@rleshner @haydenadams I am posting here a modified version of what I posted in the Temperature Check group because I believe it is critical for us to advocate for DeFi – but the proposal has some enormous drawbacks.
Here are the key ones:
1. The budget is 10x more than any other crypto player has needed to deal with similar threats. Where will all this money go?
2. The proposal lacks a clear goal, measurable interim objectives and clear criteria for success.. When coupled with a budget that is 10x what other companies have found necessary, where do we actually believe the money will go?
3. The board is not composed of the sort of people we can expect to best advocate for us. It needs to be expanded to include more gray suits and fewer Twitter KOLs.. The problem here is credibility with the government, and the unfortunate aversion to PR and conflicts of interest we will likely encounter when we engage the government.
My Background
Before unpacking what I wrote, I wanted to share a little bit of my background without outing myself.
In short, I have helped several overseas crypto, fintech and tradfi businesses navigate the halls of DC. In most cases, the situation was far more dire than what Uniswap faces. For example, a company may have been facing enforcement for sanctions violations or money laundering issues.
In each of these cases, the company resolved the matters and began a regulatory engagement effort.
The Big Picture
Taking affirmative action like HLSBFI proposes is critically important so that Uniswap and other members of the DeFi industry can avoid the sorts of issues I’ve seen companies face, and instead build a base of advocates with shared interests. This takes time - and, yes, it takes money, too.
Thinking carefully about how to do this is important - and it does require big brains and big connections.
Unfortunately there are at least 3 key issues with the proposal in its current form. They make me a hard no, and I believe they ought to make you a hard no, too.
1. Budget Size is 10x too large.
I believe the budget size is about 10x too large because I’ve personally interviewed and hired lobbyists and law firms in DC to attack similar issues with a budget of less than $500k.
This was easily achievable because almost every lobbying shop or law firm will offer a package deal for under $100k per year. These “low” rates are possible because the lawyers and lobbyists are already doing most of the work for other clients. In fact, most large Wall Street and DC shops will offer package deals as low as $25k per year.
To right size, I believe Coin Center’s entire operating budget was historically about $1m per year. It’s lobbying budget was smaller.
So, what would be done with $5-10m per year?
Which brings me to the next issue…
2. Lack of Concrete Goals, Measurable Milestones and Definition of Success
When budgeting money for a project, it usually makes sense to set clear overarching goals, create measurable objectives and to define criteria for success. That is especially important when the budget is so large ($30m is more than it took build Uniswap, plus Sushiswap, plus Compound … )
To use an example framework (OKRs):
Objective: Advance awareness of DeFi in DC and begin to identify shared interests
Key Result 1: Drive awareness of Defi by scheduling meetings with the offices of 10 senators and 15 congressman. Budget: 0
Key Result 2: Identify shared interested between the industry and the offices of 10 politicians who appear open to collaboration during initial reachouts. Budget: $5k
Key Result 3: Identify 5 most promising targets from follow-ups to seek further collaboration. Begin discussing ways to work together on shared interests. Budget: $5k
Key Result 4: Engage K Street shop to help guide dialogues with targets. Budget: $10k
Definition of Success: All key results completed and group has decided on draft engagement proposals for the next quarter
Unfortunately, the proposal provides none of this colour right now, so it effectively implies that the money can go anywhere.
In addition, this lack of discipline is what allows the request to be so large! What would the budget look like if we started at zero - and built up each key goal line by line?
3. Board Composition
The board’s composition is self-defeating because it mostly comprises Crypto Twitter KOLs. Although I imagine they are well intentioned, they just don’t give the right optics to most regulators.
To see this, just imagine that you are a regulator who is charged with enforcing a US sanctions program or runs a group in homeland security. How would you perceive
- a Crypto Twitter lawyer
- who is proclaiming how you should be doing your job
- what the law should be,
- is consistently PRing himself
- is advocating for the creation of a $30m lobbying fund that he directs …
while you, the hardworking regulator, are given an impossible mandate, a tiny budget, and are afraid to even accept a free lunch?
The standard way to solve this is to stack your organization with revolving door operators who understand how the beast works, and have reputational skin in the game and maintain a relatively low, and conflict-free profile.
For us, I’d recommend adjusting the composition of the board to include at most 2 Crypto Twitter lawyers and otherwise grey suits. This will dramatically increase our credibility.