Unchained - Oslo Freedom Forum 2019: Protecting Financial Freedoms in the Digital Age - Ep.123

Episode Date: June 11, 2019

In this panel, recorded at the Oslo Freedom Forum 2019, I moderated what an attendee described as a "lively" discussion on the relationship between finances and freedom with Bitcoin author and educator Jimmy Song; Alena Vranova, Head of Strategy at Casa; and Coin Center founder Jerry Brito. We talked about what it's like to live under a regime where people don’t have a lot of financial freedom, how the move to a cashless society is leading to a surveillance state, and how we're seeing the emergence of a corporate surveillance state. We talked about how cryptocurrency could bring us more financial freedom, how crypto is/should be regulated, privacy coins and the imminent Financial Action Task Forces rules that require crypto exchanges and other services send each other information on customers for each transaction. Plus, we discuss bad state actors using crypto. Read the show notes on Forbes! http://www.forbes.com/sites/laurashin/2019/06/11/how-bitcoin-and-cryptocurrencies-can-further-financial-freedom/ Help make Unchained better! Take our survey and enter the giveaway for a free Bitcoin lightning node and a yearlong Casa Gold membership, -- including a multisig security app for iPhone and Android, a Trezor hardware wallet, a Casa faraday bag, and 24/7 support! https://www.surveymonkey.com/r/unchainedsurvey2019 Those of you interested in learning more about Casa, or about protecting your Bitcoin investment generally, should check out my interview with CEO Jeremy Welch. https://unchainedpodcast.com/how-casa-makes-it-harder-for-someone-to-steal-your-bitcoins/ Thank you to Casa for donating! Thank you to our sponsors! Kraken: https://www.kraken.com CipherTrace: http://ciphertrace.com/unchained Episode links: Oslo Freedom Forum: https://oslofreedomforum.com Human Rights Foundation: https://hrf.org Jimmy Song: https://twitter.com/jimmysong Alena Vranova: https://twitter.com/AlenaSatoshi Jerry Brito: https://twitter.com/jerrybrito Programming Blockchain: https://programmingblockchain.com Casa: https://keys.casa Coin Center: https://coincenter.org FATF rules: https://www.coindesk.com/beyond-kyc-global-regulators-appear-set-to-adopt-tough-new-rules-for-crypto-exchanges How regulation could spur the development of technology in the crypto space toward more P2P: Vitalik blog post on this: https://vitalik.ca/general/2019/05/09/control_as_liability.html Michael Casey on the topic: https://www.coindesk.com/the-cat-and-mouse-game-of-crypto-regulation-enters-a-new-phase Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone, Laura here. One really important announcement before we begin. Unchained is doing a survey. We want to know how do you think we can make the show better? How would you like to see Unchained expand? If you could just take a moment and go to SurveyMonkey.com slash R slash Unchained Survey 2019. That's SurveyMonkey.com slash R slash Unchanged Survey 2019. Your answers will be a huge help to meet in my team here at Unchained.

changed. Also, those who answer the survey can enter to win one of five free Kasa Bitcoin Lightning nodes, plus a free year of Kasa's gold membership, including a multi-six security app for iPhone and Android, a Trezer hardware wallet, a Kasa Faraday bag, and 24-7 support. Those of you interested in learning more about Kasa or about protecting your Bitcoin investment generally should check out my interview with CEO Jeremy Welch. Thank you to Kasa for donating. Again, the URL is surveymonkey.com slash R-chained survey 2019. Go there now to give us your thoughts on the future direction of unchained and enter the giveaway.

Today's show is the recording from my panel at the Oslo Freedom Forum, which I have to say is one of the best conferences I've had the honor of attending since I started covering crypto. I'm always incredibly humbled and inspired by the people I meet there. This year, I learned that 4.1 billion people, 53% of the world's population, live under authoritarian regimes. That's 96 countries. And 25 of the 30 poorest countries on Earth are run by authoritarian regimes. The Human Rights Foundation's mission, and its interest in using cryptocurrencies to further that mission, is what made my panel in which we looked at the relationship between finances and freedom even more meaningful. discussing the topic where Bitcoin author and educator Jimmy Song, Elena of Renova, head of strategy at Kasa,

and Coin Center founder Jerry Brito. Several attendees told me afterward that they really felt we had a lively debate, so based on that feedback, I think this one is an especially good listen. Enjoy the show. Cracken is the best exchange in the world for buying and selling digital assets. It has the tightest security, deep liquidity, and a great fee structure with no minimum or hidden. fees. Whether you're looking for a simple fiat on-ramp or leveraged options trading, Cracken is the place for you. CipherTrace makes it easy for exchanges and crypto businesses to comply with

cryptocurrency anti-money laundering laws. Avoid illegal sources of funds and maintain healthy banking relationships. CipherTrace is helping you grow the crypto economy by keeping it safe and secure. Hi, everyone. Welcome to our panel about finance and freedom. My name is Laura Shin, and I'm the host of a couple of crypto podcasts, unchained and unconfirmed. And with me here to discuss this topic are Jerry Brito, the co-founder of Coin Center, Elena Vranova, the head of strategy at Kasa, and Jimmy Song, Bitcoin programmer, and educator. And as I was prepping for this panel this morning, I actually was reflecting also watching some of the sessions earlier. that actually in my family history, I have a story of my family gaining freedom because of money. So it kind of got me in the mood to discuss this. And I also believe that Elena has some personal stories on this issue. So Elena, can you tell us a little bit about your experience living in a regime where people didn't have a lot of financial freedom? I was born in the communist regime of Czechoslovakia, where several hundred people were sentenced to death.

and many thousands people were shot at the borders trying to cross out, and everyone had the same nothing, right? Everyone had the same small income, and basically that kept many people from just getting out of the country. And also the regime will try to put down the entire descent by disallowing them to do their jobs. So we had Vatslav Havel, that you may know, that was then later on our president,

and a lot of other dissidents that were not able to do what they're educated for and what was their actual profession. And so several of these dissidents created a circle and they published a work that was called Parallel Police, a concept of a parallel world that you have to create if you cannot live under the oppression of the, regime and if you cannot fight it openly, then you have to go and create your parallel economy, parallel media, parallel exchange of everything. Even education, they would homeschool their

kids about the truth. One thing that they were missing, though, was a good money, sound, secure, peer-to-peer money that would not be controlled by a central authority, right? And now, fast forward, we have Bitcoin, which is a peer-to-peer money not controlled by any central authority. And that, you know, inspired me so much that I'm dedicating my past, I don't know, nine years to developing the ecosystem and helping people interact privately and be more sovereign as individuals. So one other theme that's kind of interesting is so here we've got this sort of pure digital currency. And yet at the same time, there is kind of an overarching trend across the globe where more transactions are happening digitally as well, but in a very different way, not with cryptocurrency.

And for those of you that went to the sessions this morning, we did see that in China, they're obviously putting these Uyghurs into concentration camps. But another thing that is becoming more prevalent there is this surveillance state. And I don't know how many of you are aware. Probably actually many of you are aware of that. A lot of transactions in China now are happening on WeChat, which is something that the government has visibility into.

And your financial transactions are actually a very intimate look into what's going on in your personal life. If somebody goes missing, like one of the first things that investigators will look at is what were their last financial transactions, which indicate where, you know, where we're, you know, where were they, what was in their frame of mind? Like, what did they purchase? You know, did they buy a train ticket somewhere?

Did they, you know, were they planning? Did they fill their car with gas? Like, whatever it might be. So what do we think about kind of this surveillance state, actually, that's being built not only in China, but actually also being exported to other countries? May I take the word? Well, the thing is, it's not stopping just there where you mentioned. It's going a little bit further.

It's going into. managing the crowds. And if you're a disobedient citizen, well, you will not be able to buy a train ticket, for example, right? And so while I think that digital money is important and we're going into cashless society, it's still very important who can control the money, the issuance, and the flows as well.

And then another layer that we could talk about this privacy, but I think that we don't have the space right now. I mean, one thing you have to understand is what we mean when we talk about cash, right? So in China, as you were saying, in 2008, you had 93% of all transactions were done with cash. Today, it's less than 15%. And so what is it about cash that makes it worth talking about? When we talk about cash, we're talking about a system that is person to person. So if I want to transact with Laura in cash, I take out a $100 bill, I give it to her,

now she has it, now I don't, and there's nobody else between us, right? It's permissionless. So if I want to send her a we pay transaction, I need permission from we pay. Number one, to have an account in the first place, but number two, to have this transaction go to her. So with cash, you don't have to ask anybody for permission. You can just use the system. And last, is private, right? So nobody has to know about this transaction except us too. Maybe even just one person. If I go to a donation box and I drop a $100 bill, only I know about that transaction. So cash is permissionless, it's censorship resistant person to person, and it's private. And so as we move to a world that is increasingly intermediated, where 93% of all transactions in China are electronic, we need to retain the form of cash.

Because at some point in a not-to-distant future in China and in Norway, we're not going to have any more paper cash. everything is going to be electronic. And so we need to retain a form of electronic cash. And that's Bitcoin and cryptocurrencies like it. Yeah, I was just going to raise the point that countries like Norway and Sweden are also becoming largely cashless. And so, you know, I know,

like even at dinner last night, I was talking with some people who are not American, and it was brought up that I have access to all these kind of fancy credit cards that offer me points and that they cannot do. You know, they were telling me all about the problems where they offer their people. with their banks and stuff, which I actually don't experience, frankly.

So, but when we, you know, so if you're living in, like, Norway or Sweden and you're living in the society, that is becoming more cashless. It may not be totally apparent to you, kind of what the downsides are. And then I would also say, and we kind of mentioned this with WeChat, but even in our countries, I would say, like the issues with corporate bad actors, which was brought up in the previous panel with Facebook, Google. Like in the U.S., there was news made recently. about the fact that there is a page in your Google account where you can click it, and Google has a record of all the purchases that you've made recently, because if you use Gmail, it's getting the receipts, and it collects them,

and it, like, makes a little list of all the stuff you've just bought. So then on the flip side, now let's move to cryptocurrency, because, you know, both of these sort of seem digital, but obviously they're not, and you've kind of started to talk about the differences. So let's talk about, like, how we think that it is that cryptocurrency can help bring about financial freedom. Is that to Jerry or me? It doesn't matter.

Anybody can... All right. So the big thing, I am concerned about the privacy aspect, and that's certainly a way in which the state controls, you know, its citizens. But more than that, I think the bigger issue here is that there's a wealth confiscation component to it. We're in the previous panel, they were talking about rule of law, property rights. And one of the big things that I think a lot of people in the world don't get is that when the state issues money, when they are responsible for printing and management of the money supply, when they are the sole arbiter of how much money there is and, you know, like, at what rates they get loaned on and so on, they have an enormous amount of control.

And as a result of that, what happens is that not only do you not have privacy about your transactions, but a lot of your wealth can be confiscated away from you. Now, usually it's sold as, well, we want to take it away from the drug dealers and the child pornographers and so on. And if you are accused of that, they'll just sort of take your bank account away and just sort of freeze it and put it into litigation and so on. But the flip side of that is that you also have the authoritarian governments have the ability to seize your bank account if they don't like you. It's sort of like this right to be a jerk, basically, and the government gets to decide who's a jerk. Now, when you have somebody that you agree with in charge, that's usually fine. They will get rid of the people that you don't think should have that money.

But when you have somebody that's opposed to you, that's exactly the conditions under which you have a lot of financial oppression. And this is the big thing that I think we have to be fighting for in the next stage of digital cashless societies, is that if you do have a completely centralized system, well, it's kind of like a central banker's wet dream. Like, they can monitor every single transaction that ever happens. they can tax everything. They can prevent every kind of transaction because there's always an intermediary. Somebody that's always able to say, okay, no, you can't do that.

And that might be good if you agree with the people in charge, but as soon as it's not the people that you like, what's going to happen is that you might be the one that's under oppression. And the alternative is Bitcoin, right? Something that's decentralized, that doesn't have a single point of failure, where you are sovereign over your own money,

where you have property rights over your own money. And that's a giant difference. And that's why it matters so much for freedom. And the thing is, like, what a lot of people end up wanting is some, some like half-ass thing that's actually impossible, which is we want to get rid of the bad people using it, but we want complete freedom for ourselves. That's not how reality works. If you have somebody in the middle, they can oppress you. They can get rid of the bad actors, too. But at the same time, you know, like they might be oppressing you if they identify you as a bad actor. So you either have a central authority or you don't.

And I'm of the opinion that the only way this works is that you get rid of the central authority and, you know, be that as it may, it makes for a more free society. Sorry, another aspect to, you know, money issuance, money control is that actually if you ask yourself, what is money. There's many answers, right? But in fact, it's a tool of power, is a way to control the entire economy, the way we interact as states with other states, but also to basically control what your citizens can do. And so one day, we may live in a nice society and everything looks good. And the other day, the establishment may change, even in context. that seems stable, even if your presidents are telling you that everything's fine and there will be no monetary reform,

like it happened in 1953 in my country, and the other day people lost over 1 to 30 of their savings, just by central authority being able to print more money or being able to confiscate the money that you have. And so that's very limiting to the freedom of people. I would also say that what digital cash like Bitcoin allows people to do is to compete with the corporate money systems that you were talking about or with government. And so in China, there's very little distinction between the corporations and the government. And so you have Weech out and Allipay. And they surveil, you know, because they're in the middle. As you were saying, they're intermediaries.

They can see everything that you're buying. and that information feeds directly into the social credit system that the Communist Party is developing, and that's going to affect your life. In the Western world, in the U.S., you've got corporate surveillance of everything that you do, which can be co-opted by the government at a certain point, or could be used by these corporations to manipulate you in certain ways. and we've seen some examples of how the intermediaries can be co-opted by government. Most recently in New York, you have, and this is really breathtaking,

if you think about the constitutional order that we have in the United States, and forgive me for being U.S. centric, but that's where I'm from. You have the governor of a state, Governor Cuomo, who basically does not like this particular nonprofit that advocates for gun rights. Maybe we don't, some of us don't like guns, funds, but it's a perfectly legal thing to have a nonprofit that does why. It's an association of people that speaks on behalf of another constitutional right, which is the right to bear arms. And he doesn't like them. They're his political opponent. And so he ordered his financial

regulator to tell all banks, fintech companies and insurance companies that do business in New York, which means all of them, that they have to stop doing business with this particular nonprofit. profit. That means a death sentence work. Because without a bank account, without access to payments, without way to get donations, you're out of business. And so, you know, there's a lot of efficiencies that come with having intermediated payments. So, you know, when you have a credit card company that intermediates your payments, they can prevent fraud. They can help law enforcement fight real criminals that we don't, you know, want. They can know your purchase history. So, you know, so they can better extend credit to you.

Those are all great things. But we always have to retain a way where if we want to make a donation to a nonprofit that the governor doesn't like, if we want to buy a book that maybe is taboo, we need to retain a form of cash. And so while I agree, maybe we can live in a world in the future

where all money is completely sovereign, self-sovereign. At the moment, I would just love to see a system where it's like cash. And what do I mean by that? 99% of everything I do is intermediated. But I have the freedom to have some cash with me. And I can choose to use that when I want. So this is so interesting because after Jimmy gave his very impassioned libertarian speech,

I actually saw this expression on Jerry's face and totally expected that because he lives in D.C. And he works with regulators all the time. And he has this nonprofit that is focused on kind of like, buttering up the regulators. I thought he was going to take a slightly different stance. And here instead, he's Jordan Libertarian side. But I know from our pre-panel call that there was actually quite a bit of disagreement about certain things. And the kind of dream that you guys are talking about of this peer-to-peer system where everybody's transacting directly with each other

and there are no intermediaries, frankly, in the world of crypto is like super far off. Yes, it is possible with cryptocurrency. But the vast, majority of people already are still using these intermediary platforms like Coinbase or, well, frankly, actually, a lot of people are just speculating, so they're actually just using exchanges and not even like, you know, using it in kind of a utilitarian fashion. So within that regime right now, there's kind of a lot of, frankly, Sturman-Drong, maybe is the best way to describe it, where there's regulations either that already exist governing these companies or they're coming. And there's kind of a lot of debate within the community about how that should go.

So why don't you guys maybe just talk about sort of some of the different regulatory policies that you think are maybe the most or least effective? And I know KYC-AML, know your customer, anti-money laundering laws was a big point of contention before we spoke. So why don't you talk a little bit about how that's being implemented and why you guys differ on that? So I don't think we differ.

I think that the point of contention is this, is that I have incredible respect for Jimmy Alana and what they do, because what they're doing is that they're building the tools that will allow a future where these regulations are impossible. Right? And where you're going to be completely free

to transact however you, want, whenever you want without being surveilled. That's wonderful. I, what my contribution is to this world is that I'm trying to keep this legal, make sure that they are never regulated as people who are simply building software, right? And so I have to work within the world of the possible. And so when I talk to regulators, I mean, it's pointless to have a conversation with regulators that says, what you're doing will be obsolete in 20 years' time. My conversation with them usually is something like... Hopefully they don't listen to this podcast, but anyway.

That's fine, that's fine, but I think they understand where I'm coming from. Because what my job is, and I think it's one that they appreciate it that I do, is I say, what's your challenge today? Your challenge today is that you're trying to enforce a law, you know, you're trying to figure out how to protect consumers, protect investors. How can you best accomplish your goal while preserving the freedom to innovate and keeping this the ability to build this free. And so to that end, and I'll just say this,

you know, I don't take a position on whether a regulation is, you know, beneficial, right? Whether it protects investors or protect consumers more than it harms people. What I'll simply say is this, is that the only regulations that make sense is when you have a entity that presents a entity that presents a, potential harm or risk to investors or consumers or other third parties. And so if you're not in the business of holding funds for customers, you're not putting yourself out as a trusted party, you should not be regulated. We can then say, okay, if you are going to be regulated because you are putting yourself out as somebody who is holding custody of consumer funds, we can talk about what the regulation

should look like. But if you're just building software, if you're just writing code, that's a free speech act. You should not be regulated at all. Yeah, and you bring up a really good distinction, and I think you alluded to this, Laura. Like a lot of people that are in Bitcoin, they are in it to get exposure to that particular speculative asset class. And that's a very different thing than storing your wealth in it and controlling your own keys and being self-sovereign over your own money. And that's exactly what Bitcoin is meant to be doing. You can own your money and no one can forcefully take it away from you

like they can with pretty much every other money. The regulatory component almost always comes in on the fiat side. This is the U.S. dollar with the know-your-customer, you know, anti-money laundering laws and things like that, and almost every regime. And generally, the more authoritarian the regime, the more restrictions they have on this, right? Like, they force you to do even more due diligence on your customer

or whatever based on however much. they want to control things. And my view, you know, I'm very much a libertarian. My view is that they shouldn't be doing that, but, you know, if they are, then we need to come up with better systems that can basically not have to deal with that kind of regulation. So there are decentralized exchanges, peer-to-peer, you know, networks and things like that. I mean, Blockstream just released liquid, which lets you do atomic swaps of, like, Bitcoin for gold or, you. some other currency or whatever digital representation of some other commodity is. And you can do atomic swaps with that, which can be very useful.

And they purposefully made it so that all of the jurisdictions of the nodes that are validating it are in a variety of countries. So it makes it much, much harder to regulate, even if one government says, hey, you're not allowed to do that. well, there's like 11 other ones that are in other countries that let you do that. So that's, that I think might be more effective. But the point here is that you, I don't think regulation is really the answer. And this was something that was kind of frustrating watching the last panel. It was all about we need more laws or we need the right laws or we need to do these things in this way. Well, that's as good as it as far as.

as it goes, as long as you have a ruler that's actually, or ruling party or ruling faction that you agree with, that are virtuous that want to do the right thing. As soon as that party changes, then all of that infrastructure you've built to make that can be used against you. And it is my contention that what you actually need is a decentralized system so that you don't, you're not subject to that. Yeah, that does allow certain people to, you know, do things in an evil way or use it in some way that maybe you don't like. But that's part of the bargain, right? Like you either have regulation and some intermediary or you don't have regulation and you have no intermediary. And that means that some people might use it in some way that you don't like. So to me, that's at the

part of the financial freedom issue because people want both things. They want the bad people to go away and they want complete freedom when it's good people doing it. The problem is there's a lot of subjectivity as far as what's good and what's bad and the person in charge might view things differently later on. The scorebed app here with trusted stats and real-time sports news. Yeah, hey, who should I take in the Boston game? Well, statistically speaking. Nah, no. More statistically speaking, I want hot takes. I want knee-jerk reactions.

That's not really what I do. Is that because you don't have any knees? The score bet. Trusted sports content, seamless sports betting. Download today. 19 plus, Ontario only. If you have questions or concerns about your gambling or the gambling of someone close to you, please go to conicsonterio.ca.

Local news is in decline across Canada. And this is bad news for all of us. With less local news, noise, rumors, and misinformation nation fill the void, and it gets harder to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you live, telling the stories that matter to all of us, because local news is big news. Choose news, not noise. CBC News. Did you know that if money laundering were an economy, its GDP would be the size of Canada's. Large volumes of tainted crypto assets move through financial networks, often below the

radar of banks. Cybercriminals use unregulated crypto exchanges to avoid detection. No wonder governments around the world are rolling out tough new anti-money laundering laws for cryptocurrencies. Complying with those laws isn't easy. Banks and exchanges need the best cryptocurrency intelligence available to avoid penalties. Now you can use the same powerful AML and compliance monitoring tools used by regulators. CipherTrace is securing the crypto economy. To learn more, visit ciphertrace.com slash unchained. Today's episode is brought to you by Cracken.

Cracken is the best exchange in the world for buying and selling digital assets. With all the recent exchange hacks and other troubles, you want to trade on an exchange. you can trust. Cracken's focus on security is utterly amazing. Their liquidity is deep and their fee structure is great with no minimum or hidden fees. They even reward you for trading so you can make more trades for less. If you're a beginner, you will find an easy on-ramp from five Fiat currencies, and if you're an advanced trader, you'll love their 5x margin and futures trading. To learn more, please go to crackin.com. That's KRAK-E-N dot com.

Hey everyone, don't forget Unchained is doing a survey. And if you give us your feedback, you can be entered to win some pretty awesome prizes. We want to know, how do you think we can make the show better? How would you like to see Unchained Expand? Please, take a moment and go to SurveyMonkey.com slash R-chained Survey 2019. That's SurveyMonkey.com slash R-chained Survey 2019. It won't take long, I swear, and when we get all your feedback, Unchained will be even better than before. What more could you want than that? Okay, okay, there is something more you could want. You could maybe want to win some of the prizes we're giving out to survey respondents. You could be one of the five lucky people to win a free Kasa Bitcoin Lightning Node, plus a free year of Kasa's gold membership, including a multi-sig security app for iPhone and

Android, a Treasurer hardware wallet, a Kasa Faraday bag, and 24-6. support. Those of you interested in learning more about CASA or about protecting your Bitcoin investment generally should check out my interview with CEO Jeremy Welch. Thank you to CASA for donating. Again, the URL is surveymonkey.com slash R slash unchained survey 2019. Go there now to give us your thoughts on the future direction of unchained and enter the giveaway. Well, so speaking of rules, though, I did want to bring up the financial action task force rules, which I think are going to be implemented in June, and that's something where basically now all these different crypto exchanges and wallets will need to keep track of the information on the different parties in the transaction,

which has not really happened before. So I'm curious to know how that's affecting you and what you guys think about it, because these rules are coming. I mean, already there's, especially in the US, there's a number of them. So here's the thing. Prior to Bitcoin, I spent 10 years in the traditional finance working for big insurance companies. And 2012, we've been implementing the new European anti-money laundering directive. What happened is that the entire country spent a year and a half on implementing this in order to protect the consumer, right? We spent hundreds of millions on implementing the new rules and everything.

And the end result was that, in fact, there was no better consumer protection. we still had a big, big, you know, mafia laundering money, and we solved nothing but wasted resources. KYC-A-M-L was supposed to protect the consumer against big evil players, and when you look at the news, you find out that the big banks, even small banks, are laundering not millions, not hundreds of millions,

but billions of dollars, right? Right through those banks. that have been designed and that the KYCML has been designed for that. Now, if we apply KYC in AML, know your customer and anti-money laundering to crypto, I think KYC in crypto is even more dangerous because all of a sudden you have these Bitcoin exchanges with 25 million user accounts.

You have 25 million information on those people's names, home addresses, and that they actually have some crypto. currency, some Bitcoin, I think it's a ticking bomb. And so we should rethink the entire regulation in this sense. So we should look at, okay, does it do what we want? No. If Danske Bank laundered just one office laundered 230 billion dollars, it obviously doesn't work the way we intend it. So can we do something better? Can we do, for example, privacy by default and use the open, traceable ledger, public ledger of Bitcoin to focus on finding those criminals and not

doing a blanket surveillance, because that's basically what's happening in the banking system today. Yeah, and this is something that I've noticed over and over, is that the state almost always, when they want to take away your rights, sells you some sort of law as a means of safety, right? You're going to be better off or more secure as a result of this law. even the most despotic governments will pass laws that are completely invasive and take away your rights by justifying it by saying it's supposed to be safe for you. And this goes way back, right? French Revolution.

Who are the people using the guillotine? The Department of Public Safety, right? That's how it's always sold to us. And we have to be very careful about all of these laws that people are trying to pass, because almost always they're subverted for the enrichment of the power of the state. And that leads to oppression. That leads to people like being arrested and, you know, like having their rights taken away and all sorts of evil. And this is something that I've talked about very often.

That is the real friction in the economy today. Is that is the regulatory burden, the state's control. of a lot of people's activity. And like, if you can release that, if you can take the power of money and power of regulation away from the state in a lot of these cases, you'll have a lot more innovation, a lot more economic activity, a lot more people doing things that are better for the world instead of relying on, you know, like people to hand them food, right? Like, it's a better way, better thing for the entire world if everyone has their rights,

rather than sort of like a nanny state that's like keeping you from touching your hand on this stove all the time. So as far as the FATIF rules in particular, that you asked about, it's funny because, so number one, there are recommendations to try to harmonize laws around the world. And the particular thing you're talking about, what they're doing is that they're recommending that the rest of the world follow

what is already the law in the U.S., right? whatever it already is the rule in the U.S., which is called the travel rule. And what that means is if I have some Bitcoin on my phone, I have my own Bitcoin, and I want to send it to Laura, I can do that, and she can have it on her phone, and because I'm just doing it myself, I'm an individual, there's no regulation on me. I have no obligation.

But if you are, let's say, a cryptocurrency exchange where you're holding yourself out as a position of trust, where you're holding people's money for you, for them. So let's say I use an exchange and I have some Bitcoin there and I send some to Laura to her account, at her exchange, a different exchange. The rule requires my exchange to know that I'm doing that, that I'm sending money from my financial institution

to another financial institution and send along my personal information and her personal information along in that transmission. And that is very difficult, possible to do with Bitcoin and with other cryptocurrencies because the whole point of Bitcoin is you don't have information travel with a transaction. And so as far as I know in the U.S. today, exchanges, even the most upstanding regulated ones, simply aren't complying with this rule. And, you know, the Treasury Department hasn't made a big deal about it. They constantly remind the exchanges. You have to do this.

I think exchanges are working on solutions, but they're not quite there yet. They may not be able to technically comply. And so at the end of the day, this is a sort of Damocles that hangs over exchanges. And if it were ever to fall, and we were to have real enforcement of this rule where they say you can't do business unless you're following this rule,

it's interesting because I think what you'll end up is a couple of reactions. I think, number one, if exchanges go away, I think you're going to see consumers move to custody. their own funds and the Treasury and the government will lose visibility into the system. So that's really something they want to do, that they want to press this issue. What are they going to gain? They're going to lose visibility. The other thing is, if the government were to enforce this rule

and say, you're out of business, you can't do this unless you follow this rule, that's going to incentivize these exchanges to challenge the laws under which these rules are promulgated in the U.S. constitutionally. Why does the government have a power to require the financial institutions surveil their customers on behalf of the government? It's not clear to me that that's actually constitutional, but there hasn't been a real reason to challenge that at court yet. So there are so many topics that I want to dive more into, but out of the many we've just discussed, I actually want to touch on one first before we move more onto the technology, because this point about how the regulations might actually spur. more innovation and the peer-to-peer sector is one that I'm seeing a lot in the cryptocurrency community today. Like Vitalik Boudarin just wrote a blog post about this. I saw another reporter, former Wall Street

Journal reporter, Michael J. Casey, also wrote about that. But we're going to get to that in a second because the one thing is all the questions and like discussion so far has kind of focused around this idea like that this state is a bad actor and it's going to oppress you. But we have seen some instances where there were some authoritarian regimes that were using cryptocurrency to try to further oppress their people. One was kind of a failed example, which was Venezuela. They created this cryptocurrency, or I don't even know what you call it yet. It probably doesn't quite put that definition because I don't think it works, but they attempted to do this. It was called the Petro. And then North Korea is known for actually doing a number of different attacks in order

to obtain cryptocurrency. Probably the most famous of those. is the want-to-cry ransomware attacks that kind of swept the world last year. And, you know, of course, North Korea is the kind of place where because of the super, super-tipe control they have over their country, basically the people there, they're not connected to the internet. Like, how are they ever going to get access to Bitcoin? Like, the fact that the government is the one that's enriching themselves and, you know, they're trying to evade sanctions, essentially. I think that's a big problem. So what do you guys think of that and how should we deal with that in the system?

Well, first of all, stealing is bad. I think we can all agree about that. So even if you're a sovereign of North Korea, you should not hack and steal. But other than that, you know, I, of course, and issuing your own new cryptocurrency, as I said before, the truly good money is the one that is not controlled by a central one issuer. So, yeah, Facebook can do their Facebook coin. and, you know, authoritarian regimes can try to issue their own cryptocurrencies. But those that are collecting actually Bitcoin, I think they're doing a smart thing. Because when I first realized that there's something like Bitcoin and I was thinking, I was writing a thesis on international monetary system in the current imbalances and trying to find a better form of money. And then I was thinking ahead and I realized, well, if this is the only money that is limited in an amount that is scarce by design by definition,

then it definitely will gain on value and will be eventually considered a good store of value. So it is just natural that we will see state actors hoarding Bitcoin into their currency reserves. Right. I mean, I'm not saying that North Korea isn't smart for trying to get Bitcoin. What I'm saying is that they're using that wealth to imprison 25 million people in their country. It's like...

Yeah, I mean, I don't have the numbers in dollars, how much dollars have been, you know, used to, for criminal activity. So it's not about the tool, it's about the people, right? So we cannot blame someone for killing people with a boot because everyone's wearing boots, right? So North Koreans, when they were doing the want-to-cry ransomware, they also used email in the perpetration of that crime. But we don't say that it's email,

that's a problem here that maybe we should limit to use of email and permission so that only email right now is an open system. You don't need permission anybody can use it, so bad guys use it. We could say, well, no, we should have a system where you can only get email from regulated email providers, and we're going to make sure we have your customer on email providers, and you can only have a FATIF recommendation that there's a travel rule, right? So we don't do that about email. The reason we're talking about it in regards to Bitcoin is because Bitcoin's a new thing.

It's a new innovation. And what's interesting, though, it's kind of like what Jimmy was saying. This is the deal. Any new innovation like this, bad comes with good. And listening to the presenters this morning, it occurred to me that there's a real tension here when it comes to Bitcoin. Because what Bitcoin and cryptocurrencies allow folks who are fighting authoritarian regimes to do is to be able to transact, autonomously and privately where they otherwise would not. But that also means that authoritarians can use that technology in a way that would evade sanctions.

What a lot of folks this morning were talking about was making sure that authoritarian were subject to Magnitsky Act sanctions. And that's going to become harder to enforce the same way that's going to be harder for those authoritarians to enforce controls on our population. And I'm sorry, wait, what was that? What act? Magnitsky. Oh, okay, which is... So it's, you know, you identify authoritarians for a list of different reasons,

and governments can say we're going to sanction it. Basically, it's the sanctions law. Yeah, and this brings up a really interesting point. Yeah, but wait, actually, before you do that, I just want to push back a little bit because I think the comparison with email and Bitcoin isn't exactly the same, because sanctions don't say, like, you cannot communicate with, you know, do you know what I'm saying? It's like, sanctions literally...

prohibit money and Bitcoin is money. But they could. Right. But what I'm saying is I think the reason why Bitcoin is and why I think the comparison isn't really commensar is because email isn't what's prohibited, right? Or communication isn't what's prohibited, but Bitcoin money is what's prohibited. Yeah. But my point.

I think his point still stands. He's talking about whether or not you have an intermediary in there. And the reason why sanctions work right now is because there's a dollar hegemony around. the world, right? If you do any international transaction almost, you're either going to use the dollar, the euro, or the yen, right? It's always settled in those three currencies. And the dollar has its privileged position. Why? Because post-World War II, you know, Breton Woods, they decided to make sure that all international transactions went through the Fed, which is in New York mostly. And this is why the U.S. has so much more wealth than everybody else in large part, because

their rent seeking off of the entire world, right? Everyone has to keep their reserves in U.S. dollars because otherwise they're not going to be able to get oil because that's now denominated in dollars. So there's, because of that, sanctions are very effective because now you can say, well, any international transaction involving this particular country or this particular country will just cut off entirely. Now, it might be like humanitarian aid that's trying to get in there, in which case, you know, like they, you still can't. Or it might be, you know, like, you know, ransomware or something like that, in which case that also can't get in.

But it's always the same thing. If you have an intermediary, well, it's kind of like, you know, chemotherapy, right? It'll kill off some of the good along with some of the bad. And, you know, whether or not that's worth it, it depends on who's actually administering it and what their intentions are. If it's a doctor trying to help you, then, yeah, it's probably good for you. But if it's somebody that's, you know, trying to kill you, then it's probably not good for you, right? So the position that Bitcoin holds in this sort of economy, and the reason why, you know, North Korea is trying to go and grab more Bitcoin is because they don't want an intermediary of the United States and they're able to use it.

Now, that's one of the side effects. And, yeah, I agree. it's tragic because, of course, they are oppressing a lot of people. But it's an evil actor, not an evil system. There are lots of other good things that are happening as a result of Bitcoin. And, you know, there's a lot of people around here that can tell you about how Bitcoin is changing things in Venezuela and Iran and all these other oppressed places where you're able to get transfer value, and that opens up all sorts of possibilities of freedom. and people being able to have property rights over things in a regime that doesn't really allow them to do that.

But that's the point, right? Like it allows for good, it allows for evil, but it's a tool. And this tool in particular makes it very hard for authoritarian regimes to sort of abuse it to oppress their people. Now, if they're the sort of consumer and, you know, we do have the dollar hegemony over the entire world, Well, now they're subverting it, but for their evil purposes. But, you know, I mean, let's not forget what put Bitcoin on the map was in 2010, WikiLeaks got their PayPal account completely cut off. Right.

And Julian Assange said, you know what, let's use this new currency called Bitcoin to take donations because we don't have a bank account anywhere. We can't do anything with it. This was the U.S. government's way of cutting off all access to somebody that was protesting, right? This is the kind of oppression that is possible when you have an intermediary that's always there. This is why it's so important that we have a decentralized form of money without any intermediaries. Yeah, I would still say, though, I mean, I think, like, it's a little bit ironic here we are at the Human Rights Foundation, and, you know, North Korea is, like, one of the kind of problems that's discussed here.

and we're sort of on one side saying, well, you know, we don't think like regulation is great, but then at the other hand, we're when it comes to bad actors using Bitcoin, we're a little bit like, well, the technology is neutral. You know, I feel like there needs to be some kind of other solution. But in the interest of time, let's move on, actually, because I think this point about how the regulation is actually kind of pushing people to use the technology in more peer-to-peer fashion is super fascinating. And I don't know how much kind of background the audience has about the different kinds of possibilities that, you know, can arise the further this technology is developed.

So I know, you know, Elena with CASA, you guys are, like, their whole motto or their mission is like self-sovereignty over your finances. So what are some of the ways this technology could be developed that you think are promising? And actually, I know also I want to get in privacy. So let's be sure to touch on that. You've got two minutes to do it. Oh, okay. Great.

Okay. Well, let's get to it. Since it's a peer-to-peer tool, it allows you to be a sovereign individual. And what that means is you take ownership. It comes with certain responsibility, but also with amazing opportunities. So what you can basically do is stay away from the traditional financial system and build up your parallel economy, your parallel world. You know, you can have people from countries,

women in Afghanistan, for example, learning to code and taking Bitcoin as a payment. By the way, earning Bitcoin is the best way for you to get there and the best way to help locals in your countries to start getting afloat or to start getting better financially so they can then do their endeavors in life. So earning Bitcoin, I would say, is the next big thing that we should focus on. and if you want to help to spread Bitcoin in your countries, I would probably look into that how to allow people to get a Bitcoin pay. And one of you said something about how you can have privacy built in,

but yet also, I think was it that you said you can have a window, or regulars can have a window in, or no, was you. You said somehow you could have privacy by default, but then people could also see something on the ledger. What did you mean by that? So privacy by default, by that I meant, do not touch the usual regulated institutions that do K-Y-C-A-M-L. That's the point of the choking point, basically, right? So not using a privacy coin.

Can I just... Yes, go ahead. No, go ahead. Just address it. When I hear privacy by default, I think of the internet we have today, which is not privacy by default. By default, it's completely open and public. and everything that you do want it is visible to people on the network. And so we keep trying to build these privacy layers on top, and that's very difficult.

If you build a system as completely private by default, you can then selectively reveal things about you as you want or as you are required to by governments, by regulators. So in theory, you can have a Bitcoin wallet on your phone. It doesn't ever ask for your name, for your address, where you come from. In practice, though, you use a phone from Google, right, or a Google Play Store or something, and then your privacy is gone, right? But it's still very important that we try to achieve parallel new systems,

new mesh-type networks, for example, where we use encryption by default, where we use self-governed identity, where we keep our private data, encrypted on our home devices, and then we can use those identities, you know, in platforms that we want to log in without revealing names, passwords, without revealing anything of your privacy. So this is I think where we should go in the future. Yeah, and this points out something that's been happening for a while now is that there's a, there's a giant centralization of information on the internet, and, you know, we've talked about Facebook, I think, at least a little bit, and Google,

and all of these other giant companies that have this enormous treasure trove of data about you and what you do and your financial transactions and all that stuff. To me, that is an extension of the state in many ways because a lot of these companies got so big in large part due to governmental loans by the Fed, right?

They get very cheap interest loans. They get funded essentially by their bigness and being able to control the flow of money, the Fed gives them, like giant, well, through commercial banks, gives them giant loans that they can use to expand in such a way as to get scale, and then they use regulation as a way to defend their business

against smaller competitors and so on. But these are really extensions of the state at this point, right? Like when you think about Facebook and Google and all these others, and I think that's a large part of, of why China is trying to wall them off because it's kind of like an extension of the U.S. government. And their suspicion is that really they're going to spy on their own stuff as a result of doing that. And you can kind of see the rationale, even if you don't agree with their authoritarian nature,

why they're doing it. It's really a state versus state thing more so than it is, oh, we're going to oppress our people necessarily. So we'll see what this goes. But anyway, thank you guys so much. This has been great. Thanks, everyone.