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Speaker 1: Since you're a subscriber to this Bloomberg podcast, we thought

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Speaker 1: you'd be interested in a new four episode sponsored podcast

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Speaker 1: called Evolving Money, produced by Coinbase and Bloomberg Media Studios.

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Speaker 1: It explores some of the monetary system's biggest changes over

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Speaker 1: the centuries and today's companies that are making big bets

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Speaker 1: that cryptocurrency could be money's next evolution. You can subscribe

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Speaker 1: wherever you listen to your favorite podcasts. Here's a recent episode.

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Speaker 2: Last year, I went to France on a climbing trip.

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Speaker 2: Scaling mountains takes a toll, of course, but I was

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Speaker 2: prepared for that. The unpleasant surprise was the experience of

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Speaker 2: managing my money. There was so much friction involved in

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Speaker 2: converting and spending my US dollars in another country away

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Speaker 2: from home. Well, frankly, I could have started a small

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Speaker 2: fire at the top of the mountain to change dollars

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Speaker 2: into euros. Well, first you need to find a bank

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Speaker 2: that's open. Once you've done that, you need to stand

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Speaker 2: in line, pay a fee, and then try not to

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Speaker 2: blanch when you see that usually highly unfavorable exchange rate.

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Speaker 2: If you use your credit card in an ATM, which

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Speaker 2: you can, of course, you pay an ATM user fee,

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Speaker 2: plus a foreign transaction fee, plus a service charge depending

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Speaker 2: on the card, and then there's that appalling exchange rate again.

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Speaker 2: Of course, I could have exchanged dollars for euros before

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Speaker 2: I left, but then I'd have to weather the risk

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Speaker 2: of taken a huge amount of cash with me to

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Speaker 2: the airport and keeping it on my person as I

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Speaker 2: navigated a foreign country. So mostly I just paid for

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Speaker 2: everything with my American credit card, which worked fine and

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Speaker 2: felt friction free, but just a glance at my statement

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Speaker 2: showed it was anything But fees are binded on both

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Speaker 2: ends of my transactions, as if I'd been taken a

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Speaker 2: toll road every time I threw down my plastic. That

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Speaker 2: convenience came at a cost. I don't begrudge paying someone

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Speaker 2: who provides a service, but these days, when it can

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Speaker 2: be so easy and inexpensive to travel across the globe,

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Speaker 2: that we're still paying fees like we did last century. Frankly,

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Speaker 2: I think we can do better, and I'm not alone

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Speaker 2: in that. From Coinbase and Bloomberg Media Studios, this is

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Speaker 2: evolving money, and I'm your host, Patty Hirsch. On this podcast,

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Speaker 2: we'll be taking a different look at cryptocurrency. It's been

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Speaker 2: cast as a radical departure for the monetary system, But

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Speaker 2: what if it wasn't radical at all, just the next

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Speaker 2: logical evolution of how we pay for things and store

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Speaker 2: long term value. Along the way, we'll explore how money

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Speaker 2: has changed over the centuries look for lessons that might

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Speaker 2: predict its next evolution. Throughout history, financial markets have struggled

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Speaker 2: with the issue of borders. Borders create friction, add cost,

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Speaker 2: and cause headaches for anyone who wants to spend money

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Speaker 2: across them. On top of that, various national currencies can

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Speaker 2: be wildly unstable. So could a borderless global currency ease

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Speaker 2: friction and enhance financial inclusion and stability around the world.

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Speaker 2: Cryptocurrencies offer an intriguing possible solution to money's border problem,

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Speaker 2: and a particular kind of cryptocurrency called stable coins, could

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Speaker 2: become a powerful medium of exchange for international payments and

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Speaker 2: offer people around the world economic freedom. In a bit,

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Speaker 2: will be joined by Brian Armstrong, co founder and CEO

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Speaker 2: of Coinbase, as we ask could cryptocurrencies be the future

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Speaker 2: of global money? First, I'll be joined by Jacob Goldstein,

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Speaker 2: author of Money, The True Story of a Made Up Thing.

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Speaker 2: The issue of borders has long been a perplexing one

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Speaker 2: for our monetary system, and it's not even limited to

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Speaker 2: international borders. In the not too distant past, it was

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Speaker 2: a big issue within the borders of the United States.

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Speaker 2: The eighteen thirties, eighteen forties, or kind of was peak

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Speaker 2: wild amounts of money in the United States. This is

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Speaker 2: Jacob Golds. How many kinds of money did America have

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Speaker 2: back then?

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Speaker 3: There were thousands of kinds of money, right, you're not

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Speaker 3: indulging in hyperbole here. At one point in the eighteen

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Speaker 3: hundreds in the United States there were eight thousand, three

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Speaker 3: hundred and seventy different kinds of paper money in circulation

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Speaker 3: in the United.

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Speaker 2: States of America. And why did America have eighty three

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Speaker 2: hundred and seventy different kinds of money? Well, it was

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Speaker 2: all about what else trust. In the early eighteen hundreds,

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Speaker 2: Americans had become skeptical of the Bank of the United States,

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Speaker 2: which was a financial monopoly, the country's only national bank.

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Speaker 2: After President Andrew Jackson decided to kill that bank, the

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Speaker 2: only chartered banks that existed did so at the state level.

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Speaker 2: Eighty three hundred and seventy different local banks with eight thousand,

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Speaker 2: three hundred and seventy different currencies, which made things complicated.

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Speaker 2: If you're traveling from I don't know, California to Kentucky

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Speaker 2: and you've got a pocketload of Sacramento Bank printed money

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Speaker 2: and you're showing up to Kentucky and trying to spend

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Speaker 2: it in a general store, how did that go down?

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Speaker 4: I mean bad, bad is for there are these sort

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Speaker 4: of notorious cases of people, you know, just kind of

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Speaker 4: getting hosed and nobody knows what their money is.

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Speaker 2: Talk about friction. The storekeeper behind the counter would look

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Speaker 2: at your bill and would have to flip through a

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Speaker 2: big fat periodical to verify that it even came from

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Speaker 2: a real bank. More problematic, the value of each currency

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Speaker 2: fluctuated too. Currencies were given discounts based on the distance

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Speaker 2: to the bank and also based on the bank's financial health,

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Speaker 2: which was constantly changing. And how did that affect commerce?

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Speaker 2: Travelers did you.

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Speaker 3: Know, lose something when they exchanged paper money, something like

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Speaker 3: one or two percent.

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Speaker 2: When the Civil War broke out, the federal government needed

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Speaker 2: to raise money to fund the war effort, and this

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Speaker 2: led to the re establishment of national banks and drove

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Speaker 2: Americans towards the one single currency. We now know the

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Speaker 2: days of thousands of different kinds of money were over,

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Speaker 2: but we can draw important lessons from that chaotic time,

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Speaker 2: Bobre just like, I guess that's the way money is.

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Speaker 5: I guess there's just eight thousand kinds of money in America,

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Speaker 5: And like that kind of neta lesson of like, oh right,

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Speaker 5: there's all these different ways that money can be, has been,

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Speaker 5: will be. It's just a really useful thing to keep

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Speaker 5: in mind. Hopefully the days of thousands of different types

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Speaker 5: of banknotes are over for good, but today's global monetary

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Speaker 5: system can feel every bit as head spinning and as

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Speaker 5: full of friction as eighteen hundreds of America. Across the

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Speaker 5: world today, there are one hundred and eighty different official

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Speaker 5: national currencies. Almost all of them are what are called

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Speaker 5: fiat currencies, backed not by a commodity like gold or silver,

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Speaker 5: but simply by the relationship between supply and demand and

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Speaker 5: the ability of the issuing government. And while the world's

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Speaker 5: more connected than ever, moving money across borders is still

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Speaker 5: slow and expensive. Take remittance fees, which are astronomically high.

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Speaker 5: Americans spend around twelve billion dollars a year in fees

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Speaker 5: just to send money to friends and family abroad. Those

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Speaker 5: remittance fees are a huge problem when about one in

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Speaker 5: nine people globally depend on workers living abroad. Business to

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Speaker 5: business cross border payments are expensive too, and those costs

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Speaker 5: stifle global commerce. And on top of all of that,

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Speaker 5: currencies can fluctuate wildly, and that brings us to Argentina.

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Speaker 5: Beginning in twenty seventeen, the Argentine peso began to suffer

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Speaker 5: wild annual inflation rates. Each year was worse than the previous,

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Speaker 5: with annual inflation eventually hitting two hundred and eleven percent

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Speaker 5: at the end of twenty twenty three. When Argentinians began

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Speaker 5: seeing the value of their savings depreciate to almost nothing,

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Speaker 5: they started buying US dollars as a safeguard.

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Speaker 6: The way to head against inflation is getting two dollars.

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Speaker 2: That's Eduardo Novo Estrata, CEO and co founder of agro Token.

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Speaker 2: And by the way, you should know that coinbase has

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Speaker 2: no financial relationship with agro tooken.

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Speaker 6: So imagine all the people who were rushing to buy dollars. Basically,

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Speaker 6: they got their salary at the end of the month

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Speaker 6: and they were rushing to buy dollars. But then the

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Speaker 6: government were running out of dollars. So what they did

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Speaker 6: is what they said, Okay, you cannot buy more than

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Speaker 6: two hundred dollars a month.

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Speaker 2: Two hundred bucks a month. Wow, that's not much.

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Speaker 6: Two hundred bucks a Yeah, that opened up a big

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Speaker 6: black market.

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Speaker 2: Today. Because of that limit, lines and wait times at

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Speaker 2: the bank for dollars are interminable, and transaction fees are costly.

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Speaker 6: People had to get very creative again to get dollars.

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Speaker 2: Many Argentinians acquire US dollars through black markets where the

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Speaker 2: exchange rates are two times better than the officially sanctioned exchanges,

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Speaker 2: and then they effectively store the cash under their mattresses,

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Speaker 2: ensuring its value cannot depreciate should hyperinflation continue.

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Speaker 7: I spent about a year living in Buenos Aires, Argentina,

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Speaker 7: and it was the first time I had seen a

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Speaker 7: society that had gone through hyperinflation, and that was pretty

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Speaker 7: eye opening.

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Speaker 2: That's Brian Armstrong, CEO of Coinbase.

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Speaker 7: It affected the society in all sorts of small and

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Speaker 7: big ways. You know, in small ways, for instance, you'd

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Speaker 7: see on menus when you go to restaurants, the menu

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Speaker 7: would sort of have a sticker on top where they'd

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Speaker 7: put a new price every few days on the menu

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Speaker 7: because the prices would keep going up that fast, they

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Speaker 7: didn't want to have to print new menus every few days.

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Speaker 7: And I remember at that time there was it was

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Speaker 7: difficult for people to ride the bus, you know, I

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Speaker 7: guess the bus only took physical coins that you put

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Speaker 7: in there to ride the bus, and coins actually became

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Speaker 7: somewhat scarce because you had to you had to bring

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Speaker 7: like a whole handful of coins just to have enough

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Speaker 7: to ride the bus. But in a deeper and more

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Speaker 7: profound way, I think it sort of created this pessimism

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Speaker 7: about the future. In the early nineteen hundreds, Argentina was

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Speaker 7: one of the to up ten economies in the world.

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Speaker 7: It was like the Paris of South America. And over

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Speaker 7: a period of one hundred years or so, they've now

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Speaker 7: fallen to, you know, less than one hundred in the

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Speaker 7: world in terms of their economy, and it's basically been

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Speaker 7: by a series of policies, you know, around corruption and

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Speaker 7: lack of economic freedom. When I say economic freedom, by

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Speaker 7: the way, I mean in some ways it's about free trade,

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Speaker 7: it's about sound money, it's about enforcing private property rights,

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Speaker 7: you know, it's about reducing corruption and things like this.

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Speaker 2: Pessimism and lack of trust and an unstable financial system

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Speaker 2: isn't just an Argentinian story. Hyperinflation has recently hit Turkey, Egypt, Venezuela,

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Speaker 2: Sudan and Zimbabwe. Turmoil makes it even harder to move

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Speaker 2: money across borders. Brian saw money as border problems firsthand

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Speaker 2: while working at Airbnb over a decade ago. The vacation

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Speaker 2: rental startup was looking to expand, which naturally meant a

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Speaker 2: lot of international transactions.

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Speaker 7: I saw how difficult it was for Airbnb to move

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Speaker 7: money into an out of one hundred ninety countries around world,

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Speaker 7: and I kind of had a front row seat into

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Speaker 7: how how much of a passwork quill it, how broken

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Speaker 7: the global financial system was to move money into all

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Speaker 7: these countries and receive it from those countries. That was

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Speaker 7: like delays and fees.

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Speaker 2: The Internet has introduced a global borderless system of information sharing,

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Speaker 2: but the system from moving money internationally hasn't coughed up yet.

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Speaker 2: Think about the Internet.

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Speaker 7: Right when you're loading a website or you're sending a

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Speaker 7: message to somebody, you don't think about what country they're

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Speaker 7: in at that time. If I'm loading a website in

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Speaker 7: the UK, I don't expect to pay an exchange rate,

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Speaker 7: you know, when the website comes in from the UK

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Speaker 7: to load into my American browser. Imagine if you had

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Speaker 7: to pay an exchange fee at the border to load

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Speaker 7: a UK website or something.

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Speaker 2: It would be silly.

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Speaker 7: And when I send people WhatsApp messages, you know, it's

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Speaker 7: instant and it's free anywhere that they are in the world.

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Speaker 7: So why can't payments be like that. There's no technological

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Speaker 7: reason why we can't do that. It is purely a

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Speaker 7: matter of will and inertia, and you know, politics and

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Speaker 7: things like that.

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Speaker 2: And Brian began to see it potential solution to the

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Speaker 2: problem when he read Satoshi Nakamoto's Bitcoin white paper.

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Speaker 7: Living in Argentina was one of the pieces of the

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Speaker 7: puzzle that clicked in my mind. When I finally read

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Speaker 7: that Bitcoin white paper about what it might be like

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Speaker 7: to return to sound money globally, I saw crypto as

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Speaker 7: a very liberating force for the world, to make the

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Speaker 7: world more interconnected and fair and free. When I read

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Speaker 7: the Bitcoin white paper, I said, Okay, this is exciting

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Speaker 7: as a potential solution, but it's it's a long ways off,

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Speaker 7: you know, what could happen? How could I help make

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Speaker 7: this happen? And so I kind of couldn't help myself.

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Speaker 7: I started on nights and weekends working on a prototype,

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Speaker 7: and I realized, like, if this technology is ever going

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Speaker 7: to be used by people, would have to make it

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Speaker 7: more trusted and easier to use for the average person,

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Speaker 7: who you know, didn't understand how cryptography worked or the

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Speaker 7: technical details. I started working on a prototype that would

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Speaker 7: be a simple way for people to use bitcoin, and

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Speaker 7: that became That became coinbase.

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Speaker 2: Brian was inspired by the idea that cryptocurrencies could have

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Speaker 2: true utility in day to day transactions and could even

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Speaker 2: make the global economy freer.

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Speaker 7: It's a decentralized form of money that is provably scarce,

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Speaker 7: and that was a very powerful idea for many reasons.

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Speaker 7: But if you apply it through the Argentina lens, it's

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Speaker 7: powerful because the temptation in many of these countries when

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Speaker 7: you have a fiat currency that's not backed by any

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Speaker 7: hard commodity, is for the government to inflate the money

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Speaker 7: supply and have deficit spending and inflation. What would it

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Speaker 7: mean for the world if everybody could sort of return

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Speaker 7: to sound money, or have sound money that couldn't be

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Speaker 7: manipulated or abused by folks in government and various countries

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Speaker 7: around the world. That would be an incredible tool for

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Speaker 7: economic freedom.

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Speaker 2: We talk about signed money in the gold standard, but

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Speaker 2: I mean there was a reason we moved away from

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Speaker 2: the gold standard because we find that it wasn't particularly

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Speaker 2: signed and it was particularly volatile and particularly disruptive to economies.

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Speaker 2: So can you square that one for me?

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Speaker 7: Yeah, Well, so there's a debate about volatility, which kind

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Speaker 7: of goes back to the Great Depression and sort of

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Speaker 7: Canesian economics. That's sort of the question of should we

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Speaker 7: have a federal reserve that can change interest rates? And

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Speaker 7: that's a whole interesting topic on its own. It gives

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Speaker 7: you enormous soft power, and it gives you the ability

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Speaker 7: to buy the way, you know, inflate the money supply

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Speaker 7: and purchase things without devaluing your currency too much because

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Speaker 7: it is the reserve currency. But like every one of

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Speaker 7: those empires before us, you know, as the empire kind

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Speaker 7: of hits the peak, you start to see excessive debt,

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Speaker 7: excessive inflation. Crypto is many things to many people. Bitcoin,

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Speaker 7: I would say is specifically a is sort of a

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Speaker 7: return to the gold standard in a digital form that

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Speaker 7: is more portable and divisible than gold, and that's a

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Speaker 7: really powerful idea.

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Speaker 2: To Brian, the most powerful idea of all is the

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Speaker 2: idea that crypto could offer economic freedom, and he's convinced

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Speaker 2: that the tool to make that a reality is here

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Speaker 2: in the form of a type of cryptocurrency cold stable coins.

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Speaker 7: So there's a couple different forms of stable coins, but

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Speaker 7: the simplest one is a digitized dollar. It's backed one

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Speaker 7: one by a dollar being held in a US bank

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Speaker 7: or trust company. Often they're held in US treasuries, right,

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Speaker 7: which is kind of the lowest risk item you could have.

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Speaker 7: And it's important that we have stable coins because, again

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Speaker 7: I mentioned earlier, crypto is a technology to update the

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Speaker 7: financial system, and payments are a big source of friction.

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Speaker 7: So you can now send, for instance, usd coin on

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Speaker 7: a layer two called base for free instantly anywhere in

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Speaker 7: the world. It'll settle in a few seconds. That's a

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Speaker 7: game changer because payments flow to the path of least resistance,

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Speaker 7: kind of like water. We want to reduce friction in

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Speaker 7: our economy so that more transactions can take place.

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Speaker 2: Brian says stable coins are as stable as US dollars,

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Speaker 2: but with all the benefits of crypto. Transactions are fast,

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Speaker 2: cheap and secure, and they're accessible to anyone with Internet access,

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Speaker 2: which means that they can function as a stable currency

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Speaker 2: alternative for those who don't have access to stable feit currencies.

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Speaker 2: In recent years, the popularity of stable coins is skyrocketed

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Speaker 2: as a way for people in countries like Argentina to

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Speaker 2: safely store their money in a digital currency. I discussed

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Speaker 2: this with Eduardo.

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Speaker 6: When you have restrictions even to buy dollars, what do

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Speaker 6: you do? You know, you go to something that you

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Speaker 6: can hedge against inflation and evaluations and is something that

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Speaker 6: people start believing. So that's why there's a lot of

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Speaker 6: adoption of blockchain and cryptocurrency in Argentina.

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Speaker 2: Stable coins are safe from the inflation of the Argentine

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Speaker 2: peso and safe from having to navigate the US dollar

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Speaker 2: cash market, and that reliability is welcome in any place

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Speaker 2: experiencing hyperinflation. Nigeria, for example, is another country where people

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Speaker 2: turn to stable coins for protection and stability and to

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Speaker 2: make day to day transactions.

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Speaker 7: There's quite a few people in those markets who they

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Speaker 7: essentially are just holding USD stable coins on their smartphones

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Speaker 7: now as their primary way of using financial services. They're

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Speaker 7: doing it for peer to peer payments, like to send

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Speaker 7: money to friends and family, whether they're in the same

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Speaker 7: country or not. They're also using it for B to

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Speaker 7: B type commerce, like, you know, if they need to

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Speaker 7: order goods and supplies from Europrasia to stock their shelves

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Speaker 7: in their store, they can make those payments now with

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Speaker 7: USDC stable coins and do it fast and cheap and

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Speaker 7: cross border in a way that's just not available to

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Speaker 7: them any other way.

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Speaker 2: But the emergence of stable coins hasn't been an altogether

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Speaker 2: smooth ride. One area of economic freedom that people blanchet

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Speaker 2: a little bit is the idea that cryptocurrency is being

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Speaker 2: used by criminal organizations to facilitate their business. What's what's

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Speaker 2: your what are your thoughts about that?

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Speaker 7: Yeah, So, unfortunately there's a lot of misinformation out there

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Speaker 7: about this topic. If you look at the best third

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Speaker 7: party data that we've been able to find using blockshing

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Speaker 7: analytics companies, they publish reports on this every year, and

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Speaker 7: it looks like all illicit activity in crypto is about

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Speaker 7: half of one percent.

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Speaker 2: Global money laundering transactions mean why well are estimated at

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Speaker 2: two to five percent of global GDP.

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Speaker 7: Companies like coinbase. You know, we work closely with law enforcement.

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Speaker 7: So what a lot of criminals have realized actually is

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Speaker 7: that crypto is a really terrible choice if you want

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Speaker 7: to do a listed activity because your transactions are being

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Speaker 7: tracked on a public ledger.

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Speaker 2: That transparency is part of the reason why Brian believes

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Speaker 2: stable coins can drive quality of life improvements across the

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Speaker 2: globe and act as a human rights tool Beyond inflation

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Speaker 2: affected countries, freedom over finances correlates with overall freedom, and

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Speaker 2: in countries that suffer from socio political upheaval, governments can

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Speaker 2: treat access to traditional financial services as a censorship tool.

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Speaker 2: Banking access is another area of inequality. There are more

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Speaker 2: than seven billion smartphones in the world, but far fewer

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Speaker 2: bank accounts. More than a billion people are still unbanked,

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Speaker 2: but now many of them have the technology to access

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Speaker 2: digital currencies right in their hands, and that could change

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Speaker 2: people's lives everywhere, including as Eduardo says, in Argentina.

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Speaker 6: We foresee more use of these because the people they

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Speaker 6: don't have a way of saving.

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Speaker 2: Giving more people the financial infrastructure they need is the

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Speaker 2: mission of agro Token, which Eduardo funded in twenty twenty one.

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Speaker 2: Agrotoken creates stable coins that are backed not by US

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Speaker 2: dollars but by grain. The end goal, though, is the same.

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Speaker 6: We are giving the people the opportunity to hedge against

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Speaker 6: inflation and evaluation and they won't be so much exposed

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Speaker 6: the decisions of the government about you know, macroeconomics, economy

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Speaker 6: or whatever.

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Speaker 2: This bold vision of economic freedom is one he shares

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Speaker 2: with Brian.

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Speaker 7: If you have a smartphone and an Internet connection, you

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Speaker 7: now can have world class financial infrastructure. You can have

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Speaker 7: property rights, you can have access to sound money that

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Speaker 7: can't be eroded via inflation or seized if you're a

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Speaker 7: refugee fleeing at the border. And so it's a really

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Speaker 7: powerful idea actually that crypto could increase the and I'm

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Speaker 7: freedom of the world. So crypto is sort of saying, hey, well,

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Speaker 7: we have the Internet now, and we have smartphones, why

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Speaker 7: can't we provide financial infrastructure to everybody in a new

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Speaker 7: updated financial system. That could be an incredible tool to

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Speaker 7: lift the world out of poverty and increase economic growth

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Speaker 7: and all kinds of tools like that.

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Speaker 2: Even the biggest skeptics can agree a new technology that

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Speaker 2: can increase economic growth and economic freedom to more people

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Speaker 2: around the world is worth giving a chance. When it

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Speaker 2: comes to our financial system, we've seen time and time

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Speaker 2: again that there is always a better way and that

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Speaker 2: money always evolves. Thank you to Jacob Goldstein, Eduardo Novello,

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Speaker 2: Estrata and Brian Armstrong. This has been Season one of

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Speaker 2: Evolving Money, a podcast from Coinbase and Bloomberg Media Studios.

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Speaker 2: I'm Patti Hirsh. Thanks for listening.