Charlie Shrem – the founder of fallen bitcoin (BTC) exchange Bitshrem – has turned to becoming a voice for regulatory compliance after being jailed for crypto breaches eight years ago.
The co-founder of the exchange is now a general partner at Druid Ventures, an early-stage crypto VC firm that provides growth and strategic advisory services.
“There’s a whole bunch of people out there wrestling with the crypto compliance beast, trying to figure it all out with their lawyers,” Schrem pointed out. Wall Street Journal (WSJ), “That’s where I come in, helping them get their ducks in a row.”
After founding Bitshrem in 2011, the early bitcoin investor saw the company increase trading volume in 2013 as the price of bitcoin rose from around $100 to over $1000 by the end of the year. It then received a $1.5 million investment from Winklevoss Capital to help scale operations.
However, the ex-CEO was jailed in 2015 for operating an unlicensed money-transmitting business and laundering over $1 million through the now-shuttered darknet marketplace Silk Road. He spent two years behind bars.
Shrem said that although he didn’t expect to return to crypto after his prison stint, he’s reconsidering how he can influence the industry by pushing forward in the direction of compliance. For example, Byte Federal is a bitcoin ATM operator and says they are proud to encourage people to obtain a money transmitter license.
While Byte Federal co-founder Lennart Lopin does not recall ever receiving direct regulatory advice from Shrem, he acknowledged how Shrem’s personal story influenced his firm’s motivation to achieve compliance. They said:
“(Schrem’s) arrest was one of those moments when everybody started thinking that we live in an environment of rules and regulations.”
Schrem said his former distaste for compliance in general had led to his going to jail – but he has now learned his lesson: “Even if you’re a small guy, you don’t want to be on the wrong side of things,” he said.
Crypto rules are still hazy
The crypto industry in the United States is still working out a clear rule – specifically which coins qualify as securities, and whether or not they can be listed on crypto exchanges.
The Securities and Exchange Commission (SEC) sued Binance and Coinbase last month for listing several unregistered securities, some of which allegedly include BNB, Binance USD (BUSD), Solana (SOL), Cardano (ADA), and Polygon (MATIC).
Industry critics say the SEC has provided no clarity on how to know which cryptos are securities, nor has it provided any clear path for companies to register their securities products in the first place.
Crypto proponents believe that the SEC v. Ripple’s final decision this month will set a clear legal precedent for crypto companies. The judge in the case held that XRP itself is not a security, and neither is the secondary market sale of the asset.