Crypto: Crypto’s top venture capitalist plays the long game

By Andrew Ross Sorkin and Ephrat Livni

A top cop turned venture capitalist is now one of Silicon Valley’s most powerful women, with over $ 2 billion on hand.

Katie Haun, who created the first federal cryptocurrency task force as an attorney at the Department of Justice, will co-chair a $ 2.2 billion crypto fund announced by Andreessen Horowitz last week. She is a sponsor of the venture capital fund and independent director of crypto exchange Coinbase. Chris Dixon, also a general partner at Andreessen, will be the fund’s other co-chair.

This is Andreessen’s third crypto fund. Haun joined the company in 2018 to co-lead its first dedicated crypto fund, a commitment of $ 300 million. She also co-led Andreessen’s second fund, launched in 2020 with $ 515 million. With the latest successful fund, it will play an important role in creating the crypto space just as it seems to be gaining ground.

But it is also a time of uncertainty for crypto. A Chinese regulatory crackdown on Bitcoin beats prices and raises questions about the value and future regulatory landscape for crypto. She spoke with Andrew Ross Sorkin and Ephrat Livni about the prospects for the booming industry, blockchain geopolitics, risk, regulation and the direction of the fund. The interview has been edited and condensed for clarity.

Q: Have we ever seen a government as big as China take the steps it has taken?

A: In fact, China took a similar step in 2017. It banned trading of Bitcoin on exchanges based in China. The price of Bitcoin at that time was hovering around $ 4,000, but on this news it took a downward turn.

I am surprised that this has not happened sooner. Xi Jinping and China have made no secret of the fact that they see crypto and blockchain as one of China’s top five national priorities over the next decade. They have stated it publicly and they are developing their own version of the cryptocurrency, a digital renminbi. We know they plan to export this, link the trade to it, get people all over the world, not just in China, to use it.

Q: What happens if Bitcoin is completely shut down in China? Isn’t this market for Bitcoin on the table?

A: The best analogue for this is the Great Firewall of China, with the Internet. Of course, it will be more difficult for China to ban completely. They can do things like control entry and exit ramps, which they have done before. If you go back to this news from 2017, it actually shows the enormous resistance of an open and decentralized system like Bitcoin.

Q: Peter Thiel has argued that China would like to see Bitcoin and other cryptocurrencies rise as part of a strategic effort to destabilize the US dollar. Do you agree?

A: I don’t agree with that. I think China would like to keep control over its version of the digital yuan. And I think they are developing what is effectively a closed authorization system. Basically they want control and oversight over everything.

I agree that they would very much like to see the US dollar turned upside down as the world’s reserve currency. I don’t agree on how they would proceed. We’re much more likely to see them exporting their version, tying incentives to their digital currency to get people around the world to use it.

Q: Back here in the US, do you think crypto will be regulated?

A: There is this myth that crypto founders want the Old West. They really want regulators to say what the rules are. It takes so much time, money and resources – specialized resources – to figure out how to navigate the quagmire of agencies ranging from the CFTC to the Treasury, let alone regulators in 50 different states.

SEC Commissioner Hester Peirce called for a regulatory sandbox, but I’m not sure it goes far enough as it only fixes issues for projects that are clearly securities. What I would like to see is at the federal level in the United States, a regulatory sandbox with federal preemption. And for that, we need a law.

Q: How would that work?

A: It would allow projects to get started with certain rules, but it would provide an important testing ground to see how they behave in nature. And at the same time, it would serve a very important function for regulators and members of government in helping them train them on these new technologies. There really is no easy way to follow. I work full time in the industry with experts all around, and I can’t keep pace with this technology that is evolving so rapidly.

Q: But how do you protect consumers? The general public is clearly not being sidelined or protected while this is taking place.
A: Consumer protection is really important. However, people want to have access to these products and services. And just to say, well, we are not going to allow them in the United States is not the answer, because anyone today with an internet connection and a VPN can access the products and services quite easily. offered in other countries. It is incredibly difficult, if not nearly impossible, for the United States to control what happens abroad on offshore platforms.

Q: As a former prosecutor, how do you feel about the use of crypto in so many ransomware attacks like the Colonial Pipeline? Why do criminals love Bitcoin so much?

A: Criminals are early adopters and in some ways make excellent beta testers for new technology. They are always looking for a way around the system. Frankly, law enforcement officials really like it when payment is made in Bitcoin rather than fiat. I think it’s funny because as a former prosecutor I take this for granted.

There is a real false sense of security when cables are used or traditional financial services are used. People think, “Oh, we know all about this. So we’re just going to issue a subpoena. The bank will give us those records and we’ll just go get the money. It is so far from the reality of the situation.

Q: So don’t you think these ransomware attacks are a function of cryptography?
A: I think you are asking if crypto is the cause of the ransomware, and it absolutely is not. I have pursued several of the Department of Justice’s biggest online money laundering schemes. In fiduciary systems, 99.9% of money laundering claims are successful. In fact, what really stands out in ransomware attacks, the Colonial Pipeline is a prime example. It is unprecedented for the Department of Justice to be able to recover the proceeds of international criminal activity so quickly. This timeframe is usually years, if ever.

Q: When you think about the risks associated with crypto, what do you think is the leverage of the crypto system?
A: Just like in traditional financial services, of course there is leverage, I’m not going to deny that. But people can get a lot more influence with platforms overseas. So I think it’s in the interests of US regulators and consumers to foster responsible innovation here in this country. So, don’t say you can’t have any leverage, but let’s talk about the limits, the good rules of the road that we could agree on.

One of the only things that unites Congress lately is China, and I think American policymakers and lawmakers are starting to realize that China and other countries are moving forward, recognizing that the Crypto and blockchain are a real priority, and one that we are behind, unlike in the internet, where DARPA and the US government helped create it.

Q: What do you think of the memorization of crypto? When you see Elon Musk tweeting about Dogecoin, are you saying it’s great or terrible?

A: Somewhere in between. There’s something fundamental going on right now with the internet and culture, and I think crypto is at the epicenter. It’s easy to dismiss things like games or memes. I was a little guilty of this myself a few years ago. And, you know, I’ve been proven wrong several times. So one of the things I have tried to learn is to keep an open mind.

Q: You’ve raised $ 2 billion for this crypto fund amid this almost euphoria over the last couple of months around crypto and the future of crypto, NFTs, with the price of Bitcoin rising to over 60 000 dollars. This week a lot of air has come out. Can you contextualize the fundraising and fundraising in this environment?
A: We started talking about raising that third fund long before what you just described, the euphoria. We make bets over seven to ten years.

One big category we’re interested in is infrastructure and scalability – UX, spikes and shovels, you know, to allow more consumers to be able to use crypto products and services. Expect us to double down in this area.

The second category is NFTs and games. A lot of people I talk to about NFTs think, “Oh yeah, digital art”. I think it’s more than art. It’s more than games, it’s more than goods. It’s about this new business model for creators and bringing a whole new audience to crypto, entirely new types like creators, sports fans, and media types.

Then the third category is DeFi, or decentralized finance.

Q: This fund is much larger than funds one and two. What does that say about where we are?

A: It’s about four times bigger than our last fund. We have been oversubscribed. We could quite easily have raised much larger funds without any problems from our existing sponsors, without even going through new sponsors. But we didn’t want to raise a bigger fund just for the sake of more people.

I think of it almost as an internet fundraiser some 20 years ago. Now we don’t think about it – we have segregated funds for consumers, for infrastructure, for businesses, for things like that, for games. With crypto, we believe its potential for growth is as great as the potential of the internet.

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