The Pomp Podcast - Warren Davidson, Representative for Ohio’s 8th Congressional District: Modernizing U.S. Financial Laws to Keep Pace with Innovative Tech

Episode Date: December 10, 2019

Warren Davidson is one of the biggest Bitcoin proponents in congress. We recently had the chance to schedule this interview during the Blockland Conference in Cleveland Ohio. In this conversation, Congressman Davidson and Anthony discuss Bitcoin, financial privacy, taxation as theft, debasing currencies, and Libra's future prospects. BLOCKFI-----BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. CRYPTO.COM-----Crypto.com is a pioneering payment and cryptocurrency platform that seeks to accelerate the world's transition to cryptocurrency. With the vision of "cryptocurrency in every wallet", the Crypto.com App offers a full range of financial products with competitive pricing, well designed UX and high security. It is the best place to buy, sell and pay with crypto. COINMINE-----The Coinmine One is like an Xbox that turns your electricity into Bitcoin. You just plug it in, connect to wifi, and tap on the crypto you want. It’s so easy anyone can do it. Everything is controlled from the Coinmine mobile app and the Coinmine keeps getting better with over the air updates that add new coins, features and services to your Coinmine. Visit coinmine.com/pomp to get a Coinmine and earn crypto for powering a new world. ETORO-----This episode of Off the Chain is sponsored by eToro, the smartest crypto trading platform, and one of the largest in the world. Join 11 million other traders and create an account at etoro.com and build your crypto portfolio the smart way.

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and you can get started by going to eToro.com. Again, that is eToro.com where the entire team is ready to get you started in just a few clicks. And don't forget, go subscribe to the Off The Chain daily newsletter. You can go to offthechain.substack.com. I write a letter of news, analysis, and opinion every morning that goes out to more than 40,000 investors. See you there. What's up, everyone? This is Anthony Pompliano.

Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. congressman warren davidson is one of the biggest bitcoin proponents in congress we recently had the chance to schedule this interview during the blockland conference in cleveland ohio in this episode we talk about bitcoin financial privacy taxation as theft debasing currencies libros future prospects and much much more i really enjoyed this conversation and i hope you do as well. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by

Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I'm here in Cleveland, Ohio, with Congressman Davidson. Super excited to have this conversation because I think you've been at the forefront of really pushing a lot of the conversation in the government. So thanks so much for taking the time to do this. Yeah, thanks for the interest.

For sure. Let's just start real quick with kind of your background, pre-government role, and then we can get right into kind of the crypto stuff. Yeah, so, I mean, the first period of my life, I started out as an Army guy, you know, enlisted in the Army, went to West Point, went back in the Army as an officer. But then I got out and got into manufacturing, and certainly over the past 20 years, manufacturing has involved a lot of international components for American companies. So that's really what I was doing in 2015. Speaker Boehner resigned from Congress and as Speaker, I ended up running for representative and winning that seat. And so I've been in Congress now since June of 2016. Very cool. What did you do in the Army?

I was an infantryman. Oh, awesome. I was in the National Guard and deployed overseas as an infantry as well. Very cool. Yeah. And every soldier, I recently told somebody in Bulgaria, most of the people are mandatory military services like Israel, et cetera. And I say, when soldiers meet each other anywhere around the world, they know, hey, you've been through a lot of stuff that sucks. Plenty of camaraderie, yeah. For sure. All right. So, you get into the government seat, obviously doing a whole bunch of stuff here in Ohio. At what point do you kind of intersect with Bitcoin, crypto, blockchain, et cetera?

And what really was kind of that initial interest that drew you in? Yeah. So so I got on financial services in January of 2017. OK. All right. So in 2017, you start looking at, OK, well, what areas what issue areas can I step into as a member of Congress? And in the financial services space, you know, a lot of, you know, Congress ends up this person ends up being the champion for that person. And so you can co-sponsor their bills, but they've already built some momentum on it. So you look for issue areas that aren't taken already. well certainly this is one that isn't taken and the other thing is in 2017 the ICO market was going nuts and you know normally that would be an easy way to

have hearings and go into depth and so as I was pushing for this we weren't really getting a lot of traction on the topic there were a lot of things in banking regulation that needed address post dot Frank things that were broken and so chairman Hensarling was focused on those issues and we eventually got a bill through the Senate through the house through the Senate and got a law change that made some significant progress not as much as we were hoping for in the house but good what didn't get done though is you know a good regulatory framework for the blockchain space and really tokenized economy

whether it represents a security a commodity a currency anything else that has gone unaddressed and so as I lost patience on that that's when I said well I can convene a meeting at least and that's what led to the meeting that produce the token taxonomy act got it so let's talk a little bit about how that meeting came together who kind of came in there where how you solicited feedback and then we can get into what exactly the token taxonomy act is and kind of where that is uh currently but what was the general outreach and like who was in that initial meetings or conversations to actually end up creating this bill yeah so um the way congress is structured you know you have um you know in my case an ohio team

team that works in the district and you have a team that works in the dc office a core component of that of course is your legislative team and your communications team and so in the legislative team we had a legislative director and a policy area expert for financial services so the two of them plus our comms director plus my DC chief started started working on how to put an event together we booked a room at the Library of Congress and then we looked at who should go and you look at well okay well there's a digital Chamber of commerce. There's now a blockchain association. There are companies that are in this space. There

are markets where you would want to regulate it. And prior to that, I had already taken trips to Chicago, New York, Boston, talking to early stage companies, developed enterprises like Fidelity or State Street that are dealing with custody issues, talked with regulators in D.C., you know members of the Securities and Exchange Commission board and so we started extending invites out to all the people that we had referenced and we figured you know if we get you know a dozen maybe 20 people together that would be tremendous and initially you know that started happening but then people said well I'm actually want to send our CEO oh really the CEO of this

company's coming well we should at least send our general counsel and so it really just started to build momentum from there. And I think it'd be fair to say you had a pretty good mix of government representation, kind of the lobbying groups or the association community, and then also private companies that all came there. And as you're saying, it wasn't just, you know, hey, we're sending our government affairs person, right? This was a pretty robust group of people who are well-educated and really had skin in the game from what I can tell in terms of like, they want to see this be successful. Yeah, absolutely. That was the goal is to get the right players there and so we were successful in getting some of the the fintech companies to

send their ceo cfo general counsel which led to you know say you know like nasdaq saying well we're going to send our general counsel oh really they're coming oh well state street's going to send and fidelity's going to send andreessen horowitz is going to send and horowitz is there oh well we got to get our venture firm there well we got you know so then it turned into like you know we could we had to cap it at 50 and there were people calling my staff like 11 o'clock at night the night before the conference like you have to get my CEO in there you know and they really wanted it so we had to open it up after the conference we may we live streamed it be we had to open it up afterwards and for

a call for papers and so we had you know universities I know Wharton can came in and met and contributed and you know any number of other schools I would say What is the business school? The law school at Penn helped us a lot, as did several others. And what was the final product, if you will? So the Token Taxonomy Act as it stands today, maybe just give us kind of a quick overview of what exactly you're trying to get accomplished with it. And then we can talk about where it is. Yeah. So if you think about this as a tree, you know, at some point the tree starts branching out. You get a divergence that fills out the tree.

But the trunk is we wanted to go as high up as we could till it starts branching out. And well, you want to do this. So you branch that way. this person wants to go that way. But the common denominator goes up a certain level. So we wanted to say, well, we at least have to address when things aren't securities, because the SEC has been doing regulation by enforcement. It's been a patchwork. They've literally said, come check with us, cut your own individual deal. I mean, I told Jay Clayton that has all the charm and efficiency of a third world system. And it is. I mean, it's like our system overall is great, Because you have regulatory certainty, bang, you do these things, you can efficiently launch a company, open bank accounts, you know, do whatever.

But in this space, it's no, well, first come check with the SEC. What a horrible approach. It really is innovation by permission. And that's a really hard way to innovate when you've got to go check with mom and dad to see, can I do this or can I not? Yeah. And at that base level, that's one of the biggest reasons where entrepreneurs and frankly, venture firms said, look, I'm not putting my capital at risk because I don't know what's going to happen. But I know if I put it in Switzerland or Singapore, they have a regulatory framework. So the odd thing is, you know, a lot of times you are seeing companies offshore because of the regulatory burdens of the U.S. or the tax burdens of the U.S. Here you're seeing people move offshore to find regulations, not to, you know, not to avoid them, but to find some certainty.

So that's the biggest one. You have to get clarity around what is driving the SEC. And a big part of that's a Howey test that goes back to a Supreme Court decision, and it makes everything look like a security to the SEC, and certainly everything in this space. And so, like, literally only two no-action letters issued with hundreds on deck. And so we say you can know that your token is not a security if it meets four criteria. One, it's already created, not promised. Okay. So take the money from you. I'm not promising someday I'll create this.

it's like it here it already works it does this two it's on a distributed ledger where it's not controlled by a central authority or so it can't change the you can't dilute it you can't change the mix whatever it's already done yep three is that it's transferable between individuals without an intermediate area okay or third party including the creator and then fourth it doesn't represent a financial interest in a company or entity so you're not sure It's not stocks. Yeah, right.

So, if it does that, it doesn't say you're exempt from securities laws. It just says if it doesn't do that, well, you know it's a security. It doesn't mean, well, now you don't get regulation. No, now you would fall either in a commodity or a good or service in the Federal Trade Commission. And so, the government usually gets a hard time about the policies they put in place. But the name is actually pretty good on this one, right? In terms of what you're trying to essentially do is draw a line and say, here's how we're going to define securities. Here's how we're not going to define the securities.

and this framework will allow entrepreneurs to identify which bucket they fall into so they know the rules of the game that they're playing yeah taxonomy in terms of language and a big part of that dealt with everybody wants to speak of this whole space as cryptocurrency and the reality is most tokens frankly don't purport to be currencies they don't they don't have aspirations of being a means of exchange even in some cases some of them represent you know title to a good or service title, a deed for a property, a license for software, you know, any number of things that could happen. I mean, we haven't tapped all the use cases for the internet. We certainly haven't tapped all the use cases for blockchain. For sure. Okay. And so where is that bill today

in terms of like in the process of going from an idea to actually being put in place? And then the other question that I think a lot of people have is like, what can they do to help? Right. So kind of where are we and then what can people outside of the government actually do to help get this across okay so there's two other key components i want to mention about the bill one is it gives a de minimis tax exemption for currency and it's very important it's very important although it's not as big as we would like it's in line with current law so it's not a change to current law so it's more winnable six hundred dollars so if you were changing from u.s dollars to pound sterling to euros on a trip as long as you have six hundred dollars or less net uh gain then you

done a capital gains you want it and so it does that and then the third thing is it does is addresses custody okay a lot of times in custody if you want to you know use somebody like fidelity or State Street or you know whomever you use to store some of your investments you need a third party to be credible for custody here it's challenging because you might have a private key that you could share with multiple people and frankly part of the whole point of distributed ledger is to get rid of third parties. So it addresses that. And then so how would we move this bill forward? The process in Congress is that you would have a hearing that would include a notice for the

bill. So you would have witnesses that would come and at least part of the topic for the hearing would be to address these bills that are noticed. And then you would go to a markup, which is specific time devoted to moving this bill where members of the committee could offer amendments some of them some of would totally eliminate the whole point of the bill some of them are just small tweaks like well you didn't really address this I wish you would have gone into whatever okay so we'll debate that we'll add it well I think your language is a little too broad maybe we could tighten it here that's how a product will come out amended and it'll be okay

now it's the still be known as the token taxonomy act but as amended got it and And then and then so then the committee would vote on it and then it's available to be put on the floor. So there are a number of bills that make it that far that the speaker and majority leader, in this case, Nancy Pelosi and Steny Hoyer, don't schedule for a vote on the floor of the House. OK, but then why would they do that? Well, they might say, well, it moves through the committee, but it's really not something that we it's it's frankly, it's just like a deck of cards. I mean, if you're a chair of a committee like Maxine Waters, you want to give the speaker, you want to give your team plenty of cards to play. Yes. And unfortunately, a lot of times the speaker and the majority leader, whomever they are, are like, well, OK, this is a better card to play now.

So I'm going to play this card now. It's what people outside of the government think of as politics. Yeah. Essentially, that's what that's. People get frustrated by it. And then, you know, while Democrats right now are frustrated and they say, well, we've passed all these bills and the Senate won't even give us a vote. I'm like, don't get upset. They did the same to us. And we were in the same party, right? So you had the Republicans in control of the House. And as I highlighted earlier with the reforms we wanted

to do to Dodd-Frank, we were much more aggressive in terms of what we wanted to do than what could pass the Senate. For sure. So we had all kinds of bills that went over there and languished. And part of why I wanted to work on this area is it's not a partisan topic. So as you see the co-conference on the bill, it's just whether you actually understand it or not, which unfortunately might be a bigger barrier than partisanship on this issue. Well, we'll get to that in a second, but in terms of as kind of the political processes playing out, right, and I think a lot of people look and say, hey, you and your peers are going to have to kind of be the experts there, right, really kind of move this forward with your staffs. Is there anything that the people outside of

government can actually be doing? Is this calling up the representatives? Is this going to town halls? What can they actually be doing in terms of making your job easier or just more effective? Well, I think one of the biggest things is reach out to your member of Congress and get on their calendar, right? So if you get a meeting scheduled with your member of Congress, it drives staff work where they come in prepared. I mean, the staff will do more of the prep work, but I'll get a briefing ahead of every meeting or at least every day. Here's the highlights, and this is what the purpose of this meeting is. And that will at least get something on their radar screen. And if you can't get the meeting in the process of getting the meeting, invite staff and members to as many events in the space as you can so that they start to understand the issue.

And then, you know, frankly, there are people that are not going to shift their minds right now. Brad Sherman in Los Angeles just became the chairman of the subcommittee on capital markets. Well, for this bill to go forward, it has to get through that committee, that subcommittee or around it. so we either need him to change his mind or not be in the way or we need Maxine waters to change to to say look I care enough about this bill we're moving it and she has that power clearly that's your woman of the committee how detrimental do you think to this entire movement is it Brad Sherman coming into that chair you think it's actually a pretty big deal and people should be

paying attention to it or do you think it's it'll grab headlines in the beginning there'll be some fear-mongering going on but it's not as detrimental as maybe some think it is well i think it's really consequential because the you know he's not going to move this bill uh and for sure yeah right so so at least while um he's the chair which is all through 2020 democrats you know even if republicans win in a landslide in november of 2020 uh and take office in january of 2021 um that's still a year burnt when you could take a nonpartisan bill and move it. Right now in 2020, and there's really no prospect of moving this yet this year. So in 2020, what can we do to move it? Well, we either have to get

Brad Sherman to understand that, hey, not everything wants to be a currency. His view is anti-Bitcoin, very openly hostile to Bitcoin as a project. But that's because he likes the monopoly that the U.S. dollar gives us, the reserve currency on power, sanctions, the FinCEN spying protocols. And to be fair, he's very anti-any currency, right? That's right. Libra, Bitcoin, et cetera. It's not personalized. He hates all of it, right? For sure. And so, if he understands, like, no, this is really more of a securities law, but that's why I would have to go through the capital market subcommittee. Got it. Right. Or, you know, Chairwoman Waters cares so much that in spite of her chairman's objection, she drives it. That's not a high probability play.

So, him being the chairman is consequential. So, either, I mean, that's the only way this is This is going to move. And then if Republicans have a majority, Patrick McHenry, who's our ranking member, is very on board with the overall framework. So the prospects for the bill get much better. But that's really personalities more than it is partisanship. So I talk about party changing as a path to changing it. But the reality is the bill itself is 100 percent bipartisan. Yeah. Patrick McHenry and yourself both, I think a number of the things you guys have said either on the floor or publicly have taken Bitcoiners by surprise, but in a positive way. Right. And the one with McHenry that just shocked me is I think he said it on television. Then he said it on the floor where he said, look, you can't stop this thing. Right. And it was just so bluntly laid out there. Right.

That I think that was the first time that a lot of people said, wait a minute, there might be some Bitcoiners in Congress here. But one of the things you keep talking about and pointing out is people changing their minds, right, or getting educated on this stuff. And I think a lot of folks are of the mindset like, hey, I listen to the hearings, right? It's very obvious that 80 plus percent of these people don't understand what they're actually talking about, right? And it's an education problem. It's not a I did the work and I still don't believe in it or I don't understand how it works. It's just I haven't had the time yet to get educated. So what are you seeing your peers and where are they getting their information from?

how are they trying to get educated on it and kind of what are like the backroom conversations are there people saying hey look i actually don't understand this stuff like help me understand it or is there just a general ignorance and just non-interest and even trying to put the work in to to get educated well it certainly varies by member from this is just not my issue to oh so what is this really about and i will say that libra was a big help in that so when facebook launches libra i mean it's it's a huge um surge in attention um clearly globally uh certainly in the united states and even among members of congress so we had hearings finally that went into depth unfortunately 50 or better used their time to really bang on facebook and campaigning

right yeah whatever you know i i joked and i said some people were there to talk about the issues and some people were there to campaign yeah who would do that in politics right so that's why everyone's so frustrated with i mean a gazillion other reasons but you know we here we have this opportunity on the issue and you know it was not time well used for some members in my opinion but hey maybe it helped them in their districts right so they know their districts i don't know it and this is an issue that doesn't resonate broadly with the average american because it's just not on their radar screen yet but it is going to be huge for our economy i mean imagine if Imagine if Silicon Valley wasn't in America.

Look at all the tech jobs that are in America, the protocols, the standards that are based on how America wanted to go about it, that are driving technology all over the entire planet and a massive amount of those jobs, not just hardware and software, but the entire space, is benefiting the United States of America's economy. And we weren't entitled to that. If you go back to the 90s when they were getting the regulatory framework right broadly, I mean, overall worked pretty well. They didn't try to understand, oh, so tell me about TCP IP and, you know, the seven layer security protocols. They weren't trying to understand all that. But here with this, they're somehow trying to go, well, so tell me again, how do I do this?

And, you know, it's like, no, you just need to understand it as a big thing. And this is the framework that if you just will listen broadly to the space, not just the companies that want to make money, but even the regulatory regulatory framework that isn't working right now, it's telling you it's not working. Yeah. Right. Well, people are leaving. And the thing that I always go back to and it sounds like you and a couple others are now like really kind of hammering on. It's just look what got America to be America. Right. And I think it's much easier when you've got a soldier, you've been exposed globally, etc. you realize, like, everyone does not live the same life we live. They do not live in the same regulatory environments. They do not live in a world where entrepreneurship and innovation is encouraged. Right.

That's what got us here. And all these ideas really matter. I mean, they're really consequential. Yeah. Right. And you see places that, well, I mean, they're still the same sort of people. I mean, at the end of the day, everyone I've met, every culture I've met, everywhere I've met them, you know, they want similar things. They want to be safe.

They want to know their family's safe. They want to be able to make a decent living without somebody blocking them from doing that. And they want the next generation to have a better future than they have. And, you know, those are pretty common things across everybody. And in general, governments are the entities that mess that up. For sure. Well, and I want to kind of go abroad and then we'll bring it back to the United States. Talking about governments getting involved in this in a material way.

So let's start with China first and kind of their DCEP or their digital one that they're that they've supposedly already created and are going to launch here soon. Like, how do you view that in terms of a government stepping in and the pros and cons of them getting involved there? And then what's the global impact that you see and where should people be paying attention? Yeah. So if you look at why it's so consequential that the United States get involved, I mean, one, as Patrick McHenry highlighted, you're not going to stop it. I mean, frankly, it's like trying to ban the Internet. Right. it really is almost the same logic of saying you're going to ban the internet um good luck yeah i don't believe that's going to happen and uh and frankly i do believe that blockchain is secure and so people a lot of times will say well how do you value blockchain it's essentially

i believe the internet's going to endure and i believe that this is going to be a secure place to store this value how much do i believe that i believe up to whatever the market value is fundamentally that's not as easy to value as the net present value discounted cash flows right uh it was a debate about what's the right discount rate um so people people debate about that and right now all that is at stake is that going to be a market oriented approach or is it going to be a central government run authoritarian style system using things that give the appearance of not being authoritarian and central control yeah so you know while it might feel more free than what some countries are experiencing today behind the scenes

because they have no respect for civil liberties and privacy you know they are totally permissioned in terms of who can get on how they can get on how they can get off whether transactions are approved and this goes back to the core protection on privacy they are trying as a framework for this to have a social credit score so it's not just credit worthiness it's do you do the right things or you know you say good things about the government or you know are you yeah it's basically like this dystopian future where if you go really far out and you say hey what they're gonna do is they can have a electronic payment

system which is essentially just a digitized one what that they control that they've got complete oversight and insight into so they know what you're doing, when you're doing it, with who. And then they link that up to this social credit score that says, hey, you jaywalked today, right? Now you can't go buy candy at the store, right? Yeah, or you blend it with every other piece of data and it's like, look, you're clearly associating with these people. If you look in Hong Kong, I mean, they took their octopus cards and they quit using them, the digital version for sure and started just buying stuff with cash yep so does it maintain features of cash yeah and if everything becomes so ubiquitous that

it's permissioned and controlled by a central authority some I mean some members of Congress like that they believe that keeps us safer right that's how we keep it keep everyone safe and but you know then then you enable these dystopian futures and so the idea are we gonna go with a system that truly is decentralized where just like a $20 bill you and I can exchange it with no one's permission and frankly no one really needs to know is there a protection of privacy so I think privacy is foundational to this and I think the United States moving in a way that respects what got us here civil liberties

got us here you look at companies that make things people want well I mean people do want privacy look at how Apple's marketing has shifted look at the blowback against Facebook look at the concern over Libra a lot of that went to the center of the concern of saying, wait a minute, you're not going to filter my financial transactions like you're filtering my information, right? And China's future is definitely filtered. So the question is, could we do something similar in the United States of America? Could we enable a grand scale of innovation? We certainly have the companies, we have the talent, we have the education systems, and we have the capital to make all this happen.

We do not have the regulatory framework. And so I think part of this is we pretty much know how China is going to evolve this, right? And they'll put some lipstick on the pig and do all of what they're going to do, but they're going to digitize the currency and they're going to go ahead and release this thing. And they're going to have a lot more oversight into the financial transactions and finally just take the privacy from citizens even further. When you go to Europe that now you see the French central bank saying, hey, maybe we're going to test this in Q1 with more corporate clients. you see the BIS or the ECB. Everyone now is kind of saying like, oh, wait a minute, this may be a thing. And so, you know, kind of two, three years ago, everyone had to have a blockchain strategy. Now it seems like every monetary related organization saying, well,

we need a central bank digital currency strategy, right? The U.S. has frankly been somewhat lagging in their public comments around this. I know you've been a big proponent of like a digital dollar, but a digital dollar not meaning, hey, we just have electronic cash or something that's for surveillance. Maybe describe a little bit about what you mean around a digital dollar and why you think it's important. Well, so my version of what we would do with, frankly, fiscal policy and monetary policy are different than what we're doing. I mean, so frankly, you know, I mean, we didn't get $23 trillion in debt as a country because one party's good on the issue and the other isn't. But the fiscal policy is driving monetary policy to pay for all of it. So we're

essentially printing money, quantitative easing, which is destroying the store of value. You're destroying the whole point of money. I put the money into this dollar. I get paid in this dollar and I save for my future in this dollar. But actively, central bankers are undermining the value of my dollar. And it's been the fall of every currency in the world is the debasement of it, right? That's right. And frankly, history proves that deficits do matter. Unfortunately, Congress broadly goes about its business day to day as if deficits don't matter right and so

because in the short term we can just print more money to close the gap or solve the problem but it's getting lost in the weeds a little bit from you know what actually matters right and so as you highlight look digitizing the dollar doesn't inherently prevent that but if you tokenize it in a

way that was truly distributed you can certainly diminish the the kinds of interventions that central bankers do. So I'm not morally opposed to central banks being involved in sovereign countries, but I don't like some of the interventions they've done. Any examples? Well, I mean, so for example, right now in the repo market. That's like a layup for you.

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True. And so as you see this, I guess there's kind of the path we're on. Then there's a path of like there's a digital dollar. Do you see a middle ground where, you know, there's countries, and it's a sensitive topic because Venezuela specifically has done a bunch of bad shit, right? And we've levied a lot of sanctions, et cetera, on them and a lot for good reason. But they've talked about putting actually Bitcoin and even Ether possibly in their reserves, right, and kind of backing some of the currencies, et cetera. Do you see like kind of that as a middle ground here in the U.S. where we say, look, we can use some of these decentralized, non-manipulable currencies or assets as part of the reserves?

Or do you think it's more of we've got to make a major shift and the kind of baby steps between here and that major shift just won't get it done? Yeah. So what's going to drive this in the future? So for me, I look at the time horizon we're on. One, we don't have five years to deal with faster payments. Right. So the Fed and the Fed now, Fed now stuff. Look, this is going to happen somewhere. It's just clearly if that's the mindset in America, it's just not going to happen here. Right. And some people are OK with that. It's like we don't have to be the first mover on everything. Maybe we could be a fast follower when everybody else crashes and burns and does the wrong way. Okay. I mean, I would rather us be the leader on it, but I can at least respect that from a well-informed person. But when you look at where we're going to go, the reality is in our financial system, we have a solvency issue in the United States, cashflow that quits working really fundamentally between 2027 and 2032. Virtually every macro economist will tell you that's the reality is so how do we deal with it? Right. So how what are we going to do? And the other thing is, if you look at whether it was Libra or, you know, the the Christine Lagarde, when she was at

IMF, now European Central Bank leader, synthetic currencies are popular because it undermines the U.S. dollar as the world's reserve currency. And most everyone else knows, look, well, we're clear it's not going to be the RMB. We're clear it's not going to be the euro. Maybe if we all band together it could be the synthetic currency and it's basically we've been in a position of power for so long and we've taken inch by inch more and more of okay we have this currency everyone's dependent on it so like why don't we use that as a weapon right and we have and we've weaponized it's been useful uh for a lot of things and look i i've supported sanctions against you know like iran and north korea and uh and russia and i mean they're they're these tools are valuable they're

useful. They certainly help modify behavior and have been helpful in doing that. And then once the behavior is modified, to me, you have to be able to move forward, which we did with Russia in cases. So what happens in a world where, let's say that the U.S. dollar does diminish in importance and the U.S. loses that? Because I think Brad Sherman's a perfect example. What he's worried about, at least what I can tell, is he's worried about the U.S. losing the ability to weaponize the dollar that's exactly right the ability to use the dollar the way we're using it and the reality is um you know the petrodollar really when you look at um nixon we moved off of the gold standard uh the bretton woods framework for money and we went to the petrodollar and

frankly uh all the major oil contracts in the world are settled in u.s dollars which is great It de facto creates a reserve currency for the U.S. dollar. That's the big enabler of this, is what is it backed by? Ultimately, oil, petro. And so, if you look at the framework, you go back to Gaddafi, I mean, a big part of why he posed such a threat wasn't terrorism. It was the idea that if he united Africa and the idea that there was going to be an African currency in all their oil, natural resources, gold, diamonds, rare earth minerals, and everything else, were only settled in the African currency, that would have been a really big blow to the U.S. dollar. If you look at part of the concern that Brad Sherman and others rightly have about China,

they want to change that system so that the dollar is not the reserve currency. And look, when the dollar is not the reserve currency, we can't spend more money than we have. We can't attract as much money for our debt. We're already running into that. So we've bridged it with quantitative easing, the Fed printing more money to buy dollars, buy our treasuries when the demand really isn't there. But the demand, talk about the demand going away when the dollar isn't the reserve currency, that's really going to force the crisis. So why is that framework there? Well, one, it's going to happen anyway, because even at the rate we're able to borrow right now, we run out of runway in the next decade-ish, right? But two, if actors, whether it's Christine

Lagarde, in combination with China's central authority, come up with a synthetic currency in Saudi Arabia and Africa and everywhere else, goes with the One Belt, One Road initiative framework and starts settling in things that aren't U.S. dollars, it's going to undermine the demand for dollars. And we're not going to be able to have the same kinds of deficits we've had. And that's going to change fundamental way of life for America. Yeah. One of the things that I'm really interested in, and it went pretty uncovered in the media, but there was a couple of crypto outlets that covered it. I think it was 2017 or beginning of 2018. I think it was Argentina and Turkey settled a bilateral trade. It was very small. It was less

than $10,000 for some pesticides. They settled it in Bitcoin. And as I thought more about that specific transaction, it was, you can almost imagine the conversation, right? Like, hey, I don't trust you with your currency and your currency sucks. By the way, you don't trust my currency my currency sucks so like why don't we use this other thing that we know no one's manipulating that's fully transparent and so let's just settle on that currency to me it feels like the more that there's these currency wars and currency manipulations etc around the world and you get these kind of private meetings and people trying to come up with what's the solution more and more people just start saying like hey i don't trust any of this like i just want to opt

out oh right this is the beauty of it and it's almost as if i don't know satoshi nakamoto envisioned this future right i feel like the politicians are helping a lot man so if you look at central bankers undermining the value of everyone's currency i mean good grief most i mean look at the europeans look at countries around the world they have negative look at japan negative interest rates i mean we have negative real rates right so no one really believes that the treasury that the 10-year treasuries should sell for less than two percent because they don't believe that rate of inflation is going to be less than two percent so then you You have a negative real return with a positive nominal return on U.S. Treasuries right now.

But in other countries, the central bank has intervened and they've taken the 30-year zero. I mean, the Germans are issuing a 30-year zero bond. I mean, this is, and the Japanese have negative. You get to pay to store your cash. So, you know, when you look at the intervention of this, I think that's where, in a way, Libra is attractive, a synthetic currency for all these countries. But what's the, I mean, what's already created? I mean, Bitcoin, it's a massive piece. So, something about this framework as central bankers prove themselves less and less trustworthy and more and more predictable.

Yeah. Well, and it's also the structural component of Libra in terms of a distributed currency or a decentralized currency that's adopted, that isn't manipulatable, that's transparent, et cetera, all the things that Bitcoin has. But Bitcoin's one advantage is, one, it's got the network effect already. And two is you can't call Mark Zuckerberg in front of Congress, right? You can't call him in front of the Senate. That's exactly right. And you look at any of the other things that would come along, so far, virtually everything of scale, like Libra could be just because Facebook's behind it, You know, but they still want to keep that control.

They don't truly want to let go. Yeah. Right. And well, then it's alterable. So it's not a truly decentralized system. What, how do you think Trump plays into this? Right. So one of the, somebody recently said to me, they said, you know, nobody gives the credit

or the understanding that we're actually super lucky if you believe in this future of Bitcoin and decentralized currencies that aren't manipulated, et cetera, to have the president of the United States currently tweeting so much about currency devaluations, manipulations of economies, etc. And he's been public about not necessarily being a Bitcoin fan, but the fact that he's highlighting issues that Bitcoiners are also highlighting, that's driving a conversation. Do you buy into that at all? Or do you think that he's more dangerous than he is helpful? Well, I mean, I think he's serving the same kind of role that advocates of destroying the value of money are. I mean, he's pushing for our Fed to copy other central banks and frankly,

destroy the value of our savings, our money. So, taking negative rates isn't there. And frankly, it doesn't even do that much for the economy, except blame shift. So, it's all the Fed's fault. And frankly, I don't think the downsides in the economy are driven by the cost of money right now. They're driven by uncertainty. A big factor for the United States is trade. And another big factor is political uncertainty. I mean, the difference in policies between what, you know, Donald Trump would continue to do with great effect, great results for America's economy, versus what, frankly, the Democratic presidential debate stage, to me, looks like 15 or 20 different ways to destroy America's economy,

with Elizabeth Warren and Bernie Sanders being the most aggressive. My favorite part is this whole wealth tax thing. And I've been very kind of public with a lot of people in the crypto community that, forget all the politics for a second. All I keep hearing when I hear wealth tax is we're going to take money from some of the best capital allocators in the world and give it to who is most notorious for being a really bad capital allocator. I'm just uncomfortable with that idea. You've done so well with your money.

Why don't we take it and destroy all of it? Yeah, that's what I say. You're destroying the money. But it also brings up MMT and monetary theory. And this idea, if you go and talk to Ray Dalio, et cetera, he fell off the cliff. although he doesn't talk about bitcoin specifically he basically makes the case that okay we've got quantitative easing we can cut interest rates we're going to do all of this in the next recessionary period uh it's not going to have the effect we want and so what do we do well

rather than create money and then um go buy assets why don't we just give it to politicians to basically just give out to people right and that seems to be an area that's maybe a little bit more like hyperinflationary type situation um than not like do you see that as a real possibility or is is that more maybe kind of the capital markets looking and saying, like, you know, trying to predict the future? Yeah. And, you know, the scary thing is I see it's a possibility that we as a country would do it because, frankly, other countries have done it. Modern monetary theory is essentially already been tested, like any number of socialist ideas. And, you know, I don't... Did it work? No. It worked to destroy. It worked to give power to the people that sold it.

But it totally worked to destroy the economies. And so it's a dangerous idea. And frankly, the idea that it's gaining in popularity with people that, frankly, are smart enough to do the math and read the history is shocking to me. Well, and you used to word dangerous, which I actually wrote today this idea of money is an idea that is too dangerous for school. And what I was talking about in there is if you think about everything you're taught in school, you're taught nothing about money. even economics courses etc they don't teach about where money came from what is money right um how is it actually uh kind of the rules of the game of life and wealth etc and it goes back to the henry ford quote of like if people actually understood the banking and monetary system

there'd be a revolution before the morning right of just like the inflationary like tax on the wealth and and all these components that i think the bitcoin community people get sucked in whether it's through price or some other ethos driven thing they then go do the work to figure out Like, what is money and why does it matter, right? But there's a very, very high majority of Americans who have no clue how money works, right? And they don't understand that these ideas, they sound great because, yeah, you may get some money up front, but how detrimental they can be and how destructive they can be. Yeah, I mean, that's where I say, you know, if you want to defend freedom, you have to defend money, right?

And that's the concern I've got with central banks and their actions. They're actually destroying the whole premise of money. Modern monetary theory is openly hostile to the whole premise. What would you do if you were completely in control, etc.? What do you do to preserve the U.S. dollar? And then what do you do in terms of Bitcoin specifically? How does the United States interact with Bitcoin in the ideal world? Well, I think first and foremost, we have to get our privacy laws right.

I mean, even in our current banking framework, we've essentially deputized all the banks to spy on their customers. But it's for our safety, right? And it's funny to me that soldiers talk about this the most, right? The people you would think are like gung-ho on safety and protecting the country, et cetera, they're actually usually the most staunch privacy folks because they've seen the other side of it. You see what happens with the people with this much power. You know, absolute power corrupts absolutely. This is a system of absolute power.

It is a total system of control over the population. And, yeah, you want to stop bad people. I mean, no one's more passionate. I mean, you know, you and I were willing to fight a war, wars over keeping America safe, you know. And so are thankfully so many other people in our country voluntarily to go commit to serve and then go do whatever our country asks of us while we're in uniform. And so people buy into it. But to your point, a lot of people do get it because of that. So one, you have to get privacy protections right. Two, we need to, frankly, deal with the fact that we have an economy that depends on the federal government spending more money than we have.

I mean, if you think if you go cold turkey and cut off the trillion dollars above, I mean, we're going to collect about $3 trillion, $3.2 trillion in revenue, and we're going to spend close to $4.5 trillion next year. If it was a business, those numbers don't work. You can't do it every year, right? Or even a household, right? okay so i make 30 grand i'm going to spend 40 grand every year like no you can't do that every year right and and so you you add the numbers up it's essentially similar logic um unless you can create more money well right or you can keep getting loans right you get a new credit card offer a new credit card offer and you can extend it and uh you know but as uh herbstein famously

said if something can't continue it will eventually stop and hey it's like it's like uh it's like jumping off a building at the fall isn't isn't bad probably it's the sudden deceleration right bang and and when the economy stops putting that trillion dollars worth of extra cash or two trillion which is where we're headed you know households will feel that so we need to be responsible about how we unwind the current system and you know starting sooner is better than starting later because the course Corrections can be less aggressive with time right sure If you're walking towards a mountain, you can divert a little bit and miss it.

But if you're right on it, I mean, you're stuck. So we have to do that. And then I think there are a number of ways to do that. But most of it involves controlling spending, not necessarily revenue. I mean, you saw the tax system we've got, and you talked about the wealth tax. The idea that the government is owed this money has shifted. I mean, look at the whole systems of taxation and how hostile they are to privacy. I mean, wealth tax, very hostile.

We know everything about you, how much money you have. Estate tax, right behind it. You paid taxes your whole life, but we're going to tax you more. Income tax, we know everything about how you make money and everywhere you make it, including capital gains in our system. What you bought and sold, and that'll all net out, so we'll pay tax on your income. Payroll tax, somebody paid you money, or wait, I wanted to pay someone, you better tell us and report to the government. Property tax, you never actually own your property. You're really renting it from the government.

If you make improvements upon it, then, you know, then we'll pay even more. If you go down to sales tax, did you buy or sell something? I mean, you get down to the early systems of taxation in the country. You know, while I don't like tariffs, tariffs are taxes, it's probably less invasive of privacy than most of the other systems. And that's really early on a lot of what our government did. So I think you have to really get to a system that has a stable, predictable amount of revenue that isn't antithetical to the whole civil liberty framework, the system of control that we've got,

and we need to spend within our means. And we have the talent and innovation to do these things in America. If you look around the world, look at part of what Hong Kong did. It wasn't they had all these great natural resources. We have so much more to work with. They created a smart regulatory framework. China's actively destroying that but if we do that America's economy will continue to flourish that's what we did in the first place to make America

flourish it really is it's just like building a business it's just like you know running a campaign etc just get the best people working in the right direction right I mean at the end of the day that's really what you're doing is using regulations to incentivize people to come to our country to build things that are innovative and to change the future right or improve the future yeah And I think that the dialogue we've got in the country, why language matters so much, you know, people say, well, that's all we're doing. We just believe that everyone should have this and the government should pay for it.

No, I mean, you're using the law to do something that inherently it can't, which is part of why I like Bastiat so much. You're taking essentially a system where if you took the money yourself or with a group of friends, that would be theft, right? But if you pass a law, it's not theft. It's legal plunder, right? so you're in to say well but if you don't do this you don't care about people no I mean you charities when you do things not when you take someone

else's resources to do them and in particularly in a system where you don't even use your resources to do it my favorite thing around the wealth tax is I'm still waiting for one of the people pushing that idea to sign the the 99% giving pledge right where they give away 99% of their wealth because I haven't seen that yet they seem to be pretty good about taking everybody else's wealth but they're not necessarily giving all of theirs. Yeah, no, I think Amity Slay's in her book, Forgotten Man, has a nice introduction in that before, just a little foreword, it says, you know, the forgotten man is C, you know,

it's A and B getting together to decide what C is going to do. For sure. And so a couple more questions for you before I let you go. The first is around mining. So we're seeing in other countries a pretty big effort in terms of putting national resources towards just becoming a large contributor to the computational power of the Bitcoin network or some of these other networks. Is that something that you see the U.S. eventually getting into? Is it something that you'd like to see them doing? Where do you see that industry playing

into all this? Well, personally, I think we should, I don't know that the U.S. government should necessarily do it, but I do think we should create a system where mining is attractive in the U.S. Because again, we benefit a lot from the architecture of the internet being not just founded intellectually in America, but present physically in America. And I think when you look at that computing power, we would benefit a lot from that. And frankly, doing that effectively also has ancillary benefits for us. If you look at the energy consumption in the space, which is one of the things that you say, oh, well, I will say Bitcoin isn't perfect. It takes more energy consumption to process transactions than we would all love.

look at where that might go with, you know, computing power. And it's already moved in terms of specialized devices that do this faster, more energy efficiently. And if we can create a good, efficient energy framework to do that, America could end up being the best destination for that as well. And I'd take a step further, right? All of the work we've done show that there's a ton of investment going into renewable energy production and development because of mining, right? So, whether it's flare gas in Texas, whether it's the consumption of excess hydropower in kind of the northwest, we've got businesses that are taking tires and breaking them down into energy and then using them to mine. Like, again, when there's an economic incentive, people will get innovative, right?

And I think that's absolutely right. And for me, one that I think is a mistake to overlook, although it does require, you know, governments to be more involved to make nuclear work correctly. you know, nuclear is also carbon, you know, negative. It does not have a negative carbon footprint where a lot of our other energy frameworks do. And frankly, depending on how that's available to industry, that can be a huge competitive advantage for our economy. For sure. I know you know this question is coming, but if the government would let you, would you take part of your salary in Bitcoin? I would appreciate being able to participate more in Bitcoin right now. I'm in a role where

it would probably be perceived as unethical for me to be very public about what I want to be doing in Bitcoin or any number of other investments. But yeah, I'd be happy to take the standard thing always used to be if I could give you a quarter million dollars, but you can't get it for 10 years, do you want it in U.S. dollars or gold? And almost everyone says, I'll take the gold. And now, you know, do you want it in U.S. dollars, gold or Bitcoin? And I think most people would be foolish to not take at least a significant portion in Bitcoin. You can have a healthy debate between Bitcoin and gold, but I think no one rational is going to take it in U.S. dollars. For sure. And then I ask every guest, aliens, believer, non-believer?

Look, I believe God created man in his own image, and I don't believe that he needed to only do that here on planet Earth. All right. If you get into any of the government files and you find out anything let us know what one question you have for me to finish up I mean how did you get into this you've become this iconic voice in the space we now know you're a National Guard Army guy yeah so how did you get into this all through money so I had a young kid who I'd met when he was in high school he basically came to me and he literally like helped me hostage she was like you got to pay attention to this stuff and I probably was very similar to most people just

like this is like a video game you know what is this thing and how he convinced me he was like look my family's been the data center business for a long time so I understood kind of the idea of you know renting space bug power and got computing hardware and you rent that out for cash flow so okay got it well if you buy a different type of computer and you don't go get customers you instead rent that computing power out to this algorithm that'll pay you and a predictable transparent way it's more profitable let's go try that right and so kind of slowly did that and it goes to this whole idea of the education of

folks gets accelerated once you get some skin in the game right and so literally I made an investment to buy some mining equipment started and then it was just I just like fell really hard down the rabbit hole I always tell people like I can say you're all day long and tell you everything that you want to know about Bitcoin and it's all your questions but the best thing you can do is go buy hundred dollars like literally go buy a hundred bucks and sit there and I promise you if I come back in six months you'll know a hell of a lot more you'll pay more attention. So how long ago did you start in the mining? Yeah. So we started really looking

at it in 16 and we built the big ones in 2017, kind of early on. And it was one of these things where, you know, you start to build it. And then we also had layered on top of that, a lot of GPUs that we were using or mining Ethereum or Ether. And the price went from $10 to $30 to $50 to $100 all in a couple of months. And so I'm actually one of these people who believes like the volatility of price is um doing a lot of good work in terms of bringing people in because they come for the price right uh and somebody said to me um you know i came for the money but i stayed for the money yeah right of this idea of like the price volatility actually is a huge attraction but once you start to really understand like what is money how does it work and why are some of

this stuff maybe might be better um you kind of stick around because you're like hey this is bigger than just you know making uh making profit definitely big and now um the other big thing is you know one of the common questions i get that i feel better if you answer okay so what's the best digital wallet. People talk about, you know, how do you buy and store your Bitcoin? You're going to get me crucified on live ransom in this one. No. So, I've been pretty public about the fact that I'm with you in terms of the privacy aspect. If people own Bitcoin, I actually think that they should not be public about it. Since I am, I've basically given up control of everything. So, if there's any sort of security things, et cetera, like newsflash, I can't do anything. So,

I'm not a good target. But that was a very intentional decision of, hey, I'm going to public about this and kind of be a proponent of it and so therefore i need to take those security measures for the everyday person i actually have kind of two different pieces of advice so there's some people who are more technical in nature they really appreciate understanding the hardware walls the software walls and kind of getting deeper into not your keys not your coin etc and so for those people uh there's a whole bunch of them online i'm not going to name names but the more popular they are usually that means that they've kind of been battle tested by the community. And there's a reason why they are popular. But with that said,

I still think that there is an entire community of people who are going to come into this that just like you don't hold a bunch of dollars underneath your mattress, right? You put it in a bank. And so you do trust some sort of third party. It's not necessarily you're going to have to trust a fully custodial type wallet or exchange, but there's going to have to be a significant increase in the usability of the user interfaces, et cetera, because those technical solutions although they work today it's just not feasible for you know my mother to come in and use that stuff and so for her actually the best thing would be for her to go buy something on an exchange and leave it there right that's actually where she's probably the most safe but i don't think

that's a really good long-term solution so we've got some work there to build some solutions right same and if you think about like a corporate treasury if you look at a company with a significant amount of cash on their balance sheet to me anything that's a store of value you might want that as part of your portfolio yeah a lot of people feel like well g bitcoin moves too much for it for that to be used as a treasury tool some people i think believe that's great and i would say if i were looking at treasury management i would look at some component being stored in other stores of value besides some digital store of value yeah i i joke all the time and i say um first of all non-correlated assets actually reduce the overall risk of the portfolio so if you kind

of study any kind of modern portfolio theory you get that but the second piece is uh volatility has somehow become a bad word. And I have to remind people, volatility works on the upside and downside, right? So you can't get returns if you don't have volatility, because if something isn't volatile, it just stays flat. And so I think that it's really just being intelligent about portfolio construction, risk management, and kind of sizing in a portfolio. But I tend to think that more and more people are going to see the light a little bit, and it's going to become less of a taboo, and just people are more familiar. Okay, one last question for me. So with all volatility out there um with all the market participation out there you would think that

would provide a little bit more stability what explains the volatility yeah so if um this kind of also goes into like uh is the having priced in right it is a popular question as well and so um the way i describe it is like we all look at it as like everyone knows about bitcoin right but it's actually like i think it's like six or seven percent of americans even know what bitcoin is or have heard about it um if you look at from a participation standpoint even the most kind of bullish predictions or projections of like how many people are actually using Bitcoin internationally. It's like 1% of the world's population. And so, you know, go to the having priced in. I always talk about, okay, even if everyone in the Bitcoin community knows it's

coming, it's priced in, what about the other 99% of the world's population that's going to come in at some point in the future? Obviously they have no clue, right? So from their standpoint, it's not priced in. Same thing goes, I think, when you start looking at the volatility, which is there's not a lot of electronic trading that goes on and then also there hasn't previously until over the last like 12 months or so been the ability to short so long only market right and so anytime that you get volatility and you've got a lot of more retail human emotion driven investors again they came for the money right the people who stick around stayed for the money but there's a big delta between the people who came for the money and get shaken out and not

And so you get these hyper-volatile markets, but as everyone knows, the lows continue to be higher. And I think what that really is, is the most interesting stat to me is the amount of Bitcoins that haven't moved, right? And that number continues to trend upwards. And it's just those holders of last resort that are just saying, look, I don't care what the price does, right? It's kind of the one BTC equals one BTC, which so far has played out pretty well. So we'll see if that continues. But I think the volatility will slowly dissipate over some period of time. Well, those long-term holders have certainly been rewarded.

There's a question that a friend of mine who was very, very early in Bitcoin, I asked him, I said, at what price would you not buy anymore, not believe? Would you capitulate? He goes, I'll be buying at five cents. And I said, look, man, that's a statement from somebody who isn't here because of money, is here because of some kind of ideological or ethos-driven view of the world. And while I think we've all been trained in a different version of the world, I think we're starting to see a lot of things you've highlighted that's not working how we thought it was going to work. Right. And so there's probably going to be that plan B, whether that comes from the government, whether that comes from something like Bitcoin or there's some other avenue to pursue. I think that it's likely every day that that's becoming more and more probable. OK, I can keep asking you questions all day.

All right, man. Listen, thank you so much for doing this. I really appreciate it. Um, and then, uh, thanks for the people here in, uh, in Cleveland for, uh, for having the conference. So, uh, we'll have to do this again. Yeah. I'd love to. Thanks. Absolutely.

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