Jan 17, 2024

Former CFTC Chairman and Willkie Farr & Gallagher senior counsel J. Christopher Giancarlo, aka "Crypto Dad," joins "First Mover" with his outlook on the state of crypto regulation following the spot bitcoin ETF approval.

Video transcript

This guest is lovingly known as Crypto dad, former chairman of the US Commodity Futures Trading Commission and executive chairman of the Digital Dollar Project. Chris Giancarlo joins us now, Chris, welcome to the show, Jen. It's really great to be with you. Thank you for the warm invitation and the warm opportunity to chat with you this morning. Of course, but I have to ask you, we spoke to SEC Commissioner Hester Purse last week and we asked her what she thought of being called crypto mom. And so I think that since we have crypto dad here, how do you feel that the industry calls you crypto dad? Well, I, you know, it, it, it probably came about in the most unlikely way that a nickname could come. And that is from a, a Senate banking committee hearing in, in uh January or February of 2018. A few weeks before the CFTC had greenlighted Bitcoin Futures. And that was something of a controversial decision at that time. I remember both some us and, and many overseas regulators uh felt that that uh we were going too far. I remember one European regulator saying that we were legitimizing Bitcoin. And I said, oh, no, no, no, no, it's not for regulators to legitimize or delegitimize it's for the marketplace, at least in free economies and for free societies, it's for free peoples to legitimize something. It's for regulators to bri bring a proper regulatory structure around it to protect against fraud and manipulation. And that's what we were doing anyway, as I, I gave that testimony at the hearing, I looked up to the senators and I said, you know, senators, I know I'm here as the head of a federal regulatory agency. But if you don't mind, I'd like to just talk to you as a dad. And I explained to them that a lot of my kids uh who hadn't been interested in the stock market uh were suddenly fascinated by crypto and Bitcoin. And I said, you know, look, II, I think you're probably some mo moms and dads and their grandparents in the room here yourselves. And I think we owe it to young people to take this seriously and not dismiss it as something childish, but actually put some proper regulatory and legal uh policies in place so that this innovation can flourish and flourish. Well, and it was with that, that my crypto uh Twitter, my Twitter uh uh account just exploded and I went from 1500 followers to over 50,000 followers in a matter of days. And they gave me a lot of nicknames and crypto dad was the one that stuck. Well, I couldn't be happier to start the week off with crypto mom and dad on the show. Now, I have to ask you as we're talking about regulation. The industry finally got our long awaited spot. Bitcoin ETF. It's been 10 years in the making that came through, uh, late last week. What do you make of that news? Where does the industry go from here? Yeah, I, I, what do I make of the news? Uh what I make of the news is, I think finally, after a lot of internal turmoil in, in the current administration, um there's basically been a deal reached between the left wing of the party and Trad Fi as to how to proceed uh with regard to Bitcoin, I, I, you know, more broadly just as my own experience in the previous previous two administrations, both O Obama and Trump. Uh Bitcoin can be very threatening, crypto can be very threatening to countries that deploy central bank. They deploy a, a reserve currency. And I think almost each administration has got to work out for themselves, how they view their relationship with what is not only in what is more than a new asset class, which is really a new architecture of finance, an architecture of finance that looks to the internet and, and decentralized uh internets of value to record value as opposed to recording value on Trad by bank balance sheets and other central repository. So it's really an entirely new architecture. I think governments worldwide have have have struggled to come to grips with this. You know, China's reaction uh in, in is almost a defensive one. Let's create a central bank reserve currency, digital currency to compete with Bitcoin. I think the eu is approaching it in somewhat that same defensive fashion. The United States is still very much grappling with the question of what does crypto mean now during the Trump administration, um I was able to green light Bitcoin futures and that's almost five. It's actually a little bit over five years ago now. And today that market is, it's deep, it's liquid, it's transparent and it's well policed for fraud manipulation. And as we saw with FTX, the only piece of the FTX Empire that didn't collapse is the piece that was overseen by the CFTC. And the point I, the, the, the, the lesson to be learned from that is that us regulators and other reg regulators can engage with crypto uh and can do so successfully if they have the will to do it. But I think in current administration, they've really struggled to come to grips with that. And I think finally they've resolved that in this approach to the ETF which is, which is both positive. I think it's very positive in many ways for Bitcoin. I think it is the, the signal that that many have been waiting for that. The prospect of a banning of Bitcoin, which is always a possibility is probably no longer a likely reality. I also agree with uh with former nec director, Gary Cole, with whom I served uh in Washington that this is really now the recognition that uh atomic settlement, that same day settlement, immediate settlement um I is coming to finance and coming in a big way and it's gonna be interesting to see how an ETF that is a 22 day settlement process on top of it, uh uh an immediate settlement instrument like Bitcoin uh is going to resolve itself. I, so in those ways, I think it's an important step forward. But I also think it has certain challenges in it because we are in a sense handing the ownership of an enormous amount of Bitcoin to a lot of our traditional players. It's gonna be interesting to see, well, how that centralization uh aspect interplay with an asset class that is at heart meant to be decentralized. What role do you think? Um if any role crypto is going to play in the upcoming elections, talk to us like a dad. Do Americans really care about these crypto issues that you and I talk about so so often. Is it really a big issue in the States right now? It is J and, and some of it is not political, some of it is generational. My favorite author, Doug Adams, the, the author of Hitchhiker's Guide to the Galaxy uh once said, that and I'll, I'll paraphrase because I don't remember the exact quote. But it was that anything that's invented before you turn 35 is way cool. And it's probably gonna be the source of a lifetime of engagement the rest of your life. But anything that's invented after you turn 35 is dangerous suspect and needs to be suppressed. I think there's a lot of that going on in crypto and when we've got an administration that's, you know, pretty heavily populated by septage Arians. In some case, octogenarians, this is something that threatens everything they know about finance, going back to their days when they had passbook sa savings accounts and, and checkbooks. And, um, I can understand why this innovation is very threatening. I think as we go forward, whether it's a Republican or Democrat, whether it's, uh Trump or any other administration, we're gonna increasingly see younger people moving in to serve and younger people will bring with them a comfort level with networks, you know, are they grew up in a networked world, whether that's a network of information or a network of, of gaming, they're gonna bring with them a notion of a network of value. And so I think that this innovation is going to proceed regardless of the next administration. On the other hand, however, I do think that and, and I say this as someone who served both in Obama and Trump, but who tends to be on the free market side of the aisle. I do think that you'll see a greater emphasis on free markets and perhaps a greater comfort level uh with allowing innovations to proceed. The same comfort level allowed me to green light Bitcoin futures. Five years ago, I think you'll see uh a greater and though you'll also see a greater emphasis on if innovation is going to take place. It, it, we, we want it to take place in the United States. London has put a S A sign on the door that says we're open for business. Come and do your innovation here, the United States is losing a lot of innovation because of the hostility to crypto that I think is somewhat uh generated by a relatively old degree of financial regulators in the current administration or at least ones that are perhaps, uh more skeptical, skeptical of any type of challenge to traditional financial and traditional financial structures. Chris I'm surprised to hear you're joining us from London. Given the work you're doing on the Digital Dollar project. I would think that you'd be in Davos right now. Speaking to other world leaders about the potential for digital dollar and other digital currencies. Why aren't you there? Well, in fact, it was four years ago at Davos, uh where, uh, the Digital Dollar project, uh first announced itself to the world and, and as, uh, and I'll, and I'll talk about that in a second, but, you know, Davos certainly the World Economic Forum, I, I think is, is it, is it perhaps it may be perception of reality but, uh, doesn't seem to be as free market, uh, doesn't seem to be as wedded to, uh, uh, the type of, uh, uh, financial innovation. Uh, and, and, and democratic financial innovation as the digital Dollar project, uh, would like to see. Now, what do I mean by that? Well, the Digital Dollar project really has one very simple mission and that is to ask the question and hope come up with some answers of how do we future proof the dollar? How do we preserve if not enhance its reserve currency status? And how do we do? So preserving the values that I think the dollar has historically stood for values of free enterprise of free trade, of economic liberty and financial privacy in a coming world of digital networks of value, some of which will be highly decentralized like Bitcoin, but others will be very centralized and run by governments and even exported by governments and some run by highly centralized big tech companies and, and, and, and uh big banks. And that's the question we seek to ask. It's a question where we don't unfortunately hear enough of that question being addressed within us government. But also we feel it's vital that it be addressed by the private sector. In my book, Crypto, Dad, The Fight For the future of Money. I coined a phrase and I said money is too important to be left to central bankers. And by that, I mean, no disrespect to central bankers. But it's a play on uh a phrase by French Premier Clemenceau at the end of World War One and looking back on the carnage of the war and the bad decisions that were made, he said, you know, maybe money, maybe war is too important to be left to the generals. And I feel the same way and I think we have the Digital Dollar project feel the same way about a movement into a digital world. We need the private sector working alongside the public sector on taking a look at what a if the United States were to deploy a central bank digital currency. And by the way, the digital Dollar project does not advocate that the US deploy a central bank digital currency, but we do advocate that the United States lead this evolution and lead with its values. 30 years ago, when the world was first looking at an internet of information, the United States and other Western democracies made sure that the internet of information was not controlled by the leaders of closed societies and who who would have had an internet that was very controllable by their closed society governments. 30 years later, we have those same closed societies looking to develop standards for digital currency that are safe for censorship that are safe for surveillance and are safe for control. The United States and the other democracies, the other open societies need to be at the leadership table making sure that the internet of value is one that protects the democratic principles of freedom of, of financial expression, of economic liberty and financial independence. And that, that, that, that, that, that advocacy is actually, sadly, uh being weakly advocated by the democracies. And we at the Digital Dollar project are hoping to fill that gap, Chris I got to ask you for our audience just before we wrap this up. When we talk about a digital dollar break it down for us. Are we talking about a central bank, digital currency? Are we talking about a Stablecoin? Are we talking about the digital dollars that we use on our credit cards? And, and if one over the other, what's the progression to towards the future that you just unpacked there, the future I envision Jen um and increasingly, uh I believe this will be the case will be uh it will not be any one of the above. It will be all of the above. The future will be a kaleidoscope. Uh Both uh government uh deployed central currency, central uh digital central bank, digital currencies of, of uh big technology deployed stablecoins and a bank operated uh uh uh wholesale digital money. And it will also feature decentralized systems uh like Bitcoin, Ethereum XRP and others. Uh I think if you just look at trends, China is barreling ahead with their central bank digital currency. Europe is in uh uh continues to state that this is coming and it's coming fast. The Atlantic Council has reported that over 100 and 30 countries right now are working on central bank digital currency. Major experiments just project Mariana just announced between France, Switzerland, Singapore looking at central bank digital currency. So central bank digital currency is coming. Stablecoins continue to roll out, continue to deploy of various kinds from US DC to others. So I think the future is going to be very much a kaleidoscope and that raises issues of interoperability. Will all those stable coins operate with other stablecoins? How will they interact with government central bank digital currency with the digital yuan be interoperable with the digital euro? How will that work? The opportunity I think exists now for the United States to project the dollar into another 50 years of prominence. Not necessarily because the US economy is the biggest and largest or the dollar is the most powerful instrument in the world. But because the values on which it's based are the most powerful values in the world. Free people that aspire to freedom around the world will flock to a digital currency that protects their economic liberty. And if that's the dollar or if that's a stable coin based upon the dollar, that will be the the winner in that future Kaleidoscope of digital systems of value. Chris, we are going to have to wrap it there. It's always a pleasure having you on first mover. Thanks so much for joining the show. My pleasure to be with you, Jen. Let's do it again soon.

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