Odd Lots - A Human Rights Activist Explains Why Bitcoin Is So Important to His Work

Episode Date: December 23, 2019

When people think about Bitcoin, they often think about neo-goldbugs who hate inflation and the Federal Reserve. But beyond the financial case for it, there's a moral, human rights case as well. On this week's podcast, we talk with Alex Gladstein, the Chief Strategy Officer at the Human Rights Foundation. He explains why he sees Bitcoin as an essential tool in his fight for human rights all around the world.See omnystudio.com/listener for privacy information.

Thanks for listening to OddLots. Follow the show on Amazon Music for more future episodes or just ask Alexa play the podcast, OddLots on Amazon Music. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a big line. It's a very much. a commitment to your clients. We're talking top grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio.

That's vanguard.com slash audio. All investing is subject to risk vanguard marketing corporation distributor. Hello and welcome to another episode of the Oddlots podcast. I'm Joe Wisenthal. And I'm Tracy Allo. Tracy, I don't want you to take this the wrong way, but... Uh-oh. Here we go. No, I know. But I kind of feel like, of the two of us, you kind of are a little have, try to think how to phrase this in a polite way. You have like a little bit more like, no, no, it's not that bad. But you have like a little bit more like sort of a cranking Crankish conspiracy theory-minded sympathies than me. A little bit.

A little bit. But I am. Don't you think? No. No, the problem is I'm surrounded by conspiracy theorists and I like to be fully informed. So I listen to what they have to say. That's, that's it. I'm a depository for conspiracy theory.

But like you kind of like are into gold and silver and you kind of hate the fed a little bit. and you kind of believe that there's bubbles everywhere. Just a little bit. I'm not saying like full on, but you're like sort of like, you're like kind of curious. Like you're open to it, right? This is like scandalously libelous. I don't like gold or silver.

I keep getting given it for my birthday and I end up with it. I think the Fed's done a reasonably good job, although I certainly have some advice for them on how to proceed. I do think the corporate bond. market is overvalued and there may be some trouble there in the future. There. Those are my opinions. So the only reason I brought this up is because even though I do feel like you're a little more like crank curious than I am, I actually think that on one topic, you're a little like more skeptical than I am within this whole like the crank realm. What's that? Digital currencies.

Yes. I would agree with that. Yeah. Like I feel like you're. pretty, like, deeply skeptical of them and you're, like, kind of the view that they're all scams. And I'm, like, pretty skeptical of them and think they're mostly scams, but I'm not, like, as entirely negative on them as conceptually as you are. Wouldn't you say that's fair? Well, so I have some problems with digital currencies, but as a concept, I think they're really, really intriguing. And what I like is when people basically get up and say the only reason for digital currencies to exist is because of regulatory arbitrage purposes. Like, if we can start from that basis and just be honest with ourselves, then I don't necessarily have a problem with them,

but I still think they are going to face some massive, massive challenges. Okay, that's fair enough. Well, today, I'm actually kind of hopeful that in our conversation today, which obviously at this point everyone's figured out is going to be about Bitcoin and perhaps other cryptocurrencies, that actually we might be able to arrive at a place where we see things from a similar perspective. Okay. I'm willing to have my mind changed, so I'll be interested in this one. I think that's optimistic. So you mentioned that you're kind of believed that maybe there's a niche for cryptocurrencies and some sort of regulatory arbitrage. And I would argue that you could slightly accept that and broaden it a bit if you sort of think of cryptocurrency.

as not just regulatory arbitrage per se, but in allowing people to engage in transactions that maybe big government or big corporations, you wouldn't want them knowing about or maybe they wouldn't allow you to do. It's kind of of the same category. Such as illegal transactions? Well, some of them might be, but even, you know, illegality can be either moral or immoral depending on the country and the law and context. True. And this is something we did touch on with Jill Carlson a while back.

Like the idea that what's deemed illegal in Venezuela might actually, you know, in other countries be deemed necessary for survival. And people are using Bitcoin in order to survive. Yes. Right. So today I'm very excited because we're going to be talking to a guest that really ties these concepts together. His background or at least his current position is not. what you would expect from a sort of typical crypto guest or sort of Bitcoin believer. Our guest today is Alex Gladstein. He's the chief strategy officer at the Human Rights Foundation.

And he talks a lot about the sort of intrinsic connection he sees between Bitcoin and human rights. Great. All right. Well, let's bring Alex in. Alex, thank you very much for joining us. It's a pleasure to be on. Thanks for having me. So like I said, we talked to a fair number of people in the crypto world from time to time. Most of them are in roles that are sort of crypto-specific. Maybe they work for a VC fund or maybe they're just investor or they're a software developer. You have something that's sort of a distinctly different perch, I would say, than many of the people who are interested in this space. Talk to us just, first of all, what do you do?

What's the Human Rights Foundation? And when did your interest in digital currencies arise? So the Human Rights Foundation is a nonprofit charity based here in New York City that I started working for in 2007. And the mission of the Human Rights Foundation is to help promote freedom and human rights and closed societies. So we work with people who live under authoritarianism around the world. And by our internal metrics, about 53% of people live under either a partially or fully authoritarian regime. It's about four billion people. So the kind of people that I'm talking to all the time are struggling against various injustices in places ranging from North Korea to China to Saudi Arabia to Burma to Russia to Venezuela to Cuba to Zimbabwe, etc. And it's kind of from their perspective that I learned about why money not controlled by the government would be really useful.

So my perspective is just very different for most people. I would say even from the general human rights community because I have this particular. focus on trying to help people who live under authoritarian societies where, you know, they don't have independent media, independent courts, they can't sue their government, they don't have an EFF or an ACLU to donate to, they can't write an op-ed in the newspaper, you know, their ability to hold their government accountable is like almost non-existent. So what these governments tend to do is close down the bank accounts of people they don't like or hyperinflate the economy or, you know, just basically steal or seize.

or confiscate funds from organizations that are critical of them. So in this context, Bitcoin is very interesting. So walk us through the exact use case then, because you're talking about very authoritarian regimes that have almost complete power over their domestic population. So I'm curious to what extent does Bitcoin actually help those people offset the power of the state? Sure. And I'll get into a couple of examples, but I do want to make a plea to the listeners, that this matters for everybody. Generally speaking, this is what I'm about to say

is not a conspiracy theory. Money, the kind of money that you use every day is transforming from a bearer asset into a surveillance and control mechanism. That's not a conspiracy theory, meaning the money that I use when I use, whether it's WeChat if I live in China, perhaps visa here, et cetera, et cetera.

Like the way that I do transactions is becoming increasingly controlled, surveilled, et cetera. Moving away from a society where it was okay, and widely accepted to use basically anonymous money in the form of cash. Like in 15, 20 years, no one will use paper or metal money. So I think that this transition is the core of the matter and is why having Bitcoin and what will be built on top of Bitcoin in the future, which will be like basically, hopefully, private payments, will be something that can save us from essentially either

like Big Brother or surveillance capitalism. Now, that need is much more acute, obviously, in a place like Iran or China or Venezuela. So I'll just give you a couple examples. So in Iran today, due to both American sanctions and financial controls from the Mullahs, it's impossible really to send money from the West into Iran if you have family there to help them, right? So I know someone who's living in London. She's Iranian and her partner's father's very sick in Tehran, right? So there's no way for them to send money to help this person's father. However, they can use Bitcoin.

So within 20, 30 minutes, they'd have a non-KYC Bitcoin account, meaning it's not connected in any meaningful way to their identity. The Bitcoin appears on his father's phone in Tehran, and then he uses, like, local exchanges to turn it into Rial and get medical assistance. So this is, like, a really interesting and, I think, important way to show that, like, this can be a lifeline. Obviously, you heard from Jill on a previous episode about how some Venezuelans are taking advantage of this as well. Some people are earning money in Bitcoin in circumstances where they couldn't earn money, like if they live in Iran or Venezuela, for example.

I've seen some uptick in Palestinians using Bitcoin, both in Gaza and the West Bank. Obviously, there's quite a bit of uptick in places where the economy is cratering like Lebanon, Argentina. There are organizations in Hong Kong which are starting to get their bank accounts shut down, right? So, for example, there was an activist organization quite recently that got its HSBC account closed for political activities. Well, they can't stop me from donating Bitcoin to them. And probably the most important civil society organization in Hong Kong or one of them is the Hong Kong Free Press, right? So the Hong Kong Free Press has been accepting Bitcoin donations for a while now, and it's been very, very helpful to them. So when you're on the front lines of freedom, I believe that even today, like in its sort of infant state as a technology, Bitcoin can be extremely helpful.

So obviously there's a lot to explore there. I just want to talk a little bit more about, as you say, you're seeing it happen on the ground because there's a lot of people, and this is kind of something that we talked to with Jill, is there's certainly a lot of people in, I'm sure you come across them who like to pontificate about how Bitcoin can help people in emerging markets or whatever all while sort of, you know, sitting in their we work space in San Francisco or whatever without actually having interacted. They usually talk about why some other cryptocurrency can, but sure. Right, right, exactly.

The one that they're working on. The one that they're working on is going to be great for, right, payment, cross-border payments. No, and to be honest, there's a lot of whitewashing in the space. Somebody's working on some new token project and they're like, oh, they come to me and they're like, this has happened numerous times. You know, we're working on this new token. Do you think you can help us, like, find a use case somewhere? And I'm like, no, this is not what I, you know, this not what I'm doing. But in terms of like, you're really seeing it.

You know, is it more than just a sort of isolated case here and there? Like, what are you actually seeing on the ground in terms of up to? Yeah. So, for example, I know a guy, his name's Mo. He's an entrepreneur. He was born in Aleppo, Syria. Now, of course, he lives in London. But he does some, like, translation and creative work.

His company does this stuff. And there are people inside Syria who still work for him. So he pays them in Bitcoin. And they use Facebook groups to turn the Bitcoin into Syrian money when they need to. So in that case, the Syrian money is like a disaster from, like its perspective against the dollar, for example. So they keep it actually, they actually use the Bitcoin as like their savings account and then they withdraw it essentially via these like peer-to-peer groups into the local currency

when they need to spend it. Now, of course, that's a fringe example. There are not that many countries in the world that have, you know, inflation that high, but it's, we're talking tens of millions of people across different hemispheres, right, from Venezuela to southern Africa to the Middle East. So it is something that is making a, um, making a, a big difference, I think, for many, many people. And it won't matter as much to people who live in New York or London or Tokyo in the near

future because we have stable economies. It's easy for us to get credit. We can get loans. Our financial system works pretty well. So people kind of, I think, gloss over the real value in Bitcoin. So when I talk to human rights activists about this, I think it's very similar to encrypted messaging in many ways. Like the average person in New York City probably doesn't need.

need encrypted messaging. Or maybe they do, but generally speaking, they probably don't think they do. Same thing with Bitcoin. And they probably don't. But the average person in maybe Zimbabwe or in Iran may really need encrypted messaging because they're trying to talk to their family or a loved one who is, you know, in an opposition political party or whatever. So I think both encrypted messaging and Bitcoin are tools that are vital for people who

live under very difficult political environments, but whose value may not be so easily understood by people who live under open society. Okay, well, let me pick up that thread. Just on the point of the value, is the value more that you have payment processing that's basically done by a decentralized entity and allows you to get money into and out of a country, or is the value that Bitcoin is supposed to be anonymous and therefore untraceable? Like, which one of those things is more important from your perspective? Right. Well, Bitcoin is pseudonymous, but it is much better than, and as a payment, for example, if you're trying to evade someone looking at you, then using something that's linked directly to your identity. It's not ideal. And there's a lot of work that needs to be done in Bitcoin to make it more private. But that works being done, and it's very interesting. But what I would say are the couple main use cases. Number one is like sanctions breaker, I guess we could call it. So you're being prevented from accessing the international financial markets for some reason. probably not your fault. Like the average 23-year-old Iranian entrepreneur, she didn't do anything to not be able to buy an iPhone. She didn't even vote for her leaders. It's a dictatorship. So why should she be punished, right? So these people get to access goods and services from the outside world because of Bitcoin because it breaks sanctions. The second one is more like the example I gave

with Syria is as like a sort of confiscation resistant parallel savings account. Like the Syrian government just has no clue that these people have this Bitcoin. They have no reasonable technical way of figuring that out, and they can't confiscate it. So for the longest time, you know, the human with more violence has been able to just like take the money from someone else. Now that you can be like clever about it and hide your private key, either, you know, somewhere on your phone or written down somewhere or even memorize it, we have now an asset that is like much, much more confiscation resistant. So the censorship resistance is important. The confiscation resistance is really important. And over time, the privacy aspect of it as it becomes more mature will be very important,

especially for people, you know, in kind of advanced economies that don't want all their data being like sold to the data markets. So that's it. It's perfect because that's where I was going to go next. You said at the beginning, and I agree with you that it's not a conspiracy theory to say that money is transforming from a bearer asset, something that I can just hand. to you and nobody knows about it to a sort of tool of, you know, one might put it surveillance capitalism or at a minimum, just sort of this series of credits that are being easily viewable by corporations and government. And when I talk to or hear from people in the West who are like extremely negative on Bitcoin, and there are a lot of people who are and think,

oh, it's just a Ponzi scheme. I do think this is one area where people haven't fully thought through the implications of, well, what happens when literally every payment week? No, they don't. And I watched a debate this summer between the head of Bitmex, Arthur Hayes, and Noriel Rubini. And Noor Rubini, he just at one point got up and he was yelling and he was like, well, you know, if these people can use WeChat and Apple Pay, why do they need Bitcoin? And we're just all laughing because that's why. You don't want all of your payments to be controlled by a single entity. You know, it's just a matter of financial freedom and sovereignty and privacy.

And I say that as a person who's pretty progressive, politically speaking. I don't think this is some radical Ein Rand thing. Like, I think that this is something that can actually be a great equalizer and can allow hundreds of millions of people access in a permissionless way to a savings vehicle that they currently don't have access to. Currently, if you're, let's say, in a lot of the situations I'm looking at, how do you save money, you buy sheet metal or cows or something like that. This gives them an electronic way to have something that's confiscation resistant and parallel and is much more liquid in some cases.

I mean, the only reason I'm more excited about Bitcoin now than I was a few years ago is because the ability for you to exchange it into Fiat is on the rise. In almost every major urban city in the planet, even in Khartoum, you can sell your Bitcoin for Fiat. Today, Bitcoin on its own is not very useful to people because they can't buy things with it. And I think we'd be naive to think that that's going to change anytime soon. But as a bridge between monies and as a way to connect people in a very quick way, in a permissionless way, in a censorship-resistant way, it's really shining, I would say. So can I pick up that thread? Because I agree that the transition to digital payments is going to cause all sorts of privacy issues and also potentially harden financial

inequality because people are only going to get served up products and offerings based on their own transaction history or browsing history or whatever. But my question is, isn't the problem with the company or the platform that you're actually transacting with? So for instance, if I go to Amazon and assume that Amazon could accept Bitcoin and I buy a book, a subversive book from Amazon and I pay in Bitcoin. Isn't the problem still that I'm buying through Amazon versus, you know, that I'm using Bitcoin? Correct. So right now, the way to get around that is to use gift cards. Gift cards are very important part of the world economy. A lot of people, of course, in America, something like 25% of Americans are underbanked, essentially. I was naive enough

for a lot of my life to not understand when I walked into a Walgreens or a CVS that the gift cards weren't for Christmas gifts. People who don't have bank accounts, how they make electronic payments. So we have this kind of like legal and moral precedent right now that like using cash to buy gift cards and buy things on Amazon is totally fine. And we want to hold on to that. We don't want to let that get taken from us. We need that. So I would argue that like what I'm seeing is the birth of something that may work, which would be private payments on top of Bitcoin in the same way that like Visa is like a layer on top of the U.S. dollar. It's like a credit system on top of the dollar.

You can think of lightning as a credit system on top of Bitcoin. So what I'm potentially seeing, because Square is like heavily invested in this and has said that it's a matter of when, not if, that they will like release this into their cash app. At least Jack Dorsey said that maybe six, eight months ago, that you'll be able to use what is basically an anonymous gift card to buy stuff at Whole Foods and Starbucks and Amazon in the next year or two using this technology called Lightning. So it'll debit from your account. The merchant will see the money. They won't know anything about you. They won't know your last transaction, your name, your address. And it's fine because they didn't need to know that stuff.

And that's not how it used to work. And, you know, that was the way things were. And I think it's like an aberration historically that when you pay for something today, you reveal all this information about you. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real.

Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com.com. That's vanguard.com slash audio. All investing is subject to risk vanguard marketing corporation distributor. Do you think it's weird how, something that I think is weird anyway, I don't want to put words in your mouth, is there are a lot of people, tech critics, many of whom are tech journalists who really sounding the alarm these days. It's picked up over the last few years about the incredible power, influence, and data that Facebook, Amazon, et cetera, have.

over our lives. Like every day you pick up the New York Times and there's some article about how awful these companies are. And yet, I feel like the mainstream tech critics are still like pretty dismissive of Bitcoin and still think it's like this like weird sort of Ayn Rand Silicon Valley project and not really putting two and two together as you're putting it. I mean, look, if someone creates something better that does what I'm describing and gives us essentially digital cash that allows me to pay for things that I need to buy in my life without disclosing all this information about me or like, you know, surrendering all my liberties, I'll be all about it. But you know what? This is it is what we have. This is the only way to make a digital payment without a third party.

This is why Bitcoin is such a revolutionary financial technology is that it allows two entities, you know, on the internet to exchange value without a centralized payment processor. And that was the big deal. And that's why Satoshi Nakamoto's, invention is so revolutionary. And that is what I think allows us to start to think about a parallel way of doing things as opposed to relying on all these third parties when we do digital transactions. Why people haven't figured this out yet? I'm not sure. I mean, it's quite, it takes a lot of open-mindedness, let's put it that way, to like kind of look at this and be like, well, maybe Bitcoin's part of the answer. Well, by the same token, you know, you mentioned that your

own views politically tend to be more on the progressive side. What is the reaction to it among fellow human rights activists in the West that you deal with at work or other human rights organizations? Do they typically have the same initial reaction that's mostly like sort of like Ein Rand, Chris. It's weird because for many years working in the human rights space, we didn't even think about money or currency at all as relevant. And I remember this vividly, I invited his Zimbabwean opposition leader named Ivan Mouire to speak in an event a couple years ago in San Francisco with Joel Carlson, actually. And we said, hey, do you want to come talk about hyperinflation? We just want to do an event on hyperinflation and kind of allow people to understand what it's like.

And he said, sure. And I asked him to come and prepare some remarks on what he saw as his Zimbabwean happened in his lifetime economically. And he's like, no one's ever asked me to do this before. I thought that was kind of strange. But when he got on stage and he started talking, he took out a necklace that he was. was wearing under his shirt. And it was the 1980s in Babuand Dollar. And he was like, we all wear this, all the activists,

and not all of them, but a lot of them, as a symbol of what our economy used to be. It's fascinating. And I just think the money and currency we use is just for whatever reason in a different hemisphere or blocked off from what we think of as human rights. So for many, many years, I didn't even think about it. Like I saw Mark Anderson's New York Times article in like 2014

about Bitcoin, which I still thinks one of the better explanations of what it is. And that kind of put it on my radar, but it wasn't until a couple of years later that that someone I knew who worked at one of these mining companies, Bitfury, was like, hey, we should like maybe get human rights activists to learn about this that I started to really dive in. And then it just sort of, it went from there. But the human rights organizations today, Amnesty International, Human Rights Watch, if you just search the word Bitcoin, you won't find it. It hasn't gotten there yet. Even EFF and Wikipedia, which did receive Bitcoin donations for a while. And then, like, they, you know, early on and then they, like, got rid of it.

And now they're kind of becoming more warm to it. I would say even the digital civil liberties organizations are really, like, have positioned themselves to be very skeptical of it, which I think is a mistake. I think they should be open-minded to it. So we're not there yet with human rights organizations. They just haven't. It's not that they're, like, really against it. They just haven't really realized that this is going to be really key. So money has always been in twilight.

mind with the notion of the sovereign state in many ways. So do you worry that in arguing that Bitcoin or some new digital money technology can successfully bypass the state and create a sort of parallel payment system? Do you worry that by arguing that, you know, you'll make it sort of more likely or it will become inevitable that governments eventually crack down on this? Of course they will. I mean, we're seeing that now. I mean, look, I think Bitcoin properly understood and manifested will be a much greater threat to authoritarian governments than democracies. I think there's ways in democracies for citizens to have like back and forths and negotiations with their elected representatives. And we could come to agreements like, for example, hey, maybe it's cool that like under $2,500 U.S. dollars when you make a payment digitally, it can be anonymous.

That's fine. But you want to buy a house, you want to pay for tuition, you want to get a big loan, buy a weapon, whatever. maybe you need to provide ID. But to me, this is like something that we could actually negotiate in a democracy, especially one like the United States where we have a history of like cash being like an important American value. In dictatorships, I think Bitcoin is going to be much more of a problem because they won't want to give up their control over money.

So, I mean, obviously I think Bitcoin separates money from state. And I think that's going to be a really big problem for authoritarian systems because of the way that they kind of seize most of the money in the economy and and and and then do things that the population probably wouldn't be so hot on and is of course this happens in america we just saw how much money did our government or at least my government spend on wars in afghanistan and iraq something absurd i mean i didn't choose for them to do that so like super long term if i'm thinking utopian i suppose i would say that like an economy that's more based on this kind of um asset would hopefully prevent that kind of excessive spending that would lead to things like police states and unnecessary wars.

But that's very far into the future. So within the U.S. or within the Western developed context, one of the memes that you heard early on is that Bitcoin is useless except for buying drugs online and maybe that's it. And some Bitcoin defenders said like, oh, that's really unfair. But I still kind of think it's fair in the sense that the properties of Bitcoin that make it easy or possible for someone in Iran to send money to their ailing relative to get health insurance or to get health care. The properties that enable that transaction, which most people think are good, are the same properties that allow people to engage in. truly elicit things in the West like buying drugs. There was also a big bust recently of a child pornography ring and there were some Bitcoin related payments. How do you sort of address the fact that there is a neutrality in some sense to the technology such that we can sit here and

talk about all the great things that allow people to do for freedom, but also in theory it makes doing very bad things also possible. Yeah, I mean, I think it's really similar to the debate about encryption. Law enforcement may say in Britain and Australia, honestly, which are turning into the biggest predators of private information, which is bizarre, given that they're democracies. But they're basically trying to say, well, if you guys want to have like peer-to-peer messaging that's encrypted, we want to be in the room. You know, we want to be like the third party, which is, which is crazy. We need that ability to communicate privately. And it doesn't mean we're doing bad things. there's some studies that have been done.

So there was like an MIT-based study that looked at Bitcoin activity. I think it was a study that was done last year. And they looked at about 2% of all the transactions they viewed as criminal, per of the laws of the United States. Now, that's very low. From what I've seen, about 9% of the U.S. economy is like, quote, unquote, black market are illegal. And the average OECD country is like 13% is what I've seen.

So I think over time, the amount of Bitcoin being used for illegal stuff will probably probably flow up and even out around what 10, 15%. But I don't think the way, I don't think the medium or the type of money we use will make people any less evil or good is my general gut feeling. And I think it's, again, it's like we need it. Like if we don't want to live in a society where all of our behaviors and movements and transactions are controlled and where we cannot criticize or dissent or protest, then we're going to need the version of digital cash. The example that was so vivid I saw this summer was that Hong Kongers were starting to use cash to buy like metro cards so that they could go into the subway system and then exit without being spied on because if they went and used their like ID linked octopus card to do so, their employers could figure that out and then fire them. And you need to be able to protest to hold your government accountable. This is like something really important to democracy.

So right now the Hong Kongers are able to do that because they have cash. but in 15, 20 years, they won't have cash. So how are they going to protest, especially in an urban environment? This is another reason why I think digital cash is just so vital to democracy. I would just basically say that, you know, financial privacy is essential to a healthy democracy. I would ask people to show me other options. I'm certainly open to it. But like Bitcoin plus second layer technology that makes it private seems like the best one right now.

So the trope for technology. is always that it starts off well-intentioned and then at some point sort of becomes terrible. Why would Bitcoin not be the same? And the reason I bring that up is because, like, for instance, we saw China outlaw Bitcoin very, very early on. And now within the past few months, China's central bank has come out and said they're exploring the idea of doing their own digital currency. So how would we ensure that Bitcoin or other digital payment technology doesn't become co-opted by bad actors or used to bad ends. Yeah, that's a great question.

I think we need to separate the technologies here. So I would compare what you just said, comparing like Bitcoin, which is like open source, censorship resistant, decentralized money that nobody owns or no one has, you know, authority over. Comparing that with what the Chinese are going to build, which is going to be highly controlled, highly surveillable. I mean, I think my personal view of what they're in. is to replace the M-Zero inside China with something that's trackable, get rid of paper metal money entirely.

I view these as like as different as Signal and and WeChat. Like, yes, they're both digital currencies, but they're very, very different kinds of digital currencies. So I think we just need to to bear that in mind. But it could go wrong. Yeah, like my dystopic view of Bitcoin would be much like the original open Internet was perverted into like these like kind of siloed data collection mechanisms like Facebook and Google, et cetera, and that original promise of connecting us all privately was betrayed. I think what could happen with Bitcoin, what I think is most reasonable as a worst case scenario, is that all of the exchanges and places and marketplaces that we go to

exchange Bitcoin and turn it back and forth into Fiat become surveillance points. And then it becomes not very useful. Well, I was going to go exactly there. It seems like you could envision a scenario in which the government really does crack down on making sure that every entryway into Bitcoin is very heavily compliant. K-Y-C-A-M-L, you have to give over tons of information. Or illegal, like the Indians have made it. And so that's my next question.

What if one day the government is like, you know what, you can't banks, Bank of America, Wells Fargo, Charles Schwab, you can't make transfers to Coinbase, you can't make transfers to, et cetera, whatever. And the industry is still not that big, so, you know, they're probably not going to have much leverage to fight back. Do you worry about that? And could the ecosystem still thrive and could it still be as a liquid if Western market regulators just said, you know what you're not allowed to deal on this? Yeah, I mean, look, I think governments, it's strange, actually, once you have a full comprehension of what Bitcoin kind of makes possible, it's bizarre that they haven't tried to kill it more aggressively.

Yeah, that's what I think. It's really weird. And I think over time, they're going to regret it. in a big way later. That's a nice thing too. But let's just for a second imagine that governments have all done something they've never been able to do. All 190 plus have all agreed that, oh, we're all going to ban Bitcoin, whatever.

Okay, so the price really tanks. It becomes something that's much harder to get, obviously. But even so, let's say I'm in China five years from now, and it's become completely very difficult to get. And I can't use – there's no more cash in China. So, like, it's very difficult to buy or sell. I mean, I could still invite my friend over to my house, and he could help me with homework or something. And I could pay him on WeChat for helping me with homework.

And on the side, using two non-KYC wallets, you know, he could have sent me Bitcoin. Like, I don't think you can get rid of it. I think it's open source software. I mean, it's almost like an idea. It's very hard to kill. So I think you can damage the price. But ultimately, as long as the mining continues to chip away. and process the transactions.

And what's really interesting is that Xi Jinping, because he's so authoritarian, what we're watching is some mining move out of China because it's too strict. And it's decentralizing and going to other places. So as long as mining itself can be done, then I think the network will survive and provide this very important thing that we, I think we need.

Alex, that was a great conversation and I really appreciate you joining us. Super fun. Thanks for having me on. Thank you. Thanks, Alex. That was really interesting. So, Tracy, in the beginning, I sort of speculated that maybe this conversation would be one where we kind of saw eye to eye and maybe it sort of fit within both of our views on the space. But I'm curious if you felt the same way because it felt like we kind of, it felt like it kind of made sense.

First of all, 20 or 30 minutes later, I still haven't forgiven you for calling me crank curious. But secondly, look, I'm totally on board with a conversation about the privacy threat posed by new technologies and specifically by digital payments. I just got back from China where, by the way, I had to register my ID in order to get on Allie Pay. And it's very, very clear that every transaction on there is recorded. So absolutely it's a concern. I still have my doubts about whether or not Bitcoin is the solution to it. And the big question I have, and this sort of gets to like old theories from international relations, the big question that I have is whether or not states are going to allow their

sovereignty or their power to be undermined by this thing that is very clearly, you know, it's almost explicitly stated in the white paper and the way cryptocurrency enthusiasts talk about it, something that is clearly aimed at undermining or bypassing their authority. I completely agree. And to Alex's point at the end, if you think through the implications of this and actually just sort of like go several steps down the road, it is very surprising that any government even in the West has been as tolerant as they have. Not only have they not like really cracked down, like we actually have like regulated futures

and stuff like that that add liquidity to it. Like, it's really weird because if you really think it through, and I almost wonder whether they will, you know, come to regret it. And you sort of wonder if maybe they're sort of cowed by this idea is like, oh, we don't want to stifle innovation. And someone came in and gave a presentation about blockchain. And that got them really excited. But it does seem like if you really just sort of like follow the thread, the clashes, you would expect them to intensify over time. So here's something you'll like. almost two years ago to the day. And I hate to do this, but I'm going to refer to one of my

previous tweets. So I tweeted, it's obvious regulators are going to end up regretting, not acting on Bitcoin sooner. On the one hand, if it fails miserably, there are going to be burned investors. On the other hand, if it's a wild success, their authority or efficacy will be threatened. To me, it's so, so clear they're going to regret this down the line. I completely agree. One other point that I thought that Alex made, which was really, I find to be very compelling and a good question to pose to people is if we can establish that there is something concerning about the fact that every one of our transactions will be traceable online with the trend we're going to, his point is like,

okay, maybe there's a better solution out there to digital cash, bearer assets that allow me to pay you without person C being able to see or. or approve of the transaction. But they certainly don't exist yet. And no one has really put forth a better, more compelling idea. Some people talk about central bank digital currencies that could be designed as cash replacements. It doesn't really seem like many central banks are enthusiastically embracing that right now.

But it's certainly true to his point. It's like, okay, well, like, if we can accept that it's a problem or it should be of a concern to society, then what do you propose as the better approach to enabling these kinds of transactions? And right now, I don't think many people have thought that question or let alone come up with good answers to it. No, that's true. It feels like more people should be working on it. And the other thing I would just throw out is there's sort of a convenience aspect to all of this,

which sounds terrible because we're talking about human rights. But what I mean by that is there are ways to bypass the system. or conceal your identity currently. So Alex mentioned gift cards, of course, and then, you know, you have people in Syria who are using Bitcoin and then exchanging it via a Facebook platform. The problem with all of those things is that it's an extra step in making the transaction and you have to put some effort into it. And the thing with all of the new digital payment systems like AlliePay, like WeChat, Venmo, whatever, is they're just really easy to use and really convenient. and people are willing to sacrifice their privacy for the sake of convenience, which, you know, is terrible in the long run, but you could see why people do it in the short run. And I'm not sure

anyone has really come up with a response to, you know, human nature. Well, I completely agree. And I think this is also one of the key things to think about, which is that people look at the difficulty of using Bitcoin and they compare it with PayPal or Visa or AliPay or whatever, We chat. And they're like, yeah, it's really, it's really cumbersome. It's difficult. It's difficult for even seasoned people. But if you compare it not to WeChat, but compare it to some other means for moving money in and out of, say, a repressive regime, think, for example, of the steps that people in China go to or they like pay some junket operator to take them to Macau, then they play backer off for several hours, lose a bunch of money doing that,

cash out their chips, et cetera. If you compare Bitcoin to that versus WeChat, suddenly Bitcoin actually looks like the more convenient thing. So I think like, A, the convenience is a big detriment to privacy. But as more people perhaps feel they must have a censorship-free solution or they must engage in a transaction that's not allowed, then you might over time start to make the convenience case for Bitcoin, not by compare it to Alipay, but by comparison. paragon it to something way more convoluted.

Yeah. So all we need someone to do is to create a reasonably convenient method of bypassing the existing financial system without sufficiently angering the authorities so that they crack down on it. Good luck. All right. But if anyone has any better ideas, we'll have them on. Yeah, tell us. Let us know.

All right. This has been another episode of the Oddlots podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthall. You can follow me on Twitter at the stalwart. And you should definitely follow our guest on Twitter. Alex Gladstein.

He's at Gladstein. And be sure to follow our producer on Twitter, Laura Carlson. She's at Laura M. Carlson, as well as our substitute producer today, our old producer, who's filling back in for the day. Tofor Forges, he's on Twitter at Forhes T. And follow the Bloomberg head of podcast, French, Leshese at Francesca Today. Check out all the Bloomberg podcasts under the handle at podcasts.

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