Charlie Shrem, founder of the fallen Bitcoin (BTC) exchange Bitshrem, has become a voice for regulatory compliance after being jailed for crypto violations eight years ago.
The exchange’s co-founder is now a general partner at Druid Ventures, an early-stage crypto venture capital firm that provides growth and strategic advisory services.
“There are a lot of people fighting with the cryptocurrency compliance beast, trying to figure it all out with their lawyers,” Shrem told the Wall Street Journal (WSJ). “That’s where I come in, helping them line up their ducks.”
Having founded Bitshrem in 2011, the early Bitcoin investor company increased its trading volume in 2013 when the price of Bitcoin rose from roughly $100 to over $1,000 by the end of the year. It then received a $1.5 million investment from Winklevoss Capital to help scale operations.
However, the former chief executive was jailed in 2015 on charges of operating a money transfer business without a license and for allegedly attempting to launder more than $1 million through the defunct Silk Road darknet marketplace. He spent two years behind bars.
Shrem said that while he did not expect to return to crypto after his jail time, he reconsidered how it could affect the industry by pushing it toward compliance. Byte Federal, for example, is a Bitcoin ATM operator who says he is proud to have encouraged him to acquire a money transmitter license.
While Byte Federal co-founder Lennart Lopin doesn’t recall receiving direct regulatory advice from Shrem, he acknowledged how Shrem’s personal history affected his company’s motivation to seek compliance. He said:
“[Shrem’s] the arrest was one of the moments when everyone started to think that we live in an environment of rules and laws.”
Shrem said he ended up in prison because of his former distaste for compliance in general, but now he’s learned his lesson: “Even if they’re little, they don’t want to be on the wrong end of things,” he said.
Cryptographic rules are still confusing
The cryptocurrency industry in the United States is still working out a clear set of rules, particularly about which coins qualify as securities and whether or not they can be listed on cryptocurrency exchanges.
The Securities and Exchange Commission (SEC) sued Binance and Coinbase last month for listing multiple unregistered securities, some of which allegedly include BNB, Binance USD (BUSD), Solana (SOL), Cardano (ADA), and Polygon (MATIC).
Industry critics say the SEC has not provided clarity on how to know which cryptos are securities, nor has it provided a clear path for companies to register their securities products in the first place.
Crypto advocates are optimistic that the final ruling in SEC V. Ripple this month may have set a clear legal precedent for cryptocurrency companies. The judge in the case considered that XRP is not in itself a security, nor are sales of the asset in the secondary market.
