SotN#26: Defending our Nodes w/ Coin Center's Jerry Brito and Peter Van Valkenburgh

🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI ❤️ JOIN PRIVATE DISCORD: https://bit.ly/2UVI10O 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/ ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️LEDGER - BEST HARDWARE WALLET TO SECURE YOUR CRYPTO https://bankless.cc/ledger 🚀 ARGENT - INVEST IN DEFI FROM ONE PLACE (download it now!) https://bankless.cc/argent 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 🤖YEARN - YIELD-SEEKING MONEY ROBOT THAT FARMS DEFI FOR YOU http://bankless.cc/yearn ------ Defending Crypto from the STABLE Act | Coin Center's Jerry Brito and Peter Van Valkenburgh Coin Center is a non-profit organization focused on public policy isues facing public blockchains like Bitcoin and Ethereum. While Bitcoin and Ethereum are unstoppable internet networks, Nation States can still mediate our relationship with them, and therefore fighting the regulatory fight is extremely important! Coin Center recently opened up their Gitcoin Grant https://gitcoin.co/grants/1668/coin-center-is-educating-policy-makers-about-publ which has received an outpouring of support. Maybe it has to do with the STABLE Act? This act was recently introduced by Rashida Tlaib and others, in an attempt to add regulatory oversight to those that issue and leverage stablecoins. We bring on Jerry Brito and Peter Van Valkenburgh to help us understand the perspective coming out of the STABLE Act, and its implications to our industry. Coin Center's website: https://www.coincenter.org/ The STABLE Act: https://tlaib.house.gov/media/press-releases/tlaib-garcia-and-lynch-stableact Coin Center's Gitcoin Grant: https://gitcoin.co/grants/1668/coin-center-is-educating-policy-makers-about-publ Preston Byrne's blog post on the STABLE Act: https://prestonbyrne.com/blog/ ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Hoffman?

  The.

• 2:10David Hoffman?

  The.

• 4:20David Hoffman?

  The.

• 6:46David Hoffman?

  Are looking for a mobile wallet to hold and access your crypto assets, you need to go to argent.xyz and download the Argent Smart Contract Wallet onto your Android or iOS device. Argent is one of the most secure ways to hold your crypto assets on your mobile device while still being able to access all the DeFi products and services that we know and love. Argent has enabled one tap access to all the DeFi applications that we all use the most and recently onboarded into the Argent app is the Y earn vaults. You can now access yield from a specific vault from Y earn and then Y earn handles the rest. Also new to Argent is Balancer and being able to supply liquidity to Balancer pools and also receive BOW rewards for doing so

• 7:31David Hoffman?

  all from your Argent wallet. One of Argent's newest features is the ability to route trades and swaps through the various liquidity pools in the ecosystem, ensuring that you always receive the best rates when you trade inside of Argent. Argent has done a ton of effort into making sure that your assets are as safe as possible. They have social recovery options with their guardians feature, making sure that any trusted friend or family member can restore your access back to your Argent wallet if you were to ever lose or break your phone. And there's also some simple account features such as sending limits and whitelist accounts, making sure that your money doesn't ever do anything that you don't explicitly approve. In order to see the Argent wallet in action,

• 8:13David Hoffman?

  go to argent.link/banklist and download the app. We're also brought to you by Monolith. Monolith is your cool new DeFi account, your DeFi savings account, your DeFi checking account. Except the cool thing about the Monolith DeFi account is that it gets software updates, right? You actually get to increase the usefulness of this over time. So here are some of the features. Monolith is a smart contract wallet with a lot of the features that you would expect. If you've come to know DeFi and what it is, you can you can add money to it. You can put that money to work in compound and accessing yield. But you can and you can also swap through Uniswap. What was cool with Monolith is that they will send you a very sexy Monolith Visa card

• 8:55David Hoffman?

  that connects to your Monolith smart contract wallet on Ethereum. So it's a really awesome tool to live a bankless life with a savings account that gets software updates. So this is something that you're never going to find out in the real world, but you can still do real world things with, you know, real money and like buy your groceries. So that's just fantastic. Coming soon to Monolith, actually already here to Monolith is now you can buy, die, and get it sent to your wallet directly, right? So it's also being an on-ramp. So you don't have to go through your centralized exchange like Coinbase or Gemini or wherever. You can just go straight from your bank account right into your Monolith checking account, smart contract wallet. So check them out at monolith.xyz.

• 9:40Ryan Sean Adams?

  All right, Bankless Nation, welcome to State of the Nation number 26. We've got an exciting episode for you today. We're going to talk about defending our nodes, our Bitcoin nodes, our Ethereum nodes. We're going to talk about regulation. We're going to talk about what is going on with the stable act. And we have the experts to do that from Coin Center. We're going to introduce them in just a few moments. If this is your first State of the Nation, the drill is we talk about what is happening every week in the crypto ecosystem related to some of the big picture stuff. We address on the newsletter and in the podcast, and then we try to drop some insights and action items. This comes live on Tuesdays.

• 10:25Ryan Sean Adams?

  This is a little late on Tuesday, but we needed to accommodate some guest timing. And then it comes as well on the podcast. You can catch it in audio format tomorrow. David, how are you doing today? Are you excited about this episode?

• 10:38David Hoffman?

  Yeah, I'm really excited. And this is something that we often speak about on the Bankless Podcast, on the Bankless YouTube is like at this, at some point in time in the future, we're going to call upon On the nation to fight the fight, right? And it's in the stable act and what's going on in DC seems to be perhaps like a tremor. Maybe, maybe it's the real fight. I don't think it's the real fight, but it seems to be like an indication of what's to come. Like there is going to be a fight in, in the world of regulation, in the world of DC, in the world of nation states, that's going to be about like what this industry can or cannot do. Uh, and there, there seems, the, the fight seems to be at our doorstep. Uh, and so we are, we're bringing on a people from, from the coin center.

• 11:23David Hoffman?

  Jerry and Peter, uh, two people that have just top respect, utmost respect out of our industry to help us get some clarity as to like, what is the significance of the stable act? Is this the real fight? Is this like kind of the fight before the fight? Like what's going on here?

• 11:38Ryan Sean Adams?

  Absolutely. It's going to be good. And if you haven't heard of the stable act, uh, it, it kind of made waves last week, but we will introduce it to you. It's some, um, a bill in front of Congress right now. We'll be talking about that in just a minute. We should also talk about what's new in the bankless program, David. So we had a fantastic episode, uh, come out about like the geopolitics, uh, how crypto can emerge as a, um, a potential lot of replacement, but a decoupling of the nation state with a political philosopher, um, Bruno. And that came out on Monday. What's your take on that episode?

• 12:14David Hoffman?

  Yeah, Bruno, and this is extremely relevant, right? Because the, the whole point of that podcast was to talk about the different domains of the world. Like we, we have different countries, but that's not really what in my mind is what defines the seams of the world. We kind of have the West versus East and there's a seam there. Um, there, there's kind of developed versus undeveloped countries and there's a seam there. Uh, and, and Bruno, as a political philosopher who's traveled the globe, has opinions as to like what these different civilizations of the world, how, what their dispositions are, and importantly, what their dispositions could be towards crypto. Uh, and so we're seeing that play out in, in today's world and, and especially in the conversation that we're having today with the guys from coin centers. Like, well, America has a specific disposition towards crypto.

• 12:59David Hoffman?

  Uh, and, and we talk about the whole world's disposition with Bruno on the podcast. So that was a ton of fun.

• 13:04Ryan Sean Adams?

  Yeah, I like these episodes we've been doing lately with some folks that are maybe a little more crypto skeptical. Or if not skeptical, maybe using the term unconvinced. They're not entirely sold. They're not of the religion. I think you've called them secular before. We recorded another fantastic episode that's coming out next.

• 13:25David Hoffman?

  Next Monday.

• 13:25Ryan Sean Adams?

  Next Monday with Dimitri, who has a fantastic podcast called Hidden Forces. And he kind of fits that mold too. Do you want to give folks a preview?

• 13:36David Hoffman?

  Yeah, Hidden Forces is one of my favorite podcasts, all about talking about the hidden forces of the world that control our finances, the economies of the world, the politics of the world, the culture of the world, just the movers and shakers, the things that are moving and shaking the world. Those subject matters come on to Dimitri's podcast. And so I call him on the crypto periphery, right? Like, he understands crypto. He understands our industry. He understands the culture. But he's not in the middle of it, right? He's not in the religion, right? And so that's a very biased, sober perspective to have. And so getting that perspective on the Bankless Podcast is definitely something that we want to do. So stay tuned to hear that episode on Monday.

• 14:18Ryan Sean Adams?

  So that is next Monday, guys. We've got some ETH content on the horizon as well. We're doing a bull case for Ethereum with some of the biggest ETH bulls we know. Talking about that. And then we're having Ether Capital. I would call Ether Capital, this is a publicly traded company based in Canada. They're almost like the micro-strategy of Ether. They are buying Ether, putting on their balance sheet, and they are a publicly traded company on the Toronto Stock Exchange. Super excited to talk with them about the balance sheet. So a lot coming at you soon. But David, let's start with the question I always ask you at the beginning of every state of the nation. That's this, what is the state of the nation today, sir?

• 14:57David Hoffman?

  The state of the nation is joining the ranks. We are ranking up, right? And so, you know, at least in crypto Twitter, there's a bunch of fighting going on between Bitcoin and Ethereum. But as soon as this Rohan guy, who's one of the leaders behind the Stable Act, Join the Twitter fray, it seemed to be like the Bitcoin and Ethereum's world, just like the division between that world just like melted away. And all of a sudden, it was, you know, Bitcoin and Ethereum versus the outside world. And as somebody who like plays in both camps, I really enjoyed that. I really enjoyed the melding of the communities to like, kind of unite against like this common enemy, which is top-down bad regulation. And so like, we're ranking up, we're joining together, we're joining forces, and that is the state of the nation.

• 15:42Ryan Sean Adams?

  That is nice. It's like, it's like a unifying force, I suppose, amidst all the tribalism and rancor in crypto. There are a shared set of values that I think every crypto community, at least in the decentralized crypto community, shares. So it's fantastic when we can come together around this. All right, with that, we should get to our main event. I want to introduce two individuals, guests from Coin Center. Coin Center is a nonprofit research and advocacy center focused on public policy issues. They're based in Washington DC, in the heart of the capital, fighting the good fight. I feel like anytime we have a problem with crypto regulation, we put the bat signal in the, in the air, and in comes Jerry, in, in, in comes Peter,

• 16:25Ryan Sean Adams?

  in comes Coin Center, to, to help us with these regulatory issues. Jerry Brito is the executive director, want to welcome you Jerry, and Peter Van Vulcanberg is a research director at Coin Center. Gentlemen, it is fantastic to have you. How are you doing today?

• 16:41Speaker 02

  I'm very well. Thank you so much for having us.

• 16:42Speaker 03

  Yeah, great.

• 16:44Ryan Sean Adams?

  Awesome. All right. Well, you know what, I want to start with this, this kind of question. So Jimmy Lear said this, I read, he is the CEO of Circle, of course, which issues staple coins. He said, shit is about to get real. Guys, is shit about to get real here? Like, did something major happen last week? Or is that just crypto Twitter making much of you about nothing?

• 17:09Speaker 02

  That's a good question. Um, so look, I mean, uh, you're referring specifically to the Stable Act. And, you know, um, it's serious because it's, it's kind of a frontal assault on, um, people's ability to, run software essentially. Okay. So in that way, it's real. We should care about it. On the, on the flip side, um, this is a bill that was introduced with, you know, like a couple of weeks, like maybe less than two weeks left in, for Congress. So it's definitely not going to move this Congress, although it'll probably be reintroduced next Congress. And it was introduced, um, by Rashida Tlaib, who is a, um, member of Congress,

• 17:54Speaker 02

  who is part of the very, very progressive wing of the Democratic Party, who, um, you can say really is not in the mainstream, um, and not certainly in the leadership of the Democratic Party. So even though Democratic Party controls the House, um, this is a bill that I, you know, I would be surprised if it moves a lot. It might, um, Chairman Waters, um, who chairs the House Financial Services, might, um, decide to get behind it, um, and maybe you might see some movement, um, but I think it would be difficult. Even if it passed the House, it would also have to pass the Senate. And, you know, the Senate is where House bills go to die. Senate is the, uh, the, so, um,

• 18:38Speaker 03

  Cooling plate of democracy.

• 18:40Speaker 02

  Cooling.

• 18:42Speaker 02

  Cooling saucer, right? That's what Jefferson said.

• 18:44Speaker 03

  Awesome.

• 18:44Speaker 02

  Okay. Um, so, look, I don't think this bill is going to pass anytime soon, but this bill is a frontal assault. And I think, um, look, I, I, I think a lot of the motivation for this bill is Libra. And if we were to see another thing like Libra, um, you can imagine this bill, like, you know, um, uh, getting a lot of, um, uh,

• 19:15Speaker 02

  you know, um, juice behind it. Um, so yeah, that's kind of what I think. That said, Stable Act is not the only thing that's happening in DC. Um, and there are tons of other little things that could become big. That could necessitate a fight. Um, there are also good things that are happening.

• 19:36David Hoffman?

  So let's actually start there because I don't, like I alluded to, I don't think the stable act is going to be like the big thing that we all focus on, but it does indicate why this is important, right, and what could be, right? But let's start at the very beginning, like Bitcoin, Ethereum, these are like internet scale organizations, they don't exist inside of a nation state, they're censorship resistant, they're permissionless, they're non-sovereign. So like, why do we even need you guys? Like, why do we need people to defend this in regulatory institutions like Washington DC? Like, I thought this was a non-sovereign system. Like, why are we talking to regulators in the first place?

• 20:16Speaker 02

  Yeah, that's a good question. So I think that, look, I think you're absolutely right that something like Ethereum or Bitcoin are unstoppable machines, right? And so they're going to be running. The question is, are they going to be useful machines, right? Are you going to be able to connect to it and use it in your country? And more importantly, is it going to be something that a wide number of people are going to be able to use it? And so there, you know, that's something that nation states, for better or worse, have, you know, can definitely affect.

• 20:58Speaker 02

  And so, and look, I mean, I think that networks like Ethereum and Bitcoin are incredibly compatible with the values of liberal, democratic, Western nations like the United States. And so nation states and governments and regulation shouldn't be an impediment.

• 21:27Speaker 02

  To the use of these networks. And so if that's true, you need somebody to talk to government. If nothing else, just explain to them, hey, this is how it works. This is this is how this is what it is. Now it works technically.

• 21:44Speaker 02

  Here is where maybe there are gaps created between the technology and the law. If you're going to fill those gaps, here are ways that you can do it. That's not going to destroy the potential of this thing. And so that's what Coin Center does. And, you know, we're kind of like, you know, we a big role model for us is like Electronic Frontier Foundation, right? So the internet is, as you say, a sovereign, you know, internet scale network, right? This is the internet.

• 22:16Speaker 02

  Why, you know, why does it need representatives? Well, for the same reason. These are unknown public goods. Nobody owns Bitcoin. Nobody owns Ethereum. Nobody owns the internet. And while companies that run on top of these networks can hire their own lawyers, their own lobbyists to represent their interests. You need somebody to represent the interest of the public good, this unknown network, and to represent the interests of people to have the freedom to use these networks. And so like the EFF, you know, we at Coin Center are kind of self-appointed champions for open cryptocurrency networks.

• 22:55Speaker 03

  Yeah. Jerry, worth noting that we don't represent any companies. We don't represent any specific entities in the space. We have a mission and we're there to defend the mission. And the mission is to defend people's freedom to use permissionless blockchain networks.

• 23:11Ryan Sean Adams?

  That's how did we get the so you mentioned the EFF, I believe, Jerry. I'm actually not super familiar with the EFF. I am a bit more familiar with like the fact that actually the internet went fairly well from a regulation perspective in the 90s, right? Like there were definitely some bumps along the way, but we got it done. America accepted the internet and this was pretty novel at the time. There's some cryptography involved. There's a permissionless communication network, some scary things around copyright, all sorts of things.

• 23:46Ryan Sean Adams?

  How did we do that? And like, can that success be repeated for crypto? Because crypto, I guess, is one, it's in a different timeline, right? So like, the, um, the US as a nation in the 90s appears to me to be a bit more moderate and less polarized than it is now. So we got that issue we're dealing with. The second issue is crypto, of course, um, hits on a few things that nation state might be a little bit, um,

• 24:13Ryan Sean Adams?

  I guess scared to relinquish control of, uh, around financial transactions and the essence of, of money. But like, are you guys optimistic that we can actually repeat the success of internet adoption, uh, with, with crypto and, and kind of like for, forge our way through this path, make, make this happen?

• 24:33Speaker 02

  Yeah, I mean, I, I, you know, wouldn't be doing this full time if I wasn't optimistic that we could do it.

• 24:40Speaker 02

  I, I do think we can replicate the success of the 90s, but that didn't just happen. Uh, you know, as you were saying, we didn't just do it because we're America. It took a lot of work from people like EFF, the Electronic Frontier Foundation, right? So as, exactly as you pointed out, um, there were big concerns related to things that nation states are sensitive about, like cryptography, right? Cryptography was something that until very recently, quite frankly, until the 90s, um, was the exclusive domain of nation states. Uh, encryption was, right? And, uh, uh, the EFF was instrumental in fighting that fight, um, so that encryption could be widely used by the public. It wasn't like, you know, we weren't, um, again, it's the kind of thing where it's just

• 25:24Speaker 02

  math so that, um, you can't stop it, right? But the government can severely restrict mass adoption of it, right? And thanks to people like the EFF, um, We were able to win those fights, right? So, you know, it took a lot of lobbying and a lot of litigation to win those battles. And same for copyright.

• 25:49Speaker 03

  No, I'd say that, I'd say that, you know, there's collateral damage in the process of this, you know, determining how government will or will not accept these new technologies. So people can be put in jail. I, you know, I think ultimately these technologies are somewhat unstoppable, that in the long run will have shared networks, will have the internet as we already have. But in that process, a lot of lives can be ruined. So you look at the, the first, the first wave of crypto wars, which was over encryption technology, things like PGP. And thank God, we had organizations like the Electronic Frontier Foundation to stand up for actual scientists, cryptographers, who wanted to publish their cryptography standards.

• 26:34Speaker 03

  But the government had labeled those cryptography standards as weapons, as munitions, that you're not allowed to export out of the country because you're literally sharing weapons with our enemies. And the EFF said, look, these cryptographers just want to publish these, these mathematical equations effectively as you'd publish a book. And it's their right in America, in a liberal democracy, to do that without your prior restraint. And the EFF, broadly speaking, won those cases, and the defendants won those cases. And that's why we have things like SSL today. We, you know, we might have had it anyway, but lives would have been destroyed in the process. And, and maybe America wouldn't be the leader in the internet. Maybe it would be some other country.

• 27:17Speaker 03

  Or maybe it would even be slowed down to the point where we were just now starting to enjoy, you know, websites instead of what's next, which might be, you know, cryptocurrencies and things like that.

• 27:27David Hoffman?

  So that's optimistic. That makes me optimistic. But also what makes me a little bit skeptical is, is that was 20, 30 years ago. That was a generation ago. Like, things change. Perspectives and cultures and values change. And especially in a world where there seems to be so much polarization and there seems to be just like A lot of desire to make, finally make change happen. It seems to be that like the ascribing is like, hey, we did it back. You know, if we fight the fight like we fought it back 30 years ago, we'll get the same outcomes. Well, it's a different world nowadays. So like, maybe what, what, what do you think is, is different about this world? That might not be the same, might, might not make the, the fight, the same fight.

• 28:13Speaker 02

  Um, oh, yeah, you know, I'm not. So yeah, you're right that it's a different world. And so as a result, people who, you know, you can't necessarily apply the same kinds of tactics that you might, when, when it comes to lobbying or whatever, you know, like, like, you know, we now have Twitter. Right. So I'm not going to fax out a press release. I'm going to use. But I think those are all tactics. I think ultimately, at the end of the day, the spite,

• 28:41Speaker 02

  all the polarities and what have you.

• 28:46Speaker 02

  America still has the same values as always. And I think the internet was successful because it was able to appeal to those values. Right. If you think about it, the internet is completely open and permissionless. It's the West, right? It's, it's a wild frontier where you can go and, uh, it's, you know, it's, it's an electronic frontier, if you will, right? Where you can go and settle. This is, this is the most American thing in the world. While we were building, you know, why we in the, in America were building the internet, uh, our friends in France were building Mini-Tel, right? Which is going to win out. So, um, you know, I think if we can just remind policymakers of that, that, that hasn't changed, right? Policymakers for both left and right still see that. Um, and so, you know, we can, the story to tell is, look, while,

• 29:32Speaker 02

  China is building, uh, DCEP,

• 29:37Speaker 02

  we can build completely open and permissionless networks. And which do you think is going to win out, right? If you have any self-confidence in your values, you, you know, it's going to be open and permissionless networks.

• 29:50Speaker 02

  So, so, you know, I, I think an important thing is to make sure that, um, something like crypto does not become a partisan issue, right? If it does, then it becomes much harder, right? And to date, we've been very lucky that it's not. We have, um, strong champions on both the left and right, on the Republicans and the Democrats. And we have critics and detractors on both the left and the right. So I think that's very good.

• 30:16Ryan Sean Adams?

  Speaking of strong champions, I want to bring up your recent Gitcoin grant because you have folks that are tuned into Bankless, of course, they know what Gitcoin is. It's a quadratic funding mechanism with a matching mechanism, which essentially allows people in the crypto community to sort of vote with their dollars and have that vote amplified for the projects they support. And maybe in a way, it was kind of good timing for this Stable Act news to come out, because I just want to share the Gitcoin page because it's super exciting what the crypto community can do once it is incentivized to act. This is, I think, less than a week old, maybe just over a week old. But you guys just put

• 30:59Ryan Sean Adams?

  out your grant, I think, at the end of last week. So it's probably only a few days that this grant has been active. And you've already raised close to when you consider matching 158, that's DAI, 1,000 DAI, which is, of course, US dollars. Have you been like really excited to see how the crypto community has rallied around Coin Center in the wake of some of this regulatory news and uncertainty? Has it been surprising to you? Has it been exciting?

• 31:27Speaker 02

  No, I mean, it's been amazing. We were just completely floored by the response from the crypto community, especially the Ethereum community, you know, using Gitcoin. And we're like incredibly grateful. You know, what can I say? It's a kind of thing where, look, we weren't planning any of this. You know, Niraj, yeah, Niraj Agrawal, who runs our communications, he's like, you know, we should start a, you know, a Gitcoin account. We think it's a good way to do it. I'm like, yeah, let's do it. And it just sort of coincided

• 32:07Speaker 02

  that at the same time that we started this Gitcoin, you know, grant proposal and put it out there. The stable act made clear what's at stake, right? There are frontal assaults that come. And I think that really drove people to contribute, which, you know, we're incredibly grateful for. Because, you know, a lot of the work that we do isn't so clear, right? A lot of the work we do, we can't ever talk about because it's sort of like avoiding things that you never find out would have happened, right? And we can't talk about it. You know, but like, you know, something that the Ethereum community I think isn't aware of is, you know, Coin Center was, you know,

• 32:52Speaker 02

  if not instrumental, I think, pretty influential in making sure that the SEC understood that Ethereum is not a security. Ethereum as a running network is not a security, right? And we spent a lot of time with the SEC making that case, starting in, what, when Peter?

• 33:14Speaker 03

  2015. So, so we were in, in meetings in their interdivisional working group that was focused on cryptocurrencies back when Ethereum was brand new, long before the Dow crowdfunding and then the Dow report from the SEC, just giving them the information that is quite honest information that, you know, look, Bitcoin is open source protocol. People are going to take that code, rewrite that code, build brand new networks. And if they're actually running like Bitcoin, they're not securities. If, on the other hand, somebody is at the center of that network and everyone relies on that person, that's not sufficiently decentralized, as Director Hindman later put it. Or if they're making promises about that network, like, I guarantee you it'll be 10x

• 33:58Speaker 03

  in two years, then it is a security. And it makes sense that the SEC can carve a delicate path to go after the scams and leave the true innovation out of securities regulation. But it was not a foregone conclusion in 2015.

• 34:12Ryan Sean Adams?

  Guys.

• 34:13Speaker 02

  You know, I think it's.

• 34:14Ryan Sean Adams?

  Go ahead. Just to emphasize for like the Ethereum community, how important that that was, right? Back to what Peter was saying earlier, it it's not that the SEC might not at some point in the future change its mind on Ethereum, but this allowed them to provide clarity far sooner and accelerated the development of such things as like if Ether is listed as a commodity, it can be listed by the CFTC. It it's it's it also puts a lens in the path for tokens to to move towards decentralization. So it really just accelerates the industry in the US and accelerates the adoption of what we all want to see, which is a more open financial world.

• 34:58Ryan Sean Adams?

  So maybe the outcome would have been inevitably in 10 or 15 years that like this regulation would, you know, happen. But what you guys are doing is really accelerating adoption and it's a bunch of quiet work that I think folks don't know goes on behind the scenes with these types of issues.

• 35:19Speaker 02

  Yeah, thank you. And, you know, I'm not sure if we're accelerating, but what I like to think about what we're doing for all networks is making sure that the space exists so that you can just do your innovation and make it available so that people can use it.

• 35:36Speaker 02

  You know, and and because the alternative is there are going to be a lot of roadblocks that might just lead people to say, meh, I'm not going to work on this, I can work on something else.

• 35:45David Hoffman?

  Arguing that Ether is a triple point asset would have been way harder if Ether was also a security. And so that that is definitely valuable. And and the the link between Coin Center and Gitcoin, I think, is is a really elegant one because you guys are protecting public goods without actually representing a company, right? Uh, so there's there's you guys don't represent anyone, there's no stakeholders behind you, you guys just represent the industry. And I can imagine that like getting funding for that is actually kind of hard because of your specifically your neutrality in the whole thing. Like if you guys were sponsored by a company, Coin Center would be a different entity. It wouldn't be.

• 36:21David Hoffman?

  Coin Center would be something else. And so that's specifically where Gitcoin comes into play because Gitcoin that Gitcoin is meant to fund that gap of companies that have extremely perhaps the most significant roles to play, but don't actually have a way to get funded. And so the the alignment between Coin Center and Gitcoin, I think, is is one that's going to play out in a very long relationship that I'm excited to see unfold.

• 36:45Speaker 03

  Yeah, I'll say I'll say historically, we've we've generally gotten about half our donations from individuals, usually very generous individuals who understand our mission and want to make sure we succeed. But this Gitcoin situation will significantly increase the number of donations, more smaller donations. And that's exactly what we want. We want to be representatives of a sort of grassroots movement. To say, look, this is the technology of the future. It's important. It's important for America. It's important for all of us. Let's build it.

• 37:13Speaker 02

  Yeah, and I should hasten to say that Coin Center is a public good in itself, what we do.

• 37:20Speaker 02

  And our work is supported, as Peter says, about half of our support comes from individuals. The other half does come from companies and investors in the space. But it strings free, right? Like, you know, this is the work that we do. If you want to support us, great. If you want to support us, you know, we'll tell you at the end of the year, this is what we've done. If you want to support us, great. You don't, you know, that's okay.

• 37:42Speaker 03

  Jerry's sometimes got kind of like a Scarface mentality with fundraising. He's like, you know, we don't have to be here.

• 37:50Speaker 02

  Our independence is very important because it's what makes it possible for folks at the SEC, for example, to trust us, right? We're not, we're not selling our own book. We really want to explain to you exactly what it, what this is, how it works, and give you honest advice about, you know, what are the risks and how you could address those risks.

• 38:15Ryan Sean Adams?

  Well, guys, we want to get you to a quarter of a million on Gitcoin at least. So any bankless listeners watching this, support this excellent work. All it takes is a die, one die, and that can be amplified a whole lot with Gitcoin matching.

• 38:29Speaker 03

  I just put the link in the YouTube chat box. You can go in there.

• 38:34Ryan Sean Adams?

  Thanks, David. We should talk about the Stable Act because that has been sort of the catalyst for a lot of these things. And as you mentioned at the outset, sort of shows what's at stake in crypto and this regulatory conversation. Can you maybe explain what the Stable Act actually says and what it does? And Peter, you put together a fantastic post on it. But for those that weren't part of the conversation, haven't read it, what's the summary here?

• 39:04Speaker 03

  Yeah, so it amends federal banking laws, say that stable coins, and it defines that term. Term has obviously never been defined before in law. Stable coins can only be issued by federal banks that have FDIC insurance effectively. So there's this strong push to say, look, if it's dollar backed, and that's interpreted broadly as even if somebody is is saying this is dollar backed, but it's some algorithmic thing, or if someone's saying this is this is pegged to a dollar, or it will reflect the dollar, even using the term dollar in marketing will fit you into the definition of stable coin.

• 39:44Speaker 03

  And then this law, if it was to become law, it's just a bill, of course, would say you can't do that unless you're a chartered federal bank, which I don't need to explain, it probably sounds like it is, is very difficult to become. And an ordinary person would never become a chartered federal bank and get FDIC insurance. And so this is, you know, make no mistake, this is quite radical. Because not only does this necessarily cover, you know, like an asset-backed stable coin that's centralized, like a USDC or a Tether, this could cover things that are like Maker, like DAI, where you have just a lot of language that says it's pegged to, or it tries to equilibrate towards a dollar.

• 40:29Speaker 03

  This kind of covers it because it got such a broad definition. And it would also interestingly cover things like Like dollar, dollar, digital dollars you keep with PayPal or with Venmo, just like pre-crypto money transmission stuff, which for decades has been regulated by state licensing and never as a federal banking activity. So this is sweeping. And, you know, to put it briefly, and the reason why this is a real threat to permissionless networks, because there are decent arguments to be made that if you're claiming that you're backing something, you should be regulated in some way. So you're not scamming people, you know, not actually holding dollars. But this goes far beyond just that common sense regulation. This says that even if you're basically facilitating

• 41:13Speaker 03

  somebody who's not a bank issuing or passing or uttering a stablecoin from person to person, you, as someone facilitating that activity, could be performing an illegal act in this law. And what does facilitating a DIT transaction maybe look like? It could very easily just look like I'm an Ethereum miner or staker and I staked or mined for a block that ended up having a DIT transaction in it. So you may not have any idea that you facilitated that activity. And quite frankly, you wouldn't if you were mining a purpose agnostic blockchain network, because there's tons of transactions in there. Some of them might be stablecoins, some of them not. And if that mere act of running that server on the internet

• 41:58Speaker 03

  that performs that function makes you liable of breaking federal banking laws, you know, I don't think it would destroy Ethereum, but it would certainly destroy people's ability to, you know, honestly and legally run Ethereum nodes in the US. And that's extremely bad for innovation.

• 42:16David Hoffman?

  So there seems to be a number of different stakeholders that seem to be primarily affected here. We have the centralized issuers of stablecoins. That's like USDC, Tether would fall into this camp. Libra, now known as DM, is also very much in this camp. There's also the decentralized issuers, which is DIT or anything algorithmic, right? So like maybe even something as niche as empty set dollar would be a protocolized version of a stablecoin. Coin that pegs to a dollar. And so that's now falls under the purview. And then there's even node operators. And so like it gets even more and more expansive as we go out. And we want to touch on all three of those cohorts of people. But I kind of want to be a little nitpicky here and get your guys' perspective here because like,

• 42:59David Hoffman?

  what is a stablecoin? And it seems to only, it seems to be too easy to route around the wording that this bill has used because like, what about a token that is backed by gold? Like, that's pretty stable. That's just, you could call that a stablecoin. What about it? What about a token that represents an Aussie dollar or a euro? Or what about something that is stable to its own basket of, of, of, you know, its own, you know, index? And so like, what kind of one of the questions is like, how much have these people really thought about like, the loopholes that they're creating? Because like, you could just like, okay, we're just going to make something that is stable to, you know, one and a half dollars or, or something that's stable to gold or just like,

• 43:44David Hoffman?

  just route around the problem. Like, it seems to be really, really, really arbitrary. Is that your guys' take as well? Because that seems to be my perspective. It seems to be like, there's a number, there's also like stable-ish coins, like with things that definitely don't peg to one certain thing, but they still are much more stable than their asset. That's the the RISE system. It seems to be that there wasn't much thought put into like parameterizing this thing.

• 44:08Speaker 03

  Jerry?

• 44:10Speaker 02

  Well, I mean, so, Peter, you've read the law more carefully than me. But it would cover basically dollar pegged

• 44:22Speaker 02

  stablecoins. And the reason for that is because what the law is, you know, what the authors and the sponsors of the bill are concerned with, it seems to be, is systemic risk to the US dollar banking system. Right? That's what they're addressing. So something like a gold-backed token would not, I don't think, and I'll defer to Peter since he read it more closely, I don't think would fall here, right? I don't think a Aussie dollar backed would fall either. Really, what they're, the reason they're doing.

• 44:54Speaker 02

  Is they're targeting what they perceive to be systemic risk presented by what they would call shadow banking in the form of PayPal or USBC.

• 45:05Speaker 03

  So to give the supporters of the bill some credit, they are very passionate. And you look at, say Rohan Gray on Twitter, that dollars are a sort of public function of the United States government. And, and things like systemic risk are not just about counterparty risk. They're not about simply situations where the company that's holding the dollars and people have the tokens that that represent the claims on the dollars. They don't have enough dollars to make good to their customers. That would be counterparty risk. And we do have FDIC insurance for that reason. But, you know, I've seen Rohan talk also about how the risk I'm concerned about, he would say, is also the risk of not having full control over the monetary supply in the

• 45:47Speaker 03

  way that he thinks the federal government should have greater control over the monetary supply. That like the supply of dollars in circulation matters. And he wants only banks to be in the business of increasing or decreasing that supply effectively.

• 46:01Ryan Sean Adams?

  That's a very modern monetary.

• 46:04Speaker 03

  He, he is an MNC scholar. He's a charter list. So his, his notion of what money is, and you know, money is a crazy thing. It's easy to have lots of different notions.

• 46:13Ryan Sean Adams?

  Yes.

• 46:14Speaker 03

  Is very state oriented. So the fact that this is dollar focused is partially deliberate. I still don't agree with it, but it's, it's deliberate. And I will add, just as far as the legislative language, it's worth noting that it also applies to the, to a peg to any other state or national currency. So it would, it would apply to like a euro peg thing. And there's, there's, again, this is drafted incredibly broadly because they really want to go after everyone with this potentially. There's a paragraph towards the end of the definition of stablecoin that says it's pegged in such a manner that regardless of intent has the effect of creating a reasonable expectation or belief among the general public that the instrument will retain a nominal redemption value that is so stable as to render

• 46:55Speaker 03

  the nominal redemption value effectively fixed. So if you had like a Big Mac dollar or a Big Mac coin that was going to always retain about Big Mac purchasing power. This is covering it.

• 47:07David Hoffman?

  Wow.

• 47:07Ryan Sean Adams?

  Was that their intent, Peter? Like, you know, was it their intent to be this broad? I mean, it's affecting a lot of parties in the US, or this potentially would affect a lot. So centralized issuers, right? You really put a handcuff on like USDC and the things that Coinbase is doing. And then also, you definitely put some handcuffs on decentralized protocols like DIT. And perhaps most precariously, if an individual out of their home is running an Ethereum node that runs a transaction that is prohibited by this sort of a law, then they might have some culpability here in the process, too. This seems incredibly broad.

• 47:51Ryan Sean Adams?

  I think part of me wonders whether that broadness was the intent, or whether, back to David's question, if it was just, well, there's some education required. They didn't realize it would be, they were trying to maybe target, you know, Facebook and Libra, and they didn't realize all of these downstream effects just because they're not fully enmeshed in the crypto ecosystem. What's your take?

• 48:12Speaker 03

  So we've had lots of situations like that in the past where we go to Congress and someone's written a bill and they maybe don't fully understand the consequences because they don't fully understand the technology that it might regulate. This is not one of those examples. So this is intentionally broad because of this deeply held belief, and a genuine belief that I disagree with, that if it's dollar-related, or if it has to do with the money supply of the nation, it should be heavily regulated. So this is intentional. And what's interesting about it is it's broader than you think, even when you read the already broad-seeming language. So when we wrote a blog post about this the other day, one of the first things I pointed

• 48:53Speaker 03

  out is, why is this regulating stable coins, which are dollar liabilities, but not regulating all the other non-bank dollar liabilities out there, like all the money that PayPal and Venmo and Square Cash hold for people? Those aren't stable coins, as we tend to understand them, and they're huge liabilities, right? So shouldn't those also be regulated by, you know, putting them under the purview of federal banks? Rather than keeping them in the state money transmission licensing framework where they exist today. And Rohan, to his credit, came out immediately after we published the blog post and said, no, it's meant to cover all of those companies.

• 49:28Ryan Sean Adams?

  Wow. Oh, my God. Wow.

• 49:30Speaker 03

  We define stable coins so broadly that it would, that a PayPal, digital balance on PayPal, a digital balance in your Apple Pay wallet would be a stable coin, and then they'd have to do it through federal banking laws.

• 49:41Ryan Sean Adams?

  How about this?

• 49:42Speaker 03

  Is that's kind of Trojan horse.

• 49:45Ryan Sean Adams?

  Yeah.

• 49:46Speaker 03

  I'd say that down there in the post, actually, and then I said it again on Twitter. This is, this has got balls, not to be crude, but you know, this is, this is strong legislation with a very deliberate intent to sweep widely. It's also why I think it has much less of a chance of passing because it's, it's really out there.

• 50:06Ryan Sean Adams?

  So, so Peter, I've got some Starbucks gift cards, right? And they have a lot of stable coins, I think, like, does, would Starbucks be required to open a bank charter in order to issue Starbucks cards in this sort of wide sweeping bill?

• 50:19Speaker 03

  You know, I hadn't actually thought of gift cards. I have to reread the language with respect to gift cards. Because normally those get out of money transmission licensing requirements because they're only accepted at a number of authorized, you know, acceptors or, or.

• 50:35Ryan Sean Adams?

  There we go. We found our loophole.

• 50:37Speaker 03

  This doesn't, this doesn't have a so-called closed loop exemption like the money transmission statutes do. So maybe Starbucks cards are covered as well, actually, in this.

• 50:47Ryan Sean Adams?

  Wow.

• 50:48David Hoffman?

  So I want to ask about, there seems to be a lot of intent, which my mind, after seeing, seeing a lot of intent goes to motivations. To me, my, my, there's a, there's a decent amount of me that's a conspiracy theorist. And so I'm like, the banks are behind this, right?

• 51:03Speaker 03

  In the crypto space?

• 51:04David Hoffman?

  Weird. So unheard of. In my mind, this is just like a huge extension of banking infrastructure. And, you know, banks kind of are the big arm of the government to exert power, right? Like we exert power over things like North Korea and Iran by cutting them out from banking services, payment services.

• 51:26David Hoffman?

  So like, it seems to be that like, requiring everyone to be a bank is in some way, maybe that's good for the banking industry, but it's definitely good for the power of the central government, right? Because it's bringing everyone under their fold, under their control, right? What, so like, and, and this Rohan Gray character is definitely interesting because like, like we said, he, his, his deal generally seems to be like pro-government, just pro-state. He's a statist. He likes the state to have the, the power and control that it should have. Like, what, what are the motivations behind pushing this thing? Because like, there's also the conversation of like, Rashida Tla- Tlaib, I think I pronounced her name. Like, she had her own like verbalized intent, which is to, you know, protect the little guy, protect minorities.

• 52:11David Hoffman?

  Rohan Gray seems to have his intent. Like, what's the motivation really pushing forward this stable act?

• 52:18Speaker 02

  You know, I mean, um, that's the kind of thing that maybe you should have Rohan on and, and ask him. And I, and I think he'd be probably very game to, to come on.

• 52:30Speaker 02

  But I mean, just looking at his stated position, again, it's to address what he perceives to be a systemic risk. And yeah, I, I, you know, as Peter was just saying, you know, it's the view of not just him, but I, I think, you know, as you were saying, money mon- modern monetary theorists of all stripes, that, um, you know, what is, you know, that money is a public good. It should be controlled by the state and that the, you know, money supply, um, uh, you know, is something that only the state should be able to control and the way they control that is by controlling the banks. And so it's kind of funny. So I, I can tell you kind of categorically that this is not a plot of the big banks.

• 53:14Speaker 02

  Because again, you know, Rohan had a hand in crafting this, Tlaib introduced it. And I can think of, you know, no, um, uh, greater enemy of the banks than Rohan and Representative Tlaib. That said, it's kind of funny that what they want is to create a ton more banks potentially. So that, you know, that's funny. It sounds ironic, but no, it's not. If you consider that, you know, they think that banks should be heavily regulated so that they are, you know, essentially arms of the state, um, carrying out a public good. That's your view. And to Rohan's credit, you know, Rohan actually was on our podcast, Peter interviewed him.

• 53:55Speaker 02

  And we had him on because Representative Talib, a few months before, so this was, I don't know, Peter was in the summer.

• 54:02Speaker 03

  Four months ago.

• 54:03Speaker 02

  Four months ago, Representative Talib floated a draft bill. It was never introduced. And this was, if you remember, at a time when, you know, there were problems getting COVID relief out to people

• 54:18Speaker 02

  by the federal government. And she floated a bill that would have created a digital dollar.

• 54:29Speaker 02

  It wouldn't be the central bank doing it. It would have been the Treasury. And the neat thing about this digital dollar that she proposed, and I'm sure Rohan had a hand in

• 54:40Speaker 02

  in crafting that bill as well, it would have been a token-based bearer instrument. It was a digital dollar, and that would be, or at least had the intent to be, I sort of will quibble a little bit about

• 54:55Speaker 02

  the

• 54:57Speaker 02

  sort of function to get it to be that way, but it had the intention to be fully anonymous, right? So they wanted to create digital cash, which is awesome, right? So Rohan is all in favor of building bearer, you know, token-based bearer, completely anonymous digital cash as long as the state does it.

• 55:16Speaker 03

  But only the government should be the one doing that.

• 55:18Speaker 02

  That's just, that's their, that's their view. And that, you know, that's a legitimate point of view, I guess. It's interesting. So, and to go back to the modern monetary theory piece, that bill, the, the creating the digital money was one piece. The other piece of the bill was minting a trillion-dollar coin.

• 55:36Ryan Sean Adams?

  I remember this.

• 55:38Speaker 02

  Right. So you would create a trillion dollars and then distribute a trillion dollars through this digital dollar scheme. So anyhow, we, you know, we agree. So, you know, it's interesting. So he,

• 55:53Speaker 02

  I would sort of. Temper, you know, I mean, clearly Rohan is a quote unquote status that some people might label him, but you know, it's a status that wants to build completely anonymous, bare digital cash.

• 56:06Speaker 03

  Yeah. And his stated reasons for that, his stated reasons for that in the podcast where we, when we had him on were fear of totalitarianism. That if, if you don't have the ability to have anonymous financial transactions as we do through physical cash and as he thinks we should have with digital cash, which I agree, then you'll have a centralized database of everything that everyone ever buys, every service everyone uses, every embarrassing thing they do or political contribution that they make, and democracy can't function like that. So, you know, there may be, you could think of this as cognitive dissonance, but you could also think of this as someone who just thinks that money is this public good that the state should have monopoly control over, but that ultimately the money should be extremely user sovereign and private.

• 56:51Speaker 02

  I mean, what I would point out to Rohan, and I want, Peter, you probably did it on the podcast, is, you know, we agree on that, that we should have that user sovereign private money in order to prevent totalitarianism. But to me, the way to do that is not as the bill would have to create a board, a privacy board of political appointees to oversee and ensure that. The way to do that is with trustless, you know, mechanisms like Ethereum and Bitcoin.

• 57:22Speaker 03

  Fundamentally, where I think this comes down to, which might be interesting to your listeners who have more philosophical or economic bent, is can people band together to provide public goods?

• 57:32Speaker 02

  Right.

• 57:32Speaker 03

  Or must we trust the government to provide public goods? And can those two solutions coexist? Or would one chisel away at the other and therefore need to be outlawed? Obviously, Coin Center believes very strongly that individuals acting in their own volition and freedom and with innovation and passion can make their own public goods, and we don't need to have government monopoly over things like monetary systems. I think they can coexist.

• 57:54Ryan Sean Adams?

  As do we, as does the bankless nation, and we want to get into that a little bit more because there is some, some overlap, I think, with what Taleb and some of the folks behind this bill want to do and what crypto wants to do. But before we get to that, we'll talk about DAI, we'll talk about some other things. We've got to jump to our sponsors who have made this show possible. So we'll be back in two minutes.

• 58:18David Hoffman?

  If you want to live a bankless life, you need to get a hardware wallet. There is no alternative for storing your crypto in a self-sovereign fashion. That's why I have four ledgers that I use to manage my different crypto assets using the Ledger Live account as well. Ledger Live is like your home base for managing your Ethereum, DeFi, and crypto accounts. It does a really good job of aggregating all of your different Ethereum wallets if you are the type of person that uses more than one. But you can also add other cryptocurrencies like Bitcoin or Cosmos or whatever your preferred blockchain is. And then it will display an aggregate portfolio of all your accounts at the main page. One thing that Ledger is doing a really good job of is enabling all the money verbs that me and Ryan talked about

• 59:02David Hoffman?

  with the Bankless Skill Cube enabled in the Ledger Live app. So right now in the Ledger Live app, you can buy, sell, lend, swap, and stake your crypto assets, which is doing a really good job of fulfilling all of the money verbs in the Bankless Skill Cube. Something that's new to Ledger Live is Ledger Swap, where you can swap assets one for another directly inside the Ledger Live application, ensuring trustlessness in your financial activity on Ethereum and on Bitcoin. If you want to learn more about what you can do with a ledger, go to the blog post "The Power of Ledger Live" on the Ledger website, where they share some of the more advanced things that you can do with your ledger that you might not have known about. There's a link in the show notes that will take you to the Ledger shop, where you can get your preferred

• 59:46David Hoffman?

  Ledger hardware wallets. I personally like the Ledger Nano X, but I also have both. They're both great options. When you own a ledger, you own your own assets in the way that they have been designed to be held by the user and the user alone. So go get your ledger today to make sure that you are as self-sovereign as possible. The Bankless State and the Nations are brought to you by Wyarn. Wyarn is DeFi's first self-building, community-run project, which I just get really, really excited about. Why earn is a system that seeks out yield in DeFi and it does that in a number of different ways. A very aggressive way is with the vaults where you can deposit your preferred asset of choice and different DeFi experts will come in and generate a strategy

• 1:00:30David Hoffman?

  for what to do with your deposited token, right? And so it'll go find ways to get yield in that deposited token in DeFi. For those who want to just earn yield on their stable coins, the earn system is for you, where you can deposit your preferred stable coin and why earn will go and figure out which money market on DeFi and DeFi is producing the best interest rate, whether it's DY, DX, it's compound or Ave. It looks around DeFi to see where the yield is coming from and it directs stable coins automatically. So you don't have to check them out at why earn dot finance to get started and also check out the stats page to see what other people are doing as well.

• 1:01:10Ryan Sean Adams?

  All right, we're back with Jerry and Peter from Coin Center. Guys, where we left off, we were talking about modern monetary theory and sort of the, I guess, the political agenda this this kind of might be coming from. And there are also some, I think, areas of common ground between that, maybe call it wing of politics in America and what we are trying to do in the crypto community, particularly in the bankless community. One of the purported purposes of this bill is to help essentially the the unbanked, right? And isn't that what crypto does? I mean, the title of the show and the movement that

• 1:01:50Ryan Sean Adams?

  David and I are part of is bankless, using systems like Bitcoin and Ethereum to essentially bank without a bank in a permissionless way. That means open access to everyone in America, credibly neutral, independent of, you know, race, independent of socioeconomic class, a credibly neutral banking system for the world. That seems to be very much a part of the spirit of folks in Congress like Talib. Is there common ground there or are they not recognizing that side of the equation? Maybe we'll start with you, Jerry.

• 1:02:27Speaker 02

  Yeah, you know, I think there is common ground at a high level, right? And so I think that's, you know, you can, um, we have, we have shared concerns, right? So, um, I think where we depart is, and again, I encourage you to have somebody like Rohan on to have him speak for himself. Cause I, you know, I don't want to do that. But, you know, I'll try to steal in what I think somebody like him would say. And that's number one, you know, I think he'd be, or somebody like him would be perfectly happy to have, to, you know, let people experiment with, um, building, um, monetary experiments like Ethereum or Bitcoin.

• 1:03:12Speaker 02

  I think the problem he sees is when, um, people start issuing things that they call dollars. Right? Because again, dollars, this is public good that can only be provided by the state.

• 1:03:27Speaker 02

  And in doing that, um, perhaps creating systemic risk. And so what, what does he mean by that? Well, what I take it to mean is, um, you have a stablecoin issuer that says, um, give me a dollar and I'll issue you this token. And whenever you want, somebody, you know, you can come back with a token and I'll give you back a dollar.

• 1:03:49Speaker 02

  But what if that, what if they issue more tokens than they keep dollars? Right? And then what if there's a run on the bank, the quote unquote bank? There's a run on the bank and then it collapses. And then that means that that has a ripple effect because then loans that need to be paid can't be paid. And that ripples and ripples and you get a financial crisis, right? That's your concern. And so the way that they would address that is by regulating.

• 1:04:18Speaker 02

  What they would call depository institutions, right, as banks. Now, what I would point out there is, um, to the extent you have a stablecoin issuer that is doing stablecoin business, I'm talking here about centralized one. Since you have a centralized stablecoin issuer that isn't regulated by any body in the US and they're doing business with US people, well, they're not, you know, they're violating some law. It could be a banking law, it could be money transmission law, they're violating some law. So, you know, there's a way to address that. And if you look at, um, other stablecoin issuers, like for example Gemini,

• 1:04:56Speaker 02

  they are New York, a New York trust, right? And they have to keep a dollar in reserve for every outstanding Gemini dollar that they have. And they are regularly audited and regulated by New York Department of Financial Services. Same thing goes for USDC. Maybe, you know, so they're regulated, issuers of USDC are regulated as money transmitters. But again, they're supervised by banking.

• 1:05:27Speaker 03

  So they have a one-to-one reserve requirement, they always have, yeah.

• 1:05:31Speaker 02

  So it's not like they're not regulated, they are. Then you have things like DAI. And in my view, there, you're, you are regulated, you're regulated by the smart contract. You can, you see it and you, and you know, the, um, uh, deposits that you make,

• 1:05:52Speaker 02

  uh, are locked up, right? So, so anyhow, I mean, um, I don't see the systemic risk that's posed by any of these things, except the ones that are simply not complying with US law in any way.

• 1:06:09Ryan Sean Adams?

  So like, we would obviously agree with those arguments, of course, but this is a crypto podcast. But my, my, my question here is, I can't help but feeling like crypto is being picked on. Because we, we have this, right now, this tiny cottage industry and stablecoins are used by what? Like, a lot of crypto geeks at this point in time. There, there are other larger capital pools, but 20 billion or so? I mean, if we're talking about like, shadow banking and shadow dollars, like, what about the Eurodollar? Right? Outside of largely US jurisdiction? This is what I can't kind of wrap my head around is, why? Is it because of, is it because of Facebook?

• 1:06:48Ryan Sean Adams?

  Is it because of Libra, maybe, that the small cottage industry has suddenly risen to, like, the floor of Congress to take some action against? It just seems so early in the process. What's, what are your thoughts?

• 1:07:03Speaker 02

  So I, I definitely think that Libra is what spurred the US Congress, as well as regulators and legislators around the world, to sort of, you know, focus in on the concept of stablecoins, for sure. And not just from a credential or systemic perspective, but also from a money laundering and terrorist financing perspective, right? Libra definitely draws that. Peter, I mean, do you have other thoughts, Peter, on why stablecoins are being singled out?

• 1:07:43Speaker 03

  No, I mean, like I said earlier in the interview, I do think that, you know, there's a little bit of a mark, a tricky, sneaky marketing thing going on in the way the legislative language is drafted. Because stablecoin is drafted such that it could cover all kinds of things, like PayPal balances and Starbucks gift cards as stablecoins. And so, in some ways, this is, this is, well, let's use a somewhat easy to villainize term, because it's from a weird cottage crypto industry, in order to sneak in regulation of all kinds of non-bank dollar liabilities into a federal regime, which I don't think is a wise way to draft legislation, quite frankly, because...

• 1:08:25Speaker 02

  And I should say

• 1:08:26Speaker 03

  Realize that the words on the page mean something more than what they seem to obviously mean. They'll have to recalibrate and that that's not what you laws should be written to be clear and intuitive. They shouldn't be written such that you need to be a JD or a JSD in order to figure them out.

• 1:08:40Speaker 02

  Yeah, and I should say that while we're very happy that cryptocurrency has remained a bipartisan or nonpartisan issue. Libra was not that Libra, the parties were unified in their contempt for Libra. Broad broadly speaking, right? There are people on who maybe championed a little bit here and there, but broadly speaking, both parties.

• 1:09:09Speaker 03

  And I don't think we can underscore it enough because we will not have enough time to get into a lot of anti-money laundering law on this call. But Libra was a severe disruptor of otherwise very good policy settlements within the anti-money laundering context for, you know, from FinCEN, from the international financial crimes regulators, the FATF, the Financial Action Task Force. We had a really good situation where on-ramps to these protocols would be regulated for AML. But, you know, individual users of these protocols would not be regulated for anti-money laundering purposes. And when Facebook announces that this Libra thing is going to be P to P and tons of dollar transactions for anyone with a WhatsApp account are going to be P to P.

• 1:09:54Speaker 03

  It definitely made AML regulators suddenly say, wait a minute, you can do P to P transactions with Libra? And then also say, oh, wait a minute, you can do P to P transactions with Ether and with Bitcoin? And all of that's happening outside of these regulated on-ramps. What should we do? And that's, that's not good either.

• 1:10:13David Hoffman?

  So I want to turn the conversation to where it's in my mind and for some, and it gets crazy. And for some reason, Rohan doesn't think this is crazy. And so I kind of, I want to read some quotes from Rohan that came out through either on Twitter or through other media. He says, I think it's going to be quite easy to find concentrated power, even in those networks on. Which regulatory pressure can be placed. But, and this is why their crypto Twitter, their head exploded. I'm not going to take their propaganda as gospel that every node operator should be considered prima facie. I'm going to butcher that word. Prima facie immune from liability for any activity that takes place on the network those nodes maintain.

• 1:10:57David Hoffman?

  And then another quote, this is a completely decentralized network. You can't hold anyone accountable unless they, unless you hold the whole thing accountable. Is this is what Rohan is saying about people that talk about Ethereum and Bitcoin on crypto Twitter. This is just saying that you think it should be possible for a large group of actors to collectively engage in behavior that is unlawful for any one individual within that group to engage in, which I think is a nonstarter from a financial regulatory perspective. So this Bitcoin and Ethereum, there's activity going on in these networks, economic activity. Sometimes we're buying like Bitcoin is buying drugs. Like sometimes Bitcoin and Ether and stablecoins are used to do bad things.

• 1:11:40David Hoffman?

  And the crypto industry puts up this, what Rohan's calling this, this veil of decentralization saying, well, yeah, you know, you use the software to do things, but the nodes that run the ecosystem aren't responsible for the economic activity that happens on them. And Rohan is saying that, no, they are actually responsible. And it's actually not crazy to say that they're responsible, no matter how many number of nodes there are. What's your guys' take on that perspective? Because Rohan is trying to just be like, you know, the party's over, like, no, nodes are responsible. Like, don't give me any of that BS. Like, if you're, if you're running a computer that processes a bad transaction, like you are responsible. Is that, is that a reasonable take to have or is that just completely harebrained?

• 1:12:24Speaker 02

  So let me let Peter kind of address that veil of decentralization thing. But before that, point out that what you started with, that Rohan said, and by the way, again, you should have him on because I feel bad addressing him without having him here to defend himself. But notice what he's saying. What he's saying is Look, the stable act technically would allow the government to go after individual node operators who had some interaction with a DAI transaction, for example. But he's saying it's not going to come to that, right? There are bigger fish, right?

• 1:13:05Speaker 02

  They're, you know, they're going to be the, I'm not sure what it is he thinks it is in the case of DAI, but in the case of a, of a centralized stablecoin. This, you know, the government will be able to go after that issuer before it goes after the node. So he's, so in one sort of breath, he's saying, look, you guys don't really have to worry about this because even though, even though the law allows the state to go after you, they're not.

• 1:13:37Speaker 02

  You know, in my mind, you shouldn't write laws that allow, if that's not your intent, then don't write laws that allow that kind of fraud. But I think he's right. But, you know, again, I think we already have, number one, I think we have already good regulation in place that would address his systemic concerns. He would clearly disagree, you know, whatever. But that's one thing, that's, but then what you do is you write laws that cover decentralized, you know, sorry, centralized stablecoin issuers and you regulate them how you want to regulate them.

• 1:14:14Speaker 02

  When it comes to DAI, I'm not sure who he thinks, I'm saying this genuinely, I don't know who he thinks is left to regulate but the nodes and the users. I don't think he means the developers of the software because, you know, if he does, then that's, you know, he wants to regulate speech. So I don't know, Peter, what do you want to talk about?

• 1:14:40Ryan Sean Adams?

  And, and let's be clear, we'll get to Peter, but like, let's be clear on when we say the nodes, right? That could be individuals running ether staking nodes out of their house, individual Americans in their homes.

• 1:14:53Speaker 02

  But that's, that's part of his point. That's part of his point when he talked about availability centralization. His point is it's not as if there's nobody to hold accountable. There are real people who make up this network.

• 1:15:06Ryan Sean Adams?

  Wow. Wow.

• 1:15:09Ryan Sean Adams?

  Peter.

• 1:15:09Speaker 03

  And the disconnect there, so I don't think it's harebrained, I just think it is, it, I don't mean to be dramatic, because again, I think Rohan has some genuine beliefs that lead him to these conclusions, but I don't think it's harebrained, I think it's totalitarian. It says, it says, "Look, there are bad things in the world, and we need people in government to have the unfettered discretion to go after whoever they need to go after to stop those bad things." And the corollary to that is, as Jerry said, "We believe that people in government will use that unfettered power wisely

• 1:15:51Speaker 03

  to only go after the lumpy, bigger actors in the space and not go after, you know, your uncle who's running a ETH staking node in their basement, who's a nice man," you know? But I don't want to trust, I don't know who it would be, at the end of the day, the FBI, or the Federal Reserve, or the FDIC, to always use that power without using it in an arbitrary way and without using it in an effectively totalitarian way. And what's missing here is that laws, so in other tweets where he talks about things like nodes, he talks, he makes a comparison to counterfeiting, and says, "Well, counterfeiting is always illegal, whether it's a person passing a single $20 note that they know is counterfeit,

• 1:16:36Speaker 03

  or whether it's somebody printing thousands of $100 notes, and we usually only go after the really bad counterfeiters." A, that's not true. Lots of disenfranchised, poor individuals actually get arrested for passing a counterfeit note that they may or may not have known as counterfeit, actually.

• 1:16:54David Hoffman?

  That was extremely relevant earlier this year.

• 1:16:57Speaker 03

  Yes, extremely relevant earlier this year. And B...

• 1:17:02Speaker 03

  I would say counterfeiting laws are very carefully drafted so that you have to prove that there is a knowing intent to defraud the person you are trying to pass the note to.

• 1:17:14David Hoffman?

  Intent matters.

• 1:17:16Speaker 03

  Intent matters, and if you are participating in the Ethereum network as a staker, or as a miner, or if you're a Bitcoin miner, you have no intent to further counterfeiting. You have an intent to validate a public good, a blockchain that has a ledger of hundreds or thousands of transactions that are hopefully improving people's lives with respect to things like identity systems, monetary systems, payment systems, and most of them are completely legal. We can't just crash down every legal barrier we have to allow people in government, to allow people, to allow the police to stop every harmful act, even if it means stopping tons of un-harmful or good acts. We can't live in that world.

• 1:18:01Speaker 03

  I don't want to live in that world.

• 1:18:02Speaker 02

  And, you know, I should say that it's, there's a parallel here to that previous bill we talked about, right? So, in both cases, there is this faith that the state will be able to do the right thing in all cases, right? So, in one, in the stable act, it's that we're going to give the state this really broad power, but we trust that they're not going to abuse it, they're only going to go after the big fish. And the other one, we're going to have private digital cash, but we're going to trust this privacy board to ensure that. You know, and I think that's just where we depart. You know, if men were angels, et cetera, et cetera, it's the second time Jefferson's

• 1:18:47Speaker 02

  quoted in this podcast.

• 1:18:49Ryan Sean Adams?

  Yeah, this is a Jeffersonian-friendly podcast, I suppose. You know, one other, I guess, practical question, based on what you're saying, Jerry and Peter, is like... Let's say that, you know, Rohan was, is sort of right, or like he's, he's successful. And basically, the ETH nodes in the US drop, right? Maybe they dropped to zero. Well, outside of the US, there's still 8,000 ETH nodes that continue to run.

• 1:19:23David Hoffman?

  And process DIT transactions, importantly.

• 1:19:25Ryan Sean Adams?

  And process DIT transactions and process other US dollar denominated, whether it's black market, gray market, or whether other regulatory nation-state regimes just simply allow it, right? So from a practical perspective, even if it were possible to completely ban or make illegal this sort of activity in the US, you can't do it across a, like, multilateral world with different regulatory regimes. And therefore, all you succeed in doing is kind of put the US behind on some sort of adoption track to something that, that could be essentially the internet of money, or like, kind of a next wave of innovation.

• 1:20:10Ryan Sean Adams?

  I mean, does he, do they see that argument in play?

• 1:20:15Speaker 02

  Yeah, so I agree with you, with what you're saying. I think what Rohan would say, and again, you know, this is, you know, again-

• 1:20:23David Hoffman?

  You're doing, you're doing great, Jerry.

• 1:20:26Ryan Sean Adams?

  Steel man.

• 1:20:28Speaker 02

  I think what he would say, and I think he's right, is that, yes, that's the point. What we're trying to do is marginalize these activities. So that, yeah, maybe in the shadows they're done by a few people, but this has not become a major mainstream thing, unless it's being done by a regulated bank, right? That is the point, and I think he's right. I think, as I was saying before, while Ethereum and Bitcoin are unstoppable, you can marginalize it, right? Think of BitTorrent. BitTorrent hasn't been stopped. It's still there, you can go use it.

• 1:21:10Speaker 02

  But who, you know, BitTorrent has been marginalized, right? BitTorrent should have been really backbone infrastructure for how we move around data on the internet. And it's like this thing that is, you know, in the public mind is associated with piracy. And it really, as a result, in the technology, you know, in the technology in the corporate world, it's never really considered as a potential solution to certain problems because it never, you know, it's just been marginalized. And the same thing could happen to crypto.

• 1:21:45Speaker 03

  Another, another example is Tor. Tor is actually kind of an interesting example because it's a product of US government research. And there was a deliberate desire to get the private sector and individuals using Tor, because if the only people using Tor are US agents in the field, you can identify that network traffic. If those US agents in the field are amongst a bunch of other randos in Iran or wherever else who are interested in internet privacy, then the US agents in the field have privacy. So Tor is another interesting example. I mean, you know, I think this came up in Twitter a couple of times. Should users of Tor, should Tor relay nodes or exit nodes be held liable if people are accessing stablecoin networks through Tor?

• 1:22:28Speaker 03

  I suppose under this bill they would be. And I don't know how, I don't know how the bill's supporters feel about Tor. You know, if they value privacy, they might like Tor, but this could outlaw Tor. But the, the, the, the lesson from Tor is if you are a state, a powerful state in the world, like the US government, you do not want to, to ghettoize these new technologies because you will lose control over them completely. They will go to the corners and you will lose visibility into those networks and you will lose power over those networks altogether. Much better to play nice with these networks, understand them, utilize them for your own uses as, as a state.

• 1:23:08Speaker 03

  And and maintain, you know, points of regulation like the exchanges, like the like the centrally backed stable coins, regulate them for consumer protection and maintain power and visibility into these systems. Don't send them away.

• 1:23:26Speaker 02

  Yeah, and foster development of industry on top of these networks that is American, right? If that's what you care about, that's how we won with the Internet is that we fostered, you know, development on the Internet that was American. Should do the same thing here.

• 1:23:46Ryan Sean Adams?

  Absolutely, guys. Yeah, 100% on your team with respect to all of these things. I guess maybe just two things to quickly address some maybe some misconceptions and then we can wrap this whole thing up about like kind of where David started, which is the fight to come and how how folks can join the cause of Coin Center. Now, the first is the chances that this actually happens, guys, pretty slim. Like this bill, does it? I mean, we we've been talking about it because I think it's a very interesting angle, obviously, but is this really gonna happen?

• 1:24:17Speaker 03

  It's anecdotal at the very least.

• 1:24:18Ryan Sean Adams?

  Yes.

• 1:24:20Speaker 02

  Yeah, this particular bill, I would put, you know, the probability that it becomes law at low, right? I think there's a lot of things that would have to happen for this bill to make it all the way through. So I would say it's it's pretty low, but similar stuff could happen. And the threats to nodes could come not just from financial regulation, it can come from other quarters, right? It could come from anti-money laundering regulation. So we always got to be, you know, on the lookout.

• 1:24:53Ryan Sean Adams?

  The second misconception maybe I want to address is what we're not saying in this, I think, conversation is that there can't be some sensible regulation around, say, stable coins, right? It's not this, clearly, but I'm sure you guys would agree that the US could do things from a regulatory regime with with stable coins. Any any comments on that?

• 1:25:19Speaker 03

  Well, I think, you know, one thing we've advocated for for the last three years, which

• 1:25:25Speaker 03

  Representative Tlaib might find interesting, I don't know, is that the state money transmission licensing system, which is how a lot of these central asset-backed stablecoins are regulated, like USDC, is a strange, archaic system that you'd have to get a license in every state in the US where you have customers. So you have to accumulate, like Pokemon, all 53 state and territorial licenses. And you get examined by each of those, mostly independently. Some states coordinate, but you get like different people checking your books from different states all the time. You have to pass multiple criminal background checks. It's not sensible regulation. It's not good for the companies because the companies have to suffer these costs of regulation. It's not good for the users of money transmission services

• 1:26:08Speaker 03

  because some states, like I always pick on Alabama, have effectively very little in the way of consumer protections. You can get a money transmission license there by merely posting a $5,000 bond, generally speaking, irrespective of the amount of money you're moving. So they're woefully underprotected. So why not get rid of this state-by-state approach, which is bad for consumers and bad for businesses, and replace it with a single federal money transmission license? Or an alternative license? So if people want to get out of the state licensing conundrum, they can get this better federal license that would have better controls and, you know, more sensible regulations for the parties being regulated. I think that's a good approach.

• 1:26:50Speaker 03

  And we've advocated that for the last four years for Cointer.

• 1:26:55David Hoffman?

  So Peter, Jerry, we want to thank you for coming on the show. And we want to wrap up with this kind of just bird's eye view of this whole conversation. Recently, a friend of the pod, Jake Shavinsky, tweeted out something along the lines of like, "The time to get your assets off centralized exchanges was the day you bought them. Then the second best time to do that is right now. Seriously, do it now." And that tweet actually kind of reverberated around like almost every single Discord channel that I'm in and all the chat groups because that Jake is not somebody to just like ring a random bell. And then this came at the same time after Brian Armstrong talked to-

• 1:27:34David Hoffman?

  We made a tweet thread about, you know, having to KYC external accounts in relationship with crypto exchanges. And so like, there seems to be something like boiling under the water with people that are very in tune to these conversations. And kind of like what we said at the beginning, this stable act fight doesn't really feel like the main fight. What is the main fight? Like, what are people worried about? Because there are definitely people that are worried specifically right now. Like, what's going on? Like, what do we need to be prepared for? Like, what should we be paying attention to?

• 1:28:06Speaker 02

  So, um, the, so here's one thing that occurs to me is that, um, if you, one of the reasons we're able to be successful at Coin Center is that we're independent. We're taken seriously by folks in government. The other reason is that we're able to be discreet. All right, so, um, if people in government, whether it's regulators, fucking folks in Congress, are thinking of doing something,

• 1:28:36Speaker 02

  we can go and provide them advice about, that's a good idea, that's a bad idea, this is how you could improve it, you shouldn't do it at all. We're able to go in and give advice because they know that they're going to get that advice in private. And if we start tweeting, we're not going to get invited back.

• 1:28:55David Hoffman?

  Or are you mentioning something on a livestream, perhaps?

• 1:29:00Speaker 02

  So, that's one thing I would say. But, you know, what I would also say is, look, the Secretary of the Treasury has been very, has publicly said in the past that he's concerned that unhosted wallets could be, he said, new numbered Swiss bank accounts. Right? So he's concerned about that. And Fados has sort of echoed that in their 12-month review in May. So, um, that's definitely in the water. And look, to be, you know, perfectly honest, yeah, unhosted wallets can be used by bad actors to do illicit bad things, just like email can, right?

• 1:29:46Speaker 02

  And so it presents a risk. And there are sensible ways to address that risk and really bad ways to address that risk. So that's, you know, that's an area that I think, you know, concerns us and, you know, we've been doing some writing about that.

• 1:30:05Speaker 03

  In defense of Jake, it's probably always a good time to get your money. Yeah, crypto.

• 1:30:13Speaker 03

  Not your keys, not your coins.

• 1:30:14David Hoffman?

  Yeah, it's definitely an evergreen thought for sure.

• 1:30:19Ryan Sean Adams?

  Well, absolutely, guys. We really appreciate you sharing your insight today. This is a fight that I think the Bankless Nation can definitely support you on. Some tangible ways to do that, guys, are go to the Coin Center and get Coin Grant. A dollar goes a long way.

• 1:30:36David Hoffman?

  Just at least $1 because it gets amplified by like 60, 70, 80 more dollars after the fact.

• 1:30:42Ryan Sean Adams?

  Yeah, so if you don't know how this works, right? So your $1.

• 1:30:44David Hoffman?

  122, excuse me.

• 1:30:45Ryan Sean Adams?

  Oh, my God. So your $1 gift, like $1, 1 USDC, it doesn't really matter, can be a stablecoin. It cannot be a Starbucks dollar, I don't think. We're not there yet. But if you give that, that gets amplified by 120x right now. And this is a fight I think worth having. We need voices like Coin Center in DC, just educating, just talking to folks in Congress about these issues. So make sure you do that. We'll also include some resources for you, including Peter's fantastic article about the unintended consequences of the stable act, some other resources for you as well. But Peter and Jerry, it's been a pleasure to have you. Thank you so much for joining us for State of the Nation.

• 1:31:28Speaker 02

  Thank you for having us.

• 1:31:29David Hoffman?

  It was very fun. Thanks, guys. Cheers.

• 1:31:31Speaker 02

  Thanks.

• 1:31:31Ryan Sean Adams?

  Take care. All right, Bankless Nation, this has been a long one, but it has been fantastic. As always, none of this was financial advice. Ether is risky, die is risky, so is Bitcoin, but this is the frontier. We're glad you're with us on the Bankless journey. Thanks a lot.