#397: Congressman Davidson, Caitlin Long, and Adam Traidman on Stablecoins

Today's episode features Congressman Warren Davidson, Avanti Bank Founder Caitlin Long, and BRD Founder Adam Traidman. We focus the conversation exclusively on Stablecoins. We spend time talking about what stablecoins are, what value they bring to the market, how governments plan to use them, what the impact on banks may be, and how the future is likely to play out in the eyes of our panelists. ============================== Blockset by BRD is the leading Bitcoin and Ethereum digital asset toolkit. Blockset enables enterprises and developers around the globe to deliver massively scalable, high-quality applications in a fraction of the time, at a fraction of the cost. From custody solutions to scaling your DeFi products, Blockset is your technical backbone. https://blockset.com/ ============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

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

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Today's episode features Congressman Warren Davidson, Avanti Bank founder Caitlin Long, and BRD founder Adam Trademan. We focus the conversation exclusively on stablecoins. We spend time talking about what stablecoins are, what value they bring to the market, how governments plan to use them, what the impact on banks may be, and how the future is likely to play out in the eyes of our panelists. I really enjoyed this conversation with all three of these folks, and I learned a ton. I hope you will as well. Before we get into the episode, I want to quickly talk about our sponsors. First up is Blockset by BRD.

• 0:45Anthony Pompliano?

  They're a leading Bitcoin and Ethereum digital asset toolkit. Blockset enables enterprises and developers around the globe to deliver massively scalable, high-quality applications in a fraction of the time at a fraction of the cost. From custody solutions to scaling your DeFi products, Blockset is your technical backbone. Similar to what Amazon's AWS or other developer toolkits do in the traditional world, Blockset by BRD is that leading digital asset toolkit for the crypto world. If you're building anything in the space, I highly suggest you go check out blockset.com. Again, blockset.com.

• 1:22Anthony Pompliano?

  They're the leading digital asset toolkit, and they're ready to help you build for more mass adoption in the crypto space. Go check them out, blockset.com. Lastly, don't forget that I write a daily letter to over 75,000 investors about business technology and finance. I break down complex topics into easy-to-understand language while sharing my opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. Alright, let's get into the episode with these panelists. I hope you guys learned something about stablecoins, and let me know what you think on Twitter afterwards.

• 1:58Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 2:23Anthony Pompliano?

  All right, guys. Bang, bang. I've got a treat for you today in that I have, for the first time ever, three different people who are all on together. We'll call this a virtual panel or just a hangout session, whatever you prefer. But it's all about stablecoins. And so maybe we can just kind of go around the horn here. Adam, we'll start with you, then we'll go to the Congressman and then to Caitlin, and just give a quick introduction as to who you are and kind of what you're working on today.

• 2:51Speaker 02

  Great, thanks, Pomp. My name's Adam Traidman. I'm the CEO of BRD. We are a global Bitcoin wallet, about 5 million customers, also provide software for enterprises that are looking to accelerate blockchain tech. I'm currently based in Tokyo. I actually CEO three companies. I also work on behalf of a large Japanese investment bank, SBI, here in Tokyo. And I've been in the Bitcoin industry since about 2015 timeframe, seeing a lot of ups and downs. It's been a wild ride and happy to be here today to discuss stablecoins with you.

• 3:23Speaker 03

  I'm Congressman Warren Davidson. I'm a Republican member of Congress from Ohio. I'm a member of the House Financial Services Committee, so we oversee, you know, everything in this space that would be a security. But then you have commodities, and oddly enough, in Congress, that's broken off into the ag committee. And then when you look at things that would be like utility tokens, this would be something that's broken into energy commerce. And you look at that, you see just straight away some of the dysfunction of Congress. So if I thought Congress was working great, I probably would be back in the private sector or still be in the private sector and would not have stepped away from the businesses that I had at the time to come into here.

• 4:07Speaker 03

  But it's been exciting time of my time in Congress has really been concurrent with, you know, the ICO market and everything else. But frankly, my big lift here is to try to get members of Congress to understand the technology and frankly, to understand the implications of it. So we get a regulatory framework that keeps America the innovation hub of the world for this great technology.

• 4:32Speaker 04

  And hey, Pop, Caitlin Long, CEO and founder of Avanti Bank, literally just finished the Wyoming Blockchain Select Committee. We are, we're in the middle of a two day meeting, just finished day one. I think we're actually going to be doing something interesting on identity. I think we're actually finally going to break through on that. So I'm wearing my Wyoming brown and gold today, bleeding, riding for the brand. And we also just kicked off YO Hackathon today. So it's, it's a big day. This is a wonderful way to cap it off. Thanks for having us.

• 5:01Anthony Pompliano?

  Absolutely. Congressman, maybe let's start with you. One of the things that you and I have talked about in previous episodes is just what is money and why that is important. And so you've got a, a unique view for many that of your peers, but a one that I tend to agree with. Can you just talk a little bit about a stable coin is really a digital representation of money or a currency? And kind of, let's just start with like, what is a currency or what is money in your opinion?

• 5:27Speaker 03

  Yeah. So if you look at, you know, the idea of money in America, we think of it as dollars inherently. But, you know, it's been, you know, a phenomenon in human civilization for a really long time. And it has really characteristics that make it a store of value and a means of exchange. So it's really a tool to facilitate a trade that, you know, two or more parties want to, want to do. So when you think about trying to make it digital, it's really taking what we've done in paper, which evolved from, you know, carrying literal goods and doing a trade that

• 6:07Speaker 03

  way. And the node, a bank note was really a representation of what you had stored, you know, with that bank. Now we do that with paper and it represents a store of value. And if we do it digitally, it's essentially maybe the easiest way to think of it as a block of data in a spreadsheet. And you could say, hey, I own this block in an Excel spreadsheet.

• 6:31Speaker 03

  But it's a store of value and a means of exchange. And the way it does that in the most efficient way would make it a more useful type of money.

• 6:39Anthony Pompliano?

  Absolutely. And Caitlin, maybe you can give us an overview of just where stable coins kind of have come in the Western Hemisphere, and then Adam will come to you and kind of talk about Asia. But Caitlin, just where are we with stable coins today? You know, kind of really throughout North America?

• 6:57Speaker 04

  Sure. It's been said that stable coins are the killer app of blockchain. And indeed, right now, I think that is actually proving to be the case. They're just alternative payment systems or alternative settlement systems. But they solve a couple of very interesting problems with the legacy payment system. One of which is it just takes a long time to settle payments. That's especially true in foreign exchange, but it's also true in domestic payments. And the other is the settlement finality issue that most folks are aware that credit and debit card payments can be so-called clawed back, which means they can be reversed. But ACH payments can be as well. And for up to as many as 90 days.

• 7:42Speaker 04

  It's technically 60 days plus the statement period. But if at the beginning of the statement period, then it's really 90 days. And that's an acute issue in digital assets. And so I think this whole settlement finality topic wasn't really in the vernacular until the digital asset industry came along. And then all of a sudden, you've got huge counterparty risk on your transactions if a digital asset dealer will deliver you a digital asset, but you can claw back the dollar payment that you sent them. That's a huge risk issue. It's true for everybody. It's not just for the digital asset industry, but for obvious reasons, it's particularly acute for digital assets. And that's in part what stable coins were designed to solve. I do have to say, though, that it's ironic.

• 8:25Speaker 04

  The original use of stable coins is different than what it is today. And that was because Wells Fargo took Bitfinex's bank account away. And essentially, the traditional US banks wouldn't serve the digital asset industry. And so invention is the mother of necessity, and the digital asset industry created a way to get US dollars, and it solved this additional problem, which is really now the raison d'etre for stable coins.

• 8:53Anthony Pompliano?

  That's awesome. And Adam, maybe give us an overview of kind of where stablecoins are in Japan and in Greater Asia.

• 8:59Speaker 02

  Yeah, and I was just gonna add, I think Congressman Davidson and Caitlin bring up good points, right? And that is that the reason why stablecoins could be sort of the killer app here is because they combine the best of both worlds, right? When Bitcoin was created, it was created to have better properties of money than than current money at its time. And those properties of money are things like fungibility, divisibility, transportability, right? And with a stablecoin, you get the benefit of something that is non-volatile, right? Or limited volatility, which has always been the complaint against Bitcoin, guys like Warren Buffett and other respected investors, right? But you also get all those other benefits that Bitcoin was originally created to have, right?

• 9:41Speaker 02

  Transportability, you can send it over the speed of light anywhere in the world nearly instantly, right? And fast settlement, like Caitlin said as well, right? So stablecoins offer sort of the best of both worlds, and they do so, most importantly, I think, in an environment that feels and is now being more compliant and is accepted by regulators. And that's critical because we operate not in the wild, wild west, but we operate in the real world. And in the real world, you have to follow the rules in order to build businesses, right? In order to solve people's problems in a way that's going to scale. In Asia, I think that what we find here, not just in Japan, and you know, I think in the 80s, everything, oh, Japan is the future and all these great things, right?

• 10:21Speaker 02

  But today, you know, we all know that the country that is driving a lot of growth and innovation is China. And we see a lot, we feel a lot, both by proximity to China here in Japan, but also by, you know, nationalistic pride, frankly, in the sense of competition. And, you know, I think I'd be really interested to hear what Congressman Davidson and Caitlin think about this as well. But I think modern wars are fought with economics. And I think that, you know, superpowers of tomorrow, or even of today, like China, are embracing new technologies and recognizing these things, and are looking at them as ways to flex their power and their muscle and to get an advantage.

• 11:02Speaker 02

  Especially, you know, in in the current situation that we have with the global trade war and whatnot as well. And so I think that we in America need to be very conscious of that. And very much like we fund our our military and our traditional sort of instruments of defense and and and protection, that we need to look at economics in a similar fashion and we need to evolve and change more quickly. Because I think that's how countries like China look at it. They think in decades, they think in centuries, they don't think in weeks, months, or even in years, right? And so you see the transformation to the digital R and B, which is essentially a, you know, state issued stablecoin. And it's not that it's something that's going to happen over a decade. It's the kind of thing that a country like China can implement in a year.

• 11:47Speaker 02

  If they can get rid of coronavirus or COVID nineteen, you know, in three to four months, you know, they can they can replace their entire physical cash economy, you know, within within a period of time, not much longer than that. And so we really need to be aware of that and we need to see and understand how they're going to leverage that against us. And, you know, we need to stay competitive.

• 12:05Anthony Pompliano?

  Absolutely Congressman Davidson, maybe we can talk a little bit just about the conversation for yourself and your colleagues. There's obviously been talks of a digital dollar or a stablecoin. Kind of how are people thinking about that internally? I think we saw a clause in one of the stimulus packages where that was kind of an idea. Is that something that you think is possible in the short term? Is that something that, you know, is kind of a dream and we may not see for five or 10 years? Kind of just how do you look at the US dollar being turned into one of these digital dollars and kind of being controlled and issued by the US government?

• 12:43Speaker 03

  Yeah, so great question. You know, the person who held the seat I have now in Congress before me was Speaker Boehner. And, you know, obviously was in the seat for a long time before he has a saying, you know, things happen in Congress very slowly until they happen very fast. And and I think that's the way right now it feels like good grief, man. You can't even get people to speak about this in detail. And frankly, the number of people who truly understand it right now, small. But when you get the right bit of momentum, it tends to just fly through sometimes. Sometimes with way too little scrutiny or dialogue. So that's the concern right now because, you know, if you look at the Federal Reserve,

• 13:26Speaker 03

  they had originally said that they were going to stay hands off in faster payments. And so banks and fintech companies dumped lots of capital in there. They poured all kinds of R and D and developed all kinds of products in the faster payments arena. And then, once that looked ripe and robust, the Fed just said, yeah, we're going to play in that field. You know, so essentially, I don't think that's right. We're still trying to, you know, deal with that in Congress. And I think the same thing could happen here with their view of digital dollars versus what Congress's view is. And generally, Congress doesn't assert itself very well. They got it right when they were developing, you know, when the Internet was developing.

• 14:08Speaker 03

  Congress didn't drive that, but they put a legal framework in that made it work well. And in this case, if we don't act, I really feel like the risk is that we're going to get a digital dollar that's essentially like the digital R and B, which gives the government the ability to intervene on any transaction. You know, all the characteristics that Bitcoin has of a truly distributed ledger with no central authority, no intermediary, it is really a good replication of cash, right? So if I have a $20 bill and you and I agree on something, you know, we trade the cash for the service or good and the transaction is completed, we don't need permission from someone else.

• 14:53Speaker 03

  And, and so, you know, to me, a currency is clearly more valuable when we don't need the third party to do that. But for some in government, they want those features. To me, that's an authoritarian style system. And it has, you know, when we use lingo like, you know, Bitcoin versus Shikcoin as a differentiator. One of the key characteristics between the two is whether there's a central authority that can destroy, destroy or distort the value of it, or frankly, block.

• 15:26Speaker 03

  Transactions and and for some in Congress, that's a feature that they want. Right. They want it to and that's inherently incompatible with a true distributed ledger technology and and it goes to custody issues. You want a third party to verify the custody or things like that. And well, that's part of the feature. That's why it's faster. That's why you can can do these things. And so if you just try to build those things in to a a central bank digital currency, it it really doesn't work the the best way that the technology does. And and so as you're trying to explain this to colleagues who, in my opinion, are drawing the exact wrong conclusions from the Bank Secrecy Act, any

• 16:10Speaker 03

  money laundering, know your customer provisions that guide the current banking framework, which is essentially to say, we need bigger, more powerful, you know, tools and more government. It it's distorting the whole, it's complete economic distortion of the purpose and utility of money. And so we, to me, before we can go live on the central bank digital currency that would work right and really give the United States of America a comparative advantage with China, is we should get a system that plays to our free and open society, which could be like true distributed ledger technology. So hopefully that's clear to people that understand some of these terms. But, you know, part of this

• 16:53Speaker 03

  is to give a good piece of education for people that are still kind of learning the lingo.

• 16:59Anthony Pompliano?

  Absolutely. No, and I think those are really, really important pieces because it's one thing just to implement technology. But if you if you do it in kind of a nefarious way or a malicious way, it kind of ruins the whole point of this. So I think that's a really important point. Caitlin, maybe talk a little bit about if we do get kind of the right type of stablecoin issued, whether that comes from kind of the private sector or from the the central banks. How does this interface with the legacy financial system and kind of banking organizations? And really, just from a thought process of, does it change what they do? Or is this merely just the same type of fiat currency in a new technology form factor? And so they update some technology and then it's business as usual?

• 17:44Speaker 04

  Oh, no, it's majorly different technology, as you know. That's part of the reason why the enterprise blockchain efforts didn't generally take off. They've succeeded in niches. But, you know, five years ago, everybody thought enterprise blockchain was going to completely rip out and replace the, you know, legacy systems of the financial world. And I even subscribed to that, at least in the beginning, because I think it should. But that didn't mean that it would. And the reason is because they're two fundamentally different architectures. There's a, the architectures of the legacy financial institutions use centralized systems that duplicate data and then reckon across the counterparties and then everybody has to reconcile.

• 18:28Speaker 04

  Well, distributed ledgers use decentralized systems and nobody has to reconcile because they're shared by everyone, but they're heavily encrypted. Whereas inside the big financial institutions, pretty much nothing's encrypted. Even the small financial institutions, they just have really strong firewalls and nothing's encrypted on the inside. You know, Bitcoin has no firewall and everything's encrypted, right? So they're just really fundamentally different architectures. And so how do you actually have the legacy financial institutions, even if the central bank were to, and again, I'm talking about the US, although this is true in much of the developed world, there's just legacy infrastructure that's just fundamentally incompatible with the IT architecture of distributed ledgers.

• 19:12Speaker 04

  There's another piece of this that's, that'll be, this will be a US-specific comment, which is that there is, there are a very small number of core service providers in banking software, and they do not have the capability to do, to integrate with wallets. And so I think it's years away because the technology has, is just fundamentally different. And I could go into a whole different discussion about the impact of the fact that all the banks in the, in the US rely on a very small number of software providers and only a few of the very largest banks are exempted from the requirement to use one of those software providers. Well, what do you think happens?

• 19:54Speaker 04

  Over the last, you know, fifteen, twenty years to those software providers who were comfortably in a ensconced in a regulatorily advantaged position. They they didn't they didn't keep up with with modern software practices. Let's put it that way. In fact, some of the hottest fintech companies are are, you know, trying to break in to that, you know, effective monopoly. But if you think, if you understand that that they're not using modern software practices, and this is part of the reason for the apathy of the payment system. And here comes this distributed ledger stuff, which is all wallet based. These are two fundamentally incompatible IT architectures. And and it it literally has to be built from scratch.

• 20:37Speaker 04

  And and do you integrate it back with those old systems? That's that building that middleware to integrate it back in and of itself would be a massive task. That's why I I when I left the enterprise side of the business, I realized the public blockchains were where the action was going to be. And we're just building a parallel financial system that is entirely based on these new architectures. And what we want to try to do is just build bridges back and forth between the two. But but the two are going to be coexisting and they're not really existing, I think, within the same legal entities for that reason.

• 21:12Anthony Pompliano?

  Yeah, that's a very good point. Adam, maybe talk a little bit about, is it possible for the central bank digital currencies to be built by the governments? You talked a little bit about China, obviously, kind of what they've done. Or are we going to have to see kind of public-private partnerships, in your opinion, around the world in order to actually get the the digital currencies built correctly?

• 21:31Speaker 02

  Gosh, you know, I couldn't agree more with Caitlin's comments. I think that the technology is so fundamentally different, you know, spending like most of my career in Silicon Valley, you know, and pitching VCs and all this about disruption, disruption, disruption. You know, they say disruption really occurs when the old system becomes irrelevant. Not that it becomes improved, it becomes irrelevant, right? And that's like going from, you know, CDs to MP3s and iPods and things of that sort, right? And and I think those sort of paradigm shifts, unfortunately, we can learn from them. When we talk about money and banking and finance, well, we can't mirror that. And the reason is, like was just said, they have to coexist for some time because there's inertia in banking.

• 22:14Speaker 02

  There are bigger companies and governments even who have a lot to lose through this transformation. And it's not just about money, it's control and it's power, right? And so there's gotta be sort of a more of a compromise, really, right? It can't be one of these disruptive Silicon Valley-esque. Apple comes in and decimates the, you know, music industry and just replaces it with something new because it's better and cheaper for the end user, right? The customer, right? In this case, it's it's gotta sort of have, you know, the the oversight and the the buy off or the the sign off of of governments. And that's why, you know, folks like Congressman here have such hard jobs, right? It's to figure out what that compromise is and to figure out sort of how to get

• 22:59Speaker 02

  everything agreed when disparate parties have such big differences in expectations, whether it's a Chinese style, you know, police state, you know, all the way down to a democratic, you know, entity like the United States of America. So I think that in in China, you know, they can, they're authoritarian. It's they are clearly like what they did with COVID-19. They literally just closed the roads. I mean, they can do whatever the hell they want. And they have a population that is willing to accept that, actually. And they're very patriotic about it. I actually admire that about China, right? The people just, they they just go with what's said and and they, you know, rah rah rah, right? At least that's what we hear, right? That's what we hear.

• 23:40Speaker 02

  So, you know, I think in in the U.S., it's gonna be a a combination of technology providers and it's and and sort of government oversight of those companies. I think that to Caitlin's point, all of these core banking providers, it's not just in the U.S., it's in Europe, it's in Japan, it's in other places, a small number of really old backwards companies who frankly have been, you know, no disrespect, but, you know, comfortable, dumb, fat and happy as they say, right? With these big monopolistic style contracts. And, you know, okay, you know, we understand. So there's gotta be some change. It's gonna take the regulators. Opening things up a little bit and that's a slow change in order for these new technology companies to be able to come in. And by the way, this is the same thing we see in the private sector all the time, right?

• 24:25Speaker 02

  Like with IBM and then Microsoft came in and kind of ate their lunch, right? And then Google came in and ate their lunch and there's a long tail on IBM. They're still selling computers, believe it or not. You know who they're selling them to? All the big banks who use all those old computers, right? There's a long tail on Microsoft. There's a long tail on Google, right? So the tails keep getting longer and there's going to be a long tail on the traditional financial products and software as well. The bottom line is this, this is how I think, because I'm building a consumer and an enterprise, but really a consumer business. And that is, what do the customers want? Right, what do they want? You know, I used to be able to go to my bank and get 5% interest. I get squat now. I'm working my butt off, you know, for my salary, I'm putting it into a bank and I trust the bank. But, you know, I'm not getting anything for that.

• 25:09Speaker 02

  Now I'm hearing about these yield, you know, bearing, interest-bearing, high-yield accounts. I'm hearing about all these opportunities for yield farming and all these, you know, things where I can get not just 3% or 5%. But if I'm willing to take a little bit more risk, by the way, my money is literally sitting like the equivalent of a Wells Fargo, right? I mean, there's zero chance I'm going to get anything there, right? And I could take a little bit more risk with some of that discretionary income that I would otherwise invest. And in things like oil, by the way, which obviously, you know, more volatile than Bitcoin recently. And, um, you know, as a consumer, I like that. I want to provide for my family. I want to turn my savings into more money. I used to be able to do that, I can't do that anymore. So if the consumers push for this stuff, that's why I think the OCC changed their rules recently, right?

• 25:53Speaker 02

  Is I hope it's because the American people and as a proxy, the banks lobby the OCC to enable this, to build new business around what customers want, right? And in other countries, there's just a lot more flexibility in a lot of cases to do that, right? And so I hope we can embrace things in the US like they have in these other jurisdictions as well.

• 26:15Anthony Pompliano?

  That's a great perspective Congressman Davidson, one of the things that Adam kind of hinted at was this almost competition right between China, who has very grand ambitions, have been very public about kind of wanting to get their digital currency out and into the hands of consumers. I think that in the last conversation you and I had on the podcast, they may have grander ambitions than just their own citizens using this and then kind of see an opportunity to get globally access to really kind of drive adoption of this. The US, obviously, at some point, I think our belief is like they'll wake up to this and say, hey, we should do this as well. Talk a little bit just how you see the relationship with China, the competition, the kind of economic trade war we're engaged in right

• 27:00Anthony Pompliano?

  now, and how the stable coins or central bank digital currencies kind of plays into all of this.

• 27:06Speaker 03

  Yeah, so China in particular is a good area for me to kind of illustrate how I even got involved in this. So, you know, when I graduated high school, I enlisted in the Army, became an Army Ranger, went to West Point, came back as an officer, did all these things in the military. And in that sense, you think of China as a potential, you know, conflict, right? You think, well, maybe I'll never even go to China under friendly conditions. And so when I get out of the Army, I got involved in manufacturing. And manufacturing in the 2000s has inherently involved trade with China. And you experience all this friction

• 27:45Speaker 03

  of trade. So, you know, back when, you know, you're looking at, you know, you know, digicash and early, early ideas in this, you start going, oh, well, maybe there's a solution to digitize money so that, you know, you could actually get past all the intermediaries and just get the goods shipped. So you would miscommunicate with all this stuff. And it really shows like, you know, the governments sometimes, just like the architectures, get in the way of people who just want to work together. So you can build great relationships with, you know, people all over the world. That's been my experience. And, and the hope is That we have the kind of government that lets that happen, you know, at the nation state level.

• 28:30Speaker 03

  China is clearly got a different vision of how to run their country and and and how to run, you know, not just not just, you know, their overall country, but how they would go about a digital currency. So, you know, just like, you know, they can do things. Well, you don't hear a lot of dissent out of China because they can, you know, just push you in jail or, you know, create a million, you know, a million plus Uighurs to put into concentration camps and re-educate them. We certainly hope that the United States of America doesn't try to replicate any of those things. But when you think about it, the a lot of the push in capitalism and capital markets in the United States is to take our capital markets and frankly deputize or

• 29:15Speaker 03

  partially nationalize the banks or the publicly traded companies to say, you know, tell us everything about your customers. You know, and, you know, the Fourth Amendment does not say, the Fourth Amendment is the right to privacy. And it does not say that if you have nothing to hide, well, then you have nothing to fear. Right? It says you have a right to privacy, not secrecy, not no way for the government to find out anything. And we have an ability to take advantage of our cultural differences and do essentially what what you know, a feature of Bitcoin is a layer of privacy, not true secrecy. But that's being eroded in the United States because of at the edges, the only way to get into the on-ramp easily

• 30:00Speaker 03

  is is essentially, you know, entities like Coinbase that do to work in the United States of America and and build, you know, get a return on their capital that they're innovating and putting at risk. They have to comply with know your customer, BSA, AML. Well, Binance doesn't have to do that. They're doing all kinds of things. So you wonder why it's scaling so differently. On the back end in China, they're looking at this stuff in a different way. They know way more about the identity of their people. And they do it to a point where they're building social credit scores. So literally in China's system, they could know all the stuff in the world about every customer that comes in on.

• 30:46Speaker 03

  A transaction, particularly with a central bank digital currency. And, you know, in the United States, we have credit scores. We don't really have social credit scores. And in a way, that's kind of what some people in the United States are pushing for is, "Well, you know, you're not going to bank those people, are you? You're not gonna, you're not gonna..." You know, we made it legal that, for example, we made it legal that you can transact marijuana or medicinal marijuana in some states. But you're trying to use the financial system to essentially still keep it illegal, even though that debate on the upfront was happening. You're leveraging money to try to distort law enforcement. And/or you're leveraging publicly traded companies. So that's the real tension that exists. And so when Adam's talking about, you know, the legacy system, that tension's real.

• 31:30Speaker 03

  I mean, these people, whether it's a government institution like FinCEN or Treasury or, you know, the OCC, adapting to the reality. We have to say, are we gonna basically take the shortcut, easy route, which China's taking? And it's the easiest morph off of where we're at is to say, we're gonna have central authorities with all the same data collection points that China has, only we're gonna work to do it better. Right? Or we could say, we're gonna have a free and open society that respects some layer of privacy with the ability to get a warrant and find out and solve crimes. But we're not gonna turn money into a weapon. And, you know, frankly, in a way, the odds are stacked against that working,

• 32:15Speaker 03

  just like the odds were stacked against our founding fathers trading this country that did protect those rights.

• 32:23Anthony Pompliano?

  Yeah, I couldn't agree more. I think that is a fantastic way to view it. Caitlin, any thoughts on that?

• 32:29Speaker 04

  Well, sure. I mean, there's an inherent tension between, between privacy and use of the internet. And... You know, I think the privacy advocates in the US lost that battle in 1977 when the Bank Secrecy Act was put into place in the first place. It's been substantially expanded. And just last weekend with the BuzzFeed leak about all the suspicious activity reports, which are, it's a felony to leak those, but somebody did. And, boy, there was a lot of information. Granted, most of it was pretty old, but it's just that, you know, the, I think it was Rahm Emanuel who said, "Never let a crisis go to waste." That's going to be viewed as a crisis in that world. And the magnitude of compliance is actually going to be ratcheted up further,

• 33:14Speaker 04

  or compliance restrictions. And the sad thing about that is that that actually puts even more compliance costs on the small community banks. And essentially just makes it such that the only ones who can service those customers and handle all those compliance, which is an enormous amount of work and cost, are the very large banks. And so people get the opposite of what they want. They don't, they don't want the big banks getting bigger, but, but it's the regulatory mandate, especially on the compliance side, that, that's, that's, that's difficult. One other piece about the regulation, going back to this whole question of can the, can the US implement this even if those in Congress who are proposing

• 33:56Speaker 04

  a digital dollar for the distribution of so-called helicopter money? And it just came up again today. I think there was another bill proposed today.

• 34:05Speaker 04

  Could it, could it happen? And the answer is, none of the regulators are ready for this. They do not have, there are basically three things that have to happen in order for that kind of regulation to get put in place. You've got to pass the law first, and then the rules have to be implemented. And then the bank regulators have to have a supervisory manual so they can determine how to examine the ones that are actually handling this. That is a years-long process. In Wyoming, we're 27 months into it and just about to, I understand, release the supervisory manual on how bank supervisors can supervise banks' activities in digital assets. It's the first one that's ever been drafted. It's 1,500 pages long, promontory, consulted on it.

• 34:46Speaker 04

  And I'm sure it will be, you know, heavily copied by other regulators around the world, including the OCC, National Bank regulator here in the US and other states as well. But up until now, it didn't exist. You can't just, you know, pass a law and suddenly those things actually come into being. It takes a long time and the US is building the consensus for that. The Digital Dollar Foundation, for example, is working towards that. But it's not something that's going to happen quickly. And one other piece of that related back to the privacy and technology. Neil Ferguson has made a couple of really interesting points about the national security implications of losing the payment technology war.

• 35:28Speaker 04

  And I think he's right that you won't keep your reserve currency. The reserve currency, yes, sure, it's the perceived stability of the issuer. But it's also who's got the best payment technology. And the world's going to migrate to the best payment technologies. I've said this before, multiple S and P 500 companies have been using Bitcoin quietly in, you know, mostly in emerging markets where there are not well-developed banking systems because it's the best technology. They'll never tell you that publicly. They will never be in the newspaper about it. But it's been happening for years. And so, you know, they've got the best incentive to go out and use use whatever technology they need and they're going to go find it.

• 36:10Speaker 04

  And if the US really does lose that race, then it's our own fault.

• 36:16Anthony Pompliano?

  I love hearing that. Go ahead, Adam.

• 36:19Speaker 02

  I was just going to say, you know, listening to this, it makes me thankful that we have folks like the congressman here fighting the good fight, you know, to defend those principles on which America was founded, frankly, right? And to not become a police state like some of the other large countries in the world that we've been discussing. But I, you know, I'm really curious to get your folks' opinion on this sort of, call it a solution. Let me paint you a picture and I've talked about this before privately, maybe not publicly. And that is, that is the following. So first of all, like, let's talk about bubbles. Like all the crypto folks like Pomp and I, you know, we love to say stuff like, hey, you know, what's the biggest bubble in the world? Bitcoin isn't the biggest bubble. The biggest bubble is the US dollar, right?

• 37:02Speaker 02

  The US dollar is a self-sustaining bubble supported by the US government. It used to be backed by gold and under FDR, you know, we said, oh, well, we ran out of gold. Okay, we're just going to back it ourselves by. Whatever, we're back, right? And so it's a bubble. But that's not a bad thing, okay? Because within a bubble, if it's self-sustaining and it keeps growing, it becomes something like the US dollar, which is the world reserve currency, okay, which is damn impressive, right? Now, what the congressman said before is that on the fringes of crypto, we have to play by the traditional fiat-based rules. If we want to onboard through Coinbase, we have to go through the KYC process and all that. But imagine this world for a second. Imagine you are being paid your salary in crypto,

• 37:47Speaker 02

  and then you're holding all of your crypto yourself in a decentralized wallet, in a wallet like what Caitlin was talking about before, right? And then you're paying all your bills in crypto. You're paying your mortgage. You're paying your credit card bill. You're doing everything that way, right? And your whole world is within crypto. You never have to go back again. And better yet, you never have to come in because you're within the bubble now. That represents a possible future where the rules that cryptocurrencies like Bitcoin were created on can be truly realized, even within the context of the otherwise fully regulated world that we live in. I don't know, you know, I mean, you could do what Vietnam did and just make cryptocurrency illegal. A government could do that.

• 38:32Speaker 02

  And that's a way to stymie that whole vision instantly. And to be very honest with you, when I raised money for my company back in 2015, my would-be investors asked me, Adam, what's the number one risk for your company? And I said, oh, it's very obvious. The US government says Bitcoin's illegal. Because if they do that, you know, all bets are off. Everything's gone, right? And frankly, I've been shocked by how forthcoming and supportive US and other governments have been, actually, in helping foster the growth of crypto-related companies. But if we can create a new bubble within crypto and transact all within that bubble, that to me represents the kernel that could become the snowball that continues to grow, that really transforms money. And I honestly believe can make the world a better place

• 39:17Speaker 02

  by doing a lot of those things that others mentioned, right? And realize the benefits of, you know, quick, instant settlement, international trade, and things of that sort.

• 39:26Anthony Pompliano?

  Adam, this is why I enjoyed talking to you because I my question to end this was going to be what is the future world that you hope to see or kind of paint that picture, which you you just expertly did. Maybe we'll go to Congressman Congressman Davidson. Any kind of reactions to to that world that was painted there?

• 39:43Speaker 03

  Yeah, I mean, I think that's an interesting vision, but the reality is most people hold their wealth in something else. And in the United States, while the US dollar still is the world's reserve currency, I mean, I recently founded the Sound Money Caucus because you're actively seeing the dollar destroyed, right? So this year, we've printed $4 trillion. Now, it shows up as debt, right? But it's not really debt. Debt means you borrowed it. There was a lender. There's not a lender here. It was just printed, right? So inherently, that undermines the value. That would be the exact case for sound money that that you've got a known quantity

• 40:24Speaker 03

  there, which is why people look at some things more like gold or digital gold or backed currencies, things like that. So the principles of sound money, I think, are are going to drive the exit out of the current US dollar because of dynamics like Caitlin was talking about. But the other part is, you know, we're in a world where many countries are pushing negative interest rates. We've seen that pressure in the United States. We've seen the Federal Reserve talk about rates out, you know, at holding the rates essentially zero till 2023. The Treasury yield is less than 1%. I mean, that's a nominal positive number, but no one believes that represents the real return, you know, adjusted for inflation. That's already a negative return. So if you

• 41:07Speaker 03

  hold US dollars, they're being destroyed. That's the whole micro strategy play is I'm going to keep my Treasury, which in their case was fairly large. Instead of watching it be destroyed, I'm just going to hold it in something that has a better store of value with still more liquid than gold, which is Bitcoin in their case. Right? So I think that the pressure for negative interest rates and the massive amount of debt that the United States has means that there is going to be a huge push to exit into something, maybe this bubble that Adam's talking about. And and I think it highlights how the sense of urgency that we should be working with to get this arc built to get everybody to safety because, you know, otherwise, you know,

• 41:52Speaker 03

  It's really, you know, how painful of a Chapter 11 do you want to go through? But it's coming and we're going to have to be ready to deal with it. And, you know, central bank digital currencies could be a good way as long as we can do them without too much central authority. We do it to protect people instead of to control them.

• 42:12Speaker 04

  Absolutely.

• 42:15Speaker 04

  Go ahead, Caitlin. What's so fascinating about the bankruptcy point you just made Congressman is is looking at how Tether is actually used. Even when it was acknowledged that Tether wasn't fully backed by US dollars, it's still, after dipping down, it traded back up close to par even though everyone knew that it wasn't fully backed. What was really going on? Look at the velocity of all those stable coins. I did a table back in around June 1st. And the velocity of the three big US dollar stable coins, Tether and USDC and Paxos, was all in the range of 45 to 55 times.

• 42:56Speaker 04

  That means that on an annualized basis, each one of them trades 45 to 55 times. The velocity of the US dollar, by the way, has collapsed. It's 3.8 times, right? So you're looking at a just order of magnitude different velocity because these things are viewed as hot potatoes. And the good news is they settle really fast with settlement finality. But the other good news is you don't need to hold on to them very long. Well, the other piece of this is, as you all know, that stable coins have exploded this summer in both issuance as well as in velocity. The velocity's accelerated. And I just updated that table a couple of weeks ago using CoinMetrix data. This is on-chain verifiable velocity, so none of the, you know, exchange-reported stuff, which of course is even higher.

• 43:40Speaker 04

  But that velocity range was 45 to 55 times. It's now 64 to 154 times. So the velocity's just exploded. And again, you know, Tether is, to me, such a fascinating case because even when it was acknowledged it wasn't 100% backed, what it was really valued for was the payment system, not for the solvent. Because people could literally treat it like a hot potato and then move out of it as fast as they could. And ultimately, that's the value that payment systems really are designed to to make. And I must credit Nick Carter for saying, if the US actually goes down this path

• 44:21Speaker 04

  of allowing US dollar, you know, bank money, then frankly, it actually extends the life of the dollar as a reserve currency. But if the US loses that technology war and doesn't do that, and we stick with these really clunky old multi-day payment systems that don't have settlement finality, and even with Fedwire, when you're trying to use that for high-value payments, you can't time the precise timing of the closing of those payments. So you, nothing's programmable about it at all. Whereas all this programmable money is cropping up around the world, if we don't, if we don't,

• 45:01Speaker 04

  as a country, move in that direction and start encouraging some of these technologies, then we do move further behind. I'm optimistic for a couple of reasons, though, because you're starting to see the fintech companies acquire bank charters. It used to be that fintech companies, software companies, never wanted to be banks. But I think everybody's realizing that you've got to marry the software with the bank. You've got, in other words, the banks are the ones that clear the payments directly at the Fed. And so if the software company isn't the bank, then those are two separate processes, and you never get the maximum value of the software, because it's all still settling on those old clunky rails. If a software company becomes the bank, now all of a sudden, you get

• 45:44Speaker 04

  you get real competition in payment systems. So watch Square, GCO, Verro. They've all recently acquired bank charters. It took Square three years to get theirs. But this is not an insignificant movement. It's reason to be optimistic.

• 46:02Anthony Pompliano?

  I love that. As we go to finish up, I want to give each of you kind of a last word. So maybe Adam, we'll start with you, go to Caitlin, and then the Congressman to finish it out. But any, any kind of final thoughts when it comes to some of the stuff we talked about tonight?

• 46:16Speaker 02

  Yeah, I just want to say that I, you know, I think this year has been really troubling and difficult, obvious for obvious reasons for everyone around the world. But, you know, I think one of the silver linings on this, this cloud that is still over all of us is that it's caused people to really, you know, self introspect about their lives and about their families and about their finances, the things that are very important to them. And there's been a huge, huge uptick in cryptocurrency as a result of that. People have been learning the Google search results for Bitcoin and buy Bitcoin and crypto and app store searches. Everything is way up. All of the metrics for wallets are all time highs and all of that. And, and the reason is, is very simple. It's because people are asking themselves the difficult questions. They finally have some time. They're sheltering in place. They're at home.

• 47:00Speaker 02

  They're looking at what they can do to protect their wealth and their families in the future. And they are seeing that these kinds of technologies, whether it's a Bitcoin or stablecoin or, or one of these alternative assets that is digital, can really impact their lives positively. And to me, as an industry, you know, executive and someone who, who joined the industry, coming from a completely different area, but did so because he wants to, to figure out a way to, to, to bring some good into this world, I see that traction, that consumers find the value in this as the most inspirational thing going on in the industry right now and that growth. And, you know, consumer sentiment is always gonna, you know, companies are gonna move slower than that, right? And it's gonna take time for them to catch up. And, and especially when there's inertia,

• 47:44Speaker 02

  you know, in banks and governments and things of that sort. But, you know, we might just look back on this someday and say the COVID-19 was the catalyst that really helped kick off a lot of the digitization. Whether it comes in a stimulus bill or it doesn't, I think the, the ice, uh, snowballs already started growing. Uh, and I think, you know, once it's big enough, which it is getting there, I don't think it's, um, gonna be stoppable. So I'm really excited about it. Never been more excited for the industry.

• 48:10Anthony Pompliano?

  Awesome. Caitlin?

• 48:12Speaker 04

  Yes, I would refer to a piece that Dr. Manlan Singh and I co-wrote that was just published in the FT a couple of weeks ago about the programmability of money. And what is so important about programmability and why you need a blockchain, you can't you can't just use programmability with with a traditional relational SQL type database because the blockchain gives you consensus. It allows you it allows all the parties to share the infrastructure, not to have to duplicate and replicate and reconcile the data. And that's what a blockchain version of a programmable dollar offers you that a traditional IT architecture does not. And that's a really powerful concept.

• 48:56Speaker 04

  And literally, the velocity of these things has been proven out. It's not just unique to Tether, it's the others as well. And the implications of that for monetary policy are pretty profound. We have, to Congressman Davidson's point, really expanded the Fed's balance sheet in an effort to try to get GDP growth. Well, if you think back to your economics class, one of the variables in GDP growth is the velocity of money. Well, we now actually have programmable money that is itself exhibiting very high velocity. We don't have to do it through issuing more debt. We can do it through technology. And that's something that makes everybody a lot better off. But we've actually got to break through the barriers and get it started.

• 49:39Anthony Pompliano?

  That's a great point. Congressman Davidson, bring us home. Any any last final thoughts?

• 49:45Speaker 03

  Yeah, I think it's important to, you know, just understand where we're at. You know, I think Adam did a great job of recognizing some of the, you know, friction in terms of moving to where we really the technology makes possible to go. And frankly, I think where consumers want to go. And so, you know, you may see, you know, a less optimal path for a while. And, you know, it's just a it's such a critical time to get right because it really is going to have a profound impact on the nature of our culture and our life as to what Whether this tool, uh, sound money is a means of control or a means of freedom.

• 50:28Speaker 03

  And I, it was type of you can't defend freedom if you don't defend sound money. And those principles are so important and they're playing out really in a different way, not on the money side, but in securities law. So if you look at the S E C, uh, with, with, uh, you know, the I C O market and the, the lack of will to define a bright line test to say, we're going to say something's not a security as long as it meets this criteria. And frankly, at some levels, it's not as important what those criteria are, um, as the fact that they're certain. Uh, so that capital can come to work in the United States of America. One of the fears that I have is, is we continue to dally on this is the capital, even though we have Silicon Valley,

• 51:12Speaker 03

  uh, we have venture, uh, all over the coasts, tech, uh, all over America and now Wyoming, uh, you know, doing great. Ohio doing great with this great innovation, uh, on, on all of the gazillion potential applications in blockchain. Uh, the capital is going offshore, not to avoid our laws, but to find regulatory certainty in places that have taken the time to put frameworks in place. And so I, I just hope I can get my colleagues either educated enough or I guess pliable enough to say, you know, I don't really understand this, but I know these people do. And, uh, and let us get a good framework because it really is vital to get that right.

• 51:55Speaker 03

  So that the innovation and capital goes to work in our economy and it goes to work under our principles versus China's principles. Because there really is a truly meaningful difference.

• 52:06Anthony Pompliano?

  I think that is the absolute best way to end this. So, uh, for those that are listening or watching, uh, this was a Herculean effort because, uh, myself and Congressman Davidson are on the East Coast, Caitlin's on the West Coast, then Adam is in, uh, in Japan there. So we, we found time to line everybody up and I appreciate all three of you, uh, taking the time to do this. I hope the people really learned something, uh, today. We'll have to do it again in the future.

• 52:31Speaker 04

  Thanks, Tom.

• 52:32Speaker 03

  Thank you very much. Appreciate it. Thank you all. It's great spending time with you. Hopefully we can do it live somewhere sometime.

• 52:39Speaker 04

  Yeah, hopefully so. Thank you.