. But the tool itself, the protocol itself should be the government, and as you as you say, should be crystal clear about this. That'd be really great for Tennessee to do what it can to to to whatever it can do, issue statements,

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help people, create programs to welcome developers. I think that would be massive for the state, especially when we have a world where,

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look, you know, obviously, a lot of us are believers in this thing, this Bitcoin thing. Like, we think it's gonna happen, and it's happening. But let's say, like, put that to the side. There's a non like, just just there's clearly a nontrivial chance that that Bitcoin becomes a large global currency, that that's there's clearly at least a small chance.

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And if Tennessee is the leader in that area, man, I mean, that this is setting the future generations of the state up big time. So, you know, to whatever extent that, you know, Bitcoin Park can help, I think would be great to steer the conversation there.

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And I would just add that, you know, HRF is an incredible supporter of the park. And a lot of what we do here wouldn't be possible without the Human Rights Foundation. I personally have had the privilege of of working with Alex and the Human Rights,

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Foundation team, his team over there for, I think, a little over 6 years now, training activists how to use Freedom Tech. And and the work they're doing is

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incredibly impressive, and it really does change the world. It it helps people's lives on the ground. To give just one more example, and then let's see. Go for it, Alex. We we host, the Global Bitcoin Summit here at Bitcoin Park. We did it last year. We're gonna do it again this year, and it brings Bitcoin leaders from more than 50 countries here to Tennessee.

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And we spend 3 days together learning from each other and and and getting enriched by the Tennessee community. So that's the kind of stuff that we're interested in, and Tennessee's just been a great home for that. And, you know, we hope to be able to continue with that.

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Awesome.

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Awesome. We hope you can come. It's gonna be in October. Love to. That sounds great.

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You know,

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the the acceleration of change in technology and culture is just hard to deal with right now,

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and there's a lot of conflict that's coming up as a result of that, and people trying to assert as much control as they can

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over the pieces of the world that they can control

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because they they have a hard time just keeping up with all the change.

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But that, I think, is the wrong response.

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I think the fundamental

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values

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stay the same,

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but you cannot

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you cannot

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push for a static pocket in a dynamic world, because you're gonna get left behind.

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And I think, you know, the same

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innovation and prosperity

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and,

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you know, just a commitment to individual freedom

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that defined Tennessee for

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for centuries.

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Right? I mean, the people who came here were the people who couldn't tolerate living on the other side of the mountains. They want to get away. They want to live their own lives.

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Granted, you know, there's a lot of stuff that happened in that history.

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Not not all of it that we we necessarily wanna brag about, but there's a lot that we do wanna brag about. There's a lot there that says somebody's setting out on their own into the at least somewhat unknown

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to forge a life for themselves and their families

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can create great things. And you look around Nashville, and it is just booming

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because of that same underlying attitude.

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We want people to build things. We want people to invest in the future,

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not just in terms of money, but in terms of ideas,

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but always with a recognition

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that it's individual freedom

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that creates the best results. The government's never gonna be able to dictate to people how to live their best lives. You know, there are limits that the government sets. There are decisions that get made collectively through democratic processes,

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but there has to be, and there is, a lot of room for individual freedom.

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And so

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while my math skills

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are not great, that's why I went to law school,

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and I'm I'm certain that I do not understand a lot of the nuances of what's happening.

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In terms of the big picture, I know that this is what we want here. We wanna be a place where ideas can thrive,

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where people can be creative, where technology can move forward in ways that are gonna benefit not just the people of Tennessee, but the people of the world. And so I really appreciate the opportunity to be here,

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and I do look forward to future conversations. And let's just give you, like, an example of what we're talking about that's very specific.

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After the,

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samurai case,

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started to unfold,

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people got very worried. We We had the chilling effect. And, for example,

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one very popular,

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very pioneering,

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wallet for Bitcoin that's that's really useful. It was my favorite one to use.

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They're a European company, and they, decided to withdraw from the US.

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You know? And some people may say, oh, that was an overreaction. Well, you know, that that's their decision. They were worried about making business here, and that's absurd. I mean, that's the like, we're basically on a short list in some of these cases with, like, North Korea and a couple other countries. It'd be like, oh, Bitcoin wallet. It is valid in all these places,

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except for the US and Turkmenistan and North Korea. I mean, this is absurd.

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So, you know, we're frustrated by that. You know, we can no longer use that tool in our educational work in the United States. This is this is really silly. So that's one specific example. And as a reaction to that, Zach and his colleagues, you know, came up with this fund, the p two p rights fund. And it's a way for people to donate.

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Yeah. Let's go. Let's hear for BPI.

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You know, I

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mean,

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seriously, like, I I, you know, this is, a lot of people were upset, you know, of course, when when the samurai case unfolded, but, basically, nobody really did anything except for BPI, so they really deserve

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a lot of

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applause for that. And they've developed a fund where if you want, you can donate legal defense case, but you can also just donate to legal defense for open source developers generally. And the hope is that, you know, devs will understand now that someone's got their back. So the PPE rights fund is also something that that I think, you know, you should definitely check out. Yep. I mean, please do if

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you have the beans donate to the P2P Rights Fund. Our goal is to get involved in any kind of case or regulatory action,

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where this principle is at stake, where code is being regulated as if it were a company,

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and, you know, that will probably, unfortunately, have broad application in the future. And so developing a war chest for that, is really important.

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Unfortunately, a lot of these issues really are at the federal level and and preempt state policy. I did wanna sort of be thoughtful about what conceivably

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could happen at the state level that that would move the needle on this.

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And there were 3 things I could come up with.

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One is and I'm sure this is a longer conversation, but these are things that I would hope you might consider as policy measures to the state of Tennessee to be as welcoming as possible to to Bitcoin devs. The first is to be very clear, at least under,

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Tennessee's money transmitter rules, that noncustodial

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tools that are not run by anyone, where, you know, the software does not have custody of anyone's funds and the funds are moving peer to peer, that that is not money transmission,

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in the state's interpretation,

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of at least state law.

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The second is for companies to whom these regulations do apply,

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there's this really bad situation where, you know and sometimes you need to have a custodial element to your product. It's inevitable that you're gonna have to register with FinCEN as a money service business, but then you have to go out and get 50 states' worth of licenses. And that's, you know, easily a couple $1,000,000 and then 100 of 1,000 of dollars a year in maintenance costs. And, you know, if Tennessee could be a leader in streamlining this process, you know, whether that's just figuring out what is the the lowest, you know,

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compliance burden you could have or even setting a model that other states could sign on to so that it's one application. If you have to be a money transmitter and there's one set of rules and you don't need an army of lawyers to get this set up, that would be incredibly impactful.

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And then the third thing I think that could happen at a state level, it's a little bit different than the previous two, is,

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tomorrow I'm speaking on a a panel with Tore Eklund, who is the defense attorney in a a case, against a a custodial mixer called Bitcoin Fog.

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And in that case, there's a little bit different regulatory issues.

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That product, I think, clearly does fall under money transmitter rules. However, there's a lot of concern about whether they got the right defendant in that case. And overwhelmingly, the evidence in that criminal case comes from this one firm, Chainalysis, you might have heard of that does blockchain analytics that tracks transactions.

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And they use a closed source methodology

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that they are unwilling to share with defense counsel. They're treating as a trade secret. Anyone who, you know, even views it in camera needs to sign an NDA. And there are other firms out there that do this work using open source methodologies

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that can be audited and are provably fair,

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and we're not taking a private company's word on it. So to the extent there are criminal prosecutions,

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or or even civil cases in the state of Tennessee that rely on blockchain analytics for evidence,

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the government and the, you know, the local,

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you know, prosecutors using open source methodologies and vendors that use open source methodologies

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rather than closed source companies like Channelysys, I think, would be incredibly helpful for due process for people who are creating these types of tools.

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I would add 2 other quick things, that we we could potentially do as a state. The first is push back against federal regulation that deviates from the

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statutes.

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It's it's a huge priority for me. We've got 8 lawyers who do nothing but sue the federal government right now over regulatory matters. And, I mean, it is it's it's, like, fundamental to our model of governance that, like, the the,

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you know, anonymous bureaucrats can't make big policy decisions, and they've gotten way too comfortable doing that.

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And so with love, we push back and get them enjoined on a a variety of issues. And the other thing is amicus briefs. So if there's ever an opportunity,

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where we could talk about doing that, I'd be very interested. We'd love to, and we're definitely BPI is gonna do amicus briefs in all of these cases, but we'd love to to coordinate.

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Before we wrap, sir, can I just ask you, do you own any Bitcoin yet?

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So

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it was about 2011,

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and I was a frequent participant on the fires of heaven

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massively multiplayer online role playing game boards.

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And these people started talking about Bitcoin,

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but there was also the SETI project where you could use your computer's downtime to help find alien life

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And I was so much too altruistic

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And so in complete and utter shame of having made the worst financial decision a human being could make in my lifetime,

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I have not been able to bring myself to buy Bitcoin since then.

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Perhaps you will inspire me to do it, but I'm I'm still like, oh, man. Like, that was Let's That was so bad. Let's get this man a bit x. Yeah. Let's make it happen. We'll make it happen. You can build your own Bitcoin miner at home.

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Seriously. Love it. All open source. All open source. Wonderful. Can we get a huge round of applause for our training panel and the fantastic panel? Thank you, guys.

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Thank you.