Okay, let me talk now about regulatory risk, and this is such a vast topic, that's very difficult to select what I need to talk about in a short period of time. This is an area that is brand new. So when the laws were developed, for example, for securities, there's no Blockchain, there's no Bitcoin, there's no Ethereum, so it poses a lot of risk. So we think about regulatory risk, we think of KYC, which is Know Your Customer, and AML which is Anti-Money Laundering. So within the US at least, these are important regulations and a merchant that is accepting a payment needs to know who their customer actually is. There are certain things that go on in the DeFi space that we'll talk about, that are not allowed in the US. So for example, trading securities as tokens, they're not registered. So some of the centralized exchanges and decentralized need to geo block certain countries like the United States. And this of course applies in general, in business, that we need to worry about who your customer actually is. This is just an example, this is FTX, popular centralized exchange that deals with decentralized finance and you can see actually where they're trading here. GME and US dollars, GME is GameStop, the meme stock. And you can see the order book on the right and notice at the top FTF services and FTX token, FTT are not available in the United States or other prohibited jurisdictions. So that's just the way that it is in terms of the regulatory environment. I mentioned earlier in the learning experience, the stable coin basis, which is an algorithmic, stable coin, so it's not collateralized and they had to close down, they returned the funds that were pledged, and basically, you can see what they said. That unfortunately having to apply US securities regulations to the system had a serious negative impact on our ability to launch Basis, I'm sad to share the news, we have decided to return capital to our investors and the project will be shutting down. So again, we need to know the legal aspects are important. We've talked a lot about governance tokens, so, we need to be careful, the protocols that are launching a governor in star tokens, so compound basically launched their governance token, and basically saying that they had no intrinsic value. Well, it certainly has intrinsic value today. So, some of these governance tokens are at risk of being within the context of securities regulation. So right now, they're okay, the future remains at risk. And of course, this course is about the risk. There's also money transmitter laws. So, if there is exchange, this is actually in the US extremely complicated, because there's over 50 regulators that you have to deal with, one for each state and sometimes a territory. So this is a particularly important and the regulations in New York, which is the most important state for centralized finance are the most strict regulations in the US. So I'll talk about this a little bit later. But you need to be careful here even within the US. If the regulatory environment is really strict in a particular state, then what happens? Well, the protocol relocates to a friendly state like Wyoming. So states need to be careful on this. So tax is another issue and I can't go through all of the details here. It seems obvious to reasonable people that if you buy a crypto and it goes up in value, that that is a capital gain. One of the problems is that if you're using your own wallet, that people are not reporting this. So if you're using a centralized exchange or broker, then that would be reported. So there is some difficulty in actually enforcing. So in terms of the risk here, there's so many regulators, I know this course is about global, it's about DeFi and the world, but the fact is that most of the innovation in DeFi to date is actually coming from the US. So, US issues are important and there's many different regulators. So you have to deal with, whether it's the SEC, the CFTC, the Treasury, the Internal Revenue Service for Tax and it could be State Tax also, and there's also the FTC, the Federal Trade Commission. So again, you've got all of the state regulations also. So I want to talk a little bit about the SEC because one nugget, great importance is understanding what the law in the US deems a security. So this comes from the SEC, the Securities and Exchange Commission and basically it was established in the wake of the 1929 great Crash. And in that Crash, many uninformed investors got completely wiped out. And the basic idea here is that the SEC put in a number of regulations to reduce the risk that uninformed investors are taken advantage of, to reduce the risk of fraud. So, one key thing is to know when something is a security and if it is a security, it needs to be registered under the Securities Act. Unless an exemption is actually granted. So a digital asset is a security and we can think of securities as stocks or bonds. So those are obviously securities. So if we digitize a stock or a bond, that's just a security. And the other thing is an investment contract. So let's actually go to the Howey rule. So you might have heard about this. And if you haven't, you will. So this is a famous case in the Supreme Court and it is the case of Howey, 1946. So I'll give you a little more detail than maybe you were expecting. But this is a fascinating case. So Howey and company owned orange groves in Florida. So what they did was the following, an investor could buy the land and then lease it back to Howey who would turn to the land, harvest the oranges and then market the produce. So the court actually determined that this sort of lease back was actually an investment contract. So, this is the key part of the decision and it's basically makes up the Howey test and I want to go through this. I'm going to read the whole thing and I've highlighted in blue some of the key aspects. An investment contract for the purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and has led to expect profits solely from the efforts of the promoter or third party. It being immaterial, whether the shares in the enterprise are evidenced by formal certificates or by nominal interest in physical assets employed in the enterprise. So in blue here, we've got somebody that's investing money in a common enterprise. You need to expect profits and the profits are generated from the efforts of the promoter. So those are the four key aspects of the Howey Test. And you can see almost immediately that there's certain things that are obviously not securities like Bitcoin or Ethereum. So you don't expect a dividend or some sort of profit. You might expect the price to go up. But there's no cash flow that's associated from it. And it's certainly not due to the efforts of the promoter. Indeed, there's no promoter. It's just a computer program. So there's certain aspects of this that are very straightforward, but it gets murky. But this is the key thing that I wanted to understand. So the goal here is really to protect the retail investor. So I say retail investor sometimes that refers to a class of investors that are not as informed. And I don't mean to say that in a negative way, it's just a fact that a hedge fund has got a huge amount of data and computing resources and access to experts. Whereas a retail investor doesn't have that access. So they're relatively less informed. So basically, Howey test is very important if this is a security, you need to register with the SEC. Now we talked previously about the DAO. So this, according to the Howey test, is obviously a security. So we deposit ETH into a smart contract in return for the token. So the ETH is going to be used as venture capital. And the token holders are basically voting on the investments and there's a clear expectation of making profits. So this is a straightforward application that this is a security and this is what the SEC actually said in their decision and the key thing is that if the DAO token is a security, that's fine, but you just need to register, you need to go through the process of registering. That process, however, is pretty costly to do. So to go through, you need lawyers, you need to do research. This is not a simple thing to do. And again, the reason there's so many hopes is to protect that retail investor. There are exemptions that are possible. So it could be a private placement. It might be that you limit to accredited investors. So there's ways to get around the full registration. You can even offer under regulationares to go in a different for people outside of the US. So there is ways around this, but the way, for example, the DAO was launched, it was available for anybody in the world, in particular the US. So again, this is what has to happen. So let me finish this part of the regulatory risk with a very important insight. And this is something that high quality regulators completely understand. So if the regulation is too onerous, then the innovation is going to be driven offshore. And that's not necessarily good for the economy. It's also the case that new technology is complex. This technology of decentralized finance is quite complex as we've learned in this course. So it's difficult for the regulator to actually keep up. So just to get to the level of where we are right now in this course, that's a considerable investment of time. And as you will find out, that there is a depreciation of that knowledge. So what DeFi looks like today is going to look look much different in three to five years, some of the protocols will remain, but there'll be a lot of differences. And that means that you need to continually reinvest. This is not your last course on DeFi. You need to continue to invest in your human capital. And the last point is that it's really difficult to attract the talent that the regulators actually need, the people that really understand this space. And why is it difficult to attract? Because they've got many other options that pay a lot more.