This episode features Jesse, Web3 Prosecutor turned Web3 Protector at Rivet Capital, and Katherine KK from Starkware as hosts. The first half includes guests from Robinhood: Koi, who handles legal for Robinhood Crypto and is ex-SEC counsel to Commissioner Hester Peirce, and Song, head of product at Robinhood Crypto and former quantitative analyst.

The conversation covers Robinhood Chain's testnet launch, the intersection of AI and crypto security, regulatory developments including potential innovation exemptions, and various industry news including the Jane Street lawsuit and ETH Denver's uncertain future.

Robinhood Chain Testnet Launch and Tokenized Assets

Robinhood launched a public testnet for Robinhood Chain, a layer two blockchain designed for on-chain financial services and tokenization, generating close to 9 million transactions and over a million deployed contracts in two weeks.

"We're probably the first chain to launch with the stock token as part of the native part of the chain itself" - Song, making tokenized assets native rather than segregated from other blockchain activities.

The testnet includes tokenized stock directly in the faucet, allowing developers to build with native tokenized assets and test financial-grade applications before mainnet deployment.

"I think tokenized securities in particular, there's no doubt that's where the future is, how we get there in each jurisdiction is the big question mark" - Koi on the regulatory challenges ahead.

AI Security Risks in Crypto Trading

OpenAI and Paradigm created EVM Bench, a standardized test measuring whether AI can find bugs, fix them, and exploit them in smart contracts, revealing AI excels at exploitation but struggles with fixes.

AI exploitation capabilities jumped from 30% to 72% in recent months, while an AI trading bot called Lobster Wild accidentally sent $250,000 instead of $20 due to a decimal error.

"AI and crypto are in the same room now, but the room's sort of on fire" - Jesse, highlighting that defense capabilities lag behind exploitation abilities in AI security.

A software engineer accidentally gained access to 7,000 robot vacuums across 24 countries while trying to control his Xbox, demonstrating broader AI security vulnerabilities beyond crypto.

Jane Street Lawsuit and Market Maker Duties

Terraform Labs' bankruptcy administrator sued Jane Street for allegedly using material non-public information from a chat called 'Bryce's Secret' to front-run trades during Terraform's collapse.

The complaint heavily redacts the specific non-public information allegedly shared, making it impossible to fully assess the claims' validity from public documents.

"Don't ever create a chat called Catherine's Secret or anything else associated with secret" - Katherine on basic compliance practices for crypto professionals.

The case raises questions about market makers' duties to platforms and disclosure requirements, as these entities aren't sufficiently regulated in crypto with unclear confidentiality obligations.

Regulatory Progress and Innovation Exemptions

SEC Chair Paul Atkins and Commissioner Hester Peirce discussed innovation exemptions at ETH Denver, framing them as well-cordoned regulatory sandboxes that enable innovation while protecting consumers.

"Every step forward we make from the regulatory perspective is a step in the right direction to bring more people on board to the asset class" - Katherine on building investor confidence.

ETH Denver faces financial challenges with sponsor pullouts forcing organizers to dip into their budget, raising questions about the conference's future and the broader crypto conference ecosystem.

Hyperliquid launched a $29 million Washington Policy Institute for DeFi advocacy, though questions remain about coordination with existing crypto policy groups.

Resources Mentioned

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