Christopher Giancarlo AKA CryptoDad - Crypto Regulation & The Future Of CBDCs

Full transcript: Christopher Giancarlo AKA CryptoDad on London Real

2:38 Brian Rose: This is London Real. I am Brian Rose. My guest today is… This is London Real. I am Brian Rose.

2:50 My guest today is Chris Giancarlo, the investor, attorney, author, and blockchain technology advocate. You served as Chairman of the U.S. Commodity Futures Trading Commission from 2017-19 where you oversaw the first Bitcoin futures products. You have been named as one of the most influential people in financial regulation and your views on cryptocurrencies and digital assets are regularly featured in The Wall Street Journal, The Financial Times, and CNBC.

3:14 You are the co-founder of the Digital Dollar Project, the not-for-profit initiative to advance the exploration of a U.S. central bank digital currency, and you are also the author of the bestseller, Crypto Dad, where you suggest that, quote, money is too important to be left to central bankers. You believe we are now at a critical stage in the development of the digital dollar and that if done correctly with economic freedom and privacy, we will position the dollar as the global reserve currency for generations to come.

3:41 Chris, welcome back to London Real.

3:43 Christopher Giancarlo: Right. It’s great to be with you and great to be back.

3:46 Brian Rose: You know, I loved our conversation last time. It was a year ago, Chris, how quickly and dramatically the world has changed in just 12 months.

3:55 Maybe walk me through what your view was of the last year, kind of the big moments, your thoughts of them, because there’s quite a few events there. And then obviously the last three months has been quite headline worthy with the FTX debacle and SPF. What were your thoughts on the year?

4:12 Christopher Giancarlo: You know, a lot of people come up to me and say, Chris, what the hell has gone on in crypto? What, where are we and what’s happening?

4:20 And the way I try to respond to that, as I say, the first thing you need to do is carry in your mind almost two separate concepts. And if you can do that, I think a lot of this makes sense. So the first concept is, crypto is a highly speculative new investable asset class. The second concept is digital assets and crypto as an entirely new internet-based architecture of value including money itself. Why are they different?

4:56 Because the second one, crypto and digital assets is a new architecture, you might liken to a new technology like say railroad architecture in the 1870s. The first, crypto is a new asset class, you might liken to railroad stocks in the 1870s. And why are they different? Because of the coming of the railroads allowed countries like the United States to evolve from small un-networked regional economies into the national economy that has become the world standard for the largest and fastest growing economy of the last 150 years.

5:37 But yet railroad stocks were notorious in the 1870s for fraud, manipulation, misrepresentation. Now, some of them were very real. They funded the continental railroad, but others funded fraudulent railways that didn’t even exist, that didn’t have the right rights of way, and people lost their money speculating, others made money. So they are very different things. Crypto and digital assets, more broadly, is a brand new architecture, it’s internet-based architecture of finance.

6:09 That’s a very powerful, and it’s gonna continue to be a very powerful, and I’ll get into that in a minute, but that’s very different than crypto as a speculative asset class. And when we think about spectacular failures of FTX and others, it’s in that funding side of it. It’s in that railroad stocks aspect of it. It’s not in the underlying technology. What happened with FDX, failure of all the traditional failures that we’ve seen in financial markets, it’s not a failure of the underlying technology.

6:44 If people can keep those concepts separate, it’s much easier to understand. I feel like we’ve gone through the wildcatting days of this new technology. But every wildcatting error yields to a more fundamental, disciplined, thoughtful error where the technology embeds itself and becomes part of our world. And I remain as confident as ever that this new architecture is what’s going to remain. The world is not going to say, oh, FTX, so therefore let’s go back to three-day settlement periods, let’s go back to writing paper checks, let’s go back to branch banking.

7:25 That’s not gonna happen. The genie’s out of the bottle on the technology, notwithstanding the spectacular failure of some of the more prominent players in the early, the first phase of this crypto architecture revolution?

7:38 Brian Rose: Yeah, it reminds me a bit of the dot-com boom. I was actually in New York City. I had been hired at the tender age of 27 to be the CFO of a dot-com startup called luxuryfinder.com.

7:48 We were selling private jets online, got about 15 million of funding, a couple of very famous investors in New York City. And we rode the wave right up and I was out with my banker buddies out on the town telling them this was Columbus in the new world and they were all looking at me rolling their eyes, and of course in 2000, everything crashed. But you know, and of course, I’ve heard you reference this before, there was pets.com and petsstore.com and all these iterations.

8:13 Now the market went up in value and down in value, but the underlying technology never lost its purpose, right? That was still incredible, and that kept developing, it’s just the asset prices overshot, and then definitely came back in undershot. But fast forward 10, 20 years, that technology has fundamentally changed who we are as humans. You’re saying this is a very similar analogy to that?

8:37 Christopher Giancarlo: So let me actually give you some data to support exactly what you just said.

8:42 When pets.com failed in 2000, there was about 350 users of e-commerce. Pets.com did not fail because people didn’t want to buy pet supplies online. Pets.com failed because people didn’t want by pet supplies using dial-up modems to connect with the website. They didn’t want to wait three weeks for the pet supplies to arrive because the delivery infrastructure wasn’t there. And they didn’t want to pay ridiculous valuations for companies like pets.com.

9:14 Within 10 years, by the year 2010, there were 2 billion users of e-commerce and by then Amazon had arrived on the scene selling books and eBay had arrived. And by 2020, there are now over 6 billion users of e-commerce online, and it’s driven stock market valuations and others, e-commerce, e-commerce is part of our lives. But it took 20 years for the infrastructure to build out the promise of e-commerce. The valuation of e-commerce had gotten far ahead of the underlying infrastructure, the mature players, the disciplined players in the market, and sensible valuation. So the promise had gotten ahead of the reality. And I think we’ve seen the same thing with digital assets and crypto, the promise of an architecture that’s not based upon accounts kept proprietary institutions of where value is, but value established on the internet through protocols and protocols like crypto protocols like Bitcoin or ETH and others and distributed ledger technology really hasn’t yet built itself out.

10:33 So this is very much your analogy, Brian, exactly spot on.

10:36 Brian Rose: It’s funny, I remember in my dot com startup days, funny enough, some founders talking about railroad stocks. Fascinatingly enough, because I think where we’re seeing, also we saw a lot of fiber being laid at that time, especially in New York City, and they were making these similar analogies, like it was a big boom and they were talking about how most of these railroads went bankrupt and the analogies were very similar.

10:58 And look, you and I worked on Wall Street for decades and we saw this centralization problem occur many, many times. Of course, Bernie Madoff is a good example, but we’ve seen it where a small amount of people have power, they do things that they shouldn’t be doing, Enron, maybe mortgage crisis, maybe Madoff, But it goes, go back every 10 years and you’ll find something on Wall Street. And this was another one of those. DeFi definitely didn’t fail, and we can talk about that.

11:26 And then the underlying tech itself is maybe tainted by FTX, but nothing’s changed. It potentially is a superior technology, and you think it will prevail in time.

11:39 Christopher Giancarlo: I’m certain it will. To think that somehow the internet will not do to finance and banking and money itself, But it’s done to retail shopping, social networking, entertainment, leisure, travel, communications. But to transform those from systems that operated through proprietary rails owned by firms to an internet basis is the same thing is going to happen.

12:07 Now, will it happen in a revolution all at once? No. There are still corner shops you can shop in alongside e-commerce outlets. in the same way you know bank-based finance is not going to go away but a new form of value establishing value and who holds value and who transfers value to whom using distributed ledger technology on either wide open internets or closed nets is absolutely the direction that the future is pointing us in.

12:40 Brian Rose: What did we learn from the events of the last 12 months? I mean the big things on my radar were Terra Luna failure probably Celsius FTX those are probably the big ones what did we learn and what were the ramifications I guess yeah what would you say were the lessons and the magnitudes of those things

13:03 Christopher Giancarlo: so look I’m a big believer in decentralized trustless systems but until we get there trust is still critically important. And betrayals of trust are extraordinary breaches of the social fabric.

13:18 The allegations about what exactly happened at FTX still have to come out in full, but we’ve been reading a lot of newspaper stories. And based upon what we’ve read, it looks like a combination of Bernie Madoff, Nick Leeson in Bearings, and John Corzine and MF Global. And why do I say that? Well, you know, Bernie made off, traded off the fear of missing out, right? A big shiny object of his fabulous returns, everybody wanted to get in. Well, you had some of that here, or apparently, it appears we’ve had some of that here. Nick Leeson, you know, traded himself into a bad trading position and just thought with more leverage and more trading, he could trade out of that position. And all he did was create a bigger and bigger hole, right? Until it eventually was unsustainable. And And then lastly, John Corzine and MF Global, you know, the temptation if you’re running a trading book that you’ve got to maintain margin on your positions to dig into customer accounts to support that is what we’ve got here.

14:16 Now all of those failures are failures of traditional marketplace. They’re failures of trust in systems that require trust and that’s what we had here. There’s nothing about that combination of factors that’s particular to crypto. There’s nothing about that combination of factors that’s indictment of internet-based digital asset systems. And yet, it will be used and is being used by those who have agendas, whether their agenda is, I told you so, crypto is wicked bad, or whether it is, you know, I’m in favor of this regulatory agency or that regulatory agency having power.

14:57 It will be used just as the failure of pets.com. You can find headlines in the New York Post and others saying, you know, that’s it for online e-commerce. E-commerce is dead with the fall of crypto. Well, that wasn’t the case at all. You’ll see in the short term, a lot of silly narratives that people are gonna be embarrassed by three or four years from now.

15:15 But look, that’s the nature of human society. People will use this. But it’s not an indictment of the underlying, of the underlying technology or the promise of it.

15:23 Brian Rose: Yeah, well, I wanna talk about some of the fallout and what we might expect from a regulation perspective. Funny enough, Chris, I had Nick Leeson right here in this room a few years ago, and for a guy that worked on Wall Street in the city of London for many years, having him here was pretty epic because we all remember, although the young kids don’t remember, and when I mentioned this guy lost a billion dollars, people are like, that’s it?

15:46 But I said, back when a billion dollars was a lot of money, this guy took it out and almost took out the Bank of England because he took one error trade basically and wouldn’t cut his losses and I use this example to my students all the time and then tried to trade out of It and brought down the bank that the Queen used for hundreds of years, right?

16:06 Christopher Giancarlo: It was yeah It was it was a great names in finance, right? Yeah, a trusted name There was a name, you know that you had trusted and and and it’s amazing how hard it is to build trust now Quickly, it can be it can be dissipated

16:18 Brian Rose: You know, I had Anthony Scaramucci on a couple weeks ago and you know He had sold 30% of skybridge to Sam and you know He was out in the Middle East introducing Sam to investors out there and he said one thing which just you just made Reminded me of he said Brian, you know when the Luna thing happened They obviously were taking heavy losses there and he said what they could have maybe done is said look Alameda’s busted. I’m gonna wrap this thing up. We’re gonna take our hits But much was like look the FTX was a thriving potentially global marketplace for crypto it had everything going for it he’s like if they could have just hit taken the losses shut down Alameda and not tried to use those funds and trade out of it he’s like I still think that this could have been something that would have been saved but they doubled down and went out of it what are your thoughts on that observation actually

17:09 Christopher Giancarlo: It’s the right on it’s a right on observation so so I come you know you mentioned my background on Wall Street you know I come at markets from the trading platform side. Before I went into government, I helped run GFI group, one of the world’s premier trading platforms for over the counter swaps. It is a adage in markets that says all this time, that trading platform operators must be neutral to parties on the trade front. There’s a reason why the New York Stock Exchange doesn’t run a hedge fund. There’s a reason why the London Stock Exchange is also not running in an asset management firm or trading for its own account, right? At GFI Group, we never, you know, operate traded money on or, you know, put money to work on our own exchange. These things do not go together. And most modern regulation, including the regulation that I oversaw as chairman of the CFTC, separates trading platforms from trading houses, right? They are separate animals, they must be kept separate.

18:12 And why is that? Because the temptation is too great if you’re running a book to maybe dig into the accounts of people trading on your platform to advantage yourself or help yourself out, especially if you get yourself into trouble. So there was always something problematic into the FTX exchange sitting side by the Alameda trading house. And so I think that is something that is as crypto regulation. And by the way, when I was using the analogy of pets.com, and the infrastructure not being mature enough, part of that infrastructure is our regulatory infrastructure, regulatory infrastructure, especially in the US, which was written in the 1930s, was written for an analog physical world, a physical delivery of stock certificates, a very different world we have today. And so, you know, the regulatory infrastructure hasn’t yet caught up, but I expect it will.

19:09 And when it does, I’m quite certain that what you will see is traditional separations between trading platforms and people that run books, that run proprietary trading books. Those are things that in the natural order of human activities should be separate, must be separate. And I believe that regulation will make sure that in the crypto world, they are separated as well.

19:31 Brian Rose: Well, let’s talk about that, because, as you said, it was a trust issue, but then again, this trust miss site would have never happened in a traditional financial market, and you and I both know that.

19:42 Even internationally, in any G30 country, something this epic proportions, probably in this day and age, would have been hard to pull off. Of course, it did happen as recently as 10, 12 years ago in other places, but it would have been hard. But since this was crypto, it was a different ballgame for a variety of reasons, and maybe we can dive into them. First of all, this was located in the Bahamas because nobody was sure about if they wanted to be in the U.S. and a lot of people have blamed the SEC for lack of clarity.

20:09 I don’t know if that’s fair or not. I’m curious what you think. Also, it was a new asset class with a new 30-year-old CEO who seemed to be smarter than everybody and they were driving it forward. And I remember a couple years ago, Chris, when I really dove into this space, I remember thinking, what is Alameda Research? It sounds like, I don’t know, weird some scientific firm or is it some startup investing firm. It was never really clear what was going on and it was moving so fast that I don’t think anyone had the time to check and so you know what were the failing points and then maybe finally how do you regulate this asset because you work this for the CFTC the SEC is involved but even both of those institutions used to regulate these older type of instruments and you just said it’s almost like a railway it’s an algorithm it’s it’s not clear what it actually is crypto. Yeah.

21:05 Christopher Giancarlo: So, Brian, fascinatingly, I think you just cataloged all the failures.

21:09 Let me actually identify, however, the one pocket of the whole thing that didn’t fail. And the one pocket that didn’t fail was the piece that was under traditional regulation, which was CFTC regulation of derivatives. So the piece that didn’t fail and still is operating well today is the Bitcoin futures market. It remains liquid, it remains active, it remains transparent. It’s operating. That’s in the asset class. As far as the FTX empire, the one piece that didn’t fail was their ownership of FTX US, which is the old leg directs, which is a regulated derivatives platform under CFTC regulation. And it’s the asset that from what I hear people are hoping to buy out of bankruptcy and operate because it didn’t fail, it’s functioned well.

22:01 Now, the reason I say that is not to toot the horn of the CFTC, but to say that these old regulatory frameworks, if they are updated and repurposed, can serve rather well. I do believe, and I’ve long been an advocate for a bespoke set of regulation in the US for crypto. That doesn’t need new regulators, new statutory authorities. But until we get there, regulators can repurpose old rule books. And we did that at the CFTC in 2017, when we greenlight the Bitcoin futures, which has worked well. Subsequent to that, the licensure of LedgerX, which was subsequently bought by FTX, and continues to operate without failure. So I’m a believer that with the right vision and repurposing, legacy regulatory frameworks can be repurposed. And ultimately, at the same time, I’m hoping that again, on the US side, that Congress steps in with bespoke legislation. And look what Europe’s doing with micro legislation. I don’t think it’s perfect.

23:08 I think it’s got some some challenges in it, but it shows that policymakers can look at this new architecture and design frameworks that are appropriate for it And I think that’s what that’s what we need to do more broadly

23:21 Brian Rose: Alright, so a lot of people in crypto immediately pointed the finger at the SEC and said if they had been clearer These entities and then there’s a lot of them worldwide, right? There’s by the finances of the world. There’s the crypto comms There’s the FTX is they stayed specifically off American soil which also meant no tax revenue, maybe less jobs, et cetera, because they said there was a lack of clarity from regulations, specifically from the SEC.

23:47 Is that fair? And what is the way forward?

23:50 Christopher Giancarlo: Yeah, so here’s what I would say. When we looked at this during my time in office at the CFTC, we said, this is a new asset class. There’s a lot of challenges here.

24:02 So our first job was to get smart about it. And in the spring of 2017, we launched something called Lab CFTC to make ourselves as smart as we could be about the new asset class. To the point where I’ll give you an anecdote, in the summer of 2017, we were doing synthetic Bitcoin mining in the chairman’s conference room with the CFTC with all the commissioners present, just so we can understand what the concept was, walk us through the different concepts. That’s the degree to which we wanted to get smart about this.

24:34 So by the time we were then faced with the choice of licensure and greenlighting the launch of Bitcoin futures, we had already gotten ourselves up the learning curve. I think that’s duty number one of regulators, get smart about it. Number two, recognize that technology has its own path forward. You can’t stop the movement of time. You can’t dictate market structure, what you have to do is follow the trends and direct it in a way that is beneficial to the marketplace, that furthers the principles that your mission is focused on, fairness, transparency, honesty, integrity in markets.

25:21 But follow the technology, don’t try to bottle it up and say, well we like markets circa 1982 and therefore we forever gonna hold back innovation. So you’ve got to accept innovation in markets not try to stifle it. That’s I think that’s principle number one that we tried to do with the CFTC. The other point is once we realized that this was moving forward, what we said is, let’s create a pathway that may be in the case of crypto, we actually called it heightened scrutiny. We made the pathway slightly more challenging, actually not slightly, somewhat more challenging than a standard non-crypto product certification.

26:07 But we said, look, the pathway is going to be at a slight incline over others, but we’re going to light the pathway. We’re going to tell you what it takes. We’re not going to operate in shadows so you don’t really know what the pathway forward is. At the CFTC, the pathway to green lighting of Bitcoin futures, the pathway to getting a license for a crypto derivative exchange is clear. It may be difficult, but it’s clear.

26:37 And we felt it was our duty as regulators to say, we’re not going to hide the bull. We’re going to tell you where the path is. It may be a challenging one. It may require a higher degree of scrutiny. team is going to spend more time on your application than perhaps we would with a new wheat future contract, or some sort of new metals future contract, which we’ve been, which the agency has been looking at for 50 years, this is a new asset class. So the scrutiny is gonna be tighter, but the pathway will be clear. And so I would say that’s the third requirement of regulators to clarify the pathway forward, not mystify it, clarify it. And I think we were successful in than doing all three at the CFTC.

27:14 And I think that should be the model, if I might say so, for other regulators. That is, get smart about it, clarify the pathway forward, and engage with the industry.

27:25 Brian Rose: Well, if I make an opinion, I see no indication any of that is happening currently in the regulatory body of the SEC. I mean, I took the Series 7 exam, I’m sure you did too, the series 63 I took mine in 93 and I learned about I think it’s Securities and Exchange Act of 1933 I believe so it’s a piece of legislation almost 90 years old or 90 years old and I learned all about that and now I’m here from that organization that it’s a security everything’s a security but Bitcoin doesn’t pass the Howie test and you better look out and I hear comments like no honest man should fear the SEC and I don’t know it just doesn’t seem very helpful. Look, I’ll just start it up and ask you, is this an old way of looking at new instruments? Do we need to completely revamp? Because saying it doesn’t pass the Howie test seems like the completely wrong question to be asking about this as who cares?

28:23 It’s a completely different instrument. So I don’t know. What are your thoughts?

28:28 Christopher Giancarlo: Well look, as a former regulator, I’m evidence that regulatory administrations and their point of view come and they go. Nothing lasts forever, right? So I’m not sure that the current state of the SEC that many people complain about is the permanent state. I think, you know, things will change. Doug Adams, who’s the author of the Hitchhiker’s Guide to the Galaxy series of books, one of my favorite authors, has a great quote, and I’ll paraphrase it because I never get it right, but he says that, look, anything that was invented before you turn 35 is way cool and is subject something that you want to devote time to and maybe make it a lifelong career but anything that comes about after year 35 is suspect dangerous and needs to be suppressed. With crypto that generational divide is as great as it ever was in fact I’m old enough to remember something we called the generation gap in the 1960s and it was over things like civil rights and the war in Vietnam there was this gap between young people and their parents. I think that gap is alive today but it has to do with really the future, a networked future. Young people understand networks, digital networks and yet older people don’t understand why we need to change. You know for them there’s nothing wrong with branch banking, there’s nothing wrong with paper checks and three-day settlement cycles and that

29:59 Generation will yield to a younger generation. So part of what we have here, and I don’t want to accuse any particular people of this, but we do have a generation gap. We have a particularly septagenerian

30:16 Leadership in our financial markets, in our central banks, and I think to them, in many cases, is what was wrong with the old world. And they will be replaced in time, whether it’s this year or next year or three years from now, the technology will march forward and eventually a new leadership will emerge into those positions of power that intuitively understand digital networks. And they’ll bring with them an openness and a sensitivity. So the current generation that if it’s for comfort levels levels or technology, I don’t want to say hysteria, but technology dissidence will yield to a generation that intuitively understands this and it will happen.

31:04 And you know, whether the resistance currently is, you know, at market regulators or central bankers, I mean, I’ve spoken to people across the spectrum, across the globe, at market regulators, potential regulators, central banks, and there’s a mixture of real hesitancy because they just don’t get it and they like the world that existed before and there’s people that get it and want to march forward. Eventually, the people that get it will simply generationally emerge in the majorities at these institutions and the change will happen, but it will take time. I think Peter Thiel called it the jerryocracy, I think is what he called it.

31:45 Brian Rose: And maybe that does have to die out. In the meantime, though, as United States of America And even though I am a citizen of this country and America, I still consider myself quite American. It’s a little embarrassing that the country that should be leading the charge in this. Matter of fact, some people say it’s the only technology in the last 50 years that America hasn’t dominated. It’s probably true.

32:07 It’s, and then even today in 2023, I still don’t know if I’m able to start a new crypto company in America, and I probably wouldn’t. I’d probably go move somewhere else. So that’s a shame.

32:19 Christopher Giancarlo: just let me just let me let me just leaven that a little bit. Okay, you’re absolutely right. And as an American, I feel the same way. I feel that this is not the 1980s, 1990s, when we led the charge and developing the internet to begin with, we you know, we led the first wave of the internet, we kind of the second wave that the the the internet of things we yielded to others in terms of development of 5g technology, but this third way of the internet of value, I think it’s still a closely run thing where the US will be.

32:53 And why do I say that? Because stablecoin development has still been largely US dominated. A lot of crypto infrastructure has some strong US players involved in it. And I would say from the regulatory state putting aside what other regulators have done, it’s been five years now that the CFTC led the world in creating the first regulated marketplace any type of crypto, and that was in crypto futures. I know a small part of the marketplace, but Bitcoin futures and Ethereum futures are working well under sound regulation transparently, liquidly, and serving a lot of risk hedging needs in the marketplace. So the United States has not been absent, but I do agree with you. It’s a close run thing whether the United States will bring the same degree of dominance. And you know what, maybe a more global approach might be a good thing.

33:46 Where you see the most adoption of crypto is where societies are young. In young countries, Africa would have a high birth rate, a lot of the average population under 30, you see a high adoption rate. And in mature societies, this geriocracy that we have, unfortunately, many Western countries, we see a lot of resistance. And I think part of that resistance is that generational divide that I talked about earlier. But that generation will yield to a younger generation that will intuitively get it.

34:18 Brian Rose: I appreciate that point. And we do want to get to stablecoins and, of course, the digital currencies, because this is where you are the expert.

34:27 You’re definitely the number one guest I’ve ever had on this show that really talked straight about the digital dollar and what’s happening in China. I want to get to that. Before we do, I just want to ask what you think will be the future of regulation in America. One of the things I found very entertaining, or not entertaining, I don’t know what it was, eye-opening about the FTX hearings in both the Congress and the Senate was, man, I don’t know what to say. I find these hearings fascinating. Anything live happening in D.C.

34:58 From the Supreme Court Justice approval a couple years ago, I think is probably the the most fascinating live TV but I saw experts rolled out I mean you must have been cringing at some of these experts that were saying these things have no value whatsoever pure speculation it’s rad poison squared and then also at the same time I saw people with agendas from both parties just using this event to advance their or settle scores within the conference and I’m not a politician but it was obvious to me by watching it I’m curious if you saw similar things that I did on both of those hearings and then how will this play out do you think in regulation?

35:38 Christopher Giancarlo: So those agendas you know that’s what Washington is all about those agendas will continue to play out you know there are people that are pro CFTC pro SEC and they will run op-eds and run stories why the other agency is out of its mind and this is the right agency.

35:54 So that’s normal you can have people that are pro self-regulation that are anti-regulation they’re going to play out their agenda. They are going to be score settled. If you take away all of that noise, I think there are two pieces of legislation that will garner enough majority and interest across the aisle to have a chance of seeing the light of day in the current Congress that was just sworn in. The first one is stablecoin legislation. I do think we’re going to see some form of stablecoin legislation.

36:28 I think at a minimum, there is bipartisan support and across the House support, Senate and House, for disclosure legislation for stablecoins. At a minimum, if you’re operating a stablecoin, and if you say this is the stablecoin mechanism, you have to be truthful. You’ve got to explain what it is and be truthful about what it is, and probably there’s got to be some auditing process to actually confirm what you say it is. I think there is core support for that across that. The second question will be who can operate state of course? Must you be a licensed bank or must you have a special license to do it?

37:08 I think there’s some challenges there. There’s some contingents that like to see that limited to established banking institutions or at least someone who holds a bank license. There are others that think it should be more broadly. What’s the role of state? I think there’s still consensus building to go on there. But I think stablecoins will see the light of day. For one reason, stablecoins are considered, I think, because they hold US Treasuries as a demand factor for US debt. And so in a country that, you know, lives on debt, is issuing more, spending more and more money all the time, the need for demand, I think that if nothing else, and I think there are other reasons but I think that’s one reason why we may see stablecoin legislation in the future.

37:52 I also think because Prudential regulators want to make sure they’re in the driving seat regulating this and I think the likelihood of bank and central bank involvement in stablecoin regulation is great. The other area where I do think there remains support is to fill a gap and that is it’s now clear that certainly Bitcoin, when it’s used as a derivative, futures and swaps, is regulated by the CFTC. And cryptos that serve the function of capital formation instruments and therefore securities are regulated by the SEC. The SEC has authority are both spot markets and derivative markets for securities. The CFTC has only authority except for a few limited exceptions for only the derivative market for commodities like Bitcoin and Ethereum.

38:51 Why is that? That sounds strange, right? The SEC has both derivatives in spot, the CFTC generally only has derivatives. When you think about it, it actually makes sense. The CFTC oversees gold futures but doesn’t oversee gold markets because Because if it did, it would have to regulate every corner jewelry shop in America.

39:12 The CFTC oversees wheat futures, but if it oversees spot market for wheat, it would have to oversee every grain elevator in America. The CFTC oversees cattle futures, but doesn’t oversee cattle auctions. If it does, it would have to have agents in every cattle watering hole in America. Those are long been assumed that spot markets are under state regulation and the futures markets are under federal regulation with the CFTC. But there are a few exceptions already to that in the area of foreign exchange and others, and it is very likely, I believe, that the CFTC is going to be granted authority over spot markets for Bitcoin and Ethereum. There’s a whole bunch of reasons for that, but it makes sense. If the CFTC has got five years’ experience overseeing the derivative markets, it makes sense for it to have the spot market. That’s what happened, it’s already happened in other categories. So I believe there’s a strong likelihood that that legislation will pass. It was introduced in the last Congress. It has bipartisan support. It has cross house support. And although it’s been, again, some people are driving an agenda have tarnished it because they said, well, FDX supported it, therefore it must be bad.

40:31 But just because FDX supported something doesn’t make it bad if the underlying premise of it makes sense. And here’s why I think it’ll be beneficial. The CFTC already regulates Bitcoin and Ethereum futures. Because it regulates the futures, the SEC has greenlighted an ETF on Bitcoin and Ethereum futures. If the CFTC has given authority over the spot market for Bitcoin and Ethereum, now the SEC will have no objection to green gliding a spot-based ETF.

41:04 And therefore, as a former trader, you know, once you’ve got the full suite of future swaps, spot markets, and ETFs under effective regulation, now traders can have a field day with all All the different product sets necessary have a full curve of prices and sweet. So I think this could be a real beneficial turn for Bitcoin and Ethereum if the CFTC were given that spot authority and then the SEC saw its way to an ETF on that spot market.

41:38 Brian Rose: Yeah, that sounds like a wonderful option, but the SEC just said Ethereum is a security, right?

41:45 So we have to get over that first.

41:47 Christopher Giancarlo: So, it has the CFTC, so I’m not sure, you know, all the legislation that’s moving in Congress where it actually determines what’s under CFTC jurisdiction puts Ethereum alongside Bitcoin. There is no legislation in Congress right now that says Ethereum is under the SEC. So I think, and the fact of the matter is the CFTC has had an oversight of Ethereum futures now for almost four years. So again, there are agendas out there, you know, and whenever you’ve got institutions in a political state, you’ve got partisans for those.

42:24 I’ll admit my own support for the CFTC, right? You’ve got partisans for those institutions. But if you break it down, CFTC is five years running, overseeing Bitcoin and Ethereum futures. I think it would be unlikely and none of the current pending legislation supports the SEC being of authority. But you know, look, I’m open to other suggestions.

42:51 I think this will get hashed out in Congress. I’m just giving you my prognostication and my own view that I think the CFTC is the right regulator for Ethereum and Bitcoin spot markets.

43:02 Brian Rose: Yeah, well, you got my vote as well. I’m all for the CFTC regulating this stuff and I hope it happens. But of course, as they say in Washington and other places, never let a good crisis go to waste.

43:13 So it feels like they will use FTX for a lot of different agendas there.

43:17 Christopher Giancarlo: It’s already happening. Some seems to be losing steam. Well, watch how this plays out.

43:22 Brian Rose: I wanna jump in to the digital dollar and maybe a little bit of stable coin.

43:26 I mean, you mentioned the stable coin regulation. I guess that means something like USDC would come out with glowing colors. Tether is probably gonna be under the gun and have to do a lot of explaining if this regulation comes out. I guess we can see what happens. But maybe we jump into the digital dollar because this is something that comes up time and time again.

43:47 It’s something that initially, if we’re honest, Chris, probably scares people when they hear about the concept of the digital dollar. Now, I think when you start talking about it, you can explain why maybe that initial fear isn’t correct. But when people usually hear about it, it sounds like this instrument of censorship, instrument of surveillance, instrument of control that’s gonna be used by governments and you quickly go down this dystopian reality and it sounds really bad and really scary.

44:15 We obviously get examples of what’s happening in China with this. When you were here on my show, you gave some of the most up-to-date incredible information on this. So let’s just start. What do people need to know about digital currencies going forward and how it might affect their lives, their future, or end the world as we know it, Chris?

44:34 Christopher Giancarlo: Well, Brian, thank you.

44:35 You know, when you called and said, hey, why don’t you come on the show? You know, I saw this as an opportunity to try to demystify the subject. Well, thank you for this opportunity. And I tell you, you’ve got some great guests on your show, including Jim Rickards, who’s, you know, a real, he’s voiced some real concerns about Central Bank digital currency. I’m a great fan of Jim.

44:54 I’ve got his book, The Death of Money on My Shelf. I’ve cited him in some of my work at the CFTC, including my recent book, crypto dad the fight for the future money I cite Jim. So I’ve got great deal of respect and have a great deal of respect for the folks that see the potential of central bank digital currency being used to invade people’s privacy and they have good reason because we see what’s being built in China with their digital you want what they call their ECNY you know CNY is the international symbol for the Chinese currency. They call their digital currency the ECNY. It’s already in over 250 million Chinese wallets. And it’s naive to believe that it won’t be used as a surveillance tool. You know, if you criticize the regime, your your ECNY will be turned off from getting a train out of your village or to pay the rent on the apartment you want. And I’ve got a paper coming out in a few weeks by the American Enterprise Institute that go through this work, I had the opportunity to serve on a Hoover Institute study that studied the ECNY and issued a report to Biden administration about the concerns of the ECNY as a surveillance and censorship tool.

46:07 So your guests like Jim Rickards and others are not wrong to be highly concerned about the development of CBDC, Central Bank Digital Currency, by democratic countries that might emulate some of that surveillance and censorship features. But whenever you go from an analog to a digital construct your choices become infinite in your design choices. So just as it can be designed to be a price a privacy eroding and censorship imposing instrument so it can also be designed to be a privacy protecting and a censorship resistant instrument. And so the question is is, do we allow ourselves to fall into two camps, one camp that says CBD, sea, or bust, and another camp that says, no way, no how, let’s stop this in its tracks? Or do we take what I think is a more mature view that looks at history and says, throughout history, governments and money have always been intertwined. Now, money must enjoy the support of the private sector to carry any value, but governments have always been involved to provide some degree of trust in it. Can we trust government? And so my view is I’m as concerned about privacy as anyone. And if you look at the writings of the Digital Dollar Project, we have made privacy central to our discussions from day one. But my view is if we simply put our hands up and say, no way, no how, then we don’t have a seat at the table. And if government launches CBDC, somehow despite that opposition, and privacy is not central, then those people

47:56 That opposed it, what have they achieved by opposing it, because it may happen anyway. And therefore, rather than simply say, no way, no how, get in the game. And our digital dollar project is about bringing the private sector and the public sector together to talk about what are society – in a democratic society, what are society’s expectations for their money? Let’s make it clear to policymakers that privacy must be central. You know, if we get privacy wrong in a digital dollar, it will be a disaster. But let’s look at it the other way. If we get privacy right in a digital dollar, how powerful would that be? And for those who say, no, just leave it to the private sector to design money. Let’s the private sector. Well, how has that worked out in the area of speech? We’ve left to the private sector to operate the public square in the form of Facebook, in the form of Twitter. And now, through the Twitter files, we’re seeing how government leaned on the private sector to say what could be discussed and what could not be discussed and who could be featured and who could not. And Brian, you yourself have been a victim of government leaning on the private sector to ban certain speech.

49:12 So those who say leave it to the private sector to do money might be doing some damage. Only government in the United States is subject to our First Amendment freedom of speech, our First Amendment freedom of assembly, freedom of religion. Only government is subject to our Fourth Amendment protections of privacy. So if we design a US digital dollar right, and by the way, we do not advocate deployment of a digital dollar. But we do advocate the United States, the leader at the table bringing democratic principles of freedom of speech, freedom of assembly, to the discussion of privacy protection to the design of a digital dollar. And so I am very proud of our work at the digital dollar. I’m as purest when it comes to privacy as anybody. But I’m very proud of our work because we are a private sector initiative that is speaking to policymakers saying, if you do this, you must put privacy front and center.

50:15 The alternative is to say, do not do this. Do not create a CBDC. But what if it happens anyway? Then you’ve missed the opportunity to make privacy at the center of the conversation. Our work is to make sure that privacy, and it’s more than privacy.

50:34 We’ve issued a set of privacy principles. We published in 2021. It’s privacy. It’s operational transparency so that citizens can actually establish for themselves that the privacy is being protected. Open architecture.

50:51 So one doesn’t need to rely on government saying, trust us, you’re privacy protected. We propose operational clarity. We also propose greater accessibility. So, we have spent a lot of time thinking about this, and to those who are critical of engagement with the public sector on this, I invite them to read our privacy principles. Just this morning, we republished our 2020 white paper, January 2023, where we go through these privacy principles. You can find it on our website at www.digitaldollarproject.org. And I invite critics of CBDC to read our materials. And if you’re a critic of CBDC because you’re worried about privacy erosion, I say to you two things. One, do not assume that the private sector will respect your privacy. And two, do not assume we cannot get privacy right in a digital dollar or digital pound or a digital euro if three people make their demands, make their conditions, make their rights known to policy makers as to what their expectations are in digital money of the future, sovereign digital money, as well as privacy. I’ll just share one more thing. I was in Congress on Capitol Hill last week meeting with policymakers that are working on stablecoin legislation. And I said to them, what privacy protections are you building into your stablecoin legislation? And they said, we haven’t thought about that. Oh, okay, great.

52:22 So you’re going to allow stablecoin operators to take everybody’s data, sell it, censor it, allow administrations, the current one or the next one, to lean on them so that they can’t be used to buy ammunition, can’t be used to fund right to life, can’t be used to fund private planned parenthood, depending on what side of the abortion debate a given administrations are. So you’re willing to allow private operators to censor and to surveil people’s use of of money, somehow that’s okay. So I say to your listeners, if you think CBDC is bad, what are you doing about private operators to make sure they’re not censoring and they’re not surveilling digital money?

53:02 We at the Digital Dollar Project believe that anti-censorship, anti-surveillance must be built into digital money, whether it’s sovereign or non-sovereign. And we’re advocating for that at every chance we get.

53:14 Brian Rose: Chris, I think this is probably the most important issue for the next 100 years. you know, maybe of humanity. And assuming the dollar’s gonna stay around for a while, which it probably will.

53:25 Man, this is crucial, this is everything.

53:27 Christopher Giancarlo: Well, let me tell you how crucial it is. We have this, in the United States we have this First Amendment. It protects freedom of speech, freedom of assembly, freedom of religion. And yet we are a free market capitalist economy.

53:41 What does freedom of speech mean in a free market other than the newspapers you subscribe to, the videos that you listen to, the social media platforms that you subscribe to. What does freedom of assembly mean in a free society other than the organizations you pay dues to, right? National Rifle Association, Planned Parenthood, the American Civil Liberties Union. What does freedom of religion mean in a free society other than the churches and synagogues that you tithe to?

54:13 If government can lean on private stablecoin operators to say nobody can use your stable coin to buy ammunition to subscribe to the National Rifle Association to attend that church or that synagogue or to subscribe to that magazine, then we don’t have a First Amendment. And so building anti-censorship and anti-surveillance into the digital money of the future, whether it be sovereign or not sovereign is the most important issue, as you say, of the next hundred years. And at least if government’s running it, It is subject to the First Amendment.

54:47 What we’ve learned with Twitter is these policymakers are saying, oh, we told them not to publish Brian Rose, but we didn’t order it. You know, they’re a free company. They can do whatever they want. Well, government could not ban you, but they can lean on private actors to do it. We need to make sure that if digital money is coming, and it is, that the same prohibitions on surveillance and censorship apply whether it’s sovereign money or non-sovereign money.

55:18 And we’re a long way from getting there. And the Digital Dollar Project is one work private organization that is out there being loud and proud about the importance that the private sector make known to the public sector what a free society’s expectations are when it comes to censorship resistance and privacy protection.

55:36 Brian Rose: Yeah, so let me tell you a little story of direct experience because I’m getting tons of flashbacks here, Chris. and it’s all very pertinent to what you’re talking about because this kind of pseudo hybrid of public private is almost the worst of both worlds, right?

55:51 You don’t get your constitutional rights respected and yet they can also be trampled on by government at the same time. It’s like you literally have the worst of both words. So 2020, April 6th, right here in the studio, I streamed the second largest YouTube live stream in the world that day. 65,000 people watch me have a conversation with another person here. The largest live stream was Trump’s coronavirus briefing that night from Washington DC.

56:15 It was like 90,000. The next day, no, 30 minutes later, that video was taken down from YouTube. And for the first time in nine years of having conversations, I had a video censored. I thought the weirdos got censored, not me. And I started learning about my rights.

56:32 Now, very honestly, Chris, I’ve never spoken about this. I didn’t know who to go to, right? Because I say, wait a second, freedom of speech. Freedom of speech, I was born in America. Where’s my freedom of speech?

56:41 No, no, no, this is a private company. You can’t even go and get this enforced anywhere. And I’m like, wait a second, we’re all locked down. It’s a public utility. But I actually couldn’t go anywhere to get my supposed rights to be exercised over a private company.

56:55 And so literally I tried to sue the YouTubes and the Facebooks and try to apply those rights and I didn’t even know where to go. So that kind of illustrates a little bit of what you’re talking about. Now we watch these Twitter files. And again, they’re blowing my mind. I’m waiting for the YouTube files to come out, which they probably never will, but if they do, I’ll get to find out what really happened to me.

57:16 I was actually blown away with the Twitter files because I’m actually not a conspiracy theorist. I leave that to my guests on my show. But I would have never, ever thought that there might have been some coordinated effort even though I was simultaneously dropped from YouTube, Facebook, Dropbox, PayPal. So again, I’ve had my money taken away from me. I know what this is like.

57:34 Again, I was coordinated right across, basically within a couple days’ time. Now that I see the Twitter files, it seems very likely that there were some government organizations that said we would rather these things not be talked about. Can you help us out? So not only was the private sector doing something that we couldn’t control, but I couldn’t even get my own constitutional rights enforced because of that weird hybrid relationship. And now that I see the Twitter files, my mind goes.

58:05 So first of all, I’m curious, What are your thoughts on what I just shared with you? Because I live this weird world.

58:13 Christopher Giancarlo: We now know from the Twitter files that the White House was speaking directly to Twitter, identifying particular YouTube videos, particular speakers, and saying, we’d like to see that taken down. The government could not do it itself under the First Amendment, but it was instructing the private sector to do it, kind of, you better do this or else.

58:35 Without saying what the URLs was, but if you’re a private actor, what are you going to do in the face of that kind of pressure, right? So this problem we’ve seen with Twitter or whether it’s Canadian truckers in Canada with their PayPal accounts being shut down and banks stunning them, it could be 100X in the world of digital money. And those who say, oh, private sector, okay, CBDC bad, there’s gonna be no difference If we don’t, as a free society, say this is unacceptable, our rights, as a free people, are built into our economic transactions in free economies.

59:18 We cannot be censored. For lawful activity, I’m not talking about for drug running or prostitution, for lawful activity, governments cannot surveil and censor, and they cannot do it through proxies in the form of private companies or stablecoin operators, what they cannot do under our own constitutions or the unwritten constitution and law in the UK or EU law. And that is the battle of the future. And that’s why we at the Digital Dollar Project have engaged as opposed to sitting back.

59:51 I respect those who say it’s too dangerous, we shouldn’t go there. I respect that. But I respectfully say, what are you gonna do if policymakers go there anyway? Our approach is let’s get in the game. Let’s advocate, if you truly believe, as I do, that the future of value, transferred value establishment is digital, is internet-based, then you must get in the game now to advocate that that be privacy-protecting, that it be censorship-resistant.

1:00:26 Brian Rose: What was the biggest shock to you of the Twitter files?

1:00:31 Christopher Giancarlo: How blatant, how blatant. It seemed like an alphabet soup of US agencies, including our national security agencies, including direct White House ties, were telling private actors what speech could be aired and what speech had to be suppressed. A clear violations if government did it directly of the First Amendment. And yet it seemed to be not weekly, not daily, but hourly surveilling of online activity and instructing the social media platforms what to take down by name.

1:01:10 Brian Rose: Now, I’m only reporting on what I’ve read in the paper, and it’s only with one of the social media platforms, Twitter, we don’t know what took place at Facebook or YouTube, but just upon what took place there. I mean, quite frankly, as a constitutionalist, as an American citizen, I find it shocking and I find it frightening for what it may mean in the future. To see, like you said, the litany of organizations, even down to Senate subcommittees and individual members and White House and the FBI and the CIA or whatever agency that letter they used, it seemed to be that, it was astounding, the requests that were coming in.

1:01:51 Will anything happen with that? Will mainstream media ever cover it? Will anything ever happen with the Twitter files or does it just happen on Twitter?

1:01:58 Christopher Giancarlo: I’d say one other thing, Brian, to our friends in Britain and on the continent to Europe. Sometimes what starts in the United States crosses the Atlantic pretty quickly.

1:02:06 So those who may be sitting listening to you and me saying, well, that was an American thing. Well, first it was a Canadian thing. Now it’s an American thing. How long before policymakers in Europe say, you know what, it’s kind of good. We can’t do this ourselves, but we can get these social media platforms to do it.

1:02:23 Someday we’ll be able to get stablecoin operators to unacceptable. And I think that it’s time that free society is making clear, but I also differ with those who say, you know, we can somehow just go underground. We must engage. You know, what Martin Luther King told his followers, you must engage with the system. You can’t separate yourself.

1:02:45 And I feel the same is true about when it comes to civil rights with regard to freedom of speech, freedom of assembly, economic freedom. We must engage with the system. We must make known what our expectations are in this digital future, and we’ve got to make sure that privacy is center of every debate, every conversation, whether it’s at the central bank level, whether it’s at the national assembly level, whether it’s at the government institution level, whether it’s at the national security level, protecting our privacy.

1:03:19 Privacy has been seriously eroded throughout the Western democracies since the passage of the Bank Secrecy Act in the United States and then 9-11, and we’re heading much more in the direction of China than we like to admit even today, even before we get the sovereign money, we’ve built up this financial surveillance system that we really need to take a close look at and not turn a blind eye to. Even if we never develop digital money, there’s a really enormous amount of surveillance being conducted today on our economic activity. That’s something that needs a refresh and a re-look at.

1:03:54 Brian Rose: Yeah, and I think anybody resisting this concept of a CBDC should just be honest with themselves about The what’s happening now anyways with information with finances with censorship again, go to some of the examples we just spoke about or Only fans or the Canadian trucker drivers. It’s already happening in various forms private and or public and So don’t think it’s not happening more than you think it is or continue it going to happen So we have to be proactive about this. But it doesn’t have to be, right?

1:04:25 Christopher Giancarlo: We’ve developed this financial surveillance system because our current account-based money system requires identity in every case. It’s not a token system, it’s an account-based system. Account-based system requires identity. So it’s easy to overlay a financial surveillance system that collects identity. The beauty of digital network-based systems is you can use tokens where the token validates itself, and you don’t need identity in every case, which allows law enforcement to go to a much more data analysis pattern recognition system, just what we use on the highway. If highway law enforcement is pattern recognition, somebody speeding somebody’s reckless driving somebody’s headlights are out in the middle of the night, that’s an indication of potential for criminal activity, we then stop the activity and get identity. We don’t have to have an identity-first system, we can have an identity-last system and use pattern recognition, big data. So there are a lot of privacy enhancing techniques to do law enforcement in network-based financial systems and digital money systems if we allow ourselves to go there. Again, I say to your listeners who are skeptical, don’t look at glass always half empty. Let’s look at the prospect of sovereign and non-sovereign digital money as an opportunity to upgrade privacy in the future of money. We can upgrade. We can go to a not identity-based system, but a pseudonymous system where only where there’s patterns that

1:06:04 Indicate unlawful activity will activity be unmasked. It will take some design work, But once you go from analog to digital, the design choices become endless. One design choice could be surveillance. Another design choice could be surveillance-free and privacy-protecting. We need to lead our policy makers in the latter direction.

1:06:27 If we do, we’ll be the beneficiaries of a new system. The system we have today is not nirvana. It’s not a good one. Let’s go to a better place.

1:06:35 Brian Rose: Yeah, I think people need to be honest with themselves and admit the lack of freedom we have in the current setup the way it is between private and public because I think people are in this utopia that as long as we don’t go to a CBDC, we’re all gonna enjoy this beautiful system of not being surveilled or censored.

1:06:53 It’s happening right now and we can see it. So we need to upgrade this and we can by being proactive. I use your analogy with my students and my academy with the going on the highway and I love it because when you drive on the highway, No one checks your identity, you’re only stopped when you look like you’re breaking a law based on your patterns, and then they come and check your ID, et cetera, and that’s an incredible way of looking at how we could potentially monitor digital assets, and when I mention that to my students, they’re like, wow, that really makes a lot of sense, but it’s a concept a lot of people don’t understand.

1:07:25 Just a quick one, I wanted to ask you, when we saw the Russian-Ukraine War breakout, we saw dollars being censored based, if you own them, based on being in Russia, and I’m just wondering, like, that was a good example of some censorship happening without a CBDC. Is that something people should see as well as in that’s happening anyways? And so to assume that we can go forward with maybe a way where that doesn’t happen, or how do you put that explanation?

1:07:52 Christopher Giancarlo: Well, another example, perhaps one, for me, closer to home, you know, there were truckers in Canada that were protesting government COVID vaccination policy. they were opposed to a policy of one party that with a party in power. And in our democratic system, we considered to be peaceful protests to be part of our landscape. And yet that party in power use that by their oversight of banks to basically shut down their funding activities. So that’s in the existing banking system.

1:08:30 That’s got nothing to do with digital currency or others. So our current system is subject to surveillance and censorship now. That reiterates that point. I think if we get it right, as I said before, we could actually design sovereign and non-sovereign digital currency to be appropriately censorship and surveillance-free and yet still have appropriate law enforcement for criminal activity. In the case of what we saw in the Ukraine, I think that the crypto system worked well enough to prevent oligarchs and others from moving large amounts of capital outside of Russia and others, but yet to allow donations to be made by appropriate groups to groups the Ukraine and others for charitable relief funds. So I think that we’ve seen actually a positive use of crypto, Bitcoin and others in the Ukrainian situation.

1:09:27 Brian Rose: I have to confess, I’m not as familiar with that as others are. I have heard some very good people speaking about how crypto has actually served to provide relief to peoples in the Ukraine from some of the horrors of war. So looking forward to this digital dollar you really had something that really piqued my mind here we can design it in a way to our citizens we can surveil it and make sure the government isn’t surveilling us it can be which is something we’ve never heard of honestly Chris before in this year our governments everything happens DC is always behind the doors we always hear about government corruption worldwide and we can never prove it I mean I ran

1:10:13 To be mayor of London and I would I actually thought one day what if all all of the spending of the city was on the blockchain. What could we really see what was happening? But you’re telling people we could build a system where we could actually tell we weren’t being monitored by the transparency of the system. That is incredible if we could build that. And I think a lot of people would be into that if they could actually believe that it could be done.

1:10:40 Christopher Giancarlo: Well, you and I began this conversation some time ago this afternoon talking about the absence of trust in our current financial institutions and that’s what was squandered in the case of FTX, right? I think we can design a central bank digital currency, whether it’s a digital dollar, digital pound, a digital euro, so it’s operationally transparent. So it’s not a government saying to its people, trust us, we’re not surveilling you, trust us, we’re not censoring you.

1:11:08 So people can establish themselves technologically that their activity is not being surveilled and not being censored. That’s where, again, once you go from analog to digital, those design choices are possible. You’re not limited by physical limitations. That, we at the Digital Dollar Project, in addition to advocate for privacy, also advocate for operational transparency. So the issue of trust is what people can establish for themselves.

1:11:36 You know, there’s, you know, seeing is believing, Or is Ronald Reagan like to say, trust but verify? This would be a mechanism that people can listen to the government saying we’re not surveilling you, but they can verify that the government is not surveilling you by identity. They’re surveilling activity for law enforcement. It’s unrealistic to think that government doesn’t have a mandate to do its law enforcement job. It does.

1:12:01 We want people that are human trafficking, that are drug running, that are peddling pornography to be able to be caught and prosecuted. We want that as a civilized society, but we wanna do so in a way that privacy is not obtained in case people do wrong. Privacy is obtained when there’s evidence that people have done things wrong. So these privacy enhancing techniques that we can use and to give the operational transparency so people can establish my identity wasn’t given up unless there was a pattern and only in the situations that there was a pattern that I did something wrong.

1:12:38 We can get there, but we all need to bend our mind. We need to get our best engineers working on this. One of the reasons why the Digital Dollar Project has created a technological sandbox where private sector actors can come together and test some of these technologies. We’ve created an open architecture initiative at the Digital Dollar Project so we can test out some of these open architecture approaches to it. Again, I invite you listeners to go on our website, see what we’re doing.

1:13:07 We’re trying to be the private sector actor that leads a lot of these conversations that we, the people, we are free people, should want in digital money. And you know what? We invite stablecoin operators to operate, to look at this as well, because we’ve just got as much concern that they are operationally transparent. We have the same concern that they are using open architectures, as we do as government does this as well.

1:13:32 Brian Rose: Sounds like this might morph into some type of DAO one day, you know, where everything is there, transparent on the blockchain, monitorable by everybody.

1:13:41 I mean, we haven’t really seen DAOs in practical use, but it’s this utopian version of what a company or blockchain or community might be like, where it’s all there, it’s voted, and it’s all in the blockchain, right? So I don’t have to worry about, you know, ballots being printed and mailed in and these kinds of things. So is this what the digital dollar might look like?

1:14:06 Christopher Giancarlo: Well, you know, digital currency is just one application of what Satoshi Nakamoto, whoever, who she they are, unleashed. The notion that we can establish value, whether that value is money, whether that value is a vote, we can establish it on an open internet architecture, as opposed to relying on trusted intermediaries, you know, a state elections commission, let’s tell us, Don’t worry. The election was fair or whether it’s a government say don’t worry about it. We’re not surveilling you what What he she they were searching for what they were positing is let’s use the internet and certain architectures and protocols That can be operation transparent. We can establish for our own satisfaction That value is properly counted votes are properly counted. Uh, records of ownership are properly recorded It’s a huge, huge, this transformation that it heralds, I think, is as big as the printing press.

1:15:06 It’s as big as Gutenberg’s printing press in terms of what it means for a society and what it means for a free society. And here, Brian, you said it’s a 100-year battle. I think we’re at one of those turning points in human history. A free society either embraces this to make us more free or we ignore the dangers and the challenges. We become utopian and in fact it makes us less free.

1:15:35 In the first wave of the internet of information, the hope was we’d all be able to communicate directly with each other. In some degree that’s happened, FaceTime, others have unlocked communication potential. But we’ve also found that some of these centralizers have made us less free. They made us not free enough to decide for ourselves what was the right COVID policy because they decided to deny us access to certain information. The marketplace of ideas should have decided what was right in terms of COVID policy, not some censor sitting in Redwood City, California.

1:16:13 And so we now need to decide whether an open architecture of things of value, the next way to the internet will make us more free or less free. And I think that’s the game that’s afoot, and we all need to be engaged in that debate right now.

1:16:27 Brian Rose: Yeah. I would say it is as important as the printing press. As important as the Bill of Rights, the Constitution, or democracy, I mean, it really is as an important movement, because you might argue that this is the real test of those ideas that maybe started off in good faith and now have eroded in many different ways.

1:16:45 And now it’s a chance to see if we can put it right. maybe forever in this weird digital architecture. Now maybe there’ll be some development of analog digital, maybe a thousand years from now of some other third dimension, but right now it looks like the digital open blockchain architecture is gonna be with us for a while. Also with things like zero knowledge, there’s ways of going in and obtaining information without giving up information about you, which is probably a way of maintaining privacy.

1:17:09 I’m sure you guys are all already looking at things like that.

1:17:12 Christopher Giancarlo: Absolutely. You know, whenever you go from an account-based system where identity is required in every case. Why is that? Because you need to establish who holds that account, how much money is in that account, will that account be sufficient to pay a transaction.

1:17:26 To a token system where you don’t need to identify identity, you just need to verify the token itself. It’s a privacy protection architecture. So what we need to do is not overlay on it. You know, my biggest fear is that of FTX to come back to where we started, is that somehow it becomes the three-mile island of this new digital architecture. Why do I say that?

1:17:50 Well, if you’re younger listeners, back in the 1970s and 80s, there was a nuclear disaster in Pennsylvania at a place called Three Mile Island. And it was so blown out of proportion that the United States actually stopped nuclear power plant development. And 30 years later, we’re highly reliant on fossil fuels. We haven’t gone the way of France and other countries that have developed that technology. And we’re not the better for it.

1:18:16 And I think that if somehow FTX were a basis for us to say, you know what, let’s take the United States out of development of the digital architecture of value of the future, we will be worse for it in the future. We can’t let this short term as horrible and as despicable as it is, stop us from the promise of technology. we need to re-engage our efforts to choose the future we want. And I hope it’s a future where our economic freedom is enhanced, not diminished.

1:18:50 Brian Rose: Yeah, it’s so crucial. One of the final thought I had is that I think with the Twitter files coming out, Elon has just published recently that everyone will be able to monitor their accounts to see how much you’re being throttled, restricted, et cetera. It just seems like an interesting potentially proactive step where we can be involved in a network and be able to audit that network potentially in real time. What an incredible concept, you know? I think it’s exactly what you and I have been talking about.

1:19:19 Christopher Giancarlo: Yeah. You know, let’s build trust on the basis of transparency, not on the basis of some institution saying, don’t worry, we got you covered. Yeah.

1:19:28 Brian Rose: Well, we have our documentary film coming out in about three months that chronicles what happened to us in those four weeks kind of in 2020 and all the details. and I can’t wait to tell the story.

1:19:41 It’s kind of fascinating now how it’s still super important and pressing and even two, two and a half years later. And of course the Twitter file is really, actually even shocked me, even as experiencing that, I would have never thought that those kinds of things were happening behind the scenes. I thought I was just being paranoid or unlucky or there was a coordination. I even remember asking people on the show saying, well, why would a place like Google or YouTube doing this based on a medical thing it doesn’t seem like they would have an interest but again if if there was some type of a coordinated government activity saying we’d rather these things not being talked about it kind of all makes sense

1:20:19 Christopher Giancarlo: and it’s very important that you tell that story yeah very important you tell that story because the story you know despite the Twitter files it’s not being covered by the major media outlets you know you don’t hear anything about the Twitter files on a lot of the major broadcasters and it’s And it’s they’re doing us a disservice. These are important stories. You know a free people hold their government accountable That doesn’t mean we’re anti-government, but we hold governments accountable to preserve our rights, right?

1:20:47 You know in the United States context government was instituted to protect our rights, right? We need to hold them accountable to protect and preserve those rights. That’s why government exists

1:20:58 Brian Rose: Yeah, it’s it’s so important. And so if people first of all, I’m curious what will happen with the Twitter files I mean again, it almost feels like a lot of the world maybe it’s Washington or the media is trying to just ignore them for a while and let them go. They might actually successfully do that, which concerns me.

1:21:17 But if anybody listening to us now is concerned by what they see at the Twitter files, they should dive into this digital dollar and what you’re doing with this initiative. And if that outrages you, then you should take that emotion and put it into, well, this is maybe the one thing that could prevent that from happening in the future. And I’ve never seen the parallels as much as I’ve seen it like today when you describe it. So, yeah, I appreciate that work.

1:21:47 Next 10 years, tell me, Chris, what are you doing? I know you’re constantly traveling the world, you’re meeting with central bankers, you’re involved in a lot of things. What’s on your plate for the next 10 years? this is a big part of it, but what are your mission statements?

1:22:04 Christopher Giancarlo: Well, you know, I’ve been so fortunate. I’m so fortunate in my career. I had a good run on Wall Street. I took my company public. It was very successful. I then served five years in government, and I really enjoyed that. It was an honor to serve my country, to serve the markets, and I think we did some good work during my five years at the CFTC. I’m at a position now in life where I have a lot of options and I’ve really dedicated, I think, the remaining of my public service, the remaining years of my public service to this notion of advocating that the US, number one, invest the time and the work now to explore CBDC even if we do not deploy, even if the United States does not deploy a digital dollar, but to not surrender leadership and development to our economic competitors and our economic adversaries. Secondly, that the United’s take a actively take a leader a chair at the leadership table of what global standards for CBDC look like. And then finally that any development of a digital dollar be a partnership between the private sector and the public sector. You mentioned earlier it’s one of my phrases I coined in my book money is too important to be left to central

1:23:18 Bankers, and I mean no disrespect to Andrew Bailey at the Bank of England or Jerome Powell at the Federal Reserve. They’re good public servants. But money is too important. Money will not work without public trust and respect. And so the only way to develop a digital dollar, a digital pound, a digital euro, is with an active engagement with the free citizenry of the private sector, with the public sector. We all need to be engaged and make clear or policymakers, if they deploy a digital dollar, digital pound, a digital euro, what privacy enhancing protections must be built, what transparency must be built in. If we do that, that’s a great exercise in democracy. That’s a moment that should make us all proud that the money we will use in the future. And the same applies to non-sovereign money as well. It reflects our values as a free society. So if you’re a big believer in private sector innovation of money, then you should be out there advocating for privacy and transparency.

1:24:17 If you believe the government has a role and government will always play a role in money, you should be advocating for privacy and open architecture transparency. So now is the time to engage in this debate, and I hope people take the time. Take a look at our materials, a digital dollar project, the white paper we re-published this morning with our findings and our work over the last three years. take a look at our privacy principles, join in some of our open workshops that we do, some of our, we do a series of privacy roundtables at universities around the United States, look at our statements, and if you think we’re onto something, join us, come work with us.

1:24:54 We think there’s really an opportunity to shape the future, the digital future of money.

1:24:58 Brian Rose: Two final questions, first of all, for people that are watching, listening around the world, what’s the one thing besides going on and engaging with Digital Dollar Initiative that they can do locally? Is it contacting the Congressman, Senator, the representatives here in the EU, et cetera, and saying, look, this is important for me or we wanna get this? That’s one question.

1:25:17 The second question is, is how much are we in danger of the, is it the ECNY or the digital yuan being exported? Because we know China has been investing in all sorts of countries around the world. And I think you’ve even said, they’re very likely probably trying to just white label this CBDC to just be pumped out to a lot of countries so they could potentially surveil citizens or maybe just to continue doing business with the Chinese. So maybe answer both of those, one dark, one light.

1:25:50 Christopher Giancarlo: Yeah, so the first one is to do what free citizens always do when things are important. Get smart is the first step. Read everything you can, listen to different points of view, don’t just listen to me, listen to others as well, form a judgment and then get active in the process. Right now in the United States, Congress is considering this. The Federal Reserve is considering this.

1:26:13 Go through your representatives, let you know, write about it, do op-eds about it, get active, attend some of our roundtables, digital dollar project. Question stablecoin operators. What are they doing about privacy? Don’t give them a free pass. Privacy is, in effect, all forms of digital money of the future.

1:26:31 The second question is a somewhat darker question. So I had the honor to serve on a one year study done by the Hoover Institute of California, it’s online, that looked at the ECNY. Look, I’ve got to hand it to the Chinese. It’s a pretty sophisticated instrument that they’re developing. And although they disclaim any interest in exporting it, I’m of the belief that within 10 to 15 years, as much as a third of the globe be either using the ECNY directly because they’re part of China’s Belt Road Initiative and they’re required to use that ECNY, or they could be using central bank digital currency in a box provided to them by the People’s Bank of China to white label their own currency, a digital bolivar, a digital other currency, because they want the surveillance capabilities. I mean, don’t Don’t be naive and think that non-democratic governments around the world want to surveil their people, and if they have a currency that could surveil them, they’ll import it.

1:27:42 They’ll slap their own country’s name on it, but it will be Chinese technology, the same way that Huawei technology had a trapdoor in which there could be surveillance built into their 5G technology. The same thing will be exported for use around the globe. monies have always competed against each other in international commerce. I think I told the story last time I was on your show, Brian, about how the dollar got its name. The dollar got its name because they wanted to emulate what was the most desirable currency during the period of European exploration of the Western Hemisphere.

1:28:20 There were Dutch guilders in circulation, there were British prouns, there were French libres, but the currency that was most desired in that early trade was the dollar, but it wasn’t the American dollar, it didn’t exist yet, it was the Spanish dollar. And the reason why the Spanish dollar was the coin to have is because it was minted with new world silver, not old world silver, which was more consistently pure, meaning it required less alloy, making it lighter, but also more fungible, one was similar to the next one. But it was also minted in a way technologically that it can be broken into eight equal pieces, known as pieces of eight, making it fractionable, and therefore easier to make change.

1:29:02 In fact, the dollar was so modeled on it that the dollar is divided into eight equal pieces, half dollars, quarter dollars, and what used to be called bits, 12 and a half cents, two bits for a shave is basically a quarter. So it’s divided into eights, just like the old pieces of eight. The dollar was modeled on the Spanish dollar because the Spanish dollar was the coin to have. In a digital future, features like fractionability, fungibility are going to be as important as they ever were.

1:29:30 Money always competes. Now, for the last three generations, we’ve known the dollar is the world’s reserve currency. But in a digital future, when you can have much lower cost of transportation and the way the old Spanish dollar was lower to transport because it was lighter, where you can have programmability, fractionability built into a digital architecture, how can the dollar remain an analog instrument in a digital future and still be the world’s reserve currency?

1:29:59 So it’s naive to think that the world is not going to move to a digital format. Central banks are going to move to a digital format because it provides them with a lot of advantage to do their work as central banks. That’s fine. They should pursue their mission. But we as a free society also have a mission to preserve our freedoms.

1:30:18 So we need to make those central banks know that as they pursue a digital format of money, they cannot forget those fundamental freedoms that money represents. Money is a value carrying instrument and it must carry those values with it if it’s to preserve its support of a free society. So money will always compete. The Chinese digital currency will be competitive and we need to make sure that our currencies of free societies, whether it’s a digital power or a digital euro, have that same competitive features, programmability, networkability, fractionability that the future of digital money is going to require.

1:30:55 Brian Rose: I’ve never heard that story about the dollar, so I really appreciate that, Chris. And it’s nice to know that even then, they had to give the best innovation and money in order to get adoption. And people, they vote with the better tech, right? And if it was… Right.

1:31:11 Christopher Giancarlo: And think about it, I mean, the dollar’s been great, but it’s analog, right? I’ve seen statistics that say it cost two to 3% of the world’s GDP to move money around the world because you’ve got to pay all these corresponded banks and they all take a little big here, a little big there to do all the identity confirming and the KYC and all that and yet we’ve learned with stablecoins you can move money around the globe virtually costless in the same way that we used to spend a lot of money and make a phone call around the world and when we move that onto an internet basis the cost went way down. In a world going into a global recession, recovering 2% to 3% of the world’s GDP could be the difference between depression, recession, or even neutral economics.

1:31:53 So the world is going to be searching for cost savings in money. That’s unquestioned. The world, there’s no question, Brian, there’s no question that the future of money is networked and digital and programmable, right? We just need to make sure that we don’t sacrifice the values of a free people that got us here as we move that digital future and we should not approach it the glass half full that oh we’re going to lose our values no let’s let’s be an optimistic people let’s go at this and say no let’s use it to enhance our values because the starting point’s not very good we’ve sacrificed our our privacy already let’s use this digital revolution to regain what we’ve lost Autonomy, you know, our fundamental freedoms of economic liberty in a digital future.

1:32:43 We can do it. It’s just, it’s about coming together and making sure we get the design right, giving the engineers the opportunity to do the experimentation and getting out in front of it. Let’s not wait till it’s a foregone conclusion. Let’s get out in front of it.

1:32:56 Brian Rose: Well, as a big advocate of freedom of speech and financial freedom, then I’m all for this.

1:33:00 So I appreciate what you do. Can you give us the website to visit and also your Twitter handle so people can follow you there?

1:33:10 Christopher Giancarlo: Great, I’m at Giancarlo markets on Twitter and the website is www.digitaldollarproject.org.

1:33:17 Brian Rose: Fantastic, Chris, really appreciate what you do. You really blew me away last time you were here.

1:33:24 And again, I started having these conversations in my academy about the digital dollar and it really got a lot of people looking at it differently Because traditionally, my audience is very skeptical of big government, big tech, because we had a rough ride in 2020 and on. But once I started talking about how you were getting ahead of it and how this was possible and even crucial, and now with the Twitter files, we can just see. I mean, we’re not starting at 100 here and potentially going to zero.

1:33:53 We’re starting way down here. We’re potentially going back to 100 or even better, maybe more freedom, less censorship than we’ve ever seen. So I’m all for that. So appreciate what you do. I know you’re working tirelessly behind the scenes.

1:34:05 And for all the ex-ICAP and GFI employees out there, look, we’re getting along because we used to be fierce competitors back in the city. GFI was always coming after our clients and we fought very hard with them and they were very, very talented people over there. So yeah, appreciate what you do, Chris. Next time, let’s do this in London.

1:34:24 Christopher Giancarlo: Respect, Brian.

1:34:25 Great to be with you. We’ll do it again soon.

1:34:27 Brian Rose: All right, fantastic. Thank you, everybody. We’ll see you next time on London Real.

1:34:30 Christopher Giancarlo: Check this stuff out, get educated, and let’s move this system forward and get this freedom ensured for all. We’ll see you next time on the show. Take care, bye.