1 00:00:10,520 --> 00:00:13,600 Speaker 1: Hello and welcome to another episode of the all thoughts podcast. 2 00:00:13,640 --> 00:00:17,080 Speaker 1: I'm Tracy allowatt and I'm Joe Wi. Isn't they so, Joe? UH, 3 00:00:17,200 --> 00:00:19,079 Speaker 1: didn't we say recently that we were going to be 4 00:00:19,079 --> 00:00:23,040 Speaker 1: talking about stable coin regulations more? There's never enough, you know. 5 00:00:23,160 --> 00:00:25,520 Speaker 1: I actually I have. I think there are lots of 6 00:00:25,560 --> 00:00:30,680 Speaker 1: reasons to continue to focus on stable coin regulation. Why? Well, 7 00:00:31,120 --> 00:00:33,760 Speaker 1: I think the biggest one in my mind, is this 8 00:00:33,800 --> 00:00:36,440 Speaker 1: sort of thing I internalized from the great financial crisis, 9 00:00:36,479 --> 00:00:39,559 Speaker 1: which is that things blow up when they're promised to 10 00:00:39,560 --> 00:00:41,879 Speaker 1: be stable. Yeah, I think that's exactly and to me 11 00:00:42,040 --> 00:00:45,040 Speaker 1: it's like, I know, I do not expect to experience 12 00:00:45,440 --> 00:00:48,800 Speaker 1: in my lifetime like a bitcoin crisis, because people know 13 00:00:48,960 --> 00:00:52,760 Speaker 1: that bitcoin crisis or a dogecoin. People know that these 14 00:00:52,800 --> 00:00:56,560 Speaker 1: coins are extremely volatile. They don't bucket them into, uh, 15 00:00:56,680 --> 00:00:59,240 Speaker 1: you know, parts of their portfolio that are expected to 16 00:00:59,240 --> 00:01:02,120 Speaker 1: be safe, and so they can fall like a stock can, 17 00:01:02,240 --> 00:01:05,000 Speaker 1: whereas we know that, you know when something is like 18 00:01:05,080 --> 00:01:08,440 Speaker 1: triple a or dollar peg or whatever, that's where trouble 19 00:01:08,680 --> 00:01:12,280 Speaker 1: can theoretically start. Yeah, so two things there. I totally agree. 20 00:01:12,520 --> 00:01:15,640 Speaker 1: The other thing is, if you think about crypto broadly, 21 00:01:15,760 --> 00:01:18,440 Speaker 1: stable coins are really the way in which the traditional 22 00:01:18,480 --> 00:01:22,080 Speaker 1: financial system interacts the most or one of the most 23 00:01:22,200 --> 00:01:26,360 Speaker 1: important ways with crypto. So stable coins are interesting because 24 00:01:26,480 --> 00:01:30,360 Speaker 1: they build up these reserves of financial assets, things like 25 00:01:30,520 --> 00:01:35,280 Speaker 1: commercial paper, and there's a concern there that maybe if 26 00:01:35,280 --> 00:01:39,160 Speaker 1: you had a stable coin experience a big amount of trouble, 27 00:01:39,680 --> 00:01:42,320 Speaker 1: that it could affect the CP market more broadly and 28 00:01:42,360 --> 00:01:45,840 Speaker 1: affect the financial system more broadly. And also there's a 29 00:01:45,840 --> 00:01:48,559 Speaker 1: good argument that stable coins are the one killer APP 30 00:01:48,640 --> 00:01:51,240 Speaker 1: of Crypto, that where do people actually use crypto? It's 31 00:01:51,280 --> 00:01:54,840 Speaker 1: like tether, U, s DC. These are huge things, right, 32 00:01:55,160 --> 00:01:57,680 Speaker 1: and so he's like, well, what do people use crypto for? Well, 33 00:01:57,920 --> 00:02:02,520 Speaker 1: stable coins are like popular and why spread and therefore, 34 00:02:02,840 --> 00:02:05,040 Speaker 1: you know, it's an area to be putting a lot 35 00:02:05,040 --> 00:02:08,160 Speaker 1: of attention. Well, also, I think that they promise something, 36 00:02:08,320 --> 00:02:12,040 Speaker 1: which is the fact that they promise something, which is stability, 37 00:02:12,120 --> 00:02:16,000 Speaker 1: kind of makes them easier to regulate. Like, you know what, 38 00:02:16,000 --> 00:02:19,400 Speaker 1: what are other crypto tokens actually promising? Like they're not 39 00:02:19,440 --> 00:02:22,480 Speaker 1: necessarily promising that safety net as you are discussing, but 40 00:02:22,600 --> 00:02:26,520 Speaker 1: stable coins are, and so it naturally draws in regulatory interests, 41 00:02:26,560 --> 00:02:29,480 Speaker 1: and this is a real, key, key point that you 42 00:02:30,120 --> 00:02:33,880 Speaker 1: you bring up, which is that, yeah, like there is 43 00:02:33,960 --> 00:02:37,520 Speaker 1: this there is this promise, there is this expectation. You 44 00:02:37,520 --> 00:02:41,120 Speaker 1: can also sort of judge whether the promise is being kept. Like, 45 00:02:41,720 --> 00:02:44,440 Speaker 1: does this coin have a dollar in the bank? Is 46 00:02:44,440 --> 00:02:47,360 Speaker 1: like a pretty simple binary question. What would be the 47 00:02:47,400 --> 00:02:50,639 Speaker 1: equivalent for doge client? Well, more difficult to answer than 48 00:02:50,680 --> 00:02:54,280 Speaker 1: you might expect. Sometimes Fair enough, but we are going 49 00:02:54,320 --> 00:02:56,800 Speaker 1: to be discussing all of this with someone who I 50 00:02:56,840 --> 00:02:59,760 Speaker 1: think comes at it from a very interesting perspective. So 51 00:02:59,800 --> 00:03:02,600 Speaker 1: we recently spoke to Senator Pat to me about this. 52 00:03:03,000 --> 00:03:06,320 Speaker 1: He was talking about the stable coin bill going through Congress, 53 00:03:06,360 --> 00:03:10,160 Speaker 1: but what if there was another way to regulate stable coin? 54 00:03:10,240 --> 00:03:13,600 Speaker 1: Let's all right, without further ado, then, we are going 55 00:03:13,639 --> 00:03:16,600 Speaker 1: to be speaking to Timothy Massad. He is, of course, 56 00:03:16,639 --> 00:03:19,519 Speaker 1: a research fellow at the Harvard Kennedy School and also 57 00:03:19,639 --> 00:03:24,200 Speaker 1: the former chairman of the CFTC under president, literally the 58 00:03:24,240 --> 00:03:27,280 Speaker 1: perfect guest. Yeah, definitely, Tim thank you so much for 59 00:03:27,360 --> 00:03:29,720 Speaker 1: joining us. Thank you for having me. I'm a big 60 00:03:29,760 --> 00:03:33,680 Speaker 1: fan of the show. Thanks. Thank you for saying that. Yeah, 61 00:03:34,080 --> 00:03:38,040 Speaker 1: text and the mail. Uh. So, why don't we go ahead? 62 00:03:38,080 --> 00:03:40,760 Speaker 1: And this is a question I asked senator to me 63 00:03:40,880 --> 00:03:44,520 Speaker 1: as well, but why the interest in stable coins? Like, 64 00:03:44,600 --> 00:03:47,640 Speaker 1: what is it that is drawing this regulatory scrutiny at 65 00:03:47,640 --> 00:03:52,080 Speaker 1: this moment in time? Sure, well, they're not that big 66 00:03:52,200 --> 00:03:55,560 Speaker 1: relative to the financial senator, but they are growing very 67 00:03:55,640 --> 00:03:59,720 Speaker 1: quickly and that's one of the concerns and obviously recently 68 00:03:59,760 --> 00:04:02,480 Speaker 1: when we had that fall in crypto prices and we 69 00:04:02,520 --> 00:04:05,760 Speaker 1: saw the crash of terra, which is an Algorithmic stert 70 00:04:06,440 --> 00:04:09,800 Speaker 1: staple coin, that heightened the concern. There's a view that, 71 00:04:09,920 --> 00:04:12,480 Speaker 1: you know, these things could grow very quickly and, frankly, 72 00:04:12,600 --> 00:04:16,600 Speaker 1: that there's an opportunity here. They could help modernized payments 73 00:04:16,680 --> 00:04:20,080 Speaker 1: and increased competition. So I think it is right for 74 00:04:20,279 --> 00:04:23,760 Speaker 1: regulators to be focused on them and of course facebook's 75 00:04:23,760 --> 00:04:28,799 Speaker 1: proposal of libra was really what uh captivated or really 76 00:04:29,400 --> 00:04:33,120 Speaker 1: regulators to focus in on this. I actually hadn't realized that. 77 00:04:34,080 --> 00:04:35,799 Speaker 1: talked to us a little bit more about that because 78 00:04:36,160 --> 00:04:39,839 Speaker 1: you know, remember the Libre Splash was during the team 79 00:04:39,880 --> 00:04:42,359 Speaker 1: boom and it just seems so unwieldy and I'm not 80 00:04:42,360 --> 00:04:44,359 Speaker 1: really surprised it never got off the ground, but I 81 00:04:44,400 --> 00:04:46,600 Speaker 1: don't think I had appreciated the degree to which that 82 00:04:46,720 --> 00:04:49,120 Speaker 1: was a catalyzing moment for regulators. Can you talk about 83 00:04:49,160 --> 00:04:52,040 Speaker 1: what happened there? But yeah, it was. It was really 84 00:04:52,720 --> 00:04:56,000 Speaker 1: a huge moment, not just for the regulation of stample 85 00:04:56,000 --> 00:04:59,160 Speaker 1: coins but also for the development of Central Bank digital currencies. 86 00:04:59,400 --> 00:05:03,760 Speaker 1: You know, before were facebook announced that chair Powell testified 87 00:05:04,040 --> 00:05:08,200 Speaker 1: and he kind of brushed off a question about cryptocurrencies 88 00:05:08,240 --> 00:05:10,120 Speaker 1: by saying, you know, we don't, we don't regulate that. 89 00:05:10,200 --> 00:05:14,720 Speaker 1: We regulate banks when stable when facebook made its proposal, 90 00:05:15,120 --> 00:05:18,160 Speaker 1: and you will recall, the initial proposal was for essentially 91 00:05:18,200 --> 00:05:20,360 Speaker 1: a stable coin. They didn't call it that, but it 92 00:05:20,600 --> 00:05:23,480 Speaker 1: was a stable coin based on a basket of currencies, 93 00:05:23,720 --> 00:05:27,719 Speaker 1: not just one currency but the dollar, the euro, the 94 00:05:27,839 --> 00:05:32,120 Speaker 1: pound and a few others. And so central bankers around 95 00:05:32,160 --> 00:05:36,039 Speaker 1: the world immediately were alarmed because they thought, boy, this 96 00:05:36,080 --> 00:05:41,559 Speaker 1: could actually displace sovereign currencies. FACEBOOK has, you know, two 97 00:05:41,600 --> 00:05:44,960 Speaker 1: billion plus users. What if they all use it? It 98 00:05:45,080 --> 00:05:50,800 Speaker 1: also prompted some countries to really accelerate their CBDC development, 99 00:05:50,800 --> 00:05:53,719 Speaker 1: in particular China. I was over in China shortly after 100 00:05:53,880 --> 00:05:58,839 Speaker 1: the facebook announcement was was made and, uh, you know, 101 00:05:59,279 --> 00:06:01,920 Speaker 1: all every want in Congress sort of looked at facebook 102 00:06:01,920 --> 00:06:05,960 Speaker 1: and said, Oh, you're gonna undermine the US dollar. Well, 103 00:06:06,560 --> 00:06:09,600 Speaker 1: every government official I spoke to in China had had 104 00:06:09,600 --> 00:06:15,200 Speaker 1: the opposite reaction. They saw libra as essentially a way 105 00:06:15,240 --> 00:06:21,520 Speaker 1: to backdoor dollarize other economies, because the dollar would be 106 00:06:21,920 --> 00:06:24,680 Speaker 1: the main component. So they got very worried about it 107 00:06:24,720 --> 00:06:29,920 Speaker 1: and they accelerated their CBDC research because of interesting. So 108 00:06:30,000 --> 00:06:32,360 Speaker 1: you know it was. It was big from the standpoint 109 00:06:32,400 --> 00:06:36,400 Speaker 1: of causing people to recognize stable coins as an issue 110 00:06:36,440 --> 00:06:41,000 Speaker 1: and also from cbdcs right. So fast forward to today 111 00:06:41,240 --> 00:06:45,040 Speaker 1: and we have the president's working group report that came 112 00:06:45,080 --> 00:06:47,680 Speaker 1: out last year. I think we have this bill that 113 00:06:47,839 --> 00:06:50,320 Speaker 1: may or may not be working its way through Congress. 114 00:06:50,360 --> 00:06:52,760 Speaker 1: We have a lot of people talking in general about 115 00:06:52,920 --> 00:06:57,719 Speaker 1: stable coin regulation. Would you characterize stable coin regulation as 116 00:06:57,880 --> 00:07:02,320 Speaker 1: different to Crypto regulation more broadly, like, is there a 117 00:07:02,400 --> 00:07:07,040 Speaker 1: different set of requirements that you're trying to satisfy here? Well, 118 00:07:07,120 --> 00:07:10,680 Speaker 1: it is different because stable coins are seen primarily as 119 00:07:10,800 --> 00:07:15,520 Speaker 1: payment mechanisms. Um, and the first thing to to realize 120 00:07:15,600 --> 00:07:19,440 Speaker 1: is that the regulation today is really inadequate. It's a 121 00:07:19,520 --> 00:07:24,559 Speaker 1: very light touch. Um, these are regulated under State Law 122 00:07:24,720 --> 00:07:27,559 Speaker 1: under what we call money service business laws or money 123 00:07:27,560 --> 00:07:31,960 Speaker 1: transmitter laws. Those laws originated with the Telegraph okay, and 124 00:07:32,040 --> 00:07:34,800 Speaker 1: what they required was, you know, if you walked into 125 00:07:34,800 --> 00:07:37,720 Speaker 1: a Western Union office in Kentucky and you wanted to 126 00:07:37,760 --> 00:07:41,440 Speaker 1: send money to your cousin in Illinois, Western Union had 127 00:07:41,520 --> 00:07:45,320 Speaker 1: to make sure it had money on hand. So money 128 00:07:45,320 --> 00:07:52,920 Speaker 1: service business laws require very minimum capital. UH, they require security, again, 129 00:07:53,000 --> 00:07:57,560 Speaker 1: very we're talking about amounts in the range from zero to, 130 00:07:57,960 --> 00:08:01,000 Speaker 1: you know, maybe a million dollars, maybe two million dollars 131 00:08:01,040 --> 00:08:03,640 Speaker 1: at the high end for some of these states, and 132 00:08:03,800 --> 00:08:08,480 Speaker 1: some of them do have permissible investment rules. That does 133 00:08:08,840 --> 00:08:11,680 Speaker 1: mean if you're registered as a money service business, you 134 00:08:11,720 --> 00:08:15,120 Speaker 1: have to register with Finsen, right, which is a department 135 00:08:15,120 --> 00:08:19,640 Speaker 1: of the Treasury which enforces anti money laundering and rules. 136 00:08:19,880 --> 00:08:24,200 Speaker 1: So that's a good thing. We are imposing those kinds 137 00:08:24,240 --> 00:08:27,520 Speaker 1: of restrictions on stable coins based in the US. But 138 00:08:27,720 --> 00:08:31,480 Speaker 1: this is not a sufficient framework. To suggest it's it's sufficient. 139 00:08:31,560 --> 00:08:33,800 Speaker 1: It's sort of like saying, well, you know, there's no 140 00:08:33,880 --> 00:08:36,839 Speaker 1: difference between an excel spreadsheet and a blockchain. What can 141 00:08:36,880 --> 00:08:40,480 Speaker 1: that do? You know? Um, we people, yeah, I know, 142 00:08:40,600 --> 00:08:46,240 Speaker 1: some people do right, right, right, Um, we need a 143 00:08:46,280 --> 00:08:50,200 Speaker 1: comprehensive framework. What would that involve? Prudential Regulation First, to 144 00:08:50,280 --> 00:08:55,079 Speaker 1: make sure that these stable coins are fully reserved, meaning 145 00:08:55,120 --> 00:08:58,920 Speaker 1: they have cash or Treasury securities backing them. But, more importantly, 146 00:08:59,559 --> 00:09:02,200 Speaker 1: there's no stable in the stable coin today because there's 147 00:09:02,200 --> 00:09:06,080 Speaker 1: no resolution framework. You know, if a bank fails, right, 148 00:09:06,120 --> 00:09:08,880 Speaker 1: we have a well developed framework. The FDI C steps 149 00:09:08,920 --> 00:09:13,120 Speaker 1: in very quickly, usually on weekend. Depositors are insured and, 150 00:09:13,240 --> 00:09:16,560 Speaker 1: you know, life goes on. Everybody's fine. If a stable 151 00:09:16,600 --> 00:09:22,120 Speaker 1: coin were to default, were to collapse, um would be 152 00:09:22,240 --> 00:09:26,679 Speaker 1: handled as a normal bankruptcy, which means the automatic stay applies. Right, 153 00:09:26,720 --> 00:09:29,520 Speaker 1: so holders are not going to get their money for months, 154 00:09:29,720 --> 00:09:34,079 Speaker 1: years potentially, and what we call the Perry Passu rule applies. 155 00:09:34,200 --> 00:09:36,199 Speaker 1: So even though I'm a holder of a stable coin, 156 00:09:36,679 --> 00:09:41,000 Speaker 1: I'm in the same category as all other unsecured credits. 157 00:09:41,040 --> 00:09:44,320 Speaker 1: So if the stable coin issue or has leveraged itself, well, 158 00:09:44,480 --> 00:09:46,960 Speaker 1: you know I'm going to be competing with all of them. 159 00:09:47,000 --> 00:09:49,719 Speaker 1: So that's a big problem. We need a framework that 160 00:09:49,920 --> 00:09:54,319 Speaker 1: ensures good resolution and oversight as well as we've got 161 00:09:54,320 --> 00:09:57,040 Speaker 1: to deal with the operational risks here, because the stable 162 00:09:57,080 --> 00:10:00,400 Speaker 1: coins are trading on a number of decentralized block change 163 00:10:00,480 --> 00:10:03,000 Speaker 1: and we got to look at how resilient, how reliable, 164 00:10:03,040 --> 00:10:06,880 Speaker 1: are those? This is really interesting sort of this second 165 00:10:06,920 --> 00:10:10,120 Speaker 1: have your point, because I guess intuitively, probably everyone sort 166 00:10:10,160 --> 00:10:14,520 Speaker 1: of gets like, yeah, we should have some required disclosure, 167 00:10:14,679 --> 00:10:16,959 Speaker 1: something to make sure the money is actually there. That 168 00:10:17,040 --> 00:10:19,800 Speaker 1: seems like, I guess that's the obvious thing, that's that's 169 00:10:19,800 --> 00:10:22,920 Speaker 1: the easy one, right. The second point, though, is not 170 00:10:23,160 --> 00:10:25,920 Speaker 1: something I had really I've heard many people talk about, 171 00:10:26,080 --> 00:10:28,280 Speaker 1: which is like all right, well, what is the mechanism 172 00:10:28,320 --> 00:10:31,079 Speaker 1: that keeps it stable, particularly in the event of like 173 00:10:31,440 --> 00:10:34,280 Speaker 1: something bad happening? And I see, I have seen some people, 174 00:10:34,320 --> 00:10:37,120 Speaker 1: like on twitter for example, like talk about, say, like 175 00:10:37,200 --> 00:10:42,200 Speaker 1: circles or tether. It's like capital cushion or the equity component, 176 00:10:42,640 --> 00:10:44,640 Speaker 1: and it's often pretty thing. So what do you talk 177 00:10:44,679 --> 00:10:47,000 Speaker 1: to us a little bit more about what you see 178 00:10:47,040 --> 00:10:49,840 Speaker 1: as lacking, or what you see is the risks on 179 00:10:49,960 --> 00:10:54,320 Speaker 1: that sort of like second component? Sure, Um, well, certainly 180 00:10:54,480 --> 00:10:59,120 Speaker 1: capital helps prevent a bankruptcy, right, because it gives you 181 00:10:59,520 --> 00:11:03,200 Speaker 1: a way to absorb lawsuit. But the point is that 182 00:11:03,280 --> 00:11:07,280 Speaker 1: even with that you still need a resolution framework, you 183 00:11:07,360 --> 00:11:09,640 Speaker 1: still need a way so that you know, this is 184 00:11:09,679 --> 00:11:12,439 Speaker 1: a financial institution, we don't want it to and it's 185 00:11:12,440 --> 00:11:14,720 Speaker 1: a payment company, we don't want it to go through 186 00:11:15,400 --> 00:11:19,320 Speaker 1: the normal bankruptcy where where people are held up. So 187 00:11:19,640 --> 00:11:22,800 Speaker 1: that's why I think we really need a more comprehensive approach. 188 00:11:23,200 --> 00:11:26,160 Speaker 1: We've suggested this could be done administratively. I've talked a 189 00:11:26,200 --> 00:11:28,480 Speaker 1: senator to me about his legislation. I think it does 190 00:11:28,559 --> 00:11:30,280 Speaker 1: some of the things I'd like to see. It doesn't 191 00:11:30,280 --> 00:11:32,880 Speaker 1: do all of them, but you know, that would involve 192 00:11:33,400 --> 00:11:37,280 Speaker 1: not just prudential requirements on investments, but it would involve 193 00:11:37,360 --> 00:11:41,199 Speaker 1: creating a framework for resolution. It would involve overside, it 194 00:11:41,240 --> 00:11:45,199 Speaker 1: would involve audits, it would involve standards on operational resilience 195 00:11:45,240 --> 00:11:48,160 Speaker 1: and on concentration of power. I mean one of the 196 00:11:48,200 --> 00:11:51,560 Speaker 1: big issues here is should we allow stable coin issuers 197 00:11:51,600 --> 00:11:54,560 Speaker 1: to be affiliated with commercial companies? What if Amazon wants 198 00:11:54,559 --> 00:11:57,800 Speaker 1: to launch a stable coin? Feel about that? Well, talk 199 00:11:57,840 --> 00:11:59,920 Speaker 1: to us about your proposal done, because I think when 200 00:12:00,080 --> 00:12:04,040 Speaker 1: comes to crypto regulation there's often the sense, maybe it's 201 00:12:04,080 --> 00:12:07,680 Speaker 1: unspoken sometimes, but the sense that the existing regulation isn't 202 00:12:07,880 --> 00:12:11,720 Speaker 1: enough to tackle this new technology, this fast changing and 203 00:12:11,760 --> 00:12:15,240 Speaker 1: evolving industry. Um, you know with pat too, me the 204 00:12:15,280 --> 00:12:18,319 Speaker 1: Howe test came up, a number of times, this idea that, well, 205 00:12:18,360 --> 00:12:20,240 Speaker 1: how are you going to use something from the nineteen 206 00:12:20,320 --> 00:12:23,800 Speaker 1: thirties in order to regulate block chains and cryptocurrencies and 207 00:12:23,840 --> 00:12:27,240 Speaker 1: tokens and things like that. But you're suggesting that it 208 00:12:27,320 --> 00:12:30,960 Speaker 1: can be done. So walk us through the proposal. So 209 00:12:31,160 --> 00:12:33,560 Speaker 1: let's talk about stable coins first and then the broader 210 00:12:33,640 --> 00:12:37,360 Speaker 1: crypto market second, because we have a similar proposal but 211 00:12:37,360 --> 00:12:40,720 Speaker 1: it's a different paper. Unstable coins, what I'm saying, with 212 00:12:40,760 --> 00:12:43,480 Speaker 1: my co authors, how Jackson and Dan Owry, to law 213 00:12:43,520 --> 00:12:49,080 Speaker 1: professors is that while legislation would be great, Um, we're 214 00:12:49,080 --> 00:12:51,880 Speaker 1: not sure it will happen, number one, and we're a 215 00:12:51,880 --> 00:12:55,120 Speaker 1: little concerned that it won't be comprehensive. So what we're 216 00:12:55,160 --> 00:13:00,520 Speaker 1: saying is financial regulators today have the authorities they need 217 00:13:00,559 --> 00:13:03,680 Speaker 1: to create a framework to try to bring this activity 218 00:13:03,920 --> 00:13:07,600 Speaker 1: within the banking perimeter. Wouldn't be regulated exactly as a bank, 219 00:13:07,640 --> 00:13:09,720 Speaker 1: but what you would do technically as you set up 220 00:13:09,760 --> 00:13:13,760 Speaker 1: what's called a National Trust Bank, which then has a 221 00:13:13,800 --> 00:13:18,040 Speaker 1: trust below it that is the payment vehicle, and then 222 00:13:18,160 --> 00:13:22,760 Speaker 1: what this gets you is it gets you supervision by 223 00:13:22,760 --> 00:13:25,160 Speaker 1: a banking regulator. But it can be done in a 224 00:13:25,160 --> 00:13:29,080 Speaker 1: way where there's not deposit insurance, right, because we don't 225 00:13:29,080 --> 00:13:31,800 Speaker 1: want that. We want the stable point issuer just to 226 00:13:31,840 --> 00:13:34,400 Speaker 1: hold cash and treasuries and so forth. It doesn't need 227 00:13:34,440 --> 00:13:38,440 Speaker 1: department insurance. It could be coupled with access to a 228 00:13:38,480 --> 00:13:43,200 Speaker 1: Federal Reserve Master Account, which is very useful for settlement efficiency. 229 00:13:43,640 --> 00:13:46,920 Speaker 1: And you know, the office of the controller, which would 230 00:13:46,920 --> 00:13:49,840 Speaker 1: do this, can set a variety of other standards on 231 00:13:49,920 --> 00:13:52,120 Speaker 1: all the other issues we need to worry about, such 232 00:13:52,160 --> 00:13:57,480 Speaker 1: as operational resiliency, such as basic consumer disclosure, consumer protection 233 00:13:57,480 --> 00:14:00,079 Speaker 1: and so forth. But the point is that admit this 234 00:14:00,200 --> 00:14:02,959 Speaker 1: strative Lee. This could be done. It would require all 235 00:14:02,960 --> 00:14:07,000 Speaker 1: the bank regulators to get together and cooperate, something that 236 00:14:07,040 --> 00:14:10,480 Speaker 1: doesn't always happen in our system very well, but it 237 00:14:10,520 --> 00:14:13,839 Speaker 1: could be done today under existing law, and again, we're 238 00:14:13,840 --> 00:14:16,679 Speaker 1: not against legislation. That would be fine, but let's not 239 00:14:16,720 --> 00:14:35,440 Speaker 1: wait around. We could today. WHO WOULD BE? Who is 240 00:14:35,480 --> 00:14:38,960 Speaker 1: the regulator of a bank such as do? So? It 241 00:14:39,000 --> 00:14:42,400 Speaker 1: would be primarily the office of the controller of the currency, 242 00:14:42,480 --> 00:14:46,560 Speaker 1: because that it would issue a National Trust Bank Charter. 243 00:14:47,120 --> 00:14:49,840 Speaker 1: But you would also need the cooperation of the Fed 244 00:14:50,480 --> 00:14:54,400 Speaker 1: and the FDI C to really make this work. Ideally, 245 00:14:54,640 --> 00:14:57,160 Speaker 1: you know, you need the SEC and the CFTC to 246 00:14:57,240 --> 00:14:59,160 Speaker 1: go along to just to not do things that are 247 00:14:59,160 --> 00:15:02,120 Speaker 1: inconsistent with what you're trying to do under the bank 248 00:15:02,240 --> 00:15:07,080 Speaker 1: loans Um. But you know, we created the Financial Stability 249 00:15:07,120 --> 00:15:10,320 Speaker 1: Oversight Council to bring the regulators together. We've suggested well, 250 00:15:10,320 --> 00:15:13,720 Speaker 1: it could, it could help coordinate this as well. Is 251 00:15:13,760 --> 00:15:18,680 Speaker 1: there anything about this proposal that would impinge on the 252 00:15:18,720 --> 00:15:21,440 Speaker 1: current business model of major stable coin issuers? Because I 253 00:15:21,440 --> 00:15:23,680 Speaker 1: think if you all talk to them, if we had 254 00:15:23,880 --> 00:15:26,360 Speaker 1: Jeremy a layer of circle back on, you say yeah, 255 00:15:26,440 --> 00:15:30,200 Speaker 1: more clarity, more regulation, totally fine, etcetera. Is there anything? 256 00:15:30,320 --> 00:15:32,880 Speaker 1: Is there a Trojan horse that I'm missing that he 257 00:15:32,920 --> 00:15:35,480 Speaker 1: would say no, this is not gonna work. There are 258 00:15:35,520 --> 00:15:39,160 Speaker 1: things that they might not like. Um, the way we've 259 00:15:39,160 --> 00:15:42,600 Speaker 1: proposed it, because we've said this could be done administratively 260 00:15:42,680 --> 00:15:45,400 Speaker 1: and because we wanted to be very conservative and suggest 261 00:15:45,480 --> 00:15:48,720 Speaker 1: something that the bank regulators could say, Oh yes, this 262 00:15:49,040 --> 00:15:52,320 Speaker 1: uses building blocks we've that are tried and tested in 263 00:15:52,400 --> 00:15:55,880 Speaker 1: our regulatory framework. We can do this. Is We have said, 264 00:15:55,920 --> 00:15:58,560 Speaker 1: this trust bank would need to be a subsidiary of 265 00:15:58,600 --> 00:16:01,920 Speaker 1: an insured depository stitution. It still wouldn't have insurance, but 266 00:16:02,000 --> 00:16:05,360 Speaker 1: it would be chartered that way, which brings in banking 267 00:16:05,440 --> 00:16:08,440 Speaker 1: regulation overall. So what stable coin issuers will say is 268 00:16:08,480 --> 00:16:12,720 Speaker 1: twofold one. They'll say our business model is narrowed, we 269 00:16:12,800 --> 00:16:15,560 Speaker 1: don't need to be subject to lots and lots of 270 00:16:15,600 --> 00:16:19,320 Speaker 1: bank regulations, and I'm sympathetic to that. Um, I would 271 00:16:19,360 --> 00:16:22,440 Speaker 1: be willing to go down a path of saying, yeah, 272 00:16:22,600 --> 00:16:26,200 Speaker 1: let's customize the rules a little bit for these guys. 273 00:16:26,240 --> 00:16:29,800 Speaker 1: They don't need all of these things. Our proposal already 274 00:16:29,840 --> 00:16:32,800 Speaker 1: does that in terms of capital requirements and so forth, 275 00:16:32,920 --> 00:16:37,440 Speaker 1: because the trust itself would be off balance sheet. The 276 00:16:37,520 --> 00:16:41,160 Speaker 1: second thing they will say is, you know, if you're 277 00:16:41,240 --> 00:16:45,920 Speaker 1: going to make this a subsidiary of a bank, that 278 00:16:46,320 --> 00:16:49,800 Speaker 1: limits potential competition. The whole point of stable coins is 279 00:16:49,840 --> 00:16:52,480 Speaker 1: we want to be competing with banks. I'm sympathetic to 280 00:16:52,520 --> 00:16:56,440 Speaker 1: that too, because I do regard stable coins is potentially 281 00:16:56,440 --> 00:16:59,560 Speaker 1: helping US bring more competition to payments. I think both 282 00:16:59,560 --> 00:17:01,560 Speaker 1: those things this can be dealt with in the process. 283 00:17:01,600 --> 00:17:05,439 Speaker 1: It really depends on how much flexibility regulators want to 284 00:17:05,480 --> 00:17:07,520 Speaker 1: build in the system. But those, I think, would be 285 00:17:07,560 --> 00:17:09,920 Speaker 1: the terrain objections they would have, and this was going 286 00:17:09,960 --> 00:17:11,959 Speaker 1: to be my question actually, which is what's in it 287 00:17:12,040 --> 00:17:15,439 Speaker 1: for a bank to allow a stable coin issuer to 288 00:17:15,800 --> 00:17:19,879 Speaker 1: be a subsidiary? Yeah, well, you know, I think a 289 00:17:19,880 --> 00:17:22,240 Speaker 1: lot of banks are looking at stable coins and sort 290 00:17:22,280 --> 00:17:24,800 Speaker 1: of thinking about, do we enter this space? Do we 291 00:17:24,880 --> 00:17:28,879 Speaker 1: not enter this space? Um, I think with with interest 292 00:17:28,960 --> 00:17:33,320 Speaker 1: rates moving up, Um, it becomes interesting also, how does 293 00:17:33,359 --> 00:17:36,800 Speaker 1: that affect the stable coin issuers business model? Right, because 294 00:17:36,840 --> 00:17:38,320 Speaker 1: some of them now are going to be making a 295 00:17:38,320 --> 00:17:41,359 Speaker 1: lot of money. On the of course, their deposits are still, 296 00:17:41,520 --> 00:17:45,000 Speaker 1: you know, very, very, very small fraction of the total 297 00:17:45,359 --> 00:17:49,399 Speaker 1: deposits in the banking system. Hundred fifty billion and stable 298 00:17:49,400 --> 00:17:53,359 Speaker 1: coins versus nineteen trillion and bank deposits. But, you know, 299 00:17:53,440 --> 00:17:56,199 Speaker 1: I think banks are really thinking about how do we 300 00:17:56,320 --> 00:18:00,160 Speaker 1: maintain our competitive edge in UH in payments? I mean 301 00:18:00,680 --> 00:18:03,320 Speaker 1: all of this also goes to a broader issue, right, 302 00:18:03,400 --> 00:18:07,400 Speaker 1: of how do we think about banking? Banking has traditionally 303 00:18:07,520 --> 00:18:13,080 Speaker 1: bundled credit creation, creation of money. Really Right, because most 304 00:18:13,080 --> 00:18:17,200 Speaker 1: of the money we use is really represents private eye, I. O. U. S. 305 00:18:17,320 --> 00:18:19,800 Speaker 1: it's only paper money that represents a liability of the 306 00:18:19,840 --> 00:18:24,800 Speaker 1: government and payments. Right, banks have bundled all those functions. 307 00:18:25,200 --> 00:18:29,399 Speaker 1: They've been entitled to certain regulatory advantages in order to 308 00:18:29,480 --> 00:18:33,199 Speaker 1: do that, such as deposit insurance, such as access to 309 00:18:33,280 --> 00:18:38,560 Speaker 1: fed master accounts and really stable coins and other innovations 310 00:18:38,560 --> 00:18:41,640 Speaker 1: and payments are really raising the question of should we 311 00:18:41,840 --> 00:18:46,240 Speaker 1: unbundle this a bit and let non banking entities come 312 00:18:46,280 --> 00:18:48,520 Speaker 1: in and do payments? And this, by the way, there's 313 00:18:48,560 --> 00:18:51,439 Speaker 1: a report that's going to be put out by the 314 00:18:51,480 --> 00:18:54,800 Speaker 1: Treasury Department called the future of money and payments, which 315 00:18:54,840 --> 00:18:59,000 Speaker 1: is a report required by the executive order, which presumably 316 00:18:59,000 --> 00:19:01,280 Speaker 1: will talk about this and you know, we'll see if 317 00:19:01,320 --> 00:19:05,440 Speaker 1: it takes a firm stance. I mean the scope of 318 00:19:05,480 --> 00:19:08,199 Speaker 1: that report is very, very broad if you look at 319 00:19:08,240 --> 00:19:11,000 Speaker 1: the executive orders. Supposed to talk about future payments and 320 00:19:11,119 --> 00:19:16,160 Speaker 1: cbdcs and how can they affect competition and financial inclusion 321 00:19:16,280 --> 00:19:20,880 Speaker 1: and so forth. And truthfully, you know, I'm I'm very 322 00:19:20,920 --> 00:19:23,879 Speaker 1: interested in what the report will say, but you know, 323 00:19:24,040 --> 00:19:27,720 Speaker 1: it may well be a committee product that doesn't take 324 00:19:27,720 --> 00:19:30,399 Speaker 1: a firm view on some things but just covers a 325 00:19:30,440 --> 00:19:34,520 Speaker 1: lot of territory. We'll see. Interesting just on the banks 326 00:19:34,640 --> 00:19:37,480 Speaker 1: versus stable coins point this, this is something that came 327 00:19:37,560 --> 00:19:41,679 Speaker 1: up in our episode with the Circle CEO, with Jeremy Ahlaire. 328 00:19:42,760 --> 00:19:46,080 Speaker 1: There is a sense that, okay, maybe sending money via 329 00:19:46,119 --> 00:19:49,240 Speaker 1: stable coins is more efficient than sending it through a 330 00:19:49,280 --> 00:19:51,600 Speaker 1: bank which, you know, it takes days and maybe they 331 00:19:51,680 --> 00:19:54,320 Speaker 1: charge you fees or they charge you a bad exchange 332 00:19:54,400 --> 00:19:57,320 Speaker 1: rate or something like that. But the question always is 333 00:19:57,720 --> 00:20:03,400 Speaker 1: how much of stable coins advantage is genuinely genuine technology 334 00:20:03,480 --> 00:20:07,640 Speaker 1: innovation versus regulatory arbitrage, and I'd be curious to get 335 00:20:07,640 --> 00:20:10,640 Speaker 1: your thoughts on that. Well, I think that's a great question. 336 00:20:10,760 --> 00:20:13,960 Speaker 1: I mean, look, for most of us the payment system 337 00:20:14,040 --> 00:20:18,520 Speaker 1: works perfectly fine, right. I mean we have our credit cards, 338 00:20:18,600 --> 00:20:21,160 Speaker 1: we have mobile banking and you know, I can deposit 339 00:20:21,160 --> 00:20:24,040 Speaker 1: a check at three in the morning, uh, and I 340 00:20:24,119 --> 00:20:26,080 Speaker 1: get an instant you know, I get an email right 341 00:20:26,119 --> 00:20:28,320 Speaker 1: back and said, Oh, yes, we've got your check. Now. 342 00:20:28,400 --> 00:20:31,639 Speaker 1: In reality, of course, if I'm a low income person, 343 00:20:32,359 --> 00:20:34,639 Speaker 1: I may not even have that access and if I 344 00:20:34,680 --> 00:20:38,040 Speaker 1: deposit that check, it might be five days before it clears, right, 345 00:20:38,160 --> 00:20:43,520 Speaker 1: and that's why our payment system is actually relatively slow 346 00:20:43,800 --> 00:20:47,800 Speaker 1: and inefficient compared to what it could be and what 347 00:20:48,320 --> 00:20:51,280 Speaker 1: at least some countries have advanced in terms of having 348 00:20:51,320 --> 00:20:54,640 Speaker 1: more of a real time system. That doesn't hurt most 349 00:20:54,680 --> 00:20:57,000 Speaker 1: of us, again, because we have all these options. We 350 00:20:57,040 --> 00:21:00,199 Speaker 1: have credit cards that give us, you know, free revolving it, 351 00:21:00,960 --> 00:21:03,680 Speaker 1: but it really does hurt low income people. They're actually 352 00:21:03,960 --> 00:21:07,199 Speaker 1: subsidizing our credit cards right because they pay all the 353 00:21:07,240 --> 00:21:10,040 Speaker 1: same price as we pay, but they don't have those 354 00:21:10,040 --> 00:21:12,680 Speaker 1: credit cards. So when you look at it from a 355 00:21:12,720 --> 00:21:17,040 Speaker 1: societal standpoint, we do need to modernize the payment system. 356 00:21:17,119 --> 00:21:20,919 Speaker 1: And while, yes, the advantages today to most of us 357 00:21:21,000 --> 00:21:23,840 Speaker 1: of a stable coin payment versus, you know, a bank 358 00:21:24,400 --> 00:21:27,040 Speaker 1: may not matter that much unless maybe we're doing a 359 00:21:27,080 --> 00:21:30,640 Speaker 1: cross border payment where the fees can be high. Um, 360 00:21:30,680 --> 00:21:33,240 Speaker 1: you know, I think long term this could be significant. 361 00:21:33,560 --> 00:21:37,480 Speaker 1: I think obviously digital forms of payment have the potential. 362 00:21:37,560 --> 00:21:41,159 Speaker 1: Also blockchain forms of payment have the potential to be programmable. 363 00:21:41,720 --> 00:21:44,080 Speaker 1: But I guess at the end of the day I 364 00:21:44,080 --> 00:21:46,679 Speaker 1: would say, as a former regulator, I don't really know 365 00:21:46,760 --> 00:21:49,680 Speaker 1: the answer to the question ultimately, and I don't think 366 00:21:49,720 --> 00:21:52,280 Speaker 1: government is smart enough to figure it out. I think 367 00:21:52,280 --> 00:21:55,320 Speaker 1: the market has to figure out do these things really 368 00:21:55,400 --> 00:21:58,359 Speaker 1: have long term utility? I'm skeptical of a lot of 369 00:21:58,400 --> 00:22:01,280 Speaker 1: things that go on in it though, as to their 370 00:22:01,320 --> 00:22:05,080 Speaker 1: long term utility. But I don't think that's the government's 371 00:22:05,160 --> 00:22:07,920 Speaker 1: job to decide. I think that's the market will figure 372 00:22:07,920 --> 00:22:11,280 Speaker 1: it out. The government's job is to create a framework where, 373 00:22:11,680 --> 00:22:16,240 Speaker 1: you know, innovation can can take place, but that we ensure, 374 00:22:16,840 --> 00:22:21,640 Speaker 1: you know, financial stability and consumer protection and transparency and integrity. 375 00:22:21,680 --> 00:22:23,879 Speaker 1: And we're not doing that today. We're not doing it 376 00:22:23,920 --> 00:22:26,439 Speaker 1: with stable points, we're not doing it with Crypto more broadly, 377 00:22:26,480 --> 00:22:28,800 Speaker 1: and we can. You know, you asked about better. Happy 378 00:22:28,840 --> 00:22:32,320 Speaker 1: to turn to that. So you mentioned that what really 379 00:22:32,359 --> 00:22:35,240 Speaker 1: got crypto and stable coins in particular on the map 380 00:22:35,280 --> 00:22:38,600 Speaker 1: of regulators, obviously, was the failed libra attempt, and you 381 00:22:38,680 --> 00:22:42,120 Speaker 1: also through in their earlier in the conversation. It's like, well, 382 00:22:42,119 --> 00:22:44,480 Speaker 1: what if like Amazon wanted to do a stable coin? 383 00:22:44,960 --> 00:22:47,679 Speaker 1: And I don't know much about this, but there is 384 00:22:47,760 --> 00:22:50,439 Speaker 1: something like that prevents or makes it hard for like 385 00:22:50,480 --> 00:22:53,560 Speaker 1: a retailer or a non bank company to become a bank. 386 00:22:53,600 --> 00:22:55,560 Speaker 1: And Walmart, ever once in a while, I think, makes 387 00:22:55,600 --> 00:22:57,960 Speaker 1: noises about wanting to become a bank and like set 388 00:22:58,040 --> 00:23:00,880 Speaker 1: up something in Utah and never really seems to go anywhere. 389 00:23:00,880 --> 00:23:05,679 Speaker 1: From what I understand. Would your proposal essentially foreclose the 390 00:23:05,680 --> 00:23:10,200 Speaker 1: possibility of an Amazon stable coin at something? Yes, it would. Today. 391 00:23:10,320 --> 00:23:13,560 Speaker 1: That's an excellent question. We do have a separation between 392 00:23:13,960 --> 00:23:17,520 Speaker 1: banking and commerce. That's primarily through the bank holding company 393 00:23:17,520 --> 00:23:23,520 Speaker 1: APP and our proposal would uh have that apply. Now 394 00:23:23,880 --> 00:23:27,240 Speaker 1: you could revisit that as well and you know some 395 00:23:27,320 --> 00:23:29,960 Speaker 1: of the proposals in Congress have suggested. Well, maybe the 396 00:23:29,960 --> 00:23:32,560 Speaker 1: bank holding company Actiondn't apply, but we should still have 397 00:23:32,680 --> 00:23:37,240 Speaker 1: some limitation on commercial affiliations. I think that is important. 398 00:23:37,720 --> 00:23:41,120 Speaker 1: It's a difficult question as to exactly where you draw 399 00:23:41,200 --> 00:23:44,600 Speaker 1: the line, but I do think that we need to 400 00:23:44,640 --> 00:23:49,800 Speaker 1: be concerned about the concentration of power that could result from, 401 00:23:49,840 --> 00:23:53,040 Speaker 1: you know, a major commercial firm like an Amazon, which 402 00:23:53,080 --> 00:23:57,520 Speaker 1: has lots and lots of information from its customers Um 403 00:23:58,040 --> 00:24:02,800 Speaker 1: also then engaging in, you know, financial services and payments 404 00:24:02,840 --> 00:24:05,960 Speaker 1: types type of services. Well, let me ask you the 405 00:24:06,040 --> 00:24:09,560 Speaker 1: kind of a follow up question which is in your mind. 406 00:24:10,080 --> 00:24:13,919 Speaker 1: How do you actually distinguish the difference between, say, a 407 00:24:13,960 --> 00:24:18,640 Speaker 1: stable coin versus, say, a Venmo or a paypal, which 408 00:24:18,640 --> 00:24:20,960 Speaker 1: are not you know, you could sort of abstract them away. 409 00:24:20,960 --> 00:24:23,400 Speaker 1: They're pretty similar. You have a dollar and a paypal account. 410 00:24:23,600 --> 00:24:25,480 Speaker 1: It's supposed to be backed by a dollar, it's and 411 00:24:25,600 --> 00:24:28,600 Speaker 1: it's a liability of paypal, etcetera like. What do you 412 00:24:28,640 --> 00:24:31,439 Speaker 1: see as like the bright line difference for them? And 413 00:24:31,480 --> 00:24:33,359 Speaker 1: it seems important if we're going to be deciding who 414 00:24:33,440 --> 00:24:37,800 Speaker 1: gets to even issue these. Absolutely, because from a regulatory standpoint, 415 00:24:38,440 --> 00:24:43,679 Speaker 1: you're basically right that the same framework I talked about 416 00:24:43,720 --> 00:24:47,800 Speaker 1: that applies to stable coins is essentially what applies to 417 00:24:47,880 --> 00:24:53,080 Speaker 1: those other types of payment providers, um. From a business 418 00:24:53,119 --> 00:24:58,160 Speaker 1: model standpoint, they're different, of course, because paypal Venmo are 419 00:24:58,280 --> 00:25:01,920 Speaker 1: then connected to the banking system. They are running through 420 00:25:02,000 --> 00:25:06,879 Speaker 1: the banking system, whereas a stable coin is not, Um, 421 00:25:06,920 --> 00:25:10,960 Speaker 1: you know, in terms of what we've seen today. So, uh, 422 00:25:11,000 --> 00:25:13,399 Speaker 1: you're right that we do need to think about those 423 00:25:13,520 --> 00:25:33,080 Speaker 1: issues together when we think about how to regulates. I 424 00:25:33,119 --> 00:25:35,760 Speaker 1: have a devil's advocate question, which is you've mentioned a 425 00:25:35,840 --> 00:25:38,800 Speaker 1: number of times Um that under your proposal there wouldn't 426 00:25:38,800 --> 00:25:43,760 Speaker 1: be deposit insurance first. Stable winds. Right. Why not? Because 427 00:25:43,800 --> 00:25:46,800 Speaker 1: I mean the trade off between banks and getting deposit 428 00:25:47,080 --> 00:25:49,520 Speaker 1: insurance from the FT I C is. Well, you know, 429 00:25:49,760 --> 00:25:53,520 Speaker 1: we agreed to restrictions on what we can and can't do. 430 00:25:53,680 --> 00:25:56,000 Speaker 1: We agree to hold a certain amount of capital, to 431 00:25:56,080 --> 00:25:58,840 Speaker 1: be regulated, to be under scrutiny, and in return we 432 00:25:58,880 --> 00:26:01,560 Speaker 1: get this government back stop. So, if you're going to 433 00:26:01,720 --> 00:26:04,919 Speaker 1: make requests of stable coin providers and say that they 434 00:26:04,920 --> 00:26:08,320 Speaker 1: are going to be portfolio constraints or more disclosures, then 435 00:26:08,359 --> 00:26:12,280 Speaker 1: why not give like a carrot to reward reward them 436 00:26:12,280 --> 00:26:16,480 Speaker 1: for doing that? Yeah, good questions. So keep in mind 437 00:26:16,520 --> 00:26:23,000 Speaker 1: deposit insurance enables banks to basically create money, create credit, right, 438 00:26:23,119 --> 00:26:26,520 Speaker 1: because they can take in my deposit and then lend 439 00:26:26,560 --> 00:26:30,560 Speaker 1: it out and that's creating money. And that happens over 440 00:26:30,600 --> 00:26:34,119 Speaker 1: and over and over again, subject to minimal reserve requirements 441 00:26:34,200 --> 00:26:37,520 Speaker 1: or whatever. But as the depositor, I don't worry because 442 00:26:37,880 --> 00:26:40,960 Speaker 1: you know, I know, if the bank fails, my money 443 00:26:41,040 --> 00:26:42,680 Speaker 1: is going to be insured. So it's not going to 444 00:26:42,760 --> 00:26:46,720 Speaker 1: be like, you know, Jimmy Stewart, and it's a wonderful life. 445 00:26:47,000 --> 00:26:48,640 Speaker 1: You know, where's my money? Where's my money? Oh, it's 446 00:26:48,640 --> 00:26:55,639 Speaker 1: invested in selling those mortgage so that was a happy 447 00:26:55,760 --> 00:27:02,159 Speaker 1: ending in that. Sorry, when I take my classes and 448 00:27:02,280 --> 00:27:04,600 Speaker 1: I use a slide show, I actually have a little 449 00:27:04,640 --> 00:27:07,080 Speaker 1: slide of Jimmy Stewart in the bank facing all those 450 00:27:07,119 --> 00:27:09,800 Speaker 1: people with a little balloon coming out, you know, cartoon 451 00:27:09,880 --> 00:27:13,359 Speaker 1: things saying with him thinking they'd go away if I had, 452 00:27:13,440 --> 00:27:18,000 Speaker 1: if I told them we had blockchain. But Um, the 453 00:27:18,119 --> 00:27:20,880 Speaker 1: point is that first of all we don't want we're 454 00:27:20,880 --> 00:27:24,120 Speaker 1: saying stable coin issuers should not be creating credit. Okay, 455 00:27:24,200 --> 00:27:28,040 Speaker 1: so again we're separating the payment function from the other 456 00:27:28,119 --> 00:27:32,280 Speaker 1: things banks do. Stable coin issuers would not be creating credit. 457 00:27:32,320 --> 00:27:35,879 Speaker 1: They're not intermediating in the sense of bringing borrowers and 458 00:27:35,960 --> 00:27:40,879 Speaker 1: sabers together. They're a payment vehicle. So That, plus the 459 00:27:40,920 --> 00:27:45,120 Speaker 1: fact that we can um ensure that you know your 460 00:27:45,960 --> 00:27:50,840 Speaker 1: your money is safe, if you will, by the investment restrictions, 461 00:27:51,240 --> 00:27:54,240 Speaker 1: means we don't need deposit insurance. And the final reason is, 462 00:27:54,280 --> 00:27:56,800 Speaker 1: of course, that I don't want to subject the Deposit 463 00:27:56,840 --> 00:28:01,560 Speaker 1: Insurance Fund to the risk of these things. Um because 464 00:28:01,720 --> 00:28:03,879 Speaker 1: it is a new area. We don't know exactly how 465 00:28:03,960 --> 00:28:06,840 Speaker 1: we'll develop and I recognize that some of the concern 466 00:28:06,920 --> 00:28:09,239 Speaker 1: of the bank regulators and you know, and they've kind 467 00:28:09,240 --> 00:28:11,119 Speaker 1: of acted in a way of like Gee, you know, 468 00:28:11,200 --> 00:28:12,840 Speaker 1: we're not so sure about all this stuff. We don't 469 00:28:12,880 --> 00:28:16,640 Speaker 1: really want to legitimize it or authorize it. Um. So 470 00:28:16,680 --> 00:28:19,560 Speaker 1: that those are the reasons. Why? What kind of investment 471 00:28:19,720 --> 00:28:23,119 Speaker 1: or portfolio restrictions would you be envisioning? Because I know 472 00:28:23,160 --> 00:28:25,600 Speaker 1: we were kind of joking earlier about to some extent 473 00:28:25,680 --> 00:28:29,080 Speaker 1: this is the easy part, but still there are big 474 00:28:29,160 --> 00:28:33,240 Speaker 1: questions over what a stable coin like tether is actually 475 00:28:33,240 --> 00:28:37,439 Speaker 1: holding right, there are. So it would be some version 476 00:28:37,640 --> 00:28:42,080 Speaker 1: of cash and high quality liquid assets. Okay, whether it's 477 00:28:42,120 --> 00:28:45,280 Speaker 1: exactly like to a seven for money market funds or 478 00:28:45,280 --> 00:28:47,640 Speaker 1: whether it's more restrictive, you know, you can debate that. 479 00:28:47,800 --> 00:28:53,040 Speaker 1: But basically cash and treasuries, you know, is what is 480 00:28:53,080 --> 00:28:55,640 Speaker 1: what I would say. It wouldn't include commercial paper, it 481 00:28:55,640 --> 00:28:58,840 Speaker 1: wouldn't include other things. And you're right. Tether, you know, 482 00:28:59,280 --> 00:29:02,960 Speaker 1: has had to other investments. It had investments in cryptocurrencies. 483 00:29:03,080 --> 00:29:07,800 Speaker 1: It's only recently that that circle limited its investments to 484 00:29:08,040 --> 00:29:11,600 Speaker 1: basically cash and short term treasuries. And, by the way, 485 00:29:11,680 --> 00:29:13,760 Speaker 1: for a stable coin issue, to say, Oh, we've put 486 00:29:13,760 --> 00:29:16,800 Speaker 1: our money in FDI c ensured bank. So, you know, 487 00:29:17,200 --> 00:29:20,440 Speaker 1: that's why we don't need to be regulated. I mean, yeah, 488 00:29:20,600 --> 00:29:23,440 Speaker 1: that's safer than, you know, putting it in a mattress, 489 00:29:23,480 --> 00:29:26,600 Speaker 1: but it doesn't help people again, in the bankruptcy situation. 490 00:29:26,880 --> 00:29:29,160 Speaker 1: The F that that money is in an FDI and 491 00:29:29,520 --> 00:29:31,920 Speaker 1: C insured bank isn't going to help me as a 492 00:29:31,920 --> 00:29:35,200 Speaker 1: holder get it isn't gonna put me better off relative 493 00:29:35,280 --> 00:29:39,640 Speaker 1: to unsecure creditors of that stable coin issue. Yeah, I 494 00:29:39,640 --> 00:29:41,240 Speaker 1: think that's one of the things we're seeing like the 495 00:29:41,320 --> 00:29:44,280 Speaker 1: voyager bankruptcy, not a stable coin per saver. It's like, 496 00:29:44,280 --> 00:29:45,880 Speaker 1: Oh yeah, the fact that they held their money in 497 00:29:45,960 --> 00:29:48,040 Speaker 1: an FD. I see. In Short, bank is not really 498 00:29:48,600 --> 00:29:52,400 Speaker 1: helping many people. You know, you joked about could a 499 00:29:52,440 --> 00:29:56,600 Speaker 1: blockchain have saved George Bailey? But you you, but you 500 00:29:56,680 --> 00:29:58,320 Speaker 1: briefly brought up but I actually do want to talk 501 00:29:58,360 --> 00:30:01,440 Speaker 1: about this aspect, which is the operational risk of public 502 00:30:01,520 --> 00:30:04,480 Speaker 1: block change, which is another way that clearly stable points 503 00:30:04,520 --> 00:30:07,920 Speaker 1: differ from, say, Venmo or Paypal, which are, you know, 504 00:30:08,120 --> 00:30:11,520 Speaker 1: we know those rails. Um. What in your how? How 505 00:30:11,560 --> 00:30:14,120 Speaker 1: should you know? They're always launching new change. There's ethereum 506 00:30:14,160 --> 00:30:16,480 Speaker 1: in Salana, but there's like, I think there's like thousands, 507 00:30:16,520 --> 00:30:19,240 Speaker 1: and the big stable point issuers are all on multiple 508 00:30:19,440 --> 00:30:24,080 Speaker 1: chains at this point. From a regulatory standpoint, how should 509 00:30:24,520 --> 00:30:28,560 Speaker 1: regulators be thinking about what chains, uh, they're issued on 510 00:30:28,600 --> 00:30:31,760 Speaker 1: and the risks that posted? Yeah, yeah, great question, and 511 00:30:31,840 --> 00:30:33,680 Speaker 1: let me, by the way, before I answer that, just note, 512 00:30:33,720 --> 00:30:37,600 Speaker 1: since you've mentioned paypalates. YEA, do some advisory work to 513 00:30:37,600 --> 00:30:42,120 Speaker 1: pay OK. Thank you. We appreciate that. Um. So I 514 00:30:42,160 --> 00:30:44,560 Speaker 1: think that's a huge issue and you know, and I've 515 00:30:44,600 --> 00:30:46,440 Speaker 1: talked with senator to me about this because I said, 516 00:30:46,440 --> 00:30:48,000 Speaker 1: you know, your bill is very good, it has a 517 00:30:48,000 --> 00:30:50,320 Speaker 1: lot of things, but you haven't said anything about the 518 00:30:50,360 --> 00:30:52,560 Speaker 1: operational risk of these block chains. And he said, yeah, 519 00:30:52,560 --> 00:30:54,719 Speaker 1: I know, I'm not quite sure you know what to do. 520 00:30:55,920 --> 00:30:58,600 Speaker 1: and Um, I think regulators aren't quite sure what to 521 00:30:58,600 --> 00:31:01,480 Speaker 1: do about that. We need so we do need standards. 522 00:31:01,520 --> 00:31:04,840 Speaker 1: We need standards that would impose some obligation on the 523 00:31:04,880 --> 00:31:10,280 Speaker 1: stable coin issuer as to what blockchains it supports. Right, 524 00:31:10,320 --> 00:31:14,400 Speaker 1: because if you read circle's disclosure, you know it will say, well, 525 00:31:14,440 --> 00:31:20,640 Speaker 1: we support the trading of USDC on eight blockchain. So 526 00:31:20,720 --> 00:31:23,280 Speaker 1: there would have to be some sort of due diligent 527 00:31:23,400 --> 00:31:26,240 Speaker 1: standards and so forth. And then I think what you 528 00:31:26,280 --> 00:31:30,080 Speaker 1: would want is, you know, some requirements that a stable 529 00:31:30,080 --> 00:31:34,440 Speaker 1: coin issuer might have to freeze its tokens if certain 530 00:31:34,480 --> 00:31:38,160 Speaker 1: things happen. So freeze the tokens on that blockchain and 531 00:31:38,640 --> 00:31:42,760 Speaker 1: of course, could even be used if what happens is, 532 00:31:42,880 --> 00:31:46,400 Speaker 1: even if a blockchain isn't supported by a stable coin issuer, 533 00:31:47,040 --> 00:31:51,720 Speaker 1: someone wraps the stable coin and trades it on that blockchain, 534 00:31:52,640 --> 00:31:54,880 Speaker 1: which case the stable coin issuer could say, Hey, I 535 00:31:54,920 --> 00:31:57,840 Speaker 1: didn't authorize this but it's still happening. So, you know, 536 00:31:57,880 --> 00:32:00,280 Speaker 1: I think you'd have to have some stand or just 537 00:32:00,360 --> 00:32:03,120 Speaker 1: say look, if this happens h then you might have 538 00:32:03,160 --> 00:32:05,560 Speaker 1: to freeze, freeze the stable coins. Now, of course, the 539 00:32:05,680 --> 00:32:10,280 Speaker 1: risk is still, you know, lack of resilience, lack of reliability, 540 00:32:10,480 --> 00:32:12,640 Speaker 1: a hack or so forth, and that's why, you know, 541 00:32:12,680 --> 00:32:14,959 Speaker 1: this area is so new. I do think we have 542 00:32:15,000 --> 00:32:20,280 Speaker 1: to move cautiously, UM, because it's not clear that some 543 00:32:20,400 --> 00:32:24,120 Speaker 1: of these blockchains are resilient enough and people don't, you know, 544 00:32:24,600 --> 00:32:28,680 Speaker 1: always appreciate that. So one thing on stable coins is 545 00:32:28,720 --> 00:32:31,080 Speaker 1: it does seem like there is this sort of regulatory 546 00:32:31,200 --> 00:32:34,040 Speaker 1: dagger hanging over the industry at the moment, and you 547 00:32:34,080 --> 00:32:36,280 Speaker 1: started off by noting that this is a very fast 548 00:32:36,320 --> 00:32:40,719 Speaker 1: growing market segment. How do you think stable coin issuers 549 00:32:40,960 --> 00:32:44,719 Speaker 1: feel about regulation on the whole? Because, again, one thing 550 00:32:44,760 --> 00:32:47,640 Speaker 1: we hear is that the industry wants clarity, they want 551 00:32:47,720 --> 00:32:49,840 Speaker 1: rules to come out so they know how to go forward. 552 00:32:50,400 --> 00:32:52,680 Speaker 1: How much pent up demand do you see in the 553 00:32:52,760 --> 00:32:55,520 Speaker 1: wings from stable coin issuers? You know, if a rule 554 00:32:55,600 --> 00:33:00,400 Speaker 1: came out tomorrow, would we suddenly see fifty or injured 555 00:33:00,480 --> 00:33:03,920 Speaker 1: new stable point issuers out there? Yeah, I'm not sure 556 00:33:03,920 --> 00:33:07,240 Speaker 1: that we would. Um, Um. You know, I think people 557 00:33:07,280 --> 00:33:09,560 Speaker 1: are still trying to sort of figure out you know, 558 00:33:09,600 --> 00:33:11,720 Speaker 1: other financial institutions are still trying to figure out the 559 00:33:11,720 --> 00:33:13,240 Speaker 1: space and of course it would depend on what the 560 00:33:13,320 --> 00:33:17,280 Speaker 1: rule is, but certainly some players are eyeing this very 561 00:33:17,320 --> 00:33:20,120 Speaker 1: closely and thinking about it. So you know, it would 562 00:33:20,160 --> 00:33:23,200 Speaker 1: really depend on the on the content of the rule 563 00:33:23,520 --> 00:33:26,200 Speaker 1: and you know how burdensome it is and so forth. 564 00:33:26,720 --> 00:33:29,560 Speaker 1: One thing we have to keep in mind though, Um, 565 00:33:29,600 --> 00:33:31,880 Speaker 1: you know, maybe make two points. On the one hand, 566 00:33:31,880 --> 00:33:34,640 Speaker 1: you know, I think bank regulators sometimes kind of lull 567 00:33:34,720 --> 00:33:37,360 Speaker 1: themselves into maybe feeling like they don't have to act 568 00:33:37,400 --> 00:33:41,160 Speaker 1: that quickly because they say, well, it's still not very big, right. 569 00:33:41,200 --> 00:33:44,920 Speaker 1: I mean circle claims it did three point six billion 570 00:33:45,000 --> 00:33:49,320 Speaker 1: in payments since the beginning of well, you know, the 571 00:33:49,360 --> 00:33:52,200 Speaker 1: Fed wire system does like a hundred times that amount 572 00:33:52,240 --> 00:33:55,880 Speaker 1: every day or something. So they're small, but nevertheless they 573 00:33:55,880 --> 00:33:59,800 Speaker 1: are growing. And also there's nothing that prevents really a 574 00:34:00,120 --> 00:34:03,960 Speaker 1: stable coin issuer from incorporating abroad and then still issuing 575 00:34:03,960 --> 00:34:07,760 Speaker 1: a dollar based stable coins. So, you know, jurisdictions are 576 00:34:07,920 --> 00:34:10,680 Speaker 1: moving faster. I mean you can sort of think about this, 577 00:34:11,520 --> 00:34:14,960 Speaker 1: Um uh, in parallel to you know, the growth of 578 00:34:14,960 --> 00:34:17,920 Speaker 1: the Eurodollar market. I was talking with my friend Josh Younger, 579 00:34:17,960 --> 00:34:20,480 Speaker 1: who I know has been on your show numerous times, 580 00:34:20,560 --> 00:34:24,000 Speaker 1: about this idea of how this has kind of got 581 00:34:24,040 --> 00:34:28,279 Speaker 1: similar parallels in some ways. Um. So, you know, I 582 00:34:28,320 --> 00:34:32,680 Speaker 1: think we do need to act. Um. It is, you know, 583 00:34:32,880 --> 00:34:36,040 Speaker 1: it's it's maybe not a financial stability risk, but it's 584 00:34:36,040 --> 00:34:40,520 Speaker 1: growing quickly and we need to move forward. So one 585 00:34:40,520 --> 00:34:42,560 Speaker 1: of the thoughts that I took away from our recent 586 00:34:42,600 --> 00:34:46,000 Speaker 1: conversation with centator to me, and Tracy and I were 587 00:34:46,080 --> 00:34:49,240 Speaker 1: just talking about this, is it feels like stable coin regulation. 588 00:34:49,280 --> 00:34:52,120 Speaker 1: It's kind of low hanging fruit. It doesn't it your 589 00:34:52,360 --> 00:34:54,759 Speaker 1: it doesn't seem that hard to do. Maybe it's a 590 00:34:54,760 --> 00:34:57,759 Speaker 1: lot harder, but whether it's your proposal or something legislative, 591 00:34:57,800 --> 00:35:00,359 Speaker 1: it's like, okay, come up with a banking framework and 592 00:35:00,800 --> 00:35:03,320 Speaker 1: a way to make sure that they have the money there. 593 00:35:03,760 --> 00:35:06,120 Speaker 1: It seems like as soon as you go past that 594 00:35:06,160 --> 00:35:08,880 Speaker 1: with crypto regulation it strikes me in my mind as 595 00:35:08,960 --> 00:35:12,120 Speaker 1: orders of magnitude more complex, because how do you prevent 596 00:35:12,200 --> 00:35:14,399 Speaker 1: someone you know, or how do you think even begin 597 00:35:14,520 --> 00:35:18,960 Speaker 1: to think about regulating someone launches a joke? What's the 598 00:35:19,000 --> 00:35:23,279 Speaker 1: responsibility of that India or Estonia somewhere outside, and it 599 00:35:23,320 --> 00:35:26,640 Speaker 1: gets traded on a defi exchange and it gets marketed 600 00:35:26,680 --> 00:35:31,439 Speaker 1: towards us, uh, you know, American investors or consumers like 601 00:35:31,719 --> 00:35:34,080 Speaker 1: just conceptually, and we just have a couple of minutes left, 602 00:35:34,120 --> 00:35:36,719 Speaker 1: but how should we begin thinking about like that, which 603 00:35:36,760 --> 00:35:40,480 Speaker 1: just seems just so much harder it is. It is harder. 604 00:35:40,760 --> 00:35:42,680 Speaker 1: And you know, for one thing, we do have a 605 00:35:42,719 --> 00:35:47,400 Speaker 1: gap in the law. Right there's no federal regulator of 606 00:35:48,360 --> 00:35:54,200 Speaker 1: the trading and distribution of crypto tokens, which aren't securities 607 00:35:54,400 --> 00:35:58,719 Speaker 1: right now. The CFTC doesn't have that power. I you know, 608 00:35:58,719 --> 00:36:01,200 Speaker 1: when I was chairman we did quite bitcoined a commodity, 609 00:36:01,239 --> 00:36:04,160 Speaker 1: but that simply gave us essentially jurisdiction over swaps and 610 00:36:04,239 --> 00:36:07,279 Speaker 1: futures based on that's problem number one. Problem number two, 611 00:36:07,320 --> 00:36:10,120 Speaker 1: of course, is this. Is it a security? Is it 612 00:36:10,160 --> 00:36:12,840 Speaker 1: a commodity? And we're kind of stuck in the mud 613 00:36:12,880 --> 00:36:16,000 Speaker 1: on that because, you know, I'm very sympathetic to chairman 614 00:36:16,080 --> 00:36:20,080 Speaker 1: gainstler's view, Um, that a lot of these things probably 615 00:36:20,120 --> 00:36:22,440 Speaker 1: are securities, but I'm also sympathetic to the view that, 616 00:36:22,520 --> 00:36:25,919 Speaker 1: you know, the rules maybe aren't perfect. I mean there 617 00:36:25,920 --> 00:36:29,279 Speaker 1: are some issues where you'd like to customize them. But 618 00:36:30,040 --> 00:36:33,600 Speaker 1: my proposal that I'm working up with how Jackson at 619 00:36:33,600 --> 00:36:36,160 Speaker 1: Harvard Law School is we say, look, we're stuck in 620 00:36:36,200 --> 00:36:38,280 Speaker 1: the mud on that issue. Let's take a different approach. 621 00:36:38,440 --> 00:36:43,840 Speaker 1: Let's have the SEC and the CFTC create a joint 622 00:36:44,239 --> 00:36:49,160 Speaker 1: self regulatory organization trying to set the standards for the 623 00:36:49,200 --> 00:36:53,040 Speaker 1: trading of all crypto assets. We don't care whether their 624 00:36:53,080 --> 00:36:57,520 Speaker 1: securities can come out. We're gonna basically prod or browbeat 625 00:36:57,640 --> 00:37:00,960 Speaker 1: or jaw bone, whatever word you want to use, industry 626 00:37:01,000 --> 00:37:04,799 Speaker 1: participants to join this S R O. WE'RE gonna type. 627 00:37:04,800 --> 00:37:07,960 Speaker 1: We're gonna have the agencies tightly oversee it, tightly watch it. 628 00:37:07,960 --> 00:37:09,719 Speaker 1: It's not just going to go off on its own. 629 00:37:10,280 --> 00:37:13,360 Speaker 1: The agencies, the regulatory agencies, are going to appoint the members, 630 00:37:13,400 --> 00:37:15,360 Speaker 1: they're going to prove the rules. You know, and S 631 00:37:15,520 --> 00:37:18,080 Speaker 1: R O s have been very, very important in our 632 00:37:18,600 --> 00:37:23,280 Speaker 1: regulation of the Securities and derivatives markets since that regulation began. 633 00:37:23,600 --> 00:37:27,880 Speaker 1: And William O Douglas, former Supreme Court justice, who was 634 00:37:27,960 --> 00:37:30,319 Speaker 1: the chairman of the SEC, I guess he was like 635 00:37:30,400 --> 00:37:34,040 Speaker 1: the second or third chairman, basically was the guy who 636 00:37:34,120 --> 00:37:39,680 Speaker 1: who initiated the Self Regulatory Organization Movement and he basically said, look, 637 00:37:39,680 --> 00:37:43,200 Speaker 1: it only works if government has what he called a 638 00:37:43,280 --> 00:37:49,200 Speaker 1: Well Oiled Gun, you know, and standing by Um. In 639 00:37:49,239 --> 00:37:52,239 Speaker 1: other words, agencies really have to oversee this. But we 640 00:37:52,360 --> 00:37:55,000 Speaker 1: think it could set some standards because, you know, when 641 00:37:55,000 --> 00:37:58,879 Speaker 1: you look at the trading and distribution of Crypto, oh, 642 00:37:58,960 --> 00:38:02,000 Speaker 1: it's it just it's awful. I mean the lack of standards. 643 00:38:02,280 --> 00:38:05,160 Speaker 1: You know, you have exchanges that Um, have their own 644 00:38:05,200 --> 00:38:11,640 Speaker 1: proprietary trading operations that Um don't prohibit Um uh wash trading, 645 00:38:11,760 --> 00:38:14,600 Speaker 1: you know, where someone can basically inflate the price or 646 00:38:14,640 --> 00:38:17,720 Speaker 1: the volume of the security. You have other conflicts of interest. 647 00:38:17,800 --> 00:38:21,320 Speaker 1: You have exchanges that have interests in the CRYPTO tokens 648 00:38:21,360 --> 00:38:25,279 Speaker 1: their listing. You have, you know, no sort of order 649 00:38:25,360 --> 00:38:30,000 Speaker 1: execution rules, you have no requirements on pre impost transparency, 650 00:38:30,560 --> 00:38:35,000 Speaker 1: and crypto has created, you know, despite its claim, despite 651 00:38:35,040 --> 00:38:36,719 Speaker 1: the claim of the original White Paper, they said we're 652 00:38:36,719 --> 00:38:38,959 Speaker 1: going to eliminate intermediaries, we're not gonna have to rely 653 00:38:39,040 --> 00:38:41,839 Speaker 1: on these large intermediaries anymore. It created a whole new 654 00:38:41,880 --> 00:38:45,720 Speaker 1: class of Intermedias, right these changes and other and other actors, 655 00:38:45,800 --> 00:38:48,400 Speaker 1: and so we need standards. There and what we're proposing 656 00:38:48,480 --> 00:38:53,160 Speaker 1: is look required basically push them to become members of 657 00:38:53,200 --> 00:38:56,600 Speaker 1: this and then they'll also want these rules to apply 658 00:38:56,680 --> 00:38:59,640 Speaker 1: to the defied platforms, and the needs to figure out 659 00:38:59,680 --> 00:39:02,279 Speaker 1: a way to do that because they don't want to be, 660 00:39:02,400 --> 00:39:05,759 Speaker 1: you know, at a competitive disadvantage. So you know, it's 661 00:39:05,800 --> 00:39:08,239 Speaker 1: not a perfect solution, but compared to where we are, 662 00:39:08,640 --> 00:39:12,799 Speaker 1: we could go much, much further, we think, faster if 663 00:39:12,840 --> 00:39:15,000 Speaker 1: we were to do this. That's really interesting. I was 664 00:39:15,000 --> 00:39:18,719 Speaker 1: sort of wondering when someone would make that that suggestion. 665 00:39:18,840 --> 00:39:21,080 Speaker 1: Rather than just have this bun fight between the CFTC 666 00:39:21,239 --> 00:39:24,440 Speaker 1: and sec going back from the stain government. Right, right, 667 00:39:25,160 --> 00:39:28,200 Speaker 1: let's just band together and create a new agency. Um 668 00:39:28,239 --> 00:39:30,480 Speaker 1: Tim I'm so sorry. We could talk to you for 669 00:39:30,680 --> 00:39:33,000 Speaker 1: another hour, but we are going to have to leave 670 00:39:33,000 --> 00:39:37,080 Speaker 1: it there due to Um time constraints. But fascinating discussion. 671 00:39:37,120 --> 00:39:38,960 Speaker 1: Thank you so much for coming on all thoughts than 672 00:39:39,000 --> 00:39:52,600 Speaker 1: thank you for having me. It's been a pleasure. I 673 00:39:52,640 --> 00:39:55,480 Speaker 1: thought that was really, really interesting and he kind of 674 00:39:55,520 --> 00:39:58,880 Speaker 1: answered a long running question that I've had about stable 675 00:39:58,920 --> 00:40:01,759 Speaker 1: coins in general, which is this came up with with 676 00:40:01,840 --> 00:40:05,600 Speaker 1: the circle CEO, which is, it feels, kind of redundant 677 00:40:05,760 --> 00:40:08,080 Speaker 1: if you have this new technology but in order to 678 00:40:08,080 --> 00:40:10,160 Speaker 1: make it work you have to team up with a 679 00:40:10,239 --> 00:40:13,080 Speaker 1: bank and get, you know, a bank license and all 680 00:40:13,120 --> 00:40:16,000 Speaker 1: of that. But the way Tim described the sort of 681 00:40:16,200 --> 00:40:21,680 Speaker 1: unbundling of credit creation versus payment services, that makes some 682 00:40:21,760 --> 00:40:25,279 Speaker 1: sense to me. Can I just say, like, I'm just 683 00:40:25,280 --> 00:40:29,200 Speaker 1: gonna full disclosure here. This is people are are you 684 00:40:29,200 --> 00:40:31,240 Speaker 1: going to leave all lots to join the new CRYPTO 685 00:40:31,400 --> 00:40:37,120 Speaker 1: Inter Agency Organization? Full disclosure here. It's not always the 686 00:40:37,200 --> 00:40:41,040 Speaker 1: case that I get really excited by Finnreg conversations like 687 00:40:41,239 --> 00:40:44,560 Speaker 1: macro and commodities and markets and stuff like. Yeah, that 688 00:40:44,600 --> 00:40:48,799 Speaker 1: gets me going. Tim Got me going Finn Regg and like, 689 00:40:48,880 --> 00:40:52,000 Speaker 1: even if we weren't talking about stable coins, he's I 690 00:40:52,120 --> 00:40:54,680 Speaker 1: really just enjoyed hearing him like talk about the essentially 691 00:40:54,719 --> 00:40:58,719 Speaker 1: like theory of Finnregg or financial regulations, in a very 692 00:40:58,719 --> 00:41:02,560 Speaker 1: engaging way. Yes, absolutely, also a little bit about facebook 693 00:41:02,600 --> 00:41:06,200 Speaker 1: and Libra Galvin and political interest and very interesting that 694 00:41:06,280 --> 00:41:08,960 Speaker 1: from the perspective of the Chinese that was seen as 695 00:41:09,000 --> 00:41:11,279 Speaker 1: a way to further reach the dollar, which I think 696 00:41:11,320 --> 00:41:14,080 Speaker 1: it's really interesting think about. If you're in any other country, 697 00:41:14,560 --> 00:41:18,640 Speaker 1: how do you hold dollar assets? Is Not a trivial question. Right. 698 00:41:18,640 --> 00:41:22,000 Speaker 1: You hold a dollar denominated assets safely and there is 699 00:41:22,040 --> 00:41:24,640 Speaker 1: this clear potential. People are talking about it of like 700 00:41:24,880 --> 00:41:29,120 Speaker 1: stable coins actually really deepening and cementing the dollars global reach. 701 00:41:29,360 --> 00:41:31,120 Speaker 1: So it's really interesting that that was like sort of 702 00:41:31,120 --> 00:41:34,200 Speaker 1: the aspect of libre that they totally but this is 703 00:41:34,200 --> 00:41:36,239 Speaker 1: also why people were making jokes about like the east 704 00:41:36,280 --> 00:41:39,560 Speaker 1: India Company and stuff when when facebook announced list but 705 00:41:39,640 --> 00:41:42,919 Speaker 1: absolutely fascinating conversation. I think we're going to have more 706 00:41:43,080 --> 00:41:46,000 Speaker 1: on stable coin and CRYPTIO regulation more broadly to come, 707 00:41:46,040 --> 00:41:47,920 Speaker 1: but for now shall we leave it there? Let's leave 708 00:41:47,920 --> 00:41:50,680 Speaker 1: it there. Okay, this has been another episode of the 709 00:41:50,719 --> 00:41:53,200 Speaker 1: all thoughts podcast. I'm Tracy alloway. You can follow me 710 00:41:53,520 --> 00:41:56,560 Speaker 1: on twitter at Tracy Alloway, and I'm Joe Wisn't all. 711 00:41:56,640 --> 00:41:59,640 Speaker 1: You can follow me on twitter at the stalwork. Follow 712 00:41:59,680 --> 00:42:02,880 Speaker 1: our guest Timothy Massad. He's on twitter at Tim Massad. 713 00:42:03,239 --> 00:42:07,359 Speaker 1: Follow our producer, Carmen Rodriguez, at Carmen Armand and check 714 00:42:07,360 --> 00:42:10,120 Speaker 1: out all of our podcasts at Bloomberg under the handle 715 00:42:10,320 --> 00:42:12,000 Speaker 1: at podcasts. Thanks for listening.