Bankless - SotN#26: Defending our Nodes w/ Coin Center's Jerry Brito and Peter Van Valkenburgh

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Starting point is 00:02:53 to talk about defending our notes, our Bitcoin nodes, our Ethereum nodes. We're going to talk about regulation. We're going to talk about what is going on with the Stable Act. And we have the experts to do that from Coin Center. We're going to introduce them in just a few moments. If this is your first state of the nation, the drill is we talk about what is happening every week in the crypto ecosystem. We're related to some of the big picture stuff we address on the newsletter and in the podcast and then we try to drop some insights and action items. This comes live on Tuesdays. This is a little late on Tuesday, but we needed to accommodate some guest timing. And then it comes as well on the podcast. You can catch it in audio format tomorrow. David, how are you doing

Starting point is 00:03:41 today? Are you excited about this episode? Yeah, I'm really excited. And this is something that we often speak about on the bankless podcast on the bankless YouTube is like at this at some point in time in the future, we're going to call upon the nation to fight the fight. And it's in the stable act and what's going on in D.C. seems to be perhaps like a tremor. Maybe it's the real fight. I don't think it's the real fight, but it seems to be like an indication of what's to come. Like there is going to be a fight in the world of regulation, in the world of D.C., in the world of nation states, that's going to be about like what this industry can or cannot do. and the fight seems to be at our doorstep.

Starting point is 00:04:24 And so we're bringing on people from the coin center, Jerry and Peter, to people that have just top respect, utmost respect, out of our industry, to help us get some clarity as to like, what is the significance of the Stable Act? Is this the real fight? Is this like kind of the fight before the fight? Like what's going on here? Absolutely. It's going to be good.

Starting point is 00:04:44 And you haven't heard of the Stable Act. It kind of made waves last week. but we will introduce it to you. It's a bill in front of Congress right now. We'll be talking about that in just a minute. We should also talk about what's new in the bankless program, David. So we had a fantastic episode come out about like the geopolitics, how crypto can emerge as a potential lot of replacement,

Starting point is 00:05:11 but a decoupling of the nation state with a political philosopher. Bruno, and that came out on Monday. What was your take on that episode? Yeah, Bruno, and this is extremely relevant, right? Because the whole point of that podcast was to talk about the different domains of the world. Like we have different countries, but that's not really what, in my mind, is what defines the seams of the world. We kind of have the west versus east and there's a seam there. There's kind of developed versus undeveloped countries and there's a seam there. And Bruno, as a political philosopher who's traveled, the globe, has opinions as to like what these different civilizations of the world. what their dispositions are, and importantly, what their dispositions could be towards crypto. And so we're seeing that play out in today's world, and especially in the conversation that we're having today with the guys from CoinCenture is like, well, America has a specific disposition towards crypto. And we talk about the whole world's disposition with Bruno on the podcast. So that was a ton of fun.

Starting point is 00:06:08 Yeah, I like these episodes we've been doing lightly with some folks that are maybe a little more crypto-sceptical, or if not skeptical, maybe using the term, convinced. They're not entirely sold. They're not of the religion. I think you've called them secular before. We recorded another fantastic episode that's coming out next, next Monday with Dimitri, who has a fantastic episode, a fantastic podcast called Hidden Forces. And he got to fix that mold, too. Do you want to give folks a preview? Yeah, Hidden Forces is one of my favorite podcasts, all about talking about the hidden forces of the world that control our, our finances, the economies of the world, the politics of the world, the culture of the world, just the

Starting point is 00:06:53 movers and shakers, the things that are moving and shaking the world, those subject matters come on to Dimitri's podcast. And so he, I call him on the crypto periphery, right? Like he understands crypto. He understands our industry. He understands the culture, but he's not in the middle of it, right? He's not in the religion, right? And so like, that's a very, like, biased, sober perspective to have. And so getting that perspective on the bankless podcast is definitely something that we want to do. So stay tuned to hear that episode on Monday. So that is next Monday, guys. We've got some ETH content on the Verizon as well. We're doing a bull case for Ethereum with some of the biggest ETH bulls we know talking about that. And then we're

Starting point is 00:07:32 having Ether Capital. I would call Ether Capital. This is a publicly traded company based in Canada. They're almost like the micro strategy of Ether. They are buying Ether, putting on their balance sheet, and they are a publicly traded company on the Toronto Stock Exchange. Super excited to talk about, to talk with them about public companies and crypto on the balance sheet. So a lot coming at you soon. But David, let's start with the question. I always ask you at the beginning of every state of the nation. That's this. What is the state of the nation today, sir? The state of the nation is joining the ranks. We are ranking up, right? And so, you know, at least in crypto, Twitter, there's a bunch of fighting going on between Bitcoin and

Starting point is 00:08:15 Ethereum. But as soon as this Rohan guy, who's one of the leaders behind the stable act joined the Twitter fray. It seemed to be like the Bitcoin and Ethereum's world, just like the division between that world just like melted away. And all of a sudden it was, you know, Bitcoin and Ethereum versus the outside world. And as somebody who like plays in both camps, I really enjoyed that.

Starting point is 00:08:36 I really enjoyed the melding of the communities to like kind of unite against like this common enemy, which is top down bad regulation. And so like we're ranking up, we're joining together, we're joining forces. And that is the state of the nation. That is nice. It's like a unifying force, I suppose.

Starting point is 00:08:53 Amidst all the tribalism and rancor in crypto, there are a shared set of values that I think every crypto community, at least in the decentralized crypto community shares. So it's fantastic when we can come together around this. All right, with that, we should get to our main event. I want to introduce two individuals, guests from Coin Center. Coin Center is a nonprofit research

Starting point is 00:09:15 and advocacy center focused on public policy issues. They're based in Washington, D.C., in the heart of the capital, fighting the good fight. I feel like any time we have a problem with crypto regulation, we put the bat signal in the air and income Jerry, in incomes Peter, incomes Coin Center, to help us with these regulatory issues.

Starting point is 00:09:36 Jerry Brito is the executive director. I want to welcome you Jerry and Peter Van Volkenberg is a research director at Coin Center. Gentlemen, it is fantastic to have you. How are you doing today? Very well. Thank you so much for having us. Yeah, great. Awesome. All right. Well, you know what? I want to start with this kind of question. So Jimmy Lear said this. I read, he is the CEO of Circle, of course, which issues staple coins. He said shit is about to get real. Guys, is shit about to get real here? Like, did something major happen last week? Or is that just crypto Twitter making much of you about nothing? That's a good question. So look, I mean, you're referring specifically to the Stable Act.

Starting point is 00:10:24 And, you know, it's serious because it's kind of a frontal assault on people's ability to run software essentially. Okay. So in that way, it's real. We should care about it. On the flip side, this is a bill that was introduced with, you know, like a couple of weeks, like maybe less than two weeks left for Congress. So it's definitely not going to move this Congress, although it'll probably be reintroduced next Congress. And it was introduced by Rashida Talib, who is a member of Congress, who is part of the very, very progressive wing of the Democratic Party, who you can say really

Starting point is 00:11:08 is not in the mainstream and not certainly in the leadership of a Democratic Party. So even though Democratic Party controls the House. This is a bill that, you know, I would be surprised if it moves a lot. It might. Chairman Waters, who chairs the House financial services, might decide to get behind it and maybe you might see some movement. But I think it would be difficult. Even if it passed the House, it would also have to pass the Senate.

Starting point is 00:11:39 And, you know, the Senate is where House bills go to die. Senate is the – So, in the plate of democracy. In cooling saucer, right? That's what Jefferson said. Awesome. Okay. So, look, I don't think this bill is going to pass anytime soon, but this bill is a frontal

Starting point is 00:12:01 assault. And I think, look, I think a lot of the motivation for this bill is Libra. And if we were to see another thing like Libra, You can imagine this bill like, you know, getting a lot of, you know, juice behind it. So, yeah, that's kind of what I think. That said, Stable Act is not the only thing that's happening in D.C. And there are tons of other little things that could become big that could necessitate a fight. There are also good things that are happening.

Starting point is 00:12:40 So let's actually start there because I don't like I alluded to, I don't think the Stable Act is going to be like the big thing that we all focus on. But it does indicate why this is important, right? And what could be, right? But let's start at the very beginning. Like Bitcoin, Ethereum, these are like internet scale organizations. They don't exist inside of a nation state. They're censorship resistant. They're permissionless. They're non-sovereign. So like, why do we even need? You guys. Like, why do we need people to defend this in regulatory institutions like Washington, D.C.? Like, I thought this was a non-sovereign system. Like, why are we talking to regulators in the first place? Yeah, that's a good question. So I think that, look, I think you're absolutely right that something like Ethereum or Bitcoin are unstoppable machines, right? And so they're going to be running. The question is, are they going to be running? The question is, are they going to be? be useful machines, right? Are you going to be able to connect to it and use it in your country? And more importantly, is it going to be something that a wide number of people are going to be

Starting point is 00:13:53 able to use it? And so there, you know, that's something that nation states, for better or worse, have, you know, can definitely affect. And so, and look, I mean, I think that, networks like Ethereum and Bitcoin are incredibly compatible with the values of liberal, democratic, Western nations like the United States. And so nation states and governments and regulation shouldn't be an impediment to the use of these networks. And so if that's true, you need somebody. to talk to government. If nothing else,

Starting point is 00:14:43 he just explain to them, hey, this is how it works. This is, this is what it is, how it works. Technically, here is where

Starting point is 00:14:51 maybe there are gaps created between the technology and the law. If you're going to fill those gaps, here are ways that you can do it. That's not going to destroy the potential of this thing. And so that's what Coin Center does.

Starting point is 00:15:07 And, you know, we're kind of like, you know, we, a big, role model for us is like the Electronic Frontier Foundation, right? So the internet is, as you say, a sovereign, you know, internet scale network, right? It is the internet. Why does it need representatives?

Starting point is 00:15:25 Well, for the same reason. These are unknown public goods. Nobody owns Bitcoin. Nobody owns Ethereum. Nobody owns the internet. And while companies that run on top of these networks can hire their own lawyers, their own lobbyists to represent their interests. You need somebody to represent the interests of the public good, this unknown network, and to represent the interests of people to have the freedom to use these networks. And so like the EFF, you know, we at Coin Center are kind of self-appointed champions for open cryptocurrency networks. Yeah. Worth noting that we don't represent any companies, we don't represent any specific entities in the space, we have a mission and we're there to defend the mission.

Starting point is 00:16:11 And the mission is to defend people's freedom to use permissionless blockchain networks. How did we get that? So you mentioned the EFF, I believe, Jerry. I'm actually not super familiar with the EFF. I am a bit more familiar with like the fact that actually the internet went fairly well from a regulation perspective in the 90s, right? There were definitely some bumps along the way, but we got it done. America accepted the internet.

Starting point is 00:16:43 And this was pretty novel at the time. There's some cryptography involved. There's a permissionless communication network, some scary things around copyright, all sorts of things. How did we do that? And like, can that success be repeated for crypto? Because crypto, I guess, is one. It's in a different timeline, right? So like the U.S. as a nation in the 90s appears to me to be a bit more moderate and less polarized than it is now.

Starting point is 00:17:10 So we've got that issue we're dealing with. The second issue is crypto, of course, hits on a few things the nation state might be a little bit, I guess, scared to relinquish control of around financial transactions and the essence of money. But like, are you guys optimistic that we can actually repeat the success of internet adoption? with crypto and kind of like forge our way through this path, make this happen? Yeah, I mean, I wouldn't be doing this full time if I wasn't optimistic that we could do it. I do think we can replicate the success of the 90s, but that didn't just happen, as you were saying. We didn't just do it because of America. It took a lot of work from people like at EFF, the Electronic Frontier Foundation, right?

Starting point is 00:17:59 So exactly as you pointed out, there were big concerns related to things that nation states are sensitive about like cryptography. Cryptography was something that until very recently, quite frankly, until the 90s, was the exclusive domain of nation states. Encryption was, right? And the EFF was instrumental in fighting that fight so that encryption could be widely used by the public. It wasn't like, you know, we weren't, again, it's the kind of thing where it's just math so that you can't stop it, right? But the government can severely restrict mass adoption of it, right? And thanks to people like the EFF, we were able to win those fights, right? So, you know, it took a lot of lobbying and a lot of litigation to win those battles and same for copyright.

Starting point is 00:18:55 And I'd say that, you know, there's collateral damage in the process of this, you know, determining how government will or will not accept these new technologies. So people can be put in jail. You know, I think ultimately these technologies are somewhat unstoppable that in the long run will have shared networks, will have the internet as we already have. But in that process, a lot of lives can be ruined. So you look at the first wave of crypto wars. which was over encryption technology, things like PGP.

Starting point is 00:19:29 And thank God we had organizations like the Electronic Frontier Foundation to stand up for actual scientists, cryptographers, who wanted to publish their cryptography standards, but the government had labeled those cryptography standards as weapons, as munitions that you're not allowed to export out of the country because you're literally sharing weapons with our enemies. And the EFF said, look, these cryptographers just want to publish these

Starting point is 00:19:55 these mathematical equations effectively as you'd publish a book, and it's their right in America in a liberal democracy to do that without your prior restraint. And the EFF, broadly speaking, won those cases, and the defendants won those cases. And that's why we have things like SSL today. We might have had it anyway, but lives would have been destroyed in the process. And maybe America wouldn't be the leader in the internet. Maybe it would be some other country. Or maybe it would even be slowed down to the point where we were just now starting to enjoy, you know, websites instead of what's next, which might be, you know, cryptocurrencies and things like that. So that's optimistic. That makes me optimistic. But also what makes me a little bit skeptical is, is that was 20, 30 years ago.

Starting point is 00:20:43 That was a generation ago. Like things change. Perspectives and cultures and values change. And especially in a world where there seems to be so much polarization and there seems to be just like, a lot of desire to finally make change happen. It seems to be that like the ascribing is like, hey, we did it back, you know, if we fight the fight like we fought it back 30 years ago, we'll get the same outcomes. Well, it's a different world nowadays.

Starting point is 00:21:10 So like maybe what do you think is different about this world that might not be the same, might not make the fight the same fight? I'm not, so yeah, you're right that it's a different world. And so as a result, people who, you know, you can't necessarily apply the same kinds of tactics that you might when it comes to lobbying or whatever. You know, like, you know, we now have Twitter. So I'm not going to fax out a press release. I'm going to use it. But I think those are all tactics.

Starting point is 00:21:43 I think ultimately at the end of the day, despite all the polar residents and what have you, America still has the same values as old. always, and I think the internet was successful because it was able to appeal to those values. If you think about it, the internet is completely open and permissionless. It's the West, right? It's a wild frontier where you can go and it's, you know, it's an electronic frontier, if you will, right? Where you can go and settle. This is the most American thing in the world.

Starting point is 00:22:15 While we were building, you know, why we in America were building the internet, our friends in France were building Minitel, right? Which is going to win out. So, you know, I think if we can just remind policymakers of that, that hasn't changed, right? Policymakers for both left and right still see that. And so, you know, the story to tell is, look, while China is building DSEP, we can build completely open and permissionless networks and which do you think is going to win out, right? If you have any self-confidence in your values, you know it's going to be open and permissions.

Starting point is 00:22:54 missionless networks. So, so, you know, I think an important thing is to make sure that something like crypto does not become a partisan issue, right? If it does, then it becomes much harder, right? And to date, we've been very lucky that it's not. We have strong champions on both the left and right and the Republicans and the Democrats, and we have critics and detractors on both the left and the right. So I think that's very good. Speaking of strong champions, I want to bring up your recent Gitcoin grant because you have folks that are tuned into bank lists, of course, they know what Gitcoin is. It's a quadratic funding mechanism with a matching mechanism, which essentially allows

Starting point is 00:23:40 people in the crypto community to sort of vote with their dollars and have that vote amplified for the projects they support. And maybe in a way it was kind of good timing for this Stable Act news to come out. because I just want to share the Gitcoin page because it's super exciting what the crypto community can do once it is incentivized to act. This is, I think, less than a week old, maybe just over a week old, but you guys just put out your grant, I think, at the end of last week. So it's probably only a few days that this grant has been active. And you've already raised close to when you consider matching 158, that's die, thousand die, which is, of course, U.S. dollars.

Starting point is 00:24:21 Have you been like really excited to see how the crypto community has rallied around Coin Center in the wake of some of this regulatory news and uncertainty? Has it been surprising to you? Has it been exciting? No. I mean, it's been amazing. We were just completely floored by the response from the crypto community, especially the Ethereum community, you know, using Gitcoin. and we're like incredibly grateful. You know, what can I say? It's a kind of thing where, look, we weren't planning any of this. You know, Naraj. Yeah, Naraj Agarwal, who runs our communications, he's like, you know, we should start

Starting point is 00:25:07 a, you know, a get coin account. We think it's a good way to do it. I'm like, yeah, let's do it. And it just sort of coincided that at the same time that we started this get coin, grant proposal and put it out there, the Stable Act made clear what's at stake. There are frontal assaults that come, and I think that really drove people to contribute, which we're incredibly grateful for. Because a lot of the work that we do isn't so clear, right?

Starting point is 00:25:39 A lot of the work we do, we can't ever talk about because it's sort of like avoiding things that you never find out would have happened. Right? And we can't talk about it. You know, but like, you know, something that the Ethereum community, I think, isn't aware of is, you know, coin center was, you know, if not instrumental, I think pretty influential in making sure that the SEC understood that Ethereum is not a security. Ethereum as a running network is not a security, right? And we spent a lot of time with the SEC making that case starting in what, when Peter? 2015. So we were in meetings in their interdivisional working group that was focused on cryptocurrencies

Starting point is 00:26:28 back when Ethereum was brand new, long before the Dow crowd fund and then the Dow report from the SEC, just giving them the information that is quite honest information that, you know, look, Bitcoin is open source protocol, people are going to take that code, rewrite that code, build brand new networks, and if they're actually running like Bitcoin, they're not securities. If on the other hand, somebody is at the center of that network and everyone relies on that person, that's not sufficiently decentralized, as Director Hendon later put it, or if they're making promises about that network, like I guarantee you it'll be 10x in two years, then it is a security. And it makes sense that the SEC can carve a delicate path

Starting point is 00:27:10 to go after the scams and leave the true innovation out of securities regulation. But it was not a foregone conclusion in 2015. I think, go ahead. Just to emphasize for like the Ethereum community how important that that was, right? Back to what Peter was saying earlier, it's not that the SEC might not at some point in the future change its mind on Ethereum, but this allowed them to provide clarity far sooner and accelerated the development of such things as like if ether is listed as a commodity, it can be listed by the CFTC. It also puts a lens in the path for tokens to move towards

Starting point is 00:27:53 decentralization. So it really just accelerates the industry in the US and accelerates the adoption of what we all want to see, which is a more open financial world. So maybe the outcome would have been inevitably in 10 or 15 years that like this regulation would, you know, happen. But what you guys are doing is really accelerating adoption. And it's a bunch of quiet work that I think folks don't know goes on behind the scenes with these types of issues. Yeah. Thank you.

Starting point is 00:28:26 And, you know, I'm not sure if we're accelerating. But what I like to think about what we're doing for all networks is making sure that the space exists so that you can just do your innovation. and make it available so that people can use it. And because the alternative is there are going to be a lot of roadblocks that might just lead people to say, me, I'm not going to work on this. I can work on something else. Arguing that ether is a triple point asset would have been way harder if ether was also a security.

Starting point is 00:28:58 So that is definitely valuable. And the link between Coin Center and Gitcoin, I think, is a really elegant one because you guys are protecting public goods. without actually representing a company, right? So you guys don't represent anyone. There's no stakeholders behind you. You guys just represent the industry. And I can imagine that like getting funding for that is actually kind of hard because of your specifically

Starting point is 00:29:22 your neutrality and the whole thing. Like if you guys were sponsored by a company, CoinCenter would be a different entity. It wouldn't be CoinCenter. It would be something else. And so that's specifically where Gitcoin comes into play because Gitcoin is meant to fund that gap of companies that have extremely perhaps the most significant roles to play, but don't actually have a way to get funded.

Starting point is 00:29:45 And so the alignment between Coin Center and Gitcoin, I think, is one that's going to play out in a very long relationship that I'm excited to see unfold. Yeah, I'll say historically, we've generally gotten about half our donations from individuals, usually very generous individuals who understand our mission and want to make sure we succeed. But this Gitcoin situation will significantly increase the number of donations. more smaller donations. And that's exactly what we want. We want to be representatives of a sort of grassroots movement to say, look, this is the technology of the future. It's important. It's important for America. It's important for all of us. Let's build it. Yeah. And I should hasten to say that Coin Center is a public good in itself, what we do. And our work is supported, as Peter says, about half of our support comes from individuals. The other half does come from companies and

Starting point is 00:30:34 investors in the space, but it's strings free, right? Like, you know, this is the work that we do. If you want to support us great, if you want to support us, you know, we'll tell you at the end of a year, this is what we've done. You want to support us great. If you don't, you know, that's okay. There you sometimes got kind of like a scarface mentality with fun-facing. He's like, you know, we don't have to be here. Our independence is very important because it's what makes it possible for folks at the SEC, for example, to trust us. We're not selling our own book. We really want to explain to you exactly what this is, how it works,

Starting point is 00:31:14 and give you honest advice about, you know, what are the risks and how you could address those risks. Well, guys, we want to get you to a quarter of a million on Gitcoin at least. So any bankless listeners watching this support this excellent work. All it takes is a die. one die and that could be amplified a whole lot with get coin matching. I just put the link in the YouTube chat box. Awesome.

Starting point is 00:31:40 Thanks, David. We should talk about the Stable Act because that has been sort of the catalyst for a lot of these things. And as you mentioned at the outset, sort of shows what's at stake in crypto and this regulatory conversation. Can you maybe explain what the Stable Act actually says and what it does? And Peter, you put together a fantastic post on it. But for those that weren't part of the conversation, haven't read it, what's the summary here? Yeah, so it amends federal banking laws say that stable coins, and it defines that term.

Starting point is 00:32:16 The term is obviously never been defined before in law. Stable coins can only be issued by federal banks that have FDIC insurance effectively. So there's this strong push to say, look, if, it's dollar backed, and that's interpreted broadly, as even if somebody is saying this is dollar backed, but it's some algorithmic thing, or if someone's saying this is pegged to a dollar or it will reflect the dollar, even using the term dollar in marketing, will fit you into the definition of stablecoin. And then this law, if it was to become law, it's just a bill, of course, would say, you can't do that unless you're a chartered federal bank, which I don't need to explain.

Starting point is 00:33:00 it probably sounds like it is, is very difficult to become. And an ordinary person would never become a chartered federal bank and get FDIC insurance. And so this is, you know, make no mistake, this is quite radical. Because not only does this necessarily cover, you know, like an asset back stable coin that's centralized like a USDC or a tether, this could cover things that are like maker, like dye, where you have just a lot of language that says. It's pegged to or it tries to equilibrate towards a dollar. This kind of covers it because it got such a broad definition.

Starting point is 00:33:38 And it would also interestingly cover things like digital dollars you keep with PayPal or with Venmo, just like pre-crypto money transmission stuff, which for decades has been regulated by state licensing and never as a federal banking activity. So this is sweeping. And to put it briefly, and the reason why this is, is a real threat to permissionless networks, because there are decent arguments to be made that if you're claiming that you're backing something, you should be regulated in some way, so you're not scamming people, you know, not actually holding dollars. But this goes far beyond just that

Starting point is 00:34:14 common sense regulation. This says that even if you're basically facilitating somebody who's not a bank issuing or passing or uttering a stable coin from person to person, you, as someone facilitating that activity could be performing an illegal act in this law. And what is facilitating a die transaction maybe look like? It could very easily just look like I'm an Ethereum miner or staker, and I staked or mined for a block that ended up having a die transaction in it. So you may not have any idea that you facilitated that activity. And quite frankly, you wouldn't if you were mining a purpose agnostic blockchain network,

Starting point is 00:34:57 because there's tons of transactions in there. some of them might be stable coins, some of them than not. And if that mere act of running that server on the internet that performs that function makes you liable of breaking federal banking laws, I don't think it would destroy Ethereum, but it would certainly destroy people's ability to honestly and legally run Ethereum nodes in the US. And that's extremely bad for innovation.

Starting point is 00:35:23 So there seems to be a number of different stakeholders that seem to be primarily affected here. We have the centralized issues, issuers of stable coins. That's like USDC, tether would fall into this camp. Libra, now known as DM, is also very much in this camp. There's also the decentralized issuers, which is die or anything algorithmic, right? So like maybe even something as niche as empty set dollar would be a protocolized version of a stable coin that pegs to a dollar. And so that's now falls under the purview. And then there's even node operators. And so like it gets even more and more expansive as we

Starting point is 00:35:57 go out. And we want to touch on all three of those cohorts of people, but I kind of want to be a little nitpicky here and get your guys' perspective here because like what is a stable coin? And it seems to only, it seems to be too easy to route around the wording that this bill has used. Because like, what about a token that is backed by gold? Like that's pretty stable. That's you could call that a stable coin. What about it's what about a token that represents an Aussie dollar or a euro? Or what about something? that is stable to its own basket of, of, you know, its own, you know, index. And so like, kind of one of the questions is, like, how much have these people really

Starting point is 00:36:38 thought about, like, the loopholes that they're creating? Because, like, you could just like, okay, we're just going to make something that is stable to, you know, one and a half dollars, or something that's stable to gold or just like, just route around the problem. Like, it seems to be really, really, really arbitrary. Is that your guys' take as well? because that seems to be my perspective. It seems to be like there's a number. There's also like stable-ish coins, like things that definitely don't peg to one certain thing,

Starting point is 00:37:05 but they still are much more stable than their asset. That's the rise system. It seems to be there wasn't much thought put into like parameterizing this thing. Well, I mean, so Peter, you've read the law more carefully than me, but it would cover basically dollar pegged stable coins. And the reason for that is because what the law is, you know, what the authors and the sponsors of the bill are concerned with, it seems to be is systemic risk to the U.S. dollar banking system, right? That's what they're addressing. So something like a gold-backed token would not, I don't think, and I'll defer to Peter since you read it more closely, I don't think would fall here, right? I don't think a Aussie dollar backed would fall either. Really, what they're, the reason is, the reason is, you know, the reason. they're doing this is they're targeting what they perceive to be systemic risk presented by what they would call shadow banking in the form of PayPal or USBC.

Starting point is 00:38:07 So to give the supporters of the bill some credit, they are very passionate, and you look at, say, Rohingra on Twitter, that dollars are a sort of public function of the United States government. And things like systemic risk are not just about counterparty risk. They're not about simply situations where the company that's holding the dollars and people have the tokens that represent the claims on the dollars, they don't have enough dollars to make good to their customers. That would be counterparty risk. And we do have FDIC insurance for that reason. But, you know, I've seen Rohan talk also about how the risk I'm concerned about, he would say, is also the risk of not having full control over the monetary supply in the way that he thinks

Starting point is 00:38:51 the federal government should have greater control over the monetary supply. That like the supply of dollars in circulation matters and he wants only banks to be in the business of increasing or decreasing that supply effectively. That's a very modern monetary. He is an energy scholar. He's a charterist. So his notion of what money is and, you know, money is a crazy thing. It's easy to have lots of different notions. Yes. Is very state oriented. So the fact that this is dollar focused is partially deliberate. I still don't agree with it, but it's deliberate. And I will add just as far as the legislative language, it's worth noting that it also applies to the, to a peg to any other state or national currency. So it would apply to like a Europeg thing. And there's, there's,

Starting point is 00:39:38 again, this is drafted incredibly broadly because they really want to go after everyone with this potentially. There's a paragraph towards the end of the definition of stable coin that says it's pegged in such a manner that regardless of intent has the effect of creating a reasonable expectation or belief among the general public that the instrument will retain a nominal redemption value that is so stable as to render the nominal redemption value effectively fixed. So if you had like a Big Mac dollar or a Big Mac coin that was going to always retain about Big Mac purchasing power, this is covering it. Wow. Was that their intent, Peter? Like, you know, was it their intent to be this broad? I mean, it's affecting a lot of parties in the U.S. or this

Starting point is 00:40:20 potentially would affect a lot. So centralized issuers, right? You really put a handcuff on like USC and the things that Coinbase is doing. And also you definitely put some handcuffs on decentralized protocols like die. And perhaps most precariously, if an individual out of their home is running an Ethereum node that runs a transaction that is prohibited by this sort of a law,

Starting point is 00:40:47 then they might have some culpability here in the process too. This seems incredibly broad. I think part of me wonders whether, that broadness was the intent or whether back to to david's question if it was just well there's some education required they didn't realize it would be they were trying to maybe target you know facebook and libra and they didn't realize all of these downstream effects just because they're not fully emmeshed in the crypto ecosystem what's what's your take so we've had lots of situations like that in the past where we go to congress and someone's written a bill and they maybe don't

Starting point is 00:41:21 fully understand the consequences because they don't fully understand the technology that it might regulate. This is not one of those examples. So this is intentionally broad because of this deeply held belief and a genuine belief that I disagree with that if it's dollar related or if it has to do with the money supply of the nation, it should be heavily regulated. So this is intentional. And it's what's interesting about it is it's broader than you think even when you read the already broad seeming language. So when we wrote a blog post about this the other day, one of the first things I pointed out is why is this regulating stable coins, which are dollar liabilities, but not regulating all the other non-bank dollar liabilities out there, like all the money that

Starting point is 00:42:05 PayPal and Venmo and Square Cash hold for people. Those aren't stable coins as we tend to understand them, and they're huge liabilities, right? So shouldn't those also be regulated by, you know, putting them under the purview of federal banks rather than keeping them in the state money transmission licensing framework where they exist today? And Rohan, To his credit, came out immediately after we published the blog post and said, no, it's meant to cover all of those companies. Wow. Oh, my God.

Starting point is 00:42:32 Wow. We define stable coins so broadly that a PayPal, digital balance on PayPal, a digital balance in your Apple pay wallet would be a stable coin. And then they'd have to do it through federal banking laws. How about this? That's kind of Trojan horse. Yeah. I say that down there in the post, actually.

Starting point is 00:42:51 And then I said it again on Twitter. this is this has got balls not to be crude but you know this is this is strong legislation with a very deliberate intent to sweep widely it's also why i think it has much less of a chance of passing because it's it's really out there so so peter i've got some Starbucks gift cards right and they they have a lot of stable coins i think like does would Starbucks be required to open a bank charter in order to issue Starbucks cards in this sort of wide sweeping bill you know I hadn't actually thought of gift cards. I'd have to reread the language with respected gift cards

Starting point is 00:43:27 because normally those get out of money transmission licensing requirements because they're only accepted at a number of authorized acceptors or or. There we go. We found our loophole. This doesn't have a so-called closed-loop exemption like the money transmission statutes do. So maybe Starbucks cards are covered as well actually in this.

Starting point is 00:43:50 Wow. So I want to ask about, there seems to be a lot of intent, which my mind after seeing a lot of intent goes to the motivations. To me, there's a, there's a decent amount of me that's a conspiracy theorist. And so I'm like, the banks are behind this. In the crypto space, that's weird. So unheard of. In my mind, this is just like a huge extension of banking infrastructure. And, you know, banks kind of are the big arm of the government to exert power, right?

Starting point is 00:44:21 We exert power over things like North Korea and Iran by cutting them out from banking services, payment services. And so, like, it seems to be that, like, requiring everyone to be a bank is in some way. Maybe that's good for the banking industry, but it's definitely good for the power of the central government, right? Because it's bringing everyone under their fold, under their control, right? So, like, and this Rohan gray character is definitely interesting because, like, But his deal generally seems to be like pro government, just pro state.

Starting point is 00:44:55 He's a statist. He likes the state to have the power and control that it should have. Like what are the motivations behind pushing this thing? Because like there's also the conversation of like Rashida Taleb, I think I pronounce her name. Like she had her own like verbalized intent, which is to, you know, protect the little guy, protect minorities. Rohan Gray seems to have his intent. Like what's the motivation really pushing forward this stable? act. That's the kind of thing that maybe you should have Rohan on and ask them. And I think he'd be

Starting point is 00:45:24 probably very game to come on. But I mean, just looking at his stated position, again, it's to address what he perceives to be a systemic risk. And yeah, as Peter was just saying, you know, it's the view of not just him, but I think, you know, as you were saying, money, modern monetary theorists of all stripes, that, you know, you know, what is, you know, that money is a public good. It should be controlled by the state. And that the, you know, money supply is something that only the state should be able to control. And the way they control that is by controlling the banks.

Starting point is 00:46:05 And so it's kind of funny. So I can tell you kind of categorically that this is not a plot of the big banks. Because, again, you know, Rohan had a hand in crafting this, Taleb introduced it. And I can think of, you know, no greater enemy of the banks than Rohan and representative Talib. That said, it's kind of funny that what they want is to create a ton more banks, potentially. So, you know, that's funny. It sounds ironic.

Starting point is 00:46:36 But no, it's not if you consider that, you know, they think that banks should be heavily regulated so that they are, you know, essentially arms of the state carrying out a public good. That's your view. And to Rohan's credit, you know, Rohan actually was on our podcast, Peter interviewed him, and we had him on because Representative Talib, a few months before, so this was, I don't know, Peter Wynne was in the summer, four months ago. Four months ago, Representative Talib floated a draft bill. It was never introduced.

Starting point is 00:47:08 And this was, you remember at the time when there were problems getting COVID relief out to people. by the federal government. And she floated a bill that would have created a digital dollar. It wouldn't be the central bank doing it. It would have been to Treasury. And the neat thing about this digital dollar that she proposed, and I'm sure Rohan had a hand in crafting that bill as well, it would have been a token-based bearer instrument.

Starting point is 00:47:45 It was a digital dollar. And that would be, or at least had the intent to be, I sort of will quibble a little bit about the, the sort of function to get it to be that way. But it had the intention to be fully anonymous, right? So they wanted to create digital cash, which is awesome, right? So Rohan is all in favor of building, you know, token-based, bearer, completely anonymous digital cash, as long as the state does it. But only the government should be. one doing that. That's just that's their that's her view and that you know that's a legitimate point of view I guess. It's interesting so and to go back to the modern monetary theory piece that bill

Starting point is 00:48:27 the creating the digital money was one piece. The other piece of the bill was minting a trillion coin. I remember this. Right. So you would create a trillion dollars and then distribute a trillion dollars through this digital dollar scheme. So anyhow, you know, you know, We agree. So, you know, it's interesting. So he, I would sort of temper the, you know, I mean, clearly, Rohan is a quote-unquote status that some people might label him. But, you know, it's a status that wants to build completely anonymous, bear digital cash. Yeah.

Starting point is 00:49:05 And his stated reasons for that, his stated reasons for that in the podcast where we, when we had him on were fear of totalitarianism. Yeah. that if you don't have the ability to have anonymous financial transactions, as we do through physical cash and as he thinks we should have with digital cash, which I agree, then you'll have a centralized database of everything that everyone ever buys, every service everyone uses, every embarrassing thing they do or political contribution that they make, and democracy can't function like that. So, you know, you could think of this as cognitive dissonance, but you could also think of this as someone who just thinks that money is this public good, that the state should

Starting point is 00:49:43 monopoly control over, but that ultimately the money should be extremely user sovereign and private. I mean, what I would point out to Rohan, I want, Peter, you probably did on the podcast, is, you know, we agree on that, that we should have that user sovereign private money in order to prevent totalitarianism. But to me, the way to do that is not, as the bill would have, to create a board, a privacy board of political appointees to oversee and ensure that. The way to do that is with trustless, you know, mechanisms like Ethereum and Bitcoin.

Starting point is 00:50:21 Fundamentally where I think this comes down to, which might be interesting to your listeners who have more philosophical or economic bent, is can people ban together to provide public goods? Or must we trust the government to provide public goods? And can those two solutions coexist or would one chisel away at the other and therefore need to be outlawed? Obviously, Coin Center believes very strongly that individuals acting in their own volition and freedom and with innovation and passion can make their own public goods. And we don't need to have government monopoly over things like monetary systems. I think they can coexist. As do we, as does the bankless nation. And we want to get into that a little bit more because there is some overlap, I think, with what Teleb and some of the folks behind this bill want to do and what crypto wants to do.

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Starting point is 00:54:31 between that maybe call it wing of politics in America and what we are trying to do in the crypto community, particularly in the bankless community. One of the purported purposes of this bill is to help essentially the unbanked, right? And isn't that what crypto does? I mean, the title of the show and the movement that David and I are part of is bankless, using systems like Bitcoin and Ethereum to essentially bank without a bank in a permissionless way. That means open access to everyone in America, credibly neutral, independent of race, independent of socioeconomic class, a credibly neutral banking system for the world. That seems to be very much a part of the spirit of folks in Congress like Talib.

Starting point is 00:55:26 Is there common ground there or are they not recognizing that side of the equation? Maybe we'll start with you, Jerry. Yeah, you know, I think there is common ground at a high level, right? And so I think that's, you know, you can, we have shared concerns, right? So I think where we depart is, and again, I encourage you to have somebody like Rohan on to have him speak for himself because I don't want to do that. But, you know, I'll try to steal in what I think somebody like him would say. And that's number one, you know, I think he'd be, or somebody like him would be perfectly happy to have, to, you know, let people experiment with building monetary experiments like Ethereum or Bitcoin.

Starting point is 00:56:17 I think the problem he sees is when people start issuing things that they call a dollar. dollars, right? Because again, dollars, this is public good, that can only be provided by the state. And in doing that, perhaps creating systemic risk. So what does he mean by that? Well, what I take it to mean is you have a stable coin issuer that says, give me a dollar and I'll issue you this token. And whenever you want, you can come back with the token, I'll give you back a dollar. You can come back with a I'll give you back a dollar. But what if that, what if they issue more tokens than they keep dollars, right? And then what if there's a run on the bank, the quote unquote bank, there's a run on the bank,

Starting point is 00:57:06 and then it collapses and then that means that that has a ripple effect because then loans that need to be paid, can't be paid, and that ripples and ripples and you get a financial crisis, right? That's your concern. And so the way that they would address that is by regulating, what they would call depository institutions, right, as banks. Now, what I would point out there is to the extent you have a stable coin issuer that is doing stable coin business, I'm talking here about centralized one, so you can't you have a centralized stable coin issuer that isn't regulated by any

Starting point is 00:57:43 body in the U.S. and they're doing business with U.S. people, well, they're not, you know, they're violating some law. It could be a banking law, could be money transmission law. They're violating some law. So there's a way to address that. And if you look at other stable coin issues, like for example, Gemini, they are New York a New York trust. And they have to keep a dollar in reserve

Starting point is 00:58:09 for every outstanding Gemini dollar they have. And they are regularly audited and regulated by New York Department of Financial Services. Same thing goes for USDC. maybe, you know, so they're regulated, issuers of USDA are regulated as money transmitters. But again, they're supervised by banking. They have a one-to-one reserve requirement.

Starting point is 00:58:36 They always have, yeah. So it's not like you're not regulated. They are regulated. Then you have things like die. And in my view, there, you are regulated. You're regulated by the smart contract. You can, you see it, And, you know, the deposits that you make are locked up, right?

Starting point is 00:59:01 So anyhow, I mean, I don't see the systemic risk that's posed by any of these things, except the ones that are simply not complying with U.S. law in any way. So, like, we would obviously agree with those arguments, of course, but this is a crypto podcast. But my question here is, I can't help but feeling like crypto is being picked on. Because we have this, right now, this tiny cottage industry. And stable coins are used by what? Like a lot of crypto geeks at this point in time.

Starting point is 00:59:35 There are other larger capital pools, but $20 billion or so. I mean, if we're talking about like shadow banking and shadow dollars, like what about the euro dollar, right? outside of largely U.S. jurisdiction. This is what I can't kind of wrap my head around is why, is it because of, is it because of Facebook? Is it because of Libra maybe that the small cottage industry is suddenly risen to like the floor of Congress to take some action against? It just seems so early in the process.

Starting point is 01:00:07 What's, what are your thoughts? So I definitely think that Libra is what's, what spurred the U.S. Congress as well as regulators and legislators around the world to sort of focus in on the concept of stable coins for sure and not just from a credential or systemic perspective, but also from a money laundering and terrorist financing perspective, right? Libra definitely draws that. Peter, I mean, do you have other thoughts, Peter, on why stable coins are being single-

Starting point is 01:00:49 No, I mean, like I said earlier in the interview, I do think that, you know, there's a little bit of a tricky, sneaky marketing thing going on in the way the legislative language is drafted, because stablecoin is drafted such that it could cover all kinds of things like PayPal balances and Starbucks gift cards as stable coins. And so in some ways, this is, well, let's use a somewhat easy to villainize term because it's from a weird cottage crypto industry in order to sneak in regulation of all kinds of non-bank dollar liabilities into a federal regime, which I don't think is a wise way to draft legislation, quite frankly, because if you realize that the words on the page mean something more than what they seem to obviously mean, they'll have to recalibrate. And that's not what you, laws should be written to be. be clear and intuitive. They shouldn't be written such that you need to be a JD or a JSD in order to figure them out. Yeah, and I should say that while we're very happy that cryptocurrency has remained a bipartisan or nonpartisan issue, Libra was not that. Libra, the parties were unified

Starting point is 01:02:03 in their contempt for Libra, broadly speaking, right? There are people who may be able to who maybe championed it a little bit here and there, but broadly speaking, both parties. And I don't think we can underscore it enough because we will not have enough time to get into a lot of anti-money laundering law on this call. But Libra was a severe disruptor of otherwise very good policy settlements within the anti-money laundering context. For, you know, from FinCEN, from the international financial crimes regulators, the FATIF, the Financial Action Task Force, We had a really good situation where on ramps to these protocols would be regulated for AML, but individual users of these protocols would not be regulated for anti-money laundering purposes.

Starting point is 01:02:51 And when Facebook announces that this Libra thing is going to be P-to-P, and tons of dollar transactions for anyone with a WhatsApp account are going to be P-to-P, it definitely made AML regulators suddenly say, wait a minute, you can do P-to-P transactions with Libra, and then also say, oh, wait a minute, you can do. do P2P transactions with ether and with Bitcoin and all that's happening outside of these regulated onramps, what should we do? And that's not good either. So I want to turn the conversation to where in my mind, and for some, and it gets crazy.

Starting point is 01:03:27 And for some reason, Rohan doesn't think this is crazy. And so I kind of, I want to read some quotes from Rohan that came out through either on Twitter or through other mediums. He says, I think it's going to be quite easy to find concentrated power, even in those networks on which regulatory pressure can be placed. But, and this is why their crypto-twitter, their head exploded, I'm not going to take their propaganda as gospel that every node operator should be considered prima facie. I'm going to butcher that word. Prima-fasi immune from liability for any activity that takes place on the network those nodes maintain. And another quote, this is a completely decentralized network. You can't hold anyone accountable unless you hold the whole thing accountable.

Starting point is 01:04:12 This is what Rohan is saying about people that talk about Ethereum and Bitcoin on crypto Twitter. This is just saying that you think it should be possible for a large group of actors to collectively engage in behavior that is unlawful for any one individual within that group to engage in, which I think is a non-starter from a financial regulatory perspective. So Bitcoin and Ethereum, there's activity going on in these networks, economic activity. Sometimes we're buying, like Bitcoin is buying drugs. Like sometimes Bitcoin and Ether and stablecoins are used to do bad things. And the crypto industry puts up this, what Rohan's calling this, this veil of decentralization, saying, well, yeah, you know, you use the software to do things, but the nodes that run the ecosystem aren't responsible for the economic activity that happens on them.

Starting point is 01:05:03 And Rohan is saying that, no, they are actually responsible. And it's actually not crazy to say that they're responsible, no matter how many number of nodes there are. What should you guys take on that perspective? Because Rohan is trying to just be like, you know, the party's over. Like, no, nodes are responsible. Like, don't give me any of that BS. Like, if you're running a computer that processes a bad transaction, like you are responsible. Is that a reasonable take to have or is that just completely hairbrained?

Starting point is 01:05:30 So let me let Peter kind of address that veil of decentralization thing, but before that point out that what you started with, that Rohan said, and by the way, again, you should have him on because I feel bad addressing him without having him here to defend himself. But notice what he's saying. What he's saying is, look, the Stable Act technically would allow the government to, go after individual node operators who had some interaction with a die transaction, for example. But he's saying it's not going to come to that, right? There are bigger fish, right? They're, you know, they're going to be the, I'm not sure what it is he thinks it is in the case of die. But in the case of a centralized stable coin, the government will be able to go after that issuer before it goes after the nodes. So he's,

Starting point is 01:06:30 So in one sort of breath, he's saying, look, you guys don't really have to worry about this. Because even though the law allows the state to go after you, they're not. You know, in my mind, you shouldn't write laws that allow. If that's not your intent, then don't write laws that allow that kind of abroad. But I think he's right. But, you know, again, I think we already have, number one, I think we have already good regulation in place that would address his systemic concerns.

Starting point is 01:07:05 He would clearly disagree, you know, whatever. But that's one thing. But then what you do is you write laws that cover decentralized, you know, sorry, centralized, stable coin issuers, and you regulate them how you want to regulate them. When it comes to die, I'm not sure who he thinks. I'm saying it's genuinely. I don't know who he thinks. is left to regulate, but the nodes and the users.

Starting point is 01:07:36 I don't think he means the developers of the software because if he does, and that's, you know, he wants to regulate speech. So I don't know, Peter, what do you want to talk about? And let's be clear, we'll get to Peter, but like let's be clear on when we say the nodes, right, that could be individuals running ether staking notes out of their house.

Starting point is 01:07:58 individual Americans in their homes running stake in his point. That's part of his point when he talked about ability centralization. His point is, it's not as if there's nobody to hold accountable. There are real people who make up this network. Wow. Wow. Peter. And the disconnect there, so I don't think it's hairbrand.

Starting point is 01:08:20 I just think it is, I don't mean to be dramatic because again, I think Rohan has some genuine beliefs that lead him to these conclusions. But I don't think it's hairbrained. I think it's totalitarian. It says, look, there are bad things in the world, and we need people in government to have the unfettered discretion to go after whoever they need to go after to stop those bad things.

Starting point is 01:08:50 And the corollary to that is, as Jerry said, we believe that people in government will use that unfettered power wisely to only go after the lumpy bigger actors in the space and not go after, you know, your uncle who's running an eith staking node in their basement, who's a nice man, you know? But I don't want to trust, I don't know who it would be at the end of the day, the FBI or the Federal Reserve or the FDIC to always use that power without using it in an arbitrary way and without using it in an effectively a totalitarian way. And what's missing here is that laws, so in other tweets where he talks about things like nodes, he talks,

Starting point is 01:09:35 he makes a comparison to counterfeiting and says, well, counterfeiting is always illegal, whether it's a person passing a single $20 note that they know is counterfeit, or whether it's somebody printing thousands of $100 notes. And we usually only go after the really bad counterfeiters. A, that's not true. Lots of disenfranchised poor individuals actually get arrested for passing a counterfeit note that they may or may not have known as counterfeit, actually. That's happened a lot lately. That was extremely relevant earlier this year. Yes, extremely relevant earlier this year.

Starting point is 01:10:06 And B, I would say counterfeiting laws are very carefully drafted so that you have to prove that there is a knowing intent to defraud the person you are trying to pass the note to. Intent matters. Intent matters. And if you are participating in the Ethereum network as a staker or as a miner or if you're a Bitcoin miner, you have no intent to further counterfeiting. You have an intent to validate a public good, a blockchain that has a ledger of hundreds or thousands of transactions that are hopefully improving people's lives with respect to things like identity systems, monetary systems, payment systems. And most of them are completely legal. We can't just crash down every legal barrier we have to allow people in government and to allow people to allow the police to stop every harmful act, even if it means stopping tons of unharmful or good acts. We can't live in that world. I don't want to live in that world.

Starting point is 01:11:09 And I should say that there's a parallel here to that previous bill we talked about, right? So in both cases, there is this. faith that the state will be able to do the right thing in all cases, right? So in one, in the Stable Act, it's that we're going to give us the state this really broad power, but we trust that they're not going to abuse it. They're only going to go after the big fish. And the other one, we're going to have private digital cash, but we're going to trust this privacy board to ensure that. You know, and I think that's just where we depart. you know if men were angels etc etc it's the second time Jefferson's quoted in this podcast

Starting point is 01:11:57 yeah this is a Jeffersonian friendly podcast I suppose you know one other I guess practical question based on what you're saying Jerry and Peter is like let's say that you know Rohan was with is sort of right or like he's he's successful and basically the eth nodes in the U.S. drop, right? Maybe they drop to zero. Well, outside of the U.S., there's still 8,000 eth nodes that continue to run.

Starting point is 01:12:31 And process die transactions. And process die transactions and process other U.S. dollar denominated, whether it's black market, gray market, or whether other regulatory nation state regimes just simply allow it, right? So from a practical perspective, even if it were possible to completely ban or make illegal this sort of activity in the U.S., you can't do it across a, like, multilateral world with different regulatory regimes. And therefore, all you succeed in doing is kind of put the U.S. behind on some sort of adoption track to something that could be essentially the Internet of money or like kind of a next wave of innovation. I mean, does he, do they see that argument in play?

Starting point is 01:13:22 Yeah, so I agree with you with what you're saying. I think what Rohan would say, and again, you know, this is, you know, again, have mine. You're doing great, Jerry. I think what he would say, and I think he's right, is that, yes, that's the point. What we're trying to do is marginalize these activities. So that, yeah, maybe in the shadows they're done by a few people, but this does not become a major mainstream thing, unless it's being done by regulated bank, right? That is the point. And I think he's right.

Starting point is 01:14:04 I think, as I was saying before, while Ethereum, Bitcoin are unstoppable, you can marginalize it, right? Think of BitTorrent. BitTorrent hasn't been stopped. It's still there. you can go use it. But who, you know, BitTorrent has been marginalized, right? BitTorrent should have been really backbone infrastructure for how we move around data on the internet.

Starting point is 01:14:30 And it's like this thing that is, you know, in the public mind is associated with piracy. And it really, as a result, in the technology in the corporate world, it's never really considered as a potential solution to certain problems because it's just been marginalized. And the same thing could happen to crypto. Another example is Tor. Yeah. Tor is actually kind of an interesting example because it's a product of U.S. government research.

Starting point is 01:14:59 And there was a deliberate desire to get the private sector and individuals using Tor, because if the only people using Tor are U.S. agents in the field, you can identify that network traffic. If those U.S. agents in the field are amongst a bunch of other randos in Iran or wherever else who are interested in internet privacy, then the US agents in the field have privacy. So Tor is another interesting example. I mean, you know, I think this came up in Twitter a couple times. Should users of Tor? Should Tor relay nodes or exit nodes be held liable if people are accessing stablecoin networks through Tor? I suppose under this bill they would be. And I don't know

Starting point is 01:15:37 how I don't know how the bill's supporters feel about Tor. You know, if they value privacy, they might I like Tor, but this could outlaw Tor. But the lesson from Tor is if you are a state, a powerful state in the world, like the U.S. government, you do not want to ghettoize these new technologies because you will lose control over them completely. They will go to the corners and you will lose visibility into those networks and you will lose power over those networks altogether. Much better to play nice with these networks, understand them, utilize them for your own.

Starting point is 01:16:13 uses as a state and maintain, you know, points of regulation like the exchanges, like the, like the centrally backed stable coins, regulate them for consumer protection and maintain power and visibility into these systems. Don't send them away. Yeah, Ann Foster development of industry on top of these networks that is American, right? If that's what you care about, out, that's how we won with the internet, is that we fostered development on the internet that was American. Should do the same thing here. Absolutely, guys. Yeah, 100% on your team with respect to all of these things. I guess maybe just two things to quickly address maybe some misconceptions and then we can wrap this whole

Starting point is 01:17:04 thing up about like kind of where David started, which is the fight to come and how folks can join the cause of Coin Center. You know, the first is the chances that this actually happens, guys, pretty slim. Like this bill, does it, I mean, we've been talking about it because I think it's a very interesting angle, obviously, but is this really going to happen? It's anecdotal at the very least. Yes. Yeah, this particular bill, I would put, you know, the probability that it becomes low, right? I think there's a lot of things that would have to happen for this bill to make it all the way through.

Starting point is 01:17:41 So I would say it's pretty low, but similar stuff could happen. And the threats to nodes could come not just from financial regulation. They can come from other quarters, right? It could come from anti-money laundering regulation. So we always got to be on the lookout. The second misconception maybe I want to address is what we're not saying in this, I think, conversation is that there can't be some sensible regulation. around, say, stable coins, right?

Starting point is 01:18:14 It's not this, clearly. But I'm sure you guys would agree that the U.S. could do things from a regulatory regime with stable coins. Any comments on that? Well, I think, you know, one thing we've advocated for for the last three years, which Representative Tili might find interesting, I don't know, is that the state money transmission licensing system, which is how a lot of these central asset-backed stable coins are regulated, like USDC,

Starting point is 01:18:44 is a strange archaic system that you'd have to get a license in every state in the U.S. where you have customers. So you have to accumulate like Pokemon, all 53 state and territorial licenses. And you get examined by each of those, mostly independently. Some states coordinate, but you've got like different people checking your books from different states all the time. You have to pass multiple criminal background checks. It's not sensible regulation.

Starting point is 01:19:08 It's not good for the common. because the companies have to suffer these costs of regulation. It's not good for the users of money transmission services because some states, like I always pick on Alabama, have effectively very little in the way of consumer protections. You can get a money transmission license there by merely posting a $5,000 bond, generally speaking, irrespective of the amount of money you're moving. So they're woefully underprotected. So why not get rid of this state-by-state approach, which is bad for consumers,

Starting point is 01:19:39 and bad for businesses and replace it with a single federal money transmission license or an alternative license. So if people want to get out of the state licensing conundrum, they can get this better federal license that would have better controls and more sensible regulations for the parties being regulated. I think that's a good approach. And we've advocated that for the last four years at Coin Center. So Peter, Jerry, we want to thank you for coming on the show. and we want to wrap up with this kind of just bird's eye view of this whole conversation. Recently, a friend of the pod, Jake Shravinsky, tweeted out something along the lines of like the time to get your assets off centralized exchanges was the day you bought them.

Starting point is 01:20:22 Then the second best time to do that is right now. Seriously, do it now. And that tweet actually kind of reverberated around like almost every single Discord channel that I'm in and all the chat groups. because that Jake is not somebody to just like ring a random bell. And then this came at the same time after Brian Armstrong talked, who made a tweet thread about having to K-YC external accounts in relationship with crypto exchanges. And so like there seems to be something like boiling under the water

Starting point is 01:20:53 with people that are very in tune to these conversations. And kind of like what we said at the beginning, this stable act fight doesn't really feel like the main fight. What is the main fight? Like what are people worried about? Because there are definitely people that are worried specifically right now. Like what's going on? Like what do we need to be prepared for?

Starting point is 01:21:10 Like what should we be paying attention to? So the, so here's one thing that occurs to me is that if you, one of the reasons we're able to be successful at Coin Center is that we're independent, we're taken seriously by folks in government. The other reason is that we're able to be successful. able to be discreet. So if people in government, whether it's regulators, folks in Congress, are thinking of doing something, we can go and provide them advice about that's a good idea, that's a bad idea, this is how you could improve it, you shouldn't do it at all, we're able

Starting point is 01:21:51 to go in and give advice because they know that they're going to get that advice in private. And if we start tweeting, we're not going to get invited back. Or are you mentioning something on a live stream, perhaps? So that's one thing I would say. But what I would also say is, look, the Secretary of the Treasury has been very, has publicly said in the past that he's concerned that unhosted wallets could be, he said new number to his bank accounts, right? So he's concerned about that.

Starting point is 01:22:30 And Fadda has sort of echoed that in their 12-month review in May. So that's definitely in the water. And look, to be perfectly honest, yeah, unhosted wallets can be used by bad actors to do illicit bad things, just like email can. Right? And so it presents a risk. And there are sensible ways to address that risk and really bad ways to address the risk. So that's what, you know, that's an area that I think, you know, concerns us. And, you know, we've been doing some writing about that.

Starting point is 01:23:12 In defense of Jake, it's probably always a good time to get your money under your own. Yeah, yeah, crypto. Yeah, yeah, crypto. Not your keys, not your coins. Yeah, it's definitely an evergreen thought for sure. Well, absolutely, guys. We really appreciate you sharing your insight today. This is a fight that I think that the bankless nation can definitely support you on. Some tangible ways to do that, guys, are go to the coin center, get coin grant. A dollar goes along away. David, at least one dollar because it gets amplified by like 60, 70, 80 more dollars after the fact. Yeah, so if you don't know how this works, right? So you're $122. Excuse me. Oh my God. So you're $1.00. gift, like one die, one US DC, it doesn't really matter. It can be a stable coin.

Starting point is 01:23:59 It cannot be a Starbucks dollar, I don't think. We're not there yet. But if you give that, that gets amplified by 120x right now. And this is a fight I think worth having. We need voices like Coin Center in D.C. Just educating, just talking to folks in Congress about these issues. So make sure you do that. We'll also include some resources for you,

Starting point is 01:24:21 including Peter's fantastic article about the, unintended consequences of the Stable Act, some other resources for you as well. But Peter and Jerry, it's been a pleasure to have you. Thank you so much for joining us for State of the Nation. Thank you. Thanks for having very fun. Thanks, guys. Cheers. Thanks. Take care. All right. Bankless Station, this has been a long one, but it has been fantastic. As always, none of this was financial advice. Eth is risky, die is risky, so is Bitcoin, but this is the frontier. We're glad you're with us on the bankless journey. Thanks a lot.

Bankless - SotN#26: Defending our Nodes w/ Coin Center's Jerry Brito and Peter Van Valkenburgh

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