Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Allaway. Tracy, I think
Speaker 1: that recently we may have seen one of the most
Speaker 1: pivotal events in the history of money. Uh, that is
Speaker 1: a large claim, But I think I know what you're
Speaker 1: talking about, Facebook's announcement about starting its own cryptocurrency called Libra, right, Like,
Speaker 1: I don't necessarily think it's definitely going to be or
Speaker 1: that it's going to work, or that it's gonna take off,
Speaker 1: And in fact, I'm kind of skeptical that it will
Speaker 1: ever get launched at all because of all of the
Speaker 1: regulatory and political scrutiny that Facebook is under. But this
Speaker 1: is quite a walk back. No, No, I know it
Speaker 1: sounds like a walk back, but I think that, like
Speaker 1: with all existing capsts, it just seems like a really
Speaker 1: big deal to me that one of the biggest companies
Speaker 1: in the world is trying to launch its own global currency. Like,
Speaker 1: I think we kind of have to just step back
Speaker 1: for a second and be like, Wow, this is like
Speaker 1: pretty wild futuristic sci fi stuff here. So I will
Speaker 1: say I am sort of bullish on the idea of
Speaker 1: a global company, uh, sort of nibbling at the edges
Speaker 1: of traditional sovereignty. And I don't know if you ever
Speaker 1: read the Margaret Atwood book, but she talks about how
Speaker 1: in the future companies basically control the world and people
Speaker 1: live in corporate compounds. I can see that aspect of it.
Speaker 1: But I gotta say I'm a little bit more skeptical
Speaker 1: about exactly what Facebook is proposing here. Again, don't get
Speaker 1: me wrong, like I have plenty of skepticism on all
Speaker 1: kinds of front I just think that it's pretty wild
Speaker 1: and has the potential, in at least one version of
Speaker 1: the future, to be pretty enormous. That's what I'm saying.
Speaker 1: Maybe I maybe I oversold it. So one of the
Speaker 1: things that it was really interesting is in their launch
Speaker 1: material where they promoted Libra, their new cryptocurrency, they made
Speaker 1: a really big focus on, you know, serving the the
Speaker 1: underbanked around the world, people largely in emerging markets, who
Speaker 1: don't have access to traditional financial services, whose home currencies
Speaker 1: may be unstable, who don't easily get access to bank accounts,
Speaker 1: And you know, it's one of these things which that
Speaker 1: does seem like a big opportunity. But on the other hand,
Speaker 1: it's a very happy sheen to put on, here's this
Speaker 1: company that's worth like a half a trillion dollars, And
Speaker 1: of course it's very feel goody to say, oh, we're
Speaker 1: gonna serve all these people that the rest of the
Speaker 1: that all these other financial institutions have failed so far. Right,
Speaker 1: So two things there. First of all, I'm very upset
Speaker 1: that they've chosen Libra to be the name of this cryptocurrency,
Speaker 1: because it's my horoscope sign, and now I feel what
Speaker 1: all the people called Alexa felt like when Amazon launched
Speaker 1: that thing. But secondly, I totally agree with you on
Speaker 1: the underbanked point. And I think one interesting point of
Speaker 1: comparison is that cryptocurrencies like bitcoin have been saying similar
Speaker 1: things for a very very long time. So it's worth
Speaker 1: asking what is Facebook going to do in that space
Speaker 1: that bitcoin and other crypto coins don't already do. Right,
Speaker 1: the advocates and a lot of the developers and even
Speaker 1: a lot of the speculators in this space, a lot
Speaker 1: of them have gotten very rich and they try to
Speaker 1: come up with the story about how they're doing something
Speaker 1: very good for the world, and they usually say, oh,
Speaker 1: you in America, you don't understand the importance of all
Speaker 1: this stuff because you have a stable currency and easy
Speaker 1: to access banks. But this is all we're doing something
Speaker 1: very important for the world, and obviously a lot of
Speaker 1: that is just spin. And also it's just a lot
Speaker 1: more complicated than that, because the truth of the matter
Speaker 1: is there really aren't that many people yet and even
Speaker 1: in the near future, in the developing world, actually using
Speaker 1: any of these cryptocurrencies that people are touting as a
Speaker 1: benefit to them, right, And it kind of gets back
Speaker 1: to a really important theme, which is the problem of
Speaker 1: having the under banked out there, or the problem of
Speaker 1: having an unstable sovereign currency or a currency that people
Speaker 1: don't trust. Is that actually a technological problem or is
Speaker 1: that a political problem? Right? And another big problem is
Speaker 1: that at root, a lot of this is just about
Speaker 1: poverty rather than anything having to do with financial institutions.
Speaker 1: That being said, there is perhaps an opportunity for some
Speaker 1: new crypto based currency, whether it's a decentralized one like
Speaker 1: bitcoin or something, or maybe something like Libra, to to
Speaker 1: make a dent. And so today's guest I'm really looking
Speaker 1: forward to it is someone who's actually done the work,
Speaker 1: someone who doesn't just sit on Twitter and say, oh,
Speaker 1: this is going to be really good for the underbank.
Speaker 1: But someone who has actually talked to people in unstable
Speaker 1: markets about how money works and what it would take
Speaker 1: in theory to introduce a new, more stable cryptocurrency that
Speaker 1: actually benefited their lives. Great, I can't wait. Okay, So
Speaker 1: without further ado, I want to bring in Jill Carlson.
Speaker 1: She is a co founder of the Open Money Initiative,
Speaker 1: and unlike everyone else, as I said, she's actually talked
Speaker 1: to people and done the real work to see what
Speaker 1: it would take to introduce crypto into people's lives. So, Jill,
Speaker 1: thank you very much for joining us. Thank you. I'm
Speaker 1: happy to be here starting to do the work, starting
Speaker 1: to do the work. But what I've seen so far
Speaker 1: has been very impressive, and we'll talk about it. But
Speaker 1: before we get into that, I'm just curious. What is
Speaker 1: your background? How did you get interested in cryptocurrency? Yeah, so,
Speaker 1: I actually started my career working in finance. I was
Speaker 1: trading sovereign debt and derivatives at Goldman Um, and in
Speaker 1: particular I was on the Latin America desk, and that
Speaker 1: was actually the lens through which I first got introduced
Speaker 1: to cryptocurrency. Um, it was through trading Argentine debt through
Speaker 1: the default in and early in I had a broker
Speaker 1: come to me and you know, he would have some
Speaker 1: market color for me. Every morning. There was always something
Speaker 1: that he was excited to share, and one morning that
Speaker 1: thing that he was excited to share with me was
Speaker 1: all about bitcoin. Now this was early. The only context
Speaker 1: I had heard of bitcoin at this point was people
Speaker 1: trying to buy drugs with it on the internet. So
Speaker 1: I was very skeptical and I was like, man, I
Speaker 1: don't know, this sounds even sketchy earthan the pace, so
Speaker 1: I don't know if this is a good idea. But
Speaker 1: he kind of dragged me, kicking and screaming down the
Speaker 1: down the bitcoin rabbit hole, if you will. So what
Speaker 1: did you discover as you went down the bitcoin rabbit hole?
Speaker 1: What brought you to being co founder of the Open
Speaker 1: Money Initiative? You must have seen something in it? Yeah, Well,
Speaker 1: the thing that this broker actually, in particular, that he
Speaker 1: convinced me of was that there was something really compelling
Speaker 1: there that he was unable to do previously right, And
Speaker 1: that thing for him was to get his money offshore,
Speaker 1: to get his money out of the Argentine Paso and
Speaker 1: that ability to use this to basically evade capital controls,
Speaker 1: right is what he was doing that really piqued my
Speaker 1: interest because again that was something that you couldn't do before.
Speaker 1: You know, previously people were trying to smuggle money out
Speaker 1: of the country in suitcases. I remember talking to people
Speaker 1: I ended up doing research on the subject on Argentina
Speaker 1: and cryptocurrency in capital controls, and I remember speaking to
Speaker 1: people who had literally tried to smuggle money out of
Speaker 1: the country again in suitcases and been caught by sniffer
Speaker 1: dogs on the boat to Uruguay, all kinds of crazy stuff.
Speaker 1: And so then here, all of a sudden, you have
Speaker 1: this digital alternative that in many ways promises to to
Speaker 1: take out a lot of that trouble that people were
Speaker 1: having in in again evading capital controls. Now, whether or
Speaker 1: not that's a good thing for the world, whether or
Speaker 1: not this is something we want to enable or not,
Speaker 1: it's a phenomenon that cryptocurrency has enabled. And so that
Speaker 1: that was what really piqued my interest, and that's the
Speaker 1: thing that actually is stuck with me throughout the last
Speaker 1: five years that I've been working in this space of
Speaker 1: here's this thing that this enables that no one has
Speaker 1: been able to do before. It's interesting that you said
Speaker 1: your first introduction to knowing anything about bitcoin was that
Speaker 1: people bought drugs with it online, and then the next
Speaker 1: not me, this is this is this is all anyone
Speaker 1: was talking about. Please, I worked at Goldman their drug tests. Sure, um,
Speaker 1: we could have been dealing um. But the but then
Speaker 1: the next thing was capital controls. And although those seemed
Speaker 1: very different, I mean, in the end, the consistent category
Speaker 1: is these are the things the governments don't want you
Speaker 1: to do. Yeah, exactly, and I mean I I actually
Speaker 1: stand by this as one of the sort of primary
Speaker 1: underpinnings of that question. What is cryptocurrency good for at
Speaker 1: the end of the day, A lot of it is
Speaker 1: regulatory arbitrage. Now you can have all kinds of opinions
Speaker 1: about is that good, bad, ugly? A lot of it
Speaker 1: is very ugly, but you know it can be interesting nonetheless,
Speaker 1: So sorry to press on this point, but is there
Speaker 1: not like a sort of judgment call going on here,
Speaker 1: like you said earlier, whether or not this is a
Speaker 1: good thing that people are able to evade capital controls.
Speaker 1: But the fact that you know, you're sort of talking
Speaker 1: about and promoting the use case of doing that um
Speaker 1: in certain countries, it seems like almost a judgment call
Speaker 1: on the legitimacy of those countries or the legitimacy of
Speaker 1: the regimes or legal system. They're like, how do you
Speaker 1: think about the I'm struggling to find the word, but
Speaker 1: I guess like the moral aspect of this or how
Speaker 1: this fits in with existing government structures, it's really hairy.
Speaker 1: And and I'll clarify my organization, the Open Money Initiative,
Speaker 1: and the work that I've done, it's all just been
Speaker 1: research oriented, and so it's less about trying to push
Speaker 1: an agenda of this is right, this is wrong, and
Speaker 1: it's more about trying to look at what's going on today,
Speaker 1: what the world looks like, and then present that to
Speaker 1: the world so that people can make their own judgment calls.
Speaker 1: But I mean, I'll be very up front. We'll probably
Speaker 1: spend a lot of time this morning talking about how,
Speaker 1: you know, people who are being impoverished in Venezuela may
Speaker 1: or may not be using bitcoin in order to escape
Speaker 1: some of that poverty that, from what I've seen, has
Speaker 1: been really inflicted on them. By the government. But at
Speaker 1: the same time, it's important to also acknowledge that, you know,
Speaker 1: who's probably using bitcoin just as much, if not more
Speaker 1: than anyone sort of within the country of Venezuela who's
Speaker 1: being impoverished by these government policies is the government officials themselves, right,
Speaker 1: are also using these tools, and so it is very
Speaker 1: important to remember that any time we're talking about whether
Speaker 1: it's Bitcoin, whether it's other technology, whether it's other areas
Speaker 1: of sort of regulatory disruption. Anytime you introduce a new
Speaker 1: tool to the market, you don't get to choose who's
Speaker 1: using it, and it's going to be used by sort
Speaker 1: of the good guys and the bad guys alike. All right,
Speaker 1: So let's talk about the Open Money Initiative. And like
Speaker 1: I said in the beginning, you know, there's a lot
Speaker 1: of people that from their fancy start up offices in
Speaker 1: San Francisco tweet about how they're doing great stuff for
Speaker 1: the world and bringing financial inclusion and financial services to
Speaker 1: the under bank. But you've actually gone and talk to
Speaker 1: people and gotten behind the computer screen to learn about
Speaker 1: the potential or what's not working. So what is the
Speaker 1: open Money Initiative and sort of describe the work that
Speaker 1: you've done. Yeah, so we are a research organization. We're
Speaker 1: not for profit. That was a very important, uh, sort
Speaker 1: of foundation for us because we can't be going in
Speaker 1: trying to do kind of objective research if we're pushing
Speaker 1: a product, and so that again very objective neutral. We
Speaker 1: have partnered with and received funding from many organizations within
Speaker 1: the technology community, within the cryptocurrency world, and then also
Speaker 1: from outside from the activism community. For example, the Human
Speaker 1: Rights Foundation is a huge supporter of us. But again,
Speaker 1: all of those organizations have given us this funding because
Speaker 1: they have an interest in learning sort of the objective
Speaker 1: truths or facts of what's going on on the ground. Now.
Speaker 1: Our mission is to get a better understanding of what
Speaker 1: money systems look like in closed economy, is or failing
Speaker 1: financial systems. We went to what we believe is sort
Speaker 1: of the most extreme case of this that exists today,
Speaker 1: which is Venezuela, as our first case study to get
Speaker 1: a better understanding of what the world looks like. They're
Speaker 1: now I have sort of this background in cryptocurrency, my
Speaker 1: other two co founders due to an extent as well.
Speaker 1: But the questions that we went in asking, we're not
Speaker 1: just about bitcoin and cryptocurrency, but rather we're asking the
Speaker 1: question of what are people doing today in Venezuela, What
Speaker 1: are the sort of hacks that they're using in order
Speaker 1: to survive and in some cases even thrive, And then
Speaker 1: how can we take those and present those again back
Speaker 1: to the world so that people can, you know, whether
Speaker 1: it's these builders at these tech companies or again people
Speaker 1: in the activism community, whoever it is, take it, learn
Speaker 1: from it, and build with it. So Joe knows that
Speaker 1: I have a secret obsession with anthropology and ethnography, So
Speaker 1: I'm really curious. You know, you decide on Venezuela as
Speaker 1: your test case. You have the crypto background, but you're
Speaker 1: setting your sights on something much more broader, which is
Speaker 1: how people are using money in general. All right, so
Speaker 1: you're setting out to learn more about this subject. How
Speaker 1: exactly did you go about doing it? Yeah, So one
Speaker 1: of the first decisions we had to make was whether
Speaker 1: or not to go to Venezuela itself, and we determined
Speaker 1: that at the time, this was back in February of
Speaker 1: this year, there was a lot of upheaval going on,
Speaker 1: a lot of political uncertainty, and we determined that as
Speaker 1: an American, a Canadian who's basically American, and then also
Speaker 1: of Venezuelan himself. So my other two co founders and
Speaker 1: I we decided that it was not wise for us
Speaker 1: to try to go to Venezuela itself, so we did
Speaker 1: the next best thing, which was to go to the border.
Speaker 1: So we went to a city called Cucuta, which is
Speaker 1: in Colombia but it kind of might as well be
Speaker 1: in Venezuela, and spent a lot of time there talking
Speaker 1: to people who had just crossed the border, people who
Speaker 1: were crossing borders sort of intra day. One important thing
Speaker 1: to note about this research. The first thing people always
Speaker 1: ask me when I start talking about this work I've
Speaker 1: been doing. They say, oh, cool, So like how many
Speaker 1: people in Venezuela are using bitcoin? And the answer is,
Speaker 1: I have not the slightest idea because the type of
Speaker 1: work that we were doing, the type of research that
Speaker 1: we were interested in, was much less about sort of
Speaker 1: the quantitative or the macro here, but much more about
Speaker 1: what does this actually look like on a day to
Speaker 1: day basis. So, you know, Tracy, you mentioned sort of
Speaker 1: ethnographic or anthropological lenses. That's exactly right. So we would
Speaker 1: sit down with people for two plus hours, and often
Speaker 1: this was in context, you know, in their homes and
Speaker 1: their places of work, even sort of intercepting them on
Speaker 1: the street in the middle of of whatever they were doing,
Speaker 1: and get a really good sense of what their day
Speaker 1: to day lives look like. And often what would come
Speaker 1: out here was we would find these sort of extreme
Speaker 1: edge cases as well. Right, So, rather than looking for
Speaker 1: the men or the average, which is often what you're
Speaker 1: looking for and more kind of quantitative studies, we would
Speaker 1: be looking for outliers and finding out, Okay, what what
Speaker 1: does this guy who is really thriving and has actually
Speaker 1: managed to make a ton of money throughout this crisis,
Speaker 1: what is he doing? Or you know what is what
Speaker 1: is the woman who's managed to make it across the
Speaker 1: border with her family and with her finances intact? What
Speaker 1: did she do right? And then how can we learn
Speaker 1: from that and draw inspiration from it? So whenever I
Speaker 1: read about Venezuela, I just, yeah, obviously just boggles the
Speaker 1: mind that people can survive in such a chaotic system
Speaker 1: in which all money has been essentially rendered worthless. What
Speaker 1: were some of the most striking findings that you came
Speaker 1: across in terms of essentially how people hack the economy
Speaker 1: for their own purposes to survive or thrive. What were
Speaker 1: the things that surprised you. Yeah, so there are a
Speaker 1: lot of things that surprised me. So I'll start with one,
Speaker 1: which is that you know, as I'm sure many of
Speaker 1: your listeners know, the Venezuelan Bolivar has been in a
Speaker 1: state of hyper inflation for the last several years, and
Speaker 1: in the state of extremely high inflation for many years
Speaker 1: before that, to the point where every few years now,
Speaker 1: if not every year, they have to come out with
Speaker 1: a new denomination of boulevard that basically lops off the
Speaker 1: last three zero is because they just can't keep up,
Speaker 1: so a million note would become a hundred thousand right now.
Speaker 1: You would think in this context people would just say,
Speaker 1: the hell with it, We're not going to use the
Speaker 1: boulevard anymore, We're going to move on to some other alternative.
Speaker 1: But in fact that's not the case. There you still
Speaker 1: really need the bolivar to survive, and there are a
Speaker 1: few different reasons for that. One is because it's just
Speaker 1: kind of this this shelling points the natural standard that
Speaker 1: people still resort to and use when when you know,
Speaker 1: making transactions in the economy. Another reason for that is
Speaker 1: that the Venezuelan government mandates that the bolivard is the
Speaker 1: only currency that can be accepted, and so often what
Speaker 1: you would find is we would talk to shopkeepers who
Speaker 1: still ran shops in Venezuela or who were sort of
Speaker 1: crossing the border and leaving pine their shops, but what
Speaker 1: they would say is that they would still have to
Speaker 1: denominate everything in bolivar's. They would still have to accept
Speaker 1: bolivars for most of their transactions. But then if you
Speaker 1: went back to their books, and sometimes they would even
Speaker 1: show us their bookkeeping ledgers, they would all be denominated
Speaker 1: in US dollars. And so you have this dynamic where
Speaker 1: people have started to think in alternative of currencies, whether
Speaker 1: that's often you know, in cases like in Caracas, it
Speaker 1: would often be the US dollar. Close to the Colombian
Speaker 1: border or to often be the Colombian pass so close
Speaker 1: to the Brazilian border would often be the Brazilian rail.
Speaker 1: So you'd have these cases where people would be thinking
Speaker 1: in one currency and yet still having to deal and
Speaker 1: transact and list prices in another currency. So you have
Speaker 1: basically a duel or even triple sort of currency system
Speaker 1: that has taken hold, but it's just that no one
Speaker 1: is actually using or a few people are actually yet
Speaker 1: using dollars or pasos, etcetera. And so that's that's one
Speaker 1: example of kind of a quirk that that we've found
Speaker 1: that you know, it's kind of unexpected here. So what
Speaker 1: does that imply about the usage potential of crypto Because
Speaker 1: on the one hand, you do have people basically running
Speaker 1: parallel currency systems against one one another. But on the
Speaker 1: their hand, you have a lingering problem of adoption, right
Speaker 1: like people are just used to the boulevard, as you mentioned,
Speaker 1: and you also have the problem of the government exerting
Speaker 1: pressure on people to use the boulevard and to not
Speaker 1: basically evade regulations by using something like dollars or cryptocurrency.
Speaker 1: So putting it all together, what does that tell us? So, Yeah,
Speaker 1: one interesting thing here about cryptocurrency specifically in Venezuela is
Speaker 1: I mentioned that the boulevard it's mandated to be effectively
Speaker 1: the only currency that gets used by the government. Right now,
Speaker 1: there's kind of shades of gray here in terms of
Speaker 1: what gets enforced and where it gets enforced and how
Speaker 1: it's it's very patchy, right, there is very little rule
Speaker 1: of law left in many ways in Venezuela because you
Speaker 1: have to remember, often it's the police or the border guards, etcetera,
Speaker 1: are just as desperate as anybody else to survive, and
Speaker 1: so they kind of decide when and how they'll enforce rules,
Speaker 1: when and how often that enforcement it just takes the
Speaker 1: form of confiscation, right, and it ends up just being
Speaker 1: you know, the police seizing your assets or your cell
Speaker 1: phone or whatever it is to just hold onto for
Speaker 1: themselves for their own enrichment. Now, dollars are way on
Speaker 1: the end of the spectrum of not okay. If you
Speaker 1: are dealing in dollars and you get caught doing so,
Speaker 1: you are going to face some probably pretty serious consequences
Speaker 1: for all kinds of political reasons. Cryptocurrency is interesting because
Speaker 1: it's it's more of a gray area. It's kind of
Speaker 1: pactually enforced um to the point where when we were
Speaker 1: first speaking with people, I was sort of wondering, like,
Speaker 1: what is going on here? Half of these people lying
Speaker 1: to us, because you know what people are telling us here,
Speaker 1: it's it's completely incongruous. It doesn't make sense with each other.
Speaker 1: But in fact, the Venezuelan government has backed itself into
Speaker 1: an odd kind of corner when it comes to cryptocurrency,
Speaker 1: because the Venezuelan government issued its own cryptocurrency a couple
Speaker 1: of years ago back inen called the Petro. Now, we
Speaker 1: can do a deep dive on the Petro if you're interested.
Speaker 1: I have lots of thoughts on that as well. But
Speaker 1: the reality is is that because the Venezuelan government did that,
Speaker 1: the Venezuelan government now faces this sort of weird conundrum
Speaker 1: in which they can't just make a blanket statement of
Speaker 1: cryptocurrency is bad, you're not allowed to use any of it,
Speaker 1: because here they're almost mandating in some cases that their
Speaker 1: citizens do use their own cryptocurrency. And so there is
Speaker 1: this sort of gray area where it comes to cryptocurrency
Speaker 1: where people aren't so sure whether it's good bad, whether
Speaker 1: it's going to be enforced or not if they're using it.
Speaker 1: And so we saw some cases where actually people were
Speaker 1: more comfortable using something like bitcoin as opposed to the U. S. Dollars,
Speaker 1: which felt shocking to me. The people that do you
Speaker 1: who's bitcoin in Venezuela talk to me about the sort
Speaker 1: of usability issues because it has to be even okay,
Speaker 1: bitcoins more stable. Let's say you can find a retailer
Speaker 1: that will accept it, there have to be all kinds
Speaker 1: of difficulties of getting it, because I can't imagine there
Speaker 1: are people too many people that want to sell bitcoin
Speaker 1: for bolivars, which is the one that most people have.
Speaker 1: Even in the you know, the most developed market of
Speaker 1: the US. Cryptocurreties are sort of famously the U the
Speaker 1: user interfaces for things like well, it's it's just difficult,
Speaker 1: and so I imagine that's only compounded, uh in a
Speaker 1: place where imagine the Internet doesn't work as well, things
Speaker 1: like that. So talk to us about the people that
Speaker 1: have used them. What is that sort of life experience
Speaker 1: like for them. Yeah, so we we only talked to
Speaker 1: a handful of people who used cryptocurrency on kind of
Speaker 1: a daily basis. We talked to a handful more who
Speaker 1: are familiar with it. Maybe it toyed around with it
Speaker 1: at some point, But of those people we spoke to
Speaker 1: who used it pretty consistently, they actually didn't have many complaints.
Speaker 1: They actually had a lot of really good things to
Speaker 1: say about the experience. And so I can walk you
Speaker 1: through just kind of one example of how it gets
Speaker 1: used um which came from a young woman. Will call
Speaker 1: her Anna. She is a university student in Caracas. She's
Speaker 1: about twenty two years old, and she got introduced to
Speaker 1: bitcoin a few years ago now by way of her
Speaker 1: boyfriend who was also an engineer, and they imported a
Speaker 1: couple of mining rigs they call them, so these sort
Speaker 1: of specialized computer hardware systems, and it sounded to me
Speaker 1: like her boyfriend was a little bit of a nerdy guy,
Speaker 1: and he kind of set them up in her parents
Speaker 1: basement and they were running and it was just kind
Speaker 1: of this fun experiment that they were running on the side. Now,
Speaker 1: lo and behold, two years later, those bitcoin miners have
Speaker 1: become basically the sole source of income for Anna's family.
Speaker 1: Her dad got laid off since job, her mom doesn't
Speaker 1: is still working, but doesn't make enough money to support
Speaker 1: Anna and her two sisters, etcetera. But those bitcoin miners
Speaker 1: that she and her boyfriend imported a few years ago,
Speaker 1: they pull in about eight hundred dollars a month in bitcoin,
Speaker 1: which is a pretty staggering amount of money in the
Speaker 1: context of Venezuela right now. And so the way that
Speaker 1: she would use this though, she would take the bitcoin
Speaker 1: that was being generated by these miners and she would
Speaker 1: deposit them into an account on a website called Local
Speaker 1: Bitcoins local bitcoins dot com. This is a website that's
Speaker 1: available globally. I compare it a little bit like the
Speaker 1: Craigslist of bitcoin um because it has this sort of
Speaker 1: localized web pages depending on where you are in the world.
Speaker 1: But what it enables is you deposit your bitcoin onto there,
Speaker 1: and then all of these bids and offers will pop
Speaker 1: up of people buying and selling bitcoin in your local currency,
Speaker 1: and you can even filter it by who has a
Speaker 1: bank account at your bank, so that it can be
Speaker 1: just a seamless book transfer on that side. And so
Speaker 1: Anna Maria, Anna will deposit the bitcoin onto local Bitcoins,
Speaker 1: and she will look for someone who's looking to buy
Speaker 1: bitcoin who shares her bank account, and she will then
Speaker 1: start a discussion with that trader negotiation. They'll converge on
Speaker 1: a price, and that trader will then send her the
Speaker 1: boulevards that she needs as she's cashing out the bitcoin,
Speaker 1: and Anna Maria will put the bitcoin into an escrow
Speaker 1: that is run by Local Bitcoins. As soon as Anna
Speaker 1: confirms that she has received the money on her side
Speaker 1: in her bank account, Local bitcoins releases that bitcoin out
Speaker 1: of the scrow to the trader. So this all sounds
Speaker 1: maybe a little bit convoluted, but when she started to
Speaker 1: describe how this sort of happened in her day to
Speaker 1: day basis, it was actually quite seamless, to the point
Speaker 1: where she would even do this just as she was
Speaker 1: walking to the store. Because here's the critical point to
Speaker 1: take away is that what this enabled her to do
Speaker 1: was not only to receive the income in the form
Speaker 1: of bitcoin, but also to cash it out just in time,
Speaker 1: right because she doesn't want to hold boul of Ours
Speaker 1: for any longer than she has to. She only wants
Speaker 1: to hold boul of Ours at the very moment that
Speaker 1: she is going up to the checkout counter in the shop,
Speaker 1: because her shopkeeper doesn't take bitcoin, he's only going to
Speaker 1: accept it in boul of ours. And she could even
Speaker 1: do this as she was standing in line to go
Speaker 1: to the checkout counter. Actually, all of this would take
Speaker 1: a matter of five ten minutes, provided she could find
Speaker 1: someone who who shared her her bank And so that
Speaker 1: was a really kind of revolutionary thing for her, to
Speaker 1: the point where she's not really complaining about you know,
Speaker 1: the user experience issues or the pain of of having
Speaker 1: to you know, deal with a bitcoin private key or
Speaker 1: whatever it is, because to her that ability to cash
Speaker 1: out just in time is so critical. So that's that's
Speaker 1: one example of how people are using it. Do we
Speaker 1: know much about the other person on the other side
Speaker 1: of that trade? Like who is the person that would
Speaker 1: share the same bank as the woman in your example,
Speaker 1: and who would have you know, bolivars at hand and
Speaker 1: want to trade them into bitcoin and then what would
Speaker 1: they do with the bitcoin after that? So sometimes it's
Speaker 1: another person like Anna, right. Sometimes it's somebody who is
Speaker 1: just sort of naturally a natural real buyer, you might
Speaker 1: call them of bitcoins, So someone who may be exchanged
Speaker 1: too much into bolivars and is now trying to trade back.
Speaker 1: But in many cases it's dedicated traders. And so these
Speaker 1: might be people in Venezuela who have bank accounts. Often
Speaker 1: you have these money traders in Venezuela who have bank
Speaker 1: accounts across seven or ten different banks, and they do
Speaker 1: this intentionally so that they can have liquidity across all
Speaker 1: of these different pools, right, and they're just clipping basically
Speaker 1: bid offer as as any trader would on these trades
Speaker 1: that they're doing, and it's it's fairly liquid, but there's
Speaker 1: still a decent spread obviously to capture in there. If
Speaker 1: if you're doing this, sometimes it's folks who are based
Speaker 1: in Miami or Columbia, etcetera, who have left Venezuela excuse me,
Speaker 1: but who still have access to a Venezuelan bank account,
Speaker 1: and so they would be doing exactly the same thing
Speaker 1: as a local trader would, but they would just be
Speaker 1: doing it sort of remotely. Um, and so this this
Speaker 1: is quite common. So let's talk a little bit about
Speaker 1: Facebook Libra, but also just generally, whether it's people who
Speaker 1: are believers in bitcoin or some other currency, or a
Speaker 1: company launching its own currency like Facebook. This whole idea
Speaker 1: of we want to uh deliver financial services stable currencies
Speaker 1: to the two billion people or whatever it is that
Speaker 1: don't have access to them. What are they up against? Like,
Speaker 1: what are the sort of the big things they're going
Speaker 1: to need to do to actually make traction and not
Speaker 1: have it just be taught that regulators and the media
Speaker 1: will like. Yeah, So the first thing I'll say is
Speaker 1: that to talk about the unbanked or the underbanked. That
Speaker 1: is such a broad category that you've got to you've
Speaker 1: got to just be more specific. You've got a narrow down,
Speaker 1: You've got a narrowed down by geography. You know, often
Speaker 1: what we've seen is that what works in one place
Speaker 1: does not work in another. If you look at something
Speaker 1: like m pesa, which is obviously taken off in Kenya
Speaker 1: and in other areas of Africa, that does not translate
Speaker 1: at all to a Latin American context. You try and
Speaker 1: ask people about, oh, what do you think about using
Speaker 1: cell phone minutes is money in Latin American and they
Speaker 1: look at you like you're crazy. It doesn't. It doesn't translate.
Speaker 1: So you have to narrow it down by geography. But
Speaker 1: you also just have to narrow it down by what
Speaker 1: do you mean? Is this about access? Is this about
Speaker 1: ending people's financial access, whether that's to bank accounts, whether
Speaker 1: that's to other forms of money outside of their own
Speaker 1: sort of sovereign currency, whether that's about access to other
Speaker 1: financial instruments, investment instruments, etcetera. Or whether that's just about
Speaker 1: as you said at the beginning of the episode, Joe poverty, right,
Speaker 1: and that's that's a very different problem altogether, uh than
Speaker 1: just having, you know, having a bank account. And so
Speaker 1: that's kind of my first gripe with any time anyone
Speaker 1: sort of waves their hands and says, oh, yeah, we're gonna,
Speaker 1: uh democratize the financial system, or we're gonna bank the unbanked,
Speaker 1: and it's just it's too broad. And now I can
Speaker 1: speak to Venezuela with some degree of confidence, in Argentina
Speaker 1: with some degree of confidence, and other areas with a
Speaker 1: much lower degree of confidence. But but that's the first
Speaker 1: thing that I would say now that that I realized
Speaker 1: is kind of a lame cop out answer of like
Speaker 1: it depends, and so I'll give you something a little
Speaker 1: bit more were concrete to bite on here, which is
Speaker 1: the next thing I would think about in the context
Speaker 1: of whether it's Bitcoin, whether it's Facebook's libra coin, whatever
Speaker 1: it is. If you're talking about a different type of
Speaker 1: financial instrument, if you're talking about a different asset, the
Speaker 1: first thing you have to think about is cash in
Speaker 1: and cash out, right, And so I just ran through
Speaker 1: that whole kind of convoluted example of there's this service,
Speaker 1: this Craigslist system that exists called local Bitcoins that provides
Speaker 1: an scrow service and provides basically a bulletin board of
Speaker 1: it's and offers and blah blah blah. Now that is
Speaker 1: that is basically the one of the only cash in
Speaker 1: cash out systems that exists for bitcoin in Venezuela. And
Speaker 1: the existence of that service is why bitcoin gets used
Speaker 1: at all, gets talked about at all in Venezuela. Now
Speaker 1: why local bitcoins as opposed to coin based or as
Speaker 1: opposed to ally pay or we chat. That has to
Speaker 1: do with actually many ways, the regulatory arbitrage question again, right,
Speaker 1: because coin base and many of these other services struggle
Speaker 1: to do business in places like Venezuela. They still do,
Speaker 1: I believe, but to a very limited extent, because it's dicey, right,
Speaker 1: Like I get it. Even even just doing the research
Speaker 1: with the Open Money Initiative, And I was just doing research, right,
Speaker 1: I wasn't operating as a money transmission anything. But we
Speaker 1: had to go through layers and layers and layers of
Speaker 1: lawyers just to make sure that you know, we're doing
Speaker 1: we're doing business. We're doing work in in a sanction
Speaker 1: it's not a it's not an officially sanctioned country, but
Speaker 1: you know, a huge spot of the population Venezuela is
Speaker 1: sanctioned by the United States government. That's really hairy. That
Speaker 1: gets really dicey. And so you need these services, whether
Speaker 1: they're local, whether they're global in nature, whatever, it is
Speaker 1: uh to service cash in cash out ramps in and
Speaker 1: out of your system, and you need to be comfortable
Speaker 1: doing that in countries where frankly it is pretty uncomfortable. Right.
Speaker 1: So on that note, it feels like the places where
Speaker 1: potentially that there could be a good use case for, um,
Speaker 1: you know, something like Facebook Libra would be places where
Speaker 1: there is ethics instability, where people are seeking alternatives. But
Speaker 1: by that very sort of nature of the system, I
Speaker 1: guess there's a big question about whether or not Facebook
Speaker 1: would actually be welcomed there, and whether or not all
Speaker 1: the sort of bells and whistles, the cash in cash
Speaker 1: out systems that would go along with it would be
Speaker 1: able to attach themselves to Facebook. Is that what you're saying? Yeah,
Speaker 1: that's right, And you know, you start to get into
Speaker 1: these really hairy situations in which I have I have
Speaker 1: a friend, just as an example, who is Venezuelan. He
Speaker 1: left Venezuela pretty recently, but while he was there he
Speaker 1: had some money in coin base, and coin Base at
Speaker 1: one point actually froze those funds effectively. Because I don't
Speaker 1: know all of the details of it, but it seemed
Speaker 1: like coin Base was suddenly uncomfortable with doing business with
Speaker 1: him because they maybe didn't have all of the assurances
Speaker 1: that they needed that he wasn't doing something nefarious with
Speaker 1: them blah blah blah, which he wasn't, but just because
Speaker 1: he is in Venezuela, where again a huge portion of
Speaker 1: the population is is sanctioned, and so exactly, you know,
Speaker 1: you start to think about other cases like this. It's like, Okay,
Speaker 1: where where would this all be the most useful? Probably
Speaker 1: actually in places like Venezuela, Cuba, Ran, Somalia, etcetera, where
Speaker 1: there is all of this instability, where it is a
Speaker 1: very closed financial system. But that suddenly is, yeah, the
Speaker 1: hairriest of places to do business with this, So I
Speaker 1: gotta wrap up soon. But one more question I have,
Speaker 1: and I think this sort of gets that really Venezuela
Speaker 1: side one of the big ships about Facebook itself, and
Speaker 1: it gets to your sort of initial introduction into the
Speaker 1: crypto world, and the big opportunity for crypto is frankly
Speaker 1: kind of regulatory arbitrage, the stuff that people, whether it's
Speaker 1: banks or governments, don't really want you to do. Facebook
Speaker 1: is going to be is already one of the most
Speaker 1: scrutinized entities in the world. In addition to that, because
Speaker 1: it's going to be a FIAT backed coin in which
Speaker 1: money is held representing the Libra, It's going to be
Speaker 1: held in regulated financial institutions, which so they're gonna have
Speaker 1: to comply with all those financial rings that even like
Speaker 1: cryptocurrency brokers or whatever don't really have to think about
Speaker 1: as much. So fundamentally, in your view, can an entity
Speaker 1: that's that regulated, that that's that beholden to all kinds
Speaker 1: of rules actually deliver on any kind of promise in
Speaker 1: your view of what cryptocurrencies can be used for. I'm
Speaker 1: I'm a bit skeptical, to be honest. Um, Look, I
Speaker 1: think that they're scope for it to be an impactful
Speaker 1: sort of financial tool or product, but whether it can
Speaker 1: deliver on anything that sort of Bitcoin or other more
Speaker 1: conventional cryptocurrencies have promised and in many ways actually delivered
Speaker 1: on in terms of what the actual utility is, I'm skeptical, right,
Speaker 1: And and the reason for that is exactly what you
Speaker 1: just said that Facebook as a platform, and any platform,
Speaker 1: regardless of what other entities it brings around the table,
Speaker 1: regardless of it if it's in consortium model, whatever it is,
Speaker 1: that consortium, that platform, it has the ability to d
Speaker 1: platform you um, and this has been a huge issue
Speaker 1: that's gotten a lot of coverage over last year in
Speaker 1: terms of content and content moderation. Well, now suddenly we're
Speaker 1: talking about a world in which it's also financial moderation.
Speaker 1: And you know, we would be we would be lying
Speaker 1: right if we said that that's not the world that
Speaker 1: we already live in. It is, and it's much more
Speaker 1: so in a place like Venezuela, where it is a
Speaker 1: closed economy, where there are all of these rules and regulations,
Speaker 1: many of which feel like they don't make a lot
Speaker 1: of sense. You know, it's not something that I think
Speaker 1: about here in America. I'm not one of these sort
Speaker 1: of tinfoil hats who stays up at night worrying about
Speaker 1: what the FETE is is. Well, I do worry about
Speaker 1: what the FETE is doing, but I don't worry about,
Speaker 1: you know, what the FET or treasury is going to
Speaker 1: do in terms of d platforming. My ability to use
Speaker 1: the US dollar. But what I do want to say
Speaker 1: is that as we move to an increasingly cashless society,
Speaker 1: this becomes more and more of an issue, even for
Speaker 1: those of us in places like the United States where
Speaker 1: we feel like there is good rule of law, because
Speaker 1: I've even had these issues myself of dealing with UH
Speaker 1: cryptocurrency accounts with my banks. Banks don't tend to like that.
Speaker 1: Even if you're dealing with a regulated cryptocurrency exchange, they
Speaker 1: don't tend to like that. And so I've had banks
Speaker 1: actually call me up and ask all kinds of question
Speaker 1: ens um and even not freeze my accounts, but freeze
Speaker 1: counterparties accounts from whom I'm maybe receiving income or whatever
Speaker 1: it is. It can get really messy really quickly as
Speaker 1: soon as you move to this completely cashless society where
Speaker 1: suddenly you do have banks, corporates, entity is maybe now
Speaker 1: even Facebook controlling who can do what with your money.
Speaker 1: And that's something that with cash, there's still there's still
Speaker 1: that out right, Like I can still stuffed dollar bills
Speaker 1: under my mattress and go and use them for whatever
Speaker 1: I want to use. But so that's actually the role
Speaker 1: that I see bitcoin filling in the future and cryptocurrencies
Speaker 1: like it is that ability to have sort of truly
Speaker 1: censorship resistant money, and that's a much more niche use
Speaker 1: case than a lot of people will will say, especially
Speaker 1: if they have if they own a lot of bitcoin,
Speaker 1: or if they work in cryptocurrency. It is still niche,
Speaker 1: but I think it's important nonetheless, Joe Carlson of the
Speaker 1: Open Money Initiative, fascinating conversation. Really looking forward to following
Speaker 1: your work as you continue to research these areas more
Speaker 1: in a thank you for coming on out lots. Thank
Speaker 1: you so much so, Joe. I really enjoyed that conversation.
Speaker 1: I enjoy talking to anyone who comes on and says
Speaker 1: that crypto is basically regulatory arbitrage. Yeah, I agree with that.
Speaker 1: I completely agree with that, and I actually wish more
Speaker 1: people in crypto would be upfront about that. And because
Speaker 1: I don't think it's necessarily a bad thing. I think,
Speaker 1: as Jill pointed out in the beginning, there obviously uh
Speaker 1: uses that most people probably wouldn't approve of. There are
Speaker 1: in many cases good uses, especially when the laws or
Speaker 1: the way banks treat people is unfair. But I do
Speaker 1: think that is kind of the essential all use and
Speaker 1: people have a really hard time because, especially if they're
Speaker 1: trying to bring it to the institutions or whatever, they
Speaker 1: want to wave their hands and try and say it's
Speaker 1: about something else. But I think it at its core
Speaker 1: that is the one thing where they just sort of
Speaker 1: logically makes sense, right, And I think if you narrow
Speaker 1: it onto that one sort of use case scenario, regulatory arbitrage,
Speaker 1: it helps you a attach some value to it. But
Speaker 1: we also think about the problems of adoption, and of
Speaker 1: course we touched on some of those, and that is
Speaker 1: whether or not governments are going to allow it, and
Speaker 1: whether or not if governments don't allow it, uh, the
Speaker 1: technology itself can sort of sustain it outside of the
Speaker 1: regulated system, and we still see that debate going on. Absolutely,
Speaker 1: and just generally. I really appreciated being able to talk
Speaker 1: to someone who, again it was not just a theoretical conversation,
Speaker 1: is not just someone on Twitter. It's not just someone
Speaker 1: coming on a podcast past and pontificating, but actually talking
Speaker 1: to people and just hearing about the other things that
Speaker 1: you know, even crypto aside. It's fascinating reading and learning
Speaker 1: about how people in Venezuela or living in an economy
Speaker 1: that's extremely in turmoil, how they get by and how
Speaker 1: they use combinations of cash and social media chat rooms
Speaker 1: to sort of just get by and do commerce is
Speaker 1: a really fascinating topic, even if it had nothing to
Speaker 1: do with big point. I totally agree. And one last
Speaker 1: thing that I would say, you know, you built this
Speaker 1: up quite a lot in your intro where you said
Speaker 1: this was sort of a historic moment, and I do think,
Speaker 1: I will admit, I do think you're right in the
Speaker 1: sense that what we're probably going to see is a
Speaker 1: big clash between a private company like Facebook trying to
Speaker 1: shape regulation in its favor to get libra off the
Speaker 1: ground against politicians and existing regulatory structures. So that's going
Speaker 1: to be really interesting, and you sort of wonder which
Speaker 1: one of those is going to win out. You know,
Speaker 1: I was going to make another follow up point, but
Speaker 1: I just actually want the last point to be you
Speaker 1: agreeing with me that this is a big deal, so
Speaker 1: we could just wrap it up there. All right. This
Speaker 1: has been another episode of the Odd Thoughts podcast. I'm
Speaker 1: Tracy Alloway. You can follow me on Twitter at Tracy Alloway.
Speaker 1: I'm Joe. Why isn't thal You could follow me on
Speaker 1: Twitter at the Stalwart, and you should follow our guests
Speaker 1: on Twitter Jill Carlson. She's at Underscore Jill Ruth, and
Speaker 1: be sure to follow our producer on Twitter, Laura Carlson.
Speaker 1: She's at Laura M. Carlson. Follow the Bloomberg head of podcast,
Speaker 1: Francesca Levy at Francesca Today, and check out the new
Speaker 1: home of Bloomberg podcast on Twitter at podcasts. Thanks for listening.
Speaker 1: The year e