The Pomp Podcast - #397: Congressman Davidson, Caitlin Long, and Adam Traidman on Stablecoins

Episode Date: October 1, 2020

Today's episode features Congressman Warren Davidson, Avanti Bank Founder Caitlin Long, and BRD Founder Adam Traidman. We focus the conversation exclusively on Stablecoins. We spend time talking about what stablecoins are, what value they bring to the market, how governments plan to use them, what the impact on banks may be, and how the future is likely to play out in the eyes of our panelists. ============================== Blockset by BRD is the leading Bitcoin and Ethereum digital asset toolkit. Blockset enables enterprises and developers around the globe to deliver massively scalable, high-quality applications in a fraction of the time, at a fraction of the cost. From custody solutions to scaling your DeFi products, Blockset is your technical backbone. https://blockset.com/ ============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Today's episode features Congressman Warren Davidson, Avanti Bank founder Caitlin Long, and BRD founder Adam Traden. We focus the conversation exclusively on stablecoins. We spend time talking about what stablecoins are, what value they bring to the market, how governments plan to use them, what the impact on banks may be, and how the future is likely to play out in the eyes of our panelists. I really enjoyed this conversation with all three of these folks, and I learned a ton. I hope you will as well. Before we get into the episode, I want to

quickly talk about our sponsors. First up is Blockset by BRD. They're a leading Bitcoin and Ethereum digital asset toolkit. Blockset enables enterprises and developers around the globe to deliver massively scalable, high quality applications in a fraction of the time at a fraction of the cost. From custody solutions to scaling your DeFi products, Blockset is your technical backbone. Similar to what Amazon's AWS or other developer toolkits do in the traditional world, Blockset by BRD is that leading digital asset toolkit for the crypto world. If you're building anything in the space, I highly suggest you go check out Blockset.com. Again, Blockset.com. They're the leading digital asset toolkit, and they're ready to help you build for more

mass adoption in the crypto space. Go check them out, Blockset.com. Lastly, don't forget that I write a daily letter to over 75,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing my opinion on various aspects of each industry. You can subscribe at Pompletter.com. Again, Pompletter.com.

All right, let's get into the episode with these panelists. I hope you guys learned something about stablecoins and let me know what you think on Twitter afterwards. of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got a treat for you today in that I have, for the first time ever, three different people who are all on together. We'll call this a virtual panel or just a hangout session, whatever you prefer. But it's all about stable coins. And so maybe we can just kind of go around the horn here. Adam, we'll start with you. Then we'll go to the congressman and then to Caitlin, and just give a quick introduction as to who you are and kind of what you're working on today. Great. Thanks, Tom. My name is Adam Trademan. I'm the CEO of VRD. We are a global

Bitcoin wallet, about 5 million customers. Also provide software for enterprises that are looking to accelerate blockchain tech. I'm currently based in Tokyo. I'm actually CEO of three companies. I also work on behalf of a large Japanese investment bank, SBI, here in Tokyo. And I've been in the Bitcoin industry since about 2015 timeframe, seeing a lot of ups and downs. It's been a wild ride and happy to be here today to discuss stablecoins with you. I'm Congressman Warren Davidson. I'm a Republican member of Congress from Ohio. I'm a member of the House Financial Services Committee. So we oversee everything in this space that would be a security, but then you have commodities and oddly enough in Congress, that's broken off into the

ag committee and then when you look at things that would be like utility tokens this would be something that's broken into energy and commerce and you look at that you see just straight away some of the dysfunction of congress so i thought congress was working great i probably would be back in the private sector or still be in the private sector and would not have stepped away from the businesses that i had at the time uh to come into here but it's been exciting time of my time in Congress has really been concurrent with you know the ICO market and everything else but frankly my big lift here is to try to get members of Congress to understand the technology and frankly to understand the

implications of it so we get a regulatory framework that keeps America the innovation hub of the world for this great technology and hey pop Caitlin long CEO and founder of Avanti Bank literally just finished the Wyoming Blockchain Select Committee. We're in the middle of a two-day meeting, just finished day one. I think we're actually going to be doing something interesting on identity. I think we're actually finally going to break through on that. So I'm wearing my Wyoming brown and gold today, riding for the brand. And we also just kicked off WyoHackathon today. So it's a big day. This is a wonderful way to cap it off. Thanks for having us.

Absolutely. Congressman, maybe let's start with you. One of the things that you and I have talked about in previous episodes is just what is money and why that is important. And so you've got a unique view for many of your peers, but one that I tend to agree with. Can you just talk a little bit about a stable coin is really a digital representation of money or a currency and kind of, let's just start with like, what is a currency or what is money in your opinion? Yeah. So if you look at the idea of money in America, we think of it as dollars inherently, But, you know, it's been, you know, a phenomenon in human civilization for a really long time. And it has really characteristics that make it a store of value and a means of exchange.

So it's really a tool to facilitate a trade that, you know, two or more parties want to want to do. So when you think about trying to make it digital, it's really taking what we've done in paper, which evolved from carrying literal goods and doing a trade that way. And the note, a bank note, was really a representation of what you had stored with that bank. Now we do that with paper, and it represents a store of value. And if we do it digitally, it's essentially maybe the easiest way to think of it as a block of data in a spreadsheet. and you could say, hey, I own this block in an Excel spreadsheet. But it's a store of value and a means of exchange. And the way it does that in the most efficient way

would make it a more useful type of money. Absolutely. And Caitlin, maybe you can give us an overview of just where stablecoins kind of have come in the Western Hemisphere and then Adam will come to you and kind of talk about Asia. But Caitlin, just where are we with stablecoins today? really throughout North America? Sure. It's been said that stablecoins are the killer app of blockchain. And indeed, right now, I think that is actually proving to

be the case. They're just alternative payment systems or alternative settlement systems, but they solve a couple of very interesting problems with the legacy payment system. One of which is it just takes a long time to settle payments. That's especially true in foreign exchange. But it's also true in domestic payments. And the other is the settlement finality issue that most folks are aware that credit and debit card payments can be so-called clawed back, which means they can be reversed. But ACH payments can be as well. And for up to as many as 90 days, it's technically 60 days plus the statement period. But if you're at the beginning of the statement period, then it's really 90 days. And that's an acute issue in digital assets. And so

I think this whole settlement finality topic wasn't really in the vernacular until the digital asset industry came along. And then all of a sudden, you've got huge counterparty risk on your transactions if a digital asset dealer will deliver you a digital asset, but you can claw back the dollar payment that you sent them. That's a huge risk issue. It's true for everybody. It's not just for the digital asset industry, but for obvious reasons, it's particularly acute for digital assets. And that's in part what stable coins were designed to solve. I do have to say, though, that it's ironic. The original use of stable coins is different than what it is today. And that was because Wells Fargo took Bitfinex's bank account away. And essentially, the traditional

U.S. banks wouldn't serve the digital asset industry. And so invention is the mother of necessity, and the digital asset industry created a way to get U.S. dollars, and it solved this additional problem, which is really now the raison d'etre for stablecoins. That's awesome. And Adam, maybe give us an overview of kind of where stablecoins are in Japan and in Greater Asia. Yeah, and I was just going to add, I think Congressman Davidson and Caitlin bring up good points, right? And that is that the reason why stablecoins could be sort of the killer app here is because they combine the best of both worlds, When Bitcoin was created, it was created to have better properties of money than current money at its time.

And those properties of money are things like fungibility, divisibility, transportability. And with a stable coin, you get the benefit of something that is non-volatile or limited volatility, which has always been the complaint against Bitcoin. Guys like Warren Buffett and other respected investors. But you also get all those other benefits that Bitcoin was originally created to have. And transportability, you can send it over the suite of light anywhere in the world nearly instantly, right? And fast settlement, like Caitlin said as well, right? So stable coins offer sort of the best of both worlds. And they do so, most importantly, I think, in an environment that fuels and is now being more compliant and is accepted by regulators.

And that's critical because we operate not in the wild, wild west, but we operate in the real world. And in the real world, you have to follow the rules in order to build businesses, right? in order to solve people's problems in a way that's going to scale. In Asia, I think that what we find here, not just in Japan, and I think in the 80s, everything, oh, Japan is the future and all these great things. But today, we all know that the country that is driving a lot of growth and innovation is China. And we see a lot, we feel a lot, both by proximity to China here in Japan, but also by, you know, nationalistic pride, frankly, in the sense of competition. And, you know, I think I'd be really interested to hear what Congressman Davidson and Caitlin

think about this as well. But I think modern wars are fought with economics. And I think that, you know, superpowers of tomorrow or even of today, like China, are embracing new technologies and recognizing these things and are looking at them as ways to flex their power and their muscle and to get an advantage, especially, you know, in the current situation that we have with the global trade war and whatnot as well. And so I think that we in America need to be very conscious of that. And very much like we fund our military and our traditional sort of instruments of defense and protection, that we need to look at economics

in a similar fashion. And we need to evolve and change more quickly, because I think that's how countries like China look at. They think in decades. They think in centuries. They don't think in weeks, months, or even in years, right? And so you see the transformation to the digital RMB, which is essentially a state-issued stable coin. And it's not that it's something that's going to happen over a decade. It's the kind of thing that a country like China can implement in a year. If they can get rid of coronavirus or COVID-19 in three to four months, they can to replace their entire physical cash economy within a period of time, not much longer than that. And so we really need to be aware of that. And we need to see and understand how they're

going to leverage that against us. And we need to stay competitive. Absolutely. Congressman Davidson, maybe we can talk a little bit just about the conversation for yourself and your colleagues. There's obviously been talks of a digital dollar or a stable coin. How are people thinking about that internally? I think we saw a clause in one of the stimulus packages where that was kind of an idea. Is that something that you think is possible in the short term? Is that something that, you know, is kind of a dream and we may not see for five or 10 years? Kind of just how do you look at the US dollar being turned into one of these digital dollars and kind of being controlled and issued by the US government? Yeah, so great question. You know, the person who

held the seat I have now in Congress before me was Speaker Boehner. And, you know, obviously was in the seat for a long time before he has a saying, you know, things happen in Congress very slowly until they happen very fast. And, and I think that's the way right now it feels like good grief, man. You can't even get people to speak about this in detail. And frankly, the number of people who truly understand it right now, small, but when you get the right bit of momentum, It tends to just fly through sometimes, sometimes with way too little scrutiny or dialogue. So that's the concern right now, because, you know, if you look at the Federal Reserve, they had originally said that they were going to stay hands off and faster payments. And so banks and fintech companies dump lots of capital in there.

They poured all kinds of R&D and developed all kinds of products in the faster payments arena. And then once that looked ripe and robust, the Fed just said, yeah, we're going to play in that field. You know, so essentially, I don't think that's right. We're still trying to, you know, deal with that in Congress. And I think the same thing could happen here with their view of digital dollars versus what Congress's view is. And generally, Congress doesn't assert itself very well. They got it right when they were developing, you know, when the Internet was developing. Congress didn't drive that, but they put a legal framework in that made it work well.

And in this case, if we don't act, I really feel like the risk is that we're going to get a digital dollar that's essentially like the digital RMB, which gives the government the ability to intervene on any transaction. uh you know all the characteristics that bitcoin has of a truly distributed ledger with no central authority um no intermediary it is really a good replication of cash right so if i have a $20 bill and you and i agree on something and you know we trade the cash for the service or good and the transaction is completed we don't need permission from someone else and and so you know to me a currency is clearly more valuable when we don't need the third party to do that. But for some in government, they want those features. To me, that's an authoritarian style system. And it has,

you know, when we use lingo like, you know, Bitcoin versus shitcoin as a differentiator, one of the key characteristics between the two is whether there's a central authority that can destroy or distort the value of it, or frankly, block transactions. And for some in Congress, that's a feature that they want, right? They want it to, and that's inherently incompatible with a true distributed ledger technology. And it goes to custody issues. You want a third party to verify the custody or things like that. And well, that's part of the feature. That's why it's faster. That's why you can do these things. And so if you just try to build those things in to a central bank digital currency, it really doesn't work the best way that the technology does. And so as you're

trying to explain this to colleagues who, in my opinion, are drawing the exact wrong conclusions from the Bank Secrecy Act, any money laundering, know your customer provisions that guide the current banking framework, which is essentially to say we need bigger, more powerful tools and more government, it's distorting the whole, it's complete economic distortion of the purpose and utility of money. And so we, to me, before we can go live on the central bank digital currency that would work right and really give the United States of America a comparative advantage with China, is we should get a system that plays to our free and open society, which could be like true distributed ledger technology. So hopefully, that's clear to people that understand some of

these terms. But you know, part of this is to give a good piece of education for people that are still kind of learning the lingo. Absolutely. No, and I think those are really, really important pieces, because it's one thing just to implement technology. But if you if you do it in a kind of a nefarious way or a malicious way, it kind of ruins the whole point of this. So I think that's a really important point. Caitlin, maybe talk a little bit about if we do get kind of the right type of stable coin issued, whether that comes from kind of the private sector or from the central banks, how does this interface with the legacy financial system and kind of banking organizations, and really just from a thought process of, does it change what they do? Or is

this merely just the same type of fiat currency in a new technology form factor? And so they update some technology and then it's business as usual. Oh, no, it's majorly different technology. As you know, that's part of the reason why the enterprise blockchain efforts didn't generally take off. They've succeeded in niches. But five years ago, everybody thought enterprise blockchain was going to completely rip out and replace the legacy systems of the financial world. And I even subscribe to that, at least in the beginning, because I think it should, but that didn't mean that it would. And the reason is because they're two fundamentally different architectures. The architectures of the legacy financial institutions use centralized systems that

duplicate data and then reckon across the counterparties, and then everybody has to reconcile. Well, distributed ledgers use decentralized systems, and nobody has to reconcile because they're shared by everyone, but they're heavily encrypted. Whereas inside the big financial institutions, pretty much nothing's encrypted. Even the small financial institutions, they just have really strong firewalls and nothing's encrypted on the inside. Bitcoin has no firewall and everything's encrypted, right? So they're just really fundamentally different architectures. And so how do you actually have the legacy financial institutions, even if the central bank were to, and again, I'm talking about the US, although

this is true in much of the developed world. There's just legacy infrastructure that's just fundamentally incompatible with the IT architecture of distributed ledgers. There's another piece of this that'll be a US-specific comment, which is that there are a very small number of core service providers in banking software, and they do not have the capability to integrate with wallets. And so I think it's years away because the technology is just fundamentally different. And I could go into a whole different discussion about the impact of the fact that all the banks in the US rely on a very small number of software providers and only a few of the very largest banks are exempted from the requirement to use one of those software providers. Well, what do you think happened over the last, you know, 15, 20 years to those software providers who were comfortably ensconced in a regulatorily advantaged position? They didn't keep up with modern software practices. Let's put it that way.

In fact, some of the hottest fintech companies are, you know, trying to break in to that, you know, effective monopoly. but if you think if you understand that that they're not using modern software practices and this is part of the reason for the apathy of the payment system and here comes this distributed ledger stuff which is all wallet based these are two fundamentally incompatible IT architectures and and uh it literally has to be built from scratch and and do you integrate it back with those old systems that's that building that middleware to integrate it back in and of itself would be a massive task. That's why when I left the enterprise side of the business, I realized that public blockchains were where the action was going to be. And we're just building a

parallel financial system that is entirely based on these new architectures. And what we want to try to do is just build bridges back and forth between the two. But the two are going to be coexisting and not really existing, I think, within the same legal entities for that reason. Yeah, that's a very good point. Adam, maybe talk a little bit about, is it possible for the central bank digital currencies to be built by the government? You talked a little bit about China, obviously, kind of what they've done. Or are we going to have to see kind of public-private partnerships, in your opinion, around the world in order to actually get the digital currencies built correctly? Gosh, you know, I couldn't agree more with Caitlin's comments. I think that the technology is so fundamentally different, you know, spending like most of my career in Silicon Valley, you know, and pitching VCs and all this about disruption, disruption, disruption, you know, they say disruption really occurs when the old system

becomes irrelevant, not that it becomes improved, it becomes irrelevant, right? And that's like going from, you know, CDs to MP3s and iPods and things of that sort, right? And I think those sort of paradigm shifts, unfortunately, we can learn from them when we talk about money and banking and finance, but we can't mirror that. And the reason is, like was just said, they have to coexist for some time because there's inertia in banking. There are bigger companies and governments even who have a lot to lose through this transformation. And it's not just about money, it's control and it's power, right? And so there's got to be sort of a more of a compromise, really, right? It can't be one of these disruptive Silicon Valley-esque, Apple comes in and decimates the music industry and just replaces it with something new because it's better and cheaper for the end user, right?

The customer, right? In this case, it's got to sort of have the oversight and the buy-off or the sign-off of governments. And that's why, you know, folks like a congressman here have such hard jobs, right, is to figure out what that compromise is, and to figure out sort of how to get everything agreed when disparate parties have such big differences in expectations, whether it's a Chinese style, you know, police state, you know, all the way down to a democratic, you know, entity like the United States of America. So I think that in China, you know, they can, they're authoritarian. It's, they are clearly like what they did with COVID-19. They literally just closed the roads. I mean, they can do whatever the hell they want. And they have a population that is willing to accept that, actually. And they're very patriotic about it. I actually admire that about China, right? The people just, they just go with what's said and they, you know, rah, rah, rah, right? At least that's what we hear. Right? That's what we hear. So, you know, I think in the U.S., it's going to be a combination of technology providers and sort of government oversight of those companies. I think that to Caitlin's point, all of these core banking providers, it's not just in the U.S., it's in Europe, it's in Japan, it's in other places, a small number of really old backwards companies who frankly have been, you know, no disrespect, but, you know, comfortable, dumb, fat and happy, as they say, right, with these big monopolistic style contracts. and you know okay you know we understand so there's got to be some change um it's going to

take the regulators opening things up a little bit and that's a slow change in order for these new technology companies to be able to come in and by the way this is the same thing we see in the private sector all the time right like with ibm and then microsoft came in and kind of ate their lunch right and then google came in and ate their lunch and there's a long tail on ibm they're still selling computers believe it or not you know who they're selling them to all the big banks so use all those old computers, right? There's a long tail on Microsoft. There's a long tail on Google, right? So the tails keep getting longer and there's going to be a long tail on the traditional financial products and software as well. The bottom line is this, this is how I think

because I'm building a consumer and an enterprise, but really a consumer business. And that is, what do the customers want, right? What do they want? You know, I used to be able to go to my bank and get 5% interest. I get squat now. I'm working my butt off, you know, for my salary, on putting it into a bank, and I trust the bank, but I'm not getting anything for that. Now I'm hearing about these interest-bearing high-yield accounts. I'm hearing about all these opportunities for yield farming and all these things where I can get not just 3% or 5%, but if I'm willing to take a little bit more risk, by the way, my money is literally sitting like the equivalent of a Wells Fargo. There's zero chance I'm going to get anything there.

I could take a little bit more risk with some of that discretionary income that I would otherwise invest in things like oil, by the way, which obviously, you know, more volatile than Bitcoin recently. And, you know, as a consumer, I like that. I want to provide for my family. I want to turn my savings into more money. I used to be able to do that. I can't do that anymore. So if the consumers push for this stuff, that's why I think the OCC changed their rules recently, right? I hope it's because the American people and as a proxy, the banks lobbied the OCC to enable this to build new business around what customers want, right? And in other countries, there's just a lot more flexibility in a lot of cases to do that, right? And so I hope we can

embrace things in the U.S. like they have in these other jurisdictions as well. That's a great perspective. Congressman Davidson, one of the things that Adam kind of hinted at was this almost competition, right, between China, who has very grand ambitions, they've been very public about kind of wanting to get their digital currency out and into the hands of consumers. I think that in the last conversation you and I had on the podcast, they may have grander ambitions than just their own citizens using this and then kind of see an opportunity to get globally access to really kind of drive adoption of this. The US obviously, at some point, I think our belief is like they'll wake up to this and say, hey, we should do this as well. Talk a little bit just

how you see the relationship with China, the competition, the kind of economic trade war we're engaged in right now, and how the stable coins or central bank digital currencies kind of plays into all of this. Yeah, so China in particular is a good area for me to kind of illustrate how I even get involved in this. So, you know, when I graduated high school, I enlisted in the army, became an army ranger, went to West Point, came back as an officer, did all these things in the military. And then in that sense, you think of China as a potential, you know, conflict, right? You think, well, maybe I'll never even go to China under friendly conditions. And so when I get out of the army, I get involved in manufacturing. And

manufacturing in the 2000s has inherently involved trade with China. And you experience all this friction of trade so you know back when uh you know you're looking at uh you know you know digi cash and early early ideas in this you start going oh well maybe there's a solution to digitize money so that you know you could actually get past all the intermediaries and just get the goods shipped so you would miscommunicate with all this stuff and it really shows like you know the government's sometimes, just like the architectures, get in the way of people who just want to work together. So you can build great relationships with, you know, people all over the world. That's been my experience. And the hope is that we have the kind of government that lets that happen, you know,

at the nation state level. China is clearly got a different vision of how to run their country and how to run not just their overall country, but how they would go about a digital currency. So just like they can do things, well, you don't hear a lot of dissent out of China because they can just put you in jail or create a million-plus Uyghurs to put into concentration camps and re-educate them. We certainly hope that the United States of America doesn't try to replicate any of those things. But when you think about it, a lot of the push in capitalism and capital markets in the United States is to take our capital markets and, frankly, deputize or partially nationalize the banks or the publicly traded companies to say, you know, tell us everything about your customers. You know, and, you know, the Fourth Amendment does not say the Fourth Amendment is the right to privacy.

And it does not say that if you have nothing to hide, well, then you have nothing to fear. right it says you have a right to privacy not secrecy not no way for the government to find out anything um and we have an ability to take advantage of our cultural differences and do essentially what what you know a feature of bitcoin is a layer of privacy not true secrecy but that's being eroded in the united states because of at the edges the only way to get into the on-ramp easily is essentially, you know, entities like Coinbase that do work in the United States of America and build, you know, get a return on their capital that they're innovating and putting at risk. They have to comply with know your customer, BSA, AML. Well,

Binance doesn't have to do that. They're doing all kinds of things. You wonder why it's scaling so differently. On the back end in China, they're looking at this stuff in a different way. they know way more about the identity of their people. And they do it to a point where they're building social credit scores. So literally in China's system, they could know all the stuff in the world about every customer that comes in on a transaction, particularly with a central bank digital currency. And in the United States, we have credit scores. We don't really have social credit scores. And in a way, that's kind of what some people in the United States are pushing for is, well, you're not going to bank those people, are you? We made it legal that, for example,

we made it legal that you can transact marijuana or medicinal marijuana in some states, but you're trying to use the financial system to essentially still keep it illegal, even though that debate on the upfront was happening. You're leveraging money to try to distort law enforcement, or you're leveraging publicly traded companies. So that's the real tension that exists. And so when Adam's talking about the legacy system, that tension's real. I mean, these people,

whether it's a government institution like FinCEN or Treasury or the OCC, adapting to the reality, we have to say, are we gonna basically take the shortcut easy route, which China's taking? And it's the easiest morph off of where we're at is to say we're going to have central authorities with all the same data collection points

that China has, only we're going to work to do it better, right? Or we could say we're going to have a free and open society that respects some layer of privacy with the ability to get a warrant and find out and solve crimes, but we're not going to turn money into a weapon. And frankly, in a way, the odds are stacked against that working, just like the odds were stacked against our founding fathers trading this country that did protect those rights. Yeah, I couldn't agree more. I think that is a fantastic way to view it. Caitlin, any thoughts on that? Well, sure. I mean, there's an inherent tension between privacy and use of the internet. And I think the privacy advocates in the US lost that battle in 1977 when the Bank Secrecy Act was

put into place in the first place. It's been substantially expanded. And just last weekend with the BuzzFeed leak about all the suspicious activity reports, which are, it's a felony to leak those, but somebody did. And boy, there was a lot of information. Granted, most of it was pretty old, but it's just that, I think it was Rahm Emanuel who said, never let a crisis go to waste. That's going to be viewed as a crisis in that world. And the magnitude of compliance is actually going to be ratcheted up further or compliance restrictions. And the sad thing about that is that that actually puts even more compliance costs on the small community banks and essentially just makes it such that the only ones who can service those customers and handle all those compliance,

which is an enormous amount of work and cost, are the very large banks. And so people get the opposite of what they want. They don't want the big banks getting bigger, but it's the regulatory mandate, especially on the compliance side, that's difficult. One other piece about the regulation, going back to this whole question of can the U.S. implement this, even if those in Congress who are proposing a digital dollar for the distribution of so-called helicopter money, and it just came up again today, I think there was another bill proposed today, could it happen? And the answer is none of the regulators are ready for this. They do There are basically three things that have to happen in order for that kind of regulation to get put in place. You've got to pass the law first, and then the rules have to be implemented. And then the bank regulators have to have a supervisory manual so they can determine how to examine the ones that are actually handling this. That is a years-long process. In Wyoming, we're 27 months into it and just about to, I understand, release the supervisory manual on how bank supervisors can supervise banks' activities in digital assets.

It's the first one that's ever been drafted. It's 1,500 pages long, promontory, consulted on it, and I'm sure it will be heavily copied by other regulators around the world, including the OCC, National Bank Regulator here in the U.S., and other states as well. But up until now, it didn't exist. You can't just pass a law and suddenly those things actually come into being. It takes a long time. And the U.S. is building the consensus for that. The Digital Dollar Foundation, for example, is working towards that. But it's not something that's going to happen quickly. And one other piece of that related back to the privacy and technology,

Neil Ferguson has made a couple of really interesting points about the national security implications of losing the payment technology war. And I think he's right that you won't keep your reserve currency. The reserve currency, yes, sure, it's the perceived stability of the issuer, but it's also who's got the best payment technology. And the world's going to migrate to the best payment technologies. I've said this before. Multiple S&P 500 companies have been using Bitcoin quietly,

in, you know, mostly in emerging markets where there are not well-developed banking systems, because it's the best technology. They'll never tell you that publicly. They will never be in the newspaper about it, but it's been happening for years. And so they, you know, they've got the best incentive to go out and use whatever technology they need, and they're going to go find it. And if the U.S. really does lose that race, then it's our own fault. I love hearing that. Go ahead, Adam. I was just going to say, you know, listening to this, it makes me thankful that we have folks like the congressman here fighting the good fight, you know, to defend those principles on which America was founded, frankly, right, and to not become a police state like some of the other large countries in the world that we've been discussing. But I, you know, I'm really curious to get your folks' opinion on this sort of, call it a solution.

Let me paint you a picture. And I've talked about this before, privately, maybe not publicly. And that is the following. So first of all, like, let's talk about bubbles, like all the, you know, crypto folks like Pomp and I, you know, we love to say stuff like, hey, you know, what's the biggest bubble in the world? Bitcoin isn't the biggest bubble. The biggest bubble is the US dollar, right? The US dollar is a self-sustaining bubble supported by the US government, used to be backed by gold. And under FDR, you know, we said, well, we ran out of gold. Okay, we're just going to back it ourselves by whatever. whatever we're backing it right and and so it's a bubble but that's not a bad thing okay because within a bubble if it's self-sustaining and it keeps growing it becomes something like the u.s dollar which is the world reserve currency okay which is damn impressive right now what the congressman said before is that on the fringes of crypto we have to play by the traditional fiat based rules if we want to onboard through coinbase we have to go through the kyc process and all that But imagine this world for a second. Imagine you are being paid your salary in crypto. And then you're holding all of your crypto yourself in a decentralized wallet, in a wallet like what Caitlin was talking about before, right? And then you're paying all your bills in crypto. You're paying your mortgage. You're paying your credit card bill. You're doing everything that way, right? And your whole world is within crypto.

You never have to go back again. And better yet, you never have to come in because you're within the bubble now. That represents a possible future where the rules that cryptocurrencies like Bitcoin were created on can be truly realized, even within the context of the otherwise fully regulated world that we live in. I don't know. You know, I mean, you could do what Vietnam did and just make cryptocurrency illegal. The government could do that.

And that's a way to stymie that whole vision, you know, instantly. And to be very honest with you, when I raised money for my company back in 2015, my would-be investors asked me, Adam, what's the number one risk for your company? And I said, oh, it's very obvious. The U.S. government says Bitcoin's illegal. Because if they do that, you know, all bets are off, everything's gone, right? And frankly, I've been shocked by how forthcoming and supportive U.S. and other governments have been, actually, in helping foster the growth of crypto-related companies. But if we can create a new bubble within crypto and transact all within that bubble, that to me represents the kernel that could become the snowball that continues to grow that really transforms money.

And I honestly believe can make the world a better place by doing a lot of those things that the others mentioned and realize the benefits of quick, instant settlement, international trade, and things of that sort. Adam, this is why I enjoyed talking to you, because my question to end this was going to be, what is the future world that you hope to see or kind of paint that picture, which you just expertly did? Maybe we'll go to Congressman Davidson. Any kind of reactions to that world that was painted there? Yeah. I mean, I think that's an interesting vision, but the reality is most people hold their wealth in something else. And in the United States, while the US dollar still is the world's reserve currency, I mean, I recently founded the Sound Money Caucus because you're actively seeing the dollar destroyed, right? So this year we've printed $4 trillion. Now it shows up as debt, right? But it's not really debt. Debt means you borrowed it. There was a lender. There's not a lender here. It was just printed, right? So inherently, that undermines the value. That

would be the exact case for sound money that you've got a known quantity there, which is why people look at some things more like gold or digital gold or backed currencies, things like that. So the principles of sound money, I think, are going to drive the exit out of the current U.S. dollar because of dynamics like Caitlin was talking about. But the other part is we're in a world where many countries are pushing negative interest rates. We've seen that pressure in the United States. We've seen the Federal Reserve talk about rates out, you know, holding the rates essentially zero till 2023. The Treasury yield is less than 1%. I mean, that's a nominal positive number, but no one believes that represents the real return, you know, adjusted for inflation.

That's already a negative return. So if you hold U.S. dollars, they're being destroyed. That's the whole micro strategy play is I'm going to keep my treasury, which in their case was fairly large, instead of watching it be destroyed, I'm just going to hold it in something that has a better store of value, but still more liquid than gold, which is Bitcoin in their case. So I think that the pressure for negative interest rates and the massive amount of debt that the United States has means that there is going to be a huge push to exit into something, maybe this bubble that Adam's talking about. And I think it highlights how the sense of urgency that we should be working with to get this arc built, to get everybody to safety, because otherwise, it's really how painful of a

chapter 11 do you want to go through? But it's coming, and we're going to have to be ready to deal with it. And central bank digital currencies could be a good way, as long as we can do them without too much central authority. We do it to protect people instead of to control them. Absolutely. Go ahead, Caitlin. What's so fascinating about the bankruptcy point you just made, Congressman, is looking at how Tether's actually used. Even when it was acknowledged that Tether wasn't fully backed by U.S. dollars. It's still, after dipping down, it traded back up close to par, even though everyone knew that it wasn't fully backed. What was really going on? Look at the velocity of

all those stable coins. I did a table back in around June 1st, and the velocity of the three big U.S. dollar stable coins, Tether and USDC and Paxos, was all in the range of 45 to 55 times. That means that on an annualized basis, each one of them trades 45 to 55 times. The velocity of the U.S. dollar, by the way, has collapsed. It's 3.8 times, right? So you're looking at just order of magnitude different velocity because these things are viewed as hot potatoes. And the good news is they settle really fast with settlement finality. But the other good news is you don't need to hold on to them very long.

Well, the other piece of this is, as you all know, that stablecoins have exploded this summer in both issuance as well as in velocity. The velocity's accelerated. And I just updated that table a couple weeks ago using CoinMetrics data. This is on-chain verifiable velocity, so none of the exchange-reported stuff, which, of course, is even higher. But that velocity range was 45 to 55 times. It's now 64 to 154 times. So the velocity has just exploded. And again, Tether is, to me, such a fascinating case because even when it was acknowledged it wasn't 100% backed, what it was really valued for was the payment system, not for the solvency, because people could literally treat it like a hot potato and then move out of it as fast as they could. And ultimately, that's the value that payment systems really are designed to make.

And I must credit Nick Carter for saying, if the U.S. actually goes down this path of allowing U.S. dollar bank money, then frankly, it actually extends the life of the dollar as a reserve currency. But if the U.S. loses that technology war and doesn't do that, and we stick with these really clunky old multi-day payment systems that don't have settlement finality and even with Fedwire when you're trying to use high use out for high value payments you can't time the precise timing of the closing of those of those payments so you you nothing's programmable about it at all whereas all this programmable money is is cropping up around the world if we don't if we don't as a

country move in that direction and start encouraging some of these technologies, then we do move further behind. I'm optimistic for a couple of reasons, though, because you're starting to see the fintech companies acquire bank charters. It used to be that fintech companies, software companies never wanted to be banks. But I think everybody's realizing that you've got to marry the software with the bank. In other words, the banks are the ones that clear the payments directly at the Fed. And so if the software company isn't the bank, then those are two separate processes and you never get the maximum value of the software because it's all still settling on those old clunky rails. If the software company becomes the bank, now all of a sudden you

get real competition in payment systems. So watch Square, GECO, Vero, they've all recently acquired bank charters. It took Square three years to get theirs, but this is not an insignificant movement. It's reason to be optimistic. I love that. As we go to finish up, I want to give each of you kind of a last word. So maybe Adam, we'll start with you, go to Caitlin, and then the congressman to finish it out. But any kind of final thoughts when it comes to some of the stuff we talked about tonight? Yeah, I just want to say that I think this year has been really troubling and difficult for obvious reasons for everyone around the world. But I think one of the silver linings on this cloud that is still over all of us is that it's caused people to really

self-introspect about their lives and about their families and about their finances, the things that are very important to them. And there's been a huge, huge uptick in cryptocurrency as a result of that. People have been learning the Google search results for Bitcoin and buy bitcoin and crypto and app store searches everything is way up all of the metrics for wallets are all-time highs and all of that and and the reason is is very simple it's because people are asking themselves the difficult questions they finally have some time they're sheltering in place they're at home they're looking at what they can do to protect their wealth and their families in the future and they are seeing that these kind of technologies whether

it's a bitcoin or stablecoin or or one of these alternative assets that is digital can really impact their lives positively. And to me, as an industry, you know, executive and someone who joined the industry coming from a completely different area, but did so because he wants to figure out a way to bring some good into this world. I see that traction that consumers find the value in this as the most inspirational thing going on in the industry right now, and that growth. And, you know, consumer sentiment is always gonna, you know, companies are gonna but move slower than that, right? And it's going to take time for them to catch up.

And especially when there's inertia, you know, in banks and governments and things of that sort. But, you know, we might just look back on this someday and say that COVID-19 was the catalyst that really helped kick off a lot of the digitization. Whether it comes in a stimulus bill or it doesn't, I think the ice snowball has already started growing. And I think, you know, once it's big enough,

which it is getting there, I don't think it's going to be stoppable. So I'm really excited about it. Never been more excited for the industry. Awesome. Caitlin? Yes. I would refer to a piece that Dr. Manwan Singh and I co-wrote that was just published in

the FT a couple of weeks ago about the programmability of money and what is so important about programmability and why you need a blockchain. You can't just use programmability with a traditional relational SQL type database because the blockchain gives you consensus. It allows you, it allows all the parties to share the infrastructure, not to have to duplicate and replicate and reconcile the data. And that's what a blockchain version of a programmable dollar offers you that a traditional IT architecture does not. And that's a really powerful concept. And literally the velocity of these things has been proven out. It's not just unique to Tether. It's the others as well. And the implications of that

for monetary policy are pretty profound. We have, to Congressman Davidson's point, really expanded the Fed's balance sheet in an effort to try to get GDP growth. Well, if you think back to your economics class, one of the variables in GDP growth is the velocity of money. Well, we now actually have programmable money that is itself exhibiting very high velocity. We don't have to do it through issuing more debt. We can do it through technology. And that's something that makes everybody a lot better off, but we've actually got to break through the barriers and get it started. That's a great point. Congressman Davidson, bring us home. Any last final thoughts? Yeah, I think it's important to just understand where we're at. I think Adam did a great job of recognizing some of the friction in terms of moving to where we really, the technology makes possible to go.

And frankly, I think where consumers want to go. And so you may see a less optimal path for a while. And, you know, it's just such a critical time to get right because it really is going to have a profound impact on the nature of our culture and our life as to whether this tool, sound money, is a means of control or a means of freedom. And it was typically, you can't defend freedom if you don't defend sound money. And those principles are so important. And they're playing out really in a different way, not on the money side, but in securities law. So if you look at the SEC with the ICO market and the lack of will to define a bright line

test to say, we're going to say something's not a security as long as it meets this criteria. And frankly, at some levels, it's not as important what those criteria are as the fact that they're certain, so that capital can come to work in the United States of America. One of the fears that I have is, as we continue to dally on this, is the capital, even though we have Silicon Valley, we have venture all over the coast, tech all over America, and now Wyoming doing great, Ohio doing great with this great innovation. on all of the gazillion potential applications in blockchain, the capital is going offshore, not to avoid our laws, but to find regulatory certainty in places that have taken the time to put frameworks in place. And so I just hope I can get my colleagues either educated enough or, I guess, pliable enough to say, you know, I don't really understand this, but I know these people do. and let us get a good framework

because it really is vital to get that right so that the innovation and capital goes to work in our economy and it goes to work under our principles versus China's principles because there really is a truly meaningful difference. I think that is the absolute best way to end this. So for those that are listening or watching,

this was a Herculean effort because myself and Congressman Davidson are on the East Coast, Kaelin's on the West Coast and Adam is in Japan there. So we found time to line everybody up and I appreciate all three of you taking the time to do this. I hope that people really learned something today and we'll have to do it again in the future.

Thanks, Bob. Thank you very much, Bob. Appreciate it. Thank you all. It's great spending time with you. Hopefully we can do it live somewhere sometime. Yeah, hopefully so. Thank you.