Money20/20 Day 1: Regulators, Finance Giants Forecast Bitcoin's Future

At the first day of BitcoinWorld, panelists discussed money laundering, crypto 2.0 and the future of bitcoin regulation.

AccessTimeIconNov 3, 2014 at 10:00 p.m. UTC
Updated Apr 10, 2024 at 3:01 a.m. UTC

Roughly 7,000 members of the financial technology and services industries are gathering at the illustrious Aria hotel in downtown Las Vegas for the Money20/20 conference this week.

The four-day event formally kicked off on 2nd November, bringing together nearly 1,000 chief executives, dozens of companies and one particular emerging technology that could reshape the careers and business models of everyone attending – bitcoin.

, which focuses on the various opportunities and issues surrounding digital currencies, got off to a strong start on Sunday, with several sessions focused on consumer and security challenges as well as some of the promise offered by bitcoin and the technology underpinning it.

Those in town for the bitcoin track at Money20/20 heard bitcoin investors, entrepreneurs and federal law enforcement agencies share their thoughts and strategies on both promoting and securing digital currency for the future. Notably, the keynote speech was delivered by New York State Department of Financial Services superintendent Benjamin Lawsky.

Protecting consumers

The first panel, entitled 'Cryptocurrencies & Consumer Protection Issues', was moderated by Judie Rinearson, a partner at legal firm Bryan Cave. The panel consisted of Federal Trade Commission attorney Duane Pozza, Seven Advisory principal Constance Choi, Ripple Labs chief risk officer Greg Kidd and Hogan Lovells partner Veronica McGregor.

The panel, like others throughout the day, echoed a common argument – that regulators have no interest in squashing digital currency startups or outright preventing consumers from purchasing and using the technology.


Ripple’s Greg Kidd said that his company “would be happy if there were good regulations”, stating that such frameworks actually make it easier for businesses to expand and grow. He added that ultimately, bitcoin startups need to get the proper licensure if they plan on continuing to operate in the United States given the regulatory framework taking shape there.

“If you aren’t licensed, you aren’t in business,” he said.

Choi noted that the conversation taking place between regulators and bitcoin industry leaders is an important one, explaining that finding a balanced framework is “one of the pain points” creating problems today.

McGregor later commented that organizations like the US Consumer Financial Protection Bureau (CFPB) want to find solutions to these issues, explaining how the process currently underway will have an impact on regulations abroad.

“The international community is waiting on the US,” McGregor concluded.

Pozza helped end the session by explaining how agencies like the FTC are well aware of the benefits of digital currencies, and are only interested in fostering an environment in which lawful applications are not marred by fraudulent use cases.

He said:

“We talk about identifying the problems, but that doesn’t mean we’re not aware of the potential benefits, the consumer benefits.”

Criminal use of digital currencies

The day’s session on money laundering and fraud issues was notable for its participation by representatives from the US Federal Bureau of Investigation (FBI) and US Department of Justice, as well as members from the security and bitcoin industries.

partner Carol Van Cleef led the discussion, which included BitPay regulatory counsel Azba Habib; Catherine “Alden” Pelker, an analyst for the FBI’s Money Laundering Intelligence Unit; Kathryn Haun, assistant US attorney for the Justice Department’s Organized Crime Strike Force; and Scott Dueweke, director of identities and payments at Agilex Technologies.

Both Pelker and Haun spoke at length about the frequent use of digital currencies by online criminals for enterprises both large and small. Haun noted that today, the marketplaces for personal identities and credit cards function almost entirely on bitcoin and other digital currencies.

Haun explained:

“What we’re seeing is some of these organizations, including in the Eastern Bloc, companies that sell identities and sell credit card numbers will really only accept payment in digital currency. They aren’t interested in cash, wires – they’re really going for digital currency. We’re seeing that in the areas of child exploitation and pornography [as well].”

Pelker argued that the interest in digital currencies among online criminals reflects the broad interest among the money-using public in technologies like bitcoin and more use among businesses and consumers.

“But the natural consequence of that is that criminals – if they hear more and more about these systems – incidentally more of them will be interested in experimenting with them,” he said.

Habib revealed that BitPay has had to develop internal protocols to identify merchants trying to use their networks that ultimately prove to be fraudulent enterprises. She said that the company is working on automated systems for this purpose, and for now, manual practices and in-depth investigations is its main weapon against would-be fraudsters.


Following her comments, Haun noted that these practices are a welcome sign for federal investigators and that the government wants to see that kind of self-policing become more common.

Other topics covered during the panel included what companies can do to both identify whether or not they are the target of a federal investigation, and what they can do if and when that process occurs.

Pelker and Haun said that companies in the bitcoin space need to recognize the realities of their business, and this includes instituting a robust AML/KYC policy before being asked about it by federal regulators.

During a follow-up Q&A, Habib was asked what BitPay is doing in the wake of twin rulings released last week by the Financial Crimes Enforcement Network (FinCEN). She said the process is still ongoing, explaining:

“We looked at that ruling very closely. There are some open questions that we have engaged FinCEN with to try and gain clarity on a few nuances.”

The future of digital currencies

The session 'Building Bridges from Crypto to Legacy Financial Systems' focused on how the bitcoin industry could become more interconnected with the broader financial ecosystem. Davis Wright Tremaine associate Peter Luce utilized both his own questions and those from each of the panelists in parsing how the two industries could ever cooperate, if at all.

Participants included Bitcoin Foundation Regulatory Affairs Committee chairman and Blockchain global policy counsel Marco Santori; CoinX founder Megan Burton; ITC Financial Licenses general counsel Nicole Ibbotson; Xapo chief compliance officer Karsten Behrend; and Frank Mastrangelo, co-founder and president of Bancorp.

During the session, participants were asked to gauge the likelihood of banks working with digital currencies and the companies that service that emerging sector. Burton said that while challenging, the process can start if companies in the bitcoin sector are prepared to be as open and collaborative as possible.

She said:

“Our counteraction is simply education, bringing them into our environment, letting them audit us, let them look at our systems, walk them through a transaction and show how it mirrors the systems out there today.

Mastrangelo said that digital currency startups shouldn’t be worried about working with banking partners and financial institutions – assuming that they are willing to play within existing and yet-to-be developed regulatory and compliance frameworks.

“Our viewpoint is that one should come into the framework and operate as a fully licensed organization,” he said.

Pitfalls of block-chain technology

Panelists in the final crypto-themed talk of the day, 'Digital Securities and Bitcoin 2.0 Crowdsales, State Licensings & Overseas Structuring', looked to the new use cases being developed for block-chain technology and the pitfalls of doing so.

Panel members included Bitstamp general counsel George Frost; GoCoin co-founder and Bitcoin Foundation director Brock Pierce; general counsel Mark Griffin; Mark Smith, CEO and founder of MathMoney; and Perkins Coie partner J Dax Hansen.


The panel cast a broad view at the outset, looking at a regulatory development process on both the state and federal levels in the US that Frost called “a bit hysterical”. Other panelists echoed this sentiment, though Griffin said he was surprised that some regulators hadn’t taken a harsher approach from the outside.

A major topics of discussion was the controversy surrounding crypto 2.0 companies engaging in crowdsales that could be construed as distributing securities and investments.

Griffin noted that federal regulators could interpret existing statutes by saying that certain types of digital asset issuances count as investments, but he and others argued that the securities issuance sector needs to be innovative and that digital currency technology can lead the way, specifically in regards to issues around property rights.

Pierce added that companies that opt out of crowdsales as a means to raise capital may find themselves cut off from other channels of funding as a result. He cautioned companies considering this approach, commenting that only those who are doing "extraordinarily well" will be able to tap into more traditional means in the future.

Lawsky on BitLicense progress

During his keynote address, NYDFS superintendent Ben Lawsky outlined that his agency is trying to strike a fair balance between protecting New York consumers from fraud, while also providing the flexibility and breathing space required by developers in an emerging technology sector.

In addition to announcing the creation of a so-called transitional BitLicense framework, Lawsky outlined how regulators in his office both understand and respect that some digital currency startups will be more capable than others in meeting compliance and the associated costs.

"It's a big issue [and] something we're working on," he said.

When asked whether or not he thinks crypto 2.0 applications should be treated similarly or brought under a new kind of legal framework. He said that work is being done in this area, and acknowledged the complexities of regulating non-financial actions that require microtransactions to take place.

Images via Shutterstock


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