187. Mic Drop: Crypto and the man: Prof. Lamont Black on Donald Trump’s federal bitcoin reserve

Summary

Podcast Summary: Click Here – Episode 187. Mic Drop: Crypto and the Man: Prof. Lamont Black on Donald Trump’s Federal Bitcoin Reserve

Introduction

In Episode 187 of Click Here, titled "Mic Drop: Crypto and the Man: Prof. Lamont Black on Donald Trump’s Federal Bitcoin Reserve," host Dina Temple-Raston engages in an in-depth conversation with Professor Lamont Po, an economist formerly with the Federal Reserve Bank in Washington, D.C., and now a cryptocurrency instructor at DePaul University in Chicago. Released on November 29, 2024, the episode delves into the evolving relationship between cryptocurrency and governmental strategies, particularly focusing on former President Donald Trump’s initiative to establish a federal Bitcoin reserve.

Professor Lamont Po: Bridging Economics and Cryptocurrency

Professor Lamont Po introduces listeners to his academic journey, highlighting his transition from traditional economics at the Federal Reserve to teaching cryptocurrency and blockchain technology at DePaul University. He emphasizes the dynamic nature of the crypto ecosystem:

Professor Lamont Po [00:39]: "Money is really a social phenomenon. Crypto doesn't have value. The dollar does not have intrinsic value. It is only value that we associate with it as a community of people."

His classes encourage hands-on experience, requiring students to invest in cryptocurrency at the start of the quarter to foster a deeper understanding:

Professor Lamont Po [03:16]: "So I now teach crypto and blockchain to graduate and undergraduate students and just finished teaching a group of 40 senior finance majors about crypto and all the amazing things in that ecosystem."

Donald Trump’s Strategic Bitcoin Reserve

A significant portion of the discussion centers on President Donald Trump’s announcement to create a strategic Bitcoin reserve, aiming to position the United States as the "crypto capital of the planet" and a "Bitcoin superpower." Professor Po breaks down the implications of this move:

Donald Trump [01:40]: "United States of America will keep 100% of all the Bitcoin the US government currently holds or acquires. This will serve in effect as the core of the strategic national bitcoin stockpile."

Professor Lamont Po [06:17]: "So it's more like a savings account with a mix of currencies, including Bitcoin."

Po views this initiative as an evolution of traditional reserve practices, akin to holding gold:

Professor Lamont Po [07:30]: "I see this as the evolution of gold reserves. So if you think historically gold was viewed as a hard currency… I think Bitcoin could move into that category."

He acknowledges the potential benefits while cautioning about the volatility of cryptocurrency values:

Professor Lamont Po [07:30]: "I'm not suggesting that the federal government start betting on Bitcoin in the sense of investing it as a speculative asset, even though it will rise and fall in value."

Pennsylvania's Bold Bitcoin Investment

The conversation shifts to state-level initiatives, notably Pennsylvania’s legislative proposal to allocate up to 10% of its general fund to Bitcoin, potentially amounting to $900 million:

Professor Lamont Po [09:15]: "10%'s a large amount… they put that out just to give themselves some flexibility."

Po compares this strategy to diversified investment portfolios, indicating a cautious optimism:

Professor Lamont Po [09:23]: "It's a similar concept, even when you're looking at it from a state government perspective."

Global Perspectives: El Salvador’s Bitcoin Reserve

Drawing parallels, Po references El Salvador’s earlier adoption of Bitcoin as legal tender in 2021, highlighting the initial skepticism and subsequent validation through price cycles:

Professor Lamont Po [10:29]: "El Salvador has had a strategic bitcoin reserve since 2021… there was so much skepticism… now that we've come back into the bitcoin bull cycle, there's certainly reason for them to have the last laugh."

He underscores the global shift towards cryptocurrencies as alternative reserve assets amidst the uncertainty surrounding fiat currencies:

Professor Lamont Po [10:43]: "There's just a lot of questions about where fiat currencies are headed. And so other people are looking at bitcoin now as an alternative."

Cryptocurrency and Government: An Ironic Alliance

The episode explores the inherent irony of cryptocurrency, originally conceived as a decentralized alternative to traditional banking and government control, being integrated into federal reserves:

Professor Lamont Po [12:04]: "Bitcoin has always been seen… as a way to sort of get around the regular banking system… to have a currency that is separate from the man."

Despite this, Po notes the increasing institutional involvement in crypto over recent years:

Professor Lamont Po [12:25]: "Over the last five years in particular, we have seen more and more institutional involvement. So large financial institutions starting to invest in digital assets…"

He also expresses concern over political entanglement potentially undermining cryptocurrency’s foundational ideals:

Professor Lamont Po [14:15]: "Crypto ideally is apolitical. It is not government. For some people, it's even anti government or anarchist… the idea that this now becomes part of government, I think many of my students would be very skeptical."

The Satoshi Nakamoto Mystery

The episode touches on the enduring mystery of Bitcoin’s creator, Satoshi Nakamoto, referencing a claim from HBO's new documentary Money Electric: The Bitcoin Mystery that Peter Todd, a young crypto developer, is Nakamoto. Professor Po dismisses this speculation as likely a marketing stunt:

Professor Lamont Po [16:43]: "No. We talked about that in my class, too. As soon as that HBO show released, all my students came in. They were like, dude, they found them… I think it's a bit of a marketing stunt."

He contrasts the decentralized, community-driven nature of Bitcoin with the persona-driven politics of figures like Trump:

Professor Lamont Po [16:43]: "That's one of the beauties of bitcoin, is that it doesn't have that cult hero. And that's part of what I love about it."

Cryptocurrency as a Social Phenomenon

Professor Po reiterates his belief in cryptocurrency's future as a significant financial asset, emphasizing that its value is derived from the community's collective trust:

Professor Lamont Po [15:07]: "Money is really a social phenomenon. Crypto doesn't have value. The dollar does not have intrinsic value. It is only value that we associate with it as a community of people."

He hopes that the crypto community continues to thrive independently of political influences:

Professor Lamont Po [15:11]: "My hope is that that community continues to thrive, which will then mean the thriving of this digital ecosystem. And so I want to protect that. That's my highest incentive."

Conclusion

The episode concludes with a reflection on the current state of Bitcoin, noting its nearing $100,000 mark and the dual motivations driving its investors—both as a strategic reserve asset and as a speculative investment:

Professor Lamont Po [18:06]: "You've got other people who are just buying bitcoin because price go up and they have no intention of ever spending it. They just want to get rich, right?"

Dina Temple-Raston wraps up by highlighting the dual nature of cryptocurrency's integration into traditional financial systems and its foundational ideals of decentralization and community trust.

Key Takeaways

• Government Integration: Donald Trump’s initiative to establish a strategic Bitcoin reserve signifies a major shift in governmental approach to cryptocurrency, potentially positioning the U.S. as a leader in the crypto space.

• State-Level Investments: Pennsylvania’s proposal to invest a significant portion of its funds in Bitcoin reflects growing institutional interest and acceptance of cryptocurrencies as legitimate financial assets.

• Global Adoption: El Salvador’s early adoption of Bitcoin as legal tender serves as a precedent for other nations considering similar strategies amidst global economic uncertainties.

• Cryptocurrency’s Dual Identity: While originally conceived as a decentralized alternative to traditional banking, cryptocurrencies are increasingly intersecting with governmental and institutional frameworks, raising questions about their future autonomy and ideological purity.

• Community Over Centralization: Professor Po emphasizes the importance of the crypto community's role in maintaining the ecosystem's integrity, advocating for its continued independence from political and governmental influences.

Notable Quotes with Timestamps

• Professor Lamont Po [00:39]: "Money is really a social phenomenon. Crypto doesn't have value. The dollar does not have intrinsic value. It is only value that we associate with it as a community of people."

• Donald Trump [01:40]: "United States of America will keep 100% of all the Bitcoin the US government currently holds or acquires. This will serve in effect as the core of the strategic national bitcoin stockpile."

• Professor Lamont Po [07:30]: "I see this as the evolution of gold reserves… I think Bitcoin could move into that category."

• Professor Lamont Po [12:25]: "Over the last five years in particular, we have seen more and more institutional involvement. So large financial institutions starting to invest in digital assets…"

• Professor Lamont Po [15:07]: "Money is really a social phenomenon… It is only value that we associate with it as a community of people."

• Professor Lamont Po [18:06]: "You've got other people who are just buying bitcoin because price go up and they have no intention of ever spending it. They just want to get rich, right?"

This episode offers a comprehensive exploration of the intersection between cryptocurrency and government policy, providing listeners with nuanced insights into the potential trajectories of digital currencies within established financial systems.

Transcript

[Dina Temple Raston]

From Recorded Future News and prx, this is Click Here.

[Lamont Po]

Did you ever in a million years think that crypto was going to be sort of embraced by the man?

[Professor Lamont Po]

I guess that's where we are now, huh?

[Lamont Po]

Yes, we are.

[Dina Temple Raston]

I'm Dina Temple Raston and this is Click Here's Mic Drop, an extended cut of an interview about something we think you'd like to hear more of. And today, the fight for the soul of cryptocurrency.

[Professor Lamont Po]

Money is really a social phenomenon. Crypto doesn't have value. The dollar does not have intrinsic value. It is only value that we associate with it as a community of people.

[Dina Temple Raston]

We talked to an old friend of Click Here, Professor Lamont Po. He used to be an economist at the Federal Reserve bank in Washington, D.C. and now he teaches a cryptocurrency course at DePaul University in Chicago. We wanted to talk to him about Donald Trump's newfound love affair with cryptocurrency and what it means when the President elect says he plans to set up a strategic crypto reserve.

[Donald Trump]

United States of America will keep 100% of all the Bitcoin the US government currently holds or acquires. This will serve in a effect as the core of the strategic national bitcoin stockpile.

[Dina Temple Raston]

Stay with us.

[Tim Harford]

Do nice guys really finish last? I'm Tim Harford, host of the Cautionary Tales podcast, and I'm exploring that very question. Join me for my new miniseries on the art of fairness. From New York to Tahiti, we'll examine villains undone by their villainy, monstrous self devour, empowering egos, and accounts of the extraordinary power of decency. Listen on the iHeartRadio app, Apple Podcasts, or wherever you listen to podcasts.

[Dina Temple Raston]

I'm Dina Temple Rest, and this is.

[Lamont Po]

Click Here's Mic Draw.

[Dina Temple Raston]

Lamond Black first started teaching a blockchain and cryptocurrency class at DePaul University back.

[Professor Lamont Po]

In 2020, originally to graduate students on blockchain, talking about business applications like supply chain management and healthcare. That gradually migrated towards crypto.

[Dina Temple Raston]

And he started getting interested in Ethereum, one of the cryptocurrencies, and things like smart contracts, which are basically automated agreements between people that live on the blockchain. The blockchain is that immutable ledger that keeps track of transactions.

[Professor Lamont Po]

So I now teach crypto and blockchain to graduate and undergraduate students and just finished teaching a group of 40 senior finance majors about crypto and all the amazing things in that ecosystem.

[Dina Temple Raston]

Lamont calls himself Crypto Curious. So he's not a devotee Exactly. But definitely plugged into the community.

[Professor Lamont Po]

There's always things that are changing in crypto. That's part of what makes it interesting.

[Lamont Po]

Lamong requires his students to buy some.

[Dina Temple Raston]

Cryptocurrency at the beginning of the quarter.

[Professor Lamont Po]

There's no textbook, so I tell them it's basically their textbook fee that they're putting into crypto. And I do that so that they can get a feel for it. It's hard to really understand something if you're not involved in some ways.

[Dina Temple Raston]

Which could explain why the class had decidedly mixed feelings when they came back to school the Wednesday after the election.

[Professor Lamont Po]

You know, we're in downtown Chicago, a.

[Dina Temple Raston]

Reliably Democrat voting city, which is very.

[Professor Lamont Po]

Blue, and I'm hanging out with a bunch of 20 year olds. So it wasn't exactly a party after the election, but they were very excited about bitcoin prices.

[Dina Temple Raston]

We are back with the latest on.

[Professor Lamont Po]

A cryptocurrency surge that's been gripping Wall street since President Elect won the election last night.

[Dina Temple Raston]

Bitcoin went from almost $69,000 apiece on election day to more than 75,000 when it became clear that Trump had won.

[Professor Lamont Po]

So it definitely. It was a silver lining, I guess, right?

[Lamont Po]

A hedge against their depression.

[Professor Lamont Po]

Yes, exactly. One of my students, I came in, he said, so, professor, your bag's pumping, which is a phrase in crypto for when your value and price is going up. So it was a good day in that sense.

[Lamont Po]

Your bags pumping? Is that what it is?

[Professor Lamont Po]

Yes.

[Lamont Po]

And where does that come from?

[Professor Lamont Po]

It's a very inside crypto term. Like a bag is just your holdings of crypto. And a pump is like a price pump when the prices are going up. So people say, your bags are pumping. You learn something every day, right?

[Lamont Po]

Yes, we do.

[Dina Temple Raston]

What we were hoping Lamont would explain was this other thing that President Elect Trump has been talking about with regard to cryptocurrency.

[Donald Trump]

This afternoon, I'm laying out my plan to ensure that the United States will be the crypto capital of the planet and the bitcoin superpower of the world. And we'll get it.

[Lamont Po]

President elect Trump promised that he'd create a strategic bitcoin reserve. What does that actually mean? Pretend I'm an undergrad.

[Professor Lamont Po]

Yeah, yeah. So the idea of a government reserve is a very old idea and a very old practice. So, you know, the idea of government holding gold reserves goes back to even the early civilizations. So I think what President elect Trump has in mind is holding bitcoin as one of those assets in the federal Government reserves. Typically reserves are in other fiat currencies.

[Lamont Po]

And so fiat currencies, currencies that aren't.

[Dina Temple Raston]

Backed by, say, gold. So their value actually derives from the trust you have in it.

[Professor Lamont Po]

Currency. So for instance, other governments will hold dollar reserves and they will sometimes spend those dollar reserves to support their currency or other domestic initiatives. And so it's not unheard of for governments to hold an asset for those types of purposes. But the conversation around Bitcoin is shifting towards this idea of Bitcoin becoming a global reserve currency. So I think his idea is that becoming part of the mix of the federal asset reserves, Bitcoin as a financial asset, and as that financial asset changes in value, there are governments that are looking at that as a way to store value and potentially increase in value.

[Lamont Po]

So it's more like a savings account.

[Professor Lamont Po]

Yeah.

[Lamont Po]

With a mix of currencies, including Bitcoin.

[Professor Lamont Po]

Yeah.

[Lamont Po]

And so you used to work at the Fed and you looked at lots of different things like this. Do you think it's a good idea?

[Professor Lamont Po]

I do think it's a good idea. I, you know, the devil's in the details. I think it's going to come down to what kind of amounts are we talking about? And I'm probably somewhat unique as an academic, as an economist to say that I think it is a good idea, but I think crypto is a good idea. I'm not suggesting that the federal government start betting on Bitcoin in the sense of investing it as a speculative asset, even though it will rise and fall in value. For me, I see this as the evolution of gold reserves. So if you think historically gold was viewed as a hard currency. And so in this world today of floating currencies, where values are continually fluctuating, where governments can print money at will, gold, because it's scarce, is viewed as a hard currency that can hold value during different periods of financial distress. And I think Bitcoin could move into that category. So I don't think we're there yet, but I think this is a way to look at Bitcoin as that future store of value. And whether it's a large amount or small amount, I think this is taking us one step in that direction. And I do think this is the future. And so I think it's a forward thinking move for the government to consider this.

[Dina Temple Raston]

A lawmaker in the state of Pennsylvania has already introduced a bill that would pave the way for the state to invest up to 10% of its general fund in Bitcoin. By some accounts, that could Amount to as much as $900 million.

[Lamont Po]

What do you think of that?

[Professor Lamont Po]

Yeah, 10%'s a large amount, so that's.

[Lamont Po]

What it sounded like to me.

[Professor Lamont Po]

Yeah. My guess is that they put that out just to give themselves some flexibility. There's people who talk about 5% for crypto as an alternative asset. Just like people might put 5% in the international stock market, some people put 5% of their portfolio in crypto. So it is a, you know, a similar concept, even when you're looking at it from a state government perspective. So it's really, I think, a question of their long term ability to hold and retain those assets. But again, I think this has potential. A lot of people look at the future of bitcoin as this technology that could be transformative. And bitcoin's been around for over 15 years now, and it has that track record. So I think many people like the state of Pennsylvania are looking at this as a way to invest in the future.

[Dina Temple Raston]

This isn't a completely new concept. Developing countries with less stable currencies or less stable economies have been using cryptocurrencies to shore up their reserves for years.

[Unnamed Speaker]

And on Wednesday, the government announced bitcoin would become legal tender.

[Professor Lamont Po]

Therefore, the law of bitcoin is approved.

[Dina Temple Raston]

El Salvador has had a strategic bitcoin reserve since 2021.

[Professor Lamont Po]

And what was fascinating was when they decided to do that a number of years ago, there was so much skepticism about whether this was going to drive them into some type of sovereign default. And when we went through that crypto price cycle in 2022, 23, and Bitcoin prices fell below 20,000, a lot of people were laughing at El Salvador and their foolishness. But now that we've come back into the bitcoin bull cycle, there's certainly reason for them to have the last laugh. We'll see how things play out. But again, this is not unheard of. And for a country like El Salvador, looking at the global economy, looking at this conflict or competition among the US Dollar, the Japanese yen, the Chinese yuan, there's just a lot of questions about where fiat currencies are headed. And so other people are looking at bitcoin now as an alternative.

[Dina Temple Raston]

In the U.S. the Federal Reserve, where Lamont used to work, uses assets like gold and foreign currencies in their reserves. And the thought is that bitcoin should be added to the mix, which is kind of ironic because the whole reason bitcoin was dreamed up was to avoid banking with the man or the Federal Reserve.

[Lamont Po]

So, you know, bitcoin has always been seen, or at least cryptocurrency more broadly, as a way to sort of get around the regular banking system. Right. To have a currency that is separate from the man. So had you expected Trump to embrace crypto on the campaign trail?

[Professor Lamont Po]

So, first of all, you're right. That's very much part of the ethos of crypto. Some people talk about it being censorship resistant. It really is created as a currency that does not rely on government. It can exist apart from government, apart from the banking system. That's part of the big idea introduced with the Bitcoin white paper in 2008. But I would say over that time, certainly over the last five years in particular, we have seen more and more institutional involvement. So large financial institutions starting to invest in digital assets, which is a common way of referring to crypto. Now.

[Dina Temple Raston]

Now the difficulty will be in trying to figure out how to regulate it.

[Professor Lamont Po]

There are so many things pointing in this direction, and I think government is now facing this decision of do we try and shut it down, do we try and ignore it, or do we try and put in some guardrails and play along? And I think we're likely going to end up in that third scenario. So it's not that surprising that the Trump presidency is talking about this. I do worry, like many people, that it's just one more constituency that he's trying to rally.

[Donald Trump]

Bitcoin is not just a marvel of technology, as you know, it's a miracle of cooperation in human achievement. It's amazing. There's a great camaraderie. It's really interesting.

[Dina Temple Raston]

The mere idea of politics and cryptocurrency mixing is giving some crypto advocates heartburn. Lamont has seen that firsthand.

[Professor Lamont Po]

And I think irony of this current run in bitcoin prices is crypto investors are happy because, you know, their bags are pumping. But this idea that crypto somehow gets aligned with a certain party, and even if it was the Democratic Party, I think either outcome would not be good. Because crypto ideally is apolitical. It is not government. For some people, it's even anti government or anarchist. But for many of us, it is this alternative to this system that we've built of, you know, federal governments, taxation and debt ceilings and all these things. And so the idea that this now becomes part of government, I think many of my students would be very skeptical.

[Lamont Po]

So I know an asset or money.

[Dina Temple Raston]

Can'T have a soul, but it sounds.

[Lamont Po]

Like you're kind of worried that crypto loses its soul.

[Professor Lamont Po]

Yes. So I would Agree with you that money and asset does not have a soul, but people do. And ultimately, money and assets are about people. Because crypto isn't just zeros and ones. It's a community. And to the extent that that community thrives, crypto will thrive. Money is really a social phenomenon. Crypto doesn't have value. The dollar does not have intrinsic value. It is only value that we associate with it as a community of people. And so my hope is that that community continues to thrive, which will then mean the thriving of this digital ecosystem. And so I want to protect that. That's my highest incentive.

[Dina Temple Raston]

I had just one other question, and it had to do with this.

[Professor Lamont Po]

Satoshi Nakamoto, the inventor of bitcoin, could.

[Unnamed Speaker]

Be one of the richest people on earth.

[Dina Temple Raston]

This is from a new HBO documentary called Money Electric the Bitcoin Mystery. It claims to have figured out who Satoshi Nakamoto actually is.

[Professor Lamont Po]

Were you the first person that satoshi reached out to? I believe so, yeah.

[Dina Temple Raston]

So the documentary claims that Nakamoto was actually a young crypto developer named Peter Todd. So I had to ask Lamont, do.

[Lamont Po]

You think Nakamoto is Peter Todd, the crypto developer?

[Professor Lamont Po]

No. We talked about that in my class, too. Yeah. As soon as that HBO show released, all my students came in. They were like, dude, they found them. And, you know, I think, like most people, I think it was a bit of a marketing stunt. But that's. You know, let's. Let's talk about that and maybe even in with that, think about Satoshi Nakamoto as an unknown individual who created this amazing thing called bitcoin. In contrast, think about President elect Trump, a showman, some would even say a narcissist, someone who loves the spotlight. That's one of the beauties of bitcoin, is that it doesn't have that cult hero. And that's part of what I love about it.

[Lamont Po]

It's really community.

[Professor Lamont Po]

Yes, it is. Anybody and everybody and that we are all equal. Some people say that crypto is democratic money because no one owns the system. Blockchain is decentralized. There's no corporation, there's no tech company out in Silicon Valley that's running it. Bitcoin is for the people.

[Dina Temple Raston]

Lamont says all this talk about crypto and reserve currencies has sent bitcoin prices climbing.

[Professor Lamont Po]

You've got other people who are just buying bitcoin because price go up and they have no intention of ever spending it. They just want to get rich, right?

[Lamont Po]

Price go up like Neanderthal.

[Professor Lamont Po]

Oh, yeah, that's another crypto phrase. People say, I don't care what it does as long as price go up.

[Lamont Po]

That's awesome.

[Dina Temple Raston]

By air time, Bitcoin was closing in on $100,000 a coin from Recorded Future News. This has been Click Here's Mic Drop. It was written and produced by Erica Gaida, Megan Dietrich, Sean Powers, and me, Deana Temple. Rest. It was edited by Karen Duffin. We'll be back on Tuesday. Have a great weekend.

[Unnamed Speaker]

Looking for more of the cybersecurity and intelligence coverage you get on? Click Here. Then check out our sister publication, the Record from Recorded Future News. You'll get breaking cyber news from reporters in New York, Washington, London, and Kiev, among others. And you'll see for yourself why it attracts hundreds of thousands of page views every month. Just go to therecord Media.