A Macro Conversation with Michael Casey

This week we are joined by one of the strongest big picture thinkers on crypto, Michael Casey, currently Chief Content Officer at Coindesk, and previously a special advisor to the MIT Media Labs Digital Currency Initiative, and also author of The Age of Cryptocurrency while being a veteran reporter on financial markets for the Wall Street Journal.

Jeremy and Michael will take a wide lens on what’s happening with crypto in the world, the sweeping impact it is likely to have on social, political and economic systems, the role of Bitcoin vs. likely new synthetic global fiat stablecoins, and how we can preserve the core economic freedoms that inspire and underlie crypto today.

Join us as we discuss the industry with Michael Casey today!

Jeremy Allaire: Hello, I'm Jeremy Allaire and welcome to The Money Movement, a show where we explore the issues and ideas in this brave new world of digital currency and blockchains. What a week for crypto. I don't think we need to say too much about the astounding growth and momentum in cryptocurrency globally this week. Obviously, a good timing for any conversation about crypto, but this week, I want to really try and take a wide lens on what's happening in the crypto world, what the impact of crypto is on the world, the sweeping impact, I think that it's likely and already having on social, political and economic systems.

I want to talk about the role of Bitcoin versus potential new forms of synthetic global Fiat stable coins and ultimately, how can we preserve the core economic freedoms that inspire and underlie crypto today, a lot of big themes. To join me this week in those conversations, we have a tremendous individual, Michael Casey, who is one of the, I think, strongest big picture thinkers in this space.

Michael's actually someone who I met quite some time ago when he was just starting to explore the crypto space. He is currently the Chief Content Officer at CoinDesk, previously a special adviser to the MIT Media Labs digital currency initiative, author of The Age of Cryptocurrency, and he's a veteran reporter on global, macro and financial markets from the Wall Street Journal. Very, very excited to have Michael with us today. Hello, Michael.

Michael Casey: Hey there, Jeremy. Happy seeing you.

Jeremy: Great to see you.

Michael Casey: Yes, me too.

Jeremy: It's always fun, having a conversation together. I think our history of conversations goes back seven years, to December of 2013. I like to start these conversations just usually on a slightly personal or individual note and I know a little of this, but I think the audience would be interested to hear about your journey into crypto. I've always thought of you as one of the very biggest big picture thinkers about the impact of all this on the world and you continue to do that so so effectively in what you're doing today, but we'd love for you to just share a little bit about your journey.

Michael: Yes, and maybe you do know a little bit of this story because it impacted-- you played a bit of a role in it, so happy to talk about it. I was a journalist at the Wall Street Journal. I was running a group called the DJ FX Trader. It was a foreign exchange trading news service. There was The Journal and Dow Jones had set it up. I was the currency guy, and I'd spent a lot of my time writing about macro themes. I'd lived in Argentina for six years.

I wrote about bonds, debt and currencies. That was my big thing. I just remember, it was the Cyprus crisis in mid-2013 and suddenly, this thing Bitcoin emerged on my radar and I really, I think I'd read about it in different places and thought, "That's just too weird, I don't know what that is." Then it popped up and I was just, "What is this?" Immediately the ill-informed minds like Tulip Bubbles conversation, there's nothing valuable there. What is this thing?

I wrote a column that I think was pretty ordinary. Looking back, I cringe looking at it, "Oh my God, how out of touch is this thing going to be?" In retrospect, it isn't quite as bad as I imagined it, but it was certainly really, really rudimentary and I just, I think I'd say this thing is probably a flash in the pan and you'd be advised to ignore it or something like that. Then you and a few others, I think maybe you guys reached out to me, and you basically had seen that I'd written it and then set up a meeting.

It was a gathering of journalists, who I think were dabbling in this stuff and we had a dinner and you brought along a few folks there, yourself, Barry Silbert was there who now owns the company that owns CoinDesk, so I worked with Barry now, which is interesting. Although very, very important to stress, as we always do about the church and state [inaudible 00:05:15] of CoinDesk [crosstalk].

Jeremy: He's also a significant investor in Circa, so we both have that in common.

Michael: [crosstalk] here these disclosures have to come, but Barry was there, Raj Date was there which was really interesting to me. He'd just, I think, ended his role as the interim head of the CFPB that Elizabeth Warren had created and I was like, "What? I thought this was a crazy libertarian thing. Why would a guy who's working with Elizabeth Warren involved in this?" I can't think if it was Micky Malka there, or was it Jim Breyer, there was some other--

Jeremy: Jim Breyer, yes.

Michael: Jim Breyer, right and then. There was a number of players, and they were legit, you had this, rich history of entrepreneurship itself. I was like, "Wow, these guys are serious. What are they putting-- Why are they dabbling in this strange technology for?" Anyway, that was the first part of it. Then as the conversation progressed, one of you, and I think it might have been Barry just started to talk about the relevance to the developing world.

Because I'd spent six years in Argentina, and I'd spent so much time trying to get my head around why Argentina fails? Why does it have a crisis every 10 years? Why does it have debt blow ups. I'd spent ages writing about the debt restructuring at a time. I realized that it was an institutional problem, that they had this core breakdown between the society and its institutions.

I'd written quite a bit about it and I thought I had a pretty sophisticated take on it. It never occurred to me that you could think about money outside of a structure in which government would run it. My analysis was always, "Well, they've got to fix government, they have to get great institutions and they have to get rid of corruption and everything else." I realized that was almost impossible because there was this vicious cycle--

Jeremy: Essentially make the government debt healthier, in a sense, is what you're doing.

Michael: That's it. You'd need politicians. I recognized it was really hard because we had this vicious circle that were corruption in society and corruption in the government just read upon itself, nobody paid their taxes because they didn't want to pay a crook. The thing was in constant struggle. That meant that then they would always resort to these prices and bring in capital controls and everything else.

Then suddenly, it was just showing me that, "No, this is all about having a protocol that nobody could interfere with." That would then run their system underneath it and that this would grapple with this problem of trust. I was aware that there was this problem of lack of confidence, lack of trust in institutions and everything else, that now we can build something that would potentially live outside of that.

That is when as British and Australians say, the penny dropped. The light bulb went off. I was like, "Oh, I now have a context within which to understand this." That's why when I wrote The Age of Cryptocurrency with Paul Vigna, I had a whole chapter in there about my experiences in Argentina--

Jeremy: Yes, it's the lead-in, I think, right?

Michael: Yes. It began in the story about Afghanistan, but it was very early in the book. It was a way-- I use it as a framing to talk about trust and society and the core issue of money as being this social covenant between the issuer, in that case, the government and its people and that this is a different way to think about that. Yes, that was it. Once I saw it in that context, it's and spent much time.

I have to tell people that if you want to understand how our management system works, go to a place where it doesn't work, you get to expose all of the elements that need to be in place for something to fall apart. Then of course, we had the financial crisis in the US that I-- Everywhere in my career, I've been following crises everywhere. That then just to realize that, "This can happen anywhere." Then you start to put this into a much bigger context than just Argentina or Venezuela, but literally, the structure of money [crosstalk].

Jeremy: That's powerful. I want to come back to a few dimensions of that, actually. I think as you may remember too, in those early days, one of the things that really animated us was this idea that there'd be a synthesis or a hybrid of what we saw as digital currency and all the attributes that it presented technologically, in terms of running as a decentralized infrastructure and how could at least reserve currencies live in that world, intermix with that world.

As you know, our first attempt was like, "How do you basically tunnel Dollars and Euros and Pounds over the Bitcoin network" Like saying, "Hey, we've got this global network." We're going to come back to, I think, this interplay between Fiat, and crypto and this now much bigger world of digital currencies that is always in relation to and in contrast to Bitcoin, but also has its own narratives as well around it.

I loved the book and I've loved your writing over the years and I think you're a great storyteller, as well as a great journalist and very thoughtful. I always think looking at the impact of this through real world stories, as you were describing just a moment ago, the real-world scenarios that would drive a need for digital currency, like Bitcoin and others that have emerged, but now as you're, however many years through your journey, having covered this, what are a couple of really notable, impactful stories that you can think of where Bitcoin specifically, crypto more generally, has been transformative to a person, a society. There are so many incredible stories out there, but maybe you could just share--

Michael: Yes. The easiest ones to call on are ones that we deliberately sought out for the two books that we wrote. One of which was-- They Age of Cryptocurrency, which was really more specifically about Bitcoin and some of the spin offs from that. Then The Truth Machine, which looked more deeply at blockchain technology and various other non-monetary application.

I'll start with the opener to The Age of Cryptocurrency. We deliberately chose a story about these girls who were working out of an Afghan school. They were working for a project called the Film Annex, which had videos and blogs, and it was this network of independent bloggers and they were actually getting paid. There was a certain amount of small amount of income that was generated in this system was a bunch of freelance people.

They brought in these students in Afghanistan to contribute blogs about their life. Some of it was video, some was blogs, I think. Francesco Rulli, who was the CEO and founder of that, he had to figure, "How am I going to get money to them, because if I'm going to pay them, you've got this patriarchal system, where you wire the money or send as a check or whatever." We can't get a bank account. They have to go to the bank with their dad or with their brother.

There has to be a man involved in that system. This was a mechanism to empower them by sending money directly to them. I thought that was really, really powerful, because you recognized the intermediary there, the bank and then the opportunity that an intermediary brings, but other power structures to come in and take charge of that. You substitute the dad or the brother for the government, or for some sort of KYC regime. Whatever it is. The Chinese government or the Venezuelan government, whatever it is, there's an opportunity for that power structure to intervene when there is an identifiable and controllable intermediary, such as a bank.

That to me was a really powerful when I talk about the power of peer to peer exchange, because you just remove that capacity. I think that was really important. A lot of people who've read the book felt that that was a great way to start it. Then the other example I want to use is the story that we told at the end of The Truth Machine. This was the play on this concept that I think is really powerful as well about the blockchain as an immutable record of history.

If you take the word history, and you start to build that into it as something about, "Hey, throughout history, the stories that get told about ourselves are things that have always been manipulated by the usurpers. The next regime comes in, and the first thing they do is they burn all the books or they shut down the library or whatever. Throughout history, that's just been an element of control. Pot goes back and sets the year back to the [unintelligible 00:15:06].

Jeremy: The internet started to change that obviously, and then blockchain is the next level.

Michael: Yes, the internet did try to change it, but we have still have these vulnerabilities. We know that there isn't the feminists to it. There are these servers that shut down. I used to have a blog when I wrote my first book back in 2009 which was called Che's afterlife. It's got the image of Che Guevara completely different [unintelligible 00:15:31] I just forgot to maintain it, the host went down.

There's a Wayback Machine I have to get. It's really, really frustrating. The thing that's really interesting about this idea that now there is this permanent record of history. Yes, it's all in past form and so forth, but you have this mechanism. It actually just explored that in concept and looked at the, there's this Bitcoin could feed as a service. These days, I don't think you can actually write very much into a block itself, it becomes a rather expensive thing.

You nonetheless had these mechanisms to record information in there. Then we just got searching through the kinds of messages that people throughout the years had left in this blockchain graffiti service and you start to see some really powerful things. There's people leaving dedications to lost loved ones, said some really mundane stuff as well, but the one that really struck me was a couple of messages from a 14-year-old in Syria at the time that Aleppo was under siege. This plea for help and they were just recording this plea for help in the blockchain, and it was like, "What's going on there?"

It's this statement of my humanity. This is the way I interpreted this. I need to record this for posterity, because I need the world to know that I was here. The idea that you have this record that can be considered in some way, be that. It's a very abstract concept, of course. We tend to think, "What is the practical use of these things?" I like to go to that place sometimes and just think about it as something that does that.

There's a project I heard about the other day, that's about reporting in IPFS. I think it's called the Starling Project, the stories of Holocaust survivors. You can see why it starts to get really important that you'd actually capture this stuff [unintelligible 00:17:42].

Jeremy: This is one of the great, great promises, is immutable records. Obviously, there's a lot of innovation in blockchain protocols that can do that more scalably, and so there are profound implications from that. There's some negative ones as well, one could think of as well. These are great stories, and I guess they touch on this theme that these open networks with, whether it's information artifacts or digital money or non- sovereign digital money, have very profound social and political implications.

That was, I think, very, very apparent to a lot of people very early on. I remember many years ago talking about, there will be bloodshed in countries because people are going to be voting with their smartphones what economic system they want to participate in, and it's going to be going against the wishes of an unsuccessful regime, whether authoritarian or otherwise.

Just like the Arab Spring was this new freedom of communications that had emerged with social media and messaging unlocked these incredible aspirations for people who were seeing freedom in a very different way. I think participating in economic freedom is very profound. I think we're beginning to see some of that emerge and you have to wonder as non-sovereign digital currencies like Bitcoin grow into the trillions in value as a wide sector of society around the world starts to store value there, that undermines political power, and then the economic freedoms of people being able to transact peer to peer on the internet also threatens political power and we're starting to see some responses to that.

You're seeing these very strong words out of say the German finance minister, out of the G-7 meeting last week that we must maintain absolute control of the state over the monetary system. Very emphatic, impassioned and you're seeing the voices get louder. I think you're seeing the potential rules by fiat, not the fiat money, but the fiat as in like, do what I say emerging and this tension and you can see a world where political sovereigns do not want those young girls in Afghanistan to have the ability to transact directly.

They want everybody to be observed, and identified and authenticated by a financial institution. We're really starting to run up against that. I'd just love to hear your thoughts on is this movement and those that value these digital bear assets going to increasingly run up into conflict with governments and some of these established political institutions.

I'm not just talking about the United States, I'm obviously talking about everywhere in the world, and a lot of places where potentially sovereigns are failing financially. One could argue that almost every sovereign is failing financially by some measure these days, what do you see happening?

Michael: Well, it's such a huge, huge, huge question because I think that this is the biggest of big picture stories. You're absolutely right. Money is about power, always has been. The sovereign and money have been intrinsically linked for millennia and therefore, we've got this modern monetary theorist out there that tell us that there's only way that money itself is defined by a sovereign.

I don't think that's the case. I think money is a tool. It is a system of exchange that society generates and inevitably therefore, it intertwines with the sovereign, but the big question then is what are we talking about then? Is there a new concept of what the sovereign is in a decentralized, open internet-based digital world. We can't really separate--

Jeremy: This isn't just about money, right?

Michael: It's about the challenge to the nation state. This is where-- No one wants to go there because like, "Oh, that's just ridiculous." And it is. These are the most powerful institutions in the world, but look, it's an imagined concept. I studied at Cornell under, under Benedict Anderson who was this brilliant political scientist and anthropologist who wrote a book called Imagined Communities. When you realize that we've embedded these ideas into our heads, but they're just imagined.

There's nothing that makes me anymore-- There are plenty more people in other parts of the world, I have so much more in common with than some guy in Indiana [unintelligible 00:23:29]. The nation states are constructs and therefore the stories and the narratives that go with them have to be really, really powerful when we build systems that allow us to connect outside of that, they fall under this risk. That's the framing for this.

Jeremy: That's been the arc of the internet in many ways has been, nation states are as powerful as ever in some respects, but the internet is this overlay on the globe that has created new forms of institutions that entirely exist in software and blockchains allow for the establishment of new microeconomic units of organization that have many of the attributes of like a joint stock company or other things.

Adjudication moves on chain. Other things happen, you will see these overlay of social and political structures and economic structures that exist truly outside of the nation state. There does seem some inevitability to that.

Michael: Yes, and I don't think it does-- I'm not here predicting something as huge as that, but I do think that tensions that come along these lines will shape geopolitics in particular. My best case scenario for this, because let's be clear, I wrote this piece the other day, which I called, Bitcoin: the Biggest of Big Shorts. That you're basically shorting the global financial system in the same way that the Big Short against housing market that happened in 2008.

The point I was making was that you're not there for just hoping for dystopia, you treat the short as a signaling mechanism and hopefully what it does is, it doesn't-- we actually fix the system because the last thing we want is the whole thing to collapse. It would be [crosstalk], but you do want governments and others to recognize that there's this call for economic freedom, there's a call for change, there's a need for change that's being signaled by the prices that you're seeing and things like $23,000 overnight.

That's what you want. Now where I think the tensions are going to most emerge is in China versus the US. We do know that China has for some time wants to internationalize the Yuan. Now they have a technology that in many aspects could allow them to do so. I think one of the most misunderstood, or at least undercovered aspect of what programmable money could be and whether it's stable coins, like the ones you guys work on or Bitcoin itself, or essential bank, digital currency, a digital bearer asset, is the capacity for interoperability across currencies.

Therefore, the idea that China could say, set-up an arrangement with Russia, and you could have all sorts of powerful, smart contract structures that would lock in exchange rates.

Jeremy: Absolutely.

Michael: Then why do you need the dollar as the intermediate? The idea of the dollar as this central player in the global financial system is essentially being challenged and that is hugely challenging to the United States, but the thing is what I would love to see happen, I don't see it happening sadly, but the way that we could think about this is if you had a really forward-thinking US administration that went back to the mindset that it took in the '90s. Post-world war, the internet was coming on board, you were there at the beginnings of this.

There was the Telecom Act of 1996. I remember I was in Indonesia at the time, I was living in Jakarta covering Indonesia and we had a visit from Andrew Card, who was at that stage, I think, running the FCC. He came in and said, "Look, we're here to convince everybody to sign up to this the new open protocol--

Jeremy: Open Access.

Michael: Open access because this is in United States interest.

Jeremy: It's in everyone's interest.

Michael: It was. It was the free trade era we just come out of [crosstalk].

Jeremy: Absolutely. That was major drivers for globalization. There's a lot of obviously debate about that, but I'm with you on that. I think this idea of a very forward leaning administration that is thinking about like, what is this new global economic structure? How is it operating in this world of the internet? How is it operating in this world of digital currency embracing that?

My view is these digital currencies, by definition, they just exist everywhere the internet exists. That is just a fact. There are no borders. Once it's substantiated with a cryptographic primitive in a bearer asset that is connected to software on the internet, it is inherently global, it's inherently, as I like to say, intergalactic. Wherever the internet goes.

Michael: The effectiveness, I think we need to remember of course, so that network effects matter and anyone can spin up a currency anywhere, but will it have traction? This is where [crosstalk] really matter.

Jeremy: This ties into some of the other themes here that I want to talk with you about. Bitcoin is at-- We can always check in real time. It's at $23,000 today, which is obviously dramatic. This wall of institutional money, corporate treasuries, absolutely some of the largest players in global macro investing. This is a very different situation than we've seen in the past and per your column last week, is this purely a global macro hedge instrument?

You could argue it is, but obviously it is a transactable currency and it has some very, very powerful attributes that are very different than other historical purely financial assets or hedge assets. That makes it quite different. There's been a meme I've been seeing just in the past few days on crypto Twitter really saying, gold is not really the right market to think about what Bitcoin is disrupting.

It's actually the $100 trillion sovereign bond industry because effectively, the $100 trillion of value that are in sovereign bonds are basically this underlying fiat denominated debt collateral which are effect negative coupons.

That's considered a safe store of value, a $100 trillion of a safe store of value. That's the market that's going to be disrupted. When will central banks start to put digital currencies like Bitcoin on their balance sheet? Obviously, the corporate treasurers are, the financial institutions are, it’s only a matter of time and they are in fact because some of these nation states are mining for their own account right now.

Michael: Iran is doing it. Yes, absolutely.

Jeremy: Absolutely. I think the reserve currency question, I remember obviously that was a mantra in 2012, 2013 and for many years that Bitcoin could become a reserve currency.

Michael: It featured in the latter pages of the Age of Cryptocurrency [crosstalk].

Jeremy: It's certainly something that I believe. I think it seems a lot more credible right now. Are we in the space now? Are we in the space where that's a legitimate conversation and what are the implications of that for financial markets, for sovereign debt, for a number of other building blocks that sit on underlying reserve assets?

Michael: Yes. You have to remember, scalability challenges are still there, functionality, there is whether we like it or not a need where there are institutions participating in this world for an interface with the legal system. There has to be systems of custody and so forth now whether we change those laws or not, and so forth, but ultimately there's a lot that still has to happen to reach that big enough global scale where you could imagine it becoming this underlying core source of collateral.

We all wondered what Bitcoin was going to be. I remember when first writing in 2013, it would just become this thing. It would be used to buy cups of coffee and trade and it would become money, but ultimately all sorts of challenges to that, transaction fees, confirmation times, volatility, all those sorts of things. Now we're at this point all digital gold. That just seems rather boring. It's like, "Oh, it's just an alternative to digital gold."

But it is so much more interesting for the reasons you point out that it has all of these other qualities and features and the idea of the automated smart contract-based collateral is incredibly powerful, not only because it removes some of that counterparty risk and all the inefficiencies that come with the existing legal system for how you securitize debt, but also because once you remove all of that legal layer, you are once again, disintermediating powerful entities.

You get the idea that we could collectively perhaps, create these whole new frameworks for what is a reference rate, for example. Is there going to be a yield curve that is entirely constructed by a DeFi, that it's a fully decentralized liable or something.

Jeremy: Yes, these are happening organically, right?

Michael: Yes, they are. Now, will they be functional enough? Will bugs be taken out of the smart contracts? Will there be enough security and all of that? There's so many big questions, but it really becomes very interesting when you think about, where does this digital gold narrative go, because then it's-- Gold itself is the human reserve asset. You're right in the fact that the sovereign bond market is maybe the biggest disruptor here, but that the sovereign bonds are US dollar-based treasuries are a reserve asset for governments.

They're held by central banks and that's the whole point. That's the starting point for how the rest of the financial system is built. The rest of us, if you are a refugee from Syria and you desperately want to get out of the country before Bitcoin, you would get gold and gold is the thing, because that's your reserve asset. Now this idea that we could actually have this human based reserve asset Bitcoin, that doesn't have an intermediary in the middle of it, but it also has the functionality that you could apply by the existing financial systems rules on top of, then you start to say, "Wow, we could build a financial system that doesn't have these institutions in play."

It really is very, very big when you go there. I still think we have a long way to go--

Jeremy: Yes, absolutely. This is--

Michael: Let me say this. This pathway is still wrought with tensions. Who's going to win? Is the psycho punk economic freedom drivers of this, are we going to build systems that actually allow for a much fairer, more open economic system or are these huge Wall Street institutions going to get in and essentially dictate the development of this technology?

Albeit the protocol will stay, hopefully at least, independent because that's it’s pure design, but the on ramps and entry points, the idea that these powerful entities could start to have even more control over that may mean-- We're talking about a very different concept once they're in play.

Jeremy: Yes, there's a lot to unfold there. It leads to another theme here, which is what are the hybrid models that can exist here? We've made a big bet on crypto dollars and stable coins and acknowledging that certainly for the foreseeable future, people are going to take their salaries and pay for rent and buy cookies and milk in their domestic currencies.

Cross-border might become fewer currencies as are used today to settle transactions on an international basis. That could accelerate that, but as one of my friends out there in the industry Guy Sheffield from Visa likes to say, stable coins are a new form factor for a dollar. You get all these attributes of digital currency, bear assets, global, programmable, efficient, you have all these things, but it's still backed by CI, it's backed by that underlying monetary policy, the fundamentally-- the underlying debt worthiness credit worthiness of a sovereign.

You can look at them if you're a purist on something like Bitcoin and say, "Well, I would never want to hold my assets in that because all these reasons." But the transactability that's there and the reality of that-- do you see these growing in parallel for maybe the next decade or some period of time? How do you look at that?

Michael: Yes, definitely. Stable coins, central bank digital currencies, of course, the different structure. I think there will be a range of them. I think we'll be moving into a multicurrency world. It is the end of the Bretton Woods system, the end of dollar hegemony, which by the way, was going to happen anyway. No reserve currency lasts forever, but I think now it's pretty clear that when that happens, whether it's in 5, 10, 20, 50 years, it won't be that the Chinese Renminbi suddenly takes its place or the Euro takes its place, it will be a multicurrency, clearly the digital world.

In that environment, it's just hard to see it being anything but this crypto competitive thing, which Hayek talked about. This idea that we may actually find better [crosstalk]. I see that happening. Look, what I think is really interesting about stable coins going back to this geopolitical perspective, again, if we had this forward-thinking US administration and they said, "All right, we're going to have to give up on that sanctions model whereby we control the dollar so that we can shut out the Iranians and the Cubans and everywhere else and have all those sanctions, but we have a much more open system and let 100 stable coins bloom, dollar back."

You could imagine this being another boost for the dollar, that it's just another way of advancing US [unintelligible 00:39:27] and it would be a huge challenge to China, which is trying to of an alternative as all these concerns about privacy and essential control system. If there was a much more-- Let's build for an open system [crosstalk].

Jeremy: Well, this is like you said, it's like 1996. The answer isn't necessarily that the federal government needs to build a giant R&D operation to go operationalize some closed permission network that they're going to run and they’re going to that. The answer is how do you harness the open internet community, open source innovation, technology entrepreneurs, Silicon Valley entrepreneurship, the power and prowess of major financial institutions, all these to build this in private market driven ways, but with the right collaboration with the government to make sure the underlying safety and soundness concerns or other things can be addressed.

Seems like that's a much more realistic response from the West, from the United States, presumably, potentially from major European players as well, rather than saying, "No, we're going to federalize it," so to speak. It'll be interesting to see. There's this connection point, and you were referring to it as well to the Bretton Woods institutions and obviously, the history of all this is obviously all really interesting, because John Maynard Keynes at Bretton Woods in that period was pushing very, very hard post World War II for an international currency, that could be gold backed, but that had the implicit acceptance amongst the leading sovereigns in the post War World, the bancor proposal.

Because the US exerted so much economic and military power, they said, "No, the dollar is going to be the reserve currency, and it's going to be this fixed exchange rate to gold." There's the gold backed sovereign currency, global currency model. That obviously, worked for a period of time and then multilateralization happened with the changing dynamics of the global economy and the government went bankrupt in the Vietnam War and then said, "Fuck it, we're going to D-peg and now it's just whatever we say the money is."

That's been the last 50 years. That's a very short period of time in monetary history, obviously. Legitimately, now we're in this era, where you've got a new potential reserve asset that's better than gold, and you also have this ability for fiat backed digital currencies to have massive global reach very, very easily, which spills over into these geopolitical considerations.

The real question I have been asking, you alluded to it as well is, will this inevitably lead to a new multilateral framework for the monetary system that is grounded in synthetic digital currency, that is actually based on-- Like the SDR proposal, but but includes the Chinese Yuan, includes the Dollar, includes the Euro, includes, potentially some other assets, but also includes a peg and/or reserve ratio of Bitcoin?

Will the future global currency, that is the transaction based currency that's used by everyday people, will it evolve to something like that? We've long felt that that could be what emerges?

Michael: Everything's in play. If you're talking about these big titanic shifts in the global financial system, then this stuff has to be part of it. Have we had Raoul Pal the other day on our podcast, this is the Money [unintelligible 00:43:41] podcast that I do weekly with Sheila Lauren of the World Open Forum. Raoul had a really interesting insight into what happens when the piper has to be paid from the COVID crisis, when you've got all-- And you alluded to before, but all of these big, wealthy, industrialized governments, nicely state governments with massive debt.

What typically happens when you have debt, and everyone's got debt, it triggers a currency war because the only way out of it is actually to print money. We can take ideological positions on whether it's good or bad, or whatever, but it's just a function of what governments do, because they have to. There's no other way to play it, so you print. That's great for you if you're doing it on your own, because your currency devalues and basically, all of your import for foreign currencies, your trading partners, they pay for it.

They basically pay for your debt in that way, because you undercut their own producers and that's how you get out of it. You monetize that way. Of course, if everybody's in the same situation, you get a currency war and that's a disaster. We know that from history and the depression was it exacerbated because of that and in many respects, it led to the Second World War. You don't want this to happen. Raoul was like, "The way out of this is for mass coordinated money printing." It's not a debt jubilee, but it's a debt jubilee by monetization, which, of course, still means that people [crosstalk].

Jeremy: That's been going on. I mean QE is just has been mad [crosstalk].

Michael: But it's not coordinated.

Jeremy: It was somewhat coordinated post 2008. Everybody got together and said, "Not only are we going to provide these shared liquidity lines, but we're going to basically all at once, shock and awe, everybody's going to zero or everybody's going to where it was." It's not truly coordinated.

Michael: It's not coordination, but where do you actually bring it to what level right, and how do you stop it from just becoming [unintelligible 00:45:46] because there were loads of currency war challenges, and it didn't didn't manifest-- The Euro went through a massive, almost broke up, because of this. His point was, first of all one thing is it is good for Bitcoin because if everything else falls, it rises against it. Something else has to rise against it.

More importantly, what is the instrument that you would potentially use to settle all of that universally, and it could be some form of basket, that currency model. Is it Mark Carney's idea, which is a sort of digital version of the bank or this synthetic hegemon that the IMF would create? Raoul's actually thinking this is what the original version of Libra could've actually played this role and that's one of the things that made it very interesting is it actually might be a tool for governments rather than a threat to governments [crosstalk].

Jeremy: This is the vision for center and which governs USDC, is specifically to evolve to multiple stable coin digital currencies, ultimately, to create synthetic versions from that and include Bitcoin in the synthetics, because you need that underlying asset as well.

Michael: Do you create a basket of currency? You'd run into the similar problems that the Libra Association and Facebook did.

Jeremy: Taking a long view, I think that makes a lot of sense. Our view and the approach that we took was let's start by focusing on reserve currency digital stable coins and then also include over time, even emerging markets where there's so much power in real time convertibility from a trade perspective and a commerce perspective, there's so much power in real time convertibility and grow from there.

We just hired David Puth, as the CEO of Center. He ran for six years the largest infrastructure in the world for how currency is settled, that CLS. $2 trillion a day, 70% of the settlement of FX globally, supervised by 23 central banks and the biggest financial institutions in the world in that consortium. I think stable coins at scale, will become that systemic infrastructure.

Figuring things out, like what is this synthetic basket and how you do that, you got to do that with governments, you're not going to just do that as a large internet technology company. The building blocks are there to get there. I know we're running up against time and this is-- Obviously, we could just go on for hours on any one of these topics or sub topics. I have to always play the market cap game and ask you, today, Bitcoin is whatever, roughly $420, $430 billion market cap Etherium is a75-ish billion dollar market cap.

In five years, what does that look like on those? What do you think the total value of stable coins in circulation, aggregate of all fiat stable coins, not just US dollar stable coins? I'm not including central bank digital currencies, I'm talking about the more pure digital currency stable coins. What do you think that looks like in five years?

Michael: I'd love to be much of a fun competitor in this game mainly just because as a journalist and working for CoinDesk, anything that looks to price numbers and a prediction of a market cap--

Jeremy: Okay, you got to [inaudible 00:49:46].

Michael: [crosstalk]. What I will say is this, I think I was always-- [inaudible 00:49:52] would say, "It's either a million dollars or it's worth zero." We still don't know which one that's going to be. That's just not to say a prediction of a million, it's just literally, this is the--

Jeremy: Binary [inaudible 00:50:04].

Michael: Right, has this binary scenarios. I would argue that we've certainly moved higher up in recent times towards the confirmation of the higher-end argument here. Just with Scott Minerd coming out and saying he thinks it should be worth $400,000 and everything else. Legitimate, very, very influential financial institutions and investors are saying things like that now.

I think that it's no longer a flip of a coin, there's a greater probability that this is really, really, really valuable in the future, but I don't like to put numbers and I certainly don't want to be implying that people should be pouring all of their bets into Bitcoin at this stage, it's not my thing. I don't know whether I'd dare to put a number on global stable coins, but look, I generally think that people need this stuff and the more stress there is in the system, we saw, for example, in the first moment of the COVID crisis that there was dollar shortages all over the world.

Nigeria and those places had these problems and that's where Bitcoin became powerful, but there's also been this huge growth of stable coins in those sorts of places. Now extrapolate from those random places like Venezuela and Nigeria into a more global scenario where there is a crisis associated with the dollar itself and people are going to need payment vehicles because the financial system, the banks are going to be under serious stress and they'll need alternative means of moving value around.

I think that both Bitcoin and stable coins will play a critical role in resolving that infrastructure challenge that we're going to face. Argentina by the way, yet another perfect example of that, because when I was there, where they shut down all the banks and people came up with barter systems to figure out how to move money. This is leading to something big. I don't know what the number is, but definitely, it's on a trajectory that's pointed significantly higher.

Jeremy: I'm going to confidently say in the trillions, but we'll see. Michael, it's so great to have you for this conversation. It's been-

Michael: My pleasure, Jeremy.

Jeremy: -great to continue the conversation over the years and look forward to continuing to do it in various forums and formats as well. I just really want to thank you for joining.

Michael: Likewise. It's been a pleasure. Looking forward to many more.

Jeremy: Excellent. All, right. Great conversation there with Michael, really amazing times right now in the crypto universe. Lot of big themes, lot of big implications, very excited to be chattering that and exploring it here on The Money Movement. This is going to be our last episode of the year. We're going to pick it back up in early January. Until next time, stay safe, stay well and stay informed.


Jeremy Allaire
Co-Founder, CEO & Chairman at Circle
Michael Casey
Chief Content Officer, Coindesk

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