📺 Ethereum vs the STABLE Act

A conversation and debate with Rohan Grey the author of the STABLE Act

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📺 Ethereum vs the STABLE Act

December 22st, 2020

Ethereum vs The STABLE Act | Rohan Grey

Rohan Grey is an assistant professor of Law at Willamette University, an Advisor to politicians including Rashida Tlaib, and one of the authors of the STABLE Act, which wants to impose Federal Bank Chartering upon any stablecoin issuer.

Interesting, this proposed legislation includes entities like Square's Cash App or PayPal! Anything that offers a claim on 1 Dollar is cited by this law. 

Rohan and the STABLE Act appear to be an outgrowth of the rise of MMT and the power and ability of the state to solve economic problems like poverty and joblessness. Rohan wants to protect 'money', which he believes is a public institution that needs protecting!

Also interestingly, the goals of the STABLE Act and DeFi are highly similar, yet are opposing in their strategies for achieving these goals. 

Tune into the conversation to learn about a diversity of perspectives regarding how to protect money!

The STABLE Act:
https://tlaib.house.gov/media/press-releases/tlaib-garcia-and-lynch-stableact

Coin Center's comment on the STABLE Act:
https://www.coincenter.org/the-unintended-consequences-of-the-stable-act/


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TRANSCRIPT

Rohan Gray 

  • Assistant professor of law at Willamette University

  • President of the Modern Money Network; Advisor to politicians, including Rashida Tlaib

  • One of the authors of the STABLE Act.

RG. 1. Core beliefs

  • Aligns with leftist & progressive values.

  • Believe deeply in individual freedom and individual empowerment.

  • Believe that there is a role for monetary systems to play in empowering individuals, allocating social resources, and structuring the social provisioning process.

RG. 2. Professional focus

  • How public institutions undergird markets and systems of production

  • Uncloaking what is allegedly or what may appear to be neutral, decentralized, or naturally-occurring free-market processes; to look at the structures that underpin and govern them, and identifying where there is some actor who is exercising power

  • Figuring out how these systems can be made more democratic and more accountable to average people, not just people born into privilege and wealth. 

RG. 3. Quick bio

  • Originally Australian, moved to the United States to try to create a more profound impact on the world since in public policy, the United States can perhaps exercise a veto in anything done anywhere in the world. After spending some time in D.C., relocated to be about 15 minutes away from Wall Street (reflecting where he sees the power line up in the modern global economy).

RG. 4. Theory of money

  • Money does NOT derive value from its role in or as a, as opposed to what standard economics education will teach:

    • Markets

    • Technology

    • Medium of exchange

    • Commodity that solves barter and the 'double coincidence of wants'

  • Base of understanding

    • Understanding of its history, anthropology, legal history of money and the legal history of the institutions behind the systems behind money.

    • How it actually has operated throughout history in large advanced societies.

    • Society was built on systems of empire of warlords, white supremacy, slavery-based economies, feudalism, before citizens fought to force the creation of publicly-accountable democratic institutions. The money system reflected the former and was built upon this, and democratic society was only formed after the money system. Unfortunately, money still represents the former.

R.G. 5. Private anonymous digital cash

  • Cares deeply about private anonymous digital cash (making sure privacy & anonymity are maintained in the digital world), the true legal struggle will be pushing this forward

  • Believes that private anonymous digital cash can only be achieved as a fiat instrument and as a tool of public money

  • Believes the work happening in the crypto world in attempting to create new forms of money is a distraction, waste of time and energy

R.G. 6. Society’s understanding of money

  • The narrative now is that money is not a public good, that it comes from markets

  • The dominant metaphor in public finance is that money comes from the taxpayer, which begs the question, where did the money to pay taxes come from? It had to be created before it could be paid in taxes.

R.G. 7. Problems with money today

  • Financial institutions too fragile.

  • Governing financial institutions have not been held democratically accountable.

  • Public policy has been constructed on the basis that:

    • money is scarce, that investment has to rob A to pay B

    • there is a productivity gain from efficiency from full employment

    • private investment can do things that public investment can’t

  • Millions of people are unemployed; they would love to earn money, they would love to contribute to some collective common good, but they can’t do it.

  • Problems with the economy today:

  • Failure of full employment

  • Neo-liberalization of finance and money

  • Dominance of private interests (corporations, bankers, commercial banks, plutocrats, kleptocrats) in collective governance.

  • Quantitative easing does not cause inflation. Quantitative easing cannot be described as monetizing government debt

    • If you look at government debt as a form of money, it’s actually a separate layer. 

  • Central banks are one institution in the public system, built and constructed in a way that gives bankers direct inner-access to the monetary system, to put the bankers’ interests (or what they veil as ‘free enterprise’) over democratic considerations.

R.G. 8. US Treasury vs. US Fed

  • In 1951, the US Treasury-Fed Accord was signed, where the Secretary of the US Treasury, at the time directly accountable to an elected president, would be able to determine interest rates and have dominance over the Fed independently from the government.

  • However, there was an institutional fight between the US Treasury and the Fed, where the Fed represented certain free enterprise interests aggressively pushed to take power over determining interest rates.

  • Apparently, someone from the US Treasury was sick in a hospital on one side of that fight, and the Fed doubled crossed them; it was a knife-edge historical turning point, and the Fed ended up gaining dominance.

  • In Macroeconomic theory, central bank independence is about the ability to set interest rates according to how we (the people) think things should be done over elected officials - a critical bulwark against government spending run amok

  • In other words, the entire edifice of central banking is built on a fundamental distrust of elected officials and people representing the interest of the public

  • You can choose between taking that lesson – that the government is corrupt and any kind of public governance is corrupt – or you can take the lesson that private banking interests are critically opposed to democracy, and the way central banking is set up has gone in a bad direction.

  • Central banks today are a reactionary tool of class interest against the public.

  • We shouldn’t cede public governance to those actors in the same way as we shouldn’t have ceded it to the feudalists, the slave owners

  • There needs to be a re-litigation of central bank supremacy within public finance

  • In a bill written with Rashida Tlaib, proposed minting a trillion-dollar coin. The point was that the treasury would issue that coin (not the fed).

    • Called it ‘Fiscal Money for Fiscal Policy’: we don’t need a hand out from the central bank; we don’t need to ask them for permission

    • We don’t need to issue treasury securities, which people are going to misunderstand, and think of debt as something different from money. This misconception is understandable because people think of it like their own debt, but it’s totally different (ref. Stephanie Kelton?).

  • If the government wants to spend on emergency cash relief to every single person (the first bill R.G. worked on with congresswoman Tlaib); then the way to do that would be to issue the money and give it to the people; through elected officials, through representatives. In other words this can be done without the central bankers; we don’t need to let the Fed be the gatekeepers to good public macroeconomic policymaking.

R.G. Financial layer as a technology that can be gatekept

  • In addition to financial interests, there's also technological interests

    • Looking at the early history of governance (such as the 5000-year history of debt and all else) and it was not just financiers who were benefiting from the way that they structured the system; it was also the scribes and the lawyers. In other words, anybody that had control over the complex tools of administration of governance exercised power from their position with those tools.

    • Today, finance is crucial for survival; how are you going to pay for it, who's got money and who doesn't is. The entire financial stack is a critical layer of power.

  • So who runs the technology?

    • Everyone has a computer around them, they’re in our pockets, etc. We are currently seeing realignment of power around that, in the same way as the railroad, with the oil and and steel and other forms of technology at different points in history. There's a new power structure emerging around digital computing technology, and there are going to be people who are going to be the new scribes, the new governance architects of the future that's being built right now.

    • Whether that's Mark Zuckerberg and Erica Schmidt, or it's tribe of white male technologically savvy free-market-oriented people who distrust any form of collective governance; whether whatever the group is they are; they will be positioning themselves to be the new elite in whatever kind of currency comes after the one that we've emerged out of right now

R.G. STABLE Act

  • There’s a history of financial interests playing cat and mouse with banking regulation.

  • The minute you regulate banknotes, they switch to deposits. The minute you regulate deposits, they switch to another kind of instrument. There's a constant game of pushing out to whatever margins.

  • When those actors inevitably need public support in moments of crisis, theycome and ask to be bailed out in the name of the average person, or in the name of the entire economy.

  • The lesson of [shadow] banking history is that the way to deal with this is to regulate it on the upswing.

  • To acknowledge that they're engaging in activities that you know, while they've tried to put different face on it or put a different label on it, is still fundamentally the same kind of activity that we've regulated in the past, and to minimize how systemically important they are

  • If one of these stablecoins becomes successful in the way that they hope -- whether it's Mark Zuckerberg with Diem, or Circle and Tether, if it becomes successful; if it is mass adopted, there will be millions of people who aren't Bankless nerds. It'll be people who just expect to be able to use this as another PayPal who don't want to think about it. Who get a wallet that's been made super easy to download on their phone, and one day they wake up, the whole thing suddenly collapses? Their money's gone; that's the kind of risk if this if this kind of energy succeeds in its wildest dreams.

  • On the other hand, if stablecoins today do not succeed like that, the same kinds of financial institutions and big money investors that have played this shadow banking game at every other stage in history will get in and create their own stablecoin.

  • They will eventually turn around and get some sort of regulation, just like USDC is trying to do now - partnering with VISA, just like others are, trying to get bank licenses or money transmitter licenses. 

  • They will gloom back onto the official system they'll start complying with the Patriot Act and everything else but they'll do so with just a little bit more power than they did before.

  • Just that little bit less accountability. We'll forget some of the lessons about democratic oversight that we had last time. We can see this already with money transmitters who get to do things that banks wouldn't be allowed to do, and the reason we have money transmitters is because there was a hole in the banking regulations at a certain point and they exploited it. PayPal is doing things today that it wouldn't be allowed to do if it got a banking license; and it didn't get that banking license because it managed to find that loophole

  • On one hand it's about (1) protecting the consumers who will be using these systems, on the other hand it's about (2) realizing that there's apower realignment that will take place between the technology industry and banking

  • To try to address the new lords before they start doing the next thing that they do because once upon a time Jeff Bezos and Zuckerberg and others were just young punks with a start-up; now they're super oligarchs who do not care about accountability to any public at all.

  • The STABLE Act isn't targeting private currencies. Bitcoin is its own unit of account, Ethereum is its own unit of account. They are not actually a stablecoin under the definition in this bill.

  • The instruments that qualify as a stablecoin under this bill are instruments explicitly designed to function as public money; denominated in the fiat unit of accountant to circulate in ways that public money is trying to do. 

  • I’m a big believer in decentralized, anonymous, digital fiat cash. My goal is to build a system where if you want to do peer-to-peer cash transactions in US dollars with nobody able to see it, you can!

  • My view on that, as a theory of money, is the only way to do that in a safe, secure, and stable way long term is for the government to issue it itself

  • That does NOT say the government issues all money, but it is to say that the US dollars issued by the government has unique properties relative to a US dollar denominated token issued by anyone else

  • We can try to play the game of “my token is safe just trust me”; I think we've played that game throughout history with bank deposits with bank notes; time and time against story is, the only actual thing that can be guaranteed is when you issue the dollar yourself. To ensure the dollar convertibility

  • I don't have a problem with people developing technology. 

  • The problem here is the systemic risk that comes with its wide scale adoption in day-to-day transactions. 

  • When it comes to what you might call computerized money, the reality is that the economy is not built on humanless transactions. The economy is built around human beings. If you and I transact with a piece of paper, or a paper dollar bill, the paper dollar bill is computerized in the sense there's nobody involved in it. BUT, if you and I have a dispute there, we go to a court and the court adjudicates that.

  • The court doesn't say the piece of paper has decided something.

  • My old advisor at Cornell, James Grimmerman, who's a coder, wrote a great piece called “All Smart Contracts are Inherently Ambiguous”, and there have been others who've talked about this in the context of code going back to Larry Lessig and others. 

  • That code itself is not a substitute for law; it can automate certain physical processes but the economy and commerce are built on legal institutions; property rights, contract dispute resolution, accounting principles, limited liability for entities and corporations. Things like that.

  • Even in instances where you didn't explicitly contract, all of those things continue to apply regardless of what technology you're using to interface with another human being.

  • I could have a perfectly written code and then we could disagree about how to interpret that code in light of an existing arrangement, and that disagreement is going to come down to a court and a judge looking at two human beings on either side of a dispute.

  • Whether or not the judge chooses to agree with the code will be a question for the judge

  • How easy would it be to run a school if there were no messy children involved? Having an economy where there's a money; and saying that it doesn't involve people, in my opinion not a coherent concept, because the economy is made up out of people just like the internet is. There are ISP providers, there are people running individual servers in their basement, there's property rights around the land title of your basement. 

  • The STABLE Act looks to reduce systemic risk of stablecoin default by stablecoin issuers like USDC to get a federal banking charter so they can get that FDIC insurance & access to the Fed’s balance sheet in case that something goes wrong. What backstops the risk from platforms like USDC is the ability to print money. FDIC is one of the lesser tiers; access to the federal reserve's balance sheet & the general protections that come with being part of the banking system are the real insurance policy. 

  • Finance Franchise, looks at the history of chartered banks. Originally, charters would come through specific pieces of legislation. the Massachusetts legislature would pass a bill creating the Massachusetts bank and it was explicitly acknowledged as a kind of public-private partnership. Like the Panama Canal. Over time those quasi-private corporations began to consider themselves independent of any public accountability. 

  • They wanted all the benefits of limited liability and none of the obligations to actually serve a public interest beyond profit. That's the Neo-Liberals way of putting it: as I’m earning profit, I'm “doing good for society”. 

  • If you make the dollar, there's an infinity sign next to the amount of dollars that can be created by the US government. A promise of a dollar from the creator of the dollar can ALWAYS be upheld.

  • On the other hand, a banknote is a promise to get those US dollars. You take a banknote in 1830 to the bank and you ask for US dollars the bank may or may not have US dollars and the same holds true whether it's a centralized stablecoin issuer like Tether or USDC or a decentralized like Dai where the theory is that there's collateral sitting somewhere and that collateral is either actual dollars or worth enough dollars and hopefully the value of that collateral won't change.

  • But all of that is a theory that when you come with your token with a promise to pay somehow I’m good for it and I think our view is one actor in the whole system has a unique answer to that there's one unique answer to that that problem said and that is if you actually issue the dollar you can always pay and that's where the de-risking of a money system comes from. It is the inherent solvency of the original issuer.

  • When it comes to overcollateralization in crypto lending: ‘overcollateralized’; that's a conclusion that's not a statement of fact. You're saying that X collateral is over whatever line that you consider to be the line of safety, and maybe that's just where we frankly disagree. I don't think those theories of overcollateralization actually survive the tail risk kinds of risks that Rohan is talking about.

  • When it comes to the capitalistic view of ‘failure in markets is a part of the natural free market feedback loop’: ‘if it's got a chink in the armor it’ll fail and something you will take its place: that's exactly the argument that was given for free banking, and what we saw was every time one of those failed a bunch of people got hurt. Say Diem actually takes off, and then it fails, and then Mark Zuckerberg goes “well, we've learnt our lesson, now the next people that come after Facebook will have a better system”. Well, there's two potentially two billion users in the middle of the learning process. 

  • There’s a lot of tech people that think the entire world is their playground to not learn the lessons of history and to repeat them. If we're talking about $20 million dollars it's a rounding error, if we're talking about $200 billion dollar, that's not the kind of lesson we just let fail. It IS too big to fail, whether we want it to be or not!

  • If there's two trillion dollars of customer funds in these systems they're too big to fail then we can't just say lesson learned the free market will pick it up

  • That's the Austrian response to the global financial crisis: we'll just liquidate everything, just let everybody go under, let mortgage owners go under, let people lose their jobs and let the market will adjust. Unfortunately, millions of people die in the meantime.

  • The STABLE Act isn't stopping anyone for creating a private currency like Bitcoin. The point in which you start issuing a stablecoin denominated US dollar or another fiat currency instrument and trying to pass off as public money is where there's going to be an issue.

  • The law regulates the issuance of stablecoins and requires you get a banking charter for doing that. If you create a network where; there's only nodes, and there's no one else above nodes, so you can't go after anybody for these stablecoins unless you go after every node operator. And my response was if that's true then the only response is to go after every node operator because if you have a hundred people engaged in a criminal enterprise; the fact that there's a hundred instead of one doesn't mean that they're not all liable. 

  • BUT this was a crucial part that everybody stopped listening. That’s not actually an accurate description in these contexts; I don’t think Ethereum is decentralized; I don't think if there was a stablecoin issued on the Ethereum network it would be impossible to identify the issuer above a node level; I don't think that's true. So it wouldn't be going after node operators on Ethereum, it would be going after the issuer of the stablecoin on Ethereum.

  • If people say oh you can't find US we're hiding amongst the nodes; if you're going to say “okay we want to keep doing this so we're going to design a system where we are perfectly hidden amongst the nodes”, the answer back would be “okay we're going to go after each node operator”. I think that is the line where I am willing to take a hard stance because you can't hide amongst a hundred people to do something that would be illegal if you were doing it on your own that's the basic principle here that isn't to say we're coming after node operators who run an Ethereum node; I’m happy that people fundraised of that but that's not at all what this was bill was about. 

  • Any commercial activity related to this stuff would have to get prior approval from regulators the same way as if we issue dangerous drugs, you're going to have to get prior approval.

  • A simple conversation to understand if going after node operators through the legal system has merit. If every single person who's running Ethereum node today turned it off where would those smart contracts exist? If every single person who ran one of those nodes destroyed those nodes where would where would they be? They would be eliminated. So we've identified a layer of human beings here. 

  • Let’s say we’re talking about more than 12,000 nodes so of course we have to talk about how feasible it is to even be able to track all of this stuff okay But when you say that, you’re switching gears. Let's be honest here; you switch gears from “there's no people” to “there's a very large network”. Simple question to ask yourself: how many people are in organized crime networks? Do you think there are Mafia groups that don't have more than 8,000 or 12,000 members We've seen them in throughout history criminal enterprises that span nations. Yes, these systems may be designed to replicate and be as viral as possible; but look at New Zealand; they just eliminated COVID-19, and the way they did that was they dealt with a country of five million people and they put a wall around it.

  • There is a difference between saying there's a large distributed network and that there's no individual people involved in that. The three nodes you're running you choose what you're putting on those nodes 

  • When it comes to the crypto economic guarantees, which is the reason that people don't shut off their validators is because they're invented not to do if one country goes like Authoritarianism, a decentralized network like Bitcoin and Ethereum but another country or some small pocket decides not to they benefit disproportionately. This particular argument is not unique to computers; it's just pointing out that people can engage in arbitrage between nation states and that's why there's a bunch of billionaires with bank accounts in the Cayman Islands 

  • The point of the bill is NOT to stamp out networks. The point of the bill is to manage systemic risk from those networks and. The goal of the bill is to prevent these stablecoins from becoming the new banking right from becoming the new primary layer of the economy that millions of consumers are putting their money into NOW. The point there is you don't need to stamp out a whole network; you just need to make thatnetwork unattractive to the point of becoming central to the official economy.

  • In the case of the United States, if you had a system where no individual consumer in the United States and no major company and no business small business in the United States was using a risky stablecoin I would consider that a success in the sense that the systemic risk of stablecoins to the US economy is going to be reduced.

  • There's not going to be that bank run in Mary Poppins off of average Americans right that's the goal. You're not going to stop someone in Siberia running a node necessarily, but you are going to stop that from becoming the new shadow banking that has trillions of dollars in the American economy, and when there's a crash they're too big to fail.

  • To be clear the point here is not anything that ever uses the unit of account; it's when someone issues something in the unit of account with the expectation that it retains a fixed or stable value.

  • One of many historical examples to look at is the Money Market Mutual Fund industry. They issued shares that were in theory a share that can fluctuate in value but the point was for them to be stable in value. They were supposed to never break the buck, and when they broke the buck, it was a huge source of systemic risk because they had built an entire business model on the expectation and belief that they can't do that.

  • When we look at how instruments function it's not the collateral backing in and of itself that's the problem; it's the promise of stable value that can't guarantee because 

  • An important layer throughout the history of common law obligations, monetary obligations in contract law, in financial commerce, was called the nominal layer; the real purchasing power of the US dollar fluctuation. What a hundred-dollar bill will guarantee you is you can pay a hundred dollars worth of debts. That's a nominal layer; you can you can disagree how important you think that is but, on that layer, the nominal guarantee of a hundred equaling a hundred if it turns out a hundred doesn't equal 100, that's incredibly risky and destabilizing to the whole monetary economy.

  • Throughout history, people were unable to utilize commercial banknotes for their nominal value because the market was aware of the systemic risks associated with the banks; people would negotiate lower prices at stores for those bank notes (a $10 bank note would only get you $7 in goods). In the ‘nominal layer’, in other words the notes issued by the government, you don’t have that problem. The same thing could eventually happen with stablecoins. That’s the source of systemic risk; the nominal stability; not just and that's tied to the unit of account because we get denominated debts in the unit.

  • RSA: With DeFi and decentralized stablecoins, you can always click view source and see all of the assets all of the collateral that back a given asset right. It’s the easiest audit ever. It's a much more open and transparent monetary system that doesn't have the black box flaws that something like the euro dollar might have. RG: Traditional financial banks submit to audit requirements they submit to reporting requirements the problem is their theory is wrong their theory of why they work the way that they say they're going to work is wrong and so you could you can audit that code right but you may look at a certain thing and interpret it slightly differently you may you may look at an upgrade and think oh there's nothing wrong with this upgrade and you made a mistake

  • Let’s be honest here; if this becomes systemically important, how many people are auditing that code? Do we really think that 200 million Americans are going to start using stablecoins as their primary median payment and they're all going to be inspecting the source code? Of course not! They're going to trust certain actors in the same way as we trust we trust auditors and intermediaries for credit reporting and all other kinds of 

  • Let’s say the crypto people are right (I think this is not going to be the case), but let's say that Bitcoin or Ether become a reserve asset for the world. 

  • Would you have a big problem with that? Like fundamentally, because you feel that we need to save US from the systemic risk and so we need to have a stablecoin or money in the hands of a public institution that can print money to prevent a bank run, but you can't do that with Bitcoin or Ethereum

  • You could by doing it through the mining pool 

  • Yes, but it seems to be the case that you would be against a monetary system like that too.

  • Nobody's banned gold, and the proponents of the STABLE Act are NOT recommending banning gold. If you actually look through the history of gold standards in throughout history they have been actively maintained through public law. If you think about creating a money layer above nation states, you have to really think here. These are REAL politics, they have armies! Do you really think that they're going to put down their armies and scribe to some liberal theory of property rights above the nation state? This is liberal idealism at its at its highest; that suddenly, people who have control over means of enforcement are going to just out of the better nature agree to some higher ideal against their interests. That's not how we've actually got any democratic gains throughout history. We've got it by seizing powerful institutions. There is no international layer that forces those two actors to do what they want. They go to war and that's a problem, and there's a reason why we haven't had a war within the United States between states since the civil war because we don't let individual states create armies against each other.

  • Now if you want to have some one world government based on a belief in private property rights mean more power to you but I don't think that you're going to miraculously have the institutions of power give up that power in the name of ideal. That's not how it works. It happens when people stand up and demand accountability, and up until now, the flip side has always been democracy; on the side of the debtors; on the side of the people without property rights; it hasn't the people who've been standing up to create supranational institutions to defend property rights. Because doing so is generally against the interests of working people. So when it comes to your currency model; a hard currency like the kind you're talking about, a commodity-backed or a commodity-linked currency, whether it's a digital commodity or commodities-pro-creditor it's inherently deflationary which means if you got in early and you have assets that you own you get richer and richer at the expense of every next generation. Now to the extent that there have been moments in history were feudal lords have convinced peasants that it is in their best interest to maintain feudalism, yes, I think you can fool some of the people some of the time. I happen to think that those systems are anti-democratic. 

  • Now luckily, that's not a problem we have to deal with in the STABLE Act. The STABLE Act is specifically dealing with an emergent risk right now in the banking system. If you want me to ask me what I would do in the moment where we have a hard currency, I'd be in the room saying we shouldn't do this; we should have a currency linked to human labor where everybody who wants to work to contribute to the common good can earn currency doing, so that we eliminate rent-seeking; whether that's intellectual property, or land rent, or whatever else. That we provide free goods to people outside of the cash nexus like we do with health care and education and everything else that works well for universal service provision, and that the laborers who earn the money to contribute to the common good provide the services that are then available to people who can't work. That's the kind of democratic monetary system I want to build. It's not about protecting private property rights. Ted Turner owns half of Montana; screw his property rights. 

  • The bill that we released a month before this bill was the Public Banking Act, which would create new facilities at the federal reserve; it would create a set of grants, an onboarding process for the chartering process to speed it up to create a separate form of deposit insurance and securities license for actors that wanted to create public banking institutions owned by the public government, not for profit - without shareholders - in the interest of communities and that's specifically designed to make those commercial banks obsolete. We don't need them to do anything systemically important right now one of the reasons why those commercial banks are important because they run the payment system. They go under people can't make transactions.

  • Secondly, they're responsible for a large amount of investment if we don't get to make bank loans the economy stalls what we proposed with Rashida originally was anonymous digital cash and fed accounts for everyone at the central bank and a postal banking system where they could go deal with their banking services at the post office. 

  • The post office was the first internet; they subsidized packets going around the whole country they created information network where nothing existed. It was one of the most socialistic institutions in the US government and it operated since the birth of the republic. It issued postal savings and deposit accounts in the 1940s, 50s, and 60s until the big banks shut it down because they didn't like the competition. So before the big banks came for crypto they came for public postal banking, and then they that was the bigger threat that actually did threaten their commercial interests.

  • Commercial banks don't feel threatened by crypto, but they're just going to take it over when it becomes important. What we're trying to do here is it's a lesser of two evil situation mean I have (my personal politics go towards the side of I don't need commercial banks at all) but this bill is saying if you're going to engage in banking activity you need to be regulated like a bank and explicit public-private partnership, because the whole point of neoliberalism is to give the impression that actors that rely on public support are purely private they don't have any accountability beyond the market and profits.

  • Shadow banks are doing everything that regulated commercial banks are doing; in terms of systemic risk, in terms of socializing the benefits, socializing the losses, and privatizing the benefits but they're doing so without any of the accountability that comes with the public-private partnership model. Getting them out of the shadows into the regulated system is a critical steps that is as good as replacing them with public banks entirely.

  • The solution to this is NOT to throw them even further to the shadows and say they've got even less accountability to the public is to bring them in now.

  • In 2009, there was a point where they could have socialized and nationalized half of those banks instead of bailing them out; they didn't do that because the banking interest didn't let them. That was a failure.

  • If we had a system of anonymous digital cash fed accounts postal banking a government investment program and a network of public banks there wouldn't be much need for commercial banks anymore and all the claims that the crypto stablecoin community has is if you regulate US too much you'll kill innovation.

  • I don't agree with that; I think there are ways to have public investment in innovation that would not require them to be allowed to do whatever they want without 

  • So the alternative is that you require them to get a banking license. Some of them are going to get a banking license, and come out of the shadows; some of them aren't going to come into existence and all that energy can be redeployed in pursuit of actual public financial infrastructures.

  • If you accept the view that a stablecoin is an unlicensed bank deposit and that the reason we license bank deposits is because they are an extension of the public monetary system then these actors are not trying to just do stuff in the in the privacy of their own basement; they're literally coming for the US dollar. They're literally trying to encroach on the space the public system. If you want to create a private currency in your own universe, by all means I will defend your right to the death to do that and I will defend it against other people who would love to shut it down.

  • But if you want to start trying to mimic public dollars, you're not creating the new world you're just doing the same thing that every other bank has done in historywhich is piggyback on the public monetary system.

  • When it comes to building the internet, I know nobody in your world is going to find this remotely convincing but I'm actually trying to save you from yourselves. Because if you build an entire crypto community on the back of stablecoins which is what's happening before our eyes right now (those Bitcoin Ethereum systems are piggybacking and increasingly dependent on stablecoins), and that whole system comes crashing down, you will have destroyed the vision of the whole thing.

  • If we look back at the birth of the internet (I’m a network manager, a sort of evangelist for this group called the Freedom Box Foundation run by Evan Moglin who was the legal counsel for the Free Software Foundation, worked with Richard Stallman directly for 25 years), I believe very deeply in free software free hardware, free culture, free bandwidth …

  • If you look at the zealous defenders of section 230, they have become their own worst enemies because what is the internet now? It's a bunch of walled gatehouses run by big mega companies. The vision of the free, uncensored news net of the 90s existed around the margins but it's dead and I wish it hadn't been allowed to die. 

  • If we had made some different decisions earlier it might still be alive in a different way and I think this is this is one of those moments if you sell out to the US dollar you will live to regret it.

  • I signed on board of Coin Center; I'm all in support of their of their letter trying to protect the right to self-host wallets. I’m all in support of that, and I think it's really important advocacy work. As I said earlier - and I wasn't being ironic - I'm genuinely happy they managed to fundraise off misrepresenting my words because they're an important voice out there. I'm glad they've got a a place in DC and I wish them all the best on that work. I disagree with them when it comes to money because I think my understanding of money throughout history is it's not an anti-government tool; it's always a rich and powerful elite group relying on government support to support to fund themselves. 

  • If you want to create a private, genuinely decentralized net, stay the hell away from money; do it with information, do it with knowledge, do it with culture; I support all of that stuff and when it comes to bills like that.

  • I’m a monetary expert; that's where I focus on. I’m focusing on digital currency. With the work that I'm doing around anonymous digital cash; there's about three people in the world doing it with me I feel very alone I would welcome people in the crypto space to fight on that. As far as monetary systems and the digitization of money goes, these governments are going to build a surveillance system unless people step in and every person who goes you 

  • There is the worry that the endeavour in creating an anonymous digital fiat currency will fail, and that we're going to centralize more power in the current monetary system that we have. Some people may want a private money system but it may be that not enough people in the government do and we'll end up with something like what China doing with their digital currency 

  • The crypto community’s belief is that we cannot put all of our eggs in that basket 

  • If you’re talking about building a currency for World War III compliance, I don't know what planet you're talking about after, World War III right but you're talking about one where there's probably a nuclear winter for 20 or 30 years you're talking about most vegetation on the planet's dead but “hey at least I've got some digital gold assets”; this is not the priority in that moment. There isn’t a way to build around governments of the world and the control they have. I don't think the currency layer is what stops tanks. Mass revolution, sure, I'm with you, but making sure that your $100 million dollars is safe in your basement doesn't make a difference. You can have as much gold as you want if they're coming from every single member of your family’, or your race, it’s not going to help you. Could you buy your way out? Well if that works - if totalitarianism comes in one country - it doesn't work if it's everywhere - so if it's World War III and it's authoritarian regimes from the US to china where do you buy your ticket? 

  • We’re all in this bloody globe together; we either stop them from building the procedures of totalitarianism or we don't. But if we don't, a private digital currency is not going to save especially not one built on the US dollar.

Thanks to @Petey from the Bankless Community for this transcript!


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