Bankless - Ethereum vs The STABLE Act | Rohan Grey

Episode Date: December 23, 2020

🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI❤️ JOIN PRIVATE DISCORD: https://bit.ly/2UVI10O🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/ -----GO BANKLESS WITH THESE SPONSOR TOOLS:  ⭐️LEDGER - BEST HARDWARE WALLET TO SECURE YOUR CRYPTOhttps://bankless.cc/ledger 🚀  ZERION - INVEST IN DEFI FROM ONE PLACEhttps://bankless.cc/zerion 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 🤖YEARN - YIELD-SEEKING MONEY ROBOT THAT FARMS DEFI FOR YOU http://bankless.cc/yearn------ Ethereum vs The STABLE Act | Rohan Grey Rohan Grey is an assistant professor of Law at Willamette University, an Advisor to politicians including Rashida Tlaib, and one of the authors of the STABLE Act, which wants to impose Federal Bank Chartering upon any stablecoin issuer. Interesting, this proposed legislation includes entities like Square's Cash App or PayPal! Anything that offers a claim on 1 Dollar is cited by this law.  Rohan and the STABLE Act appear to be an outgrowth of the rise of MMT and the power and ability of the state to solve economic problems like poverty and joblessness. Rohan wants to protect 'money', which he believes is a public institution that needs protecting! Also interestingly, the goals of the STABLE Act and DeFi are highly similar, yet are opposing in their strategies for achieving these goals.  Tune into the conversation to learn about a diversity of perspectives regarding how to protect money! The STABLE Act:https://tlaib.house.gov/media/press-releases/tlaib-garcia-and-lynch-stableact Coin Center's comment on the STABLE Act:https://www.coincenter.org/the-unintended-consequences-of-the-stable-act/ ------Don't stop at the video! Subscribe to the Bankless newsletter programhttp://bankless.substack.com/ Visit the official Bankless website for resourceshttp://banklesshq.com/ Follow Bankless on Twitterhttps://twitter.com/BanklessHQ Follow Ryan on Twitter|https://twitter.com/ryansadams Follow David on Twitterhttps://twitter.com/TrustlessState -----Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case

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as well as a comprehensive breakdown of all the assets that you own and how much yield they're generating for you. Bankless Nation, we are super excited to have Rowan Gray here. He is the assistant professor of law at Willamette University. He's the president of the modern money network. He's an advisor to politicians, including Rashida Teleb. And he's one of the authors of the Stable Act. We've recently had a State of the Nation show with Coin Center where we brought this up. And they said, why don't you bring Rowan on the show so he can speak. for himself. So that's what we're doing. We're bringing Rowan on the show to talk a little bit about the Stable Act and some of his core beliefs. Rowan, welcome Bankless. It's great to have you. How are you doing, sir? Thanks for having me. Well, I'm still alive. So, you know, that's a bit of

I'm pretty sure. Surviving the tsunami of Twitter DMs and, you know, terrible comments, I'm sure. Yeah, flaming bags of dog shit on my, on my lawn notwithstanding everything. Metaphorically speaking. Well, who is it? Was it Bellaji recently, David, who, who, who talked about, or was it, one of our guests talked recently about, like, Twitter being sort of of like the, like the French Revolution, right? Where there's people with pitchforks trying to chase you down and guillotine you the entire time. That's very much been my experience. I'm sure it's yours lately as well. But we are not here to do that. What we want to find out, Roan, is what some of your, maybe we'll start there at your first principles. So David and I, the

Bankless Nation, the Bankless Program, has a variety of first principles, reasons why we are in this space. We describe it in various ways. One of course is like more self-sovereignty to the people, more power to the people away from the institutions that have historically controlled our lives. For us, it's very much about a public good, a public infrastructure that we are creating a public money system that's accessible to the world and that is credibly neutral. These are some of the principles that undergird the bankless movement, as we'd call it in crypto and DFI, a subset of that movement. But let's talk about you first. What are some of your first principles? Why are you doing what you do? Why do you care so much? What is the foundation of your belief system?

Yeah. Well, thanks. It's a good question. I mean, the first thing is that I'm a leftist, I'm a progressive. So the people who don't want to take any value in that can sort of tune out here. but I believe pretty deeply in individual sort of freedom and individual empowerment. And I think there's a role for monetary systems to play in empowering individuals and in sort of allocating social resources and structuring the social provisioning process. A lot of what I focus on are the ways in which public institutions undergird markets, undergird systems of production, and to sort of trace back or, or peel back the layers of what may seem to be sort of neutral or decentralized or sort of, you know,

free market processes to look at the structures that underpin them and that govern them, where there is some sort of actor who is exercising some sort of power. And to try to look at how we can make those systems more democratic and more accountable to average people, not just people who are born into privilege and wealth and access to means and things like that. I'm an Australian, as you can probably tell by my accent, I moved to the United States, in part because I am pretty acutely aware of how imperialism works in the modern age, and there's not really much use in trying to change the world from Australia, at least in public policy when the United States can pretty much exercise a veto in anything that we do.

So, you know, if you're living in ancient Rome and you wanted to make change, probably going to Rome was the starting point. And I moved to a point where I was about 15 minutes away from Wall Street after living in D.C. so you can sort of take what you will from that in terms of where I see the power lying. Not because I have any love for bankers or anything like that, but because that's sort of where in the modern global economy that's sort of power wise. I think probably where we disagree, maybe a good starting point, is just I think I have a very different theory of where money comes from

and where its value derives from. I don't think that it comes from sort of markets. I don't think it comes from some sort of technology of a medium of exchange or some sort of commodity. at souls barter and a double coincidence of once. Those were certainly ideas that I was introduced to at a young age and through sort of standard economics education. And the more I looked into it, the more I looked into the history, the anthropology,

the legal history and the sort of legal institutions behind those systems, it became clear to me that that was a myth and largely propaganda. And once I started looking at where money sort of actually comes from and how it actually operates throughout history in large advanced societies, it led me to the kind of understanding of money that I have today. and the kinds of attempts to make change that I do today. So I care about things like private anonymous cash. For example, I care very deeply about,

and I care very deeply about how to make sure in a digital world those kinds of features get retained. But I think where I would disagree with a lot of people in your community, perhaps, is the idea that we can achieve that without it being a Fiat instrument, without it being a tool of public money. And I think that that's probably why I think that a lot of the work that's going on in the crypto world is a distraction. and the sort of wasted energy

and that the real fight, the real struggle will be over anonymous digital public cash, which is where I think we should all be focusing. So we want to get to that. We want to talk about that a little bit, even including kind of your description of like the history of money and where it came from, I wouldn't say that David and I are necessarily

of the cut of the cloth of like hardcore Austrians, like you might see many in the crypto space. So I would say that we are like also very open to the, idea that the money is not just like from a barter system that it is kind of a debt type instrument. It's definitely a social construct, very open to that idea. So you might actually find less divergence of opinion there. But before we get, we did an entire podcast on that concept. It's actually one of our very first podcast where we kind of went through is like the barter myth. And instead the how money was created by a community where they created a depository

institution, right? Like I, in the podcast, I called it a granary, right, a place where, you know, farmers come and deposit their food, right? And then their deposits were given credits. And that's basically the formation of money by a social system that when you scale that up, you create a nation state with a with a with a fiat, right? And I think that's kind of how, where you're coming from, Rowan, where that's kind of more or less how money is made. But before we even get there, David, you know, like, I definitely want to get there. I actually want to hear more about Rowan on kind of the problem statement today. Right.

So before we get to that, let's talk about Rowan, what do you think the problems actually are with today's money system? Because we have a nation state controlled money system. We have Fiat. Like Fiat, one, that is the reserve of the world. What's wrong with it today? Why, like, does it need to be changed? What's not working for the people? That's a great question as well. I mean, I think the first thing is that we haven't sort of created a democratic society and then created money out of that as a democratic system. We had systems of empire, of warlords, of white supremacy, of slavery-based economies, of feudalism. And we fought sort of tooth and nail to carve out pockets of public accountability democratic institutions that are very fragile. I think we're seeing that right now around the world with the rise of strong men, authoritarian. I think we're seeing that right now, even

United States with things going on that if we don't keep actively fighting for those and expanding them, they're going to contract again. And that the default throughout history is that most of these sort of governing institutions have not been democratically accountable. It's not that we start with sort of public democracy and then wonder what happened. And so what I think we saw after the post-war era was a kind of moment where the energy pushed towards more democratic accountability, with some notable kind of exceptions, particularly including things like race in the United States, there was a very kind of white bent to the New Deal kind of compromise. And of course, an imperial bent outside of the US with the Marshall Plan. But if you look at what happened probably

from about the 1970s onwards, there was a kind of empire strikes back. And, you know, historians are political economy and others will call that the kind of neoliberal era. But what it was was an attempt to re-naturalize money and the economy as something that exists as a product of markets and quote-unquote private enterprise. And, And that was a very successful propagandistic effort. People have sort of documented the big money from rich people and companies that went into constructing that, to buying up university departments, to building narratives in the media. And the narrative that we have today is that money is not a public good.

It is something that comes from markets that the sort of dominant metaphor in public finance is the taxpayer, because where does money come from? It comes from somebody who pays taxes. Well, that kind of begs the question of where did the money to pay tax? It had to actually been created before it could be paid in taxes. But if you start with the idea that money grows on taxpayers or grows on people, then you end up with sort of Margaret Thatcher's world where there is no such thing as public money. There's only taxpayer money.

And I think that's the world in which we live today where public policy is being constructed on the basis that money is scarce, that investment has to rob Peter to pay Paul, that yes, in theory, there is sort of a productivity gain from efficiency or from full employment. But real, you know, in most contexts, zero sum game, no free lunch thinking is the dominant way of thinking. And that, you know, private investment can do things that public investment can't. So I think that's the dominant starting point. And the other big narrative, I would say, which is a little bit away from what we sort of think about in this conversation with money, but not that far away, is the fight over full employment. The fight over what it means to be a worker in the economy and to add value where we had debates

in the 1940s and then again in the 1970s about guaranteeing everyone a right to participate in the economy and to labor to add value through their labor. And we're still fighting that fight today. We have millions of people unemployed who would love to earn money, who would love to contribute to some collective common good, who can't do it because we have not got a full employment economy where there's more work to be done than people to do it. I mean, there is work to be done, but we're not paying people to do it. So I think the failure of full employment, the neoliberalization of finance and money,

and the kind of dominance of private interest in collective governance is where I would see the problem today. On that last point, the dominance of private interests, like what we would talk about is probably the dominance of banker interests, right? Whether that's commercial banks, whether that's other forms of plutocrats, plutocracy,

to even, you know, kleptocrats, we might say, but also central banks. So one of the, like, the thesis in bankless and in the crypto world writ large is that, like the contillion effect or the cantalon effect, as some call it, is basically positions the kleptocrats and the plutocrats and those in charge closest to the money spigot. And so when they start printing money, like buying back bonds or purchasing stocks or quantitative easing, injecting it into the economy, the recipients of those funds are those who hold assets. So if you hold stocks, if you hold real estate, you know, if you hold crypto even, you are a recipient of that inflation and that issuance.

It's not necessarily going to the people. and that has led to massive wealth inequality, among a number of other factors over the past couple of decades, and is continuing to increase. Is that a problem that you see as well? Because for us in crypto and in banklets, right, like that's the state doing something that is not good for the people. That's the state implementing monetary policy decisions that are actually benefiting the wealthy and the bankers and excluding the people. Is that a criticism that you see as well? Yeah. So there's one little technical quibble which we don't have to go into, which is I don't think quantitative easing is necessarily or kind of monetizing government debt is the moment where a lot of this necessarily happens because I think if you look at government debt as a form of money,

then there's actually a separate layer going on there. And the reason I start with that is because I think where I look at this and see a problem is that central banks are one institution in the public system. And that institution is built and constructed in a certain way to give bankers basically direct access and to put their interests and the interests of what we might call free enterprise above other democratic considerations. And so I spent a lot of time. You can search my Twitter record and things complaining about the 1951 Treasury Fed Accord,

where up until that point, the expectation was that the Treasury, that is to say, the Secretary directly accountable to an elected president, would be able to determine interest rates and to basically sort of have dominance over the Fed. And there was an institutional fight between the Treasury and the Fed at that point, where the Fed representing certain free enterprise interests, aggressively pushed to take that power back. And it came down to literally somebody being sick in hospital on one side of that fight and the other guy double-crossed. in them basically. Like it was a knife edge historical turning point. And now, if you read macroeconomic theory, you read central banker reports, they'll say central bank independence, the ability to set

interest rates according to how we think should be done over elected representatives is a critical bullwark against government spending run amok. So the entire edifice of central banking today is built on a fundamental distrust of elected officials and people representing the interests of the public. Now, you can take that lesson that the government is corrupt and that any kind of public governance is corrupt, or you can take that lesson that the private banking interest won a critical fight against democracy and that we've gone on a bad direction there. And I take that second view. So I completely agree with you that central banks today are a reactionary tool of class interest against the public. But I think the lesser there is we shouldn't cede public governance to those actors in the same way as we shouldn't have ceded it to. the feudalists or to the slave owners, right? That there needs to be a re-litigation of central bank supremacy within public finance. And if you look at, for example, bills we worked on with Rashida Taleb, we proposed minting a trillion dollar coin, which caused some people's heads to explode, which was kind of the point. But the point there was the Treasury would issue that.

You can, again, look at all the resources that we put out about that. We call it fiscal money for fiscal policy. We don't need to come with our handout to the central bank. We don't need to ask them for permission. We don't need to issue treasury securities, which people are going to misunderstand and think as debt as something different from money. I don't think it is different from money, but it's easy for people to get confused because they think of it like their own debt. But we don't need any of that. If the government wants to spend on emergency cash relief to every single person, which was the first bill I worked on with Congresswoman to leave, then the way to do that is issue the money and give it to people and do that through elected

officials and through their representatives and leave these central bankers to their bullshit and don't let them be gatekeepers to good public macroeconomic policy. So I think we probably agree on the diagnosis, but I'm not sure we'd agree on the solution. That's probably true. And by the way, I do think there's a third option there, right? So you've got corruptible bankers and corruptible politicians, and you said you had to pick one or the others. We kind of think both become corrupted over time through the money system.

But I'll let David jump in with a follow up here. We'll get more to that later. Yeah, I think this is actually where we could start to tease like the more concrete components of this conversation with regard specifically with the Stable Act. But also, Rowan, with the problems that you are trying to solve with like, you know, your life's work, you know, when you wake up in the morning and try and get things done or or things specifically with the Stable Act, like, who are the people that are being like, who are the losers that are trying, that you are trying to protect, right? Who are the disenfranchised that the current system is set up to that doesn't include, right? Like, what are the main fundamental issues that you see that things like legislation like the state blacks can help protect? Like, what are the really big problems that you are concretely trying to go after?

Yeah. And I think I probably should have mentioned one other thing at the beginning to clarify here, which is in addition to sort of financial interests, there's also technological interests, right? There are also, and I think we can go back to the early history of governance here, like the 5,000 year history of debt and things. And it was not just financiers. It was also the scribes and the lawyers. Basically, anybody that had control over the complex tools of administration of governance,

who exercised power from their position with those tools. And so today, obviously finance is crucial, right? How are you going to pay for it? Who's got money? Who doesn't is a critical, like, layer of power? But there's also who runs the technology, right? Every computer around us in our pockets, et cetera. And I think we're seeing now a realignment of power around that.

In the same way as we saw with the railroad, in the same way as we saw with oil and steel and other forms of technology at different points in history, that there's a new power structure emerging around digital computing technology. And there are going to be people who are going to be the new scribes, the new governance architects of the future that's being built right now, whether that's Mark Zuckerberg and Eric Schmidt, or it's a tribe of very white,

male technologically savvy, free market-oriented people who distrust any form of collective governance, you know, whatever the group is, they are positioning themselves to be the new elite in whatever kind ofocracy comes after the one that we've emerged out of right now. And so to go to your question with this bill, there's a couple of things. One is there's a history of financial interests playing cat and mouse with banking regulation. the minute you regulate banknotes, they switch to deposits. The minute you regulate deposits, they switch to another kind of instrument. And there's a constant game of sort of pushing out to whatever margins.

And when those actors eventually need public support, and we can talk about why, but inevitably they do in moments of crises, they then come and ask to be bailed out in the name of the average person or in the name of the entire economy. And the lesson I think of banking history, of shadow banking history, is the way to deal with that is to regulate it on the upswing, is to acknowledge that they're engaging in activities that, you know, while they've tried to put a different face on it,

put a different label on it, are still fundamentally the same activities that we've regulated in the past, and to minimize how systemically important they are. So with this bill, there's a couple of things. One is, if these kinds of stable coins become successful in the way that they hope, you know, whether it's Mark Zuckerberg with DM or Circle and Tether or die, if it becomes successful that it's mass adopted, there will be millions of people who aren't,

you know, bankless nerds who follow the podcast or, you know, people who are deep in, in the community, right, capital C. It'll be people who just expect to be able to use this as another PayPal,

right, who don't want to think about it, who get a wallet, it's been made super easy to download on their phone or whatever else. And one day they wake up and the whole thing is, suddenly their money's gone, right? That's the kind of risk if this,

if this kind of energy, succeeds in its wildest dreams. At the same time, if it doesn't succeed like that, what I think is going to happen is the same kinds of financial institutions and big money investors that have played this shadow banking game at every other stage in history will get in, we'll get in, we'll eventually turn around and get some sort of regulation, just like USDC is trying to do now partnering with Visa, just like others are trying to get bank licenses or money transmittal licenses. They will glom back on to the official system. They'll start complying with the Patriot Act and everything else, but they'll do so with just a little bit more power than they did before.

Just that little bit less accountability. We'll forget some of the lessons about democratic oversight that we had last time. And we can see this already with money transmitters. Money transmitters get to do things that banks wouldn't be allowed to do. And the reason we have money transmitters is because there was a hole in the banking regulations at a certain point, and they exploited it. Right. PayPal is doing things today that it wouldn't be allowed to do if it got a banking license. And it didn't get that banking license because it managed to find that loophole. And so I think on one hand,

it's about protecting the consumers who will be using these systems. On the other hand, it's about realizing that there's a power realignment between tech industry, telecom and banking, and to try to address the new lords before they start doing the next thing that they do. Because once upon a time, you know, Jeff Bezos

and, you know, Zuckerberg and others, we're just young punks with a startup, right? And now they're super, super kind of, you know, oligarchs who don't really give a shit about any accountability to any public at all. I think what you're saying is like the new boss is going to be the same as the old boss unless something. But they're going to know how to code, right? That's going to be.

And you were recently on Dimitri's podcast. And Dimitri on an even earlier podcast with somebody from the defyy system, the decentralized finance ecosystem, Van Spencer. Dimitri gave the opinion that like the reason why he thinks the world of defy. And to me, when I hear DFI, it's almost anonymous with Ethereum, he saw that DFI is cool and valuable explicitly because of regulatory arbitrage, right? Like the DFI ecosystem is unregulated, therefore we can do cool new things in this new ecosystem. What you are worried about is that these cool new things becoming really, really big and then starting to represent systemic risk. And things like Circle and USDA are just leveraging new rails that are unregulated to do new things.

And I would totally agree. I do agree that there is like these centralized actors like USDC like Paxos like any like tether that are definitely skirting regulations in order to establish their businesses and establish their own native currencies to be a part of this ecosystem. Now I do want to draw a line and this is where I think a lot of the crypto folk get really upset about some of this regulation is that there doesn't seem to be room for what me and Ryan are really bullish on, which is protocols, money issued protocols. And we can definitely debate about like the decentralization of something like die. Like I feel you are fully aware about veils of decentralization or decentralization theater. And die is definitely not as like

decentralized as like Bitcoin is or TCPIP is. And so there are central there's a centralized team. There are centralized beneficiaries. But it's still more decentralized than than certain. It's still more decentralized than tether. And what I'm hoping to get out of this conversation with you, Rowan, is for you to include room in your mental models for what's going on in this industry that does allow for a fully decentralized currency to exist that doesn't, that it would be outside of the Stable Act, right? I do believe that there is the possibility for protocol-driven money that is, that wouldn't, that just wouldn't necessarily be,

doesn't cause some of the existential risks that you are worried about. I don't see, in your previous conversations, I don't see you including room for completely computerized, completely protocolized, completely humanless monies. And me and Ryan are bullish on these possibilities coming out of our industry. So yeah,

I think there's two things there. The first thing is, and I appreciate you guys taking the time to listen to other conversations, and things. I hope you've seen this bill isn't targeting private currencies. Bitcoin is its own unit of account. Ethereum is its own unit of account are not actually a stable coin under the definition in this bill, right? The instruments that qualifies a stable coin under this bill are instruments explicitly designed to function as public money by which I mean denominated in the fiat unit of account and to circulate in ways that public money is trying to do. And just to get it

out of the way at the first instance, because I'm a big believer in decentralized, anonymous digital fiat cash, my goal is to build a system where if you want to do peer-to-peer cash transactions in US dollars, where nobody able to see it, you can. My view on that as a theory of money is that the only way to do that in a safe, secure and stable way long term is for the government to issue itself. That isn't say the government issues all money, right? But it is to say the US dollar issues issued by the government has unique properties relative to a US dollar denominated token issued by anyone else. And so we can try to play the game of my token is safe, just trust me. And I think we've played that game throughout history with bank deposits,

with banknotes. And the time and time again story is the only actual thing that can be guaranteed is when you issue the dollar yourself to ensure that the dollar convertibility. So the first thing is no Ethereum, no Bitcoin. If you want to issue a private currency, more power to you. The second thing is about the technology. I don't have a problem with people developing technology. The problem here is the systemic risk that comes with its wide scale adoption in day-to-day transactions. And so when it comes to what you might call sort of computerized money, I think the reality is that the economy is not built on humanless transactions. The economy is built around human beings. If you and I transact with a piece of paper or a paper dollar bill,

The paper dollar bill is computerized in the sense there's nobody involved in it, right? But if you and I have a dispute there, we go to a court, and the court adjudicates that. The court doesn't say the piece of paper has decided, right? And my old advisor at Cornell, James Grimman, who's a code, wrote a great piece called All Smart Contracts are inherently ambiguous. And there have been others who've talked about this in the context of code, you know, going back to Larry Lessig and others, that code itself is not a substitute for law. It can automate certain physical processes, but the economy and commerce is built on legal

institutions of property rights, of contract dispute resolution, of accounting principles, of limited liability for entities and corporations, for tort law, even in instances where you didn't explicitly contract. All of those things continue to apply, regardless of what technology you're using to interface with another human being. And so I could have a perfectly written code. and then we could disagree about how to interpret that code in light of an existing arrangement.

And that disagreement is going to come down to a court and a judge looking at two human beings on either side of a dispute. Whether or not the judge chooses to agree with the code or not will be a question for the judge. And so I think that this, to me, it's sort of like saying the trunch bull in Matilda, well, I'd love a school without children.

How easy would it be to run a school if there were no messy children involved? Right. Having an economy where there's a money that doesn't involve people is, in my opinion, not a coherent concept because the economy is made up out of people, just like the internet is. I can. There's ISP providers. There's people running individual servers in their basement. There's property rights around the land title of your basement, right? So I just, I think I question the premise that we can automate social interaction to a point where society is not involved. So the way that I see you trying to eliminate risk out of the public institution of money is through an MMT type of perspective where you want stable coin issuers like USDC to get a federal banking charter so they can get that FDIC insurance in case that something goes wrong. What ends up backstopping the risk from platforms like USDC is the ability to print money. Is that accurate? it. Yeah, just to be clear, FDIC insurance, I think, is actually one of the lesser tiers. It's actually access to the Federal Reserve's balance sheet and the general protections that come

with being part of the banking system. And again, colleagues of mine and my advisors have written a piece called the finance franchise where they look at the history of chartered banks. And originally, charters would come through specific pieces of legislation. The Massachusetts legislature would pass a bill creating the Massachusetts bank. And it was explicitly acknowledged as a kind of public-private partnership. It was like the Panama Canal. And over time, those private corporations or quasi-private corporations began to consider themselves independent of any public accountability, right? Give me all the benefits of limited liability and none of the obligations to actually serve a public interest beyond profit. That's the neoliberal.

As long as I'm earning profit, I'm doing good for society, right? And so the FDIC insurance is less important. The real important thing is if you're the creator of the dollar, whether that's the Federal Reserve or the Treasury or some consolidated government that sits above anyone, institution, it's the sort of constitution and everything else, you make the dollar. So yeah, there is an infinity sign next to the amount of dollars that can be created by the US government. Of course, that doesn't mean they should create an infinite amount of dollars, but it does mean if a dollar bill is a promise to pay $10, then you go get a, take a $10 bill to the bank and you ask for the dollars, they'll just give you $2.5 bills.

Right. Because it's the same thing. Whereas a banknote is a promise to get those US dollars. If you take a bank note in 1830 to the bank and you ask for US dollars, the bank may or may not have US dollars. And that's the same true whether it's a centralized stable coin issuer like Tether or USDC or a decentralized like die where the theory is that there's collateral sitting somewhere. And that collateral is either actual dollars or worth enough dollars and hopefully the value of that collateral won't change. But all of that is a theory that when you come with your token with a promise to pay, somehow I'm good for it. it. And I think our view is one actor in the whole system has a unique answer to that. There's one unique answer to that problem set. And that is if you actually issue the dollar, you can always pay. Right. Right. And that's where the derisking of a money system comes from is the inherent

solvency of the original issuer. In the defy space, in what we call trustless finance, or decentralized finance, we attack that same problem via the almost the opposite route, where like the if an application on Ethereum is going to be quote unquote trustless, it needs to be over collateralized. And I've heard you on on various podcasts talk about or criticize like what's going on in the crypto space as just like the next iteration of financial like innovation or engineering, right? Where you said like, you know, we, we allowed the shadow banking institution to happen and then it got out of control and now it's massive. And now they are saying like, they just give the same old excuses as to like why they shouldn't be regulated. And now,

what you say about defy is something along those same lines. Like we have this new platform for innovation and this time, quote unquote, this time it's different, right? Same all excuse as we've all heard before. I actually do think that quote unquote, this time it's different. And the fundamental reason why is that there is a design ethos that is backing institutions like Bitcoin and Ethereum and defy protocols that could produce a dollar denominated stablecoin. that they're designed good, good protocols that get me and Ryan and the bankless world really, really bullish are protocols that are designed to withstand World War III, right? Ethereum 2.0, it's in its rollout phase. It's been designed with an anti-world, with World War III resistance. Like, what if nuclear bombs went off?

Ethereum 2.0 should still operate. And a lot of the Defy protocols that we are really excited about are the ones that plug up all potential attack and risk vectors in order to, to make them World War III resistant. And so earlier, you said we were talking about caricaturizing some defy protocol that would produce a dollar where you would say, hey, use this money, it's risk-free, trust me. We actually don't ask for your trust. And that's why defy is so cool to us, is that the way that these protocols are set up are inherently over-collateralized with all possible attack vectors, hopefully sealed,

probably not sealed. And many bitcoins would criticize the defy ecosystem for not having adequately sealed protocols. But that is the vision. We believe that we can create these like inherently strong, hard protocols that are de-risked by the market because if they do have a chink in the armor, if they do have a failure, then they die. And then they get replaced by new ones. And those ones are supposed to be better by the laws of the free market. And so what we are excited about is the potential for having de-risk financial institutions that don't actually require, you know, money printing to backstop risk. And that's kind of where our perspective comes from.

Is that new to you or is this old information? No, this is old information, but I'm happy to go there because I don't think I've done in some of the other interviews. So there's two things there. One is when it comes to the collateral, you say over collateralized, right? That's a conclusion, right? That's not a statement of fact. You're saying that X collateral is over whatever line that you consider to be the line of safety. And maybe that's just where we frankly disagree is that I don't think those theories of over collateralization actually survive the tail risk kinds of risks that I'm talking about. And then the second point there is, well, if it's got a chink in the armor, it'll fail and something you will take its place. That's exactly the argument that was given for

free banking. And what we saw was every time one of those failed, a bunch of people got hurt, right? Say DM actually takes off and then it fails. And then Mark, Zuckerberg goes, well, we've learned our lesson. You know, the next people that come after Facebook will, we'll have a better system. Well, there's potentially two billion users in the middle of that learning process. And, you know, not not shade at you, but there's a lot of tech people that think the entire world is their playground to not learn the lessons of history and to repeat them. Like, oh, maybe I'll just do some human experiments. Oh, that's unethical. Oh, there's problems with doing that. Well, I guess I learned something this time. No, actually,

we learned that lesson 100 years ago, and nobody should have let you pretend we hadn't learned that lesson and try it all again. And when it comes to these defy things, I mean, again, if we're talking about $20 million, it's a rounding era. If we're talking about $200 billion, that's not the kind of lesson we just let fail. It is too big to fail. Whether we want it to be or not, if there's, if there's $2 trillion of customer funds in these systems, they're too big to fail. We can't just say lesson learned, the free market will pick it up. That is the kind of Austrian in response to the global financial crisis is we'll just liquidate everything. Just let everybody go under, let mortgage owners go under, let people lose their jobs and the market

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Buying a ledger is like buying a fire extinguisher. The best time to get one was yesterday, especially if you're doing something silly, like holding your crypto in a hot wallet that's always connected to the internet. If you haven't gained full control over your crypto yet, go to the link in the show notes and get your ledger today. So here's, I think, maybe a difference in kind of foundation because what you were saying is basically like everything ultimately settles back to the nation state legal system, right? With fiat currency, but like with law in general. It all kind of settles to that

layer. We are like much more bullish on a new social layer that is being created. Just like, you know, some things in the human experience are settled outside of the nation state and outside of the legal system. Things like, you know, ethics, morality. Sometimes those things get written into law, but religions are another human institution where some sort of settlement can happen. Like, you made the point that basically crypto systems aren't decentralized because at the end of the day, property has to settle to some sort of legal system. But what about property transition between countries that don't trust one another? Who is the judge that supersedes between a China that is antagonistic against a United

States of America? which judge from which country sort of decides. This is why we need overarching, credibly neutral systems that essentially can provide the ability to transfer value and a property rights system that don't have any biases to one nation state or another. We're talking about not just a money system. We're talking about a new social coordination system that is being built on these crypto rails. And this is powerful stuff. And it's outside of the legal system in some ways, the nation state legal system. And the thing about this is, right, like it is immune in some ways from the authoritarianism that you also want to prevent, right? Because it is not of the nation state.

It is a different social structure and social system. We're bullish on that. But what we see when we look at the Stable Act is a little bit of, like, we're with you on the DM stuff and the Facebook and the Zuckerberg trying to become a new banker and centralized control. I hear you. Like, we're with you. We understand what you're talking about. I'm even with you on kind of these new crypto banks becoming like the old crypto banks that we used to have. Like, I get it. We're with you. Where we depart is we believe that there are credibly neutral protocols that can be developed. And a protocol, like the Constitution is a protocol. TCPIP is a protocol. No single country owns the protocol of TCPIP. It's a standard for the communication of information of data. We think such a thing can exist also for value and for property.

And we think that you should not squelch that. You should be like we're on the same team. We want a more bankless world, basically. And we want some of that innovation and that protocol to also grow in in the U.S. So maybe it was a misinterpretation of the Stable Act. Maybe some things should be crafted in it to protect what we're trying to do on the kind of the DFI side and the self-sovereign side of things. But we absolutely want the ability for every citizen to run a node, an Ethereum node, without fear of some kind of legal reprisal because some company has issued a stable coin that is against a regulatory regime.

So I guess maybe without getting to the specifics of the Stable Act, do you resonate with that? Are you okay with this experimentation happening? Do you believe that maybe you're skeptical of it? That's fine to be skeptical of it. There's tons of people who are skeptical of crypto. But are you fine with letting that experiment play out and seeing if we can actually build a bankless money system that it sort of meets the standards of not having central intermediaries? What do you say? Well, so there's a couple of things.

there. One is, again, this bill isn't stopping anyone for creating a private currency. So you want to create a private currency, go for it. It's the point in which you start issuing a stable coin, denominated in US dollar or another fiat currency instrument and trying to pass it off as public money where there's going to be an issue. And then to go from there, the point about the nodes, just to be very clear, and I've clarified also, but I've clarified here, the law regulates the issuance of stable coins and requires you get a banking charter for doing that. What people responded almost immediately was, you'll never, you'll never stop us because these networks are decentralized, right? So immediately they've probably

lost you if you agree that there's this veil of decentralization, right? But that was their response. Well, we're going to create a network where there's only nodes. There's only nodes. There's no one else above nodes. So you can't, you can't go after anybody who is for these stable coins unless you go after every node operator. And my response was, if that's true, then the only response is to go after every node operator. Because if you have 100 people engaged in a criminal enterprise, the fact that there's 100 instead of one doesn't mean that they're not all liable, right? But, and this was the crucial part that everybody stopped listening, I don't think that's actually an accurate description in these contexts.

I don't think Ethereum is decentralized. I don't think if there was a stable coin issued on the Ethereum network, it would be impossible to identify the issuer above a node level. I don't think that's true. And so it wouldn't be going after node operators on Ethereum. It would be going after the issuer of the stable coin on Ethereum. And if people say, oh, you can't find us, we're hiding amongst the nodes. I just call bullshit on that, frankly.

But if you were going to design a system like that, if you were going to say, okay, we want to keep doing this, and we get caught up on Ethereum, we get caught out. So this time we're going to design a system where we are perfectly hidden amongst the nodes. On that system, the answer would be okay. We're going to go after each node operator. And I think that's the line where I am willing to take a hard stand because you can't hide amongst 100 people to do something. that would be illegal if you were doing it on your own. That's the basic principle here. That isn't to say we're coming after node operators who run an Ethereum note.

I'm happy that people fundraised off that. I'm happy if people managed to terminate doing that, good luck with them, right? But that's not at all what this bill was about. I mean, would you be open to carving that out in such a bill to just clarify? I've literally said to people, first of all, the way that we wrote the bill was that any activity, commercial activity, so if you're running a non-commercial, if you're engaging in non-commercial node validation, fine. You're immediately exempt anyway.

But any commercial activity related to this stuff would have to get prior approval from regulators in the same way as if we issue dangerous drugs, you're going to get prior approval. Now, what I would support and do support is have a carve-out for people who are engaging in node operations as long as that operation is not the only entity responsible for issuing the stable coin, right?

Any node operator who is not the primary actor or a member of the class primarily responsible of issuing stable coins, would be exempt. That's fine. Now, there's a question of how you draft that. I think that should happen at the layer of regulation. The bill gives regulators the authority to write that law. If you want to lobby for regulators to put that rule in place as an interpretation of this law on day one, I'll sign that. No problems. What I am not going to allow, or I don't think is reasonable to allow, is someone to say, okay, I'm going to create a decentralized blockchain where the whole

network, every single node is identical. There's no miners, there's no validators. They're just all identical. And the whole thing together issues stable coins, but you can't come after anybody unless you come after all of us. If that's created, the answer is to go after all of them. So the node operators don't have any explicit relationship with a specific protocol on Ethereum. So like, you know, one one protocol on Ethereum might just simply be like the USDC contract address. And so while I run a node or I'm mining a transaction, I'm processing those transactions from that contract address, even though I'm not the issuer. And so in terms of USC, it sounds like the Stable Act would go after USC, the issuer, circle the issuer. And then with Dye or Maker Dow, you know, you're calling bullshit on the decentralization theater.

There are people there that we could go talk to and exert regulatory pressure upon them. And therefore, we don't even need to talk about nodes in that instance either. kind of going back to what I was saying, though, with like World War III resistant protocols, the goal of Ethereum is to produce such a human removed entity, a human removed protocol that it is in itself is almost synonymous with Ethereum. When something is completely decentralized and there are contracts on Ethereum, there are protocols on Ethereum that are 100% human removed. And when that...

I don't agree. It sounds like you don't even think that's actually possible. No, if every single person who's running an Ethereum node today turned it off, where would those smart contracts exist? And they will, they would be stored in the database, which would be stale. So if every single person who ran one of those nodes destroyed those nodes, where would the smart? Yeah, then it would be eliminated. So we've identified a layer of human beings, haven't we? Yeah, but we're talking about like 8,000 nodes, I think, just got spun up in the last

week and then I think it's over like 12,000 now. Like at some point we have to talk about how feasible it is to even be able to track all of this stuff. Okay, but now you've switched gears, right? Let's be honest here. You switch gears from there's no people to there's a very large network. Okay. How many people are in organized crime networks? Do you think there are Marfioso groups that don't have 8,000 members? I mean, there are, right? We know there are because we've seen them in throughout history, right? 8,000 sounds like a big number when you're used to networks of 20 servers. It's not that big a number when you're looking at criminal enterprises that span nations.

I don't think that's a fair comparison. Because mafia networks are human to human and they create trails. But nodes are, one node is completely independent from any other node. I could have three nodes in my house that are all independent from each other. And it's just part of this same like nebulous set of, at the end of the day, you're totally right. These, these, Bitcoin Ethereum, Protocols on Ethereum. they're created by humans, but at some point it becomes such like a, kind of like a virus. Like, how do you control a virus?

Like, it's just, it just, the whole idea about these systems is that they are so easy to self-replicate that they, it's like a termite. You can't get rid of it. But we do, we do get rid of termites. We do get rid of viruses. We're not very well. Not well, but not zero, right? Like, New Zealand has just eliminated COVID, right?

And the way they did that was, they dealt with a country of five million people and they put a wall around it. Now, I'm not saying that's the right way to do. every kind of problem. But I think that there's, you know, you've got to be honest here with yourselves, there is a difference between saying there's a large distributed network and that there's no individual people involved in that, right? The three nodes you're running, you choose, you choose what you're putting on those nodes. I think, I think if this is an argument that the nation state could stamp out like a Bitcoin or Ethereum, I think like a coordinated nation state attack against these systems could do them significant damage.

There are humans that run the validators and run the machines. One of the guarantees that we haven't talked about yet is, of course, the crypto economic guarantees, which is the reason that people don't shut off their validators is because they're incented not to. So if one country goes like authoritarian on a decentralized network like a Bitcoin and Ethereum, but another country or some small pocket decides not to, they benefit disproportionately. And so they don't. That's why these crypto economic systems are so resilient to that kind of attack. At this stage, whether a nation state could take it down or not is not really the issue.

I don't see the U.S. or like a Western liberal democracy doing that at this point. I mean, like, I guess two other issues I could have had with the Stable Act, right? Or the framing. Can we just go on that question just really quickly before you go to the Stable Act, which is that's also true of like Nazi gold, right? If we say we're not going to let Nazi gold go into people's bank faults, and then Switzerland puts its hand up and says, I'm not going to look and ask questions. Or Argentina says, yeah, sure, you can come here and set up a pig farm.

It doesn't matter. I mean, the argument there is not unique to computers. It's just pointing out that people can engage in arbitrage between nation states. And that's why there's a bunch of billionaires with bank accounts in the Cayman Islands. I get your point on that. But I'm not sure it's unique to crypto. It's just if I'm rich and powerful enough, I can find someone willing to let me do what I want. What is unique to crypto, specifically with Bitcoin and Ethereum, is these protocols are designed to be as viral as possible, right?

They are engineered to be unstoppable, which means that like the having a conversation about whether we can or cannot, I think is futile. Like if these things are doing their jobs, they are untouchable. therefore like any sort of like top down control upon node operators it's not going to work because even if you do control the node operation from inside the country that you have domain over the network is ultimately unfazed as a whole due to all the nodes that you don't have domain over so then why do you even bother trying to exert control under your own constituents well i think this is where there's maybe a misunderstanding of the point of the bill right the point of the bill is not to stamp out networks the point of the bill is to manage systemic risk from those networks. And so what the goal of the bill is, is to prevent these stable coins from becoming the new banking, right, from becoming the new primary layer of the economy that millions of consumers are putting their money into. Now, we didn't stamp out torrenting, right? But that doesn't mean that most official commercial companies right now get all of their content by illegally torrenting. Now, I happen to have no problem with torrenting, right? I think that's quite,

fuck, fuck IP producers. But I think the point there is, you don't need to stamp out a whole network. You just need to make that network unattractive to the point of becoming central to the official economy. And in the case of the United States, like I think, yeah, the United States probably should take responsibility for the rest of the world in what happens to the US dollar. But if you had a system where no individual consumer in the United States and no major company and no small business in the United States was using a risky stable coin,

I would consider that a success in the sense that the systemic risk of stable coins to the US economy is going to be reduced. There's not going to be that bank run in Mary Poppins of average Americans, right? That's the goal. So yeah, you're not going to stop someone in Siberia running a node necessarily like that. But you are going to stop that from becoming the new shadow banking that has trillions of dollars in the American economy when there's a crash. They're too big to fail. But that's the goal, right? It's a feature not a buck.

Another piece of the Stable Act is there seems to be an issue in the Stable Act when any currency kind of uses the unit of account of the U.S. dollar, right? So you could envision something possibly that's not been created yet, something like a dye, but much more decentralized, right? Maybe sort of as decentralized as Ethereum and Ether and Bitcoin, but is somehow pegged or, leverages the unit of account of the US dollar. You seem to have an issue with that, right? So this is different than a circle or a coin base or a Facebook issuing their own kind of stable coin. This is a very decentralized protocol network issuing an asset that might be backed by collateral or however they do it, that is decentralized, but is using the unit of account of the dollar, the Stable Act, the Stable Act, my understanding, would prohibit that too.

Why? Like, what's the issue? What's the issue there? Why can we not use the public good of the dollar with these, with these DFI protocols? Yeah, so it's a good question. And just to be clear, the point here is not anything that ever uses the unit of account. It's the issue something in the unit of account with the expectation that retain a fixed or or so stable as, so fixed as to be stable value.

So stocks, for example, are issued in a unit of account. But stocks fluctuate in value, right? Nobody holds a stock expecting it to maintain a stable nominal value relative to the US dollar. They fluctuate. Now, one moment where that becomes an issue is the money market mutual fund industry. They issued shares, right, that were, in theory, a share can fluctuate in value. But the point of the MMF shares was that they, were supposed to be stable in value. They were supposed to never break the buck. And when they broke

the buck, it was a huge source of systemic risk because they had built an entire business model on the expectation and belief that they can't do that. And so when we look at how instruments function, it's not the collateral backing in and of itself that's the problem. It's the promise of stable value that can't guarantee because if people take it seriously, if it takes it its word, yeah, yeah, this is stable. We're literally calling ourselves stable coins, right? And then They start using it as though it's as good as US dollars, right? People use money market mutual fund shares as though they were as good as bank deposits. They weren't.

And that caused a huge systemic risk. And when you look through the history of common law obligations, monetary obligations in contract law, in financial commerce, things like that, what the over and over, a really important layer was what they called the nominal layer. So people, you know, Austrians and others will complain about the real purchasing power, the US dollar fluctuating, right? but what a $100 bill will guarantee you is, you can pay $100 worth of debts. That's a nominal layer.

You can disagree how important you think that is, but on that layer, the nominal guarantee of 100 equaling 100, if it turns out 100 doesn't equal 100, that's incredibly risky and destabilizing to the whole monetary economy. We had banks that issued banknotes that were worth 10 pounds, and then people realized those banks were risky, and every time they walked into a store, they had to negotiate how much of a discount they would put on that banknote. So there'd be a $10 banknote and you would pay for something worth seven and they'd say this banknote is actually only worth five. And the next day it might be worth eight, the next day it might be worth four. But if that banknote is designed

to function like it's always going to be worth 10 and everybody starts using it interchangeably with US dollars, right? Oh, who cares if I have $100 in my actual bank account or in cash or I have $100 in my stable coin balance? They're the same thing. They're both $100. And then it turns out one day, the stuff that was in your stable coin wallet is now worth 50. That is the source of systemic risk here. The nominal stability, not just, and that's tied to the unit of account because we denominate debts in the unit. So, Rowan, I take your point about money market mutual funds acting as kind of a shadow bank.

Like, we've seen that, that happened. Like, one could also argue that euro dollars right now exhibit those same behaviors. And by the way, that's an absolutely massive market, much bigger than the third. $30 billion or so in stable coins out there. So I'm hopeful this bill has something to say about that if it's, if it's targeting. I mean, to my understanding, Euro dollars would meet the definition of, of the stable coin deposit. Okay, but that aside, one thing that is being missed here, I feel like, is I can't click view source on my Euro dollar. Like, I have no idea what's inside my Euro dollar.

And like, what's backing it. Your dollar is issued by a European bank. Yeah, a black box. So the difference with DFI is this. You can actually like click view source and see all of the assets, all of the collateral that back a given asset, right? The easiest audit ever. Easiest audit ever.

It's a much more open and transparent monetary system. It doesn't have the black box flaws that something like the Eurodollar might have or some traditional finance. Those banks submit to audit requirements. They submit to reporting requirements. The problem is their theory is wrong. Their theory of why they work the way that they say they're going to work is wrong. And so you can audit that code, right?

But you may look at a certain thing and interpret it slightly differently. You may look at an upgrade and think, oh, there's nothing wrong in this upgrade and you made a mistake. Or let's be honest, if this becomes systemically important, how many people are auditing that code? How many? I mean, do we really think that 200 million Americans are going to start using stable coins as their primary meaning payment? And they're all going to be inspecting the source code? Of course not. They're going to trust certain actors in the same way.

as we trust, we trust auditors and intermediaries for credit reporting and all other kinds of stuff. Let me ask you. Let's say the crypto people are right, right? I think you think this is not going to be the case. But let's say that Bitcoin or Ether become a reserve asset for the world, right? Would you have something, like would you have a big problem with that? Like fundamentally, because the whole theory of money that you have is basically to save us. from the systemic risk. We need it in the hands of a public institution that can sort of print money, right? So the prevent bank rent, right?

So I understand that. But you can't do that with a Bitcoin or an ether. So it would seem to be the case. You have a percent of the mining pool you could. Well, sure. But it seems to be the case that you would be against a monetary system like that, too, even if the people chose it. If kind of the free market shows it and essentially we adopted it,

like that's where some of this becomes a little bit of like you know at what point does the nation state sort of restrict individual choice and say no sorry citizen you can't choose your own money this is the money that we have for you it's a public institution you have to adopt it like we're banning these like how far how far do you push it well for the first of all nobody's banned gold i'm not recommending banning gold i've never said like i've never said I've never recommend that in my life. I think Rashiddle leave is doing either, right? But to go to your point, there's two things.

One is, I don't think that's going to happen. If you actually look through the history of gold standards throughout history, they have been actively maintained through public law. And I think going back to your earlier point, this idea of sort of creating a layer above nation states. You asked about China and the United States. I mean, this is real politic, right? They have armies.

Do you really think that they're going to put down their armies and ascribe to some liberal theory of property rights above the nation state? I mean, this is liberal idea. idealism at its highest that suddenly people who have control over means of enforcement are going to just sort of out of the better nature agree to some higher ideal against their interest. That's not how we've actually got any democratic gains throughout history. We've got it by seizing powerful institutions. I mean, there is no international layer there that forces those two actors to do what they want.

They go to war. And that's a problem. And there's a reason why we haven't had a war within the United States between states since the civil war because we don't let individual states create armies against each other. Now, if you want to have some one world government based on a belief in private property rights, I mean, more power to you. But I don't think that you're going to miraculously have the institutions of power give up that power in the name of ideals. That's not how it works. It happens when people stand up and demand accountability. And up until now, the flip side has always been, democracy's been on the side of the debtors. It's been on

the side of the people without property rights. The people who've been standing up to create supranational institutions to defend property rights have been usually doing so against the interests of working people. And so when it comes to your currency model, a hard currency, like the kind you're talking about, a commodity-backed or a commodity-linked currency, whether it's a digital commodity or real commodity, is pro-creditor. It's inherently deflationary, which means if you got in early and you have assets that you own, you get richer and richer at the expense of every next generation. Now, to the extent that there have been moments in history where feudal lords have convinced peasants that it is in their best interest to maintain feudalism, yeah, I think you can fool some of the people some of the time. I happen to think that those systems are pretty fundamentally anti-democratic.

Now, luckily, that's not a problem we have to deal with in the Stable Act. The Stable Act is specifically dealing with an emergent risk right now in the banking system. If you want me to ask me what I would do in the moment where we'd have a hard currency, I'd be in the room saying we shouldn't do this. We should have a currency linked to human labor, where everybody who wants to work to contribute to the common good can earn currency doing so, that we eliminate rent seeking, whether that's intellectual property or landed rent or whatever else, and that we provide free goods to people outside of the cash nexus, like we do with healthcare and education and everything else that works well for universal service provision, and that the laborers who earn the money to contribute

to the common good provide the services that are then available to people who can't. work. That's the kind of democratic monetary system I want to build, but it's not about protecting private property rights. Ted Turner owns half of Montana. Fuck his property rights. So Roan, another thing that struck me as odd in the Stable Act is you are a very sort of anti-Big Bank, yet the stable coin issuers would require a bank charter in order to operate. Like we very much believe sort of a, you know, the banking system is a cartel of sorts and protected cartel of sorts. Why force them to be members of this, this cartel? The Stable Act seems incomplete if it doesn't incorporate the other aspects of your, of your vision. And it's just leaving the banking system

as is, but like forcing Stablecoin issuers to become banks. What's, what's your response to that? Yeah, that's a good question. There's a couple things. First of all, the bill that we released a month before this bill was the Public Banking Act, which would create a new facilities at the Federal Reserve, create a set of grants, create an onboarding process for the chartering process to speed it up, to create a separate form of deposit insurance and securities license for actors that wanted to create public banking institutions, owned by the public government, not-for-profit, without shareholders in the interest of communities. And that's specifically designed to make those commercial banks obsolete. We don't need them to do that.

anything systemically important. Right now, one of the reasons why those commercial banks are important is because they run the payment system, right? They go under people can't make transactions. Two, they're responsible for a large amount of investment. We don't get to make bank loans, the economy stalls. What we proposed with Rashida Taleb's bill originally was anonymous digital cash and Fed accounts for everyone at the central bank and a postal banking system where they could go deal with their banking services at the post office, right? The post office, the first internet, right? They subsidized packets going around the whole country. They created an information network where nothing existed.

One of the most socialistic institutions in the U.S. government. It operated since the birth of the republic, and it issued postal savings and deposit accounts in the 1940s and 50s and 60s until the big banks shut it down because they didn't like the competition. So before the big banks came for crypto, they came for public postal banking. And that was the bigger threat. That actually did threaten their commercial interests.

Commercial banks don't feel threatened by crypto. They're just going to take it over when it's because. becomes important. But what we're trying to do here is it's a lesser of two evil situation. I mean, I have, you know, personally, my politics go towards the side of I don't need commercial banks at all. But this bill is saying, if you're going to engage in banking activity, you need to be regulated like a bank and be in explicit public private partnership. Because, you know, go back to that earlier point that I made about neoliberalism, the whole point of neoliberalism is to give the impression that actors that rely on public support are purely

private. They don't have any accountability beyond the market and profit. So these shadow banks are doing everything that regulated commercial banks are doing in terms of systemic risk, in terms of socializing the benefits and socializing the losses and privatizing the benefits. But they're doing so without any of the accountability that comes with the public-private partnership model. And so getting them out of the shadows into the regulated system is a critical step. Is that as good as replacing them with public banks entirely? No. But it's an important step. And the solution, in my opinion, is not to throw them even further to the shadows and say they've got even less.

accountability to the public, is to bring them in. Now, in 2009, there was a point where they could have socialized and nationalized half of those banks instead of bailing them out. They didn't do that because the banking interest didn't let them. That was a failure, right? The next time this happens, maybe that'll go differently. But if we had a system of anonymous digital cash, Fed accounts, postal banking, a government investment program, and a network of public banks, there wouldn't be much need for commercial banks anymore. And all the claims that the crypto stable coin community has is if you regulate us too much, you'll kill innovation. Well, I don't agree with that. I think there are ways to have public investment in innovation that would not require them to be allowed to do

whatever they want without accountability. So that's the alternative. You require them to get a banking license. Some of them are going to get banking license is going to come out of the shadows. Some of them aren't going to come into existence. And all that energy can be redeployed in pursuit of actual public financial infrastructure. So, Ron, is it possible for you to do all of this? Like, go pursue MMT, go pursue this new banking system and the U.S. Without crushing crypto through aggressive regulation and crushing defy and crushing this experiment that we're running to create a different set of social protocols

that the world can run on top of. like, we're worried that you're trying to crush the new internet here that we're building. And we think that a lot of the goals that you have are common with the goals of crypto and the bankless movement. I think they're hugely synonymous, actually. Well, I mean, take your point. I mean, there are many in crypto who are very anti-MMT, of course, right? But like, go do MMT, right?

And like, may the best system win. Why can't we just have that sort of relationship in a free and open republic such as the United States? What's your take? My take is if you want to create a private cryptocurrency, I honestly wish you the best. I don't think stable coins meet that definition. And for example, if somebody said, hey, we just want to counterfeit US dollars. Why can't we just be left alone? If you want to print US dollars at the US min, go do that and let the best man win.

Well, no, there's a reason why those two things are intention. with us. Counterfeiting is a little bit different. Let me be clear. It's different only in this sense that a bank deposit and a US dollar issued by different actors, but counterfeiting a bank deposit is what a stable coin is doing, in my opinion. Now, you may disagree with that, fine. But if you accept that view that a stable coin is an unlicensed bank deposit and that the reason we license bank deposits is because they are an extension of the public monetary system, then these actors are not trying to just do stuff in the privacy of their own basement. They're literally coming for the US dollar. They're literally trying to encroach on the space of the public system. If you want to

create a private currency in your own unit of account, by all means, I will defend your right to the death to do that, and I will defend it against other people who would love to shut it down. But if you want to start trying to mimic public dollars, you're not creating the new world. You're just doing the same thing that every other bank has done in history, which is piggyback on the public monetary system. And when it comes to building the internet, I know nobody in your world is going to find this remotely convincing, but I'm actually trying to save you from yourselves. Because if you build an entire crypto community on the back of stablecoins, which is what's happening before our eyes right now, right? Those Bitcoin Ethereum systems are piggybacking and increasingly dependent on stable coins.

And that whole system comes crashing down. You will have destroyed the vision of the whole thing. And actually, if we look back at the birth of the internet, I work for this, you know, I'm a network manager, a sort of evangelist for this group called the Freedom Box. Foundation. It's run by Evan Moglan. He was the legal counsel for the Free Software Foundation. He worked with Richard Stalman directly for 25 years. I believe very deeply in free software, free hardware, free culture, free bandwidth. And I think that if you look at even groups like the EFF and the sort of zealous defenders of Section 230, they have become their own worst enemies. Because what is the internet now? It's a bunch of walled gatehouses run by big mega

companies, right? That vision of the free, uncensored use net of the 90s, it exists. It exists. around the margins, but it's fucking dead. And I wish it hadn't been allowed to die. And if we had made some different decisions earlier on, it might still be alive in a different way. And I think this is one of those moments. If you sell out to the US dollar, you will live to regret it.

When's your legislation going to come down the pike that will support defy and true decentralized networks and protocols and crypto in the US? When is that legislation? If you believe in this vision and you want to save us from ourselves, how are you going to foster that innovation in the United States? Well, first of all, I signed on board of coin centers. You know, I'm all in support of their letter trying to protect the right to self-host

wallets. I'm all in support of that. And I think it's really important advocacy work. And as I said earlier, and I wasn't being ironic, I'm genuinely happy they managed to fundraise off misrepresenting my words because they're an important voice out there. and I'm glad they've got a place in D.C. I wish them all the best on that work. I disagree with them when it comes to money

because I think my understanding of money throughout history is it's not an anti-government tool. It's always a rich and powerful elite group relying on government supports to fund themselves. And if you want to create a private, a genuinely decentralized net, stay the hell away from money. Do it with information, do it with knowledge,

do it with culture. I support all of that stuff. And when it comes to bills like that, I mean, to be clear, I'm a monetary expert, right? That's where I focus on. I'm focusing on digital currency. The work that I'm doing around anonymous digital cash is, honestly, there's about three people in the world doing it with me. I feel very alone. I would welcome people in the crypto space to fight on that.

And props to Jerry and Peter, when we had this conversation, they immediately went out and wrote stuff saying, if we're going to have a digital dollar, it needs to be anonymous in cash. And I said, yes, you guys are right. You're on the right track. We're completely aligned on this. because as far as monetary systems and the digitization of money goes, these governments are going to build a surveillance system unless people step in. And every person who goes, you know what, I'm just going to tune out and drop out. Like, that's the 1960s hippie approach.

It didn't work. The people who stayed in the boring room wearing the suit built the Wall Street of the 1980s without them while they all left. Can I just say, Rowan? I'm worried that you won't be successful in that. I'm worried that you won't. I'm worried that. Me too. I'm worried that what's going to happen is we're going to centralize more power in the current monetary system that we have.

And people like you might want a private money system, but not enough people in the government do. And we'll end up with something like what China's doing with their digital currency. So this is the thing. Like we can't put all our eggs in the basket that you're talking about. Like we can't. As a society and as a people, like what happens if you're wrong? happens if you don't win those arguments. We end up with a more centralized system that's now doing MMT and it's fully surveilled and we can't even open a bank account against an authoritarian

government. It's like what happens if you're wrong about those things? We lose. We all lose. Yeah, but we lose anyway, mate. This is maybe just a tactical disagreement or strategic disagreement. If you're talking about building a currency for World War III compliance, I don't know what planet you're talking about after World War III, right? But you're talking about one where there's probably a nuclear winner for 20 or 30 years. You're talking about most vegetation on the planet's dead, but hey, at least I've got some digital gold assets. I mean, come on. This is not the priority in that moment. If you really think that there's a way to build around the governments of the world and the control they have, I just don't agree with you. I don't think the currency layer

is what stops tanks. I just don't think it's true. And, you know, mass revolution, sure, I'm with you. But, but like, making sure that your $100 million is safe in your basement, it doesn't make a difference. You can have as much gold as you want. I have this conversation with Dimitri. You can have as much gold as you want if they're coming from every single member of your family or your race.

It's not going to help you. And what Dimitri said is, well, at least you can buy your way out. And that works if totalitarianism comes in one country. It doesn't work if it's everywhere. So if it's World War III and it's authoritarian regimes

from the US to China, where do you buy your ticket to? I mean, who what? Milton Freeman's grandson seesteading in the Pacific? You think that cruisers in the Pacific are going to let him do that? Come on. I mean, what is the alternative? We're all in this, we're all in this bloody globe together. And we either stop them from building

the procedures of totalitarianism or we don't. But if we don't, digital currencies, private digital currency is not going to save us, especially not one built on the US dollar. Rowan, I'm struck by the very strong similarities that I see with what you are doing, with what me and Ryan are doing, while simultaneously there being some absolutely completely polar opposite features as well. As far as like a discussion goes, I'm really happy that you came on and gave us some of your time to go through some of these details. I think for me, it was really educational to kind of hear a similar yet opposite or

similar yet different perspective. And I think I hope a lot of the listeners kind of learned about like what are, because I do believe that there are some very real criticisms of the cryptocurrency industry coming coming from what you are saying. And I do hope you know that at the same time, like it is a constant conversation in the world of crypto that if we just end up recreating the same systems that we've seen before, then we've lost. Like the crypto is supposed to be something new, something better, something cool. And likewise, I see you acting as a steward of public goods. I understand that you understand that public goods are some of the most important things that we can endeavor to create. That's also something that we see ourselves doing here at bankless. And making sure that the listeners understand that there are more than one ways to get to public goods, I think is really important.

And I think you coming on and sharing your perspective, I think was really valuable to what we call the Bankless Nation. I have an article that I want to send to you and get your opinion on. It's called the Global Public Goods and the Protocol Sync thesis. It kind of illustrates how we see public goods coming out of the space, and I want to see if it resonates with you. And likewise, I think this will not be the last of Rowan Gray when it comes to crypto legislation. And I'm looking forward to maybe having you back on in the future to talk more about the subject matter.

Yeah, thanks for having me. And yeah, I completely agree. I think we do share a lot of common goals. I think we diverge at a very sort of early point in the road, and that's where it ends up looking like there's a lot of difference. And look, if you're right and you succeed, honestly, I'm happy too, right? I think it's the wrong way, but I think we do actually want to avoid the same kinds of risk in the long term.

So thanks for having me on. I appreciate the fair questions. Cheers. It's been a pleasure. Guys, that has been another episode of bankless, risks and disclaimers, of course. Eat this risky. So is crypto. So is Bitcoin.

My goodness, MMT feels kind of risky too. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone. But thanks for joining us on Bankless.