The Wolf Of All Streets - Former CFTC Chairman Chris Giancarlo On The Future Of The Digital Dollar

Episode Date: June 30, 2022

Does the future of digital money free us to be our own unique selves, or does it enslave us to financial and governmental powers? Chris Giancarlo, lovingly known as “Crypto Dad,” knows it’s inevitable for our financial system to yield to an internet-based system and is encouraging regulators to be proactive instead of reactive. He believes that society has every right to experiment with the money of the future and is doing just that with The Digital Dollar Project. In this episode we cover the jurisdiction of the CFTC, CBDC activity and fears that come with it, and whether or not our government will get this right. JOIN THE FREE WOLF DEN NEWSLETTER 📩 https://www.getrevue.co/profile/TheWolfDen THANK YOU TO OUR SPONSORS ►► Have you ever had your exchange go completely offline during days of high volatility? Of course you have. We've all been through it. Those days are no longer with Bullish. Bullish is a new breed of digital asset exchange that empowers users to trade with deep and predictable liquidity across highly variable market conditions. They also have incredible automated market-making and industry-leading security. I can't get enough of this platform and it's fully regulated. Sign up here: https://thewolfofallstreets.info/bullish/youtube Bullish is licensed by the Gibraltar Financial Services Commission. Virtual assets and related products are high risk. Consult your investment advisor and trade responsibly. Bullish is available in select locations only and not to U.S persons. Visit bullish.com/legal for important information and risk warnings. EPISODE LINKS Chris Giancarlo: https://twitter.com/giancarlomkts Production & Marketing Team: https://penname.co/ FOLLOW SCOTT MELKER • Twitter: https://twitter.com/scottmelker • Facebook: https://www.facebook.com/wolfofallstreets • Web: https://www.thewolfofallstreets.io • Spotify: https://spoti.fi/30N5FDe • Apple Podcasts: https://apple.co/3FASB2c

What we should be focused on in crypto is less whether Bitcoin is up $1,000 today or down, and whether this new protocol of value is going to match our own values as a free society and provide us with the privacy, with the freedom to conduct our commercial affairs. You know, we talk about First Amendment freedoms, freedom of assembly, freedom of speech, freedom of religion. But in a capitalist economy, what are those freedoms other than how we use our money? This episode is sponsored by my good friends at Bullish. Stay tuned for more information on this amazing company later in the episode.

I had the honor of sitting down with crypto dad Chris Giancarlo, arguably the first regulator in the United States who showed a true understanding of our asset class and was willing to put it out on the line to defend us. Now he's working on innovating towards a central bank digital currency. And this conversation was absolutely mind blowing. He talked about why we need a freedom coin and not a tyranny coin like they have in China. He has his doubts as to whether we will see a central bank digital currency or not, but is still doing the work to make sure that it's done right. So listen, you were affectionately deemed crypto dad. You were probably the first beloved regulator that we had in the United States among the crypto community. Do people still call you crypto dad? You know, online, on Twitter and elsewhere, yes.

It's a title that I've grown to adjust to and to actually embrace because it's a way of conveying something that has been very important to me. And that is the generational aspect of crypto. And quite frankly, I wish there were more crypto dads and more crypto granddads and more crypto grandmoms. There's a generational gap. I think that is actually challenging the evolution, the adoption, and the innovation of this technology that the leadership in the public sector, the leadership in the private sector don't fully understand what this is all about. And I think the younger generation that gets what it's about does a poor job of actually conveying what it's about. We convey it as if it's some sort of funky new tradable asset class. But in fact, it's about an entirely new architecture of value, an Internet-based architecture. It's the Internet doing to finance and banking and money itself what the Internet's already done to social networking, to online shopping, to entertainment, to transportation.

And that is giving us a new relationship with those activities, one that's less based on proprietary owners of those activities. You know, we're not dependent on Kodak now to take a photograph and send it around the world, right? We're not dependent on the mail and the U.S. Postal Service or on the telephone company to speak to people around the world. And in a similar way, what crypto is about is a new internet-based way of having a relationship with our things of value, with our retirement, with our cash accounts, that's not so dependent on this bank or that correspondent banking system.

It's a new architecture of money, and we need to do a better way of conveying that. And the generation that I grew up with that's wedded to the traditional banking system needs to embrace this and not deride this. And so I got the crypto dad title by explaining that to Congress back in 2018. And at first I was taken by that title and some of the other titles. But as you know, I just published a book called Crypto Dad, The Fight for the Future of Money, in which I embrace that title because I'm trying to tell a story about how this is the technology of finance of the future. We have a generation in leadership today, a septuagenarian generation, that is defending the status quo. But like all septuagenarian generations of leadership, they will move away in time. And what will move forward is a generation that understands the power of networks, understands the power of the internet, and understands how

change is coming to the way we conduct finance. Right. I mean, it would be wonderful if our leadership in that generation embraced this technology. But frankly, as you sort of alluded to, we don't need them to because inevitably they will cease to be in power and the next generation will be digitally native and will never live in a world that didn't have Bitcoin or crypto or NFTs, basically these assets and this way to transact value between one another. Exactly. You know, life is a conveyor belt, right? Every generation has their moment in the back of the conveyor belt.

Eventually they get to the front of the conveyor belt and eventually they fall off the conveyor belt. That will happen here. You know, we have a generation in power today that grew up on the banking system as we know it, where value is recorded on the proprietary balance sheets of financial institutions that are then regulated and co-opted to serve the purposes of the financial system, but also serve the purposes of government. That system will yield as every other systems of proprietary ownership of information, proprietary ownership of retail shopping have yielded to an internet-based system. That system will yield in time progressively, not all at once, not entirely, but yet to think that the internet will not do to banking and

finance and money what it's done to all those other activities is just naive. Of course it will. What we need to do is make sure that the values are encoded in an internet-based system of value match the values of a free society. Privacy, freedom from censorship, freedom from coercion, greater access to our fellow citizens, including those without the credentialed identity that's requisite to access the current system, have access to a new internet-based system. Yeah, and especially not only in the United States, but worldwide. In a world of 8 billion plus people, where a billion and a half do not have sufficient credential identity to access the system, they are unable to access financial services.

Now, that is the current system. We can do much better with an internet-based system of money. And obviously, markets hate uncertainty, right? And so I think certainly you were leading the charge, but what people have been waiting for is clarity, even if it's negative clarity, some clarity. And we finally are now at least seeing something put forward in the Lummis-Gillibrand bill, which is pretty sweeping. And really, I was quite impressed. I think it's a measured approach, but I would love to hear your thoughts on what they've proposed and, of course, the chances that it actually makes it through.

Well, so in asking the question, you've actually stated some of the key elements of this. First of all, its realization in its current form is uncertain. In fact, when you introduce legislation, that's not even the purpose. The purpose is to create a vehicle to move through all the different committee structures as a basis for negotiation debate. So what Senators Gillibrand and Lummis have done is introduced that very vehicle, and that in itself is a huge accomplishment. The second element, and you said this again, is its very name, Lummis-Gillibrand, a Republican and a Democrat, means we're starting on a bipartisan footing.

A New York Democrat. A New York Democrat. Right. Very, very important, right? Bipartisanship is essential if we're going to get something through. When you don't have bipartisan legislation, what it means is one party is wedded to it and the other party is wedded to undoing it.

That would be devastating for crypto. We need both parties vested in what emerges. And I think we're off to a good start. And then the other point you made as well, it's comprehensive. That's really important because it sees crypto not just as, as I just said, some sort of investment asset class, but much bigger than that. A new protocol of the establishment of value and the transfer of value and the ownership of value. And that's important. I really have to tip my hat to these two senators. They've introduced something that's a really good starting point for the type of legislation I don't think we'll see in 2022.

This is an election year after all. But I do think we could see in 2023. And I think it's vitally important that we provide greater certainty to crypto. So I'm very, very pleased with this as a starting point. I think this is something to be celebrated. And I think these two senators are to be commended for this work. I tend to agree. And I think that they also made it much clearer where they want the regulation to come from, being your former agency, CFTC, and seemed pretty implicit that they would rather the SEC not have their fingers too deeply in this. Well, it's interesting.

Since the bill's been introduced, what, 48 hours ago, there's been a lot of comment on the very point that it does expand the CFTC's jurisdiction. And some people find that surprising. I don't. In fact, if you know the history, which I'll recount, of the origin of the CFTC, the CFTC was created because of the invention of perhaps arguably the most important financial innovation of the 20th century. That was the creation of the financial futures. Financial futures allowed the world to go off the gold standard and to go to a dollar standard because they could mitigate the risk of moving interest rates and moving foreign exchange rates by hedging them in the financial futures market. That product was so important that the leadership at that time in Congress and in the White House recognized that if they gave it to the SEC, with no disrespect to that agency, it could be stifled. And this innovation was so important that what they did is they plucked a bureau out

of the Department of Agriculture, named it the CFTC, and gave it a mandate for innovation and placed financial futures under its oversight. And today, we're on a global dollar standard all because of the wise regulation of that financial product by the CFTC. And it's 40-year history. The CFTC has done a fabulous job of encouraging innovation. In fact, more new products in the last 20 years have been launched under CFTC oversight than all the world's market regulators combined. It's an amazing record. So is it surprising that we have today a new financial innovation, one that could revolutionize

financial markets, and that could revolutionize financial markets and leadership says, you know what, we need to put it under a regulator with a mandate for innovation, not a regulator whose track record on innovation is at best spotty. And so to me, it's natural that the CFTC's jurisdiction would be put over this product. You talk about how futures were the innovation that effectively made the CFTC necessary. Do you think that crypto Bitcoin is a big enough innovation that it could end up with its own regulator that's neither the SEC or the CFTC?

Yeah. So having been a player in Washington's alphabet soup of regulators, I'm not sure we need another one. And each agency has its oversight body in congress the cftc falls under the ag committees which are mostly midwestern governed the sec falls under the banking committees which are mostly coastal eastern west coastal governed that balance of power between the midwest and the coasts you know falls along the fault lines of our own american society i'm not sure there's a new constituency i'm not sure there's a new body. I'm not sure there's a new body in crypto. So you've got to think about congressional politics as well. I don't think we need a new body, but I do think we need a new intellectual framework. We need a new legal framework for crypto

that recognize crypto is not some sort of new tradable class. It's not just like some new swaps or some new financial product, like some new ETFs. Crypto is about protocols to use the internet to govern where value is. It's as important as 5G technology, as important as the invention of TCP IP that allowed the internet. And so it has a broad application and we need a new legal framework.

My former colleague, Gary Gensler, who's now chairman of the SEC, likes to say, you know, same purpose, same rules, right? Well, if that were the case, then when we went from rail transportation to airline transportation, we should have just employed the Interstate Transportation Commission rules. Because they're both moving you from place A to B. Right. But we came up with a new aeronautics approach to airline travel. Yet they're both transportation. But we came up with a new protocol for airline travel.

This is, yeah, in some cases, crypto can be used as a security. It can be used as a capital formation instrument. So the SEC does have an important role. It is a long, distinguished track record of overseeing markets for capital formation, and I think the SEC has a role. I don't want to say they don't have a role here. They do have a role here. But the CFTC, with its tradition of innovation and risk transfer markets, has a role. What we really need is Congress to do exactly what the Lummis-Gillibrand bill has said,

is a new intellectual framework that sees the full potential of this and assigns responsibilities to agencies like the SEC, to the CFTC, but tells them how to go about doing it and not treat everything like a nail because all you have is a hammer, but to treat this innovation in its fullest. And so I'm very optimistic that perhaps next year we'll see some legislation that assigns a role to the SEC, assigns a role to the CFTC, maybe assigns a role to other agencies. Certainly banking regulators have some role in this, but assigns it in a very careful way to say, here's your lane and within your lane, here's what you need to do.

And most importantly, and I think this is one of the things that the Lummis-Gillibrand does very well, it declares a national interest in taking a global leadership role in this innovation. It treats it not just in a defensive fashion, which I think too many in Washington want to do, but in a, dare I say, offensive fashion. We need American leadership.

The world needs American leadership. I spend a lot of my time speaking to overseas regulators. They all say the same thing. Where is the United States in this? We need American leadership in this. And my hat's off to Senators Gillibrand and Lummis for providing American leadership. Everybody knows that there are advantages to trading on both centralized and decentralized exchanges. But why not choose an exchange like Bullish that offers the best of both worlds? Bullish's total trading volume recently exceeded $25 billion in just seven months since they launched, and they have the best liquidity in the game when it comes to Bitcoin USD. Now, Bullish has released the first major upgrade to its liquidity pool technology with the

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You should check them out immediately at bullish.com slash melker. Well, I do think that there's been a fear, certainly because the SEC and Gensler has been more vocal, that we were going to get that sweeping sort of identification of everything as a security and completely crush innovation. So I think even the idea that it will be parceled out appropriately is a huge win. And I actually think it's good for the agencies, right? In the absence of congressional direction, their natural instinct is to say, everything's under our jurisdiction, right? We got this, everybody else back off. You know, I lived in Washington, I worked in

Washington, right? Turf in Washington is the all-powerful guiding factor. What is important here is for Congress to say, no, put turf aside. We'll tell you which a turf is. And the American people have an interest in seeing this innovation furthered. So your lane is here. Your lane is here. Your lane is here. Here's the framework by which you operate. It'll be good for the agencies to have clear guidance from Congress.

So first we'll get clear guidance from Congress on this, hopefully, and then we'll make the inevitable move towards a central bank digital currency, which is where you're now focused. I am indeed. So I launched something called the Digital Dollar Project. Here's my concern. My concern is that the rest of the world moves forward with central bank digital currency. We already have a central bank digital currency in China in the hands of 250 million Chinese. My worry is the United States sits back and lets the rest of the world experiment, and then three years from now suddenly says, oh my goodness, the digital yuan is now being an export product. The Europeans have launched the digital euro. We need to do something.

And Congress, in one of its classic Memorial Day weekend drafting sessions, writes something, chucks it out there, and it does more to undermine the dollar because it's poorly considered. Also, one of our foundational principles is that money is as much a social construct as it is a government construct. And society has every right to experiment with what the money of the future does, even if our own government is behind the curve. And so we launched the Digital Dollar Project in full transparency to experiment with a central bank digital currency and make all of our experimentation data available to policy makers to academics to legislators to governors to then hopefully if someday and we do not call for a u.s digital dollar but we do call

for experimentation and we actually put our money where our mouth is we're actually doing the experimentation so here's what's interesting scott in April, we announced the first of what we hope to be nine pilot projects, the first looking at a wholesale central bank digital currency. It's the first in the world of any experiment with a digital dollar. But even more importantly, it's the first experiment with any type of central bank digital currency of any currency denomination driven entirely by the private sector, not being run by a central bank. That's a tremendous accomplishment, and it could have only happened in America. That's probably terrifying to the American central bank, but yes, absolutely. And I think there's obvious fears that come with a central bank digital currency

that is not handled appropriately. Obviously, we can say it's a central banker's wet dream, right? When you want to do stimulus and print some money, you just do an airdrop, right? And I think the second and probably larger one is privacy, right? So let's take those aside. First of all, nothing in an analog world is central banks are printing money when they need to print money, right? 30% of the dollars in circulation today have been created in the last 24 months. So they have not been restricted by doing it. As I say in my book, Crypto Dad, a profligate government will find ways to be profligate

in any form of currency, whether digital or analog. And a thoughtful, careful government that respects people and their citizenry will be careful about money, whether it's digital or whether it's analog. We do not see a central bank digital currency as a policy expression, but as a policy tool, right? Hopefully we'll use it to shore up value in our dollar, not to undermine it. Whenever you go from an analog system, a digital system, all policy aspects are design choices. Privacy can both be an offensive as well as a defensive policy choice. If we choose to make the digital dollar the most private instrument in the world, in accordance with our own values enshrined in the Fourth Amendment right to privacy, we'll make the dollar the strongest instrument on earth. And those who say leave money in the hands of the private sector, well, what I say to that is what assurances will the private sector provide for privacy?

Certainly, they haven't done a good job in the internet of information. Big tech purloins our data every day, right? And censors us, right? Often at the behest of government. So what's to say that if private sector big tech actors were to conduct money, they'll keep our privacy. At least the government is governed by the Fourth Amendment. But the real question is, what do we as a private and a free people insist upon in our private sector money, in our non-sovereign or sovereign money? Ultimately, it comes down to, do we as a people get more concerned about our privacy than, quite frankly, we have been to date, and demand privacy not just

from the government, but from private sector actors. And one of the things I'm devoting the remainder of my public life, since I've left public service, is to really trying to sensitize people to demanding greater privacy in our online affairs, whether that's in social media or whether that's in online commerce or whether that's in the digital money of the future. It doesn't matter whether that digital money is run by Facebook or whether it's run by the central bank, the Federal Reserve Bank. What really matters is to whether we, the people, demand that whoever operates it provide privacy in the way that China will not.

China's coin will be a surveillance coin. It will be a censorship coin. The question is, what do we in a free society do? If all we come up with is China-lite, OK, we'll censor it, but not as much as they do. We'll surveil you, but not as much as they do. We'll surveil you, but not as much as they do. Then we failed. But if what we develop is a freedom coin, if we insist that our online commerce is free from both government and private sector surveillance,

of course, for lawful transactions, if we insist upon that, we'll actually position the dollar for another three generations of being the world's reserve currency. Because aspirational people the world around will flock to that currency because the notion of economic and financial freedom and privacy. You gave me goosebumps. Because that's really the important point, is that you hear everybody demanding our central bank digital currency needs to protect our privacy while using their iPhone and checking Facebook and allowing themselves to be served ads and effectively spied upon by big tech. And somehow that's OK. It's interesting. We in America, in Europe, they have this GDPR. It protects your information from usurping by the private sector. But GDPR allows government to surveil everything. So they're totally paranoid

about commercial exploitation of their data, but they give it to their government. In the United States, we fought a revolution against government coming into our homes. And we have a Fourth Amendment freedom of privacy. And yet we allow commercial actors to take all our data. We're the product, right? That's why we're hoping to get away from web 2 into web 3 but could web 3 become we just trade away big tech surveillance for government surveillance of course that would be a disaster so what we've got to do is as a people what what we should be focused on in crypto is less whether bitcoin is up a thousand dollars today or down and whether this new protocol of value is going to match our own values as a free society and provide us with

the privacy, with the freedom to conduct our commercial affairs. You know, we talk about First Amendment freedoms, freedom of assembly, freedom of speech, freedom of religion. But in a capitalist economy, what are those freedoms other than how we use our money, right? We assemble with associations, freedom of assembly, by paying dues. We have freedom of speech by writing op-eds or subscribing to newsletters or listening to podcasts. We express our freedom of religion by tithing to a church, giving to a synagogue. Those are the freedoms we express. We do it financially. If we think we have those freedoms, but yet we allow surveillance of our economic activity, we don't have those freedoms at all.

And so we've got to make sure that the money of the future, whether it's conducted by a non-sovereign big tech actor or by our government, assures us freedom from surveillance and freedom from censorship. Interesting. It makes you wonder if when central bank digital currencies inevitably are launched, because we know that technology is inevitable one way or another, if that will actually drive a portion of the population to Bitcoin, because they will have learned now to transact digitally, which is something that many people are afraid of. They just don't know how to use a wallet. And maybe they won't find that some of these central bank digital currencies are private enough, and it will sort of lead them down the rabbit hole that I think quite a few of us have gone down. When I speak to my former government colleagues that are now at the central bank or in the treasury, what I say to them, if you get privacy right, you will set the dollar up as the reserve currency, the aspirational currency for people around the world for generations to come. But if you get it wrong, you will do more to help Bitcoin

than anything in the world you'll send Bitcoin to, astronomical heights, because people will flee a surveillance coin in free societies. Are you confident that this current government or iteration of it, regardless of party, can get this right? No. I'm not confident, but I'm hopeful. And that's, as I say, that's what my mission is now, for what years I've left in my public service, is to actually make people understand this is the fight right now. I call my book The Fight for the Future of Money. The battle is being waged right now by free people everywhere.

The future of money is digital. There's no question about that. The battle is being waged right now by free people everywhere. The future of money is digital. There's no question about that. The question is, in a digital future of money, what values will be incorporated? It's a new American revolution all over again. We've got to fight for the values that got us here in the future of money. If we do, the future is fine for our children and our grandchildren. And if we don't, if we just allow surveillance coin to not just be in China, but here in the United States, we have really failed them. Well, it's first they ignore you, then they laugh at you, then they fight you,

then you win, hopefully. So are we at the fight? Is this the fight? This is the fight for the, it's about values. You know, it's funny. In human existence, we're value creatures, right? What distinguished us is some very good books written by Rani and others

have written, you know, humans, what made them different is the concept of values. And, you know, the more technological we get, it's still about the values. What values? Does the freedom of digital money free us to be our own unique selves who aspire to greater futures? Or does it basically enslave us to be enslaved to financial powers, to government powers, to do what we're told because those are the only choices allowed to us because we're surveilled and censored through our economic choices? That's the path China's on. China has created the benchmark for central bank digital currency, no question about it. It's the benchmark. The question is, do we go down the same road? Do we,

in a sense, create something that's based on their benchmark, or as I hope we do in free society, based upon the values that made free society the aspirational way of life for people around the world? Well, they say fix the money, fix the world, and I'm quite glad that we have you helping to fix the money. Very kind. Great to be with you. Thank you so much. Thank you so much for listening to this episode. If you haven't already left a rating or a review on Apple Podcasts or Spotify, please do that now. Spotify just added ratings, so please go ahead and click that five star.

I'll see you guys next time.