Free Markets and the Evolution of Digital Finance Platforms with Brian Brooks of Bitfury

Innovation has been essential to creating the modern lifestyle many enjoy today, but requires a risk appetite and a willingness to let markets express consumer preferences that are only possible in a free and open society. Blockchain networks and decentralized platforms are creating a new set of conditions for financial transactions that can broadly increase inclusion and quality of service, and policymakers around the world are carefully considering the path forward.

Blockchain networks and decentralized finance can help correct many of the errors in existing financial infrastructure, but will need support from both sides of the aisle to truly unlock the benefits of programmable money while keeping consumers safe. 

Joining us this week to explore this topic is Brian Brooks, Chief Executive Officer at Bitfury Group. Brooks is an attorney, banker, entrepreneur, technologist, and former government official from the United States. He was the former head of Coinbase's legal team before joining OneWest Bank's team, he had a long career in financial services law, having graduated from Harvard and the University of Chicago. Cointelegraph has named him the world's 13th most influential person in crypto and Crunchbase has named him one of the top 10 influencers globally.

Jeremy Allaire: Hello, I'm Jeremy Allaire. Welcome to The Money Movement. Very excited to have a repeat guest, Brian Brooks, joining us today. Brian's currently CEO of Bitfury Group and a storied career in many dimensions of the financial industry, but very much in the crypto industry, as well as a principle, I think having a lot of influence. Super excited to have you for another conversation.

Brian Brooks: Thanks, Jeremy. I'm a recidivist, back again.

Jeremy: I like that. Lots we can talk about. I want to start actually, I think maybe taking some perspective, maybe you could actually just for the audience as well go back a little bit in time. When did you enter into this market? What did you think at the time like legit? What was going on in your head about this? What was happening then? I think that'll be a good framing for people and then I'll go from there.

Brian: It's a great question. I think given the conversation we're going to have, it's not just background, it's like this is what the whole discussion's about is you began your career in tech, I began my career in banking and I had been doing banking a really long time around a lot of really troubled institutions. I represented a lot of institutions that you could say that they caused the financial crisis or that they were victims of the financial crisis.

I saw a lot of what was wrong with traditional finance. I was part of the turnaround teams at IndyMac Bank after it failed and at Fannie Mae after it failed. I feel like for years and years of my career, I saw the things that did not work in traditional finance. There were a lot of reasons for that. At a certain point, when I was working at Fannie Mae, I discovered FinTech, had never really focused on crypto yet.

Jeremy: When was this?

Brian: This was in 2014.

Jeremy: 2014, right.

Brian: In 2014, people knew about Bitcoin, but they didn't really know about anything else at that point. Ethereum was a germinal idea and nothing else existed. My thought was, oh my God, it turns out that FinTech can fairly significantly improve financial services. It can shorten application cycle times, the user interface was easier, it could maybe make banking 30% better.

Jeremy: There's was what I like to call the FinTech 1.0 is sort of lipstick on a pig.

Brian: Exactly. It could be really attractive lipstick or less attractive lipstick, but the pig was still the pig. Then, I had this moment where a former law partner of mine became the general counsel of a big crypto exchange. He gave me Michael Casey and Paul Vigna's book to read, which is kind of like a lot of people start with that book and it was a real eye-opener. I watched what he was working on and I saw what was going on. Then, one of my former bank partners became CFO of Coinbase. She called me up one day and she said, there's something much bigger than FinTech happening here. This is not a lipstick on a pig. We're changing the pig out for a Swan.

It's a totally different animal if you want to have more of that metaphor, but it's a complete replacement of the underlying architecture of finance with something that's not just a little bit better, it's completely different. When I showed up at Coinbase, which is when you and I first met, that's when I realized the assumptions we've had for literally 500 years around payments, credit extension, deposit-taking, those assumptions were based on old technology that's no longer state of the art. The assumptions are outdated.

Jeremy: This is at actually during a time actually, which was a bear market. We've gone through these cycles of understanding of adoption of the technology capabilities. I remember back in 2014 when our first commercial product launched and everyone was always asking, when is this going to go mainstream? What's it going to take to go mainstream? I had a whole speech about that, that we give. One of the big ideas that we were focused on is the Fiat world.

How do you basically give Fiat the superpowers of crypto and so on? Which we can come back to. That time though, I'm interested just as you dealt with, say your peers from the existing industry like traditional finance or policy peers. I knew you spent a lot of time in DC obviously, but what did people say to you when you were like, I'm joining this Bitcoin exchange essentially, which is what Coinbase--

Brian: Was at the time.

Jeremy: What did people say to you and what did you say to them?

Brian: They thought I'd lost my mind. They really did. I'll tell you the exact words that were told to me by a friend of mine who we both know, I won't name him here, but a very famous very influential person. He said Bitcoin is only good for speculation and illicit activity and there was no way this was a good move and I'd have to be crazy to do it. This was just about four years out from Coinbase's $88 billion IPO. That's all this is. I'll tell you what I really struggled with for a while, which was people like that person but a lot of other friends, they would say, what's it good for? Show me use cases and everything.

For the first year, I really struggled with that. I remember actually USDC being one of the first real, if you want to take use cases, [unintelligible 00:05:06]. One of the first real use cases I saw, but I learned something more important as I went through that journey, Jeremy. What it was was when you're building a network, it doesn't matter what the use cases are. The use cases will come later. The fact that we didn't know in the early '90s that one day Amazon would be out there is irrelevant. Networks create platforms.

Jeremy: It's the principle of these open protocols, what they could enable that people could connect to them easily. It was permissionless.

Brian: Entrepreneurs build on that and you don't have to know what they'll build to know that once you build a platform, they will build stuff. That's what I didn't realize on day one.

Jeremy: That is definitely foundational for how we think about stuff. That's interesting just like, again going back in time and maybe just to juxtapose, like fast forward, here we are, we're at Bitcoin Miami 2022. You were just remarking to me before, there's JP Morgan people around, big auditing firms are throwing cocktail parties. There's still crazy stuff going on all over the place too. We're throwing a big party at a Versace mansion.

Brian: Speaking of crazy stuff.

Jeremy: A lot of unexpected things. When you think about that juxtaposition, I don't know how many years later it is four or five, whatever it is, what do you think now? Where do you think we are now in that? Do you still have people saying, what's it good for? What are the use cases? This is really just for speculation and illicit activity.

Brian: Not at all. That's the crazy thing. Now, the only people I hear from are politicians looking for contributions because they think all of us have made all this money so it's a totally different thing. Look, I have two thoughts about where we are today. One thought is the reason all the bankers are here and the reason that all the accountants are here is because the use cases have now emerged. There's now to a point, whatever trillion dollars of assets sitting around here, but the transaction volume, the throughput is many many trillions of dollars.

Jeremy: We've done $3 trillion-plus of USDC transactions.

Brian: Right. While USDC is probably the most important stable coin inside of DeFi, it is only one token and only one area of crypto that's not talking about necessarily all of the other applications going on. What it tells me is my belief in 2019 was correct. Which is, there was a network, several networks built, no one knew what was going to happen for a while and then thousands of people came to build.

That leads me to the second viewpoint I have right now which is you look at the 40,000 or 50,000 people here it's like a Cambrian explosion of activity.

Jeremy: It's unbelievable.

Brian: A lot of these species in this Cambrian explosion will probably die out, but some of them are going to be humans. There are going to be a number of different things that are going to permanently change the way we interact with each other, not just in finance, by the way.

Jeremy: I've had the vantage point of being part of both building and watching adoption by entrepreneurs and creators of multiple successive waves of internet technology platforms. It's the same story over and again. You had enormous number of people who got excited about building apps for mobile phones even before the iPhone. There was Blackberry and there was Nokia and there was NTT Docomo in Japan and there was all this stuff. You had these successive waves and the technology was capable of a certain thing at a certain time.

Even when it was a little bit raw, not such a great user experience, the entrepreneurs were there, the builders were there and there were major things that came through and there was a lot that didn't. You have these successive waves and what you're describing now is you could call this the third wave of crypto adoption, although people who've been at this since 2010 would say, maybe it's the fourth or whatever, but like the third wave. It just gets bigger each time, the capacity of these networks gets more powerful. The bandwidth, so to speak, is wider and there's just more there.

I would agree with you, we're seeing a lot of use cases, they're exploding actually, but I actually think most of the creativity is yet to come. We're still in the early days and even just looking at digital dollars, programmable dollars on the internet, people are just scratching the surface. DeFi is only three years old. That's an enormous undertaking so there's just a lot to build.

Brian: Well, look, there's also when you think about it, there's like the macro-environment that affects the way this is going to get built. You're talking about the various iterations of the original internet and one of the things that you talked about was mobile phone applications, even before the iPhone. The iPhone itself was a precondition for much of what we currently understand. It's not clear that in crypto, the iPhone's been built yet.

Jeremy: No, exactly.

Brian: What is that thing that sits in everybody's pocket [crosstalk]

Jeremy: The killer user experience app doesn't yet exist.

Brian: It's like the delivery layer is not there. The protocol layers exist, the application layers are there, but the delivery mechanism, which is the ubiquitous every person has it in their pocket. The phones are there, but that may not in fact be the way this works in the future. That's one thing. The other thing is the macro environment, I think is really, really critical because right now, I think there are various countries that are charting radically different courses about how to think about this. If you really do believe some of what we're talking about is the future of money, it matters if the US and the developing world diverge, or if the G20 or the G7 if they separate from--

Jeremy: This is geoeconomics, geopolitical issues. This is actually great because one of the questions I want to ask you is very much anchored in this. Let's pretend you're sitting here and you've got Antony Blinken, Jake Sullivan, Secretary Yellen, maybe Jay Powell. You got that group, and they're asking you, what do we do about this? How do we think about this? What should the United States be doing and why?

Brian: To me, there is an easy answer. I would frame it this way. People usually launch that question by saying, the dollar's dominance is under question. China's adopting a CBDC.

They're our principal geopolitical adversary, we better get on that so that they don't own the world of CBDCs. That's the usual way the question is phrased.

Jeremy: I've got a good answer for that.

Brian: I think we may have invented the answer together. The answer is, we never win by out China-ing China. The way we developed the Soviet Union or beat the Soviet Union is we didn't build our own five-year plan. They had a five-year central planning approach to the economy, and we unleashed rock and roll music and markets, and markets are what beat them.

My basic view is, when you see China and that part of the world trying to consolidate around centralized government control of the payment system of investment and all of that activity, we'll never be as good at that as they are, that is not in our DNA. What's in our DNA is--

Jeremy: Nor is it in our value system.

Jeremy: It's certainly not in our value system, not yet. [crosstalk] Value systems evolve from real systems, so it's sort of like, we're not more morally good people than Soviets or people in mainland China, but we are people who have grown up in a system that has civil rights and free speech and checks and balances on the government. We have all of those things, and that's why we're free. It's not because we're better, it's because we have a system that does that.

The financial system is as important to our freedom as any of those other things. Once you start creating a financial system that government officials can control that way, they eventually will. We might be slower than others, but we will [crosstalk]

Jeremy: This gets to a heart of the matter, which is, again, imagining that conversation that you're having, and you're thinking about the United States. This could be any modern country, I'm just using the United States because we're sitting here in the United States. We're, I think, also focused on policy issues here. Here we have crypto as a technology, we have the public internet as this intermediating, innocent software, autonomous software, the public Internet, open-source protocols.

We have this whole amalgam of stuff that has been built grassroots from the bottom up by creators of various sorts. It's not controlled by anyone, per se, although we can discuss that, but it's not the way that the financial system has been built historically and it looks really scary, it looks out of control. It looks like people could do whatever the hell they want. There's all this risk, people are going to get hurt. We don't even understand the systemic risks, they're going to explode in our face. There's a lot of fear.

At the center of that, is this kind of, can you have a financial system and an economic system that is a public good on the public internet? Kind of grappling with that. How do you think leaders of our country should be grappling with that idea?

Brian: Look, every generation goes through this exact same debate, and the debate is, we have this natural human belief that the world is a dangerous place. If only there was a wise person or a wise government that could protect us for all harms out there, then ideally, we wouldn't have all the chaos that you just described. That's what the Soviet Union looked like. They had a wise group of people, they had a central planning commission, and that commission decided how many pairs of shoes would be manufactured that year.

There were no shoes that went to waste, there weren't enough shoes either. They decided, "This year we're going to have this many shoes of this color." That's all the shoes there would ever be. The Wiseman had decided. What we have in this country, and it's true, whether you're talking about money, or whether you're talking about goods and services, or art or entertainment or whatever. The way that a free society works is it's brash and bold, and it takes risks and allows people who take the right risks to profit from those risks, which then aligns incentives around the next generation of risk-takers.

That is why we have all of this. That's why we're sitting in this beautiful place in a developed world society, is because we allowed all the signals of a bunch of free people to express themselves in markets. When I think about the future of money and the new financial system we're building, all these wacky people here in Miami with us, what they're doing, is they're each expressing the desire of a core group of market participants, their customers, or their users who say, "This is what I want." Now, not all those needs will be met because some of them are too niche, but at the end of the day, what comes out of the system you're talking about is a system that provides people what they want, in a pluralistic society.

It's a world where some people want to use Mastercard, and some people want to use Visa, but some people still use Discover, and that's okay. We don't tell them they can't. Some people want to smoke cigars on the golf course, and other people think it gives you cancer, we let them do that. Finance is going to be no different from that.

If you take your business, we could have the government build one form of a digitized dollar, and that would be like the financial marginal line. Right or wrong, that'd be all we had, or you could have a whole bunch of developers building different kinds of programmable dollars for different uses, adapted to people's preferences. That's what markets do. Yes, some people fail when that happens, but then the consumers who are king in a market or economy, the consumers win because somebody built what they wanted.

Jeremy: I think that the message, in a sense, is open competitive markets, the creativity of developers and creators. It's the same thing that breathed life into the creativity of software on the internet is breathing life into the financial system.

Brian: Jeremy, do you think that we would have something, a product as beautiful as the iPhone 13 if the FCC built smartphones? We would be living with a phone that was designed 25 years ago, and it would change.

Jeremy: Certainly, the FAA does not make jet engines and does not fly airplanes. I think that's right. Which does actually come back to, there are really important policy issues, there are regulatory issues, there are fundamental risks, that at some level, you can't just leave alone. Someone could issue a stable coin that's backed by junk Chinese commercial paper, or who knows what could happen? In all seriousness, there's risks, there's lots of risks that can happen, so there are these assurances that are needed. You ran the OCC for a period of time, and your job was to supervise 75% of the banks in the United States. Obviously, you've got a good grasp of what's involved there. We both just testified to Congress in the prior months. I think my impression is, there's a lot of progress being made right now in DC. There's a lot of progress in terms of the amount of awareness, the amount of education, the understanding.

This has become a set of issues that people are really engaging on. You're seeing real legislative proposals. It's a very different environment. I'd love to hear you A, just react to that, and then B, what do you think are going to be the most important policy things that can get done, that actually can get done on a bipartisan basis in this Congress, or maybe the next Congress?

Brian: Great questions, unfortunately, I think they're two really different questions. In terms of where we are, broadly, politically in this country, clearly different. When you and I first started doing this together five years ago, we would show up and we always got these-- we never got hostile receptions, we got blank stares, nobody even knew what we were talking about, and it was a waste of their time because we weren't Facebook or whatever. It's very, very different today.

Now, I think there is a broad consensus and increasingly a bipartisan consensus, which wouldn't have been clear a year ago. Increasingly, a bipartisan consensus, that something important is being built here, we're not 100% sure of what it is, but it is important that America not be left out of it. Creating a framework that allows the core innovations to flourish is important. Examples like Patrick McHenry's bill, being co-sponsor with the Democrats to face the tax reporting issue in the infrastructure bill. That's a big deal.

Jeremy: Lot of bipartisan things.

Brian: Lot of bipartisanship. My prediction would be that Senator Toomey's stable coin bill that came out yesterday will attract some Democrat support, and certainly on the House side, but even in the Senate to that effect.

Jeremy: I think we'll see a proposal on stable coin that is from the ranking member and the chairwoman.

Brian: I think you're right about that. Having said that, the way the congress works, as I learned when I was in government, is it's not actually 100 senators and 435 congressmen voting on things. It's really six or eight members of leadership deciding what gets to come for a vote. Regrettably, there are a couple of people mostly in the Senate, not the House, but there are a couple of very senior Democrats in the Senate who have decided that crypto is a problem. It's a problem.

I have a theory of why that is, and I don't think it's an ideological theory, but it's just my observation of what the animating principles of the two sides are. Here's the way I describe it. For the last 100 years, but really 500 years, all of finance in the West has been dominated by banks. Banks intermediated between governments which authorize the money, and consumers use the money. There was this unstable unholy balance where this thing called a bank set in the middle of it, and that was always unstable. Persisted for a while, but it was like the aggregator of money, like the post office. All letters went to a central repository before they got farmed out.

Now that we don't need that technologically, because you don't need to aggregate all the letters, you can send emails, you also need to aggregate all the dollars, you can have DeFi. There is now a significant fight over whether we're going to leave the banking model in favor of a government model or leave the banking model in favor of a user-controlled model. There are some people who are mostly one generation older than you and me Democrats, and it's not very many. I think most Democrats are on our side.

There are a couple of people of an older generation, whose belief is governments are more trustworthy than people. It's a risky world, people are fraudsters or people are not sophisticated to make their own decisions, and they're trying very, very hard to push for Central Bank digital currencies, fed accounts,-

Jeremy: Postal banking.

Brian: -postal banking. Whereas, everybody here in Miami is trying to move toward a user-controlled financial system where we make our own determinations. That is the civil rights issue of the 21st century I believe.

Jeremy: Yes, it's fascinating. I have a little story, a Circle story, which is one of the board members who you know well, at Circle, is Raj Date. Raj was recruited by Senator Elizabeth Warren to come in, and after the financial crisis, design a new regulatory agency, the Consumer Financial Protection Bureau. Through that, I've had a chance to get to know Senator Warren a bit. It was interesting, years ago, in probably 2014 or 2015, I had an opportunity to talk to Senator Warren.

What was interesting is, I talked about the ways in which this technology could empower more people, provide greater inclusivity of financial access. I talked about how there was an enormous amount of rent-seeking that went on in the financial system, that went on with banks in particular, and that there was an opportunity to eliminate a lot of that rent-seeking to return more value to the real economy. She was incredibly animated and excited about that.

I feel like somehow, and I think, as you fast forward now where Senator Warren is just outright hostile to this industry, you can look at the vantage point, what are the underlying assumptions as you've just sort of talked about as a piece of it, but you always have to come back to also, what could the creators and the entrepreneurs and the innovators and others be doing differently to affect that dialogue?

You're now starting to see that, you've got Cory Booker coming out who's an important influential Senate Democrat, who's really embraced this. You've got mayors of cities that are Democrats that are in places where financial inclusion and democratization and getting a fair deal for people is a major issue, getting behind this industry, this technology, et cetera.

The question is, on the one hand, you hear the criticism, and in fact, it's often the individuals who are called to testify, the academics mostly who are called to testify to these Senate hearings, and who are saying, it's all hype, there's no financial inclusion, it's just a bunch of people getting rich, it's all scams, people are getting hurt, that's the narrative, DeFi is actually really not decentralized, all these things are there.

In any of these things, there's some truth in all these statements, but obviously, it's not a holistic view. It seems like there's this gap, and it seems like what you're describing in some sense is maybe what looks like, just from a policymaking perspective, is this an impenetrable wall? They're not going to bring it to the Senate, they're going to bring things forward because it's just too big of a wall. Is there a way to break through that, in reality, like demonstrating the ways in which this is really improving people's lives, and improving access, and improving other things? That to me is the essential issue.

Brian: 100%. Three quick comments. First of all, Cory Booker, Elizabeth Warren, it's a difference of generation. There will come a time when the people who are really in positions of leadership will have grown up with the internet at least, even if it's not with crypto.

Jeremy: Yes.

Brian: I really do believe a big part of it is, there's the LBJ generation and then there's more like the Bill Clinton, Barack Obama generation. This generation is a strong government will protect us generation, this is much more of an empowerment generation, so you have that. The second thing I would argue is the wrong people are doing that talking in these advocacies. For example, I work at a company where one of our businesses is Bitcoin mining. No bitcoin miner is ever going to persuade Congress that Bitcoin is good for the environment. Doesn't matter how true that might be, or what the incentives are, what the analysis shows, doesn't matter, because the Bitcoin miners, the guy getting rich on Bitcoin mining.

The person who's going to convince them bitcoin mining is good for the environment is the solar farm developer who says, I can't build more solar without Bitcoin mining. As long as it's me, it's got to be that guy, and it's the same thing here, where the people whose lives are being better than I need to be doing the talking, not you and not me, it needs to be the people who are actually benefiting from it, the retail user.

The last thing I will just say is, and we might as well just call it what it is. There is a foundational disagreement in the society. I would say it's roughly 50/50 between whether the most important thing government can do is to protect us from risk, which is a legitimate view, not mine, but it's a legitimate view, versus those who believe the role of government is to empower us to better ourselves, which is my view. This entails some risks. This is not risky, but it does entail a very gray and sclerotic future, which I'm not excited about. The question is, which side are you?

Jeremy: I think the other dimension of this is, we saw this with the internet, or in early generations where there are huge amounts of risks. How could I trust that I can put my personal information into a website, it's proven to be a vexing issue, actually.

Brian: Originally, you couldn't. [crosstalk]

Jeremy: Even things like, I'm on this website, where someone is purporting to sell me these baseball cards, or these Beanie Babies or whatever-

Brian: Here's your credit card number.

Jeremy: -and it's eBay, how do I know I'm going to get that? Or the idea that I'm going to open up an app and some stranger is going to pull up and I'm going to get in their car, or I'm going to put my apartment on the web, and people are going to come in and they're going to party in there every other weekend because I am going to earn some income. Risk is inherent in the internet, it's inherent in all these things.

In the past, regulation was what provided that safety, the taxi medallion or a retail outlet that had buyers and that vetted product suppliers, and that figured out, these are good products, we're going to put them in our store, versus an open marketplace like an Amazon Marketplace, or an eBay. We now see that software, data, reputation, all these things, community, wisdom of the crowd, these models actually can provide greater signaling, and provide a better way to manage risk than regulations that are rigid and can't think through every dynamic.

This plays out in so many ways. Wikipedia is just radically better than Encyclopedia Britannica. No one makes encyclopedias anymore, why would you ever make an encyclopedia because you can use the wisdom of the crowd and all this. I think in the financial system, that's just a very foreign concept, the idea that you're going to have-- Self-regulatory is not a foreign concept, even FINRA itself theoretically is a self-regulatory organization, sort of, but there are definitely in card associations and other things.

In this area, it seems like one of the critical things that is needed is, there's a big challenge around the risk of fraud or criminal abuse or anti-money laundering, et cetera while you've got breakthroughs in blockchain analytics, or you've got innovators coming up with ways to do decentralized digital identity, and solve the problem by building on what is possible, technically. The industry can solve these problems way faster than any regulator can solve these problems. It's almost like the industry needs to focus more attention on let's solve for the risks.

That's happening organically. There's insurance on DeFi protocols, and there's lots of things happening there. Is part of the answer not just like convincing someone, which is what we're talking about with policy, but actually just builders building and solving these problems?

Brian: You used a really interesting sentence, you said, let's solve for the risks, and there are two pieces of that statement that bear on your question. One is, what is the appropriate risk appetite of society in a pluralistic society where we all choose our own adventure? You smoke cigars, I don't smoke cigars. You like to go skydiving and I hate to go skydiving. A big part of it is, how do you define the risk and how do you empower people to within some reasonable parameters make their own choices? I think if there's anything we've learned from the last two years, not everybody has the same risk appetite. Some people really embraced lockdowns and masks, and some people really resisted lockdowns and masks and weren't okay with it. We made a choice that was highly risk intolerant and that didn't work for about half the country.

It's true in financial services and a lot of other activities as well. The first question is, how do you define it, and then this question of how do you solve it, and that's the interesting part. My thesis is, all human beings are fallible, it doesn't matter if they've been confirmed by the Senate it doesn't mean if they're running the banking agency, everybody is fallible. What is my evidence for this? The biggest regulated bank in the US financial system still had the London Whale trade. The collection of the biggest banks in the United States still made all those mortgages that caused the financial crisis. Regulators are human beings and they miss things.

Jeremy: 98% of money laundering happens in the regulated bank.

Brian: Totally, because there are only 3,400 examiners at the OCC, they can only see so much fraud, they miss a lot of stuff, they're human beings, they're doing their best, but whatever versus computers don't make mistakes. Now they only do what they're programmed to do, but once they're programmed to do something, they do it the same way every single time. If you have an algorithm that's allocating credit, it's going to allocate credit according to the algorithm every single time. It's not going to choose between you, whether you're white or black, it's not going to make fine distinctions, like you almost have a 700 FICO score, but not quite. It's going to treat every single person the same time and do it all the time and not make mistakes. Now, it will be programmed with the limitations of its programmer, for sure, but my theory is the world that we're headed toward, which is a decentralized automated system, is likely to have almost all, and maybe all of the good features of the current system with some enhancements but far fewer of the bad features because it won't involve either human graft, human negligence or human bias. That's to me, what algorithmic finance is all about. That's what crypto's project is.

Jeremy: Maybe an interesting thing to pivot off of and ties into some of the policy stuff too, which is solving the problem of identity in decentralized finance and in Web3 more broadly. As you know, we helped develop and have launched Verity, which is a decentralized identity protocol and standard. I think this is a great example where in the existing financial system when I as a user I'm using a financial product and then go transfer money to another party, or use my credit card or do these things, my personal information is getting shared over and over and over again. There's like these honey pots of data of my personal information everywhere. Privacy's not preserved, it's actually violated over and over and over again, people merchandise that data. We have some real issues there. Talk about can crypto itself, this is a place where can we improve upon even just the way in which financial crimes enforcement happens, but do that in a way where it's actually preserving privacy and providing greater security and other things than the existing system.

Jeremy: I absolutely, this is just to me, it's a species of what I was talking about a second ago, where humans are fallible, but algorithms always do what you program them to do. In the olden days meaning like yesterday, if you went into a bank branch to open an account, the way that they do KYC on you is they collect your passport, and your social security number to set up other things. All of which can be faked and a certain percentage of the time they are in fact faked for the purpose of money laundering. You hear all the time about some long-deceased person's social security number being used to open a bank account or some child being, whatever, that happens all the time. There's a certain error rate, and then there's a certain criminality rate, and that just happens.

One of the things that decentralized solutions offer, and so I was so excited to read when you guys launched Verity, is the idea that if you have enough observations of a person's behavior, you can probabilistically figure out who they are, or at least whether they're a good person or a bad person. You have no evidence that this wallet after a thousand observations ever transacted with a flagged wallet in the ecosystem or whatever that is. You can do so in a way that does not require disclosure of your name, address, and phone number. All I need to know is Jeremy Allaire's wallet address of XYZ, corresponds to these other characteristics that meet KYC standards. It doesn't matter that it's Jeremy Allaire. As I like to say, it only matters that it isn't Osama bin Laden. I can tell that probabilistically inside of something. The promise of that with a very high statistical probability of correctness is another breakthrough because you're right, I don't want my number sitting in the Expedia data or my Experian databases it's going to get hacked.

Jeremy: We can use cryptography to prove things.

Brian: Correct. Without sharing the underlying data. You can just say the algorithm has reached a green result.

Jeremy: Yes, totally. A lot to build there. I'd love to just hear also, what are some of the things that you're personally working on that you're most excited about right now?

Brian: I'm working on a bunch of things. First of all, at Bitfury, we have a super interesting collection of businesses that are put together to deploy the learnings of Bitcoin across other parts of the crypto ecosystem. The funny history of the company is, it began as the first industrial-scale Bitcoin miner and from there, they decided early on that regular microchips did not work and specialty ASICs needed to be designed so we got into that business and then we figured out that a huge amount of energy in Bitcoin mining is caused by cooling costs and so we created Immersion Cooling Systems that is now the largest immersion cooling company in the world, which then led to this and this and this. There's a holding company model that we take, which is basically what are all of the adjacencies that make the Bitcoin ecosystem work, and how can we build out and commercialize those things and create the right incentives to make the Bitcoin blockchain stable and useful?

It's a really fun place to work, and one of the businesses has an adjacency that's correlated to what you're doing at Verity. We have a business called Crystal, which is one of the largest blockchain analytics platforms in Europe. Super cool. Away from Bitfury, Jeremy, there's some other things I'm looking at, and working on that are really, really interesting. You may have read I won on the board of Voyager, which is the other big publicly traded crypto exchange. The ongoing challenges of crypto exchange is figuring out how to deliver what their customer want without falling afoul of consumer protection and SCE rules. The line that we need clarity has been true for five years, and it's still true today. Like if I have an earn product, whether Coinbase is doing it or Voyager is doing it, or anybody else is doing it, and my customers are going to earn income on their crypto with no risk to them, what is the policy reason why the government doesn't want me to do that?

Who are we protecting when we bring that? These are issues that have to be solved in the world of exchanges. I also recently joined the bank at the board of Protego Bank, which is one of the three crypto national banks. Hopefully, soon to four, I'm hoping that you're going to make it through the process, but one of the three crypto national banks. When we talk about the distribution layer, the bank charter may be the iPhone of crypto. It is the ubiquitous thing that allows you to operate nationally across state lines, without limitation of activity and all these things. I think the ability to be like the banking as a service partner for a lot of parts of crypto is key mission that is necessary for the area to grow. Obviously, I'm advising a bunch of projects out there in the space as well, some decentralized exchange projects and token projects and other things. As I say, it's the Cambrian explosion, and what I find really fun, and I know you do too, is meeting the young innovators who have the little bright kernel of an idea that we can help nurture and grow I love that.

Jeremy: It's amazing. We haven't talked a lot about it, but we started Circle Ventures late last year and we've invested in 65 companies now and growing. It's interesting just the sheer volume of creative ideas of entrepreneurs, of projects, of technologies. It's unbelievable is a Cambrian explosion, it is truly astounding. Being here this week obviously is a pretty interesting touchpoint on that. There's a lot of measures for growth. We've got how many nodes are on a network, how many transactions that are happening? There's how much volume of trading, how many active wallets, like there's all these different measures that people have. There's clearly like get hub repositories, how much code is being kind of written in space. Then there's just like just the intangible, which is like how many people are there? who are doing stuff? Just like what you see [crosstalk]

Brian: Developers on networks, another amazing thing. When 70,000 people fly to Miami and most of them aren't working in crypto. They're here because this is the Vanguard of adoption and they want to meet people like you. That's the amazing thing is they're willing to buy a plane ticket and come out here because they see that this is the new thing.

Jeremy: It's awesome. It's as usual wonderful to have a great conversation. Glad we could do this. I know you will be back again at some point and I really appreciate. Thanks, Brian.

Jeremy Allaire
Co-Founder, CEO & Chairman at Circle
Brian Brooks
Acting Comptroller of the Currency OCC

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