The Digital Dollar Opportunity

Stablecoins have captured the imaginations of central bankers around the world. The power and efficiency of digital versions of local currencies on blockchains, and the promise of a more transparent and accessible financial system, have led nearly every central bank on the planet to launch a central bank digital currency (CBDC) initiative. While most of these efforts have focused on research, planning, and proposals, private sector stablecoins have been in the market for years and have seen incredible growth. From trade finance, to remittances, to cross-border business payments, digital dollar stablecoins have seen the fastest growth as macro conditions accelerate dollarization across the globe. To take one example, USD Coin (USDC), a fully-reserved and regulated US dollar stablecoin, recently topped 500% growth in market capitalization this year alone. 
 
With China's CBDC beginning to roll out, and imminent launch of Facebook's Libra payments network,and increased attention on Capitol Hill around the distribution of COVID-realted aid and financial inclusion, digital dollar initiatives at the Fed are in the spotlight. 
 
To help unpack these topics and examine the intersection between CBDC and private sector digital dollar stablecoins, we're joined this week by Chris Giancarlo, Director of The Digital Dollar Project, a partnership between Accenture and the Digital Dollar Foundation focused on advancing the exploration of a United States Central Bank Digital Currency (CBDC). Chris Senior Counsel to the law firm Willkie Farr & Gallagher and the former Chairman of the U.S. Commodity Futures Trading Commission (CFTC).  Mr. Giancarlo also served as a member of the Financial Stability Oversight Committee (FSOC), the President’s Working Group on Financial Markets, and the Executive Board of the International Organization of Securities Commissions (IOSCO). 
 
We are honored to have Chris on the show for what promises to be an exciting and wide-ranging converation. 
 

Live on YouTube Thursday October 8th at 1p ET

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Jeremy Allaire: Hello, I'm Jeremy Allaire and this is The Money Movement, a show where we explore the issues and ideas in this Brave New World of digital currency and blockchains. Today, we're going to be exploring the topic of digital dollars. Obviously, we've talked a lot about digital dollars on the show, digital dollar stable coins, digital currency, and stable coins have obviously captured the imaginations of central bankers, technology companies and others.

The power and efficiency of these digital versions of local currencies on blockchains and the promise of a more transparent and accessible financial system have led nearly every central bank on the planet to launch some form of central bank digital currency initiative. Now, while most of these efforts have focused on research, planning, proposals, private sector stable coins have been in the market for years and have seen incredible growth, most notably in the last year.

From trade finance to remittances, to cross-border business payments, digital dollar stable coins have seen the fastest growth as macro conditions accelerate dollarization across the globe. USDC itself has rocketed to nearly 3 billion in circulation and is growing at a astounding rate. With China's central bank digital currency beginning to roll out and the imminent launch of Facebook's Libra payments network, increased attention on Capitol Hill around the distribution of aid and financial inclusion, digital dollar initiatives at the fed are also in the spotlight.

To help unpack these topics and examine this intersection between central bank efforts and private sector digital dollar efforts, we're joined this week by Christopher Giancarlo, Director of the Digital Dollar Project, a partnership between Accenture and the Digital Dollar Foundation that's focused on advancing the exploration of a United States Central Bank digital currency. Chris is the senior counsel to the law firm Willkie Farr & Gallagher, and the former chairman of the US Commodities Futures Trading Commission. Welcome Chris. It's great to have you here today.

Chris: Good to be with you too, Jeremy. It's great to be with you. Thank you for the opportunity.

Jeremy: Absolutely. Well look, there's so much to talk about and we can easily fill hours with that. We're going to do our best to have a solid conversation on a lot of topics, but I like to start obviously, just to hear a little bit about your own journey into crypto specifically and all these ideas. You've got some really interesting history there and I think just great for the audience to quickly hear that.

Chris: Oh, great. Many people's stories of how they've come to crypto are fascinating. My own journey began when I joined the commission in 2014 and started meeting with some people active in the space including Cameron and Tyler [unintelligible 00:03:15] and others that were advocating for a good relationship with regulators and were getting to see us early, but really it took off for me in 2017 when I became chairman of the agency and we had an enormous run up in the value of Bitcoin.

At the same time, we were approached by two of our leading exchanges, the Chicago Market Till Exchange and Chicago Board of Options Exchange to launch Bitcoin futures as a regulated product. It was remarkable the pressure on the agency not to allow Bitcoin futures to launch. One entrepreneur took out a full page ad in the Wall Street Journal addressed to me personally, lambasting me for even considering the launch of Bitcoin futures.

In fact, his platform turned out to be one of the biggest market makers in Bitcoin futures a few months later, but look, everybody comes to it with their own point of view. We felt it was the right thing to do based upon a simple, not simple, but based upon a thorough reading of our own statutes. I won't go into explanation of how the self-certification process works other than to say, we believe we made the right decision not to block Bitcoin futures.

I think as a result of that decision, crypto assets today have established themselves as a bona fide asset class alongside other bona fide asset classes in the financial landscape. I think a lot has to do with the CFTCs decision not to block it and to move forward.

Jeremy: It was landmark. I was asked last week, a former guest Larry Summer's asked, at what point in time will it be more likely that someone does not have crypto in their portfolio than having in their portfolio and my guess was two to three years, but I think that the transformation and your involvement there was really noteworthy.

Chris: Well, other agencies were not so inclined. It happened at the CFTC. I think the agency has a historical reputation for innovation and I think this is one case where that reputation and history really came to bear in a way that's I think has been ultimately beneficial.

Jeremy: Absolutely. I remember the first time we met in your office, and I think it was at the tail end of your service and I was talking a little bit about what we're up to at Circle and USDC was very early at that point, but I think you're now I think focused on very significant, very strategic issues in this area. I'd love to hear as well, when did you have your aha moment about digital dollars and about digital currency with respect to the dollar and really we'll talk about the project as well, but just what was that moment for you?

Chris: Well, it actually wasn't the Bitcoin futures' moment. It was like a broad observation that built over my five years in government service. It was an observation that Jeremy in the United States and in the West, you look around us and you see our obsolete infrastructure of bridges and tunnels and airports and mass transportation systems that were state of the art in the last century are increasingly obsolete in the 21st century.

Sadly, the same is true-- and I've talked about this in a number of areas, same is true about a lot of our financial market infrastructure. Systems for payment and settlement for instance, but also the financial market regulatory infrastructure as well. The statutes for the CFTC and the SCC were laid out in the 1930s. We're coming on a 100-year anniversary of structures that were durable clearly, but they were built for an analog human-to-human world, not for a digital Algo-driven and increasingly tokenized and decentralized world.

My next observation and we saw it at the CFTC is this coming wave of the internet, this wave of the internet of value. The first wave of the internet of information took place in a regulatory light zone because we've long. based on our First Amendment and general principles of jurisprudence in the West, considered speech to be something that is free and not subject to government oversight, but when it comes to things of value, governments have long presumed to have authority and jurisdiction.

We have not just one, but two market regulators. We have three or four banking regulators, and that's just at the national level before we even get to the state level, governments in our Western system have long presumed to arbitrate in matters of things of value. The lessons that we learned in the first wave of the internet about don't ask permission, ask forgiveness, or you're not trying hard enough if you're not breaking things is going to have to be tempered a bit in this new wave of the internet when that's going to run smack into government entities built up to moderate and modulate things of value.

That brings me to my third observation which is that this wave of the internet is going to run crashing head long into this obsolete regulatory structure.

Jeremy: Yes right now.

Chris: It is right now. What do we do? We either do nothing in which case innovation and development is going to take place elsewhere and it's going to be stymied in the United States, or like a mighty wind instead of trying to get ourselves to be blown over by it, let's hitch a sail to it and ride it.

I think there's a huge opportunity to ride this wave to both modernize our infrastructure which needs to be modernized, but also to move forward into a new era where I think once again our core principles, freedom of speech, free enterprise, degrees of privacy can be integrated into this new technology for the betterment of ourselves and I think for the rest of the world. That's a choice I think we fundamentally have to make now.

Jeremy: No, we're right on the precipice of that. I think really your context is I have a lot of shared beliefs there of course. I was very involved in the first wave of the internet and there was that period of time in the mid-'90s when really you had these large established industries and regulators that oversaw the airwaves, that oversaw who could spread their voice to an audience of people in the world. This was all over the world, not just in the US and you had state-controlled monopolies, you had private sector- controlled infrastructure. There was, I think, bold policy actions that were taken in 1996, 1997, very bold policy actions that said, we're going to create structure sfor this to grow and flourish.

I think very few people would look back on that and say, that was a bad idea. There's stuff that we've seen uncontrolled, unfettered have created new centralization problems, actually, which we're now responding to centralized platforms, things like that. That kind of visceral idea of the internet slamming up against the government-run and administered monetary system or this hybrid is very real. There's tremendous need to walk our way through that and make sure we're on the right side of what this enables for people everywhere.

You started the Digital Dollar Project. It sounds like a lot of inspiration around this and this desire to make sure that the United States gets this right. That we have the right level of attention on this problem, that this isn't just something where China or whomever has a runaway success doing this further faster, but maybe just talk a little bit about the genesis of the project and what you're envisioning from that.

Chris: Sure. Nowhere is this clash between antiquated infrastructure, financial market infrastructure, and this new internet of value going to be more acute than in the area of money. It's already happening. Sir Jon Cunliffe, who's the deputy governor of the Bank of England and became a good friend over the last few years once said to me, not too long ago, he said, "Chris, it seems like every several generations, society once again asks itself the question, what is money, and starts rethinking that."

Money is we think of it as a government construct, but it's really not. If you look through history, money is much more of a societal construct and government has a big role to play, and we're seeing it right now. Society is reformulating their thinking about money, while government is actually a day late a dollar short to use a pun on the notion of money. Society is going to move forward in reconsidering money and unless government catches up to that, it's going to be another evidence of this antiquated financial market infrastructure running headlong.

In order to really bring some, I think a really broad debate to bear, I formed the Digital Dollar Project at the beginning of the year, first formed a not-for-profit foundation with my brother, who's a renowned Silicon Valley entrepreneur and Daniel Gorfine, who's the former chief innovation officer at the CFDC. Then we teamed up with Accenture on a pro bono basis.

The Digital Dollar Project is not a commercial venture. It's a not-for-profit think tank and its purpose is to both stimulate the conversation, bring a broad body of perspectives to bear, and then ultimately drive toward real exploration through a series of public sector-private sector, partnership pilot programs.

As I mentioned, we've built a wonderful advisory board of 40 experts in the field from across the gamut, all in their own right not as part of their firms they belong to, but speaking on their own behalf, across the political spectrum, across the technological spectrum. We really believe that if the United States is going to do this, it needs to do it through its traditional approach to big technology innovation, which has always been a partnership between the private sector and the public sector. Whether it's putting a man on the moon or building the internet, the United States always does big things working together.

Chairman Powell not too long ago said this is so important that it needs to be done by basically federal workers. Well, I have enormous respect for Chairman Powell, but on this point I disagree. This is so important that it cannot be done by government workers alone. This is so important, it needs to be done in a full-blown public and private partnership the way we always do big things in the United States and the way we need to do this big thing now.

Jeremy: It's critical timing for this work, obviously. I've been a huge advocate as you know of over the mid- to long-term this concept of hybrid central bank digital currency, where you've got leading private sector innovators that are building and advancing technology and standards and infrastructure to really drive what's possible, but working in close partnership frankly with central banks around the things that central banks are going to care the most about, which is the soundness, the security, the oversight and really the underlying ability for those institutions to continue to focus on their own core mandates of whether it's full employment or economic growth or monetary stability, price stability et cetera, monetary policy more broadly.

We have this debate, which is public, private different models in between. As you look at what's happening out in the marketplace today, there's a lot happening in the marketplace with stable coins. Projects like USDC, emerging stable coins all around the world in fact. Then the research that we know is going on throughout the fed system and other places, what do you see emerging from all that, that milieu of activity?

Chris: I use the analogy of the Space Program. In the early days of the Space Program, the big decision to land a man on the moon was made, but a lot of the how do we do that had not yet been made. In fact, there was an early debate as to whether the core technology would be rocket technology, or jet propulsion technology. The decision was to go with rocket technology, but even that wasn't made when the core decision was let's land a man on the moon.

Well, I feel the core decision should be the United States should experiment and be prepared to adopt a digital dollar, a central bank digital currency. Then we need to back up and say, okay, there are a number of ways to do that, what are some of the choices? That's what we at the Digital Dollar Project in our initial white paper in May of this year put forward what we called our champion model. That doesn't mean it's necessarily the full pathway to get there, but it's a way for us all to get our minds around some of the core decisions.

We put forward our best ideas working with our advisory board for a public discussion. Let me lay out for your audience some of the elements that we believe that we've set in our champion model, all of which are subject to a broader conversation, but to get the conversation started, we've posited a US central bank digital currency that would first be token-based as opposed to accounts-based. Now that's a fundamental choice, and we can talk about that, but we put a stake in the ground, and we said, token-based.

Secondly, it should enjoy the full faith and credit of the US government in the same way that the dollar in your pocket does. We'll talk about that a little bit more, but that's a difference from say a stable coin, which may represent that, but because dollars are held in an account, this would give [crosstalk].

Jeremy: Stable coins today don't meet that full criteria, but theoretically in the future they could.

Chris: Exactly right. We're proposing the digital dollar would have the full faith of credit. We're also proposing it would be a third form of fiat money, so you'd have coin and cash, this would be a third form, a digital form, but it'd also be a third form of money being that you have fiat money, you have accounts-based money, and now we have a form of a digital fiat money. We propose maintaining the two tiered banking system in terms how digital dollars are made available to the public.

All your listeners may know that right now, fiat money is produced by the Federal Reserve, distributed through the Federal Reserve bank system, and then distribute onto commercial banks, which then make them available through ATM machines and tellers. We would propose that digital dollars would be distributed initially in the same way, but then they'd flow out into the broader ecosystem of digital wallet providers and otherwise.

We also propose a US central bank digital currency that is monetary policy-neutral. We're not proposing an increase of the money supply, decrease, those are policy choices that are made by central bankers and governments worldwide. We don't propose any change in that being a policy choice, we're not proposing this as a policy solution.

Finally, for the major technological components of this, we believe that form should follow function or technology should follow design choices. Which is why we believe that a close partnership between the private sector and the public sector is so important because we need to know what policy choices are part of public policy, that Congress, the administration, the central bank deem important and then the technology design should follow that. Those are just some of our core foundational ideas. Now, every one of them has a lot of detail and a lot of weeds to get into, but those are the big picture issues that we proposed in our main white paper.

Jeremy: I think, as we've talked about before in conversations, we obviously have this incredible tradition in the West as well of technological innovation. Many of the greatest technology firms in the world are American companies, there's a lot of great Chinese companies as well, but a lot of great American and companies and the pace of private sector innovation, in particular in software-powered industries, which is more or less becoming everything including as we're seeing now, software is eating up the whole financial system.

We went from a world where people thought they used-- AT&T was their communications company, well now, Facebook is their communications company or Tencent is their communications company, depending on where you live and so on. The private sector activity in this digital dollar space is also accelerating at a really interesting pace. Now on a relative scale, when we talk about the trillions of dollars that slosh around in the electronic money system today, the numbers in the crypto space are quite small, but obviously we've got a lot of vectors.

We've got a lot of organic growth and we have a lot of major firms, giant internet companies, giant payments companies who are stepping in and getting involved in stable coins today. The next two to three years, let's just say, is a living laboratory of technical innovation, market innovation and many of the things that you outline as potential principles around a federal government-sponsored initiative or endorsed initiative, some of those things may already be in the market and some already even are in the market to different degrees.

How does that come together, Leading private sector actors that are innovating in the market? I think it's not unreasonable to imagine in the next two to three years that there'll be 2 billion plus people, 3 billion people potentially who have digital wallets using digital currency on the internet using software before anything even emerges from the fed.

Chris: It's interesting. We have our own way of doing things in America. When China does big things the order comes down from high and it's driven down through the party leadership all the way down into their corporate structure and things happen because the command has been given.

That's not how we roll in the United States for good and bad. If anybody had done a schematic of the way the internet rolled out and thought that they would've predicted it, it would've never happened.

It was a big, messy, glorious explosion of creativity and innovation. The Department of Defense had a role and DARPA had a role, but so did some of the foundational companies like Netscape Navigator and private equity played a role.

That's how we roll in the west and, quite frankly there's nothing better when it works, because its proof is in the pudding of what we've created. The fed has got a role here, Congress has a role in this but so does Circle, so does Ripple, so does so many of the companies that are exploring this right now. I'm not looking to brand identify other than to say that there's some really exciting experimentation going on and that needs to continue.

The official sector needs to identify the big policy issues. That's what they do, that's what they're elected to do, that's their job. The private sector is the one that can bring the creativity, the technological proficiency, the project management skills. I ran a government agency, it's really hard to do big technology projects in government. We can't afford the best and the brightest people, we don't have consistent funding, we can't raise the funding that's necessary, we don't have the big project management skills.

Let's not pretend that government alone is good at doing big projects when in fact the evidence is we're really good at it in the private sector in the West. Let's bring those forces together and drive this innovation in a way that reflects our core values as a society, but also reflects our innovativeness, our creativity, our drive and determination to do big things when we all come together.

Jeremy: It makes a great deal of sense. Speaking of innovation, I had a great conversation on the show with Brian Brooks, who's obviously blazing a trail and very focused on many of these issues as well. The phrase he used, which I really liked was, essentially we've got this leading reserve currency but in this new world to maintain preeminence as a reserve currency, that there are a lot of different things. The currency needs more features, it's got to compete. Its utility value needs to compete and there were features of old kinds of coins and notes and so on, but the features weren't that significant.

Digital currency? Wow, we're talking about real innovation in terms of the actual utility value of the unit of account itself. What do you see as the breakthrough features? What are the features that the dollar needs and what is it that digital currency brings that is transformative?

Chris: Here's a really interesting observation, Jeremy. The US dollar itself, it takes its name from the Spanish dollar and the reason why they used that name is because the Spanish dollar was considered the most technologically advanced currency of its time.

Let me just go back in history, During the 17th and 18th century exploration of the Eastern Coast of the new world, there were multiple currencies in use at that time. There were British pounds, there were Dutch guilders, there were French francs, but the currency that was traded had a premium that was considered the most attractive was the Spanish dollar. The reason is, it had technological superiority already over the other currencies.

One, it was minted with new world silver, which was more consistently pure than old world silver and therefore used less alloy, making it more consistently valuable, making it also lighter, whether in one's pocket or in one's trunk. The other thing is, it was minted in such a way that it could be broken into eight equal pieces, known as pieces of eight, making it fractionable. Fractionable meant it was more easily utilized without having to make change.

What are we facing in this COVID crisis? We don't have enough coins around to make change. If we had a digital dollar that was fractionalizable as if the cost of a candy bar was [unintelligible 00:27:49]

Jeremy: The [unintelligible 00:27:52] goes to eight decimal places. That's got visibility and on some change that were launched on it's one 20th of a cent to transact with it.

Chris: In history, we know that a technological advantage that one currency may have over another makes it more attractive in global trade. Let's think about the dollar, if it remains in an analog form, as it currently is and other countries and other economies develop a digital fractionalizable currency, how is the dollar going to continue to compete? It will continue to compete because it has other strengths. But are we willing to forego technological modernization, which goes back to my first point?

We haven't modernized our rail systems, we haven't modernized our airports and our roads. Is that going to be the same attitude we take with our currency and how long will be a major global competitor if we don't have the courage and the gumption to say we need to modernize our currency with new technologies?

Jeremy: It raises some really big questions and as I talk with not just regulators but leaders in the existing financial system, others and so on, this notion of a token-based digital unit of account in cryptocurrency and blockchains we're talking about digital bearer assets. Just like a physical note is a bearer asset, a digital token is a bearer asset and we're talking about digital bearer assets that effectively instantly, automatically exist everywhere that the internet exists at any moment in time.

If you've got an internet connection at the space station, it works there.

As I call it, blockchains are intergalactic money, but the bottom line is it exists everywhere the internet exists and it's a bearer instrument and that's profoundly powerful. In the history of money, in the history of nation states that's never existed. This is just like a fundamental breakthrough innovation and I think the lots of different metaphors, the genie is out of the bottle, all right? The genie is out of the bottle, non sovereign digital currencies, like Bitcoin have taken that genie out of the bottle as well. That genie is out of the bottle and I think it raises really questions for governments around the world.

It raises on the one hand, these very profound questions about national security, about how law enforcement fights crime on the one hand and on the other hand around human freedom, human rights, financial privacy, and then somewhere in the middle breakthrough innovation, which is if you've got a bearer, digital bearer asset we you can write code and it can be programmable on any device anywhere in the world, like, wow, what could you do with that? What could society coming back to your society's ideas of money concept, what could do with that? These are like really, I think, very profound questions. I'm curious to hear your thoughts on some of those dimensions and how government should be thinking about this.

Chris: You talked about in a digital format, money becomes intergalactic, so in space it becomes ubiquitous, you can use it, whereas fiat money is basically a local utilization. You can't use fiat on, in an online context, but let's really expand our mind. Let's not just think about space, but let's think about time.

Jeremy: Sure.

Chris: If we go to a digital format that's ultimately programmable, we could actually program money to be used not just in our current time, but across time. Think about a- I could today, if programmable money were available, whether that be stable coin or a central bank digital currency, it could be programmed to benefit my children, my grandchildren, my great grandchildren.

I could program money today for use at other places and times. It's the big breakthrough with the big idea here is we're creating money that can be used across space and across time and that has never been possible. That is a big idea and the United States has to be involved in that big idea. It's too big for us to sit on the sidelines and let the development of this be done elsewhere.

Jeremy: That ties into, I think a key question, I think a lot of times the discussions on this they get reduced down to is this a payment system innovation issue? Are we really just talking about a new federal payment system? My view is that's an extremely narrow view of this and in some ways, like the ability to settle payments digitally over the internet, that's just going to be as ubiquitous as email. That's just going to be the air we breathe, that'll be everywhere and that's almost like a tiny, tiny issue here.

With that, composability and programmability and I guess ultimately we have these blockchain networks and there's a diverse number of these public networks, just like the public internet, which is the worldwide web is this public network, the internet, email systems, this public network, no government controls those, no corporation controls those, they're just standards that are out there people can build on.

I think part of the activeness of fiat digital currencies and what's contributing certainly to some of the growth and stable points today as well, is that innovation that can happen there. The idea you have there, that there's actually a protocol called the lock protocol. It's an Ethereum smart contract. Anyone can put their stable coin through it, and they can configure all kinds of locking rules on money. That's just out there and you can put these Lego bricks together and the openness of and the creativity that developers can bring, I think that's also a place where again, the traditional financial or traditional regulars, it's very uncomfortable to think about that there's developers hacking together protocols that can do stuff with our money, but it's also a big part of the promise here.

Chris: Absolutely. It is the future. Again, the internet exploded-- when the internet first became reaching a common public, no one could have anticipated some of the developments that have come about. I remember in the 1980s, when someone who was developing one of the core technologies for the internet called asynchronous transfer mode told me about its application and explained it will allow computers to talk to computers. My attitude? Well, what good is that?

Well, what good is that is the ability to plan a vacation, order a taxi cab and all the ramifications of it today, the ability to gather information, to communicate with people around the world. I don't think we yet can anticipate all the utilizations of digital money. But that shouldn't be the reason to stop us. That's got to be the reason to get us started.

Jeremy: Exactly. Completely agree. Lots of good historical metaphors on that that should inform this.

Chris: The other reason, the real big reason is, money is a carrier of values, money conveys-- That's why we started by talking about money being a social construct, societies imprint their values on money. The dollar is attractive on to a global audience because there's a presumption that unless you're engaged in drug running or other illicit conduct, your activities with your dollar is your private activity.

It also carries the notion of free enterprise and the ability to assemble capital in a way that is most beneficial, so free-market economics. There's values built into a currency and as China makes progress, tremendous progress in building a digital RMB, there's also an expectation that their values will be in that. I don't think there's a broad expectation that a digital RMB would be free from government surveillance.

At heart, the reason why we need to be on the front edge of this technology is to make sure those values that our society holds dear are imprinted in this new form of money. That's why the conversation can't be confined to government alone. That's why it's got to be a broad conversation between the public and the private because we've got to work out what are those values? How do we write them into the future of money in a way that is both useful for our society, but societies who aspire to some of the values of our society can then utilize that as well? As opposed to the alternative, which may not be aspirational values built into the digital form of modern money.

Jeremy: This it's a great concept of imprinting values, each of these tokens so to speak, carrying a value and it speaks to, I think the very profound ways in digital currencies are increasingly going to be viewed as having, having geopolitical dimensions to them. I like to also say as things like fiat digital currencies take off, whether the private sector stuff that's today, or future collaborations with central banks, people around the world will be able to effectively vote for what economic system that they participate in with their smartphone.

They can decide. They download a piece of software and decide what economic system am I going to participate in and that has very profound geopolitical consequences. It means that really, the projection of the dollar, obviously everywhere is one thing, but also the projection of other major currencies.

I'm curious to get your thoughts on the geopolitical dimensions are very real here. I think as I've noted, with the digital RMB technically, just as a crypto-based asset really and anyone with a smartphone, theoretically, would be able to have a wallet and directly transact in RMB with the People's Bank of China, whether you're a business or an individual in any part of the world where you're connected to the internet.

That's what I call over-the-top financial system, just like we've over-the-top television delivery and we've over-the-top communications now over the internet, this is over-the-top monetary systems and it's happening and very significant geopolitical connotations here.

Chris: You're absolutely right. It is happening. I just saw some information in the last 24 hours that China says that they've now done over 1.3 million transactions, separate transactions aggregating over a billion RMB in value just through August of 2020 alone.

Meanwhile, the Federal Reserve has got a dozen or more people working on this. China's got tens of thousands of companies working on this with all their employee power and is already doing transactions. This is moving very very rapidly.

Jeremy: Comes back to what's happening in the private sector as well, where we've seen--

Chris: You're right. I don't want to dis-- I'm only referring to the feds, actually. We should spend a minute talking about really, I don't want any of your viewers to come away thinking there's not a lot of exciting innovation going on. It's just that the innovation's going on the private sector, there's some things going on in the public sector and there's not this-

Jeremy: Right

Chris: -coming together and that's really where it needs be done but-

Jeremy: [crosstalk] make that happen.

Chris: -we're doing some great work and a lot of firms are doing some great work. The folks at Paxos, I met with them recently, they've got some-- there's a lot going on.

Jeremy: There is certainly a lot going on. It's been, we've been seeing these dollarization themes, the demand for digital dollars growing significantly. We're seeing the birth of internet-based interest rate markets, credit markets, other things that are utilizing digital dollar digital currencies. It's been fascinating and the growth rates are really tremendous.

Chris: It's already-- stable coin industry is already solving for problems. In the foreign exchange industry there's the latency of settlements and the friction involved in that has been a long term problem. A number of stable coins are really providing an important utility role in both lowering cost and shortening time spans. That's a value proposition that's long been needed to be addressed. Here's this new technology addressing it. We're beyond the nascent stage.

Jeremy: I know.

Chris: Things are really happening.

Jeremy: They most certainly are. I guess we're running up against time. I want to maybe end with just a few brief thoughts on kind of where this all goes. When I got started in building Circle. one of the things that occurred to me was over time, maybe over 10 years-- and that was 7 years ago, there would emerge real standards, in the same way we have standards on the internet for content and data and communications that there would emerge standards and there'd be standards for fiat digital currency. And that those standards could be adopted by many sovereigns, they could be adopted in the private sector and that you'd have these standards.

You'd get to this place where you'd have effectively instant value exchange from any reasonable fiat currency, but represented as a digital currency instantly swappable effectively at no cost, instantly settle able globally at no cost. I actually think we're not too far off from things like that happening.

One is that development of those standards. I think that can be something that the public sector and private sector work on together. I think in fact, ultimately it's critical that they do, but where does that-- where does that lead us? Does that lead us to a place in 5 years or 10 years where kind of where all the economic actors in the world are saying, why don't we just build a synthetic global digital currency? Why are we having all these different fiat digital currencies flying around, and even beyond that, what role could a non-sovereign digital currency play in a basket that forms a synthetic global digital currency? I'd be interested in your thoughts on that.

Chris: Fascinating. It's, again, if you look at history, there have been times when certain currencies reach a large portion, but not an exclusive portion of commerce. Before the Euro, back in the 15th century, there was the florin, of the City State of Florence, which was in a sense the first European-wide currency, but that lasted maybe 80 years to 100 years before you went back to more of a diverse array.

I think the last several generations have seen the dollar reach probably a historical peak as a world currency. Yet we may be actually seeing some of the receding of that as the US economy's very dominant global role starts to recede, and we see the rise of China and others, right?

I think currencies, ultimately, if they're sovereign currencies are tied to the economic strength of a nation, and I think it's probably more likely in history that you'll have different sovereign currencies tied to the economic strength of a nation wane and wax throughout human history. Just look at the fortunes of the Euro. Its fortunes have risen and fallen with the European economy. I think that that's probably more the historical tide, but, but look, I'm also an advocate for strengthening the US economy in every way we can and strengthening our currency.

I think that the world has been made better during the last 80 years or 70 years of the dollar's dominant then than the alternative. If you take the last three generations, more people have risen out of poverty worldwide than ever before in human history. I think that's not just a coincidence. I think that's been something of a consequence of the dollar's role in global commerce. The fact that there's been a stable unit of account to price goods and services that it's earmarked with those policy and principles that I mentioned of free enterprise, of privacy, properly balanced against law enforcement interests, and other values that are grafted into the dollar, I think that's been a net good.

Therefore I believe that it's a net good for the world if we can empower the dollar for more generations to come and not simply let it decay and deteriorate like so much of our financial market infrastructure. Let's modernize it, let's harness this new technology, let's harness all the good work that's already been done in the private sector.

I think the dollar could exist alongside some of the payment functions that are being explored in stable coins, some of the convertibility functions in so many markets. I think that a healthy ecosystem would have give and take between a sovereign central bank digital currency and good strong stable coins in a global economy. I think we can get this right, but we've got to develop a national coming together, a consensus that the time to act is now.

Jeremy: Chris on that note, those are great con concluding thoughts. Wonderful conversation, really a pleasure to have you on the show today and looking forward to continued conversations and collaboration.

Chris: Great being with you, Jeremy. Let's do it again.

Jeremy: All right. Sounds good, Chris. Fascinating, of course. Really grateful to have Chris on the show today. These issues, as you can see, are very profound. They impact the future of the global economy. They impact the future of the United States. They impact so much of how society will organize itself economically. Really a great pleasure.

We're going to continue on this theme next week. We're going to continue on this theme with the two co-founding partners of Castle Island ventures, Nick Carter, and Matthew Walsh. They've been exploring the very profound implications of what they're describing as crypto dollars. We're going to talk about their latest research in this field and many of the big-picture global, social political and economic implications of crypto dollars. It should be really enjoyable conversation with two very bright minds in the space. Until next week, stay well, stay safe and stay informed. Thank you.

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Christopher Giancarlo
Former CFTC Chairman, aka "Cryptodad"

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