A (4:03)

Before we jump into the specifics of the book, I'm hoping we can step back and do a couple definitions for our listeners. First, as an academic and a law professor who studies this stuff and like two or three sentences, can you kind of sketch out why we have financial regulation?

B (4:18)

Couple of reasons. Basically, we have financial regulation to protect consumers. Consumers, investors. Basically, you know, when you're buying a financial product, it's. You can't kick the tires. You can't see if the loaf of bread is moldy, you know, so it's difficult to. To figure out what you're buying. And so there are all kinds of investor and consumer protection rationales for regulation. There's also financial stability regulation, which is my particular area of expertise, which is, you know, when lots of institutions are behaving in ways that maximize their self interest, they still make the financial system fragile and more prone to crises. So that's another reason why we regulate. We regulate because the financial system can be used to launder the proceeds of crime. So that, that's another reason for financial regulation. You know, there are others as well, but those are some of the big reasons why we regulate the financial system.

A (5:14)

What is crypto in like a sentence and is it a security?

B (5:18)

Ah, okay. Well, the first one, crypto asset, or most crypto assets, are literally an entry on a database with nothing behind them. I mean, when you say it like that, people look at you like you're crazy. Like surely there must be no more to it than that. And the answer is no. So someone has written down on the database that you own that entry in the database and there's nothing behind it. Now, there are some new types of financial, sorry, crypto assets that have backing and whatever, but, but when you think of Bitcoin, when you think of all these meme coins, that's what they are. They're an entry on a database. Now, are they securities? Now that is sort of. Well, up until this year has been the sort of the trillion dollar question, if you will. Because the securities and Exchange Commission regulates securities. They do investor protection regulation. One of the things they do is they require registration of securities if you want to just sell them to the public. Now, if all you're offering is an entry on a spreadsheet, you're not going to like. The appeal of that is you can gin that up out of thin air pretty quickly and at no cost. If you have to go through the SEC's registration process to sell to the public, that's going to add a lot of time, money and expense to the process. So it's sort of, in many ways craters that the crypto business model. The securities laws also crater the crypto business model because the securities laws require that you can't have a broker, a broker dealer, or they can't be in the same company as an exchange. So, for example, Schwab and the New York Stock Exchange can't be part of the same entity. And the reason for that is there's so many conflicts of interests that come from that. You know, if, if the, the broker is processing trades itself, it can pick and choose amongst its customers and prioritize some over others, et cetera. So structurally, if you are a securities broker, you can't also be a securities exchange. But that is the normal business model for crypto exchanges like Coinbase, for example. And so again, if you had a situation where the securities laws would were applied, it would sort of be in many respects, game over for most of these crypto exchanges. So this has been A huge issue, whether crypto or securities. And honestly most of them are. People are investing money in a sort of a common pool of money with the expectation that others are going to gin up profits for them. As I said, that was the SEC's position until the end of 2024 with the change in administration. We have a very different perception of that issue coming out of the securities and Exchange Commission. Most of the enforcement actions that had been commenced by the SEC have been dropped since the beginning of 2025. So, you know, my personal view is that, yes, the vast majority of these things are securities. I even go a step further and say I think Bitcoin's a security too. That's an unusual stance. Most people accept that Bitcoin is not a security, that it's a commodity. But I think you can make an argument, given how manipulated the market for Bitcoin is by a bunch of whales who are wash, trading back and forth, that they are actually controlling the price of Bitcoin. And so you are relying predominantly on the efforts of others for the price of Bitcoin.

A (8:34)

So in the introduction of the book, you describe what you call as a repetitive pattern in technology that I really like. I was wondering if you could describe this cycle and give us kind of one example of how it plays out.

B (8:46)

Yeah, it's basically. And I worked really hard on that paragraph in the book and so I can't remember it off by heart and I'm going to, I'm going to butcher it. So go, go read the paragraph when I'm done because it's much better there. What tech businesses often do is they find a problem or a pain point and then they develop a technology to respond to that pain point. But the problem is that they often in Silicon Valley have a lot of contempt for subject matter, expertise, for history, for what's going gone before. So they don't really understand the pain. They may not understand why technology is never going to provide a proper solution to it, but they develop the solution anyway. And then they tell a lot of good stories about it, because hype is a huge part of the Silicon Valley business model. So they hype up how this technology is paradigm shattering, nothing like it ever before. Even though we've struggled with this problem for years, decades, centuries, now the technology can fix it neatly. They lobby like hell. So they tell that story to regulators, to lawmakers, et cetera. Often regulators and lawmakers are looking for an easy solution to intractable problems because real solutions are there, but they require sort of the slow plotting work of democratic process, which isn't particularly fun. So they can be an amenable audience to these hype stories where this thing was never going to solve the problem. But sure, the story's good. So what they start doing is they start giving some perhaps temporary dispensations on the technology when it comes to it having to comply with the law. Or maybe they don't give a temporary dispensation actively. Maybe they just look the other way as this technology, which is breaking all kinds of laws, just is allowed to flourish. Then the tech business model gets so entrenched and so, so big that then as its harms start to sort of percolate up and because remember, we took away all the regulation or we stopped enforcing the regulation that was meant to address its harms, and it starts to become increasingly clear that it's not going to solve the problem at hand. But at this point, as a matter of political economy, it's such an entrenched actor with so much money that, and you know, and they, they spend politically, et cetera, that it becomes impossible to touch it. And I think, I say in the book, bonus points if you've managed to become a monopoly, because that's usually the goal. You want to be the only service provider and then lather, rinse, repeat, right? And so the problem isn't solved. We have another sort of powerful actor that is often quite harmful and is not solving the problem, but it's again burnished the reputation of Silicon Valley as being able to solve problems that no one else can, even though it's not solving those problems. And so the narrative just snowballs.

A (11:43)

So speaking of pain points, will fintech democratize finance?

B (11:48)

No, Fintech is, you know, speaking of defense, defining terms, we did that up front. So let me, let me talk about what fintech is. Fintech is just really an umbrella term, a marketing term for certain types of Silicon Valley oriented financial business models. And generally the term sort of started being used after 2008. So technology has always been integral to finance. This is, it's not like finance wasn't technologized before this, it always was. But after 2008, you have, I think, a well justified anger against the financial system that had caused that crisis. And so there was sort of a hunger for outsiders to come in who would arguably be better behaved. I will dispute that. But you know, I think that there was an understandable hunger for an alternative. You combine that hunger with a period of prolonged low interest rates, which is a great time to be a venture capitalist, because when interest rates are low. People are looking who, people who do have money are looking for a place to park their money where they can get some kind of return. And so money rushes into the venture capital firms. And so venture venture capital firms had a lot of money. They seized on the story about bad Wall street and then they started to sort of support these fintech businesses. They poured money into fintech startups that were supposed to provide an alternative. And there's so many of them. You know, there was so many business models, I mean like, so there was fintech lending, for example, which started out as, you know, back in the day. It was called peer to peer lending because the idea was these financial institutions are so bad, let's get them out of the picture. We'll just connect people who want to return with people who want to borrow and it'll be great. Well, you know what, that business model didn't work out great. People in the end needed an intermediary to do credit assessment. And so from peer to peer lending, it started to be called marketplace lending and now they just call it fintech lending. And we're, it's pretty similar to the lending business model that banks did, but with less regulation. And that really is the sort of the theme of so much fintech. It's like things that traditional financial institutions already did, but with less regulation. And to be clear, you know, fintech is a big tent, I think, you know, there's, there's, there's some interesting payments providers and stuff. So I don't want to tar everyone with this brush. But so much of the industry, you know, I mean, crypto definitely is like offer people investments but don't comply with the securities laws. We've seen things like buy now, pay later, which is really a kind of credit often because people are being charged fees if they don't pay back in time. But we say it's not a loan, right? So we don't comply with the loan regulation. So that's sort of the theme, theme of so much of this fintech. And so when you've got a situation where the technological solutions are responding to real pain points, but they're doing it by offering what was already available. But in a less regulated environment, we shouldn't be surprised that so much of it is predatory. Right? Because the reason why these populations aren't served by traditional finance is because it's expensive sometimes to serve these populations. There's more risk involved sometimes. So if you're doing that, you're probably doing it in an exploitative way. If you're making a profit from it. And I think that's the thing we always have to remember with this, is that these are for profit businesses and sometimes the solution cannot be a for profit solution. So for example, we talk about people who are unbanked. It is really expensive to be unbanked. And there's a chunk of the United States population that doesn't have access to a bank account usually because they don't have the, the minimum amount to deposit. And so they have to rely on expensive check cashing services and things like that. You know, have to pay for money orders or gift cards and things like that. So it's very expensive. And it is absolutely a noble goal to get more people banked. But if the way we're doing that is getting people to place their funds with new types of fintechs that don't offer deposit insurance, we're really giving people a much worse alternative, a much more scary alternative to my mind. And if we, you know what, how many other countries deal with it is that the governments just require the banks to bank everybody and sometimes they subsidize them, you know, for the operational costs associated with it, et cetera. And it's really just not that big a deal to have a subsidy for banks to bank the unbanked. But of course, because that's sort of politically icky in the United States, instead we get these proliferation of alternatives that are often quite predatory and exploitative.

A (17:02)

Why hasn't crypto solved the unbanking crisis?

B (17:06)

Well, there's, there's two, two strains to this answer. So the first one is like regular cryptos. So the crypto that I talked about, you know, what is crypto? It's an entry on a, on a spreadsheet. So, you know, Bitcoin originally was supposed to be quote, unquote money. It was supposed to be money that would bank the unbanked. You know, that people didn't have to deal with these awful financial institutions anymore. They could just use Bitcoin to connect in a peer to peer fashion and transact that way. That didn't work pretty quickly. I mean, for something that to be money, it really needs to have a pretty stable value. And Bitcoin is super volatile. It's also deflationary because it has a fixed supply. So we worry a lot about inflation, which is, you know, the price of, of things going up. But deflation's actually even worse because if you know that your dollar is going to buy more in a week than it is today, you're really not going to want to spend it today unless you absolutely have to. So it Actually, economists are terrified of deflation much more than inflation. Well, depends on the level. But, but deflation is a real problem because it discourages people from spending. So you combine the volatility with the deflationary aspects. The fact that, you know, any private money is subject to panics and risks. And, and we've seen this time and time again through history because ultimately having a government behind something and it's full faith and credit and it accepts the money for taxes and you know, that is what provides trust in money. So you don't have the trust, you don't have the, you know, you've got the volatility, you've got the deflation. It was just, it was never going to be a very good money. And if you don't want to trust me on this, you can look at what happened in El Salvador where they actually did make it money and you know, nobody there used it. Part of it was the volatility. You know, it was just, you know, if a can of Coke is like, you know, I'm going to use numbers that are wrong, but just for illustrative purposes, like if a can of Coke is worth one bitcoin today, four bitcoins tomorrow and two bitcoins the next day, like, how do you run a business like that? So that was part of the reason why people didn't like to use it because of the volatility. But also it's just coming back to the point I made at the beginning, actually. This underlying blockchain technology, it's a really crappy database, it's pretty clunky, it's unreliable, it takes a long time. And so people will be waiting around for an hour for a payment to go through. Like, it's not going to work like that. So really bitcoin has taken off as a speculative investment or as some people call it, straight up gambling, not because of its, its money ness. So that is not going to bank the unbanked. The other strand of the bank that unbanked debate is that there is another. There's a particular kind of crypto asset that does have something behind it, and that's a stablecoin. And you know, I don't want to overstate the stability of stablecoins as they regularly lose their peg, but the idea is that they are pegged so that a stablecoin should be worth a dollar at all times because it's backed by a reserve of reasonably safe assets. But as I said, the, the research shows that they lose their pegs all the time. There have been sort of the beginnings of runs on them. So it's, you know, I don't want to overstate their stability, but they're certainly more stable and less volatile than other kinds of crypto. And that's where a lot of the conversation about banking the unbanked has gone to now, these stablecoins, especially because in the United States, I, Congress passed what I would call a very misguided piece of legislation earlier this year called the Genius act that created a framework, a legal framework that essentially endorsed these. These stablecoins. And people have said that these will be an alternative for people who want bank accounts. But, you know, the irony of it all, and this is something that's often missed, is that if you want to get a stablecoin, most of the time you have to buy it on an exchange. Right. And because people aren't paid in stablecoins. Right. So you have to take your real money and go to a crypto exchange and buy stablecoins. Well, you know what crypto exchanges won't do? They won't open an account for you unless you have a bank account. So it's not gonna bank neon bank, because you can't get it unless you have a bank account.

A (21:47)

Given all of these issues, who or what is driving the crypto markets and why? Or put it another way, you have a section in your book that talks about crypto as regulatory arbitrage. And what does that mean?

B (21:59)

Yeah, so crypto is regulatory arbitrage. It's actually sort of what I was talking about before with the. The lather, rinse, repeat. So regulatory arbitrage is sort of the. The fancy law professor way of saying not complying with the law. Right. Finding. Well, it's not always not complying, but it's sort of finding ways to skirt the law, whether it be operating in a country that has a different legal regime, so moving to a different country, or just exploiting loopholes, or sometimes just outright not complying with the law and hoping that you don't get caught or cracked down on until you've gotten big enough to be able to throw your weight around. And so I sort of tell the story of crypto as. As a regulatory arbitrage story, because as I mentioned before, if the industry had to comply with the securities laws, there really wouldn't be much of an industry. Right. The technology itself, as I've said, is a clunky database. These businesses were never going to succeed, despite all their storytelling. They were never going to succeed based on whether this was a better alternative to regular databases. Because in fact, for almost every purpose, regular databases are a better solution. And again, if you don't want to believe me on that, I cite to a letter in the book that was written by 15. No, sorry, signed onto by, you know, 1500 independent technologists that said, and I'm going to paraphrase, but basically for any purpose, a regular database is more useful to you than a blockchain. Right. So these businesses were never going to succeed on the tech. It was always going to be about skirting the, the law. And, and really there's always been a sort of an ideological element to this too. Like it's always been very popular with techno libertarians who are fine with having all kinds of bad actors in the space and people taking advantage of you and exploitation and hacks and scams, just so long as the government isn't exercising any oversight. I guess, you know, that regulatory arbitrage works with that ideological bent that like we're fine with skirting the law. We just want to get away from government oversight. So how did this industry come to be? Well, these techno libertarian fantasies have been around actually for quite a long time. So in the book I talk about, you know, people in the 90s expressing this desire to create a financial system outside of the, you know, the oversight of financial regulators away from the central banks like the Federal Reserve. PayPal, which was started by Peter Thiel, or he was one of the founders again in the, in the 90s. That was sort of partly his goal with PayPal as well, was to, to create an alternative financial system that wasn't going to be subject to banking regulation. So these are long standing desires. And I think that explains in large part why the story of blockchain technology was so compelling to so many in Silicon Valley. Right. Finally the technology is here where we can create our alternative financial system and get away from regulatory overs. And this really was an industry built by Silicon Valley. So I know that sort of the people like to tell this is sort of a grassroots origin story, but really this was venture capitalists that built this industry. So you know, particularly Andreessen Horowitz, which is one of the largest venture capital firms in Silicon Valley. They invested in the coinbase exchange in 2013. That was their first crypto investment. And then they sort of, they went all in, particularly around sort of 2020, 2021. And you know, it was, it's not something that they were hiding. You know, there were New York Times articles saying that they realized that Andreessen Hurwitz realized that it would need to get the law changed to make their business model viable because they. Right, because at that time they were sort of getting away with the law not being enforced, but for long term durability and viability, they needed to get the law changed to, to bless what they were doing. Because once again, the technology was never going to be enough on its own. And so, you know, we've seen again, Andreessen Horowitz in particular, but other venture capital firms as well, you know, hiring a lot of people from the cftc, which is a regulatory agency, the Commodity Futures Trading Commission, that oversees commodities. And if crypto aren't securities, then they're commodities. So a lot of their personnel ended up going through sort of the revolving door with, with, with crypto firms. Andreessen Horowitz hired, you know, one of their former, one of their former commissioners, at least one other former commissioners have gone to work elsewhere in the crypto industry. Lots of lobbying, lots of media blitz as well. Like telling this story of how crypto is decentralized and gets rid of the need for intermediaries and therefore there is no one to regulate. But in fact, crypto is rife with intermediaries, very concentrated intermediaries. In many places, economic control is more concentrated in crypto than in traditional finance. So this is really just a story, but it's a story that they, you know, yelled from the rooftops. And it became in many way, in many places, sort of the, the conventional wisdom. And so, yeah, with, with all of that, they sort of built this industry around a tech that wasn't very good, but allowed them to sort of achieve what were sometimes economic ends. As a venture capitalist, it's really useful to have your investments not be considered securities because it allows you to cash out earlier. And also ideological ends like these, this techno libertarian streak. They were pushing for legislation in Congress that would sort of bless the existing crypto models starting. Well, I mean, it was really coming to a head in 2022. And that's when Sam Bankman Fried was sort of the, the face of crypto in Washington. When the crypto markets collapsed in 2020, the. Well, they were calling it the crypto winter. It started in sort of the spring of 2022. It was sort of this very weird time because anyone who followed the crypto markets could see that they were literally imploding in real time. But in Washington, all the lawmakers who had been lobbied so heavily by the industry were saying, like, crypto is the future. Crypto is transformational. It was like, have you seen what is happening? It's literally imploding. But once those implosions snowballed and ended, FTX brought the, brought the fraud FTX to light. And Sam Bankman Fried, who had been the head of FTX and the sort of the golden boy up till then of crypto in Washington that really sort of put a damper on the legislative project and it sort of got shelved for a little while. And, and some of us thought these, thought this was done, but some of us being me, were, were a little too naive then and didn't appreciate how much money was still in the coffers of venture capital firms like Andreessen Horowitz, and that they were just going to keep going. And really, they were back with a vengeance by 2024. So almost half of all corporate expenditures on the 2024 election cycle came from the crypto industry. And when I say from the crypto industry, it was really primarily, according to reporting from the New York Times, three entities. It was Andreessen Horowitz, it was Coinbase, the crypto exchange, and also another crypto company called Ripple.

A (29:51)

I'd like to follow up on something you briefly mentioned about the fact that this being a commodity, meaning that we can cash out earlier. I found this point particularly compelling in your book as to maybe why there's still so much interest and momentum in making crypto a part of our institutional system. Would you mind explaining for our readers kind of what I'm alluding to here?

B (30:11)

Sure. I mentioned the securities laws. So the securities laws basically say if you want to sell to the general public, you have to go through the equivalent of an, well, an ipo, an initial public offering. And that is expensive and time consuming to do. If you don't want to go through an ipo, there are alternatives. You can sell to just sort of sophisticated institutional investors, and you don't have to go through that process. That is an option and an option that many, many people, many institutions, offerings take. But if you want to be able to essentially access everybody, all people, then you need to go through the public offering process. One of the things that I think is so attractive to venture capitalists about crypto is if they can say it is not a security, it is in fact, just a commodity, then they don't have to comply with those laws, and they can dump their crypto tokens, whatever they got for their investment, they can dump those on the public pretty quickly. Usually there's a contractual lockup of about a year, but Then they can dump most other venture capital investments. They either have to wait for a very long time for the business to be big enough to ipo, or they are dependent on finding sort of a sophisticated acquirer for what they're selling. And so those, you know, those exit options are the usual options on the menu. And it's, I think, quite appealing for venture capitalists to have a third option on the menu which is can dump on unsuspecting members of the public pretty quickly. That dump on unsuspecting members of the public is why the securities laws were enacted in the first place, why we have an sec, because it was formed in the wake of the Great Depression, because, you know, during the rah rah markets of the 1920s, you know, there were door to door salesmen selling stocks and bonds with nothing behind them. And it just, it got completely out of control. And then the markets crashed. Half of the stuff that people bought was completely worthless and we ended up in a depression. So, you know, often when I talk about this stuff, people are like, well, shouldn't investors just be able to sort of choose what they want? You know, personal responsibility and things like that? I was like, well, we've tried that. Didn't go too great. I think, you know, having securities laws is good for investor protection. It's good for financial stability because the bubbles that get built up in these kinds of assets can explode into a financial crisis, hurting people who never even touched the stuff. And it's also good for just, you know, the markets more broadly, because people will stay in the markets if they trust them. If they don't, then you're going to have people keeping money under their proverbial mattress instead. So that's sort of the exit option. But I also don't want to understate the ideological stuff going on here. And this is the part where I say I am not making this up because people tend to think I'm a crazy person. But I'm really just citing things that these people have said. So, you know, Brian Armstrong, who's the CEO of Coinbase, and Mark Andreessen, who's one of the partners in Andreessen Horowitz, they along with people like Peter Thiel, are very involved in this network states movement, which is an attempt to essentially create tech CEO dictatorships that exist outside the, the reach or scope of democratic governments. Right. And they think that this blockchain and crypto will be the backbone of these new kinds of states that exist beyond the control of any democratic government. So that I think is Also a motivating force in all of this.

A (34:07)

You've mentioned the Genius Act a couple times during this interview. I was wondering if you could just briefly touch on what it is again and what that means for the rest of us.

B (34:16)

And the Genius act is about a particular type of crypto asset that I've already already referred to, which is these stable coins, right? So these are crypto assets that do have something behind them. They have a reserve of assets backing them, but they don't necessarily guarantee that they will always be worth a dollar. But that's the sort of the marketing pitch. So these have been around for a while. You could absolutely have argued up until this year, and. And I did, that these were unlicensed deposits, right? So only banks are allowed to accept deposits. And you could have argued that these were breaking the law because they were accepting deposits when they shouldn't have been because they weren't licensed banks. You also could have argued that they were unlicensed money market mutual funds, because in many ways they were structured that way. So they were. These things, again, were regulatory arbitrage. They were operating in this legal gray area. No one had cracked down on them, but they were arguably illegal. People were using these things, but not the way that, again, the hype and the story tells us they were, right? So the hype in the story was that stablecoins were banking the unbanked and everybody was using these to buy loaves of bread at the grocery. The grocery store, right? Like that. These were a payments mechanism, and that just simply wasn't how people were using them. The two main use cases, and I think this is still. It's even after the passage of the Genius act, we are still in a place where the two main use cases are. Are one for illicit payments, right? So stablecoins are used for, you know, drug trafficking, and they're being used to fund the North Korean nuclear program. They're being used for sanctions evasion by Russia. So there's a lot of sort of very clearly illegal use cases. But then also people were using them in conjunction with speculation on other crypto assets. So you can sort of think of them almost like a cash management tool if you're speculating in crypto. So say you, you know, you just sold some bitcoin and you don't want to take your cash out off the crypto exchange. You could essentially park it in stablecoins on the crypto exchange until you were ready to invest in some other crypto. People were also using them for staking, which is basically Lending them out in terms of, and you get a return on it. So that, you know, but so it was crypto speculation. Basically those were the two main use cases, illicit payments and crypto speculation. But the story was told that these were a transformational payments technology and therefore we need to pass a law to bring them out from the, you know, legal gray area and bless them. And again, this is being tried since 2022 and hadn't succeeded. And then finally earlier this year they did get this, this law passed the Genius Act. And to be clear, it's no secret, I think that lots of people who voted for this didn't think it was a great bill, but were afraid of being targeted by crypto super PAC money. So you know, it had bipartisan support. But I wouldn't necessarily read all of that as die hard crypto believers in Congress. That, you know, the, the money cannon here was a huge swaying factor. And in fact, you know, someone, I think it was semaphore, obtained access to a group chat between crypto industry folks and high level Democratic Congress people in the lead up to Genius act. And people from the crypto industry were like, you know, if you don't vote for this, we won't be able to support you. And you know what, no one ever lost a primary because, or no one's going to lose a primary because they backed Genius. So just do it. Your voters don't aren't noticing. So you know, it was, it was pretty obvious what was going on. But so we now have a stablecoin law and it is a bad one. It assumes kind of like a kid sticking his fingers ear saying la la la, I can't hear you. It assumes that it's impossible to have a run on stable coins. So it doesn't have any of the protections we would have in banking regulation. So there's no insurance, there's an equivalent of deposit insurance. There's not a special way for winding up a failed stablecoin to make sure people get their money back quickly. You know, just stuff like that. So that is a big problem. And then another big problem with it is that it lets the largest tech companies issue stablecoins so essentially issue their own private money. And that's a huge issue. And it's to me it's just shocking that this was allowed to be included. And the reason why it's shocking is about, in 2019, about five or six years ago, Facebook tried to launch its own money and the world collectively. And it was a stablecoin, to be clear. And the world collectively freaked out and said, this is a terrible idea. Shut it down. And it was shut down. And just, you know, not too many years later, we have the United States Congress passing a law that says, all right, Facebook, you can launch your own money. X Elon Musk, you can launch your own money. And that's the plan. And I actually, I'd be surprised if most stable coins really take off for everyday payments for the reasons I mentioned earlier with regards to Bitcoin. Sure, it's less volatile, but you know, if we're actually processing these transactions on the blockchain, it's kind of slow and clunky and expensive and really it just doesn't, doesn't improve upon the payments experience of most people. But if we look at what happened in China when some of their tech platforms launched sort of payments apps, they really took off because people wanted to sort of work in this in app world. And so things like Alipay and WeChat Pay really took off. And so I think it's really important to keep our eye on these large tech platforms and see what they're going to do with this kind of stablecoin blessing. And yeah, I'm really worried about that for a bunch of reasons. I mean, they could subsidize stablecoins because what they really want is your transaction data. They want to see your payments transaction data. I mean, they, they want data per se, you know, all kinds of data, but nothing. Well, maybe not nothing, but few things are as valuable as payments data because it's sort of an unvarnished look into what you actually want, you know, what you actually value. It also can give away location where you're buying things and stuff like that. So I wouldn't be surprised if these large tech platforms end up subsidizing stablecoins to encourage adoption in order to get people's payments data. And I could see people adopting stablecoins when it's sort of incentivized by those large tech platforms. So, yeah, that's something that's really terrible about this bill that has me very concerned.

A (41:30)

On a slightly cheerier note, I was wondering if you could tell us a little bit about what are potential solutions to this problem that you've brought up?

B (41:37)

It depends which problem we're focusing on. Right. So in terms of the problems that fintech is supposed to be solving, part of apps like Robinhood or the Buy Now, Pay later firms or the earned wage access programs, part of what they're selling is basically a vision for helping people who are in financially precarious circumstances and they won't be able to do it. You know what we're, you can't. I mean, basically Robinhood's app is very gamified. You're essentially gambling. You're not going to. The vast majority of people are not going to gamble their way out of financial precarity. The house always wins, otherwise there's no house. Right. And some of these things that are effectively, you know, loans, they're. If you borrow money, you have to pay it back. Right. So that's not really gonna. And pay for the money in the interim. Right. Often. So, so that isn't going to get people out of their financially precarious circumstances. So if we actually want to solve those problems we actually have to deal with, we need to increase the minimum wage so that people who are, I mean, half of all Americans, even at the end of last year, half of all Americans who are full working full time were living paycheck to paycheck. And that is only getting worse with some of the legislative policies that we've seen this year and other things. So when people are in financially precarious circumstances like that, you know, these Fintech Hail Marys are not going to get them out of it. So we need to increase the minimum wage and we need to put in place, you know, the safety nets that are being torn apart now. We need to put those back in place and, you know, and bolster them and yeah, I know that sounds hard, but it's. There's no other way to deal with this. Right. And you, you cannot have a population where everybody is just, except for the top 10% is feeling incredibly economically precarious. It just doesn't work. Some solutions are more tractable. I already mentioned that with, with banking. You know, it's really not that big a deal to force the banks to offer accounts to everybody. And even we can sweeten the deal a little bit for those banks with a subsidy. Now the, the sort of, the bigger picture problem that I identify in the book is this techno solutionism, this pervading idea that we think that technology can solve our problems. And what that does is it saps the energy for the kinds of real solutions that I just mentioned because those are politically challenging. And so a nice shiny silver bullet in the form of tech solutions sounds real appealing. You don't do the work. Techno solutionism also flattens our problems, our social problems. It sort of cherry picks the aspects of problems that are well suited to a tech fix and ignores the rest. And the rest is usually the Most important part, it ignores, as I think I said at the beginning of this conversation, it ignores expertise about how to actually solve these problems. People have been working on it for a long time. So this techno solutionism I think is a real issue and it's not, you know, I have written a book about fintech, but it's a problem in so many other areas. It's a problem with climate change. It's, I mean, it's all over the place. And so one of the things that I am trying to solve, if you will, is techno solutionism. And you know, there's no, like, there's no silver bullet that is going to address the problem of techno solutionism. So in the book I really get into like why we worship innovation and how that's capitalized on by Silicon Valley, how we subsidize Silicon Valley because we believe so much that it's tech can solve all our problems. And so we're in a vicious cycle of giving them money instead of keeping the money for public solutions. So a couple of things I come up with, you know, some of them are things that are above my pay grade but critical, like dealing with campaign finance, right? If, if, if Silicon Valley can essentially just bully our electorate, sorry, our elected representatives into giving them the laws that they want, then we're in big trouble. So we do need to solve that issue. But what I wanted to focus on, and this is in the final chapter of the book, is what we can do on the ground. And I think this is a time where a lot of people are feeling like they lack a sense of agency, that there is not much we can do. And one thing we can do is we can change how we talk about technology, right? And more importantly, we can laugh at the most ridiculous promises that are coming from Silicon Valley. So the idea is if we start with this understanding, with this presumption that these are essentially used car salesmen trying to sell us something, and we shouldn't really believe their hype until we got reason to and you know, laugh at what they're promising like that can slowly, very slowly but incrementally change the policy that we have towards technology right now. We have so many regulators, for example, and legislators who are terrified of being cast as anti innovation that they won't actually enforce the laws on the books. But you know what? Not all innovation is good. And also a lot of innovation coming out of Silicon Valley isn't even tech innovation. It's legal innovation, AKA regulatory arc contrast, right? So just I think talking about this stuff differently is really important. And I think we have a really good moment to do this because one thing that you and I haven't talked about, but I've got chapters on it and discussion on it in the book, is, is AI. And AI is another big umbrella term where some of it is good, some of it is not good, and it's not even all the same technology. So there's, you know, machine learning versions of AI have been in use for a while now, and a lot of the useful use cases are performed quite well by machine learning. But all the hype right now is around the chat GPTs of the world. These, these large language models, these general purpose models that are supposed to create their own text or, you know, images or video, but it's not creating anything. It's essentially it's, it's a probability engine. It is taking the data that it has. So it's trained on vast swathes of other people's work which they haven't paid for. So that's the regulatory arbitrage for AI, you know, their copyright evasion and also probably some regulatory arbitrage of environmental laws as well, because they're not getting the right permits for data centers. Um, and then they're taking that data. They use a lot of human labor to curate that data. That human labor is often in foreign countries where people are not paid very well. They're sometimes traumatized by it. But then essentially what these models do is that they spit out the statistically most likely response to your prompt. It doesn't mean it's right, it's just statistically most likely. And people are rightly making fun of the outputs of this. People call them hallucinations. That sort of kind of anthropomorphizes the, the AI a little bit. It's not human, it doesn't hallucinate. It isn't going to get any better either because just if you're just proceeding statistically, your output is what your output's going to be. And accuracy has basically hit a wall with these models. They're not getting better. So it's a good place to start realizing how silly some of these promises can be. Especially because the hype around Gen AI has been so overblown that it's sort of ridiculous. So I think this is a time for people to feel empowered, to start being skeptical of technology, to start laughing at it. And I think if we do that collectively and we change the way we talk about things, that is going to go some of the way towards addressing techno solutionism.

A (49:57)

Well, Hilary, that's about all the time we have today. Thank you so much for coming on the show.

B (50:02)

Thank you for having me.

A (50:03)

If people want to know more about you or your work or where to read this book, where should they go?

B (50:08)

Well, the book is@fintechdistopia.com so the whole book is right there. But if you want to learn more about my other work, I published a book earlier called Driverless Finance. There's a website for that book, too, driverlessfinancebook.com you can also look up my faculty website. As Jake said, I am a professor of law at the American University Washington College of Law.

A (50:30)

Thanks again.

B (50:30)

Thank you.