Speaker 1: Hello, Odd Lots listeners. It's Joe Wisenthal. Before we get
Speaker 1: to today's episode, I wanted to let you know that
Speaker 1: we recorded this interview with Rowan Gray back in early
Speaker 1: in March, so things have obviously changed quite a bit
Speaker 1: since then. What we thought the interview was still an
Speaker 1: important one to run, and actually it's quite a bit
Speaker 1: to say about the role of money as it relates
Speaker 1: to government, questions of privacy, all things that are going
Speaker 1: to be important. So we wanted to get it out.
Speaker 1: But if it doesn't sound exactly timely with the news,
Speaker 1: now you know why. Thanks for listening. Hello, and welcome
Speaker 1: to another episode of the Odd Lots Podcast. I'm Joe
Speaker 1: Wisenthal and I'm Tracy all Away. Uh, Tracy, how are things?
Speaker 1: How are things holding up there in Hong Kong these days?
Speaker 1: I don't know what to say. Most people are still
Speaker 1: wearing face masks, lots of people are working from home.
Speaker 1: I guess it just feels more normal nowadays, so normal ish,
Speaker 1: like more normal than it was, say, like a month ago. Yeah,
Speaker 1: but I can't figure out whether or not it's actually
Speaker 1: getting back to normal or this has just become the
Speaker 1: new normal. There are there are a lot of like
Speaker 1: extraordinary stories that we've been reading about things going on
Speaker 1: in China in Asia as people and government to deal
Speaker 1: with this virus. And one story that's probably not the
Speaker 1: most important story of all of it, but that was interesting,
Speaker 1: was the story about the government literally laundering cash. Yeah,
Speaker 1: that's right. So in order to help mitigate the spread
Speaker 1: of the coronavirus, there was a moment when the Chinese
Speaker 1: government was sanitizing it's actually cash bills, and it was
Speaker 1: doing it with I think it was with uv light,
Speaker 1: but money laundering, as you say, literally literal laundering of money.
Speaker 1: But by large, like although obviously cash exists, and cash
Speaker 1: exists in Hong Kong, etcetera, mainland China and Hong Kong
Speaker 1: are probably among the most forward economies in terms of
Speaker 1: really becoming a post cash society. Yeah, I think that's right.
Speaker 1: I think I've told you stories before of me going
Speaker 1: to Beijing and just being almost unable to purchase stuff
Speaker 1: with cash. When you try to pay for coffee at Starbucks,
Speaker 1: for instance, with actual money, the cash register lady tends
Speaker 1: to give you this sort of look of despair and
Speaker 1: have to go to the back room and pull out
Speaker 1: a little plastic bag with with change in it because
Speaker 1: no one else pays it that way. And in the
Speaker 1: coronavirus outbreak, there's actually an argument that the digital realization
Speaker 1: of money in China was a good thing because it
Speaker 1: meant that people could still pay for stuff through apps,
Speaker 1: money could still flow through the system, and of course
Speaker 1: people didn't have to touch all those dirty physical bills. Yeah,
Speaker 1: I mean, it feels like there's a few different angles
Speaker 1: of this. So one, as you mentioned and um uh
Speaker 1: we just discussed, bills could in theory be a vehicle
Speaker 1: for transmitting the virus. There was also an interesting story
Speaker 1: a few weeks ago I recall about how authorities in
Speaker 1: Hubei Province, where Wuhan is the real epicenter of the virus,
Speaker 1: we're able to basically track everyone who had bought cold
Speaker 1: medicine uh in the entire province or in the entire city.
Speaker 1: And it struck me that that is one of those
Speaker 1: things you can only do if you have a very
Speaker 1: highly centralized database of essentially every transaction there is, every purchase,
Speaker 1: and be able to tie that to some individual. Yeah,
Speaker 1: a digital database combined with an intensely powerful surveillance system
Speaker 1: of government short Yeah, So regardless, we are moving and
Speaker 1: you know, this this episode is not really going to
Speaker 1: be about the virus per se, but it is emblematic
Speaker 1: of where we're all going as a society, maybe a
Speaker 1: different speedies, which is that physical cash is on the
Speaker 1: way out, and certainly with so much commerce going digital,
Speaker 1: where there's no such thing as cash in the digital
Speaker 1: realm for the most part, excluding sort of U independent cryptocurrencies,
Speaker 1: cash is kind of a dying thing. I think that's
Speaker 1: definitely an open question, and I think there is as
Speaker 1: you say, this move to electronic transactions, Uh, definitely, China
Speaker 1: is at the vanguard of this, and it does open
Speaker 1: up the question of what's the role of cash in
Speaker 1: that kind of society in the future. You know, is
Speaker 1: it going to be like the Starbucks in Beijing where
Speaker 1: people have to go to a back room to sort
Speaker 1: of search for coins to give you change because no
Speaker 1: one else is using it, right, And you know, we
Speaker 1: see this push towards cash in different ways. So there's
Speaker 1: the sort of emergent phenomenon which is just hey, app
Speaker 1: payment apps are cool. I like paying for things on
Speaker 1: Apple Pay on my phone. It's extremely convenient. There's aggressive
Speaker 1: pushes among some sort of intellectual elite to reduce the
Speaker 1: amount of cash and society. The economist Ken Rogoff wrote
Speaker 1: an entire book basically about why we should get rid
Speaker 1: of cash. He had a few arguments. One, it's like
Speaker 1: it's used in crime more than digital money. It also, uh,
Speaker 1: if we don't have cash, you can't take your money
Speaker 1: out of the bank put under your mattress. That makes
Speaker 1: it easier to impose negative interest rates. In India a
Speaker 1: couple of years ago, in sixteen, we know there was
Speaker 1: the big demonitization campaign where they suddenly forced everyone to
Speaker 1: convert their high dollar bills. That has had mixed success
Speaker 1: at best, I believe. But whatever it is, whether it's
Speaker 1: sort of an emergent phenomenon or very intentional push by elites,
Speaker 1: there is this sort of disappearance of the significance of
Speaker 1: cash in the economy. Sure, is that what we're going
Speaker 1: to be talking about today? It is, And I think
Speaker 1: the key question we're going to explore today is just
Speaker 1: because it's happening, is this good? And do people really
Speaker 1: want this? Do people really realize what they're losing with cash?
Speaker 1: And is there a danger in society if one day
Speaker 1: we wake up and there's no cash, and everything is
Speaker 1: just purely uh in our bank accounts. Yeah, and I
Speaker 1: think that gets back to the surveillance question. Of course,
Speaker 1: when it comes to the coronavirus, it might be a
Speaker 1: good thing that China contract all the cold medicine purchases
Speaker 1: because people were paying for them by apps and electronically.
Speaker 1: But maybe when it comes to some other stuff, you
Speaker 1: wouldn't necessarily want the government to be able to see
Speaker 1: your entire purchase history. So big questions. That is exactly right. So,
Speaker 1: without further ado, I want to bring in our guest
Speaker 1: for today. He's Rowan Gray, poly math thinker UH talks
Speaker 1: about all kinds of stuff money, modern monetary fury, the law,
Speaker 1: and so forth. He is a doctoral fellow at the
Speaker 1: Cornell Law School, and he's done a lot of thinking
Speaker 1: about cash and whether what we lose when society slowly
Speaker 1: gives up cash is more and more transactions go digital.
Speaker 1: So Rowan, thank you very much for joining us. Really
Speaker 1: looking forward to talking to UH. Why should we care
Speaker 1: about the existence of cash in your view? Uh, Well,
Speaker 1: thank you for having me, um, And I think the
Speaker 1: first thing tonight is that the rumors of cash's demise
Speaker 1: might be slightly exaggerated. UM. First, I don't think it's
Speaker 1: just a matter of UM even convenience or the elites.
Speaker 1: As my friend Brett Scott has has written about at length,
Speaker 1: there's a there's a deliberate war on cash by UM
Speaker 1: certain industries who benefit from the move to digital cash,
Speaker 1: notably various financial technology and regular financial industries. UM. There's
Speaker 1: actually a pushback starting now. Places like Philadelphia have passed
Speaker 1: laws requiring physical cash UM. And I think if you
Speaker 1: look at the history of digital voting and the problems
Speaker 1: there UM, and and the ways that voting experts talk
Speaker 1: about the value of sort of in person physical voting,
Speaker 1: there's a good case be made that whatever happens with
Speaker 1: digital that we're still going to need physical cash as
Speaker 1: another layer, as a kind of fail safe, and should
Speaker 1: be taking steps to protect that. UM. But I think
Speaker 1: when it comes to digital UM finance, and as you say,
Speaker 1: the world is sort of moving increasingly towards centering digital
Speaker 1: payments as as the primary way of paying. We're in
Speaker 1: a moment now where we have to make a decision
Speaker 1: as a society whether the balance of civil liberties and
Speaker 1: privacy on one hand and surveillance, control and law enforcement
Speaker 1: on the other either maintains the sort of uneasy relationship
Speaker 1: it's had for centuries with respect to money, or whether
Speaker 1: it moves drastically in one direction away from the ability
Speaker 1: of average people to engage in any form of monetary
Speaker 1: activity that isn't surveilled, controlled, and potentially censored on the
Speaker 1: basis of the interest of political authorities. And I think
Speaker 1: the really important thing to think about here is that
Speaker 1: this isn't a question where we should be thinking about
Speaker 1: it as taking an active step to introduced digital cash,
Speaker 1: but rather that if we don't do something, the inertia
Speaker 1: of technology will take away something that we already have.
Speaker 1: And in that respect, the radical move is to get
Speaker 1: rid of cash and cash like services, not to allow
Speaker 1: them in the digital world that we're building. Maybe before
Speaker 1: we go any further, you could explain the relationship between
Speaker 1: money and governments as it's existed historically, because I think
Speaker 1: this is probably going to influence a lot of our discussion.
Speaker 1: But how do you see that relationship? Yeah? Thanks so, I,
Speaker 1: as as Joe said, come from a background in modern
Speaker 1: monetary theory, but I also come from a background in
Speaker 1: the legal history of money. And scholars like Christine Disanne
Speaker 1: and Roy Krietner and others have traced that the way
Speaker 1: that money throughout history has been a tool of public
Speaker 1: governance and most importantly a creature of law, so you
Speaker 1: can have private actors involved in the making of law.
Speaker 1: My my former law professor, Caterine A. Pistol, has a
Speaker 1: whole book out recently called The Code of Capital about
Speaker 1: the way that private lawyers used various legal techniques to
Speaker 1: old capital and make capital instruments, but that ultimately you
Speaker 1: require some sort of public authority to not only enforced law,
Speaker 1: but be the kind of enforcer of final settlement. If
Speaker 1: you have disagreements amongst private arbitrators or private lawyers, the
Speaker 1: place that they go to resolve those things is the
Speaker 1: public courts and ultimately some sort of central court that
Speaker 1: says this is the sort of final decision. So when
Speaker 1: we look at the way that money works, there is
Speaker 1: the charter lists sort of m M T argument that
Speaker 1: whatever kind of money the state says it will accept
Speaker 1: in payment of its debts will always have a primacy
Speaker 1: in any society with a functioning rule of law, because
Speaker 1: that's the entity that most people are going to find
Speaker 1: themselves in some sort of relationship with, or know that
Speaker 1: their friends and colleagues and and and sort of trading
Speaker 1: partners are also going to be in some relationship with.
Speaker 1: But it's also because that entity can choose what kinds
Speaker 1: of private contracts and private property it wants to enforce.
Speaker 1: So there's always been various forms of private money issued
Speaker 1: in circulating in circulation alongside public money um and and
Speaker 1: some of them have been more or less validated by
Speaker 1: the state, notably, for example, to turn towards uh state
Speaker 1: licensed commercial banks being able to issue money being considered
Speaker 1: one of the notable developments towards modern capitalism. But even
Speaker 1: with sort of various forms of private community currency or
Speaker 1: private credit, there's always a relationship to state validation, state enforcements,
Speaker 1: state legitimacy. And if you think about the modern economy today,
Speaker 1: there's so many ways in which public law and legal
Speaker 1: governance structures even the most private relationships. It's impossible to
Speaker 1: think of a world in which you could sort of
Speaker 1: even go out into the middle of the Pacific Ocean
Speaker 1: and try to create some private utopia without international water
Speaker 1: law coming into into relevance or things like that. So
Speaker 1: so in my opinion. Money is always a creature of
Speaker 1: public governance. It's always an instrument of law, and public
Speaker 1: law is always the basis for the way that we
Speaker 1: govern even private actors. Before we go any further, I'm
Speaker 1: actually curious if we just need to define what cash is,
Speaker 1: because Okay, I have a dollar bill or a twenty
Speaker 1: dollar bill in my pocket. That cash. We're gonna be
Speaker 1: talking about it more. What cash means in the digital realm?
Speaker 1: What how how do you define cash? Yeah, that's a
Speaker 1: great question. So I think if you look at the
Speaker 1: history of money, on one hand, you can look at
Speaker 1: it in terms of the kind of legal and power
Speaker 1: dynamics at play, and that's a really important lens. Another
Speaker 1: lens to look at it is in terms of its materiality.
Speaker 1: So a lawyer at the Federal is a Bank of
Speaker 1: New York. Joseph Summer has a line that I like
Speaker 1: to use or like to borrow, which is UM. Money
Speaker 1: is what payment systems do. And if you look throughout history,
Speaker 1: there's been two major forms of money that have existed
Speaker 1: in in parallel, in sort of combination with each other.
Speaker 1: UM one is a system of ledgers. So the the
Speaker 1: economist time at Minski would say, you can think of
Speaker 1: the whole economy as a series of balance sheets and
Speaker 1: income statements. You could imagine a sort of great, you know,
Speaker 1: god like master account in the sky, where everybody's liabilities
Speaker 1: and assets are being constantly added and weighed up and
Speaker 1: moved around relative to each other. But the other one
Speaker 1: is a system of tokens, a system of what we
Speaker 1: would call legally bearer instruments, where there is no single ledger,
Speaker 1: even distributed ledger. There's no ledger at all. Um. It's
Speaker 1: it's simply an instrument, a physical thing, or it can
Speaker 1: be a digital thing that you that you own, and
Speaker 1: the act of being able to show that you're in
Speaker 1: possession of it is proof that it is. It is
Speaker 1: your asset. And this will goes back, actually interestingly to
Speaker 1: the origins of writing itself, about six or eight thousand
Speaker 1: years ago. The archaeologist M. Denise schmant Besser at when
Speaker 1: she started looking at where writing came from. What she
Speaker 1: saw was that there were these three D clay tokens,
Speaker 1: sort of little kind of shapes and abstractions of various
Speaker 1: kinds of animals that people used to use as a
Speaker 1: form of tax receipt so not even a tax credit,
Speaker 1: but proof you paid your taxes um that the tax
Speaker 1: collector would go around to the provinces and when you
Speaker 1: give them the right amount of real goods and services,
Speaker 1: they would give you a little token to prove that
Speaker 1: you had paid, so that when the time came to
Speaker 1: sort of do you do your taxes effectively, you could
Speaker 1: present these tokens. And what happened was that eventually they
Speaker 1: started to store these tokens in forms of clay tubes
Speaker 1: for sort of safe keeping, so that the tax collector
Speaker 1: couldn't steal them or you know, skim off the top.
Speaker 1: And then over time they would start to mark the
Speaker 1: outside of these sealed clay tubes with with little markings
Speaker 1: to show what three D tokens were inside. And eventually
Speaker 1: they said, you know what, rather than carrying around this
Speaker 1: tube with these markings, why don't we just roll the
Speaker 1: whole thing onto a flat piece of clay and put
Speaker 1: the markings there. And that was the sort of origins
Speaker 1: of what we now consider writing on a piece of paper.
Speaker 1: But it began with a three D token that people
Speaker 1: would physically hold as an abstract representation of tax receipts,
Speaker 1: which is not only entirely consistent with the chart list
Speaker 1: MMT narrative, but also shows the relationship between even sort
Speaker 1: of balance sheet accounting based money and a physical bearer
Speaker 1: kind of abstract less abstract money. So we've defined our variables,
Speaker 1: we've talked about what money is and whatsh is. Can
Speaker 1: you maybe talk to us about the value of cash
Speaker 1: to governments? Like I sort of get the I get
Speaker 1: why cash is important for individuals. You know, you can
Speaker 1: put stuff on your mattress, as we mentioned in the intro,
Speaker 1: and you can hide certain transactions from the government, possibly,
Speaker 1: so there are privacy issues at play there. But is
Speaker 1: there any reason that governments should want cash? Yeah? I
Speaker 1: mean I think if you sort of maybe hopelessly idealist,
Speaker 1: you would think that any government's interests should be to
Speaker 1: preserve people's civilities um as as a sort of core feature.
Speaker 1: People often like to present um civilities and law enforcement
Speaker 1: interests as in in conflict with each other, sort of
Speaker 1: a trade off between being able to catch the bad
Speaker 1: guys and let the good guys get away with things.
Speaker 1: But there seems to be, at least to me in
Speaker 1: my legal capacity, very little point in having law enforcement
Speaker 1: if it isn't to protect people's legal rights includes our
Speaker 1: civilities UM, but to sort of think about the government
Speaker 1: as an as an entity, as an institution with its
Speaker 1: own set of vested interests UM. I think one area,
Speaker 1: certainly is that, at least until recently, the idea of
Speaker 1: the government maintaining its own accounts was not considered the
Speaker 1: primary kind of feasible model for an account based money UM.
Speaker 1: Usually there have been various forms of private institutions or
Speaker 1: delegated institutions who maintain parts of what we could call
Speaker 1: the kind of common universal ledger, And in that respect,
Speaker 1: the more power that those entities have over both economic
Speaker 1: information and payment system settlement, the more the state exists
Speaker 1: in a kind of UM public private partnership with those
Speaker 1: actors and has to share power. So having direct cash
Speaker 1: that goes into individual citizens hands is a way to
Speaker 1: counterbalance the power of any private intermediaries that they might
Speaker 1: be UM employing. Beyond that, I think that there are
Speaker 1: sort of technological or technical benefits to having physical cash UM,
Speaker 1: in the sense that it creates a different kind of
Speaker 1: infrastructural need or a different kind of infrastructural cost benefit
Speaker 1: analysis when you have to do things like inject money
Speaker 1: into an area that doesn't have established institutions, doesn't have
Speaker 1: established banks or even post offices that can function as banks,
Speaker 1: or if you're going into a war zone, or if
Speaker 1: you need to be able to move money into a
Speaker 1: place temporarily that's not going to have established accountants and
Speaker 1: established payments intermediaries, and then want to leave that place
Speaker 1: shortly thereafter. Um. Having something that is sort of instrument
Speaker 1: out rather than institution in I think has its own
Speaker 1: unique benefits depending on the use case, and that that's
Speaker 1: thing that throughout history, for example, has been very useful
Speaker 1: for states with potentially moving borders. So if you think
Speaker 1: about Europe and the sort of maps you see about
Speaker 1: the evolution of various European political units, and then kind
Speaker 1: of every five years the whole map is rearranging. Requiring
Speaker 1: the same entity to be accountable in the exact same
Speaker 1: way to a public authority might be unfeasible or at
Speaker 1: least quite difficult, whereas having an instrument that can sort
Speaker 1: of do the work of validating itself in people's pockets,
Speaker 1: UH creates a very different kind of set of costs
Speaker 1: and potential. So something I'm curious about is that you know,
Speaker 1: a lot of the people who are most interested in
Speaker 1: this topic, the idea of censorship free payments, the idea
Speaker 1: of bearer assets that people can hold onto for person
Speaker 1: aid to transfer to person B without worrying about person
Speaker 1: see overseeing it. Are people who are involved in the
Speaker 1: non state cryptocurrency realm bitcoiners and so forth. And then
Speaker 1: a lot of people who are sort of interested in
Speaker 1: working within the existing existing system, including many M M.
Speaker 1: Tears and Keynesians and people who otherwise accept that public
Speaker 1: money is an important thing, that public institutions are good,
Speaker 1: tend to be uh more skeptical of their worldview, and
Speaker 1: so I'm curious you sort of bridge the two, and
Speaker 1: I'm what, what do you have a hard time in
Speaker 1: the circles that you deal with on the public money
Speaker 1: front arguing convincing people that these sort of crypto perspective
Speaker 1: on money, at least from a privacy and censorship standpoint,
Speaker 1: is something that they need to internalize more seriously into
Speaker 1: their worldview. Yeah, that's a great question. I think there's
Speaker 1: been a lot of I'm not going to say trauma,
Speaker 1: but a lot of skepticism in precisely because the people
Speaker 1: that they usually associate these kinds of ideas with are
Speaker 1: the kinds of people that you could be considered either
Speaker 1: libertarians on one hand, or money money cranks on the other.
Speaker 1: And so the minute they even hear the word digital
Speaker 1: currency of cryptocurrency, they sort of think you're one of
Speaker 1: those people. But a lot of the people I think
Speaker 1: who do come from an m MT point of view
Speaker 1: do so because they care about the empowerment of individuals
Speaker 1: relative to the state. I mean, for example, a job
Speaker 1: guarantee is at least in my opinion, a way of
Speaker 1: reclaiming power for individuals even against the state and saying,
Speaker 1: you know, I have a right to a job. This
Speaker 1: isn't something that the state can arbitrarily deny me. So
Speaker 1: even though you're relying on the public institution to provide
Speaker 1: the job, you're doing it in a way that's designed
Speaker 1: to transfer sort of relative power away from the center
Speaker 1: and towards the proofhery. So once you explain these ideas,
Speaker 1: I think it's often quite possible to get people on board.
Speaker 1: It's just that it is new, and that it's hard
Speaker 1: enough for the average person to to get their head
Speaker 1: around five thousand years of monetary history and macroeconomic theory
Speaker 1: and central banking operations. To then add on sort of
Speaker 1: the entire world of technology is just it's a lot
Speaker 1: to bite off. As someone coming from a background in
Speaker 1: law and and now money and finance and now moving
Speaker 1: into technology, there's a lot of technical competencies to juggle.
Speaker 1: But I would say that that the m m T
Speaker 1: community has been very open and warm to at least
Speaker 1: trying to incorporate these ideas as it involves and grows. Um.
Speaker 1: For example, it had my friend Brett Scott as a
Speaker 1: keynote speaker at the International m Ntique Conference two years
Speaker 1: ago in Kansas City, which I don't think would have
Speaker 1: happened if if there was a sort of antipathy towards
Speaker 1: um these concerns. I think one of the challenges is that,
Speaker 1: you know, not to get too crude, but on the
Speaker 1: kind of two dimensional political access. A lot of the
Speaker 1: m m T focuses on economic equality, and so it's
Speaker 1: that kind of left right spectrum, but that and often
Speaker 1: to make the case in favor of economic equality involves
Speaker 1: making a case for the benefit for the benefits that
Speaker 1: can be gained from collective governance. So you're offering in
Speaker 1: a position where you're defending the state against people that
Speaker 1: say the government can't do anything good. So to be
Speaker 1: able to hold that thought in your head simultaneously as saying, yes,
Speaker 1: the government is a necessary engine for social justice and equality,
Speaker 1: but also maybe we shouldn't be trusting it with all
Speaker 1: of our hopes, dreams, and forgetting historical moments when the
Speaker 1: state kept a list of everybody everybody knew and everybody
Speaker 1: where everybody went, and the problems that came from that,
Speaker 1: whether that was right wing governments or left wing governments. UM.
Speaker 1: To keep that kind of left libertarian, libertarian, socialists, anarchists
Speaker 1: kind of framework in your head as well as making
Speaker 1: a case for collective government, democratic socialism, etcetera. UM, it
Speaker 1: often feels like just another priority for people, and they
Speaker 1: often might say, well, that's great, but that's not my
Speaker 1: my area. UM And I do try to kind of
Speaker 1: bang this drum. And I think the man Courier, who's
Speaker 1: who works in a lot of kind of consumer oriented
Speaker 1: financial regulation issues is banging this drum quite a lot
Speaker 1: as well. UM. And I think that you're going to
Speaker 1: see more and more attention to this as a lot
Speaker 1: of the finance scholars start to focus their attention on
Speaker 1: digital currency. So just to press on this issue, because
Speaker 1: this is exactly, um, what I was tweeting about earlier.
Speaker 1: But if you think about one of the use cases
Speaker 1: for cryptocurrencies that comes up a lot, it's this idea
Speaker 1: of censorship free digital money that's sort of outside the
Speaker 1: grasp of existing governments or power structures. If crypto went
Speaker 1: mainstream enough, or if crypto adoption were really widespread, would
Speaker 1: that diminish the monetary sovereignty that allows m m T
Speaker 1: to exist theoretically or be effective. UM. I don't think
Speaker 1: so at all, actually, and I understand why that's a concern,
Speaker 1: But I think that this is one of those examples
Speaker 1: where a much richer understanding of the kind of way
Speaker 1: that law drives public money's value. Often when m m
Speaker 1: T is talk about, for example, taxes driving money, UM,
Speaker 1: And what you'll see when you read those um sort
Speaker 1: of scholar pieces, they'll say, taxes includes fees and fines
Speaker 1: and court judgments and a whole range of what might
Speaker 1: be technically called non reciprocal hierarchically imposed obligations from the state. UM.
Speaker 1: But it but it often in people's minds comes across
Speaker 1: a sort of a quantity number, so that you need
Speaker 1: to have a quantity of taxes ten taxes to to
Speaker 1: impose a demand of ten dollars on the economy. But
Speaker 1: the way I think about it as a lawyer is
Speaker 1: that the state is simultaneously in creating and enforcing every
Speaker 1: property right and every contract right that the entire private,
Speaker 1: sort of market based economy relies upon to operate. And
Speaker 1: that's before we get to things like limited liability corporations
Speaker 1: and banking charters and things like that, So that in reality,
Speaker 1: it's not just a matter of the sort of tax
Speaker 1: bill you get at the end of the year, where
Speaker 1: you can see a particular number that represents the sort
Speaker 1: of tax striven money value. It's this much more kind
Speaker 1: of risk liability cloud that exists in a state of
Speaker 1: probability at every point in time. If I walk down
Speaker 1: the street, I could potentially knock somebody over accidentally if
Speaker 1: I'm not paying attention. If they break their shoulder, then
Speaker 1: they could sue me, and then under you know, principles
Speaker 1: of tort law, I could be liable to pay them damages.
Speaker 1: I could drive down the street and my car and
Speaker 1: the same thing could happen. You know, somebody could come
Speaker 1: onto my property and I could fail to have a
Speaker 1: sign up. All of these create a formal legal liability risk.
Speaker 1: That it's a sort of fog that we're just living
Speaker 1: in all the time, And because that fog is always
Speaker 1: sort of positively valued, that we don't ever exist in
Speaker 1: a state of zero lehig liability risk. That it doesn't
Speaker 1: it doesn't reduce down to your tax bill to think
Speaker 1: about why you're going to need public money. But even
Speaker 1: more broadly than that, we've had a lot of forms
Speaker 1: of private money throughout history operating in circulation alongside public money,
Speaker 1: and it hasn't ever provided that kind of challenge. And
Speaker 1: if you think about the way that things like tax
Speaker 1: havens or Swiss bank accounts work today, um, it's actually
Speaker 1: the richest and most powerful and largest pots of money
Speaker 1: that require state protection the most. I often like to
Speaker 1: joke that if you really wanted to kind of get
Speaker 1: rid of tax havens, one way to do it could
Speaker 1: be to just say we're not going to enforce any
Speaker 1: legal sanction against anybody that steals assets above a certain
Speaker 1: amount of money that haven't been declared. So if you
Speaker 1: want to go with your kind of hacking skills and
Speaker 1: go after the Cayman Islands bank accounts. Go for it.
Speaker 1: It's it's open day. We will not stop enforcement. We
Speaker 1: will not try to prosecute you for theft or anything else.
Speaker 1: And I think if you started to see that kind
Speaker 1: of use of legal power, suddenly a lot of entities
Speaker 1: that like to think of their wealth as private are
Speaker 1: going to realize just how dependent upon the public legal
Speaker 1: system they are to protect and support that. Well, I
Speaker 1: love that. I love that framework. Let's talk a little
Speaker 1: bit about what you're envisioning in terms of state digital cash.
Speaker 1: So right now, if I want to, like, if I
Speaker 1: visit Tracy in Hong Kong and we go out to
Speaker 1: dinner together, maybe I split the check and I, like,
Speaker 1: you know, use whatever app uh it's on both of
Speaker 1: our phones and pay her. That's not cash because that
Speaker 1: the money that I have in say my Venmo account
Speaker 1: is really just a liability of Venmo, and if I
Speaker 1: transfer it to Tracy, then that's a lot her liability
Speaker 1: of Venmo. It's not a bearer asset. How what would
Speaker 1: it look like for me to have a true digital
Speaker 1: dollar something that is pegged one to one against the dollar,
Speaker 1: but that is not a liability of some bank or
Speaker 1: some fintech company, but something that I actually control and
Speaker 1: can move around and at my will. Yeah, So if
Speaker 1: you think about I would sort of divide up digital
Speaker 1: currency infrastructure into sort of three pillars. You've got accounts,
Speaker 1: You've got credit, and then you've got cash. And with
Speaker 1: respect to cash, the critical part to me is that
Speaker 1: the two different wallets, whatever sort of hardware and software
Speaker 1: combination that is holding these instruments, can effectuate a transaction
Speaker 1: with each other according to a set of predetermined rules.
Speaker 1: So we can call that a protocol, in the same
Speaker 1: way as you create the t c P i P
Speaker 1: protocol for the Internet, or the asset and t P protocols,
Speaker 1: so that emails know how to talk to each other.
Speaker 1: So you create some sort of wallet system that can
Speaker 1: identify each other with a handshake, so regular public encryption,
Speaker 1: things like that. And then the way that the wallet
Speaker 1: balances work. And this is the sort of way that
Speaker 1: I think about that is different from innsferring money from
Speaker 1: one account to another is imagine it in terms of
Speaker 1: getting change for physical cash. So if I go to
Speaker 1: a bank and I'm wearing a battle club and I
Speaker 1: don't get knocked over and arrested by the security card
Speaker 1: for wearing a battle club in the bank. But imagine
Speaker 1: I walking into the bank with a battle club and
Speaker 1: I have a hundred dollar bill, and I asked the
Speaker 1: bank teller to give me five twenties. Um, I don't
Speaker 1: need an account at that bank to do that, right now.
Speaker 1: Maybe there are laws that say I need to sort
Speaker 1: of show my idea after a certain amount of money.
Speaker 1: But at this point, at least technically, the bank is
Speaker 1: only engaging in money um exchange. Giving five twenties for
Speaker 1: one hundred is just changing the physical structure of the money.
Speaker 1: It isn't moving the money around. Now, imagine you and
Speaker 1: I together walk into the bank, both of us wearing
Speaker 1: a batat Claver, and I have fifty dollars and you
Speaker 1: have fifty dollars. I'm not going to do that, by
Speaker 1: the way. Yeah, you know, I wouldn't recommend it, you know,
Speaker 1: And I don't give legal advice, you know, very often publicly.
Speaker 1: But my legal advice we're not to go into Okay,
Speaker 1: keep going, keep going, But but but say, but say
Speaker 1: this was Amnesty Day and you did go in and
Speaker 1: you had a fifty dollar bill, and I had a
Speaker 1: fifture dollar bill, and we walked up together, and you know,
Speaker 1: we put a piece of paper down so they didn't
Speaker 1: even know our voice, and a piece of paper said,
Speaker 1: please turn these into five twenties. So instead of a
Speaker 1: hundred dollar bill, there's two of us with two different
Speaker 1: sized bills or the same size bills, And we go
Speaker 1: in and we asked for them to be exchanged. Now
Speaker 1: they give us back those five twenties, but instead of
Speaker 1: we can't split them equally, so I take two and
Speaker 1: you take three. So you walk out with sixty dollars
Speaker 1: and I walk out with forty dollars. The effect of
Speaker 1: that for you and I is that we have transacted
Speaker 1: ten dollars, right, But the effect from the bank teller's
Speaker 1: point of view is the bank teller has exchanged one
Speaker 1: dollars for one hundred dollars. He doesn't know who we are,
Speaker 1: doesn't know what that transaction was for. Theoretically, you could
Speaker 1: wait outside and immediate with the battle club. So I
Speaker 1: walk here and I get the hundred dollars, and then
Speaker 1: I walk outside and I dropped forty on the floor,
Speaker 1: sixty on the floor, and you pick it up and
Speaker 1: walk away. But the point is that from the point
Speaker 1: of view of the authority of the central entity there,
Speaker 1: the only thing it's doing is a validating the no
Speaker 1: double spending rule. So a hundred dollars walked in, a
Speaker 1: hundred dollars walked out, and b it's changing the relative
Speaker 1: size of different wallet balances. And that, to me is
Speaker 1: the way that you can conceive technically of a system
Speaker 1: where the protocol between us, the set of rules between us,
Speaker 1: can ensure that there is a protection against counterfeiting and
Speaker 1: that the two actors know each other, but that they
Speaker 1: don't know any more information that they need to and
Speaker 1: an actual transaction being taken place that needs to take place.
Speaker 1: So if you think of the bank teller there as
Speaker 1: rather than a human being, but just a robot, and
Speaker 1: that robot is not even a third party, but rather
Speaker 1: a set of protocols that the two wallets need to
Speaker 1: agree exactly on before the transaction will take place, then
Speaker 1: you've got a system where the only thing the government
Speaker 1: really needs to be able to monitor is that no
Speaker 1: new instruments are being created relative to the number that
Speaker 1: are already in existence, and that's very different to approving transactions.
Speaker 1: So the notion is that you could create this protocol
Speaker 1: that would basically get over the surveillance or the privacy concerns. Yeah,
Speaker 1: what what you would do is you would have some
Speaker 1: sort of approved hardware and it doesn't have to be
Speaker 1: centrally issued. It could be a white label kind of generic,
Speaker 1: but but based on certain conditions that every um, every
Speaker 1: wallet had to meet a combination of hardware and software.
Speaker 1: So if you think about email right now, you and
Speaker 1: I can send information over the Internet, and depending on
Speaker 1: how we structure that information, it can be read by
Speaker 1: a web browser or it could be read by an
Speaker 1: email server. But if you send it in the wrong format,
Speaker 1: the SMTP servers can't communicate with each other because one
Speaker 1: SMTP server, one email server will not recognize the information
Speaker 1: you're sending as information to receive for an email server.
Speaker 1: Sort of like little kids with little blocks that are
Speaker 1: shaped like stars and circles and squares. If you try
Speaker 1: to put the square through the star block, it just
Speaker 1: won't go through. So you can design the protocol in
Speaker 1: relation to the wallets in such a way as to
Speaker 1: say the only kinds of transaction that will go through
Speaker 1: is a transaction that meets these criteria, and one of
Speaker 1: these criteria can be we have to be able to
Speaker 1: do a handshake with each other using public keys. Another
Speaker 1: will be it has to show that A plus B
Speaker 1: on the wallets on one side equals C plus D
Speaker 1: on the wallets on the other side. And and the
Speaker 1: protocol doesn't even need to know how how much those
Speaker 1: balances are, just needs to be able to weigh them
Speaker 1: in a kind of encrypted sense. And then it needs
Speaker 1: to be able to say that once the transactions done,
Speaker 1: it's final and there's no record of it except on
Speaker 1: the wallets themselves. And you can design design something like
Speaker 1: this where the wallet balance is actually kept at home.
Speaker 1: So I'm a I'm a what's called a network manager.
Speaker 1: It's sort of like an evangelist for a nonprofit foundation
Speaker 1: called the Freedom Box Foundation that was designed founded by
Speaker 1: one of my old law professors at Columbia, Evan Mowglan,
Speaker 1: who who was one of the people that really got
Speaker 1: me into this privacy issue. He lost a lot of
Speaker 1: members of his family in the Holocaust, and he said
Speaker 1: to me in a law school class in first year
Speaker 1: of law school, next time they come for my family,
Speaker 1: and they will they'll get every single one because they'll
Speaker 1: know exactly where we are, and they'll know exactly who
Speaker 1: we're talking to. And that hit me like a ton
Speaker 1: of bricks and scared the hell out of me, to
Speaker 1: be honest, which is why I've spent a lot of
Speaker 1: time trying to think about these privacy issues on top
Speaker 1: of the issues of economic justice that I already cared about. UM.
Speaker 1: But he built this Freedom Box Foundation as a way
Speaker 1: to develop a bunch of free software, free and open
Speaker 1: source software that's privacy respecting that you can put on
Speaker 1: tiny little computers, little chips that are about the size
Speaker 1: of a phone charger and that you plug in at home,
Speaker 1: and they use barely any power year, like three or
Speaker 1: four dollars of power year, and they provide all of
Speaker 1: the kinds of quote unquote cloud services that people rely
Speaker 1: on the big centralized financial technology companies for so web server,
Speaker 1: file server, social media, all those kinds of things. UM
Speaker 1: and I run one at home now. I use it
Speaker 1: for for the equivalent of drop Box. I use it
Speaker 1: for the equivalent of Slack with my nonprofit where it's
Speaker 1: called Riot and it works exactly like slack. UM. I
Speaker 1: use it for a VPN to get into my home,
Speaker 1: you know, internet when I'm out surfing the world. There's
Speaker 1: a whole range of hern key, extremely easy to use
Speaker 1: pieces of software that it's incorporated. But you can keep
Speaker 1: this box at home, which means police can't access that
Speaker 1: without a search warrant. Um, it's got Fourth Amendment protection
Speaker 1: to the extent of Fourth Amendment protections still mean anything.
Speaker 1: And you can tunnel into that with a secure tunnel
Speaker 1: from your phone or from anything else. So it wouldn't
Speaker 1: be simply a matter of having digital cash on your phone,
Speaker 1: and then if your phone gets stolen, you've lost your
Speaker 1: your money. You'd be keeping your money literally under the mattress.
Speaker 1: Literally um in in the most sort of you know,
Speaker 1: my grandmother doesn't trust the government kind of way. But
Speaker 1: that the under the mattress would just be a tiny
Speaker 1: little phone charger that's plugged into the wall, and your
Speaker 1: phone would be tunneling into it like a client tunnels
Speaker 1: into an email server today. Um And and that gives
Speaker 1: you some degree of freedom and control. And to be clear,
Speaker 1: I don't think that this would replace all kinds of
Speaker 1: accounts um in the same way. Most people, perhaps outside
Speaker 1: of certain demographics, aren't walking around with ten thousand dollars
Speaker 1: of cash as their entire life savings in the in
Speaker 1: a what in their pocket. But it means that at
Speaker 1: least we have kept that layout of the payment system
Speaker 1: from disappearing forever, and from that possibility of civil liberties
Speaker 1: and privacy from disappearing forever from our vocabulary and our
Speaker 1: political identity. So how much of the money network that
Speaker 1: you just described, the notion of a common protocol, how
Speaker 1: much of that depends on building consensus for it to
Speaker 1: actually work well and work specifically across borders Because we're talking,
Speaker 1: of course about monetary transactions, which tends to be one
Speaker 1: of the most regulated, most sensitive of topics um in
Speaker 1: the world, especially international money transfers. So how do you
Speaker 1: build consensus towards that and would it still work if
Speaker 1: people had differ ideas of how the protocol should actually be. Yeah,
Speaker 1: I mean, I think the first thing is that this
Speaker 1: would likely not become the primary vehicle for large institutional
Speaker 1: money flows, and I think that's the right answer. So
Speaker 1: in the same way as I said before, you know,
Speaker 1: there's a difference between sort of caring about individual private
Speaker 1: transactions and caring whether super rich people get to store
Speaker 1: all their money in Swiss bank accounts. UM. There's a
Speaker 1: difference between what I considered to be the economic privacy
Speaker 1: of individuals and the civilivities of individuals and the rights
Speaker 1: of large corporations to have bank accounts l or huge
Speaker 1: stashes of money that they essentially don't have to declare
Speaker 1: or that art serveiled. And to the extent that those
Speaker 1: kinds of entities are already kind of public entities in
Speaker 1: the sense that corporations have to submit filings and other
Speaker 1: things as a condition of having a limited liability cha UM,
Speaker 1: I think it's entirely reasonable for those kinds of flows
Speaker 1: to be more visible and and to be regulated under
Speaker 1: sort of traditional traditional privacy laws alongside the kinds of
Speaker 1: laws that might protect cash for individuals. UM. In that respect,
Speaker 1: I think you know what you're mostly going to see
Speaker 1: is the same kinds of back of how central accounting
Speaker 1: to manage those laves transactions as we have today, but
Speaker 1: that the push for cash can become the tip of
Speaker 1: the spear for a larger rethinking of privacy issues with
Speaker 1: related to payments that is starting to happen already as
Speaker 1: a result of the broader privacy kind of debate sparked
Speaker 1: by people like Edward Snowden, um And and the kind
Speaker 1: of censorship debate that you're seeing around things like the
Speaker 1: payment sanctions on Iran. When it's very clear that the
Speaker 1: NSA doesn't care about any kind of crypto or other
Speaker 1: form of privacy of financial transactions, even after claiming they
Speaker 1: would never break the cryptography of of the monetary system. Um.
Speaker 1: And when it's clear that the pay whoever controls the
Speaker 1: payment system, can control access to two basic goods in countries,
Speaker 1: that you need to start having a very different kind
Speaker 1: of conversation about how that works internationally. UM. But my
Speaker 1: blind my kind of thinking about this is that there
Speaker 1: is probably a reasonable balance to be had in terms
Speaker 1: of scale and scope of these digital wallets. UM. I
Speaker 1: wouldn't argue for that on day one, because I don't
Speaker 1: think you argue for what you want by sort of
Speaker 1: capitulating to the center of the negotiation on day one. UM.
Speaker 1: But that right now we do have limits on the
Speaker 1: size of physical bills. We don't have a billion dollar
Speaker 1: paper bill um. And I think that's probably okay. And
Speaker 1: to the extent that there was some sort of quantitative
Speaker 1: limit on these kinds of wards, you know, probably maybe
Speaker 1: a thousand dollars two thousand dollars, you could imagine maybe less,
Speaker 1: maybe two and fifty UM. The Central Bank of Sweden,
Speaker 1: which is probably the central bank who's considered digital currency
Speaker 1: in the context of anonymous cash that can work basically offline,
Speaker 1: off bridge between two wallets UM at the most, has
Speaker 1: been talking about having the cash layer that eat cash
Speaker 1: layer as something limited to sort of two d two hundred,
Speaker 1: three hundred dollars worth of corona um, although we'll see
Speaker 1: how truly anonymous and decentralized that model will be depending
Speaker 1: on the technology they choose to adopt or implement. But
Speaker 1: I think you could imagine something where you know, what
Speaker 1: you're essentially talking about is closer to the act of
Speaker 1: taking a couple of hundred dollars in your pocket on
Speaker 1: the plane than it is of really altering the core
Speaker 1: dynamics of international payments flows. We hear things all the
Speaker 1: time about central banks and government talking about their own
Speaker 1: digital currencies, and it's very hard for me to wrap
Speaker 1: around or wrap my head around what they're going for. So,
Speaker 1: for example, you hear about the PBOC doing a digital
Speaker 1: renman b, and my gut feeling is that this is
Speaker 1: not about some incredible urge for consumer privacy. I suspect
Speaker 1: that they have something else in mind. Other people might
Speaker 1: talk about it. I suspect cynically, but maybe less cynically,
Speaker 1: like they just want to sound interesting on a panel
Speaker 1: somewhere by sounding cool and getting to use the word
Speaker 1: blockchain and their official line of business because that's probably
Speaker 1: gonna make them sound interesting or something like that. How
Speaker 1: many how much of the conversation that you hear regarding
Speaker 1: central bank digital currencies really is the result of people
Speaker 1: thinking along the lines of what you're thinking, which is
Speaker 1: that if we don't have some sort of central bank
Speaker 1: digital currency, if we don't have a true digital cash,
Speaker 1: then something that people value could truly disappear before they
Speaker 1: ever had to say so in its disappearance. Yeah, so,
Speaker 1: I mean, I will give a shout out to In
Speaker 1: addition to Brat, Scott had mentioned a few times to
Speaker 1: the group of Positive Money in the UK, who you know,
Speaker 1: I've had some disagreements about their theories of money before,
Speaker 1: but they've been writting some really important policy papers around
Speaker 1: the case for cash and you know, having digital cash,
Speaker 1: and I think that they're one of the few, you know,
Speaker 1: interest groups that have a large dream of influence at
Speaker 1: a national level. Um, that are really taking the cash
Speaker 1: dimension of this quite seriously. UM, I really would love
Speaker 1: to see a lot more involvement from privacy people. And
Speaker 1: I would, really, you know, although I'm not holding my breath,
Speaker 1: love to see a lot of the crypto libertarian crowd
Speaker 1: to focus their attention on public money rather than these
Speaker 1: sort of inferior private money is because I think a
Speaker 1: lot of them are motivated by by good concerns when
Speaker 1: it comes to civil libertarian issues, but they are sort
Speaker 1: of hamstrung and sent to the wrong direction by their
Speaker 1: their sort of libertarian theories of money. Unfortunately. UM. But
Speaker 1: I don't think that the majority of people who are
Speaker 1: involved in this discourse are really coming from a privacy
Speaker 1: centric perspective. No, And I think that that's a self
Speaker 1: reinforcing phenomenon because most central bankers are not civil libertarians
Speaker 1: or lawyers there. They're people who did, you know, macroeconomic modeling,
Speaker 1: statistical modeling, and graduate school and wrote a bunch of
Speaker 1: math papers and then got into this world because they're
Speaker 1: interested in thinking about how you can, you know, move
Speaker 1: one or two big levers and move the entire economy.
Speaker 1: I mean, I understand that motivation. I think there's a
Speaker 1: lot to be said for that kind of work, but
Speaker 1: it's a kind of inherently centralizing kind of public planning mentality.
Speaker 1: My my, my advisor Robert Goot likes to say that
Speaker 1: central banking, central banking is the last refuge of central planets.
Speaker 1: Um And and you don't often see that much overlap
Speaker 1: between central planners and civil libertarians unfortunately. UM But I
Speaker 1: think the debate over sent to a bank um technical
Speaker 1: design of this. And you can see this all the
Speaker 1: way from the Bank of International Settlements famous money Flower
Speaker 1: to the many hundreds of almost identical papers that you
Speaker 1: can read from different central banks on the future digital currency.
Speaker 1: They usually frame it in this sort of dichonomy between
Speaker 1: token based in account based money, which you know, going
Speaker 1: well so far, but then very quickly you read it
Speaker 1: and and the part that talks about tokens is usually
Speaker 1: some sort of decent distributed ledger which is not a
Speaker 1: token based system at all. It's just an account based
Speaker 1: system where you sort of have a slightly decentralized set
Speaker 1: of accounts. Um. So, one of the people who's made
Speaker 1: the case for central bank accounts for all the best
Speaker 1: my friend Morgan ris Um and and for the record,
Speaker 1: I agree that we definitely need central bank accounts for all.
Speaker 1: Um We were just having this conversation on Twitter the
Speaker 1: other day and he said, well, you know, you Rowan
Speaker 1: are one of the only people who actually means it
Speaker 1: when they say they want a token based system, because
Speaker 1: mostly when I read about that stuff, they're just really
Speaker 1: talking about other forms of accounts. And I said, yeah, look,
Speaker 1: if if all you read was that stuff, I would
Speaker 1: agree that it sounds like it's a tweetl d tweedle
Speaker 1: dumb fight. You might as well just go central bank
Speaker 1: accounts for all and just ignore the rest of it.
Speaker 1: But that there is this other debate, There is this
Speaker 1: other set of issues. And the reason I'm kind of
Speaker 1: trying to sound the alarm is because we are not
Speaker 1: going to have another chance to relitigate this the next
Speaker 1: time around. Once we build an infrastructure for the future
Speaker 1: of digital public money that is built around centralized accounts
Speaker 1: and doesn't have a space for a token based cash
Speaker 1: like instrument, it will be too late to undring that bell.
Speaker 1: We will not go back forty years from now and
Speaker 1: go whoopsie and get to rebuild the whole thing. So
Speaker 1: this is a moment, like with the kind of building
Speaker 1: of the Internet, where we are the last generation that
Speaker 1: will remember that there was a choice to be had
Speaker 1: here and we have an obligation, in my opinion, to
Speaker 1: do something. So to go to your question China, UM,
Speaker 1: I was visiting China and went to the PBOC and
Speaker 1: spoke to the people who had their Monetary Payments division
Speaker 1: UM only only in the end between nineteen and they
Speaker 1: they use a term there that they call managed anonymity,
Speaker 1: which means anonymity between payments operators and between you know,
Speaker 1: people on either side of the transaction, but no anonymity
Speaker 1: to the central government. UM. And I'm always reminded of
Speaker 1: when you go on Facebook and there are privacy settings
Speaker 1: and it says, you know, choose who you want to
Speaker 1: see your your posts, but there's never a button that says, well,
Speaker 1: I would like Mark Zuckerberg not to see my posts.
Speaker 1: He gets to see everything, you know. He's like Tom
Speaker 1: from my Space. He's the first friend of the last
Speaker 1: friend on your friends list every time. So the Central
Speaker 1: Bank of China is absolutely building a system where they
Speaker 1: are your first and your last friend and they get
Speaker 1: to see everything um, and they're going to frame that
Speaker 1: in terms of law enforcement, just like the n s
Speaker 1: A frames surveilling everybody in terms of law enforcement. And
Speaker 1: now you is the most heinous, sort of morally objectionable
Speaker 1: cases that they can think of for shock value. So
Speaker 1: it will be terrorism, it will be money laundering for
Speaker 1: big criminal gangs, it will be child pornography and sex trafficking,
Speaker 1: and they will use those as as a justification for saying, well,
Speaker 1: this is why we need to be able to see
Speaker 1: everything everybody does all the time. Um. And what China
Speaker 1: did do with this is how a massive industry of
Speaker 1: the mobile payment companies we chat an alley pay that
Speaker 1: we're just completely dominating, and they recognized to their credit
Speaker 1: that this was an unstable, inferior form of money and
Speaker 1: was carrying a kind of shadow banking like risk because
Speaker 1: these large mobile payment companies were building their entire payments
Speaker 1: infrastructure on top of the regular banking system. Like if Venmo,
Speaker 1: you know, suddenly had a float the size of the
Speaker 1: entire money market mutual fund industry before two thou and eight,
Speaker 1: you go, well, wait a second, mobile money is going
Speaker 1: to be the new shadow money that could collapse if
Speaker 1: something goes wrong, and they, within the space of sort
Speaker 1: of a couple of years, required those entities to get
Speaker 1: direct accounts at the Central Bank and then to back
Speaker 1: those accounts one to one with Central Bank reserved dollars.
Speaker 1: And I think the next step you're going to see
Speaker 1: is they're actually just going to collapse those two layers
Speaker 1: entile so that the money going through those wallets, those
Speaker 1: sort of mobile money wallets, will be directly central bank
Speaker 1: issue money. And that's the final step of what they're building.
Speaker 1: I think Rowan great. That was a truly fascinating conversation.
Speaker 1: Thank you very much for joining us. Thank you so
Speaker 1: much for having me, Tracy. I really like that episode.
Speaker 1: I feel like Rowan brings such a range of insights,
Speaker 1: whether or it's into the specifics of how money works,
Speaker 1: how law works, the sort of civil libertarian bent that
Speaker 1: he has. It's a very different perspective than almost anything
Speaker 1: we've heard so far in some of the conversations we've
Speaker 1: had about what money is or some of our cryptocurrency discussions. Yeah,
Speaker 1: I was about to say exactly that. It's it's such
Speaker 1: a different um position to be coming from, and he's
Speaker 1: really bridging that space between cryptocurrencies and MMT, which kind
Speaker 1: of naturally you would think wouldn't work, but there does
Speaker 1: seem to be some overlap. The other thing I was
Speaker 1: thinking about is the distinguishing in the cash system between
Speaker 1: ledger based accounting versus that sort of token based system
Speaker 1: of piment is a really nice framework to sort of
Speaker 1: explain the difference in in privacy concerns for digital payment systems.
Speaker 1: I really like that framework. Yeah, no, that's exact, actually right.
Speaker 1: And then the question of can the state really offer
Speaker 1: a digital token version. I mean, the nice thing about
Speaker 1: cryptocurrencies is we know them. One thing they've proven is
Speaker 1: that you can have a digital token, and that was
Speaker 1: sort of Stosi's breakthrough, which is that I can own
Speaker 1: something or I can control something that's digital that nobody
Speaker 1: else has because of course digital you think file sharing
Speaker 1: replication difficult to own. So that part has been established.
Speaker 1: Now the question is whether the state, in theory or
Speaker 1: central banks can apply that same principle, which they already
Speaker 1: accept with physical cash, to the digital realm. And I
Speaker 1: think Roman makes a really compelling case that they should,
Speaker 1: and I love his point about like now is the moment,
Speaker 1: because if we don't build this now into the money
Speaker 1: system of the future. Forty years from now, when all
Speaker 1: the infrastructure is in place and everyone is purely on
Speaker 1: digital abs, and maybe the apps are collapsed and that
Speaker 1: we're only using central bank money, the time will have
Speaker 1: been uh, we won't be able to easily reverse engineer
Speaker 1: a token element of the digital money system. Yeah. I
Speaker 1: kind of wonder how many of the libertarian crypto enthusiasts
Speaker 1: will heed his call to maybe, you know, work with
Speaker 1: central authorities to figure out some form of public digital money.
Speaker 1: I don't know, it seems like it seems like that
Speaker 1: might be a big gask that You can see his
Speaker 1: argument it's a lonely battle, right because among like the
Speaker 1: people who believe in the legitimacy of public institutions, there's
Speaker 1: a lot of skepticism towards the sort of uh, you know,
Speaker 1: sort of extreme civil liberty, maybe anarchist bent about individual behavior.
Speaker 1: And among the people who care about that stuff, primarily,
Speaker 1: there is not a lot of people who believe in
Speaker 1: uh strong public institutions. So I applaud Roman's lonely path
Speaker 1: on this, and hopefully more people take them up. The
Speaker 1: common area in that ven diagram is pretty small. It
Speaker 1: might only be Rowan. In fact, it might all right, okay,
Speaker 1: this has been another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway and I'm Joe wi Isn't though. You can
Speaker 1: follow Rowan on Twitter at Rowan Gray. Also, he has
Speaker 1: a book coming out in January one titled Digitizing the Dollar,
Speaker 1: The Battle for the Soul of Public Money in the
Speaker 1: Age of Cryptocurrency. Definitely going to be a must read,
Speaker 1: so check that out. You can follow me on Twitter
Speaker 1: at the Stalwart, and you should follow our producer on Twitter,
Speaker 1: Laura Carlson. She's at Laura M. Carlston. Follow the Bloomberg
Speaker 1: head of podcast, Francesco Levi at Francesca Today, and check
Speaker 1: out all of our podcasts on Twitter at the handle
Speaker 1: at podcasts. Thanks for listening to