Can traditional financial institutions use permissionless blockchains without being offside of the Bank Secrecy Act?
What happens if a bank unknowingly pays a fee to a sanctioned validator?
By the end of this episode, you'll understand the history of the Bank Secrecy Act, how OFAC actually enforces sanctions and a new paper's nine-part framework for how banks can use public blockchains and stay compliant.
You'll hear from the paper's three co-authors:
- Rebecca Rettig (Chief Operating Officer and Chief Legal Officer of Jito Labs, of counsel at Arktouros)
- Omid Malekan (adjunct professor at Columbia Business School) and
- Michael Mosier (co-founder of Arktouros and former acting director of FinCEN).
This episode is presented by Altitude, visit https://altitude.xyz/law to learn more about their global payments platform.
Timestamps:
0:00 Intro
3:24 Problems they see
5:39 The router principle
7:13 What permissionless systems get right
11:28 Lessons from the open internet
14:23 Credible neutrality
19:20 A brief history of the BSA
23:55 What OFAC enforcement looks for
26:16 Treasury, Iran and open networks
28:29 The SEC's innovation exemption
34:03 Compliance belongs at the app layer
37:04 "The government will never allow it"
39:39 The paper's nine-part framework
44:12 Network layer vs. transaction layer
46:28 The $50,000 canoe
48:02 Safety, soundness and final settlement
50:29 Why this matters for national security
51:27 Privacy
58:07 What this means for DeFi
Thank you to Cahill Gordon & Reindel for sponsoring this podcast.
Thank you as well to the Solana Policy Institute, the Hyperliquid Policy Center and the Decentralization Research Center for supporting the podcast.
The full paper is here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=7343938.
Disclaimer: This podcast is for informational and educational purposes only and does not constitute legal or investment advice. Views expressed by guests are their own and do not necessarily reflect those of their employers. Listening to this podcast does not create an attorney-client relationship.
