The Money Movement / Episode 22

Episode 22

The Digital Dollar Opportunity

Summary & Key Takeaways

Full Transcript

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

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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.

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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.

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Jeremy Allaire: To launch some form of central bank digital currency initiative. Now, most of these efforts have focused on research planning proposals.

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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.

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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.

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Jeremy Allaire: USD see itself has rocketed to nearly 3 billion in circulation and is growing at a astounding rate.

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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.

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Jeremy Allaire: To help unpack these topics and examine this intersection between central bank efforts and private sector digital dollar efforts.

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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

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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.

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chrisgiancarlo: To be with you today, Jeremy. It's great to have you be with you. Thank you for the opportunity.

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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

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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

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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

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chrisgiancarlo: People active in the space, including Cameron, a title, a week of August, and others.

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chrisgiancarlo: That were advocating for, you know, a good relationship with regulators and we're getting to see us early

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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

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chrisgiancarlo: And at the same time, we were approached by two of our leading exchanges the Chicago Mercantile Exchange in Chicago Board Options Exchange.

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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,

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chrisgiancarlo: One entrepreneur took out a full page ad in the Wall Street Journal

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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

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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

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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.

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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

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Jeremy Allaire: Yeah.

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chrisgiancarlo: You should not to block it and to move forward and

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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

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Jeremy Allaire: I think that the transformation and your involvement there is is obviously really noteworthy.

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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.

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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

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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.

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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.

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Jeremy Allaire: And about digital currency.

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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.

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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

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chrisgiancarlo: You know, Jeremy in the United States and in the West, you look around us. And you see our obsolete.

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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.

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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.

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chrisgiancarlo: Systems for payment and settlement for next year.

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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.

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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.

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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.

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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

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chrisgiancarlo: That is free and not subject to government oversight. But when it comes to things of value governments have long presumed

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chrisgiancarlo: To have authority and jurisdiction, you know, we have not just one, but two market regulators, we

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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

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chrisgiancarlo: In matters of things of value. So the lessons that we learned in the first wave of the internet about about

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chrisgiancarlo: Don't ask permission is forgiveness or, you know, you're not trying hard enough breaking things

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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

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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.

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Jeremy Allaire: Is right now.

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chrisgiancarlo: It is right now.

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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

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chrisgiancarlo: In the states.

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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

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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

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chrisgiancarlo: Once again, our core principles.

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chrisgiancarlo: Yeah, freedom of speech, free enterprise degrees of privacy can be integrated into this new technology.

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chrisgiancarlo: Right for the betterment of ourselves. And I think for the rest of the world.

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chrisgiancarlo: And that's a choice. I think we fundamentally have to make now.

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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

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Jeremy Allaire: You know, I was very involved in the first way to the internet. And, you know, there's that period of time.

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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

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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,

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Jeremy Allaire: And you had, you know, monopolies state controlled monopolies, you had private sector, you know, kind of controlled infrastructure and

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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

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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

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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

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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.

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Jeremy Allaire: So. So you started the digital dollar project. It sounds like a lot of inspiration around this and this desire to

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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

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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

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chrisgiancarlo: A renowned Silicon Valley entrepreneur and Daniel gore find who's the former Chief Innovation Officer to see FTC

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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

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chrisgiancarlo: It's a nonprofit think tank and its, its purpose is to both stimulate the conversation.

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chrisgiancarlo: Bring a broad body of perspectives to bear and then ultimately drive toward real exploration through a series of public sector, private sector.

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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

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chrisgiancarlo: Firms they belong to. But speaking on their own behalf across the political spectrum across the technological spectrum and and we really believe

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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.

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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

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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.

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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.

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Jeremy Allaire: Yeah, so we have, it's, it's a, you know, critical timing for these for for this work obviously and

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Jeremy Allaire: I've been a huge advocate, as you know, have

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Jeremy Allaire: Kind of over the mid to long term this concept of

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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.

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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.

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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,

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Jeremy Allaire: We sort of have this this debate, right, which is, you know, public, private, you know, different models in between.

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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.

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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.

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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.

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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

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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,

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chrisgiancarlo: I feel the core decision should be the United States should experiment and be prepared to adopt a

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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.

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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.

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chrisgiancarlo: And that doesn't mean it's necessarily the full pathway to get there, but it's a way for

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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.

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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

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chrisgiancarlo: Central US Central Bank digital currency that would first be token based as opposed to account space. Now that's

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chrisgiancarlo: A fundamental choice and we can talk about that, but we put a stake in the ground and we said token base. Secondly,

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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.

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chrisgiancarlo: Which may represent that. But because dollars I held in an account. This would tell

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Jeremy Allaire: If you're a stable coins. Today I don't meet that criteria but

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Jeremy Allaire: Theoretically, in the future, they could

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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

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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.

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chrisgiancarlo: Right, we propose maintaining the two tiered banking system in terms of how digital dollars are made available to the public.

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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

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chrisgiancarlo: The Federal Reserve Bank system and then distribute on to commercial banks, which then make them available for ATM machines and

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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.

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chrisgiancarlo: We also propose a US Central Bank digital currency that is monetary policy neutral.

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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

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chrisgiancarlo: A policy choice not we're not proposing this as a policy solution. And finally for the major technological components of this

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chrisgiancarlo: We believe that form should follow function or technology should follow design choices and which is why

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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

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chrisgiancarlo: The administration, the central bank deem important and then the technology designed should follow that. So those are just some of our

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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.

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Jeremy Allaire: So I think as we've talked about before in conversations

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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.

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Jeremy Allaire: There's a lot of great Chinese companies as well. But a lot of great American companies and

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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.

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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

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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

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Jeremy Allaire: electronic money system today, the numbers in the crypto space are quite small. But obviously, we got a lot of vectors.

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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.

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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

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Jeremy Allaire: You know, many of the things that you outline as as potential principles.

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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

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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

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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.

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Jeremy Allaire: On the internet using software before anything even emerges from the Fed. Yeah.

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chrisgiancarlo: Well, you know, it's interesting when

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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

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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

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chrisgiancarlo: And thought that they would have predicted it, it would have never happened. It was a big messy glorious explosion.

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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.

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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

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chrisgiancarlo: The Fed has got a role here, Congress has a role in this, but so does circle. So, so does

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chrisgiancarlo: Ripple so does so many of the companies that are exploring this right now, and I'm not

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Jeremy Allaire: Sure.

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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

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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.

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chrisgiancarlo: I ran a government agency. It's really hard.

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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.

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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.

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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.

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Jeremy Allaire: That's it makes it makes a great deal sense

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Jeremy Allaire: Speaking of innovation.

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Jeremy Allaire: I had a great conversation on the show with Brian blogs, who's obviously

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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

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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

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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

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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

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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.

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chrisgiancarlo: Here's a really interesting observation Jeremy that the US dollar itself. It takes its name.

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chrisgiancarlo: From the Spanish dollar and the reason why they use that name is because the Spanish dollar was considered the most technologically advanced

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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

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chrisgiancarlo: Eastern Coast of the New World. There were multiple currencies and use during their time.

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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.

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chrisgiancarlo: But the currency that was that had the training at a premium that was considered the most attractive.

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chrisgiancarlo: Was the Spanish dollar and the reason is it had technological superior already over the other currencies one

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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.

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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

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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

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Jeremy Allaire: He when

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Jeremy Allaire: He goes to a decimal places.

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Jeremy Allaire: So that

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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.

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chrisgiancarlo: So in history. We know that a technological advantage that one currency may have over another makes it more attractive in global trade.

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chrisgiancarlo: Well, let's think about the dollar.

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chrisgiancarlo: If it remains in an analog form as it currently is and other countries and other economies.

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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

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chrisgiancarlo: A logical modernization, which goes back to my first point.

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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.

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chrisgiancarlo: The gumption to say we need to modernize our currency with new technologies.

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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

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Jeremy Allaire: So on like this, this notion of like a token based, you know, digital unit of account.

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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.

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Jeremy Allaire: And we're talking about digital bear assets that effectively.

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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.

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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

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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

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Jeremy Allaire: You know the lots of metaphors, the genies out of the bottle right and the genie is out of the bottom. This

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Jeremy Allaire: Non sovereign digital currencies like Bitcoin have taken that genie out of the bottle as well.

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Jeremy Allaire: But that genie is out of the bottle and I think it raises really profound questions for governments around the world.

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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,

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Jeremy Allaire: And on the other hand around, you know, human freedom, human rights, financial privacy and then somewhere in the middle.

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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.

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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

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Jeremy Allaire: I'm curious to hear your thoughts on on some of those those dimensions.

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Jeremy Allaire: And how

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Jeremy Allaire: You know, government should be thinking about this.

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chrisgiancarlo: So, so, you know, you talked about

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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

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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.

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Jeremy Allaire: Sure.

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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

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Jeremy Allaire: Yeah.

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chrisgiancarlo: But across time.

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chrisgiancarlo: To think about a

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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

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chrisgiancarlo: Grandfather, I could program money today.

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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.

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chrisgiancarlo: Now big ideas too big for us to sit on the sidelines and let the

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chrisgiancarlo: Development of this be done elsewhere.

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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.

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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.

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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.

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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.

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Jeremy Allaire: That compose ability and program ability and

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Jeremy Allaire: And I guess ultimately


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Jeremy Allaire: You know, we have these we have these blockchain networks and there's a diverse number of these these public networks, just like the public Internet, which is, you know, the World Wide Web. Is this public network. The internet email systems this public network.

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Jeremy Allaire: No government controls those no corporation controls those. They're just standards that are out there, people can build on and I think part of the attractiveness of

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Jeremy Allaire: Of, you know, fee on digital currencies and what's contributing certainly just some of the growth and stable points today as well is

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Jeremy Allaire: That innovation that can happen there. The idea you had that there's actually a protocol called the lock protocol. It's in a theorem smart contract.

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Jeremy Allaire: Anyone can can put their stamp of crunch through it and they can configure all kinds of locking rules on on money. And that's just out there and you can put these Lego bricks together and you know

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Jeremy Allaire: The openness of the creativity that developers can bring. I think that's also a place where again.

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Jeremy Allaire: The, the traditional financial system or traditional regulars. It's very uncomfortable to think about here. There's developers hacking together protocols that can do stuff with our with our money, but it's also a big part of the promise here.

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chrisgiancarlo: Absolutely. It is the future. I mean, you know, when the again the internet exploded when the internet first became reaching a common public

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chrisgiancarlo: No one could have been anticipated. Some of the developments that have come about. I remember in the 1980s when someone who was developing was one of the core technologies for the internet called Asynchronous Transfer Mode.

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chrisgiancarlo: Told me that its application and explain it will allow computers to talk to computers. My attitude. What good is that, well, what good is that is the ability

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chrisgiancarlo: 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.

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chrisgiancarlo: But that can't that shouldn't be the reason to stop us. That's got to be the reason to get us started.

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Jeremy Allaire: I completely agree and I

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Jeremy Allaire: Lots of good historical metaphors on that that should that should inform this and

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chrisgiancarlo: The other reason. The other real big reason is money is a carrier of values.

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chrisgiancarlo: Money convey. That's why we started by talking about money, money being a social construct societies in print their values on money.

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chrisgiancarlo: You know the dollar is attractive on to a global audience because there's a presumption that unless you're, you know, engaged in drug running or or other illicit conduct your activities with your dollar is your private activity.

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chrisgiancarlo: It also carries the notion of Free Enterprise and ability to to assemble capital in a way that is most beneficial and so so free market economics.

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chrisgiancarlo: There's, there's, there's values built into a currency and and as China makes progress tremendous progress and

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chrisgiancarlo: Build 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 r&b would be free from government surveillance.

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Jeremy Allaire: Right, the

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chrisgiancarlo: 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.

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chrisgiancarlo: 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.

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chrisgiancarlo: How do we write them into the future of money in a way that is both useful for our society but societies who aspire.

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chrisgiancarlo: To some of the values of our society can then utilize that as well as opposed to the alternative which may not be an ass may not be aspirational values built into the digital digital form of modern

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Jeremy Allaire: This. It's a great concept of imprinting values, you know, each of these tokens, so to speak, carrying a value and speaks to I think the very profound ways in which digital currency.

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Jeremy Allaire: are increasingly going to be viewed as, you know, having, having geopolitical dimensions to them.

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Jeremy Allaire: I like to also say, you know, as, as things like digital currencies take off on whether whether you know the private sector stuff that's today or future future collaboration to central banks.

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Jeremy Allaire: You know, people around the world will be able to effectively vote for what

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Jeremy Allaire: Economic system that they participate in with their smartphone, they can decide the download a piece of software and decide what economic system. Am I going to participate and

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Jeremy Allaire: And that has very profound to political consequences. You know, it means that you know really

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Jeremy Allaire: The projection of the dollar obviously everywhere is one thing, but also the projection of other major currencies and I'm curious to get your thoughts on that.

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Jeremy Allaire: I mean the geopolitical dimensions are very, very real here. I think as I've noted, you know with with the digital RnB

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Jeremy Allaire: I mean, technically, just as a crypto based asset, you know, really, and anyone with a smartphone theoretically would be able to have a wallet and directly transact in RMB with

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Jeremy Allaire: The People's Bank of China, whether you're a business or an individual

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Jeremy Allaire: In any part of the world where you're connected to the Internet and so

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Jeremy Allaire: That's what I call over the, over the top financial system just like we've over the top TV delivery and over the top communications now on the internet. This is over the top monetary systems and it's sort of happening. And, you know, very significant geopolitical kind of connotations here.

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chrisgiancarlo: And you're absolutely right. It is happening. I just saw some information last 24 hours that China says that they've now done over 1.3 million transactions.

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chrisgiancarlo: Separate transactions aggregating over a billion RMB in value just through August of 2020 alone. Meanwhile, you know, you know, the Federal Reserve has got a dozen or more people working on this.

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chrisgiancarlo: China's got you know 10s of thousands

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chrisgiancarlo: Of companies working on this with all their employee power and is already doing transactions. This is

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Jeremy Allaire: Yeah, and they're

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Jeremy Allaire: Very comes back to you know what's happening in the private sector as well where we've seen

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chrisgiancarlo: Oh, you're right. And I don't want to decide I'm only referring to the fence.

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chrisgiancarlo: Absolutely, we should spend a minute talking about really I don't want any of us to come away thinking there's not a lot of exciting innovation going on.

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chrisgiancarlo: It's just that, you know, the innovation is going on the private sector, there's some things going on in the public sector and then there's not this

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chrisgiancarlo: Right coming together. And that's really where

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chrisgiancarlo: We're done. But

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chrisgiancarlo: You got to work and a lot of firms are doing some great work. The folks at Paxos I've met with them recently they've got some, you know, there's a lot going on.

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Jeremy Allaire: Yeah, there is certainly, certainly a lot going on. It's been we've been seeing, you know, these dollarisation themes. The demand for digital dollars very growing significantly. We're seeing the birth of

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Jeremy Allaire: Internet based interest rate markets credit market. Other things that are that are usually utilizing digital dollar, you know, digital currencies, it's been it's been it's been fascinating and the growth rates are really, really tremendous

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chrisgiancarlo: Well, it's already stable coin industry is already solving for problems. So in the foreign exchange industry, you know that the latency of settlements and the friction involved in that is been a long term problem and and and

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chrisgiancarlo: A number of stable coins are really providing an important utility role in both lowering costs and shortening time spans.

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chrisgiancarlo: And and that's a value proposition that it's long been needed to be addressed and here's this new technology addressing it. So, you know, we're beyond the nascent stage.

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Jeremy Allaire: Yeah, no, it's

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chrisgiancarlo: really happening.

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Jeremy Allaire: They most certainly are, I guess we're kind of running up against time I want to maybe end with just a

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Jeremy Allaire: Few brief thoughts on kind of where this all goes and you know when I got started in in building circle, you know, one of the things that occurred to me was, you know, over time, maybe over 10 years

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Jeremy Allaire: And that was seven years ago you know that there would emerge, you know, real standards.

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Jeremy Allaire: In the same way, we have standards on the internet for for content and data and communications that there would emerge standards.

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Jeremy Allaire: And and there'll be standards for Fiat digital currency and that those standards could be adopted by many, many sovereigns that could be adopted in the private sector.

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Jeremy Allaire: And that you'd have these standards and you sort of get to this place where you'd have, you know, a effectively instant value exchange from any reasonable, you know,

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Jeremy Allaire: Digital fiat currency but represented as a digital currency instantly swappable effectively at no cost instantly settle globally at no cost.

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Jeremy Allaire: And I actually think we're not too far off from from things like that happening.

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Jeremy Allaire: And, you know, so one is that development of those standards. And 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.

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Jeremy Allaire: But where does that, you know, where does that lead us does that lead us to a place in five years or 10 years where kind of where all all the economic actors in the world are saying

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Jeremy Allaire: Why don't we just build a synthetic global digital currency. Why, why, why are we doing, why, why are we having all these different you know

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Jeremy Allaire: digital currency flying around, and even beyond that, what role could, you know, a non sovereign digital currency play in in a in a basket that forms a synthetic global digital currency, I'd be interested in your thoughts on

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chrisgiancarlo: Fascinating, once again, if you look at history. There are been times when certain currencies.

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chrisgiancarlo: Reach a large portion, but not an exclusive portion of commerce, you know, before the euro back in the 15th century, there was the

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chrisgiancarlo: Floor the floor in a flood of the city state of Florence, which was in the sense that first European wide.

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chrisgiancarlo: Currency, but that lasted, you know, maybe 80 years 200 years before you went back to more of a diverse array. And I think the last several generations have seen the dollar reached probably a historical peak as a

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chrisgiancarlo: World Currency.

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chrisgiancarlo: And yet we may be actually seeing some of the receiving of that as the your US economies, you know, very

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chrisgiancarlo: Dominant global role starts to recede, and we see the rise of China and others. Right. So I think currencies ultimately if their sovereign currencies are tied to

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chrisgiancarlo: The economic straight 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 Wayne and wax, you know, throughout human history.

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chrisgiancarlo: Look at just look at the fortunes of the euro, it's fortunes have risen and fallen with European economy.

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chrisgiancarlo: And I think that that's probably more historical time but but look, I'm also an advocate for strengthening the US economy in every way we can and strengthening our currency.

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chrisgiancarlo: I think that the world has been made better during the last eight years or seven years of the dollars dominance

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chrisgiancarlo: Then, then the alternative, if you take the last three generations, more people have risen out of poverty worldwide than ever before in human history.

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chrisgiancarlo: And I think that's not just a coincidence. I think that's been something of a consequence of the dollars role in global commerce, the fact that there's been a stable.

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chrisgiancarlo: unit of account to price goods and services that it is it's it's it's you're marked with those policy.

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chrisgiancarlo: And principles that I mentioned of free enterprise of privacy but properly balanced against law enforcement interests.

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chrisgiancarlo: And other values that are grafted instance all i think that's been a net good and so therefore I believe that it's a net good for the world if we can empower the dollar for more generations to

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chrisgiancarlo: Come and not simply let it decay and deteriorate like so much of our financial market infrastructure. Let's modernize it let's let's harness this new technology. Let's harness all the good work that's already been done in the private sector, and I think the dollar could exist alongside

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Jeremy Allaire: Yeah.

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chrisgiancarlo: No, but the payment functions that are being explored in stable coin. Some of the the the convertibility functions in so many markets. I think that

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chrisgiancarlo: A healthy ecosystem would have given take between us a sovereign central bank digital currency and good strong, stable coins in a global economy. So I think we can get this right. But we've got it. We've got to develop a national coming together a consensus that the time to act is now.

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

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chrisgiancarlo: Great game with you, Jeremy. Let's do it again.

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Jeremy Allaire: Alright, sounds good. Chris

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Jeremy Allaire: So fascinating, of course, really grateful to have Chris on the on the show today, you know, the these issues. As you can see, are very profound they impact.

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Jeremy Allaire: 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 so

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Jeremy Allaire: really a great pleasure and we're going to continue on this theme next week.

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Jeremy Allaire: We're going to continue on this theme with the two co founding partners of Castle island ventures Nick Carter and Matthew Walsh.

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Jeremy Allaire: They've been exploring the very profound implications of what they're describing as crypto dollars.

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Jeremy Allaire: And 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. So it should be.

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Jeremy Allaire: A really really enjoyable conversation with two very, very bright minds in the space so until next week. Stay well, stay safe and stay informed. Thank you.

Episode Highlights

Watch as Christopher Giancarlo talks about how he got in to blockchain and digital dollars on #themm

When did cryptodad have his "ah-ha!" moment when it came to realizing the impact on digital dollars? If you're a blockchain enthusiast you won't want to miss this answer #themm

How did the Digital Dollar project get started and why stablecoins need to be a joint effort #themm

How do the public & private sector come together to build out the future of payments? #themm

What are the breakthrough features that a standardized digital dollar needs?Find out on #themm

Space dollars that exist outside of time? We talk about space dollars that exist outside of time!

Guests in this episode

Christopher Giancarlo

Former CFTC Chairman, of "Cryptodad"