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

Watch each week live on YouTube, and be sure to subscribe on Apple Podcasts,  Spotify and YouTube.


00:04:50.730 --> 00:05:09.060
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

19
00:05:10.230 --> 00:05:24.810
Jeremy Allaire: The topic of digital dollars. Obviously, we've talked a lot about digital dollars on the show digits are stable coins digital currency and stable coins have obviously capturing the imaginations of central bankers technology companies and others.

20
00:05:25.830 --> 00:05:37.320
Jeremy Allaire: To 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.

21
00:05:37.800 --> 00:05:47.490
Jeremy Allaire: To launch some form of central bank digital currency initiative. Now, most of these efforts have focused on research planning proposals.

22
00:05:47.910 --> 00:05:54.930
Jeremy Allaire: Private sector stable coins have been in the market for years and I've seen incredible growth, most notably in the last year.

23
00:05:55.410 --> 00:06:07.020
Jeremy Allaire: From trade finance to remittances to cross border business payments digital dollar stable coins have seen the fastest growth as macro conditions accelerate dollarisation across the globe.

24
00:06:07.560 --> 00:06:14.040
Jeremy Allaire: USD see itself has rocketed to nearly 3 billion in circulation and is growing at a astounding rate.

25
00:06:14.760 --> 00:06:31.830
Jeremy Allaire: 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.

26
00:06:33.090 --> 00:06:41.850
Jeremy Allaire: To help unpack these topics and examine this intersection between central bank efforts and private sector digital dollar efforts.

27
00:06:42.390 --> 00:06:52.710
Jeremy Allaire: We're joined this week by Christopher john Carlo director of the digital dollar project a partnership between Accenture and the digital dollar foundation that's focused on advancing

28
00:06:53.160 --> 00:07:10.320
Jeremy Allaire: The exploration of the United States central bank digital currency, Chris, a Senior Counsel to the law firm Wilkie foreign Gallagher and the former chairman of the US Commodities Futures Trading Commission welcome Chris. It's great to have you here today.

29
00:07:10.800 --> 00:07:14.460
chrisgiancarlo: To be with you today, Jeremy. It's great to have you be with you. Thank you for the opportunity.

30
00:07:14.730 --> 00:07:23.700
Jeremy Allaire: Absolutely. So, well, look, there's so much to talk about. And we could easily fill hours with that. So we're gonna we're gonna do our best to

31
00:07:24.240 --> 00:07:42.750
Jeremy Allaire: To have a solid conversation. 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 that you've got some really interesting history there. And I think just great for the audience to quickly here that

32
00:07:42.840 --> 00:07:53.220
chrisgiancarlo: You know, great. I mean, you know, so many people's stories of how they've come to crypto are fascinating my own journey began when I joined the Commission and in 2014 and started meeting with some

33
00:07:54.120 --> 00:07:58.350
chrisgiancarlo: People active in the space, including Cameron, a title, a week of August, and others.

34
00:07:58.980 --> 00:08:05.010
chrisgiancarlo: That were advocating for, you know, a good relationship with regulators and we're getting to see us early

35
00:08:05.460 --> 00:08:15.750
chrisgiancarlo: 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, the value of bitcoin

36
00:08:16.080 --> 00:08:23.640
chrisgiancarlo: And at the same time, we were approached by two of our leading exchanges the Chicago Mercantile Exchange in Chicago Board Options Exchange.

37
00:08:24.120 --> 00:08:36.390
chrisgiancarlo: To launch Bitcoin futures as a regulated product and it was remarkable that the pressure on the agency, not to allow Bitcoin futures to launch. I mean,

38
00:08:37.260 --> 00:08:41.040
chrisgiancarlo: One entrepreneur took out a full page ad in the Wall Street Journal

39
00:08:41.640 --> 00:08:53.160
chrisgiancarlo: 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

40
00:08:53.880 --> 00:09:00.780
chrisgiancarlo: Look everybody comes to it with their own point of view, we felt it was the right thing to do, based upon a simple

41
00:09:01.410 --> 00:09:17.790
chrisgiancarlo: That simple. But it based upon a thorough reading of our own statutes. And I won't go into explanation of how these self certification process works, other than to say we believe we made the right decision not to block Bitcoin futures. And I think as a result of that decision.

42
00:09:18.840 --> 00:09:32.520
chrisgiancarlo: Crypto assets today have established themselves as a as an as an as a bona fide asset class alongside other bonafide asset classes in the in the financial landscape. And I think a lot has to do with the CFD sees

43
00:09:32.610 --> 00:09:32.850
Jeremy Allaire: Yeah.

44
00:09:33.030 --> 00:09:35.280
chrisgiancarlo: You should not to block it and to move forward and

45
00:09:35.340 --> 00:09:50.640
Jeremy Allaire: It was landmark. I was asked in a in me last week of former guests larry summers asked, at what point in time, will it be more likely that someone does not have crypto in their portfolio, then that having their portfolio and my guess was was two to three years, but

46
00:09:52.260 --> 00:09:56.970
Jeremy Allaire: I think that the transformation and your involvement there is is obviously really noteworthy.

47
00:09:57.180 --> 00:10:14.970
chrisgiancarlo: Well, other agencies were not so inclined. It was it happened at the CF TC. And I think the agency as a historical reputation for innovation. And I think this is one case where that reputation and and and and history really came to bear in a way that I think has been ultimately beneficial.

48
00:10:15.660 --> 00:10:24.000
Jeremy Allaire: Absolutely. So I think I remember the first time we met in your office and I think it was at the tail end of your service and

49
00:10:24.840 --> 00:10:31.950
Jeremy Allaire: And I was talking a little bit about what we're up to its circle and and US DC was very early at that point.

50
00:10:32.760 --> 00:10:47.100
Jeremy Allaire: But I think you're now i think you know focused on on very significant very strategic issues in in this area, and I'd love to hear as well, sort of what you know. When did you have your aha moment about digital dollars.

51
00:10:47.160 --> 00:10:48.300
Jeremy Allaire: And about digital currency.

52
00:10:48.330 --> 00:10:54.570
Jeremy Allaire: With respect to the dollar and and really we'll talk about the project as well, but just sort of what was that moment for you.

53
00:10:54.870 --> 00:11:05.220
chrisgiancarlo: Well, it actually wasn't the Bitcoin futures moment. It really wasn't. It was sort of like a abroad observation that built over my five years in government service. And it was an observation that

54
00:11:05.760 --> 00:11:12.180
chrisgiancarlo: You know, Jeremy in the United States and in the West, you look around us. And you see our obsolete.

55
00:11:12.960 --> 00:11:23.280
chrisgiancarlo: Infrastructure of bridges and tunnels and airports and mass transportation systems that were state of the art in the last century or increasingly obsolete in the 21st century.

56
00:11:23.730 --> 00:11:30.210
chrisgiancarlo: Sadly, the same is true. And I've talked about this, some numbers. Same is true about a lot of our financial market infrastructure.

57
00:11:30.780 --> 00:11:33.240
chrisgiancarlo: Systems for payment and settlement for next year.

58
00:11:33.420 --> 00:11:41.790
chrisgiancarlo: But also the financial market regulatory infrastructure as well. I mean, the statute for the CDC and the SEC were laid out in the 1930s.

59
00:11:42.330 --> 00:11:58.260
chrisgiancarlo: Were coming on 100 year anniversary of structures that were durable, clearly, but they were built for an analog human to human world, not for a digital our ego driven driven and increasingly token eyes and decentralized world.

60
00:11:58.530 --> 00:12:09.420
chrisgiancarlo: Yeah, and my next observation and we started to see FTC is this coming wave of the internet. This this wave of the Internet of value, you know, the first wave of the Internet of information.

61
00:12:10.080 --> 00:12:20.040
chrisgiancarlo: 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 to be speech to be something

62
00:12:20.370 --> 00:12:27.450
chrisgiancarlo: That is free and not subject to government oversight. But when it comes to things of value governments have long presumed

63
00:12:27.810 --> 00:12:32.790
chrisgiancarlo: To have authority and jurisdiction, you know, we have not just one, but two market regulators, we

64
00:12:32.790 --> 00:12:43.950
chrisgiancarlo: 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

65
00:12:44.430 --> 00:12:50.430
chrisgiancarlo: In matters of things of value. So the lessons that we learned in the first wave of the internet about about

66
00:12:50.910 --> 00:12:55.500
chrisgiancarlo: Don't ask permission is forgiveness or, you know, you're not trying hard enough breaking things

67
00:12:55.920 --> 00:13:05.220
chrisgiancarlo: Is going to have to be tempered a bit in this new wave of the internet when you're going to run when that's going to run smack into government entities built up to

68
00:13:05.520 --> 00:13:18.660
chrisgiancarlo: Moderate and modulate things of value. And that brings me to my third observation, which is that this wave of the internet is going to run crashing headlong into this obsolete regulatory structure.

69
00:13:18.720 --> 00:13:19.440
Jeremy Allaire: Is right now.

70
00:13:19.740 --> 00:13:20.640
chrisgiancarlo: It is right now.

71
00:13:20.970 --> 00:13:29.310
chrisgiancarlo: And so 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

72
00:13:29.730 --> 00:13:30.630
chrisgiancarlo: In the states.

73
00:13:30.840 --> 00:13:38.220
chrisgiancarlo: Or, you know, like, like a mighty wind instead of trying to get blocked with loving ourselves to be blown over by it, let's hit yourself to it and write it

74
00:13:38.520 --> 00:13:49.350
chrisgiancarlo: And 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 error, where I think

75
00:13:50.160 --> 00:13:53.250
chrisgiancarlo: Once again, our core principles.

76
00:13:53.310 --> 00:14:00.540
chrisgiancarlo: Yeah, freedom of speech, free enterprise degrees of privacy can be integrated into this new technology.

77
00:14:00.690 --> 00:14:04.560
chrisgiancarlo: Right for the betterment of ourselves. And I think for the rest of the world.

78
00:14:04.740 --> 00:14:07.320
chrisgiancarlo: And that's a choice. I think we fundamentally have to make now.

79
00:14:07.620 --> 00:14:16.380
Jeremy Allaire: Yeah, no, we're, we're, we're right on the precipice of that I really your context is a lot of shared beliefs there of course and

80
00:14:17.910 --> 00:14:23.310
Jeremy Allaire: You know, I was very involved in the first way to the internet. And, you know, there's that period of time.

81
00:14:23.700 --> 00:14:36.330
Jeremy Allaire: In the you know the mid 90s when, you know, really, you have these large established industries and regulators that oversaw you know the airwaves that oversaw who could have who could

82
00:14:36.660 --> 00:14:42.450
Jeremy Allaire: Who could spread their voice to an audience of people in the world. And this was all over the world, not just in the US, sort of,

83
00:14:43.020 --> 00:14:50.700
Jeremy Allaire: And you had, you know, monopolies state controlled monopolies, you had private sector, you know, kind of controlled infrastructure and

84
00:14:51.270 --> 00:15:02.640
Jeremy Allaire: You know the there was, I think, bold policy actions that were taken in 1996 1997 very bold policy actions that sort of said we're going to, we're going to create structures for

85
00:15:03.120 --> 00:15:13.050
Jeremy Allaire: This to grow and flourish and you know I think very few people would look back on that and say that was a bad idea. There's stuff that we've seen, you know, an uncontrolled unfettered have

86
00:15:13.620 --> 00:15:29.820
Jeremy Allaire: created new centralization problems actually which which are now responding to centralized platforms, things like that, but that that that kind of visceral idea of the internet slamming up against the government run and administered monetary system or this hybrid

87
00:15:30.840 --> 00:15:40.380
Jeremy Allaire: Is very real and there's a tremendous need to walk our way through that and make sure we're on the right side of what this enables for people everywhere.

88
00:15:42.270 --> 00:15:49.680
Jeremy Allaire: So. So you started the digital dollar project. It sounds like a lot of inspiration around this and this desire to

89
00:15:50.670 --> 00:15:57.810
Jeremy Allaire: You know, see, make sure make sure that the United States gets this right that we have the right level of attention on this problem.

90
00:15:58.290 --> 00:16:12.150
Jeremy Allaire: That it. This isn't just something where, you know, China or whomever kind of has a runaway success. Doing this further faster, but maybe just talk a little bit about, you know, the genesis of the project and and what you're envisioning from that.

91
00:16:12.330 --> 00:16:23.190
chrisgiancarlo: Sure. So know where is this clash between antiquated structure infrastructure financial market infrastructure and this new internet value going to be more acute than in the area of money.

92
00:16:23.790 --> 00:16:31.560
chrisgiancarlo: And it's already happening. SIR JOHN come live, who's the Deputy Governor of the Bank of England and became a good friend of last few years, once said to me.

93
00:16:31.860 --> 00:16:40.110
chrisgiancarlo: Not too long ago he said, you know, Chris. It seems like every several generations society once again asked itself, the question what is money.

94
00:16:40.860 --> 00:16:48.630
chrisgiancarlo: And start rethinking that you know money is we think of it as a government construct, but it's really not. If you look at history.

95
00:16:48.990 --> 00:16:58.740
chrisgiancarlo: Money is much more of a societal construct the government has a big role to play, but we're seeing it right now. Society is really formulating their thinking about money.

96
00:16:59.100 --> 00:17:10.800
chrisgiancarlo: What government is actually sort of $1 a day late dollar short to use a pun on on the notion of money and and so society is going to move forward and we considering money.

97
00:17:11.310 --> 00:17:24.270
chrisgiancarlo: And unless government catches up to that it's going to be another evidence of this. This antiquated financial market infrastructure running headlong. And so, so in order to really

98
00:17:26.190 --> 00:17:36.630
chrisgiancarlo: Bring some, some, I think, a really broad debate to bear I formed the digital dollar project at the beginning of the year first formed a nonprofit foundation with my brother who's

99
00:17:37.170 --> 00:17:42.810
chrisgiancarlo: A renowned Silicon Valley entrepreneur and Daniel gore find who's the former Chief Innovation Officer to see FTC

100
00:17:43.140 --> 00:17:49.980
chrisgiancarlo: And then we teamed up with it with Accenture on a pro bono basis. And so the digital dollar project is not a commercial venture

101
00:17:50.310 --> 00:17:56.640
chrisgiancarlo: It's a nonprofit think tank and its, its purpose is to both stimulate the conversation.

102
00:17:57.000 --> 00:18:06.810
chrisgiancarlo: Bring a broad body of perspectives to bear and then ultimately drive toward real exploration through a series of public sector, private sector.

103
00:18:07.140 --> 00:18:19.770
chrisgiancarlo: Partnership pilot programs. So as I mentioned, we 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, their

104
00:18:20.280 --> 00:18:30.270
chrisgiancarlo: Firms they belong to. But speaking on their own behalf across the political spectrum across the technological spectrum and and we really believe

105
00:18:30.840 --> 00:18:38.160
chrisgiancarlo: That if if the United States is going to do this, it needs to do it through its, its traditional approach to big technology innovation.

106
00:18:38.400 --> 00:18:50.340
chrisgiancarlo: 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 and Chairman Mao

107
00:18:51.150 --> 00:19:03.660
chrisgiancarlo: And not too long ago said this is so important, than it needs to be done by basically federal workers. Well, I have enormous respect for chairman, pal. But on this point, I disagree. This is so important.

108
00:19:04.260 --> 00:19:17.850
chrisgiancarlo: 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.

109
00:19:18.390 --> 00:19:26.040
Jeremy Allaire: Yeah, so we have, it's, it's a, you know, critical timing for these for for this work obviously and

110
00:19:27.300 --> 00:19:29.400
Jeremy Allaire: I've been a huge advocate, as you know, have

111
00:19:30.870 --> 00:19:34.260
Jeremy Allaire: Kind of over the mid to long term this concept of

112
00:19:34.800 --> 00:19:48.600
Jeremy Allaire: Hybrid central bank digital currency where you've got, you know, you know, leading private sector innovators that are building an advancing technology and standards and infrastructure to to really drive, drive what's possible.

113
00:19:49.050 --> 00:20:00.450
Jeremy Allaire: But working in close partnership, frankly, with central banks around the things that central banks are going to care the most about. Which is this, this, this, the soundness the security.

114
00:20:01.230 --> 00:20:19.740
Jeremy Allaire: The oversight and really the under the underlying ability for those institutions to continue to focus on their own core mandates of whether it's full employment or or economic growth or monetary stability, price stability, etc. Monetary policy, more, more broadly,

115
00:20:21.060 --> 00:20:28.050
Jeremy Allaire: We sort of have this this debate, right, which is, you know, public, private, you know, different models in between.

116
00:20:29.070 --> 00:20:35.040
Jeremy Allaire: You know, as you look at what's happening out in the marketplace today. There's a lot happening in the marketplace with with stable coins.

117
00:20:35.490 --> 00:20:52.260
Jeremy Allaire: You know, you know, projects like us DC emerging stable coins all around the world. In fact, and then the sort of the research that we know is going on throughout the Fed system and other places. What do you see emerging from all that that that meal you have of activity.

118
00:20:52.530 --> 00:21:00.630
chrisgiancarlo: So I use the analogy of the space program, you know, in the early days of the space program. The big decision to land a man on the moon was made.

119
00:21:01.290 --> 00:21:13.080
chrisgiancarlo: But a lot of the. How do we do that had not yet been made. In fact, it was an early debate as to whether the core technology would be rocket technology or jet propulsion technology and the decision was to go

120
00:21:13.530 --> 00:21:20.850
chrisgiancarlo: With rocket technology. But even that wasn't made when the core decision was let's let's let the man on the moon. Well,

121
00:21:21.450 --> 00:21:27.570
chrisgiancarlo: I feel the core decision should be the United States should experiment and be prepared to adopt a

122
00:21:27.960 --> 00:21:35.580
chrisgiancarlo: Digital dollar a central bank digital currency and then we need to back up and say, okay, there are a number of ways to do that.

123
00:21:36.060 --> 00:21:44.970
chrisgiancarlo: What are some of the choices. And 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.

124
00:21:45.600 --> 00:21:52.770
chrisgiancarlo: And that doesn't mean it's necessarily the full pathway to get there, but it's a way for

125
00:21:53.190 --> 00:22:00.060
chrisgiancarlo: us all to get our minds around some of the core decisions and we put forward our best ideas, working with our advisory board.

126
00:22:00.300 --> 00:22:14.790
chrisgiancarlo: For a public discussion. So let me lay out for your audience, some of the elements that we believe that we've said in our champion model, all of which are subject to a broader conversation, but to get the conversation started. We've posited a

127
00:22:16.200 --> 00:22:23.130
chrisgiancarlo: Central US Central Bank digital currency that would first be token based as opposed to account space. Now that's

128
00:22:23.580 --> 00:22:30.120
chrisgiancarlo: A fundamental choice and we can talk about that, but we put a stake in the ground and we said token base. Secondly,

129
00:22:30.630 --> 00:22:39.570
chrisgiancarlo: It should enjoy the full faith and credit of the US government and the same way that the dollar in your pocket does. And we'll talk about that a little bit more, but that's a difference from say a stable coin.

130
00:22:39.990 --> 00:22:44.460
chrisgiancarlo: Which may represent that. But because dollars I held in an account. This would tell

131
00:22:44.520 --> 00:22:47.820
Jeremy Allaire: If you're a stable coins. Today I don't meet that criteria but

132
00:22:48.210 --> 00:22:49.860
Jeremy Allaire: Theoretically, in the future, they could

133
00:22:50.130 --> 00:22:56.520
chrisgiancarlo: Exactly right. So, so we're proposing the digital dollar would have the full faith and credit. We're also proposing it would be

134
00:22:57.180 --> 00:23:15.030
chrisgiancarlo: A third form of fiat money. So you'd have coins and cash. This would be a third form in digital form, but it also be a third form of money being that you have fiat money you have accounts based money and now we'd have a form of digital fiat money.

135
00:23:15.270 --> 00:23:23.760
chrisgiancarlo: Right, we propose maintaining the two tiered banking system in terms of how digital dollars are made available to the public.

136
00:23:24.210 --> 00:23:32.250
chrisgiancarlo: So your some of your listeners all your listeners may know that right now fiat money is produced by the Federal Reserve distributed through

137
00:23:32.550 --> 00:23:38.850
chrisgiancarlo: The Federal Reserve Bank system and then distribute on to commercial banks, which then make them available for ATM machines and

138
00:23:39.240 --> 00:23:50.430
chrisgiancarlo: At tellers, we would propose the digital dollars would be distributed initially in the same way, but then they flow out to the broader ecosystem of digital wallet providers and otherwise.

139
00:23:51.030 --> 00:23:57.030
chrisgiancarlo: We also propose a US Central Bank digital currency that is monetary policy neutral.

140
00:23:57.570 --> 00:24:08.490
chrisgiancarlo: We're not proposing an increase in 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

141
00:24:08.910 --> 00:24:18.060
chrisgiancarlo: A policy choice not we're not proposing this as a policy solution. And finally for the major technological components of this

142
00:24:18.390 --> 00:24:25.470
chrisgiancarlo: We believe that form should follow function or technology should follow design choices and which is why

143
00:24:26.310 --> 00:24:38.400
chrisgiancarlo: 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 are part of public policy that Congress

144
00:24:39.330 --> 00:24:47.250
chrisgiancarlo: The administration, the central bank deem important and then the technology designed should follow that. So those are just some of our

145
00:24:47.640 --> 00:25:00.840
chrisgiancarlo: 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, you know what, you know, I'm a white paper. Yeah.

146
00:25:01.350 --> 00:25:06.090
Jeremy Allaire: So I think as we've talked about before in conversations

147
00:25:07.230 --> 00:25:18.690
Jeremy Allaire: You know, we have, we obviously have this incredible tradition in the West as well of technological innovation, you know, many of the greatest technology firms in the world are American companies.

148
00:25:19.290 --> 00:25:24.480
Jeremy Allaire: There's a lot of great Chinese companies as well. But a lot of great American companies and

149
00:25:25.440 --> 00:25:36.390
Jeremy Allaire: You know, the, the pace of private sector innovation in particular in software powered industries which is more or less becoming everything, including us, we're seeing now software is eating up the whole financial system.

150
00:25:38.010 --> 00:25:51.870
Jeremy Allaire: You know, we went from a world where, you know, people thought they used you know at AMP T was their communications company will now you know Facebook is their communications company or 10 cent is their communications company, depending on where you live, and so on and

151
00:25:53.040 --> 00:26:06.120
Jeremy Allaire: The private sector activity in this digital dollar spaces 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

152
00:26:06.720 --> 00:26:13.500
Jeremy Allaire: electronic money system today, the numbers in the crypto space are quite small. But obviously, we got a lot of vectors.

153
00:26:13.950 --> 00:26:22.230
Jeremy Allaire: We've got a lot of organic growth and we have a lot of major, major firms giant internet companies giant payments companies.

154
00:26:22.560 --> 00:26:36.540
Jeremy Allaire: Who are are stepping in and getting involved in stable coins today. Right. And so the next two to three years. Let's just say is a living laboratory of technical innovation market innovation and

155
00:26:37.410 --> 00:26:42.330
Jeremy Allaire: You know, many of the things that you outline as as potential principles.

156
00:26:42.840 --> 00:26:54.510
Jeremy Allaire: Around a federal government sponsored initiative or endorsed initiative, some of those things may already be in the market or and some already even are in the market into two different degrees and so

157
00:26:54.810 --> 00:27:02.850
Jeremy Allaire: How does that, how does that come together, leading private sector actors that are innovating in the market. I think it's not unreasonable to imagine

158
00:27:03.210 --> 00:27:12.600
Jeremy Allaire: In the next two to three years that they'll be 2 billion plus people 3 billion people potentially who have digital wallets using digital currency.

159
00:27:13.770 --> 00:27:19.680
Jeremy Allaire: On the internet using software before anything even emerges from the Fed. Yeah.

160
00:27:19.710 --> 00:27:20.820
chrisgiancarlo: Well, you know, it's interesting when

161
00:27:21.990 --> 00:27:33.420
chrisgiancarlo: We have our own way of doing things in America, you know, in China does big things. The order comes down from on high. And it's driven down for the party leadership, all the way down into their corporate structure and

162
00:27:33.810 --> 00:27:47.400
chrisgiancarlo: And things happen because the command has been given. That's not how we roll in the United States for good and bad. I mean, if you, if anybody had designed the way the internet it done a schematic. The way the internet rolled out

163
00:27:48.120 --> 00:27:56.070
chrisgiancarlo: And thought that they would have predicted it, it would have never happened. It was a big messy glorious explosion.

164
00:27:56.520 --> 00:28:10.200
chrisgiancarlo: Of creativity and innovation and the Department of Defense had a role and DARPA at a role, but so did some of the foundational companies like Netscape Navigator and private equity played a role. That's how we roll.

165
00:28:11.040 --> 00:28:19.200
chrisgiancarlo: In the West, and quite frankly, there's nothing better when it works because it's proof is in the pudding of what we've created and so

166
00:28:20.430 --> 00:28:26.550
chrisgiancarlo: The Fed has got a role here, Congress has a role in this, but so does circle. So, so does

167
00:28:27.780 --> 00:28:32.790
chrisgiancarlo: Ripple so does so many of the companies that are exploring this right now, and I'm not

168
00:28:33.690 --> 00:28:33.930
Jeremy Allaire: Sure.

169
00:28:33.990 --> 00:28:41.700
chrisgiancarlo: Your brand identify older than to say that there's some really exciting experimentation going on and that needs to continue the feds when

170
00:28:43.080 --> 00:28:59.580
chrisgiancarlo: 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, but the private sector is the one that can bring the creativity. The technological proficiency, the project management skills.

171
00:29:00.090 --> 00:29:03.000
chrisgiancarlo: I ran a government agency. It's really hard.

172
00:29:03.330 --> 00:29:16.140
chrisgiancarlo: To do big technology projects and government. We can't afford the best and the brightest people we don't have consistent funding, we can't raise the kind of funding that's necessary. We don't have that big project management skills.

173
00:29:17.040 --> 00:29:26.160
chrisgiancarlo: And so let's not pretend that government alone is going to do in big projects, when in fact the evidence is we're really good at it in the private sector.

174
00:29:26.520 --> 00:29:45.150
chrisgiancarlo: In the West, let's bring those forces together and and 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. Yeah.

175
00:29:45.240 --> 00:29:47.910
Jeremy Allaire: That's it makes it makes a great deal sense

176
00:29:49.380 --> 00:29:50.550
Jeremy Allaire: Speaking of innovation.

177
00:29:51.600 --> 00:29:56.340
Jeremy Allaire: I had a great conversation on the show with Brian blogs, who's obviously

178
00:29:57.660 --> 00:30:08.190
Jeremy Allaire: You know, blazing a trail and and very focused on many of these issues as well. And the phrase he used which I really liked was

179
00:30:09.090 --> 00:30:19.470
Jeremy Allaire: You know, essentially, you know, we've got this leading reserve currency, but in this in this new world like to to maintain preeminence as a reserve currency that there are a lot of different things, but

180
00:30:20.070 --> 00:30:27.720
Jeremy Allaire: The currency needs more features. It's got to compete its utility value needs to compete and you know that there were features of

181
00:30:28.320 --> 00:30:41.850
Jeremy Allaire: Old kinds of coins and notes and so on. But you know the the features more that significant digital currency. Wow, we're talking about real innovation in terms of the, the actual utility value of the of the unit of account itself and

182
00:30:42.870 --> 00:30:53.910
Jeremy Allaire: You know, what do you see as the breakthrough features like what are the features that the dollar needs what and what is it that you know digital currency brings that that that is transformative in that way.

183
00:30:53.940 --> 00:31:01.800
chrisgiancarlo: Here's a really interesting observation Jeremy that the US dollar itself. It takes its name.

184
00:31:02.460 --> 00:31:11.370
chrisgiancarlo: From the Spanish dollar and the reason why they use that name is because the Spanish dollar was considered the most technologically advanced

185
00:31:11.670 --> 00:31:21.150
chrisgiancarlo: Currency of its time. And let me, let me just go back in history during the 16th century, the 15th and 16th century exploration of the

186
00:31:21.840 --> 00:31:27.480
chrisgiancarlo: Eastern Coast of the New World. There were multiple currencies and use during their time.

187
00:31:28.110 --> 00:31:37.740
chrisgiancarlo: I'm sorry, I said it should be the 17th and 18th century there were multiple currencies and use during that time there were British pounds. They were Dutch guilders there were French francs.

188
00:31:38.070 --> 00:31:42.720
chrisgiancarlo: But the currency that was that had the training at a premium that was considered the most attractive.

189
00:31:43.050 --> 00:31:49.680
chrisgiancarlo: Was the Spanish dollar and the reason is it had technological superior already over the other currencies one

190
00:31:50.040 --> 00:32:04.050
chrisgiancarlo: It was minted with new world server, which was more consistently pure than old world silver and therefore use less alloy, making it more consistently valuable, making it also later, whether it once pocket or once trunk.

191
00:32:04.950 --> 00:32:16.500
chrisgiancarlo: And the other thing is, it was minted in such a way that it could be broken into eight equal pieces, known as pieces of be making it fractional and fractional knowing that it was more easily, easily utilize

192
00:32:17.010 --> 00:32:31.050
chrisgiancarlo: Having to make change. Well, what are we facing in this corporate crisis, we don't have enough coins around right to make change. Well, if we had a digital dollars fraction of the cost of a of a of a candy bar when

193
00:32:32.580 --> 00:32:33.060
Jeremy Allaire: He when

194
00:32:33.510 --> 00:32:35.310
Jeremy Allaire: He goes to a decimal places.

195
00:32:35.340 --> 00:32:35.820
Jeremy Allaire: So that

196
00:32:36.060 --> 00:32:43.170
Jeremy Allaire: That's got visibility and and and some change that were launched on it's one 20th of a cent to transact with it.

197
00:32:43.290 --> 00:32:51.960
chrisgiancarlo: So in history. We know that a technological advantage that one currency may have over another makes it more attractive in global trade.

198
00:32:52.320 --> 00:32:54.030
chrisgiancarlo: Well, let's think about the dollar.

199
00:32:54.510 --> 00:33:00.330
chrisgiancarlo: If it remains in an analog form as it currently is and other countries and other economies.

200
00:33:00.630 --> 00:33:11.430
chrisgiancarlo: Develop a digital fractionalized double currency. How is the dollar going to continue to compete, it will continue to compete, because it has other strengths, but are we going to, are we willing to forego

201
00:33:12.030 --> 00:33:14.700
chrisgiancarlo: A logical modernization, which goes back to my first point.

202
00:33:14.910 --> 00:33:26.970
chrisgiancarlo: We haven't modernized our rail systems. We haven't modernize our airports in a rose. 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.

203
00:33:27.630 --> 00:33:31.680
chrisgiancarlo: The gumption to say we need to modernize our currency with new technologies.

204
00:33:31.770 --> 00:33:45.900
Jeremy Allaire: It's a raises, it's a it's it raises some really big questions. And I think as I, you know, talk with not just regulators, but but leaders in the existing financial system on others, and

205
00:33:46.410 --> 00:33:53.220
Jeremy Allaire: So on like this, this notion of like a token based, you know, digital unit of account.

206
00:33:53.970 --> 00:34:05.970
Jeremy Allaire: You know, and in crypto currency and blockchains we're talking about digital bearer assets. So just like a physical note is a bear asset digital token is a bear asset.

207
00:34:06.450 --> 00:34:09.570
Jeremy Allaire: And we're talking about digital bear assets that effectively.

208
00:34:10.320 --> 00:34:25.200
Jeremy Allaire: Instantly automatically exist everywhere that the Internet exists at that at any moment in time. So if you've got an Internet connection at the at the space station you know it works there as I call it blockchains are intergalactic money.

209
00:34:26.250 --> 00:34:35.460
Jeremy Allaire: And but but the bottom line is, it exists everywhere. The internet exists, and it's a bear instrument and that's profoundly powerful and

210
00:34:36.090 --> 00:34:46.650
Jeremy Allaire: You know, in the history of money in the history of nation states that's never existed. And this is just like a fundamental breakthrough innovation and I think

211
00:34:47.670 --> 00:34:52.830
Jeremy Allaire: You know the lots of metaphors, the genies out of the bottle right and the genie is out of the bottom. This

212
00:34:53.580 --> 00:34:57.570
Jeremy Allaire: Non sovereign digital currencies like Bitcoin have taken that genie out of the bottle as well.

213
00:34:58.320 --> 00:35:04.890
Jeremy Allaire: But that genie is out of the bottle and I think it raises really profound questions for governments around the world.

214
00:35:05.850 --> 00:35:18.540
Jeremy Allaire: And it raises, on the one hand, these very profound questions about national security about how how law enforcement fights crime, on the one hand,

215
00:35:19.140 --> 00:35:26.730
Jeremy Allaire: And on the other hand around, you know, human freedom, human rights, financial privacy and then somewhere in the middle.

216
00:35:27.120 --> 00:35:39.060
Jeremy Allaire: Breakthrough innovation which is if you've got a bear digital bear asset and you can write code and it can be programmable on any device anywhere in the world, like, wow, what can you do with that. What could society.

217
00:35:39.240 --> 00:35:49.080
Jeremy Allaire: Coming back to your societies ideas of money content what God says I do with that. And so these are like really, I think, very, very profound questions and

218
00:35:50.310 --> 00:35:54.030
Jeremy Allaire: I'm curious to hear your thoughts on on some of those those dimensions.

219
00:35:54.420 --> 00:35:55.080
Jeremy Allaire: And how

220
00:35:55.350 --> 00:35:57.990
Jeremy Allaire: You know, government should be thinking about this.

221
00:35:58.050 --> 00:36:00.720
chrisgiancarlo: So, so, you know, you talked about

222
00:36:01.980 --> 00:36:13.740
chrisgiancarlo: In a digital format money becomes intergalactic so in in space, it becomes ubiquitous. You can use it. Where's where's the money is basically a local utilization

223
00:36:14.430 --> 00:36:26.400
chrisgiancarlo: You can't use fee out on an island context. Well, but let's really expand our mind, let's not just think about space. But let's think about time.

224
00:36:26.850 --> 00:36:27.270
Jeremy Allaire: Sure.

225
00:36:27.330 --> 00:36:35.910
chrisgiancarlo: We go to a digital format that's ultimately programmable, we could actually program money to be used not just in our current time

226
00:36:35.970 --> 00:36:36.300
Jeremy Allaire: Yeah.

227
00:36:36.360 --> 00:36:37.650
chrisgiancarlo: But across time.

228
00:36:37.710 --> 00:36:38.910
chrisgiancarlo: To think about a

229
00:36:39.960 --> 00:36:52.710
chrisgiancarlo: I could today if programmable money we're available, whether that be stable coin or a central bank digital currency, it can be programmed to benefit my children, my grandchildren. My great

230
00:36:52.710 --> 00:36:55.230
chrisgiancarlo: Grandfather, I could program money today.

231
00:36:55.710 --> 00:37:11.070
chrisgiancarlo: For you said other place in time so that that's the big break 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.

232
00:37:11.340 --> 00:37:15.510
chrisgiancarlo: Now big ideas too big for us to sit on the sidelines and let the

233
00:37:15.510 --> 00:37:17.730
chrisgiancarlo: Development of this be done elsewhere.

234
00:37:18.210 --> 00:37:25.110
Jeremy Allaire: So that that ties into I think a, I think a key question. I think a lot of times the discussions on this.

235
00:37:25.560 --> 00:37:34.470
Jeremy Allaire: They get, they get kind of reduced down to, is this a payment system innovation issue or we just are we really just talking about a you know, a new federal payment system.

236
00:37:34.860 --> 00:37:43.440
Jeremy Allaire: And I, my view is, that's an extremely narrow view of this and and and you know, in some ways, like the ability to settle payments.

237
00:37:43.800 --> 00:37:52.860
Jeremy Allaire: Digitally over the internet. That's just going to be as ubiquitous as email and it's just, that's just going to be the air we breathe it will be everywhere. And then, and that's almost like a tiny, tiny issue here.

238
00:37:53.640 --> 00:37:56.790
Jeremy Allaire: That compose ability and program ability and

239
00:37:57.450 --> 00:37:58.710
Jeremy Allaire: And I guess ultimately


Christopher Giancarlo
Former CFTC Chairman, "Cryptodad"