As part of CoinDesk's State of Crypto 2023 event in Washington, D.C., MobileCoin head of compliance David Ackerman, along with Lightspark co-founder and chief legal officer Jai Massari, discuss the potential hurdles to adopting legislation around stablecoins and CBDCs across the globe.
We're talking now about the future of Central Bank digital currencies as the Atlantic Council stays 100 and 30 countries are exploring a CBD C. Joining us. Now to discuss is the Stimson Center, Lumus Innovation Council member and head of compliance for mobile coin. Dave Ackerman, along with Lights Spark, co founder and Chief legal Officer Zai. I'm sorry. Welcome David and Zai. Thank you. Great to be here. Great to have you here. All right, we're talking all about CBD CS and stable coins and I got to ask right off the top. I'll start with you, Dave. Uh What's the difference do we need both? So sure. Um There's, do we need both? Let's, there's a lot of technology out there and picking winners and losers is probably going to be the market's job, right? So let's give as much innovation as we can a chance and let's see who has the better use case if it works out properly. Go from there. I think it's um the, the debate we're having about CBD C and Stablecoins versus tokenized deposits is a really important one. I think what it recognizes is that we need a new form of money, which is real electronic cash. Each of these different options has different tradeoffs. CBD C of course, is issued directly by the government. Stable coins are privately issued. Uh More like most of the money that many of us have today. At least those of us who live in the United States. Uh Most of our money is privately issued by commercial banks and I think um each has different functionalities. Each has different tradeoffs, important different tradeoffs ranging from privacy to uh the role of commercial banks and private money issuers in our economy versus the role of the government. Um And I think uh whether we need both of them is really a question uh for all of us to answer as consumers of money. Let's talk about some of those trade offs. One of the big topics of discourse around CBD CS comes down to privacy. Um What are your perspectives there? Do CBD CS pose a threat to national security? Sure. So I think there's a pretty broad recognition now among central bankers globally, that privacy is a really important aspect of any CBD C design. That being said, I'm not sure that anyone has really cracked the code, so to speak on how to ensure privacy protections when designing and implementing the CBD C including to address concerns about government surveillance as well as for example, the ability of the public to see transactions on public ledgers. And so I don't think anybody's, anybody's cracked that code. I think privacy is one aspect but national security is quite another. And there are also, of course, separate national security concerns that come along with the CBD C. So this is where I may say something a little bit controversial, shall we say? Um, to think that the debate between privacy and security is not a national security issue is insane. Um, you need both and it's a, unfortunately in our industry, people tend to think of it as binary. You either have one or the other and that's not how this works. It's a pendulum and it will go back and forth, you know, as society changes as different things in the world change. So in terms of the technology of is it there in order to be able to do both? Um, thankfully, this is an area where I have seen that there are solutions that do exist and they work, the hard part is why aren't they getting adopted? And that's where the regulatory uncertainty comes in. That's where the education piece comes in. This is a new, innovative technology and with any new innovation, I mean, the internet, the car, there's going to be things that are very scary about that and we need to work together moving slowly and try to get it right. Once we've started, we've started to move the needle in that direction and we started to understand that you can have both. Hopefully we can kind of get a little bit further along in in the US specifically and get us there, get over that finish line and allow these technologies to really thrive and develop. Do you think regulators are incentivized to provide that clarity specifically around stable coins and CBD CS right now, you know, regulators are really looking at this entire industry. We have D five centralized exchanges that they're going after with the stable coin and CBD C discussion that seemed to, to move at some point. And then we just kind of got stuck and paused on it. Do you think that regulators are incentivized? So, here's an interesting thing. I, I was at finner for a time and, and I think what a lot of people don't necessarily understand is regulators and people just like you and me, they're paid to do a job. These are very dedicated, intelligent mission driven folks. And when it comes to motivations, I mean, if you look at the motivation of any regular, it's, it's stability, it's protecting the investing public depending upon where you sit in the system. Uh, a, a regulatory body is a growing organism. So they're supposed to be moving slowly. That's, they're, they're supposed to get it right? Because the massive implications that happen when they get it wrong are catastrophic, not just to the people who they regulate, but to the world, to the, to the public. So in terms of what are they incentivized to do they're incentivized to get it right. What that looks like, reasonable minds can differ. And that's where people in the industry, it's our job to help educate, to help, help them understand quell fears, validate fears. It's, it takes time and it's frustrating and it's a process and this is not the first time we've been through it. I would answer it slightly differently, which is, um, I think we can see the incentives playing out in real life. Um The US has not moved on adopting Stablecoin legislation that would, uh provide, I think a lot of clarity to the market about how stable coins are to be regulated and supervised and chartered. Stablecoins issues are to be chartered. Um I think we've seen other jurisdictions move much faster. Europe has moved faster than the United States, which is an unusual circumstance. We're seeing Singapore moving, we're seeing Japan moving, we're seeing South Korea moving. It seems that the incentives are not yet there in the US. Perhaps we'll see it in the coming months and years and that's where I would hope that, that we would be able to help educate a little bit more as to if we keep pushing all of this technology and jobs offshore, that also is a national security threat because the rest of the world is still going to continue to develop and they're going to use this technology and as payments and infrastructure and tokenization as all of these things develop when the hope is, is that we can kind of come to a consensus before it's too late and before the rest of the world kind of gets so far ahead of us that we just can't catch up. It's interesting. You brought up South Korea, it brings me back to the tun the collapse, which I believe, set up all reports point to its setting us a little bit backwards when it comes to stablecoin regulation in the US. T of course, had a South Korean founder and you say South Korea is advancing on Stablecoin law. Talk to me about how the collapse of Terra Lua have set us back when it comes to stable con regulation in the US. And why countries like South Korea and some of the other Asian countries are moving ahead so much faster than us. I think there's a few things that set us back in the United States. I think Tunno is one of them. I think there are other significant crypto intermediary collapses and problems that have also set us back. I think there is still a pretty rigorous debate going on in the United States about how best and who should supervise stablecoin issuers and stablecoin activities. The United States has a very unique financial regulatory framework fragmented among many, many many regulators. I think that is also really slowing us down in terms of helping them decide who's in charge of stablecoin activities. Other countries first don't have that problem. Second, maybe have seen close at close hand, what unregulated stablecoin, what unregulated Stablecoins can cause in terms of problems. And then third, I think they just see a use case for stable coins that we in the United States have not yet understood. I think it exists. I don't think we've understood it yet here in terms of the regulatory framework, 13 different federal regulators depending upon how you're licensed. That's just federal. Yes. Yeah. How long do you think it will take before we see stablecoin regulation that the industry can make sense of? What time is it? What's I think next year is our year? I, I truly believe so because when you see with everything that's happening in the world, the there's we are moving so quickly, not just as a technology and as an industry, but innovation in finance does not slow down it, it doesn't. And you're starting to see a lot of the bigger players start to get excited about this. That's usually a telltale sign that um you know, the big traditional finance companies and the juggernauts move on something that's usually a good indicator that we need more guard rails around this, we need, you know, because these institutions have billions and billions and billions of dollars that are moving through. So we can't allow unregulated or cla you know, lack of clarity to then put us into this stagnation. There is a way to regulate this, but still keep innovation alive. And I know the United States States haven't come out and said that CBD C is on the horizon. But do you think A CBD C is likely for the United States in the near future? Absolutely. And once we have adopted either a framework or a system of policies that we can all get behind, that will give us the balance between the privacy that you need for a payment system and the security that we need in order to monitor that system. I think then everyone's gonna get behind it and understand that we can move forward together. And I, I'm, I'm, I'm hopeful. I really am very hopeful. This is where I'll disagree with my friend, Dave. Uh I think a wholesale CBD C is possible. I think uh A retail CBD C makes no sense in the United States. I think uh first and foremost, as the regulators are starting to recognize more publicly, it would deeply undermine our commer commercial banking system. Uh And I just think that's uh too high a cost for a retail CBD C in the United States elsewhere perhaps here. No. Do you have a response to that, Dave? No, no, there's look at the end of the day, there's where we are today versus where we are tomorrow. We cannot stay, still stagnation is not an option anymore. We need to move forward and reasonable minds are going to differ on what that path looks like. But ultimately, what we have done through our entire professional career is what many others have done is you, you disagree and commit, you figure out what is the path we're not looking for? Perfect and AAA consistent criticism I have of our industry is anything less than a full win, is a loss. That is not the case. We just need to be a little bit better than we are yesterday. And if we keep moving in that direction, we'll, we'll get there where there is reasonable minds will differ. All right, quickly before we wrap, I know there's some news coming out of Light Spark yesterday, unveiled enterprise great end to end solution for universal money addresses. Like what can you tell us about this? So we're really excited about this. I'm sure I could talk for a lot more than a few minutes. But, um, we think this is the first major step for Lights Spark as a company, but also for the lightning network to be usable at an enterprise level. Um A universal money addresses builds on Ln URL and lightning addresses, which is an existing open source protocol to add functionality that supports true open payments on the lightning network. Uh, not only by individuals but also by uh, regulated service providers. The idea is to bring more and different types of participants on to lightning, uh to make payments uh across the board, you know, for remittances, peer to peer payments for goods and services payments, even for wholesale payments. A real possibility on lightning. We're clearly very excited about this and thrilled to have seven partners across the globe joining us in this initial effort. It's fantastic, David. Thank you so much for joining me and good luck with the rest of the day. Thank you. That was the head of compliance for mobile coin, Dave Ackerman and lights spark co-founder, Zai Massari.