As Chief Legal Officer at Kraken, Marco Santori oversaw legal and regulatory compliance at one of the world’s longest-standing and most secure crypto platforms.
Now, having joined the WalletConnect Foundation as a Director, Santori is getting “back to his roots,” he told Decrypt.
“I wanted to focus on self custody,” Santori said, explaining that much of the growth in the crypto industry in recent years has been driven by speculation. “That’s a feature, not a bug; Satoshi was one of the first to point this out,” he added. But while speculators are the “top of the funnel for crypto adoption,” he said, “It’s critical that there are tools that demonstrate how powerful self custody can be—how it cannot just serve philosophical ends, but also practical ends.”
That, he explained, is what drew him to WalletConnect. The platform is “cutting edge, it is ubiquitous, it is broadly compatible,” he said, adding that it, “makes it easy for developers to build self-custody.”
Santori has joined WalletConnect at a pivotal point in its journey, with the platform listing its WCT token, used for fees, rewards, staking and governance on the network.
To date, WalletConnect claims to have enabled over 255 million “seamless, secure connections” for more than 45 million users worldwide, across an ecosystem of 600 wallets and 54,000 apps. Last year, the platform launched its WalletConnect Certified kitemark to help improve standards in UX and security across self-custody wallets.
Navigating crypto regulations
Santori is helping to steer WalletConnect’s growth as it navigates an evolving landscape of crypto regulation and legislation around the globe. In Europe, he said, “we’re seeing fit for purpose regulation being created,” in the form of MiCA, the Markets in Crypto Assets framework.
While he anticipates “friction and disagreement” over the next few years, as firms grapple with how to interpret MiCA’s provisions, “those disagreements will be resolved” through judicial and extrajudicial processes, as well as liaising with regulators. “From that will come guidance, no action letters, appeals to ESMA,” he said. “We’re going to see all of this gloss on top of the existing MiCA rules.”
U.S. regulation is “not quite as far along, but it does have the benefit of somewhat more stable regulation, at least historically,” Santori said, adding that, “Because of that stability, it tends to take a little longer to get things right.” Stablecoin laws are coming in the form of the GENIUS Act and the STABLE Act, he noted, and “Following in the pipeline is market structure regulation,” covering secondary markets like crypto exchanges. “For anybody who wants to do business in the United States, it will finally be a functional regulatory regime,” he said.
UK crypto regulation has seen a “stutter-start effort” for the last several years, Santori said, adding that, “there have been multiple attempts to regulate crypto in the UK, and it never seems to quite come to fruition.”
More broadly, he said, “I haven’t seen the legal landscape keeping up,” with self-custody. “That may actually be a good thing,” he added. “To put it plainly, regulators are primarily reacting to people complaining about losing money, or headlines of people making money,” he explained. “They aren’t yet focused on what happens when these digital assets are used in commerce. For example, we don’t have in the United States a Regulation E for stablecoins, and that’s a good thing—but query how long that will last.”
Does crypto need privacy?
Questions of crypto regulation and legislation inevitably highlight the tension between privacy and compliance. For Santori, “I don’t think there is a correct answer.” He argued that, “You can’t look at the world today and say, ‘Okay, this is precisely the dollar threshold of transactions that ought to be reviewed by the government’.”
Blockchains and self-custody are “inherently political,” he said, explaining that, “they change the status quo from an intermediated by default system to a private peer-to-peer by default system.”
He added that, “There are plenty, particularly in the United States, that would say that there’s no really good argument for the government to have visibility into any particular private transactions, and the only transactions that the government ought to have visibility into are aggregate transactions.”
But the tension between privacy and compliance may be a “false dichotomy,” Santori said. “You have to square the development of zero knowledge and ZK-proofs, and the community’s apparent desire for privacy, on the one hand, with the fact that so few people actually use it on the other.”
“The reality of the matter is that most people don’t seek financial privacy,” he added. “It may be the case that this problem that we identify as primary is not as existential a struggle as people might make it seem.”
DeFi and beyond
Similarly, the crypto community is quick to trot out the mantra of “not your keys, not your crypto.” But, said Santori, “it may not be the case that everybody ought to self-custody under every circumstance and for every purpose.”
“The beauty of crypto is that it gives you that choice,” he said, explaining that, “We don’t self-custody everything that we own, but we do self-custody some things that we own.”
“In terms of getting to that place where people are self custodying as much as they ought to be self custodying, what I’d like to see is greater functionality,” Santori added, noting that, “we’re still building those primitives as an ecosystem, as a community.”
“It used to be with Bitcoin, you bought them, they sat there, you hodled and that was it,” he said. “Now we expect that our coins actually work on blockchain, that we can engage in DeFi, that we can sign more complex transactions, that they can interact with smart contracts—and WalletConnect is the software that allows people to do that.”
And while self-custody “shines today” in DeFi, among experienced crypto users, the space needs to drive adoption among “normies” to reach its true potential. There’s still work to be done on “the basic fundamental primitives that allow people to engage in a more convenient and fluid way with those systems,” Santori said. “WalletConnect is leading the charge there, and that’s part of why I joined the project.”
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