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Who Will Control the Next Financial System? — Transcript

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0:01[music]
0:02Bankless Nation, I have the pleasure of
0:04being joined with former CFTC commission
0:06commissioner Chris Gian Carlo. Chris,
0:08welcome back to Bankless.
0:09>> It's great to be back, David, and I I
0:11hope it's been sooner than 5 years. I
0:13know it was at least 5 years, but I
0:15think we've done [music] one more
0:17recently. It's great to be with you.
0:19>> You have been in my arc in crypto uh the
0:23entire time. Uh and I remember maybe
0:27start off because your book is very
0:29personal. We're going to talk about uh
0:30the book that you wrote. I've got it
0:31here on on my desk. The first time you
0:34came across my my awareness was when I
0:38was first getting into crypto and I my
0:41imagination was going wild and I was
0:43paying attention to your hearing when
0:45you became crypto dad and I was a young
0:49millennial barely an adult at the time
0:53and I heard this this older gentleman
0:56who had already had this established
0:57career advocating for the curiosity of
1:01these young kids growing up and finding
1:03ing crypto. Uh, and then I remember
1:05getting very emotional in that moment.
1:07Uh, feeling very heard as just a young
1:10adult coming into the workforce being
1:12interested about tech. And so your your
1:15arc throughout crypto has been with me
1:17the entire step of the way uh through
1:19your tenure at the CFTC and beyond. And
1:22now you've got a second book out uh, The
1:24New Adventures of Crypto Dad. Got it
1:26here with me. Maybe just start there
1:28about this book. Like why did you write
1:31this book? what does it mean for you and
1:33and really who is this book for?
1:35>> Thank thank you so much and that is
1:37really touching. uh you know when you go
1:39into a hearing like that you you don't
1:41know who's listening or what impact it's
1:43going to have and and quite frankly I
1:46was speaking to people for the most part
1:48even older than me a lot of old senators
1:51and um they're almost by definition
1:53fairly old in that body and I was trying
1:57to say to them uh don't turn your noses
2:00up at this innovation don't treat it
2:02with you know disdain and derision
2:05there's a lot of young people that are
2:07truly fascinated ated by it that see it
2:09as a huge opportunity to actually engage
2:12in the financial system and rather than
2:15you know taking a you know a old boomer
2:18view that well this is beneath us you
2:20know there's nothing wrong with the
2:21financial system there's no problem to
2:23be solved um you know it worked for us
2:26you know paper checks were good enough
2:27for us why they shouldn't be good enough
2:29for for the next generation I was trying
2:31to say to them look you know we owe it
2:33to the next generation to get the rules
2:35right let let's not create create an
2:38environment that's filled with fraud
2:40manipulation. Let's create a smart
2:42regulatory framework. So that was the
2:45you know that day that's who I was
2:47trying to reach. Um I remember John
2:50Kennedy
2:51said at the hearing and it's in the
2:53transcript. He said I write I still
2:55write with a quill pen. Why should I
2:58have to learn about a new technology? Uh
3:01and my response was something to the
3:03effect of you can learn about it or not
3:05learn about it. It's going to happen
3:06anyway.
3:07um uh and so maybe it's a better idea to
3:10learn about it. But I that was the
3:11audience I was trying to reach. Uh but
3:13in fact uh as you know it reached a much
3:16broader audience. I I came into that
3:18hearing with about 1500 Twitter
3:21followers. I left with about 45,000 and
3:24they had given me all these nicknames
3:25including crypto dad which is the name
3:28that I I I liked and and have adopted
3:30and have used in a way to communicate.
3:33And as you ask the question, what am I
3:35trying to do with the new book? A lot of
3:36what I tried to do with my previous
3:39book, it is to speak to a broad
3:42audience, not just a a a crypto efficado
3:46audience, but a much broader audience
3:48and explain that this is not just some,
3:52you know, funky new alternative asset
3:54class. This is a whole new architecture
3:58of finance and and it's going to change
4:01everything we know about banking and and
4:04finance and even money itself uh with
4:07the same profound impact that the first
4:11wave of the internet had on information
4:13gathering and social networking um and
4:16communications and and commerce. Uh this
4:18is a new wave of the internet. It's
4:20almost as if the internet is finally
4:22getting around to setting its sights on
4:26finance, finally getting around to
4:27setting it sights on banking, finally
4:30getting around to setting its sights on
4:31money. And none of those things are
4:33going to be the same when this wave uh
4:35completes its course. when you were
4:38talking in your uh hearing to the
4:40congressmen and senators and you were
4:43imploring them to take this technology
4:45with curiosity, with openness rather
4:48than uh with cynicism. Do you think they
4:51listened now that it's 8 years later
4:53that hearing happened in early 2018
4:55coming up on a decade now? Uh they the
4:58royal they the collective they did they
5:01listen do you think? Well, you know, I
5:04ended that plea with let's create a
5:06smart regulatory framework. And judged
5:09by that plea to them, they were not
5:12listening because here we are 8 years
5:14later and we still don't have that
5:15framework. And the clarity bill got
5:17passed in the House, it stalled in the
5:19Senate. So many of those same senators
5:22couldn't find the will to put forward
5:24that regulatory framework that I called
5:27them to do. And and candidly, I I don't
5:30know how many of them were listening
5:32that day I spoke to them. It seems as if
5:34it was more people in the critter
5:35sphere, Twitter sphere that were
5:37listening rather than senators. I don't
5:39think they paid any attention to crypto
5:41until Sam Bankman freed and Sam
5:45Bankfrieded embarrassed them because of
5:47his campaign contributions. I, as I
5:50write about in this new book, I think
5:52that's when up until that point, crypto
5:55wasn't really um uh a Republican or
5:59Democrat thing. It wasn't political. It
6:01wasn't political really through the
6:02first year or so of the of the Biden
6:05administration. It didn't become
6:07political until Sam Bankman freed. And I
6:11think the embarrassment factor led
6:13Democrats, certainly the ones that are
6:14in the in in the in the camp of
6:17Elizabeth Warren to take a the best
6:20defense is a good offense. Rather than
6:23admit that maybe we got too in bed with
6:26a guy who turned out to be a fraudster,
6:28they went on to attack mode and and
6:30became very hostile to crypto. And also,
6:33as I write about in the book, um um uh
6:36Donald Trump took advantage of that. he
6:38recognized the political opportunity and
6:41and pitched in uh with support for
6:43crypto. So So it was a combination of
6:45Sam Beckmanfrey, then the election and
6:48the money from from Fair Shake woke a
6:50lot of these senators and congressmen up
6:53to the power of crypto. So I think it
6:56was a political response to crypto and
6:58these are things I write about uh
7:00extensively in the new book. Um I'm
7:03hoping that we're back to a
7:05non-political approach to crypto. I I'm
7:08hoping that that now it's becoming so
7:10ingrained. The generation that's grown
7:12up with it are taking it forward and and
7:15and the the lites in the party have now
7:19moved on in in many ways. Now they've
7:21set their opposition to innovation to
7:23data centers and they've set their
7:25opposition to AI and maybe they'll leave
7:28crypto alone.
7:30>> This is actually one of the threads I
7:31really want to pull on with you with I
7:33now that I have the opportunity. you
7:35kind of have some some inside baseball,
7:37some inside perspectives because you
7:38were in some pretty key meetings
7:41watching the Democrat party and the
7:43Republican party kind of choose sides,
7:45you know, position themselves around the
7:47crypto industry. There was that famous
7:49meeting with Mark Cuban and Roana uh
7:53decently into the Republic the Democrats
7:55hostility towards crypto trying to get
7:58the Democrats to to open up to crypto.
8:01Um, you also talked about in the book uh
8:04how just there were relationships with
8:06Elizabeth Warren and uh the banks. My
8:09question to you is was Sam Bank been
8:12freed did that episode with the
8:14Democrats com mostly or completely
8:17explain Democrats hostility to crypto or
8:20are there other things to also discuss
8:22when it when we ask the question why did
8:24the Democrats hate crypto? How did that
8:26happen?
8:27>> Yeah. So, you know, we all sometimes can
8:30be fall into the camp of
8:32overgeneralizing. And I think it's an
8:34overgeneralization to say, you know, all
8:37Democrats were opposed. There were some,
8:38and there still are people like Kristen
8:41Gillibrand, who I think is really smart
8:43on on crypto issues and very positive
8:46and and the new senator from uh
8:49Maryland, also Brooks, and there's
8:52several others. I I I don't think it's,
8:54you know, a a a Democrat party thing,
8:56but it's definitely the Elizabeth Warren
8:58thing. And uh, you know, Elizabeth
9:01Warren likes to position herself as a
9:04friend of the little guy, but you know,
9:05her campaign contributions come from a
9:07lot of large banks. And I think in some
9:10ways, uh, the resistance to this
9:12innovation.
9:14Sadly, and I write about this in the
9:16book as well, our American banks have
9:18used their Washington lobbying clout for
9:21the last 40 or 50 years to resist every
9:25innovation. They they used it to resist
9:27um interstate banking. They used it to
9:30resist um chips in in credit cards to
9:33keep the old swipe cards. They used it
9:36to resist ATM machines. They use their
9:38lobbying cloud. It's almost as the
9:40lobbyists run out to the countryside and
9:42tell community banks that the sky is
9:45falling. There's some new technology
9:47that's going to hurt banking and then
9:49they get the ascent from the banks to go
9:51back to Washington and and fight the
9:53innovation. And and it and and maybe a
9:56short-term win, it's a long-term failure
9:59because eventually these community banks
10:01have to adopt the new technology anyway.
10:04And I think once again crypto came along
10:07and and the bank lobbying groups ran to
10:10their members and said the sky is
10:11falling. We need to fight this. Give us
10:13more and more resources to do that and
10:16we'll get a win for you and you know
10:18we'll we'll you'll salute us. And I
10:20think that's what happened. And they
10:22fought clarity. And the sad part about
10:25that is you know banks from coast to
10:27coast are eventually going to have to
10:28adopt tokenized deposits anyway. you
10:31know, the the whole financial system is
10:33moving to digital rails and resisting
10:38uh you know, regulatory in in in um
10:41authorizing statutes only delay the
10:43inevitable and wind up hurting these
10:46regional banks anyway. So, but Elizabeth
10:48Warren fought the fight and Gary Gensler
10:50saw, I believe, that his pathway to
10:53becoming Treasury Secretary in a second
10:55Biden term was through Elizabeth Warren.
10:58And to get her support, he had to become
11:01uh the the prosecutor o of crypto. And
11:05as I recount in the book in great
11:07detail, he used a whole bunch of
11:09techniques from uh refusal to work with
11:12Congress on new legislation to debanking
11:16of not just crypto companies but crypto
11:18executives
11:20um to refusing to write rules and to
11:24wildly abusing uh his enforcement power.
11:27I I detail uh in great detail the the
11:30degree to which he used something called
11:32the wells notice which is a a common um
11:36uh procedure by which the SEC informs
11:39firms that they're about to commence
11:41enforcement action. He used that to
11:43actually stop firms from doing business
11:45even if there was no intention to
11:47prosecute them anyway. I mean there was
11:49wild abuses. It's, you know, it's often
11:51said that uh Donald Trump and his
11:54administrations break norms, but the
11:57norm breaking that took place at the SEC
11:59under Gary Gensler is unprecedented and
12:02and and needs to be held to account. And
12:04I try to do that to some degree in the
12:06book. It's not political. It's just
12:08factual that the SEC was rogue uh for
12:11the last two years of the B
12:12administration. And I hope we never see
12:14that happen again.
12:17During the Gendler era, there was just a
12:19persistent question from the crypto
12:21community of just why why was he like
12:25this? Is is your answer that crypto was
12:28just a means to an end for Gary Gendler
12:30to advance his career? It was just a
12:32strategic bet by Gendler to to climb a
12:34ladder. I don't want to I don't want to
12:37dump on him personally, but I do want
12:39to, you know, criticize the agency um
12:42institutionally for where it went under
12:44his leadership, but I will say this um
12:48if one knows his career, I mean, he
12:49started out as part of the new Democrats
12:53under Jack Rubin under Clinton
12:55administration that was opposed to
12:57regulating the swaps market. Um and he
13:01you know he was not a uh he you know he
13:03was a friend of markets and a friend of
13:05innovation earlier in his career. So to
13:09become a uh uh you know there's a famous
13:12um uh medieval
13:15um inquisition figure called tokamada
13:18who prosecuted people that didn't have
13:21uh the right thinking. you know, he
13:22became the torque commamada of the SEC
13:25and um you know, it's it really held
13:29back innovation. But I guess the big
13:32takeaway, David, is it didn't stop it.
13:35And in fact, the firms that persevere
13:37just got stronger. It's amazing under
13:40such heavy prosecution and persecution,
13:43you might say, digital asset innovation
13:46did not uh die. It's it's survived and
13:50in many ways it's stronger because of
13:52it. Firms now that survived that period
13:54of time are emerging as some of the
13:57leading firms now. And of course now
13:58you're seeing all of traditional finance
14:01including all the major banks, all the
14:04major infrastructure providers like
14:06Depository Trust Clearing Corporation
14:08and Swift and others are now all moving
14:11into this asset class are moving in
14:13adopting this technology. Why? Because
14:15it's more efficient. Why? because it's
14:18lower cost. Why? Because it's much more
14:20accurate in terms of knowing where their
14:23things of value are, their collateral,
14:25their money. And so under the most, you
14:27know, worst persecution one could see,
14:31this this uh innovation didn't die, it
14:35thrived. And now the genie is out of the
14:38bottle. It's becoming so embedded that
14:41even if Elizabeth Warren were to be
14:43elected president someday and brings him
14:45back, I I I think it's too the the roots
14:48are going to be too deep in the ground
14:50to be ripped up and and we're on our
14:52way. I I truly believe within the next
14:5512 to 15 years by the year uh 2040 the
15:00entire financial system is going to be
15:01moved from its current analog state into
15:04digital rails distributed ledger
15:06technology uh and tokenization.
15:10Do you think the hostility towards
15:13crypto which goes back as far as I can
15:15remember I when you were uh called into
15:18the hearing it was right after the CFTC
15:20under your leadership uh approved the
15:23first uh Bitcoin futures. It was the
15:25first Bitcoin derivative product uh
15:27product and like
15:30you know it was the first it was the
15:32first regulated framework for crypto
15:35derivatives in any in any economy and
15:38anywhere in the world.
15:40Yeah. And I I remember the tone of the
15:42hearing was not, "Hey, what is this? Can
15:45you please educate us?" It was explain
15:48yourself. What did you just do? And so
15:50that facility has been with with crypto
15:53as far as I can remember up until modern
15:55times. And even on the carpet, I was
15:59definitely being called on the carpet.
16:00Yeah.
16:02>> Do you think the era of institutional
16:04hostility to crypto is behind us? Well,
16:06you know, you know the reason I was
16:08being called on the carpet, you know who
16:09was really most annoyed at what we did?
16:12It was the Wall Street banks,
16:14>> right? They were the ones who were
16:16annoyed. You know, they were the ones
16:17that were taking out full page ads in
16:19the Wall Street Journal. They were the
16:21ones behind getting the Futures Industry
16:23Association to write letters to
16:25Congress, uh, saying, you know, you
16:27know, you better reign in John Carlo.
16:29He's, you know, he's off the rail. He's
16:31off the chain here. And the reason they
16:33were doing that is because they were
16:34unprepared.
16:36uh it was moving faster than they wanted
16:38to go and they do what they they did
16:40what they usually do. They ran to their
16:43politician friends to try to get them to
16:45gang up on me. But you know I I felt as
16:49if look if Congress wanted to ban
16:52crypto, they had all the authority to do
16:54so. But if they didn't ban it, if it was
16:56a legal product and there were some
16:59people that wanted to trade it, then it
17:00was my my job. It was my duty to put a
17:04regulatory framework around it. Um I I
17:07felt as if I was doing the thing I was
17:08there to do.
17:09>> So you opened the door to the very first
17:11derivative products at the CFTC as it
17:13relates to crypto. The the march has
17:16continued after your tenure. We've got
17:18uh CME, Bitcoin options, Ether futures.
17:21We had down market altcoin futures,
17:24physically settled futures, and most
17:26recently perpetuals. Uh was that the
17:29normal arc for the CFTC? Was that about
17:32what you expected? Was there anything
17:34that has the CFTC missed something? How
17:36would you uh evaluate or give a report
17:40card to the CFTC's progress after your
17:42departure?
17:42>> Well, look, eight years later, if we did
17:44that, that market today, it's deep. It's
17:47liquid. It's transparent because it's on
17:50a regulated exchange. And most
17:53importantly, it's well regulated. I
17:55mean, it it's well policed against fraud
17:57and manipulation. So, I think it's been
17:59an enormous success. Whenever you see
18:02the CFTC green light a new asset class,
18:06it's almost for everybody involved, it's
18:08a test case. And the CFTC usually does
18:11not um so allow a self-certification of
18:14a lookalike product for a couple of
18:16months because it's now getting all of
18:18its um surveillance techniques in place.
18:22It's developing its metrics. It's
18:24developing its pattern recognition
18:26capability for that new asset class.
18:29It's gathering data from the exchanges
18:32that are sponsoring that product. It's
18:34usually assigning an analyst or two to
18:37monitor that product. start becoming
18:39familiar with trading patterns, become
18:42familiar with um uh u market liquidity
18:46issues, becoming with familiar with how
18:48it trades over the course of 5 days or 7
18:51days or however the pattern is. It might
18:54start working with overseas regulators
18:56that have a lookalike markets to see if
18:59there's some information sharing. And
19:01once it develops familiarity with the
19:04asset class and the product set, now
19:06it's ready to start, you know, moving to
19:08different durations or different
19:10settlement periods and variations on the
19:12original. So, we knew that greenlighting
19:16that first Bitcoin future was now going
19:19to give our agency time to start
19:22mastering the product, mastering, you
19:25know, all the the different trade flows
19:27and liquidity profiles so that as new
19:30products came online, Ethereum futures,
19:33XRP futures, Salana futures, etc., etc.,
19:36uh the CFTC would now have started to
19:38build some what what people don't out
19:41from the outside don't understand uh or
19:44don't really appreciate is the degree of
19:46really market expertise that are in an
19:49agency like the CFTC. You know, we don't
19:52have a disclosure regime the way the SEC
19:54does. We're primarily a anti-arket
19:57manipulation
19:59agency. Our job is to really understand
20:02market dynamics and and I think there's
20:04few agencies that that do that as well
20:07as the CFTC globally. I mean compared to
20:10our counterparts around the world. One
20:12of the reasons why we don't merge the
20:13two agencies, the SEC and the CFTC is
20:16because of all this experience, all this
20:18um u surveillance and market dynamic
20:21understanding the CFTC has that's
20:24unique. Uh agencies around the world
20:26that that are primarily securities
20:28agencies. they do a little bit of
20:29derivatives. They don't have that same
20:31degree of market expertise. The CFTC is
20:34really good at that. And I have every
20:36confidence um that the CFTC monitoring
20:40of these uh listed futures crypto
20:43derivative futures markets is excellent
20:45and superb and and they probably uncover
20:48a lot more misbehavior than they ever
20:51talk about. um and they put a stop to it
20:53and penalize firms for doing it because
20:55they really are the masters of
20:57understanding market dynamics.
20:59>> One of the main quest lines in crypto
21:00these days is the growth of the
21:02perpetual which is a brand new financial
21:05instrument. Absolutely. Under the uh
21:08jurisdiction of the CFTC since it's a
21:10derivative. It's not often in humanity's
21:13history that we create new financial
21:15instruments. It's actually a very rare
21:17event. It's like a star is born type of
21:18thing. Yeah, put put us into the shoes
21:20of what it's like to be at the CFTC
21:23within the birth of a new financial
21:26instrument. What does the CFCC need to
21:28do in order to do its job on something
21:30that's brand new?
21:31>> Well, so I I I might push back a little
21:34bit. Per globally, and the CFTC has
21:38actually never, unlike some
21:40jurisdictions that ban them, the CFTC
21:43has never taken that position. They've
21:45taken the position that if you're
21:46serving retail, they've got to be on a
21:49proper fully licensed exchange, not on a
21:51like an a light exchange light
21:54structure. So, what we call a DCM or a
21:56designated contract market. Um uh the
22:00reason why our um default uh thinking
22:05about derivatives is that they have a
22:08settlement date is because most
22:10derivatives come out of the egg sector
22:12and eggs have a cycle. You plant in the
22:15spring and you harvest in the fall and
22:18you take your harvest to the grain
22:19elevator to the market at at harvest
22:22time. And so most um uh agricultural
22:26derivatives which for for the longest
22:28time most I mean 100% of the CFTC
22:31oversight were of derivatives of things
22:34that came out of the ground and had a
22:35growing season. That's why you were you
22:38know most products have this default
22:40date. But there's nothing that says you
22:43can't have a rolling settlement date
22:46with no final settlement. And and once
22:48the CFTC in the 1970s started accepting
22:52products that didn't come out of the
22:54ground which were based on benchmarks
22:56such as uh interest rates and exchange
22:59rates and developed the notion of a
23:00financial future. It only became in many
23:03ways inevitable that eventually it would
23:05also not be restricted to only you know
23:08fixed settlement dates. It could go to
23:11what we call perpetuals or um rolling
23:15settlement dates. And so, um, it it's
23:17really not it's it it it is new in terms
23:21of the degree of retail engagement in
23:24these perpetual markets and the desire
23:26to bring them on shore, but as a product
23:29goes, they're not, you know, they're not
23:32so novel that the CFTC is struggling to
23:35get their heads around it. It's actually
23:36something the CFTC, I think, is quite up
23:39for. And I really do commend Chairman
23:42Celig and his desire to ha not have new
23:45markets develop offshore the way the
23:48United States allowed the the the the um
23:51uh the Euro dollar market to develop
23:53offshore because of boneheaded
23:56regulations in the United States. You
23:57know, the reason why for many years we
24:00priced our mortgages in liebore, the
24:02London interbank borrowing rate, is
24:06because in the 1970s, in order to
24:08control inflation, we the the Federal
24:11Reserve put a cap on how much interest
24:14American banks could pay on dollar
24:17deposits. So, what did people do? They
24:20put their their money offshore in banks
24:23that paid a higher rate. Of course, they
24:26would. and the London banks paid a
24:27higher rate. So dollars started
24:29accumulating there because of bad
24:31American policy. And because the money
24:34was accumulating there commercially in
24:37in in depositors fighting for the best
24:39rate, the London rate became the real
24:41rate of borrowing in London because it
24:44wasn't subject to an artificial cap. And
24:46that's why Liebore, the London interbank
24:48borrowing rate was based on an overseas
24:51rate. And it it it became part of our
24:53entire financial system that we're
24:55relying on dollar deposits offshore. So
24:58bad policy can sometimes force things to
25:00happen offshore. And Mike Celig was very
25:03concerned that global per markets which
25:07Americans wanted to access would develop
25:09offshore only and he was determined
25:11let's bring it onshore. Not only do we
25:13support the American economy, we
25:15actually then can apply American
25:17regulation to it. So American investors
25:20can benefit of their home state
25:21regulation rather than the regulation of
25:23Singapore or the Philippines or some
25:26other foreign jurisdiction. So I think
25:28this is the right move. I think the CFDC
25:30will not struggle to get their heads
25:32around um rolling uh expiration dates,
25:35perpetual futures. Um I don't think it's
25:38that technologically that hard of a
25:40leap. And I'm I'm very confident the
25:42CFTC's got this. I'm not I'm not com I'm
25:45I I'm I think look I think decentralized
25:48markets like Hyperlord are a much bigger
25:51uh intellectual and policy bridge or
25:55chasm to cross than our perpetuals. I've
25:58been trading crypto for almost a decade
26:00and I've used so many different wallets,
26:02exchanges, aggregators or frontends and
26:04I'm basically always looking for the
26:05same thing, just one interface with a
26:07deep liquidity across a bunch of chains
26:09and assets where I can access markets
26:11like pers, earn yield, trade
26:13confidentially and still control all of
26:15my funds. And I've never really found it
26:16and I'm just always switching wallets,
26:18juggling gas fees, or getting eaten by
26:20slippage. But near.com feels
26:22fundamentally different to me. I can do
26:24anything I want from any chain and keep
26:26all of my activity confidential. Crypto
26:28tokenized assets per payments. I can
26:31even earn yield confidentially. One
26:33account over 30 chains confidential by
26:35default. It's the way that crypto ought
26:37to work and it's powered by Near, which
26:39has moved over $30 billion crosschain
26:42uses postquantum signatures and has run
26:44over 5 years on mainet with zero
26:46downtime. Near.com is the best way to be
26:48onchain and be in [music] control. Get
26:5020% of your trading fees back on
26:51near.com using the bank list link in the
26:54show notes, not investment advice.
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27:54Your relationship with Mike Celic goes
27:57uh beyond just being excited to see him
27:59at the CFTC. You actually hired him at
28:03the law firm that you worked at before
28:05you became the CFTC commissioner. And
28:07then Mike Celig, who you hired, is now
28:10the CFTC commissioner. So, it does seem
28:12to fit with the crypto dad uh motif of
28:15handing the baton off from the Gen X to
28:18the to the millennial generation. Uh
28:20talk about that story of hiring Mike
28:22Celig at uh at your law firm. Uh what
28:24did you see in Mike and how has you
28:26guys' relationship evolved?
28:27>> Yeah, so I teased him recently. I I I
28:30had the honor of introducing him at a
28:33law symposium at Forom Law School two
28:35weeks ago and I said, "Look, if people
28:37call me crypto dad, then Mike Celig is
28:40something of the crypto prodical son
28:43because he wandered off to the SEC
28:45before we got him back to where he
28:46belongs to the CFTC." Uh the the
28:49[laughter] the history there is when I
28:50was a commissioner before I became
28:53chairman of the CFTC, Mike was a law
28:55student at George Washington University
28:58and law school in Washington and I hired
29:00him as a law clerk and he worked for me
29:03and he actually helped me do some of my
29:05first work on Bitcoin. I gave a speech
29:08um in 2016 at the Kato Institute calling
29:11for a do no harm approach um to
29:15distributed ledger technology generally
29:18and Bitcoin specifically. And Mike
29:20helped me with some of that research as
29:21a young law student. He then went on to
29:24begin a practice uh in New York City
29:27advising crypto firms. I then went on to
29:30become chairman of the CFTC. But when I
29:32left the CFTC at the end of my five-year
29:35term in 2019,
29:37I joined the uh New York White shoe law
29:39firm of Wilky Foreign Gallaer and I
29:42helped them build the practice we called
29:44Wilky Digital Works and Mike Celig. I
29:47then recruited from his law firm to join
29:49me at Wilky and uh helped him uh make
29:53his way through the firm eventually
29:55earning his way to be a partner in the
29:56firm and helping build that digital
29:59practice. Um, and so Mike and I have a
30:01close relationship. When the opportunity
30:04came in the new Trump administration,
30:06uh, for him to go to the SEC and serve
30:09as chief counsel to the crypto task
30:11force, I was very supportive of that and
30:13I was also very supportive of President
30:16Trump's nominate him to serve as
30:18chairman of the CFTC where he is today.
30:20Mike Celig is a remarkable is a strong
30:23legal mind. Uh, he's got enormous
30:26energy, drive. He shares my view uh that
30:30digital assets are more than just a new
30:32asset class. It's a whole new
30:33architecture of finance. And he also
30:36shares my view that innovation should
30:37take place here in the United States
30:39should support American capital
30:41formation, American risk hedging uh and
30:44the American economy. Well, between you
30:47chairman Celig Hess and also Paul
30:50Atkins, it seems we've finally grown an
30:53avengers of regulators who [laughter]
30:56have discourse with the crypto industry.
30:59You know, advocate for us. Uh don't
31:02write us a blank check. I don't think
31:04any regulator has ever just written
31:06crypto a blank check. Like has been fair
31:08and and tough when the times call for
31:10it. But I think most importantly just
31:13have engaged with us and this is
31:15something that just gives me renewed
31:17optimism about the state of crypto when
31:19it comes to being regulated inside the
31:20United States markets.
31:22>> And you know in many ways we're just
31:23refinding our mojo. I mean financial
31:26market innovation has been part of the
31:29American way of life for for for a
31:31century or more. Do you know that uh up
31:34until the 1970s
31:36uh every currency was anchored to
31:38usually a commodity that came out of the
31:40ground often a precious metal when the
31:42United the United States could have
31:44never gone off the gold standard if we
31:47had not invented here in the United
31:49States mostly in Chicago the financial
31:52future and that allowed holders of
31:55dollars to hedge the risk of interest
31:58rates of exchange rates in deep liquid
32:02markets in Chicago and New York. The
32:05financial future was invented by
32:07Americans, Dr. Richard Sandor and and
32:09Leo Muhammad, uh, great Americans, uh,
32:13great innovators. And that financial
32:15future you might ar I could argue is
32:17responsible for the last 30 years of
32:19globalization because they could
32:22countries could use dollars as a means
32:24of currency means of trade knowing that
32:27they could hedge the risk in America's
32:30deep liquid markets and during that 30
32:32years more people have risen out of
32:34poverty than ever before in human
32:36history. And so it's American financial
32:39innovation um with its shortcomings and
32:42risk that it takes of a of of market
32:44rises and market falls that always come
32:46with innovation. And yet it's American
32:48innovation that I think has served the
32:50world well.
32:52It's it's incumbent on regulators to to
32:55actually play small ball. It's it's
32:57regulators shouldn't be shouldn't be
32:59sand in the wheels of innovation. They
33:01should be standing like mature
33:03individuals think working with
33:05innovators to say okay have you thought
33:07about this have you thought about this
33:08how do we make sure there's we we limit
33:10fraud and manipulation there's always
33:12going to be bad guys there's always
33:14going to be people that seek to you know
33:17steal people's money but that's why
33:19regulators there they should work with
33:20innovators to make sure these markets
33:23are deep and liquid and healthy and
33:24robust and durable uh but not try to you
33:28know insert themselves and say we know
33:30what's best for everybody. We don't like
33:32this crypto. We're going to try to stop
33:34it. That's not American. I don't know
33:36where that comes from. That's not the
33:37way we traditionally roll in this
33:39country. We usually are open to
33:41innovation. We usually find a way to
33:42further it, but do it in a way that's uh
33:45that's smart and safe and healthy uh for
33:48consumers, for citizens, and for market
33:51participants.
33:52>> I want to turn to a few of the key
33:54questions that you asked in the book
33:56that I found particularly interesting
33:58that I want to get your p perspective
33:59on. And at the very beginning of the
34:01book, you begin with a question that I
34:04think I consider I think about, you
34:06know, every single day when I when I
34:07think about crypto, which is I'll just
34:09actually quote you here. The question,
34:11however, is whether the traditional
34:13hierarchy of value, custody, and
34:14allocation will be displaced by
34:16decentralized networks or will they be
34:18planted by entirely new centralized
34:20hierarchies that have mastered this new
34:22technology but recentralized it among
34:25themselves or perhaps it will be a
34:27different third outcome. Can you talk
34:29about why this question is so important
34:32and maybe uh what can you say about what
34:34you think the answer is shaping up to
34:35be? So, it's, you know, it's a theme
34:37that,
34:39excuse me, that runs through the book.
34:42Um, you know, I I came out of I I came
34:45into public life in the 1980s on Wall
34:47Street and have watched how uh through
34:52the years uh the 80s and 90s, Wall
34:55Street really became the allocator of
34:58capital. And it was a philosophy really
35:02uh exemplified by Milton Freriedman and
35:04before M. Frederick Hayek that said the
35:07market may not be perfect but it's the
35:10best way we know to allocate capital and
35:13then the 2008 financial crisis came
35:15along and there was s of something of a
35:18rejection of that free market philosophy
35:21and the rejection says you know what the
35:23market's done a rotten job of actually
35:25allocating capital certainly to certain
35:27underserved communities and therefore we
35:30need a political component to the
35:33allocation of capital and in many ways
35:35The DoddFrank Act passed in 2010 was the
35:38victory of Washington over Wall Street.
35:41And people I think like Elizabeth Warren
35:43and others presume now to have a seat at
35:46the table in the allocation of capital.
35:49They presume to be able to say to Wall
35:51Street, look, you know, do what you do,
35:53but make sure you allocate capital to
35:56this constituency or that constituency.
35:59And in in many ways up until the crypto
36:03innovation you had this sort of shared
36:05authority over the allocation rough you
36:07know rough um equilibrium between
36:10Washington and Wall Street. Well crypto
36:12challenges all that. What crypto says is
36:15actually you know we don't need bankers
36:17on Wall Street and we don't need
36:18politicians in Washington to figure out
36:21how to allocate capital. We just got to
36:22get the algos right. you know, if we get
36:25if we get the protocol right, it should
36:27be colorblind and community neutral and
36:30should be able to allocate capital based
36:32upon whatever the algo standard is. And
36:35in many ways, crypto, you know,
36:37threatens the monopoly of Washington,
36:40Wall Street with new um participants
36:44from from Silicon Valley and hopefully
36:47Main Street um challenging the hierarchy
36:50over the allocation of capital. And so I
36:52I toy with this idea all the way through
36:54my book. And where I come out is I
36:58believe the f the the digital network
37:00future is going to be as complex as the
37:03analog past. It's going to be a sort of
37:06rough equilibrium between centralized
37:10power in the financial system and
37:11decentralized power. Bitcoin's not going
37:14away and it's the best example we have
37:16of decentralized
37:18capital allocation. But at the same
37:20time, if you see what the major Wall
37:22Street banks are doing in working with
37:24DTC and others, they are making sure
37:27that they're still going to play a role
37:29in this digital network future. And so I
37:32use the example of the American
37:34Revolution.
37:36My book is being published in uh 2026,
37:39the 250th anniversary of the revolution.
37:42A year before the revolution started,
37:44Paul Rivere warned and and and and and
37:48triggered a decentralized network of
37:51yman farmers and tradesmen to attack
37:54what was then the most centralized power
37:56in North America, the British authority.
37:59And it decimated that authority in a
38:01battle in battles that took place at at
38:03Cambridge and Lexington. And yet the war
38:06only ended seven years later when that
38:08British hierarchy was defeated by a new
38:10hierarchy of the American Continental
38:12Army supported by the French army. But
38:15here's the point. What resulted what was
38:18a government that was designed to be
38:19both centralized and decentralized with
38:22power centers at the federal level but
38:24also power centers at the state and
38:26local level and and divided government
38:30separation of powers. the notion that we
38:33don't want all power, political power
38:35centralized in one government, but we
38:37want multiple points of of of power and
38:41we want decentralization. And I think
38:44that's an example that's sort of a a
38:46model for where we if we're lucky and if
38:49and if we work hard, this new
38:53uh you know, internet of value, this new
38:56decentralized ledger technology can take
38:58us. And it's not a foregone thing that
39:01it's going to end up there. It could
39:03also end end up with enormous state
39:05control. That's where China is headed
39:07with their digital yuan to amass even
39:10more power in the central state. We need
39:12to make sure that as we build digital
39:15networks here in the United States and
39:17in the western democracies, we build
39:19them in a way that actually returns
39:21power to individuals, gives individuals
39:24more autonomy over their financial
39:27wherewithal, more access to the system,
39:29more control over their own financial
39:32choices, free from control by either
39:34governments or big technology companies
39:36or big banks directing their financial
39:39decisions. Also in the beginning of the
39:41book, you set on the theme of the 2008
39:44crisis. Uh you were born in the 2008
39:49crisis working in the in the world of uh
39:51financial regulation. Uh you were at a a
39:54hedge fund. No, I was at I was at GFI
39:57Group, which um then and today is one of
40:01the leading platforms for um uh
40:04over-thec counter non-exchange trading
40:07of swaps and and our big product was
40:10credit default swaps. About 80%
40:12somewhere around 2/3 or more of the
40:14world's uh credit default swap
40:16marketplace traded on our platforms. We
40:18we were not directional. We we just
40:20executed trades. We didn't take a
40:22position.
40:23>> Right. But and you had an incredible
40:24perspective over the the 2008 uh crisis.
40:28This is something I go back and forth on
40:30where crypto and Bitcoin especially was
40:34born out of a reaction to the 2008
40:37crisis. And so some days I wake up and
40:39I'm like, "Oh, crypto is the antidote.
40:41Crypto will provide uh the buffer, the
40:44protection, the prophylactic for any
40:45sort of future 2008." And then other
40:48days I wake up and be like, h we're
40:49building a parallel financial system.
40:51Just because we were built as a reaction
40:53to it doesn't mean that we actually have
40:56too much to do with solving some of the
40:59core problems that created 2008. Where
41:02do you stand on on that? Do you think
41:04about 2008 frequently when you talk
41:06about and think about crypto systems?
41:08>> You know, we all fall down fell down the
41:11crypto rabbit hole in our own unique
41:13way. I fell down it uh in the in the in
41:17the in the bullseye of the crisis, the
41:19eye of the storm, you might say, when I
41:22was getting calls from the New York
41:24Federal Reserve saying, "Hey, what do
41:27you guys do again?" And I said, "Well,
41:29look, we're the exchange for things that
41:31don't trade on exchange. We're the
41:33exchange for credit default swaps." And
41:36he said, "Right now, what are you seeing
41:37in the market?"
41:39Excuse me. And I said, 'Well, what we're
41:41seeing is that the cost of using these
41:45products, it's basically like an
41:46insurance product against the inability
41:49of a financial institution to pay out on
41:52its debt obligations. The cost of
41:55getting that insurance is getting more
41:57expensive by the hour. And he said,
42:00"Right." And he said, "Well, what about
42:01Lehman Brothers?" And I said, "Well,
42:03Lehman Brothers are already gone." And
42:05he and this was weeks before they fell.
42:07And he said, "Well, what do you mean
42:08they're gone?" And I said, he says, "Is
42:09it because that the insurance is too
42:10expensive?" I said, "No, nobody will
42:13actually trade with none. The other
42:14banks want to trade with them because
42:16they don't think they'll be around in a
42:17few days to make good on those trades."
42:20And in fact, Lehman Brothers did in fact
42:22fall not long afterwards. But my point
42:24is this uh David at the time Lehman
42:27Brothers fell the Federal Reserve added
42:30up all of the protection that had been
42:32written by the other banks against a
42:35failure of Leman Brothers and they
42:37estimated the cost that the other banks
42:39would pay out if Lehman fell at 400
42:41billion
42:43aggregate from the other banks. And then
42:45they figured well if all those banks got
42:47to pay out 400 billion they themselves
42:48will have weakened balance sheets and
42:51then they may fail. And so what we need
42:52to do is stuff their ballot sheets with
42:54cash the way a fire brigade wets down
42:57the houses surrounding the one that's on
42:59fire so that they would survive. Well, I
43:03knew then just intuitively because of
43:06our work on our trading floor that
43:08whenever one of these banks wrote
43:10protection against another bank, they
43:12would turn around and rehedge the
43:13protection. So if there was 400 billion
43:16in aggregate against the failure of
43:17Lehman Brothers, the net must have been
43:20closer in my mind to maybe 200 billion.
43:23And I spoke to a professor at NYU by the
43:25name of Bruce Tuckman who had done some
43:27research. I said, Tuckman, what do you
43:28think? And he said, well, I think it's
43:30actually they're more hedged than that.
43:32I would estimate that a federal Leman
43:34Brothers would only have a net impact of
43:3680 billion of payouts from the other
43:38banks. Well, eventually when I became
43:40chairman of the CFTC, I offered Bruce
43:42Tuckman a job as the agency's chief
43:44economist. I said, 'I'm going to give
43:46you all of our data. Run the numbers for
43:49me. Tell me what a failure of Lehman
43:50Brothers would have come up with. Well,
43:52that research was actually published by
43:54our agency. And it's now known as a
43:57result of that work that a failure of
43:59Lehman Brothers would have not triggered
44:01400 billion in payout, not 200, not 80,
44:04would have triggered less than $9
44:06billion a payout. Here's the point. If
44:10we knew in the summer of 2008 that a
44:13failure of Leman Brothers would have
44:14triggered less than $9 billion, we could
44:17have let it fail. We could have let it
44:19been bought. There would have been
44:20buyers lined up around the block. We
44:22could have bailed it out. None of those
44:24things would have triggered a financial
44:27crisis because of the opacity of its
44:29balance sheet and all the other banks
44:31balance sheet. We did not know. And
44:35crises happen when you have opacity
44:37because people don't know. If the if the
44:39Federal Reserve could have said, "Relax
44:41everybody. A failure librar is going to
44:42trigger 9 billion, we might not have had
44:44a bank crisis."
44:47If all of those swaps had been on a
44:50blockchain, we would have known. And to
44:53me, that was the light bulb moment. This
44:56technology is incredible. This
44:58technology
45:00should be the mutual ledger of all of
45:03Wall Street. If we can move Wall Street,
45:05and we are now, onto distributed ledger
45:08networks,
45:09things like bank crises simply because
45:11we don't know the gross exposure will be
45:15resolved. And so I fell down the crypto
45:17rabbit hole looking at this as as as new
45:21architecture, better architecture, more
45:23efficient architecture for the financial
45:25system, not just on Wall Street, but
45:27globally. And I remain I continue to
45:30believe in that today.
45:31>> What does that actually look like?
45:32because we are certainly in the era
45:34where institutional appetite for crypto,
45:36for doing some of the things that you
45:38just said is the highest it's ever been,
45:40which makes this a very exciting era to
45:42be in crypto. But the idea of putting
45:44swaps on the blockchain still feels a
45:47little bit uh uh opaque to me. I I just
45:50don't know how imagine how that would
45:52work. Are these banks settling
45:55transactions on Ethereum using a layer
45:582? Are they doing their own intranet
46:00blockchains? what what is the actual
46:02like technical details to the best that
46:04you can imagine them for how this
46:05actually manifests.
46:06>> Yeah. Well, we're such an early stage,
46:08you know, we if you know, compare it to
46:10the railroad stage of the 1840s through
46:13the 1880s in the United States, you
46:15know, we're just laying that first rail
46:17between uh Baltimore and wherever it
46:20went. Um there's still a whole continent
46:23to be built uh and to be uh railroad
46:26beds across and new engines to be built.
46:29We're still in the very very early stage
46:30of this innovation and yet it's
46:33happening. Um and and we're one of the
46:36areas where we're seeing a real
46:38important use case is what the
46:40depository trust clearing corporation is
46:42doing with collateral. Um there's over
46:4550 of the most important financial
46:48institutions involved in this
46:49experiment. And yes, it's in an enclosed
46:51environment. The collateral is going to
46:54stay within depository trust clearing
46:56corporation, but within it it's going to
46:58be put into a tokenized form on a
47:01distributed ledger. And once these firms
47:03get used to the efficiencies,
47:06get used to the cost savings, get used
47:08to not having to fund hundreds of
47:10different accounts because now they can
47:12have absolute precision to the penny of
47:14where their collateral is, they're going
47:16to say, "This is really cool. Now, let's
47:18take it out of the zoo. let let's take
47:20this into the wild and they're going to
47:23do it. uh you know I used to run a
47:24public company GFI group you know our
47:27shares were in issued in street name we
47:31were lucky if we knew who 30% of our
47:33investors were well imagine when shares
47:35are on a blockchain and in we can have
47:38direct proximity with our investors I
47:40think this is going to be as much demand
47:42driven as it's going to be supply side
47:44driven in terms of moving to these
47:46distributed ledgers so look it we're in
47:49early innings but I have every certainty
47:52that as I say that by 20440
47:55the the the financial system is going to
47:57be rebuilt on digital rails. Now will
47:59there still be you know traditional
48:01share certificates around? Sure. I mean
48:03depository trust still has beer bonds in
48:06a vault somewhere you know there you
48:08know Rome was built on top of the cities
48:11that came before. We will build this new
48:13digital financial system on top of the
48:16analog financial system. But the
48:18direction of travel to me is is just
48:20absolutely clear. If I can send a
48:22photograph around the world in seconds,
48:24why can't I move money in the same way?
48:27If I can, you know, you know, why why is
48:30any money transaction completely
48:32intermediated by six different firms and
48:35and yet I can send a text message in in
48:37no time? This is direction travel. And
48:39I'll tell you what's going to absolutely
48:41get us there is the new generation
48:43coming into the financial system. A
48:45generation that grew up, you know, in
48:47their parents' bas basement trading game
48:49tokens and suits of armor are going to
48:53say, "I want to do the same thing with
48:54my money. I I don't have patience for
48:55paper checks and branch banking." So,
48:58it's this is going to happen because
48:59it's going to happen generationally.
49:00Bankless Nation, we've built something
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50:05Some exciting news. We are launching a
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50:51waiting for you. Now,
50:52>> you carve out towards the end of your
50:53book a section to talk about privacy.
50:55And I think the antidote to 2008, as you
50:58say, is transparency, but that brings
51:01with it a double-edged sword, which is
51:03individual privacy, especially on public
51:06permissionless, transparent blockchains.
51:08And right now, I think that is also one
51:10of the main uh eras that we are finding
51:12ourselves in crypto, the the extreme
51:16levels of transparency is actually
51:18showing up uh in in negative ways with
51:22home invasions, kidnappings in in in
51:24France. Uh but then also you write a
51:26section about how the IRS uh uh demanded
51:31Coinbase to turn over a bunch of files
51:33uh about their customers report which
51:34was a violation of privacy. How do you
51:36think privacy unfolds as crypto
51:39progresses?
51:40>> Well, this is this is to me the most
51:42fundamental issue of all. As important
51:44as this technological change is, it
51:47pales in significance to the real
51:50valuebased
51:52um issues. So, I have every certainty
51:56that this technology is going to take
51:57hold. I don't have any certainty that
52:00we're going to be able to encode our
52:02democratic values in this digital
52:05future. And that's what I worry about. I
52:06think what we already know where China
52:09is going with their digital yuan, and
52:11that's to be a control instrument. If
52:14you criticize the regime, your money
52:16will be turned off, and you won't be
52:18able to get a bus out of your village.
52:20We know where Europe is going with their
52:22digital euro and we already know where
52:24they are with their banking system and
52:26it's a surveillance regime. Um
52:30surveillance by the government.
52:32Unfortunately, as as intelligent as the
52:35Genius Act was, as as an important
52:37breakthrough as it was to legitimize
52:38stable coins, it imposed upon stable
52:42coins the very retrograde analog bank
52:46secrecy act, which has nothing to do
52:47with secrecy and everything to do with
52:49surveillance. So, already going down the
52:51road of bringing surveillance,
52:54government surveillance into a new
52:56financial system and that's the wrong
52:58path to follow. I think the United
53:00States has the absolute opportunity to
53:02be the big winner in the 21st century of
53:06distributed ledger technology, but only
53:10if we once again regain the right
53:12balance between individual privacy and
53:15law enforcement. We we that that that
53:17that relationship has gotten out of
53:19balance since the Bank Secrecy Act was
53:21passed in the 1970s and further out of
53:24balance since 9/11 where our financial
53:27system today is much closer to Chinese
53:29system than anybody wants to admit. It
53:32is completely surveiled. Um, you know,
53:34our financial transactions are subject
53:36to surveillance. And if you think cash
53:38gives you any protection from
53:40surveillance, just look around the next
53:42time you go into a bodega. There's
53:44cameras right over the cash cash
53:46register reading every serial number on
53:48every bill. There's no privacy in our
53:51current financial system. And the
53:52Supreme Court is as much guilty of that
53:55condition because of the what they call
53:57the third party rule, which I write
53:58about, a third party doctrine, which I
54:01write about in my book. We have to
54:03regain that balance and I think that
54:05digital asset technology gives us the
54:08opportunity to regain that balance. But
54:10right now we're not heading in the right
54:12direction and and and as a result we're
54:14losing our advantage. I think the winner
54:17in the next century that's why I call my
54:19book the quest for financial freedom. I
54:21subtitle it because what we ought to be
54:23doing is as this technology is coming
54:25in, use it as an opportunity to say,
54:27"Wait a minute. Privacy is not only a
54:31right, it's a social good. We want our
54:34citizens to feel they can make private
54:36financial decisions free of
54:38eavesdropping. Whether these
54:40eavesdroppers are big tech companies,
54:42whether they're banks, we with the OC
54:44just put out a report this week talking
54:47about how the Biden administration used
54:50their surveillance of financial
54:51transactions to actually debank people,
54:55CEOs of companies for reasons having to
54:57do with politics or religion. That's not
55:00what we should be doing in a democracy.
55:02We've got to get away from politicians
55:05using the financial system to eavesdrop,
55:08surveil, and ultimately punish their
55:10adversaries. If we if we get this wrong,
55:14then all the technology in the world is
55:16just going to be used by people to
55:17oppress us. But if we get it right, the
55:20technology is going to be used by us to
55:22free ourselves to engage in financial
55:24transactions to to enhance our
55:26individual autonomy, our private
55:28choices, lawful choices of course, but
55:31private choices that each of us are
55:33entitled to make, you know, in in the in
55:35the classic notion of freedom and
55:38democracy.
55:39>> Do you think the US government should
55:40create a dollar CBDC? Well, I I reject
55:44the notion that CBDC is somehow an
55:48invasion of privacy and stable coins are
55:50somehow a protection of privacy. That's
55:52a completely false choice. Stable coins
55:54are now legally fully subject to
55:56government surveillance under the Bank
55:58Secrecy Act. So, there's no privacy in
56:01stable coins. And I could make an
56:03argument under the Fourth Amendment that
56:05if the government was an issuer, they
56:07couldn't engage in surveillance because
56:09there's a right to privacy. Now, as I
56:10said, the Supreme Court has bollocks
56:12that all up with their third party
56:14doctrine. So, it's not clear, but I
56:17don't think CBDC is inherently
56:20a uh compared to stable coins,
56:22inherently um a greater source of
56:25surveillance. Now, there's no question
56:27that what China's done with CBDC is a
56:29control instrument. What Europe is doing
56:31is a surveillance instrument. So,
56:33anything that looked like that, we
56:35should never do in the United States.
56:38Um, but it's a the bigger issue and
56:40that's why I I'm the co-founder and the
56:42chairman of something called the digital
56:44dollar project. We exist to ask the
56:46question in any modernization of the
56:49dollar, how do we protect the values for
56:52which the dollars historically stood.
56:55What Congress should have done with the
56:57Genius Act in addition to what they did
57:01was add on a section that says the
57:04dollar is a unique instrument.
57:06Whether it's offered by a private
57:08company, whether it's offered by a bank,
57:10whether it's offered by a government, it
57:13must contain within it the right balance
57:16between law enforcement and privacy. And
57:18you know, that's not a hard balance to
57:19rediscover. We've been dealing with that
57:22for centuries in in democracies. We have
57:25this notion that what goes on inside
57:27your home is your private business.
57:28Government can't walk through the door
57:30because they want to know what you're up
57:31to. Now, if there's probable cause of
57:34lawb breakaking if they can go get a
57:37judge to issue a subpoena, they can
57:39actually bash down your door. And that's
57:41considered the right balance. We've
57:43accepted that as a society. this notion
57:45of probable cause of lawb breaking
57:48supported by an independent judge
57:50issuing a subpoena to law enforcement.
57:53We don't have that in our financial
57:54system now. As I write about in my book,
57:56the IRS can tell tell Coinbase, "Give us
58:00all your data. We don't we don't have
58:01any reason to believe anybody's doing
58:02anything wrong. We just want to parse
58:04through all that data and have a look
58:06for ourselves." That's not the notion of
58:08a right balance between privacy and law
58:10enforcement. And so my answer to your
58:12question about CBDC, stablecoin is right
58:14now in America, they're both headed in
58:16the wrong direction. Let's let's get
58:18back to the notion that d the dollar is
58:20a sacred instrument. It should
58:22distinguish itself from every other
58:23currency in the world by having the best
58:25balance of privacy in the world. And if
58:28we do that, it doesn't matter whether
58:30it's issued by the government or a
58:32private sector actors. If the standard
58:33is it's a privacy, it's an instrument of
58:36freedom. Let's make the dollar the
58:38world's instrument of freedom and then
58:39people the world over will aspire to
58:41owning it.
58:42>> Incredibly interesting. Chris, thanks
58:44for coming back on Bank list. I have to
58:45say the some of my favorite parts of the
58:47book we weren't able to get to on the
58:49episode today. I think the the section
58:51where you talked about how you were
58:52personally involved with introducing SPF
58:54to Gary Gendler was particularly
58:56interesting. I really enjoyed uh the
58:58story of you watching Bill Clinton react
59:01to SPF at FTX Bahamas. I thought these
59:04were particularly interesting for
59:06banklist listeners. The first half of
59:08the book I'll call a crash course in
59:10crypto and then the second half of the
59:13book I kind of will say is um uh being a
59:16fly on the wall of every room that Chris
59:19here has been on uh when it comes to
59:21crypto in uh the administrations
59:23Democrat and Republicans over the years.
59:25So it's a wealth of knowledge and
59:27experience. Chris, thanks for writing.
59:29I've got the book here. If bankless
59:31listeners want to go get a copy, they it
59:33comes out today at the time of release.
59:35Chris, is there anything else you want
59:36to say about the book?
59:37>> Well, I I hope readers enjoy it. I I I
59:40put a lot into it. I wanted to share a
59:41lot of stories. Uh and I hope if they if
59:44they find my points um uh resonate with
59:48them, that they'll support me in making
59:50sure that the future of finance is a
59:52future of freedom.
59:53>> That's former CFTC Commissioner Chris
59:55Junk Carlo. Thanks for coming on
59:56Bankless.
59:57>> My pleasure, Dave. Let's do it again.
59:58>> Bank listation, you guys know the deal.
59:59Crypto is risky. You can lose what you
1:00:01put in. But nonetheless, this is the
1:00:03frontier. It's not for everyone, but we
1:00:05are glad you're with us on the bankless
1:00:06journey. Thanks a lot. [music]

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