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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 2: I'm Joe Wisenthal.

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Speaker 3: And I'm Tracy Alloway.

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Speaker 2: Tracy, we're recording this August sixth. The coins have been falling,

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Speaker 2: the cryptos.

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Speaker 3: That's right, the coins have been falling. Let's see, I'm

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Speaker 3: bringing up bitcoin right now. Let's see, it's down from

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Speaker 3: a little over seventy two thousand and it is now

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Speaker 3: down to fifty six thousand, So fun times in crypto land.

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Speaker 2: There's sort of two things. We have not done many

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Speaker 2: crypto episodes. I think we did one. We did it

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Speaker 2: one a couple months ago with a member of the

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Speaker 2: Oudlaws discord talking about trading. I think that's really stood

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Speaker 2: out to me about this really is like since twenty

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Speaker 2: twenty two is I have to say I've found it

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Speaker 2: kind of boring. And the reason I've found it boring

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Speaker 2: is like, sure, the price has gone up from the lows,

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Speaker 2: and that's always exciting, but unlike even twenty twenty one,

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Speaker 2: twenty twenty two, when people are like talk about DeFi

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Speaker 2: and Web three and stuff, I just feel like there

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Speaker 2: hasn't been much new or exciting, like sort of narrative

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Speaker 2: wise within crypto and so like there's not even like

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Speaker 2: a thing to shoot down right now.

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Speaker 3: No, I actually, well I agree that none of the

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Speaker 3: narratives have been very interesting. However, the thing about bitcoin

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Speaker 3: especially is the narratives always keep coming, and that's kind

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Speaker 3: of the thing that I find fascinating about it. So

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Speaker 3: let's see last year when you had the banking drama,

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Speaker 3: people were pitching bitcoin and some other things as like

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Speaker 3: safe haven from the financial system, and then fast forward

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Speaker 3: to late last year, suddenly they are the beneficiaries of

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Speaker 3: the financial system because everyone's excited about the ETF's coming

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Speaker 3: on stream and you know, black Rock is going to

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Speaker 3: buy bitcoin and all that stuff. And then fast forward

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Speaker 3: to this year and it's like a Trump thing.

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Speaker 2: Now, oh yeah, right.

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Speaker 3: It's so it's so funny how much the narratives shift

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Speaker 3: and are often very much at odds with each other.

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Speaker 3: But the reason that can happen is because some people

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Speaker 3: might argue that, like bitcoin is kind of this weird

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Speaker 3: post modern thing. Yeah, it's just a token, Like it's

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Speaker 3: just a symbol, and people aren't really using it for

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Speaker 3: anything other than betting.

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Speaker 2: You know what cryptocurrency actually has retained a real store

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Speaker 2: of value property. Tell me Tether, I'm looking at it

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Speaker 2: on the screen. It's a dollar right now and it's

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Speaker 2: been a dollar forever, so you know, in circle, USDC

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Speaker 2: also very big. The big stable coins have so far

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Speaker 2: proven to infect be stable.

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Speaker 3: Some caveats there, I mean, we still remember twenty twenty one,

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Speaker 3: in early twenty twenty two when there was some discrepancy there.

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Speaker 3: But yes, okay, stable coins buy and large have remained stable.

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Speaker 2: And I do think you know, one of the you know,

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Speaker 2: as you mentioned, narratives in crypto are always shape shifting,

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Speaker 2: always evolving, but one of them has been this idea

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Speaker 2: that stable coins. Specifically Nick Carter, who we've had on

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Speaker 2: the show in the past, has been pushing this a lot,

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Speaker 2: which is this idea that like stable coins and the

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Speaker 2: ability to transact dollar denominated assets anywhere you want, that'll

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Speaker 2: be the killer app of crypto. And to me, it's

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Speaker 2: like I'm always like a little unsatisfied by it because

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Speaker 2: it's like, well, you're still.

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Speaker 3: Like Benmo exists, the name Pal exists.

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Speaker 2: And you're then also those dollars at the stable coins,

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Speaker 2: at least the centralized ones like Tether, like USDC, they're

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Speaker 2: in a bank somewhere, right, So you're still relying on

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Speaker 2: existing legacy financial market infrastructure. And if your whole point

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Speaker 2: is to get away from that, then isn't it kind

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Speaker 2: of like cheating to say crypto. Crypto's killer app is

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Speaker 2: going to be dollars that you hold in a regulated bank.

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Speaker 3: Yeah, dollars that are like backed by t bills. Yes,

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Speaker 3: that's right, are the big innovation here? Okay, Well, I

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Speaker 3: think we should get into this because, as you say,

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Speaker 3: stable coins, they're still around, contrary to what a lot

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Speaker 3: of people were expecting, especially with something like Tether, which

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Speaker 3: has just behaved very weirdly over the years, and there

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Speaker 3: are a lot of questions there about what exactly is

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Speaker 3: backing their stable coin. But you're right, still kind of stable.

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Speaker 3: People are using them, some people, so we should talk

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Speaker 3: about it.

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Speaker 2: And there's one other reason to talk about stable coins,

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Speaker 2: which is I think there's this view that if crypto

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Speaker 2: were to ever pose a systemic risk to the actual

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Speaker 2: financial system, it's not going to be bitcoin volatility. It's

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Speaker 2: the lesson that we all learned in two thousand and

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Speaker 2: eight two thousand and nine, which is that systemic risk

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Speaker 2: comes from the assets that you don't presume to be volatile, right,

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Speaker 2: and so this is a reason why legislation exists about

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Speaker 2: regulating should they just be regulated like money market mutual funds,

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Speaker 2: things like this question, because we know that you really

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Speaker 2: get into trouble when assets that are supposed to be

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Speaker 2: dollar good or triple A or whatever don't behave as such.

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Speaker 2: And so if there's ever going to be a time

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Speaker 2: where there's gonna be a link between the real economy

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Speaker 2: of the real financial system and crypto, would probably be

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Speaker 2: something with stable coins.

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Speaker 3: Yeah, let's get into it, all right.

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Speaker 2: Well, I'm really excited. We do have the perfect guests,

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Speaker 2: someone who's been out working in this area for a while,

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Speaker 2: someone who knows both sides of both fis sort of

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Speaker 2: trad FI and crypto, who's worked in both worlds, who's

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Speaker 2: very interested in the stable coin world. Done a lot

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Speaker 2: on that. We're going to be speaking with Austin Campbell.

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Speaker 2: He is an adjunct professor at Columbia Business School. He

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Speaker 2: is the founder and managing partner of Zero Knowledge Consulting,

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Speaker 2: and he has previously done stints at City, JP Morgan

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Speaker 2: and stone Ridge. So he really does know both worlds

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Speaker 2: really well, which is where stable coins sit neatly in

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Speaker 2: both worlds. So, Austin, thank you so much for on

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Speaker 2: odd lots.

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Speaker 4: Yeah, thank you for having me excited to be here.

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Speaker 2: You've been in both worlds. You have zero knowledge consulting

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Speaker 2: crypto stuff. You've been at legacy finance, having traded a

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Speaker 2: city a JP Morgan done tech stuff there. What interests

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Speaker 2: you about crypto? Why is this even an interesting topic

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Speaker 2: that we should be talking about.

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Speaker 4: Well, as I've joked with some of my other friends,

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Speaker 4: I kind of had crypto come to me as opposed

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Speaker 4: to most people who themselves went to crypto. So back

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Speaker 4: in the day at JP Morgan, I ran a trading

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Speaker 4: desk called stable value products. And stop me if you've

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Speaker 4: heard this story before, But that was stuff where you

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Speaker 4: were having a large pile of highly diversified bonds that

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Speaker 4: were supposed to largely be safe with some guarantees on

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Speaker 4: top of them, and people were supposed to be able

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Speaker 4: to transact in and out at a fixed stable value. Well,

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Speaker 4: this sounds a lot like a stable coin, only no,

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Speaker 4: I'm talking about a trillion dollars of stuff in four

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Speaker 4: oh when k markets largely in the United States. So

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Speaker 4: I found these interesting because it's sort of crypto encroaching

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Speaker 4: into a very tradfi space and being totally honest, probably

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Speaker 4: largely misunderstanding it for a long time.

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Speaker 3: Crypto came to me too. It is also something that's

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Speaker 3: been inflicted on me throughout the years.

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Speaker 4: Inflicted.

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Speaker 3: Okay, But on that note, remind me when we talk

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Speaker 3: about stable coins, what exactly are we talking about here?

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Speaker 3: How do they differ from some other cryptocurrency or token,

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Speaker 3: and crucially, how do they differ from me having a

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Speaker 3: digital deposit line a number that appears in my account

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Speaker 3: and then hitting the send button and sending money to

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Speaker 3: someone else's account.

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Speaker 4: Yeah, So the answer is they are both similar to

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Speaker 4: that and different to some very important ways. So I'll

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Speaker 4: start with answering your literal question, which is what we

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Speaker 4: mean when we say stable coin and crypto is unfortunately

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Speaker 4: like a horrible variety of things, many of which have

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Speaker 4: not proven to be stable over time. So I would

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Speaker 4: tell people you're talking about everything from things that look

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Speaker 4: like money market funds and maybe bank deposits probably stable

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Speaker 4: all the way to things that look like self reference

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Speaker 4: equity sorts of structures like structured nodes, derivatives. That was

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Speaker 4: like the algorithmic stable coin from Terraform Labs, which it

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Speaker 4: was a coin, but definitely not so much on the

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Speaker 4: stable part. I would say, what's important about them and

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Speaker 4: where they differ to your question from a traditional bank

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Speaker 4: account is you kind of have this bifurcation of where

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Speaker 4: the money rests and is invested and where the token

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Speaker 4: can move around to. Because the big contrast by putting

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Speaker 4: them on a blockchain is if I have a bank

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Speaker 4: account at say JP Morgan, and I want to send

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Speaker 4: money to somebody at Bank of America. Simplifying away a

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Speaker 4: lot of the details here, JP Morgan has to essentially

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Speaker 4: take money out of their accounts whatever they were invested

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Speaker 4: and send it over to b of A, who's going

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Speaker 4: to reinvest it. In token world, with a stable coin,

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Speaker 4: it just sort of sits at rest being invested the

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Speaker 4: whole time, and the token represents an ownership interest in

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Speaker 4: that moves around on a blockchain, which is also a

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Speaker 4: very open access platform. It really is in many ways

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Speaker 4: a bifurcation of rights that were not possible in the

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Speaker 4: traditional system and changes how you can move money around

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Speaker 4: it at what velocity.

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Speaker 3: Oh I see, So if you have a bank transaction,

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Speaker 3: if you're moving money, then there's sort of two separate

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Speaker 3: things happening. So you're transferring the information about the money

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Speaker 3: and the instruction and then the value, whereas with the

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Speaker 3: token you can kind of transfer both at the same time.

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Speaker 3: So the instruction, the information plus the value.

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Speaker 4: Yeah, it would be as if So if we're all

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Speaker 4: trading around tether on a blockchain, to use the previous

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Speaker 4: example that was raised, that is almost as if everybody,

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Speaker 4: like everybody banks at JP Morgan, right, so that everything

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Speaker 4: is just an internal ledger transfer there.

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Speaker 3: Got it like instantaneous intra bank transfer. So for instance,

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Speaker 3: if you're with JP Morgan, you can more or less

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Speaker 3: instantaneously transfer money into another JP Morgan account, But if

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Speaker 3: you're transferring it to like somewhere in Europe, you have

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Speaker 3: to provide all these additional instructions.

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Speaker 2: It sort of feels to me like if you wanted

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Speaker 2: to trans for money to me, rather than transferring the

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Speaker 2: money to me, it's like you're transferring the password to

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Speaker 2: your account, and so the money does not have to move.

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Speaker 2: But now, because of tokenization and blockchains and digital signatures,

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Speaker 2: you can transfer the pass if you want to send

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Speaker 2: me one hundred dollars worth of coin. Tracy can send

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Speaker 2: me a password for one hundred dollars worth of coins,

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Speaker 2: and then when I want to spend it, I'm transferring

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Speaker 2: that password. Would that be a good way to think

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Speaker 2: about it?

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Speaker 4: I think that's a good mental simplification. Yes, in many ways,

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Speaker 4: Like if we really think about what legally they entitle

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Speaker 4: you to. It's just I can go to the stable

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Speaker 4: coin issuer and redeem this thing against them to get

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Speaker 4: cash back. Right now, I'm just transferring the ability to

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Speaker 4: redeem that cash around exactly as you said, kind of

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Speaker 4: like a password, or it's like a vault receipt.

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Speaker 2: Yeah, like a right, a vault receipt or a key

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Speaker 2: or something like that. Of course, they talk about keys

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Speaker 2: all the time in crypto, So the big thing when

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Speaker 2: people talk about they show these charts of tether volume

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Speaker 2: going to the moon or circle and all these lines

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Speaker 2: that have generally gone up over time. My first reaction is, yeah,

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Speaker 2: I guess that's kind of interesting. But if people are

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Speaker 2: just using these coins to trade crypto itself, then it

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Speaker 2: still feels very recursive to me. So it's like, oh,

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Speaker 2: there is a use case stable coins. But if the

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Speaker 2: use case of stable coins is to then do a

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Speaker 2: levered long eh trade or a levered long Salona trade

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Speaker 2: or whatever it is. Then I don't find that interesting.

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Speaker 2: It's only I don't find that that interesting. It's only

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Speaker 2: particularly interesting to me if people are using these dollar

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Speaker 2: denominated assets for something other than trading crypto. Is that happening.

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Speaker 4: So one, yes, post the twenty twenty two crash, we

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Speaker 4: saw a very interesting phenomenon. And you reference Nick Carter

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Speaker 4: who's been on earlier, and he has some very good

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Speaker 4: data about this that's publicly available. But the correlation between

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Speaker 4: crypto trading volumes and stable coin settlement volumes has really

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Speaker 4: broken down significantly post twenty twenty two, and now there

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Speaker 4: appear to be a decent body of people who are

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Speaker 4: using stable coins for I will generically wrap it in

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Speaker 4: the basket of something else, and that something else mostly

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Speaker 4: seems to come in two forms. One is a lot

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Speaker 4: of peer to peer transfers of stable coins, so that's

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Speaker 4: people probably using it for things like business payments, individual payments,

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Speaker 4: like settlement of call it real world activity where one

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Speaker 4: leg is in crypto, and the other part that they

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Speaker 4: seem to be using it for significantly is just dollar access.

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Speaker 4: Because something we take for granted in the United States

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Speaker 4: because our banking system, you know, for all our criticisms,

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Speaker 4: is pretty good, largely works. It's easy for us to

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Speaker 4: get dollars, and more importantly, it's easy for us to

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Speaker 4: get dollars in a way that we feel good about

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Speaker 4: being safe and secure. But if you live in like Argentina,

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Speaker 4: if you live in Venezuela, if you live in like

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Speaker 4: Southeast Asia, it can be much harder to get your

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Speaker 4: hands on dollars. And this is definitely a tool where

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Speaker 4: people are using that. Like when I was at Paxos

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Speaker 4: and we were looking at our stable coins there, I

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Speaker 4: would ask to make probably ninety five percent of our

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Speaker 4: holders were non US persons, and many of them seem

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Speaker 4: to just buy the coins and hold them.

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Speaker 2: Huh.

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Speaker 3: It almost sounds like a shadow dollar system, almost like

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Speaker 3: a euro dollars type thing. But where is the dollarness

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Speaker 3: of stable coins coming from? So I think in the intro,

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Speaker 3: you know, we kind of mentioned the t bills backing

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Speaker 3: something like tether. There have been rumors at various points

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Speaker 3: in time that there are less safe things perhaps backing tether.

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Speaker 3: Talk to us about how that dollarness is achieved.

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Speaker 4: Yeah, So that's been done a little bit differently across

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Speaker 4: multiple stable coins, which I think leads to the earlier

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Speaker 4: point of a need for regulation in this space. So

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Speaker 4: we can look at the three big models. The answer

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Speaker 4: to Tether is they kind of won't totally tell you.

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Speaker 4: They give suggestions about what they're doing, but they very

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Speaker 4: much operate in the Swiss bank style of we're going

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Speaker 4: to be very private. You just have to trust us.

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Speaker 4: We have the money. Now. Recently at Bitcoin Nashville, Howard

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Speaker 4: Lutnik from Canter Fitzgerald gave a talk about how they

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Speaker 4: manage a significant portion of Tether's reserve. So now we

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Speaker 4: know a significant portion of it's probably an overnight reverse

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Speaker 4: repo in the United States, likely secured by mostly treasuries.

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Speaker 4: That's a good sign, but Tether is unwilling to disclose

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Speaker 4: this with specificity or disclose all of their partners.

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Speaker 3: They also, you just reminded me, they also referred to

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Speaker 3: it once as reverse repo notes, which was really weird

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Speaker 3: because that does not exist, and they had it in

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Speaker 3: like their financial statements, and everyone in the repo market

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Speaker 3: was going, what the heck is a reverse repot note?

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Speaker 4: What you are experiencing? I would suggest as crypto people

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Speaker 4: attempting to talk about finance, which goes usually about as

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Speaker 4: well as finance people attempting to talk about crypto. Yeah,

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Speaker 4: the two sides have a long history of talking past

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Speaker 4: each other.

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Speaker 2: All right, so what are the other models you mentioned Tether?

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Speaker 2: What are the other models for holding dollars?

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Speaker 4: So Circle's current model is basically, hey, we're largely going

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Speaker 4: to outsource this to Blackrock. Right, they have a captive

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Speaker 4: fund with Blackrock. Blackrock is actually doing largely overnight reverse

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Speaker 4: repe in there, and that is essentially saying this should

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Speaker 4: look like some sort of tokenized government money market fund

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Speaker 4: type construct. So we're just going to have a professional

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Speaker 4: do that. Previously Circle had had some call it misadventures

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Speaker 4: in the bank deposit world, and I think they had

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Speaker 4: to learn some hard lessons there back to crypto people

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Speaker 4: not understanding finance, but I think mostly now it is Blackrock.

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Speaker 4: The last model, which is what we did at Paxos,

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Speaker 4: was essentially running the thing internally like a traditional cash

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Speaker 4: stability product. So when I was at Paxos in twenty

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Speaker 4: twenty two, we started disclosing everything down to the q

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Speaker 4: SIPs so you could see what we hold and it

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Speaker 4: was a mix of insured bank deposits, T bills and

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Speaker 4: overnight reverse repos spread across a number of different custodians

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Speaker 4: and banks to diversify the risk. I would tell you

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Speaker 4: in the future, if you're looking at what makes for

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Speaker 4: a quote unquote safe stable coin, it's going to look

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Speaker 4: more like that model. Or maybe what Circle is doing now,

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Speaker 4: not what they've done in the past.

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Speaker 3: What happens just on that note, but what happens when

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Speaker 3: you start to see the sort of dollarness or the

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Speaker 3: one to one dollar value breakdown, Because we have seen,

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Speaker 3: you know, like little glimmers of that happen in the past.

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Speaker 3: I think I mentioned twenty twenty one, and then in

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Speaker 3: twenty twenty two as well there was a bit of

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Speaker 3: a breakdown. What's happening?

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Speaker 4: So the interesting part about crypto is it's sort of

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Speaker 4: a microcosm of traditional finance. There's a couple of things

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Speaker 4: that have happened in the past. One which I think

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Speaker 4: is what you're probably alluding to, is fears about the

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Speaker 4: balance sheet and solvency of the issuer. So Tether has

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Speaker 4: had multiple periods in the past where they've depegged for

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Speaker 4: moments in time, Circle certainly had a very large deepeg

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Speaker 4: around the Silicon Valley bank incident where people didn't know

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Speaker 4: if their reserve was totally money good. So Echoes of

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Speaker 4: two thousand and eight right there, it's the classic can

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Speaker 4: we trust you if we come to redeem our deposits

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Speaker 4: with you. The other one that happens, which is fascinating,

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Speaker 4: is you have stable coins that deepeg to the upside

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Speaker 4: in times of crisis. Right, Like again back to my experience,

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Speaker 4: we had busd trading at like a bucko six on

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Speaker 4: Binance when Tara went down. And the reason there is

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Speaker 4: they serve the opposite function, which is the flight to safety,

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Speaker 4: especially if that happens during off hours. Because one of

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Speaker 4: the things that's true about stable coins is I'm trying

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Speaker 4: to weld essentially New York banking hours to the twenty

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Speaker 4: four to seven NISS of crypto. So if something blows

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Speaker 4: up at oh, I don't know, three am on a Friday,

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Speaker 4: I might have an entire weekend of people trying to

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Speaker 4: flee to safety and willing to pay a premium for that.

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Speaker 2: All right, So here's my other My other big question is, like,

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Speaker 2: all right, let's say we accept that the best stable

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Speaker 2: coin model. It's something like with what Circle is doing now,

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Speaker 2: or something like USDC where there as it's in regulated

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Speaker 2: financial institutions, why do we need public blockchains to solve that?

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Speaker 2: We If Tracy and I are trading claims from or

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Speaker 2: transferring claims that are claims on a dollar held at

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Speaker 2: a bank, why do we need ethereum and Solana to

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Speaker 2: do that? Why not some other solution because we've already

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Speaker 2: accepted the premise of centralized legacy infrastructure.

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Speaker 4: So I think this goes back to our discussion on bifurcating.

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Speaker 4: Call it the investment from the technological rights of transfer.

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Speaker 4: And essentially what you're asking is what systems should we

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Speaker 4: live in and whose rules should we play by? Because

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Speaker 4: let me give you a couple of examples. If you're

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Speaker 4: in the United States and you just want to pay

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Speaker 4: people through regular channels, through like a sandwich, you know,

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Speaker 4: or something as you're like more of the transaction, I'm

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Speaker 4: at a deli, right, I don't think you need a

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Speaker 4: public blockchain, like our infrastructure largely works. But on the

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Speaker 4: other hand, let's say that I am a supplier in

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Speaker 4: Thailand who needs to receive a payment from somebody in

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Speaker 4: Finland for goods, and it's denominated in dollars. Sending that

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Speaker 4: through the traditional infrastructure will take days and have relatively

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Speaker 4: large fees attached to it, and in some jurisdictions, I'm

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Speaker 4: not sure I trust my banks at all.

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Speaker 2: Oh way, before you go on further, like, I get

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Speaker 2: that there are all kinds of aspects of legacy finance

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Speaker 2: that don't seem as efficient as they should be, and

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Speaker 2: people like oh, T plus two and T plus three

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Speaker 2: in settlement and blah blah blah, But like, why isn't

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Speaker 2: that just a matter of Okay, Eventually the banks will

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Speaker 2: upgrade their software and these are things that are being solved.

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Speaker 4: Some of it's regulation, right, well, I think some of

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Speaker 4: it is regulation. Some of it is quite frankly, I

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Speaker 4: don't think the banks have a lot of incentive to

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Speaker 4: solve it. They are largely the beneficiaries of the current system.

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Speaker 4: Like you know, if you're looking at correspondent banks, they

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Speaker 4: would prefer these payments to take as long as humanly possible.

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Speaker 4: And then I think a third part that again we

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Speaker 4: really take for granted in the United States is you're

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Speaker 4: assuming that the financial system you're dealing with is legitimate

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Speaker 4: in the first place. Right, So in the US, where

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Speaker 4: things largely work and we have good rule of law,

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Speaker 4: that's totally true. But there are many people who live

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Speaker 4: in situations where the government itself is the bad guy

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Speaker 4: and therefore going only through regulated banks captured by them

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Speaker 4: is an excellent way to basically have all my money expropriated.

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Speaker 4: Right Like if I am, say, to take an actual

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Speaker 4: example of humanitarian aid with bitcoin, If I am a

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Speaker 4: woman in Afghanistan trying to work and I don't want

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Speaker 4: the Taliban just taking all of my money, I can't

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Speaker 4: hold it in the local system, right.

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Speaker 3: This actually reminds me of a very old episode we

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Speaker 3: did with I think it was Joe Carlson from the

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Speaker 3: Open Money Initiative. Do you remember that show where she

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Speaker 3: was making the argument that you know, for people in

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Speaker 3: Venezuela or other countries, there is that use case where

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Speaker 3: you can use this as a story value that's separated

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Speaker 3: from the government. But I guess my question is, like,

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Speaker 3: it feels kind of weird to have this shadow financial

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Speaker 3: system exist, and is there some like I guess what

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Speaker 3: are the downsides to this? Let's just get to that.

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Speaker 4: Yeah, And I would say you end up with in

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Speaker 4: the current world three kinds of downsides, though I think

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Speaker 4: some of them don't need to exist. I think they're

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Speaker 4: a choice we've made based on some misunderstandings. So downside

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Speaker 4: number one is with the lack of good regulation around

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Speaker 4: stable coins globally, you have a lot of people reaching

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Speaker 4: for these things of let's be generous and say highly

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Speaker 4: variable quality, and the downside has been a lot of

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Speaker 4: damage to people who were not super financially sophisticated, who

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Speaker 4: got wiped out on their holdings. Again see like the

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Speaker 4: terrorform Labs incident. These are I would say strictly bad

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Speaker 4: that shouldn't be happening. Two. I think a public blockchain

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Speaker 4: that operates where the criteria for being able to use

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Speaker 4: it are basically the following is do you have the

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Speaker 4: Internet and do you have something of value to trade,

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Speaker 4: is in some way ways a challenged rule of law

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Speaker 4: in many places. Now. I view that quite frankly as

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Speaker 4: a positive in many areas, but there are also areas

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Speaker 4: with pretty good rule of law where that could be

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Speaker 4: a negative. Right you could look at that as pulling

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Speaker 4: in both directions. I think that becomes a question of

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Speaker 4: how do you regulate these what do we think of

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Speaker 4: as systemic legitimacy. I think the third part that is

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Speaker 4: a downside that people often under discuss is that you

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Speaker 4: are inheriting a completely different set of problems by using

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Speaker 4: these which is one people really underestimate the public part

431
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Speaker 4: of public blockchains, right. It becomes much easier to track

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Speaker 4: and trace people using these systems, especially once you have

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Speaker 4: one or two pieces of information about where the money

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Speaker 4: started and from whom, and two they are not totally

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Speaker 4: free of regulation. I will remind everybody that all the

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Speaker 4: FIAT backed stable coins have freeze and seas capability, which

437
00:22:49,359 --> 00:22:52,440
Speaker 4: in many ways is even more power full than traditional finance.

438
00:22:52,520 --> 00:22:54,359
Speaker 4: So like, if I am at one of the stable

439
00:22:54,400 --> 00:22:57,960
Speaker 4: coins and I see somebody who has that stable coin

440
00:22:58,000 --> 00:22:59,960
Speaker 4: in a wallet where I don't like them for some reason,

441
00:23:00,040 --> 00:23:02,240
Speaker 4: maybe it's an o fact violation, maybe I just don't

442
00:23:02,280 --> 00:23:04,640
Speaker 4: like the color of their hat, I have the ability

443
00:23:04,640 --> 00:23:06,640
Speaker 4: to freeze their money in that wallet so they can't

444
00:23:06,680 --> 00:23:09,200
Speaker 4: move it, and I have the ability to actually burn

445
00:23:09,280 --> 00:23:11,920
Speaker 4: that money and take it back from them unilaterally.

446
00:23:12,800 --> 00:23:18,280
Speaker 2: In that case, do stable coins solve the problem of, say,

447
00:23:18,359 --> 00:23:22,640
Speaker 2: humanitarian aid to someone in an oppressive regime? If, as

448
00:23:22,680 --> 00:23:29,560
Speaker 2: you say, the publicness block of public blockchains remains underappreciated.

449
00:23:29,720 --> 00:23:32,560
Speaker 2: These things are much more easily traceable, that the idea

450
00:23:32,600 --> 00:23:36,040
Speaker 2: that this is private money is largely not true. That

451
00:23:36,160 --> 00:23:39,199
Speaker 2: analytics firms have gotten extremely good with very little amount

452
00:23:39,200 --> 00:23:42,119
Speaker 2: of data to say I could say that this person

453
00:23:42,200 --> 00:23:45,719
Speaker 2: owns this token. Does that not undermine the claim that

454
00:23:45,760 --> 00:23:49,760
Speaker 2: stable coins are a powerful tool in these sort of

455
00:23:50,040 --> 00:23:51,000
Speaker 2: oppressive regimes?

456
00:23:51,680 --> 00:23:54,959
Speaker 4: I would say, One, it depends how good your opsec is,

457
00:23:55,040 --> 00:23:58,240
Speaker 4: So the answer is maybe if you're not very careful

458
00:23:58,240 --> 00:24:00,119
Speaker 4: with them, the answer will be yes to that. And

459
00:24:00,160 --> 00:24:02,639
Speaker 4: then two, it does reveal sort of one of the

460
00:24:02,720 --> 00:24:05,840
Speaker 4: underlying assumptions, which I think is something Tracy was driving

461
00:24:05,840 --> 00:24:09,520
Speaker 4: towards earlier, which is that stable coins where the reserves

462
00:24:09,560 --> 00:24:12,679
Speaker 4: are kept in call it traditional institutions, are only as

463
00:24:12,760 --> 00:24:15,159
Speaker 4: good as the rule of law in those places. So

464
00:24:15,240 --> 00:24:17,119
Speaker 4: the question to you of how good are these for

465
00:24:17,240 --> 00:24:20,359
Speaker 4: humanitarian aid in many ways simplifies to how are we

466
00:24:20,440 --> 00:24:22,119
Speaker 4: feeling about the US legal system?

467
00:24:22,240 --> 00:24:25,560
Speaker 3: That's a fun thought. Just then, uh, I want to

468
00:24:25,560 --> 00:24:29,320
Speaker 3: get into the financial stability aspect of this. But before

469
00:24:29,359 --> 00:24:34,040
Speaker 3: I do, you mentioned regulation who should regulate stable coins?

470
00:24:34,160 --> 00:24:37,600
Speaker 3: Given that you know the issuers tend to be in

471
00:24:37,680 --> 00:24:41,600
Speaker 3: different places around the world. Tether where's tether again in

472
00:24:41,640 --> 00:24:42,640
Speaker 3: like the Caymans or.

473
00:24:42,560 --> 00:24:44,360
Speaker 4: Something British Virginiz very good.

474
00:24:46,280 --> 00:24:50,480
Speaker 3: So, and there is this sort of like supernational aspect

475
00:24:50,560 --> 00:24:53,960
Speaker 3: to some of this. You're talking about dollar like cross

476
00:24:54,000 --> 00:24:58,240
Speaker 3: border payments. So who ultimately gets to decide what a

477
00:24:58,280 --> 00:25:01,360
Speaker 3: good stable coin is or how the rules should be enforced?

478
00:25:01,480 --> 00:25:03,880
Speaker 4: All right, So let's let's zoom out a little bit

479
00:25:03,880 --> 00:25:06,360
Speaker 4: and look at the traditional financial system and ask how

480
00:25:06,359 --> 00:25:08,480
Speaker 4: that question would be answered, and then we'll zoom back

481
00:25:08,480 --> 00:25:11,400
Speaker 4: in on stable coins. So in traditional finance, there's two

482
00:25:11,440 --> 00:25:16,040
Speaker 4: layers to that regulation. Layer number one is for issuers,

483
00:25:16,119 --> 00:25:19,600
Speaker 4: it's usually the local jurisdiction, and in particular for things

484
00:25:19,600 --> 00:25:22,600
Speaker 4: that are stable coins, usually the banking regulators in local

485
00:25:22,720 --> 00:25:25,760
Speaker 4: jurisdictions that would look at these sorts of things, Right,

486
00:25:25,840 --> 00:25:28,880
Speaker 4: So like, if you're in the United States, you probably

487
00:25:28,920 --> 00:25:31,160
Speaker 4: don't have much of a say of how Deutsche Bank

488
00:25:31,240 --> 00:25:34,840
Speaker 4: is running their operations in Germany that will be the boffin, right,

489
00:25:34,920 --> 00:25:38,280
Speaker 4: So that's part one. Part two is then in your

490
00:25:38,440 --> 00:25:41,480
Speaker 4: local area, if the issuer is from a foreign jurisdiction,

491
00:25:42,119 --> 00:25:45,280
Speaker 4: are they permitted do you give them equivalency for their regimes?

492
00:25:45,320 --> 00:25:47,240
Speaker 4: Do you trust them? Right? So this is sort of

493
00:25:47,240 --> 00:25:51,000
Speaker 4: the patchwork of our current regulation and again zooming out.

494
00:25:51,119 --> 00:25:53,400
Speaker 4: Stable coins work very much the same way. You would

495
00:25:53,440 --> 00:25:56,640
Speaker 4: look at each one in the jurisdiction in which you're issued, Right,

496
00:25:56,720 --> 00:25:59,159
Speaker 4: you look at regimes that exist. You've got like Bermuda,

497
00:25:59,600 --> 00:26:01,960
Speaker 4: You've got like Singapore, You've got Hong Kong who have

498
00:26:02,000 --> 00:26:04,679
Speaker 4: all booted things up. Do you trust them? Do you

499
00:26:04,720 --> 00:26:07,200
Speaker 4: think they're good? And then the leverage that you would

500
00:26:07,200 --> 00:26:09,320
Speaker 4: have in a place like the United States is do

501
00:26:09,359 --> 00:26:11,960
Speaker 4: we think companies operating here should be able to accept

502
00:26:12,040 --> 00:26:13,320
Speaker 4: or interact with those things?

503
00:26:14,119 --> 00:26:16,600
Speaker 2: We say more on that. So is the idea that

504
00:26:17,040 --> 00:26:21,240
Speaker 2: cryptocurrency exchanges in the United States there would be some

505
00:26:21,480 --> 00:26:24,840
Speaker 2: rule that says you're not allowed to trade this, or

506
00:26:24,880 --> 00:26:27,399
Speaker 2: you're not allowed to call this a stable coin on

507
00:26:27,440 --> 00:26:30,000
Speaker 2: your website. Like I mean, this gets to the issue

508
00:26:30,040 --> 00:26:33,680
Speaker 2: of we can't even really talk about regulating stable coins

509
00:26:34,000 --> 00:26:37,880
Speaker 2: when both Circle and the Terra Lunar coin were both

510
00:26:37,960 --> 00:26:41,280
Speaker 2: called stable coins on the internet, but we're radically different

511
00:26:41,320 --> 00:26:42,240
Speaker 2: financial products.

512
00:26:42,800 --> 00:26:45,000
Speaker 4: Yeah, no, that's exactly correct. And so if you look

513
00:26:45,040 --> 00:26:47,800
Speaker 4: at something like McHenry Waters, right, which is one of

514
00:26:47,840 --> 00:26:50,240
Speaker 4: the stable coin bills running around in front of the

515
00:26:50,359 --> 00:26:54,199
Speaker 4: US legislature right now. They are trying to define in

516
00:26:54,280 --> 00:26:57,440
Speaker 4: their words, what a stable coin actually is, and many

517
00:26:57,480 --> 00:27:01,399
Speaker 4: of these bills include either bab uns on stable coins

518
00:27:01,440 --> 00:27:04,240
Speaker 4: that're outside of that box. So that probably means both

519
00:27:04,320 --> 00:27:07,719
Speaker 4: issuers and people using them for payments. It has stable coins,

520
00:27:07,960 --> 00:27:11,800
Speaker 4: or if not bans, at least prohibitions on like calling

521
00:27:11,800 --> 00:27:15,160
Speaker 4: them stable coins, representing them as safe, using them for payments.

522
00:27:15,720 --> 00:27:17,879
Speaker 4: I tend to fall into the second camp, which is

523
00:27:18,600 --> 00:27:20,920
Speaker 4: people should be able to experiment and try things. They

524
00:27:20,960 --> 00:27:22,800
Speaker 4: just need to be honest about it and not lie

525
00:27:22,800 --> 00:27:25,760
Speaker 4: about stability or get special treatment unless they've actually done

526
00:27:25,760 --> 00:27:26,359
Speaker 4: the right things.

527
00:27:27,040 --> 00:27:30,119
Speaker 3: So so far in the real world, we've seen a

528
00:27:30,160 --> 00:27:34,040
Speaker 3: stable coin that was affected by the collapse of a bank,

529
00:27:34,200 --> 00:27:38,199
Speaker 3: so Circle and SVB, which is kind of funny. But

530
00:27:38,359 --> 00:27:40,840
Speaker 3: I'm going to ask you the complete opposite question, which is,

531
00:27:40,880 --> 00:27:43,600
Speaker 3: if we have the collapse of a stable coin, what

532
00:27:43,840 --> 00:27:46,920
Speaker 3: impact would that have on the traditional financial system.

533
00:27:47,640 --> 00:27:49,600
Speaker 4: So the answer to that is we need to ask

534
00:27:49,680 --> 00:27:51,840
Speaker 4: what we mean by quote unquote the collapse of a

535
00:27:51,840 --> 00:27:54,400
Speaker 4: stable coin, right, because you're kind of looking at two

536
00:27:54,440 --> 00:27:57,960
Speaker 4: scenarios and this reveals where you know, I said earlier,

537
00:27:58,000 --> 00:27:59,800
Speaker 4: I think the discourse around these has been a little

538
00:27:59,800 --> 00:28:02,480
Speaker 4: bit broken. This is why. So one would be the

539
00:28:02,520 --> 00:28:05,920
Speaker 4: complete liquidation of a stable coin, but with sufficient preserves.

540
00:28:06,000 --> 00:28:08,560
Speaker 4: So circle as of the time of US recording, this

541
00:28:08,600 --> 00:28:11,639
Speaker 4: is somewhere in like the thirty four billion ish range,

542
00:28:12,119 --> 00:28:14,600
Speaker 4: But they have the super majority of that money in

543
00:28:14,640 --> 00:28:17,920
Speaker 4: a reverse repo fund that's being managed by a professional

544
00:28:17,920 --> 00:28:21,000
Speaker 4: asset manager. If they had to liquidate one hundred percent

545
00:28:21,000 --> 00:28:24,000
Speaker 4: of that thing, they could, And so the answer you're

546
00:28:24,040 --> 00:28:28,160
Speaker 4: asking is what does liquidating thirty four billion of overnight

547
00:28:28,200 --> 00:28:30,520
Speaker 4: reverse repo look like? And by the way, who's on

548
00:28:30,560 --> 00:28:32,399
Speaker 4: the other side of that? Because that money has to

549
00:28:32,440 --> 00:28:35,040
Speaker 4: go somewhere. It's not being vaporized, right Like, this is

550
00:28:35,080 --> 00:28:37,960
Speaker 4: the classic problem of plus one minus one. I don't

551
00:28:38,000 --> 00:28:41,200
Speaker 4: think that's really a systemic problem unless we're in a

552
00:28:41,240 --> 00:28:45,160
Speaker 4: period of such deeply impacted liquidity that we can't move

553
00:28:45,280 --> 00:28:47,600
Speaker 4: thirty four yards of that stuff. But in that case,

554
00:28:47,640 --> 00:28:49,320
Speaker 4: I would tell you the problem is unlikely to be

555
00:28:49,600 --> 00:28:53,000
Speaker 4: just the stable coin. The other option is did a

556
00:28:53,040 --> 00:28:57,520
Speaker 4: stable coin hold reserves that themselves lost value? So, like,

557
00:28:57,640 --> 00:29:00,400
Speaker 4: let's hypothetically say that the guys that circled use them

558
00:29:00,400 --> 00:29:02,840
Speaker 4: again as the example, not an insult to circle decided

559
00:29:02,880 --> 00:29:06,160
Speaker 4: instead of holding like overnight reverse repo, we're gonna YOLO

560
00:29:06,240 --> 00:29:10,080
Speaker 4: into Tesla, and then that goes really badly, right, And

561
00:29:10,120 --> 00:29:11,800
Speaker 4: so in that case, you're gonna have a bunch of

562
00:29:11,800 --> 00:29:14,080
Speaker 4: people coming to redeem and what's gonna happen is you

563
00:29:14,080 --> 00:29:16,160
Speaker 4: will have a ton of cell pressure on that asset

564
00:29:16,160 --> 00:29:18,520
Speaker 4: as people bail out, and then you're gonna have the

565
00:29:18,520 --> 00:29:21,959
Speaker 4: classic problem of at the end it's worth zero. I

566
00:29:22,040 --> 00:29:25,120
Speaker 4: think that largely becomes a problem if you're using it

567
00:29:25,160 --> 00:29:27,640
Speaker 4: for payments, or using it for savings, or using it

568
00:29:27,680 --> 00:29:30,840
Speaker 4: with an expectation of safety. So in that case, there's

569
00:29:30,880 --> 00:29:33,680
Speaker 4: this sort of intrinsic linkage between the safety of the

570
00:29:33,760 --> 00:29:38,120
Speaker 4: reserves and the ability to cause shocks. That tether has

571
00:29:38,120 --> 00:29:40,440
Speaker 4: been the main focus of these concerns, and it's been

572
00:29:40,480 --> 00:29:43,120
Speaker 4: the main focus of these concerns because people don't know

573
00:29:43,200 --> 00:29:47,120
Speaker 4: what tether is holding, right. But like take Paksos for example,

574
00:29:47,200 --> 00:29:50,600
Speaker 4: BUSD was shut down by the NYDFS and at the

575
00:29:50,600 --> 00:29:52,560
Speaker 4: time it was twenty two and a half billion and

576
00:29:52,640 --> 00:29:55,920
Speaker 4: now today is under one billion, and absolutely nothing happened

577
00:29:56,000 --> 00:29:56,680
Speaker 4: liquidating that.

578
00:30:13,600 --> 00:30:17,600
Speaker 2: So let's say, you know, stable coin usage continues to

579
00:30:17,760 --> 00:30:22,440
Speaker 2: grow in markets where people just want to have dollar exposure,

580
00:30:22,600 --> 00:30:26,720
Speaker 2: so you're you know, you're obvious examples Argentina as your Venezuela's.

581
00:30:27,080 --> 00:30:30,400
Speaker 2: And let's say people are using the popular public blockchains

582
00:30:30,400 --> 00:30:35,000
Speaker 2: to exchange them, whether it's Ethereum, Solana, et cetera. There

583
00:30:35,040 --> 00:30:38,120
Speaker 2: are people who are bullish on those changes the tokens

584
00:30:38,160 --> 00:30:41,120
Speaker 2: of those chains, because people are gonna listen to the

585
00:30:41,200 --> 00:30:43,880
Speaker 2: Austin Campbell scenario where this is a lot of real

586
00:30:43,960 --> 00:30:48,600
Speaker 2: dollars are being traded or exchanged over these chains. In

587
00:30:48,720 --> 00:30:52,520
Speaker 2: your in your view, does much value who does the

588
00:30:52,600 --> 00:30:55,520
Speaker 2: value accru to? Does there accrue much value to the

589
00:30:55,520 --> 00:30:56,880
Speaker 2: tokenholders of these chains?

590
00:30:57,680 --> 00:31:00,320
Speaker 4: I'm not certain that it does. Again, this sort of

591
00:31:00,320 --> 00:31:04,680
Speaker 4: comes back to crypto sort of reinventing things in finance

592
00:31:04,720 --> 00:31:07,800
Speaker 4: and everybody talking past each other. Right, if you're an

593
00:31:07,800 --> 00:31:11,680
Speaker 4: extremely high through put chain, but you charge extremely low

594
00:31:11,800 --> 00:31:14,680
Speaker 4: fees for that high through put, it's not like a Solana.

595
00:31:14,760 --> 00:31:17,720
Speaker 4: Like a Solana, it's not clear to me that value

596
00:31:17,760 --> 00:31:20,160
Speaker 4: will accrue in a deep way to the Salana holders.

597
00:31:20,160 --> 00:31:22,560
Speaker 4: It's also not clear to me that it won't. But

598
00:31:22,720 --> 00:31:25,400
Speaker 4: I would say that is an area where many things

599
00:31:25,440 --> 00:31:28,640
Speaker 4: are simply accepted as given in the crypto space, and

600
00:31:28,680 --> 00:31:31,240
Speaker 4: I often have questions about them, which is not to

601
00:31:31,280 --> 00:31:34,880
Speaker 4: say right skeptic in the sense of like it'll never work,

602
00:31:34,960 --> 00:31:37,200
Speaker 4: but I'm I would say skeptical in the sense of

603
00:31:37,320 --> 00:31:39,840
Speaker 4: I genuinely don't know, Like I have a lot of questions.

604
00:31:40,080 --> 00:31:43,240
Speaker 3: Could we ever have a situation where the use of

605
00:31:43,280 --> 00:31:46,920
Speaker 3: stable coins grows so enormously that at some point the

606
00:31:47,000 --> 00:31:49,360
Speaker 3: banks are like, actually, we're going to get in on

607
00:31:49,440 --> 00:31:53,640
Speaker 3: this cold Could they, in theory, like flip a switch

608
00:31:53,840 --> 00:31:57,720
Speaker 3: and come up with a stable coin competitor or immediately

609
00:31:57,800 --> 00:32:02,800
Speaker 3: convert to like atomic settle or instantaneous settlement or something

610
00:32:02,840 --> 00:32:05,400
Speaker 3: like that, Or would that just be impossible, either because

611
00:32:05,440 --> 00:32:10,440
Speaker 3: of their technological systems or because of regulations around remittances

612
00:32:10,480 --> 00:32:11,160
Speaker 3: and things like that.

613
00:32:11,280 --> 00:32:13,560
Speaker 4: So I think the current biggest problem is the legal

614
00:32:13,600 --> 00:32:16,640
Speaker 4: structure and balance sheet of banks, right, which is to say,

615
00:32:17,200 --> 00:32:19,840
Speaker 4: stable coins are trying to be this thing that everybody

616
00:32:19,840 --> 00:32:22,640
Speaker 4: can transfer between everybody, and the reserves over time have

617
00:32:22,760 --> 00:32:26,640
Speaker 4: trended towards being incredibly simplistic and call it mutually acceptable

618
00:32:26,640 --> 00:32:30,360
Speaker 4: to everybody. That's not typically true of bank balance sheets right.

619
00:32:30,440 --> 00:32:33,560
Speaker 4: Problem number one, bank deposits are not fungible. You would

620
00:32:33,600 --> 00:32:36,480
Speaker 4: feel very differently last year owning a deposit at say

621
00:32:36,520 --> 00:32:39,120
Speaker 4: Bank of America versus Silicon Valley Bank. These will not

622
00:32:39,160 --> 00:32:44,000
Speaker 4: be priced identically and two banks moving money around between them.

623
00:32:44,040 --> 00:32:46,400
Speaker 4: Back to our earlier example, if they actually have to

624
00:32:46,440 --> 00:32:49,040
Speaker 4: net settle, are like deinvesting out of things and then

625
00:32:49,120 --> 00:32:52,360
Speaker 4: reinvesting in other things. This is not really the same

626
00:32:52,400 --> 00:32:56,160
Speaker 4: as moving a token around. So to answer that question,

627
00:32:56,240 --> 00:32:59,280
Speaker 4: I think there's not a reason banks can't do it

628
00:32:59,360 --> 00:33:03,000
Speaker 4: in theory, but it would require a pretty radical transformation

629
00:33:03,040 --> 00:33:05,760
Speaker 4: of bank balance sheets. Like if all the banks set

630
00:33:05,840 --> 00:33:09,440
Speaker 4: up call it bankruptcy remote trusts that represent a stable

631
00:33:09,520 --> 00:33:11,680
Speaker 4: coin where they're just doing t bills, Yeah, this will

632
00:33:11,680 --> 00:33:14,920
Speaker 4: work fine. Those will all largely be fungible, but right

633
00:33:14,960 --> 00:33:16,720
Speaker 4: now with bank balance sheets unlikely.

634
00:33:16,960 --> 00:33:21,360
Speaker 2: So basically, if JP Morgan and Bank of America, they're

635
00:33:21,360 --> 00:33:25,480
Speaker 2: probably their asset book probably looks somewhat similar, but they're

636
00:33:25,480 --> 00:33:28,480
Speaker 2: not identical. And therefore a transfer of value from a

637
00:33:28,520 --> 00:33:31,280
Speaker 2: dollar of a JP Morgan deposit holder to a Bank

638
00:33:31,280 --> 00:33:35,719
Speaker 2: of America means some reshuffling of the assets or the

639
00:33:35,760 --> 00:33:38,400
Speaker 2: loans that they've made and they're not perfectly identical, and

640
00:33:38,440 --> 00:33:39,800
Speaker 2: then this creates friction.

641
00:33:40,120 --> 00:33:43,040
Speaker 4: And I would say importantly, the degree of difference between

642
00:33:43,040 --> 00:33:45,280
Speaker 4: those things is going to be much larger than if

643
00:33:45,280 --> 00:33:48,120
Speaker 4: we go look at like fidelities government money market fund

644
00:33:48,240 --> 00:33:51,080
Speaker 4: versus Vanguard's government money market fund, which may not be

645
00:33:51,120 --> 00:33:53,160
Speaker 4: perfectly identical but will be way closer.

646
00:33:53,400 --> 00:33:55,280
Speaker 2: There is this toggers like, just treat these as money

647
00:33:55,280 --> 00:33:58,640
Speaker 2: market funds. If your a stable coin issuer, your money

648
00:33:58,640 --> 00:34:01,440
Speaker 2: market fund and all the obligations that they that a

649
00:34:01,480 --> 00:34:04,800
Speaker 2: money market mutual fund has, that's your obligation. Does that work?

650
00:34:05,000 --> 00:34:07,080
Speaker 2: Like what are the differences? Why or why not?

651
00:34:07,560 --> 00:34:11,080
Speaker 4: Yeah, So that's a very like us peculiarity problem of

652
00:34:11,239 --> 00:34:14,680
Speaker 4: it's really hard to pay for things with securities. So

653
00:34:15,000 --> 00:34:17,160
Speaker 4: my question would be what do you mean by money

654
00:34:17,160 --> 00:34:19,759
Speaker 4: market fund? If you mean we can put it in

655
00:34:19,880 --> 00:34:23,120
Speaker 4: like a bank or a trust wrapper and own assets

656
00:34:23,160 --> 00:34:26,080
Speaker 4: that look substantially similar to a government money market fund,

657
00:34:26,080 --> 00:34:29,120
Speaker 4: I would tell you that's basically what mckenry waters does.

658
00:34:29,680 --> 00:34:32,000
Speaker 4: So I think that works fine. If you want to

659
00:34:32,040 --> 00:34:34,360
Speaker 4: say no, you le like literally need to be issued

660
00:34:34,400 --> 00:34:36,640
Speaker 4: as a security and handled in that way, then no,

661
00:34:36,760 --> 00:34:39,239
Speaker 4: that creates a whole host of other problems that will

662
00:34:39,239 --> 00:34:40,560
Speaker 4: break things for payments.

663
00:34:41,040 --> 00:34:44,439
Speaker 3: So here we are in early twenty twenty four. We're

664
00:34:44,440 --> 00:34:47,560
Speaker 3: talking about stable coins, which a lot of people thought

665
00:34:47,960 --> 00:34:50,279
Speaker 3: might go away at some point or there would be

666
00:34:50,320 --> 00:34:52,840
Speaker 3: some sort of volatility event that would lead everyone to

667
00:34:52,960 --> 00:34:55,880
Speaker 3: question whether or not these are a legitimate store of value,

668
00:34:56,239 --> 00:35:00,239
Speaker 3: And instead they're still here. They've been pretty stable. What's

669
00:35:00,440 --> 00:35:04,680
Speaker 3: next in the sort of stable coin either discourse or trajectory.

670
00:35:05,520 --> 00:35:08,320
Speaker 4: So I think what we're starting to see right now

671
00:35:08,440 --> 00:35:12,200
Speaker 4: is a growing realization among some of the regulators, mostly

672
00:35:12,200 --> 00:35:14,880
Speaker 4: in Asia, who have looked most closely at crypto, that

673
00:35:15,120 --> 00:35:18,439
Speaker 4: wait a minute, using these things properly is a way

674
00:35:18,480 --> 00:35:21,880
Speaker 4: to fix some of our lingering problems from two thousand

675
00:35:21,880 --> 00:35:26,400
Speaker 4: and eight, right, And then probably a increasing merging of

676
00:35:26,560 --> 00:35:30,200
Speaker 4: call it crypto native stable coin thinking with traditional financial

677
00:35:30,239 --> 00:35:33,520
Speaker 4: thinking into something that one hopes will get you the

678
00:35:33,600 --> 00:35:37,360
Speaker 4: best of And those two problems you referenced one earlier

679
00:35:37,880 --> 00:35:41,400
Speaker 4: are atomic settlement, right, which is to say, the ability

680
00:35:41,440 --> 00:35:46,439
Speaker 4: to pay for something completely perfectly simultaneously on chain using

681
00:35:46,480 --> 00:35:49,240
Speaker 4: a smart contract so that I don't have counterparty credit

682
00:35:49,320 --> 00:35:52,319
Speaker 4: risk in my trades. That is actually a pretty big

683
00:35:52,400 --> 00:35:54,279
Speaker 4: upgrade to the current system if we can get that

684
00:35:54,400 --> 00:35:59,280
Speaker 4: done and then simultaneously having these very bankruptcy stable vehicles

685
00:35:59,320 --> 00:36:01,920
Speaker 4: that can be held in self custody, because what that

686
00:36:02,000 --> 00:36:04,120
Speaker 4: does is eliminates a lot of the run risk of

687
00:36:04,160 --> 00:36:06,880
Speaker 4: the large banks and the systemicness there. Right like in

688
00:36:06,920 --> 00:36:09,960
Speaker 4: two thousand and eight, if you owned USDC in its

689
00:36:09,960 --> 00:36:13,280
Speaker 4: current form, which is basically a government money market fund

690
00:36:13,360 --> 00:36:16,759
Speaker 4: under the hood, nobody's running that thing, nobody's panicking. They're

691
00:36:16,760 --> 00:36:20,000
Speaker 4: all just sitting around looking marginally bored, instead of having

692
00:36:20,000 --> 00:36:23,160
Speaker 4: a giant run on bank deposits. And so I think

693
00:36:23,200 --> 00:36:25,960
Speaker 4: a system that starts embracing those things and then being

694
00:36:26,000 --> 00:36:29,880
Speaker 4: able to move them around easily across borders both eliminates

695
00:36:29,880 --> 00:36:33,160
Speaker 4: a huge amount of frictions and simultaneously reduces a lot

696
00:36:33,200 --> 00:36:34,680
Speaker 4: of risk that's left from O eight.

697
00:36:35,800 --> 00:36:40,319
Speaker 2: Tracy mentioned the prospect of a JPM stable coin or

698
00:36:40,360 --> 00:36:44,160
Speaker 2: something like that. I believe, like has jp Morgan like,

699
00:36:44,200 --> 00:36:47,920
Speaker 2: have they built their own like sort of e EVM

700
00:36:47,960 --> 00:36:48,920
Speaker 2: compatible chain.

701
00:36:49,800 --> 00:36:52,560
Speaker 4: So JPM has a project called Onyx and a thing

702
00:36:52,600 --> 00:36:57,480
Speaker 4: called jpm coin, and back to using it for financial purposes.

703
00:36:58,040 --> 00:37:00,399
Speaker 4: Now you have a twenty four to seven plat form

704
00:37:00,440 --> 00:37:03,120
Speaker 4: that can do atomic settlement largely of things like repo,

705
00:37:03,760 --> 00:37:06,120
Speaker 4: and you can do them outside of regular market hours.

706
00:37:06,160 --> 00:37:07,279
Speaker 4: So yeah, these are very real.

707
00:37:07,400 --> 00:37:11,880
Speaker 2: So is there any reason why a platform like onyx

708
00:37:11,960 --> 00:37:15,760
Speaker 2: couldn't just be the chain that everyone around the world

709
00:37:15,920 --> 00:37:18,680
Speaker 2: uses to transfer stable claims.

710
00:37:19,040 --> 00:37:22,040
Speaker 4: Well, let me ask you a different question to reveal

711
00:37:22,040 --> 00:37:24,160
Speaker 4: the problem with that question, which is, if you were

712
00:37:24,160 --> 00:37:26,880
Speaker 4: the CEO of Goldman Sachs, would you use a trading

713
00:37:26,880 --> 00:37:30,680
Speaker 4: and settlement platform unilaterally controlled by JP Morgan you get.

714
00:37:30,600 --> 00:37:33,920
Speaker 2: A little consortium together, like, get six or seven banks

715
00:37:33,920 --> 00:37:34,080
Speaker 2: to do.

716
00:37:34,120 --> 00:37:36,920
Speaker 4: It, correct, So now you're leading down the path to

717
00:37:37,040 --> 00:37:40,160
Speaker 4: like DTCC. So like, let's take this actually a few

718
00:37:40,200 --> 00:37:42,960
Speaker 4: steps forward. If you get a large consortium of I

719
00:37:42,960 --> 00:37:45,080
Speaker 4: would suggest in the US, this will not work with

720
00:37:45,280 --> 00:37:47,839
Speaker 4: just banks. So let's say bank's asset managers and maybe

721
00:37:47,840 --> 00:37:51,240
Speaker 4: insurance companies. Okay, that would probably work inside the US,

722
00:37:51,400 --> 00:37:52,719
Speaker 4: But then you're going to have the problem of how

723
00:37:52,719 --> 00:37:54,080
Speaker 4: do we get Europe to use it? How do we

724
00:37:54,080 --> 00:37:56,520
Speaker 4: get Asia to use it? Okay, So now you're incorporating

725
00:37:56,560 --> 00:38:00,239
Speaker 4: those entities as well. So if you're telling me the

726
00:38:00,600 --> 00:38:03,239
Speaker 4: I'm gonna say public here in a very loose way

727
00:38:03,800 --> 00:38:06,440
Speaker 4: blockchain of the future that everybody is using is a

728
00:38:06,480 --> 00:38:09,560
Speaker 4: consortium of call it the five hundred largest financial entities

729
00:38:09,600 --> 00:38:12,640
Speaker 4: globally that actually seems viable to me, Like that is

730
00:38:12,760 --> 00:38:16,440
Speaker 4: decentralized in a slightly different way. I don't think anonymous

731
00:38:16,480 --> 00:38:19,600
Speaker 4: public validators are necessarily the perfect answer. And by the way,

732
00:38:20,080 --> 00:38:22,239
Speaker 4: even if you look at current technology, like if you're

733
00:38:22,280 --> 00:38:25,040
Speaker 4: familiar with the Stellar blockchain, they have a fully doxed

734
00:38:25,120 --> 00:38:27,759
Speaker 4: validator set and what I just described is essentially how

735
00:38:27,760 --> 00:38:30,200
Speaker 4: they want it to work. So I do think in

736
00:38:30,239 --> 00:38:34,319
Speaker 4: the future, more institutional if you will, chains could be

737
00:38:34,400 --> 00:38:37,000
Speaker 4: the answer. I'm not like an ETHMAXI on that, but

738
00:38:37,040 --> 00:38:39,160
Speaker 4: I do think they need to be neutral enough that

739
00:38:39,200 --> 00:38:40,920
Speaker 4: everybody trusts them.

740
00:38:41,600 --> 00:38:44,719
Speaker 3: I have another question just on why others aren't doing this.

741
00:38:44,840 --> 00:38:46,680
Speaker 3: We've been talking about the banks, and you laid out

742
00:38:46,719 --> 00:38:50,360
Speaker 3: a very clear argument why banks might be reticent to

743
00:38:50,480 --> 00:38:53,800
Speaker 3: create their own stable coins, including that it would involve

744
00:38:53,880 --> 00:38:57,440
Speaker 3: possibly rejigging the way their balance sheets are structured or

745
00:38:57,440 --> 00:39:00,120
Speaker 3: creating some sort of shared balance sheet, which okay, obviously

746
00:39:00,160 --> 00:39:03,239
Speaker 3: banks don't want to do it. What about other financial

747
00:39:03,239 --> 00:39:07,480
Speaker 3: intermediaries like a PayPal? Is this something they would ostensibly

748
00:39:07,520 --> 00:39:10,280
Speaker 3: be interested in, and could they create their own.

749
00:39:10,160 --> 00:39:12,440
Speaker 4: Competitor, Well, I mean I built the back end for

750
00:39:12,480 --> 00:39:15,520
Speaker 4: PayPal stable corner. The answer there is, oh, yeah, they're

751
00:39:15,600 --> 00:39:19,239
Speaker 4: very interested. I would say as you look at the

752
00:39:19,280 --> 00:39:22,360
Speaker 4: groups who are threatened by this, banks and payments companies

753
00:39:22,400 --> 00:39:26,000
Speaker 4: are probably the most exposed to the technological change, and

754
00:39:26,000 --> 00:39:29,520
Speaker 4: the majority of them are currently paralyzed by a combination

755
00:39:29,600 --> 00:39:34,319
Speaker 4: of the innovator's dilemma and regulation. Whoever moves first there

756
00:39:34,320 --> 00:39:37,520
Speaker 4: and gets this right is probably your leader in the

757
00:39:37,560 --> 00:39:40,280
Speaker 4: next generation of how these things are going to work.

758
00:39:40,719 --> 00:39:44,000
Speaker 4: So to your point, you'd much rather cannibalize yourself than

759
00:39:44,040 --> 00:39:47,520
Speaker 4: have other people cannibalize you. And there are very much

760
00:39:47,560 --> 00:39:50,719
Speaker 4: people at like PayPal, Visa and others who are thinking

761
00:39:50,760 --> 00:39:54,120
Speaker 4: about this exact problem and building things right now. I

762
00:39:54,160 --> 00:39:57,200
Speaker 4: would also say the other big thrust is the asset managers,

763
00:39:57,239 --> 00:39:59,719
Speaker 4: because they're the ones probably with the biggest incentive to

764
00:39:59,719 --> 00:40:03,000
Speaker 4: dis intermediate the banks. I would say black rocks interest

765
00:40:03,040 --> 00:40:07,680
Speaker 4: in blockchain is not a coincidence economically, going.

766
00:40:07,480 --> 00:40:11,200
Speaker 2: Back to the countries or the regimes in which someone

767
00:40:11,280 --> 00:40:15,000
Speaker 2: might want to hold dollar denominated assets and let's bracket

768
00:40:15,040 --> 00:40:17,840
Speaker 2: out the Afghanistans or the world, which is an extreme scenario,

769
00:40:17,840 --> 00:40:20,960
Speaker 2: but the places that just do not have stable domestic currencies,

770
00:40:21,239 --> 00:40:25,560
Speaker 2: et cetera. Can they presumably don't want all of their

771
00:40:25,600 --> 00:40:30,239
Speaker 2: domestic savers to like hold hold dollars, right, They presumably

772
00:40:30,239 --> 00:40:33,719
Speaker 2: don't want people swapping their money into dollars as soon

773
00:40:33,760 --> 00:40:37,680
Speaker 2: as they can. Do they have mechanisms of pushing back

774
00:40:37,719 --> 00:40:41,560
Speaker 2: against this? Does an Argentinian government like I, you know,

775
00:40:41,600 --> 00:40:44,600
Speaker 2: anyone can download and eth wallet onto their phone, get

776
00:40:44,880 --> 00:40:47,840
Speaker 2: transferred onto it, et cetera. Do they at some point?

777
00:40:47,880 --> 00:40:49,799
Speaker 2: Does it scare them? And do they have ways of

778
00:40:49,840 --> 00:40:54,640
Speaker 2: pushing back against their domestic savers automatically being able to

779
00:40:54,640 --> 00:40:55,240
Speaker 2: hold dollars?

780
00:40:56,040 --> 00:40:58,759
Speaker 4: So one, it one hundred percent scares them. If you

781
00:40:58,800 --> 00:41:00,879
Speaker 4: look at what's going on in Nigel area right now

782
00:41:00,920 --> 00:41:05,440
Speaker 4: and them taking like executives from Binance hostage literally like

783
00:41:05,560 --> 00:41:08,160
Speaker 4: this as part of the driver. So I would say

784
00:41:08,200 --> 00:41:10,719
Speaker 4: to you there's two things you need to think about there.

785
00:41:10,880 --> 00:41:13,360
Speaker 4: One is do they have ways to stop them that

786
00:41:13,480 --> 00:41:17,440
Speaker 4: involve coercive measures? Yes, but they have to be extreme.

787
00:41:17,640 --> 00:41:19,799
Speaker 4: Like again, to go back to having run a stable coin,

788
00:41:19,840 --> 00:41:22,359
Speaker 4: the only country where we were totally certain nobody owned

789
00:41:22,360 --> 00:41:24,960
Speaker 4: a stable coin was North Korea, right, And the answer

790
00:41:25,000 --> 00:41:26,640
Speaker 4: is you have to take the Internet away from your

791
00:41:26,640 --> 00:41:29,040
Speaker 4: people right to be able to totally stop it, so

792
00:41:29,080 --> 00:41:31,440
Speaker 4: there will always be some degree of leakage. Now you

793
00:41:31,440 --> 00:41:34,360
Speaker 4: can get more and more coercive and abuse human rights

794
00:41:34,360 --> 00:41:36,680
Speaker 4: more and more to try to turn it down, but

795
00:41:36,800 --> 00:41:39,279
Speaker 4: that's gonna have other negative effects on your economy that

796
00:41:39,360 --> 00:41:41,919
Speaker 4: go hand in hand with that. The other part, which

797
00:41:41,920 --> 00:41:44,799
Speaker 4: I would call the positive case, is you know you

798
00:41:44,840 --> 00:41:47,200
Speaker 4: could just run your currency better and cut it with

799
00:41:47,239 --> 00:41:49,920
Speaker 4: the inflation. Right If you look at places like Switzerland

800
00:41:49,920 --> 00:41:54,319
Speaker 4: and Singapore, they're not seeing massive outflows into dollars out

801
00:41:54,320 --> 00:41:57,440
Speaker 4: of their local currency because people trust the local currency

802
00:41:58,080 --> 00:42:00,480
Speaker 4: in many ways. If you give people the option but

803
00:42:00,560 --> 00:42:04,319
Speaker 4: not the requirement, to substitute into dollars, it's going to

804
00:42:04,440 --> 00:42:07,600
Speaker 4: If people want their local currencies to survive, have to

805
00:42:08,080 --> 00:42:10,680
Speaker 4: raise the level of behavior so that you're at least

806
00:42:10,719 --> 00:42:13,480
Speaker 4: close to the dollar, or you are eventually going to

807
00:42:13,480 --> 00:42:14,120
Speaker 4: get wiped out.

808
00:42:14,600 --> 00:42:18,000
Speaker 3: Conversely, asking the same question from the other side, is

809
00:42:18,040 --> 00:42:20,719
Speaker 3: there a reason that the US should be concerned about this?

810
00:42:20,880 --> 00:42:22,600
Speaker 3: I mean, we are kind of talking about a shadow

811
00:42:22,680 --> 00:42:26,320
Speaker 3: dollar system. There is this ongoing discussion about the pros

812
00:42:26,440 --> 00:42:29,719
Speaker 3: and cons of the dollar being the reserve asset to

813
00:42:29,920 --> 00:42:33,759
Speaker 3: the US economy. Is there a reason that people in

814
00:42:33,840 --> 00:42:38,080
Speaker 3: America or policy makers in America should be concerned about.

815
00:42:37,880 --> 00:42:41,520
Speaker 4: This, Well, I would say from a policy makers standpoint,

816
00:42:41,560 --> 00:42:44,560
Speaker 4: my biggest concerns would be two, which is, one, we

817
00:42:44,600 --> 00:42:47,319
Speaker 4: restrict these things so much that something other than the

818
00:42:47,400 --> 00:42:50,879
Speaker 4: dollar becomes the dominant currency on a blockchain, because if

819
00:42:50,880 --> 00:42:54,960
Speaker 4: this process essentially continues to run of people getting access

820
00:42:54,960 --> 00:42:57,760
Speaker 4: to other financial systems but they prefer like the euro

821
00:42:57,960 --> 00:42:59,719
Speaker 4: or the yen or something like that, that could have

822
00:42:59,719 --> 00:43:02,960
Speaker 4: a major impact on dollar dominance. And whether you think

823
00:43:03,000 --> 00:43:05,000
Speaker 4: the dollars should be the reserve currency or not, I

824
00:43:05,000 --> 00:43:08,000
Speaker 4: would hope everybody is an agreement that a call it

825
00:43:08,239 --> 00:43:12,400
Speaker 4: unpredictable sort of technology driven catastrophic onwind of that system

826
00:43:12,480 --> 00:43:15,919
Speaker 4: is probably bad for everybody. Two, there are a lot

827
00:43:15,960 --> 00:43:20,040
Speaker 4: of national security implications to dollar stable coins working properly.

828
00:43:20,160 --> 00:43:24,160
Speaker 4: Back to what I just said about public blockchains. If

829
00:43:24,160 --> 00:43:27,040
Speaker 4: you have all of the KYC information and you know

830
00:43:27,080 --> 00:43:30,040
Speaker 4: where the reserves are, you are in very good shape

831
00:43:30,040 --> 00:43:33,160
Speaker 4: to interdict bad actors and retain some degree of control

832
00:43:33,239 --> 00:43:36,680
Speaker 4: over a system. If everything moves off shore in a

833
00:43:36,680 --> 00:43:39,040
Speaker 4: way that you have no access to it, things are

834
00:43:39,120 --> 00:43:42,080
Speaker 4: worse instead. So I think we have a real fork

835
00:43:42,120 --> 00:43:44,279
Speaker 4: in the road here of being able to call it

836
00:43:44,440 --> 00:43:48,120
Speaker 4: enforced dollar norms in a more effective, targeted and quite

837
00:43:48,160 --> 00:43:52,480
Speaker 4: frankly transparent way, or having that breakdown even further, and

838
00:43:52,520 --> 00:43:55,840
Speaker 4: that is based on getting US dollar coins on shore,

839
00:43:56,200 --> 00:43:58,600
Speaker 4: structured properly and in a way where we can interact

840
00:43:58,600 --> 00:43:59,240
Speaker 4: with them easily.

841
00:44:00,120 --> 00:44:02,600
Speaker 2: Norms is a really good phrase. I might use that

842
00:44:02,640 --> 00:44:04,120
Speaker 2: at some point in the future. All Right, I just

843
00:44:04,160 --> 00:44:06,759
Speaker 2: have one last question. You know, you mentioned that sort

844
00:44:06,800 --> 00:44:11,160
Speaker 2: of like circle due to its own I don't know,

845
00:44:11,200 --> 00:44:15,120
Speaker 2: maybe misunderstanding aspects of the traditional financial system did not

846
00:44:15,280 --> 00:44:19,720
Speaker 2: have particularly good risk management, and they had some money

847
00:44:19,719 --> 00:44:22,640
Speaker 2: in SVB, and for a while they had a pretty

848
00:44:22,680 --> 00:44:25,840
Speaker 2: significant DEPEG, but then SVB got built out and it

849
00:44:26,040 --> 00:44:29,880
Speaker 2: was fine. What are the when you talk to crypto people,

850
00:44:30,360 --> 00:44:35,520
Speaker 2: what are their sort of frequent misunderstandings? And I again,

851
00:44:35,560 --> 00:44:38,720
Speaker 2: I imagine we could go hours and hours with a series

852
00:44:38,760 --> 00:44:41,640
Speaker 2: of things crypto people don't get about the financial system.

853
00:44:41,920 --> 00:44:45,560
Speaker 2: But what are the consistent patterns that you see failure

854
00:44:45,600 --> 00:44:49,799
Speaker 2: patterns in people in crypto not getting some aspect of

855
00:44:49,840 --> 00:44:50,359
Speaker 2: trad five.

856
00:44:51,000 --> 00:44:53,320
Speaker 4: Yeah, so I would say there's a couple of big themes.

857
00:44:53,400 --> 00:44:57,120
Speaker 4: One of the biggest is sort of extrapolating from personal finance,

858
00:44:57,200 --> 00:44:59,560
Speaker 4: which is a big problem in finance in general. Like

859
00:44:59,600 --> 00:45:02,000
Speaker 4: the way you or local bank account works for five

860
00:45:02,040 --> 00:45:06,320
Speaker 4: thousand dollars is not the way that like Ford's balance

861
00:45:06,360 --> 00:45:08,759
Speaker 4: sheet works, and that is a big problem because when

862
00:45:08,760 --> 00:45:11,640
Speaker 4: you have people being like, well, I own USDC, won't

863
00:45:11,640 --> 00:45:14,799
Speaker 4: the FDIC protect the deposits at SVB. It's like they

864
00:45:14,840 --> 00:45:17,040
Speaker 4: have three point three billion of deposits and two hundred

865
00:45:17,040 --> 00:45:20,040
Speaker 4: and fifty thousand dollars of FDIC coverage. I don't like

866
00:45:20,120 --> 00:45:24,920
Speaker 4: your odds, and very basic misunderstandings like that happen frequently.

867
00:45:25,520 --> 00:45:28,360
Speaker 4: Number two is this thing that happens a lot with

868
00:45:28,480 --> 00:45:31,080
Speaker 4: tech where when you look at Silicon Valley companies, right,

869
00:45:31,160 --> 00:45:33,200
Speaker 4: the tech people drive it, the product people drive it.

870
00:45:33,239 --> 00:45:35,160
Speaker 4: They are the rock stars, and the finance people are

871
00:45:35,200 --> 00:45:36,959
Speaker 4: kind of in a broom closet in the back room

872
00:45:37,440 --> 00:45:39,719
Speaker 4: and not even in the decision loops. So a lot

873
00:45:39,760 --> 00:45:42,839
Speaker 4: of its information accessibility, like there may have been people

874
00:45:42,840 --> 00:45:44,880
Speaker 4: who knew this, but nobody was talking to them or

875
00:45:44,920 --> 00:45:47,480
Speaker 4: taking them seriously. It's kind of the reverse of what

876
00:45:47,560 --> 00:45:49,319
Speaker 4: a lot of banks do, where they don't spend enough

877
00:45:49,320 --> 00:45:51,600
Speaker 4: time on the tech and let the investment bankers drive

878
00:45:51,640 --> 00:45:54,920
Speaker 4: everything right. So there's a cultural problem there in crypto.

879
00:45:55,400 --> 00:45:57,080
Speaker 4: And then the third part is you have a lot

880
00:45:57,080 --> 00:46:00,479
Speaker 4: of people who have these ideological stances on I want

881
00:46:00,520 --> 00:46:03,000
Speaker 4: hard money, I want to reinvent the system, we shouldn't

882
00:46:03,000 --> 00:46:06,640
Speaker 4: have leverage or credit at all, without understanding the implications

883
00:46:06,680 --> 00:46:08,359
Speaker 4: of what they're saying. And I often, like I've had

884
00:46:08,360 --> 00:46:10,520
Speaker 4: this discussion with students in my class, if you guys

885
00:46:10,520 --> 00:46:13,600
Speaker 4: want to go back to a system where there's no lending,

886
00:46:14,080 --> 00:46:16,799
Speaker 4: everything is hard money and it's just do you have

887
00:46:16,880 --> 00:46:19,040
Speaker 4: it or not. We've had that before. It's basically like

888
00:46:19,080 --> 00:46:22,120
Speaker 4: European feudalism, Like why would you want to go back there?

889
00:46:22,239 --> 00:46:25,760
Speaker 4: So there's very core misunderstandings of how the monetary system

890
00:46:25,800 --> 00:46:29,480
Speaker 4: works that I would say are a subset, but unfortunately

891
00:46:29,520 --> 00:46:31,800
Speaker 4: still a significant subset of people in crypto.

892
00:46:32,719 --> 00:46:35,600
Speaker 2: Austin Campbell, thank you so much for coming on outlast.

893
00:46:35,640 --> 00:46:51,799
Speaker 2: That was great, Tracy. I really enjoyed that conversation. It

894
00:46:51,960 --> 00:46:55,800
Speaker 2: was just, you know, zoom a someone, So it was

895
00:46:55,920 --> 00:46:59,640
Speaker 2: nxe to talk to someone who genuinely seems grounded in

896
00:46:59,719 --> 00:47:05,600
Speaker 2: multi yeah, which is extremely rare. Frankly, honestly, in any perspective,

897
00:47:05,640 --> 00:47:09,000
Speaker 2: most people have a worldview that's extremely skewed to one.

898
00:47:10,040 --> 00:47:12,480
Speaker 3: Well, it was very impressive when I asked about PayPal

899
00:47:12,520 --> 00:47:15,759
Speaker 3: and he's like, I got the back end. Okay, you

900
00:47:15,800 --> 00:47:18,120
Speaker 3: know what I remembered while we were you asked that

901
00:47:18,239 --> 00:47:21,799
Speaker 3: question about JP Morgan and eth and I remembered in

902
00:47:21,920 --> 00:47:27,960
Speaker 3: twenty thirteen finding a patent application for JP Morgan to do.

903
00:47:28,640 --> 00:47:30,960
Speaker 3: At the time, it was described by me as a

904
00:47:30,960 --> 00:47:35,120
Speaker 3: bitcoin like online payment system, but it was basically like

905
00:47:35,239 --> 00:47:38,880
Speaker 3: on chain payments. And it's so funny reading this. I

906
00:47:38,960 --> 00:47:40,600
Speaker 3: just dug it up and I was reading it, and

907
00:47:40,600 --> 00:47:44,080
Speaker 3: there's a line like traditional finance companies have had to

908
00:47:44,080 --> 00:47:46,959
Speaker 3: contend with new types of virtual currencies, which some people

909
00:47:47,080 --> 00:47:50,040
Speaker 3: view as viable alternative payment systems that could one day

910
00:47:50,160 --> 00:47:53,600
Speaker 3: challenge the biggest banks and credit cards. That was twenty thirteen,

911
00:47:53,960 --> 00:47:57,840
Speaker 3: and it's funny how much has changed, but also how

912
00:47:57,920 --> 00:48:00,000
Speaker 3: the conversation is still very similar totally.

913
00:48:00,120 --> 00:48:00,319
Speaker 4: You know.

914
00:48:00,480 --> 00:48:03,560
Speaker 2: It's so like I think Austin made a very good

915
00:48:03,680 --> 00:48:09,920
Speaker 2: case that there are some very deep institutional headwinds so

916
00:48:10,040 --> 00:48:13,920
Speaker 2: to speak, with banks going fully crypto, either launching their

917
00:48:13,960 --> 00:48:17,760
Speaker 2: own stable coins, or launching their own their own EVM

918
00:48:17,840 --> 00:48:21,759
Speaker 2: compatible chains, et cetera. That being said, you know, it's

919
00:48:21,760 --> 00:48:24,680
Speaker 2: hard for me to imagine the banks just sort of

920
00:48:25,160 --> 00:48:29,680
Speaker 2: sitting idly by, particularly in the scenario in which and

921
00:48:29,760 --> 00:48:31,920
Speaker 2: Austin is sort of seemed to be sort of agnostic

922
00:48:31,960 --> 00:48:34,279
Speaker 2: on this question. If it turns out that a lot

923
00:48:34,320 --> 00:48:38,400
Speaker 2: of value is accruing to the holders of eth tokens

924
00:48:38,520 --> 00:48:41,120
Speaker 2: or the holders of Solana tokens, or the holders of

925
00:48:41,160 --> 00:48:45,960
Speaker 2: tron tokens or whatever chain people are exchanging stable coins on,

926
00:48:46,400 --> 00:48:48,719
Speaker 2: I doubt they're gonna like sort of sit idly by

927
00:48:48,920 --> 00:48:51,680
Speaker 2: and just sort of let those let them, and we're

928
00:48:51,680 --> 00:48:53,680
Speaker 2: it's like, oh, we're just we're just the custodian that

929
00:48:53,719 --> 00:48:55,840
Speaker 2: holds the dollars while everyone else makes the money on

930
00:48:55,880 --> 00:48:56,360
Speaker 2: the payments.

931
00:48:56,800 --> 00:48:59,640
Speaker 3: Well, on the other hand, I mean, if the price

932
00:48:59,800 --> 00:49:03,080
Speaker 3: of developing or if the cost of developing your own

933
00:49:03,160 --> 00:49:06,080
Speaker 3: stable coin is that you have to, as Austin said,

934
00:49:06,160 --> 00:49:10,319
Speaker 3: radically reimagine your balance sheet and also cooperate in some

935
00:49:10,440 --> 00:49:13,640
Speaker 3: ways with other banks, which banks don't tend to be

936
00:49:13,760 --> 00:49:16,560
Speaker 3: very good at cooperating with each other. Like maybe the

937
00:49:16,600 --> 00:49:20,360
Speaker 3: business play is just become the custodian for those assets

938
00:49:20,360 --> 00:49:21,399
Speaker 3: and make money that way.

939
00:49:21,719 --> 00:49:23,640
Speaker 2: Yeah, it could be. It's also we didn't really bring

940
00:49:23,680 --> 00:49:27,520
Speaker 2: it up in this conversation, like especially in the last

941
00:49:27,520 --> 00:49:29,719
Speaker 2: couple of years. I mean, the stable coin business like

942
00:49:29,760 --> 00:49:32,920
Speaker 2: the best business coin, the best, the best business in

943
00:49:32,960 --> 00:49:36,680
Speaker 2: the entire world, because you you're getting all this yield

944
00:49:36,760 --> 00:49:38,920
Speaker 2: on your t bill, holdings, et cetera. And for the

945
00:49:38,920 --> 00:49:41,279
Speaker 2: most part, none of them. I think there are some

946
00:49:41,360 --> 00:49:44,120
Speaker 2: like theoretically yielding stable coins, but for the most part

947
00:49:44,600 --> 00:49:46,920
Speaker 2: they're just keeping all that yield and the end owner,

948
00:49:47,000 --> 00:49:49,200
Speaker 2: you know. So it's like, do not use these as

949
00:49:49,239 --> 00:49:51,960
Speaker 2: a money market mutual fund because those who are giving

950
00:49:52,040 --> 00:49:53,600
Speaker 2: up they're giving up the yield.

951
00:49:53,840 --> 00:49:54,080
Speaker 4: Yeah.

952
00:49:54,080 --> 00:49:58,480
Speaker 3: But still a fascinating conversation. And we'll have to keep

953
00:49:58,520 --> 00:50:01,400
Speaker 3: track of coins again. Yeah, yeah, because it's been a while,

954
00:50:01,440 --> 00:50:02,880
Speaker 3: hasn't it all right? Shall we leave it there?

955
00:50:02,960 --> 00:50:03,640
Speaker 2: Let's leave it there.

956
00:50:03,760 --> 00:50:06,759
Speaker 3: This has been another episode of the Authoughts podcast. I'm

957
00:50:06,800 --> 00:50:09,800
Speaker 3: Tracy Alloway. You can follow me at Tracy Alloway.

958
00:50:09,560 --> 00:50:12,280
Speaker 2: And I'm Joe Wisenthal. You can follow me at The Stalwart.

959
00:50:12,560 --> 00:50:16,400
Speaker 2: Follow Austin Campbell. He's at Campbell j Austin. Follow our

960
00:50:16,440 --> 00:50:20,480
Speaker 2: producers Carmen Rodriguez at Carmen Erman, Dashel Bennett at Dashbot,

961
00:50:20,480 --> 00:50:24,040
Speaker 2: and Kilbrooks at Kilbrooks. Thank you to our producer Moses ONEm.

962
00:50:24,239 --> 00:50:26,880
Speaker 2: For more Oddlaws content, go to Bloomberg dot com slash

963
00:50:26,880 --> 00:50:29,360
Speaker 2: odd Lots, where we have transcripts, a blog and a

964
00:50:29,400 --> 00:50:32,000
Speaker 2: newsletter and you can chat about all of these topics.

965
00:50:32,160 --> 00:50:34,640
Speaker 2: Twenty four to seven in our discord we have a

966
00:50:34,680 --> 00:50:37,000
Speaker 2: crypto channel and there maybe people will talk about it

967
00:50:37,040 --> 00:50:39,319
Speaker 2: there discord gg slash.

968
00:50:39,000 --> 00:50:41,680
Speaker 3: Odd Lots And if you enjoy odd Lots, if you

969
00:50:41,920 --> 00:50:45,080
Speaker 3: like it when we dig into the inner workings of

970
00:50:45,120 --> 00:50:48,440
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971
00:50:48,520 --> 00:50:52,000
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972
00:50:52,280 --> 00:50:55,040
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973
00:50:55,080 --> 00:50:58,600
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975
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976
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Speaker 3: Bloomberg channel on Apple Podcasts and follow the instructions there.

977
00:51:07,840 --> 00:51:08,680
Speaker 3: Thanks for listening.