Canadian Web3 Council with Morva Rohani

GM. I talked to Morva Rohani who leads the Canadian Web3 Council about her association, lobbying government, and why regulations in the Web3 industry are a good thing.

The House of Commons and provincial legislatures are back in session, so hopefully, some interesting policy discussions are on the horizon.

Today I've got a 3800-word read for you which should take about 16-minutes.

 - Erin, @erin_gee

Erin Gee: How did you get into Web 3.0?

Morva Rohani: My background is in government affairs and lobbying, and my expertise is in bringing new businesses or nascent technologies to government. Ones that they don't understand, or they may have had a different impression of, or maybe the wrong impression of, and helping them understand the opportunity and helping them bridge that regulatory policy gap between what their public policy interests are and where the business and consumer interest is. Before this, I spent a few years working at other tech companies. I worked at Uber for two-and-a-half years. I negotiated a lot of municipal regulations for Uber and worked with a great team to launch new markets in Canada. But I also worked on consumer protection and safety.

I led some of Uber's personal safety projects globally. So, I have an understanding of the regulatory landscape as it relates to consumer protection, and some of the concerns and also priorities of government as it relates to consumer protection. Obviously, something like Uber is very different because it's the intersection of the physical and the digital. But it is very similar in terms of the opportunity, in terms of what it is trying to change, the shift between the traditional and the new.

This is more interesting, in my opinion, in terms of the technology involved. Before all of this, I used to be really interested in cybersecurity and internet freedom and rights. I worked at a startup for a while where we worked on providing anti-censorship tools for people in the Middle East and certain countries in Asia. So for me, Web3 is kind of a marrying of everything, of yes, representing private interests to some extent to government, but also new technology, regulatory gray areas, and just the core of Web3 around the philosophies around decentralization. Things like enabling the creator economy and giving individual contributors or people the freedom to decide how they make money on the internet or how they sell their creativity on the internet or how they transact on the internet. That all aligns with me. I would say I'm green to the space from a technical perspective, but in terms of understanding how to bridge that gap and really help industries negotiate to a better place, that's sort of where my expertise is.

EG: Tell me about the Canadian Web3 Council.

MR: We launched back in March, but a few folks were working on putting this group together way before that. I think folks saw the need for better coordination for Canadian companies in this space and a group that also puts together what the agenda for Web3 in Canada should look like. Industries that are smaller than Web3 have some sort of connector between themselves and what is happening in the government, the legislative, regulatory, and policy environment, so there was definitely a need for that.

We have members ranging from big companies like Wealthsimple to smaller exchanges. We even have members who aren't even incorporated; one member is a member's cooperative; another member, ETHGlobal, has a more decentralized structure. So, we have anywhere from your crypto trading platforms to folks who are core developers in this space, from infrastructure liquidity providers to investors; it's quite a diverse group of people. So, the fact that a diverse group of people can agree on a specific set of public policy goals means that we have some burning issues that we need to work through from a regulatory and policy perspective in Canada.

99% of my work, and the association's work, focuses on government and regulatory affairs, which means that it is our job to coordinate what a Web3 policy agenda looks like for Canada and present that to governments, including elected officials, regulators, public servants, and to also provide education to the public as it relates to Web3. We are here to educate about the industry, both in a sense that enhances consumer protection so folks are aware of this environment and how to be involved in it in a safe way, but also explaining what this is and how does it work? That seems to be something that is most useful for government right now.

EG: Was agreeing on the public policy goals a challenge, or did it come pretty easy given that there is such variance in your membership?

MR: Before I started I expected it to be challenging, but surprisingly it hasn't been at all. Folks seem to agree on most things and that is because the industry has evolved so much in the past few years. At a given crypto company, there's so much legal regulatory compliance expertise already, and a lot of these folks have decades of experience in regulatory law or compliance or traditional finance. So, a lot of folks have maybe come across each other in the past or come across government in the past, or worked in traditional finance and compliance for so long that they have an in-depth understanding of what we need to do to keep consumers safe and what we need to do to grow Web3 responsibly in Canada.

For some of my other members who don't really interact with the regulatory landscape, who are just core developers in this space. I think for them, they trust the rest of the group to be able to bring the appropriate expertise. They're just invested in seeing things grow, and they understand the value of the regulatory and public policy piece to unlocking the true potential of some of these technologies in our country.

EG: That aligns generally with what I've been hearing from people. In speaking with Michelle Rempel Garner, she said that in her conversations with industry, they've been very open to regulations with a consultation process. That definitely aligns with what you're saying right now. It's interesting that you point out that there is a little bit of a difference between the larger companies who have much more experience in either the banking sector or with regulations from government, and those who don't have that experience because they're new and maybe more focused on the tech side right now.

I find that there are people who haven't interacted in that fashion with government before, so they don't necessarily understand why government regulations should be enacted or pursued, because they think that goes against the whole ethos of Web3.

MR: Within our membership, we agree that we need government regulation. Regulatory legal clarity brings more certainty to the industry; that allows you, as a big or small player, to have more legal certainty around what your liabilities are before you invest in a business or you start a business, and it gives more certainty to investors as well. We do have a framework-ish in Canada right now, but I wouldn't say it provides the necessary tax, legal, regulatory, or even policy certainty to the industry in a way that makes it easy for a big company even to operate with a hundred percent clarity on the risks that they're taking before they launch a new product or service, let alone a startup or a smaller ecosystem. These are the things I worry about in terms of risk, not just to the ecosystem, but also to consumers.

I'm based in Vancouver so I think a lot about the growing Web3 ecosystem in a place like Vancouver, but I also think a lot about how if I was a founder right now and I went and talked to a lawyer for an hour about what I would have to do to launch a crypto trading platform, I think it would seem very scary and overwhelming. There's the sheer volume of work involved alone, but then there's also the scenario of ‘You could do this, but we're not really sure how it might work.’ So yeah, those are some of the challenges that we're working through as an association. We do think that between our membership, we are equipped to be that connector and provide that expertise with government, to kind of marry their public policy interests between that, what consumers want, and also what the ecosystem needs to grow.

EG: I think a good example of the discrepancies is that there's no clarity around what you need to prove your identity when you're getting a new wallet. Like MetaMask and MoonPay, completely different obligations. And I think that there's a risk, particularly being in Ottawa where we had the convoy and all of the crypto issues with that, is that you don't really know who's who, and authorities in the event of terrorist financing, worst case scenario, you can't necessarily trace that back or be certain that that person is who they say they are…

MR: What I will say about the convoy is all of our members already had systems in place and registered with FINTRAC, et cetera, et cetera, to be able to respond to that. So for us, what came out of that was the ability to demonstrate that the ecosystem is ready for those types of situations. But in terms of concerns around fraud, like money laundering, I mean, that exists in traditional finance as well, with cash payments or even within banking. That’s something that, as an association, we're not going to sit here and deny happens. There's an interesting technology software called Chainalysis, and they're always producing reports on the percentage of fraud that happens on chain. And it does tend to be quite a small percentage compared to the actual overall volume.

I think AML and fraud is something that as an industry, we do have. Like I mentioned, it is important that it has evolved in the past few years in expertise and has matured because we have that expertise in-house in most Canadian companies, or there are external experts who can help in this space to ensure that you have the information and the tools necessary to be able to have the safest product out there. But it's also important that the piece around us being a connector to government, working with government and helping government understand how it can better reach this ecosystem, and folks who interact with this ecosystem, so people are more aware of how to be safe. So I mean, the trucker convoy, I think, was hard for a lot of reasons for a lot of people. But I would say what came out of it for us was this validation that we know what we were doing and we do have the systems in place and it is working and we're able to respond to them when they arrive.

EG: So when you are talking to government, how are those conversations going?

MR: Actually, quite positive. A lot of curiosity. We've been engaging with governments federally and provincially, just due to the inter-jurisdictional nature of this and the various different regulators involved. So we've been talking to elected officials, like people like Michelle Rempel Gardner or folks in the Liberal Party and the NDP, all across the aisle. We've been speaking to public servants, folks who are tasked with studying this. There's a digitization of money report coming out at the federal level that focuses on crypto and stable coins. And then we have provincial securities regulators who we've been speaking to as well. We've been speaking to elected officials at the provincial level too. Across the board there's a lot of curiosity. How does this work? What are your grievances? A lot of, "We're glad you're here because we didn't know to talk to before," or the difficulties in navigating the space certainly was something that was communicated to us as feedback once we launched.

Conversations with regulators are a little bit different because they've been interacting with this ecosystem for some time. They're more technical and issue focused. But all across the board, I wouldn't say I've had a single conversation where anybody has peppered me with negativity. It's been a lot of curiosity and a lot of validation around the importance of the association playing a role in educating the government. And frankly, folks asking us how we want them to approach it. Just seeing the expertise that we have within our group, asking where we see what the issues are. So I would say folks are figuring it out. And at the same time, the association plays an educational role for the ecosystem. So, helping our members and beyond understand how the government works, the pace at which it works, and also how to best navigate and best provide what is practical and useful.

EG: Do you get a lot of questions about use cases or the potential of blockchain?

MR: We do get that question often, especially around blockchain and especially around its application in a government context. How can the government better deliver services using this technology? I have had some folks who are interested in that, and there are some innovators in the Canadian landscape who are working with other governments on how to more efficiently collect taxes abroad or deliver programs and services using blockchain technology. But I would say that asking about use cases of Web3 right now is a little bit similar to asking about use cases in the early days of the internet.

It's hard to predict at this point, but what I can say is we already have some use cases. We already have growing businesses. Seeing that, even in a bear market, folks are still investing in projects and still building. Look at the Ethereum merge that's been happening this week. I think that in itself kind of speaks volumes to the promise of this sector and in this ecosystem continuing to grow.

I'm hopeful at least that in market downturns, the real builders, the folks who are going to come up with the best use cases are going to continue to build. So, I actually look forward to seeing what comes out of it, hopefully by the time we're at the tail end of it. But yeah, I'm of the belief that asking about very specific use cases, the value of this 20 years from now, is very similar to somebody asking that question about early days of the internet. And we really couldn't have known back then.

EG: I think that most people view Web3 and blockchain as just being about either cryptocurrencies or NFTs, both of which have their utility. I think that, like you were saying, we really just are at a very nascent place where we don't actually know how far we can push the technology. Then from a regulatory perspective, having to think about all of the different sectors you would have to regulate, but then also thinking from the government perspective, is how can you also leverage blockchain technology? Because collecting taxes, rather than submitting via paper you just trying to push your services on chain, there's just a lot of opportunity that it really is presented. Do you have to do a lot of deprogramming of people in their understanding of the options instead of thinking that it's just NFTs?

MR: A bit. But I would say a lot of the deprogramming revolves around concerns with the industry. The majority of our conversations focus on, "Tell us more. We're interested in this." They’re quite positive. In conversations with some folks, we do have to remind them that yes, there are use cases, but it is a massive ecosystem at this point. Folks are receptive to that; they're just trying to understand. It will take us a lot longer to educate about what the stuff is and how it works than the deprogramming, I think.

EG: In your conversations with governments across Canada, I'm sure that there are some that are much more advanced. For instance, Alberta has been very vocal in this area. What's the divide between governments in terms of how advanced they are in thinking about this technology?

MR: Across the board, it’s early stages in terms of understanding and wrapping their heads around the file. And I use the word file because that is how government thinks about things. I'm very sympathetic that governments for the past two-something years have been busy with the pandemic and they have a lot on their plate, frankly. So I think for us it's a good opportunity to educate. But they're pretty nascent across the board. There are some provinces, like Alberta, that have more outwardly expressed their interest in this sector for a little bit longer than others. From a regulatory perspective, I'd say we face different challenges across the country. But across the board, I think everybody agrees that this is something that they have to address federally and provincially.

So with the federal government, we're looking forward to the consultation that's happening. We have seen that the federal government has dedicated resources to that. Michelle Rempel's private member's bill, which is going to be up for second reading next week, for a second hour of second reading, I think provides a great forum for discussion. So I'm really hoping that it makes it to the committee stage where folks from the industry can come and talk and educate with parliamentarians, I think is the first opportunity to have that live discussion with electeds. So I think things are moving, and everybody to some extent equally understands the importance of it. And I feel positive that we'll only see more interest in the future.

EG: Is your association advocating for any specific regulations or are you just in education mode at this point?

MR: It's a little bit tough because we do have a unique setup in Canada. We are uniquely positioned in Canada in that we have provincial securities regulators. I think modernization of securities regulation is something that would be helpful but at this point we are focused on problem solving. So we have been focused a lot on asking for a new round of consultations at the provincial level. The last time a public consultation or an industry consultation happened was three years ago. We're not being that specific right now, but we are asking for an opportunity to provide input a lot. So that's what we've been focusing on. When we launched, we asked the same thing of the federal government. Michelle Rempel's private member's bill also talks about the same thing, just starting a process.

There is a lot of expertise in this space now. There's a lot of data that's been generated in the past few years about how consumers interact with this space and how they trade crypto, for instance; a lot of insights that would help inform regulators on how investor protection should actually work in this space. I could go through a bucket list of ranging from taxes and insurance to securities regulations on the changes that we want. It is a long list, but because it's so large and overwhelming.

EG: What would a good government consultation look like? Government consultations happen all the time. We spend millions of dollars at every level of government consulting. And when you're participating in a consultation, how do you know that it's being done in good faith, or do you?

MR: My personal view is you can always tell by the questions that are being asked. Sometimes when they're a bit more open-ended, I think there's openness to seeing what the industry's fully fleshed-out thoughts on something are. Sometimes when there're more points, it all depends on the framing. While we've had positive conversations with the federal government and Finance Canada around the report that they're working on, I do worry about the scope. It is purely focused on risks to our financial system, AML, and fraud.

Those are really important things to talk about but I don't see a lot of focus on Canada's competitiveness in this space, in the global landscape, because our trading partners are moving quite quick on this. I don't see a lot of focus on economic policy. And so I think those are the things we look out for when we see a public consultation, is what is the scope? What are the questions being asked? Also logistics, like how are they being held? How inclusive are they being? I would say the scope is the biggest tell. So I have some concerns with the federal consultation, but it's too early to tell.

EG: Do you think that that signals a lack of understanding of the sector or more willful blindness?

MR: I wouldn't say a lack of understanding, but a sector being misunderstood. But I think this is what happens when the government is being reactive. So the federal government is reacting to the trucker convoy. They are reacting to what they may have perceived from this sector in the past few years. They're reacting to risk. And right now there's a lot of talk about risk in this environment, so it's understandable. But at the same time, there's a lot of risk in a variety of other sectors as well.

Frankly, it's the internet. So people are going to use what they want to use. The question is, are they going to be using the products and services that are built in Canada and growing in Canada, or are they going to be using something that's built and grown somewhere else? Nothing wrong with that, but it's about consumer choices at the end of the day. So what we've been saying to government a lot for the past few months is we just need to create safe, secure, and efficient access points for people, because you're going to find those access points to the ecosystem elsewhere anyways. So how do we do that in Canada? Because this ecosystem is going to grow with or without us.

We created Spotify and Netflix. We gave consumers what they wanted, the efficiencies, the price points, and the product experience that they wanted. And so it's kind of the same thing with this. But the best way to ensure that people are using safe products and services is to give them easy access to those safe products and services, plenty of options for it too, and competitive options for them. The cheapest, fastest, safest, most efficient stuff. And how can we have that in Canada? And I think that makes our job easier, but also the jobs of regulators a lot easier.