Odd Lots - Here's How People Are Using Cryptocurrency in Venezuela

Episode Date: July 29, 2019

Last month, Facebook announced it was launching its own cryptocurrency called Libra. Facebook says Libra is going to have all sorts of benefits, including helping people without traditional bank accounts and acting as an alternative form of money in countries that don't have stable currencies. At the same time, Facebook's Libra has already been criticized for potentially allowing people to skirt existing government rules. On this episode of Odd Lots, we speak with Jill Carlson, co-founder of the Open Money Initiative, about the actual use cases of Bitcoin and other cryptocurrencies. She's been studying exactly how people have been using cryptocurrency in one of the world's most unstable monetary systems: Venezuela. See omnystudio.com/listener for privacy information.

Thanks for listening to Odd Lots. Follow the show on Amazon Music for more future episodes or just ask Alexa, play the Odd Lots podcast on Amazon Music. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal. And I'm Tracy Allaway. Tracy, I think that recently we may have seen one of the most pivotal events in the history of money. That is a large claim, but I think I know what you're talking about, Facebook's announcement about starting. its own cryptocurrency called Libra. Right. Like, I don't necessarily think it's definitely going to be or that it's going to work or that it's going to take off. And in fact, I'm kind of skeptical that it'll ever get

launched at all because of all the regulatory and political scrutiny that Facebook is under. But I... This is quite a walkback from what you just said. I know it sounds like a walkback. But I think that, like, with all existing caveats, it just seems like a really big deal to me that, what I'm just. of the biggest companies in the world is trying to launch its own global currency. Like I think we kind of have to just step back for a second and be like, wow, this is like pretty wild, futuristic sci-fi stuff here.

So I will say I am sort of bullish on the idea of a global company sort of nibbling at the edges of traditional sovereignty. And I don't know if you ever read the Margaret Atwood book, but she talks about how in the future companies basically control the world and people live in corporate compounds. I can see that aspect of it, but I got to say I'm a little bit more skeptical about exactly what Facebook is proposing here. Again, don't get me wrong. Like, I have plenty of skepticism on all kinds of fronts. I just think that it's pretty wild and has the potential in at least one version of the future to be pretty enormous. That's all I'm saying. Maybe I oversold it.

Right. So one of the things that was really interesting is in their launch material where they promoted Libra, their new cryptocurrency. They made a really big focus on, you know, serving the underbanked around the world, people largely in emerging markets who don't have access to traditional financial services, whose home currencies may be unstable, who don't easily get access to bank accounts. And, you know, it's one of these things which that does seem like a big opportunity. But on the other hand, it's a very happy sheen to put on. Here's this, you know, a company that's worth like a half a trillion dollars. And of course, it's very feel-goody to say, oh, we're going to serve all these people that the rest of the, that all these other financial institutions have failed so far. Right. So two things there. First of all, I'm very upset that they've chosen Libra to be the name of this cryptocurrency because it's my horse.

microscope sign. And now I feel what all the people called Alexa felt like when Amazon launched that thing. But secondly, I totally agree with you on the underbanked point. And I think one interesting point of comparison is that cryptocurrencies like Bitcoin have been saying similar things for a very, very long time. So it's worth asking what is Facebook going to do in that space that Bitcoin and other crypto coins don't already do. Right. The advocates and a lot of of the developers and even a lot of the speculators in this space, a lot of them have gotten very rich and they try to come up with a story about how they're doing something very good for the world. And they usually say, oh, you in America, you don't understand the importance of all this stuff

because you have a stable currency and easy to access banks. But this is all, we're doing something very important for the world. And obviously, a lot of that has just spin. And also, it's just a lot more complicated than that because the truth of the matter is there really aren't that many people yet and even in the near future in the developing world actually using any of these cryptocurrencies that people are touting as a benefit to them. Right. And it kind of gets back to a really important theme, which is the problem of having the underbanked out there or the problem of having an unstable sovereign currency or a currency that people don't trust, is that actually a technological problem, or is that a political problem? Right. And another big problem is that

at root, a lot of this is just about poverty rather than anything having to do with financial institutions. That being said, there is perhaps an opportunity for some new crypto-based currency, whether it's a decentralized one like Bitcoin or something, or maybe something like Libra, to to make a dent. And so today's guest, I'm really looking forward to it, is someone who's actually done the work, someone who doesn't just sit on Twitter and say, oh, this is going to be really good for the underbanked, but someone who has actually talked to people in unstable markets about how money works and what it would take, in theory, to introduce a new, more stable cryptocurrency that actually benefited their lives. Great. I can't wait. Okay. So without

further ado, I want to bring in Jill Carlson. She is a co-founder of the Open Money Initiative. And unlike everyone else, as I said, she's actually talked to people and done the real work to see what it would take to introduce crypto into people's lives. So Jill, thank you very much for joining us. Thank you. I'm happy to be here, starting to do the work. Starting to do the work. But what I've seen so far has been very impressive and we'll talk about it. But before we get into that, I'm just curious, what is your background? How did you? get interested in cryptocurrency? Yeah, so I actually started my career working in finance. I was trading sovereign debt and derivatives at Goldman. And in particular, I was on the Latin America desk. And that was actually the lens through which I first got introduced to cryptocurrency. It was through trading Argentine debt through the default in 2013, 2014. And early in 2013, I had a broker come to me.

and, you know, he would have some market color for me every morning. There was always something that he was excited to share. And one morning, that thing that he was excited to share with me was all about Bitcoin. Now, this was early 2013. The only context I had heard of Bitcoin at this point was people trying to buy drugs with it on the internet. So I was very skeptical. And I was like, man, I don't know. This sounds even sketchier than the peso.

I don't know if this is a good idea. but he kind of dragged me kicking and screaming down the Bitcoin rabbit hole, if you will. So what did you discover as you went down the Bitcoin rabbit hole? What brought you to being co-founder of the Open Money Initiative? You must have seen something in it. Yeah, well, the thing that this broker actually in particular that he convinced me of was that there was something really compelling there that he was unable to do previously, right? And that thing for him was to get his money offshore to get his money out of the Argentine peso.

And that ability to use this to basically evade capital controls, right, is what he was doing. That really piqued my interest because, again, that was something that you couldn't do before. You know, previously people were trying to smuggle money out of the country in suitcases. I remember talking to people. I ended up doing research on the subject on Argentina and cryptocurrency and capital controls. And I remember speaking to people who had literally tried to smuggle money out of the country, again, in suitcases and been caught by sniffer dogs, on the boat to Uruguay, all kinds of crazy stuff. And so then here, all of a sudden, you have this digital alternative that in many ways promises to take out a lot of that trouble that people were having in, again, evasion. capital controls. Now, whether or not that's a good thing for the world, whether or not this is

something we want to enable or not, it's a phenomenon that cryptocurrency has enabled. And so that was what really piqued my interest. And that's the thing that actually is stuck with me throughout the last five years that I've been working in this space of here's this thing that this enables that no one has been able to do before. It's interesting that you said your first introduction to knowing anything about Bitcoin was that people bought drugs with it online. And then the next... Not me. No, no.

You didn't. This was 2012, 2013. This was all anyone was talking about. Please, I worked at Goldman. Their drug tests. Sure. I believe you. We could have been dealing.

But then the next thing was capital controls. And although those seem very different, I mean, in the end, the consistent category is, these are the things the governments don't want you to do. Yeah, exactly. And I mean, I actually stand by this as one of the sort of primary underpinnings of that question, what is cryptocurrency good for? At the end of the day, a lot of it is regulatory arbitrage. Now, you can have all kinds of opinions about is that good, bad, ugly. A lot of it is very ugly, but it can be interesting nonetheless. So, sorry to press on this point, but is there not like a sort of judgment call going on here? Like you said earlier whether or not this is a good thing

that people are able to evade capital controls, but the fact that you know, you're sort of talking about and promoting the use case of doing that in certain countries, it seems like almost a judgment call on the legitimacy of those countries or the legitimacy of the regimes or the legal system there? Like how do you think

about the, I'm struggling to find the word, but I guess like the moral aspect of this or how this fits in with existing government structures. It's really hairy. And I'll clarify my organization, the open money initiative and the work that I've done. It's all just been research oriented. And so it's less about trying to push an agenda of this is right, this is wrong. And it's more about trying to look at what's going on today, what the world looks like, and then present that to the world so that people can make their own judgment calls. But I mean, I'll be very upfront. We'll probably spend a lot of time this morning talking about how, you know, people who are being impoverished in Venezuela may or may not be using Bitcoin in order to escape some of that poverty

that from what I've seen has been really inflicted on them by the government. But at the same time, it's important to also acknowledge that, you know, who's probably using Bitcoin just as much, if not more, than anyone sort of within the country of Venezuela who's being impoverished by these government policies is the government officials themselves, right, are also using these tools. And so it is very important to remember that any time we're talking about whether it's Bitcoin, whether it's other technology, whether it's other areas of sort of regulatory disruption, anytime you introduce a new tool to the market, you don't get to choose who's using it. And it's going to be used by sort of the good guys and the bad guys alike.

All right. So let's talk about the open money initiative. And like I said, in the beginning, you know, there's a lot of people that from their fancy startup offices in San Francisco tweet about how they're doing great stuff for the world and bringing financial inclusion and financial services to the underbanked. But you've actually gone and talked to people and gotten behind the computer screen to learn about the potential or what's necessary. not working. So what is the open money initiative and sort of describe the work that you've done? Yeah. So we are a research organization. We're not for profit. That was a very important sort of foundation for us because we can't be going in trying to do kind of objective research

if we're pushing a product. And so that, again, very objective, neutral. We have partnered with and received funding from many organizations within the technology community. within the cryptocurrency world, and then also from outside it from the activism community, for example, the Human Rights Foundation is a huge supporter of us. But again, all of those organizations have given us this funding because they have an interest in learning sort of the objective truths or facts of what's going on on the ground. Now, our mission is to get a better understanding of what money systems look like in closed economies or failing financial systems. We went to what we believe is sort of the most extreme

case of this that exists today, which is Venezuela, as our first case study to get a better understanding of what the world looks like there. Now, I have sort of this background in cryptocurrency, my other two co-founders do to an extent as well. But the questions that we went in asking were not just about Bitcoin and cryptocurrency, but rather we're asking the question, of what are people doing today in Venezuela, what are the sort of hacks that they're using in order to survive and in some cases even thrive? And then how can we take those and present those again back to the world so that people can, you know, whether it's these builders at these tech companies or again people in the activism community, whoever it is, take it, learn from it

and build with it. So Joe knows that I have a secret obsession with anthropology and ethnography. So I'm really curious. You know, you decide on Venezuela as your test case. You have the crypto background, but you're setting your sights on something much more broader, which is how people are using money in general. All right. So you're setting out to learn more about this subject. How exactly did you go about doing it? Yeah. So one of the first decisions we had to make was whether or not to go to Venezuela itself. And we determined that at the time, this was back in February. of this year. There was a lot of upheaval going on, a lot of political uncertainty. And we determined that as an American, a Canadian who's basically American, and then also a Venezuelan himself, so my other two co-founders and I, we decided that it was not wise for us to try to go to Venezuela itself. So we did the next best thing, which was to go to the border. So we went to a city called Kukuta, which is in Colombia, but it kind of might as well be in Venezuela and spent a lot of time there talking to people who had just crossed the border, people who were crossing borders sort of intraday.

One important thing to note about this research, the first thing people always ask me when I start talking about this work I've been doing, they say, oh, cool, so like how many people in Venezuela are using Bitcoin? And the answer is, I have not the slightest idea. Because the type of work that we were doing the type of research that we were interested in was much less about sort of the quantitative or the macro here, but much more about what does this actually look like on a day-to-day basis. So, you know, Tracy, you mentioned sort of ethnographic or anthropological lenses. That's exactly right. So we would sit down with people for two plus hours. And often this was in context, you know, in their homes and their places of work, even sort of intercepting them

on the street in the middle of whatever they were doing and get a really good sense of what their day-to-day lives looked like. And often what would come out here was we would find these sort of extreme edge cases as well, right? So rather than looking for the mean or the average, which is often what you're looking for in more kind of quantitative studies, we would be looking for outliers and finding out, okay, what does this guy who is really thriving and has actually managed to make a ton of money throughout this crisis. What is he doing? Or, you know, what is, what is the woman who's managed to make it across the border with her family and with her finances intact? What did she do right? And then how can we learn from that and draw inspiration from it?

The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg this weekend. I'm Christina Ruffini. We'll bring you the latest Headlines, in-depth analysis, and big interviews. All the stories that hit home on your days off. And I'm Lisa Mateo. Watch and listen to Bloomberg this weekend for thoughtful, enlightening conversations about business, lifestyle, people, and culture.

On Saturday mornings, we put the past week's events into context, examining what happened in the markets and the world. That on Sundays, we speak with journalists, columnists, and key political figures to prepare you for the week ahead. Join us as soon as you wake up and bring us with you wherever your weekend plans take you. Watch us on Bloomberg Television. Listen on Bloomberg Radio, stream the show live on the Bloomberg business app, or listen to the podcast. That's Bloomberg this weekend.

Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg Television, radio, and wherever you get your podcasts. So whenever I read about Venezuela, I just, yeah, obviously it just boggles the mind that people can survive in such a chaotic system in which all money has been essentially. rendered worthless. What were some of the most striking findings that you came across in terms of essentially how people hacked the economy for their own purposes to survive or thrive? What were the things that surprised you? Yeah. So there were a lot of things that surprised me. So I'll start with one, which is that, you know, as I'm sure many of your listeners know, the Venezuelan Bolivar has been in a state of hyperinflation for the last several years and in a state of extremely high inflation

for many years before that. To the point where every few years now, if not every year, they have to come out with a new denomination of Bolivar that basically lops off the last three zeros because they just can't keep up. So a million note would become 100,000, right? Now, you would think in this context, people would just say,

the hell with it, we're not going to use the Bolivar anymore. We're going to move on to some other alternative. But in fact, that's not the case there. you still really need the Bolivar to survive. And there are a few different reasons for that. One is because it's just kind of this shelling point, it's the natural standard that people still resort to and use when, you know, making transactions in the economy.

Another reason for that is that the Venezuelan government mandates that the Bolivar is the only currency that can be accepted. And so often what you would find is we would talk to shopkeepers who still ran shops in Venezuela or who were sort of crossing the border and leaving behind their shops. But what they would say is that they would still have to denominate everything in boulevars. They would still have to accept boulevars for most of their transactions. But then if you went back to their books, and sometimes they would even show us, their bookkeeping ledgers, they would all be denominated in U.S. dollars. And so you have this dynamic where people have started to think in alternative currencies, whether that's often, you know, in cases like in Caracas, it would often be the U.S. dollar, close to the Colombian border,

it would often be the Colombian peso, close to the Brazilian border would often be the Brazilian Real. So you'd have these cases where people would be thinking in one currency and yet still having to deal and transact and list prices in another currency. So you have basically a dual or even triple sort of currency system that has taken hold. But, it's just that no one is actually using, or few people are actually yet using dollars or pesos, etc. And so that's one example of kind of a quirk that we've found that, you know, is kind of unexpected here. So what does that imply about the usage potential of crypto? Because on the one hand, you do have people basically running parallel currency systems against one another. But on the other hand,

you have a lingering problem of adoption, right? Like people are just used to the Bolivar, as you mentioned. And you also have the problem of the government exerting pressure on people to use the boulevard and to not basically evade regulations by using something like dollars or cryptocurrencies. So putting it all together, what does that tell us? So, yeah, one interesting thing here about cryptocurrency, specifically in Venezuela is I mentioned that the boulevard, it's mandated to be effectively the only currency that gets used by the government, right? Now, there's kind of shades of gray here in terms of what gets enforced and where it gets enforced and how. It's very patchy, right? There is very little rule of law left in many ways in Venezuela, because you have to remember often it's the police or the border guards, et cetera,

are just as desperate as anybody else to survive. And so they kind of decide when and how they'll enforce rules when and how often that enforcement, it just takes the form of confiscation, right? And it ends up just being, you know, the police seizing your assets or your cell phone or whatever it is to just hold on to for themselves for their own enrichment. Now, dollars are way on the end of the spectrum of not okay. If you are dealing in dollars and you get caught doing so, you are going to face some probably pretty serious consequences for all kinds of political reasons. Cryptocurrency is interesting because it's more of a gray area. It's kind of patchly enforced to the point where when we were first speaking with people, I was sort of wondering, like,

what is going on here? Half of these people lying to us because, you know, what people are telling us here, it's completely incongruous. It doesn't make sense with each other. But in fact, the Venezuelan government has backed itself into an odd kind of corner when it comes to cryptocurrency because the Venezuelan government issued its own cryptocurrency a couple of years ago back in 2017 called the Petro. Now, we can do a deep dive on the Petro if you're interested. I have lots of thoughts on that as well. But the reality is that because the Venezuelan government did that, the Venezuelan government now faces this sort of weird. conundrum in which they can't just make a blanket statement of cryptocurrency is bad, you're not

allowed to use any of it, because here they're almost mandating in some cases that their citizens do use their own cryptocurrency. And so there is this sort of gray area where it comes to cryptocurrency where people aren't so sure whether it's good, bad, whether it's going to be enforced or not if they're using it. And so we saw some cases where actually people were more comfortable using something like Bitcoin as opposed to the U.S. dollars, which felt shocking to me. The people that do use Bitcoin in Venezuela, talk to me about the sort of usability issues, because it has to be even, okay, Bitcoin's more stable.

Let's say you can find a retailer that will accept it. There have to be all kinds of difficulties of getting it because I can't imagine there are people, too many people that want to sell Bitcoin for Bolivars, which is the money that most people have, even in the most developed market. out of the U.S. cryptocurrencies are sort of famously the user interfaces for things like wallets. It's just difficult. And so I imagine that's only compounded in a place where I imagine the internet doesn't work as well, things like that. So talk to us about the people that have used them. What is that sort of life experience like for them? Yeah. So we only talk to a handful of

people who used cryptocurrency on kind of a daily basis. We talked to a handful more who were familiar with it. Maybe it toyed around with it at some point. But of those people we spoke to who used it pretty consistently, they actually didn't have many complaints. They actually had a lot of really good things to say about the experience. And so I can walk you through just kind of one example of how it gets used, which came from a young woman, we'll call her Anna. She is a university student in Caracas. She's about 22 years old. And she got introduced to Bitcoin a few years ago now by way of her boyfriend, who was also an engineer. And they imported a couple of mining rigs, they call them. So these sort of specialized computer hardware systems. And it sounded to me like

her boyfriend was a little bit of a dirty guy. And he kind of set them up in her parents' basement. And they were running. And it was just kind of this fun experiment that they were running on the side. Now, lo and behold, old two years later, those Bitcoin miners have become basically the sole source of income for Anna's family. Her dad got laid off from his job. Her mom is still working but doesn't make enough money to support Anna and her two sisters, et cetera. But those Bitcoin miners that she and her boyfriend imported a few years ago, they pull in about $800 a month in Bitcoin, which is a pretty staggering amount of money in the context of Venezuela right now. And so the way that she would use

this, though, is she would take the Bitcoin that was being generated by these miners, and she would deposit them into an account on a website called Local Bitcoins, Localbitcoins.com. This is a website that's available globally. I compare it a little bit to like the Craigslist of Bitcoin because it has this sort of localized web pages depending on where you are in the world. But, what it enables is you deposit your Bitcoin onto there. And then all of these bids and offers will pop up of people buying and selling Bitcoin in your local currency. And you can even filter it by who has a bank account at your bank so that it can be just a seamless book transfer on that side. And so Anna Maria, Anna will deposit the Bitcoin onto local Bitcoins. And she will look for someone

who's looking to buy Bitcoin, who shares her bank account. And she will then start it discussion with that trader negotiation, they'll converge on a price. And that trader will then send her the boulevars that she needs as she's cashing out the Bitcoin. And Anna Maria will put the Bitcoin into an escrow that is run by local Bitcoins as soon as Anna confirms that she has received the money on her side in her bank account, local Bitcoins releases that Bitcoin out of the escrow to the trader. So this all sounds. maybe a little bit convoluted. But when she started to describe how this sort of happened in her day-to-day basis, it was actually quite seamless to the point where she would even do this just as

she was walking to the store. Because here's the critical point to take away is that what this enabled her to do was not only to receive the income in the form of Bitcoin, but also to cash it out just in time, right? Because she doesn't want to hold boulevars for any longer than she has to. She only wants to hold boulevard at the very moment that she is going up to the checkout counter in the shop because her shopkeeper doesn't take Bitcoin. He's only going to accept it in boulevard. And she could even do this as she was standing in line to go to the checkout counter, actually. All of this would take a matter of five, ten minutes, provided she could find someone who shared her bank. And so that was a really kind of revolutionary thing for her to the point where she's not really completely planning about, you know, the user experience issues or the pain of having to, you know, deal with a Bitcoin private key or whatever it is. Because to her, that ability to cash out just in time is so critical. So that's, that's one example of how people are using it. Do we know much about the other person on the other side of that trade? Like, who is the

person that would share the same bank as the woman in your example and who would, would have, you know, bolivars at hand and want to trade them into Bitcoin. And then what would they do with the Bitcoin after that? So sometimes it's another person like Anna, right? Sometimes it's somebody who is just sort of naturally a natural real buyer, you might call them, of Bitcoins. So someone who maybe exchanged too much into bolivars and is now trying to trade back. But in many cases, it's dedicated traders. And so these might be people in, Venezuela who have bank accounts. Often you have these money traders in Venezuela who have bank accounts across seven or ten different banks. And they do this intentionally so that they can have

liquidity across all of these different pools, right? And they're just clipping basically bit offer as any trader would on these trades that they're doing. And it's fairly liquid, but there's still a decent spread, obviously, to capture in there if you're doing this. Sometimes, it's folks who are based in Miami or Columbia, et cetera, who have left Venezuela, excuse me, but who still have access to a Venezuelan bank account. And so they would be doing exactly the same thing as a local trader would, but they would just be doing it sort of remotely. And so this is quite common. So let's talk a little bit about Facebook Libra, but also just generally, whether it's people who are believers in Bitcoin or some other currency or a company launching its own currency like Facebook, this whole idea of, oh, we want to deliver financial services, stable currencies to the 2 billion people or whatever it is that don't have access to them.

What are they up against? Like, what are the sort of the big things they're going to need to do to actually make traction and not have it just be talked that regulators in the media? will like. Yeah. So the first thing I'll say is that to talk about the unbanked or the underbanked, that is such a broad category that you've got to, you've got to just be more specific. You've got to narrow it down. You've got to narrow it down by geography. You know, often what we've seen is that what works in one place does not work in another. If you look at something like M. Pesa, which is obviously taken off in Kenya and in other areas of Africa. that does not translate at all to a Latin American context. You try and ask people about, oh, what do you think about using cell phone minutes as money in Latin America? And they look at you like you're crazy. It doesn't translate. So you have to narrow it down by geography, but you also just have to narrow it down by what do you mean? Is this about access? Is this about extending people's financial access, whether that's to bank accounts, whether that's to other forms of money outside of their own sort of sovereign currency, whether it's

that's about access to other financial instruments, investment instruments, et cetera, or whether that's just about, as you said at the beginning of the episode, Joe, poverty, right? And that's, that's a very different problem altogether than just having, you know, having a bank account. And so that's kind of my first gripe with any time anyone sort of waves their hands and says, oh, yeah, we're going to democratize the financial system or we're going to bank the unbanked. And it's just, it's too broad. And now I can speak to Venezuela with some degree of confidence and Argentina with some degree of confidence and other areas with a much lower degree of confidence. But that's the first thing that I would say.

Now, that, that I realize is kind of a lame cop-out answer. Sure. Like, it depends. And so I'll give you something a little bit more concrete to bite on here, which is the next thing I would think about in the context of whether it's Bitcoin, whether it's Facebook's Libra coin, whatever it is, if you're talking about a different type of financial instrument, if you're talking about a different asset, the first thing you have to think about is cash in and cash out, right? And so I just ran through that whole kind of convoluted example of there's this service, this Craigslist system that exists called local bitcoins that provides an escrow service and provides basically a bulletin board

of bits and offers and blah, blah, blah. Now, that is basically the one of the only cash. in cash-out systems that exists for Bitcoin in Venezuela. And the existence of that service is why Bitcoin gets used at all, gets talked about at all in Venezuela. Now, why local bitcoins, as opposed to Coinbase or as opposed to AliPay or WeChat? That has to do with, actually, in many ways, the regulatory arbitrage question again, right? Because Coinbase and many of these other services struggle to do business in places like Venezuela. They still do, I believe, but to a very limited extent, because it's dicey, right? Like, I get it. Even just doing the research with the Open Money Initiative. And I was just doing research, right? I wasn't operating as a

money transmission, anything. But we had to go through layers and layers and layers of lawyers just to make sure that, you know, we're doing business, we're doing work in a sanction, It's not an officially sanctioned country, but, you know, a huge swath of the population of Venezuela is sanctioned by the United States government. That's really hairy. That gets really dicey. And so you need these services, whether they're local, whether they're global in nature, whatever it is, to serve as cash in, cash out ramps in and out of your system. And you need to be comfortable doing that in countries where, frankly, it is pretty uncomfortable. Right. So on that note, it feels like the places where potentially there could be a good use case for, you know, something like Facebook Libra would be places where there is ethics instability, where people are seeking alternatives. But by that very sort of nature of the system, I guess there's a big question about whether or not Facebook would actually be welcome there and whether or not all the sort of bells and whistles, the cash in, cash out systems that would go along with it, would be able to attach

themselves to Facebook. Is that what you're saying? Yeah, that's right. And, you know, you start to get into these really hairy situations in which I have a friend, just as an example, who is Venezuelan. He left Venezuela pretty recently, but while he was there, he had some money in Coinbase. And Coinbase at one point actually froze those funds effectively because I don't know all. of the details of it, but it seemed like Coinbase was suddenly uncomfortable with doing business with him because they maybe didn't have all of the assurances that they needed that he wasn't doing something nefarious with him, blah, blah, blah, which he wasn't, but just because he is in Venezuela where, again, a huge portion of the population is sanctioned. And so exactly, you know,

you start to think about other cases like this. It's like, okay, where, where would this all be the most useful? Probably actually in places like Venezuela, Cuba, Iran, Somalia, et cetera, where there is all of this instability where it is a very closed financial system. But that suddenly is, yeah, the harriest of places to do business with this. So, yeah, got to wrap up soon. But one more question I have. And I think this sort of gets at really Venezuela side.

One of the big questions about Facebook itself and it gets to your sort of initial introduction into the crypto world. And the big opportunity for crypto is, frankly, kind of regulatory arbitrage, the stuff that people, whether it's banks or governments, don't really want you to do. Facebook is going to be already one of the most scrutinized entities in the world. In addition to that, because it's going to be a fiat-backed coin in which money is held representing the Libra, it's going to be held in regulated financial institutions, which, so they're going to have to comply with all those financial regs that even like cryptocurrency brokers or whatever don't really have to think about as much. So fundamentally, in your view, can an entity that's that regulated,

that's that beholden to all kinds of rules, actually deliver on any kind of promise in your view of what cryptocurrencies can be used for? I'm a bit skeptical, to be honest. Look, I think that there's scope for it to be an impactful sort of financial tool or product. But whether it can deliver on anything that sort of Bitcoin or other more conventional cryptocurrencies have promised, and in many ways actually delivered on in terms of what the actual utility is, I'm skeptical, right? And the reason for that is exactly what you just said, that Facebook is a platform. And any platform, regardless of what other entities it brings around the table, regardless of it, if it's in consortium model, whatever it is, that consortium, that platform, it has the ability to de-platform you. And this has been a huge issue that's gotten a lot of coverage over the last year in terms of content and content moderation.

Well, now suddenly we're talking about a world in which it's also financial moderation. And, you know, we would be, we would be lying, right, if we said that that's not the world that we already live in. It is. And it's much more so in a place like Venezuela, where it is a closed economy where there are all of these rules and regulations, many of which feel like they don't make a lot of sense. You know, it's not something that I think about here in America. I'm not one of these sort of tinfoil hats who stays up at night worrying about what the Fed is, well, I do worry about what the Fed is doing. But I don't worry about, you know, what the, the, the, the, or Treasury is going to do in terms of deplatforming my ability to use the U.S. dollar. But what I do want to say is that as we move to an increasingly cashless society, this becomes more and more of an issue, even for those of us in places like the United States where we feel like there is good rule of law. Because I've even had these issues myself of dealing with cryptocurrency accounts with my banks. Banks don't tend to like that. Even if you're dealing with a regulated cryptocurrency exchange, they don't tend to like that. And so I've had banks actually call me up

and ask all kinds of questions and even not freeze my accounts, but freeze counterparties accounts from whom I'm maybe receiving income or whatever it is. It can get really messy really quickly as soon as you move to this completely cashless society where suddenly you do have banks, corporates, entities, maybe now even Facebook, controlling who can do what with your money. And that's something that with cash, there's still that out, right? Like, I can still stuff dollar bills under my mattress and go and use them for whatever I want to use. But so that's actually the role that I see Bitcoin filling in the future and cryptocurrencies like it is that ability to have sort of truly censorship-resistant money. And that's a much more niche use case than a lot of people will

say, especially if they have, if they own a lot of Bitcoin or if they work in cryptocurrency. It is still niche, but I think it's important nonetheless. Joe Carlson of the Open Money Initiative, fascinating conversation. Really looking forward to following your work as you continue to research these areas more. And thank you for coming on outlaws. Thank you so much. So, Joe, I really enjoyed that conversation. I enjoyed that conversation. talking to anyone who comes on and says that crypto is basically regulatory arbitrage. Yeah, I agree with that. I completely agree with that. And I actually wish more people in crypto would be upfront about that. And because I don't think it's necessarily a bad thing.

I think, as Jill pointed out in the beginning, there are obviously uses that most people probably wouldn't approve of. There are in many cases good uses, especially when the laws or the way banks treat people is unfair. But I do think that. that is kind of the essential use. And people have a really hard time because especially if they're trying to bring it to the institutions or whatever, they want to wave their hands and try and say it's about something else. But I think at its core, that is the one thing where it just sort of logically makes sense. Right. And I think if you narrow it onto that one sort of use case scenario, regulatory arbitrage, it helps you, A, attach some value to it. But B, also think about the

of adoption. And of course, we touched on some of those. And that is whether or not governments are going to allow it. And whether or not if governments don't allow it, the technology itself can sort of sustain it outside of the regulated system. And we still see that debate going on. Absolutely. And just generally, I really appreciated being able to talk to someone who, again, it was not just a theoretical conversation, not just someone on Twitter. it's not just someone coming on a podcast and pontificating, but actually talking to people and just hearing about the other things that, you know, even crypto aside, it's fascinating reading and learning about how people in Venezuela or living in an economy that's extremely in turmoil, how they get by and how they use combinations of cash and social media and chat rooms to sort of just get by and do commerce is a really fascinating topic, even if, it had nothing to do with Bitcoin. I totally agree. And one last thing that I would say, you know, you built this up quite a lot in your intro where you said this was sort of a historic moment.

And I do think, I will admit, I do think you're right in the sense that what we're probably going to see is a big clash between a private company like Facebook trying to shape regulation in its favor to get Libra off the ground against politicians and existing regulatory structures. So that's going to be really interesting.

And you sort of wonder which one of those is going to win out. You know, I was going to make another follow-up point, but I just actually want the last point to be you agreeing with me that this is a big deal. So we could just wrap it up there. All right. This has been another episode of the Odd Lots podcast. I'm Tracy Allaway.

You can follow me on Twitter at Tracy Alloy. I'm Joe Wisenthall. You can follow me on Twitter at the stalwart. And you should follow our guest on Twitter, Jill Carlson. She's at underscore Jill Ruth. And be sure to follow our producer on Twitter, Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca Levy, at Francesca Today.

And check out the new home of Bloomberg Podcasts on Twitter at podcasts. Thanks for listening. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris. And I'm Karen Moskow. here to tell you about our new on-demand news report delivered right to your podcast feed. Bloomberg News Now is a short five-minute audio report on the day's top stories. Episodes are published throughout the day with the latest information and data to keep you informed.

Yes, there are other products like this from a variety of news organizations, but they usually rerun their radio newscasts throughout the day. That's not what we do. We create customized episodes that can only be heard on Bloomberg News. News Now. And we don't wait an hour to publish breaking news. When news breaks, we'll have an episode up in your podcast feed within minutes. So you're always getting the latest stories and developments. Get the reporting and the context from Bloomberg's 3,000 journalists and analysts we're all over the world. Listen to the latest from Bloomberg News Now on Apple, Spotify,

or anywhere you listen. What separates good leaders from transformational ones? I'm Jessica Chen and in season two, of Leading by Example, we'll sit down with executives like Grace Chen of Bertie Gray to find out. It's important to understand where you spike, but also really acknowledge where you don't and find people who can fill those gaps. Listen to Leading by Example, executives making an impact on the IHeart Radio app, Apple Podcast, or wherever you get your podcasts.