Understanding the STABLE Act and the Push to Regulate Crypto | Rohan Grey
The Hidden Forces podcast features long-form conversations broken into two parts, the second hour of which is made available to our premium subscribers, along with transcripts and notes to each conversation. For more information about how to access the episode overtimes, transcripts, and rundowns, head over to patreon.com/hiddenforces. You can also sign up to our mailing list at hiddenforces.io. Follow us on Twitter @hiddenforcespod and leave us a review on Apple Podcasts. And with that, please enjoy this week's episode. What's up everybody, my guest on this episode of Hidden Forces is Rohan Grey, an expert on the legal design and regulation of digital fiat currency and one of the prime authors of the recently proposed STABLE Act, a piece of legislation put forward by Congresswoman Rashida Tlaib of Michigan and congressmen Jesus Garcia and Stephen Lynch of Illinois and Massachusetts respectively. The stated justification for the bill is to
"protect consumers from the risks posed by emerging digital payment instruments such as Facebook's Libra and other stablecoins," which the authors define as "digital currencies whose value is permanently pegged to or stabilized against a conventional currency like the dollar and which pose new regulatory risks while also representing a growing source of market, liquidity, and credit risk." The news of this bill came out a little over a week ago, and just a week after that, the Federal Trade Commission along with the attorney generals for 48 US states led by the state of New York, filed an antitrust lawsuit against the social media company Facebook in an effort to "stand up for the millions of consumers and many small businesses that have been harmed by Facebook's illegal behavior." I want to submit that these two events, the announcement of the STABLE Act and the news about the Facebook antitrust lawsuit are not disconnected. I believe that we are in the early stages of a multi-decade cycle
of increased regulation, taxation, and fiscal spending that will dramatically disrupt the prevailing economic assumptions upon which investors, entrepreneurs, and business people have operated on for more or less 40 years. And cryptocurrencies are not immune from that, as is evidenced by the uproar the bill's announcement has generated in the crypto community over the last week. I think it was naive to ever imagine that it would be possible to integrate cryptocurrencies into the broader financial system without paying a steep regulatory price for the privilege. At the same time, it's not clear to me what choice the community would reasonably have had in this matter, but regardless, we are where we are.
My objective in today's conversation was to get absolutely clear on the language and intent of the regulation, not just as a standalone document, but as part of a much larger regulatory agenda that is being pushed forward by the more progressive factions of the Democratic Party. What is clear after speaking with Rohan for just under two hours, is that much of this rests on our definition of what money is and what we mean when we talk about a deposit. This part of the discussion unfolds mainly during the overtime, because I spent most of the first hour of our conversation trying to get absolutely clear on what Rohan believes about the nature of money, what he thinks the proper role of government is and how he sees himself and his role as an influential activist within the progressive movement and as a prominent advocate of modern monetary theory within government circles. This was not an easy conversation for me to have, primarily because I disagree so strongly with some of Rohan's most basic ideological assumptions. I don't believe, for example, that unemployment is a monetary phenomenon, nor do I believe that it's the government's responsibility to provide everyone with a job. I also don't believe that our money should be used primarily as a tool for public policy, I think that's reckless. And I think it's partly this type of technocratic mentality around money
that's largely responsible for where we find ourselves today. Rohan would disagree with me. He would emphasize, I think, that policy makers haven't actually had the public interest in mind. And I think this is one place where we agree. I think we both agree that we are currently living in a public private oligopoly, that our financial system is deeply corrupted, that our regulators are captured and that our money has been co-opted and is being actively used to privatize gains and socialize losses in a way that is destabilizing our society and our political system. My goal was not the dispute every single point of disagreement, because if I did, we'd never get anywhere. Instead, I wanted to give Rohan an opportunity to really make his case and explain his intentions and objectives and helping craft the STABLE Act as well as other pieces of legislation targeting the crypto FinTech and financial industries that we can expect to see going forward. As you will learn, this bill doesn't just impact crypto.
It impacts the entire euro dollar market. We're talking about trillions and trillions of bank deposits denominated in US dollars but not subject to US banking regulations. This bill would directly affect that. They would also impact companies like PayPal and other payment providers currently registered as money transmitters, but who under this act would potentially need to obtain a banking charter and get FDIC insurance or otherwise maintain reserves at the Fed.
I genuinely believe that regulatory risk is being deeply mispriced in financial markets today, not just in crypto. And regardless of what your personal beliefs are, regulation is coming. The question is, what is it going to look like? And how is it going to impact you and your community, whether that community is your local community, your business community, or your crypto community? This conversation is meant to help you begin to wrap your arms around it, to understand what you think about it and how you want to respond to it.
And with that, please enjoy this insightful and engaging conversation with my guest Rohan Grey. Rohan Grey, welcome to Hidden Forces. Thank you for having me. It's my pleasure having you on, Rohan. So, we're literally doing this about 30 minutes after you completed a conversation with Frank Chaparro on The Block, sort of a livestream. He spoke to you for 30 minutes and then he spoke to Jeremy Allaire for 30 minutes, and I'll have also spoken with Jeremy by the time that this episode airs and that conversation will be available on our overtime feed in time for this broadcast. So, anyone who is interested in hearing my conversation with Jeremy,
you can do that by becoming a premium subscriber at patreon.com/hiddenforces or just scroll down to the bottom of the summary page to this podcast and click on the Patreon link. So, before we get into the details of the STABLE Act, Rohan, and your role and intentions around the bill, I'd love for you to tell me and our audience who you are, because I think in recent days with the release of the STABLE Act, there's been a lot of speculation about your position, your intentions as someone who's played an important role in the drafting of this bill, et cetera, et cetera. So, I'd love to start off with you educating me and my audience on who you are and how you got into this field. Yeah, sure. I'm assistant professor of law at the University of Willamette in Salem, Oregon. Before that I was a practicing attorney representing children and family court in New York. And before that I was a music teacher in elementary and high
school in the United States and in Australia. I come from Sydney. I moved to the United States, been here for about 10 years. And my interest in this area sort of came from when I was young age. My father was an early scientist and telecommunications regulator in Australia working on cable TV regulation, 1980s. And I was always interested in internet-related issues,
pursued them while I was at law school and then got further involved with them particularly around digital money issues because I was also interested in monetary macro economic issues in the aftermath of the global financial crisis. Gotten very involved in the MMT community and do a lot of work around other issues related to financial system design, job guarantee, macro economic stability. I have in the last few years also been a network manager for the FreedomBox Foundation which puts together a free and open source privacy, respecting self-hosted software. And also I'm involved with the International Telecommunications Union consulting and working with them on designing our regulatory standards for central bank digital currency. I don't work with banks, I don't work with big tech companies. I don't take money from any of
them and I'm not particularly interested in any of their...my interest here come from a public policy perspective and perspective of somebody who cares very deeply about the internet and about privacy and freedom, but also understands the history of money and understands the ways in which moneyed interests, including small but growing moneyed interest in the tech sector use the sort of veil of decentralization and rhetoric around internet freedom to hide activities that are really better described as either grifting or unregulated banking activity. So, this bill is part of a suite of bills that I've had the privilege of working with Congresswoman Tlaib's office, began with the Automatic Boost to Communities Act in March of this year that was designed to provide emergency cash relief to every individual.
I did also include a provision to direct the treasury to develop anonymous barrier instrument, digital cash that could be held in a self-hosted open hardware, open software wallet and would be overseen by an independent board to make sure that it was replicating the privacy and autonomy features of cash and didn't have back doors and surveillance. And that motivation was coming from a desire to ensure that emergency cash relief in a pandemic and other times can be delivered to everybody who deserves it, not just those who are part of the official banking system. And from there, we also worked on another bill called The Public Banking Act which was about making it easier for state and local governments and other public entities to charter new banks and to create regulation specifically to accommodate and support public banks that serve public purpose in opposition to the large banking industry. So the first bill you mentioned was the ABC Act, correct? Yes.
Okay. So, that'll also get us into a conversation about digital fiat currencies. Before we do that, though, you mentioned the 2008 crisis and you got more interested in MMT after that. First of all, what was your understanding of money and banking? How did you understand the financial system at the time of the crisis? Number one. Number two, how did you get introduced to MMT and then for those who either have no idea what MMT is or who have an idea of it but don't actually have an idea of what it is, what is MMT? Yeah, so I got interested in the global financial crisis because I came of age at a time when the entire economy was collapsing. I had studied political economy at the University of Sydney, which was relatively kind of heterodoxy question a lot of the standard Econ 101 narratives. But even then, I had also been around bankers and other people who studied Econ sort of at more orthodox institutions and the way that those kinds of ideas permeated public discourse and public policymaking was sort of the default assumption that most people have and the global financial crisis, I think, shook a lot of that. And at that point,
a lot of people were looking for answers in all sorts of different places. And I didn't have any preconceived loyalties to MMT, I just simply followed a lot of the debates and got more involved in those conversations. And over time it became clear to me that they were the sort of most correct paradigm out there. And they understood both the sort of technical nuances of
how the system actually worked and also could see behind the surface and see the kind of underlying power and institutional dynamics that shape the sort of surface level formalities. So, for people that don't know, MMT stands for modern money theory or modern monetary theory and it's a sort of heterodox school of thought that emerged out of earlier post-Keynesian and Marxian and other theories and basically starts by taking money seriously. It says that you can't reduce a monetary economy to a barter economy, you can't reduce money to barter. The historical narrative that you often read in Econ 101 textbooks that situates the origins of money in a sort of technological improvement upon barter and upon commodities is empirically wrong. There's no historical evidence for that. And in fact, the historical evidence suggests that
the origins of money line, public governance and social institutions that take qualitative forms of debts and turn them into something that can be precisely quantified and enforced by law. So, the idea of kind of, "I owe you one," becomes, "I owe you exactly two of this and three of this. And if you don't give me that way, we're going to war." And you can see that as early as the Old Testament, but it is frankly far more consistent with the earliest origins of the technology of writing and the technology of record keeping as well as even the technology of numbers itself, which in part sort of at least early... In other words, the idea of money is a liability. Yeah, money is not just a liability, but money is a form of quantified liabilities that can be made commensurate with each other. I mean, the thing about saying, "I owe you one," that's between you and me. I can't take a favor that you did me last week that's tied up in the fact that you're
married to a family member of mine and you saved me from a burning building one time and separate that favor from our social relationship. But if I owe you exactly $6 and that's because if you don't pay me $6 because you accidentally killed my prize cow, then we're going to have a blood feud, that law is being enforced by the entire community. If you owe me $6 and I owe someone else $6, then I can say, "Well, you just pay that person." And so the act of turning qualitative debts that
are deeply embedded in particular social relationships and to quantify debts that can be alienated and transferred is the sort of basis on which money and credit comes from. And then when you look at actual money that has existed in what we call modern economies, that's why the term is modern monetary theory, because there've been other forms of money going back 50,000 years that have very limited purposes in certain contexts like in ceremonies or in sort of particular religious context. But if you look at the kinds of monies that actually govern large societies where people have to interact with each other beyond face-to-face relationships, they tend to be publicly intermediated and they tend to be backed by a legal entity that in addition to enforcing liabilities, and by that we mean not just taxes but also contract liabilities and property liabilities and things. So, in addition to enforcing liabilities
is also setting the rules of the game. You often hear sort of from free market and people that the state should sort of stay out of money, but you can't stay out of money if you're also enforcing the rules of property and contract that actually keep markets functioning. We can't stare- I think what they mean when they say that is they should stay out of the role of managing the value of money directly through monetary expansion or contraction. Right. And my point is that, first of all, whatever instrument you choose to
accept in settlement of legal liabilities is going to be a public money, no matter what. So, you're already making a value judgment and you choose, but also the act of actually creating contracts and validating contracts, which the court does. The court says, "This is a contract we're going to recognize and this one doesn't." Or the act of creating something like a tort liability or even enforcing a property right is something that creates the monetary value in society. If
you want to change how valuable Disney's holdings are, or you change how many years a copyright can be held for, right? That actually changes the value of different assets in the economy. But are you suggesting, and we'll get into this actually in the overtime because I do want to keep the focus of the first part of this conversation moving towards a conversation about the STABLE Act and there's overall more progressive regulatory push, but are you suggesting that money cannot exist outside of a... In other words, yes, I acknowledge and agree that fiat money drives its value fundamentally from the state's acceptance of it as a means by which to pay state liabilities i.e. taxes. In that sense, I mean that word- And private law. Right, but that independent
market-generated currencies cannot also exist. side-by-side in that system? Even though- No, no, no. So, there's two things. One is the word market there, that market is constructed by public law. Sure.
The actors themselves have legal status, the contracts themselves get legally enforced, the property rights get legally enforced and the accounting rules get legally enforced. The limited liability of the corporation gets legally enforced. So, this idea that there's a sort of market out there that is sort of sending money in is not true. The state creates the conditions under which markets operate. And so anything that even comes to the
market is itself a reflection of the public law foundations upon which that market depends. But to your broader point, yes, of course it could be multiple forms of money in an economy. One of the earliest sort of forebearers of MMT is a guy named Hyman Minsky who was actually one of the early theorists of shadow banking before people heard that term.
And he famously said, "Anyone can create money. The challenge is to get it accepted." And what MMT is talking about is the fact that historically speaking, it is the public money that becomes the most valuable and most important money in an economy. And there's a reason why even other private liabilities tend to be denominated in the public's unit of account, right? If you look at even the crypto market today, yes, there is Bitcoin. Yes, there is a Terrarium, but
what are the instruments that are actually ending up sort of sinking to the bottom right now or rising to the top, whichever metaphor you want to use of those systems? It's stablecoins denominated in US dollars. And so the unit of account, which we denominate all contract liabilities in, is the foundational point of the whole economy. And you can create local currencies and complimentary currencies and private currencies, et cetera. But historically speaking, those are not the currencies upon which the whole economy runs, right? They're peripheral. They stay at the margins, they stay within certain communities.
They stay localized and particularized, the general money. The thing that serves as the general unit of account and means of value and that is the most widely accepted instrument tends to be the public money. Now, there are situations where a state can be destabilized and collapse, of course, right? And you can have political failure of a state. But in that moment, you're also talking about a political failure of the markets that underpin private currencies. Or you can have states that have done full or partial dollarization in which case- Yeah, they choose another country's unit of account.
Right. But that country's unit of account is not the country's unit of account that they have to pay taxes in. Well, they have to pay taxes locally denominated in those dollars, right? What they're choosing there is a unit of account, even in those countries where they adopt another entities unit of account that becomes the public unit of account that all of their liabilities are also denominated in. Their liabilities are still acceptable in payment of taxes, right? The state is still enforcing contracts denominated in that account. The fact that they choose a unit of account, people have chosen an unit of account based in Bali Grain before. That doesn't mean that Bali Grain created money, it means that the state
adopted a particular unit of account. I mean, the earliest coins in Greece, the term drachma comes from spits of meat that religious leaders used to dispense at large ceremonies to different classes of actors according to their social rank. The coin was a symbolic representation of the redistribution of resources that came in a feast. And that's why they used words that have relationships to sort of iron spits that the meat used to be carried on. But that doesn't mean that the metal of the coin or the meat was the money,
the money was the unit of account, which is why when they stopped having these festivals, they continued to use the unit of account. They just changed the token to which it referred. Like I said, we're going to pick up on this and have a much broader philosophical discussion about MMT and money and what is money and banking in the overtime for sure. But for now, let's actually move to my next question. Before we get to the STABLE Acts specifically, I want to
understand your overall philosophy and worldview as it pertains to government and its role in the marketplace. What is government's role and where do you feel that it has perhaps been negligent in fulfilling that function and how do you hope and wish to see that role expand going forward? Yeah, I mean, so first of all, I don't sort of sit here and think of all the ways that I can expand government, right? I think that the biggest- Let me rephrase that, hold on. Because that's not how I meant it, I didn't mean like are you going to expand government. What I meant is that, look, my general view here is that we are heading into a period where we're going to see a dramatic push for new regulations. And I think we need a regulatory overhaul of the financial system. I think regulators have been negligent, I understand this is generally not a popular view in the crypto space, but I think one way or the other, whether you agree that there's a need for regulation, whether you agree or not the government officials have been competent, certainly they have been incompetence, certainly they have in some ways promoted malfeasance in my view, they've been complicit in a lot of the problems that we have today. I've got huge problems with how we've
conducted monetary policy, the role that central banks have played, the role that government spending has played, et cetera, et cetera. But that's neither here nor there. I do think we're heading into this period. And so what I see when I look at the STABLE Act, I see a lot of these conversations happening on Twitter where people have opinions about the wording, et cetera, and we'll get into all of that. But I think that in order to understand this piece of legislation, you have to look at the broader picture. Because I think it's just one piece of a much larger milieu of legislation and regulation that we are going to see in the years to come.
And we may even see it sooner rather than later if Democrats manage to flip both Senate Georgia races. So, that's what I want to start with, I want to start with understanding because you are a key part of this legislative push in terms of giving it its intellectual language and thinking, and I want to understand your perspective and your worldview. Yeah, sure. Okay, fair enough. So, the first thing is I think that, yeah, you won't find any sort of
naive faith in existing government for me. The difference, I think maybe with some people who take that to become sort of crypto libertarians is I don't think that private markets and certainly not for-profit, monetary-based markets are a viable alternative because as I said before, I think that they are in turn constituted by public law. So, I think, for the same reason that I moved 5,000 miles away from my family and friends and live in United States to work on issues of justice because there's no point trying to change the world from Australia when the United States has all the kind of power in the system. That if you want to reform how the economy works and how economic, justice and political freedom works, the place to do that is in public law. And so from my view, one of the major things is I think that in a monetary economy, the fact that people can't find ways to earn decent money doing decent work that helps them in their communities or disgrace in a moral failing. So, unemployment is prima facie evidence of the failure of public policy, right? Unemployment is somebody not being able to perform labor to get money. And if money
is something that government can create, at any point in time the government is capable of paying people to do things as long as there are things to be done that helps society. I think frankly, there are things to be done to help society and as someone that has taught in a daycare center in K to 12 education and now in tertiary education, my view is that the idea that there is a sort of 5% of the population that is so incapable of doing anything useful for society, that they have to be kept as sort of lepers on the margins is frankly bullshit. And so the fact that we have unemployment is because we allow unemployment to persist and that one of the major reforms we need to be doing is building an economy in which everybody has a place to contribute and everybody can live. And there are people who... Yeah. No, sorry to interrupt. I want to try and segment your thoughts here because now
we're getting into something which I think is even more expensive than I was suggesting. And it's an interesting conversation to have, and we can have it now, but- Well, I haven't moved to finance. I just wanted to start by starting with where money interacts with real products. Sure. Okay, okay. Because I would do want to challenge some of your points on that and some of them may just be values-oriented, but let's continue. I just wanted to point that out. We'll put a pin in that and we'll
talk about that later, but please continue. Yeah. So, that's the first thing is that I think if a monetary system is leaving millions and millions of people out and millions and millions of hours of productive labor wasted every day, that is a gross failure. And there's an economist named James Tobin who famously said, "It takes a lot of Harberger triangles to fill an Okun gap." And those are technically Econ terms, but a Harberger triangle is the productivity loss from an inefficient market and the Okun gap is the output loss from a system operating below full employment. So, his point is that you can tinker around the margins of all these different industries and make them "more efficient." But if you have a system running persistently under capacity, that is going to have a massive impact on overall productive output.
Yeah, no, but is capacity the issue? Is getting the system working at full capacity or should the objective be generating... I mean, I wouldn't even say generating wealth, actually I would ask the question is operating a full capacity the objective? Yes. I don't think that means that everybody needs to be working 80 hours a week. In fact, I think it's the opposite. I think that if we were working at full capacity, then the people
who are working 80 hours wouldn't have to. Well, that's not what I mean, but if you've got an economy that produces an excessive amount of paperclips but you're at 80% capacity, should you move to 100% capacity and produce that many more paperclips that you don't need? Well, no. The point of operating a full capacity is not to produce things you don't need, it's to fulfill the things we do need. And I think the point is that there are huge amounts of needs that we aren't currently fulfilling. And there are a bunch of people that would love to be doing more, who are living left on the sidelines. I mean, here's a big, basic example. You're looking at equivalent analogy, but if there's a community and one person's house is on fire and there's sort of 5 people out of the 100 people in the community frantically pouring buckets of water on the house to try and stop it going out and the other 95 are not doing anything, right? We would say, "Hey, maybe the others can pick up a bucket and help too. That would help everybody and
that would sort of stop the fire from spreading and stop the person whose house is on fire from losing their house." Right? So if you accept that there are problems in the world that need to be addressed with the urgency of a house on fire, and I think there are many, and there are a bunch of people currently doing the equivalent-- If you're talking about that kind of labor market flexibility. What you're describing is a just-in-time labor market. Well, yeah. And the way to do that is to have a system where there's more needs being identified at any point than there are people to do them so that there is flexibility. There's so many
jobs to get done. I mean, look, maybe you have a different experience, but I've been the director of a nonprofit for a number of years, I've worked in other situations where I have people who work for me. And if you're a good director, if you have a vision for your entity, for your community, for your organization, there's always more work to be done and there is people available to do it. You never sit there and go, "Oh, I've sold everything I need to be done." If you have a vision for how you want to improve things, you need more people. That's the general position. Well, true. I will make the point though that I don't think it's for lack of needs
that a lot of people don't find the people they need to do the job, it's for all sorts of other reasons. They may themselves not be equipped to manage the enterprise correctly, they haven't properly identified the mechanisms by which to do it efficiently and effectively. But what you're describing sounds a little bit more like a Peace Corps type situation, something where you have a standing body of individuals that can be paid by the state to go out and solve large community needs. That seems more scalable. Yeah, you can design it however you want. It doesn't have to be one central identity, it can be a number of large entities and also a number of smaller entities. You can distribute the capacity to create those jobs, but the one thing
you can't distribute, or the one thing that needs to come from one central place is the money. Why? So maybe you understand MMT, you start from the idea that unemployment is a monetary phenomenon. It is the phenomenon of an actor who has the ability to create more money, to hire people to do stuff not doing it. And the rest of it is a design question and reasonable minds can disagree. But the idea that people are unemployed because they're lazy or because they're unproductive or because there isn't stuff to do is frankly a non-starter to me. They're unemployed because people who have the money to pay them to do stuff aren't doing it. And I'm not blaming private actors for that record. I
don't think that the job of the private market is to ensure full employment, let them do whatever the hell they want. It's not their responsibility, it's the public system's responsibility to make sure that people aren't left behind and that the collective capacity of the country is put to work fulfilling public purpose. Well, theoretically you could have a much poorer economy that's fully employed versus an economy that's much wealthier that has a 4% unemployment rate. Yeah, sure. And you can have an economy without a guaranteed right to public education where more people are literate. I don't think that's actually on average what ends up happening, right? But we recognize at a certain point that if we want every child to get an education, if we can't leave that up to the vicissitudes of the market or arbitrary chance, the way that we have worked out over history to do that is to actually take responsibility every time a child is born to make sure they can learn how to read.
And I think the same is true for making sure there are work opportunities available to people. I think we got to look back... I mean, I come from a country that actually guarantees people healthcare, shock horror, but we think we're going to look back, and we're going to say, "Wow, once upon a time, we didn't think that children should learn how to read, we didn't think that sick people should get to have healthcare and we didn't think that anyone who could work should be able to." And they're going to all look back as ridiculous, moral failings and intellectual failings of people who spent a lot of time justifying it with ridiculous theories about natural rates of unemployment and about whether or not the government's even involved in the market when it clearly and obviously is. Well, tell us how you really feel. Yeah, and I know I'm on the record. No, no, it's just cool. I'm messing with
you. Like I said, we are going to talk about this in much more detail. So, let's continue where we kind of got sidetracked, I think- Yeah. So, financial markets, revisions for financial, right? In your overall... Exactly, yes. Yeah. So, the next thing is once you understand the government could create money, the next question is where's the appropriate role for private monies, right? I think that there is a role. I think that local communities, I think a system of nested currencies to go with nested political units in the same way we have state and city governments, make sense. I think that private groups that want to do try something should have the right to do
that too. Where I think there's a line that has to be drawn is when that starts to interfere with the integrity of the public monetary system because that's something on which everybody relies on. In the same way as I don't get to pollute upstream in a river in the name of private enterprise, I don't think that individuals that engage in systemically risky activity should be able to do that. Now, the good news is that doesn't mean
that the answer is to hand over all the power of big banks. In fact, one of the reasons why I worked with Rashida to leave on a public banking bill is precisely to point out that if you care about credit, and if you care about a decentralized system of financial institutions, you can do those things within a public system where the actors are not for-profit privatizing the gains, socializing the losses, big banking behemoths where they all commit fraud and don't go to jail. I think those actors are frankly, mostly criminal and should be shut down. But the answer is not to then hand that over to a slightly larger group of for-profit actors all acting without any sense of social accountability in the name of decentralized crypto networks. The answer is to say, "Public money, like credit, is a public institution on public good and we need to have serious conversations about collective governance." And that means thinking about the extent to which it is actually possible to have a banking system that doesn't connect to the public monetary authority. And I think the hard lesson of banking history is you can't. The other part, I would say quickly about the financial vision here is that I care very deeply about individual people's privacy, which is why the very first bill we worked on with Congresswoman Tlaib's office was a bill to create anonymous, digital cash.
What I think is very dangerous and what I have said to even friends of mine who I believe are working in the crypto space in good faith is that private currencies will never provide the function that public cash provides. It will always be risky, it will always be destabilizing. And every minute you're putting energy into what's trying to get anonymity in transactions through private currency doesn't mean that you're not spending fighting the real fight, which is public money. And if you sit there and let the Zuckerbergs of the world or the Jamie Dimons of the world be responsible for the official public monetary system because you think you're too cool. You think it's a cowboy game to go on the edges and work in crypto land, they are going to privatize the money that you and your grandparents have to pay their taxes and get paid from their employer with, and that's surveilled system is going to destroy freedom. So, I care very deeply about monetary privacy, which is why I don't waste my time on dead ends and distractions. All right. So, let's separate a few things out. Again, I do want to get into privacy also as part
of this larger conversation about digital fiat currencies. Let's hone in on something you said, you said the real fight. Be more specific about that, what is the real fight and what is the problem that you are focused on solving and that you think needs to be solved? The real fight is that both certain public actors and not all public actors, but certain public actors and certain private actors have value in controlling individuals and in creating a financial system where there's no way to turn that isn't subject to sanction. And what we see
throughout history is that private- I don't understand what you mean, I didn't understand. What I mean is a combination of totalitarian government and hyper-capitalist markets built around financialized data. On one hand, you have the Facebooks and the Googles and the sort of WeChats of the world, and on the other hand you have the Communist Party of China and the American government, both of whom have no problem breaking crypto when they want to, have no problem violating people's financial privacy and extrajudicially killing people. So to be clear, what you're describing is the tendency for governments to work alongside large private corporations in a public private partnership for private gain? Private gain and public control and the suppression of dissent, yes. Right. And the use of government regulations,
crafting government regulations in a manner so as to benefit a handful of oligopolies? Yes. Which is kind of what we have today in the financial system, wouldn't you say? Absolutely. All right. So, we both agree that we're living currently in a sort of financial oligopoly?
Absolutely, yeah. Okay. You can see this on my writing and I think Rashida Tlaib, what a great too, I don't want to put words in her mouth, but the idea that she's getting up every day, trying to build that system at all that I am trying to get up and build that system is frankly a misreading. If you think that may be convenient for your caricature, not you, but that may be convenient for someone's caricatures and demonization, but it's not actually what's going on. What's going on is that we have a different theory of how to fight that. And throughout history, it's the moments at which the struggles for freedom and for economic justice reach public systems when they actually come to a head and real change gets made. So, in my view, we are not going to have privacy in the financial system until we have private public cash. We are not going to be able to tinker in the margins of crypto land and suddenly stop the panopticon from being built. What will happen is people will make a few bucks in their speculative
trading, they will continue to be a rounding error in the financial system and the actual big actors will integrate into the large financial government oligopoly in a surveilled way. And that's what you're going to see with stablecoins, that's what you're going to see with Facebook's diem, right? And if you want to fight that fight, what we have to do is actually protect cash, not chucking cheese dollars, but physical cash that is actually guaranteed and it's valued by the public monetary authority and it's something that you can hold in your pocket. And that fight every time we say, "Oh, government fiat, it's bad." Or, "We can never do that, invest in Bitcoin," is a minute we're not fighting that fight. Right, okay. So, a few thoughts. Well, first of all, question, how important was Libra in motivating you to go down this road? I don't mean your overall interest in money, but I've gotten that sense after reading a bunch of your stuff that Facebook's push to get into the space, raise the stakes of this fight, this effort for you and for others that are part of this progressive push regulation. Is that a fair interpretation? Yes, in the sense that it made a fight that was always coming more urgent. I mean, the thing about
Facebook is it's scale. It's 2 billion plus users, right? We've seen what actors at that scale do, with Alipay, with WeChat and whatever Facebook does here is going to blow half of this, the other stablecoins out of the water very quickly and it's going to blow half of the financial banking system out of the water very quickly if it actually succeeds in what it's trying to do. Right. But to be clear, it's not that if Libra didn't come about these risks wouldn't be there, they were already there. Tether, USDC, they're already
there. And going back to the very first article I wrote on this issue about mobile money back in about 2013, it's already here with mobile money operators in developing countries that are also issuing their own forms of sort of "stablecoins." Although we call them other things, right? So this is not a unique problem to Libra, but Libra makes the stakes clear. What Libra actually does though, is it provides a political opening because this is the first time that all the central bankers and all the public officials that don't care about the little guy in economic justice in the way that I or Rashida Tlaib does, actually are realizing they need to do something, right? Until now, the presumption in the Fed, for example, has been, "Oh, let the banks deal with payments." Right? "It's not our problem. We don't want to take the lead in innovation, we'll step back and support the banks but they're the ones who run the payment system." And it's no surprise there's been very little payments innovation. But you know who the big
banks killed before they took aim at crypto? They took aim at postal banking in the 1960s, right? You know who they killed beforehand? They killed the proposal for public banks back in the 30s and elsewhere, right? It's not a situation where the only fight is to sort of go into these private crypto markets where frankly, 80% of people are grifters and speculators. And then there's a bunch of true believers who are being taken for a ride by others, right? It's to actually fight the public monetary fight itself and whether or not Facebook came about, that would be what we need to do to take away the power from the big banks and to ensure that governments don't use the digitization of finances as an excuse to further perfect the tools of totalitarianism. Actually, I think that's a really great framing. And I
tend to view in similar terms, in what sense? I do think that this is an important fight to wage, and my concern in particular, with respect to the STABLE Act and other forms of regulation is how do you fight the good fight, so to speak, in terms of reforming and improving upon public money and public banking infrastructure, while at the same time not stifling the type of innovation that can improve upon all of these other forms of public money and also private commercial activity in the economy. I think that's something I do want to get to because I think that's one of the big concerns of demanding or requiring bank licenses for a lot of these young startups. But- Well, to be clear, the bill target stablecoins, it doesn't target private currencies. And I understand that there are a lot of people- But those are private currencies, stablecoins are private currencies. No, they're instruments that are designed to function as public money, they're not designed to be their own unit of account. Do you think the--