Episode #23: Kate Goldman

Episode 23

Cryptocurrency has gone mainstream.

Digital assets have been endorsed by major banks across the world and are no longer niche investments made only by those with insider knowledge of blockchain. While the technology has seen a rapid rise in popularity, it’s still not ubiquitous – for the uninitiated, digital currencies still seem foreign, and maybe even worrisome.

The rise of crypto presents a number of questions about how this new technology fits into the traditional banking sector. Kate Goldman, a senior policy associate at Elliptic, talks with David about crypto’s current regulatory state, the possibilities afforded by blockchain technology and how Web3 and conventional finance can work together to create better outcomes for consumers.

Kate Goldman Profile Pic

Featured Guest: Kate Goldman

Kate Goldman is the Senior Policy Associate within Elliptic’s Global Policy and Research Group. Goldman’s work focuses on developing policy frameworks surrounding cryptocurrencies for US-based regulators and policymakers. She is a board member of the Modern Markets Initiative and a co-host of the Crypto [Study Hall] podcast. Prior to Elliptic, she led the FinTech program within the Milken Institute’s Center for Financial Markets, where her work emphasized responsible and pro-innovation policies for digital assets. While at the Milken Institute, she led many executive groups, roundtables, and panels on matters related to financial technology. Kate Goldman holds a Bachelor’s Degree in Public Policy from the University of Delaware.

David Reiling Headshot

David Reiling

David Reiling is an innovative social entrepreneur focused on empowering individuals through community banking and financial technology. David is the Chief Executive Officer of Sunrise Banks and has been in the community development banking industry for more than 25 years.

Featured Music

Mason Zgoda

"Your Visit to the Louvre"

Postcard to the World
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Episode Transcript

0:00 – Kate Goldman
It’s about, how do we maintain what makes the US banking system so brilliant and so good at what it does. But also, how do you offer people products that they want? Like people want crypto.

0:19 – David Reiling
Welcome to the NextGen Banker Podcast where we explore what’s next in banking and talk with the innovators responsible for creating positive change in the financial sector. I’m your host, David Reiling, and I am very excited to welcome Kate Goldman. Kate, thank you for being on the NextGen Banker Podcast.

0:36 – Kate Goldman
David, thank you so much for having me. I guess as a brief matter of housekeeping, I just want to say that anything I say today is reflecting of my own personal sentiments, not so much necessarily those of my employer. But I live in DC, so that’s kind of the preamble to every conversation that we have, but just wanted to get that out there. Thanks, David.

1:00 – David Reiling
Totally get it, totally accepted. And yes, you’re right. That is the precursor to every DC conversation I have. So, I totally understand that. Yeah. So well, just for our audience as a reminder, stick around at the end of the episode, we have a musical feature. So, each NextGen Banker episode, we have one new artist from somewhere around the world. All sorts of different genres that are represented, so be sure to check that out.

1:25 – David Reiling
And so, Kate, a little background on you. Senior policy associate at Elliptic. Elliptic provides blockchain AML analytics for crypto. Formerly worked as the fintech program lead at the Milken Institute. And you’ve authored numerous articles on cryptocurrency, fintech, and equity. So very cool background. I’m looking forward to our conversation. But I have to tell you in the wonderful world of crypto that you live in and for our audience, so what do you do? What is Elliptic all about?

1:58 – Kate Goldman
Yeah. So Elliptic is a blockchain and cryptocurrency forensics provider. And so, we work with numerous stakeholders ranging from banks to agencies to virtual asset service providers. And what we do is we provide on-chain anti-money laundering technology so that we can help them build out compliance regimes that whether it be third party due diligence for a VASP or wallet screening like OFAC SDN list, the Office of Foreign Asset Control.

2:34 – Kate Goldman
They’ll publish sanctioned individuals lists. And so, on that list our cryptocurrency wallet addresses. And so, one of the things that Elliptic would do is help you as a provider cross-reference, make sure that you’re not engaging with anyone who’s being pinged on OFAC’s sanctioned list. So, things like that, basically helping the crypto ecosystem be fairer and safer and less fraught with crime.

3:06 – David Reiling
So that’s awesome to obviously, ears of a banker and those listening a lot of bankers. That’s one aspect I think of crypto that people are like, whoa, who’s out there? And isn’t it always used for some dark evil purpose? But the fact that you’re providing that service is such I would say a benefit to the blockchain and the crypto industry to make it safe and sound. So now, I understand you’re in DC and you’re on the policy side. So, what’s going on in DC relative to the policy around crypto and blockchain?

3:40 – Kate Goldman
Yeah. So, it is I would say the conversations around crypto in DC are really different from those– I just got back from Florida two weeks ago, I was in London, on the West Coast. It is very geographically specific. And I think DC has one of the most interesting sorts of lenses on crypto just because of the nature of this town. We’ve got Congress, we’ve got the regulators. And so, I think DC for better or worse tends to take a more sober and harsh look at industries.

4:18 – Kate Goldman
And people will criticize DC for moving too slowly, but that is really just the nature of the beast. It’s all about, how do we understand cryptocurrency and move forward in a way that makes sense respective to our constituencies, the financial market, investor protection, cybersecurity? Like pick your topic, you have to think it through 10-fold, and you have to sort of play 3D chess. If I do X, what does Y look like for the markets, our international affairs, et cetera? And so that sort of everything that’s going on in DC.

4:59 – Kate Goldman
But I’ve been working in DC crypto policy since– God, it feels like forever, but it’s really since the spring of 2019. And to take you back in time, that was the summer that Facebook had come out with what was essentially their plan for Libra, which was a permissioned blockchain-based stablecoin, which essentially means that its value is pegged to either one singular asset like USDC circle or in the case of Libra they had a whole basket of currencies that they were pegging this stablecoin to.

5:36 – Kate Goldman
And that was a super interesting summer to be in DC because for the very first time, even myself, I don’t think people really looked at crypto as something that needed to be taken seriously and that should be thought of in the broader context. I think people had a lot of those preconceived notions, oh, it’s something that criminals use or whatever sort of perception people come into it with.

6:06 – Kate Goldman
And a lot of the regulators, this was just like two years after big tech as a term had been coined. And so, for better or worse, there was a big moment of like, whoa, what is this? What we’re doing about it, like, what do we think about it? Members of Congress didn’t really understand the intricacies of the tech behind crypto. It’s definitely a lot better now but still so much work to be done.

6:36 – Kate Goldman
But yeah, that was a big turning point moment where regulators were actually sort of pausing, looking at the technology, and figuring out how they want to react. The plus side and how I’ll wrap this up is just to say that I feel very encouraged that hopefully we are moving more towards proactive policy making rather than reactive policy making. I come from a policy background, and proactive policy is 11 out of 11 times the best way to do it.

7:12 – Kate Goldman
And so I was really encouraged by the president’s executive order whether it was meaty or not meaty enough or too meaty, whatever your opinion is, I think it was really encouraging to just see such a large and powerful body like the executive office come out with something that says, yeah, we have to continue thinking and talking and looking at crypto. So, all moving in the right direction.

7:38 – David Reiling
So very cool. And gosh, I have to ask you from a policy standpoint particularly, how old is crypto? I mean, maybe from an industry that’s easier to answer, but from a policy standpoint, is there any difference between the life cycle of the two?

7:55 – Kate Goldman
That’s an interesting question. So technically speaking, it is about, I want to say like 13 and 1/2 years old, which is incredibly like– it’s basically a middle schooler if you’re talking about life cycle. Whereas if you’re looking at the US banking system, it’s like my great, great grandfather and then some.

8:17 – David Reiling
Kind of a dinosaur. Yeah, got it.

8:18 – Kate Goldman
Exactly. Yeah. So, it is like quite young. I would say as far as proper policy making, I mean two-fold, half of it is you have things like the Howey test that’s like what 70, 80 years old. How do we define securities? And we’ve got like banking laws and BSA and all of your traditional money service business-type regulations that is sort of like a natural plugin.

8:49 – Kate Goldman
But the next iteration sort of like the maturation of crypto policy where you’re really building things from scratch, that’s like a year old. Maybe 3 and 1/2 years old if you’re being generous. But that is far, far newer than anything else, I would say.

9:09 – David Reiling
All right. So that’s pretty cool. And then how would you compare that to– I mean, everything that I read is like China’s way ahead and so and so’s way ahead. How would you compare the US to maybe some other prominent countries on the crypto scene?

9:23 – Kate Goldman
Yeah. So, I think a lot of the times, we compare ourselves or we get compared like we have to do X because China’s doing it or because Russia is doing this. But I don’t think the US has ever strived to be like China. I hope we don’t start doing that. We’ll see. But no, I think we should move to distinguish ourselves. And you know, everyone’s trying to adopt technology, and everyone will. Like all countries will digitize in their own time when it makes sense.

10:01 – Kate Goldman
We have a very different set of goals and aligning policy and thought leadership strategies in the United States that really differ from those in more authoritarian regimes. So, I don’t think we’re behind or ahead or next to anyone per chance. I think that America is doing what it does best. But I would like to see things move quickly. That’s me just being impatient less so than me putting my policy hat on.

10:35 – David Reiling
Got it. That’s very cool. I love that answer. So let me touch on one thing that I find around crypto and blockchain a lot, and that is there’s passion. And there’s passion for and there’s passion against. And gosh, how do you explain the importance of blockchain and crypto to people on not only what it’s maybe around today. And maybe if the answer to the passion, but the fact is, what do you see for those two? And again, distinctly the blockchain, the technology as well as the cryptocurrencies that are out there. What do you see in the future for that?

11:13 – Kate Goldman
Yeah. I think you’re 100% right. There is so much passion and energy in crypto. And I mean, just personally speaking, that is what makes it so enjoyable to be around. Like everything, it is an imperfect system that has a lot of maturing to do and a lot more growth to be done. I mean, look at the progress in the last 12 months, 5 years, 13 and 1/2 years. It is developing and changing so quickly.

11:46 – Kate Goldman
And I think that rapid evolution of the technology is because there are so many people coming to the crypto space from a Wall Street background, from human rights background, lawyers, advocates, policymakers. So many different people who are coming together and bringing their perspectives and their insights to just make a better system.

12:14 – Kate Goldman
The literal birth of crypto was because someone said, I feel like I can do payments better. I feel like I can make a monetary system that just works better. I think the banking system is full of flaws. I think crypto is full of flaws. But I think the beauty and what makes it so exciting is looking at those challenges or all of the problems and saying, how do we move forward? Like how do we take the good of everything and just make it widely accessible and widely available?

12:46 – Kate Goldman
And then as far as use cases, I think what’s happening in Russia and Ukraine is devastating and it’s sickening. But the way that crypto is being leveraged firstly for donations to Ukraine, it is hard to get a lot of money cross-border quickly.

13:08 – Kate Goldman
And you’re potentially losing out on a ton of money on fees depending on how you get that money cross-border. Like remittances are expensive, especially when you’re talking about something like Ukraine. Minutes cannot be spared. Dollars cannot be spared. You need fast money that is easy and borderless. And that is an incredible power of crypto. And it is really exciting.

13:38 – Kate Goldman
And then on the reverse when you have people fleeing a country who they need to take their life savings and get out and go to somewhere that is physically safer for them, the portability of crypto again, it is really, really life changing. And so, I believe in this technology 110%. I would be the first to say that it has its problems, but you can’t get up every day and work in crypto without seeing the long-term vision, the long-term plan.

14:13 – David Reiling
Yeah, definitely. So going to that point of that financial inclusion, that financial equity. So, remittance is a great use case for it just because of the fact that obviously, you disintermediate all the players in between the remittance game, you go direct. As well as immigrants and conflict zones, any time that portability aspect of it, I don’t know, it’s super fantastic from that standpoint. It’s very efficient.

14:40 – David Reiling
The other one that and maybe more in a business context is it seems– and I get your reaction to this– from contract execution. Hey, I want X number of tons of strawberries from Ukraine to come to Minnesota. Boy, once they hit the border, payment is automatically done. Again, it eliminates letters of credit and insurance and all the various kind of things that go with it or embedded into the process. That to me from an enterprise level seems to be a massive opportunity. Any thoughts on that?

15:13 – Kate Goldman
110%. Like the supply chain– I mean, this is less so in my day-to-day life and more so me just being obsessed with the technology. Like there’s a company– and I wish I had their name off the top of my head– where they’re using blockchain to validate the supply chain of diamonds, where diamonds have difficult history of where they’re sourced sometimes.

15:41 – Kate Goldman
And people aren’t going to stop getting married. People still want engagement rings. And they want to know where their diamonds are coming from as a business. And then also as a purchaser, there is a massive need to understand where your goods are being sourced. And you sort of want that guarantee that this where this came from.

16:04 – Kate Goldman
And so, this company is basically using blockchain to fully make transparent the supply chain of these diamonds. But you can reduce duplicities in purchasing power, and basically, the more technology that you’re integrating if it’s well thought through and well executed, you’re saving money, you’re saving time, you’re allowing people to do their jobs better, faster, easier.

16:32 – David Reiling
Cool. Hey, let me take you back for just a second on the individual side. So, I get the use cases around it’s less expensive to send a remittance. But there still are fees in the crypto world. So, for example, I go into Ethereum and then I want to move it to Bitcoin and then I want it to come back.

16:52 – David Reiling
I’m paying a fee every time I move or store something. And so, it’s not that it’s free, but how would you kind of describe the, I don’t know, the cost benefit in this particular case as opposed to– I think that there’s a myth there to say, oh, it’s just I’m on the blockchain. It’s free. Everything’s free and maybe not so.

17:11 – Kate Goldman
Yeah, you’re 100% right. And I think that is absolutely something that policy could maybe step in and make better, technology as well. I mean, without getting too nerdy on you, it’s because crypto is property. By all IRS intents and purposes, it is property. And unfortunately, property is taxed way differently than sometimes it’s collectible, always different than money, basically. And so, you’re paying these short-term capital gains taxes, which are not insignificant sums of money. Even long-term capital gains taxes, it’s still a hefty chunk.

17:57 – Kate Goldman
And so, with like-kind exchanges tax exemptions. It used to apply to things like art and other things. Right now you only get a like-kind tax exemption when you are purchasing investment property, which essentially means if you buy one piece of investment property, and say I make $100,000, instead of paying capital gains taxes on that, if I roll that 100K into an even bigger investment property, you get a little pardon from the IRS.

18:27 – Kate Goldman
And so, because crypto doesn’t count as like-kind exchange, for example, when you buy an NFT, I have to put money into my Ethereum MetaMask wallet. And then I have to then convert that to an NFT. So, it’s like a double taxable event to bring it on and off chain. And again, it’s just because of like tax property. It’s a whole other basket of worms that I won’t bore your listeners with. But no, it is really interesting where it’s like is it a payment system? Is it property? Is it what you make of it? That’s not going to fly by government standards. So, I don’t know. It’s a funny one.

19:13 – David Reiling
Yeah, definitely an evolution to be had there. That will improve in time as I think things advance. It was funny. I think there used to be a loophole in the law where if you think of crypto as property or a commodity, there was– I think there was some court case where somebody was trading strawberries for paper, and then paper was being traded for something else.

19:36 – David Reiling
So, the barter system, they all had a value to them. But it was a tax-exempt transaction, and he made it all work. And so, it’s a bit like the same kind of scenario with different cryptos. But one thing in regard to working with on and underbanked. So, these are folks that obviously don’t have access to the system today or seeking to get some.

19:58 – David Reiling
And maybe the toughest part that I see in working with clients like this is, how do you explain to them crypto? And maybe it’s just I’m so used to explaining the banking system to them that maybe I just throw that out the window, and I just figure out ways to simply explain crypto. But that seems like a challenge, particularly in serving communities maybe not familiar with what’s currently. Maybe it’s just a whole new system to start with. How do you think about that?

20:29 – Kate Goldman
Yeah. So crypto for serving underserved markets or those who have been underbanked or unbanked. And I think it’s important to understand why people are typically under and unbanked in the United States. And there’s two main reasons for that. And the number one reason is that it is too expensive to be banked in the United States.

20:51 – Kate Goldman
That is time and time again the number one cited reason by the FDIC in these massive surveys that they do. It is really expensive to be banked, particularly if you are low income. Overdraft fees, that’s not touching the top 1% or even the vast majority. And so, I think because of that reason, a lot of people are unbanked or are looking for other options.

21:22 – Kate Goldman
And so, I think that is initially a massive drawing point. And even for the vast majority of us, if you park all of your money in a savings account, just simply by the rate of inflation, you’re losing out. But also at the same time, I wouldn’t recommend that you go 180 degrees separate and put all of your money into Bitcoin or any sort of like highly volatile cryptocurrency.

21:55 – Kate Goldman
And so, I think most importantly for people who are unbanked or underbanked where most often they can’t afford a $400 financial emergency, it is not by mistake that the US banking system is the best of the best. It is the safest. It is the best place to park your money. But in a 21st century world, people want that tech integration. People want to realize high gains.

22:25 – Kate Goldman
And this isn’t like a perfect answer to your question, but I think what is so exciting about the FDIC asking their banks to disclose, what are you guys doing about crypto? You have the CFPB taking a closer look at crypto and consumer protection. It’s about, how do we maintain what makes the US banking system so brilliant and so good at what it does? But also, how do you offer people products that they want?

22:56 – Kate Goldman
Like people want crypto. It didn’t become a $3 trillion market cap because of meme coins or a big joke, but people want these products. But I am fearful of underbanked and unbanked people turning crypto alone because there is no recourse in the same way that there is in a banking system.

23:21 – Kate Goldman
And I think there are a lot of crafty people out there who are straight up. There they’re doing crypto scams. Like let’s call a spade a spade. And I think it makes me it keeps me up at night to think about people who are the most vulnerable to financial crimes. It’s elderly people. I have elderly grandparents. It’s people with low financial literacy.

23:45 – Kate Goldman
And so, I don’t want to see them, see those groups of people have their money wiped out by Bitcoin or crypto. But I also don’t want to see them lose out on opportunities for economic gains. And I think the important piece about crypto that people really love is that there aren’t these barriers to entry that exist for most other systems. There is no accredited investor rules for crypto.

24:13 – David Reiling
Yeah. So, we’re definitely in the development process. It’s interesting how you bring this up and play with it, because in a lot of conversations I hear it’s like, oh, blockchain is coming, crypto is coming. Totally going to take over the banking system. But it sounds like you see some duality there. You’re going to have a banking system that is very similar maybe of what it is today. But then you also have this connection with crypto, and they flow, and they play in maybe the same ecosystem. Does that sound accurate?

24:40 – Kate Goldman
100%. Maybe it’s just because I’m spoiled, I’m the youngest child. I truly do believe that we can have our cake and eat it too. I don’t believe in sacrificing or picking one or the other. I think that we 1 billion percent will have a world where banking isn’t going away. I would eat my hat if the US banking system went away. That would be absolutely shocking to me. I would also be shocked if crypto went away.

25:09 – Kate Goldman
So, it’s really just about how do we come to the table as mature adults putting aside, like, OK, I’m coming from the banking sector. I’m coming from the crypto sector. And how do we just talk about financial health in a modern context in a way that serves the most disenfranchised to the top 0.01% gajillionaires you are ruling the roost. How do we make this work for everyone?

25:37 – Kate Goldman
And that I think is more so now the framing that people are taking where used to be like, crypto is like threatening banking. And now crypto gets their feathers ruffled by stablecoins and CBDCs. Like no, enough. It can all work together. What that design looks like, that’s a conversation for another day. But I do firmly believe that it is all doable.

26:05 – David Reiling
Well, so with that in mind, so there still is let’s say some traditional banking as we know it today and there’s some bankers. So, what do you think the Next Gen banker looks like?

26:20 – Kate Goldman
I think the next gen banker looks like everyone that you pass by on the street. I hope that there are more bankers who are more diversely representative, younger, more women, more BIPOC bankers. I want to see– because banking has this history of being like the gatekeepers and like the marble, the institution. It has this pristine legacy of, oh my God, it’s untouchable. It’s the banking system.

26:53 – Kate Goldman
But I think when you have people on the inside of the banking system that more accurately represent the customers that they are serving, that’s when you have fairer access to lending and money and just financial tools that make sense. You want people who look like you. You want people who understand what it’s like to grow up in all sorts of different neighborhoods and income levels and all of that. I think that is the melting pot country. And I think we should embrace it a little more.

27:28 – David Reiling
Yeah. And it almost sounds like you touch on something that I never really thought of before. But it’s really taking some of the control of what is in banking today and giving a piece of it to everybody. So, what does it mean to be able to do remittances better? What does it mean to be portable with my currency and my money? Well, that gives me the control not necessarily the institution that control. And as a result, I’m freer. I maybe have the ability to do more things and intersect with more people. So, it is a bit more I think, democratic from that standpoint. But that piece of that control.

28:06 – David Reiling
Well, Kate, I just have to thank you for being with us today on the NextGen Banker Podcast. We appreciate your expertise and everything crypto and blockchain today. Good luck out there. Keep fighting the good fight. I’m an advocate for this. I think it’s just fascinating to see how fast crypto’s grown, to see what can be done with blockchain. So big future but obviously, all that disruption comes with some mess and transition. But we’ll leave it up to you to straighten it out in DC and we’ll be all good.

28:37 – Kate Goldman
Awesome. I’ve got my work cut out for me. But seriously, thank you, David. Thanks for having me on.

28:41 – David Reiling
Sounds good. Thanks, Kate.

28:44 – Becca Hoeft
For this episode’s musical feature, we’re showcasing Mason Zgoda. Mason is a Nashville-based singer songwriter who seamlessly meshes influences from the late 1960s and early 1970s while bringing a depth to her lyrics not heard in mainstream music. Her latest release is her 2021 EP Postcard to the World. Here is her single, Your Visit to the Louvre.

(song plays)

30:10 – Becca Hoeft
That was Your Visit to the Louvre by Mason Zgoda. You can hear more of Mason’s music on Spotify and on Mason Zgoda that’s Z-G-O-D-A .com If you would like your music featured on the NextGen Banker Podcast, email David@nextgen-banker.com with a link to your music and website. Thanks for listening to the NextGen Banker Podcast. We’ll see you next time.