Introduction to Owl Explains Podcast
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Hello and welcome to this Owl Explains Hootenanny, our podcast series where you can wise up on blockchain and Web3 as we talk to the people seeking to build a better internet.
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Owl Explains is powered by Avalabs, a blockchain software company and participant in the Avalanche ecosystem.
Introduction of Speakers and Focus on Courts and Tech
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My name is Silvia Sanchez, project manager of Owl Explains, and with that, I'll hand it over to today's amazing speakers.
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Hi everybody, welcome back to Owl Explains. I am Sylvia and today we're talking about something that doesn't usually make the headlines but should. Courts, judges, and whether they're ready for the technology that's already changing the rules of the game.
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My guest today is Michelle Neitz, law professor and director at the Center for Law, Tech, and Social Good at the University of San Francisco. She's on New York's but Virtual Currency Advisory Board, and she's advising the UN n on AI policy in Latin America.
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She's also been training governments on blockchain and digital assets, and what she's seeing should make us all sit up.
Are Courts Ready for Blockchain and AI?
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So hi, Michelle, thank you so much for joining us. Thank you for having me. Awesome. And pretty much Michelle's message is loud and clear. Our courts aren't quite built for blockchain AI for what's coming next. And unless we rethink about how we educate judges, we risk locking in decisions that shape our digital future with somewhat outdated tools.
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So today we're here to talk about what needs to change, why education is step one, and how we build smarter systems from the bench up. So whether you're a builder, a policymaker, or just someone curious about all of this, we're glad to hear.
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So Michelle, let's start with the big picture. What made you realize that our our legal system, especially the courts, just isn't equipped for what's happening with blockchain and AI? What was like that that clicking point for you?
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Well, I started the Center for Law, Tech, and Social Good as the Blockchain Law for Social Goods Center. And the reason I started the center in 2022 was because I was concerned about the fact that state legislators and federal legislators just kept talking about crypto scam, crypto scam, crypto scam.
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And I thought, you know, these these legislative officials are going to throw the baby out with the bathwater if all they're concerned about is crypto scam. And all of the social impact projects that I knew about um from my time on the California Blockchain Working Group and from the work I've been doing in this space, I was concerned that they were going to not be able to thrive because legislators just didn't know about them.
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So I started the center to try to educate government officials in the same way I educate law students, neutral academic style trainings. And I've trained about over a thousand government officials in the last three years.
Michelle's Journey in Blockchain Law
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And overwhelmingly, I saw similar themes, which is they really wanted to learn. And they really felt intimidated by the learning curve and their own lack of resources to be able to have the time and space to learn about blockchain.
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And then I started noticing that as the legislative branches were not passing any real meaningful legislation, and as state agencies and federal agencies were taking their own approaches, particularly related to, for example, as your listeners would know, that the SEC and the CFTC and the turf war between them,
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I started realizing that a lot of these really cutting edge issues are going to end up in court. And in fact, as you know, a lot of them already have. And because I was a ah law clerk in federal court in the Southern District of California, I've seen firsthand how challenging it can be to be a federal judge and to be a federal judge's law clerk.
Challenges Faced by Courts with Emerging Technologies
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And I realized that as the courts become busier and as more emerging technology cases land in these courts, we're asking our judges to do ah really untenable task, which is teach themselves about blockchain and digital assets and AI and quantum computing and all the other things coming down the pipeline and then make decisions that will have real ramifications on the industry.
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And so because I see this as I look around the corner, I thought something needs to be done. We have to start letting folks in the industry and in organizations that are nonprofits and government officials themselves know this is coming and you need to be ready.
00:04:42
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That's a big one. And I think the crypto scam, crypto scam, all of that, like basically when you're like, I think we share that. that essence, like that that why, I think that's also why I'll explain this got started and why i love connecting with people that are also sharing this miss mission and driving forward the the education on this space and all. Because when people either hear like, oh, you're working in crypto, they immediately think like, oh, it's a scam. And they sort of like demonize the technology. And like you said, all the social impact projects, all the good stuff that's happening, what people are building here.
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So you said that we're seeing like this power shift that more and more decisions are being made about emerging technology in the federal courts. So what does this mean for the blockchain space specifically like this legislative gridlock? Like how how how are courts stepping into this gap?
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Yeah, it's becoming very interesting to watch. ah So We you know i know I know there's a lot of hope about the stablecoin legislation that's that's pending that that will be passed. I have learned not to rely on Congress to move quickly on any of these topics.
00:05:48
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And so whether that legislation gets passed or not there's still a very broad swath of the industry that is operating without any regulatory clarity in the United States.
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And so that in my mind, that means we can't really rely on the federal legislative branch to be able to provide the clarity that we will need.
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Then we move on to the executive branch, which, as you know, had a major swing from the Biden administration to the Trump administration. And, you know, depending on what happens, could also, you know,
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presidents change, there could be another major swing down the line. And so it's difficult to rely, if if I'm a business person, if I'm the CEO of a blockchain protocol, for example, or or any company in this space, it's difficult to rely on the executive branch for long-term clarity.
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And so that leaves the judicial branch. to be the ones where a lot of these major decisions are going to be decided. And as a result of a case that came down from the Supreme Court last year, um you know, which was called the Raimondo versus Loper Bright Enterprises, and I won't and want drag your audience through a law school class on that Supreme Court case, but ah that case essentially has eliminated agency deference.
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in courts, meaning that judges no longer have to rely on an agency determination on any issue, environmental law, any kind of issue. And so so that means that the courts are going to be able to create their own rulings.
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ah They can have input from agencies on specific things like, I'll give you a specific example, is a particular token ah ah you know or or a particular coin, a security or a commodity that may be decided in a courtroom by a judge who had never heard of that until that case arrived in her chambers.
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And so that's really what I see coming, and that's what I'm trying to raise the red flags about. For sure. So we've pretty much got rising litigation, overloaded judges, and this very complex technology that also goes fast. So I think it's like this perfect cocktail for disastrous result. So like, what are the real risks if we don't make a change? Like inconsistent rulings, like if if this continues to be this way, yeah, what could be like the the big risk on that?
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It's a great question. So I see two major risks for the industry here. The first one is the one you mentioned, right? Inconsistent rulings. And any lawyer would tell me, well, if the Southern District of California rules one way and the Northern District of California rules another way, well, eventually it will go up to the Ninth Circuit. And if people don't like that ruling, they can go to the Supreme Court.
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In the meantime, while that's happening, you might have different rulings depending on which circuit you're in or which district you're in, which makes it just impossible. i mean, you know, most blockchain companies are not based solely, for example, in San Francisco and do no business outside of San Francisco. These are global companies who need some sort of clarity to make decisions.
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And if you've got conflicting rulings ah and you have to wait for it to go to the Supreme Court, it makes it very difficult to plan. I also think that, so there's the inconsistent ruling problem and then there's the timing problem, which is a huge risk. As you as you know, the Supreme Court has been overloaded with litigation since the Trump administration began.
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And so a lot of the big cases that are heading their way they might decide are more important to resolve than whether or not a particular digital asset is a security or a commodity, for example. And so so it could be that those they've declined to take the case, which would leave inconsistent rulings in place.
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And even if they do take the case, it's years of litigation. And this space moves really quickly.
Can Specialized Tech Courts Solve Judicial Challenges?
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There's such a fast pace to this that I think it would be really difficult for anybody trying to plan to have inconsistent rulings for a period of years And then you're just kind of sitting around hoping that your side is the one that wins when it may not.
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Right. No, that that's crazy. I think you just outlined it very well. And that's, yeah, that's disastrous. um So to not start, like, I feel like there we have, like, the problem and just all of this how can I say the elephant in the room that needs to be addressed, but now let's talk about solutions, not like some ah some lights at the end of the tunnel. And this is also the big part of the podcast because you wrote a paper that makes a strong case for creating tech courts.
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And for people who haven't read it yet, what exactly are you proposing? What's the concept of these tech courts? Sure. So this actually came out of an experience I had when I was clerking in the Southern District.
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At the time, I was clerking for a wonderful judge who had been a criminal law judge. And this is when in San Diego, lots of biotech patent cases were being filed in the district court.
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And that had not really happened before to that extent. And so judges were really overloaded trying to learn these very specific technical scientific details to be able to decide the case.
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And so one judge who had majored in hard science in college said, I'll take them because I know how to handle them. And the judges said, oh, thank God. Here, here's all the cases. You take them.
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And as a result, the cases moved much more quickly through the Southern District at that time because you had a judge who understood it. Fast forward to now, I'm seeing that judges who may have no technical or scientific training at all are going to be in a position to decide these major cases without the resources to learn what ah digital asset even is.
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And so I think having a specialized court, I mean, judges already are doing what we call opinion specialization, like what I described, where they there's a particular type of case that a judge has expertise in.
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He'll talk or she'll talk to her colleagues and say, send me those types of cases. That happens informally a lot. ah There's also, in the in the Central District of California, there's a patent project where judges who want to do patent cases can sign up to do them.
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What I'm talking about is different from that. it's It's not just judges informally taking cases on. I think we need a formal change in structure of courts where we would have a specific specialized court called a tech court or an emerging tech court where those judges will be trained regularly on new advances in the technology.
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So every quarter, they're spending a day learning about what's happening with blockchain and digital assets or with AI or with quantum computing. And therefore, those cases are going to run much more quickly through their courtrooms.
00:13:05
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I think that there's There's real advantages for the for the litigants to have a judge that understands it. We've seen this in Delaware with their Chancery Court ah that handles business cases. There's lots of state examples.
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There's lots of federal examples. The Federal Court of Appeals that handles very specialized cases. We have tax court. um And so so I think we need a tech court.
00:13:30
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That's a great explanation. So pretty much specialized judges and courts, tech advisors and being updated constantly, pretty much, not like in a nutshell, that would be like this special division, this special court that focuses on tech and that consistently receives these trainings and rides the wave in a way.
00:13:49
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Would that be a good way to describe it? like Just really briefly. Yes. And I think that, you know, we could start with a tech court in every circuit so that you don't, I mean, the natural place as I was exploring this, people would say, oh, clearly that court will be in San Francisco.
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And I thought, no, what about, you know, companies that are incorporated in other states? Let's have one in every circuit so that you're not having to come to the Northern District to litigate your case. You can go to the one in your particular circuit.
00:14:19
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um And so that's really what I'm envisioning, that there would be a ah court that's local enough to founders and entrepreneurs and litigants in their own circuit where you could just go straight to the merits of the case and not have to spend time educating the judge through your briefs.
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Why Do Judges Mistake Blockchain for Crypto?
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00:15:36
Speaker
Oh, okay. Got it. Got it. So you've been in the room with the judges, with the regulators. You've also been running the trainings and basically shifting and the perspective a little bit. What are they asking you and what are they getting wrong? Like what what theme have you seen with that?
00:15:53
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So that's a great question too, because I think it has changed over the three years I've been doing this. um So when the Sam Bateman Freed debacle occurred, a lot of what I was hearing in these trainings was, well, this is just a terrible area. Like, that you know, this field is just nothing but scams.
00:16:12
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um And I understand why people think that, because if all you do is read, you know, the headlines, you would think this is all that this technology is good for. So a lot of it has been about showcasing social impact use cases.
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ah So, for example, i I love talking about Starling Lab, which is a joint um ah joint project between USC and Stanford to record Holocaust survivors' oral testimonies on a blockchain or to document war crime photographs.
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on the blockchain. So I, you know, I talk a lot about the UNHCR and their efforts with refugees and and digital payments for refugees. And usually when I mention cases like that and use cases like that, what I get is, oh, I had no idea.
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Because why would they, right? If you're not in the space, how would you know that these use cases are happening? And so a lot of it is about showing folks how you can use blockchain for more than crypto.
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I was once asked at a conference, how will you know when blockchain has reached mass adoption? And my answer is when people stop asking me how my Bitcoin class is going and they start asking how my blockchain law class is going.
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Because for a lot of people, Bitcoin and blockchain mean the same thing. And so I really start with the, you know, here's what a blockchain is and can do. Here's one particular cryptocurrency case.
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Here are the other cryptocurrencies that exist. Here are the other use cases that exist. And usually by the end, I most of the time have people asking me for a part two.
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so that they can hear more about like, what is a smart contract? What is a DAO? Like, so that they can learn a little more about what the technology is capable of doing. I love that. So pretty much you know get them interested in this part of the beginning. is I think there's always like this, this starting point, no, like this division between, oh, this is Bitcoin, this is blockchain. And then all of these classifications, like I remember I was at ah at a dinner table with, with some uncles. I think we all have a how can I say, a controversial family members, you know what I mean? just i like to
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um With a lot of respect, because I was like, yeah, I'm working in blockchain. He was like, oh no, so like why are you going to lose money? like You're just going to gambling. like Exactly, like Bitcoin trading or investing in meme coins. And I was like, there's so much more to that. And I literally got a napkin and I was like,
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this is blockchain and then these are like the cryptocurrencies and then this is smart content like all this different stuff and then the the reaction was exactly what you said oh i had no idea you could do that and like gaming and art um And it the most important thing is like, okay, bring the people to like understand this is what you can also do.
00:19:11
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And then they go down on this rabbit hole. Like you said, they're asking you for part two and part three. And it becomes like sort of this, this seduction, no? Like, oh, wow. Then the technology is sort of like drawing you in, in a way. I don't know if that makes sense.
00:19:25
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um But we need to start somewhere. I have to tell you, I learned about blockchain for the first time on a dinner napkin at a family dinner in 2017. So I'm a big fan of the dinner napkin as a teaching tool. I think it works very well.
00:19:39
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Exactly. I mean, I had that in Colombia, so i'm glad that it's also being accepted in how many places. um And like you said, you have these social impact projects. You have these...
00:19:50
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stories of refugees recorded on the blockchain so much stuff you can do ah but we have this big education gap and yet i think that education maybe that's going to sound weird it's one of the easiest things to fix right because it's not like there's something inherently wrong with the technology that we need like to do these really big changes i think that the biggest change start with okay demystifying things and setting things clearly a it's educating the people it's not really a technology problem it's a people problem so what would it take to to give judges a working understanding of blockchain or ai you mentioned these quarterly trainings but
Role of Education in Advancing Tech Understanding
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How else could that could that be moved in into action and just spread into this mass adoption? Yeah, it's a hard, as you said, it's simple but hard. And so one of the ways that I've been a law professor since 2006.
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So I really have been trying to, I was the first and i still am the only law professor in San Francisco teaching blockchain law. And so bringing it into law schools where the future judges will come from, i think, is an important long term part of this. I teach blockchain law every year.
00:21:01
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i consistently have a wait list for the class because people are intrigued and want to know about what this means. I think also though, in the current, if we want to look at the current bench, I do think that there needs to be more education of judges around what these technologies can do, which is the whole point of what we're discussing, right? It's not just one use case. There's so much that you can do with these technologies.
00:21:27
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And if we're not going to get tech courts, I mean, my you know my job as an academic is to come up with good ideas and try to push for them. But I understand. I'm a realist, too. And I know that Congress may not give us a tech court this year.
00:21:40
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There are other smaller things that that could happen that would also be very helpful. So having a tech advisor in courtrooms, right, or in chambers, a full-time person who's, it could be a computer scientist, it could be somebody who's very skilled at communicating difficult technologies to to lay people, right, to those who are not in the in the field.
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Having someone that the judges could call consistently, who's subject to the same confidentiality rules as the judge's law clerks, would be enormously helpful for federal judges who are deciding these cases.
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And so I also think in addition to more education, in addition to specialized courts, I think finding the funding to allow for tech advisors in federal courts will move the cases more quickly and ultimately would prove to be budgetary friendly to the courts in the long term.
Global Efforts in AI and Tech Policy
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that's good. And and yeah, we have so many so many things we'd love to do, but I think that's like a great ah great point, like a realistic starting a starting place. um But it's about that, just okay, getting somebody in the room, even if it is like this tech advisor and little by little, hopefully it will start to to create that ripple effect.
00:22:56
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um And just zooming out a little bit and touching about a different topic and also knowing about your work with the UN, because you've been working with them on AI policy in in Latin America. So I want to know from you, what are those conversations like compared to the US? Because I feel like I also sort of relate to this, like I am Colombian, but I lived in the US. So I want to see what's what's your comparison on those and what you've been seeing there.
00:23:23
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Sure. I have learned so much from this United Nations Development Program discussion group on AI and development in Latin America and the Caribbean. And I'll give you an example. Last week, we had a meeting in which we learned about the way in which infrastructure needs to be modernized.
00:23:42
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Along with things like data privacy concerns, if if countries start to use AI to do government operations, what are the privacy concerns that we should have? We've also had meetings at the on that discussion group around opportunity for entrepreneurs.
00:23:58
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Right, so as AI becomes more specialized and centralized in American companies, frankly in in San Francisco, right in San Francisco companies, what does that mean for folks in other countries who want to participate and build businesses in this space?
00:24:15
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Frankly, it's what I've always loved about blockchain is is the decentralization allows people from around the world to start businesses that can be very successful without having to be located within, you know, four miles of the San Francisco zip code, for example.
00:24:32
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But I will say with the UN, I'm impressed by their focus on making sure that AI develops responsibly. making sure that privacy is considered.
00:24:44
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I've also learned a lot about the ways that multiple countries with different ideas can come together to try to make decisions. Some countries in Latin America have moved more quickly in this space than others.
00:24:57
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Reminds me a lot of states in the United States ah that are moving more quickly than others. And so I think the real takeaway I have from being on this discussion group is But you know Americans, this will not surprise anyone, we're very focused on the United States.
00:25:16
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It's important to remember that whatever technologies we're creating will be used globally. And we have to make sure that we're including global residents as we're designing these technologies.
00:25:29
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So like one example I'll give you that was discussed last week was let's make sure there's a chat bot in Chilean Spanish, right? Because as you know, Spanish is different from country to country.
00:25:41
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And so having specific dialects for these chat bots is gonna be really important.
How to Implement Tech Courts Globally?
00:25:49
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So that's one example. Yeah, no, that's super interesting. And I love what you said about, okay, just because it's created in the U.S. doesn't mean it's going to stay right here. And I think also the goal is, okay, to be and used by many people globally, but we also have to think about them. So I like what what you mentioned there.
00:26:04
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And then... Thinking back ah about this application with other countries, but now on the legal system side, are there legal systems that are getting this right or at least moving faster than the US?
00:26:18
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um And maybe this whole concept of tech courts or a version of them, do you think it could work internationally? Oh, I love this idea. So to answer your first question, think it depends on what you mean by getting it right.
00:26:30
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So like Gary Gensler, the former SEC commissioner, has a very different definition of getting it right than others, right? And so so I'll define it first, what it means for me.
00:26:41
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For me, getting this right, getting regulation of this space right, for me, means making sure that we have that that those public protections in place to prevent the next Sam Bateman Freed, for example. And I have lots of thoughts on how to do that, including education.
00:26:58
Speaker
but also making space for entrepreneurs to be able to build the companies that they want to build, especially the creative social impact companies in the United States.
00:27:09
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And I don't think it's necessary to do one or the other. I think, you know, yeah for example, the use of we we discussed this in the California Blockchain Working Group, the use of regulatory sandboxes.
00:27:21
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You have a social impact sandbox in your jurisdiction. enabling people who are wanting to do social impact startups to be able to operate without having all of the burdensome regulations.
00:27:34
Speaker
And you would have somebody keeping an eye on the sandbox portfolio companies. And so, So there are ways that you can do this. I mean, to answer your second point, every kind country's judiciary is different, but it's pretty common that they don't have a whole ton of background in blockchain and in every courtroom around the world, right? And so depending on the way the jurisdictions operate, I think there's a need for tech specialized judges across the board in every country.
00:28:04
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um And so, you know, I'm happy to work with countries that are interested in doing that and and are, um because frankly, those are the countries that are going to win the litigation race to have cases filed in their jurisdictions.
Conclusion and Call to Action on Tech Education
00:28:17
Speaker
Very good point. Well, we're out of time, but this has been incredible, Michelle. Thank you so much. And i think you've given us a lot to think about, to digest, but also a clear call to action. So for everybody listening, whether they are builders, regulators, judges, or curious uncles at a family dinner about blockchain or whatever, what's the one thing that we should all walk away with just to to close this all out?
00:28:44
Speaker
The one thing that i that wakes me up in the morning is education. We need to be educating folks. So when you're talking to people about blockchain, please include a social impact use case.
00:28:55
Speaker
So that as the conversation, you know, if the conversation is all about meme coins, we're not going to convince folks that this is a space that has a real potential for social impact and social good.
00:29:06
Speaker
But if in every conversation you have, you say, oh, and by the way, there's this, you know, you you can do this with blockchain. You could do this with blockchain. Then I think we're going to have a very different cultural exchange around what this is. And that will lead to broader laws that are able to take in the good along with regulating the bad.
00:29:26
Speaker
I love that. And it's kind of like show and tell. You can't just like tell about this, but show them what it can do, show them the impact. And yeah, that's a great way to close us all out. So thank you so much for reminding us that education isn't just a nice to have, it's pretty much how we build a better system from from the ground up.
00:29:45
Speaker
So for more on Michelle's work, you can check out the Center for Law, Tech and Social Good. And we'll also link to Michelle's article on tech courts and her research in the episode notes description. So once again, Michelle, thank you so much for joining us. It was amazing to talk to you. Thank you so much for having me. Of course, our pleasure. And that's it for this episode of Owl Explains. Till next time.
00:30:08
Speaker
We hope you enjoyed our Hootenanny. Thank you for listening. For more hootful and hype-free resources, visit owlexplains.com. There, you will find articles, quizzes, practical explainers, suggested reading materials, and lots more.
00:30:23
Speaker
Also, follow us on Twitter and LinkedIn to continue wising up on blockchain and Web3. That's all for now on Owl Explains. Until next time.