How to play the legal system for post-capitalism with Florian Gatz
In Thailand I spoke to Florian Glatz, probably the first crypto focused lawyer in Europe and possible the world and co-founder of Common Ground, an on-chain social network. Florian also helped author some part of the MiCA legislation in the EU which lays out the legal framework for cryptocurrences. We spoke about his experiences in the early days of the ICO boom, the unpreparedness of the legal system for crypto, and how Common Ground is leading the way for fairer ways to do ICOs. You can al...
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Pretty early on in my career as a lawyer in this scene, I came in touch with the, you know, the the rails that international finance uses to move money around. But my clients were not people trying to hide taxes. They were just people trying to not go to jail when launching a token. You know, we talked about Creative Commons as a great example for sort of using a loophole in copyright to create an entirely alternative system to copyright that is maybe much more humane or much more adapt to modern culture of remixing and remixing in the Internet effective. Right? So there are capitalist logics that allow for the existence of public goods as well. Yeah. That's also something that could be explored more, but, of course, you need to be sort of varying the cahoots with the whole thing to even see these opportunities in a sense. Through a bicameral system as we call it, which has a cooperative with all the users inside and it runs the service, all the data is on there, users govern their own data, Profits are generated there. Users receive dividends, like members of the co op receive dividends, from that co op membership.
Hey, guys. What you're about to watch is one of the many interviews I took during my time in Thailand for Defcon twenty twenty four. I was in the country for a total of over a month and got the opportunity to meet a bunch of really cool people and interview them in person. DevCon itself was an incredible and interesting experience, and you can find my full review of it on my Patreon. So if you like the content I've been making and would like me to continue going to these kinds of events and improving, then I hope you'll become a patron starting at just $3 per month for access to loads of bonus content and Blockchain Socialist merch at patreon.com/theblockchainsocialist. You are watching or listening to another installment of, the series of interviews that I'm doing while in Thailand for, for DevCon and around a lot of the events that are happening in Chiang Mai. So I'm still in Chiang Mai, and I am here speaking to, Florian Glatz. Tapley is I didn't ask you how you want to be introduced, but he is basically a super crypto lawyer. And, I know you did a lot of the work around many of the, like, ICOs during 2017. You were deep in the trenches during this time. Probably have a lot of context on and, thoughts about that that era. But I want to have you on so that we can talk about, yeah, your thoughts on kind of like the intersection of law and all this crypto stuff, and you're also cofounder of Common Ground, which we can talk about a bit as well.
Yeah. Welcome. Well, thank you so much for being here, having me here. Yeah. Excited to discuss whatever comes to our mind, I guess. Yeah. So, like, the kind of big thing that I'm really interested in to hear from you,
just being, like, one of the first crypto lawyers involved and, you know, having probably a lot of thoughts around this, is, like, this intersection of, sort of radical politics. So the the in the space of, like, being radical, being in legal gray zones, let's say, and, the crypto world. Oftentimes, or I would say that, you know, generally when we think of, like, kind of looking for legal loopholes in almost like a white collar way, it's often presumed from a like libertarian point of view in order to like pay less taxes. And that's that there is oftentimes this aesthetic association with libertarianism and like the right, and then maybe on the left sometimes that's more associated with like, I don't know, breaking shit at a protest or something like that. But I think the, at least for me, what I am interested in is that it's kind of like breaking this aesthetic associations with the practical, which I think there are plenty of things, there are plenty of examples of that happening, and we've talked a lot about kind of, yeah, the legal implications of many different types of financial schemes and whether those being, like, meant for a purpose that is meant for, like, profit maximizing or meant for, like, something completely different. Yeah. So I'm just curious to hear kind of, like, broadly Yeah. You know, we can start from there.
It's such a great entry point because it goes to me right at the core of this conflict I have seen play out now for many years between, let's say, the idealized left, which is traditionally for taxing the billionaires to become more like millionaires and considers, you know, finance broadly as sort of an arena of evil, you know, playing up. And I think part of that is this whole jurisdictional arbitrage game where we know, and that's, I mean, that's correct, that rich people can use international multinational structures to just move money around and really be not capturable by any given jurisdiction. And when I got, more active in crypto also as a lawyer, funny enough, I was approached by, you know, people who had never done any multinational tax evasion schemes, people in crypto who were just building decentralized infrastructure, who needed a token because that is how the whole system worked and how they wanted to finance themselves. They didn't wanna go the traditional VC route. They wanted to do this new way of raising capital. They effectively had to resort to the same infrastructure that had been sort of prebuilt by rich and wealthy people Mhmm. To effectively compensate for the lack of legal clarity in the jurisdiction they lived in regarding launching tokens, regarding all the compliance aspects of doing that. So pretty early on in my career as a lawyer in this scene, I came in touch with the, you know, the the rails that international finance uses to move money around. But my clients were not people trying to hide taxes. They were just people trying to not go to jail when launching a token. Mhmm. There were people from all over the world, from Europe, from The Americas, from Asia. And for one reason or another, I worked with many of them on doing some sort of token launch. And, yeah, I have to say that I I was I'm I would be glad to see maybe more experimentation around loopholes and to a broader extent, this idea of exclosures, so sort of stable loopholes or rule systems within our established system that sort of allow for entirely new things to be done in a new way. You know, we talked about Creative Commons as a great example for sort of using a loophole in copyright to create an entirely alternative system to copyright that is maybe much more humane or much more adept to modern culture of remixing and remixing the Internet effectively. So there are a bunch of really successful examples of loopholes that to me have more of a sort of leftist imprint than, you know, rich people playing power games, that sort of thinking.
Sure. Sure. I think, yeah, it's, just often forgotten as a tool that, like, you don't necessarily, you don't have to be so nihilistic to think that only the rich and powerful, like, can take advantage of these things. And it's a matter of, like, maybe there's a bit of knowledge, like, having the knowledge about legal systems and, like, how to traverse them, that then you're able to take advantage of those things. Yeah. But can you maybe explain, what is it like you were explaining to me earlier before recording, like, what was the like, some you used exclosures is interesting, but like what are some other kinds of frameworks of Yeah. Like legal loopholes to think about? You know, we can think about it in an abstract way just to create a foundation, but that, you know, with the thinking in mind of like how do we use this for like more progressive ends?
Yeah. So for example, I, realized that only here in Chiang Mai, funny enough, during a talk of Jesse Kate, who's a, you know, scholar and researcher and overall great person who is working on the ideas. Guest of the podcast. Okay. And, and she's working on this idea of exclosures. And during her talk where I had heard this term before, I thought I understood it. But then when I heard her really explain it, I had new insights around it. And one one great example that, I was involved in that I think might be actually an disclosure or become one is, what we did around MICA. Now what is MICA? MICA is a new law that's, MICA's short name. It's markets in crypto assets, and MICA is the acronym for that. And this is a new law that will regulate crypto, as one sort of big field of new economic and financial activity that we see out there in Europe. And there is now one sort of coherent framework to regulate virtually all activities, in in that field. And it's the first time a big jurisdiction in the world has done such a law. So The US is watching very actively China. Everybody wants to see how is this European experiment panning up. And during the negotiations of Nika, me plus two other people, Marina and Simon, which are representatives of other European member states, France and Slovenia, we banded together in a sort of grassroots initiative called European crypto initiative, And we set ourselves one goal. We wanted to bring an exemption of DeFi and other decentralized systems. So DeFi is decentralized finance, but other equally decentralized systems like refi, regenerative finance, or DeSci, like decentralized science. We wanted them to be entirely exempt from this new regulation because we understood that there would be too much conflict between these sort of traditionally crafted rules for systems centered around an intermediary that has, elevated control over a system versus the decentralized ones that do not have that concept, which don't comply with these, thing thoughts. And so we actually succeeded in doing that, funny enough. And so now that MICA, will fully apply starting 01/01/2025, the only systems out there that are not affected at all by this new MICA regulation are sufficiently decentralized crypto systems Mhmm. Which is DeFi and others, because there is now a paragraph in these rules that says if this, a a a cryptosystem is sufficiently decentralized, these rules here or this entire regulation doesn't apply. So now you have sort of a white space or a loophole for crypto systems that can do whatever as long as they are sufficiently decentralized, whatever that means. Now you have to operationalize that term, and this will be decades of enforcement actions against players who might be overdoing it in the eyes of the enforces and courts checking if the enforces are doing their job well or not. But this is how this will establish a practice over the years just like Creative Commons has done the same with many court rulings and all the jurisdictions saying which paragraphs of the Creative Commons are interpreted how. And the same will happen with DeFi and other systems, which of them are sufficiently decentralized, which are not. That applies to DAOs, how they are governed. That applies to protocols. That is also for bread chain, for example. Is, bread chain, sufficiently decentralized in the sense that there is no recognizable issuer of the token and so on. So, yeah, I feel we laid the foundation for a potential disclosure, with this one single paragraph in in a piece of law that literally has hundreds of pages. Yeah. If you add the secondary rule making around MICA, which is a traditional thing in the EU, you have a big law, then you have secondary laws to interpret the law. If you add that altogether, we are talking about thousands of pages. Jesus. And there's one single rule, one single sentence in there that exempts all of DeFi, which you and me know. Yeah. It's an insane universe, like, insanely big of maybe entire, yeah, sub universes with economies that are very big. So, that that feels crazy to me that that we achieved that.
Yeah. That is very crazy. And I am I it's so interesting to be talking to the person to, like, put that to, like, help put that in there. I I guess I I wonder, is this normal, like, in these types of situations that in these, like, you know, high innovation technologies or technology that, like, kind of push the boundaries of, like, legal, kind of definitions that, yeah, that they're not so well defined. That, like, when like, for example, this term sufficiently decentralized, the way that I often have tried to understand it when I try to read something about being sufficiently decentralized particularly, in The US context as well, like there seems to be an implicit or an implication that decentralization requires market dynamics in a particular way that, like, it requires that you have that that a token is on a free market for anyone to to purchase, and that's what kind of, like, in part, decentralization must include, but it's also the fact that I haven't seen other types of examples, and maybe there are I think one of the things that that worries me in the sense that I think it shows the biases in larger legal structures and systems of like this assumed markets, that then we cannot be decentralized if we are not market governed. Oh, okay. And now we get what you're saying here. That would that so then that means that, like Yeah. Because they're identifiable
people Yeah. I don't know what you're talking about. I no. It's very interesting what you're saying. So on Resideo 22, the most significant, thing that happened after Mika, the final version of it contained that thing in the first place, is that the Danish authority, a financial market authority, has released a paper a couple of months ago just talking about Resideo '22 and its interpretation. Its impact on cryptocurrency companies in Europe who think they might be affected by this resettlement. Like, it might apply to them, and so they might not plan to comply with all the rules in that big law. And so they gave, you know, about 30 pages their sort of intricate interpretations. And, it went really, really deep into DAO governance and other factors where, at least, they conclude that right now, it seems to be the case that at their very best, DAOs function like traditional companies with roles, permissions, and so on. And that that is would be sufficient to say that this is not sufficiently decentralized. So, I don't think there need to be, by definition, market mechanisms at play to say something is sufficiently decentralized. But a market mechanism is indeed sort of a decentralized coordination function that you can give certain tasks to and thereby credibly claim no single person was somehow responsible for something. Right. But we all know that creating liquid markets around things is very hard. And even if you claim there is a market, there probably isn't. And I don't think it's a great defense mechanism in in general. What, doctor no. What is his name? Doctor Nick on Twitter. Do you doctor Nick a? Nick Almond. Yeah. Nick Almond. What he said, on Twitter, which I really liked, is that in a sense, for DAOs and these structure governance structures to comply with the idea of what the Danish have in mind is they have to be like these wind creatures by this artist. I don't know if you know that them. He just ties together sticks with string. And when wind comes in just the right direction, they rise up. And carried by the wind, they actually start to move like robots. And for a couple of seconds, as long as the gust of wind lasts, there's literally a monster rising out of nothing, walking for a few meters on the beach, and then just collapsing into itself again. And that's it's like an artist building these things. He's famous for it. K. And I like it as an analogy because in a sense, it's true. It's like you need something that is is sort of equivalent to this wind that can fill this sort of lifeless, sort of governance rules that are somewhat lifelessly encoded on the blockchain to sort of fill them with some spirit and execute whatever rules this governance for cease. And, I don't think there has to be a market, but it needs to be some coordination mechanism that can function equivalently well. So the question is just what what do we have in our toolset here to create that? Right. Right. Right. Right. Yeah. I think yeah.
Yeah. In part it has been, you know, larger side effect of there are largely being people with a, like, business mindsets playing in the space. I think in large part it feels to me there are definitely people who are, maybe more radical in certain ways, but by and large, kind of like the business ontology still dominates
in the In the budget. Yeah. In which one degree, yeah. There's not very much post capitalist experiments at a larger scale. Mhmm. But they do exist at small scales. I just think that the problem is how do you scale them? How do you scale a post capitalist thing? I do think it's possible for sure. Like, if I think about financial domination, for example, which is sort of, I think, a sexual kink that became I mean
Alright. Take two. We left at a very funny point. We found out that the recording went off. So rerecording the rerecording also, and this is also the third attempt. So we're just going to move on to the final question I asked, which was about the kind of practical things that you guys are doing at Common Ground, and how you are tackling the legal association issues that you have when it comes to to crypto from a
say, not purely, like, extremely capitalist point of view, not taking on, like, venture capital and so forth. Yep. So Common Ground wants to be a user owned platform. We're a social app, and we're targeting communities and ecosystems, which are, like, groups of groups, groups of communities, to onboard onto common ground and organize themselves there. It is a long road to go down because, obviously, there's so much in terms of, you know, cooperation, communication, collaboration primitives that you could build into such a thing. We're right now at the moment where you could say we're a pretty good sort of, clone of something like Discord or Slack for communities specifically. And we're sort of expanding from there now with a focus on sort of on chain interactions for communities like, you know, a community wallet, to, you know, pay people, moderators, or things from. If we should be successful with our general vision and we become very big, if we would have incorporated as a traditional LLC, we would have been trapped into these capitalist rule sets. We would have had an IPO at some point, then people could have bought into our stock. And if we would have been very smart like Mark Zuckerberg, we have could secured ourselves all the voting rights and then actually still govern it like a dictator in a sense. Mhmm. We didn't want that road for the future of what we believe could be social networking. We want we thought this has to be user owned, and you need to sort of make sure in the very beginning that you have that path even accessible to you. A platform co op. A platform co op, exactly, is sort of the end goal. Yeah. But a co op is a very big and heavy legal entity. It's not suitable for start ups at all. And almost all the start ups I know that started as a coop failed at some point Yeah. Because they were just too big. It's not lean. So we started with a different approach. We started as an association, a DUNA, a decentralized, unincorporated, nonprofit association. It's a new thing in something like Wyoming, but we're in Switzerland, but this has been going on for a century. This DUNA, this association, is effectively the legal entity that represents a project right now. It mostly has founders and investors in there. It's sort of based on token weighted weighted governance, so we have a governance token. And the idea is that once we have common ground sort of in a more stable, you know, pattern where it generates real revenues, maybe even a surplus, so it has profits. In this moment, it would be a good time to go from a sort of small start up that has this association foundation to a bicameral system, as we call it, which has a cooperative with all the users inside, and it runs the service, all the data is on there, users govern their own data, profits are generated there, users receive dividends, like members of the co op receive dividends from that co op membership. So this is all happening there, and you have the association almost like a, you know, assurance type, you know, backup that ensures that the co op isn't going wild, that it's not being hijacked by, you know, someone with vastly different values. But over time, this association could dissolve, and it's really just entirely the core. And the way we think this bicameral system can sort of do checks and balances is through an IP agreement. So because right now this association is developing the entire, you know, intellectual property behind common ground, and when the coop takes over, there would really be an IP agreement between the association and the coop, and that would be the foundation to actually have any sorts of rules around how the association can force the coop to do one thing, or how the coop can tell the association to not bother it because this is where it wants to have sovereignty or autonomy, and that can be sort of an evolving relationship over time. So that's sort of how we think about it. We think the cons the cooperative could even have a constitution, something that members really opt into very consciously. There can be very, you know, a value centric view on what this is about. It doesn't have to be about generating profits first. It could be about, you know, other priorities. I think that's the affordances of a co op, effectively. Yeah. So, anyways, these are all the things we wanna try with Common Ground. It's not even the full picture. We didn't talk about tokenomics. We have some, I think, radical things on that end too, but maybe that's for another episode. But sort of it has many layers to it in a sense if you wanna do it right. Mhmm. Maybe we overthought it, but we definitely chose a way that is progressive Mhmm. In a sense, like, we start small. But we did make sure in the beginning that we're not starting with an LLC, which I think an ef entrepreneur would do with the best intentions. We did start as this association, and it comes with friction because certain investors will say, well, we can't invest. We really like you guys and your idea, but our fund can only do equity deals. John, like, I've heard that sentence so many times. Right. So, we're we're really funded by, more like wealthy individuals who are strong believers in our mission that's very compatible with them. Mhmm. But if you wanna do this, yeah, have more access to more venture capital, you really sort of need to be so successful that they can't say no. That that's possible. We're unfortunately not there yet, but that's where we wanna go. We wanna be so successful that even big capital wants to be in on it because it's obvious that it's sort of gonna be a thing. Right? And and getting that is obviously really hard. Mhmm. You've got to land a viral success almost. So,
yeah, we we haven't cracked that yet. But Yeah. Hopefully. But, the token so the token that you guys have planned from what I understand is, it's not a security. Yeah. So just for note to the regulators, not a security. And, yeah, I just find it fascinating that you guys have been able to kind of, I mean, innovate in that space of, like, yeah, finding the appropriate legal, tooling that you put together in order to, like, think ahead about, like, Yeah. Because eventually, you know, capital does what it always does, and it extracts. Yeah. And to find to create the and people don't really know about them, but there are, like, legal tools in toolbox to to utilize and combine together in order to create, things that don't have to play by those rules. Yeah. I agree. And
we do see in crypto some VCs, I would say, maybe Paradigm, they they fund sometimes public goods type infrastructure because it knows it benefits all their portfolio companies. Of course. Right? So there are capitalist logics that allow for the existence of public goods as well. Yeah. That's also something that could be explored more, but, of course, you need to be sort of very in the cahoots with the whole thing to even see these opportunities in a sense. Yeah.
Yeah. Yeah. And mindful about, like, the downstream effects of those things. Yeah. Yeah.
As well. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Nice. So people can check it out. Commonground.cg.
Correct. And, yeah, thanks so much for coming on and enlightening us with your legal knowledge. Thank you, Jeff, for having me. Appreciate it.