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The Wolf Of All Streets
New Crypto Laws & CBDCs: What It Means for Bitcoin’s Future | Chris & Luke Giancarlo
01:06:46
New Crypto Laws & CBDCs: What It Means for Bitcoin’s Future | Chris & Luke Giancarlo
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- [00:00]
Chris Giancarlo
God said, well, what do you want? I sent a squad car, I sent a boat, I sent a helicopter. What more can I do? I think right now the message to people is it's not don't wait for a signal from heaven, get on with it. The signal is that permission slips are no longer needed.
- [00:14]
Scott Melker
If the President of the United States is launching meme coins, I'd say that your helicopter has come to the steeple.
- [00:20]
Luke Giancarlo
I would argue. I really think that blockchain and distributed ledger is truly the most radical innovation since the beginning of the Internet.
- [00:28]
Chris Giancarlo
Who exactly do we go to in this administration for permission to do a big project they're setting out on? Don't expect an actual signal. The signal out of Washington now is go free.
- [00:39]
Luke Giancarlo
No.
- [00:40]
Scott Melker
4 words strike fear into the hearts of bitcoiners more than central bank digital currencies. That said, we know that CBDCs are inevitable and we need people on the front lines like Chris Giancarlo and his son Luke working to make sure that these central bank digital currencies end up having the same privacy and freedoms as we have with cash. That was just one of the many topics that we discussed in this incredible conversation. We touched everything about Web3 crypto policy, legislation, regulation with this ex CFTC chairman and his incredible son. You do not want to miss this conversation. Let's do. I know that the price of one is exceptionally high when I see your name being floated for crypto czar just a few months ago. Chris would love to see you in that role. To be quite honest, I don't know if it was something that you were interested in or if you had other plans.
- [01:49]
Chris Giancarlo
Well, actually it's a story we could talk about. I mean, my followers on Twitter know I made it clear that I didn't really want to run an agency again and certainly sized up the size of the task that Paul Atkins is gonna have at the SEC following Gary Gensler to clean up that mess. And it really is a mess. A lot of harm was done. I know it directly cuz I faced the same thing when I went into the cftc and the mess he had left was pretty enormous. His modus operandi is expediency. If the head of the division won't get the job done to his satisfaction within the timeframe he sets out, he just goes to their deputy and their deputy's deputy and says, deliver this on my desk by the time I need it. And that has a terrible impact on morale and chain of command. And it caused a lot of departures from the cftc, a very talented, capable people. CFTC is a quarter of the size of the sec. What he did at the SEC was a magnitude multiple of what he did at the cftc, the damage that was done. And so that task is a big task. And Paul Atkins, fortunately, is very up to that task. I felt that at this stage of my life, having done that once already, I didn't wish to do it. I did wish to, though, to be involved in policy. And I did sketch out for the incoming Trump administration the role of someone who would be responsible for delivering on all the promises that Trump had made with regard to crypto. A crypto council, no capital gains on crypto, a crypto stockpile, et cetera. Trump laid those out masterfully in his Nashville speech in July of 2024, but interestingly did not actually designate a person or as it's come to be known, a czar to deliver on those promises. And I identified that as a necessity to make promises into reality. And that's a role that, should the President have turned to me, I would have been delighted to serve in. In fact, he turned to David Sacks, a different set of skills. Not somebody who's experienced in Washington, but somebody very experienced in getting things done, sees the big picture. And to David's credit, he added to my outline the notion of making it not just crypto, but AI. And David's gone in with a lot of vim and vigor and sense of urgency, and I think he's doing a fine job, and I'm delighted to be in touch with him and. And sharing ideas. I won't be leaving the private sector to go back into government, but I hope to be a resource. I think I will be a resource to the administration as they think about all that needs to be done to really reverse bad policy. Truly bad policy of the prior administration, truly un American, hindering innovation, going after legitimate businesses, going after legitimate innovators with every tool they could use and really thwarted and in some ways retarded US Innovation in this area, forced a lot of businesses to relocate outside the shores of the U.S. fortunately, I think that's being reversed in very quick order. So I'm very pleased with the way things are going, and I'm very happy to support efforts by David Sachs and others to turn bad policy into good policy.
- [05:04]
Scott Melker
You and I were chatting right before we hit record. You sort of alluded to the fact that most people still don't quite get it. I think I referred to it as ptsd, but I don't think that people in The United States quite understand what a mammoth change this is and that you can actually operate here.
- [05:23]
Chris Giancarlo
Scott, PTSD is actually the right analogy. PTSD meaning that people that are suddenly freed from captivity still have a captivity mindset. I was talking to the CEO of one of America's largest financial traditional financial institutions, and she was quizzing me hard, saying, so where do we, who, who exactly do we go to in this administration for permission to do a big project they're setting out on? And I said, that's what's changed. This new administration doesn't want to be in the permissioning business. That that's the way it worked before. And quite frankly, when you asked permission before, you didn't get it. You just got the run around and told to come back and see them again. Like the wizard.
- [06:04]
Scott Melker
You got a Wells notice.
- [06:05]
Chris Giancarlo
Yeah, you got a Wells notice. Right. And it's all changed now. They're not in the permission business. We're going back to the traditional American notion that innovators shouldn't be seeking permission. They should if they go too far seeking forgiveness. But don't misunderstand. And I think Hester Purce lay this out. That doesn't mean they're not going to be cops on the beat for traditional fraud, manipulation, Criminal activity will not be tolerated. But if you're not ripping somebody off, but you're simply doing something that's never been done before, if you're pursuing a commercial imperative, if you see an opportunity in the market that no one else is pursuing, you should pursue it. And this administration is not going to be there to give you permission about doing things that haven't been done before. They're going to tell you if you're going off the rails or if you're misbehaving, but they're not going to give you permission anymore. We're back into a traditional American go fast and break things. And if you're not breaking things, you're not trying hard enough.
- [07:01]
Scott Melker
Last I checked, fraud was already illegal and we had laws on the books to deal with that, whether crypto or otherwise. So it's nice to, I think, be back in an environment where people are going to be able to innovate. Obviously, the two of you are here together for a reason. Luke, maybe you can kind of break down why we're having a three way conversation instead of a two way conversation this time.
- [07:21]
Luke Giancarlo
Yeah, it's actually a good segue. Also bring up the idea of innovation. So I wear a couple hats at Accenture. For starters, I run the FinTech Innovation Lab, which is an incubator and accelerator program that's been around for actually the past 15 years. And we work across tier one organizations, across banking, capital markets, payments and insurance. So a lot of the big banks, big payment providers, where each year we sit down with their executives to understand what are their innovation priorities that they're trying to solve. We then go out to the market to identify top startup companies. And then through a competitive process, we get down to top 10 that get put into the lab itself. And the lab runs for about three months from April till June, where each of those startup companies get connected with those financial institutions to really help them refine their product in some of the most competitive markets here in the US and it's really back to the topic of crypto, like you guys just mentioned. We're starting to see, I think, that also trickle into the innovation frontier as well. A lot of the startup companies that have applied to the program this year are going back to some of the topics and the use cases that we've been talking about for years around sort of payment optionality, settlement, compression, tokenization for transparency and distributed access. And then to your point around security, a lot of security companies starting to think about how to do this in a way that's compliant, in a way that prevents fraud, can ensure AML and KYC for the identity. And so I think blockchain is having a bit of resurgence from the innovation wave. And what we're seeing is some of the startup companies, while being driven by the legacies that are also curious around what the new administration is going to do in this space.
- [09:00]
Scott Melker
Accenture is obviously a massive company, one that I think many would find surprise to be moving forward with crypto projects or even investigating it. I think that's become a trend. Maybe now everybody's just coming out of the closet and actually discussing it more widely, because even as we know, even at institutions that are the biggest notorious haters of crypto, like JP Morgan, for example, a lot happening behind the scenes with this technology and with the asset class. So what are you specifically working on that's interesting to you in the crypto space?
- [09:35]
Luke Giancarlo
Yeah, and so Accenture's got a really strict definition for the types of distributed ledger assets that we actually explore. And so the other hat that I wear at Accenture is I lead an offering that's focused on the corporate adoption of digital currency, or what we call digital currency Treasury. And what it's very much focused on is large corporate clients. So, you know, the large multinationals and operations around the globe that are starting to look at this and saying, hey, wait a second, how can I use stablecoins, tokenized deposits and eventually central bank digital currencies that are emerging around the globe? Where do those fit into our existing toolkit or the different solutions that we have on hand? And how do we integrate that back so that our treasury team, right, the office of our cfo, that they've got one user experience to be able to interact with all the traditional payment mediums that they use and now all these new emerging asset classes. And so what my team focuses on is how do we help those corporate clients integrate and also make a decision on in which use case do they want to use which instrument, whether it is a stablecoin or a tokenized deposit or in some regions, central bank digital.
- [10:45]
Scott Melker
Currency, tokenized deposits, stablecoins. These seem to be the hottest narratives in crypto right now. Tokenization generally. I'll say even Larry Fink obviously making a huge splash with the ETFs. But then specifically talking about tokenization constantly, actually BlackRock was putting tokenization of all assets in their reports before they were even talking about the ETFs. It just didn't catch the headlines. I think at the time. Tokenization of assets. Chris, it's been a slow process. It is happening. We have, you know, 10, $11 billion of tokenized treasuries online. But that's a drop in the bucket relative to what is possible here. Do you see this exploding in the future? Stablecoins, Another conversation we will have that I think that's the lowest hanging fruit for regulation, legislation and explosive growth. But I just want to talk about tokenization at the moment.
- [11:39]
Chris Giancarlo
Totally, totally. Scott. You know, it's funny, we were talking a minute ago about the last four years. One of the things that Gary Gensler did, unfortunately, is he gave cover to every CEO of every major tradfi firm to not have a digital asset strategy, to not have a tokenization strategy. That cover has now been ripped off. I think any TradFi CEO that doesn't have a tokenization strategy has got reputation risk right now. In fact, it's got Kodak risk of becoming the Kodak of the future. I have a working assumption that within 10 years, by 2035, there will not be a securities offering of any nature. Private securities, equity securities, debt securities, government securities that is not tokenized and on chain. And that's just for security instruments. I mean, every type of assets is going to move. You know, analogy that I used the other night that maybe some of your listeners might find useful when explaining this to people. In many ways, photography has two worlds. There's the pre smartphone world and there's the post. I have photo albums in my house that are stagnant, never move and never get looked at. And then I have the ones that are on my phone and on my computer, which I send, I manipulate, I use for, for all kinds of purposes. Once you digitize something, its accessibility, its usability is increased by a factor of 10. Assets that are not on chain are going to be like the old photos and those old albums, inaccessible, unusable and forgotten. And assets that go online are going to be as useful and as present and as available as the digital photographs on one's mobile device. The world is changing and institutions that are not going to get ahead of this curve are going to fall behind it. The photography analogy goes to that very notion of Kodak as a great American institution that is no more because an innovation. They just couldn't get in far off. And you know what, to give them credit, it wasn't, they didn't try. They actually invented it. But that's how fast some of these innovations can move if an institution is not ahead of it.
- [13:55]
Luke Giancarlo
Yeah, and on that I, I wouldn't dismiss that people are not innovative. I think we see one in the startup scene. But a lot of the legacy institutions as well are just waiting to get the green light to launch these new solutions in the space. And so a lot of my clients I mentioned are corporates, but we also work with a lot of legacy financial service providers who are the ones that traditionally provide custody payments. Issuances, marketplaces, clearing, settlement, right. They are that end to end financial service chain. And when you think about what tokenization does, right, look at the coinbase for example, right. Or let's first look at our legacy infrastructure. You've got issuance, that happens in one place. You then have a marketplace like our legacy exchanges. You then got the clearing and settlement that happens at another institution like the dtcc. You then have a custodian that's actually holding the underlying receipts and then the cash is all settled at a separate location as well. And so our financial service ecosystem has emerged as this fractional sort of stage gates of how we process information. When you think of distributed ledger and the really radical innovation that distributed ledger provides is it condenses this whole ecosystem into one technology. And so you look at what Coinbase is doing, right, you can issue a token on it, you've got a marketplace for that, you can do the settlement right on that platform. For both the assets and the cash. And that's really novel to think about. And they're doing it for maybe just NFTs and crypto, and you can dismiss that, but the fact that they have this technology across the board, there's no way that the legacy financial service providers aren't going to look at this and say, I want to be able to use that same power, that same technology for traditional asset classes as well. And so a lot of financial service clients we're working with, they've been exploring this for years. And like Chris said, we're just at that point of waiting for that green light that go ahead, motion to then start launching and rolling these out.
- [15:46]
Chris Giancarlo
And what I would say to those firms, Luke, is that don't expect an actual signal. The signal out of Washington now is go for it, green. If you're going to wait for something. You know, there's the old joke about the minister who says that the storm is coming, everybody's got to leave, but I'm going to stay here. And then the squad cars come and say, hey, minister, it's time to go. The rains are falling. He says, no, no, God will provide. And a few hours later, they come in rowboats and they say, minister, we got to get out of here. The tide's rising. He says, no, no, God will provide. And finally, he's on the steeple, and the tides wash him away. A helicopter comes. He says, no, no, God will provide. And finally he gets washed away. He winds up in heaven. And God says. He says to God, God, I was waiting for the signal. And God said, well, what do you want? I sent a squad car, I sent a boat, I sent a helicopter. What more can I do? I think right now the message to people is don't wait for a signal from heaven. Get on with it. The signal is that permission slips are.
- [16:42]
Scott Melker
No longer needed if the President of the United States is launching meme coins, I'd say that your helicopter has come to the steeple.
- [16:50]
Chris Giancarlo
It's exactly right.
- [16:51]
Scott Melker
Now, given I can't say it's a legal position to say he did it, so I can. He might be in a unique situation that the rest of us aren't, but I think it's very clear that we have a green light to try things.
- [17:03]
Chris Giancarlo
Exactly right. Exactly right. Well, we've been. You know, one of the things you mentioned in the beginning is, is all these different offerings. One of the things that Luke mentioned is that ultimately people around the world are going to be dealing with all forms of digital assets, including Digital currency, some that are offered by non sovereigns and corporates in the form of stablecoins, some are offered by sovereigns in the form of digital yuans out of China, digital Euros out of the US and that's something that we've been focused on quite intently for the last few years through the work of the Digital Dollar project. Our work has envisioned for some time and I think we've proven to be correct, that the dollar is going to wind up being modernized and taken out of its analog state into a digital state. The question is, make sure we do that right. Do it in a way that preserves the dollar's reserve currency status and does in a way that's consistent with traditional American values, values of privacy, values of individual autonomy free from censorship and surveillance, but also that a dollar is a dollar is a dollar. Whatever the stabilization mechanism are used, it creates a uniformity amongst dollars and that we don't have, say big tech companies approaching it like Apple and creating unique ecosystems around their stablecoin that only certain smart contracts and dapps can operate or that they have different holdings of treasury so that you have premiums or discounts associated to one to the other. So that's an area of real focus for us.
- [18:40]
Scott Melker
I mean CBDC is probably the biggest triggering four letters that there are strung together for the crypto community. Maybe G A, R, Y. But I think he's gone. But I'll give it to CBDC right now. Interesting. You and I have spoken about this for years actually, Chris. Right. And I think people get triggered by the idea. But what you're saying at the Digital Dollar project is that they're inevitable and wherever they happen, you want to make sure that they preserve the same rights as you would have with cash. Effectively.
- [19:09]
Chris Giancarlo
Absolutely. The concern about CBDC is extremely well placed. There's no question that anything that would be analogous to what China's building, whether that's done by a government or a private sector actor, would be a means of censorship, of surveillance and control. And that would be totally antithetical to American values and the role of the dollar in the analog system. But as we've learned, even the dollar as an analog instrument is heavily surveilled and quite controlled. What we want to do is actually get back to core American principles and a robust notion of our fourth Amendment freedom from searches and seizures, unwarranted searches and seizures. And that can trump administration banning cbdc. And actually what they're really saying is we're going to rely on the private sector to build this. That's fine. We've done very well having the private sector build things. And it's unquestionable that the public sector, at least in the United States, has been a disaster at building things. Look how quickly rocketry is advanced under Elon Musk. And Nasdaq has done very little in the last two decades. So we know we can build things right in the private sector. But we do need to make sure that the same values that we hold dear as a country and apply. And that means that there's still work to be done to make sure. I mean, quite frankly, I've been disappointed in a lot of the stablecoin legislation with the paucity of references to privacy in it. There's very little in the way of existing stablecoin legislation that protects one's privacy with a private sector provided stablecoin. And it's issues of privacy, it's issues of interoperability. I mean, do we want digital dollars that might be walled gardens that don't interoperate with other digital dollars? There's a lot to do in terms of getting the values right. I've always say if we get the values right in a digital dollar, we'll get the value right. But we've got a lot of work to do on the values.
- [21:09]
Luke Giancarlo
Also interesting to kind of take a look at how other countries have explored tokenization or even just data privacy in general.
- [21:16]
Scott Melker
Right.
- [21:16]
Luke Giancarlo
When you look at what Europe has done with gdpr, that is a rule that imposes privacy controls over private organizations. Right over the private sector, but doesn't pose that over the public sector. Whereas in the US we have the reverse where our 4th amendment really restricts what the government is able to peer into our privacy. But there's nothing that really restricts our private sector from doing the same.
- [21:40]
Scott Melker
Check out Google or Meta.
- [21:43]
Chris Giancarlo
One of the glaring omissions in the current privacy legislation stablecoin proposed legislation is it doesn't prevent licensing authorities from actually saying hey, nice license you got there. It's coming up for renewal in six months. Shame you're allowing people to buy ammunition with your stablecoin or, or support this cause or that cause. There really needs to be a provision that says if a stablecoin is transacting otherwise legal activity, no government entity can can done them. And if people think that's far fetched, just look at what we're learning about what's happened in the last four years with with social media where government has been very much censoring activity and the same government that did that would have no hesitation doing the same on private sector stablecoins.
- [22:29]
Scott Melker
And you said this earlier, I mean, just look at China. You know, if they don't like the post on social media or something that you did, then your money disappears for a month, or they don't like what you, or they airdrop your money and say you can only spend this on groceries and clothing, but you can't spend it on entertainment or your social credit score is affected. This isn't a myth. It may seem like it couldn't happen here, but it's already happening elsewhere in the world.
- [22:53]
Chris Giancarlo
Right? And you know, government censors may actually prefer stablecoins to a CBDC because they could tell a stablecoin operator what to prohibit in the same way that if government was running it, the fourth Amendment would prohibit them from doing that. So look, the issues about privacy, the issues about censorship and control are absolutely legitimate. Anytime you go to a digital form of currency, especially if it's built on a centralized ledger as opposed to a decentralized one, the same issues apply. So the same work that needs to be done to get the values right, to get the, the core principles right is important work to be done by people of goodwill.
- [23:32]
Luke Giancarlo
And you don't even need to look as far as China for that as well. I mean, if you look at what Canada did a couple of years ago with the trucker strike where they shut down the payment activity of those strikers, I mean, that's an example of the government not needing to even have a cbdc, but just instructing their banking sector in order to shut off this payment activity. And so that is very much something the digital dollar project tries to explore and advocate and have a voice of the private sector that as money is more and more digital in all these different forms, rather than stable coins, tokenized deposits or central bank digital currency. But as that dollar becomes more and more digital, it's important to enshrine those American values of privacy and freedom of expression through payments in however we design that money.
- [24:16]
Chris Giancarlo
You know, the future is going to be a kaleidoscope of different digital forms of value, of storage of value, and different digital forms of payment and transactions of value. And it's wide open to the different value sets that are going to exist. The digital yuan is going to proceed and there are going to be, it's going to overlay China's Belt and Road initiative. There's going to be no avoiding it. It's going to be there and the digital euro is going to appear. It's going to be there. Americans are going to be dealing with both dollar based private sector stablecoins and government sponsored CBDC in the future, whether we like it or not, whether we have an executive order banning a dollar based CBDC or not, it's not going to change the fact that the future is going to feature all of the above. I believe that the winning system is going to be the one that best reflects the values underlying a given currency. If we get the values right in every dollar based digital currency network, we will win this future state and we will protect the dollar as the world's reserve currency because of the aspirational values associated with it. But if we give in to these censorship ideas, if we give in to that, then we've actually lost our way. So we've got to make sure the dollar represents the right values. If we do, I think the dollar can actually absolutely prevail in the 21st century in the same way it did in the 20th century.
- [25:43]
Scott Melker
With all of the bluster around banning CBDCs, as you said, whether by executive order legislation, state to state. We've had a lot of states propose a ban on central bank digital currencies. Do you think they're still inevitable here?
- [25:57]
Chris Giancarlo
I don't know if they're inevitable here. I actually am very excited about the notion that we're going to explore digital money using the private sector. I think the private sector will be nimble. I'm on the board of Paxos which is doing some very interesting work in the aristable coin circle is PayPal is. There's a lot of very, very smart American companies and if we get, as I say, the values right, this can be in a very exciting dynamic. However, look, I can envision a world where at least a wholesale CBDC is actually needed to make a retail digital dollar done by private sector actors work. And I'll just give you an example. If there's a run on a stablecoin operator, which there have been in the past, there's nothing to make us think there won't be in the future. The same reaction will happen by holders that actually happens when there's a run on the bank. When there's a run on the bank, people run down to the ATM machine but they're doing two things. They're taking possession. But more importantly what they're actually doing is converting a corporate liability of the bank into a sovereign liability of the government. That's why they take out dollars in cash. Because now the liabilities with the government, if there's a run on a corporate issued cb, a stablecoin, you would assume that people would want to do the same thing. They want to go to a higher priority of money. They want to go to a stronger backing from the corporate backing. Now there's a chance they may go to another stablecoin. But if it's a large scale run, if there is actually economic worry, they'll want to go to a sovereign. If there's no sovereign US instrument to go to, then they might go to a European sovereign. You could see a conversion from dollar based stablecoins to a European CBDC simply because they want to convert out of a corporate liability into a sovereign liability. And then you'll see de dollarization that may take a decade or more to play out. The US may never go to a sovereign cbdc. It may always do this through the private sector. And if that happens, then the same work needs to be done to get the values right. The issues of privacy, interoperability, technical uniformity, et cetera. But could be that the US experiments with this for a decade or more and finds that at least some version of a digital form of a sovereign digital form of the dollar is needed. I'm happy to let that play out and see how that evolves.
- [28:19]
Luke Giancarlo
And even I mean the example you gave about the threat of a run on the banks is still very much would be solved by more of a retail CBDC blitz. Take a step back and look at kind of more of a holistic or wholesale use case. So one of the POD programs that the digital dollar project did was with the dtcc, the Depository Trust Clearing Corporation. And Scott, I don't know how familiar your your viewers are with how the DTCC works but to give a quick crash course I'm going to simplify things right you have a a marketplace where buyers and sellers agree on the price of a trade. The stock exchange that is then sent to the DTCC and they become the middleman of all the assets and all the cash to then pay everybody back out. And that cash is also not even moved within their within the dtcc. It's actually moved at the Federal Reserve at the end of the day. And just to give an example of how that system can can break if you look at the GameStop trading scenario that happened a couple years ago when Robinhood was margin called the scenario that happened was the trading volume of Robin Hood went 4x during that period of when everyone was trading these meme stocks and the DTCC margin called Robinhood to say look, you need to post more collateral here if you want to be able to settle or complete your trades at the end of the day. And I'm simplifying it. But Robinhood effectively said, look, we can't post that additional collateral, it hasn't settled yet into our accounts, even put that cash there. And so they were halted with trading or at least threatened with the halt of trading. And in that scenario, that's a great example of how money moves really slowly, even today's world, right? It takes multiple days for this to settle, to move hands. If you had a digital currency and what we explored during the pilot program with the DTCC is to demonstrate what does that scenario look like when those securities, those assets are tokenized, like an NFT almost, and the cash is tokenized as well. And then you can then demonstrate the actual settlement of that on the network. And it provides a lot of speed and efficiency to the network.
- [30:17]
Scott Melker
I mean, I just laugh because I remember the big news last year that we had gone from T plus 2 to T plus 1, right? When you can do T plus 00 0.00 when you use crypto. But the issue there obviously is who this disrupts, right? I mean, Chris, you sort of alluded to 10 year time frame for everything to be tokenized for us to be trading securities. Ten years would actually be pretty fast considering all of the toll collectors and third parties that benefit from these systems that would have to be replaced. Maybe that 10 years takes them to not be Kodak and to integrate these into their own system so they're not replaced. Or maybe it just takes them that long to die before these better systems are incorporated. But I mean, many would say, hey, the technology's ready. This should be 2026. But you're talking about every payment processor, the DTCC, as you pointed out, the government, credit cards, I mean the biggest institutions on the planet.
- [31:11]
Chris Giancarlo
Well, there's two, right? There's several things in that. One is, look, we've got the biggest, most sophisticated financial system that's ever been built. And it's a lot to change that there's a limit to humans ability to actually transition from one technology base to another. It's easier for young people than it is for older people. I think that's one of the things that's held us back is the octogenarians that have been running things that grew up in the analog system are reluctant to give it up. And that's I think, been held in us back. I'll give you a historical analogy. And in the late 1990s we had this.com boom where the promise of E commerce raised valuations enormously. And when the dot com boom bust in 2000, at that time there was a little bit less than 300 million people using e commerce. And there were jokes made about companies like Pets.com, which were called Pets Bomb. And there were commentators who are saying that's it, E commerce is over. People are not going to buy pet supplies online. Well, the fact of the matter is, looking back, we realized it wasn't that people didn't want to buy pet supplies online. It's just that they didn't want to do it using dial up modems. Putting their credit card information into some dodgy website and waiting four weeks for the pet supplies to arrive. The pet may have died by the time the pet food got there. It took the arrival of 3G and 4G and 5G technology. It took the arrival of PayPal and Amazon.com and Amazon Deluxe Delivery to make the promise of e commerce a reality. And yet by 2010, there were something like 2 billion people on Earth using e commerce. And now by 2025, the number is something like 7 billion. Most of the planet uses e commerce. It's quick, efficient, it's on your doorstep, if not that afternoon, the next morning. And the system works. We've transitioned to E commerce. I think the same thing is going to happen with this innovation. Real world assets. We're still kind of doing it on dial up modems, but the infrastructure is going to build out and I don't think it's going to take two decades. I think it's going to take one decade this time around for all assets, for all new issuance of assets to go on chain and be tokenized. I think it's going to happen faster than the less innovation. But look, things are still counted in decades, not in years yet for this magnitude.
- [33:43]
Scott Melker
I remember Taxi Magic and Sidecar and all the pre Ubers that just didn't work because we didn't have iPhones yet.
- [33:49]
Chris Giancarlo
That's exactly right.
- [33:51]
Scott Melker
If you didn't have a phone, it was really hard to do digital ride sharing. Right. They were just too early.
- [33:55]
Chris Giancarlo
Yeah. So the infrastructure's got to build out, but it's coming. And Luke, that's something you've been involved in is actually focusing on the infrastructure.
- [34:02]
Luke Giancarlo
Well, I was going to say, I mean, I would argue, I really think that blockchain and distributed ledger is truly the most radical innovation since the beginning of the Internet. And I know with AI, it's very cool technology, it's fun. Machine learning has been around for a While Quantum does excite me, I think Quantum is very cool and we're looking at all this with the FinTech Innovation Lab. But I really think that distributed ledger and blockchain is one of the most radical technologies that has emerged since beginning of the Internet. And the reason for that is all of those systems, everything we've talked about. Let's take a step back. Actually think about the banking system itself is all based on message and reconciliation. And that's been since the beginning of time. Right. Think about how the modern bank system really came out of the crusades where people were telling the church to move money into different regions and it was sending a message across these infrastructures. We still have that system today and it's just faster because we're doing it digitally. But Scott, if I want to pay you 100 bucks, I'm in New York, I don't know where you sit. I message my bank to message your bank to message you. And you're going to approve that to your bank, which approve it to my bank. And then both of our banks need to debit $100, credit $100 and all these processes that go back and forth. Yeah, you can try to automate it, but it still is this multiple process chain that has to happen with distributed ledger. I can move that $100 directly to you. And both your bank and my bank that's on the network knows that that happened. And their data sets are reconciled immediately. And that really changes the entire way we think about financial services. But also telecoms, identity, all these different ways that we share information are really shaken up by this technology.
- [35:39]
Scott Melker
I think you take that a step further because the hundred dollars from you to me is actually easy relative to the rest of the world. Right. Try $5 to someone in Nigeria.
- [35:48]
Luke Giancarlo
Yeah, exactly. And so it's only a matter of time. The technology is just too powerful. And both financial service clients are starting to think about how to use it and issue new solutions to their customers. And corporates and individuals are starting to say, how do I leverage this technology? To your point, by moving money around the globe or sharing access and identity. It's a really powerful space and I think you're going to see that come more and more with this new administration.
- [36:13]
Chris Giancarlo
It's funny, in the last administration we talked about the resistance they put up to crypto, but in many ways they were also focused in a positive way about actually trying to modernize the existing system. If you think about treasury clearing, if you think about moving to T +1, what they were doing is Saying, well, let's improve the existing system as best we can, while holding back the entirely new architecture. What's happening now is people are realizing, well, those innovations are fine if what you're trying to do is perfect last century's technology. But why are we wasting actually time and effort doing that when we've got a whole new technology, a whole new architecture that is, as Luke just described it, immediate, accessible, much more democratic? I mean, we haven't even gotten into that aspect of it. There's a cartoon going around right now of a man standing in front of a teller booth at a bank and he says, I'm here to request permission to access my money. That's kind of the system we have now. The beauty of this system is it's going to make people, without having to say, mother may I have access to the things I already own because it's right there accessible to them. So it's a new architecture. We don't need to continue perfecting the old system. In fact, FedNow was a little bit of that too, catching up to where Europe was already trying to perfect an old system. I think what's now is the brakes are off, the door is wide open to start really moving forward with this new architecture.
- [37:43]
Scott Melker
Can I ask, since the brakes are off, obviously, and I think we know that this technology is inevitable, but should there be concerns about unforeseen problems and guardrails with this technology? Obviously. Listen, I don't get into the scams and hacks and all those things and they're not necessarily relevant to this, but it feels like once you flick the switch from the old system to the new system, you can't really flick it back. Right. So, you know, unforeseen problems with hackers from North Korea of our central bank, digital currency bad. Right. Or tokenized stocks, and you accidentally send it to a phishing scam address and send your entire life savings or investments, retirement investments, to a scammer in North Korea. Right. So it just seems like there's also a lot to be done in that security side or to.
- [38:35]
Chris Giancarlo
So let me address that, Scott. I used to run an agency with prosecutorial ability and law enforcement component at the CFD Commodity Futures Trading Commission. So I know a little bit about this. The first thing I'll say, though is we don't have a choice. I mean, humanity never has a choice to actually allow a technology to go forward. Society may try to close it down in its own society, but it moves forward elsewhere. China once tried to shut down sailboat commerce around the world. All they did was put their society backwards. While other societies explored the world, the Biden administration tried to stifle innovation in crypto. All they did is send it offshore. So we don't really have a choice. It's going to come anyway. Now, I will tell you, the bad guys are always one step ahead of the good guys, and they will find ways to use this for bad behavior, which is why the good guys need to make sure they're not two steps behind, but at worst, one step behind, and that we're using the technology. As usable as this technology is for bad guys, it's actually great for law enforcement. If I were to ask somebody at the doj, would they prefer to try to track a criminal that use cash in a suitcase to commit the crime, or crypto? They much rather crypto because they know exactly where it went. Now, it may have gone to North Korea, it may have gone to parts unknown or to parts where we don't have law enforcement capability, but they know where it's gone, as opposed to the suitcase full of cash, which they can't track. And so law enforcement will catch up. We'll find there will be absolute scams and frauds, and as you said at the beginning of the show, there always will be fraud. And fraud is already against the law. Law enforcement has the tools they need. What they need is the technical capability, which they will, which they will learn and they will get. So we can't stop this innovation. What we need to do is move forward into it. As JD Vance gave a great speech at this AI conference in Paris earlier this week, I commend everybody to listen to it because it was basically whatever one thinks about AI, it was the point that basically says the role of policymakers is not to resist, but approach new innovations with optimism, with thoughtfulness, with intelligence. But to go with it, not try to resist it, you can't resist the win. You've got to go with it. The winds are blowing. Now. You got, we got to move forward with this and own it, not resist it.
- [41:06]
Luke Giancarlo
And there's threats, I think, with all technology advancements, right? I think with. Look at automobiles, right? And there's a clear thread of how many people they kill. But even at a less drastic level, think about AI with the deep fakes that are coming out and the sophisticated hacking measures that are coming out with AI, and we're seeing people come up with AI to fight AI. And so it's this eternal cops and robbers game. There's a company that came out of our FinTech lab last year called Reality Defender, and they're crushing it. But what they do is they identify in real time deepfake audio, video and text. And they're using that to embed at kind of call centers and other institutions to help you have first line prevention against deepfake attacks. And so you're going to continue to see that across, whether it's crypto, whether it's AI, quantum especially. I mean, quantum hacking is a huge threat. And the only way to measure against it is going to be quantum measures of security. And so this is going to be an internal game that we'll be playing.
- [42:01]
Scott Melker
An endless game of cat and mouse. But I guess it's always been that way, right? This is just the new shiny thing. But that was probably. They were probably talking about this in the 1930s and 40s and 1970s when we went off the gold standard. It's always something.
- [42:16]
Chris Giancarlo
We can go even further back. Scott. There's an organization, a trade association in the UK that did a study of financial crime. They were able to access bank of England records going back to like the 1690s, and they looked at all the financial crime that happened since then. And since then, we went through how many technology revolutions, from the steam engine to communications, telegraph, telephone, et cetera, and they were able to categorize all the financial crime into like 25 buckets. It's the same crime over and over again, whether it's fraud or market manipulation, but using different technologies. And they approached it from a technology neutral. They just said it's the same crime. What the bad guys just do is find a new means of doing it. And what the good guys need to do is master those techniques so they can catch the bad guys using those new technologies.
- [43:05]
Scott Melker
Luke, seeing all of this innovation, obviously being on the front line of it, what is exciting you the most about what you're working on at the moment?
- [43:15]
Luke Giancarlo
Yeah, it's fun. What I really like is actually how these technologies are starting to bleed together, which I think is super interesting. I mean, we've talked about distributed ledger, blockchain, AI, accelerated data processing, like with quantum, and you're starting to see companies are starting to solve problems by blending these technologies together. And I think that's going to be super interesting. I mean, take a more web3 example. You think about tokenized assets. You're then using AI for either fraud or security on top of crypto, or using AI for accelerated algorithms for trading. And so I think the blend of these technologies is super interesting. One that Accenture has really stuck a Flag in is this idea of universal wallet. Whereas things are becoming more and more tokenized, whether it's money, identity or objects that all gets engaged with at the point of your wallet. Right. So that's your how you actually costing these. It's also your user experience for how you engage with these different asset types across different networks. And so that's something that it's going to be coming to life. As things are tokenized, you need new ways to engage with these technologies. And so by blending the idea of managing your identity, really sound user experience, and then these different tokenized assets to give you engagement across ecosystems, I see is a really fascinating new frontier. So to me right now, you've got all these awesome technologies and where it goes is where we see this combination happen.
- [44:41]
Scott Melker
Something that was a very eloquent description of interoperability.
- [44:45]
Chris Giancarlo
Right.
- [44:46]
Scott Melker
Because as Chris, you alluded to before, these things can't be walled gardens. And there's really no way to force everybody to develop things on the same blockchain. Right. And last I checked, we continued to get new layer ones and new layer twos and new layer zeros at a tremendous rate. And there's going to be developers on all of those things. There's not going to be one winner, realistically. So they all have to talk to each other, as you're describing here.
- [45:15]
Luke Giancarlo
Absolutely. And there's different ways to achieve interoperability. Right. I mean, from one perspective, a lot of governments are trying to establish standards and protocols across the board. At a more technical level, people are building bridges across networks or using networks within networks like Chainlink in order to provide interoperability across these different asset classes. And the one I mentioned around Universal Wallet is the idea of connecting it at the point of the wallet to these different networks that you've got control across these. But there's a lot of different ways to solve for interoperability, both with all these distributed ledger networks, but also we didn't talk about is these legacy systems as well. Right. And there's going to be a time when you've got these new systems and also these legacy infrastructures. And how do you keep those in sync? How do you slowly carve away your legacy tech stack and introduce new technologies in a way that's not disruptive to how you modernize? And so that's really challenging to do. And takes a good bit of thought from both the public sector to set out clear legislation, clear policies, but also from the private sector as a whole to agree to use these different standards and really sharp innovators that think about how to actually do this at a.
- [46:23]
Scott Melker
Code level and how to abstract away all the complexity so that grandma pushes one button and doesn't need to worry about bridges and wormholes.
- [46:30]
Luke Giancarlo
Right, right, right, exactly. Public and private keys.
- [46:33]
Chris Giancarlo
Let's talk about how we've successfully done that in the past. You know, when the first wave of the Internet came, it was not an Internet of value, but an Internet of information. And the United States actually led the world, both through a combination of private sector initiatives and government support, in creating the institutions that set the global standards. So institutions like the Internet Society, institutions like icann, where American, American creations, with a lot of input from some of the democratic societies around the world that governed how that Internet came together and made it increasingly interoperable, increasingly utility like, increasingly useful. Unfortunately, over the last four years, when the Internet of Value has been under sort of unannounced but quite official government attack and hostility, it hasn't been able to organize those things. Rather, what it's done is formed a series of trade associations to carry its banner. But what's really needed is similar to ICANN and Internet Society, to establish some standards. And I think now that we're out of the hostility period, and the things are wide open, I think we're going to see two things happen at once. One is we're going to just see, as you described it, Scott, a flood of new innovations, new approaches, new ways. And that's good. That's in the expansionary phase of any type of technology developments like the railroads in the 1840s in the United States, when railroads were built everywhere. And after a while they realized a lot of those lines didn't make a lot of economic sense. I think we're going to see some of the similar things, but then there'll come a period of rationalization. And I'm hoping the leaders in the industry, along with a different government standard, people like David Sachs and others, can help this industry form some common standards. And I think we at the Digital Dollar Project want to contribute to that effort to develop some of the core standards so that this next wave of the Internet becomes rational, it becomes thoughtful, it becomes still private sector innovation driven in the best history and the best tradition of America, but with core governing standards so that we don't create walled gardens. And we get to certainly with the dollar, we get to A dollar is a dollar a dollar, whether it's on a stablecoin or on a different platform, however it's transacted, we're going to need that type of Standardization.
- [48:53]
Luke Giancarlo
And Scott, it's been fun doing these calls and thanks for hosting the two of us here. And part of kind of the series that dad and I have been doing is that he's got this perspective of being a veteran in the space, having years of experience, having seen a lot of these things, being a geezer.
- [49:08]
Scott Melker
Yeah, yeah, I'm a geezer too, man. I'm probably right between you guys somewhere, but almost 50 and sort of me.
- [49:15]
Luke Giancarlo
And my generation are very much forward looking and I get to work with all these cool startup companies with the FinTech Lab. And so it's been a really unique experience of kind of sharing how things have done historically while looking at these new technologies. And like dad pointed out, how do you think about these innovation waves and how those are going to follow through with some of these new technologies we're seeing?
- [49:34]
Scott Melker
And this time it's your money, right? So listen, I'm not saying that that's any less important than your safety. Obviously, like automobiles got seatbelts and airbags and they started drawing lines on the roads and putting up lights because they needed them. As the industry grew, you gave a great example, I think, with trains. But when it's your life savings, people going to have to get this right, you know, And I think it's really going to be hard for legislators and regulators even in this environment where it's all systems go, because things just move so much faster now. By the time they've come together to put a vote on something, it's going to be a different industry.
- [50:12]
Chris Giancarlo
I think that's right. Again, the last four years we saw innovators being sued personally in addition to their having the corporation sued by a government that was just hostile to that type of innovation. And it's hard for them to come together and set standards when that level of prosecution and persecution you might say is ongoing. I think we're in a different world now. That's not to give a free rein to fraudsters and manipulators by any means, but we do need to get to an environment where we don't have hostile government efforts. We have a government that fully sees what can be gained by American innovation onshore innovation in the space. And I think I know we have that now. And so it's game on. This is an exciting time. I think it's going to be an explosion of innovation, of activity and some of it's going to be a bit confusing at first till we work through it. But you know, we got an enormous aspirational society here. I mean, you know, when I see Luke and some of the companies he's working with at the New York Fintech Innovation Lab, it really excites me. These are exciting years ahead of us right now. And it's, it's put your seatbelts on, we're in for a great ride.
- [51:26]
Luke Giancarlo
And Scott, we have seen modernizations of money before, right? I mean, in the last 70 years, credit cards, in the last 15 years, Venmo and P2P platforms. This is just the next step in that. And that's from a private perspective, but also from a government perspective. We've had digital reserves and now Fed now, and we've had instant payments and what other countries are doing like pics in Brazil of really modernizing these payment infrastructures. And so this is just another cycle of that. And I think we've gone through these before. We've gone through the growing pains and the learning curve of these new technologies. And I think we're just at that next frontier for this.
- [52:00]
Scott Melker
I tend to agree. It's going to be a crazy few years when you look at this actual election, I think, and what happened, it's not a red and blue situation at all. I had Raoul Pal on and he actually sort of made the argument. He was like the technologist 1. You had fairshake and Brian Armstrong and Coinbase. They threw the money in the direction to actually allow innovation to happen in this country. It wasn't about who is the Democrat, who was the Republican. It was about getting back to a place where we can have IPOs or innovate and operate with wider guardrails. Now we got to prove it. I keep saying this. It's like crypto. Finally, we've been screaming from the sidelines, let us innovate, let us do things. I hope we do more than launch meme points.
- [52:42]
Chris Giancarlo
I think that's really true. You know, put a general, general a geographical spin on it. I think the late 20th century American economy was really Wall street driven in the concept that the market, albeit imperfect, is the best way to allocate capital. And then I think the last 15 years have been a reaction to that. That said, actually the market has done a poor way to allocate capital to certain underserved communities. There needs to be a political component on it. In many ways, the Dodd Frank act was the victory of Washington over Wall Street. And so we've had Washington domination of finance and markets for the last 15 years or so. I think in this victory, it wasn't the New York Wall Streeters or the Washington Politicians, this was the victory of Silicon Valley. And that said, actually, we're going to bring algorithms to bear in how capital is allocated. And if we get the algorithms right, we can allocate capital as fairly as built into the design. So after free owners of the financial markets from Wall street to Washington, it's now the Silicon Valley. And we're going to get a Silicon Valley ethos to bear. An ethos that says if you're not breaking something, you're not working hard enough, if you haven't failed a few times, you weren't trying hard enough, and if you're asking permission, you're going to miss the opportunity to innovate.
- [54:02]
Scott Melker
And what I find really interesting is that all of the people who are being placed in positions of power, whether having to do with finance or technology at all, are seemingly all bitcoiners. And I'm not, I'm not saying that there's a consistent theme that they're trying to put bitcoiners into office. I'm saying we finally have the kind of people being put into office who are smart enough to understand why we care about crypto and bitcoin. And they're all the ones who have had their aha moment with it already. I mean, across the board, like, regardless of what you think of the people. I mean, Tulsi Gabbard just, you know, she, she's sworn in, she owns Litecoin and Ethereum and has talked about a Bitcoin strategic reserve rfk, that Health and Human Services. The guy, like, has the bulk of his net worth in crypto. Vivek. Every single one of them somehow is either bitcoin or crypto adjacent. At least bitcoin crypto. Curious.
- [54:50]
Chris Giancarlo
And, you know, Trump 47 is so different than Trump 45 and that he hated bitcoin. But when we, when we greenlighted bitcoin futures back in 2017, during Trump 45, I went around Washington trying to find some sympathy for what we were doing in both in the administration on Capitol Hill, and nobody knew what bitcoin was and they certainly didn't know why we were greenlighting bitcoin futures. Now, eight years later, it's, everybody knows what it not only knows what it is, they own it. It's a complete change.
- [55:18]
Luke Giancarlo
But you've also had a lot of kind of your old colleagues from the D.C. era really be put into new positions. I mean, what do you think of Brian Quintenz at the CFTC and Paul Atkins of the sec? I mean, a lot of these guys are Your old friends, any word on what they're gonna do?
- [55:32]
Chris Giancarlo
I tell you what, I think we're in for a golden age of management of the CFTC and the sec. So let me start with with Paul Atkins, who I've probably known the longest because we were together at Vanderbilt Law School back in the early 80s. Paul grew up at the SEC. He was a commissioner there. Both Mark Uada and Hester Peirce, the two existing commissioners there, worked for him. And they are going to bring a real openness to innovation. Paul at heart is almost libertarian. He's a free believer in free markets. He's a believer in free innovation. He really understands the aspirational nature of American society and that the role of the SEC is to oversee markets for capital formation so that innovators can raise the capital they need to realize the opportunity they see in their innovation. I think Paul is going to be not just a good chairman of the sec. I think he's going to be one of the greats. Now let me go to Brian Quintenz. Brian served with me at the cftc. I couldn't have gotten bitcoin futures done without Brian's support. He was a fabulous commissioner, smart, thorough, intelligent. He's now gone on to work as head of government relations at A16Z, one of the leading investors in digital innovation. And now he's been nominated to serve as chairman of the cftc. I think he's going to bring everything he's learned, plus his native intelligence and his openness to innovation, back to the cftc. And it worked very well with Paul Atkins. I think we're in for a golden age of these two agencies. I just hope they're kept separate. There has been some rumors.
- [57:10]
Scott Melker
There's talk already of joint task force this week.
- [57:13]
Chris Giancarlo
Yeah, well, so, you know, we looked at that in 2017 and actually the treasury issued a report. When they came to me and said, what do you think about merging with the sec? I said, let's do an M and A analysis. Let's see where the synergies are. And that treasury report identified about 9 million in savings. Now, I'm not gonna look down my nose at 9 million, but imagine if we had said, let's take that 9 million and merge it. And then Biden had put Gary Gensler in charge of the joint agencies, Bitcoin futures would have been shut down and so we would have lost even that. Thankfully, the agencies stayed separate. And Russ Benham, to his great credit, I think, is to his undying legacy, held the line and didn't Let the pressure of Gary Gensler and others in the administration thwart the CFTC's continuing good work in terms of crypto innovation. Look, our founders believed in divided government. They felt that if you aggregate too much power in one hand and they created that would be dangerous and they created agencies to pit against each other. I think the competition between the CFTC and the SEC has served us well. And you know, $9 million is $9 million. I'm not sure that's a worthy price to destroy the innovation nature of the CFTC if it was merged into the SEC. But we'll see how that goes.
- [58:27]
Scott Melker
The government spent 9 million in debt service while you said your last word literally.
- [58:33]
Chris Giancarlo
Indeed. And they, you know, so look, the CFTC is a principles based regulator. The SEC is a rules based regulator. The CFTC focuses on on market liquidity and debt. The SEC focus on investor protection. The CFTC really is the, is, is the, is the, the major overseer of the dollar's reserve currency status because it maintains the markets for hedging dollar risk, interest rate risk and dollar based exchange rate risk that the rest of the world relies on. Since the dollar is not anchored to a stabilizing influence like gold or maybe a digital currency, maybe that will change. But right now the world needs those deep liquid markets for risk hedging that the CFTC maintains. I'm not sure the SEC is well set up to do that same function.
- [59:18]
Luke Giancarlo
How do you see those two agencies kind of like providing oversight to crypto markets and digital asset digital currencies? Because it's always been interesting to see where the Howie tests land on that. And both those agencies are not really geared properly. Whereas crypto is a commodity but has a retail market element and the which is usually over has oversight by the SEC and then the SEC does or the CFTC doesn't usually look over retail market. So how do you think about like that comparison split?
- [59:46]
Chris Giancarlo
Well, so the Howey test which has been used over the last four years to decide what is under CFTC jurisdiction. What is under SEC jurisdiction? Howey refers to a Supreme court decision in 1946 determining what is a security and what's not a security. And as your listeners know, the SEC overseas securities. I think it's actually been a huge distraction to the way we should be thinking about this. The real difference between commodities that are under CFTC jurisdiction and securities under SEC jurisdiction is the nature of the information asymmetries. What do I mean by that? When one buys a security, we know that the promoters of that security the company that's issuing that security or the municipality has information that we in the market do not have and therefore what's required is that they disseminate to the market much of that information in order to level out the playing field for what information people know about the value proposition underlying that security. In the area of commodities, there are information asymmetries, but there's no centralized group of people that have superior information to others in the market. When Mother Nature produces wheat, she doesn't issue a prospectus and says, here's what I know about the growing season. One farmer in one county knows what he knows and a farmer in another county knows what he knows. And it may be different information in terms of what the weather conditions are like or what the crop looks like. So what the difference of the two agencies, how they go about equalizing those information asymmetries. In SEC world, the SEC requires promoters to issue a prospectus and at least every 90 days re up the information asymmetry differential. In CFTC world we rely on third party data providers to commercially provide information. There are wheat reports put out, government issues data and then commentators write reports on that data. In the area of oil, there's oil reports, there's others. Look, in the case of crypto, there's a report every 60 seconds on X saying where they think the price may be going or not. Now you can take those reports for what they're worth because nobody has perfect information. So the point I'm making is what we really need to do when we think about crypto is think about is it decentralized or centralized? If it's centralized, who has what information and how do we equalize that information asymmetry? If it's decentralized, are there sufficient amount of reporting done to provide information to the marketplace so that people can make informed decisions? And that's really what the two agencies do. The CFTC approaches it not from a prospectus approach, but from a making sure there's adequate information so the market is deep, liquid and orderly and the CFTC'd otherwise. I think what we need to do is, you know, the crypto. Maybe it's time to retire the Howie test and start thinking more holistically about how do we make sure there's enough information so that people can make informed decisions. And I think the two agencies have unique skill sets in handling information asymmetries in those different ways.
- [62:53]
Scott Melker
I think that there's another element there that's going to be very difficult. But Peirce has her finger on this and has proposed safe harbor a number of times, but you not only have to figure out which agency is doing what, but then when you look at these entities, figure out if they're sufficiently decentralized or where they fall on that sliding scale of centralization to decentralization to see how they should be regulated and under which rules that are set. I think that's a huge challenge. People act like decentralized and centralized are a binary situation, but has a wide range. And she always said, you know, give them three years or whatever to prove that they're sufficiently decentralized by some sort of rules that are created. But it's going to be hard right now to even know who to apply which rules to if they're made right.
- [63:38]
Chris Giancarlo
Well, you know, crypto mom is a woman of great wisdom and she has also said something else that I like a lot. When asked whether the CFTC should be merged, she said, well, I don't know about merging them, but maybe putting them in the same building would make a lot of sense. And actually, I think that does make a lot of sense. If we're going to get to a world where what we're really focused on is the holistic analysis of whether there are, whether it's fully decentralized, semi decentralized, centralized, and how do we ameliorate information asymmetries. The agencies need to be talking to each other, and the best way to talk to each other is to be adjacent to one another. And I'd like to see, I think her wise approach to this is the right.
- [64:19]
Scott Melker
Do they deserve that? I mean, this is an echo chamber notion, I would imagine, of thinking that we're much more important than we are. But at this point, does crypto need its own agency or is AI and crypto czar a good step in the direction of at least having eyes and ears on this through all of the agencies?
- [64:38]
Chris Giancarlo
Yeah, well, Luke made a good point before that at some point all of these technologies merged together. At some point, we're not going to know where crypto ends and banking begins. We're not going to know where crypto ends and insurance begins. We're not going to. And so I'm not sure another agency with a very specific focus will make sense over time. I think what we need to do is really get greater working relationships amongst the different regulators, whether they're bank regulators, insurance regulators, or market regulators, so that we come up with a, a regulatory approach that is better suited for the comprehensive and all, all seeking nature of this new technology which is going to seep into every aspect of our financial markets, our lending markets, our financial transactions, our payments systems.
- [65:32]
Scott Melker
I think we pretty much nail. I'm going to give us the compliment, collectively that we nailed it. I have to say, Chris, you must be very proud to have Luke as a son. And, Luke, you must be very proud to have Chris as a son. Dad. Incredible to be able to have a conversation with the two of you like this. I think that would be a rare duo in most families on a podcast like this.
- [65:49]
Chris Giancarlo
Thanks, guys. Right back at you. I mean, it is great spending time in this space with one son. We have some fun conversations at dinner. We could have actually just recorded one of our dinner conversations.
- [66:01]
Scott Melker
You should do that. It would make for, you know, it would make for a great conversation. You guys need your own show. Get me out of here. Get me out of here. You don't need me.
- [66:10]
Luke Giancarlo
This goes way back to being in the backseat of the car driving around as a kid. So it's been years in the making.
- [66:16]
Scott Melker
Was that in the seatbelt era? I remember I talking to my dad in the back when we didn't even have seatbelts in the car. So there you go. Proof that regulation evolves as we need it. Chris, Luke, thank you so much for the conversation. Really a pleasure.
- [66:29]
Chris Giancarlo
Great to be with you.
- [66:29]
Luke Giancarlo
Likewise. Thank you, Scott.
- [66:31]
Chris Giancarlo
That's dope.