Dr. Emin Gün Sirer testifies before the US House of Representatives Financial Services Committee

By and The Owl

Dr. Emin Gün Sirer testifies before the US House of Representatives Financial Services Committee

Dr Emin Gun Sirer, Founder & CEO of Ava Labs, testified on 13 June 2023 before the US House of Representatives, House Financial Services Committee on Fostering responsible growth of blockchain technology.

Watch his 5 minute introductory speech below.

Ahead of his appearance, the Committee published his written testimony which can be read in full below or here

Fostering Responsible Growth Of Blockchain Technology

Testimony of Dr. Emin Gün Sirer Founder & CEO, Ava Labs, Inc.

Before the United States House of Representatives, House Financial Services Committee

Chairman McHenry, Ranking Member Waters, and Members of the Committee.

It is an honor to be here with you today. I thank you for the opportunity to appear before you as a computer scientist to discuss blockchain technology, its innovative uses, why it is impactful to the economy, and how to understand the use cases that blockchain will support. With an understanding of these key concepts, it is possible to develop sensible regulatory frameworks and ensure the technology will thrive in the United States.

There have been several testimonies before this Committee regarding blockchain, but they have been primarily provided by lawyers and business people. To that end, I hope this testimony will provide a helpful overview of blockchain and tokenization from a technology and computer science perspective. I will focus on blockchain’s ability to transform society by making digital services more efficient, reliable and accessible to all.

The collective goal is that the United States should seek to enable the free, safe, and responsible proliferation of blockchain technologies and their many applications so that, as a country, the United States and its citizens can benefit greatly from the economic growth that blockchain technologies will enable.

My Background

I am the founder and CEO of Ava Labs, a software company founded in 2018 that is headquartered in Brooklyn, New York, whose mission is to digitize the world’s assets. Ava Labs is a software company that builds and helps implement technologies on the Avalanche public blockchain and other blockchain ecosystems. We have developed some of the most significant recent technological innovations in blockchain, including the biggest breakthrough in consensus protocols following Bitcoin. Before founding Ava Labs, I was a professor of computer science at Cornell for almost 20 years, advancing the science of blockchains with a focus on improving their scalability, performance, and security. During that time, I consulted with various U.S. government agencies and departments on a range of topics. I have made fundamental contributions to several areas of computer science, including distributed systems, operating systems, and networking, with dozens of peer-reviewed articles (among other things, I am one of the most cited authors in the blockchain space after Satoshi Nakamoto). I hold a National Science Foundation CAREER award and previously served on the DARPA ISAT Committee. I serve as a member of the Commodity Futures Trading Commission’s Technology Advisory Committee. But I am perhaps most proud of having helped write a parody of the blockchain space with John Oliver.

The Big Picture

We are living through a period of unprecedented technological progress and transformation. The computer revolution set this trend in motion, initially with mainframes and later with personal computers. However, these early systems were limited by their "stand-alone architecture," capable only of processing local data and executing local computations. Although they made existing tasks more efficient, they failed to create a multiplier effect due to their lack of network connectivity.

The emergence of the internet and, subsequently, world wide web marked a pivotal shift from isolated, local computing to global-scale computing. Architecturally, we transitioned from standalone computers to a "client-server architecture," which enabled us to connect to remote services operated by others to leverage their programs and capabilities. This new paradigm gave rise to digital services that catered to the entire world, created millions of jobs, and solidified the U.S.'s position as a global economic leader.

Blockchains represent the next phase in the evolution of networked computer systems. Whereas the client-server systems that power the web today rely on point-to-point technologies to connect clients to servers, blockchains facilitate many-to-many communication over a shared ledger. This allows multiple computers to collaborate, achieve consensus, and act in unison. Blockchain technologies allow us to build shared services in the network. In turn, this enables the development of unique, secure digital assets, more efficient financial services systems, tamper-proof supply chain tracking, digital identity solutions, and transparent voting systems, among many other innovative applications. By harnessing the power of blockchain technology and the digital uniqueness it allows us to create, we can redefine trust, ownership, commerce, recreation, and communications, ultimately transforming how we interact with digital systems and each other.

The implications of this breakthrough are far-reaching. Blockchain technology allows us to create systems that reduce costs, increase efficiencies, and gain more control over our digital lives and the virtual world. Additionally, we can establish new kinds of 2 marketplaces, novel digital goods, and services that empower individuals and communities to foster economic growth and social impact.

The advancements from blockchain technology will result in leaps forward, just like the internet itself, because they will improve the internet itself. This technology creates a new kind of public good, namely, a shared ledger that can be purposed for a wide range of applications. As we enter the era of customizable blockchains and smart contracts, the fine-tuning of this software will further enhance and improve what the technology delivers today while empowering compliance with relevant regulations.

Blockchains and Smart Contracts: Impact Across Applications

Blockchains solve a long-standing challenge in computer science: enabling a diverse set of computers worldwide to reach consensus (agreement) on a piece of data and the larger dataset to which it belongs. While it may appear obscure at first glance, this is a crucial building block for solving complex problems that traditional internet systems struggle to address, such as creating digitally unique assets, tracking their ownership, and safely executing business and other processes. In doing so, this technology does not have to rely on humans or intermediaries for its security properties; in fact, it typically provides strong integrity guarantees even in the presence of (partial) system failures.

Let me be clear: this ability to leverage distributed or decentralized networks is a desirable goal for many reasons that have nothing to do with securities laws, financial services regulation, or the laws and rules governing other areas of commerce, recreation, and communications. Distributed networks are more resilient, secure, auditable, and available for builders. Blockchain builders did not set out to develop the technology to evade laws and rules. We set out to solve computer science problems.

The potential applications for blockchain technology are vast and varied in contrast to the client-server model where many functions are expensive or impossible. Below, I will discuss just some of the key applications and innovations blockchains enable.

Blockchains are evolving rapidly

Blockchain technology has evolved rapidly in the 14 years since Satoshi Nakamoto introduced Bitcoin to the world. The Bitcoin blockchain pioneered a consensus mechanism – the way that the data is agreed upon by participating computers – popularly and inaccurately known as "proof-of-work." Bitcoin has demonstrated to the world that public, permissionless blockchains are possible. The topic of consensus was known in computer science literature as "byzantine fault tolerance" and research into creating such systems had been funded by the National Science Foundation and DARPA, and involved hundreds of academics, myself included, for multiple decades. Bitcoin solved the problem and proved to the world that this technology could create and maintain a digital asset, as well as establish and transfer ownership over it. Bitcoin has remained up and accessible, even as it weathered numerous attacks throughout its 14 years, without a central authority or controller maintaining its health. In contrast, even the best client-server services built by Microsoft, Google, Amazon, and Facebook have experienced numerous outages during the same timeframe.

Computer scientists did not stop there. Subsequent blockchain technologies have expanded this core functionality. Most notably, Ethereum introduced the concept of smart contracts, self-executing programs encoded on blockchains. Smart contracts can facilitate all manner of applications, including currently popular ones like peer-to-peer lending, social networks, digital collectibles such as NFTs and gaming skins, and the tokenization of real-world (traditional) assets on a single chain governed by a uniform set of rules.

The latest breakthrough in blockchain architecture is known as multichain blockchains. In these systems, developers can create chains with custom rule sets, execution environments, and governance regimes tailored to their needs. Not only does this level of customization unlock use cases previously not possible on blockchains with single rule sets, but it also isolates traffic and data into environments purpose-built for a task or application. Examples of these systems include Avalanche and Cosmos, which enable the creation of specialized blockchains, sometimes referred to as subnets or app-chains, that can be compliant by design.

For instance, SK Planet, a company in South Korea, recently created a specialized blockchain on Avalanche that onboarded more than 58,000 fully identified customers in its first few days. Additionally, Ava Labs is working with Wall Street firms to create a specialized institutional blockchain. With a multichain architecture, operators have complete control over who can access the chain, who secures it, what token, if any, is used for transaction fees, and more.

There is a general trend here. Blockchain technology is evolving rapidly and naturally progressing towards making itself more flexible and secure. In other words, it has been through code that many challenging issues have already been addressed.

The lesson from these developments is clear: Policymakers should enunciate clear objectives based on the particular implementation of the technology (that is, the activity it is used for), while leaving the mechanisms of achieving those objectives up to experts to determine. Because we can customize blockchain implementations, it is easier than ever to regulate the implementation rather than the technology, and achieve neutrality of regulation.

Regulation in The Token World

Blockchains are technologies that allow us to build resilient and fault-tolerant applications. They are, in effect, openly programmable platforms that their users can interact with as if they are a public commons. This powerful construct naturally gives rise to many different kinds of applications and, consequently, tokenization, the creation of digital representations of bundles of rights, assets, and other things.

All tokens are not equivalent in their implementation or function – they must be treated differently according to their essential nature. Tokens cannot simply be lumped together under a single set of regulations because they vary so widely in function and features. A good analogy is paper; we regulate the bundle of rights, assets, or things created by the words, numbers and pictures on the page.

Types of tokens include but are not limited to:

A real-world asset: A token can be the direct or indirect representation of a traditional asset. For example, one could tokenize land ownership such that each token corresponds to a uniquely identifiable piece of land. In many cases, real-world assets are already regulated, and their digitization into a blockchain format should not necessitate wholesale new regulation.

A virtual item: A token can represent a piece of digital art, a collectible, a gaming skin, and more. These can be varied in function and form as well. They can range from simple non-programmable pictures, a common use of NFTs, to complex assets, some used in games, that can encode all sorts of functions and features of the asset directly inside the asset itself.

Pay-for-use: Public blockchains constitute shared computing resources that must be allocated efficiently. A token is the perfect mechanism to meter resource consumption and prioritize important activities. Such tokens are sometimes known as "gas tokens." For example, BTC is the gas token of the Bitcoin blockchain, ETH for Ethereum, AVAX for Avalanche, and so on. Without gas or transaction costs, a single user or small group of users could potentially overwhelm the blockchain, similar to a denial of service attack, making the blockchain unusable.

The list above covers expansive categories...

But remains just a snapshot of what is happening and what is possible. I encourage you to review our Owl Explains educational initiative for more information. As a matter of first principles, the determination of the regulatory regime must start and end with the functionality and features of the token, not the technology used to create it. At Ava Labs, we call this sensible token classification.

Let me be clear again: Tokenization was not created to evade laws. It is the natural product of blockchain technology and an improvement that blockchains offer over traditional systems, just like computer databases were an improvement over paper filing cabinets.

In addition to sensible token classification, regulations that pertain to tokens must be devised in a manner that can be enforced at a layer that has access to the necessary information for enforcement. In the same way that we do not expect internet routers to check the verity of content sent on social media applications, we cannot impose a regulatory burden on technology layers that are unaware of the content or operations carried out on-chain. The platforms already provide features, such as lockups and transfer restrictions, that can assist in coding these limitations.

Enhancing Market Efficiency, Transparency, and Oversight

Blockchains and smart contracts can be the foundation of a more transparent and efficient financial system that enables all participants to share a level playing field. This includes regulators, who can have greater visibility than ever before into the actions and activities of all market participants. Privacy remains an important component of any system. Developing these new ways of providing and regulating financial services should incorporate personal privacy. These improvements can only come with the support and collaboration of regulators and policymakers by providing sensible laws and regulations that allow for the responsible growth of the technologies.

How has this played out in the wild? A perfect example is the trustworthiness of exchanges.

Last year saw the failure of several crypto-asset exchanges, most notably FTX. Make no mistake: these failures were not failures of blockchain technology. They were failures of traditional custodians who were supposed to secure user deposits. Not a single major decentralized exchange was affected by a similar failure. Blockchain technology is purpose-built to eliminate this reliance on centralized intermediaries, who can jeopardize user funds, market integrity, and other desired features of a well-functioning system.

In addition to on-chain custody and transacting, a more recent breakthrough known as enclaves enables new marketplaces where code severely constrains what even the owner and operator of the marketplace can do. This innovation can rule out unwanted behaviors like front-running, stop-loss hunting, and breaches of privacy that challenge market integrity. Ava Labs’s own Enclave Markets is at the forefront of this innovation, which we call fully encrypted exchanges.

Another example that points up the benefits of engaging in activities on-chain as opposed to with centralized parties comes in the lending context. Last year saw major failures of lenders and borrowers who conducted their activities off-chain, while the major on-chain lending platforms weathered the stormy markets mostly unscathed. These protocols adeptly navigated liquidations and collateral calls in rapidly falling markets, due to their reliance on over-collateralization and automated systems. While there is no panacea, the evidence so far points to the success of decentralized networks in managing stress conditions much better than centralized counterparties. These results are in line with what blockchain design predicts.

Stablecoins as the Digital Gateway for the U.S. Dollar

Stablecoins, which are predominantly denominated in United States Dollars, are expanding globally because they are a superior way of holding dollars. Stablecoins not only enhance the user experience—by increasing the velocity of capital and reducing the cost of transferring it—but also cater to a growing demand for stablecoin dollars among those facing economic uncertainty and hyperinflation in their local economies.

By transforming the dollar's capacity to retain value into an accessible product outside the U.S., stablecoins help individuals protect their life savings from fluctuations in the value of their local currencies and from being stolen by criminals and other rogue actors.

This potential can be realized with appropriate regulation, which allows for the responsible growth of stablecoins through new technologies and configurations.

Blockchains Can Accelerate Recoveries from Climate Disasters with Insurance

Consider the emerging property insurance crisis catalyzed by more frequent and extreme climate events. State Farm, the largest property insurer in California, announced it will no longer provide insurance due to the risk of wildfires. Insurers in Texas, Florida, Colorado, and Louisiana have felt the same pressure to stop provisioning insurance, increase rates, or find backstops for insolvency.

Who will communities in these states, and in the U.S. as a whole, rely on to insure their homes and economic futures? If the industry consolidates as bankruptcies hit smaller regional insurers, how will that risk be managed?

Using smart contracts and the Avalanche network, Lemonade Foundation is now providing insurance to more than 7,000 farmers who previously only had access to products with unaffordable premiums or delays in payout that had lasting, multi-season impacts. These premiums were not economically feasible for the organization due to the manually-intensive processes now condensed into a single smart contract. As another example, in 2019, the U.S. government completed the accounting for Hurricane Katrina disbursements, a full 14 years after its catastrophic impact in 2005. The delays stemmed partly from the difficulty of achieving agreement among the many stakeholders participating in this process.

In 2012, Superstorm Sandy damaged almost half a million homes and incurred roughly $50B in damages. The same gaps in insurance payouts stifled urgent recovery efforts across the East Coast. Families who had paid their premiums for years were given pennies on the dollar to rebuild their lives. By the time their lawsuits led to action and more financial payouts, the damage had been done, and scars set on these communities. Blockchain-based distributed ledgers can significantly streamline such processes, and our company is collaborating with Deloitte under a FEMA contract to develop and implement this technology.

Supply Chain and Fighting Counterfeiting

Global supply chains are facing challenges relating to the expedited demand for goods and pandemic-driven strains, including our most security-critical infrastructure. When supply chain problems hit, they can be especially problematic, and when there is fraud, the problems are exacerbated. Blockchains and smart contracts can help secure and validate supply chains for various global sectors.

Blockchains can perform supply-chain management to provide a reliable and transparent record of a product's origin and authenticity. The Tracr platform from De Beers has shown how to accomplish this for diamonds, while other deployments have addressed fields ranging from luxury goods to concert tickets. Blockchains can be vital tools to fight the counterfeiting of medical supplies, pharmaceuticals, food products, and consumer technologies that directly affect our communities and your constituents.

Upcoming Technological Improvements

While there have been highly-publicized exploits of smart contracts, the space has significantly matured since its early days, and new technologies stand poised to improve the safety of on-chain assets and applications.

The potential risks relating to smart contract-based systems have centered around flaws in implementation, such as poor coding and negligence in following best practices, rather than fundamental issues inherent to smart contracts or blockchain technology. Just as the internet software stacks were weak in the 1990s, smart contract programming tools are in their infancy.

The space has rapidly evolved to use code audits and other techniques to certify that smart contracts uphold safety standards, giving rise to a burgeoning field of software threat analysis, certification, and verification services. In addition, we are seeing the emergence of automated tools for program verification and model checking to help find bugs that human eyes cannot easily locate. These techniques operate even before programs are deployed to root out bugs before they can affect anyone.

Finally, there are new mechanisms, such as run-time integrity checks, smart contract escape hatches, and automated limits on money flows that operate in real-time to help contain the effects of any unintended errors that might pass through to production. Systems that have employed best practices, such as lending platforms and well-designed bridges, such as the ones Ava Labs has built, have seen billions of dollars pass through their contracts without compromise.

Given my background in academia and research, I am confident that the space will develop even stronger techniques for ensuring the correctness of smart contract software. One of the spillover effects of this activity will be better integrity and safety for all software, including software not related to blockchains.

Technological Competitiveness and Risk of Inaction

As we stand at the precipice of this new era, it is imperative that we nurture and support the development of this revolutionary technology. By doing so, we can unlock its full potential and ensure that the United States remains at the forefront of innovation, propelling the next generation of internet technologies and ushering in great economic growth.

Responsible actors in the blockchain space want sensible laws and regulations that incentivize growth and good behavior, punish bad actors, and elevate the users of blockchain networks. The community stands ready to provide guidance to policymakers to achieve those aims. However, without sensible frameworks and collaboration, there is a clear path to losing technological leadership to other countries.

The United States won the first wave of the internet revolution precisely because it enabled responsible freedom to innovate. The United States must follow the same path of enabling free but responsible growth of blockchain technology while carefully and intelligently classifying and regulating blockchain applications and tokens. Otherwise, there are two critical paths of failure for any regulatory framework.

First, the blockchain platforms themselves become regulated at the protocol layer. This would be the equivalent of regulating internet protocols, which would have doomed information technology and the vibrant internet we have today. Second, the tokens and smart contracts created with blockchains are lumped into homogenous and incompatible categories. This would be the equivalent of regulating a social media application like we regulate a consumer health care application. Instead, tokens and smart contracts must be analyzed case-by-case and regulated carefully based on their function and features.

As we move towards a more digitally-native world, aided by AI, virtual reality, and a work-from-home society, we will have to rely increasingly on digitally-native transfer and programmability of value. Blockchains are the clear technological answer to these needs and are definitively synergistic with the global economy. The addressable market for digitizing the world's assets and transferring value safely across the internet is greater than the sum of all the value of all existing assets. Failure to see the power of blockchain technology – whether due to a lack of understanding or misplaced fears of the technology – will have disastrous consequences. Failure to rapidly provide sensible regulatory frameworks will not only undermine economic growth but also make it easier for bad actors to conduct illicit activities.

Finally, it is essential to remember that just as there are good people committed to public service, there are also good people committed to building technologies to improve lives. By working together, we can lay the foundation for trustworthy, efficient, and self-enforcing systems that serve as the foundation for our modern economy.

Articles

2025-06-30

London Calling: The UK’s drive to develop cryptoasset regulation

Following the EU’s introduction of MiCA earlier this year and legislative developments in the US with the GENIUS Act, other major jurisdictions around the world are steadily working to put in place clear rules of the road, intended to give both the cryptoasset sector and traditional finance clear guidance on how to make the most of blockchain technology. British politicians and regulators are working hard to develop regulation for the UK’s cryptoasset sector. Following a long-term political commitment to develop the UK into a ‘global crypto hub’, the regulatory pieces are beginning to fall into place to make this happen. When this regulatory framework has been implemented, the UK will (if all goes to plan) have rules that support the steady growth of the sector and innovation in finance and technology - alongside stronger consumer protection and market stability. In this Owl Explains post we outline the different recent milestones the UK has passed, and look ahead to what is coming next. HM Treasury: Draft Statutory Instrument for a Regulatory Regime for Cryptoassets HM Treasury (the UK government’s Ministry of Finance) published its so-called Secondary Legislation for cryptoassets on 29 April 2025. Secondary Legislation (via a ‘Statutory Instrument’) is a piece of more detailed legislation that follows on from higher-level, overarching legislation that has already been passed by both Houses of Parliament; in this case, comprising the 2023 amendment to the Financial Services and Markets Act (FSMA), which now brings. cryptoassets into UK financial legislation. The proposed Statutory Instrument defines ‘qualifying cryptoassets’ and ‘qualifying stablecoins’ as regulated ‘specified investments’and brings under FCA oversight key activities such as running crypto exchanges and custody services, dealing, arranging, staking, and issuing stablecoins. The proposal also amends money‑laundering and financial‑promotion rules, and ensures that stablecoins don’t unintentionally fall under other categories like e‑money or collective investment schemes. Decentralized systems without a controlling party are broadly exempt, and there would be a transition period to allow firms to apply for authorisation. FCA DP 25/1: Regulating cryptoasset activities Shortly after HM Treasury published its proposals for the Statutory Instrument, the UK’s main financial regulator, the Financial Conduct Authority (FCA), published its related Discussion Paper (DP) 25/1 on Regulating cryptoasset activities. The discussion paper builds on existing financial market rules, proposing that crypto trading venues follow similar standards to traditional trading venues, with strict transparency requirements, conflict-of-interest rules, and protections for retail clients. It also suggests that intermediaries should follow best-execution rules, that payment-for-order-flow is banned, that lending and borrowing to consumers may be heavily restricted, and proposes a prohibition on the purchase of cryptoassets using credit cards. With respect to staking, clear disclosures, customer consent, separate wallets, and liability safeguards are proposed. Truly decentralised systems without a controlling party remain outside the framework, but any service deemed by the FCA to have a central operator would be included. FCA CP 25/14: Stablecoin issuance and cryptoasset custody Later in May 2025, the FCA launched Consultation Paper (CP) 25/14, proposing rules for the issuance of fiat-referenced stablecoins and the safe custody of cryptoassets. Issuers would need to fully back every stablecoin with high-quality, liquid assets held in a statutory trust via an independent custodian, honor redemptions at par value within one business day, and regularly publish transparency reports on reserves and redemption policies. Meanwhile, crypto custodians would be required to segregate client tokens from their own, maintain accurate records and governance, and hold assets in trust. This adapts established FCA protections from traditional finance for the digital asset sector. FCA CP 25/15: A prudential regime for cryptoasset firms At the same time as CP 25/14, the FCA published CP 25/15 to propose a dedicated prudential rulebook for crypto firms that issue fiat‑backed stablecoins or safeguard cryptoassets. It proposes two new rulebooks: COREPRU, which covers general capital, liquidity, and risk standards, and CRYPTOPRU, which is tailored to crypto activities. Firms will have to hold the greater of three capital measures: a permanent minimum (£350,000 for stablecoin issuers, £150,000 for custodians), a buffer equal to 25 % of fixed overheads, or an activity‑based “K‑factor” (equivalent to the market value of 2 % of stablecoins issued or 0.04 % of cryptoassets safeguarded). On top of that, liquidity rules require crypto firms to set aside enough in high‑quality liquid assets to cover short‑term obligations and ensure resilience, plus safeguards on concentration risk to avoid over‑reliance on any single counterparty or asset. Further proposals by the FCA are expected in the coming months, following its clear and scheduled ‘Crypto Roadmap’. Taken together, the Roadmap aims to build trust and stability in crypto markets ahead of final rules that are expected to be published in 2026. The rules will then come into effect some time in 2027. What does Owl Explains think about these proposals? Owl Explains strongly supports the UK’s efforts to develop its regulatory regime for cryptoassets. As we consistently argue, a clear, stable and proportionate set of rules is needed - right around the world - to allow the long-term development of blockchain technology and ensure that its benefits can be fully realized. Piece by piece, policy-makers are laying the groundwork for this in the UK. For us, the key thing is that regulators recognise that infrastructure providers on blockchain networks are not in themselves financial intermediaries, including but not limited to when they use native DLT Tokens to perform technology functions integral to the operation of the blockchain. The recent proposals put forward by HM Treasury and the FCA go some way to acknowledging this, but it will benefit everyone to have that point clarified more explicitly. You can read Owl Explains’ Response to the FCA’s DP 25/1 here. And be rest assured, as the FCA follows its Crypto Roadmap, we’ll keep on highlighting what it means and making the case for a clear, stable and proportionate regulatory framework for cryptoassets in the UK - and around the world.

By and The Owl

2025-06-23

Future Forward: Key Themes from the Owl Explains Crypto Summit

What better place to explore the future than a setting steeped in the past? Against the backdrop of the Dorchester Hotel—an iconic London venue rich with history and elegance—the first Owl Explains Crypto Summit brought together a dynamic mix of policymakers, technologists, legal minds, and industry leaders to tackle some of the most forward-looking questions in crypto and digital markets. The turnout was strong, the energy high, and the conversations —both on and offstage — were substantive. This wasn’t a day of soundbites or sales pitches! So in between the delicious food (miniature vegan lemon meringue pie, yes please), getting your new complimentary professional headshot from Van Scoyoc Associates, and enjoying the contents of your OE tote swag - our owlet attendees were able to enjoy a range of panels, delving into topics including privacy, liquidity, global commerce, autonomous code, anti-money laundering and tokenization. Big Picture Perspectives Sprinkled delightfully among our roundtables we were able to hear from three keynote speakers whose leadership continues to shape digital policy at the highest levels: Lord Holmes (UK House of Lords), Peter Kerstens (European Commission), and MEP Ondřej Kovařík (European Parliament). While occupying very different roles in the policy ecosystem, they all spoke to the power of blockchain and digital assets to enhance the global financial world of tomorrow. Lord Chris Holmes emphasized the need for thoughtful regulation of emerging technologies and called for a cross-sectoral AI framework—highlighting both innovation and social inclusivity, especially for sensory-impaired communities. Peter Kerstens, “the father of MiCA”, used his keynote to underline Europe’s new crypto-assets framework and urged developers not to wait for prescriptive regulation, but to innovate, demonstrating in practice how the rules can be shaped and applied. MEP Ondřej Kovařík offered a forward-looking view on MiCA implementation and its broader implications for the European crypto ecosystem, emphasizing the importance of ensuring a smooth and coordinated rollout of the new framework. With those big-picture perspectives anchoring the day, we can now zoom into the practical, the technical, and the sometimes provocative. Across six expert-led roundtable sessions, attendees had the chance to get stuck into the details: asking hard questions, sharing lived experience, and debating what’s really needed to take this industry from potential to practice. Roundtable Session 1: Tokenizing It All The summit’s first roundtable, Tokenizing It All, explored the implications of a fully tokenized world where stablecoins are commonplace with panelists Helen Disney, Sean McElroy, Yuliya Guseva, Jannah Patchay, Varun Paul, Isadora Arredondo, and Kene Ezeji-Okoye. The discussion delved into the fundamentals - what does it mean to tokenize something, the practical challenges and opportunities of tokenizing various asset classes (including Sean’s apartment!), the role of regulation, and the potential impact on commerce and trading. Roundtable Session 2: DeFi-ing Liquidity The second session, DeFi-ing Liquidity, examined the dynamics between decentralized and centralized finance in providing market liquidity. Panelists Fahad Saleh, Lavan Thasarathakumar, Joey Garcia, Dan Gibbons, David Wells, Sara George, and Olta Andoni had an animated discussion, highlighting the benefits and risks associated with DeFi, the need for regulatory clarity, and the future of liquidity provision in a tokenized economy. And even a sprinkling of friendly feather ruffling as the question of definitional prowess between academics and lawyers came to a head! Roundtable Session 3: Globalizing Commerce If the audience were hungry, they weren’t letting it show. The high spirits continued into the final panel of the morning, which addressed the complexities of global commercial structures in the context of tokenized assets. Panelists Yesha Yadav, Erwin Voloder, Scott Mason, Sam Gandhi, Emma Pike, Dagmar Machova, Ari Pine, and Amanda Wick discussed jurisdictional challenges, the convergence of commerce and trading, and the legal implications of cross-border transactions in a blockchain-enabled world. Roundtable Session 4: The Chase is On The afternoon discussions kicked off with a great panel looking into enforcement, litigation, and anti-money laundering in the realm of tokenized and decentralized finance. Our expert panel featuring Justin Gunnell, Christopher Mackin, Sayuri Ganesarajah, Joanna F. Wasick, Laura Clatworthy, Isabella Chase, Joe Hall, and Jesse Overall shared insights on tracking illicit activities, the role of international cooperation, and the evolving legal landscape in digital finance. They also touched briefly on the rise of wrench attacks, which involve real-world violence targeted at individuals for their digital assets - reminding our audience that the digital and physical worlds are now inextricably linked. Roundtable Session 5: When We Need Secrets The fifth roundtable raised some interesting Nuggets (!) on privacy and identity in a fully tokenized and decentralized market. Speakers Seema Khinda Johnson, Dr. Agata Ferreira, Adam Jackson, Eugenio Reggianini, Adi Ben-Ari, Peter Freeman, and Chris Grieco debated the challenging balance between giving citizens control and privacy, and combating fraud. They discussed the development of digital identity solutions, and the ethical considerations of data protection in blockchain applications. Roundtable Session 6: Code Running Solo Last but by no means least, the final session, Code Running Solo, explored the intersection of cybersecurity, artificial intelligence, and autonomous code in tokenized markets. Panelists Lilya Tessler, Norma Krayem, Laura Navaratnam, Fabian Schär, Eva Wong, Joni Pirovich, and Caroline Malcolm examined the challenges of securing decentralized systems, the implications of AI-driven decision-making and the role of regulation (on which opinions differed wildly!) within that. Looking Ahead: A Community with Purpose As Wee Ming Choon took to the stage to close out the first ever The Owl Explains Crypto Summit, the mood was buoyant, especially for a conference ending after 6pm! This wasn’t just a policy event—it was a community coming together to explore real questions about how our digital future is taking shape. One topic that kept coming up was regulation. Are regulators getting it wrong because they have turned their back on technology and competition? Or is that a mischaracterization of the role of regulation - and in fact the incentives work against regulators, promoting continuity of the status quo? Our panels on liquidity and autonomous codes in particular discussed this at length - and while this is not a discussion that can be solved easily, creating platforms for smart and articulate individuals with a range of views and experience to debate them can only serve to be a step towards answers. As our Owl Explains parliament retired to the drinks reception, brains fizzing with a heady mix of topics - from tokenization to AI, from privacy to liquidity, all conversations that didn’t shy away from complexity. And that’s exactly what made them so valuable. In the words of Owl Explains founder Lee Schneider, “I came away with a really positive sense that we will change the world.” It was a sentiment shared by many in the room: pride in what’s been built, and excitement for what comes next.

By and The Owl

2025-05-29

Tokens, Currencies, Coins, Assets… What the Heck Are We Talking About Anyway?

“Stablecoins are a type of cryptocurrency that act as a form of cash but sit outside the banking system. They are used to pay for other crypto assets…” Financial Times, 2 April 2025 There are a lot of names in the crypto space. People often use them interchangeably. Different countries, different companies, and different regulators all have their preferred names for what they’re talking about. But it matters that we all know what we’re talking about when we use these words and - as much as possible - use them in the same way. This is particularly true when it comes to regulation because without solid definitions, compliance is difficult. In this Owl Explains note we’re going to tackle lexicography for commonly used terms for what we prefer to call tokens. And explain why we think ‘tokens’ is the best word to use when talking in a general sense. By the end of the article you should be able to see how the Financial Times quote at the top uses these different terms - and decide whether you think it gets them right. Crypto: Let’s start with the fundamental word: ‘crypto’. The ‘crypto’ in cryptoasset or cryptocurrency comes from ‘cryptography’. That is, the use of codes or ‘encryption’ to provide secrecy. Cryptography is an ancient practice going back many thousands of years, at least to the ancient Egyptians. Modern cryptography has been greatly enhanced by the use of computers and new techniques. Together these allow people to create the public and private keys necessary for blockchain. The use of ‘crypto’ essentially just means that some information has been ‘encrypted’ using these modern cryptographic techniques. And in practice it is used to refer to something on a blockchain - or the whole blockchain-based sector itself. Cryptocurrency: A cryptocurrency is, naturally enough, a type of currency utilizing ‘crypto’. But what is a currency? A currency is a type of money widely used in a particular area. It is a form of ‘money’. So by calling something a ‘cryptocurrency’, its founders are implying that it has the characteristics of money: the dollars, pounds, euros or yen that you use every day. The three fundamental characteristics of money are: That it is a store of value. That is, that what you hold today will be worth the same amount tomorrow. That it is a means of exchange. That is, that other people will be happy to take it in exchange for goods or services they provide. That it is a unit of account. That is, that you can price a good or service in it. While ‘cryptocurrency’ was one of the first ways of describing these blockchain-based units, it is now largely out of favor since many (or even most) don’t fulfil these three characteristics. When was the last time you heard someone price something in Dogecoin? Cryptoasset: More popular nowadays is the term ‘cryptoasset’ (and note that there are different ways of spelling this: all one word, with a hyphen, or as two separate words). But what’s an asset? An asset is something that has (financial) value. So a cryptoasset is something on the blockchain that holds (or represents) value. This makes sense as a term, given that many people buy or sell ‘cryptoassets’ as speculation (to make money) or because it offers them access to something else that has value (like a blockchain protocol or a good or service in the real world). But while this is a useful term that is in wide use, it does also have one issue with it: it implies the crypto ’asset’ does have some sort of value. Which they don’t always. For example, a tokenized digital record, such as a diploma, might not ever have (or be intended to have) a value. So calling them ‘cryptoassets’ would imply a use - and therefore a form of regulatory treatment - that doesn’t make sense. This is one of the reasons we stress token classification, including in our submission to the SEC Crypto Task Force. This terminology matters when it comes to thinking about the correct regulatory treatment for things on the blockchain. Nowadays when a regulator or government official says ‘crypto’ they’re referring to a cryptoasset - and probably including the idea of a ‘cryptocurrency’ within it. Stablecoin: Stablecoins are a unique type of ‘cryptoasset’ that attempt to maintain a stable value against a reference asset. Usually today this reference asset will be a so-called ‘fiat currency’: in other words, the normal currency of any given country (dollars, pesos, etc.). In this sense they are a ‘crypto’ or on-chain representation of normal money that already exists, and they fulfil the three functions of currency by ‘piggybacking’ on the underlying existing fiat currency. Previously (around 2018-2019) the term was used more loosely to mean something that tried to reduce volatility in the value of a cryptoasset - either through its backing asset or via an algorithm. Now, largely driven by regulation, ‘stablecoin’ tends to only refer to a token that is pegged one for one to a single fiat currency, or perhaps sometimes to a group (a ‘basket’) of different fiat currencies. So depending who you’re talking to, ‘stablecoin’ could be referring to the whole universe of ‘stablecoins’ that attempt to minimise volatility or just to those, more common now, that maintain a stable value against the reference asset or fiat currency. Central Bank Digital Currency (CBDC): A CBDC is very similar to a stablecoin, in that it is the ‘digital’ version of a fiat currency, except that it is created by a government’s Central Bank or other monetary authority. That is, a CBDC is issued by a country’s public sector and is a direct liability of that authority. There is therefore no private sector company responsible for it, or which could go bankrupt or fail to provide it. That makes it very safe, in an economic sense, for people who hold it. Many countries are still exploring developing a CBDC, and there are significant ongoing political discussions around questions like privacy rights and the ability of governments (or Central Banks) to control how a CBDC might be used by citizens and businesses. Digital [currency/asset/cash]: As you’ll have seen in the term CBDC, this is not called ‘crypto’ but ‘digital’. That’s because ‘crypto’ implies something on a blockchain, as we’ve seen, and through its meaning about the wider sector still sometimes has a negative connotation. Central Banks don’t want to be associated with that - and anyway may not issue on a blockchain. So they used ‘digital’. That makes sense as far as it goes, but has one major problem: the overwhelming majority of ‘traditional’ money is also digital because it exists as commercial bank deposits (and indeed as Central Bank reserve deposits). These deposits are purely digital in that the value solely exists as information inside bank computers. Calling something blockchain-based as ‘digital’ does not really help distinguish it. In other words, digital is a much broader category that includes crypto. Virtual [currency/asset/cash]: Some people use the term ‘virtual’ in an attempt to get around this confusion, though it’s now a little less used than it used to be. ‘Virtual’ covers basically the same ground as ‘digital’ but without the confusion about existing bank deposits. In this sense it’s really used as a synonym for ‘on-chain’: that is, something based on a blockchain. Virtual has more traditionally been used to mean anything on the internet, such as people referring to a “virtual meeting” when they do a video call. For these reasons, by and large the term ‘crypto’ is winning out as the main usage for something on-chain. All these terms are in use, but all have problems. So what does Owl Explains use? Well, we prefer the term ‘Token’. This word refers to something that is used to represent an asset, item, bundle of rights or thing. It does not necessarily imply financial value (like ‘asset’) or money (like ‘currency’). It is technology neutral, so does not imply something has to be blockchain-based (like ‘crypto’) or not (like a CBDC) - and indeed it even applies to non-digital/virtual representations like those that are based on paper (like old time stock certificates or tickets to an event) or metal (like subway tokens). A ‘token’ can refer to all these things without implying any characteristic, and therefore without prejudging any regulatory treatment. And the word ‘token’ allows anything to be ‘tokenized’ or ‘represented by a token’, which is a major growth area for the blockchain sector at the moment. In an upcoming post, we’ll explain how tokens themselves can be classified from a regulatory and market point of view.

By and The Owl

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