Newsletter: How to recruit talent; the unhosted wallet rule; and an attack, maybe
Editor’s note: This post originally appeared in our web3 newsletter — a guide to trending topics in crypto with insights and resources from engineers, researchers, and others on the a16z crypto team. Subscribe to see it in your inbox every other week.
🤝🫶 Feature: Hiring and retaining talent in web3
Finding the right technical talent is critical, so founders are often advised to “hold a high bar” and “be obsessed” about it. This advice is both exactly correct and totally useless for anyone juggling a list of competing priorities: No one provides a roadmap for finding great candidates, while also maintaining an excellent candidate experience, and also running a company!
So in this post, Petracca — who helped grow Airbnb from 50 to 900 and Coinbase from 7 to 700 — argues a recruiter should be among a startup’s first 10 hires. But wait: If founders are pressed for time and need the right technical talent right away, shouldn’t those other hires come first?
read the why, how, and what on hiring recruiters
see also:
- Hiring and retaining talent in web3 with Craig Naylor, Mehdi Hasan, and Madan Nagaldinne from our recent crypto startup accelerator program (CSX)
🗣️💥 Governance attack!?
In this episode of our podcast, we covered both recent events and evergreen governance questions in political systems. Beginning by breaking down the recent Compound “governance attack” (Was it even an attack? How do people even figure out motives behind actions on-chain) — the episode also shares how to avoid, prevent, and respond to governance attacks in general.
The team also discusses key differences between on-chain voting systems as compared to political systems around the world. What happens when you have activity that the majority doesn’t agree with?
see also:
🏦💼 Regulatory update: The unhosted wallet rule has been officially withdrawn
with Michele Korver and David Sverdlov
Last week, the Department of the Treasury published its Semiannual Agenda — reporting that it officially withdrew the so-called “Mnuchin Rule”. The Financial Crimes Enforcement Network (FinCEN, a bureau of Treasury) originally published the rule on the Federal Register in December 2020. (The rule was first proposed by Treasury Secretary Steven Mnuchin, hence the nickname.)
Under the Bank Secrecy Act (BSA), financial institutions have specific recordkeeping, reporting, and other obligations to help prevent money laundering and terrorist financing. However, the proposed regulations would have required BSA-covered crypto businesses to not only collect and report detailed personal identifying information (PII) about their customers, but also about their customers’ counterparties in transactions involving self-hosted wallets. As such, this rule (among other new BSA requirements) would have imposed a novel requirement beyond the traditional “Know Your Customer” requirement, adding a new “Know Your Customer’s Customer” requirement.
Why does this matter? For one, it would have been difficult, if not impossible, for crypto businesses in many cases to interact with self-hosted wallets in a compliant manner — effectively banning them from doing so. This is important because a key premise of crypto is allowing people to control their own wallets without having to rely on third-party intermediaries.
Notably, a de facto ban on interactions involving self-hosted wallets could actually be counterintuitive to the objectives of the BSA: Driving wallets away from covered entities would have made information less easily accessible to law enforcement. That’s why this recent update in Treasury’s Semiannual Agenda is so significant: It reported the end of this particularly lengthy and controversial rulemaking.
Of course, Treasury could still propose similar new regulations (or re-propose the original regulations). But even if it did so, the Administrative Procedure Act — which governs the rulemaking processes and standards of federal agencies — would require a new notice and comment period.
It is worth noting the process surrounding the rule’s release here: Treasury published the rule on December 23, 2020, and had an initial comment period that closed on January 4, 2021. Affected crypto businesses, therefore, had just six business days to respond to the rule — which happened to coincide almost entirely with the winter holiday season. By comparison, FinCEN had provided at least a 30-day comment period for every other substantive rulemaking over the past two decades.
Treasury also originally proposed the rule in the form of an IFR (Interim Final Rule) — an infrequent form of rulemaking where an agency finds it has good cause to issue a final rule without providing for a notice and comment period, and the rule becomes effective on publication. After industry outcry, the proposal was converted to an NPRM (Notice of Proposed Rulemaking), which provides for a comment period before the rule becomes effective.
By the end of the process, the rule had received more than 8,000 comments — showing the importance of engaging with regulators during the rulemaking process. To learn more about some of the arguments made objecting to the rule, see a16z’s comment letter, Coin Center’s comment letter, and Coinbase’s comment letter.
We recommend web3 founders and their counsel monitor for any updates here, check out our regulatory updates, or reach out with questions.
📰🪪 News you can use: on payments
Integrating blockchains and crypto into our current credit card and payments system has the potential to enhance security, lower transaction costs and fees, speed up processes, provide global availability, and much more. Recent announcements and news in this space — linking crypto to credit cards — include: MetaMask enabling debit-card spending directly from one’s self-custody wallet; Coinbase launching a credit card that allows cryptocurrency payments, purchases, and ATM withdrawals; and other efforts via decentralized exchanges.
–a16z crypto editorial team
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