What is Crypto Law, and what do Crypto Lawyers even do?
On this episode we talk with Crypto and Regulatory Lawyer, Frank Hepworth all about Crypto Law and he shares insights on what his day to day looks like and what he is excited for in the future of crypto.
In this episode you will learn:
Guest: Frank Hepworth
TikTok: @frankhep
Contact Frank: Frankhverdure@gmail.com
Duke McKenzie
LinkedIn - Duke McKenzie
Kyle Kaplanis
LinkedIn - Kyle Kaplanis
TikTok - @theweb3guy
IG - @kyle_kaplanis
YT - The Web3 Guy
What is Crypto Law, and what do Crypto Lawyers even do?
On this episode we talk with Crypto and Regulatory Lawyer, Frank Hepworth all about Crypto Law and he shares insights on what his day to day looks like and what he is excited for in the future of crypto.
In this episode you will learn:
Guest: Frank Hepworth
TikTok: @frankhep
Contact Frank: Frankhverdure@gmail.com
Duke McKenzie
LinkedIn - Duke McKenzie
Kyle Kaplanis
LinkedIn - Kyle Kaplanis
TikTok - @theweb3guy
IG - @kyle_kaplanis
YT - The Web3 Guy
Welcome back to Tomorrow Today, podcast. How's it going Duke?
Duke McKenzie:I'm good. I'm good. I'm excited. I'm excited. We got some good stuff going today. Some good stuff, some good stuff..
Kyle Kaplanis:We do. We got another episode here for the week and today we're bringing you Frank Hepworth. Frank is an associate lawyer, in crypto regulatory and financing law. So we're really pumped to have Frank on the show today to talk to us all about that, and share some insight knowledge that he has. Frank, welcome to Tomorrow Today.
Duke McKenzie:Welcome to tomorrow today, Kyle, you got to clap for Frank. Welcome to Tomorrow Today, Frank, welcome.
Frank Hepworth:Thank you guys pumped to be here.
Kyle Kaplanis:Super pumped to have you, man. I want to know , what made you even decide to get into crypto law?
Frank Hepworth:How it happened was I was just finishing off a bachelor of commerce, a business undergrad, and you can do an exchange. So I went to Hong Kong and this was in 2017. And when I was in Hong Kong, I made a bet with a buddy on, I think it was on the super bowl and he bet against Tom Brady.
Duke McKenzie:Don't do that. That's a bad bet.
Frank Hepworth:Yeah. That's what I thought. And so at the end of it, he owed me like a hundred US dollars cause he was American, but I'm Canadian. And for him to get that to me was just such a hassle. And so he's like, can I just send you some ether? I was like, yeah. I'm just not a guy to say no to things. I'll just say yes. And so he sends me the ether and shortly after I find myself being accepted into law school. But I like to travel, whether I'm in University or not. And so I'm traveling around the world through Europe and in Asia and whatnot. And I always have this ether with me and I'm like, this is great because I'm always just exchanging my FIAT currencies. But my ether is always with me. And also in 2017 we had the bull run. That was fascinating in itself. The law student in me just got right into it and my first thought is, should I just drop out of law school and go hard on this? And then I thought, nah, it's probably going need the lawyers. So I'm just going to be the best crypto lawyer. And that was my goal from day one. And I didn't know what that meant. People are like, oh, what kind of law is that? I'm like, I don't know, but whatever the crypto company needs or whatever their crypto protocol needs, I'm just going to deliver on whatever that is. And right away securities laws, is the main one. And then. When the platforms get involved, actual businesses, its regulatory law. So I said, okay, I'm going to do that. And so that's always been my driver. It's not so much that crypto law fascinated me it's that crypto fascinated me, and I was just going to make sure I was going to be the lawyer that service the crypto company.
Kyle Kaplanis:You went into it with it being the wild west. Cause like you said, people are like, what is crypto law? And you're like, I don't even know
Duke McKenzie:Frank, isn't it still the wild west? Isn't it still like still crazy.
Frank Hepworth:Yeah, all of our clients are companies that are going into the wild west and they're trying to package it up nicely for their clients, for their users. And when they're doing that process of packaging it up and delivering it, I step in there and I communicate it to the government and say, this is what they're doing in the wild west. This is how they're packaging it up. And this is why it's okay for the Canadian consumer to purchase that package. And the government's like, are you sure? And I'm like, yeah, we're sure.
Duke McKenzie:Talk to me a little bit more about what does it mean to be a crypto lawyer today? What type of companies are you working with? What type of products are they offering? And what are they asking? What is your day look like?
Frank Hepworth:The majority of my time is spent with crypto trading platforms. Those companies that onboard users and they'll take their Fiat Canadian or a Fiat US dollars, and they'll allow them to purchase any cryptocurrency out of a roster of pretty standardized cryptocurrencies. I think Coinbase has the biggest listing maybe Kraken has like 75. And in Canada we call them crypto assets. That's the term we've decided on as an industry is crypto assets. We also help companies do capital raises through crypto. The investor wants to pay with crypto and then a lot of our clients are integrating crypto payment systems. It's actually not very crypto at all. It's not very anarchist. It's not very libertarian. It's not very Degen. To work within the regulations, you really need to soften and, make it palatable, for the regulators. You really do get away from DeFi, but I'm okay with that because I just want to get as many dollars into crypto as I can. And that's what I think I do. That's the tomorrow aspect. I'd really just want to get the government money into the blockchain money. And so when I'm helping these companies do what they do, that's what lets me sleep at night. A lot of our clients are getting pretty wealthy and that's good for them, but a lot of them were, wealthy to begin with. I'm okay with helping them because my friends and family are getting into crypto and thats a good thing.
Kyle Kaplanis:You mentioned working with corporations for them to establish bringing crypto into their day-to-day business, transactional type things. Is it becoming more popular for businesses , to add crypto into their business strategy?
Frank Hepworth:Yeah, definitely. I don't have any data for that, but we all know that's happening..
Duke McKenzie:When you say adding to the strategy, like what are you seeing the most of? Is it more all over the board when people are saying, let me accept crypto as a payment, or, what are the types of things that you're seeing that are interesting, you the most?
Frank Hepworth:That doesn't interest me too much because it's actually a pretty standard business process. It's a plugin on your website, your service, and then you'll accept the crypto and then you'll just offload it into Fiat dollars if you need to. And you do that through a trading platform that offer corporate services. It's actually pretty standard, nothing too crazy there. What does fascinate me is the financial markets attempt , as I was talking about earlier, take DeFi products and high yield lending protocols, and then package them up in a product that they will then sell it to the mainstream market. That's a really interesting space and, it's going to be a battle between the companies and the regulators over the next few years. Because typically when a, financial industry player offers a financial product to the Canadian or US consumer, you need certain disclosures about that product and you need certain guarantees. Very simple example is if it's a share of a company, you need to have public disclosure on the company. You need to know who the CEO is, and you need to have transparency, but the proper good yields in DeFi a inability to be disclosed because there's no one to enforce disclosure on. And the regulators would like to say any sort of DeFi products, traditional finance, you can't offer that. But what they're starting to learn is that DeFi's for the individual and the individual will find access to DeFi if they want to, and they are. And so the regulators are starting to realize we need to start letting these companies offer these new products that we wouldn't previously let them offer it because if we don't individuals are going to get it in a way that we have no understanding of rather than the hybrid way of like incorporating a traditional industry player. In which case you can have at least KYC, AML things like.
Kyle Kaplanis:Some people might be listening that are not familiar with some terms. Can you explain to us what DeFi means in your, simple terminology?
Frank Hepworth:Sure. Decentralized finance is the replication of the capital markets, the financial markets, as we know it right now, but it's a removal of an intermediary. It's sort of just software doing what the stockbrokers would do. And before the stock brokers would say, okay, you need to come to us through your bank or through your money manager. But now the software that does the stuff that the stockbroker used to do, all it says is you just need your own piece of software on your computer. And as long as that piece of software on your computer has some crypto in it, you can interact with us and we can do all the same financial services that your mom and dad and your grandparents have been used to through the JP Morgan and through Fidelity and through the New York stock exchange. We'll do all of that on a whole lot more. And you just got to have the right software in your computer and people are like, wow, that's crazy. I can download that software and I can do. And it's way more efficient because I don't need to pay all those middlemen.
Duke McKenzie:That's fascinating. What I had to wrap my head around and I started my journey of crypto and that more seriously last year, but I had to wrap my head around what is actually currency. You know, how you're talking about Fiat currency. The definition of that is, it's not backed by anything other than a government, right? What's the proper definition of Fiat currency. that's what I've been telling people.
Frank Hepworth:It's a government issued.
Duke McKenzie:Yeah, government issued. I had to wrap my head around what currency is, it's not dollars in my pocket, right? This is actually a representation of value and Eth is a representation of value. And I had to wrap my head around that versus when I think of money, I think of a physical paper money in my pocket. Was that hard for you to, I guess that wasn't hard for you to wrap your head around when you got your first Eth, I guess that's when you sort of had to wrap your head around
Frank Hepworth:and yeah. There's no. So I always take a lot of pride in this, but after the 2017 bull run, most people fell out of crypto, but I just went to extra hard because I had this great example in front of me when I was traveling. And I did do a lot of traveling in this time because university was so boring. I was going through so many Fiat currencies, but the ether in my wallet was just like always there. And I knew I could always transact with it. And I was like, this is different. I like this way more. And so in 2018, I was just going nuts into Bitcoin. And by the end of 2018, all the prices were going down. And so I wasn't particularly keen to jump in, but my belief in it was solidifying. And then at 2019, thankfully when things had flat-lined I was like, yeah, no, this is biblical. I can can completely understand not how it works, I wish I could. I've gone through the Bitcoin white paper many times, but there's some things in there that I just don't think I have the time to understand, but the concept certainly., I've lived in Asia for a couple of years and in mainland China for over a year and seeing how they use we-chat and how fundamentally different their payment structure is. Then our payment structure, like very different. The only common denominator is that a mobile phone is often used. When I was able to see the two different systems. I was like, yeah, like for sure, crypto and Bitcoin will be holding a value because we already using 10 different systems. What's one more, especially one that's objective and independent.
Kyle Kaplanis:How I see it is that eventually we might have I don't know if it's going to be Bitcoin or another coin, but there will most likely be a worldwide currency that will be able to use so that way there's not all these exchanges, you know, you can go to China and your Bitcoin still works in China, or you can go to Europe and your Bitcoin still works in Europe. So there's not all of these exchanges. Is that something that you think is going to be happening in the years to come.
Frank Hepworth:Truthfully, no, I guess maybe. Everything does point towards centralization. But I don't know. I think there will always be situations of arbitrage. I do think Bitcoin will be the ultimate bottom line. The easy analogy is as currencies to gold. I do think it will take shape in that way. And I do think CBDC's, will be very successful CBC, Central Bank Digital Currency. So governments issuing their own cryptocurrency. I do think those will take hold and they will have their own utility and they will need. Be a detriment to crypto or an aid. It will just be another thing.
Duke McKenzie:Here's the thing with Bitcoin, right? It's interesting that you compared it to gold, like a store of value, because as a currency. When you were walking around, you said Asia or Europe or wherever with your first Ethereum, but you know how they're doing this big test making, what country. El Salvador.
Frank Hepworth:Yup.
Duke McKenzie:Yeah, El Salvador. They said, okay, we're crypto. And we're accepting Bitcoin everywhere and all those things. The problem with Bitcoin is, and I've been purchasing Bitcoin because I'm saying, okay, X percent of my portfolio. I believe that the long-term value in several of these things, because this makes sense. And maybe you could bet the right one or not, but A version of this will be a major player, over the next 30 years or 20 years or whatever it is, I believe it's one of these three but who knows, but the challenge with Bitcoin per se, and Ethereum or whatever, but let's use Bitcoin. The granddaddy. It's not a good transactional tool because the thing fluctuates all the time. And it acts more like gold than. A Fiat currency, like a dollar. Right. That's what I found. what do you think about that? What are your thoughts and all of those things you're seeing?
Frank Hepworth:Yeah, I agree. I will never sell my Bitcoin over my dead body, would I transact with my Bitcoin, like no way. The thing is, stored away. There's going to be, and there are great transactional cryptocurrencies, but just, Bitcoin's just not one of them until everything is pegged back to Bitcoin, which, won't be happening it's not a good transactional currency, but I appreciate El Salvador for going for it. The worst case scenario is that their country is going to have an influx of Bitcoin and that's just fine. And maybe that's the strategic play and maybe they're not trying to have a better. Transactional crypto, maybe they're just trying to import Bitcoin, which is fine. Their citizens are going to do very well.
Duke McKenzie:You're on the cusp, of what's tomorrow, right? And all of those things. If you had to make three predictions as to where, these cryptocurrencies are going or how people adopt, or if you have any thoughts or something like that? How does the future look to you?
Frank Hepworth:Lawyers work very well respond ing rather than creating it's a personality flaw, almost all of us. I would say, Bitcoin's going nowhere. I know a lot of people don't like the proof of work and they don't like how much energy consumption that Bitcoin has and they want that to be changed. Like it's not going to be changed. It shouldn't be changed. That's a feature, not a side effect.
Duke McKenzie:Sorry for cutting off on this. So proof of work. What happens right now? Describe the proof of work process. And then I have a question of proof of stake but describe proof of work for the audience.
Frank Hepworth:The Bitcoin network is decentralized. There are a bunch of computers out there that maintain the network. And the reason they maintain the network is because they are rewarded with newly mined or newly minted Bitcoin as compensation for their securitization efforts and the all compete with each other for the opportunity to perform honestly, and be rewarded with newly-minted Bitcoin, if they do their job and they perform honestly, and they process the transactions, they're supposed to deny the transactions that are they're supposed to the Bitcoin protocol itself will reward them with brand new Bitcoins and the way that they compete with each. Is by expending tremendous amounts of computational power. And the idea there is that that dishonest actor wouldn't spend all of their resources, all of their money by paying their electricity bills, to do this extreme, computational, effort for them to just go and be a bad actor that sort of has to be a barrier of entry to. Earned the opportunity to be a good actor. And bad actors, won't be willing to pay the price. Because Bitcoin is so valuable. You've got hundreds of thousands of these miners competing with each other, extending energy, all for the opportunity to be, honest and be rewarded with nearly mine Bitcoins, the side effect that gets the attention. Is the huge energy expenditure. People don't like that about it.
Duke McKenzie:Right. It's interesting that you say that. I've been reading about a concept called, proof of stake, they saying that you can achieve the same goal, of basically you have to prove that you're a member of the community and own a piece. What do you think of that versus proof of work? I read that the cryptocurrency Ethereum in theory is switching over to that system. I believe.
Frank Hepworth:That's that is correct.
Duke McKenzie:I'm pretty good. I am going to law school and I am going to become a crypto lawyer. That's what I'm going to do. I'm going to do me a mother. I was going to curse. It was going to go me and mother fucking Frank. And I was like, wait, I can't curse, this is a business podcast
Frank Hepworth:You keep that in there. Don't edit that out.
Duke McKenzie:All right. This is staying in. This is staying in.
Frank Hepworth:But no that's correct. If they're even going from this proof of work right now, it operates the same way Bitcoin does. It's moving to proof of stake and there are people who want Bitcoin to do the same thing, but, Bitcoin works the way it is. And there's very, proper academic arguments out there against this that I actually can't bring up. So I am talking outside of my element here. So I won't say too much, but proof of stake is unproven. There are issues with the consensus mechanism. It always comes back to game theory and the game theory hasn't been fully fleshed out yet when it comes to proof of stake. And Bitcoin is a different asset that the proof of work makes it a much harder asset. Then proof of stake is an arguments I know is brought up, but, I know that people get their knickers in a twist. My parents would say that their English over, over the proof of work energy expenditure, I think people underestimate the value of Bitcoin. Is the only asset that the world has access to. At least everyone with a cell phone that is not affiliated with any centralized entity. We had gold before and other commodities, but those were always, quite inaccessible, like ask if someone in Zimbabwe to get exposure to gold, and they're gonna have a tough time, but they all have cell phones and, there's. Going to be extreme value that comes from that. Extreme value. That's true.
Duke McKenzie:So what you're saying, I actually liked that. Basically what you're arguing and your thesis is. Is that, yes, this is using a lot of power, a lot of power. However, the value that Bitcoin is going to be providing the world and the opportunity is worth the opportunity cost of the power of.
Frank Hepworth:It is for, it is
Duke McKenzie:that's your thesis and that's, and that's an interesting thing because you are correct. And I guess that's what the promise is, right? The promise is if this could be a more globally available, Commodity or asset like, currency as a store value. You talk about gold is not accessible. And way that you, get exposure to gold is you deal with it, the financial markets where your banker calls this guy or girl to sell you in this fund and blah, blah, blah. Right? It's not accessible to get exposure to gold where you are. As this expands, every single person in the world, has access to a cell phone and this is the product of fines for exposure to Bitcoin and these other types of currencies, but that gives Bitcoin at edge. And that's why you're arguing that people have not fully digested the value of Bitcoin as of yet.
Frank Hepworth:Exactly. But also. This is another sort of counter argument that's brought up also Bitcoin miners are incentivized towards renewable energy sources because they're cheaper. So they're competing with each other profit. And so their fossil fuels are quite expensive. And so they're going to be naturally going towards the cheapest fuel that they can, which is renewables. They will be going for solar wind and hydro, for sure. All Bitcoin will be renewable. Strictly by capital market forces. Or by market forces alone
Kyle Kaplanis:Which is a good thing.
Frank Hepworth:And it's a good thing.
Duke McKenzie:Yeah, that's great. That's great.
Kyle Kaplanis:That's awesome.
Duke McKenzie:That was fascinating. Let's leave it there. Frank, thank you. Thank you very much for coming on today. I think this is very useful and educational and I would say, I'm going to tell my son to grow up to be a crypto lawyer, like, all right. Thanks.
Frank Hepworth:Thanks a lot for thanks. Thanks for having me. I appreciate it.