Ep. 156: Dr. Sean Stein Smith - Cryptoassets, NFTs, and DeFI

Dr. Sean Stein Smith:
https://www.linkedin.com/in/dr-sean-stein-smith-dba-cpa-63307444/


President’s Working Group on Financial Markets Releases
Report and Recommendations on Stablecoins:
https://home.treasury.gov/news/press-releases/jy0454


Stablecoins Might Be On The Hot Seat, But Are Integral
For Crypto Innovation:
https://www.forbes.com/sites/seansteinsmith/2021/11/29/stablecoins-might-be-on-the-hot-seat-but-are-integral-for-crypto-innovation/?sh=6628d556674d


FULL EPISODE TRANSCRIPTAdam: (00:04)
 Welcome back to Count Me In, IMA's podcast about all things
affecting the accounting and finance world. This is your host
Adam Larson, and for episode 156, we welcome back Dr. Sean Stein
Smith. With the constant evolution and advancements around
crypto. Sean joins count me in again to talk about various
reports and newsworthy information relating to stablecoins and
digital assets. From standards on cryptocurrency to NFTs and
decentralized finance. You'll want to keep listening to learn
about what it all means and hear some of the potential future
implications. Let's head over the conversation now.
 
 Mitch: (00:48)
 So Sean, you've joined us for a few episodes now and in
previous conversations you've discussed blockchain. Lastly, we
talked about accounting standards for cryptocurrencies. Now there
have been more advancements and additional considerations around
crypto assets. I'd first like to get your thoughts on the report
and the recommendations on stablecoins from the president's
working group on financial markets. I know that came out a few
weeks ago now, early November. I was just wondering if you can
kind of summarize what was included in that report and why it is
so important as an update.
 
 Sean: (01:21)
 Absolutely Mitch. And I'm always happy to be on here
talking with you blockchain, crypto asset updates, because it
really is one: a hot topic and two: an area that is increasingly
of importance for everybody working in accounting, finance,
economic roles, whether in industry management or elsewhere. So,
so in terms of sort of the highlights and the core points in the
president's working group report there really what I would say is
that honestly, on the one hand, I would say that the involved
actors, right, be it, the OCC, FDIC, private sector corporations
had done a pretty good job at outlining the, the base case and
the fundamentals for how a stablecoin operates. Right. But on the
other hand, they were, I believe a bit overt or unbalanced in
terms of how they analyzed the whole stablecoin ecosystem, right.
In terms of the pros and the cons. And especially in terms of
the, risks, right, that having a actual stablecoin based payment
network actually get, get to that level of being used at a
commercial level by either corporations or by whole nation
states. But, overall, probably the top two or three points there
is that one they've, they've done a good job at researching and
trying to pull out sort of who the, big players are out there.
And there honestly really only are a handful of them and the, and
the bulk of the transactions happening in any stablecoin outlook
now are handled by a, by a handful of organizations and the bulk
of those, transactions are also happen with coins backed on the
one-to-one basis at the US dollar. And then two, sort of they
also did a good job, I believe at outlining sort of the pros and
cons, obviously more on the cons side, but, but a pretty good job
at outlining the pros and cons of having a stablecoin based
payment network versus the current Fiat based network. And then
three. And, and here's where I think there's the most promise,
but also the highest risk. On the one hand, they also outlined
and by they, I mean, the members of the working group, outlined
really what, what, factors and components any organizations
trying to use a stablecoin payment network would have to take
into account meaning who the counterparties are, who has the
insurance, and then how are these platforms and these connections
between these different involved organizations able to be secure.
And then ultimately the end result of all of that of that
conversation and I believe the actual report was about 28 pages.
The end result kind of mirrors the policy paper put out by
Coinbase back on October. And, and in both of those white papers,
both of which were between 15, and 30 pages long. So they aren't
massive documents, but the end goal or the end call to action on
both documents, which I find quite interesting is this call for a
new crypto specific, regulator that, that, that has powers or is
imbued with powers by, by Congress to directly oversee all
aspects of the, crypto asset space. So overall probably I would
give it like a "B Minus" in terms of the output. Cause on the one
hand, the working group did a good job at outline the issues,
outlining terminology, characteristics, and traits, and,
highlighting some of the core issues out there. But they were, I
believe a bit unbalanced in their outlook in terms of the pros
and the cons.
 
 Mitch: (05:31)
 It's so funny, you bring that up because I read through the
paper and as we got towards the end, you know, particularly when
they summarized everything at the end, there's a statement that
they gave, it says while the scope of this report is limited to
stablecoins, work on digital assets and other innovations related
to cryptographic and distributed ledger technology is ongoing
throughout the administration. So it sounds like they are aware
that they did not cover everything that they needed to
necessarily, or maybe something else is in the works. You know,
that's kinda where I was going with my next question. Other
innovations in this space, can you take a guess at what they
might be referring to?
 
 Sean: (06:11)
 I mean, man, if I had access to that data, I mean, I'd be
on a beach somewhere, which, but probably if I had to hazard a
guess, I would say that the top two areas, and obviously there
have been quite, public comments out of the SEC and the IRS in
terms of their really uptick in compliance efforts, collection
efforts, enforcement efforts. So I would say that probably one
output or outcome that I am sort of eyeing to happen during 2022
is that there is going to be out of some agency don't know which
one yet. I would say probably the SEC there is going to be some
sort of, framework or guideline to help companies get a better
handle on which type of crypto asset falls into which, financial
instrument bucket. And by that, I actually mean if I'm issuing a
token or a coin, is that gonna be treated as a, equity, security,
commodity or some other form of instrument? So I say on the one
hand, that's probably an area, that they are trying to work on
and by they, if the White House Congress and the various,
oversight agencies, and then two, what I would say is that
currently I'm hearing quite a bit of, chatter about NFTs, but I
haven't hearing quite a bit about NFTs because even though now
the conversation around NFTs is, you know, kind of focused on
like the Board Ape NFTs and you know, Beeple in March of this
year. And it's more athlete and artist and artwork focused the
implications for this new type of crypto asset nonfunctional
token, or, NFT are actually quite broad. So I would not be
surprised at all if, you know, going forward NFTs are an area
that the White House and policy makers and regulators try to
really get a handle on, right. Because they because on the one
hand, Bitcoin ...