Sarah Brennan, a US corporate and securities lawyer and General Counsel for Delphi Ventures, a Web3 investment VC firm, has shared her insights on various aspects of the crypto industry. Brennan is also a co-founder of the LeXpunK project, which focuses on legal advocacy for decentralized communities. In an exclusive interview with crypto.news, she discussed topics such as the rise of crypto super PACs, the shortcomings of SEC regulation, and the potential dangers of centralization in the crypto space.
According to Brennan, major institutions like Ripple and Circle have formed crypto super PACs to fund congressional campaigns in response to strict regulations from the SEC and the Biden administration. She expresses concerns about the lobbying efforts of these major players and emphasizes the need for more innovative regulatory approaches that align with the transformative nature of crypto. Brennan believes that relying on centralized institutions in the crypto industry poses the risk of recreating traditional financial market structures, which goes against the ethos of the space.
Brennan further explains the potential consequences of consolidating power in the hands of a few dominant crypto players. Without legislative or regulatory counterbalances, the industry could become a hellscape where large centralized actors become unprecedented monopolists. These actors could control various aspects of the ecosystem, including infrastructure, trading platforms, market making arms, and even venture capital firms and development shops. Brennan warns that concentration of ownership by major institutions could destroy the decentralized essence of crypto.
Regarding SEC regulation, Brennan argues that while large centralized actors in the crypto industry should be regulated, the challenges lie in finding effective ways to do so without stifling innovation. She highlights the lack of clarity in existing regulations, which can incentivize bad business practices. Brennan criticizes SEC Chair Gary Gensler for going after good actors and disincentivizing positive practices in the industry. She believes that a clear policy framework is necessary to provide a path for compliance.
As a co-founder of LeXpunK, Brennan is actively involved in cryptolaw advocacy. The group aims to bring together lawyers, industry professionals, developers, and investors to propose new legal frameworks to regulators. In 2022, Brennan and her co-authors drafted an SEC framework that allows token projects to issue crypto tokens legally, even if they don’t qualify for existing safe harbor guidelines. While the proposal has yet to gain traction, Brennan believes that regulators should focus on pre-emptive antitrust enforcement to prevent institutions from becoming “too big to fail.” She emphasizes the importance of supporting decentralization and targeting criminals instead of the technologies they use.
Despite the challenges of getting regulators to listen to experts from the crypto industry, Brennan remains committed to her advocacy work and is currently working on a new initiative to support decentralized communities.