A Macro Conversation with Michael Casey

This week we are joined by one of the strongest big picture thinkers on crypto, Michael Casey, currently Chief Content Officer at Coindesk, and previously a special advisor to the MIT Media Labs Digital Currency Initiative, and also author of The Age of Cryptocurrency while being a veteran reporter on financial markets for the Wall Street Journal.

Jeremy and Michael will take a wide lens on what’s happening with crypto in the world, the sweeping impact it is likely to have on social, political and economic systems, the role of Bitcoin vs. likely new synthetic global fiat stablecoins, and how we can preserve the core economic freedoms that inspire and underlie crypto today.

[00:00:08] Hello, I'm Jeremy Allaire and welcome to The Money Movement, a show where we explore the issues and ideas in this brave new world of digital currency and blockchains what a week for crypto. I don't think we need to say too much about the astounding growth and momentum in cryptocurrency globally this week. Obviously a good timing for any conversation about crypto. But but this week I want to really try and take a wide lens on what's happening in the crypto world, what the impact of crypto is on the world, the sweeping impact, I think that it's likely and already having on social, political and economic systems. I want to talk about the role of Bitcoin versus potential new forms of synthetic global fiat stablecoins. And ultimately, how can we preserve the core economic freedoms that inspire and underlie crypto today? A lot of big themes. And to join me this week in those conversations, we have a tremendous individual, Michael Casey, who is one of the, I think, strongest big picture thinkers in the space. Michael is actually someone who I met quite some time ago when he was just starting to explore, you know, the kind of crypto space. And he is currently the chief content officer at Coin Desk, previously a special advisor to the MIT Media Lab Digital Currency Initiative, author of The Age of Cryptocurrency. And he's a veteran reporter on global macro and financial markets from The Wall Street Journal. Very, very excited to have Michael with us today. Hello, Michael. Hey there, Jeremy. Great to see you. Yeah, yeah. It's it's always fun having a conversation together and think our conversations goes back seven years to December of twenty thirteen. I like to start these conversations just usually on a slightly personal or individual note. And I know a little of this, but I think I think the audience would be interested to hear about your journey into crypto. And, you know, I I've always thought of you as one of the very biggest big picture thinkers about the impact of all of this on the world. And you continue to do that so, so effectively in what you're doing today. But I would love for you to just share a little bit about your journey. [00:03:09][180.6]

[00:03:10] Yeah, maybe you do know a little bit of this story because it infected you quite a bit of a role in it, so, so happy to talk about it. You know, I was a journalist at the Wall Street Journal. I was was running the digital FX trade or Foreign Exchange Trading News Service. There was the Journal and Dow Jones ET set it. And so I was there, the currency guy, and I spent a lot of my time writing about macro themes. I lived in Argentina for six years. I was you know, I read about bonds, debt and currencies. That was my big thing. And I just remember it was the Cyprus crisis, right, in mid 2013. And suddenly this thing, Bitcoin emerged on my radar. And I really I think I read about it in different places and thought that's just through. We don't know what that is. And then it popped up and I just what is this? And so immediately in the ill-informed mind, it's like tulip bubbles sort of conversation. There's nothing valuable there. What is this thing? I wrote a column that I that I think was pretty ordinary. I look back like looking back, I cringe. I think, oh my God, how out of touch is this thing going to be in retrospect? Isn't quite as bad as I imagine, but it was certainly very, you know, really, really rudimentary. And I just I think I basically said this thing is probably a flash in the pan and you'd be advised to ignore it or something like that. And and then you and a few others, I think maybe you guys reached out to me and you basically had seen that I'd written it and then set up a meeting. And it was a gathering of journalists who I think is just sort of dabbling in this stuff. And we had a dinner and you brought along a few folks there yourself. Barry Silbert was there who now owns the company that owns going. And so I've got to work very now, which is interesting. And although very, very important to stress, as we always do about the events of Coinbase is also significant investor in Circle. So that's where these discussions have to come. But, you know, Barry was that Raj Data was there, which is really interesting to me. He was that he just, I think, ended his role as the interim head of the CFP, be that you the world created. And I was like, what? I thought this was sort of a crazy libertarian thing. Why would a guy who was working with Elizabeth Warren involved in this making Volcker there, or was it Jim Breyer or some other Breyer and. Right. And then so there was a number of players and they were they were legit. You had this rich history of entrepreneurship myself. And I was like, wow, these guys are kind of serious. What are they putting? What are they dabbling in this strange technology for? So anyway, that was the best part of it. And then as the conversation progressed, one of you and I think it might have been Barry just started to talk about the relevance to this, to the developing world. And because I had spent six years in Argentina and I spent so much time trying to get my head around why Argentina files, why does it have a crisis every 10 years? Why does it have debt blow up? So I'd spent ages writing about the debt restructuring at the time and I sort of realized that it was an institutional problem, that they had this core breakdown between the society and its institutions. And I'd written quite a bit about it. And so I had a pretty sophisticated take on it. [00:06:49][219.1]

[00:06:51] But I never it never occurred to me that you could think about money outside of a structure in which government would run it. So I would write my analysis and drawings. Well, they've got to fix government that they have to they have to get to they have to have to get rid of corruption and everything else. [00:07:10][18.1]

[00:07:10] And I realized that was almost impossible because there was this vicious sort of essentially make the government debt healthier. And in a sense is what you're what you need. [00:07:19][9.5]

[00:07:20] Better politicians. Right. And I recognize it was really hard. [00:07:22][2.4]

[00:07:22] That is vicious circle that where corruption in society, corruption in the government just read about itself. Nobody paid the taxes because they don't want to pay a crook. And so the thing was a constant struggle. And it meant that then they would always resort to these crises and bring in capital controls and everything. Right. And and then suddenly it just it was just showing me that this is all about having a protocol that nobody could interfere with. Would they run this system underneath that and that this would grapple with this problem of trust? And I was aware that there was this sort of problem of lack of confidence, lack of trust, the institutions and everything else that now we can build something that would potentially live outside of that. That is when is British and Australian say the penny dropped? The light bulb went off. I was like, oh, I now have a context within which to understand this. And and that's why when I wrote the book, when you add a whole chapter there about my experiences in Argentina, it's like the lead. And I think it. Yeah, it would begin in the story about Afghanistan, but it's very early. It was it was a way I use it as a framing to talk about, you know, trust and society. And sort of the core issue of money is being this social problem between the issuer that pays the government and its people and that this is a different way to think about that. So, yeah, I mean, that was that was it. Once I once I saw it in that context, it's been so much time to tell people that if you want to understand how how a monetary system works, go to a place where it doesn't work. You get to sort of expose all of the elements that need to be in place with something to pull apart. And then, of course, we had the financial crisis, you know, in the US that we were like, we're following crises everywhere. And so that and just realize that this can happen anywhere. And then you start to put this into a much bigger context than just, you know, Argentina or Venezuela, but literally the structure of money. [00:09:27][124.8]

[00:09:29] Yeah, that's that's powerful. I want to come back to a few dimensions of that. Actually, I think, you know, as as as you may remember, too, is in those early days, one of the things that were really animated us was, yeah, there's sort of this idea that there'd be a kind of synthesis or a hybrid of what we saw as digital currency and all the attributes that it presented technologically in terms of running as a decentralized infrastructure. And how could you at least reserve currencies live in that world, intermix with that world? You know, as you know, like our first attempt was like, how do you basically tunnel, you know, dollars and euros and pounds over the Bitcoin network, like saying, hey, we've got this global network, so we're going to come back to it? I think this interplay between Fiat and crypto and and this now much bigger world of digital currencies, that that is always in relation to and in contrast to Bitcoin, but also has its own narratives as well around it. You know, I think, you know, I love I love the book and I love your writing over the years. And I think the you're a great storyteller as well as a great journalist and very thoughtful. I always think, you know, looking at the impact of this through real world stories, as you were describing just a moment ago, kind of like the real world scenarios that would drive a need for digital currency like Bitcoin and others that have emerged. [00:11:10][100.9]

[00:11:10] But now, as your however many years through your journey, having covered this, you know what what are a couple of really notable, impactful stories that you can think of where, you know, Bitcoin specifically crypto more generally has been transformative to a person, a society. You know, there's so many incredible stories out there, but maybe maybe you could just share. [00:11:37][26.7]

[00:11:38] Yeah. I mean, so the easiest ones to go along are ones that we deliberately sought out with the two books that we wrote. One one of which was. You know, the currency, which is really more specifically about Bitcoin and sort of some of the spinoffs from that and then the truth machine, which look more deeply at Blockchains technology and various other non-monetary applications. So I'll start with the the opener to the idea of the currency. We deliberately chose a story about these girls who were working out of an Afghan school, and they they were working for a project called the film FX, which had videos and blogs. [00:12:27][49.3]

[00:12:28] And it was like this sort of network of independent bloggers. And they were actually getting paid. There was you know, there was a certain amount of small amount of income that was generated in this system was a bunch of freelance people. And so they brought in these students in Afghanistan to contribute blogs about their life. And and some of it was video blogs. And Francesco Ruili, who was the co-founder of that in a figure, how am I going to get money to them? Because if I'm going to pay them, you've got this patriarchal system right, where you sort of wire the money or send them a check or whatever. We can't get a bank account. They have to go to the bank with their, you know, their dad or with their brother. There has to be a man involved in that system. And and so this was a mechanism to to empower them by sending money directly to to them. And I thought that was really, really powerful because we recognized the intermediary there, the bank, and then the opportunity that an intermediary brings. But other power structures to come in and take charge of that. Right. If you substitute you're the dad or the brother for the government. Right. Or some sort of KYC regime or whatever it is, there's the Chinese government or the Venezuelan government. Whatever it is there is there's an opportunity for that power structure to intervene when there is an identifiable and controllable intermediary such as the bank. So so the idea that that to me was a very powerful way to talk about the power of peer to peer exchange because you just remove that capacity. So that was a really it was really when I would read the book, I felt that that was a great way to start it. [00:14:14][106.2]

[00:14:15] And then the other is that I want to use is the story that we told at the end of the truth machine and in this sort of the play on this concept that I think is really powerful as well, about a blockchains as as an immutable record of history. Yeah. And the with history and you start to build that into it as something about, you know, hey, you know, throughout history, the stories that get told about ourselves are things that have always been manipulated by the U.S.. That's right. The next regime comes in. The first thing they do is they burn all the books or they shut down the library. And that's just been an element of control, goes back and sets the back. [00:15:06][51.3]

[00:15:07] And the Internet started to change that, obviously. And then Blockchains is sort of like the next. [00:15:11][4.0]

[00:15:12] And the Internet did start to change. But yet we still have these vulnerabilities, right? We know that there is the permanence to it. There's these servers that shut down. I mean, I used to have a blog when I wrote my first book back in 2009. It was Blockchains offline. But the image of Che Guevara, a completely different sort of guys that I just got to maintain at the highest level down, that this is a wayback machine, that I have to it's really, really frustrating. But the thing that's really funny about this, this idea that now there is this permanent record of history and yes, it's all in past form and so forth, but you have this mechanism so so it's hard to just explore that concept and looked at the. [00:15:58][45.7]

[00:16:01] There's this this Bitcoin as a service right now, you know, it's these days, I don't think you can actually write very much into a blog itself. It becomes a rather expensive thing. But you nonetheless had these mechanisms to record information in there. And then we just got searching through the kinds of messages that people throughout the years had left in this blockchains service. And you start to see some really powerful things, those people leading leaving dedications to the lost loved ones. It's a really mundane stuff as well. But the one that really struck me was a couple of messages from 14 year old in in Syria at the time that Aleppo was under siege. It was like this plea for help and they were just like recording this plea for help in the blockchains. And it was like, what's going on there? Right. It's like it's this statement of my humanity. I it's this the way I feel. I need to record this with posterity because I need to know the world to know that I was needed. And the idea that you have this record that can be things that in some way be that it's a very abstract concept. Of course, we tend to think what is the practical use of these things? But I like to go to that place sometimes. Just think about it as something that does that. So there's a there's a project I heard about the other day that's about recording this. Think it's for the Starling project, the stories of Holocaust survivors. You can see why it starts to get really important that you would you would actually capture this stuff. [00:17:43][102.6]

[00:17:44] And this is this is one of the great, great promises. Right. Is is immutable records. And, you know, and obviously there's a lot of innovation in blockchains protocols that that can do can do that more scalable. [00:17:57][13.3]

[00:17:58] And so there are profound implications from that. And there's some negative ones as well you can think of as well. But, yeah, these are great stories. And I guess they sort of touch on this theme that, you know, these open networks with with whether it's information, artifacts or or digital money or non sovereign digital money, have very profound social and political implications. And, you know, I think that was, I think, very, very apparent to a lot of people very early on. And and and I remember many years ago talking about, you know, there will be kind of bloodshed in countries because people are going to be voting with their smartphones, what economic system they want to participate in. And it's going to be going against the wishes of an unsexy, unsuccessful regime, whether authoritarian or otherwise. And that, you know, just like the Arab Spring was sort of this new freedom of communications that had emerged with social media and messaging, you know, kind of unlocked these incredible aspirations for people who were we're seeing freedom in a very different way. And I think participating in economic freedom is is very profound. And I think we're you know, we're beginning to see some of that emerge. And you have to wonder as as non sovereign, you know, digital currencies like Bitcoin grow into the trillions in value. As you know, they as a wide sector of society around the world starts to store value there. That undermines political power and and then the economic freedoms of people being able to transact peer to peer on the Internet, you know, also threatens political power. And we're starting to see some responses to that. You're seeing these very, you know, very strong words out of, say, the German finance minister, out of the G7 meeting last week that we must maintain absolute control of the state over the monetary system. I mean, very emphatic, impassioned. You know, this is and you're seeing the voices get louder. I think you're seeing the potential kind of rules by fiat, not the fiat money, but the fiat as in like do what I say, you know, emerging. And this the sort of tension. And you can you can see a world where, you know, political sovereigns do not want that those young girls in Afghanistan to have the ability to. Transact directly, they want everybody to be observed and and and and identified and authenticated by a financial institution, and we're really starting to to run up against that. And I just love to hear your thoughts on is this movement and and those that value these these digital assets going to increasingly run up into conflict with with governments and these some of these established political institutions. And I'm not just talking about the United States. I'm obviously talking about everywhere in the world and in a lot of places where potentially, you know, sovereigns are failing financially. One can argue that almost every sovereign is failing financially by some measure these days. But what do you see happening? What do you see happening? [00:21:57][238.7]

[00:21:57] It's such a huge, huge, huge question, right? Because I think that this is this is this is the biggest of big picture stories. I mean, you're absolutely right. I mean, money is about power. It always has been the sovereign and the money have been intrinsically linked, but for millennia. And therefore, you know, we've got this modern monetary theorists out there that sort of tell us that there's only way that money itself is defined by a sovereign right. And I don't think that's the case. I think money is a is a tool. It is a system of exchange that society generates and inevitably, therefore, it intertwines with the sovereign. But the big question then is like, what are we talking about then? Is there a new concept of what the sovereign is in a in a sort of a decentralized, open, Internet based digital world? [00:22:49][51.9]

[00:22:51] We can't really separate. And this isn't just about money supply. The challenge to the nation state. I mean, let's be strong. And this is where people like no one wants to go there because, like, that's just ridiculous. And it is these are the most powerful institutions in the world. It's a look, it's an imagined concept. But I was I studied at Cornell under Benedict Anderson, who was this brilliant political scientist, the anthropologist who wrote a book called Imagine Communities. And he just just when you realize that we've embedded these ideas in our heads with just imagine there's nothing that makes me any more. They were playing while people in other parts of the world, so much more in common than some some guy in India. And so to say that the nations that are constructs and therefore that the stories in the narrative that go with them have to be really, really powerful when when we build systems that allow us to connect outside of that, many people are under threat. So that's that's the framing for this. [00:23:48][56.6]

[00:23:48] That's sort of been the arc of the Internet in many ways, has been nation states are as powerful as ever in some respects, but that is this overlay on the globe that has created new forms of institutions that are entirely existing in software. And I guess the Blockchains allow for the establishment of new micro economic units of organization and that that have many of the attributes are like a joint stock company or other things. And so adjudication moves on and other things happen. You will see this overlay of social and political structures and economic structures. Right. That exist truly outside of the nation state. And it seems there does seem some inevitability to that. [00:24:37][48.5]

[00:24:37] Yeah, yeah. I mean, I don't think it does mean I'm not predicting something as huge as that. Right. But I do think the tensions that come along these lines will will shape geopolitics in particular. So so I think one of the things I would like my best case scenario for this, because let's be clear, I mean, I wrote this piece the other day, which I called Bitcoin the biggest of big shots, that basically shorting the global financial system in the same way that the big short against the housing market happened in 2008. But but the point I was making was that you're not therefore just hoping the dystopia is you treat this short as as a signaling mechanism. And hopefully what it does is it doesn't we actually fix the system was the last thing we want is the whole thing to collapse, right? It would be. Yeah, right. But you do want governments and others to recognize that there's this whole economic freedom. There's a call for change. There's a there's a need for change that's being signaled by the by the prices that you're seeing and things like twenty three thousand dollars overnight. So so the that's what you want. Now what I think where I think the tensions are going to most emerge is in China versus the US. So we do know that if China has some time, wants to internationalize the um, the. And now they have a technology that in many ways could allow them to do so, and I think whether it was on the misunderstood or at least undiscovered aspect of what, you know, programable money would be, whether it's stablecoins like the ones you guys work on or Bitcoin itself or a central digital currency, a digital asset is the capacity for interoperability across currencies. And therefore, the idea that China could say set up an arrangement with Russia and you could have all sorts of powerful smart contract structures that would lock in exchange rates. Absolutely. And then why do you need the dollar as the intermediary so that the idea of the dollar as this central player in the global financial system is essentially being challenged? And that is hugely challenging to the U.S.. But the thing is, what I would love to see happen, I don't see it happening, sadly, but the way that we could think about this is is a really if you had a really forward thinking, you know, US administration that went back to the mindset that it took in the 90s, post-World War II, the Internet was coming on board. You mean you were there at the beginnings of this? Right. There was a telecom act of 1996. I remember I was in Indonesia at the time. I was living in Jakarta covering Indonesia. And we had a visit from Andrew Todd, who was at that stage, I think, running the FCC. And he came in and said, look, we're here to convince everybody to sort of sign up to this new open protocol, open access, open access. This is because this is in the United States interests and everyone's interest. It was and it was it was the free trade era we just found out of that that had been signed. [00:27:49][192.1]

[00:27:49] That was that was a major drivers for globalization. And where there's a lot of obviously debate about about about that. But I'm I'm with you on that. And I I think this idea of a very forward leaning administration that is thinking about like what is this new global economic structure? How is it operating in this world of the Internet? How is it operating in this world of digital currency, embracing that? I mean, my view is, you know, these digital currency, they by definition, they just exist everywhere. [00:28:24][34.5]

[00:28:24] The Internet exists. I mean, it's just that is just a fact. There are no borders once it's instantiated with the cryptographic primitive in a asset that is connected to software on the Internet. It is it is inherently global. It's inherently, as I like to say, intergalactic wherever the Internet goes. [00:28:42][18.2]

[00:28:43] I mean, I think we need to remember, of course, that network effects matter and absolutely can spin off anywhere. But like, will it have to this is with. Yeah. And nobody else really matter. [00:28:54][10.5]

[00:28:54] This sort of ties into some of the other themes here that I want to talk with you about. So Bitcoin is that I mean, you can always check in real time. I mean, it's at twenty three thousand dollars today, which is obviously dramatic. [00:29:09][14.7]

[00:29:10] I mean, this wall of of institutional money, corporate treasuries. [00:29:15][4.4]

[00:29:17] Absolutely. Some of the largest players in global macro investing. This is a very different situation than we've seen in the past. And for your column last week, is this is this is this purely a global macro hedge instrument? You could argue it is. But obviously it is a transactional currency and and it has some very, very powerful attributes that are very different than other historical kind of purely financial assets or hedge assets. And that makes it quite different. There's been a meme I've been seeing just in the past few days on on crypto Twitter really saying gold is not really the right market to think about what Bitcoin is disrupting. It's actually one hundred trillion dollar sovereign bond industry is effectively one hundred trillion dollars value that are in sovereign bonds are basically this underlying fiat denominated debt collateral and which are effectively negative coupons. And so like people, that's that's considered a safe store of value. One hundred trillion dollars of a safeguard value. And that's the market that's going to be disrupted. When will central banks start to put digital currencies like Bitcoin on their balance sheet? Obviously, corporate treasurers are. If financial institutions are, it's only a matter of time. And I mean, they are in fact, some of the some of these nation states are mining for their own account right now. And so. Yeah, absolutely. And and so, you know, I think it's a. You know, this this sort of reserve currency question, I think that, you know, I remember obviously that was a mantra in twenty, twelve, twenty, thirteen, and for many years, the Bitcoin could become a reserve currency. [00:31:13][116.6]

[00:31:14] It featured in the latter pages of the currency mean. [00:31:18][3.8]

[00:31:18] And it's certainly something that that and I believe I think, you know, it seems a lot more credible right now. Yeah. I mean and what what what is that. What is the are we are we in the space now? Are we in this space where that's a legitimate conversation? [00:31:36][18.0]

[00:31:37] And what are the implications of that for for for financial markets, for sovereign debt, for a number of other building blocks that sit on underlying reserve assets? [00:31:52][14.3]

[00:31:53] Yeah, I mean, look, I think we have to remember that still has the scalability challenges are still there know functionality there is, whether we like it or not, a need, whether our institutions participate in this world for an interface with the legal system that has to be systems of custody and so forth, and how we change the laws or not and so forth. But but ultimately, there's a lot that still has to happen to reach that kind of a big enough global scale where you could imagine it becoming this underlying core collateral core source of collateral. But I think that is if I if I now what I think we all wondered what Bitcoin is going to be able to finish writing it. It would just become this thing that they would use that to buy cups of coffee and trade, and it would come from money, but ultimately all sorts of challenges to that transaction fees and times volatility. And now at this point, all digital gold. And so that just seems like rather boring saga. It's just an old digital go. But it is so much more interesting for the reasons you point out, that it has all of these other qualities and features. And the idea of the automated smart contract based collateral is incredibly powerful, not only because it removes some of that counterparty risk and all the inefficiencies that come with the existing legal system for how you securitize debt. But but also because once you remove all of that legal layer, you are once again this intermediating powerful entity. And so you get the idea that we could collectively perhaps create these whole new framework for what is a reference. Right. Example. Right. Is there going to be a yield curve that is entirely constructed by default, that it's a fully decentralized. Right. These are these are happening organically, right? They are now. Will they be will they be sort of functional enough or will the bugs be taken out of the smart contract? Will there be enough security and all of that this some of these big questions. But it really becomes very interesting when you think about what what is this digital Goldner? Right. Because then, you know, it's digital gold itself is like the it's like the human reserve asset. Right. So you're right in the fact that the sovereign bond market is maybe the biggest disruptor here. But but that's the sovereign bonds of US dollar. Treasuries are a reserve asset for governments held by central banks. And absolutely whole point. And that's the starting point for how the rest of the financial system is built. The rest of us, you know, if you're a refugee from Syria and you and you desperately want to go to a country before Bitcoin, you would get gold. And gold is the things that your reserve right now. This idea that we could actually have this human based reserve asset, Bitcoin, that doesn't have an intermediary in the middle of it, but it also has the functionality that you could apply the existing financial systems rules on top of. Then you start to say, wow, we could build a financial system that doesn't have these institutions in place. So it's it really is very, very big when you go there. I still think we have a long way to go. Yeah, absolutely. I mean, this is sort of this pathway is still fraught with tensions like, you know, who's going to win, right? I mean, is is the is the sort of cypherpunk economic freedom drivers of this. Are we going to build systems that actually allow for a much fairer, more open economic system? Or are these huge Wall Street institutions going to get in and essentially dictate the development of this technology, albeit this? The protocol will stay hopefully independent, because that's that's pure design. That's the on ramps and entry points. The idea that these powerful entities could start to have even more control over that may mean we're talking a very different concept. [00:35:59][245.6]

[00:36:00] Once once they're in play, yeah, I mean, there's a lot to unfold there, I think kind of leads to another theme here, which is what are the what are the hybrid models that can kind of exist here? And so we've we've made a big bet, one on crypto dollars and stablecoins and sort of acknowledging that, you know, certainly for the foreseeable future, people are going to take their salaries and pay for rent, buy cookies and milk in in their domestic currencies. CrossBorder might become fewer currencies, as are used today, to settle transactions on an international basis. So this could accelerate that. But as well as one of my friends out there in the industry, Kai Sheffield from Visa, likes to say Stablecoins are a new form factor for Adolpho. [00:37:01][60.6]

[00:37:02] And and this you get the all these attributes of digital currency, their assets, global programable editions. You have all these things. But, you know, it's still backed by fiat. [00:37:16][14.1]

[00:37:17] It's sort of backed by that underlying monetary policy, the fundamentally like, the underlying debt worthiness, the credit worthiness of of of a sovereign. And so you can kind of you can look at them if you're a purist on something like Bitcoin and say, well, I would never, never want to hold my assets in that because all these reasons. But the transact ability that's there and the reality of that, you know, do you see these kind of growing in parallel for maybe the next decade or some period of time? How do you look at that? [00:37:53][35.8]

[00:37:53] Yeah, definitely. I mean, I think and not stablecoins Sempo like digital currency is, of course, a different thing, different structure. I think the Béranger I mean, we're going to have I think we'll be moving into a multi currency world. It is the end of the Bretton Woods system, the end of dollar hegemony, which, by the way, was going to happen anyway. I mean, the reserve currency less so. But I think now it's pretty clear that that when that happens, whether it's in five, 10, 20, 50 years, we won't go. It won't be that the Chinese to be suddenly takes its place or the euro takes its place. It will be a multi currency, digital, clearly the digital world. So in that environment, it's just hard to see it being anything but this sort of competitive thing which Hayek talked about, this idea that we may find of nationalization. Right. So I see that happening. Look, I think what I think is really interesting about about stablecoins from a geopolitical perspective. Right. Again, if we had this forward thinking, the US administration and and they said, all right, we're going to have to give up on on that kind of sanctions model whereby we control the dollar so that we can sort of shut out the Iranians and the Cubans and everywhere else and have all the sanctions. But we have a much more open system, you know, and let let let one hundred, Stablecoins billion in a dollar back, you can imagine as being another sort of boost with the dollar that there would be that it's just another way of advancing. You will see the edge and it would be a huge challenge to China, which is, you know, is trying to build an alternative as well as about privacy and a centralized system. So if there was a much more let's build open system, this is like this is like you said, it's like nineteen ninety six. [00:39:46][113.0]

[00:39:47] And the answer is necessarily that the federal government needs to build a giant R&D operation to go operationalize some closed permission network that they're going to run and they're going to do that. [00:39:56][9.3]

[00:39:57] The answer is like, how do you harness the open Internet community, open source innovation, technology, entrepreneurs, Silicon Valley entrepreneurship, the power and powers of major financial institutions, all of these to to build this in in private market driven ways, but with the right collaboration with the government to sort of make sure the underlying safety and soundness kind of concerns or other things that can be addressed. It seems like that's a much more realistic response from the West, from from the United States, presumably potentially from major European players as well, rather than say, no, we're going to we're going to we're going to federalize it, so to speak. [00:40:47][50.1]

[00:40:48] But, yeah, it'll be interesting to see. I think, like there's this connection point. [00:40:54][6.4]

[00:40:55] And you were referring to it as well, to the Bretton Woods institutions and obviously. [00:40:59][4.5]

[00:41:01] The history of all this is obviously all really interesting, right, because John Maynard Keynes at Bretton Woods, you know, in that period was pushing very, very hard post-World War Two for an international currency that could be gold backed, but that have had the implicit acceptance among the leading sovereigns in the postwar world, the banker proposal. And because the U.S. exerted so much economic and military power, it said, no, it's going to be the dollar, the dollar is going to be the reserve currency and it's going to be this fixed, this fixed exchange rate to gold, says the gold backed sovereign currency, global currency model. [00:41:44][43.7]

[00:41:46] And that that obviously worked for a period of time. And then multilateralism ization happened with the changing dynamics of the global economy. And, you know, the government went bankrupt in the Vietnam War and and then said, fuck it, you know, we're going to we're going to we're going to peg. And now it's just whatever we say the money is to that's been the last 50 years. That's a very short period of time in monetary history, obviously. [00:42:07][21.8]

[00:42:09] And so I think legitimately now we're in this era where you've got to you've got a new potential reserve asset that's better than gold. And you also have this ability for kind of fiat backed digital currencies to have massive global reach, you know, very, very easily, which does have these kind of spills over into these geopolitical kind of considerations. [00:42:34][25.4]

[00:42:35] And so the real question I have been asking, you alluded to it as well as you know, will this inevitably lead to a new multilateral framework for the monetary system that is grounded in synthetic digital currency that is actually based on a, you know, like the SDR proposal, but but includes the Chinese yuan, includes the dollar, includes the euro, includes potentially some other assets, but also includes a peg and or reserve ratio of Bitcoin like will the future global currency, that is the transaction based currency that's used by everyday people. [00:43:14][38.5]

[00:43:14] Will it evolve to something like that? And we we've long felt that that could be could be what emerges. [00:43:22][7.6]

[00:43:23] Yeah, look, I look, everything's in play, right? I mean, I think, you know, if you're talking about these big titanic shifts in the global financial system, then then this stuff has to be part of it. Now, we had a pile the other day on our podcast. This is the money podcast that we do weekly. I do weekly with Sheila Warren of the World Forum. And so Rühle had really, I think is a really interesting insight into what happens when the the piper has to be paid from the covid crisis, right where you've got all and you alluded to before. [00:44:02][39.0]

[00:44:02] But all of these these big wealthy industrialized governments, nations that governments with massive debt, that just and what typically happens when you have debt and everyone's got debt is you it triggers a currency war because the only way out of it is actually money. Right. And that's we can idealogue ideological positions, whether it's good or bad or whatever. It was just a function of what governments do because they have to there's no other way to play it. So so you print and and that's great for you if you're doing it on your own because your currency devalues and basically all of your imports are foreign governments are foreign countries. You're trading partners. They pay for it. Right. They basically pipe you in that way because you undercut their own producers. And that's how you that's how you get out of it. You prioritize that way. But of course, if everybody's in the same situation, you get a currency war and that's a disaster. And that's we know that from history as the depression was exacerbated because of that. And in many respects, that led to the Second World War. So. So you don't want this to happen. And I was like, OK, so the way out of this is is for kind of mass coordinated money. So it's like a debt jubilee, but it's a debt jubilee by monetization, which, of course, still means that that's been going on. [00:45:18][75.5]

[00:45:18] QE is just has been but it's not coordinated. Right. And so the light was somewhat coordinated. I mean, well post twenty eight, I mean everybody kind of got together and said, all right, we're going to not only we're going to provide these sort of shared liquidity lines that we're going to basically all at once shock and awe. [00:45:35][16.4]

[00:45:36] Everybody's everybody's going to zero or everybody's going to pay for it was you know, I mean it's not it's not really. [00:45:44][8.3]

[00:45:44] Where do you actually bring it to what level? Right. [00:45:46][1.8]

[00:45:46] And how do you stop it? You just become explosive because there were loads of currency war like challenges. It didn't didn't manifest. I mean, that the euro went through a massive almost broke up. So so there's the so that is his point was like, well, what if one thing is that it is good for Bitcoin because it has to if everything else falls, it rises, gets something else. It's the rise against it. But but more importantly, what is the instrument that you would potentially use to settle all of that? [00:46:17][30.4]

[00:46:17] You know, obviously, and it could be some form of basket, you know, that currency model. So is it you know, Mark Carney's idea, which is a sort of digital version of the bank or this synthetic Edgemont that the IMF would create? I was actually thinking this is what the original the original version of Libra would have actually played this role. And that's one of things that made it very interesting. [00:46:41][23.3]

[00:46:41] It actually might be a tool for governments to go, but this is the vision for center and which governs USDC is is specifically to evolve to multiple stablecoin digital currencies, ultimately to create synthetic versions from that and and include Bitcoin in the synthetics because you need that underlying asset as well. [00:47:09][27.8]

[00:47:09] Would you create a basket of currency, some sort of you'd run into similar problems that the Libra Association? [00:47:15][6.2]

[00:47:16] Yeah, no. I mean, I think that that taking a long view, I think that makes a lot of sense. I think our view and the approach that we took was let's start by focusing on reserve currency, digital stablecoins and and then also include over time, even emerging markets where there's so much power in real time convertibility. From a trade perspective, in an ecommerce perspective, there's so much power in real time convertibility and and grow from there. And, you know, I think, yeah, we just hired David Puth as the CEO center and he you know, he ran for six years, the largest infrastructure in the world for how currencies settle that class. And two trillion dollars a day, 70 percent of the settlement of FX globally supervised by twenty three central banks and the biggest financial institutions in the world in that consortium, I think Stablecoins at scale will become that kind of systemic infrastructure. [00:48:21][64.3]

[00:48:23] But, you know, figuring things out, like what is this synthetic basket and how you do that, you've got to do that with governments. You're not going to just do that, you know, as a as a large Internet technology company. But I think, you know, the building blocks are there to get there. But I know we're we're running up against time. And and this is obviously we could just go on for hours on any one of these topics or subtopics. I have to I have to always play the market cap game and and ask you today, Bitcoin is whatever, roughly four hundred and twenty four hundred and thirty billion dollar market cap. Ethereum is a seventy five ish billion dollar market cap. You know, in five years, you know, what does that look like on those? And then what do you think the total value of stablecoins in circulation, aggregate of all fiat stablecoins not just US dollar stablecoins and I'm not including central bank digital currencies. I'm talking about the sort of more pure digital currency stablecoins. What do you think that looks like in five years? [00:49:32][69.2]

[00:49:34] I mean, I'm not going to be much of a of a fun competitor in this game because I think. Mainly just because as a journalist and to sort of anything that looks to sort of like price numbers and a prediction of the market, OK, you get a free pass. [00:49:49][15.5]

[00:49:51] What I will say is it's I think that I was always Wences. Consumers would say, look, you know, it's either it's either a million dollars or it's worth zero. Right. And we still don't know which one that's going to be. And and that's just not to say a prediction of a million. It's just literally this is this is that the binary as this binary scenario? I would argue that the we've certainly moved higher up in recent times towards the confirmation of the the higher end argument here. Right. I mean, it's just me coming out and saying he thinks it should be with one or two thousand dollars and everything else. People have legitimate, very, very influential financial institutions and investors are saying things like that. And and so I think that that that it's no longer a flip of a coin. There's a greater probability that this is really, really, really valuable in the future. But I don't put numbers and I certainly don't want to be implying that people should be pouring all of their bets into Bitcoin at this stage. It's not it's not my thing. And I don't know whether to put a number on on one global stablecoins. But I look, I generally think that. [00:51:03][72.5]

[00:51:05] You know, it's. [00:51:05][0.8]

[00:51:08] People need this stuff and the the more stress there is in in the system and we saw, for example, in the the first moment of crisis that there was dollar shortages all over the world. And so Nigerians had the problems and that's where Bitcoin became awful. But there's also been this huge growth of stablecoins in those sorts of places. Now, extrapolate from those random places like Venezuela and Nigeria into a more global scenario where there is a crisis associated associated with the dollar itself and people are going to need vehicles. That is the essence of the banks are going to be under serious stress and they'll need alternative means of moving around. And I think that both Bitcoin and Stablecoins will play a critical role in in sort of resolving that infrastructure challenges that we face in Argentina. By the way, another yet another perfect example of that, because when I was there, they shut down all the banks and people came up with a system to figure out how to do so. So this is leading to something big. I don't know what the number is, but definitely, you know, it's it's it's on a trajectory that I'm going to confidently say in the trillions that we'll see. [00:52:29][80.8]

[00:52:30] Michael, it's so great to have you for this conversation. It's been great to continue the conversation over the years and you continuing to do it in various forums and formats as well. So I just really want to thank you for joining us. Pleasure. Looking forward to many more. Excellent. All right. So great conversation there with Michael. Really amazing times right now in in the crypto universe. A lot of big themes, a lot of big implications. Very excited to be chartering that and exploring it here on The Money Movement. This may be our last episode of the year, so we're going to pick it back up in early January and until next time, stay safe, stay well and stay informed of all. [00:52:30][0.0]


Michael Casey
Chief Content Officer, Coindesk