In June, venture-capital powerhouse Andreessen Horowitz launched a $2.2 billion crypto fund, staking out an enormous position in a market known as much for its volatility as its innovative potential. For Andreessen Horowitz, the enormous investment is the product of the firm’s evolving approach to crypto, which it first invested in back in 2013. That approach is thanks in no small part to Katie Haun, a partner at Andreessen who co-leads the firm’s crypto fund.
Before joining Andreessen Horowitz in 2018, Haun was a federal prosecutor who had experience going after gun smugglers, drug cartels, motorcycle gangs, and fraudsters. At some point, she caught her first bitcoin case, and soon after, she was the federal government’s go-to prosecutor for cryptocurrency cases. In 2015, she established the Department of Justice’s first task force for digital-currency cases. So when Andreessen Horowitz was looking for “somebody who could be the kind of poised, credible face of crypto,” as the firm’s co-founder Ben Horowitz told CNBC, Haun seemed like a perfect fit.
Four years later, Haun is one of the most powerful investors in Silicon Valley, poised to shape the future of digital currency. Intelligencer talked to Haun about tailor-made regulation, whether bitcoin will survive the test of time, and the role celebrities are playing in this brave new economy.
I’d heard you were spending some time in L.A., maybe talking with celebrities, and then I saw Reese Witherspoon recently came out and talked about NFTs. Did you have something to do with that?
I don’t want to drop names, but I can definitely tell you that we meet with a lot of groups across the country and across the globe, trying to serve as a bridge between crypto and different groups. Hollywood is definitely a place where I’ve been spending a lot of time because there’s so much mainstream interest right now in crypto. If I had to characterize this year, it was the year crypto went consumer. In 2017 and 2018, we spent a lot of time with Wall Street and institutional investors talking about crypto, because back in those days the applications were largely financial. Now, we’ve expanded to engage with communities like Hollywood, whether that’s meeting with celebrities who want to learn more or get more involved in crypto, or how it can really help content creators and their fans, or how it’s just a new business model for the future.
It sounds like it. But just to clarify on the Hollywood thing, do they reach out to you?
Oh, yeah. I didn’t give you names. I’m not confirming or denying who they are, but they are definitely household, Hollywood celebrity names. And yes, they will reach out to me through a variety of channels. It’s not that they’re asking to become educated about crypto; they know about it already and they want to know more. I think that’s a win for some of our companies and our portfolio. Certainly the investments I’ve made in my time at Andreessen Horowitz — Coinbase, OpenSea, one that will soon be mentioned — tend to be very consumer-facing. Some of those projects, it’s very helpful to be in touch with content creators. We see this as bridging the world for our founders, too. This is not just that I want to go spend my time talking to celebrities and helping them understand crypto. It’s about being that bridge for them in the crypto industry.
What do you tell them? How can crypto be a part of that Hollywood content creation? Is it NFTs or more than that?
It’s a lot of the new digital economy. Certainly NFTs are part of the conversation, but I wouldn’t say it’s limited to NFTs. It’s about new financial services. And it’s not just Hollywood, it’s L.A. personalities, mainstream media, influencers, and musicians.
Certainly NFTs have captured a lot of mainstream attention this year, so that’s definitely part of the conversation. But I would say the conversation is even deeper than that. They want to understand how this is going to change consumer expectations. How is this going to change the way that I might interact with my fan base? A lot of these folks have large followings on social media. What does that look like? Also, a lot of people are really interested in this new model of content creation.
By bringing in some of these pop-culture personalities and musicians, does that take the profile of crypto in a new direction? Is there value in making it more cool?
I don’t think it’s about cool. Certainly I think crypto is cool, but I think it’s about being more accessible to more people, which I think is cool. I would also add artists to that group. We have art curators and well-known artists from around the world involved in some of these conversations. I host a series of dinners where various types of folks from these different worlds come together, whether it’s the world of tech, the world of finance, the world of art, the world of influencers/celebrities, athletes. It’s really all kinds of people and I’m focused on bringing them together. Again, for us and for the industry, it’s to further our founders, because of course some of the companies that we’re talking about rely on creatives for their platforms. There needs to be someone to create these new digitally scarce goods and, although the conversation around NFTs to date has largely been focused on digital art, the founders we’re working with now know it’s about much more than that. It’s about any piece of media, any piece of content, we think can be digitally scarce. It’s not that those founders want celebrities on their cap table, it’s that these are actually people or content creators who will have unique insights and perspectives to bring as they build this new future of the web.
I want to talk about the big picture, the big vision that you’re working on at Andreessen Horowitz and how the composition of the firm itself has changed over the past few years. Crypto started as something of an offshoot fund, but it seems as if now it has become almost the main fund. Is that true?
The firm’s slogan is “software is eating the world,” and we now say crypto’s eating venture capital. It’s certainly true that crypto is one of the largest funds now at Andreessen Horowitz. We have a lot of different funds, but I would also say the pace of deployment and scale of crypto is enormous within the context of the firm.
So crypto is one of the largest funds?
It is. And it’s certainly the largest to have any number of people who work on a single fund. In terms of the size, not only of the funds that were raised, which were in an order of magnitude that were quite large, but also in the pace. Also in terms of how quickly returns have been realized. What we’ve learned is that crypto founders want very different services and need very different things than an enterprise software company.
What we’ve really done, and what I’ve really done, is help build a team that’s for crypto founders. As we’ve done that, we’ve naturally become a little more independent from the rest of the firm.
You’re holding stakes in companies, but you’re also holding tokens and managing significant funds at this point. Where do you want to go with that money? What’s the vision?
We have different categories of investments. I don’t have exact numbers, but let’s say the vast majority of our holdings now, or where we see most of the action in crypto, is in tokens. However, that’s not to say that there aren’t still great equity companies in crypto being built, and we’ve invested in a number of those. You’ve seen me lead investments in [NFT marketplace] OpenSea. I led our series A round and I led our series B round. That was an equity company, and they have no plans to launch a token.
Thinking about NFTs, I’m on the board of Coinbase, and they’ve announced their NFT plans. I’m the only board member, with the founders, on OpenSea’s board. They’re obviously right at the heart of this NFT movement and have been for years now. One of the interesting things for us has been, everyone thinks of the word cryptocurrency. Currency, currency, currency. We think there are a lot of great things going on with fungible tokens, things like bitcoin, ethereum, and all of their different use cases. But we also think there are so many exciting things to be explored in the non-fungible token space. I like to call them digitally scarce goods because calling them NFTs just kind of minimizes what they are. People think, Oh, well, I already have digital goods. I keep hearing this from so many people. I keep trying to explain that while we had digital goods, until crypto and the advent of NFTs, we didn’t have digitally scarce goods. What crypto unlocks is basically property rights for digital on the internet. Why is that? Until now, the internet was one ginormous copy-and-paste machine, right? With digital scarcity, it’s a big change in what it means to really create and to own on the internet. It will imbue things with digital property rights in a way that wasn’t possible before. Longer term, this is really going to change what consumers expect when they buy, acquire, or even borrow digital goods, and what consumers are going to be willing to let centralized platforms own.
Let’s talk about real-world examples. Right now, I can go buy a movie on a platform, whether on Prime Video, or streaming. How many times have people said, “Did I own that book? Did I own that movie? Did I buy it on another platform? Where is it?” If you actually bought something in the physical world in the days of the VHS cassette tape, you owned it. But to date, in the digital world, that’s not been the case. You buy a song, you don’t own it. You buy an Amazon Kindle book, you don’t own it. If you’re done with it, and you want to give it to someone, you can’t. You’re restricted. You cannot sell it or pledge it as collateral. When you buy a good in the physical world, whether it’s a book, movie, purse, piece of clothing, piece of art, or whatever, you can do what you want with it. Increasingly, people are buying digital goods and spending a lot of money on digital goods, but they don’t actually own them. Why don’t they own them? Because they’re not digitally scarce. They rely on a central gatekeeper. The platform owns it and they set the rules of the road for what you can do with it in quite a different way than when you buy a good in the physical world.
I’m big on normalizing crypto for the average consumer, not only crypto natives. So what would the average consumer buy? Well, they would buy books or music. But then there are things they can’t buy digitally that they might want, like maybe a Twitter handle. Maybe they would want to buy someone else’s Instagram handle. There’s no marketplace for that right now. What if you actually own something, whether it’s a domain name or a handle digitally. If they were digitally scarce, there could be marketplaces for those. I think that’s really interesting. You can buy domain names, for example, right now on OpenSea. So it’s not just digital art, it’s all kinds of different things. We’re just starting to scratch the surface on NFTs.
Young people and kids are perfectly comfortable spending their money on digital items that they can’t hold in their hand. We’ve already had that shift happen. In fact, sometimes they prefer it. Why? Because they spend a lot of time online. It’s about show and tell. Why would they want to have something that only they can display in their physical life? Back when I was a teenager, certain people wanted Air Jordans or a poster and they could display those to their friend groups. But today’s friend circles have expanded. People are connected online, and so young people are comfortable buying things digitally that sometimes at first flush seems odd to different generations. It’s a new form of digital expression. We call it digital flex. It’s almost like a new status symbol.
It’s also a new economic paradigm for content creators. If I were to sell an NFT to you or to someone else, that token can be programmed so that the artist, the content creator, gets a cut of all future transactions. In the real world, if I sell this to you, I go through an auction house, or maybe I go through a platform. Maybe we just met and you saw a piece of art on my wall. Whatever transaction we engage in, the artist doesn’t ever get any future royalties or cut. Now, with digitally scarce goods, the people who created that art, music, or media can actually program the tokens to always participate in future transactions. That’s revolutionary and I think it’s just starting to be understood in this digital art world.
You said earlier that currency is just like a small subset of what crypto is, and you mentioned bitcoin and ethereum. But what we’re talking about now is far from that. Do you think of something like bitcoin as the past? Or does bitcoin, and things that are kind of the most mainstream in crypto, have a future in that vision?
I definitely think there’s still room for all of the above. I don’t think of bitcoin as the past. Bitcoin has one of the largest brand recognitions in the world, far greater than NFTs. If you went and pulled some random person somewhere in the world, the odds are they likely would’ve heard of bitcoin and they wouldn’t be able to tell you what an NFT is. Bitcoin launched thousands of experiments. In many ways, NFTs pick up on the ideas that led to the creation of bitcoin. I think bitcoin will always have a place, it’s just a different use case. I know others think of it as a payment system. I don’t think that bitcoin has been realized as a payment system yet at scale. Will it? I’m not sure. But to date, it hasn’t. What it has done is provide a really important new form of digital gold. I do think NFTs are the future, but I would still say that there’s still a future for digital gold, for ethereum, and for many other things.
Andreessen’s fund would invest in all of these different parts of the spectrum?
Absolutely. You’re too young, but I remember when the internet was around when I was in college or law school and it was like, ‘The internet, what do I use this for? I use it for email.” I think of bitcoin somewhat like that. We still use email today, but now we use the internet for all new things. Is bitcoin the old thing? No more than email’s the old thing for the internet. There’s just more to come and the space is much broader than anyone realized.
I imagine you’re having lots of conversations in Washington, D.C., with SEC and CFTC and all of these different players. Andreessen has put some very legal, very long documents and proposals out there. What are you trying to accomplish in Washington?
We’re trying to help regulators and policy-makers understand what we’re talking about, that this is no longer just financial services. The space has moved a lot in the past few years and there’s been a lot of innovation. I know this firsthand. I was in the government. It was really hard to keep up with technology even back then. I felt like I had only started to sink my teeth into bitcoin when, boom, the ethereum white paper came out. Now we have ethereum. It was incredibly hard to keep up with all of the different innovations in the space, and I think that’s even more true today because this is software and it moves at a much faster pace than hardware.
What we’re really proposing in D.C. is fit-for-purpose regulations and laws that don’t entrench incumbents. By incumbents, I mean Wall Street, but I also mean Big Tech. We’re trying to set the stage for competition and, particularly in the U.S., trying to do that in a way that the U.S. can remain competitive. For so long, the U.S. has had this place in the financial system built around the legacy financial system, but we see that changing very rapidly. We want to harness that in the United States and have the U.S. continue to play an important role with this new technology.
I don’t necessarily call it advocacy so much as just trying to help explain what crypto is, what it can be, and that one-size-fits-all regulation is just not the right approach. Do you really want the SEC regulating what kind of digitally scarce art Reese Witherspoon can put up on her Twitter handle as a security? We don’t believe that everything that touches crypto is a security. Certainly some are, but there are an awful lot that aren’t.
I think you have some history with the chairman of the SEC, Gary Gensler, from before he was at the SEC. Does the SEC have a place in regulating crypto?
Absolutely, for certain kinds of crypto products and services. Does it have a place to regulate crypto? Yes, a place where products and services might be securities, but not beyond. What we see right now is, frankly, a lot of agencies just think that they regulate the entire space. We saw this happen in the early days of the internet. Is it the FTC? Is it the SEC? Is it the FCC? What about the DOJ? They created their own computer-crime unit. With the technology landscape this vast, no one regulator should regulate the entire space. Look at NBA Top Shots. Is that a security? Would you have said that a physical baseball card would be a security? Why should something be treated differently because it’s in a more modern digital form?
At the same time, we absolutely believe in consumer protection. I prosecuted cases on behalf of consumers and it’s something I believe deeply in, but I also think regulation in the name of consumer protection can be taken too far. A great example of that is in 1980, when the state of Massachusetts banned its citizens from participating in the Apple IPO because it was too risky.
Right now, there’s a different regulatory paradigm that’s still in flux about how regulators approach Big Tech and how they approach financial services. I wonder, does crypto maybe go in the tech regulation bucket? Is that a more appropriate fit than the financial regulatory bucket?
Again, one-size-fits-all is not how we should do regulations. What are you trying to regulate? I think that will determine who the regulator is. To try and decide that in advance, when we don’t even yet know how all of these products and services will evolve, is a real mistake, and one that I don’t fundamentally think will protect consumers. It will only encourage people to go develop products and services outside the United States, and people who want to get those products and services can do that from anywhere with an internet connection.
Given your experience as a prosecutor, I want you to address something that is coming up a lot with regulators. Gary Gensler has called crypto the Wild West and it seems like the thing that gets raised over and over again among regulators in Washington is that crypto is full of crime, fraud, scams, ransomware, and all of these scary things. How do you think of crypto’s viability when those things do exist?
I think we have to step back. Ransomware is a computer hack, and computer hacks existed long before bitcoin existed. I prosecuted some of the biggest computer hacks ever. Now, a technology comes along, bitcoin, and it is definitely used in ransomware attacks. There’s no question about that. But it’s not that there wouldn’t be computer hacks and computer crime without bitcoin. Today, some that comment on this think of it as the “but for cause” of computer hacks and ransomware. It’s not. It’s a tool, and criminals exploit technology and tools all the time. Criminals use the internet all the time to accomplish criminal acts. That doesn’t make the technology itself a bad technology. In fact, we believe crypto is used for a lot more good than bad. You can look at some of the reports put out by Chainalysis and others to see that.
It’s important that we as an industry acknowledge that the technology, like any technology, can also be exploited. The question is, what do we do to mitigate that? That’s the conversation we ought to be having as an industry and that’s the conversation that regulators ought to be focused on, because frankly they will not be able to stop crypto. This has been around for a decade and it’s only growing in popularity. There are so many societal benefits. Crypto will be around and cryptographic systems will continue to exist and cryptocurrencies will continue to exist. So how do you mitigate the nefarious uses? That’s something that regulators are right to want and it’s also something that the crypto industry wants, because nefarious activity is bad for business.
The real fallacy is that crypto enables these crimes. Having prosecuted the Justice Department’s largest-ever online money-laundering scheme, I know that it is far easier to commit computer crimes and hacks and get away with it using fiat money or wires. Why? There’s a false sense of security that the legacy systems we have under things like the Bank Secrecy Act and the subpoena power to subpoena banks is a false sense of security. Five times out of ten, when I would subpoena bank records, I wouldn’t even get them back. When I did get them back, it was months too late. If they were overseas, forget it. You have to go through a mutual legal assistance treaty process for any country and you may get them back in a year or two. By then, the funds are transferred to the next bank account. We operate under this fallacy that because it’s a wire or a bank we can trace it, and therefore the government will be able to punish the wrongdoers. Even the U.S. Senate received testimony from a Treasury official saying 99.9 percent of money-laundering crimes with fiat and wires succeed.
The truth of the matter is crypto is a step-level function improvement, because, as we said when I was a prosecutor, it’s digital bread crumbs. Look no further than the Colonial Pipeline hack. It’s absolutely unprecedented that one month after an international computer crime involving an international flow of funds, the U.S. was able to trace and recoup so much of the funds. It’s never happened in the history of the government. If that had been wires or fiat, in the best-case scenario it would’ve taken well over a year, if not multiple years, for them to have recovered that.
Crypto has sort of resisted the partisanship you see in many other issues. People thought the Trump administration would be friendly to crypto and then they said the same thing about the Biden administration. Lately, it seems as if Republicans are becoming friendlier to crypto than Democrats, and I wonder if you’re seeing anything like that in Washington?
We feel very strongly that crypto should be a bipartisan issue. Just like no regulation should be one-size-fits-all, this should be an apolitical technology as much as the internet is an apolitical technology. There are elements of crypto that, of course, people on the right should embrace and also people on the left should embrace. For a while, I was thinking maybe it’s just a generational thing, but not always. There are important exceptions. There are some people in other generations that have become crypto supporters and there are people in the younger generations, the policy-makers, who have said negative things. Let me end with this: A vote against crypto is a vote against the future and a vote in favor of preserving the status quo. It’s saying, “Let big banks, Wall Street, and Big Tech continue to have the advantages.”
Is it fair to say that you’re meeting with policy-makers on both sides of the aisle?
Absolutely. Equal measure. And Washington, D.C., is not the only game in town. I spend time meeting with leaders all over the world, because crypto is global and the technology is global. I’m certainly a patriot and I want the U.S. to be ahead of the game on crypto, and I don’t want this important piece of the economy and economic activity to go offshore, but crypto is by its nature distributed. It’s very much a global technology and the global regulators and policy-makers are absolutely a part of the conversation as well.
Is there anything that you wanted to highlight in the portfolio that you’re particularly excited about?
I’m personally excited about a lot of what I see as consumer-facing applications coming out, because there’s been so much progress on some of the blockchains and the performance and interoperability of blockchains. We’re also excited about things that make blockchains interoperable, bridges, and technology like that. But I also am personally very excited about some of the consumer-facing applications. Whether that’s a Venmo for the developing world in the form of a financial application that people can access with their cell phones like Celo, or whether that’s OpenSea, where consumers can buy something they actually own and creators can program their content so that they share in the upside. I continue to be very excited about being on the board of Coinbase, because it is literally a front receipt to everything happening in crypto. Stay tuned because we have some other platforms that involve media, music, gaming, and things that really aren’t financial-services applications. Things like play-to-earn, we’ve announced investments in things like Axie Infinity and Zed Run and others. As well as pick-and-shovels companies like CoinSwitch in India, one of the largest exchanges in India. A lot to be excited about. We’ve made a ton of investments.